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Earlier this month, officials in the Competition Commission of India (CCI)'s office of the Director General (DG), the commission's investigative arm, raided the offices of a multinational construction equipment maker in Delhi and Faridabad, alleging it wasn't cooperating in an ongoing investigation related to unfair business practices. This was the first time in its 11-year history that the fair trade watchdog had invoked its search-and-seizure powers.
The reasons behind not exercising such powers more often and the growing backlog of pending cases under investigation in the DG's office aren't hard to figure.
When he heard about the raid, a senior competition lawyer who deals with the DG's office regularly sounded incredulous. "The DG's office never had the resources to conduct a raid. I don't know how it has conducted this raid," he said. With Delhi High Court ordering a stay in this investigation, the spotlight is on DG's office.
Overloaded, under-staffed
Of the 91-odd cases the DG's office investigated in 2013-14, it could dispose of barely a third, with 61 still pending. Experts say as the fair trade watch dog becomes more proactive in investigating cases of unfair business practice and presiding over regulatory issues around mergers and acquisitions, the investigation wing's workload is bound to swell. Through the past two years, the number of new cases to the DG's office has grown threefold - from 21 in 2012 to 62 in 2014.
A 2007 study by Indian Institute of Management-Bangalore, instituted by the CCI, recommended a 240-strong cadre of investigators, with the bulk (about 80 per cent) from economics and legal domains, and the rest financial analysts, chartered accountants and technology experts.
Housed in the ground floor of the tony South Delhi commercial complex of Bikaji Cama Place, about 10 km from the CCI's main office in central Delhi, the DG's office is a key cog in the functioning of country's fair trade watchdog. "The office is critical to the CCI's effectiveness," says Vinod Dhall, former acting chairman, CCI.
The CCI's probe arm works independently and operates at arm's length from the commission; the Ministry of Corporate Affairs is its administrative ministry. Cases in which the commission finds prima facie evidence of violation of competition norms are referred to the DG's office for detailed investigation. Through the past few months, the commission has hogged the headlines, owing to rulings against business practices in sectors such as cement, automobiles, pharmaceuticals and real estate. However, many former officials associated with the commission, as well as some lawyers who worked closely with the watchdog, say the regulator's effectiveness will be put to test as its decisions are challenged in various courts. "The thoroughness of investigation in a case will be critical to withstand any legal pressures and scrutiny," said a lawyer.
Deputation pangs
"The DG's office is working with a 50 per cent deficit of the sanctioned strength," says Ajay Kumar Chauhan, ex-DG of the CCI, who retired in June last year. CCI Chairman Ashok Chawla, too, admits investigation in a case takes more time than it should, as the DG's office is short-staffed. Usually, it takes a year and six months from the time a case is taken up for prima facie hearing till a final ruling. Officials say one of the key reasons for the delay is the practice of appointing officers on deputation alone. "The office has to be filled according to rules - only by deputation. The government is not able to get an adequate number of people to depute there," says Chawla.
All the 20-odd investigating officers are on deputation for three years, extendable up to five years. "This process of deputation keeps creating vacuum time and again," says Chauhan.
A former senior official in the DG's office says half the tenure of an officer is spent understanding the contours of competition law. Amitabh Kumar, partner, J Sagar Associates and the first DG in the CCI (2004-2009), says: "The cases handled by the DG's office are quite complex and require certain expertise. A three-year term means loss of expertise gained."
Most officials and experts feel the DG's office won't be effective until there is a degree of permanency in the tenure of investigators. Dhall says to tide over the issue, the CCI had suggested inter-changeability of officers of the CCI and the DG's office. However, the government turned down the proposal.
Chauhan feels there is a need for a separate permanent cadre at the DG's office. "At least 50 per cent of the professional staff should be from this permanent cadre," he says.
Limited powers
Another hurdle faced by many former DGs is the limited powers given to the office. For instance, if the DG's office wants a support staff of financial analysts or legal advisors to assist it in a case, it can't hire on its own; it has to approach the CCI. "There was a time when I was not able to purchase a pen without the CCI's permission," says Chauhan. Though the situation has changed through the years, the financial powers of the DG's office are still limited.
When it comes to conducing raids and searches, the DG's office has to first take the approval of the Chief Metropolitan Magistrate, Delhi.
"This compromises the secrecy of the operation. A search is conducted when there is concrete information or reason to do so. When we go to the court, this information goes public," says Chauhan.
Thwarting the process
Another reason why investigations take time, officials say, is the uncooperative attitude of those being investigated. "Apart from manpower problem, enterprises and their lawyers do their best to thwart the process (of investigation)," says Chawla. "It is a standard procedure that their (companies') side ensures the investigation isn't completed fast. Once it goes for investigation, there is reasonably high probability of an adverse outcome. They try to protect themselves from that."
A former DG of the CCI says most cases are investigated in fits and starts. When a case is brought before the DG's office, officers are given 60 days to complete their investigation. However, in most cases, the DG's office seeks more time. "The DG is never able to do long-term planning, which affects the quality of investigation," says Kumar.
A former senior official in the DG's office says while the CCI usually approves extensions for investigations, "every time, we have to explain to the CCI the status of the investigation".
Once an investigation report is submitted by the DG to the CCI, in most cases, the investigator isn't allowed to represent her/his case or to file a counter report during the final hearing before the CCI.
Though the commission has decided to involve the DG's office in post-investigation, on a selective basis, many officials in the DG's office feel this isn't enough. "I believe the DG should have the right to defend his report in front of the commission," says Chauhan.
Rising pending cases
One of the reasons for the rising pending cases before the DG's office and the low disposal rate is the exodus of investigators to their parent cadre every three years, say officials. "This results in an institutional memory loss," says Manas Kumar Chaudhary, partner, Khaitan and Co, and a former additional registrar in the CCI.
With the disposal rate of cases dropping to 33 per cent, the Ministry of Corporate Affairs has, in the past two years, stopped stating the 'percentage case disposal rate' in its annual report.
As the process to revive the country's economic growth gathers pace and the workload of the DG's office goes up, the list of pending cases is bound to increase. "The DG's office will be buried under the cases. It will be disastrous," says Kumar. Clearly, the ball to set the record straight is in the court of the government.
