Raids, conducted by government officials are intended to collect incriminatory evidence against an entity or individual accused of committing act(s) which are in contravention of law. However, the procedure required under numerous statutory provisions makes it too obvious for the entity before the same is conducted thereby providing it necessary opportunity to hide, tamper or...
Raids, conducted by government officials are intended to collect incriminatory evidence against an entity or individual accused of committing act(s) which are in contravention of law. However, the procedure required under numerous statutory provisions makes it too obvious for the entity before the same is conducted thereby providing it necessary opportunity to hide, tamper or destroy evidence essential for their successful prosecution. To prevent such inconvenience on part of the Competition Commission of India (CCI), the principal statute provides the Director General (DG) of CCI to conduct dawn raids on its instruction.
In India, the first Dawn raid was conducted by the DG in September 2014 at JCB India Limited Offices. The raid was conducted in pursuance of allegation against them for abuse of their dominant position in market. Since then, the CCI has conducted multiple such raids on entities under the scanner for anti-competitive practices like cartelisation, anti-competitive agreements, abuse of dominance, etc. With passing year dawn raid has come under severe scrutiny by both the bar and the bench for its intrusive nature. The issue was again highlighted with the placement of Competition(Amendment) Bill, 2022 which intends to further broaden the powers of DG to interrogate Legal Advisors.
Dawn Raids
Dawn Raids are essentially surprise raids conducted by CCI to investigate potential infringement of Anti-Trust Laws. It is conducted under the Supervision of Director General (Investigation) of Competition Commission of India to seize documents or other articles of evidentiary value which it believes to be pertinent for securing prosecution of concerned entity. Dawn raids are of particular importance when the evidence is under the threat of likely being destroyed or mutilated to obstruct the course of investigation.
Under the Competition Act, the Director General is empowered under Section41(3) to conduct Dawn Raid on instructions from the CCI. Hence the DG cannot take suo-moto cognizance of any alleged infringement of Competition Law but shall be subject to decision of CCI. It is necessary to note that during the raid it is not required for the DG to be present in person. Only senior official from the DG office and local police, along with experts who are well versed with requirements of the concerned case are enough for conduction of the raid. The DG has broad powers related to search and seizure under Section 41(3) during conduction of Dawn Raids when read in consonance with Section220 of the Companies Act which relates to power of inspector during investigation to seize documents where there is a reasonable belief in his part that such documents might possibly be destroyer or tampered with.
Mandatory Requirement
However, in light of evident intrusive and arbitrary nature of dawn raids, the same is subject to securing a search warrant from the Ld. Court of Chief Metropolitan Magistrate, New Delhi. However, if the Court of Chief Metropolitan Magistrate is not satisfied with the reasoning behind requirement for such a warrant, it is at liberty to reject such application.
It is of particular importance to note that if the warrant issued by the Chief Metropolitan Magistrate provides the ambit of search and seizure which can be conducted by the CCI then the officials of DG cannot transgress the same. Hence, if the extent of seizure has been restricted to only select documents in the warrant, then it shall be illegal on part of the Director General’s team to seize any other documentary evidence from the premises of the entity under scanner except for those mentioned in the warrant.
International Application
Interestingly, dawns raids conducted by CCI is not restricted within the jurisdiction of India itself but can be conducted in foreign nations as well. The only requirement is a pre-existing MoU under Section 18 with relevant authorities in any foreign nation where the CCI intends to conduct dawn raids. India has entered into such MoU’s with US, EU, Canada, Australia and Russia amongst several others. Such MoU’s have the effect of broadening the base of CCI and providing them necessary logistic and manpower support which will have the evident effect of effective conduction of such raids.
Potential Abuse Of Process: To What Extent Dawn Raids Are Sustainable?
Despite the benefits which dawn raids entail; it requires in-depth introspection by the DG office before its conduction considering the concerns related to infringement of privacy rights and freedom of trade under Article 21 and 19 of the Constitution of India it warrants alongside. To do away with such concerns the decision to conduct a dawn raid by the CCI should be based on reasonable ground supported by evidence which clearly indicate possible instance of competition law infringement. Hence for conduction of Dawn Raid, belief in potential contravention of competition law has no place for substantiating any such claim of Competition Commission. Instead, it is the evidence which substantiates the belief which plays significant role in providing impetus to its constitutionality. The hon’ble Supreme Court itself in the case of Calcutta Discount CompanyLtd. v. Income Tax Officer had stated that,
"The expression 'has reason to believe'...does not mean a purely subjective satisfaction of the Income-tax Officer but predicates the existence of reasons on which such belief has to be founded. That belief, therefore, cannot be founded on mere suspicion and must be based on evidence and any question as to the adequacy of such evidence is wholly immaterial at that stage."
Requirement of such intense level of scrutiny before granting of permission for dawn raid is based on the perception that the same can potentially be utilized by the CCI for fishing expedition or politically motivated investigations against an entity to sabotage its market presence.
Competition (Amendment) Bill, 2022: An attempt to curb the rights of entity under investigation
Recently, the StandingCommittee on Finance in its 52nd Report took note of the Competition (Amendment) Act, 2022 which proposes incorporation of Section 41(6) in the Act which shall have the effect of further widening the powers of DG. It states that during conduction of an investigation the DG shall have the power to interview the legal advisors. The evident effect of the same is that the DG during dawn raids shall have the power to interview individuals who have privileged relationship with the company like a legal advisor. This shall have significant effect on Attorney Client privilege which is supported by years of precedence behind it.
Such amendment is liable to be struck down on grounds of unconstitutionality in light of its evident contravention with established principles of law. The Hon’ble Bombay High Court in the landmark case of Municipal Corporate of Greater Bombay v. Vijay Metal Works expounded upon the importance of Attorney-Client privilege. However, the contention of the Government is that the same is intended to seek necessary information during the investigation and no more. It is certainly a pun considering the government intends to interrogate the attorney on privileged issues between the him and his client without infringing attorney client privilege. The contention of Government stands on thin ice which is liable to be struck down questioned before a court of record.
Dawn Raids are certainly an effective method for collecting evidence against an entity under scanner of the CCI without risking its existence or status-quo. However, such raids should be subject to reasonable restriction, deficiency of which can lead to potential misuse of its authority. Any further extension of DGs power under Competition Act during investigation can have the effect of curtailing rights of entities under Investigation.
Even the Competition Law Review Committee in its 2019 report took note of mandatory requirement of Chief Metropolitan Magistrates authorisation for conduction of raids and strongly recommended retaining the same in the Act. The Committee further took note of lack of codified procedural requirements under the Competition Act on matters related to raid and suggested codification of power of DG during investigation and search and seizures. With regards to the Competition (Amendment) Bill, 2022, incorporation of Section 41(6) should be dissuaded or at least toned down to exempt legal advisors from interrogation. Any such provisions would have widespread ramification, thereby dissuading foreign entities from investing in India as well as restricting freedom of trade without fear of persecution.
Views are personal.