Gujarat HC Upholds CCI’s Order against Paper Mills’ Alleged Cartel

Case Details: J.K. Paper Ltd. v. Competition Commissioner of India - [2023] 149 taxmann.com 127 (HC-Gujarat)

Judiciary and Counsel Details

• • Biren Vaishnav, J.
  • Mihir Thakore, Devang Nanavati, Sr. Advs., Nirag N. Pathak, Ms Manisha Narsinghani, Aaditya Narayan & Arnav Narayan, Advs. for the Petitioner.
  • Devang Vyas, ASG., K.M. Antani & Ms Garima Malhotra, Advs. for the Respondent.

Facts of the Case

In the instant case, the J.K. Paper Ltd. filed a writ petition contesting an investigation order issued by the Competition Commission of India (CCI) u/s 26 of the Competition Act, 2002. The company argued that the order was merely an administrative one and only represented a preliminary view, and did not impact their legal rights and obligations.

It was alleged in the report of the Director General that the petitioner was a party to the cartel among the paper mills which would get-together and facilitate price rise every month, which contravened Section 3 (Anti-competitive agreements) and Section 4 (Abuse of dominant position) of the Competition Act, 2002.

High Court Held

The High Court observed that the order u/S.26(1) merely directs an investigation. It does not affect the rights and liabilities of the petitioner. The CCI is to examine the validity of the allegations as to whether the petitioner’s conduct is anti-competitive. The petitioner has been provided an opportunity to file its objections and suggestions to the Director General’s (DG) report and the petition is therefore certainly misconceived.

It was noted that Section 26 of the Act indicates that upon receipt of a Reference from the Central Government or a State Government or an information received u/s 19 (inquiry into certain agreements and dominant position), if the Commission is of the opinion that there exists a prima facie case, it shall direct an investigation to be made in the matter.

The Court relied upon the judgement of the Supreme Court in Competition Commission of India v. Steel Authority of India in which it was laid down that the exercise of powers by the CCI under Section 26(1) of the Act is not adjudicatory in nature and the formation of prima facie opinion is only an administrative process that does not entail civil consequences.

The High Court further observed that through the reading of investigation reports and the orders passed u/s 26 of the Act would indicate that the order is an administrative order that only forms a prima facie opinion.

Further, the petitioner has been given an opportunity to produce evidence before the DG during the process of investigation and by the orders impugned, the DG has called upon the petitioner to file its objections/suggestions to the investigation report. It cannot be said, therefore, that the petitioners’ doors are closed.

The High Court while dismissing the petition held that it cannot delve into the merits and demerits of the report when the petitioner for cross examination of witnesses has been rejected and the CCI has granted liberty to the petitioner to file affidavits in rebuttal to dispute the conclusions drawn by the DG based on the depositions etc.