COMPETITION COMMISSION OF INDIA versus STATE OF MIZORAM & ORS. on 19 January 2022

SUPREME COURT REPORTS

[2022] 13 S.C.R.

ACOMPETITION COMMISSION OF INDIA

v.

STATE OF MIZORAM & ORS.

(Civil Appeal Nos. 10820-10822 of 2014)

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JANUARY 19, 2022

[SANJAY KISHAN KAUL AND M. M. SUNDRESH, JJ.]

Competition Act, 2002 – ss. 2(i), 2(u), 3, 4, 19(1)(a) & 26 –Lotteries (Regulation) Act, 1998 – Mizoram Lotteries (Regulation)CRules, 2011 – Jurisdiction of Competition Commission of India –State of Mizoram issued an Invitation for Expression of Interest(EOI), inviting bids for appointment of lotteries distributors andselling agents for State lotteries – In pursuance of EOI, bids werereceived and four companies were selected as distributors –DRespondent No.4 made a complaint to the CCI, seeking investigationin respect of State lottery – Respondent alleged that the biddershad cartelised and entered into a collusive agreement that had anappreciable adverse effect on competition in the lottery business –CCI and Director General (DG) found prima facie evidence ofcartelization and bid rigging by the bidders – However, CCI opinedEthat no prima facie case was made out against the State and rejectedthe complaint – DG did make some observations against Director,IF&SL and the State of Mizoram to the effect that they ought tohave been more vigilant in stopping unfair trade practices – HighCourt in writ petition filed by the State, held that lottery businessFbeing in the nature of res extra commercium could not be coveredby the Competition Act – Consequently CCI did not have jurisdictionto entertain the complaint – On appeal, held: State, under amisconception, approached the High Court, possibly in anendeavour to defend one of its officers, respondent No. 2 whoseconduct has not been very favourably commented on by the DG –GLotteries may be a regulated commodity and may even be res extracommercium – That would not takeaway the aspect of somethingwhich is anti-competition in the context of the business related tolotteries – The lottery business can continue to be regulated by theRegulation Act, however, if in the tendering process there is anelement of anti-competition which would require investigation byH

the CCI, that cannot be prevented under the pretext of the lotterybusiness being res extra commercium, more so when the StateGovernment decides to deal in lotteries – There was really no needfor the High Court to proceed in the manner and in the direction itsought to proceed – The correct approach, more so once the statementwas made on behalf of the CCI, would have been to close theproceedings filed by the State Government and let the private partiesface the ultimate decision of the CCI.

Allowing the appeal, the Court

Conclusion

Allowing the appeal, the Court

HELD: 1. The complaint of respondent No.4 may have beenalso under Section 4 of the Competition Act but it had not evenreferred that aspect to the DG and had decided not to proceedagainst the State. That should have been the end of the matter sofar as the State is concerned. Yet the State, under a misconception,approached the High Court, possibly in an endeavour to defendone of its officers, respondent No. 2, whose conduct has not beenvery favourably commented on by the DG. Even if the State feltthat these comments of the DG were not sustainable, such anaspect could have been pleaded with the CCI in pursuance of itsnotice and possibly the matter would have been closed atthatstage. In fact, the CCI had opined, both before and after the filingof the writ petition, that it was not proceeding against respondentNo.1/State under Section 4 of the Competition Act. The aforesaidgave an opportunity to respondent Nos. 5 & 6 also to approachthe Court and interdict the proceedings which ought to have beenconcluded a long time ago. It would, in our view, have beenbeneficial even to the State to have come to a conclusion one wayor the other. The interdict post the investigation report by theDG and prohibiting the CCI from carrying out its mandate underthe Competition Act is unsustainable. The concern was limitedto the role assigned to the CCI under the Competition Act, andin the context of the EoI was limited to examining any perceivedbid rigging in the tendering process for appointment of sellingagents and distributors for the lottery business. There was noconflict in the interplay of the two Acts that even neededreconciliation or prohibition against either one, as the limitedscrutiny was to examine the mandate of Section 3(1) read withSection 3(3) of the Competition Act. Lotteries may be a regulated AB

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Acommodity and may even be res extra commercium. That wouldnot takeaway the aspect of something which is anti- competitionin the context of the business related to lotteries. [Paras 37 &38][894-F-G; 895-A-B, D-E]

2. This Court take note of the expansive definition ofB‘Service’ under Section 2(u) of the Competition Act. It means“service of any description”, which is to be made available topotential users. The purchaser of a lottery ticket is a potentialuser and a service is being made available by the selling agentsin the context of the Competition Act. Suffice for us to say theinclusive mentioning does not inhibit the larger expansiveCdefinition. The lottery business can continue to be regulated bythe Regulation Act. However, if in the tendering process there isan element of anti- competition which would require investigationby the CCI, that cannot be prevented under the pretext of thelottery business being res extra commercium, more so when theDState Government decides to deal in lotteries. The interventionby the High Court was extremely premature. It ought to havewaited for the CCI to come to a conclusion but on the other handwhat has happened is that the CCI proceedings have been broughtto a standstill while the High Court opined on the basis of someaspects which may or may not arise. [Paras 39 & 40][895-F-H;E896-A-B]

3. There was really no need for the High Court to proceedin the manner and in the direction it sought to proceed. Thecorrect approach, more so once the statement was made on behalfof the CCI, would have been to close the proceedings filed byFthe State Government and let the private parties face the ultimatedecision of the CCI. If they were aggrieved by any adverse decisionof the CCI they were entitled to avail of the appellate remedyunder Section 53B of the Competition Act. The complaint havingbeen made by respondent No.4 under Section 19 of theGCompetition Act, which provides that the Commission “may”inquire into certain agreements and dominant position ofenterprise as envisaged under sub-section (1) of Section 3 andsub- section (1) of Section 4 of the Competition Act. The CCIfound out a prima facie case for investigation by the DG underSection 3(1) of the Competition Act, the DG opined adversely,H

COMPETITION COMMISSION OF INDIA v. STATE OFMIZORAM & ORS.

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and the CCI issued notice giving an opportunity to the affectedparties to place their stand before it. This process ought to havebeen permitted to conclude with the right available to the affectedparties to avail of the appellate remedy under Section 53B of theCompetition Act. [Paras 41 & 42][896-B-E]

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B.R. Enterprises v. State of UP (1999) 9 SCC 700 :[1999] 2 SCR 1111; Sunrise Associates v. Governmentof NCT of Delhi). (2006) 5 SCC 603 : [2006] 1 Suppl.SCR 421; Union of India v. Martin Lotter Agencies Ltd.(2009) 12 SCC 209 : [2009] 7 SCR 946; CCI v. BhartiAirtel (2019) 2 SCC 521 : [2018] 14 SCR 489; BlackDiamond Beverages 19 v. Commercial Tax Officer(1998) 1 SCC 458 : [1997] 4 Suppl. SCR 133; State ofPunjab v. Devans Modern Breweries. (2004) 11 SCC26 : [2003] 5 Suppl. SCR 930; Competition Commissionof India v. Steel Authority of India & Anr. (2010) 10SCC 744 : [2010] 11 SCR 112; Sunrise Associates v.Government of NCT of Delhi (2006) 5 SCC 603 : [2006]1 Suppl. SCR 421; R.D. Goyal & Anr. v. RelianceIndustries Ltd.10) (2003) 1 SCC 81 : [2002] 4 Suppl.SCR 231 – referred to.

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Case Law Reference

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[2022] 13 S.C.R.

ACIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10820-10822 of 2014.

From the Judgment and Order dated 16.08.2014 of the High Courtof Gauhati, Aizawl Bench, Aizawl in W.P. (C) Nos.24, 76 and 90 of2013.B

With

Civil Appeal No. 1797 of 2015.

Rajshekhar Rao, Bijendra Chahar, Ritin Ray, Sr. Advs., ArjunKrishnan, Ms. Khushboo Mittal, Sumit Srivastava, Ms. Mansi Sood,CShourya Bari, Rajesh Kumar, Raj Kumar Prasad, Pratyush Nandan,Vinod Kumar, Siddhesh Kotwal, Ms. Ara Upadhyay, Ms. Maniya Hasija,Ms. Pragya Barsaiyan, Akash Singh, Nirnimesh Dube, Arjun Garg, AmanShukla, Ms. Sagun Srivastava, M/s Parekh & Co., Kedar Nath Tripathy,Advs. for the appearing parties.

DThe Judgment of the Court was delivered bySANJAY KISHAN KAUL, J.

Facts:

1. A complaint received by the Competition Commission of India(for short ‘appellant/CCI’) from respondent No.4 seeking investigationEunder the Competition Act, 2002 (hereinafter referred to as the‘Competition Act’) in respect of State Lottery run by the State of Mizoram(respondent No.1) has given rise to the present dispute. The jurisdictionof CCI to inquire into allegations of bid rigging, collusive bidding, andcartelisation in the tender process for appointment of selling agents andFdistributors for lotteries organised in the State of Mizoram has beenchallenged in the present proceedings by the successful bidders, and toa much lesser extent, by the State of Mizoram.

2. The State of Mizoram issued an Invitation for Expression ofInterest (for short ‘EoI’) through respondent No.2, the Director,GInstitutional Finance and State Lottery (IF&SL) on 20.12.2011 invitingbids for the appointment of lottery distributors and selling agents forstate lotteries to be organised by the Government of Mizoram in termsof the Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referredto as the ‘Regulation Rules’) framed under the Lotteries (Regulation)Act, 1998 (hereinafter referred to as the ‘Regulation Act’). The EoIH

was for appointment of lottery distributors/selling agents to organise,promote, conduct, and market the Mizoram State Lottery through bothconventional paper type and online system. The EoI specified that theminimum rate fixed by the Government of India is Rs.5 lakh per drawfor Bumper and Rs.10,000 per draw for others – bids less than theserates would be summarily rejected. In pursuance of the EoI, five bidswere received of which four were accepted. The accepted bids quotedidentical rates as per the following table:

These four companies/partnerships were selected as distributorsto operate the lotteries as per the Regulation Rules and the RegulationAct. In accordance with the EoI, selected distributors/selling agents wereinter alia required to furnish Rs. 5 crore each for paper and onlinelottery as security, a sum of Rs.1 crore each as advance payment of thesale proceeds, and a sum of Rs.1 crore each towards the prize pool.

3. Respondent No.4 made a complaint to the CCI on 16.05.2012under Sections 3 & 4 read with Section 19(1)(a) of the Competition Actand the complaint was registered as Case No. 24 of 2012. In order tocomplete the array of parties defined as per Civil Appeal No.10820/2014, we may note that respondent No. 3 is the Director General of CCIand both respondent Nos. 4 & 5 are private companies while respondentNo. 6 is a partnership firm.

4. The substratum of the complaint by respondent No. 4 was thatidentical offers of Rs.10,000 per draw were made in all four bids (onefor paper and three for online) and a single bid of Rs.5 lakh per drawwas made for the Bumper draw. These amounts were the minimumrates fixed under the EoI. The allegation made by respondent No. 4 wasthat the bidders had cartelised and entered into an agreement that hadan appreciable adverse effect on competition in the lottery business inMizoram. There was bid rigging and a collusive bidding process which A

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Aviolated Section 3(1) read with Section 3(3) of the Competition Act, andalso caused grave financial loss to the State of Mizoram.

5. Respondent No. 4 also alleged that the State of Mizoram abusedits dominant position as administrator of State lotteries, by requiringdistributors to furnish exorbitant sums of money towards security, advanceBpayment, and prize pool even before the lotteries were held. This wasalleged to be unfair, discriminatory and illegal and effectively restrictedthe supply of service of lotteries. The consequent allegation against theState was that it violated Section 4 of the Competition Act. The prayermade by respondent No. 4 was that the EoI be quashed and set aside,respondent No.1 be restrained from abusing their dominant position, aCrestraint be passed from awarding the tender to the selected bidders,and selected bidders be banned from carrying out business in the Stateof Mizoram.

The Legal Position:

The Legal Position:

6. In order to appreciate the contours of the complaint, it may beDappropriate 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 effecton competition, to promote and sustain competition in markets, to protectthe interests of consumers, and to ensure freedom of trade carried on byEother participants in markets, in India, and for matters connected therewithor incidental thereto. Chapter II of the Competition Act prohibits certainagreements, 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:

“CHAPTER II

FPROHIBITION OF CERTAIN AGREEMENTS, ABUSEOF DOMINANT POSITION AND REGULATION OFCOMBINATIONS

Prohibition of agreements

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3. Anti-competitive agreements (1) No enterprise orassociation of enterprises or person or association of persons shallenter into any agreement in respect of production, supply,distribution, storage, acquisition or control of goods or provision ofservices, which causes or is likely to cause an appreciable adverseeffect on competition within India.

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COMPETITION COMMISSION OF INDIA v. STATE OFMIZORAM & ORS. [SANJAY KISHAN KAUL, J.]

(2) Any agreement entered into in contravention of the provisionscontained in subsection (1) shall be void.

(3) Any agreement entered into between enterprises or associationsof enterprises or persons or associations of persons or betweenany person and enterprise or practice carried on, or decision takenby, any association of enterprises or association of persons,including cartels, engaged in identical or similar trade of goods orprovision of services, which—

(a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technicaldevelopment, investment or provision of services;

(c) shares the market or source of production or provision ofservices by way of allocation of geographical area of market,or type of goods or services, or number of customers in themarket or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect oncompetition:

Provided that nothing contained in this sub-section shall apply toany agreement entered into by way of joint ventures if suchagreement 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 referredto in sub-section (3) engaged in identical or similar production ortrading of goods or provision of services, which has the effect ofeliminating or reducing competition for bids or adversely affectingor manipulating the process for bidding.

[…]”

Under the same Chapter, Section 4 prohibits the abuse of dominantposition. The relevant portion is extracted hereunder:

“4. Abuse of dominant position. – [(1) No enterprise or groupshall abuse its dominant position.]

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A(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) ofgoods or service.

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[…]”

7. Chapter III deals with provisions relating to establishment,Composition, etc. of the CCI while Chapter IV set outs the Duties,CPowers and Functions of CCI. Chapter V sets out the Duties of theDirector-General. Penalties are provided in Chapter VI. Chapter VIIIArefers to the Establishment of the Appellate Tribunal.

8. Section 26 of the Competition Act provides for the procedurefor an inquiry under Section 19, which deals with inquiries into certainDagreements and dominant position of enterprises. The relevant provisionsof Section 26 are extracted as under:

“[26. Procedure for inquiry under section 19. – (1) On receiptof a reference from the Central Government or a StateGovernment or a statutory authority or on its own knowledge orEinformation received under section 19, if the Commission is of theopinion that there exists a prima facie case, it shall direct theDirector-General to cause an investigation to be made into thematter:

Provided that if the subject-matter of an information received is,Fin the opinion of the Commission, substantially the same as or hasbeen covered by any previous information received, then the newinformation may be clubbed with the previous information.

(2) Where on receipt of a reference from the Central Governmentor a State Government or a statutory authority or informationGreceived under section 19, the Commission is of the opinion thatthere exists no prima facie case, it shall close the matterforthwith and pass such orders as it deems fit and send a copyof its order to the Central Government or the State Governmentor the statutory authority or the parties concerned, as the casemay be.

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(3) The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within such period asmay be specified by the Commission.

(4) The Commission may forward a copy of the report referredto 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 CompetitionAct, as it found prima facie evidence of cartelisation and bid rigging bythe bidders and gave three reasons for the same:

a.Three bidders made identical bids of the minimum rate ofRs.10,000/- per draw for online lotteries; b.Only one party made a bid for the paper lottery segmentand they quoted the minimum rate for the same.

c.Only one party made a bid for the bumper draw and alsoquoted the minimum rate for the same.

10. In the aforesaid circumstances, the CCI expressed a primafacie view that there appears to be contravention of the provisions ofSection 3(1) read with Section 3(3) of the Competition Act by respondentNos. 5 & 6 and other successful bidders. Accordingly, the CCI requiredthe Director General (for short ‘DG’) to conduct an investigation intothe matter. However, the CCI opined that no prima facie case wasmade out against respondent No.1/State of Mizoram as it could not beconsidered as an ‘enterprise’ or a ‘group’ under the Competition Act.Respondent No. 1’s role was to regulate and monitor the business oflotteries in the State of Mizoram in exercise of its powers and functionsunder the Regulation Act and the Regulation Rules. It was, thus, opinedthat they have every right to impose financial, technical and otherconditions in their bid documents as they deemed fit. The CCI, thus,rejected the complaint of respondent No. 4 under Section 4 of theCompetition Act.

11. The DG in pursuance of the said order of the CCI, a reportdated 14.01.2013 was submitted on 17.01.2013 whereby it came to theconclusion that respondent Nos. 5 & 6 along with M/s. Teesta Distributors A

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Aand 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 provisionsof Section 3(1) read with Section 3(3) of the Competition Act. However,no order was passed against the State of Mizoram.

12. What is relevant to note is that the DG did make someBobservations against respondent No.2 and the State of Mizoram to theeffect that they ought to have been more vigilant in stopping unfair tradepractices and their lapses raised suspicions of favouritism and collusion.The bidding committee had received the complaint of respondent No. 4on 18.05.2012 when the Committee recommended that the successfulbidders be appointed as selling agents. Thus, the DG opined that theCCommittee allowed rigging to happen and respondent No.2 was alsoinstrumental in calling all four bidders together for the renegotiation ofbid prices on 22.05.2012. The DG, thus, opined that it was a case ofcollusive bidding but the case against respondent No.1 under Section 4of the Competition Act was dropped.D

13. The aforesaid report was placed before the CCI in its ordinarymeeting on 12.02.2013 when it was decided to send copies of the reportto the parties so that they could file their objections/replies thereto. Theparties were instructed to file profit & loss accounts, balance sheets,and turnover of their enterprise for the past three financial years alongEwith their objections to the DG’s report and a date was fixed of 20.03.2013for an oral hearing.

The Court Litigation:

14. We may note that surprisingly respondent No.1 filed a writpetition, being WP(C) No.24/2013, in the Gauhati High Court, AizwalFBench challenging both the report of the DG and the CCI’s order dated12.02.2013. The grievance of respondent No.1 was actually with theadverse observations made by the DG in his report and the fact that theCCI had forwarded the DG report to them despite observations thatrespondent No. 4 had failed to establish a prima facie case under SectionG4 of the Competition Act. We say ‘surprisingly’, because if at all, thegrievance could have been of respondent No.2 qua the observationsmade, but could not have been of respondent No.1/State. That toorespondent No.2 could have filed a response and it was open to the CCIto close the proceedings both against respondent Nos.1 & 2. In fact,Section 4 proceedings against respondent No.1 were already closed.HThe 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 bythe CCI. On the said order being passed, the CCI vide its order dated11.06.2013, authorised its representative to inform the High Court that itdid not intend to pass an order against the State of Mizoram, and to praythat the High Court’s injunction against passing a final order be lifted. Inany case, that ought to have put the matter to rest.

15. It, thus, does appear to us that the respondent No.1 lent itsshoulder to assist the other private parties and respondent No. 6 filed awrit petition, being WP(C) No.76/2013, praying for quashing of the DGreport and all proceedings pending before the CCI. Respondent No. 6sought to raise a plea that they had struck an agreement with respondentNo.1 on 22.07.2010 as per which they were formally assured of at least25% of the total number of draws held per day once lotteries werereopened. An agreement was struck to settle an amount of Rs.2.89crore 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 indulgingin bid rigging did not arise. Respondent No. 5 also sought to take advantageof the proceedings initiated by respondent No.1 and filed a writ petition,being WP(C) No.90/2013 seeking similar relief. Among the pleas raisedby respondent No. 5 was that lotteries were not covered by theCompetition Act and, thus, the CCI did not have jurisdiction to conductan inquiry under Section 26(1) of the Competition Act.

16. The three writ petitions were taken up together and admittedby the Gauhati High Court vide its order dated 29.10.2013 and theoperation 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 thesaid 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 permittedto 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, whichmade those SLPs infructuous and were consequently dismissed aswithdrawn on 25.08.2014.

The Impugned Order:

18. The final order dated 16.08.2014 sought to be impugned in thepresent proceedings shows that the merits of the case were not reallyurged but the arguments were confined to the show cause notice issued A

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Aby the CCI. Thus, what the High Court examined was whether theCompetition Act would be applicable entitling the CCI to entertain thecomplaint/information given by respondent No. 4.

19. The High Court went into the question of the nature of thebusiness sought to be carried out, i.e., of lotteries. In this behalf relyingBon the judgment of this Court in B.R. Enterprises v. State of UP[1] it washeld that lotteries cannot be considered to be trade and commerce withinthe meaning of Articles 301-303 of the Constitution of India. The HighCourt also observed that the lottery tickets have no value in and ofthemselves (Sunrise Associates v. Government of NCT of Delhi).[2]The right covered by a lottery ticket is nothing but an actionable claimCand, therefore, it was concluded from the definition of ‘goods’ under theSale of Goods Act, 1930 that they were excluded from such definitionand other tax statutes. Lastly, relying upon the judgment of this Court inUnion of India v. Martin Lotter Agencies Ltd.[3] it was opined thatlotteries, being akin to gambling activities, came under the purview of

Dthe doctrine of res extra commercium. The Competition Act, it wasopined, was applicable to legitimate trade and goods, and waspromulgated to ensure competition in markets that are res commercium.Thus, lottery activity being in the nature of res extra commercium couldnot be covered by the Competition Act and consequently the CCI didnot have jurisdiction to entertain the complaint of respondent No. 4. TheEHigh Court also took note of the stand of the CCI, which found nocontravention of Section 4 of the Competition Act by the State of Mizoramand, thus, there was no question of any further proceedings being allowedby the CCI against the State of Mizoram.

20. We may place at this stage itself our caveat to the manner inFwhich the High Court proceeded. On the statement of the CCI indicatingits intent not to proceed against the State of Mizoram, that petition couldhave been put to rest. In fact, even earlier there was no intent to takeout any proceedings against the State of Mizoram and only someobservations had been made against respondent No.2 in the manner inGwhich they proceeded to carry out the allotment pursuant to the EoI.The lis really was between the private parties and whether their conductcould have been inquired into by the CCI.

1 (1999) 9 SCC 700.2 (2006) 5 SCC 603.H3 (2009) 12 SCC 209.

21. The Special Leave Petitions were filed by the CCI andrespondent No. 4 against the orders passed in the three petitions andleave was granted with all the matters being tagged together.

Appellant’s case:

22. Mr. Rajshekhar Rao, learned senior counsel sought to canvasthe case on behalf of the CCI. It was urged that the High Court hadnot appreciated the contours of the case sought to be examined by theCCI. The CCI was not concerned with the carrying out, regulation, orprohibition of lottery business at all; but its concern was only aboutpotential bid rigging in the tender process for appointment of sellingagents and distributors of lotteries. There is stated to be no conflictbetween the Competition Act and the Regulation Act. There was noteven an overlap between the two which would require us to excludethe particular tender process from the mandate of Section 3(1) readwith Section 3(3) of the Competition Act. It was urged thatnotwithstanding the fact that lotteries are a regulated commodity underthe Regulation Act, the CCI would continue to have jurisdiction overthe competition law aspect of such regulated commodity. In this behalf,he referred to the judgment of this Court in CCI v. Bharti Airtel[4],which examined the contours of the Telecom Regulatory Authority ofIndia Act, 1997 (hereinafter referred to as the ‘TRAI Act’) and theCompetition Act in the context of the exercise of power by the TelecomRegulatory Authority of India (for short ‘TRAI’) and the CCI. It wasobserved in that context that the Competition Act frowns on anti-competitive agreements and it prohibits:

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(a) where agreements are entered into by certain personswith a view to cause an appreciable adverse effect oncompetition; (b) where any enterprise or group of enterprises, which enjoysdominant position, abuses the said dominant position; and

(c) regulating the combination of enterprises by means ofmergers or amalgamations to ensure that such mergers oramalgamations do not become anti-competitive or abuse thedominant position which they can attain.”

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A23. In the aforesaid context, it was, thus, observed that the functionassigned to the CCI was distinct from the function of the TRAI underthe TRAI Act. What the CCI was supposed to find out was whetherthere was concert and collusion thereby forming a cartel. Whether aparticular agreement would have an appreciable adverse effect oncompetition within the relevant market in India was, thus, held to beBwithin 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 otherwiseCrequires,—

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(u) “service” means service of any description which is madeavailable to potential users and includes the provision of servicesin connection with business of any industrial or commercial mattersDsuch 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 newsor information and advertising;”

EIt was, thus, urged that the expression ‘service’ would mean serviceof any description which is made available to potential users and includesthe provision of services in connection with business of any industrial orcommercial matter. In the aforesaid context it was urged that the sale ordistribution of lottery tickets to a prospective buyer on behalf of theFState for consideration should be construed as “service”. While referringto the definition of ‘service’ it was submitted that a reading of thedefinition 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’ inthis case to mean “service of any description”. To support this contention,Glearned senior counsel referred to the view taken by this Court in BlackDiamond Beverages v. Commercial Tax Officer[5]. Wherein, it wasobserved in paragraph 7 that the first part of the definition gives themeaning of the expression “sale price” and must have its ordinary, popular or natural meaning which is not controlled or affected by the secondpart which `includes’ certain other things in the definition. The sameprinciple, it was urged, would apply in the given scenario.

25. Learned senior counsel also urged that had the Parliamentintended to exclude any service from the application of the CompetitionAct, then they would have specifically stated so under Section 2(h) orSection 54 of the Competition Act. Section 54 forms part of Chapter IXof the Competition Act under the general heading ‘Miscellaneous’ and itspecifically empowers the Central Government to exempt from theapplication of the Act or any provision thereof and for such period as itmay specify in such notification. It was urged that no such notificationhas been issued. The present activity could hardly be called a sovereignfunction. On the different cases referred to in the impugned judgmentand by the respondents, it was urged that they were all in the context oftax laws to be tested on the touchstone of Article 19(1)(g) of theConstitution of India while the present case really dealt with the interplayof the Competition Act and the Regulation Act. In such a scenario thedoctrine of res extra commercium would only apply where the issuewas whether the State Government can regulate (by taxation orotherwise) certain kinds of trades, which would otherwise be free forregulation/subject to reasonable restriction. It was argued that the businessof acting as distributors/selling agents cannot be said to come within thepurview of such a doctrine (State of Punjab v. Devans ModernBreweries[6]).

26. Lastly, it was urged that the High Court ought not to haveentertained a petition under Article 226/227 of the Constitution of Indiaas an order passed under Section 26(1) of the Competition Act was inthe nature of an administrative direction. There were no adverse civilconsequences. The proceedings were akin to a show cause notice andeven the DG’s report did not amount to a final decision. The respondentswere also stated to have the alternative efficacious remedy of an appealunder Section 53B of the Competition Act whereby it could approachthe appellate tribunal aggrieved by any decision or direction or orderinter alia under sub-section (2) of Section 26 of the Competition Act.The commission is expected to form an opinion about the existence ofa prima facie case for contravention of certain provisions of the AB

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ACompetition Act and then passes a direction for the DG to cause aninvestigation into the matter. Post the report of the DG it can proceedfurther or close the proceedings. (Competition Commission of Indiav. Steel Authority of India & Anr.[7] confirmed in CCI v. Bharti Airtel[8]case.) That stage had not even arisen. The final report of the CCI wasyet to mature and the CCI was not even bound by the report of theBDG.

27. The aforesaid was also in the context of the CCI having alreadymade it clear that it did not intend to pass any adverse orders against theState of Mizoram and that the DG being the investigative arm was dutybound to report all facts to the CCI.C

Respondent No.1’s Arguments:

28. The State of Mizoram actually prayed to be deleted as a partyas they contended that the appeal had become infructuous in the contextof the order passed by the CCI on 07.06.2012 and 11.06.2013 when itDwas opined that no fault could be attributed to the State and they wouldnot pass any adverse orders against it. As noted, what is surprising isthat there was originally also no cause for the State of Mizoram to haveapproached the High Court.

29. Learned counsel for the State sought to contend that they hadEnever prayed for quashing of the proceedings against the private parties.They only restricted their prayer against the continuation of proceedingsagainst the State, something which we have already failed to appreciateand, once again, fail to appreciate. The last submission of the State ofMizoram was, once again, surprising – that it was a victim of cartelisationand would continue to cooperate with the CCI. If it was so, then theFproceedings should have been permitted to continue before the CCI andthe State ought to have given appropriate assistance as is sought to bevolunteered now.

Respondent No.5’s arguments:

30. The only real contesting party before us and the beneficiaryGof what was complained against was respondent No. 5. Their contentionwas based on the fact that Section 3(1) of the Competition Act wouldhave no application as there was no “goods” or “provisions of services”

7 (2010) 10 SCC 744.H8 (supra)

COMPETITION COMMISSION OF INDIA v. STATE OFMIZORAM & ORS. [SANJAY KISHAN KAUL, J.]

which could give rise to the CCI’s jurisdiction. Lottery tickets were notgoods and there was no provision of any services. Lottery business beingres extra commercium, it had to be strictly regulated under the provisionsof the Regulation Act. The definition of “goods” under Section 2(i) ofthe Competition Act, which refers to the definition of Sale of Goods Act,reads as under:

“2. Definitions. – In this Act, unless the context otherwiserequires,—

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(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 excludesactionable claims from the ambit of goods, which reads as under:

“2. Definitions.—In this Act, unless there is anything repugnantin the subject or context,—

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(7) “goods” means every kind of moveable property other thanactionable claims and money; and includes stock and shares,growing crops, grass, and things attached to or forming part ofthe land which are agreed to be severed before sale or under thecontract of sale;”

32. A lottery ticket has been held to be only an actionable claim(Sunrise Associates v. Government of NCT of Delhi[9]) and was, thusheld to not be a good. Where an actionable claim was sought to beincluded within the definition of ‘goods’, it was specifically so done.For example, debentures are specifically included within the definitionof ‘goods’ under Section 2(i)(B) of the Competition Act. A comparisonwas also sought to be made with the Monopolies and Restrictive Trade A

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APractices 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 whichdid not provide any services to any potential user of lottery and suchBdistribution does not constitute a service under Section 2(u) of theCompetition Act, which has been extracted above.

34. It may be relevant to note here that the definition of service isinclusive and the principles of specifying certain inclusions would, thus,apply without inhibiting the first part of the definition clause.

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35. Lastly it was contended that lottery business is res extracommercium and strictly regulated by State. Therefore, it could not havebeen the intent of the legislature to promote or sustain competition inlottery business. The Competition Act will thus not apply as there was aspecial act promulgated for conduct of lotteries.

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Our View:

36. In the conspectus of the arguments, we find that a simpleaspect of anti-competitive practices and cartelisation has got draggedon for almost ten years in what appears to be a mis-application by theEHigh Court of the interplay of the two Acts, i.e., the Competition Actand the Regulation Act. We have already observed that respondent No.1 seems to have played a very non-appreciable role in our opinion. Whatought to have weighed with respondent No.1/State is what is sought tocontend now, i.e., it is a victim of cartelisation and it is in its interests tocooperate with the CCI.F

37. The complaint of respondent No.4 may have been also underSection 4 of the Competition Act but it had not even referred that aspectto the DG and had decided not to proceed against the State. That shouldhave been the end of the matter so far as the State is concerned. Yet theState, in our view, under a misconception, approached the High Court,Gpossibly in an endeavour to defend one of its officers, respondent No. 2,whose conduct has not been very favourably commented on by the DG.Even if the State felt that these comments of the DG were notsustainable, such an aspect could have been pleaded with the CCI in pursuance of its notice and possibly the matter would have been closedat that stage. In fact, the CCI had opined, both before and after the filingof the writ petition, that it was not proceeding against respondent No.1/State under Section 4 of the Competition Act. The aforesaid gave anopportunity to respondent Nos. 5 & 6 also to approach the Court andinterdict the proceedings which ought to have been concluded a longtime ago. It would, in our view, have been beneficial even to the State tohave come to a conclusion one way or the other. The interdict post theinvestigation report by the DG and prohibiting the CCI from carrying outits mandate under the Competition Act is unsustainable.

38. We are in agreement with the line of arguments advanced byMr. Rajshekhar Rao, learned senior counsel for the CCI where he hassuccinctly sought to point out that the concern of the CCI was not at allwith the carrying out, regulation or prohibition of the lottery business aswas governed by the Regulation Act. Rather, the concern was limited tothe role assigned to the CCI under the Competition Act, and in the contextof the EoI was limited to examining any perceived bid rigging in thetendering process for appointment of selling agents and distributors forthe lottery business. There was no conflict in the interplay of the twoActs that even needed reconciliation or prohibition against either one, asthe limited scrutiny was to examine the mandate of Section 3(1) readwith Section 3(3) of the Competition Act. Lotteries may be a regulatedcommodity and may even be res extra commercium. That would nottake away the aspect of something which is anti-competition in the contextof 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 anydescription”, which is to be made available to potential users. Thepurchaser of a lottery ticket is a potential user and a service is beingmade available by the selling agents in the context of the CompetitionAct. Suffice for us to say the inclusive mentioning does not inhibit thelarger expansive definition. The lottery business can continue to beregulated by the Regulation Act. However, if in the tendering processthere is an element of anti-competition which would require investigationby the CCI, that cannot be prevented under the pretext of the lotterybusiness being res extra commercium, more so when the StateGovernment decides to deal in lotteries.

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40. We would like to say that the intervention by the High Courtwas extremely premature. It ought to have waited for the CCI to cometo a conclusion but on the other hand what has happened is that the CCIproceedings have been brought to a standstill while the High Court opinedon the basis of some aspects which may or may not arise.

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B41. We are, thus, of the view that there was really no need for theHigh Court to proceed in the manner and in the direction it sought toproceed. The correct approach, more so once the statement was madeon behalf of the CCI, would have been to close the proceedings filed bythe State Government and let the private parties face the ultimate decisionCof the CCI. If they were aggrieved by any adverse decision of the CCIthey were entitled to avail of the appellate remedy under Section 53B ofthe Competition Act.

42. The complaint having been made by respondent No.4 underSection 19 of the Competition Act, which provides that the CommissionD“may” inquire into certain agreements and dominant position of enterpriseas envisaged under sub-section (1) of Section 3 and sub-section (1) ofSection 4 of the Competition Act. The CCI found out a prima faciecase for investigation by the DG under Section 3(1) of the CompetitionAct, the DG opined adversely, and the CCI issued notice giving anopportunity to the affected parties to place their stand before it. ThisEprocess ought to have been permitted to conclude with the right availableto the affected parties to avail of the appellate remedy under Section53B of the Competition Act.

Conclusion:

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F43. We, thus, set aside the impugned judgment of the High Courtand direct that the proceedings in WP(C) No. 24/2013 filed by respondentNo.1 would stand closed in view of the statement made on behalf of theCCI before the High Court on 11.06.2013 and the proceedings againstthe other parties would continue. Since the State Government has alreadyvolunteered in the present proceedings to cooperate, we are sure a properGsequitur 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 areconscious of the fact that much time has passed but then the materialforming basis of the investigation is already with the CCI and it will haveto proceed in accordance with law. This will have a future impact even H

if the contracts have come to an end and also in the context of thejurisdiction of the CCI, and that is why we have proceeded to pen downthe judgment.

44. The appeals are accordingly allowed leaving the parties tobear their own costs.

Ankit Gyan(Assisted by : Rahul Rathi, LCRA)

Appeals allowed.

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