What SAIL did not Decide: To Notice or not before Section 26(2) Order

An analysis of whether notice is required before the Competition Commission of India passes a closure order under Section 26(2) of the Competition Act, 2002, arguing that CCI v. SAIL leaves the question open and that its reasoning favours adherence to natural justice at the closure stage.

Introduction

On 14 May 2026, the Delhi High Court in KSD Zonne Energie LLP v. CCI¹ (hereinafter, “KSD Zonne”) has held that an informant is not entitled to notice or a hearing, prior to the Competition Commission of India (Commission) passing a closure order under Section 26(2), Competition Act, 2002 (Competition Act). In the KSD Zonne case, the petitioner was a micro, small, and medium enterprises (MSMEs) solar developer that had availed a term loan from Canara Bank. The petitioner was aggrieved by retrospective interest hikes, the bank’s refusal to release title documents for a loan takeover, and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) proceedings. It filed information before the Commission alleging abuse of dominance and an anti-competitive agreement with the bank’s valuers under Sections 3 and 4, Competition Act. Without issuing notice or affording a hearing to the informant/complainant, the Commission passed an order under Section 26(2) on 19 May 2025 closing the matter for want of a prima facie case. The informant then moved the Delhi High Court under Article 226 of the Constitution. Justice Kaurav of the Delhi High Court dismissed the petition, holding that the Commission is not obliged to give an informant notice before a Section 26(2) closure, and relegated the petitioner to the statutory appeal before the National Company Law Appellate Tribunal (NCLAT) under Sections 53-A and 53-B, Competition Act.

This article questions the High Court’s reliance upon the landmark decision of CCI v. SAIL² (SAIL). The claim of the article is narrow, not that Steel Authority of India Ltd. (SAIL) affirmatively requires notice at the Section 26(2) stage, but that the SAIL case leaves the question open, and its considered reasoning favours notice. The argument runs in three layers. First, the Section 26(2) notice question was never an issue framed, argued or decided in the SAIL case. Second, even the rationale of the SAIL case, upon which the High Court relies, does not say what the High Court reads into it. Third, SAIL’s considered reasoning, particularly its characterisation of a Section 26(2) order as a final, rights-determining order with civil consequences, points the other way. The piece further discusses the High Court’s reliance on the CCI v. Kerala Film Exhibitors Federation³ (KFEF) and Karnataka Power Corpn. Ltd. v. CCI⁴ (KPCL) decisions. It further explains why the High Court’s reasoning that the Section 53-A appeal supplies the informant’s right to be heard is difficult to sustain in law. More fundamentally, while the High Court hinges the non-requirement of notice upon the prima facie threshold shared by Section 26(1) and (2), in the SAIL case instead gauges the application of natural justice to an order by evaluating its inherent character and the consequences emanating from it, as discussed further below.

SAIL did not decide the Section 26(2) — Notice question

The Supreme Court has held⁵ that “A decision is only an authority for what it actually decides.” On a reading of the decision in the SAIL case, it is clear that the Supreme Court did not decide whether notice is required before a closure order under Section 26(2).

The Supreme Court in the SAIL case⁶ expressly limited the scope of its own enquiry. At para 70, the gateway to its analysis of natural justice, the court was emphatic: “At the very outset, we must make it clear that we are considering the application of these principles only in light of the provisions of Section 26(1) and the finding recorded by the Tribunal in this regard.” That self-imposed limit governs everything that follows.

The six points framed for determination at para 30 of the judgment reaffirm the scope of determination. Point 2, the only point bearing on notice and hearing, asks about “the ambit and scope of power vested with the Commission under Section 26(1)” and whether parties are entitled to notice or hearing “at the preliminary stage of formulating an opinion as to the existence of the prima facie case”. Point 5 likewise concerns reasons for a prima facie opinion “in terms of Section 26(1)”. None of the six points poses the question of notice under Section 26(2). The court’s formal answer to Point 2 mirrors the question and is bounded to Section 26(1) and to the issuance of a direction to investigate.

Even para 91, on which the High Court rests, closes by limiting its own holding:

91. … Thus, keeping in mind the nature of the functions required to be performed by the Commission in terms of Section 26(1), we are of the considered view that the right of notice or hearing is not contemplated under the provisions of Section 26(1) of the Act.⁷

The court is express about the boundary of its own holding. The High Court’s reading of the SAIL case requires the reader to treat one intermediate clause within para 91 as overriding both the framed questions, the formal answer, the gateway proviso of para 70, and the concluding sentence of para 91 itself.

The factual matrix in the SAIL case buttresses the point. SAIL itself was the investigated party challenging a Section 26(1) direction to investigate. No case had been closed. No informant’s pre-closure rights were before the court. No argument on whether the informant must be heard before a Section 26(2) order was advanced. The Section 26(2) notice question was, on every conventional measure, not in the Supreme Court’s field of vision.

The Delhi High Court’s reason for rejecting the obiter argument (at paras 36 and 37) was that para 91 of the SAIL case “addressed both possible outcomes” and “deliberately located the hearing right as arising only after the Section 26(2) stage” conflates the comprehensiveness of description with the comprehensiveness of a decision. Ratio is decided by what was asked and answered, not by the descriptive sweep of an intervening sentence. The contrary view could potentially convert every passing line that mentions a sub-section into binding ratio.

The High Court’s interpretation of para 91 appears strained

Assuming that the line in para 91 which discusses orders under Section 26(2) being “appealable before the Tribunal and only after this stage, there is a specific right of notice and hearing available to the aggrieved/affected party”, is part of the binding ratio, the reading of the paragraph by the High Court is difficult to sustain.

The paragraph states:

91. … At best, it can direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of Section 26(2) of the Act, which order itself is appealable before the Tribunal and only after this stage, there is a specific right of notice and hearing available to the aggrieved/affected party.⁸

“After this stage” naturally refers to the post-investigation hearing under Section 26(5)—(8), Competition Act, when the Commission considers the Director General’s report and is bound to hear the parties before passing orders. The SAIL case itself, in para 92, identifies this as the structural purpose of investigation: It is conducted “to enable the Commission to examine the report upon its submission by the Director General and to pass appropriate orders after hearing the parties concerned”.

If, however, “after this stage” is read as applying to a Section 26(2) closure, the line is in direct tension with paras 37—38, where the court holds that the Section 26(2) order is “a final order as it puts an end to the proceedings”, that it is appealable under Section 53-A, and that “Closure of the case causes determination of rights and affects a party, i.e. the informant; resultantly, the said party has a right to appeal against such closure of case under Section 26(2) of the Act.” If a closure determines rights and triggers a right of appeal, it is hard to maintain that the informant’s only hearing comes after the decision is taken, on appeal. An ambiguous clause in a paragraph dealing with Section 26(1) should not override the court’s clearer treatment of Section 26(2) elsewhere in the judgment.

SAIL’s considered reasoning points toward notice at Section 26(2) and not the other way around

SAIL’s reasoning, taken as a whole, favours notice before a closure order for the following reasons:

1. Section 26(2) entails civil consequences thereby necessitating adherence to principles of natural justice: Paras 37—38 draw a sharp contrast between Section 26(1) and (2). A direction under Section 26(1) is “an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process”, and “does not effectively determine any right or obligation of the parties to the lis”. An order under Section 26(1) “does not entail civil consequences for any person”, as against a closure under Section 26(2), which is a “final order” that “causes determination of rights and affects a party, i.e. the informant”. Therefore, the court’s differentiating criterion is whether the order determines rights and entails civil consequences for a party. Under Section 26(2), civil consequences exist in relation to the informant, and the order consequently attracts the principles of natural justice. The 2023 Amendment to the Competition Act, reinforces the point: Section 26(2-A) now bars reinquiry on the same or substantially the same facts, making a Section 26(2) closure irreversible, especially for the informant.

At para 84 of the SAIL case, the Supreme Court, quoting Raj Restaurant v. MCD⁹, accepts that “in administrative action, which entails civil consequences for a person, the principles of natural justice should be adhered to”. A closure order has unmistakable civil consequences. It terminates the informant’s complaint, and with Section 26(2-A) in force, bars them from refiling. The civil-consequences test that the SAIL case endorses is, therefore, directly satisfied at closure, and natural justice must be adhered to at the Section 26(2) stage.

The requirements of natural justice are twin. At para 95, the SAIL case reproduces with approval the principle that an affected party must be (a) “given notice to show cause thereof and granted an opportunity of hearing”, and that (b) the resulting order must “give reason for arriving at any conclusion showing proper application of mind”. At para 97, the court adopts that reasoning “even in this case”. It then draws the operative line: Section 26(1) directions simpliciter need only “minimum reasons”, but “other decisions and orders, which are not directions simpliciter and determining the rights of the parties, should be well-reasoned analysing and deciding the rival contentions raised before the Commission by the parties”. The contrast that an order under Section 26(1) is a “direction simpliciter” while an order under Section 26(2) is not, is also provided in para 38 of the SAIL case.

The conclusion is straightforward. At the Section 26(2) stage the Commission is not undertaking mere preparatory measures. It is passing a final, rights-determining order with civil consequences. Those consequences are concrete: the proceeding is terminated, and Section 26(2-A) statutorily bars the informant from raising the same facts again. The natural justice loosening that the SAIL case permits for Section 26(1) does not, on SAIL’s own reasoning, extend to it.

Two contrary lines in the SAIL case deserve mention. Para 91, which the High Court places strong reliance upon, describes the prima facie function as “merely of administrative nature”. That paragraph, however, is addressed to Section 26(1), and it should not displace paras 37—38, which engage directly with the difference between the nature of the two orders. Para 83’s formulation that Section 26(1) excludes natural justice “at least at the initial stages” might be pressed to make timing the controlling factor, but SAIL reasons from character of the order, not timing. If natural justice is hinged to the timing of the order, the appealability distinction at paras 37—38 would itself collapse, since both orders are “initial” in that sense.

2. Pre-decisional silence is only excusable where a full inquiry follows: The SAIL case (para 81) relies on Union of India v. W.N. Chadha¹⁰, for the principle that pre-decisional silence is tolerated where “the decision was purely an administrative one and a full-fledged inquiry follows”. It is settled law that a Section 26(2) order is not purely administrative. The High Court in the KSD Zonne case¹¹ also relied upon Swadeshi Cotton Mills v. Union of India¹², to hold that:

44. … where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage.

The qualifying condition is essential, no notice or a lack of hearing is justified because a follow-on inquiry will give the affected party a full hearing. A closure under Section 26(2) has no follow-on inquiry, it is the terminus of the proceeding. The very condition that the SAIL case identifies as the justification for excluding pre-decisional hearing under Section 26(1) is, on closure, absent. The Delhi High Court in KSD Zonne case¹³ reads the appeal to the NCLAT, under Section 53-A read with Section 53-B, Competition Act, as the forum to provide a first hearing after the decision taken under Section 26(2). However, a hearing at the appellate stage cannot substitute a hearing at the trial stage.

The Section 53-A appeal is not a substitute

The High Court rests heavily on the availability of a statutory appeal under Section 53-A and treats the SAIL case as having located the hearing right at that appellate stage. The Supreme Court’s recent decision in Krishnadatt Awasthy v. State of M.P.¹⁴ (Krishnadatt Awasthy), puts it beyond dispute, a denial of natural justice, at the initial rights-determining stage, is not cured by a fair hearing on appeal.

In the Krishnadatt Awasthy case, the court traces the line of authority beginning with Leary v. National Union of Vehicle Builders¹⁵, described as “a leading authority on the point that a failure of natural justice at the initial stage cannot be cured at the appellate stage”, and quotes Megarry, J., with approval: “As a general rule, at all events, I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body.” The court then records the position in unambiguous terms:

63. Indian Courts have applied the Leary principle as a rule… . In our view, the provision for an appeal should not rest on the assumption that the appellate body is infallible. When one party is denied the opportunity to present their case, the initial decision fails to provide meaningful guidance to the appellate authority, in achieving a fair and just resolution.¹⁶

It adopts Professor H.W.R. Wade’s formulation that, where natural justice is violated at the first stage, “the procedure is reduced to an unfair trial followed by fair trial,” and states that an appeal “cannot validate what is clearly a nullity”.

That reasoning is directly applicable to the Section 26(2) setting. The existence of two distinct stages at which the principles of natural justice must be adhered to supports the position that the lack of a hearing at the initial stage cannot be replaced by a hearing at the appellate stage. The NCLAT under Section 53-A exercises appellate review confined largely to the decision-making process; the question whether a prima facie case is made out turns on the facts, the contentions and the records before the Commission. The appellate body is institutionally ill-suited to reconstruct the proceedings ab initio where the informant was never heard below. At best, it may remand the matter back to the Commission with directions to hear the informant. To say that the post- Section 26(2) appeal is the moment at which the hearing right accrues is, in the language of Krishnadatt Awasthy, to convert what should be a “fair trial followed by appeal” into “an unfair trial followed by fair trial”, and to strip the informant of a meaningful right of appeal from a decision that was, a nullity at the threshold. SAIL itself recognises the prior question by simultaneously characterising the closure order as final and rights-determining (paras 37—38) and as appealable under Section 53-A, Competition Act. Appealability is a consequence of the order’s rights-determining character, not a substitute for natural justice at the point where rights are determined.

KFEF and KPCL do not fill the gap

The High Court reinforces its reading of the SAIL case with two recent decisions. Neither supplies what SAIL lacks.

The first is KFEF case¹⁷, which does not confirm a no-notice rule at Section 26(2). What the Delhi High Court in KSD Zonne case¹⁸ numbers “para 38” is a verbatim reproduction of SAIL para 71, which addresses only Section 26(1)’s silence on notice and contrasts it with the express post-Director General hearing under Section 26(7) and (8). The reasoning is therefore bounded to Section 26(1) and tied to silence in that provision. Nothing in the SAIL case para 71, or in KFEF’s reproduction of it, extends that silence reasoning to Section 26(2). Whether it does is a separate question, and one that, as the SAIL case itself shows, turns on the nature of the order, not statutory silence.

The second is the NCLAT’s decision in the KPCL case¹⁹, which holds that no notice is required under Section 26(2) because the statute is silent. That reasoning does not engage with the very distinction the SAIL case draws at paras 37—38, 84 and 97. Statutory silence is not the relevant question. On the contrary, the NCLAT in its decision chooses to separate the two ingredients of natural justice and notes that the CCI had passed a speaking order, and that it would therefore be incorrect to say that natural justice has not been adhered to. The SAIL case does not treat the two ingredients of natural justice (the right to a fair hearing and the requirement to pass a speaking order) as substitutes for one another; it looks at the overall applicability of natural justice at the stage in question. The NCLAT effectively splits the two ingredients and holds that adherence to one alone suffices for the Section 26(2) stage.

That reasoning is difficult to reconcile with the SAIL case, which asks whether the order is an administrative direction without civil consequences, as in Section 26(1) where natural justice is loosened, or a rights-determining order with civil consequences, as in Section 26(2), where the SAIL case itself says natural justice in both its ingredients must be adhered to. The SAIL case loosens the natural justice obligation for Section 26(1) precisely because it entails no civil consequences and is preparatory; it does not loosen it for Section 26(2), which is final and rights-determining on the court’s own characterisation. KPCL sidesteps that distinction altogether. While the Supreme Court refused to interfere with the KPCL order in the appeal preferred against it, it did so without recording reasons and dismissed the appeal at the threshold. That dismissal does not answer the question of notice at the Section 26(2) stage, which the Supreme Court left open in the SAIL case, and nor does it engage with the distinction SAIL itself draws between the two orders.

Conclusion

The High Court’s reasoning in the KSD Zonne case²⁰ rests on a single intermediate clause in para 91 of the SAIL case, read in isolation from the rest of the judgment. The opening proviso at para 70, the six points framed for determination at para 30, the formal answer to Point 2, and the closing sentence of para 91 itself all confine the holding in the SAIL case to Section 26(1). On the very order in question, the SAIL case speaks in its own voice: at paras 37—38 a Section 26(2) closure is a final order which causes determination of rights and affects the informant; at para 84 administrative action with civil consequences must adhere to natural justice; and at paras 95 and 97 natural justice has twin ingredients of notice and reasons, with determinative orders required to engage rival contentions. Each of these strands points toward, not against, a hearing before closure.

Neither KFEF²¹ nor KPCL²² repairs the gap. KFEF merely reproduces the SAIL case para 71, which is itself addressed only to Section 26(1) and reasons from the silence of that provision; that reasoning does not, of its own force, extend to Section 26(2). KPCL treats statutory silence as dispositive without engaging with the character-based distinction the SAIL case itself draws between preparatory and rights-determining orders. KPCL also separates the two ingredients of natural justice, treating compliance with the speaking-order requirement as sufficient on its own. That approach finds no support in the SAIL case, which treats the requirements of notice and reasons together: loosened together for Section 26(1), and otherwise adhered to in full. And after the Krishnadatt Awasthy case, the contention that the Section 53-A appeal cures the absence of a pre-decisional hearing is no longer tenable: a failure of natural justice at the rights-determining stage is not validated by a fair hearing on appeal.

The defensible position is therefore narrower than the proposition that SAIL requires notice at the Section 26(2) stage. It is that the SAIL case leaves the question open, and that its considered reasoning favours notice. The High Court’s contrary reading in the KSD Zonne case converts undecided dicta into a holding of the judgment, and displaces SAIL’s own characterisation of the very order in question. Therefore, the no-notice requirement adopted in the KSD Zonne case cannot be securely grounded in the SAIL case.