2025 (9) TMI 817 - HC - Law of Competition

Challenge to CCI order under Section 26(1) dismissed; Section 26(2-A) doesn't bar investigations into distinct complaints

Asian Paints Limited Versus Competition Commission of India New Delhi, Grasim Industries Limited (Birla Paints Division) Mumbai.

HC dismissed the challenge to the CCI order under Section 26(1), upholding its prima facie direction to the DG to investigate. The court held Section ... Anti-competitive practices - abuse of dominance position - Seeking setting-aside of the orders firstly uploaded on the website of the Respondent No. 1-Competition Commission of India (CCI) - seeking a direction to the CCI to re-examine the purported information/allegations submitted against it - HELD THAT:- Under Section 26(1) of Competition Act, if upon receipt of information, the Commission is of the opinion that a prima facie case exists, it may direct the DG to investigate. Section 26(2) empowers the Commission to close the matter forthwith if it is of the opinion that no prima facie case exists. Sections 26(3) to 26(6) relate to the processes to be followed by the Commission, after receipt of the DG’s report, both, in the event the Commission is inclined to proceed further or to close the matter. Under Section 26(6), the Commission is mandatorily empowered to close the matter after receipt of the DG’s report. In the event, the Commission is inclined to proceed with the matter and pass an order under Section 27 (after inquiry), it is specifically required to issue a show-cause notice to the party concerned, indicating the contraventions alleged to have been committed, the object being to give a reasonable opportunity of being heard to the party concerned. Thus, the Act guarantees for sufficient safeguards with respect to the rights of an affected party to have a full and fair hearing before any order is passed by the CCI, on receipt of a report of the DG, which may affect the rights of the parties. In the present petition, it is concerned essentially with Section 26(2-A), which is inserted by an amendment to the Act, and which came into effect from 18th May 2023. By the said amendment, the Commission has the discretion to decide not to inquire into any agreement if the same or substantially same issues are raised in the information received under Section 19, which issues have already been decided by the Commission in its previous order. The legislative intent behind this amendment, as noted in the Committee Report, was to avoid duplication of effort and to ensure expedition in disposal of matters - Thus, as is evident, the legislative intent behind the Competition (Amendment) Act of 2023 which inserted Section 26(2-A), that it was in the interest of expedience and to avoid repetition of the effort already undertaken by the CCI. It is not found that Section 26(2-A) creates any jurisdictional embargo on the CCI to entertain a representation, if the representation is found distinct/different from the earlier representation. The object of Section 26(2-A) is only to avoid repetition of the task already undertaken, and in the interest of expedience. Section 26(2-A) only cautions and the CCI to be mindful before considering the representation for the said reasons and cannot be interpreted to create any jurisdictional embargo, when a new complaint is made to CCI - CCI would be required to deal with the same i.e. Section 26(2-A), in its order only in cases where it decides to close the case by acting under Section 26(2) or Section 26(2-A) i.e. the CCI is of the view that ‘the same or substantially same facts and information raised in the information under Section 19 or reference from the Central Government or a State Government or a statutory authority, has already been decided by the CCI in its earlier order. Conversely, where CCI decides not to close the case under Section 26(2) or 26(2-A) and decides to direct the DG to cause an investigation to be made, the CCI is not required to give reasons why Section 26(2-A) is not applicable. It is well settled that no inherent right of hearing, oral/written, vests in the Petitioner at the stage of formation of a prima facie opinion. Whether or not to afford such hearing is a matter of discretion with the CCI, guided by the facts and circumstances of each case. The impugned order, being administrative in nature, merely records such opinion and directs the DG to undertake investigation. Thus, there is no merit in the Petitioner’s contention that he ought to have been heard in the facts. There are no infirmity in the impugned order passed by the CCI under Section 26(1) of the Act - petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether two versions of an order uploaded on the Authority's website (an unsigned draft and a subsequently uploaded signed order of the same date) render the impugned action invalid. 2. Whether an affected enterprise has a right to be heard prior to the Authority forming a prima facie opinion and directing the Director General to investigate under Section 26(1) of the Act. 3. The scope and legal effect of Section 26(2-A) of the Act: whether it creates a jurisdictional bar on the Authority to inquire into a subsequent information that raises the same or substantially the same facts and issues as a matter previously decided by the Authority, and whether the Authority is obliged to record reasons under Section 26(2-A) when it entertains a subsequent information. 4. Whether the impugned order directing investigation under Section 26(1) is susceptible to judicial review on merits at the interlocutory/administrative stage. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of two uploaded versions of the order (draft vs signed) Legal framework: Administrative correctness and authenticity of orders; requirement that a signed, authentic order be communicated to parties. Precedent treatment: No specific contrary precedent invoked; approach guided by ordinary principles of administrative action and communication. Interpretation and reasoning: The Court accepted the explanation that an unsigned draft was inadvertently uploaded and that the signed authentic order dated the same day was subsequently uploaded and furnished to the affected party by covering letter. The end result in both versions was identical and the party received the correct signed order. Ratio vs. Obiter: Ratio - inadvertent uploading of a draft where a signed order is subsequently uploaded and communicated does not vitiate the decision where the substantive outcome is identical and the correct order was furnished. Conclusion: No merit in challenge based on two uploaded versions; grievance rejected. Issue 2 - Right to hearing before formation of prima facie opinion under Section 26(1) Legal framework: Section 19(1)(a) empowers inquiry on information; Section 26(1) permits the Commission to direct the Director General to investigate where it is of the opinion that a prima facie case exists; Section 26(9) and later sub-sections prescribe show-cause and hearing requirements at the adjudicatory stage. Precedent treatment: Followed established rulings that orders under Section 26(1) are administrative/preparatory and do not attract a pre-direction right of hearing (principles drawn from prior authoritative decisions). Interpretation and reasoning: The Court reaffirmed that formation of a prima facie opinion under Section 26(1) is a preparatory administrative act and that there is no inherent right to an oral or written hearing at that stage. The Act affords procedural safeguards (show-cause notice and reasonable opportunity of being heard) at the stage after completion of investigation when the Authority proceeds to determine contravention. Whether to afford any representation at the prima facie stage is left to the Authority's discretion guided by facts and circumstances. Ratio vs. Obiter: Ratio - no entitlement to pre-investigation hearing before an order under Section 26(1); such orders are administrative and not judicial determinations of rights. Conclusion: Petitioners' contention that they were entitled to a hearing prior to the Section 26(1) direction is unsustainable. Issue 3 - Scope and effect of Section 26(2-A): jurisdictional bar, mandatory reasons and applicability when entertaining subsequent information Legal framework: Section 26(2) permits closure where no prima facie case exists; Section 26(2-A) (inserted by amendment) provides that the Commission may not inquire where the same or substantially the same facts and issues have already been decided by the Commission in a previous order. Legislative materials indicate purpose: avoid duplication and ensure expedition. Precedent treatment: The Court treated Section 26(2-A) as clarificatory and enabling of Section 26(2), following the legislative intent set out in the Committee report; distinguished authority relied upon by petitioner concerning different factual matrices. Interpretation and reasoning: Section 26(2-A) does not create a jurisdictional embargo preventing the Authority from entertaining a subsequent information that is distinct or raises different facts, context or provisions of the Act. The provision is aimed at preventing repetition where the Authority would close a matter on that ground; it is not an obligatory reason-recording threshold that must be satisfied whenever the Authority chooses instead to direct an investigation. Where the Authority elects to direct investigation under Section 26(1), it is not required to explain why Section 26(2-A) is inapplicable. The provision is clarificatory/enabling - it expressly enables closure where the same or substantially same issues already decided - but does not operate to bar fresh inquiries based on new material, different sections invoked, or a distinct factual matrix. The Authority must be mindful of Section 26(2-A) when considering closure, but may exercise discretion to investigate when prima facie material exists despite earlier dismissal of a different or insufficiently substantiated representation. Ratio vs. Obiter: Ratio - Section 26(2-A) is clarificatory and enabling of Section 26(2) and does not operate as an absolute jurisdictional bar to entertain subsequent information; no mandatory obligation to record reasons under Section 26(2-A) when the Authority, after awareness of earlier proceedings, forms a prima facie opinion and directs investigation under Section 26(1). Conclusion: Petitioner's submission that Section 26(2-A) mandated closure or precluded investigation absent recorded reasons is rejected; the Authority lawfully directed investigation having regard to material before it and awareness of earlier proceedings. Issue 4 - Justiciability of Section 26(1) direction at interlocutory stage Legal framework: Administrative nature of Section 26(1) directions; limits of High Court's scope in adjudicating administrative prima facie directions as opposed to final adjudicatory orders; statutory scheme for hearing and show-cause at later stages. Precedent treatment: Followed established authorities holding that Section 26(1) orders are administrative and not ordinarily amenable to merits-based judicial review at interlocutory stage; High Court not competent to adjudge merits of such prima facie administrative directions. Interpretation and reasoning: The Court reiterated that Section 26(1) directions are preparatory; they express a prima facie view sufficient to require investigation. Detailed reasons are not mandated at that stage beyond expressing that a prima facie case exists based on the information furnished. Merits review of such administrative opinions is inappropriate until investigation/report and subsequent adjudicatory steps occur where show-cause and hearing are provided by statute. Ratio vs. Obiter: Ratio - interlocutory judicial review of the merits of a Section 26(1) direction is generally inappropriate; challenges to such administrative directions on merits cannot be sustained prior to completion of the statutory inquiry process. Conclusion: The Court will not strike down or adjudicate the merits of the Section 26(1) direction; the petition seeking to preclude investigation on the basis of merits of the prima facie view is unsustainable. Overall Conclusion The Court found no infirmity in the Authority's action: (i) the inadvertent uploading of a draft did not vitiate the authentic signed order communicated to the party; (ii) there was no right to pre-investigation hearing under Section 26(1); (iii) Section 26(2-A) is clarificatory/enabling and does not operate as a jurisdictional bar to investigation where the Authority, on the material before it, forms a prima facie opinion; and (iv) the administrative prima facie direction is not amenable to merits adjudication at this interlocutory stage. The petition was dismissed as devoid of merits.