Telangana High Court Dismisses Dr. Reddy's Plea Against CCI's Procedural Directions In Antitrust Probe

The Telangana High Court recently dismissed a writ petition filed by Dr. Reddy's Laboratories Limited challenging procedural directions issued by the Competition Commission of India (CCI) during an ongoing inquiry into alleged anti-competitive practices in the pharmaceutical distribution sector.

Justice Nagesh Bheemapaka held that the impugned order merely directed the petitioner to file objections to the Director General's investigation report and furnish audited financial statements, without determining any rights or imposing any penalty.

The proceedings arose from information filed in 2012 alleging contravention of Sections 3 and 4 of the Competition Act by the All India Organisation of Chemists and Druggists (AIOCD) and several pharmaceutical companies, including the petitioner.

Pursuant to the CCI's direction, the Director General investigated the matter and, in April 2024, submitted a report finding that 24 opposite parties, including the petitioner, had contravened Section 3 of the Act. The Commission thereafter directed the petitioner to file objections to the report and furnish audited financial statements.

Aggrieved, the petitioner approached the High Court contending that it had merely acted under the coercive practices of AIOCD, that the Director General's report was vitiated by inordinate delay, and that it ignored binding precedents which, according to the petitioner, exonerated pharmaceutical manufacturers acting under such coercion.

The CCI opposed the petition, contending that the impugned order was purely procedural, passed during an ongoing inquiry, and neither determined the petitioner's rights nor imposed any penalty.

Refusing to interfere, the High Court observed that the proceedings were still at an intermediary stage and that the Commission had only called upon the petitioner to respond to the Director General's findings.

"An order which is merely directory or procedural in nature, forming part of a continuing inquiry process, does not give rise to any cause of action for interference under Article 226 of the Constitution of India. The Impugned Order is, by its very nature, bereft of any finality.", the court held.

Emphasising the availability of an appellate remedy before the National Company Law Appellate Tribunal (NCLAT), the Court stated:

"The Commission, under Section 27 of the Act, is required to pass a reasoned order after conducting an inquiry, and such order is amenable to appellate scrutiny. The legislative policy is explicit: the prescribed route for challenging an order of the Commission is through the appellate mechanism and not by approaching the High Court at the stage of inquiry.", it ruled.

Rejecting the challenge based on delay, the Court noted that the investigation had remained stayed for a substantial period between 2012 and 2022 pursuant to orders passed by the Karnataka High Court.

"The delay, therefore, cannot be viewed in isolation or attributed solely to any procedural lapse on the part of the authorities. In any event, such delay, by itself, does not render the entire proceedings void or without jurisdiction, particularly when the statutory framework does not prescribe any consequence of nullification on that ground.", the court held.

The bench further held that the petitioner's challenge to the merits of the Director General's findings, including its plea that it had acted under coercion and its reliance on earlier precedents, was a matter to be considered by the Commission and not in the exercise of writ jurisdiction.

As regards the direction to furnish audited financial statements, the Court said it was only a procedural requirement to enable the Commission to exercise its powers under Section 27 if it ultimately arrived at a finding of contravention after completing the inquiry.

On the petitioner's contention regarding the absence of a judicial member in the Commission, the Court held that the issue related to the validity of the statutory framework and could not be examined in the present proceedings. It also noted that the Commission had not yet passed any final adjudicatory order affecting the petitioner's rights.

Accordingly, the court dismissed the writ petition, holding that the petitioner should pursue its objections before the Competition Commission as part of the ongoing inquiry.

For Petitioner: Advocate Kopal Sharraf

For Respondents: Advocate N Bhujanga Rao, Dy Solicitor General of India