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Judgment
C.L. Pangarkar, J.—Heard. Rule, by consent, returnable forthwith. Learned Counsel for respondents waive service.
This writ petition challenges the notices issued by the Competition Commission under the Competition Act, 2002 in respect of an alliance between the petitioners and Jet Airways (India) Ltd.
The facts leading to this petition can be narrated as follows
Petitioner No. 1 is a Company incorporated under the provisions of the Companies Act, 1956 and is engaged in business of running an airline. The airline carries on operation throughout India and also on some international roots. Petitioner No. 2 is the Chairman of petitioner No. 1. Some time in October, 2008, petitioner No. 1 and Jet Airways issued a press announcement informing that two airlines were pleased to form an alliance of wide ranging proportions which will help the airlines to rationalize the rates and provide improved standards of service of wider choice of air travel options to the consumers. After such an announcement, the Commission established under the provisions of the Monopolies and Restrictive Trade Practices Act (M.R.T.P. Act), issued certain notices to the petitioners. On 17th October, 2008, an order was passed by the M.R.T.P. Commission ordering an investigation into the reported agreement between the petitioners and the Jet Airways. On 29th October, 2008, the Director General W.P. No. 1785.09 4 of Investigation issued a notice to petitioner No. 1 calling certain information u/s 11 of the M.R.T.P. Act. The petitioner filed a reply to the said notice before the M.R.T.P. Commission. On 16/1/2009, a further notice was issued by the Director General under the M.R.T.P. Act seeking further information. Reply was sent to the said letter. Several other letters were written by the Assistant Director General to the petitioner and replies were accordingly sent. Later, on 11th August, 2009, the Additional Director General of Competition Commission wrote a letter to the petitioner. This letter was issued on the basis of information sent by respondent No. 3 to the Competition Commission, which came to be established under the provisions of the Competition Act, 2002. The informant places reliance upon the newspaper report in respect of market shares and the strength of fleet, etc. On the basis of the aforesaid information, Competition Commission passed an order on 4th August, 2009 in which it is recorded that on the basis of information submitted by respondent No. 3, the Commission is of the opinion that there exists a prima facie case and the matter should be referred to the Director General for investigation. The petitioners, therefore, feel aggrieved. According to the petitioners, the M.R.T.P. Commission is already seized of the matter in enquiry No. 172 of 2008 and therefore, the cognizance taken by the Competitive Commission was one without jurisdiction. The petitioners contend that Sections 3 and 4 of the Competition Act, 2002 cannot have retrospective effect since the Act contains penal provisions, which includes even imprisonment and fine. It is the contention of the petitioners that since the Act came into force on 20th May, 2009, the alliance between the petitioners and Jet airways is saved, as, according to them, the Act has no retrospective effect. Further, the petitioners have also contended that a plain reading of Sections 3 and 4 would indicate that the Act has neither retroactive nor retrospective effect and therefore the alliance or agreement entered into by the parties in October, 2008 is beyond the purview of the provisions of Sections 3 and 4. The petitioners contend that no action as contemplated by Section 4 of the Act can be taken unless and until it is first established that there was an abuse of the dominant position by the group. It was also necessary to consider and establish the three concepts known as relevant market, relevant geographic market and relevant product market. According to the petitioners, no action can be taken as the Commission has not determined whether the Domestic Air Transport Service (Passenger) constitutes relevant market for the purpose of the Act, which is prerequisite for the exercise of jurisdiction u/s 4. Thus, according to the petitioners, establishment of relevant market is an essential condition before any exercise can be undertaken by the Commission for taking any action against the petitioners. Further, the petitioners contend that the provisions of Sections 3, 4, 19, 27, 42 and 43 are violative of provisions of Article 20 of the Constitution of India.
Respondent No. 1/the Competition Commission in its affidavit contends that the petition itself is premature and without merits. The Commission contends that an enquiry has merely been ordered and no action whatsoever has been taken against the petitioners. It is also contended that the prima facie view has been formed by respondent No. 1 and enquiry and investigation has been ordered. No final order has been passed by the Commission and it is only after the conclusion of the investigation that the Commission will pass an appropriate order giving opportunities to the petitioners to present their case. Respondent No. 1 contends that the respondent/Commission has received an information and it had to form an opinion with regard to the existence or nonexistence of a prima facie case against the petitioners. It is contended that the enquiry and investigation is at a preliminary stage and the petitioners, therefore, has no right to challenge the enquiry which the commission can hold under a statute itself. The next contention of respondent No. 1 is that the Competitive Commission is investigating in relation to anticompetitive agreement u/s 3 of the Act and for abuse of dominant position by the two airlines u/s 2 of the Act. Such an investigation is different and has no relation with investigation carried out by the erstwhile M.R.T.P. Commission. Both investigations are different and have no connection whatsoever with each other. Further, an affidavit has been filed that the said M.R.T.P. Commission now no more exists. The respondent denies that the respondent is required to determine the relevant market before ordering the investigation u/s 4. The respondent further contends that Sections 3 and 4 of the Act cannot be read so as to have application only to agreements entered after 20th of May, 2009 as is sought to be done by the petitioners. It is contended that such an interpretation would be against the language of the Section and intention of the legislature. Further, the respondents contend that the Act is not ultra vires and the Competitive Commission has a right to investigate and enquire into any agreement which may have been entered prior to coming into force of the Competition Act. It is also contended that any agreement which is sought to be enforced after coming into force of the Act, could and would fall within the scope of the Act.
We have heard the learned Counsel for the petitioners and the respondents.
A few undisputed facts may be summarized as follows
The petitioners and Jet Airways entered into an alliance with an objective to rationalise the rates and provide improved standard of service of wider choice to the customers in the month of October, 2008. The M.R.T.P. Commission had taken cognizance of the agreement. It, however, did not take any action since it found that alliance had not come through. It, however, left it open for the Director General to investigate, if necessary, on further developments. This order was passed on 4th September, 2009. The Competition Act, 2002 repealing the M.R.T.P. Act came into effect on 20th May, 2009. However, the operation of Section 66 was kept in abeyance for two years, as a result of which, M.R.T.P. Commission could continue to exercise the jurisdiction till the expiry of two years from 20th May, 2009. It appears, however, that Legislature amended the Act with regard to Section 66 proviso and substituted the words "after the expiry of two years referred to in the proviso to Subsection 1" by words "on the commencement of the Competition Act, 2009". This Gazette of India shows that the amendment came into effect on 14th October, 2009. It is, therefore, apparent that M.R.T.P. Commission ceases to have existence from 14th October, 2009. The Competition Commission has passed an order on 4/8/2009 directing the Director General to investigate into the information given by respondent No. 3. The main challenge is to this order dated 4/8/2009.
The said order dated 4/8/2009 (Exh.B) reads as follows
Competition Commission of India.
Filed by: Mr. M.P. Mehrotra, C561, Defence Colony, New Delhi - 110024.
Against: 1) Jet Airways (India) Ltd. S.M. Centre, AndheriKurla Road, Andheri (East), Mumbai - 400059 and (ii) Kingfisher Airlines Ltd. 12th Floor,UB Tower, UB City, No. 24, Vutal Mallya Road, Bangalore - 560001.
This information has been filed by Sh.M.P. Mehrotra in his individual capacity through his Advocate Shri Rupin Pahwa u/s 19(1) of the Competition Act, 2002. In the application, it is stated that the opponents namely Jet Airways (India) Ltd. and Kingfisher Airlines Ltd. have entered into anti competitive agreement by way of code sharing, joint fuel management, common ground handling, joint network rationalization etc. It is also stated that these Airlines are controlling major share of market collectively and by abusing their dominant position, they are adversely affecting the competition in the market.
The Informant has claimed to be a consumer of products and services provided by Jet Airways and Kingfisher Airlines and has alleged that the interest of the consumer like him is affected because of cartelized behaviour of these Airlines which are acting in monopolistic manner to the disadvantage of consumers and are abusing their dominant position which is also causing appreciable adverse effect on fair competition in India.
It is alleged by the informant that the two airlines mentioned above are acting in concert to fix prices and limiting/controlling supply through route rationalization in violation of Sections 3 and 4 of the Competition Act.
In the application the Informant has prayed for instituting an enquiry against opponents Airlines in view of the provisions of Section 19(1)(a) of the Competition Act and also to direct the opponent to discontinue and not to reenter in such cartel like agreements.
A prayer for passing an exparte ad interim order u/s 33 of the act for directing Jet Airways and Kingfisher Airlines to immediately cease and desist from acting in a cartel like manner has also been made in the application.
The application was received on 26.7.2009 and was placed in the meeting of the Commission on 4.8.2009 by the Secretary.
The Commission considered this information in its meeting dated 4.8.2009. After considering the entire material on record and relevant facts and circumstances relating to this matter which are brought to the notice of the Commission in the meeting, the Commission is of the opinion that there exists a prima facie case and hence the matter should be referred to the Director General for conducting enquiry into it. The Commission, therefore, directs that a reference be made to the Director General to cause an investigation to be made into this matter and to submit his report within 45 days of the receipt of the order of the Commission.
The Commission, therefore, directs the Secretary to convey these directions to the office of the Director General, accordingly. The Secretary shall transmit the information along with entire material to the Office of the Director General at the earliest.
So far as prayer for passing adinterim order is concerned, the matter shall be considered separately in the next meeting of Commission. The Informant may be informed accordingly.
With this, we turn to the submission made by Shri Seervai, the learned senior counsel for the petitioners, who mainly urged the following points:
(1) The Competition Act cannot have retrospective effect since it contains a provision to punish and convict a person.
(2) since the agreement was valid when entered into, it could not be rendered invalid applying the analogy of Article 20 of the Constitution of India.
(3) The M.R.T.P. Commission had taken cognizance of the alliance and had decided not to take any action and therefore, for the same act second action would violate the provision of Article 21 of the Constitution of India.
(4) The Competition Commission has no jurisdiction to go into constitutional validity of the Act, and
(5) since the Commission has not determined the relevant market first, it cannot take action under Sections 3 and 4 of the Act against the petitioners.
Shri Seervai, the learned Senior Counsel, submits that the very wording of Section 3 of the Act would make it clear that the Act is prospective in nature. He submits that even a plain reading of the provisions would go to show that. He contends that the legislature in its wisdom has not added any words in the section to say that it would affect the agreement already entered into. He submits that if it wanted to bring the agreement, prior to coming into force of the Act, into its sweep, it would have and could have said so in very many words. Section 3 of the Act reads as follows
Anticompetitive agreements No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in Subsection (1) shall be void.
The Act nowhere declares the agreement already entered into as void. If the Section is read, it says that after coming into force of the Act, no person shall enter into an agreement in contravention of the provisions of the Act and if entered into, same shall be void. This, to our mind, at the most, would mean that the Act does not render the agreement entered into, prior to coming into force of the Act, void ab initio. Had the Act been retrospective in operation, it would render the agreement void ab initio. The agreement prior to coming into force of the new Act was, therefore, certainly valid, for it was not in breach of any law or affected any law then existing. The question here is whether this agreement, which was valid until coming into force of the Act, would continue to be so valid even after the operation of the law. The parties as on today certainly propose to act upon that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and cannot be questioned. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy. We would say that the Act could have been treated as operating retrospectively, had the act rendered the agreement void ab initio and would render anything done pursuant to it as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and subsisting even after coming into force of the Act, which prohibits an agreement of such nature, such an agreement cannot be said to be valid from the date of the coming into force of the Act. If the law cannot be applied to the existing agreement, the very purpose of the implementation of the public policy would be defeated. Any and every person may set up an agreement said to be entered into prior to the coming into force of the Act and then claim immunity from the application of the Act. Such thing would be absurd, illogical and illegal. The moment the Act comes into force, it brings into its sweep all existing agreements. This can be explained further by quoting the following example:"A and B enter into agreement of sale of land on 2/1/2008. It is agreed between them that saledeed would be executed on or before 2/1/2009. Meanwhile, i.e. on 10/8/2008, the Government decides to impose a ban on transfer of the land and declares that any such transfer, if effected, shall be void. The question is, could the parties say that since their agreement being prior to Government putting a ban on transfer, their case is not covered by the ban? The answer has to be in the negative, as on the day the contract is sought to be completed, it is prohibited." Similar would be the result in the instant case.
Shri Seervai contended before us that the Benami Transactions (Prohibition Act) which contains a similar provision has been held by the Supreme Court to be prospective in nature. He cites to us a decision reported in R. Rajagopal Reddy and Others (deceased by legal representatives) Vs. Padmini Chandrasekharan (deceased by legal representatives), . The Supreme Court has held in the said decision that the Act is not retrospective. We, however, find that even the Benami Transaction Act operates in a similar manner as that of Competition Act, 2002. The Supreme court has held that all transactions in respect of which the suits were pending on the date the Act came into force were saved. This is because the transactions were valid since the Act had not come into force and the Act did not specifically render them void. The Benami Act prohibits the benami transaction as from the date of commencement of the Act. It not only prohibits in present such type of Benami transaction but also prohibits a real owner from instituting a suit after coming into force of the Act, claiming a declaration that he is the real owner of the property. Therefore, what has been saved is suits instituted prior to coming into force of the Act. Naturally, it prohibits a person from instituting a suit, after the Act comes into force, in respect of the transaction prior to the Act. We may usefully quote here paragraph No. 11 of the judgment in Rajgopal''s case. These observations to our mind set at rest the controversy.
Before we deal with these six considerations which weighed with the Division Bench for taking the view that Section 4 will apply retrospectively in the sense that it will get telescoped into all pending proceedings, howsoever earlier they might have been filed, if they were pending at different stages in the hierarchy of the proceedings even up to this Court, when Section 4 came into operation, it would be apposite to recapitulate the salient feature of the Act. As seen earlier, the preamble of the Act itself states that it is an Act to prohibit benami transactions and the right to recover property held benami, for matters connected therewith or incidental thereto. Thus it was enacted to efface the then existing right of the real owners of properties held by other benami. Such an Act was not given any retrospective effect by the legislature. Even when we come to Section 4, it is easy to visualise that Subsection (1) of Section 4 states that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other shall lie by or on behalf of a person claiming to be the real owner of such property. As per Section 4(1) no such suit shall thenceforth lie to recover the possession of the property held benami by the defendant. Plaintiff''s right to that effect is sought to be taken away and any suit to enforce such a right after coming into operation of Section 4(1) that is 19/5/1988, shall not lie. The legislature in its wisdom has nowhere provided in Section 4(1) that no such suit, claim or action pending on the date when Section 4 came into force shall not be proceeded with and shall stand abated. On the contrary, clear legislative intention is seen from the words "no such claim, suit or action shall lie", meaning thereby no such suit, claim or action shall be permitted to be filed or entertained nor admitted to the portals of any court for seeking such a relief after coming into force of Section 4(1). In Collins English Dictionary, 1979 Edition as reprinted subsequently, the word ''lie'' has been defined in connection with suits and proceedings. At page 848 of the Dictionary while dealing with Topic No. 9 under the definition of term ''lie'' it is stated as under:
For an action, claim appeal etc. to subsist; be maintainable or admissible.
The word ''lie'' in connection with the suit, claim or action is not defined by the Act. If we go by the aforesaid dictionary meaning it would mean that such suit, claim or action to get any property declared benami will not be admitted on behalf of such plaintiff or applicant against the defendant concerned in whose name the property is held on and from the date on which this prohibition against entertaining of such suits comes into force. With respect, the view taken that Section 4(1) would apply even to such pending suits which were already filed and entertained prior to the date when the section came into force and which has the effect of destroying the then existing right of plaintiff in connection with the suit property cannot be sustained in the face of the clear language of Section 4(1). It has to be visualised that the legislature in its wisdom has not expressly made Section 4 retrospective. Then to imply by necessary implication that Section 4 would have retrospective effect and would cover pending litigations filed prior to coming into force of the section would amount to taking a view which would run counter to the legislative scheme and intent projected by various provisions of the Act to which we have referred earlier. It is, however, true as held by the Division Bench that on the express language of Section 4(1) any right inhering in the real owner in respect of any property held benami would get effaced once Section 4(1) operated, even if such transaction had been entered into prior to the coming into operation of Section 4(1), and hence after Section 4(1) applied no suit can lie in respect to such a past benami transaction. To that extent the section may be retroactive. To highlight this aspect we may take an illustration. If a benami transaction has taken place in 1980 and a suit is filed in June 1988 by the plaintiff claiming that he is the real owner of the property and defendant is merely a benamidar and the consideration has flown from him, then such a suit would not lie on account of the provisions of Section 4(1). Bar against filing, entertaining and admission of such suits would have become operative by June, 1988 and to that extent Section 4(1) would take in its sweep even past benami transactions which are sought to be litigated upon after coming into force of the prohibitory provision of Section 4(1) shall apply even to past benami transactions to the aforesaid extent, the next step taken by the Division Bench that therefore, the then existing rights got destroyed and even though suits by real owners were filed prior to coming into operation of Section 4(1) they would not survive, does not logically follow.
It is more than clear to us that though the transaction and agreement may be prior to coming into force of the Act, it stands covered by the Act on the date the Act came into operation. The decision in Rajgopal''s case applies on all fours to the instant case. We are, therefore, of considered opinion that though the Competition Act is not retrospective, it would cover all the agreements covered by the Act though entered into prior to the commencement of the Act and sought to be acted upon.
This takes us to the next question as to whether the Competition Act could be said to be penal in nature. It was submitted on behalf of the petitioner that Section 43 of the Act prescribes punishment and therefore, it should be treated as a penal Act. We do not think that the Act, strictly speaking, is a penal Act. This is because the Act does not make punishable by itself an act of entering into an agreement, contrary to the provisions of the Act. Therefore, even if parties enter into an agreement covered by the Act, that by itself, does not amount to an offence. What is made punishable is disobedience of the order passed by the Commission and noncompliance. Sections 42 and 43 of the Competition Act read as follows
Contravention of order of Commission -
(1) The Commission may cause an inquiry to be made into compliance of its orders or directions made in exercise of its powers under the Act.
(2) If any person, without reasonable cause, fails to comply with the orders or directions of the Commission issued under Sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be punishable with fine which may extend to rupees one lakh for each day during which such noncompliance occurs, subject to a maximum of rupees ten crore, as the Commission may determine.
(3) If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under Subsection (2), he shall, without prejudice to any proceeding u/s 39, be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to rupees twentyfive crore, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit:
Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this section save on a complaint filed by the Commission or any of its officers authorised by it.
Penalty for failure to comply with direction of Commission and Director General. If any person fails to comply, without reasonable cause, with a direction given by
(a) the Commission under Subsections (2) and (4) of Section 36; or
(b) The Director General while exercising powers referred to in Subsection (2) of Section 41, such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of rupees one crore, as may be determined by the Commission.
The Sections, therefore, make contravention of orders of commission and noncompliance of the direction of Commission an offence. Strictly speaking, no criminal liability ensues for breach of Section 3 or 4 of the Competition Act. It seems to us that the penalty is provided only with a view to ensure or enforce compliance of the directions of the Commission, as can be seen from Section 27(1) of the Competition Act. Such a direction can be issued by the Commission only after enquiry. Necessarily, therefore, unless and until any enquiry is held and pursuant to that certain directions as envisaged by Section 2 (a) to (g) are issued, there would be no question of anybody committing any offence. At the cost of repetition, it may be said that breach of Sections 3 and 4 by itself is not an offence.
We propose to now deal with the question if the action under Sections 3, 4, 19, 36, 27, 43 and 44 is violative of either Article 20 or 21 of the Constitution of India. Articles 20 and 21 read as follows
Protection in respect of conviction for offences -
(1) No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
(2) No person shall be prosecuted and punished for the same offence more than once.
(3) No person accused of any offence shall be compelled to be a witness against himself.
Protection of life and personal liberty -No person shall be deprived of his life or personal liberty except according to procedure established by law.
What Article 20(1) says is that no person shall be convicted of any offence except for violation of law in force. It was contended that on the date the parties entered into an alliance, there was no prohibition and therefore, it was not void agreement nor was it repugnant to the statutory provision. Shri Seervai submits that if it was then valid, it continues to be so valid unless parties want to abandon it. He also submits that even if the agreement could be said to be in violation now, the Commission cannot take cognizance of the same as it was valid when the said agreement was entered into. The Commission, according to him, has no jurisdiction to punish for any breach which was not an offence when the agreement was entered into. There cannot be two opinions that the parties can be dealt with in accordance with the law as was existing on the date of offence and not in accordance with the law at the time of trial or conviction State of Maharashtra Vs. Kaliar Koil Subramaniam Ramaswamy, is the decision on the proposition. In the instant case, the Act does not make breach of Sections 3 and 4 by itself punishable. Therefore, entering into an agreement, contrary to provisions of law, is not an offence but such agreement is only void. That may not be enforceable in law. If the law today prohibits entering into such agreement, it means that even the existing agreements, which are contrary to law, must become void. The petitioners are not sought to be convicted immediately. There is no direction as yet from the Commission to the petitioners. There is, therefore, as on today no question of petitioners being sought to be tried. Article 20(1) to us has no application to the instant case. If the article is read carefully, what it prevents to do is the imposition of higher penalty at the time of conviction, if the law provided lesser at the time of commission of the offence. The person will have to be convicted in accordance with the punishment provided at the time of commission of the offence and not in accordance with the law which may be prevailing at the time of trial and conviction of the offender. For instance, if the Act provided maximum punishment of two years at the time of Commission of the offence and law is amended at the time of trial, prescribing higher penalty, then higher penalty cannot be imposed at the time of conviction. The agreement was valid when entered into. It was not an offence at that time nor is it an offence even today or even on the date of the coming into force of the Act. As pointed out earlier, entering into agreement contrary to the Act by itself is not an offence. The petitioners are not sought to be convicted or even tried for an act of entering into an alliance. The proceedings or the action of the Commission is at the preliminary stage only. It only seeks to look into and enquire into/investigate into the terms of the alliance. If Article 20 is to be applied, there has to be trial or prosecution for the act done prior to the coming into force of the Act. There is nothing like that.
Shri Khambata, learned Additional Solicitor General, submits before us that the contention of the petitioners that Article 20 should be applied to the facts of the instant case is misconceived. He submits that this is not a penal statute falling in the realm of criminal law. We find substance in the contention of the learned Counsel. We have already observed that the statute is not penal, for it does not seek to try or convict a person for entering into agreement prohibited by Sections 3 and 4 of the Act. The argument of the learned senior counsel Shri Seervai that the Competition Act is hit by Article 20 of the Constitution of India has no force. The decision cited to us by Shri Seervai, reported in Soni Devrajbhai Babubhai Vs. State of Gujarat and others, . has no application. We do not even for a moment dispute the proposition that a litigant does have a right to approach the High Court or the Supreme Court to challenge the constitutional validity of any provision which otherwise cannot be challenged before the Commission. The Commission would, no doubt, not be able to decide that question at all. However, simply because such question cannot be challenged before the Commission that does not take away the right of the Commission to enquire into or investigate into the alleged breaches. Mere enquiry into certain alliance can in no way be said to be unconstitutional. What is sought to be done by the Commission is to examine terms of alliance. If it finds that certain terms of the alliance are repugnant to the Act, it may ask the parties to stop acting upon them or u/s 27(d) to modify the terms of the said agreement. Therefore, unless and until the Commission examines all aspects, it cannot come to the conclusion if the agreement is void and partly valid. The commission alone, upon such examination, has a right to give such finding.
Shri Seervai, the learned Senior counsel, contended that any statute having penal provision has to be interpreted strictly and narrowly and should not be held to be retrospective. He relied upon a decision of the Supreme court in Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, . The Supreme Court observes as under
Section 271 of the Act is a penal provision and there are wellestablished principles for the interpretation of such a penal provision. Such a provision has to be construed strictly and narrowly and not widely or with the object of advancing the object and intention of the legislature.
This Court as well as the various High Courts of the country have consistently held that the statute creating the penalty is the first and the last consideration and must be construed within the term and language of the particular statute. In Bijaya Kumar Agarwala v. State of Orissa it has been held by this Court in paras 17 and 18 as under: SCC pp. 67).
Strict construction is the general rule of penal statutes. Mahajan, J. in Tolaram Relumal v. State of Bombay (AIR at pp. 49899) stated the rule in the following words:
[I] If two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the court to stretch the meaning of an expression used by the legislature in order to carry out the intention of the legislature.
The same principle was echoed in the judgment of the fivejudge Bench in Sanjay Dutt v. State, which approved an earlier expression of the rule by us in Niranjan Singh Karam Singh Punjabi v. Jitendra Bhimraj Bijjaya: (SCC p. 86, para 8.)
Therefore, when a law visits a person with serious penal consequences extra care must be taken to ensure that those whom the legislature did not intend to be covered by the express language of the statute are not roped in by stretching the language of the law.
Keeping in view the rules of interpretation of criminal statute and the language and intend of the Order and the Act, we find ourselves in agreement with the view expressed by Ranganath Mishra, J. as he then was, in Prem Bahadur v. State of Orissa (Cril.L.J. 685, para 4).
The Orissa Order does not make possession without a licence an offence. Storage, however, has been made an offence. Between "possession" and "storage", some elements may be common and, therefore, it would be appropriate to say that in all instances of storage there would be possession. Yet, all possession may not amount to storage. "Storage" in the common parlance meaning connotes the concept of continued possession. There is an element of continuity of possession spread over some time and the concept is connected with the idea of a regular place of storage. Transhipment is a moving vehicle would not amount to storage within the meaning of the Orissa Order.
Every statutory provision for imposition of penalty has two distinct components:
(i) That which lays down the conditions for imposition of penalty.
(ii) That which provides for computation of the quantum of penalty. Section 271(1)(c) and sub Clause (iii) relate to the conditions for imposition of penalty, whereas, on the other hand, Explanation 4 of Section 271(1)(c) relates to the computation of the quantum of penalty.
Shri Khambata, learned Additional Solicitor General, contended that there is nothing in the Act suggesting that it is retrospective. Therefore, there is no reason why the petitioners should feel aggrieved. He submits that even the respondents do not say that the alliance is void ab initio. He draws our attention to paragraph No. 57 of the judgment in Virtual Soft Systems Ltd case. The said paragraphs reads as follows
Next proposition is with reference to the amended provision of law made by the Finance Act, 2002, where the expression used in Explanation 4 "the amount of tax sought to be evaded" has been deliberately amended providing specifically for cases where the filing of return and the assessment had the effect of reducing the loss declared in the return or converting that loss into income. Taking support from this amendment brought about in the statute with effect from 1/4/2003, it is contended that the legislature has now deliberately enacted such provision to fill in the lacuna in law and also to put an end to the controversy which existed between the High Courts in interpreting the laws after 1/4/1976. The amended provision of law is not available prior to 1/4/2003, as the same is not enacted with retrospective effect. That this amendment is declaratory and applies to all pending cases, as held by the Bombay High Court in CIT v. Chemiequip Ltd. is untenable for the following reasons:
(a) There is nothing in the statute to suggest to that effect. The interpretation that it is clarificatory as per the Notes on Clauses do not advance the Revenue''s case, because of its specific omission to that effect. It is purely a case of amendment to the statute.
(b) Amendment is not retrospective and there is no assumption as to its retrospectivity. Retrospectivity has to be enacted specifically in the fiscal statute and it is more so in the case of penal provisions, otherwise it would be contradictory or derogatory to Article 20(1) of the Constitution. This Court has held in Brij Mohan v. CIT that the law to be applied is the one in force on the first day of accounting period. To this effect are the other decisions of this Court as CIT v. Patel Bros. and Co. Ltd. The Allahabad High Court has also taken the same view in Zam Zam Tanners. Notes on Clauses on the amendment introduced by the Finance Act, 2002 makes specific mention inter alia of the amendment to be effective from 1/4/2003 of which the Bombay High Court has failed to take notice in its judgment in CIT v. Chemiequip Ltd.
The Supreme Court, in very clear language, says that the retrospectivity has to be enacted specifically in the fiscal statue and it is more so in respect of penal provision else it would be derogatory to Article 20(1). If this ratio is to be applied, it must be said that the Competition Act is not retrospective since there is no provision to that effect at all in the statute. For this reason, too, we find that the Competition Act is not retrospective and is therefore not hit by Article 20(1) even if it is assumed to be penal for the sake of the argument.
Shri Seervai, the learned senior counsel for the petitioners, has placed reliance on a decision reported in 1923 KBD 193 Henshall v. Porter. The court observes as follows
In my opinion the Act of 1922 must be considered in the light of the settled, recognized and beneficent rule of law that existing rights are not to be deemed to be destroyed by a statute unless there be express words or the plainest implication to that effect. I need not cite the overwhelming body of authority as to this; many of the decisions and textbooks are quoted in Bowling v. Camp (2). I see nothing in the Act of 1922 which compels me to give it a retrospective operation. Take the broad facts here. On July, 20, 1922, the plaintiff possessed fully accrued rights under the Act of 1835. The defendant then owed him statutory debts: see Cohen v. Hall (3). These debts constituted property in the fullest sense of the word. Can it justly be said that on July, 20, 1922, that property was wholly destroyed by an ambiguously worded Act of Parliament ? In my opinion the answer is No. It should, I venture to think, be remembered that in many cases the statutory debts under the Act of 1835 may have been assigned for value or may have been mortgaged to secure advances.
I beg respectfully to say that in my view it is important to maintain the rule of law that existing rights are not to be deemed destroyed unless an Act of Parliament is clear to that effect.
Shri Seervai submits that the new Act can divest the petitioners of their right to act upon alliance entered into prior to coming into force of the new Act. On going through the decision, it appears to us that what the court lays down is that if any cause of action has arisen under an old statute, that cause of action is not obliterated by new Act unless the new Act specifically says so. We need not dilate any more on the question of retrospectivity and the interpretation of the statute with regard to the retrospectivity.
We now turn to the submission with regard to the action taken under the M.R.T.P. Act. There is no doubt that the M.R.T.P. Commission had received a complaint under that Act. The said complaint No. 172 of 2008 was looked into by the M.R.T.P. Commission. The M.R.T.P. Commission has passed the following order:
We have gone through the P.I.R. The alliance between the Jet Airways and King Fisher Airlines has not come into existence as being confirmed by the Director General of Civil Aviation on a probe from D.G. D.G. has certain apprehensions that if the alliance as and when comes through it may lead to certain practices which would draw action under the MRPT Act. As the alliance has not come into existence the apprehensions raised by D.G. at this stage cannot be taken into consideration. Accordingly the matter is closed. D.G. would be at liberty to restart the investigation if necessary on further developments taking place.
It is thus clear that the M.R.T.P. Commission had found that since the alliance had not come into effect, the mere apprehension cannot be taken into consideration and had, therefore, left the matter open for the Director General to take up the investigation if any development occurs. It is apparent that the Commission has not decided any issue at all nor has it ordered any investigation. We, therefore, find that no action whatsoever has been taken by the M.R.T.P. Commission. There could therefore be no impediment in taking any action under the new Act. Even otherwise, the provisions of the M.R.T.P. Act and the Competition Act are not identical. Since no action whatsoever is taken or proposed to be taken by the M.R.T.P. Commission, there could be no question of the petitioners being subjected to double jeopardy. Further, the M.R.T.P. Commission now stands abolished w.e.f. 14th October, 2009. There is, therefore, no question of M.R.T.P. Commission now taking any action against the petitioners. This ground of challenge has no substance at all.
Now, we propose to deal with the submission that unless and until the Commission first determines the relevant market, the relevant geographic market, it cannot take any action u/s 4 of the Competition Act. Shri Seervai, the learned Senior counsel, submits that Section 4 postulates abuse of dominant position. He submits that, dominant position shall be taken as an abuse if the group does an act as given in Clauses (a) and (e) of Subsection 2 and three conditions such as relevant market, relevant geographic market and relevant product are established. There is no doubt that for coming at a conclusion as to whether a particular group has abused the dominant position or not, three things, namely; relevant market, relevant geographic market and relevant products are to be considered. However, for considering the effect of Section 4, it would also be necessary to look into the various other provisions of the Act.
If Section 4 is read, it can be said that there are two conditions which need to be fulfilled. First, the group must hold a dominant position and secondly, such dominant position must be abused. Clearly, therefore, if a group holds a dominant position but does not abuse it, the group would not be covered by the section at all. The question is whether the Commission is prevented from taking any action before it is so actually established. On careful reading of Section 4, it is clear to us that Section 4 merely defines the dominant position. It does not go further or beyond defining abuse. To us, it is clear from Section 19 that the Commission can act upon receipt of information and on a reference made to it by the Central or State Government or on its own motion. It is, therefore, clear that there has to be some information before the Commission about the alleged breaches of Sections 3 and 4. If the Commission receives an information, it is supposed u/s 19 to enquire into the complaint received. Under the Code of Criminal Procedure, a Police Officer is supposed to look into the complaint and decide whether the information discloses a cognizable offence or not. If, upon reading the complaint, he finds that it does disclose a cognizable offence, he is bound to register the First Information Report and investigate into it. The word ''investigation'' has been defined in the Criminal Procedure Code as follows:
"Investigation" includes all the proceedings under this Code for the collection of evidence conducted by a police officer or by any person (other than a Magistrate) who is authorised by a Magistrate in this behalf.
The investigation is only for the purpose of collection of evidence. The investigation starts only after there is a prima facie proof of commission of cognizable offence. The position of this Act appears to be almost identical. Section 19 clarifies as to on what count enquiry should be made and in what manner. For instance, Subsection 6 says as to which factors need to be taken into consideration while determining the relevant geographic market. The enquiry is supposed to proceed bearing in mind those factors. If Section 26 is read with Section 19, it would be clear that the information received u/s 19 is to be placed before the Commission; and if the Commission finds a prima facie case, it can direct the investigation; and it has an option to drop the matter if there is no prima facie case. It is, therefore, not necessary that the investigation would be ordered in each and every case. Therefore, the information that is received can be treated as if it is an F.I.R. It will have to be found out by the Commission from that information whether there is any material in the said information which requires them to take cognizance of the complaint and then order an investigation. The investigation, the purpose of which, would be to collect evidence and would disclose if the group abused its dominant position. Therefore, it is clear that the investigation would reveal if there is sufficient evidence available to take further action. It is after the report of the Director General that the Commission proceeds to pass order u/s 26(6) either to close the matter forthwith or under Clause (7) may order further investigation. If the report discloses any breach, the Commission is supposed to enquire into such breaches. This enquiry report is again considered u/s 27 and then an action follows. It is, therefore, clear to us that the question as to whether there is a breach of provisions of Sections 3 and 4 is finally considered under Sections 19, 26 and 27(8). Sections 19 and 26(1) speak of existence of prima facie case only. Therefore, at the prima facie stage, it is never concluded whether there is breach or otherwise. Therefore, at preliminary stage, it is only to be seen if there is a reason to believe that there is a breach of Sections 3 and 4. The law is well settled that the court should not stifle the investigation at all, except for compelling reason or when F.I.R. does not disclose any offence at all. If the analogy is to be applied here it cannot be said that the information given by respondent No. 3 does not disclose any beach nor can it be said that it is a case of lack of inherent jurisdiction to the Commission to investigate. It has a power to enquire and investigate into every complaint received under the Act, as is clear from the above provision. The Supreme Court in a decision reported in Sanapareddy Maheedhar and Another Vs. State of Andhra Pradesh and Another, makes following observations
The High Court should be extremely cautious and slow to interfere with the investigation and/or prosecution except when it is convinced beyond any manner of doubt that FIR does not disclose commission of any offence or that the allegations contained in FIR do not constitute any cognizable offence or that the prosecution is barred by law or the High Court is convinced that it is necessary to interfere to prevent abuse of the process of the Court. In dealing with such cases, the High Court has to bear in mind that the judicial intervention at the threshold of the legal process initiated against a person accused of committing offence is highly detrimental to the larger public and societal interest. The people and the society have a legitimate expectation that those committing offences either against an individual or the society are expeditiously brought to trial and, if found guilty, adequately punished. Therefore, while deciding a petition filed for quashing FIR or complaint or restraining the competent authority from investigating the allegations contained in FIR or complaint or for stalling the trial of the case, the High Court should be extremely careful and circumspect.
If the allegations contained in FIR or complaint disclose commission of some crime, then the High Court must keep its hands off and allow the investigating agency to complete the investigation without any fetter and also refrain from passing order which may impede the trial. The High Court should not go into the merits and demerits of the allegations imply because the petitioner alleges mauls animus against the author of FIR or the complainant. The High Court must also refrain from making imaginary journey in the realm of possible harassment which may be caused to the petitioner on account of investigation of FIR or complaint. Such a course will result in miscarriage of justice and would encourage those accused of committing crimes to repeat the same.
Although the decision is basically on criminal law, the ratio can be squarely applied. If the said ratio is to be applied, the enquiry/investigation cannot be stifled at all. We have not made reference to other decisions cited, since we find that the decisions referred to in this judgment were enough to arrive at a conclusion. We find that it was not necessary for the Commission to first find out the relevant geographic market, relevant products market or relevant market. Such things can be found or concluded upon investigation and not necessarily before that.
In the circumstances, we find that no writ as sought can be issued and petition should be dismissed. We, therefore, dismiss the petition with no order as to costs. Rule discharged.
On the judgment being pronounced, the learned Counsel appearing for the petitioner sought leave to prefer an appeal in the matter before the Supreme Court. We do not think that in the facts and circumstances, this Court should certify that this is a fit case for filing appeal before the Supreme Court. Therefore, the oral prayer made by the learned Counsel for the petitioners is rejected.