No Need for a Second Show-Cause Notice Before Imposing Penalty Under Competition Act: Supreme Court Clarifies Scope of Natural Justice

“Notice is to answer the contravention, not the proposed penalty” – Supreme Court upholds CCI’s full penalty powers under Section 27 of Competition Act. In a significant judgment reaffirming the powers of the Competition Commission of India (CCI) and clarifying procedural norms under the Competition Act, 2002, the Supreme Court of India on 26th September 2025 held that a second show-cause notice before imposing penalties under Section 27 is not legally required, provided the parties have been given access to the Director General’s (DG) investigation report and an opportunity of hearing.

The Court allowing the appeal filed by the CCI against the 2016 judgment of the erstwhile Competition Appellate Tribunal (COMPAT) which had partially quashed penalties imposed on two key office bearers of the Kerala Film Exhibitors Federation (KFEF).

CCI Had Penalised Federation for Anti-Competitive Boycott of Theatre

The case arose from a complaint filed by Crown Theatre in 2014 alleging that KFEF was indulging in anti-competitive practices by coercing film distributors not to release films at Crown Theatre’s venue. The allegations included threats and a boycott call initiated by KFEF, particularly targeting Tamil and Malayalam film distributors who dealt with Crown Theatre.

The Director General's report, based on a detailed investigation, concluded that the KFEF had violated Section 3(1) read with Section 3(3)(b) of the Competition Act, which prohibits anti-competitive agreements and boycotts.

Importantly, the DG also found personal involvement of Mr. P.V. Basheer Ahmed (President) and Mr. M.C. Bobby (General Secretary) of KFEF. The CCI, in its final order dated 08.09.2015, imposed both monetary and behavioural penalties on the KFEF and these two office bearers under Section 48 (liability of individuals in companies/associations).

While COMPAT upheld the violation by KFEF, it quashed the penalties on Mr. Ahmed and Mr. Bobby on the grounds that no separate show-cause notice was issued regarding their personal liability or the proposed penalties.

“No Statutory Mandate for Second Show-Cause Notice; Prior Opportunity via DG Report is Sufficient”

Supreme Court Rejects COMPAT’s View on Violation of Natural Justice

A bench comprising Justice Manoj Misra and Justice K.V. Viswanathan categorically held that no second or separate show-cause notice is mandated under the Act before imposing penalties on individuals under Section 27 read with Section 48.

The Court observed: “We are fully convinced that the notice dated 10.06.2015 issued in the present case fulfils the requirement in law as it then stood… Respondents 2 and 3 can complain of no prejudice if, on the basis of this notice, the Commission held them guilty.”

The notice of 10.06.2015, which forwarded the DG’s report to the office bearers and asked them to file replies, submit financial statements, and appear for an oral hearing, was deemed adequate. The Court stated that this notice, in light of then-applicable Regulation 48, met all procedural fairness standards.

“Penalty on Office Bearers Was Proportionate, Not Shocking”

Monetary and Behavioural Penalties Justified Due to Repeat Offences

The Supreme Court reinstated the penalty of 10% of average income on both office bearers:

• P.V. Basheer Ahmed: ₹56,397

• M.C. Bobby: ₹47,778

Additionally, the behavioural remedy imposed by CCI, directing that the two shall not associate with KFEF’s affairs for 2 years, was also upheld.

The Court ruled:

“The penalty imposed… cannot be said to be of such a nature as to shock the conscience of a judicially trained mind… Behavioural remedy like the one ordered would alone protect the interest of the consumers and uphold the majesty of law.”

Notably, the Court found that these very individuals had previously been penalised in Case No. 45/2012 for similar anti-competitive conduct. Their repeated actions justified more stringent deterrence.

“Behavioural and Structural Remedies Are Core Tools Under Section 27”

SC Emphasises CCI’s Role as a Robust Regulator, Not a Toothless Body Like MRTP Commission

The judgment draws a contrast between the current Competition Act and the outdated MRTP Act, which limited remedies to mere cease-and-desist orders.

Quoting international best practices and scholarly work, the Court recognised behavioural and structural remedies as essential elements of competition enforcement, stating:

“Without such powers… behavioural remedies imposed on enterprises which incidentally impinge on individuals could never be given effect to.”

The Court held that Section 27 read with Section 48 clearly allows CCI to impose such remedies, including debarment from association, without necessitating a second notice.

“Right to Form Association Not Absolute — Article 19(1)(c) Subject to Reasonable Restrictions”

The respondents argued that the personal penalties violated their fundamental right to form associations under Article 19(1)(c) of the Constitution.

Rejecting this contention, the Court held:

“Unethical practices can always be checked… the right under Article 19(1)(c) is not absolute and reasonable restrictions under Article 19(4) are permissible.”

The judgment affirms that personal liability under Section 48, when backed by due process and credible evidence, does not infringe constitutional rights.

Key Takeaway from the Judgment

“The ecosystem of the Competition Act is sufficient notice to the violator that the regulating body has vast discretion... Providing a back and forth to arrive at an appropriate penalty can defeat the purpose of the Act.”

This judicial declaration strengthens the CCI's authority to impose timely and proportionate penalties, ensuring deterrence, efficiency, and finality in competition law proceedings.

COMPAT's Interpretation Overturned, Full CCI Order Restored

The Supreme Court allowed the appeal, restored the full order of the CCI dated 08.09.2015, and directed that:

• The 2-year disassociation of Mr. P.V. Basheer Ahmed and Mr. M.C. Bobby from KFEF will commence from 01.12.2025

• Compliance reports to be filed within three months

The decision is a landmark precedent in affirming that natural justice is not a ritualistic formality, and that regulatory discretion and proportionality must be preserved in the interest of effective market regulation.

Date of Decision: 26 September 2025