The Delhi High Court recently put mediation and out-of-court settlements center stage, as mechanisms to conclusively put an end to ongoing competition litigation. But do competition disputes end with private settlements and oust CCI's jurisdiction?
Recently, the Delhi High Court, in the matter of JCB v. CCI, terminated the proceedings before the Competition Commission of India (CCI) primarily on account of the informant - Bull Machines Private Limited (BMPL) and the opposite parties - JCB India Limited and JC Bamford Excavators Limited (JCB), settling the matter amongst themselves. (JCB Order)
The genesis of the dispute was a suit filed by JCB against BMPL in 2011, seeking an injunction and restraining order against infringement of copyright and piracy of JCB's registered design before the Delhi High Court. In retaliation, BMPL challenged the validity of the registered designs of JCB by filing a cancellation petition before the Controller of Designs. To put an end to all the ongoing disputes, the parties agreed to an interim arrangement. While the settlement talks were still underway, BMPL filed an information before the CCI in 2013, alleging that JCB was abusing its dominant position through "bad faith" litigation. The CCI then passed an order directing an investigation into the allegations. Aggrieved by this, JCB filed a writ petition before the Delhi High Court challenging the CCI's jurisdiction to undertake an investigation and sought an order to quash proceedings before the CCI.
In 2021, the parties agreed to resolve their disputes through the Delhi High Court's mediation centre and arrived at a settlement. Eventually, the parties moved an application before the Delhi High Court to quash the proceedings before the CCI.
What did the Delhi High Court say?
The Delhi High Court ordered a termination of the proceedings before the CCI, highlighting the "spirit" of the mediation process. The bench observed that the "spirit" of entering into mediation by litigating parties was to ensure a finality to ongoing matters since such a recourse mechanism ensures a faster, more cost-effective, and less adversarial alternative to litigation. The bench also noted that settlements were not a recent mechanism for litigating parties but a recourse that had been used and upheld in myriad fields of law, ranging from family settlements to commercial and labour disputes.
Interestingly, on the CCI's role, the Delhi High Court noted that once parties had settled a matter amongst themselves, an "over-involvement" by the CCI would disrupt the harmony of the settlement mechanism. The Delhi High Court, however also noted that the competition regulator would have the power to proceed under its suo motu powers or on the basis of a fresh information filed before it.
Notably, the outcome in this case is reflective of a peculiar set of facts. The Delhi High Court, while quashing the pending CCI proceedings, noted that the dispute between the parties before the CCI stemmed from BMPL's allegations that JCB was resorting to "sham litigation", which, according to the Delhi High Court, did not amount to an abuse of dominance especially when the IP dispute was pending before the courts. Thus, while the CCI proceedings were terminated on account of the settlement, the Delhi High Court noted that a settlement between the parties may still be examined by the CCI if it raises concerns of abuse of dominance.
How have High Courts historically treated settlements between parties during the pendency of CCI's investigation?
Proceedings before the CCI are in rem proceedings that affect the public interest. The Supreme Court of India (Supreme Court) has held that in rem proceedings affect the rights and liabilities of the world at large and they cannot be subject to private dispute resolution mechanisms like arbitrations that are only binding between the parties to the arbitration. The Delhi High Court in the JCB Order, appears to delicately align with this position by recognizing that the CCI would still retain the power to proceed suo motu or on the basis of a fresh information which is filed before it despite a private settlement between parties.
The Madras High Court, in Tamil Nadu Film Exhibitors Association v. CCI, also recognised this. It found that although the scheme of the Competition Act, 2002 (Competition Act) allows parties to enter into a compromise or settlement amongst themselves, the CCI could still scrutinize the settlement to see if it was a cover-up to circumvent the CCI's investigation into anti-competitive practices which potentially affect the public interest. Applying this principle, the court vested the CCI with the discretion to examine the settlement between the parties, since the Director General's Report had found the opposite parties to have engaged in anti-competitive conduct.
In contrast, while relying on the logic of the Madras High Court, the Telangana High Court in GMR v. CCI stayed the CCI proceedings on the basis of the settlement between the parties. The Telangana High Court interestingly remarked that once a settlement was reached between the parties to an investigation, the "substratum of proceedings" before the CCI is lost.
In yet another settlement matter involving a pending CCI investigation, the Delhi High Court in Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India (Ericsson case) quashed the ongoing CCI proceedings. The Delhi High Court, similar to the Telangana High Court, noted that the "substratum of proceedings by the CCI" was lost when the parties settled. However, this case was set against a peculiar set of facts where the Delhi High Court ruled that the CCI did not have the power to examine the IP disputes in question, under the Competition Act. According to the Delhi High Court, there was no scope for the CCI to examine the settlement when it did not have the power to adjudicate the case.
In Nhava Sheva International Container Terminal Pvt. Ltd. And Anr vs. The Union of India and Ors., the division bench of the Bombay High Court took a slightly differing stance. The Court allowed informants to withdraw the complaint before the CCI since their settlement had effectively ended the competition dispute. This was done dehors of CCI's power to evaluate if such a settlement would impact public interest. While the CCI filed a review petition against this order, arguing that the law does not permit the withdrawal of complaints filed before the CCI as the CCI proceedings are in rem, the matter remains pending as on date.
Private settlements - what lies ahead?
The positions across various High Courts have thrown up contrasting outcomes. While the Madras High Court encouraged settlement between parties, albeit while balancing it out along with a public interest review by the CCI, the two recent judgements of the Delhi High Court and that of the Bombay High Court quashed the CCI proceedings in lieu of giving finality to disputes when parties settle matters. The Delhi High Court, in the JCB Order, used particularly strong language to note that CCI's "over-involvement" post a private settlement between parties would jeopardize the finality that mediation aims to achieve. The Court also noted that the CCI must respect the boundary of its jurisdiction and ensure that its regulatory role complements the resolution of disputes rather than conflicting with it.
The Ericsson case is pending appeal before the Supreme Court. The outcome of this appeal will likely provide finality on the issue of how private settlements in competition matters impact the CCI's jurisdiction. This would vest litigating parties with some degree of predictability when taking decisions to settle disputes, which have also triggered the CCI's jurisdiction.
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