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Avirup Bose & Pratik Datta: Debacle over natural justice | Business Standard Column

Avirup Bose & Pratik

Datta:Debacle over natural
justice
In a liberal market economy, economic laws should facilitate smoother transactions without having to always
resort to courts, judges
Avirup Bose & Pratik Datta
January 14, 2016 Last Updated at 21:46 IST

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Of late, there has been some visible discord between

theCompetition Commission of India (CCI) and theCompetition
Appellate Tribunal (Compat). CCI had imposed an aggregate
penalty of around Rs 6,300 crore on 11 cement companies for
cartelisation. The cement companies challenged this decision
before Compat. They argued that the then CCI chairperson
could not have signed the penalty order without hearing their oral

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arguments. Compat, after almost three years of arguments,

upheld the challenge on the ground of breach of "natural justice"

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and remanded the matter back to CCI. CCI will now have to re-

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hear the cartelisation complaint, which was originally filed before

DK Sikri to head
Competition Commission of
India

The outgoing chairperson publicly expressed reservations about

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the CCI in 2011.

Compat's wide interpretation of "natural justice", saying that "all

rules of judicial system are not applicable to the regulator". The
ex-chairperson's view seems to be that strict application of
judicial rules to a regulatory setting may not always be suitable.
There is some merit in his argument.

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Avirup Bose & Pratik Datta: Debacle over natural justice | Business Standard Column

The Competition Act, 2002, devises a scheme where the

decision-makers of CCI, its "members" meet in "meetings"
rather than in "benches" while exercising their quasi-judicial
function of enforcing the Act. Section 22 of the Act specifically
provides that the business of CCI shall be conducted at
"meetings", with a quorum of three members, where a decision
shall be taken by a majority vote of the members present and
voting. The Act further provides that when the chairperson is
unable to attend such a meeting, the senior-most "member"
shall preside over it. Therefore, the Act specifically contemplates
a "consensus model" of decision-making for CCI, almost akin to those taken by a board of directors.
Given that this statutory arrangement has been "technically" blessed by the Supreme Court of India when
it declined a constitutional challenge to the Act in Brahm Dutt vs Union of India (2005), Compat's ruling
has possibly rekindled the debate.
This is not to say that procedural propriety is unnecessary in a regulatory context. But it is certainly
absurd to presume that common law concepts like "natural justice" will be self-explanatory to
bureaucratic enforcement agencies and regulators. Here, India's routinely ill-drafted regulatory statutes
(under which the economic regulators function) are to blame. The concerns raised by the ex-chairman
call for a larger review of the Competition Act from a regulatory governance perspective.
To understand the need for better legislative drafting, an example from the Competition Act will be useful.
Section 36(1) of the Act merely states that in the discharge of its functions, CCI shall be guided by the
"principles of natural justice". The term "natural justice" is not defined or explained but left for the CCI to
interpret. Section 36(2) gives CCI powers of a civil court while trying a suit in matters like summoning
and enforcing attendance of any person, requiring discovery and production of documents, receiving
evidence on affidavit etc. However, no clear detailed procedure for imposition of penalty by CCI has been
laid down in the Act or in its schedules.
Contrast this with similar UK laws. Section 112 of the UK Enterprise Act, 2002, deals with the procedure
to be followed by the UK's Competition and Market Authority (CMA) while imposing penalties. Instead of
using vague phrases like "natural justice", it lays down the exact procedure of imposing penalties in plain
English. For example, CMA has to give notice as soon as possible; the contents of the notice are clearly
laid down in the legislation itself; the procedure of serving the notice is also stated. Section 90 and
Schedule 10 of the Enterprise Act provides the procedure for passing certain enforcement orders.
Paragraph 2 of Schedule 10 requires CMA to give notice to a person and hear his representations before
a ruling is made. It also lays down what such notice should contain and the process for serving such
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Avirup Bose & Pratik Datta: Debacle over natural justice | Business Standard Column

notice.
The UK legislative drafting style is primarily principles-based drafting. Yet their statutes often require
enforcement agencies to comply with detailed procedures rather than vague common law notions like
"natural justice". These detailed procedures are usually mentioned in schedules to the statute. The very
concept of "natural justice" is hardwired into the procedures in the schedules with great clarity and
simplicity. Bureaucratic agencies can then merely follow the procedures and automatically adhere to the
principles of natural justice, without having to know or interpret what "natural justice" may mean.
India needs to adopt plain English drafting style for laws and regulations. Current Indian laws are drafted
with the courts and judges as primary users. But in a liberal market economy, economic laws should
facilitate smoother transactions without having to always resort to courts and judges. Laws should be
drafted with non-lawyers (bureaucrats, regulators and entrepreneurs) as the primary audience. Jargon,
Latin maxims and legal phrases should be avoided. Two good examples of this development are the
Indian Financial Code, 2015, drafted by the Financial Sector Legislative Reforms Commission and the
Insolvency and Bankruptcy Bill, 2015, drafted by the Bankruptcy Law Reforms Committee. Hopefully, the
government will take cues to incorporate these best practices in statutory drafting for all future laws as
well as review the existing laws to improve clarity to avoid unnecessary problems as the CCI-Compat
discord has revealed.

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