The Supreme Court of India, on Friday, affirmed the decision of the National Company Law Appellate Tribunal (NCLAT) to nullify a ₹301 crore penalty imposed by the Competition Commission of India (CCI) on Grasim Industries Limited. This penalty was originally levied for purported abuse of market dominance in the viscose staple fibre (VSF) sector.
The judicial bench, comprising Justices JB Pardiwala and K Vinod Chandran, dismissed the CCI’s appeal against the NCLAT’s ruling, which had annulled the financial sanction and sent the case back to the CCI for re-evaluation. The NCLAT’s decision was grounded in the assertion that the CCI’s order contravened the principles of natural justice, mandating a fresh hearing after considering Grasim’s input.
The controversy originated from a March 16, 2020, directive by the CCI, which identified Grasim as a dominant player in the VSF supply market to spinners across India. The CCI accused Grasim of exploiting its dominant position by levying unfair and discriminatory pricing and enforcing ancillary obligations upon purchasers.
In its directives, the CCI instructed Grasim to halt such practices, avoid soliciting VSF consumption data from buyers, establish a transparent, non-discriminatory discount policy, and make this policy publicly accessible. Furthermore, the CCI stipulated that Grasim should not impose any usage restrictions on VSF, thereby allowing buyers the freedom to use it for spinning, trading, or any lawful purpose.
Grasim contested the CCI’s decision, primarily arguing that the order was issued without providing the company an opportunity to respond. The company referenced the findings of the Director General (DG) of CCI, which indicated that merely failing to disclose pricing or discount policies did not constitute a breach of the Competition Act. Additionally, the DG concluded that Grasim was not obligated to support traders’ businesses and could not be penalized for not supplying VSF to traders.
More Read
Despite these findings, the CCI instructed Grasim to publicly reveal its discount policy and refrain from imposing usage restrictions that could hinder VSF trading. The NCLAT observed discrepancies between the DG’s report and the CCI’s directives and emphasized that proper notice and hearing are essential whenever the CCI considers deviating from the DG’s report. The tribunal also cited the newly added proviso to Section 26(9) of the Competition Act, effective from September 19, 2024, which mandates a show-cause notice prior to issuing final orders.
Consequently, the NCLAT nullified the CCI’s order and remanded the matter for fresh adjudication. The CCI subsequently appealed to the Supreme Court. With the Supreme Court’s decision to uphold the NCLAT’s ruling, the CCI is now required to reconvene the hearing, addressing Grasim on any points of divergence from the DG’s findings before reaching a new decision.
Senior Advocate Sajan Poovayya represented the CCI in this matter.
