BackMultiple court stays hold up CCI investigations
With its investigations blocked and proceedings stayed by courts, the word 'stay' has become an 'anathema' for the agency
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New Delhi: India’s fair trade regulator Competition Commission of India (CCI) is in danger of becoming a watchdog leashed, with its investigations blocked and proceedings stayed by various courts. So much so that one of the agency’s lawyers was recently forced to tell the Delhi high court that such stays had become an “anathema" for CCI.
CCI’s lawyers have often assured judges that the agency will not take any coercive steps or conclude its investigation until the next hearing, just to dissuade the court from using the word stay in its order.
When asked about this at a public event last week, CCI chairperson Ashok Chawla said that such intervention was “unfavourable" for the agency and that it seemed to stem from a reluctance of the superior courts to fully appreciate the role of a new regulator.
The Competition Act 2002 was passed to replace the Monopolies and Restrictive Trade Practices Act 1969 to promote and sustain competition by curbing practices that could hit competition. The agency was given powers of inquiry, investigation and imposing penalties for violations.
The CCI can order an investigation by its director-general, drawing from its powers under section 26 (1) of the Act. However, many such proceedings have been stayed by courts, often at an early stage.
In 2010, the apex court settled many controversies by definitively interpreting certain sections of the Competition Act in the landmark Steel Authority of India Ltd (SAIL) case outlining the role and powers of CCI as a market regulator.
“The delay in disposal of cases, as well as undue continuation of interim restraint orders, can adversely and prejudicially affect the free economy of the country," the court said. The apex court had astutely noted the effect of such interim stays on the larger economy, but that has not made life any better for the regulator.
On 25 August, CCI fined 14 car makers ₹ 2,554 crore. The director general’s (DG’s) decision to enlarge the scope of investigation was challenged by Nissan Motors Co. Ltd and Hyundai Motor Co. in the Madras high court. Nissan won a stay in 2013, delaying a final order for nearly a year. When the order was passed, four of the seven members who heard the case had left CCI. After this, 11 of these car makers, including Tata Motors Ltd and Mahindra and Mahindra Ltd, challenged the constitutional validity of sections of the Competition Act in Delhi high court, which has stayed implementation of the order passed by CCI.
In another case, CCI initiated an investigation against Telefonaktiebolaget LM Ericsson after Intex Technologies (India) Ltd accused it of abusing dominant position in the market for standard essential patents. Ericsson challenged CCI’s jurisdiction, arguing the appropriate mechanism for such a case was provided under the Patents Act. On 21 January, the Delhi high court pointed to “a substantial question of jurisdiction" and allowed the DG to collect information from Ericsson, but restrained CCI and DG from passing a final order or submitting a final report. A two-judge bench also refused to interfere with this part of the single judge’s order.
Another case involved the Institute of Chartered Accountants of India (ICAI). The CCI had directed its DG to investigate charges against the institute, but ICAI won a stay on the investigation after filing a writ petition before the Delhi high court. The stay was also upheld by the division bench of the high court.
In another case, an interim stay granted by the Karnataka high court in a case involving the Karnataka Chemist and Druggist Association as far back as January 2012 is continuing.
Experts say high courts, in their writ jurisdiction, have the authority to test CCI’s jurisdiction. Senior lawyer A.N. Haksar, who has appeared both for and against CCI in several cases said, “The high court, being a constitutional court, can always go into the question of jurisdiction of CCI. Each case will be looked at according to the merits of that particular case and if DG oversteps the mandate that is given to him by CCI, even that can be questioned by the high court in its writ jurisdiction".
“Adjudication of Competition Law breaches is mandated to be remedied by CCI, but adjudication of breaches arising out of transparency or due process guaranteed by the Constitution of India, are within the domain of high courts," says Manas Chaudhuri, competition partner at Khaitan and Co.
However, others like lawyer Anupam Sanghi, who frequently represent CCI, believe, “Staying investigations initiated by CCI would mean delaying the benefits that can reach the consumer and affected market players which accrue through CCI’s decisions of correcting market irregularities when the parties who harm competition are punished and put to terms. If the parties investigated can rush to courts and stall investigations against them, then the object of the law to proactively curtail anti-competitive behavior is made ineffective and CCI is rendered toothless."
To be fair, high courts have often shown restraint in granting stays. The Delhi high court has refused to stay a DG probe into the Delhi Development Authority (DDA) and its officials over its 2010 housing scheme. In April, JCB India Ltd had approached the Delhi high court for a stay on a CCI investigation. The DG was allowed to investigate but not submit a final report. In the course of its investigation, the DG raided JCB’s premises. Calling this action “drastic", justice Vibhu Bakhru stayed all further proceedings in the case before CCI on 26 September. CCI challenged the stay before a division bench of chief justice G. Rohini and justice Rajiv Sahai Endlaw which has reserved the order.
On 20 November, the Karnataka high court dismissed a petition challenging CCI’s jurisdiction filed by Karnataka Film Chamber of Commerce, but not without restricting further proceedings before CCI for over a year. CCI proceedings have also been stayed by the Madras high court in a case involving the All India Chess Federation.
In most of these cases, the CCI has defended its stand citing the Supreme Court’s SAIL judgement. A ruling of a three-judge bench of the apex court in SAIL says that the function of investigation is of a preliminary nature and is a departmental function. It even says that investigation is “preparatory" rather than a “decision-making process". Relying on other cases that rule that high courts be restrained from entertaining writs against departmental functions, CCI has unsuccessfully tried to convince high courts that the order of investigation is merely an administrative order which should not be interfered under their writ jurisdiction.
“Efforts to liberalize the Indian economy to bring it at par with the best of the economies in this era of globalization would be jeopardized if time bound schedule and, in any case, expeditious disposal by the Commission (CCI) is not adhered to," the apex court had observed in 2010 in the SAIL case.
With stays lasting over a year in some cases, one wonders whether this goal remains an elusive one. While some of the lawyers interviewed believe that this is something every new regulator must go through, others believe too much interference by courts shakes the confidence of the regulator and hinders its development.
Aman Malik contributed to this story.
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