TaxTMI 
TaxTMI 
2019 (4) TMI 2167
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....als were heard together and are proposed to be disposed of by a common judgment. 2. The Appellants filed informations separately and independent of each other alleging contravention of provisions of Section 3 and 4 of the Act. First and foremost information was filed by 'Saifudheen E.' - Informant in Case No.75 of 2012 alleging that the 'Kerala Cement Dealers Association' (hereinafter referred to as 'KCDA') was interrupting or blocking the supply of cement to the Informant by 'Ramco' as he ignored the instructions of KCDA to sell cement at an unjust price. CCI, being satisfied that a prima facie case of contravention of Section 3(3) of the Act was made out, passed order dated 6th May, 2013 under Section 26(1) of the Act directing the Director General (DG) to cause an investigation into the matter. Meanwhile, the CCI received another information being Case No. 56 of 2013 from 'K. M. Chakrapani' alleging stoppage of cement supply by 'Ramco' as 'M/s Coir India' was not a member of KCDA. The allegations in the information being similar to allegations in Case No.75 of 2012, CCI clubbed the same with the aforesaid case and send the matter for investigation to DG. Subsequently, CCI rec....
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....er. Regarding appreciable adverse effect on competition, the investigation was of the view that since Ramco had only about 20% share in the relevant market during the relevant period, same was not at all probable. 3. Report of investigation submitted by DG came to be considered by the CCI, which found some deficiencies in the investigation. DG was accordingly directed to examine all the relevant issues including the deficiencies pointed out by CCI. This led to filing of supplementary investigation report by DG, wherein DG observed that KCDA had no role in appointing or terminating the dealers, which was the sole prerogative of cement manufacturers. It further observed that supplies to dealers were based on market considerations alone and KCDA had no role as regards the same. It further observed that there was no evidence of involvement of KCDA in stoppage or reduction in supply of cement to any member or non- member. The evidence produced during investigation did not ascribe any role to KCDA in stoppage or reduction of supply. There was no evidence produced to support the allegation that KCDA has forced the dealers to make contribution towards building fund and on refusal it had....
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....main controversy involved at the bottom of the informations/complaints has escaped the attention of CCI which focused on peripheral issues and failed to consider that KCDA had the pivotal role in insisting upon its consent/NOC as a mandatory requirement for award of cement dealership with non-compliance resulting in choking/ blocking/ reducing supply of cement to the dealers. It is contended that the CCI has erred in evaluating the material on record and failed to appreciate the same in proper perspective. Per contra it is submitted on behalf of the Respondents that these appeals are not maintainable in terms of provisions of Section 53-B r/w Section 53-A of the Act. It is further submitted that the decision of CCI to close the matter is based on application of mind and the material assembled during investigation and findings arrived at by DG have been properly evaluated. 8. Before adverting to the issues raised in these appeals, it would be appropriate to notice the relevant provisions of the Competition Act, 2002. Relevant portion of Section 3 reads as under:- "3. (1) No enterprise or association of enterprises or person or association of persons shall enter into any ....
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....f goods or provisions of services which determine purchase or sale price, limit or control, production, supply, markets, shares the market or source of production, etc. by allocating geographical areas of markets or type of goods or services or number of customers in market in any conceivable manner or directly or indirectly results in bid rigging or collusive bidding is presumed to have an appreciable adverse effect on competition. Joint venture agreements designed to increase efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services have been kept out of purview of Sub-section (3) which means that the presumption relating to such agreement shall not be available qua joint venture agreements. The explanation appended to Sub-section (3) provides that an agreement between such enterprises or persons engaged in identical or similar production or trading of goods or provisions of services shall fall within the definition of 'bid rigging', if it has the effect of eliminating or reducing competition or bids or adversely affecting or manipulating the process for bidding. A bare look at the provision engrafted in Section 3 brings it....
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....n. (3) Where on receipt of a complaint under clause (a) of sub-section (1) of section 19, the Commission is of the opinion that there exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of costs, if necessary. (4) The Commission shall forward a copy of the report referred to in sub-section (2) to the parties concerned or 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 relates on a complaint and such report recommends that there is no contravention of any of the provisions of this Act, the complainant shall be given an opportunity to rebut the findings of the Director-General. (6) If, after hearing the complainant, the Commission agrees with the recommendation of the Director General, it shall dismiss the complaint. (7) If, after hearing the complainant, the Commission is of the opinion that further inquiry is called for, it shall direct the complainant to proceed with the complaint. (8) If the report of the Director General relates on a reference made under sub-section ....
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....-section (8) of Section 26 bears nexus with Sub-section (3) of Section 26 and operates independent of Sub-section (5), (6) and (7) of Section 26. It envisages a situation where the Director General submits a report on his findings with recommendation that there is contravention of any of the provisions of the Act. The provision embodied in Section 26 of the Act takes care of different eventualities but one thing is clear that inquiry contemplated under this Section is of quasi-judicial nature and investigation by Director General is only a component of such inquiry. The findings reported by the Director General in its report of investigation are merely recommendatory in nature and cannot be a substitute for judicial findings. The Commission is required to follow the rules of procedure apart from the rules of natural justice, associate the concerned parties including the alleged contraveners whose complicity is alleged with the inquiry and provide opportunity of hearing to the Informant and the affected party in a fair and transparent manner. It is in this backdrop, that the impugned order has to be appreciated. 12. Before coming to grips on the merits of the case be it seen that....
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....g opportunity to the Informants to file objections and according consideration thereto was of the view that there was no evidence to persuasively establish indulgence into any anti- competitive conduct covered under the provisions of the Act. However, it expressed its displeasure with the conduct of 'KCDA', 'Dalmia' and 'Ramco' in making a common appeal to the dealers. It is abundantly clear that 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 and there was no substance in the allegations leveled by the Appellants - Informants. Viewed thus it is crystal clear that 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....
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....n this from district committee on the eligible cases may be referred to state committee for smooth operations." 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. 'Understanding with KCDA' does not necessarily speak of an agreement between KCDA and the cement manufacturers. It may be for regulating even and equitable distribution besides ensuring regular supplies at fair and reasonable prices to protect the interests of consumers. 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 t....
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....me cartelization of only two cement manufacturers with the dealers association for fixing the sale price would be repugnant to common sense. The Commission also noted that 'Ramco' has been suggesting its dealers to desist sales below the invoice price as the practice of issuing credit notes lead to dealers being forced to pay the VAT on an amount on which 'Ramco' had already paid VAT. It also noted that 'Ramco' has stopped issuing credit notes to avoid losses of dealers arising out of dealer's sales below the invoice price. Commission observed that sale of cement by dealer below invoice price would incur loss to the dealer. Therefore, any exhortation to refrain from loss making sales cannot be construed as a price fixation agreement. This cannot be explained on any hypothesis other than the one that the manufacturer warned the dealers and their association of the disastrous consequences of loss making sales with a clear message that the manufacturer would not compensate the dealer for the loss caused on account of sales below the invoice price. The instance with reference to the meeting in a hotel can by no stretch of imagination be construed as a decision by KCDA to restrain compe....