2023 (7) TMI 1537 - AT - Law of Competition

Locus standi to challenge the order of the Competition Commission of India (CCI) - SCN to be issued to the parties to combination i.e. both acquirer and the target entity or word parties occurring in Section 29(1) has to be read singularly - non-issuance of Show Cause Notice to HNG vitiates the order of approval granted by the Commission under Section 31 sub-section (1) or not - combination is likely to cause an appreciable adverse effect on competition by the CCI under Section 29 sub-section (1) or not - process as contemplated under Section 29 sub- section (2) having not been completed by the CCI before passing the order the order passed by the CCI is against the procedure prescribed under Section 29 and deserved to be set aside - obligation to direct the parties to publish details of the combination - modifications suggested by Respondent No.2 in its reply to Show Cause Notice adequately addressed the AAEC as expressed in the Show Cause Notice under Section 29 sub- section (1) - non-application of mind - violation of principles of natural justice. Whether the Appellant(s) have locus to challenge the order of the Competition Commission of India dated 15.03.2023 within the meaning of Section 53B of the Competition Act 2002? - HELD THAT - In the Judgment of the Hon ble Supreme Court in Samir Aggarwal 2020 (12) TMI 621 - SUPREME COURT where Hon ble Supreme Court was considering the expression person aggrieved in context of the Competition Act it was categorically held by Hon ble Supreme Court that the expression person aggrieved has to be understood widely and not be constructed narrowly. The present is a case where Appellants are challenging the order passed by the Commission approving the combination of two biggest market players in container glass industry. It is contended in the Appeal that approval of the combination has been done in breach of the procedure prescribed in the Competition Act. We have noticed the pleading in C.A. (AT) No. 7/2023 where it is specifically pleaded that Appellant is also a body of micro and small manufacturers of glass based in UP which represent the interest of MSME Glass Manufacturer. The Appellant in the Appeal pleads and has enumerated various consequences of combination of two largest players in market. The Appellant expresses apprehension and filed objection before the CCI even before the approval of the combination and the Commission vide its letter dated 23.02.2023 has noted the concern raised by the Appellant and Appellant was communicated that their concerns shall be noted at the relevant time - the objection of the Respondents that none of the Appellants have locus to file the Appeal is rejected. Whether Section 29 sub-section (1) contemplates that a Show Cause Notice to be issued to the parties to combination i.e. both acquirer and the target entity or word parties occurring in Section 29(1) has to be read singularly? - HELD THAT - There can be no quarrel to the provision of General Clauses Act that words in singular includes plural and vice versa but when we look into the specific purpose and object which is delineated by Section 29(1) in show cause notice to both the parties we cannot agree with the submission of the CCI that parties in the present case shall only be the AGI who has given notice under Section 6(2). There can be no doubt that Respondent No. 2-AGI who has given notice under Section 6(2) is included within the definition of parties. The show cause notice specifically required to be given to both of them. The statute clearly contemplates issuance of show cause notice to both the parties of the combination - Section 29(1) of the Act contemplates that show cause notice has to be issued to both parties to the combination i.e. acquirer and target entity. Whether non-issuance of Show Cause Notice to HNG vitiates the order of approval granted by the Commission under Section 31 sub-section (1)? - HELD THAT - In the facts of the present case especially that Respondent No. 3 is in insolvency and the Resolution Professional himself has placed proposal for acquisition of Respondent No. 2 which has been approved by the Committee of Creditors and all details and information have been given by Respondent No. 2 in its notice under Section 6(2) of Competition Act which relate both to Respondent No. 2 and Respondent No. 3 non-issuance of notice to target entity i.e. Respondent No. 3 is not to ipso facto vitiate the order of the Commission when Respondent No. 3 has neither any objection nor grievance regarding non-service of notice to Respondent No. 3 and information regarding Respondent No. 3 are all in public domain which has been used by Respondent No. 2 in submitting the notice. By mere non-issuance of notice to Respondent No. 3 the proceedings before the CCI need not be annulled. Whether after formation of prima-facie opinion that combination is likely to cause an appreciable adverse effect on competition by the CCI under Section 29 sub-section (1) there was no occasion to form again a prima facie opinion under Section 29(2) after receipt of response to the Show Cause Notice and the CCI was required to complete the further process under Section 29(2) including direction to the parties to the combination to publish details of combination? - Whether the process as contemplated under Section 29 sub- section (2) having not been completed by the CCI before passing the order dated 15.03.2023 the order passed by the CCI is against the procedure prescribed under Section 29 and deserved to be set aside? - Whether inspite of Respondent No.2 along with response to Show Cause Notice having offered modification to address the prima facie concern expressed in the said Show Cause Notice as per Regulation 25 (1) (a) of 2011 Regulations the CCI was obliged to direct the parties to publish details of the combination? - HELD THAT - The bone of contention of the parties is as to whether after formation of prima facie opinion under Section 29(1) whether there was any requirement of formation of prima facie opinion at the second time under sub-section (2) of Section 29. Whereas the Appellant(s) pleads that there is no requirement of formation of prima facie opinion at the second time and when notice under Section 29 sub-section (1) has been issued even after response to the notice the Commission is required to direct the parties to the combination to publish the details of the combination. The Appellants contention is that Section 29 sub-section (2) insofar as it directs for publishing the details of the combination having not been complied the statutory procedure has not been complied by the Commission resulting in vitiation of the order approving the combination dated 15.03.2023. The contention of the CCI and other Respondents is that formation of prima facie opinion is required at the second stage as per Section 29 sub-section (2) when response is received to the notice and the requirement of publication of details of the combination comes into play only when prima facie opinion is formed at the second time. The plain reading of Section 29 sub-section (2) indicates that the Commission if it is prima facie of the opinion that combination is likely to have an appreciable adverse effect on competition it shall within seven working days from the date of receipt of the response of the parties to the combination or the receipt of the report from Director General called under sub-section (1A) whichever is later direct the parties to the said combination to publish details of the combination - The legislative intent is clear by sub-section (2) of Section 29 that there may be cases where the Commission is satisfied after response of the notice or the report of the Director General that there is no appreciable adverse effect on competition it may decide not to proceed further under Section 29 sub-section (2) and approve the combination. The submission of the Appellant(s) that prima facie opinion at the second stage is not required to be formed does not commend. As per the statutory provisions contained in Section 29 and the Regulations 2011 after receipt of the response to show-cause notice the Commission has to form prima facie opinion at the second stage as required by Section 29 sub-section (2) and in cases where prima facie opinion at the second stage under Section 29 sub-section (2) has not been formed and the Commission is satisfied that the response received in the modification if any submitted by the Party does not meet the requirements of law the Commission directed publication of details of combination in such cases - the Commission proceeded to approve the combination by following the statutory procedure prescribed under Section 29 as well as Regulations 2011. Further in the facts of the present case under sub-section (2) of Section 29 the publication of details of combination was not required to be directed since at the second stage the Commission did not form any prima facie opinion of AAEC - the Commission had duly considered the modification submitted by AGI in response to the show-cause notice and after accepting the modification proceeded to approve the combination under Section 31 sub-section (1). Whether order of the Commission dated 15.3.2023 can be said to have been passed in violation of principles of natural justice since the objections filed by Appellant the U.P. Glass Manufacturers Syndicate even after the order dated 22.02.2023 were not duly considered? - HELD THAT - The principles of natural justice are generally to be followed when a decision is taken which has civil consequence on any person or entity. The Competition Act 2002 and the Regulations framed thereunder specially Combination Regulations 2011 provides a detailed procedure and manner in which participation of others including Members of the pubic and other parties have to be allowed - The right of participation of public in general and other entities arises when under Section 29 sub-section (2) of the Act the Commission directed the parties to the combination to publish the details of the combination within seven days from of such direction for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected. The stage for filing any objection or giving any information by public in general including the Appellant UPGMS can arise only when details of the combination are published under Section 29 sub-section (2). In the present case stage of direction to publish details of combination had not arisen since there was no prima facie opinion formed at the second stage under Section 29 sub- section (2) - The right to third parties to submit objections arises when the Commission issues direction to the parties to publish the details of the proposed combination which stage never arose in the present case - in the procedure adopted by the Commission in inquiring the notice under Section 6 sub-section (2) there is no violation of principles of natural justice which can be attributed to the Commission. Conclusion - i) The appellants have locus standi to challenge the CCI s order as the term aggrieved person is broadly interpreted in the context of the Competition Act. ii) The CCI should have issued the show-cause notice to both the acquirer and the target entity as required by Section 29(1). iii) The non-issuance of notice to HNG did not vitiate the CCI s order given the insolvency context and lack of objection from the Resolution Professional. iv) The CCI s process was compliant with the statutory procedure and the acceptance of modifications addressed AAEC concerns negating the need for a second prima facie opinion and publication of details. v) The CCI s process did not violate principles of natural justice as the procedural framework did not require public participation at the stage reached. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the appellants have the locus standi to challenge the order of the Competition Commission of India (CCI) dated 15.03.2023 under Section 53B of the Competition Act, 2002.
• Whether Section 29(1) of the Competition Act requires a show-cause notice to be issued to both the acquirer and the target entity, or if the term "parties" can be read singularly.
• Whether the non-issuance of a show-cause notice to Hindustan National Glass & Industries Limited (HNG) vitiates the CCI's order of approval.
• Whether the CCI was required to form a second prima facie opinion under Section 29(2) after receiving the response to the show-cause notice and direct the publication of the combination's details.
• Whether the CCI's approval of the combination without completing the process under Section 29(2) was procedurally defective.
• Whether the modifications suggested by AGI Greenpac Limited adequately addressed the appreciable adverse effect on competition (AAEC) expressed in the show-cause notice.
• Whether the CCI considered the relevant factors under Section 20(4) of the Act or if the order suffers from non-application of mind.
• Whether the order was passed in violation of principles of natural justice, given that objections filed by the U.P. Glass Manufacturers Syndicate were not duly considered.

2. ISSUE-WISE DETAILED ANALYSIS

Issue I: Locus Standi of the Appellants

• Legal Framework and Precedents: Section 53B of the Competition Act allows an "aggrieved person" to appeal. The term "aggrieved person" is interpreted broadly in the context of the Competition Act, as per the Supreme Court's ruling in "Samir Agarwal vs. CCI & Ors."
• Court's Interpretation and Reasoning: The court acknowledged the broad interpretation of "aggrieved person" in competition matters, emphasizing the public interest and the Act's objective to eliminate anti-competitive practices.
• Key Evidence and Findings: The appellants, particularly the U.P. Glass Manufacturers Syndicate, represent MSME glass manufacturers and raised concerns about the combination's impact on competition.
• Application of Law to Facts: The court found that the appellants had a legitimate interest in the combination's approval due to potential adverse effects on competition.
• Treatment of Competing Arguments: The respondents argued that the appellants lacked direct legal grievance. However, the court favored a broader interpretation aligned with the Act's purpose.
• Conclusions: The appellants have the locus standi to challenge the CCI's order.

Issue II: Requirement of Show-Cause Notice to Both Parties

• Legal Framework and Precedents: Section 29(1) of the Competition Act requires a show-cause notice to the "parties to combination."
• Court's Interpretation and Reasoning: The court interpreted "parties" to mean both the acquirer and the target entity, emphasizing the need for both to respond to the show-cause notice.
• Key Evidence and Findings: The CCI issued the notice only to AGI, not to HNG.
• Application of Law to Facts: The court found that the CCI should have issued the notice to both AGI and HNG.
• Treatment of Competing Arguments: The CCI argued that "parties" could be singular, but the court disagreed, emphasizing the statutory language.
• Conclusions: The CCI should have issued the show-cause notice to both parties.

Issue III: Impact of Non-Issuance of Notice to HNG

• Legal Framework and Precedents: The procedural requirements of Section 29 of the Competition Act.
• Court's Interpretation and Reasoning: The court considered the insolvency status of HNG and the role of the Resolution Professional.
• Key Evidence and Findings: HNG, through its Resolution Professional, did not object to the combination.
• Application of Law to Facts: The court found that the non-issuance of notice to HNG did not vitiate the proceedings, given the circumstances.
• Treatment of Competing Arguments: The appellants argued for procedural compliance, but the court emphasized the practical context.
• Conclusions: The non-issuance of notice to HNG did not invalidate the CCI's order.

Issue IV-VI: Procedural Compliance under Section 29

• Legal Framework and Precedents: Sections 29, 30, and 31 of the Competition Act, along with the Combination Regulations, 2011.
• Court's Interpretation and Reasoning: The court analyzed the procedural steps under Section 29, including the requirement for a second prima facie opinion.
• Key Evidence and Findings: The CCI did not form a second prima facie opinion but accepted AGI's modifications.
• Application of Law to Facts: The court found that the CCI followed the statutory procedure, as a second prima facie opinion was not necessary when modifications addressed AAEC concerns.
• Treatment of Competing Arguments: The appellants argued for strict procedural adherence, while the CCI emphasized practical compliance.
• Conclusions: The CCI's process was compliant, and the order was valid.

Issue VII-VIII: Adequacy of Modifications and Consideration of Factors

• Legal Framework and Precedents: Section 20(4) of the Competition Act, regarding factors for assessing AAEC.
• Court's Interpretation and Reasoning: The court reviewed the CCI's detailed analysis of AGI's proposed modifications.
• Key Evidence and Findings: The CCI concluded that the modifications effectively addressed AAEC concerns.
• Application of Law to Facts: The court found no error in the CCI's assessment and acceptance of the modifications.
• Treatment of Competing Arguments: The appellants questioned the adequacy of the modifications, but the court deferred to the CCI's expertise.
• Conclusions: The modifications were adequate, and the CCI's decision was well-founded.

Issue IX: Principles of Natural Justice

• Legal Framework and Precedents: The principles of natural justice and their application in competition proceedings.
• Court's Interpretation and Reasoning: The court considered the procedural framework and the CCI's communications with the appellants.
• Key Evidence and Findings: The CCI noted the appellants' concerns but did not provide for their participation, as the process did not reach the stage requiring public input.
• Application of Law to Facts: The court found no violation of natural justice, as the procedural framework was followed.
• Treatment of Competing Arguments: The appellants argued for a hearing, but the court emphasized statutory compliance.
• Conclusions: The CCI's process did not violate principles of natural justice.

3. SIGNIFICANT HOLDINGS

• The appellants have locus standi to challenge the CCI's order, as the term "aggrieved person" is broadly interpreted in the context of the Competition Act.
• The CCI should have issued the show-cause notice to both the acquirer and the target entity, as required by Section 29(1).
• The non-issuance of notice to HNG did not vitiate the CCI's order, given the insolvency context and lack of objection from the Resolution Professional.
• The CCI's process was compliant with the statutory procedure, and the acceptance of modifications addressed AAEC concerns, negating the need for a second prima facie opinion and publication of details.
• The modifications proposed by AGI were adequate, and the CCI's decision was based on a detailed analysis of relevant factors.
• The CCI's process did not violate principles of natural justice, as the procedural framework did not require public participation at the stage reached.
• The CCI's order dated 15.03.2023 was upheld, with no grounds for interference by the Appellate Tribunal.