9911796707
TMI Blog2016 (5) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellants in the contravention allegedly committed by Respondent No. 5 and finally impose penalty on Appellant No. 1 @ 10% of the average of his income of preceding three financial years and also direct Respondent No. 5 not to associate the appellants with its affairs including administration, management and governance for a period of two years albeit without issuing action oriented notice and giving them opportunity of hearing. 2. Respondent No. 2, P.K. Krishnan, who is proprietor of Vinayaka Pharma, Palakkad District, Kerala submitted complaint dated 06.01.2014 to the Commission and prayed that action may be taken against M/s. Alkem Laboratories Limited (Opposite Party No. 2 before the Commission and Respondent No. 4 herein) and Mr. Paul Madavana (Respondent No. 3 herein) for refusing to supply the medicines despite his appointment as a stockist vide letter dated 14.11.2013. On being asked by the Secretariat of the Commission, Respondent No. 2 filed an information under Section 19(1)(a) of the Act with similar prayer but the same was found to be defective. Respondent No. 2 re-filed the information, which was registered as Case No. 28 of 2014. 3. After hearing Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prima facie view that the Opposite Party and AKCDA have contravened the provisions of Section 3 of the Act in the matter and this is a fit case for investigation by the Director General (DG). 4. Accordingly, under the provisions of 26(1) of the Act, DG is directed to cause an investigation into the matter and to complete the investigation within a period of 60 days from receipt of this order. 5. During the course of investigation, if involvement of any other party is found, DG shall investigate the conduct of such other parties who may indulge in the said contravention. In case of contravention, DG shall also investigate the role of the persons who at the time of such contravention were in-charge of and responsible for the conduct of the business of the contravening entity. 6. Nothing stated in this order shall tantamount to final expression of opinion on merits of the case and the DG shall conduct investigation without being swayed in any manner whatsoever by any observations made herein." (Emphasis supplied) 4. The Joint Director General (for short, the 'Jt. DG') to whom the investigation appears to have entrusted by the DG, issued notices/probe letters to Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m AKCDA (OP-3 can be construed to be an arrangement/agreement being practiced between OP-2 and OP-3, and as such OP-2 has contravened the provisions of Section 3(1) of the Competition Act, 2002. 9.2 Investigation has also concluded that OP-3 (AKCDA) as an association of stockists and distributors has been following a practice of NOC necessarily required to be taken from it for appointment of a new/additional stockiest which has the effect of limiting and controlling the supply of drugs and medicines in Kerala, apart from being an entry barrier, thereby contravening the provisions of Section 3(3)(b) read with Section 3(1) of the Competition Act, 2002. 9.3 Investigation has concluded that the IP has concealed/suppressed material fact before the Hon'ble Commission, thereby contravening the provisions of Section 45 of the Competition Act, 2002." 7. In paragraph 8.2 of his report, the Jt. DG noted that Respondent No. 5 is a society registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 and in terms of the Memorandum of Association, all its affairs are required to be managed by the Executive Committees at district and state le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proprietor MEERA MEDICALS 5. Shri P. Shankaranarayanan, Sabari Medicals, Olavakod, Palghat - 678 564 VICE PRESENT SOUTH ZONE 09447065510 AGEPS1446G Proprietor SABARI MEDICALS 6. Shri Antony K.J. Suma Medicals Ayarkunnam, Kottayam - 686 564 VICE PRESENT NORTH ZONE 09747824657 AQMPA0903A Proprietor, SUMA MEDICALS 7. Shri C.K. Asif, Drug House, Opp. Hilal Shopping Complex, Main Road, Kanhangad, Kasargod - 671 315 SECRETARY NORTH ZONE 09847219821 [email protected] ANJPA4549G Managing Director DRUG HOUSE 8. Shri Wilson K.K. Sangam Medicals, Nada, Irinjalakuda, Thrissur-680 121. SECRETARY CENTRAL ZONE 09846083373 [email protected] AZMPK4404H Proprietor SANGAM MEDICALS 9. Shri S. Subramoniam, English Pharma Souparnika Buildings Aryasala, Chala P.O. Thiruvananthapuram-695036 SECRETARY SOUTH ZONE 09447078766 [email protected] ABXPC4935C Proprietor ENGLISH PHARMA MANNER OF ELECTION Election conducted by Court appointed Chief Election Officer/Advocate Commissioner, Adv. A. Balagopalan, as per the order of Sub Court, Ernakulam as per order in IA No. 3338/2008 in OS No. 355/2009, IA No. 6264/2010 and IA No. 4571/2011 in OS No. 414/2010 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DG to the following persons who were identified by the DG as employees of OP-2 and to the executive committee members, of OP-3, who at the time of contravention of the provisions of the Act were responsible for the conduct of the affairs of OP-2 and OP-3, respectively: (1) Shri Jonson Mathew DGM (Sales South & West) of OP-2; (2) Shri T.K. Haridas, Branch Manager of OP-2; (3) Shri A.N. Mohanakurup, President of OP-3; (4) Shri Thomas Raju, General Secretary of OP-3; (5) Shri O.M. Abduljaleel, Treasurer of OP-3; (6) Shri P.K. Surendranath, Vice-President (North) of OP-3; (7) Shri P. Sankaranarayanan, Vice President (Central) of OP-3; (8) Shri Antony K.J., Vice President (South) of OP-3; (9) Shri C.K. Asif, Secretary, (North) of OP-3; (10) Shri Wilson K.K., Secretary, (Central) of OP-3; and (11) Shri S. Subramoniam, Secretary, (South) of OP-3. The Commission directed the parties, including the aforesaid individuals, to file their suggestions/objections latest by 5th June 2015. The Informant is directed to provide a copy of his suggestion/objections to the Opposite Parties and each of the Opposite Parties is directed to provide a copy of his/its suggestion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication dated 25th March 2015 requesting initiation of proceedings against M/s. Lividus Pharmaceuticals Pvt. Ltd. under Section 43 of the Act for not complying with the directions of the DG. The Commission considered the application dated 25th March 2015 in its ordinary meeting held on 23rd April, 2015 and decided to issue show cause notice to M/s. Lividus Pharmaceuticals Pvt. Ltd. under Section 43 of the Act. Accordingly, notice dated 12th May 2015 was issued to M/s. Lividus Pharmaceuticals Pvt. Ltd. directing them to show cause, in writing, within 15 days, from the receipt of the notice as to why a penalty upto rupees one lac per day to the maximum of rupees one crore in terms of the provision of Section 43 of the Act should not be imposed upon them. M/s. Lividus Pharmaceuticals Pvt. Ltd. was also directed to appear before the Commission on 10th June 2015 for an oral hearing. As per the postal tracking system, the notice dated 12th May 2015 was delivered to M/s. Lividus Pharmaceuticals Pvt. Ltd. on 16th May 2015. However, no reply was received from M/s. Lividus Pharmaceuticals Pvt. Ltd. Further, none appeared for them today. The Commission took serious note of the conduct o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral) Regulations, 2009; b) application dated 5th June 2015 filed by the Informant inter alia seeking extension of time for filing his reply to the DG report and to the show cause notice dated 13th May 2015; c) reply/submission dated 9th June 2015 of OP-3 along with (i) trial balance sheet as on 31st March 2015, income details for the period between 20th August 2013 to 31st March 2014 and balance sheet as on 31st March 2014; (ii) ITRs of Shri A.N. Mohanakurup, President of OP-3, Shri O.M. Abdul Jaleel, treasurer of OP-3, Shri P. Sankaranarayanan, Vice-President, Secretary (South) of OP-3, Shri C.K. Asif, Secretary (North) of OP-3 and Shri Subramoniam, Secretary (South) of OP-3 for financial years 2012-13, 2013-14 & 2014-15; and (iii) Submissions of Shri Thomas Raju, General Secretary of OP-3, Shri K.P. Surendranath, Vice-President (North) of OP-3, Shri Anthony K.J. Vice-President (South) of OP-3 and Shri Wilson. K.K. Secretary (Central) of OP-3; 4. Today, the Commission heard the counsel for the Informant and Opposite Parties on the investigation report. The Commission directed the counsel for OP-2 to file information regarding its internal policy/process for appointing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... euticals Pvt. Ltd. as it had failed to comply with the directions of the DG. The Commission considered the said application in its ordinary meeting held on 23rd April, 2015 and decided to issue show cause notice to M/s. Lividus Pharmaceuticals Pvt. Ltd. Accordingly, notice dated 12th May, 2015 was issued to M/s. Lividus Pharmaceuticals Pvt. Ltd. directing it to show cause, in writing, within 15 days, from the receipt of the notice as to why a monetary penalty should not be imposed upon it in terms of Section 43 of the Act. M/s. Lividus Pharmaceuticals Pvt. Ltd. was also directed to appear before the Commission on 10th June 2015 for an oral hearing. In compliance to above directions, the Commission noted that no reply was filed and none appeared on behalf of M/s. Lividus Pharmaceuticals Pvt. Ltd. on 10th June 2015. The Commission took a serious note of the conduct of M/s. Lividus Pharmaceuticals Pvt. Ltd. However, the Commission decided to provide one more opportunity to M/s. Lividus Pharmaceuticals Pvt. Ltd. and directed it to file reply to the show cause notice and also appear for an oral hearing on 23rd June 2015. Today, none appeared on behalf of M/s. Lividus Pharmaceuticals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Haridas, and c) Independent auditor's report dated 13th May 2014 (filed/received on 30th July 2015). 4. Today, the Commission heard the counsel for the Informant and Opposite Parties on the investigation report of the DG. The parties have concluded their arguments. 5. Upon the request of OP-2 and OP-3, the Commission has granted them time to file additional submissions, if any, by 24th August 2015. The Opposite Parties are directed to provide a copy of his/its additional submission to the Informant. 6. The Secretary is directed to inform the concerned parties, accordingly." 13. After two months of the receipt of written arguments of the parties, the Commission passed the impugned order and held that the conduct of Respondent No. 5 is contrary to Section 3(3)(b) read with Section 3(1) of the Act and the appellants are liable to be penalised under Section 48(1) of the Act. However, Shri O.M. Abduljaleel was exonerated on the ground that he was only the custodian of funds and responsible for keeping financial statements on behalf of Respondent No. 5. The Commission also held that Respondent No. 4 is responsible for contravention of Section 3(1) for facilitating the acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by pharmaceutical companies wherein the said companies had sent the names of their newly appointed stockists and requested the OP 3 'to do the needful'. All such emails are not reproduced herein for the sake of brevity. 7.7 It is relevant to reproduce another evidence relied upon by the DG which clearly shows the involvement of OP 3 and its district units in perpetuating their anti-competitive practices in the State of Kerala. M/s. Sunanda Associates, one of the stockist, vide communication dated 20.08.2014 had sent to Mr. A.N. Mohan, President OP-3 and Mr. Thomas Raju, General Secretary of OP 3, complaining about the anti-competitive activities of OP 3 and its office bearers in Kozhikode district unit of OP 3. The relevant excerpts of the same are reproduced below: 'This is to inform you regarding a hearing that I was allowed by Mr. K.P. Surendranath, Vice President, AKCDA (North Zone) and Mr. Asif, Secretary, AKCDA (North Zone) on 14.08.2014 at AKCDA office, Kozhikode in front of president and secretaries of north zone district. The district president and secretary of Kozhikode district AKCDA, Mr. K.T. Ranjit Damodaran had asked for action against my firm, Sunan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs & Chemists & Ors. v. Chemists & Druggists Association Goa); Case No. 20/2011 (M/s. Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and Ors.); Suo moto Case No. 05 of 2013 (In re: Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa, M/s. Glenmark Company and M/s. Wockhardt Ltd. etc.), the Commission has unequivocally held that imposing the requirement of NOC for the appointment of chemists/druggists/stockists/super stockists and/or imposition of PIS charges is anticompetitive in terms of the Act. It directed these chemists and druggists associations and their members to cease and desist from indulging in such anti-competitive trade practices. 7.11 More particularly, in Case No. 30 of 2011 (M/s. Peeveear Medical Agencies, Kerala and AIOCD and others), the Commission vide its order dated 09.12.2013 found that the practice of NOC was prevalent in the State of Kerala and the same was leading to problems for the consumers by limiting or controlling the supply of drugs in the market. The Commission held the conduct of AIOCD and its State affiliate AKCDA (OP 3) to be in contravention of the provisions of section 3(3)(a) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat part of the impugned order because the same is under challenge in the appeals filed by them. 16. The appellants have challenged the impugned order mainly on the ground of violation of the provisions of the Act and the principles of natural justice. In paragraphs 7.2 to 7.4 of the memo of appeal, the appellants have averred that in the election held in August, 2009, Appellant No. 1 was elected as President and Shri K. Sivasankaran and Shri K. Sahadevan were elected as General Secretary and Treasurer respectively, but they were not allowed to function because the rival faction headed by Shri Abdul Gaffoor unlawfully took possession of the Registered office of the Respondent No. 5; that the rival faction was supported by AIOCD, which had written letters to the pharmaceutical companies in the entire State of Kerala to deal with the said faction and that despite interim order dated 23.12.2010 passed by Sub-Judge, Ernakulam, they were not allowed to discharge the functions of office- bearers. The appellants have further averred that in the election held under the supervision of the Commissioner appointed by Sub-Judge, Ernakulam, they were elected as President and General Secretary r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministration, management and governance in any manner that for period of two years totally disregarding the civil and Constitutional rights consequences thereto?" 17. While issuing notice of appeal and application for interim relief on 29.01.2016, the Tribunal passed the following order: "This appeal is directed against order dated 01.12.2015 passed by the Competition Commission of India whereby penalty has been imposed on the appellants under Section 48 of the Competition Act, 2002. One of the points which would require consideration is whether an order could have been passed by the Commission under Section 48 of the Act without issuing notice and giving opportunity of hearing to the appellants. The other point, which would require consideration is, whether the burden to prove the ingredients of Section 48 of the Act was on the appellants. Issue notice on the main appeal and also the application for interim relief returnable on 15.03.2016. In the meanwhile, operation of the impugned order shall remain stayed. Notice on the main appeal as well as interlocutory application be given Dasti to the appellants, who shall be duty bound to serve the same before the date fixed fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued thereunder, but in the present case the proceedings for determination of the liability of the persons incharge of and responsible for the conduct of the business of Respondent No. 5 were initiated at the threshold and that resulted in serious prejudice to the cause of the appellants. Shri Rajshekhar Rao referred to paragraph 5 of order dated 29.09.2014 passed by the Commission and argued that notwithstanding what was stated in paragraph 6 by the Commission that the order passed under Section 26(1) would not be treated as final expression or opinion on the merit of the case and the DG shall conduct the investigation without being swayed by the observations made therein, the DG was left with little or no choice but to return a finding of guilty against the appellants and he dutifully did so by holding that three members of the Executive Committee of Respondent No. 5 are equally complicit in the anti-competitive practices being carried on and the decisions being taken by Respondent No. 5 in contravention of the provisions of the Act. Learned counsel further argued that even if the Commission is held to have the jurisdiction to issue hybrid direction under Section 26(1) read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order is legally correct and the Tribunal should not interfere with the same on the hyper-technical ground of violation of the principles of natural justice because the Jt. DG had given ample opportunity to the appellants to defend themselves and he returned a finding on the issue of the appellants' complicity in the anti-competitive practices of Respondent No. 5 after threadbare analysis of the evidence collected during investigation, more so, because appeal filed by AKCDA against order dated 01.12.2015 passed by the Commission in Case No. 28 of 2014 penalizing it for contravention of Section 3(3)(b) read with Section 3(1) of the Act has been dismissed by the Tribunal. Learned counsel submitted that even though the Commission had given opportunity to the appellants to file their suggestions/objections to the findings contained in the investigation report, neither of them availed that opportunity. Shri Shergill pointed out that Appellant No. 1 had filed reply on behalf of Respondent No. 5 and also produced his own income tax details, but he did not contest the finding recorded by the Jt. DG about his own complicity in the anti-competitive practices being pursued by Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in the meetings held in accordance with Clauses 3(3) and (5) of the Competition Commission of India (Meetings for Transaction of Business) Regulations, 2009, which are treated as ordinary meetings. 24. The scheme of the Act was considered by the Supreme Court in Competition Commission of India v. Steel Authority of India Limited and Another - 2010 (10) SCC 744 and it was held that while discharging adjudicatory functions, the Commission acts as a quasi-judicial body. The provisions of the Act and the Competition Commission of India (General) Regulations, 2009 (for short, the 'Regulations') have also been analysed by this Tribunal in several decisions. In Appeal No. 105 of 2012 Lafarge India Limited v. Competition Commission of India and Another decided on 11.12.2015 along with a batch of matters, the Tribunal extensively referred to the provisions of the Act and the Regulations and ruled the while deciding the allegation contained in the information filed or reference made under Section 19(1)(a) and passing orders under Sections 27, 33, 39, 42, 42A, 43, 43A, 44 and 45 the Commission does not exercise purely administrative power or discharge administrative functions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy or other document, which is by law declared to be admissible as evidence of any particular fact provided it is duly certified by a gazetted officer of the Central Government or by a State Government or a statutory authority, as the case may be or a Magistrate or a Notary appointed under the Notaries Act, 1952 or the Secretary of the Commission; admit the entries in the books of account, including those maintained in an electronic form, regularly kept in the course of business, including entries in any public or other official book, register or record or an electronic record, made by a public servant in the discharge of his official duty, or by any other person in performance of a duty specially enjoined by the law of the country in which such book, register or record or an electronic record is kept, as documentary evidence; admit the opinion of any person acquainted with the handwriting of the person by whom a document is supposed to have been written or signed, as relevant fact to prove the handwriting of the person by whom the document was written or signed; admit the opinion of the handwriting experts or the experts in identifying finger impressions or the persons specially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act in accordance with the procedure enshrined in sub-sections (4) to (8) of Section 26, which provide for forwarding a copy of the record to the parties concerned including the Central or the State Government or the statutory body, as the case may be, sub-sections (5) and (6) of Section 26 deal with the situation in which the report of the Director General recommends that there is no contravention of the provisions of the Act. In that event, the Commission is required to invite objections or suggestions from the Central Government or the State Government or the statutory authority or parties concerned, as the case may be. If after considering the objections/suggestions filed in terms of sub-section (5), the Commission agrees with the recommendations of the Director General, then it is required to close the matter and pass orders, which may be communicated to the Central or State Government or statutory authority or the concerned parties. If after considering the objections/suggestions referred to in subsection (5), the Commission forms an opinion that the further investigation is to be made, or cause further inquiry to be made in the matter or itself proceed with further inquiry i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides for imposition of fine for contravention of orders or directions issued under Section 27, 28, 31, 32, 33, 42A and 43A. The quantum of fine may extend to rupees one lakh per day, subject to a maximum of rupees ten crores. If any person fails to comply with the orders or directions issued by the Commission or fails to pay the fine imposed under Section 42(2), then he can be punished with imprisonment for a term which may extend to three year of with fine upto rupees twenty five crores or with both, as the Chief Judicial Magistrate may determine. Section 42A postulates award of compensation for contravention of decision or order of the Commission issued under Section 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction or exemption has been granted or for delay in carrying out such orders or directions. Section 43 provides for imposition of fine for non-compliance of direction by the Commission under Section 36(2) and (4) or by the Director General under Section 41(2). The amount of fine may extend to rupees one lakh per day during the period of continuance of such failure subject to a maximum of rupees one crore. Section 43A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expounded by the Courts across the globe including the Supreme Court of India. Rather, on the basis of case law developed in this country, it must be held that like any other adjudicatory body, the Commission is bound to comply with various facets of the principles of natural justice and its proceedings confirm to the objective standard of fairness." (Emphasis supplied) In support of the conclusion recorded in paragraph 48 above, the Tribunal relied upon the judgments of the Supreme Court in Rangi International Limited v. Nova Scotia Bank and others 2013 (7) SCC 160, State of Orissa v. Dr. (Miss) Binapani Dei- AIR 1967 SC 1269, A.K. Kraipak v. Union of India- 1969 (2) SCC 262, Sayeedur Rehman V. State of Bihar- 1973 (3) SCC 333, Maneka Gandhi v. Union of India- 1978 (1) SCC 248, Mohinder Singh Gill v. Chief Election Commissioner- 1978 (1) SCC 405, Mahipal Singh Tomar v. State of U.P. - 2013 (16) SCC 771, Manohar v. State of Maharashtra - 2012 (13) SCC 14 and order dated 23.02.2015 passed in Appeal No. 17/2015, The Board of Control for Cricket in India v. Competition Commission of India and Another. 25. In the light of the above, we shall consider the questions formulated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Act or of any rule, regulation, order made or direction issued thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: PROVIDED that nothing contained in this subsection shall render any such person liable to any punishment if he proves that the contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such contravention. (2) Notwithstanding anything contained in subsection (1), where a contravention of any of the provisions of this Act or of any rule, regulation, order made or direction issued thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission. Section 42 confers power upon the Commission to penalize any person, who, without reasonable cause, fails to comply with the orders or directions issued by it under Sections 27, 28, 31, 32, 33, 42A and 43A of the Act. Under Section 42 (2), the Commission can impose fine to the extent of rupees one lakh for each day during which such non-compliance occurs, subject to a maximum of rupees ten crore. Sub-section 3 of Section 42 declares that if any person does not comply with the orders or directions issued, or fails to pay the fine imposed under sub-section 2 then he shall be punishable with imprisonment for a period which may extend to three years or with fine which may extend to rupees twenty-five crore, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit. Section 42A provides for making any application by any person for recovery of compensation from any enterprise for any loss or damage suffered by him/it as a result of violation of the directions issued by the Commission or contravention of any decision or order of the Commission issued under Sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to a firm, means a partner in the firm. 29. Since the provision contained in Section 48(1) raises a presumption of guilty against every person, who, at the time of contravention of the provisions of the Act by the company, was incharge of, and was responsible for the conduct of its business and visits him with penalty, the same deserves to be construed strictly and in our view, the deeming provisions contained in the two sub-sections of Section 48 can be invoked only after it is found that the company has contravened the provisions of the Act or any rule, regulation, order made and direction issued thereunder. The use of the word 'committed' in the two sub-sections necessarily implies that before any person incharge of and responsible to the company or director, manager etc. of the company can be proceeded against and punished by invoking the deeming provisions contained in Section 48(1) and/or (2), there must exist an affirmative finding by some competent authority that the company has contravened the provisions of the Act or any rule, regulation etc. Under the scheme of the Act, final determination on the issue of contravention of the provisions of the Act or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited and others (supra), on which reliance has been placed by Shri Jaiveer Shergill, does not have any direct bearing on the decision of this appeal. In that case, the Supreme Court interpreted Section 49-A of the Electricity Act, 2010 which is pari materia to Section 48 of the Act and it was held that the burden to prove that the particular person was incharge of and was responsible to the company for the conduct of business of the company is primarily on the complainant and the same shifts on the other party only if it is established by evidence that the particular person was, in fact, incharge of and was responsible to the company for its business. Paragraphs 11 to 14 of that judgment which notices the relevant provision and contains analysis thereof read as under: "11. Section 49-A which was inserted by Act 32 of 1959 provides for offence by companies. It reads as under: "49A Offence by companies.--(1) If the person committing an offence under this Act is a company, every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary burden to prove that the particular person was, at the time of contravention of the incharge and was responsible to the company is on the one who makes such allegation and only after the evidence has been led to show that the particular person was, in fact, at the time of commission of offence, incharge of and was responsible to the company for the conduct of its business but there is nothing in the judgment from which can be inferred that the Commission has the power to pass hybrid order under Section 26 (1) and direct the DG to cause investigation to be made about the role of the person who was incharge and was responsible to Respondent No. 5 for the conduct of its business without a determination by the competent authority that Respondent No. 5 had contravened the provisions of the Act or any rule, regulation, order made or direction issued thereunder. 33. We may now consider the argument of Shri Jaiveer Shergill that the source of the Commission's power to impose monetary penalty on any person or enterprise found guilty of acting in contravention of Section 3 or 4 of the Act can be traced in Section 27(b) and the penalty imposed on Appellant No. 1 @ 10% of the avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of an entity of their right to hold the particular offices/posts and, in any case, the direction contained in the second part of paragraph 14 of the impugned order could not have been issued without any notice or opportunity of hearing to the appellants, Shri Jaiveer Shergill defended the direction given by the Commission by relying upon clause (g) of Section 27. Shri Shergill also submitted that the appellants were given due notice and opportunity to defend inasmuch as the copy of the investigation report was supplied to them and they were given opportunity to file suggestions/objections. 36. In our opinion, Clause (g) of Section 27, which gives power to the Commission to pass such other orders or issue such other directions as it may deem fit has to be interpreted by applying the rule of contextual interpretation and keeping in view the objects sought to be achieved by enactment of the Act, namely, to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect interest of consumers and to ensure freedom of trade carried on by other participants in the markets in India and for matters connected therewith or incidental there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed office-bearers or deprive them of their right to exercise powers and discharge the functions of the elected offices/posts under the particular statutes. As a corollary, it must be held that the direction contained in the second part of paragraph 14 of the impugned order is ultravires the powers vested in the Commission under the Act. If we were to hold that wide and open-ended language used in Section 27(g) empowers the Commission to issue a direction which interferes with the rights of the elected representatives of an association then the results would be catastrophic. In a given case, the Commission may order removal of the office-bearers of an association which may be found to have acted in contravention of Section 3 and/or Section 4 on the ground that the they were incharge of and responsible for the conduct of the affairs of the association. In another case, the Commission may curtail the tenure of the elected office-bearers as has been done in the present case. Such consequence of the exercise of unbridled power was never envisaged by the Legislature. 38. Even if it is assumed for a moment that the direction contained in the second part of paragraph 14 of the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
