2019 (10) TMI 1599 - HC - Law of Competition

CCI can reject DG's report finding contraventions under Section 4 after proper examination and hearing parties

Shri Saurabh Tripathy Versus Competition Commission Of India & Anr.

The Delhi HC dismissed a petition challenging CCI's rejection of the DG's report finding contraventions under Section 4 of the Competition Act, 2002. The ... Contravention of the provisions of Section 4 of the Competition Act, 2002 - rejection of report submitted by the Director General, Competition of Commission of India - no opportunity was granted to the petitioner to contest the premise on which CCI rejected the DG’s report - violation of principles of natural justice. Whether it was incumbent upon CCI to pass an order directing further inquiry under Section 26(8) of the Act in the event it did not agree with the report submitted by the DG? HELD THAT:- The contention that if the DG’s report recommends that there are contraventions of the Act, CCI cannot close the case straightway, is without any merit. There is no provision in the Act which mandates that CCI must accept the DG’s report recommending that there are contraventions of the provisions of the Act. The DG’s report is not binding on CCI and it can differ with the DG’s findings and reject the same. If on examination of the DG’s investigation report indicating contraventions of the Act and CCI finds that there are no such contraventions; it is required to close the case, as has been done in the present case - If the petitioner’s contention that it is mandatory for CCI to direct further investigation in the event it disagrees with the DG’s recommendation is accepted, it would imply that CCI can never disagree with the report submitted by the DG. This, clearly, is not the scheme of Sections 26 and 27 of the Act. The report submitted by the DG under Section 26(3) of the Act is merely recommendatory. CCI is required to examine the same and take a view after hearing the concerned parties. In the present case, CCI has not accepted the DG’s report and after hearing the parties has decided to close the case. The contention that this is contrary to the scheme of Sections 26 and 27 of the Act, is bereft of any merit and is, accordingly, rejected - Undisputedly, the impugned order passed by CCI is final and no appeal is provided under the Act against such an order. The contention that the impugned order is an order under Section 27 of the Act was rejected by COMPAT vide its order dated 15.05.2017. The petitioner has accepted the said order and the issue whether the impugned order is appealable or not, does not arise for any further consideration. Whether the impugned order suffers from any infirmity, which warrants interference by this Court under Article 226 of the Constitution of India? - HELD THAT:- In the present case, CCI had noticed that the parties had exchanged drafts of the GSPA before finalising the same. More importantly, some of the clauses which the petitioner claimed were unfair and discriminatory, had not been objected to by SRMB during contractual negotiations. Clearly, in these circumstances, the decision of CCI to take into account that the GSPA was a negotiated contract, cannot be faulted. This Court finds that the entire approach of the DG in expressing its subjective opinion on various clauses is flawed. The DG is required to submit an investigation report after investigating facts and making recommendations on the basis of a factual foundation. In the present case, the DG has considered various clauses of the GSPA and has expressed its subjective opinion regarding the same. This, clearly, is not the only scope of investigation as contemplated under Section 26(3) of the Act. It was contended on behalf of the petitioner that CCI ought to have remanded the matter back to the DG for further inquiry instead of relying on the submissions made on behalf of SRMB. This contention is unmerited, as most of the recommendations made by the DG with regard to various specific clauses of GSPA were based on its subjective opinion and therefore, there was no necessity for remanding the matter back for further inquiry. CCI was well within its jurisdiction to examine the DG’s subjective opinion and take an informed view after considering the submissions made by the concerned parties. This Court finds the present petition unmerited. This Court is also of the view that the proceedings instituting by the petitioner are an abuse of the process of law. The petitioner is an employee of SRMB and SRMB had issued no authority in favour of the petitioner to espouse its cause - Petition dismissed. Issues Involved:1. Whether the Competition Commission of India (CCI) was required to direct further inquiry under Section 26(8) of the Competition Act, 2002, when it disagreed with the Director General's (DG) report.2. Whether the CCI's decision to reject the DG's report was violative of principles of natural justice.3. Whether the clauses in the Gas Sale Purchase Agreement (GSPA) between GEECL and SRMB were unfair or discriminatory, constituting an abuse of dominant position under Section 4 of the Act.4. Whether the petitioner had the locus standi to challenge the CCI's order.Detailed Analysis:1. Requirement for Further Inquiry under Section 26(8):The petitioner argued that CCI was bound to direct further inquiry if it disagreed with the DG's report, which found contraventions of the Act. However, the court clarified that CCI is not obligated to accept the DG's report and can reject it if it finds no contraventions after examining the report and hearing the parties. Sections 26 and 27 of the Act do not mandate CCI to accept the DG's findings; rather, the DG's report is merely recommendatory. CCI has the discretion to decide whether further inquiry is necessary, and it can close the case if it concludes that there are no contraventions.2. Principles of Natural Justice:The petitioner contended that the CCI's rejection of the DG's report violated principles of natural justice as it did not provide an opportunity to contest the reasons for rejection. The court found this argument unmerited, noting that CCI had considered the DG's report and the submissions from both parties before making its decision. The CCI's decision-making process did not deprive the petitioner of a fair hearing, and the court upheld the CCI's approach.3. Unfair or Discriminatory Clauses in the GSPA:The petitioner alleged that several clauses in the GSPA were unfair and discriminatory, constituting an abuse of GEECL's dominant position. The DG had identified specific clauses as problematic, but CCI rejected these findings. The court reviewed the clauses and agreed with CCI's assessment, noting that:- Clause 2: The DG's interpretation of GEECL's power to revise terms was erroneous. The clause allowed for price revisions with SRMB's consent, not unilaterally.- Clause 4.4: The clause was not unfair as it provided for third-party inspection in case of disputes, a common practice in commercial contracts.- Clause 5: The Minimum Guaranteed Offtake (MGO) liability was standard in gas supply agreements and not inherently unfair.- Clause 6: The DG's finding of discrimination based on calorific value pricing was unsubstantiated, as terms were individually negotiated.- Clauses 9.2, 11, and 15: The DG's opinions on these clauses were subjective and lacked empirical investigation. CCI's rejection of these findings was justified.The court emphasized that the DG's role is to investigate facts and not to substitute the commercial wisdom of contracting parties. CCI's decision to consider the negotiated nature of the GSPA was appropriate, as none of the parties to the contract had raised complaints against it.4. Locus Standi of the Petitioner:The respondents argued that the petitioner lacked the locus standi to challenge the CCI's order, as he was not an aggrieved party. The court found merit in this argument, noting that the petitioner was an employee of SRMB and had no authority to challenge the GSPA on behalf of SRMB. The court also observed that the petition appeared to be an abuse of the process of law, as the petitioner was likely acting on behalf of SRMB due to disputes between SRMB and GEECL.Conclusion:The court dismissed the petition, affirming that CCI had acted within its jurisdiction and discretion in rejecting the DG's report and closing the case. The petitioner's contentions were found to be without merit, and the proceedings were deemed an abuse of the process of law. The petitioner was ordered to pay costs to each of the respondents.