2024 (1) TMI 1389 - HC - Law of Competition

Google payment dispute suit dismissed as competition matters fall under CCI jurisdiction under Competition Act 2002

The Madras HC dismissed an appeal challenging rejection of a plaint under Order VII Rule 11(d) CPC. Plaintiffs sought declaration that Google's payment ... Competition Act, 2002 - Section 61 and Section 62 interplay - Payment and Settlement Systems Act, 2007 - RBI's adjudicatory scheme and Section 24 - implied ouster of civil jurisdiction - Doctrine of complete code - Order VII Rule 11(d) - rejection of plaint - exclusive jurisdiction clause / forum-selection clause - Ombudsman scheme non-ousting principleCompetition Act, 2002 - Section 61 and Section 62 interplay - implied ouster of civil jurisdiction - Whether the civil court's jurisdiction is barred by the Competition Act, 2002 in respect of matters which the Commission is empowered to determine - HELD THAT: - The Court held that the plaint, read in its entirety, discloses matters that fall squarely within the remit of the Competition Commission of India (CCI) - namely, allegations of abuse of dominant position and related reliefs that the CCI can grant under Section 27. Section 61 operates to bar civil court jurisdiction in respect of matters the CCI is empowered to determine. Section 62 (that the Act is in addition to other laws) does not negate Section 61; the two provisions must be read together and reconciled so that where CCI has the power to grant the reliefs claimed, the civil court is barred from entertaining the suit. The Court relied on the statutory scheme of inquiry, interim powers, and remedial powers vested in the CCI and on authorities laying down the principles for inferring ouster of civil jurisdiction. Because the plaint repeatedly invokes and relies upon the CCI order and seeks reliefs within the CCI's competence, the suit is barred and liable to be rejected under Order VII Rule 11(d). [Paras 21, 26, 30, 34, 38]Civil court jurisdiction is barred by the Competition Act, 2002 in respect of the matters pleaded; the plaint is liable to be rejected under Order VII Rule 11(d) insofar as it seeks reliefs within the CCI's domain.Payment and Settlement Systems Act, 2007 - RBI's adjudicatory scheme and Section 24 - Doctrine of complete code - Whether the PSS Act, 2007 impliedly ousts civil court jurisdiction by providing a complete adjudicatory scheme (including referral to RBI under Section 24) for disputes between system participants and system providers - HELD THAT: - The Court concluded that the PSS Act, 2007 envisages a coherent and complete regulatory and dispute-resolution scheme with the Reserve Bank of India as the designated expert authority. Section 24(3) provides for referral of disputes between system participant and system provider to the RBI and Section 24(4) gives finality to the RBI's decision in that mechanism. Given the regulatory scope, the preventive and enforcement powers of the RBI under the Act, and the statutory scheme designed to regulate payment systems, the PSS Act constitutes a complete code in relation to the subject-matter and, by necessary implication, bars parallel adjudication in the civil courts for disputes falling within that scheme. Consequently, allegations founded on contraventions of the PSS Act ought to be addressed before the regulator rather than in civil courts. [Paras 31, 33, 35]The PSS Act, 2007 provides a complete statutory scheme for regulation and dispute resolution in respect of payment systems; disputes within that scheme are to be addressed under the PSS Act and not by civil courts.Exclusive jurisdiction clause / forum-selection clause - Order VII Rule 11(d) - rejection of plaint - Whether Clause 16.8 of the Developer Distribution Agreement (purporting to confer exclusive jurisdiction on courts in Santa Clara, California) excludes Indian courts from entertaining the suits - HELD THAT: - The Court upheld the learned Single Judge's conclusion that Clause 16.8, which seeks to restrict jurisdiction exclusively to a foreign forum and to foreign law, is unenforceable to the extent it operates as a complete exclusion of Indian courts. When a party does business in India and the agreement purports to oust Indian jurisdiction entirely, such an agreement would be in restraint of legal proceedings and contrary to public policy under Section 28 of the Indian Contract Act. The Single Judge correctly applied the principle that agreements which effectively preclude recourse to domestic courts for matters arising under Indian law are unenforceable. [Paras 11]Clause 16.8 is unenforceable so as to preclude the jurisdiction of Indian courts.Order VII Rule 11(d) - rejection of plaint - Whether the plaints were correctly rejected under Order VII Rule 11(d) of the Code of Civil Procedure, 1908 - HELD THAT: - The Court reiterated the strict test for rejection under Order VII Rule 11(d): a plaint can be rejected only where, on its face and taking the averments as true, it is barred by law. A plaint cannot be rejected in part; rejection is proper only if the plaint in its entirety is barred. Applying these principles and having regard to the pleadings which invoke remedies and findings within the CCI and the PSS Act scheme, the Court found that the plaints are, on their face, barred by the special statutes and therefore were rightly rejected by the Single Judge. [Paras 14, 15, 38]The learned Single Judge did not err in rejecting the plaints under Order VII Rule 11(d).Ombudsman scheme non-ousting principle - Whether recourse to the Ombudsman or similar non-adversarial schemes ousts civil court jurisdiction - HELD THAT: - The Court noted the established principle that Ombudsman proceedings, being non-adversarial and alternative in nature, do not ordinarily oust the jurisdiction of civil courts; an Ombudsman may decline complaints requiring elaborate evidence. Nevertheless, having found that the statutory schemes under the Competition Act and PSS Act provide fora and remedies that cover the plaintiffs' grievances, the Court held that the present disputes should be pursued before the designated authorities. [Paras 13, 31]Ombudsman proceedings per se do not oust civil jurisdiction, but the statutory dispute-resolution schemes available under the special Acts make the regulatory fora the appropriate channels for the present disputes.Order VII Rule 11(d) - rejection of plaint - Extension of interim protection previously granted to appellants - HELD THAT: - By consent/conflicting submissions recorded, the Court extended the interim protection already in operation to enable appellants to exhaust appellate remedies but limited that extension to a period of three weeks, after which the protection lapses.Interim relief continued for a period of three weeks; thereafter the protection shall cease.Final Conclusion: The appeals and cross-objections are dismissed. The High Court upheld the Single Judge's rejection of the plaints under Order VII Rule 11(d) on the ground that the matters pleaded fall within the exclusive statutory domain of the Competition Commission of India and/or the regulatory scheme under the PSS Act, 2007 (and thus civil jurisdiction is barred as to those matters); Clause 16.8 of the DDA is unenforceable to oust Indian jurisdiction; interim protection is continued for three weeks; no order as to costs. Issues Involved:1. Jurisdiction of civil courts in light of the Competition Act, 2002, and the Payment and Settlement Systems Act, 2007.2. Applicability of exclusive jurisdiction clauses in agreements.3. Alleged violations of the Payment and Settlement Systems Act, 2007, and the Competition Act, 2002.4. Interpretation and application of Section 61 and Section 62 of the Competition Act, 2002.5. The role of the Reserve Bank of India as a regulator under the PSS Act, 2007.6. The powers of the Competition Commission of India under the Act of 2002.7. The enforceability of the Developer Distribution Agreement (DDA) and its clauses.Detailed Analysis:1. Jurisdiction of Civil Courts:The primary issue was whether the jurisdiction of the civil court is ousted by the Competition Act, 2002, and the Payment and Settlement Systems Act, 2007. The court held that civil courts generally have jurisdiction unless expressly or impliedly barred by law. Section 61 of the Competition Act, 2002, expressly bars civil court jurisdiction over matters the Competition Commission of India (CCI) can determine. The court found that the issues raised by the plaintiffs, such as abuse of dominance and unfair conditions imposed by Google, fall within the purview of the CCI, thus barring civil court jurisdiction.2. Exclusive Jurisdiction Clauses:The defendants argued that the jurisdiction is restricted to the courts in California as per Clause 16.8 of the Developer Distribution Agreement (DDA). The court held that such clauses, which restrict jurisdiction to foreign courts, are unenforceable under Indian law, as they contravene Section 28 of the Indian Contract Act, 1872, which deals with agreements in restraint of legal proceedings.3. Alleged Violations of the PSS Act, 2007, and the Act of 2002:The plaintiffs alleged violations of the PSS Act, 2007, by Google, particularly concerning the settlement period and service fees. The court observed that the PSS Act, 2007, is a complete code and the Reserve Bank of India (RBI) is the designated expert authority to handle such violations. The court emphasized that the RBI has the power to regulate and enforce compliance with the PSS Act, 2007, and any disputes should be referred to it.4. Interpretation of Sections 61 and 62 of the Competition Act, 2002:Section 61 bars civil courts from entertaining suits on matters the CCI can address, while Section 62 states that the Act is in addition to other laws. The court clarified that Section 62 does not negate the bar on civil court jurisdiction established by Section 61. The provisions should be read together to ensure that matters within the CCI's jurisdiction are not simultaneously adjudicated by civil courts.5. Role of RBI under the PSS Act, 2007:The court highlighted the RBI's role as the regulator under the PSS Act, 2007. It is empowered to issue directions and resolve disputes between system participants and providers. The court noted that the RBI's decisions are given finality under the Act, and civil courts should not interfere in matters that fall within the RBI's regulatory domain.6. Powers of the Competition Commission of India:The CCI is tasked with addressing anti-competitive practices and abuse of dominance under the Act of 2002. The court noted that the CCI has the authority to modify agreements, impose penalties, and issue directions to prevent abuse of dominance. The plaintiffs' grievances regarding Google's practices could be adequately addressed by the CCI, which has already issued orders against Google.7. Enforceability of the DDA and its Clauses:The court examined the enforceability of the DDA, particularly the clauses related to jurisdiction and service fees. It found that the clauses imposing jurisdiction in California are unenforceable in India. The court also noted that the CCI had already addressed the fairness of Google's service fees and billing practices, and any further disputes should be resolved by the CCI.Conclusion:The court upheld the rejection of the plaints under Order VII Rule 11(d) of the Civil Procedure Code, 1908, affirming that the jurisdiction of civil courts is barred by the Competition Act, 2002, and the PSS Act, 2007. The plaintiffs were directed to seek remedies through the appropriate regulatory bodies, namely the CCI and the RBI, for their grievances. The court also extended the interim relief for three weeks to allow the appellants to explore further appellate remedies.