Orissa HC Upholds Quashing Of Cartel Probe Against Rungta Mines, Finding CCI Minutes Failed To Show Independent Prima Facie Assessment

A complaint alleging cartelisation and price-fixing by steel manufacturers was referred by the CBI to the Director General (DG), Competition Commission of India (CCI). Following a Madras High Court direction to take action “in accordance with law,” the CCI registered Suo Motu Case No. 02 of 2021 and directed an investigation.

Rungta Mines Limited was not named in the original complaint, but its Kolkata office was searched and its employees were questioned. After inspecting the CCI’s records, Rungta Mines and its Whole-Time Director challenged the investigation under Article 226, alleging the absence of a valid direction under Section 26(1) of the Competition Act, 2002, and procedural irregularities in their inclusion. The Single Judge quashed the investigation and consequential proceedings as against them; the CCI and DG appealed.

Article 226 permits judicial review notwithstanding an alternative remedy where, among other exceptions, proceedings are alleged to be wholly without jurisdiction or in breach of natural justice; the rule of exhaustion is discretionary (*Whirlpool Corporation v. Registrar of Trade Marks*, (1998) 8 SCC 1; *M/S Radha Krishan Industries v. State of Himachal Pradesh*, (2021) 6 SCC 771).

Under Article 226(2), territorial jurisdiction exists where a material part of the cause of action arises within the High Court’s territory (*ONGC v. Utpal Kumar Basu*, (1994) 4 SCC 711).

Sections 19 and 26(1) of the Competition Act empower the CCI to inquire into alleged contraventions and direct a DG investigation only after forming its own prima facie opinion. Although that direction is administrative and preliminary and requires neither a hearing nor an elaborate speaking order, the CCI is expected to record at least some reasons demonstrating application of mind (*CCI v. Steel Authority of India Ltd.*, (2010) 10 SCC 744).

Once an inquiry is validly initiated, the DG may investigate additional facts and enterprises whose involvement emerges, even if they were not named in the complaint (*Excel Crop Care Ltd. v. CCI*, (2017) 8 SCC 47); the CCI’s inquisitorial, public-interest function may operate in rem, but that does not create jurisdiction beyond the subject matter of a valid inquiry (*Samir Agrawal v. CCI*, (2021) 3 SCC 136).

The Court held that the writ petition raised a challenge to the jurisdictional foundation of the investigation, for which no effective appeal was available at the investigation stage; it was filed promptly after inspection of the records. Odisha-based manufacturing and commercial operations also provided a material territorial nexus.

The Madras High Court’s direction to act in accordance with law did not displace the CCI’s statutory responsibility. Although the CCI was not required to issue a separately titled or elaborate order, its minutes merely recorded “detailed deliberations” and directed investigation by reference to the Madras High Court order; they did not disclose the CCI’s independent prima facie assessment or its basis.

The DG could, in a validly initiated inquiry, follow evidence implicating unnamed enterprises, but the in rem character of proceedings could not cure the missing statutory foundation. The Court also noted that no corresponding CCI order or prescribed procedure had been shown for bringing Rungta Mines in as an Opposite Party, unlike the procedure followed for certain associations.

While the DG may investigate unnamed enterprises in a validly initiated inquiry, that principle could not sustain this investigation; the procedural infirmities concerning Rungta Mines further supported the result.

The writ appeal was dismissed, affirming the quashing of the investigation and consequential proceedings insofar as Rungta Mines and its Whole-Time Director were concerned. The relief was confined to them and did not determine the merits of allegations against other enterprises or persons.