Supreme Court upholds quashing of ₹301 crore CCI penalty against Grasim

The Supreme Court on Friday refused to interfere with a National Company Law Appellate Tribunal (NCLAT) order that set aside a ₹301 crore penalty imposed by the Competition Commission of India (CCI) on Grasim Industries Ltd for alleged abuse of dominance in the viscose staple fibre (VSF) market.

A Bench of Justices JB Pardiwala and K Vinod Chandran dismissed CCI’s challenge against the NCLAT order which had set aside the penalty and remanded the matter to the CCI for a fresh hearing.

The NCLAT had held that the CCI order violated principles of natural justice. It set aside the penalty and related behavioural directions and directed the Commission to decide the matter afresh after hearing Grasim.

The case originated from a March 16, 2020 CCI order in which Grasim was found to be dominant in the market for supply of VSF to spinners in India. The regulator concluded 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. It further held 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 passed the order without giving it an opportunity to respond. The company pointed out that the Director General (DG) of CCIm who had first submitted a report, had specifically found that non-disclosure of the pricing or discount policy was, by itself, not a violation of the Competition Act. The DG had also held that Grasim had no obligation to keep traders in business and could not be faulted for not supplying VSF to traders.

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

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

It held that notice and hearing are mandatory when the CCI proposes to depart from the DG’s report. It 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.

Hence, it set aside the order and remanded the matter back to CCI for fresh consideration.

The CCI then appealed to the Supreme Court.

With the Supreme Court declining to interfere, the CCI will now have to hear Grasim on the points of divergence from the DG’s findings and decide the matter afresh.

Senior Advocate Sajan Poovayya appeared for CCI.