Court finds substantial compliance with Competition Act provisions as Commission's suo motu case and Madras High Court's direction justify probe by Director General; investigation allowed to proceed without stay.
In a significant decision delivered on October 6, 2026, the Division Bench of the Calcutta High Court, comprising Justices Shampa Sarkar and Arjun Ray Mukherjee, dismissed appeals seeking to stay an ongoing investigation into alleged cartelization among steel manufacturers. The investigation, initiated by the Director General (DG) of the Competition Commission of India (CCI), follows a suo motu case registered by the Commission after detailed deliberations, pursuant to a direction from the Madras High Court.
The controversy arose when Shyam Steel Industries Ltd. and Gobind Beriwal challenged the authority of the DG and the Commission to investigate them without an explicit prima facie opinion recorded by the Commission under Section 26(1) of the Competition Act, 2002. The appellants contended that the Madras High Court's direction to the DG to proceed "in accordance with law" did not substitute for the Commission's independent satisfaction of a prima facie case, which they argued was mandatory before investigation could be ordered.
The Calcutta High Court, however, rejected these contentions, holding that the Madras High Court's order directing the DG to proceed with the investigation was binding and had attained finality, effectively subsuming the requirement for the Commission to record a separate prima facie opinion. Further, the Court supplemented the Single Judge's findings by observing that the Commission had indeed held an urgent special meeting on August 17, 2021, attended by the Chairperson, members, DG, and legal and economic advisors, where it deliberated in detail and decided to register a suo motu case and direct the DG to investigate the alleged cartelization.
The Court emphasized that the investigation under the Competition Act is a proceeding in rem, concerned with market-wide anti-competitive practices and not restricted to parties named in the complaint. Consequently, the DG was empowered to investigate the role of all members of the alleged cartel, including those not specifically named initially.
Rejecting reliance on the Orissa High Court's contrary view in Rungta Mines Ltd., the Calcutta High Court held that the Commission's detailed deliberation and decision to register the suo motu case constituted substantial compliance with Section 26(1). The Court further clarified that the direction under Section 26(1) is administrative and preparatory, not an adjudicatory order requiring detailed reasons or notice to the parties.
The Court also declined to stay the investigation, noting that searches had already been conducted at the appellants' premises, and the investigation was substantially complete with reports filed before the Commission. The balance of convenience favored allowing the investigation to proceed expeditiously to protect consumer interests and prevent anti-competitive harm to the economy.
This decision reinforces the authority of the Competition Commission and its Director General to act promptly against anti-competitive conduct, especially cartelization in critical sectors like steel manufacturing, where such practices can have widespread economic impact. It also clarifies procedural aspects of investigations under the Competition Act, affirming that a suo motu registration and direction by the Commission after deliberation suffices as compliance with the statutory requirement of forming a prima facie opinion before investigation.
The appellants' challenge to the summons issued during investigation was rendered infructuous as the probe had advanced beyond preliminary stages. The Court's ruling underscores the importance of timely and effective enforcement of competition law to curb anti-competitive practices and protect consumer welfare.
Bottom Line:
Competition Act, 2002 - Investigation by Director General into alleged cartelisation by steel manufacturers - Where Madras High Court had directed DG to proceed in accordance with law on complaint alleging anti-competitive conduct, and Competition Commission thereafter held special meeting, deliberated and directed registration of suo motu case and investigation, there was substantial compliance with Section 26(1) - Order under Section 26(1) is administrative and preparatory in nature - Interim stay of investigation/further proceedings rightly refused, especially when investigation stood completed and report had already been filed.
Statutory provision(s):
Competition Act, 2002 Sections 3(1), 4(1), 19, 26(1), 26(2), 41(1), 57; Code of Criminal Procedure Section 482
Shyam Steel Industries Ltd. v. Union of India, (Calcutta)(DB) : Law Finder Doc Id # 2991848
