INDIA – The National Company Law Appellate Tribunal (NCLAT) has upheld the Rs 873-crore (approx. US$105.5 million) penalty imposed by the fair-trade regulator CCI (Competition Commission of India) on United Breweries Ltd (UBL) and other beer makers.

The penalties imposed by CCI were on UBL, Carlsberg India, All India Brewers’ Association (AIBA), and 11 individuals for cartelization in the sale and supply of beer in India on 24 September last year.

The move was challenged before the NCLAT, an appellate authority, over the CCI against any direction issued or decision made or order passed by the regulator.

A two-member bench said after examining the materials and considering the arguments, it reckoned that the “appellants had already admitted in the leniency application regarding their involvement in the cartelization.”

Referring to the batch of petitions moved by the beer makers before the CCI seeking reduction in penalty, the NCLAT said: “Lesser penalty application is like an admission of guilt in a cartel.”

Justices Rakesh Kumar and Ashok Kumar Mishra added: “Once they have admitted their involvement in an application filed under Section 46 read with Regulation 5, they were only entitled to question the imposition of penalty”.

The period of cartelization outlined in the 81-page order was said to have been from March 2005 to at least March 2017.

The NCLAT also dismissed the submissions made by the beer makers that a CCI order is liable to be set aside in the absence of a judicial member, which is required to be noticed only for its rejection.

Rejecting it, the NCLAT observed that “nowhere has been indicated that CCI must consist of a judicial member and the Act (Competition Act) does not reflect to add a judicial member for deciding the proceeding.”

CCI had also rejected their pleas for leniency application. Gopal Subramaniam, senior counsel appearing for the beer maker, had argued that the order forming a prima facie case and directing inquiry based on leniency application was not valid.

Over the quantum of penalty, NCLAT said it is evident that though the CCI was having the discretion to impose a penalty of up to 10 percent average turnover for the last three financial years, in the present case besides granting benefit on a leniency application, the CCI has also taken a lenient view.

It determined the quantum of penalty at 0.5 times profit for each year of the continuance of the cartel or 2 percent of the turnover for each year of the continuance of the cartel, whichever was higher.

Confirming the development, UBL, in a regulatory filing, said it received an order passed by the NCLAT, staying the CCI order upon a condition of pre-deposit of 10% of the penalty amount imposed on the company.

“The company will comply with the directions, and the said 10% amount shall be deposited through a fixed deposit receipt within stipulated time as mentioned in the Order,” UBL, now controlled by Dutch-based multinational Heineken said.

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