Abbott Healthcare Pvt Ltd vs Competition Commission Of India & ...
2018 Latest Caselaw 7016 Del

    * IN THE HIGH COURT OF DELHI AT NEW DELHI
    %                            Date of decision: 28th November, 2018

+    LPA 658/2018, CM Nos. 49071-49075/2018
     ABBOTT HEALTHCARE PVT LTD
                                                               ..... Appellant
                        Through:      Mr. Sandeep Sethi, Sr. Adv. with
                                      Mr. Raj Shekhar Rao, Mr. Aashish
                                      Gupta, Mr. Aditya Mukherjee,
                                      Mr. Aman Sethi, Mr. Anirudh Lekhi
                                      and Ms. Anjali Kumar, Advs.
                        versus

     COMPETITION COMMISSION OF INDIA & ANR.
                                                           ..... Respondents
                        Through:      Mr. Samar Bansal, Mr. Manan
                                      Shishodia and Ms. Devahuti Pathak,
                                      Advs. for CCI.
                                      Mr. Manish Mohan, CGSC for UOI
     CORAM:
     HON'BLE THE CHIEF JUSTICE
     HON'BLE MR. JUSTICE V. KAMESWAR RAO

    V. KAMESWAR RAO, J. (ORAL)

CM No. 49073/2018 (for exemption) Exemption allowed, subject to all just exceptions.

Application stands disposed of.

LPA 658/2018

1. The present appeal has been filed by the appellant

challenging the order dated November 13, 2018 passed by the

learned Single Judge in W.P. (C) 12129/2018, whereby the learned

Single Judge has dismissed the writ petition. The challenge in the

writ petition was to an order dated July 05, 2017 passed by the

Competition Commission of India (hereinafter 'CCI') under Section

26(1) of the Competition Act, 2002 (hereinafter 'the Act of 2002'),

whereby the Commission has directed the Director General to cause

an investigation into the matter and submit an investigation report

within 60 days from the receipt of the said order.

2. The appellant has also impugned an order dated October 29,

2018 passed by the CCI rejecting the appellant's application for

review and recall of the impugned order dated July 05, 2017. It is

noted from the record that the proceedings before the CCI were

commenced pursuant to a letter dated March 22, 2017 received from

the National Pharmaceutical Pricing Authority, Department of

Pharmaceuticals (NPPA) requesting the CCI to analyse the alleged

anti-competitive agreement between four leading pharmaceutical

companies namely, Novartis India, Abbott Healthcare Pvt. Ltd.

(appellant herein), USV Ltd., and Emcure Pharmaceutical Limited.

The allegation against the said manufactures is that they were

controlling the prices of the oral diabetes drugs containing the

Active Pharmaceutical Ingredient (API) Vildagliptin. In addition to

the pricing data furnished by NPPA, the CCI also had also received

an anonymous e-mail enclosing therewith an e-mail dated July 29,

2016 purportedly sent by one of the employees of the appellant,

which indicated that there was an understanding to maintain the

price of drugs across the country.

3. The plea on behalf of the appellant before the learned

Single Judge was; (i) the CCI was required to take an informed view

regarding both the veracity of the e-mail as well as also the data

provided by NPPA so as to form a prima facie opinion; (ii) without

considering the appellant's contentions, the CCI could not have

formed a prima facie view, which it was required to form in terms

of Section 26 of the Act, more so in light of Section 36(2) of the Act

of 2002, which expressly conferred with CCI the powers of a Civil

Court under the Code of Civil Procedure which includes

summoning and enforcing the attendance of any person; and (iii)

Regulation 17(2) of the Competition Commission of India (General)

Regulations, 2009 in terms of which the Commission is empowered

to invite the information provider and such other person as is

necessary for a preliminary conference. In substance, it was the

submission on behalf of the appellant before the learned Single

Judge that it was incumbent upon the CCI to exercise such powers

and form a prima facie view after conducting due enquiry.

4. Suffice it to state that the learned Single Judge has in paras

7 and 8 held as under to dismiss the writ petition:

"7. This Court is not persuaded to accept any of the contentions advanced by the learned counsel on behalf of the petitioner. As explained by the Supreme Court in Competition Commission of India v. Steel Authority of India Ltd. and Anr.: (2010) 10 SCC 744, the order passed by the CCI under Section 26 (1) is, essentially, an administrative order and akin to a direction from one wing of the department to another. Under Section 26(1) of the Act, CCI can at best direct investigation and this does not amount to an adjudicatory function. The court had further observed as under:

"92....The investigation is directed with dual purpose: (a) to collect material and verify the information, as may be, directed by the Commission,

(b) to enable the Commission to examine the report upon its submission by the Director General and to pass appropriate orders after hearing the parties concerned. No inquiry commences prior to the direction issued to the Director General for conducting the investigation. Therefore, even from

the practical point of view, it will be required that undue time is not spent at the preliminary stage of formation of prima facie opinion and the matters are dealt with effectively and expeditiously.

93. We may also usefully note that the functions performed by the Commission under Section 26(1) of the Act are in the nature of preparatory measures in contrast to the decision- making process. That is the precise reason that the legislature has used the word "direction" to be issued to the Director General for investigation in that provision and not that the Commission shall take a decision or pass an order directing inquiry into the allegations made in the reference to the Commission."

8. The provisions of Section 36 and Regulations 17, 41 and 44 also relate to the powers of the CCI to take evidence and call for information. Clearly, this is not a case where the powers of the CCI are in question. The CCI would have a jurisdiction to exercise its powers in the manner in accordance with provisions of the Act. The contention that it was incumbent upon the CCI to first take evidence under Section 36(2) of the Act or Regulation 41 of the Regulations, is bereft of any merit. As explained by the Supreme Court in Steel Authority of India

(supra), the decision under Section 26(1) is only a preparatory measure, which precedes an inquiry."

5. Mr. Sandeep Sethi, learned Senior Counsel appearing for

the appellant has drawn our attention to various documents in

support of his contention, that (1) the said e-mail is a forgery and

could not have been relied upon, (2) the letter received from NPPA

has been contested by the appellant and rather the NPPA response

before the Commission only strengthened the appellant's contention

that the data submitted by NPPA which had been relied upon by the

Commission on the passing the order under Section 26(1) was

incorrect.

6. He has referred to the judgment of the Supreme Court in the

case of Competition Commission of India vs. Steel Authority of

India Ltd. and Anr. (2010) 10 SCC 744, as relied upon by the

learned Single Judge to contend that reliance placed by the learned

Single Judge on this judgment is totally misplaced.

7. According to him, the Supreme Court, in the very same

judgement has held that the Commission, upon receiving any

information alleging violation of the Act, must first satisfy itself and

express an opinion that a prima facie violation exists, from the

record produced before it, and thereafter pass a direction to the

Director General to cause an investigation to be made into the

matter. It is his submission that the judgement relied upon by the

learned Single Judge itself makes it manifestly clear that the

Commission must first apply its mind to the material on record,

ascertaining the authenticity and accuracy of the material supplied

along with the information/reference, before forming a prima facie

opinion. According to him, formation of a prima facie opinion is

sine qua non for directing the Director General to conduct an

investigation.

8. We are not in agreement with the submissions made by

Mr. Sethi. On a perusal of the judgment of the Supreme Court in

Competition Commission of India (supra), the Supreme Court in

paras 21, 38 and 91, has held as under:

"21. The informant, i.e. the person who wishes to complain to the Commission constituted under section 1 of the Act, would make such information available in writing to the Commission. Of course, such information could also be received from the Central Government, State Government, Statutory authority or on its own knowledge as provided under Section 19(1)(a) of the Act. When such information is received,

the Commission is expected to satisfy itself and express its opinion that a prima facie case exists, from the record produced before it and then to pass a direction to the Director General to cause an investigation to be made into the matter. This direction, normally, could be issued by the Commission with or without assistance from other quarters including experts of eminence. The provisions of Section 19 do not suggest that any notice is required to be given to the informant, affected party or any other person at that stage. Such parties cannot claim the right to notice or hearing but it is always open to the Commission to call any `such person', for rendering assistance or produce such records, as the Commission may consider appropriate.

38. In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis. Closure of the case causes determination of rights and affects a party, i.e. the informant; resultantly, the said party has a right to appeal against such closure of case under Section 26(2) of the Act. On the other hand, mere direction for investigation to one of the wings of

the Commission is akin to a departmental proceeding which does not entail civil consequences for any person, particularly, in light of the strict confidentiality that is expected to be maintained by the Commission in terms of Section 57of the Act and Regulation 35 of the Regulations.

91. The jurisdiction of the Commission, to act under this provision, does not contemplate any adjudicatory function. The Commission is not expected to give notice to the parties, i.e. the informant or the affected parties and hear them at length, before forming its opinion. The function is of a very preliminary nature and in fact, in common parlance, it is a departmental function. At that stage, it does not condemn any person and therefore, application of audi alteram partem is not called for. Formation of a prima facie opinion departmentally (Director General, being appointed by the Central Government to assist the Commission, is one of the wings of the Commission itself) does not amount to an adjudicatory function but is merely of administrative nature. At best, it can direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of Section 26(2) of the Act, which order itself is appealable before the Tribunal and only after this stage, there is a specific right of notice and hearing available to the aggrieved/affected party. Thus,

keeping in mind the nature of the functions required to be performed by the Commission in terms of Section 26(1), we are of the considered view that the right of notice of hearing is not contemplated under the provisions of Section 26(1) of the Act."

9. From the reading of the aforesaid the following position of

law emerges:

1. Upon receiving the information from any person

including Central Government, State Government, Statutory

Authority or on its own knowledge under Section 19 (1)(a)

of the Act, the commission is expected to satisfy itself and

express its opinion that a prima facie case exists and then

pass a direction to the Director General to cause an

investigation into the matter in terms of Section 26 (1).

2. This direction under Section 26 (1) to the Director

General may be passed with or without seeking assistance

from any other quarters including experts of eminence or the

affected parties themselves. The aggrieved / affected parties

cannot claim a right to notice or hearing at this stage.

3. Issuance of a direction by the Commission under

Section 26 (1) of the Act is a direction simplicitor to cause a

investigation and is administrative in nature to one of its

own wings departmentally. It does not effectively determine

any right or obligation of the parties to the lis. Such

direction for investigation to one of the wings of the

commission is akin to a departmental proceedings and does

not entail civil consequences for any person.

5. The subject provision does not contemplate any

adjudicatory action on the part of the Commission. The

Commission is not expected to give notice to the parties and

hear them at length. It is of a very preliminary nature.

6. It is only after consideration of the report of the

Director General and passing of an order in terms of Section

26 (2) of the Act that the aggrieved / affected parties gain a

specific right of notice and hearing.

10. In view of the above position of law, we agree with the

conclusion arrived at by the learned Single Judge which we have

already reproduced above. We do not see any merit in the appeal,

and the same is dismissed. The time granted by the DG for

furnishing information is extended for a period of three weeks from

today.

CM Nos. 49071/2018, 49072/2018, 49074/2018 & 49075/2018

Dismissed as infructuous.

V. KAMESWAR RAO, J

CHIEF JUSTICE

NOVEMBER 28, 2018/aky