Quorum and Coram Requirements in the Competition Act: A Redrafting of Section 22

Introduction

In 2023, the Competition Commission of India (‘CCI’ or ‘the Commission’) found itself in an unprecedented situation. With only an Acting Chairperson and a Member, the Commission faced a backlog of pending merger approvals. This led to the invocation of the doctrine of necessity in order to examine and approve combination agreements, i.e, mergers and acquisitions. Normally, an M&A approval, being an administrative function, requires a quorum of three members, as per section 22(3) of the Competition Act, 2002. However, the CCI, upon the approval of the government, invoked the rule of necessity to depart from the general rule under section 22(3).

The invocation of this doctrine raised a serious legal question with regard to section 22(3). The provision does not specify whether the three-member requirement is for administrative, adjudicatory, or both kinds of functions, thereby creating a legal gap as to the functions in which the doctrine is invoked.

In view of this, the authors of this article will lay down the existing statutory framework under the Competition Act and then go on to conduct a two-part analysis with regards to, first, the untenability of the invocation of the doctrine of necessity in administrative as well as adjudicatory discharge of powers and, second, the absence of the three-member requirement for adjudicatory functions in section 22(3). To conclude, the authors, with the help of this analysis, recommend certain amendments to sections 15 and 22. 

Statutory Framework under the Competition Act

In the Mahindra Electric Mobility Limited and Ors v CCI, famously known as the Autoparts case, the Delhi High Court, while relying on CCI v SAIL, ruled that, along with administrative powers, the Commission is vested with investigative, adjudicatory, inquisitorial, and advisory powers. While the primary functions being administrative and adjudicatory, the Commission is neither a mere competition regulator nor a judicial tribunal but a quasi-judicial authority.

To discharge these functions, the only minimum member threshold provided in the act is under section 22. The section, short-titled as ‘Meetings of Commission’, requires the Commission to meet and transact any business which is provided by the regulations. The regulations referred to in sub-section 3 are the Competition Commission of India (General Regulations), Combination regulations, 2024, etc. These regulations outline the procedures through which the Commission performs its aforesaid functions. They provide for different situations where the Commission shall convene its meetings. For instance, regulation 17 of the CCI (General Regulations), 2024 provides for an ordinary meeting by the commission in order to conclude the existence of a prima facie case under section 26 of the Competition Act, 2002.

Further, the proviso to section 22(3) states that the minimum number of members for such meetings shall be three. It is to be noted that the proviso uses the term ‘quorum’, which denotes the minimum number of members of any body of persons required in its meetings to transact its business validly, as was ruled by the Supreme Court in The Punjab University v Vijay Singh Lamba. On the other hand, coram, literally meaning in presence of, refers to a bench of judges who are set to hear and adjudicate in a matter.  

To bypass this statutorily prescribed limit of three members on the quorum, the Act contains section 15, which is short-titled as ‘Vacancy, etc not to invalidate proceedings of Commission.’ Sub-section (a) of this section acts like a saving clause as it protects any act or proceeding of the Commission from being invalidated by reason of ‘any vacancy in, or any defect in the constitution of, the Commission.’ The section, however, refers to the ‘constitution of the Commission’, ie, the overall composition defined under section 8. Instead, Section 15(a) should incorporate something which suggests that it refers to the minimum member requirements essential for discharging the functions of the commission.

Breach of the Statutorily Prescribed Limit and the Invalid Invocation of the Rule of Necessity

Section 15 is a saving clause which protects the Commission’s acts and proceedings from being invalidated by any vacancy or defect in the composition of the Commission. This section is applied in individual cases where the Commission is suffering from vacancy owing to non-appointment. However, when the period of non-appointment prolongs, as was the case in 2023, the Commission resorts to the rule of necessity.

In October 2022, the then Chairperson of the CCI, Mr Ashok Kumar Gupta, retired, rendering the post of Chairperson vacant. This paved the way for an Acting Chairperson along with one other Member. At that time, there were more than 20 notified combination transactions under section 6 awaiting the Commission’s approval. Section 31 of the act, read with section 22, requires a minimum three-member quorum to approve combinations. Therefore, in February 2023, the Commission sought the central government’s approval and invoked the doctrine of necessity to bypass the statutorily prescribed limit.

In order to ascertain whether this invocation was valid, it must first be understood what the rule entails. The rule of necessity is a common law doctrine which allows a judge or an adjudicator to be on the coram despite being ordinarily disqualified by bias or conflict of interest. It is the necessity of the situation which warrants the inclusion of a disqualified adjudicator. The Delhi High Court in Alliance of Digital India Foundation v CCI ruled that the doctrine can be invoked in situations where the quorum is fully constituted to begin with and a Member who is disqualified by reason of bias continues owing to necessity. The Court held that the doctrine would clearly not be invocable in a case where the CCI comprises members less than three.

Further, Justice Gedela in the Alliance case, while interpreting the words ‘act or proceeding’ in section 15, held that a ‘proceeding’ relates to the adjudicatory powers exercised by the CCI, and the word ‘act’ covers anything other than adjudicatory, ie, regulatory or administrative powers of the CCI. In this regard, section 15 should be the sole resort for the Commission in all instances of vacancies or defects in the constitution of the Commission and not the rule of necessity, as it is an ‘enabling provision engrafted by the legislature to overcome any inability by the commission in discharging its functions.’ Therefore, invoking the doctrine in a two-member quorum to pass orders under section 31 (orders regarding combinations) was not a legally sound application of the doctrine.

Legislative Gap and Conflicting Judicial Approaches

Section 15 has been regarded as an all-encompassing saving clause in the Alliance case, which applies to both the primary functions served by the CCI. However, as far as the minimum number of members to constitute a ‘vacancy’ within the section is concerned, section 15 does not place reliance on 22(3) for two reasons.

First, ‘constitution of the Commission’ as used in section 15 has no nexus with the word ‘quorum’ used in the proviso to section 22(3). This implies that the proviso to section 22(3) is restricted in its application to the administrative actions of the commission.

Second, the Act nowhere describes the constitution of a coram for dispensing the adjudicatory process of the commission. Section 22(3), subsequent to the 2007 Amendment, underwent a complete overhaul. Prior to the Amendment, the section was short-titled ‘benches of commission’ and provided the constitution of the Commission for adjudicatory purposes. While it mandated a three-member coram, inclusive of the Chairperson, it also made the presence of a judicial member necessary. These were necessary safeguards provided by the Act because of the difference in the nature of adjudicatory and administrative powers. Adjudicating a case involves ‘an application of mind and determination of issues in the judicial sense’ which is significantly different from passing an administrative order.

Since the Amendment, there have been conflicting judicial opinions on whether section 22 pertains to the administrative or adjudicatory process. While the Delhi High Court recently laid the law in the Alliance case by ruling that the proviso to section 22(3) is meant for administrative functions only, a 2-judge bench of the High Court in the Autoparts case held otherwise. In the Autoparts case, the Delhi High Court declared section 22(3) unconstitutional to the extent that the section provided a second vote to the presiding member in the absence of the Chairperson which refers to a casting vote. Such a provision is only relevant as long as a meeting of the Commission is concerned. A judicial coram, on the other hand, does not provide such casting votes.

It was contended that section 22(3) fails to reflect that the CCI performs judicial functions. An attempt to apply this section to the adjudicatory functioning of the CCI was made in the Autoparts case, but the casting vote provision makes it an inconceivable proposition and an ‘anathema to a judicial body.’ Therefore, a combined analysis of these cases underscores how section 22, currently, only caters to administrative functions, as is also evident from its short-title as well as sub-sections.

Hence, in order to facilitate a conjunctive reading of section 15 and section 22 for the effective application of the saving clause, the following draft of section 22 is proposed by the authors, which incorporates the observations by Justice Gedela in the Alliance case and the provision that existed prior to the 2007 Amendment:

Meetings and Benches of the Commission

22. (1) The powers and functions of the Commission, in accordance with section 15, shall be discharged either,

(a)   In administrative meetings of the Commission; or

(b)   By benches of the Commission constituted for adjudicatory proceedings.

(2) The Commission shall meet at such times and places, and shall observe such rules and procedure in regard to the transaction of business at its meetings as may be provided by regulations.

(3) The Chairperson, if for any reason, is unable to attend a meeting of the Commission, the senior-most Member present at the meeting, shall preside at the meeting.

(4) All questions which come up before any meeting of the Commission shall be decided by a majority of a quorum of at least three members. 

(5) Every bench of the Commission constituted for adjudicatory proceedings shall consist of not less than three members, including at least one judicial member.

In addition to this, insertion of ‘in accordance with the provisions of section 22’ after ‘constitution of the commission’ in section 15(1) of the Act would allow a harmonious construction of section 22 and section 15, thereby solving the existing legal anomaly with regard to the sections.

Conclusion

The lack of clarity surrounding the quorum and coram requirements under the Competition Act, 2002, led to the Commission’s reliance on the doctrine of necessity, which is not justified in light of section 15. As a saving clause, section 15 validates the Commission’s act and proceedings in case of a vacancy or defect in composition, thereby eliminating the need to invoke a common law doctrine. The proposed draft of section 22 seeks to clarify the administrative and adjudicatory functions of the commission, thereby eliminating any interpretive differences. Together, these amendments to sections 15 and 22 would provide a comprehensive framework to address any future vacancies in the Commission.

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This article has been authored by Aashi Sharma, Junior Editor and Shreya Pachori, Assistant Editor at RSRR. It is a part of the RSRR Editor's Column Series.