TMI Blog2014 (1) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of Section 155 of the Code of Criminal Procedure mandates that no police officer shall investigate a non-cognizable case, without the order of the Magistrate having power to try such case or commit the case for trial. There is no provision in the Code of Criminal Procedure for an accused to apply to the investigating officer to permit him to examine his witnesses. Under the scheme of the Code, a police officer investigating a criminal case cannot allow cross-examination of witness, during the course of investigation conducted by him. On the other hand, clause (4) of the Regulation 41 expressly permits the Director General to record evidence and the power conferred upon him includes the power to record evidence of the enterprise against whom the information is being investigated by him. Unlike the provisions of the Code of Criminal Procedure, clause (5) of Regulation 41 empowers the Director General to allow cross-examination of a witness by the opposite party during the course of investigation conducted by him. Therefore, the scheme of investigation by a police officer, in terms of the provisions contained in the Code of Criminal Procedure and investigation by the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nash Sharma, and Ms. Monica, Advs. for CCI and Mr. S.P. Khatana, Director (Law) JUDGEMENT V.K.JAIN, J. An Information was received by the Competition Commission of India (hereinafter referred to as the Commission‟) that the manufacturers of Man Made Fibres (for short MMF‟) i.e. Polyester Staple Fibre (PSF), Acrylic Staple Fibre (ASF), Viscose Staple Fibre (VSF) Nylon Staple Fibre (NSF) had imposed several restrictions on Indian Textile Industry, which are their customers for purchase of MMF, and such restrictions constitute anti- competitive actions. The Commission, vide order dated 22.6.2011, on consideration of the information submitted by the informant, formed a prima facie opinion that there existed a case to direct the Director General to cause an investigation into the matter. The Director General was accordingly instructed to conduct an investigation into the matter. The allegations against MMF manufacturers, who were alleged to be contravening the provisions of Section 3(3)(a)(b)(c) of the Competition Act, 2002 (hereinafter referred to as the Act‟) in a nutshell were as follows: (a) Price fixation of MMF products in the domestic ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to loyalty discount, continuity discount, quantity discount and special discount of the GIL were discriminatory from buyer to buyer; 7. Limiting supplies to the domestic buyers by way of exporting more quantities and at times by cutting down the production; 8. Limiting quantity of specific quality of fibre (Kharach fibre), when there is a requirement of yarn made out of that fibre; 9. Not entertaining any complaint with respect to quality related issues emanating out of their products. If there was any loss of productivity or quality during spinning due to the poor or inferior quality of fibres supplied by GIL, they will not provide any financial compensation for the same; 10. GIL was selling fibre at commercial/invoice weight (13% moisture) whereas subsequent textile value chain does not entertain such a commercial invoicing. The payment of additional moisture becomes the cost for the spinners. Payment of all the fibre discounts given by GIL to the spinners was calculated on net weight of yarn produced by us and not on commercial weight of fibre. Therefore, the waste generated during the process of spinning, spinners don‟t get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt production and sale of yarn (either domestic or export) by virtue of its dominance and violated the provisions of section 4(2)(a) of the Act. 2. The GIL provides segmental discounts for export or domestic consumption on the conditions that a minimum of 25% content of VSF is necessary in yarn. In case the content of VSF is less than that, no discounts are offered. GIL obtains proof of production/export before providing discounts. Customers have no choice but to manufacture the yarn in the given manner to obtain such discount. Otherwise they have to pay higher prices for the same VSF. GIL being dominant in the relevant market have imposed such unfair condition and violated the provisions of section 4(2)(a) of the Act. 3. A continuity discount/rebate is given by GIL with a condition that the yarn manufacturer shall not purchase VSF from anybody (including imports) other than GIL. The policy of GIL in this regard is not transparent and through such conditions, the GIL prevents its customer from importing VSF. Putting such unfair conditions and limiting or restricting the market for yarn manufacturers for imports of VSF is violative of the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be seen from its Objects and Reasons, the Competition Act seeks to ensure fair competition in India, by prohibiting trade practices which cause appreciable adverse effect on competitions, besides curbing negative aspects of competition. The Act provides for investigation by the Director General for the assistance of the Commission, but the Director General can act only if so directed by the Commission and does not have the suo moto powers for initiating investigation. The Act has also repealed the Monopolistic and Restrictive Trade Practices Act, 1969. Section 3(1) of the Act prohibits agreements in respect of production, supply, distribution, shortage, acquisition or control of goods or provisions of services which cause or are likely to cause appreciable adverse effect on competition within India whereas section 4(1) of the Act prohibits use of its dominant position by an enterprise. Sub section (3) of Section 3 provides that the agreements of the nature specified therein shall be presumed to have an appreciable adverse effect on competition, whereas Sub section (4) of the said section provides that the agreements in respect of production, supply, distribution, shortage, sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Act or otherwise. In case the Director General recommends that no contravention of the provisions of the Act is made out, the Commission is required to invite objections or suggestions, on the said report, from the Central Government, or the State Government or the Statutory Authority of the parties concerned, as the case may be. Such report then is required to be considered by the Commission in the light of the objections or suggestions received by it. If the Commission, on consideration of the matter in the light of the objections or suggestions, if any, received by it, agrees with him, the matter is required to be closed forthwith. However, the recommendation made by the Director General in this regard is not binding on the Commission and after considering the said report in the light of the objections or suggestions received by it if the Commission is of the opinion that further investigation is required, it may direct such further investigation in the matter by the Director General. The Commission, instead of directing further investigation by Director General, may also cause further inquiry to be made in the matter or it may itself hold further inquiry into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the third option available to the Commission is to accept the report without directing any further inquiry and proceed to pass orders in accordance with the provisions of Section 27 of the Act. 9. Regulation 18 (2) of the Competition Commission of India (General) Regulations, 2009 (for short the Regulations‟) provides that a direction of investigation to the Director General shall be deemed to be the commencement of an Inquiry under Section 26 of the Act. Regulation 20(1) requires the Secretary to send a copy of the information or the reference, as the case may be, with all other documents or material or affidavit or statements which have been filed either along with the said information or reference or at the time of preliminary conference to the Director General, while conveying to him, the directions of the Commission under Regulation 18. Clause (4) of the said Regulation requires the Director General to give report containing his findings on each of the allegations made in the information or the reference as the case may be. (emphasis supplied) Clause (1) of Regulation 41 empowers the Commission and the Director General to determine the manner in which evidence may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation based upon an information which was not available to the Commission. It would be appropriate to note here that though MRTP Act, 1969 empowered the Director General to exercise suo motu power of investigation, the said power has been expressly denied to him under the Competition Act. In clause (5) of the State of Objects and Reasons for enacting the Competition Act, it is clearly stated that "the Director General would be able to act only if so directed by the Commission, but will not have any suo motu power for initiating investigation". If the Director General, is directed by the Commission to cause an investigation to be made into information X‟ and he, besides investigating information X‟ also investigates information Y‟, which was not considered by the Commission, while directing investigation by him, that would amount to conferring suo motu, power of investigation upon the Director General which would clearly contravene the scheme of the Act, as far as investigation into complaint Y‟ is concerned. In Bhikhubhai Vithlabhai Patel vs. State of Gujarat (2008) 4 SCC 144, Gujarat Town Planning and Urban Development Act, 1976, entitled the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s findings on each of the allegations made in the information or the reference as the case may be. This is yet another indicator that the report of the Director General is to be confined to the allegations made in the information or the reference received by the Commission and he is not competent to travel outside the said information or reference. 12. It was contended by the learned counsel for the Commission that in terms of sub-section (8) of Section 26, the Commission would inquire further into the matter and during such an inquiry, the petitioner would get ample opportunity to place its case before the Commission and satisfy it that no contravention of Section 4 of the Act is made out against it and, therefore, the Commission should not be precluded from considering the report of the Director General, to the extent he has reported contravention of the provisions of Section 4 of the Act. I, however, find no merit in this contention. Under the scheme of the Act, the enterprise against whom the information is given to the Commission is entitled to defend itself; firstly before the Director General, during the course of investigation by him and in case Director General is not sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention of the provisions of the Act is submitted by the Director General, will get no opportunity to lead evidence and to cross-examine the witnesses of the opposite party, even before the Commission. In any case, it would be contrary to the scheme of the Act and ultra vires the powers of the Director General if he carries out investigation into an information which, in the first instance, was not considered by the Commission, while forming its opinion with respect to existence of a prima facie case of contravention of the provisions of the Act, by an enterprise. In Institute of Chartered Accountants vs. L.K. Ratna, (1986) 4 SCC 537, the appellant before the Apex Court contended that since Section 22A of Chartered Accountants Act, 1949 provides an appeal to the High Court against an order of the Council imposing penalty and there was no limitation imposed on the scope of the appeal, any insufficiency in grant of hearing before the Council could be cured by resort to such appeal. Rejecting the contention, the Apex Court referred to the following observations made in Sir William Wade‟s work on "Administrative Law"5th Edn.: "If natural justice is violated at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l issued a notice to Kingfisher Airlines Limited calling for certain information under Section 11 of the MRTP Act. This was followed by exchange of letters between the Director General of Investigation and the petitioner. Respondent No. 3 in the petition, referring to newspaper reports in respect of the market shares and the strength of fleet etc. of the aforesaid airlines provided certain information to the Commission which formed an opinion that there existed a prima facie case and referred the matter to the Director General for investigation. Being aggrieved, the petitioners filed the aforesaid writ petition contending inter alia that since MRTP Commission was already seized of the matter, the cognizance taken by the Commission was without jurisdiction. This was also the contention of the petitioners that Section 3 and 4 of the Act cannot have retrospective effect, since the Act contained penal provisions. CCI, however, contended that the petition was premature since only an enquiry had been ordered and no action had been taken against the petitioners. It was also submitted by the Commission that a final order can be passed by it only after the conclusion of the investigation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the complaint and then order an investigation. The investigation, the purpose of which, would be to collect evidence and would disclose if the group abused its dominant position. Therefore, it is clear that 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. If the report discloses any breach, the Commission is supposed to enquire into such breaches. This enquiry report is again considered under Section 27 and then an action follows. It is, therefore, clear to us that the question as to whether there is a breach of provisions of Sections 3 and 4 is finally considered under Sections 19, 26 and 27(8). Sections 19 and 26(1) speak of existence of prima facie case only. Therefore, at the prima facie stage, it is never concluded whether there is breach or otherwise. Therefore, at preliminary stage, it is only to be seen if there is a reason to believe that there is a breach of Sections 3 and 4. The law is well settled that the court should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment which may be caused to the petitioner on account of investigation of FIR or complaint. Such a course will result in miscarriage of justice and would encourage those accused of committing crimes to repeat the same. Although the decision is basically on criminal law, the ratio can be squarely applied. If the said ratio is to be applied, the enquiry / investigation cannot be stifled at all. We have not made reference to other decisions cited, since we find that the decisions referred to in this judgment were enough to arrive at a conclusion. 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. 24. In the circumstances, we find that no writ as sought can be issued and petition should be dismissed. We, therefore, dismiss the petition with no order as to costs. Rule discharged." In my view, an investigation by the Director General, pursuant to the Commission forming an opinion that prima facie there exists a contravention of the provisions of the Act and directing investigation by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng contravention of the provisions of Section 4 of the Act by the petitioner, it would be well within the power of the Commission to direct the Director General to cause an investigation to be made into the said information. If a police officer, while carrying out investigation into a cognizable offence, receives information or evidence relating to Commission of yet another offence, whether that be cognizable or non-cognizable, he is competent to carry out investigation into the said offence as well, the reason being that investigation in a cognizable case can be carried out without the order of the Magistrate and as provided in sub-section (4) of Section 155, where the case relates to two or more offences, of which at least one is cognizable, the case shall be deemed to be a cognizable one, notwithstanding that the other offences are non- cognizable. The Director General, on the other hand, does not have any suo motu power of investigation and, therefore, cannot be treated at par with a police officer, investigating a cognizable case. In Pratibha Finvest P. Ltd. (supra), this Court interpreting the provisions of Section 147 of the Income-tax Act, inter alia, observed as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amining that part of the report, is of the opinion that there exists a prima facie case of contravention of the provisions of the Act, it has to direct the Director General to cause an investigation to be made into that opinion. In the case before this Court, admittedly, the information alleging abuse of its monopolistic position by the petitioner and thereby contravention of the provisions of Section 4 of the Act, was not considered by the Commission when it recorded a prima facie view that there existed a case to direct the Director General to cause an investigation into the matter. Therefore, the report of the Director General, to the extent he reported contravention of the provisions of Section 4 of the Act by the petitioner by abusing its dominant position as the manufacturer of Viscose Staple Fibre, cannot be forwarded to the parties in terms of sub- section (4) of Section 26 nor can the Commission hold further inquiry into it in terms of sub-section (8) of Section 26 or proceed to pass order on its basis in terms of Section 27 of the Act. The Commission may, however, is at liberty to treat the aforesaid part of the report of the Director General as information under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor General during the course of investigation and then before the Commission during the course of inquiry, if any, conducted by the Commission, whereas the petitioner before this Court got no opportunity to defend itself before the Director General as far as the information alleging contravention of the provisions of Section 4 of the Act is concerned. 18. For the reasons stated hereinabove, the writ petition is disposed of with the direction that the report of the Director General, to the extent he has reported contravention of the provisions of Section 4 of the Act by the petitioner by misuse of its dominant position as a VSF manufacturer, shall not be subjected to the procedure prescribed in sub-section (8) of Section 26 nor shall the Commission be entitled to pass order on the said report, in terms of the provisions of Section 27 of the Act. The Commission, however, shall be entitled to treat the aforesaid part of the report of the Director General as an information in terms of Section 19 of the Act and proceed accordingly in terms of the provisions of the Act, if the Commission on consideration of the aforesaid part of the report of the Director General, is of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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