2018 (12) TMI 2008 - HC - Law of Competition

Delhi HC upholds CCI proceedings against company directors under Section 48, rejecting challenge to vicarious liability provisions

Mahyco Monsanto Biotech (India) Private Ltd & Anr. And Monsanto Company Versus Competition Commission Of India & Ors

The Delhi HC dismissed appeals challenging CCI proceedings against company directors under Section 48 of the Competition Act. The court held that ... Hearing of appellants - issuance of notice to the Directors / Persons In-charge of the Company - vicarious liability of persons In-charge and responsible for the conduct of business of the Company. Whether before deciding the appeal in the case of Cadila [2018 (9) TMI 844 - DELHI HIGH COURT], the Division Bench was required to hear the appellants as the Division Bench has pronounced on the correctness of the CCI orders in two cases in Ministry of Agriculture v. M/s. Mahyco Monsanto Biotech Limited and connected matter [2016 (7) TMI 1705 - COMPETITION COMMISSION OF INDIA (LB)], which were under challenge in two writ petitions filed by the appellants herein? - HELD THAT:- No doubt the judgment passed by the CCI in Ministry of Agriculture and connected matter was under challenge before the learned Single Judge of this Court; the said judgment having been approved by the Division Bench in the case of Cadila, the appellants were required to be heard. In any case we have also heard the learned counsel for the appellants on the issues, which they had raised in their writ petitions or at least in their applications for amendment for additional grounds and which have been incorporated in these appeals and accordingly, proceed to decide the same. So, to that extent, the grievance of the appellants has been addressed. It is also necessary to note the only issue, which the Division Bench in Cadila has framed for its consideration, which has a bearing on the judgment passed by the CCI in Ministry of Agriculture and which was under challenge before the learned Single Judge by the appellants is question No.4 which reads, “Whether DG could have issued notice to Cadila Officials under Section 48”. That apart, the issue whether the penalty could have been imposed on the Officers / Directors only for contravention of Sections 42 to 44 of the Competition Act or also for contravention of Sections 3 and 4 of the said Act, is an issue, which was neither raised nor considered by the Division Bench in Cadila. Whether no notice can be issued to the Directors / Persons In-charge of the Company till the CCI returns a finding against the Company that it has indulged in anti-competitive activities under Sections 3 and 4 of the Competition Act? - HELD THAT:- The Division Bench in Cadila [2018 (9) TMI 844 - DELHI HIGH COURT] held that proceedings against company officials could occur without a prior finding against the company. The court referenced the judgment in Aneeta Hada, which clarified that the commission of an offence by the company is a condition precedent for vicarious liability. The court agreed with the interpretation that proceedings against individuals could occur simultaneously with those against the company, rejecting the appellants' contention that such proceedings should be separate. Whether Section 48 of the Competition Act, which provides for vicarious liability of persons In-charge and responsible for the conduct of business of the Company, will apply only on contravention of orders of CCI or DG under Sections 42 to 44 of the Competition Act and not to contravention of Sections 3 and 4 of the Competition Act? - HELD THAT:- There cannot be any dispute that if the Company and the Officers / Directors are being proceeded against for violation of Sections 3 and 4, there has to be a consequence for violation - there would not be any stipulation of penalty to be imposed on Officers / Directors even if they are found to be violating Sections 3 and 4. That cannot be the intent of Sections 27(b) and 48. Such a stipulation, surely requires a purposive interpretation. Further, it has been held by the Supreme Court in Board of Muslim Wakfs Rajasthan v. Radha Krishna & ors [1978 (10) TMI 149 - SUPREME COURT], that the construction which tends to make any part of the statute meaningless or ineffective must always be avoided and construction which advances the remedy intended by the statute should be accepted. The impugned order needs no interference. The appeals are dismissed. Issues Involved:1. Whether the Division Bench was required to hear the appellants before deciding the appeal in Cadila, as it pronounced on the correctness of CCI orders under challenge in writ petitions filed by the appellants.2. Whether no notice can be issued to the Directors/Persons In-charge of the Company until CCI finds the Company guilty of anti-competitive activities under Sections 3 and 4 of the Competition Act.3. Whether Section 48 of the Competition Act, which provides for vicarious liability, applies only to contraventions of orders under Sections 42 to 44 and not to contraventions of Sections 3 and 4.Issue-Wise Analysis:Issue No. 1:The court addressed whether the appellants should have been heard before the Division Bench decided the appeal in Cadila, which impacted CCI orders under challenge in the appellants' writ petitions. The court acknowledged that the appellants were required to be heard since the judgment in Cadila had a bearing on the CCI's orders under challenge. However, the court noted that it had heard the appellants on the issues they raised, thus addressing their grievance.Issue No. 2:The court examined whether notices could be issued to company directors or persons in charge before a finding of guilt against the company. The Division Bench in Cadila held that proceedings against company officials could occur without a prior finding against the company. The court referenced the judgment in Aneeta Hada, which clarified that the commission of an offence by the company is a condition precedent for vicarious liability. The court agreed with the interpretation that proceedings against individuals could occur simultaneously with those against the company, rejecting the appellants' contention that such proceedings should be separate.Issue No. 3:The court considered whether Section 48 applies only to contraventions of orders and not to contraventions of Sections 3 and 4. The appellants argued that penalties under Section 27, which refer to 'turnover,' could not apply to individuals. The court disagreed, stating that penalties could be imposed on individuals for violations of Sections 3 and 4, with 'turnover' interpreted as the income of the officers/directors from the company. The court emphasized a purposive interpretation to avoid rendering the penalty provisions ineffective. The court also rejected the argument that Section 48, falling under Chapter VI, relates solely to contraventions of Sections 42 to 44, noting that it encompasses contraventions of the Act's provisions, including Sections 3 and 4.Conclusion:The court dismissed the appeals, finding no merit in the appellants' arguments and determining that the impugned order required no interference. The court also dismissed related applications as infructuous.