2014 (12) TMI 1433 - HC - Law of Competition

Contravention of the provisions of Section 4 of Competition Act 2002 - Locus of CCI to prefer an appeal - validity of search conducted at the office premises of the petitioners by Director General. Whether CCI has locus to prefer the present appeal challenging the order of the learned Single Judge staying the investigation by the Director General? - HELD THAT - CCI which is a body corporate in terms of Section 7(2) of the Act having perpetual succession and a common seal with power to sue and be sued in its name has a right of representation in any appeal before the tribunal as has been specifically mentioned under Section 53-S(3) and it even has a right of appeal under Section 53-T before the Supreme Court - since the investigation by the Director General forms part of the regulatory jurisdiction exercised by CCI any order hampering the investigation process directly affects the statutory functioning of CCI. Under the circumstances the right to assail an order staying the investigation cannot be confined only to the informant but the CCI also being an equally aggrieved party is entitled to do so - CCI has locus standi to present the appeal against the order of the learned Single Judge staying investigation by the Director General. Scope of the powers of the Director General under the Competition Act 2002 particularly concerning search and seizure operations - HELD THAT - It is relevant to note that the learned Single Judge initially by order dated 04.04.2014 allowed the Director General to proceed with the investigation however granted stay only to the extent of passing a final order/report. The said order has been accepted and acted upon by both the parties. It appears that the whole grievance of the writ petitioner is only with regard to the manner in which the Director General has been proceeding with the investigation. The Director General who was directed to file his personal affidavit is not a party to the proceedings before the learned Single Judge and admittedly the matter is being contested by the CCI alone. Be that as it may since the matter is still pending before the learned Single Judge and the counters are yet to be filed by the CCI and other respondents therein it is always open to the CCI/appellant herein to file the necessary counter and seek for vacating the order dated 26.09.2014 including the direction that the Director General shall file his personal affidavit. Therefore the interference at this stage is unwarranted. Conclusion - The CCI has the locus standi to appeal against orders affecting its statutory functions. The Director General s investigative powers are subject to procedural safeguards. Since the matter is still pending before the learned Single Judge and the counters are yet to be filed by the CCI and other respondents therein it is always open to the CCI/appellant herein to file the necessary counter and seek for vacating the order dated 26.09.2014 including the direction that the Director General shall file his personal affidavit. Appeal disposed off.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment involves the following core legal questions:

Whether the Competition Commission of India (CCI) has the locus standi to file an appeal against the interim orders passed by the learned Single Judge staying the investigation by the Director General.
Whether the interim orders passed by the learned Single Judge, which stayed the investigation and required the Director General to provide a personal affidavit, were justified.
What is the scope of the powers of the Director General under the Competition Act, 2002, particularly concerning search and seizure operations?
Whether the CCI's order under Section 26(1) of the Competition Act is merely administrative and non-appealable, and how this impacts the current proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Locus Standi of CCI to File an Appeal

Relevant Legal Framework and Precedents: The Competition Act, 2002, particularly Sections 7, 19, 26, and 53, and the Supreme Court's interpretation in CCI v. SAIL regarding CCI's functions and rights.
Court's Interpretation and Reasoning: The court reasoned that CCI, being a body corporate with perpetual succession and a common seal, has the right to sue and be sued. The court also highlighted the necessity for CCI to be a party in proceedings affecting its statutory functions.
Key Evidence and Findings: The court noted that CCI was impleaded as a respondent in the writ petition and that the order staying the investigation directly affected CCI's statutory functions.
Application of Law to Facts: The court applied the legal principles from CCI v. SAIL to conclude that CCI has the locus standi to appeal against the order staying the investigation.
Treatment of Competing Arguments: The court considered the respondents' argument that the appeal was premature but found that CCI's statutory role justified its right to appeal.
Conclusions: The court concluded that CCI has the locus standi to file the appeal, given its statutory responsibilities and the impact of the order on its functions.

Issue 2: Justification of Interim Orders by the Single Judge

Relevant Legal Framework and Precedents: The procedural aspects under the Competition Act, 2002, and the principles of judicial intervention in ongoing investigations.
Court's Interpretation and Reasoning: The court observed that the interim orders were procedural and aimed at ensuring fair investigation practices, not at halting the investigation entirely.
Key Evidence and Findings: The court noted the petitioners' grievances regarding the manner of the investigation, particularly the search and seizure operations.
Application of Law to Facts: The court balanced the need for investigation with procedural fairness, allowing the investigation to proceed but with oversight.
Treatment of Competing Arguments: The court acknowledged the respondents' concerns about procedural fairness while ensuring the investigation's continuation.
Conclusions: The court found the interim orders justified, as they did not impede the investigation but ensured procedural fairness.

Issue 3: Scope of Director General's Powers

Relevant Legal Framework and Precedents: Section 41 of the Competition Act, 2002, concerning the Director General's powers of search and seizure.
Court's Interpretation and Reasoning: The court emphasized the Director General's powers as investigative, subject to procedural safeguards and judicial oversight.
Key Evidence and Findings: The court noted the allegations of improper search and seizure without prior notice or attempts to obtain information.
Application of Law to Facts: The court applied the legal standards for search and seizure, emphasizing the need for procedural compliance.
Treatment of Competing Arguments: The court considered the respondents' procedural concerns while affirming the Director General's investigative role.
Conclusions: The court upheld the Director General's powers but underscored the need for adherence to procedural norms.

Issue 4: Nature of CCI's Order under Section 26(1)

Relevant Legal Framework and Precedents: Section 26(1) of the Competition Act, 2002, and its interpretation as an administrative order.
Court's Interpretation and Reasoning: The court reiterated that the order under Section 26(1) is administrative, aimed at initiating investigation without adjudicatory implications.
Key Evidence and Findings: The court referenced CCI v. SAIL to support the administrative nature of the order.
Application of Law to Facts: The court applied the administrative nature of the order to justify non-interference at the investigation stage.
Treatment of Competing Arguments: The court acknowledged the administrative nature of the order, countering arguments for its appealability.
Conclusions: The court confirmed the administrative nature of the order, supporting the continuation of the investigation.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Director General of respondent no.1 shall file a personal affidavit indicating the material available and the reasons that prompted him to take the drastic action."
Core principles established: The CCI has the locus standi to appeal against orders affecting its statutory functions; the Director General's investigative powers are subject to procedural safeguards; and the order under Section 26(1) is administrative and not subject to appeal.
Final determinations on each issue: The court upheld CCI's right to appeal, justified the interim orders for procedural fairness, affirmed the Director General's powers with procedural oversight, and confirmed the administrative nature of the Section 26(1) order.