The The Supreme Court of India (Supreme Court), in a judgment dated 8 May 2017 (Judgment), has curtailed the penal powers of the Competition Commission of India (CCI). The Judgment also ruled on the power of the CCI to investigate potential anticompetitive practices.
The Food Corporation of India (FCI), in a letter dated 4
February 2011, complained to the CCI of the anti-competitive
agreement arrived at between M/s Excel Crop Care Limited, M/s
United Phosphorous Limited, M/s Sandhya Organic Chemicals (P)
Limited (collectively, the Appellants) and Agrosynth Chemicals
Limited (Agrosynth). The FCI alleged that anticompetitive
practices were carried out in relation to tenders relating to
procurement of aluminum phosphide tablets, issued by the FCI
between 2007 and 2009.
The Supreme Court determined that the following issues, among others, required consideration in this case:
The findings of the Supreme Court in respect of each of the issues are set out below:
Section 3 of the Act deals with the prohibition of anti-competitive agreements. This section came into force on 20 May 2009, which was after the date of submission of bids for the March 2009 tender. However, the opening of the bid was after the date of notification of the section.
The Appellants argued that retrospective operation could not be given to the provisions of the Act. However, the Supreme Court held that as the anticompetitive conduct of the Appellants continued much after the date of the coming into force of Section 3, the section would still be attracted. The Supreme Court based this on the fact that after the coming into force of Section 3, the Appellants entered into negotiations with the FCI and continued the bidding process. Therefore, the process of "manipulating the process of bidding" continued after the coming into force of Section 3 of the Act.
The Supreme Court held that restricting the CCI only to the matters set out in the complaint would defeat the entire purpose of carrying out an investigation. The Supreme Court held that the purpose of an investigation was to uncover all necessary facts and evidence in relation to a case to determine if there have been any anti-competitive practices and if these necessarily require the inclusion of any extraneous facts not covered in the initial complaint.
The Supreme Court, in relation to the issue of the quantum of penalty, upheld the decision of COMPAT and held that the basis for computation of penalty should be "relevant turnover" instead of "total turnover." The Supreme Court based this on the following factors:
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