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WRITTEN BY COMPETITIONLAWOBSERVERNOVEMBER 3, 2016MARCH 20, 2017

COMPAT can’t intervene CCI investigation:

Analysis of CCI v. SAIL, (2010) 10 SCC 744
Shivam Garg[*]

Introduction

In the landmark judgment of CCI vs. SAIL[1], the apex court held that ― “No appeal can be filed
against an order of Competition Commission of India (CCI), directing an investigation into a complaint
received by it”. Thus, this judgment played a prominent role in ensuring the distribution of power
of COMPAT and CCI, such that they do not disturb the each other in proceeding. It provided
effective boundary.

In this matter, it initiated when Jindal Steel and Power Limited (JSPL) filed a complaint[2] before
the Competition Commission of India alleging that SAIL had an exclusive supply agreement with
Indian Railways. SAIL was the biggest player in market of manufacture of rail tracks thus had
dominant position in market. It had created its monopoly. This was anti competitive and abusive
behavior. Thus, as Indian railway is largest buyer of rail tracks, JSPL by necessary implications
couldn’t supply rails to them[3]. SAIL used its position to keep other player out of market and
thus deprive others from fair competition.[4]

CCI on receiving application, began the process, and issued notice to SAIL to submit documents
with certain information within 2 weeks from date of receipt. But SAIL instead of complying asked
for extension of time for upto 6 weeks. CCI did not accepted the same in its meeting and also
formed a prima facie opinion that there exist a case and asked DG to go ahead with inquiry under
Section 26 of the Act. This was challenged by SAIL as no hearing was provided to them. Further,
no reasons were recorded for such decision and the time given to them was inadequate from
beginning. COMPAT didn’t let CCI to implead as either necessary party nor proper party and
finally held that under Section 53A(1) of the Act, it had power to listen to appeal even on the CCI
order of investigation where no fair hearing was given and it can grant STAY order. Thus, CCI
appealed to Supreme Court.

Issues
 Whether the directions passed by the Commission in exercise of its powers under Section 26(1)
of the Act forming a prima facie opinion would be appealable in terms of Section 53A(1) of the
Act?
What is the ambit and scope of power vested with the Commission under Section 26(1) of the
Act and whether the parties, including the informant or the affected party, are entitled to notice
or hearing, as a matter of right, at the preliminary stage of formulating an opinion as to the
existence of the prima facie case?
Whether the Commission would be a necessary, or at least a proper, party in the proceedings
before the Tribunal in an appeal preferred by any party?
At what stage and in what manner the Commission can exercise powers vested in it under
Section 33 of the Act to pass temporary restraint orders?
Whether it is obligatory for the Commission to record reasons for formation of a prima facie
opinion in terms of Section 26(1) of the Act?
What directions, if any, need to be issued by the Court to ensure proper compliance in regard to
procedural requirements while keeping in mind the scheme of the Act and the legislative
intent?

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Analysis

The apex court in Issue 1 expressed that the direction of CCI to DG to conduct an investigation
under Section 26(1) of the Act is not appealable under Section 53A(1) of the Act, because the order
under section 26(1) does not determine any rights or obligations of the party to the case. The court
reached this after analyzing the provision under Act and rules of interpretation[5], to note the
difference between “and” & “or”.[6] It followed the principle of Expressum facit cessare
tacitum[7]. They referred to Indian and other country legislation like European and case laws and
finally reached to conclusion that Section 53(1) provides right of appeal[8] which is a substantive
right[9] and this section allows appeal only in things provided in section.

Further in regard to Issue 2, it highlighted that the legislature is competent to enact such laws
which exclude[10] the principle of natural justice.
[11] Each matter i.e. facts of each case have to
analyzed in the context of rules and regulation and provision of Act. If the same are vitiated
then the whole proceeding[12] could be nullified[13] on ground of non application of principles of
natural justice. The power under Section 26(1) of the Act is regulatory and inquisitorial[14], i.e. the
its administrative power[15] and not adjudicatory power of commission. Its only a step taken by
commission to prepare for future case i.e. collection of data and hence at this stage right of notice
of hearing is not required to be issued.

Apex court[16] in Issue 3 held that in matter where CCI initiated matter suo moto, it will be proper
party[17] and in every other it will be necessary party[18].

Further with respect to Issue 4, the power under section 33 is given to Commission which is to be
used in rare situation and only at time of inquiry to pass temporary order[19] to stop party from
carrying on such act which is according to commission contravening the provision. This order is
limited to the period till other order is passed or till end of inquiry. While passing such order, it
must be supported by reasoning.[20]

The commission has responsibility to base its prima facie opinion as per Issue 5, whose terms must
be unambiguous, on basis of records furnished by parties and obtained through complainant and
other sources. The Act does not mandate any detailed reasoning[21] but there must be “minimum
reason” to substantiate the claim of forming prima facie opinion.

Finally, to ensure proper compliance in regard to procedural requirements the following directions
were given so that the matter could be disposed expeditiously and the same would be in larger
interest of justice. The directions are as followed –

1. The commission should hold its meeting and record its opinion much before 15 days[22] (the
maximum time provided in regulation) about its prima facie opinion about complaint.
2. The objectives of act must be strictly followed while inquiry and investigation conducted by
DG and commission.

if temporary order is passed, the final order must also be passed in short duration (not later
than 60 days).

1. The Director General must submit its report[23] within the period as stated by commission (
and not more than 45 days[24] after the direction passed under Section 26(1))
2. The confidentiality must be maintained by commission and its delegate[25].

Conclusion

The judgment played an important role in development of Competition Law in India, which was
at very native stage in year 2009. The issues raised in the matter highlight the ambiguity among
people which was clarified by the court. And this kind of judgment is the first step toward
building of Antitrust jurisprudence in India[26]. The Apex court has very well explained the intent
of legislature while ruling. The interest of consumer has to be protected along with freedom of
trade. Thus, overall judgment ensured proper distribution of power between Commission and
COMPAT.

[*]5th Year Student, B.Sc. LL.B. (Trade Hons.), Co-Convener Centre for Competition Law and
Policy, National Law University, Jodhpur

[1] CCI vs. SAIL, (2010) 10 SCC 744

[2] Complaint was made under Section 19 of the Competition Act, 2002 (hereinafter referred as the
“Act”) read with Section 26(1) of the Act.
[3] Tilottama Raychoudhary, Competition Commission v. SAIL (2010) – Comment, available at
http://blog.mylaw.net/1competition-commission-v-sail-comment/
(http://blog.mylaw.net/1competition-commission-v-sail-comment/)

[4] Competition Law and Policy, CCI v SAIL: Supreme Court Gets it Right!, available at
competitionlawyer.blogspot.in/2010/09/cci-v-sail-supreme-court-gets-it-right.html

[5] Shiv Shakti Co-op. Housing Society, Nagpur v. Swaraj Developers, (2003) 6 SCC 659; Grasim
Industries Ltd. v. Collector of Customs, Bombay, (2002) 4 SCC 297

[6] Municipal Corporation of Delhi v. Tek Chand Bhatia, (1980) 1 SCC 158; Super Cassettes
Industries Ltd. v. State of U.P., (2009)10 SCC 531

[7] Union of India v. Tulsiram Patel, AIR 1985 SC 1416; Padma Sundara Rao v. State of T.N., AIR
2002 SC 1334

[8] Maria Cristina De Souza Sadder v. Amria Zurana Pereira Pinto, (1979) 1 SCC 92;

[9] Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, (1999) 3 SCC 722; Kashmir Singh v. Harnam
Singh, AIR 2008 SC 1749

[10] Delhi Transport Corporation v. Delhi Transport Corporation Mazdoor Congress, (1991) Supp1
SCC 600

[11] Competition Commission of India (General) Regulations, 2009, Regulation 17(2) and
Regulation 21(8)

[12] Raj Restaurant and Anr. v. Municipal Corporation of Delhi, (1982) 3 SCC 338,

[13] Canara Bank v. Debasis Das, (2003) 4 SCC 557

[14] Krishna Swami v. Union of India, (1992) 4 SCC 605

[15] Union of India v. W.N. Chadha, (1993) Supp 4 SCC 260

[16] Udit Narain Singh Malpaharia v. Addl. Member, Board of Revenue, Bihar, AIR 1963 SC 786;
Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay, (1992) 2 SCC 524

[17] A proper party is one in whose absence an effective order can be made but whose presence is
necessary for a complete and final decision on the question involved in the proceeding.

[18] A necessary party is one without whom no order can be made effectively.

[19] Morgan Stanley Mutual Funds v. Kartick Das, (1994) 4 SCC 225

[20] (a) record its satisfaction (which has to be of much higher degree than formation of a prima
facie view under Section 26(1) of the Act) in clear terms that an act in contravention of the stated
provisions has been committed and continues to be committed or is about to be committed;

(b) It is necessary to issue order of restraint and

(c) from the record before the Commission, it is apparent that there is every likelihood of the party
to the lis, suffering irreparable and irretrievable damage or there is definite apprehension that it
would have adverse effect on competition in the market.

[21] S.N. Mukherjee v. Union of India, (1990) 4 SCC 594; Assistant Commissioner, C.T.D.W.C. v.
Shukla and Brothers, JT 2010 (4) SC 35

[22] Regulation 16

[23] Section 26(2) of the Act.

[24] Regulation 20

[25] Section 57 of the Act and Regulation 35.

[26]Vikram Sobti and Kanika Chaudhary, Analysis of verdict of Apex Court in CCI v. SAIL,
available at http://www.luthra.com/admin/article_images/analysis%20-cci-v.PDF
(http://www.luthra.com/admin/article_images/analysis%20-cci-v.PDF)

Disclaimer: This article has been written by a member of Centre for Competition Law and Policy.
The article is just an opinion of the Author and no legal consequences follow from the same.

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