Ease of doing business is definitely improving. One is not sure whether the same is good for the cost of doing business, considering the pain and suffering it will cause in terms of compliance, red tape, harassment through motivated court cases, access to justice, etc. Must pass ,
The Competition Act, 2002 gives a party aggrieved by an order of the Competition Commission of India (CCI) a right of appeal against the same. It improves the ease of doing business. The Competition (Amendment) Bill, 2022, which is under consideration of Parliament, proposes to require the aggrieved party to deposit 25 per cent of the amount payable under the order before the appeal is accepted. This adds to the cost of doing business.
Why this offer? CCI has imposed total fines of around Rs 20,000 crore since its inception, of which around 1 per cent has been recovered. The remaining amount is reportedly stuck in frivolous appeals. Hence the proposal to discourage such appeals.
Too many appeals does not mean that the appeals are frivolous. The Appellate Authority has disposed of a total of 556 appeals during 2009-21. It has allowed 219 appeals, which is 40 per cent of the appeals disposed of. In addition, the CCI has issued a total of 1,030 orders in 2009-2021. Parties have appealed against 333 orders, which means they have accepted 68 per cent of the orders without objection. None of these percentages suggest that appeals are frivolous. Usually, an appeal is filed along with for value court fees. Courts apply their mind while allowing an appeal or staying an order. They often require a deposit for admission/residence, sometimes the full amount has to be deposited before the appeal is accepted. They deal strictly with appeals which are without merit including imposition of costs. Thus, there is an in-built valve in the court process itself to prevent the entry of frivolous appeals.
Will this solve the issue? impossible. Acceptance of appeal only means that the appellate authority is ready to look into the disputes. This is not an automatic stay of the order of CCI, which can use the permitted means to enforce its order/recover the full amount.
Today only where the order has been stayed, recovery is not possible. With the proposal, once the party deposits 25 per cent amount for acceptance of the appeal, it may not be possible to recover the remaining 75 per cent till the disposal of the appeal, which can be a bad result. Apart from this, there are orders which have not been stayed today, yet the fine has not been recovered. There are also orders that impose a number of sanctions in addition to fines. In such cases the motion is of no use.
broad powers
The law confers wide powers on the CCI to levy fines in the manner specified in the rules. It also has the option of taking help from the Income Tax authority for recovery of the penalty. The Bill is silent on justifying the proposal if these provisions have proved ineffective.
The proposed measure has already been tried in comparable (market-related) legislation. The Securities and Exchange Board of India Appellate Tribunal (Procedure) Rules, 1995 require the deposit of fine before the appeal is entertained by the appellate authority. However, after a detailed consideration, this was repealed and no such provision exists today in the Securities Appellate Tribunal (Procedure) Rules, 2000. Mature Competition Jurisdiction. The proposal has several unintended consequences. The CCI imposes a penalty which may extend up to 10 per cent of the turnover of the party.
Sometimes the amount of fine runs into thousands of crores. If innocent parties have to pay 25 per cent of such amount upfront to prove their innocence, they may have to down the shutters while their business dwindles as the market ostracises them because of the order. Or they may always have to keep a large idle cash reserve to meet such unforeseen contingencies that may arise under business laws, which will only increase the cost of doing business. This is likely to encourage the unscrupulous to file frivolous appeals to buy time, while depositing fines to avail the right of first appeal to the innocent is gross injustice.
The proposal distorts equal opportunity. It assumes that the CCI is always right and the perpetrator is always wrong. It also creates a presumption of prejudice in favor of the informant, who, if aggrieved by the order, can file an appeal without any deposit, while the offender is required to deposit 25 per cent fine.
Furthermore, one offender may be aggrieved by an order that imposes a fine, and another by an order that imposes other sanctions. While the object of the sanction is the same in both the cases, only the former is discouraged from filing appeals as compared to the latter. The proposal seems to be based on a misdiagnosis of the problem. Why should the state be bothered if a party resorts to frivolous appeals? He has to face the consequences on disposal of the appeal. It is better to dispose of an appeal in a month, or a quarter, and let the offender bear the consequences at the earliest, rather than collect a percentage of the fine and have the innocent suffer slander, deposits and damages. business indefinitely.
The simple solution is speedy and timely disposal of appeals, which only requires an adequate appellate mechanism commensurate with its responsibility. The trade-off is between: (a) some investment in providing an adequate appellate mechanism, and (b) disposal of appeals after years/decades, suffering of the innocent and relief for the unscrupulous, and capital blocked in deposits. In a sense it is cost to government versus cost to business.
Hope the Parliament will take the right decision. A better option may be to allow the business to explicitly bear the cost of the appeals mechanism. A regulatory impact assessment would have brought out the inadequacies of the proposal.
Shahu is Distinguished Professor, National Law University Delhi. Agarwal is a partner at Regstreet Law Advisors. Thoughts are personal.