Violating CCI notice may be a criminal offence

The penalty amount is likely to be enhanced to Rs 1 cr along with imprisonment of up to three years.

Defying a Competition Commission of India (CCI) notice may soon be treated as a criminal offence. This implies that the offending companies will face court proceedings and stiff penalties, including jail for the executives. At present, such a violation is treated as a civil offence, inviting lighter penalties.

The decision has been taken by a group of ministers (GoM) headed by Finance Minister P Chidambaram. The change will be reflected in the Competition Act, 2006, which is expected to be amended in the coming monsoon session.

The Competition (Amendment) Bill, 2006, was introduced in the Lok Sabha by Minister of Corporate Affairs Prem Chand Gupta on March 9, 2006. The issue of treating defiance of the CCI order as a criminal offence was referred to the GoM last year. The Securities and Exchange Board of India (Sebi) Act and the Electricity Act, 2003, have a similar provision.

"The GoM has endorsed the idea of criminal liability on those who defy the CCI order. It means the company will be taken to a judicial magistrate for criminal proceedings and will have to face the consequences, including imprisonment," a source said.

According to official sources, the GoM has also endorsed a proposal to substantially increase the penalty for non-compliance of the orders. Accordingly, the penalty amount would be enhanced to Rs 1 crore, along with the option of imprisonment of up to three years or both, as against the existing provision of Rs 10 lakh or one-year imprisonment.

The GoM has also decided to give some leeway to the companies. "Before being taken to court, the company will be served one more notice and face additional penalty," a source said. However, the quantum of the additional penalty is yet to be fixed.

Under the existing law, the CCI can impose a penalty of up to 10 per cent of the turnover of the violating company. Cartelisation and abuse of dominant position are among the punishable and reversible anti-competitive practices recognised in competition laws across the world, including in India.