HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 9664 OF 2012 Date : 16.12-2014 Between :
M/S.Hyderabad Cylinders Private Limited Flat No 402, Maltinaik Plaza, Abids, Hyderabad Rep by its Director Hitesh Sanghvi … Petitioner and The Union of India, Ministry of Corporate Affairs, 4th floor, Shastri Bhavan Rajendraprasad road, New Delhi and others … Respondents The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 9664 OF 2012 ORDER:
Petitioner is manufacturer of LPG cylinders and supplying them to Indian Oil Corporation Limited, Bharat Petroleum Corporation, Hindustan Petroleum Corporation etc. Factory of the petitioner is located in Kothur in Mahabubnagar district. In the year 2010-11, Indian Oil corporation Limited (for short IOCL) invited bids for supply of 105 lakh 14.2 Kg capacity LPG cylinders with SC valve to various bottling plats as per the terms, conditions and specifications mentioned in the tender document. As per the tender conditions, only those manufacturers having valid approval from Chief Controller of Explosives (CCOE) and Bureau of Indian Standards (BIS) license for manufacture of 14.2 Kg LPG cylinders as per IS-3196 (Part-1) as on due date of the tender, were eligible to submit the bids. Petitioner is one of the participants in the bid process. Technical bid was opened on 3.3.2010 and price bids of 50 qualified bidders were opened on 23.3.2010.
2. The Competition Commission of India (for short CCI) was appraised that there was bid rigging in large scale by the tenderers which attract the provisions of the Competition Commission of India Act, 2002. The Director General of CCI reported to the CCI of such bid rigging. Having found prima facie evidence that there was bid rigging, CCI has suo-motu initiated investigation into the matter. The Director General was directed to enquire into the issue and submit a report. Accordingly, Director General inquired into the matter and submitted his report. Based on the report submitted by the Director General, Case No. 3 of 2011 is registered and notices were issued to all 50 companies involved in manufacturing of LPG gas cylinders who participated in the tender process, including the petitioner herein. After affording due opportunity of hearing and considering the objections, CCI by its decision dated 24.2.2012 held that except JBM industries and Punjab Cylinders, all the bidders including the petitioner, have contravened the provisions of Section 3 (3) read with Section 3 (1) of the CCI Act, 2002. Having found the contravention as very grave and serious, CCI imposed penalties on the companies @ 7 % of the average turnover of the company. However, insofar as petitioner company is concerned, penalty was calculated on the basis of 2.1 times of the Net Profit and penalty of Rs.6,48,10,724/- was imposed. Challenging the said order, this writ petition is instituted.
3. By order dated 4.4.2012 this Court directed not to take coercive steps pursuant to the impugned order dated 24.2.2014 for a period of four weeks. By order dated 27.4.2012, the interim order was extended until further orders. Praying to vacate the interim order, CCI filed a vacate petition in WVMP No. 3216 of 2012.
4. When the vacate stay petition was taken up, learned counsel for petitioner and learned counsel appearing for CCI represented to hear and dispose of the main writ petition itself. With the consent of both the counsel, the writ petition is taken up for final disposal.
5. Learned counsel for petitioner contended that petitioner was denied reasonable opportunity during the enquiry conducted by the Director General, and therefore the orders passed by CCI based on the report of Director General is vitiated and is liable to be set aside on that ground alone. It is contended that on 9.3.2011 CCI ordered the Director General to conduct investigation and submit a report in exercise of power vested under Section 26 (1) of the Act. The Director General has adopted the methodology in conducting the investigation. As evident from para 2.1 of the methodology, evidence was collected by sending the questionnaire to the concerned parties. Statements of the parties who submitted bids were recorded. Persons who were questioned were shown evidence in possession of the office of CCI and after evaluating the evidence, opportunity was given to explain their position. Thus, Director General felt that it was necessary to hear all the concerned companies before submitting the report and has afforded opportunity to 49 companies except petitioner company. He therefore submitted that action of the Director General in not affording opportunity is wholly illegal and report prepared thereon by him is vitiated. Therefore he submitted that CCI ought not to have relied on said report while passing impugned orders levying heavy penalty on the petitioner company. Since the entire proceedings are vitiated on account of denial of reasonable opportunity at the initial stage of investigation, it is not necessary to avail the remedy of appeal and writ petition is maintainable even when statutory remedy of appeal is available.
6. Learned counsel for petitioner pointed out that the reasoning assigned by CCI would show non application of mind on the issue of affording of opportunity. The CCI has proceeded on the assumption that opportunity was provided to the petitioner by Director General and CCI erred in holding that sufficient opportunity is afforded by the CCI, in support of the stand of the petitioner company during the enquiry by the Commission which petitioner has fully availed. It is further contended that CCI was under erroneous impression that Mr.Vijay Sanghvi also represented the petitioner company. Learned counsel submitted that at that particular point of time, Mr.Vijay Sanghvi was not only a Director of petitioner company but he was also Director of other group companies such as Sanghvi Cylinders Private Limited and RM Cylinders Private Limited. He was only representing other group companies but not the petitioner company. Therefore, the basis on which the contention of the petitioner that it was denied reasonable opportunity is rejected was erroneous and therefore matter requires fresh adjudication in the hands of CCI.
7. In support of his contentions, learned counsel for petitioner placed reliance on the following decisions.
MARIAMMA ROY Vs INDIAN BANK AND OTHERS
[1]
, UMA NATH PANDEY AND OTHERS Vs STATE OF UTTAR PRADESH AND ANOTHER
[2]
, SATWATI DESWAL Vs STATE OF HARYANA AND
[3]
OTHERS and INDIA CEMENTS LIMITED Vs CHAIRMAN, APSERC,
[4]
HYDERABAD AND OTHERS .
8. Second limb of the submission of the learned counsel for petitioner is on the question of penalty. He contended that there is no basis for CCI to levy penalty by 2.1 times of net profit. The CCI failed to appreciate that penalty can be levied on the basis of the profit derived by the company, whereas for the year in which proceedings are initiated, the petitioner company, actually incurred losses. If an opportunity was given by the Director General, the petitioner company would have raised these contentions to the satisfaction of the Director General of CCI but the CCI has simply adopted the recommendations made by the Director General without looking into the explanation submitted by the petitioner. He further contended that no reasons are assigned for arriving at the conclusions and levying the quantum of penalty and such action is wholly illegal and arbitrary.
9. Ms. Sundari R Pisupati, learned counsel representing CCI raised preliminary objection on the maintainability of the writ petition. She contended that Act provides an effective remedy by way of appeal and when petitioner has an effective remedy by way of appeal, the writ petition is not maintainable. She further contended that CCI has jurisdiction to decide the issue and power is vested in CCI to suo-muto register a complaint and investigate into the same, take action wherever violations of provisions of Section 3 are found. Once CCI is competent to take a decision, against such a decision writ petition does not lie, more so, when effective remedy by way of appeal is provided. There is neither allegation of inherent lack of jurisdiction nor the order passed is without any basis.
10. Learned counsel for respondent further contended that whenever an appeal is preferred, the appellant has to deposit 10 % of the amount of penalty quantified and has to give security with reference to 90% of the amount of penalty levied. By instituting this writ petition instead of appeal, petitioner is trying to escape such liability statutorily enjoined upon and so far has not deposited any money. Learned counsel further contended that earlier some appeals were filed before the Appellate Tribunal and the Appellate Tribunal on consideration of the appeals, remanded the matter to CCI on the issue of quantum of penalty imposed for its reconsideration. CCI having reconsidered the matter has passed orders reaffirming the earlier penalties imposed. Against the orders passed by CCI, some companies have preferred appeals and except petitioner-company no other company has instituted writ petition.
11. Learned counsel for respondent further contended that at the stage of enquiry by the Director General, there is no requirement of putting the persons on notice and giving opportunity of hearing and submitting report after hearing them. The report of the Director General is in the form of an administrative report to aid and assist CCI and therefore there is no requirement to afford opportunity of hearing to the parties. After submission of the report by the Director General, notices were issued to all the companies, full opportunity of hearing was afforded by CCI, report of the Director General was supplied to all the companies. Petitioner has availed the opportunity of hearing, has raised all the objections available to it and all such objections raised by petitioner company were considered and orders are passed. She therefore contends that, it is not true that petitioner company was denied opportunity of hearing. Learned counsel further contended that the record would disclose that Mr.Vijay Sanghvi deposed before the Director General stating that he is Director of three companies, including the petitioner company and he is representing the petitioner company also. More particularly with reference to answer given to Question No.2 of his deposition dated 29.4.2011 he stated that ‘my company has submitted bids to supply LPG cylinders to IOCL in March 2010’. It would thus appear that Mr Vijay Sanghvi was representing the petitioner company also before the Director General.
12. Learned counsel for respondent further contended that in view of decision of the Supreme Court in COMPETITION COMMISSION OF INDIA
[5]
Vs STEEL AUTHORITY OF INDIA LIMITED AND ANOTHER the defense of petitioner is no more available. The Supreme Court held that during the investigation by the Director General as ordered by CCI, there is no necessity for giving opportunity of hearing to the affected parties.
Supreme Court compared the report of the Director General to that of an enquiry report in service matters. Learned counsel placed reliance on paras 54, 63 and 69 in support of her contentions. It is further contended that there is clear distinction between section 21 (1) and section 26 (2) and insofar Section 26(2) is concerned, no person is entitled to opportunity of hearing. The above decision of the Supreme Court is followed by Delhi High Court in SOUTH ASIA L.P.G. COMPANY PRIVATE LIMITED Vs COMPETITION
[6]
COMMISSION OF INAID AND OTHERS
13. Learned counsel for respondent further contended that even assuming that petitioner was not afforded opportunity of hearing and not affording of opportunity at that stage was erroneous, proceedings cannot be set aside unless the petitioner satisfies this Court the prejudice caused to petitioner. Learned counsel contended that petitioner failed in establishing the prejudice caused to petitioner on account of denial of opportunity of hearing by the Director General. Learned counsel therefore contended that there is no merit in the submission of the learned counsel for petitioner that proceedings are vitiated on the ground that no opportunity of hearing was given by the Director General.
14. With reference to the merits of the case, learned counsel for respondent justified the decision of CCI which was well considered order dealt with all the objections and assigned detailed reasons for each of the issues relating to each of the companies. CCI was compelled to impose 2.1 times penalty on the net profit since petitioner has not furnished the details as required for the purpose of arriving at penalty, therefore, such a procedure was followed. Detailed reasons are assigned in support of the decision and same is valid. Be that as it may, learned counsel contended that on merits petitioner has an effective remedy of appeal and has to avail the remedy of appeal.
15. The issue for consideration is whether petitioner was denied opportunity of hearing by the Director General and not providing opportunity of hearing by the Director General vitiate the entire proceedings, warranting interference by this Court in exercise of power of judicial review under Article 226 of the Constitution of India.
16. On receiving of complaint under Section 19 (1) the process of enquiry and investigation was set in motion. The Commission directed the Director General to investigate into the complaint and submit its report. The Director General issued notices to all the companies against whom allegations are made, heard them and submitted its report.
17. Even assuming that Mr Vijay Sanghi did not represent the petitioner, it is seen that per se, the provision in Section 26 do not envisage an opportunity of hearing by the Director General. The Director General report is in the form of a preliminary report, which should be considered by CCI. In the instant case, petitioner company was given notice by the Commission, full opportunity of hearing was afforded, the report of the Director General was supplied. Petitioner company has raised its objections including the objection that the Director General did not afford opportunity, same was considered and decision was rendered. Against this decision, an appeal shall lie to the Appellate Tribunal.
18. Scope of Section 26 is no more resintegra. Supreme Court has considered this issue in detail and rendered judgment in COMPETITION COMMISSION OF INDIA (referred supra) holding that report of the Director General is an administrative report and at the stage of preparation of the report by the Director General as required by the commission, there is no requirement of giving opportunity of hearing to the delinquent company. The Act does not envisage giving of opportunity of hearing at that stage and therefore person is not entitled to plead that as opportunity of hearing was not afforded to him by the Director General, the proceedings would vitiate. Supreme Court said mere direction for investigation to one of the wings of the Commission is akin to departmental proceedings, which do not entail civil consequences for any person, particularly, in the light of the strict confidentiality that is expected to be maintained by the Commission. Supreme Court held as under:
“54. At the very outset, we must make it clear that we are considering the application of these principles only in light of the provisions of Section 26 (1) and the finding recorded by the Tribunal in this regard. The intimation received by the Commission from any specific person complaining of violation of Section 3(4) read with Section 19 of the Act, sets into the motion, the mechanism stated under Section 26 of the Act. Section 26(1), as already noticed, requires the Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of a reference or information received by it. Language of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contra- distinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under Section 26(2), the Commission is not only expected to forward the copy of the report, issue notice, invite objections or suggestions from the informant, Central Government, State Government, Statutory Authorities or the parties concerned, but also to provide an opportunity of hearing to the parties before arriving at any final conclusion under Section 26(7) or 26(8) of the Act, as the case may be. This obviously means that wherever the legislature has intended that notice is to be served upon the other party, it has specifically so stated and we see no compelling reason to read into the provisions of Section 26(1) the requirement of notice, when it is conspicuous by its very absence. Once the proceedings before the Commission are completed, the parties have a right to appeal under Section 53A(1)(a) in regard to the orders termed as appealable under that provision. Section 53B requires that the Tribunal should give, parties to the appeal, notice and an opportunity of being heard before passing orders, as it may deem fit and proper, confirming, modifying or setting aside the direction, decision or order appealed against.
………..
63. It is difficult to state as an absolute proposition of law that in all cases, at all stages and in all events the right to notice and hearing is a mandatory requirement of principles of natural justice. Furthermore, that non- compliance thereof, would always result in violation of fundamental requirements vitiating the entire proceedings. Different laws have provided for exclusion of principles of natural justice at different stages, particularly, at the initial stage of the proceedings and such laws have been upheld by this Court. Wherever, such exclusion is founded on larger public interest and is for compelling and valid reasons, the Courts have declined to entertain such a challenge. It will always depend upon the nature of the proceedings, the grounds for invocation of such law and the requirement of compliance to the principles of natural justice in light of the above noticed principles.
………… 69. The jurisdiction of the Commission, to act under this provision, does not contemplate any adjudicatory function. The Commission is not expected to give notice to the parties, i.e. the informant or the affected parties and hear them at length, before forming its opinion. The function is of a very preliminary nature and in fact, in common parlance, it is a departmental function. At that stage, it does not condemn any person and therefore, application of audi alteram partem is not called for. Formation of a prima facie opinion departmentally (Director General, being appointed by the Central Government to assist the Commission, is one of the wings of the Commission itself) does not amount to an adjudicatory function but is merely of administrative nature. At best, it can direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of Section 26(2) of the Act, which order itself is appealable before the Tribunal and only after this stage, there is a specific right of notice and hearing available to the aggrieved/affected party. Thus, keeping in mind the nature of the functions required to be performed by the Commission in terms of Section 26(1), we are of the considered view that the right of notice of hearing is not contemplated under the provisions of Section 26(1) of the Act. However, Regulation 17(2) gives right to Commission for seeking information, or in other words, the Commission is vested with the power of inviting such persons, as it may deem necessary, to render required assistance or produce requisite information or documents as per the direction of the Commission. This discretion is exclusively vested in the Commission by the legislature. The investigation is directed with dual purpose; (a) to collect material and verify the information, as may be, directed by the Commission, (b) to enable the Commission to examine the report upon its submission by the Director General and to pass appropriate orders after hearing the parties concerned. No inquiry commences prior to the direction issued to the Director General for conducting the investigation. Therefore, even from the practical point of view, it will be required that undue time is not spent at the preliminary stage of formation of prima facie opinion and the matters are dealt with effectively and expeditiously.”
19. Identical issue has fallen for consideration before the High Court of Delhi in SOUTH ASIA L.P.G. COMPANY PVT LTD (cited supra). Following the decision of the Supreme Court in COMPETITION COMMISSION OF INDIA (Cited supra), High Court of Delhi held that at the stage of preparation of the report by the Director General there is no requirement to put on notice the party against whom allegation of violation of provisions of the Act are made.
20. On the scope of applicability of principles of natural justice and entertainment of writ petition on the ground that the principles of natural justice are violated, was considered in detail by Division Bench of this Court i n FLEMINGO (DFS) PRIVATE LIMITED Vs THE COMMISSIONER OF CUSTOMS[7] and held as under:
“26. Therefore, the rule that whenever natural justice is violated, the judicial review Court should ignore the statutorily provided remedy of appeal or revision and entertain the writ petition is not acceptable absolutely……..
27. In Salam Khan v. Tamil Nadu Wakf Board, Chennai MANU/TN /0061/2005 : AIR 2005 Mad 241, the Chief Justice Markandey Katju (as he then was), dealt with this aspect of the matter and made the following observations.
28. No doubt, alternative remedy is not an absolute bar to the filing of writ petitions, but at the same time it is well settled that writ jurisdiction is discretionary jurisdiction and when there is an alternative remedy, ordinarily a party must resort to that remedy first before approaching this Court. Entertaining writ petitions straight away without insisting that a party should first avail of the alternative remedy is an over liberal approach which has caused immense difficulties to the High Courts in the country because they have added to the huge arrears. The Courts have already become overburdened by this over liberal approach instead of following the settled legal principle that a writ petition should ordinarily be dismissed if there is an alternative remedy. The High Courts in India are already tottering and reeling under the burden of massive arrears which have flooded the dockets of the Court, and such kind of over liberal approach has only multiplied this problem manifold. If this approach is further continued a time will surly come when the High Courts will find it impossible to function. All this has happened because unfortunately some Courts have departed from well-settled legal principles.
29. (emphasis supplied) Even in cases where there is demonstrable breach of natural justice, as of right a petition for judicial review would not lie.
30. Clive Lewis in Judicial Remedies, (2004 edn., p 412), after considering the issue comes to the conclusion that in the tax field issues of natural justice can be dealt with by the appeal system. The learned author gives the following reasons.
31. One issue that has arisen is the extent to which questions of procedural error or breach of natural justice are suitable for resolution by an appellate mechanism. This area straddles the border between general public law and the specialized statutory scheme, since the issue of what procedure is appropriate depends on what is fair in the circumstances of a particular case. Breaches of the procedural rules will normally be dealt with on appeal, where the statutory scheme itself sets out the relevant procedural rules. Breach of the common law principles of natural justice may be dealt with on appeal, providing that the appellate body can deal adequately with such complaints.
32. (emphasis supplied) The legal position is that interference by the Court, ignoring the appellate mechanism, depends on what is fair in the circumstances of particular case, and what is the statutory scheme itself that mandates procedural fairness including compliance with natural justice. If the statute itself curtails or excludes natural justice with or without limitations, it is a sure test to deny judicial review. For instance, the statute may empower the quasi judicial body to give a personal hearing only when asked for.”
21. The decisions relied upon by the learned counsel for petitioner are on the issue of the maintainability of writ petition even when alternative remedy is available. There is no quarrel with reference to maintainability of the writ petition even when an effective alternative remedy is available more so when allegation of violation of principles of natural justice are made. However, in the light of the specific provision in the Competition Commission Act, as interpreted by the Supreme Court in COMPETITION COMMISSION OF INDIA (cited supra), the writ petition in the present stage is not maintainable. More over, the case on hand also does not warrant exercise of such extraordinary jurisdiction. As per the record of Competition Commission of India, one of the Directors of the petitioner company who also happens to be a Director in two sister companies represented before the Director General. He has specifically deposed that he is representing the petitioner company. The representation by the said person on behalf of the petitioner company was never objected to. Only a general plea was taken that petitioner was not given opportunity of hearing. The very contention was considered by the Commission and having noted that one of the Directors appeared before the Director General and represented that he is also representing the petitioner company, the objection was over ruled. Thus, in the facts of this case, it cannot be said at this stage, that petitioner company was not heard.
22. The order impugned is not vitiated on the allegation of violation of principles of natural justice. The petitioner has an effective remedy of appeal before the appellate tribunal and therefore the writ petition is not maintainable.
23. For the foregoing reasons the writ petition fails and accordingly the same is dismissed. The petitioner is granted liberty to file appeal against the order of Competition Commission of India. In the facts of this case, the respondents shall not take coercive steps against the petitioner for a period of two months from the date of receipt of copy of this order. No costs.
Having regard to the same, all old miscellaneous petitions are closed.
P NAVEEN RAO, J DATE: 16.12.2014 TVK HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 9664 OF 2012 Date : 16.12-2014
[1] (2009) 16 SCC 187
[2] (2009) 12 SCC 40
[3] (2010) 1 SCC 126
[4] 2011 (6) ALD 35
[5] 2010 SCC (10) 744
[6] MANU/DE/2731/2013 = (2014)123SCL105 (Delhi)
[7] 2011 (6) ALT 256