Competition Commission Of India vs Thomas Cook (India) Ltd. .

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.13578 OF 2015

COMPETITION COMMISSION OF INDIA ...APPELLANT(S)

VERSUS

THOMAS COOK (INDIA) LTD. & ANR. ...RESPONDENT(S)

J U D G M E N T

ARUN MISHRA, J.

1. The Competition Commission of India (in short, “the Commission”)

is in appeal aggrieved by the order passed by the Competition Appellate

Tribunal (in short, “the Tribunal”) setting aside the order passed by the

Competition Commission under section 43A of the Competition Act, 2002

(in short, referred to as “the Act”) whereby penalty of Rupees One Crore 2

was imposed on the respondents on the ground of non­compliance of

provisions contained in section 6(2) of the Act.

2. The Thomas Cook India Ltd (for short, "the TCIL") – respondent

No.1, Thomas Cook Insurance Services India Limited, (for short, "the

TCISIL") – respondent No.2 and Sterling Holiday and Resorts India

Limited (for short, "the SHRIL") – respondent No.3 is the companies

registered under the Companies Act, 1956. The TCIL is engaged in travel

and travel related services. The TCISIL is also engaged in travel and

travel related services and is a subsidiary of the TCIL and is also a

registered corporate agent of Bajaj Allianz General Insurance Company

Limited, which is engaged in the business of selling insurance to

outbound travelers, as well as health insurance, motor insurance,

personal accident insurance etc. SHRIL is engaged in the business of

providing premium hotel services, vacation ownership services, normal

hotel services like renting of rooms, restaurants, holiday activities etc. It

also arranges meetings, incentives, conference and events for its

corporate clients. The Board of Directors of the aforesaid three

companies on 7.2.2014 approved a Scheme for demerger/amalgamation,

(referred to as the ‘Scheme'). The said Scheme contemplated the

following:

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(a) Demerger: i.e. Resorts and timeshare business of SHRIL were to be

transferred by way of demerger from SHRIL to TCISIL in lieu of which

equity shares of TCIL would be issued to shareholders of SHRIL as per

the ratio in the ‘Scheme’; and

(b) Amalgamation: SHRIL with its residual business would be

amalgamated into TCIL in lieu of equity shares to be issued to the

shareholders of SHRIL as per the ratio in the Scheme.

3. For the purpose of implementing the above transactions, the

Respondents entered into a Merger Cooperation Agreement (for short,

‘the MCA’) on the same day i.e. on 07.2.2014.

4. On the very same day i.e. 07.2.2014, by another resolution of the

Boards of Directors of the respondents, the following transactions were

approved and executed ­

(i) Share Subscription Agreement (SSA): TCISIL was to subscribe

2,06,50,000 shares of SHRIL pursuant to a preferential allotment

(amounting to 22.86% of SHRIL of equity share capital of SHRIL on fully

diluted basis);

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(ii) Share Purchase Agreement (SPA): TCISIL was to acquire 19.94% of

equity share capital of SHRIL on the fully diluted basis from certain

existing shareholders and promoters of SHRIL.

(iii) Open Offer by TCIL and TCISIL to purchase 26% of the equity share

capital from public shareholders of SHRIL, in terms of the SEBI

(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (in

short, “the SEBI’s Regulations”).

5. In addition to the above, TCISIL acquired 90,26,794 equity shares

of SHRIL through purchase on the Bombay Stock Exchange. These

purchases (hereinafter referred to as "market purchases") amounted to

9.93% of the equity share capital of SHRIL on the fully diluted basis. The

market purchases were made between 10.2.2014 and 12.2.2014.

6. On 14.2.2014, the respondents sent a notice under section 6(2) of

the Act to the Appellant – Commission, notifying only the ‘Demerger' and

‘Amalgamation'. Other transactions were, however, disclosed, while

claiming exemption from section 5 of the Act.

7. On 20.02.2014, the Commission asked the Respondents to remove

certain defects in their application and provide further information, inter 5

alia on, whether the notified and non­notified transactions were

interrelated.

8. On 5.3.2014, the Commission passed an approval order under

section 31(1) of the Act. However, it observed that the same would not

affect the action proposed under section 43(A) of the Act for imposition of

penalty in separate proceedings.

9. On 10.3.2014, the Commission issued a show cause notice asking

the respondents as to why they should not be penalized under section

43A for failing in notifying the ‘market purchase’ under section 6(2) of the

Act.

10. On 25.3.2014, the respondents filed their reply to the show cause.

After hearing the respondents, on 21.5.2014, the Commission imposed a

penalty of Rupees One crore under section 43A of the Act. As against the

same the appeal was preferred. The Tribunal has allowed the appeal

filed under section 53 B of the Act and has set aside the order passed by

the Commission. Aggrieved thereby, the appeal has been preferred by

the Commission under section 53 B of the Act.

11. It was urged by the learned senior counsel appearing on behalf of

appellants that on 7.2.2014, the Board of Directors of the three 6

respondent companies have decided about the de­merger/

amalgamation, Share Subscription Agreement (SSA), Share Purchase

Agreement (SPA), Open Offer by TCIL and the TCISIL to purchase 26% of

the equity shares capital from the public shareholders of SHRIL in terms

of the SEBI's Regulations and market purchases were also part of the

same transaction. TCISIL acquired 90,26,794 equity shares of SHRIL

through purchase on Bombay Stock Exchange between 10.2.2014 and

12.2.2014. These market purchases amounted to 9.93% of the equity

share capital of SHRIL on the fully diluted basis. Out of the aforesaid

transactions, the respondent notified only the "De­merger" and

"Amalgamation" in terms of section 6(2) of the Act. The Share

Subscription Agreement (SSA), Share Purchase agreement (SPA), Open

Offer and Market Purchases were not notified and the exemption was

claimed under notification S.O. 482 (E), dated 4.3.2011, on the premise

that turnover of the company of which shares have been acquired i.e.

SHRIL did not have turn over in excess of Rs.750/­ crores whereas the

other transactions were at the proposal/ agreement stage only. The

transaction 6 (Market Purchases) has already been consummated prior

to filing of the notice under section 6(2) of the Act on 14.2.2014. As such

the Tribunal has rightly taken the view that all the above transaction 7

being interconnected transactions or steps with the same ultimate effect

were part of the single composite combination, therefore, non­notification

of the part of the said combination, particularly, the consummation of

market purchases was a violation of the Act. Thus, a penalty of Rupees

One crore was rightly imposed by the Commission under section 43 A of

the Act.

12. It was further urged that the Tribunal erred in holding that said

transactions were not inter­dependent on each other. Tribunal also

erred in holding that market purchases fell within the ambit of

exemption notification i.e. S.O. 482 (E). The Tribunal has committed a

gross error while not correctly identifying the issue as to combination.

The combination was clearly a composite one, comprised of entire series

of transaction/ steps and not any one transaction on a stand­alone

basis. The penalty was rightly levied on the respondents for their failure

to notify the entire combination and avoiding regulatory scrutiny by

notifying only a part thereof. Even if the market purchases could be said

to be exempted, if taken in isolation, the entire composite combination

could never be stated to be exempted, as the whole of it had to be notified

in terms of section 6(2). The violations were not purely technical, thus,

the order passed by the tribunal be set aside.

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13. Per contra, on behalf of the respondents learned senior counsel

contended that section 5 of the Act defines the combination especially in

terms of providing asset and turnover thresholds, is to ensure that the

only transaction between enterprises or groups of enterprise above a

specified critical size are scrutinized by the Commission, as these

transactions are more likely to have a measurable market effect or an

AAEC factors in the relevant market, therefore, may be required to be

preempted and corrected by the Commission. It was further contended

that a target based exemptions exempt certain transactions from the

purview of the term ‘combination' as defined under section 5 of the Act.

Under the Ministry of Corporate Affairs Notification S.O. 482 (E) dated

4.3.2011, certain transactions (in the nature of ‘acquisition') are

exempted from a requirement to mandatorily notify to the Commission.

If the value of the assets or turnover of the target enterprise does not

exceed a specified de minimis threshold, the transaction which qualifies

under the Target Based Exemption are exempt from the purview of the

"combination" under section 5 of the Act. Therefore, the Share

Subscription Agreement (SSA), Share Purchase Agreement (SPA) and

open offer are exempted under the Target Based Exemption on account

of being "acquisition" of shares, are also eligible for the Target Based 9

Exemption as admittedly the turnover of SHRIL was below the de

minimis threshold. It was also contended that market purchases of

9.94% by TCISIL on the stock exchange were not interdependent on the

main Merger Scheme. Merely because they were contemplated

contemporaneously, did not mean that all the transactions were “inter­

dependent”. The said ‘market purchase’ finds no mention in either the

merger scheme or the joint press release issued by respondent No.7 on

7.2.2014. The reference to part equity, part merger deal means the

reference to merger scheme and acquisition of shares by way of Share

Subscription Agreement, Share Purchase Agreement and open offer and

not market purchases which were completely a separate and distinct

acquisition. The Commission in the case of Vedanta Aluminium Limited

held that transactions in a series of transactions which are inter­related

and inter­dependent shall be considered as a composite whole if the

"ultimate objective" can be achieved only on the successful completion of

all such transactions in a series of transactions which are interrelated or

interdependent. In the instant case, the Market Purchases do not satisfy

this fundamental tenet established by the Commission as the Merger

Scheme was in no way dependent upon the market purchases and would

have been implemented irrespective of the market purchases. 10

The learned counsel further pointed out that there is a subsequent

change in law with effect from March 28, 2014, after show cause notice

but before passing the penalty order, the Commission introduced a new

provision in the Combination Regulations. Regulation 9(5) which

provides that requirement of filing notice shall be determined with

respect to the substance of the transactions and any structure of the

transaction(s) comprising a combination that has the effect of avoiding

notice in respect of whole or part of the combination shall be

disregarded. Thus, it was incumbent upon the Commission to look into

the substance of the transaction.

14. Lastly, it was contended that there were no malafides on the part of

the respondents. Notification to the Commission filed by the respondents

on 14.2.2014, did contain information about the market purchases

under the heading “Exempt Transactions” on the basis that the Target

Based Exemptions covered the market purchases. Thus, imposing a

penalty on the respondents for not having specifically identified the

market purchases has been part of "Notifiable Transaction" is nothing

more than a mere technicality. The respondent was under a bona fide

and genuine belief that market purchases were unconnected and

moreover, exempt. Further, no malafides have been attributed to the 11

respondents even in the penalty order passed by the Commission on

21.05.2014 and when Commission had passed the Approval Order on

6.5.2014 and observed that market purchases would not result in an

appreciable adverse effect on competition in the market, penalty ought

not to have been imposed by the Commission. The Tribunal has rightly

set it aside.

15. Before proceedings to deal with the rival submissions, it is

necessary to note the statutory framework of the Act. Section 5 of the

Act defines the combination for the purposes of Act. Section 5 is

extracted hereunder.

“5. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if—

(a) any acquisition where—

(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have,—

(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(B) [in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]

(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being 12

acquired, would belong after the acquisition, jointly have or would jointly have,—

(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or

(B) [in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India; or]

(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of similar or identical or substitutable goods or provision of a similar or identical or substitutable service, if—

(i) the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control jointly have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(B) [in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]

(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the acquisition, jointly have or would jointly have,—

(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores or

(B) [in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India; or]

(c) any merger or amalgamation in which— 13

(i) the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, as the case may be, have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(B) [in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]

(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,—

(A) either in India, the assets of the value of more than rupees four­thousand crores or turnover more than rupees twelve thousand crores; or

(B) [in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees Fifteen Hundred Crores in India”

16. Under section 5(a), a combination is formed if the acquisition by

one person or enterprise of control, shares, voting rights or assets of

another person or enterprise subject to certain threshold requirement

that is minimum asset valuation or turn over within or outside India.

17. Under Section 5(b) of the Act the combination is formed if the

acquisition of control by a person over enterprise when such person has

already acquired direct or indirect control over another enterprise 14

engaged in the production, distribution or payment of a similar or

identical or substitutable good provided that the exigencies provided in

section 5(b) in terms of asset or turnover are met.

18. Under section 5(c) merger and amalgamation are also within the

ambit of combination. The enterprise remaining after merger or

amalgamation subject to a minimum threshold requirement in terms of

assets or turnover is covered within the purview of section 5(c).

19. Once a particular transaction or a series of transactions falls within

the purview of combination, it is obligatory to report the same to the

Commission under section 6 of the Act. Section 6(1) prohibits

combinations which cause or likely to cause an adverse effect on the

competition and such a combination shall be void. Section 6(2) of the

Act requires that advance notice has to be given of the proposal to enter

into a combination and that has to be given within 30 days of approval of

the proposal relating to merger or amalgamation, execution of any

agreement or other document or acquisition referred to in section 5(a).

Section 6 (2) makes it clear that no combination shall come into effect

until 210 days have elapsed from the date on which notice has been

given to the Commission under section 6(2) and the Commission has

passed orders under section 30(1), whichever is earlier. And once 15

mandatory notice is given under section 6(2), the Commission has to deal

with the same in accordance with the provisions contained in sections

29, 30 and 31. Certain exceptions are carved out as to Public Financial

Institutions, Foreign Investment Institutions, Banks or Public Venture

Funds etc. funds under section 6(4) of the Act.

20. On 4.3.2011, Central Government in the exercise of its powers

under section 54(a) of the Act issued notification No. SO. 482 E dated

4.3.2011, commonly known as target­based exemptions, which reads as

under:

“In exercise of the powers conferred by clause (a) of section 54 of the Competition Act, 2002 (12 of 2003) the Central Government, in public interest hereby exempt an enterprise, whose control, shares, voting rights or assets are being acquired has assets of the value of not more than INR 250 crores in India or turnover of not more than INR 750 crores in India from the provisions of Section 5 of the said Act for a period of 5 years.”

21. Section 64 of the Act confers upon the Commission power to make

Regulations. Under section 64(3), the Regulations are to be placed before

the Houses of Parliament. On 11.5.2011, the Commission framed the

Competition Commission of India (Procedure in Regard to the

Transaction of Business Relating to Combinations) Regulations, 2011 (for 16

short, “the Regulations, 2011”). Regulation 9(4) as it stood at the

relevant time, is as under:­

9(4). Where the ultimate intended effect of a business transaction is achieved by way of a series of a steps or smaller individual transactions which are inter­connected or inter­ dependent on each other, one or more of which may amount to a combination, a single notice, covering all these transactions, may be filed by the parties to the combination.”

22. It is relevant to note here that the Act and Regulations, 2011

clearly envisage that a combination can consist of one or more

transactions. Under Regulation 9(4) of the Regulations, 2011, the parties

have an option of giving either a single notice or multiple notices in

respect of all the transactions. On 30.5.2011, sections 5 and 6 of the Act

were brought into force.

23. It is apparent that between the three respondent companies de­

merger of the resort of SHRIL on time­share basis took place. It was to

be transferred to TCISIL in view of the equity shares of TCIL were to be

issued to shareholders of SHRIL as per the ratio provided in the scheme.

There was an amalgamation of SHRIL with its residual business into

TCIL. There was shares subsequent transfer agreement. The TCISIL was

to subscribe 2,06,50,000 shares of SHRIL to preferential allotment

amounting to 22.86 of the equity share capital.

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24. TCISIL was to acquire 19.94% of equity share capital of SHRIL.

‘Open Offer' by TCIL and TCISIL was to purchase 26% of the equity share

capital from public shareholders of SHRIL in terms of SEBI's regulations

and market purchases. TCISIL acquired 90,26,794 equity shares of

SHRIL through purchase in Bombay Stock Exchange amount to 9.93% of

equity share capital on the fully diluted basis. Public notice was

published to the following effect:

“Sterling Holiday Resort (India) Limited

Thomas Cook (India) Limited & Sterling Holiday Resort (India) Limited, announce merger

 Merger focused on synergies and jointly leveraging growing Domestic & Inbound travel, Vacation Ownership & Hospitality opportunities.

 Post­merger, Sterling Holiday Resorts to continue operations under the leadership of Ramesh Ramanathan with an independent Board

 Based on equity investments and merger ratios the aggregate value of the two companies is approximately Rs.3000 Cr.

Mumbai, February 7, 2014

Thomas Cook (India) Ltd. (TCIL) – India's leading integrated travel and travel related financial services company, and the 27­year­old vacation ownership pioneer, Sterling Holiday Resorts India Limited announced a merger between the companies today. The transaction is expected to close by the fourth quarter of 2014, subject to customary closing conditions and regulatory approval as required.

The part equity, part merger deal – estimated to be valued at Rs.870 Cr., is structured as a multi­stage process:

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 TCIL Group will make a Preferential Allotment Investment for approximately 23.24% of approximately Rs.190 Cr. into Sterling.

 TCIL Group purchases 23.63% stake from Sterling shareholders for Rs.207 Cr.

 TCIL Group will make a mandatory open offer for buying up to 26% stake in Sterling for Rs.230 Cr.

 TCIL Group has an option to buy an additional 7.22% stake from shareholders for Rs.63 Cr.

 The merger will involve shares of TCIL being issued to Sterling shareholders at a defined swap ratio or 120:100

The merger brings significant synergies to both partners – with Thomas Cook India gaining access to Sterling Resorts' network of 19 resorts in 16­holiday destinations across India.

The company also has 15 additional sites where it plans to add new resorts in the coming years.

Serling's affiliation with Resort Condominiums International (RCI)­ the global expert in exchange vacations, also allows its members to vacation in over 4000 RCI affiliated resorts all over the world."

25. The resolution passed by the Board of Director of TCIL on

7.02.2014. Share Subscription Agreement etc. and similar resolutions

were passed by TCISIL and SHRIL.

26. It is apparent that in the notification made under section 6(2) on

14.2.2014 notifiable transactions were shown regarding merger and

amalgamation. It was also mentioned that parties have also

contemplated certain other transactions in view of the notifiable

transactions, they were the substitution of equity shares, SPA, open offer 19

and market purchase. It is crystal clear from the aforesaid application

itself that all these transactions were part of the same transactions and

even before notifying the transactions of purchase from the market on

14.2.2014, it was consummated between 10.2.2014 to 12.2.2014. It is

crystal clear that market purchases being a part of the composite

combination was consummated before giving notice to the Commission.

Joint Press Release dated 7.2.2014 clearly indicated SPA as an open

offer. The Board of Directors of the respective parties authorized market

purchases on the same day. All the said transactions are intrinsically

connected and interdependent with each other and form part of one

viable business transaction.

27. Though market purchases have no references in MCA, SA, SPA and

the scheme, the facts, and circumstances of the case, as the scheme was

prepared on the same day and the three companies passed the resolution

on the same day. All other acquisitions were made on the same day.

Market purchases having been consummated between 10.2.2014 to

12.2.2014, which is almost after finalizing the composite combination

clearly suggested that market purchases would not have taken place in

the absence of scheme and the other acquisitions. In case they were not

part of the same scheme that would not have been referred to in the 20

notice filed by them with the Commission on 14.2.2014. Thus, in our

considered opinion market purchases were not independent and were

intrinsically related to the scheme and other acquisitions.

28. Coming to the question of the exemption that was claimed, the

market purchases do not qualify as a combination in view of the target

exemption notification which exempts an enterprise if ‘assets’ are of the

value not more than INR Rs.250 crores in India or ‘turnover’ of not more

than INR Rs.750 crores in India. When series of transactions is

envisaged to accomplish a combination, all the transactions have to be

taken into consideration by the Commission, not an isolated transaction.

While it is open for the parties to structure their transactions in a

particular way the substance of the transactions would be more relevant

to assess the effect on competition irrespective of whether such

transactions are pursued through one or more step/transactions.

Structuring of transactions cannot be permitted in such a manner so as

to avoid compliance with the mandatory provisions of the Act. For

ensuring the compliance with the requirements of the Act it is open to

considering whether the particular step was an individual transaction or

part of the whole of the transaction. It was evident in the facts and

circumstances of the case as TCISIL would not have made market 21

purchase in the absence of any one transaction. Thus, market

purchases could not have been termed to be independent transaction.

29. Coming to the submission with respect to the effect of regulation

9(4) of the combination regulation. It is apparent that there is power

under the Regulation 9(4) to consider the ultimate intended effect of

transaction achieved by series of steps which are interconnected or inter­

dependent on each other, it would depend upon the facts and

circumstances of the case and a single notice may be filed by the parties

to a combination. The Regulation envisages the possibility of a business

transaction may be achieved by a combination by way of interconnected

or interdependent steps/ transactions. Enabling provision to file single

notice would not mean that in what particular manner transaction has

taken place, same is to be determined on the facts and circumstances.

The market purchases were not independent could not have been viewed

in isolation for the purpose of the exemption.

30. The provision of Regulation 9(4) clearly acknowledges the

possibility of the business transaction being interconnected or

interdependent steps of such transactions. Technical interpretation to

isolate two different steps of transactions of a composite combination

would be against the spirit and provision of the Act. Market purchases 22

were not independent and could not be used in isolation for the purpose

of any exemption. Regulation 9(4) cannot be interpreted to enable

consummation by a composite combination before giving notice to the

Commission. That would be defeating the intent and purpose of the Act

and in particular section 5 and 6 thereof.

31. If the ultimate objective test is applied, it is apparent that market

purchases were within view of the scheme that was framed. As such the

subsequent change of law also did not come to the rescue of the

respondents considering the substance of the transaction. The market

purchases were part of the same transaction of the combination.

32. Lastly, the submission raised that there were no malafides on the

part of the respondent as such penalty could not have been imposed. We

are unable to accept the submission. The mens rea assumes importance

in case of criminal and quasi criminal liability. For the imposition of

penalty under section 43A, the action may not be mala fide in case there

is a breach of the statutory provisions of the civil law, penalty is attracted

simpliciter on its violation. The imposition of penalty was permissible

and it was rightly imposed. There was no requirement of mens rea under

section 43A or intentional breach as an essential element for levy of

penalty. Section 43A of the Act does not use the expression "the failure 23

has to be willful or mala fide" for the purpose of imposition of penalty.

The breach of the provision is punishable and considering the nature of

the breach, it is open to impose the penalty.

In Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253, with

respect to imposition of penalty on failure to comply with the civil

obligation this Court has laid down thus:

"In our opinion, mens rea is not an essential ingredient for contravention of the provision of a civil act. In our view, the penalty is attracted as soon as the contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart that unless the language of the statute indicates the need to establish the element of mens rea. It is generally sufficient to prove that a default in complying with the statute has occurred. The penalty has to follow and only the quantum of penalty is discretionary.

x x x

In our considered opinion, a penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence intention of the parties committing such violation becomes wholly irrelevant. x x x

We also further hold that unless the language of the 24

statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15(D) (b) and Section 15­E of the Act, there is nothing which requires that mens rea must be proved before a penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow."

33. The imposition of penalty under section 43A is on account of

breach of a civil obligation, and the proceedings are neither criminal nor

quasi­criminal; the penalty has to follow. Only discretion in the provision

under section 43A is with respect to quantum of penalty.

34. We find that in the facts and circumstances of the case, the order

passed by the Commission was just and proper and in accordance with

law, which the Tribunal set aside on wrong premises. Thus, the order of

the Tribunal cannot be said to be legally sustainable.

35. The nominal penalty has been imposed by the Commission of

Rupees One crore only considering the facts and circumstances of the

case and that there was a violation of the provision. Thus, we find no

ground to interfere with the nominal penalty that has been imposed in

the instant case.

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36. Resultantly, the appeal filed by the Commission is allowed, the

order passed by the Tribunal is set aside, and passed by the Commission

imposing penalty of Rupees One crore is hereby restored. No costs.

…………………………….J. (ARUN MISHRA)

……………………………..J. (NAVIN SINHA)

APRIL 17, 2018 NEW DELHI.