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TMI Blog2018 (12) TMI 2008X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Single has dismissed the writ petitions by relying upon the judgment of the Coordinate Bench of this Court in Cadila Healthcare Ltd. and Anr. V. Competition Commission of India, LPA No. 160/2018 decided on 12th September, 2018. 2. It was the submission of Mr. P.V. Kapur and Mr. Rajshekhar Rao, learned Sr. Counsel / counsel appearing for the appellants that in Cadila (Supra), the Coordinate Bench of this Court has noticed the order passed by the Competition Commission of India (CCI) in Ministry of Agriculture v. M/s. Mahyco Monsanto Biotech Limited and has confirmed the reasoning therein. According to them, the Coordinate Bench has confirmed the judgment which was under challenge in the writ petitions before the learned Single Judge. This was done without notice to the appellants herein. As such the judgment of the Coordinate Bench in Cadila (Supra) to the extent it affirms the order of the CCI impugned by the appellants before the learned Single Judge in the writ petitions has adversely affected their legal rights and remedies as evidenced by the summary dismissal of the writ petitions. In this regard, they had relied upon the judgment of the Supreme Court in Poonam v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passed under Section 27 of the 2002 Act can only be directed against an 'enterprise' as defined under Section 2(h) of the Act, 2002, and not against individual Directors / officers. It is their submission that since the grounds and points raised by the appellants at the time of hearing before this Court have admittedly not been considered by the Division Bench in Cadila (Supra), this court ought to refer the matter to a larger Bench to decide the legal challenge raised by the appellants. In this regard they rely upon the judgment of the Supreme Court in the case of Dawoodi Bohra (supra). 5. It was the submission of the learned counsel for the appellants that Division Bench in Cadila (Supra) only considered a limited argument in relation to Section 48 of the 2002 Act and admittedly did not consider the arguments raised by the appellants before the ld. Single Judge. A reading of Cadila (Supra) would show that the Division Bench has, without considering the special scheme and construction of the 2002 Act, gone into an elaborate discussion on the interpretation of Section 138 of Negotiable Instruments Act, 1881 and while doing so, the Division Bench, with utmost respect, did not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetition Commission of India and Ors. AIR 2017 SC 2734 has interpreted the word "turnover" appearing in Section 27 of the 2002 Act to mean only the relevant turnover pertaining to the infringing product (s). In the context of a director / officer of a company and in the absence of any enabling provision or prescribed parameters being prescribed under the 2002 Act, it would be impossible to ascertain the relevant turnover. 7. According to the counsels, it is a settled rule of interpretation that if the language used in a statute is capable of bearing more than one construction, a construction that results in absurdity or anomaly should be eschewed. On the contrary, the court should prefer a construction that brings it into harmony with its purpose as it may always be presumed that while employing a particular language in the provision, absurdity or anomaly was never intended. In this regard, reliance was placed on the judgment passed by the Supreme Court in M. Nizamudeen v. Chemplast Sanmar Limited and Ors. (2010) 4 SCC 240. 8. It was the submission of the learned counsel for the appellants that the Supreme Court while interpreting the 2002 Act in Excel Crop Care (supra), also o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, perusal of the judgment would show that to the contrary, the said judgment supports the case of the appellants inasmuch as at Paragraph 7, it was clearly observed that the words "punished accordingly" in the context would mean that a person deemed guilty of an offence committed by a company shall receive the punishment and that is prescribed by the Act for that offence. In the present case, since no punishment can be imposed upon individual directors / officers of a company under Section 27 of the 2002 Act, such individual directors / officers of a company cannot be proceeded against and punished, except as contemplated under Chapter VI of the 2002 Act. 11. They also submitted that the learned counsel for the respondents have contended that if the interpretation which is sought to be given by the appellants to Section 48 of the 2002 Act has to be accepted, the same would render Section 48 of the 2002 otiose in its entirety. This submission is wholly misplaced and deserves to be rejected. In terms of the interpretation propounded by the appellants to Section 48 of the 2002 Act, it is their stand that the said section would only apply in a case where orders / directions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors or person-in charge would surely come and challenge the finding before they could be held vicariously liable and would insist on that finding being revisited. 15. It was his submission that no prejudice would be caused to persons in-charge if they were asked / permitted to participate in the proceedings at the initial stage itself. They would be given a chance to contest the charge against the company as well as the charge that they were in-charge of the company at the time when the offence was committed. He refers to paras 52 to 55 of the judgment of the Division Bench of this Court in Cadila (Supra). Further, it was submitted that the reasoning of the learned Single Judge in Pran Mehra vs. CCI, W.P. (C) 6258/2014 as well as the Division Bench in Cadila (Supra) is correct and needs no re- visitation. In this regard he would rely upon the judgment of the Kerala High Court in B. Unnikrishnan and Ors. vs. CCI and Ors. W.P. (C) 22534/2016. 16. It was his submission that Section 48 which provides for vicarious liability of person in-charge of and responsible for the conduct of business of the company will apply only for contravention of orders of the CCI or DG under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s basically enacted in reference to an enterprise which would be conducting business but that does not mean that the deeming provision cannot be interpreted for an individual in the context of the Competition Act. Meaning of the term 'turnover', in the context of an individual, can easily be interpreted to mean the income of the individual from the company in question. Merely because the term needs an interpretation does not mean that the individual escapes complete liability although Section 48 is very clear that the person in- charge of managing the affairs of the company shall be deemed to be guilty when there is a contravention of Section 3 or 4 of the Competition Act by a company. In this connection, reliance was placed on Excel Crop Care Limited (Supra) wherein even though Section 27 of the Competition Act only said turnover of the company, the Supreme Court interpreted turnover in the context to mean turnover for the relevant product. It is submitted that this judgment therefore shows that the word 'turnover" has to be interpreted in the context of the offence and need not literally mean what it prima facie states. Thus, in the context of an individual who is in-charge of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re committed by companies in various other Acts. 21. On the issue of hearing the appellants by the Division Bench before pronouncing the judgment in Cadila (Supra), since the Bench pronounced on the correctness of Competition Commission's order in the appellants' case is concerned, it the submission of Mr. Bhushan that often similar issue arises in different cases. It is an accepted position in law that the Court while deciding a lis between some parties lay down the law which will have an effect on the lis between separate parties which are still pending. Yet, there is no requirement in law for hearing all parties who may be affected. In deciding the lis between the parties involved in Cadila (Supra), this Court has laid down law and while laying down that law, it has noticed that the judgment of the CCI in the present case, laid down the correct law. There is absolutely nothing wrong with this and the submission that the appellants were therefore condemned unheard is totally misplaced. 22. In the end, it is his submission that the points raised by the appellants are either covered by the Cadila (Supra) or have no merit. In any case, that the appellants have held up the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for additional grounds and which have been incorporated in these appeals and accordingly, proceed to decide the same. So, to that extent, the grievance of the appellants has been addressed. 26. Before we come to the other two issues raised by the appellants in these appeals, it is necessary to note the only issue, which the Division Bench in Cadila (supra) has framed for its consideration, which has a bearing on the judgment passed by the CCI in Ministry of Agriculture (supra) and which was under challenge before the learned Single Judge by the appellants is question No.4 which reads, "Whether DG could have issued notice to Cadila Officials under Section 48". 27. That apart, the issue whether the penalty could have been imposed on the Officers / Directors only for contravention of Sections 42 to 44 of the Competition Act or also for contravention of Sections 3 and 4 of the said Act, is an issue, which was neither raised nor considered by the Division Bench in Cadila (supra). Having said that, we now proceed to answer the two issues, which have arisen for our consideration. ISSUE NO. 2 28. Insofar as issue No. 2 is concerned, the Division Bench in Cadila (supra), in paras 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the company (i.e. VeriFone) and the key-persons as the scheme of the Act, to my mind, does not contemplate such a procedure. The procedure suggested by Mr.Ramji Srinivasan is both inefficacious and inexpedient. As in every such matter, including the proceedings under Section 138of the Negotiable Instruments Act, 1881 (in short N.I. Act), a procedure of the kind suggested is not contemplated. The judgment of the Supreme Court in the case Aneeta Hada dealt with proceedings under Section 138 of the N.I. Act. The judgment does not deal with issue at hand, which is whether adjudication in two parts, as contended by Mr. Ramji Srinivasan, is permissible. The judgment, in my opinion is distinguishable. 7. It is no doubt true that the petitioners can only be held liable if, the CCI, were to come to a conclusion that they were the key-persons, who were in-charge and responsible for the conduct of the business of the company. In the course of the proceedings qua a company, it would be open to the key-persons to contend that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to prevent the contravention. These arguments ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. This court is of opinion that the correct interpretation of law was given in Pran Mehra the reasoning of which is hereby confirmed, as is the reasoning in Ministry of Agriculture v M/s Mahyco Monsanto Biotech Ltd, which proceeds on a correct appreciation of the law. Accordingly Cadila's grievance with respect to issuance of notice to its directors by citing Section 48 is without substance; it is hereby rejected. The impugned judgment cannot be faulted." 29. The submission of Mr. Kapur and Mr. Rao on this issue was that the judgment of Cadila (supra), is primarily premised on a judgment of three Judges in Aneeta Hada (supra), wherein the issue was whether a Director / Official of a Company could be prosecuted when the Company has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business of the company. In the course of the proceedings qua a company, it would be open to the key-persons to contend that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to prevent the contravention. These arguments can easily be advanced by key- persons without prejudice to the main issue, as to whether or not the company had contravened, in the first place, the provisions of the Act, as alleged by the D.G.I., in a given case. (emphasis supplied by this Court) 31. We agree with the aforesaid conclusion of the learned Single Judge, which is independent of what was held in Aneeta Hada (supra), which is the correct interpretation of law. So, we reject the submission of Mr. Kapur and Mr. Rao. ISSUE NO. 3 32. On this issue, the submissions of Mr. Kapur and Mr. Rao can be summed up as under:- (i) The Scheme of Competition Act, does not contemplate punishment of the Officers / Directors of a Company under Section 27 of the Act as the order contemplated therein can only be against an 'enterprise'; (ii) They can only be proceeded against if the orders / directions of CCI are not obeyed and / or are flouted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch agreement or discontinue such abuse of dominant position, as the case may be; (b) impose such penalty, as it may deem fit which shall be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: [Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent. of its turnover for each year of the continuance of such agreement, whichever is higher.] [***] (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; [Omitted by Competition (Amendment) Act, 2007] (g) pass such other 45 [order or issue such directions] as it may deem fit. 46[Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty for failure to comply with directions of Commission and Director General - If any person fails to comply, without reasonable cause, with a direction given by- (a) the Commission under sub-sections (2) and (4) of section 36; or (b) the Director General while exercising powers referred to in sub-section (2)of section 41, such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of rupees one crore, as may be determined by the Commission.] 43A Power to impose penalty for non-furnishing of information on combinations] - If any person or enterprise who fails to give notice to the Commission under sub- section(2) of section 6, the Commission shall impose on such person or enterprise a penalty which may extend to one percent, of the total turnover or the assets, whichever is higher, of such a combination.] 44. Penalty for making false statement or omission to furnish material information - If any person, being a party to a combination,- (a) makes a statement which is false in any material particular, or knowing it to be false; or (b) omits to state any material particular knowing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'enterprise' and a 'person' i.e individual, who has been proceeded against, imposing penalty. 36. The issue is, as contended by Mr. Kapur and Mr. Rao that, the penalty under Section 27(b) being 10% of the average 'turnover' for the last three preceding financial years cannot be on the person / individual / Director / Official. This they say so, as there is no 'turnover' of a person. On this submission of Mr. Kapur, the argument of Mr. Bhushan and Mr. Bansal was primarily was that on a reading of Sections 27(b) and 48 of the Competition Act, it is clear that a penalty can be imposed on a person for violation of the provisions of the Act, which includes Sections 3 and 4 also, in view of the presence of the words "upon each of such person" in Section 27(b) and "where a person committing contravention of any of the provisions of this Act" in Section 48(1). 37. We agree with the said submission of Mr. Bhushan and Mr. Bansal. There cannot be any dispute that if the Company and the Officers / Directors are being proceeded against for violation of Sections 3 and 4, there has to be a consequence for violation. Mr. Kapur and Mr. Rao's plea was that the word 'turnover' would not be applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both literal and purposive approaches. In other words the legislative intention i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. (See District Mining Officer and Ors. v. Tata Iron & Steel Co. & Anr. JT 2001 (6) SC 183). It is also well settled that to arrive at the intention of the legislation depending on the objects for which the enactment is made, the Court can resort to historical, contextual and purposive interpretation leaving textual interpretation aside. (emphasis supplied) 69. It was also opined: More often than not, literal interpretation of a statute or a provision of a statute results in absurdity. Therefore, while interpreting statutory provisions, the Courts should keep in mind the objectives or purpose fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty for violating the Act. 42. Insofar as the judgments, as relied upon by the learned counsels for the appellants are concerned, in Poonam (supra), the reliance was placed on a proposition of law that no order can be passed behind the back of a person adversely affecting him. 43. Insofar as Central Board of Dawoodi Bohra Community and Anr. (supra), the reliance was placed by the appellants in support of their contention that the matter must be referred to a larger Bench in the facts of this case. 44. Insofar as the judgments in the case of Shah and Co., Bombay (supra) & Bangalore Turf Club Limited relied upon by the appellants in support of their submission that there is no justification to refer to the NI Act when the 2002 Act as a Special Act deals with the subject matter, which is entirely distinct from the NI Act. 45. Insofar as the M. Nizamudeen (supra) is concerned, the same was relied upon by the learned counsel for the appellants to contend that it is a settled rule of interpretation that if the language used in a statute is capable of bearing more than one construction, a construction that results in absurdity or anomaly should be eschewed. 46. Similarly, Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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