The Competition Commission of India (CCI) has sent a show-cause notice to non-banking financial company (NBFC) Muthoot Finance for alleged misrepresentation of data, sources have told Moneycontrol.
The notice, dated March 14, questions Muthoot's omission of key facts in a case concerning debenture trustees.
A trustee's role typically includes safeguarding the interests of debenture holders, monitoring a company's performance, enforcing security, providing information to debenture holders and taking legal action in case of default by the company.
In September 2021, Muthoot Finance filed a complaint alleging that debenture trustees were exploiting their market dominance by imposing exorbitant fees for facilitating non-convertible debenture (NCD) issuances.
An investigation by the CCI, however, found that Muthoot had filed a similar complaint with the Securities and Exchange Board of India (SEBI) but didn't inform the competition watchdog about it, sources said.
Legal experts say the case is unique since regulatory action has been initiated against the complainant, or in legal parlance the "informant". The party filing a complaint with the CCI against entities engaging in anti-competitive practices and seeking regulatory intervention is termed an "informant."
Section 45 of the Competition Act empowers the CCI to commence regulatory proceedings if a party furnishes incomplete or false information.
Email queries sent to Muthoot and the CCI for comment remained unanswered.
"This marks the second notice issued to Muthoot in this matter. Previously, a similar notice was issued by the CCI, but it was stayed by the High Court of Kerala in September 2023. Following the court's directive to reconsider the matter and provide Muthoot with a personal hearing, the CCI has now issued a second show-cause notice," one of the sources said.
Legal experts say that the requirement to disclose parallel proceedings was introduced by the CCI to dissuade entities from regulatory forum shopping and lodging complaints on matters already under investigation by other regulators.
"In some instances, informants utilise information provided to the CCI as one of several avenues for complaint against the same company. The CCI aims to avoid allocating resources to essentially commercial disputes already being adjudicated elsewhere," said Vaibhav Choukse, head of the competition practice at J Sagar Associates.
The provision was introduced in response to a case involving telecom companies and is enshrined in Regulation 10(2) of the CCI General Regulations, which mandates informants to disclose all pending disputes related to their complaint.
The Muthoot case has also turned into a jurisdictional battle. Debenture trustees have approached the Bombay High Court, contending that the CCI lacks jurisdiction over the dispute, which falls under the purview of SEBI. The resolution of this dispute remains pending.
At 12.43 pm, Muthoot Finance was trading at Rs 1,656.90 on the National Stock Exchange, up 1.64 percent from the previous close.
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