Competition Commission of India v. Steel Authority of India Ltd.
Supreme Court of India, 9 September 2010, 3 judges
A direction by the Competition Commission under Section 26(1) to investigate, after forming a prima facie opinion, is not appealable under Section 53A, and no party has a right to notice or hearing at that stage.
Facts
Jindal Steel and Power Ltd. informed the Competition Commission that SAIL had entered into an exclusive supply agreement with Indian Railways for rails, contravening Sections 3(4) and 4(1) of the Competition Act, 2002. The Commission asked SAIL for comments. When SAIL sought six more weeks, the Commission, by order dated 8 December 2009, refused the extension, formed the opinion that a prima facie case existed and directed the Director General to investigate under Section 26(1), leaving SAIL free to file its comments before him. SAIL appealed to the Competition Appellate Tribunal. On 15 February 2010 the Tribunal refused to implead the Commission, held the appeal maintainable under Section 53A, set aside the order for violation of natural justice, required reasons for every order, and gave SAIL further time to reply. The Commission appealed.
Questions before the Court
- Is a direction under Section 26(1) of the Competition Act to investigate, on forming a prima facie opinion, appealable under Section 53A(1)?
- Are the informant or the affected party entitled, as of right, to notice or hearing before the Commission forms its prima facie opinion under Section 26(1)?
- Is the Commission a necessary or proper party in appeals before the Tribunal, and when may it pass interim restraint orders under Section 33?
- Must the Commission record reasons when forming a prima facie opinion under Section 26(1)?
What the Court held
- An appeal lies under Section 53A(1)(a) only against the directions, decisions or orders specifically listed there; other orders cannot be treated as appealable by implication. A Section 26(1) direction to investigate is an administrative, preparatory step that determines no rights, so SAIL's appeal ought to have been dismissed as not maintainable.
- No statutory duty is cast on the Commission to give notice or hearing before forming a prima facie opinion under Section 26(1), and no party can claim it as of right. The Commission may, in its discretion, call parties to assist or produce information.
- The Commission is a necessary party before the Tribunal where it initiated the inquiry suo motu, and a proper party in all other cases.
- Section 33 restraint orders may be passed only after a prima facie opinion and a direction under Section 26(1), sparingly, by a reasoned order recording a satisfaction higher than a prima facie view, necessity and the risk of irreparable harm or adverse effect on competition.
- The Commission must record at least some reason when forming a prima facie view, and must pass speaking orders when deciding the rights of parties. The Court also fixed time limits for the Commission and the Director General until regulations are framed, and directed SAIL to pay Rs. 25,000 costs to the informant.
Why it matters
The judgment lays down the procedure the Competition Commission must follow under the Competition Act, 2002. It holds that the list of appealable orders in Section 53A is exhaustive, that natural justice is excluded by necessary implication at the Section 26(1) stage, and sets conditions for ex parte interim orders under Section 33. It also issued time-bound directions for the Commission and the Director General to remain in force until regulations are framed.
In the Court's words
Copied from the official judgment; each passage links to its page.
“In terms of Section 53A(1)(a) of the Act appeal shall lie only against such directions, decisions or orders passed by the Commission before the Tribunal which have been specifically stated under the provisions of Section 53A(1)(a). The orders, which have not been specifically made appealable, cannot be treated appealable by implication. For example taking a prima facie view and issuing a direction to the Director General for investigation would not be an order appealable under Section 53A.”
“In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis.”
“In consonance with the settled principles of administrative jurisprudence, the Commission is expected to record at least some reason even while forming a prima facie view. However, while passing directions and orders dealing with the rights of the parties in its adjudicatory and determinative capacity, it is required of the Commission to pass speaking orders, upon due application of mind, responding to all the contentions raised before it by the rival parties.”
“For these reasons, we may conclude that the Commission can pass ex parte ad interim restraint orders in terms of Section 33, only after having applied its mind as to the existence of a prima facie case and issue direction to the Director General for conducting an investigation in terms of Section 26(1) of the Act. It has the power to pass ad interim ex parte injunction orders, but only upon recording its due satisfaction as well as its view that the Commission deemed it necessary not to give a notice to the other side.”
Provisions interpreted
- Section 26, Competition Act, 2002
- Section 53A, Competition Act, 2002
- Section 33, Competition Act, 2002
- Section 19, Competition Act, 2002
- Regulations 17(2) and 18(2), Competition Commission of India (General) Regulations, 2009
Case and bench
- Parties
- Competition Commission of India v. Steel Authority of India Ltd.
- Case
- Civil Appeal No. 7779 of 2010
- Decided
- 9 September 2010
- Bench
- S.H. Kapadia, K.S. Radhakrishnan, Swatanter Kumar
- Opinions
- Unanimous. Judgment of the Court by Swatanter Kumar, J., signed by S.H. Kapadia, CJI and K.S. Radhakrishnan, J.
Questions on this case
11 questions in live Law Maker papers mention this case. A few from free papers:
Question 1, Competition Law Practice Set 1
In Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television (2017), a body describing itself as a trade union called for a boycott of dubbed television serials. The Supreme Court held that:
- A. The body acted as an association of enterprises, and its conduct limited supply in breach of Section 3(3)(b)
- B. The conduct was an abuse of dominant position under Section 4 and not an agreement under Section 3
- C. The body was a trade union protected by Article 19, so the Competition Act did not apply to it
- D. Only the broadcasters could be liable, since the boycott caller was not engaged in economic activity
Show the answer
A. The body acted as an association of enterprises, and its conduct limited supply in breach of Section 3(3)(b)
In CCI v. Coordination Committee of Artistes and Technicians of W.B. Film and Television (2017), the Court held that the Committee was in fact backing enterprises engaged in film production, distribution and exhibition, so it could not shelter behind trade unionism. Barring dubbed serials limited supply and violated Section 3(3)(b); the CCI's appeal was allowed.
Question 2, Competition Law Practice Set 1
In Excel Crop Care Ltd. v. Competition Commission of India (2017), bids in a Food Corporation of India tender were submitted under a collusive agreement on 8 May 2009, before Section 3 came into force on 20 May 2009, but the tender process continued after that date. The Supreme Court held that:
- A. Section 3 could not apply, since applying it would give the Act retrospective operation
- B. Section 3 applied only if the Central Government had notified the tender as a continuing contract
- C. Section 3 applied, because the agreement continued to operate and was acted upon after 20 May 2009
- D. Section 3 applied only to the tenders floated after the date on which the Commission was established
Show the answer
C. Section 3 applied, because the agreement continued to operate and was acted upon after 20 May 2009
The Court in Excel Crop Care Ltd. v. CCI (2017) held that the role of the bidders did not end with submission of bids on 8 May 2009; the arrangement continued and was acted upon after 20 May 2009, when Section 3 was brought into force, so the inquiry was covered by Section 3 without any retrospective application.