Gauhati High Court quashes CCI order imposing ₹5 lakh penalty on cement company

The Gauhati High Court recently quashed an order passed by the Competition Commission of India (CCI) imposing a penalty of ₹5,00,000 on a cement company for failing to comply with its Director General's directions. [Star Cement Ltd v. Competition Commission of India & Ors].The High Court also quashed the proceedings initiated by CCI against the cement company under the Competition Act, 2002Justice Kaushik Goswami observed that the CCI passed the order without fulfilling the essential requirements of the Competition Act, 2002. The order stated,"the impugned Order dated 06.12.2016 having been passed without fulfillment of the precondition of the Section 26(1) of the said Act, 2002, i.e., without arriving a prima facie finding under Section 3(1) and 3(3) of the said Act, 2002 is without jurisdiction and as such, is a nullity....Resultantly, the Review Order dated 08.12.2018 is also null and void. Accordingly, in WP(C) No. 6343/2018, the impugned Order dated 06.12.2016 passed by the CCI under Section 26(1) of the said Act, 2002 and the Review Order dated 08.08.2018 passed by the CCI stands quashed and set aside." .The Court was hearing two cases by the cement company seeking to quash the proceedings and orders issued by the CCI under Section 26(1) of the Competition Act, 2002, as well as the rejection of its review application against the CCI order.The Assam Real Estate and Developer Association had filed a complaint with the CCI on September 8, 2016 alleging that the petitioner company, Star Cement, along with other cement manufacturers, were indulging in cartelization and abuse of dominance to manipulate the prices of their respective brands of cement in North East Region of India.On December 6, 2016, the CCI, after forming a preliminary opinion that the company was involved in anti-competitive activities, ordered an investigation under Section 26(1) of the Competition Act, 2002. The Director General (DG) was directed to complete the investigation within 60 days. Almost a year later, on December 8, 2017, the Joint Director General issued a notice to the company requesting various information. However, the company did not receive the original CCI order.The company requested more details from the CCI and asked for an extension to submit the required information. Eventually, on May 30, 2018, after receiving the CCI’s order, the company filed an application to review and recall the order. However, the CCI rejected this application on in August the same year.Aggrieved by the rejection of its review application, the company filed the first writ petition challenging the CCI’s decisions..Following the initiation of the investigation, the DG issued a notice to the petitioner company directing it to provide various information.Despite multiple responses from the company, the CCI, on August 27, 2018, determined that the company had failed to provide complete information and did not show reasonable cause for the delay.Consequently, the CCI imposed a penalty of ₹5,00,000 for non-compliance. Aggrieved by this, the petitioner company filed another plea before the High Court..The Court observed that an order under Section 26(1) called for a DG investigation is a preliminary opinion and is not included in the list of appealable orders which lie before the National Company Law Appellate Tribunal (NCLAT).While deciding whether a plea challenging orders passed under Section 26 was maintainable before the High Court, the Bench held that a writ court can assess whether there is a prima facie case for the CCI to direct the investigation. Further,"The power of this Court to quash such registration of proceeding for investigation is akin to the powers of this Court under Section 482 of Cr.PC for quashing FIR/complaints..."On whether a prima facie case existed for the CCI to direct investigation by the DG in this case, the Court held,"it is apparent that the information received does not disclose existence of the prima facie case as regards contravention of the provisions of the Section 3 and/or 4 of the said Act, 2002, and since the same is a sine qua non for CCI to direct the investigation, the decision of the CCI in directing investigation without fulfillment of the said mandatory pre-condition is totally without jurisdiction and is therefore, null and void."Based on this reasoning, the Court set aside the CCI orders..Senior Advocate A Saraf and Advocate P Das appeared for the petitioner.Senior Advocate TJ Mahanta and Advocates D Das and D Nath appeared for the respondents..[Read Order]