Case Brief: Namrata Marketing Pvt. Ltd. v. Competition Commission of India and others

Allahabad High Court, Decided on 04.12.2013

Citation: MANU/UP/2018/2013

Facts: The Government of Uttar Pradesh enacted the Uttar Pradesh Sugar Undertakings (Acquisition) (Amendment) Act, 2009 in an attempt to privatize the operating units of 11 Sugar Mills held by the Sugar Corporation. In pursuance of this Act, the Government decided to opt for slump sale of the operating units. The petitioners were bidders in this slump sale. The CAG in one of its Reports has alleged that in the impugned slump sale, bid-rigging was involved. The Competition Commission on the basis of the Report have suo moto looked into the matter. On being satisfied of the existence of a prima facie case, the Director General has been directed to investigate into the matter. The DG therefore asked the petitioner to submit certain information. The Petitioners have requested for extension of time because the Constitutionality of the Act which facilitated the slump sale itself has been challenged and the petition is pending in the Supreme Court. The DG persisted for the information and passed an order/ notice under Section 41(2) read with Section 36(2) of the Competition Act, 2002 (“the Act”). The Petitioners have therefore come before this Court to quash the order of the DG and to seek the CCI to keep the proceedings in respect of the petitioner in abeyance till SC decides on the validity of the UP Sugar Undertaking Act.

Issue: In light of the pending SC case challenging the validity of the Uttar Pradesh Sugar Undertaking Act, will the rights of the petitioner be prejudiced if the is the Commission initiates investigation against actions under the impugned Act?

Judgment:

The scheme of the Act is discussed by the Court to understand the procedure laid under the Act. Following that the court looks at the evidence which the Commission has relied on to conclude the existence of a prima facie case. The Court concludes by looking at the rights of the Petitioner at the stage of investigation by the Commission and if a Writ petition is maintainable at that stage.

Procedure under the Act:

A full reading of Sections 3, 4, 19 and 26 of the Competition Act make it clear that the Commission may form its opinion with regard to the prima facie case for contraventions of the provisions of Section 3 or Section 4. Section 19 states that if the Commission is prima facie satisfied that the information needs investigation, it will ask the Director-General (DG) to make the necessary inquiry/investigation in respect of violation of Section 3 or 4 of the Act. The function of the DG is to assist the Commission in conduct of enquiry into contravention of any provision of the Act. The DG, on receipt of direction from the Commission makes an enquiry and submits a report on his findings to the Commission. Thereupon, the Commission forwards a copy of its report to the parties concerned. If the investigation was initiated on the reference of Central Government or the State Government or the statutory authority, it shall forward the report to such authority. If the report finds that there is no contravention of Section 3 or 4 of the Act, the Commission invites objections or suggestions from the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be, on the report of the DG, and after considering the objections/suggestions received from the concerned party if the Commission agrees with the recommendation of the Director General, it closes the matter. However, if the Commission is of the opinion that further investigation is required, it may direct further investigation in the matter by the Director General or it may itself make further inquiry in accordance with the provisions of the Act.

Evidence relied on to establish prima facie case:

The Court is informed of the evidence looked at by the Commission to establish a prima facie case to counter the argument of the petitioner that is no material for the suo moto enquiry. The evidence relied which indicates at bid rigging are (for example):

1. No competition amongst bidders as each bidder had bid exclusively for separate sugar mills.

2. Bidders were related companies.

3. Unusual withdrawal of bids where there was overlaps.

Rights of the Petitioner at the stage of investigation:

The Court relies on the Supreme Court decision in Competition Commission of India v. Steel Authority of India Limited and another to decide the issue.

The SAIL case held:

1. The matter related to contraventions of the Act, ought to be disposed of expeditiously in a time bound manner.

2. Scope of S. 26: “Whether the parties are entitled to notice or hearing, as a matter of right, at the preliminary stage of formulating an opinion as to the existence of the prima facie case?”

“Neither any statutory duty is cast on the Commission to issue notice or grant hearing, nor any party can claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the Commission, in terms of Section 26(1) of the Act that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter.”

1. “The Supreme Court further held that formation of the prima facie opinion under Section 26(1) is a direction simpliciter and it is administrative in nature, and a direction is like a departmental proceeding, which does not entail civil consequences.”

In the present case, the petitioner has been simply asked to furnish some documents mentioned in the impugned order/notice of DG. The enquiry is in the nature of an administrative enquiry. No prejudice will be caused to the petitioner if the DG causes an investigation into the matter.

Maintainability of Writ Petition:

The order of DG at the stage of investigation is analogous to a show-cause notice in an administrative enquiry. The Supreme Court has held that a writ petition against a show cause is maintainable on very limited ground; i.e. when the show cause is beyond the jurisdiction or against the vires of the statutory provision. In the present case, the petitioner has not challenged the impugned notice on the ground that the Commission does not have power to investigate or enquire into the matter. Therefore the Writ Petition is not maintainable against the DG investigation.

Directions: The Petitioners in this case were directed to comply with the order of the DG.