2013 (11) TMI 993 - HC - Companies Law

Violation of principle of natural justice - Notice or hearing opportunity not given - Whether the Competition Commission of India is required to give notice or hearing to the person against whom an information is given or a reference is made, in terms of Section 19 of the Competition Act, 2002 before the Commission directs further investigation, in exercise of the powers conferred upon it by sub-section (7) of Section 26 of the Act - Held that - Though, the principles of natural justice do necessitates hearing the affected party before a quasi-judicial or even an administrative decision which adversely affects his interest is taken, the order directing further investigation cannot be said to be an order prejudicially affecting the person against whom information is provided or a reference is made to the Commission. An order of this nature does not visit the person against whom information is provided or a reference is made to the Commission, with any civil consequences nor does it in any manner impair any legal right of such a person. Procedure adopted by the Commission would not be rendered unfair or unreasonableness or arbitrary in case no notice or hearing to the affected party is given before directing further investigation under sub section (7) of section 26 of the Act. In fact, even an accused in a criminal case is not entitled to a hearing before a Magistrate passes an order for further investigation in exercise of the powers conferred upon him by sub section (8) of section 173 of Code of Criminal Procedure. The person against whom an information is given or a reference is made to the Commission in terms of section 19 of the Act cannot be placed on a footing higher than that of an accused in a criminal trial. Regulation 41(5) of the Competition Commission of India (General) Regulation, 2009 confers upon the Commission or the Director General, to direct evidence by a party to be led by way of oral submissions and if deemed necessary or expedient grant an opportunity to other party or parties, as the case may be, to cross examine the person giving evidence. Thus, the opportunity to cross examine the witness is to be given to the opposite party when a party before the Commission or the Director General is allowed to lead evidence by way of oral submissions. Commission has permitted the informant to cross examine only the witness of the petitioner and the cross examination has been restricted to the questions which are relevant and germane to the issue raised in the matter. Obviously, such cross examination can take place only if further investigation is directed by the Commission - Decided against Appellant.

Summary

Issues Involved:
1. Whether the Competition Commission of India (the Commission) is required to give notice or hearing to the person against whom information is given or a reference is made before directing further investigation under Section 26(7) of the Competition Act, 2002.

Issue-wise Detailed Analysis:

1. Requirement of Notice or Hearing Before Directing Further Investigation:
The primary issue in this petition is whether the Commission is obligated to provide notice or a hearing to the person against whom information is given or a reference is made under Section 19 of the Competition Act, 2002 before directing further investigation under Section 26(7) of the Act.

Section 19(1) of the Act empowers the Commission to inquire into any alleged contravention of the provisions under Section 3(1) or Section 4(1) either on its own or upon receiving information from any person, or a reference made by the Central or State Government or a statutory authority.

Case Background:
Respondent No. 3, engaged in providing terminalling services at Vishakhapatnam Port, alleged that the petitioner-company had created a dominant position and abused this dominance by setting up a blender facility and charging exorbitantly for services. The Commission referred the matter to the Director General for investigation. The Director General's findings were as follows:
- The relevant market was identified as upstream and downstream terminalling services at Vishakhapatnam Port.
- The petitioner held a 100% market share in upstream terminalling services.
- Entry barriers were not high, as evidenced by the informant's application for pipeline permission.
- The petitioner's monopolistic position was limited by the bargaining power of its customers.
- No dominance or contravention of sections 4(2)(a)(i) and 4(2)(a)(ii) of the Act by the petitioner was established.
- The petitioner provided valid justifications for denying access to the informant for bypass services.

Procedural Contentions:
The respondent No. 3 sought to cross-examine witnesses whose evidence was recorded by the Director General. The Commission agreed, stating that cross-examination was necessary to test the veracity of the witnesses and bring out the truth. The Commission referred the matter back to the Director General for this purpose, directing that only relevant questions be asked during cross-examination.

Petitioner's Arguments:
The petitioner contended that the order for further investigation was passed without giving them an opportunity to be heard, violating the principles of natural justice. They argued that both the informant and the person against whom information is given should be heard before the Commission takes a view on the Director General's report.

Legal Provisions and Interpretation:
Section 26(1) allows the Commission to direct the Director General to investigate upon finding a prima facie case. Sub-sections (4), (5), and (7) outline the procedure for forwarding the report, inviting objections, and directing further inquiry. The petitioner argued that sub-section (5) requires inviting objections from "the parties concerned," which should include the person against whom information is given.

However, the court noted that the statutory language uses "or" between "Statutory Authority" and "the parties," indicating that objections are invited only from the informant or the statutory authority, not the person against whom the information is given. The definition of "party" in the Competition Commission of India (General) Regulations, 2009 does not apply to sub-section (5) of Section 26.

Supreme Court Precedent:
In Competition Commission of India vs. Steel Authority of India and Another (2010) 10 SCC 744, the Supreme Court held that no notice is required to be given to the informant or the affected party before the Commission forms a prima facie opinion and directs investigation.

Principles of Natural Justice:
The court referenced Smt. Maneka Gandhi v. Union of India AIR 1978 SC 597, emphasizing that the principles of natural justice, including the right to a hearing, apply unless explicitly excluded by statute. However, the court concluded that directing further investigation does not adversely affect the person against whom information is given, as it does not result in civil consequences or impair legal rights.

Conclusion:
The court found no merit in the petitioner's contention that the Commission was required to give notice or a hearing before directing further investigation. The order for further investigation does not prejudicially affect the person against whom information is provided. The writ petition was dismissed, and the Commission's order was upheld.

Cross-Examination of Witnesses:
Regulation 41(5) allows the Commission or the Director General to direct oral evidence and grant cross-examination opportunities. The Commission's decision to permit cross-examination of the petitioner's witnesses was deemed appropriate, ensuring relevance and germane questions to the issues raised.

Final Judgment:
The writ petition was dismissed, and no costs were awarded. The Commission's procedure and decision to direct further investigation without prior notice or hearing to the petitioner were upheld.