W.P.No.1785.09 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION. WIRT PETITION NO.1785 OF 2009. PETITIONERS: 1. Kingfisher Airlines Limited, a company incorporated and registered under the provisions of the Companies Act, 1956, having its registered office at UB Towers, Level 12, UB City, 24 Vittal Mallya Road, Bangalore – 560 001 and its corporate office at Kingfisher House, Vile Parle (East), Western Express Highway, Mumbai 400099. 2. Dr. Vijay Mallya, citizen of India, having his office, amongst other places, at Hoechst House, 5th Floor, Nariman Point, Mumbai – 400 021. : VERSUS : RESPONDENTS: 1. Competition Commission of India, through its Secretary (Ministry of Company Affairs, Government of India) situate at B Wing, 14 HUDCO Vishala, Bhikaji Cama Place, New Delhi 110056. 2. The Director General, Competition Commission of India, B Wing, 14 HUDCO Vishala, Bhikaji Cama Place, New Delhi 110 056. 3. M.P. Mehrotra, Indian Inhabitant, resident at C-561, Defense Colony, New Delhi 110 024. W.P.No.1785.09 2 4. Union of India through Secretary, Ministry of Company Affairs, New Delhi. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- Mr.N.H.Seervai, Senior Advocate with Dr.B.B.Saraf i/b Mr.Buchubhai Munim Adv. for the petitioners. Mr.T.Andhyarujina,Senior Adv. with Mr.Sunail Nathani and Mr.Sushanth Murthy i/b Mr.Madhur Baya for resp.nos.1 and 2. Mr.D.J.Khambata Addl.Solicitor General with Mr.R.A.Rodrigues, Mr.A.M.Sethna and Ms.L.B.Patane Advocates for respondent no.4. =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- CORAM: J.N. PATEL AND C.L. PANGARKAR, JJ. DATE OF RESERVING THE JUDGMENT: 12/03/2010. DATE OF PRONOUNCEMENT OF JUDGMENT: 31/03/2010. JUDGMENT (Per C.L. Pangarkar, J.):- 1. Heard. Rule, by consent, returnable forthwith. Learned counsel for respondents waive service. 2. This writ petition challenges the notices issued by the Competition Commission under the Competition Act, 2002 in respect of an alliance between the petitioners and Jet Airways (India) Ltd. W.P.No.1785.09 3 3. The facts leading to this petition can be narrated as follows - Petitioner no.1 is a Company incorporated under the provisions of the Companies Act, 1956 and is engaged in business of running an airline. The airline carries on operation throughout India and also on some international roots. Petitioner no.2 is the Chairman of petitioner no.1. Some time in October, 2008, petitioner no.1 and Jet Airways issued a press announcement informing that two airlines were pleased to form an alliance of wide ranging proportions which will help the airlines to rationalize the rates and provide improved standards of service of wider choice of air travel options to the consumers. After such an announcement, the Commission established under the provisions of the Monopolies and Restrictive Trade Practices Act (M.R.T.P.Act), issued certain notices to the petitioners. On 17th October, 2008, an order was passed by the M.R.T.P. Commission ordering an investigation into the reported agreement between the petitioners and the Jet Airways. On 29th October, 2008, the Director General W.P.No.1785.09 4 of Investigation issued a notice to petitioner no.1 calling certain information under Section 11 of the M.R.T.P.Act. The petitioner filed a reply to the said notice before the M.R.T.P. Commission. On 16/1/2009, a further notice was issued by the Director General under the M.R.T.P. Act seeking further information. Reply was sent to the said letter. Several other letters were written by the Assistant Director General to the petitioner and replies were accordingly sent. Later, on 11th August, 2009, the Additional Director General of Competition Commission wrote a letter to the petitioner. This letter was issued on the basis of information sent by respondent no.3 to the Competition Commission, which came to be established under the provisions of the Competition Act, 2002. The informant places reliance upon the newspaper report in respect of market shares and the strength of fleet, etc. On the basis of the aforesaid information, Competition Commission passed an order on 4th August, 2009 in which it is recorded that on the basis of information submitted by respondent no.3, the Commission is of the opinion that there exists a prima facie case and the matter W.P.No.1785.09 5 should be referred to the Director General for investigation. The petitioners, therefore, feel aggrieved. According to the petitioners, the M.R.T.P. Commission is already seized of the matter in enquiry No.172 of 2008 and therefore, the cognizance taken by the Competitive Commission was one without jurisdiction. The petitioners contend that Sections 3 and 4 of the Competition Act, 2002 cannot have retrospective effect since the Act contains penal provisions, which includes even imprisonment and fine. It is the contention of the petitioners that since the Act came into force on 20th May, 2009, the alliance between the petitioners and Jet airways is saved, as, according to them, the Act has no retrospective effect. Further, the petitioners have also contended that a plain reading of Sections 3 and 4 would indicate that the Act has neither retroactive nor retrospective effect and therefore the alliance or agreement entered into by the parties in October, 2008 is beyond the purview of the provisions of Sections 3 and 4. The petitioners contend that no action as contemplated by Section 4 of the Act can be taken unless and until it is first established that there was an W.P.No.1785.09 6 abuse of the dominant position by the group. It was also necessary to consider and establish the three concepts known as relevant market, relevant geographic market and relevant product market. According to the petitioners, no action can be taken as the Commission has not determined whether the Domestic Air Transport Service (Passenger) constitutes relevant market for the purpose of the Act, which is prerequisite for the exercise of jurisdiction under Section 4. Thus, according to the petitioners, establishment of relevant market is an essential condition before any exercise can be undertaken by the Commission for taking any action against the petitioners. Further, the petitioners contend that the provisions of Sections 3, 4, 19, 27, 42 and 43 are violative of provisions of Article 20 of the Constitution of India. 4. Respondent no.1/the Competition Commission in its affidavit contends that the petition itself is premature and without merits. The Commission contends that an enquiry has merely been ordered and no action whatsoever has been taken against W.P.No.1785.09 7 the petitioners. It is also contended that the prima facie view has been formed by respondent no.1 and enquiry and investigation has been ordered. No final order has been passed by the Commission and it is only after the conclusion of the investigation that the Commission will pass an appropriate order giving opportunities to the petitioners to present their case. Respondent no.1 contends that the respondent/Commission has received an information and it had to form an opinion with regard to the existence or non-existence of a prima facie case against the petitioners. It is contended that the enquiry and investigation is at a preliminary stage and the petitioners, therefore, has no right to challenge the enquiry which the commission can hold under a statute itself. The next contention of respondent no.1 is that the Competitive Commission is investigating in relation to anti-competitive agreement under Section 3 of the Act and for abuse of dominant position by the two airlines under Section 2 of the Act. Such an investigation is different and has no relation with investigation carried out by the erstwhile M.R.T.P. Commission. Both investigations are different W.P.No.1785.09 8 and have no connection whatsoever with each other. Further, an affidavit has been filed that the said M.R.T.P. Commission now no more exists. The respondent denies that the respondent is required to determine the relevant market before ordering the investigation under Section 4. The respondent further contends that Sections 3 and 4 of the Act cannot be read so as to have application only to agreements entered after 20th of May, 2009 as is sought to be done by the petitioners. It is contended that such an interpretation would be against the language of the Section and intention of the legislature. Further, the respondents contend that the Act is not ultra vires and the Competitive Commission has a right to investigate and enquire into any agreement which may have been entered prior to coming into force of the Competition Act. It is also contended that any agreement which is sought to be enforced after coming into force of the Act, could and would fall within the scope of the Act. 5. We have heard the learned counsel for the petitioners and the respondents. W.P.No.1785.09 9 6. A few undisputed facts may be summarized as follows - The petitioners and Jet Airways entered into an alliance with an objective to rationalise the rates and provide improved standard of service of wider choice to the customers in the month of October, 2008. The M.R.T.P. Commission had taken cognizance of the agreement. It, however, did not take any action since it found that alliance had not come through. It, however, left it open for the Director General to investigate, if necessary, on further developments. This order was passed on 4th September, 2009. The Competition Act, 2002 repealing the M.R.T.P. Act came into effect on 20th May, 2009. However, the operation of Section 66 was kept in abeyance for two years, as a result of which, M.R.T.P. Commission could continue to exercise the jurisdiction till the expiry of two years from 20th May, 2009. It appears, however, that Legislature amended the Act with regard to Section 66 proviso and substituted the words “after the expiry of two years referred to in the proviso to sub-section 1” by words “on the commencement of the Competition Act, 2009”. This Gazette of India shows that the W.P.No.1785.09 10 amendment came into effect on 14th October, 2009. It is, therefore, apparent that M.R.T.P. Commission ceases to have existence from 14th October, 2009. The Competition Commission has passed an order on 4/8/2009 directing the Director General to investigate into the information given by respondent no.3. The main challenge is to this order dated 4/8/2009. 7. The said order dated 4/8/2009 (Exh.B) reads as follows - COMPETITION COMMISSION OF INDIA. Case No.4/2009 dated 4.8.2009. Filed by : Mr.M.P.Mehrotra, C-561, Defence Colony, New Delhi – 110024. Against : 1) Jet Airways (India) Ltd. S.M.Centre, Andheri-Kurla Road, Andheri (East), Mumbai – 400059 and (ii) Kingfisher Airlines Ltd.12th Floor,UB Tower, UB City, NO, 24,Vutal Mallya Road, Bangalore – 560001. This information has been filed by Sh.M.P.Mehrotra in his individual capacity through his Advocate Shri Rupin Pahwa U/s 19(1) of the Competition Act, 2002. In the application, it is stated that the opponents namely Jet Airways (India) Ltd. and Kingfisher Airlines Ltd. have W.P.No.1785.09 11 entered into anti competitive agreement by way of code sharing, joint fuel management, common ground handling, joint network rationalization etc. It is also stated that these Airlines are controlling major share of market collectively and by abusing their dominant position, they are adversely affecting the competition in the market. The Informant has claimed to be a consumer of products and services provided by Jet Airways and Kingfisher Airlines and has alleged that the interest of the consumer like him is affected because of cartelized behaviour of these Airlines which are acting in monopolistic manner to the disadvantage of consumers and are abusing their dominant position which is also causing appreciable adverse effect on fair competition in India. It is alleged by the informant that the two airlines mentioned above are acting in concert to fix prices and limiting/controlling supply through route rationalization in violation of Sections 3 and 4 of the Competition Act. In the application the Informant has prayed for instituting an enquiry against opponents Airlines in view of the provisions of Section 19(1)(a) of the W.P.No.1785.09 12 Competition Act and also to direct the opponent to discontinue and not to reenter in such cartel like agreements. A prayer for passing an exparte ad interim order U/s 33 of the act for directing Jet Airways and Kingfisher Airlines to immediately cease and desist from acting in a cartel like manner has also been made in the application. The application was received on 26.7.2009 and was placed in the meeting of the Commission on 4.8.2009 by the Secretary. The Commission considered this information in its meeting dated 4.8.2009. After considering the entire material on record and relevant facts and circumstances relating to this matter which are brought to the notice of the Commission in the meeting, the Commission is of the opinion that there exists a prima facie case and hence the matter should be referred to the Director General for conducting enquiry into it. The Commission, therefore, directs that a reference be made to the Director General to cause an investigation to be made into this matter and to submit his report within 45 days of the receipt of the order of the Commission. W.P.No.1785.09 13 The Commission, therefore, directs the Secretary to convey these directions to the office of the Director General, accordingly. The Secretary shall transmit the information along with entire material to the Office of the Director General at the earliest. So far as prayer for passing ad-interim order is concerned, the matter shall be considered separately in the next meeting of Commission. The Informant may be informed accordingly.” With this, we turn to the submission made by Shri Seervai, the learned senior counsel for the petitioners, who mainly urged the following points:- (1) The Competition Act cannot have retrospective effect since it contains a provision to punish and convict a person. (2) since the agreement was valid when entered into, it could not be rendered invalid applying the analogy of Article 20 of the Constitution of India. (3) The M.R.T.P. Commission had taken cognizance of the alliance and had decided not to take any action and therefore, for W.P.No.1785.09 14 the same act second action would violate the provision of Article 21 of the Constitution of India. (4) The Competition Commission has no jurisdiction to go into constitutional validity of the Act, and (5) since the Commission has not determined the relevant market first, it cannot take action under Sections 3 and 4 of the Act against the petitioners. 8. Shri Seervai, the learned Senior Counsel, submits that the very wording of Section 3 of the Act would make it clear that the Act is prospective in nature. He submits that even a plain reading of the provisions would go to show that. He contends that the legislature in its wisdom has not added any words in the section to say that it would affect the agreement already entered into. He submits that if it wanted to bring the agreement, prior to coming into force of the Act, into its sweep, it would have and could have said so in very many words. Section 3 of the Act reads as follows - W.P.No.1785.09 15 3.Anti-competitive agreements- No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. (2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. The Act nowhere declares the agreement already entered into as void. If the Section is read, it says that after coming into force of the Act, no person shall enter into an agreement in contravention of the provisions of the Act and if entered into, same shall be void. This, to our mind, at the most, would mean that the Act does not render the agreement entered into, prior to coming into force of the Act, void ab initio. Had the Act been retrospective in operation, it would render the agreement void ab initio. The agreement prior to coming into force of the new Act was, therefore, certainly valid, for it was not in breach of any law or affected any law then existing. The question here is whether this agreement, which was valid until W.P.No.1785.09 16 coming into force of the Act, would continue to be so valid even after the operation of the law. The parties as on today certainly propose to act upon that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and cannot be questioned. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy. We would say that the Act could have been treated as operating retrospectively, had the act rendered the agreement void ab initio and would render anything done pursuant to it as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and subsisting even after coming into force of the Act, which prohibits an agreement of such nature, such an agreement cannot be said to be valid from the date of the coming into force of the Act. If the law cannot be applied to the existing agreement, W.P.No.1785.09 17 the very purpose of the implementation of the public policy would be defeated. Any and every person may set up an agreement said to be entered into prior to the coming into force of the Act and then claim immunity from the application of the Act. Such thing would be absurd, illogical and illegal. The moment the Act comes into force, it brings into its sweep all existing agreements. This can be explained further by quoting the following example:- “A and B enter into agreement of sale of land on 2/1/2008. It is agreed between them that sale-deed would be executed on or before 2/1/2009. Meanwhile, i.e. on 10/8/2008, the Government decides to impose a ban on transfer of the land and declares that any such transfer, if effected, shall be void. The question is, could the parties say that since their agreement being prior to Government putting a ban on transfer, their case is not covered by the ban? The answer has to be in the negative, as on the day the contract is sought to be completed, it is prohibited.” Similar would be the result in the instant case. W.P.No.1785.09 18 9. Shri Seervai contended before us that the Benami Transactions (Prohibition Act) which contains a similar provision has been held by the Supreme Court to be prospective in nature. He cites to us a decision reported in (1995)2 SCC 630 (R.Rajagopal Reddy (dead) by Lrs. And anr. ..vs.. Padmini Chandrasekharan (dead) by L.Rs.). The Supreme Court has held in the said decision that the Act is not retrospective. We, however, find that even the Benami Transaction Act operates in a similar manner as that of Competition Act, 2002. The Supreme court has held that all transactions in respect of which the suits were pending on the date the Act came into force were saved. This is because the transactions were valid since the Act had not come into force and the Act did not specifically render them void. The Benami Act prohibits the benami transaction as from the date of commencement of the Act. It not only prohibits in present such type of Benami transaction but also prohibits a real owner from instituting a suit after coming into force of the Act, claiming a declaration that he is the real owner of the property. W.P.No.1785.09 19 Therefore, what has been saved is suits instituted prior to coming into force of the Act. Naturally, it prohibits a person from instituting a suit, after the Act comes into force, in respect of the transaction prior to the Act. We may usefully quote here paragraph no.11 of the judgment in Rajgopal's case. These observations to our mind set at rest the controversy. 11.Before we deal with these six considerations which weighed with the Division Bench for taking the view that Section 4 will apply retrospectively in the sense that it will get telescoped into all pending proceedings, howsoever earlier they might have been filed, if they were pending at different stages in the hierarchy of the proceedings even up to this Court, when Section 4 came into operation, it would be apposite to recapitulate the salient feature of the Act. As seen earlier, the preamble of the Act itself states that it is an Act to prohibit benami transactions and the right to recover property held benami, for matters connected therewith or incidental thereto. Thus it was enacted to efface the then existing right of the real owners of properties held by other benami. Such an Act was not given any retrospective effect by the legislature. Even when we come to W.P.No.1785.09 20 Section 4, it is easy to visualise that sub-section (1) of Section 4 states that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other shall lie by or on behalf of a person claiming to be the real owner of such property. As per Section 4(1) no such suit shall thenceforth lie to recover the possession of the property held benami by the defendant. Plaintiff's right to that effect is sought to be taken away and any suit to enforce such a right after coming into operation of Section 4(1) that is 19/5/1988, shall not lie. The legislature in its wisdom has nowhere provided in Section 4(1) that no such suit, claim or action pending on the date when Section 4 came into force shall not be proceeded with and shall stand abated. On the contrary, clear legislative intention is seen from the words “no such claim, suit or action shall lie”, meaning thereby no such suit, claim or action shall be permitted to be filed or entertained nor admitted to the portals of any court for seeking such a relief after coming into force of Section 4(1). In Collins English Dictionary, 1979 Edition as reprinted subsequently, the word 'lie' has been defined in connection with suits and proceedings. At page 848 of W.P.No.1785.09 21 the Dictionary while dealing with Topic No.9 under the definition of term 'lie' it is stated as under: “For an action, claim appeal etc. to subsist; be maintainable or admissible.” The word 'lie' in connection with the suit, claim or action is not defined by the Act. If we go by the aforesaid dictionary meaning it would mean that such suit, claim or action to get any property declared benami will not be admitted on behalf of such plaintiff or applicant against the defendant concerned in whose name the property is held on and from the date on which this prohibition against entertaining of such suits comes into force. With respect, the view taken that Section 4(1) would apply even to such pending suits which were already filed and entertained prior to the date when the section came into force and which has the effect of destroying the then existing right of plaintiff in connection with the suit property cannot be sustained in the face of the clear language of Section 4(1). It has to be visualised that the legislature in its wisdom has not expressly made Section 4 retrospective. W.P.No.1785.09 22 Then to imply by necessary implication that Section 4 would have retrospective effect and would cover pending litigations filed prior to coming into force of the section would amount to taking a view which would run counter to the legislative scheme and intent projected by various provisions of the Act to which we have referred earlier. It is, however, true as held by the Division Bench that on the express language of Section 4(1) any right inhering in the real owner in respect of any property held benami would get effaced once Section 4(1) operated, even if such transaction had been entered into prior to the coming into operation of Section 4(1), and hence after Section 4(1)