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2019 (4) TMI 2107 - HC - Indian LawsAnti-Competitive agreements - Constitutional Validity of provisions of Sections 22(3), 27(b), 53A, 53B, 53C, 53D, 53E, 53F and 61 of Competition Act, 2002 and the notification dated 31.03.2011 amending Regulation 48 (1) of the Competition Commission of India (General) Regulations, 2009 and in relation to the appellate remedies to the Competition Appellate Tribunal (COMPAT) - indulging in abusive behavior in regard to the spare parts market. HELD THAT - This Court notes in conclusion, that the Competition Act is an attempt by Parliament to improve in the light of experience gained from a modern liberalized economy and corresponding state retreat in key areas of economic activities, the prevalent laws governing concentration of market power. The MRTP Act, 1969 was its first attempt (in a closed economy) to control monopolies and restrictive practices. In the light of experience gained and the felt necessities of the changed times and having seen the experience gained by other nations, in the course of their legislation with competition, the Act was introduced, with due deliberation. Recent decisions have emphasized the importance of the CCI in imbuing the market place with the culture of competition, and even underlined that sectoral regulators‟ decisions or regulations (within the frame works of their parent legislations) cannot foreclose enquiry and consequential action by the CCI in its overarching concerns with respect to market domination and anti-competitive behaviour of erring entities. In Competition Commission of India v Bharti Airtel Limited And Ors. 2018 (12) TMI 1683 - SUPREME COURT this was emphasized and underlined having taken note of the skillful exercise which the TRAI is supposed to carry out, such a comment vis-a-vis TRAI may not be appropriate. No doubt, as commented by the Planning Commission in its report of February, 2007, a sectoral regulator, may not have an overall view of the economy as a whole, which the CCI is able to fathom. Therefore, our analysis does not bar the jurisdiction of CCI altogether but only pushes it to a later stage, after the TRAI has undertaken necessary exercise in the first place, which it is more suitable to carry out. Parliamentary effort to innovate and legislate new market regulations, gained in the light of previous experience and teaching gained from the experience in other countries, led it to enact the Competition Act. The raison d etre of such laws is its objective of promoting competition, - and eliminating disparities that would ensue in the event of market dominance by a few, resulting in concentration of resources of the nation (which Article 39 of the Constitution of India, enjoins the State to avoid). Speaking of the Sherman Anti-Trust Act, in Essential Communications Sys, Inc. v AmTel Tel Co the third Federal Circuit Appellate Court held The Sherman Act, embodying as it does a preference for competition, has been since its enactment almost an economic constitution for our complex national economy. A fair approach in the accommodation between the seemingly disparate goals of regulation and competition should be to assume that competition, and thus antitrust law, does operate unless clearly displaced. The need to experiment and bring in new legislation to face the challenges of the changing times and the legislature duty to do so- as well as the correct approach that courts should adopt was outlined in New State Ice Co. v. Liebman, where Justice Brandeis stated The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues. The following conclusions are recorded and directions issued (i) Section 22(3) of the Competition Act (except the proviso thereto) is declared unconstitutional and void; (ii) Section 53E (prior to the amendment in 2017) is declared unconstitutional and void however, this is subject to the final decision of the Supreme Court in the writ petitions challenging the Finance Act, 2017; (iii) All other provisions of the Competition Act are held to be valid subject to the following orders (a) The CCI shall frame guidelines with respect to the directions contained in para 179 of this judgment, i.e. to ensure that one who hears decides is embodied in letter and spirit in all cases where final hearings are undertaken and concluded. In other words, once final hearings in any complaint or batch of complaints begin, the membership should not vary- it should preferably be heard by a substantial number of 7 or at least, 5 members. (b) The Central Government shall take expeditious steps to fill all existing vacancies in the CCI, within 6 months; (c) The CCI shall ensure that at all times, during the final hearing, the judicial member (in line with the declaration of law in Utility Users Welfare Association, (supra) is present and participates in the hearing; (d) The parties should in all cases, at the final hearing stage, address arguments, taking into consideration the factors indicated in Excel Crop Care 2017 (5) TMI 542 - SUPREME COURT and any other relevant factors; they may also indicate in their written submissions, or separate note, of submissions, to the CCI, why penalty should not be awarded, and if awarded, what should be the mitigating factors and the quantum- without prejudice to their other submissions. (iv) Since the petitioners had not availed the remedy of appeal (and had approached this Court) it is open to such of them who wish to do so, to approach the Appellate Tribunal, within 6 weeks; in such eventuality, the Appellate Tribunal shall entertain their appeals and decide them on their merits in accordance with law, unhindered by the question of limitation. The writ petitions are partly allowed.
Issues Involved:
1. Whether the Competition Commission of India (CCI) is a tribunal exercising judicial functions or performs administrative and investigative functions. 2. Constitutionality of the CCI in relation to the separation of powers principle. 3. Constitutionality of Section 22(3) of the Competition Act. 4. Validity of the "revolving door" practice in CCI's decision-making. 5. Legality of CCI's power to expand the scope of inquiry under Section 26(1). 6. Constitutionality and arbitrariness of Section 27(b) regarding penalties without a separate hearing. Detailed Analysis: 1. Nature of CCI: Tribunal or Administrative Body The CCI performs multiple roles, including administrative, investigative, regulatory, adjudicatory, and advisory functions. The Supreme Court in SAIL clarified that the initial steps taken by CCI, such as forming a prima facie opinion, are administrative. The CCI's role extends beyond adjudication to include market regulation and competition advocacy. The CCI's powers and duties are spread across Sections 3, 4, 19, 26, and 36 of the Competition Act, indicating its multifaceted role. Therefore, the CCI is not a tribunal exercising exclusive judicial power but a body performing a mix of administrative, expert, and quasi-judicial functions. 2. Constitutionality of CCI and Separation of Powers The CCI's structure and functions do not violate the separation of powers principle. The CCI's multifarious tasks, including advisory, advocacy, investigation, and adjudication, necessitate a composition that includes experts from various fields, not just the judiciary. The Act does not supplant the jurisdiction of pre-existing courts or tribunals but creates a specialized body for competition regulation. The Supreme Court's decisions in L. Chandra Kumar, R. Gandhi, and Madras Bar Association emphasized that while judicial power should not be eroded, specialized tribunals with mixed membership are permissible. The CCI's composition, which includes experts from various fields, aligns with this principle. 3. Constitutionality of Section 22(3) Section 22(3) allows the Chairperson or presiding member to have a casting vote in case of a tie, which is contrary to judicial principles. The concept of a casting vote is appropriate for administrative or corporate decisions but not for adjudicatory functions. The principle of equal weight for each member's decision is essential for judicial bodies. Therefore, Section 22(3) is declared void, except for the proviso mandating a quorum of three members. 4. "Revolving Door" Practice The "revolving door" practice, where different members participate in different stages of the hearing, undermines the principle that one who hears must decide. However, this practice does not automatically invalidate the law. The CCI should ensure that the same members participate throughout the final hearing and decision-making process. The CCI is directed to frame guidelines to ensure consistent membership during hearings. 5. Legality of Expanding the Scope of Inquiry under Section 26(1) The CCI's power to expand the scope of inquiry is valid. The investigation by the Director General (DG) can uncover broader anti-competitive practices beyond the initial complaint. The Supreme Court in Excel Crop Care clarified that the DG's investigation is not limited to the initial complaint but can include other related practices. The CCI's order to expand the investigation is within its jurisdiction and aligns with the Act's objectives. 6. Constitutionality and Arbitrariness of Section 27(b) Section 27(b) allows the CCI to impose penalties without a separate hearing, which is not arbitrary. The CCI's procedure includes multiple stages of hearing and opportunity for parties to present their case. The Supreme Court in Excel Crop Care provided guidelines for determining penalties, emphasizing proportionality and relevant turnover. The absence of a separate pre-penalty hearing does not render Section 27(b) unconstitutional. The CCI's discretion in imposing penalties is guided by established principles and subject to appellate review. Conclusions and Directions: 1. Section 22(3) (except the proviso) is declared unconstitutional. 2. Section 53E (prior to the 2017 amendment) is declared unconstitutional, subject to the Supreme Court's decision on the Finance Act, 2017. 3. The CCI must frame guidelines to ensure consistent membership during hearings. 4. The Central Government should fill all vacancies in the CCI within six months. 5. The CCI must include a judicial member during final hearings. 6. Parties can appeal to the Appellate Tribunal within six weeks, which will decide on merits without considering the limitation period. The writ petitions are partly allowed with no order on costs.
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