2022 (10) TMI 1270 - HC - Law of Competition

HC dismisses challenge to CCI investigation order under Section 26(1) for alleged abuse of dominant position

The Telangana HC dismissed a petition challenging CCI's order under Section 26(1) of the Competition Act, 2002 directing investigation into alleged abuse ... Seeking a writ of mandamus to set aside the order passed by Respondent No. 1 under section 26(1) of the Competition Act, 2002 - jurisdiction to order an investigation into the alleged abuse of dominant position by the Petitioner - HELD THAT:- An order passed under S.26(1) of the Act, directing investigation by the Director General is an administrative order passed only to determine whether the allegations made by the informant under S.19 (1) of the Act, about possible violations of competition law are true. Once information is received under section 19(1) of the Act, CCI, based on the material produced by the informant has to form a prima facie opinion regarding the possible competition law violations. It is relevant to note that while forming a prima facie opinion, CCI has to only determine if the allegations along with the material produced are taken to be true, will that result in breach of competition law. CCI cannot determine the legality or correctness of the allegations by going into the merits of the case. It only has to see whether the allegations, prima facie, constitute violation of competition law. A same cause of action may have reliefs under different areas of law and the party aggrieved by the same can invoke both remedies. For instance, remedy for fraud is available under civil law which may include a claim of money and under criminal law the said fraud can be prosecuted under IPC. Similarly, a party may claim damages for defamation under tort law and also initiate criminal proceedings under S.499 of IPC. Therefore, it cannot be said that Respondent No. 2 could not have approached CCI with concerns of abuse of dominant position of Petitioner No. 1. A relief for breach of fundamental rights is independent from a relief sought aggrieved by abuse of dominance. Respondent No. 1/CCI was well within its jurisdiction to entertain information under S.19(1) of the Act, and order investigation on the basis of prima facie opinion. In the present case, there is no threat of contrary findings as breach of principles of natural justice by one party towards other has little or no bearing on abuse of dominance which effects the entire market. This Court has perused the order dated 3-10-2019. The said order is well-reasoned given that only a prima facie opinion was formed. Respondent No. 1 made it clear that no final opinion was expressed on the merits of the case. Therefore, according to this Court, the Director General shall complete investigation in accordance with law. Conclusion - The CCI had jurisdiction to order an investigation, the prima facie determination was valid, and the High Court should not interfere with the CCI's order. Petition dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the Competition Commission of India (CCI) had jurisdiction to order an investigation into the alleged abuse of dominant position by the Petitioner, given that similar reliefs were claimed in a pending writ petition before the High Court.Whether the order dated 3-10-2019 by the CCI directing an investigation under Section 26(1) of the Competition Act, 2002, was liable to be set aside on the grounds of jurisdictional overreach and lack of opportunity for the Petitioners to be heard.Whether the CCI's prima facie determination of abuse of dominance was valid, considering the Petitioner's contentions regarding the contractual nature of the dispute and alleged errors in market analysis.Whether the High Court should interfere with the CCI's order directing investigation under Article 226 of the Constitution of India.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Jurisdiction of the CCIRelevant legal framework and precedents: The CCI operates under the Competition Act, 2002, which empowers it to investigate anti-competitive practices. The court referred to precedents like SAIL v. CCI and Bharti Airtel Ltd. v. CCI, which clarify the CCI's jurisdiction and the nature of orders under Section 26(1) as administrative.Court's interpretation and reasoning: The court held that the CCI's jurisdiction to investigate competition issues is distinct from the High Court's jurisdiction over constitutional matters. The CCI's order was administrative and did not usurp the High Court's jurisdiction.Key evidence and findings: The court noted that the reliefs in the writ petition were based on constitutional grounds, while the CCI's investigation pertained to competition law issues.Application of law to facts: The court found that the CCI was within its rights to investigate potential competition law violations, irrespective of the pending writ petition.Treatment of competing arguments: The Petitioners argued that the CCI's actions were premature and usurped the High Court's jurisdiction. The court rejected these arguments, emphasizing the separate legal grounds for each proceeding.Conclusions: The CCI had jurisdiction to order an investigation, and the existence of a pending writ petition did not preclude this.Issue 2: Validity of the CCI's Prima Facie DeterminationRelevant legal framework and precedents: The court referenced SAIL v. CCI and Excel Crop Case Ltd. v. CCI to establish that a Section 26(1) order is based on a prima facie opinion and does not require detailed reasoning or a hearing.Court's interpretation and reasoning: The court held that the CCI's order was a preliminary administrative step, not a final determination, and thus did not require a hearing for the Petitioners.Key evidence and findings: The CCI's order was based on allegations of abuse of dominance and market analysis, which were deemed sufficient for a prima facie case.Application of law to facts: The court found that the CCI's determination was procedurally sound and based on sufficient prima facie evidence.Treatment of competing arguments: The Petitioners argued that the CCI's market analysis was flawed and that the dispute was purely contractual. The court dismissed these arguments, noting that the CCI's role was to investigate potential market-wide impacts.Conclusions: The CCI's prima facie determination was valid, and the investigation should proceed.Issue 3: High Court's Interference with CCI's OrderRelevant legal framework and precedents: The court relied on precedents like Flipkart Internet (P.) Ltd. v. CCI and TANGEDCO v. CCI, which limit judicial interference in CCI investigations.Court's interpretation and reasoning: The court emphasized that interference with CCI's orders under Section 26(1) should be rare and only in cases of clear abuse of process.Key evidence and findings: The court found no evidence of mala fides or jurisdictional overreach by the CCI.Application of law to facts: The court determined that the CCI's order was legally sound and did not warrant interference.Treatment of competing arguments: The Petitioners argued for interference based on alleged jurisdictional errors and procedural lapses. The court found these arguments unconvincing.Conclusions: The High Court should not interfere with the CCI's order, and the investigation should continue.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The jurisdiction of the Commission, to act under this provision, does not contemplate any adjudicatory function. The Commission is not expected to give notice to the parties... before forming its opinion.'Core principles established: The CCI's order under Section 26(1) is administrative and does not require a hearing; High Courts should not interfere with such orders unless there is clear evidence of abuse of process.Final determinations on each issue: The CCI had jurisdiction to order an investigation, the prima facie determination was valid, and the High Court should not interfere with the CCI's order.