C&M E-ALERT: DELHI HIGH COURT: NO INTEREST ON CCI PENALTIES WHEN APPELLATE AUTHORITY GRANTS STAY

On 1 November 2025, a Division Bench of the Delhi High Court (DHC) delivered two significant judgments on payment of interest on penalty imposed by the Competition Commission of India (CCI). 

In United India Insurance Company Limited v. Competition Commission of India,^[1] (United India) the DHC clarified that when a demand notice is rendered inoperable due to a subsisting stay by the appellate authority, no interest accrues on the penalty imposed by the CCI. Doing so, would be contrary to the letter and spirit of the Competition Act (Act), the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 (2011 Regulations) and penalise parties for complying with interim protection granted by the appellate authority.

In Competition Commission of India v. Geep Industries & Others,^[2] (Geep Industries) the DHC held that the CCI must issue a fresh demand notice after the appeal is decided and the interest will accrue only as per the fresh notice.

FINDINGS IN UNITED INDIA AND GEEP INDUSTRIES

No penalty recoverable under an invalid demand notice: In United India, the CCI issued the demand notice before, but was received by the parties after the stay had been granted. The DHC held that: (a) the stay rendered the CCI's final order imposing the penalty unenforceable and therefore, there was no "penalty recoverable" on the date of receipt of the demand notice; (b) on the date of receipt (which is the relevant date on which the notice becomes operational), the demand notice was "dead letter" as stay was already in operation; and (c) Regulation 5 triggering liability to pay interest only applies when a valid demand notice has been served.

In Geep Industries, it clarified that the issuance of a demand notice is a condition precedent for the accrual of any liability to pay interest. The CCI is not empowered to impose interest automatically from the date of the penalty order.

Levying of interest is a penal provision which restricts application of principle of restitution: In Geep Industries, the DHC clarified that the provision for imposition of interest on penalty is a penal provision and must be construed strictly. The DHC also observed that the equitable principle of restitution could not be invoked to override explicit statutory provisions or to introduce a liability not contemplated under the governing law.

Accrual of interest during the stay period defeats the objective of interim relief: The DHC observed that acceptance of the CCI's assertion would lead to an absurd and unjust result – an appellant, despite complying with the stay and depositing the penalty, would face an impossible choice: either pay the full penalty immediately, which would defeat the purpose of the stay, or leave the penalty unpaid and incur interest.

C&M COMMENT

The decisions underscore the importance of procedural correctness in penalty and interest calculations, emphasising that: (a) no interest is payable on the penalty unless a valid demand notice has been issued; and (b) demand notices and interest can only be validly issued when the penalty is legally enforceable. Specifically, the decisions:

1. Protect the statutory right to appeal as parties will not be deterred from exercising appellate rights due to the threat of accumulating interest. Previously, the DHC Single Judge decision in United Insurance and other prior decisions^[3] had created a significant burden on parties who wanted to exercise their legitimate appellate rights.

2. Provide clarity on regulatory interpretation between demand notices, stays, and interest liability under the 2011 Regulations and the amended CCI (Manner of Recovery of Monetary Penalty) Regulations 2025 (2025 Regulations).

3. Clarify that CCI's powers to recover interest is subject to proper application of the regulatory framework.

However, this may not be the conclusive word on the issue as the CCI will likely appeal these decisions to the Supreme Court.

Impact of the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2025

On 27 February 2025, the CCI notified the 2025 Regulations which repealed the 2011 Regulations. Since the 2025 Regulations do not alter the fundamental principles established by the 2011 Regulations or the Division Bench Decision, the legal position established by this judgement will likely apply under the 2025 Regulations as well

KEY TAKEAWAY

While the CCI retains and is likely to exercise its right to appeal the decisions, parties who face interest demands or have paid interests on penalties despite securing a stay, should carefully review their circumstances considering these decisions and take appropriate legal action to protect their rights.

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^[1] LPA 724/2019.

^[2] LPA 727/2024

^[3] SCM Soilfert Ltd. v. Competition Commission of India, 2018 SCC OnLine NCLAT 462.

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