Supreme Court Sets Aside NCLAT DG-Probe Direction, Asks Tribunal To Take Fresh Decision On Whether Competition Act Probe Is Needed Against Flipkart
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The Supreme Court three Judge Bench of Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice Vipul Pancholi on Tuesday set aside a 2020 order of the National Company Law Appellate Tribunal (NCLAT) that had directed the Director General to investigate whether Flipkart violated the Competition Act.
The Bench sent the case back to the NCLAT for reconsideration. The remand followed Flipkart’s submission that the tribunal’s earlier direction had relied on observations made by an Assessing Officer during income tax proceedings—observations that were later nullified when the Income Tax Appellate Tribunal (ITAT) set aside the assessment order.
On March 4, 2020, the NCLAT had overturned the CCI’s decision to close AIOVA’s complaint and directed the Director General to investigate Flipkart. The tribunal had held that there was, prima facie, material suggesting a possible violation of Section 4 of the Competition Act, 2002, which deals with abuse of dominant position, including allegations of predatory pricing.
The NCLAT had accordingly set aside the CCI’s closure order passed under Section 26(2) of the Competition Act.
In its 2020 order, a bench led by Justice S J Mukhopadhyay referred to an ITAT order in Flipkart India Private Limited vs. Assistant Commissioner of Income-Tax (ITA No. 202/Bang/2018). It noted the assessing officer’s discussion that Flipkart India Private Limited (FIPL) would purchase goods and then sell them at discounted prices to retail sellers such as WS Retail Services Private Limited and others.
AIOVA—stating it represented over 2,000 online sellers—had moved the CCI in November 2018 alleging abuse of market power by major e-commerce entities. Its complaint targeted Flipkart India Pvt Ltd (wholesale/distribution across categories including books, mobiles, computers and accessories) as well as Flipkart Internet Pvt Ltd (marketplace operations). It also alleged that smaller vendors were being pushed into supply roles for large sellers such as Cloudtail, WS Retail and others on leading platforms, instead of selling directly to consumers.
On November 6, 2018, the CCI rejected the allegations at the preliminary stage, holding that the business practices of Flipkart and Amazon did not, on the material then available, warrant action for contravention of competition norms.
The Supreme Court said it had not expressed any view on the merits and left all issues open for the NCLAT to examine afresh."We request the NCLAT to decide the appeal afresh, keeping in mind the principles stated by this Court in a catena of decisions, including in Coal India Ltd. The parties will be at liberty to raise their respective contentions for the purpose of determining whether a prima facie case is made out, and if so, whether further remand of the case to the CCI is warranted," observed a bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice Vipul Pancholi.
Senior advocate Dr Abhishek Manu Singhvi, appearing for Flipkart Internet Pvt Ltd, argued that there was neither a finding that the company was dominant in the relevant market nor any conclusion of abuse of dominance. He contended that the NCLAT’s 2020 order was founded on remarks from income tax assessment proceedings, even though the ITAT later set aside the assessing officer’s order. Singhvi also pointed to the CCI’s earlier view that Flipkart was not dominant and asserted that Amazon held the dominant position in the online marketplace. Relying on tests laid down by the Supreme Court in the Coal India decision, he maintained that the threshold for directing an investigation was not met in Flipkart’s case.
At that stage, the Chief Justice indicated that the matter could be remanded to the NCLAT so it could reassess the dispute on material other than the assessing officer’s findings. Counsel for the All India Online Vendors’ Association (AIOVA), which had approached the CCI as the informant, argued that the ITAT’s reversal was on legal grounds and did not disturb observations relating to the business model.
Senior advocate Rajshekhar Rao, representing Flipkart India, submitted that the assessment order pertained to Flipkart India—a B2B wholesale entity with a negligible market share—and not Flipkart Internet Pvt Ltd, which operates the online marketplace. He argued that comments made in proceedings concerning Flipkart India were wrongly used against Flipkart Internet Pvt Ltd.
Case Title: FLIPKART INDIA PRIVATE LIMITED Vs COMPETITION COMMISSION OF INDIA |
Case No.: C.A. No. 2770/2020
Bench: Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice Vipul Pancholi
