Competition Commission Of India vs Steel Authority Of India & Anr

In India, a High Level Committee on Competition Policy and Law was constituted to examine its various aspects and make suggestions keeping in view the competition policy of India. This Committee made recommendations and submitted its report on 22nd of May, 2002. After completion of the consultation process, the Competition Act, 2002 (for short, the `Act') as Act 12 of 2003, dated 12th December, 2003, was enacted. As per the statement of objects and reasons, this enactment is India's response to the opening up of its economy, removing controls and resorting to liberalization. The natural corollary of this is that the Indian market should be geared to face competition from within the country and outside. The Bill sought to ensure fair competition in India by prohibiting trade practices which cause appreciable adverse effect on the competition in market within India and for this purpose establishment of a quasi judicial body was considered essential. The other object was to curb the negative aspects of competition through such a body namely, the `Competition Commission of India' (for short, the `Commission') which has the power to perform different kinds of functions, including passing of interim orders and even awarding compensation and imposing penalty. The Director General appointed under Section 16(1) of the Act is a specialized investigating wing of the Commission. In short, the establishment of the Commission and enactment of the Act 4 was aimed at preventing practices having adverse effect on competition, to protect the interest of the consumer and to ensure fair trade carried out by other participants in the market in India and for matters connected therewith or incidental thereto.

Jindal Steel & Powers Ltd. (for short the `informant') invoked the provisions of Section 19 read with Section 26(1) of the Act by providing information to the Commission alleging that M/s. Steel Authority of India Ltd. (for short `SAIL') had, inter alia, entered into an exclusive supply agreement with Indian Railways for supply of rails. The SAIL, thus, was alleged to have abused its dominant position in the market and deprived others of fair competition and therefore, acted contrary to Section 3(4) (Anti-competitive Agreements) and Section 4(1) (Abuse of dominant position) of the Act. This information was registered by the Commission and was considered in its meeting held on 27th October, 2008 on which date the matter was deferred at the request of the informant for furnishing additional information. During the course of hearing, it was also brought to the notice of the Commission that a petition being Writ Petition (C) No.8531 of 2009, filed by the informant against the Ministry 7 of Railways, was also pending in the High Court of Delhi at New Delhi. Vide order dated 10th November, 2009 the Commission directed the informant to file an affidavit with respect to the information furnished by it. The Commission also directed SAIL to submit its comments in respect of the information received by the Commission within two weeks from the date of the said meeting and the matter was adjourned till 8 th December, 2009. On 19th November, 2009 a notice was issued to SAIL enclosing all information submitted by the informant. When the matter was taken up for consideration by the Commission on 8th December, 2009, the Commission took on record the affidavit filed by the informant on 30th November, 2009 in terms of the earlier order of the Commission, but SAIL requested extension of six weeks time to file its comments. Finding no justification in the request of the SAIL, the Commission, vide its order dated 8th December, 2009, declined the prayer for extension of time. In this order, it also formed the opinion that prima facie case existed against SAIL, and resultantly, directed the Director General, appointed under Section 16(1) of the Act, to make investigation into the matter in terms of Section 26(1) of the Act. It also granted liberty to SAIL to file its views and comments before the Director General during the course of investigation. Despite these orders, SAIL filed an interim reply before the Commission along with an application that it may be heard before any interim order is passed by the Commission in the proceedings. On 22nd December, 2009 the Commission only reiterated 8 its earlier directions made to the Director General for investigation and granted liberty to SAIL to file its reply before the Director General. The correctness of the directions contained in the order dated 8th December, 2009 was challenged by SAIL before the Competition Appellate Tribunal (for short, the `Tribunal'). The Commission filed an application on 28th January, 2010 before the Tribunal seeking impleadment in the appeal filed by SAIL. It also filed an application for vacation of interim orders which had been issued by the Tribunal on 11th January, 2010, staying further proceedings before the Director General in furtherance of the directions of the Commission dated 8th December, 2009. It will be useful to refer to the order passed by the Commission on 8th December, 2009 at this stage itself which reads as under:

2. The case was earlier considered by the Commission in its meetings held on 4.11.2009 and 10.11.2009. In the meeting of the Commission held on 10.11.2009, Mr. Suman Kr. Dey, VP and Head Legal and Mrs. Pallavi Shroff, Advocate (along with their fellow advocates) appeared before the Commission on behalf of the informant and made detailed admissions. As per decision taken during the meeting held on 10.11.2009, informant/his counsel was directed to file an affidavit regarding the current status of the writ petition filed in the Delhi high Court, particular indicating its admission or otherwise and as to whether any other order has been passed by the Hon'ble High Court, in the matter so far. SAIL was also requested to furnish their views/comments in the matter within 2 weeks time.

3. In the meeting of the Commission held on 08.12.2009, the Commission took on record the affidavit filed by the informant on 30.11.2009 regarding the current status of the writ petition filed in the Delhi High Court and certified copies of all the orders passed by the Hon'ble High Court, in the matter, till date. However, SAIL did not file its 9 reply within the stipulated time and requested to allow extension of time from 3.12.2009 for a further period of six weeks. The Commission considered the above request of SAIL. However, the Commission did not allow any further extension.

5. Secretary was accordingly directed to refer the case to DG for investigation and submission of the report within 45 days of the receipt of orders of the Commission. SAIL informed that they may furnish their views/comments in the matter to the DG."

As already noticed, the legality of this order was questioned before the Tribunal by SAIL on one hand, while, on the other hand the Commission had pressed its application for impleadment. In the application for impleadment it was averred by the Commission that it is a necessary and proper party for adjudication of the matter before the Tribunal and therefore, it should be impleaded as a party and be heard in accordance with law. Emphasis was also placed on Section 18 of the Act to contend that powers, functions and duties of the Commission were such that it would always be appropriate for the Commission to be impleaded as a party in appeals filed before the Tribunal. It was also averred in the application that intervention of the Commission at the appellate proceedings would not prejudice anybody. The very maintainability of the appeal before the Tribunal was also questioned by 10 the Commission on the ground that the order under appeal before the Tribunal was a direction simpliciter to conduct investigation and thus was not an order appealable within the meaning of Section 53A of the Act. The Tribunal in its order dated 15th February, 2010, inter alia, but significantly held as under:

Having referred to the background leading to the enactment of competition law in India and the procedure that the Commission is expected to follow while deciding the matters before it and facts of the case, now it will be appropriate for this Court to refer to the submissions made in light of the facts of this case. According to the Commission (the appellant herein), the directions passed in the order dated 8th December, 2009 under Section 26(1) of the Act are not appealable and further there is no requirement in law to afford an opportunity of hearing to the parties at the stage of formulating an opinion as to the existence of a prima facie case. It is also the contention of the Commission that in an appeal before the Tribunal it is the necessary party and that the Commission is not expected to state reasons for forming an opinion at the prima facie stage.

On the contrary, according to SAIL (the respondent herein), the principles of natural justice have been violated by the Commission while declining to grant extension of time to file its reply and that the direction in referring the matter to Director General was passed in undue haste. The informant placed reliance upon Regulation 30(2) of the 15 Regulations which empowers the Commission to pass such orders as it may deem fit on the basis of the facts available, where a party refuses to assist or otherwise does not provide necessary information within the stipulated time. Further, according to the informant there was no valid reason submitted by the SAIL which would justify grant of extension and as such the order passed by the Commission on merits was not liable to be interfered.

3) The Commission, in cases where the inquiry has been initiated by the Commission suo moto, shall be a necessary party and in all other cases the Commission shall be a proper party in the proceedings before the Competition Tribunal. The presence of the Commission before the Tribunal would help in complete adjudication 19 and effective and expeditious disposal of matters. Being an expert body, its views would be of appropriate assistance to the Tribunal. Thus, the Commission in the proceedings before the Tribunal would be a necessary or a proper party, as the case may be.

The application for leave to appeal is allowed. Civil appeal is admitted. The decision of the Government of India to liberalize its economy with the intention of removing controls persuaded the Indian Parliament to enact laws providing for checks and balances in the free economy. The laws were required to be enacted, primarily, for the objective of taking measures to avoid anti-competitive agreements and abuse of dominance as well as to regulate mergers and takeovers which result in distortion of the market. The earlier Monopolies and Restrictive Trade Practices Act, 1969 was not only found to be inadequate but also obsolete in certain respects, particularly, in the light of international economic developments relating to competition law. Most countries in 1 the world have enacted competition laws to protect their free market economies- an economic system in which the allocation of resources is determined solely by supply and demand. The rationale of free market economy is that the competitive offers of different suppliers allow the buyers to make the best purchase. The motivation of each participant in a free market economy is to maximize self-interest but the result is favourable to society. As Adam Smith observed: "there is an invisible hand at work to take care of this".

In the case in hand, the provisions of Section 33 are specific and certain criteria have been specified therein, which need to be satisfied by the Commission, before it passes an ex parte ad interim order. These three ingredients we have already spelt out above and at the cost of repetition we may notice that there has to be application of mind of higher degree and definite reasons having nexus to the necessity for passing such an order need be stated. Further, it is required that the case of the informant-applicant should also be stronger than a mere prima facie case. Once these ingredients are satisfied and where the Commission deems it necessary, it can pass such an order without giving notice to the other party. The scope of this power is limited and is expected to be 74 exercised in appropriate circumstances. These provisions can hardly be invoked in each and every case except in a reasoned manner. Wherever, the applicant is able to satisfy the Commission that from the information received and the documents in support thereof, or even from the report submitted by the Director General, a strong case is made out of contravention of the specified provisions relating to anti-competitive agreement or an abuse of dominant position and it is in the interest of free market and trade that injunctive orders are called for, the Commission, in its discretion, may pass such order ex parte or even after issuing notice to the other side.

B) All proceedings, including investigation and inquiry should be completed by the Commission/Director General most expeditiously and while ensuring that the time taken in completion of such proceedings does not adversely affect any of the parties as well as the open market in purposeful implementation of the provisions of the Act.

C) Wherever during the course of inquiry the Commission exercises its jurisdiction to pass interim orders, it should pass a final order in that behalf as expeditiously as possible and in any case not later than 60 days.

In our considered view the scheme and essence of the Act and the Regulations are clearly suggestive of speedy and expeditious disposal of the matters. Thus, it will be desirable that the Competent Authority frames Regulations providing definite time frame for completion of investigation, inquiry and final disposal of the matters pending before the Commission. Till such Regulations are framed, the period specified by us supra shall remain in force and we expect all the concerned authorities to adhere to the period specified.

Resultantly, this appeal is partially allowed. The order dated 15th February, 2010 passed by the Tribunal is modified to the above extent. The Commission shall proceed with the case in accordance with law and the principles enunciated supra.

In the circumstances there will be no order as to costs. 83 .......................................CJI [ S.H. KAPADIA ] ........................................J. [ K.S. RADHAKRISHNAN ] ....

.....................................J. [ SWATANTER KUMAR ] New Delhi September 9, 2010.