Levy Of Interest On Penalty Amounts Retrospectively By CCI Without A Valid Demand Notice Unsustainable: Delhi High Court

The High Court was hearing petitions challenging the levy of interest on penalties imposed under the Competition Act, where the companies argued that the CCI had not issued any notice that satisfied the mandatory procedural requirements prescribed under Regulation 3, thereby rendering the demand illegal.

A Division Bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar, after examining the regulatory scheme, observed that “the imposition of interest on the penalty that is recoverable is contingent upon and triggered by the non-compliance with the Demand Notice as expressly specified in the 2011 Regulations", while clarifying that "the principle of restitution cannot be invoked in a manner such as to give retrospective operation to the triggering event, namely the Demand Notice itself".

N. Venkataraman, ASG, appeared on behalf of CCI, while Advocate Ravisekhar Nair represented the respondents.

Background

The dispute arose after the CCI imposed monetary penalties under Section 27 of the Competition Act. When the companies did not make the payment immediately, the CCI issued communications claiming that interest would accrue on the unpaid penalty amount.

The petitioners contended that these communications did not qualify as demand notices under Regulation 3, arguing that the alleged notices lacked necessary particulars, including computation of dues, timelines, and a clear demand for payment.

The petitioners submitted that without a valid demand notice, no liability to pay interest could accrue, and therefore, CCI’s attempt to recover interest amounted to exercising powers not vested under the law. The CCI, on the other hand, argued that the original penalty order itself carried an implicit demand and that interest automatically followed upon non-payment.

Court’s Observation

The Delhi High Court examined the structure of the Competition Act along with the 2011 Recovery Regulations, noting that Regulation 3 creates a mandatory mechanism for recovery. The Bench held that the regulation requires CCI to issue a formal demand notice specifying the amount, mode of payment, time period for compliance, and consequences of default. Without such notice, recovery proceedings, including interest, cannot lawfully begin.

The Bench emphasised that Regulation 3 is not procedural in a casual sense, but a condition precedent that ensures compliance with principles of natural justice. The Bench observed that the legislative intent behind the regulation was to ensure that an assessee is duly notified of statutory liability and given a reasonable time to comply before coercive measures are initiated.

Referring to the impugned communications, the Bench found that none of them satisfied the statutory requirements. The communications referred to by CCI neither quantified interest payable nor indicated a deadline or recovery mechanism. Therefore, they did not constitute a valid “demand notice” as understood under the 2011 Regulations.

The Bench also took note that the 2011 Regulations have since been replaced by the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2025, and observed that the corresponding provisions are almost identical to those contained in the earlier Regulations.

While stating that “imposing interest on the penalty is a penal provision” and that “a penal provision must be construed strictly as provided in the statute”, the Bench held that “the argument advanced by the CCI that the principle of restitution fully applies in the present case, and therefore, upon vacation of the stay orders, the CCI ought to be restored to the position it would have occupied had the stay not operated, thereby entitling it to recover interest on the penalty amount in accordance with the 2011 Regulations, cannot be accepted without the support of an express statutory mandate.”

Consequently, the Court held that the absence of such notice deprived CCI of jurisdiction to levy interest. The Bench stated that where a statute prescribes a mode of exercising a power, the authority must act strictly within that framework.

Conclusion

With the Delhi High Court holding that the levy of interest was contrary to the statutory framework, the petitions were accordingly allowed.

Cause Title: Competition Commission of India v. Geep Industries & Others (Neutral Citation: 2025:DHC:9632-DB)

Appearances

Petitioners: N. Venkataraman, ASG, with Advocates Shivshankar, Ankur Singh, Kaustav Som and Pritha Banerjee

Respondents: Advocates Ravisekhar Nair, Parthsarathi Jha and Aayushi Sharma

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