Suo Moto Addition of 3rd Parties by the DG under Indian Competition Law – Need for Taming the Investigative Beast? (Part II)
by Kabir Singh
Part I of this article provided the readers with an overview of the legislative framework of the DG’s investigatory powers and the impact on the same by the SC judgment of Excel Crop Care Ltd. v. Competition Commission of India. Part II delves into the conflicting High Court judgments on the power of the DG to add third parties and suggests a check & balance mechanism to restrain the DG’s suo moto power to do the same.
Analysing the High Court Judgments on Addition of Third Parties
In July 2018, a division bench of the Madras High Court addressed the question of whether the DG is allowed to add third parties in the case of Hyundai Motor India Ltd. v. Competition Commission of India (Hyundai Motors). The DG, in this case, had expanded its investigatory scope beyond the initial three car manufacturers addressed in the complaint. The Madras HC, while citing Excel, held that the addition of third parties was legally valid. More importantly, the Court noted and emphasised on the fact that since the DG had sought permission from the CCI before adding the third parties, the addition of the parties was not suo moto, and thus legally valid. This emphasis is significant, as it highlighted/re-affirmed the fact that the DG is not allowed to conduct suo moto investigations, the dangers of which have been highlighted in earlier judgments and law reports.
Later, in September 2018, another judgment on the addition of third parties was penned by a division bench of the Delhi High Court in Cadila Health Care Limited & Others v Competition Commission of India & Others (Cadila). In the said case, the PF Order noted that certain pharmaceutical companies had indulged in anti-competitive practices. The DG went beyond the mentioned companies and also investigated the actions of Cadila Healthcare Ltd (Cadila Ltd.). Hence, Cadila Ltd. challenged the DG’s investigation before the Delhi HC on the basis of them not being mentioned in the PF Order. The Delhi HC rejected Cadila Ltd.’s claims and held that the DG’s power to add third parties is not limited to the PF Order. Interestingly, this judgment, unlike Hyundai Motors, made no reference to suo moto
investigations by the DG. This contrast is significant and shall be delved into later, as the DG
in the present case made no effort to take the CCI’s permission before adding Cadila Ltd. to
the investigation.
In the same vein as the above judgments, in April 2019, another division bench of the Delhi
HC delved into the DG’s power to add third parties in the case of Mahindra & Mahindra vs. Competition Commission of India & Others (Mahindra). The CCI had passed a PF Order for investigating anti-competitive conduct by three car manufacturing companies, i.e., Fiat, Honda & Volkswagen. The DG while investigating, noted that other car companies were also indulging in similar anti-competitive practices and requested, via an internal note to the CCI, to add the said companies to the investigation. The later added parties protested against the same by arguing that a separate PF Order was required to add them to the investigation. The Delhi HC rejected their contention and allowed their addition to the investigation, following the same rationale as Hyundai Motors and Cadila. While the judgment itself made no reference to concerns regarding suo moto exercise of powers, since permission was requested via an internal notice by the DG, the said addition may not be considered suo moto in nature.
From the above three judgments, it can be soundly concluded that the DG possesses the power to add third parties to an investigation. However, confusion arises upon a deeper look into the rationale adopted by each case. While Cadila makes no mention of suo moto exercise of power by the DG, Hyundai Motors extensively relies upon it, and also opposes it. On the basis of our analysis, Mahindra may also be assumed to be against granting the DG excessive suo moto powers. This conflict amongst rationale needs further consideration and requires resolving. The same brings us to the last section, which looks into the dangers of granting the DG suo moto powers and concludes while arguing against the same.
The Conclusion: Restraining Suo Moto Addition of Third Parties
The origin of the Competition Act, 2002 can be traced to the Report of the High Level Committee on Competition Policy and Law, 2000 (Raghavan Committee) and the 93 rd Report of the Parliamentary Standing Committee (93 rd Report). Both the Raghavan Committee and the 93 rd Report explicitly state that the DG under the new Act shall possess no suo moto power of investigation. The Raghavan Committee further clarified that the same was done to prevent any “fishing and rowing enquiries designed to threaten and harass corporates”. The intention to not grant the DG any suo moto powers was also codified in the Statement of Objects and Reasons of the Competition Act.
However, contemporary judicial and legislative trends seem to be heading towards a contrary direction to the Competition Act’s framer’s intent to not grant the DG excessive powers. For example, both the Draft Competition (Amendment) Bill, 2020 and the Competition (Amendment) Bill, 2022, were noted to substantially increase the scope of the DG’s investigatory powers. While the enlargement of DG’s powers is a positive move, and would definitely result in increasing caution exercised by companies and deter anti-competitive practices, it is necessary that the said enlargement is met with sufficient checks and balances. The absence of the said checks might lead to the unjust exercise of the DG’s powers and materialisation of the concerns of “fishing and rowing investigations” raised by the Raghavan Committee.
On the basis of the above analysis, the author proposes that the DG must mandatorily take permission from the CCI before adding any third party to an investigation, in alignment with the judgments of Hyundai Motors and Mahindra. The permission may be taken officially, as in Hyundai Motors, or internally, as in Mahindra. The same guarantees that the DG has the power to add third parties to an investigation, ensuring that its investigatory powers are not impeded, in alignment with Excel. At the same time, this ensures that its powers are not suo moto and unfettered, by adding a sufficient check against the same.
Both the judgments in Cadila and Mahindra have been appealed in the Apex Court, and the jurisprudence may yet again witness another expansion of the DG’s power, in the same vein as Excel. However, it is hoped and prayed that the Supreme Court offsets the tremors of the power expansion with sufficient checks and balances in their judgment.
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