Samir Agarwal vs CCI – NCLAT’s Erroneous Approach Towards Locus Standi

Anurag Mohan Bhatnagar and Amiya Upadhyay, National Law University Odisha

Introduction

Recently, the National Company Law Appellate Tribunal (NCLAT) passed a decision wherein it ruled that the locus standi to approach the Competition Commission of India (CCI) shall only be restricted to the person who has suffered harm because of anti-competitive practices in the market. This has created a major turmoil in the competition law regime since the decision is in disregard of the intent of the legislature and settled principles of interpretation. Axiomatically, the term “any person” as under Section 19(1)(a) of the Competition Act, 2002 (Act) acts as a gate through which multiple entities can reach the commission with complaints of anti-competitive practices. The provision also ensures healthy competition in the market of India. However, it does not have a mechanism to filter-out ill-motivated and frivolous complaints reaching CCI.

Under this article, the authors aim to critically analyze the NCLAT’s decision in the matter of Samir Agarwal v. CCI. In furtherance of the analysis, the authors aim to highlight the conundrum between the legislature and the NCLAT judgment and how it can cause concern not only to CCI but also to all those who have a stake in sustaining vigorous competitive markets in India.

Background of the Case

It was alleged by Mr. Samir Agarwal before the Commission that the cab aggregators and drivers were acting as a hub-and-spoke cartel where drivers (spokes) were colluding on prices. He based his arguments on the fact that since the drivers were independent contractors, there existed no contractual relationship between the cab aggregators (Hub) and them and therefore was not a part of a single economic entity. He purported that the algorithmic pricing sanctioned by the cab aggregators in collusion with the drivers resulted in “concerted action” in contravention with Section 3(3)(a) read with Section 3(1) of the Act. The CCI vide its order observed that no arrangement existed between the cab aggregators and the drivers. While rejecting the contention of the informant, it relied on the fact that there existed no prima facie case in contravention of the aforementioned sections of the act to order the Director-General for an investigation. Hence, the matter was closed by CCI in terms of Section 26(2) of the Act.  Aggrieved with the decision, Mr. Agarwal challenged this decision before the NCLAT.

NCLAT’s Impugned Order

While adjudicating on the issue of locus standi, the  NCLAT stated that CCI can initiate a probe into an alleged anti-competitive agreement under Section 19(1) of the Act: “(i) on its own motion (ii) on receiving information from ‘any person’, or their association or trade association; (iii) suo moto or on a reference from government or any statutory authority”. However, NCLAT in the impugned order has imposed a limitation over CCI’s discretion in adjudicating information. It held that ‘any person’ who files information under the Competition act ought to be “one who has suffered an invasion of their legal rights as a consumer or as a beneficiary of healthy competitive practices”. The rationale given by the NCLAT behind this interpretation is to prevent individuals with ulterior motives from targeting enterprises gratuitously.

Critical Analysis

The observation of the NCLAT in the concerned case is provincial and exactly the opposite of the intention of the legislature, which is indicative by the term “any” as under Section 19(1)(a). Furthermore, in Coal India v. CCI, the COMPAT opined “the inquiry envisaged by Section 19(1) into any alleged contravention of Section 3(1) or Section 4(1) can be initiated by the Commission either on its own motion or on receipt of any information from ‘any person’ or a reference made by the Central or State Government or a statutory authority”. NCLAT’s judgment did not take the crucial issue of frivolous complaints that reach CCI and hence, an impeding effect is created by it via its rationale of the case. As mentioned in Section 18 and the preamble of the Act, CCI is obligated to pursue all legal and reasonable means to ensure that the Indian markets remain vigorous and act strictly against ill practices such as abuse of dominance and cartels. Its prime responsibility is towards the market at large and not towards any particular individual. As held in Re: Indian Motion Picture Producers’ Association v. Federation of Western India Cine Employees, the decisions of the CCI are “in rem” and not “in personam”.

Section 19(1)(a) of the Act acts as a medium through which any information regarding an alleged contravention can reach CCI. In BCCI v. The Competition Commission of India, it was held that if CCI is of the opinion that, “a prima-facie case of contravention is made out, an investigation could be directed irrespective of whether an informant withdraws at a later stage”. On the contrary, the identity of the complainant can also be kept confidential during the investigation by the Commission. Moreover, the 2007 Amendment of the competition act replaced the word “complainant” to “informant”. The rationale behind doing so was that an informant may or may not have any personal interest in the alleged anti-competitive conduct but it is the duty of every citizen to point out such conduct to CCI, and it is required to probe into it if it finds a prima facie case to begin with.  

The Apex Court also set the scope of the term “any person” as defined under Section 53B of the Act in the case of CCI v SAIL. The court opined that the term “any person” must be interpreted liberally, since the provision first states particular government bodies, then local enterprises and authorities, which in any case, is of generic nature, and then lastly states ‘any person’. The Court further stated that an extended meaning must be given to the term ‘any person’, i.e., bodies or persons who are authorized to appeal. Previously, COMPAT in the case of Shri Surendra Prasad v. CCI [1] has stated that the competition act itself does not provide for any limitation on who could file information. 

Recently, in the case of Harshita Chawla v. WhatsApp the CCI clarified the situation of locus standi. The main contention of the appellant, in this case, was that WhatsApp was forcing its product of payment into existing users of the app since the service of payment was ingested in the app itself. The CCI in this case went astray to the ratio of Samir Agarwal v. CCI and subsequently held that the informant may not necessarily be an aggrieved party to file a case before the commission. It ruled that neither there is an explicit requirement in the Act, nor does any provision implicitly suggest the same. It laid emphasis on the inquisitorial nature of the act wherein the commission is required to solve competition issues in rem and not in personam. Further, it held that “as long as the matter reported to the CCI involves anti-competitive issues falling within the ambit of the Act, the Commission is mandated to proceed with the matter”. Thus it clearly established that the substance of an information should be given primacy over the standing or antecedents of the informant. 

Cross-Jurisdictional Analysis

Article 230 (4) of the Treaty on the European Community (EC) restricts the locus standi only to the people who have suffered harm and it is of direct and individual concern to them. This has also been stated in the European Court of Justice (ECJ) ruling in Plauman v. Commission (Plaumann test). This approach is similar in nature to that of NCLAT’s stand. However, in numerous cases, the ECJ has also been more liberal with regard to this standing. In Metro v. Commission, an indirect applicant was granted standing to challenge a prior decision of the commission. Furthermore, in Piraiki-Patraiki v. Commission, flexibility in the approach towards locus standi was taken notwithstanding the apparent strictness of the Plaumann test. The European Commission also allows people to report information via the whistleblower tool to curb all sorts of competition violations. Anonymous whistle-blower tools for reporting cartels and other infringements are increasingly common in European Union (EU) Member States.

In the UK, the Competition and Markets Authority (CMA) can initiate an anti-trust violation probe via different sources which include information received through external sources such as complainants and whistle-blowers. In 2019, the US too passed the Antitrust Whistle-blower Protection Bill for those who furnish details to the Department of Justice (DOJ)with respect to the actions that contravene the criminal antitrust laws. The European countries not only investigate but provide monetary rewards to individuals who provide information about cartels and other anti-trust violations.

Though the Indian anti-trust law framework is closely similar to the European framework with respect to the provisions of the Act yet both the systems differ in the quality of enforcement of the act. The competition regulatory authorities in India should adopt a more robust framework in the matter of locus standi and initiation of an investigation.  

Concluding Remarks

The order of NCLAT acts as a restraint on the term ‘person’ and is against the intention and motive of the lawmakers of the Act. Instead of putting up a clause of locus standi, NCLAT should have come up with a mechanism to help CCI demarcate the frivolous and ill-intended complaints from those which are legitimate and need to be looked upon as soon as possible. The limited interpretation of the term ‘any person’ by it regarding locus standi not only critically curbed the rights of a common man to reach CCI, but also foisted restrictions on it to curb anti-competitive practices in the Indian market. It is hoped that these competition regulatory authorities will soon come up with a solution to cope with the pressing issue.


[1][2015] 63 taxmann.com 368 (CAT).

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