Introduction
The Gujarat High Court delivered a judgment on 09.09.2022 in the case of M/s Shree Shivam Corporation through its Sole Proprietor Mr. Prahlad Durlabhjibhai Joshi v. Competition Commission of India[i], wherein the Hon’ble High Court (‘HC’) held that an order by the Competition Commission of India (‘CCI’) directing the Director General (‘DG’) to cause an investigation into the matter does not affect the parties’ rights, and opportunity of hearing is not mandatory at this stage.
Brief Facts
The petitioner company was primarily involved in the printing and binding of schoolbooks and related material, its primary consumer being the Gujarat Council and Elementary Education (‘GCEE’). The allegation on the petitioner company was that of bid rigging in the tender process of the Gujarat State Board of School Texts Books (‘GSBSTB’).
The informant had also alleged that GSBSTB had abused its dominant position in the said market. However, an order under s. 26(2) of the Competition Act, 2002 (‘2002 Act’) was passed by the CCI holding that there was no prima facie case made out against GSBSTB.
In regard to the case against the petitioner company alleging bid rigging, the CCI passed another order under s. 26(1) of the 2002 Act stating that a prima facie case was made against the petitioner company and other bidders, and therefore, the DG was directed to cause an investigation in the said matter. Aggrieved by this, the petitioner company approached the HC.
Decision
The HC dismissed the petitions and held that an order passed under s. 26(1) of the 2002 Act did not require a preliminary hearing for parties against whom an investigation is initiated. It was further observed that the function performed by the CCI under s. 26(1) was of a very preliminary nature and did not condemn any person at that stage. Therefore, parties did not have a right to be heard at that stage.
The HC clarified that the power exercised under s. 19(1) of the 2002 Act was not judicial but administrative. Thus, when any authority exercises such administrative power regarding an inquiry, the Court does not sit as a Court of Appeal but reviews the manner in which the decision was made.
It was observed that s. 26(1) of the 2002 Act excludes the principle of natural justice, at least at the initial stage, in cases where a party’s conduct would seriously prejudice public interest. In such cases, the CCI can pass an ex-parte ad-interim injunction order immediately.
The HC noted that the function of the CCI under s. 26(1) of the 2002 Act is inquisitorial and regulatory, which does not condemn any person at that stage, so the application of audi alteram partem is not required. The HC stated that the CCI only needs to determine whether a prima facie case exists and may pass an order for inquiry based on prima facie material without elaborate reasons. The HC further held that the statute provides a safeguard for parties by allowing an inquiry after an order under s. 26(1) of the 2002 Act whereby the DG is required to grant an opportunity for a hearing during the inquiry.
The HC concluded that although no appeal lies against an order under s. 26(1) of the 2002 Act, a Constitutional remedy under a. 226 is available to challenge such an order. However, HCs should exercise judicial restraint and interfere only when the order is contrary to law or relevant factors were not considered.
Analysis
This ruling by the HC sheds light on the procedural aspects of initiating investigations under the 2002 Act. It highlights the CCI’s authority to order an investigation without a preliminary hearing, emphasizing the administrative, rather than judicial, nature of this early stage. Such an interpretation allows the CCI to act decisively against potential anti-competitive behaviour while ensuring that affected parties will have their chance to be heard during the detailed investigation that follows.
In this decision, the HC made it clear that the principles of natural justice, particularly the right to be heard, do not apply at the initial stage of inquiry under s. 26(1) of the 2002 Act. This is based on the understanding that such early actions by the CCI are meant to protect the public interest and are not final judgments against any party. This judgment also reassures that the CCI’s autonomy in conducting preliminary assessments is protected, with the judicial intervention being limited to instances where the CCI’s orders conflict with the law or fail to consider essential factors. This sets a precedent for the restrained role of judicial review in the early enforcement of competition law, ensuring that regulatory processes are not unnecessarily delayed by premature legal challenges.
End Note
[i] [2022] 142 taxmann.com 252 (Gujarat), dated 09.09.2022.
Authored by Sanyam Aggarwal, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.