India: Dawn Raids – When CCI (India) Comes Knocking?

MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India Email: mmsharma@vaishlaw.com

On 22 September, 2014, the Director General, Competition Commission of India ("CCI"), conducted its first-ever 'dawn-raid' at the premises of M/s JCB India Ltd., an Indian subsidiary of a UK based construction company ("JCB"). According to news reports, the raid was conducted due to JCB's alleged non co-operation in the process of investigation by the Director General ("DG") in an allegation of abuse of dominant position. The Indian Competition Act, 2002 ("the Act") empowers the DG to conduct such raids after obtaining a warrant from the Chief Metropolitan Magistrate, Delhi.

Whilst it was the first time that the DG conducted such a surprise raid, it will certainly not be the last. Notwithstanding the fact that it is important to co-operate and provide information to the DG to conduct its investigation, it is also important for the companies to be prepared in advance to handle dawn raids at its premises. This article seeks to briefly introduce dawn raids, the pre-conditions necessary for such raids to happen and how to be prepared for and manage a dawn raid by CCI.

Introduction-

"Dawn raid" colloquially known as "unannounced or surprise search and seizure" is an investigative tool commonly used by investigative agencies around the World to probe into serious antitrust or competition law violations. These surprise inspections are made without warning and are usually conducted at times when least expected, often at the crack of "dawn" and/or during weekends. Hence the name.

These are conducted generally when CCI has a strong suspicion that serious antitrust infringements have occurred. This could include typical cartel agreements (on pricing, volumes, and territories) or even serious allegations of abuse of dominance, as noticed in the JCB case. However, inspections are not confined to cases involving cartels. Even the exchange of sensitive company information between competitors, or setting resale prices for dealers, may trigger a dawn raid. Any company, no matter how small, can be subject to a dawn raid by authorities investigating a competition law infringement. By their nature, dawn raids are unannounced and unexpected. Understanding what will happen, and knowing what your obligations, and indeed your rights are, will help you ensure that the business cooperates fully, while minimising disruption and protecting your legal position. In line with international trend, the Indian Competition Law also empowers the Director General (DG) (the investigating arm of the CCI) to undertake such 'search and seizure'.

The 'raids' are conducted in a covert manner leaving no scope with the party under investigation to scuttle the search in any manner and also not to give any opportunity to 'sanitize' the records. In case of multi-national corporations, simultaneous raids can be coordinated in several jurisdictions and at different locations in the same jurisdiction.

Any unannounced inspection or dawn raid by a competition authority will create major disruption for your business and may signal the start of protracted proceedings, potentially leading to fines, damages actions and personal sanctions for individuals and disqualification for directors.

In a dawn raid it is normal for between five to fifteen officials to show up, possibly with the police in tow. The officials are at will to enter business premises, look in lockers and desks, and search computers and servers. They are allowed to open safes (or have them forcibly opened), and private premises and vehicles may also be searched. If they find incriminating material, they are allowed to take copies of documents, if not the originals, away with them. Generally, they are most interested in e-mails, documents, calendars and travel documents. Employees may also be questioned and, in the case of investigations which last several days, entire rooms and computer servers may be sealed off.

If you are subject to a dawn raid, you will need to take immediate steps to ensure your interests are protected on the day, making sure you understand the authority's processes and procedures so as to be able to assess where you stand, enabling you to take an informed decision on how to react. Advance preparation for a dawn raid is, therefore, extremely important.

Essential Pre-conditions necessary for dawn raid-

Dawn raids are a part of investigation to be made by the Director General of Competition Commission of India ("DG"). However, unlike in the erstwhile MRTP Act, 1969 (Since repealed) DG though the investigation arm of CCI, in not authorized to start an investigation of its own. Investigation by the DG can start only when CCI decides to initiate an inquiry in any matter and directs the DG by an order in writing to investigate the matter. The essential pre-conditions required for conducting a dawn raid are as follows:

  1. Investigation is conducted by the Director General (DG) who is a functionally independent part of the CCI. Investigations by the DG can begin only after an order in writing is passed by the CCI after forming a prima facie opinion on the contravention of any provision of the Competition Act 2002 (the Act).
  2. The order by the CCI forming a prima facie opinion ought not to influence the investigation to be undertaken by the DG and the DG is free to arrive at a contrary conclusion after the Investigation.
  3. During the course of the Investigation, the DG may decide to conduct searches and, if required, seizure of documents etc. Search or seizure operations are, therefore, a part of the Investigation to be conducted by the DG.
  4. Before conducting the search and /or seizure operation, the DG is required to obtain a legal search seizure warrant from the Chief Metropolitan Magistrate (CMM), Delhi.
  5. Therefore, any unannounced inspection can begin only after the DG is armed with such a warrant from the CMM.
  6. Under the law, only the CMM is authorized to issue such warrants for search / seizure by the DG1.

What documents the DG officials must present before commencing the dawn raid?

  1. You may ask for a copy of the CCI order directing investigation in the matter from the inspecting officials, though they are not obliged to supply this under the Act.
  2. You must insist on the warrant / order of the CMM directing the search and / or seizure by the DG; examine it carefully and check:
  • Are your company's premises mentioned as the place to be searched?
  • Is the offence suspected to have been committed by your company mentioned in the search warrant?
  • Is the "thing" to be searched mentioned in the search warrant?
  • Are the name(s) and designation(s) of the officer(s), including the police officers, authorised to conduct search / seizure mentioned in the search warrant?
  • Ask for the identity cards of the officers to verify that only those named in the search warrant conduct the search/seizure.

The rights of the company during the unannounced inspection (search):

  1. To be allowed a reasonable time for calling the in-house counsel or external counsel to arrive. However, it is not obligatory for the investigator to wait for the arrival of the counsel;
  2. To ask for the identity cards of the inspecting officials to verify their authority to conduct the search as per the warrant of the CMM and the scope of the dawn raid. It is advisable to confirm the authenticity of the dawn raid by calling the Director General;
  3. To object to any inspection (search) in the absence of a search warrant from the CMM. However, do not attempt to stop the officials by use of force. Follow the same procedure if the officials extend the scope of the investigation on the spot;
  4. To insist on receiving a copy of the "Seizure Memo" at the end;
  5. To object to the review or taking of copies of "privileged documents" including confidential communication between the client and its external attorney;
  6. To refuse to answer direct self-incriminating questions;
  7. To insist on the presence of an independent witness during the search and seizure operations;
  8. To ask for photocopies of the records / statements recorded during the search / seizure operation, including disputes, objections taken, if any, relating to privileged documents etc.

Obligations of the Company after the unannounced inspection (search):

The company is not to tamper with or break the official seals, if any, affixed by the officials inter alia, to premises, rooms, cupboards and documents, e.g. if an inspection lasts several days since breaking a seal is a criminal offence.

How to prepare for a dawn raid?

As may be noticed, a dawn raid in non-cartel investigation may be avoided by cooperating with the office of the DG during investigation i.e. by giving true and complete answers to the questions sent by the DG through notices and to timely respond for any personal examination by the DG. However, in cases of investigations in to hard-core cartels for which DG may not like to issue questionnaire, preparing an advance strategy on how to handle a dawn raid if required, including:

  1. Advance and periodical trainings to all relevant employees, with focus on Reception staff, IT teams, PR and Legal teams.
  2. Coordinated meetings of the security / reception top officials with IT, PR and Legal teams.
  3. Setting up a dawn raid response team.
  4. Training the response team on the dawn raid response process with the help of step by step Action Flow Chart.

How to manage a dawn raid?

As stated above, in cases of serious antitrust violations like participation in hard-core cartels, dawn raids are usually resorted to. In such a situation, the following tips may be useful to avoid further damage to the company.

  1. Be prepared for a dawn raid- read the dawn raid check list/quick guide and the process chart periodically and consult legal department whenever in doubt.
  2. Cooperate with the investigators without forcing information on them.
  3. Avoid aggressive behaviour towards officials.
  4. Make extensive notes/ copies of all documents/ data taken.
  5. Never leave officials unaccompanied on company premises.
  6. If possible, provide statements only in the presence of a lawyer.
  7. Do not try to destroy or alter any documents on coming to know about the raid.
  8. Never break an official seal.

The advance preparation of the dawn raid check list / quick guide and the process flow chart for each department along with the constitution of a dawn raid response team from the key departments which are likely to come or should remain in contact with the inspecting staff are absolutely necessary. Expert guidance from local perspective on these preparations are advisable.

Follow Ups:

After the conclusion of the dawn raid, the following essential steps are required:

  1. Conduct a review meeting taking inputs from all concerned.
  2. Prepare a Press release and circulate it to the media to avoid wrong publicity in media through unreliable sources.
  3. Secure the seizure memo, copies of the documents/notes prepared during inspection, including list of documents, electronic data taken/seized during inspection.
  4. Prepare a de- brief note for the top management and external lawyers.
  5. Forward the de brief note to the external lawyers, pointing out irregularities, if any, noticed during the raid and requesting for urgent opinion on action to be taken.

Footnotes

1.Section 41 of the Competition Act, 2002 (the Act) lays down the duties & powers of the Director General. DG generally has the same powers of a civil court for conducting the investigation as are available to the CCI. In particular, sub-section (3) of section 41 of the Act empowers the DG with the same powers relating to search and seizure, as they apply to an Inspector in terms of Section 240 and 240A of the Companies Act, 1956. In terms of Section 240A of the Companies Act, where in the course of investigation, the Inspector has reasonable ground to believe that the books and papers of , or relating to, any company or any other body corporate, may be destroyed, mutilated, altered, falsified or secreted, as the case may be, the Inspector may obtain on order of the Magistrate, to (a) enter, with such assistance, as may be required , to such places where such books or papers are kept, (b) to search that place in the manner specified in the order , and (c) seize the books and papers as he considers necessary for the purposes of his investigation . Further, in terms of an Explanation below sub section (3) of Section 41 of the Act , the DG has to obtain the warrant for the same from the CMM, Delhi, in accordance with the provisions of the Code of Criminal Procedure, 1973

* The author heads the Competition law & Policy practice at Vaish Associates, Advocates, New Delhi. He served as Additional Registrar in Competition Commission of India. Can be reached at mmsharma@vaishlaw.com. Views expressed are personal.

Specific Questions relating to this article should be addressed directly to the author.

Article by MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
MM Sharma, Head Competition Law & Policy Practice
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions