Cartel Amongst Paper Mills? Gujarat High Court Refuses To Interfere With CCI's Investigation Order

The Gujarat High Court on Monday dismissed a writ petition filed by J.K. Paper Ltd. challenging an investigation order under Section 26 of Competition Act, 2002 passed by the Competition Commission of India on the ground that the said order is an administrative order which only forms a prima facie opinion and it does not affect rights and liabilities of the petitioner.

The single judge bench of Justice Biren Vaishnav observed:

“The order u/S.26(1) merely directs an investigation. It does not effects the rights and liabilities of the petitioner. The CCI is to examine the validity of the allegations as to whether the petitioner’s conduct is anti-competitive. The petitioner has been provided an opportunity to file its objections and suggestions to the DG report and the petition therefore is certainly misconceived.”

It was the case of the petitioner-J.K. Paper Ltd. that the respondent no.3- Sivakasi Master Printers Association filed Information Petition alleging that there was a cartel amongst the paper mills which would get-together and facilitate price rise every month, which contravened Section 3 (Anti-competitive agreements) and Section 4 (Abuse of dominant position) of the Competition Act, 2002 (the Act).

A similar information petition was filed by respondent no. 4- All India Federation of Masters and Printers in the year 2015.

The Competition Commission of India (CCI) clubbed both the proceedings and by orders dated August 1, 2014 and November 17, 2015 directed the DG to undertake investigation prima facie opining that the petitioner seems to be indulging in contravention in the paper industry.

Based on the orders so passed, the CCI carried out investigation and submitted a consolidated report dated February 7, 2019 and by the impugned order dated May 2, 2019, the CCI called upon the petitioner to file its objections/suggestions to the impugned report on or before June 6, 2019 and further issued directions to submit audited balance sheets and profit and loss account / turn over for the last three financial years i.e. 2015-16 to 2017-18.

The CCI further directed the petitioner to submit details of the profits /revenue generated from unquoted writing and printing papers during 2015-16 to 2017-18 by way of affidavit supported by certificate of the Chartered Accountant.

Aggrieved by the above mentioned orders, the petitioner approached the High Court challenging the same.

The court noted that Section 26 of the Act indicates that on a receipt of a Reference from the Central Government or a State Government or an information received under Section 19 (Inquiry into certain agreements and dominant position of enterprise), if the Commission is of the opinion that there exists a prima facie case it shall direct investigation to be made in the matter.

The court further observed that it is evident that the information filed was neither restricted to a particular set of manufacturers but was in context of the entire paper industry connected with different varieties of paper.

The Court averred:

“What is evident from the chronology of dates and events set out hereinabove is that pursuant to the Information Petitions filed, the CCI in exercise of powers u/S.26(1) of the Act formed a prima facie case for directing investigation into the allegations against the paper mills. In context of the paper industry the order was passed in August, 2014 and November, 2015 respectively. These orders were accepted by the petitioners at the relevant point of time and the petitioner continued to voluntarily participate in the proceedings before the DG.”

It was further stated by the court that the petitioner only after rejection of an application for cross examination by the impugned order dated July 4, 2019, approached the Court to challenge the Investigation Report in addition to the orders passed under Section 26(1) of the Act on the ground that “copier paper was never a part of the inquiry.”

However, the court observed that the petitioner to participate on all fronts including that of the product related to copier paper.

The Court held:

“Having voluntarily furnished the information including the information on copier paper, at this stage of the investigation when the objections and suggestions of the petitioner have been invited the petitioner cannot be allowed to set up a case that the copier paper was never a part of investigation.”

The Court relied upon the judgement of Supreme Court in Competition Commission of India v. Steel Authority of India 2010 SCC 744 in which it was laid down that exercise of powers by the CCI under Section 26(1) of the Act are not adjudicatory in nature and the formation of prima facie opinion is only an administrative process which does not entail civil consequences.

The Court opined:

“Reading the investigation reports and the orders passed under Sections 26(1) read with Section 26(3) of the Act would indicate that the order is an administrative order which only forms a prima facie opinion. The petitioner has been given an opportunity of producing evidence before the DG during the process of investigation and by the orders impugned the DG has called upon the petitioner to file its objections / suggestions to the investigation report. It cannot be said therefore that the petitioners' doors are closed. After affording a reasonable opportunity and considering the objections and suggestions, the Commission based on the investigation reports will take an appropriate decision.”

The Court ruled that the High Court cannot delve into the merits and demerits of the report when the petitioner for cross examination of witnesses has been rejected and the CCI has granted liberty to the petitioner to file affidavits in rebuttal to dispute the conclusions drawn by the DG based on the depositions etc.

Thus, the Court dismissed the petition and vacated the interim relief forthwith.

Case Title: J.K. Paper Ltd. Through Santosh Wakhloo, Authorized Signatory Herein v. Competition Commissioner of India

Case Citation: 2023 Livelaw (Guj) 65

Coram: Justice Biren Vaishnav

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