TMI Blog2021 (6) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - WRIT PETITION No.3363 OF 2020 C/W WRIT PETITION No.4334 OF 2020 (GM-RES) IN W.P. NO.3363 OF 2020 - - - Dated:- 11-6-2021 - THE HON BLE MR. JUSTICE P.S. DINESH KUMAR FOR THE PETITIONER : SHRI. GOPAL SUBRAMANIUM, SENIOR ADVOCATE AND SHRI. SAJAN POOVAYYA, SENIOR ADVOCATE FOR SHRI. NIKHIL JOY, ADVOCATE FOR THE RESPONDENTS : SMT. MADHAVI DIWAN, Addl. SG A/W SHRI. B.N. HARISHA, ADVOCATE FOR R1; SHRI. S. GAUTAMADITYA AND SHRI. ABIR ROY, ADVOCATES FOR R2 R4; SHRI. UDAYA HOLL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie view. (g) The impugned order is not a reasoned order as there is no analysis with regard to Appreciable Adverse Effect on Competition ['AAEC' for short] ; (h) The Commission has not formed any prima facie opinion with regard to contravention of any provision. (i) The jurisdiction of CCI is barred on account of pending investigation by the Enforcement Directorate; and (j) The impugned order is abuse of process of law and would cause grave hardship to the petitioners. 6. Amplifying the grounds urged in support of writ petitions, Shri. Gopal Subramanium, learned Senior Advocate has submitted that: The Competition Act is to foster the competition in the Country. An Online Market place, in fact, promotes Competition and cannot be treated as anticompetitive, unless, there is clear and cogent evidence to that effect. This factor has not been considered by the Commission; Commission s main objects are, to prevent practices having adverse effect on Competition, to promote and sustain Competition in the markets, to protect the interests of consumers and to ensure freedom of trade. The Commission has not considered these aspects. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace and it must cause or likely to cause AAEC; The Commission must form a prima facie opinion before ordering investigation; No agreement is placed on record. Therefore, the Commission did not have jurisdictional facts while considering the information. It has not recorded its prima facie opinion. Therefore, the impugned order is unsustainable in law; The manufacturers of products sell them on Flipkart s online market place. If a seller chooses to sell exclusively on Flipkart s market place, it is his/her prerogative and Flipkart cannot be held responsible; 8. The Competition Commission of India has contended in the Statement of objections as follows: An order made under Section 26(1) of the Act by the Commission is an Administrative Order directing one of its wings to conduct Departmental proceedings. It does not determine any right or obligation of parties nor entail any civil consequences. Petitioners have not challenged the inherent jurisdiction of the Commission to direct investigation; e-Commerce is not regulated by any specific legislation or by a sectoral regulator; Malafides or exercise of jurisdiction in unrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners' assistance at the preliminary stage. In AIOVA's case, Commission was dealing with allegations of abuse of dominance under Section 4 of the Act. In such a case, to assess the dominance of an entity, competitor s behaviour in a given case may be relevant. In the case on hand, such opportunity is not warranted on distinct facts. Further, Commission's order in AIOVA has been set-aside by NCLAT and matter has been remitted to the Commission with a direction to the Director General to cause investigation; Information under Section 19(1)(a) of the Act, is one of the three possible 'starting points' for an enquiry. Commission can also suo moto direct investigation. In the light of investigation mechanism provided under the Act, the contents of information will become secondary after the investigation report is filed; So far as Commission is concerned, the aspect whether informant has acted independently or at the instance of CAIT, is wholly irrelevant. The Commission is concerned only with the material allegation disclosed in the information, which in its wisdom deserves to be investigated. Further, Commission has also called upon the informan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that 'certain agreements between smart phone manufacturers and Amazon were signed in Bengaluru; Amazon has stated in paragraph No.71 of the writ petition that 'various correspondences/agreements between Amazon and Smart phone manufacturers have been executed in Bengaluru'. This shows the existence of such agreements; 10. The CAIT (respondent No.4) has filed summary of arguments through Shri.Gautamaditya, learned Advocate contending inter alia that: It adopts all the arguments made by the Commission and Delhi Vyapar Mahasangh. In addition, it is submitted that this Court has no territorial jurisdiction to entertain these petitions because no part of the cause of action has arisen in the State of Karnataka. This Court also cannot exercise jurisdiction under Article 227 because Commission is situated in Delhi and every High Court has superintendence over the Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction; These petitions are appeals in the garb of writ petitions. 11. Smt. Madhavi Diwan, learned Additional Solicitor General for Commission, Shri. S. Gautamaditya, learned Advocate for Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting; Preferential Listing; and Exclusive Tie-ups. Deep Discounting 18. With regard to deep discounting the informant has alleged that; Amazon has several preferred sellers and notably among them are 'Cloudtail India' and 'Appario Retail', which are related to Amazon. It provides incentives to its preferred sellers to sell their products at 'predatory prices' throughout the year to the detriment of nonpreferred sellers, who are not compensated for the amount of loss which they would incur to keep competing in the market. 19. 'Appario Retail' is wholly owned subsidiary of a Joint Venture between Amazon and another entity. It has received investments from Frontizo Business Services Pvt. Ltd. Both Appario and Frontizo have common Director by name Ankit Popat. Frontizo and Amazon Retail India Pvt. Ltd., also have a common Director. 20. Cloudtail is a joint venture between Amazon and Catamaran Ventures. 21. It is alleged that Flipkart follows a model of providing deep discount to few preferential sellers such as 'Omnitech Retail', and it adversely impacts non-preferred sellers. Flipkart sends communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that these facts clearly establish that the Contact e-mail ID of both Companies is the same and maintenance of Books of Accounts of both Companies is at the same address. 29. Shri. Abhir Roy further submitted that Amazon Retail India Pvt. Ltd., and Frontizo Business Services Pvt. Ltd., have a common Director by name Sameer Kshetrapal. Appario Retail is a wholly owned subsidiary of Frontizo business. He pointed out that this aspect has been admitted by Amazon by stating thus in paragraph No.19 of its rejoinder: 19. That the contents of paragraph 22 of the Objections are also denied. It is a matter of public knowledge that Cloudtail India Pvt. Ltd., ( Cloudtail ) is a wholly owned subsidiary of Prione Business Services Private Limited ( Prione ), a Joint venture, wherein Amazon Asia Pacific Resources Pvt. Ltd., and Amazon Eurasia Holdings S.a.r.l, collectively hold a minority, non-controlling interest of 24% shares. It is submitted that Appario Retail Pvt. Ltd., ( Appario ) is a wholly owned subsidiary of Frontizo Business Services Private Limited ( Frontizo ), a Joint venture wherein Amazon Asia-Pacific Holdings Pvt. Ltd., and Zafar LLC together hold a minority, non-con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the hilt, but a case which can be said to be established, if the evidence which is led in support of the same were believed. 34. It may be also be profitable to recall the words of Lord Diplock in American Cyanamid Co Vs. Ethicon Ltd [(1975) 1 All E.R. 504] , a case involving injunction at interlocutory stage, wherein, that Court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party s case. 35. Both petitioners and the Commission have placed reliance on CCI Vs. SAIL and CCI Vs. Bharathi Airtel. In CCI Vs. SAIL, it is held as follows: 38. In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis. Closure of the case causes determination of rights and affects a party i.e. the informant; resultantly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, notice and an opportunity of being heard before passing orders, as it may deem fit and proper, confirming, modifying or setting aside the direction, decision or order appealed against. In CCI Vs.Bharathi Airtel, it is held as follows: 116. We may mention at the outset that in SAIL [CCI v. SAIL, (2010) 10 SCC 744] , nature of the order passed by CCI under Section 26(1) of the Competition Act [here also we are concerned with an order which is passed under Section 26(1) of the Competition Act] was gone into. The Court, in no uncertain terms, held that such an order would be an administrative order and not a quasi-judicial order. It can be discerned from paras 94, 97 and 98 of the said judgment, which are as under: (SAIL case [CCI v. SAIL, (2010) 10 SCC 744] , SCC pp. 785 787) 94. The Tribunal, in the impugned judgment [SAIL v. Jindal Steel Power Ltd., 2010 SCC OnLine Comp AT 5] , has taken the view that there is a requirement to record reasons which can be express, or, in any case, followed by necessary implication and therefore, the authority is required to record reasons for coming to the conclusion. The proposition of law whether an administrative or quas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such an approach can also be justified with reference to Regulation 20(4), which requires the Director General to record, in his report, findings on each of the allegations made by a party in the intimation or reference submitted to the Commission and sent for investigation to the Director General, as the case may be, together with all evidence and documents collected during investigation. The inevitable consequence is that the Commission is similarly expected to write appropriate reasons on every issue while passing an order under Sections 26 to 28 of the Act. 117. There is no reason to take a contrary view. Therefore, we are not inclined to refer the matter to a larger Bench for reconsideration. 36. Thus, from the above authorities, it is clear 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; and 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. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scounted price on petitioners' platforms and are sold largely through the sellers identified by informant as 'preferred sellers'. With regard to the allegations such as funding of discount, the Commission has opined that it is a matter that merits investigation. 43. Adverting to preferential listing, the Commission has noted that the allegations are inter-connected and therefore, a holistic investigation is necessary. 44. The Commission has further noted (in paragraph 26) that the exclusive arrangements between smart phone brands and e-Commerce platforms, demonstrated in the information coupled with the allegations of linkage between preferred sellers and the petitioners, merits investigation. 45. Thus, a plain reading of the impugned order shows that Commission has looked into the information in detail and applied its mind. 46. It was argued by Shri. Gopal Subramanium that on the earlier occasions and particularly in the AIOVA case, though the allegation was against Flipkart, in order to understand the nuances of the trade, the Commission had held preliminary conference with Amazon. In this case, when Commission has taken a drastic decision to initiate an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law relating to Foreign exchange with the objective of facilitating external trade and payments for promoting orderly development and maintenance of Foreign Exchange markets in India. The FDI policy issued under FEMA specifies entry conditions for Foreign Companies in various sectors. The FDI policy does not offer any immunity or exemption from the law of the land. She submitted that the Hon'ble Supreme Court of India in number of cases has upheld parallel investigation/adjudication by different Regulators/Agencies/ Adjudicators. She submitted that in Securities Exchange Board of India Vs. Pan Asia Advisors Limited and another [(2015)14 SCC 71 (paragraph No.92)] , it is held that SEBI can exercise its powers while action is taken for violation under FEMA or RBI Act. In S. Sukumar Vs. Secretary, Institute of Chartered Accountants in India and Ors. [(2018)14 SCC 360 (paragraphs No.45 46)] , it is held that Institute of Chartered Accountants, a statutory body can investigate while ED and ROC investigations are in progress. 52. Smt. Madhavi Diwan further submitted that the Foreign Exchange Management Act is an earlier Act, and Competition Act has come into force later. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Barium Chemicals is, in the opinion of this court, irrelevant given the facts of this case. Granted, administrative orders should be reasoned; however, where they trigger investigative processes that are not conclusive, having regard to the clear enunciation in SAIL, that notice is inessential, accepting the argument, that inquiry would harm the market or commercial reputation of a concern, would be glossing over the law in SAIL. Moreover, the Rohtas Industries related to the affairs of a company, which implicated its internal management. Allowing inquiry, even an innocuous one, without application of mind, is a different proposition altogether from acting on the information of someone who alleges either direct or indirect or tacit dominance in the market place in the course of one's business. The latter is regulatory of the marketplace rather than the core management of the concern; it is akin to adjudicating a tax or commercial dispute, or a regulatory dispute. As stated by Justice Brennan, natural justice in such instances should not ―unlock the gate which shuts the court out of review on the merits. (in this case, preclude or chill the exercise of jurisdiction b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nreasonable in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting unreasonably . Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington L.J. in Short v. Poole Corporation [1926 Ch 66] gave the example of the red-haired teacher, dismissed because she had red hair. This is unreasonable in one sense. In another it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and, in fact, all these things run into one another. 59. In G. Veerappa Pillai, Proprietor, Sathi Vilas Bus Service, Porayar, Tanjore District, Madras Vs. Raman and Raman Limited, Kumbakonam, Tanjore Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. Wade's comment on Wednesbury doctrine, has held that the point to note is that a thing is not unreasonable in the legal sense merely because Court thinks it unwise. Prof. Wade's comment reads thus: This has become the most frequently cited passage (though most commonly cited only by its nickname) in administrative law. It explains how unreasonableness , in its classic formulation, covers a multitude of sins. These various errors commonly result from paying too much attention to the mere words of the Act and too little to its general scheme and purpose, and from the fallacy that unrestricted language naturally confers unfettered discretion. Unreasonableness has thus become a generalised rubric covering not only sheer absurdity or caprice, but merging into illegitimate motives and purposes, a wide category of errors commonly described as irrelevant considerations , and mistakes and misunderstandings which can be classed as self-misdirection, or addressing oneself to the wrong question . Further, following observations of Lord Scarman in Nottinghamshire County Council Vs. Secretary of State for Environment have also been quoted and they aptly apply to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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