G.S. Singhvi, J. (Chairman) and Rajeev Kher, Member

MANU/TA/0025/2016
IN THE COMPETITION APPELLATE TRIBUNAL

NEW DELHI
Appeal No. 05 of 2016
Decided On: 10.05.2016
A.N. Mohana Kurup and Ors. Vs. Competition Commission of India and Ors.
Hon'ble Judges/Coram:
G.S. Singhvi, J. (Chairman) and Rajeev Kher, Member
Counsels:
For Appellant/Petitioner/Plaintiff: Rajshekhar Rao, Harshwardhan and Sajith P. Warrier,
Advocates
For Respondents/Defendant: Jaiveer Shergill, Advocate
ORDER
G.S. Singhvi, J. (Chairman)
1 . The questions which arise for consideration in this appeal filed against order dated
01.12.2015 passed by the Competition Commission of India (for short, 'the
Commission') in Case No. 28 of 2014 are whether the Commission could, without
recording a finding that All Kerala Chemists and Druggists Association (Opposite Party
No. 3 before the Commission and Respondent No. 5 herein), of which the appellants are
the President and the Secretary respectively with effect from 11.08.2013, has
contravened the provisions of the Competition Act, 2002 (for short, 'the Act') or of any
rule, regulation, order made or direction issued thereunder direct the Director General
to investigate the role of the appellants in the contravention allegedly committed by
Respondent No. 5 and finally impose penalty on Appellant No. 1 @ 10% of the average
of his income of preceding three financial years and also direct Respondent No. 5 not to
associate the appellants with its affairs including administration, management and
governance for a period of two years albeit without issuing action oriented notice and
giving them opportunity of hearing.
2 . Respondent No. 2, P.K. Krishnan, who is proprietor of Vinayaka Pharma, Palakkad
District, Kerala submitted complaint dated 06.01.2014 to the Commission and prayed
that action may be taken against M/s. Alkem Laboratories Limited (Opposite Party No. 2
before the Commission and Respondent No. 4 herein) and Mr. Paul Madavana
(Respondent No. 3 herein) for refusing to supply the medicines despite his appointment
as a stockist vide letter dated 14.11.2013. On being asked by the Secretariat of the
Commission, Respondent No. 2 filed an information under Section 19(1)(a) of the Act
with similar prayer but the same was found to be defective. Respondent No. 2 re-filed
the information, which was registered as Case No. 28 of 2014.
3. After hearing Respondent No. 2, the Commission passed an order dated 29.09.2014
under Section 26(1), whereby the Director General (DG) was directed to cause an
investigation into the matter. The Commission noted that the informant (Respondent
No. 2 herein) had made allegation only against Respondent No. 4 and did not implead
Respondent No. 5 as a party despite the fact that the NOC demanded by Respondent No.
4 was to be issued by that respondent and opined that both the respondents have
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contravened Section 3 of the Act. The Commission also directed the DG that in case of
contravention, he should also investigate the role of the persons, who at the time of
contravention were in-charge of and were responsible for the conduct of the business of
the contravening entity. For the sake of reference, the relevant portions of order dated
29.09.2014 are reproduced below:
"Order under Section 26(1) of the Competition Act, 2002
1. Shri P.K. Krishnan (the "Informant") Proprietor of Vinayak Pharma has filed
the instant information under Section 19(1)(a) of the Competition Act, 2002
(the "Act") against Shri Paul Madavana, Divisional Sales Manager of M/s. Alkem
Laboratories Limited, Kerala (the "Opposite Party") alleging, inter alia,
contravention of the provisions of Section 4 of the Act in the matter.
2. to 2.4 *** *** *** ***
2.5 The facts of the case, as detailed above, reveal that the Opposite Party has
refused to appoint the Informant as stockist because Informant purportedly
failed to obtain NOC from AKCDA. Even if it can be said that the conduct of
Opposite Party in refusing to deal with Informant emanated from its anxiety to
avoid punitive action from AKCDA and to protect its business interest the same,
nonetheless, falls foul of section 3(4)(d) read with section 3(1) of the Act.
Furthermore, although the Informant has not made AKCDA party in this case the
refusal of Opposite Party to appoint Informant as stockist essentially arises
from the anticompetitive conduct of AKCDA requiring the pharmaceutical
companies not to appoint any person as stockist unless he obtains NOC from
the association. In Case No. 30 of 2011 the Commission has found such
practice on behalf of AKCDA and AIOCD violative of section 3(3)(b) read with
section 3(1) of the Act as it controlled and limited the supplies of pharma
products in the market.
3. In the light of the above analysis, the Commission is of the prima facie view
that the Opposite Party and AKCDA have contravened the provisions of Section
3 of the Act in the matter and this is a fit case for investigation by the Director
General (DG).
4 . Accordingly, under the provisions of 26(1) of the Act, DG is directed to
cause an investigation into the matter and to complete the investigation within
a period of 60 days from receipt of this order.
5 . During the course of investigation, if involvement of any other party is
found, DG shall investigate the conduct of such other parties who may indulge
in the said contravention. In case of contravention, DG shall also investigate
the role of the persons who at the time of such contravention were in-charge of
and responsible for the conduct of the business of the contravening entity.
6 . Nothing stated in this order shall tantamount to final expression of opinion
on merits of the case and the DG shall conduct investigation without being
swayed in any manner whatsoever by any observations made herein."
(Emphasis supplied)
4. The Joint Director General (for short, the 'Jt. DG') to whom the investigation appears
to have entrusted by the DG, issued notices/probe letters to Respondents Nos. 2 to 5

requiring them to furnish the specified information/documents. Similar notices were
issued to M/s. Merck Limited, M/s. Mankind Pharma Ltd., M/s. Cadila Healthcare Ltd.
(Zydus), M/s. Glenmark Pharmaceuticals Ltd., M/s. Sunanda Associates, M/s. C.M.
Corporation (C&F Agents of M/s. Merck Ltd.) and BSNL, Palakkad & Trivandrum. The Jt.
DG also issued summons to Respondent No. 2 Shri P.K. Krishnan, Respondent No. 3 -
Shri Paul Madavana (Divisional Sales Manager of Respondent No. 4), Appellant No. 1 -
Shri A.N. Mohana Kurup, Shri J.S. Shinde (President of All India Organisation of
Chemists & Druggists), Managing Directors/Authorised Representatives of M/s. Merck
Limited, M/s. Lividus Pharmaceuticals Ltd., M/s. Glenmark Pharmaceuticals Ltd. and
M/s. Mankind Pharma Ltd. and recorded the statements of the Informant (Respondent
No. 2 herein), Respondent No. 3, Appellant No. 1 and three others, who responded to
the summons.
5 . After completing the investigation, the Jt. D.G. submitted report dated 31.03.2015.
In Chapter-5 of the report, the Jt. DG identified the following issues:
"(i) Whether AKCDA (OP-3) is compelling the Pharma companies to seek "NOC"
before appointment of new Stockists/Distributors. If reply is in affirmative, then
whether the said conduct amounts to refusal to deal and hence hit by the
provisions of the Competition Act, 2002.
(ii) Whether the allegations of the IP against OP-2 (M/s. Alkem Laboratories
Ltd.) regarding practice of the requirement of "NOC" from OP-3 (AKCDA) prior
to appointment of stockists by pharmaceutical companies is substantiated by
evidences. If so, whether such arrangement between OP-2 and OP-3 violates
provisions of the Competition Act, 2002.
(iii) Whether the IP has concealed/suppressed any material facts before the
Commission at the time of filing the information against the OP-2.
(iv) In the event of investigation concluding contravention of the provisions of
the Competition Act, 2002, identification of persons who are responsible for the
said conduct."
6 . The Jt. DG analysed the documentary and oral evidence collected/recorded during
investigation, recorded findings with reference to the four issues identified in Chapter-5
of the report and recorded the following conclusions:
"9.1 Investigation has concluded that the conduct of OP-2 of refusing to deal
with the IP in the absence of an NOC from AKCDA (OP-3 can be construed to be
an arrangement/agreement being practiced between OP-2 and OP-3, and as
such OP-2 has contravened the provisions of Section 3(1) of the Competition
Act, 2002.
9.2 Investigation has also concluded that OP-3 (AKCDA) as an association of
stockists and distributors has been following a practice of NOC necessarily
required to be taken from it for appointment of a new/additional stockiest
which has the effect of limiting and controlling the supply of drugs and
medicines in Kerala, apart from being an entry barrier, thereby contravening the
provisions of Section 3(3)(b) read with Section 3(1) of the Competition Act,
2002.
9.3 Investigation has concluded that the IP has concealed/suppressed material
fact before the Hon'ble Commission, thereby contravening the provisions of

Section 45 of the Competition Act, 2002."
7. In paragraph 8.2 of his report, the Jt. DG noted that Respondent No. 5 is a society
registered under the Travancore Cochin Literary, Scientific and Charitable Societies
Registration Act, 1955 and in terms of the Memorandum of Association, all its affairs are
required to be managed by the Executive Committees at district and state levels, which
are democratically elected once in three years. In paragraph 8.2.1, the Jt. DG extracted
the particulars of the members of the Executive Committee elected for the period from
11.08.2013 to 30.06.2016 and also noted that the election was conducted by the Chief
Election Officer/Commissioner as per order dated 05.09.2012 passed by Sub-Judge,
Ernakulam in O.S. No. 355 of 2009 and O.S. No. 414 of 2010. In paragraph 8.2.2, he
referred to letter dated 21.03.2015 sent by Respondent No. 5 in which it is said to have
mentioned that the appellants and Shri O.M. Abduljaleel were the key persons and
concluded that they took very active role apart from Shri O.M. Abduljaleel. For the sake
of reference, these three paragraphs are reproduced below:
"8.2 In the said matter, it has also been observed that All Kerala Chemists &
Druggists Association (AKCDA), OP-3 is a Society registered under the
Travancore Cochin Literary, Scientific and Charitable Societies Registration Act
XII of 1955 with registration No. ER21 of 1973 on 27th March, 1973 and as
amended at the one day general council of 21st February, 2007 and in terms of
its Memorandum of Association, all affairs of the Association shall be managed
by the respective Executive Committees at district and State levels elected
democratically, once in 3 years.
8.2.1 As per the information furnished by AKCDA (OP-3) regarding it's State
Executive Committee Members/office bearers of AKCDA during the period
11.08.2013 to 30.06.2016, the following are the elected members of the
Executive committee of AKCDA:

MANNER OF ELECTION
Election conducted by Court appointed Chief Election Officer/Advocate
Commissioner, Adv. A. Balagopalan, as per the order of Sub Court, Ernakulam
as per order in IA No. 3338/2008 in OS No. 355/2009, IA No. 6264/2010 and
IA No. 4571/2011 in OS No. 414/2010 dated 5th September, 2012.
8.2.2 Copy of the Memorandum of Association of AKCDA (OP-3) is annexed as
Annexure H6 and the details of office bearers of AKCDA during the period
11.08.2013 to 30.06.2016, as submitted by AKCDA, vide it's letter dated
21.03.2015, confirmed that the key persons are listed at Sl. No. 1 to 3 of the
above table. Further, from the evidences surfaced during the course of
investigation. It is established that Shri A.N. Mohan, Shri Thomas Raju took
very active role apart from Shri O.M. Abduljaleel.
Conclusion : In view of the above, investigation has concluded that the
aforementioned three members of the Executive Committee of AKCDA (OP-3)
are equally complicit in the practices being carried on and the decisions being
taken by OP-3, which have been found to be contravening the provisions of the

Competition Act, 2002. Despite the fact that the Hon'ble Commission had
already penalized AKCDA in Case No. 30 of 2011 and an undertaking, dated
21.02.2014 as furnished by AKCDA (annexed as Annexure -H5), in compliance
with the orders of CCI dated 09.12.2013 in the case No. 30/2011, they have
continued to indulge in the alleged anti-competitive conduct investigated in this
report."
8 . The investigation report was considered by the Commission in its meeting held on
23.04.2015 and it was decided that electronic copy thereof be forwarded to the parties
and 11 individuals including the appellants to enable them to file their
replies/suggestions/objections. The Commission also directed the opposite parties and
the individuals to furnish their income details including income tax returns for the last
three financial years and fixed 10.06.2015 as the date for oral hearing. The order
passed on the basis of the decision taken in the meeting held on 23.04.2015 reads as
under:
"In the instant case, the Commission vide its Order dated 29th September, 2014
under Section 26(1) of the Competition Act, 2002 (Act) had directed the
Director General (DG) to cause an investigation. Accordingly, the DG, after
completing the investigation, has filed the investigation report.
Today, the Commission considered the investigation report of the DG and
decided to forward an electronic copy of the investigation report of the DG to
the parties for filing their replies/objections. The Commission also decided to
forward an electronic copy of the investigation report of the DG to the following
persons who were identified by the DG as employees of OP-2 and to the
executive committee members, of OP-3, who at the time of contravention of the
provisions of the Act were responsible for the conduct of the affairs of OP-2 and
OP-3, respectively:
(1) Shri Jonson Mathew DGM (Sales South & West) of OP-2;
(2) Shri T.K. Haridas, Branch Manager of OP-2;
(3) Shri A.N. Mohanakurup, President of OP-3;
(4) Shri Thomas Raju, General Secretary of OP-3;
(5) Shri O.M. Abduljaleel, Treasurer of OP-3;
(6) Shri P.K. Surendranath, Vice-President (North) of OP-3;
(7) Shri P. Sankaranarayanan, Vice President (Central) of OP-3;
(8) Shri Antony K.J., Vice President (South) of OP-3;
(9) Shri C.K. Asif, Secretary, (North) of OP-3;
(10) Shri Wilson K.K., Secretary, (Central) of OP-3; and
(11) Shri S. Subramoniam, Secretary, (South) of OP-3.
The Commission directed the parties, including the aforesaid individuals, to file
their suggestions/objections latest by 5th June 2015. The Informant is directed
to provide a copy of his suggestion/objections to the Opposite Parties and each

of the Opposite Parties is directed to provide a copy of his/its
suggestions/objections to the Informant.
The Opposite Parties are also directed to furnish their audited balance sheet and
profit and loss account/turnover for the last three financial years latest by 5th
June 2015. The aforesaid individuals are directed to furnish their income details
including their Income Tax Returns for the last three financial years latest by
5th June 2015.
All the parties are directed to appear before the Commission, either in person or
through a duly authorized representative, for oral hearing on the investigation
report of the DG on 10th June 2015 at 10:30 AM.
The Commission also considered the following submission/application : (a)
Findings in the investigation report of the DG under Section 45 of the Act,
regarding concealment/suppression of the material facts by the Informant with
respect to the information filed before the Commission; and (b) Application
dated 25th March 2015 of the DG requesting initiation of proceedings against
M/s. Lividus Pharmaceuticals Pvt. Ltd. under Section 43 of the Act. With regard
to these applications, the Commission decided to issue show cause notice to
the Informant and M/s. Lividus Pharmaceuticals Pvt. Ltd. under Sections 45 and
43 of the Act, respectively.
The Secretary is directed to inform, and issue notices, to the concerned parties
for necessary compliance."
9 . On the next date, i.e., 10.06.2015, the Commission passed three orders. By one
order, the Commission directed that application dated 09.06.2015 received from S/Shri
Sudeep P.M., K.A. Sundaran, Antony K.V. and Giri Nair for joining them as parties shall
be heard on 18.06.2015. By the second order, the Commission directed that an
opportunity be given to M/s. Lividus Pharmaceuticals Pvt. Ltd. to file its reply before
passing an order under Section 43. In the third order, the Commission took cognisance
of the replies/submissions received from Respondents Nos. 4 and 5 and issued certain
directions to Respondents Nos. 4 and 5. The relevant portions of the second and third
orders are reproduced below:
"Second Order passed on 10.06.2015:
"In the instant case, the Commission vide its Order dated 29th
September 2014 under Section 26(1) of the Competition Act, 2002
(Act) had directed the Director General (DG) to cause an investigation.
Accordingly, the DG, after completing the investigation, has filed the
investigation report along with an application dated 25th March 2015
requesting initiation of proceedings against M/s. Lividus
Pharmaceuticals Pvt. Ltd. under Section 43 of the Act for not complying
with the directions of the DG.
The Commission considered the application dated 25th March 2015 in
its ordinary meeting held on 23rd April, 2015 and decided to issue
show cause notice to M/s. Lividus Pharmaceuticals Pvt. Ltd. under
Section 43 of the Act. Accordingly, notice dated 12th May 2015 was
issued to M/s. Lividus Pharmaceuticals Pvt. Ltd. directing them to show
cause, in writing, within 15 days, from the receipt of the notice as to
why a penalty upto rupees one lac per day to the maximum of rupees

one crore in terms of the provision of Section 43 of the Act should not
be imposed upon them. M/s. Lividus Pharmaceuticals Pvt. Ltd. was also
directed to appear before the Commission on 10th June 2015 for an
oral hearing.
As per the postal tracking system, the notice dated 12th May 2015 was
delivered to M/s. Lividus Pharmaceuticals Pvt. Ltd. on 16th May 2015.
However, no reply was received from M/s. Lividus Pharmaceuticals Pvt.
Ltd. Further, none appeared for them today.
The Commission took serious note of the conduct of M/s. Lividus
Pharmaceuticals Pvt. Ltd. However, in the interest of justice, the
Commission decided to provide one more opportunity to M/s. Lividus
Pharmaceuticals Pvt. Ltd. before passing any order under Section 13 of
the Act. Therefore, the Commission directed M/s. Lividus
Pharmaceuticals Pvt. Ltd. by giving one more opportunity to file its
written reply to the notice dated 12th May 2015 latest by 16th June
2015 and to appear for an oral hearing on 23rd June 2015."
Third order passed on 10.06.2015:
"1. In the instant case, the Commission had considered the
investigation report of the DG in its ordinary meeting held on 23rd
April 2015 and decided to forward an electronic copy of the same to all
the parties, including the individuals, identified by the DG as
responsible for the conduct of the affairs of OP-2 and OP-3 at the time
of alleged contravention of the Act. The Parties were directed to file
their replies/objections to the investigation report, latest by 5th June
2015 and appear for an oral hearing before the Commission on 10th
June 2015. The Opposite parties were also directed to furnish their
audited balance sheet and profit and loss account/turnover for the last
three financial years latest by 5th June 2015. The said individuals were
also directed to furnish their income details including their income tax
returns for the last three financial years latest by 5th June 2015.
2 . On 23rd April 2015, the Commission had also considered the
findings in the investigation report of the DG, regarding
concealment/suppression of material facts by the Informant. In that
regard, the Commission had decided to issue show cause notice to the
Informant under Section 45 of the Act. Accordingly, show cause notice
dated 13th May 2015 was issued to the Informant directing him to
appear for an oral hearing on 10th June 2015.
3 . Subsequently, the Commission has received the following
submissions from the parties:
a) reply/submission dated 4th June 2015 from OP-2 along with
(i) balance sheet/profit and loss statements for the financial
years 2011-12, 2012-13 & 2013-14 for OP-2; (ii) income tax
return (ITRs) of Shri Johnson Matthew, DGM (Sales) of OP-2
and Shri T.K. Haridas, Branch Manager of OP-2 for financial
years 2012-13, 2013-14 & 2014-15; and (iii) application dated
4th June 2015 from OP-2 filed under Regulation 26 of the
Competition Commission of India (General) Regulations, 2009;

b) application dated 5th June 2015 filed by the Informant inter
alia seeking extension of time for filing his reply to the DG
report and to the show cause notice dated 13th May 2015;
c) reply/submission dated 9th June 2015 of OP-3 along with (i)
trial balance sheet as on 31st March 2015, income details for
the period between 20th August 2013 to 31st March 2014 and
balance sheet as on 31st March 2014; (ii) ITRs of Shri A.N.
Mohanakurup, President of OP-3, Shri O.M. Abdul Jaleel,
treasurer of OP-3, Shri P. Sankaranarayanan, Vice-President,
Secretary (South) of OP-3, Shri C.K. Asif, Secretary (North) of
OP-3 and Shri Subramoniam, Secretary (South) of OP-3 for
financial years 2012-13, 2013-14 & 2014-15; and (iii)
Submissions of Shri Thomas Raju, General Secretary of OP-3,
Shri K.P. Surendranath, Vice-President (North) of OP-3, Shri
Anthony K.J. Vice-President (South) of OP-3 and Shri Wilson.
K.K. Secretary (Central) of OP-3;
4 . Today, the Commission heard the counsel for the Informant and Opposite
Parties on the investigation report. The Commission directed the counsel for
OP-2 to file information regarding its internal policy/process for appointing
stockists, including the details regarding its officers authorized to appoint
stockists, and the details of due diligence done by OP-2 while appointing
Informant as a stockist along with a copy of the appointment letter.
5. The counsel for OP-3 and the Informant requested for additional time to file
their reply/objections regarding the DG report and an oral hearing thereafter.
The Commission considered the request and directed the parties to file their
reply/objections latest by 10th July 2015 and appear for oral hearing on 4th
August 2015 at 10.30 A.M. The Informant is directed to provide a copy of
his/its reply/objection to the Informant.
6. The counsel for the Informant was also directed to file his reply to the show
cause notice dated 13th may, 2015, latest by 10th July 2015 and appear for an
oral hearing in that regard on 4th August 2015. The Commission also observed
that OP-1 did not file his income details regarding the income tax returns for
the last three financial years. Similarly, OP-3 has not filed its income
details/profit and loss details/balance sheet for the last three financial years.
Therefore, the Commission directed OP-1 to file his income tax returns for the
last three financial years and OP-3 to file its income/turnover details including
copies of its audited income and expenditure statement for the last three
financial years.
7. The Secretary is directed to inform the concerned parties accordingly."
(Underlining is ours)
10. In the meetings held on 18.06.2015 and 23.06.2015, the Commission passed the
following orders:
"Order dated 18.06.2015
In the instant matter, Shri Sudeep P.M., Shri K.A. Sundaran, Shri Antony K.V.
and Shri Giri Nair have filed an application dated 9th June 2015 under General

Regulation 25 of the Competition Commission of India (General) Regulations,
2009 requesting to the Commission to allow them to join as interveners in the
case.
The Commission considered the aforementioned application in its ordinary
meeting held on 10th June 2015 and decided to hear the applicants on 18th
June 2015.
Today, the Commission heard the counsel for the interveners and decided to list
the matter again on 25th June 2015."
"Order dated 23.06.2015
In the instant case, the Director General (DG) vide application dated 25th March
2015 had requested the Commission to initiate Section 43 proceedings against
M/s. Lividus Pharmaceuticals Pvt. Ltd. as it had failed to comply with the
directions of the DG. The Commission considered the said application in its
ordinary meeting held on 23rd April, 2015 and decided to issue show cause
notice to M/s. Lividus Pharmaceuticals Pvt. Ltd. Accordingly, notice dated 12th
May, 2015 was issued to M/s. Lividus Pharmaceuticals Pvt. Ltd. directing it to
show cause, in writing, within 15 days, from the receipt of the notice as to why
a monetary penalty should not be imposed upon it in terms of Section 43 of the
Act. M/s. Lividus Pharmaceuticals Pvt. Ltd. was also directed to appear before
the Commission on 10th June 2015 for an oral hearing.
In compliance to above directions, the Commission noted that no reply was
filed and none appeared on behalf of M/s. Lividus Pharmaceuticals Pvt. Ltd. on
10th June 2015. The Commission took a serious note of the conduct of M/s.
Lividus Pharmaceuticals Pvt. Ltd. However, the Commission decided to provide
one more opportunity to M/s. Lividus Pharmaceuticals Pvt. Ltd. and directed it
to file reply to the show cause notice and also appear for an oral hearing on
23rd June 2015.
Today, none appeared on behalf of M/s. Lividus Pharmaceuticals Pvt. Ltd. The
Commission deferred the matter for consideration in another meeting."
1 1 . In the next meeting held on 25.06.2015, the Commission observed that the
allegations contained in the application filed by Shri Sudeep P.M. and three others were
different from those investigated by the DG and decided to treat the same as separate
information and pass appropriate order in due course.
1 2 . On 04.08.2015, the Commission heard further arguments and recorded the
following order:
"1. In the instant case, the Commission had considered the investigation report
of the DG in its ordinary meeting held on 23rd April, 2015 and decided to
forward an electronic copy of the same to all the parties. The parties were
directed to file their replies/objections to the investigation report, appear for an
oral hearing on 10th June 2015. The Commission had also considered the
findings in the investigation report of the DG, regarding
concealment/suppression of material facts by the Informant. In that regard, the
Commission had decided to issue show cause notice to the Informant under
Section 45 of the Act. Accordingly, show cause notice dated 13th May 2015 was
issued to the Informant directing him to appear for an oral hearing on 10th

June 2015.
2 . Accordingly, the Commission heard the counsel for the Informant and
Opposite Parties on the investigation report on 10th June 2015. The
Commission inter alia directed OP 2 to file certain details/information regarding
its internal policy/process. Further, OP-3 and the Informant requested for
additional time to file their reply/objections regarding the DG report and an oral
hearing thereafter. The commission acceded the request of the Informant and
Opposite Parties and decided to hear the parties on 4th August 2015. The
Commission also directed the Informant to file his reply to the show cause
notice dated 13th May 2015, latest by 10th July 2015. The Commission also
directed OP-1 to file his income tax returns for the last three financial years and
OP-3 to file its income/turnover details including copies of its audited income
and expenditure statement for the last three financial years.
3. Subsequently, the Commission has received the following submissions from
the parties:
a) reply/submission dated 10th July, 2015 from Informant;
b) written submission/reply dated 10th July 2015 from OP-2, Shri
Johnson Matthew and Shri T.K. Haridas, and
c) Independent auditor's report dated 13th May 2014 (filed/received on
30th July 2015).
4 . Today, the Commission heard the counsel for the Informant and Opposite
Parties on the investigation report of the DG. The parties have concluded their
arguments.
5. Upon the request of OP-2 and OP-3, the Commission has granted them time
to file additional submissions, if any, by 24th August 2015. The Opposite
Parties are directed to provide a copy of his/its additional submission to the
Informant.
6. The Secretary is directed to inform the concerned parties, accordingly."
13. After two months of the receipt of written arguments of the parties, the Commission
passed the impugned order and held that the conduct of Respondent No. 5 is contrary to
Section 3(3)(b) read with Section 3(1) of the Act and the appellants are liable to be
penalised under Section 48(1) of the Act. However, Shri O.M. Abduljaleel was
exonerated on the ground that he was only the custodian of funds and responsible for
keeping financial statements on behalf of Respondent No. 5. The Commission also held
that Respondent No. 4 is responsible for contravention of Section 3(1) for facilitating
the acts of Respondent No. 5 and two of its officers, namely, Shri Johnson Mathew and
Shri T.K. Haridas, are individually responsible under Section 48(1) of the Act for the
anti-competitive conduct perpetrated by Respondent No. 4. The aforesaid conclusions of
the Commission, in so far as Respondent No. 5 and the appellants are concerned, are
founded on the observations contained in paragraphs 7.3 to 7.12 of the impugned
order, which are reproduced below:
"7.3 The above stated email clearly establishes that the appointments of
stockists were being made with the approval of district/State units of OP 3. It is
apparent that OP 3 was disgruntled because of M/s. Merck Ltd. not following its

diktats. It is also mentioned in the said email that Mr. A.N. Mohana Kurup
discussed some issues with Mr. Chadha of M/s. Merck Ltd. who assured that
those issues would be taken up with their MD.
7.4 The e-mail also highlights that OP 3 unanimously decided to boycott M/s.
Merck Ltd. by requesting the stockists not to provide medicines and sales
statement to Merck and also not to accept any new product. Further, vide the
said email, Mr. A.N. Mohana Kurup communicated to Mr. J.S. Shinde that 95%
of the stockists members complied with its request.
7 . 5 This undoubtedly shows that OP 3 has been exercising influence and
controlling the supply of medicines by way of allocations the geographic
market, or number of stockists in the market and enforcing such intervention by
way of boycotts etc. This conduct of OP 3 results in restricting the provisioning
of goods in the market, is in contravention of section 3(3)(b) read with section
3(1) of the Act.
7.6 Further, the e-mails exchanged between pharmaceutical companies and OP
3 clearly illustrate the prevalence of anti-competitive practice of requiring NOC.
Vide e-mail dated 09.12.2014, M/s. Getwell Enterprises, a pharmaceutical
company, sent the NOC received from one of its stockist to OP 3. Another email
dated 10.12.2014 sent by Mr. A.N. Mohana President of OP 3 to M/s. Getwell
Enterprises vide which OP 3 had requested M/s. Getwell Enterprises to send the
names of the existing parties at Trivandrum to enable Mr. A.N. Mohana Kurup to
send M/s. Getwell Enterprises the 'Bona-fide Member Certificate'. When
enquired, Mr. A.N. Mohana Kurup could not give much justification for these
emails. There are several other emails which were sent by pharmaceutical
companies wherein the said companies had sent the names of their newly
appointed stockists and requested the OP 3 'to do the needful'. All such emails
are not reproduced herein for the sake of brevity.
7.7 It is relevant to reproduce another evidence relied upon by the DG which
clearly shows the involvement of OP 3 and its district units in perpetuating their
anti-competitive practices in the State of Kerala. M/s. Sunanda Associates, one
of the stockist, vide communication dated 20.08.2014 had sent to Mr. A.N.
Mohan, President OP-3 and Mr. Thomas Raju, General Secretary of OP 3,
complaining about the anti-competitive activities of OP 3 and its office bearers
in Kozhikode district unit of OP 3. The relevant excerpts of the same are
reproduced below:
'This is to inform you regarding a hearing that I was allowed by Mr.
K.P. Surendranath, Vice President, AKCDA (North Zone) and Mr. Asif,
Secretary, AKCDA (North Zone) on 14.08.2014 at AKCDA office,
Kozhikode in front of president and secretaries of north zone district.
The district president and secretary of Kozhikode district AKCDA, Mr.
K.T. Ranjit Damodaran had asked for action against my firm, Sunanda
Associates and my wife's firm, Sunanda Enterprises on charges that the
two firms took the stockistship of M/s. Glenmark Labs, Wallace
Pharmaceuticals, Alkem Labs and Lividus Pharma without obtaining
permission (NOC) of all Kerala Chemists and Druggists Association.
These two persons persuaded the office bearers of the other four
districts of the north zone to launch boycott against Sunanda
Associates and Sunanda Enterprises and meeting of the north zone

committee held last month took a decision to inform our customers
(retail chemists and hospital members and others alike) to stop buying
medicines from these firms. The committee also took a decision to start
non-cooperation against the above companies and the stockists of
these companies were asked to restrict purchase in retaliation to the
companies supplying medicines to the two firms without the permission
of AKCDA. Consequent to this the field staff of these companies started
putting pressure on the firms to drop stockistship so that the other
stockists would resume purchase normally and would not cause
shortage of life saving medicines in the market. Our customers in
certain markets who were threatened by AKCDA started refusing to buy
from the two firms. I explained about these difficulties to the office
bearers of districts present in the meeting on the above date and
requested them to desist from harming the two firms...........
..........
...........
......... '
7 .8 Further, the Commission has also perused the copies of the complaints
dated 11.09.2014 and 08.11.2014 submitted by M/s. Sunanda Associates to
Drug Controller of Kerala regarding the holding of stocks partly/non-supply of
medicines by OP 2 even after they had received payment. Purportedly, the
authorised representative of OP 2 i.e., Mr. T.K. Haridas has expressed that OP 3
had threatened him that OP 2 will be boycotted if supplies were made by it to
M/s. Sunanda Associates.
7.9 These lead to inescapable conclusion that OP 3 has been indulging in the
practice of mandatory NOC/clearance certificate from it before appointment of
any new stockist. It has also been revealed that OP 3 has been threatening the
pharmaceutical companies to follow its diktats by threatening them that it
would boycott the products of non-complying pharmaceutical companies.
7 .1 0 In many previous cases namely, Case No. C-127/2009/MRTPC (Varca
Drugs & Chemists & Ors. v. Chemists & Druggists Association Goa); Case No.
20/2011 (M/s. Santuka Associates Pvt. Ltd. v. All India Organization of
Chemists and Druggists and Ors.); Suo moto Case No. 05 of 2013 (In re:
Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa,
M/s. Glenmark Company and M/s. Wockhardt Ltd. etc.), the Commission has
unequivocally held that imposing the requirement of NOC for the appointment
of chemists/druggists/stockists/super stockists and/or imposition of PIS
charges is anticompetitive in terms of the Act. It directed these chemists and
druggists associations and their members to cease and desist from indulging in
such anti-competitive trade practices.
7 . 1 1 More particularly, in Case No. 30 of 2011 (M/s. Peeveear Medical
Agencies, Kerala and AIOCD and others), the Commission vide its order dated
09.12.2013 found that the practice of NOC was prevalent in the State of Kerala
and the same was leading to problems for the consumers by limiting or
controlling the supply of drugs in the market. The Commission held the conduct
of AIOCD and its State affiliate AKCDA (OP 3) to be in contravention of the
provisions of section 3(3)(a) and 3(3)(b) read with section 3(1) of the Act.

Apart from imposing monetary penalty on AKCDA, the Commission further had
directed AKCDA i.e., OP 3 (and AIOCD) to file an undertaking that the practices
carried on by their members such as the issue of grant of NOC for appointment
of stockists, fixation of trade margins, collection of PIS charges and boycott of
products of pharmaceutical companies have been discontinued. Accordingly, OP
3 filed an undertaking dated 21.02.2014 declaring that it had not conducted its
activities nor would it indulge in future in any kind of anticompetitive conduct
in contravention of the Commission's order dated 09.12.2013.
7.12 The Commission, however, notes that in spite of the said undertaking, OP
3 and its office bearers who have signed the undertaking i.e., Mr. A.N. Mohana
Kurup and Mr. Thomas Raju have indulged in the anti-competitive conduct after
they were directed to cease and desist. Their conduct is in the nature of
continued contravention with complete disregard to the mandate of the
Commission and the Act. It is apparent from the evidence on record that OP 3
has no intention of complying with the law and has wilfully ignored the
undertaking submitted by it on 21.02.2014 and its office bearers are actively
involved in anti-competitive conduct even after filing the undertaking."
14. As a sequel to the aforesaid findings and conclusions, the Commission imposed
penalty on Respondent No. 5 @ 10% of its income (Since Respondent No. 5 had
furnished financial statement only for the year 2013-14, penalty of Rs. 4,35,778/- was
imposed by taking into consideration the income of that financial year). The
Commission also imposed penalty @ 10% of the income of Appellant No. 1 and directed
him to deposit Rs. 50,203/- within sixty days. In addition to this, the Commission
issued the following direction:
"14. Additionally, the Commission directs OP 3 association to organize, in letter
and in spirit, at least five competition awareness and compliance programmes
over the next six months in State of Kerala for its members. OP 3 is further
directed not to associate Mr. A.N. Mohana Kurup and Mr. Thomas Raju with its
affairs including administration, management and governance in any manner for
a period of two years."
15. The Commission also penalized Respondent No. 4 and its officers, but we do not
consider it necessary to advert to that part of the impugned order because the same is
under challenge in the appeals filed by them.
1 6 . The appellants have challenged the impugned order mainly on the ground of
violation of the provisions of the Act and the principles of natural justice. In paragraphs
7.2 to 7.4 of the memo of appeal, the appellants have averred that in the election held
in August, 2009, Appellant No. 1 was elected as President and Shri K. Sivasankaran and
Shri K. Sahadevan were elected as General Secretary and Treasurer respectively, but
they were not allowed to function because the rival faction headed by Shri Abdul
Gaffoor unlawfully took possession of the Registered office of the Respondent No. 5;
that the rival faction was supported by AIOCD, which had written letters to the
pharmaceutical companies in the entire State of Kerala to deal with the said faction and
that despite interim order dated 23.12.2010 passed by Sub-Judge, Ernakulam, they
were not allowed to discharge the functions of office- bearers. The appellants have
further averred that in the election held under the supervision of the Commissioner
appointed by Sub-Judge, Ernakulam, they were elected as President and General
Secretary respectively for the period from 11.08.2013 to 30.06.2016. In paragraph 7.8,
the appellants have referred to order dated 09.12.2013 passed by the Commission in

Peeveear's case (Case No. 30 of 2011-M/s. Peeveear Medical Agencies, Kerala v. All
India Organisation of Chemists and Druggists and five others) and averred that in
compliance of the direction given by the Commission, they had filed the required
undertaking. In paragraphs 7.9 to 7.26, the appellants have narrated the events leading
to the passing of the impugned order and in paragraph 8B of the appeal, they have
formulated various questions of law including the following:
"8B Questions of Law:
C. Whether the DG's report is illegal and vitiated as it is not in accordance with
the relevant law and the relevant considerations for arriving at a prima facie
view that the ingredients of Section 3(3)(b) and 3(4)(d) read with Section 3(1)
are established?
D. Whether the Commission is justified in ignoring the fact that the DG has
grossly violated principles of natural justice during the course of its inquiry by
calling the 1st appellant as a witness against himself during the inquiry?
E. Whether the Commission is justified in ignoring the fact that the
investigation carried out by the DG is flawed on account of various procedural
as well as material infirmities as the DG has violated principles of natural
justice by not providing copy of the complaint and documents/affidavits
furnished by certain persons, upon which the DG has relied, to the appellants,
thereby disabling the appellants to cross-examine such persons to test their
veracity apart from denying any opportunity for rebutting the allegations?
F. Whether the Commission is justified in ignoring the fact that the order
passed by the Commission dated 29.09.2014 directing investigation was also
not supplied to the appellants which has resulted in grave miscarriage of justice
as the ambit and extent of the investigative jurisdiction of the DG was not
known to the appellants? AND whether the DG exceeded its jurisdiction of
investigation?
G. Whether the Commission lost sight the scope of the section 27 of the
Competition Act in the facts and circumstances of the case?
H. Whether the Commission has power to direct the association to disassociate
its' democratically elected president and general secretary with its affairs
including administration, management and governance in any manner that for
period of two years totally disregarding the civil and Constitutional rights
consequences thereto?"
17. While issuing notice of appeal and application for interim relief on 29.01.2016, the
Tribunal passed the following order:
"This appeal is directed against order dated 01.12.2015 passed by the
Competition Commission of India whereby penalty has been imposed on the
appellants under Section 48 of the Competition Act, 2002.
One of the points which would require consideration is whether an order could
have been passed by the Commission under Section 48 of the Act without
issuing notice and giving opportunity of hearing to the appellants. The other
point, which would require consideration is, whether the burden to prove the
ingredients of Section 48 of the Act was on the appellants.

Issue notice on the main appeal and also the application for interim relief
returnable on 15.03.2016.
In the meanwhile, operation of the impugned order shall remain stayed.
Notice on the main appeal as well as interlocutory application be given Dasti to
the appellants, who shall be duty bound to serve the same before the date fixed
failing which the appeal shall stand automatically dismissed and the interim
order shall stand vacated.
I.A. No. 17/2016
This is an application by the appellants for placing on record additional
documents.
On the previous date of hearing, the Tribunal had pointed out that the
application for placing on record of additional documents has not been well
drafted. Now a fresh application has been filed for permission to place on
record the additional documents.
We have perused the averments contained in the application and are satisfied
that the leave should be granted for placing on record the additional documents
which were part of the record of the Commission. Ordered accordingly.
I.A. No. 17 of 2016 is disposed of in the manner indicated above."
1 8 . On the next date of hearing i.e. 15.03.2016, the Tribunal adjourned the case
because the learned counsel for the Commission had not appeared, but issued the
following direction:
"On the next date, learned counsel or representative of the Commission shall
produce all the order sheets of Case No. 28/2014 and show whether any notice
was given to the appellants proposing to debar them from continuing as office
bearers of All Kerala Chemists and Druggists Association for a period of two
years."
19. In compliance of the aforesaid direction, Shri Jaiveer Shergill, learned counsel for
the Commission produced a folder containing copies of the orders passed by the
Commission. He also produced a compilation which contains the replies/objections and
written submissions filed on behalf of Respondent No. 4, its officers and Respondent
No. 5.
20. Shri Rajshekhar Rao, learned counsel for the appellants argued that the penalty
imposed on Appellant No. 1 and the direction contained in the second part of paragraph
14 of the impugned order are liable to be quashed because the same are not only
contrary to law but are vitiated due to blatant violation of principles of natural justice.
Learned counsel argued that the deeming provision contained in Section 48(1) can be
invoked only after a finding is recorded by the competent authority i.e. the Commission
that the company [By virtue of Explanation (a) appended to Section 48, the word
'company' means a body corporate and includes a firm or other association of
individuals] has contravened the provisions of the Act or of any rule, regulation, order
made or direction issued thereunder, but in the present case the proceedings for
determination of the liability of the persons incharge of and responsible for the conduct
of the business of Respondent No. 5 were initiated at the threshold and that resulted in

serious prejudice to the cause of the appellants. Shri Rajshekhar Rao referred to
paragraph 5 of order dated 29.09.2014 passed by the Commission and argued that
notwithstanding what was stated in paragraph 6 by the Commission that the order
passed under Section 26(1) would not be treated as final expression or opinion on the
merit of the case and the DG shall conduct the investigation without being swayed by
the observations made therein, the DG was left with little or no choice but to return a
finding of guilty against the appellants and he dutifully did so by holding that three
members of the Executive Committee of Respondent No. 5 are equally complicit in the
anti-competitive practices being carried on and the decisions being taken by Respondent
No. 5 in contravention of the provisions of the Act. Learned counsel further argued that
even if the Commission is held to have the jurisdiction to issue hybrid direction under
Section 26(1) read with Section 48, the appellants cannot be directly or indirectly
deprived of their legitimate right to hold the offices/posts to which they were duly
elected in accordance with law and in any case, such a direction could not have been
issued without giving them an action-oriented notice and effective opportunity of
hearing. He submitted that the direction issued by the Commission vide order dated
23.04.2015 for supply of electronic copy to the opposite parties and 11 individuals to
enable them to file their suggestions/objections cannot be construed as a notice to the
appellants to show cause against the proposed imposition of penalty under Section 27
or issuance of a direction to Respondent No. 5 not to associate them with its affairs for
a period of two years. Learned counsel further argued that Section 27 does not
empower the Commission to pass an order or issue a direction which has the effect of,
directly or indirectly, depriving the elected office-bearers of an association of their
legitimate right to continue in the elective offices/posts for the particular period and
exercise the powers and perform the functions of those offices/posts. Shri Rajshekhar
Rao pointed out that despite the direction given by the Tribunal on 15.03.2016, no
record has been produced on behalf of the Commission to show that any notice was
given to the appellants to show cause against the direction proposed to be given to
Respondent No. 5 not to associate them in the administration, management and the
governance of the Association. Learned counsel also questioned the penalty imposed on
Appellant No. 1 and argued that in exercise of the power vested in it under Section
27(b), the Commission could not have penalised Appellant No. 1 without giving him
notice and opportunity of hearing. Learned counsel again emphasised that the direction
given by the Commission to supply electronic copy of the investigation report with an
opportunity to Appellant No. 1 to file his suggestions/objections and also file his
income-tax return cannot be interpreted as a notice proposing imposition of penalty
under Section 27(b) because till that time the competent authority had not recorded a
finding that Respondent No. 5 had contravened the provisions of the Act or any rule,
regulation, order made or direction issued thereunder.
21. Shri Jaiveer Shergill, learned counsel for the Commission argued that the impugned
order is legally correct and the Tribunal should not interfere with the same on the
hyper-technical ground of violation of the principles of natural justice because the Jt.
DG had given ample opportunity to the appellants to defend themselves and he returned
a finding on the issue of the appellants' complicity in the anti-competitive practices of
Respondent No. 5 after threadbare analysis of the evidence collected during
investigation, more so, because appeal filed by AKCDA against order dated 01.12.2015
passed by the Commission in Case No. 28 of 2014 penalizing it for contravention of
Section 3(3)(b) read with Section 3(1) of the Act has been dismissed by the Tribunal.
Learned counsel submitted that even though the Commission had given opportunity to
the appellants to file their suggestions/objections to the findings contained in the
investigation report, neither of them availed that opportunity. Shri Shergill pointed out
that Appellant No. 1 had filed reply on behalf of Respondent No. 5 and also produced

his own income tax details, but he did not contest the finding recorded by the Jt. DG
about his own complicity in the anti-competitive practices being pursued by Respondent
No. 5. Learned counsel argued that even though the impugned order does not make a
reference to the particular clause of Section 27 under which penalty @ 10% of the
average income of three preceding financial years of Appellant No. 1 was imposed, the
same should be treated to have been done under Clause (b) of Section 27 and the
direction contained in the second part of paragraph 14 of the impugned order should be
treated to have been issued under Section 27(g). Learned counsel further argued that
the Commission did not commit any illegality by passing an order under Section 48(1)
whereby Respondent No. 5 was directed not to associate the appellants with its affairs
for a period of two years because at the relevant time they were incharge of and were
responsible for the conduct of the business of that respondent. Shri Shergill emphasised
that by virtue of Section 48(1), every person who is incharge of, and is responsible to
the company at the time of contravention of the provisions of the Act or of any rule,
regulation, order made or direction issued thereunder is deemed to be guilty of such
contravention and is liable to be punished accordingly and the burden to prove that
contravention of Section 3(3)(b) read with Section 3(1) had been committed by
Respondent No. 5 without their knowledge or that they had exercised all due diligence
to prevent Respondent No. 5 from committing such contravention squarely lay upon the
appellants, which they failed to discharge. In support of this argument, Shri Shergill
relied upon the judgment of the Supreme Court in Tamil Nadu Electricity Board v.
Rasipuram Textile (P) Ltd. and Others - MANU/SC/8533/2008 : 2008 (17) SCC 285.
2 2 . Ms. Rashmi Nandkumar, learned counsel for Respondent No. 2, argued that the
appellants do not have the locus to challenge the direction contained in the second part
of paragraph 14 of the impugned order because it mandates Respondent No. 5 not to
associate the appellants with its affairs for a period of two years and no affirmative
direction has been given by the Commission to deprive the appellants of their right to
hold the offices/posts of the President and the Secretary of Respondent No. 5.
23. We have considered the respective arguments and carefully perused the record. We
have also gone through various orders passed by the Commission from between
13.05.2014 and 01.12.2015 on the basis of the decisions taken in the meetings held in
accordance with Clauses 3(3) and (5) of the Competition Commission of India
(Meetings for Transaction of Business) Regulations, 2009, which are treated as ordinary
meetings.
2 4 . The scheme of the Act was considered by the Supreme Court in Competition
Commission of India v. Steel Authority of India Limited and Another -
MANU/SC/0690/2010 : 2010 (10) SCC 744 and it was held that while discharging
adjudicatory functions, the Commission acts as a quasi-judicial body. The provisions of
the Act and the Competition Commission of India (General) Regulations, 2009 (for
short, the 'Regulations') have also been analysed by this Tribunal in several decisions.
In Appeal No. 105 of 2012 Lafarge India Limited v. Competition Commission of India
and Another decided on 11.12.2015 along with a batch of matters, the Tribunal
extensively referred to the provisions of the Act and the Regulations and ruled the while
deciding the allegation contained in the information filed or reference made under
Section 19(1)(a) and passing orders under Sections 27, 33, 39, 42, 42A, 43, 43A, 44
and 45 the Commission does not exercise purely administrative power or discharge
administrative functions and that it is bound to comply with various facets of the
principles of natural justice. Paragraphs 44 to 48 of that order, which have bearing on
the decision of this appeal, read as under:

"44. An analysis of the provisions noticed hereinabove gives a clear indication
of the nature of powers and functions exercisable by the Commission and the
Director General. The inquiry envisaged by Section 19(1) into any alleged
contravention of Section 3(1) or Section 4(1) can be initiated by the
Commission either on its own motion or on receipt of any information from any
person, consumer or their association or trade association or a reference made
by the Central or State Government or a statutory authority. After the
information or reference received in the office of the Commission is scrutinized
by the Secretary of the Commission and if the same is found to be fulfilling all
the requirements of the Regulation 14, then the same is placed before the
Commission for consideration whether a prima facie case has been made out
for investigation. In terms of Regulation 17, the Commission can hold
preliminary conference for that purpose. The Commission can invite the
information provider and such other person, as may be considered necessary
for the preliminary conference. Section 26(1) read with Regulation 18 provides
that if the Commission forms an opinion that there exists a prima facie case,
then it is required to issue direction to the Director General to cause an
investigation to be made into the matter. The detailed procedure for conducting
investigation is contained in Section 41 read with Section 36 and Regulations
20, 21, 35, 41, 42 and 45. In terms of Regulation 41, the Director General can
determine the manner in which the evidence may be adduced. In the
proceedings before him in terms of Regulation 41(2), the Director General can
admit evidence taken in the form of verifiable transcripts of tape recordings,
unedited versions of video recording, electronic mail, telephone records
including authenticated mobile telephone records, written signed unsworn
statements of individuals or signed responses to written questionnaires or
interviews or comments or opinions or analyses of experts based upon market
surveys or economic studies or other authoritative texts or otherwise, as
material evidence; admit on record every document purporting to be a
certificate, certified copy or other document, which is by law declared to be
admissible as evidence of any particular fact provided it is duly certified by a
gazetted officer of the Central Government or by a State Government or a
statutory authority, as the case may be or a Magistrate or a Notary appointed
under the Notaries Act, 1952 or the Secretary of the Commission; admit the
entries in the books of account, including those maintained in an electronic
form, regularly kept in the course of business, including entries in any public or
other official book, register or record or an electronic record, made by a public
servant in the discharge of his official duty, or by any other person in
performance of a duty specially enjoined by the law of the country in which
such book, register or record or an electronic record is kept, as documentary
evidence; admit the opinion of any person acquainted with the handwriting of
the person by whom a document is supposed to have been written or signed, as
relevant fact to prove the handwriting of the person by whom the document
was written or signed; admit the opinion of the handwriting experts or the
experts in identifying finger impressions or the persons specially skilled in
interpretation of foreign law or of science or art; take notice of the facts of
which notice can be taken by a court of law under Section 57 of the Indian
Evidence Act, 1872; accept the facts, which parties to the proceedings admit or
agree in writing as proved; presume that any document purporting to be a
certified copy of any record of any authority, court or government of any
country not forming part of India as genuine and accurate, if the document
purports to be certified in any manner which is certified by any representative

of the National Government of such country including certification by the
Embassy or the High Commission of that country in India and admit such
documents including electronic records in evidence as may be considered
relevant and material for the proceedings. Clause (3) of Regulation 41 makes
Sections 22A, 47A, 65B, 67A, 73A, 81A, 85A 85B, 85C, 88A, 89 and 90A of the
Evidence Act applicable for the purpose of investigation by the Director
General, subject, of course, to clause (2) of Regulation.
45. In terms of clause (4), the Director General can call for the parties to lead
evidence by way of affidavit or lead oral evidence in the matter. In terms of
clause (5), the Director General can give an opportunity to the other party or
parties to cross-examine the person giving the evidence. Clause (6) empowers
the Director General to entrust the task of recording evidence to any officer or
person designated for the said purpose. Regulation 42 provides that the
Director General can, for sufficient reasons, order that any particular fact or
facts may be supported by an affidavit. Various clauses of this Regulation
prescribe the mode and manner in which the affidavit required to be filed under
clause (1) is to be prepared. On completion of investigation, the Director
General is required to submit his report to the Commission. Clause (4) of
Regulation 20 provides that the report 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. Proviso to this clause empowers the Director General to grant
partial or total confidentiality to the commercially sensitive information and
documents.
4 6 . Once the report of the Director General is received, the Commission is
required to act in accordance with the procedure enshrined in sub-sections (4)
to (8) of Section 26, which provide for forwarding a copy of the record to the
parties concerned including the Central or the State Government or the
statutory body, as the case may be, sub-sections (5) and (6) of Section 26 deal
with the situation in which the report of the Director General recommends that
there is no contravention of the provisions of the Act. In that event, the
Commission is required to invite objections or suggestions from the Central
Government or the State Government or the statutory authority or parties
concerned, as the case may be. If after considering the objections/suggestions
filed in terms of sub-section (5), the Commission agrees with the
recommendations of the Director General, then it is required to close the matter
and pass orders, which may be communicated to the Central or State
Government or statutory authority or the concerned parties. If after considering
the objections/suggestions referred to in subsection (5), the Commission forms
an opinion that the further investigation is to be made, or cause further inquiry
to be made in the matter or itself proceed with further inquiry in accordance
with the provisions of the Act [Regulation 26(7)]. If the report of the Director
General recommends that there is contravention of any of the provisions of the
Act and the Commission forms the view that further inquiry is called for then it
shall inquire into such contravention in accordance with the provisions of the
Act [Regulation 26(8)]. Regulations 21 to 27 and Regulations 41 to 44 contain
the procedure for conducting inquiry by the Commission. Under Regulation 35,
the Commission can make a reference to any statutory authority for opinion
under Section 21A. Regulation 35 empowers the Commission to grant
confidentiality in certain situations. Regulation 43 empowers the Commission to
take additional evidence. Regulation 46 postulates representation of the parties

by their representatives before the Commission. Regulation 52 empowers the
Commission to invite experts of eminence to assist the Commission in
discharging of its functions under the Act. Section 36(2) lays down that the
Commission shall have, for the purposes of discharging its functions under the
Act, the same powers as are vested in a Civil Court under the Code of Civil
Procedure, 1908 in respect of the matters relating to summoning and enforcing
the attendance of any person and examining him on oath; requiring the
discovery and production of documents; receiving evidence on affidavit; issuing
commissions for the examination of witnesses or documents and requisitioning
any public record or document or copy of such record or document from any
office. Under Section 36(3), the Commission is empowered to call upon
experts, from the fields of economics, commerce and accountancy. Under
Section 36(4), the Commission can issue direction to any person to produce
books of accounts or other documents in his custody or under the control
before the Director General and to furnish to him or Secretary of the
Commission such other information as may be in his possession in relation to
trade carried on by such person as may be required for the purposes of the Act.
At the end of this exercise, the Commission can pass appropriate orders under
Section 27 including an order for imposing penalty in cases involving
contravention of Section 3 and/or Section 4. By virtue of Section 41(2),
Director General is entitled to exercise the powers conferred upon the
Commission under Section 36(2). Section 42(2) provides for imposition of fine
for contravention of orders or directions issued under Section 27, 28, 31, 32,
33, 42A and 43A. The quantum of fine may extend to rupees one lakh per day,
subject to a maximum of rupees ten crores. If any person fails to comply with
the orders or directions issued by the Commission or fails to pay the fine
imposed under Section 42(2), then he can be punished with imprisonment for a
term which may extend to three year of with fine upto rupees twenty five crores
or with both, as the Chief Judicial Magistrate may determine. Section 42A
postulates award of compensation for contravention of decision or order of the
Commission issued under Section 27, 28, 31, 32 and 33 or any condition or
restriction subject to which any approval, sanction, direction or exemption has
been granted or for delay in carrying out such orders or directions. Section 43
provides for imposition of fine for non-compliance of direction by the
Commission under Section 36(2) and (4) or by the Director General under
Section 41(2). The amount of fine may extend to rupees one lakh per day
during the period of continuance of such failure subject to a maximum of
rupees one crore. Section 43A provides for imposition of penalty for non-
furnishing of information under Section 6(2). The extent of such penalty may
be upto 10% of the total turnover or the assets of the wrong doer, whichever is
higher. Section 44 provides for imposition of penalty for making a false
statement or omission to furnish material information in combination case.
Section 45 contains a general provisions for imposition of fine upto rupees one
crore for making false statement or omission to state any material fact knowing
it to be a material or wilful alteration, suppression or destruction of any
document, which is required to be furnished.
4 7 . From what we have mentioned above, it is clear that the procedure
required to be followed by the Director General for conducting investigation and
by the Commission as a prelude to the passing of orders/issue directions under
Section 27 and/or the various provisions contained in Chapter-VI of the Act and
corresponding regulations is akin to the procedure required to be followed by
the Civil Court for deciding a suit except that the Director General and the

Commission are not bound by the technicalities of the procedure contained in
the Code of Civil Procedure, 1908 and rules embodied in the Evidence Act
except to the extent indicated in the Act.
4 8 . The above survey of various provisions of the Act and the Regulations
shows that even while amending the Act by Act 39 of 2007 and Act 39 of 2009,
Parliament consciously decided to retain provisions relating to adjudicatory
functions of the Commission in their full vigour and the mere fact that by virtue
of substituted Section 22, the business of the Commission is required to be
transacted in its meetings and the business would necessarily include exercise
of adjudicatory functions/powers, cannot lead to an inference that while
deciding the allegations contained in the information filed or reference made
under Section 19(1)(a) and passing orders under Sections 27, 33, 39, 42, 42A,
43, 43A, 44 and 45, the Commission exercises purely administrative power or
discharge administrative functions or that while passing orders under those
sections and also under Section 28, which can have far-reaching impact on the
rights of the parties, the Commission is not required to act as per the accepted
standard of fairness and render just decision after complying with the principles
of natural justice as expounded by the Courts across the globe including the
Supreme Court of India. Rather, on the basis of case law developed in this
country, it must be held that like any other adjudicatory body, the Commission
is bound to comply with various facets of the principles of natural justice and
its proceedings confirm to the objective standard of fairness."
(Emphasis supplied)
In support of the conclusion recorded in paragraph 48 above, the Tribunal relied upon
the judgments of the Supreme Court in Rangi International Limited v. Nova Scotia Bank
and others MANU/SC/0557/2013 : 2013 (7) SCC 160, State of Orissa v. Dr. (Miss)
Binapani Dei-MANU/SC/0332/1967 : AIR 1967 SC 1269, A.K. Kraipak v. Union of India-
MANU/SC/0427/1969 : 1969 (2) SCC 262, Sayeedur Rehman V. State of Bihar-
MANU/SC/0053/1972 : 1973 (3) SCC 333, Maneka Gandhi v. Union of India-
MANU/SC/0133/1978 : 1978 (1) SCC 248, Mohinder Singh Gill v. Chief Election
Commissioner- MANU/SC/0209/1977 : 1978 (1) SCC 405, Mahipal Singh Tomar v. State
of U.P. - MANU/SC/1078/2013 : 2013 (16) SCC 771, Manohar v. State of Maharashtra -
MANU/SC/1140/2012 : 2012 (13) SCC 14 and order dated 23.02.2015 passed in Appeal
No. 17/2015, The Board of Control for Cricket in India v. Competition Commission of
India and Another.
25. In the light of the above, we shall consider the questions formulated in the opening
paragraph of this order. For this purpose, it will be useful to notice Sections 27 and 48
of the Act. The same read as under:
"Sec. 27. Orders by Commission after inquiry into agreements or abuse of
dominant position.--Where after inquiry the Commission finds that any
agreement referred to in section 3 or action of an enterprise in a dominant
position, is in contravention of section 3 or section 4, as the case may be, it
may pass all or any of the following orders, namely:--
(a) direct any enterprise or association of enterprises or person or
association of persons, as the case may be, involved in such
agreement, or abuse of dominant position, to discontinue and not to
re-enter such agreement or discontinue such abuse of dominant
position, as the case may be;

(b) impose such penalty, as it may deem fit which shall be not more
than ten per cent of the average of the turnover for the last three
preceding financial years, upon each of such person or enterprises
which are parties to such agreements or abuse:
Provided that in case any agreement referred to in section 3
has been entered into by any cartel, the Commission may
impose upon each producer, seller, distributor, trader or
service provider included in that cartel, a penalty of up to three
times of its profit for each year of the continuance of such
agreement or ten per cent of its turnover for each year of the
continuance of such agreement, whichever is higher.
***
(d) direct that the agreements shall stand modified to the extent and in
the manner as may be specified in the order by the Commission;
(e) direct the enterprises concerned to abide by such other orders as
the Commission may pass and comply with the directions, including
payment of costs, if any;
***
(g) pass such other order or issue such directions as it may deem fit:
Provided that while passing orders under this section, if the
Commission comes to a finding, that an enterprise in
contravention to section 3 or section 4 of the Act is a member
of a group as defined in clause (b) of the Explanation to
section 5 of the Act, and other members of such a group are
also responsible for, or have contributed to, such a
contravention, then it may pass orders, under this section,
against such members of the group."
"Sec. 48. Contravention by companies -
(1) Where a person committing contravention of any of the
provisions of this Act or of any rule, regulation, order made or
direction issued thereunder is a company, every person who, at
the time the contravention was committed, was in charge of,
and was responsible to the company for the conduct of the
business of the company, as well as the company, shall be
deemed to be guilty of the contravention and shall be liable to
be proceeded against and punished accordingly:
PROVIDED that nothing contained in this subsection shall
render any such person liable to any punishment if he proves
that the contravention was committed without his knowledge or
that he had exercised all due diligence to prevent the
commission of such contravention.
(2) Notwithstanding anything contained in subsection (1),
where a contravention of any of the provisions of this Act or of

any rule, regulation, order made or direction issued thereunder
has been committed by a company and it is proved that the
contravention has taken place with the consent or connivance
of, or is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be
deemed to be guilty of that contravention and shall be liable to
be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) "company" means a body corporate and includes a firm or
other association of individuals; and
(b) "director", in relation to a firm, means a partner in the
firm."
26. Section 27 is a part of Chapter IV of the Act, which contains provisions relating to
duties, powers and functions of the Commission. Under this section, the Commission is
empowered to pass any of the orders enumerated in Clauses (a) to (g) if after inquiry it
finds that any agreement referred to in Section 3 or action of an enterprise in a
dominant position is in contravention of Section 3 or Section 4 of the Act. Under Clause
(a), the Commission can direct any enterprise or association of enterprises or person or
association of persons involved in such agreement, or abuse of dominant position, to
discontinue and not to re-enter such agreement or discontinue such abuse of dominant
position. Under Clause (b), the Commission can impose penalty upto of 10% of the
average of the turnover for the last three preceding financial years, upon each of such
person or enterprises which are parties to the agreements referred to in Section 3 or
abuse referred to in Section 4. Proviso to this clause lays down that if any agreement
referred to in section 3 has been entered into by a cartel than the Commission can
impose penalty of upto three times of profit for each year of continuance of an
agreement or 10% of the turnover for each of the year of the continuance of such
agreement, whichever is higher on every producer, seller, distributor, trader or service
provider who is a party to an agreement entered into by a cartel. In terms of Clause (d),
the Commission can direct that the agreements found to be in contravention of Section
3 shall stand modified to the extent and in the manner as may be specified in the order.
Clause (e) lays down that the Commission can direct the enterprises concerned to abide
by such other orders as the Commission may pass and mandate compliance thereof
including payment of costs. Clause (g) confers an omnibus power upon the Commission
to pass such other order or issue such directions as it may deem fit.
27. Section 48 finds place in Chapter VI of the Act, which contains various provisions
relating to penalties that can be imposed by the Commission. Section 42 confers power
upon the Commission to penalize any person, who, without reasonable cause, fails to
comply with the orders or directions issued by it under Sections 27, 28, 31, 32, 33, 42A
and 43A of the Act. Under Section 42 (2), the Commission can impose fine to the extent
of rupees one lakh for each day during which such non-compliance occurs, subject to a
maximum of rupees ten crore. Sub-section 3 of Section 42 declares that if any person
does not comply with the orders or directions issued, or fails to pay the fine imposed
under sub-section 2 then he shall be punishable with imprisonment for a period which
may extend to three years or with fine which may extend to rupees twenty-five crore, or
with both, as the Chief Metropolitan Magistrate, Delhi may deem fit. Section 42A
provides for making any application by any person for recovery of compensation from

any enterprise for any loss or damage suffered by him/it as a result of violation of the
directions issued by the Commission or contravention of any decision or order of the
Commission issued under Sections 27, 28, 31, 32 and 33 or any condition or restriction
subject to which any approval, sanction, direction or exemption in relation to any
matter has been accorded, given, made or granted under the Act or delaying in carrying
out the orders or directions of the Commission. Section 43 lays down that if any person
fails to comply, without reasonable cause, with a direction given by the Commission
under Section 36(2) and (4) or the Director-General while exercising powers under
Section 41(2), then he shall be punishable with fine which may extend to rupees one
lakh for each day during which such failure continues subject to a maximum of rupees
one crore. Section 43(A) which was inserted with effect from 01.06.2011 provides for
imposition of penalty if any person or enterprise fails to give notice under Section 6(2).
The extent of penalty which can be imposed under that section extend to one percent of
the total turnover or the assets, whichever is higher, of such a combination. Section 44
provides for imposition of penalty on a person, who is a party to a combination and
makes false statement in any material particular, or knowing it to be false, or omits to
state any material particular knowing it to be material. The extent of penalty which can
be imposed under this section is rupees fifty lakh to one crore. Section 45 empowers
the Commission to punish any person who fails to provide necessary information or
documents, omits to state any material fact knowing it to be material, or wilfully alters,
suppresses or destroys any document which is required to be furnished. Section 46
confers power upon the Commission to impose lesser penalty than the one specified in
the preceding sections.
28. Section 48(1) lays down that where a person committing contravention of any of
the provisions of the Act or of any rule, regulations, order made or direction issued
thereunder is a company, every person who, at the time of contravention was incharge
of and was responsible to the company for the conduct of its business as well as the
company shall be deemed to be guilty of contravention and shall be liable to be
proceeded against and punished accordingly. Sub-section 2 contains a similar provision
qua any director, manager, secretary or other officer of the company. The explanation
appended to Section 48 makes it clear that for the purpose of Section 48, the term
"Company" means a body corporate and includes a firm or other association of
individuals and the term "Director" in relation to a firm, means a partner in the firm.
2 9 . Since the provision contained in Section 48(1) raises a presumption of guilty
against every person, who, at the time of contravention of the provisions of the Act by
the company, was incharge of, and was responsible for the conduct of its business and
visits him with penalty, the same deserves to be construed strictly and in our view, the
deeming provisions contained in the two sub-sections of Section 48 can be invoked only
after it is found that the company has contravened the provisions of the Act or any rule,
regulation, order made and direction issued thereunder. The use of the word
'committed' in the two sub-sections necessarily implies that before any person incharge
of and responsible to the company or director, manager etc. of the company can be
proceeded against and punished by invoking the deeming provisions contained in
Section 48(1) and/or (2), there must exist an affirmative finding by some competent
authority that the company has contravened the provisions of the Act or any rule,
regulation etc. Under the scheme of the Act, final determination on the issue of
contravention of the provisions of the Act or any rule, regulation etc. can be made only
by the Commission and not by the Director General or any other authority. Even the
determination made by the Commission is subject to the right of the aggrieved person
to challenge the same by filing an appeal under Section 53B(2) of the Act. To put it
differently, in the absence of a determination by the Commission that the company has

committed contravention of any of the provisions of the Act or any rule, regulation etc.,
the deeming clause contained in Section 48(1) cannot be invoked for punishing the
person incharge of and responsible to the company for the conduct of its business.
Similarly, the deeming provision contain in Section 48(2) cannot be invoked for
penalising any director, manager, secretary or other officer of the company whose
consent or connivance or negligence may have resulted in contravention of the
provisions of the Act or of any rule, regulation or order made or direction issued
thereunder by the company unless a finding is recorded by the competent authority that
the company has in fact contravened the provisions of the Act.
3 0 . In the present case, investigation into the role of the persons incharge of and
responsible to Respondent No. 5 for the conduct of its affairs was initiated by the
Commission at the threshold i.e. while passing order dated 29.09.2014 under Section
26(1) of the Act and Jt. DG returned a finding in paragraph 8 of his report that the
appellants are equally complicit in the practices being carried on and the decisions
being taken by Respondent No. 5, which were found to be contrary to the provisions of
the Act. This exercise was ex facie contrary to the plain language of Section 48 of the
Act. That apart, in the absence of a determination by the Commission that Respondent
No. 5 had acted in contravention of Section 3, the finding recorded by the Jt. DG in
paragraph 8.2.2 of his report about the alleged complicity of the appellants in the anti-
competitive practices being carried on and the decisions taken by Respondent No. 5
could not have been made basis for passing an order under Section 27(b) or 27(g) and
on that ground alone, the penalty imposed on Appellant No. 1 and the direction
contained in the second part of paragraph 14 of the impugned order are liable to be set
aside.
31. The judgment of the Supreme Court in Tamil Nadu Electricity Board v. Rasipuram
Textile Private Limited and others (supra), on which reliance has been placed by Shri
Jaiveer Shergill, does not have any direct bearing on the decision of this appeal. In that
case, the Supreme Court interpreted Section 49-A of the Electricity Act, 2010 which is
pari materia to Section 48 of the Act and it was held that the burden to prove that the
particular person was incharge of and was responsible to the company for the conduct
of business of the company is primarily on the complainant and the same shifts on the
other party only if it is established by evidence that the particular person was, in fact,
incharge of and was responsible to the company for its business. Paragraphs 11 to 14 of
that judgment which notices the relevant provision and contains analysis thereof read as
under:
"11. Section 49-A which was inserted by Act 32 of 1959 provides for offence by
companies. It reads as under:
"49A Offence by companies.--(1) If the person committing an offence
under this Act is a company, every person who at the time the offence
was committed was in charge of, and was responsible to the company
for the conduct of the business of the company as well as the company,
shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render
any such person liable to any punishment, if he proves that the
offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such
offence.

(2) Notwithstanding anything contained in subsection (1), where an
offence under this Act has been committed with the consent or
connivance of, or is attributable to any neglect on the part of, any
director or manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
Explanation.--For the purposes of this section.--
(a) 'company' means any body corporate and includes a firm or
other association of individuals; and
(b) 'director', in relation to a firm, means a partner in the
firm."
12. In terms of the aforesaid provision, therefore, it was obligatory on the part
of the complainant not only to make requisite averments in the complaint
petition but also to prove that any of the Directors who had been prosecuted for
alleged commission of the aforementioned offence was incharge of and was
otherwise responsible for the conduct or the affairs of the Company.
13. We have noticed hereinbefore that how the learned trial Judge has dealt
with the entire aspect. Learned trial Judge has misconstrued and misinterpreted
the provisions of Section 49A of the Act.
14. In terms of sub-section (1) of Section 49-A, it is for the complainant to
prove that the Director of the Company at the time when the theft was
committed was in charge of and/or was responsible for the conduct of its
business. Only in the event such an averment is made and sufficient and cogent
evidence is brought on record to prove the said allegations, the proviso
appended to Section 49-A would be attracted; meaning thereby only in the
event it is proved that a Director or a Group of Directors of the Company were
in charge of and/or were responsible for the conduct of the business of the
company, the burden would shift on the accused to establish the ingredients
contained in the proviso appended to Section 49-A of the Act."
32. The ratio of the above noted judgment is that the primary burden to prove that the
particular person was, at the time of contravention of the incharge and was responsible
to the company is on the one who makes such allegation and only after the evidence
has been led to show that the particular person was, in fact, at the time of commission
of offence, incharge of and was responsible to the company for the conduct of its
business but there is nothing in the judgment from which can be inferred that the
Commission has the power to pass hybrid order under Section 26 (1) and direct the DG
to cause investigation to be made about the role of the person who was incharge and
was responsible to Respondent No. 5 for the conduct of its business without a
determination by the competent authority that Respondent No. 5 had contravened the
provisions of the Act or any rule, regulation, order made or direction issued thereunder.
33. We may now consider the argument of Shri Jaiveer Shergill that the source of the
Commission's power to impose monetary penalty on any person or enterprise found
guilty of acting in contravention of Section 3 or 4 of the Act can be traced in Section
27(b) and the penalty imposed on Appellant No. 1 @ 10% of the average of his income
of the three preceding financial years cannot be termed as illegal because he was given

opportunity to controvert the findings recorded by the Jt. DG, which he did not avail.
Though, this argument appears attractive, we do not find any merit in it. It is not in
dispute that copy of the order passed by the Commission under Section 26(1) was not
supplied to the appellants and at no stage of the investigation or even thereafter they
were told that there is a proposal to penalise them under Section 27(b). The decision
taken in the Commission's meeting held on 23.04.2015 to supply electronic copy of the
investigation report to the appellants to enable them to file their
reply/suggestions/objections and further direction given to them to furnish their income
details for the last three preceding financial years cannot be construed as a notice
proposing imposition of penalty under Section 27(b). As a matter of fact, by then the
stage had not reached for issuing a notice to Appellant No. 1 because the Commission
had not recorded a finding that Respondent No. 5 had contravened the particular sub-
sections of Section 3 of the Act and he, being incharge of the affairs of Respondent No.
5, was liable to be punished with the help of Section 48(1).
34. The record produced before the Tribunal does not show that the Commission had,
at any point of time, informed the appellants that it was intending to impose penalty on
either of them under Clause (b) of Section 27 of the Act. Therefore, they did not get any
opportunity to show that paragraph 5 of the order passed by the Commission under
Section 26(1) and the conclusion recorded by the Jt. DG in paragraph 8.2.2 of his
report were ultravires the provisions of the Act and also represent their cause against
the proposed penalty. Thus, there is no escape from the conclusion that the penalty
imposed on Appellant No. 1 is vitiated due to violation of the principles of natural
justice.
35. The question which remains to be considered is whether the direction given by the
Commission to Respondent No. 5 not to associate the appellants with its affairs
including administration, management or governance for a period of two years is legally
sustainable. While Shri Rajshekhar Rao argued that the Act does not empower the
Commission to pass an order or issue direction which results in depriving the elected
representatives of an entity of their right to hold the particular offices/posts and, in any
case, the direction contained in the second part of paragraph 14 of the impugned order
could not have been issued without any notice or opportunity of hearing to the
appellants, Shri Jaiveer Shergill defended the direction given by the Commission by
relying upon clause (g) of Section 27. Shri Shergill also submitted that the appellants
were given due notice and opportunity to defend inasmuch as the copy of the
investigation report was supplied to them and they were given opportunity to file
suggestions/objections.
36. In our opinion, Clause (g) of Section 27, which gives power to the Commission to
pass such other orders or issue such other directions as it may deem fit has to be
interpreted by applying the rule of contextual interpretation and keeping in view the
objects sought to be achieved by enactment of the Act, namely, to prevent practices
having adverse effect on competition, to promote and sustain competition in markets, to
protect interest of consumers and to ensure freedom of trade carried on by other
participants in the markets in India and for matters connected therewith or incidental
thereto. The powers vested in the Commission under Clauses (a), (b), (d) and (e) of
Section 27 are in consonance with one of the objectives of the Act i.e. to prevent
practices having adverse effect on competition. The Commission's power to issue
direction to any enterprise or association of enterprises or person or association of
persons involved in anti-competitive agreement, which are hit by Section 3 or abuse of
dominant position, which is prohibited under Section 4, to discontinue and not to re-
enter such agreement or discontinue such abuse of dominant position as also its power

to impose monetary penalty under Clause (b) are in harmony with the objective of
putting an end to the practices which have adverse effect on competition. Likewise, the
Commission's power to issue direction that the agreements which are anti-competitive
shall stand modified is in tune with the objects of the Act and the scheme of Sections 3
and 4 thereof. Under Clause (e), the Commission can issue direction for ensuring
compliance of the orders passed by it. It will, therefore, be reasonable to say that
Clause (g) of Section 27 should be interpreted keeping in view the language of the
preceding clauses. If Clause (g) is interpreted as conferring unbridled power upon
Commission to pass any order or issue any direction as it may deem fit, then the
provision will become prone to the challenge of unconstitutionality and it is settled law
that if a provision of the statute is capable of two constructions, then the Court should
not adopt the one which makes it constitutionally infirm.
37. We are also convinced that in exercise of power vested in it under Section 27(g),
the Commission cannot make an order or issue a direction which would directly or
indirectly impinge upon the provisions of other statutes. The election to the offices of
the President and the Secretary of Respondent No. 5 and such like bodies are governed
by the provisions contained in the Travancore Cochin Literary, Scientific and Charitable
Societies Registration Act, 1955, rules, regulations and by-laws made thereunder. The
tenure of the elected office-bearers is also fixed by these statutory provisions, rules,
regulations and by-laws. Therefore, the Commission does not have the jurisdiction,
power or authority to pass an order which has the effect of directly or indirectly
curtailing the tenure of the duly elected office-bearers or deprive them of their right to
exercise powers and discharge the functions of the elected offices/posts under the
particular statutes. As a corollary, it must be held that the direction contained in the
second part of paragraph 14 of the impugned order is ultravires the powers vested in
the Commission under the Act. If we were to hold that wide and open-ended language
used in Section 27(g) empowers the Commission to issue a direction which interferes
with the rights of the elected representatives of an association then the results would be
catastrophic. In a given case, the Commission may order removal of the office-bearers
of an association which may be found to have acted in contravention of Section 3
and/or Section 4 on the ground that the they were incharge of and responsible for the
conduct of the affairs of the association. In another case, the Commission may curtail
the tenure of the elected office-bearers as has been done in the present case. Such
consequence of the exercise of unbridled power was never envisaged by the Legislature.
38. Even if it is assumed for a moment that the direction contained in the second part
of paragraph 14 of the impugned order can be treated as having been passed under
Section 27(g), the same is liable to be quashed for the simple reason that before
issuing direction to Respondent No. 5, which effectively curtailed the tenure of the
appellants, the Commission did not give any notice or opportunity of hearing to the
appellants. The language in which paragraph 14 of the impugned order has been
couched may support the argument of Ms. Rashmi Nandakumar in the first blush, but on
a deeper examination, we do not have slightest hesitation to reject the same because
the impact of the direction given by the Commission has resulted in depriving the
appellants of their legitimate right attached to the posts of the President and the
Secretary and no such direction could have been given by the Commission without
putting the appellants to notice and giving them an effective opportunity to defend
against the proposed direction. If the offending direction had not been stayed by the
Tribunal, Respondent No. 5 would have been left without the President and the
Secretary for a period of two years and it would have become a headless body. We have
no doubt that the Commission did not ponder over the unwarranted consequences of
the direction given by it, else it would not have given the impugned direction.

39. The order passed by the Tribunal dismissing the appeal filed by AKCDA (Appeal No.
17 of 2016) has no bearing on the present case because the only issue raised by the
appellant in that case was whether the Commission was justified in holding it guilty of
having acted in contravention of Section 3(3)(b) read with Section 3(1) of the Act and
the same was answered in affirmative. The question whether the Commission could
penalise the appellants by invoking Section 27(g) and that too without giving them
action-oriented notice and opportunity of hearing was neither raised nor considered by
the Tribunal. Therefore, dismissal of the appeal filed by AKCDA cannot be relied upon
for denying relief to the appellants.
40. In the result, the appeal is allowed. The impugned order is set aside in so far as it
relates to the imposition of penalty on Appellant No. 1 @ 10% of the average of his
income of preceding three financial years. The direction contained in the second part of
paragraph 14 of the impugned order is also set aside.
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MANU/TA/0025/2016

IN THE COMPETITION APPELLATE TRIBUNAL

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