2022 (12) TMI 980 - AT - Companies Law

Contravention of the provisions of Section 4 of Competition Act, 2002 - it is alleged that several clauses of the agreement which was entered into between the appellant and Respondent No.2 in the present appeal were violative of provisions of Section 4(2)(a)(i) of the Act - Section 53(B) of the Competition Act, 2002 - HELD THAT - On examination of the provisions contained in Section 26 of the Act it is evident that the CCI is having a very limited jurisdiction to direct for further investigation that too in a case as per Section 26(5) of the Act if the DG recommends that there is no contravention of provisions of Act then Commission shall invite objections or suggestions and thereafter under sub-section (7) of Section 26 of the Act after consideration of objections and suggestions referred to in sub-section (5) further investigation is necessary only then direct for further investigation. Meaning thereby that purport of Section 26 of the Act is that if after investigation DG submits report disclosing therein violation of the provisions contained in the Act, the CCI is required to pass appropriate order. In a case DG submits a closure report and thereafter under sub-section (5) of Section 26 of the Act, after inviting objections, CCI is satisfied, only then under sub-section (7) of Section 26 of the Act, CCI can issue direction for further investigation. Further investigation as per Act is required in a case of closure not in a case where DG has submitted report showing contravention of provisions of the Act by a party/parties. The Regulation 20 describes procedure about the investigation by the DG, whereas Regulation 20(6) empowers the CCI to direct DG for further investigation. However, in view of Section 26 of the Act it can be concluded that Regulation 20 (6) of CCI(General) Regulations, 2009 can be used in furtherance of exercise of jurisdiction under Section 26(7) of the Act which is required to be invoked in a case where DG under Section 26(5) submits report regarding non contravention of the provisions of the Act. In any event taking shelter of Regulation 20(6) of Regulation 2009 CCI was not authorised to pass an order for further investigation and the same cannot be justified - without going into further detail or delving into merit of the case the order impugned is liable to be set aside since the order is primarily passed on the supplementary investigation report submitted by the DG which was conducted on a void order of the CCI. The matter is remitted back to the CCI to pass order afresh on the basis of the 1st DG Report i.e. Report dated 18.03.2016 submitted by the DG - Appeal allowed.

Summary

Issues Involved:
1. Alleged violation of Section 4 of the Competition Act, 2002.
2. Validity of the CCI's order directing further investigation.
3. Dominance and abuse of dominance by the Respondents.
4. Settlement between the parties and its impact on the appeal.

Detailed Analysis:

1. Alleged Violation of Section 4 of the Competition Act, 2002:
The appellant filed an information application under Section 19 of the Competition Act, 2002, alleging that several clauses of the agreement with Respondent No.2 were violative of Section 4(2)(a)(i) of the Act. The CCI initially found a prima facie case of abuse of dominance and directed the Director General (DG) to investigate. The DG's initial investigation report dated 18.03.2016 concluded that the Respondents had violated Section 4 of the Act. However, the CCI later directed further investigation, which resulted in a supplementary report concluding that the Respondents did not hold a dominant position.

2. Validity of the CCI's Order Directing Further Investigation:
The appellant argued that the CCI's order directing further investigation was unauthorized under the provisions of the Act. The CCI relied on Regulation 20(6) of the Competition Commission of India (General) Regulations, 2009, to direct the DG to conduct further investigation. However, the Tribunal found that Section 26 of the Act provides limited jurisdiction for further investigation, primarily in cases where the DG's report recommends no contravention of the Act. Since the DG's initial report found a violation, the CCI's direction for further investigation was deemed unauthorized and void.

3. Dominance and Abuse of Dominance by the Respondents:
The CCI initially found that the Respondents, as a group, held a dominant position in the relevant market for "provisioning of services for development and sale of residential units in Gurgaon." The DG's initial report supported this finding, identifying several clauses in the agreement as abusive and one-sided. However, the supplementary investigation report took a different stance, concluding that the Respondents' financial strength did not bestow a position of dominance. The Tribunal found that the CCI's reliance on the supplementary report was misplaced, as the order directing further investigation was unauthorized.

4. Settlement Between the Parties and Its Impact on the Appeal:
The Respondents argued that the appellant had entered into a settlement agreement with them, forfeiting the right to file an appeal. The appellant countered that the settlement was breached by the Respondents and that competition law proceedings are for the benefit of a larger group, not just an individual. The Tribunal noted that the CCI did not consider the settlement in its decision, focusing instead on the merits of the case. The Tribunal found that the appellant had the right to seek justice for the larger interest, and the settlement did not bar the appeal.

Conclusion:
The Tribunal concluded that the CCI's order based on the supplementary investigation report was void, as the direction for further investigation was unauthorized. The matter was remitted back to the CCI to pass an order afresh based on the initial DG report dated 18.03.2016. The CCI was directed to examine the entire issue and pass an appropriate order in accordance with the law within three months, after giving an opportunity of hearing to all concerned. The appeal was allowed with these observations and directions.