Competition (Amendment) Bill 2020: Assessing the Impact of Governing Board on Independence of the Commission
The Ministry of Corporate Affairs (MCA) has released a draft version of the Competition (Amendment) Bill, 2020 (now referred as “the Bill”). The Bill is a result of deliberate discussions held as part of the Competition Law Review Committee (CLRC) formed by the Ministry earlier, and seeks to largely address the lacunae observed over last ten years of implementation of the law. Few of the major changes in the draft Bill include formation of the Governing Board (GB) within the Competition Commission of India (CCI), introducing a settlement and commitment scheme, enlarging the scope of exemption granted under the IPR law and introduction of green channel among others. The Bill also makes technical changes to the law like altering wordings of section 3 to cover hub and spoke arrangements under anti-competitive agreements, and of section 26 to allow the Commission to pass relevant orders under the Act, respectively. The scope of this paper is restricted to cover the impact of introduction of GB on overall functioning of the Act.
One of the primary changes, as discussed before, made in the Bill is introduction of the Governing Board in the Commission. The origin of the Board lies in the recommendations made by the CLRC in its report, where it had suggested that the Board be introduced for efficiency purposes. The Ministry assessed the recommendations of the Committee, and gave wide powers to the Board through various amended provisions. The Committee had assessed the accountability and democratic practices in the Commission, and suggested that the Board be introduced for bringing external perspective and objectivity to the Commission’s decision making [Competition Law Review Committee (CLRC) report, p.20]. The Committee suggested that it was in line with structure of other sectoral regulators in the country [Competition Law Review Committee (CLRC) report, p.20].
Existing Provisions in the Bill
It is appropriate to peruse bare provisions related to the GB in the amended Bill. Apart from the change in definitional clauses, substantive provisions of the Bill include section 8(1A) where it talks about the constitution of the Board. Section 17 delineates functioning of the Board along with the Commission, where they can appoint the Secretary, experts, professionals and other officers in the Commission. Section 18A is also of importance as it empowers the Board to manage and superintend overall affairs of the CCI. Section 64 allows the Board to acquire the character of quasi-legislative body where it can make regulations for working of the Commission. This was something even suggested by the CLRC. Section 63 talks about expansion of the roles and functions of the Board as per the laid criteria.
A bare perusal of the said provisions would suggest that the constitution of the Board does not settle well with overall structure of the Commission. Section 9 of the original Act suggests formation of the Selection Committee to recommend whole time members of the Commission, and the said Committee is headed by the Chief Justice of India or his nominee. The National Company Law Appellate Tribunal (NCLAT) and the Supreme Court of India (SC), through various decisions, have held that the Commission has quasi-judicial character and adjudicatory functions to perform. The Delhi High Court, even moved one step beyond, and held that the Chairperson of the CCI cannot have a casting vote as it dilutes adjudicatory functions of the Commission, and declared section 22(3) of the original Act unconstitutional.
Section 36 of the Act also sheds light on working of the Commission. The said provision lays emphasis on principles of natural justice as far as procedure of the Commission is concerned. This is an aspect unique to the CCI, as other sectoral regulators like the SEBI and CERC are not guided by the same. This gains more prominence in the context of CERC as appointment of the members of the regulator see consultation with the CJI [Proviso to Section 77(2) of the CERC Act, 2003], a situation quite similar to the CCI.
Section 8(1A)(c) of the amended Bill, on the contrary, introduces the concept of Part Time Members (PTMs) in the GB, with no criteria laid for nomination of such members. The said provision further empowers the central government to nominate such PTMs under its sole discretion, with no consultation with judicial members of the State. Section 18(1A)(6) further states that presence of two PTMs is mandatory to make meetings of the GB valid. A combined perusal of the original text of the Act, as well as its operation, would suggest that the PTMs may be able to supersede whole time members of the Commission in the future. As on date, the Commission has three whole time members including the Chairperson, when it is allowed to have seven, as per section 8 of the Act. However section 8(1A)(c) allows the government to nominate four PTMs to the GB along with two ex-officio members as Secretary, Department of Economic Affairs, and Secretary, Ministry of Corporate Affairs, taking the total number of its nominated members to six. Section 18(1A)(5) states that decisions in the GB should be taken by majority, and with such a situation, it may happen that the whole time members selected by the Selection Committee fall in minority in case of a conflict.
The GB was introduced in the CCI for efficiency purposes. The Competition Act was one, which pays heavy reliance on the ‘expertise’ quotient. GB would supposedly fill the same. However as analyzed above, the Bill has exceeded the mandate of the Board as carved out by the CLRC. Inclusion of PTMs in the GB, with no criteria laid for their nomination, particularly dilutes the case for presence of the Board. The overall jurisprudence behind Indian competition law would suggest that the Commission is a quasi-judicial body, where performs substantive adjudicatory functions. Time and again, the Courts have held such a position. Therefore, a more prudent approach would be to either lay down a set of qualifications for PTMs, or allow judicial members of the State to have a say in their appointment. Reducing the number of PTMs may be also be a good option as it would then allow whole time members of the Commission to remain in majority, thereby preserving its quasi-judicial character.