The Competition Commission of India (hereinafter referred to as “CCI”) is a legal body formed in compliance with the Competition Act, 2002 (“Competition Act“) with the sole objective to combat anti-competitive acts in India’s domiciliary market. In order to attain this objective, the CCI has been given broad powers to investigate, evaluate, and punish parties who engage in anti-competitive behaviour that is forbidden under the Competition Act.
One of the key provisions of the Competition Act i.e., Section 26(1) allows CCI to order an Investigation by the Director General (DG) if the commission is of the opinion that there exists a prima facie case in relation to evidence received. Since the commencement of the act, the horizon of the DG’s investigative power, as well as the way in which the DG can employ those powers, has been a sensitive topic. Parties to a dispute frequently contest the DG’s report disputing the scope of investigation or the DG’s authority. All appeals against impugned orders of the CCI earlier, would be heard by the Competition Appellate Tribunal (COMPAT). The COMPAT was abolished on May 26, 2017 as a result of a recent modification. The National Company Law Appellate Tribunal (NCLAT) will now have the appellate function under the Competition Act.
Dilemma in order passed U/S 26(1) whether Administrative or Authoritative in Nature?
CCI is a statutory body with quasi-judicial powers, its Section 26(1) orders are not “administrative” in nature. Further, even if they were, CCI must nevertheless apply its mind to the evidence in the record and, thereafter, conclude based on cogent reasons that there is a prima facie violation of the Act. This is especially important given the DG’s expansive powers during an investigation.
In WHATSAPP LLC V. CCI it was held that the order passed U/S.26(1) of the Act is purely administrative in nature and does not have any implications on the petitioner’s civil rights (s). In fact, the impugned Order may have been issued without providing the petitioner with any notice or an opportunity to be heard. Though the respondent is required to explain reasons in the impugned decision, I believe that because it is not required to make any definitive conclusions but merely to develop a prima facie view in order to initiate such an inquiry, it does not need to address all of the petitioner(s)’ points in depth.
In the above-mentioned case of WhatsApp LLC, the Hon’ble Single Judge in my opinion failed to appreciate that the direction to investigate U/S 26(1) of the Act has significant adverse consequences. Indeed, the CCI Order subjects WhatsApp to the rigors of an intrusive investigation by the DG whose powers are “far more sweeping and wider than the power of investigation conferred on the Police under the Code of Criminal Procedure” (Google Inc v. CCI). As the Hon’ble Supreme Court observed, even where such investigations are non-binding fact-finding endeavours, they carry “grave” risks — including prejudicially impacting a party’s credibility, reputation, and commercial prospects.
Challenge of order passed under section 26(1)
In the landmark case of CCI v. SAIL the Hon’ble SC held that, “No appeal lies against an order of CCI, directing an investigation into a complaint received by it”. One of the key issues addressed by The Hon’ble SC was, ‘Whether the CCI orders establishing a prima facie case, issued in the exercise of its competence under section 26(1) of the act, are appealable under section 53A (1) of the act.?’. The supreme court stated that the CCI’s directive to the DG to undertake an inquiry under section 26(1) of the act is not appealable under section 53A (1) of the act since the decision under section 26(1) does not decide any rights or responsibilities of the parties.
The above mentioned case of CCI v. SAIL, raised a havoc in the legal industry and the said development is concerning, since the particular order of the CCI to direct investigation has been specifically set aside by the legislature from the scope/jurisdiction of appealable orders under Section 53A of the Act. In order to cater the above mentioned issue different HC have utilised their extraordinary power inherent from Article 226 of the Indian Constitution to stay or set aside a few CCI orders to examine implicated parties.
Jurisdiction of Court to interfere with order under 26(1)
The legislative objective, based on a quick skim reading of the Competition Act, is for cases to be resolved quickly since extended litigation would be harmful to the market and economy. In SAIL judgement and Excel Corporation vs. CCI, the Supreme Court reaffirmed this stance. As a result, court involvement in CCI investigations should only be used when absolutely required, because a delay in the inquiry might cause irreversible harm to a domestic market. Over a span of time, the Apex Court and numerous High Courts have considered it appropriate to intervene in these orders under their extraordinary jurisdiction. A combined study of the law and the Apex Court judgements following reasons can be established on which an order to investigate stayed or set aside: