Competition commission shackled: an analysis of the judgment by national company law appellate tribunal

PSL Advocates and Solicitors | View firm profile

More often than not, judgments come to be passed which are set to ruffle many a feather and are, rather, surprising, with all due regards. Not so long ago, one more was passed and it fit the bill in totality.

On 29th May, 2020, the National Company Law Appellate Tribunal (NCLAT), in the case of Samir Agrawal vs Competition Commission of India, passed the judgment which scuttled the powers of Competition Commission of India (CCI), diluted the unambiguous intention of the Legislature and threatened the reigning-in of anti-competitive practices. Its application would have been just fine had the premise of the same been well founded in law but, unfortunately, a perusal of the same demonstrates otherwise. It was at a complete variance.

Inter-alia, the ratio of the aforesaid case is that a person who is not a consumer who has suffered invasion of his legal rights or a person whose legal rights have been or likely to be jeopardized by the alleged anti-competitive agreement or abuse of dominant position, cannot approach the CCI with the information under the Competition Act, 2002.

Before respectfully adverting to the merits of the judgment, it would be worthwhile to go through the factual matrix of the case. The Informant, who was an independent law practitioner, filed Information with the CCI, thereby, alleging contravention of provisions of Section 3 of the Competition Act, 2002. The informant alleged collusion for price fixing on the part of drivers associated with Ola and Uber through the apps of the two companies. It was alleged that the algorithm was used to fix prices which the drivers were bound to accept. The CCI, after hearing the parties, observed that neither there appeared to be any agreement or arrangement between the cab aggregators and drivers nor one between the drivers inter se. Observing thus, the CCI dismissed the matter. Aggrieved by the same, the Information approached the NCLAT in appeal whence this judgment came to be passed.

The NCLAT, while dismissing the appeal on merits of the case, also observed on the locus standi of the information and opined that when the Competition Act specifically provides for the mode of taking cognizance of allegations regarding contraventions and at the instance of a person apart from other modes, like, suo motu or upon a reference from the competent government or authority, reference to ‘any person’ in Section 19(1)(a) has, necessarily, to be construed as a reference to a person who has suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices. Any other interpretation would make room for unscrupulous people to rake issues of anti-competitive agreements or abuse of dominant position targeting some enterprises with oblique motives.

As stated above, this observation of the NCLAT is set to shackle the powers of the CCI and would affect the application of the Act as the people who are out of the scope defined by the NCLAT cannot approach the CCI. But whether this judgment is legally sound is what this article aims at.

The Object and Reasons of the Competition Act, 2002 read as follows:

An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.

An appreciation of the same would demonstrate that the scope and application of the Competition Act, 2002 is in rem and not in personum. It operates in, and encompasses, the relevant markets – relevant product market or relevant geographic market – as a whole and does not, necessarily, swim into the ken of individual rights. In view of the same, the CCI has been entrusted with the larger duty of preventing practices having adverse effect on competition, inter alia, in view of the economic development of the country. To achieve this objective, necessary was it for the Legislature to allow the information to be received from all quarters.

It is interesting to note that the NCLAT, in its judgment, demonstrates its consciousness of the fact that the concept of locus standi is not a pre-requisite for litigations. However, while giving the example of PILs, class-actions suits, cases brought about by trade associations and whistle blowers, the NCLAT narrowed the scope of the Competition Act, 2002 considerably, which observation, with all due regards, is not well-founded.

While laying down that persons other than those who are consumers who have suffered invasion of their legal rights or those whose legal rights have been or are likely to be jeopardized by the alleged anti-competitive agreement or abuse of dominant position are not entitled to approach the CCI, the NCLAT referred to Section 19 of the Act which provides modes of inquiry into certain agreements and dominant position of enterprise. According to Section 19, the Commission may, inter alia, initiate inquiry on receipt of any information from any person, consumer or their association or trade association. A perusal of the same would demonstrate that ‘consumer’ is but one category of informants among many. The Legislature, consonant to the spirit of the statute, has been rather unambiguous when providing for the scope. Along with association/trade association, the CCI can also initiate the inquiry upon receipt of information from ‘any person’. But the NCLAT has, in essence, merged the two distinct categories.

It is pertinent to note that had the intention of the Legislature been to allow only the categories as provided by the NCLAT, it would have categorically provided for the same. But, in the absence of a clear mention by the Legislature, and in view of the unambiguous wording of the provision, it was not open to the NCLAT to supplant its own view against the wording of the statute. There are a catena of judgments which categorically provide that if the language of the statute is clear and unambiguous, the same are to be interpreted in a strict manner.

However, it is also be kept in mind that, till the judgment is set aside, if at all, it is going to be in operation and, till that time, we are supposed to respectfully adhere to the same which means that CCI will be working with scuttled powers and the potential informants would be kept at bay.

Authored by :- Mr. Siddharth Jain, Co-Founding Partner, PSL Advocates & Solicitors

More from PSL Advocates and Solicitors