Scope Of Investigation By DG Not Limited To Prima Facie Opinion Expressed By CCI Under S. 26 of Competition Act: Delhi HC [Read Judgment]
The Delhi High Court on Thursday held that the scope of the investigation conducted by the Director-General on directions received under Section 26 of the Competition Act, 2002, is not limited to the prima facie opinion expressed by the Competition Commission of India (CCI).
"The investigation has to be a comprehensive one. The DG may not, in fact, be able to anticipate what information may emerge during such investigation. Merely because the information that emerges does not pertain to the specific subject matter which the DG has been asked to investigate, would not constrain the DG from examining such information as well if it points to violation of some other provisions of the Act. Indeed, the directions given by the CCI to the DG under Section 26 (1) of the Act are only to "trigger" investigation", held the bench of Justices S. Muralidhar and Talwant Singh.
The decision came in light of the LPA filed by CCI, impugning the order of a single judge of the high court who had quashed the investigation under Section 4 of the Act against the Respondent, M/S. Grasim Industries Ltd., on a contrary observation.
The Respondent submitted that CCI's direction under Section 26 of the Act to examine Section 3 violations pertaining to anticompetitive agreements by manufacturers of Man Made Fibre, including the Respondent, was a sine qua non for initiation of an investigation. Thus the DG, as a delegatee under the Act, could not have suo motu enlarged the scope of investigation into violation of Section 4 of the Act, which pertains to abuse of dominant position. Reliance was placed on Roop Chand v. State of Punjab, 1962 (1) SCR 539. He further submitted that:
- Under Regulations 27 and 28 of the CCI Regulations, it was only CCI which could "join multiple information" and allow amendment of the information. Therefore the DG ought to have sought approval of CCI before investigating additional information, pointing to violation of Section 4 of the Act.
- If the DG was not held to be bound by the prima facie view of the CCI, it would place him "virtually on a higher pedestal than the CCI itself", contrary to the legislative intent.
- The report of the DG was violative of principles of natural justice to the extent it leveled violation of Section 4 of the Act, as the Respondent was never put to notice during investigation that the DG was examining such violations.
CCI, on the other hand, submitted that "the legislative intent was not to place the burden of proof of all violations on the informant. The information was meant to trigger investigation followed by submission of a report by the DG, on the basis of which the CCI could pass its final order. A complete investigation by the DG involved analysing the fact from all angles and finding out every possible violation of the Act". Reliance was placed on Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744.
It was also contended that as per Regulation 18 (1) and 20 (4) of the CCI Regulations, DG has to attach with the investigation report all the evidence and documents, statements, and analysis collected during the investigation, which might not be limited to the prima facie opinion expressed by the CCI.
Concurring with the submissions made by CCI, the court held in light of Competition Commission of India v. Steel Authority of India Limited that "opinion formed by the CCI at the stage of issuing directions to the DG under Section 26 (1) of the Act is, by no means, intended to restrict the opinion that may be formed by the DG on such investigation".
Dismissing contention no. 3 of the Respondent, the bench said that "Issue of notice to a party at the initial stage of the proceedings, which are not determinative in their nature and substance, can hardly be implied".
It observed that "The object of the Act is to ensure fair competition by prohibiting trade practices which have an adverse effect on competition in the markets within India. The focus of the Act is to prohibit anti-competitive agreements, which are the subject matter of Section 3 of the Act, and abuse of dominant position, which forms the subject matter Section 4 of the Act", and the present order was passed to uphold the same.
CCI was represented by Advocates Samar Bansal, Devahuti Pathak, Manan Shishodia and Sachin Mishra and the Respondent by Senior Advocate Dhruv Mehta with Advocates Ajit Warrier, Ashish Gupta and Sharad Kharra.