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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 ..... proved by the Division Bench in the case of Cadila, the appellants were required to be heard. In any case we have also heard the learned counsel for the appellants on the issues, which they had raised in their writ petitions or at least in their applications for amendment 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. It is also necessary to note the only issue, which the Division Bench in Cadila has framed for its consideration, which has a bearing on the judgment passed by the CCI in Ministry of Agriculture 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 . 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. Whether no notice can be issued to the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or R-2. Mr. Sunil J. Mathews, Adv. for R-3 Mr. Jayant K. Bhushan, Sr. Adv. with Mr. Amitabh Kumar, Mr. Vaibhav Choukse, Ms. Akansha Mehta & Mr.Aditya Gupta, Advs. for R-4 to R6. Mr. Sabah Iqbal Siddiqui, Adv. for R-7.2018: JUDGMENT V. KAMESWAR RAO, J 1. These appeals have been filed by the appellants challenging the order dated 12th October, 2018 passed by the learned Single Judge in W.P. (C) 7583/2016 and 7578/2016 whereby 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Directors / Officers of a company under Section 27 of the 2002 Act and that they can only be proceeded against if the orders / directions of CCI are not obeyed and / or are flouted by the company. However, CCI may, in a given case, be entitled to invoke provisions of Chapter VI of the 2002 Act if the pre-condition of the various Sections contained therein are shown to have been fulfilled. The categories of orders that can be 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as "turnover" and "profit" which terms can only be relevant to an enterprise and not to an individual. If "turnover" is interpreted to include income of a director / officer (as suggested by the learned counsel for the respondents herein), the same would amount to re-writing Section 27 of the Act. Further, the term "profit" cannot be applied in the context of a Director / Officer. The Supreme Court in Excel Crop Care Ltd v. Competition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for private respondents in the case of Rajasthan Pharmaceutical Laboratory, Bangalore and Ors. V. State of Karnataka (1981) 1 SCC 645, which was in the context of the Drugs and Cosmetics Act, 1940. The respondents, by relying upon a similarly worded section therein as Section 48 of the 2002 Act, sought to argue that once an offence is committed, both the company and its officers are deemed to be guilty of the offence. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons in-charge of the company, a finding of guilt must be recorded against the company. According to Mr. Bhushan, it would not even be in the public interest as it would prolong the proceedings and may even result in the same issue being argued twice. If for instance, the initial proceedings were only against the company and the company did not properly defend itself and a finding of guilt was recorded against the company, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmaceutical Laboratory (supra) wherein in paras 6 and 7, it has been held that "punished accordingly" does not mean that individuals have to be punished in exactly the same manner as the company. The punishment prescribed for the offence in the Competition Act for contravention of Section 3 and 4 is in Section 27 i.e. a penalty which shall not be more than the average of the turnover of the last 3 preceding years. The provision was 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 (Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enterprises is a company (which it obviously can, as per definition of enterprise in Section 2(h) and definition of person under Section 2(I)(iii) of the Competition Act), Section 48 becomes applicable and every person, namely, individual would be deemed to be guilty of the same offence as the company. This is the statutory framework of many similar deeming provisions of guilt for persons in-charge of companies where offences were 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I in Ministry of Agriculture (supra) and connected matter was under challenge before the learned Single Judge of this Court; the said judgment having been approved by the Division Bench in the case of Cadila (supra), the appellants were required to be heard. In any case we have also heard the learned counsel for the appellants on the issues, which they had raised in their writ petitions or at least in their applications for amendment 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 / Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individuals; and b) "director", in relation to a firm, means a partner in the firm. 53. The question sought to be agitated was urged before another single judge in Pran Mehra vs. Competition Commission of India and Another (Writ Petitions No. 6258/ 2014, 6259/ 2014 and 6669/ 2014) when the court held as follows: "6.... I am in agreement with the submissions of Mr. Chandhiok that there cannot be two separate proceedings in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with him. In Aneeta Hada (supra) it was held, inter alia, as follows: 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words ―as well as the company‖ appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. (emphasis supplied by this Court) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:-- (a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such 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.] [***] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating directions issued by the Commission or contravening, without any reasonable ground, 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 or exemption in relation to any matter has been accorded, given, made or granted under this Act or delaying in carrying out such orders or directions of the Commission.] 43. Penalty 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be proceeded against, along with Company. We also say that the Officers / Directors can only be liable if the CCI were to come to the conclusion that they were the key persons who were In-charge and responsible for the conduct of the business of the Company. 35. On a perusal of Section 27 of the Act, it is clear that it stipulates, the CCI on a finding that there is a contravention of Section 3 or Section 4, can pass orders against an '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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act", one shall be liable to be proceeded against and punished accordingly. The contravention of the provisions of the Act includes Sections 3 and 4, as is clear from Section 46, which is also in Chapter VI, stipulates lesser penalty for violating Section 3 in certain eventualities. If the interpretation as sought to be advanced by Mr. Kapur and Mr. Rao, is to be accepted / agreed to, then Section 48 shall become nugatory, and there shall be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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