CCI's Order For Preliminary Enquiry Does Not Attract Civil Consequences; Writ Court Can't Interfere : Madras HC

The Madras High Court has recently held that under the writ jurisdiction there should be no interference with a preliminary enquiry ordered by the Competition Commission of India under Section 26(1) of the Competition Act.The Court clarified that an order for investigation passed under S.26(1) is a preliminary order and does not attract any civil consequences and does not determine the issue raised against the parties finally and any interference by the court at that stage would only allow the parties to escape the investigation itself that would defeat the object sought to be achieved by the Act and thus, the court held that the learned single judge was right in not interfering with the order of CCI and in dismissing the petition.The Court also observed that the failure to comply with any requirement of CCI rules and regulations shall not invalidate any proceedings unless the CCI is of the view that such failure has resulted in miscarriage of Justice. A bench of Justice T. Raja and Justice T.V. Thamilselvi, while looking at a case pertaining to abuse of dominant position through price parallelism and cartelization by five tyre manufacturers controlling 90% of tyre production in India, stated that "There is no iota of prejudice that has been suffered by the appellant or supporting private respondents and thus, any irregularity in following the procedure of the Commission will not make the proceedings of the Commission invalid, unless such irregularity affects the merits of the case." The facts of the case are as follows: AITDF (All India Tyre Dealers Federation – respondent no. 3) had sent a representation to the MCA (Ministry of Corporate Affairs – respondent no. 1) that the five tyre manufacturing companies (M/s MRF, Apollo, CEAT, JK and Birla), have control of 90% of tyre production in India and they have engaged in abusing this dominant position through price parallelism. According to AITDF's representation, these five companies increased the price of tyres when the price of rubber increased but subsequent deduction in tyre prices did not follow when prices of rubber decreased, which had resulted in huge loss to the public. They did this under the aegis of the cartel association – ATMA (Automotive Tyre Manufacturers Association- respondent no. 9). On this basis, AITDF had sought suo motu action against the domestic tyre manufacturers alleging that none of the leading domestic tyre manufacturers rolled back their tyre prices even after a steep drop in the rubber prices. MCA forwarded this communication from AITDF to CCI under S.19(1)(b) of the Competition Act, requesting CCI to inquire into the matter. CCI then directed the MCA and AITDF to address preliminary arguments. ATMA requested an inspection of documents at this stage and was allowed. MCA sought exemption from further proceedings on the basis that they had no further submissions to make and that was allowed too. After considering the written submissions made by AITDF and ATMA, the CCI passed an order under S.26(1) of the Competition Act holding that CCI prima facie believed that the case required further investigation by the Director-General (DG-respondent no.3). A writ petition was then filed in Madras High court by the appellant but the investigation by Director-General and the CCI enquiry were permitted to go on and when the DG's report was completed and submitted to CCI, the writ petition was dismissed. Then a writ appeal was filed in the same court which passed an interim order directing the CCI to keep the report in a sealed cover. This appeal is an ongoing one and has been filed under Clause 15 of Letters Patent against the order dismissing the writ petition passed by a learned single judge. Now the case of the appellant (M/s MRF ltd.- One of the 5 tyre manufacturers, the rest four are respondents in this case), represented by Senior Counsel Shri G. Masilamani was that neither did AITDF (All India Tyre Dealers Association – 4th respondent) in its representation to MCA, show any proof of price cartelization nor did this representation follow regulation 2(j), 10(2), 11(2) and 15 of CCI (General) Regulations, 2009 and thus, if the reference itself is totally invalid, non est in the eye of the law, all actions done on the non-existing reference shall be without jurisdiction including the order passed by the CCI invoking S.26(1) of the Competition Act. Further assailing the order of the learned single judge (who had dismissed the writ petition), the learned Counsel stated that the findings of the single judge that CCI had suo motu power to inquire and order an investigation in this matter, was faulty and that the learned single judge had failed to consider whether the regulations given in 15(3), 40 and above-mentioned regulations are mandatory or directory, although this issue was specifically raised. Finally, talking about how CCI's action was barred by res judicata...

CCI's Order For Preliminary Enquiry Does Not Attract Civil Consequences; Writ Court Can't Interfere : Madras HC

Rashmi Bagri

The Court rejected the challenge against the CCI probe raised by tyre manufacturers.

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