Coming Soon: Compensation Applications under Competition Act 2002
[Prashansa is an Advocate practising at the High Court of Bombay.]
A recent case, Food Corporation v. Excel Corp and Others (Food Corporation Case), gave much-needed clarity on compensation applications filed under the Competition Act 2002 (the Act), which have only recently started gaining traction. The Food Corporation Case determined a compensation application filed under Section 53N of the Act before the National Company Law Appellate Tribunal (NCLAT). The maintainability of the compensation application itself was challenged in the aforesaid case. Vide its decision on 3 June 2020, the NCLAT found the compensation application to be maintainable.
In this article, the author analyses the grounds on which a compensation application may be filed and the grounds on which the compensation application was allowed by the NCLAT in the Food Corporation Case.
One of the primary objectives of the Act is the protection of consumer interests. The penal provisions of the Act afford such protection by regulating anti-competitive conduct of enterprises. At the same time, compensating the consumers for losses suffered on account of abusive practices is equally important for the purpose of preserving their interests. A consumer can avail such compensation by filing an application under Section 53N of the Act; a legal right rarely enforced by the consumers.
Compensation applications can be granted only after a case against an enterprise has been finally disposed of i.e. after the enterprise is held anti-competitive by the final court of appeal. As litigation under the Act started only in 2009, the first-ever batch of appeals from orders of the Competition Commission of India (CCI) and erstwhile Competition Appellate Tribunal (COMPAT) are still pending before the Apex Court. Therefore, no precedent for a successful compensation application exists. This picture is expected to change soon enough with the impending disposal of several cases by the Apex Court.
The NCLAT decision in the Food Corporation Case is a first of its kind, which upholds the maintainability of a compensation application and embarks upon such ‘private’ enforcement of competition law in India.
In the said case, the Respondents i.e. Excel Corp, UPL and Sandhya Organic Chemicals (Excel Corp.) were found to have formed a ‘cartel’ in violation of Section 3(3) of the Act by the CCI by way of its Order dated 23 April 2012. In an appeal against the order, COMPAT agreed with the CCI in terms of the violations by Excel Corp but disagreed with the penalty CCI levied. Competition Appellate Tribunal (COMPAT) calculated the penalty on a different set of parameters than CCI. The Supreme Court of India (SC) upheld the COMPAT order on 8 May 2017.
Under the strength of the SC order, Food Corporation claimed compensation against the three respondents by filing a single application before the NCLAT on 11 July 2019.
Excel Corp and others contended before NCLAT that the application at hand was barred by limitation. While deciding the above claims, the following two questions were answered by NCLAT:
1. When can a compensation application be filed?
Section 53N contemplates that a claim for compensation may arise from the findings of the CCI or Appellate Tribunal. In view thereof, it was the argument of Excel Corp that a compensation application ought to be filed while the order passed by CCI/Appellate Tribunal persists, and that after the decision by the SC, the existence of the CCI/Appellate Tribunal’s order merges with that of the SC. Therefore, with no CCI/Appellate Tribunal order “existing”, the compensation application also loses its existence/fulcrum.
The NCLAT disagreed with this argument. It observed that Section 53N does not deal with the limitation period for filing a compensation application. It only provides that the ‘cause of action’ for a compensation claim is to arise out of the findings of the CCI or Appellate Tribunal. Likewise, in the present case, the application by Food Corporation finds its genesis in the order of CCI/COMPAT.
In light thereof, NCLAT observed that the application has been filed in accordance with Section 53N as there is nothing in the section to indicate that a compensation application must be filed before the order of the Supreme Court. The NCLAT further held that since the orders of CCI and COMPAT attained finality only after the decision of the SC, such a compensation application was well within time.
The NCLAT also noted that in the case of National Stock Exchange of India Limited v Competition Commission of India (Civil Appeal Number 8974 of 2014), the compensation claim was made when the appeal was yet to be decided by the SC but the said application was (and continues to be) stayed until the final decision of the Apex Court. This means that until orders of CCI/COMPAT attain finality, the fate of compensation applications remains uncertain, therefore a hard and fast rule to file such applications before the SC decides the case does not make much difference.
2. Quantum of the limitation period for filing a compensation application
Section 53N does not contemplate any limitation period within which a compensation application ought to be filed. However, according to the ‘doctrine of laches’, the NCLAT observed that a compensation application must be filed within a ‘reasonable’ period of time.
NCLAT thus ruled that the instant compensation application having been filed within 3 years of the order of the Apex Court, has been filed within a reasonable period of time and is not barred by limitation.
It is also pertinent to note that the Competition (Amendment) Bill 2020 (Competition Amendment Bill) seeks to inter alia amend Section 53N of the Act to include ‘orders of the Supreme Court’ such that the amended section would read that compensation claims may arise from the findings of CCI or orders of Appellate Tribunal or those of the SC. Therefore, the controversy in the instant case― ‘whether compensation applications can be filed after the order of the Supreme Court’, would be settled once the Competition Amendment Bill becomes the law. Also, this proposed amendment in procedural law is merely clarificatory in nature, therefore it would have retrospective application as was held by the Supreme Court in BK Educational Services Private Limited v. Parag Gupta and Associates in respect of an amendment to Insolvency and Bankruptcy Code 2016.
The law in relation to compensation applications remains unsettled. Not many controversies for awarding compensation to the consumers have arisen before the Indian courts as the competition jurisprudence in India still remains at its nascent stage with few examples of compensation applications. However, several compensation applications could be decided and filed in times to come.