2018 (3) TMI 1553 - HC - Companies Law

Inquiry into certain agreements and dominant position of enterprise - Procedure for scrutiny of information or reference - Opinion on existence of prima facie case - whether the writ petition is maintainable against the order made under Section 26(1) since there is no appealable remedy available under the said Act? - Held that - The direction issued under Section 26(1) is a direction simpliciter and an administrative direction without entering upon any adjudicatory process; that it does not effectively determine any right or obligation of the parties to the lis; that mere investigation does not entile civil consequences for any person; that such direction is at the preliminary stage and of preparatory in nature without recording the findings which will bind the parties; that the function of the Commission to form an opinion under Section 26(1) is in a inquisitorial and regulatory power and therefore, the same is neither civil nor criminal but sui generis; that the jurisdiction of the Commission to act under Section 26(1) does not contemplate any adjudicatory function. Therefore, it is to be noted that the order passed under Section 26(1) itself does not give rise to a cause of action to subject the same to judicial interference, as the very challenge by way of statutory appeal against such order itself is barred under Section 53A, since such order does not result in civil consequences. When the very order passed under Section 26(1) is not appealable and the merits of the said order also cannot be questioned before this Court under Article 226, since it is administrative in nature, not deciding the rights of the parties in any manner and on the other hand, it is only in the form of preparatory, that too, at the preliminary stage, the petitioner and the supporting respondents are not entitled to question the said order by disputing or questioning the very reference made under Section 19(1)(b). What they cannot achieve directly, cannot be achieved indirectly by raising a ground against the reference made under Section 19(1)(b). Moreover, it is to be noted that both the reference and information got merged with the direction issued under Section 26(1) and therefore, such reference even assuming to be a defective one, cannot be segregated independently from the order passed under Section 26(1) and decide about its validity, more particularly, when the resultant order under Section 26(1) itself cannot be questioned as it does not result in civil consequences. Thus, it does not give any cause of action for the parties to challenge. In this case, admittedly, during the pendency of this writ petition, the investigation has already been completed and all the parties have taken part in the investigation. It is also stated that the report of the investigating officer was submitted before the Commission and all the parties have taken part in the proceedings before the Commission and have advanced their arguments. Therefore, the final order alone is to be passed by the Commission. When such being the factual position, it is for the parties to face the order and thereafter to work out their remedy, if the order goes against them. The present writ petition is liable to be dismissed and accordingly, the same is dismissed

Summary

Issues Involved:
1. Validity of the reference made under Section 19(1)(b) of the Competition Act, 2002.
2. Compliance with mandatory statutory requirements under Regulations 10, 11, and 15.
3. Violation of principles of natural justice.
4. Jurisdiction of the Competition Commission of India (CCI) to order investigation under Section 26(1).
5. Maintainability of the writ petition against an order under Section 26(1).

Detailed Analysis:

1. Validity of the Reference under Section 19(1)(b):
The petitioners argued that the reference made by the Ministry of Corporate Affairs (MCA) under Section 19(1)(b) was invalid as it did not fulfill the mandatory statutory requirements of Regulations 10, 11, and 15. They contended that the reference was merely a forwarding letter without the necessary details and was not signed by a competent authority. The court, however, emphasized that the CCI is empowered to take suo motu action and that the procedural lapses in the reference do not invalidate the investigation order under Section 26(1). The court held that the reference, even if defective, does not affect the jurisdiction of the CCI to proceed with the investigation.

2. Compliance with Mandatory Statutory Requirements:
The petitioners contended that the reference did not comply with Regulations 10, 11, and 15, which require detailed information and proper verification. The court acknowledged the procedural lapses but held that these lapses do not invalidate the investigation order as the CCI has the power to order an investigation based on its prima facie opinion. The court emphasized that the regulations are procedural and non-compliance does not necessarily render the proceedings void, especially when no civil consequences arise at the preliminary stage.

3. Violation of Principles of Natural Justice:
The petitioners argued that the CCI violated the principles of natural justice by not providing them an opportunity to be heard before passing the order under Section 26(1). The court referred to the Supreme Court's decision in the SAIL case, which held that the formation of a prima facie opinion under Section 26(1) is an administrative function and does not require a hearing. The court concluded that the principles of natural justice were not violated as the order under Section 26(1) is merely a direction for investigation and does not determine the rights or obligations of the parties.

4. Jurisdiction of the CCI:
The petitioners questioned the jurisdiction of the CCI to order an investigation based on an invalid reference. The court held that the CCI's jurisdiction is not ousted by procedural lapses in the reference. It emphasized that the CCI has wide powers under the Competition Act to protect consumer interests and promote competition. The court concluded that the CCI's jurisdiction to order an investigation is valid even if the reference is procedurally defective.

5. Maintainability of the Writ Petition:
The respondents argued that the writ petition is not maintainable as the order under Section 26(1) is not appealable and does not result in civil consequences. The court referred to the SAIL case and the Chettinad case, which held that an order under Section 26(1) is not appealable as it is administrative in nature and does not affect the rights of the parties. However, the court also noted that the absence of an appeal remedy does not bar the jurisdiction of the High Court under Article 226 of the Constitution. The court concluded that the writ petition is maintainable but found no grounds to interfere with the investigation order.

Conclusion:
The court dismissed the writ petition, holding that the procedural lapses in the reference do not invalidate the investigation order under Section 26(1) of the Competition Act. The court emphasized that the order is administrative in nature, does not result in civil consequences, and does not require compliance with the principles of natural justice. The CCI's jurisdiction to order an investigation is valid, and the writ petition is maintainable but without merit.