The CCI's Quorum Conundrum: Can the doctrine of necessity get the CCI back on track?
The CCI has not had quorum from October 2022, when the previous Chairperson completed his term. Could it use the Doctrine of Necessity to pass orders until an appointment is made?
A couple of weeks ago, we posited that the common law doctrine of necessity could offer a way out of a situation where the CCI’s lack of quorum means that it cannot pass orders - including merger approval orders. The Central Government has not completed the process of appointing additional members and/or a Chairperson to the CCI. Instead, it has extended the tenure of the Acting Chairperson, Dr Sangeeta Verma, until further notice.
Scroll down to read our article - first published on moneycontrol.com on 13 January 2023 here.
A note exploring the use of the doctrine of necessity in different contexts is available here.
A few questions:
Would it be legally tenable for the CCI to invoke the doctrine of necessity to overcome this hurdle?
How could the use of this doctrine be circumscribed? Likely only to apply to uncontroversial merger approvals and not to antitrust enforcement cases?
Read on and share your thoughts & comments below!
India’s market regulator – the Competition Commission of India (CCI) – finds itself facing an unprecedented predicament: it doesn’t have the adequate number of members to clear big-ticket mergers awaiting its approval or to decide numerous important antitrust cases. The CCI consists of a chairperson and at least two and not more than six members who are collectively tasked with making important decisions. However, since the superannuation of its last chairman in October 2022, the CCI has remained in regulatory limbo. Without the minimum three members required to make decisions, it cannot approve routine M&A deals that pose no competition concerns which are reportedly worth over a staggering Rs 10,000 crore. Equally, it cannot decide important cases, including alleged steel and cement cartels, that are pending adjudication, and which could have wide-ranging repercussions for the Indian economy.
While the situation is unprecedented for the CCI, it is not the first time that Indian regulators have been hamstrung by the delay in appointments. Take for instance the central government’s inability for four years to find a suitable “technical member” to the Intellectual Property Appellate Board’s (IPAB) patent bench responsible for hearing patent-related appeals. Or for that matter – India’s well-respected securities market regulator SEBI whose appellate tribunal – the Securities Appellate Tribunal (SAT) functioned without a technical member for nearly a year after its technical member CKG Nair retired in March 2021 and his replacement appointed only a year later. The delay in the process of appointment of important members to both these tribunals hindered their ability to make important decisions and had tremendous economic and regulatory implications.
However, where timely appointments to important statutory bodies and tribunals have not happened– including in these two instances, the courts have stepped in and prevented paralysis in justice administration. In the IPAB instance, the Delhi High Court (Mylan Laboratories v Union of India, 2019) resurrected the IPAB’s patent bench and made it functional by observing that the Constitution mandated that all citizens must have the right to access justice which would be compromised if tribunals were not able to discharge their legal obligations simply because of the lack of quorum. Similarly, in the instance of the non-appointment of a technical member to the SAT, it held (Axis Bank v NSE, 2021) that the absence of a technical member should not stall the SAT’s functioning since its orders were valid even if there was a defect in its constitution.
In doing so, the courts have invoked the “doctrine of necessity” – which is a common law doctrine that suggests that actions which would have otherwise not been permitted, are made lawful by necessity. While the doctrine has its roots in the writings of a 13th century jurist, it has been used by Indian courts in numerous instances. It essentially permits tribunals to take certain actions in very specific situations, where such actions might not have otherwise been permitted. While invoking the doctrine, courts have allowed tribunals to continue to function in exceptional situations: such as the temporary lack of quorum caused by a delay in the appointment of a member. In the courts’ wisdom, the (temporary) deviation from the procedure prescribed by law is outweighed by the denial of access to justice that results from the lack of quorum. The 3-member quorum requirement contained in the Competition Act is designed to ensure a fair hearing by the CCI. Invoking the judicially-recognised doctrine of necessity for a short period of time while the government finalises its appointment would perhaps be appropriate in this unique situation.