TaxTMI 
TaxTMI 
2026 (2) TMI 846
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....etition Act, 2002 (the "Competition Act/Act") by Manoj K. Sheth who is the Appellant herein, challenging the Impugned Order dated 28.06.2021 in Case No.35 of 2019 passed by the Competition Commission of India under Section 26(2) of the Competition Act. Competition Commission of India is the Respondent No.1 herein. National Stоck Exchange of India is the Respondent No.2 herein. 2. The Appellant submitted that he initiated a complaint before the Competition Commission of India (CCI) under Section 19(1)(a) of the Competition Act, 2002, against the National Stock Exchange of India Limited (NSE) for indulging in practices of granting preferential market access to select brokers through "Co-location Facilities", thereby disadvantaging the rest of the market via front-running, artificial information asymmetry, and market manipulation on a consistent basis. 3. The Appellant submitted that the co-location facility permitted select brokers to locate trading systems within NSE premises, enabling access to granular 'tick-by-tick' data (including orders, cancellations, modifications, prices, and trades) ahead of other market participants, thereby benefiting such broker....
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....nd (iii) collusion with specific brokers. 8. These allegations were confirmed by SEBI's Technical Advisory Committee (TAC) Report, which found that select brokers possessed insider information on server activation timings and speeds, enabling login to faster servers first, facilitating front-running and trading on insider data about impending buy/sell orders, distorting investor interests and stock pricing principles. 9. The Appellant highlighted SEBI's findings in para 8.3.3.7 of the TAC Report, evidencing inequities in: (i) IP allocation without equitable distribution across servers/ports; (ii) absence of load balancers for even IP arrays and equitable login rank distribution; (iii) lack of randomizer in Normal TBT feed for fair data receipt; and (iv) failure to monitor frequent secondary server access by certain trading members (TMs) to bypass primary server loads, with NSE issuing only emails/advisories despite repeated violations. Further, para 8.1.19(a) of the TAC Report underscored the significance of microsecond variances in TCP-IP data dissemination for algo-trading by co-located brokers, necessitating evaluation of NSE's architecture. 10. The Appellan....
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....he Appellant sought rebuttal chances, but the 17.12.2020 procedural order omitted the next date, necessitating W.P. No. 877/2021 before Madras High Court (allowed 10.03.2021, mandating Appellant's hearing), after which the Appellant submitted rejoinder and additional briefs both disregarded prior to 19.03.2021 arguments, reserved orders, and impugned dismissal on 29.06.2021. 13. The Appellant contended that while Section 26(1) imposes no obligation to hear the opposite party before forming prima facie opinion, NSE was afforded over five opportunities, including extensive oral and written submissions, effectively converting proceedings into final hearing. Conversely, the Appellant was compelled to approach Madras High Court for effective hearing, evidencing procedural infirmity. 14. The Appellant submitted that the CCI erred in determining that the NSE co-location facility is not anti-competitive in nature, as such facility inherently grants preferential market access to select brokers, fostering front-running, artificial information asymmetry, and market manipulation, thereby distorting competition in violation of Sections 4(2)(a)(i), 4(2)(b)(ii), and 4(2)(c) of the Compe....
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....-location facility, are non-anti-competitive in nature, and this error renders the Impugned Order liable to be set aside for perversity. The Appellant contended that the onus at prima facie stage required scrutiny of Appellant's materials, not unsubstantiated exoneration, highlighting the CCI's misdirection. 21. The Appellant submitted that the CCI failed to observe that the co-location facility offered by NSE constitutes a mechanism for market abuse, as limited rack space was rented exclusively to select brokers, enabling them to front-run other brokers and clients, thereby inherently violating the Competition Act, 2002, through abuse of dominant position. The Appellant contended that this selective access to proximity-based advantages and granular data fosters information asymmetry, allowing privileged brokers to earn extraordinary proprietary profits at the expense of the broader market, distorting competition and warranting CCI intervention under Section 4. 22. The Appellant contended that such evidential oversight at the prima facie stage under Section 26(1) reflects a failure to appreciate the gravity of anti- competitive conduct, rendering the dismissal arbitra....
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....g investigation into NSE's dominant practices. 27. The Appellant submitted that a key feature of the co-location facility is provision of complete order book data up to "n" depth to co-located recipients, unavailable to external brokers, rendering it unfair among the same class of traders with no justification for such discrimination; retail clients, reliant on brokers, suffer penalization, as a poor pensioner in southern India is disadvantaged against top-tier Bombay brokers and corporates viewing the entire order book ahead. The Appellant contended that this facility divides the market, placing co-located participants better positioned than outsiders, violating equal access under Section 4(2)(c) of the Act and eroding investor trust. 28. The Appellant submitted that the NSE holds a dominant position in the securities market, with February 2020 shares of 92.6% in cash and 99.79% in derivatives vis-à-vis BSE, where retailers contribute 70% volume unlike BSE's institutional focus; launched without SEBI approval in a regulatory vacuum, the co-location facility is a mechanism for market abuse, as select brokers rented limited rack space unavailable to others, enab....
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....gulatory role; SEBI proceedings are irrelevant, and prima facie material now exists via these orders for Section 26(1) action, yet the Impugned Order ignores this precedent for final exoneration. 34. The Appellant submitted that assuming sequential data dissemination to brokers as normal like exam question distribution not affecting results is incorrect, as exams are non-time-critical while trade execution is extremely so, with data travel distance critically determining broker success/failure vis-à-vis others. 35. The Appellant contended that in modern financial markets, time-to- execution and data flow distance are decisive; NSE's undue advantages impose not only financial but larger economic/social costs, weakening India's financial market fabric involving its premier exchange, a factor overlooked by the CCI. 36. The Appellant submitted that the CCI miserably failed to observe that NSE's inaugural circular for co-location facilities operated on a patently illegal first- come-first-serve basis, enabling arbitrary allocation that entrenched dominance and excluded broader participation. It was contended that, driven by profit motives, NSE imposed prohibi....
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....only in the 12.11.2012 circular, thereby limiting access to a select few for at least three years post-inception, with current uptake remaining opaque despite claims of 188 users. 39. The Appellant submitted that co-location engendered artificial information asymmetry, affording proximate servers a premature view of the entire order book ahead of others, enabling first-mover execution before counter-bids from the wider market, thus institutionalizing front-running opportunities for privileged brokers at the expense of equitable participation. It was contended that while theoretical efficient price discovery benefits the market, here it accrues solely to co-located entities via lagged dissemination for others, rendering it inefficacious absent fair, simultaneous information access for all; this differentiated price-dissemination regime, coupled with TCP/IP vulnerabilities, attracts Section 4's prohibitions on abuse of dominance, including denial of market access under Section 4(2)(c) and limitation of technical services under Section 4(2)(b)(ii). 40. The Appellant submitted that the CCI's order failed to note that SEBI's order dated 30.04.2019 operates against NSE&....
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....39;s prior Rs. 55.5 crores penalty (June 2011, upheld by COMPAT 05.08.2014, recovery stayed by Supreme Court 23.09.2014) for abusing dominance in currency derivatives via predatory pricing against MCX-SX (Case No. 13/2009), confirming habitual Competition Act violations; co-location abuses fall exclusively within CCI's domain, warranting DG investigation. 45. The Appellant submitted that anti-competitive activity prevailed at four levels: (i) broker-vs-broker via proprietary trading discrimination; (ii) co-located broker clients vs. non-co-located broker clients; (iii) NSE brokers (with co- location) vs. other exchanges' brokers; (iv) NSE vs. BSE/MCX-SX; NSE offered co-location not for international alignment but personal gain, distorting competition. 46. The Appellant contended that NSE discriminates against impecunious members unable to afford rack space, with three-year prohibitive charges (Rs. 22.50 lakhs full/ Rs. 10 lakhs half rack from 2009, halved post-complaints to Rs. 12/6 lakhs w.e.f. 01.01.2013) evidencing exploitation. 47. The Appellant stated that the CCI failed to note NSE's deviation from its establishment for transparent price discovery and equ....
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....us Deloitte's report on serious violations; CCI's duty under the Act to eliminate anti-competitive practices, promote/sustain competition, protect consumers, ensure trade freedom mandates Section 19 inquiry. 52. The Appellant contended that the NSE is a repeat offender, per DG Report (20.09.2010, Case 13/2009) and the CCI order (26.06.2011) on predatory pricing against MCX-SX, confirmed via social media; this fits DG probe, given contemptuous recidivism. 53. The Appellant contended that implementation abuses Section 4 via: (i) TCP/IP choice despite decade-old Multicast availability (used by Interconnected SE 1999, NSE pre-2009 trading), baselessly citing complexity/cost when Multicast simpler/cheaper; (ii) NSE's day-one awareness of misuse potential, yet no randomizer/load balancer; (iii) intra-co-location inequities: discriminatory primary server access crowding out others; secondary server favouritism for time edges; all-day advantages to Omnesys (NSE subsidiary) users logging first/second/third on majority days, as algo host/server manager. 54. The Appellant submitted that price/time priority core to electronic trading per NSE Bye-Laws/Regulations/Rules for ....
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....ied its mind to the issues raised, and recorded a reasoned finding that no prima facie contravention of the Competition Act was disclosed. The NSE submitted that it is a settled principle of law that an appellate forum does not substitute its own view merely because another view is possible. In the absence of perversity or manifest illegality, interference with a Section 26(2) order is wholly unwarranted. 61. The NSE submitted that the Appellant's case before the CCI was confined to only two broad allegations, namely: first, that the NSE allegedly abused its dominant position merely by offering co-location services to trading members who opted to pay for the same; and second, that amongst those trading members who availed of co-location services, certain members were allegedly provided preferential access. The CCI has independently examined both these allegations on their own merits and has rightly found that neither discloses any contravention of the Competition Act even at a prima facie level. 62. The NSE submitted that the CCI has expressly recognised that co-location services, which have been operational for over twelve years and are offered by multiple stock exchanges in....
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....uction of latency was essential for the effective functioning of DMA and Algorithmic Trading. International exchanges had already addressed this issue through co-location services, which had proven successful. 67. The NSE submitted that it was in this backdrop, and in furtherance of the regulatory objective envisaged by the sectoral regulator, that the NSE introduced co-location services in August 2009. Subsequently, BSE also introduced similar services, and the sectoral regulator issued multiple guidelines governing the provision of such services. 68. The NSE contended that the Appellant's assertion that the mere provision of co-location services on payment amounts to abuse of dominant position is fundamentally flawed. Charging for a value-added service does not constitute market division or denial of access. The NSE submitted that the Appellant's argument is commercially illogical and ignores basic principles of differentiated services. Acceptance of such an argument would imply that any premium or specialised service offered on payment would be rendered illegal, which is contrary to established competition law principles. 69. The NSE submitted that co-location services ....
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.... facie level. The NSE contended that permitting an investigation on the basis of speculative, outdated and suppressed material would result in a fishing and roving enquiry, contrary to the statutory scheme of Section 26 of the Competition Act. 74. The NSE submitted that the CCI has considered all the information, submissions and documents placed before it and has thereafter passed a well- reasoned order dismissing the information at the prima facie stage. The Impugned Order clearly records that the CCI perused the information, written submissions and documents filed by both the Informant and the NSE, as well as the orders passed by the sectoral regulator and the SAT which were placed on record by the parties. 75. The NSE submitted that at the time of introduction of co-location services, no specific technology was mandated by the sectoral regulator. The NSE undertook extensive due diligence, including assessment by internal and external experts, multiple committees and its Board of Directors, before selecting the TCP/IP architecture. The choice was guided by considerations of market safety, reliability, integrity and accessibility, and by the need to ensure affordability and ....
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.... threshold was not met. The NSE submitted that this Appellate Tribunal has consistently held that an informant has no vested right to seek an investigation under the Competition Act, and that unless sufficient material is placed to demonstrate a prima facie case, no direction for investigation can be issued. 81. The NSE submitted that the mere mechanical reproduction of documents and materials does not automatically warrant an investigation under the Competition Act. It is incumbent upon the CCI to be satisfied, upon application of mind, that all the ingredients of the alleged contravention are made out even at a prima facie level. The NSE contended that the Hon'ble High Court of Bombay has clarified that even at the threshold stage, there must be prima facie satisfaction with respect to all essential elements of the alleged violation. This requirement has not been met in the present case, and the Appellant's submissions are a transparent attempt to bypass this settled position of law. 82. The NSE submitted that the Appellant's allegation that the CCI conducted the matter as though it were a final hearing is wholly misconceived. Under the scheme of the Competition Act, an inq....
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....der section 26(2) of the Act holding that there is no prima-facie case for further investigations about alleged abuse of dominant position by the NSE in alleged indulging in practice of granting preferential market access to select brokers on account of manipulation of Co-Location Facilities. 89. It has been brought to our notice that Co-Location Facilities given by the NSE was a mechanism whereby trading members of the NSE were allowed to take on rent the limited rack space and front run brokers and their clients by accessing the market early to take advantage of information on the price and other relevant information. It has also been argued by the Appellant that this practice of Co- Location Facilities eventually divide the market into two segments i.e., Trading Member having Co-Location Facilities vis-à-vis Trading Member not having Co- Location Facilities, giving unfair advantages to selected brokers having Co- Location Facilities, restricting market access to others Trading Member in violation of Section 4(2)(a)(i), 4(2)(b)(ii) and 4(2)(c)(iii) of the Competition Act. We also take note that the CCI as well as the NSE strongly refuted all the allegations of the Appel....
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....gh charges made unaffordable for large number of its trading members. Finally, the Appellant also took strong objection against the CCI for not referring the matter to the DG for further investigation in terms of the Section 19 of the Competition Act. 95. In order to understand the allegations of the Appellant, the rebuttal given by the CCI and the NSE and the issues involved, we will first take into account and elaborate few basic concepts which are relevant in the present appeal and which have been referred to by all the parties and other agencies, which have gone into the alleged allegations of Co-Location Facilities. As such, the basic concepts are being summarised, based on submissions of the Appellant, the CCI and the NSE, in the following discussions: (a) Direct Market Access (DMA) Direct Market Access (DMA) is a facility that allows brokers to offer their clients direct access to a stock exchange's trading system through the broker's infrastructure, without manual intervention by the broker. Some advantages of DMA are direct control of clients over orders, faster execution of client orders, reduced risk of errors associated with manual order ent....
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....nd cooling. We also take into consideration the explanation submitted by the NSE that at relevant stage of 2009, many international stock exchange also provided such Co-Location facilities to its trading members including: (i) the London Stock Exchange (UK) (ii) NASDAQ (US) (iii) The Chi-X (Australia) (iv) BATS (Better alternative trading system) (US) etc. (d) TCP/IP and MTBT We note that Stock Exchange like the NSE could have adopted the Transmission Control Protocol/ Internet protocol (TCP/IP) technology for co-location services or alternative Multicast Tick-by-Tick (MTBT) technology. Both TCP/IP and MTBT were recognized international standards. TCP/IP disseminates data sequentially, ensuring each Trading Members receives every packet though in sequence. MTBT broadcasts data but cannot guarantee that every Trading Members will receive every packet. It has been brought out that implementing MTBT would have required extensive programming and investment by the Trading Members and the onus of receiving the data packets would have been on the TMs. Comparatively, TCP/IP was both less expensive and less complex than MTBT, making it more suitable for a nascent market, a....
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....s complaint dated 08.01.2015 complaining regarding unfair and fraudulent practice in provision of Co-Location Services by the NSE which resulted into alleged financial and market scam. 99. The SEBI started examinations of allegations, after receiving pseudonymous complaints, regarding alleged fraudulent and unfair practices in the provision of co-location services by the NSE especially on the following aspects: - • Whether the TCP/IP architecture of NSE for TBT data feed provided fair and equitable access to all Trading Members? • Whether access to the secondary server of the NSE conferred an advantage and how the NSE monitored potential misuse? • Whether the NSE could be held liable for violations under the Prevention of Fraudulent and Unfair Trade Practices Regulations, 2003? • The role of the NSE's employees and the level of cooperation with the investigation. 100. We take into consideration that subsequent to above, SEBI also issued guidelines of Co-Location Services offered by stock exchanges vide Circular dated 13.05.2015. It has also been brought to our notice during submissions that SEBI set up an expert cross functi....
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....scrimination towards any specific Trading Members or the accrual of monetary benefits / unjust enrichment to any employee or Trading Members is made out. Therefore, no "fraud" or violation of the provisions of the SEBI (PFUTP) Regulations is made out against the NSE. • As per the Appellant, SEBI passed orders against NSE wherein at para 8.3.3.7, where the SEBI had found that there was inequity in the colocation process and that NSE failed to create a level playing field for the trading members. SEBI also held NSE violative of regulation 41(2) of the SECC regulations, 2012 and at the conclusion, SEBI directed the NSE to disgorge as sum of Rs. 620 crores and further restrained NSE from excessing the securities market for a period of 6 months. • However, as also observed by the CCI in Paragraph 58, of the Impugned Order dated 28.06.202, SEBI found no evidence of fraud or unfair trade practices, nor any benefit accruing to Trading Members due to the NSE's co-location services. SEBI exonerated the NSE of allegations of unfair trade practices. SEBI made no findings of deliberate preferential access being given to any particular class of Trading Members in so far....
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....the Appellant filed an appeal before the NCLAT, Chennai, which was returned on 12.11.2021 due to jurisdictional issues. On 17.11.202, the appeal was filed before the NCLAT, New Delhi, on the same grounds as those raised in the original Information filed with the CCI. 106. We note that SEBI's order was challenged by the NSE regarding violation of security control, Regulation before SEBI Appellate Authority ('SAT') on 19.05.2019 and on 23.01.2023, SAT issued its order on the NSE's appeal against the SEBI Order, finding in favour of the NSE. The Salient features of SAT order includes:- • • No fault in the NSE's adoption of TBT architecture over MTBT. • The system was inherently random, and SEBI had acknowledged this. Therefore, absence of randomiser did not impute any fault on the part of the NSE. • No early advantage as a Trading Members connecting first is not guaranteed to receive the data first. • The NSE has not indulged in any unethical act nor has unjustly enriched itself as a result of any wrongful act. • Agreed with SEBI's findings that no violation of the SEBI (PFUTP) Regulations. ....
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.... and functioning under the RTI Act in recent past; d. If so, the details thereof; and e. The steps taken by the SEBI to monitor and check such malpractices in the NSE? ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL) a : Yes Madam. The Securities and Exchange Board of India (SEBI) has informed that it received three letters dated January 2015, 10th August 2015 and 28th October 2015 from a whistle-blower making the following allegations with regard to the co-location facility of the National Stock Exchange (NSE): i. Preferential access to data dissemination servers was given to few stock brokers ii. NSE allowed non-empanelled internet service provider (ISP) to lay fibre in its premises for few stock brokers, and iii. Certain NSE officials colluded with the stock broker(s) in the matter. b SEBI had constituted an Expert Committee under the guidance of its Technical Advisory Committee (TAC) to examine the allegations made by the complainant. The major observations / findings of the Expert Committee following examination of the same were as follows: i. The architecture ....
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....ges in line with technological advancements, SEBI has issued regulatory guidelines in the form of Circulars from time to time. In the matter of co-location. SEBI, vide Circular dated 13th May, 2015, has advised stock exchanges to ensure fair and equitable access to the co-location facility. Further, vide Circular dated 1st December, 2016, SEBI has, inter alia, directed the stock exchanges to further strengthen the co- location framework in order to ensure fair and equitable access, in the following manner: i. To allow direct connectivity between co-location facility of one recognized stock exchange and the co-location facility of other recognized stock exchanges. ii. To allow direct connectivity between the servers of a stock broker placed in the co-location facility of a recognized stock exchange and servers of the same stock broker placed in the co-location facility of a different recognized stock exchange. (f) Further, the co-location services provided through third parties and local area network (LAN) based connectivity to stock brokers have been brought under the ambit of regulatory framework for colocation facility." B) It was also stated in the rep....
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....ad Balancer and Randomiser, the NSE failed to ensure free and equitable access to all trading members. (iv) Whether, the Co-Location Facilities offered by the NSE, were in contravention to Section 4 of the Competition Act. (v) Whether the NSE as dominant stock exchange in the relevant market, violated Section 4(2)(a)(i) of the Competition Act. (vi) Whether, the CCI failed to adjudicate correctly against NSE for alleged indulging in practice of granting preferential market access to select few brokers in violation of Section 4(2)(b)(i), 4(2)(b)(ii) and 4(2)(c) of the Competition Act. (vii) Whether, the CCI was bound to order enquiry by DG under Section 19(1) of the Competition Act. (viii) Whether, the CCI came to correct conclusion that prima-facie no case existed against the NSE in Impugned Order dated 04.09.2021. 112. Since, all these issues are inter-connected, inter-related and inter- dependent, we shall examine all these issues comprehensively in conjoint manner in the following discussion. 113. At this stage, we will also take into consideration the relevant section of the Competition Act, referred by the Appellant, the CCI an....
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.... (2) There shall be an abuse of dominant position under sub- section (1), if an enterprise or a group, - • • (a) directly or indirectly, imposes unfair or discriminatory- 1. condition in purchase or sale of goods or service; or 2. price in purchase or sale (including predatory price) of goods or service. ***** Explanation: For the purposes of this section, the expression - 1. "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to - 1. operate independently of competitive forces prevailing in the relevant market; or 2. affect its competitors or consumers or the relevant market in its favour; 2. "predatory price" means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors; 3. "group" shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5." Section (4)(2)(b)(ii) (ii....
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....w entrants in the market; • (b) driving existing competitors out of the market; • (c) foreclosure of competition; • (d) benefits or harm to consumers; • (e) improvements in production or distribution of goods or provision of services; • (f) promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. (4) The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely: • • (a) market share of the enterprise; • (b) size and resources of the enterprise; • (c) size and importance of the competitors; • • (d) economic power of the enterprise including commercial advantages over competitors; • (e) vertical integration of the enterprises or sale or service network of such enterprises; • (f) dependence of consumers on the enterprise; • (g) monopoly or dominant position whether acquired as a result of any statute or by virtu....
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....e note that Section 19 explains the powers and approach of the CCI while examining anti-competitive agreements and abuse of dominant position. The CCI can start an inquiry on its own or based on information received from any person, consumer, or association. While assessing agreements under Section 3, the CCI considers factors like market entry barriers, impact on competitors, consumer benefits or harm, and overall economic and technical development. For determining dominance under Section 4, the CCI looks at aspects such as market share, economic power, consumer dependence, entry barriers, and market structure. The section also lays down how to identify the relevant market, which includes both the relevant geographic market and relevant product market. Various factors like consumer preferences, price, transport costs, regulatory barriers, and substitutability of goods or services guide this determination. 114. In the present appeal, the issue is whether the CCI erred in its determination that the NSE's colocation facility does not have anti-competitive implications, despite potential discrimination between traders and market division. In terms of Section 19(1) of the Competi....
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....ately are investors and their intermediaries like trading members in the present appeal. It needs to be appreciated that bigness of an enterprise making it dominant entity may be result of various factors, inter-alia, organisation's efficiently, innovations and advantage occur to the enterprise in the then prevailing circumstances. 119. All are aware that the NSE came into existence as a challenger to decades established stock exchanges like the BSE and the NSE became dominant player in no time due to its technology advantage, openness, innovations, perceived fairness and transparency. The NSE was also supported by all big market players at that stage. We have already noted the legacy history of DMA, Co-Location, use of technology TCP/IP in 2009 and MTBT by NSE in 2016. We have noted that initially there was certain regulatory vacuum, since SEBI introduced DMA, but did not stipulate the conditions and the echo-system under which the stock exchanges were required to offer the co-location services. The first Circular of SEBI about Co-Location Services indeed came only in 2012 followed by subsequent Circulars. 120. Thus, we need to look into whether the NSE abused its dominant p....
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....dominance cannot be presumed to be abusive. Fundamentally and significantly, clear distinction is required to be made between abusive practices under competition act which tend to exclude or restrict market competition or market access on one hand vis-à-vis the success of business entity like NSE who can offer better products, better platform, better technology, faster access or conducive environment to its trading member, which eventually may result into economic advantage to its trading members and ultimately to the investors. 123. We consciously take into consideration allegations of the Appellant that the NSE was involved in abuse of its dominant position which offered discriminatory conditions to its trading members and favoured select few Trading Members by providing co-location services and preferential secondary servers. It needs to be appreciated that discrimination in such cases, involve differentiation among Trading Members, in case if the NSE gave preference to select few trading members/ brokers not warranted by circumstances of transactions or trading echo- system. Such discrimination could have been due to relating to price or terms of provisions of service....
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....s of the Appellant would have been correct, if the NSE would have refused to offer Co- Location Services to any of its trading member, directly or indirectly, by stipulating stiff eligibility criteria for such trading member to apply for Co- Location Services. We have noted that the NSE offered clear terms of Co- Location Services to all its Trading Members who were willing to satisfy the basic conditions and on first come first serve basis. The NSE has categorically mentioned that out of its all trading member, only limited number of trading members have availed Co-Location Services which are still available to any Trading Members who could take the same. Such candid statement of the NSE demolish the allegations of the Appellant on the face value. 126. In the impugned order, it is very evident that the CCI took all aspects into consideration in order to determine whether the NSE colocation facility is anti- competitive. It is a practice being there from way before and it has also guidelines which has to be followed in order to have this facility. The CCI felt that there was no potential discrimination which this facility holds between traders and market division because the pri....
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....d be of opinion that a prima-facie case exists. It would be wrong to assume that there should be a clear case to be treated as condition precedent for enquiry by the CCI or an enquiry to be conducted by the DG. 129. At this stage, we take into consideration that in earlier avatar, the Competition Act provided for "receipt of complain" which was later substituted by "receipt of information" in Clause (a) of Section 19(1) of the Competition Act which was provided by Competition (amendment Act, 2007). Thus, we find that the Parliament consciously widened the scope of and given wider power to the CCI. In this connection, the Appellant submitted to us that his information contained several facts and prevailing available report which suggested that NSE was involved in scam reported by a pseudonymous complaint filed by some whistle blower exposing nexus between the NSE and its official including top management further including Chairman and MD and CEO. It is the case of the Appellant that in such given circumstances, there was clear prima-facie case and therefore, the CCI should have formed its prima-facie opinion in favour of the further enquiry. 130. On this aspect, we appreciate ....
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....is not based on erroneous or fictitious grounds. It also implies that the relevant material, evidence, circumstances in the knowledge of the CCI, there was possibility for the CCI to arrive at such conclusions that prima-facie the allegations of the Appellant were correct. 134. We need to recognise the fact that prima-facie case does not mean a case proved to be to the finality but means a case which is set to be established if the evidence which is furnished by the informant like the Appellant herein lead to support the same. In such cases, a summary enquiry is done by the CCI by taking evident of the concerned stakeholders including written submission as deemed to be adequate for summary enquiry. We note that the CCI in the present case, based on the allegations of the Appellant, indeed called the NSE, who submitted all the required information to the CCI. We further take into consideration that the CCI, evaluated such evidence and the documents furnished by the NSE before concluding that prima-facie did not exist. 135. We also consciously note that the CCI has also took into account the SEBI's order (SEBI being the Sectoral Regulator for Market) as well as SAT's order. The....
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....son and therefore, application of Audi alteram partem is not called for. Formation of a prima facie opinion departmentally (Director General, being appointed by the Central Government to assist the Commission, is one of the wings of the Commission itself) does not amount to an adjudicatory function but is merely of administrative nature. At best, it can direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of Section 26(2) of the Act, which order itself is appealable before the Tribunal and only after this stage, there is a specific right of notice and hearing available to the aggrieved/affected party. Thus, keeping in mind the nature of the functions required to be performed by the Commission in terms of Section 26(1), we are of the considered view that the right of notice of hearing is not contemplated under the provisions of Section 26(1) of the Act. However, Regulation 17(2) gives right to Commission for seeking information, or in other words, the Commission is vested with the power of inviting such persons, as it may deem necessary, to render required assistance or produce requisite information or documents as p....
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....f direction for investigation to the Director General. Such view should be recorded with reference to the information furnished to the Commission. Such opinion should be 61 formed on the basis of the records, including the information furnished and reference made to the Commission under the various provisions of the Act, as afore-referred. However, other decisions and orders, which are not directions simpliciter and determining the rights of the parties, should be well reasoned analysing and deciding the rival contentions raised before the Commission by the parties. In other words, the Commission is expected to express prima facie view in terms of Section 26(1) of the Act, without entering into any adjudicatory or determinative process and by recording minimum reasons substantiating the formation of such opinion, while all its other orders and decisions should be well reasoned. Such an approach can also be justified with reference to Regulation 20(4), which requires the Director General to record, in his report, findings on each of the allegations made by a party in the intimation or reference submitted to the Commission and sent for investigation to the Director General, as the ca....
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....rprise, the NSE herein and not by misconduct by a third-party like its employees, if at all Section 4(2)(a)(i) violation necessitates an element of compulsion by the dominant enterprise. It is also the case of the NSE that section 4 violation, even prima-facie, cannot be established without evidence of anti- competitive harm, and prior to directing an investigation and therefore, the CCI needs to ensure that all elements of a Section 3/4 violation have been satisfied. On this issue, it is the case of the Appellant that no overt act on the part of the NSE was needed. All evidence, documents, information submitted by the Appellant to the CCI, were more than adequate to form prima-facie opinion by the CCI for causing further investigation. On these contrary view points, we will take into consideration the judgment given by Hon'ble Supreme Court of India in the case of Competition Commission of India v. Schott Glass India P. Ltd. & Anr., 2025 SCC OnLine SC 1097. The relevant portion of the judgement reads as under: - "India's economic ascent rests on a delicate but decisive equilibrium. On the one hand, markets must remain contestable: no undertaking may extinguish riva....
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....onduct which enhances consumer welfare may co-exist with market power and should not be condemned. 66. We therefore hold: (i) that an effects-based analysis is an obligatory component of every inquiry under section 4 of the Act; (ii) that the Competition Commission of India, having relied on untested statements and pre-2009 correspondence, undertook no credible assessment of harm; and (iii) that, on the evidence marshalled by the COMPAT, converter growth, stable downstream prices, absence of foreclosure-no appreciable adverse effect on competition is shown. 67. The omission of a proper harm analysis vitiates the Competition Commission of India's order in limine. Because each of the alleged abuses has already been negatived on the facts, the appeals must fail on this additional ground as well. The COMPAT's decision to set aside the Competition Commission of India's directions and penalty therefore warrants affirmation. Issue V is answered in the affirmative with respect to both the questions." (Emphasis Supplied) We find some similarity especially on cause and effect conditions. We find the CCI correctly concluded that there is no prima-facie case....
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....tion that CCI has the jurisdiction to deal with the complaints/information filed before it. It needs to be reiterated that RJIL has approached the DoT in relation to its alleged grievance of augmentation of POIs which in turn had informed RJIL vide letter dated 6-9-2016 that the matter related to interconnectivity between service providers is within the purview of TRAI. RJIL thereafter approached TRAI; TRAI intervened and issued show-cause notice dated 27-9-2016; and post issuance of show-cause notice and directions, TRAI issued recommendations dated 21-10-2016 on the issue of interconnection and provisioning of POIs to RJIL. The sectoral authorities are, therefore, seized of the matter. TRAI, being a specialised sectoral regulator and also armed with sufficient power to ensure fair, non-discriminatory and competitive market in the telecom sector, is better suited to decide the aforesaid issues. After all, RJIL's grievance is that interconnectivity is not provided by the IDOs in terms of the licences granted to them. 104. We, therefore, are of the opinion that the High Court is right in concluding that till the jurisdictional issues are straightened and answered by TRA....
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....ofar as the telecom sector is concerned, jurisdiction of CCI under the Competition Act is totally ousted. In a nutshell, that leads to the conclusion that the view taken by the High Court is perfectly justified. Even the argument of the learned ASG is that the exercise of jurisdiction by CCI to investigate an alleged cartel does not impinge upon TRAI's jurisdiction to regulate the industry in any way. It was submitted that the promotion of competition and prevention of competitive behaviour may not be high on the change of sectoral regulator which makes it prone to "regulatory capture" and, therefore, CCI is competent to exercise its jurisdiction from the standpoint of the Competition Act. However, having taken note of the skilful exercise which TRAI is supposed to carry out, such a comment vis-à-vis TRAI may not be appropriate. No doubt, as commented by the Planning Commission in its report of February 2007, a sectoral regulator, may not have an overall view of the economy as a whole, which CCI is able to fathom. Therefore, our analysis does not bar the jurisdiction of CCI altogether but only pushes it to a later stage, after TRAI has undertaken necessary exercise in th....