2021 (6) TMI 1141 - HC - Law of Competition

Directing an investigation under Section 26(1) of the Competition Act 2002 - contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act - nature of the impugned order passed under Section 26(1) of the Act - Administrative order or not - prior notice and opportunity of hearing is mandatory at the stage of issuing direction to the Director General to hold inquiry under Section 26(1) of the Act or not - HELD THAT - An order under Section 26(1) of the Act passed by the Commission is an administrative direction to one of its wings departmentally and without entering upon any adjudicatory process - Section 26(1) of the Act does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it. Whether the Commission has acted in consonance with the settled law? - HELD THAT - In the case on hand the informant has filed information and appended material papers which according to the informant support its allegations. It was submitted by the learned Additional Solicitor General that the Commission has also called upon the informant to file a Certificate under Section 65B of the Indian Evidence Act and the penalty for incorrect information is upto Rs. One Crore under Section 44 of the Competition Act - It is expected that an order directing investigation be supported by some reasoning which the Commission has fulfilled. Therefore it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation. Therefore the impugned order does not call for any interference. Petition dismissed.

Summary

Issues Involved:
1. Nature of the impugned order under Section 26(1) of the Competition Act.
2. Requirement of prior notice and opportunity of hearing before directing an inquiry under Section 26(1).
3. Validity of the impugned order and whether it calls for interference.

Issue-wise Detailed Analysis:

A. Nature of the Impugned Order:
The court examined the nature of the impugned order passed under Section 26(1) of the Competition Act. It was determined that such an order is an “administrative direction” to one of its wings and does not enter upon any adjudicatory process. The court referred to the precedents set by the Supreme Court in CCI vs. SAIL and CCI vs. Bharathi Airtel, which held that the order under Section 26(1) is administrative and does not determine any rights or obligations of the parties involved. Therefore, it does not entail civil consequences and is not subject to the same procedural requirements as a quasi-judicial order.

B. Requirement of Prior Notice and Opportunity of Hearing:
The court addressed whether prior notice and an opportunity of hearing are mandatory at the stage of issuing a direction to the Director General to hold an inquiry under Section 26(1). It was concluded that Section 26(1) does not mention the issuance of any notice before forming a prima facie opinion. The court cited CCI vs. SAIL, which clarified that the mechanism under Section 26 does not require notice at the stage of forming a prima facie view. The court reiterated that the legislative intent does not necessitate notice at this preliminary stage, and the absence of such a requirement is conspicuous in the statutory language.

C. Validity of the Impugned Order:
The court examined whether the impugned order calls for interference. It was noted that the Commission had examined the material provided by the informant and had analyzed the information under various heads, such as exclusive launch of mobile phones, preferred sellers, deep discounting, and preferential listing. The Commission had recorded prima facie observations that warranted an investigation. The court found that the Commission had applied its mind and provided some reasoning to support its direction for investigation, fulfilling the requirement set by CCI vs. SAIL.

The court also addressed several contentions raised by the petitioners, including the argument that the informant had not approached with clean hands and that the Commission had deviated from its earlier practices. The court found these contentions untenable, noting that the Commission's concern is with the material allegations disclosed in the information, irrespective of the informant's background.

Additionally, the court discussed the argument that the jurisdiction of the CCI was barred due to a pending investigation by the Enforcement Directorate. It was clarified that the Competition Act has an overriding effect and allows for parallel investigations by different regulators.

Finally, the court emphasized that judicial review under Article 226 is limited to examining the decision-making process and does not extend to re-evaluating the merits of the case. The court found no procedural irregularities or manifest errors in the Commission's order and thus concluded that the impugned order did not warrant interference.

Conclusion:
The writ petitions were dismissed, and the rule was discharged. The court upheld the Commission's order directing an investigation under Section 26(1) of the Competition Act, finding it to be an administrative direction supported by adequate reasoning. No costs were awarded.