2015 (2) TMI 1414 - HC - Law of Competition

Whether the process commenced under Section 48 of the Act Competition Act 2002 is premature in view of the fact that the CCI has not returned any finding as to the contravention of the Act as yet? - HELD THAT - There cannot be two separate proceedings in respect of the company (i.e. VeriFone) and the key-persons. As the scheme of the Act to my mind does not contemplate such a procedure. As in every such matter including the proceedings under Section 138 of the Negotiable Instruments Act 1881 (in short N.I. Act) a procedure of the kind suggested is not contemplated. The judgment of the Supreme Court in the case Aneeta Hada 2012 (5) TMI 83 - SUPREME COURT dealt with proceedings under Section 138 of the N.I. Act. The judgment does not deal with issue at hand which is whether adjudication in two parts is permissible. The judgment is distinguishable. It is no doubt true that the petitioners can only be held liable if the CCI were to come to a conclusion that they were the key-persons who were in-charge and responsible for the conduct of the business of the company. In the course of the proceedings qua a company it would be open to the key-persons to contend that the contravention if any was not committed by them and that they had in any event employed due diligence to prevent the contravention. These arguments can easily be advanced by key-persons without prejudice to the main issue as to whether or not the company had contravened in the first place the provisions of the Act as alleged by the D.G.I. in a given case. Conclusion - The Competition Act does not require separate proceedings for the company and its key-persons and that key-persons can present their defenses during the unified proceeding. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in the judgment are:

• Whether the process under Section 48 of the Competition Act, 2002, can commence before the Competition Commission of India (CCI) returns a finding of contravention against the company.
• Whether the proceedings against the company and its key-persons should be conducted separately or simultaneously.
• The applicability of the Supreme Court's judgment in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. to the present case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Commencement of Process under Section 48

• Relevant Legal Framework and Precedents: Section 48 of the Competition Act, 2002, pertains to the liability of key-persons in a company for contraventions of the Act. The petitioner argued that proceedings under this section should only commence after a finding of contravention by the company under Section 27.
• Court's Interpretation and Reasoning: The court disagreed with the petitioner's interpretation, stating that the Act does not support separate proceedings for the company and its key-persons.
• Key Evidence and Findings: The CCI had already reserved its judgment on the matter, indicating that the process was ongoing and not yet concluded.
• Application of Law to Facts: The court applied the legal framework to conclude that the process should not be split, as the Act does not envisage separate proceedings.
• Treatment of Competing Arguments: The court found the petitioner's argument for separate proceedings inefficacious and inexpedient, drawing comparisons to procedures under other laws, such as the Negotiable Instruments Act.
• Conclusions: The court concluded that the CCI should proceed with delivering its judgment and, if a contravention is found, provide an opportunity for the petitioners to present their defense.

Issue 2: Separate vs. Simultaneous Proceedings

• Relevant Legal Framework and Precedents: The petitioner relied on the Supreme Court's judgment in Aneeta Hada, which dealt with proceedings under the Negotiable Instruments Act.
• Court's Interpretation and Reasoning: The court distinguished the Aneeta Hada case, noting it did not address the issue of separate proceedings under the Competition Act.
• Key Evidence and Findings: The court observed that the CCI had already heard arguments from both the informant and the opposite party, indicating a unified proceeding.
• Application of Law to Facts: The court applied its interpretation to conclude that the proceedings should not be bifurcated, as the Act does not contemplate such a division.
• Treatment of Competing Arguments: The court found the respondent's argument for a unified proceeding more aligned with the Act's scheme.
• Conclusions: The court concluded that a single proceeding is appropriate, allowing key-persons to argue their defenses without prejudice to the main issue.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The procedure suggested by Mr. Ramji Srinivasan is both inefficacious and inexpedient." "The judgment of the Supreme Court in the case Aneeta Hada...is distinguishable."
• Core Principles Established: The court established that the Competition Act does not require separate proceedings for the company and its key-persons and that key-persons can present their defenses during the unified proceeding.
• Final Determinations on Each Issue: The court determined that the CCI should proceed with its judgment and, if necessary, allow the petitioners to defend themselves post-judgment. The court also clarified that this process would not serve as a precedent for other cases.