[Shourya Mitra is a penultimate year law student at Jindal Global Law School, Sonipat]
Recently, the National Company Law Appellate Tribunal (NCLAT) in the case of Amit Mittal v. DLF Ltd Competition Appeal (AT) No.82 of 2018 (DLF case), passed an order remitting a case against DLF, back to the Competition Commission of India (CCI) on account of the Commission’s order being void. The reason was that CCI had allegedly exceeded its jurisdiction while directing the Director General (DG) to investigate further.
The Tribunal held that the Commission could only direct a further investigation by the DG if the DG concluded that there was no breach of the provisions of the Competition Act, 2002. In effect, the Commission cannot disagree with the affirmative findings of the DG and order further investigation. In remitting the matter back to the Commission, the Tribunal ended up limiting the scope of the Commission’s power to give findings independently of the report of the DG which will be discussed further.
The Timeline Summarised
The Informant had alleged that DLF was abusing its dominant position via its agreements with homebuyers which had arbitrary and one-sided clauses. The Commission had found prima facie contravention and had ordered the DG to investigate. The DG had also concluded in the affirmative. However, the commission directed the DG to conduct a further investigation pursuant to its powers under regulation 20(6) of the Competition Commission of India (General) Regulations, 2009. The DG in its supplementary report found that there was no contravention of the provisions and based on this supplementary report, the Commission concluded that further proceedings were not necessary and decided to close the case.
On appeal, the NCLAT examined the provisions contained in section 26 of the Competition Act, 2002 and concluded that CCI has limited jurisdiction to direct further investigation. Accordingly, the only case in which the Commission can direct further investigation is under sections 26(5) read with 26(7) wherein the DG has concluded that no contravention of the provisions exists. Section 26(5) envisages a situation wherein the DG recommends that there is no contravention, and the Commission invites objections from the concerned parties. Under section 26(7), the Commission can order a further investigation by the DG after taking into account any objections that may have been raised under section 26(5).
It also dismissed the argument that regulation 20(6) allows for the Commission to direct further investigation even in cases where the DG recommends the existence of a contravention. The NCLAT held that the reading of regulation 20(6) must be restricted within the framework of section 26 which only explicitly permits such direction under 26(7).
The implication of this ratio however goes beyond just restricting the power of the Commission to order further investigation. It indirectly restricts the Commission from disagreeing with the affirmative findings of the DG as the Commission cannot use its investigating arm to deal with any irregularities that may exist in the report and direct further investigation.
Further, this may be quite problematic on three fronts:
- This undermines the idea that the Commission is to assess the report of DG independently and is free to disagree with it;
- It ignores the potential irregularities that tend to show up in the investigation of the DG and the far-reaching consequences of it;
- The ruling fails to acknowledge both the pre-existing jurisprudence as well as the prospective changes in the law that are to come.
The Commission’s Ability to Give Findings Independent of the Report
The High Court of Delhi in the case of Saurabh Tripathy v. CCI held that a report by the DG under section 26(8) which recommends that there are contraventions, is not binding on the Commission and that the provisions of section 26(7) and (8) are merely enabling provisions that allow the Commission to proceed with further inquiry/investigation. Similar rulings have also been given by the Competition Appellate Tribunal (COMPAT), and the NCLAT wherein it was held that the Commission can order a further investigation by the DG if it is not satisfied with the report of the DG and that the Commission has to apply its mind independently of the Report. The report of the DG is merely recommendatory in nature. The order of the NCLAT in the DLF case overlooks this independence that is attributed to the Commission.
The Far-reaching Implications of an Erroneous DG Investigation
The DG has wide powers, and the consequences of the investigation can be very far-reaching. There have been numerous cases wherein the DG has given findings that are speculative or erroneous. For instance, in the case of Google Matrimony, one of the findings with respect to the abuse of dominance was termed as egregious, and in the realm of speculation, as the DG had recommended a contravention on the fact that there was some “scope” for Google to interpret the clauses in a certain manner. Additionally, the COMPAT in Gurpreet Singh, held that the DG was pre-determined to reach a finding that showed the contravention of the provisions. This led the DG to resort to certain distasteful means in its investigation which were “totally unjustified and contrary to the basics of fairness and natural justice”.
Even mere errors of the DG have had immense consequences, such as in the recent ruling of the NCLAT in the Tyre Cartel case, wherein the DG’s analysis of price parallelism in its report had miscalculations which if corrected, would show a result to the contrary of such allegation. Consequently, the NCLAT had to remand the matter back to the CCI for reconsideration.
The ratio of the NCLAT in the DLF case results in imposing such reports on the Commission, despite the fact that they often may consist of such errors.
The Disregard of the Pre-existing Jurisprudence and Prospective Changes to Law
The Apex Court in the case of CCI v. SAIL stated that: “If there is contravention of any of the provisions of the Act and in the opinion of the Commission, further inquiry is needed, then it shall conduct such further inquiry into the matter itself or direct the Director General to do so in accordance with the provisions of the Act”. This statement is reflective of the fact that the Commission is free to choose how it wants to proceed further.
Similarly, a Division Bench of the Gujarat High Court has held that if the DG’s report recommends contravention, then the CCI is “obliged to proceed and investigate further”.
The NCLAT failed to take these rulings into account. Further, it should also have considered the Competition Law review Committee Report, 2019, wherein the Committee identified a problem that on a bare reading of section 26(8), there is an impression created, that CCI cannot disagree with the recommendations of the DG, which is not the case. Similarly on a bare reading of section 26(7), an impression is created that CCI cannot pass the appropriate final orders which was also sought to be corrected by the committee. Further, the recent Competition Amendment Bill, 2022 also highlights the intent of the legislature wherein the proposed section 26(3A) provides the Commission with the power to direct the DG to further investigate irrespective of whether the DG recommends a contravention or not.
The Tribunal’s ruling and remission fail to consider the pre-existing jurisprudence and also overlook the prospective changes in the law that are to come. The order of the NCLAT for all the above-mentioned reasons may act as a hindrance to the independence of the Commission and restrict it from using its own investigating arm for further investigation. The NCLAT’s reasoning that regulation 20(6) should be restricted within the framework of section 26 should have been considered carefully as the proposed amendment does envisage a situation where the Commission can direct further investigation, irrespective of the nature of the DG’s findings. The same, however, will hopefully be statutorily remedied as and when the bill is passed in the upcoming budget session.
– Shourya Mitra