Madras High Court

Madras High Court quashes Competition Commission of India investigation against MRF Limited for lack of transparency in proceedings

The Madras High Court (“MHC”) in the case of MRF Limited v. Competition Commission of India & Ors¹. has held that the Competition Commission of India (“CCI”) ought to have given notice to MRF Limited (“Petitioner”) prior to changing its status to an ‘opposite party' from a ‘third party' and must issue a speaking order to justify such a change given the need for procedural fairness and compliance with legal principles.

Brief Background

On September 21, 2018, the Directorate of State Transport, Haryana (“Complainant”) invited bids for a tender for purchase of steel radial tyres. JK Tyres & Industries Limited (“JK Tyres”) was a sole bidder in the said tender and certain subsequent tenders, even though there were other companies that manufactured steel radial tyres. The Complainant made a reference to CCI against JK Tyres alleging cartelisation. No other party was mentioned in the complaint filed by the Complainant.

On November 1, 2019, CCI passed an order directing the Director General (“DG”) to cause an investigation into the matter (referred to as the ‘Prima Facie Order'). As part of the investigation, in April and August 2020, the DG issued notices to the Petitioner seeking information from it as a ‘third party'. While responding to the said notices, the Petitioner mentioned to the DG that the said information was sought from the Petitioner as a ‘third party'. Further, the Petitioner asked the DG for a copy of the Prima Facie Order which was refused by the DG on the ground that the Petitioner is a ‘third party' in the proceedings.

In August 2020, the DG submitted a note to CCI seeking to include CEAT Tyres Limited, Birla Tyre Limited, Michelin Tyres Limited, Continental, Apollo Tyres, Bridgestone and the Petitioner into his investigation (referred to as the ‘DG Note'), which was allowed by CCI on August 26, 2020 and the status of the Petitioner and other tyre companies were changed to ‘opposite party' from ‘third party' (referred to as the ‘Impleadment Order'). In September 2020, a copy of the Prima Facie Order was supplied to the Petitioner. Further, on March 1, 2024, a copy of the Impleadment Order was supplied to the Petitioner. It is only when the Petitioner received a copy of the Impleadment Order, it came to know that it has been impleaded as an ‘opposite party' in the matter.

Aggrieved, on March 7, 2024, the Petitioner challenged the Prima Facie Order, the Impleadment Order and fresh DG notice dated February 2, 2024 before the MHC on the ground that the change of status of the Petitioner from ‘third party' to ‘opposite party' without giving prior notice to the Petitioner is bad in law and contrary to the provisions of the Competition Act and the regulations.

Proceedings before the MHC

MHC, inter alia, observed as follows:

1. the Petitioner exhibited no delay in filing the writ petition, as the Impleadment Order was only provided to it on March 1, 2024, following a delay of more than 3 (three) years;
2. the Impleadment Order was issued ex parte, meaning it was rendered without affording the Petitioner a hearing, and it was only furnished to the Petitioner on March 1, 2024. Consequently, the proceedings lacked transparency;
3. a party cannot effectively respond to statutory proceedings if it is unaware of the specific legal provision under which its involvement is necessitated. Section 41(4) of the Competition Act, 2002 (“Competition Act”) makes a clear distinction between obligations of a ‘third party' and an ‘opposite party'; and
4. Section 27 of the Competition Act delineates the scope of orders that CCI can issue, including the imposition of penalties and the issuance of directions. Therefore, for a party to be subjected to the measures prescribed under Section 27 of the Competition Act, it must be given adequate opportunity to contest its impleadment as a contesting or opposite party and must be duly notified.

Consequently, the MHC quashed the Impleadment Order and the DG notice dated February 2, 2024 issued to the Petitioner.

(Source:  MHC Judgment dated April 30, 2024)

Footnote

1. WP.Nos.6493, 6497 & 6502 of 2024 and W.M.P.Nos. 7221, 7227, 7228, 7233 and 9707 of 2024

Originally published 10 July 2024

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