Samir Agrawal v. CCI: NCLAT's Misstep in Interpreting Locus Standi of Whistle-blower Informants
[Parash is a student at Rajiv Gandhi National University of Law.]
The National Company Law Appellate Tribunal (NCLAT) in its recent judgment in the matter of Samir Agrawal v. Competition Commission of India and Others took a rather conservative approach in interpreting the locus standi of whistle-blower informants under Section 19(1)(a) of the Competition Act 2002 (Act). The bench held that an informant cannot approach the Competition Commission of India (CCI) without having suffered any legal injury, essentially closing the gates on whistle-blower informants. The judgment raises grave concerns as it not only restricts the right of whistle-blower informants but also limits the CCI’s mandate as a regulatory body and counters the legislative intent behind the Act.
Samir Agrawal, an independent legal practitioner, had filed an information before the CCI alleging that the opposite parties (OPs), cab aggregators Ola and Uber, made use of algorithms to facilitate price fixing between them and the drivers, thus violating Section 3 of the Act.
The CCI closed the matter stating that there did not seem to be any prima facie case. The commission was of the view that the price for each ride was fixed algorithmically by processing user generated data and there was no indication of any understanding or arrangement between the OPs and their respective drivers to fix prices and affect the competition. The appellant, aggrieved with the CCI’s decision to close the matter, preferred to file an appeal before the NCLAT assailing the impugned order on several grounds.
NCLAT Ruling: Restrictive Interpretation of Locus Standi Under Section 19(1)(a)
The NCLAT, after hearing the appellant, sided with the CCI on all grounds and dismissed the appeal. It held that there was no merit in the appeal as it did not find any legal infirmity in the CCI’s ruling. However, before delving into the merits of the appeal, the tribunal outrightly rejected the appellant’s locus standi to initiate and maintain an action against the alleged contravention of Act. The restrictive standard of locus standi set by the tribunal raises grave concerns not only for whistle-blower informants but also for the commission and other stakeholders. This is because whistle-blower informants have brought several useful information to the CCI’s notice in the past and have helped it nab offenders and maintain a fair and competitive market.
From a plain reading of Section 19(1)(a) of the Act, it can be inferred that the commission reserves the right to inquire into any possible anti-competitive activity either on its own motion or on receiving information from 'any person', 'consumer' or 'their association or trade association.' However, the tribunal erred in interpreting Section 19(1)(a) of the Act and restricted the scope of 'any person' under the said provision. It held that a person approaching the CCI with an information under Section 19(1)(a) can do so only if he has suffered from any legal injury. It further stated that any other interpretation of the provision would let people with oblique motives target certain enterprises. It was held that the appellant had not suffered any kind of legal injury at the hands of the OPs, i.e., Ola and Uber, and as a result, he did not have any locus standi in the matter. The tribunal’s restrictive locus standi requirement not only impedes the rights of whistle-blower informants but also goes against the bare provisions of the Act and sets a bad precedent in law.
Furthermore, the tribunal’s interpretation of Section 19(1)(a) counters the judicial rulings on the locus standi requirements. Most notably, the decision of the Competition Appellate Tribunal (COMPAT), the NCLAT’s predecessor, on the issue of locus standi in Shri Surendra Prasad v. Competition Commission of India and Others. The erstwhile COMPAT analysed the legislative intent behind Sections 18 and 19 read with Section 26(1) of the Act and ruled that there is no specific qualification or condition which needs to be fulfilled by any person in order to file an information under Section 19(1)(a) of the Act.
Misplaced Fear Regarding Vexatious Litigation
As per the preamble to and Section 18 of the Act, the CCI is entrusted with the duty of maintaining fair competition in the market, safeguarding consumer interests and preventing all anti-competitive activities. It is up to the commission to pursue all reasonable means to fulfil its duties and obligations. As discussed in the previous segment, a plain reading of Section 19(1)(a) of the Act shows the clear and conclusive mandate provided to the CCI, which is to inquire into any anti-competitive act brought to its notice by an informant. If the information has substance and prima facie points to any contravention of the provisions of the act, then the locus standi of the informant does not matter. Moreover, as per Section 26(1) of the Act, if the information does not convince the CCI to form a prima facie opinion against the accused, it reserves the freedom to not order an investigation and dismiss the information. The same was discussed and upheld in Competition Commission of India v. Steel Authority of India and Another by the Supreme Court. In addition, the Act provides the commission with a safeguard from vexatious litigation in the form of Section 45. The COMPAT, in Alkem Laboratories Limited and Others v. Competition Commission of India and Others, upheld the commission’s powers under Section 45 which empowers it to impose penalties up to INR 1 crore on informants who furnish false information, omit material facts or willfully alter documents. Therefore, it can be concluded that the tribunal’s concern regarding motivated and unscrupulous action by whistle-blower informants is misplaced.
Counters Legislative Intent and Restricts CCI's Mandate
The word ‘information’ in Section 19(1)(a) of the Act replaced the earlier used ‘complaint’ through the Competition (Amendment) Act 2007. This was a result of the recommendation of the 44th Standing Committee on Finance which stated in its report that the term ‘information’ would be more inclusive and have a wider meaning. This was done to enhance the role of the CCI as a regulatory body and expand its scope. It is pertinent to note that the wider scope of the term ‘information’ vis-à-vis ‘complaint’ was discussed and upheld in Walmart India Private Limited v. Central Vigilance Commission by the Delhi High Court. On that note, the tribunal’s interpretation of Section 19(1)(a) seems to counter the legislative intent behind the Act as it restrains the common public from approaching the CCI and in turn restrains the scope of the commission.
Moreover, the CCI rulings are in rem and not in personam, i.e., the commission’s duty as a regulatory body is towards the market at large and is not concerned with the right of any single person or enterprise. In Telefonaktiebolaget lm Ericsson v. Competition Commission of India, the Delhi High Court stated that the objective of the Act is to prevent anti-competitive conduct in the market and not necessarily to grant relief to a particular informant who approaches the commission under Section 19. Therefore, the CCI’s role as a regulatory body is concerned with the greater good of the economy and the tribunal’s locus standi requirement is bound to impede it from realizing the same.
Additionally, the NCLAT’s decision is problematic as it blatantly ignores the importance of whistle-blower informants as stakeholders in curbing anti-competitive practices. As per the CCI’s Annual Report of 2018-19, the information received from the general public under Section 19(1)(a) of the Act has been extremely important to the CCI in identifying and punishing competition violators, and has accounted for a large chunk of its investigations. Similarly, in more mature competition jurisdictions like the UK and Canada, whistle-blower informants are encouraged to report anti-competitive activities and aid the authorities in identifying violators. Therefore, the tribunal’s decision to shut out whistle-blower informants is a step backwards and against international best practices.
The NCLAT has taken an extremely conservative approach in interpreting the locus standi of whistle-blower informants. The rationale behind such an interpretation seems misplaced given the plain and simple language of the concerned provision. The ruling on locus standi is regressive given the dynamic nature of markets which the CCI seeks to regulate. Whistle-blower informants have helped the CCI in keeping pace with the rapidly changing markets by bringing in information regarding contraventions of the act which have triggered investigations. They have been a stakeholder in maintaining and sustaining robust competition in the markets. The ruling not only restricts the rights of such informants but also clips the CCI’s wings. It is contrary to the legislative intent behind the provisions of the Act and downplays the mandate of the CCI as an expert regulatory body tasked with maintaining healthy and fair competition. It would be in the best interests of all stakeholders that this narrow interpretation of locus standi is overruled by a larger bench or through an appeal before the higher courts.