TMI Blog2022 (1) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... referred that aspect to the DG and had decided not to proceed against the State. That should have been the end of the matter so far as the State is concerned. Yet the State, in our view, under a misconception, approached the High Court, possibly in an endeavour to defend one of its officers, respondent No. 2, whose conduct has not been very favourably commented on by the DG. Even if the State felt that these comments of the DG were not sustainable, such an aspect could have been pleaded with the CCI in pursuance of its notice and possibly the matter would have been closed at that stage - It would have been beneficial even to the State to have come to a conclusion one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram has been challenged in the present proceedings by the successful bidders, and to a much lesser extent, by the State of Mizoram. 2. The State of Mizoram issued an Invitation for Expression of Interest (for short EoI ) through respondent No.2, the Director, Institutional Finance and State Lottery (IF SL) on 20.12.2011 inviting bids for the appointment of lottery distributors and selling agents for state lotteries to be organised by the Government of Mizoram in terms of the Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referred to as the Regulation Rules ) framed under the Lotteries (Regulation) Act, 1998 (hereinafter referred to as the Regulation Act ). The EoI was for appointment of lottery distributors/selling agents to organise, promote, conduct, and market the Mizoram State Lottery through both conventional paper type and online system. The EoI specified that the minimum rate fixed by the Government of India is ₹ 5 lakh per draw for Bumper and ₹ 10,000 per draw for others bids less than these rates w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3(3) of the Competition Act, and also caused grave financial loss to the State of Mizoram. 5. Respondent No. 4 also alleged that the State of Mizoram abused its dominant position as administrator of State lotteries, by requiring distributors to furnish exorbitant sums of money towards security, advance payment, and prize pool even before the lotteries were held. This was alleged to be unfair, discriminatory and illegal and effectively restricted the supply of service of lotteries. The consequent allegation against the State was that it violated Section 4 of the Competition Act. The prayer made by respondent No. 4 was that the EoI be quashed and set aside, respondent No.1 be restrained from abusing their dominant position, a restraint be passed from awarding the tender to the selected bidders, and selected bidders be banned from carrying out business in the State of Mizoram. The Legal Position: 6. In order to appreciate the contours of the complaint, it may be appropriate to deal with some of the provisions of the Competition Act. The objective of the Competition Act is set out in the Preamble itself, i.e., to establish a Commission to prevent practices having adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding. [ ] Under the same Chapter, Section 4 prohibits the abuse of dominant position. The relevant portion is extracted hereunder: 4. Abuse of dominant position. [(1) No enterprise or group shall abuse its dominant position.] (2) There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a group],- (a) directly or indirectly, imposes unfair or discriminatory- (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. [ ] 7. Chapter III deals with provisions relating to establishment, Composition, etc. of the CCI while Chapter IV set outs the Duties, Powers and Functions of CCI. Chapter V sets out the Duties of the Director-General. Penalties are provided in Chapter VI. Chapter VIIIA refers to the Establishment of the Appellate Tribunal. 8. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with Section 3(3) of the Competition Act by respondent Nos. 5 6 and other successful bidders. Accordingly, the CCI required the Director General (for short DG ) to conduct an investigation into the matter. However, the CCI opined that no prima facie case was made out against respondent No.1/State of Mizoram as it could not be considered as an enterprise or a group under the Competition Act. Respondent No. 1 s role was to regulate and monitor the business of lotteries in the State of Mizoram in exercise of its powers and functions under the Regulation Act and the Regulation Rules. It was, thus, opined that they have every right to impose financial, technical and other conditions in their bid documents as they deemed fit. The CCI, thus, rejected the complaint of respondent No. 4 under Section 4 of the Competition Act. 11. The DG in pursuance of the said order of the CCI, a report dated 14.01.2013 was submitted on 17.01.2013 whereby it came to the conclusion that respondent Nos. 5 6 along with M/s. Teesta Distributors and M/s. E-Cool Gaming Solutions (P) Ltd. had colluded, formed a cartel, and indulged in bid rigging. Thus, they were in violation of the provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irecting that no final order be passed by the CCI. On the said order being passed, the CCI vide its order dated 11.06.2013, authorised its representative to inform the High Court that it did not intend to pass an order against the State of Mizoram, and to pray that the High Court s injunction against passing a final order be lifted. In any case, that ought to have put the matter to rest. 15. It, thus, does appear to us that the respondent No.1 lent its shoulder to assist the other private parties and respondent No. 6 filed a writ petition, being WP(C) No.76/2013, praying for quashing of the DG report and all proceedings pending before the CCI. Respondent No. 6 sought to raise a plea that they had struck an agreement with respondent No.1 on 22.07.2010 as per which they were formally assured of at least 25% of the total number of draws held per day once lotteries were reopened. An agreement was struck to settle an amount of ₹ 2.89 crore stated to be owed by respondent No.1 to respondent No. 6 and, thus, it was pleaded that the very question of forming a cartel or indulging in bid rigging did not arise. Respondent No. 5 also sought to take advantage of the proceedings initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octrine of res extra commercium. The Competition Act, it was opined, was applicable to legitimate trade and goods, and was promulgated to ensure competition in markets that are res commercium. Thus, lottery activity being in the nature of res extra commercium could not be covered by the Competition Act and consequently the CCI did not have jurisdiction to entertain the complaint of respondent No. 4. The High Court also took note of the stand of the CCI, which found no contravention of Section 4 of the Competition Act by the State of Mizoram and, thus, there was no question of any further proceedings being allowed by the CCI against the State of Mizoram. 20. We may place at this stage itself our caveat to the manner in which the High Court proceeded. On the statement of the CCI indicating its intent not to proceed against the State of Mizoram, that petition could have been put to rest. In fact, even earlier there was no intent to take out any proceedings against the State of Mizoram and only some observations had been made against respondent No.2 in the manner in which they proceeded to carry out the allotment pursuant to the EoI. The lis really was between the private parties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was concert and collusion thereby forming a cartel. Whether a particular agreement would have an appreciable adverse effect on competition within the relevant market in India was, thus, held to be within the exclusive domain of the CCI. 24. Learned senior counsel referred to us the definition of Service under Section 2(u) of the Competition Act, which reads as under: 2. Definitions. In this Act, unless the context otherwise requires,- xxxx xxxx xxxx xxxx (u) service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising; It was, thus, urged that the expression service would mean service of any description which is made available to potential users and includes the provision of services in connection with business of any industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be said to come within the purview of such a doctrine (State of Punjab v. Devans Modern Breweries (2004) 11 SCC 26 ). 26. Lastly, it was urged that the High Court ought not to have entertained a petition under Article 226/227 of the Constitution of India as an order passed under Section 26(1) of the Competition Act was in the nature of an administrative direction. There were no adverse civil consequences. The proceedings were akin to a show cause notice and even the DG s report did not amount to a final decision. The respondents were also stated to have the alternative efficacious remedy of an appeal under Section 53B of the Competition Act whereby it could approach the appellate tribunal aggrieved by any decision or direction or order inter alia under sub-section (2) of Section 26 of the Competition Act. The commission is expected to form an opinion about the existence of a prima facie case for contravention of certain provisions of the Competition Act and then passes a direction for the DG to cause an investigation into the matter. Post the report of the DG it can proceed further or close the proceedings. (Competition Commission of India v. Steel Authority of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxx xxxx xxxx xxxx (i) goods means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes- (A) products manufactured, processed or mined; (B) debentures, stocks and shares after allotment; (C) in relation to goods supplied, distributed or controlled in India, goods imported into India; 31. Section 2(7) of the Sale of Goods Act specifically excludes actionable claims from the ambit of goods, which reads as under: 2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,- xxxx xxxx xxxx xxxx (7) goods means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; 32. A lottery ticket has been held to be only an actionable claim (Sunrise Associates v. Government of NCT of Delhi (2006) 5 SCC 603 ) and was, thus held to not be a good. Where an actionable claim was sought to be included within the definition of goods , it was specifically so done. For example, debentures are specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice and possibly the matter would have been closed at that stage. In fact, the CCI had opined, both before and after the filing of the writ petition, that it was not proceeding against respondent No.1/State under Section 4 of the Competition Act. The aforesaid gave an opportunity to respondent Nos. 5 6 also to approach the Court and interdict the proceedings which ought to have been concluded a long time ago. It would, in our view, have been beneficial even to the State to have come to a conclusion one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. 38. We are in agreement with the line of arguments advanced by Mr. Rajshekhar Rao, learned senior counsel for the CCI where he has succinctly sought to point out that the concern of the CCI was not at all with the carrying out, regulation or prohibition of the lottery business as was governed by the Regulation Act. Rather, the concern was limited to the role assigned to the CCI under the Competition Act, and in the context of the EoI was limited to examining any perceived bid rigging in the tendering process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1) of Section 3 and sub- section (1) of Section 4 of the Competition Act. The CCI found out a prima facie case for investigation by the DG under Section 3(1) of the Competition Act, the DG opined adversely, and the CCI issued notice giving an opportunity to the affected parties to place their stand before it. This process ought to have been permitted to conclude with the right available to the affected parties to avail of the appellate remedy under Section 53B of the Competition Act. Conclusion: 43. We, thus, set aside the impugned judgment of the High Court and direct that the proceedings in WP(C) No. 24/2013 filed by respondent No.1 would stand closed in view of the statement made on behalf of the CCI before the High Court on 11.06.2013 and the proceedings against the other parties would continue. Since the State Government has already volunteered in the present proceedings to cooperate, we are sure a proper sequitur to the investigation would follow. WP(C) No. 76/2013 and WP(C) No. 90/2013 filed by the private parties would stand dismissed. We are conscious of the fact that much time has passed but then the material forming basis of the investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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