Steel Authority Of India Limited vs Competition Commission Of India & ...

on 6 May, 2011

Delhi High Court Delhi High Court Steel Authority Of India Limited vs Competition Commission Of India & ... on 6 May, 2011 Author: S. Muralidhar * IN THE HIGH COURT OF DELHI AT NEW DELHI 20 + W. P. (C) 2691/2011 STEEL AUTHORITY OF INDIA LIMITED ..... Petitioner Through: Mr. Parag Tripathi, Additional Solicitor General with Mr. G.K. Bhatia, Mr. Vikram Sobti, Ms. Kanika Chaudhary, Ms. Nidhi Singh and Ms. Manisha Handa, Advocates versus COMPETITION COMMISSION OF INDIA & ORS ..... Respondents Through: Mr. A.S. Chandhiok, Additional Solicitor General with Mr. Suhail Nathani and Mr. Tarun Gulati, Mr. Ritesh Kumar, Mr. Neil Hildreth and Mr. Himangini, Advocates for R-1. Mr. Shaqib, Advocate for R-2. Ms. Pallavi Shroff with Mr. Harman Sandhu and Ms. Ruchi Mahajan, Advocate for JSPL/R-3. Dr. Ashwani Bhardwaj and Mr. S.P. Sharma, Advocates for R-4. CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the order? No 2. To be referred to the Reporter or not? Yes 3. Whether the order should be reported in Digest? Yes ORDER
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Steel Authority Of India Limited vs Competition Commission Of India & ... on 6 May, 2011

06.05.2011 CM APPL No. 5716/2011 (for exemption) Exemption allowed subject to all just exceptions. The application is disposed of. W.P. (C) 2691/2011 Page 1 of 11 CM APPL No. 6415/2011 (for amendment of petition) For the reasons stated therein and without prejudice to the rights and contentions of the parties, this application is allowed. The amended petition is taken on record. The application is disposed of. WP (C) 2691/2011 & CM APPL No. 5715/2011 (for directions) 1. Notice. Mr. Tarun Gulati, Mr. Shaqib, Ms. Pallavi Shroff and Mr. Ashwani Bhardwaj, learned counsel accept notice on behalf of Respondent Nos. 1, 2, 3 and 4 respectively. With the consent of learned counsel for the parties this petition has been heard finally. 2. The Steel Authority of India ( SAIL ) challenges an order dated 17 th March 2011 and a consequential order dated 25th March 2011 passed by the Competition Commission of India ( CCI ), Respondent No. 1, in Case No. 11 of 2009. 3. The facts in brief are that Jindal Steel & Power Limited ( JSPL ), Respondent No. 3, invoked the provisions of Section 19 read with Section 26 (1) of the Competition Act, 2002 ( CA') by providing information to the CCI alleging that the Petitioner SAIL had inter alia entered into an exclusive supply agreement with Indian Railways ( IR ), Respondent No. W.P. (C) 2691/2011 Page 2 of 11 4, for supply of long rails. JSPL alleged that SAIL had abused its dominant position in the market and deprived others of fair competition and therefore, acted contrary to Section 3 (4) CA [anti-competitive agreements] and Section 4 (1) CA [abuse of dominant position]. On 8th December 2009 the CCI took on record the affidavit filed by JSPL. SAIL requested extension of time to file its comments but this prayer was declined by the CCI by the same order dated 8 th December 2009. The CCI formed the opinion that prima facie case existed against SAIL. Consequently, the CCI directed the Director General ( DG ) to conduct an inquiry into the complaint. SAIL filed an interim reply before the CCI along with an application seeking hearing before any interim order was passed by the CCI. On 22nd December 2009 the CCI reiterated its earlier directions to the DG for investigation and granted liberty to SAIL to file its reply before the DG. 4. The order dated 8th December 2009 of the CCI was challenged by the SAIL before the Competition Appellate Tribunal ( Tribunal ). The CCI filed an application on 28th January 2010 before the Tribunal seeking impleadment in the appeal and also filed an application for vacation of interim orders which had been passed by the Tribunal on 11 th January 2010 staying further proceedings before the DG. The Tribunal by its order dated 15th February 2010 dismissed the CCI s application for W.P. (C) 2691/2011 Page 3 of 11 impleadment. It directed that the CCI must give reasons while passing any order, direction or taking any decision. While setting aside the order of the CCI and recording a finding that there was violation of principles of natural justice, the Tribunal granted SAIL further time to file a reply by 22nd February 2010 in addition to the replay already filed by it. 5. The CCI filed an appeal against the order dated 15 th February 2010 of the Tribunal before the Supreme Court. In Competition Commission of India v. Steel Authority of India Limited (2010) 10 SCC 744 (hereafter CCI v. SAIL) the Supreme Court held that the CCI was a proper party before the Tribunal and directed SAIL to pay costs of Rs. 25,000/- to the JSPL for extension of time for filing a further reply. The Supreme Court further directed that in the event the report prepared by the DG during the period 8th December 2009 to 11th January 2010 had been received, the CCI should proceed in accordance with the provisions of the CA as well
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Steel Authority Of India Limited vs Competition Commission Of India & ... on 6 May, 2011

as principles of law enunciated in its judgment after giving proper notice to JSPL and SAIL and pass appropriate orders. The order dated 15th February 2010 of the Tribunal was modified to the above extent. 6. On 29th June 2010 a detailed order was passed under Section 26 (1) of the CA by the CCI prima facie concluding that this case be referred to the DG to investigate the matter. On 11th January 2011 the DG submitted an W.P. (C) 2691/2011 Page 4 of 11 investigation report before the CCI, copies of which were then sent to the parties by the CCI for their comments. During the course of investigation, officers of SAIL and IR were summoned, examined on oath and were also asked to submit the relevant documents. The officers of JSPL were also asked to appear in person to explain "the modalities and mechanics of producing rails by using various available techniques". Significantly, none of the officers of JSPL were examined on oath. Also their statements were not recorded by the DG. 7. A certificate dated 1st February 2010 issued by M/s S.S. Kothari Mehta & Co. was produced before the DG by JSPL. Relying on the above certificate the DG observed in para 8 of Chapter 8 of his report that JSPL was not in a position to commercially produce long rails prior to 28 th April 2008 only, using RH degasser technology. Before this, it was using the vacuum tank degassing technique for degassing the steel which did not comply with the regulation laid down by IR. This had been observed by Research, Designs and Standards Organization ( RDSO ) of the IR during its inspection of JSPL facilities during February 2005 and July 2005. 8. In response to the notice received from the DG, the JSPL, by a letter dated 12th August 2010, supplied information inter alia enclosing a "list W.P. (C) 2691/2011 Page 5 of 11 of buyers who procure their requirements of RDSO compliant rails from JSPL". The terms of Regulation 35 of the Competition Commission of India (General) Regulations, 2009 ( CCI Regulations 2009 ) read with Section 57 CA, JSPL requested that the information provided by it be kept confidential for the following reasons: "(a) the documents contain commercially sensitive and strictly confidential information which is not in the public domain; (b) if the information contained in these documents is disclosed, it could: i) have an adverse impact on JSPL s business causing irreparable harm; and

ii) result in JSPL, losing its competitive edge vis- -vis its competitors in the sale of rails." 9. On 16th March 2011 SAIL filed its reply to the DG s report and also filed two separate applications before the CCI. One was an application under Regulation 20 (2) of the CCI Regulations 2009 for crossexamination of the chartered accountants who issued a certificate dated 1 st August 2010 as regards JSPL commencing trial production of RDSO compliant long rails on 1st January 2008 and commercial production of such long rails on 28th April 2008. It also sought an opportunity to cross- examine the witnesses who had provided information to the DG regarding the modalities and mechanics of producing rails by JSPL. The second was W.P. (C) 2691/2011 Page 6 of 11 an application under Section 57 CA read with Regulation 35 of the CCI Regulations 2009 seeking access to the documents provided by JSPL to the DG containing list of buyers who procured their requirements of RDSO compliant rails from JSPL as well as granting access to the document regarding the quantity of rails supplied by JSPL based on the orders placed by each of such buyers. 10. Both the applications were rejected by the CCI by an order dated 17 th March 2011. The CCI noted the amendment to Regulation 20 (2) of the CCI Regulations 2009 with effect from 20th October 2010. The CCI held that the change in the procedural law operated retrospectively and therefore, the SAIL could not ask for examination of the witnesses. Nevertheless, the CCI considered it "expedient and in the interest of justice to provide the applicant an opportunity to adduce evidence in rebuttal or to controvert the impugned report by filing affidavits or other material, as it deems appropriate".
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Steel Authority Of India Limited vs Competition Commission Of India & ... on 6 May, 2011

11. As regards the second application seeking disclosure of the information concerning list of buyers of JSPL, it was held by the CCI as under: "It is true that for determining the market share figures of total sales are relevant. In our opinion, customer wise list may not serve any additional or useful purpose. However, it W.P. (C) 2691/2011 Page 7 of 11 would be open for the applicant to obtain the required information through other source/domain, viz., RDSO etc., if available, and to adduce the same before the Commission, if it considers necessary." 12. Mr. Parag Tripathi, learned Additional Solicitor General appearing for the Petitioner SAIL contended that inasmuch as the DG had based his conclusions on the certificate dated 1st August 2010 issued by the chartered accountants of JSPL, SAIL had a right to access "records and other documents" on the basis of which such certificate was given. This would include the right to cross-examine the chartered accountants who issued it. It is submitted that SAIL had a right to access the documentation that formed the basis of the certificate and to cross-examine the chartered accountants as to the basis for their conclusion. It is further submitted that documents forming the basis of a decision of the DG adverse to the SAIL had to be provided to SAIL in compliance with the principles of natural justice. Reliance is place on the decisions in Lakshman Exports Limited v. Collector of Central Excise (2005) 10 SCC 634, K.L. Tripathi v. State Bank of India (1984) 1 SCC 43 and New India Assurance Company Limited v. Nusli Neville Wadia (2008) 3 SCC 279. Mr. Tripathi relies on the observations made in the last mentioned judgment that "an effective show cause can be filed when eviction is sought for a specified ground and the occupants must know the particulars in relation thereto." He also W.P. (C) 2691/2011 Page 8 of 11 relied on the following observation in para 47 of the last mentioned judgment: (SCC @ 295) "47. It is axiomatic that when in support of its case the landlord intends to rely upon a document which is to be taken on record, it would be obligatory on the part of the Estate Officer to allow inspection thereof to the notice. Denial of such inspection of documents shall be violative of the principle of natural justice. It would run counter to the doctrine of fairness in the matter of determination of a lis between the parties." 13. On the other hand it is submitted by Mr. A.S. Chandhiok, learned Additional Solicitor General appearing for the CCI that no witness had been examined on behalf of the JSPL and therefore, the question of allowing cross-examination did not arise. It is submitted that it is always open for the CCI to seek more information on the basis of what is urged before it by SAIL while assailing the report of the DG. 14. Appearing for the JSPL Ms. Pallavi Shroff, learned counsel, submitted that the certificate was a document relied upon by the JSPL and was given to it by the chartered accountants. It was not a statement made by the chartered accountants before the CCI. Consequently, the question of SAIL cross-examining the chartered accountants did not arise. W.P. (C) 2691/2011 Page 9 of 11 15. Having considered the above submissions, this Court is of the view that the impugned order of the CCI on the issue of cross-examination of witnesses by SAIL does not call for interference. Indeed, the certificate was given by the chartered accountants to JSPL and not to the CCI. No witness as such has been examined to prove the certificate. The question of cross-examination of any witness in regard to such certificate does not arise. It is always open to SAIL to challenge the certificate of the chartered accountants by filing affidavits of its witnesses. In any event, in the impugned order the CCI had provided SAIL an opportunity to adduce witnesses by way of rebuttal of the report of the DG by filing affidavits or other material as it deems appropriate. 16. On the aspect of disclosure of the information concerning the buyers of long rails of JSPL, Mr. Tripathi urged that in terms of the CCI Regulations 2009, the DG or the CCI as the case may be, had to be satisfied that the claim of confidentiality in respect of any document was justified. It is submitted that there was no determination to that effect by either the DG or the CCI on this aspect. Mr. Chandhiok on the other hand points out that this aspect has already been adverted to by the Supreme Court in CCI v. SAIL. Ms. Shroff
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Steel Authority Of India Limited vs Competition Commission Of India & ... on 6 May, 2011

pointed out that cogent reasons had been given by JSPL as to why the information provided by it to the CCI should be kept confidential. W.P. (C) 2691/2011 Page 10 of 11 17. On the aspect of confidentiality of the information provided to the CCI by JSPL, the conclusion of the CCI again does not call for interference. It is for the CCI to be satisfied about the reasons furnished by JSPL for treating the information concerning its buyers as confidential. The CCI has to form an opinion whether the data concerning the buyers substantiates the plea of JSPL. 18. For the aforementioned reasons, the writ petition is dismissed. S. MURALIDHAR, J MAY 06, 2011 rk W.P. (C) 2691/2011 Page 11 of 11

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