BY TIOL News Service

NEW DELHI, APRIL 19, 2016: THE issue is: Whether the Commission is under an obligation to indicate the reasons for disagreement with the findings of the DG and give an opportunity to the opposite parties to file their replies/objections. YES is the answer.

Facts of the case

The Informant Express Industry Council of India, filed an information dated 25.04.2013 under Section 19(1) (a) of the Act with the allegation that the appellants, Jet Airways (India) Ltd. Spice Jet Ltd., Indigo Airlines, Air India and Go air had joined hands and formed a cartel to introduce Fuel Surcharge (FSC) for transport cargo with effect from 15.05.2008 and uniformly increased the same from time to time adversely affecting the freight companies and the consumers. The DG investigation found no direct and indirect evidence and submitted the report that no cartelization had taken place. But the Commission took a contrary view and found that the appellants (Jet Airways, Indigo Airlines and Spice Jet) have acted in a concerted manner in fixing and revising ‘Fuel Surcharge' (FSC) and thereby contravened Section 3(1) read with Section 3(3)(a) and imposed penalty of Rs. 63.74crores, Rs. 42.48 crores and Rs. 151.69 crores respectively on the three appellants.

The appellants have challenged the impugned order on several grounds including the one that the same is vitiated due to violation of the principles of natural justice. It was submitted that even though there is no specific provision in the Act and the Competition Commission of India (General) Regulations, 2009 (for short, ‘the Regulations'), which obligate the Commission to record reasons for disagreement, if any, with the findings and conclusions recorded by the investigating officer (DG), communicate the same to the person against whom the investigation is conducted in terms of an order made under Section 26(1) and give such person opportunity to controvert the same, this requirement must be read as implicit in the scheme of the Act and the Regulations because by virtue of Section 36(1), the Commission is bound to act in consonance with the principles of natural justice and one of the facets thereof is that ‘no person can be condemned unheard'.

Reasoning

1. If as a result of the inquiry held under Section 26(7) or 26(8) read with the relevant regulations, the Commission comes to the conclusion that contravention of Section 3 or Section 4 of the Act is established then it can pass appropriate order under Section 27 including an order for imposing penalty. The exercise required to be undertaken by the Commission under Sections 26(7) or 26(8) read with the relevant regulations and an order passed under Section 27 which visits the concerned person with civil consequences makes the functions of the Commission adjudicatory/quasi judicial. Therefore, before recording an adverse finding against a person and holding him guilty of violating Section 3 or 4 of the Act, the Commission is obliged to comply with various facets of the principles of natural justice. This necessarily implies that while holding an inquiry under Section 26(7) or Section 26(8) the Commission is required to comply with the rule of audi alteram partem and give an effective opportunity of hearing to the person against whom a finding is likely to be recorded on the issue of contravention of Section 3 or Section 4 of the Act not only to controvert the allegation made against him as also the evidence/material proposed to be used in support of such allegation but also produced evidence to show that he/she/it has not violated any provision of the Act. If the Commission wants to rely upon some information/ material, which does not form part of the report of the Director General then such information/material must be disclosed to the person concerned and an effective opportunity has to be given to him to controvert the same.

2. A careful scrutiny of the record shows that after conducting detailed investigation, the Jt. DG recorded findings/ conclusions in respect of the seven issues framed by her and held that the allegation of formation of cartel and violation of Section 3(1) read with Section 3(3)(a) has not been proved against the appellants. The Commission considered the report of the Jt. DG in its meeting held on 19.02.2015 and passed the usual order for supply of copies thereof to the parties to enable them to file their replies/ objections. That order does not contain any indication that the Commission had disagreed with the findings and conclusions recorded by the Jt. DG and formed a reason-based opinion that the allegation of formation of cartel and violation of Section 3(1) read with Section 3(3)(a) appears to have been proved against the appellants. The letter/notice dated 23.02.2015 issued by the Secretary of the Commission also did not give any hint to the appellants that the Commission had not agreed with the findings and conclusions recorded by the Jt. DG. Even at the stage of oral hearing, the Commission did not give any indication to the appellants that it was not in agreement with the findings/ conclusions recorded by the Jt. DG called upon them to show cause as to why an affirmative finding may not be recorded on the issue of formation of cartel in the matter of levy of FSC and why they should not be held guilty of having acted in contravention of Section 3(1) read with Section 3(3)(a) of the Act. However, in the final order passed on 17.11.2015, the Commission recorded its disagreement with the Jt. DG and held that the appellants are guilty of forming a cartel and acting in contravention of those provisions and imposed penalty under Section 27.

3. It is clear that till the passing of the impugned order, the Commission had, at no stage of the proceedings held after the receipt of investigation report, given any notice to the appellants indicating/incorporating the reasons for its disagreement with the findings/conclusions recorded by the Jt. DG that the appellants had not formed any cartel or acted in contravention of Section 3(1) and Section 3(3)(a) of the Act and no opportunity was given to them to show that the reasons recorded by the Commission for its disagreement with the findings and conclusion recorded by the Jt. DG were untenable and also show that they had neither formed any cartel nor acted in contravention of the provisions of the Act.

4. The Tribunal was of the view that violation of the principles of natural justice by the Commission has caused serious prejudice to the appellants because they have been condemned without being afforded an opportunity to present their cause against the proposed action and burdened with huge financial liability running into crores of rupees. The Commission shall re-consider the report of the Jt. DG and take appropriate decision under Section 26(8) of the Act. If the Commission disagrees with the findings and conclusions recorded by the Jt. DG, then it shall indicate the reasons for such disagreement and issue notice to the parties incorporating the reasons of disagreement and give them opportunity to file their replies/ objections.

(See 2016-TIOL-15-COMPAT-CACT)