Gujarat High Court Upheld That An Order Of Inquiry Under Section 26 Of The Competition Act, 2000 Does Not Affect Parties' Rights And The Opportunity Of Hearing Is Not Mandatory

The High Court of Gujarat held that inquiry under Section 26 of the Competition Act, it was stated that there is no violation of the parties rights and issuing the opportunity of a hearing shall not be mandatory.

[Case Title: M/S. SHREE SHIVAM CORPORATION THROUGH ITS SOLE PROPEIRTOR MR. PRAHLAD DURLABHJIBHAI JOSHI v/s COMPETITION COMMISSION OF INDIA]

• Gujarat High Court upheld that order of inquiry under Section 26 of the Competition Act, 2002 does not violatethe rights of any person. It was held that the High court cannot review such an order unless it is proven to be contradictory to the provisions of the act or the order included irrelevant facts excluding relevant facts.
• The case was heard by Justice A P Thaker who held that during the passing of the order for inquiry, there is no breach of any rights of the persons concerned and he cannot claim right to hearing be provided at that stage.
• It was further added that "After submission of the Report by the Inquiry Officer i.e. Director General, the person concerned against whom any report is made, will also get an opportunity to defend and place his case before the Commission. At that stage, if no opportunity of hearing is afforded, then, definitely the person concerned against whom any adverse order is passed, has every right to challenge the same on various grounds, one of which may be a breach of natural justice."
• Several petitions were filed by a few private companies before the High Court regarding a bidding issue in tenders issued by the Gujarat State Board of school textbooks and the case was under the inquiry of the Competition Commission.
• Petitioners contended that the order passed by CCI did not comply with the statutory requirements as provided under section 26(1) as it had failed in providing justifiable reasons for framing a prima facie case against them.
• They relied on CCI Vs State Authority of India Limited to substantiate that as per Section 26(1) of the Competition Act,2002 an opinion should be formed and based on records.
• Section 3(1) of the Competition Act was taken into consideration to state that there was no agreement in existence about the supply of goods and services to successful parties which could have caused adverse effects of competition. Thus it was held that allegations of bid rigging and collusive bidding were baseless.
• CCI in its order submitted that there was a cartel between the petitioners which could be inferred from the fact that the bidders quoted more than one bid and required data was provided to CCI basis mathematical calculation.
• The Additional Solicitor General (ASG) reported that challenging an impugned order had amounted to an appeal against the order which was not warranted with any judicial review under Article 226.
• Proceedings in Section 26(1) order was not adjudicatory and hence cannot be assailed at this juncture. It was claimed that the order passed under the section was only to trigger investigation proceedings as like in the CCI v/s Grasim Industries Ltd order. ASG further stated that the petitioners were trying to evade the CCI investigations.
• Section 2(b) of the Competition Act provides for an agreement that includes any arrangement to act in a concerted manner to collude. The Gujarat High Court stated though there is no patent evidence to prove the formation of a cartel or an arrangement, CCI is allowed to form prima facie opinion for the same and they are also vested with the power to inquire agreements and dominant positions as per Section 19.
• The power conferred on CCI is administrative and not judicial in nature and hence no further inference can be derived from such administrative actions.
• Justice Thaker in addressing regards to Section 26(1) said that CCI has jurisdiction to pass ex-parte ad-interim injunction given it does not violate any principles of natural justice.
• Such actions are inquisitorial and regulatory at early stages and are a preparatory measure in contrast to the decision-making process.
• The High Court observed that "Further, as observed earlier in various decisions, it is the prerogative of the Commission to invite any person or sought information from any person for forming prima facie opinion as to whether any inquiry contemplated under Section 26(1) of the Act is necessary or not. Such action of the Commission cannot be said to be biased one or giving any right to another person against whom any order of inquiry is passed."
• The petitions were dismissed and the court granted four weeks for the petitioners to respond to the penalty action initiation notice from CCI.

What do you think of this?

Let us know your thoughts in the comment section below!