NCLAT Delhi Quashes ₹301.61 Crore Penalty On Grasim, Says CCI Must Hear Party Before Deviating From DG Report

On 5 May, the New Delhi National Company Law Appellate Tribunal (NCLAT) held that the Competition Commission of India (CCI) must give a party an opportunity to respond if it intends to depart from the Director General's (DG) findings before issuing adverse directions.

A Bench of Judicial Member Yogesh Khanna and Technical Member Ajai Das Mehrotra set aside the CCI's order dated 16 March 2020, which had imposed a penalty of Rs 301.61 crore on Grasim Industries Ltd in the alleged abuse of dominance case in the viscose staple fibre (VSF) market. It observed:

“The National Company Law Appellate Tribunal (NCLAT) at Delhi on 5 May set aside the Competition Commission of India's (CCI) order dated 16 March 2020 that imposed a penalty of Rs 301.61 crore on Grasim Industries Ltd. for alleged abuse of dominance in the Viscose Staple Fibre (VSF) market.”

The CCI had found Grasim dominant in the VSF market and held that it charged discriminatory prices, imposed additional conditions on buyers, and lacked transparency in its discount policy. It directed the company to publish a clear and non-discriminatory discount policy, stop end-use restrictions, and avoid discriminatory practices.

Grasim challenged the order before the NCLAT. It argued that CCI changed the DG's findings without issuing a show cause notice, which violated natural justice. It also said the DG had not found any violation regarding refusal to sell to traders or non-disclosure of discount policy.

The DG had noted that traders could import VSF and that Grasim had no obligation to keep them in business. It also held that non-disclosure of the discount policy did not violate the Competition Act.

The Textile Consumer Foundation and CCI argued that earlier cases like BCCI and InterGlobe did not apply. They said those cases involved a complete change in market definition or reversal of DG findings. They also said that in this case, both the DG and CCI agreed on the relevant market as supply of VSF to spinners in India. They further argued that procedural lapses without prejudice should not invalidate the order.

The Bench noted that the DG had treated the pricing policy as discriminatory but had not found any violation for non-disclosure. However, CCI still directed Grasim to publish its policy, which differed from the DG's findings. It observed:

“Similarly, the explanation of the Commission that the word “buyer” refers only to “spinners” is not borne out by plain reading of the direction, as no such definition is provided. In the common parlance, if a “buyer” is allowed to trade, then he can be assumed to be a “trader”. Thus, this direction is also in variance with the findings of the DG.”

The Tribunal also held that CCI did not issue notice to Grasim before departing from the DG report. It said this deprived Grasim of a fair chance to respond.

Accordingly, it set aside the CCI order and sent the case back to the Commission. It directed CCI to give Grasim an opportunity to respond wherever it differs from the DG findings and to decide the matter in a time-bound manner.

For Appellants: Senior Advocate Aryama Sundaram with Advocates Nisha Kaur Uberoi, Sathak Ranade, Mehar Singh Dang, Shivangi Chawla and Ishan Arora

For Respondents: Advocates Samar Bansal, Manu Chaturvedi, Madhav Tripathi, Vedant Kapur for CCI, Advocates MM Sharma, Ankit Singh Rajput for R2