Competition Commission™s direction of investigation cannot be challenged before Appellate Tribunal

[2010] 98 CLA (Mag.)  35

Competition Commission™s  direction of investigation cannot be challenged before Appellate Tribunal Rules Supreme Court in Jindal™s case

Mamta Bhargava

In this brief note, Mamta Bhargava, Company Secretary, summaries decision of the Supreme Court in CCI v. Steel Authority of India [2010] 98 CLA 278 holding that the authority of the Competition Commission of India to direct investigation into unfair trade practice cannot be challenged before the Competition Appellate Tribunal.

The Supreme Court  in the case of  Competition Commission of India v. Steel Authority of India [2010] 98 CLA 278 has ruled that the authority of  the Competition Commission of India (˜CCI™) to direct investigation into unfair trade practice by companies cannot be challenged before the Competition Appellate Tribunal (˜Appellate Tribunal™) putting curtain on a contentious issue between the CCI and Appellate Tribunal and laying down their respective jurisdiction in matters of anti-competitive agreements and abuse of dominant position.

In the instant case  Jindal Steel & Powers Ltd. (˜Jindal™) invoked the provisions of section 19 read with sub-section (1) of section 26 of the Competition Act, 2002 ( ˜the Act™) by  filing complaint/providing information to the Commission alleging that  Steel Authority  of India Ltd. ( ˜SAIL™) had, inter alia, entered into an exclusive supply agreement with Indian Railways for supply of rails. This meant that  Jindal, who also had a steel plant for rails, cannot supply steel  to Railways in spite of being a big manufacturer of steel. The SAIL was, thus, alleged to have abused its dominant position in the market and deprived others of fair competition and, therefore, acted contrary to sub-section (4) of section 3 (anti- competitive agreements) and sub-section (1) of section 4 (abuse of dominant position) of the Act.

Based on the complaint filed by Jindal, the CCI  ordered an investigation by the Director General of Investigation (˜Director General™) into the ˜exclusive supply agreement™ between SAIL and Indian Railways under sub-section (1) of section 26. Before the Director General could begin its investigation, the SAIL appealed to the Appellate Tribunal. Staying the investigation by the Director General,  the Appellant Tribunal held that the Appellate is within its right to come up in appeal and any order of the CCI could be appealed before the Appellate Tribunal.

The CCI questioned the very maintainability of the appeal before the Appellate Tribunal on the ground that the order under appeal before the Appellate Tribunal is a direction simpliciter to conduct investigation and not an order appealable within the meaning of section 53A of the Act. The CCI also pleaded that it should be heard and made a party to the appeal. However, Appellate Tribunal ruled that it is not necessary. This led to CCI going in appeal against Appellate Tribunal order before the Supreme Court.

While holding that the CCI  has the authority to initiate such investigation, the Supreme Court ruled as follows on issues that came up for its consideration :

¢ CCI™s directions for investigation under sub-section (1) of section 26 cannot be  appealed to the Appellate Tribunal  under section 53A Appeal shall lie before the Appellate Tribunal only against such directions, decisions or orders of the CCI which have been specifically stated under the provisions of clause (a) of sub-section (1) of section 53A. The orders, which have not been specifically made appealable, cannot be treated as appealable by implication and issuance of direction of the CCI to the Director General for investigation cannot  be held to be an order appealable under section 53A.

¢ Commission to be necessary/proper party to the proceedings  before the Appellate Tribunal In cases where the inquiry has been initiated by the CCI suo motu, the CCI shall be a necessary party and in all other cases the CCI shall be a proper party in the proceedings before the Appellate Tribunal.

¢ CCI need not hear parties as a matter of right Neither statutory duty is cast on the CCI to issue notice or grant hearing, nor any party can claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the CCI, in terms of sub-section (1) of section 26, that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter.

¢ CCI  investigation to be completed in a time bound manner : The opinion on existence of prima facie case has to be formed within 60 days. Though  the time period for the formation of such opinion has been specifically laid down, still it is expected of the CCI to hold its meetings and record its opinion about existence or otherwise of a prima facie case within a period much shorter than the stated period.

¢ CCI to record some reason while arriving at prima facie view : In terms of sub-section (1) of section 26 and in  consonance with the settled principles of administrative  jurisprudence, the CCI is expected to record at least some reason even while forming a prima facie view.

Source: Corporate Law Adviser





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