TaxTMI 
TaxTMI 
2026 (5) TMI 378
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....on 4(1) of the Competition Act, with an amount of Rs. 301.61 Crore(s) imposed as penalty. The Appellant has assailed the findings qua abuse of dominant position attributed to Appellant. 2. Another Competition Appeal (AT) No.11 of 2020 has been filed by the Textile Consumers Foundation against the same impugned order on the ground of inadequate penalty imposed on Grasim Industries. 3. It is submitted the following findings and directions have been given against the appellant in the impugned order viz. i) the relevant market is the Market for supply of Viscose Staple Fibre (VSF) to spinners in India in which market the appellant enjoys the dominant position; ii) the appellant charges unfair and discriminatory price for sale of VSF to its customers in contravention of Section 4(2)(a)(ii) read with Section 4(1) of the Act; iii) the appellant has imposed supplementary obligations in contravention of Section 4(2)(d), read with Section 4(1) of the Act; iv) the appellant must publish its discount policy which must be transparent and non-discriminatory to all the market participants, and to make it easily and publicly accessible; v) appella....
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....us allowing competition in the market From the submissions of OP2 it is observed that it does not sell VSF to traders or intermediaries. However, traders are free to import VSF for onward supply to spinners. There are instances of such trade in the market. Therefore, nothing stops the potential traders from importing VSF and creating a secondary market, thus posing competition to OP2. But they may run the risk of losses, if OP2 reduces prices. The traders stand no chance in price competition with OP2. Secondly, VSF has to be stored in controlled condition thereby increasing the carrying cost. Absence of traders in VSF market is not a creation of OP2 alone. OP2 has no obligation to keep the traders in business and it cannot be faulted for not doing so. Thus, it does not appear to fall in the realm of Section 4 of the Act (xii) Not disclosing pricing and discounting policy. Not disclosing pricing / discounting policy by OP2 does not appear in itself to be contravention of the Act. It may lead to unfair and discriminatory pricing to customers and this aspect has already been examined. 5.4 Thereafter, the Ld. Sr. Counsel referred to the following operative....
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....allegations contained in the information or reference together with evidence or documents or statements or analysis collected during the investigation. Section 26(4) enjoins the Commission to forward the report of the Director General to the parties concerned. If the investigation is caused to be made based on a reference received from the Central Government or the State Government or the statutory authority, then the report is required to be sent to the appropriate Government or the statutory authority. The object of sending report to the appropriate Government or the statutory authority or the parties concerned is to enable them to submit objections or suggestions qua the findings recorded by the Director General. This exercise has to be undertaken by the Commission even if the Director General finds that there is no contravention of Sections 3 or 4 of the Act. The Commission can close the case if, after considering the objections or suggestions, it agrees with the recommendations of the Director General. If the Commission is not satisfied with the report of the Director General and forms an opinion that further investigation is called for then it can direct the Director General ....
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....he person concerned and an effective opportunity has to be given to him to controvert the same. The Commission is also required to pass a speaking order to demonstrate application of mind to the relevant factors/considerations and exclusion of irrelevant and extraneous factors/considerations. 16. The ambit and scope of principles of natural justice has been considered by the Courts across the globe. In India, the High Courts and Supreme Court have invoked these principles in innumerable cases and quashed administrative, quasi judicial or even judicial orders the ground of violation thereof. ........ 24. In her affidavit, Secretary of the Commission has made an attempt to show that there is no difference in the finding/conclusion recorded by the Director General and the Commission on the issue of 'relevant market' and the appellant got full opportunity to show that Organization of Private Professional Cricket League/Events in India constituted the 'relevant market', but she has not disputed that in the order passed under Section 26(1), the Commission had clearly mentioned that its focus was on the underlying economic activities which are ancillary for the ....
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....appellant to explain/controvert the same has not only resulted in violation of the principles of natural justice but also occasioned failure of justice. .......... 36. By relying upon the above noted judgments, I hold that the finding recorded by the Commission on the issue of abuse of dominance is legally unsustainable and is liable to be set-aside because the information downloaded from the net and similar other material do not have any evidentiary value and, in any case, the same could not have been relied upon by the Commission without giving an effective opportunity to the appellant to controvert the same." • Further, in Interglobe Aviation Ltd (IndiGoAirlines) Vs CCI, Appeal No.07/2016 the COMPAT held as under:- "32. We may now revert to these appeals. A careful scrutiny of the record shows that after conducting detailed investigation, the Jt. DG recorded findings/conclusions in respect of the seven issues framed by her and held that the allegation of formation of cartel and violation of Section 3(1) read with Section 3(3)(a) has not been proved against the appellants. The Commission considered the report of the Jt. DG in its meeting he....
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....3(3)(a) of the Act and this amounts to clear violation of the basics of natural justice, which the Commission was duty bound to comply within view of the mandate of Section 36(1) of the Act. 34. We are further of the view that violation of the principles of natural justice by the Commission has caused serious prejudice to the appellants because they have been condemned without being afforded an opportunity to present their cause against the proposed action and burdened with huge financial liability running into crores of rupees. If the Commission had informed the appellants that it proposes to disagree with the findings and conclusions recorded by the Jt. DG and given them an opportunity to file objections against the reasons for disagreement and also given them chance of oral hearing, then the latter may have put forwarded various arguments to persuade/ convince the Commission that the Jt. DG had rightly returned a negative finding on the issue of formation of cartel and that no attempt had been made by them to arbitrarily determine the FSC or revise the same. By omitting to give notice to the appellants incorporating the reasons for its disagreement with the findings and....
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..... Learned counsel for the Respondent submitted that in BCCI case the DG found the relevant market as 'underlying economic activities which are ancillary for organising the IPL Twenty20 cricket tournament being carried out under the aegis of BCCI'. However, the Commission found the relevant market as 'market for organizing of private professional cricket league/events in India'. It is submitted that in the present case there is no difference in the market definition between the DG and the Commission. The Commission has fully endorsed the finding of the DG on the market being that of market for supply of VSF to spinners in India. 6.1 Further in Inter Globe case, the Commission had completely reversed the findings in the DG's report in its final order without giving the accused party any indication that they wanted to disagree with the DG's findings. It is argued that the DG had concluded in respect of seven issues that the allegation of formation of cartel and violation of Section 3(1) read with Section 3(3)(a) of the Act were not proved against the Opposite parties, the Commission had disagreed with the findings and held that the opposite parties were guilty of forming a cartel a....
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....travention of supplementary obligations, hence the Commission rightly held the appellant has contravened Section 4(2)(a)(ii) and 4(2)(d) read with Section 4(1) of the Competition Act. 6.4 It is the submitted that the term "buyer" used in para 124 of the impugned order refers to "spinners" and not third parties such as traders, and does not contradict the finding of the DG that appellant "has no obligation to keep the traders in business". Arguments of Respondent No. 1: 7. The Ld. Counsel for the Respondent No. 1 argued that there is no variation in the findings of the DG as well as the Commission, there was no need to issue show cause and as such there is no case for violation of principle of natural justice. Reference was made to the following paragraphs of the DG's report, wherein he noted as following: ".......... (viii) Refusing to sell to traders, thus not allowing competition in the market. From the submissions of OP2 it is observed that it does not sell VSF to traders or intermediaries. However, traders are free to import VSF for onward supply to spinners. There are instances of such trade in the market. Therefore, nothing stops the potent....
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.... group violates the provision if it makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature of according to commercial usage, have no connection with the subject of such contracts. ......... (xii) Not disclosing pricing and discounting policy. Not disclosing pricing / discounting policy by OP2 does not appear in itself to be contravention of the Act. It may lead to unfair and discriminatory pricing to customers and this aspect has already been examined." 7.1 The DG has summarized the findings as under: "7. Investigation has found that OP2 has been selling VSF to different customers at different rates. It does not declare the price of VSF in the open but confidentially communicates to each local customer the price available to it. OP2 also provides discount under various heads to its customers. It is found that there is disparity in the provision of discounts to different customers. It is found that many a times, a buyer buying more quantity of VSF has to pay a higher price as compared to another buyer who sources lesser quantity from OP2. Moreover, it is also found that OP2 sells....
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....oing discussion, the Commission is of the considered opinion that OP-2, in abuse of its market power in the relevant market, has imposed unfair and discriminatory price in sale of VSF upon its customers who are similarly placed and thereby contravened the provisions of Section 4(2)(a)(ii) of the Act. 122. Further, the Commission is of the opinion that only a seller abusing its dominant position can seek such details to prevent the resale and trading of its products and thereby hinder the emergence of an alternate source of competition in the market. The act of OP-2, with respect to seeking from its customers' details of VSF bought and used for production of VSF yarn in the garb of offering discounts as a condition for sale of VSF can be interpreted as not only preventing the resale of VSF by its customers in India but also preventing the export of VSF by its customers as a competitor to OP-2 in the export market. By seeking the details of production and sale from its customer, OP-2, has been controlling the entire market in its favour. 123. In view of the aforesaid discussion, the Commission is of the considered opinion that OP-2 has imposed supplementary obligati....
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....along with representation of the party complained against. If the DG report is in favour of the party complained against, the party does not respond to it and if it is to be adversely used by the CCI, then opportunity to respond should be given to the party complained against. 8.1 The Ld. Sr. Counsel submitted that the impugned order is a composite, interlinked, non-severable order with common penalty for all violations referred in the order. He specifically mentioned that in para 128, the Commission notes that "The Commission, after taking into account the totality of the facts and the circumstances of the present case, decides to impose penalty calculated @ 5% of the relevant turnover generated by OP-2 from the relevant market delineated i.e., the market for sale of VSF to spinners in India during the financial years from 2014-15 to 2016-17......." 8.2 The Ld. Sr. Counsel submitted that findings of the DG in favour of the Appellant were reversed by Ld. CCI without giving notice to the Appellant to present his case, which is gross violation of principles of natural justice. 8.3 The Ld. Sr. Counsel referred to para 117 of the impugned order (Vol-2, at page 351 of the Appea....
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....s differing from some of the findings of the DG's report. It was submitted that this requirement, as per the aforesaid judgments, has now been brought in the statute in proviso to Section 26(9) which reads as under: "SECTION 26: PROCEDURE FOR INQUIRY UNDER SECTION 19. [(9) Upon completion of the investigation or inquiry under sub- section (7) or sub-section (8), as the case may be, the Commission may pass an order closing the matter or pass an order under section 27, and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be: Provided that before passing such order, the Commission shall issue a show-cause notice indicating the contraventions alleged to have been committed and such other details as may be specified by regulations and give a reasonable opportunity of being heard to the parties concerned.]" This Section is enforced w.e.f. 19.09.2024. Analysis and findings: 9. We have heard the parties and perused the records. Presently, we are restricting the adjudication to the issue of compliance of principles of natural justice, that is, whether anything d....
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....rs, thus not allowing competition in the market. From the submissions of OP2 it is observed that it does not sell VSF to traders or intermediaries. However, traders are free to import VSF for onward supply to spinners. There are instances of such trade in the market. Therefore, nothing stops the potential traders from importing VSF and creating a secondary market, thus posing competition to OP2. But they may run the risk of losses, if OP2 reduces prices. The traders stand no chance in price competition with OP2. Secondly, VSF has to be stored in controlled condition thereby increasing the carrying cost. Absence of traders in VSF market is not a creation of OP2 alone. OP2 has no obligation to keep the traders in business and it cannot be faulted for not doing so. Thus, it does not appear to fall in the realm of Section 4 of the Act." 16. It is the submission of the Appellant that while the DG has held that the Appellant is under no obligation to keep the traders in business, the Ld. Commission has directed the Appellant not to place any end-use restriction on the buyers of VSF and it will be open to them to use the same for spinning or trading or any other purpose, as pe....
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....assumed to be a "trader". Thus, this direction is also in variance with the findings of the DG. 20. The Competition Appellate Tribunal in the case of BCCI v. CCI & Anr. reported in 2015 SCC OnLine Comp AT 238, has held as under: "24. .......... If the Commission wanted to differ with the Director General on the issue of 'relevant market' then it should have given notice spelling out its intention to do so and give an opportunity of hearing to the appellant, which was admittedly not done. Therefore, there is no escape from the conclusion that the finding recorded by the Commission that Organization of Private Professional Cricket League/Events in India is the 'relevant market' is vitiated due to violation of the rule of audi alteram partem. ....... 37. The discussion made by the Commission in the context of clause 9.1(c)(i) of the media agreement is also vitiated due to breach of principles of natural justice because the same was neither referred in the order passed under Section 26(1) nor the Director General recorded any finding qua its validity or otherwise and on this count the appellant did not get an opportunity to defend the said clause." (Emp....
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....ngs/conclusions recorded by the Jt. DG that the appellants had not formed any cartel or acted in contravention of Section 3(1) and Section 3(3)(a) of the Act and no opportunity was given to them to show that the reasons recorded by the Commission for its disagreement with the findings and conclusion recorded by the Jt. DG were untenable and also show that they had neither formed any cartel nor acted in contravention of the provisions of the Act. In other words, the Commission passed the impugned order without giving an action-oriented notice to the appellants and an effective opportunity to controvert what the Commission had perceived as contrary to Section 3(1) read with Section 3(3)(a) of the Act and this amounts to clear violation of the basics of natural justice, which the Commission was duty bound to comply within view of the mandate of Section 36(1) of the Act. 34. We are further of the view that violation of the principles of natural justice by the Commission has caused serious prejudice to the appellants because they have been condemned without being afforded an opportunity to present their cause against the proposed action and burdened with huge financial liabilit....