Shri Ghanshyam Das Vij vs M/S Bajaj Corp. Ltd.

& Others on 12 October, 2015

COMPETITION COMMISSION OF INDIA

1. Case No. 68 of 2013 Appearances: Shri R. D. Makheeja, Advocate for the Informant
alongwith Shri Ghanshyam Dass Vij, Informant-in-Person.
2. Shri Pawan Sharma and Shri Anuj Shah, Advocates for M/s Bajaj Corp. Ltd. (OP-1) and
OP-2.
3. Shri Robin Kumar, Advocate for Sonipat Distributor (FMCG) Association (OP-5) and its
officials. Order under Section 27 of the Competition Act, 2002

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1. The present information has been filed under section 19(1) (a) of the Competition Act, 2002
(„the Act‟) by Shri Ghanshyam Dass Vij, the Informant‟) against M/s Bajaj Corp. Ltd., Mumbai,
the Opposite Part No. 1‟/ Bajaj/ OP-1), Area Sales Manager, M/s Bajaj Corp. Ltd., New Delhi
(„the Opposite Party No. 2‟/ OP-2), Branch Manager, M/s Bajaj Corp. Ltd., Panchkula, Haryana
(„the Opposite Party No. 3‟/ OP-3), Branch Manager, M/s Bajaj Corp. Ltd., Ambala, Haryana
(„the Opposite Party No. 4‟/ OP-4) and Sonipat Distributor (FMCG) Association (Regd.),
Sonipat („the Opposite Party No. 5‟/ SDA/ OP-5), a member of Haryana Distributors (FMCG)
Association alleging inter alia contravention of the provisions of section 3 of the Act.

ORDER

88. OP-5 and its office bearers are directed to cease and desist from indulging in the acts/
conduct which have been found to be in contravention of the provisions of the Act. Further, it is
ordered that OP- 5 association shall modify its bye-laws in light of the contraventions found and
observations made by the Commission in this order so as to bring the same in accord with the
provisions of the Act. Further, in exercise of the powers under 27(g) of the Act, the Commission
directs OP-5 to put in place, in letter and in spirit, a „Competition Compliance Manual‟ to
educate its members about the basic tenets of competition law principles. It is hoped that the
association shall play an active role in creating awareness amongst its members of the provisions
of the Act through competition advocacy. Lastly, the Commission has also taken into
consideration the submission made by the counsel appearing for OP-5 to the effect that the
association has stopped the practice of NOC since the Informant approached the Commission.
Accordingly, in the facts and circumstances of the present case, the Commission does not deem
it appropriate to issue any further remedy.

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Shri Sonam Sharma vs Apple Inc. Usa & Ors on 19 March, 2013

Competition Issues

31. The allegations in the present case relate to Section 3 on the anti-competitive agreements and
to Section 4 on abuse of dominant position of the opposite parties. The specific competition
issues that arise from these allegations are:

i. Appreciable adverse affect arising from such agreements;

ii. Abuse of dominance by the opposite parties by:

a) Imposing unfair conditions in the purchase of Apple iPhones

b) Imposing discriminatory conditions on users who had purchased their Apple iPhones from a
source other than OP 3 and OP 4

c) Indulging in such concerted practices under the agreements/ understandings between them,
which results in denial of access, to the other GSM network providers

d) Concluding contracts for the sale of iPhones subject to acceptance by other parties of
supplementary obligations

e) OP 3 &OP4 using their dominant position in the GSM market to enter and control the iPhone
market in India.

32. The case as such has two dimensions to it as can be seen from the informant's allegation of
contravention of Section 3 and Section 4. As submitted by DG, Apple iPhone 3G and 3GS were
launched in India in August 2008 and March 2010, respectively. Apple India did not own or

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operate retail stores in India, but preferred to distribute its handsets and related marketing
activities through two channels Mobile Network Operators (MNOs) and Authorized Premium
Resellers (APRs) by way of non-exclusive distribution agreements with tenure of two to three
years. Of significance is that the MNOs are also service providers. The duality of the roles of
MNOs permits examination of the contravention of the Act under Sections 3 and 4.

Section 3 arises from the agreements between Apple and its distributors and fall within the ambit
of vertical restraints on competition elucidated in Section 3(4) of the Act. Contraventions
of Section 4arise from the dominance of the two sets of players' viz., the iPhone manufacturer
(Apple) and service providers (Airtel and Vodafone) in their respective markets.

33. We shall first examine the contraventions arising from abuse of dominant position. The steps
required for assessing contravention of the Act are: i. Delineate the relevant market where anti-
competitive conduct has been alleged ii. Determine the dominance of opposite parties in the
relevant market so defined and iii. Establish if there has been abuse of dominance by the
opposite parties in the relevant market.

34. Given the nature of allegations leveled by the Informant and subsequent investigation
conducted by the DG thereon, it would be appropriate at the outset to understand the dynamics of
cellular phones and their interaction with cellular network services.

Market Dynamics

35. With the advent of mobile telephony, faster and reliable modes of communication have
become a reality. With passage of time and with infusion of technology, the mobile handset got
transformed from a simple communicating devise to becoming a platform for undertaking
activities like e- commerce, m-banking, entertainment, m-health etc.

36. In the context of mobile telephony, two distinct entities - the mobile network operators and
handset manufacturers create the communication channel wherein the former provides the
service and latter sells the hardware to harness the benefits of the service provider. A mobile
handset is a complementary product to mobile network service, thereby meaning that unless a
mobile handset user has the access to a mobile network services, he would not be in a position to

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exploit the full utility of the handset. It is observed that, generally, as a part of complementary
marketing strategy, handset makers and mobile service providers, although, distinct entities often
offer bundled products / services. It has been observed that with the approval of the sector
regulator, there have been instances of offering bundled services, wherein mobile service
providers offer handsets to their customers that may be locked to their network for a certain time
period.

37. As per the data provided by the DG, the Commission has noted the GSM subscriber base in
India has shown a phenomenal growth - it stood at 25,82,35,642 in 2008 and has grown to
63,96,37,109 in 2011, a growth of nearly 150%. Taking the GSM subscriber base to be the proxy
for the handset market (as every subscriber requires a handset to use mobile services), the story
of handset sales in India is no different. It is a resilient market with presence of more than 20
companies competing in a space which is growing by about 15%, as per the data pertaining to H1
2012 as per a market research group, CMR (http://cmrindia.com/india-mobile-handset-
shipments-cross-100-million-units-in-the-first-six-months-of-2012/). Another Report of CMR
'India Mobile Handsets Market Review, 2Q 2012, September 2012', during H1 2012 (January-
June 2012), total India shipments of mobile handsets was recorded at 102.43 million units. In
India, handsets are available from plethora of manufacturers in practically every price range -
from few hundred rupees to about half a lakh rupees.

38. Handsets can be primarily characterized as being one of the three: (i) basic phones; (ii)
feature phones and (iii) smart-phones. While the basic phone is equipped for call and text
messaging services, the other two have more advances features.There is no industry standard
definition of a smartphone, but rather a spectrum of functionalities that defines a particular brand
of smartphone. A significant difference between smart-phones and feature phones is that the
advanced application programming interfaces (APIs) on smart-phones for running third party
applications can allow those applications to have better integration with the phone's operating
system and hardware. In comparison, feature phones more commonly run on proprietary
firmware, with third-party software support through platforms such as Java ME or BREW.
Further categorization on the basis of operating system, hardware configuration, other
functionality, 2G/3G/4G etc is also possible to distinguish a particular handset. Presumably,

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price of the mobile handsets increases progressively and discreetly with the inclusion of
additional functionalities / features.

39. The present case deals with the smartphones, which are at the highest end of mobile
handsets. In addition to mobile phone functionality, many modern smartphones typically also
serve as portable media player and camera phone with high-resolution touch-screen, web
browsers that can access and properly display standard web pages rather than only mobile-
optimized sites, GPS navigation, Wi-Fi and mobile broadband access. Presently, smartphones are
manufactured by various competing companies such as Apple, Samsung, Nokia, LG, HTC,
Micromax, Sony etc. It is notable that each manufacturer has several variants of smartphones,
available in different price-bands.

In this dynamic scenario, we now proceed to examine the case from the lens of competition.

Relevant Market

40. Section 2 (r), (s) and (t) of the Act define the relevant market. Further, Section 19(5), (6) and
(7) of the Act gives the guidelines for determining relevant market.

41. The Informant has averred that features offered on iPhone are exclusive only to it, because of
which an iPhone cannot be substituted by any other smartphone available in the market. While
saying so, we infer that the Informant is referring to the relevant market as consisting of Apple
iPhones.On the other hand, while defining relevant market, DG has held that "in case of
technologically driven products and industries characterized by rapid innovation the availability
of substitutable products has to be assessed over a period of time (few months or year/s) rather
than at a given point of time".

42. As stated earlier, DG has made a distinction between a smartphone and a normal phone in as
much as the former is capable of running larger menu of third party application. While
acknowledging the fact that iPhone offers certain distinguishing features such as multi-touch
screen-pad replacing the traditional physical keypads, light detecting and proximity censors, DG
has held that it belongs to the category of smartphones, competing with other smartphones
offered by other companies.

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43. Furthermore, in view of the allegations on the service providers, DG has considered it
appropriate to include a second relevant market in the present case - that of mobile network
service. On the cellular network services market, DG has observed that the same can be
classified under two heads namely GSM and CDMA, based on the underlying technology.
Further, SIM cards of each of these cellular services are compatible only with those handsets
which deploy their respective technology. On account of such technological differences, DG has
submitted that there is no substitutability between GSM and CDMA cellular services. It has also
been submitted by the DG that iPhones (in India) are based on GSM technology. The DG has
found that the cellular network of most of the GSM cellular service providers in India at the time
of launch of iPhones was technologically compatible for use of iPhones. Hence unless the
iPhones were specifically locked to a particular GSM network, the users could have used the
network of any of the existing cellular service providers in India.

44. Taking into consideration the provisions of the Act and the issues under investigation relating
to the sale of the locked iPhone and cellular services and data plans for using these handsets, two
separate relevant markets have been identified by the DG as following:

• Market of GSM Cellular Services in India.

• Market for smartphones in India View of the Commission

45. In terms of the provisions of the Act, relevant market has to be defined in terms of product-
substitutability from demand perspective. It is worth noting that relevant market has two
dimensions - product and geography. The DG has delineated two distinct relevant markets in the
present case. The Commission will examine the aspect of two markets and opine on the
delineation of the two markets in subsequent paragraphs. Concerns of the informant on the
definition of the relevant market raised in his oral response to the DG's Report will be addressed
in the subsequent paragraphs.

A. Mobile Telephony Market

46. From the public documents available on the internet as also from the Information and the DG
Report, it is apparent that products of Apple have been defying the conventional norms - they

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come with innovative features that offer qualitative leap over their rivals. No doubt, some people
might have a preference for Apple products like iPhone but to qualify it as a niche segment, it is
required that no other competing products offer similar products and that the target customers
perceive it as being the 'only' product in the market. If it were so then, the relevant market would
have been that of iPhones. The Commission finds it difficult to define the relevant market as just
consisting of iPhones. Such single-brand markets are rarely tenable. Relevant markets generally
cannot be limited to a singlemanufacturer's products.The Commission views reasonable
interchangability between iPhones and other smartphones. iPhone is a part of bigger segment of
mobile handset i.e. the smartphone market. Comparisons of features and prices of different
smartphones are done and referred to that includes iPhone along with other smartphones.
Apparently, Apple views Samsung, Nokia, Blackberry etc as its competitor in the smartphone
market in India and similarly other smartphone manufacturers also offer their products in direct
competition with iPhones.

47. In view of the above discussion and in the absence of any specific finding that Apple iPhone
constitutes a distinct market; the Commission has reasons to believe that the true relevant market
is the market of smartphones in India, in line with the approach and reasoning of the DG.

B. Cellular Telecom Services Market

48. There are two competing technologies that offer commercial mobile telephony

- (i) GSM and (ii) CDMA. The handset to be used for availing service from any of these cannot
be used to avail the service from other. Even from the supply side, the two are not substitutable
in as much as each require set of equipments that are not compatible with other. In our analysis,
since iPhone is offered only for GSM module in India and that specific allegation has been
brought against two GSM service providers, the Commission shall limit its analysis to the GSM
service market.

49. The mobile network service in India is divided into distinct telecom circles, also known as
licensing areas, with majority of the circle having 6-7 operators. It is important to take note of
the fact that each telecom circle has different valuation and accordingly the license fee varies
across each circle. Further, a mobile service operator can operate only in the license area for

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which license has been granted. From a consumer's perspective, calling a subscriber within a
telecom circle, irrespective of physical distance between the two, is treated as local call and any
call terminating in other license area is treated as long-distance (STD) call. There is
substitutability of availing mobile network services to the extent that consumers have a choice of
availing services from competing service providers that have been given license in a particular
license area. Thus, from the point of view of both - mobile service operators and mobile service
subscribers, one license area is distinct from another.

50. It is important to note that the agreement between Apple and Vodafone / Airtel to sell locked
phones in India did not envisage locking the iPhone to a particular license area. Rather, it is
apparent that locking was to a particular carrier irrespective of the service area in which they
were bought in, thereby meaning that, as an example, iPhone purchased from Airtel could be
made functional by inserting Airtel SIM in any service area in which Airtel was licensed to offer
mobile services.

51. In view of the above discussion and in consonance with the definition of relevant market in
respect of cellular telecom services market as proposed by the DG, the Commission opines that
the relevant market is the market for GSM mobile services in India.

52. To sum, the two relevant markets identified for the purpose of present case are:

• Market for smartphones in India; and • Market for mobile services in India.

Dominance

53. Dominant position has been defined under Explanation to Sec 4 as "...position of strength,
enjoyed by an enterprise, in the relevant market, in India, which enables it to--

(i) operate independently of competitive forces prevailing in the relevant market; or

(ii) affect its competitors or consumers or the relevant market in its favour.

Section 19(4) of the Act lists guiding conditions under which an enterprise may be viewed as
having a dominant position.

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54. The Informant has submitted that Apple is the largest selling smartphone worldwide. It has
also submitted that by the end of fiscal year 2010, a total of 73.5 million iPhones have been sold.
Hence, OP1 enjoys dominant position in the smartphone market worldwide including India
where it enjoys such a position through OP2.

55. Quoting the IDC Smartphone Market Share for India (2008-2011) and other reports cited by
DG in its investigation report, DG has observed that in terms of volume, Apple India had a share
between the ranges of 1%-3% in the smart-phone market during the period 2008-11 in India. The
DG, then, proceeded further and analyzed the other factors to be considered for determining
dominance of an enterprise and found that OP1 and OP2 are not in a dominant position in the
relevant market of smart-phones in India.

View of the Commission

56. There are two issues that need to be highlighted before commenting on the dominant position
of the opposite parties. Firstly, the business model / strategy of Apple in India need to be
emphasized. At the time of launch of iPhones in India, Apple did not have its own retail stores. It
might have been a conscious decision of Apple to sell the iPhones through existing mobile
network operators (MNOs) in a locked state apart from APRs. This arrangement suited both
Apple and MNOs since the former did not have to incur establishment / marketing expenditures
while the latter were guaranteed of turf-client for the period of lock-in. In any case, the locked-in
customers had the option to get their phone unlocked by paying some fees. It is observed that
similar arrangement has been made by Apple in many countries where it launched its iPhones.
For instance, in the US, AT&T has been the exclusive network of the iPhone.

57. Secondly, the Commission notes that while the Informant has submitted that information
pertains only to iPhone 3G and 3GS, it is not clear whether data relied in the information to
portray Apple's position includes all variants of iPhone. In the opinion of the Commission,
relevant market cannot be segmented variant-wise (as has been proposed by the Informant)
unless it is established that different variants have such distinct characteristic so as to be viewed
as a distinct product by the customers - the only test that has been enshrined in the Act is
substitutability / interchangeability from demand perspective.

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58. Coming to the issue of dominance of Apple, it is noted from various independent reports that
Apple's share in smartphone market in India was around 3% during 2008-11. On this screening
criterion, the argument of Apple's dominance falls flat. However, the DG has analyzed
dominance of other factors as envisaged under 19(4) conditions and has concluded that even
then, Apple cannot be said to be in a dominant position. The Commission endorses the view of
the DG.

59. As regards the dominance of OP3 and OP4 in the second relevant market, the DG has held on
the basis of section 19(4) conditions that neither Airtel nor Vodafone has adequate market power
so as to be deemed dominant. Also, the argument made by the Informant that OP3 and OP4 hold
nearly 52% of market share in the GSM services in India cannot be accepted for the fact that they
are horizontal competitors who fight for greater market share. Moreover, there is no allegation
qua these OPs that they have indulged into anti-competitive conduct among themselves for a
common cause.

60. According to the data available on the website of Cellular Operators Association of India
(COAI), Group Company wise percentage market share in terms of GSM subscribers for the
month of December 2012 is as follows:

Sl. No. Name of Company Subscribers (actual) Market Share

(%)

1 BhartiAirtel 18,19,06,892 27.68%

2 Vodafone Essar 14,74,76,290 22.44%

3 IDEA 11,39,46,827 17.34%

4 BSNL 9,71,72,146 14.79%

5 Aircel 6,33,47,284 9.64%

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 6 Uninor 4,15,20,544 6.32%

7 Videocon 36,40,312 0.55%

8 MTNL 51,19,179 0.78%

9 Loop Mobile 30,28,539 0.46%

All India 65,71,58,013 100.00%

Source: http://www.coai.com/statistics.php - Subscriber Figures for Dec 2012 From the above
data as also the data submitted by the DG, it is observed that none of the OPs can be deemed
dominant in terms of respective market share in the relevant market and other Section
19(4) conditions.

61. An issue has been raised by the Informant, submitting that OP3 and OP4 hold more than 50%
of GSM market, thereby making them dominant in the market. The Commission notes that there
is no indication of any sort of agreement between them (OP3 and OP4) that could be deemed
anti-competitive. Therefore, it is not relevant to take cognizance of this piece of information in
the given context, more so when they are competitors in the same market.

62. In view of the above discussion, Commission opines that since dominance does not get
established, there can be no case for abuse of dominance under Section 4 of the Act.

Anti-competitive agreement

63. Having opined on AoD aspect, the Commission shall now give its view on the agreement
between Apple and Airtel / Vodafone that has been alleged to be 'anti-competitive'.

64. According to Section 3 of the Act, "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".Section 3(4) of the Act
highlights anti-competitive agreements between vertically related enterprise as "Any agreement

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amongst enterprises or persons at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods
or provision of services, including--

(a) tie-in arrangement;

(b) exclusive supply agreement;

(c) exclusive distribution agreement;

(d) refusal to deal;

(e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such
agreement causes or is likely to cause an appreciable adverse effect on competition in India".

Further, what constitutes appreciable adverse effect on competition has been provided for
in Section 19(3) of the Act.

65. The allegation is focused on what is referred to as a lock-in arrangement between the handset
manufacturer and service-provider by the Informant. At this stage, it is worthwhile to distinguish
between tie-in and bundling as these two terms tend to be used interchangeably in common
parlance especially in marketing strategies. Anti-competitive concerns, however, require a
distinction in the two terms that an agreement sets out. Furthermore, an agreement, as in the
present case, the Commission has carefully reviewed the tie-arrangement in the context of the
dual roles of the service provider. On one hand the service providers are independent mobile
telephony providers including internet services and on the other are distributors of iPhone. A tie-
arrangement, therefore, must be assessed with respect to foreclosure in the handset market and to
foreclosure in the service market; and whether the agreement results in consumer harm.
Moreover, the Commission also notes that Apple's exclusive agreement with the two service
providers was announced and widely known, and that consumers were informed at the time they
purchased their iPhones of the necessity of these tied cellular services, which in themselves were
not exclusive as iPhone could be purchased both with an Airtel and a Vodafone service.

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66. A tying arrangement occurs when, through a contractual or technological requirement, a
seller conditions the sale or lease of one product or service on the customer's agreement to take a
second product or service. In other words, a firm selling products X and Y makes the purchase of
product X conditional to the purchase of product Y. Product Y can be purchased freely on the
market, but product X can only be purchased together with product Y. The product that a buyer
is required to purchase in order to get the product the buyer actually wants is called the tied
product. The product that the buyer wants to purchase is called the tying product. Examples of
tying include the tied sales of machines and complementary products, the tied sales of machines
and maintenance services, as well as technological ties that force consumers to buy two or more
products from the same supplier due to compatibility reasons. More often, tying is a sales
strategy usually adopted by the companies to promote / introduce a slow-selling or unknown
brand when it has in its portfolio a fast-selling or well known product, over which it has certain
market power.

67. Price bundling is a strategy whereby a seller bundles together many different goods / items
for sale and offers the entire bundle at a single price. There are two forms of price bundling -
pure bundling, where the seller does not offer buyers the option of buying the items separately,
and mixed bundling, where the seller offers the items separately at higher individual prices. From
producers perspective, mixed bundling is usually preferable to pure bundling, both because there
are fewer legal regulations forbidding it, and because the reference price effect makes it appear
even more attractive to buyers. Bundling is used as a strategic pricing tool by the producers to
price discriminate among groups of buyers with different preference schedule in order to capture
larger pie of social surplus thus generated.

68. Having discussed tying and bundling, it is important to underscore the fact that there is a
subtle difference between the two concepts. The term "tying" is most often used when the
proportion in which the customer purchases the two products is not fixed or specified at the time
of purchase, as in a "requirements tie-in" sale. A bundled sale typically refers to a sale in which
the products are sold only in fixed proportions (e.g., one pair of shoes and one pair of shoe laces
or a newspaper, which can be viewed as a bundle of sections, some of which may not be read at
all by the customers). Bundling may also be referred to as a "package tie-in." It is also true that
various foreign courts have occasionally used the two terms interchangeably.

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69. On the other hand, anti-trust concerns are raised in the case of tie-in as held in section
3(4) (a), although per se it is not anti-competitive. Therefore, the Commission has been at pains
to distinguish between a tie-in arrangement and bundling in this specific case. Economics
literature suggests that there are pro-competitive rationales for product-tying. These include
assembly benefits (economies of scale and scope), quality improvement as also addressing
pricing inefficiencies. Generally, the following conditions are necessary and essential in respect
of anti-competitive tying:

1. Presence of two separate products or services capable of being tied:

In order to have a tying arrangement, there must be two products that the seller can tie together.
Further, there must be a sale or an agreement to sell one product or service on the condition that
the buyer purchases another product or service (or the buyer agrees not to purchase the product
or service from another supplier). In other words, the requirement is that purchase of a
commodity was conditioned upon the purchase of another commodity.

2. The seller must have sufficient economic power with respect to the tying product to
appreciably restrain free competition in the market for the tied product:

An important and crucial consideration for analyzing tying violation is the requirement of market
power. The seller must have sufficient economic power in the tying market to leverage into the
market for the tied product. That is, the seller has to have such power in the market for the tying
product that it can force the buyer to purchase the tied product.

3. The tying arrangement must affect a "not insubstantial" amount of commerce:

Linked with the above requirement, tying arrangements are generally not perceived as being anti-
competitive when substantial portion of market is not affected.

70. The present case involves a distribution / sales arrangement between Apple and Airtel /
Vodafone is a case of 'contractual tying' wherein the handset manufacturer and service provider
have joined hands to offer a packaged product to a customer. Tying arrangements are common in
the wirelesstelecommunications industry. Worldwide wireless networks compete forexclusive

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contracts to offer popular mobile devices. However, the Commission deliberated on whether
such tying arrangements are anti- competitive. An agreement between two parties in a vertical
chain to be anti- competitive essentially requires that theintention of such an agreement was
foreclosure in both the relevant markets resulting in considerable consumer harm. But as pointed
out that for a vertical agreement to be anti competitive requires the monopolization claim to hold,
and given the minuscule market share of the tying party the monopolization claim will be
contrived. Nevertheless, we assess this agreement in the framework of 19(3)(a) (b) and

(c) by posing the following questions:

• Does this agreement prevent Airtel and Vodafone customers to use other smart phones?

• Does the agreement prevent unlocked iPhone usersto use services of other mobile service
provider?

• Consequently, is there a foreclosure effect of the agreement on any of the two markets -
smartphone and mobile services?

71. Given the fact that none of the opposite parties (Apple / Airtel / Vodafone) have dominant
position in their respective market, as discussed earlier and that there has been no intention and
evidence to show that market has been foreclosed to competitors or that entry-barriers have been
erected for new entrants in any of the markets by any of the opposite parties, the anti-
competitive analysis of the tie-in arrangement shall be made while addressing the above
questions.

72. In this case, it is found that a consumer interested in buying an iPhone is tied to one of the
two mobile networks i.e. Airtel or Vodafone. It is worth noting that at the time of launch of
iPhone in India, Apple did not have an outlet to sell its iPhone, a high-end smartphone. Instead of
investing money on creating sales and service outlet and incurring advertisement expenditure,
Apple's strategy was to have tactical agreement with network operators, possibly the best
partners for selling mobile handsets. This arrangement also helped Apple in gauging the public
perception for iPhone before actually selling iPhone through its own retail stores. The mobile
network companies who spent money on creating distribution channel and incurring

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advertisement expenditure wanted the iPhone to be locked-in for some period so that they would
be able to recoup their investment over a period of time.

73. To assess the alleged anti-competitive effect of the tie-in arrangement between Apple and
Airtel / Vodafone in line with Section 19(3), the Commission examined the following:

A. Share of markets: Market share of Apple iPhone in the smartphone segment; subscribers
using Apple iPhone as a percentage of total GSM subscriber.

B. Sanctity of exclusivity under multiple arrangements of Apple with other service providers as
well as premium resellers, apart from the cited opposite parties.

C. Effect of the tie-in arrangement between a handset manufacturer and a service provider vis-à-
vis consumer choice.

74. Relying on the market share statistics of smartphones in India as provided by the DG, the
Commission observes that Apple had a share of less than 6% in the market of smart phones
during the period 2008-11. Furthermore, share of GSM subscribers using Apple iPhone to total
GSM subscribers in India is miniscule (less than 0.1%). Similarly, relying on the data provided
by the DG on mobile service provider, the Commission observes that no operator has more than
35% market share in an otherwise competitive mobile network service market. As none of the
impugned operators (OP3 / OP4) have market-share exceeding 30%, that smartphone market in
India is less than a tenth of the entire handset market and that Apple iPhone has less than 3%
share in the smartphone market in India, it is highly improbable that there would be an AAEC in
the Indian market.

75. In the present case, the Commission notes from the DG's investigation that Apple iPhone had
approached several service providers to sell its handset without exclusivity as regards the service
provider. Apart from service providers, these handsets were also sold through the Apple
Premium Resellers (APRs). The exclusivity argument put forward by the Informant flies in the
evidence of multiple choices for both purchase of iPhone as well as network service provider for
consumers.

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76. The Commission also notes that a consumer having a mobile handset (smartphone or
otherwise) is free to exercise his choice for availing network services without any restrictions.
Furthermore, the network operators do not require any particular handset to be purchased by the
customer in order to avail its network services. Moreover, the lock-in arrangement of iPhone to a
particular network was for only for a specific period and not perpetual, a fact known to
prospective customer. It is difficult to construe consumer harm from the 'tie-in' arrangement
between the opposite parties. The Commission observes that there is no restriction on consumers
to use the network services of OP3 and OP4 to the extent that the network services can be
availed on any mobile handset, even an unlocked iPhone purchased from abroad. Also, a
consumer who has purchased a locked iPhone in India and paid the unlocking fees is free to
choose the network operator of his choice.

77. On the basis of facts submitted by the DG, none of the OPs have a position of strength to
affect the market outcome in terms of market foreclosure or deterring entry, creating entry
barriers or driving any existing competitor out of the market and within the theoretical
framework of tying arrangement, the anti-competitive concerns in terms of section
3(4) violations does not hold. On the other hand, Commission has reasons to believe that the
distribution arrangement between the impugned parties helped create a market for iPhone in
India wherein domestic consumers got an opportunity to purchase a contemporary handset which
was otherwise available through the grey market.

78. The Commission does not find any evidence to show that entry-barriers have been created for
new entrants in the markets i.e. smartphone market and mobile services market by any of the
impugned parties. Similarly, nothing has been brought to the notice of the Commission to reveal
that existing competitors have been driven out from the market or that the market itself has been
foreclosed.

79. Under these circumstances, on the basis of the counter-factual posed, the Commission opines
that there is no anti-competitive effect of the tie-in arrangement as alleged by the Informant. In
fact, there is some suggestion in the literature that the earlier tying arrangement between the
iPhone and the service providers in other jurisdictions may have spurred wireless service
providers to invest in innovation in mobile devices. Such innovation has resulted in an explosion

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of new mobile devices and continued growth of the mobile communications industry. It has not
caused the disastrous results on competition or the formation of double-monopolies that some
have feared. Hence, the belief that the tying arrangement has caused serious harm is misplaced,

80. In view of the foregoing, there is no case in terms of Section 3(4) violation.

ORDER On the basis of investigation and examination of the data the Commission does not find
the OPs in a dominant position in their respective relevant market to establish violation
of Section 4(2),(a),(b),(c),(d) and (e). No appreciable adverse effect on competition in the market
of smart-phones and/or mobile service has been established, there is no contravention of Section
3 (4) of the Act. Accordingly, the case is ordered to be closed.

Secretary is directed to forward a copy of this Order to the concerned parties, in terms of relevant
provisions of the Act.

ABUSE OF DOMINANCE, INDIA

Shamsher Kataria v. Honda Siel Cars India Ltd. – Great End, but Means?

Ayushi Singhal (West Bengal National University of Juridical Sciences)/May 9, 2017 /Leave
a comment

I thank my friend and senior, Sahithya Murali, for meaningful suggestions on a draft of this blog.

I. Introduction

The car spare-parts market in India is a closed one, because car manufacturers mandate that the
authorized dealers source their spare parts only from the Original Equipment Manufacturers
(OEMs) or the approved vendors, and the spare parts are not sold in the open market. The
Competition Commission of India (‘CCI’) in the case of Shamsher Kataria v. Honda Siel Cars

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India Ltd. and others,[i] regarded as the first spare-parts case of India, has held that these
agreements were anti-competitive.

It further held that the Indian car spare-parts market forms a separate market from that of
cars, inter alia, as the consumers do not engage in whole life costing while buying cars, and the
OEMs, who were generally the car manufacturers monopolized this spare-parts market.

The OEMs were abusing this dominance, by restricting independent repairers and other non-
authorized repairers from accessing the secondary market and marking up the prices of spare-
parts to the extent of 5,000 per cent. Further, the OEMs did not allow independent service
providers access to their spare parts, thus protecting their position in the after services market as
well. This decision was affirmed on appeal to the Competition Appellate Tribunal (‘COMPAT’),
the COMPAT only differing on the quantum of penalties.

II. Analysis of the COMPAT order

While I support the conclusion of the commission, I believe that the analysis provided by the
commission to reach the conclusion is inadequate. Further, the penalties imposed by the
Commission are also unreasonable for the reasons I detail below.

First, with respect to the conclusion of relevant market, the Commission does not consider any
economic evidence relevant to India to reach a conclusion that the consumers in India are
unlikely to make a whole-life cost analysis of the cars purchased.[ii]

The court relied on the decision in Eastman Kodak Company v. Image Technical Services
Inc.[iii]to reach the conclusion that Indian consumers might not make a whole-life cost analysis
since doing so requires a substantial amount of raw data and requires one to undertake
sophisticated analysis. Firstly, the analysis in the Kodak judgment itself has been criticized by
various scholars.[iv] Further, the empirical studies[v] cited by the court do not relate to car
markets and include the caveat that the observations reached by the studies might indeed differ
from situation to situation. This is specifically so in light of the Commission’s own

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acknowledgement that the analysis would depend from product to product (¶20.5.29). There also
exist contrary studies to the effect that the consumers indeed make whole life cost analysis in
many cases.[vi]

Not to mention that the studies cited by Commission date back to 1979-1982 ignoring the fact
that consumers today are much more aware. There was one more aspect that was ignored by the
commission. CCI in paragraph 20.5.33 notes that “consumers tend to buy cheaper models with
higher operating costs than those that would be efficient in terms of lifecycle costs, and therefore
end up paying higher lifecycle costs”. Illustratively, it is possible that the competition in the
primary market leads to a situation where increase in the prices of secondary products makes the
primary product uncompetitive, unless this rise in the secondary market is used to compensate
the decrease in price of the primary product. This would ensure that the prices of the primary
product and secondary product taken cumulatively are competitive.

Further, even if life-cycle calculation is not done by the consumer, the competitors might
perform such an analysis, and compete accordingly, which might result in the supplier of the
primary and secondary products not enjoying high overall profits, even though the prices of the
aftermarket are high. That is, stiff competition in the primary market can result in a decrease in
the price of primary products, such that the overall price being charged to the consumers is
competitive, even when the consumers are not taking into account this overall price while
making decisions concerning purchase of the primary product. The supplier might believe that
the lower market prices of primary products would compensate for the higher prices charged on
secondary products. This can be identified by calculating the return on investment which the
supplier is receiving on the overall market, and whether this is abnormally high for the particular
industry sector, this margin can also be compared to that of other similar sectors, or the margin
of other products in the same market, unless they are being sold at unfair prices as well.

This link between the aftermarket and primary market would generally function in a standard
case, unless this link is disturbed when the supplier changes his policy at a sudden and raises
prices in the aftermarkets. This policy is called ‘installed-base opportunism’.

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The burden of proving that this link no longer exists is on the Commission, as the Competition
Act, 2002 at the end of the day is a penal statute, and the Commission, as in this case has powers
to impose massive penalties with respect to anti-competitive activities on firms. However, as
explained above, concrete analysis on actual consumer behavior was not made by the
Commission.

Second, the orders which the court has made against the OEMs do not appear economically
sound.

For instance, the COMPAT has directed the Ministry of Road Transport and Highways to create
a program for standardization of automobile parts. While the objective of this direction might be
to increase the supply of spare parts in the market, but even if some spare parts are to be
standardized, it impinges on the property rights and commercial freedom of the car
manufacturers. It is not a stretch to say that certain kinds of spare parts also add to the quality of
a car. Instead, making information regarding interoperability of spare parts (on the lines of
software interoperability) available publically can be a viable alternative.

Similarly, the COMPAT has directed that the OEMs should not put any restriction on the
Original Equipment Suppliers with respect to the supply of spare parts in the open market and
warranty on a product is to be denied only when such certified repairers make faulty repairs. This
imposes a heavy evidentiary burden on the OEMs to prove that the repairs have indeed been
faulty. It is more suitable to take the approach of the EU where a qualitative criterion is
prescribed by the OEM and all firms that meet this criterion can join the authorized repair
network.[vii] This ensures that the investigations with respect to faulty repairs need not be
carried out, and the warranty of the primary product remains the same irrespective of the firm
from which repair services are taken.

Thus, while the objective of the COMPAT seems laudable, the manner in which it has sought to
achieve it, will only put additional burden on both the consumer and the OEMs, and is not
economically the most efficient. Certain car manufacturers have appealed to the High Court
against the CCI order and we can only hope that the directions made by the COMPAT will be
modified.

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[i] C-03/2011. This has been affirmed by the Competition Appellate Tribunal subsequently in an
order dated December 9, 2016, except on the issue concerning quantum of penalty, an
explanation of which is not relevant for the instant discussion.

[ii] The burden of proof in this regard indeed rests on the Commission; see, European Federation
of Ink and Ink Cartridge Manufacturers (EFIM), Case COMP/C-3/39.391 EFIM.

[iii] 504 U.S. 451 (1992).

[iv] See, for e.g., Justice Scalia’s dissenting opinion in the case; Jonathan L Gleklen, The ISO
Litigation Legacy of Eastman Kodak Co. v. ImageTechnical Services: Twenty Years and Not
Much to Show for It, 27(1) Antitrust 56 (Fall 2012).

[v] Dermot Gately, Individual Discount Rates and the Purchase and Utilization of Energy using
Durables: Comment, 11 Bell J. Econ. 373 (1980), Jerry A. Hausman, Individual Discount Rates
and the Purchase and Utilization of Energy-using Durables, 10 Bell J. Econ. 33 (1979), Jerry A.
Hausman and Paul L. Joskow, Evaluating the Costs and benefits of Appliance Efficiency
Standards, 72 Am. Econ. Rev. 220 (1982) (as cited in the order of the Commission, ¶20.5.33).

[vi] European Commission Regulation 1400/02, see also Automotive Sector Groups of Houthoff
Buruma and Liedelerke Wolters Waelbroeck Kirkpartick, Flawed Reform of the Competition
Rules for the European Motor Vehicle Distribution Sector, 24(6) European Competition Law
Review (2003).

[vii] Commission Notice – Supplementary guidelines on vertical restraints in agreements for the
sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles OJ
[2010] C 138/16.

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Jindal Steel & Power Ltd vs Steel Authority Of India Ltd. Main ... on 20 December, 2011

In this case, the majority the Commission has held that no case is made out

and for this reason they have closed the case. I have a different view and therefore I

am passing a separate order.

2. In this case Jindal Steel and Power Ltd. (JSPL) submitted information on

16.10.2009 against Steel Authority of India Ltd. (SAIL). The gist of the information is

that SAIL entered into an exclusive supply agreement with Indian Railways (IR) for

the supply of rails vide a Memorandum of Understanding (MOU) dated 01.02.2003

and therefore foreclosed the market for JSPL. It has been stated that by the virtue of

the MoU, market access was denied to JSPL. It was stated that SAIL is a dominant

player in the market and that by the denial of market access and foreclosure of

competition in the markets and denial of market access SAIL has abused its

dominant position under Section 4(1) of the Competition Act as well as Section 3(4)

of the Act. It was also stated that by having an exclusive supply agreement, when

there was practically only one buyer, the entire market has been denied to the

informant JSPL. The informant provider JSPL further argued that as it had made

substantial investment in setting up the rail plant and because of the MOU between

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SAIL and IR, it had no entry in the market for rail, it would have no option but to

suffer a loss and close the mill.

Anand Darbari vs Union Of India (Uoi) And Anr. on 28 July, 1999

Equivalent citations: 84 (2000) DLT 718

Author: K Ramamoorthy

Bench: K Ramamoorthy

JUDGMENT K. Ramamoorthy, J.

1. The writ petitioner has prayed for the following reliefs:

"In view of the facts mentioned and submissions herein above, it is respectfully prayed that the
Honble Court may be pleased:

(a) to issue an appropriate writ or order holding the initiation of disciplinary action against the
petitioner vide Memorandum No. 1(2)/97-PE. XII dated 24.11.1997 as illegal, arbitrary, unfair
and discriminatory;

(b) to issue writ of certiorari or any other appropriate order quashing/ setting aside Mamorandum
No. 1(2)/97-PE. XII dated 24.11.1997 alongwith its annexures and Order No. 1(2)/97-PE. XII
dated 17.7.1998;

(c) to issue writ of prohibition or any other appropriate order restraining respondent No. 1 from
initiating any further action or proceedings against the petitioner on the basis of Memorandum
dated 24.11.1997 and restraining respondent No. 2 from taking any action pursuant to Order No.
1(2)/97-PE.XII dated 17.7.1998 passed by respondent No. 1;

(d) to call for the records relating to the investigations and reports of the respondent No. 1 and
CBI, correspondence/communications exchanged between the respondent No. 1 and CVC in the
matter of disciplinary action against the petitioner and any other relevant record."

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2. The facts that are necessary for the appreciation of the rival contentions of the parties could be
recounted concisely in the following terms:

On the 2nd of January, 1989, the petitioner was appointed as Chairman-cum-Managing Director
of the Cement of Corporation of India (hereinafter referred to as the 'CCI'). In September, 1995,
Vigilance clearance was given by the Central Vigilance Commission (hereinafter referred to as
'CVC) for the proposed appointment of the petitioner as the Chairman of Rashtriya Chemicals &
Fertilizers Ltd. The petitioner did not join the post. In December, 1995, there were some
complaints received by the first respondent, the Department of Heavy Industry, Ministry of
Industry. The first respondent did not find any substance in the complaint. The petitioner was
granted extension for three years from February, 1996 upto the 31st of December, 1998.

3. The petitioner was functioning as the Chairman-cum-Managing Director of CCI on the date of
filing of the writ petition. In or about September, 1996, the petitioner was considered for the post
of Chairman, Airport Authority of India and was placed at No. 1 in the panel drawn by the PESB
(Public Enterprises Selection Board). The Department of Heavy Industry, Ministry of Industry
examined the same complaint again and could not find anything against the petitioner. The first
respondent sought for vigilance clearance for the appointment of the petitioner as Chairman,
Airport Authority of India. In March, 1997, at the instance of the CVC, the Department of Heavy
Industry, Ministry of Industry appointed a Two-Member Committee of two senior officers to
examine the case and that Committee came to the conclusion that there was no substance in the
complaint against the petitioner. On the 13th of May, 1997, the Department of Heavy Industry,
Ministry of Industry, wrote to the CVC on the point as according to the Ministry, the case against
the petitioner had to be closed. On the 23rd of May, 1997, the CVC wrote to the Union of India,
Department of Heavy Industry, in the following terms :

"The Department of Heavy Industry may please refer to their Office Memorandum No. C-
13011/11/96-VIG, Vol.-III dated 13.5.1997 on the aforementioned subject.

2. The Commission observes that the report of the Committee constituted by the Department of
Heavy Industry can only be termed as a preliminary fact finding exercise based on some
documents and some other inputs. The Committee, does not appear to have recorded the oral

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evidence of all the witnesses /persons who were connected with these matters. In particularly, it
is felt that the affairs relating to Coal Linkage through private parties and emergency import of
spares which are still lying at the port need further probe.

3. Although the investigation conducted so far is not adequate to initiate formal disciplinary
action against Shri Darbari, the instances brought out are a case for real concern as there are clear
pointers to the lack of transparency and commercial prudence in the transactions and a certain
rashness in financial management.

4. Keeping these in view, it is not possible to accord Shri Darbari a clean chit for his proposed
appointment as Chairman, Airport Authority of India. The Commission also observes that the
Airport Authority of India is a complex technical organisation with a lot of administrative and
financial responsibilities. Its vigilance health is also not too commendable. Viewed together, the
Commission expresses its reservations against Shri Anand Darbari, being considered for
appointment to the post of Chairman, Airport Authority of India.

5. Receipt of Commission's Office Memorandum may be acknowledged."

4. In this, the CVC opined that the investigation conducted so far was not adequate to initiate
formal disciplinary action against the petitioner. At this stage, it must be noticed that CVC has
based its opinion on its subjective consideration of the matter.

5. On the 28th of August, 1997, the Deputy Secretary, Department of Heavy Industry, Ministry
of Industry wrote to the petitioner in the following terms :

"CCI has taken steps to obtain coal from Assam-Magalia for its Units located in the South
through private parties and also getting linkage coal through private transporters by permitting
them to make payment on behalf of the company and transporting coal by road. The system in
place seems to be flawed as sufficient and effective checks do not seem to be in position to
prevent misuse/abuse by the concerned parties.

In the light of the above position, a detailed report on the experience of the company in getting
coal through the above modes alongwith actions taken on misuse/malpractices brought to the

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notice of the management may be sent urgently. The report should also incorporate
changes/modifications proposed to be introduced in procurement of coal. The same may be sent
to the Government after discussions in the Board.

Pending finalisation of the report and its consideration by the Board, fresh contracts for
transportation of coal through private parties may not be awarded. The feasibility of termination
of existing contracts may be explored and put up to the Board for decision."

6. On the 10th of August, 1997, the petitioner wrote to the Secretary, Ministry of Heavy Industry
in reply to the letter dated 28.8.1997. The Minutes of the Meetings of the Board of the CCI dated
17.9.1997, 8.10.1997 & 28.10.1997 are on record at pages 96 to 99 which would show the
decisions taken by the Board in the meetings.

7. The letters dated 26.9.1997,22.10.1997 & 12.11.1997, the Director (Finance) of the CCI to the
Ministry of Heavy Industry are on record at pages 103 to 131.

8. The extracts from the Minutes of the Meetings of the Board held on 27.21996, 12.7.1996,
16.1.1997 & 24.6.1997 are on record at pages 144 to 171. In June, 1997, the CVC called for
original records though photostat copies of the records were already available with the CVC. In
July, 1997, the Department of Heavy Industry, Ministry of Industry, in its letter to the
Department of Personnel & Training, noted that some of the allegations referred to in the
complaint of September, 1996 had already been examined and were closed, and the other
allegations were also looked into in detail and nothing had been substantiated against the
petitioner, as found by the Departmental Committee of the first respondent.

9. In paragraph 32 of the writ petition, the petitioner has stated :

"That the respondent No. 1 in the first week of July, 1997, sent a letter to Department of
Personnel and Training again expressed its views in respect of the allegations made against the
petitioner in the complaint of September, 1996. As per these views of the respondent No. 1, some
of the allegations contained in the above complaint were already examined and were closed. The
remaining allegations were looked into in detail but the same remain unsubstantiated even after

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an in-depth investigation held by a Departmental Committee of two officers of the respondent
No. 1."

10. In reply to the paragraph 32, the first respondent has stated in the counter "refer to para 7 in
reply." In paragraph 7 of the reply, it is stated :

"The procedure regarding issue of charge sheet in the Vigilance Manual is a broad guideline and
is not mandatory since it is not a statute. The Disciplinary Authority is not precluded from
instituting formal disciplinary proceeding without calling for explanation of the Delinquent
Officer. It is clarified that a Memorandum is a formal show-cause notice which gives opportunity
to the Delinquent Officer to explain his/her stand. A decision to institute a formal inquiry is
taken only after due consideration of his reply by the Disciplinary Authority."

11. From this, it is clear that what is stated in paragraph 32 remains uncontroverted.

12. In September, 1997, the CCI had constituted a Committee headed by Director (Operations)
for looking into the matters mentioned in the letter dated 28.8.1997. In October, 1997, that
Committee inquired into the matter in great detail and found that no case had been made out
against the petitioner. At once, the Committee recorded that the CCI "reduced the loss to the rune
of Rs. 21 crores on the strength of the purchase policy adopted by the CCI". The report of the
Committee was considered by the Board in its three meetings. It is to be noted here that the Two-
Members are officers nominated by the first respondent (Union of India, Department of Heavy
Industry).

13. As I had noticed above, on the 10th October, 1997, the petitioner wrote to the first
respondent, Ministry of Heavy Industry about the report of the Committee.

14. In paragraph 39 of the writ petition, the petitioner had stated :

"That besides above, petitioner vide his letter dated 10.10.1997 addressed to Secretary of
Department of Heavy Industry apprised him about the salient feature of the report of the
aforesaid Committee. The petitioner understands that after perusing the aforesaid letter, the
concerned Industry Minister vide a written note on the said letter itself directed that no further

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action in the matter may be taken without considering the report of the Committee headed by
Director (Operations), CCI which consisted of more than two volumes and was sent separately to
respondent No. 1. In total disregard of the written instructions of the Industry Minister, the
Report of the Committee has not been examined by the respondent No. 1 as they are aware that
the said Report is factually correct. A copy of the said letter dated 10.10.1997 is annexed as
AnnexureP-XI."

15. On the 7th of November, 1997, the petitioner challenged the action of the CVC in refusing to
give clearance for his appointment as the Chairman, Airport Authority of India in CWP 4749/97.
That is pending in this Court.

16. On the 24th of November, 1997, the first respondent issued charge sheet against the
petitioner mentioning six charges. On the 25th of November, 1997, the first respondent made a
complaint to the CBI and the same was registered. The allegations in the FIR and the imputations
in the charge sheet issued on 24.11.1997 are similar but what is stated by the first respondent is
that the thrust in the charge sheet is different. On the 2nd of January, 1998, the petitioner
submitted his defense to the charge sheet. In or about April, 1998, the petitioner received
intimation calling for an interview for the post of CMD, Bharat Heavy Electricals. However, he
was asked not to appear as the CVC had not given clearance. In or about the 16th of July, 1998,
the CBI had sent its report to the first respondent. On the 17th of July, 1998, the first respondent
issued an order appointing Inquiry Officer pursuant to the charge sheet.

17. One the 18th of July, 1998, the writ petition was presented in this Court.

18. The judgment was reserved in the matter on the 9th of December, 1998. On the 14th of
December, 1998, in the evening, the Additional Solicitor General, Mr. Madan Lokur, produced a
copy of the letter dated 14.12.1998 by the CVC to the first respondent, about which I shall refer
to a little later.

19. The case of the petitioner in the writ petition is that once the first respondent had approached
the CBI and the CBI had expressed the view that no case had been made out against the
petitioner, the charge cannot be sustained and the first respondent should have applied its mind to

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find out whether prima facie case is there, for issuing a charge sheet, and there was no
application of mind and issuance of charge sheet was not at all valid in law.

20. The point to be considered is: Whether the charge sheet was issued on the basis of objective
considerations on the materials on record and whether it was an exercise just to deprive the
petitioner of his legitimate right to be considered for appointment in any of the public sector
undertakings. The second respondent is the Inquiry Officer appointed by the first respondent to
inquire into the charges.

21. The first respondent would state that in view of the report of the Committee, which had been
adverted to above, there were no procedural irregularities and the petitioner cannot be proceeded
against on that score. There could be no charge of any corruption against the petitioner.
However, according to the first respondent, there had been departmental irregularities in respect
of the grant of contracts for procurement of coal.

22. Dr. A.M. Singhvi, the learned Senior Counsel for the petitioner, formulated his submissions
and the same could be enumerated thus :

1. Disciplinary Authority has no power to reopen the case against the petitioner, which had been
considered and decision had been arrived at to close the matter, at the instance of the CVC. The
CVC for reasons best known to it, had acted in excess of its powers and without any justifiable
reasons had triggered off the issue.

2. The first respondent ought to have acted in accordance with the Vigilance Manual. Once the
matter was referred to the CBI, the first respondent could act only after the CBI had expressed its
view. In this case, the CBI had completely cleared the petitioner and, if that is so, there is no
scope for issuing charge sheet on the premise of the thrust being different', which is merely a
verbal acrobatics.

3. The first respondent had singled out the petitioner for disciplinary action while the decisions
involve collective responsibility of officers and that violative of Article 14 of the Constitution of
India.

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4. The allegations of charge against the petitioner were relating to transactions for the years
1991-92 and 1992-93 to which the first respondent-was well aware of and the charge sheet had
been issued on the 24th of November, 1997, and, therefore, it was belated and it would amount
to reopening of stale matters.

5. The stand taken in paragraph 63 of the counter that the CBI had addressed itself adequately in
respect of five imputations is absolutely unsustainable.

23. On the facts and circumstances of this case, the charge sheet is liable to be quashed and the
petitioner is entitled to a writ of mandamus for bearing the first respondent from proceeding
further with any other inquiry against the petitioner on the basis of charge sheet dated
24.11.1997.

24. Mr. Madan Lokur, the learned Additional Solicitor General for the respondents, submitted
that the fact that the Two-Member Committee had expressed its view and thus there were no
procedural irregularities and the first respondent is not on that but Mr. Madan Lokur, Additional
Solicitor General, submitted that the first respondent has not proceeded against the petitioner on
the ground of any charge of corruption. According to the learned Additional Solicitor General,
the first respondent had come to a decision on the basis of materials available on record and the
petitioner could be stated to have been guilty of some departmental irregularities and there is a
grey area which was not covered by the report of the Two-Member Committee and by the report
of the CBI, and therefore, the petitioner cannot say that the first respondent was not justified in
issuing the charge sheet.

25. The learned Additional Solicitor General further submitted that the first respondent had
acted, in issuing the charge sheet, on the basis of statutory rules and regulations, and the
petitioner cannot rely upon the Vigilance Manual which is not mandatory in nature and the
petitioner cannot have any grievance if the first respondent had not followed the provisions of
the Vigilance Manual. The allegations broadly catalogued in paragraph 63 of the counter are
only to highlight the imputations against the petitioner and that is not conclusive on the point.
The learned Additional Solicitor General submitted that the first respondent had issued only a
charge sheet and the petitioner had submitted his defense and petitioner would have full

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opportunity to defend himself and at this stage, the petitioner is not entitled to approach this
Court under Article 226 of the Constitution of India. The learned Additional Solicitor General
submitted that ultimately the petitioner may be found not guilty of any of the charges. The
learned Additional Solicitor General further submitted that the first respondent had not acted on
the pressure of CVC and that stand is wholly untenable. Mr. Madan Lokur, the Additional
Solicitor General, submitted that the CBI despatched its report on the 16th of July, 1998 and it
was received by the first respondent on the 17th of July, 1998 and before that the first respondent
had issued an order appointing the Inquiry Officer, who is the second respondent. The argument
that after the receipt of the report from the CBI, the first respondent had appointed the Inquiry
Officer is not factually correct.

26. On the factual matrics, the reports given by the Two-Member Committee had completely
exonerated the petitioner could be appreciated from a perusal of those reports.

27. The charge sheet was issued long before the CBI sent its report. It is in this connection the
provisions of the Vigilance Manual would assume importance. In Clause 1.2 in Chapter III of the
Vigilance Manual, the work to be entrusted to the CBI is adumbrated. That clause as follows :

"As a general rule investigations of the types given below should be entrusted to the Central
Bureau of Investigation or the anti-corruption branch in the Union Territories.

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