Merger of COMPAT and NCLAT

Recently, the Government of India decided to merge the Competition Appellate Tribunal (COMPAT) with the National Company Law Appellate Tribunal (NCLAT). In the recent past, the Competition Commission of India (CCI) has often found itself at the receiving end of the COMPAT, in more ways than one.

While the debate is still going on as to the benefits and drawbacks of this decision, it is interesting to see the approach of the COMPAT in few cases which came before it in last few months. Several of the CCI’s orders have been set aside, primarily on grounds of failure to adhere to the principles of natural justice. However, following a string of recent orders of the COMPAT, it now appears that the COMPAT has been steadily slipping into the CCI’s adjudicatory shoes.

In a recent decision of the CCI involving alleged abuse of dominance by Gas Authority of India Limited, the COMPAT disapproved of the CCI for being overly diligent while passing a prima facie order. The COMPAT noted that at the initial stage of forming an opinion on whether there exists a prima facie case, the CCI is required to merely conduct a preliminary analysis based on averments made in the information. It further noted that the CCI cannot conduct a detailed examination of the allegations, evaluate evidence and record its findings on the merits of the issue given that such exercise can be undertaken only after receiving the investigation report from the Director General (DG). Accordingly, the COMPAT reversed the CCI’s finding of no prima facie violation under the Competition Act, 2002 (Act) and simultaneously directed the DG to investigate the matter.

In view of the COMPAT’s observations in the GAIL order, the scope of adjudicatory powers of the CCI has yet again come to question. What would be the adequate amount of information that should be considered by the CCI to pass a prima facie order and at what point in the investigation process can the CCI assume an investigatory role, are some of the questions that merit further deliberation.

The GAIL order also assumes significance as it appears to be an extension of the COMPAT’s growing proclivity to order a DG investigation in a matter after forming a prima facie view of a potential violation of the Act (in contrast with the CCI’s finding). For example, the COMPAT set aside a prima facie decision of the CCI ordering closure of the matter, in a case of alleged abuse of dominant position and anti-competitive practices by Uber. Interestingly, Uber has moved to the Supreme Court against the COMPAT order based on the plea that COMPAT’s probe order suffers from a patent jurisdictional flaw. While the GAIL and Uber orders were both decisions of the CCI at the prima facie stage, the COMPAT has not shied away from “taking matters in its own hands” by ordering the DG to investigate even in appeals arising out of final orders of the CCI (i.e.,post DG investigation). One such instance is the case involving allegations of abuse of dominance and anti-competitive practices against International Transport Association (IATA). While dismissing the CCI’s findings, the COMPAT ordered the DG to initiate a fresh investigation in view of the DG’s omission to record a specific finding on the allegation of abuse of dominance by IATA.

This begs the question as to whether the scope of the powers of the COMPAT under the Act includes the power to bypass the CCI to determine the existence of a prima facie case by itself and direct an investigation by the DG, or whether the COMPAT is required to let the CCI re- examine the matter and pass appropriate orders. One may argue that the Act allows the COMPAT, as an appellate body having overarching powers, to pass such orders as it thinks fit, confirming, modifying or setting aside the direction, decision or order appealed against and therefore, the COMPAT is well within its powers to direct the DG to conduct investigations. However, another school of thought suggests that the power to direct an investigation lies solely with the CCI considering that the DG is the investigative arm of the CCI and reports to the CCI alone. Therefore, arguably, a more appropriate step would be to, perhaps remand the matter to CCI for fresh consideration rather than directing the DG to investigate. It is thus a moot point as to whether the COMPAT can exercise such drastic powers and if so, whether any parameters are required to be satisfied before exercise of such powers. Given the regulatory architecture of the Act, it is indeed vital that the role and powers of the various statutory authorities are clear to ensure that each authority functions within its legislative mandate and the parties have certainty in the manner in which their cases are likely to proceed. One hopes that the impending decision of the Supreme Court in the Uber case will settle this procedural dilemma between the competition watchdog and the appellate body. Further, as COMPAT’s merger with the NCLAT is in the offing, appeals from the orders of the CCI would lie before the NCLAT. Thus, while the cases discussed in this piece analyse the COMPAT’s approach over the last few months, it remains to be seen how the NCLAT would deal with such matters and whether it’s approach would be aligned to that of the COMPAT or if it would differ.

History of COMPAT

COMPAT was constituted following the passage of the Competition (Amendment) Act, 2007 [hereinafter “Amendment Act, 2007”]. It amended the Competition Act by deleting Section 40 and introducing Chapter VIIIA titled “Appellate Tribunal”.

  1. Prior to the amendment, any person aggrieved by any decision or order of the Competition Commission of India[hereinafter, “CCI”] would have to directly file an appeal with the Supreme Court asking for necessary relief. But following the amendment, parties aggrieved by an order of CCI had to first file an appeal with COMPAT and if they were still dissatisfied, they could approach the Supreme Court. The double-layered system streamlined the cases which landed in the Supreme Court.
  2. The amendment and the resulting creation of COMPAT was the result of the Supreme Court judgment in the case of Brahmdutt vs. Union of India, the Supreme Court ruled on whether with regard to the operations and appointments of CCI, the Competition Act was in violation of the doctrine of separation of powers as recognized by the Constitution of India. The Supreme Court noted that CCI was performing advisory, regulatory, and adjudicatory functions, even when appointments of CCI were completely under the control of the government. Under the doctrine of separation of powers, appointments to tribunals, wherein the functions are essentially judicial in nature, are to be made by the judiciary.
  3. The Supreme Court therefore, was of the view that the Government ought to consider the creation of a separate appellate body. So, while CCI being the expert body, would continue to perform a mix of advisory, regulatory and adjudicatory functions, this new body would be tasked primarily with performing adjudicatory functions. It would ensure judicial accountability of CCI and would ensure that orders passed by CCI are fair and in consonance with the principles of natural justice.
  4. In the wake of this judgment, the Government passed the Amendment Act, 2007 creating COMPAT. The formal notification to establish COMPAT with its headquarters in New Delhi was passed on 15th May, 2009.
  5. The Amendment Act interalia authorized COMPAT to hear appeals against orders passed by CCI and to adjudicate on compensation applications. The power of COMPAT to take up appeals was limited to orders passed by CCI under Sections 26(2), 26(6), 27, 28, 31,32,33,38,39,43,43A, 44, 45 and 46 of the Competition Act.

The tussle of power between CCI and COMPAT

CCI’s relationship with COMPAT has been fairly tumultuous. CCI’s 1st appeal at Supreme Court against COMPAT came in the matter of Competition Commission of India vs. Steel Authority of India Ltd.

Jindal had filed a complaint with the CCI against SAIL and Indian Railways alleging abuse of dominant position and existence of anti-competitive agreement. CCI had taken a prima facie view in the matter referring to its director general, investigations under Section 26(1) of the Competition Act. Before the director general could commence his inquiry, SAIL filed an appeal with COMPAT on grounds, inter alia, that the order was contrary to the principles of natural justice, since CCI had neither given a notice nor granted a hearing to it. The tribunal passed an interim order and stayed the investigation. CCI, taken aback by the ruling, approached the Supreme Court.

The Supreme Court in its judgment attempted to circumscribe the balance of powers between CCI and COMPAT. It observed that, all orders passed by the CCI are not subject to appeal. When the matter is at the stage of forming a prima facie case, there exists no duty under the Act to give notice or grant hearing to any party.

The judgment was hailed for its efforts to delineate and outline the powers of CCI and to provide for a robust antitrust jurisprudence in India. However, this judgment marked the beginning of an unending power tussle between the 2 bodies. In its journey of 8 years, COMPAT disposed 360 appeals filed against orders passed by CCI. It has upheld 216 orders of the CCI, while striking down 114 orders, which is about 40% of the orders.

While COMPAT set aside several of the CCI’s order primarily on grounds of violation of principles of natural justice. But increasingly, it appeared that COMPAT was over-stepping its powers.

In 2015, CCI had dismissed a complaint filed by Gujarat Industries Power Company Ltd. Against Gas Authority of India Ltd. Alleging abuse of dominant position. CCI took a prima facie view and held that there was no case of abuse of dominant position. On appeal, COMPAT passed an order reversing the decision of CCI. It said that at the stage of forming an opinion to commission investigation, CCI should only decide whether or not there exists a prima facie case. However, it was found by COMPAT that CCI had donned the role of an investigator and had prematurely dismissed the allegation of anti-competitive behaviour. COMPAT, thereafter, passed the order issuing a directive that the director general must initiate investigation instead of remanding the matter to CCI. Oflate, COMPAT had passed a number of such directives, bypassing the CCI entirely. In 2016, COMPAT had issued a directive to the director general to initiate investigations against Uber, after CCI had dismissed the complaint filed by Meru Cabs. While the matter is yet to be finally disposed, it has been argued by Uber that the order by COMPAT suffered from a “jurisdictional flaw”.

But despite these ongoing tussles of power, COMPAT had a fairly respectably run as an appellate tribunal. It was instrumental in adopting “relevant turnover” as opposed to “total turnover” in M/s Excel Corp Care Limited vs. Competition Commission of India, therefore bringing India in line with the global best practices. COMPAT upheld the principle of natural justice in Lafarge India Limited & Ors. Vs. Competition Commission of India. In this case, CCI had passed an order with the chairperson as one of the signatories to the order even when the chairperson had not heard the matter. In its order, COMPAT highlighted the principles of natural justice are enshrined in the order and CCI cannot pass orders violating the principles.

Therefore, it remains unclear what had warranted the decision to completely scrap-off COMPAT and necessitated the transfer of all matters of appeal to NCLAT. NCLAT is already saddled with appeals filed against orders passed by NCLT under Section 410 of the Companies Act, 2013. It is also the appellate tribunal for hearing appeals against orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 [“IBC”]. Further, NCLAT is also the appellate tribunal for hearing appeals against the orders passed by Insolvency  and Bankruptcy Board of India under Section 202 and Section 211 of IBC. Even with the burgeoning work, membership of NCLAT remains unchanged. NCLAT continues to comprise of only 2 members i.e., one Chairperson who is a retired Supreme Court judge, and one other technical member. Neither of the 2 members have expertise in competition law. While the Government can appoint up to 11 members to NCLAT, no such move appears to be on the radar. It was further revealed in an RTI application that as of November 2017, out of the 73 cases which were transferred to the NCLAT, the appellate body has succeeded in disposing just 8 cases.

Conclusion

It remains to be seen whether the end of COMPAT was really necessary and whether NCLAT will serve as a better appellate tribunal for competition law. However, it is clear that NCLAT has an uphill task. Considering that the scope of competition law in India is only going to increase, the government should consider expanding the bench strength of NCLAT. It should appoint enough competition law experts to ensure that the competition law disputes are smoothly adjudicated.

Aishwarya Says:

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