Competition Law: Analysis of the COMPAT Order in Surendra Prasad v. CCI

[The following guest post is contributed by Sarthak Raizada and Kartikey Kulshreshtha, who are 4th year
students at
Dr. Ram Manohar
Lohiya National Law University, Lucknow.]
The Competition Act, 2002 (the “Act”), while still in
the early stages of its development in India, has witnessed immense litigation.
The Competition Commission of India (“CCI”) has adjudicated and delivered
several landmark verdicts, laid down normative standards, effectively
discharged its mandate to promote competition. However, the lack of coherence
and subjective reasoning in some of its decisions has plagued and paralyzed the
standards along which an enterprise may be required to align his conduct. Such
practices have sparked debates related to the interpretation of the Act among
competition economists and lawyers. Moreover, the CCI as well the Competition
Appellate Tribunal (“COMPAT”) have passed orders in disregard of certain
fundamental principles under law. It is in this light that this post seeks to
comment upon a ruling of COMPAT in Surendra Prasad v. Competition Commission of
delivered in September which deals with important aspects as to
the interpretation of the Act and duties of the CCI as a quasi-judicial body.  
to the Dispute
A notice for tender was issued by the Maharashtra
State Electricity Board (“MAHAGENCO”) for coal liasoning, quality and quantity
supervision. In pursuance of the tender notice, M/s B.S.N. Joshi & Sons
Ltd. (“BSN”) and three other players submitted their tenders. The tender of the
BSN was challenged before the Bombay High Court by one of the tenderers
alleging that it failed to fulfill certain essential conditions. The writ
petition was allowed by the High Court quashing the award of the contract to BSN.
The said judgment of the High Court was challenged before the Supreme Court.
Therein, the Court directed MAHAGENCO to reconsider the matter afresh by
providing another opportunity to BSN. In
a striking observation, the Court further said that the three players apart
from BSN had engaged in cartel like behavior. Despite this order of the Supreme
Court directing MAHAGENCO to consider the matter afresh, MAHAGENCO did not
consider its application for tender. Thereafter, BSN filed a contempt petition
before the Supreme Court alleging willful disobedience to the order of the
Court. While disposing off the contempt petition, the Court made critical
remarks against MAHAGENCO for encouraging cartel like behavior.
Consequently, a contract of one year was granted to BSN
as directed by the Supreme Court. However, the contract was terminated
prematurely on grounds of unsatisfactory performance.
Matrix of the Case
The informant filed information under section 19(1) of
the Act alleging violation of section 3 and 4 by the opposite parties. It was
averred that the contractors had formed a cartel for bid-rigging and have
geographically divided the area of contracts constituting a violation of section
3. It was further alleged that MAHAGENCO had facilitated the formation of
cartel between the contractors. In support of the allegation, it relied upon
the observation of the Supreme Court in the contempt petition filed against
MAHAGENCO. The informant also alleged that the conduct of MAHAGENCO and other
contractors results in denial of market access to new players under section 4
of the Act. After a perusal of the arguments advanced, the CCI rejected these
allegations observing that the CCI does not have jurisdiction to inquire into
allegations of favoritism and corruption.
The order of the CCI was appealed before COMPAT. One of
the contentions raised before COMPAT dealt with the locus standi of the
informant to file the information. This contention of the respondents was
repelled by COMPAT on a plain reading of the statute. It proceeded to set aside
the order of the CCI ordering the Director General (“DG”) to make an
investigation into the matter and thereafter submit a report to the Commission.
While recording this observation, COMPAT relied upon the remarks of Supreme
Court in the Civil Appeal and the Contempt Petition pertaining to cartel-like
conduct, discussed above. It further observed that the DG shall not procced on
the premise that MAHAGENCO is a part of the cartel.
For Consideration

The order of COMPAT raises several important issues
as to the interpretation of the Competition Act. The first question that arises
for consideration is the power of COMPAT to make a direction to the DG to make
an investigation under section 26(1) of the Act. The second question that
requires consideration is the locus of the informant and his bona-fides to file
information before the Commission under section 19(1) of the Act. Third, the
question of discharging MAHAGENCO also prompts the question of cartel
facilitator liability in India, in view of the recent ruling of the CJEU in AC-Treuhand AG v. European Commission.[1]
Lastly, this post also attempts to question the legality of the observation made
by COMPAT to hold “that the Commission is
judicially subordinate to the Supreme Court and is bound by the verdict of the highest
court in the country”
. It also analyzes the nature and character of the proceedings
before the Supreme Court vis-à-vis the proceedings before the CCI. This is to
establish that the observation does not operate as a rule of binding precedent
on the CCI.
of the COMPAT Order
The order of COMPAT made a direction to the DG to
investigate into the matter and submit a report to the CCI. Whilst it may be
true that the statutory authority to pass a direction is vested in the CCI by
virtue of section 26(1), to assume that no such power is available to COMPAT is
to deprive it of necessary powers inherently vested in it. Critically analyzing
the judgment, a few authors have argued that it is incumbent upon COMPAT to
make an order of remand to the CCI while reversing an order made under section 26(2)
of the Act. Such an argument is strictly positivistic and is therefore, liable
to be rejected.
Section 53B (3) of the Act provides:
On receipt of an appeal under sub-section
(1), the Appellate Tribunal may, after giving the parties to the appeal, an
opportunity of being heard, pass such orders thereon as it thinks fit,
confirming, modifying or setting aside the direction, decision or order
appealed against.
It is a fundamental principle of law that where an
Act confers a jurisdiction, it impliedly also grants the power of doing all
such acts, or employing such means, as are essentially necessary for their execution.
A remand by an appellate court is usually made when the record before it is in
such shape that the appellate court cannot in justice determine what final
judgment should be rendered and the power to do so cannot but be an essential requisite of the very jurisdiction
to entertain the appeal
. It is an old maxim of the law that to whomsoever a
jurisdiction is given, those things also are supposed to be granted without
which the jurisdiction cannot be exercised: cui
jurisdictio data est, ea quo que concessa cssee videntur, sine quibus
jurisdictio explicari non potest
. Therefore, on a plain reading of section
53B(3), it may well be argued that the expression ‘as it thinks fit’ confers a
jurisdiction of widest amplitude on COMPAT. Furthermore, the power to set aside
the direction, order or decision appealed against may include the power to
remand the matter, as an order of remand will necessarily set aside the order. Both
these portions necessarily imply that COMPAT has the power to set aside the
decision which is under appeal before it and remand the matter to the CCI for
fresh consideration. Hence, the power to remand is an inherent power vested in COMPAT
and is not a power which can be disputed. Therefore, the question which
requires consideration is not whether such a power is available to COMPAT, but
whether an order of remand was necessary and proper in the present dispute if
the essential requisites to entertain the appeal were not fulfilled.
This takes us back to the provisions of section 26 of
the Act. Under that provision, the CCI has the power to issue directions or
pass orders as required by various sub-sections. Section 53A provides for an
appeal to orders made under section 26. Subsection (1) to section 26 requires
formation of a prima facie opinion by the CCI to direct the DG to make an
investigation into the matter. The formation of a prima facie opinion does not
require the CCI to record detailed reasons. However, it is incumbent upon the CCI
to express in no uncertain terms that it is of the view that prima facie case
exists calling for an investigation to be made into the matter by DG.[2]
While forming such an opinion, the CCI is required to consider and pass a
reference to the information furnished to the CCI. Such opinion should be
formed on the basis of the records, including the information furnished and
reference made to the CCI under the various provisions of the Act.[3]
Therefore, a natural query that arises in the dispute under discussion is
whether there was sufficient information available before the CCI to take a
view that prima facie case exists. As stated in the minority order passed under
section 26(2) by Justice (Retd.) S. N. Dhingra, the conduct of the contractors
and MAHAGENCO after the termination of contract with BSN is reflective of
anti-competitive conduct. To this effect, he elaborately analyzed and discussed
their conduct for the relevant period under consideration, which in authors’
view, constitute sufficient evidence to form a prima facie opinion. Therefore,
the majority order passed by the CCI deeming such allegations as those of
favoritism and corruption, lying outside the purview of its jurisdiction, is
unsustainable and unwarranted under law.
The second question which formed the subject-matter
of COMPAT’s ruling was the locus standi of the informant to file the
information.  In Appeal before COMPAT,
the respondent challenged the locus of the appellant-informant on the ground
that he is espousing the cause of BSN since he had been representing him in
several other litigation. While rightly rejecting this contention on a plain
reading of the statute, COMPAT observed that there is nothing in the language
of section 19(1)(a) to suggest that any person filing such information is
required to possess any qualification or prescribe any condition which is
required to be fulfilled. This is evidently clear from a plain reading of
section 19(1)(a) which provides for the following two conditions:
The receipt of such information in such manner and accompanied by such fee as
may be determined by regulations; and
Such information should be filed by any person, consumer or their association
or trade association.
While the procedure to file such information is
prescribed by the CCI (General) Regulations, 2009, they do not provide for any
fee or any method for filing such information. Moreover, the manner of filing
information is procedural in nature and therefore cannot subdue the substance
of the information.[4]
Therefore, there is no bar to filing any information under the Act, provided
the conditions mentioned above are satisfied.
With regard to condition (b), COMPAT observed that
the informant is also a consumer within the meaning of the Act. In any case, it
is submitted that the informant would have fulfilled the condition as he is a
person within the meaning of the Act.
The third question analyzed in this post is based on
a rather novel interpretation of section 3 liability. This interpretation of
the statute is founded on the principle laid down by the Court of Justice in AC-Treuhand AG v. European Commission. It
observed that article 81 of the European Community (EC) Treaty does not only
concern undertakings which are active on the relevant or related markets
affected by the restriction of competition. It affirmed the ruling of the
General Court that passive participation in a cartel maybe sufficient to
constitute a liability under article 81(1). Relying on the objective of article
81 to prevent distortion of competition in the common market, it held
AC-Treuhand liable on the ground that the very purpose of providing services to
the members of the cartel was in pursuance of attaining anti-competitive
This interpretation adopted by the Court of Justice
of the European Union is relevant in view of the strikingly interesting observation
of COMPAT as follows:
 However, it is made clear that while making
investigation, the Director General shall not proceed on the premise that
Respondent No. 2 was a part of the cartel.
This observation of COMPAT triggers the debate that
whether cartel facilitators be held for an infringement under section 3(3) of
the Act. While allegations of facilitating the cartel against MAHAGENCO were
raised before the CCI as well as COMPAT, the two forums seem to have either
rejected the allegation or absolved MAHAGENCO from such liability without
stating any reasons whatsoever. Hence, the impact and legal implications of
such an approach are yet to be seen while the Indian competition authorities strive
and aim to bring Indian law in consonance with the law propounded by EU institutions.
Lastly, the post seeks to critically examine the
statement recorded by COMPAT pertaining to the binding value of the observation
made by the Supreme Court in the Civil Appeal and Contempt Petition. Hence, it
is necessary to discuss the law laid down with respect to the doctrine of
precedents under article 141 of the Constitution.
It is a well-established principle that the “law
declared” under article 141 is a binding precedent. A finding on facts or any
question of law which was not required to be raised in a particular case cannot
be treated as a binding precedent. In other words, particular words or sentences
made or findings of fact recorded by the court lacking any independent analysis
or examination of its own cannot fall within the scope of the expression “law
In the present dispute, the observations made by the
Supreme Court in the Civil Appeal and the Contempt Petition pertaining to the act
of cartelization by the contractors cannot be regarded as a binding. Primarily,
the observation is merely based on the statements recorded by senior
functionaries of MAHAGENCO. Furthermore, the Court did not provide any independent
analysis of cartel-like conduct on its own to substantiate the observation.
This is further evidenced by the failure of the Supreme Court to record any
reasons for the same. Hence, the order of COMPAT rebuking the CCI for breach of
judicial discipline in disregarding the findings of the Supreme Court is
unwarranted and unsustainable under law. 
It is also pertinent to note that the question
regarding the formation of cartel between the contractors did not require any
determination in the proceedings before the Supreme Court. The proceedings
therein only dealt with the aspect of legitimate expectation of BSN to be
considered for empanelment of coal liasoning while the proceedings before the
CCI dealt with the aspect of anti-competitive practices adopted by the
contractors and MAHAGENCO. The relief sought before the Supreme Court involved
reconsideration for public procurement through a competitive bidding process
whereas the adjudicatory process before the CCI involves imposition of
penalties and directions to end the infringing conduct/agreement.
Keeping in mind this fundamental distinction, we argue
that the order of COMPAT has lost sight of the true scope and import of article
141 of the Constitution.
Sarthak Raizada & Kartikey Kulshreshtha

[1] Case
C194/14 P AC
Treuhand AG v Commission
[27] not yet reported.
[2] Nissan Motors India Private Limited v
Competition Commission of India
Writ Petition No 26488/2013 &
[4] Hyundai Motor India Limited v Competition
Commission of India
WP No 31808-09/2012.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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