Forum: Delhi High Court
Citation: 2014CompLR109(Delhi)
Facts:
An Information was received by the Competition Commission of India (hereinafter referred to as the ‘Commission’) that the manufacturers of Man Made Fibres (for short ‘MMF’) had imposed several restrictions on Indian Textile Industry and such restrictions constitute anticompetitive actions. The Commission on consideration of the information formed a prima facie opinion that there existed a case to direct the Director General to cause an investigation into the matter for contravening the provisions of Section 3 (3) (a) (b) (c) of the Competition Act, 2002 (hereinafter referred to as the ‘Act’). The DG reported that there was no violation of the provisions of Section 3(3) (a) (b) (c) either by the Petitioner or by other MMF manufacturers, but GIL (petitioner) being a dominant enterprise had abused its dominant position [violation of S. 4(2) (a) and (b)]. The petitioner filed an application before the Commission seeking inter alia quashing and setting aside of the DG’s report to the extent it pertains to the alleged violation of Section 4 of the Act. The ground for quashing being that investigation into the alleged violation of Section 4 of the Act was beyond the scope of the powers of the DG as he could have carried out investigation only into the alleged contraventions of Section 3(3) (a) (b) (c) of the Act. Since the Commission dismissed the application, the petitioner has approached this Court.
Issue: What is the scope and extent of the power of the Director General under the Act?
Judgment:
From an analysis of the provisions of the Act, the Court held that:
“The Act contains no provision empowering the Director General to investigate any contravention of sub section (1) of section 3 or sub section (1) of section 4 without a direction of the Commission in terms of sub section (1) of section 26. It can be seen that once the Commission forms an opinion that there exists a prima facie case of contravention, it is duty bound to direct investigation by the Director General. If, however, the Commission is of the opinion that there exists no prima facie case, it is required to close the matter forthwith, as provided in sub section (2) of section 26. Thus, formation of an opinion that prima facie there is a contravention of the provisions of the Act, is a sine qua non, for investigation by the Director General. In other words, the investigation by the Director General depends upon the nature of the opinion formed by the Commission, on consideration of reference or information received by it.” “If the Director General investigates an information which the Commission did not consider in the first instance, while forming opinion with respect to existence of a prima facie case, such an act on his part shall be ultra vires his power under the Act and, therefore, clearly illegal.”
But at the same time, “it is quite understandable if the Commission, on consideration of an information forms an opinion that there exists a prima facie contravention of Section 3 of the Act and the Director General, while investigating the said information, reports contravention of Section 4 or Section 3 as well as Section 4 of the Act. Such a report will not be contrary to the provisions of the Act, since the information which is investigated by the Director General was considered by the Commission, before it formed an opinion in terms of sub-section (1) of Section 26 of the Act. If, however, the investigation by the Director General is based upon an altogether different information which the Commission did not consider, while forming its opinion with respect to existence of a prima facie case, his action would be contrary to the scheme of the Act and the powers conferred upon him.”
Therefore the Director General is at liberty to report contravention of Section 4 even if the prima facie opinion recording by the Commission makes out a case of contravention of Section 3, but this can be done only while investigating the information or reference which the Commission had considered while forming its prima facie case and not by entertaining and investigating an altogether different information during the course of investigation by the Director General. In this case, the DG suo moto set the terms of investigation and the information alleging the abuse of dominance was not considered by the Commission. To conclude the DG acted beyond his scope of power.
Directions: Therefore the part of the Report which alleged violation of Section 4 cannot be utilized under Section 26(4) and (8). But the Commission can treat the part of the Report alleging violation as independent ‘information’ as per Section 19 and proceed with the investigation for abuse of dominance.
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