India: Does A Valid Arbitration Agreement Exclude The Jurisdiction Of The Competition Commission Of India?

Last Updated: 19 July 2017
Article by Satwik Singh and Adhip Ray

Most Read Contributor in India, July 2017

Arbitration has become an immensely popular method of alternative dispute resolution in India. The fact that almost every contract nowadays has an arbitration clause is testament to the popularity of arbitration. Section 28 of the Indian Contract Act, 1872 gives parties a right to enter into contracts for arbitration (to the exclusion of the jurisdiction of the courts) and accordingly, parties can decide to refer their disputes to arbitration rather than initiate court proceedings. The process of arbitration in India is regulated by the Arbitration and Conciliation Act, 1996 (hereinafter, "the Arbitration Act"). Section 5 of the Arbitration Act lays down the principle of minimal judicial intervention and states that a judicial authority cannot interfere in any manner with the arbitration proceedings other than under the Arbitration Act. The Competition Act, 2002 (hereinafter, "the Competition Act") was enacted with the purpose of preventing anti-competitive practices that have an appreciable adverse effect on competition and abuse of dominant position. Under the scheme of the Competition Act, the Competition Commission was established and given extensive powers to ensure fulfilment of this objective.

Thus, in light of the minimal judicial intervention principle crystallised under Section 5 of the Arbitration Act, the important question that arises is – Would an arbitration clause in a contract exclude the jurisdiction of the CCI, even when a party is acting in an anticompetitive manner and abusing its dominance?

This question was examined by Hon'ble Delhi High Court in the case of Union of India v Competition Commission of India and Ors54. In this case, it was contended that the Ministry of Railways was abusing its dominant position by increasing rates for various services; by not providing access to infrastructure such as rail terminals; by imposing several restrictions on the transport of certain categories of goods that the Complainant was dealing in. The Complainant filed a complaint before the CCI alleging that these practices were in contravention of abuse of dominant position contravening Section 4 of the Competition Act. The CCI found prima facie evidence of abuse of dominant position and ordered the DG to investigate. Against this order, a writ petition was preferred with the High Court of Delhi. The main contention of the Railways was that there was a valid and binding arbitration clause between itself and the Complainant and thus, the CCI would not have jurisdiction over the dispute and the same had to be referred to Arbitration under Section 8 of the Arbitration Act.

The Delhi High Court however, rejected this contention. The Court held that the scope and focus of CCI's inquiry was very different from the scope of dispute raised before an Arbitral Tribunal. It was observed that the Arbitral Tribunal's main focus would be on questions arising out of a breach of contractual obligations whereas the focus of the CCI would be to uphold the mandate under Section 3 (Anti-Competitive Agreements) and Section 4 (Abuse of Dominant Position) of the Competition Act. The Court also relied on Section 60 read with Section 62 of the Competition Act to say that because the provisions of the Competition Act have an overriding effect on other laws and have to be read in addition to, and not in derogation of, the provisions of any other law for the time being in force, the existence of an arbitration clause could not oust the jurisdiction of the CCI to rule on issues of anti-competitive agreements and abuse of dominance.

Therefore, in accordance with the ratio of the Union of India v Competition Commission of India, the aforementioned question of whether a valid arbitration clause will exclude the jurisdiction of the CCI has to be answered in the negative. Consequently, the CCI has jurisdiction on disputes that involve questions of anticompetitive agreements and abuse of dominance.

Footnote

54 [2012] AIR 66 (DelHC)

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