2015 (12) TMI 1893 - AT - Indian Laws

Cartelization by the manufacturers of cement and manipulation of prices - Section 19(1)(a) of Competition Commission Act, 2002 - constitutional validity of Rule 3 of the Competition Commission of India (Selection of Chairperson and other Members of the Commission) Rules, 2003 - violation of principles of natural justice. HELD THAT - In a number of decisions, the High Courts and Supreme Court have repeatedly ruled that the Commissions, Tribunals and other administrative bodies clothed with the power to adjudicate upon the rights of the parties or pass orders adversely affecting a person or a body of persons or imposing penalty for contravention of any statutory provision or otherwise are bound to act justly, fairly and in consonance with the principles of natural justice. In Mahipal Singh Tomar v. State of Uttar Pradesh 2013 (5) TMI 1064 - SUPREME COURT , the Supreme Court examined the issue relating to violation of natural justice in a case where copy of the enquiry report was not furnished to the affected person and he was not given opportunity to represent his cause against the allegation of large scale irregularities in the placement of selected candidates in different colleges. The Chairperson did not have the opportunity of hearing the arguments of the advocates for the parties, which lasted for three days i.e. 21st, 22nd and 23rd February, 2012 and yet he became party to the decision. Obviously, he did not know what are the nature and contents of the arguments of the seven Senior Advocates and other advocates, who appeared for the parties. The minutes of the meetings recorded on those dates do not show that the remaining six Members had recorded the arguments advanced by the learned advocates, as was done by the officer who heard the arguments in Ossein and Gelatine Manufacturers' Association of India v. Modi Alkalies and Chemicals Limited and Another 1989 (8) TMI 347 - SUPREME COURT . The Chairperson's participation in the decision making process had salutary effect on the final verdict. The arguments of Respondents that no prejudice has been caused to the appellants due the participation of the Chairperson in the decision-making process cannot be accepted. It is not possible to make a guesswork of what would have been the fate of the case if the Chairperson had not taken part in the decision-making process. One does not know whether the remaining six Members would have reached a positive conclusion that the appellants are not guilty of violating Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act and/or they would not have imposed the particular penalty under Section 27 of the Act. The impugned order is vitiated due to the violation of one of the facets of the principles of natural justice, we do not consider it necessary to deal with and decide other points argued by the learned counsel for the appellants for assailing the order under challenge - The impugned order is set aside and the matter is remitted to the Commission for fresh adjudication of the issues relating to alleged violation of Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act by the appellants. The appellant shall be entitled to withdraw the amount deposited by them in compliance of the interim order passed by the Tribunal. Appeal allowed.

Summary

Issues Involved:
1. Whether the Chairperson of the Competition Commission of India (CCI) could be a party to the final order without hearing the arguments.
2. Allegation of cartelization by cement manufacturers.
3. Procedural fairness and bias in the investigation and adjudication process.
4. Confidentiality and handling of sensitive information.

Issue-wise Detailed Analysis:

1. Whether the Chairperson of the Competition Commission of India (CCI) could be a party to the final order without hearing the arguments:
The Tribunal examined whether the Chairperson of the CCI, who did not hear the arguments, could be a party to the final order. It was found that the Chairperson did not participate in the meetings on 21st, 22nd, and 23rd February 2012, where the arguments were heard, yet he joined in passing the final order. The Tribunal emphasized that the rule of law requires that only those who hear the arguments should decide the case. The participation of the Chairperson, who did not hear the arguments, was deemed a violation of the principles of natural justice, rendering the final order invalid.

2. Allegation of cartelization by cement manufacturers:
The case involved allegations of cartelization by cement manufacturers, leading to price manipulation and reduced production. The Builders' Association of India (BAI) filed information under Section 19(1)(a) of the Competition Act, 2002, against the Cement Manufacturers' Association and 11 cement manufacturers. The Director General's investigation revealed that major cement manufacturers controlled the market, indulged in collusive price fixing, and manipulated production to maintain high prices. The Commission found the appellants guilty of violating Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act and imposed penalties.

3. Procedural fairness and bias in the investigation and adjudication process:
The appellants argued that the investigation and adjudication process was biased and lacked fairness. They pointed out that the Commission had expressed views on cartelization before receiving the information from BAI, indicating a pre-determined mindset. Additionally, private communications from a former IAS officer complaining about cartel formation were found in the DG's records, raising doubts about the fairness of the investigation. The Tribunal noted that the principles of natural justice require that the person who hears the case must decide it. The participation of the Chairperson, who did not hear the arguments, was seen as a violation of this principle.

4. Confidentiality and handling of sensitive information:
The handling of confidential information was a significant issue. The appellants complained about the dissemination of confidential information by the DG. The Commission had earlier granted confidentiality to certain data but later revoked it. The Tribunal noted that the Commission must maintain confidentiality as prescribed by the Act and regulations. The Tribunal also highlighted the importance of providing a fair opportunity to the parties to defend themselves, which includes access to relevant data and documents.

Conclusion:
The Tribunal allowed the appeals, set aside the impugned order, and remitted the matter to the Commission for fresh adjudication. The Commission was directed to hear the advocates/representatives of the appellants and BAI and pass a fresh order in accordance with the law. The Tribunal emphasized the need for the Commission to evolve a comprehensive protocol and guidelines for conducting investigations and inquiries in consonance with the principles of natural justice.