Who can be David to bring down Goliath?

Introduction

Pre liberalization, competition law in India was governed by the Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP Act”). Based on principles of ‘command and control’, the MRTP Act was enacted to prevent concentration of economic power in the hands of a few, control monopolies and to prohibit monopolistic, restrictive, and unfair trade practices.  It was only in the 1990s when India transitioned into a free market-based economy that the need for an effective competition law regime arose. The MRTP Act was repealed since it had outlived its effectiveness and purpose and the Competition Act, 2002 (“Act”) was enacted to replace it. However, substantive provisions of the Act relating to competition law enforcement came into force only on 20th May 2009. The Competition Commission of India (“CCI”) was established to enforce the provisions of the Act with the overarching objectives of preventing practices having an adverse effect on competition in India, promoting and sustaining competition in markets, protecting the interests of consumers, and ensuring freedom of trade.

It is evident from the Act that being a market regulator, the CCI’s mandate is to protect larger public interest by curbing anti-competitive practices/conduct. Thus, the scheme of the Act is inquisitorial in nature where orders passed by the CCI are in rem and not in personam. This has also been upheld by the Hon’ble Supreme Court of India (“SC”) in the case of Competition Commission of India vs. Steel Authority of India Ltd.[1].

In the above context, this article explains who can file a case before the CCI and more importantly, if such person requires locus standi to be able to do so.

Who can inform the CCI of a contravention under the Act?

Section 19(1) of the Act states that the CCI can inquire into any contraventions of the Act either: (i) suo moto, or (ii) based on ‘information’ provided by any person, consumer or their association or trade association or (iii) upon reference made to it by Government or a statutory authority. The wording of Section 19 makes it clear that ‘any person’ can apprise the CCI of a contravention. There is no requirement under the Act for such person to be aggrieved or to establish any nexus with the subject matter of dispute in order to approach the CCI. Pertinently, several amendments to the Act support such interpretation and indicate that the concept of locus standi does not apply to proceedings under the Act.

Firstly, the word ‘complaint’ was replaced with ‘information’, thus widening the scope of Section 19 of the Act. Similarly, under Section 35, the words ‘complainant or defendant’ were substituted by the words ‘person or an enterprise’. Such substitution is not without significance. It suggests that the legislature intended to allow any person to come forward with information against an entity which may be engaging in anti-competitive conduct. In contrast, for filing appeals against orders of the CCI, the Act prescribes a qualification by only allowing ‘aggrieved’ persons to file such appeals.

Conflicting verdicts - NCLAT v. CCI/COMPAT

The issue of locus under the Act came to the fore recently in the matter of Samir Agrawal vs. CCI & Ors.[2], wherein the National Company Law Appellate Tribunal (“NCLAT”) ruled that the locus standi to approach the CCI under the Act lies only with a person “who is either a consumer of the goods/services in question or a beneficiary of healthy competitive practices in a given market”.  The order of the NCLAT was hotly debated since it was contrary to the legislative intent of Section 19 discussed above and earlier decisions of the Appellate Tribunal, i.e., the erstwhile Competition Appellate Tribunal (“COMPAT”).

Briefly, Mr. Samir Agrawal, the informant was an independent law practitioner who filed a case against Uber and Ola alleging the existence of a cartel between the cab aggregators and their drivers. However, for lack of evidence, the CCI dismissed the case. Thereafter, in an appeal filed by the informant before the NCLAT, Ola and Uber contested the locus of the informant stating that he had not shown any evidence of being ‘aggrieved’ or having suffered any legal injury on account of the alleged conduct.

While interpreting ‘any person’, the NCLAT noted that although public interest litigations and class action suits, etc. have diluted the concept of locus standi, since the Act provided for unique modes to take cognizance of a matter, “it has necessarily to be construed as a reference to a person who has suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices”. The NCLAT clarified that it was necessary to adopt such a restrictive interpretation to prevent ‘unscrupulous people’ with ‘oblique motives’ from targeting any enterprise and engaging in frivolous litigation. This is starkly differed from the decisional practice of the CCI as well as the erstwhile COMPAT. By focusing on the legislative intent of the Act and the various provisions thereunder, both the CCI and COMPAT consistently maintained that the Parliament had not prescribed any qualification or conditions to file an information under Section 19(1)(a). The COMPAT in the case of Shri Surendra Prasad v. Competition Commission of India and others[3] went on to clarify that the requirement of the informant to have a personal interest in the matter could not be implied when the same did not flow from the language in the Act.

Supreme Court’s last word on locus

The issue has finally been put to rest by the judgment of the SC dated 15th December 2020[4] in the appeal against Samir Agrawal (supra). The SC rejected the restrictive interpretation on locus adopted by the NCLAT. It was held that the CCI and NCLAT examine practices which have an adverse effect on competition, thereby protecting the interest of the consumers. The Act empowers the CCI to act in public interest (in rem). Therefore ‘person aggrieved’ must, in the context of the Act, be understood widely and not be construed narrowly.

Considering the scheme of the Act and its various provisions, the SC rightly observed that “Obviously, when the CCI performs inquisitorial, as opposed to adjudicatory functions, the doors of approaching the CCI and the appellate authority, i.e., the NCLAT, must be kept wide open in public interest, so as to subserve the high public purpose of the Act”. Regarding the issue of frivolous or mala fide litigation, the SC observed that Section 45 acts as a deterrent since the CCI is empowered to impose penalties (up to Rupees One Crore) or pass any other orders as it deems fit on persons making false statements or omitting to submit material facts.

Conclusion

The decision of the SC settles the issue of locus standi as it unequivocally clarifies that ‘any person’ can approach the CCI regarding contravention of the Act. This implies that the substance of the information carries greater weight than the locus of the informant. In other words, anyone can be David when it comes to bringing down Goliath.

The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal, Hyderabad.

[1] (2010) 10 SCC 744.

[2] Competition Appeal No. 11 of 2019.

[3] Competition Appeal No. 43 of 2014.

[4] Civil Appeal No. 3100 of 2020.