Competition Law

Case analysis of
Mahindra Electric Mobility Ltd. & Anr. vs CCI &
ANR.

Submitted By –
Tia Sachdeva (L21LLBU007)
Subhankori Banerji (L20BLB071)
Naveen Sharma (L20BLB061)
 IN THE HIGH COURT OF DELHI

CM. APPL. 44376-44378/2018

MAHINDRA ELECTRIC MOBILITY LTD. AND ANR. …. Petitioners

Versus

COMPETITION COMMISSION OF INDIA AND ANR. ....

Respondents

Facts –

In these legal proceedings, as per Article 226 of the Indian Constitution, the individuals filing
the petition are contesting various aspects of the Competition Act, 2002 (referred to as "the
Act" henceforth). Specifically, their challenge pertains to several sections of the Act, namely
Sections 22(3), 27(b), 53A, 53B, 53C, 53D, 53E, 53F, and 61, collectively known as "the
challenged provisions." They are also contesting a notification dated 31.03.2011, which
modified Regulation 48(1) of the Competition Commission of India (General) Regulations,
2009 (referred to as "the Regulations" and the "challenged amendment" respectively).
Additionally, they are addressing issues related to the appellate remedies provided by the
Competition Appellate Tribunal ("COMPAT"), which have now been transferred to the
National Company Law Appellate Tribunal ("NCLAT") due to provisions in the Finance Act
of 2017.

It's worth noting that while the petitioners initially contested provisions of the Finance Act,
they have chosen not to pursue this aspect, given a pending matter before the Supreme Court
concerning a broader challenge to the Finance Act of 2017.

The origin of the foregoing conflicts can be traced back to a grievance lodged by Mr.
Shamsher Kataria, who submitted a complaint under Section 19(1)(a) of the Act towards M/s.
Honda Siel Cars India Ltd, Volkswagen India Pvt. Ltd, and Fiat India Automobiles Limited
on 18.01.2011. The complaint alleged that the above automakers were engaging in abusive
practices in relation to the spare component marketplace. On January 27, 2011, the
complainant proceeded to provide additional data concerning many automotive companies,
including Toyota, Skoda, General Motors, Ford, Nissan Motors, Mercedes Benz, BMW,
Audi, among others. Based on the aforementioned reports, the Competition Commission of
India (from this point on referred to as "CCI") rendered its preliminary view that the
allegations warranted further examination, as stated in its decision of 24.02.2011. Following
this, on April 19, 2011, the Director General (referred to as "DG" henceforth) carried out an
inquiry into the claims presented by the complainant as directed by the CCI. The DG then
presented the results of his findings.

According to the report, the Director General (DG) has formally requested authorization to
broaden the inquiry's purview to encompass more automobile manufacturers. The realm of
inquiry being undertaken by the DG was increased by the CCI by its decision dated
26.04.2011 to cover the applicant along with additional automakers that operate in India. On
May 4, 2011, the Director General (DG) released a notice to the remaining automakers in
accordance with Section 36 (2) and Section 41(2) of the Act. The purpose of this notice was
to request comprehensive data and records pertaining to an ongoing inquiry into asserted anti-
competitive practices within the Indian marketplace for selling, maintenance, servicing, and
restoration of automobiles. This inquiry was being carried out under Case No. 03/2011. The
Madras High Court, in WP 31808/2012 brought by M/s. Hyundai Motors India Ltd., stayed
the hearings in this matter. The purpose of the petition was to challenge the decision dated
26.04.2011 issued by the Competition Commission of India (CCI). As a result, some
individuals who had submitted petitions sought to halt the legal process by requesting
instructions from the Competition Commission of India (CCI).

The court in hearing the case W.P.(C) 2734/2013, initiated by M/s. Maruti Suzuki India Ltd,
ruled that the CCI could move forward with the ongoing processes but should refrain from
implementing its final decision for a period of 10 days. One of the parties involved in the
case, specifically Mahindra & Mahindra (W.P.(C) 6610/2014), submitted an application on
10.07.2013 to the Competition Commission of India (CCI). The purpose of this application
was to seek assurance from the CCI that the fluctuating composition of its Members who
listened to the proceeding would not lead to any unfairness or negative influence on the final
decision in Case No.03/2011. As a result, the Competition Commission of India (CCI), in its
judgement dated 24.07.2013, dismissed the plea and determined that the case in issue would
be decided only by those members who were in attendance throughout the proceedings and
were acquainted with the issue.

Procedural History

1. Information –
 In 2011, Shamsher Kataria filed allegations against Honda, Volkswagen, and Fiat.
 The Director General (DG) was directed to conduct an inquiry.
2. Investigation –
 The investigation conducted by the Directorate General shows the presence of
similar behaviour exhibited by other automakers.
 The Competition Commission of India initiated a probe involving 14 vehicle
manufacturers.
3. CCI Order –
 The Directorate General filed a report indicating that all 14 automobile
manufacturers have violated Sections 3(4) and 4 of the legislation.
 The Competition Commission of India (CCI) imposes a collective penalty of INR
2544 crores on the vehicle makers (2014).
4. COMPAT Order –
 The order is contested before the COMPAT.
 COMPAT reiterated the violations of the Act by Original Equipment
Manufacturers (OEMs) as determined by the Competition Commission of India
(CCI) but has modified the penalty calculation process by transitioning from
average yearly turnover to average relevant turnover.
5. JUDGEMENT OF THE DELHI HIGH COURT –
 The case was brought before the Delhi High Court for adjudication. Furthermore,
a group of ten original equipment manufacturers (OEMs) filed writ petitions not
only contesting the imposed penalty but also questioning the legitimacy of the
composition and diverse powers of the Competition Commission of India (CCI).
 The writ petitions are decided and disposed of by the High Court of Delhi (2019).

Issues –
Issue 1 – Is the CCI a tribunal exercising judicial functions, or does it perform administrative
and investigative functions as well as adjudicate issues before it?

Issue 2 – Is the CCI unconstitutional inasmuch as it violates the separation of powers

principle, which underlies the Constitution – and is now recognized as a basic or essential
feature of the Constitution of India?

Issue 3 – Is Section 22 (3) unconstitutional for the reasons urged by the petitioners?

Issue 4 – Does the revolving door practice vitiate any provision of the Act, or the decisions
rendered by the CCI?

Issue 5 – Was the power exercised by the CCI to expand the scope of inquiry and notice
under Section 26 (1) in an illegal and in an overboard manner?

Rule of law –

1. Section 22(3) - When the Commission convenes a meeting, any questions that arise
will be resolved by a majority vote among the attending Members. In cases where
votes are tied, the Chairperson, or if absent, the presiding Member, will have the
deciding vote. It's important to note that at least three Members must be present to
constitute a quorum for such a meeting.
2. Section 26(1) - Upon receiving a reference, knowledge, or information, if the
Commission believes that there is an initial case to investigate, it will instruct the
Director General to conduct an inquiry into the matter.
3. Section 61 - No ordinary court is authorized to hear any lawsuit or legal proceeding
related to matters that fall under the jurisdiction of the Commission or the NCLAT
[formerly COMPAT] as specified in this Act. Additionally, no court or other authority
can issue an injunction to halt any action that is being or will be taken in accordance
with the powers granted by or under this Act.

Ratio Decidendi/Reasoning:

The Director General (hereinafter “DG”) after investigation drafted the following issues: -

Issue 1: - Is the CCI a tribunal exercising judicial functions, or does it perform administrative
and investigative functions as well as adjudicate issues before it? The first issue raised by the
petitioner was regarding the nature of functions of the Competition Commission of India
along with the legislative provisions that make CCI an adjudicatory body.
Ruling: In order to answer this issue, the Court relied on the judgment of Competition
Commission of India v SAIL (“SAIL” for short) which considered the effect of orders made
under Section 26 (1), analysed Sections 3, 4, 19, 26 and various regulations, and ruled on the
effect by stating that the 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 enunciation of the law
binds the courts; furthermore, there can be no other view, given that SAIL (supra) delineated
the role of CCI, which decides whether to commence an inquiry or investigation, under
Section 26 (1).”

Analysis: When it comes to the functions of the CCI, it can be safely concluded that the Court
has not erred in stating that the Commission’s functions overlap as they undertake
administrative, advisory, regulatory, and quasi-judicial roles by sanction of the legislation
itself. Reading Regulation 17 of Regulations of 2009 it can be understood that the jurisdiction
does not contemplate any adjudicatory function. For the commission, a slight doubt of unfair
practices does not qualify for adjudicatory function being activated, instead only allows the
Commission to conduct an administrative enquiry after which the submissions are made and
then investigation begins. 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 can in for an appeal before the Tribunal and only after this stage, there is a
specific right of notice and hearing available to the aggrieved/affected party. What is
noteworthy is that every stage has a clear function, and the contours are well defined as to
when, how much and what type of power the Commission can exercise. Regulation 17(2)
gives right to the Commission for seeking information, the Commission is vested with the
power of inviting such persons, as it may deem necessary, to render required assistance or
produce requisite information or documents as per the direction of the Commission. This
discretion is exclusively vested in the Commission by the legislature. The investigation is
directed with dual purpose; (a) to collect material and check the veracity of the information,
as may be directed by the Commission, (b) to enable the Commission to examine the report
upon its submission by the DG and to pass appropriate orders after hearing the parties
concerned.
Issue 2: - Is the CCI unconstitutional inasmuch as it violates the separation of powers
principle, which underlies the Constitution – and is now recognized as a basic or essential
feature of the Constitution of India?

Ruling: The Court shed light on the fact that the Petitioners repeatedly questioned the powers
that are exercised by the CCI and further mentioned that the Counsels have painstakingly
tried to clear out by comparing CCI with the regulatory models and legislations in the country
[TRAI and TDSAT, the APTEL in the electricity/energy sector; SEBI and Securities
Appellate Tribunal, for the securities market and the Reserve Bank of India (RBI)]. The CCI
does perform important regulatory tasks and the Court clarified it has no subordinate
legislative power over the aspect of market behaviour i.e., no control on market forces, which
its task is to regulate, but that places no limitation in the manner of its regulating entities,
markets, contractual relationships, and associations once it determines, with respect to the
undesirable effect upon competition in the “relevant market” of a particular product or
service. In conclusion, Star India Private Limited v. Department of Industrial Policy and
Promotion & Ors. cleared the expression “regulate” and included the Commission having the
powers to issue directions.

Analysis: A direct comparison was drawn with the Securities Exchange Board of India
(SEBI) where all the judicial functions are performed by an Adjudicating Officer, and it was
concluded that the CCI performs both adjudicatory and regulatory functions. For better
reference, the Court also compared the CCI with the Telecom Regulatory Authority of India-
Telecom Dispute Settlement and Appellate Tribunal (TRAI-TDSAT) model in which TDSAT
exercises wide original jurisdiction while discharging adjudicatory functions and TRAI
performs the regulatory functions. The CCI and the COMPAT both do not work in the manner
of the latter of the Telecom authorities as the CCI only exercises the adjudicatory powers. The
purpose behind this comparison by the Court was to clearly lay down the functions that are
performed by the CCI. The analysis that is conducted by the CCI does not involve two parties
at a micro level rather it is about the unfair means across industries going on the economy
and that may cause or are likely to cause appreciable adverse effect on competition which
gives them a macro perspective in understanding. Tracing back to the basic roots of
competition, it is said that it is healthy to have competition in an economy to keep the
businesses going and provide customers with quality and choice depending on their
purchasing power. If the unfair practices are causing adverse effects on competition, then the
aim of the CCI is to eliminate these practices promoting and sustaining competition,
protecting the interests of consumers, and ensuring freedom of trade carried on by other
participants in markets in India. It is not possible to completely eliminate risk, but it is always
better to have risk mitigation strategies drafted to put in to Suo moto action as and when
needed.

Issue 3 and Issue 4: -

Issue 3 - Is Section 22 (3) unconstitutional for the reasons urged by the petitioners?

Issue 4- Does the revolving door practice vitiate any provision of the Act, or the decisions
rendered by the CCI?

Ruling: In answering Issue 3, Section 22(3) stipulates that all questions which come up for
consideration in a meeting would be decided by majority of members present and voting and
that in the event of equality of votes, the Chairperson or the Member presiding would have a
second or casting vote. The proviso to Section 22 (3) stipulates a minimum quorum of at least
three members for any meeting. The petitioners’ argument was that Section 22(3) was
unconstitutional to the extent it enables the Chairperson or the senior member presiding a
board meeting to vote twice, i.e. having a casting vote is not fair to judicial functioning. It is
submitted that the concept of casting vote is relatable to board meetings in private
environments such as company board meetings etc. and cannot have any place where the duty
to act judicially and give reasons for such decisions are mandated. It was urged consequently
that having regard to the stipulation of a minimum quorum (3 members) wherever there is a
difference of opinion, in the CCI where the quorum is of even members – 4 or 6 invariably,
the Chairperson or the member presiding would have his say because, he would necessarily
vote twice. Catering to Issue 4, the most serious objection to Section 22(3) as a whole was
that it places or permits “the revolving door policy” that enables members to participate in
one or the other proceedings or desist from participation at their will. There can be no two
opinions about the impropriety of a decision which is contrary to the principle that a tribunal
or adjudicatory body is bound to render its decision, after hearing the parties; if the body
comprises of one or several members, it is a necessary corollary that only those who hear
should decide.

Analysis: Issue 3, the Section that is challenged in here is a procedural one that relates to
Meetings of the Commission and among the many functions of the CCI, the one that is
debated the most is that of the quasi-judicial functions where the Commission decides on
legitimacy of the behaviour of the concerned market players. While performing this role, the
Commission needs to be fair in its assessment of facts as established by investigation and
evidence. While fair is very subjective, the Commission must abide by the principles of
natural justice while administering the same. In the judgment, it has been expressed that when
CCI in the ambit of its function directs an inquiry, it is not performing any adjudicatory
function rather its administrative. But subsequently, in paragraph 163 the Court held that
Section 22 (3) was unconstitutional in its entirety for the simple reason that the Chairman or
Officer can abuse the casting vote power by requiring investigation in the matter where the
rest of the Members disagree. This is a clear contradiction in the Judgement with respect to
understanding whether the inquiry process has to be considered as part of the judicial
function or administrative. For Issue 4, this power seemed arbitrary as it gave substantial
discretion in deciding participation. But the judgment has been explicit and clear in its
opinion that the policy is not abused. The emphasis on “one who hears must decide” was
well-placed.

Issue 5: Was the power exercised by the CCI to expand the scope of inquiry and notice under
Section 26 (1) in an illegal and in overboard manner?

Ruling: The petitioners had impugned the expansion of scope of the initial inquiry. The facts
here are that based on the complaint by the informant and supplementary materials, the CCI
recorded its prima facie opinion that the complaints needed investigation by its order of
24.02.2011. On 19.04.2011, the DG conducted an investigation into the allegations made by
the informant and submitted his investigation report. That DG Report requested permission to
expand the scope of its investigation to include other car manufacturers. By its order of
26.04.2011, CCI expanded the scope of investigation being conducted by the DG to include
the petitioners herein and certain other car manufacturers operating in India. The DG
thereafter issued notice to the other car manufacturers, i.e. the petitioners on 04.05.2011
under Section 36 (2) read with Section 41 (2) of the Act, seeking detailed information and
documents from them with reference to an investigation being conducted into certain anti-
competitive practices alleged to be prevalent in the sale, maintenance, service, and repair
market of the cars manufactured in India.

Analysis: This Court is of the opinion that the argument with respect to illegality of the CCI‟s
procedure, in expanding the scope of inquiry under Section 26 (1) is insubstantial. The Court
relied on Excel Crop Care India v. Competition Commission of India, wherein the broad
powers of the DG were laid down. The same has been quoted below: “if other facts also get
revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into
an agreement that is prohibited by Section 3 which had appreciable adverse effect on the
competition, the DG would be well within his powers to include those as well in his
report….If the investigation process is to be restricted in the manner projected by the
Appellants, it would defeat the very purpose of the Act which is to prevent practices having
appreciable adverse effect on the competition‖). The assumption of jurisdiction of the CCI,
then is upon receipt of complaint or information, when the ―Commission is of the opinion
that there exists a prima facie case”.

Decision/Conclusion: -

The judgement did strike down some very clear unconstitutional powers but also managed to
hold up most of the powers of the Commission. The judgement was able to clarify like in its
functioning, the CCI is unique and does not function like other tribunal in the Country. The
Commission performs a multitude of functions aforementioned, and since the adjudicatory
functions are not its sole duty, it does exercise a recognisable degree of quasi-judicial
functions. Speaking of Section 22 (3), the Commission only has three Members at present
(excluding the Chairperson), of which there is no Judicial Member, the Central Government
would need to change its policy from last year when it composed the CCI to have only three
Members and one Chairperson. Till this change comes into action, the CCI will be
constrained from making any Orders. Further, the present composition of CCI is only of three
Members including the Chairperson and it does not include any Judicial Member. Further
shedding light on the broad powers of the DG, the landmark judgement of Excel Care Crop
has been relied upon and adequate directions were also issued for the revolving door practice
that must be complied with strictly.

Obiter Dicta: -

"In the regulation of various sectors of the economy, such as telecom, securities, power,
airports, and petroleum, a two-stage pattern has emerged, where primary regulators like
TRAI, SEBI, Electricity Commissions, AAI, AERA, and PNGRB are empowered with
regulatory responsibilities and the authority to issue directions and regulations, typically after
consulting relevant parties, and these orders and directions can be appealed to tribunals like
SAT, TDSAT, Electricity Appellate Tribunal, Airport Appellate Tribunal, and AERAT."
"For instance, in the case of SEBI, its decisions can have significant consequences,
potentially leading to the suspension of trading for specific durations, which can be a serious
civil consequence, and the statutes provide for a right to appeal, with appellate tribunals
typically led by individuals with judicial training, such as former High Court Chief Justices
or former Supreme Court judges."

"Regarding Section 22(3), it undermines the principle of equal weight for decisions in quasi-
judicial tribunals, as it allows the Chairperson's casting vote to tip the balance, and this
provision cannot be neatly segmented and must be declared void entirely, with the surviving
provision being the one requiring a minimum quorum of three members, including the
Chairman."

Concurrent Opinion –

The Judges on the basis of cases cited by the petitioners such as State of Orissa vs. Dr.
Binapani Dei along with Swadeshi Cotton Mills V. Union of India agreed on the basis of fair
procedure and right to notice served by the DG before conducting a full investigation and
also providing an opportunity of hearing to the parties. However the judges looked into the
arbitrariness and unconstitutionality of section 27 and found that the DG report contains
elaborate analysis of investigation and fulfils all the criteria established in the Legislation and
although agreeing on fair procedure and right to notice but judges have not emphasised on it
in the Judgment.