In what could be music to the ears of domestic tyre industry, the National Company Law Appellate Tribunal (NCLAT) has asked CCI to review its ₹1,788-crore penalty on tyre companies on the grounds that domestic industry needs to be “saved” during challenging times and that promotion of domestic industry keeping in view economic development of country was an important facet of the Competition Act, 2002. 

Setting aside the penalty (imposed for cartelisation) in an order pronounced on Thursday, a Division Bench of NCLAT comprising Justice Rakesh Kumar, Member (Judicial) and Ashok Kumar Mishra, Member (Technical) remanded the matter back to the Competition Commission of India (CCI) while highlighting that the competition watchdog’s order was “surrounded by arithmetical errors” in calculations and need to be re-examined.

The NCLAT order highlighted that the object of the Competition Act, 2002, requires to keep in view the economic development of the country also.

NCLAT in its order observed that “…matter can be remitted back to the CCI to re-examine the calculation of arithmetical errors and also consider reviewing the penalty to save domestic industry in view of the fact that domestic tyre industry is under lot of pressure from global tyre manufacturing companies where lot of unutilised capacity is available, the promotion of domestic industry is also to be kept in mind by CCI, as the object of the Competition Act, 2002 requires to keep in view the economic development of the country also. If violations are done by domestic industries, no doubt they should be penalised and be given a chance of reformatory instead of virtually putting the organisation on weak health. One of the Appellant – Birla Tyre is already under Corporate Insolvency Resolution Process”. 

EXPERTS’ TAKE

The latest NCLAT order in the tyre cartel case evoked mixed reactions from Competition law experts and practitioners.

“By directing CCI to review penalty to save domestic industry in view of the fact that domestic tyre industry is under lot of pressure from global tyre manufacturing companies where lot of unutilised capacity is available,  the ruling sets a dangerous  precedent, besides smacking  of protectionism  of domestic industry. 

“It disturbs level playing field and may send a wrong signal to global players undermining  India’s standing. Competition  law applies in equal measure  to both domestic and foreign  players”, said a competition law expert who sought anonymity.

However, Ruby Singh Ahuja, Senior Partner - Karanjawala & co,  had a different take on this order. “It would not be wrong to state that the protection of the domestic market is in consonance with the objectives of Competition Act namely economic development of the country and sustaining competition in the market, specially when the industry in issue is already in the red. The extreme penalties imposed are likely to kill the industry which is not good for the economy,” she said.

Aseem Chawla, Managing Partner, ASC Legal, said “ The judgment also identifies the topical daylight challenges being faced by a Industry at large. It would be interesting to see whether one may contend that the nature of said observations be regarded per se having a precedential value highlighting the imperatives & concerns of business under consideration” 

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