COMPETITION LAW NEWSLETTER

PETITION CONTESTING COMPETITION COMMISSION OF INDIA’s (“CCI”)  STEEL CARTEL INQUIRY DISMISSED BY THE MADRAS HIGH COURT (“MHC”)[1].

By ruling dated October 19, 2023, a division bench of the MHC dismissed the writ suit filed by Agni Steels Private Limited (“the Petitioner”), contesting the CCI's probe against specific steel makers. The MHC had ordered the Director General (“DG”) to launch an investigation against the suspected steel cartel in response to a complaint from the Coimbatore Corporation Contractors Welfare Association. Consequently, the DG had initiated  the inquiry, whereby search and seizures were carried out as per prescribed procedures, and inquiry notices were issued upon different steel firms, including the Petitioner. 

The Petitioner raised two (2) main objections to the proceedings:

·       First, the Petitioner argued that the inquiry was void ab initio because the CCI had not issued a prima facie order in accordance with Section 26(1)[2] of the Competition Act, 2002 (“Act”) which is a prerequisite that must be met before an investigation may begin.

·       Second, the Petitioner said that the DG had selectively targeted particular steel firms and taken legal action against them, without taking any action against other manufacturers included in the initial complaint filed with the MHC. 

The MHC rejected these arguments, ruling that the legal requirement under Section 26(1) had been satisfied because the investigation had been started in response to an order from a higher court. As a result, the MHC denied the petition that contested the DG's inquiry against the petitioner.

CCI APPROVES ACQUISITION OF SHAREHOLDING OF LANCO AMARKANTAK PURSUANT TO CORPORATE INSOLVENCY RESOLUTION PROCESS.[3]

By order dated October 3, 2023, the CCI authorized PFC Projects Limited (“PPL”), REC Limited (“REC”), SJVN Limited (“SJVN”), and Damodar Valley Corporation (“DVC”) (collectively referred to as “Acquirers”) to purchase shares of Lanco Amarkantak Power Limited (“Target”), which is presently undergoing Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

The notice was submitted in response to the Acquirers’ filing of a settlement plan. The CCI noted that the parties’ operations show both vertical and horizontal overlaps in the Indian market as well as in some associated markets' power generation industries. 

The CCI however maintained that the Target's total power producing capacity is less than 1% of all installed power plants in India. Furthermore, CCI noted that the Proposed ‘combination’ is unlikely to alter the dynamics of competition in the power sector, given that the Target is undergoing CIRP and has not participated in the bidding process for Power Purchase Agreements for the past three (3) years. Accordingly, the proposed ‘combination’ was approved under Section 31(1)[4] of the Act.

NCLAT OVERTURNS A CCI RULING THAT PENALIZED SUGAR MILLS AND THEIR TRADE ASSOCIATIONS FOR MANIPULATING BIDS.[5]

By its ruling dated October 10, 2023, the National Company Law Appellate Tribunal (“NCLAT”) overturned the CCI’s order that fined 18 sugar mills and their two trade associations INR 380,000,000 (thirty-eight crores) (collectively referred to as the “Appellants”).

Through an order dated September 18, 2018, the CCI penalized the Appellants for violating Sections 3(1) and 3(3)[6] of the Act by manipulating the bids in a joint tender that the oil marketing companies (“OMCs”) held to acquire ethanol for mixing with gasoline. 

The Appellants argued before the NCLAT that although six (6) members of the CCI heard the case on multiple times, only three (3) members signed and delivered the final verdict, demonstrating a disregard for the rule that "one who hears must decide." Additionally, they claimed that not all members consistently attended the oral hearings and that the CCI took an excessive amount of time to approve the order following the hearing. Lastly, it was claimed that the ruling was granted against the natural justice principles and that the CCI ought to have given the parties a chance for an oral hearing after the supplemental investigation report was submitted. 

The CCI argued that a judgment or order may not be invalidated for the simple reason that a technical violation of natural justice principles occurred.

The argument made regarding the CCI's obligation to provide an oral hearing following the submission of a supplementary investigation report was that it was not required to do so and that the appellants' challenge to the non-adherence to the principle of natural justice should have been brought up during the CCI hearing, as it could not be brought up at the appellate stage.

The NCLAT ruled that because the CCI panel that heard the closing arguments failed to pass the final order in a timely manner, the contested ruling is not in accordance with the principles of natural justice. 

The NCLAT ruled that there was a major defect as a result of the delay in issuing the contested order, since the principle of "one who hears must decide" was not adhered to in full. Additionally, the NCLAT noted that prior to issuing the final ruling and following receipt of the DG’s investigation report, the CCI had to have given the opposing parties a chance for an oral hearing. The NCLAT ruled that the challenged ruling issued by the CCI fails to meet the fundamental requirement of adhering to the natural justice principles embedded in Section 36[7] of the Act.

As a result, the NCLAT sent the case back to the CCI for another hearing, overturning the CCI's ruling penalizing the appellants.

Dhruv Gandhi, Partner, Chaitanya Sharma, Associate and Tanvi Pandey, Associate

Disclaimer: The contents of the above publication are based on interpretation, analysis and understanding of applicable laws and updates in law, within the knowledge of authors. Readers should take steps to ascertain the current developments given the everyday changes that may be occurring in India on internationally on the subject covered hereinabove. This is not a legal opinion, analysis or interpretation. This is an initiative to share developments in the world of law or as may be relevant for a reader. No reader should act on the basis of any statement made above without seeking professional and up-to date legal advice.