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The First Year At Glance For NCLAT Post-Merger With COMPAT

Close on the heels of 1st February 2017 whereby the Hon’ble Finance Minister of India, Mr. Arun Jaitley presented the Union Budget 2017 in Parliament, the day can be marked as historical for the long lasted empirical legislative history of India. Mr. Jaitley robustly highlighted the key significant work executed by his administration in the last two and a half years headed by NDA Government. The key highlights included the decrease in the inflation rate, the war against black money through demonetization, growth in the economy and many other things, followed by challenges and goals for the upcoming year. However, an important part of his embellished speech failed to grab the attention of members of the Parliament and media houses presided in the lower house.

The Hon’ble Finance Minister might not have laid emphasis on this important aspect of his speech but as on 31st March 2017 owing to the passing of Finance Act, 2017, the whole jurisprudence and functioning of tribunals in India changed and thus lead to more than 40 amendments in various different acts and statutes. Para 128 of Hon’ble Minister’s speech said:

  1. “Over the years, the number of tribunals has multiplied with overlapping functions. We propose to rationalize the number of tribunals and merge tribunals wherever appropriate.”

This move was proposed keeping in line with the Modi government’s commitment to ‘maximum governance, and minimum government’. However, such a move by NDA Government should not come as a surprise to anyone as Hon’ble Prime Minister of India, Mr. Narendra Modi has voiced his opinion on this issue at various forums in the past. In April 2015, addressing a joint conference of Chief Ministers of all the states along with the Chief Justices of all the High Courts in the country, the former Chief Minister of Gujarat said, “there is a need to brainstorm over whether tribunals lead to faster delivery of justice or are acting as “barriers” to it and slowing it down. The budget allocated to run the tribunals can be diverted to courts to strengthen them if it is found that they are not delivering results”.

The core of the idea to merge various tribunals comes from a presentation by a group of secretaries on good governance and subsequently in February 2016, the government set up an Inter-Ministerial Group (hereinafter as ‘IMG’) under law secretary Mr. Suresh Chandra to discuss and assess reducing the number of tribunals from 36 to 18. IMG studied a report in this regard prepared by Indian Law Institute and Ministry of Law and Justice and thereafter looked into the comments received from various Ministries/ Departments to give its suggestion on this issue. The report suggested the merger of 36 tribunals restructuring the same through amalgamation to form about 17 tribunals and finalize a single nodal ministry to supervise the functioning of these tribunals.

The Finance Act, 2017 comes into effect after a lot of hullaballoo in the parliament whereby the constitutional validity of the Act was challenged by the respected members of the parliament at every corner. The Act seeks to provide merger of Tribunals and Other Authorities and Conditions of Service of Chairpersons, Members etc.

In a dystopian manner, the Act converges unconnected Appellate Tribunals on an imagined synergy between unconnected universes (e.g. airport regulatory appellate with telecom appellate). However, it cannot be contested that the decision to merge few of the tribunals such as Railway Rates Tribunal with Railway Claims Tribunal or Copyright Board with Intellectual Property Appellate Board does hold merit but at the same time, decided to merge Airports Economic Regulatory Authority with Telecom Disputes Settlement and Appellate Tribunal or National Highways Tribunal with Airport Appellate Tribunal sounds ludicrous and scandalous.

This article does not seek to comment on the constitutional validity of the Act or to comment on the decision of the government, whether it is right to merge the tribunals or not? This article merely delves into the functioning of the NCLAT in the FY 17-18 after the NDA government introduced the idea of merging COMPAT with NCLAT. The article substantiates its position by pointing out lack of judicial and technical members, lack of relevant rules and regulations and disposition of appeals by the tribunal (NCLAT). The article seeks to support its argument based on the information available in the public domain and through personal knowledge of the author.

Missing pieces of the Reform are as follows:

Lack of judicial and technical members– NCLAT is presided over by Hon’ble Justice Shri Sudhansu Jyoti Mukhopadhaya[1]. He was appointed as the chairman of NCLAT on 1st June 2016[2]. Shri Balvinder Singh serves as a technical member of NCLAT and he took in charge as Member (Technical) of NCLAT on 1st July 2016.[3] However, the last one year has seen the increase in the number of members to more than a double. In addition to the Chairman and technical member, FY2017-18 saw the appointment of two new judicial members to the rooster of NCLAT. Hon’ble Mr. Justice  A.I.S. Cheema was appointed as the judicial member of NCLAT on 11.09.2017[4] and Hon’ble Mr. Justice Bansi Lal Bhat was appointed as a judicial member of NCLAT on 17.10.2017 respectively.[5]

The appointment of judicial members falls in line with the central government’s decision to merge the tribunals in order to use the ancillary budget and resources for the appointment of new judges to the merging tribunals. The decision to appoint two new members in the FY 17-18 by the Central Government is suggestive of the correct approach but at the same time, it appears to be too little and inappreciable.

Currently, neither the chairman or judicial member(s) or technical member(s) of NCLAT indicates any prior experience in the field of economics or competition law. This is in contrast to the 272nd Law Commission of India Report which recommended, “Expert Member/Technical Member/Accountant Member should be a person of ability, integrity and standing, and having special knowledge of and professional experience of not less than fifteen years, in the relevant domain”[6]. Further, the report suggested that the appointment of a technical member should only be made when the adjudication requires specialized knowledge and has technical aspects.[7]

Prior to the merger, COMPAT was considered to be a specialized tribunal, consisting of members who possessed expert knowledge in the field of economics and competition with experience of not less than 25 years.[8] The tribunal consisted of three members (chairman and two other members) who were either retired Chief Justice of High Court (hereafter as ‘HC’) or retired judge of the Supreme Court (hereinafter as ‘SC’) and two technical members. Further, in other jurisdictions such as UK[9] and Singapore[10], the members of the regulatory body consist of expert professionals, competition law experts, economists, among others.

NCLAT was originally established as an appellate body to adjudicate upon the issues relating to company law. Therefore, The Companies Act, 2013 does not stipulate the technical member of the NCLAT to possess expertise in economics and competition law[11].

Further, without any presupposition of disrespect, the competency level of members sitting in the NCLAT with respect to adjudicating competition matters is questionable. The subject matter of cases under company law and competition law are completely different. The primary aim of company law is to regulate rights and liabilities of the company and its members. It facilitates the ease of doing the business. On the other hand, the primary aim of competition law is to “to prevent anti-competitive practices, promote and sustain competition, protect the interests of the consumers and ensure freedom of trade in markets in India”[12]. Therefore, both the laws work on a distinctive playing field and hence, NCLAT requires a technical member with special expertise in competition and economics in order to assist the tribunal in adjudicating competition law appeals fairly.

At present, there are only 3 members and 1 chairman presiding in the NCLAT. Section 410 of The Companies Act recommends the NCLAT to have 11 members excluding the chairman. Given the fact that, NCLAT is overburdened with cases where the appellate authority is required to adjudicate upon matters relating to Company Law, Insolvency and Bankruptcy Code and Competition Law appeals, there is a need to recruit new members to the tribunals in order to ensure timely, efficient and speedy recovery of suits and avoid pendency of the appeals. The appellate tribunal should be adequately staffed. There should a designated bench or body comprising of expert members who should be dealing with all the appeals arising from the orders of CCI.

Disposition of Appeals– One of the foremost duty of the appellant tribunal is to dispose of the appeals as promptly as possible. The Companies Act, 2013[13] demands the NCLAT to dispose of the appeals within 3 months of its filing whereas the Competition Act, 2002 allots 6 months of time. However, according to the information available on public domain, both the tribunals have failed to compile with the deadline. The annual report of CCI from 2012-2016 concluded that 46% of the appeals remained pending with COMPAT for over the year[14].

Further, an RTI application was filed before the NCLAT seeking the number of cases that got transferred from COMPAT after merging of tribunals. According to the report of the aforementioned RTI, a total number of 73 cases were transferred from COMPAT to NCLAT[15]. The impugned tribunal has been able to dispose of 10 cases out of the 73 transferred in the first year, giving out a 14% of disposal rate in its first year of adjudication of competition law appeals.

Further, another RTI[16] was filed with the NCLAT by the author seeking the number of fresh appeals that have been filed by the informants against the orders of CCI in the FY 17-18. According to the reply by NCLAT, 43 fresh appeals were filled before the NCLAT in the FY 17-18 and only 15 appeals were disposed of in the FY 17-18.  This gives a disposal rate of about 35% in the case of fresh appeals to NCLAT against the order of CCI and about 14% disposal rate in the transferred cases from COMPAT to NCLAT in the year 17-18.

The abysmal rate in disposing of the cases by the tribunal can be attributed to various reasons, ranging from, lack of technical/ judicial members, stage-wise timelines governing the appellate process over-burdened tribunal, lack of relevant rules and regulations, incompetency to deal with competition subject matters etc.

Lack of relevant Rules and Regulations– It is a widely accepted principle that competition regulators should provide with well-established relevant rules and regulations in order to provide stability and certainty in terms of the interpretation of the law and positively engage with the concerned stakeholders[17].

The Finance Act 2017 bought an end to COMPAT’s adjudication and merged it with NCLAT. Section 53A of the Competition Act was amended which was the core provision in relation to filing an appeal against the order of CCI. However, the amendment does not touch upon the substantive nature of the provision.  Right to appeal under section 53A of the Competition Act was restricted in nature and is only applicable to certain orders of CCI. Appeals cannot be made against the order that does not form part of Section 53A and this lacuna in the provision still persist.

Further, the rules regulations governing the COMPAT and its actions were not scrapped out fully and remain un-amended. The Competition Appellate Tribunal (Form and Fee for Filing an Appeal and Fee for Filing Compensation Applications) Rules 2009, CCI (General) Regulations, 2009 and the Competition Appellate Tribunal (Procedure) Regulations, 2011 are still operating but none of these legislations provide the NCLAT with stage-wise timelines for the efficient fulfilment of the appeal procedure. The Competition Act requires the appeals to be disposed by the tribunal as expeditiously as possible within six (6) months of the date of receipt of the appeal[18]. On the other hand, the Companies Act 2013 requires the NCLAT to dispose the appeals as expeditiously as possible within three (3) months of filing the appeal.

According to author’s personal source, the names of which is being kept anonymous, there is a discrepancy in filing fee as well for filing appeals in the NCLAT against the fees paid in COMPAT for filing fresh appeals. The practitioners in NCLAT have complained that fees charged for competition appeals by NCLAT are according to the Companies Act, 2013 rather than the Competition Appellate Tribunal (Form and Fee for Filing an Appeal and Fee for Filing Compensation Applications) Rules, 2009. Such issues merely complicate the life of all the stakeholders and affect the effective implementation of the step taken up by the government.

There is a need for smooth transition of matters from COMPAT to NCLAT. Amendment to relevant provisions for fresh filings, clarity regarding the timeline of the case to be heard by the NCLAT is the need of the hour. Given the fact, that the already overburdened NCLAT was given responsibility to hear competition appeals as well. It is the duty of the government to provide the administrative machinery for the tribunal with the relevant set of rules and regulation in order to perform effectively.

Conclusion

Competition Law per se is a highly specialized branch and has numerous important principles that are peculiar to this branch. Further, the principles governing the competition law are totally different from that of company law. NCLAT, the tribunal that primarily deals with the company law matters is already overburdened with work and it is unfortunate to see that appeals from the Competition Commission of India’s order will now be heard by NCLAT and not by COMPAT. The move is expected to streamline India’s tribunal-based structure and increase its efficiency through consolidation. However, by doing away with certain appellate tribunals, the Government actions might as well backfire, as the already overburdened tribunals will be made to take up further appeals which will end up adding up to the backlog of these tribunals. The now merged tribunal is faced with lack of resources. Going into the FY18-19, it is the Government’s responsibility to equip the impugned tribunal with the appointment of judicial and technical members. The Government should also lay down a fresh set of guidelines and relevant rules and regulations for the various stakeholders in order to remove the possibility of discrepancy at the procedural stage. Lastly, it is the foremost duty of the tribunal to dispose of the case in timely and efficient manner. The NCLAT has failed to dispose of the cases in an efficient manner and therefore equipping the tribunal with relevant resources mentioned above could help the tribunal in disposing of the case in the most efficient ways.

Therefore, keeping these thoughts in mind, the first year, post the merger of COMPAT with NCLAT does not seem to be in the right direction and until some intervention and efforts are made by the Government, the future of competition law jurisprudence in the country has certainly taken a downhill path.

Srajan Jain is a B.A. LL.B. (Hons.) student at Jindal Global Law School.
[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]

[1] Available at,  http://www.nclat.nic.in/about-chairman.html

[2] Available at, http://www.nclat.nic.in/about-chairman.html

[3] Available at, http://www.nclat.nic.in/about_member.html

[4] http://www.nclat.nic.in/about_member_J.html

[5] http://www.nclat.nic.in/about_member_J_I.html

[6] Available at, http://lawcommissionofindia.nic.in/reports/Report272.pdf

[7] Available at, http://lawcommissionofindia.nic.in/reports/Report272.pdf

[8] Section 53 D of the Competition Act, 2002 [Omitted by the Finance Act, 2017, w.e.f. 26th May, 2017]

[9] Available at, https://www.gov.uk/government/news/minister-appoints-new-competition-appeal-tribunal-members–2

[10]Available at, http://www.drewnapier.com/DrewASPX/media/assets/Publications/International_Comparative_Legal_Guide_to_Competition_Litigation_2016.pdf

[11] Section 411(3) of The Companies Act, 2013

[12] Section 18, The Competition Act 2002

[13] Section 53(B)(5) of the Competition Act, 2002

[14] Available at, http://www.financialexpress.com/opinion/nclat-getting-clogged-up-appellate-body-has-no-competition-law-expert/985041/

[15] Available at, http://www.financialexpress.com/opinion/nclat-getting-clogged-up-appellate-body-has-no-competition-law-expert/985041/

[16] RTI application number NCLAT/R/2018/50004

[17]Available at, https://static1.squarespace.com/static/551ea026e4b0adba21a8f9df/t/5a18f086ec212d9bd3c645f9/1511583896465/Systematizing+Fairplay+-+Key+Issues+in+the+Indian+Competition+Law+Regime.pdf

[18] Section 53(B)(5) of the Competition Act, 2002

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