Rationalisation of Competition Appeals: A Way Forward?

[Abhimanyu Singh Yadav and Anubha Singhal are 3rd year BA LLB (Hons) students at Dr. Ram Manohar Lohiya National Law University, Lucknow]

The purpose of a Finance Act has generally been to lay down the tax proposals framed by the Central Government. However, apart from laying down tax proposals, the Finance Act 2017 brought about some noticeable structural changes in the functioning of appellate tribunals in India. As a result of this, we witness the curtains falling down on the independent Competition Appellate Tribunal (“COMPAT”) which, for some years now, had been entertaining appeals on competition related disputes in India. It is because of Part XIV of the Chapter VI of the Finance Act, 2017 that these amendments were brought into effect. The Eradi Committee had initially endorsed the importance of setting up a specific tribunal that would deal with the revival, rehabilitation and winding up of companies. Finally on May 26, 2017, the Government through a notification brought an end to the independent COMPAT regime by merging it with the National Company Law Appellate Tribunal (“NCLAT”).

The NCLAT was constituted by the Ministry of Corporate Affairs with a motive to replace some specific judicial avenues which were functioning individually on their own. Initially it was expected that this move would streamline India’s tribunal-based structure and increase its efficiency through consolidation. However, now it leaves us with some doubts as to whether it would be capable of handling its responsibilities the way it was expected. The rationalization of tribunals is necessary; however, at times it often leads to the dilution of expertise and to some level of confusion.

While the amendment is quite clear and straightforward, it is likely to face certain teething problems on a practical level. One such instance where the amendment falls short would be the merger of COMPAT with the NCLAT. The NCLAT was constituted under section 410 of the Companies Act, 2013 for hearing appeals against the orders given by National Company Law Tribunal (“NCLT”). It is to be composed of a chairperson, judicial members and a technical member who has to be a person of high integrity having special knowledge and expertise. In accordance with rule 57 of the National Company Law Tribunal Rules, 2016, the tribunal would be bound by the Code of Civil Procedure and would follow the principles of natural justice and equity.

Unlike the NCLAT, COMPAT was a specialised appellate authority. Being a specialized body, it was effective in dealing with complex competition law-related matters arising from appeals against the decisions of CCI. Merging the authorities which operate in similar fields is justified in order to reduce cost and avoid multiplicity of cases, as has been witnessed in UK wherein a new single Competition and Markets Authority (CMA) was established by merging the Office of Fair Trading (OFT) and Competition Commission. However, merging the authorities dealing in different fields is likely to hinder the judicial process. The dissolution of COMPAT and its merger with NCLAT, which would deal with company, competition and insolvency laws together, could hinder the focus on competition law in India. Further competition law and company law are fairly distinct from each other, since the primary aim of competition law is “to prevent anti-competitive practices, promote and sustain competition, protect the interests of the consumers and ensure freedom of trade in markets in India” while that of company law is to determine rights and liabilities of companies and their members and to facilitate the ease of doing business. Therefore, they operate in distinctive fields of the law.

It is important to understand that none of the relevant rules or regulations, including the CCI (General) Regulations, 2009, the Competition Appellate Tribunal (Form and Fee for Filing an Appeal and Fee for Filing Compensation Applications), Rules 2009 and the Competition Appellate Tribunal (Procedure) Regulations, 2011 provide stage-wise timelines for the fulfilment of the appellate process. The Companies Act, 2013 and the rules thereunder require the NCLAT to make every endeavour to dispose an appeal within three months from the date of filing but do not provide any indicative stage-wise timelines to dispose appeals.

Further, section 411(3) of the Companies Act, 2013, which provides for qualifications of a technical member of the NCLAT does not require him or her to possess expertise in competition law and policy or economics, since it was originally an appellate body only for issues pertaining to company law. The profile of the present NCLAT members indicates that there is no technical member who has prior experience in the domain of competition law and economics. In this regard, reference may be made to the 272nd Law Commission of India Report which has recommended that “appointments to specialised tribunals should comprise of persons of proven ability, integrity and standing having special knowledge and professional experience or expertise of not less than fifteen years in the particular field.” COMPAT, being a specialised tribunal, consisted of members having special knowledge of competition matters.[1] In the UK, the Competition Appellate Tribunal (CAT) accommodates an aggregate of enterprise specialists, economists and legal practitioners, among others. In Singapore, the Competition Act provides for the establishment of the Competition Appeal Board (CAB) consisting of professionals from commerce, industry and administration.

COMPAT had established itself as a robust institution in the eight years of its existence, emphasizing strict adherence to due process and natural justice.[2] Most importantly, the COMPAT articulated the concept of “relevant turnover”, which significantly reduced the CCI’s powers to penalize erring enterprises.[3] During its tenure, COMPAT had played an instrumental role in the evolution of competition law jurisprudence in India since it was a specialised body dealing with matters relating specifically to competition law.

Further, section 410 of Companies Act, 2013 prescribes the maximum permissible strength of the NCLAT as 11 members; however, at present there are only 3 members. Given the fact that it is an appellate authority for cases pertaining to Companies Act, 2013, the Insolvency and Bankruptcy Code, 2016 and the Competition Act, 2002, there is a need to appoint more members in order to ensure speedy and effective disposal of appeals and to avoid pendency as has been experienced by Customs, Excise and Service Tax Appellate Tribunals (90,592 cases were pending at the end of 2016) and Debt Recovery Tribunals (78,118 cases were pending as on July 3, 2017), and Income Tax Appellate Authority (91,538 cases were pending at the end of 2016). 

Looking at it from a broader perspective, we find that this merger would lead to over burdening of the NCLAT and thereby causing significant judicial delays in the adjudication of disputes as it is already exercising its jurisdiction over the appeals arising out of the NCLT and the Insolvency and Bankruptcy Board of India. It would defy the purpose of “tribunalisation” as was pointed out in the 272nd Law Commission Report that “the concept of tribunalisation was developed to overcome the crisis of delay and backlogs in the administration of justice”. Though the present amendment aims to avoid multiplicity of various tribunals, the efficacy of the NCLAT in dealing with competition specific cases is yet to be seen.

– Abhimanyu Singh Yadav & Anubha Singhal

[1] Section 53 D of the Competition Act, 2002 [Omitted by the Finance Act, 2017, w.e.f. 26th May, 2017]

[2] Escorts Ltd v. Competition Commission of India (Appeal No. 13/2014).

[3] Excel Corp Care Limited v CCI, 2013 CompLR 799 (COMPAT); LH Hiranandani Hospital v CCI, COMP 19/2014.