South Asia Lpg Company Private ... vs Competition Commission Of India ...
2014 Latest Caselaw 4110 Del

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Date of decision: 3rd September, 2014

+                             LPA No. 857/2013

       SOUTH ASIA LPG COMPANY
       PRIVATE LIMITED                                        .... Appellant
                         Through:      Mr. Amitabh Kumar with Ms. Divya
                                       Chaturvedi and Mr. Sameer Agarwal,
                                       Advs.

                                    Versus

       COMPETITION COMMISSION OF INDIA
       AND ORS.                                            ..... Respondents

                         Through:      Mr. Rajeev Saxena Adv. for CCI.
                                       Ms. Anuradha Mukherjee with Mr.
                                       Abhijit Mittal, Advs. For R-3/EIPPL.
CORAM :-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J

1. This intra-court appeal impugns the judgment dated 2nd September,

2013 (as corrected on 3rd September, 2013) of the learned Single Judge of

this Court of dismissal of W.P.(C) No.4602/2013 filed by the appellant. The

said writ petition was filed, impugning the order dated 1st July, 2013 of the

respondent no.1 Competition Commission of India (CCI) (passed in exercise

of powers under Section 26(7) of The Competition Act, 2002 and referring

back the complaint / information filed by the respondent No.3 East India

Petroleum Private Limited under Section 19(1) of the Act to the respondent

no.2 Director General (DG), CCI for allowing the respondent no.3 /

informant to cross examine the witnesses of the appellant) on the ground that

the said order was passed without issuing notice to and without hearing the

appellant. Summons issued to the witnesses of the appellant for cross

examination, in pursuance to the said order of the CCI, were also impugned

in the writ petition.

2. The learned Single Judge dismissed the writ petition holding that as

per the judgment of the Supreme Court in Competition Commission of

India Vs. Steel Authority of India Limited (2010) 10 SCC 744, no notice of

hearing was required to be given and the appellant was not required to be

heard by the respondent no.1 CCI before passing the order on 1st July, 2013.

3. Though this appeal came up first before this Court on 18 th November,

2013 but was taken up for hearing on 4th March, 2014 when notice thereof

was issued and the operation of the „impugned order‟ was stayed. The

respondent no.3 / informant on the next date of hearing i.e. 15 th April, 2014

informed this Court that the appellant, while securing the interim order, had

not brought to the notice of the Court that in the interregnum the cross

examination etc. of the witnesses of the appellant in terms of the order dated

1st July, 2013 of the respondent no.1 CCI had already been carried out

between 9th and 19th September, 2013 and that the appellant also, in

CM No.19277/2013 filed along with this appeal, had categorically stated

that it was not pressing for any stay of proceedings. In the face of this

position, this Court on 15th April, 2014 vacated the interim order earlier

granted on 4th March, 2014.

4. It was also the contention of the respondent no.3 / informant on 15 th

April, 2014 that since the cross examination ordered vide order dated 1st

July, 2013 which was impugned in the writ petition had already been carried

out, this appeal had become infructuous. The counsel for the appellant

however opposed and the matter was posted for hearing on 21 st August,

2014.

5. On 21st August, 2014, the counsel for the appellant informed that

though the witnesses of the appellant had been cross examined by the

respondent no.3 / informant in terms of the order dated 1 st July, 2013 but the

respondent no.2 DG was yet to submit its report to the respondent no.1 CCI.

The counsel further contended that since the Competition Act is still at is

nascent stage, the issue as arises for consideration in this appeal be decided

since it repeatedly arises before the respondent no.1 CCI. It was his further

contention that the appeal cannot be said to have become infructuous

because if the appellant succeeds and it is held that the appellant ought to

have been heard before the respondent no.1 CCI, in exercise of powers under

Section 26(7) referred back the matter to the respondent no.2 DG for

allowing such cross examination, the entire proceedings conducted by the

respondent no.2 DG thereafter would be non est and of no avail. Though we

suggested to the counsel for the appellant that since, what was directed vide

order dated 1st July, 2013 of the respondent no.1 CCI which is impugned in

these proceedings has already happened, we can dispose of this appeal by

observing that the appellant shall be entitled to raise the issue as raised in

this appeal in the remedy if any taken by the appellant against the order of

the respondent no.1 CCI on the report to be submitted by the respondent

no.2 DG, if against the appellant, but the counsel for the appellant did not

agree.

6. In the circumstances, we heard the counsels for the parties on the

merits of the appeal also and reserved orders.

7. Having considered the matter, we are unable to hold the matter to

have become infructuous so as to be able to dispose of this appeal on the

said ground alone. There is merit in the contention of the counsel for the

appellant that if indeed the appellant succeeds, what has happened in

pursuance to the impugned order dated 1st July, 2013 would be non est;

without the appellant agreeing to our suggestion aforesaid, the appeal cannot

be dismissed as infructuous.

8. We have also considered whether the appellant is disentitled to be

heard on the appeal itself on the ground for which the interim order was

vacated as aforesaid. We are however unable to hold so also, firstly for the

reason that the appellant has already been punished for the said lapse if any

in as much as the interim order earlier granted was vacated and cannot be

punished again therefor and secondly for the reason that the stay granted by

this Court was only of the order of the learned Single Judge dismissing the

writ petition of the appellant; this Court did not grant any interim order

staying the proceedings being conducted by the respondent no.2 DG or the

proceedings before the respondent no.1 CCI. The counsel for the appellant in

this regard has also contended that this Court, while issuing notice to the

respondent no.3 / informant was so appalled by the order of the learned

Single Judge that on its own granted the stay. Another fact which cannot be

lost sight of is, that the counsel for the respondent no.1 CCI and the

respondent no.2 DG was present before this Court on 4th March, 2014 when

the interim order was granted.

9. That takes us to the merits of the appeal. The question entailed is

purely legal, as to the interpretation particularly of Section 26 of the Act.

The only facts necessary to appreciate the said legal question, are as under:-

(a) The respondent no.3 / informant on 24th November, 2011

submitted information within the meaning of Section 19(1) of

the Act to the respondent no.1 CCI, of the appellant having

indulged in contravention of the provisions of Section 3(1) /

4(1) of the Act. The respondent no.1 CCI vide order dated 28 th

December, 2011, in exercise of powers under Section 26(1) of

the Act, passed an order stating that on the basis of the

information furnished by the respondent No.3/informant, there

existed a prima facie case against the appellant and accordingly

directed investigation to be conducted by the respondent no.2

DG. Notice was also issued to the appellant, of the application

of the respondent no.3 / informant under Section 33 of the Act

for interim relief. The respondent no.2 DG also, in exercise of

investigative powers under Section 41 and Section 36 (2) of the

Act, sought certain information from the appellant.

(b) The respondent no.1 CCI, vide order dated 8th February, 2012

dismissed the application of the respondent no.3 / informant for

interim relief. The appellant, in the meanwhile submitted the

information sought by the respondent no.2 DG.

(c) The respondent no.2 DG submitted a report dated 3rd December,

2012 to the respondent no.1 CCI inter alia to the effect that the

appellant was not found to be in contravention of Section 4(2)

of the Act. A copy of the said report was ordered by the

respondent no.1 CCI to be supplied to the respondent no.3 /

informant. The respondent no.3 / informant filed an application

before the respondent no.1 / CCI to cross examine the witnesses

whose evidence was recorded by the respondent no.2 DG

during the investigation. The respondent no.1 CCI however

vide order dated 12th February, 2013 asked the respondent no.3

/ informant to specify the issues and areas of cross examination

sought, by filing questions and interrogatories for the witnesses

of the appellant and others. The respondent no.3 / informant so

delivered the interrogatories for discovery and production of

certain documents from the appellant and other witnesses

examined by the respondent no.2 DG during investigation.

(d) The respondent no.1 CCI vide impugned order dated 1 st July,

2013 noted that the witnesses of the appellant examined by the

respondent no.2 DG had given testimony in respect of several

technical and safety concern aspects and the respondent no.3 /

informant was not provided an opportunity to cross examine the

said witnesses and therefore the testimonies of those witnesses

and the contentions of the appellant regarding several aspects

had gone unrebutted. The respondent no.1 CCI was of the

opinion that the respondent no.2 DG should have allowed the

respondent no.3 / informant to cross-examine the witnesses so

that a complete picture was there in respect of technical and

safety concern aspects raised by the appellant in respect of

certain matters. It was further observed that the cross

examination would have brought out the genuineness of the

concerns and would have also given an opportunity to the

respondent no.3 / informant to show as to whether those

concerns expressed by the appellant before the respondent no.2

DG and accepted by the respondent no.2 DG in the report, were

real or false. The respondent no.1 CCI was further of the

opinion that the respondent no.3 / informant should have got an

opportunity to clear the air on other aspects and to test the

veracity of the witnesses so as to bring out the truth.

The respondent no.1 CCI accordingly, in exercise of powers under

Section 26(7) of the Act, referred the matter back to the respondent no.2 DG

for allowing the respondent no.3 / informant to cross examine the witnesses

of the appellant.

10. In accordance with the order dated 1st July, 2013, the respondent no.2

DG on 15th July, 2013 issued summons to the witnesses of the appellant for

being cross examined by the respondent no.3 / informant.

11. The appellant then filed the writ petition from which this appeal

arises, challenging the order dated 1st July, 2013 on the ground that the same

had been passed without issuing notice to and without hearing the appellant.

12. For proper appreciation of the legal question which arises for

consideration, it is apposite to set out herein below Section 19(1) and

Section 26 in entirety, of the Act:-

"19. Inquiry into certain agreements and dominant position of enterprise - (1) The Commission may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4 either on its own motion or on--

(a) receipt of any information, in such manner and accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or

(b) a reference made to it by the Central Government or a State Government or a statutory authority.

26. Procedure for inquiry under Section 19. - (1)On receipt of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under Section 19, if the Commission is of the opinion that there exists a prima

facie case, it shall direct the Director General to cause an investigation to be made into the matter:

Provided that if the subject matter of an information received is, in the opinion of the Commission, substantially the same as or has been covered by any previous information received, then the new information may be clubbed with the previous information.

(2) Where on receipt of a reference from the Central Government or a State Government or a statutory authority or information received under Section 19, the Commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be.

(3) The Director General shall, on receipt of direction under sub-Section (1), submit a report on his findings within such period as may be specified by the Commission.

(4) The Commission may forward a copy of the report referred to in sub Section (3) to the parties concerned:

Provided that in case the investigation is caused to be made based on reference received from the Central Government or the State Government or the statutory authority, the Commission shall forward a copy of the report referred to in sub Section (3) to the Central Government or the State Government or the statutory authority, as the case may be.

(5) If the report of the Director General referred to in sub-Section (3) recommends that there is no contravention of the provisions of this Act, the Commission shall invite objections or suggestions from the Central Government or the State Government or the statutory

authority or the parties concerned, as the case may be, on such report of the Director General.

(6) If, after consideration of the objections and suggestions referred to in sub Section (5), if any, the Commission agrees with the recommendation of the Director General, it shall close the matter forthwith and pass such orders as it deems fit and communicate its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be.

(7) If, after consideration of the objections or suggestions referred to in sub Section (5), if any, the Commission is of the opinion that further investigation is called for, it may direct further investigation in the matter by the Director General or cause further inquiry to be made in the matter or itself proceed with further inquiry in the matter in accordance with the provisions of this Act.

(8) If the report of the Director General referred to in sub-Section (3) recommends that there is contravention of any of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such contravention in accordance with the provisions of this Act."

13. The learned Single Judge dismissed the writ petition, finding /

observing / holding:-

(a) that neither Section 26(1) provides for any opportunity of

hearing to the person against whom information in terms of

Section 19 is received nor Section 26(7) provides for any such

hearing to such a person before further investigation is directed

by the CCI;

(b) that Section 26(5) also does not envisage any notice to the

person against whom information is provided to the CCI, before

the CCI considers the report of the DG recommending that

there was no contravention of the provisions of the Act;

(c) had the legislature intended inviting objections or suggestions

even from the person against whom the complaint is made,

Section 26(5), instead of using the word „or‟ would have used

the word „and‟ between the words "....statutory authority....."

and the words "....the parties concerned, as the case may be..."

in Section 26(5);

(d) incase investigation is ordered on receipt of a reference from

the Central Government/State Government/Statutory Authority

and the DG recommends that there is no contravention of

provisions of the Act, CCI will have to invite objections or

suggestions from the Central Government/State Government

/Statutory Authority as the case may be before it takes a view on

such report; had the intention of the legislature been that in such

a case, besides hearing the Central Government/State

Government/ Statutory Authority which had made the reference

under Section 19(1), the CCI should also hear the person

against whom the reference is made, it would not have used the

word „or‟ and would have used the word „and‟ in Section 26(5)

as aforesaid;

(e) therefore the contention of the appellant / writ petitioner that

Section 26(5) envisages notice not only to the informant but

also to the person against whom information is given or

reference is made, cannot be accepted;

(f) the definition of the expression „party‟ in Regulation 2(1)(i) of

The Competition Commission of India (General) Regulations,

2009 as including inter alia an information provider as well as

an enterprises against whom any inquiry or proceeding is

instituted, thus could not be used for the purpose of interpreting

Section 26(5);

(g) the Supreme Court in Steel Authority of India Limited supra

has already held that at the stage of Section 26(1), no notice is

required to be given to the person against whom information is

received or reference is made;

(h) that the argument of the appellant / writ petitioner on the basis

of principles of natural justice could not be accepted because

the statute does not mandate issuance of notice to the affected

party before directing investigation to be made by the DG;

(i) if the law does not mandate issuance of notice to the affected

party before directing investigation to be made by the DG, there

is no reason to imply such a notice before directing further

investigation in exercise of powers under Section 26(7);

(j) as far as the affected party is concerned, there is no difference

between direction for investigation or direction for further

investigation since any further investigation by the DG would

only be in continuation of the investigation carried out earlier;

(k) the order directing further investigation cannot prejudicially

affect the person against whom information is provided or a

reference is made; an order of this nature does not visit the

person against whom information is provided or a reference is

made with any civil consequences nor does it impair any legal

right of such a person; thus the principles of audi alteram

partem would have no application at this stage; and,

(l) Regulation 41(5) of the 2009 Regulations supra also empowers

the CCI and the DG to direct evidence of a party to be led and if

deem necessary, grant an opportunity to the other party to cross

examine the person giving the evidence; the CCI vide order

dated 1st July, 2013 had merely permitted the respondent no.3 /

informant to cross examine the witnesses of the appellant; such

cross examination can take place only if further investigation is

directed by the CCI.

14. The contention of the counsel for the appellant before us is, that the

language of Section 26(1), on the interpretation whereof the Supreme Court

in Steel Authority of India Limited (supra) has held that the person against

whom information is given or reference is made has no right to be heard, is

materially different from the language of Section 26(7); while Section 26(1)

does not provide for any hearing to the person against whom information is

received or reference is made, Section 26(7) expressly requires the CCI to,

only after consideration of the objections or suggestions referred to in sub

Section (5), if of the opinion that further investigation is called for, direct

further investigation by the DG. It is further argued that Section 26(5) also

expressly requires the CCI to invite objections or suggestions from "the

parties concerned" if the report submitted by the respondent no.2 DG

recommends that there is no contravention of the provisions of the Act. It is

thus argued that the judgment of the learned Single Judge is against the

language of the statute. Attention is also invited to paragraphs 23 and 71 of

the judgment of the Supreme Court in Steel Authority of India Limited and

it is argued that the Supreme Court in the said judgment has itself held that

in contradistinction to Section 26(1), Section 26(7) requires CCI to invite

objections and provide an opportunity of hearing. It is thus contended that

the learned Single Judge has gone against the judgment of the Supreme

Court.

15. We deem it appropriate to set out herein below, paras 23 and 71 of the

judgment aforesaid of the Supreme Court:-

"23. In terms of Section 26(3), the Director General is supposed to take up the investigation and submit the report in accordance with law and within the time stated by the Commission in the directive issued under Section 26(1). After the report is submitted, there is a requirement and in fact specific duty on the Commission to issue notice to the affected parties to reply with regard to the details of the information and the report submitted by the Director General and thereafter permit the parties to submit objections and suggestions to such documents.

71. The intimation received by the Commission from any specific person complaining of violation of Section 3(4) read with Section 19 of the Act, sets into motion, the mechanism stated under Section 26 of the Act. Section 26(1), as already noticed, requires the Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of a reference or information received by it. Language of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contradistinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under Section 26(2), the Commission is not only expected to forward the copy of the report, issue notice, invite objections or suggestions from the informant, the Central Government, the State Government, Statutory

Authorities or the parties concerned, but also to provide an opportunity of hearing to the parties before arriving at any final conclusion under Section 26(7) or 26(8) of the Act, as the case may be. This obviously means that wherever the legislature has intended that notice is to be served upon the other party, it has specifically so stated and we see no compelling reason to read into the provisions of Section 26(1) the requirement of notice, when it is conspicuous by its very absence. Once the proceedings before the Commission are completed, the parties have a right to appeal under Section 53-A(1)(a) in regard to the orders termed as appealable under that provision. Section 53-B requires that the Tribunal should give, parties to the appeal, notice and an opportunity of being heard before passing orders, as it may deem fit and proper, confirming, modifying or setting aside the direction, decision or order appealed against."

16. It is further argued by the counsel for the appellant that the learned

Single Judge has also erred in holding that the appellant, from the order

dated 1st July, 2013, is not visited with any civil consequences or that the

same does not impair any legal right of the appellant. It is contended that

since the appellant, in terms of the said order is subjected to further

investigation, it is visited with civil consequences and its rights are impaired.

17. Per contra, the counsel for the respondent no.1 CCI and the

respondent no.2 DG has contended that the reference in Section 26(5) to "the

parties concerned" is only to the informant and not to the party against

whom information is given. Reliance in this regard is placed on the proviso

to Section 26(1) of the Act. It is further argued that investigation is merely

an administrative function of the respondent no.1 CCI.

18. Though Sections 26(5) and (7) on a bare reading appear to provide

that if the investigation report of the DG is that there is no contravention,

"objections" shall be invited by the CCI from "the parties concerned", which

would include the person/enterprise informed/referred against and that

direction for further investigation shall be issued only "after consideration"

(and which may include hearing) of the said objections, but on deeper

consideration, Sections 26(5) & (7) cannot be so interpreted.

19. Infact we had, during the hearing repeatedly enquired from the

counsel for the appellant whether not it would be illogical to hold that

though while ordering investigation, no opportunity of hearing is required to

be given to the person ordered to be investigated against, such a person is

required to be heard before "further investigation" is ordered. The only

answer of the counsel for the appellant was that the legislature itself having

provided so, the CCI cannot go against the law of which it is the creation.

20. Though we can think of another answer, i.e. that though it may not be

necessary to give an opportunity of hearing before the CCI forms a prima

facie opinion and orders investigation but once the DG on investigation has

found the information to be wrong and the person/enterprise

informed/referred against of being not guilty of any contravention, such

person, before further investigation has a right of hearing, but we find the

Courts to have held otherwise.

21. The Supreme Court in Sri Bhagwan Samardha Sreepada Vallabha

Venkata Vishwandadha Maharaj Vs. State of Andhra Pradesh (1999) 5

SCC 740, in the context of Section 173(8) of the Code of Criminal

Procedure, 1973 (and which saves the power of the Magistrate to direct

further investigation) held that the Court is not obliged to hear the accused

before any such direction for further investigation is made and that casting

of any such obligation on the Court would only result in encumbering the

Court with the burden of searching for all the potential accused, to be

afforded with the opportunity of being heard and since the law does not

require it, the Court need not be burdened with such an obligation.

The proposition of law which thus emerges is that an investigation

report in favour of the accused does not vest the accused with a right of

hearing before the Court/authority, to which the investigation report is

submitted, orders further investigation.

22. Per contra, it is also the settled legal position that before closing a case

on the basis of investigation report of no case for proceeding further having

been made out, issuance of notice and hearing the informant/complainant is

necessary / mandatory. Reliance in this regard can be placed on Bhagwant

Singh v. Commissioner of Police (1985) 2 SCC 537 laying down that in

case the Magistrate, to whom an investigation report is forwarded under

Section 173(2)(i) of the Cr.P.C., decides not to take cognizance of the

offence and to drop the proceedings or takes a view that there is no sufficient

ground for proceeding against some of the persons mentioned in the FIR, the

Magistrate must give notice to the informant and provide him an

opportunity to be heard at the time of consideration of the report. The same

view has been reiterated in Union Public Service Commission Vs. S.

Papaiah (1997) 7 SCC 614, Gangadhar Janardan Mhatre Vs. State of

Maharashtra (2004) 7 SCC 768, Sundeep Kumar Bafna Vs. State of

Maharashtra AIR 2014 SC 1745 (where it was held that if the proceedings

are likely to be quashed, then the complainant should be heard at that stage,

rather than compelling him to assail the quashment by taking recourse to an

appeal) and by this Court in Praveen Grover Vs. Central Bureau of

Investigation MANU/DE/8725/2007.

23. Reference in this regard can also be made to Popular Muthiah Vs.

State (2006) 7 SCC 296 where the Supreme Court, while holding that the

High Court in an appeal, before directing prosecution of a person though

mentioned in the FIR but not charge-sheeted, should have heard such person,

clarified that the judgment should not be read as laying down the law that

the Magistrate, while directing further investigation or the Sessions Judge

while exercising jurisdiction under Section 319 of the Cr.P.C. is required to

hear the accused. It was held that the accused has no right to be heard at that

stage and thus the question of hearing him at that stage does not arise.

Similarly, in Pritish Vs. State of Maharashtra (2002) 1 SCC 253 even in

relation to a proceeding under Section 340 of the Cr.P.C., it was held that a

person complained against has no right to be heard in the inquiry, whether

he should be tried for the offence or not but such a legal right is envisaged

only when the Magistrate summons him - then he has a right to participate

in the pre-trial inquiry and to satisfy the Magistrate that he is entitled to be

discharged.

24. The position in law is thus quite clear. There is no right of the accused

to be heard, before the Magistrate or the Sessions Judge directs further

investigation, even where the investigation carried out has found him to be

not guilty. What needs to be determined is, whether the language of Section

26 carves out an exception to the said general proposition of law.

25. The Supreme Court, in Steel Authority of India Limited (supra) does

not appear to be of the said opinion,

(a) by holding in para 10 of the judgment that the Competition Act and

the Regulations framed thereunder indicate the legislative intent of

dealing with the matters related to contravention of the Act

expeditiously and even in a time-bound programme;

(b) by holding in para 21 of the judgment that Section 19 does not suggest

that any notice is required to be given to the affected party and thus

the affected party cannot claim the right to notice or hearing;

(c) by holding in para 31(1) of the judgment that the order by which the

CCI forms a prima facie view and issues a direction to the DG for

investigation would not be appealable;

(d) by holding in para 31(2) of the judgment that no duty has been cast on

the CCI to issue notice or grant hearing to the person against whom

information is given, at the stage of formation of opinion by the CCI

in terms of Section 26(1) of the Act and issuing a direction to the DG

to cause an investigation to be made in the matter;

(e) by holding in para 71 of the judgment that Section 26(1) also does not

require the CCI to issue notice to the party against whom information

is given;

(f) by holding in para 77 of the judgment that issuance of notice to a

party at the initial stage of the proceeding, which is not determinative

in nature and substance, can hardly be implied;

(g) by holding in para 78 of the judgment that the scheme of the

Competition Act suggests that it will not be in consonance with the

settled rules of interpretation that a statutory notice or an absolute

right to claim notice and hearing can be read into Section 26(1) of the

Act;

(h) by holding in para 79 of the judgment that it is difficult to state as an

absolute proposition of law that at all stages and in all events the right

to notice and hearing is a mandatory requirement of principles of

natural justice or that non-compliance therewith would always result

in violation of fundamental requirements vitiating the entire

proceedings;

(i) by holding in para 83 of the judgment that Section 26(1) clearly

indicates exclusion of principles of natural justice, at least at the initial

stages;

(j) by holding in para 86 of the judgment that the scope of duty cast upon

the authority or a body and the nature of the function to be performed

cannot be rendered nugatory by imposition of unnecessary directions

or impediments which are not postulated in the plain language of the

section itself and that "natural justice" is a term which may have a

different connotation and dimension depending upon the facts of the

case;

(k) by carving out a distinction in para 87 of the judgment between

inquisitorial and adjudicatory functions;

(l) by holding in para 91 of the judgment that jurisdiction of the CCI

under Section 26(1) does not contemplate any adjudicatory function

and the CCI is not expected to give notice to the informant or the

affected parties and hear them at length before forming its opinion, as

the function is of a very preliminary nature and in fact in common

parlance, it is a departmental function; at that stage CCI does not

condemn any person and therefore application of audi alteram partem

is not called for and that formation of a prima facie opinion

departmentally (DG being one of the wings of the CCI) does not

amount to an adjudicatory function but is merely of administrative

nature and so, keeping the nature of function performed in terms of

Section 26(1), the right of notice or hearing cannot be held to be

contemplated under Section 26(1) of the Act; and,

(m) by holding in para 134 of the judgment that the legislative intent in

enacting Competition Act is that investigations under the provisions

thereof should be concluded as expeditiously as possible.

26. The reasons given by the Supreme Court for holding that no notice or

hearing is required to be given, to the person/enterprise informed/referred

against, by the CCI before forming a prima facie opinion and directing

investigation under Section 26(1) of the Act, apply also to the stage under

Section 26(7) of the Act. The stage of Section 26(7) is also an "initial stage"

which is not determinative in nature and substance; "further investigation" is

also a pre-cognizance stage; issuance of notice to the person/enterprise

informed/referred against, at that stage cannot be implied. Besides the

judgments cited above, reference can also be made to K. Chandrasekhar Vs.

State of Kerala (1998) 5 SCC 223 in support of the proposition that there is

no difference between „investigation‟ and „further investigation‟. The

Supreme Court in the said judgement, relying on the dictionary meaning of

"further" when used as an adjective, held 'further investigation' to be a

continuation of the earlier investigation and not a fresh investigation or re-

investigation to be started ab initio, wiping out the earlier investigation

altogether. Secondly, just like Section 26(1) does not contemplate any

adjudicatory function and the function of the CCI thereunder has been held

to be of a preliminary / departmental / administrative nature with no person

being condemned at that stage, similarly the function of the CCI under

Section 26(7) insofar as of directing further investigation is concerned is also

not adjudicatory and of a preliminary/department/administrative nature only,

with the person/enterprise informed / referred against being not condemned

at that stage also. We have already noticed above that ordering investigation

against anyone does not amount to condemning that person/enterprise. The

word „investigation‟ has not been defined in the Act. However the Supreme

Court in H.N. Rishbud v. State of Delhi AIR 1955 SC 196, dealing with the

definition of 'investigation' in the Code of Criminal Procedure, held that

investigation generally consists of the following steps:

i. proceeding to the spot;

ii. ascertainment of the facts and circumstances of the case;

iii. discovery of the suspected offender;

iv. collection of evidence relating to commission of offence and which

evidence may consist of examination of various persons including

the accused and search of places or seizure of things considered

necessary for the investigation and to be produced at the trial; and,

v. formation of the opinion as to whether on the material collected there

is a case to place the accused for trial.

Even in Steel Authority of India Limited (supra), it was held that the power

of investigation is inquisitorial in nature. „Further investigation‟ cannot also

be anything but inquisitorial. Thirdly, just like requiring giving of an

opportunity of hearing to the person/enterprise informed/referred against at

the stage of Section 26(1) was held by the Supreme Court to lead to delays,

defeating the function to be performed by the CCI, similarly the giving of an

opportunity of hearing to the person/enterprise informed/referred against at

the stage of Section 26(7) would also lead to delays defeating the function to be

performed by the CCI. The stage of Section 26(7), is also not determinative

in nature.

27. In fact this Court, applying the principles laid down by the Supreme

Court in Steel Authority of India Limited (supra), in DLF Ltd. Vs.

Securities and Exchange Board of India 186 (2012) DLT 145 and an

appeal being LPA No.100/2012 to the Division Bench whereagainst was

dismissed vide judgment dated 20th November, 2012 has held, (i) that since

the Securities and Exchange Board of India Act, 1992 provides the mode of

inquiring into the complaint of, first, investigations conducted prior to

ordering investigation, second, investigation by the investigating authority

and finally adjudication, the exercise of inquisitorial power to determine

whether an investigation is to be conducted, in fact does not require hearing

the affected parties; and, (ii) that at the stage of inquiry by the authority /

body (in that case SEBI) of examining whether or not the facts disclosed the

material for entertainment of a reasonable belief to cause an investigation

which is an inquisitorial and not an adjudicatory exercise, no notice of

hearing is required to be given to the party sought to be investigated against.

28. However, the Supreme Court in Steel Authority of India Limited and

this Court in DLF Ltd. (supra) were concerned with Section 26(1) of the

Competition Act and Section 11C(1) of the SEBI Act (and which are not

pari materia to the provisions of the Competition Act) respectively, the said

judgments thus cannot be said to be conclusive on the issue before us.

29. The „objections‟ which are to be considered under Section 26(7) are

the objections which the CCI is to invite under Section 26(5). Under Section

26(5), objections have to be invited from the "parties concerned". The

learned Single Judge in this regard has held the person/enterprise

informed/referred against to be not a party concerned for the reason of the

use of the word „or‟ in Section 26(5) between the words "... statutory

authority..." and the words "....the parties concerned...". We are entirely in

agreement. If the legislature was of the view that the person/enterprise

informed/referred against is also one of the „parties concerned‟ within the

meaning of Section 26(5), the legislature would have, in the case of Section

26(1) being initiated on a reference from Central Government/State

Government/Statutory Authority, would have used the word "and" in place

of "or" in Section 26(5) requiring the CCI to besides inviting objections

from the Central Government/State Government/Statutory Authority, also

from the person/enterprise referred against. Not only so, the question of the

person/enterprise informed/referred against having any „objection‟ or

„suggestion‟ when the Report of the DG is in its favour i.e. of there being no

contravention, does not arise. „Objection‟ or „suggestion‟ at that stage, can

only be of the informant or the referring Government / Statutory Authority,

inspite of whose information /reference of contravention of the Act, DG has

found otherwise. Besides the said reason given by the learned Single Judge,

as we have noticed above, under the general law, the accused has no right of

hearing at that stage. Thus, the legislature, when used the words „parties

concerned‟ in Section 26(5) cannot be said to have meant the

person/enterprise informed/referred against, which is in the position of an

accused in the said investigation. The consideration under Section 26(7)

thus, of the objections / suggestions has to be of the objections / suggestions

of the informant / referring Government / Statutory Authority only and not

of the person/enterprise informed/referred against. We would however be

failing in our duty if do not mention that Section 26 as it stood prior to

amendment w.e.f. 20.05.2009, in Sub-Section (5) thereof, provided for

giving of an opportunity to the "complainant" to rebut the findings of the

DG of there being no contravention. Similarly, Section 26(7) as it stood

prior to the said amendment, provided for hearing the complainant before

further investigation. We wondered whether the amendment, substituting

giving of notice and hearing to the „complainant‟ with inviting objections/

suggestions of the „parties concerned‟ and consideration thereof was with

the intent of including therein the person/enterprise informed/referred

against also. In this regard, we perused The Competition (Amendment) Bill,

2007 (Bill No.70/2007), which led to the amendment with effect from 20th

May, 2009. However, the Statement of Objects and Reasons given for the

amendment does not list any such reason. It thus appears that the reason

which prevailed with the legislature to so amend Section 26 was not to

provide for notice or hearing to the person/enterprise informed/referred

against, before directing further investigation. In the absence of any such

reason having been given by the Legislature, we have to interpret the

language of the statute as it stands post amendment and on which

interpretation, we have concluded that „parties concerned‟ would at the stage

of investigation not include the person/enterprise informed/referred against.

Our research has also disclosed introduction in the Lok Sabha of the

Competition (Amendment) Bill, 2012 (Bill No.136 of 2012) which proposes

to inter alia amend Section 26(7) and (8) of the Act but which proposed amendments

also, though not law till date, are not suggestive of the intent of the

Legislature being otherwise than what has been interpreted by us.

30. The learned Single Judge has further held that the definition of „Party‟

in Regulation 2(1)(i) of the 2009 Regulations as including an enterprise

against whom an inquiry or proceeding is instituted, would not apply to

Section 26(5). We may add that it is the settled position in law (see Jeevan

Chandrabhan Idnani Vs. Divisional Commissioner, Konkan Bhavan

(2012) 2 SCC 794) that the Rules/Regulations even if framed under the

statute, cannot alter or vary the meaning of the statute itself, where it is

unambiguous. A good discussion on the said aspect is also to be found in a

decision of England and Wales High Court (Chancery Division) in BDW

Trading Ltd. Vs. South Anglia Housing Ltd. MANU/UKCH/0234/2013

where, quoting Maxwell on interpretation of Statutes, it was inter alia held

that Regulations made under a Statute provide a parliamentary or

administrative contemporanea expositio of the statute but do not decide or

control its meaning: to allow this would be to substitute the rule making

authority for the judges as interpreters and would disregard the possibility

that the regulation relied upon was misconceived or ultra vires.

31. Yet another facet which may be noticed is that Section 26(7), besides

the expression "further investigation" also uses the expression "further

inquiry" either by the DG or by the CCI itself. The Supreme Court, in Steel

Authority of India Limited (supra) has held that „investigation‟ is distinct

from „inquiry‟ inasmuch as investigation by the DG is only in terms of the

directive of the CCI and it is only after the „investigation‟ that the „inquiry‟

commences and in which the CCI has to consider the report of the DG "as

well as consider the objections & submissions" made by other party and it is

the inquiry which continues till the final order is passed by the CCI. We find

the CCI also in its order in All India Tyre Dealers' Federation Vs. Tyre

Manufacturers MANU/CO/0097/2012 to have so understood the difference

between "investigation" and "inquiry", with „inquiry‟ leading to

determination of rights of the parties and levy of penalty on those

contravening the law, through adjudication or decision and in which

principles of natural justice have to be complied with and „investigation‟ as

not conferring any rights and leading to no penalties. The Supreme Court in

Directorate of Enforcement Vs. Deepak Mahajan (1994) 3 SCC 440 held

that term "investigation" cannot be limited only to police investigation but

has a wider connotation and is flexible, so as to include inter alia

investigation carried out under the direction of a Magistrate.

32. In our opinion, „investigation‟ includes all proceedings for collection

of evidence, to form an opinion whether any law has been contravened or

not. Per contra, an „inquiry‟ is akin to prosecution i.e. a proceeding to

adjudicate after hearing the accused whether the opinion formed after

investigation, of law having been contravened, is established or not. A Full

Bench of the Bombay High Court also in Motilal Hiralal Vs. Emperor

MANU/MH/0314/1921 though in the context of Code of Criminal

Procedure, has held that the word inquiry is used to indicate a judicial

proceeding as distinguished from investigation. A Single Judge of the

Allahabad High Court also in Gauri Shankar Sawhney Vs. State of U.P.

MANU/UP/0972/2012 held that while distinguishing between inquiry and

investigation it may be borne in mind that the object of inquiry is to

determine the truth or falsity of certain facts in order to take further action

thereon, while the object of an investigation is to collect evidence.

33. Before proceeding further, we may also notice that as per the scheme

of the Act, the opinion/investigation report of the DG is not binding on the

CCI. We find the CompAT also, in Gulf Oil Corporation Ltd. Vs.

Competition Commission of India MANU/TA/0010/2013 to have taken the

same view.

34. On the basis of the above discussion, in our view, the procedure to be

followed after the Section 26(1) stage, is as under:-

(I) If the report of the DG referred to in Section 26(3) recommends that

there is no contravention, the CCI is to invite objections either from the

referring Government / Statutory Authority if the proceedings under Section

26(1) were commenced on such reference or from the informant if the

proceedings under Section 26(1) were commenced on receipt of information

and formation of a prima facie opinion thereon. [Section 26(5)]

(II) CCI on consideration of the aforesaid objections, may agree with the

report of the DG and close the case (see para 24 of Steel Authority of India

Limited). [Section 26(6)]

(III) However if the CCI on the basis of the material collected by the DG

and the objections, forms an opinion different from that of the DG, the

nature of the proceedings changes from „investigation‟ to adjudicatory and it

is such proceeding which has been labelled by the Supreme Court in Steel

Authority of India Limited (supra) as „inquiry‟ and of which inquiry notice

will have to be issued to the person/enterprise informed/referred against.

(IV) However CCI, if on the basis of the material collected by the DG and

after consideration of the objections, is neither able to close the case nor able

to proceed from investigative to the inquiry stage, and is of the opinion that

there are lacunae /deficiencies in the report of the DG, may give directions

for 'further investigation'. For issuing such directions, no hearing has to be

given to the person/enterprise informed/referred against.

(V) A direction, under Section 26(7), of "further investigation", within the

meaning of (IV) above, is distinct from "causing further inquiry to be made

in the matter or itself proceed with further inquiry....". While at the time of

ordering "further investigation", CCI has not formed an opinion of the

statute having been contravened, before "causing further inquiry" to be

made, formation of opinion (as distinct from prima facie opinion under

Section 26(1)) by the CCI of the statute having been contravened, is a must.

It was so held by the Supreme Court in para 24 of the Steel Authority of

India Limited by observing that if the CCI is of the opinion that there is

contravention of any of the provisions of the Act, it may order further

inquiry into the matter.

35. The order dated 1st July, 2013 of the CCI does not record any

satisfaction having been reached or opinion having been formed by the CCI,

of contravention having been committed by the appellant. The same is

indicative of the order dated 1st July, 2013 being merely an order of further

investigation in continuation of which investigation the report of

„no contravention‟ was submitted by the DG, and not being an order of

conducting inquiry after recording satisfaction, higher than the prima facie

view under Section 26(1), of contravention having been committed.

36. As far as the reliance by the counsel for the appellant on Paras 23 and

71 of the judgment in Steel Authority of India Limited is concerned, the

Supreme Court in the said judgment was not concerned with Section 26(7)

of the Act and a stray observation, which otherwise goes against the grain of

the judgment, cannot be relied upon. It was so held in UOI Vs. Dhanwanti

Devi (1996) 6 SCC 44 and Gangadhara Palo Vs. The Revenue Divisional

Officer (2011) 4 SCC 602.

37. The Supreme Court in Steel Authority of India Limited, for

determining whether the stage of the proceeding is in the realm of

investigation or adjudication, also applied the test of maintainability of

appeal thereagainst as provided in Section 53A(1) of the Act. The said

provision though provides for appeal against a direction/decision under

Section 26(2) and (6) i.e. the decision of the CCI on receipt of

reference/information that there is no prima facie case and the decision of

the CCI on consideration of the report of the DG of no contravention and the

objections and suggestions invited thereon, of closure of the case, but not

against directions under Section 26(7) for further investigation. For this

reason also we are of the opinion that direction for further investigation

under Section 26(7) is not in exercise of adjudicatory but of

preliminary/departmental/administrative/inquisitorial functions.

38. We find that the same learned Single Judge who has authored the

judgment impugned before us, has also dealt with the procedure to be

followed by the CCI and the DG, in Grasim Industries Ltd. Vs. Competition

Commission of India 206 (2014) DLT 42 and though the impugned

judgment was cited before him but observed that the impugned judgment

had no application to the issue involved in Grasim Industries Ltd. (supra).

We however refrain from dealing with the judgment in Grasim Industries

Ltd. since we find that LPA No. 137/2014 preferred thereagainst is pending

consideration.

39. Before parting, we may record that the language of Section 26(4) to

(7) as well as of Regulation 21 of the 2009 Regulations leaves much to be

desired. However, it is the settled principle of law (see Bhag Mal Vs. Ch.

Parbhu Ram (1985) 1 SCC 61, Tinsukhia Electric Supply Co. Ltd. Vs.

State of Assam (1989) 3 SCC 709, Deepak Mahajan (supra), Surjit Singh

Vs. Mahanagar Telephone Nigam Ltd AIR 2008 SC 2226,) that where

plain and literal interpretation of a statutory provision produces a manifestly

absurd and unjust results, the Court may modify the language used or even

do some violence to it so as to achieve the obvious intentions of the

legislature and produce a rational construction and just result.

40. The counsel for the appellant has also argued that the CCI, in the

order dated 1st July, 2013 has proceeded on the safety concerns, which have

no relevance.

41. However, having held that the CCI is still at investigative stage,

according to us the said argument is not available to the appellant at this

stage. The Courts have always been reluctant to interfere at the investigation

stage.

42. We therefore hold that the challenge by the appellant to the order

dated 1st July, 2013 of the CCI on the ground of the same having been

passed without giving any opportunity of hearing to the appellant, which is

the enterprise informed against, has no merit. Resultantly, the appeal is

dismissed.

No costs.

RAJIV SAHAI ENDLAW, J.

CHIEF JUSTICE

SEPTEMBER 3, 2014 pp