Entity Is Entitled To Know Status Under Which Its Presence Is Sought In Statutory Proceedings: Madras HC Sets Aside CCI Proceeding, Calls It Opaque

Noting that MRF was not a “party” to the proceeding and yet the CCI allowed an investigation against MRF, Justice Anita Sumanth noted that an entity was entitled to know the status under which its presence and participation was sought in a statutory proceeding. The court noted that the applications and their consequences would vary depending on the status of a party in a proceeding and thus, unless a party was aware of the provision under which it was involved, it would not be able to pursue appropriate legal remedy.

“In my considered view, an entity is entitled to know the status under which its presence and participation is sought in statutory proceedings. The application of the statutory provisions and connected Regulations, their consequences, as well as available protections would vary depending on the status of the party. Thus, unless a party is aware as to the specific provision under which its involvement is sought and obtained, it would be in the dark as to the measures available to it under the law,” the court observed.

The court also criticised the manner in which the Competition Commission had conducted the proceedings and remarked that there was considerable “opaqueness” and delay in the proceedings. The court added that when the CCI had initially stated that MRF was a third party to the proceedings, it should have sought MRF's response before changing its status as a party to the proceedings.

“It is also my considered view that there has been considerable opaqueness in the manner of conduct of the proceedings and considerable delay on the part of R1 to R5 in making available order dated 26.08.2020 to the petitioner. Having expressly stated under letter dated 24.04.2020 that the role of the petitioner is only as a third party, it was incumbent upon the authorities to have solicited the response of the petitioner prior to changing the status, which change has serious and grave implications,” the court said.

Background

The Directorate of State Transport, Haryana had invited online tenders on September 21, 2018, for purchase of new steel radial tyres of different sizes and specifications to replace the worn-out tyres on the buses run by Haryana Roadways. JK Tyres was the only bidder. Since the procurement value exceeded one crore, the matter was referred to High Power Purchase Committee (HPCC) after technical and financial scrutiny. The HPCC suspected cartelization and rigging of prices by tyre manufacturing firms

The CCI prima facie opined that there was cartelization by tyre manufacturers, in contravention of Section 3(1) read with Section 3(3) of the Competition Act. Thus, the CCI directed that a detailed investigation needed to be carried out to unearth the moderus operandi. Subsequent to this order, notices were issued to CEAT Ltd., Birla Tyre Ltd., Michelin Tyre Ltd., Continental, Apollo Tyres, MRF Ltd. and Bridgestone. Following this, these companies were impleaded into the case.

MRF challenged the order and the notices and contended that the same were issued without providing a copy. It was submitted that when the order copies were sought, the Commission rejected the request on the ground that MRF was only a third party to the proceeding. However, the CCI had later went on to change MRF's status in the case without informing it.

The court noted that the Director General had neither supplied it's report or the order to MRF which made it clear that MRF was being treated as a third party to the proceeding despite its upgradation in status. The court underlined that it was important that an opportunity is afforded to a third party prior to its conversion from a “third person” to a “contesting party”.

The court observed that MRF ought to have been given notice prior to impleadment as a party and the satisfaction of the authority as to the justification for such impleadment ought to have been highlighted in a speaking order.

The court thus deemed it fit to quash the order and the notice and gave liberty to the commission to proceed with the matter as per law.

Counsel for Petitioner: Mr. AL.Somayaji Senior Counsel For M/s.King&Patridge

Counsel for Respondents: Mr N.Venkatraman Additional Solicitor General assisted by Mr.R.Thirunavukkarasu Central Government Standing Counsel

Citation: 2024 LiveLaw (Mad) 239

Case Title: MRF Ltd v Competition Commission of India and Others

Case No: WP.Nos.6493, 6497 & 6502 of 2024