Emphasising that Competition Act and State Excise Act operate in distinct fields, the High Court of Madhya Pradesh at Jabalpur Bench has held that the Competition Act, 2002 does not encroach upon the State Legislature’s exclusive domain over intoxicating liquor under Entries 8 and 51 of List II, since the two statutes operate in entirely different fields with distinct objects. The Court clarified that unlike the telecom sector where TRAI exists as a sectoral regulator equipped to examine competition issues, the M.P. Excise Act establishes no independent authority to deal with anti-competitive practices, leaving the CCI as the expert body empowered to conduct such inquiry.
The Court accepted that the un-tabled CAG Audit Report for FY 2016–17 could be treated as ‘information received’ under Section 19(1) of the Competition Act, justifying the CCI’s suo motu initiation, and distinguished the CPIL precedent on the ground that no penalty was imposed solely on the basis of the CAG report. The Court observed that an order under Section 26(1) is administrative and inquisitorial, determining no civil rights, and that the petitioners had an efficacious statutory remedy of appeal under Section 53A before the NCLAT.
Accordingly, the CCI was directed to complete the enquiry under Section 26 and pass the final order under Section 27 of the Competition Act.
The Division Bench comprising Justice Vivek Rusia and Justice Pradeep Mittal observed that the M.P. Excise Act, 1915 and the Competition Act, 2002 operate in entirely different fields with distinct aims and objects. While the Excise Act controls the manufacture, sale, licensing, and pricing of intoxicants through the State Excise Department, the Competition Act is concerned with eliminating anti-competitive practices, promoting competition, protecting consumer interests, and ensuring freedom of trade. The Court held that none of the Acts interfere with the fields created under the other enactment, and there is no conflict between the two statutes.
The Court noted that the Competition Act is traceable to Entry 21 of List III (Concurrent List) dealing with commercial and industrial monopolies, combines and trusts, and that there is no implied repeal of the State Excise Department’s powers. The CCI is not exercising parallel or concurrent jurisdiction over distilleries; it is examining whether particular agreements have an appreciable adverse effect on competition within the relevant market. The Court further observed that unlike the telecom sector in Bharti Airtel (where TRAI was a sectoral regulator equipped to examine competition issues), the M.P. Excise Act does not establish any independent authority to examine anti-competitive practices or protect consumer interest in the licensing fold.
On the CAG report issue, the Court held that the CCI did not accept the CAG report as conclusive proof of guilt but treated it merely as ‘information received’ under Section 19(1) of the Act, which authorises the Commission to inquire into alleged contraventions on its own motion or upon receiving information.
The Court also observed that the petitioners ought to have approached the Court immediately after the order dated Aug 04, 2020, was passed, rather than waiting until the DG submitted its report and the CCI began proceedings under Section 26(8). The petitioners continued to participate in the proceedings on multiple dates and filed interlocutory applications seeking extensions, cross-examination, and supply of documents, before approaching the Court mid-stream. The Court noted that even if any adverse order is passed, the petitioners have an efficacious statutory remedy of appeal under Section 53A before the National Company Law Appellate Tribunal.
Briefly, a batch of petitions was filed by several commercial distilleries and bottling units operating in Madhya Pradesh, challenging the legality of orders passed by the Competition Commission of India (CCI). The petitioners specifically challenged the initiation order under Section 26(1) of the Competition Act, 2002, the consequential Investigation Report submitted by the Director General, the procedural order accepting the redacted report, and the order rejecting the petitioner’s preliminary objections on jurisdiction.
The petitioners are engaged in the manufacture and wholesale supply of country liquor exclusively within Madhya Pradesh, operating under the M.P. Excise Act, 1915 and rules framed thereunder. The supply is undertaken through annual or multi-year tender processes floated by the State Excise Department. The genesis of the proceedings traces back to Audit Report No. 1 on the Revenue Sector of the Government of Madhya Pradesh for FY 2016–17 prepared by the CAG, which observed that the same distilleries were emerging as successful L-1 bidders in identical districts with narrow price variations, suggesting possible collusive bidding or market allocation.
Acting on the CAG report, the CCI registered a suo motu case and directed the Director General to investigate eight named distilleries. During the investigation, the DG summoned high-ranking State officials, conducted search and seizure operations, and ultimately submitted a 1,200+ page Investigation Report. Notably, despite recording that no party claimed confidentiality, the DG suo motu bifurcated the report into confidential and non-confidential versions, blacking out material portions. The CCI took the report on record and forwarded only the redacted version to the petitioners, prompting preliminary objections on jurisdiction, which were rejected.
