This article is written by Ronika Tater, from the University of Petroleum and Energy Studies, School of Law. In this article, she seeks to precisely introduce dawn raids, the pre-condition necessary for such foreseen raids, and how to be prepared for and succeed a dawn raid by competition authorities.

Introduction

The office of the Director-General (DG) as per Section 41 of the Competition Act, 2002, is the investigative arm of the Competition Commission of India (CCI) conducts search and seizure operations in the country. The first search and seizure operation commonly known as dawn raids was conducted at the premises of M/S JCB India Ltd., an Indian subsidiary of a United Kingdom-based construction company (JCB India) on 22 September 2014. 

The second one was carried out on the premises of Eveready Industries Limited (Eveready), a well-established dry cell manufacturer. In the case of multinational corporations, the search and seizure can be conducted in several or simultaneous jurisdictions and at different locations in the same jurisdiction. The raids are conducted covertly, leaving no scope for the party under the investigation to fetch the search in any condition and also to provide an opportunity to refresh or clean the records. 

The act empowers the DG to conduct such dawn raids after obtaining a warrant from the Chief Metropolitan Magistrate, Delhi. Hence, the dawn raid is an arm to resolve the CCI to conduct search and seizure operations under the provision of the Act. Thus, the first DG conducted a surprise raid but it will not be the last one. Nevertheless, it is essential to co-operate and facilitate relevant information and documents to the competition authorities and it is also essential for the companies in India to know what they should do in such a course of a dawn raid to control the consequences and fallout.

What is a dawn raid

A dawn raid is known as undisclosed or surprises search and seizure, it is a type of investigation operation that is majorly conducted by all the investigative agencies around the globe to examine major antitrust or competition law violations to prevent suspects off guards. These surprise inspections are conducted without any warning or notice and are usually conducted in a period when it is least expected, hence, at the crack of the “dawn”. 

It is inherently intrusive and conducted to disclose the evidence to establish an anti-competition practice going around. The power to conduct a dawn raid by the DG is conferred under Section 41 of the Competition Act, which states that the investigation by the DG should comply with Section 240 of the Companies Act, 1956 and 240A of the Companies Act, 1956; however, the act is repealed and the present power is conferred under Section 219, and 220 of the Companies Act, 2013 and it dispose of the express requirement to get a warrant from a judicial magistrate before initiating a search and seizure operation. Although the Code of Criminal Procedure, 1973 (CrPC) states that to conduct a search and seizure operation carried out by the DG it is necessary to option a judicial warrant first, notwithstanding, the lack of an express requirement under the Companies Act, 2013, the DG seeks a warrant from the Chief Metropolitan Magistrate in Delhi before conducting a dawn raid.

 Powers enshrined to the Director-General

• It empowers the DG to seize the books and documents of the company.
• Emails and electronic evidence also play a particular interest to the antitrust authorities across the world.
• The DG may seize documents, electronic devices i.e., hard-drive, and storage chips from the device.
• The DG has the power to testify to any employees or person connected with the investigation during the dawn raids.

The power exercised by the competition authorities will create major disruption for the company and may lead to the sign of stating and proceeding leading to files, damage action, injunction, and disqualifications of directors. To ensure an effective investigation process, it is better to be acquitted with the authority’s processes and procedures to make reasonable decisions at the times of dawn raids. Hence, preparation for dawn raids is of utmost importance.

Dawn raids under the Competition (Amendment) Bill 2012

The Competition (Amendment) Bill, 2012 was introduced in the Lok Sabha in December 2012 stating the following on dawn raids:

1. The chairperson of the CCI may direct the DG to conduct dawn raids if the investigator during the investigation has reasons to believe that the party has hidden or omitted to provide certain relevant information or documents which he or she is supposed to produce or if there is a threat to dispose of or destroy the evidence.
2. Reasonable force can be used by the competent authorities in such cases to carry out the dawn raids.

The term “reason to believe” has a wide connotation and the commission may undertake fishing activity to get evidence during dawn raids. As per the bill, the commission should have reasonable belief before conducting dawn raids by the DG. In the case of Rai Bahadur Seth Sreeram Durga Parasd Ltd., the court observed that there is no definite definition of the term and it would depend on various circumstances. Hence the investigation process to issue a warrant may involve the below-mentioned elements:

• Article of search.
• Place or location in which they are concealed.
• How they are concealed.
• The person who has the said article or document or the location where they are concealed.

The CCI may refer to the relevant guidance from the European Commission’s case of Nexans France SAS and Nexans SA v. European Commission, it was held that the reasons provided for an inspection decision should state the essential characteristics of the suspected violation indicating a possible market to be affected.

The rights of a company subject to dawn raids

• The company may ask the DG to call for the in-house counsel or external counsel to arrive in some time. Although, the discretion for the wait is in the hands of the officer-in-charge.
• The company may ask for the identification details of each officer conducting dawn raids and to facilitate the copy of the order of the Chief Metropolitan Magistrate to verify the authenticity of a dawn raid.
• To maintain copies of the records of all the questions and answers given during the investigation process.
• The company has the right to object to any interference with the privileged documents concerning any confidential information or documents exchanged between the client and the attorney.
• To refuse any answer direct to self-incriminating questions as it is a basic right
• To insist on the presence of an independent witness during the whole process of search and seizure by the antitrust authorities.
• To insist on receiving a copy of the “seizure memo” at the end of the investigation process.

It should be noted that the powers of the investigation authorities are limited to certain restrictions as below-mentioned:

• It cannot use force against any person.
• It cannot exceed the limit of the reason for which the dawn raids have been authorized.
• It cannot hamper or interfere with the scope of legal privilege.

The obligations of the company after the unannounced inspection

The company is not authorized to tamper with or dispose of any official seals affixed by the officials concerning any premise, rooms, cupboards, documents, or hardware devices. Any action to dispose of or destroy any relevant evidence included in the investigation process may lead to a criminal offence.

How to prepare for a dawn raid

The company should take preventive measures during the dawn raids from turning into fishing expeditions as they are harmful to business interests. In the case of a dawn raid in the non-cartel investigation, the employees should coordinate with the offices of the DG during the investigation by providing relevant and complete answers to the questions sent by the DG through notices. However, in the case of hard-core cartels where the DG provides no notices it is vital to be prepared in advance strategy on how to handle dawn raids by competitive authorities in the following ways:

1. Advance strategy and periodical training to all relevant employees i.e., reception or front desk staff, IT team, HR team, PR, and Legal team.
2. Coordinated meetings of the security and the reception top officials with IT, PR, HR and the legal terms to get acquitted with each other working.
3. Establishing a dawn raid response team.
4. Active in-house counsel with reasonable knowledge on the particular field to safeguard the business interest.
5. Training the response team on the dawn raid response process by facilitating step by step action flow charts.

How to manage a dawn raid

In the case of serious antitrust infringement, the following points should be useful for the smooth running of the investigation process and to avoid any further damage to the company:

• Advance prepared for a dawn raid by reading the dawn raid checklist or guide and the process of the chart timely and consult the legal department in case of any doubt during the process.
• Cooperate with the investigators without forcing unnecessary information to the officials.
• Avoid aggressive behaviour towards officials.
• Make notes or copies of all the documents or data taken.
• Do not leave officials with the information or documents on the company premise alone.
• If possible, facilitate statements in the presence of the lawyer.
• Never try to dispose of or alter any documents known during the investigation process.
• Never break any official seal.
• Stay calm and relaxed during the whole investigation process.

The benefit of preparation of the dawn raid checklist, quick guide and the process of the flowchart for each department on the company premise and timely vocational training for the constitution of dawn response team is necessary during the time of the dawn raid or to avoid any foreseen circumstances. Expert guidance from local bodies on these preparations is also advisable.

Steps required after the post-dawn raid

After the conclusion of the dawn raid, the following are the responsibility of the enterprise:

1. Conduct a review meeting taking all the facts and circumstances.
2. Prepare a press release and circulate it in the media to avoid any false or wrong publicity in the media through an unreliable source and to protect the interest of the clients towards the company.
3. Secure the seizure memo, copies of the documents, electronic data taken or seized during the investigation.
4. Prepare a de-brief note or record for the top management and external lawyers of the investigation process.
5. Forward the debrief note to the external lawyers to find out any irregularities in the investigation process and requesting an urgent opinion on action taken or avoid any future events.

Further, it should be noted about the dawn raids, that the documents and the electronic data seized during the investigation process by the inspector can be retained after a while. After the investigation process is completed, he is bound to return the seized documents to the accused enterprise. Also, the inspector for the instant investigation is required to inform the Chief Metropolitan Magistrate whose authorization was taken to conduct the dawn raids.

Conclusion

Hence, India relies on the Competition Law of the European Union however the search and seizure operation is not directly operated in India as there is a huge gap of legislation to cover illegal raids and exploitation of small players in the market. To avoid the illegal raids, adoption of new investigation based on the information and evidence obtained during the legal search operation. The procedural evidence provided by the Indian legislation can be used as bait to conceal any hidden information of the anti-competition activities. There should be sufficient provision in the Competition Law deterring the CCI from conducting any fishing expeditions to procure hidden information at the time of dawn raids. In case of any fishing expedition carried out by the CCI, the innocent party should be duly compensated and should be free to regain all the seized documents and data seized.

References

• http://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf
• https://indiankanoon.org/docfragment/9716115/?formInput=jcb

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