The Appellate Tribunal for Foreign Exchange in Jaipur IPL Cricket Pvt Ltd and Ors v. The Special Director Directorate of Enforcement, Bangalore held that technical violations and denial in nature are to be distinguished from a wilful act done with a mens rea. Therefore, the imposition of a penalty is to be guided by well-established principles of proportionality.
While taking this principle forward, the Supreme Court in Excel Crop Care Limited v. Competition Commission of India and Ors came up with a two-step formula to arrive at a correct quantum of penalty in quasi-criminal proceedings:
(a) Determination of relevant turnover:
The Court observed that the concerned authority should calculate turnover while relying upon audited financial statements or other authentic, reliable records for the relevant period of the offending entity and while considering the facts and circumstances of a particular case.
(b) Determination of appropriate percentage of penalty based on aggravating and mitigating circumstances
After arriving at the relevant turnover, basis nature, gravity, extent and role played by the infringer, and considering other illustrative factors such as duration of participation, the intensity of participation, loss or damage suffered as a result of such contravention, market circumstances in which the contravention took place, nature of the product, market share of the entity, barriers to entry in the market, nature of involvement of the company, bona fides of the company, profit derived from the contravention etc, appropriate percentage of penalty should be imposed.
Source: Barandbench
