Inquiry and Investigation: Sections 19 and 26

A case under Sections 3 and 4 passes through four stages: the Commission takes cognisance, forms a prima facie opinion, directs the Director General to investigate, and then hears the parties on the report before making any order. Each stage has its own legal character, and the commonest error in this area is to treat the first two as though they were adjudicatory. They are not: Competition Commission of India v. Steel Authority of India Ltd., (2010) 10 SCC 744 holds that the direction to investigate is an administrative act which requires no hearing and is not appealable, and that the rights of the party arise when the report is considered.

1. How an Inquiry Begins: Section 19(1)

The Commission may inquire into any alleged contravention of Section 3(1) or Section 4(1) on its own motion, or on receipt of any information from any person, consumer or their association or trade association, in such manner and accompanied by such fee as may be determined by regulations, or on a reference made to it by the Central Government or a State Government or a statutory authority.

1. Information. The commonest route. The informant supplies information and pays the fee; he is not a plaintiff, and the proceeding is not adversarial between him and the enterprise.
2. Suo motu. The Commission may act on its own knowledge, on press reports, on a market study or on material coming to light in another case.
3. Government reference. By the Central Government or a State Government, ordinarily where a department encounters conduct in its sector, and frequently in public procurement matters.
4. Statutory authority reference. Under Section 21, where in the course of a proceeding before a sectoral regulator a question arises whether a decision it proposes to take would contravene the Act, it may refer the question to the Commission for its opinion. Section 21A provides the converse, permitting the Commission to refer a question arising before it to the statutory authority.

2. Limitation after the Amendment of 2023

Until 2023 no period of limitation applied, and informations were entertained many years after the conduct complained of. The amendment inserted a proviso to Section 19(1) under which the Commission shall not entertain an information or a reference unless it is filed within three years from the date on which the cause of action has arisen. A further proviso permits the Commission to condone the delay if it is satisfied that there was sufficient cause, after recording its reasons in writing.

3. The Prima Facie Opinion: Section 26(1)

On receipt of information or a reference, or on its own knowledge, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter. Where it is of the opinion that no prima facie case exists, Section 26(2) requires it to close the matter and to pass such orders as it deems fit, sending a copy to the informant or the referring authority.

An order of closure under Section 26(2) stands on a different footing. It terminates the proceeding, it affects the informant, and it is appealable under Section 53A. The Commission must therefore give reasons for closure that address the material supplied, and a closure order that does not engage with the information is liable to be set aside.

4. The Investigation

Section 41 requires the Director General, when so directed, to assist the Commission in investigating into any contravention, and gives him the powers of the Commission under Section 36(2), together with the powers relating to investigation under the company law, which include search and seizure with the authorisation of the Chief Metropolitan Magistrate.

• Scope. The investigation is into the matter referred, not merely into the allegations of the informant. If in the course of investigating the conduct referred the Director General finds contraventions by the same parties in related transactions, he may report on them.
• Parties. The Director General may find a contravention by a person not named in the information, where that person is found to be party to the conduct investigated.
• Non-cooperation. Section 43 provides a penalty for failure to comply with the directions of the Commission or the Director General, and the Commission may draw an adverse inference.
• Report. The report of the findings is submitted to the Commission within the period the Commission directs.

5. After the Report: Section 26(3) to (8)

1. Where the report finds no contravention. The Commission forwards a copy to the parties concerned and invites objections or suggestions. If after considering them it agrees, it closes the matter; if it does not agree, it may direct further investigation or proceed to inquire into the contravention itself.
2. Where the report finds a contravention. The Commission forwards the report to the parties, invites objections and, if it so decides, holds an inquiry, hears the parties and passes such orders as it deems fit.
3. The Commission is not bound by the report. It may differ in either direction. What it may not do is act on a view adverse to a party without giving that party the report and an opportunity to be heard on it.

6. Natural Justice in Commission Proceedings

Section 36(1) requires the Commission to be guided by the principles of natural justice while permitting it to regulate its own procedure. What those principles require at each stage has been worked out in the decisions.

• At the prima facie stage. Nothing. There is no right to notice or hearing before a direction under Section 26(1), because no right is decided.
• During the investigation. The party must be told what is being investigated and must be given a proper opportunity to produce material; statements are recorded and the party is entitled to the assistance of counsel in the manner the regulations permit.
• On the report. The report must be supplied, and objections must be invited and considered. This is the stage at which the right to be heard attaches.
• Oral hearing. The Commission hears the parties before passing a final order, and the hearing is before the Members who will decide; a party heard by one bench cannot be decided against by another without being heard afresh.
• Cross-examination. There is no absolute right. The Commission permits cross-examination where the evidence of a witness is relied upon against a party and credibility is genuinely in issue, and refuses it where the material is documentary or the request is made to delay. A refusal must be reasoned, and a finding resting on untested oral evidence adverse to a party, where cross-examination was sought and denied without reason, is vulnerable on appeal.
• Inspection of records. Permitted in accordance with the regulations, subject to the confidentiality claims of other parties.

7. Confidentiality

Section 57 prohibits disclosure of information relating to any enterprise obtained by or on behalf of the Commission without the previous permission in writing of that enterprise, except in compliance with or for the purposes of the Act or any other law. The general regulations, as revised in 2024, supply the machinery.

• Claiming confidentiality. A party seeking confidential treatment must apply, identify the material precisely, state the reasons and the period for which protection is sought, and provide a non-confidential version for the record.
• The test. Whether disclosure would result in disclosure of a trade secret, cause serious injury, or unfairly advantage a competitor; a blanket claim over an entire document is routinely rejected.
• The confidentiality ring. The regulations provide for a mechanism by which named representatives of a party, typically external counsel and experts who give undertakings, may inspect confidential material for the purposes of the proceeding without disclosing it to the party itself. It exists to reconcile the right of a party to know the case against it with the protection of a competitor's business secrets.
• Leniency material. Information supplied by a leniency applicant is treated as confidential under the lesser penalty regulations, subject to disclosure to other parties for the purpose of hearing them, which is done through the ring.

8. Evidence

The Commission is not bound by the law of evidence. The standard of proof is the balance of probabilities and not proof beyond reasonable doubt, the proceedings being civil in character. Cartel cases in particular are ordinarily established by circumstantial evidence, the inference being drawn from parallel conduct together with plus factors. Electronic material, comprising email, messages, call records and material recovered in a search, is central to modern cases, and its integrity is established through the ordinary requirements applicable to electronic records, now under the Bharatiya Sakshya Adhiniyam, 2023, including a certificate in respect of a record produced by a computer.

9. Interim Orders: Section 33

During an inquiry, where the Commission is satisfied that an act in contravention of Section 3(1), Section 4(1) or Section 6 has been committed and continues to be committed or is about to be committed, it may temporarily restrain the party from carrying on such act until the conclusion of the inquiry or until further orders, without giving notice to that party where it deems it necessary. In Steel Authority of India the Supreme Court held that the power is to be exercised sparingly and on the established principles governing interim relief: a strong prima facie case, the likelihood of irreparable injury if the order is not made, and a balance of convenience in favour of making it, with reasons recorded.

10. Remedies at the End of an Inquiry

Section 27 supplies the orders that may follow a finding of contravention, and Section 28 the power to direct division of an enterprise enjoying a dominant position. These are treated in detail in the separate topic on orders and remedies. In outline, the Commission may direct the parties to discontinue and not to re-enter the agreement or to discontinue the abuse, impose a penalty, direct modification of an agreement, and pass such other orders or issue such directions as it may deem fit; behavioural remedies regulate future conduct, and structural remedies alter the enterprise itself, of which division under Section 28 is the extreme and has never been used.

11. Related Topics and Provisions