2016 (5) TMI 1623 - HC - Law of Competition

Real estate developers' similar practices don't violate Competition Act without proven common intention or meeting of minds

HC dismissed petition challenging CCI order regarding alleged Competition Act violations. Court held that agreements under Section 3(1) require meeting of ... Maintainability of petition under Article 226 of the Constitution of India - contravention of provisions of Sections 3(3)(a) & (b) of the Competition Act - HELD THAT:- An agreement, in law, may be oral or in writing but requires a meeting of minds of the parties entering into agreement on all the essentials of the subject qua which they are entering into agreement so as to bind each other thereto and compel performance or to measure damages in lieu of performance. Such meeting of the minds, in the absence of a writing, has to be proved as a fact and without it being so proved, there cannot be said to be contravention of Section 3(1). Section 2(b) of the Act while defining ‘agreement’, takes within its ambit “any arrangement” or “understanding” or “action in concert”, even if arrived at informally and even if not intended to be enforceable. Thus, an agreement within the meaning of Section 3(1) will be found if the action of parties are found to be in pursuance to some common intention, even if not in pursuance to an ‘agreement’ within the definition of Contract Act, 1872, but in pursuance to an ‘understanding’ or ‘arrangement’. Conversely it follows that merely because two or more persons are doing similar or identical thing, will not find an agreement within the meaning of Section 3(1) unless some, if not all the way, meeting of their minds or common intention to do so is established. Whether the words “practice carried on” refers to a situation resulting even without meeting of minds? - whether a practice carried on by those engaged in same trade even without any meeting of minds to carry on such a practice would be covered? - HELD THAT:- Section 2(m) defines a “practice” as including relating to the carrying on of any trade. However what is peculiar is that Section 3(3) which contains the words “practice carried on” is only raising a presumption as to what the same words in Section 3(1) mean. Section 3(3) by itself is neither prohibitory nor a voiding provision as Sections 3(1) and 3(2) respectively are. Thus, the words “practice carried on” have to be understood as a practice of trade in pursuance to meeting of minds. In the absence of any evidence of meeting of minds between any two or more developers of real estate with an intention of causing an appreciable adverse effect on competition, there could be no violation of Section 3 as was complained/ informed of by the petitioner/informer. Mere formation of an association i.e. the respondent No.5 CREDAI, is not violation of Section 3, without it being further established that such an association was to or has resulted in appreciable adverse effect on competition. DG, which is an investigative agency of CCI and with whose findings/recommendations CCI, which has adjudicatory role is not bound, found such violations because of finding certain common practices followed by all the developers of real estate surveyed/examined by DG. CCI has however found such practices to be not a result of any common intention. CCI has further found such practices to be not having any appreciable adverse effect on competition. No error is thus found in the impugned order of the CCI - The petition is dismissed. Issues Involved:1. Maintainability of the petition under Article 226 of the Constitution of India.2. Appealability of the Competition Commission of India (CCI) order to the Competition Appellate Tribunal (COMPAT).3. Jurisdiction of CCI versus Real Estate Regulatory Authority (RERA) under the Real Estate (Regulation and Development) Act, 2016.4. Alleged contravention of the Competition Act, 2002 by real estate developers.5. Evaluation of evidence and findings by CCI regarding anti-competitive practices.Issue-wise Detailed Analysis:1. Maintainability of the Petition under Article 226:The petition challenged the CCI's order under Article 226, arguing it was maintainable since no appeal to COMPAT was provided for in cases where CCI disagrees with the Director General's (DG) report. The court examined the applicability of precedent cases and the interpretation of relevant sections of the Competition Act. It was noted that the absence of a specific provision for appeal in such scenarios could render the petition maintainable.2. Appealability of the CCI Order to COMPAT:The court considered whether the CCI's order, which differed from the DG's findings, was appealable to COMPAT. Reference was made to Section 53A(1)(a) of the Competition Act, which allows appeals against certain CCI orders. The court discussed the implications of the absence of a specific sub-section in Section 26 for cases where CCI disagrees with the DG's report. The court expressed a prima facie view that an appeal might lie, but ultimately focused on the merits of the petition instead of resolving this legal question.3. Jurisdiction of CCI versus RERA:The court deliberated on whether the petitioner's grievance should be addressed by CCI or under the newly enacted RERA. The petitioner contended that the jurisdiction lies with CCI, as the RERA is prospective. The court did not make a conclusive determination on this issue, as it found no merit in the petition itself.4. Alleged Contravention of the Competition Act by Real Estate Developers:The petitioner alleged anti-competitive agreements among real estate developers, citing common practices in flat buyers' agreements. The DG's report suggested contravention of Sections 3(3)(a) and 3(3)(b) of the Competition Act. However, CCI found no sufficient evidence of any agreement or understanding among developers to substantiate these claims. The court agreed with CCI's reasoning, finding no evidence of a meeting of minds or common intention among developers to engage in anti-competitive practices.5. Evaluation of Evidence and Findings by CCI:The court reviewed the CCI's analysis and found no error in its conclusion that there was no contravention of the Competition Act. CCI had assessed the common practices in the real estate industry and determined they were inherent to the business rather than indicative of anti-competitive conduct. The court emphasized the lack of evidence showing any concerted action or agreement among developers to justify a finding of contravention under Section 3 of the Act.In conclusion, the court dismissed the petition, finding no merit in the allegations of anti-competitive practices and no error in the CCI's order. The court did not address the maintainability of an appeal or the jurisdictional issue concerning RERA, as these were rendered moot by the dismissal of the petition on factual grounds.