2022 (1) TMI 860 - SC - Indian Laws

Jurisdiction - power of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram - Seeking investigation in respect of State Lottery run by the State of Mizoram - Competition Act, 2002 - HELD THAT - A simple aspect of anti-competitive practices and cartelisation has got dragged on for almost ten years in what appears to be a mis-application by the High Court of the interplay of the two Acts, i.e., the Competition Act and the Regulation Act. We have already observed that respondent No. 1 seems to have played a very non-appreciable role in our opinion. What ought to have weighed with respondent No.1/State is what is sought to contend now, i.e., it is a victim of cartelisation and it is in its interests to cooperate with the CCI. The complaint of respondent No.4 may have been also under Section 4 of the Competition Act but it had not even referred that aspect to the DG and had decided not to proceed against the State. That should have been the end of the matter so far as the State is concerned. Yet the State, in our view, under a misconception, approached the High Court, possibly in an endeavour to defend one of its officers, respondent No. 2, whose conduct has not been very favourably commented on by the DG. Even if the State felt that these comments of the DG were not sustainable, such an aspect could have been pleaded with the CCI in pursuance of its notice and possibly the matter would have been closed at that stage - It would have been beneficial even to the State to have come to a conclusion one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect of something which is anti-competition in the context of the business related to lotteries - The lottery business can continue to be regulated by the Regulation Act. However, if in the tendering process there is an element of anti-competition which would require investigation by the CCI, that cannot be prevented under the pretext of the lottery business being res extra commercium, more so when the State Government decides to deal in lotteries. The complaint having been made by respondent No.4 under Section 19 of the Competition Act, which provides that the Commission may inquire into certain agreements and dominant position of enterprise as envisaged under sub-section (1) of Section 3 and sub- section (1) of Section 4 of the Competition Act. The CCI found out a prima facie case for investigation by the DG under Section 3(1) of the Competition Act, the DG opined adversely, and the CCI issued notice giving an opportunity to the affected parties to place their stand before it. This process ought to have been permitted to conclude with the right available to the affected parties to avail of the appellate remedy under Section 53B of the Competition Act. Appeal allowed.

Summary

Issues Involved: Jurisdiction of the Competition Commission of India (CCI), allegations of bid rigging, collusive bidding, cartelisation, abuse of dominant position by the State of Mizoram, applicability of the Competition Act to lottery business.

Issue-wise Detailed Analysis:

1. Jurisdiction of CCI:
The Supreme Court examined whether the CCI had the jurisdiction to investigate allegations of bid rigging and cartelisation in the tender process for the appointment of selling agents and distributors for state lotteries in Mizoram. The CCI's role was to ensure fair competition, not to regulate the lottery business itself. The Court concluded that the CCI had jurisdiction to investigate potential anti-competitive practices in the tendering process, despite lotteries being a regulated commodity under the Lotteries (Regulation) Act.

2. Allegations of Bid Rigging and Collusive Bidding:
The complaint by respondent No. 4 alleged that the identical bids submitted by the four successful bidders indicated cartelisation and bid rigging, violating Section 3(1) read with Section 3(3) of the Competition Act. The CCI found prima facie evidence of such practices and directed the Director General (DG) to investigate. The DG's report confirmed the collusion among the bidders. The Supreme Court emphasized that the investigation by the CCI should have been allowed to proceed without interference from the High Court.

3. Abuse of Dominant Position by the State of Mizoram:
Respondent No. 4 also alleged that the State of Mizoram abused its dominant position by imposing exorbitant financial requirements on distributors, which restricted the supply of lottery services. However, the CCI concluded that the State could not be considered an "enterprise" under the Competition Act and thus dismissed the complaint under Section 4 against the State. The Supreme Court upheld this view, noting that the State's role was to regulate and monitor lotteries, not to engage in commercial activities.

4. Applicability of the Competition Act to Lottery Business:
The High Court had ruled that the Competition Act did not apply to lottery business, considering it res extra commercium (outside the realm of commerce). The Supreme Court disagreed, stating that while lotteries are regulated, the tendering process for appointing distributors involves commercial activities that fall under the Competition Act. The definition of "service" under Section 2(u) of the Competition Act includes services made available to potential users, which encompasses the sale and distribution of lottery tickets.

5. Procedural Aspects and High Court's Intervention:
The Supreme Court criticized the High Court for prematurely intervening in the CCI's proceedings. The High Court should have allowed the CCI to complete its investigation and issue a final order. The Court emphasized that the CCI's initial order under Section 26(1) was administrative and did not have adverse civil consequences, thus not warranting judicial intervention at that stage.

Conclusion:
The Supreme Court set aside the High Court's judgment, allowing the CCI to continue its proceedings against the private parties involved in the alleged cartelisation. The Court directed that the writ petition filed by the State of Mizoram be closed, as the CCI had already decided not to proceed against the State. The Court reaffirmed the CCI's jurisdiction to investigate anti-competitive practices in the tendering process for lottery distribution and emphasized the need for the investigation to proceed in accordance with the law. The appeals were allowed, with each party bearing its own costs.