2014 (11) TMI 1269 - HC - Indian Laws

Violation of principles of natural justice (Audi alteram partem) - Direction u/s 26(1) of the Competition Act, 2002 for investigation into the allegations made by the informants i.e., respondent Nos.1 and 2 herein, and for submission of report - whether opinion formed by the Commission with regard to the existence of a prima facie case, to direct the Director-General to cause an investigation into the matter, calls for interference? HELD THAT - The Commission having deliberated, found that there exits a prima facie case and directed the investigation by the Director- General. The finding in Annexure-A being only for the limited purpose of directing investigation into the allegations made in Annexure-C, by the Director-General, shall have no bearing either on the investigator or even on the Commission, at a subsequent stage. When once report of investigation is received, the matter shall have to proceed in accordance with Sub-sections (4) to (8) of S.26 of the Act. Annexure-A having made reference to certain aspects, cannot be said to be perverse or is without any basis and thus, arbitrary to warrant interference under Article 226 of the Constitution. Non providing of opportunity of hearing while issuing the direction - Principles of natural justice - HELD THAT - The points raised for consideration has no merit and should fail. Since the petitioner has further opportunity to raise its objections as against the said report before the Commission, order passed on 23.09.2014, on the memo filed and submissions made by Sri Krishna S.Dixit, that the report dated 30.04.2013 of respondent No.9 shall be kept in abeyance and not to act upon the same, until further orders, is hereby recalled. Both the legal points raised by the petitioner are covered by the Judgment referred to hereinbefore, this writ petition being devoid of merit is dismissed. Liberty is reserved to the petitioner to file its objections to the report dated 26.04.2013, in view of Sub-section(6) of S.26 of the Act.

Summary

Issues Involved:
1. Whether the opinion formed by the Competition Commission of India (CCI) regarding the existence of a prima facie case for investigation calls for interference.
2. Whether the reference made by the CCI to the Director-General for Investigation is violative of the principles of natural justice (Audi alteram partem).

Detailed Analysis:

Issue 1: Prima Facie Case for Investigation
The petitioner challenged the direction issued by the CCI on 18.10.2012 under Section 26(1) of the Competition Act, 2002, to investigate allegations made by the informants (respondent Nos.1 and 2). The petitioner argued that the complaint was vague, lacked specific pleas regarding violations of Sections 3 and 4 of the Act, and that no prima facie case existed. The court noted that the CCI, an expert body, formed the opinion that there was a prima facie case based on the information provided, which alleged anti-competitive agreements and cartel-like behavior. The CCI's decision was based on the Articles of Association of the petitioner, which imposed various unfair conditions and sanctions on members. The court emphasized that a prima facie case means the case is not frivolous or vexatious and warrants investigation. The court found that the CCI's direction for investigation was neither perverse nor arbitrary, and thus did not warrant interference.

Issue 2: Violation of Principles of Natural Justice
The petitioner contended that the CCI's direction violated the principles of natural justice as no opportunity for hearing was provided before issuing the direction. The court referred to the Supreme Court's judgment in the case of *Competition Commission of India vs. Steel Authority of India Limited and Another*, which clarified that the principles of natural justice are excluded at the initial stage of forming a prima facie opinion under Section 26(1) of the Act. The court noted that the CCI's function at this stage is preliminary and administrative, not adjudicatory, and does not condemn any party. Therefore, the right to notice and hearing is not mandatory at this stage. The court concluded that the exclusion of natural justice principles at this stage is justified and does not vitiate the proceedings.

Conclusion:
The court dismissed the writ petition, holding that the CCI's direction for investigation was based on a valid prima facie case and did not violate the principles of natural justice. The petitioner was given the liberty to file objections to the investigation report, and the CCI was directed to consider these objections in accordance with the law. The interim order to keep the investigation report in abeyance was recalled, and no costs were awarded.