Directors’ Duties and Personal Liability for Competition Breaches

Introduction

In August 2026, the CCI fined two agro-input dealer associations for running a cartel, The case began when Ulink Agritech complained that they had boycotted online agri-input platforms. Four individuals were also held liable. This shows that a company or association cannot absorb the blame of the people running it.

For directors, this leaves a question that the Companies Act, 2013 does not clearly address. It says nothing about competition compliance expressly. But the way CCI applies Section 48 means that in practice, directors are expected to look out for competition law breaches. The Companies Act requires directors to act in the company’s best interests, while the Competition Act imposes personal liability for conduct that harms market competition. This blog argues that the duty of care under Section 166(3) should be read to include competition law oversight, and that Section 48 of the Competition Act supports this reading.

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Section 48: Personal Liability

Section 27 of the Competition Act is the main provision for breaches of Sections 3 and 4, and in practice it falls mainly on the companies involved. For cartels, the penalty can reach up to three times the profit or 10% of turnover for each year the cartel continued, whichever is higher. Section 48 goes a step further and makes the individuals behind a company answerable.

Section 48, as amended by the Competition (Amendment) Act, 2023, operates in two ways. Under Section 48(1), any person who was in charge of the company’s business, and responsible to it for that conduct, at the time of the contravention is liable. Under Section 48(3), a director, manager, secretary or other officer is liable if the contravention happened with their consent or connivance, or because of their neglect. The first looks at position. The second looks at actual involvement.

There is a defence. Section 48(2) allows a person to avoid liability by showing that they did not know about the contravention or had taken due care to prevent it. The defence applies only to people held liable under Section 48(1) as persons in charge. Under Section 48(3), an officer is liable only if it is proved that the contravention happened with their consent or connivance, or through their neglect.

The individual penalty is civil. The amended section caps it at 10% of the individual’s average income over the preceding three financial years, or, for a cartel agreement, at up to 10% of income for each year the agreement continued, with “income” determined as the regulations specify. The CCI’s penalty guidelines follow the same methodology. Before the amendment, Section 48 set no percentage, and the CCI relied on Section 27(b) to penalise individuals; the appellate tribunal set aside several such orders.

How the CCI’s Reading of Section 48 Developed

The CCI’s reading of Section 48 has changed over time. In Varca Druggist & Chemist v. Chemists & Druggists Association, Goa, the CCI found the association in breach of Sections 3(3)(a) and 3(3)(b) and seemingly required both parts of Section 48 to be met before holding its key personnel liable. It later separated the two limbs in Indian Sugar Mills Association v. Indian Jute Mills Association, where key personnel who gave no evidence to clear themselves were held vicariously liable. The Competition Appellate Tribunal later set that order aside. The CCI explained the difference in detail in Maruti & Company v. Karnataka Chemists & Druggists Association.  In Bengal Chemists and Druggists Association, the association argued that Section 48 could not reach its office bearers. The CCI held that it did, because the association was a body corporate.

Recent matters show the same approach. In the SBI signage bid-rigging case the CCI held that it can proceed under Section 48 against individuals together with the company. It found Macromedia Digital Imaging Pvt. Ltd. and its director liable, and the Tribunal dismissed both their appeals. In Mahyco Monsanto the Delhi High Court upheld a CCI probe covering directors as well as the company. It rejected the arguments that directors can be proceeded against only after a finding against the company, and that Section 48 applies only to violations of CCI orders.

In the August 2026 order, the CCI found the association’s president and secretary in contravention of Section 3(3)(b) read with Section 3(1) themselves. It separately held the association’s General Secretary and National Spokesperson liable under Section 48.

What the Companies Act Adds

Section 166(2) of the Companies Act requires directors to act in good faith. They must promote the company’s objects for the benefit of its members as a whole. They must also act in the best interests of the company, its employees, shareholders, the community and the environment. A cartel may raise short-term profits. But it exposes the company to penalties of up to three times its profit or 10% of its turnover for each year the cartel continues. So, a defence based on the company’s interest is hard to sustain.

Section 166(3) requires directors to act with due and reasonable care, skill and diligence and to exercise independent judgment, and Section 166(7) punishes a breach with a fine of ₹1 lakh to ₹5 lakh. The provision does not mention competition law. But a director who never asks how prices are set, or what is discussed at trade association meetings, will struggle to show due care in those areas.

Independent and non-executive directors are protected by Section 149(12). They are liable only for acts that happened with their knowledge, attributable through board processes, and with their consent or connivance, or where they did not act diligently. This protection depends on board processes. If a board has no competition-compliance process, a director cannot show they were kept in the dark. If a board has regular audit committee reports and a vigil mechanism under Section 177 (where required), it has a record to show.

Where the two Acts Meet

The idea of due diligence is where the two Acts intersect. Section 166(3) of the Companies Act requires directors to exercise due care. Section 48(2) of the Competition Act, in turn, recognises due diligence as a defence for a person in charge of the business. Both provisions therefore bring the director’s efforts to prevent a contravention into focus.

One compliance record does two jobs. Under the Companies Act it is evidence that a director took care. Under Section 48(2) of the Competition Act it is evidence that a director exercised all due diligence to prevent the contravention. A director who only had good intentions has nothing to show for either.

However, the Companies Act says nothing about competition compliance. Section 48 comes into play after a contravention has occurred. It does not, by itself, set out what directors are expected to do to prevent anti-competitive conduct.

What boards should do

Boards do not need to be competition-law experts, but they should be able to show that they took reasonable steps to prevent violations. This could include:

• Having a written competition compliance programme, with regular reports to the board or audit committee.
• Setting clear rules for dealing with competitors and sharing pricing or bidding information.
• Keeping a record of board discussions on competition risks and compliance measures.

Conclusion

Section 166(3) asks directors to take care, and Section 48 shows what follows when they do not. Competition compliance should be on the board’s agenda, and the strongest protection is a documented record of what the board did to prevent a breach. The orders discussed here do not say how much compliance counts as “all due diligence” under Section 48(2). That remains an open question for boards and for the CCI.

Author: Sarika Aggarwal (Head – Advisory & International Relations)
Co- Author: Pawni, Intern

1. https://www.livelawbiz.com/amp/competition-law/cci/competition-commission-of-india-penalises-agro-input-associations-four-individuals-cartelisation-competition-commission-act-547167
2. https://taxguru.in/corporate-law/cci-penalises-agro-associations-boycott-online-agri-input-platforms.html
3.  Varca Druggist & Chemist v Chemists & Druggists Association of Goa 2012 SCC OnLine CCI 41
4.  Indian Sugar Mills Association v Indian Jute Mills Association 2014 SCC OnLine CCI 141
5. https://law.asia/sweet-victory-as-jute-group-bags-compat-order/
6.  Maruti & Company v. Karnataka Chemists & Druggists Association, 2016 SCC OnLine CCI 43
7.  Bengal Chemists and Druggists Association, In re 2014 SCC OnLine CCI 38
8.  Suo Motu Case No. 02 of 2020
9. https://www.scconline.com/blog/post/2022/03/09/7-entities-indulged-in-anti-competitive-agreement-for-supply-of-signages-for-branches-offices-atms-of-sbi-e-mails-exchanged-between-parties-formed-basis-for-manipulation-of-bidding-process/