15 April 2019

Certain provisions of Competition Act held unconstitutional – Court directs CCI to formulate regulations

15th April

Delhi High Court has declared Section 22(3) of the Competition Act (except proviso), relating to meetings of the Commission, as unconstitutional and void. Section 53E, in respect of COMPAT, as it stood before the amendment by the Finance Act, 2017 was also held to be unconstitutional.  

Observing that there should not be any addition, deletion or substitution in the composition of the bench during the course of final hearing, the court also directed the CCI to formulate regulations for hearing and for passing of orders.

Court in the case of Mahindra Electric Mobility v. CCI also directed the Central Govt. to take steps to fill vacancies in CCI. Presence of judicial member, was also mandated by the High Court while it observed that parties should, in their written submissions, also indicate why penalty should not be awarded.

Unconstitutionality of Section 23(3)

Finding Section 23(3) of the Competition Act unconstitutional, Court observed that there can be no two opinions that a casting vote, which potentially can lead to as adjudicatory result or consequence, is anathema to and destroys the Rule of Law in the context of Indian Constitution. It was held that principle of equal weight for the decisions of each participant of a quasi-judicial tribunal is undoubtedly destroyed by Section 22(3).

Pondering over the “revolving door” policy, the Court observed that if the body comprises of one or several members, it is a necessary corollary that only those who hear should decide. However, it was of the view that that the mere circumstance that in a given case or group of cases, the practise of “revolving door” hearing is resorted to, would not ipso facto, constitute a valid ground to declare Section 22 invalid or arbitrary.

It however noted that hearing by a larger body and decision by a smaller number does lead to undesirable and avoidable situations.

Directions to CCI to formulate regulations for hearing

The court CCI to formulate regulations for hearing and passing of orders. It directed that when all evidence are completed, the CCI should set down the case for final hearing, and at that stage, when hearing commences, the membership of the CCI should be constant, and that the same number of members should write the final order.

Court also directed that no member of the CCI should take a recess individually, during the course of hearing, or take a break to re-join the proceeding later, and that once final hearings in any complaint begin, the membership should not vary- it should preferably be heard by a substantial number of 7 or at least, 5 members.
It observed that if at all, it becomes impossible to continue the hearing before the same bench (for example, due to one of the judges having demitted office), the matter is to be heard afresh by the new bench even if the composition is partly common with the previous bench.

CCI whether a judicial Tribunal?

Observing that functions of CCI extend to directing (and overseeing) investigation and fact gathering, advising the government on policy (as an expert body) and advocating competition, in addition to issuing directions or orders against specific entities with the aim of eliminating a practice found pernicious or one which constitutes a barrier to competition and fair dealing in the marketplace, Court held that CCI does not perform exclusive adjudicatory functions to be called a Tribunal.

It was held that CCI is a body that is in parts administrative, expert (having regard to its advisory and advocacy roles) and quasi-judicial -when it proceeds to issue final orders, directions and (or) penalties, and hence is thus not purely a judicial Tribunal but discharges multifarious functions, one of which is adjudicatory.

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