India: Delhi High Court Clears Procedural And Jurisdictional Issues In Antitrust Inquiry By CCI - Rejects Cadila's Petition

Last Updated: 27 September 2018

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

The Division Bench of the High Court of Delhi comprising of Justice S. Ravindra Bhatt and Justice A K Chawla, vide its landmark judgment dated 12 September 2018 has cleared some important procedural ambiguities surrounding the inquiry by the Competition Commission of India (CCI) under the Competition Act,2002 (the Act). The Hon'ble DB of the High Court while dismissing three out of four pleas appealed by Cadila Healthcare Limited ("Cadila") in a Letter Patent Appeal (LPA) against an earlier judgment dated 09 March 2018 of the Single Bench of the Delhi High Court (Justice  V Kameshwar Rao) , has held that (i) The investigation by  the Director General (DG) does not get vitiated in the absence of specific prima facie finding against a particular party by CCI under section 26(1) of the Act; (ii) CCI can hold simultaneous inquiry under section 48 of the Act against the Managing Director and other officials of the company without first arriving at a finding of violation of anti-competitive conduct against the company ; (iii) There is no power with CCI to recall its prima facie order under section 26(1) of the Act after the DG investigation report is received, in terms of the Google decision of Delhi High Court. The Hon'ble DB however, allowed Cadila's contention on grounds of violation of principles of nature justice and directed CCI to permit cross examination of 3 witnesses specifically requested by Cadila. 

Cadila had initially filed a writ petition under Article-226 of the Constitution of India before Delhi High Court alleging that investigation and the DG investigation report of DG was  nullity without a separate order under Section-26(1) of the Act finding a prima facie case against Cadila and that since DG had proceeded with the investigation against Cadila without being authorized by CCI vis-à-vis Cadila, the CCI's order under section 26(1) of the Act was required to be recalled. . The single bench of the High Court (Justice V Kameshwar Rao) dismissed the writ petition on all the grounds filed by Cadila vide Judgment dated 09 March 2018.

The inquiry was initiated by CCI based on 3 information filed by 3 stockists namely M/s Alis Medical Agency, M/s Stockwell Pharma, M/s Apna Dawa Bazar) of Ahmedabad, Surat and  Baroda respectively, who along with another stockist, M/s Reliance Medical Agency of Baroda, who  had filed complaints against the Federation of Gujarat Chemists and Druggists Association (Federation) , Amdavad Chemist Association, Surat Chemists and Druggists Association, the Chemists and Druggists Association of Baroda and 25 pharmaceutical companies including Cadila besides their C&F  agents. It was alleged that when the Informants approached pharmaceutical companies or their C&F agents for  supply of medicines, they were allegedly denied the same on the alleged directions of the Federation and that pharmaceutical companies were in tacit collusion with the Federation or the district level chemist associations and insisted upon obtaining a "No objection Certificate" from the Federation / Associations. The CCI vide its orders dated 16 January 2018, 17 January 2018 and 17 November 2015 under section 26(1) of the Act in the 4 cases had found prima facie case for investigation by the DG in the conduct of the Federation and the district level chemists associations and any other party which may be found to be violating the provisions of section 3 of the Act.  

In the LPA filed by Cadila against the Judgment of the Single Bench of the Delhi High Court dated 09 March 2018, the Hon'ble DB of the Delhi High Court framed the following issues for adjudication:

  1. Whether the DG's investigation in the absence of a specific order under Section 26(1) by CCI having formed a prima facie opinion, is vitiated
  2. Rejection of Recall application by CCI (based on grounds of fraud, res judicata and/or no cause of action )
  3. CCI rejection of Cadila's application for permission to cross examine three witnesses who had deposed before the DG.
  4. Whether simultaneous proceedings against the Company and its Managing Director and other officials can be initiated under section 48 of the Act?

The gist of the Judgment passed by the Hon'ble DB of the Delhi High Court on each of the above issues is as under:

On the first issue i.e., DG's investigation in the absence of a specific order under Section 26(1) by CCI having formed a prima facie opinion, is vitiated, the Court has said that DG's power is not limited by a remand or restricted to the matters that fall within the complaint. The Court rejected the reliance placed by Cadila upon the Judgment of the Single Bench in the case of Grasim Industries1  where it was held that without an order by CCI into the matter with respect to a particular party for a particular violation, it is not competent for the DG to investigate in to allegations. The Court relied on the judgement passed by the Hon'ble Supreme Court of India where the power of DG has been explained power of DG in the broader term i.e. Excel Crop Care Limited v. Competition Commission of India & Anr.2:

"if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report....If the investigation process is to be restricted in the manner projected by the Appellants, it would defeat the very purpose of the Act which is to prevent practices having appreciable adverse effect on the competition."

The Court stated that cognizance of a case is taken by CCI on the basis of the information received and which further requires investigation. On the stage of information it is not necessary that CCI has the complete information about the conducts that contaminate the entire market and it is during the inquiry only the whole picture with regard to the conduct of the persons becomes clear. Therefore, the Court held that investigation done by DG without CCI's recording prima facie opinion against Cadila is acceptable.

On the second issue i.e. CCI has rejected the recall application filed by Cadila the Court said that there are some concerns with regard to review power of CCI as to whether such a role played by the Commission is in "administrative power" or "statutory power". The CCI was vested with the review power under Section-37 (now repealed) of the Act, now the question arises how to understand the review power of the CCI. As per Section-383 of the Act, the Commission may rectify a mistake in its order either on its own motion or on application by the party.

With regard to case in hand the Court has distinguished from the case of Google Inc v Competition Commission of India4 ("Google order") where CCI has reviewed its order. Cadila has argued that review application was accepted by CCI in Google order, therefore, in the instant case also the application should also be accepted. The Court has pointed out that while deciding the Google order the Court had relied on several other decisions which dealt with pure administrative power, or power which was statutory for which no specific power was conferred, to recall (or review). In the latter category, the Supreme Court had consistently ruled that Section 21 of the General Clauses Act 1897 applied. That provision specifically states that where a statute does not enable the recall of an order or notification, or bye-law (note that all are legislative or quasi legislative statutory powers) the power to recall those exists, provided it is exercised in the same manner as in the case of the exercise of original power.

While answering the second issue on the recall application the Court held that Google order doesn't have a bearing on the present case because in the Google order the recall application was filed before the DG has submitted the investigation report before the Commission while in the matter of Cadila the recall application is filed after the submission of the DG investigation report. Therefore, CCI and the single bench didn't err on rejecting the recall application. 

The next point attached to the second issue is whether CCI erred in holding that the question of investigation into its conduct, was as a result of fraud or misrepresentation by any party? The Court finds CCI's order is irreproachable. To this issue, the Court drew a similarity with the inherent power of the High Court under Section-482 of Cr. PC. stating that "for instance, the charge sheet disclosing prima facie materials reasonably disclosing the complicity of any accused is filed in court, the inherent power to quash proceedings is rarely, if ever resorted to." In the instant case Cadila filed a 110 page recall application which contained complicated questions of law and detailed analysis of facts, therefore, by rejecting the recall application the Commission has not acted erroneously.

On the final point of res judicata attached to the second issue, the Court finds that the Commission or similar expert body should "ordinarily" not be crippled or hamstrung in their efforts by the application of technical rules of procedure.

On the third issue i.e. CCI didn't allow Cadila to cross-examine three witnesses named in the review application, the Court has accepted Cadila's disposition by saying that, though there is a discretion vested with the CCI with regard to accept or refuse the plea of cross-examine of a person within the ambit of Regulation 41(5)5 of The Competition Commission of India (General) Regulations, 2009, ("General Regulations") but the reason given by CCI for not accepting the request of cross-examination i.e. "dissatisfaction" does not imply judicious exercise of discretion. Therefore, CCI erred in rejecting Cadila's plea of cross-examination of the witness.

On the fourth issue of whether a simultaneous case against the Managing Director and other officials of Cadila can be filed without recording Cadila guilty of the anti-competitive  conduct, the Court has relied on the case of Pran Mehra vs. Competition Commission of India and Another6 wherein the court observed that "there cannot be two separate proceedings in respect of the company and the key-persons as the scheme of the Act, does not contemplate such a procedure. In the course of the proceedings qua a company, it would be open to the key-persons to contend that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to prevent the contravention. These arguments can easily be advanced by key- persons without prejudice to the main issue, as to whether or not the company had contravened, in the first place, the provisions of the Act, as alleged by the D.G.I., in a given case." The Court held that, Cadila's grievance with regard to issuance of notice to its Managing Director and other officials under Section-48 of the Act is without substance.

Conclusion- By rejecting three out of four pleas raised by Cadila, the Division Bench of the Delhi High Court has not only upheld the decisions passed by CCI and the single judge bench of the Delhi High Court but also cleared the web of uncertainties on important jurisdictional and procedural issues. The only aspect on which Cadila has succeeded, is about allowing cross examination of the witness named under the review application.

Comment

This case holds significance because Firstly, the Court has clarified the issue with regard to period when the recall application can be filed. Secondly, the Court has stated that while exercising the discretion vested with CCI with regard to permitting cross examination, as per Regulation 41(5) of the General Regulation, the Commission should act judicially. Thirdly, though the Commission has already cleared the air with regard to simultaneous proceeding initiated against company and its key personnel. The Court while dealing with the specific issue that proceedings against the office bearers cannot be initiated under Section- 48 of the Act unless the "enterprise" or "person" is found guilty of anti-competitive conduct has reinforced its earlier stand i.e. notice and proceedings in composite manner against the Managing Director and officials of a company is in accordance with the law.

Footnotes

1 206 (2014) DLT-42-Grasim Industries Limited Vs. CCI.

2 (2017) 8 SCC 47

3 Rectification of orders

(1) With a view to rectifying any mistake apparent from the record, the Commission may amend any order passed by it under the provisions of this Act. (2) Subject to the other provisions of this Act, the Commission may make— (a) an amendment under sub-section (1) of its own motion; (b) an amendment for rectifying any such mistake which has been brought to its notice by any party to the order. Explanation.—- For the removal of doubts, it is hereby declared that the Commission shall not, while rectifying any mistake apparent from record, amend substantive part of its order passed under the provisions of this Act.

4 2015 (150) DRJ 192.

5 If the Commission or the Director General, as the case may be, directs evidence by a party to be led by way of oral submission, the Commission or the Director General, as the case may be, if considered necessary or expedient, grant an opportunity to the other party or parties, as the case may be, to cross examine the person giving the evidence.

6 Writ Petitions No. 6258/ 2014, 6259/ 2014 and 6669/ 2014

Note : This article first appeared on the Antitrust & Competition Law Blog.

© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (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.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
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