The Orissa High Court (Cuttack Bench) has clarified that Section 26(1) of the Competition Act requires the Competition Commission of India (CCI) to independently apply its mind and form a prima facie opinion before directing investigation by the Director General (DG). This statutory requirement cannot be treated as a mere formality.
The Court ruled that it’s direction to take ‘necessary and appropriate action in accordance with law’ did not authorize the DG to proceed without a valid Section 26(1) direction from the CCI. Judicial directions cannot substitute statutory requirements under the Competition Act.
Although the CCI’s minutes dated Aug 23, 2021, referred to ‘detailed deliberations’, they did not record any prima facie opinion on alleged cartelisation or indicate the basis on which the Commission found sufficient material to justify an investigation. The Court found this to be a foundational defect.
Reaffirming settled competition law principles, the Court held that the DG is not restricted to entities named in the original complaint and may investigate other enterprises whose involvement emerges during the probe. However, such powers arise only after a legally valid investigation has been initiated under Section 26(1).
The Court noted that while formal permission had been obtained for investigating certain other entities during the probe, no similar procedure was shown to have been followed in relation to Rungta Mines Limited. This procedural deficiency reinforced the conclusion that the proceedings against the company could not be sustained.
Briefly, the dispute arose from a complaint filed in March 2021 by the Coimbatore Corporation Contractors Welfare Association alleging cartelisation and price-fixing by certain steel manufacturers. Although Rungta Mines Limited was not named in that complaint, the Competition Commission of India (CCI) later registered Suo Motu Case No. 02 of 2021 and directed an investigation through its Director General (DG). During the investigation, search and seizure operations were conducted at Rungta Mines’ Kolkata office, its employees were examined, and the company eventually came to be treated as an opposite party in the proceedings.
Rungta Mines Limited challenged the investigation before the Orissa High Court, contending that there was no valid order showing CCI’s independent prima facie satisfaction under Section 26(1) of the Competition Act before directing the investigation. A Single Judge accepted the challenge and quashed the investigation and all consequential proceedings against Rungta Mines Limited and its Whole-Time Director.
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The Division Bench comprising the Chief Justice Harish Tandon and Justice Chittaranjan Dash observed that the availability of alternative remedies under the Competition Act does not bar the High Court from exercising writ jurisdiction where the challenge is directed at the very jurisdictional foundation of the proceedings. Since the petitioners questioned the legality of the initiation of the investigation itself, the writ petition was maintainable. The Court also held that the petition was neither premature nor barred by delay because the challenge was filed soon after the petitioners obtained relevant records revealing the alleged jurisdictional defect.
On territorial jurisdiction, the Court noted that although the registered office of Rungta Mines Limited was situated in Kolkata, three of its four manufacturing units were located in Odisha and substantial business operations were carried on within the State. Therefore, a material part of the cause of action had arisen within Odisha, enabling the Orissa High Court to entertain the writ petition.
The Court further held that the Madras High Court’s earlier direction to take appropriate action ‘in accordance with law’ did not dispense with the statutory requirement under Section 26(1) of the Competition Act. The power to form a prima facie opinion and direct an investigation lies exclusively with the CCI, while the DG can investigate only after such satisfaction is recorded. A judicial direction to act according to law cannot substitute this statutory requirement.
Examining the CCI’s minutes dated 23 August 2021, the Court found that while they referred to ‘detailed deliberations’, they did not disclose any independent prima facie opinion or even brief reasons indicating application of mind regarding the alleged cartelisation. Instead, the investigation was directed to proceed in terms of the Madras High Court’s order. According to the Court, the statutory safeguard requiring CCI’s independent satisfaction could not be reduced to a mere formality.
The Court also acknowledged the settled principle that the DG is not confined only to entities named in the original complaint and may investigate other enterprises whose involvement emerges during an investigation. However, this broader investigative power presupposes a validly initiated inquiry under Section 26(1). The DG’s authority to expand the scope of investigation cannot cure the absence of a valid jurisdictional foundation.
Additionally, the Court noticed procedural irregularities in the manner Rungta Mines Limited was brought into the proceedings. While the CCI had formally approved investigation against certain other entities during the probe, no similar order or procedure was shown to have been followed in respect of Rungta Mines. This procedural deficiency further supported the challenge raised by the company.
