"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Tuesday, February 28, 2012

Reference of Disputes under Competition Act, 2002 to Arbitration: Delhi HC Says No

Union of India (UOI) v. Competition Commission of India (CCI), a case decided by the Delhi High Court on 23.02.2012 discusses the important issue of whether allegations relating to abuse of dominant position under Competition Law are arbitrable. 

Under Section 19(1) of the Competition Act, 2002 (hereinafter “2002 Act”), the Competition Commission (Commission) is given the discretion to conduct inquiry into an alleged contravention of Section 3(1) (relating to prohibition of anti-competitive agreements) or Section 4(1) (relating to prohibition of abuse of dominant position) on the basis of receipt of information along with fee from any person, consumer, consumer association or trade association.

An informant (Informant) had sent information to the Commission under Section 19(1) alleging that the Ministry of Railways and the Container Corporation of India (a Government of India Corporation primarily involved in container transportation through railroad) (CONCOR) had abused their dominant position. The allegations were that despite the Parent Company of the Informant entering into a Concession Agreement with Ministry and having invested Rs. 550 crores into the Project, the Ministry had abused its dominant position thereby contravening Section 4 of the 2002 Act. 

Section 26(1) of the 2002 Act empowers the Commission to order the Director General of the Commission to investigate if, based on the information supplied under Section 19(1), there is a prima facie case of contravention of Section 3(1) or 4(1). On the basis of the information supplied and after hearing the Informant, the Commission was of the view that there was a prima facie case and consequently, ordered the Director General to investigate into the matter (Order dt. 24.01.2011). The Director General took cognizance of the matter and issued notice to the Ministry of Railways. The said notice was challenged by a writ petition filed in the Delhi High Court raising several jurisdictional pleas. The petition was dismissed on 23.03.2011 on the ground that the Ministry could raise all those jurisdictional pleas even before the Commission.

Vide an application dt. 30.03.2011, the Ministry raised several jurisdictional objections before the Commission. The Ministry also prayed in the application that the jurisdictional objections should be decided first before going into the merits. Simultaneously, the Ministry moved an application under Section 8 of the Arbitration and Conciliation Act, 1996 (1996 Act) for referring the dispute to an arbitral tribunal in view of the arbitration clause in the Concession Agreement. The Commission dismissed the applications. According to the Commission, the scope of the proceedings under the 2002 Act relating to abuse of dominant position were completely different from an adjudication by an arbitral tribunal on the contractual rights of the parties. The Commission also relied Section 60 of the Act which gave an overriding effect to the 2002 Act "notwithstanding anything inconsistent therewith contained in any other law for the time being in force" and Section 62 by which it was provided that the 2002 Act "shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force". The jurisdictional objections on other grounds are not dealt with here. 

Against the dismissal order, the Ministry filed a writ petition before the Delhi High Court.

Contentions:
On Behalf of UOI (Ministry), it was contended that the issues raised before the Commission by Respondent 2 were contractual disputes which could be decided by the tribunal provided in the Concession Agreement. Additionally, it was also contended that since the railway transport industry was specifically reserved for the public sector under the Industrial Policy, 1991, the impugned acts were done in the exercise of sovereign functions. 

Apart from the jurisdictional objection that the writ petition was not maintainable for availability of adequate statutory remedy of appeal before the Competition Appellate Tribunal, it was contended by Respondent 2 that UOI was not discharging sovereign functions. 

Decision:
Vipin Singhi, J. of the High Court rejected the contentions of UOI. Its decision is summarized below:
  • The 2002 Act is in addition to and not in derogation to any other law in force in India (Section 62). This is similar to Section 3 of the Consumer Protection Act, 1986 (1986 Act). A similar question arose under the Consumer Protection Act, 1986 in Fair Air Engineers v. NK Modi(1996) 6 SCC 385 wherein the Supreme Court observed that the 1986 Act provided an additional remedy.
  • The nature of proceedings before the arbitral tribunal is different from that under the 2002 Act. Further, the focus of investigation by the tribunal is not the same as that of the Commission. The tribunal may not even go into the question of abuse of dominant position. Further, the arbitral tribunal is not the appropriate body to implement the 2002 Act for the following reasons:
o   It does not have the mandate to conduct an investigation under the 2002 Act.
o   The arbitral tribunal would not have the expertise or the resources for such an investigation

Consequently the court rejected the argument that the proceedings before the Commission are not maintainable in view of the arbitration clause. 

The judgement of the Delhi High Court in UOI v CCI can be accessed from here. The judgement came to the attention of this blawgger through this page in the website of Taxmann.

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