2018 (9) TMI 844 - HC - Law of Competition

Court Allows Witness Cross-Examination in CCI Case, Affirms Denial of Recall Request, Validates Ongoing Investigation.

The court partially upheld the appeal, directing the Competition Commission of India (CCI) to permit cross-examination of three witnesses, thus addressing ... Review/recall application - Whether the DG’s investigation in the absence of a specific order under Section 26(1) by CCI having formed a prima facie opinion, is vitiated? - Held that:- A plain reading of Section 26(1) shows that at the opinion formation stage regarding existence of a prima facie case needing investigation, CCI should consider the contents of inter alia, information supplied under Section 19(1)(a) and the documents, if any, received with the reference or information. This is a sine qua non for a direction to the DG to investigate into the matter. Consequently while exercising power under Section 26(1), CCI cannot adjudicate upon the merits and de-merits of the allegations in the information. If after examining the contents of the reference or information, the Commission finds that the material produced along with it is not sufficient for forming an opinion about the existence or otherwise of a prima facie case or it wants some clarification on any particular aspect of the matter/issue, it seeks a preliminary conference and invites the complainant/information or other person as is considered necessary for the preliminary conference (Regulation 17 of the 2009 regulations). Thereafter, CCI can pass an order under Section 26(1) briefly stating the reasons for forming an opinion regarding existence of a prima facie case warranting DG’s investigation - the steps outlined in Section 26 are amplified in the procedure mandated by Regulation 20 and 21, which requires participation by “the parties” in the event a report after DG’s inquiry, which is likely to result in an adverse order, under Sections 27-34 of the Act. Consequently Cadila’s argument that a specific order by CCI applying its mind into the role played by it was essential before the DG could have proceeded with the inquiry, is rejected. Rejection of Recall Application - Is the impugned judgment correct in upholding as sound CCI’s finding rejecting the recall application, (based on grounds of fraud, res judicata and/or no cause of action)? - Held that:- Settlement or disposal of individual or some cases might not be determinative of the matter which pertains to abuse of dominance, for the reason that it affects the wider public, just as a crime does. It is like saying that a builder or other service provider who indulges in widespread malpractice that amounts to cheating investors or flat buyers, which is exposed by one complaint, that results in a first information report (FIR) and consequent investigation, that unearths that several other consumers are like preys can be quashed on the ground that the errant service provider settles with the complainant/informant. In such event, the High Court would never exercise its discretion to quash the proceeding emanating from the FIR. Therefore, the CCI or an expert body should ordinarily not be crippled or hamstrung in their efforts by application of technical rules of procedure. Whether there was denial of principles of natural justice in the rejection of Cadila’s request for cross examination? - Held that:- This court notices that the CCI had earlier, in the order, noted that a party can reasonably request for cross examination of individuals whose testimony can adversely affect it and that it has to consider the applications made in such cases, by exercise of discretion - This court is of the opinion that the discretion, which is undoubtedly vested with the CCI to permit or refuse cross examination of a witness, is to be exercised judiciously. The reason for denial of the request for cross examination is that the justification given by Cadila is not “satisfactory” and that the testimony of witnesses who have deposed and whose cross examination is sought, are not relied upon in the DG’s report. This court is of the opinion that such reasons are not germane; mere “dissatisfaction” does not imply judicious exercise of discretion - CCI erred in refusing to grant cross examination (to Cadila) of the three witnesses who had deposed before the DG. Whether DG could have issued notice to Cadila’s officials under Section 48? - Held that:- Cadila’s grievance with respect to issuance of notice to its directors by citing Section 48 is without substance; it is hereby rejected. Appeal allowed in part. Issues Involved:1. Validity of DG’s investigation without a specific order under Section 26(1) by CCI.2. Correctness of the impugned judgment upholding CCI’s rejection of the recall application.3. Alleged denial of principles of natural justice in rejecting Cadila’s request for cross-examination.4. Legality of DG issuing notice to Cadila’s officials under Section 48.Issue-wise Detailed Analysis:1. Validity of DG’s Investigation:The court examined whether the DG’s investigation was valid without a specific order under Section 26(1) by CCI. It was noted that Section 26(1) allows the CCI to direct the DG to investigate based on a prima facie case. The court referred to the Supreme Court’s ruling in Excel Crop Care Ltd. v. Competition Commission of India (2017), which clarified that the DG’s investigation could include other facts and parties revealed during the investigation. The court concluded that the DG’s investigation into Cadila’s conduct was valid, even without a specific order from CCI, as the investigation could cover broader aspects of anti-competitive behavior.2. Correctness of the Impugned Judgment:The court analyzed the rejection of Cadila’s recall application. It was observed that the recall power, though recognized in Google Inc. v. Competition Commission of India, should be exercised sparingly and only in clear cases of fraud or mistake. The court found that the recall application filed by Cadila was extensive and involved detailed factual and legal arguments, which did not meet the threshold for a simple recall. The court upheld the CCI’s decision, noting that the DG’s report had already been submitted, making the recall application inappropriate at that stage.3. Alleged Denial of Natural Justice:The court addressed Cadila’s request for cross-examination of three witnesses. The CCI had denied the request, stating that the witnesses’ statements were not relied upon in the DG’s report. The court found this reasoning inadequate, emphasizing that cross-examination is crucial for assessing witness credibility and the relevance of their statements. The court directed the CCI to allow Cadila to cross-examine the three witnesses.4. Legality of Notices to Officials under Section 48:The court examined whether notices could be issued to Cadila’s officials under Section 48 without first establishing the company’s liability. It referred to Pran Mehra v. Competition Commission of India, which allowed simultaneous proceedings against the company and its officials. The court confirmed that the CCI could proceed against the officials concurrently with the company, rejecting Cadila’s argument that separate proceedings were required.Conclusion:The appeal succeeded in part. The court directed the CCI to allow cross-examination of the three witnesses but upheld the CCI’s rejection of the recall application and the legality of notices to Cadila’s officials under Section 48. The court emphasized that the DG’s investigation was valid and that the CCI’s procedures were consistent with the law.