The Competition Commission of India’s (CCI) prima facie order under section 26(1) of the Competition Act, 2002 (Competition Act) allows the Director General (DG) to investigate alleged violations of the Competition Act. Parties under investigation, however, often allege that the DG investigations go beyond the scope of the order passed by the CCI.

Various High Courts are considering issues of this nature under their writ jurisdiction. However, the recent Hon’ble Supreme Court of India’s (SC) decision in Excel Crop Care Limited v. Competition Commission of India & Another (Excel Case)[1] may provide an important perspective to the existing debate.

The Facts

The inquiry in the Excel Case was triggered by a letter (dated 4 February 2011) from the Food Corporation of India (FCI) to the CCI. This alleged that an anti-competitive agreement had been arrived at between certain manufacturers of Aluminium Phosphide (ALP) tablets in relation to a tender issued by the FCI in 2009 (FCI 2009 Tender). As part of its letter, the FCI also referred to bids submitted by the ALP manufacturers’ to tenders of various State Warehousing Corporations (SWCs).

The CCI took notice of the letter and passed an order under Section 26(1) of the Competition Act directing the DG to investigate. While the DG’s investigation was underway, the FCI wrote another letter to the DG informing them about a subsequent tender in 2011 (2011 FCI Tender) where certain ALP tablet manufacturers had allegedly collectively boycotted the tender in violation of Section 3(3) of the Competition Act.

DG’s investigation report recorded a violation of Section 3(3) of the Competition Act in relation to the 2009 FCI tender and the 2011 FCI tender. The ALP tablet manufacturers challenged the DG’s authority to examine allegations/ give findings with respect to the 2011 FCI tender considering that it was not covered within the initial letter filed by the FCI nor within the terms of reference laid out in the order passed by the CCI under Section 26(1) of the Competition Act. This challenge was rejected by the CCI and the Competition Appellate Tribunal (COMPAT), in appeal[2]. Accordingly, the parties challenged the rejection in the appeals[3], before the SC.

SC’s View

In considering this contention, the SC has held that they completely agree with the view taken by the COMPAT. In its findings, the COMPAT accepted the view that the DG should investigate the matter in accordance with the direction given by the CCI. The COMPAT also accepted that the DG must record its findings on each of the allegations made in the information. However, the COMPAT also held that scope of investigation will depend on the language of the CCI’s order. The COMPAT observed that in the facts of Excel’s case the language of CCI’s order is broad enough to allow the DG to investigate the tenders beyond 2009.

Therefore, the COMPAT simply considered whether the language of the order passed by the CCI under Section 26(1) of the Competition Act in the Excel Case was “broad enough” to legitimise the investigation and findings by the DG into the 2011 tender. Accordingly, the COMPAT did not examine or issue any finding of general application beyond the above situation. This is where SC appears to have gone a step further than the COMPAT.

After recording its agreement with the findings recorded by the COMPAT, the SC seems to have given certain findings that do not seem to be limited to the scope of the Excel Case but to investigations by the DG generally.

The SC has found that the purpose of a DG investigation is to “cover all necessary facts and evidence in order to see as to whether there are any anti-competitive practices adopted by the persons complained against”. Therefore, “the starting point of the inquiry would be the allegations contained in the complaint” but during the course of the investigation “if other facts also get revealed and are brought to light”, according to the SC, “the DG would be well within his powers to include those as well in his report”.

The SC has decided the above on the basis that at the initial stage, the CCI “cannot foresee and predict whether any violation of the Act would be found upon the investigation and what would be the nature of the violation revealed through investigation”. Accordingly, the SC holds that a restriction of the investigation process “would defeat the very purpose of the Act”.

Therefore, the order passed by the SC has broadened the boundaries/ paradigm of DG investigations. For all practical purposes the SC has ventured a step beyond the COMPAT order by suggesting that DG is well within its power to investigate other facts regarding a contravention (not considered by the CCI) which the DG discovers later, during the course of the investigation.

Key Takeaways

The above decision may have far-reaching impact on the nature of investigations being conducted by the DG. Since it is couched in fairly general terms, it will be important to examine how High Courts respond to the finding when they are faced with similar challenges. It will also be noteworthy whether the findings of the SC in the Excel Case will apply in cases where the DG subjects added parties to investigation despite lack of formal orders from the CCI. Additionally, it will be relevant to see whether the SC reiterates this view in cases involving similar issues.

[1] Excel Crop Care Limited v. CCI and Another Civil Appeal No. 2480 of 2014; Judgment dated 8 May 2017

[2] Under Section 53-A of the Competition Act.

[3] Under Section 53-T of the Competition Act.

* Cyril Amarchand Mangaldas represented Excel Crop Care Limited

** The author was assisted by Anu Monga, Director – Competition Practice