This article is written by Avik Sarkar pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from Lawsikho.
Table of Contents
Introduction
With a plethora of statutory bodies in the nation, it’s very common to have jurisdictional tussles between them. And one such body which has time and again indulged in such transactions is the Competition Commission of India (hereinafter referred to as CCI). Though commonly all statutory bodies have been allotted a particular sector when it comes to CCI there has been no such sectoral boundaries. Therefore, getting into a jurisdictional scuffle with other statutory authorities seems to be foreseeable. And a similar situation arose in the case of Re: Brickwork Ratings India Pvt. Ltd. and CRISIL Ltd. and Others. Here CCI had a jurisdictional overlap with SEBI. Further, this piece deals with ways of resolving conundrums in relation to jurisdictional feuds between statutory bodies. It tries to explain the same by critically analysing the judgement given in the case of Re: Brickwork Ratings India Pvt. Ltd. and CRISIL Ltd. and Others.
India is considered to be having one of the most complex democracies in the world. Therefore, in order to maintain equipment in the country, there are a lot of statutory authorities created with an intention to maintain the same. But in common parlance, it has been observed that these statutory bodies often get into a jurisdictional tussle with each other. And whenever such tussles have shown up the courts have time and again tried to demystify all the convolutions connected to that particular matter. One such case was the case of In Re: Brickwork Ratings India Pvt. Ltd. and CRISIL Ltd. and Others. In the present case, the jurisdictional overlap between CCI with Security Exchange Board of India (hereinafter referred to as SEBI) was in question.
Factual matrix
In the present case, the National highway authority of India had called for tenders from different credit rating agencies (hereinafter referred to as CRA) to rate their bonds. Relying on it, companies such as CRISIL Ltd., India Ratings and Research Pvt. Ltd., CARE Ratings Ltd. and ICRA Ltd had submitted their bids. It was found that the price quotation of all the above-mentioned agencies was similarly based on which the informant had filed a complaint with CCI under Section 3 of Competition Act, 2002.
But the contentious part of the issue was the fact that CRAs can only be regulated by SEBI and thereby making it the appropriate sectoral authority to deal with the issue. But on the contrary, does it mean that CCI cannot adjudicate the matter?
Critical analysis
It was upon the courts to decide over the jurisdictional feud that the two statutory bodies had indulged themselves into.
In the case of Telefonaktiebolaget LM Ericsson v. CCI, it was held that the CCI is supposed to work in concord with other authorities and not in discord. To be precise the intention of both the statutory bodies should be to resolve the dispute with minimal friction between them. This judgement led to the conclusion that securities law governing CRAs cannot be said to be in conflict with Competition Act, 2002.
In another judgement of Supreme Court CCI vs Bharti Airtel, a similar issue relating to jurisdictional tussle was in question. Here the tassel was between Telecom Regulatory Authority of India (hereinafter referred to as TRAI) and CCI. The court had clearly stated in the above case that CCI is not a sectoral regulator which means that CCI does not have any particular sector assigned to it. Therefore, CCI has the power to adjudicate matters relating to competition in any sector.
In order to avoid confusion, the court in the above case had propounded a two-step process. In this process, the jurisdictional aspect needs to be first determined i.e TRAI in this matter. TRAI as a sectoral regulator is better equipped to handle the jurisdictional aspect of the telecom sector whereas for CCI it would be the competition aspect. And it is only after TRAI completes its findings on the jurisdictional aspect as per TRAI Act, CCI would be allowed to exercise its powers.
Now again for instance, if while adjudicating the matter TRAI finds that there has been an appreciable adverse effect due to cartelization then TRAI will only be allowed to take action as per TRAI Act. It won’t be allowed to act beyond the scope of the Act.
The Preamble of the SEBI Act, 1992 states that the primary role of SEBI is to regulate the securities market. And CRAs are supposed to be regulated by SEBI as well. CRAs are basically agencies that rate the issue of securities so as to provide investors with the level of risk that is involved in investing in the same. CRAs are regulated under the SEBI (Credit Rating Agencies) Regulations, 1999.
In the present case, the informant had alleged the formation of a cartel for the sole purpose of bid-rigging. On the contrary, opposing parties had contended that CCI lacked the jurisdiction to adjudicate the matter as according to them it was only SEBI that had the power to regulate or adjudicate any offence in relation to CRAs. But the court relied on the Bharti Airtel judgement and put an end to all conundrums regarding the scope of CCI to adjudicate the matter. And by iterating the judgement the court didn’t put any bars on the power of CCI but just pushed the investigating power of CCI to a later stage.
Did CCI abide by the Bharti Airtel judgement?
Abiding by the two steps process the CCI had asked for the opinion of SEBI, replying to which SEBI stated that as per allegations raised it has got exclusive power to investigate any matters relating to CRAs. And according to SEBI, CCI was wrong on its part to have entertained the allegations against CRAs. But it must be noted that SEBI didn’t mention anything about initiation of action against the CRAs or any form of investigation in the particular matter. Based on which it can be concluded that SEBI didn’t deal with the jurisdictional issue and the technical issue efficiently thereby violating the CRA Regulation. And based on the technicality of the two-step process CCI has used its power to adjudicate the matter. It can be said that CCI had abided by the two-step process that was laid down in the Bharti Airtel case. And based on the same it came out with a conclusion that there was no form of cartelization that could be detected thereby freeing the opposition parties from the accusation to have committed an abuse of dominant position.
An alternative way forward to avoid future tussle
The concept of ‘mandatory consultation approach’ can be put to use in order to resolve all jurisdictional tussles. According to the concept, whenever there is a jurisdictional scuffle between statutory bodies then in such cases the statutory bodies shall consult with each other and try to resolve the matter efficiently. This concept can prove to be a one-stop solution for matters relating to jurisdictional tussle
Though it should be noted that India follows a non-mandatory consultation approach which means that it is upon the discretion of the statutory bodies to indulge themselves in consultation with each other or not.
Section 21 and 21A of Competition Act, 2002 provides for consultation of statutory bodies with the commission. However, as has already been stated above, it is non-mandatory to follow the process. Countries where the consultation process is mandatory have shown the successful application of the same thereby facing a smaller number of cases with regards to jurisdictional tussles. Countries such as Turkey, Argentina, France. This process was suggested by the National committee on Nation Competition policy and Allied Matters, 2011. But unfortunately, it is yet to be applied.
Conclusion
It must be noted that competition matters are supposed to be dealt with by CCI exclusively and SEBI shall not interfere with the same. There is always a possibility of a jurisdictional tussle whenever there is one sectoral regulator like e.g SEBI and on the other hand a non-sectoral regulator for example; CCI. Therefore, it is incumbent upon all statutory authorities to either follow the Bharti Airtel judgement or else go for the consultation method whenever such situations arise. If we see Section 62 of the Competition Act, 2002 it has been clearly stated that the provisions of this Act shall be in addition to, and not in derogation of any other law.
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