9911796707
TMI Blog2016 (5) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant No. 1 had refused to appoint Respondent No. 2 as a stockist and supply the medicines on the ground of non-production of NOC from AKCDA - It is neither the pleaded case of Respondent No. 2 nor it has been argued before us that he is an illiterate person. Rather, the facts brought on record show that he is a graduate and has been in the business of medicines as a stockist of various pharmaceutical companies for last more than one decade. Therefore, he cannot plead innocent ignorance for rebutting the charge of deliberately concealing the material facts and documents from the Commission. Whether the conduct/practices of OP 2 and/or OP 3 amount to contravention of any of the provisions of section 3 of the Act? - HELD THAT:- The findings recorded by the Commission about the alleged complicity of Appellant No. 1 in the anti-competitive practices/conduct of Respondent No. 3 are self-contradictory and are perverse. Once the Commission found that Respondent No. 3 had been issuing diktats to the pharmaceutical companies or coercing them to insist on production of NOC for appointment of a person as a stockist or supply of medicines, the element of agreement/concurrence automatically d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, 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. - in the absence of a determination by the Commission that the company has committed contravention of any of the provisions of the Act or any rule, regulation etc., the deeming clause contained in Section 48(1) cannot be invoked for punishing the person incharge of and responsible to the company for the conduct of its business. Similarly, the deemin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial penalty imposed by the Commission on Appellants Nos. 1, 2 and 3 cannot be sustained and is liable to be quashed. Conclusion - The evidence did not support the allegations of anti-competitive conduct or the individual liability of Appellants Nos. 2 and 3. The impugned order set aside - appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... reet, Palakkad - 678001 E-mail - [email protected] ___________________________ To, The Asst. Drugs Controller, Ernakulam, Dear Sir, Sub: Refusal of supply of medicines by M/s. Alkem Laboratories Ltd. I submit that I am holding valid drugs License in form 20b & 21 under the Name and Style of VINAYAKA PHARMA, Kanara Street Palakkad. I am engaged in distribution of Medicines manufactured by various company's. I have been offered distributorship of M/s. Alkem Laboratories in Palakad district by the company after completing the usual survey conducted by them and upon satisfactory reports from the market the company officials have issued M/s. VINAYAKA PHARMA their offer letter conforming my distributorship of the company. As advised by them I had completed all formalities by sending them DD for Rupees. Five Lakhs along with the order for the company products (copy enclosed) surprising the company has returned the order and the draft with a direction orally from the Depo Manager to obtain NOC from AKCDA. This is gross violation of Drugs and Cosmetics Act and also against the Competition Commission of India - New Delhi Verdict (copy enclosed). The deliberate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout consent or knowledge of the undersigned. The undersigned has aware about the offer only when we received a copy of the offer letter. The further argument in the letter issued by M/s. Vinayaka Pharma is that there was an oral instruction from Depot Manager which is not correct as there is no depot manager available in our Cochin office. The undersigned has not received any amount or order from M/s. Vinayaka Pharma for any product. M/s. Vinayaka Pharma has not been appointed as the stockist as the offer letter which they have received from Divisional Manager is not an authorized one. Since M/s. Vinayaka Pharma is not appointed as a stockist by the undersigned or our head office no question of violation of Drugs & Cosmetics Act or competitive commission arises. Moreover we have no product shortage or distribution problem in Palakkad area. We have not made any objection to supply any product to this party. Hence we hereby confirm that M/s. Vinayaka Pharma, Palakkad is not a stockiest of our company and no authorized offer letter has been given to them by our Cochin office or Head office. Copy of the authorized person's letter is attached hereby for your reference. We t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible. Thanking you, assuring you our best co-operation at all times. Yours faithfully, For Alkem Laboratories Limited T.K. Haridas Branch Manager & Power of Attorney Holder" 9. On the next day i.e. 20.03.2014, Respondent No. 2 submitted the papers and deposited money required for supply of medicines and the needful was done by the concerned officers/officials of Appellant No. 1 after completion of the necessary formalities. 10. In the meanwhile, Respondent No. 2 submitted complaint dated 06.01.2014 to the Commission alleging violation of the provisions of the Act at the instance of AKCDA and prayed that action may be taken for the financial loss suffered by him. The complaint made by Respondent No. 2 reads as under: 6/1/2014 "To, The Competition Commission of India New Delhi Honorable Members Sub:-Refusal of supply of medicines by M/s. Alkem Laboratories Ltd., inspite of Competent Commission order instructing not to insist on NOC from Akeda. I am a valid drug license holder in form 20 & 21B operating in the name and style of Vinayaka Pharma, Palakkad. I am engaged in distribution of medicines manufactured by various companies, I have been offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Ltd. 06 Letter dated 28.11.2013 of Vinayaka Pharma addressed to Alkem Laboratories, cochin for supply of their products 07 Copy of DD No.386358 dated 28.11.2013 in favour of Alkem Laboratories Ltd 08 Letter dated 06.12.2013 addressed to the Asst. Drugs Controller, Ernakulam 09 Copy of the receipt dated 06.12.2013 of Asstt. Drugs Controller 10 Letter dated 06.01.2014 addressed to the Competition Commission of India, New Delhi 11 Reply dated 30.01.2014 of the Competition Commission of India 12 Letter addressed to the Divisional Sales Manager, Alkem Laboratories Ltd. Ernakulam 13 Copy of the registration receipt for having sent the letter to Divisional Sales Manager, Alkem Laboratories Ltd. Ernakulam * * * From P.K. Krishnan, Proprietor, Vinayaka Pharma, 11/259/1, Kannara Street, Palakkad, Kerala, Pin - 678 001. Tel: 0491-2531109, 0491-3203073 To The Secretary, Competition Commission of India, Hindustan Times House, (3rd, 4th and 7th Floor), 18-20, Kasturba Gandhi Marg, New Delhi-110001. Subject: Re-submission of Complaint/information filed u/s. 19(1)(a) of the Competition Act 2002: Reg Ref: Letter No. PC to M.F. No. 10(1)/2010-Sectt/229 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bank, Bhikaji Cama Place, New Delhi - 110066"). Demand Draft No.805699 dated 19.02.2014 for Rs.5000/- (Rupees five thousand only) of Punjab National Bank, Palakkad Branch in favour of Competition Commission of India (Competition Fund) payable at Punjab National Bank D. No.2107, CDPC Delhi Finacle. 8 Introduction/ brief of the facts giving rise to filing of the information M/s Alkem Laboratories Limited refused to deal with my firm M/s Vinayaka Pharma by refusing to supply their products in spite of sending DD for Rs.500000/- without any valid reason. The above action of M/s Alkem Laboratories is an act for creation of barriers to new entrants in the market and also for driving existing competitors out of the market. 9 Jurisdiction of CCI (applicant(s) should satisfy before filing application whether the issue taken up is covered under the provisions of the Competition Act, 2002) Refusal to deal with us by M/s Alkem Laboratories' Ltd. is a violation of Section 4(d) of Chapter II of the Competition Act 2002 read with the Competition (Amendment Act 2007), as well as Chapter IV 19(3)(b) driving existing competitors out of the market and (c) foreclosure of competition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CCI (General Regulations, shall be 2009 scrupulously) Not necessary 13.2 If 13.1 is yes, (i) The reason for seeking confidentially of document or documents or parts thereof (ii) the period for which confidentiality is sought (iii) Whether the procedure laid down in Regulation No.35(5) of CCI (General) Regulations, 2009 have been followed and a non confidential part of the documents has been filled. Not applicable 14. Any other relevant fact in connection with the filing of information NIL 15 Interim relief sought for under section 33 of the Competition Act 2002, if any (for this purpose the informant shall explain that (i) What irreparable loss is cause likely to be caused to the informant; and (ii) How balance of convenience lies in his favour M/s. Alkem Laboratories Limited. Alkem House, "Vishwarupa" No.VII/166J. Vaikom Road, South Paravoor, Poet: Udayamperoor, Dist Ernakulam, Kerala State Pin-682 320 May be directed to appoint M/s. Vinayaka Pharma as stockist ship for Palakkad District and the surrounding areas and supply their products. 16 Relief sought for from the CCI Direction of M/s. Alkem Laboratories Ltd to appoint M/s Vinayaka Pharma as stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve lakh only) bearing No. 386358 dated 28.11.2013 of Indian Bank payable at Service Branch Ernakulam in favour of Alkem Laboratories Ltd. was sent to them on 28.11.2013 (Copies of the list of items sent by me is enclosed as Annexure-3 and Demand Draft as Annexure-4). 4. Surprisingly, M/s. Alkem Laboratories Ltd. refused to receive my letter and Demand Draft and informed me orally over phone to obtain No Objection Certificate from All Kerala Chemists and Druggists Association which is led by President Mr. A.N. Mohan. 5. The above direction is a gross violation of Section 3(4)(d) (refusal to deal) of Chapter II of the Competition Act 2002 read with the Competition (Amendment) Act 2007 without any valid reason. It is also a violation of the Order No. F No. 1(20)2011-Sectt/1248 dated 25th February 2013 of the Competition Commission of India, New Delhi. In this order it is clearly mentioned that "It will not be required to obtain NOC for appointment of stockiest". It is also a violation of Drugs and Cosmetics Act. The above act of M/s. Alkem Laboratories Ltd. is refusal to deal with my firm and also a deliberate act of driving me being existing competitor out of the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utical products in Palakkad District with a turnover of over Rs. 6.5 Crores per annum. I have an excellent coverage of all the territories in Palakkad district of Kerala. I am having well experience salesmen and well trained office staff to look after the operation of my business activities. 3. On 02.09.2013, I had sent a request letter to the of M/s. Alkem Laboratories Ltd., Ernakulam for considering my firm for their Stockistship for Palakkad District and its surrounding. In response to my letter Mr. Paul Madavana, Divisional Sales Manager of M/s. Alkem Laboratories Limited informed me vide his letter No. Nil dated 14th November, 2013 that they are pleased to offer me their stockistship for Palakkad District and its surrounding. It is also mentioned that the terms and condition will be informed after completion of all the formalities from my side. Accordingly, I had completed all formalities as per their direction. Thereafter the Company officials completed the usual survey and upon satisfactory reports from the market company officials, they have issued their offer letter confirming my distribution ship for the company. Later on a list of their products required by me along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the re-filed information bears the date 31.03.2014 and the supporting affidavit bears the date 09.04.2014, the same were actually filed in the Secretariat of the Commission only on 30.04.2014. It is also of considerable significance to note that neither in the index or the body of the information nor in the prescribed format, the statement of facts and affidavit dated 09.04.2014, Respondent No. 2 disclosed that the complaint filed by him before the Assistant Drugs Controller, Ernakulam about the non-supply of medicines by Appellant No. 1 was not entertained by the concerned officer who accepted the latter's assertion that Respondent No. 2 had not been appointed as authorised stockist/distributor by the competent authority of Appellant No. 1. It is equally important to note that neither in the statements of facts filed with the format of the information nor in his affidavit dated 09.04.2014, Respondent No. 2 had mentioned that Appellant No. 3 had orally told him that medicines cannot be supplied unless NOC is obtained from AKCDA. These omissions will acquire significance when we critically examine the affidavit filed by Respondent No. 2 and the statement made by him before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng him the stockistship of Palakkad District, with terms and conditions to be communicated later. After completing the necessary formalities, Opposite Party alleged to have confirmed the distributorship of the Informant. Later, Opposite Party returned Informant's Demand Draft No. 386358 dated 28/11/2013 for an amount of Rs. 5,00,000/- with oral instructions to submit No Objection Certificate (NOC) from All Kerala Chemists and Druggists Association (AKCDA). 2.3 It is alleged that imposing the condition of procuring NOC from AKCDA by the Opposite Party is in contravention of the provisions of section 4 of the Act. It is averred that the above direction is in violation of section 4(d) of the Act and amounts to an act of refusal to deal and driving existing competitors out of the market. 2.4 Based on the above averments and allegations, the Informant has prayed, inter alia, for the issuance of direction to the Opposite Party to appoint his firm as Stockistship for Palakkad and nearby areas for supply of their products and also to initiate action against the Opposite Party for violation of the provisions of the Act. 2.5 The facts of the case, as detailed above, reveal that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply the specified information and documents. Appellant No. 1 filed three replies dated 07.01.2015, 13.02.2015 and 19.03.2015. The categorical stand taken by Appellant No. 1 was that Shri Paul Madavana, Divisional Sales Manager was not authorised to appoint M/s. Vinayaka Pharma as a stockist and this was the reason why the medicines were not supplied between November, 2013 and March, 2014 and not because of non-production of NOC from AKCDA. It was also stated that Respondent No. 2 was granted stockistship by the competent authority vide letter dated 19.03.2014 and, soon thereafter, the medicines were supplied to his proprietorship concern, i.e., M/s. Vinayaka Pharma. For the sake of reference, the relevant portions of replies dated 19.01.2015 and 13.02.2015 submitted on behalf of Appellant No. 1, which contain answers to the queries made by the Jt. D.G. and which were accompanied by several dozen documents including certified true copy of the resolution passed in the meeting of the Board of Directors held on 12.06.2013 authorizing Appellant No. 3, Shri T.K. Haridas to look-after the day-to-day business of the premises situated at Ernakulam, are reproduced below: "Reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorization by the Company to do so. It was clarified that Mr. T.K. Haridas, the Branch Manager, alone was authorised to sign any such offer letter. A copy of the letter dated 22 January 2014 from the Company to the Assistant Drug Controller is attached as Annexure 2; (vii) After verifying the complete details of the matter, the Assistant Drugs Controller came to the conclusion that M/s. Vinayaka Pharma was not an authorized stockist of the Company and issued a letter to Mr. P.K. Krishnan, M/s. Vinayaka Pharma, informing that no action can be taken on the basis of his petition. A copy of the letter issued by the Assistant Drugs Controller has been obtained by the Company and is attached Annexure 3; (viii) Thus, it is amply clear that M/s. Vinayaka Pharma was never appointed as an authorized stockist at the first place-Moreover, there was no oral communication from any Depot Manager to M/s. Vinayaka Pharma about obtaining No Objection Certificate (NOC) from the All Kerala Chemists and Druggists Association ("AKCDA"). Further, the Branch Manager never received any order along with the Demand Draft; (ix) Pursuant to the reply of Assistant Drug Controller, M/s. Vina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company, i.e., either the Area Business Manager or the Regional Manager. (ii) On receiving the request the above-named filed employees survey the position and standing of the stockist in relation to its credit-worthiness, market presence and chemist coverage. Field employees also assess whether the prospective stockist is in a position to supply the products as per the requirement of the market. (iii) Based on the survey and assessment, the field employees prepare a report for the consideration of the concerned National Sales Manager or Division Sales Manager. Thereafter, the concerned National Sales Manager/Division Sales Manager forwards the request for appointment of the stockist to its respective Divisional Head or the Vice President (Marketing) for the final approval. (iv) Once an approval is received from the Divisional Head, the offer letter of appointment as a stockist of the Company is issued by the authorized signatory (in the instant case concerning Palakkad district, the Branch Manager). The approved request of the stockist along with a request of supplying certain documents (in the form of a check list) are provided to the Distribution Department of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayaka Pharma under a letter dated 18 March 2014. It may be noted that as per the documents provided by M/s. Vinayaka Pharma to the Hon'ble Commission along with the information, the application was dated 2 September 2013, however, the records of Alkem indicate that the application was dated 31 August 2013 received by Alkem on 3 September 2013. The Hon'ble D.G. is requested to investigate as to why the letter dated 2 September 2013 was relied upon by the M/s. Vinayaka Pharma when the same was not sent to Alkem on the said date. Question 4 of the D.G.'s Notice How many Firms have been appointed as stockiests/distributors for M/s. Alkem Laboratories Ltd. during the last three years in Kerala State? District-wise detail thereof, (details may include serial number, name of the Firm/company, date appointment and etc.). Response: The list of the stockiests appointed during the last three years in Kerala by Alkem are provided as Annexure-4. Question 5 of the D.G.'s Notice Copies of Offer/Appointment letters issued to the stockiest by the company during the last three years. Response: Copies of the appointments letter issued to stockiests by Alkem for the las ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2014, after completing all formalities. Please furnish the date-wise details (in chronological order) of all events and formalities which were undertaken before offering stockiest-ship of your company to Vinayaka Pharma, till the offer letter is issued. Response All the documents pertaining to the application of M/s. Vinayaka Pharma are collectively enclosed as Annexure - 6 (colly). Question 10 of the D.G.'s Notice It is noted that, along with your submission dated 19.01.2015 you have submitted copies of letter dated 17.03.2014 but issued on 19.03.2014 by Assistant Drug Controller, Kochi to Mr. P.K. Krishnan and the petition dated 06.12.2013 made to Assistant Drug Controller, Kochi to Mr. P.K. Krishnan. Please let us know how you got copies of these letters, when a copy of the same was not marked to your company. Response It is submitted that Alkem through its Local Advocate, G. Subramanian filed an application under Right to Information Act, 2005 to the Public Information Officer at the Office of Assistant Drug Controller, Ernakulam on 8 January 2015 for obtaining a copy of the reply issued by the Assistant Drug Controller to M/s. Vinayaka Pharma in response to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that M/s. Vinayaka Pharma's appointment as one of the recognised stockiests of Alkem was administratively delayed as the appointment was not completed through proper approvals and authorization. The administrative delays cannot be attributed to any legal breach much less a breach of Section 3(4)(d) of the Act. It is evident from the sales figures for the period from March 2014 to December 2014, provided to the Hon'ble D.G., that Alkem has been engaging regularly with M/s. Vinayaka Pharma in business and the volume of sales was to the tune of INR 26.82 Lakhs. These facts are sufficient to show that M/s. Vinayaka Pharma was a stockiest of Alkem and the allegations made by it before the Hon'ble Commission in March 2014 were misleading and are liable to be rejected post investigation by the Hon'ble D.G. It is, therefore, prayed before the Hon'ble D.G. to consider the facts as stated in the foregoing and responses submitted from time to time to the D.G. by Alkem and recommend closure of the case against Alkem as the allegations made against could not be substantiated during the investigation. It would not be out of place to mention that Alkem has been contemplati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harmaceuticals Ltd. (TP) on 25.03.2015. viii) Shri Sanjeev Kumar Singh, DGM-Legal and Company Secretary of M/s. Mankind Pharma Ltd. (TP) on 26.03.2015." (Although in his report, the Jt. D.G. adversely commented on the conduct of Appellants Nos. 2 and 3, neither any notice was given to them nor their statements were recorded during the investigation) 19. After completing the investigation, the Jt. D.G. considered replies/responses of various parties, the statements recorded by him and submitted report dated 31.03.2015. In Chapter 4 of the report, the Jt. D.G. outlined the procedure adopted for investigation. In Chapter 5, he identified the following issues: "(i) Whether AKCDA (OP-3) is compelling the Pharma companies to seek "NOC" before appointment of new Stockists/Distributors. If reply is in affirmative, then whether the said conduct amounts to refusal to deal and hence hit by the provisions of the Competition Act, 2002. (ii) Whether the allegations of the IP against OP-2 (M/s. Alkem Laboratories Ltd.) regarding practice of the requirement of NOC from OP-3 (AKCDA) prior to appointment of stockists by pharmaceutical companies is substantiated by evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KCDA) and appointments of Stockists are made with the approval of OP-3's (AKCDA's) District/State units. ii) OP-3 (AKCDA) and AIOCD advise the pharma companies to meet them for negotiations. In this instance, it was M/s. Merck Limited, who was not interested to meet them or submit their price list even after OP-3's (AKCDA's) repeated requests. Even they (officials of AIOCD & M/s. Merck Ltd.) have had a meeting to discuss these issues at AIOCD office on 20th August, 2014. iii) OP-3 (AKCDA) influences and compels the pharma companies to meet them before making any new appointment of stockists. Even supplies are made under the intimation to OP-3 (AKCDA). The OP-3 is not only practising NOC but aggressively pursuing it with AIOCD and is also infuriated with M/s. Merck Limited as it appointed stockists without their (AKCDA's-OP-3's) consent. iv) The State Committee of AKCDA (OP-3) unanimously decided to extend non-cooperation to M/s. Merck Limited. Initially Stockists were requested (1) Not to give STOCK & SALES statement from 1st December onwards and (2) Not to accept NEW PRODUCTS without their signed order and Price List in Form V. v) AKCDA (OP-3) has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for getting stockistship of pharma companies, which may be one of the forms of acknowledging their presence in the process of appointment of stockists by the pharma companies. This is nothing but conveying NOC by OP-3 to pharma companies. • From the evidence listed at Sl. No. (m), Page No. 54, it may also be observed that the OP-3 (AKCDA) issued Clearance Certificates on the said dates to some of the Stockists. • From the evidence listed at Sl. No. (p), Page No. 55, it is evident that AKCDA (OP-3) indulges into anticompetitive practices by pressurising the pharma companies to concede to its demands by threatening boycott of their products. It is also pressurising the field executives to obtain NOC/Clearance Certificate from them. • From the evidences listed above, it is evident that the conduct of the AKCDA (OP-3) i.e. indulging into practice of NOC and other anti-competitive practices are still being carried on by the office bearers of AKCDA. • Appointment of new stockists/distributors should be a consumer choice and not the trade associations'. In fact, the right to do a business, a fundamental right, is taken away by the above mentioned anti-compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 20 emails, an email dated 29th December, 2014, at 05:03 P.M., which was forwarded by Shri T.K. Haridas, Branch Manager of M/s. Alkem Laboratories Limited (OP-2) from his email ID [email protected] to Shri A.N. Mohan, President of AKCDA (OP-3) to his email ID [email protected] was also found along with an attachment to it. The fact that this communication i.e. email dated 29.12.2014 (informing appointment of IP as stockiest forwarding the stockists offer letter dated 14.11.2013 signed by Shri Paul Madavana sent by Branch Head Shri T.K. Haridas on 29.12.2014, clearly establish that the original offer letter signed by Shri Paul Madavana (OP-1) was within the knowledge of the company's (OP-2's) seniors." [Underlining is ours] He also referred to the similar complaint allegedly made by M/s. Sunanda Associates and observed: "In view of the above facts and evidences, it is established that there has been refusal to deal with IP by OP-2 with an understanding/in direct or indirect agreement with the AKCDA (OP-3) and therefore it is established that the OP-2 also involved in the anticompetitive practices." [Underlining is ours] 25. The Jt. D.G. then a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of stockists. All this is borne out from paragraph 8.1.2 of the investigation report, which is extracted below: "8.1.2 However, as per the information submitted by the OP-2 vide its letter dated 19th March, 2015 (annexed as Annexure-A), the persons responsible for decision making and appointment of stockists, distributors etc. in the districts of Palakkad, Ernakulam and Calicut in Kerala on behalf of M/s. Alkem Laboratories Ltd. (OP-2) are as follows: Year: 2013-14 & 2014-15 S. No. Name & Designation Address, phone nos. & email ID PAN No. Marketing Department: 1. Johnson Mathew DGM-ACE Sales South& West) Bangalore Apartment No. 001, Shravanthi Gardens, J.P. Nagar, Phase 5/13th Main, Bangalore 560078 Mobile No. +91 9611667402 Email [email protected] ADDPJ0665Q Distribution Department: 2. T.K. Haridas Branch Manager & Authorised Signatory 29/1657-A1, "Haritha", Jawahar Road, Vyttila, Kochi, Ernakulam, Kerala - 682019. Mobile No. +91 94465 77035 E mail: [email protected] AANPH7431H Conclusion: In view of the above, investigation has concluded that the afore mentioned two members of M/s. Alkem Laboratories Ltd. (OP-2) are equally compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling their replies/objections. The Commission also decided to forward an electronic copy of the investigation report of the D.G. to the following persons who were identified by the D.G. 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 suggestio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (DG) to cause an investigation. Accordingly, the D.G., after completing the investigation, has filed the investigation report along with an application 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 D.G. 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial years 2012-13, 2013-14 & 2014-15; and (iii) application dated 4th June 2015 from OP-2 filed under Regulation 26 of the Competition Commission of India (General) Regulations, 2009; b) application dated 5th June 2015 filed by the Informant inter alia seeking extension of time for filing his reply to the D.G. 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 Opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 In the instant case, the Director General (DG) vide application dated 25th March 2015 had requested the Commission to initiate Section 43 proceedings against M/s. Lividus Pharmaceuticals Pvt. Ltd. as it had failed to comply with the directions of the D.G. 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 Pharmaceutical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived the following submissions from the parties: a) reply/submission dated 10th July, 2015 from Informant; b) written submission/reply dated 10th July 2015 from OP-2, Shri Johnson Matthew and Shri T.K. 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 D.G. 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." 35. In compliance of the directive given by the Commission, Appellant No. 1 filed detailed reply running into 219 pages, some paragraphs of which are extracted below: "4. It is further submitted that on perusal of the D.G. Report, it was observed that the D.G. has not enclosed some of the essential documents submitted by Alkem as a part of its core defense during the period of investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive as such necessity of translation from English to Malayalam and vice versa through the good offices of an Advocate during the oral deposition appears misleading in respect of "demeanour" of the Informant. This action of the D.G. in allowing the counsel of the informant during the oral deposition makes the entire investigation report a nullity in law as against Alkem and its functionaries as the D.G. seemed to have acted with bias and in the process prejudiced the Hon'ble Commission against the Opposite Parties including Alkem. 7. It is submitted that the Hon'ble Commission in its Section 26(1) Order dated 29 September 2014 directed the D.G. to also investigate the role of the persons who, at the time of such contravention, were in-charge of an responsible for the conduct of the business of the contravening entity so as to fix responsibility of such persons under Section 48 of the Competition Act. This direction of the Hon'ble Commission at the very preliminary threshold to the D.G. is colourable exercise of statutory powers since Section 48 could not be invoked at 26(1) stage unless the Hon'ble Commission and not the D.G. is able to conclusively find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetition Act much before the passing of the Order by the Hon'ble Commission on 5 March 2015 as such the findings of the D.G. as against Alkem, Mr. Mathew and Mr. Haridas are liable to be rejected. 13. The D.G. has stated that Alkem has contravened the provisions of Section 3(1) of the Competition Act. In this regard it is submitted that sub-section (1) of Section 3 of the Competition Act is a "general" provision and not the substantive "charging section" as per intent of the legislation. However, assuming but not admitting that Section 3(1) has been breached, the D.G. has still failed to establish appreciable adverse effect on competition ("AAEC") as required under sub-section (3)(a) to (c) of Section 19 of the Competition Act. On the contrary with the supply of stocks to the Informant by Alkem to the tune of Rs. 34.09 lakhs from March 2014 up to February 2015 the consumers of the region have in fact been benefited along with the Informant. 17. In a chronological order of events it is stated that on 2 September 2013, the Informant through his firm M/s. Vinayaka Pharma applied for stockistship of Alkem to the Branch Manager of Alkem, Ernakulam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.G. Report) the Informant had submitted that "For the offer of stockistship, they have not asked NOC or Clearance Certificate. However, they have directed to get the NOC before invoicing. But I got the first stock invoice date was 20th March 2014 without submitting any NOC to M/s. Alkem Laboratories Ltd., because of my complaint in CCI." 27. It is therefore highly noteworthy that the Informant, during its oral Testimony on "oath" before the D.G., admittedly averred that Alkem did not demand submission of "NOC" at the time of appointing his enterprise as one of the Stockist of Alkem in Palakkad District of Kerala. It is also noteworthy that the Informant had filed the "Information" on 30 April 2014 with the Hon'ble Commission, much after being appointed as stockist of Alkem on 19 March 2014 and has also been successfully receiving the products from Alkem until this date. 32. At the outset, it is clarified that Alkem is not a member of AKCDA. Alkem is a pharmaceutical company engaged in the manufacture and distribution of pharmaceutical products whereas AKCDA i.e. OP-3 is an association of chemists and druggists and the informant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Informant because of his complaint to the Hon'ble Commission, stands negated in the light of the fact that the invoice of products was raised by the Informant in March 2014, whereas the information was submitted by him to the Hon'ble Commission only on 30 April 2014, i.e. a month later. By making such false oral statements on oath i.e. "because of my complaint in CCI", the Informant is misleading the Hon'ble Commission. 39. It is submitted that had an NOC been an absolute pre-requisite for Alkem, the Informant would not have been appointed as an authorized stockist for the Palakkad district in the first place. In fact, until today and even in March 2014, when the first order from the Informant was received there was no NOC that was received by Alkem. If the real intention of Alkem would have been to restrict supplies to the Informant until an NOC was received from AKCDA, Alkem would not have been obliged to supply the products to the Informant until this date as there is no NOC with Alkem even on this date of submission. 41. It is submitted that the assumption of the D.G. regarding the issue of holding stocks of M/s. Sunanda Associates is baseless an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 3(1) of the Competition Act, 2002." 51. It is submitted that the D.G. has based its findings of agreement on an allegation of refusal to supply drugs to the Informant without any substantial evidence of actual refusal to deal within the strict meaning of Section 3(4)(d) of the Competition Act. Furthermore, at no point has an NOC been demanded by Alkem. It is submitted that before concluding that there was an agreement, the D.G. has to prove beyond reasonable doubt that there was a refusal to supply the drugs by Alkem. Once that is proved, the D.G. will have to show an AAEC in terms of the factors laid down under Section 19(3) of the Competition Act to prove a contravention. 52. In order to establish an AAEC, it is mandatory for the D.G. to analyse in detail the factors laid down in Section 19(3)(a) to (c) of the competition Act. The D.G. has failed to show the triggering of any of the factors laid down and furthermore, a "meeting of minds" to prove an agreement has also not been shown. The Hon'ble Commission in Shamsher Kataria vs. Honda Siel Cars India Ltd. & Others, Case No. 03/2011 at paragraph 20.6.11 has noted that: ".....It is pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3 of the Act? 38. The Commission first considered whether Respondent No. 2 can be held guilty of suppression of material facts and made the following observations: "6.4 From the material placed on record, it is an uncontroverted fact that OP 2 had appointed the Informant as its stockist vide its letter dated 14.11.2013 sent by OP 1. The said letter was also marked to Mr. T.K. Haridas, Branch Manager of OP 2, who as per OP 2 was the authorized person to issue the appointment letter to the Informant. Thereafter, OP 2 refused to supply drugs to the Informant and returned the demand draft sent by the Informant dated 28.11.2013. On enquiry, the Informant came to know that the refusal to deal/supply the medicines by OP 2 was because of the intervention of OP 3. The Commission is of the view that these facts formed the foundation on which the prima facie order was issued. These facts, irrespective of the later appointment of the Informant as stockist of OP 2, were enough to cause the Commission to order enquiry in the said particular case. The Commission, however, is not revisiting the validity of its prima facie order and the present exercise has been undertaken only with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e refusal to supply for want of NOC. 7.19 The Commission further notes that the evidence collected by the D.G. in this case shows that OP 2 was holding up the supply of stocks to other stockists also because of the pressure of OP 3. The complaint dated 11.09.2014 and 08.11.2014 submitted by M/s. Sunanda Associates to Drug Controller of Kerala regarding holding up of the stocks partly/non-supply of medicines by OP 2 shows that OP 2 was indulging in such anticompetitive conduct. Purportedly, the authorised representative of OP 2 i.e., Mr. T.K. Haridas has expressed that OP 3 had threatened him that OP 2 will be boycotted if supplies were made by it to M/s. Sunanda Associates. 7.20 Based on the aforesaid, the Commission is of the opinion that denial of supply by OP 2 is established by the evidence placed on record. Such refusal was because of the instructions given by OPs and as such amounts to understanding between OP 2 and OP 3. 7.21 Since OP 3, an association of enterprises, was not itself engaged in the supply and distribution of drugs and medicines in the market and, OP 2 is the manufacturer of drugs and medicines, as such, any agreement between OP 2 and OP 3 being not betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e market. In view of the foregoing, the Commission deems it appropriate to hold OP 2 responsible for its anti-competitive conduct under section 3(1) of the Act as they were facilitating the acts of OP 3. With regard to the liability under section 48, the D.G. found Mr. Johnson Mathew, DGM-ACE Sales (South & West Bangalore) and Mr. T.K. Haridas, Branch Manager & Authorised Signatory of OP 2 to be responsible for the conduct of OP 2 which has been found to be in contravention of the provisions of the Act." [Emphasis supplied] 43. As regards Appellants Nos. 2 and 3, the Commission made very casual observations in paragraphs 7.27 that they were responsible by virtue of their key positions in the organisation of Appellant No. 1 and that despite ample opportunity given to them, they failed to adduce any evidence to establish their innocence. On that premise, the Commission held Appellant Nos. 2 and 3 individually responsible under Section 48(1) for the anticompetitive conduct of Appellant No. 1. These observations were made without a shred of evidence that Appellants Nos. 2 and 3 were incharge of and were responsible for the conduct of the business of Appellant No. 1. Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 3 and supply of medicines. Shri Sibal emphasised that if the Commission had been apprised of the full and correct facts, it could not have ordered an investigation by assuming that Appellant No. 1 had refused to supply medicines to Respondent No. 2 and insisted on production of NOC from AKCDA. Shri Sibal referred to paragraphs 7.10.2 to 7.10.5 of the investigation report to show that the Jt. D.G. had returned an unequivocal finding that Respondent No. 2 had concealed/suppressed material facts which had bearing on the prima facie view/decision of the Commission and argued that the latter brushed aside the objection taken by Appellant No. 1 on the specious ground that subsequent appointment of Respondent No. 2 as stockist was inconsequential. Learned senior counsel referred to the contents of the order passed by the Commission under Section 26(1) of the Act to emphasise that the alleged refusal of Appellant No. 1 to supply medicines to Respondent No. 2, which constituted the foundation of the opinion formed by the Commission that the allegations made by Respondent No. 2 call for investigation and argued that if Respondent No. 2 had candidly apprised the Commission of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order to show that on the one hand the Jt. D.G. and the Commission relied upon the alleged diktats/directions issued by Respondent No. 3 to the parties to obtain NOC and at the same time, recorded a finding that there was some understanding between Appellant No. 1 and Respondent No. 3 on the issue of production of NOC as a condition precedent for supply of medicines. 47. Shri Jaiveer Shergill, learned counsel for the Commission extensively referred to various paragraphs of the investigation report and the impugned order and argued that the Commission has given cogent reasons for recording a finding that Appellant No. 1 had acted in connivance with Respondent No. 3 to deny supply of medicines to Respondent No. 2 and, thereby, acted in contravention of Section 3(1) of the Act. Shri Shergill made pointed reference to complaints dated 11.09.2014 and 08.11.2014 sent by M/s. Sunanda Associates to show that Respondent No. 3 had threatened Appellant No. 2 against the supply of medicines without NOC. He also relied upon copy of the proforma of bio-data of stockists produced by M/s. Mankind Pharma and the affirmative answer given by it in paragraph 17 that NOC was required from Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28 of 2014 sent by the Commission. 50. Although we do not intend to penalise Respondent No. 2 by imposing fine under Section 45 of the Act, having carefully perused the detailed information prepared by him on 31.03.2014 and his affidavit dated 09.04.2014, we do not have the slightest hesitation in recording a finding that he had deliberately suppressed the vital facts and documents from the Commission, which resulted in passing of the order under Section 26(1) on the premise that Appellant No. 1 had refused to appoint Respondent No. 2 as a stockist and supply the medicines on the ground of non-production of NOC from AKCDA. We are sure that if the Commission had been apprised about complaint dated 06.12.2013 made by Respondent No. 2 to the Assistant Drugs Controller that despite his appointment as a stockist by Shri Paul Madavana, vide letter dated 14.11.2013, the medicines were not supplied and the Depot Manager had orally asked him to produce NOC from AKCDA, reply dated 22.01.2014 sent by Appellant No. 1 mentioning that Respondent No. 2 had not been appointed as a stockist by the competent authority and acceptance of that assertion by the Assistant Drugs Controller vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pleaded case of Appellant No. 1 that the Branch Manager was the competent authority to appoint a stockist and, at the relevant time, that post was held by Appellant No. 3. Unfortunately, the Jt. D.G. and the Commission completely overlooked the import of communication dated 17.03.2014 issued by the Assistant Drugs Controller and repeatedly observed that the medicines were not supplied to Respondent No. 2 and he was orally asked by the Depot Manager to produce NOC from AKCDA. The Jt. D.G. and the Commission also failed to take cognisance of the assertion made on behalf of Appellant No. 1 that there was no Depot Manager at Ernakulam at the relevant point of time and, therefore, the statement made by Respondent No. 2 that the Depot Manager orally asked him to produce NOC from AKCDA was false. 54. In Chapter 7 of his report, the Jt. D.G. first considered whether AKCDA (Respondent No. 3 herein) is compelling the pharmaceutical companies to seek NOC before the appointment of new stockists/distributors and whether the said conduct amounts to refusal to deal and is hit by the provisions of the Act. The Jt. D.G. referred to the statements made by Shri A.N. Mohana Kurup, President of Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to justify his action for issuance of such an offer letter dated 14.11.2013 to the IP. Further the conduct of OP-2 of refusing to deal with the IP in absence of an NOC/Consent from OP-3 (AKCDA), seems 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. * * * Conduct of the OP-2 in refusing to deal with the IP even emanated from its anxiety to avoid punitive action from OP-3 (AKCDA) and to protect its own business interest the same, none-the-less, falls foul of Section 3(1) of the Act. The actions/conduct of OP-2 cannot be excused on the ground of compulsions as there are various other pharma companies which may not be indulging in any such anti-competitive practices in the same region." 55. The Commission went a step further and returned several findings on similar lines as is from paragraph 7.5, 7.8, 7.9, 7.18 to 7.20, 7.23 and 7.26 of the impugned order, which are extracted below: "7.5 This undoubtedly shows that OP 3 has been exercising influence and controlling the supply of medicines by way of allocations the geographic market or number of sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the instructions given by OPs and as such amounts to understanding between OP 2 and OP 3. 7.23 Therefore, OP 3's instructions to OP 2 and OP 2's agreement to such instructions can be construed as an agreement amenable under section 3(1) of the Act subject to establishment of AAEC. 7.26 The Commission has seen in number of previous cases involving chemists and druggists associations where the diktats of the Association are followed by the members without any hesitation. Even though OP 2 acted on the directions and threats of OP 3, the same cannot absolve it from any liability under the Act. OP 2 could have approached the Commission instead of complying with the directions of OP 3 which were against the order of the Commission for refusing to deal with unauthorized stockists. Such denial of supply to unauthorized stockists by various pharmaceutical companies like OP 2 undoubtedly affects the competition in the market adversely and appreciably. The Commission thinks it appropriate to issue orders against such pharmaceutical companies as well to deter their actions of facilitating the associations in indulging in anti-competitive practices in the market. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) falls to the ground. 58. The issue which remains to be considered is whether the Commission could have held Appellants Nos. 2 and 3 guilty by invoking Section 48(1) of the Act. 59. Before considering the aforesaid issue in the light of the facts brought on record, we may observe that the scheme of the Act was considered by the Supreme Court in Competition Commission of India Vs. 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 Vs. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial evidence; admit on record every document purporting to be a certificate, certified 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 hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46. Once the report of the Director General is received, the Commission is required to 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 sub-section (5), the Commission forms an opinion that the further investigation is to be made, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to exercise the powers conferred upon the Commission under Section 36(2). Section 42(2) provides 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairness and render just decision after complying with the principles of natural justice as 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 vs. Nova Scotia Bank and others 2013 (7) SCC 160, State of Orissa Vs. Dr. (Miss) Binapani Dei-AIR 1967 SC 1269, A.K. Kraipak Vs. Union of India- 1969 (2) SCC 262, Sayeedur Rehman V. State of Bihar- 1973 (3) SCC 333, Maneka Gandhi Vs. Union of India - 1978 (1) SCC 248, Mohinder Singh Gill Vs. Chief Election Commissioner - 1978 (1) SCC 405, Mahipal Singh Tomar Vs. State of U.P. - 2013 (16) SCC 771, Manohar Vs. 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 Vs. Competition Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48. Contravention by companies- (1) Where a person committing contravention of any of the provisions 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 sub-section 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 sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 48 finds place in Chapter VI of the Act, which contains various provisions relating to penalties that can be imposed by the Commission. 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 Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, the term "Company" means a body corporate and includes a firm or other association of individuals and the term "Director" in relation to a firm, means a partner in the firm. 64. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he did not return a finding that Appellants Nos. 2 and 3 were incharge of and were responsible for the conduct of business of Appellant No. 1. 66. Notwithstanding the fact that no evidence was collected by the Jt. D.G. during investigation that Appellants Nos. 2 and 3 were incharge of and responsible to Appellant No. 1 for the conduct of its business, the Commission casually held them guilty under Section 48(1). This approach of the Commission is ex-facie contrary to the law laid down by the Supreme Court in Tamil Nadu Electricity Board Vs. Rasipuram Textile (P) Ltd. and Others - (2008) 17 SCC 285. In that case, the Supreme Court interpreted Section 49-A of the Electricity Act, 2010 which is pari materia 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 contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the said allegations, the proviso appended to Section 49-A would be attracted; meaning thereby only in the event it is proved that a Director or a Group of Directors of the Company were in charge of and/or were responsible for the conduct of the business of the company, the burden would shift on the accused to establish the ingredients contained in the proviso appended to Section 49-A of the Act." [Emphasis supplied] 67. The ratio of the above noted judgment is that the primary 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. 68. In our view, the aforesaid judgment is squarely attracted in the present case. At the cost of repetition, we would like to emphasise that neither Respondent No. 2 had not produced nor the Jt. D.G. independently collected any evidence to prove that Appellants Nos. 2 and 3 were incharge of and were responsible to Appellant N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus clear that during the course of investigation, Appellants Nos. 2 and 3 did not get any opportunity to explain their position or to cross-examine Respondent No. 2, who had made all sorts of unfounded allegations against Appellant No. 1 and went to the extent of making a false statement that the Depot Manager had orally asked him to produce NOC from AKCDA as a condition for supply of medicines. 71. After considering the report of the Jt. D.G. in its ordinary meeting held on 23.04.2015, the Commission did direct that copy thereof be supplied to the parties and 11 individuals including Appellants Nos. 2 and 3 but the proceedings recorded in that meeting or the communications sent to the two appellants did not contain any indication about the action proposed to be taken against them under Section 48(1) of the Act. Like others, Appellants Nos. 2 and 3 were also given opportunity by the Commission to file their reply/suggestions/objections but there was not even a whisper that their role was being probed in the context of Section 48(1) of the Act. Therefore, Appellants Nos. 2 and 3 did not get an opportunity to show that Section 48(1) cannot be invoked against them because they were ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
