2017 (10) TMI 1639 - HC - Law of Competition

Anti-competitive agreements - restriction on production by Indian Made Foreign Liquor (IMFL) - denial of marketing access - HELD THAT - This Court is of the opinion that there is no infirmity in the observations and findings returned by the learned Single Judge. The judgment in Competition Commission of India v. Steel Authority 2010 (9) TMI 215 - SUPREME COURT states that an order under Section 26(1) of the Act is an administrative one and does not in any manner result in adverse consequences or determine the rights and obligations of the parties. The State of Uttarakhand formulated a policy and it is fashioned in such a manner that State officials vested with exclusive powers of taking decisions to dictate as to what brands of liquor are to be procured and distributed to retailers and sold to the consumers. These functions cannot per se be called a sovereign function. When the State or its agency who are vested with exclusive rights or monopoly rights conducts trade or business per se such activity cannot fall within the description of or cannot be characterized as sovereign functions. It is only when activities such as printing of notes minting production of other national security related services articles or goods etc. are involved and are sought to be regulated would it be an issue as to whether such trade or business are sovereign functions of the Government or State entity. In the present case the State of Uttarakhand like all other States in the country have created monopolies by canalizing liquor procurement. Therefore the Government departments or other public agencies or entities that may be quasi public cannot be described as engaged in sovereign functions. Assertion with respect to the policy having been upheld by the Uttrakhand High Court - HELD THAT - This Court is of the opinion that the upholding of the policy was on an application of the parameters of judicial review. The wisdom of the policy or its impact with respect to position of domination or abuse thereof could not have been the subject matter of Court s jurisdiction under Article 226 of the Constitution. It is precisely to oversee those aspects that the Competition Commission has been created. This Court finds no merit in the appeal. At the same time it is open to the appellant to raise all contentions in defence available to it in the ongoing investigation by the Director General - Appeal dismissed.

Summary

Issues:
Challenge to Competition Commission of India order under Section 26(1) of The Competition Act, 2002 by Uttrakhand Agricultural Produce Marketing Board.

Analysis:
1. The judgment dealt with the challenge by the Uttrakhand Agricultural Produce Marketing Board against an order of the Competition Commission of India (CCI) under Section 26(1) of The Competition Act, 2002. The Single Judge rejected the writ petition, stating that the CCI's order was administrative, aiding investigation, and did not have adverse consequences. The judgment referred to previous cases to establish that activities like liquor business by the State do not constitute sovereign functions.

2. The Court analyzed the definition of 'enterprise' under Section 2(h) of the Act to determine the jurisdiction of the Commission. It clarified that if an entity is engaged in activities not related to sovereign functions, it falls under the definition of an 'enterprise.' The Court emphasized that the Central Government's exemption under Section 54 is specific to activities related to sovereign functions and not all activities of an enterprise.

3. The judgment highlighted the distinction between sovereign functions and commercial activities. It cited a Supreme Court case to establish that running railways for public service does not convert it into a sovereign function. The Court reiterated that when a State entity engages in trade or business, it does not perform sovereign functions unless activities like national security-related services are involved.

4. The Court dismissed the argument that the State's procurement policy was a sovereign function, stating that monopolies created by States in liquor procurement do not constitute sovereign functions. It emphasized that the Competition Commission's role is to oversee aspects like market domination and abuse, which fall outside the purview of judicial review.

5. Ultimately, the Court found no merit in the appeal, affirming the Single Judge's decision. It allowed the appellant to present defenses during the ongoing investigation by the Director General. The appeal and pending applications were dismissed accordingly.