A Single Bench of the High Court of Delhi gave its judgment in Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors. on 20th May 2020, dealing with the question of overlap of jurisdiction between the Competition Commission and the Patents Controller.

In 2016, the Competition Commission (CCI) of India exercised its powers under Section 26(1) of the Competition Commission Act, 2002 established a prima facie case against Mahyco Monsanto Biotech (which is an equal joint venture between Mahyco and Monsanto Holdings Pvt Ltd.) and conducted an investigation by virtue of its order, dated 9th June 2016. It was established that there was absolute misuse of the dominant position by the appellants by inflicting discriminatory and unfair conditions in the sub-license agreements through which Bt. technology is sub-licensed to the seed manufacturing companies in India. In addition to that, they had entered into an exclusive supply agreement, refusing to deal with Indian seed manufacturers, and reserved the right to fix the price of seeds in some particular circumstances limiting scientific development regarding Bt. cotton technology and Bt. cotton seeds thereby violating Section 3 of the Act for cause an appreciable adverse effect on competition within India and Section 4 for the misuse of its Dominant position in the market.

Subsequently, a writ petition which was filed by Monsanto Inc. and Monsanto’s against the prima facie order was dismissed by the Single Bench of the High Court vide judgment dated 12th October 2018 by relying upon the judgment of the Coordinate Bench of this Court in Cadila Healthcare Ltd. and Anr. V. Competition Commission of India. Thus, this case is an appeal that is challenging the same order.

This case is regarding the trait fee charged by Mahyco Monsanto Biotech Ltd (MMBL) and the other terms and conditions inflicted by it for using the technology for manufacturing Bt. Cotton Seeds. Monsanto is a company that is engaged in commercializing and developing technology for producing genetically modified seeds. It holds a portfolio of trademarks, patents, and licenses. It is expressed that Monsanto was the first company to commercialize and develop Bt. Cotton Technology. The technology is focused on genetically modifying hybrid seeds to instill a particular trait i.e. resistance to bollworms.

Mahyco Monsanto Biotech Ltd (MMBL) is a company incorporated in India and is a portion of the Monsanto group inasmuch as it is a joint venture company between MHPL which is a hundred subsidiary of Monsanto and Mahyco. Moreover, MHPL also holds twenty-six percent equity in Mahyco.

The Prabhat Agri Biotech Ltd. (‘PABL’), Nuziveedu Seeds Ltd. (‘NSL’), and Pravardhan Seeds Pvt. Ltd. (‘PSPL’) had filed Information under section 19(1)(a) of the Competition Act before the Competition Commission (CCI) alleging a contravention of the Competition Act. The Informants had accused the Petitioner of abusing its position as the dominant player in the market of Bt Cotton Seeds by charging unreasonably high trait fees.

Issues 

The primary issues for consideration before the Delhi High Court can be classified as follows which is as under:

1. Whether no notice can be issued to the persons In-charge or director of the Company till the Competition Commission (CCI) returns a finding against the Company that it has indulged in anti-competitive activities under Sections 3 and 4 of the Competition Act
2. Whether Section 48 of the Competition Act, which provides for vicarious liability of persons in-charge and responsible for the conduct of the business of the Company, will be applicable only on contravention of orders of the Competition Commission (CCI )or DG under Sections 42 to 44 of the Competition Act and not to a contravention of Sections 3 and 4 of the Competition Act.

Judgment

While deciding whether the proceedings against the other officials and the managing director of the appellant company can continue without the issuance of any notice under Section 48 for the violation of Section 3 and 4 of the Act which fundamentally talks about anti-competitive activities, the court considered at length three case laws, namely, Cadila case, Aneeta Hada vs. M/s Godfather Travels & Tours Private Limited and Pran Mehra v. CCI.

As per the judgment in Cadila, the CCI has to first record that the company is guilty of an abusive act, after which it can proceed against its officers, directors, etc.

While in Pran Mehra, it was held that persons in charge or directors can be held liable if the competition commission of India (CCI) were to come to a decision that they were the key-persons, who were in-charge and responsible for the conduct of the business of the company.

Whereas in Aneeta Hada, the court was of the view that the commission of the offense by the company is an express condition precedent to attract the vicarious liability of others.

The court agreed with the judgment in Pran Mehra, which in accordance with the court was independent of what was held in Aneeta Hada, which is the correct interpretation of the law. Hence, the court recapitulated its stance in Cadila and concluded that Officers or Directors can be proceeded against, But, the Officers or Directors can only be liable if the competition commission of India (CCI) were to come to the decision that they were the key persons who were responsible and in-charge for the conduct of the business of the Company.

While proceeding to decide Whether Section 48 of the Competition Act, will be applicable only on contravention of orders of the Competition Commission (CCI )or DG under Sections 42 to 44 of the Competition Act and not to a contravention of Sections 3 and 4 of the Competition Act it became essential for the court to make an interpretation of Section 27 of the Act as it was contended by the appellants that Section 27 shall apply to an ‘enterprise’ and not to “persons” because as per clause (b) of the Section the penalty is ten percent of the turnover, which as contended by the appellants, cannot be attributed to a ‘person’, as a person does not have turnover. Giving a purposive interpretation to Section 27, the Court held that the term “turnover” in Section 27(b), would mean the “income” of the Director or Officer.

The court placed reliance on National Insurance Co. Ltd. v. Laxmi Narain and the State of Bihar & Ors. V. Anil Kumar and Ors wherein court observed that “A statute is an edict of the Legislature and in construing a statute, it is necessary to seek the intention of its maker. A statute has to be construed according to the intent of those who make it and the duty of the court is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature”. Thus, the purposive interpretation of the Section was done away with.

Thus, the court observed if there is a contravention of Section 3 or Section 4, the Commission can pass directions against an ‘enterprise’ and a ‘person’ i.e. individual, who has been proceeded against, imposing a penalty.