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TMI Blog2022 (1) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as the 'Competition Act') in respect of State Lottery run by the State of Mizoram (respondent No.1) has given rise to the present dispute. The jurisdiction of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram has been challenged in the present proceedings by the successful bidders, and to a much lesser extent, by the State of Mizoram. 2. The State of Mizoram issued an Invitation for Expression of Interest (for short 'EoI') through respondent No.2, the Director, Institutional Finance and State Lottery (IF&SL) on 20.12.2011 inviting bids for the appointment of lottery distributors and selling agents for state lotteries to be organised by the Government of Mizoram in terms of the Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referred to as the 'Regulation Rules') framed under the Lotteries (Regulation) Act, 1998 (hereinafter referred to as the 'Regulation Act'). The EoI was for appointment of lottery distributors/selling agents to organise, promote, conduct, and market the Mizoram State Lottery th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish exorbitant sums of money towards security, advance payment, and prize pool even before the lotteries were held. This was alleged to be unfair, discriminatory and illegal and effectively restricted the supply of service of lotteries. The consequent allegation against the State was that it violated Section 4 of the Competition Act. The prayer made by respondent No. 4 was that the EoI be quashed and set aside, respondent No.1 be restrained from abusing their dominant position, a restraint be passed from awarding the tender to the selected bidders, and selected bidders be banned from carrying out business in the State of Mizoram. The Legal Position: 6. In order to appreciate the contours of the complaint, it may be appropriate to deal with some of the provisions of the Competition Act. The objective of the Competition Act is set out in the Preamble itself, i.e., to establish a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers, and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the same Chapter, Section 4 prohibits the abuse of dominant position. The relevant portion is extracted hereunder: "4. Abuse of dominant position. - [(1) No enterprise or group shall abuse its dominant position.] (2) There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a group],- (a) directly or indirectly, imposes unfair or discriminatory- (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. [...]" 7. Chapter III deals with provisions relating to establishment, Composition, etc. of the CCI while Chapter IV set outs the Duties, Powers and Functions of CCI. Chapter V sets out the Duties of the Director-General. Penalties are provided in Chapter VI. Chapter VIIIA refers to the Establishment of the Appellate Tribunal. 8. Section 26 of the Competition Act provides for the procedure for an inquiry under Section 19, which deals with inquiries into certain agreements and dominant position of enterprises. The relevant provisions of Section 26 are extracted as under: "[26. Procedure for inquiry under section 19. - (1) On receipt of a refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 'enterprise' or a 'group' under the Competition Act. Respondent No. 1's role was to regulate and monitor the business of lotteries in the State of Mizoram in exercise of its powers and functions under the Regulation Act and the Regulation Rules. It was, thus, opined that they have every right to impose financial, technical and other conditions in their bid documents as they deemed fit. The CCI, thus, rejected the complaint of respondent No. 4 under Section 4 of the Competition Act. 11. The DG in pursuance of the said order of the CCI, a report dated 14.01.2013 was submitted on 17.01.2013 whereby it came to the conclusion that respondent Nos. 5 & 6 along with M/s. Teesta Distributors and M/s. E-Cool Gaming Solutions (P) Ltd. had colluded, formed a cartel, and indulged in bid rigging. Thus, they were in violation of the provisions of Section 3(1) read with Section 3(3) of the Competition Act. However, no order was passed against the State of Mizoram. 12. What is relevant to note is that the DG did make some observations against respondent No.2 and the State of Mizoram to the effect that they ought to have been more vigilant in stopping unfair trade practices and their lapses rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have put the matter to rest. 15. It, thus, does appear to us that the respondent No.1 lent its shoulder to assist the other private parties and respondent No. 6 filed a writ petition, being WP(C) No.76/2013, praying for quashing of the DG report and all proceedings pending before the CCI. Respondent No. 6 sought to raise a plea that they had struck an agreement with respondent No.1 on 22.07.2010 as per which they were formally assured of at least 25% of the total number of draws held per day once lotteries were reopened. An agreement was struck to settle an amount of Rs. 2.89 crore stated to be owed by respondent No.1 to respondent No. 6 and, thus, it was pleaded that the very question of forming a cartel or indulging in bid rigging did not arise. Respondent No. 5 also sought to take advantage of the proceedings initiated by respondent No.1 and filed a writ petition, being WP(C) No.90/2013 seeking similar relief. Among the pleas raised by respondent No. 5 was that lotteries were not covered by the Competition Act and, thus, the CCI did not have jurisdiction to conduct an inquiry under Section 26(1) of the Competition Act. 16. The three writ petitions were taken up together and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 4. The High Court also took note of the stand of the CCI, which found no contravention of Section 4 of the Competition Act by the State of Mizoram and, thus, there was no question of any further proceedings being allowed by the CCI against the State of Mizoram. 20. We may place at this stage itself our caveat to the manner in which the High Court proceeded. On the statement of the CCI indicating its intent not to proceed against the State of Mizoram, that petition could have been put to rest. In fact, even earlier there was no intent to take out any proceedings against the State of Mizoram and only some observations had been made against respondent No.2 in the manner in which they proceeded to carry out the allotment pursuant to the EoI. The lis really was between the private parties and whether their conduct could have been inquired into by the CCI. 21. The Special Leave Petitions were filed by the CCI and respondent No. 4 against the orders passed in the three petitions and leave was granted with all the matters being tagged together. Appellant's case: 22. Mr. Rajshekhar Rao, learned senior counsel sought to canvas the case on behalf of the CCI. It was urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the context otherwise requires,- xxxx xxxx xxxx xxxx (u) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising;" It was, thus, urged that the expression 'service' would mean service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matter. In the aforesaid context it was urged that the sale or distribution of lottery tickets to a prospective buyer on behalf of the State for consideration should be construed as "service". While referring to the definition of 'service' it was submitted that a reading of the definition would show it as a "means" and "includes" definition and the 'includes' part does not narrow down the width of the 'me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs were akin to a show cause notice and even the DG's report did not amount to a final decision. The respondents were also stated to have the alternative efficacious remedy of an appeal under Section 53B of the Competition Act whereby it could approach the appellate tribunal aggrieved by any decision or direction or order inter alia under sub-section (2) of Section 26 of the Competition Act. The commission is expected to form an opinion about the existence of a prima facie case for contravention of certain provisions of the Competition Act and then passes a direction for the DG to cause an investigation into the matter. Post the report of the DG it can proceed further or close the proceedings. (Competition Commission of India v. Steel Authority of India & Anr. (2010) 10 SCC 744 confirmed in CCI v. Bharti Airtel (supra) case.) That stage had not even arisen. The final report of the CCI was yet to mature and the CCI was not even bound by the report of the DG. 27. The aforesaid was also in the context of the CCI having already made it clear that it did not intend to pass any adverse orders against the State of Mizoram and that the DG being the investigative arm was duty bound to rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinitions.-In this Act, unless there is anything repugnant in the subject or context,- xxxx xxxx xxxx xxxx (7) "goods" means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;" 32. A lottery ticket has been held to be only an actionable claim (Sunrise Associates v. Government of NCT of Delhi (2006) 5 SCC 603) and was, thus held to not be a good. Where an actionable claim was sought to be included within the definition of 'goods', it was specifically so done. For example, debentures are specifically included within the definition of 'goods' under Section 2(i)(B) of the Competition Act. A comparison was also sought to be made with the Monopolies and Restrictive Trade Practices Act, 1969 where there was no such inclusion and, thus, debentures were opined to be excluded (R.D. Goyal & Anr. V. Reliance Industries Ltd. (2003) 1 SCC 81). 33. Respondent No. 5 claimed to be merely a distributor which did not provide any services to any potential user of lottery and such distribution doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. 38. We are in agreement with the line of arguments advanced by Mr. Rajshekhar Rao, learned senior counsel for the CCI where he has succinctly sought to point out that the concern of the CCI was not at all with the carrying out, regulation or prohibition of the lottery business as was governed by the Regulation Act. Rather, the concern was limited to the role assigned to the CCI under the Competition Act, and in the context of the EoI was limited to examining any perceived bid rigging in the tendering process for appointment of selling agents and distributors for the lottery business. There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect of something which is anti-competition in the context of the business related to lott ..... X X X X Extracts X X X X X X X X Extracts X X X X
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