Introduction
The Competition Act of 2002 came into the picture to safeguard consumer interests, encourage and maintain market competition, and guarantee market players’ freedom of trade. The establishment of Competition Commission of India (CCI) was done to eradicate any practices that could negatively hamper the prevalent market competition. However, since the Act was implemented, changes in the business landscape, such as the rise of internet-based digital companies and new-age technology-driven markets, have taken place. The Competition Law Review Committee (CLRC) was established in 2018 by the Ministry of Corporate Affairs to ensure that the Competition Act is consistent with India’s economic fundamentals. The Competition (Amendment) Bill of 2022 was introduced as a consequence of the Committee’s 2019 report recommending multiple amendments to the Act.
Deposit Requirement for Appeals against Orders Issued by the CCI
One of the amendments proposed by the Competition (Amendment) Bill of 2022 requires appellants to deposit 25% of the penalty amount to file an appeal before the National Company Law Appellate Tribunal (NCLAT) against orders issued by the CCI. The deposit requirement has received a mixed response from stakeholders. While some have welcomed the move, others have raised concerns about its potential impact on the rights of businesses, especially small and medium enterprises (SMEs), which may not have the financial resources to deposit the required amount.
Section 53A stipulates that the Appellate Tribunal is open to appeals from the Central Government, State Government, local authority, enterprise, or any individual who feels aggrieved by an order, decision or direction mentioned under clause (a) of the said section. In the proposed Bill, a proviso is intended to be added after Section 53B (2), which states that, the appellate tribunal will not consider any appeals from individuals who are required to pay a certain amount, unless the appellant has deposited twenty-five percent of that amount as instructed.
Impact and Analysis of the Deposit Requirement
The provision regarding depositing 25% of the total penalty imposed, or 25% of the total amount of the compensation awarded, is intended to discourage frivolous appeals and ensure that only serious and genuine appeals are filed before the Commission. Some contend that the deposit requirement is anticipated to have a substantial impact on the conduct of companies under the CCI’s investigation. Previously, companies would file an appeal against CCI orders as a delaying tactic. However, with the deposit requirement in place, companies will need to weigh the costs and benefits of filing an appeal, as they would need to deposit a significant amount of money upfront.
The deposit requirement is also likely to reduce the burden on the appellate body, the NCLAT, which has been struggling with a backlog of cases. With fewer frivolous appeals being filed, the NCLAT can focus on hearing and resolving cases that have merit. It is important to note that during the period of 2011-12 to 2017-18, the CCI imposed penalties amounting to Rs 13,524 crore, but only Rs 121 crore was collected. The CCI attributes the low collection rate to the fact that many of its orders have been appealed before the NCLAT, Supreme Court, or challenged before the High Court.
However, the deposit requirement is not without its critics. The fact that there are a large number of appeals does not necessarily mean that they are without merit. During 2009-21, the appellate authority disposed a total of 556 appeals, of which 219 were allowed, accounting for 40 percent of the total number of appeals disposed of. During the same period, the CCI issued 1,030 orders, of which parties appealed against 333 orders. This indicates that 68 percent of orders were accepted without any appeal. Neither of these percentages suggests that the appeals are made without any reasonable grounds or are intended to cause unnecessary delay or expense.
In certain cases, the monetary penalty levied may be in the range of thousands of crores. If such a penalty is imposed, individuals who are innocent of the charges may be forced to cease operations, as they would need to furnish 25 percent of the penalty amount as a precondition for proving their innocence. Furthermore, such individuals may experience a decrease in business activity, as the market may ostracize them due to the order. Alternatively, they may be compelled to maintain a significant idle cash reserve to meet unanticipated contingencies that may arise under business laws, thereby increasing the cost of conducting business. Dishonest actors may be motivated to file frivolous appeals to delay the proceedings while forcing the innocent to deposit the penalty amount as a prerequisite for availing themselves of their right to appeal constitutes a gross miscarriage of justice.
Debating Appellate Authority’s Power: Director, ESI Healthcare v. Maruti Suzuki
The deposit requirement stipulated in the Competition (Amendment) Bill of 2022 represents a significant development within India’s legal framework governing market competition. However, when evaluated in light of comparable provisions in other legislations, such as Section 254 of the Income Tax Act, 1961 and Sections 41, 51, and 67 of the Consumer Protection Act, 2019, it becomes apparent that the deposit requirement in question is not the first of its kind.
But the question to be considered is whether the appellate authority can be granted a right to waive off the pre-deposit requirement depending on the situation. The appeal in the case of Director, ESI Healthcare v. Maruti Suzuki India Ltd. revolves around an order issued on 27th October 2016 by the High Court of Punjab & Haryana. The order declared that the pre-deposit requirement under Section 45-AA of the Employees State Insurance Act, 1948 is not obligatory, and the appellate authority possesses the power to either partially or completely waive the pre-deposit requirement under the same circumstances and conditions as explained in its earlier judgment in Punjab State Power Corporation Limited v. The State of Punjab & Ors. The High Court ruled that the State is empowered to enact Section 62(5) of the Punjab Value Added Tax Act, 2005 (PVAT Act) and that the pre-deposit condition of 25% for hearing the first appeal is not burdensome, severe, unreasonable, or in violation of Article 14 of the Constitution of India. However, the High Court referred to a prior judgment by a five-judge full bench of the High Court in Ranjit Singh v. State of Haryana & Ors. to conclude that although the appellate authority is not expressly granted the power to issue an interim injunction/protection, such power is implicitly embedded under Section 62(5) of the PVAT Act based on various pronouncements.
However, in the present case it was found that the perspective adopted by the High Court that the appellate authority possesses an implied power to grant interim relief, is untenable. Once the statute has established the pre-deposit condition before filing an appeal, such a condition must be fulfilled. The judgments of the High Court in Ranjit Singh and Punjab State Power Corporation Limited, suggesting that the appellate authority has the implied power to waive the determined amount, cannot be deemed consistent with the law. Therefore, the notion that the pre-deposit condition is non-mandatory and grants the appellate authority discretion to waive the determined amount is clearly unsustainable and hereby overturned.
Conclusion
In conclusion, it is evident that granting excessive power to the appellant authority poses significant concerns within the legal system. To address this issue effectively, two feasible solutions emerge: either completely eliminating the pre-deposit requirement or substantially reducing the percentage demanded. The considerable penalties imposed by the CCI, ranging from billions of rupees to multinational corporations, coupled with the persisting issues of prolonged judicial delays, make the current deposit precondition an arduous burden. It not only denies the right of appeal but also obstructs the availability of capital for businesses. In order to ensure fairness, accessibility to justice, and the preservation of firms’ financial resources, it becomes imperative to reconsider and revise the deposit requirement accordingly.
(This article has been authored by Ekta Agarwal and Shruti Srivastava, third-year law students from National Law University and Judicial Academy, Assam)
CITE AS: Ekta Agarwal and Shruti Srivastava, “Finding the Right Balance: The Pre-Deposit Requirement in Antitrust Appeals” (The Contemporary Law Forum, 14 July 2023) <
tclf.in/2023/07/14/finding-the-right-balance-the-pre-deposit-requirement-in-antitrust-appeals/> date of access.