NCLAT sets aside ₹301 crore CCI penalty against Grasim

The National Company Law Appellate Tribunal (NCLAT) on Tuesday set aside a ₹301.61 crore penalty imposed by the Competition Commission of India on Grasim Industries Ltd for alleged abuse of dominance in the viscose staple fibre (VSF) market [Grasim Vs Competition Commission of India].

A Bench comprising Judicial Member Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra held that the CCI order violated principles of natural justice.

Therefore, the NCLAT remanded the matter to the CCI for fresh consideration and also directed that Grasim be given the opportunity to respond on aspects on which the CCI had differed from the findings of the Director General (DG).

The case arose from a 2020 CCI order in which Grasim was found to be the dominant player in the market for supply of VSF to spinners in India.

The regulator held that Grasim had abused its dominant position by charging unfair and discriminatory prices and imposing supplementary obligations on buyers.

The CCI directed Grasim to cease such practices, refrain from seeking consumption details of VSF from buyers, put in place a transparent and non-discriminatory discount policy, make the policy publicly accessible and not impose any end-use restriction on buyers of VSF.

It also said that buyers should be free to use VSF for spinning, trading or any other lawful purpose.

Grasim challenged the order primarily on the ground that the CCI had gone beyond the DG’s report without giving it an opportunity to respond.

The company argued that the DG had specifically found that non-disclosure of pricing or discount policy was, by itself, not a violation of the Competition Act.

The DG had also found that Grasim had no obligation to keep traders in business and could not be faulted for not supplying VSF to traders.

However, the CCI still directed Grasim to publicly disclose its discount policy and not impose end-use restrictions that would prevent trading of VSF

The NCLAT found these directions to be at variance with the DG’s report.

The tribunal agreed that the CCI’s directions requiring disclosure of pricing policies and permitting buyers to freely trade VSF were contrary to these findings.

"The Ld. Commission has differed from findings of the DG regarding their directions for disclosure of discounting/pricing policy and sale to “buyers” who can trade the VSF. The Commission had omitted to give notice to the Appellant regarding the disagreement and has thereby deprived the Appellant an opportunity to defend itself against the proposed actions," the NCLAT said.

It held that the Commission failed to notify Grasim of its disagreement with the DG and denied it an opportunity to rebut the proposed conclusions.

The tribunal underscored that such notice and hearing are mandatory when the regulator proposes to depart from the DG’s report.

NCLAT also noted that the newly inserted proviso to Section 26(9) of the Competition Act, effective from September 19, 2024, now expressly requires a show cause notice before final orders are passed.

The tribunal clarified that it had not examined the merits of the allegations against Grasim.

In light of these, the NCLAT remanded the case to the CCI with a direction to give Grasim an opportunity of hearing.

Grasim was represented by Senior Advocate C Aryama Sundaram along with advocates Nisha Kaur Uberoi, Sarthak Ranade, Mehar Singh Dang, Shivangi Chawla and Ishan Arora from JSA Advocates & Solicitors.

CCI was represented by advocates Samar Bansal, Manu Chaturvedi, Madhav Tripathi and Vedant Kapur.

Advocates MM Sharma and Ankit Singh Rajput appeared for Textile Consumer Foundation

[Read Judgment]