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Apr 1, 20186 min read

End of Road for COMPAT: Issues and Challenges

Introduction

On 31st March 2017, the Finance Act 2017 received the assent of the President. The notification for this Act stated that from 26th May, 2017, Competition Appellate Tribunal [hereinafter, “COMPAT”]would cease to exist. Under the amended Section 53A, the appellate function under the Competition Act, 2002 [hereinafter, “Competition Act”] now lies with the National Company Law Appellate Tribunal [hereinafter, “NCLAT”].

This blog will outline the history of COMPAT, highlighting the power tussles it engaged in and examine the need and effectiveness of replacing COMPAT with NCLAT.

History of COMPAT

COMPAT was constituted following the passage of the Competition (Amendment) Act, 2007[hereinafter“Amendment Act, 2007”]. It amended the Competition Act by deleting Section 40 and introducing Chapter VIIIA titled “Appellate Tribunal”.[1]Prior to the amendment, any person aggrieved by any decision or order of the Competition Commission of India[hereinafter, “CCI”] would have todirectly file an appeal with the Supreme Court asking for necessary relief. But following the amendment, parties aggrieved by an order of CCI had to first file an appeal with COMPAT and if they were still dissatisfied, they could approach the Supreme Court. The double-layered system streamlined the cases which landed in the Supreme Court.

The amendment and the resulting creation of COMPAT was the result of the Supreme Court judgmentin the case ofBrahmDutt vs. Union of India[2] [“BrahmDutt”]. InBrahmDutt, the Supreme Court ruled on whether with regard to the operations and appointments of CCI, the Competition Act was in violation of the doctrine of separation of powers as recognised by the Constitution of India. The Supreme Court noted that CCI was performing advisory, regulatory and adjudicatory functions, even when appointments to CCI were completely under the control of the government. Under the doctrine of separation of powers, appointments to tribunals, wherein the functions are essentially judicial in nature, are to be made by the judiciary. The Supreme Court therefore, was of the view that the Government ought to consider the creation of a separate appellate body. So, while CCI being the expert body, would continue to perform a mix of advisory, regulatory and adjudicatory functions, this new body would be tasked primarily withperforming adjudicatory functions. It would ensure judicial accountability of CCI and wouldensure that orders passed by CCI are fair and in consonance with the principles of natural justice.

In the wake of this judgment, the Government passed the Amendment Act, 2007 creating COMPAT. The formal notificationto establish COMPAT with its headquarters in New Delhi was passed on 15th May, 2009.[3]The Amendment Act interalia authorised COMPAT to hear appeals against orders passed by CCI and to adjudicate on compensation applications.[4]The power of COMPAT to take up appeals was limited to orders passed by CCI under Sections 26(2), 26(6), 27, 28, 31, 32, 33, 38, 39, 43, 43, 43A, 44, 45 and 46 of the Competition Act.

The Tussle of Power Between CCI &COMPAT

CCI’s relationship with COMPAT has been fairly tumultuous. CCI’s first appeal at Supreme Court against COMPAT came in the matter of Competition Commission of India vs. Steel Authority of India Ltd.[5] Jindal had filed a complaint with the CCI against SAIL and Indian Railways alleging abuse of dominant position and existence of anti-competitive agreement. CCI had taken a prima facie view in the matter referring it to its director general, investigations under Section 26(1) of the Competition Act. Before the director general could commence his inquiry, SAIL filed an appeal with COMPATon grounds, inter alia, that the order was contrary to the principles of natural justice, since CCI had neither given a notice nor granted a hearing to it. The tribunal passed an interim order and stayed the investigation. CCI, taken aback by the ruling, approached the Supreme Court.[6]

The Supreme Court in its judgment attempted to circumscribe the balance of powers between CCI and COMPAT. It observed that, all orders passed by the CCI are not subject to appeal.  When the matter is at the stage of forming a prima facie case, there exists no duty under the Act to give notice or grant hearing to any party.

This judgment was hailed for its efforts to delineate and outline the powers of CCI and to provide for a robust antitrust jurisprudence in India. However, this judgment marked the beginning of an unending power tussle between the two bodies. In its journey of 8 years, COMPAT disposed 360 appeals filed against orders passed by CCI.[7] It has upheld 216 orders of the CCI, while striking down 114 orders, which is about 40% of the orders.[8]

While COMPAT set aside several of the CCI’s order primarily on grounds of violation of principles of natural justice. But increasingly, it appeared that COMPAT was over-stepping its powers.

In 2015, CCI had dismissed a complaint filed by Gujarat Industries Power Company Ltd. against Gas Authority of India Ltd. alleging abuse of dominant position. CCI took a prima facie view and held that there was no case of abuse of dominant position. On appeal, COMPAT passed an order reversing the decision of CCI. It said that at the stage of forming an opinion to commission investigation, CCI should only decide whether or not there exists a prima facie case. However, it was found by COMPAT that CCI had donned the role of an investigator and had prematurely dismissed the allegation of anti-competitive behaviour.[9]  COMPAT, thereafter, passed the order issuing a directive that the director general must initiate investigation instead of remanding the matter to CCI. Oflate, COMPAT had passed a number of such directives, bypassing the CCI entirely.  In 2016, COMPAT had issued a directive to the director general to initiate investigations against Uber, after CCI had dismissed the complaint filed by Meru Cabs.[10] While the matter is yet to be finally disposed, it has been argued by Uber that the order by COMPAT suffered from a “jurisdictional flaw”.[11]

But despite these ongoing tussles of power, COMPAT had a fairly respectably run as an appellate tribunal. It was instrumental in adopting “relevant turnover” as opposed to “total turnover” in M/s Excel Corp Care Limited vs. Competition Commission of India[12], therefore bringing India in line with the global best practices. COMPAT upheld the principle of natural justice in Lafarge India Limited &Ors. vs. Competition Commission of India.[13] In this case, CCI had passed an order with the Chairperson as one of the signatories to the order even when the Chairperson had not heard the matter. In its order, COMPAT highlighted the principles of natural justice are enshrined in the order and CCI cannot pass orders violating the principles.

Therefore, it remains unclear what had warranted the decision to completely scrap-off COMPATand necessitated the transfer of all matters of appeal to NCLAT. NCLAT is already saddled with appeals filed against orders passed by NCLT under Section 410 of the Companies Act, 2013. It is also the appellate tribunal for hearing appeals against orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 [“IBC”]. Further, NCLAT is also the appellate tribunal for hearing appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.Even with the burgeoning work, membership of NCLAT remains unchanged. NCLAT continues to comprise of only two members i.e., one Chairperson who is a retired Supreme Court judge, and one other technical member.[14]Neither of the two members have expertise in competition law.[15]While the Government can appoint up to 11 members to NCLAT, no such move appears to be on the radar. It was further revealed in an RTI application that as of November 2017, out of the 73 cases which were transferred to the NCLAT, the appellate body has succeeded in disposing just 8 cases.[16]

Conclusion

It remains to be seen whether the end of COMPAT was really necessary and whether NCLAT will serve as a better appellate tribunal for competition law. However, it is clear that NCLAT has an uphill task. Considering that the scope of competition law in India is only going to increase, the government should consider expanding the bench strength of NCLAT. It should appoint enough competition law experts to ensure that the competition law disputes are smoothly adjudicated.

This post has been submitted by Sayan Deb, a fifth year student of West Bengal National University of Juridical Sciences. 

 

[1] Prior to omission, Section 40 read as under:- “Any person aggrieved by any decision or order of the Commission may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Commission to him on one or more of the grounds specified in section 100 of the Code of Civil Procedure, 1908 (5 of 1908): Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days: Provided further that no appeal shall lie against any decision or order of the Commission made with the consent of the parties.”

[2]AIR 2005 SC 730.

[4]Sections 42A, 53(Q)(2), 53N, Competition Act, 2002.

[5](2010) 10 SCC 744.

[7] Information is available till the close of financial year 2015-2016;

[9] Gujarat Industries Power Company Limited v. Competition Commission of India, Appeal No. 3/2016.

[10] Meru Travels Solutions Private Limited v. Competition Commission of India and Ors., Appeal No. 31/2016.

[12] Appeal No. 79/2012.

[13] Order dated August 31 2016, Case No. 29/2010.

[14] Section 410, Companies Act, 2013.

[15] The present membership comprises of Hon’ble Justice Shri S.J. Mukhopadhaya, former Judge of the Supreme Court, who is the chairman and Hon’ble Mr. Balvinder Singh, former Deputy CAG is the technical member.

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