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Entity Entitled To Know Basis Of Involvement In Statutory Proceedings: Madras Hc Overturns Cci Proceeding, Labels It Opaque

Ifrah Murtaza ,
  20 June 2024       Share Bookmark

Court :
Hon’ble High Court of Madras
Brief :

Citation :
WP Nos. 6493, 6497, & 6502 of 2024

Case title:

MRF Ltd v. Competition Commission of India & Ors

Date of Order:

30.04.2024

Bench:

Hon’ble Dr. Justice Anita Sumanth 

Parties:

Petitioner: MRF Ltd. Represented by its Senior General Manager

Respondent(s): 1. Competition Commission of India

                          2. Director General, Competition Commission of India

                         3. Joint Director General, Competition Commission of India

                         4. Additional Director General, Competition Commission of India

                         5. Deputy Director General, Competition Commission of India

                         6. State of Haryana 

SUBJECT:

In the instant case, the Hon’ble High Court of Madras (hereinafter referred to as ‘the High Court’ or ‘the Court’) addressed a case involving challenge to a party’s changed status during ongoing proceedings. During the scrutiny of tenders, Respondent no. 6 (JK Tyres) was suspected of rigging prices and a potential cartelization. The proceedings initiated thereafter had the petitioner listed as a 3rd Party to the proceedings, but its status was changed to that of an Opposite Party after the investigative report was submitted by the DG. The petitioner argued that it was not informed about its changed status until the pronouncement of the impugned order dated 26.08.2020 until much later, not allowing it sufficient opportunity to contest it. The High Court held that the petitioner was entitled to the know the change in its status and the opaque manner of investigation and proceedings had violated the petitioner’s rights and principles of natural justice. Consequently, the impugned order was quashed by the Court.   

IMPORTANT PROVISIONS: 

The Constitution of India, 1950:

  • Article 226

The Competition Act, 2002 (the Act): 

  • Section 19(1)(b)
  • Section 3
  • Section 41
  • Section 2
  • Section 27
  • Section 4
  • Section 5
  • Section 6
  • Section 19
  • Section 26
  • Section 136

OVERVIEW:

  • The Directorate of State Transport (DST), Haryana invited online tenders on 21.09.2018 for the purchase of new radial tyres of different sizes and specifications. JK Tyres & Industries Ltd was the sole bidder.
  • The matter was referred to the High-Power Purchase Committee (HPPC) after technical and financial scrutiny due to the procurement value exceeding Rs. 1 crore.
  • It was notable that JK Tyres, in the meeting held on 13.11.2018, quoted rates which were significantly higher than the previous purchase rates. The company remained firmed on its quotations, resulting in a failure of Negotiations. 
  • HPPC suspected cartelization and price rigging by tyre manufacturing companies. This prompted a tabulation of other companies manufacturing comparable radial tyre models, namely, JK Tyres, Apollo, MRF (petitioner), Birla and CEAT. 
  • The DST referred to Section 19(1)(b) of the Act against JK tyres. It was followed by the order of the Competition Commission of India (CCI) in 2019 directing the Director General (DG) to conduct an investigation into the matter and ordered the submission of an investigation report within 60 days. JK tyres was arrayed as opposite party in that reference.
  • The order passed by CCI on 01.11.2019, but it was provided to the petitioner immediately. The petitioner received the copy of the said order on 14.09.2020 under cover of a letter, where it’s status as a 3rd-Party participant was communicated.
  • On 26.08.2020, an ex-parte order was issued based on the DG’s report that upgraded the petitioner’s status from 3rd to Opposite Party. This order was not immediately served to the petitioner. 
  • The petitioner was provided with the copy of the order dated 26.08.2020 where they first learnt about their status upgrade as Opposite party.
  • The petitioner, in the instant case, has filed writ petitions contesting the orders dated 01.11.2019 and 26.08.2020 and the notice dated 02.02.2024.

ISSUES RAISED:

  • Whether the challenge to orders dated 01.11.2019 and 26.08.2020 are belated?
  • Whether the Writ Petitions suffer from laches?
  • Whether the change of status of the petitioner from ‘participant’ to ‘opposite party’ in the reference is material?
  • Whether the change of status is contrary to the provisions of law and the procedure contemplated under the Act and connected Regulations?

ARGUMENTS ADVANCED BY THE PETITIONER:

  • Petitioner was not notified about the change in status. The failure to communicate properly was violative of principles of natural justice. 
  • The investigative report by the DG dated 17.08.2020 was also not furnished to the petitioner. The failure to access the report resulted in delay of the petitioner’s adequate response. 
  •  According to section 26(4) of the Competition Act, it is mandatory to furnish the DG’s report to all concerned parties, but these provisions were not adhered to in the petitioner’s case. 
  • They should have been allowed ample time to contest their impleadment as an opposite party but they were deprived of this opportunity.
  • The impugned change of status had serious implications, especially since the petitioner could possibly face penalties u/s 27 of the Act. It is essential to follow proper procedure to safeguard their rights.
  • The petitioner’s participation in the proceedings was so far based on the assumption that they were 3rd-party participant. The change in their status was unexpected and unjustified.
  • Petitioner underscored the significance of transparency in proceedings. Such lack of communication was violative of their rights and served as hindrance to the investigation.
  • The petitioner sought the dismissal of the impugned orders and notices, and a directive for strictly adhering to proper legal procedure. 

ARGUMENTS ADVANCED BY THE RESPONDENT:

  • The provisions of the Competition Act were adhered to as the investigation and subsequent actions were conducted as mandated by the statute.
  • The authority to order investigations and take subsequent actions belonged to the CCI. The CCI had also acted accordingly when ordering the investigation and changing the status of the petitioner.
  • The change in the petitioner’s status was justified and necessary as it was a direct consequence of the much-needed detailed investigation. The change of status of the petitioner was part of this comprehensive investigation process. 
  • The petitioner was notified about the change of status. They argued that the petitioner’s involvement in the proceedings was a display of his awareness. 
  • Refuting the allegations of causing unnecessary delays and depriving the petitioner of a chance to respond to the impugned orders, it was contented that all processes were followed by them in a timely manner, allowing the petitioner to have ample time to respond to the orders. Any delay was not intentional, but a result of the technicalities of the investigation. 

JUDGEMENT ANALYSIS:

  • The High Court observed that an entity is entitled to be aware of any change in its status under which its participation is sought during statutory proceedings. 
  • The High Court recognized the petitioner’s entitlement to be made known of the change in its status and stated that petitioner was subjected to unwarranted opaqueness and delays.
  • It was noted that under section 27 of the Act, a party must be put on notice prior to such inclusion to give them sufficient opportunity to respond to any such inclusion or impleadment.
  • It only learnt about his changed role as an Opposite Party rather than a 3rd Party, through the order dated 01.11.2019, which was provided to him under the cover of letter dated 14.09.2020. Until the letter was furnished to the petitioner, it was under the impression of being only a 3rd Party participant.
  • The Court ruled that the petitioner had promptly filed the Writ Petitions from the date it received the impugned order. 
  • The delayed and opaque manner of conduct of the proceedings were criticized by the Court. It opined that the unnecessary delays lacked transparency.
  • Additionally, the Court also took into account that non-furnishing of the DG’s report to the petitioner which was mandated by section 26(4) for the CCI. The lack of communication demonstrated that the petitioner was still being treated as a 3rd Party to the proceedings. 
  • The High Court subsequently allowed the Writ Petitions and dismissed the impugned orders. 

CONCLUSION:

  • The High Court of Madras set aside the impugned orders of 01.11.2019 and 26.08.2020 and the notice dated 02.02.2024, and underscored the need for transparency and procedural fairness. It held that the petitioner was wrongfully deprived of an opportunity to respond to its changed status from 3rd Party to Opposite Party during the proceedings. Section 27 of the Competition Act mandates that a contesting party be explicitly communicated to about its changes status in timely manner allowing the party sufficient amount of time to contest the impleadment. The respondents were at liberty to proceed with the matter in accordance with the observations set out in the instant case. Any connected Miscellaneous Petition was also held closed. 
 
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