[This is a two-part series by Rahul Dev.]
In April 2019, the Delhi High Court upheld the constitutional validity of the Competition Commission of India (CCI). The challenge to its validity was based on the ground that the structure of the CCI disregarded the constitutional doctrine of the separation of powers. The Petition alleged that the CCI, which was a judicial body performing judicial functions, was not sufficiently independent of the Executive. In this two-part series, I will argue that the CCI is in fact unconstitutional.
Before examining the constitutional validity of the CCI, I believe that a summary of the context in which it was established and its evolution would be useful. A brief overview of the context is as follows: A committee (Raghavan Committee) was appointed by the Government of India in 1999 to advise on a new Competition Law in India. The committee submitted its report in 2000 and recommended the enactment of a new competition law in line with international developments. On the basis of this report the Competition Act 2002 (the Act) was enacted.
Soon after the CCI was established under the Act, A Writ Petition (Brahm Dutt v. Union of India) was filed before the Supreme Court, challenging the Rules prescribed by the Central Government under the Act for the selection of the Chairperson and other Members of the Commission. It was alleged that Rule 3 was unconstitutional on the ground that though the CCI was largely a judicial body, the power to select and appoint its members was conferred on the Central Government. It was contended that the rule in question was contrary to the doctrine of separation of powers and was liable to be struck down.
The Government filed a counter-affidavit refuting the Petitioner’s contentions. However, it thereafter filed two additional counter-affidavits stating that certain amendments were proposed to be carried out in the Act as well as the Rules. It said that the proposed amendments were to be carried out to enable the Chairman and the Members to be selected by a Committee presided over by the Chief Justice of India or his nominee. It was further stated that the alleged usurpation of judicial power would be remedied by the establishment of an appellate authority which would be a judicial body conforming to the doctrine of separation of powers.
The Supreme Court, being of the view that the proposed amendments would have a direct bearing on the outcome of the Writ Petition, did not pronounce a judgment on the issue at that time. It decided to leave all questions open to be decided after the proposed amendments were made, and disposed of the matter. The amendments that were spoken of by the Central Government were carried out in 2007. It was through this amendment that the CCI, which was established in 2003, attained its current structure.
Examination of CCI’s Constitutional Validity by the Delhi High Court
Several car manufacturers who were aggrieved by an order passed by the CCI filed Writ Petitions before the Delhi High Court challenging several provisions of the Act. Through these petitions they, inter alia, challenged the constitutional validity of the CCI. These petitions were heard together and disposed of by a common judgment on 10th April 2019 (Mahindra Electric Mobility Limited and Anr. vs. Competition Commission of India and Anr.).
Section 8 of the Act provides for the composition of the CCI and the qualifications of its members. The violation of the doctrine of separation of powers by Section 8 may have been raised since it does not mandate that a majority of the members ought to be qualified to be appointed to a judicial office. Section 9 of the Act provides for the manner of appointment of the members of the commission. It provides that the members of the CCI are to be appointed by the Central Government from names recommended by a Selection Committee. The Selection Committee is to consist of the Chief Justice of India or his nominee and four other members to be appointed by the Central Government. The conceivable basis of challenge under this provision is that appointments to a judicial body are controlled by the Central Government.
The Delhi High Court heard the matter and held that the CCI does not violate the doctrine of separation of powers. I submit that the decision of the Court is incorrect.
A violation of the doctrine of separation of powers entails an encroachment by one organ of the State into the powers of another. In this case it entails the encroachment by the Executive into the powers of the Judiciary. Therefore the first question that requires consideration is:
Whether the CCI is a part of the judiciary? In other words, can the CCI be considered a judicial body?
The Delhi High Court examined the nature of the functions performed by the CCI as well as its status so that it may decide whether the CCI is a judicial body or not . However, the question for consideration was framed in a way which could not aid the court in deciding whether the CCI is a judicial body. The question framed was:
“Is the CCI a tribunal exercising judicial functions, or is it performing administrative and investigative functions and also adjudicating issues before it?”
The question has two parts. The first part: “Is the CCI a tribunal exercising judicial functions?” the second part: “or, is it performing administrative and investigative functions and also adjudicating issues before it?” Therefore, the question gives rise to two possibilities.
First possibility: The CCI is a judicial body performing judicial functions.
Second Possibility: The CCI performs judicial functions as well as administrative and investigative functions.
The two possibilities may not be mutually exclusive. That is to say, the two possibilities could occur simultaneously. The CCI could be a judicial body which also performs other administrative and investigative functions (perhaps in the course of performing its judicial functions).
The question however divides the two possibilities by the word ‘or’. By doing so it is assumed that it is not possible for a body to be a judicial body and perform investigative functions and minor administrative functions.
In my submission, a situation where a judicial body may in fact perform minor investigative and administrative functions. The CCI itself is such a body. The civil courts are also such bodies. One may refer to the powers of a civil court under Order XXVI Rule 9 of the Code of Civil Procedure 1908, to issue a commission to a person to conduct local investigations to elucidate on a matter in dispute and file a report regarding such investigations. A report filed by the commissioner along with the evidence collected would be evidence in the suit. The investigation carried out by the commissioner on the orders of the court is nothing but a fact finding exercise. It is an exercise of collection of evidence by the Court. The nature of this function may not be termed as an adjudicatory but an investigative one. However, this function is performed to aid the court in deciding certain issues in a suit. It is a means to perform the end function of the court which is judicial in its nature. Merely because it also performs this investigative function in aid of its judicial functions, it cannot be said that the civil court is not a judicial body. The function of investigation performed by the Director General on the orders of the CCI are to be seen in the same light.
Now, the question as to whether the CCI is a judicial body requires to be answered. In the discussion on the nature of the functions performed by CCI the Delhi High Court relied heavily upon the decision of the Supreme Court in Competition Commission of India vs. Steel Authority of India and Anr. I submit that the reliance on this decision by the High Court was misplaced. The High Court quoted a passage from the decision of the Supreme Court which states (without discussion on the point) that the functions of the CCI are wide and held that it was bound by this enunciation of law. The passage quoted was:
“75. … Under the scheme of the Act, this Commission is vested with inquisitorial, investigative, regulatory, adjudicatory and to a limited extent even advisory jurisdiction. Vast powers have been given to the Commission to deal with the complaints or information leading to invocation of the provisions of Sections 3 and 4 read with Section 19 of the Act”.”
This statement was made by the Supreme Court as a part of an overview of Competition Law in India. The overview did not pertain to any particular issue but was generally made before the issues in that case were taken up for discussion. It may safely be said that the statement forms a part of the obiter-dicta of the judgment. It was wholly irrelevant to that case, in which the questions revolved around the scope of powers of the CCI in forming a prima facie opinion under Section 26(1) of the Act. The statement being a part of the obiter-dicta of the judgment was not binding on the Delhi High Court.
The reliance placed by the High Court upon the decision of the Supreme Court in Steel Authority of India Limited (supra) was misplaced for another reason. The question that arose for the consideration of the Supreme Court in Steel Authority of India Limited (supra) was with regard to the scope of power of the CCI while forming a prima facie opinion under Section 26(1) of the Act. In order to answer that question it considered the nature of the function performed by the CCI specifically under Section 26(1) of the Act. In coming to the conclusion that the function under Section 26(1) of the Act was inquisitorial, it did not characterize any other function of the CCI to be inquisitorial. It was only the function of forming a prima facie opinion which was considered to be inquisitorial.
The Delhi High Court however applied this finding to characterize the entire proceeding before the CCI. This is apparent from its statements in paragraphs 76 and 77 of its decision. The statements read as under:
76. Characterizing the proceeding before CCI as one akin to the preliminary stages of a departmental proceeding, the court, in SAIL (supra), held that prima facie opinion formation was merely an administrative function and that inquiry into the information or complaint (received by CCI) commences after such opinion was formed…”
77. It is therefore clear that though information or complaint which may trigger an inquiry, (but not necessarily so, in all cases) is received by the CCI, the initial steps it takes are not always towards, or in aid of adjudication. They are to ascertain fuller details and inquire into the veracity (or perhaps) seriousness of the contents of the information, to discern whether such investigation and further steps towards adjudication are necessary.
This mischaracterization of the entire proceeding before the CCI may have been overlooked if the Court thereafter analysed the other functions of the CCI independently and came to its conclusions as to their nature. However, the decision lacks such an analysis.
(I would submit that the finding made by the Supreme Court in Steel Authority of India Ltd. (supra) that the CCI performs only an administrative function in forming a prima facie opinion under Section 26(1) of the Act is incorrect. This is because the formation of a prima facie opinion requires the application of facts to the law. Thereafter it involves the application of a judicial mind to determine whether from the set of given facts a possibility of contravention of the law exists. The function under Section 26(1) of the Act does not end at ascertaining the veracity or seriousness of the contents of information. It is one of the functions to verify the contents of the information, but not the only one. The important function under Section 26(1) of the Act is the formation of a prima facie opinion. A detailed analysis has been made later in this article. For now, we may assume that the Delhi High Court was bound to hold the function under Section 26(1) as inquisitorial.)
Instead of analysing the other functions of the CCI, the High Court summarised them and ambiguously stated that the functions were administrative in nature. The relevant portion of the judgment has been extracted below:
78. At the next stage, after CCI directs investigation, the Director General (DG), after investigation, has to report to it [Section 26 (2)]. If the recommendation of the DG is that no case exists, the CCI is nevertheless obliged to forward a report to the informant/complainant, receive its or his comments and afford a hearing [Section 26 (5)]. After the hearing, it may dismiss the complaint [Section 26 (6)]; or direct further inquiry [Section 26 (7)]. If, on the other hand, the DG‟s report recommends that there exists some contravention of provisions of the Act, the CCI has to proceed further, and inquire into that [Section 26 (3) read with Section 26 (8)]. The CCI has limited powers of the civil court [Section 36 (2)] in matters such as (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavit; (d) issuing commissions for the examination of witnesses or documents; (e) requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), any public record or document or copy of such record or document from any office. The CCI can also require the opinion of experts [Section 36 (3)]. Significantly, CCI has no power to review its orders: previously, Section 37 permitted review; however, the 2007 amendment repealed that provision; it has limited rectification power, under Section 38. In case of imposition of penalty, one mode of recovery is through reference to the concerned income tax authority [Section 39 (2)]; such officer or income tax authority can then recover the penalty as if the party concerned were an ―assessee in default‖ under provisions of the Income tax Act [Section 39 (3)]. These investigative powers are also conferred concurrently upon the DG [Section 41 (2)].
A reading of the above paragraph reveals that there is no analysis whatsoever into the nature of the functions mentioned. The functions mentioned are clearly different from that discussed by the Supreme Court in its decision in Steel Authority of India Limited (supra). For instance, in the summary of functions made by the Court, it is mentioned that the CCI may dismiss the complaint based on the recommendation of the Director General that no case contravention of the Act exists. However, it may do so after hearing the parties concerned. This function of dismissal of the complaint is, on the face of it, adjudicatory. However no discussion into its nature has been made by the High Court.
There is another problem with examining independent functions such as investigation directed by the CCI in an inquiry under Section 19 of the Act, or the dispatch of notice upon the receipt of information from an informant. These functions are performed as a part of the entire function of conducting the inquiry and passing orders. They are never performed on their own or in isolation. For instance, an order directing the Director General to conduct an investigation can never be passed without an inquiry being initiated under Section 19 of the Act. If they were performed in isolation, their performance would lead to no logical end. Therefore the nature of these functions cannot be taken to characterize the CCI. The nature of the larger function is to be examined in order to determine the nature of functions performed by the CCI.
Thereafter, the High Court erroneously relied on the decision of the Supreme Court in Excel Crop Care India v. Competition Commission of India, to delineate the role of the CCI. In that case a contention was taken up by the Appellant that the Director General has no jurisdiction to investigate certain anti-competitive activities which took place after information had been filed with the CCI under Section 19 of the Act. Therefore the question in that case was whether the jurisdiction of the Director General in conducting investigations under the Act extended to actions which took place after the information had been filed. It did not pertain to the role of the CCI or the nature of functions performed by it. There was no discussion by the Court on this aspect.
The Delhi High Court quoted a passage from the said decision of the Supreme Court which did not discuss the role of the CCI in any manner and held that the said decision underlined the role of the CCI through investigation. In my submission, the decision of the Supreme Court does not aid the identification of the nature of functions of the CCI.
It was thereafter held that the CCI does not solely perform adjudication so that it may be characterized as a tribunal discharging solely judicial powers of the state. It was rather considered to be an administrative body which also performs quasi judicial functions.
The second issue framed by the High Court was whether the CCI violates the doctrine of separation of powers and is therefore unconstitutional. A vague continuation of the discussion as to the character of the CCI was made. The structure of the CCI was compared to regulatory bodies such as SEBI, TRAI, AERA, AAI and State Commissions and the Central Commission under the Electricity Act and it was stated that statutes governing these bodies do not require that its officers performing adjudicatory functions need not possess judicial experience. Such comparisons could not assist the Court in determining the character of CCI since the functions performed by these bodies differ widely. The CCI is fundamentally different since it does not have any legislative or executive powers, barring limited powers to regulate its own procedure.
The Court thereafter recognised that the CCI does perform certain adjudicatory functions in passing orders. However, it held that the adjudicatory functions were not to be given such primacy as to hold the CCI to be a judicial tribunal. Therefore, the challenge to the constitutional validity of the CCI on the ground that it was a violation of the doctrine of separation of powers was rejected.
In my opinion the finding that adjudicatory functions of the CCI cannot be given primacy is incorrect. It is a finding that is crucial to the point in discussion since the nature of an independent function would change the nature of the body depending on the weight attached to the function in question. That discussion will be taken up in the next post.