As per section 19 of the Competition Act, 2002 (Act), the Competition Commission of India (CCI) may take cognizance of any allegations of cartel or abuse of a dominant position levied against an enterprise via an information, reference, or on its own accord (suo motu). Such a framework has been discussed in the landmark judgment passed by the Hon’ble Supreme Court of India in Competition Commission of India v. Steel Authority of India ((2010) 10 SCC 744) at para [97],


“Section 26, under its different sub-sections, requires the Commission to issue various directions, take decisions and pass orders, some of which are even appealable before the Tribunal. Even if it is a direction under any of the provisions and not a decision, conclusion or order passed on merits by the Commission, it is expected that the same would be supported by some reasoning. At the stage of forming a prima facie view, as required under Section 26(1) of the Act, the Commission may not really record detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requiring issuance of direction for investigation.”


Further, the CCI while passing an order under Section 26 of the Act is believed to express prima facie view in terms of Section 26(1) of the Act, without entering into any adjudicatory or determinative process and by recording minimum reasons substantiating the formation of such opinion.


Over the years various Hon’ble High Courts[1] across India have time and again opined and reiterated the relevance of an order passed under Section 26(1) of the Act, and how the same ought to be construed as a direction simpliciter and is administrative in nature, and a direction is like a departmental proceeding which does not entail civil consequences or affects rights and liabilities of the parties.


However, under peculiar factual scenario, the Hon’ble Madras High Court in Coimbatore Corporation Contractors Welfare Association v. Central Bureau of Investigation & Anr. (Crl O.P. No. 6153 of 2021)  received a criminal complaint under Section 482 of the Code of Criminal Procedure, 1973 from Coimbatore Corporation Contractors Welfare Association, against a syndicate of nine steel manufacturers (Association) namely Tata Steel Ltd., JSW Steel, SAIL Steel, Vizag Steel, Tirumala TMT, Kamachi TMT, Agni Steel, Indrola Steel, and Kiscol TMT), alleging their involvement in a price cartel, and several anti-competitive activities attempting to control the supply of steel. The complaint was raised with the Central Bureau of Investigation (CBI) and Deputy Superintendent of Police, however, upon receiving a cold response from their end, the Association approached the Hon’ble Madras High Court.


Upon the commencement of the proceedings, the Hon’ble Madras High Court took cognizance of a very crucial letter shared by the CBI apprising the Court that it had “already forwarded the complaint to the Director General (Investigation), Competition Commission of India, for taking necessary actions, since the CBI had no jurisdiction over the matter”.  The High Court, satisfied with the same, vide its order dated 29.07.2021 directed the Director General, Competition Commission of India (DG) to take necessary action in accordance with law.


In December 2022,  dawn raids were conducted at the premises/offices of nine small-scale steel companies across Coimbatore, Erode, Chennai, Kolkata, Delhi, and Punjab for alleged collusion of steel projects used in construction (including TMT bars) as being reported in several media reports (here and here).


After almost six months of silence, the said matter came into the limelight yet again when one of the parties to the investigation namely Shyam Steel Industries Ltd (Shyam Steel) filed a Writ Petition Appeal No. 10107/2023 before the Hon’ble Calcutta High Court against the CCI, and the DG, challenging the summons issued to Shyam Steel & officials, namely, the Director & the Shareholder of the Company, and sought quashing of the same. Moreover, Shyam Steel has also alleged that the said summons were issued without regard to the statutory mandate under Section 26(1) of the Act, and that the requirement to form a prima facie opinion ought to have been fulfilled by the CCI before the DG could cause an investigation. Based on the above, Shyam Steel also challenged the validity of the dawn raid conducted by the DG on it even when it was not a named party in the original complaint filed by the Association before the CBI, or in the Writ Petition filed before to Hon’ble Madras High Court.  


Post hearing on the application for interim relief, the single judge bench of Justice Moushumi Bhattacharya of the Hon’ble Calcutta High Court vide its order dated 18.05.2023 refused to stay the summons issued to the officials by the DG for the said investigation and surprisingly shook the gravel below the ground by categorically stating at paragraph 14:


“The order of the Madras High Court of July 2021, in essence kick-starts the process from the stage of directing the Director-General to cause an investigation without exhausting the requirements preceding the Commission’s direction to the Director-General under Section 26(1) of the Act.”


Moreover, it states that:


“..in the absence of a jurisdictional error, the petitioners do not have any ground to obstruct the investigation and seek interruption of or interference with the process, Section 26(2) of the Act provides a further exit route to the petitioners where the entire process may be closed if the prima facie case ceases to exist.”


The order of the single judge has been appealed by Shyam Steel before a division bench of the same Court.


It may be noted that the procedure followed by the CCI to initiate investigation very well comes from the Act itself. Moreover, the  High Court has very clearly explained that the framework of Sections 26(1) and 41 of the Act makes it clear that the CCI and DG are two separate and distinct entities, and goes onto note that “by directing the Director-General to take necessary and appropriate action on the complaint, the Madras High Court through exercise of its extraordinary discretion, thought it fit to by-pass the requirement in the Commission to form an opinion under section 26(1) of the Act. The formation of opinion and all the conditions precedent for a direction on the Director-General to investigate were accelerated and made irrelevant by the Madras High Court.”


The Madras High Court decision is unprecedented and was seconded by the Calcutta High Court. Though, it is worth noting that the order of the Calcutta High Court does refer to an order of the CCI dated 23.08.2022 which directed the DG to investigate the matter, however, the counsel appearing on behalf of the CCI at paragraph 5 of the order states that “the Director-General did not have any choice after the order of the Madras High Court, but to conduct investigation into the matter.”


It appears that the DG, on receiving the directions from the Hon’ble Madras High Court, sought clarification from the CCI, who took cognizance of the matter and either ‘directed’ or ‘permitted’ the DG to proceed with its investigation in the matter.


Subsequently, the Division Bench of the Madras High Court comprising of Chief Justice Gangapurwala and Justice P.D. Audikesavalu vide its order dated 19.06.2023 took cognizance of a separate Writ Petition (W.P. 11911 of 2023) filed by yet another steel company namely Agni Steel (which also was raided by the DG on 16.12.2022 in the same case) challenging the quandary surrounding the same missing prima facie order of the CCI. The High Court did not stay the investigation initiated by the DG, thereby reinforcing the decision of the Calcutta High Court.


Recently, the CCI had filed a Transfer Petition (Crl.) Nos. 1654-1656/2023 Competition Commission of India v. Agni Steel Private Limited & Ors. before the Hon’ble Supreme Court of India, seeking a transfer of the Writ Petitions filed before the Hon’ble Madras High Court, and Hon’ble Calcutta High Courts under Article 139A of the Constitution of India. However, the bench comprising of Justice Sanjiv Khanna and Justice Bela M. Trivedi vide its order dated 18.07.2023 were not inclined to entertain the said transfer petition by the CCI and dismissed the same. However, the bench allowed the CCI to raise all pleas and contentions before the respective Hon’ble High Courts where the Writ Petitions are pending. Under such circumstances, it will be worthwhile awaiting the outcome of the writ petitions pending before the respective Hon’ble High Courts.


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[1] CCI v. Grasim (Delhi High Court), Cadilla Healthcare Limited v. CCI (Delhi High Court), and J.K. Paper v. CCI (Gujarat High Court).