CONTINUOUS INTERNAL ASSESSMENT: COMPETITION LAW

COMPETITION COMMISSION OF INDIA VS. STEEL

AUTHORITY OF INDIA LIMITED
CASE ANALYSIS

Submitted To: Submitted By:

MR. V. SURYANARAYANA RAJU K IRTI

SHARMA

Assistant Professor Roll No. 81, Section-C

Faculty in Competition Law Semester: VII

ID: 1920192095

HIDAYATULLAH NATIONAL LAW UNIVERSITY

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 NAYA RAIPUR, CHHATTISGARH

DECLARATION OF ORIGINALITY
I, Kirti Sharma, hereby undertake that this work titled “Competition Commission of India vs.
Steel Authority of India Limited – Case Analysis” has been carried out by me independently
and this is my original work. I certify to its originality.

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 COMPETITION COMMISSION OF INDIA VS. STEEL AUTHORITY OF
INDIA LIMITED – CASE ANALYSIS
INTRODUCTION
The landmark case of Competition Commission of India vs. Steel Authority of India
Limited1 is considered to be an analytical as well as a descriptive case with respect to the
importance of the Competition Act, 2002 (hereinafter referred to as ‘Act’). The case acts as
an authority, bringing an end to the much debated interpretation of the provisions of the Act,
highlighting the distinction between the scope and functioning of the Competition Appellate
Tribunal (hereinafter referred to as ‘Tribunal’) and the Competition Commission of India
(hereinafter referred to as ‘Commission’).

FACTS
A suit was filed before the Commission by Jindal Steel & Power Ltd. (hereinafter referred to
as ‘JSPL’) against M/s. Steel Authority of India Ltd. (hereinafter referred to as ‘SAIL’). The
case was filed under Section 19, read with Section 26(1) of the Act, alleging signing off an
exclusive supply agreement with Indian Railways for the supply of rails. It was contended
that Section 3 and 4 of the Act were infringed as the agreement was anti-competitive and
SAIL exploited its influential title in the market. Despite the fact that SAIL demanded
sufficient time to put forward all the relevant information, the Commission pronounced that a
prima facie case has been established which entails an investigation by the Directorate
General (hereinafter referred to as ‘DG’).

An appeal before the Tribunal was filed by SAIL against this order on one hand, and on the
other hand the Commission contended for the prosecution of the matter. According to the
latter’s contention, firstly, its order amounted to a basic duty to carry out a probe, and
secondly, Section 53A of the act was not applicable on the order.

The Commission’s contention was quashed by the Tribunal stating that the same is neither an
essential nor an authoritative party in the prosecution. The judgment was backed by the right
to reason, not to be infringed by any individual or corporation. Thus, Section 53A was

1
“Competition Commission of India vs. Steel Authority of India Limited, (2010) 10 SCC 744”

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concluded to be pertinent. Moreover, additional period was accorded to SAIL to file its
response. Subsequently, an appeal before the Supreme Court was filed against this order.

APPEAL BEFORE THE TRIBUNAL VIS-À-VIS SECTION 53A

With regards to Section 53A, the intention of the legislature to consider the ‘right to appeal’
as a statutory right and not a right with an assumed existence has been explicitly
demonstrated. The reasoning stated by the SC behind the admissibility of appeal of an order
of Section 26(2) under Section 53A is that sub-clause (2) is of decisive nature as it brings to
an end the proceedings determining the rights and duties of the concerned parties. Further, the
Commission under Section 26(1) does not carry out any adjudicatory function and merely
passes merely administrative direction, investigatory in nature.

It is evident that Section 26(3) clearly marks a demarcation between the intended meanings of
sub-clauses (1) and (2) by imposing a duty on the DG to submit a report as per the findings of
the investigation directed to be conducted by the Commission. Despite such clarification, the
Supreme Court held that the text of Section 53A and terms such as direction, order or
decision must be read as a whole and not disjunctively.

DUTY TO ISSUE NOTICE

It was pronounced by the SC that the Commission has no obligation with regards to the
issuance of a notice at the prima facie stage of any investigation. Even when Section 26(1) is
comprehended with Regulation 17(2), there is no point highlighting the said obligation. Such
an obligation has been expressly put forward by the Act, as the concerned obligation is
imposed after the Commission receives the report from the DG. Moreover, it was held the
nature of the Commission’s duty is interrogational and regulatory which would have no
consequential effect on the rights of the parties. This nature of duty marks the demarcation
between duty imposed by Section 26(1) and 26(2) as the latter is of adjudicatory nature.2

DUTY TO POSTULATE REASONS

The SC upheld the order of the tribunal obliging the Commission to back its orders, under
Section 26(1), with reasons, (i) articulating the presence of a prima facie case, (ii) instructing
the DG to conduct investigation in pursuance of the prima facie case, and (iii) in pursuance of
the determination of the rights and duties of the concerned parties.

2
“Competition Commission of India vs. Steel Authority of India Limited, Judgement, ¶ 91, 92.”

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The significance of a reasoned order is reflected at the time of any appeal against such order. 3
With regards to the present Act and case, the significance of providing reasoning can be
witnessed by the fact that while appealing against the final order, the parties have been
accorded with the right to challenge the directions passed by the Commission.

The ambiguity of the verdict of the Court is reflected in the fact that on one hand, the Court
held that an order under Section 26(1) would not mandate reasoning as it is a mere direction
simpliciter or a mere fact-finding process. But, on the other hand, the Court postulates the
importance of a reasoned order and points out that when at the stage of appeal against the
final order, the grounds of the prima facie view are being challenged, the same view does not
remain a mere direction simpliciter.

THE COMMISSION - A PROPER PARTY

The SC differed with the decision of the Tribunal on the aspect of considering the
Commission a necessary party in cases filed under Section 19 of the Act. As per the Court’s
reasoning, the Commission being a regulatory body must be a proper party in the case.
Moreover, as laid down in the case of Brahmdutt vs. Union of India4 that advisory and
regulatory roles must not be played by a single body, the Court laid emphasis on the
Commission’s presence before the Tribunal, in order to strengthen the role of the
Commission in being a watchdog.5

INTERIM ORDERS
The Act creates a clear distinction between the meanings of the terms ‘inquiry’ and
‘investigation’, where the former is definitive in nature and the latter is tentative. Thus, on the
question of the Commission passing interim orders under Section 33, the Court took the view
that such a power must be exercised with caution and in rare cases. This can be backed by the
observation that Section 33 consists of the term ‘inquiry’ and as per Regulation 18(2), the
term must be exercised only after a direction to conduct investigation has been passed to the
DG.6

3
“Competition Commission of India vs. Steel Authority of India Limited, Judgement, ¶ 97.”
4
“Brahmdutt vs. Union of India, (2005) 2 SCC 431”
5
“Competition Commission of India vs. Steel Authority of India Limited, Judgement, ¶ 113.”
6
“Competition Commission of India vs. Steel Authority of India Limited, Judgement, ¶ 115.”

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But, it must be taken into cognizance, that such a reasoning has been formulated with respect
to an ex-parte injunction exclusively. The following three conditions must be fulfilled while
passing the concerned under Section 33 of the Act–

a. “expressly record its satisfaction that an act in violation of the provisions is

committed, continues to be committed or about to be committed,
b. need to issue restraining order, and
c. there would be irreparable damage to the party, or adverse effect on competition in
the market.”

The reasoning to adopt different standards for passing a prima facie opinion in case of
Section 26(1) and an interim order in case of Section 33 of the Act has been relied upon the
judgment of Morgan Stanley Mutual Funds vs. Kartik Das 7, which deals with the Consumer
Protection Act, 1986 and not the Competition Act, 2002. Hence, the relying authority lacks
validity.

POWERS BESTOWED ON THE COMMISSION

The order dated 9th September, 2010 declares the direction issued under Section 26(1) to be
non-appealable, with no mandate of any reasoning. The only requirement is of a prima facie
view, which in turn would empower the Commission to conduct investigation in the matter. It
also possesses the power to choose to issue a notice of hearing to the parties in case of a
prima facie view under Section 26(1), depriving the concerned right to dispute any allegation
made. Under Section 33 of the Act, the Commission has been bestowed with the power to
analyse the necessity of summoning the parties prior pronouncing any interim order. Hence,
the judgment acts as an evidence of the fact that roles such as advisory, regulatory,
interrogational and adjudicatory are played by the same authority, the Commission.8

CONCLUSION
The case correctly supported the spirit of the legislation and backed the Act's purpose, which
is to safeguard economic freedom and defend consumer interests. This will significantly
shape India's competition legal landscape.

7
“Morgan Stanley Mutual Funds vs. Kartik Das, 1994 SCC (4) 225”
8
“Competition Commission of India vs. Steel Authority of India Limited, Judgement, ¶ 126.”

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