2022 (1) TMI 1313 - HC - Law of Competition

Court Dismisses Appeal on Competition Act Order; Forum Shopping Condemned, Proceedings to Continue.

The court dismissed the writ appeal, affirming the validity of the reference made under Section 19(1)(b) of the Competition Act. It upheld the legality of ... Cartelization - representation alleged that when natural rubber price increased, the tyre prices were increased in a concerted manner by the domestic major tyre manufacturers, however, when the price of natural rubber decreased, the tyre prices were not reduced by the domestic major tyre manufacturers and as such, they indulged in price parallelism and cartelization - Section 3 of the Competition Act, 2002. Whether the reference made under Section 19(1)(b) of the Competition Act is invalid and non est in law? - Whether Regulation 15(3) is mandatory or directory? - HELD THAT:- A conjoint reading of Regulation 15(3), Regulation 15(5), Regulation 40 and Section 15(c) would indicate the clear wisdom of the Legislature that the non compliance of the regulations in each case shall not invalidate the proceedings initiated by the CCI. Only in two situations, namely, if there is an irregularity or non compliance of the procedures affecting the merits of the case, Regulation 15(3) will come into operation. Secondly, if there is any irregularity or non compliance of the procedures or regulations resulting in miscarriage of justice alone, Regulation 15(3) will take effect. In all other cases not affecting the merits of the case or causing miscarriage, the non compliance of the regulations will not invalidate the proceedings before the CCI. The Apex Court in STATE OF PUNJAB AND ANOTHER VERSUS SHAMLAL MURARI & ANR [1975 (10) TMI 105 - SUPREME COURT] has settled this issue holding that while dealing with procedural law, we must always remember that procedural law is not to be a tyrant, but a servant, not an obstruction, but an aid to justice. This legal position has been reiterated by the Apex Court in yet another decision in RANI KUSUM VERSUS KANCHAN DEVI & ORS. [2005 (8) TMI 709 - SUPREME COURT]. When the Competition Commission has proceeded to order investigation after forming an opinion that a prima facie case exists, the rights of the parties cannot be complained of being affected in any manner at this stage, because the order for investigation does not attract any civil consequences, inasmuch as it does not determine the issue raised against the parties finally. Although certain procedural lapses take place while arriving at such a prima facie opinion, that itself will not make the entire proceedings invalid, because the parties are given opportunities to take part in the investigation and thereafter to submit their objections before the Commission, to enable the Commission to arrive at a just and proper conclusion and pass a final order under Section 27 - the view taken by the learned single Judge that the writ Court cannot interfere with the preliminary order directing investigation on the ground of procedural lapses either in making the reference or entertaining the same, does not call for any interference by this Court. Whether the order dated 24.6.2014 passed by the Commission under Section 26(1) of the Competition Act, shall be liable to be quashed? - HELD THAT:- The allegations of the AITDF in the representation dated 28.11.2013 to the MCA were that the opposite parties, having control over 90% of the tyre production in India, are engaged in abusing their dominant position through price parallelism under the aegis of cartel association-Automotive Tyre Manufacturers' Association (ATMA) and also raising the prices of tyres and tubes on the pretext of increase in the price of natural rubber and other inputs, but the subsequent reduction in the price of the raw material has not been followed by the corresponding decrease in the price of tyres, resulting in huge loss to the innocent public - Moreover, whether the order or direction issued under Section 26(1) of the Competition Act is appealable or not, is concerned, the said issue is no longer res integra. While considering the very same issue, the Apex Court in Competition Commission of India v. Steel Authority of India Limited, [2010 (9) TMI 215 - SUPREME COURT] has held vividly that the order or direction issued under Section 26(1) after forming a prima facie opinion is a direction simpliciter to cause an investigation in the matter and it does not effectively determine any right or obligation of the parties to the lis, because it passes the interim order or direction at the preliminary stage without recording a finding which would bind the parties and it would not make the direction as an order which affects the rights of the parties and therefore, is not appealable. Whether the complaint/reference made by the fourth respondent-AITDF is hit by the principles of res judicata? - HELD THAT:- The AITDF made a complaint against the appellant and others relating to the year 2011-12, 2012-13 and 2013-14. Since the present complaint is not related to 2008, whereas it alleges that the appellant and others have indulged in cartelization during the period from 2011-12 to 2013-14 by indirectly determining the sale of tyres and tubes in the domestic market contravening the provisions of Section 31 read with Section 33 of the Competition Act, the CCI is empowered to inquire into the fresh complaint for each year, for, Section 27 of the Competition Act empowers the CCI to pass an adjudicatory order for each year of cartelization. The principles of res judicata may not apply, inasmuch as the expression 'for each year of the continuance of such agreement', the CCI is empowered to investigate the complaint of cartelization, as it concerns with each year. Moreover, if the CCI taking up the complaint for the year 2008, finding want of acceptable evidence, dismissed the complaint for the year 2008, it does not mean that the same CCI is precluded from entertaining a fresh complaint for the next year against the same producer or distributor, trader, etc., by virtue of Section 27. When the Act permits the CCI to initiate action on the complaint of cartelization independently for each year, the argument of the appellant on the principles of res judicata cannot be accepted. This issue is also answered against the appellant, accordingly. Whether the conduct of the ninth respondent-ATMA in approaching the Delhi High Court for the relief would amount to forum shopping? - HELD THAT:- When this Court has directed the final order to be kept in a sealed cover and accordingly, the CCI also has complied with the order by keeping the above order in a sealed cover, instead of approaching this Court, discreetly approaching the Delhi High Court with the writ petition would amount to abuse of the process of law, for the simple reason that what shall not be done directly cannot be done indirectly - since the investigation as ordered by the CCI has already been completed and the report of the investigating officer has also been submitted before the Commission and all the parties have also taken part in the proceedings before the Commission and advanced their arguments and that the final order passed by the CCI is also kept in a sealed cover as per the order dated 8.3.2018 passed by this Court, after getting the said final order, the parties, who are likely to be aggrieved, have to work out their remedy in the manner known to law. Therefore, at this final stage, the Court should, as far as possible, avoid any decision which would bring about the result of rendering the system unworkable in practice. There are no merit in the appeal and accordingly, the writ appeal stands dismissed. Issues Involved:1. Validity of the reference under Section 19(1)(b) of the Competition Act.2. Legality of the order dated 24.6.2014 passed by the Commission under Section 26(1) of the Competition Act.3. Applicability of the principles of res judicata to the complaint/reference made by the AITDF.4. Whether Regulation 15(3) is mandatory or directory.5. Whether the conduct of the ninth respondent-ATMA in approaching the Delhi High Court amounts to forum shopping.Issue-wise Detailed Analysis:1. Validity of the Reference under Section 19(1)(b) of the Competition Act:The appellant argued that the Ministry of Corporate Affairs (MCA) failed to adhere to the mandatory requirements under Regulations 10, 11, 12, 14, 16, and 23, rendering the reference invalid under Regulation 15(3). However, the court emphasized that Regulation 15(3) cannot be read in isolation and must be considered along with Regulation 15(5), Regulation 40, and Section 15(c) of the Competition Act. Regulation 15(5) allows the Commission to use the contents of such information or reference for inquiring into any possible contravention of any provision of the Act. Regulation 40 states that failure to comply with any requirement of these regulations shall not invalidate any proceeding unless it results in a miscarriage of justice. Section 15(c) states that any irregularity in the procedure of the Commission not affecting the merits of the case will not invalidate the proceedings. Therefore, the court concluded that Regulation 15(3) is directory and not mandatory, and the reference was valid.2. Legality of the Order Dated 24.6.2014 Passed by the Commission under Section 26(1) of the Competition Act:The court held that the order under Section 26(1) is a preliminary order directing an investigation and does not result in civil consequences or determine the issues raised against the parties finally. The order for investigation is administrative and does not affect the rights of the parties at this stage. The court referred to the Supreme Court's judgment in Competition Commission of India v. Steel Authority of India Limited, which held that the direction under Section 26(1) is a direction simpliciter to cause an investigation and does not determine any right or obligation of the parties. Therefore, the court found no reason to interfere with the order dated 24.6.2014.3. Applicability of the Principles of Res Judicata to the Complaint/Reference Made by the AITDF:The appellant argued that the complaint was hit by the principles of res judicata as a similar complaint was dismissed by the CCI in 2012. However, the court noted that the present complaint relates to the period from 2011-12 to 2013-14, which is different from the period covered in the earlier complaint. Section 27 of the Competition Act allows the CCI to impose penalties for each year of the continuance of such an agreement. Therefore, the principles of res judicata do not apply, and the CCI is empowered to investigate the complaint for each year independently.4. Whether Regulation 15(3) is Mandatory or Directory:The court concluded that Regulation 15(3) is directory and not mandatory. The non-compliance of the regulations will not invalidate the proceedings before the CCI unless it affects the merits of the case or results in a miscarriage of justice. The court emphasized that procedural laws are meant to advance the cause of justice and not to defeat it. Therefore, the reference made by the MCA was valid despite any procedural lapses.5. Whether the Conduct of the Ninth Respondent-ATMA in Approaching the Delhi High Court Amounts to Forum Shopping:The court found that the ninth respondent's act of filing a writ petition before the Delhi High Court while the present writ appeal was pending amounted to forum shopping. The ninth respondent sought to obtain copies of reports that were kept in a sealed cover as per the order of this court. The court held that approaching another forum to dilute the direction of this court is an abuse of the process of law and amounts to browbeating the court. Therefore, the conduct of the ninth respondent was condemned, and the appeal was dismissed.Conclusion:The court dismissed the writ appeal, holding that the reference made under Section 19(1)(b) was valid, the order dated 24.6.2014 under Section 26(1) was legal, the complaint was not hit by res judicata, Regulation 15(3) was directory, and the conduct of the ninth respondent amounted to forum shopping. The respondents were allowed to proceed further in the manner known to law.