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The Appellate Tribunal has taken Section 26 of the Competition Act in Uncharted Terrain; its time for the lawmaker to fix the Ambiguity

Noel Benno Joseph

Section 26 of the Competition Act establishes the procedure for inquiry, once the Competition Commission of India (CCI) receives an information regarding violation of the Act. The said section is directly related with section 53A(1)(a), which entails the CCI orders and directions challengeable with the Appellate Tribunal (AT) as per the sub-section under which they are passed. Now even though the purpose of statute is to give rule of law a frame, recent developments in the AT would suggest the opposite.

Section 26(1) of the Act states that the due process of enquiry, in case the Commission is of the opinion that there exists prima facie case, is the commission to direct the DG to cause an investigation into the matter. The Apex Court in its landmark judgment on CCI v. SAIL observed that the enquiries ordered by the Commission under s.26(1) are not appealable in the AT and that only those clauses specifically made appealable under section 53A(1)(a) will be treated as such. Interestingly, the said provision leaves out enquiries ordered under Section 26(7) and 26 (8).

Once the CCI orders DG investigation, there are four cases possible. It can be shown in a tabular method as follows:

Whereas the clause of non-appealable nature of case Four (orange box) is justified since decision to pursue case Four is not an end in itself and that there involves further enquiry in the matter (as also held by the apex court in CCI vs. SAIL, 2010), the non-appealable and arbitrary nature of proceedings in case Two (yellow box) is highly problematic. The rationale behind this analysis being that case Two does not leave room for further discussions since the case is closed by the Commission leaving ambiguity on whether this decision is appealable or not. Thus, the Act is silent about such a scenario, and this gives room for arbitrariness to creep in. The level of arbitrariness has been quite evident in a handful of cases that have been adjudicated by the Commission and later contested at the AT.

Faiveley Transport (India) Pvt. Ltd. and M/s Knorr Bremse India Pvt. Ltd, 2013

In this case, the DG during the investigation found evidence of bid rigging. However, the commission closed the case on ground that findings of DG were inadequate to confirm cartelization. The Informant then appealed in the AT. Now even though the Tribunal agreed with the Commission and dismissed the case, the fact that it admitted the case in itself is problematic. When there is no exact statutory provision under which the decision is appealable, it goes against the celebrated judgement of the apex court in the case of CCI vs. SAIL. There existed the legal issue of jurisdiction of Tribunal itself, but this was not discussed since it was probably not in the interest of the informant.

Saurabh Tripathy vs M/S Great Eastern Energy, 2014

The DG opined that there has been contravention of the S.4(2)(a)(i). The Commission disagreed with the finding and closed the case. It is quite unclear as to which section in the Act permits the Commission to take such a decision and still be immune to being contested in the COMPAT (since 53A(1)(a) puts forth an exhaustive and not an inclusive list). The case was not taken to COMPAT.

Financial Software vs. CCI, 2016 [COMPAT]

The commission disagreed with DG on its findings of contravention of sections 3 and 4. The appellant believed that the order was under 26(8) and hence was not challengeable under section 53(1)(a), and took the case to Delhi HC. However, Financial Software later appealed in the COMPAT considering the admittance of appeal in the cases of Sunil Bansal and Faiveley both of which were adjudicated under 26(8) despite the mentions of section 26(6) in the former. The level of arbitrariness in this case crosses all levels of human comprehension and the delays caused fail the very purpose of ‘ensuring competition for the greater good’.

Regarding closure of a case

Presently the act does not contain any provision to close a case if the DG’s report recognizes contravention of the Act. Nowhere does the Act empower the commission to act in the case where the DG has found a contravention in its report and the Commission disagrees with the same. It is appropriate that two additional clauses of the following nature be included in the Act.

26(9) If the report of the Director General referred to in sub-section (3) recommends that there is contravention of any of the provisions of this Act,the Commission shall invite objections or suggestions from the Central Government or the State Government or the statutory authority or theparties concerned, as the case may be, on such report of the Director General.

26(10) If, after consideration of the objections and suggestions referred to in sub section (9), if any, the Commission disagrees with the recommendation of the Director General, it shall close the matter forthwith and pass such orders as it deems fit and communicate its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be.

Needless to mention that S.26(10) should be included in S.53(1)(a) and be made appealable because otherwise, the closure becomes arbitrary without any scrutiny.