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2019 (6) TMI 1700 - COMPETITION COMMISSION OF INDIA Law of Competition

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No Antitrust Violations Found in Online Sales Restrictions and Pricing Policies; Case Closed.
The Commission concluded that there were no violations of the Competition Act in the allegations against the Opposite Parties (OPs) concerning restrictions on online sales, the Market Infiltration Policy (MIP), Minimum Operation Price (MOP) practices, and alleged cartel facilitation at the retailer level. The Commission determined that the restrictions did not adversely affect competition, as Vivo products were available through multiple channels, and the MIP and MOP policies did not lead to an Appreciable Adverse Effect on Competition (AAEC). Furthermore, the cartel allegation lacked evidence. Consequently, the case was closed under Section 26(2) of the Act, with no action taken against the OPs.

Exclusive distribution agreement - resale price maintenance - territorial allocation / market infiltration policy - restriction on online sales - appreciable adverse effect on competition (AAEC) - relative market power - agreement among enterprises at different stages or levels of the production chain - facilitation of cartel / concerted conduct at retailer level - Section 3(4) of the Competition Act, 2002 - Section 3(3) of the Competition Act, 2002Restriction on online sales - exclusive distribution agreement - appreciable adverse effect on competition (AAEC) - Restriction imposed by OP-1 on distributors/retailers from selling Vivo products via online platforms does not contravene Section 3(4) and does not cause or is not likely to cause AAEC in the market for sale and distribution of smartphones in India. - HELD THAT: - The Commission found that Vivo products were readily available to consumers through multiple e-commerce portals and via the official Vivo e-store, and that the Primary Distribution Agreement between OP-2 and OP-1 related to offline sales and did not grant OP-1 exclusive rights over online sales. Given availability of alternative channels and absence of supply withholding to consumers, the contested clause in the Secondary Distributorship Agreement did not directly restrict consumer access or withhold supply and therefore was not likely to cause AAEC. The Informants also had the option to exit the distributorship and no exit barriers were established.No contravention of Section 3(4)(c) insofar as the restriction on online sales is concerned.Territorial allocation / market infiltration policy - agreement among enterprises at different stages or levels of the production chain - appreciable adverse effect on competition (AAEC) - The Market Infiltration Policy (MIP) enforced by OP-1 (territorial/geographic restrictions and penalties for infiltration) does not, on the material before the Commission, cause or is likely to cause AAEC in the relevant market and therefore does not contravene Section 3(4)(c). - HELD THAT: - The Commission accepted that OP-1 enforced the MIP, but OPs justified the policy on grounds of protecting investments of distributors/retailers, preventing counterfeits through IMEI tracking, enabling accurate computation of rewards, and preventing predatory pricing. The Informants did not dispute that they were free to deal in other brands within or outside their territory. In light of the facts, prior Commission reasoning in similar matters, and absence of evidence of foreclosure, entry/exit barriers, or consumer harm, the MIP was not found to produce AAEC in the market for sale and distribution of smartphones in India.No contravention of Section 3(4)(c) on account of the MIP.Resale price maintenance - minimum operating price (MOP) - appreciable adverse effect on competition (AAEC) - The imposition of a suggested Minimum Operating Price (MOP) by OP-1, resulting in alleged resale price maintenance, does not, on the record, cause or is likely to cause AAEC in the relevant market and thus does not contravene Section 3(4)(e). - HELD THAT: - The Commission noted the presence of multiple distributors and retailers, extensive online availability, and intense inter-brand competition in the smartphone market. The Informants failed to establish that the MOP produced adverse effects on competition or that distributors were locked in without alternatives. Given consumer access to competitive prices and the distributors' ability to switch brands, the MOP did not amount to RPM causing AAEC.No contravention of Section 3(4)(e) in relation to the MOP/RPM allegation.Facilitation of cartel / concerted conduct at retailer level - Section 3(3) of the Competition Act, 2002 - The allegation that the OPs facilitated or contributed to a cartel among retailers under the aegis of AIMRA in contravention of Section 3(3) is not substantiated by evidence and is rejected. - HELD THAT: - The Informants advanced a general allegation of OPs facilitating a retailer-level cartel but did not implead any retailers or AIMRA or furnish tangible evidence to substantiate facilitation or concerted conduct. The OPs controverted the claim and the Commission found the allegation to be unsubstantiated on the record.No case made out for contravention of Section 3(3).Relative market power - appreciable adverse effect on competition (AAEC) - OPs do not possess such relative market power as to cause AAEC on the basis of combined or single-brand market shares as per the material on record. - HELD THAT: - The Commission examined publicly available market-share data (IDC, shipment data) and the parties' submissions regarding corporate relationships. The Informants' contention that the market shares of brands alleged to be part of a single corporate group (BBK brands) should be aggregated was not supported by evidence of common control or shared decision-making. On the available data, the OPs did not demonstrate market dominance or sufficient influencing power to cause AAEC.Market power insufficient to establish AAEC; combined-market-share aggregation claim rejected for lack of evidence of common control.Final Conclusion: The Commission, after examining the Information, submissions and available market data, found no prima facie case of contravention of Sections 3(4) or 3(3) of the Competition Act, 2002 by the Opposite Parties and accordingly closed the matter under Section 26(2).

2019 (7) TMI 522 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI Law of Competition

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Issues Involved:
1. Whether the Tribunal erred in declining to sanction the scheme of demerger due to pending investigations.
2. Whether the Tribunal failed to consider the prayer for dispensation of meetings of creditors and shareholders.
3. Whether the Tribunal overstepped its jurisdiction by examining the merits of the scheme at the preliminary stage.

Issue-wise Detailed Analysis:

1. Tribunal's Refusal to Sanction the Scheme of Demerger Due to Pending Investigations:
The Tribunal declined to sanction the scheme of demerger on the ground that several issues were pending finalization and certain investigations were pending in relation to the business of the demerged company. The Appellants argued that the pending investigations, registered as Spl. CC No. 12/2016 and Spl. CC No. 471/2016, were unrelated to the proposed demerger and should not impede the approval process. The Tribunal's decision was based on these pending issues, but the Appellants contended that the demerger scheme was not related to the mining business under investigation, and thus, the pending investigations would not impact the demerger.

2. Tribunal's Failure to Consider the Prayer for Dispensation of Meetings:
The Appellants submitted that they had filed applications for the dispensation of meetings of their creditors and shareholders, supported by consent affidavits from 100% of the shareholders of each company, 100% of the creditors of the resulting companies, and 97.18% of the creditors of the demerged company. The Tribunal rejected the applications without considering these consent affidavits or directing the convening of meetings, which the Appellants argued was a breach of the mandatory provisions under Section 230(1) of the Companies Act, 2013. The Tribunal's refusal to either dispense with or direct the calling of meetings was seen as a failure to adhere to the statutory requirements.

3. Tribunal Overstepping its Jurisdiction:
The Tribunal was criticized for overstepping its jurisdiction by examining the merits of the proposed scheme of demerger at the preliminary stage. According to the Appellants, the Tribunal's role at this stage was limited to ordering the meeting of creditors or members or dispensing with such meetings if 90% of the value of creditors or members agreed to the scheme. The Tribunal's decision to reject the scheme on merits without first obtaining the consent of creditors/members or directing meetings was deemed premature and beyond its jurisdiction. The Tribunal was required to call for meetings or dispense with them based on the consent affidavits before delving into the merits of the scheme.

Conclusion:
The Tribunal's order was set aside due to its failure to comply with the mandatory provisions of Section 230(1) of the Companies Act, 2013, and for overstepping its jurisdiction by examining the merits of the scheme at the preliminary stage. The matter was remanded back to the National Company Law Tribunal, Bengaluru Bench, for further proceedings in accordance with the observations made and the provisions of law, ensuring that the consent of creditors/members is obtained or meetings are convened as required.

Tribunal's Overreach: Decision Overturned for Prematurely Assessing Demerger, Sent Back for Proper Procedures.
The Tribunal's decision was overturned due to non-compliance with Section 230(1) of the Companies Act, 2013, and for exceeding its jurisdiction by assessing the merits of the demerger scheme prematurely. The case was remanded to the National Company Law Tribunal, Bengaluru Bench, for further proceedings, with instructions to adhere to legal requirements by obtaining the consent of creditors and members or convening necessary meetings.

Power to order meeting for compromise or arrangement under Section 230 - Dispensing with meetings where 90% consent exists (Section 230(9)) - Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Effect of pending investigations on sanction of a scheme of demerger - Sanction of reconstruction/merger/amalgamation under Section 232Power to order meeting for compromise or arrangement under Section 230 - Dispensing with meetings where 90% consent exists (Section 230(9)) - Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Whether the Tribunal was obliged, at the threshold stage, to either call meetings of creditors/members or dispense with such meetings where requisite affidavits of consent were filed, before adjudicating on sanction of the scheme. - HELD THAT: - The Tribunal is required, on an application under Section 230 read with Section 232, to order calling of meetings of creditors or members for consideration of the proposed compromise or arrangement unless it dispenses with such meetings under Section 230(9) where creditors/members holding at least ninety per cent in value have filed affidavits consenting to the scheme. This procedural mandate is a preliminary requirement and the Tribunal is not entitled at that stage to examine the merits of the proposed scheme. Where affidavits evidencing the required consent are filed, the discretion vested in the Tribunal is to either dispense with meetings under sub-section (9) or to call the meetings; declining to follow either course and proceeding to decide the scheme on merits at the threshold stage constitutes a breach of the statutory procedure and is without jurisdiction. The impugned order declined sanction without addressing dispensation or calling of meetings despite the filing of consent affidavits by 100% of shareholders of each company, 100% of creditors of the Resulting Companies and 97.18% of creditors of the Demerged Company, and therefore cannot be sustained. [Paras 5, 6]Impugned order set aside to the extent it dismissed the applications on merits at the threshold; the Tribunal erred in failing to either call the meetings or dispense with them under Section 230(9) before adjudicating the scheme.Effect of pending investigations on sanction of a scheme of demerger - Whether pendency of investigations/proceedings in respect of past transactions or other business activities of the Demerged Company is a legal impediment to sanctioning the proposed scheme of demerger. - HELD THAT: - Pendency of criminal or other investigations in relation to past transactions does not, by itself, constitute a legal bar to the sanction of a scheme of demerger. The scheme can be sanctioned subject to and without prejudice to any liability in civil or criminal proceedings arising out of past events; such liabilities continue notwithstanding sanction. The Tribunal therefore ought not to have treated pending investigations as an absolute impediment to proceed with the scheme at the stage when the statutory requirement of calling or dispensing with meetings was to be determined. [Paras 7]Pending investigations cannot be treated as an automatic impediment to sanctioning the demerger; any liability in civil or criminal proceedings in respect of past transactions will continue despite sanction.Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Whether the matter should be remanded to the Tribunal for further proceedings in accordance with the statutory scheme after rectifying the procedural error. - HELD THAT: - Given the Tribunal's failure to comply with the procedural mandate under Section 230 by neither calling meetings nor dispensing with them despite requisite affidavits of consent, the appropriate course is to set aside the impugned order and remit the matter to the Tribunal. The Tribunal is directed to proceed further in the light of the observations in this judgment and the provisions of law, hear the parties and take steps either to call the necessary meetings or to dispense with them in accordance with Section 230(9), and thereafter consider sanction in accordance with law. [Paras 8]Matter remanded to the National Company Law Tribunal, Bengaluru Bench for fresh consideration in accordance with this judgment and the statutory provisions, after hearing the parties.Final Conclusion: The impugned order of the Tribunal is set aside. The appeals are allowed and the matter is remitted to the National Company Law Tribunal, Bengaluru Bench to proceed afresh in accordance with the statutory scheme - namely by calling meetings or dispensing with them under Section 230(9) as appropriate, hearing the parties, and then considering sanction of the demerger scheme; pending investigations do not ipso facto preclude sanction and any liabilities arising therefrom remain unaffected.

2019 (4) TMI 2167 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Law of Competition

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1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

Whether the Kerala Cement Dealers Association (KCDA) engaged in anti-competitive practices in violation of Section 3(3) read with Section 3(1) of the Competition Act, 2002.
Whether the alleged conduct of KCDA and associated cement manufacturers, particularly Ramco and Dalmia Cements, constituted a cartel or anti-competitive agreement affecting the supply and pricing of cement in Kerala.
Whether the Competition Commission of India (CCI) appropriately evaluated the evidence and applied the law in closing the case without finding a contravention of the Act.
Whether the appeals against the CCI's decision to close the matter are maintainable under the provisions of the Competition Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Anti-Competitive Practices by KCDA

Relevant legal framework and precedents: Section 3(1) of the Competition Act prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition. Section 3(3) specifically addresses agreements that directly or indirectly determine purchase or sale prices, limit or control production, supply, or markets, or result in bid rigging or collusive bidding.
Court's interpretation and reasoning: The court examined whether there was an agreement between KCDA and cement manufacturers that resulted in anti-competitive effects. The court noted that an agreement requires a meeting of minds and that the evidence must demonstrate such an agreement.
Key evidence and findings: The investigation revealed no substantial evidence of KCDA's involvement in appointing or terminating dealers or influencing the supply of cement. The supplementary investigation reports did not find persuasive evidence of KCDA's role in anti-competitive conduct.
Application of law to facts: The court applied the provisions of Section 3, concluding that the evidence did not support the existence of an anti-competitive agreement involving KCDA.
Treatment of competing arguments: The appellants argued that KCDA played a pivotal role in controlling dealership appointments and supply, but the court found these allegations unsubstantiated by the evidence.
Conclusions: The court concluded that there was no contravention of Section 3 by KCDA, as the evidence did not demonstrate an agreement or conduct that adversely affected competition.

Issue 2: Alleged Cartelization and Price Fixing

Relevant legal framework and precedents: Section 3(3) presumes agreements that fix prices or limit supply to have an appreciable adverse effect on competition.
Court's interpretation and reasoning: The court considered the evidence related to a meeting where cement dealers were allegedly exhorted not to sell below the invoice price. It assessed whether this constituted price fixing.
Key evidence and findings: The second supplementary investigation report found evidence of exhortation by Ramco, Dalmia, and KCDA representatives, but the court noted that such exhortation did not necessarily equate to an anti-competitive agreement.
Application of law to facts: The court determined that the exhortation did not have a direct and proximate nexus with price fixing, especially given the diverse market conditions and the rationale behind avoiding sales below invoice price.
Treatment of competing arguments: The appellants contended that the exhortation was indicative of cartel behavior, but the court found the rationale provided by the manufacturers plausible and not indicative of a cartel.
Conclusions: The court concluded that the evidence did not support a finding of cartelization or price fixing by KCDA and the cement manufacturers.

Issue 3: Evaluation by CCI and Maintainability of Appeals

Relevant legal framework and precedents: Sections 26 and 53 of the Competition Act outline the procedures for investigation and appeal.
Court's interpretation and reasoning: The court examined whether the CCI properly evaluated the investigation reports and evidence, and whether the appeals were maintainable.
Key evidence and findings: The CCI found no substantial evidence of anti-competitive conduct and closed the case. The court agreed with this assessment, noting the lack of persuasive evidence.
Application of law to facts: The court applied the procedural requirements under the Act and found that the CCI's decision was within its discretion and based on the evidence.
Treatment of competing arguments: The appellants argued that the CCI failed to consider key issues, but the court found that the CCI had adequately addressed the relevant concerns.
Conclusions: The court upheld the CCI's decision to close the case and found the appeals maintainable but without merit.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Commission, while disagreeing with the second supplementary investigation report of the DG in regard to contravention of Section 3 of the Act for lack of substantive evidence, accepted the conclusions arrived at by DG in main as well as supplementary investigation report that complicity of KCDA in award or termination of cement dealership was not disclosed by the material assembled during investigation."
Core principles established: The court reinforced that anti-competitive agreements require clear evidence of a meeting of minds and that exhortations or suggestions without a direct impact on competition do not constitute a violation of Section 3.
Final determinations on each issue: The court dismissed the appeals, affirming the CCI's decision to close the case due to insufficient evidence of anti-competitive conduct by KCDA and associated parties.

Competition Commission order upheld dismissing anti-competitive practices allegations against cement manufacturers and dealers association
NCLAT dismissed appeal challenging Competition Commission's order regarding alleged anti-competitive practices by cement manufacturers and dealers association. The tribunal upheld Commission's finding that no contravention of Section 3(3) read with Section 3(1) of Competition Act was established. Investigation revealed dealers association had no role in appointment/termination of dealers, which remained manufacturers' prerogative. Isolated instances of two manufacturers withdrawing post-sale discounts insufficient to prove anti-competitive agreement. Court emphasized anti-competitive agreements require clear evidence of meeting of minds, and mere exhortations without direct competitive impact don't constitute violations.

Maintainability of appeal - Anti-competitive practices - abuse of dominant position - bid-rigging - contravention of Section 3(3) r/w Section 3(1) of the Competition Act, 2002 - Whether the Commission was justified in overturning the finding of DG in regard to alleged contravention of Section 3 of the Act? - Price fixation. Maintainability of appeal - HELD THAT:- Since the Commission found some deficiencies in investigation, it directed the DG to examine all relevant issues including the deficiencies pointed out by the Commission. Further investigation was carried out by DG culminating in filing of supplementary investigation report, wherein, DG reiterated its earlier conclusions and observed that KCDA had no role in appointing or terminating the dealers, which was the sole prerogative of cement manufacturers. It also found that KCDA had no role in regard to supply of cement by the cement manufacturers to dealers, which purely depended on market considerations. The supplementary investigation report thus further reinforced conclusions arrived at in the main investigation report - the Commission closed the matter largely agreeing with the recommendation of DG though disagreeing with its finding regarding contravention of Section 3 noticed hereinabove passing the order within the ambit of Section 26(6) of the Act which is appealable in terms of Section 53-B r/w Section 53-A clause (a) of the Act. Objection raised by the Commission in regard to maintainability of appeal being devoid of merit is accordingly overruled. Whether the Commission was justified in overturning the finding of DG in regard to alleged contravention of Section 3 of the Act? - HELD THAT:- Clause 05 of Annexure A11 provides that any new appointment of stockists/dealers shall be as per understanding with KCDA. Normally, grant of dealership or appointment of stockists should rest exclusively with the cement manufacturing company. Merely because the cement manufacturer has an understanding with the Cement Dealers Association in regard to grant of dealership or appointment of stockists does not imply that a role is assigned to KCDA in appointment of stockists/dealers - The allegations emanating from the Appellants /Informants in regard to termination of dealership and stoppage of supplies to dealers have been inquired into by the Commission and on the basis of available evidence it has been found to be attributable to reasons peculiar to the dealer/ stockists. CCI appears to have considered these documents to arrive at a finding that there was no meeting of minds between KCDA and the cement manufacturers in regard to grant or termination of dealership. No fault can be found with the conclusions drawn by the Commission on consideration of the available material, moreso as the investigation found that there were several cement dealers in Kerala who were not members of KCDA - in arriving at the conclusion that no case of contravention of Section 3(3) r/w Section 3(1) of the Act was made out was largely influenced by the fact that the investigation reports consistently concluded that there was no material to attribute any role to KCDA in award or termination of dealership. Price fixation - HELD THAT:- An isolated instance of merely two manufacturers out of a large number of manufacturers of a product withdrawing post sale discounts would not necessarily be a proof of an anti- competitive agreement, moreso, as the rationale behind the same as noticed above has been explained. While it is true that the aforestated exhortation on the part of KCDA jointly with the two odd cement manufacturers to dealers would impinge on the fair concept of competition, the same would not fall within the mischief of Section 3(3) r/w Section 3(1) of the Competition Act. Conclusion - The anti-competitive agreements require clear evidence of a meeting of minds and that exhortations or suggestions without a direct impact on competition do not constitute a violation of Section 3. The impugned order does not suffer from any legal infirmity and the conclusions drawn on evaluation of material are not erroneous - Appeal dismissed.

2019 (4) TMI 2107 - DELHI HIGH COURT Law of Competition

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Issues: (i) Whether the Competition Commission of India discharges exclusively adjudicatory functions so as to be treated as a tribunal exercising judicial power; (ii) whether the composition and control provisions of the Competition Act, 2002 violate separation of powers and the requirement of judicial independence; (iii) whether the casting vote and quorum scheme in Section 22(3) is unconstitutional; (iv) whether the revolving-door participation of members vitiates the proceedings; (v) whether the expansion of investigation under Section 26(1) was unlawful; (vi) whether Section 27(b) and Regulation 48(1) are unconstitutional for want of a separate penalty hearing and clear guidelines.

Issue (i): Whether the Competition Commission of India discharges exclusively adjudicatory functions so as to be treated as a tribunal exercising judicial power.

Analysis: The statutory scheme gives the Commission inquisitorial, investigative, regulatory, advisory and advocacy functions, while final orders under Sections 26 and 27 are quasi-judicial. Formation of a prima facie opinion and direction of investigation are administrative in nature; only after the report is received and the parties are heard does the Commission enter the adjudicatory phase.

Conclusion: The Commission is not a tribunal exercising exclusively judicial power, though its final orders are quasi-judicial.

Issue (ii): Whether the composition and control provisions of the Competition Act, 2002 violate separation of powers and the requirement of judicial independence.

Analysis: The Court applied the settled distinction between pure tribunals created to replace courts and regulatory bodies that combine administrative, investigative and adjudicatory roles. Since the Commission is a composite regulator and not a substitute for a traditional court, the mere absence of a predominantly judicial composition or the existence of governmental supervisory provisions does not by itself invalidate the statute. The bar on civil court jurisdiction and the appellate structure were also upheld in principle.

Conclusion: The challenge based on separation of powers and lack of judicial independence failed, except to the extent specifically dealt with under the other issues.

Issue (iii): Whether the casting vote and quorum scheme in Section 22(3) is unconstitutional.

Analysis: A casting vote is consistent with ordinary board administration, but it is incompatible with a quasi-judicial decision-making process where each participating member must apply an equal mind and the decision must reflect collegial adjudication. The provision enabled an unequal weighting of opinions and could distort the outcome of adjudication. The quorum proviso by itself was not objectionable.

Conclusion: Section 22(3) was held unconstitutional and void, except for the proviso prescribing a quorum of three Members.

Issue (iv): Whether the revolving-door participation of members vitiates the proceedings.

Analysis: The Court held that the mere possibility of changing membership during proceedings does not automatically invalidate the provision. On the facts, the members who finally decided the matter had heard the final arguments, and the intervening participation of a member who did not sign the final order did not by itself cause legal prejudice. However, the Court directed that final hearings must ordinarily be heard and decided by the same membership.

Conclusion: The revolving-door complaint did not render the provision or the impugned decision invalid, though procedural safeguards were directed for future cases.

Issue (v): Whether the expansion of investigation under Section 26(1) was unlawful.

Analysis: The Commission may direct investigation into the matter, and the Director General is not confined rigidly to the named entities if the investigation reveals a broader pattern of anti-competitive conduct. The Supreme Court's construction in Excel Crop Care permitted investigation into allied or additional actors where the conduct was system-wide and the statutory objective required a complete inquiry.

Conclusion: The expansion of the investigation was held valid.

Issue (vi): Whether Section 27(b) and Regulation 48(1) are unconstitutional for want of a separate penalty hearing and clear guidelines.

Analysis: The Court held that the statutory process provided adequate hearing: investigation, disclosure of the DG report, objections, oral hearing and written submissions before final order. A separate second show-cause stage was not constitutionally required in this scheme. On discretion, the Court adopted the principle of proportionality and relevant turnover, together with aggravating and mitigating factors, as controlling standards, and read the provision consistently with constitutional requirements. Regulation 48(1) therefore did not render the penalty scheme invalid.

Conclusion: The challenge to Section 27(b) and Regulation 48(1) failed.

Final Conclusion: The petitions succeeded only to the limited extent of striking down the casting-vote feature in Section 22(3) and invalidating the pre-amendment composition provision of Section 53E, while the remaining challenged provisions were upheld, and future final hearings before the Commission were directed to follow a stable, judge-like collegial process.

Ratio Decidendi: A competition regulator may combine investigative, regulatory and quasi-judicial functions, but where it finally adjudicates, the process must preserve equal participation of all deciding members, adherence to natural justice, and constitutionally guided discretion; a casting vote that distorts equal adjudicatory weight is impermissible.

Competition regulator powers upheld, but casting vote in quasi-judicial decisions was struck down as unconstitutional.
The Competition Commission was held to be a composite regulator with investigative, advisory and quasi-judicial functions, so it is not an exclusively judicial tribunal, and the challenge based on separation of powers and judicial independence largely failed. Section 22(3) was struck down for permitting a casting vote in quasi-judicial adjudication, though the quorum proviso was upheld. The revolving-door participation of members did not invalidate the proceedings, but future final hearings were directed to be heard by a stable membership. Expanded investigation under Section 26(1) and the penalty framework under Section 27(b) and Regulation 48(1) were upheld, with discretion controlled by proportionality and relevant turnover.

Quasi-judicial functions - separation of powers - one who hears must decide - casting vote and quorum in multi-member adjudicatory bodies - revolving-door participation of members - scope of investigation under Section 26(1) - penalty imposition under Section 27(b) - principle of proportionality in imposing administrative penalties - bar to jurisdiction of civil courts - composition and selection safeguards for regulators/tribunalsQuasi-judicial functions - composition and selection safeguards for regulators/tribunals - Nature of CCI's functions - whether CCI is a tribunal exclusively exercising judicial power or an expert regulatory body with administrative, investigative and quasi-judicial roles. - HELD THAT: - The Court held that CCI performs a composite role - administrative (formation of prima facie opinion and directing DG to investigate), investigative (DG's fact gathering powers), advisory/advocacy, and quasi judicial (when it issues final orders, directions or penalties). SAIL and subsequent Supreme Court authorities were treated as binding on the characterization. The Court emphasised that CCI's initial steps under Section 26(1) are administrative (prima facie opinion and direction to investigate) while final orders after investigation are quasi judicial, subject to statutory safeguards, appeals and writ review. The consequence is that CCI is not a court or a body exercising only judicial power but it must follow fair procedure when issuing final orders. [Paras 81, 82, 83, 84, 85]CCI is a composite expert regulatory body with administrative, investigative and quasi judicial functions; it is not solely a tribunal exercising the exclusive judicial power of the State.Separation of powers - composition and selection safeguards for regulators/tribunals - Whether the Competition Act (its composition, appointment, supervisory and executive control provisions) violates separation of powers or the requirement of judicial composition when CCI performs adjudicatory functions. - HELD THAT: - Applying the function based approach in L. Chandra Kumar, R. Gandhi and Madras Bar Association, the Court found that mere performance of adjudicatory functions by CCI does not make the Act unconstitutional. The legislature may create specialised regulators that also adjudicate, subject to safeguards. However, to guard independence and judicial quality in adjudication, the Court accepted that CCI must include a judicial member for final hearings and that selection procedures must ensure judicial participation (drawing on Utility Users Welfare Association and Madras Bar Association principles). The Court upheld bar on civil courts (Section 61) as consistent with other regulatory statutes and constitutionally permissible. The Court observed that the Selection Committee structure (Section 9) and appellate safeguards ameliorate concerns, but held that prior form of Section 53E (COMPAT selection provisions pre 2017 amendment) raised constitutional concerns (subject to Supreme Court rulings on Finance Act, 2017). [Paras 134, 149, 152, 155, 156]The Act does not ipso facto violate separation of powers; CCI may be constituted as an expert regulator that adjudicates, but where it adjudicates finally it must include judicial participation and the selection/appeal architecture must respect the constitutional safeguards; Section 53E (pre 2017 form) was found constitutionally vulnerable (subject to higher court rulings).Casting vote and quorum in multi-member adjudicatory bodies - one who hears must decide - Validity of Section 22(3) (majority of Members present and voting; casting/second vote of Chairperson/member presiding; proviso quorum of three) and related challenge to 'revolving door' practice. - HELD THAT: - The Court held that the proviso requiring a minimum quorum of three Members is severable and valid but the remainder of Section 22(3) - the provision permitting a Chairperson/member presiding to exercise a second or casting vote in the event of equality - is inconsistent with judicial decision making and the rule that members who hear must decide, and is therefore unconstitutional and void. The Court explained that a casting vote undermines equal weight of members' opinions in adjudicatory decisions and cannot be compartmentalised. As to the 'revolving door' practice (members joining/leaving during the course of proceedings), the Court recognised its potential for unfairness but held that the mere possibility of such practice does not render the provision invalid; prejudice must be shown in the individual case. The Court directed procedural safeguards: once final hearings commence the same members should continue and the bench that hears must write the final order; CCI to adopt regulations to enforce this, and the Government to fill vacancies so substantial benches sit. [Paras 164, 165, 171, 179, 180]Section 22(3) is unconstitutional to the extent it confers a casting/second vote; the quorum proviso remains valid. The 'revolving door' practice does not by itself invalidate the statute, but CCI must adopt and follow regulations ensuring that those who hear a case decide it and that final hearings proceed with a stable bench.Scope of investigation under Section 26(1) - one who hears must decide - Legality of CCI/DG expanding the scope of investigation (26(1)) to include other enterprises not named in the original information. - HELD THAT: - Relying on SAIL and Excel Crop Care, the Court held that when the Commission directs investigation it acts administratively and may order the DG to investigate issues beyond the named parties if the subject matter or revealed facts indicate pervasive conduct affecting competition. The DG may include additional entities in investigation where investigation reveals systemic or industry wide practices. The Court rejected the challenge that an express order naming each party was a necessary precondition to investigation; it emphasised that Section 26(1) contemplates investigation 'into the matter' and that the Commission's direction to broaden scope to all parties covered by the issue is permissible provided the Commission applies its mind and procedural safeguards (notice/hearing) follow during the inquiry. [Paras 181, 182, 183, 184, 185]Expansion of the DG's investigation under Section 26(1) to other manufacturers was lawful where the Commission, after application of mind, found that alleged anti competitive conduct was industry wide; Excel Crop Care and SAIL permit inclusion of additional parties when investigation reveals such scope.Penalty imposition under Section 27(b) - principle of proportionality in imposing administrative penalties - Constitutionality of Section 27(b) (power to impose penalty up to prescribed caps) and Regulation 48 (procedure for imposition of penalty) - whether lack of separate pre penalty hearing and absence of detailed statutory guidelines renders the penalty regime arbitrary or void. - HELD THAT: - The Court held Section 27(b) to be constitutionally valid. It concluded that the statutory scheme (DG investigation; report; opportunity to parties to respond and to be heard before CCI; reasoned final order) provides adequate procedural safeguards and that a separate, distinct pre penalty show cause stage is not constitutionally mandated for Section 27(b) in every case. The Court adopted and reiterated guiding principles (following the concurring observations in Excel Crop Care) that penalty assessment must be governed by proportionality and reasoned application: (i) determine the relevant turnover (turnover related to products/services affected by contravention); (ii) select an appropriate percentage within the statutory cap by weighing aggravating and mitigating factors (nature/gravity, duration, role, market share, loss/damage, bona fides, etc.). The Court held Regulation 48 and Section 27 are capable of being applied consistently with rule of law principles and that judicial/appeal remedies (COMPAT/NCLAT/Supreme Court and writ jurisdiction) provide corrective avenues. [Paras 201, 202, 203, 204, 205]Section 27(b) and the penalty framework are not unconstitutional; penalties must be imposed consistently with proportionality and the statutory cap, determining relevant turnover and applying aggravating/mitigating factors; parties have adequate procedural safeguards through the investigation/report/hearing process and appellate/judicial review.Bar to jurisdiction of civil courts - Validity of Section 61 (exclusion of civil court jurisdiction) and related challenge that ouster of ordinary courts is unconstitutional. - HELD THAT: - The Court upheld Section 61 as consistent with legislative practice in sectoral regulatory regimes (e.g., SEBI, TRAI, Electricity Act, AAI, AERA). It observed that the Act creates a specialised fact finding and adjudicatory mechanism and that exclusion of civil courts is permissible where a statutory alternative with procedural safeguards and appellate review exists; writ jurisdiction under Article 226 remains available for review of procedural fairness. The Court relied on precedent upholding similar ousters in specialised regulatory contexts. [Paras 145, 146, 147]Section 61's exclusion of civil court jurisdiction is constitutionally valid in the statutory regulatory framework, subject to availability of statutory appeals and writ jurisdiction for procedural fairness.Final Conclusion: The Court upheld the constitutional validity of the Competition Act's core regulatory and penalty scheme while clarifying structural and procedural limits: CCI is an expert regulatory body that also adjudicates (not a pure judicial tribunal); Section 22(3) is unconstitutional to the extent it permits a casting vote (the quorum proviso survives); investigation scope under Section 26(1) may lawfully be expanded where systemic conduct is revealed; penalties under Section 27(b) are valid but must be imposed consistently with proportionality, with relevant turnover and aggravating/mitigating factors guiding quantum; exclusion of civil courts (Section 61) is permissible; selection and adjudicatory processes must ensure judicial participation and that those who hear decide, with the Court directing remedial procedural safeguards and vacancies to be filled.

2019 (4) TMI 314 - DELHI HIGH COURT Law of Competition

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Court Confirms CCI's Authority to Penalize, Rules No Double Jeopardy Violation in Pre-Trial Dismissal.
The court dismissed the petitions, affirming the Chief Metropolitan Magistrate's (CMM) jurisdiction to take cognizance of criminal complaints under Section 42(3) of the Competition Act, 2002. It upheld the Competition Commission of India's (CCI) authority to penalize non-compliance with its orders and directions, stating that such actions do not infringe upon the constitutional protection against double jeopardy under Article 20(2). The court determined that any factual disputes concerning the petitioner's responsibilities and non-compliance should be addressed during the trial rather than through pre-trial motions.

Criminal liability under Section 42(3) - failure to pay fine as ground for prosecution - scope of "orders or directions issued" - orders and directions issued by the Director General - double jeopardy under Article 20(2) - civil penalty and subsequent criminal prosecution - powers of the Commission to impose penaltyCriminal liability under Section 42(3) - failure to pay fine as ground for prosecution - Section 42(3) of the Competition Act includes failure to pay the fine imposed under subsection (2) as an independent ground for criminal prosecution. - HELD THAT: - The court construed the clause in Section 42(3) as disjunctive: the phrase "does not comply with the orders or directions issued, or fails to pay the fine imposed under sub-section (2)" is separated by commas and the conjunction, indicating two alternative bases for criminal action. The first limb (non-compliance with orders or directions) and the second limb (failure to pay fine imposed under sub-section (2)) are therefore independent. The marginal heading and the limited reference to the Commission in the earlier sub-sections do not restrict the broader statutory language of sub-section (3). The court rejected the petitioners' contention that failure to pay a penalty under Section 43 cannot attract prosecution under Section 42(3). [Paras 25, 32, 33, 34]The interpretation urged by the petitioners is repelled; Section 42(3) separately contemplates prosecution for failure to pay the fine imposed under subsection (2).Scope of "orders or directions issued" - orders and directions issued by the Director General - The words "orders or directions issued" in Section 42(3) are not confined to orders of the Commission alone and extend to directions issued by its functionaries, such as the Director General. - HELD THAT: - Noting that sub-sections (1) and (2) of Section 42 expressly refer to the Commission while sub-section (3) does not, the court held that the legislature intended a wider sweep for the penal provision. The offence under sub-section (3) therefore covers failure to comply with orders or directions issued under the Act, irrespective of whether they emanated from the Commission or from its investigative functionaries. [Paras 33]Section 42(3) extends to non-compliance with orders or directions issued under the Act by the Commission or its functionaries, including the Director General.Double jeopardy under Article 20(2) - civil penalty and subsequent criminal prosecution - Imposition of a monetary penalty by the Commission under Section 43 does not bar subsequent criminal prosecution under Section 42(3) on double jeopardy grounds under Article 20(2). - HELD THAT: - The court applied the constitutional and precedential distinction between civil/administrative penalties and criminal punishment. Article 20(2) protects against prosecution and punishment for the same offence where there has been prior prosecution and punishment; it does not bar successive civil or administrative penalties followed by criminal proceedings. The court relied on the constitutional jurisprudence explaining the limited scope of Article 20(2) and on authority distinguishing civil sanctions from criminal prosecution to hold that successive administrative fines and criminal proceedings are not proscribed by Article 20(2). [Paras 35, 36]The plea of double jeopardy under Article 20(2) is rejected; criminal prosecution under Section 42(3) after imposition of penalty does not amount to prohibited double jeopardy.Questions of fact left for trial - Factual disputes regarding service of notices, cessation of office-bearer status, and extent of personal responsibility are matters to be examined at trial and are not amenable to quashing under Section 482 Cr.P.C. at this stage. - HELD THAT: - The petitioners raised factual defences - non-service of some notices, cessation of office-bearing status, and lack of personal culpability - which the court regarded as questions of fact requiring evidence and trial. The court observed that the jurisdiction under Section 482 Cr.P.C. is not the appropriate forum to adjudicate these contested factual issues and that such matters should be left to the criminal court for determination. [Paras 36, 37]The factual contentions of the petitioners are to be tried and cannot be resolved by this court in proceedings under Section 482 Cr.P.C.Final Conclusion: The petitions under Section 482 Cr.P.C. are dismissed. The High Court upholds the Commission's power to initiate criminal proceedings under Section 42(3) both for non-compliance with orders or directions issued under the Act (including those of the Director General) and for failure to pay fines imposed under subsection (2); Article 20(2) does not bar such prosecution following imposition of a civil penalty. Questions of fact raised by the petitioners remain for trial in the criminal court.

2019 (2) TMI 2122 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Law of Competition

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1. ISSUES PRESENTED and CONSIDERED

The core legal issue in this judgment is whether the Competition Commission of India (CCI) erred in its decision to dismiss the allegations of collusive bid rigging against the Respondents without ordering an investigation under Section 26(1) of the Competition Act, 2002.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework is provided by Section 3 of the Competition Act, 2002, which prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition within India. Specifically, agreements that result in bid rigging or collusive bidding are presumed to have such an adverse effect. Section 26 of the Act outlines the procedure for inquiry into alleged contraventions, allowing the CCI to direct an investigation if a prima facie case exists.

Court's Interpretation and Reasoning

The court interpreted Section 3 as requiring evidence of an agreement between enterprises or persons engaged in similar business activities that results in bid rigging or collusive bidding. The court emphasized that the presumption of an adverse effect on competition arises only when there is evidence of such an agreement.

Key Evidence and Findings

The Appellant alleged that Respondents 2 and 3 colluded in the bidding process for a tender floated by Bharat Heavy Electricals Ltd. (BHEL) for IT equipment. The CCI found that the tender process was open and competitive, with various participants involved in pre-bid discussions. Only Respondents 2 and 3 submitted bids for Group-A items, which included maintenance services over a five-year lease period. The CCI concluded that low participation was not indicative of collusion and found no evidence of bid rotation or supportive bidding between the Respondents.

Application of Law to Facts

The court applied the legal principles of Section 3 to the facts, determining that the Appellant failed to provide evidence of an agreement or meeting of minds between the Respondents that would suggest collusive bidding. The court noted that the choice of quoting products from a particular manufacturer by Respondent No. 2 was within the terms of the tender and did not imply collusion.

Treatment of Competing Arguments

The court considered the Appellant's allegations but found them to be unsubstantiated. The court noted that the Appellant's claims were based on assumptions rather than evidence. The CCI's findings that Respondents 2 and 3 operated independently and that no evidence of bid rotation was present were upheld.

Conclusions

The court concluded that the Appellant failed to establish a prima facie case of collusive bidding, and the CCI's decision to not order an investigation was justified. The appeal was dismissed on the grounds that the allegations lacked merit and were unsupported by evidence.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"The Appellant-Informant has miserably failed to make out a prima facie case warranting causing of an investigation by DG. The impugned order passed by the Commission is based on application of mind and does not suffer from any legal infirmity."

Core Principles Established

The judgment reinforces the principle that allegations of anti-competitive behavior must be supported by evidence demonstrating an agreement or meeting of minds between the parties involved. Mere assumptions or low participation in a bidding process do not suffice to establish collusion.

Final Determinations on Each Issue

The court determined that the CCI acted within its discretion by dismissing the case without ordering an investigation, as the Appellant did not present a prima facie case. The appeal was dismissed, and no costs were awarded.

NCLAT upholds CCI dismissal of bid rigging allegations lacking prima facie case under Section 26(1)
NCLAT upheld CCI's decision dismissing allegations of collusive bid rigging without ordering investigation. The tribunal ruled that CCI correctly determined no prima facie case existed under Section 26(1) of Competition Act, 2002. The appellant-informant, who was neither an OEM nor SI and not involved in the tender process, failed to provide substantial evidence supporting bid rigging allegations against respondents. NCLAT found the informant's claims were wild allegations without substance or incriminating evidence. The tribunal emphasized that investigation by Director General is contingent upon establishing prima facie case, which was absent. CCI's order was deemed legally sound and based on proper application of mind. Appeal dismissed.

Anti-competitive action - collusive bid rigging - whether the CCI erred in undertaking an exercise itself to determine whether or not the allegation of inter-alia collusive bid rigging leveled against Respondent No. 2 & 3 has been established without ordering an investigation in terms of Section 26(1) of the Competition Act, 2002? HELD THAT:- CCI is empowered to inquire into any alleged contravention of provisions contained in Section 3(1) or Section 4(1) of the Competition Act, 2002 on its own motion or on receipt of an information from any person, consumers or their associations or trade associations or upon a reference made to it by the Central Government, State Government or Statutory Authority. Section 26 of the Act provides that upon receipt of a reference or upon its own knowledge or upon information received from any person, the Commission, if of opinion that there exists a prima facie case, shall direct the Director General (DG) to cause an investigation to be made into the matter. On a bare reading of this provision, it is abundantly clear that causing of investigation to be conducted by Director General is entirely dependent on existence of a prima facie case warranting such investigation. Unless the Commission is satisfied that a prima facie case exists, the Informant (where information has been received from any person) has no vested right to seek investigation into alleged contravention of provisions Section 3(1) or Section 4(1) of the Act. The Appellant – Informant who was neither an OEM nor an SI and was not in the fray for bidding qua the tender in question raised competition concerns on the basis of wild allegations without any substance. The circumstances projected by him, in absence of any incriminating evidence, would not justify drawing inference of complicity of Respondents 2 and 3 in bid rigging/ collusive bidding. The Appellant-Informant has miserably failed to make out a prima facie case warranting causing of an investigation by DG. The impugned order passed by the Commission is based on application of mind and does not suffer from any legal infirmity. Conclusion - The Appellant-Informant has miserably failed to make out a prima facie case warranting causing of an investigation by DG. The impugned order passed by the Commission is based on application of mind and does not suffer from any legal infirmity. Appeal dismissed.

2019 (2) TMI 1947 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Law of Competition

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Issues:
- Challenge to the order of Liquidation under Section 33(1) of the Insolvency & Bankruptcy Code
- Compliance with corporate insolvency resolution process
- Applicability of Section 230 of the Companies Act, 2013

Challenge to Liquidation Order:
The appeal was filed challenging the order of Liquidation under Section 33(1) of the Insolvency & Bankruptcy Code by a Director/Shareholder of the Corporate Debtor. The appellant argued that the corporate insolvency resolution process did not proceed lawfully as all Board of Directors members were not directed to attend the Committee of Creditors meeting. Additionally, the Adjudicating Authority did not extend the time for resolution applicants to submit a plan to prevent liquidation. However, as no resolution plan was submitted within the stipulated time, the order of Liquidation was upheld by the Appellate Tribunal.

Compliance with Corporate Insolvency Resolution Process:
The Resolution Professional stated that no resolution plan was submitted within the required timeframe, leading to the passing of the Liquidation order by the Adjudicating Authority. In light of these facts, the Appellate Tribunal declined to interfere with the order of Liquidation dated December 20, 2018.

Applicability of Section 230 of the Companies Act, 2013:
The Appellate Tribunal directed the Liquidator to proceed in accordance with Section 230 of the Companies Act, 2013, and the decisions in 'Meghal Homes Pvt. Ltd.' and 'Swiss Ribbons Pvt. Ltd.' The Liquidator was instructed to verify all creditor claims, take control of the Corporate Debtor's assets, and conduct business for beneficial liquidation as per Section 35 of the I&B Code. Furthermore, the Liquidator was required to follow the procedures outlined in Sections 33, 38, 39, and 40 for claim verification and admission/rejection. Before selling the Corporate Debtor's assets, the Liquidator must adhere to Section 230 of the Companies Act, 2013, and the Adjudicating Authority may issue necessary orders. If revival efforts fail, the Liquidator should proceed with the sale of assets wholly or partially as per legal requirements.

Conclusion:
The Appellate Tribunal directed the Liquidator to act in accordance with the provided instructions and take steps under Section 230 of the Companies Act, 2013. If the Corporate Debtor's members or creditors propose a compromise or arrangement, the Liquidator should file an application under Section 230 before the NCLT. In case of failure, the Liquidator should proceed with the outright sale of the Corporate Debtor to facilitate the continuation of employee services. The appeals were disposed of with the mentioned directions and observations, without any costs incurred.

Company Liquidation Proceeding Continues: Tribunal Orders Asset Sales After Failed Resolution Plan Submission.
The Appellate Tribunal upheld the order of Liquidation under Section 33(1) of the Insolvency & Bankruptcy Code due to the absence of a submitted resolution plan within the required timeframe. The Tribunal instructed the Liquidator to comply with Section 230 of the Companies Act, 2013, for potential compromises or arrangements, and to verify creditor claims as per Sections 33, 38, 39, and 40 of the I&B Code. If no viable revival plan emerges, the Liquidator is to proceed with asset sales. The appeals were resolved with these directives, incurring no costs.

Liquidation under the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process - Committee of Creditors - Power to compromise or make arrangements under Section 230 of the Companies Act, 2013 - Verification, admission and rejection of claims under the Insolvency and Bankruptcy Code - Duty of the liquidator to take custody, control and realise assets and to explore revival before sale - Sale of the corporate debtor as a measure of last resortLiquidation under the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process - Committee of Creditors - Whether the order of liquidation dated 20th December, 2018 passed by the Adjudicating Authority should be interfered with - HELD THAT: - The Appellate Tribunal declined to interfere with the Adjudicating Authority's order of liquidation. The Tribunal recorded that no resolution plan had been submitted and that more than the prescribed period (in excess of 270 days) had elapsed, and therefore the Adjudicating Authority acted within the framework of the I&B Code in passing the liquidation order. Contentions regarding non-direction to all board members to attend the Committee of Creditors meeting and requests for extension to enable submission of a resolution plan did not persuade the Tribunal to set aside the liquidation order. [Paras 4]The impugned order of liquidation dated 20th December, 2018 is not interfered with.Power to compromise or make arrangements under Section 230 of the Companies Act, 2013 - Verification, admission and rejection of claims under the Insolvency and Bankruptcy Code - Duty of the liquidator to take custody, control and realise assets and to explore revival before sale - Sale of the corporate debtor as a measure of last resort - Directions to the Liquidator concerning verification of claims, invocation of Section 230 consultations, and procedure before sale of assets - HELD THAT: - Relying on the Tribunal's earlier observations and relevant Supreme Court decisions, the Tribunal directed that the Liquidator shall act in accordance with law: verify and consolidate claims and admit or reject them in terms of the I&B Code; take custody and control of the corporate debtor's assets and operate the business for beneficial liquidation as prescribed under Section 35; and, before initiating sale of the company's assets, take steps to explore compromise or arrangement by moving an application under Section 230 of the Companies Act, 2013 before the National Company Law Tribunal if proposals are made by members or creditors through the Liquidator. Only upon failure of revival or compromise should the Adjudicating Authority and the Liquidator proceed to sell the company's assets, including consideration of outright sale to preserve employees' continuity. [Paras 5, 6]The Liquidator is directed to verify claims under the I&B Code and to take steps under Section 230 of the Companies Act, 2013 to explore compromise or arrangement before proceeding to sell the corporate debtor; sale is to be resorted to only after such revival efforts fail.Final Conclusion: The appeal is disposed of: the Tribunal refuses to disturb the Adjudicating Authority's liquidation order but issues directions that the Liquidator must verify and admit/reject claims under the I&B Code and, before selling the company or its assets, must invoke Section 230 of the Companies Act, 2013 to explore compromise or arrangement; only on failure of such revival steps may the Adjudicating Authority and Liquidator proceed to sale. No costs.

2019 (2) TMI 1938 - Supreme Court Law of Competition

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Issues: (i) Whether the National Green Tribunal had jurisdiction to entertain direct appeals against the original orders of the Tamil Nadu Pollution Control Board and the State Government when the statutory first appeal had not been decided; (ii) whether directions issued under Section 31A of the Air Act and the composite orders containing such directions were appealable to the National Green Tribunal; (iii) whether the National Green Tribunal could invoke a doctrine of necessity or general judicial review to assume jurisdiction over an order passed under Section 18 of the Water Act.

Issue (i): Whether the National Green Tribunal had jurisdiction to entertain direct appeals against the original orders of the Tamil Nadu Pollution Control Board and the State Government when the statutory first appeal had not been decided.

Analysis: The appellate structure under the Water Act and the Air Act is statutory and sequential. An appeal to the National Green Tribunal lies only from the order of the appellate authority under the Water Act or the Air Act, not from the original order of the Board. The pending appeal before the statutory appellate authority could not be bypassed by filing a direct appeal before the Tribunal. The Tribunal's appellate jurisdiction is confined to the situations expressly covered by the National Green Tribunal Act and the parent enactments.

Conclusion: The direct appeal before the National Green Tribunal against the original refusal of consent was not maintainable, and the Tribunal lacked jurisdiction to set aside that order.

Issue (ii): Whether directions issued under Section 31A of the Air Act and the composite orders containing such directions were appealable to the National Green Tribunal.

Analysis: The Water Act expressly provides an appeal to the National Green Tribunal against directions under Section 33A, but the Air Act does not confer a corresponding appellate route for directions under Section 31A. The statutory scheme could not be altered by treating directions as if they were appealable orders, nor could composite orders be split to create appellate jurisdiction where none existed. The Tribunal, being a creature of statute, cannot enlarge its own jurisdiction by treating an unappealable direction as a quasi-judicial order under the appellate provisions.

Conclusion: The Tribunal had no jurisdiction to entertain an appeal against directions issued under Section 31A of the Air Act, and composite orders containing such directions were not rendered appealable on that account.

Issue (iii): Whether the National Green Tribunal could invoke a doctrine of necessity or general judicial review to assume jurisdiction over an order passed under Section 18 of the Water Act.

Analysis: An order under Section 18 of the Water Act is not an appellate-order route contemplated by Section 16 of the National Green Tribunal Act. The Tribunal does not possess a free-standing power of judicial review comparable to Article 226 of the Constitution of India. Where the statute does not confer appellate jurisdiction, the Tribunal cannot assume it on equitable or pragmatic grounds, and non-constitution or non-functioning of an appellate authority does not create a leapfrog appeal. An administrative order does not become void on its face and can be challenged only in proceedings competent to examine it, namely a suit or writ jurisdiction, not before the National Green Tribunal.

Conclusion: The National Green Tribunal could not assume jurisdiction over the Section 18 order on the basis of necessity or general judicial review, and its interference with that order was without jurisdiction.

Final Conclusion: The impugned judgments of the National Green Tribunal were set aside for want of maintainability and jurisdiction. The orders challenged before the Tribunal were restored to force, and the parties were relegated to pursue appropriate writ remedies before the High Court.

Ratio Decidendi: An appellate tribunal can exercise only the jurisdiction expressly conferred by statute, and a direct leapfrog appeal cannot be entertained unless the governing enactment specifically provides for that route of appeal.

Statutory appellate jurisdiction before the National Green Tribunal cannot be expanded to permit leapfrog appeals or unwarranted judicial review.
The National Green Tribunal's appellate jurisdiction is confined to the routes expressly created by the Water Act, the Air Act and the National Green Tribunal Act. A direct appeal against the original order of the Pollution Control Board was held not maintainable where the statutory first appeal remained pending, and the Tribunal could not bypass that sequence. Directions under Section 31A of the Air Act, including composite orders containing them, were also held not appealable to the Tribunal because the Air Act provides no corresponding appellate route. The Tribunal likewise could not invoke necessity or general judicial review to assume jurisdiction over a Section 18 Water Act order, as it has no free-standing writ-like power.

Maintainability of appeals to the National Green Tribunal - leapfrog/direct appeal bypassing statutory appellate authority - doctrine of necessity as basis for invoking alternate remedy - appealability of directions under Section 31A of the Air Act versus Section 33A of the Water Act - jurisdictional limits of the NGT's appellate jurisdiction - challenge to State Government order under Section 18 of the Water Act by writ or civil suit - appeal as a creature of statuteMaintainability of appeals to the National Green Tribunal - leapfrog/direct appeal bypassing statutory appellate authority - appeal as a creature of statute - Whether the NGT had jurisdiction to entertain direct appeals against original orders of the State Board while an appeal against those orders was pending before the statutory appellate authority. - HELD THAT: - The Court held that appeals are creatures of statute and the NGT's appellate jurisdiction is strictly circumscribed by the statutory scheme. Where the Water Act and the Air Act provide for first appeals to a statutory appellate authority (Sections 28 and 31 respectively) and for onward appeals to the NGT only from that appellate authority (Sections 33B/31B read with Section 16 of the NGT Act), a direct appeal against an original order to the NGT is incompetent if an appeal under the statute is pending. On the facts, an appeal before the statutory appellate authority was pending when the NGT set aside the original order dated 09.04.2018; hence the NGT acted without jurisdiction in entertaining the direct appeal. [Paras 21, 22, 23, 31]Direct appeals to the NGT from original orders are not maintainable where a statutory first appeal lies and is pending before the appellate authority; the NGT lacked jurisdiction to entertain the direct appeal in the facts of this case.Doctrine of necessity as basis for invoking alternate remedy - maintainability of appeals to the National Green Tribunal - Whether the doctrine of necessity justified a leapfrog appeal to the NGT when the appellate authority under the statute was non functional or not properly constituted. - HELD THAT: - The Court rejected the use of the doctrine of necessity to permit leapfrog appeals to the NGT. The mere non constitution or non proper constitution of the appellate authority does not confer jurisdiction on the NGT to hear direct appeals in place of the statutory appellate forum. The statutory scheme must be followed and absence of special provisions (analogous to 'leapfrog' provisions in other jurisdictions) precludes such appeals. [Paras 19, 44, 45]The doctrine of necessity cannot be invoked to bypass the statutory appellate route and to permit direct appeals to the NGT; the NGT had no jurisdiction on this basis.Appealability of directions under Section 31A of the Air Act versus Section 33A of the Water Act - jurisdictional limits of the NGT's appellate jurisdiction - Whether directions issued under Section 31A of the Air Act are appealable to the NGT and whether composite orders issued under both the Air Act and the Water Act can be split to make them appealable. - HELD THAT: - The Court analysed the statutory scheme and observed that while directions under Section 33A of the Water Act are made appealable to the NGT (Section 33B(c) read with Section 16(c) of the NGT Act), the Air Act does not make directions under Section 31A appealable to the NGT (absence of Section 31A in Section 31B). The difference in statutory treatment is deliberate; composite orders issued under both Acts cannot be dissected so as to permit an appeal to the NGT in respect of the Water Act part while ignoring the non appealability of the Air Act part. The argument that a 'direction' is in all cases an 'order' amenable to appeal was rejected as contrary to the express legislative scheme. [Paras 35, 36]Directions under Section 31A of the Air Act are not appealable to the NGT; composite orders under both Acts cannot be split to confer appellate jurisdiction on the NGT where the Air Act component is non appealable.Challenge to State Government order under Section 18 of the Water Act by writ or civil suit - jurisdictional limits of the NGT's appellate jurisdiction - Whether an order of the State Government made under Section 18(1)(b) of the Water Act is appealable to the NGT or amenable to adjudication by the NGT. - HELD THAT: - The Court held that the State Government order under Section 18 is not an order appealable to the NGT under the Water Act or the NGT Act. Such administrative orders do not become non justiciable on their face; they must be challenged by appropriate writ petition under Article 226 or by a civil suit where competent. The NGT does not possess a general power of judicial review analogous to a High Court under Article 226 and therefore cannot entertain direct challenges to Section 18 orders. Attempts to characterise the Section 18 order as a revisional order under Section 29 were rejected because the Section 18 order lacked the quasi judicial features required of a Section 29 revision. [Paras 39, 42, 43]An order under Section 18 of the Water Act is not appealable to the NGT and must be challenged by writ or suit; the NGT cannot judicially review a Section 18 order as a substitute for High Court jurisdiction.Jurisdictional limits of the NGT's appellate jurisdiction - consequential effect on NGT orders set aside - Consequences of the Court's finding on maintainability for the impugned NGT orders and related consequential orders. - HELD THAT: - Because the impugned NGT judgments were set aside on the ground that the NGT lacked jurisdiction to entertain the direct appeals, the consequential administrative order dated 22.01.2019 (rejection of renewal) was also set aside. The Court left open the Respondent's remedy to challenge the original orders (including the TNPCB and State Government orders) by appropriate writ petition or civil proceedings before the High Court and indicated that interim relief and expedition may be sought there. [Paras 45]The impugned NGT judgments are set aside for want of jurisdiction; consequential administrative orders are also set aside, and the Respondent may pursue remedies before the High Court (writ/suit) including interim relief.Final Conclusion: The appeals are allowed on the sole ground of maintainability: the NGT had no jurisdiction to entertain direct (leapfrog) appeals against original orders where a statutory first appeal lay or was pending before the appellate authority; directions under Section 31A of the Air Act are not appealable to the NGT; the State Government order under Section 18 of the Water Act is not amenable to appeal before the NGT and must be challenged by writ or suit; the NGT judgments impugned are set aside and consequential administrative orders are also set aside, with liberty to the Respondent to seek appropriate remedies in the High Court.

2019 (1) TMI 2052 - COMPETITION COMMISSION OF INDIA Law of Competition

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Competition Commission closes case against stock exchange for alleged discriminatory co-location services under Section 26(2)
The Competition Commission of India closed a case against a stock exchange regarding alleged abuse of dominant position through discriminatory co-location services. The informant claimed certain trading members received preferential access to trading information and price feeds despite uniform fees being charged to all members. While the Commission acknowledged that the exchange's policy required non-discriminatory provision of co-location services and that discriminatory conduct falls within its jurisdiction, it found insufficient evidence to establish a prima facie case. The Commission noted lack of adequate information about the exchange's role in providing allegedly discriminatory services and closed the matter under Section 26(2) of the Competition Act, 2002.

Abuse of dominant position - Denial of market access - Preferential access / discriminatory access to co-location services - Prima facie inquiry under Section 26(1) and closure under Section 26(2) - Non-discriminatory provision of services - Jurisdiction of the Commission to examine discriminatory and abusive conductAbuse of dominant position - Preferential access / discriminatory access to co-location services - Denial of market access - Prima facie inquiry under Section 26(1) and closure under Section 26(2) - Whether the information alleging that the National Stock Exchange provided preferential and discriminatory co-location access amounting to abuse of dominant position and denial of market access warranted investigation under Section 26(1) of the Act or should be closed under Section 26(2). - HELD THAT: - The Commission considered the Informant's allegations that NSE provided preferential access to certain trading members through its co-location services, thereby restricting provision of services to others and causing denial of market access in contravention of Section 4(2)(b)(ii) and Section 4(2)(c). The Commission noted that the policy and fee structure for co-location were required to be non-discriminatory and that SEBI and other agencies were investigating related complaints, including forensic and TAC examinations which had reported concerns about preferential access. While recognising that discriminatory and abusive conduct falls within the Commission's jurisdiction and can be independently examined, the Commission found that the allegations were still at the investigation stage before SEBI and that the exact role of the OP in the alleged discriminatory provision of co-location services had not been established. In the absence of sufficient cogent facts and data attributing the discriminatory practices to the OP, the Commission declined to embark upon a full inquiry and concluded that it would not be appropriate to delve into the allegations at that stage. [Paras 21, 22]Information closed under Section 26(2) of the Act for lack of sufficient prima facie material to proceed with an inquiry.Final Conclusion: The Commission observed that while the subject matter-preferential/discriminatory co-location access and potential denial of market access-falls within its jurisdiction, the allegations against NSE were under ongoing investigation by SEBI and other agencies and there was insufficient cogent material before the Commission to form a prima facie view; accordingly the information was closed under Section 26(2) of the Competition Act, 2002.

2018 (12) TMI 2008 - DELHI HIGH COURT Law of Competition

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Issues Involved:

1. Whether the Division Bench was required to hear the appellants before deciding the appeal in Cadila, as it pronounced on the correctness of CCI orders under challenge in writ petitions filed by the appellants.
2. Whether no notice can be issued to the Directors/Persons In-charge of the Company until CCI finds the Company guilty of anti-competitive activities under Sections 3 and 4 of the Competition Act.
3. Whether Section 48 of the Competition Act, which provides for vicarious liability, applies only to contraventions of orders under Sections 42 to 44 and not to contraventions of Sections 3 and 4.

Issue-Wise Analysis:

Issue No. 1:
The court addressed whether the appellants should have been heard before the Division Bench decided the appeal in Cadila, which impacted CCI orders under challenge in the appellants' writ petitions. The court acknowledged that the appellants were required to be heard since the judgment in Cadila had a bearing on the CCI's orders under challenge. However, the court noted that it had heard the appellants on the issues they raised, thus addressing their grievance.

Issue No. 2:
The court examined whether notices could be issued to company directors or persons in charge before a finding of guilt against the company. The Division Bench in Cadila held that proceedings against company officials could occur without a prior finding against the company. The court referenced the judgment in Aneeta Hada, which clarified that the commission of an offence by the company is a condition precedent for vicarious liability. The court agreed with the interpretation that proceedings against individuals could occur simultaneously with those against the company, rejecting the appellants' contention that such proceedings should be separate.

Issue No. 3:
The court considered whether Section 48 applies only to contraventions of orders and not to contraventions of Sections 3 and 4. The appellants argued that penalties under Section 27, which refer to "turnover," could not apply to individuals. The court disagreed, stating that penalties could be imposed on individuals for violations of Sections 3 and 4, with "turnover" interpreted as the income of the officers/directors from the company. The court emphasized a purposive interpretation to avoid rendering the penalty provisions ineffective. The court also rejected the argument that Section 48, falling under Chapter VI, relates solely to contraventions of Sections 42 to 44, noting that it encompasses contraventions of the Act's provisions, including Sections 3 and 4.

Conclusion:
The court dismissed the appeals, finding no merit in the appellants' arguments and determining that the impugned order required no interference. The court also dismissed related applications as infructuous.

Delhi HC upholds CCI proceedings against company directors under Section 48, rejecting challenge to vicarious liability provisions
The Delhi HC dismissed appeals challenging CCI proceedings against company directors under Section 48 of the Competition Act. The court held that proceedings against company officials can occur simultaneously with those against the company, without requiring a prior finding of anti-competitive activities. The HC rejected appellants' contention that Section 48 applies only to contraventions of Sections 42-44 and not Sections 3-4, ruling that vicarious liability extends to all Competition Act violations. The court emphasized purposive interpretation to avoid rendering statutory provisions meaningless.

Hearing of appellants - issuance of notice to the Directors / Persons In-charge of the Company - vicarious liability of persons In-charge and responsible for the conduct of business of the Company. Whether before deciding the appeal in the case of Cadila [2018 (9) TMI 844 - DELHI HIGH COURT], the Division Bench was required to hear the appellants as the Division Bench has pronounced on the correctness of the CCI orders in two cases in Ministry of Agriculture v. M/s. Mahyco Monsanto Biotech Limited and connected matter [2016 (7) TMI 1705 - COMPETITION COMMISSION OF INDIA (LB)], which were under challenge in two writ petitions filed by the appellants herein? - HELD THAT:- No doubt the judgment passed by the CCI in Ministry of Agriculture and connected matter was under challenge before the learned Single Judge of this Court; the said judgment having been approved by the Division Bench in the case of Cadila, the appellants were required to be heard. In any case we have also heard the learned counsel for the appellants on the issues, which they had raised in their writ petitions or at least in their applications for amendment for additional grounds and which have been incorporated in these appeals and accordingly, proceed to decide the same. So, to that extent, the grievance of the appellants has been addressed. It is also necessary to note the only issue, which the Division Bench in Cadila has framed for its consideration, which has a bearing on the judgment passed by the CCI in Ministry of Agriculture and which was under challenge before the learned Single Judge by the appellants is question No.4 which reads, “Whether DG could have issued notice to Cadila Officials under Section 48”. That apart, the issue whether the penalty could have been imposed on the Officers / Directors only for contravention of Sections 42 to 44 of the Competition Act or also for contravention of Sections 3 and 4 of the said Act, is an issue, which was neither raised nor considered by the Division Bench in Cadila. Whether no notice can be issued to the Directors / Persons In-charge of the Company till the CCI returns a finding against the Company that it has indulged in anti-competitive activities under Sections 3 and 4 of the Competition Act? - HELD THAT:- The Division Bench in Cadila [2018 (9) TMI 844 - DELHI HIGH COURT] held that proceedings against company officials could occur without a prior finding against the company. The court referenced the judgment in Aneeta Hada, which clarified that the commission of an offence by the company is a condition precedent for vicarious liability. The court agreed with the interpretation that proceedings against individuals could occur simultaneously with those against the company, rejecting the appellants' contention that such proceedings should be separate. Whether Section 48 of the Competition Act, which provides for vicarious liability of persons In-charge and responsible for the conduct of business of the Company, will apply only on contravention of orders of CCI or DG under Sections 42 to 44 of the Competition Act and not to contravention of Sections 3 and 4 of the Competition Act? - HELD THAT:- There cannot be any dispute that if the Company and the Officers / Directors are being proceeded against for violation of Sections 3 and 4, there has to be a consequence for violation - there would not be any stipulation of penalty to be imposed on Officers / Directors even if they are found to be violating Sections 3 and 4. That cannot be the intent of Sections 27(b) and 48. Such a stipulation, surely requires a purposive interpretation. Further, it has been held by the Supreme Court in Board of Muslim Wakfs Rajasthan v. Radha Krishna & ors [1978 (10) TMI 149 - SUPREME COURT], that the construction which tends to make any part of the statute meaningless or ineffective must always be avoided and construction which advances the remedy intended by the statute should be accepted. The impugned order needs no interference. The appeals are dismissed.

2018 (12) TMI 1773 - DELHI HIGH COURT Law of Competition

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Issues: (i) Whether the Ethanol Blended Petrol programme and the administered price for ethanol could be sustained as an executive policy without specific statutory backing; (ii) Whether the policy was liable to be struck down as arbitrary for its impact on industrial users of ethanol and on the market for the commodity.

Issue (i): Whether the Ethanol Blended Petrol programme and the administered price for ethanol could be sustained as an executive policy without specific statutory backing.

Analysis: The programme was introduced and continued through executive action in exercise of the Union's constitutional authority. The materials showed that the scheme was framed as a public policy measure linked to cleaner fuel, environmental benefits, support to farmers, and planned procurement by public sector oil companies. The absence of a separate enactment did not, by itself, invalidate the policy where the executive was acting within its sphere and no constitutional or statutory prohibition was shown.

Conclusion: The challenge on the ground of want of statutory foundation failed.

Issue (ii): Whether the policy was liable to be struck down as arbitrary for its impact on industrial users of ethanol and on the market for the commodity.

Analysis: The Court held that the wisdom, efficacy, and comparative desirability of an economic policy are not matters for judicial substitution. The record showed that the policy had been considered over time, with expert reports and policy reviews, and that the Union had chosen a procurement and pricing model in furtherance of public interest. The fact that the policy adversely affected one class of industrial consumers or may have altered market prices did not establish arbitrariness or illegality, absent violation of any constitutional or statutory command or proof of mala fides or irrationality.

Conclusion: The challenge on the ground of arbitrariness and economic disadvantage also failed.

Final Conclusion: The petition was held to be without merit because the ethanol blending policy was treated as a valid exercise of executive power and its economic consequences were held to be beyond the scope of merits review in judicial review.

Ratio Decidendi: A policy framed within the executive's constitutional power, adopted in public interest and not contrary to any constitutional or statutory provision, cannot be invalidated merely because it affects private commercial interests or because a court considers it economically unwise.

Executive economic policy on ethanol blending upheld as valid; courts will not substitute views on policy wisdom.
The Delhi HC upheld the Ethanol Blended Petrol programme and administered ethanol pricing as a valid exercise of executive power, since the policy was framed in public interest and no constitutional or statutory prohibition was shown. The absence of a separate statute did not invalidate the scheme where the Union acted within its constitutional sphere. The Court also rejected arbitrariness challenges, holding that judicial review does not extend to reassessing the wisdom or economic desirability of policy, and that adverse impact on industrial users or market prices did not by itself establish illegality, mala fides, or irrationality.

Executive power to frame and implement policy in public interest - Limited scope of judicial review in economic and policy matters - Price fixation by executive organs as part of procurement strategy linked to public interest - Doctrine of arbitrariness under Article 14 - Essential Commodities Act as a statutory vehicle for price-directional notificationsExecutive power to frame and implement policy in public interest - Essential Commodities Act as a statutory vehicle for price-directional notifications - Limited scope of judicial review in economic and policy matters - Validity of the Ethanol Blended Petrol (EBP) Programme and the executive fixation of a uniform procurement price for ethanol in the absence of primary legislation - HELD THAT: - The Court held that the State, in exercise of its executive power, may frame and implement policies, enter into commercial relationships and specify procurement terms where such measures are aimed at securing public interest and larger public good. Historical records and extracts of notifications, cabinet minutes and the National Policy on Bio-fuels show that uniform pricing and ex-factory price fixation for ethanol was an integral component of the EBP strategy to secure supply, incentivise production and achieve environmental and macroeconomic objectives. Precedents establish that policy decisions on economic matters enjoy broad latitude and that courts will not engage in merits review of policy so long as the measure is not contrary to constitutional or statutory prescriptions, arbitrary, mala fide or otherwise tainted. The Court concluded that executive pricing directives tied to the EBP fall within the permissible ambit of executive action and policy-making, and are amenable to judicial scrutiny only on narrow legality grounds, not on efficacy or wisdom. [Paras 36, 37, 43]The challenge to the EBP as unlawful for lack of statutory basis and to the executive fixation of ethanol procurement price is rejected; the policy and pricing directives are within executive competence and not amenable to being struck down on merits.Doctrine of arbitrariness under Article 14 - Limited scope of judicial review in economic and policy matters - Price fixation by executive organs as part of procurement strategy linked to public interest - Whether the EBP and the administered price fixation are arbitrary or irrational because they adversely affect industrial users (chemical industry) and drive up ethanol prices - HELD THAT: - The Court examined the petitioner's contention that mandatory blending and administered pricing diverted ethanol supply and raised prices to the detriment of chemical manufacturers. While acknowledging the petitioner's commercial grievances and reports recommending market-based price discovery, the Court reaffirmed that dissatisfaction with policy outcomes does not suffice to characterise a policy as arbitrary. Citing authorities, the Court emphasised that judicial intervention is limited where policy measures are adopted in public interest and not shown to be structured to favour a particular private party or marked by mala fides or procedural irregularity. The record demonstrates considered executive decision-making balancing environmental, agricultural and energy objectives; absent a showing of illegality, arbitrariness or abuse of power, the Court will not substitute its judgment for that of the executive on economic policy choices. [Paras 33, 38, 42, 43]The assertion that the EBP and its price fixation are arbitrary and hence violative of constitutional protections is negatived; the policy is not struck down on the ground of alleged arbitrariness.Final Conclusion: The petition challenging the Ethanol Blended Petrol programme and the executive fixation of ethanol procurement price is dismissed; the Court declines to interfere with the executive policy decisions in the absence of illegality, arbitrariness or mala fides.

2018 (12) TMI 1683 - Supreme Court Law of Competition

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Issues: (i) Whether the Competition Commission could exercise jurisdiction over alleged anti-competitive conduct in the telecom sector before the Telecom Regulatory Authority had first determined the jurisdictional and regulatory issues arising under the telecom regime; (ii) Whether a writ petition was maintainable against an order under Section 26(1) of the Competition Act, 2002.

Issue (i): Whether the Competition Commission could exercise jurisdiction over alleged anti-competitive conduct in the telecom sector before the Telecom Regulatory Authority had first determined the jurisdictional and regulatory issues arising under the telecom regime.

Analysis: The Competition Act, 2002 and the Telecom Regulatory Authority of India Act, 1997 operate in different but overlapping fields. The telecom regulator is the expert body to decide issues concerning interconnection, quality of service, licence conditions, subscriber status, test phase obligations, reasonable demand for points of interconnection, and the factual matrix governing rights and obligations between telecom service providers. Those jurisdictional facts must first be settled under the telecom framework. Only after such determination can the competition regulator examine whether the proven conduct amounts to cartelisation or an anti-competitive agreement within the meaning of the Competition Act. The competition regime is not excluded altogether, but its invocation at that stage was premature.

Conclusion: The competition regulator could not proceed first on these facts; the challenge to its assumption of jurisdiction succeeded in substance, and the resulting quashing of its order was justified.

Issue (ii): Whether a writ petition was maintainable against an order under Section 26(1) of the Competition Act, 2002.

Analysis: An order under Section 26(1) is ordinarily administrative and not an adjudication on merits. However, where the challenge goes to the very existence of jurisdictional facts and the authority's competence to initiate inquiry, judicial review under Article 226 is available. The High Court therefore had the power to entertain the writ petitions on the jurisdictional objection, even though it ought not to have gone into merits beyond that limited domain.

Conclusion: The writ petitions were maintainable.

Final Conclusion: The appeals failed because the telecom regulator had to first determine the governing jurisdictional issues, and the competition inquiry was therefore premature at that stage.

Ratio Decidendi: Where a dispute arises in a sector governed by a specialised regulatory regime, the authority under that regime must first determine the jurisdictional facts and regulatory obligations; only thereafter can the competition authority assess whether the conduct amounts to an anti-competitive agreement or cartel under the Competition Act.

Sectoral regulator first determines jurisdictional facts before competition review of alleged anti-competitive conduct begins.
Where a sector is governed by a specialised regulatory framework, the regulator under that framework must first determine the jurisdictional facts and regulatory obligations before the competition authority can assess whether the conduct amounts to cartelisation or an anti-competitive agreement. In the telecom context, issues such as interconnection, quality of service, licence conditions, subscriber status and points of interconnection fall first for determination under the telecom regime; competition review at that stage is premature. An order under Section 26(1) of the Competition Act is ordinarily administrative, but judicial review under Article 226 remains available where the challenge concerns the existence of jurisdictional facts and the authority's competence to initiate inquiry.

Jurisdiction of Competition Commission of India - scope of Telecom Regulatory Authority of India (TRAI) jurisdiction - anti-competitive agreement and cartelisation under Section 3 - jurisdictional facts and competence of sectoral regulator - prima facie direction under Section 26(1) of the Competition Act - judicial review of jurisdictional questions under Article 226 - reference to statutory authority under Section 21AJurisdiction of Competition Commission of India - scope of Telecom Regulatory Authority of India (TRAI) jurisdiction - jurisdictional facts and competence of sectoral regulator - reference to statutory authority under Section 21A - Whether CCI could investigate the allegations relating to denial/delay of POIs in the telecom sector at the stage when TRAI was seized of interconnection and licence-related issues - HELD THAT: - The Court held that both statutory regimes have distinct and important functions: TRAI is the sectoral regulator charged with technical, license-compliance and interconnection disputes; CCI is the market regulator mandated to detect and remedy anti-competitive agreements under the Competition Act. Where disputes in the telecom sector raise jurisdictional questions that fall squarely within TRAI's specialized remit-such as whether POIs were required during test phase, timing of commercial launch, reasonableness of demands, conformity with licence/ICA and QoS obligations-those jurisdictional facts must be determined by TRAI in the first instance. Only upon a TRAI determination adverse to the IDOs on those jurisdictional aspects, or after TRAI's opinion under Section 21A where applicable, can CCI properly proceed to examine whether the facts amount to an anti-competitive agreement or abuse of dominance under the Competition Act. The Court rejected the submission that TRAI ousts CCI entirely; rather it adopted a balanced approach preserving CCI's distinct competence to analyse cartel/Section 3 and abuse/Section 4 claims while requiring TRAI to decide the preliminary telecom-specific questions so as to avoid conflicting findings and duplication of specialized fact-finding.CCI's power to investigate is not wholly ousted by TRAI, but CCI must await determination by TRAI of the telecom-specific jurisdictional facts (or obtain TRAI's opinion under Section 21A) before proceeding to investigate alleged anti-competitive agreements in the telecom sector.Prima facie direction under Section 26(1) of the Competition Act - judicial review of jurisdictional questions under Article 226 - jurisdictional facts and competence of sectoral regulator - Whether the writ petitions challenging the CCI order under Section 26(1) were maintainable before the High Court - HELD THAT: - Although an order under Section 26(1) is ordinarily a prima facie administrative direction to the Director General to investigate, the Court recognised that where the challenge raised before the High Court is to the existence of jurisdictional facts (i.e., whether CCI had competence to act at that stage because TRAI was seized of core telecom issues), the High Court had competence under Article 226 to entertain the writ petitions. The Court relied on settled doctrine that jurisdictional facts are preliminary facts on which a tribunal's power depends and may be the subject of writ review. Consequently, the High Court was competent to determine whether CCI's exercise of power was premature for want of prior determination by TRAI.Writ petitions challenging the CCI's Section 26(1) direction were maintainable in the High Court insofar as they raised a contest as to existence of jurisdictional facts that confer competence on CCI.Prima facie direction under Section 26(1) of the Competition Act - judicial review of jurisdictional questions under Article 226 - Whether the High Court was entitled to decide the merits of the cartel/anti competitive allegations in its writ adjudication - HELD THAT: - The Court reiterated that a Section 26(1) direction is, by nature, a prima facie administrative step and does not determine rights on merits; accordingly, the High Court should not have embarked upon an adjudication of the merits of the anti-competition allegations. However, having correctly found that CCI's direction was premature because TRAI had to first decide telecom-specific jurisdictional issues, the Court upheld the High Court's ultimate relief quashing the CCI order as correctly resulting from prematurity of CCI action. The Court therefore distinguished the propriety of entertaining the writ petition (which it approved) from the propriety of the High Court deciding merits (which it disapproved).High Court should not have decided merits of cartel allegations, but its quashing of CCI's order was sustained because CCI's investigation was premature pending TRAI's determination of jurisdictional issues.Reference to statutory authority under Section 21A - jurisdictional facts and competence of sectoral regulator - Remand for determination by TRAI of telecom-specific jurisdictional facts before CCI proceeds - HELD THAT: - The Court directed that the jurisdictional aspects identified-such as whether POIs were due during test phase, the timing and reasonableness of RJIL's demand, compliance with ICA timelines and QoS thresholds, and whether there was denial or delay in provisioning-are matters appropriately decided by TRAI and/or TDSAT in the first instance. The CCI may proceed thereafter to examine, in light of TRAI's determinations (or TRAI's opinion under Section 21A), whether the conduct constitutes an anti-competitive agreement or abuse of dominance under the Competition Act. This calibrated sequencing is intended to prevent conflicting findings and to respect the specialized competence of TRAI while preserving CCI's statutory role.The matter is to proceed only after TRAI determines the specified telecom-specific jurisdictional issues (or furnishes its opinion), following which CCI may, if warranted, undertake competition-law investigation.Final Conclusion: The appeals are dismissed. The Court adopts a harmonised approach: TRAI must first determine the telecom-specific jurisdictional facts (or give its opinion under Section 21A) concerning interconnection, POIs and related licence/ICA/QoS matters; only thereafter may CCI investigate whether those facts amount to an anti-competitive agreement or abuse of dominance under the Competition Act. The High Court was competent to entertain the writs on jurisdictional grounds, and its quashing of CCI's prima facie investigation order is upheld as the CCI's action was premature, but the High Court should not have reached the merits of cartelisation.

2018 (11) TMI 1969 - DELHI HIGH COURT Law of Competition

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Prima facie competition review permits investigation directions without prior notice, hearing, or detailed evidentiary enquiry.
A direction under Section 26(1) of the Competition Act is a preliminary, administrative step to assess whether a prima facie case exists for investigation. At that stage, the Competition Commission need only satisfy itself on the material already on record; it is not required to issue prior notice, grant a hearing, or conduct a detailed evidentiary enquiry into the authenticity of the material. Sections 36(2) and the related regulations are enabling provisions for calling information and taking evidence, but they do not transform the prima facie assessment into an adjudicatory proceeding. The Delhi HC upheld the investigation direction as valid and not vitiated by absence of prior hearing.

Formation of prima facie opinion - Direction under Section 26(1) to the Director General is administrative and preparatory - No requirement of notice or hearing at the stage of issuing direction under Section 26(1) - Investigation direction distinct from adjudicatory action and appealable closure under Section 26(2)Formation of prima facie opinion - Investigation direction distinct from adjudicatory action - Whether the Commission was required to conduct a preliminary inquiry into the authenticity of the material or to hold a hearing before issuing a direction to the Director General under Section 26(1). - HELD THAT: - The Court applied the precedent in Competition Commission of India v. Steel Authority of India Ltd. and Anr. and held that upon receipt of information the Commission is expected to satisfy itself and express an opinion that a prima facie case exists before issuing a direction to the Director General. However, such formation of prima facie opinion is a preparatory, administrative function and not an adjudicatory determination of rights. The power to direct investigation under Section 26(1) is a direction simpliciter to an internal wing (the Director General) to collect and verify material; it does not determine civil rights or obligations and therefore does not require the procedures attendant to adjudication at that stage. The Court therefore found no merit in the contention that the Commission was obliged to conduct a fuller preliminary enquiry into the authenticity of the e-mail or the NPPA data before issuing the investigation direction. [Paras 4, 9]The Commission was not obliged to conduct a full preliminary inquiry or adjudicatory verification of material before issuing a direction under Section 26(1); formation of a prima facie opinion for that purpose is administrative and preparatory.No requirement of notice or hearing at the stage of issuing direction under Section 26(1) - Investigation direction distinct from adjudicatory action and appealable closure under Section 26(2) - Whether the affected party is entitled to notice or hearing before the Commission issues a direction under Section 26(1) and the legal consequences of such direction vis-a -vis rights of the parties. - HELD THAT: - Relying on the Supreme Court's pronouncement, the Court held that the statutory scheme does not contemplate notice or hearing of the informant or affected parties at the stage when the Commission forms a prima facie opinion and issues a direction under Section 26(1). The function at that stage is preliminary and departmental; it does not condemn any person nor produce civil consequences that would trigger the audi alteram partem rule. Rights of notice and hearing arise after consideration of the Director General's report and on any order under Section 26(2), including the right to appeal against closure. [Paras 7, 8, 9]No right to notice or hearing is required before the Commission issues a direction under Section 26(1); procedural rights attach after the Director General's report and on subsequent action under Section 26(2).Final Conclusion: The writ appeal is dismissed; the High Court upheld that the Commission lawfully issued a direction under Section 26(1) as a preparatory administrative measure without the need for prior notice or a full preliminary inquiry, and the appellant's challenge to that direction fails. Time for furnishing information extended for three weeks.

2018 (11) TMI 679 - COMPETITION COMMISSION OF INDIA Law of Competition

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Investigation Launched into Alleged Abuse of Market Power in India's Server Processor Industry.
The Commission identified a prima facie violation of Section 4 of the Competition Act, 2002, by the Opposite Party (OP), who allegedly abused its dominant position in the market for "Processors for Servers in India." The OP was accused of denying market access to the Informant by withholding reference design and simulation files necessary for server-board design, thus engaging in discriminatory practices without reasonable justification. Consequently, the Commission directed the Director General to conduct a detailed investigation into the alleged anti-competitive conduct and the involvement of responsible individuals within the OP, while clarifying that this order does not constitute a final judgment on the case's merits.

Relevant market delineation - dominant position in the market for Processors for Servers in India - denial of market access by withholding essential interoperability information - discriminatory refusal to deal as abuse under Section 4(2)(c) - limitation of production and technical development as abuse under Section 4(2)(b) - prima facie determination and remand for investigation to the Director GeneralRelevant market delineation - dominant position in the market for Processors for Servers in India - The relevant product market is market for Processors for Servers in India and the OP is prima facie dominant in that market. - HELD THAT: - The Commission held that the conduct complained of related to denial of design files necessary to make products compatible with the OP's micro processors, and therefore the relevant product market is the market in which that conduct occurred - i.e., Processors for Servers. Under the Explanation to Section 4 of the Act, dominance is to be assessed in India; having regard to the material on record (including an earlier Commission decision relied upon by the Informant), the OP is prima facie in a position of strength in the market for Processors for Servers in India. [Paras 21, 22, 23]Relevant market held to be Processors for Servers in India and OP prima facie dominant in that market.Denial of market access by withholding essential interoperability information - discriminatory refusal to deal as abuse under Section 4(2)(c) - limitation of production and technical development as abuse under Section 4(2)(b) - prima facie determination and remand for investigation to the Director General - Prima facie abuse of dominance by the OP through discriminatory refusal to provide the complete set of reference design and simulation files, contrary to Section 4(2)(c) and Section 4(2)(b), and the matter is directed for investigation by the DG. - HELD THAT: - The Commission found that although the OP had provided some collateral via its portal, material gaps remained (including non provision of certain IBIS simulation files and other important documents) and the OP had not furnished a cogent justification for treating the Informant differently from ODMs/OEMs. The Commission rejected the preliminary contention that SPICE files furnished were an adequate explanation for non provision of IBIS files without a reasonable justification for the discriminatory treatment. On the basis of these prima facie findings, and in view of unresolved factual questions about the completeness and parity of files provided and the reasons for differential treatment, the Commission directed a detailed investigation by the Director General into whether the OP abused its dominance by denying access to reference design and simulation files in a discriminatory manner, and also directed the DG to examine the role of responsible officers under the Act. [Paras 41, 57, 58, 59]Prima facie abuse found in refusal to provide complete reference and simulation files; DG directed to investigate the alleged violations of Section 4(2)(c) and Section 4(2)(b) and to examine responsibility of officers.Final Conclusion: The Commission, having held prima facie that the OP is dominant in the market for Processors for Servers in India and that there is a prima facie case of discriminatory denial of reference design and simulation files contrary to Section 4(2)(c) and (b), has directed the Director General to investigate the matter (including any additional anti competitive conduct and the role of responsible officers); the observations are prima facie and do not constitute a final adjudication on the merits.

2018 (11) TMI 1932 - COMPETITION COMMISSION OF INDIA Law of Competition

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No Violation Found: Online Market Giants Cleared of Unfair Practices in India.
The Commission concluded that there was no contravention of Section 4 of the Competition Act, 2002, by Flipkart or Amazon, as the allegations of abuse of dominant position and unfair trade practices were unsubstantiated. The relevant market was defined as "services provided by online marketplace platforms for selling goods in India," and it was determined that no single player held a dominant position. Consequently, the Commission ordered the closure of the information under Section 26(2) of the Act, and the Secretary was instructed to communicate this decision to the involved parties.

Services provided by online marketplace platforms for selling goods in India - relevant geographic market - dominant position - abuse of dominant position - market definition - network effects - violation of Section 4 of the Competition Act, 2002Market definition - Services provided by online marketplace platforms for selling goods in India - relevant geographic market - Relevant product and geographic market for assessing alleged abuse by Flipkart - HELD THAT: - The Commission examined whether separate markets should be delineated for Flipkart India (B2B wholesaling) and Flipkart Internet (marketplace/B2C). Having regard to the allegations made (which principally concerned the conduct of the marketplace operator, Flipkart Internet), the Commission held that the impugned conduct could be examined with reference to a single relevant market. It distinguished online retail stores from online marketplace platforms, noting the presence of network effects on marketplaces and the different commercial characteristics of inventory-based retail versus marketplace models. On geographic scope, the Commission found conditions of competition for online marketplaces to be homogeneous across India. Consequently, the relevant market was defined as "Services provided by online marketplace platforms for selling goods in India." [Paras 19, 24, 25, 26, 27]The relevant market is "Services provided by online marketplace platforms for selling goods in India" and the relevant geographic market is India.Dominant position - network effects - abuse of dominant position - violation of Section 4 of the Competition Act, 2002 - Whether Flipkart (Flipkart Internet) is dominant in the defined relevant market and whether there is a prima facie case of abuse under Section 4 - HELD THAT: - The Commission considered market shares and market structure based on material on record and public-domain information. While acknowledging Flipkart's size and resources and that incumbency advantages arise from network effects, the Commission noted the presence of multiple marketplace players (including Amazon, Paytm Mall, SnapDeal, ShopClues) and observed that Amazon is a close and substantial competitor. Entry into marketplace platforms was regarded as possible, indicative of limited entry barriers. The Informant's asserted market-share figures lacked credible sourcing. On this assessment of the market construct and competition dynamics, no single player was found to command dominance in the marketplace market at this stage of its evolution. As dominance was not established, the question of abuse under Section 4 did not arise on the material before the Commission. [Paras 28, 29, 30]Flipkart Internet is not established to be dominant in the relevant market and no case of abuse under Section 4 is made out on the record.Market definition - structural link - preferential treatment - Allegation of preferential treatment arising from historical structural links between Flipkart entities and WS Retail - HELD THAT: - The Informant alleged preferential treatment through a structural link between Flipkart entities and an exclusive seller (WS Retail). The Commission noted the Informant's own admission that any structural link between Flipkart Internet and WS Retail existed only until 2012, and further noted that WS Retail was no longer a seller on the Flipkart marketplace after 11 April 2017. Flipkart also submitted that arrangements by Flipkart India with B2B customers were non-exclusive and at arm's length, with no restraints on resellers. The Informant did not place material to substantiate ongoing preferential or exclusive arrangements. On these facts, the concern of present preferential treatment attributable to an historical structural link was not sustained. [Paras 6, 11, 31]No present preferential treatment by reason of any structural link with WS Retail is established.Interim relief - Section 33 - Requests for interim relief restraining alleged preferred sellers or combinations pending investigation - HELD THAT: - The Informant sought interim relief under Section 33 to restrain alleged preferred sellers and to prohibit combinations involving the Opposite Parties until investigation. The Commission conducted preliminary conferences, considered the material and submissions, and found no prima facie case of abuse of dominance against Flipkart (nor against Amazon). Given the absence of a made-out case under Section 4 on the available record, no basis was shown to grant the interim remedies sought. [Paras 1, 8, 9, 32, 33]The prayers for interim relief and for prohibition of combinations pending investigation are not granted.Investigation closure - violation of Section 4 of the Competition Act, 2002 - Final disposition of the Information filed under Section 19 alleging contravention of Section 4 - HELD THAT: - After examining the allegations, submissions, and available material, and having defined the relevant market and assessed dominance, the Commission concluded that no case of contravention of Section 4 was made out against the Opposite Parties. The Commission also took on record submissions denying abusive conduct and noted regulatory constraints and compliance obligations applicable to marketplace operators. The Commission extended its reasoning to Amazon, considered as a key market player, and found no case against it on the market construct and reasons given. [Paras 30, 31, 32, 33, 34]The Information is ordered to be closed forthwith under Section 26(2) as no contravention of Section 4 is established.Final Conclusion: The Commission defined the relevant market as services provided by online marketplace platforms for selling goods in India (geographic market India), found no single player dominant in that market on the material before it, held that no contravention of Section 4 of the Competition Act, 2002 was made out against the Opposite Parties (and similarly found no case against Amazon), refused the interim reliefs sought, and closed the Information under Section 26(2).

2018 (10) TMI 2046 - DELHI HIGH COURT Law of Competition

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Interim stay refused where prior order already kept action under the Competition Act subject to further court directions.
The Delhi HC declined to grant a fifteen-day stay on the impugned order to enable approach to the Division Bench, noting that the earlier interim order of 15.05.2017 had already clarified that any action taken under Section 43 of the Competition Act, 2002 would remain subject to further orders of the Court. In view of that existing protection, the Court found no basis to pass the requested stay and dismissed the petition.

2018 (11) TMI 1043 - COMPETITION COMMISSION OF INDIA Law of Competition

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Proposed Media Merger Gets Green Light: No Harm to Competition in India, Says Commission.
The Commission concluded that the proposed combination does not pose an appreciable adverse effect on competition in India. The analysis covered horizontal overlaps in film production, licensing of audio-visual content, operation of TV channels, and supply of advertising airtime, among others. It also considered vertically related markets, such as licensing of content rights and the wholesale supply of TV channels. In all areas, the presence of significant competitors and the insignificant market shares of the involved parties ensured no competition concerns. The order is subject to revocation if the provided information is incorrect, with confidentiality maintained under Section 57 of the Act.

Appreciable adverse effect on competition - horizontal overlap - vertical foreclosure - licensing of audio-visual content - operation and wholesale supply of TV channels - retail supply of audio-visual content (OTT) - supply of advertising airtime - character merchandising - licensing of music rights - licensing of publication rights - interactive media - market delineation left open - Section 6 notice and combination review under Section 31(1)Horizontal overlap - production and supply of films - market delineation left open - Proposed combination will not have an appreciable adverse effect on competition in the production and supply of films to third party distributors and exhibitors in India (including sub segments English, Bollywood and Regional films). - HELD THAT: - The Commission treated relevant market delineation as open but on the record found that combined market shares for English and Bollywood films declined between 2016 and 2017; the hit driven nature of film production causes year to year variability; significant global and domestic competitors would continue to constrain the Parties; distributors and exhibitors retain negotiating power post release. For regional films the Parties' combined share was negligible. On these bases the Commission concluded there is no likelihood of AAEC in this segment. [Paras 7]No appreciable adverse effect on competition in production and supply of films.Horizontal overlap - licensing of audio-visual content - market delineation left open - Proposed combination will not have an appreciable adverse effect on competition in the licensing of audio visual contents in India (sub segments: film content rights, sports content rights, and non film/non sports content). - HELD THAT: - The Commission noted the Parties produce a small proportion of total films licensed for broadcast and that TWDC is effectively absent from mass appeal sports rights in India (ESPN has no mass appeal TV rights and has licensed rights to Sony). The Parties' positions in non film/non sports content are also insignificant. Accordingly, the Commission found no AAEC concern in these licensing sub segments. [Paras 7]No appreciable adverse effect on competition in licensing of audio visual content.Horizontal overlap - operation and wholesale supply of TV channels - Proposed combination will not have an appreciable adverse effect on competition in the operation and wholesale supply of TV channels in India across identified sub genres (Films, Infotainment & Lifestyle, Kids, Hindi GEC, English GEC, Regional GEC, Music, Sports). - HELD THAT: - Using viewership based market shares supplied by the Parties, the Commission assessed each sub genre and found that combined shares were either modest or met significant competitive constraint from other incumbents (e.g., Zee, Sony, Discovery, TV18, Turner, Sun). In the Kids sub segment TWDC had a strong share but 21CF was insignificant and other competitors remain. For sports, 21CF's share is sizeable but the combination does not change market dynamics for reasons earlier noted. Overall, the Parties would face continued competitive constraints post combination. [Paras 7]No appreciable adverse effect on competition in operation and wholesale supply of TV channels.Retail supply of audio-visual content (OTT) - horizontal overlap - Proposed combination will not have an appreciable adverse effect on competition in the retail supply of audio visual content in India (including OTT services and DTH related retail supply). - HELD THAT: - The Parties' combined OTT market share was estimated at 30-35% with negligible incremental impact from TWDC; the sector is characterised by multiple strong competitors (Netflix, Amazon Prime, YouTube, ErosNow, SonyLIV, Voot, etc.) that would continue to constrain the Parties. Although 21CF has equity in Tata Sky (DTH), there is no overlap between the Parties in DTH retail supply and regulatory measures and rival DTH operators mitigate foreclosure risk. [Paras 7, 12]No appreciable adverse effect on competition in retail supply of audio visual content.Supply of advertising airtime - vertical relationship - Proposed combination will not have an appreciable adverse effect on competition in the supply of advertising airtime on television channels. - HELD THAT: - The Commission observed that television advertising frequently is not confined to a single genre and viewers are largely genre agnostic; 21CF's market share in advertising airtime is around 20-25% and the incremental share from the combination is insignificant. These factors mean the combination does not materially change advertising market dynamics. [Paras 7]No appreciable adverse effect on competition in supply of advertising airtime.Character merchandising - consumer products - Proposed combination will not have an appreciable adverse effect on competition in the supply of consumer products via character merchandising (licensing of intellectual property). - HELD THAT: - The Parties engage in character merchandising primarily through licensing of intellectual property; their combined presence in this business is insignificant and therefore cannot cause AAEC. [Paras 7]No appreciable adverse effect on competition in character merchandising/consumer products.Licensing of music rights - Proposed combination will not have an appreciable adverse effect on competition in licensing of music rights in India. - HELD THAT: - Both Parties are present as licensors of music but each has an insignificant market share in this segment; on this basis the Commission found no competition concern. [Paras 7]No appreciable adverse effect on competition in licensing of music rights.Licensing of publication rights - Proposed combination will not have an appreciable adverse effect on competition in licensing of publication rights in India. - HELD THAT: - Neither Party publishes books in India; their presence is limited to licensing IP to third party publishers and combined revenues from publishing licensing are insignificant, eliminating AAEC concerns in this segment. [Paras 7]No appreciable adverse effect on competition in licensing of publication rights.Interactive media - Proposed combination will not have an appreciable adverse effect on competition in interactive media in India. - HELD THAT: - The Parties overlap in interactive media via licensing of IP and audio visual content to game developers and telecom/value added service providers, but their combined market share is insignificant and other competitors remain, so no AAEC is likely. [Paras 7]No appreciable adverse effect on competition in interactive media.Vertical foreclosure - upstream licensing vs downstream wholesale/retail - Proposed combination will not enable the Parties to foreclose competitors in identified vertically related markets (licensing of audio visual content upstream vs wholesale supply of TV channels and retail supply; advertising upstream vs OTT downstream; licensing of music upstream vs sub licensing downstream; and operation/wholesale TV channels upstream vs DTH retail downstream). - HELD THAT: - The Commission identified relevant vertical relationships but found that in each case the Parties' presence is either insignificant or subject to sufficient competitive constraints from other players and regulatory measures (including TRAI orders in DTH/tariff regulation). Consequently, the Parties would lack the ability to foreclose rivals post combination. [Paras 9, 10, 11, 12]No likelihood of vertical foreclosure or AAEC in the identified vertical markets.Section 6 notice and combination review under Section 31(1) - appreciable adverse effect on competition - Overall conclusion under sub section (1) of Section 31: the Proposed Combination is not likely to have an appreciable adverse effect on competition in India. - HELD THAT: - Having considered the notice under Section 6(2), the submissions and materials provided by the Acquirers, and the factors in Section 20(4), the Commission assessed horizontal and vertical overlaps across identified markets and found no AAEC. The order also records that it shall be revoked if the information provided by the Acquirers is found incorrect and that the information is confidential under Section 57. [Paras 13, 14, 15]Commission concluded the Proposed Combination is not likely to have an appreciable adverse effect on competition and recorded the order under Section 31(1).Final Conclusion: The Commission, after assessing the notified combination under the procedure following the Section 6 notice and applying the factors in Section 20(4), found no appreciable adverse effect on competition in India across the analysed horizontal and vertical markets and accordingly recorded the order under sub section (1) of Section 31; the order is subject to revocation if information provided is found incorrect and the submitted information is confidential.

2018 (11) TMI 1042 - COMPETITION COMMISSION OF INDIA Law of Competition

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Consumer Dispute Case Closed; Not Anti-Competitive, Says Competition Commission of India.
The Competition Commission of India concluded that the allegations against the Opposite Parties concerning the Development Agreement did not contravene Section 3 of the Competition Act, 2002, as the issues pertained to consumer and contractual disputes rather than anti-competitive practices. The Commission determined that the matter was a private injury issue outside its jurisdiction and advised the parties to pursue resolution through appropriate legal avenues. Consequently, the case was closed under Section 26(2) of the Competition Act, 2002, and the Informants were notified of the decision and its rationale.

Appreciable Adverse Effect on Competition - private injury versus competition concern - jurisdiction of the Commission - closure under Section 26(2) of the Competition Act - non-applicability of restrictive trade practice provisions in purely contractual disputesNon-applicability of restrictive trade practice provisions in purely contractual disputes - Appreciable Adverse Effect on Competition - The allegations do not constitute a contravention of the provisions of Section 3 of the Act. - HELD THAT: - The Commission examined the nature of the allegations and the relationship between the parties and found that the Informants and the Opposite Parties are neither at the same level of the market nor part of the same production or supply chain. The dispute arises from alleged non performance of a Development Agreement, dishonour of cheques and related grievances, which are private/contractual in character and do not disclose any conduct causing an Appreciable Adverse Effect on Competition. Consequently, the factual matrix does not engage the restrictive trade practice provisions for which Section 3 is invoked. [Paras 18, 19]No case of contravention of Section 3 of the Act is made out.Jurisdiction of the Commission - private injury versus competition concern - closure under Section 26(2) of the Competition Act - The information falls outside the jurisdiction of the Commission and is to be closed under Section 26(2). - HELD THAT: - Having concluded that the matter discloses only a private injury and lacks any competition concern, the Commission held that the complaint lies beyond its remit. The Development Agreement and related Memoranda of Understanding substantiate that the dispute is contractual in nature and appropriate for adjudication by civil or other competent fora. In view of this absence of jurisdictional competence to entertain competition law claims on the present facts, the Commission exercised the power to terminate the proceedings and close the information under the statutory provision permitting such disposal. [Paras 20, 21]The information is ordered to be closed forthwith under Section 26(2) of the Act and the Informants are directed to seek redressal from an appropriate forum.Final Conclusion: The Commission found no competition law violation; the matter is a private contractual dispute outside its jurisdiction and the information is closed under Section 26(2) of the Competition Act, 2002.

2018 (10) TMI 229 - Supreme Court Law of Competition

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Issues Involved:
1. Whether there was any collusive agreement between the participating bidders resulting in bid rigging of the tender floated by IOCL in March 2010.
2. Whether the appellants successfully rebutted the presumption of appreciable adverse effect on competition.
3. The role of IOCL in the tendering process and its impact on the alleged bid rigging.

Issue-wise Detailed Analysis:

1. Collusive Agreement and Bid Rigging:
The Supreme Court analyzed the findings of the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT), which concluded that the appellants had engaged in cartelization and bid rigging. The CCI's investigation revealed that the appellants, manufacturers of 14.2 kg LPG cylinders, had submitted identical or near-identical bids in response to IOCL's tender. The CCI inferred collusion from the following factors: market conditions, small number of suppliers, few new entrants, active trade association, repetitive bidding, identical products, few or no substitutes, no significant technological changes, meetings of bidders in Mumbai just before the tender submission, appointing common agents, and identical bids despite varying costs. The COMPAT upheld these findings, emphasizing the existence of an active trade association and meetings held just before the tender submission. However, the Supreme Court noted that only 19 appellants attended the meeting, and many others quoted similar prices without attending, suggesting market conditions rather than collusion.

2. Rebuttal of Presumption of Adverse Effect on Competition:
The appellants argued that the market conditions, characterized by an oligopsony with only three buyers (IOCL, HPCL, and BPCL), influenced their bidding behavior. They contended that IOCL's tendering process, which involved internal estimates and negotiations leading to a final price lower than the bids, controlled the pricing. The Supreme Court found merit in the appellants' arguments, noting that IOCL's internal estimate of Rs. 1106.61 per cylinder was higher than the final negotiated prices, indicating IOCL's significant influence over pricing. The Court also observed that the presence of 12 new entrants in the tender contradicted the CCI's conclusion that the appellants prevented new entries. The Supreme Court concluded that the appellants successfully rebutted the presumption of an appreciable adverse effect on competition.

3. Role of IOCL in the Tendering Process:
The Supreme Court emphasized the need to examine IOCL's role in the tendering process. It noted that IOCL undertook an exercise to determine internal estimates and negotiated prices with the lowest bidder (L1), ultimately awarding contracts at the negotiated price to multiple bidders. This process ensured that all technically viable bidders received some order, maintaining a larger pool of manufacturers. The Court highlighted that IOCL's control over the tendering process and price determination was a significant factor influencing the bidding behavior of the appellants. The Court criticized CCI for not summoning IOCL to clarify its role, which could have provided crucial insights into the tendering process and the alleged bid rigging.

Conclusion:
The Supreme Court concluded that there was insufficient evidence to prove that the appellants had entered into an agreement for bid rigging. The Court allowed the appeals, setting aside the orders of the CCI and COMPAT, and dismissed the appeals of the CCI as infructuous. The Court emphasized the importance of examining the role of IOCL in the tendering process to fully understand the dynamics influencing the bidding behavior of the appellants.

Suppliers rebut presumption of bid rigging under Section 3(3)(d) as oligopsony and buyer concentration drove similar bids
SC held that appellants, suppliers of LPG cylinders, successfully rebutted the presumption of bid rigging under Section 3(3)(d) of the Competition Act given prevailing oligopsony market conditions and repetitive similar bids driven by buyer concentration. The Court found CCI failed to conduct necessary further inquiry, including summoning the purchasing entity, and there was insufficient evidence of an agreement to rig bids. Consequently the penalties were set aside, the appeals allowed, and the competition authority's appeals dismissed as infructuous; all pending applications were disposed of.

Cartelisation / bid rigging under Section 3(3)(d) of the Competition Act, 2002 - presumption of appreciable adverse effect on competition arising from agreements in Section 3(3) - parallel pricing and concerted practice - inference from circumstantial and economic evidence - facilitating factors (market structure, trade association, meetings, common agents, identical bids) - oligopsony / monopsony as a limiting market structure and its impact on competition law jurisdiction - standard of proof - probability and need to exclude independent conductCartelisation / bid rigging under Section 3(3)(d) of the Competition Act, 2002 - parallel pricing and concerted practice - inference from circumstantial and economic evidence - facilitating factors (market structure, trade association, meetings, common agents, identical bids) - standard of proof - probability and need to exclude independent conduct - Whether the appellants had entered into an agreement amounting to bid rigging / cartelisation such as to attract prohibition and penalty under Section 3(3)(d) of the Competition Act, 2002 - HELD THAT: - The Court examined the material on which CCI and COMPAT found cartelisation - identical or near-identical bids across States, meetings of the Indian LPG Cylinder Manufacturers' Association shortly before tendering, appointment of common agents, market structure (few suppliers, repetitive bidding, identical product, few substitutes) and upward shift in prices. Applying the established test that parallel behaviour is strong evidence only when it cannot be satisfactorily explained by independent conduct or market structure, the Court analysed the appellants' explanation of oligopsonistic market conditions and the IOCL tendering mechanism. The appellants demonstrated that (a) only three buyers existed for 14.2 kg cylinders (IOCL, BPCL, HPCL) and IOCL exercised significant control over price through internal estimates and post-bid negotiations; (b) IOCL's procurement practice (negotiating L 1 bids down and awarding L 2/L 3 at negotiated rates) and prior knowledge from contemporaneous tenders reduced the scope for bid-driven price determination by suppliers; (c) the product, regulatory regime and entry barriers explained repetitive and similar bidding; and (d) most indicia relied upon by CCI/COMPAT could be plausibly attributed to these market realities rather than a concluded agreement. The Court emphasised that where concerted action is difficult to prove directly, a regime of probability and corroborative evidence is applied, but such inferences must tend to exclude independent conduct. On the whole evidence, and in light of the need to have pursued further enquiry (notably from IOCL) to dispel uncertainties, the Court concluded that the presumption of a cartel was rebutted and there was insufficient material to hold that an agreement to rig bids existed. [Paras 90, 91, 101, 102, 103]Findings of cartelisation / bid rigging are not sustained; insufficient evidence of an agreement between the appellants to rig bids.Presumption of appreciable adverse effect on competition arising from agreements in Section 3(3) - oligopsony / monopsony as a limiting market structure and its impact on competition law jurisdiction - Whether CCI had jurisdiction to investigate and whether the presumption under Section 3(3) operated so as to sustain penalties once appellants relied on oligopsony/market-structure defence - HELD THAT: - The Court held that CCI has jurisdiction to investigate agreements alleged to be anti competitive even in markets where buyers are few; the object and scheme of the Act contemplate investigation to promote and sustain competition. However, the statutory presumption that agreements covered by Section 3(3) have appreciable adverse effect shifts the burden to respondents to rebut; such rebuttal was available here by showing market conditions (oligopsony, IOCL's control of price formation, regulatory constraints, entry dynamics) which plausibly explained the conduct. The Court noted that once appellants met that burden, the CCI ought to have conducted further inquiry (including summoning IOCL) to test and verify competing explanations. Because those necessary further inquiries were not made and the appellants successfully rebutted the presumption on the record, penalties could not be sustained. [Paras 78, 79, 101, 102, 103]CCI had jurisdiction, but the presumption under Section 3(3) was rebutted on the facts and, in absence of further inquiry by CCI (notably from IOCL), the penalties based on Section 3(3) could not be sustained.Final Conclusion: The appeals by the suppliers succeed. The Supreme Court set aside the CCI and COMPAT findings of cartelisation/bid rigging for want of sufficient evidence of an agreement and inadequate inquiry (including failure to examine IOCL); accordingly the penalties are quashed and the CCI's cross appeal against reduction of penalty is rendered infructuous. All pending applications are disposed of; no costs.

2018 (9) TMI 2121 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Law of Competition

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Issues Involved:
1. Contravention of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002 (Resale Price Maintenance).
2. Contravention of Section 3(4)(a) read with Section 3(1) of the Competition Act, 2002 (Mandating use of recommended lubricants and oils).
3. Allegations of exclusive dealership arrangements and refusal to deal.
4. Allegations of price collusion and hub-and-spoke arrangements.
5. Determination of relevant market.
6. Violation of principles of natural justice.
7. Inquiry procedure under Section 19 and Section 26 of the Act.

Detailed Analysis:

1. Contravention of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002 (Resale Price Maintenance):

The Commission held that Hyundai Motor India Limited (Hyundai Motor) contravened these provisions through arrangements resulting in Resale Price Maintenance (RPM). The DG's report noted that Hyundai Motor fixed the ex-showroom price of cars and maintained a "Discount Control Mechanism" which restricted the maximum discount dealers could offer to consumers. The Commission observed that Hyundai Motor engaged in various mystery shopping agencies to police its dealers and monitor the arrangement. However, the judgment criticized the Commission for not citing specific evidence to support these conclusions, relying solely on the DG's report, which is not permissible.

2. Contravention of Section 3(4)(a) read with Section 3(1) of the Competition Act, 2002 (Mandating use of recommended lubricants and oils):

The Commission found Hyundai Motor guilty of mandating its dealers to use recommended lubricants and oils and penalizing them for using non-recommended ones. The judgment pointed out contradictions in the Commission's findings, noting that while the Commission initially stated that cancellation of warranty upon use of non-recommended oils does not amount to contravention, it later concluded that Hyundai Motor contravened Section 3(4)(a) read with Section 3(1) by mandating the use of recommended lubricants. The judgment highlighted the lack of evidence to suggest that Hyundai Motor penalized dealers for not using recommended lubricants.

3. Allegations of exclusive dealership arrangements and refusal to deal:

The 1st Informant alleged that Hyundai Motor entered into exclusive dealership arrangements, requiring dealers to obtain prior consent before taking up other brand dealerships. The 2nd Informant alleged that Clause 5(iii) of the Dealership Agreement prohibited dealers from investing in other businesses, amounting to "refusal to deal" under Section 3(4)(d). The Commission noted that Clause 5 did not strictly set out an exclusivity obligation but required prior written permission from Hyundai Motor. The judgment criticized the Commission for not discussing evidence or agreements to substantiate these allegations.

4. Allegations of price collusion and hub-and-spoke arrangements:

The 1st Informant alleged that Hyundai Motor was responsible for price collusion among competitors through hub-and-spoke arrangements. The judgment did not find substantial discussion or evidence in the Commission's findings to support this allegation.

5. Determination of relevant market:

The DG defined multiple relevant markets for different contraventions, but the Commission rejected these definitions, delineating two markets: the upstream product market (all passenger cars) and the downstream product market (dealership and distribution of Hyundai cars). The judgment criticized the Commission for failing to decide the relevant geographic and product markets as required under Section 19(6) and (7) of the Act. It highlighted the need to identify competitive constraints and actual competitors, which the Commission failed to do.

6. Violation of principles of natural justice:

The Appellant argued that the Commission failed to provide notice of disagreement with the DG's report regarding the relevant market. The judgment did not delve into this issue, focusing instead on the lack of evidence and proper inquiry.

7. Inquiry procedure under Section 19 and Section 26 of the Act:

The judgment emphasized that the Commission failed to conduct a proper inquiry under Section 19 and Section 26 of the Act. It noted that the DG's report is merely an opinion to assist the Commission, which must independently analyze evidence. The Commission's reliance solely on the DG's findings without discussing specific evidence was deemed impermissible.

Conclusion:

The judgment set aside the impugned order dated 14th June 2017, criticizing the Commission for not basing its findings on specific evidence and relying solely on the DG's report. It highlighted the failure to determine the relevant market and conduct a proper inquiry under Section 19 and Section 26 of the Act. The Appellant was entitled to a refund of any amount deposited pursuant to the interim order dated 18th July 2017, with no order as to costs.

Judgment Overturns Order Due to Flawed Inquiry and Lack of Evidence in Competition Case.
The judgment annulled the order dated 14th June 2017, finding fault with the Commission for basing its conclusions solely on the Director General's report without specific evidence. The Commission's failure to properly determine the relevant market and conduct a thorough inquiry under Sections 19 and 26 of the Competition Act, 2002, was highlighted. Consequently, the Appellant was entitled to a refund of any amount deposited under the interim order dated 18th July 2017, with no imposition of costs.

Resale Price Maintenance (vertical agreement) - Tie in arrangement / Exclusive supply and refusal to deal - Definition of relevant product and geographic market - Requirement of independent appreciation of Director General's investigation report - Appreciation of evidence and burden of proof - Contradictory findings in adjudicatory orders - Factors under Section 19 for market delineationDefinition of relevant product and geographic market - Factors under Section 19 for market delineation - Validity of the Commission's market delineation and compliance with the requirements of Section 19 while determining the relevant product and geographic market. - HELD THAT: - The Tribunal held that both the DG and the Commission failed to determine the relevant product and geographic market as required by law. The Commission did not apply the factors listed in Section 19(6) and 19(7) (such as regulatory trade barriers, local specification requirements, consumer preferences, physical characteristics and end use) to delineate the market and instead adopted market definitions aligned with perceived areas of harm. Market definition is a requisite economic exercise to identify competitive constraints and cannot be bypassed; the inquiry under Section 27 cannot be completed without proper market delineation in accordance with Section 19. For these reasons the Tribunal found the inquiry incomplete and legally deficient. [Paras 26, 36, 40]Findings of the Commission on relevant product and geographic market are legally infirm for non compliance with Section 19 and the market delineation is vitiated.Requirement of independent appreciation of Director General's investigation report - Appreciation of evidence and burden of proof - Whether the Commission could base its final determination merely on the DG's report without independent analysis of the evidence on record. - HELD THAT: - The Tribunal reiterated that the DG's report is an investigative opinion meant to assist the Commission and is not binding. The Commission is required to independently analyse the evidence, read the DG's report in conjunction with other material on record and form its own reasoned conclusion. In the impugned order the Commission largely depended on the DG's findings and failed to discuss or weigh specific evidence, including material relied on by the appellant. Such reliance on the DG's report without independent appraisal infringes the statutory scheme and renders the Commission's conclusion impermissible. [Paras 37, 44, 45]The Commission impermissibly relied on the DG's report without independent appreciation of evidence; such reliance vitiates its findings.Resale Price Maintenance (vertical agreement) - Tie in arrangement / Exclusive supply and refusal to deal - Contradictory findings in adjudicatory orders - Sustainability of the Commission's findings that Hyundai contravened Section 3(4)(e) (resale price maintenance) and Section 3(4)(a) (tie in for lubricants) in light of evidential shortcomings and internal contradictions. - HELD THAT: - The Tribunal observed that the Commission's conclusions on resale price maintenance and on mandating use of recommended lubricants were not supported by specific evidence in the record. The impugned order repeatedly cites the DG's observations but does not exhibit analysis of primary evidence proving that dealers were penalised for use of non recommended oils or that RPM was effected beyond DG's assertions. Further, the Commission's reasoning is internally inconsistent: it stated that cancellation of warranty for use of non recommended oils does not amount to contravention (paragraph 108) yet concluded that Hyundai contravened Section 3(4)(a) by mandating recommended lubricants (paragraph 116). In view of absence of independent evidentiary findings and these contradictions, the Tribunal found the Commission's determinations unsustainable. [Paras 34, 46, 47, 48]Findings that Hyundai contravened Sections 3(4)(e) and 3(4)(a) are unsustainable for want of evidence and because of contradictory conclusions in the impugned order.Final Conclusion: The impugned order dated 14th June, 2017 of the Commission is set aside: the Commission's findings are vitiated by failure to delineate the relevant market in accordance with Section 19, by impermissible reliance on the DG's report without independent appreciation of evidence, and by internally contradictory conclusions; the appellant is entitled to refund of any amounts deposited pursuant to the interim order, and there shall be no order as to costs.

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