19 July, 2015
On April 27, 2015, COMPAT set aside CCI’s final order in Santuka Associates Private Limited v. All India Organization of Chemists and Druggists, noting that CCI had violated the princi- ples of natural justice in arriving at its findings.
Three separate complaints were filed against the All India Organization of Chemists and Druggists (‘AIOCD’). First, Santuka Associates Private Limited, Cuttack, (‘Santuka’) filed an in- formation against the AIOCD alleging that AIOCD had abused its dominant position by limiting and restricting supply of pharmaceutical drugs in India (‘Santuka Case). Subsequently, CCI re- ceived two substantively similar complaints, one from M/s Peeveera Medical Agency, Palakkad, Kerala, (‘Peeveera’), and another from by Sandhya Drug Agency, Barpeta in Assam.
The Director General (‘DG’) issued separate notices to AIOCD requesting information with regard to the allegations raised against Santuka and Peeveera. The AIOCD provided the required information relating to the Peeveera investigation however it refrained from providing the in- formation requested by the DG in the Santuka investigation, as the information was identical to what had already been provided to the DG. However, the DG issued a notice to the AIOCD to show cause as to why penalty should not be imposed on it under Section 43 of the Competition Act for failing to provide the information requested in the Santuka investigation.
AIOCD submitted that the non-supply of information and documents was inconsequential because the required information and documents had already been furnished as part of its re- sponse to the Peeveera investigation. However, subsequent to the oral and written submissions of AIOCD, CCI imposed a penalty of ¤25,000 (approximately US$390) on AIOCD for each day from the date on which the information was to be submitted to the DG. CCI also directed that the penalty would continue to be levied till the required information was provided to the DG.
Subsequently the DG submitted the report of its findings in the three investigations based on the information submitted by AIOCD in Peeveera investigation. Following the report of DG, CCI passed an order finding AIOCD guilty of violating the Competition Act and ordering AIOCD inter alia to cease and desist from all anti competitive practices.
AIOCD challenged the above orders of the CCI on several grounds including (i) that the Chairperson and five other members of CCI could not have issued any orders because two of the members of CCI were not present during the proceedings in the case; (ii) the submission of the final report of the DG in the Peeveera investigation rendered the direction for supply of information redundant in the other cases; and (iii) failure to supply information by in AIOCD in the Santuka investigation was inconsequential as the DG had relied on information submitted in the Peeveera investigation to prepare its final report.
COMPAT observed that two of the five members who signed the order had joined CCI more than a month after the hearings in the case were held. Based on the principle of ‘one who hears must decide,’ as members of the CCI who had not attended the hearings had signed the final order, COMPAT held that CCI had violated the principles of natural justice. COMPAT also observed that failure to supply the information to the DG was inconsequential, as the DG had requested identical information in all three relevant investigations, and that the DG faced no difficulty in preparing its report even though the AIOCD had not provided the information in the Santuka investigation.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
Shuva Mandal, Partner, AZB & Partners
shuva.mandal@azbpartners.com
