2023 (1) TMI 58 - HC - Companies Law

Anti-competitive acts - bid rigging - use of dominion position - it is alleged that the impugned order of CCI does not comply with the requirements of Section 26(1) of the Competition Act, 2002 and the same is arbitrary, perverse and illegal - formal agreement exists between the parties or not - HELD THAT - On plain reading of Section 2(b), it clearly reveals that an agreement includes any arrangement or understanding or action in concert, whether it is formal or in writing or whether it is intended to be enforceable by legal proceedings. Thus, for an agreement, under this Act , need not be in writing. On the facts and circumstances of each case, the conduct of the parties to agreement can be inferred. At the same time, under Section 2(c) Cartel would include association of producers, sellers, distributors, traders or service providers, who, by agreement amongst themselves, limit control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services. Thus, even an action which may form itself, may be agreement of creating Cartel. It is obvious that there may not be patent evidence as to forming Cartel or creating an agreement in writing. The facts and circumstances of the case may reflect, primafacie, that there is agreement and/ or Cartel. Now, it is well settled that under Section 26(1) of the Act, the Commission is only required to see whether a primafacie opinion exist or not. The order under Section 26(1) of the Act can be passed when there is prima-facie material to direct an inquiry and elaborate reasons are not required, as Commission is required to express only a tentative view. It is also settled that in case elaborate reasons are provided in the order passed under Section 26(1), it will certainly prejudice the person against whom the complaint has been made, and therefore, the Statute provided a safeguard for holding an inquiry after an order is passed under Section 26(1) and the Director General is certainly required to grant an opportunity of hearing by holding inquiry in the matter - considering the provision of Section 53A, admittedly, the order of inquiry passed by the Commission, by virtue of power under Section 26(1) of the Act, no appeal is permissible. Therefore, the Constitutional power under Article 226 is available to the concerned person to challenge the order of the inquiry issued by the Commission under Section 26(1) of the Act. But, the action under Section 26(1) being an administrative in nature, there would be a judicial restrain on the High Court to interfere with such administrative order unless and until it is shown that the order was contrary to law, or relevant factors were not considered or relevant factors were considered or the decision was one which no reasonable person could have taken. Considering the material placed on record, it reveals that the Commission has initiated proceedings in accordance with Section 26 of the Act, pursuant to it, forming an opinion under Section 26(1) of the Act as to the existence of a prima-facie case. This exercise has been undertakne on the basis of the information received by the Commission from Respondent No.3 regarding the Cartel in the form of anti-competitive agreement. No Statutory right is availabe to the person concerned against whom any inquiry is ordered to be initiated by the Commission on the exercise of its administrative power available to it under the Act. Further, it is well settled that in an order of Inquiry under Section 26, which is only prima-facie opinion and does not affect the rights of any person, it cannot be reviewed by the High Court unless and until it is shown that it is contrary to any provisions of the Act or irrelevant material has been considered or relevant material has not been considered - it is the prerogative of the Commission to invite any person or sought information from any person for forming primafacie opinion as to whether any inquiry contemplated under Section 26(1) of the Act is necessary or not. Such action of the Commission cannot be said to be bias one or giving any right to other person against whom any order of inquiry is passed. The Commission has considered material placed on record by the respondent No.3 as well as GCEE for forming its primafacie opinion as to initiate inquiry under Section 26(1). It clearly reveals that while passing order for initiation of inquiry, the Commission has also considered that the allegation of the informant regarding provision of restriction on Standard terms and conditions have not been accepted by the Commission. Thus, the Commission has considered every material placed before it before arriving at the prima-facie opinion as to inquiry. Now, the main grievance of the petitioner is the interpretation of L1 price and negotiation price in each packet and has submitted that the Commission has misinterpreted the information provided to it. However, it needs to be observed that it is for the Commission to interprete and consider the information provided to it by the person concerned relating to material, which may be in the form of business transactions, information relating to Accounts or such statistical data, etc. The Court has no such expertise in evaluating or interpreting the business data or statistical data pertaining to a particular commercial activity. Any such information which is in the form of statistical data relating to any business or commercial transaction and accounting procedure may be interpreted in a different manner by different person having such expertise, knowledge in such fields. The angle of interpretation of such data may be different by different person and, therefore, the submission of the petitioner that information relating to the statistical datea including the interpretation of effect of L1 price in each packet and the negotiated price thereof, etc., is misunderstood by the Commission, cannot be accpeted at this stage, as it is prerogative of the Commission to form prima-facie opinion as to initiation of inquiry. In the considered opinion of this Court, unless and until a detailed inquiry is conducted by the Director General, the question of dealing a finding in respect of violation of the statutory provision does not arise. Therefore, the petitioner should not have hesitated in participating in the inquiry which is yet to be commenced by the Director General and all the grounds raised by the Petitioners will be available before the Director General as well as before the Commission. The impugned order passed under Section 26(1) is only a starting point of the process and the petitioners want to stop process at the threshold and the Commission is not being permitted by the petitioner to proceed ahead in the matter - Further, it is well settled that when questions of fact are involved in any matter, the High Court may not exercise its constitutional power under Article 226 of the Constitution. Admittedly, in this case, as discussed hereinabove, the disputed question of facts relating to interpreation of information in the form of data is agitated. Therefore, on this ground also, this court deems it fit not to exercise its discretionary power under Article 226 of the Constitution of India, especially when the impugned order is administrative in nature. This Court is of the considered opinion that the Writ-Petitions are devoid of merit and deserved to be dismissed. However, it is pertinent to note that during the pendency of the petitions, the Director General has also issued certain notices to initiate penalty proceedings under Section 43 of the Act, as there was no stay in operation against the impugned order of the Commission - since all the petitions are devoid of merits and deserve to be dismissed, all are hereby dismissed.

Summary

Issues Involved:
1. Legality of the order passed under Section 26(1) of the Competition Act, 2002.
2. Whether the order under Section 26(1) of the Act is administrative or quasi-judicial.
3. Requirement of reasons in the order under Section 26(1).
4. Opportunity of hearing before passing the order under Section 26(1).
5. Validity of the investigation initiated by the Director General (DG).
6. Judicial review of the administrative order under Section 26(1).

Detailed Analysis:

1. Legality of the order passed under Section 26(1) of the Competition Act, 2002:
The petitioners challenged the order passed by the Competition Commission of India (CCI) under Section 26(1) of the Competition Act, 2002, which directed an investigation into alleged anti-competitive practices. The petitioners argued that the order was arbitrary, perverse, and illegal, as it did not comply with the requirements of Section 26(1) and was a non-speaking order. The CCI's order was based on allegations of bid rigging and cartelization in the tender process for printing and binding school textbooks.

2. Whether the order under Section 26(1) of the Act is administrative or quasi-judicial:
The court observed that the function of the CCI under Section 26(1) is inquisitorial and regulatory, not adjudicatory. The order under Section 26(1) is administrative in nature and does not determine the rights or obligations of the parties. It is a direction simpliciter to cause an investigation into the matter, akin to a departmental proceeding.

3. Requirement of reasons in the order under Section 26(1):
The court noted that while forming a prima facie view under Section 26(1), the CCI is expected to record at least some reasons, even if minimal, to substantiate the formation of such an opinion. The CCI must express its mind that a prima facie case exists, requiring an investigation by the Director General. The reasons should be based on the information furnished to the CCI.

4. Opportunity of hearing before passing the order under Section 26(1):
The court held that there is no statutory duty cast on the CCI to issue notice or grant a hearing to the parties at the stage of forming a prima facie opinion under Section 26(1). The CCI can form its opinion without any assistance or with the assistance of experts. The principle of audi alteram partem is not applicable at this stage as the order does not condemn any person and is merely preparatory.

5. Validity of the investigation initiated by the Director General (DG):
The court emphasized that the investigation initiated by the DG is quasi-inquisitorial and does not affect the rights or liabilities of the parties. The purpose of the investigation is to examine the veracity of the allegations and determine any anti-competitive effects. The petitioners have the opportunity to present their case during the investigation and subsequent proceedings before the CCI.

6. Judicial review of the administrative order under Section 26(1):
The court observed that judicial review of an administrative order under Section 26(1) is limited. The High Court can interfere only if the order is contrary to law, relevant factors were not considered, or irrelevant factors were considered. The court does not sit as an appellate body over the CCI's decision but reviews the manner in which the decision was made.

Conclusion:
The court dismissed the petitions, holding that the CCI's order under Section 26(1) was based on a prima facie view and did not violate any statutory provisions. The order was administrative in nature, and the petitioners would have the opportunity to present their case during the investigation and subsequent proceedings. The court also stayed the initiation of penalty proceedings by the DG until the petitioners had the opportunity to reply to the notices issued based on the CCI's order.