2010 (3) TMI 1159 - HC - Law of Competition

Petition challenges the Notices issued by the Competition Commission under the Competition Act 2002 in respect of an alliance between the petitioners and Jet Airways (India) Ltd - retrospective effect on alliance between the parties - objective to rationalise the rates and provide improved standard of service of wider choice to the customers - M.R.T.P. Commission had taken cognizance of the agreement - Competition Act 2002 repealing the M.R.T.P. Act came into effect on 20th May 2009 - However the operation of Section 66 was kept in abeyance for two years as a result of which M.R.T.P. Commission could continue to exercise the jurisdiction till the expiry of two years from 20th May 2009 - According to the petitioners the M.R.T.P. Commission is already seized of the matter in enquiry and therefore the cognizance taken by the Competitive Commission was one without jurisdiction - establishment of relevant market is an essential condition before any exercise can be undertaken by the Commission. HELD THAT - It is clear that though the transaction and agreement may be prior to coming into force of the Act it stands covered by the Act on the date the Act came into operation. The decision in Rajgopal s 1995 (1) TMI 67 - SUPREME COURT case applies on all fours to the instant case. We are therefore of considered opinion that though the Competition Act is not retrospective it would cover all the agreements covered by the Act though entered into prior to the commencement of the Act and sought to be acted upon. Whether the Competition Act could be said to be penal in nature - It was submitted on behalf of the petitioner that Section 43 of the Act prescribes punishment and therefore it should be treated as a penal Act. We do not think that the Act strictly speaking is a penal Act. This is because the Act does not make punishable by itself an act of entering into an agreement contrary to the provisions of the Act. Therefore even if parties enter into an agreement covered by the Act that by itself does not amount to an offence. What is made punishable is disobedience of the order passed by the Commission and noncompliance. Strictly speaking no criminal liability ensues for breach of Section 3 or 4 of the Competition Act. It seems to us that the penalty is provided only with a view to ensure or enforce compliance of the directions of the Commission as can be seen from Section 27(1) of the Competition Act. Such a direction can be issued by the Commission only after enquiry. Necessarily therefore unless and until any enquiry is held and pursuant to that certain directions as envisaged by Section 2(a) to (g) are issued there would be no question of anybody committing any offence. At the cost of repetition it may be said that breach of Sections 3 and 4 by itself is not an offence. The agreement was valid when entered into. It was not an offence at that time nor is it an offence even today or even on the date of the coming into force of the Act. As pointed out earlier entering into agreement contrary to the Act by itself is not an offence. The petitioners are not sought to be convicted or even tried for an act of entering into an alliance. The proceedings or the action of the Commission is at the preliminary stage only. It only seeks to look into and enquire into/investigate into the terms of the alliance. If Article 20 is to be applied there has to be trial or prosecution for the act done prior to the coming into force of the Act. There is nothing like that. There is no doubt that the M.R.T.P. Commission had received a complaint under that Act. The said complaint No.172 of 2008 was looked into by the M.R.T.P. Commission. It is clear that the M.R.T.P. Commission had found that since the alliance had not come into effect the mere apprehension cannot be taken into consideration and had therefore left the matter open for the Director General to take up the investigation if any development occurs. It is apparent that the Commission has not decided any issue at all nor has it ordered any investigation. We therefore find that no action whatsoever has been taken by the M.R.T.P. Commission. There could therefore be no impediment in taking any action under the new Act. Even otherwise the provisions of the M.R.T.P. Act and the Competition Act are not identical. Since no action whatsoever is taken or proposed to be taken by the M.R.T.P. Commission there could be no question of the petitioners being subjected to double jeopardy. Further the M.R.T.P. Commission now stands abolished w.e.f. 14th October 2009. There is therefore no question of M.R.T.P. Commission now taking any action against the petitioners. This ground of challenge has no substance at all. The submission that unless and until the Commission first determines the relevant market the relevant geographic market it cannot take any action u/s 4 of the Competition Act. There is no doubt that for coming at a conclusion as to whether a particular group has abused the dominant position or not three things namely; relevant market relevant geographic market and relevant products are to be considered. However for considering the effect of Section 4 it would also be necessary to look into the various other provisions of the Act. It is clear from Section 19 that the Commission can act upon receipt of information and on a reference made to it by the Central or State Government or on its own motion. It is therefore clear that there has to be some information before the Commission about the alleged breaches of Sections 3 and 4. If the Commission receives an information it is supposed under Section 19 to enquire into the complaint received. Under the Code of Criminal Procedure a Police Officer is supposed to look into the complaint and decide whether the information discloses a cognizable offence or not. If upon reading the complaint he finds that it does disclose a cognizable offence he is bound to register the First Information Report and investigate into it. The law is well settled that the court should not stifle the investigation at all except for compelling reason or when F.I.R. does not disclose any offence at all. If the analogy is to be applied here it cannot be said that the information given by respondent no.3 does not disclose any beach nor can it be said that it is a case of lack of inherent jurisdiction to the Commission to investigate. It has a power to enquire and investigate into every complaint received under the Act as is clear from the above provision. We find that it was not necessary for the Commission to first find out the relevant geographic market relevant products market or relevant market. Such things can be found or concluded upon investigation and not necessarily before that. Therefore we find that no writ as sought can be issued and petition should be dismissed. We therefore dismiss the petition.

Summary

Issues Involved:
1. Retrospective effect of the Competition Act, 2002.
2. Jurisdiction of the Competition Commission vis-`a-vis the MRTP Commission.
3. Determination of relevant market by the Competition Commission.
4. Constitutional validity of Sections 3, 4, 19, 27, 42, and 43 of the Competition Act, 2002.
5. Penal nature of the Competition Act, 2002.

Detailed Analysis:

1. Retrospective Effect of the Competition Act, 2002:
The petitioners argued that the Competition Act, 2002 should not have retrospective effect as it contains penal provisions. They contended that since the Act came into force on 20th May 2009, any agreement entered into before that date should be exempt from its purview. The court, however, clarified that while the Act is not retrospective, it covers all existing agreements that are still being acted upon after the Act came into force. The court stated, "The moment the Act comes into force, it brings into its sweep all existing agreements." Therefore, any action taken under such agreements after the Act's commencement would be subject to the new law.

2. Jurisdiction of the Competition Commission vis-`a-vis the MRTP Commission:
The petitioners claimed that the MRTP Commission had already taken cognizance of the matter and decided not to take any action, thereby precluding the Competition Commission from investigating the same issue. The court noted that the MRTP Commission had not taken any conclusive action and had left the matter open for further investigation. Moreover, the MRTP Commission ceased to exist from 14th October 2009, and thus, the Competition Commission had the jurisdiction to investigate the matter. The court stated, "Since no action whatsoever is taken or proposed to be taken by the MRTP Commission, there could be no question of the petitioners being subjected to double jeopardy."

3. Determination of Relevant Market by the Competition Commission:
The petitioners contended that the Competition Commission could not take action under Section 4 of the Act without first determining the relevant market, relevant geographic market, and relevant product market. The court held that the Commission is required to determine these factors during the investigation and not necessarily before it. The court explained, "The investigation would reveal if there is sufficient evidence available to take further action. It is after the report of the Director General that the Commission proceeds to pass order under Section 26(6) either to close the matter forthwith or under clause (7) may order further investigation."

4. Constitutional Validity of Sections 3, 4, 19, 27, 42, and 43 of the Competition Act, 2002:
The petitioners argued that these sections were violative of Article 20 of the Constitution of India, which protects against retrospective penal laws. The court dismissed this argument, stating that the Competition Act is not penal in nature as it does not make entering into an agreement contrary to the provisions of the Act an offence. Instead, it only makes the agreement void and unenforceable. The court clarified, "Strictly speaking, no criminal liability ensues for breach of Section 3 or 4 of the Competition Act."

5. Penal Nature of the Competition Act, 2002:
The petitioners argued that the Act should be considered penal because it prescribes punishment under Section 43. The court disagreed, stating that the Act is not penal as it does not criminalize the act of entering into an agreement itself but penalizes the non-compliance with the Commission's orders. The court noted, "The penalty is provided only with a view to ensure or enforce compliance of the directions of the Commission."

Conclusion:
The court dismissed the petition, holding that the Competition Act, 2002, while not retrospective, applies to existing agreements still being acted upon. The Competition Commission has jurisdiction to investigate the matter despite the previous involvement of the MRTP Commission. The determination of the relevant market is part of the investigation process, and the Act is not penal in nature. The court found no violation of constitutional provisions and upheld the validity of the sections challenged. The petitioners' request for leave to appeal to the Supreme Court was also rejected.