[This is a two-part series by Rahul Dev.]
I submit that the characterization of the CCI as an administrative body is incorrect. It is to be considered a judicial body which performs the function akin to those performed by courts. Once it is considered a judicial body, it can be said that it requires the same independence from the executive as enjoyed by courts of law.
The primary objective of the CCI is to ensure competition in markets, by enforcing the provisions of the Act. To that end, its objective is to ensure that the provisions of the Act are not contravened. The only powers provided to the CCI to enforce the provisions of the Act are provided under Sections 27, 28 and 31 of the Act. These sections empower the Commission to pass orders and issue directions to entities found to be engaging in anti-competitive behaviour. The CCI is also empowered to issue interim orders during an inquiry under Section 33 of the Act.
The CCI does not have any legislative or executive powers to ensure compliance with provisions of the Act and prevent anti-competitive behaviour. It cannot pass orders or issue directions in rem which are binding on the public at large or have any statutory force. It does perform an advisory function under Section 49 of the Act. However in its performance of the advisory function it does not have the power to enforce provisions of the Act. This is clarified by the provision itself which states that the advice of the CCI shall not be binding on the Government in formulating a policy.
An examination of the nature of functions performed by the CCI under Sections 27, 28 and 31 is to be made in order to determine the nature of the function performed in enforcing the provisions of the Act. For without the powers provided under these sections, the CCI would be devoid of any power to enforce the provisions of the Act. Therefore the nature of these powers would determine the nature of the primary functions performed by the CCI.
On the face of it, the powers provided to the CCI by the aforesaid provisions are judicial. They relate to the power to pass orders and issue directions against parties. A test to determine whether a decision is a judicial decision or a quasi-judicial decision was laid down by the King’s Bench of the High Court in England in Cooper v. Wilson, (1937)2 K.B. 307. The test has been followed by the Supreme Court of India in a number of decisions, some of which were in fact cited before the Delhi High Court. The Test states:
A true judicial decision presupposes an existing dispute between two or more parties, and then involves four requisites :- (1) The presentation (not necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties, and (4) a decision which disposes of the whole matter by a finding upon the facts in dispute and application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law. A quasi-judicial decision equally presupposes an existing dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4). The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister’s free choice.
Examination of Nature of Decision under Section 27
In order to apply this test to the function of the CCI under Section 27, the procedure adopted by the CCI in conducting the inquiry under Section 19 is to be examined. The procedure is provided for under Section 26 of the Act. According to the said provision, upon receipt of information or reference, the CCI is required to form an opinion as to the existence of a prima facie case of contravention of the provisions of the Act. If it finds a prima facie case of contravention of the Act, it is required to direct the Director General to investigate the matter. If it finds no prima facie case of contravention of the provisions of the Act from the information provided, it is required to pass an order to that effect and close the matter. It is also required to send a copy of the order to the parties concerned.
A reading of the regulations governing the contents of information to be filed before the CCI (Regulation 10 of the CCI (General) Regulations 2009), reveals that the information is to contain detailed facts, allegations of contraventions of provisions of the Act along with supporting evidence which may be available, arguments in support of its contentions and reliefs which are claimed. The submission of such a document to the CCI satisfies the first requisite of the test that there must be a presentation of their case by parties to the dispute.
It is inconsequential that, in the event the CCI finds no prima facie case of contravention and passes an order to that effect, a presentation of the case is not made by the party against whom the dispute had been raised (Opposite Party) as required by the aforementioned test. This is because the Regulations require that a copy of the information be sent to the Opposite Party. Further, Section 26 of the Act mandates that the order of the CCI is required to be sent to both the informant and the opposite party. These requirements suppose the existence of a dispute between the informant and the opposite party.
Although the aforementioned test requires that the case of both parties to the dispute be presented, the presentation of its case by the Opposite Party may not be required in circumstances where the information lacks sufficient merit for the CCI to make out a prima facie case. The desperate lack of merit in the case of one party such that it obviates the necessity of a response from the other party cannot change the character of the proceeding. The authority to which the case is presented may itself identify the lack of merit and dismiss the matter at the threshold.
The High Courts exercise a similar power at the stage of Preliminary Hearing of a Writ Petition. The only difference is that the Petitioner there is given an opportunity to orally present her case. If the High Court finds that the petition lacks merit, it may dismiss the matter at the threshold without issuing notice to be issued to the Respondent. However, the lack of response from the respondent in a writ petition which lacks merit does not change the nature of the proceeding or the decision made thereon.
Having established that in such cases the act of filing of information meets the first criteria of the test, I shall proceed to examine whether an order made in such cases meets other criteria laid down by the test. The second criteria is that if the dispute is between the parties is a question of fact, the authority must ascertain facts by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence.
In forming a prima facie opinion which is the basis of the order, The CCI would be required to establish the veracity of facts stated in the information. The ascertainment of the veracity of facts is to be done by evaluating evidence produced along with the information. Since no investigation can take place at this stage, the CCI would necessarily be required to rely on evidence produced by the informant in verifying facts. Therefore an order passed under Section 26(1) of the Act would satisfy the second criteria.
So far as the third criteria is concerned, the CCI would ordinarily not consider a question of law while forming a prima facie opinion as to a possible contravention of the Act. It is to be noted that this criteria need not be met if no question of law is raised. Therefore the question of considering a legal argument at this stage does not arise.
An order finding no prima facie case of contravention of the provisions of the Act meets the fourth criteria. This is because it does dispose of the whole of the matter upon a finding upon facts and applying the facts found to the law. As noted earlier, at this stage the CCI is required to examine the veracity of facts by evaluating evidence adduced. This process leads the CCI to come to a finding upon the facts alleged in the information. Once it has made a finding upon the facts, it must determine whether the facts found would on the face of it contravene the provisions of the Act. To that end, it is required to consider arguments made by the informant as to why the facts alleged constitute a contravention of the provisions of the Act.
Thereafter, it must apply the facts found to the law. That is to say, the facts found must be tested against the provisions of the Act so as to determine whether they might on the face of it constitute a contravention of the provisions. It is required to apply its mind while making this determination. It is also required to provide reasons in its order as to why, the findings of fact were so made and as to why it found no contravention on the face of the facts found upon their application to the law.
Now, if an order passed under Section 26(1) of the Act is considered a judicial decision, an order passed by the CCI under Section 27 after consideration of objections by the Opposite Party and questions of law and arguments thereon, is also to be considered a judicial decision.
Examination of Nature of Decision under Section 28
Section 28 of the Act empowers the CCI to pass an order in writing directing the division of a dominant enterprise to ensure that such enterprise does not abuse its dominance. The Act in its current form does not specify a procedure to be followed in passing such orders. Prior to the amendment carried out in 2007, an order under Section 28 was to be passed by the Central Government on a recommendation by the CCI. However such a recommendation could be made only if the CCI had found the enterprise in question to have abused its dominant position in the market under Section 27 of the Act. Therefore prior to the amendment, a condition precedent to an order under Section 28 was an order passed under Section 27.
I would submit that this position has not changed after the amendment. This is because, the prohibition under the Act relates to the actual abuse of dominance rather than a possible abuse of dominance. The objective of the Act is not the prevention of dominance in the markets but the prevention of anti-competitive behaviour which arises out of dominance. A reading of the provision would show that there is no guidance with regard to the circumstances under which the CCI may direct the division of an enterprise. There is no guidance as to the factors which may be considered by the CCI before concluding that an enterprise is likely to abuse its dominant position.
Therefore an order under Section 28 cannot be passed without following the procedure under Section 26. As has been examined, the procedure contemplated under Section 26 leads to a decision that is judicial in nature. Therefore an order passed under Section 28 of the would be a judicial decision.
Examination of Nature of Decision under Section 31
Having established that the CCI exercises judicial powers in passing orders with regard to anti-competitive activities under Section 3 and 4 of the Act, we must examine the nature of the function performed by it in regulating combinations through orders passed under Section 31 of the Act. This function cannot be categorised as one that is purely judicial in nature, since it is not an order arising out of an adversarial proceeding. (However it does attain the character of an adversarial proceeding when objections are filed to the proposed combination by a person who would be affected by it.) The passing of an order under Section 31 of the Act involves the examination of facts pertaining to the combination. The CCI thereafter is required to apply such facts and determine whether the combination is likely to have an appreciable adverse effect on competition in the relevant market. This involves consideration of several factors including whether the combination would enjoy a dominant position in the relevant market after such combination is given effect. A list of factors to be considered by the CCI in deciding the question as to whether a combination is likely to have an appreciable adverse effect on competition in India, is provided under Section 20(4) of the Act. Therefore the CCI is required to apply the facts to the policy laid down by the law and determine the question.
There are several judicial elements to the function performed by the CCI in regulating combinations through orders. The function is not very different from the function performed by a company court in mergers and amalgamations of companies. These functions are more akin to judicial functions than to executive or legislative functions.
From the above analysis it is clear that the primary functions of the CCI performed are judicial in nature. Although it does perform secondary functions which are advisory in nature, they cannot be taken to be a basis of classification of the nature of the body. If the function of the CCI is considered to be the prevention of anti-competitive behaviour through the enforcement of the provisions of the Act, the only powers which enable it to do so are judicial in nature. Without these powers, the CCI would be a toothless body, incapable of enforcing the provisions of the Act. Therefore, I submit that the CCI is to be considered a judicial tribunal.
If the status of the CCI is that of a judicial tribunal, its composition and manner of appointment of members would need to be in line with the guidelines laid down by the Supreme Court in paragraph 120 of its judgment in Union of India v. R. Gandhi which were reiterated in Madras Bar Association v. Union of India. This is because once it is characterized as a judicial tribunal, the CCI becomes a judicial body performing the role of a court.
Therefore the constitution of the CCI, which has a preponderance of non-judicial members, coupled with the fact that they are selected by a committee whose majority of members are appointed by the Central Government are clearly violative of the guidelines laid down by the Supreme Court. For these reasons, I submit that the CCI in its current form is unconstitutional.