[Nardeep Chawla is a fifth-year law student at Maharashtra National Law University, Mumbai]
Introduction
On 30th April 2024, the hon’ble Madras High Court passed an unusual judgement in the matter of MRF Ltd vs Competition Commission of India (MRF vs CCI), which has essentially introduced a conflicting precedent on the rights of opposite parties during investigation stage under Section 26 of the Competition Act, 2002 (Act) by holding that opposite parties have the right to be intimated about their inclusion as an opposite party and the opportunity to contest the impleadment as well. The single bench judgment is not just erroneous and bad in law because it goes against the precedents set by the hon’ble Supreme Court in Competition Commission of India vs Steel Authority of India, 2010 (CCI vs SAIL), it also goes against the interpretation of Section 26(4) and prevents a “harm” on the opposite parties which in real life application can be at best described as a mere terminology change with no effect on the rights of the opposite parties.
Background
The MRF vs CCI is result of the CCI’s probe into Tyre manufacturer's cartelization, which started in 2019. The Directorate of State Transport, Haryana made a complaint to commission against JK Tyres & Industries Limited for bid rigging under Section 3(3) of the Act in 2019. The commission passed an order under Section 26 of the Act directing Director General (DG) to investigate the circumstances, notably at that time, JK Tyres was the only opposite party. Thereafter, DG sought responses from MRF in the capacity of MRF being a third-party and not as a party to the proceedings. MRF by a reply on 21st August 2020 had emphasized on its status as third party and asked for copy of order passed under Section 26 in 2019 but was denied by CCI as the MRF was not entitled to it. Subsequently, CCI passed an order on 26th August 2020 directing DG to investigate several other Tyre manufacturers including MRF, CEAT Ltd, Michelin Tyre Ltd, Apollo Tyres, etc., as OP-2 to OP-8 based on a note by DG requesting the commission’s permission to investigate the alleged cartelization by all the major tyre manufacturers. This order was challenged in the Madras High Court and resulted in an erroneous precedent that third parties cannot be impleaded as opposite parties without a notice and opportunity to contest the direction of investigation by CCI.
The Unnatural Interpretation To Protect Natural Justice Principles
The problem with the judgment begins at paragraph 22 where the hon’ble judge notes that it is “it was incumbent upon the authorities to have solicited the response of the petitioner prior to changing the status, which change has serious and grave implications”. This view is not backed by judicial precedents in antitrust jurisprudence in the country as the hon’ble justice has herself noted in paragraph 40 that the procedural framework of Sections 41 and 26(4) is silent upon the procedure to be followed when a third party is converted to being an opposite party. However, noting that an opportunity to be heard must be granted before such elevation goes against the precedent set in landmark judgment of CCI vs SAIL, where the hon’ble Supreme Court has held that a Section 26 order to investigate is a mere administrative task where the principles of natural justice do not exist as there is no judicial inquest being undertaken by the antitrust regulator and that there is no requirement of giving an opportunity to be heard to any party under investigation. This precedent has since been followed rigorously in cases such as XYZ vs Alphabet, 2020 where the commission noted that the nature of proceedings before the commission is inquisitorial and not adversarial or accusatory. On a similar line of reasoning, the hon’ble Gujarat High Court in J.K Paper Ltd. Vs Competition Commission of India, 2022 held that the order under Section 26(1) merely directs an investigation, the rights and liabilities of the parties are not affected and the CCI will examine the validity of allegations after the report. This judgment is in line with the reasoning that the DG and the Commission are two separate entities which perform two separate functions.
Now the main question that arises is why despite the precedent that natural justice rights are not affected in an administrative task of ordering an investigation, the hon’ble judge still gave the order in favor of opposite parties? The answer to this question brings us to probably the gravest misinterpretation of the Act when the hon’ble judge notes in paragraph 45 that “Section 26(4) makes it statutorily mandatory for the Commission to supply a copy of the report to the parties”. This is a grave misinterpretation as Section 26(4) uses the word “may” in relation to forwarding a copy of the report, hence this was plain oversight by the hon’ble judge. This misinterpretation is a grave issue, not just because of its nature but also because the hon’ble judge noted in paragraph 39 that MRF was being treated as a third party because they had not been served the notice for further investigation under Section 26(4). The reason behind the conclusion that CCI is treating MRF as a third party is because if it was an opposite party, it would have got the notice is legally invalid.
Another defense of this conflicting judgment could have been that the DG is not entitled to expand the scope of the investigation from the information received or the order under Section 26(1) but that also has been dealt in detail by the hon’ble Supreme Court in Excel Crop Care Limited vs Competition Commission of India where the apex court has held that any restriction of the investigation process would defeat the very purpose of the Act and that the CCI in initial stages could not foresee or predict violations of the Act hence enhancing the scope of investigation is well within the powers of DG.
Now we come to the final nail in the coffin of validity of the reasoning behind this controversial ruling. It is not unreasonable to think that the rights of the opposite parties would get affected depending on the fact, whether it is a party to the proceedings as an accused or is a mere third party, the hon’ble judge should have inquired into the situation of what rights substantially get affected due to the conversion and not what is the procedure of doing so.
Section 36(4) of the Act gives commission the power to ask ‘any’ person to produce before the DG and furnish any document or books or any information of the trade which is necessary for the investigation. This is the same provision from where the commission draws its powers to regulate the procedure. It becomes clear that both the party under investigation and the third party may be asked to produce the relevant documents, assist in the investigation, etc., therefore the main question that should have been discussed in the MRF vs CCI is that can a third party evade assisting in the investigation and hide information from the commission if it knows that it is being investigated for the offence? And the answer is - if we read Section 45 of the Act, which specifies penalty for offences relating to furnishing of information, it becomes clear that this provision applies to a ‘person’ who is required to furnish that information, book, document, etc. This ‘person’, according to Section 36(4) of the Act, could be an opposite party as well as a third party like MRF Ltd was for some time. Hence, the conclusion would be that there exists no harm of rights of an opposite party if its status gets elevated from being a mere spectator to the player in the arena since both have the same responsibilities, duties and rights in the Act when it comes to participating in the investigation.
Conclusion
The MRF vs CCI has not just went against the main precedents set regarding the procedural aspects of investigation and notice of investigation in antitrust matters, but it has now introduced a conflicting and confusing rule which could benefit OPs in some ongoing matters of cartelization. It would be interesting to see how the apex court deals with the appeal of this judgment when there is one and if the apex court will rule it as a precedent unique to its facts or would change the landscape of natural justice principles in antitrust jurisprudence.
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