Devansh Malhotra and Vaibhav Garg

INTRODUCTION

The Delhi High Court recently decided a matter concerning a tussle between two statutory bodies in the country involving the Institute of Chartered Accountants of India (“ICAI”) and Competition Commission of India (“CCI”) which was pending since 2014 for adjudication. In the case of ICAI v. CCI, a single judge bench of Justice Vibhu Bakhru ruled in favour of ICAI, setting aside the CCI order (“Impugned order”) dated 28 February 2014, directing the Director General of CCI (“DG”) to investigate alleged anti-competitive conduct by the ICAI in conduction of Continuing Professional Education (“CPE”) programme.

FACTUAL MATRIX AND CASE HISTORY

In the present case the informant, Shri Arun Anandgiri, approached CCI under section 19(1) of the Competition Act, 2002 (“Competition Act”) alleging ICAI of abusing its dominant position in conducting of CPE seminars for its professional members which comprise of a 120 hour long professional training over 3 years vide statement issued by ICAI in 2003. CPE was started, as mandated by ICAI, with an objective to give all certified Chartered Accountants’ professional training enabling them to maintain standard and professional skill sets while providing professional services. Further, he alleged that due to this ICAI is earning more than ₹ 45 crore per year giving its council members an unfair advantage. Finding a prima facie violation of section 4(1) of the Competition Act, CCI passed the impugned order under section 26(1) of the Competition Act directing the Director General of CCI (“DG”) to investigate alleged anti-competitive conduct by the ICAI. Aggrieved by this, ICAI approached Hon’ble Delhi High Court against the impugned order passed by CCI.

ISSUES

The following issues were raised before the Delhi High Court to decide upon:

1. Whether ICAI is considered an “enterprise” under the Competition Act and how it affects its operations?
2. Whether the implementation of the CPE Program by ICAI raises concerns of potential abuse of dominance?
3. Whether CCI has the legal authority to enforce outsourcing of activities?

CONTENTION BY THE PARTIES

The informant in the present case alleged that being the “Regulator”, ICAI is abusing its dominant position through its service of conducting CPE seminars which tends to be a violation of section 4(2) of the Competition Act. Further, he claimed that ICAI, controlled by its elected members, refused to accredit any other organisation for conducting these seminars and clarified that the fees charged by ICAI is not an issue of concern in the current petition.

ICAI claimed to be a non-profit organisation and argued that its CPE program is essential for upholding professional standards. Placing reliance on Director of Income Tax (Exemptions) v. ICAI, it asserted that it is engaged in activities fulfilling its objectives and not involved in any commercial activities. The court recognized ICAI as an organisation for charitable purposes under the section 2(15) of Income Tax Act, 1961 and ICAI contended that it does not qualify as an “enterprise” under  Section 2(h) of the Competition Act since its activities are regulatory rather than economic in nature.

CCI argued that ICAI, as a dominant player, abused the process of conducting CPE seminars. Placing reliance on the Court of Justice of the European Union (“ECJ”) decision Ordem Dos Tecnicos Oficiais De Contas v. Autoridade Da Concorrencia (“Ordem”), it contended that the Court held that providing training is in violation of Article 101 and  Article 102 of Treaty on the Functioning of the European Union (“TFEU”). CCI put forth that the impugned order was just an interdepartmental direction and hence, administrative in nature. Also, CCI contended that ICAI had other remedies available before approaching this Hon’ble Court as CCI itself could have decided issues regarding its own jurisdiction, if raised, but later ICAI submitted itself to CCI’s jurisdiction. CCI also contended that ICAI is very well covered by the definition of enterprise under Section 2(h) of the Competition Act as it is providing services defined under Section 2(u) of the Competition Act.

VERDICT

Delhi High Court set aside the impugned order, passed by the CCI directing DG to conduct an inquiry under Section 26(1) of the Competition Act. Further, the Court directed CCI has power to regulate the markets but they can’t regulate decisions of any statutory authority. The Court observed that ICAI falls under the definition of enterprise in Section 2(h) of the Competition Act, even if its functions are regulatory and administrative in nature, not the economic ones/based on profits as it provides “Service(s)” as defined on section 2(u) of the Competition Act. However, the Court also accepted that its activities fall under the definition of “Charitable Purpose” under section 2(15) of the Income Tax Act, 1961 as per Director of Income Tax v. ICAI. The Court observed that as per Section 15(2)(j) of the CA Act, 1949 and and by virtue of being a member of the International Federation of Accountants (IFAC), ICAI in discharge of its functions is responsible for regulation and maintenance of the status and standard of professional qualifications of members of the Institute and is charged with the function of maintaining professional standards. In furtherance of this, it conducts the educational program for structured CPE Credits, in-house or through its organs named Programme Organizing Units (POUs). The Court also observed that the ICAI falls squarely within the definition of a statutory authority under the Section 2(w) of the Competition Act.

ANALYSIS

In the opinion of authors, Hon’ble Delhi High Court has rightly held that CCI shall not intervene with the working and functioning of sister (sectoral) regulators when they are performing their functions entrusted to them by legislative mandate under the parent legislation. The authors are in complete agreement with the observation of the Court that the ICAI squarely falls within the definition of a statutory authority within the meaning of Section 2(w) of the Competition Act. The Court was correct while noting that statutory corporations and bodies, with specific functions and regulatory provisions, may be subject to scrutiny by the CCI if their economic activities fall outside their regulatory functions. However, decisions made by regulators in the exercise of their regulatory powers are wholly governed by the relevant statutes, and such powers are not reviewable by the CCI. Hence, the Court was right in refusing to accept the contention that the CCI can compel an organisation or an enterprise to outsource its activities, as the CCI’s authority does not extend to reviewing non-sovereign decisions made by statutory bodies or foreign governments, aligning with the objectives enshrined under the Competition Act.

The case pivots around the contention that the CCI views the ICAI decision to restrict organising CPE seminars as arbitrary. This hinges on whether there exists a market for conducting structured CPE programs and if CCI should regulate it as a market regulator. The Court clarifies that CCI does not have the authority to act as any appellate court or redressal forum against decisions of statutory regulators unrelated to trade or commerce. It limits CCI’s powers to economic activities affecting the market engaged in trade and commerce.

A statutory body may, in the course of its functions, be required to make decisions involving trade and commerce. For example, any regulatory authority may purchase goods (consumables) and/or avail services of professionals which is sine qua non to its day-to-day administration or functioning and as well as to realise the vision for which it was established. CCI should not whinge that any decision in this regard may, if it falls foul of the provisions of the Competition Act, on the touchstone of Competition Law and its principles.

The informant’s grievance with the ICAI pertains only to its role as a regulator, not as a service provider for seminars and conferences. The informant does not allege that the seminars are deficient, expensive, or subject to unfair terms. There are no grievances related to the organisation or conduct of the seminars by ICAI, nor any accusation of abuse of its service provider position.

The Delhi High Court in this case also departed from its earlier decision titled Uttarakhand Agriculture Produce Marketing Board and Ors. v. CCI and Anr., which ruled that procurement of goods from the open market, by its very nature, is a matter which involves the commercial market. And in the said case jurisdiction of CCI to investigate the information that Uttarakhand Agriculture Produce Marketing Board (“Board”) had denied market access by restricting the procurement of Indian Made Foreign Liquor (“IMFL”) though the procurement of IMFL was pursuant to a policy framed by the Board and in discharge of its statutory functions, hence the canalising of IMFL brands was an activity relating to distribution of IMFL, which in any way could not be considered as a sovereign function.

The Delhi High Court’s decision differs from the ECJ’s ruling in Ordem, where it was held that as per the EU Competition Rules, a professional association cannot impose a training system that eliminates competition and imposes detrimental conditions on competitors. The restrictions in Ordem exceeded what was necessary to ensure quality of services and it did not qualify for exemptions enshrined under  Article 101(3) of the TFEU.

The Delhi High Court distinguished a previous decision by the ECJ, stating that it was rendered in a different context where multiple bodies provided training. In the present case, ICAI was the sole provider of the CPE program, and no relevant market for alternative training existed.

CONCLUSION

On a concluding note, this decision would pave the long way as it settled the issue of conflict between CCI and other regulators, when all of them are performing their statutory functions and duties. The decision upholds the preambular objectives of the Competition Act which enshrines that CCI shall strive to encourage competition, enhance efficiency, promote innovation, and create a level playing field for businesses, but with a scope of regulation of markets in nature of trade and commerce. Per contra if the CCI is allowed to review the decision of other regulatory authorities it will open the floodgates of litigation since most of the regulators established in India are tribunals and pari passu to each other. For instance, if CCI is allowed to interfere with the discretion of other regulators then, the issue of exorbitant enrolment fee for advocates charged by State Bar Councils would be an ideal matter to take up.