Case Summary

Facts

On 21.09.2018, the Directorate of State Transport, Haryana (‘Procurer’), invited online tenders for the purchase of new steel radial tyres of different sizes and specifications. JK Tyres was the only bidder who participated, despite there being seven other market players such as CEAT Ltd., Birla Tyre Ltd., Michelin Tyre Ltd., Continental, Apollo Tyres, MRF Ltd., and Bridgestone, who were in the same business.

The Procurer noted that the rates quoted by JK Tyres were considerably higher than the last purchase rates. Furthermore, JK Tyres had been the single bidder in tenders floated on three different occasions. Suspecting cartelisation by the tyre manufacturers, the Procurer filed a Reference against JK Tyres before the Competition Commission of India (CCI).

On 01.11.2019, the CCI expressed a prima facie opinion that there was cartelisation by the tyre manufacturers and passed an order directing an investigation against JK Tyres. The CCI also gave liberty to investigate the role of other tyre manufacturers who were not specifically arrayed as Opposite Parties, as may be required for the investigation purpose.

Pursuant to the order dated 01.11.2019, notices were issued to MRF Ltd., starting with a notice dated 24.04.2020, calling for various particulars.

On 17.08.2020, the Director General (DG) moved a note to the CCI, proposing to investigate the following tyre manufacturers: CEAT Ltd., Birla Tyre Ltd., Michelin Tyre Ltd., Continental, Apollo Tyres, MRF Ltd., and Bridgestone.

On 26.08.2020, the Competition Commission of India (CCI) passed an order impleading MRF Ltd. and six other tyre manufacturers as Opposite Parties. A copy of the investigation order dated 01.11.2019 was supplied to MRF Ltd. via a letter dated 14.09.2020.

According to MRF, it only became aware of its change of status from a third party to an Opposite Party when it received the order dated 26.08.2022 on 01.03.2024. Aggrieved by this, MRF filed a writ petition before the Madras High Court challenging the change in its status from a ‘participant’ to an ‘opposite party’ without any opportunity granted to it in that respect.

Question of Law:

Whether the change of status of MRF from ‘participant’ to ‘party’/‘opposite party’ by the CCI via order dated 26.08.2020 is contrary to the provisions of law and the procedure contemplated under the Act and connected Regulations.

Court's Observation:

The High Court noted that there were several provisions in the Competition Act that use the term ‘party’ or ‘parties’, which should not be applied to a mere participant or third party. The Competition Act addresses violations by a ‘party’/‘opposite party’ only. There is no provision of law which could make a third party liable for violations of the Competition Act.

The High Court looked into Sections 41(3) and (4) to opine that a clear distinction is made between the party under investigation arrayed as the opposite party and a third party to the investigation.

Section 41(3) states that it is the duty of all officers, other employees, and agents of a party under investigation to assist the DG by providing all information, books, documents, and records relating to the party under investigation when sought. Section 41(3) thus relates to the party under investigation.

Whereas Section 41(4) empowers the DG to require a third party, i.e., a party other than the party under investigation, to furnish information or produce books or records at the DG's request. Section 41(4) thus relates to a third party.

The High Court also looked into Sections 26(3), 26(3B), and 26(4) of the Competition Act. Section 26(4) provides for the CCI to forward a copy of the investigation report referred to in Sections 26(3) and (3B) to the parties concerned. The term used in Section 26(4) is ‘parties’.

It was noted that in the present case, a report dated 17.08.2020 was not furnished to MRF. Since a copy of the investigation report under Section 26(3) was not furnished to MRF, it was clear that MRF was still being treated as a third party to the proceedings, despite the change in status to a contesting party under the order dated 26.08.2020.

Thus, for MRF to be subject to the rigors of Section 27, it must have been afforded sufficient opportunity to contest its impleadment as an opposite party and must be put on notice.

In light of the above discussion, the High Court held that MRF should have been given notice prior to impleadment as a party, and the authority's satisfaction regarding the justification for such impleadment should have been documented in a speaking order.

Based on this, the order changing the status from third party to opposite party was quashed. The CCI is at liberty to proceed with the matter in accordance with the observations set out in this decision and in accordance with the law.