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2023 (6) TMI 139
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....r General (hereafter 'DG') to conduct an investigation into the matter relating to the Continuing Professional Education (CPE) program being conducted by ICAI. ICAI, as a part of its functions, has framed the CPE program, which requires its members to continue to keep themselves abreast of professional developments and skills by participating in educational activities related to the profession on a continuous basis. 2. ICAI has, with a view to maintain the standards of the professional services rendered by its members, identified CPE as an area of focus. In the year 2003, ICAI issued a Statement on Continuing Professional Education, which prescribes the norms for undergoing CPE activities. The CPE program of ICAI requires its members to devote specified hours for CPE learning activities. The learning activities are classified into structured and unstructured activities. ICAI has also prescribed the minimum number of CPE credit hours including structured CPE credit hours that are required to be earned by its members, classified on the basis of their age (whether below or above 60 years) and on the basis of whether they hold a Certificate of Practice (CoP). At the material time, a....
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....s no open market, which requires any regulation by the CCI and it cannot review ICAI's decisions taken in exercise of its statutory powers. Information under Section 19(1)(a) of the Competition Act 8. Before proceeding further, it would be relevant to examine the information as provided by the Informant. He had submitted that ICAI is a member of the International Federation of Accountants (IFAC) and is obliged to follow the IFAC best practices as per its constitution. Members of the IFAC are required to ensure that their members update their knowledge on a continuing basis by conducting a continuing professional development program. The objective being that all professional accountants continue to develop and maintain their competence in the field of their profession. It is stated that the IFAC member bodies are required to ensure that each professional accountant completes at least one hundred and twenty hours (or equivalent learning units) of relevant professional development activities in a rolling three year period. Out of the same, at least sixty hours should be verifiable. In addition, a professional accountant is also required to complete at least twenty hours of relev....
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..... There is no allegation that the fees charged is excessive or not commensurate with the activities organized by ICAI or its organs. It is not alleged that charging fees amounts to abuse of ICIA's dominant position. 13. The Informant alleges that one of the reasons ICAI Council has steadfastly refused accreditation to any independent organization for conducting seminars is to further the self interest of its elected members (including the Council, Regional Councils and Branches). He claims that the elected members of ICAI act as Conference Directors and Co-ordinators and "this allows them to hog the limelight and is a vehicle for their self-promotion and a ladder for electoral success, since elections to ICAI Council/Regional Councils/Branches are held every 3 years." 14. The Informant alleges as follows: "1. ICAI is in violation of Section 4(2)(a)(i), i.e. by directly imposing 'unfair' and 'discriminatory' condition in sale of CPE Service by insisting that its over 2 lakh CA members attend only seminars organised by ICAI to attain structured CPE Credits. 2. ICAI is in violation of Section 4(2)(b)(i), i.e. by limiting and confining the provision of service o....
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.... there appeared to be "force in the allegations of the informant that the restrictions put in by ICAI in not allowing any other organization to conduct the CPE seminars for CPE credits created an entry barrier for other players in the relevant market." It observed that there were hundreds of seminars and conferences organized every month across India by reputed organizations like the CCI, FICCI, ASSOCHAM, NASSCOM etc. However, these conferences were not recognized by ICAI for the purpose of granting CPE credits to its participants. According to CCI, this, prima facie, amounted to imposing an unreasonable restraint, as the members of ICAI are left with no option but to compulsorily attend seminars organized by ICAI and its organs. CCI further observed that the action of ICAI, restricting the function of organizing CPE seminars conferences to itself and its organs, is an "arbitrary exercise of its powers" and thus contravened Section 4 of the Act. In view of the above, CCI has directed the DG to conduct an investigation into the matter and complete the same within a period of sixty days from the receipt of the orders. CCI also directed the DG to investigate the role, if any, of perso....
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....e submitted that any activity carried out by ICAI, in exercise of its regulatory function, could not result in ICAI being considered as an enterprise. 21. Lastly, he contended that the CA Act is a complete code and it was enacted to constitute an autonomous association of accountants to maintain the standards of professional competence and to regulate the profession of chartered accountants. He submitted that since ICAI was performing its functions under the four corners of the CA Act, the same could not be interfered with by the CCI in exercise of its functions. 22. Mr Haksar, learned counsel appearing for ICAI, referred to the decision of CCI in Thupili Raveendra Babu v Bar Council of India (BCI) & Ors.: 2021 SCC Online CCI 1 in support of his contention that ICAI was conducting the CPE program in exercise of its statutory function and was not an "enterprise" in respect of that activity. 23. Mr Gaggar, learned counsel appearing on behalf of the CCI and Mr Hossain, learned counsel appearing on behalf of the Informant, countered the aforesaid submissions made by Mr Haksar. They submitted that the present petition was not maintainable because an order under Section 26(1) of....
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.... 8 SCC 61 and contended that the functions performed by ICAI were not sovereign functions. 26. Lastly, Mr Gaggar and Mr Hossain relied on the decision of the Court of Justice of the European Union (Second Chamber) in Ordem Dos Tecnicos Oficiais De Contas v. Autoridade Da Concorrencia in Case C-1/12, whereby the Court held that a regulation, which puts into place a system of compulsory training for chartered accountants, in order to guarantee the quality of services offered by them such as training credit regulation adopted by professional association such as Ordem Dos Tecnicos Oficiais De Contas (Order of Chartered Accountants) constitutes a restriction on competition, which is prohibited by Article 101 of the Treaty on Functioning of European Union (TFEU). Reasons and conclusion 27. At the outset, it is necessary to examine the constitution and the functions of ICAI. 28. ICAI is a statutory body established under the CA Act, which was enacted in 1949. Prior to its enactment, the Government of India had framed Auditors Certificates Rules in the year 1932. This was in exercise of its powers conferred under Section 144 of the Indian Companies Act, 1913 and the profession ....
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....mes are entered in the "Register", which is defined under Section 2(1)(g) of the CA Act to mean a Register of Members maintained under the CA Act. No member of ICAI is entitled to practice the profession of accountancy unless he/she has obtained a Certificate of Practice (CoP) from ICAI. Also, no person can use the designation of Chartered Accountant unless he is entitled to practice the profession of accountancy. 30. Section 9 of the CA Act provides for constitution of the Council. The Council includes members who are elected and also persons who are nominated by the Government of India. ICAI functions under the overarching control and supervision of the Council. Section 15 of the CA Act sets out the functions of the Council and is reproduced below: "15.- Functions of Council. - (1) The Institute shall function under the overall control, guidance and supervision of the Council and the duty of carrying out the provisions of this Act shall be vested in the Council. (2) In particular, and without prejudice to the generality of the foregoing powers, the duties of the Council shall include: (a) to approve academic courses and their contents ; (b) ....
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....ndards, which are required to be followed by various entities. 32. ICAI is the sole body that can grant the qualification of a Chartered Accountant. No other person or body can confer any degree, diploma or bestow any designation, which indicates attainment of any qualification or competence as a Chartered Accountant. Section 24A of the CA Act provides for imposing penalty on any other person or entity using the name of the Council or awarding degrees of Chartered Accountancy. It expressly provides that except as otherwise provided under the CA Act, no person shall award any degree, diploma or certificate or bestow any designation, which indicates or purports to indicate the position or attainment of any qualification or competence similar to that of a member of the Institute. Section 24A(1)(ii) of the CA Act is set out below: "24A. Penalty for using name of the Council, awarding degrees of chartered accountancy, etc.- (1) Save as otherwise provided in this Act, no person shall- (i) xxxx xxxx xxxx xxxx (ii) award any degree, diploma or certificate or bestow any designation which indicates or purports to indicate the position or attainment of any qualif....
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.... (p) the powers, duties and functions of the President and the Vice-President of the Council; (q) the functions of the Standing and other Committees and the conditions subject to which such functions shall be discharged; (r) the terms of office, and the powers, duties and functions of the Secretary and other officers and servants of the Council; and (s) xxxx xxxx xxxx xxxx (t) any other matter which is required to be or may be prescribed under this Act." 34. The CPE program of ICAI is at the heart of the controversy involved in the present petition. As stated herein before, in the year 2003, ICAI issued a statement on CPE (hereafter 'the Statement'), which was amended from time to time. The opening paragraphs of the Statement indicated that the CPE has been identified by ICAI as a major area of focus for its members. This has been done with the view to enable its members to maintain the requisite professional competence and to ensure high quality and standards of the professional services that they render. 35. It is at once clear that the Statement was issued by ICAI (Council) in discharge of its functions under Section 15(2)(j) of th....
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....and the same is reproduced below: "10.0 Powers and Functions of the CPED The powers and functions of CPED include the following: 10.1 To design and promulgate annually 'The CPE Calendar' prescribing the topics for the CPE learning activities to all POUs for that particular calendar year. 10.2 To prescribe the eligibility of structured and unstructured learning activities for CPE credit hours and to make appropriate modifications in the indicative list of eligible structured and unstructured learning activities as given in the CPE Advisory on Structured CPE Learning Activities and Unstructured CPE Learning Activities respectively. 10.3 To approve the grant of CPE credit hours to eligible programmes and such other learning activities as may be decided upon by the Directorate. 10.4 To approve the formation of CPE Chapters/ CPE Study Groups 10.5 To provide guidance to the CPE Study Circles in the formation of Study Circles or any other administrative problem. 10.6 To review and monitor the programmes conducted by various POUs [refer para 13 of this statement] 10.7 To allocate and assign responsibilities to....
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....t sets out the functions of the POUs. The same is reproduced below: "12.0 Functions of the POUs 12.1 To organise CPE Structured Learning Activities on the topics as prescribed in the CPE Calendar. 12.2 To seek prior approval from CPED for holding the programmes on topics which are not covered under the CPE Calendar 12.3 To upload the details of the programme to be organised by them on the CPE Portal in advance at least 3 days prior to holding the programme for grant of approval of CPE hours. 12.4 To maintain records of the programmes organised by them, in the manner as stipulated by CPED from time to time. 12.5 POUs shall upload the attendance on the CPE Portal within 72 hours of organising the programme. 12.6 To follow the directions, guidelines and Advisories issued by the Council and by the CPED from time to time." 42. Annexure B to the Statement sets out the CPE credit hour requirements, which are required to be achieved by the members of ICAI. As per the said requirements (which are applicable with effect from 01.01.2020) all members of ICAI, holding a CoP (Certificate of practice), are required to complete at l....
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....ice" includes a new service; (c) "unit" or "division", in relation to an enterprise, includes (i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods; (ii) any branch or office established for the provision of any service;" 44. A plain reading of the above Clause indicates that the word "enterprise" is defined in wide terms. It includes a person and a department of the Government, which is engaged in any activity specified in the Clause. Apart from activities that are relatable to the sovereign function of the Government - which are specifically excluded - all other activities are included within the aforesaid definition. Thus, even a department of the Government, which is engaged in any of the activities that are not relatable to sovereign functions, would fall within the definition of the term "enterprise". 45. The term 'person' is defined under Clause (l) of Section 2 of the Competition Act. The said definition is an inclusive definition and it includes an association of persons or a body of individuals whether incorporated or not. It also includes a local authority, a c....
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....ls in the field of accountancy and, therefore, it cannot be stated that ICAI does not carry out any economic activity. It follows that even though earning revenue is not ICAI's objective and it has been formed for a charitable purpose; it, nonetheless, does carry on economic activity and is, therefore, not excluded from the definition of an enterprise under Section 2(h) of the Competition Act. Undoubtedly, it provides a service related to the field of education and, therefore, some of the services provided by it clearly fall within the definition of the expression 'service' as defined in Clause (u) of Section 2 of the Competition Act. 49. Having stated the above, the principal question that requires to be answered is whether the grievances articulated by the Informant constitutes an abuse of dominant position as contemplated under Section 4 of the Competition Act. The Informant prays that the CCI declare ICAI's CPE program as an abuse of dominant position. He further prays that ICAI be directed to revise its program to allow members to obtain CPE credits by attending seminars of their choice and interests, which may be organized by other associations or bodies. 50. The CCI ha....
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....ferences organized by ICAI are an abuse of ICAI's dominant position on account of the seminars being deficient in their contents or being made available at exorbitant or unfair charges or terms. The Informant has no grievances - at least none that fall within the scope of the Competition Act - regarding the manner in which the seminars are organized or conducted by ICAI. Although, the Informant has mentioned that the seminars are used for elected members of the Council to secure face time with the members, there is no allegation that the conduct of the seminars itself amount to ICAI abusing its position as a service provider. 53. Therefore, the fundamental premise of the CCI that ICAI has abused its dominant position, with regard to a non-regulatory activity is flawed. As noticed above, the Informant has in unambiguous terms articulated his grievance in the information filed by him. He alleges that "the ICAI is abusing its dominant position as a 'Regulator' to create a monopoly in the service of providing CPE seminars, clearly violating Section 4(1) of the Competition Act". The grievance of the Informant, thus, is with regard to the decision of ICAI in making it mandatory for it....
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....which it is so empowered. As an illustration, the Controller of Patents would exercise its power as a regulator to regulate the grants of patents and perform the functions as required under the Patents Act, 1970. Clearly, a decision of the Controller of Patents not to grant a compulsory patent license cannot be a subject of a review by the CCI on the grounds that such decision impacts competition in the long run. The statutory authority, which is vested with the regulatory powers can alone exercise such powers. The Competition Act does not contemplate the CCI to act as an appellate court or a grievance redressal forum against such decisions, which are taken by other regulators, in exercise of their statutory powers and are not interfaced with trade or commerce. A statutory body may in course of its functions, also make decisions which involve trade and commerce. As an illustration, the concerned body may purchase equipment and consumables or avail services of professionals. There is no cavil that any decision in this regard may, if it falls foul of the provisions of the Competition Act, be examined by the CCI. 56. At this stage, it is also relevant to refer to the definition of ....
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....equired to seek prior approval of the CPED. They are required to upload the details of the programs to be organized by them and to maintain records of the programs organized in the manner as stipulated by the CPED. They are also required to upload the attendance on the CPE portal and follow the directions as issued by ICAI and the CPED from time to time. A plain reading of the Statement clearly indicates that the CPE program is not an unsupervised program; ICAI determines the content and the manner in which the CPE programs are to be organized and conducted. Recognizing seminars organized by ASSOCHAM and other Chambers of Commerce as a part of the structured learning would, essentially, mean that ICAI would have to supervise the contents of those seminars and ensure that they are conducted in accordance with its guidelines. If the Informant's contention is accepted, ICAI is obliged to do that, as not doing so is anti-competitive. This Court is unable to accept the aforesaid contention. ICAI being a statutory body and charged with taking the necessary powers to take decisions regarding the conduct of the CPE program for enrolling as a chartered accountant as well as for maintaining ....
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....nt is flawed. This is for the same reason that ICAI is charged with the function of prescribing the qualification for entry of a person's name in the Register. [See Section 15(2)(d) of the CA Act; to approve academic courses and their contents]. This function is required to be performed by ICAI and it has been granted the statutory powers to do so. Such exercise of statutory powers are not subject to a review by the CCI. In terms of Section 15(2)(e) of the CA Act, the Council / ICAI has the power and the function to recognize foreign qualification and training for the purposes of enrolment. The discretion to recognize certain foreign qualifications is vested with ICAI. Plainly, this would not be subject to any review by the CCI. It is relevant to note that the CCI exercises powers conferred under the Competition Act, which in terms of Section 62 of the Competition Act, is in addition and not in derogation of other statutes. 65. In view of the above, the decision of ICAI to frame the CPE Program for maintenance of professional standards cannot be considered as abuse of its dominant position. 66. It is important to note that the CCI's power is for regulating of markets; it does....
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....e considered as a sovereign function. Procurement of goods from open market, by its very nature, is a matter which involves the commercial market. 70. As noted above, this Court has not accepted the contention that ICAI is not an "enterprise" within the meaning of Section 2(h) of the Competition Act. The controversy, as noticed earlier, is whether the grievance regarding ICAI not outsourcing the activity of conducting the CPE program in discharge of its functions, can be considered as abuse of dominance even at a prima facie stage. 71. In the impugned order, the CCI has expressed a prima facie view that the decision of ICAI to restrict organising CPE seminars to itself and its organisations is, prima facie, arbitrary. This is on the premise that there is a market for conducting structured CPE program, which is required to be regulated by the CCI as a market regulator. The said assumption lies at the centre of the controversy in this case. This Court is unable to accept that all decisions made by authorities, which have any relation to economic activities, are liable to be subject matter of investigation by the CCI on the ground that they are prima facie arbitrary notwithstand....
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....nd the impugned regulations were likely to hinder trade between the Member States. However, the Court did not accept that OTOC had abused its dominant position in the relevant market. OTOC sought annulment of the decision of the Commercial Court by contending that its training activity fell outside the economic activity and therefore, outside the scope of Article 101 of the TFEU. However, the said contention was rejected by the Court of Second Chamber. The Court held that OTOC should be required to be regulated in its entirety as an association of undertakings. 74. In that case, the Court found that on one hand OTOC itself provides training for chartered accountants, and on the other, access to other providers wishing to offer such training is subject to standards as set out in the impugned Regulation. Consequently, the Regulations in question had deep impact on the economic activity on the market of compulsory training for chartered accountants. 75. The Court further held that the fact that OTOC was required to put in place a system of compulsory training for its members did not remove it from the source of Article 101 of the TFEU. 76. This court has reservations as to th....