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TMI Blog2019 (9) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation with the CCI did pertain to the alleged violation by GIL and others under Section 3(3) (a) and (b) of the Act, the direction given to the DG was to investigate the matter , and this enabled the DG to examine violations not only of under Section 3 of the Act, but any other violation that may have come to his notice while undertaking the investigation. An order of the CCI under Section 26 (1) of the Act triggers investigation by the DG, and that the powers of the DG are not necessarily circumscribed to examine only such matters that formed the subject matter of the original complaint. No doubt, the language of the order passed by the CCI issuing directions to the DG will also have a bearing on the scope of such investigation by the DG. In the present case, however, the language of the order passed by the CCI on 26th February, 2011, is broad enough to cover an investigation by the DG into what appeared to be prima facie violation of Section 4 of the Act by GIL. The scope of the powers and functions of the CCI, when it is considering the report of the DG, is a quasi judicial function. It undertakes that exercise after furnishing to the party a copy of the report and then permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court reverses the judgment of the learned Single Judge and holds that the DG was within his powers in terms of Section 26 (1) of the Act read with Regulations 18, 20 and 41 of the CCI (General) Regulations 2009 (CCI Regulations), to submit a report regarding the violation of Section 4 of the Act by GIL, although the direction issued by the CCI under Section 26 (1) of the Act was with reference to information pertaining to violation of Section 3(3) (a) , (b) and (c) of the Act. Background facts 2. On 30th May 2011, 'information' came to be filed with the CCI under Section 19 (1) of the Act that all manufacturers of MMF, including GIL, had imposed anti-competitive restrictions on the Indian textile industry. GIL is a manufacturer of Viscose Staple Fibre ('VSF'), a variety of MMF. 3. On 22nd June 2011, CCI passed an order under Section 26 (1) of the Act, concluding that the aforementioned information prima facie disclosed violation under Section 3(3)(a), (b) and (c) of the Act by the manufacturers of MMF. The CCI, therefore, directed the DG to investigate the matter and submit a report within 60 days. 4. Between 30th November, 2011 and 17th December, 2012, GIL led evidence an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while investigating activities attracting Section 3 of the Act, the DG may come across 'information' that prima facie reveals activities attracting Section 4 of the Act. CCI's directions under Section 26 (1) of the Act 8. The report dated 26th February, 2013 of the DG was pursuant to the following directions issued by the CCI on 22nd June, 2011: "11. On thorough Perusal of the entire material submitted by the informant, the Commission, prima facie, finds substance in the submissions made in the Information supported by the material filed by the Informant. 12. After giving thoughtful consideration on the matter, the Commission is of the opinion that. there exists a. prima facie, case to direct the Director General to cause an investigation into the matter. 13. Accordingly, the Commission directs the Director General to conduct an investigation into the matter and to submit his report within a period of 60 days from the communication of this order. 14. The Secretary is directed to send a copy of the information to the Office of the Director General in terms of the relevant provisions of the Act and the Regulations made thereunder." DG's Report 9. The DG submitted a repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 4(2)(a) of the Act. (3) A continuity discount/rebate is given by GIL with a condition that the yarn manufacturer shall not purchase VSF from anybody (including imports) other than GIL. The policy of GIL in this regard is not transparent and through such conditions, the GIL prevents its customer from importing VSF. Putting such unfair conditions and limiting or restricting the market for yarn manufacturers for imports of VSF is violative of the provisions of section 4(2)(a) and 4(2)(b) of the Act. (4) The GIL sells VSF to the yarn manufacturers directly. It is not sold to the traders. The production, composition of yarn and its quantity is monitored by the GIL to see that VSF is not traded in the relevant market. The GIL stifles the competition by preventing trading of VSF in the relevant market and restricts the choice of customers to buy VSF from alternate source in India. Accordingly putting such unfair conditions in sales and restricting the market, GIL Is violating the provisions of section 4(2)(a) and 4(2)(b) of the Act. (5) GIL provides discounts on lifting or consumption of VSF, whichever is lower. Through this unfair condition on discount, GIL not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 14. The CCI further held that the directions given to the DG under Section 26(1) of the Act are only meant to initiate the process of investigation and the purpose of Section 26(1) was neither to scuttle nor to limit the investigation. As regards the submission of GIL that it was never put to notice by the DG about the potential violation of Section 4 of the Act being investigated, and that it had denied an opportunity to present its arguments in relation to such violation, the CCI observed that the questionnaire sent by the DG to GIL "was self-explanatory and reflected the direction of investigation". It was noted that GIL had been given a copy of the report of the DG and that it had the opportunity to file the relevant documents before the CCI. The order concluded by observing that the CCI would consider all those documents and evidence filed by GIL with its objections to the report of the DG. Single Judge's impugned judgment 15. W.P.(C) No.4159/2013 challenging the aforementioned order of the CCI was then filed by GIL in this Court. When it was first listed on 5th July, 2013, while directing notice to be issued in the writ petition, the learned Single Judge directed, noting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, CCI was entitled to reject that part of the report, which pertained to such investigation. (vi) The report of the DG, to the extent that it reported a contravention of Section 4 of the Act by GIL, could not be forwarded to GIL under Section 26 (4) of the Act, nor could the CCI hold a further enquiry into it under Section 26 (8) of the Act, or proceed to pass an order on its basis under Section 27 of the Act. However, CCI in its discretion could treat the said part of the report as 'information' under Section 19 of the Act (concerning prima facie contravention of Section 4 of the Act) and direct the DG to undertake an investigation into such information. This appeal 17. While admitting this appeal on 7th February, 2014, this Court passed the following order: "Admit. Issue notice to the respondent returnable on 31st March, 2014. In the meantime, in view of the undertaking given by the learned Solicitor General of India that the appellant, till the disposal of the appeal is not going to proceed against the respondent under sub-Section (8) of Section 26 of the Competition Act, 2002 with regard to the report of the Director General to the effect that the respondent ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a Tecoya Trend article dated 11th May, 2011, which stated that GIL had reported a "30% hike in VSF price realisation". All of this was forwarded to DG for further investigation. (v) A correct interpretation of Regulation 18 (1) and Regulation 20 (4) of the CCI Regulations would acknowledge that the DG has to attach with the investigation report all the evidence and documents, statements, and analysis collected during investigation, which might not be limited to the prima facie opinion expressed by the CCI, which, in any event, was not binding upon the DG. (vi) After the DG had already given a comprehensive report of investigation, pointing to violation of Section 4 of the Act by the GIL, it would be pointless for the CCI to again require the DG to undertake an identical exercise by treating it only as 'information' for the purposes of forming a prima facie view under Section 26 (1) of the Act. Submissions on behalf of GIL 20. Mr. Dhruv Mehta, learned Senior Counsel appearing for the GIL, submitted as under: (i) The expression 'into the matter', in the order dated 22nd June, 2011 of the CCI, only referred to violations of Section 3(3) (a), (b) and (c) of the Act, and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity, GIL would have made submissions on facts, law and economics, regarding market definition, dominance and abuse of a dominant position, which formed the subject matter of Section 4 of the Act. Thus, the report of the DG to the extent that contained findings of alleged contravention of Section 4 of the Act by GIL was null and void, and cannot be used or relied for any purpose. Reliance is placed on the decision in Institute of Chartered Accountants v. L.K. Ratna, (1986) 4 SCC 537 and Commissioner of Wealth Tax v. Ravi Cheloor (1989) 178 ITR 640 (Ker). 21. Mr Mehta distinguished the decision in Excel Crop Care Limited v. Competitive Commission of India (2017) 8 SCC 47, which dealt with inclusion of more than one incident or incidents of contravention of the same matter i.e. violations of Section 3 of the Act within the ambit of the DG's investigation. He pointed out that the complaint in that case was filed in respect of one tender only, and the DG sought to investigate the conduct of the relevant entities with respect to a subsequent tender. However, in the present case, the DG went beyond the complaint under Section 3 of the Act, and investigated GIL for alleged violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act lists out those factors which would be kept in view when the CCI enquires into whether an enterprise enjoys a dominant position or not under Section 4 of the Act. 26. Section 26 of the Act sets out the procedure for an enquiry under Section 19 of the Act and it reads as under: "26. Procedure for inquiry on complaints under section 19.- (1) On receipt of a complaint or a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information, under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter. (2) The Director General shall, on receipt of direction under subsection (1), submit a report on his findings within such period as may be specified by the Commission. (3) Where on receipt of a complaint under clause (a) of sub-section (1) of section 19, the Commission is of the opinion that there exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of costs, if necessary. (4) The Commission shall forward a copy of the report refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there exists no prima facie case justifying passing of such a direction to the Director General, it can close the matter and/or pass such orders as it may deem fit and proper. In other words, the order passed by the Commission under Section 26(2) is a final order as it puts an end to the proceedings initiated upon receiving the information in one of the specified modes. This order has been specifically made appealable under Section 53A of the Act. 38. In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis. Closure of the case causes determination of rights and affects a party, i.e. the informant; resultantly, the said party has a right to appeal against such closure of case under Section 26(2) of the Act. On the other hand, mere direction for investigation to one of the wings of the Commission is akin to a depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested in the Commission, by virtue of the Regulations, which must be construed in their plain language and without giving it undue expansion. 79. It is difficult to state as an absolute proposition of law that in all cases, at all stages and in all events the right to notice and hearing is a mandatory requirement of principles of natural justice. Furthermore, that non- compliance thereof, would always result in violation of fundamental requirements vitiating the entire proceedings. Different laws have provided for exclusion of principles of natural justice at different stages, particularly, at the initial stage of the proceedings and such laws have been upheld by this Court. Wherever, such exclusion is founded on larger public interest and is for compelling and valid reasons, the Courts have declined to entertain such a challenge. It will always depend upon the nature of the proceedings, the grounds for invocation of such law and the requirement of compliance to the principles of natural justice in light of the above noticed principles." 27.3 The Supreme Court in Competition Commission of India v Steel Authority of India Limited (supra) has characterized the powers of the CCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are quite distinguishable, as is clear from various provisions of the Act as well as the scheme framed thereunder. The Director General is expected to conduct an investigation only in terms of the directive of the Commission and thereafter, inquiry shall be deemed to have commenced, which continues with the submission of the report by the Director General, unlike the investigation under the MRTP Act, 1969, where the Director General can initiate investigation suo moto. Then the Commission has to consider such report as well as consider the objections and submissions made by other party. Till the time final order is passed by the Commission in accordance with law, the inquiry under this Act continues. Both these expressions cannot be treated as synonymous. They are distinct, different in expression and operate in different areas." 27.5. A distinction was drawn between the kind of satisfaction that the CCI would record, in terms of Section 33 of the Act, and that which has to be recorded under Section 26 (1) of the Act. It was held as under: "117. Once the inquiry has begun, then alone the Commission is expected to exercise its powers vested under Section 33 of the Act. That is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the effect that four manufacturers of Aluminium Phosphide Tablets ('APT') had formed a cartel by entering into anti-competitive agreements amongst themselves and on that basis had been submitting bids for the previous eight years by quoting identical rates in the tenders invited by the FCI for the purchase of APT. 29.2 In the report of the DG, issued pursuant to the directions issued by the CCI under Section 26 (1) of the Act, it was inter alia found that right from the year 2002 up to 2009, all the four parties used to quote identical rates, except in the year 2007. In 2008, all parties abstained from quoting, while in 2009, only three of them participated. For the tender floated in 2009, the three Appellants had quoted identical rates. On that basis, the DG formed an opinion that the Appellants had contravened Section 3(3) (a) (b) and (d) read with Section 3 (1) of the Act. 29.3 The Appellant there inter alia contended that since Sections 3 and 4 of the Act were brought into force only with effect from 20th May, 2009, the tenders prior to that date, could not be the subject matter of enquiry for ascertaining if there was a violation of Section 3 of the Act. Even the March, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unlike the Commission, the Director General has no suo-moto power to investigate. That is clear from the language of Section 41 also, 28 which suggests that when directed by the Commission, the Director General is to assist the Commission in investigating into any contravention of the provisions of the Act. Our attention was also invited to the Regulations and more particularly to Regulation 20, which pertains to the investigation by the Director General. Sub-Regulation (4) of Section 20 was pressed into service by all the learned Counsel, which is in the following term: 20(4). The report of the Director-General shall contain his findings on each of the allegations made in the information or reference, as the case may be, together with all evidences or documents or statements or analyses collected during the investigation:(proviso not necessary) From this, the learned Counsel argued that the Director General could have seen into the tender floated on 08.05.2009 only, and no other tender as the information did not contain any allegation about the tender floated in 2011. Therefore, the investigation made into the tender floated in 2011 was outside the jurisdiction of the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the direction by CCI. In fact, the DG has also taken into 30 account the tenders by some other corporations floated in 2010 and 2011 and we have already held that the DG did nothing wrong in that. In our opinion, therefore, the argument fails and must be rejected.' We entirely agree with the aforesaid view taken by the COMPAT. 45. If the contention of the Appellants is accepted, it would render the entire purpose of investigation nugatory. The entire purpose of such an investigation is to cover all necessary facts and evidence in order to see as to whether there are any anticompetitive practices adopted by the persons complained against. For this purpose, no doubt, the starting point of inquiry would be the allegations contained in the complaint. However, while carrying out this investigation, if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report. Even when the CCI forms prima facie opinion on receipt of a complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine whether the DG in that case had exceeded its powers in finding a violation of the Act by Cadila which was not even named in the original complaint filed by the CCI. 32.2 There, the CCI took cognizance of information filed by the Reliance Medical Agency ('RMA') complaining of denial of supply of medicines by certain pharmaceutical companies. Cadila's case was that there had to be separate orders under Sections 26 (1) of the Act by the CCI authorizing the DG to investigate Cadila, and that, in the absence of such order, the DG could not have proceeded against Cadila on the strength of a general order passed by the CCI on 17th November, 2015 where it stated as under: "in the course of investigation, if involvement of any other party is found, the DG shall investigate the conduct of such other parties who may have indulged in such contravention". 32.3 After the DG's report was submitted to the CCI, a copy thereof was provided to Cadila, which objected to the report. It also relied upon the decision of this Court in Google Inc. v. Competition Commission of India (supra). However, the CCI rejected these objections. After its appeal against the said order was dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The trigger for assumption of jurisdiction of the CCI is receipt of complaint or information, (when the Commission is of the opinion that there exists a prima facie case exists (per Section 26 (1)). The succeeding order is administrative (per SAIL); however, that order should disclose application of mind and should be reasoned (per SAIL). Up to this stage, with that enunciation of law, no doubt arguably Cadila could have said that absent a specific order as regards its role, by CCI, the DG could not have inquired into its conduct. However, with Excel Crop Care specifically dealing with the question of alleged "subject matter" expansion (in the absence of any specific order under Section 26 (1)) and the Supreme Court clarifying that the subject matter included not only the one alleged, but other allied and unremunerated ones, involving others (i.e. third parties), the issue is no longer untouched; Cadila, in the opinion of this court, is precluded from stating that a specific order authorizing transactions by it, was a necessary condition for DG's inquiry into its conduct. This court is further reinforced in its conclusion in this regard by the express terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into by the DG, as held by this Court in Cadila Healthcare Limited v. Competition Commission of India (supra). 34. The aforementioned decisions clarify that an order of the CCI under Section 26 (1) of the Act 'triggers' investigation by the DG, and that the powers of the DG are not necessarily circumscribed to examine only such matters that formed the subject matter of the original complaint. No doubt, the language of the order passed by the CCI issuing directions to the DG will also have a bearing on the scope of such investigation by the DG. In the present case, however, the language of the order passed by the CCI on 26th February, 2011, is broad enough to cover an investigation by the DG into what appeared to be prima facie violation of Section 4 of the Act by GIL. 35. Consequently, this Court is not impressed with the submissions of Mr Mehta that since Section 26 (1) of the Act limits the powers of the DG, in the instant case, the DG went beyond the scope of its powers in submitting a report for the alleged violations of Section 4 of the Act by the GIL. 36. Extensive reliance was placed by Mr. Mehta on the decision in Bhikhubhai Vithlabhai Patel v. State of Gujarat (supra) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is in progress, will depend on the facts and circumstances of the case, and on the kind of information and evidence chanced upon by the DG during the course of its investigation. Indeed, it is not mandatory that in every such case, even at the stage of investigation, the party will have to be given opportunity to adduce evidence, cross-examine persons who may have given evidence adverse to them, in the course of investigation. That is not the position that emerges on a collective reading of Section 26 of the Act read with Regulations 20, 41 and 45 of the CCI Regulations. 40. The admitted position is that GIL did make its written submissions before the DG and was considered by the DG before forming a prima facie view in the report submitted to CCI. It is not in dispute that before the CCI, the GIL had a full-fledged opportunity of presenting evidence, documents and materials to counter the report of the DG. 41. In Cadila Healthcare Limited v. Competition Commission of India (supra), the Court characterized the functions of the DG at the stage of investigation as 'quasi inquisitorial.' Indeed, the essential function of the DG is to investigate i.e. gathering of facts and evide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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