1. Tender for lottery distributors — Allegations of bid rigging and cartelization — Investigation under Competition Act — High Court quashing proceedings based on nature of lottery business. (Para 1 , 2 , 4 , 5 )
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2022 Supreme(SC) 28
SUPREME COURT OF INDIA
(From the Aizawl Bench of Gauhati High Court)
SANJAY KISHAN KAUL, M.M. SUNDRESH, JJ.
Competition Commission of India – Appellant
Versus
State of Mizoram and Others – Respondents
With
M/s. Tamarai Technologies Pvt. Ltd. – Appellant
Versus
State of Mizoram and Others – Respondents
Civil Appeal Nos. 10820-10822 of 2014, 1797 of 2015
Decided On : 19-01-2022
Important Points
IMPORTANT POINTS
(1) Purchaser of a lottery ticket is a potential user and a service is being made available by selling agents in context of Competition Act, 2002.
(2) Inclusive mentioning does not inhibit larger expansive definition.
(3) Lottery business can continue to be regulated by Regulation Act – However, if in tendering process there is an element of anti-competition which would require investigation by CCI, that cannot be prevented under pretext of lottery business being res extra commercium, more so when State Government decides to deal in lotteries.
(1) Purchaser of a lottery ticket is a potential user and a service is being made available by selling agents in context of Competition Act, 2002.
(2) Inclusive mentioning does not inhibit larger expansive definition.
(3) Lottery business can continue to be regulated by Regulation Act – However, if in tendering process there is an element of anti-competition which would require investigation by CCI, that cannot be prevented under pretext of lottery business being res extra commercium, more so when State Government decides to deal in lotteries.
Subject
COMPETITION LAW - ANTI-COMPETITIVE AGREEMENTS
Act Referred
Headnote
Competition Act, 2002 – Sections 3, 19, 26 and 53B – Mizoram Lotteries (Regulation) Rules, 2011 – Lottery – Jurisdiction of Competition Commission of India (CCI) to inquire into allegations of bid rigging, collusive bidding, and cartelisation in tender process for appointment of selling agents and distributors for lotteries organised in State of Mizoram – Purchaser of a lottery ticket is a potential user and a service is being made available by selling agents in context of Competition Act – Inclusive mentioning does not inhibit larger expansive definition – Lottery business can continue to be regulated by Regulation Act – However, if in tendering process there is an element of anti-competition which would require investigation by CCI, that cannot be prevented under pretext of lottery business being res extra commercium, more so when State Government decides to deal in lotteries – There was really no need for High Court to proceed in manner and in the direction it sought to proceed – Correct approach, more so once statement was made on behalf of CCI, would have been to close proceedings filed by State Government and let private parties face ultimate decision of CCI – If they were aggrieved by any adverse decision of CCI they were entitled to avail of appellate remedy under Section 53B of Competition Act – CCI found out a prima facie case for investigation by DG under Section 3(1) of Competition Act, DG opined adversely, and CCI issued notice giving an opportunity to affected parties to place their stand before it – This process ought to have been permitted to conclude with right available to affected parties to avail of appellate remedy under Section 53B of Competition Act – Impugned judgment of High Court set aside – Material forming basis of investigation is already with CCI and it will have to proceed in accordance with law. (Paras 39, 41, 42 and 43)
Facts of the case:
A complaint received by the Competition Commission of India (appellant/CCI’) from respondent No.4 seeking investigation under the Competition Act, 2002 in respect of State Lottery run by State of Mizoram (respondent No.1) has given rise to the present dispute. The jurisdiction of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram has been challenged in the present proceedings by the successful bidders, and to a much lesser extent, by the State of Mizoram.
Findings of Court:
Intervention by the High Court was extremely premature. It ought to have waited for the CCI to come to a conclusion but on the other hand what has happened is that the CCI proceedings have been brought to a standstill while the High Court opined on the basis of some aspects which may or may not arise.
Result : Appeals allowed.
Legal Category Hierarchy
- competition law
- administrative law
-
constitutional law
-
trade and commerce
- articles 301-303 (Para 19)
-
trade and commerce
Advocates appeared:
For the Parties : 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. K. 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
For the Parties : 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. K. 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
Table of Contents
2. Whether lottery distribution constitutes goods or services under Competition Act — Applicability of res extra commercium doctrine to tendering processes for regulated activities. (Para 22 , 24 , 30 , 31 , 33 , 35 )
3. CCI's jurisdiction extends to bid rigging in tenders for regulated commodities — Expansive definition of service includes lottery distribution — High Court intervention was premature. (Para 38 , 39 , 40 , 41 )
4. The Competition Act applies to anti-competitive conduct in tendering processes, regardless of whether the underlying commodity is regulated or considered res extra commercium. (Para 38 , 39 )
5. High Court judgment set aside — Proceedings against private parties restored — Proceedings against the State closed. (Para 43 , 44 )
6. Does the Competition Act apply to the tendering process for activities considered res extra commercium?
Yes. The court held that while a business may be regulated or considered res extra commercium, the Competition Act still applies to investigate anti-competitive elements, such as bid rigging, in the tendering process for appointing agents or distributors. (Para 38 , 39 )
7. Does the distribution of lottery tickets constitute a service under Section 2(u) of the Competition Act?
Yes. The court noted the expansive definition of service as any description made available to potential users. The sale or distribution of lottery tickets to prospective buyers on behalf of the State for consideration is construed as a service. (Para 24 , 39 )
8. Can a High Court intervene in CCI proceedings at the stage of a Director General's investigation report?
The court observed that such intervention is premature. Parties should wait for the CCI to reach a final conclusion and then avail themselves of the appellate remedy under Section 53B of the Competition Act. (Para 26 , 40 , 41 , 42 )
JUDGMENT :
SANJAY KISHAN KAUL, J.
Facts:
1. A complaint received by the Competition Commission of India (for short ‘appellant/CCI’) from respondent No. 4 seeking investigation under the Competition Act, 2002 (hereinafter referred to as the ‘Competition Act’) in respect of State Lottery run by the State of Mizoram (respondent No. 1) has given rise to the present dispute. The jurisdiction of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram has been challenged in the present proceedings by the successful bidders and to a much lesser extent, by the State of Mizoram.
2. The State of Mizoram issued an Invitation for Expression of Interest (for short ‘EoI’) through respondent No. 2, the Director, Institutional Finance and State Lottery (IF&SL) on 20.12.2011 inviting bids for the appointment of lottery distributors and selling agents for state lotteries to be organised by the Government of Mizoram in terms of the Mizoram Lotteries (Regulation) Rules, 2011 (hereinafter referred to as the ‘Regulation Rules’) framed under the Lotteries (Regulation) Act, 1998 (hereinafter referred to as the ‘Regulation Act’). The EoI was for appointment of lottery distributors/selling agents to organise, promote, conduct and market the Mizoram State Lottery through both conventional paper type and online system. The EoI specified that the minimum rate fixed by the Government of India is Rs. 5 lakh per draw for Bumper and Rs. 10,000 per draw for others - bids less than these rates would be summarily rejected. In pursuance of the EoI, five bids were received of which four were accepted. The accepted bids quoted identical rates as per the following table:
| Rate Per Draw | ||||
| S. No. | Name | Paper | Online | Bumper |
| 1. | E-Cool Gaming Solutions | -- | 10,000 | -- |
| 2. | Summit Online Trade Solution Pvt. Ltd. (R5) | -- | 10,000 | -- |
| 3. | M/s. NV International (R6) | -- | 10,000 | -- |
| 4. | Teesta Distributors | 10,000 | -- | 5,00,000 |
These four companies/partnerships were selected as distributors to operate the lotteries as per the Regulation Rules and the Regulation Act. In accordance with the EoI, selected distributors/selling agents were inter-alia required to furnish Rs. 5 crore each for paper and online lottery as security, a sum of Rs. 1 crore each as advance payment of the sale proceeds, and a sum of Rs. 1 crore each towards the prize pool.
3. Respondent No. 4 made a complaint to the CCI on 16.05.2012 under Sections 3 and 4 read with Section 19(1)(a) of the Competition Act and the complaint was registered as Case No. 24 of 2012. In order to complete the array of parties defined as per Civil Appeal No. 10820/2014, we may note that respondent No. 3 is the Director General of CCI and both respondent Nos. 4 and 5 are private companies while respondent No. 6 is a partnership firm.
4. The substratum of the complaint by respondent No. 4 was that identical offers of Rs. 10,000 per draw were made in all four bids (one for paper and three for online) and a single bid of Rs. 5 lakh per draw was made for the Bumper draw. These amounts were the minimum rates fixed under the EoI. The allegation made by respondent No. 4 was that the bidders had cartelised and entered into an agreement that had an appreciable adverse effect on competition in the lottery business in Mizoram. There was bid rigging and a collusive bidding process which violated Section 3(1) read with Section 3(3) of the Competition Act, and also caused grave financial loss to the State of Mizoram.
5. Respondent No. 4 also alleged that the State of Mizoram abused its dominant position as administrator of State lotteries, by requiring distributors to furnish exorbitant sums of money towards security, advance payment, and prize pool even before the lotteries were held. This was alleged to be unfair, discriminatory and illega
