[Shourya Mitra is a penultimate year law student at Jindal Global Law School, Sonipat]
Recently, the National Company Law Appellate Tribunal (NCLAT) dismissed the appeals filed by United Breweries and others against the order of the Competition Commission of India (CCI) (Beer Cartel Case). The CCI had held that the beer companies were in contravention of the provisions of the Competition Act 2002 (Act) by cartelizing amongst themselves. While dismissing the appeals, the NCLAT firmly observed that the coram of the Commission did not require the presence of a judicial member as there is no such requirement in the Act. This post will attempt to locate the stand taken by the NCLAT in the broader legal setting and analyse its impact.
The Brief Facts of the Case and the Concerned Ratio
The CCI had taken cognizance of the case via a leniency application filed by one of the companies. After hearing the parties, the Commission had imposed a penalty of Rs. 870 crores on the various beer companies for cartelizing. The NCLAT was hearing an appeal against this order, and one of the grounds raised by the Appellants was based on the absence of a Judicial member in the coram of the CCI. It was argued that in the absence of a Judicial Member, the order of the CCI should be interfered with and set aside. The NCLAT dismissed this argument by perusing sections 8 and 9 of the Act, which deal with the composition of the CCI and the selection of its members, respectively. On perusing the provisions, it held that there is no mandatory requirement to have a Judicial member for deciding a proceeding, and stated that “if a statute speaks to do it in a particular manner that has to be done in the same manner not in other way”.
The NCLAT, while giving this decision, did not rely upon any material beyond the provisions of the Act itself. Therefore, this piece will attempt to locate the ruling in the broader legal setting by analysing the following: (i) The legal backdrop favouring the presence of a judicial member; (ii) The legal backdrop against the presence of a judicial member; (iii) The interaction of the ruling with various competition law reports.
The Legal Backdrop Favouring the Presence of a Judicial member
The Mahindra Electricity case is a landmark decision regarding the constitutionality of certain provisions of the Act. One of the issues therein was the constitutionality of section 8 of the Act, wherein it was alleged that the composition of CCI is unconstitutional and violates the principle of separation of powers. The Delhi High Court, while ruling on this issue, held that the CCI cannot be characterized as a tribunal solely discharging judicial functions owing to its various other roles, such as its administrative and expert roles. However, in line with the judgement given by the Apex Court in the Utility Users Welfare Association case, the Delhi High Court held that the CCI should, at all times, and especially during final orders, have a judicial member present. This would act as a safeguard against the executive-dominated selection process under section 9 of the Act as well.
Unfortunately, the NCLAT, while ruling in the Beer Cartel case did not deliberate upon this decision of the Delhi High Court. Despite the decision in Mahindra Electricity being under challenge at the Apex Court, such a conclusive stand by the NCLAT may be detrimental to the proper functioning of the Commission, while also being contrary to the principle of judicial discipline. Further, having a judicial member may arguably be a fair mandate as following the principles of natural justice is an important facet to be considered by the CCI while giving decisions. The same is evident from section 36 of the Act, which states that the “Commission shall be guided by the principles of natural justice”. The Apex Court as well as the COMPAT have reiterated this in numerous cases. Several decisions have also been overturned due for violating principles of natural justice, such as in the Lafarge India case. Therefore, the presence of a judicial member may help alleviate these situations due to the experience and knowledge such a member holds, and may bring fairness to the proceedings.
Further, the application of complex laws is something that can also be secured by having a judicial member present. The NCLAT could have chosen to take the route that it did in some of the other cases, such as Tyre Cartel andSahuwala Cylinders, wherein it refrained from commenting upon the coram argument, as the matter was sub-judicebefore the Apex Court.
The Legal Backdrop Against the Presence of a Judicial Member
The Delhi High Court, in the case of CADD Systems, held that the ruling in Mahindra Electricity cannot interdict the functioning of the CCI, pending the appointment of a judicial member. It also relied on section 15 of the Act, which states that mere defects in the composition of the CCI cannot invalidate its proceedings. The NCLAT, in the case of Amazon NV Holdings, also relied upon section 15 of the Act to hold that the lack of a judicial member is a defect in the composition, which cannot vitiate the entire proceeding. These two cases give the impression that the requirement of a judicial member is not a sine qua non.
Unfortunately, the NCLAT in the Beer Cartel case, neither took recourse to section 15 of the Act, nor did it choose to rely on the decision in CADD Systems. Therefore, while the Beer Cartel ruling is in line with certain previous decisions, the jurisprudential basis of the decision itself does not feel limpid.
The Interaction of the Ruling with Various Competition Law Reports
The Raghavan Committee Report (Report), which is responsible for the inception of the Competition Act 2002, took a stand that would be in favour of the Beer Cartel ruling of the NCLAT. The Report explicitly stated that the judiciary may be inexperienced to deal with free market problems which is why the need for a specialized body like the CCI was suggested. The acknowledgement of the inexperience is indicative of the fact that the judiciary, and consequently, judicial members may not be the mandatory or preferred persons for constituting the CCI.
Conversely, the 2019 report of the Competition Law Review Committee, acknowledged the Mahindra Electricitydecision mandating the presence of a judicial member, and suggested that necessary action may be considered by the Central Government. Similarly, the Standing Committee on Finance released its 52nd Report last month, wherein it also discussed the presence of judicial member in the coram. It reflected on various suggestions from different stakeholders, which suggested that CCI must have judicial members owing to the adjudicatory functions it performs. On the other hand, the Ministry of Corporate Affairs suggested that the statute does not mention the appointment of a judicial member specifically, and should be interpreted accordingly.
On a balancing exercise, the answer to the judicial member puzzle seems to be leaning towards the inclusion of a judicial member in the coram. While section 15 of the Act forms a convincing basis for not necessitating the presence, it should not override the strong arguments in favour of carrying out the well settled principles of natural justice, which can be ensured by the presence of a judicial member. Further, the Mahindra Electricity ruling is valid in law until the Apex Court takes a stand to the contrary. The ruling is also supported by the Report of the Competition Law Review Committee, which recommends that the Central Government to take necessary action.
The NCLAT, while making the observation with respect to the presence of a judicial member, could have deliberated upon the pre-existing jurisprudence, both in favour and against, to help clarify the position of law. It could also have chosen to refrain from conclusively deciding the issue, in line with its decisions in Tyre Cartel and Sahuwala cylinders cases. Further, the NCLAT also could have relied upon section 15 of the Act, and held that the defective composition does not make the orders of the CCI void.
Unfortunately, the NCLAT did not deliberate over the cases discussed above in reaching its conclusions. This firm holding by the NCLAT can possibly muddle the already convoluted legal state of the issue. We now have to await the decision of the Apex Court for conclusive settlement of the issue, which is presently sub-judice. At present, the CCI has two members, and both of the members have a non-judicial background.
– Shourya Mitra