The Hon'ble High Court of Delhi dismissed an appeal filed by Mr Saurabh Tripathy (Petitioner) against an order of the Competition Commission of India (CCI) dated 16.02.2017, holding that the Director General's Investigation Report (DG Report) is not binding on the CCI and that the Commission can disagree with the DG Report's findings, including deciding to close the case.

Factual Background:
The petitioner works for Srijan Ltd. (SRMB) - a rolling mill with two rolling units in Sagar Bhanga, Durgapur, West Bengal. SRMB is an energy-intensive industrial unit that relied heavily on coal to meet its needs. However, due to the polluting nature of coal and other issues associated with its use, it shifted to a cleaner fuel - Coalbed Methane Gas (CBM).

GEECL is in the business of exploring, developing, producing, distributing, and selling CBM. It owns a 100 per cent stake in two CBM gas blocks in West Bengal's Raniganj (South) and Tamil Nadu's Mannargudi. GEECL admits that its pipeline network in the Asansol-Durgapur industrial belt delivers CBM to more than thirty-one industrial consumers. GEECL began producing CBM in 2007, and it is admitted that it was the region's sole supplier of CBM until 2011-2012. GEECL and SRMB entered into a Gas Sale Purchase Agreement (GSPA) on May 11, 2011.

On September 16, 2019, the petitioner filed a piece of information with CCI under Section 19(1)(a) of the Act alleging that GEECL violated the provisions of Section 4(1) of the Act by imposing unfair and discriminatory conditions for the supply of CBM in accordance with the GSPA.

CCI reviewed the information provided by the petitioner under Section 19(1)(a) of the Act and concluded that GEECL held a dominant position in the relevant geographical market of the Asansol-Raniganj-Durgapur Region in the State of West Bengal. CCI was also of the first impression that the terms of the GSPA appeared to be biased in favour of the seller (GEECL) and against the buyer, implying that GEECL had violated Section 4 of the Act.

In light of the foregoing, CCI, by order dated December 29, 2014, issued under Section 26(1) of the Act, directed the DG to investigate the matter and complete it within sixty days of receipt of the order. The DG reported that Clause 2, Clause 4.4, Clause 5.2, Clause 6.1, Clause 9.2, Clause 11.2, and Clause 15 of the GSPA violated Section 4(1) of the Act read with Section 4(2)(a)(i) of the Act.

CCI issued the impugned order on February 16, 2017, after hearing both parties and concluding that GEECL had not abused its dominant position in the relevant market. An appeal was filed against the contested order before the COMPAT, which dismissed the appeal on the grounds that it was not maintainable. Following that, on February 28, 2018, the Petitioner filed an application with the High Court.

Submissions
The Petitioner contended that the CCI's decision was incorrect because it rejected the DG Report recommended a violation of Section 4 of the Act. The CCI, according to the petitioner, was instead required to direct further investigation under Section 26(8) of the Act. It was also argued that the order violated Natural Justice Principles because the petitioner was not allowed to contest the premise on which the CCI rejected the DG Report.

The petitioner contended that the CCI was required to state the reasons for rejecting the DG report before proceeding, which would have allowed the petitioner to contest the same. The petitioner also challenged the CCI's decision to reject the DG's findings regarding the clauses deemed unfair by the CCI.

Arguing that the agreement was reached after negotiations between the parties involved. GEECL, on the other hand, contended that the petition was not maintainable because the petitioner cannot be considered an aggrieved person because he has no interest and no locus to challenge the CCI's order. GEECL also claimed that the proceedings were an abuse of the court process because neither SRMB nor GEECL had claimed that the GSPA was unfair.

Issues Before The Court:

1. Whether the CCI was required to issue an order directing further investigation under Section 26(8) of the Act if it disagreed with the DG's findings.
2. The second question before the High Court was whether the impugned order dated 16.02.2017 had any flaws that required intervention by the High Court under Article 226 of the Indian Constitution.

Decision Of The Court
Following issue 1, the Court observed that if the CCI believes that no further investigation is required, there is no need for the CCI to conduct any further investigation or issue any such directions to the DG to conduct the same. The Hon'ble Court observed that there is no provision in the Act requiring the CCI to accept the DG Report recommending that there are violations of the Act's provisions.

In other words, the DG Report is not binding on the CCI, and it may differ from the DG's findings. If the petitioner's arguments are accepted, it would imply that CCI can never disagree with the DG's report, which is contrary to the intent of Sections 26 and 27 of the Act. The language of section 26(8) clearly states:

'If the report of the Director General relates on a reference made under sub-section (1) and such report recommends that there is no contravention of the provisions of this Act, the Commission shall invite comments of the Central Government or the State Government or the statutory authority, as the case may be, on such report and on receipt of such comments, the Commission shall return the reference if there is no prima facie case or proceed with the reference as a complaint if there is a prima facie case'

The word used in this section provides that it is up to the discretion given to CCI that, it may or may not proceed with further enquiry after DG has submitted the report.

The Court held that the DG Report is merely recommendatory in nature, and that the CCI is required to examine it and make a decision after hearing the parties, and that the provisions of further inquiry/investigation (sub-sections 7 and 8 of Section 26 of the Act) are only enabling provisions that allow the Commission to direct further investigation or conduct further inquiry if it believes that such further investigation is necessary. As a result, the Court rejected the petitioner's contention that CCI was required to conduct additional investigation.

For the 2nd issue, the petitioner contended that GEECL abused its dominant position by imposing unfair and discriminatory conditions for the purchase and sale of CBM and that CCI was required to consider this in light of Section 27(d) of the Act, which allows the CCI to modify an agreement (GSPA in this case) to the extent it deems fit.

The High Court rejected this argument for two reasons:

1. The GSPA was a negotiated agreement between SRMB and GEECL, and neither party had approached the CCI for such relief. CCI cannot have exercised its authority to amend the GSPA at the request of a third party who has no interest in the agreement.
2. The underlying premise that GEECL violated Sections 3 and 4 of the Act was unjustified.

The petitioner also contended that CCI was incorrect in rejecting the contention that certain GSPA clauses were discriminatory and/or unfair because the GSPA was negotiated by the parties. The petitioner contended that even if a condition imposed for the purchase and sale of goods and services is found to be unfair or discriminatory, it will remain in effect because it was negotiated between the parties.

The Court rejected this contention, observing that the fact that a commercial contract was negotiated between two parties is an important factor in determining whether an enterprise has abused its dominant position by imposing unfair and discriminatory terms, especially when none of the parties has lodged any complaint against the said contract.

The High Court acknowledged that there may be cases where one of the parties establishes that certain unfair terms and conditions were unilaterally imposed by a dominant enterprise and the affected party was commercially coerced to accept them. In such cases, the fact that the parties had entered into negotiations may be unimportant. However, in cases where the contracting parties have not made any such allegations, the fact that the contract was freely negotiated is critical in determining whether Sections 3 or 4 of the Act were violated.

As a result, CCI discovered that the parties had exchanged draughts of the GSPA before finalizing it. More importantly, SRMB did not object to some of the clauses that the petitioner claimed were unfair and discriminatory during contractual negotiations. As a result, the Court determined that CCI's decision to consider the GSPA as a negotiated contract could not be faulted.

In addition to the foregoing observations, the Court examined the various clauses found by the DG to be in violation of Section 4 and concluded that the CCI was correct in rejecting the DG's recommendation.

Conclusion
The Delhi High Court has rejected the contention that if the Director General's (DG) report recommends that there are violations of the Competition Act, the Competition Commission of India (CCI) cannot close the case immediately. It was also noted that there is no provision in the Competition Act requiring the CCI to accept the DG's report recommending that there are violations of the Act's provisions.

The High Court dismissed the CCI's claims of violation of Sections 26 and 27 as without merit, holding that the DG's report is only recommendatory and not binding on the CCI and that the Commission can disagree with the DG's findings and reject them. Previously, the CCI had rejected the DG's report and, following a hearing, the parties decided to close the case.

In the case of Saurabh Tripathy v. CCI, the Court also rejected the argument that it was the CCI's responsibility to issue an order directing further investigation under Section 26(8) of the Competition Act if it did not agree with the DG's report. Furthermore, in upholding the CCI order on merits, the Court examined various contract clauses and concluded that the DG's overall approach in expressing its subjective opinion on various clauses was flawed.

References:

• https://indiankanoon.org/doc/111833484/
• https://www.scconline.com/Members/BrowseResult.aspx