Penalties, leniency, settlements and commitments under the Competition Act

Competition Law · Unit V · Topic 15 of 18 · 7 min read

The procedure for imposing penalty and the penalty provisions of Chapter VI: section 27 on global turnover, the cartel penalty, liability of officers under section 48, gun-jumping, non-compliance and false information, lesser penalty and leniency plus under section 46, settlements and commitments under sections 48A to 48C, and the penalty guidelines, with a leniency problem.

← All Competition Law topics Past papers

On this page

1. Procedure for imposing penalty
2. Section 27(b): the main penalty
3. Liability of officers: section 48
4. The other penalty provisions
5. Lesser penalty (leniency): section 46
6. Settlements and commitments: sections 48A to 48C
7. Problem
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

The examinable core. January 2026 and June 2025 both asked for the procedure for imposition of penalty. The answer has two halves: the procedure (prima facie order, DG report, show-cause notice and hearing, reasoned order applying the penalty guidelines, appeal on 25 per cent deposit) and the penalty provisions (section 27(b) on global turnover; the cartel formula; sections 42 to 48). The 2023 amendment changed both halves, and an answer that ignores it is out of date.

1. Procedure for imposing penalty

Prima facie order and investigation — section 26(1); DG report under section 26(3), with supplementary report if directed.
Hearing — the report is shared, objections are taken, and before passing any order under section 27 the Commission must issue a show-cause notice stating the alleged contraventions and give a reasonable opportunity of being heard (section 26(9), 2023). Natural justice governs (section 36(1)).
Determining the amount — the Commission must consider the penalty guidelines it publishes under section 64B(3) and give reasons for any departure (section 64B(4)). The guidelines issued in March 2024 work from a base amount tied to relevant turnover, adjusted for aggravating and mitigating factors (duration, gravity, recidivism, cooperation, compliance programmes), subject to the statutory cap on global turnover.
Order and recovery — a reasoned order; penalties go to the Consolidated Fund of India (section 47); recovery under section 39, including through income-tax recovery machinery.
Appeal — to the NCLAT within 60 days (section 53B), with a pre-deposit of 25 per cent of the amount (second proviso to section 53B(2), 2023); further appeal to the Supreme Court (section 53T).

2. Section 27(b): the main penalty

On finding a contravention of section 3 or 4, the Commission may impose a penalty of not more than 10 per cent of the average of the turnover or income for the last three preceding financial years on each person or enterprise party to the agreement or abuse.

Cartels (proviso): on each producer, seller, distributor, trader or service provider in the cartel, up to three times its profit for each year of the cartel, or 10 per cent of its turnover or income for each year of the cartel, whichever is higher.

Relevant or global turnover. In Excel Crop Care Ltd. v. Competition Commission of India, 2017 INSC 1286, (2017) 8 SCC 47, the Supreme Court held that “turnover” meant relevant turnover — of the product affected — because a penalty on total turnover of a multi-product firm would be disproportionate. The 2023 amendment added Explanation 2: “turnover” means global turnover derived from all the products and services. In force from 6 March 2024. The cap is now on global turnover, while the guidelines use relevant turnover as the starting point, so proportionality survives in the calculation rather than in the definition.

3. Liability of officers: section 48

Where the contravener is a company, every person in charge of and responsible to the company for its business, and any director, manager, secretary or officer by whose consent, connivance or neglect the contravention occurred, is deemed to have contravened the Act. Since 2023 the Commission may impose on them a penalty up to 10 per cent of their average income for the last three years (for cartels, up to 10 per cent of income for each year). A person in charge escapes if he proves the contravention was without his knowledge or that he exercised due diligence.

4. The other penalty provisions

Section 42 — failure without reasonable cause to comply with orders under sections 6, 27, 28, 31, 32, 33, 42A, 43, 43A, 44 and 45: penalty up to Rs. 1 lakh a day, maximum Rs. 10 crore. Continued non-compliance or failure to pay: imprisonment up to three years or fine up to Rs. 25 crore or both, by the Chief Metropolitan Magistrate, Delhi, on the Commission’s complaint (section 42(3)).
Section 42A — compensation from the NCLAT for loss caused by contravention of the Commission’s orders.
Section 43 — failure to comply with directions of the Commission under section 36(2), (4) or of the DG: up to Rs. 1 lakh a day, maximum Rs. 1 crore.
Section 43A — failure to notify a combination or consummation in breach of the standstill: up to 1 per cent of total turnover, assets or deal value, whichever is higher.
Section 44 — false statement or omission by a party to a combination: Rs. 50 lakh to Rs. 5 crore.
Section 45 — false information, omission or destruction of documents: up to Rs. 1 crore.

The 2023 amendment changed “punishable with fine” to “liable to a penalty” in sections 42(2), 43 and 45, making them civil penalties imposed by the Commission. Section 59A allows compounding of offences not punishable with imprisonment.

5. Lesser penalty (leniency): section 46

A cartel member who makes a full, true and vital disclosure may receive a lesser penalty, as specified by regulations (the Lesser Penalty Regulations, 2024). The first applicant may receive a reduction of up to 100 per cent, the second up to 50 per cent, and later applicants up to 30 per cent, depending on the order of the marker and the value added.
Not available once the DG’s investigation report has been received.
The applicant must continue to cooperate till the proceedings end. If it breaches a condition, gives false evidence, or its disclosure is not vital, the benefit is withdrawn and it may be penalised in full.
Withdrawal of an application is allowed as regulations specify; evidence submitted (but not the admission) may still be used (section 46(2), (3)).
Leniency plus (section 46(4), in force 20 February 2024): an applicant in one cartel investigation that discloses a different cartel, enabling a prima facie view on it, gets an additional reduction in the first case on top of lenience in the second.

6. Settlements and commitments: sections 48A to 48C

Available only for vertical agreements (section 3(4)) and abuse of dominance (section 4), not cartels, for which section 46 is the route.
Commitment (section 48B): offered after the section 26(1) order and before the DG report; the enterprise proposes behavioural or structural changes; no admission or payment is necessary.
Settlement (section 48A): applied for after the DG report and before the final order; the Commission may agree on payment of a settlement amount and other terms, credited to the Consolidated Fund of India.
The Commission considers the nature, gravity and impact of the contravention; the DG and other parties may object; there is no appeal from orders under either section. Failure to comply or non-disclosure revokes the order, with legal costs up to Rs. 1 crore and restoration of the inquiry (section 48C).
In force from 6 March 2024, with regulations of the same year.

Keep the three tools apart. Leniency (section 46) is for cartels and rewards disclosure. Commitments (section 48B) are early, for section 3(4) and 4 cases, and promise future conduct. Settlements (section 48A) are late, for the same cases, and usually involve a payment. Settlement orders can found a compensation claim under section 53N.

7. Problem

Five paint manufacturers have fixed prices for four years. The DG has been directed to investigate. Before his report, Company C applies for lesser penalty with emails proving the cartel; Company D follows a month later. C also discloses a separate cartel in primers. Advise C and D.

Issue. What penalty exposure C and D face and what benefit section 46 gives them.

Law. Section 27(b) proviso (three times profit or 10 per cent of turnover per year, higher of the two, on global turnover); section 46(1) and the first proviso (no lesser penalty after the DG report); section 46(4) leniency plus; Lesser Penalty Regulations.

Application. Both applications precede the DG report, so both are eligible. C is first with vital evidence and may receive a reduction of up to 100 per cent; D, second, up to 50 per cent if it adds significant value. C’s disclosure of the primer cartel, if it enables a prima facie opinion, earns it lesser penalty in the primer case and an additional reduction in the paint case. Both must keep cooperating; any concealment forfeits the benefit. Officers in charge remain exposed under section 48 unless they too cooperate.

Conclusion. C should perfect its marker and continue full cooperation; D should add evidence beyond C’s. Settlement or commitment is not available because this is a cartel.

How this is examined

January 2026: “Explain the procedure for imposition of penalty under Competition Act.” June 2025: “Explain the penalties and procedure for imposition of penalty under the Competition Act.” Use section 1 as the spine and sections 2 to 5 as content; finish with section 6 in a paragraph. Excel Crop Care and the 2023 global turnover change are the two points most likely to earn the extra marks.

Now try the real questions: Competition Law past question papers.