2017 (9) TMI 1926 - HC - Law of Competition

Maintainability of petition - Territorial Jurisdiction - Anti-competitive arrangements - cartelisation by action in concert - delaying and denying adequate Point of Interconnections (POIs) even during the test phase/period thereby attempting and thwarting the RJIL s new project/entry in the telecom market - HELD THAT - There is no total bar in entertaining such Writ Petition specifically when the case is made out of great injustice perversity illegality hardship and prejudice to the legal rights of the service providers or the enterprises apart from non-application of mind to the telecommunication laws. This is specifically keeping in mind the consequences of this opinion so expressed and the investigation so contemplated followed by the final order of compensation under the Competition Act. Territorial Jurisdiction - HELD THAT - There is no issue and/or denial to the facts that the part of cause of action arose in Mumbai and/or the State of Maharashtra. The parties have placed material on record including the affidavits and the averments so made in the Petition which supports the fact that the part cause of action arose in Maharashtra including in Mumbai. The relevant averments in this regard of the respective Petitioners in the Petitions are read and referred by the Senior Counsel - substantial client/consumer base is in State of Maharashtra. The Respondents/service providers Officers are at Mumbai. The affidavits and averments and the documents so placed on record show that the various correspondences/the documents have been exchanged by and between the parties within the jurisdiction of Maharashtra State including Mumbai. Both the parties have substantially argued the matter by referring to the affidavit and the documents/charts which are necessary to adjudicate the issues so raised. The Senior Counsel appearing for the CCI has not agitated issue about maintainability or entertainability of the Writ Petitions in this Court - the present Writ Petitions are maintainable and entertainable in this High Court. Maintainability of Writ Petitions in light of Section 26(1) of Competition Act - HELD THAT - The impugned order/even if of impugned majority order and/or minority order no way can be stated to be administrative order/directions and/or not adjudicatory in nature and without any Civil consequences as submitted by the counsel appearing for the Respondents Jio and CCI. This impugned majority order in fact has decided several issues and elements though stated to be in prima facie nature ultimately entail into the DG to inquire and investigate with clear adverse consequences so recorded revolving around the Competition Act by overlooking the provisions of TRAI Act/Contracts between parties. Power and jurisdiction under the TRAI Act and the Competition Act - HELD THAT - The Authorities/Tribunals under the TRAI Act provide for various measures to facilitate the competition and to promote efficiently in the operation in telecommunication services including aspects of technical compatibility. All are bound by their respective rights and obligations arising out of the contracts they enter into under the prescribed contract terms and under the supervision of the authorities under the TRAI Act. Therefore if any dispute and/or issue and/or any question of interpretation arises in respect of any terms and conditions and/or policy decision and/or of any rights and obligations of the respective service providers it is the authorities under the TRAI Act which is specifically empowered to deal and decide the same - The interest of all the service providers and consumers is required to be treated equally fairly keeping in mind new technology the supply and the developing telecom market. The Commission independently without keeping in mind the provisions of the TRAI Act in fact by overlooking it on presumption and assumption proceeded and initiated the stated inquiry. The scope and power of the Commission to initiate investigation by giving prima facie opinion inspite of pendency of the issues and existing provisions of telecommunication laws therefore is perverse illegal and impermissible. TRAI recommendations treated as final - HELD THAT - The majority decision has wrongly relied upon the recommendations and proceeded upon it. The reliance of recommendation was impermissible to initiate the inquiry. In any way the impugned order/decision cannot be explained by additional reasons and/or by the oral submission during the course of the arguments. The market complexity because of lack of clarity revolving around these important issues be left for final decision with the High Court or the Authority under the Telecommunication laws. Free Subscribers and card holders and the Obligations of other Service Providers - HELD THAT - The free service as announced and/or declared by one provider if has direct communication and or it required to link with the other providers both the parties are required to act within the framework of agreement but there is no such agreement and/or clause made out and/or pointed out and certainly not referred in the majority decision. The Commission is required to wait for the decision of the authorities/tribunals based upon the policy and/or circular already declared for the telecom market. The distribution of millions of test cards to the general public though may be a business strategy but if the issue is raised about its feasibility in the terms of contract and regulation on the date of such action then there existed a confusion and the clarification as sought by the service providers independently and/or through the Association in no way can be stated to be action within the purview of Section 3 of the Competition Act. Telecommunication regulations are binding - HELD THAT - Admittedly the concern Respondent launched with 2.2 million subscribers which was unprecedented specifically because it offers free services as a business strategy. Everything is required a pre-contract pre-notice specific pre-agreements/clauses and reasonable phase-wise demand in the existing telecom market. The conduct of Respondents was noted in the dissent note but not in majority decision. Having once offered free services and even if there are call failures that itself ought not to have been reason to hold that it was only due to deficiency of POIs. The various issues of informants network and/or operationalization of POIs non-utilization of POIs and various other technical factors apart from match and/or mismatch of new technology with the existing technology may be the relevant factors. All these aspects unless settled and decided by the Competent Authority/Tribunal under the TRAI Act the prima facie majority decision is unsustainable and unacceptable even for issuance of any direction - all these disputes where there is delay and denial in providing reasonable POIs; whether there is an obligation to provide one way POI instead of two 2 way POIs; whether there is breach of such obligations; whether the test phase extends only to business partners or employees; whether cards could be supplied for testing quality of network and not for testing the market and; whether this amounts to creation of subscriber base, - all these are issues to be decided by the authorities and tribunals (TDSTD) and not by the High Court and definitely not by the Commission under the Competition Act. Role of Association (COAI)- Every majority decision is not cartelisation - HELD THAT - No case is made out that the action of the Association was aimed at boycotting the new entrant or such conduct could be presumed to be anti-competitive. The judgments cited by the RJIL are of no assistance to accept the case of collusion and/or conspiracy. The failure to provide unreasonable demands and/or the reasonable demands for want of conditions in the respective licenses (Unified licenses) and the clarification sought in no way can be stated to be with intent to stifle the launching by RJIL. Some Petitioners/service providers have shown the charts to demonstrate that from time to time they had supplied the sufficient POIs keeping in mind the terms of the contract to provide reasonable POIs on demand - Merely because the telecom service providers adopted the similar approach to split the trunk groups that cannot be stated to be a collusive approach and/or treated as an anti competitive agreement. At the appropriate stage even RJIL has not recorded any objection on the provisions of one way E1S as reflected from the letters submitted by the RJIL - The Commission (majority) decision based upon the media report and allegations of RJIL by overlooking the above position cannot fall within the ambit of requisite ingredients of Section 3 of the Act. No case of tacit agreement or joint decision and/or attempt to hamper the RJIL commercial launching - HELD THAT - The RJIL conduct and free services as stated to be a business strategy was an issue concerning the telecom market itself and therefore the steps and the representations so made by COAI in no way can be concluded as a cartelisation . The Respondent s reproach of interdiction in the stated supply by the Petitioners and its Association is unjust unreasonable and unsustainable and also premature. Cartelisation - HELD THAT - The role of the COAI of making representations even for some members but in view of the uncleared position of the market cannot be termed as stated cartelisation . It cannot be treated/read to mean the deliberate collusive action only to thwart and/or to scuttle the new entry. The whole action of COIA is bonafide within their power and the authority in the interest of telecom market and the consumers. The findings based upon these action of COIA that it breaches the provisions or falls within the ambit of Section 3(2) of the Competition Act is unjust and untenable. Show cause notices issued by DG - HELD THAT - The rights and obligations to provide POIs arise under the terms of the license granted by the DOT and the terms of supply are governed by the interconnection agreements entered into by service providers with each other. It is relevant to note that the consultation paper of TRAI on these issues further reiterates the fact of confusion and the controversy so agitated by the service providers and the COAI. Such grievances are genuine and bonafide. Therefore no case is made out of any cartelisation by and through the COAI. The Parties material and/or suppression of material facts and/or incorrect information - HELD THAT - The observation of the Commission that the service providers/Petitioners had an understanding agreement and acted in concert to deny or delay the provision of POIs and they as individual members through their Association have breached the provisions of Section 3(3)(b) ought not to have been opined even prima facie unless their respective rights and obligations under the Telecommunication laws are clarified and/or decided by the Regulatory authorities/Tribunal and the High Court. The initiation of enquiry at this stage by the Commission by holding that the alleged parallel conduct of individual members and Association establishes prima facie that there is a collusive conduct that limits provision of services and the technical development as per Section 3(3)(b) is unacceptable including further action of investigation so ordered being without jurisdiction illegal and perverse - It is unacceptable to permit the Commission to collect the facts and/or information when it has not itself concluded the controversy about the rights and obligations of the parties based upon statutory agreements/regulatory authority s guidance/circulars. The stated conduct and/or cartel could not have been tested or inquired into unless their rights and obligations based upon the governing laws in the market are clear and settled as the same binds all the respective service providers of the telecom sectors. Petitions allowed.

Summary

Issues Involved:

1. Maintainability and territorial jurisdiction of the writ petitions.
2. Nature and scope of the order under Section 26(1) of the Competition Act.
3. Jurisdictional conflict between the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI).
4. Allegations of cartelization and anti-competitive practices by telecom service providers.
5. Role and actions of the Cellular Operators Association of India (COAI).
6. Relevance and impact of TRAI's recommendations.
7. Procedural propriety and adequacy of the investigation process.
8. Judicial review of the CCI's order.

Detailed Analysis:

1. Maintainability and Territorial Jurisdiction of the Writ Petitions:
The court held that the writ petitions were maintainable and entertainable in the Bombay High Court. It was noted that a part of the cause of action arose in Maharashtra, including Mumbai, and the substantial client/consumer base was in the State of Maharashtra. The court referenced various judgments to support the contention that even a small part of the cause of action arising within the territorial jurisdiction of a court is sufficient to entertain a writ petition.

2. Nature and Scope of the Order under Section 26(1) of the Competition Act:
The court observed that the order passed by the CCI under Section 26(1) was not merely an administrative order but a reasoned order/direction. The court emphasized that judicial review is permissible if the case is made out of great injustice, perversity, illegality, hardship, and prejudice to the legal rights of the service providers or enterprises.

3. Jurisdictional Conflict between CCI and TRAI:
The court highlighted that the telecommunication sector is governed, regulated, controlled, and developed by the authorities under the Telegraph Act, the TRAI Act, and related regulations, rules, and circulars. The court held that the question of interpretation or clarification of any contract clauses, unified licenses, interconnection agreements, and quality of service regulations are to be settled by the authorities/TDSAT under the TRAI Act and not by the authorities under the Competition Act.

4. Allegations of Cartelization and Anti-Competitive Practices by Telecom Service Providers:
The court found that the majority decision of the CCI was based on wrong presumptions of law and usurpation of jurisdiction. The court noted that the CCI had relied heavily on TRAI's recommendations, which were not final and were under challenge in the High Court. The court held that the CCI could not proceed with the inquiry unless the contract agreements, terms, and clauses, and related issues were settled by the authority under the TRAI Act.

5. Role and Actions of the Cellular Operators Association of India (COAI):
The court observed that the COAI's actions and representations were within their power and authority in the interest of the telecom market and consumers. The court held that every majority decision by the association and/or its members could not be termed as cartelization. The court noted that the COAI's representations to the DOT and TRAI were about RJIL's conduct of providing full-fledged services to more than 1.5 million subscribers on its network during the test phase, which was unprecedented.

6. Relevance and Impact of TRAI's Recommendations:
The court noted that the CCI had relied on TRAI's recommendations, which were not final and were under challenge. The court held that the CCI could not proceed with the inquiry based on these recommendations. The court emphasized that the TRAI's recommendations were not binding unless settled and decided by the competent authority.

7. Procedural Propriety and Adequacy of the Investigation Process:
The court found that the CCI had not followed the proper procedure in forming its prima facie opinion and initiating the investigation. The court noted that the CCI had overlooked relevant material and relied on irrelevant material. The court held that the CCI's order was illegal and perverse.

8. Judicial Review of the CCI's Order:
The court emphasized that judicial review is permissible if the case is made out of great injustice, perversity, illegality, hardship, and prejudice to the legal rights of the service providers or enterprises. The court held that the CCI's order was subject to judicial review and quashed the impugned order and all consequential actions/notices of the Director General under the Competition Act.

Conclusion:
The court quashed and set aside the impugned order dated 21 April 2017, passed by the CCI under Section 26(1) of the Competition Act, 2002, and all consequential actions/notices of the Director General under Section 41 of the Competition Act. The court allowed all the writ petitions and held that the CCI had no jurisdiction to initiate the inquiry and investigation unless the contract agreements, terms, and clauses, and related issues were settled by the authority under the TRAI Act.