COMPETITION COMMISSION OF INDIA versus STATE OF MIZORAM & ORS.
[2022] 13 S.C.R. 876, Supreme Court of India, 2022
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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[2022] 13 S.C.R. 876
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COMPETITION COMMISSION OF INDIA
v.
STATE OF MIZORAM & ORS.
(Civil Appeal Nos. 10820-10822 of 2014)
JANUARY 19, 2022
[SANJAY KISHAN KAUL AND M. M. SUNDRESH, JJ.]
Competition Act, 2002 – ss. 2(i), 2(u), 3, 4, 19(1)(a) & 26 –
Lotteries (Regulation) Act, 1998 – Mizoram Lotteries (Regulation)
Rules, 2011 – Jurisdiction of Competition Commission of India –
State of Mizoram issued an Invitation for Expression of Interest
(EOI), inviting bids for appointment of lotteries distributors and
selling agents for State lotteries – In pursuance of EOI, bids were
received and four companies were selected as distributors –
Respondent No.4 made a complaint to the CCI, seeking investigation
in respect of State lottery – Respondent alleged that the bidders
had cartelised and entered into a collusive agreement that had an
appreciable adverse effect on competition in the lottery business –
CCI and Director General (DG) found prima facie evidence of
cartelization and bid rigging by the bidders – However, CCI opined
that no prima facie case was made out against the State and rejected
the complaint – DG did make some observations against Director,
IF&SL and the State of Mizoram to the effect that they ought to
have been more vigilant in stopping unfair trade practices – High
Court in writ petition filed by the State, held that lottery business
being in the nature of res extra commercium could not be covered
by the
Competition Act – Consequently CCI did not have jurisdiction
to entertain the complaint – On appeal, held: State, under a
misconception, approached the High Court, possibly in an
endeavour to defend one of its officers, respondent No. 2 whose
conduct has not been very favourably commented on by the DG –
Lotteries may be a regulated commodity and may even be res extra
commercium – That would not takeaway the aspect of something
which is anti-competition in the context of the business related to
lotteries – The lottery business can continue to be regulated by the
Regulation Act, however, if in the tendering process there is an
element of anti-competition which would require investigation by
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the CCI, that cannot be prevented under the pretext of the lottery
business being res extra commercium, more so when the State
Government decides to deal in lotteries – There was really no need
for the High Court to proceed in the manner and in the direction it
sought to proceed – The correct approach, more so once the statement
was made on behalf of the CCI, would have been to close the
proceedings filed by the State Government and let the private parties
face the ultimate decision of the CCI.
Allowing the appeal, the Court
HELD: 1. The complaint of respondent No.4 may have been
also under Section 4 of the Competition Act but it had not even
referred that aspect to the DG and had decided not to proceed
against the State. That should have been the end of the matter so
far as the State is concerned. Yet the State, under a misconception,
approached the High Court, possibly in an endeavour to defend
one of its officers, respondent No. 2, whose conduct has not been
very favourably commented on by the DG. Even if the State felt
that these comments of the DG were not sustainable, such an
aspect could have been pleaded with the CCI in pursuance of its
notice and possibly the matter would have been closed atthat
stage. In fact, the CCI had opined, both before and after the filing
of the writ petition, that it was not proceeding against respondent
No.1/State under Section 4 of the Competition Act. The aforesaid
gave an opportunity to respondent Nos. 5 & 6 also to
approach
the Court and interdict the proceedings which ought to have been
concluded a long time ago. It would, in our view, have been
beneficial even to the State to have come to a conclusion one way
or the other. The interdict post the investigation report by the
DG and prohibiting the CCI from carrying out its mandate under
the Competition Act is unsustainable. The concern was limited
to the role assigned to the CCI under the Competition Act, and
in the context of the EoI was limited to examining any perceived
bid rigging in the tendering process for appointment of selling
agents and distributors for the lottery business. There was no
conflict in the interplay of the two Acts that even needed
reconciliation or prohibition against either one, as the limited
scrutiny was to examine the mandate of Section 3(1) read with
Section 3(3) of the Competition Act. Lotteries may be a regulated
COMPETITION COMMISSION OF INDIA v. STATE OF
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commodity and may even be res extra commercium. That would
not takeaway the aspect of something which is anti- competition
in the context of the business related to lotteries. [Paras 37 &
38][894-F-G; 895-A-B, D-E]
2. This Court take note of the expansive definition of
‘Service’ under Section 2(u) of the Competition Act. It means
“service of any description”, which is to be made available to
potential users. The purchaser of a lottery ticket is a potential
user and a service is being made available by the selling agents
in the context of the Competition Act. Suffice for us to say the
inclusive mentioning does not inhibit the larger expansive
definition. The lottery business can continue to be regulated by
the Regulation Act. However, if in the tendering process there is
an element of anti- competition which would require investigation
by the CCI, that cannot be prevented under the pretext of the
lottery business being res extra commercium, more so when the
State Government decides to deal in lotteries. The intervention
by the High Court was extremely premature. It ought to have
waited for the CCI to come to a conclusion but on the other hand
what has happened is that the CCI proceedings have been brought
to a standstill while the High Court opined on the basis of some
aspects which may or may not arise. [Paras 39 & 40][895-F-H;
896-A-B]
3. There was really no need for the High Court to proceed
in the manner and in
the direction it sought to proceed. The
correct approach, more so once the statement was made on behalf
of the CCI, would have been to close the proceedings filed by
the State Government and let the private parties face the ultimate
decision of the CCI. If they were aggrieved by any adverse decision
of the CCI they were entitled to avail of the appellate remedy
under Section 53B of the Competition Act. The complaint having
been made by respondent No.4 under Section 19 of the
Competition Act, which provides that the Commission “may”
inquire into certain agreements and dominant position of
enterprise as envisaged under sub-section (1) of Section 3 and
sub- section (1) of Section 4 of the Competition Act. The CCI
found out a prima facie case for investigation by the DG under
Section 3(1) of the Competition Act, the DG opined adversely,
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and the CCI issued notice giving an opportunity to the affected
parties to place their stand before it. This process ought to have
been permitted to conclude with the right available to the affected
parties to avail of the appellate remedy under Section 53B of the
Competition Act. [Paras 41 & 42][896-B-E]
B.R. Enterprises v. State of UP (1999) 9 SCC 700 :
[1999] 2 SCR 1111; Sunrise Associates v. Government
of NCT of Delhi). (2006) 5 SCC 603 : [2006] 1 Suppl.
SCR 421; Union of India v. Martin Lotter Agencies Ltd.
(2009) 12 SCC 209 : [2009] 7 SCR 946; CCI v. Bharti
Airtel (2019) 2 SCC 521 : [2018] 14 SCR 489; Black
Diamond Beverages 19 v. Commercial Tax Officer
(1998) 1 SCC 458 : [1997] 4 Suppl. SCR 133; State of
Punjab v. Devans Modern Breweries. (2004) 11 SCC
26 : [2003] 5 Suppl. SCR 930; Competition Commission
of India v. Steel Authority of India & Anr. (2010) 10
SCC 744 : [2010] 11 SCR 112; Sunrise Associates v.
Government of NCT of Delhi (2006) 5 SCC 603 : [2006]
1 Suppl. SCR 421; R.D. Goyal & Anr. v. Reliance
Industries Ltd.10) (2003) 1 SCC 81 : [2002] 4 Suppl.
SCR 231 – referred to.
Case Law Reference
[1999] 2 SCR 1111
referred to
Para 19
[2006] 1 Suppl. SCR 421
referred to
Para 19
[2009] 7 SCR 946
referred to
Para 19
[2018] 14 SCR 489
referred to
Para 22
[1997] 4 Suppl. SCR 133
referred to
Para24
[2003] 5 Suppl. SCR 930
referred to
Para 25
[2010] 11 SCR 112
referred to
Para 26
[2006] 1 Suppl. SCR 421
referred to
Para 32
[2002] 4 Suppl. SCR 231
referred to
Para 32
COMPETITION COMMISSION OF INDIA v. STATE OF
MIZORAM & ORS.
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10820-
10822 of 2014.
From the Judgment and Order dated 16.08.2014 of the High Court
of Gauhati, Aizawl Bench, Aizawl in W.P. (C) Nos.24, 76 and 90 of
2013.
With
Civil Appeal No. 1797 of 2015.
Rajshekhar Rao, Bijendra Chahar, Ritin Ray, Sr. Advs., Arjun
Krishnan, Ms. Khushboo Mittal, Sumit Srivastava, Ms. Mansi Sood,
Shourya Bari, Rajesh Kumar, Raj Kumar Prasad, Pratyush Nandan,
Vinod Kumar, Siddhesh Kotwal, Ms. Ara Upadhyay, Ms. Maniya Hasija,
Ms. Pragya Barsaiyan, Akash Singh, Nirnimesh Dube, Arjun Garg, Aman
Shukla, Ms. Sagun Srivastava, M/s Parekh & Co., Kedar Nath Tripathy,
Advs. for the appearing parties.
The Judgment of the Court was delivered by
SANJAY KISHAN KAUL, J.
Facts:
1. A complaint received by the Competition Commission of India
(for short ‘appellant/CCI’) from respondent No.4 seeking investigation
under the Competition Act, 2002 (hereinafter referred to as the
‘Competition Act’) in respect of State Lottery run by the State of Mizoram
(respondent No.1) has given rise to the present dispute. The jurisdiction
of CCI to inquire into allegations of bid rigging, collusive bidding, and
cartelisation in the tender process for appointment of selling agents and
distributors for lotteries organised in the State of Mizoram has been
challenged in the present proceedings by the successful bidders, and to
a much lesser extent, by the State of Mizoram.
2. The State of
Mizoram issued an Invitation for Expression of
Interest (for short ‘EoI’) through respondent No.2, the Director,
Institutional Finance and State Lottery (IF&SL) on 20.12.2011 inviting
bids for the appointment of lottery distributors and selling agents for
state lotteries to be organised by the Government of Mizoram in terms
of the Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referred
to as the ‘Regulation Rules’) framed under the Lotteries (Regulation)
Act, 1998 (hereinafter referred to as the ‘Regulation Act’). The EoI
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was for appointment of lottery distributors/selling agents to organise,
promote, conduct, and market the Mizoram State Lottery through both
conventional paper type and online system. The EoI specified that the
minimum rate fixed by the Government of India is Rs.5 lakh per draw
for Bumper and Rs.10,000 per draw for others – bids less than these
rates would be summarily rejected. In pursuance of the EoI, five bids
were received of which four were accepted. The accepted bids quoted
identical rates as per the following table:
These four companies/partnerships were selected as distributors
to operate the lotteries as per the Regulation Rules and the Regulation
Act. In accordance with the EoI, selected distributors/selling agents were
inter alia required to furnish Rs. 5 crore each for paper and online
lottery as security, a sum of Rs.1 crore each as advance payment of the
sale proceeds, and a sum of Rs.1 crore each towards the prize pool.
3. Respondent No.4 made a complaint to the CCI on 16.05.2012
under Sections 3 & 4 read with Section 19(1)(a) of the Competition Act
and the complaint was registered as Case No. 24 of 2012. In order to
complete the array of parties defined as per Civil Appeal No.10820/
2014, we may note that respondent No. 3 is the Director General of CCI
and both respondent Nos. 4 & 5 are private companies while respondent
No. 6 is a partnership firm.
4. The substratum of the complaint by respondent No. 4 was that
identical offers of
Rs.10,000 per draw were made in all four bids (one
for paper and three for online) and a single bid of Rs.5 lakh per draw
was made for the Bumper draw. These amounts were the minimum
rates fixed under the EoI. The allegation made by respondent No. 4 was
that the bidders had cartelised and entered into an agreement that had
an appreciable adverse effect on competition in the lottery business in
Mizoram. There was bid rigging and a collusive bidding process which
COMPETITION COMMISSION OF INDIA v. STATE OF
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violated Section 3(1) read with Section 3(3) of the Competition Act, and
also caused grave financial loss to the State of Mizoram.
5. Respondent No. 4 also alleged that the State of Mizoram abused
its dominant position as administrator of State lotteries, by requiring
distributors to furnish exorbitant sums of money towards security, advance
payment, and prize pool even before the lotteries were held. This was
alleged to be unfair, discriminatory and illegal and effectively restricted
the supply of service of lotteries. The consequent allegation against the
State was that it violated Section 4 of the Competition Act. The prayer
made by respondent No. 4 was that the EoI be quashed and set aside,
respondent No.1 be restrained from abusing their dominant position, a
restraint be passed from awarding the tender to the selected bidders,
and selected bidders be banned from carrying out business in the State
of Mizoram.
The Legal Position:
6. In order to appreciate the contours of the complaint, it may be
appropriate to deal with some of the provisions of the Competition Act.
The objective of the Competition Act is set out in the Preamble itself,
i.e., to establish a Commission to prevent practices having adverse effect
on competition, to promote and sustain competition in markets, to protect
the interests of consumers, and to ensure freedom of trade carried on by
other participants in markets, in India, and for matters
connected therewith
or incidental thereto. Chapter II of the Competition Act prohibits certain
agreements, abuse of dominant position and regulation of combinations.
The prohibition of anti-competitive agreements is set out in Section 3.
The relevant provisions read as under:
“CHAPTER II
PROHIBITION OF CERTAIN AGREEMENTS, ABUSE
OF DOMINANT POSITION AND REGULATION OF
COMBINATIONS
Prohibition of agreements
3. Anti-competitive agreements (1) 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.
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(2) Any agreement entered into in contravention of the provisions
contained in subsection (1) shall be void.
(3) Any agreement entered into between enterprises or associations
of enterprises or persons or associations of persons or between
any person and enterprise or practice carried on, or decision taken
by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or
provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) shares the market or source of production or provision of
services by way of allocation of geographical area of market,
or type of goods or services, or number of customers in the
market or any other similar way;
(d)  directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on
competition:
Provided that nothing contained in this sub-section shall apply to
any agreement entered into by way of joint ventures if such
agreement increases efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services.
Explanation.— For the purposes of this sub-section, “bid rigging”
means any agreement, between enterprises or persons referred
to in sub-section (3) engaged in identical or similar production or
trading of goods
or provision of services, which has the effect of
eliminating or reducing competition for bids or adversely affecting
or manipulating the process for bidding.
[…]”
Under the same Chapter, Section 4 prohibits the abuse of dominant
position. The relevant portion is extracted hereunder:
“4. Abuse of dominant position. – [(1) No enterprise or group
shall abuse its dominant position.]
COMPETITION COMMISSION OF INDIA v. STATE OF
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(2) There shall be an abuse of dominant position 4 [under sub-
section (1), if an enterprise or a group],—
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of
goods or service.
[…]”
7. Chapter III deals with provisions relating to establishment,
Composition, etc. of the CCI while Chapter IV set outs the Duties,
Powers and Functions of CCI. Chapter V sets out the Duties of the
Director-General. Penalties are provided in Chapter VI. Chapter VIIIA
refers to the Establishment of the Appellate Tribunal.
8. Section 26 of the Competition Act provides for the procedure
for an inquiry under Section 19, which deals with inquiries into certain
agreements and dominant position of enterprises. The relevant provisions
of Section 26 are extracted as under:
“[26. Procedure for inquiry under section 19. – (1) On receipt
of a reference from the Central Government or a State
Government or a statutory authority or on its own knowledge or
information received under section 19, if the Commission is of the
opinion that there exists a prima facie case, it shall direct the
Director-General to cause an investigation to be made into the
matter:
Provided that if the subject-matter of an information received is,
in the opinion of the Commission, substantially the same as or has
been covered by any previous information
received, then the new
information may be clubbed with the previous information.
(2) Where on receipt of a reference from the Central Government
or a State Government or a statutory authority or information
received under section 19, the Commission is of the opinion that
there exists no prima facie case, it shall close the matter
forthwith and pass such orders as it deems fit and send a copy
of its order to the Central Government or the State Government
or the statutory authority or the parties concerned, as the case
may be.
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(3) The Director General shall, on receipt of direction under sub-
section (1), submit a report on his findings within such period as
may be specified by the Commission.
(4) The Commission may forward a copy of the report referred
to in sub-section (3) to the parties concerned:
[…]”
The Developments:
9. In pursuance of the complaint received from respondent No. 4,
the CCI exercised its powers under Section 26(1) of the Competition
Act, as it found prima facie evidence of cartelisation and bid rigging by
the bidders and gave three reasons for the same:
a.
Three bidders made identical bids of the minimum rate of
Rs.10,000/- per draw for online lotteries;
b.
Only one party made a bid for the paper lottery segment
and they quoted the minimum rate for the same.
c.
Only one party made a bid for the bumper draw and also
quoted the minimum rate for the same.
10. In the aforesaid circumstances, the CCI expressed a prima
facie view that there appears to be contravention of the provisions of
Section 3(1) read with Section 3(3) of the Competition Act by respondent
Nos. 5 & 6 and other successful bidders. Accordingly, the CCI required
the Director General (for short ‘DG’) to conduct an investigation into
the matter. However, the CCI opined that no prima facie case was
made out against respondent No.1/State of Mizoram as it could not be
considered as an ‘enterprise’ or a ‘group’ under the Competition Act.
Respondent No. 1’s role was to regulate and monitor the business
of
lotteries in the State of Mizoram in exercise of its powers and functions
under the Regulation Act and the Regulation Rules. It was, thus, opined
that they have every right to impose financial, technical and other
conditions in their bid documents as they deemed fit. The CCI, thus,
rejected the complaint of respondent No. 4 under Section 4 of the
Competition Act.
11. The DG in pursuance of the said order of the CCI, a report
dated 14.01.2013 was submitted on 17.01.2013 whereby it came to the
conclusion that respondent Nos. 5 & 6 along with M/s. Teesta Distributors
COMPETITION COMMISSION OF INDIA v. STATE OF
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and M/s. E-Cool Gaming Solutions (P) Ltd. had colluded, formed a cartel,
and indulged in bid rigging. Thus, they were in violation of the provisions
of Section 3(1) read with Section 3(3) of the Competition Act. However,
no order was passed against the State of Mizoram.
12. What is relevant to note is that the DG did make some
observations against respondent No.2 and the State of Mizoram to the
effect that they ought to have been more vigilant in stopping unfair trade
practices and their lapses raised suspicions of favouritism and collusion.
The bidding committee had received the complaint of respondent No. 4
on 18.05.2012 when the Committee recommended that the successful
bidders be appointed as selling agents. Thus, the DG opined that the
Committee allowed rigging to happen and respondent No.2 was also
instrumental in calling all four bidders together for the renegotiation of
bid prices on 22.05.2012. The DG, thus, opined that it was a case of
collusive bidding but the case against respondent No.1 under Section 4
of the Competition Act was dropped.
13. The aforesaid report was placed before the CCI in its ordinary
meeting on 12.02.2013 when it was decided to send copies of the report
to the parties so that they could file their objections/replies thereto. The
parties were instructed to file profit & loss accounts, balance sheets,
and turnover of their enterprise for the past three financial years along
with their
objections to the DG’s report and a date was fixed of 20.03.2013
for an oral hearing.
The Court Litigation:
14. We may note that surprisingly respondent No.1 filed a writ
petition, being WP(C) No.24/2013, in the Gauhati High Court, Aizwal
Bench challenging both the report of the DG and the CCI’s order dated
12.02.2013. The grievance of respondent No.1 was actually with the
adverse observations made by the DG in his report and the fact that the
CCI had forwarded the DG report to them despite observations that
respondent No. 4 had failed to establish a prima facie case under Section
4 of the Competition Act. We say ‘surprisingly’, because if at all, the
grievance could have been of respondent No.2 qua the observations
made, but could not have been of respondent No.1/State. That too
respondent No.2 could have filed a response and it was open to the CCI
to close the proceedings both against respondent Nos.1 & 2. In fact,
Section 4 proceedings against respondent No.1 were already closed.
The Gauhati High Court, however, chose to pass an interim order on
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18.03.2013 in the writ petition directing that no final order be passed by
the CCI. On the said order being passed, the CCI vide its order dated
11.06.2013, authorised its representative to inform the High Court that it
did not intend to pass an order against the State of Mizoram, and to pray
that the High Court’s injunction against passing a final order be lifted. In
any case, that ought to have put the matter to rest.
15. It, thus, does appear to us that the respondent No.1 lent its
shoulder to assist the other private parties and respondent No. 6 filed a
writ petition, being WP(C) No.76/2013, praying for quashing of the DG
report and all proceedings pending before the CCI. Respondent No. 6
sought to raise a plea that they had struck an agreement with respondent
No.1 on 22.07.2010 as per which they were formally assured of at least
25% of the total number of draws held per day once lotteries were
reopened. An agreement was struck to settle an amount of Rs.2.89
crore stated to be owed by respondent No.1 to respondent No. 6 and,
thus, it was pleaded that the very question of forming a cartel or indulging
in bid rigging did not arise. Respondent No. 5 also sought to take advantage
of the proceedings initiated by respondent No.1 and filed a writ petition,
being WP(C) No.90/2013 seeking similar relief. Among the pleas raised
by respondent No. 5 was that lotteries were not covered by the
Competition Act and, thus, the CCI did not have jurisdiction to conduct
an inquiry under Section 26(1) of the Competition Act.
16. The three writ petitions were taken up together and admitted
by the Gauhati High Court vide its order dated 29.10.2013 and the
operation of interim directions issued on 18.03.2013 were continued,
restraining the CCI from delivering the final order.
17. The CCI aggrieved by the same moved this Court against the
said interim direction dated 29.10.2013. Notice was issued in the SLP(C)
No. 4438-4441/2014 on 10.03.2014 and the High Court was permitted
to proceed with the matter in the mean time. The High Court, thus,
passed its final order in the three writ petitions on 16.08.2014, which
made those SLPs infructuous and were consequently dismissed as
withdrawn on 25.08.2014.
The Impugned Order:
18. The final order dated 16.08.2014 sought to be impugned in the
present proceedings shows that the merits of the case were not really
urged but the arguments were confined to the show cause notice issued
COMPETITION COMMISSION OF INDIA v. STATE OF
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by the CCI. Thus, what the High Court examined was whether the
Competition Act would be applicable entitling the CCI to entertain the
complaint/information given by respondent No. 4.
19. The High Court went into the question of the nature of the
business sought to be carried out, i.e., of lotteries. In this behalf relying
on the judgment of this Court in B.R. Enterprises v. State of UP1 it was
held that lotteries cannot be considered to be trade and commerce within
the meaning of Articles 301-303 of the Constitution of India. The High
Court also observed that the lottery tickets have no value in and of
themselves (Sunrise Associates v. Government of NCT of Delhi).2
The right covered by a lottery ticket is nothing but an actionable claim
and, therefore, it was concluded from the definition of ‘goods’ under the
Sale of Goods Act, 1930 that they were excluded from such definition
and other tax statutes. Lastly, relying upon the judgment of this Court in
Union of India v. Martin Lotter Agencies Ltd.3 it was opined that
lotteries, being akin to gambling activities, came under the purview of
the doctrine of res extra commercium. The Competition Act, it was
opined, was applicable to legitimate trade and goods, and was
promulgated to ensure competition in markets that are res commercium.
Thus, lottery activity being in the nature of res extra commercium could
not be covered by the Competition Act and consequently the CCI did
not have jurisdiction to entertain the complaint of respondent No. 4. The
High Court also took note of the stand of the CCI, which found no
contravention of Section 4 of the Competition Act by the State of Mizoram
and, thus, there was no question of any further proceedings being allowed
by the CCI against the State of Mizoram.
20. We may place at this stage itself our caveat to the manner in
which the High Court proceeded. On the statement of the CCI indicating
its intent not to proceed against the State of Mizoram, that petition could
have been put to rest. In fact, even earlier there was no intent to take
out any proceedings against the State of Mizoram and only some
observations had been made against respondent No.2 in the manner in
which they proceeded to carry out the allotment pursuant to the EoI.
The lis really was between the private parties and whether their conduct
could have been inquired into by the CCI.
1 (1999) 9 SCC 700.
2 (2006) 5 SCC 603.
3 (2009) 12 SCC 209.
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21. The Special Leave Petitions were filed by the CCI and
respondent No. 4 against the orders passed in the three petitions and
leave was granted with all the matters being tagged together.
Appellant’s case:
22. Mr. Rajshekhar Rao, learned senior counsel sought to canvas
the case on behalf of the CCI. It was urged that the High Court had
not appreciated the contours of the case sought to be examined by the
CCI. The CCI was not concerned with the carrying out, regulation, or
prohibition of lottery business at all; but its concern was only about
potential bid rigging in the tender process for appointment of selling
agents and distributors of lotteries. There is stated to be no conflict
between the Competition Act and the Regulation Act. There was not
even an overlap between the two which would require us to exclude
the particular tender process from the mandate of Section 3(1) read
with Section 3(3) of the Competition Act. It was urged that
notwithstanding the fact that lotteries are a regulated commodity under
the Regulation Act, the CCI would continue to have jurisdiction over
the competition law aspect of such regulated commodity. In this behalf,
he referred to the judgment of this Court in CCI v. Bharti Airtel4,
which examined the contours of the Telecom Regulatory Authority of
India Act, 1997 (hereinafter referred to as the ‘TRAI Act’) and the
Competition Act in the context of the exercise of power by the Telecom
Regulatory Authority of India (for
short ‘TRAI’) and the CCI. It was
observed in that context that the Competition Act frowns on anti-
competitive agreements and it prohibits:
“
(a) where agreements are entered into by certain persons
with a view to cause an appreciable adverse effect on
competition;
(b) where any enterprise or group of enterprises, which enjoys
dominant position, abuses the said dominant position; and
(c) regulating the combination of enterprises by means of
mergers or amalgamations to ensure that such mergers or
amalgamations do not become anti-competitive or abuse the
dominant position which they can attain.”
4 (2019) 2 SCC 521.
COMPETITION COMMISSION OF INDIA v. STATE OF
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23. In the aforesaid context, it was, thus, observed that the function
assigned to the CCI was distinct from the function of the TRAI under
the TRAI Act. What the CCI was supposed to find out was whether
there was concert and collusion thereby forming a cartel. Whether a
particular agreement would have an appreciable adverse effect on
competition within the relevant market in India was, thus, held to be
within the exclusive domain of the CCI.
24. Learned senior counsel referred to us the definition of ‘Service’
under Section 2(u) of the Competition Act, which reads as under:
“2. Definitions. – In this Act, unless the context otherwise
requires,—
xxxx
xxxx
xxxx
xxxx
(u) “service” means service of any description which is made
available to potential users and includes the provision of services
in connection with business of any industrial or commercial matters
such as banking, communication, education, financing, insurance,
chit funds, real estate, transport, storage, material treatment,
processing, supply of electrical or other energy, boarding, lodging,
entertainment, amusement, construction, repair, conveying of news
or information and advertising;”
It was, thus, urged that the expression ‘service’ would mean service
of any description which is made available to potential users and includes
the provision of services in connection with business of any industrial or
commercial matter. In the aforesaid context it was
urged that the sale or
distribution of lottery tickets to a prospective buyer on behalf of the
State for consideration should be construed as “service”. While referring
to the definition of ‘service’ it was submitted that a reading of the
definition would show it as a “means” and “includes” definition and the
‘includes’ part does not narrow down the width of the ‘means’ part.
Thus, the widest amplitude must be given to the definition of ‘service’ in
this case to mean “service of any description”. To support this contention,
learned senior counsel referred to the view taken by this Court in Black
Diamond Beverages v. Commercial Tax Officer5. Wherein, it was
observed in paragraph 7 that the first part of the definition gives the
meaning of the expression “sale price” and must have its ordinary, popular
5 (1998) 1 SCC 458.
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or natural meaning which is not controlled or affected by the second
part which `includes’ certain other things in the definition. The same
principle, it was urged, would apply in the given scenario.
25. Learned senior counsel also urged that had the Parliament
intended to exclude any service from the application of the Competition
Act, then they would have specifically stated so under Section 2(h) or
Section 54 of the Competition Act. Section 54 forms part of Chapter IX
of the Competition Act under the general heading ‘Miscellaneous’ and it
specifically empowers the Central Government to exempt from the
application of the Act or any provision thereof and for such period as it
may specify in such notification. It was urged that no such notification
has been issued. The present activity could hardly be called a sovereign
function. On the different cases referred to in the impugned judgment
and by the respondents, it was urged that they were all in the context of
tax laws to be tested on the touchstone of Article 19(1)(g) of the
Constitution of India while the present case really dealt with the interplay
of the Competition Act and the Regulation Act. In such a scenario the
doctrine of res extra commercium would only apply where the issue
was whether the State Government can regulate (by taxation or
otherwise) certain kinds of trades, which would otherwise be free for
regulation/subject to reasonable restriction. It was argued that the business
of acting as
distributors/selling agents cannot be said to come within the
purview of such a doctrine (State of Punjab v. Devans Modern
Breweries6).
26. Lastly, it was urged that the High Court ought not to have
entertained a petition under Article 226/227 of the Constitution of India
as an order passed under Section 26(1) of the Competition Act was in
the nature of an administrative direction. There were no adverse civil
consequences. The proceedings were akin to a show cause notice and
even the DG’s report did not amount to a final decision. The respondents
were also stated to have the alternative efficacious remedy of an appeal
under Section 53B of the Competition Act whereby it could approach
the appellate tribunal aggrieved by any decision or direction or order
inter alia under sub-section (2) of Section 26 of the Competition Act.
The commission is expected to form an opinion about the existence of
a prima facie case for contravention of certain provisions of the
6 (2004) 11 SCC 26.
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Competition Act and then passes a direction for the DG to cause an
investigation into the matter. Post the report of the DG it can proceed
further or close the proceedings. (Competition Commission of India
v. Steel Authority of India & Anr.7 confirmed in CCI v. Bharti Airtel8
case.) That stage had not even arisen. The final report of the CCI was
yet to mature and the CCI was not even bound by the report of the
DG.
27. The aforesaid was also in the context of the CCI having already
made it clear that it did not intend to pass any adverse orders against the
State of Mizoram and that the DG being the investigative arm was duty
bound to report all facts to the CCI.
Respondent No.1’s Arguments:
28. The State of Mizoram actually prayed to be deleted as a party
as they contended that the appeal had become infructuous in the context
of the order passed by the CCI on 07.06.2012 and 11.06.2013 when it
was opined that no fault could be attributed to the State and they would
not pass any adverse orders against it. As noted, what is surprising is
that there was originally also no cause for the State of Mizoram to have
approached the High Court.
29. Learned counsel for the State sought to contend that they had
never prayed for quashing of the proceedings against the private parties.
They only restricted their prayer against the continuation of proceedings
against the State, something which we have already failed to appreciate
and,
once again, fail to appreciate. The last submission of the State of
Mizoram was, once again, surprising – that it was a victim of cartelisation
and would continue to cooperate with the CCI. If it was so, then the
proceedings should have been permitted to continue before the CCI and
the State ought to have given appropriate assistance as is sought to be
volunteered now.
Respondent No.5’s arguments:
30. The only real contesting party before us and the beneficiary
of what was complained against was respondent No. 5. Their contention
was based on the fact that Section 3(1) of the Competition Act would
have no application as there was no “goods” or “provisions of services”
7 (2010) 10 SCC 744.
8 (supra)
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which could give rise to the CCI’s jurisdiction. Lottery tickets were not
goods and there was no provision of any services. Lottery business being
res extra commercium, it had to be strictly regulated under the provisions
of the Regulation Act. The definition of “goods” under Section 2(i) of
the Competition Act, which refers to the definition of Sale of Goods Act,
reads as under:
“2. Definitions. – In this Act, unless the context otherwise
requires,—
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(i)
 “goods” means goods as defined in the Sale of Goods Act,
1930 (8 of 1930) and includes—
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in India,
goods imported into India;”
31. Section 2(7) of the Sale of Goods Act specifically excludes
actionable claims from the ambit of goods, which reads as under:
“2. Definitions.—In this Act, unless there is anything repugnant
in the subject or context,—
xxxx
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(7) “goods” means every kind of moveable property other than
actionable claims and money; and includes stock and shares,
growing crops, grass, and things attached to or forming part of
the land which are agreed to be severed before sale or under the
contract of sale;”
32. A lottery ticket has been held to be only an actionable claim
(Sunrise Associates v. Government of NCT of Delhi9) and was, thus
held to not be a good. Where an actionable claim was sought to be
included within the definition of ‘goods’, it was specifically so done.
For example, debentures are specifically included within the definition
of ‘goods’ under Section 2(i)(B) of the Competition Act. A comparison
was also sought to be made with the Monopolies and Restrictive Trade
9 (2006) 5 SCC 603.
COMPETITION COMMISSION OF INDIA v. STATE OF
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Practices Act, 1969 where there was no such inclusion and, thus,
debentures were opined to be excluded (R.D. Goyal & Anr. V.
Reliance Industries Ltd.10).
33. Respondent No. 5 claimed to be merely a distributor which
did not provide any services to any potential user of lottery and such
distribution does not constitute a service under Section 2(u) of the
Competition Act, which has been extracted above.
34. It may be relevant to note here that the definition of service is
inclusive and the principles of specifying certain inclusions would, thus,
apply without inhibiting the first part of the definition clause.
35. Lastly it was contended that lottery business is res extra
commercium and strictly regulated by State. Therefore, it could not have
been the intent of the legislature to promote or sustain competition in
lottery business. The Competition Act will thus not apply as there was a
special act promulgated for conduct of lotteries.
Our View:
36. In the conspectus of the arguments, we find that a simple
aspect of anti-competitive practices and cartelisation has got dragged
on for almost ten years in what appears to be a mis-application by the
High Court of the interplay of the two Acts, i.e., the Competition Act
and the Regulation Act. We have already observed that respondent No.
1 seems to have played a very non-appreciable role in our opinion. What
ought to have weighed with respondent No.1/State is what is sought
to
contend now, i.e., it is a victim of cartelisation and it is in its interests to
cooperate with the CCI.
37. The complaint of respondent No.4 may have been also under
Section 4 of the Competition Act but it had not even referred that aspect
to the DG and had decided not to proceed against the State. That should
have been the end of the matter so far as the State is concerned. Yet the
State, in our view, under a misconception, approached the High Court,
possibly in an endeavour to defend one of its officers, respondent No. 2,
whose conduct has not been very favourably commented on by the DG.
Even if the State felt that these comments of the DG were not
sustainable, such an aspect could have been pleaded with the CCI in
10 (2003) 1 SCC 81.
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pursuance of its notice and possibly the matter would have been closed
at that stage. In fact, the CCI had opined, both before and after the filing
of the writ petition, that it was not proceeding against respondent No.1/
State under Section 4 of the Competition Act. The aforesaid gave an
opportunity to respondent Nos. 5 & 6 also to approach the Court and
interdict the proceedings which ought to have been concluded a long
time ago. It would, in our view, have been beneficial even to the State to
have come to a conclusion one way or the other. The interdict post the
investigation report by the DG and prohibiting the CCI from carrying out
its mandate under the Competition Act is unsustainable.
38. We are in agreement with the line of arguments advanced by
Mr. Rajshekhar Rao, learned senior counsel for the CCI where he has
succinctly sought to point out that the concern of the CCI was not at all
with the carrying out, regulation or prohibition of the lottery business as
was governed by the Regulation Act. Rather, the concern was limited to
the role assigned to the CCI under the Competition Act, and in the context
of the EoI was limited to examining any perceived bid rigging in the
tendering process for appointment of selling agents and distributors for
the lottery business. There was no conflict in the interplay of the two
Acts that even needed reconciliation or prohibition against either one, as
the limited scrutiny was to examine the mandate of Section
3(1) read
with Section 3(3) of the Competition Act. Lotteries may be a regulated
commodity and may even be res extra commercium. That would not
take away the aspect of something which is anti-competition in the context
of the business related to lotteries.
39. We must take note of the expansive definition of ‘Service’
under Section 2(u) of the Competition Act. It means “service of any
description”, which is to be made available to potential users. The
purchaser of a lottery ticket is a potential user and a service is being
made available by the selling agents in the context of the Competition
Act. Suffice for us to say the inclusive mentioning does not inhibit the
larger expansive definition. The lottery business can continue to be
regulated by the Regulation Act. However, if in the tendering process
there is an element of anti-competition which would require investigation
by the CCI, that cannot be prevented under the pretext of the lottery
business being res extra commercium, more so when the State
Government decides to deal in lotteries.
COMPETITION COMMISSION OF INDIA v. STATE OF
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40. We would like to say that the intervention by the High Court
was extremely premature. It ought to have waited for the CCI to come
to a conclusion but on the other hand what has happened is that the CCI
proceedings have been brought to a standstill while the High Court opined
on the basis of some aspects which may or may not arise.
41. We are, thus, of the view that there was really no need for the
High Court to proceed in the manner and in the direction it sought to
proceed. The correct approach, more so once the statement was made
on behalf of the CCI, would have been to close the proceedings filed by
the State Government and let the private parties face the ultimate decision
of the CCI. If they were aggrieved by any adverse decision of the CCI
they were entitled to avail of the appellate remedy under Section 53B of
the Competition Act.
42. The complaint having been made by respondent No.4 under
Section 19 of the Competition Act, which provides that the Commission
“may” inquire into certain agreements and dominant position of enterprise
as envisaged under sub-section (1) of Section 3 and sub-section (1) of
Section 4 of the Competition Act. The CCI found out a prima facie
case for investigation by the DG under Section 3(1) of the Competition
Act, the DG opined adversely, and the CCI issued notice giving an
opportunity to the affected parties to place their stand before it. This
process ought to have been
permitted to conclude with the right available
to the affected parties to avail of the appellate remedy under Section
53B of the Competition Act.
Conclusion:
43. We, thus, set aside the impugned judgment of the High Court
and direct that the proceedings in WP(C) No. 24/2013 filed by respondent
No.1 would stand closed in view of the statement made on behalf of the
CCI before the High Court on 11.06.2013 and the proceedings against
the other parties would continue. Since the State Government has already
volunteered in the present proceedings to cooperate, we are sure a proper
sequitur to the investigation would follow. WP(C) No. 76/2013 and WP(C)
No. 90/2013 filed by the private parties would stand dismissed. We are
conscious of the fact that much time has passed but then the material
forming basis of the investigation is already with the CCI and it will have
to proceed in accordance with law. This will have a future impact even

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if the contracts have come to an end and also in the context of the
jurisdiction of the CCI, and that is why we have proceeded to pen down
the judgment.
44. The appeals are accordingly allowed leaving the parties to
bear their own costs.
Ankit Gyan
Appeals allowed.
(Assisted by : Rahul Rathi, LCRA)
COMPETITION COMMISSION OF INDIA v. STATE OF
MIZORAM & ORS. [SANJAY KISHAN KAUL, J.]