caselaws
Supreme Court of India
Competition Commission Of India vs State Of Mizoram on 19 January, 2022Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul, M.M. Sundresh
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10820-10822 OF 2014
COMPETITION COMMISSION OF INDIA … Appellant
Versus
STATE OF MIZORAM & ORS. …Respondents
WITH
CIVIL APPEAL NO.1797 OF 2015
M/S. TAMARAI TECHNOLOGIES PVT. LTD. …Appellant
Versus
STATE OF MIZORAM & ORS. …Respondents.
JUDGMENT
SANJAY KISHAN KAUL, J.
Facts:
1. A complaint received by the Competition Commission of India
Signature Not Verified (for short ‘appellant/CCI’) from respondent No.4 seeking investigation
Digitally signed by
RASHI GUPTA
Date: 2022.01.19
17:22:55 IST
Reason: under the Competition Act, 2002 (hereinafter referred to as the
1
‘Competition Act’) in respect of State Lottery run by the State of
Mizoram (respondent No.1) has given rise to the present dispute. The
jurisdiction of CCI to inquire into allegations of bid rigging, collusive
bidding, and cartelisation in the tender process for appointment of selling
agents and distributors for lotteries organised in the State of Mizoram has
been challenged in the present proceedings by the successful bidders, and
to a much lesser extent, by the State of Mizoram.
2. The State of Mizoram issued an Invitation for Expression of
Interest (for short ‘EoI’) through respondent No.2, the Director,
Institutional Finance and State Lottery (IF&SL) on 20.12.2011 inviting
bids for the appointment of lottery distributors and selling agents for state
lotteries to be organised by the Government of Mizoram in terms of the
Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referred to as
the ‘Regulation Rules’) framed under the Lotteries (Regulation) Act,
1998 (hereinafter referred to as the ‘Regulation Act’). The EoI was for
appointment of lottery distributors/selling agents to organise, promote,
conduct, and market the Mizoram State Lottery through both
conventional paper type and online system. The EoI specified that the
minimum rate fixed by the Government of India is Rs.5 lakh per draw for
2
Bumper and Rs.10,000 per draw for others – bids less than these rates
would be summarily rejected. In pursuance of the EoI, five bids were
received of which four were accepted. The accepted bids quoted
identical rates as per the following table:
Rate per draw
S.No. Name Paper Online Bumper
1. E-Cool Gaming Solutions – 10,000 –
2. Summit Online Trade – 10,000 –
Solution Pvt. Ltd. (R5)
3. M/s. NV International – 10,000 –
(R6)
4. Teesta Distributors 10,000 – 5,00,000
These four companies/partnerships were selected as distributors to
operate the lotteries as per the Regulation Rules and the Regulation Act.
In accordance with the EoI, selected distributors/selling agents were inter
alia required to furnish Rs. 5 crore each for paper and online lottery as
security, a sum of Rs.1 crore each as advance payment of the sale
proceeds, and a sum of Rs.1 crore each towards the prize pool.
3. Respondent No.4 made a complaint to the CCI on 16.05.2012
under Sections 3 & 4 read with Section 19(1)(a) of the Competition Act
and the complaint was registered as Case No. 24 of 2012. In order to
complete the array of parties defined as per Civil Appeal No.10820/2014,
3
we may note that respondent No. 3 is the Director General of CCI and
both respondent Nos. 4 & 5 are private companies while respondent No.
6 is a partnership firm.
4. The substratum of the complaint by respondent No. 4 was that
identical offers of Rs.10,000 per draw were made in all four bids (one for
paper and three for online) and a single bid of Rs.5 lakh per draw was
made for the Bumper draw. These amounts were the minimum rates
fixed under the EoI. The allegation made by respondent No. 4 was that
the bidders had cartelised and entered into an agreement that had an
appreciable adverse effect on competition in the lottery business in
Mizoram. There was bid rigging and a collusive bidding process which
violated Section 3(1) read with Section 3(3) of the Competition Act, and
also caused grave financial loss to the State of Mizoram.
5. Respondent No. 4 also alleged that the State of Mizoram abused its
dominant position as administrator of State lotteries, by requiring
distributors to furnish exorbitant sums of money towards security,
advance payment, and prize pool even before the lotteries were held.
This was alleged to be unfair, discriminatory and illegal and effectively
restricted the supply of service of lotteries. The consequent allegation
4
against the State was that it violated Section 4 of the Competition Act.
The prayer made by respondent No. 4 was that the EoI be quashed and
set aside, respondent No.1 be restrained from abusing their dominant
position, a restraint be passed from awarding the tender to the selected
bidders, and selected bidders be banned from carrying out business in the
State of Mizoram.
The Legal Position:
6. In order to appreciate the contours of the complaint, it may be
appropriate to deal with some of the provisions of the Competition Act.
The objective of the Competition Act is set out in the Preamble itself, i.e.,
to establish a Commission to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect
the interests of consumers, and to ensure freedom of trade carried on by
other participants in markets, in India, and for matters connected
therewith or incidental thereto. Chapter II of the Competition Act
prohibits certain agreements, abuse of dominant position and regulation
of combinations. The prohibition of anti-competitive agreements is set
out in Section 3. The relevant provisions read as under:
5
“CHAPTER II
PROHIBITION OF CERTAIN AGREEMENTS, ABUSE
OF DOMINANT POSITION AND REGULATION OF
COMBINATIONS
Prohibition of agreements
3. Anti-competitive agreements (1) 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.
(3) Any agreement entered into between enterprises or
associations of enterprises or persons or associations of persons
or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association
of persons, including cartels, engaged in identical or similar
trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale
prices;
(b) limits or controls production, supply, markets,
technical development, investment or provision of
services;
(c) shares the market or source of production or provision
of services by way of allocation of geographical area of
market, or type of goods or services, or number of
customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or
collusive bidding,
6
shall be presumed to have an appreciable adverse effect on
competition:
Provided that nothing contained in this sub-section shall apply
to any agreement entered into by way of joint ventures if such
agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or
provision of services.
Explanation.— For the purposes of this sub-section, “bid
rigging” means any agreement, between enterprises or persons
referred to in sub-section (3) engaged in identical or similar
production or trading of goods or provision of services, which
has the effect of eliminating or reducing competition for bids or
adversely affecting or manipulating the process for bidding.
[…]”
Under the same Chapter, Section 4 prohibits the abuse of dominant position.
The relevant portion is extracted hereunder:
“4. Abuse of dominant position. – [(1) No enterprise or group shall
abuse its dominant position.]
(2) There shall be an abuse of dominant position 4 [under sub-section
(1), if an enterprise or a group],—
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of
goods or service.
[…]”
7. Chapter III deals with provisions relating to establishment,
7
Composition, etc. of the CCI while Chapter IV set outs the Duties,
Powers and Functions of CCI. Chapter V sets out the Duties of the
Director-General. Penalties are provided in Chapter VI. Chapter VIIIA
refers to the Establishment of the Appellate Tribunal.
8. Section 26 of the Competition Act provides for the procedure for
an inquiry under Section 19, which deals with inquiries into certain
agreements and dominant position of enterprises. The relevant
provisions of Section 26 are extracted as under:
“[26. Procedure for inquiry under section 19. – (1) On
receipt of a reference from the Central Government or a State
Government or a statutory authority or on its own knowledge or
information received under section 19, 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:
Provided that if the subject-matter of an information received
is, in the opinion of the Commission, substantially the same as
or has been covered by any previous information received, then
the new information may be clubbed with the previous
information.
(2) Where on receipt of a reference from the Central
Government or a State Government or a statutory authority or
information received under section 19, the Commission is of
the opinion that there exists no prima facie case, it shall close
the matter forthwith and pass such orders as it deems fit and
send a copy of its order to the Central Government or the State
Government or the statutory authority or the parties concerned,
as the case may be.
8
(3) The Director General shall, on receipt of direction under
sub-section (1), submit a report on his findings within such
period as may be specified by the Commission.
(4) The Commission may forward a copy of the report referred
to in sub-section (3) to the parties concerned:
[…]”
The Developments:
9. In pursuance of the complaint received from respondent No. 4, the
CCI exercised its powers under Section 26(1) of the Competition Act, as
it found prima facie evidence of cartelisation and bid rigging by the
bidders and gave three reasons for the same:
a. Three bidders made identical bids of the minimum rate of
Rs.10,000/- per draw for online lotteries;
b. Only one party made a bid for the paper lottery segment and
they quoted the minimum rate for the same.
c. Only one party made a bid for the bumper draw and also quoted
the minimum rate for the same.
10. In the aforesaid circumstances, the CCI expressed a prima facie
view that there appears to be contravention of the provisions of Section
3(1) read with Section 3(3) of the Competition Act by respondent Nos. 5
9
& 6 and other successful bidders. Accordingly, the CCI required the
Director General (for short ‘DG’) to conduct an investigation into the
matter. However, the CCI opined that no prima facie case was made out
against respondent No.1/State of Mizoram as it could not be considered
as an ‘enterprise’ or a ‘group’ under the Competition Act. Respondent
No. 1’s role was to regulate and monitor the business of lotteries in the
State of Mizoram in exercise of its powers and functions under the
Regulation Act and the Regulation Rules. It was, thus, opined that they
have every right to impose financial, technical and other conditions in
their bid documents as they deemed fit. The CCI, thus, rejected the
complaint of respondent No. 4 under Section 4 of the Competition Act.
11. The DG in pursuance of the said order of the CCI, a report dated
14.01.2013 was submitted on 17.01.2013 whereby it came to the
conclusion that respondent Nos. 5 & 6 along with M/s. Teesta
Distributors and M/s. E-Cool Gaming Solutions (P) Ltd. had colluded,
formed a cartel, and indulged in bid rigging. Thus, they were in violation
of the provisions of Section 3(1) read with Section 3(3) of the
Competition Act. However, no order was passed against the State of
Mizoram.
10
12. What is relevant to note is that the DG did make some
observations against respondent No.2 and the State of Mizoram to the
effect that they ought to have been more vigilant in stopping unfair trade
practices and their lapses raised suspicions of favouritism and collusion.
The bidding committee had received the complaint of respondent No. 4
on 18.05.2012 when the Committee recommended that the successful
bidders be appointed as selling agents. Thus, the DG opined that the
Committee allowed rigging to happen and respondent No.2 was also
instrumental in calling all four bidders together for the renegotiation of
bid prices on 22.05.2012. The DG, thus, opined that it was a case of
collusive bidding but the case against respondent No.1 under Section 4 of
the Competition Act was dropped.
13. The aforesaid report was placed before the CCI in its ordinary
meeting on 12.02.2013 when it was decided to send copies of the report
to the parties so that they could file their objections/replies thereto. The
parties were instructed to file profit & loss accounts, balance sheets, and
turnover of their enterprise for the past three financial years along with
their objections to the DG’s report and a date was fixed of 20.03.2013 for
an oral hearing.
11
The Court Litigation:
14. We may note that surprisingly respondent No.1 filed a writ
petition, being WP(C) No.24/2013, in the Gauhati High Court, Aizwal
Bench challenging both the report of the DG and the CCI’s order dated
12.02.2013. The grievance of respondent No.1 was actually with the
adverse observations made by the DG in his report and the fact that the
CCI had forwarded the DG report to them despite observations that
respondent No. 4 had failed to establish a prima facie case under Section
4 of the Competition Act. We say ‘surprisingly’, because if at all, the
grievance could have been of respondent No.2 qua the observations
made, but could not have been of respondent No.1/State. That too
respondent No.2 could have filed a response and it was open to the CCI
to close the proceedings both against respondent Nos.1 & 2. In fact,
Section 4 proceedings against respondent No.1 were already closed. The
Gauhati High Court, however, chose to pass an interim order on
18.03.2013 in the writ petition directing that no final order be passed by
the CCI. On the said order being passed, the CCI vide its order dated
11.06.2013, authorised its representative to inform the High Court that it
did not intend to pass an order against the State of Mizoram, and to pray
12
that the High Court’s injunction against passing a final order be lifted. In
any case, that ought to have put the matter to rest.
15. It, thus, does appear to us that the respondent No.1 lent its shoulder
to assist the other private parties and respondent No. 6 filed a writ
petition, being WP(C) No.76/2013, praying for quashing of the DG
report and all proceedings pending before the CCI. Respondent No. 6
sought to raise a plea that they had struck an agreement with respondent
No.1 on 22.07.2010 as per which they were formally assured of at least
25% of the total number of draws held per day once lotteries were
reopened. An agreement was struck to settle an amount of Rs.2.89 crore
stated to be owed by respondent No.1 to respondent No. 6 and, thus, it
was pleaded that the very question of forming a cartel or indulging in bid
rigging did not arise. Respondent No. 5 also sought to take advantage of
the proceedings initiated by respondent No.1 and filed a writ petition,
being WP(C) No.90/2013 seeking similar relief. Among the pleas raised
by respondent No. 5 was that lotteries were not covered by the
Competition Act and, thus, the CCI did not have jurisdiction to conduct
an inquiry under Section 26(1) of the Competition Act.
16. The three writ petitions were taken up together and admitted by the
13
Gauhati High Court vide its order dated 29.10.2013 and the operation of
interim directions issued on 18.03.2013 were continued, restraining the
CCI from delivering the final order.
17. The CCI aggrieved by the same moved this Court against the said
interim direction dated 29.10.2013. Notice was issued in the SLP(C) No.
4438-4441/2014 on 10.03.2014 and the High Court was permitted to
proceed with the matter in the mean time. The High Court, thus, passed
its final order in the three writ petitions on 16.08.2014, which made those
SLPs infructuous and were consequently dismissed as withdrawn on
25.08.2014.
The Impugned Order:
18. The final order dated 16.08.2014 sought to be impugned in the
present proceedings shows that the merits of the case were not really
urged but the arguments were confined to the show cause notice issued
by the CCI. Thus, what the High Court examined was whether the
Competition Act would be applicable entitling the CCI to entertain the
complaint/information given by respondent No. 4.
19. The High Court went into the question of the nature of the
business sought to be carried out, i.e., of lotteries. In this behalf relying
14
on the judgment of this Court in B.R. Enterprises v. State of UP1 it was
held that lotteries cannot be considered to be trade and commerce within
the meaning of Articles 301-303 of the Constitution of India. The High
Court also observed that the lottery tickets have no value in and of
themselves (Sunrise Associates v. Government of NCT of Delhi).2 The
right covered by a lottery ticket is nothing but an actionable claim and,
therefore, it was concluded from the definition of ‘goods’ under the Sale
of Goods Act, 1930 that they were excluded from such definition and
other tax statutes. Lastly, relying upon the judgment of this Court in
Union of India v. Martin Lotter Agencies Ltd. 3 it was opined that
lotteries, being akin to gambling activities, came under the purview of
the doctrine of res extra commercium. The Competition Act, it was
opined, was applicable to legitimate trade and goods, and was
promulgated to ensure competition in markets that are res commercium.
Thus, lottery activity being in the nature of res extra commercium could
not be covered by the Competition Act and consequently the CCI did not
have jurisdiction to entertain the complaint of respondent No. 4. The
High Court also took note of the stand of the CCI, which found no
1
(1999) 9 SCC 700.
2
(2006) 5 SCC 603.
3
(2009) 12 SCC 209.
15
contravention of Section 4 of the Competition Act by the State of
Mizoram and, thus, there was no question of any further proceedings
being allowed by the CCI against the State of Mizoram.
20. We may place at this stage itself our caveat to the manner in which
the High Court proceeded. On the statement of the CCI indicating its
intent not to proceed against the State of Mizoram, that petition could
have been put to rest. In fact, even earlier there was no intent to take out
any proceedings against the State of Mizoram and only some
observations had been made against respondent No.2 in the manner in
which they proceeded to carry out the allotment pursuant to the EoI. The
lis really was between the private parties and whether their conduct could
have been inquired into by the CCI.
21. The Special Leave Petitions were filed by the CCI and respondent
No. 4 against the orders passed in the three petitions and leave was
granted with all the matters being tagged together.
Appellant’s case:
22. Mr. Rajshekhar Rao, learned senior counsel sought to canvas the
case on behalf of the CCI. It was urged that the High Court had not
appreciated the contours of the case sought to be examined by the CCI.
16
The CCI was not concerned with the carrying out, regulation, or
prohibition of lottery business at all; but its concern was only about
potential bid rigging in the tender process for appointment of selling
agents and distributors of lotteries. There is stated to be no conflict
between the Competition Act and the Regulation Act. There was not even
an overlap between the two which would require us to exclude the
particular tender process from the mandate of Section 3(1) read with
Section 3(3) of the Competition Act. It was urged that notwithstanding
the fact that lotteries are a regulated commodity under the Regulation
Act, the CCI would continue to have jurisdiction over the competition
law aspect of such regulated commodity. In this behalf, he referred to the
judgment of this Court in CCI v. Bharti Airtel4, which examined the
contours of the Telecom Regulatory Authority of India Act, 1997
(hereinafter referred to as the ‘TRAI Act’) and the Competition Act in the
context of the exercise of power by the Telecom Regulatory Authority of
India (for short ‘TRAI’) and the CCI. It was observed in that context that
the Competition Act frowns on anti-competitive agreements and it
prohibits:
“
4
(2019) 2 SCC 521.
17
(a) where agreements are entered into by certain persons with a
view to cause an appreciable adverse effect on competition;
(b) where any enterprise or group of enterprises, which enjoys
dominant position, abuses the said dominant position; and
(c) regulating the combination of enterprises by means of mergers
or amalgamations to ensure that such mergers or amalgamations do
not become anti-competitive or abuse the dominant position which
they can attain.”
23. In the aforesaid context, it was, thus, observed that the function
assigned to the CCI was distinct from the function of the TRAI under the
TRAI Act. What the CCI was supposed to find out was whether there
was concert and collusion thereby forming a cartel. Whether a particular
agreement would have an appreciable adverse effect on competition
within the relevant market in India was, thus, held to be within the
exclusive domain of the CCI.
24. Learned senior counsel referred to us the definition of ‘Service’
under Section 2(u) of the Competition Act, which reads as under:
“2. Definitions. – In this Act, unless the context otherwise
requires,—
xxxx xxxx xxxx xxxx
18
(u) “service” means service of any description which is made
available to potential users and includes the provision of
services in connection with business of any industrial or
commercial matters such as banking, communication,
education, financing, insurance, chit funds, real estate,
transport, storage, material treatment, processing, supply of
electrical or other energy, boarding, lodging, entertainment,
amusement, construction, repair, conveying of news or
information and advertising;”
It was, thus, urged that the expression ‘service’ would mean
service of any description which is made available to potential users
and includes the provision of services in connection with business of
any industrial or commercial matter. In the aforesaid context it was
urged that the sale or distribution of lottery tickets to a prospective
buyer on behalf of the State for consideration should be construed as
“service”. While referring to the definition of ‘service’ it was
submitted that a reading of the definition would show it as a “means”
and “includes” definition and the ‘includes’ part does not narrow
down the width of the ‘means’ part. Thus, the widest amplitude must
be given to the definition of ‘service’ in this case to mean “service of
any description”. To support this contention, learned senior counsel
referred to the view taken by this Court in Black Diamond Beverages
19
v. Commercial Tax Officer5. Wherein, it was observed in paragraph 7
that the first part of the definition gives the meaning of the expression
“sale price” and must have its ordinary, popular or natural meaning
which is not controlled or affected by the second part which `includes’
certain other things in the definition. The same principle, it was
urged, would apply in the given scenario.
25. Learned senior counsel also urged that had the Parliament intended
to exclude any service from the application of the Competition Act, then
they would have specifically stated so under Section 2(h) or Section 54
of the Competition Act. Section 54 forms part of Chapter IX of the
Competition Act under the general heading ‘Miscellaneous’ and it
specifically empowers the Central Government to exempt from the
application of the Act or any provision thereof and for such period as it
may specify in such notification. It was urged that no such notification
has been issued. The present activity could hardly be called a sovereign
function. On the different cases referred to in the impugned judgment
and by the respondents, it was urged that they were all in the context of
tax laws to be tested on the touchstone of Article 19(1)(g) of the
5
(1998) 1 SCC 458.
20
Constitution of India while the present case really dealt with the interplay
of the Competition Act and the Regulation Act. In such a scenario the
doctrine of res extra commercium would only apply where the issue was
whether the State Government can regulate (by taxation or otherwise)
certain kinds of trades, which would otherwise be free for
regulation/subject to reasonable restriction. It was argued that the
business of acting as distributors/selling agents cannot be said to come
within the purview of such a doctrine (State of Punjab v. Devans
Modern Breweries6).
26. Lastly, it was urged that the High Court ought not to have
entertained a petition under Article 226/227 of the Constitution of India
as an order passed under Section 26(1) of the Competition Act was in the
nature of an administrative direction. There were no adverse civil
consequences. The proceedings were akin to a show cause notice and
even the DG’s report did not amount to a final decision. The respondents
were also stated to have the alternative efficacious remedy of an appeal
under Section 53B of the Competition Act whereby it could approach the
appellate tribunal aggrieved by any decision or direction or order inter
alia under sub-section (2) of Section 26 of the Competition Act. The
6
(2004) 11 SCC 26.
21
commission is expected to form an opinion about the existence of a
prima facie case for contravention of certain provisions of the
Competition Act and then passes a direction for the DG to cause an
investigation into the matter. Post the report of the DG it can proceed
further or close the proceedings. (Competition Commission of India v.
Steel Authority of India & Anr.7 confirmed in CCI v. Bharti Airtel8
case.) That stage had not even arisen. The final report of the CCI was yet
to mature and the CCI was not even bound by the report of the DG.
27. The aforesaid was also in the context of the CCI having already
made it clear that it did not intend to pass any adverse orders against the
State of Mizoram and that the DG being the investigative arm was duty
bound to report all facts to the CCI.
Respondent No.1’s Arguments:
28. The State of Mizoram actually prayed to be deleted as a party as
they contended that the appeal had become infructuous in the context of
the order passed by the CCI on 07.06.2012 and 11.06.2013 when it was
opined that no fault could be attributed to the State and they would not
pass any adverse orders against it. As noted, what is surprising is that
7
(2010) 10 SCC 744.
8
(supra)
22
there was originally also no cause for the State of Mizoram to have
approached the High Court.
29. Learned counsel for the State sought to contend that they had
never prayed for quashing of the proceedings against the private parties.
They only restricted their prayer against the continuation of proceedings
against the State, something which we have already failed to appreciate
and, once again, fail to appreciate. The last submission of the State of
Mizoram was, once again, surprising – that it was a victim of
cartelisation and would continue to cooperate with the CCI. If it was so,
then the proceedings should have been permitted to continue before the
CCI and the State ought to have given appropriate assistance as is sought
to be volunteered now.
Respondent No.5’s arguments:
30. The only real contesting party before us and the beneficiary of
what was complained against was respondent No. 5. Their contention
was based on the fact that Section 3(1) of the Competition Act would
have no application as there was no “goods” or “provisions of services”
which could give rise to the CCI’s jurisdiction. Lottery tickets were not
goods and there was no provision of any services. Lottery business being
23
res extra commercium, it had to be strictly regulated under the provisions
of the Regulation Act. The definition of “goods” under Section 2(i) of
the Competition Act, which refers to the definition of Sale of Goods Act,
reads as under:
“2. Definitions. – In this Act, unless the context otherwise
requires,—
xxxx xxxx xxxx xxxx
(i) “goods” means goods as defined in the Sale of Goods
Act, 1930 (8 of 1930) and includes—
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in
India, goods imported into India;”
31. Section 2(7) of the Sale of Goods Act specifically excludes
actionable claims from the ambit of goods, which reads as under:
“2. Definitions.—In this Act, unless there is anything
repugnant in the subject or context,—
xxxx xxxx xxxx xxxx
(7) “goods” means every kind of moveable property other than
actionable claims and money; and includes stock and shares,
growing crops, grass, and things attached to or forming part of
the land which are agreed to be severed before sale or under the
contract of sale;”
24
32. A lottery ticket has been held to be only an actionable claim
(Sunrise Associates v. Government of NCT of Delhi9) and was, thus held
to not be a good. Where an actionable claim was sought to be included
within the definition of ‘goods’, it was specifically so done. For example,
debentures are specifically included within the definition of ‘goods’
under Section 2(i)(B) of the Competition Act. A comparison was also
sought to be made with the Monopolies and Restrictive Trade Practices
Act, 1969 where there was no such inclusion and, thus, debentures were
opined to be excluded (R.D. Goyal & Anr. V. Reliance Industries Ltd.10).
33. Respondent No. 5 claimed to be merely a distributor which did not
provide any services to any potential user of lottery and such distribution
does not constitute a service under Section 2(u) of the Competition Act,
which has been extracted above.
34. It may be relevant to note here that the definition of service is
inclusive and the principles of specifying certain inclusions would, thus,
apply without inhibiting the first part of the definition clause.
35. Lastly it was contended that lottery business is res extra
commercium and strictly regulated by State. Therefore, it could not have
9
(2006) 5 SCC 603.
10
(2003) 1 SCC 81.
25
been the intent of the legislature to promote or sustain competition in
lottery business. The Competition Act will thus not apply as there was a
special act promulgated for conduct of lotteries.
Our View:
36. In the conspectus of the arguments, we find that a simple aspect of
anti-competitive practices and cartelisation has got dragged on for almost
ten years in what appears to be a mis-application by the High Court of
the interplay of the two Acts, i.e., the Competition Act and the Regulation
Act. We have already observed that respondent No. 1 seems to have
played a very non-appreciable role in our opinion. What ought to have
weighed with respondent No.1/State is what is sought to contend now,
i.e., it is a victim of cartelisation and it is in its interests to cooperate with
the CCI.
37. The complaint of respondent No.4 may have been also under
Section 4 of the Competition Act but it had not even referred that aspect
to the DG and had decided not to proceed against the State. That should
have been the end of the matter so far as the State is concerned. Yet the
State, in our view, under a misconception, approached the High Court,
possibly in an endeavour to defend one of its officers, respondent No. 2,
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whose conduct has not been very favourably commented on by the DG.
Even if the State felt that these comments of the DG were not
sustainable, such an aspect could have been pleaded with the CCI in
pursuance of its notice and possibly the matter would have been closed at
that stage. In fact, the CCI had opined, both before and after the filing of
the writ petition, that it was not proceeding against respondent No.1/State
under Section 4 of the Competition Act. The aforesaid gave an
opportunity to respondent Nos. 5 & 6 also to approach the Court and
interdict the proceedings which ought to have been concluded a long
time ago. It would, in our view, have been beneficial even to the State to
have come to a conclusion one way or the other. The interdict post the
investigation report by the DG and prohibiting the CCI from carrying out
its mandate under the Competition Act is unsustainable.
38. We are in agreement with the line of arguments advanced by Mr.
Rajshekhar Rao, learned senior counsel for the CCI where he has
succinctly sought to point out that the concern of the CCI was not at all
with the carrying out, regulation or prohibition of the lottery business as
was governed by the Regulation Act. Rather, the concern was limited to
the role assigned to the CCI under the Competition Act, and in the
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context of the EoI was limited to examining any perceived bid rigging in
the tendering process for appointment of selling agents and distributors
for the lottery business. There was no conflict in the interplay of the two
Acts that even needed reconciliation or prohibition against either one, as
the limited scrutiny was to examine the mandate of Section 3(1) read
with Section 3(3) of the Competition Act. Lotteries may be a regulated
commodity and may even be res extra commercium. That would not take
away the aspect of something which is anti-competition in the context of
the business related to lotteries.
39. We must take note of the expansive definition of ‘Service’ under
Section 2(u) of the Competition Act. It means “service of any
description”, which is to be made available to potential users. The
purchaser of a lottery ticket is a potential user and a service is being
made available by the selling agents in the context of the Competition
Act. Suffice for us to say the inclusive mentioning does not inhibit the
larger expansive definition. The lottery business can continue to be
regulated by the Regulation Act. However, if in the tendering process
there is an element of anti-competition which would require investigation
by the CCI, that cannot be prevented under the pretext of the lottery
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business being res extra commercium, more so when the State
Government decides to deal in lotteries.
40. We would like to say that the intervention by the High Court was
extremely premature. It ought to have waited for the CCI to come to a
conclusion but on the other hand what has happened is that the CCI
proceedings have been brought to a standstill while the High Court
opined on the basis of some aspects which may or may not arise.
41. We are, thus, of the view that there was really no need for the High
Court to proceed in the manner and in the direction it sought to proceed.
The correct approach, more so once the statement was made on behalf of
the CCI, would have been to close the proceedings filed by the State
Government and let the private parties face the ultimate decision of the
CCI. If they were aggrieved by any adverse decision of the CCI they
were entitled to avail of the appellate remedy under Section 53B of the
Competition Act.
42. The complaint having been made by respondent No.4 under
Section 19 of the Competition Act, which provides that the Commission
“may” inquire into certain agreements and dominant position of
enterprise as envisaged under sub-section (1) of Section 3 and sub-
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section (1) of Section 4 of the Competition Act. The CCI found out a
prima facie case for investigation by the DG under Section 3(1) of the
Competition Act, the DG opined adversely, and the CCI issued notice
giving an opportunity to the affected parties to place their stand before it.
This process ought to have been permitted to conclude with the right
available to the affected parties to avail of the appellate remedy under
Section 53B of the Competition Act.
Conclusion:
43. We, thus, set aside the impugned judgment of the High Court and
direct that the proceedings in WP(C) No. 24/2013 filed by respondent
No.1 would stand closed in view of the statement made on behalf of the
CCI before the High Court on 11.06.2013 and the proceedings against the
other parties would continue. Since the State Government has already
volunteered in the present proceedings to cooperate, we are sure a proper
sequitur to the investigation would follow. WP(C) No. 76/2013 and
WP(C) No. 90/2013 filed by the private parties would stand dismissed.
We are conscious of the fact that much time has passed but then the
material forming basis of the investigation is already with the CCI and it
will have to proceed in accordance with law. This will have a future
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impact even if the contracts have come to an end and also in the context
of the jurisdiction of the CCI, and that is why we have proceeded to pen
down the judgment.
44. The appeals are accordingly allowed leaving the parties to bear
their own costs.
………………………………J.
[Sanjay Kishan Kaul]
………………………………J.
[M.M. Sundresh]
New Delhi.
January 19, 2022.
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