COMPETITION LAW

FEBRUARY 2021 (1)

INDIAN COMPETITION LAW:

HOW TO CONTEST EFFECTIVELY AN INQUIRY RELATING TO ANTI-
COMPETITIVE AGREEMENTS BEFORE THE COMPETITION
COMMISSION OF INDIA/DIRECTOR GENERAL
(PART II)
INTRODUCTION

The present antitrust/competition law, the Competition Act, 2002, inter alia, deals with
one of the substantive laws relating to prohibition of anti-competitive agreements (under
Section 3) which was enforced w.e.f. 20th May, 2009. An anti-competitive agreement is an
agreement entered into by and between enterprises or persons, association of
enterprises, in respect of production, supply, distribution, storage, acquisition or control
of goods or provision of service which causes or is likely to cause an appreciable adverse
effect on competition within India (“AAEC”) Such agreements are treated in contravention
of the Act and are void. These agreements are either horizontal or vertical in nature.
Section 3(5)(i) deals with the exemptions relating to Intellectual Property Rights (“IPR”)
and exports under Section 3(5)(ii). All these sub-sections have been dealt with in detail in
our various articles which are available at the links given in the end of this article.

Having dealt with the substantive provisions of Section 3 in the various articles as stated
above, now we will discuss how to contest effectively an inquiry/investigation relating to
anti-competitive agreements before the Competition Commission of India (“CCI”)/
Director General (“DG”).

An inquiry/investigation relating to anti-competitive agreements can be contested before

the CCI/DG keeping in view of the factors as legislated in Section 19(3) of the Competition
Act, 2002, viz. statutory defences available to the contesting party. Besides this, there are
certain points which have to be kept in mind relating to violation of principles of natural
justice as it has been seen that the authorities under the Competition Act often do not
follow the same. It can either be during investigation by the DG or during inquiry by the
CCI. Thus, this topic can be discussed in three broader heads:

1. Factors for Determination of AAEC under Section 19(3)

2. Irregularities/Violation of Principles of Natural Justice during Investigation by DG
3. Irregularities/Violation of Principles of Natural Justice during Inquiry by the CCI

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In Part I of the Article, we have discussed the factors for determination of AAEC under
Section 19(3) emphasizing on the decisional practice by the Competition authorities. For
the sake of continuity, we are hereby stating the conclusion of that Article as follows:

By way of this article, we dealt the applicability and scope of factors enumerated in Section
19(3) on the agreements, vertical as well as horizontal, which are required to be tested on
the criteria of AAEC. An inquiry or investigation relating to anti-competitive agreements
can be contested before the CCI/DG in due consideration of the factors given in Section
19(3). To put it in simpler words, factors under Section 19(3) are the statutory defences
available to the contesting party. In so far as horizontal agreements are concerned,
Section 19(3) is a deeming provision and the burden is on the party that is alleged to have
entered into horizontal agreements to prove that its act and conduct does not create
barriers to new entrants in the market, do not drive existing competitors out of the market
or do not foreclose competition by hindering entry into the market. The party to horizontal
agreements, depending on the facts and circumstances, may also have to prove that the
said agreements are beneficial to consumers, improve production/distribution of goods
and provision of services or promote technical, scientific and economic development. On
the other hand, in case of vertical agreements, the onus to prove contravention of Section
3(4) and AAEC due to such contravention lies on the complainant as the AAEC in such cases
is determined on the rule of reason unlike horizontal agreements which are presumed to
be anti-competitive per se.

We discussed the classification of factors determining AAEC into negative factors and
positive factors. Factors enumerated in clause (a) to (c) of Section 19(3) are negative
factors which usually indicate AAEC unless proven otherwise. The other three factors
mentioned in clauses (d) to (f) are in the nature of efficiency justifications and even though
they do not indicate AAEC, yet they are vital to determine the presence or absence of AAEC
in the market and it is therefore, prudent to examine all six factors together to determine
the overall impact on competition. The story, however, does not end here. In order to
understand how the interplay of these factors has proved to be decisive in evaluating the
impact of horizontal as well as vertical agreements on the competition, we have discussed
decisional practice by the authorities by way of a plethora of orders and judgments passed

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by the CCI, COMPAT (and NCLAT) and the Supreme Court. As per the broad scheme of
Section 19(3) read with Section 3(3) formulated by the Supreme Court in Rajasthan
Cylinders judgment (supra), once the CCI finds that case is covered by one or more of the
clauses of Section 3(3), it need not undertake any further enquiry and burden would shift
upon the opposite party to rebut the presumption of AAEC by leading adequate evidence.
If an evidence dispelling the presumption is led, the CCI shall consider the factors
mentioned in Section 19 to see whether all or any of these factors are established. If the
evidence collected by the CCI leads to one or more factors mentioned in Section 19(3), it
would again be treated as an agreement which may cause or is likely to cause AAEC,
thereby compelling the CCI to take further remedial action. In line with the framework of
Section 19(3) as well as the said Apex Court ruling, the Competition Authorities (CCI,
COMPAT and NCLAT) by way of judicial orders have observed, opined and held as follows:

I. For applicability of Section 19(3)(a), (b) & (c), there should be an agreement of
the nature defined under Section 2(b) of the Act, which creates barriers to new
entrants in the market or forecloses competition by hindering entry into the
market. In any market, any firm is free to leave the market.

II. While determining whether an agreement has an appreciable adverse effect on

competition under Section 3 of the Act, the Commission as well as DG shall have
due regard to all or any of the Section 19(3) factors.

III. It is wrong to presume that the parameters prescribed under Section 19(3) are
not required to be applied while assessing an agreement under Section 3(3)
because it is a deeming provision. Section 19(3) being a deeming provision does
not deprive the Commission of its powers to apply these factors while
determining AAEC. Section 19(3) is a mandatory provision and the Commission is
bound to apply these factors for arriving at AAEC.

IV. The barrier to entry for competing firms must not be confused with difficulties in
exit, if any, faced by the consumers. Therefore, any aspect of any inconvenience
or difficulty faced by consumers must be examined in the context of Section
19(3)(d) which makes accrual of benefits to the customers as one of the

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 determinant factors for assessing appreciable adverse effect. If a consumer finds
it difficult to shift from one bank to another due to prepayment charges, that
difficulty must be examined under this clause.

V. The practice of levying pre-payment penalty and foreclosure charges by the banks
and financial institutions acts as an exit load, restricts or limits the borrower from
availing the best market rate of interest and impedes competition among lending
institutions.

VI. If in every tender document only one person gets an order to the exclusion of
others, it amounts to foreclosure of competition by creating entry barriers into
the market and thereby, violative of Section 19(3) of the Act. If the tender
document is designed so as to create barriers and hindrances to new entrants in
the market, it would amount to anti-competitive practice.

VII. In order to determine if the agreements entered between the OEMs and the
authorized dealers are in the nature of exclusive distribution agreements or
refusal to deal, the Commission needs to determine if such agreements cause an
AAEC in the market based upon the factors listed in section 19(3) of the Act.

VIII. An agreement which creates barriers to entry may also induce improvements in
promotion or distribution of goods or vice-versa. Hence, whether an agreement
restricts the competitive process is always an analysis of a balance between the
positive and negative factors listed in Section 19(3) of the Act.

IX. Accrual of benefits to the consumers which is one of the factors enumerated in
Section 19(3), cannot be viewed only from the perspective of continuous supply
of the tendered product or supply at negotiated price. The procurement should
be at a competitive price, more so when the procurer is a public authority. When
the bids are quoted pursuant to a collusive action by the bidders, even post bid
negotiations cannot guarantee lowest rates because the procurer cannot
ascertain the most competitive price prevalent in the market. Manipulation in the

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 bidding process itself thwarts provision of goods and services by credible players,
who lose out in the absence of conditions which foster competition.

In view of the decisional practices by Competition Authorities across the length and
breadth of numerous judicial orders, it is fair to conclude that examining the horizontal
and vertical agreements on the yardstick of factors mentioned in Section 19(3) has proved
to be vital and decisive in evaluating and determining the overall impact on competition
and both the CCI as well as the Appellate Tribunal(s) have accorded primacy to the these
factors while determining whether or not the agreements in question are anti-competitive
and have an appreciable adverse effect on competition.

Now in this Part II of the article, we will discuss irregularities/violation of principles of

natural justice during Investigation by the DG.

IRREGULARITIES/VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY DIRECTOR

GENERAL (DG) DURING INVESTIGATION

The investigation under the Competition Act by the DG commences from the receipt of
prima facie order under Section 26(1) of the Act passed by the CCI along with a copy of
the information or reference as the case may be along with all other documents or
materials or affidavits or statements which have been filed either along with the said
information or reference or at the time of hearing before the CCI. Thus, the investigation
by the DG is dependent upon the passing of prima facie order by the CCI. In other words,
the DG is under the scheme of the Act not competent to start investigation of its own/suo
moto unlike its predecessor under the MRTP Act.

In terms of the Section 41(2) of the Act, the DG shall have all the powers as conferred
upon the CCI under Section 36(2) of the Act. Besides that, in terms of Section 41(3), the
provisions of Companies Act 1956, i.e. Section 240 and 240A shall apply to an investigation
made by the DG as they may apply to an Inspector appointed under the latter Act. Further,
the Competition Commission of India (General) Regulations 2009 framed under the Act
also state the powers of the DG during the investigation in taking evidence on record.

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Section 36(1) of the Act inter alia provides that the CCI shall be guided by the principles
of natural justice. However, this sub-section does not provide whether the DG during
investigation is also guided by the principles of natural justice or not. Thus, this is a grey
area, why we are saying so because under the scheme of the Act and the Regulations
framed thereunder, there is no set procedure stated which has to be followed by the DG
during investigation. In the absence of the said procedure, the DG has evolved its own
procedure which according to us on various occasions gives rise to certain irregularities
or violates the principles of natural justice during investigation vis-à-vis against the party
which has been enquired into contravening the provisions of the Act. However, in Coal
India Limited vs. Competition Commission of India and Ors.1 (Appeal No. 1/2014 and
several related appeals) decided on 17.05.2016, the COMPAT was spot on in observing
that the Parliament in its wisdom conferred on the Commission and the DG, the powers
which are vested in regular civil courts, and enacted several provisions making compliance
of the principles of natural justice mandatory, and it is therefore, wholly misconceived to
say that CCI functions only as an administrative body and is not required to adhere to the
principles of natural justice and fairness. Placing reliance on and quoting numerous
decisions of the Hon’ble Supreme Court, the Tribunal minced no words in holding that the
functions performed by the bodies like Competition Commission which are clothed with
the power to decide the rights of the parties are quasi-judicial in nature and are bound to
comply with different facets of the principles of natural justice.

Thus, according to us, in view of the above ruling of the COMPAT, the DG is bound to
comply with different facets of principles of natural justice during investigation.

Now we will explain how and in what manner the irregularities/principles of natural
justice are being violated by the DG during the investigation under the following heads:

A. Non-Supply of Documents/Additional Documents of the Informant/Third Party to

the Opposite Party

1
2016 CompLR 716 (CompAT).

7
 B. Recording of Statement on Oath of the Informant/Third Party in the Absence of
Opposite Party

C. Presence of Advocate alongwith the Witness during Investigation before the DG

A. Non-Supply of Documents/Additional Documents of the Informant/Third Party to the

Opposite Party

The DG begins its investigation soon after the receipt of prima facie order from the CCI,
by issuing a probe notice under Section 41(2) read with Section 36(2) asking the
Informant/third party and the parties who have been alleged to have contravened the
provisions of the Act. Generally, it is observed that invariably the DG does not send copy
of prima facie order under Section 26(1) of the Act and other accompanying documents
to the opposite party against whom investigation has been ordered which not only causes
lot of inconvenience to the said party but also delays investigation as the said party has
to obtain such documents from the CCI after making inspection of the record of the case.
These types of irregularities can be avoided by the DG by timely supply of the prima facie
order under Section 26(1) alongwith other related documents as non-compliance thereof
ultimately results in violation of principles of natural justice.

Pursuant to the notice of the DG, the Informant/third party furnishes information as per
the probe notice. However, in practice it has been seen that the information/additional
information submitted by the Informant/third party is not forwarded to the party against
whom the investigation is going on. This results in not only procedural irregularities but
also amount to violation of principles of natural justice. In this regard, the order dated
29.09.2016 passed by the High Court of Delhi in the matter Forech India Ltd. vs.
Competition Commission of India and Ors.2 is significant to mention. In this matter, the
High Court in para 13 to 18 observed as under:

13. The respondents indeed, in the garb of modification, are seeking to wriggle
out of the consent given by them i) to furnish to the petitioner all the documents
of investigation available with the respondents save those with respect to which

2
MANU/DE/2677/2016. (WP(C) No. 11072/2015).

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any party has claimed confidentiality; ii) to give an opportunity to the petitioner
to cross-examine any witness whose oral statement pertaining to the petitioner
has been recorded; iii) to give to the petitioner an opportunity to make a further
statement after copies of the documents have been given to the petitioner and
after the official of the petitioner has been confronted with some of the
documents; iv) to give to the petitioner the orders passed on the application of
any other person claiming confidentiality with respect to any document /
material.

14. The respondents, through while seeking modification of their statement to

give to the petitioner orders on the application of any other person claiming
confidentiality with respect to any document / material have given reasons
therefor, for seeking modification of their statement to furnish to the petitioner
all documents of investigation with the respondents save those with respect to
which any party has claimed confidentiality, have not given any reasons
whatsoever save for expressing "difficulties" therein and which reasons were
shown to the undersigned subsequently in confidence.

15. I am not satisfied with the reasons shown to me in confidence for

withdrawing the consent given on 2nd December, 2015 to furnish to the
petitioner all documents of investigation available with the respondents save
those with respect to which any party has claimed confidentiality.

16. Since the order disposing of the petition was not adjudicatory order and was
without prejudice to the rights and contentions of the respondents and without
constituting a precedent for the respondents, I do not deem it appropriate to in
this application for modification of the said order enter into an adjudicatory
exercise as the counsels have argued. The same would clearly be beyond the
scope of modification and even beyond the scope of review. Reference in this
regard can be made to the order dated 16th September, 2016 of the Division
Bench of this Court in Review Petition No.542/2014 in W.P.(C) No.3821/2014
titled Rosa Power Supply Co. Ltd. Vs. Union of India. I therefore decline to
adjudicate, whether the respondents under the law are required to at the stage
of investigation before the DG of CCI supply all material to the person being
investigated against or not.

17. Though the respondents on 1st April, 2016 and as recorded in the order of
that date reproduced above further agreed to grant full opportunity to the
petitioner including of adducing evidence and cross-examining witnesses before
the CCI also and it appeared that the same offered a viable solution but the
same was not acceptable to the senior counsel for the petitioner. In the light of

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 consent earlier given by the respondents in this regard and to withdraw which
no satisfactory reason is given, the same cannot be permitted to be withdrawn
without consent of the petitioner.

18. The modification of that part of the order sought is thus declined.

The above order of the High Court was challenged by the CCI.3 The Division Bench of the
High Court in Competition Commission of India vs. Forech India Ltd.4 vide order dated
22.01.2020 observed as under:

13. We are in complete agreement with the observations made by the learned
Single Judge as reproduced hereinabove. There is no justification to modify the
impugned order in the light of the statement made by learned counsel for the
appellant/CCI on 2.12.2015, as noted in the order dated 2.12.2015. Thus, even
on merits, no case for interference is made out by the appellant/CCI.

14. Accordingly, the application for seeking condonation of delay is dismissed

as meritless and as a sequel thereto, the appeal and the pending application
are also dismissed.

The CCI challenged the order of Division Bench of the High Court dated 22.01.2020 in SLP
No. 9018-19/2020 before the Supreme Court. The Supreme Court vide recent order dated
28.01.2021 while dismissing the petition, kept the question of law open.

In Alkem Laboratories Limited vs. Competition Commission of India5 (Appeal Nos. 9, 14

and 15 of 2016) decided on 10.05.2016, finding merit in the submissions of the Appellant
the COMPAT opined that:

a) A perusal of the DG Report showed that DG did not enclose some of the essential
documents submitted by Appellant as a part of core defense during the period of
investigation. On conducting inspection of the CCI and DG case records, the
Appellant found that the DG failed to enclose all the relevant information and

3
LPA No. 97/2017.
4
MANU/DE/1912/2020.
5
2016 CompLR 757 (CompAT).

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 material gathered during investigation from other Opposite Parties and Informant
along with the Report. By submitting incomplete documents and more specifically,
ignoring evidences supporting the defense of Appellant, the DG caused bias in the
minds of the members of CCI and prejudiced the CCI against the Appellant.

b) Regulation 20(4) provides that the report of the Director-General shall contain his
findings on each of the allegations made in the information or reference, as the
case may be, together with all evidences or documents or statements or analyses
collected during the investigation. The conduct of the DG was a clear breach of
Regulation 20(4) of the CCI (General) Regulations and violative of principles of
natural justice, thereby rendering the entire Investigation Report a nullity in law.

Thus, from the above chronology of the Forech India case (supra) and the observations
made by COMPAT in Alkem Laboratories (supra), it is very crucial to note that the
documents submitted by the Informant/third party must be supplied to the party against
whom the investigating is going on and non-supply thereof may result in violation of
principles of natural justice.

B. Recording of Statement on Oath of the Informant/Third Party in the Absence of

Opposite Party

The Competition Act and the Regulations framed thereunder have empowered the DG to
record statement on oath inter alia of the Informant/third party before it. The DG almost
on no occasion informs the opposite party against whom the investigation is being
conducted regarding recording of statement on oath of the Informant/third party. Even
thereafter, the DG does not send the copy of that statement to the said opposite party
for availing the cross-examination of said witness by it. Thus, there is no cross examination
of the said witnesses done by it. Thus, it not only creates irregularities but also violates
the principles of natural justice.

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In Himachal Pradesh Society of Chemist & Druggist Alliance and Ors. vs. Rohit Medical
Store6 (Appeal No. 58/2015) decided on 13.01.2016, accepting and concurring with the
contentions and submissions of the Appellant pertaining to violation of principles of
natural justice by DG, the COMPAT opined and inferred as under:

a) The DG relied upon the statement made by Respondent No. 1 and the unverified
documents produced by him without making any attempt to verify the correctness
and authenticity thereof and without giving Appellants an opportunity to cross
examine him.

b) The DG relied upon his personal knowledge for recording a finding against the
Appellants which is contrary to the basic principle that 'no one should be a judge
in his own cause'.

c) The finding recorded by the DG on the issue of violation of Section 3(1) read with
Section 3(3)(b) of the Act was perverse because he relied on the unsubstantiated
statement made by Respondent No. 1 and fabricated documents etc. produced by
him.

In the matter of Coal India Limited vs. Competition Commission of India7 (Appeal No.
81/2014) decided on 20.03.2017, the COMPAT observed and found that the Appellant
failed to demonstrate any prejudice and violation of principles of natural justice arising
from the absence of the counsel and that the CCI passed a reasoned order. The issue
arising before the COMPAT was whether the deposition of one Shri Mukherjee, GM (S &
M - Commercial) of the Appellant company (hereinafter ‘deponent’) recorded without
permitting his legal representative to accompany him, was in violation of the principles of
natural justice and required annulment. The Appellant sought expungement of Shri
Mukherjee’s statement alleging violation of principles of natural justice as it was recorded
in the absence of the counsel of the Appellant. Rejecting the contentions of the Appellant

6
2016 CompLR 304 (CompAT).
7
2017 CompLR 447 (CompAT).

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and concurring with the findings and submissions of the CCI, the Appellate Tribunal
observed and opined that:

a) By Appellant’s own admission, its counsel was allowed to remain present in the
premises and the same was duly noted by the CCI.

b) The DG had given permission to the deponent to consult the counsel for queries
on any point of law.

c) The Appellant did not question the accuracy of the submissions made by the
deponent.

d) The Appellant did not specify as to in what way, the presence of the counsel would
have assisted the deponent in responding to the queries raised by the DG.

e) There was no grievance of the deponent being pressurized or threatened, to

obtain incriminating material.

f) The Appellant had sufficient opportunity before the Commission to present its
case and could have controverted the submissions of the deponent but at no stage
he pleaded prejudice due to absence of counsel.

In view of the above-stated facts and circumstances of the case, the Appellate Tribunal
was of the view that principles of natural justice cannot be straitjacketed. There can be
flexibility in interpreting principles of natural justice when no prejudice is caused and the
facts of this case warranted such flexibility. The violation claimed by the Appellant was
only in form and not in substance.

The High Court of Delhi held in Google Inc. v. Competition Commission of India8 that:

8
2015 CompLR 391 (Delhi).

13
 a) The powers of the DG during investigation are far more sweeping and wider than
the power of investigation conferred on the Police under Cr.PC. While the Police
has no power to record evidence on oath, DG has been vested with such a power.

b) Not only statement on oath of witnesses summoned during the course of

investigation is recorded, the witnesses are also permitted to be cross-examined
including by the Informant and which evidence as part of the DG report forms the
basis of further proceedings before the CCI. Thus, while in investigation by Police
under the Cr.PC, the rule of audi alteram partem does not apply, there is no such
embargo on the DG and CCI.

However, we are of the view that this power of examining on oath to the DG during
investigation may not have been given. In this regard, we have written an article titled as
“Need for Examining the Powers of the Civil Court Conferred on the Director General
during Investigation (Section 41(2))”.9 In this article, we have concluded that:

“In view of the above analysis of the Raghavan Committee, various enactments and the
Orders of the Supreme Court, it is amply clear that inquiry conducted by the CCI and
investigation conducted by the DG as per the Orders of the CCI are not synonymous. It is
also clear that, while inquiry under the Competition Act, the CCI has certain powers of Civil
Courts (trappings of courts), being an adjudicator, inter alia, of substantive provisions,
Section 3 (prohibition of anticompetitive agreements) and Section 4 (prohibition of abuse
of dominance). It has also come out that investigation by the DG, as per the order of the
CCI, under the Competition Act, cannot record evidences as its function is, inter alia, to
collect evidences and the evidences have to be recorded by the CCI during inquiry as was
being done by the MRTPC under the MRTP Act. Thus, the same power of Civil Courts,
including recording of evidences, of the CCI (Section 36(2)) to DG during investigation as
per Section 41(2) is coming in the way of fair trial which is not consistent with the principles
laid down under Article 13 read with Article 21 of the Constitution. Thus, it is suggested
that Section 41(2) along with the relevant CCI General Regulations may be amended

9
Available at: https://www.linkedin.com/posts/lex-indis-law-offices_dgs-power-of-examination-activity-
6704651409066905601-WRWd.

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accordingly so that this infirmity to fair trial in the Competition Act and the Regulations
framed therein may be overcome.”

C. Presence of Advocate alongwith the Witness During Investigation before the DG

Whether a person summoned for investigation (and whose statement may be recorded)
has the right to be represented by an advocate merely because the authority investigating
is empowered to take evidence, was the question before the High Court of Delhi in
Competition Commission of India and Anr. vs. Oriental Rubber Industries Private Limited.10
The Division Bench of the High Court vide order dated 24.05.2018 after analyzing the
situation inter alia in US and EU in para 22 and 23 observed as under:

22. Since the DG's powers are so far-reaching and the consequences of an
investigation by the DG so drastic, it would necessary that the right of a
party/person to be accompanied by an advocate during the investigations by the
DG, when the latter is collecting or recording evidence, not be taken away. This
Court, therefore, finds that the Learned Single Judge's reliance on Google (supra)
as well as the decision in Punjab National Bank (supra), to hold that when the
consequences of an enquiry or investigation are severe and drastic, the right of
a person to be accompanied or represented by an advocate cannot be
extinguished, stands to reason and cannot be faulted with.

23. At the same time, this Court is alive to the concerns raised by the CCI that if
parties are allowed to be accompanied or represented by advocates in
investigations before the DG, the efficacy of the investigation may be hampered
and the collection of evidence may become onerous or cumbersome. The concern
of CCI, furthermore that during the course of investigation and recording of
evidence of a witness, the active participation of a counsel may not be conducive
to the larger public interest in promoting competition, because the likelihood of
a counsel cautioning (either orally, or through non verbal communication) a
witness from making or refraining from making a statement. In that regard, the
Commission or the DG, as the case may be, lay prescribe, in the order, during the
course of proceeding, when a request for representation by counsel is made, an
appropriate procedure to be followed during such investigation, where the
counsel may be allowed to accompany the party, but not continuously confer
with him when the DG is taking his or her testimony or asking questions.

10
251 (2018) DLT 137.

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 Therefore, while the party is allowed his right to be accompanied by an advocate,
the DG's investigations are not unnecessarily hindered. The Commission having
regard to the appropriate best practices across jurisdictions in antitrust matters
may formulate such procedures and incorporate them in regulations; till then, it
is open to the DG to make appropriate procedural orders. This court feels
additionally that this precautionary note is essential, because often there can be
situations where the prominent presence of a counsel might hinder questioning
of the witness by the investigating officers or the Director General. Apart from
non-verbal communication, the counsel might restrict the element of surprise
that is essential when collecting such evidence. Therefore, the DG shall ensure
that the counsel does not sit in front of the witness; but is some distance away
and the witness should be not able to confer, or consult her or him. The Court
does not deem it necessary or appropriate to say more on this aspect of the
matter, leaving it to the Commission to decide the appropriate course.

Pursuant to the above order of the High Court, the CCI vide Notification No. L-3(2/Regln.-
Gen. (Amdt.)/2018/CCI dated 06.12.2018 amended the Regulations 2009 by incorporating
Regulation 46A- Authorizing an Advocate to Accompany any Person Summoned by the
Director General. Regulation 46A reads as under:

“(1) An Advocate may accompany any person summoned by the DG to appear before him,
subject to the following conditions, namely –

a) The Advocate shall not be allowed to accompany such person, unless a request in
writing accompanied by a Vakalatnama or Power of Attorney is duly submitted to
the DG, prior to commencement of the proceedings.

b) The Advocate shall not sit in front of the person so summoned.

c) The Advocate shall not be at a hearing distance and shall not interact, consult,
confer or in any manner communicate with the person, during his examination on
oath.

(2) No misconduct on the part of the Advocate, accompanying the person summoned
during continuance of his presence before the DG shall be permitted. In case of any
misconduct, the DG for reasons to be recorded in writing shall forward a complaint to the
Commission. The Commission, if satisfied with the complaint of the DG, may pass
necessary order debarring the Advocate, guilty of misconduct, from appearing in the
proceedings before the DG as well as before the Commission in future or till such time as
the Commission deems necessary.

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3) In the event of the misconduct being committed by any Advocate, the Secretary, if so
directed by the Commission, shall forward a complaint to this effect in writing to the Bar
Council of the State of which the Advocate is member.

Explanation – For the purposes of this Regulation, the term ‘Misconduct’ shall have the
same meaning as assigned to it in explanation to sub-regulation 4 of Regulation 46.”

The said Regulation 46A was challenged before the Madras High Court in Writ Petition (C)
No. 34313 of 2018 and said Regulation 46A(2) was stayed until further orders on
04.01.2019. However, very recently, the High Court of Gujarat in Vardayani Offset vs.
Competition Commission of India,11 has recognized the validity of Regulation 46A by
observing that under the said regulation, if permission is sought to engage an advocate,
the same can be granted.

In this regard, it is also relevant to refer to the observations made by the COMPAT in
Alkem Laboratories Limited vs. Competition Commission of India12 wherein the Appellate
Tribunal concurred with the submissions of the Appellant and opined that:

a) Admittedly, the DG adopted a very unusual practice of not allowing any advocate
accompany the client/deponent(s) during oral deposition before him. The
advocates for the Appellant orally requested the DG to permit them to assist the
deponent during the oral deposition process, but the DG declined the request.

b) The Appellant and its Advocates noticed that a gross discrimination in the
procedure of oral testimony on oath was adopted by the DG by permitting the
Informant's Advocate to be present during the oral testimony of the Informant
two days before the oral deposition of Advocate of the Appellant. The presence of
the Informant's Advocate as well her interpreting the communication between the
DG and the Informant from Malayalam to English and vice versa would lead one
to wonder if the Informant's answers were his own or driven by the Advocate. This
act of the DG in allowing the counsel of the informant during the oral deposition
made the entire investigation report a nullity in law as against the Appellant and

11
MANU/GJ/1046/2020 (R/Special C. App. No. 8101 of 2020 filed against CCI order in Case No. 32/2018).
12
Supra note 5.

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 its functionaries because the DG seemed to have acted with bias and in the
process prejudiced the CCI against the Opposite Parties including the Appellant.

CONCLUSION

By way of this Part II of the Article, we dealt irregularities/violation of principles of natural

justice in the light of investigation which is commenced and carried out by the DG on the
receipt of prima facie order passed by the CCI under Section 26(1) of the Act alongwith
the copy of information or reference, as the case may be, and other documents and
materials filed therewith or at the time of hearing before the CCI. Under the scheme of
the Act, the DG can start investigation only on the order/direction by the CCI and not on
its own. In terms of the Act as well as Regulations framed thereunder, the DG has all the
powers as conferred upon the CCI under Section 36(2) including power to take evidence
on record during investigation. The Act provides that CCI shall be guided by the principles
of natural justice, however, the Act as well as the Regulations framed under are silent on
whether DG during investigation should also be guided by the principles of natural justice
and there is no prescribed procedure for the DG to follow while conducting investigation.
This is the grey area which forms the crux of this article. In the absence of any procedure,
though the DG has evolved its own procedure on case-to-case, however, on various
occasions, the procedure adopted by the DG has given rise to certain irregularities or
violated the principles of natural justice vis-à-vis the opposite party against which the
investigation is carried out.

We categorized the violation of principles of natural justice by DG under three broad

heads and highlighted each of these violations with reference to case laws. As to the
violation under first head, i.e. non supply of documents/additional documents to opposite
party, it has been observed in numerous cases that the DG more often than not fails to
send copy of prima facie order under Section 26(1) and accompanying documents to the
opposite party thereby causing lot of inconvenience to the said party and leading to delays
in investigation. The story does not end here. Pursuant to DG notice, the information/
additional information furnished by the Informant/third party is not submitted to the
opposite party which results in procedural irregularities and violation of principles of

18
natural justice. The DG must ensure that his report contains findings on each of the
allegations made in the information or reference, as the case may be, together with all
evidences, documents, statements or analyses collected during the investigation.

Regarding violation under second head, i.e. recording of statement on oath in absence of
opposite party, it is a sad state of affairs that the DG does not give opportunity to the
opposite party to record statement on oath of the Informant/third party and also does
not send the copy of that statement to the said opposite party, thereby depriving it from
cross-examining the witness of the Informant/third party. By denying the opposite party
a level playing field, the DG not only creates irregularities but also violates the principles
of natural justice. The DG must not rely upon unverified and fabricated documents and
unsubstantiated statements produced and made by Informant/third party without
making attempt to verify the correctness and authenticity thereof and without giving
opposite party an opportunity to cross examine the former. The DG also should not rely
upon his personal knowledge for recording a finding which is contrary to the principle that
'no one should be a judge in his own cause'.

Lastly, so far as the violation under third head is concerned, the same was highlighted by
the High Court of Delhi in CCI v. Oriental Rubber Industries (supra) wherein the Court while
voicing support for the right of the person summoned for investigation to be represented
by an advocate, left the issue open for the Competition Commission to decide the
appropriate course. Pursuant to the order passed by the High Court, vide amendment
dated 06.12.2018, Regulation 46A was inserted in the CCI (General) Regulations 2009. The
said Regulation authorizes the DG to allow the person summoned to be accompanied by
an advocate, subject to the conditions prescribed in clause (1) of the Regulation. In other
words, if the person summoned for investigation seeks permission to engage an advocate,
the same can be granted. The DG shall not adopt discrimination by way of permitting
advocate of the Informant to be present during oral testimony and denying the same
opportunity to advocate of the opposite party. As rightly observed by COMPAT in Alkem
Laboratories ruling, such an act on the part of DG makes the entire investigation report a
nullity in law and is violative of the principles of natural justice.

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In view of the prevailing practice by the DG as to violation of principles of natural justice,
it is highly recommended that to fill up the grey area, the Act or the Regulations framed
thereunder are amended to either add provision(s) prescribing the procedure to be
followed by the DG in accordance with the principles or natural justice, or insert
provision(s) requiring the DG to abide by the principles of natural justice while conducting
investigation against the party alleged to have contravened the provisions of the Act.

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 Disclaimer

While Lex Indis Law Offices has paid meticulous attention to the contents of this material to
ensure its accuracy, we assume no responsibility for any error, factual or legal, which might have
crept in. This article has been published for academic research and private circulation only.
Information in this material does not constitute rendering of legal advice. Such information must
not be construed as solicitation of work as expressly prohibited by the Bar Council of India.

Authors

Sunil Kumar Gandhi, Senior Partner; Dr. Vijay Kumar Aggarwal, Senior Consultant, Head,
Competition Law and Policy; Sankalp Jain, Associate; Anmol Vashisht, Associate of Lex Indis Law
Offices.

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