Jurisdiction - India
Reports and Analysis
India – Competition Watchdog Guilty Of Violating Principles Of Natural Justice.

23 June, 2015

 

 

The Competition Commission of India (CCI) is one of the most active regulatory bodies in India. It was set up under the provisions of the Competition Act. 2002 (Act) to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India. CCI consists of a Chairperson and 6 Members appointed by the Central Government. In the 6 years that the CCI became fully functional it has taken the industry by storm. It has given some landmark orders to reign in defaulters. It has safeguarded the rights of the consumers fearlessly. This has earned it the ‘Competition watchdog’ and ‘fair trade watchdog’ tag.

 

CCI has used the powers conferred on it by the Act very effectively. However there have been certain instances when the CCI appears to have acted more enthusiastically that it is permitted under law.

 

In the recent case of All India Organisation of Chemists and Druggists v. CCI (decided on April 27, 2015), the orders passed and penalty imposed by the CCI came into question before the appellate tribunal, Competition Appellate Tribunal (Compat). In that case CCI had received 3 similar complaints against All India Organisation of Chemists and Druggists (AIOCD) for alleged abuse of dominant position. CCI immediately passed an order whereby the Director General (DG) was asked to conduct investigation and submit a report. DG sent a notice to submit documents to AIOCD in each of the 3 cases. The documents were identical, hence AIOCD submitted one set of documents.

 

However, the DG chose to take action against AIOCD for non-submission of documents including issuing a show cause notice and thereafter imposed a penalty of INR 25k per day till actual supply of documents. In the meantime DG submitted its report on all the 3 cases relying on the documents submitted by AIOCD in one case for recording its findings. Based on DG’s report, CCI passed an order against AIOCD for abuse of dominant position and also levied further penalty totally to INR 10m. AIOCD contested the order and in due course filed an appeal in Compat. Compat found that ‘two of the five members who signed the impugned order had joined the Commission after more than 1-1/2 months of the date of hearing. Therefore, the only possible inference which can be drawn is that they had mechanically signed the order and such an order cannot but be treated as vitiated due to flagrant violation of the basics of natural justice’. The Compat further cited precedents from Supreme Court and inter alia held ‘that the impugned order is vitiated due to violation of one of the important facets of the principles of natural justice and is liable to be set aside only on that ground’.

 

In another recent case, Board of Control for Cricket in India (BCCI) v CCI (decided on February 23, 2015), the Compat has set aside orders of the CCI for violation of the principles of natural justice and remitted the matter to the CCI for fresh disposal in accordance with law. While giving its order on the CCI’s conclusion on the ‘relevant market’ it was inter alia held that ‘If the Commission wanted to differ with the Director General on the issue of ‘relevant market’ then it should have given notice spelling out its intention to do so and give an opportunity of hearing to the appellant, which was admittedly not done. Therefore, there is no escape from the conclusion that the finding recorded by the Commission that Organization of Private Professional Cricket League/Events in India is the ‘relevant market’ is vitiated due to violation of the rule of audi alteram partem’.

 

The Compat’s Chairman, while dealing with CCI’s conclusion in holding BCCI guilty of abuse of dominant position, expressed his opinion as ‘In my view the Commission’s failure to disclose the information/material proposed to be used by it for arriving at a finding on the issue of abuse of dominance and give an opportunity to the appellant to explain/controvert the same has not only resulted in violation of the principles of natural justice but also occasioned failure of justice.’ In this respect it held that ‘the finding recorded by the Commission on the issue of abuse of dominance is legally unsustainable and is liable to be set-aside because the information downloaded from the net and similar other material do not have any evidentiary value and, in any case, the same could not have been relied upon by the Commission without giving an effective opportunity to the appellant to controvert the same’.

 

The opposite parties have been quick to latch on to this ground in ongoing appeals before Compat filed by Coal India Limited & Ors., Madhya Pradesh Power Generating Company Ltd. and Sponge Iron Manufacturers Association. In Compat’s separate orders dated May 1, 2015 in all the 3 cases, the counsel for the appellants ‘pointed out that arguments on the complaint made by the respondents were heard by the Commission comprising Chairperson and three members but the order under challenge has been passed by the Commission comprising six persons including Chairperson and it has been erroneously recorded that all of them had heard the arguments’. The Compat’s chairman, while adjourning the cases, took cognizance of a couple of Supreme Court cases in each of the 3 matters and observed ‘The ratio of these judgements is that one who hears must decide and violation of this rule will make the final order non-est.’

 

The CCI chief, Mr. Ashok Chawla, was quoted in the media defending its own order in the AIOCD case ‘We don’t think there is any great miscarriage of justice but we respect the judgement and we will try to adhere to it more strictly in the future…. But it is also a fact that hearings go over a long period of time. They are not essentially related to one particular day, it is possible that on some day some member may not be present’.

 

In all the above cases, Compat has cited numerous judgements of the Hon’ble Supreme Court of India to come to its conclusion. Adherence to the principles of natural justice is an essential element of India’s judicial history and violation of the same amounts to a serious miscarriage of justice, which has been severely dealt with by India’s highest court.

 

The CCI has hitherto done an excellent job in enforcing the provisions of the Act. However, its eagerness to take appropriate action has come at the cost of some of the basic tenets of law and justice. What is more shocking is the response of its chairman in a public forum. Instead of taking responsibility for the severe and unpardonable lapse, he chose to waive it off rather lightly.

 

It is disconcerting to see that the CCI, which has taken a number of offending organisations to task, is becoming a victim of its own improper actions. The author sincerely hopes that the CCI will arrest this disturbing trend and its members will take suitable remedial measures to ensure that principles of natural justice are respected in its future orders.

 

Contributed by Sourish Mohan Mitra, Principal Consultant at PwC, India; views expressed are personal; 


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