Kiran Raj

The Supreme Court, Division Bench of Justice Manoj Misra and Justice K.V. Viswanathan today restored the September 8, 2015 order of the Competition Commission of India (CCI), which had imposed penalties on the Kerala Film Exhibitors Federation (KFEF) and its office-bearers, P.V. Basheer Ahmed and M.C. Bobby, for anti-competitive conduct. The case concerned the Federation’s collective action that denied screening of Tamil and Malayalam films at the informant’s Crown Theatre. The Court reinstated the monetary penalties and a two-year debarment from KFEF’s management, holding that the 2015 notice and hearing satisfied statutory requirements and reinforcing deterrence against such restrictive trade practices.

The dispute arose from an information filed by Crown Theatre against the Kerala Film Exhibitors Federation (KFEF) and its office bearers, P.V. Basheer Ahmed (President) and M.C. Bobby (General Secretary). The informant alleged that KFEF coerced film distributors to refrain from screening new Tamil and Malayalam movies at Crown Theatre, thereby restricting competition. It was claimed that KFEF threatened distributors with a boycott and called for a strike among its member theatres, resulting in the withdrawal of films such as “Raja Rani” shortly after release.

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Acting under Section 19 of the Competition Act, 2002, the Competition Commission of India (CCI) directed the Director General (DG) on 8 May 2014 to investigate the alleged anti-competitive practices. The DG’s report of 22 May 2015 concluded that KFEF violated Section 3(1) read with Section 3(3)(b) by collectively refusing to allow the exhibition of films at the informant’s theatre. The DG identified Basheer Ahmed and Bobby as key decision-makers who actively enforced the boycott, including direct communications with distributors to halt screenings. Evidence included statements from film distributors such as Mukesh Mehta of E4 Entertainment, corroborating the claim that directives were issued to block screenings.

The CCI issued notice on 10 June 2015 to KFEF and its office bearers, directing them to respond to the DG’s findings and furnish financial records. After hearings, the CCI passed an order on 8 September 2015 under Section 27 of the Act, holding KFEF and its two office bearers liable. The CCI imposed monetary penalties and ordered cessation of the anti-competitive practices, disassociation of the two office bearers from KFEF’s affairs for two years, and compliance programmes for competition awareness.

The respondents appealed to the Competition Appellate Tribunal (COMPAT), which on 19 April 2016 upheld the finding of contravention against KFEF but set aside the penalties and behavioural directions against Basheer Ahmed and Bobby, citing absence of specific notice regarding proposed penalties. The CCI challenged this partial relief before the Supreme Court, asserting that a second, penalty-specific notice was not required under the Act and that adequate opportunity to respond had already been afforded.

The case thus concerned the interpretation of statutory provisions on notice and liability under Sections 3, 27, and 48 of the Competition Act, 2002, as well as the balance between procedural fairness and enforcement of competition law. hearings.

The Supreme Court Division Bench observed that the Act’s framework did not envisage a two-stage procedure for determining liability and then imposing penalty. The Court stated that “the notice dated 10.06.2015 furnished to respondents Nos. 2 and 3 along with the DG’s report and calling for their replies provided sufficient opportunity to answer the allegations and meet the proposed consequences.”

The Bench noted that “Section 48 makes every person in charge of and responsible for the conduct of the business of an association liable for contraventions, unless they prove lack of knowledge or due diligence to prevent the contravention.” The Court further recorded that the respondents had failed to produce evidence showing absence of knowledge or exercise of due diligence.

On the issue of natural justice, the Court observed: “What is required is a reasonable opportunity of hearing. The Act does not mandate a second notice specifying the quantum or nature of penalty. Adequate opportunity is afforded when the parties receive the DG’s report and are asked to respond and are heard before the Commission.”

It recorded that “competition law seeks to protect the process of competition itself; collective boycotts aimed at excluding rivals undermine that process and cannot be condoned.”

The Bench also clarified that procedural compliance was met: “The respondents were represented by counsel, heard on the DG’s findings, and directed to produce financial documents necessary for penalty determination. Absence of a second, separate notice cannot invalidate the order of the Commission.”

Rejecting the COMPAT’s reasoning, the Court concluded that the directions disassociating the two office bearers and imposing penalties were validly made under Section 27. It held that “once contravention is established and the persons responsible are identified, the Commission is competent to proceed to determine appropriate penalties in the same proceedings.”

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The Supreme Court concluded: “For the reasons stated above, we allow the appeal and set aside the judgment of the COMPAT dated 04.02.2016 insofar as it set aside the penalty and directions against Respondent Nos.2 and 3 and the direction contained in clauses (d) and (e) of para 9 of the order of the Commission. We restore the findings of the Commission dated 08.09.2015 in its entirety.”

“The directions to Respondent No.1 not to associate with Respondent Nos.2 and 3 with its affairs including administration, management and governance of Respondent No.1 and the directions to Respondent Nos.2 and 3 not to associate with Respondent No.1 in the administration, management and governance of Respondent No.1 for a period of two years shall commence from 01.12.2025 and continue till the period of two years is over.”

“Compliance to be filed before the Commission within three months from today with regard to all the directions imposed by the Commission in its order dated 08.09.2015. No order as to costs.”

Advocates Representing the Parties

For the Petitioner: Arjun Krishnan, AOR
For the Respondents: Mr. Harshad V. Hameed, AOR Mr. Dileep Poolakkot, Adv. Mrs. Ashly Harshad, Adv. Mr. Anshul Saharan, Adv.

Case Title: Competition Commission of India v. Kerala Film Exhibitors Federation & Ors.
Neutral Citation: 2025 INSC 1167
Case Number: Civil Appeal No. 9726 of 2016
Bench: Justice Manoj Misra and Justice K.V. Viswanathan