On Wednesday, the Supreme Courtroom held that although lottery is a regulated commodity below the Regulation Act, anti-competitive parts in enterprise associated to lotteries would proceed to be ruled by the Competitors Act, 2002. The Apex Courtroom additional held that there was no bar on the Competitors Fee of India to analyze anti-competitive practices like bid rigging, collusive bidding and cartelisation within the tendering course of for lottery enterprise, which is within the nature res additional commercium.

A bench comprising Justices Sanjay Kishan Kaul and M.M. Sundresh allowed an attraction assailing the order of the Gauahati Excessive Courtroom, which had put aside the preliminary order of the Competitors Fee of India (“CCI”) and the report of the Director Basic, primarily, on the bottom that CCI had no jurisdiction to inquire into allegations of bid rigging, collusive bidding, and cartelisation within the tender course of for appointment of promoting brokers and distributors for lotteries organised by State.

Factual Background

On 20.12.2011, the Authorities of Mizoram issued an Invitation for Expression of Curiosity (“EoI”) by the Director of Institutional Finance and State Lottery inviting bids to nominate lottery distributors and promoting brokers for State lotteries, that are organised when it comes to Mizoram Lotteries (Regulation) Guidelines, 2011 framed below the Lotteries (Regulation) Act, 1998. As per the EoI, the minimal fee fastened was Rs. 5 lakh per draw for Bumper draw and Rs. 10,000 per draw for others. The profitable bidders had been presupposed to organise, promote, conduct and market the lottery by paper in addition to on-line. The chosen distributors/settlers had been required to furnish safety of Rs. 5 crore every for the lottery, Rs 1 crore as advance cost on the market proceeds and one other Rs. 1 crore for the prize pool. The Mizoram Authorities chosen 4 corporations/partnership companies. Thereafter on 16.05.2012, a grievance was made to the Competitors Fee of India (“CCI”) below Part 3 and 4 learn with Part 19(1)(a) of the Competitors Act (“Act”) searching for investigation in respect of the State Lottery run by the Authorities of Mizoram. In train of powers below Part 26(1) of the Act, CCI took a view that prima facie there was proof of cartelisation and bid rigging as –

  1. Three bidders made equivalent bid of minimal fee for on-line lotteries;
  2. Just one social gathering made a bid for paper lottery and that too on the minimal fee;
  3. Just one social gathering made a bid for the bumper draw and that too on the minimal fee.

The CCI opined that on first blush the profitable bidders had acted in violation of Part 3(1) learn with Part 3(3) of the Act, however no prima facie case was made out in opposition to the State and the allegation of abuse of dominant place exercised by the State was rejected. By order dated 07.06.2012 path was given to the Director Basic (“DG”) to analyze the matter, who finally concluded that the profitable bidders had colluded, shaped a cartel and indulged in bid rigging and handed opposed remarks on the conduct of the State Authorities and its officer. On 12.02.2013, the report of the DG was forwarded by the CCI to the profitable bidders and in addition the State searching for their response. The State of Mizoram filed a writ petition earlier than the Guwahati Excessive Courtroom difficult the report of (“DG”) and the truth that the report was forwarded to the State even when the allegation of abuse of dominant energy in opposition to it was dropped. The Excessive Courtroom granted interim aid directing CCI to not go ultimate orders. Subsequently, writ petitions had been filed by two profitable bidders searching for quashing of the DG’s report and the proceedings earlier than the CCI. The three petitions had been taken up collectively and the CCI was restrained from passing ultimate orders. Ultimately, the Excessive Courtroom put aside the report of the DG and the CCI orders dated 07.06.2012 and 12.02.2013 on the discovering that the lottery enterprise being playing and falling throughout the purview of doctrine of res additional commercium wouldn’t fall throughout the purview of the Competitors Act.

Contentions raised by appellant

Senior Advocate, Mr. Rajshekar Rao showing on behalf of CCI argued that CCI was not involved with the regulation of prohibition of lottery enterprise however solely about the opportunity of bid rigging within the tender course of. It was clarified that as there is no such thing as a overlap between the Competitors Act and the Regulation Act, there is no such thing as a bar on CCI in contemplating the particulars of the tender course of, which could have anti-competitive parts below the scope of Sections 3(1) and three(3) of the Competitors Act. Reference was made to CCI v. Bharti Airtel  , whereby after scrutinising the contours of Telecom Regulatory Authority of India Act, 1997 and the Competitors Act, the Apex Courtroom held that the 2 had been distinct in operate and willpower of cartel or collusion would fall throughout the unique area of CCI. Inserting reliance on the definition of “service” below part 2(u) of the Competitors Act, it was argued that sale or distribution of lottery tickets to a purchaser for a consideration should be thought of as “service”. Mr. Rao additional contended that if the legislature supposed to exclude any service from the ambit of the Competitors Act then they’d have specified the identical or the Authorities would have notified accordingly. The judgments referred to within the impugned order pertained to tax legal guidelines, freedom of commerce and the facility of State to control and the identical can’t be utilized to the current case that focuses on the interaction between the Competitors Act and the Regulation Act. It was urged that the petitions weren’t maintainable below Article 226/227 of the Structure because the bidders and the State had approached the Excessive Courtroom on the stage of present trigger discover.

Contentions raised by the respondents

As no opposed order was handed in opposition to the State of Mizoram, it prayed to be deleted from the array of events. The profitable bidders contended that Part 3(1) of the Competitors Act would don’t have any software as lottery tickets usually are not “items” as outlined below the Competitors Act. Referring to Dawn Associates v. Govt. of NCT of Delhi (2006) 5 SCC 603, it was argued that lottery tickets being actionable claims can’t be a “good”. Furthermore, it was asserted that they had been distributors and weren’t offering “service” as outlined below Part 2(u) of the Competitors Act. Emphasis was given to the submission that the Competitors Act will not be relevant to the lottery enterprise which is regulated by the Authorities below a particular statute.

Evaluation of the Supreme Courtroom

Interaction between Regulation Act and Competitors Act

The Courtroom expressed its dissatisfaction concerning the futility of the proceedings initiated by the State of Mizoram, when the CCI had dropped the allegation in opposition to it on the preliminary stage. With respect to the difficulty, if CCI had the authority to look into the grievance of cartelisation and collusive bidding, the Courtroom agreed with the submissions made by Mr. Rao and opined that even when lotteries are regulated commodities, facets of anti-competition in lottery associated enterprise can’t be taken out of the ambit of the Competitors Act.

There was no battle within the interaction of the 2 Acts that even wanted reconciliation or prohibition in opposition to both one, because the restricted scrutiny was to look at the mandate of Part 3(1) learn with Part 3(3) of the Competitors Act. Lotteries could also be a regulated commodity and will even be res additional commercium. That might not take away the side of one thing which is anti-competition within the context of the enterprise associated to lotteries.”

The Courtroom held:

“The lottery enterprise can proceed to be regulated by the Regulation Act. Nonetheless, if within the tendering course of there is a component of anti-competition which might require investigation by the CCI, that can not be prevented below the pretext of the lottery enterprise being res additional commercium, extra so when the State Authorities decides to deal in lotteries.”

Inclusive mentioning doesn’t inhibit the bigger expansive definition

On perusal of definition of “service” below Part 2(u) of the Competitors Act, the Courtroom noticed that it means “service of any description” which is made out there to potential customers. It was of the view that the purchaser of lottery ticket is a possible person and the promoting brokers are certainly offering service. Part 2(u) reads as below –

“2(u) “service” means service of any description which is made out there to potential customers and consists of the availability of companies in reference to enterprise of any industrial or industrial issues resembling banking, communication, training, financing, insurance coverage, chit funds, actual property, transport, storage, materials therapy, processing, provide {of electrical} or different vitality, boarding, lodging, leisure, amusement, building, restore, conveying of stories or info and promoting;”

The Courtroom asserted that although the definition enumerates what could be included as companies, the listing will not be exhaustive.

“Suffice for us to say the inclusive mentioning doesn’t inhibit the bigger expansive definition.”

Untimely intervention by Excessive Courtroom

The Courtroom remarked that the Excessive Courtroom had not solely intervened within the matter which had not but reached finality however by passing an interim order it had introduced the proceedings earlier than the CCI to a standstill. It was clarified that when ultimate order is handed by CCI, the personal bidders might avail the appellate treatment as stipulated below Part 53B of the Competitors Act.

Case Identify: Competitors Fee of India v. State of Mizoram And Ors.

Quotation: 2022 LiveLaw (SC) 75

Case No. and Date: Civil Attraction No. 10820-10822 of 2014 | 19 Jan 2022

Corum: Justices Sanjay Kishan Kaul and M.M. Sundresh

Counsel for the Events: Mr. Rajshekhar Rao, Sr. Adv., Mr. Arjun Krishnan, AOR, Ms. Khushboo Mittal, Adv., Mr. Sumit Srivastava, Adv., Mr. Brijender Chahar, Sr. Adv., Mr. Rajesh Kumar, AOR, Mr. Varun Mudgil, Adv., Mr. R. Ok. Srivastava, Adv., Dr. Pratyush Nandan, Adv., Mr. Arjun Garg, Adv., Mr. Aakash Nandolia, Adv., Mr. Sagun Srivastava, Adv. M/S. Parekh & Co., AOR, Mr. Kedar Nath Tripathy, AOR, Mr. Siddhesh Kotwal, Adv., Ms. Ana Upadhyay, Adv., Ms. Manya Hasija, Adv., Ms. Pragya Barsaiyan, Adv., Mr. Akash Singh, Adv., Mr. Nirnimesh Dube, AOR, Mr. Nikhilesh Krishnan, Adv. Mr. Pranav Malhotra, Adv. Mr. Shantanu Kumar, AOR

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