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The Delhi High Court today sought Competition Commission of India’s response on two Indian car makers’ plea challenging provisions of Competition Act as well as a CCI order imposing a penalty on them for violating trade norms in after-services market and spare parts.

A bench of Chief Justice G Rohini and Justice Rajiv Sahai Endlaw also directed that till the next date of hearing, the order imposing penalty on Mahindra and Mahindra and Tata Motors “shall not be given effect to” as far as these two companies are concerned.

While Mahindra has been ordered by CCI to pay a fine of over Rs 200 crore, Tata was slapped with an amount of Rs 1400 crore.

The court directed CCI to inform it whether the Competition Appellate Tribunal (COMPAT) is functional and also whether the Supreme Court is seized of any matter challenging provisions of the Competition Act, while the car makers have been ordered to produce a copy of the August 25 order of the anti-trust regulator imposing a fine on them.

The provisions challenged by the two companies pertain to the imposition of penalty (section 27(b) of the Act) and the holding of meetings by CCI (section 22) to adjudicate a matter.

Senior advocate Gopal Subramaniam, appearing for Mahindra and Mahindra, contended that both provisions are ultra vires the Constitution.

He said that under the Act, CCI is arbitrarily imposing penalties without giving a hearing.

This view was echoed by senior advocate Abhishek Manu Singhvi, appearing for Tata, who said CCI is imposing penalty “as it sees fit”.

They also contended that in the present case, the issue was heard by a seven-member quorum of CCI, however, the order under challenge was passed by only three members.
Counsel for CCI, on the other hand, contended that the order can be challenged before COMPAT which is functional right now and added that the apex court is seized of a matter challenging provisions of the Competition Act.

On August 25, CCI had fined Mahindra, Tata and 12 other companies, Rs 2,554 crore for allegedly violating trade norms in the spare parts and after-services market and the same was to be deposited within 60 days.

For each entity, the individual fine amounted to two per cent of their average turnover.

Tata has contended that while calculating the amount, CCI also took into account the turnovers of its subsidiary companies, like Jaguar and alleged that the provision for imposing penalty “is being misused”.

They also said that CCI had suo motu expanded the scope of the investigations into the entire car industry even though it had originally received a complaint against three automobile firms – Honda, Volkswagen and FIAT.

The two companies also questioned whether the anti-trust regulator had the powers to expand the scope of investigations on its own even if the complainant had not named a company in the original complaint.

Besides the two, the other companies on which penalties have been imposed were, Mercedes Benz India Pvt Ltd, Toyota Kirloskar Motor Pvt. Ltd, Honda Cars India Ltd, Volkswagen India, Fiat Group Automobiles India Pvt. Ltd, Ford India Pvt.

Ltd, General Motors India Pvt. Ltd, Nissan Motor India Pvt.

Ltd, Hindustan Motors Ltd, BMW, Maruti Suzuki and Skoda Auto India Pvt. Ltd.

A single-judge bench of the high court had recently given three weeks interim protection from the CCI order to BMW and Mercedes-Benz.

The same bench had also stayed the operation of the order against Maruti.

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