2023 (4) TMI 1387 - HC - Law of Competition

Supplier wins against unilateral rate revision after competition authority cleared dominant position allegations

PPS International Versus Union of India and 3 others

HC dismissed respondent's invocation of Book Examination Clause against petitioner supplier. Petitioner supplied SNS Assembly equipment per purchase ... Invocation of the 'Book Examination Clause' by the respondent - abuse of dominant position in violation of Sections 3 and 4 of the Competition Act, 2002 - unilateral revision of rates by the respondent without appealing the Competition Commission of India's (CCI) decision - HELD THAT:- The petitioner entered into an agreement with M/s Arthur Flury AG. The CORE floated the online global tender on their website for supply of 28 sets of SNS Assembly (Phase Breaks). The petitioner firm also participated in the global tender. The bid was opened on 18.10.2017 and the petitioner's bid was accepted. Consequently, the purchase order was given to the petitioner on 12.1.2018 for supply of 28 sets of SNS Assembly (Phase Breaks) for Rs. 2.31 crores. Admittedly, the said material was supplied by the petitioner firm. Meanwhile, another global tender was published by the CORE and the global bids were opened on 29.11.2017 for supply of 238 sets of SNS Assembly (Phase Breaks). The petitioner firm again participated in the said global tender and it's bid was accepted for supply of 176 sets, out of total tender quantity of 238 sets - Admittedly, in response of the purchase order dated 27.2.2018, the petitioner supplied the entire articles through various Challan-cum-Tax Invoices dated 26.6.2018 but instead of clearing the outstanding amount to the petitioner firm, the second respondent sent a letter dated 17.05.2018 stating that they have invoked “Book Examination Clause” for the present order as well as the previous order of 2013. The price trend does not support the allegation of abuse of dominant position made by the informant by artificially determining the sale price in terms of the provisions contained in Section 4(2)(a)(ii) of the Act, 2002. In view of the above assessment, the Commission was of the view that the petitioner does not appear to have abused its dominant position in terms of the provisions of Section 4 of the Act, 2002 and no case of contravention of the provisions of Section 4 of the Act, 2002 was made out against the petitioner, accordingly the matter was ordered to be closed in terms of the provisions contained in Section 26(2) of the Act, 2002 - there are no justification to entertain the writ petition to sit in appeal or to upset the findings recorded by the CCI in its order dated 27.8.2018, which was affirmed by the NCLAT in the order dated 23.1.2020 and in the review order dated 13.4.2022. A Constitutional Bench of Hon'ble Supreme Court in L. Chandra Kumar vs. Union of India [1997 (3) TMI 90 - SUPREME COURT] has held that the power vested in the High Courts to exercise judicial superintendence over the decisions of all courts and tribunals within their respective jurisdictions is also part of the basic structure of the Constitution and the decisions of Tribunals would be subject to the High Court’s Writ jurisdiction under Article 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls. A careful perusal of Section 53T of the Act, 2002 would show that an appeal to the Supreme Court is provided against “any order passed by the Appellate Tribunal”. Therefore, the appropriate remedy for the respondent was to file an appeal against the judgment and order dated 23.01.2020 passed by the Tribunal before Hon'ble Supreme Court of India in terms of the aforesaid provisions of the Act, 2002 within the period of limitation prescribed therein. Admittedly, the respondent did not prefer any appeal before Hon'ble Supreme Court neither within the period of limitation nor even any delayed appeal was filed after expiry of the limitation period. Conclusion - Once the respondent/CORE has lost the reference made on similar allegations of excessive pricing on the same material on record before the CCI, which are referred in the impugned orders, and the appeal and review preferred by the CORE before the NCLAT have also been dismissed, the findings arrived by the CCI has attained finality in the event of the order not challenged before Hon'ble Supreme Court in terms of Section 53T of Act, 2002, then the issue involved in the present writ petition stood settled and covered by the order passed by the CCI dated 27.08.2018. The impugned orders dated 12/13.9.2018 as well as demand notice dated 26.9.2018 are liable to be set aside - Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe judgment primarily revolves around the following core legal questions:Whether the invocation of the 'Book Examination Clause' by the respondent was justified under the circumstances of the contract.Whether the petitioner abused its dominant position in violation of Sections 3 and 4 of the Competition Act, 2002.Whether the unilateral revision of rates by the respondent without appealing the Competition Commission of India's (CCI) decision was lawful.Whether the writ petition is maintainable given the presence of an arbitration clause and alternative remedies.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Invocation of the 'Book Examination Clause'Relevant legal framework and precedents: The 'Book Examination Clause' is part of the Indian Railway Standard (IRS) conditions, allowing the examination of contractors' books to verify costs.Court's interpretation and reasoning: The court found that the clause was not part of the tender conditions and could not be invoked without the petitioner's consent.Key evidence and findings: The respondent invoked the clause citing excessive profits but failed to provide prior notice or include it in the tender conditions.Application of law to facts: The court held the invocation as arbitrary, lacking proper notice and justification.Treatment of competing arguments: The respondent argued the clause's statutory nature, while the petitioner contested its applicability without explicit inclusion in the contract.Conclusions: The court concluded the invocation was unjustified and arbitrary.Issue 2: Abuse of Dominant PositionRelevant legal framework and precedents: Sections 3 and 4 of the Competition Act, 2002 prohibit anti-competitive agreements and abuse of dominant position.Court's interpretation and reasoning: The CCI found no evidence of excessive pricing or abuse of dominance by the petitioner.Key evidence and findings: The CCI noted no continuous price increase trend, and the petitioner's pricing was not excessive.Application of law to facts: The court relied on CCI's findings, which were not challenged successfully by the respondent.Treatment of competing arguments: The respondent alleged monopolistic practices, while the petitioner relied on CCI's decision.Conclusions: The court upheld CCI's decision, finding no abuse of dominant position.Issue 3: Unilateral Revision of RatesRelevant legal framework and precedents: The CCI's decision was not appealed, making unilateral rate revision questionable.Court's interpretation and reasoning: The court noted that without appealing the CCI decision, the respondent's actions were arbitrary.Key evidence and findings: The respondent revised rates post-CCI decision without pursuing an appeal.Application of law to facts: The court found the respondent's actions lacked legal basis post-CCI decision.Treatment of competing arguments: The respondent's failure to appeal weakened their position.Conclusions: The court deemed the rate revision unlawful.Issue 4: Maintainability of the Writ PetitionRelevant legal framework and precedents: The presence of an arbitration clause and alternative remedies were considered.Court's interpretation and reasoning: The court held that alternative remedies do not bar writ jurisdiction in cases of arbitrariness and violation of Article 14.Key evidence and findings: The petitioner's claims of arbitrariness warranted judicial review despite alternative remedies.Application of law to facts: The court exercised its writ jurisdiction due to the arbitrary nature of the respondent's actions.Treatment of competing arguments: The respondent cited the arbitration clause, while the petitioner highlighted arbitrary actions.Conclusions: The writ petition was maintainable.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'Once the respondent had lost the Reference made on similar allegation of excessive pricing on the same materials on record before the CCI, which are referred in the impugned orders; thereafter, the Appeal and Review Application preferred by the CORE before the NCLAT have also been dismissed and the findings recorded by the CCI have attained finality then the issue involved in the present writ petition stood settled.'Core principles established: The court emphasized the importance of adhering to contractual terms and the necessity of appealing decisions before unilateral actions.Final determinations on each issue: The court set aside the respondent's orders and demand notice, directing payment to the petitioner.