CCI rules on collective Benchmark Pricing by Trustees’ Association of India: liability without monetary penalty

1. Background and parties involved

Muthoot Finance Limited Vs Trustees’ Association of India (Competition Commission of India) concerns the debenture trustees’ fee model for listed debt instruments and whether an industry association could prescribe and enforce a common fee structure.

The Informant, Muthoot Finance Limited, is a listed company headquartered in Ernakulam, Kerala, with a significant portfolio of Non-Convertible Debentures (NCDs). Over a decade, it raised working capital through 25 public and private NCD issuances and consistently appointed IDBI Trusteeship Services Limited (OP-2) as its debenture trustee.

The opposite parties before the Competition Commission of India (CCI/Commission) were:

• OP-1 – Trustees’ Association of India (TAI), an association of debenture trustees (DTs)
• OP-2 – IDBI Trusteeship Services Limited
• OP-3 – Axis Trustee Services Limited
• OP-4 – SBI CAP Trustee Company Limited

OP-3 served as President of OP-1, OP-4 as Secretary and OP-2 as Treasurer during the relevant period. A later entity referred to as new TAI was held to be successor-in-interest of OP-1 for purposes of the order.

The Informant alleged anti-competitive conduct under Section 3 and abuse of dominance under Section 4 of the Competition Act, 2002 in relation to a revised common fee structure introduced from 01.04.2021 for debenture trusteeship services.

2. Trigger: steep increase in trusteeship fees for a proposed NCD issue

In August 2021, Muthoot Finance proposed a secured NCD issue of INR 982 crores through private placement and sought a fee quote from OP-2 for acting as debenture trustee.

Under the revised mechanism, the fee structure prescribed for non‑PSU issuers of listed debentures comprised:

• Initial Fee: INR 75,000 to INR 15,00,000
• Annual Fee: INR 1,00,000 to INR 22,50,000

For an issue size between INR 100 crores and INR 1500 crores, OP-1’s structure provided:

• Initial fee: 0.01% of issue size
• Annual fee: 0.015% of issue size

Accordingly, for the proposed INR 982 crore issuance, OP-2 quoted to the Informant:

The Informant asserted that this represented a manifold jump over the previous fee levels, without any contemporaneous change in its understanding of the actual roles and responsibilities of DTs in such issues. The assessee also highlighted commercial disruption: it could not line up alternative trustees in time, allegedly affecting its ability to file the offer document for raising working capital.

On querying the increase, the Informant was informed by OP-2 (including via an email dated 31.08.2021) that:

• The revised fee was fixed by OP-1 (TAI)
• The fee structure applied from 01.04.2021 to both existing and new clients
• Any deviation from the structure would attract “adverse repercussions” for OP-2

The increase was also linked by OP-2 to SEBI’s regulatory framework and the SEBI Circular dated 27.05.2019 (SEBI May 2019 Circular) which required disclosure on DTs’ websites of their minimum fee and fee determinants.

3. Allegations before CCI

The Informant’s principal contentions were:

• Cartel-like pricing: OP-1 and its member DTs had agreed to a common minimum fee structure and collectively prevented members from quoting below that level, thereby contravening Section 3(3)(a) read with Section 3(1) of the Competition Act, 2002.
• Information asymmetry and lock‑in: The assessee was not consulted in advance and could not secure alternatives in time, resulting in loss of business opportunity.
• Abuse of dominance by OP-1: OP-1 was alleged to hold a dominant position as the industry association of DTs and to have imposed unfair prices in violation of Section 4(2) by imposing the revised fee structure.

Reliefs sought included directions that:

1. OP-1 and its members cease any price‑fixing arrangements for trusteeship services.
2. Any alleged abuse of dominant position be discontinued.
3. DTs who are members of OP-1 revert to pre‑31.03.2021 prices for a defined period (with limited permitted annual escalation).

An interim relief application under Section 33 was also filed.

4. CCI’s initial prima facie view and investigation direction

After obtaining responses from the opposite parties, the Commission, by order dated 23.12.2021 under Section 26(1) (“Prima Facie Order”), concluded that:

• The collective decision of OP-1 prescribing a fee structure for its members, coupled with the indication of adverse consequences for deviation, prima facie attracted Section 3(3)(a) read with Section 3(1) and was presumed to have an appreciable adverse effect on competition.
• As to Section 4, SEBI’s listing showed 26 registered DTs, indicating a fragmented market with multiple providers. With only 10 DT members, OP-1 itself could not be treated as a dominant enterprise; further, the Act does not recognise collective dominance under Section 4. No Section 4 case was therefore made out.

CCI accordingly ordered an investigation by the Director General (DG) into potential contraventions of Section 3(3)(a) and Section 3(3)(b). The interim relief application under Section 33 was rejected by a separate order on the same date.

5. Jurisdictional challenge and interface with SEBI

5.1 Reference request and SEBI’s initial stand

OP-1 applied on 14.12.2021 seeking a reference to SEBI under Section 21A, arguing that debenture trustees were under SEBI’s exclusive regulatory oversight. Around the same time, SEBI wrote to CCI (letter dated 25.01.2022) indicating that:

• SEBI had received a complaint from the Informant regarding possible cartelisation by SEBI‑registered DTs,
• SEBI was examining the matter, and
• CCI should not proceed until SEBI submitted its prima facie findings.

CCI, in its meeting of 08.02.2022, observed that:

• The statutory coordination mechanism under Section 21A had not been formally triggered, and
• It would not be appropriate to suspend the DG’s investigation on that basis.

The application by OP-1 was treated as premature and no direction was issued to halt the investigation.

5.2 Writ petitions and Bombay High Court’s directions

OPs filed writ petitions before the Bombay High Court (WP Nos. 3781/2022, 3791/2022, 3842/2022, 3847/2022), challenging the Prima Facie Order mainly on jurisdictional grounds, contending that only SEBI could deal with the alleged conduct.

On 08.04.2022 and 11.04.2022, the High Court:

• Permitted SEBI up to 30.06.2022 to complete its enquiry and form a prima facie view.