2017 (9) TMI 1636 - HC - Law of Competition

Court Upholds CCI's Jurisdiction; Liquor Distributors Classified as Enterprises, Not Sovereign Entities.

The court dismissed the petitioners' arguments, affirming the jurisdiction of the Competition Commission of India (CCI) and rejecting the applicability of ... Enterprise under Section 2(h) - sovereign function exclusion - abuse of dominant position / denial of market access - res judicata and issue estoppel - jurisdiction of the Competition Commission of India under Section 26(1) - provisions of the Competition Act are in addition to other lawsEnterprise under Section 2(h) - sovereign function exclusion - Whether the petitioners fall within the definition of 'enterprise' and are excluded by the sovereign function proviso in Section 2(h) of the Act. - HELD THAT: - The Court held that Section 2(h) includes a department of the Government engaged in activities relating to supply and distribution of goods and that the exclusion applies only to activities relatable to the sovereign functions of the State. The petitioners were responsible for procurement, supply and distribution of IMFL and these activities are not relatable to primary inalienable sovereign functions such as taxation, police power, defence, currency, atomic energy or space. Applying the test in Agricultural Produce Marketing Committee v. Ashok Harikuni, the Court found that mere state involvement or monopoly does not render an activity sovereign if it could be undertaken by a private person. Consequently the petitioners are not excluded from the ambit of 'enterprise' under Section 2(h). [Paras 10, 11, 12, 14]The petitioners are 'enterprises' within the meaning of Section 2(h) and are not excluded by the sovereign-function proviso.Res judicata and issue estoppel - provisions of the Competition Act are in addition to other laws - Whether the CCI proceedings are barred by res judicata or issue estoppel because the Uttarakhand High Court considered related writ petitions. - HELD THAT: - The Court observed that the parties to the High Court writ petitions (USL and Pernod) were different from the informant before the CCI (an association) and that the scope of the High Court proceedings-challenging administrative arbitrariness and seeking specific directions-differed materially from the CCI's inquiry into alleged contraventions of Section 4 relating to abuse of dominant position and denial of market access. The Court further relied on Section 62 of the Act, noting that the Competition Act operates in addition to other laws. Because the issues and remedies before the two fora were distinct and not mutually destructive, the principles of res judicata or issue estoppel did not preclude the CCI proceedings. [Paras 16, 17, 18, 19, 20]The CCI proceedings are not barred by res judicata or issue estoppel; the inquiry under the Competition Act may proceed.Jurisdiction of the Competition Commission of India under Section 26(1) - Whether the impugned order under Section 26(1) of the Act is vitiated, perverse or outside the CCI's jurisdiction and therefore liable to interference. - HELD THAT: - The Court noted precedents holding that an order under Section 26(1) is administrative and does not finally determine rights and obligations, and that the legislative scheme limits appellate interference against such orders. Having considered the material and the submissions, the Court found no perversity or want of jurisdiction in the impugned order directing the Director General to investigate the information. Thus, there was no basis for this Court to interfere with the CCI's prima facie determination and direction for investigation. [Paras 21, 22]The impugned order under Section 26(1) is not perverse or without jurisdiction; no interference is warranted.Final Conclusion: The writ petition and related applications are dismissed: the petitioners are within the definition of 'enterprise', the CCI proceedings are not barred by res judicata, and the CCI's order directing investigation under Section 26(1) does not call for interference. Issues Involved:1. Jurisdiction of the Competition Commission of India (CCI) over the petitioners.2. Applicability of the principles of res judicata.3. Classification of the petitioners as 'enterprises' under Section 2(h) of the Competition Act, 2002.4. The nature of the order passed under Section 26(1) of the Competition Act, 2002.Detailed Analysis:1. Jurisdiction of the Competition Commission of India (CCI) over the petitioners:The petitioners challenged the jurisdiction of the CCI, arguing that they were administering the liquor policy of the State of Uttarakhand and thus were not 'enterprises' under Section 2(h) of the Competition Act, 2002. The court noted that Section 2(h) includes any person or department of the government engaged in activities related to production, storage, supply, distribution, acquisition, or control of articles or goods, excluding sovereign functions. The court concluded that the petitioners' activities in the distribution of liquor were not sovereign functions and thus fell within the ambit of 'enterprise' as defined under the Act. The court referenced the Supreme Court's interpretation in Agricultural Produce Marketing Committee v. Ashok Hariuni, emphasizing that sovereign functions are primary inalienable functions that only the state can exercise, which did not include the distribution of liquor.2. Applicability of the principles of res judicata:The petitioners argued that the matter had already been adjudicated by the Uttarakhand High Court and thus was barred by res judicata. The court rejected this argument, stating that the parties in the two proceedings were not the same, and the scope of the petitions before the Uttarakhand High Court and the CCI were materially different. The High Court was concerned with the arbitrary and unreasonable administration of liquor procurement, whereas the CCI was examining whether the petitioners' conduct violated Section 4 of the Act. Additionally, Section 62 of the Act states that the provisions of the Act are in addition to and not in derogation of other laws, allowing CCI's jurisdiction to proceed.3. Classification of the petitioners as 'enterprises' under Section 2(h) of the Competition Act, 2002:The petitioners contended that they were not 'enterprises' as defined under Section 2(h) of the Act. The court held that the petitioners were engaged in the supply and distribution of IMFL, which is not a sovereign function. The court cited Union of India v. Competition Commission of India & Ors., where the Indian Railways was held to be an enterprise under the Act, reinforcing that the petitioners' activities fell within the definition of 'enterprise.'4. The nature of the order passed under Section 26(1) of the Competition Act, 2002:The petitioners challenged the CCI's order under Section 26(1) of the Act, which directed an investigation into their activities. The court referenced the Supreme Court's decision in Competition Commission of India v. Steel Authority of India Ltd. and Anr., which clarified that an order under Section 26(1) is administrative and does not determine the rights and obligations of the parties. The court found no merit in interfering with the CCI's order, emphasizing that the legislative intent was not to permit appeals against such orders.Conclusion:The court dismissed the petitioners' contentions, upholding the CCI's jurisdiction and rejecting the applicability of res judicata. The petitioners were classified as 'enterprises' under the Act, and the nature of the CCI's order under Section 26(1) was deemed administrative. Consequently, the petition and pending applications were dismissed.