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2016 (5) TMI 1625 - AT - Law of CompetitionWhether the Commission could without recording a finding that All Kerala Chemists and Druggists Association of which the appellants are the President and the Secretary respectively with effect from 11.08.2013 has contravened the provisions of the Competition Act 2002? - HELD THAT - In the present case investigation into the role of the persons incharge of and responsible to Respondent No. 5 for the conduct of its affairs was initiated by the Commission at the threshold i.e. while passing order dated 29.09.2014 under Section 26(1) of the Act and Jt. DG returned a finding in paragraph 8 of his report that the appellants are equally complicit in the practices being carried on and the decisions being taken by Respondent No. 5 which were found to be contrary to the provisions of the Act. This exercise was ex facie contrary to the plain language of Section 48 of the Act. That apart in the absence of a determination by the Commission that Respondent No. 5 had acted in contravention of Section 3 the finding recorded by the Jt. DG in paragraph 8.2.2 of his report about the alleged complicity of the appellants in the anti-competitive practices being carried on and the decisions taken by Respondent No. 5 could not have been made basis for passing an order under Section 27(b) or 27(g) and on that ground alone the penalty imposed on Appellant No. 1 and the direction contained in the second part of paragraph 14 of the impugned order are liable to be set aside. The record produced before the Tribunal does not show that the Commission had at any point of time informed the appellants that it was intending to impose penalty on either of them under Clause (b) of Section 27 of the Act. Therefore they did not get any opportunity to show that paragraph 5 of the order passed by the Commission under Section 26(1) and the conclusion recorded by the Jt. DG in paragraph 8.2.2 of his report were ultravires the provisions of the Act and also represent their cause against the proposed penalty. Thus there is no escape from the conclusion that the penalty imposed on Appellant No. 1 is vitiated due to violation of the principles of natural justice. Whether the direction given by the Commission to Respondent No. 5 not to associate the appellants with its affairs including administration management or governance for a period of two years is legally sustainable? - HELD THAT - Clause (g) of Section 27 which gives power to the Commission to pass such other orders or issue such other directions as it may deem fit has to be interpreted by applying the rule of contextual interpretation and keeping in view the objects sought to be achieved by enactment of the Act namely to prevent practices having adverse effect on competition to promote and sustain competition in markets to protect interest of consumers and to ensure freedom of trade carried on by other participants in the markets in India and for matters connected therewith or incidental thereto. The powers vested in the Commission under Clauses (a) (b) (d) and (e) of Section 27 are in consonance with one of the objectives of the Act i.e. to prevent practices having adverse effect on competition - in exercise of power vested in it under Section 27(g) the Commission cannot make an order or issue a direction which would directly or indirectly impinge upon the provisions of other statutes. The election to the offices of the President and the Secretary of Respondent No. 5 and such like bodies are governed by the provisions contained in the Travancore Cochin Literary Scientific and Charitable Societies Registration Act 1955 rules regulations and by-laws made thereunder. The order passed by the Tribunal dismissing the appeal filed by AKCDA (Appeal No. 17 of 2016) has no bearing on the present case because the only issue raised by the appellant in that case was whether the Commission was justified in holding it guilty of having acted in contravention of Section 3(3)(b) read with Section 3(1) of the Act and the same was answered in affirmative. The question whether the Commission could penalise the appellants by invoking Section 27(g) and that too without giving them action-oriented notice and opportunity of hearing was neither raised nor considered by the Tribunal. Therefore dismissal of the appeal filed by AKCDA cannot be relied upon for denying relief to the appellants. Conclusion - The deeming provisions contained in Section 48 can be invoked only after it is found that the company has contravened the provisions of the Act. The CCI must comply with principles of natural justice and cannot exercise powers that interfere with statutory rights under other laws. The impugned order is set aside in so far as it relates to the imposition of penalty on Appellant No. 1 @ 10% of the average of his income of preceding three financial years - appeal allowed. 1. ISSUES PRESENTED and CONSIDERED The legal judgment revolves around several core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Investigation without Prior Contravention Finding
Issue 2: Imposition of Penalties without Notice
Issue 3: Authority to Affect Tenure of Elected Officials
3. SIGNIFICANT HOLDINGS
The Tribunal's decision emphasizes the importance of adhering to procedural fairness and the limits of the CCI's authority under the Competition Act, ensuring that individuals are not penalized without due process and that statutory rights are respected.
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