|
|
Tata Motors was not present for this ordinary meeting.] Bunker, who was present at this meeting was not present during the oral submissions made by Tata and only joined the CCI on 25 March 2013) |
| 24.7.2013 |
CCI recorded that Mahindra, Nissan Motor and BMW had filed application seeking fresh oral hearings in the matter on ground that there was change in the constitution of the quorum of the CCI. CCI dismissed these applications after recording that the only those members who heard the parties will pass the final order. |
Anurag Goel Ashok Chawla Geeta Gouri S N Dhingra S.L. Bunker M.L. Tayal [R Prasad (retired on 28.02.2013) and HC Gupta, who heard Tata Motors were not present for this ordinary meeting. Bunker, who was present at this meeting was not present during the oral submissions made by Tata and only joined the CCI on 25 March 2013.) |
| 08.08.2013 |
CCI considered the additional information filed by Tata Motors on 30 July 2013 and 5 August 2013 (Vol IV, @ 905-917) |
Anurag Goel Ashok Chawla Geeta Gouri S N Dhingra S.L. Bunker M.L. Tayal (R Prasad (retired on 28.02.2013) and HC Gupta, who heard Tata Motors were not present for this ordinary meeting. Bunker, who was present at this meeting was not present during the oral submissions made by Tata and only joined the CCI on 25 March 2013) |
| 25.8.2014 |
[CCI FINAL ORDER] |
Anurag Goel Ashok Chawla M L Tayal |
119
(R Prasad (retired on 28.02.2013), HC Gupta (retired on 24.11.2013), Geeta Gouri (retired on 15.04.2014) and Dhingra (March 2014) who heard Tata Motors were not present for this ordinary meeting. Also, the members HC Gupta, Dhingra and Geeta Gouri considered the additional submissions filed by Tata Motors post the
conclusion of the oral submissions.
Bunker, was not present during the oral
submissions made by Tata (only joined the CCI on 25 March 2013) considered the additional submissions filed by Tata Motors post the oral submissions.)
165. There can be no two opinions about the impropriety of a decision which is contrary to the principle that a tribunal or adjudicatory body is bound to render its decision, after hearing the parties; if the body comprises of one or several members, it is a necessary corollary that only those who hear should decide. The decisions of the Supreme Court in Gullapalli Nageswara Rao (supra); Union of India v Shiv Raj & Others (2014) 6 SCC 564 establish this rule. The ratio of these judgments is that one who hears must decide and violation of this rule will render the final order void.
166. The question here is, did anyone who did not hear the complaints decide it?
The record and the tabular chart, listing the members who heard the matters on 05.02.2013 to 08.02.2013, shows that those who participated were Mr. HC Gupta, Anurag Goel, M L Tayal, Ashok Chawla, R Prasad, Justice S.N. Dhingra (Retd) and Ms. Geeta Gouri. On 05.03.2013, when CCI requested for additional information from the informant and the other OEMs, the same members - except Mr. R. Prasad participated; he had retired, in the meanwhile. On 09.05.2013, the same combination
120
(Mr. HC Gupta, Anurag Goel, M L Tayal, Ashok Chawla, Justice S.N. Dhingra (Retd) and Ms. Geeta Gouri) were present. Instead of R Prasad, Mr. Bunker, was present at this meeting. He was not present during the oral submissions and he joined the CCI on 25 March 2013. On 08.08.2013, five equipment manufacturers (OEMs) made submissions; on this date, Mr. Anurag Goel, M L Tayal, Ashok Chawla, Justice S.N. Dhingra (Retd) and Ms. Geeta Gouri (from the original combination who heard the matter consecutively on 5th-8thFebruary, 2013) were present; two (R. Prasad, who had retired and H.C. Gupta) were not present; Mr. Bunker was present like in the previous hearing. The final order was made on 25.08.2014; it was by three members, i.e. Mr. Anurag Goel, Ashok Chawla and M.L. Tayal.
167. It is evident that Mr. Bunker, who was not present in the initial hearings on 05.02.2013 to 08.02.2013 and 05.03.2013, joined the hearings of 09.05.2013 and 08.08.2013. Those who had initially heard, but retired, in the meanwhile, before the final order was made, were Mr. R. Prasad, Justice S.N. Dhingra (Retd); Mr. H.C. Gupta and Ms. Geeta Gouri. The petitioners had urged that the hearings in which Mr. Bunker participated (i.e. on two dates) tainted the procedure and furthermore, that the retirement (or end of tenure) of four members resulted in violation of law and rules of natural justice. Their submission was, firstly that a tribunal acts as one body; the quoram rule (per proviso to Section 22 (3)) cannot be stretched to such levels as to render access to justice, an illusion, whereby a larger body comprising of several members hears the matter and the ultimate decision is rendered by a minority of such body or tribunal, for whatever reasons.
168. In Bharat Bank (supra), the fact situation was that the chairman of the tribunal was unable to attend the proceedings, since he was entrusted with another assignment. The argument made was two-fold, that the remaining two members had to be formally constituted as the tribunal; more crucially, it was contended that the award that was made included the participation of the chairman, who then returned. The Supreme Court held that the award was vitiated. In Automotive Tyre Manufacturers Association
v. The Designated Authority &Ors(2011) 2 SCC 258, the issue was that one Designated Authority under the Customs Tariff Act heard the parties; he was transferred; another official took charge. He issued notice to the parties and asked
121
them to provide written submissions. The Supreme Court considered the submission that the parties were given notice to appear, and did not do so; it however, rejected it as unsubstantiated. In the light of these facts, it was held that the decision was vitiated because one who heard did not decide the matter.
169. In Ossein and Gelatine Manufacturers Association of India v Modi Alkalies & Chemicals Limited &Ors1989 (4) SCC 264, the court held as follows:
"5. On the issue of natural justice, we are satisfied that no prejudice has been caused to the assessee by any of the circumstances pointed out by the appellant. It is the true that the order has been passed by an officer different from the one who heard the parties. However, the proceedings were not in the nature of formal judicial hearings. They were in the nature of meetings and full minutes were recorded of all the points discussed at each meeting. It has not been brought to our notice that any salient point urged by the petitioners has been missed. On the contrary, the order itself summarises and deals with all the important objections of the petitioners. This circumstance has not, therefore, caused any prejudice to the petitioners. The delay in the passing of the order also does not, in the above circumstances, vitiate the order in the absence of any suggestion that there has been a change of circumstances in the interregnum brought to the notice of the authorities or that the authority passing the order has forgotten to deal with any particular aspect by reason of such delay. The argument that the application of the Modis had referred to bonemeal as the raw material used and this was later changed to "crushed bones" is pointless because it is not disputed that all along the petitioners were aware that the reference to bonemeal was incorrect and that the Modis were going to use crushed bones in their project. The last contention that some documents were produced at the hearing by the Modis which the petitioners could not deal with effectively is also without force as, admittedly, the assessee's representatives were shown those documents but did not seek any time for considering them and countering their effect. There has, therefore, been, in fact, no prejudice the petitioners. They have had a fair hearing and the Government's decision has been reached after considering all the pros and cons. We are unable to find any ground to interfere therewith.
6. There was some discussion before us on a larger question as to whether the requirements of natural justice can be said to have been complied with where the objections of parties heard by one officer but the order of passed by another. Sri Salve, referring to certain passages in Local Government Board v. Alridge 1915 A.C. 120, Ridge v. Daldwin 1964 A.C. 40, Regina v. Race Relations Board. Ex parte Selvarajan 1975 1 WIR 1686 and in de Smith's Judicial Review of Administrative
122
Action (Fourth Adn. p. 219-220) submitted that this was not necessarily so and that the contents of natural justice will vary with the nature of the enquiry, the object of the proceeding and whether the decision involved is an "institutional' decision or one taken by an officer specially empowered to do it. Sri Divan, on the other hand pointed out that the majority judgment in Gullappalli Nageswara Rao v. ASRTC (1959) Supp. 1 S.C.R. 319 has disapproved of Alridge's case and that natural justice demands that the hearing and order should be by the same officer. This is a very interesting question and Alridge's case has been dealt with by wade (Administrative Law, 6th Edition) at pp. 507 et. seq.) We are of opinion that it is unnecessary to enter into a decision of this issue for the purposes of the present case. Here the issue is one of grant of approval by the Government and not any particular officer statutorily designated. It is also perfectly clear on the records that the officer who passed the order has taken full note of all the objections put forward by the petitioners. We are fully satisfied, therefore, that the requirements of natural justice have been fulfilled in the present case."
170. In Tan Boon Chee David v Medical Council of Singapore [1980] 2 MLJ 116, the Singapore High Court expressed disapproval at the manner the Singapore Medical Council had conducted an inquiry casually, and passed strictures upon the council for committing a glaring breach of natural justice. The appellant was held guilty of misconduct and suspended from medical practice. The inquiry had been held over two days; the record however, disclosed that the attendance of members of the Council were erratic and furthermore, members walked in and out of the inquiry as and when they liked when evidence of the witnesses was recorded. The High Court held the inquiry to be vitiated, stating that:
"... a person who has not seen and heard a witness is as a rule incapable of estimating the value of his evidence. It was therefore improper for members of the Council to walk in and out of the Inquiry while evidence was being recorded or to be absent altogether... such conduct is not only improper and unfair to the practitioner ... but it also tends to destroy confidence in the fairness of the Council's decision..."
171. It is clear that on the question whether in a particular case, a suitor or litigant can justly complain of violation of principles of natural justice- on the aspect that a tribunal of varied composition rendered decision through only some members, when at earlier stages, all members had participated and heard, is not capable of any one answer. Much depends on the factual context. Here, the three members who did
123
finally decide the complaints (Mr. Anurag Goel, Ashok Chawla and M.L. Tayal) were present throughout all the dates of final hearing. No doubt, as time passed, four original members (Mr. R. Prasad ,H.C. Gupta, Justice S.N. Dhingra (Retd), and Ms. Geeta Gouri) retired or completed their tenure. That fact is not disputed; in these circumstances, in the opinion of the court, the mere fact that Mr. Bunker participated in two intervening hearings, but was not a party to the final decision, per se does not amount to violation of principles of natural justice.
172. That proviso to Section 22(3) permits the possibility of the "revolving door" in the opinion of the court, does not result in its invalidity. It is well settled that the possibility of abuse of power is not a ground to hold the law, or provision of a law, arbitrary. In Sushil Kumar Sharma v Union of India and Ors. (2005) 6 SCC 281 it was observed as follows:
"11. It is well settled that mere possibility of abuse of a provision of law does not per se invalidate a legislation. It must be presumed, unless contrary is proved, that administration and application of a particular law would be done "not with an evil eye and unequal hand" (see: A. Thangal Kunju Musaliar v. M. Venkatachalam Potti, Authorised Official and Income-Tax Officer and Anr.) (1956) 29 ITR 349 (SC)".
173. Again, in Budhan Choudhary & Ors. v State of Bihar 1955 CriLJ 374, the Supreme Court repelled the contention holding that on the possibility of abuse of a provision by the authority, the legislation may not be held arbitrary or discriminatory and violative of Article 14 of the Constitution:
"13. From the decided cases in India as well as in United States of America, the principle appears to be well settled that if a statutory provision is otherwise intra-vires, constitutional and valid, mere possibility of abuse of power in a given case would not make it objectionable, ultra-vires or unconstitutional. In such cases, "action" and not the "section" may be vulnerable. If it is so, the court by upholding the provision of law, may still set aside the action, order or decision and grant appropriate relief to the person aggrieved."
174. Likewise, it was said, in State of Rajasthan v Union of India (1978) 1 SCR 1 it was observed that:
124
"it must be remembered that merely because power may sometimes be abused, it is no ground for denying the existence of power. The wisdom of man has not yet been able to conceive of a Government with power sufficient to answer all its legitimate needs and at the same time incapable of mischief."
175. In view of the above discussion, it is held that the mere circumstance that in a given case or group of cases, the practise of "revolving door" hearing is resorted to, would not ipso facto, constitute a valid ground to declare Section 22 invalid or arbitrary. Whether in a particular case, the concerned party has been prejudiced would have to therefore, be examined, in the light of the facts and circumstances of that case.
176. Only three parties, Nissan Motors, BMW and Mahindra & Mahindra had raised an issue with regard to the varying composition of the members who heard the matter. The relevant extract of the application dated 19.10.2012 filed by Mahindra & Mahindra is as follows:
"d. This Respondent requests this Hon'ble Commission to ensure that the varying quorum of honourable members who have heard the matter would not result in any injustice to the Respondents or adversely impact the outcome of the Hon'ble Commission's judgment in the Case No.3 of 2011."
177. These contentions were dealt with by the Commission in its order dated 24.07.2013 in the following manner:
"4. Nissan Motor India Pvt. Ltd. and BMW filed applications under Section 36(1) seeking fresh oral hearing in this matter by the Commission on the ground that there was a change in the constitution of quorum of the Commission. Mahindra & Mahindra filed application dated 10th July, 2013 requesting to ensure that the varying quorum of members who have heard the matter would not result in any injustice to the Respondents or adversely impact the outcome of the Hon'ble Commission in the matter. After the matter was heard, one new Member had joined the Commission, however, only those Members of the Commission who heard the matter and were present at the time of arguments, shall decide the matter in question. The application is, therefore, dismissed."
178. It appears that the parties who had raised this issue were satisfied that no prejudice would be caused to them in view of this order of the CCI. As far as the other
125
parties are concerned, they did not raise the issue at all and were evidently not apprehensive about the consequences of the procedure adopted in this regard.
179. Having so concluded, this Court is nevertheless of the opinion that a hearing by a larger body and decision by a smaller number (for compelling reasons or otherwise) does lead to undesirable and perhaps at times avoidable situations. To address this, the court hereby directs that when all evidence (i.e. report, its objections/affidavits etc.) are completed, the CCI should set down the case for final hearing. At the next stage, when hearing commences, the membership of the CCI should be constant (i.e. if 3 or 5 members commence hearing, they should continue to hear and participate in all proceedings on all hearing dates); the same number of members (of the CCI) should write the final order (or orders, as the case may be). This procedure should be assimilated in the form of regulations, and followed by the CCI and all its members in all the final hearings; it would impart a certain formality to the procedure. Furthermore, the court hereby directs that no member of the CCI should take a recess individually, during the course of hearing, or "take a break" to rejoin the proceeding later. Such "walk out and walk in" practise is deleterious to principles of natural justice, and gravely undermines public confidence in the CCI"s functioning. Once the hearing commences, all members (who hear the case, be they in quorums of 3 or 5 or seven) should continue to be part of the proceeding, and all hearings, en banc. An analogy may also be drawn to the hearings in courts before benches of more than one member. Hearings may take place from time to time before benches of varying composition, but once the final hearing has commenced, the matter is heard and decided only by the same bench. There is no addition, deletion or substitution in the composition of the bench during the course of final hearing. If at all, it becomes impossible to continue the hearing before the same bench (for example, due to one of the judges having demitted office), the matter is heard afresh by the new bench even if the composition is partly common with the previous bench. A similar example may be given of hearings in the Supreme Court - if a matter is heard in part by a bench of two judges, further hearings are held only before that bench, and not before the bench of three judges even if both the original members of the bench are also part of the three judge bench. The invariable practice of the courts, which also ought to be followed by
126
the CCI, is that the bench which hears the matter decides it, and that every member who participates in the hearing, is also party to the final decision.
180. Furthermore, the court is of the opinion that the CCI should be manned fully with all nine members. This will enable the Chairman to ensure that substantial numbers (of at least five) are present at every substantial hearing and final hearing. Furthermore, the Central Government should seriously consider recruiting legal practitioners who regularly practise in the field of company law, competition, securities and other related fields, with sufficient experience (of over 7 years, as in the case of District Judges, under the Constitution) as technical members. This will eventually promote wider participation in CCI"s decision making process and result in these lawyers" grooming for responsible positions in their later years: this can foster expertise which will be valuable to the legal and judicial system. Was the power exercised by the CCI to expand the scope of inquiry and notice under Section 26 (1) in an illegal and overbroad manner
181. The petitioners had impugned the expansion of scope of the initial inquiry. The facts here are that based on the complaint by the informant and supplementary materials, the CCI recorded its prima facie opinion that the complaints needed investigation by its order of 24.02.2011. On 19.04.2011, the DG conducted investigation into the allegations made by the informant and submitted his investigation report. That DG Report requested for permission to expand the scope of its investigation to include other car manufacturers. By its order of 26.04.2011, CCI expanded the scope of investigation being conducted by the DG to include the petitioners herein and certain other car manufacturers operating in India. The DG thereafter issued notice to the other car manufacturers, i.e. the petitioners on 04.05.2011 under Section 36 (2) read with Section 41 (2) of the Act, seeking detailed information and documents from them with reference to an investigation being conducted into certain anti-competitive practices alleged to be prevalent in the sale, maintenance, service and repair market of the cars manufactured in India in Case No. 03/2011. The DG"s request for expansion reads as follows:
127
" In terms of CGI Order 03/2011 dated February 24, 2011, the Hon'ble Commission has directed the office of DG to investigate the captioned case against HSIL, VIPL and FIAL. The informant has inter-alia alleged anti- competitive practices by these entities such as:
a. genuine spare parts, diagnostic tools, technological information etc
are not made available to independent repair workshops; b. restrictions are imposed on original equipment suppliers (OESs)
forcing them not to supply spare parts in the open market. c. Dealers are prohibited from taking dealership of other car manufactures.
2…..
3. However, in view of the fact that these practices may not be confined to these entities, the case involves larger issue related to prevalent conduct of the players in the automobile sector and its implication on the consumers at large it is suggested that the investigation may not be restricted to the opposite parties mentioned in the order. Accordingly, it is proposed that the scope of the investigation may be expanded to examine the practices, in the areas under consideration, of all the car manufacturers in India. A list of car manufacturers in India, as obtained from SIAM (Society of Indian Automobile Manufacturers) is placed at Annexure I. Submitted for consideration and approval please."
182. The note of the investigating officer (which was before the CCI), records that:
"the scope of investigation needs to be widened in this case, considering the fact that restrictive trade practices on sale of spare parts, dealership etc. are also resorted by other car manufacturers. There appears a prima facie case, against the other car manufacturer as per list obtained from Society of Indian automobile manufacturer (SIAM) & therefore requires investigation for verification in the larger interest of the consumers. It is therefore required that CCI may kindly issue necessary direction to initiate investigation against other car manufacturers."
183. The Commission in its order dated 26.04.2011 recorded as follows:
"ORDER The information was referred to DG on 08.03.2011 for investigation and submission of report within 60 days.
2. The DG vie not dated 19.04.2011 has requested for directions to initiate investigation against other car manufacturers, inter alia starting that the scope of investigation needs to widened in this case.
128
3. The Commission considered the DG's note in the ordinary meeting- held on 26.04.2011 and approved the request to initiate investigation against other car manufacturers also as mentioned in the note of DG dated 19.04.2011.
4. Commission further observed that whenever Commission orders of investigation in any case it need not be confined to the parties mentioned in the information. The investigation is ordered on certain issue and all the parties which are covered by that issue should be investigated. There is no need to obtain the orders of Commission on each individual case."
184. The final order of the CCI further records the following findings - while dealing with the issue of validity of the expansion of hearing by a separate order under Section 26 (1):
" The direction of the Commission was with respect to alleged anti- competitive conduct by the said industry in general and not specifically qua the car manufacturers named in the information. This is apparent from the order of the Commission dated April 26, 2011 which was passed after considering the request of the DG when he found, at that stage that alleged anticompetitive conduct was not confined to the named entities in the information but was prevalent across the industry. Further, while directing the DG to investigate against those car manufacturers also who were not specifically named in the information, the Commission treated the almost similar conduct of all car manufacturers equally and gave mandate to the DG that he can investigate the matter against not only the named car manufacturers but against other car manufacturers as well.
20.3.7 In the present case the DG brought the matter to the Commission and thereafter exercising its power under the Act, the Commission allowed the request in order to achieve the objectives of the Act, as mentioned in the preamble an discharge of its functions under section 18 of the Act. The Commission, therefore, cannot be said to have committed any irregularity by allowing the request of DG for doing thorough and complete investigation as mandated under the Act for achieving its objectives. It is also noted that all OPs were given ample opportunity by the DG to present their case and without exception all of them have indeed taken that opportunity to make detailed submissions. Further, all OPs have not only submitted their detailed objections to the report of the DG but they have been heard at length by the Commission and they were further allowed to submit written arguments. All these facts demonstrate that principles of natural justice were followed by the Commission at every stage of inquiry and none of the OPs has claimed that DG has drawn findings against it without affording sufficient opportunity of hearing.
129
20.3.8 The Commission is of the opinion that the objections taken by the Ops regarding jurisdiction of the Commission are not only contrary to the scheme of that but also do not capture the factual position in the correct perspective. Based on above discussion the contention raised by the OPs has no force and is liable to be rejected."
185. This Court is of the opinion that the argument with respect to illegality of the CCI"s procedure, in expanding the scope of inquiry under Section 26 (1) is insubstantial. At the stage the CCI decides to act on a complaint, and directs investigation, it does not always have all information or material in respect of the general pattern or method adopted by parties that vitiates the marketplace. It is only the information given to it. Premised on that information, the DG is tasked to look into the matter. During the course of that inquiry, based on that solitary complaint or information, facts leading to pervasive practises that amount to abuse of dominant position on the part of one or more individuals or entities may be possibly unearthed. At that stage, the investigation is quasi inquisitorial, to the extent that the report given is inconclusive of the rights of the parties; however, to the extent that evidence is gathered, the material can be final. Neither is the DG"s power limited by a remand or restricted to the matters that fall within the complaint and nothing else. The Excel Crop Care (supra) case has explained the DG"s powers in broad terms: ("if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report….If the investigation process is to be restricted in the manner projected by the Appellants, it would defeat the very purpose of the Act which is to prevent practices having appreciable adverse effect on the competition"). The assumption of jurisdiction of the CCI, then is upon receipt of complaint or information, when the "Commission is of the opinion that there exists a prima facie case" [as per Section 26 (1)]. The following order is administrative [as per SAIL (supra)]; however, that order should disclose application of mind and should be reasoned [as per SAIL (supra)]. Till that time, with the enunciation of law confined to SAIL (supra), it could arguably have been said that in the absence of a specific order as regards its role, by CCI, the DG could not have inquired into a particular
130
party"s conduct. However, with Excel Crop Care (supra) specifically dealing with the question of alleged "subject matter" expansion (in the absence of any specific order under Section 26 (1)) and the Supreme Court clarifying that the subject matter included not only the one alleged, but other allied and unenumerated ones, involving others (i.e. third parties), the issue is no longer untouched; the petitioners are precluded from stating that a specific order authorizing transactions by it, was a necessary condition for the DG"s inquiry into its conduct.
186. This Court is further reinforced in its conclusion in this regard by the express terms of the statute: Section 26 (1) talks of action by CCI directing the DG to inquire into "the matter". At this stage, there is no individual; the scope of inquiry is the tendency of market behaviour, of the kind frowned upon in Sections 3 and 4. The stage at which CCI can call upon parties to react is when it receives a report from DG stating that there is no material calling for action, it has to issue notice to the concerned parties (i.e. the complainant) before it proceeds to close the case [Sections 26 (5) and (6)]. On the other hand, if the DG"s report recommends otherwise, it is obliged to proceed and investigate further [Sections 26 (7) and (8)]. Again Section 27 talks of different "parties" ["enterprise or association of enterprises or person or association of persons"- per Section 27 (a)]. Likewise, the steps outlined in Section 26 are amplified in the procedure mandated by Regulation 20 and 21, which requires participation by "the parties", in the event a report after DG"s inquiry, which is likely to result in an adverse order, under Sections 27-34 of the Act. Consequently, the argument that a specific order by CCI applying its mind into the role played by each of them was essential before the DG could have proceeded with the inquiry, is unmerited and, therefore, rejected.
Re Point No. 6 Is Section 27 (b) of the Act and the provision for penalties unconstitutional or the orders impugned arbitrary, for the reason that no separate hearing is provided, and the statute provides no guideline for exercise of discretion.
187. This issue is an important one; during the hearing, counsel had highlighted that in the absence of a statutorily mandated notice and hearing procedure preceding penalty, Section 27 (b) is arbitrary and unreasonable. Section 27 reads as follows:
131
"Orders by Commission after inquiry into agreements or abuse of dominant position
27. Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:—
(a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;
(b) impose such penalty, as it may deem fit which shall be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse:
[Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent of its turnover for each year of the continuance of such agreement, whichever is higher.]
(c) [Omitted by Competition (Amendment) Act, 2007]
(d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;
(e) direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment of costs, if any;
(f) [Omitted by Competition (Amendment) Act, 2007]
(g) pass such other [order or issue such directions] as it may deem fit. [Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group.]"
132
188. It is evident- from the scheme of the Act, that after carrying out the investigation, the DG files the report before the CCI which is shared with the opposite parties. In the present case, the DG made his report. This report formed the basis of further proceedings before the CCI which held proceedings and hearings on various dates. The final order in this case was made after a series of final hearing, on 25.08.2014. The final order dealt with 14 opposite parties, and made a detailed analysis with respect to prevalent anti-competitive prices and also dealt with the arguments of the equipment manufacturers, such as the petitioners. There is a discussion with respect to the justification for imposition of penalty and the quantum. Having regard to these facts, it is now essential to consider whether the absence of a mandatory provision, which precedes the imposition of penalty under Section 27(b) renders it unconstitutional and arbitrary.
189. The common refrain of all petitioners on this aspect is that sans a mandated pre-penalty notice and hearing, an adverse action by way of monetary penalty cannot be imposed and that the provision which enables such penalty without hearing is void. In this respect, the learned counsel has relied upon the judgments reported as S.L. Kapoor v. Jagmohan and Ors. 1980 (4) SCC 379; Swadeshi Cotton Mills v. Union Of India . 1981 (1) SCC 664; and Canara Bank vs V.K. Awasthy 2005 (6) SCC 321. The other allied aspect with respect to Section 27(b) is that it provides no guidance or guidelines as to how penalty is to be imposed and what would be the quantum of penalty. The further complaint is that in the present case, the CCI has taken a uniform and arbitrary rate of 2% without differentiating between individual facts of the other case and moreover departed from its own prescribed foundation of the "relevant market". The CCI, had, on the other hand, distinguished the rulings relied upon by the petitioners and relied upon certain other decisions to say that providing a statutorily mandated prior hearing as condition precedent for imposition of penalty is inessential. In this regard, Sh. Sanjay Jain relied upon F.N. Roy (supra); Organic Chemicals (supra) and Prestolite India Limited 1994 (Suppl) (3) SCC 390. CCI"s previous decision in Indian Foundation of Transport Research and Training [Case No.61/2012 dated 16.02.2015; M/s. Rohit Medical Store v. Macleods Pharmaceutical Ltd. [Case No.78/2012 dated 29.01.2015]; M/s. Swastik Stevedoves Pvt. Ltd. v. M/s. Dumper
133
Owner's Association Case No.42/2012 dated 21.01.2015]. This Court notices that the Act envisions that the Statement of Objects and Reasons of the Act underlines that Parliament intended CCI to be a regulatory body. Its uniqueness perhaps is in the manner it interprets various facets and dimensions of anti-competitive behaviour, outlined in Sections 3 and 4 of the Act, on a case-by-case basis. This case-by-case enshrining of principles is not unknown. As noted in a previous part of this judgment in Chenery Corporation (supra), the US Supreme Court held that formulation of regulations through an adjudicatory mode is not anathema to law. PTC India (supra) - a Constitution Bench judgment of the Supreme Court too underlined that law can come into existence through litigation as well.
190. If these principles are kept in mind, the CCI"s determinations are not only declaratory of what constitutes anti-competitive or impermissible dominant behaviour in the marketplace, but also ensure that such behaviour is appropriately sanctioned. In this regard, the court notices that Section 46 of the Act embodies a very salient principle, i.e. that at the initial stage, if an entity or an entity trader, manufacturer or dealer etc. makes full disclosure, it can be imposed with lesser penalty in the ultimate analysis of a finding with respect to objectionable behaviour either under Sections 3 or 4. Section 46 of the Act reads as follows:
"46. Power to impose lesser penalty.—The Commission may, if it is satisfied that any producer, seller, distributor, trader or service provider included in any cartel, which is alleged to have violated section 3, has made a full and true disclosure in respect of the alleged violations and such disclosure is vital, impose upon such producer, seller, distributor, trader or service provider a lesser penalty as it may deem fit, than leviable under this Act or the rules or the regulations:
Provided that lesser penalty shall not be imposed by the Commission in cases where proceedings for the violation of any of the provisions of this Act or the rules or the regulations have been instituted or any investigation has been directed to be made under section 26 before making of such disclosure:
Provided further that lesser penalty shall be imposed by the Commission only in respect of a producer, seller, distributor, trader or service provider included in the cartel, who first made the full, true and vital disclosures under this section:
134
Provided also that the Commission may, if it is satisfied that such producer, seller, distributor, trader or service provider included in the cartel had in the course of proceedings,—
(a) not complied with the condition on which the lesser penalty was imposed by the Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital, and thereupon such producer, seller, distributor, trader or service provider may be tried for the offence with respect to which the lesser penalty was imposed and shall also be liable to the imposition of penalty to which such person have been liable, had lesser penalty not been imposed."
191. It is quite evident from a bare reading of the provision that if a full and necessary disclosure is made at the outset of the investigation and before the report is submitted to the CCI, a lesser penalty under Section 46 can be issued. Chapter VI of the Act deals with various kinds of penalties, such as contravention of the CCI"s order (Section 42); compensation in the case of contravention of CCI"s order (Section 42A); penalty for failure to comply with Commission or DG (Section 43); not furnishing information (Section 43A); false statement or omission to furnish material information (Section 45); offences in relation to furnishing of information etc. Each one - barring Section 46, this Court notices, deals with the consequence of orders made by the Commission, either substantive or during the course of the proceeding. In one sense, these are ensuring the enforcement of the CCI"s authority to conduct its proceedings. The only provision, i.e. Section 46, which deals with lesser penalty occurs in this Chapter. Now this aspect assumes significance under Regulation 48 as amended, the imposition of common penalty under Chapter 6 is to be preceded by a Show Cause Notice and reasonable opportunity of hearing. The petitioners had strongly argued that the imposition of these penalties - which are in one sense lower in the scale, require a Show Cause Notice, whereas the determination of penalty under Section 27(b) is not necessarily preceded by separate Show Cause Notice.
192. A recent decision-albeit in the context of a case that concerned imposition of a penalty for not complying with the CCI"s orders (under Section 43A) underscored the point that such penalties are not conditioned upon existence of a mental condition or
135
mens rea; they are civil in nature. Therefore, in Competition Commission of India v Thomas Cook (India) Ltd. and Ors. 2018 (6) SCC 549 it was held that:
"There was no requirement of mens rea Under Section 43A or intentional breach as an essential element for levy of penalty. Section 43A of the Act does not use the expression "the failure has to be willful or mala fide" for the purpose of imposition of penalty. The breach of the provision is punishable and considering the nature of the breach, it is open to impose the penalty."
193. The Supreme Court quoted with approval its previous decision in Hindustan Steel Ltd. v State of Orissa AIR 1970 SC 253, that held that "breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not."
194. In the present case, what is important is that the petitioners" complaint is not that they were not given any opportunity; rather it is that they ought to have been given a separate opportunity of hearing. Ordinarily, the court would have concurred with such an argument. However, a deeper analysis of the nature of the proceeding before the CCI would reveal that the procedure it adopts- and is required to adopt gives sufficient safeguard to parties likely to be affected adversely, both as regards findings and the sanctions. The first step, of course, is to decide whether to issue notice. Excel Crop Care (supra) and the later decisions have now held conclusively that this step is administrative and does not contemplate any prior notice or hearing to the opposite parties. The next stage is investigation by the DG. At this stage, the parties - whenever needed - receive notice and opportunity; if it is denied, they can seek directions to the DG from the CCI. This stage incudes evidence gathering and wherever necessary, cross-examination on behalf of one or more individuals, before the DG- and later, before the CCI, if the complaint is that cross-examination is not granted. The next stage is the report of the DG, which is shared by the parties, who then make their comments, and are granted full opportunity of hearing. This step is very significant, because when the parties do address the CCI and submit their contentions, they have foreknowledge of all the materials, including adverse materials and comments made in the DG"s report. This stage is a "full blown" hearing, when
136
the parties know and have a fair awareness of the range of options available with the CCI in terms of both findings and the sanctions (such as orders enjoining some activity, or requiring positive steps to be taken). This forewarning, as it were, and the statutory cap (of not more than 10 percent) is a broad guideline within which both CCI and the parties before it, operate.
195. Fiscal enactments indicate different approaches. The Customs Act, 1962 (i.e. by Sections 28 and 124), require separate show cause notices. However, it is not necessary that the show cause notices have to be issued after adjudication of duty liability; a composite show cause notice for both is usually issued. Under the Central Excise Act, 1944, a composite show cause notice for duty and penalty is issued(by Sections 11A and other related provisions). In other enactments, such as for instance, Section 13 of the Foreign Exchange Management Act, 1999, any contravention of the Act, rules, regulations or directions (under the Act) attract serious penal consequences. The adjudicating officer can impose penalties equal to three times the amount involved in the contravention; yet the parent statute is silent about the procedure and the nature of hearing. Rule 4 (1) of the Rules requires the Adjudicating Authority to issue a notice to any person believed to have committed any contravention of Section 13 of FEMA, Rule 4 (2) requires the show-cause notice to indicate the nature of contravention alleged to have been committed. Rule 4
(3) provides that if the Adjudicating Authority is of the opinion that an enquiry should be held, it shall issue a notice, fixing a date for the appearance of that person either personally or through his legal practitioner.
196. The pattern or structure of the statute and its object, in every such case, defines the nature of hearing provided for. In some cases, the opportunity of hearing is preceded by a composite one; in other cases, however, of necessity, a show cause notice is to be issued separately. In the Income Tax Act, 1961, for instance, every person or entity who earns taxable income has a duty to file returns; those returns then can be merely "framed" without adjudication (under Section 143(1)) or assessed, after due notice of scrutiny, under Section 143 (2) culminating in an assessment order. Necessarily, therefore, before the assessment order is made, the Assessing officer (i.e. the primary adjudicating authority) has no occasion to consider and apply his mind, if
137
the assessee has under-reported income or claimed an obviously unjustified deduction or tax benefit. It is during the course of assessment that such behaviour, in the form of a claim, is noticed; the assessment order, which is adverse on that point, then becomes the occasion for imposition of penalty. Therefore, at that stage only would the adjudicating authority have the "cause" to issue show cause notice.
197. If these considerations are kept in mind, the fact that certain types of penalties (which are pre-determined quantum for specific violations of the Act) elicit show cause notice as prelude to penalty on the one hand, and absence of any compulsion to issue a separate show cause notice preceding a penalty under Section 27 (b) (although a show cause notice and full hearing is provided with opportunity to submit against the report of DG) does not in the opinion of this Court, render that provision arbitrary.
198. The court is cognizant of the fact that there are several adjudications- quasi judicial and by judicial tribunals, which envision a "rolled up" hearing which visualizes only one show cause notice- that can culminate in both an adverse finding and a consequential penalty. The most obvious example of this is Union of India v Tulsiram Patel 1985 Supp (2) SCR 131. The court then had upheld the Union"s contention that the Constitution, by Article 311(2) (after its amendment by the forty second amendment) no longer required a "second show cause notice" as a pre- requisite for imposition of penalty against a delinquent public servant. The court held as follows:
"In the case of Suresh Koshy George v the University of Kerala &Ors. (at page 326-7) are pertinent :
"There seems to be an erroneous impression in certain quarters evidently influenced by the provisions in Article 311 of the Constitution particularly as they stood before the amendment of that article that every disciplinary proceeding must consist of two inquiries, one before issuing the show cause notice to be followed by another inquiry thereafter. Such is not the requirement of the principles of natural justice. Law may or may not prescribe such a course."
In Associated Cement Companies Ltd v T.C Shrivastava & Ors [1984] 3 S.C.R. 361,369, this Court held that "neither under the ordinary law of the land nor under industrial law a second opportunity to show cause against the proposed punishment is necessary"
138
199. Now, coming to the decisions cited by the petitioners. In S.L. Kapoor (supra), the issue was whether the authority was obliged to give opportunity of hearing by issuing a show cause notice, before superseding the municipal committee. The Supreme Court held that the silence of the statute did not preclude the obligation to follow a fair procedure of granting opportunity to the party likely to be affected, by the adverse action; in doing so, it followed its previous rulings in Mohinder Singh Gill v Chief Election Commissioner 1978 (2) SCR 272 [that "(t)he silence of a statute has no exclusionary effect except where it flows from necessary implication."] and State of Orissa v Dr. Binapani Dei AIR 1967 SC 1269 [that an "administrative order which involves civil consequences.... must be made consistently with the rules of natural justice"]. Furthermore, the court also is aware that these decisions crystallized into a rule best spelt out by the seminal decision in Swadeshi Cotton Mills (supra), where the court enunciated the guiding principle, (since considered an aphorism, and axiomatic in public law) as follows:
"If the statute conferring the power is silent with regard to the giving of pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature and no full review or appeal on merits against that decision is provided courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless viewed pragmatically it would paralyse the administrative process or frustrate the need for utmost promptitude"
200. This Court is of the opinion that the Supreme Court felt compelled to say what it did, in each of those decisions, and the long line of successive authorities, because the action taken by the executive government or the public agency was not preceded by fair procedure, that encapsulated any opportunity of hearing. Here, however, the CCI followed all the steps indicated in the statute; the DG held an inquiry, during which the petitioners were permitted participation; the consequent report and documents were shared with them, or they were given access to the record. After these, each petitioner was given full hearing which included submissions on potential orders under Section 27. It is undeniable that the petitioners also furnished written
139
submissions. The DG"s report contains an elaborate analysis of the materials found and inquired into; the CCI"s order analyses the report, in the light of the petitioners"
submissions. The penalty order is reasoned. Having regard to these circumstances, it cannot be said that the CCI was compelled by the statute to adopt an unfair procedure (i.e. the absence of a second specific hearing before imposition of penalty) exposing Section 27 to the vice of arbitrariness and unconstitutionality.
201. Having concluded that Section 27 is not arbitrary or unreasonable, the court now proceeds to deal with the second submission of the learned counsel, which is that the provision lacks guidelines with respect to the scale of penalty that is to be imposed in any given case and that this very omission renders it vague and clothes CCI with uncanalized power. At the outset, this Court would quote and extract the relevant discussion in the concurring judgment of N.V. Ramana, J in Excel Crop. Care (supra), to the following effect:
"84. It is well settled that the Competition Act, 2002 is a regulatory legislation enacted to maintain free market so that the Adam Smith's concept of invincible hands operate unhindered in the background.5 Further it is clear from the Statement of objects and reason that this law was foreseen as a tool against concentration of unjust monopolistic powers at the hands of private individuals which might be detrimental for freedom of trade. Competition law in India aims to achieve highest sustainable levels of economic growth, entrepreneurship, employment, higher standards of living for citizens, protect economic rights for just, equitable, inclusive and sustainable economic and social development, promote economic democracy, and support good governance by restricting rent seeking practices. Therefore an interpretation should be provided which is in consonance with the aforesaid objectives.
85. At this point, I would like to emphasize on the usage of the phrase 'as it may deem fit' as occurring Under Section 27 of the Act. At the outset this phrase is indicative of the discretionary power provided for the fining authority under the Act. As the law abhors absolute power and arbitrary discretion, this discretion provided Under Section 27 needs to be regulated and guided so that there is uniformity and stability with respect to imposition of penalty. This discretion should be governed by Rule of law and not by arbitrary, vague or fanciful considerations. Here we may deal with two judgments which may be helpful in deciding the concerned issue. In Dilip N. Shroff v. Joint Commissioner of Income Tax (2007) 6 SCC 329, this Court while dealing with the imposition of the penalty has observed that-
140
The legal history of Section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of Sub-section (1) of Section 271 categorically states that the penalty would be leviable if the Assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the Assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this Court, inheres on the face of the statutory provisions. Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the Assessee. The approach of the Assessing Officer in this behalf must be fair and objective.
(Emphasis supplied)
Moreover in the case of Hindustan Steel Ltd. v. State Of Orissa . AIR 1970 SC 253 this Court made following observations-
"An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the Authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the Authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute."
(Emphasis supplied)
86. It should be noted that any penal law imposing punishment is made for general good of the society. As a part of equitable consideration, we should strive to only punish those who deserve it and to the extent of their guilt. Further it is well established by this Court that the principle
141
of proportionality requires the fine imposed must not exceed what is appropriate and necessary for attaining the object pursued. In Coimbatore District Central Co-operative Bank v. Coimbatore District Central Co-operative Bank Employees Assn. (2007) 4 SCC 699 this Court has explained the concept of 'proportionality' in the following manner-
'proportionality' is a principle where the Court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of the decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise-the elaboration of a Rule of permissible priorities. De Smith states that 'proportionality' involves 'balancing test' and 'necessity test'. Whereas the former ('balancing test') permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations, the latter ('necessity teat') requires infringement of human rights to the least restrictive alternative' In consonance of established jurisprudence, the principle of proportionality needs to be imbibed into any penalty imposed Under Section 27 of the Act. Otherwise excessively high fines may over-deter, by discouraging potential investors, which is not the intention of the Act. Therefore the fine Under Section 27(b) of the Act should be determined on the basis of the relevant turnover. In light of the above discussion a two step calculation has to be followed while imposing the penalty Under Section 27 of the Act.
STEP 1: DETERMINATION of RELEVANT TURNOVER.
87. At this point of time it needs to be clarified that relevant turnover is the entity's turnover pertaining to products and services that have been affected by such contravention. The aforesaid definition is not exhaustive. The authority should have regard to the entity's audited financial statements. Where audited financial statements are not available, the Commission may consider any other reliable records reflecting the entity's relevant turnover or estimate the relevant turnover based on available information. However the Tribunal is free to consider facts and circumstances of a particular case to calculate relevant turnover as and when it is seized with such matter. STEP 2: DETERMINATION of APPROPRIATE PERCENTAGE of
PENALTY BASED ON AGGRAVATING AND MITIGATING
CIRCUMSTANCES.
88. After such initial determination of relevant turnover, commission may consider appropriate percentage, as the case may be, by taking into consideration nature, gravity, extent of the contravention, role played by the infringer (ringleader? Follower?), the duration of participation, the intensity of participation, loss or damage suffered as
142
a result of such contravention, market circumstances in which the contravention took place, nature of the product, market share of the entity, barriers to entry in the market, nature of involvement of the company, bona fides of the company, profit derived from the contravention etc. These factors are only illustrative for the tribunal to take into consideration while imposing appropriate percentage of penalty.
89. At the cost of repetition it should be noted that starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter the tribunal should calculate appropriate percentage of penalty based on facts and circumstances of the case taking into consideration various factors while determining the quantum. But such penalty should not be more than the overall cap of 10% of the entity's relevant turnover. Such interpretation of Section 27
(b) of the Act, wherein the discretion of the commission is guided by principles established by law would sub-serve the intention of the enactment.."
202. In the opinion of this Court, the enunciation of the above principles as the guiding norm which CCI has to follow, in each case, when it determines deviant behaviour that invite adverse findings and appropriate sanctions, are a sufficient answer to the charge of unconstitutionality levelled against Section 27. It is a recognized and sound principle of constitutional interpretation that courts will, while considering the vires or validity of a law, lean in favour of its constitutionality, if it is so capable of construction, rather than to hold it void. In Namit Sharma v Union of India (2013) 1 SCC 745therefore, it was held that:
"(the) most significant canon of determination of constitutionality is that the courts would be reluctant to declare a law invalid or ultra vires on account of unconstitutionality. The courts would accept an interpretation which would be in favour of the constitutionality, than an approach which would render the law unconstitutional. Declaring the law unconstitutional is one of the last resorts taken by the courts. The courts would preferably put into service the principle of 'reading down' or 'reading into' the provision to make it effective, workable and ensure the attainment of the object of the Act. These are the principles which clearly emerge from the consistent view taken by this Court in its various pronouncements."
143
203. Long ago in Kedar Nath Singh v State of Bihar AIR 1962 SC 955, the Supreme Court held that:
"It is well settled that if certain provisions of law, construed in one way, would make them consistent with the Constitution and another interpretation would render them unconstitutional, the court would lean in favour of the former construction."
204. Again, later in Rt. Rev. Msgr. Mark Netto v State of Kerala (1979) 1 SCC 23 held that the court must make every effort to uphold the constitutional validity of a statute, even if that requires giving strained construction or narrowing down its scope. In Bharat Petroleum Corporation Ltd. v Maddula Ratnavalli and Ors in 2007 (6) SCC 81 it was held as follows:
"Therefore, there is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the Constitution. If the provisions of a law or the rule is construed in such a way as would make it consistent with the Constitution and Another interpretation would render the provision or the rule unconstitutional, the Court would lean in favour of the former construction."
205. Following the salutary principle of constitutional interpretation, this Court is of the opinion that the soundness of discretion and the method adopted by the CCI having regard to the objectives of the Act and regulations framed under it should be the paramount guiding factors, apart from the principle of proportionality which Excel Crop Care (supra) talked about. Given that the Supreme Court has indicated the path and course that guides CCI, and the relevant considerations, this Court is of the opinion that the objection to the unconstitutionality of Section 27 (b) cannot survive.
206. The last aspect on the issue of Section 27 is that the common refrain of learned counsel (for the petitioners) was that the CCI misapplied the "relevant market"
principle which should have been considered. Tata Motors, particularly complained that the CCI"s impugned order was inconsistent, and, therefore, arbitrary, inasmuch as it faltered in the application of that principle- in its (i.e. Tata Motors") case, despite outlining the relevant market as the domestic market, the turnover (based on which penalty was imposed) was expanded to include the global turnover. The objection of Mercedes Benz (articulated by its senior counsel Mr. Neeraj Kishan Kaul) was that
144
the manufacturer sold an entire system that left no room for a separate spare parts market and, consequently, the finding of anti-competitive behaviour was unjustified and illegal. A plain reading of the order impugned would show that the CCI has considered Benz"s submissions, and given several reasons why it proceeded to record adverse findings and impose penalties. In the view that, this Court is ultimately taking, which is to address itself only with the constitutionality and vires of the statute, it is held that a further discussion on the merits of the order- vis-à-vis- each aggrieved petitioner would not be essential. The court prefers to leave these submissions open for decision on merits, by the Appellate Tribunal.
207. In S.N Mukherjee v. Union Of India . (1990) 4 SCC 594, adverting to the practice adopted and insistence placed by the courts in United States, which is to emphasize the importance of recording of reasons for decisions by the administrative authorities and tribunals, it said "administrative process will best be vindicated by clarity in its exercise". The exercise of power of review- appellate or public law review, is to be in consonance with settled principles, which means that those affected are informed of considerations that impelled the action. The Supreme Court stated as follows:
"the orderly functioning of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained.
xxx xxxxxxxxx
12. At the cost of repetition, we may notice, that this Court has consistently taken the view that recording of reasons is an essential feature of dispensation of justice. A litigant who approaches the Court with any grievance in accordance with law is entitled to know the reasons for grant or rejection of his prayer. Reasons are the soul of orders. Non-recording of reasons could lead to dual infirmities; firstly, it may cause prejudice to the affected party and secondly, more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative or executive actions, but they apply with equal force and, in fact, with a greater degree of precision to judicial pronouncements. A judgment without reasons causes prejudice to the person against whom it is pronounced, as that litigant is unable to know the ground which weighed with the Court in rejecting his claim and also causes impediments in his taking adequate and appropriate grounds before the higher Court in the event of challenge to that judgment...
145
13. The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the Court should meet with this requirement with higher degree of satisfaction. The order of an administrative authority may not provide reasons like a judgment but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi- judicial authority has practically extinguished and both are required to pass reasoned orders..."
208. Several subsequent authorities have reiterated the necessity of furnishing reasons in support of conclusions. Therefore, this Court concludes that to decide whether to, and to what extent impose penalty are in the domain of the CCI"s discretion, which it is bound to exercise, keeping in mind the factors (deemed not exhaustive) in Excel Crop Care (supra) and also general objects and purposes of the Act. The challenge to Section 27(b) and Regulation 48, therefore, fails. It goes without saying that the exercise of such power can be interfered by COMPAT on appeal, on its merits. All these are inbuilt safeguards which if transgressed by the CCI in any given case, are capable of correction within the framework of the Act. Conclusions and Directions
209. This Court notes in conclusion, that the Competition Act is an attempt by Parliament to improve - in the light of experience gained from a modern liberalized economy and corresponding state retreat in key areas of economic activities, the prevalent laws governing concentration of market power. The MRTP Act, 1969 was its first attempt (in a closed economy) to control monopolies and restrictive practices. In the light of experience gained and the felt necessities of the changed times - and having seen the experience gained by other nations, in the course of their legislation with competition, the Act was introduced, with due deliberation. Recent decisions have emphasized the importance of the CCI in imbuing the market place with the
146
culture of competition, and even underlined that sectoral regulators" decisions or regulations (within the frame works of their parent legislations) cannot foreclose enquiry and consequential action by the CCI in its overarching concerns with respect to market domination and anti-competitive behaviour of erring entities. In Competition Commission of India v Bharat Sanchar Nigam Ltd 2018 SCC OnLine SC 2678 this was emphasized and underlined in the following manner:
"102. Obviously, all the aforesaid functions not only come within the domain of the CCI, TRAI is not at all equipped to deal with the same. Even if TRAI also returns a finding that a particular activity was anti- competitive, its powers would be limited to the action that can be taken under the TRAI Act alone. It is only the CCI which is empowered to deal with the same anti-competitive act from the lens of the Competition Act. If such activities offend the provisions of the Competition Act as well, the consequences under that Act would also follow. Therefore, contention of the IDOs that the jurisdiction of the CCI stands totally ousted cannot be accepted. Insofar as the nuanced exercise from the stand point of Competition Act is concerned, the CCI is the experienced body in conducting competition analysis. Further, the CCI is more likely to opt for structural remedies which would lead the sector to evolve a point where sufficient new entry is induced thereby promoting genuine competition. This specific and important role assigned to the CCI cannot be completely wished away and the 'comity' between the sectoral regulator (i.e TRAI) and the market regulator (i.e the CCI) is to be maintained.
103. The conclusion of the aforesaid discussion is to give primacy to the respective objections of the two regulators under the two Acts. At the same time, since the matter pertains to the telecom sector which is specifically regulated by the TRAI Act, balance is maintained by permitting TRAI in the first instance to deal with and decide the jurisdictional aspects which can be more competently handled by it. Once that exercise is done and there are findings returned by the TRAI which lead to the prima facie conclusion that the IDOs have indulged in anti-competitive practices, the CCI can be activated to investigate the matter going by the criteria laid down in the relevant provisions of the Competition Act and take it to its logical conclusion. This balanced approach in construing the two Acts would take care of Section 60 of the Competition Act as well.
104. We, thus, do not agree with the appellants that CCI could have dealt with this matter at this stage itself without availing the inquiry by TRAI. We also do not agree with the respondents that insofar as the telecom sector is concerned, jurisdiction of the CCI under the Competition Act is totally ousted. In nutshell, that leads to the
147
conclusion that the view taken by the High Court is perfectly justified. Even the argument of the learned ASG is that the exercise of jurisdiction by the CCI to investigate an alleged cartel does not impinge upon TRAI's jurisdiction to regulate the industry in any way. It was submitted that the promotion of competition and prevention of competitive behaviour may not be high on the change of sectoral regulator which makes it prone to 'regulatory capture' and, therefore, the CCI is competent to exercise its jurisdiction from the stand point of the Competition Act. However, having taken note of the skillful exercise which the TRAI is supposed to carry out, such a comment vis-a-vis TRAI may not be appropriate. No doubt, as commented by the Planning Commission in its report of February, 2007, a sectoral regulator, may not have an overall view of the economy as a whole, which the CCI is able to fathom. Therefore, our analysis does not bar the jurisdiction of CCI altogether but only pushes it to a later stage, after the TRAI has undertaken necessary exercise in the first place, which it is more suitable to carry out."
210. Parliamentary effort to innovate and legislate new market regulations, gained in the light of previous experience and teaching gained from the experience in other countries, led it to enact the Competition Act. The raison d'etre of such laws is its objective of promoting competition, - and eliminating disparities that would ensue in the event of market dominance by a few, resulting in concentration of resources of the nation (which Article 39 of the Constitution of India, enjoins the State to avoid). Speaking of the Sherman Anti-Trust Act, in Essential Communications Sys, Inc. v AmTel & Tel Co 610 F 2d 1114, 1117 (3d Cir 1979) the third Federal Circuit Appellate Court held:
"The Sherman Act, embodying as it does a preference for competition, has been since its enactment almost an economic constitution for our complex national economy. A fair approach in the accommodation between the seemingly disparate goals of regulation and competition should be to assume that competition, and thus antitrust law, does operate unless clearly displaced"
211. The need to experiment and bring in new legislation to face the challenges of the changing times and the legislature duty to do so- as well as the correct approach that courts should adopt was outlined as follows in New State Ice Co. v. Liebman, 285 U.S. 262 (1932), where Justice Brandeis stated as follows:
148
"…There must be power in the States and the Nation to remould, through experimentation, our economic practices and institutions to meet changing social and economic needs. I cannot believe that the framers of the Fourteenth Amendment, or the States which ratified it, intended to deprive us of the power to correct the evils of technological unemployment and excess productive capacity which have attended progress in the useful arts.
To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the Nation. It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country. This Court has the power to prevent an experiment. We may strike down the statute which embodies it on the ground that, in our opinion, the measure is arbitrary, capricious or unreasonable. We have power to do this, because the due process clause has been held by the Court applicable to matters of substantive law as well as to matters of procedure. But in the exercise of this high power, we must be ever on our guard, lest we erect our prejudices into legal principles. If we would guide by the light of reason, we must let our minds be bold."
Resonance can be found in almost identical views echoed by the Supreme court in India, in R.K. Garg v. Union of India, (1981) 4 SCC 675 where it was held that:
"The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of remedy are not always possible" and that
"judgment is largely a prophecy based on meagre and uninterpreted experience". Every legislation, particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company [94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation
149
which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues."
212. Similar views were expressed in Director General of Foreign Trade v Kanak Exports, (2016) 2 SCC 226, and Swiss Ribbons (supra). In the former (Kanak Exports) the court stated that:
"in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call trial and error method and therefore, its validity cannot be tested on any rigid prior considerations or on the application of any straitjacket formula. In Balco Employees' Union v. Union of India [Balco Employees' Union v. Union of India, (2002) 2 SCC 333], the Supreme Court held that laws, including executive action relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrine or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems greater latitude require to be allowed to the legislature.."
213. In view of the findings of this Court, in the previous parts of this judgment, the following conclusions are recorded and directions issued:
(i) Section 22(3) of the Competition Act (except the proviso thereto) is declared unconstitutional and void;
(ii) Section 53E (prior to the amendment in 2017) is declared unconstitutional and void: however, this is subject to the final decision of the Supreme Court in the writ petitions challenging the Finance Act, 2017;
150
(iii) All other provisions of the Competition Act are held to be valid subject to the following orders:
(a) The CCI shall frame guidelines with respect to the directions contained in para 179 of this judgment, i.e. to ensure that one who hears decides is embodied in letter and spirit in all cases where final hearings are undertaken and concluded. In other words, once final hearings in any complaint or batch of complaints begin, the membership should not vary- it should preferably be heard by a substantial number of 7 or at least, 5 members.
(b) The Central Government shall take expeditious steps to fill all existing vacancies in the CCI, within 6 months;
(c) The CCI shall ensure that at all times, during the final hearing, the judicial member (in line with the declaration of law in Utility Users Welfare Association, (supra) is present and participates in the hearing;
(d) The parties should in all cases, at the final hearing stage, address arguments, taking into consideration the factors indicated in Excel Crop Care (supra) and any other relevant factors; they may also indicate in their written submissions, or separate note, of submissions, to the CCI, why penalty should not be awarded, and if awarded, what should be the mitigating factors and the quantum- without prejudice to their other submissions.
(iv) Since the petitioners had not availed the remedy of appeal (and had approached this Court) it is open to such of them who wish to do so, to approach the Appellate Tribunal, within 6 weeks; in such eventuality, the Appellate Tribunal shall entertain their appeals and decide them on their merits in accordance with law, unhindered by the question of limitation.
151
214. The writ petitions are partly allowed in the above terms. There shall be no order on costs.
S. RAVINDRA BHAT
(JUDGE)
PRATEEK JALAN
(JUDGE)
APRIL 10, 2019
152