CCI and DG’s powers under the Competition Act and the Principles of Natural Justice

[Kunal Kumar is a 4th year B.A., LL.B.(Hons.) student at NLU Jodhpur)]

Introduction

In Central Bank of India v. Shri Prakash Chand Jain (1969), the Supreme Court held that a fact which is sought to be proved must be supported by statements made in the presence of the person against whom enquiry is held and the statement made behind the back of the person charged are not to be treated as substantive evidence. Additionally, in Town Area Committee v. Jagdish Parsad (1978), it was held that a person has the right to know the evidences used against him, along with the right to rebut such adverse evidences, and if any departure is made from these settled rules, it would be a sheer violation of principles of natural justice.

Section 36(1) of the Competition Act, 2002 (the “Act”) provides that “in discharge of its functions, the Competition Commission of India (“CCI”) should be guided by the principles of natural justice”; this was again affirmed by the Competition Appellate Tribunal (“COMPAT”) in Coal India Limited v. CCI.[1]

Departure from principles of natural justice

Thus, the question which requires consideration is whether the Director General (“DG”) and the CCI while investigating a case could undermine the principles of natural justice? There are certain provisions in the Act which seem to compromise the principles of natural justice and confer upon the DG and the CCI sweeping powers.

The DG initiates an investigation when he receives the CCI’s order under section 26(1) of the Act, which provides that on receipt of any information if the CCI is of the opinion that prima facie case exists, it shall direct the DG to cause an investigation. Thus, two important aspects need consideration here: (i) whether the CCI, on receiving any information regarding violation of any provisions of the Act, should make an opinion regarding existence of a prima facie case without giving the opposite party an opportunity to rebut the allegations against them; and (ii) whether the DG, while investigating the case, should rely on evidences/witnesses against the respondent without giving him an opportunity to rebut such evidences.

The CCI and the DG never seem to give such opportunity to rebut the evidences while deciding about the existence of a prima facie case. There are many cases where the parties accused were later held not guilty and the DG and the CCI have been found relying on false and improper evidences.

In Board of Control for Cricket in India,[2] the COMPAT overturned the CCI order for its lack of due process and procedural fairness in relation to the investigation and held that, before issuing any adverse decision, the CCI must comply with the principles of natural justice, including following the rule of audi alteram partem.

In  Schott Glass India, the DG had relied on statements of certain converters/competitors, who were bound to have conflicting interests against the appellant, without giving the appellant an opportunity to cross-examine the witnesses, the COMPAT categorically held that such reliance on statements of the interested witnesses without their cross-examination was risky and uncalled for.[3]

Source of the CCI and the DG’ powers

Section 53A(1)(a) empowers the National Company Law Tribunal (“NCLT”) to hear and dispose of appeals against the CCI orders passed only under sub-sections (2) and (6) of section 26, sections 27, 28, 31, 32, 33, 38, 39, 43, 43A, 44, 45 or 46. It can be said that the legislature has specifically excluded section 26(1). Hence, no appeal will lie to the NCLT against the investigation of the DG, which thus gives scope to the investigations to suffer from irregularities and manipulations and pulverises the principles of natural justice.

In CCI v. SAIL, the Supreme Court categorically held that no appeal will lie from any decision, order or direction of the CCI which is not made specifically appealable under section 53A(1)(a).

In this regard, it has to be noted that in Gujarat Agro Industries v. Municipal Corporation, the Supreme Court observed that the right of appeal is neither a natural nor inherent right vested in a party. It is substantive statutory right regulated by the statute creating it. It was further observed in Super Cassettes Industries v. State of U.P. that, being a creature of statute, the remedy of appeal must be legitimately traceable to the statutory provisions. Thus, having such provisions which  could violate the principles of natural justice and affect businesses of law abiding entities is certainly not acceptable.

In order for the DG to carry out the procedure, the Competition Commission of India (General) Regulations, 2009 in regulation 41(5) provides that when evidence by a party is to be led by way of oral submissions, the other party may be granted an opportunity to cross-examine the person giving the evidence only if the CCI or the DG considers it necessary or expedient (affirmed in In re Alleged cartelisation by Cement Manufacturers).Thus, it is a discretionary power of the said authorities to afford such an opportunity. However, even though it is discretionary; when such opportunity for cross-examination of evidences seems reasonable, the DG will have to afford it.

Suppose information is filed with the CCI with ill motive, and the DG goes on investigate the matter and declares that there is a prima facie case only to find out later that the respondents in the matter was not in the wrong, surely  penalty is imposed on wrong/malicious information, but what about the loss to the party who was innocent and the costs (time, money and labour) they have incurred, which adversely affects their business. Had the opportunity to cross-examine the witness be allowed at the initial stage to the respondents, the case would have rested there on account of its falsity, thereby saving the parties from the cumbersome proceedings.

Other important judgments which harm the principles of natural justice

In the case of W.N. Chadha, the Supreme Court held that “when the investigation officer is not deciding any matter but collecting the materials for ascertaining whether a prima facie case is made out or not and a full inquiry in case of filing a report under Section 173(2) Cr.P.C. follows in a trial before the Tribunal pursuant to the filing of the report, it cannot be said that at that stage rule of audi alteram partem superimposes an obligation to issue a prior notice and hear the accused which the statute does not expressly recognise”. This case has been considered by the CCI, COMPAT in CCI v. SAIL and other cases, but is not a good law when it comes to judging the investigation by the DG, as we cannot equate the investigation carried out by the enforcement agency in a criminal matter with that of the investigation by the DG.

Additionally, the CCI in the case of In Re Shri Nirmal Kumar, where the opposition alleged that the DG during the investigation had relied on the statements of third parties without giving an opportunity to rebut the same, held that the Office of the DG is the investigating arm of the Commission and to demand natural justice during the investigation as against the adjudication stage is to render the investigation meaningless. The CCI also opined that there is no similar provision as section 36(1) for the investigations by the DG; thus, they exclude the DG from application of section 36(1). However, section 36(1) provides, in discharge of its functions, the CCI should be guided by the principles of natural justice, and it is therefore apposite to include the “investigation by the DG” in the meaning of “functions of CCI”. The DG is part and parcel of the CCI and should not be alienated from the Commission for this purpose.

Conclusion

It is evident from the above discussion how the highlighted provisions of the Act violate the principles of natural justice by giving the authorities sweeping powers. As discussed, there are cases which show the lacuna that the Act suffers from, yet there have been no attempts by the legislature to correct those errors. It is time that amendments in this area are considered.

– Kunal Kumar

[1] Coal India Limited (CIL) and Ors. v. CCI, and Ors, Appeal Nos. 01, 44-47, 49, 70/2014 and 52/2015 dated 17-05-2016.

[2] The Board of Control for Cricket in India v. CCI & Ors., Appeal No. 17 of 2013 and I.A. No. 26 of 2013, dated 23-02-2015.

[3] See also, Himachal Pradesh Society of Chemist & Druggist Alliance and Ors.v. Rohit Medical Store and Ors., Appeal No. 58 of 2015 dated 13-01-2016; Forech India Ltd. v. CCI, WP(C) No. 11072 of 2015, dated 2-12-215.

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