TaxTMI 
TaxTMI 
2022 (1) TMI 1313
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.... as "the MCA" and the said representation was forwarded by the MCA to the second respondent-Competition Commission of India, hereinafter referred to as "the CCI" on 16.12.2013. The representation alleged that when natural rubber price increased, the tyre prices were increased in a concerted manner by the domestic major tyre manufacturers, however, when the price of natural rubber decreased, the tyre prices were not reduced by the domestic major tyre manufacturers and as such, they indulged in price parallelism and cartelization. In order to support the said allegations, the AITDF mentioned some unauthenticated natural rubber prices for certain years, instead of showing the rubber board price. Neither the actual tyre price nor the year or the name of the company were mentioned in the said representation. Without even showing any proof of price parallelism, the allegation of cartelization under Section 3 of the Competition Act, 2002 cannot stand up. 3. Shri G. Masilamani, continuing his arguments, contended that it is common knowledge that to make a comparison, there must be minimum two parameters. While arriving at the price parallelism between the opposite parties, who are 5 in ....
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....ically, therefore, the letter dated 16.12.2013 cannot be considered as a reference, muchless, a valid reference within the meaning of Section 19(1)(b) of the Competition Act read with Regulations 10 and 11 of the Competition Commission of India (General) Regulations. Moreover, the word 'reference' is defined under Regulation 2(j). Therefore, it shall comply with the mandatory regulations framed under this Act. Further, not even one word is written about the violation of Section 3 of the Competition Act while forwarding the letter. Besides, no names of the tyre producers were mentioned against whom action was to be taken. When the forwarding letter failed to contain the word 'reference', the forwarding of the letter by MCA, being an executive action, to set in motion a reference under the Competition Act, the MCA ought to have recorded some reasons in support of the purported reference. But the MCA not only failed to give any reason, but also equally failed to refer to any fact or situation to implicate the opposite parties for violation of Section 3 of the Act. When Regulations 11 and 12 have not been complied with by the MCA, the MCA ought to have seen and followed....
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.... order under Section 26(1). Without doing so, the CCI had formed a prima facie opinion without the most essential and fundamental fact, namely, actual tyre prices of opposite parties and wrongly arrived at the price parallelism and cartelization. Again emphasising that it was impossible to make a comparison of the prices of tyres without the actual prices of tyres, he has argued that the AITDF and the CCI had boiled empty vessels to cook the opposite parties. Again to bring his case under Regulation 15(3), it has been argued that the reference was not even signed by the Joint Secretary as required in Regulation 11(2), as it was signed by the Director. Therefore, when the statutory regulation prescribes a particular thing to be done in a particular way, it shall be done in that way or not at all. When no person other than the Joint Secretary can sign the reference, it cannot be delegated to anyone by the Joint Secretary, because even such a delegation is not found in the note sheet. Even the forwarding note does not contain anything, therefore, this would not constitute a valid reference. Moreover, the said reference does not comply with the Regulations 10(1) and 11(2), hence, it sh....
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....ation report was served by way of paper book on the counsel for the appellant, without the leave of the Court, as an additional document. Therefore, no reference to the contents of the Director General's report can be made, for the simple reason that any finding or observation by this Court on the report of the Director General would jeopardize the prospect of statutory appeal under Section 53-B of the Competition Act to be filed before the National Company Law Appellate Tribunal. Learned Senior Counsel also requested this Court not to refer to the report or place reliance on the contents of the Director General's report while disposing of this writ appeal, as it is subsequent to the order passed by the learned single Judge. Moreover, it was not even placed before the learned single Judge, therefore, what was not part of the pleadings before the learned single Judge, cannot be taken up for consideration by this Appeal Court, that too, without the leave of this Court. 7. Again assailing the approach adopted by the learned single Judge, Shri G. Masilamani submitted that the findings of the learned single Judge that the CCI had suo motu power, therefore, the order impugned ....
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....ion 27 of the Competition Act and when the punishment is also imposed, the observation of the learned single Judge that the parties are at liberty to raise all their objections before the Director General and before the Commission at the time of inquiry before passing final order, is legally not permissible in law. A compendious reading of Sections 26(1) and 41(2) read with Regulation 21(7) and (8) shall disclose all opportunities to object are subject to the pure discretion of the Commission and the Director General. Assailing one of the impugned observations made by the learned single Judge that no prejudice is caused on account of the order under Section 26(1) on the reference, since it is only at the investigation stage, it has been contended that the entire process of investigation by the Director General and the inquiry by the CCI are the same procedure which may result in punishment, therefore, in the absence of reasonable opportunity for the person likely to be affected by the finding of the Director General, the learned single Judge ought not to have come to the conclusion that no prejudice is caused on account of the investigation being proceeded against them. Finally, hi....
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....ng to be made. When Regulation 10(2) makes it mandatory that the information or reference referred to in sub-regulation (1) shall contain the statement of facts, the details of the alleged contravention of the Act, together with a list enlisting all documents, affidavits and evidence, as the case may be, in support of each of the alleged contraventions, and the same shall be duly verified by the person submitting it, placing reliance on the judgment of the Apex Court in Bijay Kumar Singh v. Amit Kumar Chamariya, (2019) 10 SCC 660 to say that if an act is required to be performed by a private person within a stipulated time, the same would ordinarily be mandated. But when a public functionary is required to perform a public function within a time frame, the same will be held to be jurisdictional unless the consequences thereof are specified. Again referring to the judgment of the Apex Court in Annamalai University represented by its Registrar v. Secretary to Government, Information and Tourism Department and others, (2009) 4 SCC 590, Shri P.S. Raman pleaded that the Apex Court held in the said judgment that a subordinate legislation when validly made becomes a part of the Act. Simil....
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....ack to the Central Government for rectification of the defects, as per Regulation 15(2), which has not been done. Therefore, Regulation 15(3) will come into effect and the reference will necessarily have to be declared as invalid. Moreover, the consequential order dated 24.6.2014 passed by the CCI under Section 26(1) is illegal and this has been overlooked by the learned single Judge. Hence, the appeal deserves to be allowed, he pleaded. 9. Shri AR.L. Sundaresan, learned Senior Counsel appearing for the ninth respondent-Automotive Tyre Manufacturers' Association (ATMA) argued that the ninth respondent is a non profit company registered under Section 25 of the Companies Act and it has not been involved in the conduct or management of the affairs or day to day operation of any of its members. Learned Senior Counsel also stated that the ninth respondent has always conducted all its affairs within the parameters of all applicable rules, regulations and laws. On behalf of the tyre industries in India, the ninth respondent carries on legitimate and positive functions including conducting seminars about technical and other advances in industry identifying competition problem with p....
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.... it conforms to general regulations and in case there are any defects, the same ought to be communicated to the parties within a reasonable period of time and the parties are granted a specific time period to clear the defects. As per Regulation 15(3), if the said defects are not cleared within the stipulated time period, the reference or information shall be treated as invalid. In the present case, he pleaded that the Secretary to the CCI failed to adhere to Regulation 15 and did not inform the MCA of the defects in the reference. Instead, the Secretary erroneously placed the reference before the CCI. Therefore, placing the invalid reference in front of the CCI without curing the defects, is a violation of Regulation 15(3), which is mandatory in nature. When a specific effect or consequence is provided in a particular provision, the same must be given effect to. Therefore, the order passed by the CCI is liable to be set aside on the ground of non-compliance of Regulation 15(3). On the other hand, the reliance placed by the CCI on Regulation 40 is fully misplaced and cannot apply in respect of specific consequences set out in Regulation 15(3). Any other interpretation would render ....
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....nancial years 2015-16 and 2019-20 before releasing the final order in Reference Case No. 8 of 2013, which is kept in a sealed cover as per the directions of this Court dated 8.3.2018. Earlier, when the ninth respondent-ATMA approached the CCI with an application dated 21.7.2021 praying for furnishing of the aforementioned two reports, the said request was rejected by the CCI on 3.8.2021 on the ground that the Reference Case No. 8 of 2013 was closed since a final adjudication order has been passed in the matter and thereupon the same has been kept in a sealed cover, as per the direction issued by this Court on 8.3.2018. Having been aggrieved by the said order, the ninth respondent-ATMA filed the above writ petition before the Delhi High Court and when the Court, finding no merits, sought to dismiss the writ petition, the ninth respondent withdrew the same. 13. Learned Additional Solicitor General, continuing his arguments, further stated that the MCA forwarded the letter dated 16.12.2013 to the CCI along with a copy of the representation dated 28.11.2013 received from the AITDF for appropriate action. As per Regulation 11(2) of the Competition Commission of India (General) Regula....
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...., the learned Additional Solicitor General contended that no act or proceeding of the Commission shall be invalid merely by reason of any irregularity in the procedure of the Commission not affecting the merits of the case. Again as per Regulation 40, the failure to comply with any requirement of these regulations shall not invalidate any proceeding merely by reason of such failure, unless the failure has resulted in miscarriage of justice. In the present case, a conjoint reading of Section 15(c) read with Regulations 15(5) and 40 would indicate that the reference cannot be held as invalid. 16. Moving to the order passed under Section 26(1) by the CCI, it has been heavily contended that the Hon'ble three-Judge Bench of the Apex Court in Competition Commission of India v. Steel Authority of India Limited and another, (2010) 10 SCC 744 has held clearly that the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter and it does not effectively determine any right or obligation of the parties to the lis and it would not affect the rights of the parties and therefore is not appealable. Concluding....
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....ed? (iii) Whether the complaint/reference made by the fourth respondent-AITDF is hit by the principles of res judicata? (iv) Whether Regulation 15(3) is mandatory or directory? (v) Whether the conduct of the ninth respondent-ATMA in approaching the Delhi High Court for the relief would amount to forum shopping? 18.1. Issue Nos. (i) & (iv): This writ appeal has been brought before this Court by the unsuccessful writ petitioner-M/s. MRF Limited praying to set aside the order passed by the learned single Judge, dismissing the writ petition on the following three counts:- 18.2. Firstly, the power of the Competition Commission of India (CCI) to go into the merits of the allegations in the reference as well as the information is within its domain as the original adjudicating authority, with which the writ Court is not expected to interfere at the preliminary stage, because the CCI being the fact finding authority shall be left free to find out the truth of the allegations after conducting a proper inquiry. Therefore, the interference at the stage of investigation would certainly amount to usurping the original jurisd....
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....d under section 21 or sub-section (1) of section 49 of the Act. (2) The information provider referred to in clause (a) of sub-section (1) of section 19 of the Act or the Central Government or the State Government or the statutory authority referred under clause (b) of sub-section (1) of section 19 or in sub-section (1) of section 49 of the Act, as the case may be, shall, on receipt of the communication about the defects under sub-regulation (1), remove the defects within:- (a) thirty days of receiving the intimation in case of an information or reference under clause (b) of sub-section (1) of section 19 of the Act; or (b) fifteen days of receiving the intimation in case of a reference under section 21 or sub-section (1) of section 49 of the Act. (3) In case the defects are not removed by the Central Government or the State Government or the statutory authority or the concerned party, as the case may be, as per the provision of sub....
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....ined therein above shall preclude the Commission from using the contents of such information or reference in any manner as may be deemed fit, for inquiring into any possible contravention of any provision of the Act, it shall be meant and understood that the operation of sub-regulation (5) is notwithstanding the impact of sub-regulation (3) of Regulation 15, therefore, the operation of Regulation 15(5) would empower the CCI to consider the contents of the information or reference in any manner as it deems fit to inquire into any possible violation of the provisions of the Act, notwithstanding the operation of Regulation 15(3). 22. Besides, this regulation is further fortified by the application of Regulation 40, which is extracted as under:- "R.40. Effect of non-compliance.-Failure to comply with any requirement of these regulations shall not invalidate any proceeding, merely by reason of such failure, unless the Commission is of the view that such failure has resulted in miscarriage of justice." A mere reading of the above regulation vividly shows that even the failure to comply with any requirement of these regulations shall not invalidate any proceedi....
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....atory. 24. If the makers of the law intended to hold that any defective reference is invalid under Regulation 15(3), they would not have brought in Regulation 15(5). Moreover, Section 15(c) of the Competition Act and Regulation 40 of the Competition Commission of India (General) Regulations would not have been made available. Since these three provisions have been added, in our considered opinion, although Regulation 15(5) operates notwithstanding Regulation 15(3), Section 15(c) and Regulation 40 empower the CCI, an expert body, would function as a market regulator, to consider whether the defective reference carries any merit for further adjudication. Therefore, what becomes invalid under Regulation 15(3) is only the form of reference and not what the reference contains in terms of information, because when the AITDF alleged that the appellant along with four other tyre manufacturers control over 90% of the tyre production in India by engaging in dominant position through price parallelism, they raise the prices of tyres and tubes on the pretext of increase in the price of natural rubber, but the subsequent reduction in this raw material was not followed by the corresponding de....
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....ow under Section 26(1), after receiving information under Section 19(1), the CCI is legally duty bound to form a prima facie case. While considering the scope of Section 26(1), the Apex Court in Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744 has held vividly that the order or direction issued under Section 26(1) after forming a prima facie opinion is a direction simpliciter to cause an investigation in the matter and it does not effectively determine any right or obligation of the parties to the lis, because it passes the interim order or direction at the preliminary stage without recording a finding which would bind the parties and it would not make the direction as an order which affects the rights of the parties and therefore, is not appealable. 26. When it is the allegation made by the AITDF that the appellant/writ petitioner, joining hands with his cartel group, unfairly decides the price fixation of tyres and tubes, as a result, the common men at large are put to immense prejudice, whether such allegation is correct or incorrect, the CCI constituted for the exclusive purpose alone can go into this issue, for which the investigation h....
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....quired to be tested on the anvil of Regulation 15(3), Regulation 15(5), Regulation 40 of the Competition Commission of India (General) Regulations, 2009 read with Section 15(c) of the Competition Act, 2002? 28. Moreover, coming to the issue whether the Regulations are mandatory or directory in nature, it has been the consistent effort of the respective learned Senior Counsel appearing for the appellant, sixth and ninth respondents that the reference made by the MCA to CCI is defective, for the reasons that while making the reference to CCI, the entire procedure contemplated under Regulations 10, 11, 14, 16 & 23 have been ignored by the MCA and ignoring the same, once again the CCI also acted above the law, because the reference was not signed by the Joint Secretary as required under Regulation 11, as it was signed only by the Director. Therefore, the respective learned Senior Counsel appearing for the appellant, sixth and ninth respondents emphasized that when the statutory regulations prescribe a particular thing to be done in a particular way, it shall be done in that way, therefore, the reference would become non est by virtue of Regulation 15(3). 29. In our considered opi....
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....ause, rules and procedures are the handmaid of justice and not its mistress, therefore, it shall not override the object of securing the ends of justice. The Apex Court in The State of Punjab and another v. Shamilal Murari and another, (1976) 1 SCC 719 has settled this issue holding that while dealing with procedural law, we must always remember that procedural law is not to be a tyrant, but a servant, not an obstruction, but an aid to justice. This legal position has been reiterated by the Apex Court in yet another decision in Smt. Rani Kusum (Smt.) v. Smt. Kanchan Devi, (2005) 6 SCC 705. More importantly, conflict between the procedural law and the substantial law has been resolved by the Hon'ble Supreme Court in Zolba v. Keshao and others, (2008) 11 SCC 769, wherein the Hon'ble Supreme Court, quoted with approval its earlier decision in Salem Advocate Bar Association, Tamil Nadu v. Union of India, (2005) 6 SCC 344, holding thus: "21. It has been clearly held that the provisions including the proviso to Order 8 Rule 1 of the CPC are not mandatory but directory. It has been held in that decision that the delay can be condoned and the written statement....
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....tary is directed to send a copy of this direction passed under section 26(1) along with copy of the information of the office of the DG. DG shall investigate the matter about violation of the provisions of the Act along with cases mentioned above. In case the DG finds Ops in violation of the provision of the Act, it shall also investigate the role of the persons who at the time of such contravention were in charge of and responsible for the conduct of the business of the opposite parties. The report of DG be submitted within 60 days from receipt of the order. 18. Nothing stated in this order shall tantamount to a final expression of opinion on merit of the case and the DG shall conduct the investigation without being swayed in any manner whatsoever by the observations made herein." 33. When the said order was put to challenge before the writ Court under Article 226, the learned single Judge, framing a point for consideration as to whether the impugned order passed under Section 26(1) of the Act is liable to be interfered with, for the reasons mentioned in the order, answered against the appellant/writ petitioner holding that the order under Section 26(1) ba....
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....copy of the report referred to in sub section(3) to the parties concerned: Provided that in case the investigation is caused to be made based on reference received from the Central Government or the State Government or the statutory authority, the Commission shall forward a copy of the report referred to in sub-section (3) to the Central Government or the State Government or the statutory authority, as the case may be. (5) If the report of the Director General referred to in sub-section (3) recommends that there is no contravention of the provisions of this Act, the Commission shall invite objections or suggestions from the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be, on such report of the Director General. (6) If, after consideration of the objections and suggestions referred to in sub section (5), if any, the Commission agrees with the recommendation of the Director General, it shall close the matter forthwith and pass such orders as it deems fit and communicate its order to the Central Government or the State Government ....
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....cted in any manner at this stage, because the order for investigation does not attract any civil consequences, inasmuch as it does not determine the issue raised against the parties finally. Although certain procedural lapses take place while arriving at such a prima facie opinion, that itself will not make the entire proceedings invalid, because the parties are given opportunities to take part in the investigation and thereafter to submit their objections before the Commission, to enable the Commission to arrive at a just and proper conclusion and pass a final order under Section 27. Further, receiving of complaint/information in the form of reference and ordering investigation on the same after forming a prima facie opinion that there exists a prima facie case, are undoubtedly an administrative action at a preliminary stage. Therefore, at this stage, any interference will only allow the parties to escape from the investigation itself, which would ultimately defeat the object sought to be achieved by the Act. This is for the reason that they are entitled to place relevant materials before the investigating authority and show that the allegations are baseless. They can also take pa....
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....013, forwarded the copy of the above representation dated 28.11.2013 under Section 19(1)(b) of the Competition Act to the CCI with a request that the matter may be inquired into for appropriate orders. The CCI, in its meeting held on 7.1.2014, directed the MCA and the AITDF to address preliminary arguments. At this stage, ATMA filed an application on 30.1.2014 seeking for inspection of the documents and the CCI also allowed the request of ATMA for inspecting the documents. Thereafter, when the matter was taken up by the CCI on 18.1.2014 for inquiry, the MCA stating that they have no further submissions to make in the proceedings, sought exemption from further proceedings and the same was allowed. Subsequently, after considering the written submissions made by the AITDF and the ATMA, the CCI proceeded to pass an order under Section 26(1) on 24.6.2014 holding that the CCI is prima facie of the opinion that the case requires investigation by the Director General to find out the presence of any agreement of understanding within the meaning of Section 3 of the Competition Act between the market players and the role of the Association to maintain/increase the prices. 39. Moreover, whe....
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....f the case causes determination of rights and affects a party, i.e. the informant; resultantly, the said party has a right to appeal against such closure of case under Section 26(2) of the Act. On the other hand, mere direction for investigation to one of the wings of the Commission is akin to a departmental proceeding which does not entail civil consequences for any person, particularly, in light of the strict confidentiality that is expected to be maintained by the Commission in terms of Section 57 of the Act and Regulation 35 of the Regulations. 39. Wherever, in the course of the proceedings before the Commission, the Commission passes a direction or interim order which is at the preliminary stage and of preparatory nature without recording findings which will bind the parties and where such order will only pave the way for final decision, it would not make that direction as an order or decision which affects the rights of the parties and therefore, is not appealable." 40. The above ratio clearly shows that the order passed by the Commission under Section 26(1) is not amenable to writ jurisdiction, as it does not affect the rights of the parties and it a....
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....case may be, it may pass all or any of the following orders, namely:-- (a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be; (b) impose such penalty, as it may deem fit which shall be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent. of its turnover for each year of the continuance of such agreement, whichever is higher. &nb....
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....lant on the principles of res judicata cannot be accepted. This issue is also answered against the appellant, accordingly. 44. Issue No. (v): Coming to the issue whether the filing of the subsequent Writ Petition No. 9903 of 2021 by the ninth respondent before the Delhi High Court would amount to forum shopping, it is seen from the records that the ninth respondent made an application dated 21.7.2021 before the CCI, the second respondent herein seeking a prayer to issue the copies of the reports of the Tariff Commission for the financial year 2015-16 and financial year 2019-20. The said request was turned down, because final adjudication order has been passed and the same is directed to be kept in a sealed cover as per the order dated 8.3.2018 passed by this Court. Questioning the same, the above writ petition was filed before the Delhi High Court under Article 226 on 6.9.2021 after this Court started hearing of the present writ appeal. When this Court has directed the final order to be kept in a sealed cover and accordingly, the CCI also has complied with the order by keeping the above order in a sealed cover, instead of approaching this Court, discreetly approaching the Delhi ....
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.... for the ninth respondent-ATMA, refuting the said allegation of forum shopping and misuse of the process of Court, submitted that after filing an application dated 21.7.2021 before the CCI in Reference Case No. 8 of 2013 for procuring the copies of the two reports prepared by the Tariff Commission, the CCI passed an order on 3.8.2021 dismissing the said application stating that the Commission has already concluded the proceeding and passed a final order that has been kept in a sealed cover as per the direction given by this Court in the appeal. Therefore, left with no other recourse, Writ Petition No. 9903 of 2021 was filed before the Delhi High Court, because the Delhi High Court was having the jurisdiction and secondly, the prayer of the ninth respondent was to get copies of the said two reports to bring on record the entirety of the facts and circumstances. Besides, the ninth respondent, on an earlier occasion, also filed a writ petition before the Delhi High Court in respect of the very same Reference Case No. 8 of 2013. In the said writ petition No. 6881 of 2016 questioning the locus standi of S.P. Singh, the same was dismissed on 7.9.2017 on the ground that the CCI had alread....