Court allows simultaneous proceedings against directors for alleged antitrust violation August 14, 2019
Published in: Articles
On 18 December 2018 the division bench of the Delhi High Court (comprising Chief Justice Rajendra Menon and Justice V K Rao) reconfirmed its earlier decision in Cadila(1) and held that simultaneous inquiries could be undertaken into Monsanto and its directors and officers for their alleged violation of the Competition Act 2002 (for further details please see “Delhi High Court clarifies procedural and jurisdictional issues in CCI antitrust inquiry”). The court also clarified that under Section 27 of the act, penalties could be imposed on the individuals in question based on their Monsanto-derived income.
In 2016 the Competition Commission of India (CCI) – by way of its common prima facie order of 9 June 2016 made under Section 26(1) of the act – ordered an investigation into Monsanto, Monsanto Holdings Private Limited, Maharashtra Hybrid Seeds Company and Mahyco Monsanto Biotech for abuse of their dominant position in the country’s bacillus thuringiensis cotton seed market. The CCI ordered the investigation after finding evidence of unfair and discriminatory conditions in the sublicence agreements through which Bt Cotton technology was sublicensed to seed manufacturers in India.
Although the director general submitted an investigation report, the CCI could not pass a final order due to the fact that Monsanto and Monsanto Inc’s writ petitions against the CCI’s prima facie order were pending in the Delhi High Court. On 12 October 2018 the single bench of the High Court (comprising Justice Vibhu Bhakru) dismissed the writ petitions.
High Court decision
Monsanto filed a letter patents appeal against the judgment of the single bench of the Delhi High Court to the division bench of the Delhi High Court. The appeal centred on the following questions:
On the first issue of whether a simultaneous proceeding could continue against the managing director and other officials of Monsanto, the court reiterated its earlier judgment in Cadila, wherein the division bench had relied on the High Court’s judgment in Pran Mehra v CCI,(2) and held that:
there cannot be two separate proceedings in respect of the company and the key-persons, as the scheme of the Act does not contemplate such a procedure. In the course of the proceedings qua a company, it would be open to the keypersons to contend that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to prevent the contravention. These arguments can easily be advanced by key- persons without prejudice to the main issue, as to whether or not the company had contravened, in the first place, the provisions of the Act, as alleged by the Director General, in a given case.
Accordingly, the court held that the appellant’s grievance with regard to the issuance of a notice to its managing director and other officials under Section 48 of the act was without substance. On the second issue, in view of its conclusion regarding the first issue and while affirming the order passed by the single bench, the division bench held that in case of an alleged violation of the act, proceedings can be opened against directors and officers, alongside their company. If the company is found to have indulged in an anti-competitive act, a penalty can also be imposed on the directors or officers in charge pursuant to Sections 27 and 48 of the act. As regards the aim of Sections 27(b) and 48, the court held that a penalty can be imposed on directors and officers even if they are found to have violated Sections 3 and 4 and observed that:
on a perusal of Section 27 of the Act, it is clear that if there is a contravention of Section 3 or Section 4, the Commission can pass orders against an ‘enterprise’ and a ‘person’ i.e. individual, who has been proceeded against, imposing [a] penalty.
For further information on this topic please contact Mr. M M Sharma at [email protected]
(1) LPA 160/2018 & CM APPL 11741-44/2018, decided on 12 September 2018.
(2) WP (C) 6258/2014, decided on 26 February 2015.
This article has also been published in International Law Office