2024 (9) TMI 709 - HC - Law of Competition

Competition Commission procedural violations found but writ petition dismissed despite flawed status change

MRF Ltd. Versus Competition Commission of India Delhi, Director General Competition Commission of India Delhi, Joint Director General Additional Director General, Deputy Director General Delhi, State of Haryana Chandigarh

The Madras HC addressed a challenge to Competition Commission orders dated 01.11.2019 and 26.08.2020 regarding abuse of dominant position. The court held ... Abuse of dominant position - belated challenge to orders - change of status from 'participant' to 'opposite party'. Whether the challenge to orders dated 01.11.2019 and 26.08.2020 are belated and whether the Writ Petitions suffer from laches? - HELD THAT:- There is no delay in filing of these Writ Petitions, since one of the impugned orders have been provided to the petitioner only very proximate to the filing of the Writ Petitions. A copy of order dated 01.11.2019 was supplied to the petitioner under cover of letter dated 14.09.2020. At that juncture, the stand of the respondents had been that the role of the petitioner as a participant was only in the capacity of a ‘third party'. Since a copy of order dated 26.08.2020 has been supplied only on 01.03.2024, the petitioner was unaware that the furnishing of order dated 01.11.2019 was on account of the upgradation of its status. Thus, the participation of the petitioner in the proceedings does not either militate against the present challenges or amount to acquiescence thereof. Importantly, a photostat copy of order dated 26.08.2020 has been supplied to the petitioner only 01.03.2024 and the present writ petitions have been filed on 07.03.24. There is thus no delay in the petitioner approaching this Court. Whether the change of status of the petitioner from ‘participant’ to ‘party’/’opposite party’ in the reference is material and whether it is contrary to the provisions of law and the procedure contemplated under the Act and connected Regulations? - HELD THAT:- An entity is entitled to know the status under which its presence and participation is sought in statutory proceedings. The application of the statutory provisions and connected Regulations, their consequences, as well as available protections would vary depending on the status of the party. Thus, unless a party is aware as to the specific provision under which its involvement is sought and obtained, it would be in the dark as to the measures available to it under the law. There are serious consequences to an order passed by the Commission under Section 27 of the Act whereunder it may direct any enterprise found guilty of abuse of dominant position, to discontinue from, and not re-enter such agreement. It may also impose penalties as it may deem fit, upto 10% of the average turnover or income for the last three preceding financial years when the entity is found to have abused its dominant position. In the present case, a reference has been made by R6 on the basis of which the DG would directed to investigate the matter. The powers of the DG under Section 41 thus stand triggered. Section 41 provides for the powers to investigate similar to the powers under Section 136(2) conferred on the Commission. In the present case, a report dated 17.08.2020 has been furnished by the DG which has not been furnished to the petitioner. Sub-section (4) provides for the Commission to forward a copy of the report referred to in sub-section (3) and (3B) to the parties concerned. The term used in Section 26(4) is ‘parties’. Since a copy of the report u/s 26(3) has not been furnished to the petitioner, it is clear that it is still being treated on par with a third party to the proceedings. This is despite the updation in status exparte to contesting party, under order dated 26.08.2020 furnished to the petitioner in 2024 - In the present case, a report dated 17.08.2020 has been furnished by the DG which has not been furnished to the petitioner. Sub-section (4) provides for the Commission to forward a copy of the report referred to in sub-section (3) and (3B) to the parties concerned. The term used in Section 26(4) is ‘parties’. Since a copy of the report u/s 26(3) has not been furnished to the petitioner, it is clear that it is still being treated on par with a third party to the proceedings. This is despite the updation in status exparte to contesting party, under order dated 26.08.2020 furnished to the petitioner in 2024. This Court is of the view that the petitioner ought to have been given notice prior to impleadment as a party and the satisfaction of the authority as to the justification for such impleadment ought to have been made out by way of a speaking order. Petition dismissed. Issues Involved:1. Challenge to orders dated 01.11.2019 and 26.08.2020.2. Status change from 'participant' to 'opposite party'.3. Delay in filing the Writ Petitions and laches.4. Procedural irregularities and lack of transparency.5. Legal implications of being treated as a 'party' under the Competition Act, 2002.Issue-wise Detailed Analysis:1. Challenge to Orders Dated 01.11.2019 and 26.08.2020:The petitioner challenges the orders dated 01.11.2019 and 26.08.2020, along with the notice dated 02.02.2024. The genesis of the matter is a reference made by the Directorate of State Transport, Haryana under Section 19(1)(b) of the Competition Act, 2002 against JK Tyres. The Competition Commission of India (CCI) directed an investigation into suspected cartelization by tyre manufacturers, including the petitioner. The petitioner was initially treated as a 'third party' but later included as an 'opposite party' without notice.2. Status Change from 'Participant' to 'Opposite Party':The petitioner was initially involved as a 'third party' in the investigation. However, the order dated 26.08.2020 changed the petitioner's status to 'opposite party' without prior notice or opportunity to contest this change. The court noted that the petitioner was not informed about this status change until 01.03.2024, which has serious implications under the Competition Act, 2002. The court emphasized that an entity must be aware of its status in statutory proceedings to understand the legal protections and consequences applicable to it.3. Delay in Filing the Writ Petitions and Laches:The court addressed whether the Writ Petitions were delayed and if they suffered from laches. It was found that there was no delay in filing the petitions. The petitioner received the order dated 01.11.2019 only on 14.09.2020 and the order dated 26.08.2020 only on 01.03.2024. The Writ Petitions were filed on 07.03.2024, thus there was no undue delay in approaching the court.4. Procedural Irregularities and Lack of Transparency:The court observed significant procedural irregularities and lack of transparency in the conduct of the proceedings. The petitioner was not given notice or an opportunity to respond before being upgraded from a 'third party' to an 'opposite party'. The court noted that the authorities failed to provide the petitioner with the DG's report or the note proposing the investigation of additional tyre manufacturers. The court emphasized that the petitioner should have been informed and given a chance to contest its inclusion as an 'opposite party'.5. Legal Implications of Being Treated as a 'Party' under the Competition Act, 2002:The court discussed the legal implications of being treated as a 'party' under the Competition Act, 2002. The Act defines 'party' to include various entities such as consumers, enterprises, and government bodies. Being treated as a 'party' has significant consequences, including potential penalties and orders under Section 27 of the Act. The court highlighted that the petitioner should have been given notice and an opportunity to contest its status change, as the consequences of being an 'opposite party' are severe.Conclusion:The court dismissed W.P.No.6493 of 2024 and allowed W.P.Nos.6497 and 6502 of 2024. The order dated 26.08.2020 and notice dated 02.02.2024 were quashed. The respondents were given liberty to proceed with the matter in accordance with the observations made in the judgment and as per the law. The court emphasized the need for transparency and procedural fairness in statutory proceedings.