Delhi High Court Clarifies Powers of CCI and Director General to Initiate Criminal Proceedings under Section 42(3) of the Act for Non-compliance of its Orders and Directions

On March 29, 2019, the Delhi High Court (‘DHC’) passed a judgment in the matters of M/S Rajasthan Cylinders and Containers Ltd. v CCI[1], Shri Jose C. Mundadan v. State and Anr.[2] and Jose C. Mundadan v. Government of NCT of Delhi and Anr.[3] (the three writ petitions are collectively referred to as ‘Petitions’). By way of this judgment, the DHC refrained from interfering with the non-compliance criminal proceedings initiated by CCI against Rajasthan Cylinders and Containers Limited (‘RCCL’), Film Distributors Association, Kerala (‘FDA’) and Mr. Jose C. Mundadan in his capacity as the Honorary General Secretary of FDA, (collectively referred to as ‘Petitioners’), under Section 42(3) of the Act. These proceedings were initiated separately against the Petitioners before the court of the Chief Metropolitan Magistrate, New Delhi (‘CMM’). The writs filed by each of the Petitioners were heard together by the DHC.

A.       RCCL (‘Petition 1’)

CCI instituted a criminal complaint under against RCCL for failure to pay penalty imposed by CCI for non-compliance with the Director General (‘DG’) and CCI’s directions in certain suo moto proceedings initiated by CCI.

B.       FDA and Mr. Jose C. Mundadan (‘Petition 2 and Petition 3’)

CCI instituted a criminal complaint against FDA through Mr. Jose C. Mundadan and against Mr. Jose C. Mundadan, in his capacity as the Honorary General Secretary of the FDA for failure to pay penalty imposed by CCI and comply with DG’s directions.

The Petitioners challenged the jurisdiction of CCI in initiating criminal proceedings for failing to pay the penalty imposed by CCI and comply with directions of DG. It was argued that the penal clause leading to such criminal action in the court of CMM under Section 42(3) of the Act: (i) was not intended to cover non-compliance of orders directing payment of penalty; (ii) only dealt situations arising out of non-compliance of orders of CCI and not the DG; and (ii) would lead to double jeopardy, which is prohibited under Article 20(2) of the Constitution of India.

DHC clarified that the cause of action for criminal complaint to be filed in the court of CMM arises in two possible situations: (i) failure to ‘comply with the orders or directions’ issued under the law; or (2) failure to pay fine imposed for non-compliance with orders or directions of CCI under specified provisions (i.e., Sections 27, 28, 31, 32, 33, 42A and 43A of the Act), with CCI finding absence of ‘reasonable cause’ after inquiry. DHC held that legislature intended the offence under Section 42(3) of the Act to have a larger sweep, covering failure to comply with the orders or directions issued under the law, including failure to pay penalty, irrespective of whether they had been issued by CCI or by its functionaries, like DG-CCI.

As for the argument on double jeopardy, the DHC relied on Union of India & Anr. v. Purushottam[4], and held that the imposition of penalty under Section 43 of the Act is civil in nature and imposed by the statutory authority (CCI) in exercise of powers conferred on it by the Act. However, the criminal action by CCI (i.e., alleging an offence under Section 42(3) of the Act) carries an additional element of failure to comply further with the said directions/orders. On this basis, DHC held that such an action did not violate Article 20(2) of the Constitution of India and rejected the Petitions for these reasons.

[1] Crl. M.C. 4363/2018
[2] Crl..M.C. 5324/2018
[3] Crl. M.C. 5371/2018
[4] (2015) 3 SCC 779