MAHYCO MONSANTO BIOTECH (INDIA) PVT. LTD. & ANR. V. CCI- AN ANALYSIS

– NISHTHA OJHA[1]

BACKGROUND

In 2016, the Competition Commission [hereinafter “CCI”] of India by exercising its powers under Section 26(1) of the Competition Commission Act, 2002 [hereinafter the “Act”] established a prima facie case against Mahyco Monsanto Biotech (which is an equal joint venture between Mahyco and Monsanto Holdings Pvt Ltd.) and directed an investigation by virtue of its order Order dated 9th June 2016. It was found that there was utter misuse of the dominant position by the appellants by imposing unfair and discriminatory conditions in the sub-license agreements through which Bt. technology is sub-licensed to the seed manufacturing companies in India; In addition to that they had entered into exclusive supply agreement, refused to deal with Indian seed manufacturers and reserved the right to fix price of seeds in certain circumstances limiting scientific development relating to Bt. cotton technology as well as Bt. cotton seeds thereby violating Section 3 of the Act for cause an appreciable adverse effect on competition within India and Section 4 for the misuse of its Dominant position in the market.

Thereafter, writ petition filed by Monsanto Inc. and Monsanto’s against the prima facie order were dismissed by the Single Bench of the High Court vide judgement dated 12th October 2018[2] by relying upon the judgment of the Coordinate Bench of this Court in Cadila Healthcare Ltd. and Anr. V. Competition Commission of India[3] [Hereinafter referred to as Cadila]. Hence, this case is an appeal challenging the same order.

ISSUES FOR CONSIDERATION

The primary issues for consideration before the Delhi High Court can be divided as follows:-

  • Whether no notice can be issued to the Directors / Persons In-charge of the Company till the CCI returns a finding against the Company that it has indulged in anti-competitive activities under Sections 3 and 4 of the Competition Act;
  • Whether Section 48 of the Competition Act, which provides for vicarious liability of persons in-charge and responsible for the conduct of business of the Company, will apply only on contravention of orders of CCI or DG under Sections 42 to 44 of the Competition Act and not to contravention of Sections 3 and 4 of the Competition Act.

JUDGEMENT

  • ISSUE NO.1

While deciding whether the proceedings against the Managing Director and other officials of the appellant company can continue without issuance of any notice under Section 48 for the violation of Section 3 and 4 of the Act which essentially talks about anti-competitive activities, the court discussed at length three case laws, namely, Cadila, Aneeta Hada vs. M/s Godfather Travels & Tours Private Limited[4] [hereinafter “Aneeta Hada”] and Pran Mehra v. CCI[5][hereinafter “Pran Mehra”].

According to the judgement in Cadila, the CCI has to first record that the company is guilty of an abusive act, after which it can proceed against its director, officers etc.

While in Pran Mehra, it was held that directors/persons in charge can be held liable if the CCI were to come to a conclusion that they were the key-persons, who were in-charge and responsible for the conduct of the business of the company.

Whereas in Aneeta Hada, the court was of the opinion that the commission of offence by the company is an express condition precedent to attract the vicarious liability of others.

The court agreed with the judgement in Pran Mehra, which according to the court was independent of what was held in Aneeta Hada, which is the correct interpretation of law. Therefore, the court reiterated its stance in Cadila and decided that Officers/Directors can be proceeded against, along with Company. However, the Officers/Directors can only be liable if the CCI were to come to the conclusion that they were the key persons who were in-charge and responsible for the conduct of the business of the Company.

  • ISSUE NO.2

While proceeding to decide on the issue no. 2 it became necessary for the court to interpret Section 27 of the Act as it was contended by the appellants that Section 27 shall be applicable to an ‘enterprise’ and not to “persons” because according to the clause (b) of the Section the penalty is 10% of the turnover, which as contended by the appellants, cannot be attributed to a ‘person’, as a person does not have turnover. Giving a purposive interpretation to Section 27, the Court further held that the term “turnover” in Section 27(b), would mean the “income” of the Director/Officer.

The court placed reliance on State of Bihar & Ors. V. Anil Kumar and Ors[6]and National Insurance Co. Ltd. v. Laxmi Narain Dhut[7] wherein court observed that “A statute is an edict of the Legislature and in construing a statute, it is necessary to seek the intention of its makerA statute has to be construed according to the intent of those who make it and the duty of the court is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature”. Hence, the purposive interpretation of the Section was done.

Therefore, the court observed 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 penalty.

COMMENT

Mahyco case stands out as one of the major developments in Competition Law reiterating the settled position in Cadila regarding simultaneous proceeding against company as well as the directors/key members. Moreover, the case extensively with the application of various principles of interpretation to the various provisions such as Section 27 of the Act ranging from the doctrine of purposive interpretation to determining the scheme of the act to avoid any absurdity in the construction of the Act.

Further developments on the case can be expected in the light of the recent move on the part of Monsanto to approach the Supreme Court against the Delhi High Court order contending that the competition law could not probe its officials until the company was found in contravention of competition norms.

[1] 3rd-year student, B.A. LL.B (Hons.), National Law University, Jodhpur, Rajasthan.

[2] W.P. (C) 7583/2016

[3] LPA No. 160/2018

[4] (2008) 13 SCC 70

[5] W.P. (C) 6258/2014

[6] AIR 2017 SC 2716

[7] (2007) 4 SCALE 36

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