“Dawn raid” is a colloquial term for any unannounced or surprise search and seizure by the investigative authorities across the globe. A dawn raid (DR) is any unexpected search and seizure operation conducted by the investigation arm of antitrust watchdogs i.e. Director General (DG) of the Competition Commission in India on the premises of the accused enterprises for collecting evidence in any ongoing antitrust probe especially involving matters related to anti-competitive agreements. Such kind of surprise inspections are made without any warning and are usually conducted at those times of the day when least expected, often at the crack of dawn and/or during weekends. The very first DR in India was conducted by the DG in 2014 on the premises of JCB India Limited (JCB), wherein the case was related to the abuse of dominant position and not cartelisation under the Competition Act, 20021.
The power to conduct such a DR is derived from Section 41(3)2 of the Competition Act, 2002 which provides that the investigator shall have powers akin to that of an inspector appointed under Section 2353 or Section 2374 read with Section 2405 and Section 240-A6 of the Companies Act, 1956 (Section 2207 of the Companies Act, 2013) in respect of production of documents, evidence, search and seizure.
Position of Indian Law
Section 3(1)8 of the Competition Act, 2002 (the Act) puts a restriction on the firms from entering into any kind of anti-competitive agreements which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in the market. Such agreements are declared void under Section 3(2)9 of the Act.
After getting any kind of information from various sources if the Competition Commission of India (CCI) is of the opinion that a prima facie case exists with regards to any such anti-competitive agreement which exists between the alleged parties or contravention of any other provision of the Act, then it has the power to direct the Director General (DG) to conduct an investigation as mandated under Section 26(1)10 of the Act. Investigation by the DG can start only when CCI decides to initiate an inquiry in any matter and directs the DG by an order in writing to investigate the matter.
DRs are a part of investigation to be made by the Director General of Competition Commission of India. However, unlike in the former Monopolies and Restrictive Trade Practices Act, 196911 (now repealed) DG though the investigation arm of CCI, is not authorised to start an investigation of its own or take a suo motu cognizance of the matter.
The order by the CCI forming a prima facie opinion about any anti-competitive practice being carried out, ought not to influence the investigation to be undertaken by the DG and the DG is free to arrive at a contrary conclusion after the completion of investigation while submission of the report of the same to the CCI. During the course of the investigation, the DG may deem fit to conduct searches and, if required, seizure of documents, etc. Search or seizure operations are, therefore, a part of the investigation to be conducted by the DG. Initially, the DG had only developed a practice of causing production of documents and summoning/requisitioning witnesses and evidence at the DG's office as per the procedure under the act.
In order to conduct a DR, the DG is required to apply to the Chief Metropolitan Magistrate (CMM), Delhi or his designate as mandated under Section 41(3)12 of the Act based on its “reasonable apprehension” that relevant documents, books and papers of, or relating to, any company or other body corporate or managing director or manager of such company or other body corporate may be destroyed, mutilated, altered, falsified or secreted in order to conceal any violation of the provisions of the act or purposefully to hide any details of any existing anti-competitive practices on the part of accused. As a matter of practice, applications of this nature are always ex parte, to ensure an element of “surprise”.
The DG, pursuant to the warrant issued, is typically authorised to do the following:
(a) enter with such assistance, as may be required, the place or places where such documents, books and papers are kept;
(b) search the place or the places in the manner specified in the warrant; and
(c) seize any documents, books, and papers it deems fit and necessary for the purposes of the investigation.
These “raids” are conducted in a covert manner leaving no scope with the party under investigation to scuttle the search in any manner and also not to give any opportunity to “sanitise” the records.
Given the wide amplitude and nature of DG's power with regards to DRs, makes it all the more necessary to list certain circumstances wherein the DG could misuse its power to unduly harm the interests of enterprise and jeopardise it. The main issues are enumerated below:
(a) Seizure of materials outside the scope and purview of the DR search warrant: For instance, a firm manufactures two different types of food products, which are not easily substitutable by consumers of the products, but the CCI wrongly delineates the relevant market such that both the products are considered as a part of one market. Therefore, since the delineated market is now of a broad nature, the DG during the DR will not only collect evidence and material regarding Product 1 but also of Product 2 which could be utterly unnecessary and amount to an abuse of the warrant, undue seizure, and breach of business privacy of the enterprise. Or say the firm manufactures two distinct types of products i.e. of Grades 1 and 2, the investigation pertains to one of them, but the DG during the DR collects material pertaining to both. A similar situation arose in Nexans France SAS v. European Commission13, where the General Court of EU recognised this concern as substantial. In Nexans France case14, the authority instead of delineating the market of “high-voltage underwater electric cables”, delineated the market of electric cables and hence during the DR, collected materials pertaining to all electric cables.
(b) Use of collected evidence in different/subsequent investigations: The evidence collected during a DR for one investigation, in all possibility could be misused for another investigation relating to the same enterprise but for a different anti-competitive activity by the investigating agency. This issue was raised during Deutsche Bahn AG v. European Commission case15 where the EU General Court, where while conducting a DR for the investigation of a “discriminatory rebate scheme”, the investigating officials collected materials concerning the same Company's anti-competitive practises in the market of “rail transport”.
(c) Conflict regarding legally privileged documents: Any kind of confidential communication between an enterprise and its legal counsel is protected, and not subject to disclosure as per the evidence law.16 However, in absence of any rules/guidelines/formula for deciding what documents and data would be considered as legally privileged or confidential, during the DR deciding the same rests upon the discretion of the DG. This could be troublesome because the raided firm would not be able to stop the DG from incorrectly deciding upon this matter and seize and even make copies of the legally privileged documents.
(d) Absence of right against self-incrimination: Constitution of India (CoI) in Article 20(3)17 provides for protection against self-incriminating testimonies. On a comparative note, the European jurisprudence in Orkem v. Commission18 offers a right against self-incriminating testimonies during the DR, but the same is not provided in India. As Article 20(3) is only applicable to prosecutions under criminal law19, whereas the proceedings under Section 41(3) of the Act are civil in nature. Thus, during the DR, the officials can depose the employee(s) of the firm under oath, and ask any questions regarding the seized materials, which might incriminate either the enterprise or its employee(s) itself.
The authors are of the opinion that abovementioned issues raise eyebrows over the powers of DG during a DR. As it is to be noted that there is no statutory right for a lawyer to be present during a DR and these problems are highly technical, in absence of a lawyer, there is a chance that the enterprise will be left at the mercy of the DG and its officials.
Critical analysis of Indian Law
Over the years, the courts and judicial forums in India have time and again been facing the question of whether to allow the counsel to be present during the investigations carried out under the mandate of various special and local laws. The courts have not devised a uniform approach, yet which is evident from the cases discussed below:
The Supreme Court of India in the landmark case of N.K. Bajpai v. Union of India20 taking note of this issue held that, in addition to being a legislative right, the right to practice enriched by Section 30 of the Advocates Act, 196121 is also protected by Article 19(1)(g)22 of the Constitution as a fundamental right. While further defining its jurisdictional sphere it was held that the advocate's right to represent the client was also pertinent before tribunals, authorities, and individuals.
The Supreme Court in Poolpandi v. Central Excise23 while denying the right to be accompanied by a legal practitioner noted that the purpose of enquiry commissions will be exhausted if the questioning of accused will be hindered stating the constitutional values and this contrary to Nandini Satpathy v. P.L. Dani24, where the Judges opined that asking for a lawyer may be a different thing at this time of investigation but a lawyer during investigation is needed to let know his client about his rights and cautions to be considered during depositions but must wait for a reasonable time and if lawyer not available the accused must be let known of his rights, as the Court in Poolpandi25 held that presence of a lawyer cannot be allowed during examination/interrogation by a customs officer. It was contended unsuccessfully that the charge was unsustainable in view of the protection under Article 20(3)26 of the Constitution and the immunity under Section 161(2)27 of the Criminal Procedure Code.
In K.T. Advani v. State28 while dealing with contravention of the Foreign Exchange Regulation Act, 197329 the Delhi High Court held that the petitioners are entitled to the presence of counsel in the course of investigation as well as deposition to check upon their statements and evidence.
In the much-celebrated case of Punjab National Bank v. Kingfisher Airlines Ltd.30, the Delhi High Court while assessing the aftermath effects of enquiry on a company affirmed that denying the right of legal representation could lead to tantamount repercussions to the overall image of the company/person ultimately affecting its stocks and market value.
In Paradip Port Trust v. Workmen31, the Supreme Court upheld the decision of the Industrial Disputes Tribunal debarring from representation of the appellant under the provisions of the Industrial Disputes Act, 194732 (IDA). But it is pertinent to note that Section 3633 of the IDA is the provision concerned which specifically debars the presence of an advocate while if we look at the Indian antitrust legislation there is no such bar impending provision exist.
The same line of reasoning was reaffirmed by this Court in Google Inc. v. CCI34 which intended to analyse the consequences of investigation initiated by DG after forming an ex parte prima facie opinion, it was observed that the presence of legal counsel for assistance of clients before the DG is one of the important elements and required since the proceedings before the DG are in the manner of a trial which can affect the future course of a party.
In Lafarge India Ltd. v. CCI35, COMPAT critically analysed regulations and provisions of the act when equated to the civil procedural approaches. COMPAT while upholding the principle of “audi alteram partem” specifically emphasised on the need of development of a comprehensive protocol by commission for conduction of enquiry which should satisfy the PNJ. The same was taken up as a matter of cognizance following up the same line of reasoning while pronouncing the judgment of Oriental Rubber Industries (P) Ltd. v. CCI36 of India which acted as a precedent to keep a note of the arbitrary powers of DG and define the actual periphery of conduct of DG.
One of the most vital contentions that CCI presented in the court during the proceedings of Oriental Rubber Industries case37 was that the antitrust law of India belongs to economic offences dealing legislation such as the Foreign Exchange Regulation Act, 1973, where the right to the presence of an advocate had been denied constantly keeping in mind the stage as collection of evidence. Herein the Court after a thorough analysis of the powers of DG held that the presence of counsel during deposition was to be allowed. The Court also remarked that the investigation is to be balanced with the rights of a person/company to defend itself in a reasonable manner through the course of the investigation.
In Alkem Laboratories Ltd. v. CCI38, COMPAT had also emphasised the importance of the Latin maxim “audi alteram partem”. The Tribunal quashed the order of penalty imposed under Section 48(1)39 of the Act to be null, holding the whole inquiry to be vitiated due to unavailability of opportunity to respondents to present their case during the course of enquiry.
On the other hand, earlier in CCI v. SAIL40, the Supreme Court while assessing this issue held that the principle of natural justice could be debarred off but to the extent that it could satisfy the reasons of rationality41 at the initial stage of enquiry keeping in context the nature of inquiry conducted by commission.
While moving forward to the analysis of the said issue by the foreign antitrust regulators, the European Commission in the famous case of Hoechst AG v. Commission of the European Communities42 held that “right to legal representation and the privileged nature of correspondence between lawyer and client must be respected from a preliminary inquiry stage”.
In AM & S Europe Ltd. v. Commission of the European Communities43, the ECHR (European Court of Human Rights) strictly emphasised on the issue of availability of the abovementioned rights from the preliminary stage of enquiry and was ultimately answered in positive.
In the landmark case of Samsung44 when the Court found that the French Competition Authority had violated the firm’s right to defence when performing search and seizure, it acknowledged the right to defence during the investigative process and further the Court stated that if the authority prevents the company from exercising its right to defence, the evidence gathered will be void.
The ECHR in Delta Pekárny v. Czech Republic45 ruling discussed the sufficient procedural safeguards for dawn raids, particularly in cases when they are carried out by national authorities.
In the landmark Miranda46 decision pertaining to the Fifth Amendment of the US Constitution, the Supreme Court of the United States of America provided the accused or the person in question with the right to be accompanied by an attorney during the course of investigation.
The authors in this article have attempted to draw a parallel with other sectoral regulators and agencies in the country to develop the liability of India's antitrust regulator with regard to the protection of an individual's rights during the course of a dawn raid and deposition. Although, the CCI through the Competition Commission of India (General) Amendment Regulations, 201847 incorporated Regulation 46-A48 which pertains to “authorising an advocate to accompany any person summoned by the Director General” sub-clauses (1)(b) and (c) of this regulation are based on principles and guidelines laid down in the landmark case of Nandini Satpathy49. Further, Regulation 41(5)50 of the CCI Regulations provides for a right of cross-examination. The courts in India must settle the dust surrounding this issue, as it concerns the rights of the firms and establishments along with their management to be granted a right to counsel during the investigation by DG or a DR. In the opinion of the authors the powers conferred to DG must be balanced with certain checks to prevent abuses or minimise subjectivity and ensure fairness in the procedure.
† 3rd year BBA LLB student at University School of Law and Legal Studies, GGSIPU, New Delhi. Author can be reached at email@example.com.
†† 5th year BA LLB (Hons.) student at National Law Institute University, Bhopal. Author can be reached at firstname.lastname@example.org.
13. Case T-135/09, decided on 14-11-2012.
14. Nexans France SAS v. European Commission, Case T-135/09, decided on 14-11-2012.
15. Cases T-289/11, T-290/11 and T-521/11, decided on 6-9-2013.
18. Case 374/87, decided on 18-10-1989.
42. Joined Cases 46/87 & 227/88, 1989 ECR 2859, paras 16, 41, decided on 21-9-1989.
43. Case 155/79.
44. Cour de cassation, Criminal Chamber, 4-5-2017, n°16-81071.
45. Application No. 97/11, decided on 2-10-2014.
46. Miranda v. State of Arizona, 1966 SCC OnLine US SC 112 : 16 L Ed 2d 694 : 384 US 436 (1966).
47. Competition Commission of India (General) Amendment Regulations, 2018 (No. 2 of 2018).
48. Competition Commission of India (General) Amendment Regulations, 2018 (No. 2 of 2018), Regn. 46-A.