'Public Interest Requires Investigation To Continue': Calcutta High Court On CCI's Probe Into Cartelization, Price Manipulation By Steel Companies

The Calcutta High Court recently refused to stay summons issued to two senior officials including a Director of Shyam Steel Industries Ltd. by the Director General of Competition Commission of India (CCI) with regard to the investigation being conducted into the alleged cartelization by steel manufacturers.

The single judge bench of Justice Moushumi Bhattacharya observed:

“It follows from the above that section 26(1) does not involve any adjudicatory processes and would also not cause any particular prejudice to the petitioners at the stage of investigation. In the absence of any adjudication, the petitioners would not be visited with civil consequences or any imminent threat of irreversible prejudice. The petitioners will have every opportunity to challenge the investigation process or the decision arising therefrom at a later stage.”

The impugned summons referred to an investigation being conducted by the DG, CCI into alleged cartelization by steel Manufacturers under the provisions of the Competition Act, 2002. It said that the DG came to know that the Director of the petitioner company may be in possession of evidence relevant for the investigation. The Director was summoned on April 25, 2023 in exercise of the powers conferred under section 41(2) read with section 36(2) of the Act.

The counsel appearing for the petitioners submitted that the impugned summons was issued without regard to the statutory mandate under section 26(1) of the Act and the requirement to form a prima facie opinion on the Commission must be fulfilled before the Director General can be directed to cause an investigation.

The counsel further referred to an order of the Madras High Court dated July 29, 2021 in Coimbatore Corporation Contractors Welfare Association v. Central Bureau of Investigation whereby the court directed the Director-General to act in accordance with law.

It was submitted that the company was not named in the Madras High Court order and that the decision dated August 23, 2021 of the Commission directing the DG to investigate the matter in terms of the said order was made available to the petitioners only on April 21, 2023.

On the other hand, the ASG appearing for the CCI submitted that Director General did not have any choice after the order of the Madras High Court, but to conduct investigation into the matter. It was further submitted that the investigation involves larger public interest since the allegations relate to the manipulation of the price of steel and balance of convenience lies in favour of continuation of the investigation.

The Court noted that Section 26(1) of the Act requires the Commission to form an opinion on the existence of a prima facie case after which the Commission shall direct the DG to investigate into the matter and this requirement of formation of opinion was recognized by the Supreme Court in Competition Commission of India v. Steel Authority of India Limited (2010) 10 SCC 744.

It was observed by the court that the order of the Madras High Court dated July 29, 2021 was passed on a complaint made by the Coimbatore Corporation Contractors Welfare Association against the Central Bureau of Investigation and the Deputy Superintendent of Police alleging profiteering and hiking of steel prices by a syndicate of steel owners.

However, the court noted that petitioner company was not named in the said complaint. It was further noted by the court that the Madras High Court was of the view that since the complaint has already been forwarded to the DG (Investigation), CCI, the DG concerned should be directed to proceed further in this regard and take appropriate action on the complaint filed by the Welfare Association in accordance with law.

“Therefore, the Madras High Court order compresses and subsumes the sequential steps for the Commission to inquire into any alleged contravention on receipt of any information or information received under section 19 or on its own knowledge of such contravention/s,” the court said.

The court observed that the said order of the Madras High Court in essence kick-starts the process from the stage of directing the Director-General to cause an investigation without exhausting the requirements preceding the Commission’s direction to the Director General under Section 26(1) of the Act.

It further noted that the order passed by the Madras High Court was not challenged by any of the Steel Companies mentioned in the order or even by the petitioner company which would presumably be affected by the charges of cartelization and hike of prices by steel companies.

The court relied upon the judgment of Supreme Court in Steel Authority of India wherein it was held that section 26(1) of the Act excludes the principles of natural justice by necessary implication.

Thus, the court opined that in the absence of a jurisdictional error, the petitioners do not have any ground to obstruct the investigation and seek interruption of or interference with the process.

“Section 26(2) of the Act provides a further exit route to the petitioners where the entire process may be closed if the prima facie case ceases to exist. The petitioners have the opportunity to disprove the charges made against them and lead the proceedings to a close,” said the court.

It was observed by the Court that the allegations are of cartelization and manipulation of supply and price of steel and the ramifications of such activities extend beyond a few to the public at large, including end-users, consumers and home buyers. The larger public interest angle also requires the investigation to continue, it observed.

“The ripple-effect of price manipulation reaches the margins of the social circumference and may be seen as actions in rem. The petitioners hence have a duty to assist in the process of investigation and permit the Director General to comply with the direction of the Madras High Court,” the court said.

Thus, the court noted that there is no pressing or compelling reason to interfere with the investigation by restraining the respondents to stay their hands with reference to the impugned Summons.

Case Title: Shyam Steel Industries Ltd. & Anr. v. Union of India & Ors.

Coram: Justice Moushumi Bhattacharya

Click Here to Read/Download Order