[By Sajith Anjickal]
The author is a student at the National Law School of India University, Bangalore.
Section 53A of the Competition Act, 2002 (‘Act’) deals with the scope of the Appellate Tribunal’s power to hear appeals against directions issued, decisions made, or orders passed by the Competition Commission of India (‘CCI’). In terms of the powers of the CCI under Section 26, Section 53A(1)(a) allows appeals only under two circumstances: (i) Section 26(2) – when the CCI is of the opinion that no prima facie case exists and passes an order to close the matter; and (ii) Section 26(6) – when the Director-General (‘DG’) finds no contravention and the CCI, agreeing with the DG, passes an order to close the matter. Orders passed under other subsections of Section 26 are not appealable. Thus, no appeal shall lie in circumstances wherein: (i) the CCI, after forming an opinion that a prima facie case exists, directs an investigation under Section 26(1); (ii) the DG finds no contravention but the CCI disagrees with the DG and directs further investigation/inquiry under Section 26(7); and (iii) the DG finds contravention and the CCI directs further inquiry under Section 26(8). This scope of appeal under Section 53A(1)(a) was clarified by the Supreme Court in Competition Commission of India v. Steel Authority of India (‘SAIL’). However, ambiguity still exists with respect to circumstances wherein the DG finds contravention but the CCI disagrees with the DG and closes the matter. The Act does not account for orders made in this regard. Consequently, there is no clarity as to whether the CCI’s decision to close a matter, despite a finding of contravention by the DG, is appealable.
Should closure orders, passed after a finding of contravention by the DG, be appealable?
In the SAIL case, while justifying the scope of appeal under Section 53A(1)(a), the Supreme Court distinguished between the nature of orders passed by the CCI under sub-sections (2) or (6) of Section 26 and other sub-sections of Section 26. The Court held that, unlike the orders under other sub-sections, orders under sub-section (2) or (6) of Section 26 are final as they put an end to the proceedings initiated upon receiving the information. Such closure of proceedings, in the opinion of the Court, causes determination of rights and affects a party (the informant), and thus the said party must have a right to appeal against the closure of the case. This observation of the Supreme Court lends support to the view that the CCI’s decision to close matters, despite a finding of contravention by the DG, must be appealable. Such decisions, by putting an end to proceedings, determine rights and affect the informant(s) and thus there is no reason as to why they should not be appealable. Nevertheless, given that the right to appeal is a statutory right, the problem of maintainability arises as there is no statutory backing for appealing these decisions.
Approach of the Appellate Tribunal
The manner in which the Appellate Tribunal has dealt with the problem of maintainability has been confusing. On one hand, in some cases, the Appellate Tribunal has gone on to admit appeals by either ignoring or evading the problem altogether. For instance, in In Re: Deputy Chief Materials Manager, Rail Coach Factory, Kapurthala and M/s Faiveley Transport India Ltd and Anr, the DG submitted a report finding contravention. The CCI, however, passed an order closing the case on the ground that the DG’s findings were inadequate to confirm the contravention. The informant appealed to the Appellate Tribunal, which admitted the appeal without going into the question of maintainability.[i] Given that the CCI, in closing the matter, disagreed with the DG’s finding of contravention, it is apparent that the closure order does not fall within sub-sections (2) or (6) of Section 26. Thus, the Appellate Tribunal’s decision to admit the appeal, without providing any justification for the same, is problematic. Another instance is the Appellate Tribunal’s treatment of the appeal against the order in In Re: Sunil Bansal & Ors and M/s Jaiprakash Associates Ltd & Ors. In this case, the DG filed a report finding no contravention but the CCI disagreed and directed further investigation under Section 26(7). Pursuant to this direction, the DG filed a supplementary report finding contravention. The CCI, however, closed the case by discarding the findings recorded by the DG in the supplementary report and accepting the conclusions recorded in the initial report. The informant appealed against this decision of the CCI. The Appellate Tribunal admitted the appeal by noting that as the CCI accepted the DG’s initial finding of no contravention, its closure order fell within the ambit of Section 26(6).[ii] In doing so, however, the Appellate Tribunal conveniently ignored the fact that, in closing the matter, the CCI effectively disagreed with the DG’s finding of contravention in the supplementary report. On considering the CCI’s disagreement with the finding of contravention in the DG’s supplementary report, it becomes clear that the CCI’s closure order cannot be categorised as one falling within Section 26(6).
On the other hand, in a few cases, the Appellate Tribunal has acknowledged the limitations in its appellate jurisdiction and dismissed appeals. For instance, in In Re: Saurabh Tripathy and Great Eastern Energy Corporation Ltd, the DG filed a report finding contravention but the CCI disagreed and passed an order to close the case. The informant appealed to the Appellate Tribunal. The Appellate Tribunal, however, dismissed the appeal noting that the present scheme of the Act did not empower it to admit appeals against such orders. [iii]
Need for Legislative Action
It is evident that legislative action is required to settle the problem of maintainability of appeals against closure orders passed subsequent to a finding of contravention by DG. Unfortunately, the recently proposed Draft Competition (Amendment) Bill, 2020 (‘Bill’) falls short of completely resolving the problem. The Bill seeks to incorporate Section 26(9) by virtue of which the CCI, upon completion of the investigation or inquiry under Sections 26(7) or 26(8), may pass orders as it deems it, and orders passed under Section 26(9) would be appealable under Section 53A(1)(a). Therefore, if the DG finds contravention and the CCI, after a further inquiry under Section 26(8), passes an order closing the case, an appeal would be maintainable against such order. However, the Bill does not account for circumstances wherein, subsequent to a finding of contravention by the DG, the CCI closes the case without any further inquiry. It is hoped that the Bill that is finally brought before the Parliament addresses this gap and resolves the problem completely.
[i] Deputy Chief Materials Manager, Rail Coach Factory, Kapurthala v. M/s Faiveley Transport India Ltd & Anr, Appeal No. 10 of 2016 (Competition Appellate Tribunal).
[ii] Sunil Bansal & Ors v. M/s Jaiprakash Associates Ltd & Ors, Appeal No. 21 of 2016 (Competition Appellate Tribunal).
[iii] Saurabh Tripathy v. Competition Commission of India and Anr, Appeal No. 16 of 2017 (Competition Appellate Tribunal).