Introduction

As per section 33 of the Competition Act, 2002, the interim order can be passed by the Competition Commission of India during an inquiry on the contravention of section 3(1), or 4(1), or 6 of the Act. The said section empowers the CCI to restrain the anti-competitive activity for a temporary period. The procedure for the interim order has to be mandated according to Regulation 31 of the General Regulation, 2009. Also, the CCI can pass an ex–parte interim order against a party, but the CCI must send a notice to that party immediately. It may be argued that during the inquiry of a competition matter, the interim order can be seen as the strongest tool to prevent irreparable damage due to anti-competitive activity.

Orders passed under section 33 are directly challengeable at the Hon’ble National Company Law Appellate Tribunal under section 53A of the Act. In case of violation of natural justice by the CCI, the parties can also file a writ before the High Court under article 226 of the Indian Constitution. In 2010, the Supreme Court laid down principles and three conditions to be followed by the CCI while deciding interim order in CCI v. SAIL.

Conditions and Principles of Interim Order

For a better understanding, the three conditions laid down in CCI v. SAIL will be divided into parts.

1st SAIL Condition: Record its satisfaction (which has to be of much higher degree than formation of a prima facie view under section 26(1) of the Act) in clear terms that an act in contravention of the stated provisions has been committed and continues to be committed or is about to be committed

According to the 1st SAIL condition, the satisfaction required for an interim order under section 33 of the Act should be higher than the satisfaction required for the formation of prima facie view under section 26(1) of the Act. At the stage of interim relief, the CCI is satisfied that there is a likelihood of anti-competitive activity in the case and the Commission needs to record the reasons for its “satisfaction” in clear terms upon due application of mind. This is because the CCI records its satisfaction after the enquiry has begun. On the other hand, it’s only a tentative view at the stage of forming a prima facie view under section 26(1) of the Act. In Karnataka Film Chambers of Commerce v. Kannada Garahakara Koota, the Commission held that the existence of prima facie case at section 26(1) stage means that it is satisfied that the case is not vexatious or frivolous, and therefore needs an enquiry.

In the FHRAI & Anr. v. MMT-Go & OYO, (hereinafter “MMT-Go order”) the CCI stated that the threshold for satisfaction differs from case to case according to the availability of evidence. In a hypothetical scenario, say, at the prima facie stage, evidence is high enough for the CCI to record its satisfaction for the interim order. Then in such a case there may not be any separate requirement to raise the threshold of its “satisfaction” for the interim order. Hence, in such a case, the degree of satisfaction between section 26(1) and section 33 of the Act won’t be compared.

In Fast-Track Call Cab v. ANI Technologies, the CCI observed that an interim order can’t be granted just because of the mere existence of a prima facie case. When the said order was challenged by the Informant at the Appellate Tribunal, the appeal was dismissed and it was held that the appellant has to prove the balance of convenience and irreparable loss along with a strong prima facie case.

2nd SAIL Condition: It is necessary to issue order of restrain

In MMT-Go, the CCI held that the 2nd SAIL condition is also known as the necessary condition or the ‘balance of convenience’ condition. According to the 2nd SAIL condition, on one side the CCI has to compare the inconvenience between the competitor and all the stakeholders of the market, and on the other side the Opposite Parties (hereinafter “OPs”). In Confederation of Real Estate Developer v. Department of Town and Country Planning and Anr., it was said that while considering the balance of convenience, the CCI has to contemplate “whether justice would be best served by passing an interim order in this case restraining OPs.” In the Nuziveedu Seeds Limited & Ors v. Monsanto & Ors., the CCI said that if the interim order is granted then Monsanto will not face any major issue, whereas if the relief isn’t granted then there is an imminent risk to the Nuziveedu Seeds Limited and all stakeholders of the market. Under this condition, CCI analyses what would be the impact on both the sides if the interim order is granted. For this analysis, the CCI does a balancing exercise, where it weighs the inconveniences that would be felt by the competitors and all stakeholders of the market if the interim order isn’t granted, versus the inconvenience of the OPs if the interim order is granted.

3rd SAIL Condition:

A. There is every likelihood that the party to the lis would suffer irreparable and irretrievable damage

Or

B. There is definite apprehension that it would have adverse effect on competition in the market.

The 3rd SAIL condition is divided into two sub-conditions, separated by an “or", inferring any one of the sub-condition is enough to fulfil the 3rd SAIL condition as stated above.

In the MMT-Go order, the CCI interprets the first sub-condition as the irreparable harm being caused to the competition, and not to an individual competitor. The same is done in the light of already settled position of the law that the Commission is entrusted with the role of deciding competition matters which are neither in the nature of lis, nor a right in personam.

The second sub-condition is more reasonable as the role of the CCI is to protect the competition in the market by preventing practices from having adverse effects on competition. For example, in the Monsanto order, the Nuziveedu Seeds Limited had a significant presence in the downstream market and the nature of the concerned product was affecting all the stakeholders. So if CCI would not have intervened, then not only the Nuziveedu Seeds Limited would be affected but also the market would have been affected adversely.

As per section 33 of the Act, the CCI’s power to grant interim orders is discretionary in nature. This means, even though all three SAIL conditions are established, the CCI still has the discretion to reject the interim relief.

Where is the trend going?

Interestingly, the three conditions of CCI v. SAIL are very much similar to conditions laid down for interim order in civil matters. The conditions that the civil courts consider are:

i. Prima facie

ii. Balance of convenience

iii. Irreparable damage

In the MMT-Go order, the CCI for the first time took the duty to draw a clear line of demarcation between the application of the principles laid down by the civil courts and the principle laid down by the CCI v. SAIL while deciding the 1st SAIL condition. The CCI in the interim order observed that the principles for granting interim relief in civil matters may not stricto sensu applicable in competition matters. Because the proceeding before the civil court is right in personam, as opposed to, the right in rem proceeding before the CCI. Hence, the CCI held that though the condition to grant interim order may be similar in both civil and competition matters, but only the principles enunciated in CCI v. SAIL shall be recognised as the yardstick for 1st SAIL condition.

It is important to note that the Commission strictly interpreted the first sub-condition of the 3rd SAIL Condition by not considering the irreparable harm of individual competitors as a legal standard to fulfil the irreparable and irretrievable condition for interim order. Though the MMT-Go order delineates the approach of the Commission on the interim matter, the Supreme Court in the case of CCI v. SAIL neither gave an exhaustive principle nor excluded the principles from civil matters for recording the “satisfaction” under 1st SAIL condition.

The said interim order passed in MMT-GO case was challenged by OYO in the Gujarat High Court on the account of violation of principles of natural justice. The High Court stayed the interim order and directed the CCI to hear the side of OYO. Through this decision it could be further inferred that wherever the Commission is deciding an information related to passing of orders under section 33 of the Act.

The said interim order passed in MMT-GO case was challenged by OYO in the Gujarat High Court on the account of violation of principles of natural justice. The High Court stayed the interim order and directed the CCI to hear the side of OYO. Through this decision it could be further inferred that wherever the CCI is deciding on information related to passing of orders under section 33 of the Act, then it needs to hear all the parties. Or else writ can be filed for the violation of principles of natural justice.

Suggestions

The powers granted to the CCI under section 33 of the Act are not being utilised to their full potential. One of the major reasons behind it is that a higher standard of satisfaction in compliance with the conditions set by CCI v. SAIL is required. Further, the Supreme Court held that the CCI should grant interim orders only in compelling and exceptional circumstances.

Even if the conditions to grant interim orders are clear, they are not enough to prevent the anti-competitive activity in the present market conditions. So, for better and faster enforcement of the interim order, the CCI needs to lower its standards to satisfy its conditions for an interim order. To lower the standard of the 3rd SAIL condition, the CCI needs to widely interpret the first sub-condition of the 3rd SAIL condition by including the risk of irreparable harm caused to an independent competitor as a legal standard to satisfy the 3rd SAIL condition. This will expedite the Director General’s investigation process for an interim order. Because, rather than analysing the irreparable harm to the whole market, the DG would only analyse the irreparable harm caused to the independent competitors.

Though in the CCI v. SAIL, the SC has set a threshold for an interim order which is higher than the one required to pass a prima facie order under the Act, it did not put an upper limit for the 1st SAIL condition. Therefore, the CCI should set an upper limit for itself that would be lower than proving a clear existence of anti-competitive activity. This would allow it to have more discretion as far as satisfying the interim condition is concerned. The said upper limit would further allow the Commission to take facts and circumstances of the case on board and pass interim orders wherever it feels that the same is in the best interests of the justice thereby strengthening the overall enforcement scheme envisaged under the Act. It is also suggested that the SC should fill the lacunae identified as far as jurisprudence related to passage of interim orders under the Competition Act is concerned.