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TMI Blog2023 (6) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... of regulating the CA profession and in view of these non-regulatory activities, ICAI falls within the definition of an enterprise under the CCI Act. The CCI concluded that the relevant market for the purposes of the inquiry be the organizing recognised CPE Seminars/Workshops/Conferences in India . The CCI held that while OP [ICAI], as a regulator of the accounting profession, has all the powers to prescribe a policy for continuous up gradation of its members through the CPE Policy and recognition of POUs, however, on its non-regulatory function of organizing CPE Seminars, restricting the same only to itself and its organs, prima facie, appears to be an arbitrary exercise of powers and thus in contravention of Section 4 of the Competition Act. The Informant has no grievances at least none that fall within the scope of the Competition Act regarding the manner in which the seminars are organized or conducted by ICAI. Although, the Informant has mentioned that the seminars are used for elected members of the Council to secure face time with the members, there is no allegation that the conduct of the seminars itself amount to ICAI abusing its position as a service provider. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity, it would be necessary to create an open market for the same. This Court is unable to accept that the CCI can compel an organisation or an enterprise to outsource its activities. The structured program is conducted only by ICAI and its organs. The credits for unstructured training are based on self-declaration, the same in effect requires the professional chartered accountants to certify that they have devoted certain time for professional development. Importantly, there is no other body or institution, which is engaged in the activity of providing professional training to acquire the classification of a chartered accountant or for the continuing education program. The impugned order is set aside - Petition allowed. - W.P.(C) 2815/2014 and CM Nos. 5836/2014 & 15032/2014 - - - Dated:- 2-6-2023 - HON BLE MR JUSTICE VIBHU BAKHRU Advocates who appeared in this case: For the Petitioner : Mr A.N. Haksar, Senior Advocate with Ms Pooja M. Saigal, Mr Simrat Singh and Mr Chaitanya Pandey, Mr Neil Hildreth, Mr Abeer Kumar, Ms Hitakshi Mittal, Ms Sitwat Nabi, Mr Sahil Sharma, Advocates. For the Respondents : Mr Vaibhav Gaggar, Ms Kokila Kumar, Mr Prerak Khurana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to complete ten CPE credit hours during each calendar year. 3. The structured learning activities are specified activities, which are conducted by ICAI or its organs. 4. On 11.11.2013, respondent no.2 (hereafter the Informant ) who is a qualified chartered accountant and an accomplished journalist in the field of Finance and Fiscal Laws filed information with the CCI under Section 19(1) of the Competition Act. 5. The principal grievance of the Informant stems from the fact that only ICAI and its organs are conducting the structured learning activities and ICAI has not affiliated or recognized any other body to conduct such learning activities. According to the Informant, this falls foul of Section 4 of the Competition Act. The CCI has, prima facie, agreed with the aforesaid view and therefore, issued the impugned order. 6. ICAI contends that it is a non-profit organization and therefore, the CCI does not have any jurisdiction over its activities. ICAI also claims that its CPE program has been structured in exercise of its powers granted to it under the Chartered Accountants Act, 1949 (hereafter the CA Act ) and therefore, the CCI would have no jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it hours. 9. The structured CPE credit hours can be acquired by attending any seminar/conference/workshop, which is organized by ICAI or any of ICAI organs; or by being a faculty at any seminar organized by ICAI or any of its organs; or by contributing to the professional journal of ICAI. The unstructured CPE credits can be obtained by reading professional journals, business literature, attending internal training programs of Chartered Accountancy (CA) firms (constituted by seven or more partners) or participating in group discussions, acting as visiting faculty at Universities/Management Institutions etc. The unstructured CPE credits are availed by filling in a self declaration form in the format as prescribed by ICAI. 10. The Informant voiced a grievance with regard to the policy of ICAI and its decision to conduct the structured CPE program either directly itself or through its organs. According to the Informant, this violates Section 4 of the Competition Act as ICAI has restricted the relevant market of conducting the CPE program to its own organs and has rejected the applications of several reputed non-profit organization for holding and organizing such CPE seminars. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars and conferences that could be included in the structured learning program for the purpose of the participating members of ICAI acquiring structured CPE credit hours. The Informant argues that a chartered accountant has got limited hours to devote to seminars, conferences, and other such activities for developing his skills and keeping abreast with developments and best practices in the professional field. Thus, ICAI s insistence that its members attend the seminars and conferences organized by it or any of its organs, effectively, deprives its members from participating in other conferences and seminars, which may be organized by various other associations and professional bodies. Impugned order 16. The CCI considered the aforesaid information and concluded that although ICAI carries out the regulatory functions under the CA Act, it also carries out other commercial/economic activities like conducting professional courses including the CPE programs and publication of book relating to profession of CAs apart from conducting examination for CAs . According to the CCI, these economic activities could be differentiated from the regulatory activities of regulating the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment of the country; to prevent practices having adverse effect on competition and to sustain competition in markets. He submitted that there was no commercial market for conducting CPE program, which was being done by ICAI through its Program Organizing Units (POUs). He submitted that the CCI would have no jurisdiction to review the decisions made by ICAI in discharge of its statutory functions. 19. Next, he submitted that ICAI does not carry on any business, trade or commercial activity. He submitted that ICAI is carrying on its activities in furtherance of its objectives, which are not for profit. He also relied on the decision of this Court in the Director of Income Tax (Exemptions) v. Institute of Chartered Accountants of India: (2012) 347 ITR 86, whereby this Court had held that the activities of ICAI fall within the scope of charitable purposes as defined under Section 2(15) of the Income Tax Act, 1961. He submitted that since the primary object of ICAI was to regulate the profession of accountancy, the activities of education training and conducting educational programs could not be considered as commercial or business activities in the eyes of law. He also refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Comp LJ 557 (Bom) in support of this contention. 24. Next, Mr Gaggar submitted that the present petition was premature and ICAI had not exhausted its remedies. He submitted that the CCI had the power to decide on its own jurisdiction and therefore, it was necessary for ICAI to have raised the issue regarding its jurisdiction before the CCI. He further submitted that ICAI had also sought time to make submissions before the CCI and therefore, had submitted to its jurisdiction. 25. He also submitted that ICAI was an enterprise within the meaning of Section 2(h) of the Competition Act as the said definition was couched in wide terms. He submitted that a plain reading of the definition indicates that an enterprise could be a person or a government enterprise engaged in any activity as specified therein. It was not necessary that the specified activity be carried for commercial gain or profit for a person or a department of the government to be considered as an enterprise . Thus, a person carrying on charitable activities would also fall within the definition of the term enterprise . He submitted that the only exception was carrying out of sovereign functions as defined in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy profession in India is at present regulated by the Auditors Certificates Rules framed in 1932 in exercise of the powers conferred on the Government of India by section 144 of the Indian Companies Act, 1913, and the Indian Accountancy Board advises Government in all matters relating to the profession and assists it in maintaining the standards of the professional qualifications and conduct required of the members of the profession. The majority of the Board s members are elected by Registered Accountants members of the profession from all parts of India. These arrangements have, however, all long been intended to be only transitional, to lead up to a system in which such accountants will, in autonomous association of themselves, largely assume the responsibilities involved in the discharge of their public duties by securing maintenance of the requisite standard of professional qualifications, discipline and conduct, the control of the Central Government being confined to a very few specified matters. The Bill seeks to authorize the incorporation by statute of such an autonomous professional body and embodies a scheme which is largely the result of a detailed examination of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appropriate authorities under the Act, the removal of names from the Register and the restoration to the Register of names which have been removed; (j) the regulation and maintenance of the status and standard of professional qualifications of members of the Institute ; (k) the carrying out by granting financial assistance to persons other than members of the Council or in any other manner, of research in accountancy; (l) the maintenance of a library and publication of books and periodicals relating to accountancy ; (m) to enable functioning of the Director (Discipline), the Board of Discipline, the Disciplinary Committee and the Appellate Authority constituted under the provisions of this Act; (n) to enable functioning of the Quality Review Board; (o) consideration of the recommendations of the Quality Review Board made under Clause (a) of Section 28B and the details of action taken thereon in its annual report ;and (p) to ensure the functioning of the Institute in accordance with the provisions of this Act and in performance of other statutory duties as may be entrusted to the Institute from time to time. 31. In discharge of its function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the entry of the name of any person in the Register as a member of the Institute; (c) the conditions under which any examination or training may be treated as equivalent to the examination and training prescribed for members of the Institute; (d) the conditions under which any foreign qualification may be recognised; (e) the manner in which and the conditions subject to which applications for entry in the Register may be made; (f) the fees payable for membership of the Institute and the annual fees payable by associates and fellows of the Institute in respect of their certificates; (g) the manner in which elections to the Regional Councils may be held; (h) the particulars to be entered in the Register; (i) the functions of Regional Councils; (j) the training of articled and audit assistants, the fixation of limits within which premia may be charged from articled assistants the cancellation of articles and termination of audit service for misconduct or for any other sufficient cause; (k) the regulation and maintenance of the status and standard of professional qualifications of members of the Institute; (l) the carrying out of rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities and grant of CPE hours credit to members. 37. Paragraph 2.6 of the Statement defines CPE learning activities as an educational endeavor that maintains and adds value to the professional competence of members and develops the professional knowledge, skills, ethics and attitudes of the members, relevant to their professional responsibilities. Such learning activities, which are eligible for CPE credit hours are divided into structured and unstructured learning activities. ICAI had also issued advisories as to what constitutes structured learning activities and unstructured learning activities. 38. The Statement expressly indicates that it is issued by ICAI in terms of the authority granted to the Council under Section 15 of the CA Act. It also provides that the compliance of the provisions of the Statement are mandatory for members of ICAI. All members of ICAI are required to meet the CPE credit hours requirement as specified by the Council from time to time. The CPE credit hours are the credit hours granted to a member for participating in any CPE learning activity, by way of structured or unstructured learning. 39. ICAI has set up the CPE Director (CPED)for overs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant exemptions to members in terms of the Statement. 10.13 To take such other steps to carry out the mission and objective of the CPE Directorate and such other tasks as may be delegated to the Directorate. (Refer Appendix A) 10.14 To take action against CPE Study Circles / CPE Chapters/ CPE Study Groups who in the opinion of the CPED do not facilitate in achieving the objectives of this Statement. Such action may include suspension of the status of POU. 10.15 To recommend to the Council to take action against POUs, other than those as mentioned in paragraph 10.14 above, who in the opinion of the CPED do not facilitate in achieving the objectives of this Statement. Such action may include derecognition of POU. 10.16 To recommend to the Council any modification in the Statement 10.17 To issue Directions, Advisories and other guidelines from time to time to enable programme designers and organisers as well as all other persons connected with CPE activities at various POU levels, to discharge their responsibilities and, thus, achieve the objectives of this Statement. 10.18 To issue new Advisories and also amend the existing advisories. The list of existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of three years. However, they have to complete a minimum of twenty CPE credit hours in each calendar year. 43. The first and foremost question to be addressed is whether ICAI is an enterprise within the meaning of Clause (h) of Section 2 of the Competition Act. Clause (h) of Section 2 of the Competition Act, which defines the term enterprise , is set out below:- 2(h) enterprise means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of Clause (h) of Section 2 of the Competition Act. The functions being performed by ICAI in respect of providing education to chartered accountants or to students, cannot be termed as sovereign functions. However, even if it is accepted that the function of regulation of a profession is relatable to the sovereign functions of the Government, the same is also not excluded from the definition of the term enterprise as it excludes only activities of the Government which are relatable to the sovereign functions of the Government. ICAI cannot be considered the Government and, therefore, even if it carries on regulatory functions, it is not excluded from the wide definition of the term enterprise as defined under Clause (h) of Section 2 of the Competition Act. 48. The contention that ICAI does not carry on any business and, therefore, is excluded from the scope of the Competition Act is also unpersuasive. Whilst, it is correct that ICAI is not an organization for profit and its activities fall within the scope of charitable purposes as defined under Section 2(15) of the Income Tax Act, 1961. But, the same does not mean that ICAI does not carry out any economic activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put by ICAI in not allowing other organizations to conduct CPE seminars for CPE credits created an entry barrier for other players in the relevant market. It further observed that since members of ICAI are left with no option but to compulsorily attend seminars organized by ICAI and its organs, the same is an unreasonable restraint on the members. 51. The CCI held that while OP [ICAI], as a regulator of the accounting profession, has all the powers to prescribe a policy for continuous up gradation of its members through the CPE Policy and recognition of POUs, however, on its non-regulatory function of organizing CPE Seminars, restricting the same only to itself and its organs, prima facie, appears to be an arbitrary exercise of powers and thus in contravention of Section 4 of the Competition Act. 52. This Court is unable to appreciate the aforesaid reasoning, which indicates that the CCI has proceeded on the basis that the Informant s grievance stems not from ICAI s exercise of regulatory powers in discharge of it regulatory function but in performance of its non-regulatory activities. First of all, it is necessary to note that the Informant s grievance is with regard to I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICAI and its organs. 54. ICAI s decision that its members should attend the CPE program is its decision as a regulator and not a service provider. ICAI s decision that the CPE program be conducted by it as a continuing educational program is also its decision as a regulator. Thus, essentially, the Informant seeks a review of the decision taken by ICAI in exercise of its statutory powers to regulate the profession of accountancy. It seeks that ICAI should recognize other bodies/organizations to discharge its function of providing education for professional accountants for maintenance of the professional standards, instead of ICAI restricting the said function in house. 55. Thus, the principal question that needs to be addressed is whether the CCI as a market regulator for ensuring fair competition in the markets, exercises powers to review the decisions of other statutory regulators, which are taken by them in exercise of their regulatory functions and which have no interface with trade or commerce. If the Informant s contention is accepted then the CCI would also have the power to review the decisions taken by all regulators in discharge of their regulatory functions and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Institute. In discharge of this function, ICAI has prescribed that all of its members undertake the CPE organized by POUs. There is no separate learning activity, which is prescribed and is interchangeable with the CPE program conducted by it/POU. This decision is not amenable to review by the CCI. 59. The CPE program is an education program run by ICAI. This is not interchangeable with any of the services provided by any other agency. A seminar of ASSOCHAM or other Chambers of Commerce are not education programs run by ICAI or a part of the professional educational program prescribed by ICAI. It is, thus, difficult to appreciate as to how any other service provider or any other persons holding the seminar can profess to impart a professional education, which is the sole preserve of ICAI. 60. As observed above, Article 10 of the Statement sets out the powers and functions of the CPED. This includes the function to approve formation of CPE chapters / CPE study groups; to review and monitor the programs conducted by various POUs; to allocate and assign responsibilities to various persons and or organizations as the case may be for development of CPE background material; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior publication and approval of the Central Government, ICAI also has the power to make regulation for the regulation and maintenance of the status and standard of professional qualifications of members of the Institute 64. It is important to note that apart from conducting CPE program, ICAI also conducts the educational program for qualifying as a chartered accountant. ICAI has evolved a detailed program for ensuring imparting of training to the students and further evaluating them for granting them the requisite qualification as an accountant. The said qualification then entitles the successful student to be enrolled as a member of ICAI and to practice as a chartered accountant. The logical sequitor of the Informant s arguments is that ICAI is also obliged to recognize other educational institutions and the programs run by them as educational programs to qualify as a chartered accountant. There are numerous universities that run degree courses in the subject of accountancy. Some universities have also designed specialized courses, which teach the same subjects that are part of the syllabus of the educational program run by ICAI. Accepting the Informant s arguments would me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay fall within the sphere of economic activity. It would be erroneous to assume that if any activity falls within the broad definition of economic activity, it would be necessary to create an open market for the same. This Court is unable to accept that the CCI can compel an organisation or an enterprise to outsource its activities. 68. The learned counsel appearing for CCI has relied on the decision of this Court in Uttarakhand Agriculture Produce Marketing Board and Ors. v. Competition Commission of India and Anr.: 2017 SCC OnLine Del 10906 and on the strength of the said case, contended that the Division Bench of this Court had not interfered with the decision of the CCI to investigate information that Uttarakhand Agriculture Produce Marketing Board had denied market access by restricting the procurement of Indian Made Foreign Liquor (IMFL). He had submitted that although the procurement of IMFL was pursuant to a policy framed by the Board and in discharge of its statutory functions, the jurisdiction of the CCI to examine the same was upheld. 69. The point in issue in Uttarakhand Agriculture Produce Marketing Board and Ors. v. Competition Commission of India and Anr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TFEU prevents restriction or distortion of competition. Article 102 of the TFEU requires that abuse by one or more undertaking of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with internal market insofar as it may affect trade between Member States. 73. Article 3 of the Regulations impugned in the said case provided that Ordem Dos Tecnicos Oficiais De Contas (Order of Chartered Accountants OTOC) promoted two types of training, namely, institutional training and professional training. In terms of Article 5 of the OTOC could offer all types of training relevant to the exercise of the profession. However, institutional training could only be provided by OTOC. The professional training could be provided by higher education establishments and bodies authorised by law to provide training and bodies registered with OTOC. Two training bodies had approached the Court alleging that the impugned regulations unduly restricted their freedom to provide training for chartered accountants. The Court, at the first instance, found that the impugned regulations offended Article 101 and 102 of the TFEU. OTOC had challenged th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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