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12 November, 2016
The Office of the Director General (DG), being the investigative arm of the Competition Commission of India (CCI), has conducted two search and seizure operations thus far. The first of these, more popularly known as dawn raids, was on the offices of JCB India Limited (JCB India) on 22 September 2014. More recently, the DG carried out a dawn raid on the premises of Eveready Industries Limited (Eveready), a leading dry cell manufacturer.
Dawn raids such as these signify the resolve of the CCI to actively conduct intrusive operations to enforce the provisions of the Competition Act, 2002 (Competition Act). In light of such a pro-active approach, and given that the DG enjoys wide (and mostly untested) powers whilst conducting such operations, companies in India must be aware of what they should do in the course of a dawn raid to contain the consequences and fallout.
The power to conduct a dawn raid is conferred upon the DG under the provisions of Section 41 of the Competition Act. Section 41 lays down that the investigation made by the DG is to be conducted in accordance with the provisions of Sections 240 and 240A of the Companies Act, 1956 (Companies Act 1956). In 2013, the Indian parliament passed the Companies Act, 2013 (Companies Act 2013), and repealed the erstwhile Companies Act 1956.
While Sections 217 and 220 of the Companies Act 2013 are broadly similar to Sections 240 and 240A of the Companies Act 1956 (referred to in the Competition Act), a crucial difference is that the Companies Act 2013 does away with the express requirement to obtain a warrant from a judicial magistrate before conducting a search and seizure operation. However, the Code of Criminal Procedure, 1973 (CrPC) applies to every search and seizure operation carried out by the DG. Since the CrPC mandates that search and seizure operations be conducted with a judicial warrant, it is likely that, notwithstanding the lack of an express requirement under the Companies Act 2013, the DG will have to continue to seek a warrant from the Chief Metropolitan Magistrate in Delhi before conducting a dawn raid.
Within the scope of its powers to conduct a dawn raid, the DG is empowered to seize the books and documents of the company. Emails and electronic evidence are of particular interest to competition authorities across the world and it is likely that the DG will seize, apart from documents, electronic devices such as computer hard-drives and removable storage devices. The DG also has the power to depose employees or persons connected with the investigation during the dawn raid.
What to do if the DG comes calling
The first point of contact for the DG is the front desk/reception of the enterprise. The employees manning the reception must be made aware of what is to be done if a dawn raid were to happen. First, the reception must inform a certain pre-determined member of middle management or the in-house legal team that a dawn raid is underway. This employee (Designated Contact) is responsible for initiating a pre-determined protocol to handle the dawn raid – which includes informing senior management and (internal and external) counsel, and forming teams of employees to shadow and assist the DG’s officials. The reception must also verify the identities of all the DG’s officials as well as scrutinise (and, if possible, photocopy) the warrant that the DG is bound to show.
The Designated Contact must form certain pre-selected teams of employees to shadow the DG’s officials as they initiate the raid. These teams must assist the officials, allow them access to the entire premises, take copies of every document that is seized and note down the names of every employee who is deposed. These details must be provided to the company’s counsel (both internal and external) who would need to perform a risk assessment.
Post the dawn raid, given the possibility of media attention, a member of the company’s corporate communications team must be briefed on how to handle any media queries. They must be instructed to confirm that a dawn raid took place, but in no event give any details regarding the information/documents seized/copied by the DG.
What NOT to do in such circumstances
The broad rule of thumb is that the DG must not be impeded in any way. Further, under no circumstances must any documents, physical or electronic, be destroyed or hidden. The same rule applies to emails.
Since the CCI is a pan-sectoral regulator, no company that qualifies as an ‘enterprise’ under the Competition Act is beyond the reach of the DG’s powers. It is thus imperative that proper dawn raid training be given to the employees of every company. External counsel may be brought in to establish such protocols and run simulations to ensure that employees are well versed on how to handle such search and seizure operations. Last, it must be kept in mind that a dawn raid is merely an investigation procedure. By itself, it is no proof of any contravention. Handling a dawn raid properly thus goes a long way to ensuring that interests of the company are protected to the fullest extent possible.
For further information, please contact:
Anshuman Sakle, Partner, Cyril Amarchand Mangaldas
anshuman.sakle@cyrilshroff.com
