In a significant move, the Supreme Court has stayed the operation of the NCLAT’s December 21 order of last year in the realty major DLF’s case. The apex court bench of Justices Hrishikesh Roy and Manoj Mishra on Friday stayed the NCLAT order and also issued notice. 

The Competition Commission of India (CCI) had filed the appeal against the NCLAT order, which had held that the CCI had no power to direct further investigation in cases where there is finding of contravention of Sections 3 and 4 of the Competition Act in the first report of investigation by the Director General (DG).

‘Completely wrong’

Appearing on behalf of CCI, Balbir Singh, Senior Advocate and Additional Solicitor General, argued that the findings of NCLAT that “under Section 26 of the Competition Act, 2022, CCI has very limited jurisdiction to direct for further investigation” and that too only cases where a finding of no-contravention is given by the DG under Sec 26(5) of the Act is “completely wrong” and is in ignorance of the entire scheme of Competition Act, including Sec 26(8). It was pointed out that Section 26(8) allows CCI to conduct “further inquiry” even when the DG recommends contravention of the provision of the Competition Act 2002 in the report.

Singh submitted to the Supreme Court that the NCLAT order has been passed without considering the applicability of the Section 26(8) in the present matter.

It was argued that the NCLAT’s judgement has crippled the power of CCI and supplanted the scheme of the Act by tying the hands of CCI in effectively discharging duty as per object and preamble of the Competition Act.

‘Report not binding’

CCI Counsel argued that the NCLAT judgment distorts the scheme and balance of the Competition Act by holding that CCI has no power to direct further investigation to DG in cases where there is a finding of contravention in the DG report when there is no provision in the Act which mandates that CCI must accept the DG’s report in case such report recommends contravention.

Singh also noted that the DG’s report is not binding on the CCI and it can differ with the DG’s findings and reject the same.

CCI also argued for the stay of the NCLAT judgment on the ground that the said finding impacts many other similar cases pending inquiry/ investigations.

It maybe recalled that in a landmark ruling, the NCLAT had remanded a matter related to realty major DLF back to Competition Commission of India (CCI) for a fresh order on the basis of the first investigation report in the case. The CCI had earlier closed the case against DLF on the basis of a supplementary investigation report, which was found to be beyond the jurisdiction of the competition watchdog.

In its 27-page order, the NCLAT, after making elaborate reference to the provisions of the Competition Act, 2002, and the general regulations framed thereunder by CCI, held that the competition watchdog had no power to order supplementary investigation in a matter where the DG already found contravention by the entity.

It, however, clarified that if the DG does not find contravention in the first instance, CCI can order supplementary investigation.

Two investigations

The appeal before NCLAT arose out of an order passed by CCI in 2018 in a case filed against DLF by a flat buyer at its residential township ‘Regal Garden’ in DLF Garden City, Gurgaon, that claimed various terms of flat buyer agreement were unfair and discriminatory in abuse of dominant position by DLF.

The CCI ordered an investigation and the DG report found DLF in contravention of the competition law. CCI, however, ordered the DG to conduct a supplementary investigation.

This time, the DG did not find any contravention and CCI closed the matter NCLAT has now voided the CCI order, saying no provision in the competition law enabled it to order supplementary investigation where the DG finds contravention in the first instance.

Earlier, in 2011, the CCI had imposed a penalty of ₹630 crore on DLF for abusing its dominant position through “unfair and discriminatory” terms for buyers through apartment buyers’ agreements.