United India Insurance Bid-Rigging Case: Supreme Court Tags CCI Appeal Over ₹32.76 Lakh Interest With Penalty Appeal
The Supreme Court on Friday deferred to March the hearing of the Competition Commission of India's appeal challenging a Delhi High Court judgment that had quashed its demand of Rs. 32.76 lakh as interest for alleged delay in payment of a bid-rigging penalty imposed on United India Insurance Company Ltd.
A Bench of Justices K.V. Viswanathan and Atul S. Chandurkar was informed by Attorney General R. Venkataramani, appearing for the CCI, that a connected civil appeal challenging the reduction of penalty in the same matter is already pending before the Court.
Recording the submission, the Bench directed that the present appeal be tagged with Civil Appeal No. 3261 of 2017 and listed the matter on March 9.
“Heard the learned Attorney General for India on behalf of the Competition Commission of India. Learned Attorney General submits that the civil appeal challenging the order of the NCLAT reducing the penalty from Rs. 156 crore to Rs. 1.56 crore is itself pending in appeal in this Court in Civil Appeal 3261 of 2017. We deem it appropriate to tag this matter with Civil Appeal 3261 of 2017,” the Court said.
The dispute originates from proceedings initiated by the CCI on September 4, 2013 based on information alleging cartelisation by four public sector general insurers in tenders floated by the State of Kerala under the Rashtriya Swasthya Bima Yojana and the Comprehensive Health Insurance Scheme.
After investigation, the CCI on July 10, 2015, held the insurers guilty of bid rigging under Section 3(3) of the Competition Act and imposed a penalty of Rs. 156.62 crore on United India Insurance.
The company challenged the order before the Competition Appellate Tribunal (COMPAT), which on October 5, 2015 stayed the operation of the penalty subject to a deposit of 10% of the amount. The company deposited the required sum on October 15, 2015 within the stipulated period.
Meanwhile, the CCI had issued a demand notice dated October 1, 2015, directing payment of the full penalty within 30 days, failing which interest at 1.5% per month would accrue under Regulation 5 of the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011. The notice was received by the company on October 7, 2015, after the stay order had been passed.
By its final order dated December 9, 2016, COMPAT upheld the finding of contravention but substantially reduced the penalty from Rs. 156.62 crore to Rs. 1.56 crore. The reduced amount was paid by the company on January 4, 2017.
Subsequently, the CCI issued a demand notice dated January 17, 2017, claiming Rs 32.76 lakh towards interest for alleged delay of fourteen months in payment of the penalty, calculated under Regulation 5.
Challenging this interest demand, the company approached the Delhi High Court. Allowing the appeal, the Division Bench held that the October 1, 2015, demand notice had been served during the subsistence of the stay granted by COMPAT and was therefore rendered inoperative. In the absence of a valid and enforceable demand notice in respect of a recoverable penalty, interest under Regulation 5 could not accrue.
The High Court further held that once COMPAT reduced the penalty, the CCI's July 10, 2015 order stood merged into the appellate decision. Since the company had paid the reduced penalty on January 4, 2017, no independent liability to pay interest survived .
The CCI has challenged that ruling before the Supreme Court, which will now hear the matter along with the connected appeal in March.