Section 26 of the Competition Act

Section 26 of the Competition Act, 2002 (“Act”) prescribes the “procedure for inquiry of complaints under Section 19”. If the Competition Commission of India (“CCI”) on receipt of information received under Section 19 is of the opinion that there exists a prima facie case, it must direct the Director General (“DG”) to investigate. The DG, on receipt of such a direction, must eventually submit a Report, noting at the very least findings concerning whether there at all has been a contravention of the provisions of the Act. There can only be two outcomes:

[A] In the event that the DG recommends that there is no contravention – the CCI, must invite objections or suggestions from the parties concerned, on the DG’s Report.

If even after consideration of the submissions of the parties the CCI agrees with the DG, in as much as there has indeed been no contraventions, the CCI must close the matter forthwith and pass such orders as it deems fit. It is possible however that after consideration of the submissions of the parties the CCI feels that there should be “further investigation(s)”, that may be ordered for.

[B] In the event that the DG recommends that there is a contravention  – the CCI can inquire into such contraventions, in accordance with the provisions of the Act, only if the CCI is of the opinion that a “further inquiry” is necessitated.

The confusion in distinguishing a “further inquiry” and a “further investigation” aside, Section 26 is fraught with other riddles. The questions we are concerned with: In scenario [A] is it acceptable that the CCI, after evidently not agreeing with the DG (that there has been no contravention), does not feel the need of further investigations and instead, proceeds to write an order in terms of Section 27 of the Act? In the matter of M/s. Keltech Energies Ltd. v. Coal India Ltd. & Ors., (Appeal No. 90 of 2012) (“Coal India”), the Competition Appellate Tribunal (“COMPAT”) has answered the question in the affirmative. It has been held that: “It is not in every case where the CCI disagrees with the report of the DG, it has to proceed under Section 26 (7)… If the CCI was of the opinion that the report was per-se incorrect and the opposite parties had actually contravened any of the provisions of the Act, then the CCI was perfectly justified in writing its separate findings, independent of the DG’s report and the findings therein….”

The COMPAT therefore seems to have fixed the threshold for CCI to refuse further investigations and write a Section 27 order, in scenario [A], on the standard of a “per-se incorrect” report of the DG. At any rate, the COMPAT, at this juncture of history, would have us believe that apart from ‘disagreeing’ with the DG the CCI can also potentially decline the prospect of “further investigation(s)”.

But, does this imply that in scenario [B] too, if there is a “per-se incorrect report of the DG” and the CCI again, not only does not agree with the DG (that there has been a contravention) but is of the opinion also that no “further inquiry” is necessitated – it can close the matter forthwith?  This is especially relevant, since in light of Section 53A(1)(a) and an analysis of the pronouncement in the matter of Competition Commission of India v. Steel Authority of India Ltd. & Anr., (2010) 10 SCC 744 such an order would not appealable to the COMPAT. I am assuming, of course, that the CCI passes such an order in terms of Section 26(8) of the Act [even though I must warn that clause (8), in its clear plain language, does not envisage a closure of the matter. It only speaks of a possible ‘further inquiry’ and otherwise, by implication, a final order in terms of Section 27].

That there are problems in the wording of Section 26 is, by now, well known. A legislative amendment should be in order. Coal India though seems to have provided a brave explanation – the explanation, in itself, does not bode well with general tenor of the Section and seems to fail at the slightest stretch of its ambit. The the simplest way to read Section 26 would be to admit at the outset that the CCI cannot disagree with the DG, so readily.  For instance, in scenario [A], while the CCI can agree with the DG that there is no contravention (and the wording of the Section unambiguously says so), the CCI never really gets to a state of a disagreement with the DG (in fact, the wording of the Section points to no such eventuality). It only arrives at a conclusion of a “further investigation”. In scenario [B] too, the CCI can never disagree with the DG (until the time it is ready to pronounce its final order which may record differences), but only feel a “further inquiry” to be necessary. On that view, Coal India’s observations seem unacceptable.

There is a lot more to be tested concerning Section 26 of the Act. In the absence of such deliberations many proceedings before the CCI and the COMPAT are a trifle suspect.