AI Drafter 
TaxTMI 
TaxTMI 
2010 (3) TMI 1159
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....s (India) Ltd. 3. The facts leading to this petition can be narrated as follows Petitioner no.1 is a Company incorporated under the provisions of the Companies Act, 1956 and is engaged in business of running an airline. The airline carries on operation throughout India and also on some international roots. Petitioner no.2 is the Chairman of petitioner no.1. Some time in October, 2008, petitioner no.1 and Jet Airways issued a press announcement informing that two airlines were pleased to form an alliance of wide ranging proportions which will help the airlines to rationalize the rates and provide improved standards of service of wider choice of air travel options to the consumers. After such an announcement, the Commission established under the provisions of the Monopolies and Restrictive Trade Practices Act (M.R.T.P.Act), issued certain notices to the petitioners. On 17th October, 2008, an order was passed by the M.R.T.P. Commission ordering an investigation into the reported agreement between the petitioners and the Jet Airways. On 29th October, 2008, the Director General of Investigation issued a notice to petitioner no.1 calling certain information under Section 11 o....
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.... geographic market and relevant product market. According to the petitioners, no action can be taken as the Commission has not determined whether the Domestic Air Transport Service (Passenger) constitutes relevant market for the purpose of the Act, which is prerequisite for the exercise of jurisdiction under Section 4. Thus, according to the petitioners, establishment of relevant market is an essential condition before any exercise can be undertaken by the Commission for taking any action against the petitioners. Further, the petitioners contend that the provisions of Sections 3, 4, 19, 27, 42 and 43 are violative of provisions of Article 20 of the Constitution of India. 4. Respondent no.1/the Competition Commission in its affidavit contends that the petition itself is premature and without merits. The Commission contends that an enquiry has merely been ordered and no action whatsoever has been taken against the petitioners. It is also contended that the prima facie view has been formed by respondent no.1 and enquiry and investigation has been ordered. No final order has been passed by the Commission and it is only after the conclusion of the investigation that the Commission wi....
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.... left it open for the Director General to investigate, if necessary, on further developments. This order was passed on 4th September, 2009. The Competition Act, 2002 repealing the M.R.T.P. Act came into effect on 20th May, 2009. However, the operation of Section 66 was kept in abeyance for two years, as a result of which, M.R.T.P. Commission could continue to exercise the jurisdiction till the expiry of two years from 20th May, 2009. It appears, however, that Legislature amended the Act with regard to Section 66 proviso and substituted the words "after the expiry of two years referred to in the proviso to subsection 1" by words "on the commencement of the Competition Act, 2009". This Gazette of India shows that the amendment came into effect on 14th October, 2009. It is, therefore, apparent that M.R.T.P. Commission ceases to have existence from 14th October, 2009. The Competition Commission has passed an order on 4/8/2009 directing the Director General to investigate into the information given by respondent no.3. The main challenge is to this order dated 4/8/2009. 7. The said order dated 4/8/2009 (Exh.B) reads as follows COMPETITION COMMISSION OF INDIA. ....
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.....8.2009. After considering the entire material on record and relevant facts and circumstances relating to this matter which are brought to the notice of the Commission in the meeting, the Commission is of the opinion that there exists a prima facie case and hence the matter should be referred to the Director General for conducting enquiry into it. The Commission, therefore, directs that a reference be made to the Director General to cause an investigation to be made into this matter and to submit his report within 45 days of the receipt of the order of the Commission. The Commission, therefore, directs the Secretary to convey these directions to the office of the Director General, accordingly. The Secretary shall transmit the information along with entire material to the Office of the Director General at the earliest. So far as prayer for passing adinterim order is concerned, the matter shall be considered separately in the next meeting of Commission. The Informant may be informed accordingly." With this, we turn to the submission made by Shri Seervai, the learned senior counsel for the petitioners, who mainly urged the following points: (1) The Compet....
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....f the new Act was, therefore, certainly valid, for it was not in breach of any law or affected any law then existing. The question here is whether this agreement, which was valid until coming into force of the Act, would continue to be so valid even after the operation of the law. The parties as on today certainly propose to act upon that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and cannot be questioned. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy. We would say that the Act could have been treated as operating retrospectively, had the act rendered the agreement void ab initio and would render anything done pursuant to it as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and subsisting even after coming into force of the Act, which prohibits an agreement o....
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....ed prior to coming into force of the Act. Naturally, it prohibits a person from instituting a suit, after the Act comes into force, in respect of the transaction prior to the Act. We may usefully quote here paragraph no.11 of the judgment in Rajgopal's case. These observations to our mind set at rest the controversy. 11.Before we deal with these six considerations which weighed with the Division Bench for taking the view that Section 4 will apply retrospectively in the sense that it will get telescoped into all pending proceedings, howsoever earlier they might have been filed, if they were pending at different stages in the hierarchy of the proceedings even up to this Court, when Section 4 came into operation, it would be apposite to recapitulate the salient feature of the Act. As seen earlier, the preamble of the Act itself states that it is an Act to prohibit benami transactions and the right to recover property held benami, for matters connected therewith or incidental thereto. Thus it was enacted to efface the then existing right of the real owners of properties held by other benami. Such an Act was not given any retrospective effect by the legislature. Even when w....
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....sdom has not expressly made Section 4 retrospective. Then to imply by necessary implication that Section 4 would have retrospective effect and would cover pending litigations filed prior to coming into force of the section would amount to taking a view which would run counter to the legislative scheme and intent projected by various provisions of the Act to which we have referred earlier. It is, however, true as held by the Division Bench that on the express language of Section 4(1) any right inhering in the real owner in respect of any property held benami would get effaced once Section 4(1) operated, even if such transaction had been entered into prior to the coming into operation of Section 4(1), and hence after Section 4(1) applied no suit can lie in respect to such a past benami transaction. To that extent the section may be retroactive. To highlight this aspect we may take an illustration. If a benami transaction has taken place in 1980 and a suit is filed in June 1988 by the plaintiff claiming that he is the real owner of the property and defendant is merely a benamidar and the consideration has flown from him, then such a suit would not lie on account of the provisions of S....
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....crore, as the Commission may determine. (3) If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under subsection (2), he shall, without prejudice to any proceeding under section 39, be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to rupees twenty five crore, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit: Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this section save on a complaint filed by the Commission or any of its officers authorised by it. 43. Penalty for failure to comply with direction of Commission and Director General. If any person fails to comply, without reasonable cause, with a direction given by (a) the Commission under subsections (2) and (4) of section 36; or (b) The Director General while exercising powers referred to in subsection (2) of section 41, such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of rupees one crore, as may be determined by the ....
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.... has no jurisdiction to punish for any breach which was not an offence when the agreement was entered into. There cannot be two opinions that the parties can be dealt with in accordance with the law as was existing on the date of offence and not in accordance with the law at the time of trial or conviction. (1977) 3 SCC 525 (State of Mah. ..vs.. Kaliar Koil Subramaniam) is the decision on the proposition. In the instant case, the Act does not make breach of Sections 3 and 4 by itself punishable. Therefore, entering into an agreement, contrary to provisions of law, is not an offence but such agreement is only void. That may not be enforceable in law. If the law today prohibits entering into such agreement, it means that even the existing agreements, which are contrary to law, must become void. The petitioners are not sought to be convicted immediately. There is no direction as yet from the Commission to the petitioners. There is, therefore, as on today no question of petitioners being sought to be tried. Article 20(1) to us has no application to the instant case. If the article is read carefully, what it prevents to do is the imposition of higher penalty at the time of conviction, i....
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....such question cannot be challenged before the Commission that does not take away the right of the Commission to enquire into or investigate into the alleged breaches. Mere enquiry into certain alliance can in no way be said to be unconstitutional. What is sought to be done by the Commission is to examine terms of alliance. If it finds that certain terms of the alliance are repugnant to the Act, it may ask the parties to stop acting upon them or under Section 27(d) to modify the terms of the said agreement. Therefore, unless and until the Commission examines all aspects, it cannot come to the conclusion if the agreement is void and partly valid. The commission alone, upon such examination, has a right to give such finding. 16. Shri Seervai, the learned Senior counsel, contended that any statute having penal provision has to be interpreted strictly and narrowly and should not be held to be retrospective. He relied upon a decision of the Supreme court in 2007 (9)SCC 665 (Virtual Soft Systems Ltd. ..vs.. Commissioner of Income Tax, Delhi I). The Supreme Court observes as under 24. Section 271 of the Act is a penal provision and there are wellestablished principles for the i....
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....tinuity of possession spread over some time and the concept is connected with the idea of a regular place of storage. Transhipment is a moving vehicle would not amount to storage within the meaning of the Orissa Order." 27. Every statutory provision for imposition of penalty has two distinct components: (i) That which lays down the conditions for imposition of penalty. (ii) That which provides for computation of the quantum of penalty. Section 271(1)(c) and subclause (iii) relate to the conditions for imposition of penalty, whereas, on the other hand, Explanation 4 of Section 271(1)(c) relates to the computation of the quantum of penalty. 17. Shri Khambata, learned Additional Solicitor General, contended that there is nothing in the Act suggesting that it is retrospective. Therefore, there is no reason why the petitioners should feel aggrieved. He submits that even the respondents do not say that the alliance is void ab initio. He draws our attention to paragraph no.57 of the judgment in Virtual Soft Systems Ltd case. The said paragraphs reads as follows 57. Next proposition is with reference to the amended provision of law made by th....
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.... at all in the statute. For this reason, too, we find that the Competition Act is not retrospective and is therefore not hit by Article 20(1) even if it is assumed to be penal for the sake of the argument. 18. Shri Seervai, the learned senior counsel for the petitioners, has placed reliance on a decision reported in 1923 King's Bench Division 193 ( Henshall ..vs.. Porter). The court observes as follows "In my opinion the Act of 1922 must be considered in the light of the settled, recognized and beneficent rule of law that existing rights are not to be deemed to be destroyed by a statute unless there be express words or the plainest implication to that effect. I need not cite the overwhelming body of authority as to this; many of the decisions and textbooks are quoted in Bowling v. Camp (2). I see nothing in the Act of 1922 which compels me to give it a retrospective operation. Take the broad facts here. On July, 20, 1922, the plaintiff possessed fully accrued rights under the Act of 1835. The defendant then owed him statutory debts: see Cohen v. Hall (3). These debts constituted property in the fullest sense of the word. Can it justly be said that on July, 20, 1922,....
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....that no action whatsoever has been taken by the M.R.T.P. Commission. There could therefore be no impediment in taking any action under the new Act. Even otherwise, the provisions of the M.R.T.P. Act and the Competition Act are not identical. Since no action whatsoever is taken or proposed to be taken by the M.R.T.P. Commission, there could be no question of the petitioners being subjected to double jeopardy. Further, the M.R.T.P. Commission now stands abolished w.e.f. 14th October, 2009. There is, therefore, no question of M.R.T.P. Commission now taking any action against the petitioners. This ground of challenge has no substance at all. 21. Now, we propose to deal with the submission that unless and until the Commission first determines the relevant market, the relevant geographic market, it cannot take any action under Section 4 of the Competition Act. Shri Seervai, the learned Senior counsel, submits that Section 4 postulates abuse of dominant position. He submits that, dominant position shall be taken as an abuse if the group does an act as given in clauses (a) and (e) of subSection 2 and three conditions such as relevant market, relevant geographic market and relevant produ....
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....ys as to which factors need to be taken into consideration while determining the relevant geographic market. The enquiry is supposed to proceed bearing in mind those factors. If Section 26 is read with Section 19, it would be clear that the information received under Section 19 is to be placed before the Commission; and if the Commission finds a prima facie case, it can direct the investigation; and it has an option to drop the matter if there is no prima facie case. It is, therefore, not necessary that the investigation would be ordered in each and every case. Therefore, the information that is received can be treated as if it is an F.I.R. It will have to be found out by the Commission from that information whether there is any material in the said information which requires them to take cognizance of the complaint and then order an investigation. The investigation, the purpose of which, would be to collect evidence and would disclose if the group abused its dominant position. Therefore, it is clear that the investigation would reveal if there is sufficient evidence available to take further action. It is after the report of the Director General that the Commission proceeds to pas....