2024 (11) TMI 1084 - HC - Companies Law

Seeking an injunction restraining infringement of copyright, piracy of registered design, passing off etc. - whether the filing of a design infringement action could constitute an anti-competitive practice or vexatious/sham litigation, so as to lead to a conclusion that the Plaintiff in the infringement action in the original suit has engaged in abuse of dominance? - HELD THAT - The potential for the CCI to continue an inquiry after a settlement has been reached, could even jeopardize the settlement, dissuading parties from opting for mediation in the first place. It could lead to a lack of trust in the mediation process, as parties may fear that their efforts to settle disputes amicably would be disregarded. Moreover, settlements in general being agreements voluntarily agreed to between parties, unless there is an extraordinary situation, they cannot be permitted to be reopened so as to ensure FINALITY and CLOSURE . Furthermore, the threat of continued investigations by the CCI could compel parties to engage in prolonged and costly legal battles, defeating the purpose of settlements. The question whether JCB s stance is misleading or not would have been for the High Court to decide, not the CCI. Thereafter, the Information makes an reference to the ad-interim injunction dated 25th November, 2011 granted by the Delhi High Court. The allegation is that the litigation in itself is an overall diabolical and insidious strategy and is a misuse of judicial process. In the entire Information, the repeated allegations are of abuse of judicial process and regulatory process. Details of various hearings in the Delhi High Court are set out in the Information. The consequences of the litigation are set out in the Information and it is argued that JCB abused its dominance in view of the said litigation, which is termed as a predatory litigation - No issues regarding anti-competitive practices were also raised in the information, apart from the allegation of abuse of dominant position in the garb of filed injunction suit and being lead players in the market. In the present dispute also the substratum of the dispute being the design infringement action filed by JCB for protection of its registered designs, the said suit having itself being settled, in the opinion of this Court, the CCI proceeding cannot continue and deserves to be disposed of - This is in line with the decision of the Division Bench in Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India Anr. 2014 (1) TMI 1954 - DELHI HIGH COURT where the Court categorically holds that once the settlement is reached, the substratum of the proceedings itself no longer exists. The settlement dated 22nd July, 2021 is taken on record. The impugned order dated 11th March, 2014 under Section 26(1) of the Act is set aside. The proceedings before the CCI in Case No. 105/2013 are accordingly terminated. The order dated 17th September 2014 passed by the ld. Metropolitan Magistrate is also set aside. Any material seized by CCI shall not be used in any other proceedings and be returned to JCB - the application is allowed.

Summary

Issues Involved:

1. Jurisdiction of the Competition Commission of India (CCI) in relation to the filing of a design infringement action as an anti-competitive practice.
2. Validity and legality of search and seizure conducted by the Director General (DG) of CCI.
3. Impact of settlement agreements on ongoing CCI proceedings.
4. Examination of whether settlements can have anti-competitive effects.
5. Role of mediation and settlements in resolving disputes.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Competition Commission of India (CCI):

The core issue was whether the filing of a design infringement action by JCB against BMPL could constitute an anti-competitive practice or sham litigation, leading to an abuse of dominance under Section 4 of the Competition Act, 2002. The CCI initiated an inquiry under Section 26(1) of the Act, based on BMPL's allegations that JCB's litigation was a strategy to stifle competition. However, the court observed that the design infringement action had been settled, and the Supreme Court had taken the settlement on record. Thus, the proceedings before the CCI lost their substratum, as the primary dispute had been resolved through mediation.

2. Validity and Legality of Search and Seizure:

The Petitioners challenged the search and seizure conducted by the DG CCI, claiming it violated legal procedures and the High Court's directives. The search was alleged to have been conducted without prior summons or requisition for information, and by unauthorized personnel. The court noted that the search warrant was issued under a repealed section of the Companies Act, and the search violated procedural safeguards. The court set aside the order of the Chief Metropolitan Magistrate authorizing the search and directed that any material seized should not be used in other proceedings.

3. Impact of Settlement Agreements on Ongoing CCI Proceedings:

The court emphasized the importance of mediation and settlements in resolving disputes efficiently. It highlighted that allowing CCI to proceed with an inquiry post-settlement would undermine the fundamental purpose of mediation by reopening issues that parties had already resolved. The court held that the settlement agreement between JCB and BMPL, recorded by the Supreme Court, brought finality to the dispute, and the CCI proceedings should not continue. The court referenced the Division Bench's decision in Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India & Anr., which held that once a settlement is reached, the substratum of CCI proceedings is lost.

4. Examination of Whether Settlements Can Have Anti-Competitive Effects:

The CCI argued that settlements could potentially have anti-competitive effects, such as reverse payment settlements. However, the court noted that the information provided by BMPL did not address anti-trust issues like cartel formation or collusive arrangements. The court emphasized that settlements are agreements voluntarily agreed upon by parties, and unless there is an extraordinary situation, they should not be reopened. The court preserved the CCI's power to proceed under its suo moto powers or based on new information.

5. Role of Mediation and Settlements in Resolving Disputes:

The court underscored the significance of mediation as a mechanism for dispute resolution, providing a faster, cost-effective, and less adversarial alternative to litigation. It stressed that mediation outcomes should be respected by regulatory authorities like the CCI, as they foster a legal environment encouraging amicable dispute resolution. The court cited the Supreme Court's emphasis on the sanctity of settlements in various fields of law and reiterated that mediation is a new dimension of access to justice.

Conclusion:

The court allowed the writ petitions, set aside the CCI's order directing an inquiry, and terminated the proceedings before the CCI. It also set aside the search warrant issued by the Chief Metropolitan Magistrate and directed that seized materials be returned to JCB. The court took the settlement on record and emphasized the need for finality and closure in mediated settlements, preserving CCI's powers to act on new information or suo moto.