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2019 (9) TMI 568

..... stigate the matter i.e. the allegations “made in information or reference, as the case may be”, together with all evidence, documents, statements or analysis collected during investigation. The investigation has to be a comprehensive one. The DG may not, in fact, be able to anticipate what information may emerge during such investigation. Merely because the information that emerges does not pertain to the specific subject matter which the DG has been asked to investigate, would not constrain the DG from examining such information as well if it points to violation of some other provisions of the Act. Indeed, the directions given by the CCI to the DG under Section 26 (1) of the Act is only to ‘trigger’ investigation. In the present case, the Court finds that while the information with the CCI did pertain to the alleged violation by GIL and others under Section 3(3) (a) and (b) of the Act, the direction given to the DG was to investigate ‘the matter’, and this enabled the DG to examine violations not only of under Section 3 of the Act, but any other violation that may have come to his notice while undertaking the investigation. An order of the CCI u .....

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..... abused its dominant position, in terms of Section 4 of the Competition Act, 2002 ( Act ). 1.3 The learned Single Judge has, in the impugned judgment, held that inasmuch as the direction issued by the CCI to the DG was to investigate violations of Section 3(3) (a), (b) and (c) of the Act, pertaining to anticompetitive agreements, by manufacturers of Man Made Fibre ( MMF ), including GIL, the DG could not have investigated into any violation by GIL of Section 4 of the Act which pertained to abuse of dominant position. The learned Single Judge clarified that CCI would be entitled to treat the aforesaid part of the report of the DG as information under Section 19 of the Act and proceed accordingly if the CCI was of the opinion that there existed a prima facie case of contravention by GIL of Section 4 of the Act. 1.4 In the judgment that follows, this Court reverses the judgment of the learned Single Judge and holds that the DG was within his powers in terms of Section 26 (1) of the Act read with Regulations 18, 20 and 41 of the CCI (General) Regulations 2009 (CCI Regulations), to submit a report regarding the violation of Section 4 of the Act by GIL, although the direction issued by t .....

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..... arket in India which enables it to: (i) Operate independently of competitive forces prevailing in the relevant market; or (ii) Affect its competitors or consumers or the relevant market in its favour. 7. It is thus seen that the focus of Section 4 is on a particular enterprise or group. Enterprise is defined under Section 2 (h) of the Act to mean a person or a department of the government engaged in any activity relating to production, storage, supply, distribution, acquisition or control of articles or goods or the provision of services of any kind. Under Section 2 (l) of the Act, a person includes a company. It is thus seen that the scope of enquiry under Section 4 of the Act would be different from the scope under Section 3 of the Act. However, it is entirely possible that, as has happened in the present case, while investigating activities attracting Section 3 of the Act, the DG may come across information that prima facie reveals activities attracting Section 4 of the Act. CCI s directions under Section 26 (1) of the Act 8. The report dated 26th February, 2013 of the DG was pursuant to the following directions issued by the CCI on 22nd June, 2011: 11. On thorough Perusal of th .....

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..... nd differential discounts. for the sale of VSF, by imposing unfair conditions relating to subsequent 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 condition that a minimum of 35% 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 conditions 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 y .....

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..... ons ), the CCI held that the DG had to submit a report on each of the allegations made in the information or the reference , as the case may. It was further held as under: 10. The scope of investigation to be made by the DG cannot be limited by the prima facie opinion expressed by the Commission. Neither, the DG is bound by the views given by the Commission. While the Commission may have found a matter prima facie showing violation of the provisions of the Act, DG may come to a contrary conclusion. Similarly, the Commission may form a view (prima facie) on the basis of facts available to it regarding violation of one or the other provisions of the Competition Act. DG on investigation may find the violations in respect of different provisions of the Competition Act. 14. The CCI further held that the directions given to the DG under Section 26(1) of the Act are only meant to initiate the process of investigation and the purpose of Section 26(1) was neither to scuttle nor to limit the investigation. As regards the submission of GIL that it was never put to notice by the DG about the potential violation of Section 4 of the Act being investigated, and that it had denied an opportunity t .....

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..... Regulations, to permit it to lead evidence to satisfy the DG that no contravention of Section 4 of the Act had been committed by it. Since the part of the information provided to the DG during the course of investigation alleging contravention by GIL of Section 4 of the Act was not available to the CCI, it was not the subject matter of the directions issued by the CCI to the DG. Consequently, GIL had no occasion to make an application to the DG under Regulation 41(4) and (5) of the CCI Regulations. (v) Although there was no power given to the CCI under the Act to quash or set aside the report of the DG, if the DG carried out an investigation into an information, which was not considered by the CCI, while forming its opinion under Section 26 (1) of the Act, CCI was entitled to reject that part of the report, which pertained to such investigation. (vi) The report of the DG, to the extent that it reported a contravention of Section 4 of the Act by GIL, could not be forwarded to GIL under Section 26 (4) of the Act, nor could the CCI hold a further enquiry into it under Section 26 (8) of the Act, or proceed to pass an order on its basis under Section 27 of the Act. However, CCI in its d .....

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..... iolation of the Act. Reliance was placed on the observations of the Supreme Court in Competition Commission of India v Steel Authority of India Limited (supra). (iv) In the present case, it could not be said that the DG exceeded his jurisdiction in examining the conduct of GIL for violation of Section 4 of the Act. The information provided in the case on file with the CCI was a comprehensive one. It sought an enquiry against the MMF Industry and Association of MMF Industry in India by referring inter alia to Section 19 (4) and (6) of the Act, which specifically dealt with abuse of dominance provision under Section 4 of the Act. The information highlighted that GIL manufactured VSFs. The source of such information was a Tecoya Trend article dated 11th May, 2011, which stated that GIL had reported a 30% hike in VSF price realisation . All of this was forwarded to DG for further investigation. (v) A correct interpretation of Regulation 18 (1) and Regulation 20 (4) of the CCI Regulations would acknowledge that the DG has to attach with the investigation report all the evidence and documents, statements, and analysis collected during investigation, which might not be limited to the prim .....

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..... f Section 26 (1) of the Act with Regulation 20 (4) of the CCI Regulations, revealed that the DG cannot initiate any suo moto investigation, based on the information that was never placed before the CCI, in the first instance. If the DG was held not be bound by the prima facie view of the CCI, then the DG would be virtually on a higher pedestal than the CCI itself , and this would be contrary to the legislative intent. (vi) To the extent that the report of the DG found GIL to be in violation of Section 4 of the Act, it would be violative of principles of natural justice, as GIL was never put to notice during investigation that the DG was examining such violations. Had it been given such an opportunity, GIL would have made submissions on facts, law and economics, regarding market definition, dominance and abuse of a dominant position, which formed the subject matter of Section 4 of the Act. Thus, the report of the DG to the extent that contained findings of alleged contravention of Section 4 of the Act by GIL was null and void, and cannot be used or relied for any purpose. Reliance is placed on the decision in Institute of Chartered Accountants v. L.K. Ratna, (1986) 4 SCC 537 and Com .....

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..... eeks to regulate combinations under Sections 5 and 6 of the Act. 25. Under Section 18 of the Act, the CCI is tasked with the duty of eliminating practices that have an adverse effect on competition and to promote and sustain competition, protect the interest of consumers, and ensure freedom of trade carried on by other participants in the markets in India . Section 19 of the Act deals with inquiry by the CCI into certain agreements and dominant position of enterprise. While Section 19 (3) lists out the factors that will be examined by the CCI while determining whether an agreement has an appreciable adverse effect on competition under Section 3 of the Act, Section 19 (4) of the Act lists out those factors which would be kept in view when the CCI enquires into whether an enterprise enjoys a dominant position or not under Section 4 of the Act. 26. Section 26 of the Act sets out the procedure for an enquiry under Section 19 of the Act and it reads as under: 26. Procedure for inquiry on complaints under section 19.- (1) On receipt of a complaint or a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information, under sectio .....

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..... y of India Limited (supra). It was observed in paragraphs 37 to 39 of the said decision as under: 37. As already noticed, in exercise of its powers, the Commission is expected to form its opinion as to the existence of a prima facie case for contravention of certain provisions of the Act and then pass a direction to the Director General to cause an investigation into the matter. These proceedings are initiated by the intimation or reference received by the Commission in any of the manners specified under Section 19 of the Act. At the very threshold, the Commission is to exercise its powers in passing the direction for investigation; or where it finds that there exists no prima facie case justifying passing of such a direction to the Director General, it can close the matter and/or pass such orders as it may deem fit and proper. In other words, the order passed by the Commission under Section 26(2) is a final order as it puts an end to the proceedings initiated upon receiving the information in one of the specified modes. This order has been specifically made appealable under Section 53A of the Act. 38. In contradistinction, the direction under Section 26(1) after formation of a pri .....

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..... ignated authority to issue a public notice of the decision to initiate investigation. In other words, notice prior to initiation of investigation is specifically provided for under the Anti-Dumping Rules, whereas, it is not so under the provisions of Section 26(1) of the Act. 78. Cumulative reading of these provisions, in conjunction with the scheme of the Act and the object sought to be achieved, suggests that it will not be in consonance with the settled rules of interpretation that a statutory notice or an absolute right to claim notice and hearing can be read into the provisions of Section 26(1) of the Act. Discretion to invite, has been vested in the Commission, by virtue of the Regulations, which must be construed in their plain language and without giving it undue expansion. 79. It is difficult to state as an absolute proposition of law that in all cases, at all stages and in all events the right to notice and hearing is a mandatory requirement of principles of natural justice. Furthermore, that non- compliance thereof, would always result in violation of fundamental requirements vitiating the entire proceedings. Different laws have provided for exclusion of principles of na .....

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..... ry' has not been defined in the Act, however, Regulation 18(2) explains what is inquiry'. Inquiry' shall be deemed to have commenced when direction to the Director General is issued to conduct investigation in terms of Regulation 18(2). In other words, the law shall presume that an inquiry' is commenced when the Commission, in exercise of its powers under Section 26(1) of the Act, issues a direction to the Director General. Once the Regulations have explained inquiry' it will not be permissible to give meaning to this expression contrary to the statutory explanation. 116. Inquiry and investigation are quite distinguishable, as is clear from various provisions of the Act as well as the scheme framed thereunder. The Director General is expected to conduct an investigation only in terms of the directive of the Commission and thereafter, inquiry shall be deemed to have commenced, which continues with the submission of the report by the Director General, unlike the investigation under the MRTP Act, 1969, where the Director General can initiate investigation suo moto. Then the Commission has to consider such report as well as consider the objections and submissions ma .....

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..... which the DG has been asked to investigate, would not constrain the DG from examining such information as well if it points to violation of some other provisions of the Act. Indeed, the directions given by the CCI to the DG under Section 26 (1) of the Act is only to trigger investigation. 29.1 In Excel Crop Care Limited v. Competitive Commission of India (supra), the Supreme Court further explained the powers of the DG in broad terms. In that case, an enquiry was initiated by the CCI on the basis of a letter/complaint dated 4th February, 2011 sent by the Chairman and Managing Director of FCI to the CCI to the effect that four manufacturers of Aluminium Phosphide Tablets ( APT ) had formed a cartel by entering into anti-competitive agreements amongst themselves and on that basis had been submitting bids for the previous eight years by quoting identical rates in the tenders invited by the FCI for the purchase of APT. 29.2 In the report of the DG, issued pursuant to the directions issued by the CCI under Section 26 (1) of the Act, it was inter alia found that right from the year 2002 up to 2009, all the four parties used to quote identical rates, except in the year 2007. In 2008, all .....

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..... specified by the Commission. The argument of the parties is that if on the relevant date when the Commission passed the order, even the tender notice was not floated, then there was no question of Direction General going into the investigation of that tender. It must be noted at this juncture that Under Section 18, the Commission has the duty to eliminate practices having adverse effect on competition and to promote and sustain competition. It is also required to protect the interests of the consumers. There can be no dispute about the proposition that the Director General on his own cannot act and unlike the Commission, the Director General has no suo-moto power to investigate. That is clear from the language of Section 41 also, 28 which suggests that when directed by the Commission, the Director General is to assist the Commission in investigating into any contravention of the provisions of the Act. Our attention was also invited to the Regulations and more particularly to Regulation 20, which pertains to the investigation by the Director General. Sub-Regulation (4) of Section 20 was pressed into service by all the learned Counsel, which is in the following term: 20(4). The repo .....

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..... nough to hold, that the Director General was empowered and duty bound to look into all the facts till the investigation was completed. If in the course of investigation, it came to the light that the parties had boycotted the tender in 2011 with preconcerted agreement, there was no question of the DG not going into it. We must view this on the background that when the information was led, the Commission had material only to form a prima facie view. The said prima-facie view could not restrict the Director General, if he was duty bound to carry out a comprehensive investigation in keeping with the direction by CCI. In fact, the DG has also taken into 30 account the tenders by some other corporations floated in 2010 and 2011 and we have already held that the DG did nothing wrong in that. In our opinion, therefore, the argument fails and must be rejected. We entirely agree with the aforesaid view taken by the COMPAT. 45. If the contention of the Appellants is accepted, it would render the entire purpose of investigation nugatory. The entire purpose of such an investigation is to cover all necessary facts and evidence in order to see as to whether there are any anticompetitive practice .....

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..... me to his notice while undertaking the investigation. 31. It must be noticed here that when the learned Single Judge passed the impugned judgment, he did not have the benefit of the decision in Excel Crop Care Limited v. Competitive Commission of India (supra), and this Court is in no doubt that if such judgment was available at that point in time, the learned Single Judge would not have taken the view that he has taken in the impugned judgment. 32.1 The Division Bench of this Court in Cadila Healthcare Limited v. Competition Commission of India (supra) was called upon likewise to examine whether the DG in that case had exceeded its powers in finding a violation of the Act by Cadila which was not even named in the original complaint filed by the CCI. 32.2 There, the CCI took cognizance of information filed by the Reliance Medical Agency ( RMA ) complaining of denial of supply of medicines by certain pharmaceutical companies. Cadila s case was that there had to be separate orders under Sections 26 (1) of the Act by the CCI authorizing the DG to investigate Cadila, and that, in the absence of such order, the DG could not have proceeded against Cadila on the strength of a general orde .....

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..... DG's powers in broad terms: (if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report....If the investigation process is to be restricted in the manner projected by the Appellants, it would defeat the very purpose of the Act which is to prevent practices having appreciable adverse effect on the competition). The trigger for assumption of jurisdiction of the CCI is receipt of complaint or information, (when the Commission is of the opinion that there exists a prima facie case exists (per Section 26 (1)). The succeeding order is administrative (per SAIL); however, that order should disclose application of mind and should be reasoned (per SAIL). Up to this stage, with that enunciation of law, no doubt arguably Cadila could have said that absent a specific order as regards its role, by CCI, the DG could not have inquired into its conduct. However, with Excel Crop Care specifically dealing with the question of alleged "su .....

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..... e Commission of India (supra) makes it abundantly clear that while the initial complaint may be on a limited aspect, the DG can investigate into other violations that emerged during the investigation of such complaint. For instance, in Excel Crop Care Limited v. Competitive Commission of India (supra), the validity of the DG s report which pointed to the existence of a cartel in relation to a tender which was not even mentioned in the first complaint was upheld by the Supreme Court. Likewise, a party which was not even named in the complaint could be investigated into by the DG, as held by this Court in Cadila Healthcare Limited v. Competition Commission of India (supra). 34. The aforementioned decisions clarify that an order of the CCI under Section 26 (1) of the Act triggers investigation by the DG, and that the powers of the DG are not necessarily circumscribed to examine only such matters that formed the subject matter of the original complaint. No doubt, the language of the order passed by the CCI issuing directions to the DG will also have a bearing on the scope of such investigation by the DG. In the present case, however, the language of the order passed by the CCI on 26th .....

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..... the CCI, at the stage of the enquiry, following the report of the DG. 39. No doubt under Regulation 41 of the CCI Regulations, both the CCI and the DG can determine the manner in which evidence may be adduced in the proceedings before them, and the DG also has the powers to call for information and examine witnesses and documents under Regulation 45 of the CCI Regulations, it is not mandatory that in every such investigation the DG has to necessarily exercise all those powers. The extent of the opportunity to be given to a party, against whom the investigation is in progress, will depend on the facts and circumstances of the case, and on the kind of information and evidence chanced upon by the DG during the course of its investigation. Indeed, it is not mandatory that in every such case, even at the stage of investigation, the party will have to be given opportunity to adduce evidence, cross-examine persons who may have given evidence adverse to them, in the course of investigation. That is not the position that emerges on a collective reading of Section 26 of the Act read with Regulations 20, 41 and 45 of the CCI Regulations. 40. The admitted position is that GIL did make its writ .....

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