Supreme Court of India

Competition Commission v. SAIL (2010) – Comment

On 9th September, a landmark judgment was passed by the Supreme Court on the Indian Competition Act pointing out that the primary objective of competition law – promotion of economic efficiency through competition in the market – cannot be attained unless matters related to contravention of the Act are dealt with in an expeditious and time bound manner. In the event of a delay, the very purpose and object of the Act would be frustrated, as greater damage would be caused to the market and the country’s economy.

The Indian Competition Act, which recently came into force, prohibits anti-competitive practices, abuse of dominant position and combinations which result in distortion of the market. To look into violations of the Act, the Competition Commission of India has been established, a body vested with wide powers – inquisitorial, investigative, regulatory, adjudicatory, and to some extent, even advisory. Appeals from directions, decisions or orders of the Commission lie before the Competition Appellate Tribunal.

In October 2008, Jindal Steel and Powers Ltd. informed the Competition Commission that Steel Authority of India (SAIL) had entered into an exclusive supply agreement with Indian Railways for the supply of rails. SAIL being a key player in the Indian steel market was alleged to have abused its dominant position in the market in contravention of Section 4 (1) of the Act, and also acted in contravention of Section 3 (4) of the Act which prohibits certain exclusive supply agreements. On registering the information, the Commission directed SAIL to submit its comments. When SAIL failed to do so within the stipulated time, the Commission formed the opinion that a prima facie case existed against SAIL and passed an order directing the Director General to start investigation into the matter. The Commission also granted liberty to SAIL to file its comments before the Director General during the course of the investigation.

This order was challenged by SAIL before the Competition Appellate Tribunal on grounds, inter alia, that the order was contrary to the principles of natural justice as the Commission did not give SAIL extension of time to file its reply and denied the latter of its right to be heard.

In a decision of significant ramifications for the growth of Competition law in India, the Appellate Tribunal, on 15th February, 2010, stayed the Commission’s order and also dismissed the Commission’s application for impleadment in the appeal, stating that the Competition Commission was neither a necessary party, nor a proper party in appellate proceedings before the tribunal.

The Supreme Court in its judgment of last Thursday corrected what would have otherwise been a grave error in interpretation of the law, by ruling, inter alia, that:
•    All orders passed by the Competition Commission are not subject to appeal. Only orders specifically made appealable under the Act. [Section 53 A (1) (a)] will be treated as such. An order of this nature (forming a prima facie case and directing the Director General to start investigation) is a direction simpliciter, NOT an appealable order.

•    At the stage of forming a prima facie case, there is NO statutory duty on the Commission to give notice or grant hearing to any party. There is also no need to record any detailed reason while passing such an order for starting investigation, though keeping in mind the principles of natural justice, some minimum reasons should be recorded.

•    The Commission, in cases where an inquiry has been initiated suo motu, shall be a necessary party, and in all other cases, a proper party in proceedings before the Appellate Tribunal.

This judgment goes a long way in reinforcing the legislative intent behind the enactment of the new Competition Act. A mere direction to start investigation, like in the instant case, is not one which determines any right or obligation of the parties involved in the dispute. The Supreme Court, by declaring that such orders are not appealable has ensured a more effective and expeditious functioning of the new law. When it comes to a law on competition, delay can be fatal to the market. Further, by including the Competition Commission as a party in proceedings before the Tribunal, the Apex Court, apart from the reinforcing the Commission’s legal right has also ensured that the expertise of the latter would be available on all matters in dispute. This is also crucial in view of the nascent stage the law is in. Commendable first steps indeed!

(Tilottama Raychoudhary is an Assistant Professor at WBNUJS, Kolkata.)