2021 (9) TMI 1569 - HC - Law of Competition

CCI cannot review orders after Section 37 repeal, only rectify mistakes under Section 38

Eaton Power Quality Pvt Ltd. Versus Competition Commission Of India & Ors

Delhi HC held that CCI lacks power to review its orders following repeal of Section 37 of Competition Act 2002. The court distinguished between review ... Acquisition of the electrical and automation business - implementation of two of the modifications or remedies that were proposed by the CCI in its Approval Order, being the remedy of `White Labelling’, and the consequential `Non-exclusive technology transfer’ licences which were to be given - primary contention raised on behalf of the Petitioner- Eaton is that CCI does not have the statutory power of Review and hence the impugned order, which seeks to Review the earlier order dated 7th January, 2020, is bad in law. HELD THAT:- The question as to whether the CCI has the power of Review or not, is no longer res integra and the same has been considered in various decisions of this Court. It is important to note that Section 37 of the Act of 2002, was, however, repealed by Competition (Amendment) Act of 2007, and the said provision no longer exists on the statute book. It is under the now repealed Section 37 that any aggrieved person, who did not avail of the remedy of an appeal, could have sought a Review of the CCI’s order before the CCI. The CCI had to, then, compulsorily provide a hearing and make such order as it makes fit. However, the said provision has been expressly repealed now and has no application to this case - Insofar as Section 38 of the Act of 2002 is considered, the same provides for rectification of a mistake apparent from the record, in respect of which the CCI could pass an order rectifying the said mistake. Such a mistake can be rectified either suo moto, or upon an application of the party. There need not even be a written application as the words used are “mistake…brought to its notice”. The explanation to Section 38 makes it further abundantly clear that while rectifying a mistake, the substantive part of the order cannot be amended. In Google [2015 (4) TMI 1234 - DELHI HIGH COURT], the Division Bench, framed a question as to whether at the stage of Section 26(1) of the Act of 2002, the CCI has the power to Recall/Review an order directing/causing investigation. The Division Bench, after considering in detail the submissions made on behalf of the parties, held that even though while making an order under Section 26(1), as held in Competition Commission of India v. Steel Authority of India Ltd. [2010 (9) TMI 215 - SUPREME COURT], the CCI is not required to hear the person, there can be no inference that even if a party approaches the CCI for Recall or Review, such party is not to be heard. In Cadila Healthcare Ltd. v. Competition Commission of India [2018 (9) TMI 844 - DELHI HIGH COURT], a ld. Division Bench of this court again considered the power of Review/Recall of the CCI of an order passed under Section 26(1) of the Act of 2002. The conclusion of the Division Bench in Cadila was that in proceedings under Section 26 of the Act of 2002, which was held to be administrative in nature, i.e., during the course of investigation, Review/Recall application can be filed, however, only if an egregious fraud or a mistake which is covered by Section 38 exists. Apart from these circumstances power to Review/Recall does not exist with the CCI. From the facts stated in the affidavit, it is clear that the negotiations are at an advanced stage with some parties. The exchange of correspondence, mentioned in the Affidavit dated 26th July 2021, shows that there are continuous talks going on between Schneider, MA and the four parties, however the White Labelling Agreements have not yet been finalized yet. Schneider claims that the applicants in the said Arrangements have repeatedly requested rescheduling and extensions. To the extent that it is relevant to the present writ petition, it is important to note is that while CCI sought to exclude Eaton vide the impugned order, on the ground of the delay in the conclusion of White Labelling Arrangements as in August, 2020, till date, i.e., after more than a year having passed since the date of closing, the said arrangements have not been concluded. Further, considering the fact that Eaton was itself responsible for having not submitted the documents in terms of the advertisement, and its offer to the EOI being non-responsive, as also the direction clearly provided in the portal, it ought not to be allowed to completely upset the negotiations which are currently underway and are at an advanced stage - There is, in effect, no clarity as to why Eaton failed to submit the documents in time, when the EOI, as also the instructions on the portal were categorical and brooked no ambiguity. However, Eaton cannot also be indefinitely excluded as the intention of the Approval order is to expand and enlarge the number of players in the market, so as to increase competition. Conclusion - The CCI does not have the power to review its orders post the repeal of Section 37. Orders affecting substantive rights must adhere to principles of natural justice. Since CCI does not enjoy the power of Review, the impugned order is not sustainable in law - petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in the judgment are:Whether the Competition Commission of India (CCI) possesses the statutory power to review or recall its own orders, particularly in the context of the order dated 7th January 2020, which included Eaton in the White Labelling process.Whether the CCI's order dated 7th January 2020, including Eaton in the White Labelling process, was procedurally valid, given that it was passed without notice or hearing to Schneider.Whether the subsequent order dated 24th August 2020, which excluded Eaton from the White Labelling process, was justified and lawful.What relief, if any, should be granted to Eaton in light of the procedural and substantive issues identifiedRs.2. ISSUE-WISE DETAILED ANALYSISIssue 1: CCI's Power to Review/Recall OrdersLegal Framework and Precedents: The Competition Act, 2002, initially included Section 37, which allowed for the review of CCI orders, but this section was repealed by the Competition (Amendment) Act, 2007. Section 38 allows for the rectification of mistakes apparent on the record but does not permit substantive changes to an order.Court's Interpretation and Reasoning: The court noted that the CCI does not have the power to review its orders post the repeal of Section 37. The power to rectify under Section 38 does not extend to substantive changes, such as those made in the order dated 24th August 2020.Conclusion: The CCI's order dated 24th August 2020, which effectively reviewed and nullified its previous order, was beyond its statutory powers and thus not sustainable in law.Issue 2: Procedural Validity of the Order Dated 7th January 2020Relevant Legal Framework: The principles of natural justice require that parties affected by a decision have the right to be heard.Court's Interpretation and Reasoning: The court found that the CCI's order dated 7th January 2020, which included Eaton in the White Labelling process, was passed without notice or hearing to Schneider. This was procedurally flawed as it affected Schneider's rights without giving it an opportunity to present its case.Conclusion: The order dated 7th January 2020 was procedurally invalid due to the lack of adherence to principles of natural justice.Issue 3: Justification of the Order Dated 24th August 2020Relevant Legal Framework: The CCI's role is to ensure fair competition and adherence to the modifications stipulated in the Approval Order.Court's Interpretation and Reasoning: The court observed that the CCI's decision to exclude Eaton was primarily based on the delay in the White Labelling process. However, this reasoning was inconsistent with the CCI's earlier position that wider participation was desirable.Conclusion: The order dated 24th August 2020 was not justified as it was based on inconsistent reasoning and was beyond the CCI's power to review.Issue 4: Relief for EatonApplication of Law to Facts: The court considered the procedural flaws in both the orders and the current status of negotiations in the White Labelling process.Conclusions: The court decided not to remand the matter back to the CCI, as that would further delay the process and affect the public interest. Instead, it provided specific directions to balance the interests of all parties.3. SIGNIFICANT HOLDINGSCore Principles Established: The CCI does not have the power to review its orders post the repeal of Section 37. Orders affecting substantive rights must adhere to principles of natural justice.Final Determinations on Each Issue:The order dated 24th August 2020 is set aside due to lack of statutory power to review.The order dated 7th January 2020 is also deemed procedurally flawed.Specific directions were given to Schneider to conclude ongoing negotiations and include Eaton in future opportunities.The court's decision emphasizes the importance of procedural fairness and adherence to statutory powers in regulatory decisions affecting competition and market dynamics.