[By Aditya Bhargava]
The Author is a student of National Law School of India University, Bengaluru
Introduction
The Competition Act, 2002 (“the Act”) was enacted to ensure fair competition by prohibiting trade practices that have an appreciable adverse effect on competition (“AAEC”) in India. For this purpose, the Competition Commission of India (CCI or “the Commission”) was established and tasked with the duty to: (i) eliminate practices having an AAEC, (ii) promote and sustain competition, (iii) protect the interests of consumers, and (iv) ensure freedom of trade carried on by market participants, in India.[1]
The investigative wing of the CCI, i.e., the Director General (“DG”), assists it in investigations into anti-competitive practices of enterprise(s). Under Section 19 of the Act, any person aggrieved by the anti-competitive conduct of an enterprise can provide information to the CCI, requesting an investigation. Based on the information, if the Commission is of the prima facie opinion that there exists a potential Section 3 or Section 4 violation, it is required to direct the DG to investigate the matter through a Section 26(1) order. As per the Supreme Court’s judgment in CCI v. SAIL, this order acts as the “Jurisdictional Gateway” for the DG to proceed with the investigation.
However, the precise scope of the DG’s investigation remains far from clear, considering conflicting jurisprudence from various courts and the latest 2023 amendments to the Act. The latest question is whether, relying on Excel Corp, the DG can unilaterally extend the inquiry to unnamed parties or reclassify Third Parties as Opposite or Contesting Parties without explicit permission from the CCI and in the absence of a mandatory Section 26(1) order. Currently sub-judice before several High Courts is the question of whether this reclassification is merely procedural or whether it also violates Third Parties’ substantive rights under the Act. I argue that it is the latter, and it must not be preserved under the guise of procedural efficiency, as suggested by the existing literature.
This article contends that the DG’s investigation must be strictly confined to the scope of the Commission’s prima facie order. The legislative history of the Competition Act, 2002, reveals a deliberate departure from the preceding MRTP Act, 1969, by stripping the DG of suo motu powers. This established a two-tiered structure: the CCI as a quasi-judicial body with exclusive discretionary authority, and the DG as its purely investigative arm.
This statutory separation of powers has been decisively affirmed by the judiciary, particularly in the recent Bombay High Court’s judgment in Asian Paints Ltd. v. Competition Commission of India, which pointed towards the CCI’s supreme role in forming a prima facie opinion under Section 26(1). Consequently, I argue that the DG cannot unilaterally implead new parties or reclassify third parties as opposite parties, as this would constitute jurisdictional overreach and a back-door attempt to reclaim suo motu powers.
Therefore, should an investigation reveal the culpability of a new enterprise, the only legally sound procedure is for the DG to refer the matter back to the Commission and seek explicit permission from the Commission. Only the CCI has the authority to apply its mind and issue a fresh or supplemental Section 26(1) order to expand the inquiry. Furthermore, any party subsequently impleaded must be formally notified of its status as an “Opposite Party” and afforded all attendant procedural and substantive rights.
The Statutory Architecture of Sections 26 and 41 read with the General Regulations
Section 26 is a carefully crafted provision that must be read alongside Sections 19 and 41. Section 19 empowers the CCI to form a “prima facie opinion” on the basis of information, a reference, or its own knowledge. Once the Commission reaches that opinion, it shall and only then issue an order under Section 26(1) directing the DG “to cause an investigation into the matter”. The phrase “the matter” is significant: textually, it refers to the specific allegations, theories of harm, and named enterprises that gave rise to the Commission’s prima facie satisfaction.
Consequently, the Act does not authorise the DG to amend, expand, or substitute “the matter”; it merely authorises the DG to investigate exactly what the Commission has delineated in its Section 26(1) order. Notably, under the Monopolies & Restrictive Trade Practices Act, 1969 (the Competition Act’s predecessor), the DG possessed suo motu powers, powers explicitly removed by the Raghavan Committee in recommending the Competition Act 2002. This legislative history clarifies the intent: the DG’s authority is strictly derivative, and the DG, being an independent office, must operate at an ‘arm’s length’ from the CCI.
A clear reading of Section 41, which provides for the powers of the DG, supports this. The Section is triggered only “when so directed by the Commission”. Its subsection (4) distinguishes between (a) “officers, employees and agents of the party being investigated” and (b) “any other person,” and obliges the DG to secure the Commission’s prior approval before examining the latter on oath. The dichotomy created by the subsection presupposes clarity, at every stage, as to who is the party under investigation and who is merely a third‑party information holder. The reason this differentiation is crucial is due to the difference in rights afforded to differently designated parties under the Act. In particular, classification as an “opposite party” triggers rights such as notice, inspection of records, and participation in proceedings, alongside exposure to penalties and remedial orders, whereas a third party does not enjoy these rights nor bear such liabilities.
The General Regulations, in force since 2009 and amended in 2024, reinforce this dichotomy by separating Regulation 24 (joinder of necessary parties) from Regulation 25 (participation of interested persons). Each of these is predicated on an application and a reasoned order of the Commission. Neither empowers the DG to alter party status proprio motu. The Commission’s power under Regulation 20 to “call for information from any person” is investigatory, not adjudicatory. When read alongside Section 36(1), which requires the Commission to be guided by natural justice, the text supports a clear proposition: the identity of an opposite party is a jurisdictional fact that must be established by a formal order of the Commission, after affording the proposed party an opportunity to be heard.
Jurisprudential Trajectory: From Excel Crop to MRF and the Emerging Fault-Line
The primary defence advanced by the DG in instances of unilateral impleadment is the reliance on Excel Corp (¶44 & 45), where the court hinted at the DG’s broad powers given the absence of adequate material when the Section 26 order was issued. The loose dictum that “the matter” includes all ancillary facts is deployed to justify adding enterprises whose conduct was never scrutinised by the Commission at the threshold. While that logic may support additional findings against the same party, I argue that it cannot be stretched to permit a roving expedition whereby parties not mentioned in the Section 26 order are impleaded without the Commission’s express permission.
Excel Corp did not involve converting an unnamed enterprise into an opposite party; rather, the investigation extended to an additional tender year not explicitly indicated in the prima facie order. Cadila and Grasim applied that ratio where the DG had examined further conduct or provisions. None of those decisions addressed unilateral impleadment of new parties. On the other hand, in Hyundai Motor India Ltd vs Competition Commission of India, the DG had sought explicit permission of the Commission before proceeding against a third party.
The absence, until 2023 of a statutory definition of “party” permitted a broad reading of Excel Corp. As noted in MRF v. CCI (¶30), the impact of such a conversion on a party must also be considered, given that serious consequences follow.
Three features distinguish the MRF (¶14,15) ruling and make it normatively superior. First, it confronted a paradigmatic shift in status: the tyre manufacturer was repeatedly treated as a third party and denied access to records; only after the DG’s note was it labelled as an opposite party. Second, neither the note nor the Commission’s two‑paragraph endorsement was served on the affected firm until years later; thereby denying it timely notice of the basis of its impleadment and any meaningful opportunity to challenge the decision at the appropriate stage. Third, by then the 2023 amendment had introduced in Section 2(ka) a definition of “party” limited to entities “against whom any inquiry or proceeding is instituted” or “impleaded by the Commission”. The Madras High Court, therefore, examined the current statutory text (post-amendment) rather than blindly relying on Excel Corp. It concluded that the Commission must issue a speaking order, grounded in its independent prima facie assessment, before the DG may shift an entity from the periphery to the centre of liability.
Moreover, the reasoning in MRF is rooted in administrative‑law principles. Jurisdiction may not be enlarged by consent or waiver; it must be conferred by statute and exercised in the prescribed manner. Because the Commission alone is authorised to form a prima facie opinion under Section 26(1), the DG’s attempt to expand its scope by the back door is a classic colourable exercise. Likewise, notice and hearing are not empty formalities: they are the means by which an entity may argue that the factual matrix fails to link its conduct to the alleged cartel, that market‑share tests negate dominance, or that the limitation period under section 20(1) bars inquiry. Denying that opportunity results in structural unfairness on multiple counts as discussed below.
Limits on Investigative Expansion and the Centrality of Natural Justice
The words “the matter” in Section 26(1) are not a charter for investigative omniscience. They refer to the subject matter delineated in the complaint, reference, or information that the Commission has examined. Systemic consequences follow if that delimitation is ignored.
First, unilateral impleadment by the DG converts a staged procedure into a rolling inquiry with no fixed terminus. Information against Firm A can morph into findings against Firms B, C, and D, each deprived of the safeguards of prima facie scrutiny and Section 26(4) report disclosure. This is inimical to predictability and chills legitimate business planning. It is also possible that information sought by Firm B against Firm A, on the pretext that Firm A is a third party, may later be used against Firm B once its status has been unilaterally altered. Moreover, the Commission itself is divested of its gate‑keeping function. Moreover, an opportunity to close the investigation under Section 26(2) is not given to the commission, prejudicing the non-contesting party.
Second, natural justice is not a discretion to be selectively conferred. When a third party’s classification changes, so do its substantive liabilities: exposure to penalties under Section 27(b); behavioural and structural remedies under Section 27(d); compensation actions under Section 53N; and, post‑2023, monetary sanctions under the new Section 48A. Such exposure necessitates prior notice and knowledge of status. It is trite law that procedural fairness must adapt to the gravity of consequences.
Third, informational asymmetry cannot justify a departure from procedure. The argument sometimes offered is that the Commission “could not foresee” whether unnamed actors are complicit until the DG unearths evidence. That scenario is already addressed by Regulations 24 and 25: the DG may recommend impleadment, whereupon the Commission decides after hearing the affected party. Nothing prevents the Commission from adopting a rolling prima facie approach in instalments as evidence accumulates. What is impermissible is to invert the sequence, treat the DG’s recommendation as a fait accompli, and present the Commission’s later adjudication as a rubber stamp, something that has been happening often.
Fourth, the 2023 definition of “party,” read conjointly with Sections 36(1) and 36(4), clarifies that only a “party” is entitled to inspect records. A firm unaware of its changed status cannot exercise that right within the six‑month inspection window prescribed in Regulation 37 of the amended General Regulations. The denial is material because access to the DG’s non‑confidential documents and to the Commission’s file is the foundation on which defence submissions are built. If the DG stealthily promotes a third party to the status of an opposite party after the evidentiary record is closed, that entity is irretrievably prejudiced.
Fifth, Section 48B’s 75-day window for commitments, triggered by “receipt of the order” under Section 26(1), depends on timely impleadment. If an entity remains a third party until the DG’s report is forwarded, that window never opens, going against Parliament’s aim of swift, negotiated market corrections. Commitments bind the Commission, not the DG, so late impleadment strips enterprises of a cost-efficient alternative to protracted litigation. Neither condonation of delay nor discretionary extensions finds textual support: Section 48B allows only 45 days plus a single 30-day “sufficient cause” extension. Absent service of a prima facie opinion, time cannot run. The remedy is simple: the Commission must issue and serve a supplementary prima facie opinion whenever it adds a party, thereby reactivating Section 48B’s commitment clock.
Conclusion and Policy Considerations
The Act draws a sharp line: the Commission names the parties, and the DG only investigates them. When the DG converts a third party as an opposite party without a fresh Section 26(1) order, that line vanishes. The result is investigative overreach that destroys due process, deflates Parliament’s deliberate removal of the DG’s suo‑motu power, and strips firms of the chance to defend themselves at the true threshold. Legal certainty simply cannot survive such fluid party designations. Moreover, procedural discipline enhances the probative quality of investigations; a DG conscious of the need to justify additional impleadments will secure stronger evidence before moving for expansion, thereby producing more litigation-proof final orders.
Excel Corp never authorised this shortcut, and the 2023 addition of Section 2(ka) now closes the door. A change of status must always be preceded by notice from the Commission, because that single step triggers key protections: file inspection, the 48B commitment window, defences on limitation and market power, and the Commission’s own ability to terminate the matter under Section 26(2). Without it, any later order is jurisdictionally fragile and ripe for judicial takedown.
The fix is simple. Where the DG finds new evidence against a stranger to the original mandate, the file must return to the Commission for a reasoned, supplemental prima‑facie opinion identifying the party and the material linking it to the alleged contravention. Only then may the DG proceed. Rule‑based enforcement, market certainty, and constitutional fairness all require no less.