W.P.(C)/3556/2017 of MONSANTO HOLDINGS PRIVATE LIMITED & ORS Vs COMPETITION COMMISSION OF INDIA & ORS

IN THE HIGH COURT OF DELHI AT NEW DELHI

%Judgment delivered on: 20.05.2020

+W.P.(C) 1776/2016 and CM Nos. 7606/2016, 12396/2016 &16685/2016

MONSANTO HOLDINGS PVT. LTD.AND ORS.

..... Petitioners

Versus

COMPETITION COMMISSION OF INDIAAND ORS.

..... Respondents

Advocates who appeared in this case:

For the Petitioners:Mr Chander M. Lal, Senior Advocate withMr Rajshekhar Rao, Ms Anusuya Nigam,MrLakshayKaushik,MrAnandhVenkatramaniandMsNancyRoy,Advocates.Mr Rajshekhar Rao, Ms Anusuya Nigam,MrLakshayKaushik,MrAnandhVenkatramaniandMsNancyRoy,Advocates.For the Respondents:Mr Pallav Saxena and Mr MohammadNausheen Samar, Advocates for R-1.Mr Ruchir Mishra and Mr Mukesh KumarTiwari, Advocates for UOI.Mr Jayant Bhushan, Senior Advocate withMr Vaibhav Choukse, Ms Ela Bali and MsAkansha Mehta, Advocates for R-2 to 4.Mr Sunil Mathews, Advocate for UOI.Nausheen Samar, Advocates for R-1.Mr Ruchir Mishra and Mr Mukesh KumarTiwari, Advocates for UOI.Mr Jayant Bhushan, Senior Advocate withMr Vaibhav Choukse, Ms Ela Bali and MsAkansha Mehta, Advocates for R-2 to 4.Mr Sunil Mathews, Advocate for UOI.

AND

+W.P.(C) 3556/2017 and CM Nos. 15578/2017, 15579/2017 &35943/2017

MONSANTO HOLDINGS PVT. LTD.AND ORS.

VersusCOMPETITION COMMISSION OF INDIAAND ORS.

..... Petitioners

..... Respondents

Advocates who appeared in this case:

CORAM

HON’BLE MR JUSTICE VIBHU BAKHRU

VIBHU BAKHRU, J

JUDGMENT

1.Monsanto Holdings Pvt. Ltd. (hereafter ‘MHPL’), MonsantoCompany (hereafter ‘Monsanto’), Mahyco Monsanto Biotech (India)Pvt. Ltd.(hereafter ‘MMBL’) have filed the petition, W.P.(C)1776/2016, inter alia, impugning common order dated 10.02.2016(hereafter‘theimpugnedorder’)passedbytheCompetitionCommission of India (hereafter ‘CCI’) under section 26(1) of theCompetition Act, 2002 (hereafter the Competition Act) in ReferenceCase 02/2015 and Information Case 107/2015, whereby the CCI hasdirected the Director General (hereafter ‘DG’) to investigate theactivities of the petitioners and Maharashtra Hybrid Seeds Company(Mahyco). The petitioners also impugn an order dated 18.02.2016,whereby CCI had issued notice to the petitioners in an applicationfiled by the informants under Section 33 of the Competition Act.

2.In W.P(C) 3556/2017, the petitioners impugn four separateorders – common order dated 18.02.2016 passed in Case No.10/2016,Case No. 3/2016and Ref Case no.1/2016; common order dated09.06.2016 passed in Case no. 37/2016, Case no.38/206 and Caseno.39/2016; Order dated 21.09.2016 in Case no. 36/2016; and Orderdated 14.03.2017 in Case no. 88/2016 – passed by the CCI underSection 26(1) of the Competition Act read with Regulation 27 of theCompetition Commission of India (General) Regulations, 2009. Bythe said orders the CCI had held that the substance of the allegationsmade in the said cases were similar to the allegations made in Case no.107/2015 and Reference Case no.2/2015 and directed that the mattersbe clubbed with the investigation being conducted in those casespursuant to the impugned order.

3.CCI had passed the impugned order under Section 26 (1) of theCompetition Act in Information Case No. 107/2015 and ReferenceCase No. 02/2015.Reference Case No. 02/2015 was institutedpursuant to reference made by the Department of Agriculture,Cooperation and Farmers Welfare, Ministry of Agriculture andFarmers Welfare, Government of India (‘MOA&FW’) under section19(1)(b) of the Competition Act against the petitioners, inter alia,alleging contravention of provisions of Sections 3 and 4 of theCompetition Act.Information Case No. 107/2015 was institutedpursuanttoinformationfiledunderSection19(1)(a)oftheCompetition Act by Nuziveedu Seeds Ltd. (‘NSL’), Prabhat AgriBiotech Ltd. (‘PABL’) and Pravardhan Seeds Pvt. Ltd. (‘PSPL’). The

saidcompaniesarehereaftercollectivelyreferredtoas‘theInformants’.

4.The controversy, essentially, relates to the trait fee charged byMMBL and the other terms and conditions imposed by it for using thetechnology for manufacturing Bt. Cotton Seeds.

5.Monsantoisacompanyengagedindevelopingandcommercializing technology for producing genetically modified seeds.It is claimed that Monsanto is fortune 500 company and is engagedin providing agricultural products. It holds portfolio of patents,trademarks and licenses. It is stated that Monsanto was the firstcompany to develop and commercialize Bt. Cotton Technology(Bollgard-I). The technology is aimed at genetically modifying hybridseeds to instill particular trait – resistance to bollworms. Initially,Monsanto had developed single-gene technology for producingseeds that were resistant to bollworms (Bollgard-I). Subsequently,Monsanto developed the second generation cotton technology, whichconsists of two genes that makes it resistant to bollworms (Bollgard-II). It is stated that the second generation cotton technology wasdeveloped as Pink Bollworms had become resistant to Bollgard-I.Bollgard -II technology is patented under the Patents Act, 1970(hereafter ‘the Patents Act’).Monsanto has licensed the said Bt.Cotton Technology to MMBL.

6.MMBL is company incorporated in India and is part of theMonsanto group inasmuch as it is joint venture company between

MHPL (which is 100 subsidiary of Monsanto) and Mahyco. Further,MHPL also holds 26% equity in Mahyco.

7.MMBL, in turn sub-licenses the technology licensed byMonsanto to various seed manufacturers in India including theInformants. It is stated that consideration for sub-licensing the saidtechnology is in two parts. The first is non-refundable fee, which is arequired to be paid upfront. The second part is recurring fee, whichis referred to as ‘trait value’ and is determined on the basis of theMaximum Retail Price (MRP) fixed for Bt. Cotton Seeds. Thefees/royalty charged by MMBL from the Informants has been asubject matter of disputes between them.

8.MMBL had licensed Bollgard-I and Bollgard-II technologies toNSL in terms of an agreement dated 21.02.2004 (2004 Agreement).This agreement was extended from time to time till 31.03.2013. It isstated that on 10.03.2015, MMBL entered into fresh sub-licenseagreement (2015 Agreement) with NSL, whereby it sub-licensedBollgard-II technologies to it. In terms of the 2004 Agreement, NSLwasrequiredtopayaone-timefeeofRupeesFiftyLacs(`50,00,000/-) and in addition running fee/trait fee, which wasdetermined based on the annual sales volume of NSL. It is stated thatunder the 2015 Agreement running fee/trait value is payable, based onthe MRP of Bt. Cotton Hybrid Seeds sold by NSL.

9.As stated above, payment of royalty/fees for use of Bt.Technology has been subject matter of disputes between the

concerned parties. On 30.08.2005, Andhra Pradesh, Ryotu Sanghamfiled complaint before the Monopolies and Restrictive TradePractices Commission (MRTPC) seeking investigation into allegedunfair trade practice of charging excessive royalty by MMBL. TheGovernment of Andhra Pradesh and the Commissioner and Director ofAgriculture had also filed Reference before MRTPC making similarallegations. It is stated that the Director General of Investigation andRegulation had also submitted preliminary report recommendinginstitution of an inquiry by MRTPC. It is stated that on 11.05.2006,MRTPC passed an interim injunction restraining MMBL fromcharging trait value of `900 per 450 grams packet of Bt. CottonHybrid Seeds and to fix reasonable trait value within month.

10.It is stated that on 27.11.2008, MMBL issued communicationto NSL seeking on account payment towards trait value. NSLresponded to the said communication by requesting MMBL to chargea reasonable trait value considering the increase in the cost ofproduction and fixation of lower MRP of cotton seeds by the StateGovernments.

11.On 03.07.2009, MMBL issued termination notice to NSL onaccount of non-payment of trait value for the Kharif 2008 season. Inthe information filed by NSL, it referred to various communicationswith MMBL with regard to payment of trait value. It is apparent fromthe above that the issue regarding payment of trait value continued tobe subject matter of dispute between the said parties.

12.MMBL had also instituted proceedings under the Arbitrationand Conciliation Act, 1996 which were settled by the said parties byentering into Settlement Agreement and Settlement AmendmentAgreement dated 20.01.2011.

13.On19.07.2015,NSL,PABLandsevenotherseedmanufacturers (sub-licensees) issued letter to MMBL requesting thatit consider charging trait value at rate determined by the StateGovernments.Immediately thereafter on 01.08.2015, MMBL filedpetitions under Section 9 of the Arbitration and Conciliation Act, 1996before the Bombay High Court against NSL and PABL seeking tosecure amount of `1,72,83,81,567/- and `26,21,36,431/- respectively.These being the amounts claimed by MMBL from them. It is statedthat in November 2015, MMBL filed similar petition against PSPLfor securing an amount of `20,34,48,646. Thereafter, on 22.08.2015,MMBL issued notice calling upon NSL to pay the amount within aperiod of twenty one days failing which MMBL would take legalaction against NSL.Similar notices were also issued to other sub-licensees. On 18.10.2015, MMBL filed another petition under Section9 of the Arbitration and Conciliation Act, 1996 before coordinatebench of this Court seeking certain interim relief in relation to the traitvalue claimed by it. On 19.10.2015, the Court passed an ad interimorder directing NSL to secure MMBL for sum of `21,37,76,123/- bydepositing the amount in no lien account with its bank.

14.Subsequently, MMBL issued termination notices to NSL,PABL and PSPL terminating the sub-licenses on the ground that they

had failed to pay the trait value for the technologies sub-licensed tothem.

15.It is not necessary, for the purposes of this petition, to set outthe disputes between the parties – MMBL and Monsanto Group onone part and NSL and its affiliates on the other. Suffice it to state thatthe disputes relating to the terms of the sub-license agreement(s) existbetween the said parties.

16.In the aforesaid context, the informants (NSL, PABL and PSPL)filed Information under section 19(1)(a) of the Competition Act beforeCCI alleging contravention of the Competition Act.

17.The informants claim that there is no substitute for Bt.Technology and given the Bollworm resistant characteristics of Bt.Cotton Seeds, there is surge in demand for such seeds. They claimthat more than 99% of the total cotton cultivation in India is doneusing Bt. Cotton Hybrid Seeds.They state that forty-nine majorcotton seed manufacturers use Bt. Technology sub-licenced byMMBL. According to the informants, MMBL and Monsanto Groupare dominant undertakings in the upstream market of licensing of Bt.Cotton Technology to seed manufacturers.

18.The informants allege that MMBL and its other groupcompanies have violated Section 4(2) of the Competition Actinasmuch as they have abused their dominant position by chargingexcessive and unfair prices for Bt. Technology. The informants allegethat MMBL and Monsanto Group have exploited their dominant

position and set prices for the technology, which are significantlyhigher than those that would result if there was effective competitionin the relevant market.They further allege that linking of the traitvalue to MRP of cotton seeds is unreasonable and not reflective of theeconomic value of the said technology.

19.Next, the informants allege that MMBL had imposed unfairconditions in the sub-license agreement(s) and the same violatedSection 4(2)(a)(i) of the Competition Act. The Informants aver that interms of clause 2.05(c) of the sub-license agreements entered into byMMBL with them, they are required to notify MMBL in case theiraffiliates enter into negotiations with any competitor of MMBL withinthirty days of commencement of such negotiations. In terms of thesaid clause, the Informants are also required to inform MMBL in casethey or their affiliates intend to deal with any competitor of MMBLand failure to give such prior notice entitles MMBL to terminate thesub-license agreement. The Informants allege that this clause is unfairas commercial negotiations are confidential and any disclosure of suchnegotiations would have an adverse effect on the Informants. Theyfurther alleged that there is reasonable apprehension that dealingwith any competitor or any competing technology provider, wouldinvite an adverse action against the Informants. It is alleged that thesaid apprehension is not unfounded as MMBL has followed policyof selective licensing and had refused to sub-license Bt. Technology tocertain seed manufacturers.

20.The Informants further claim that Article 9.4 of the sub-licenseagreements also imposes an unfair condition as in terms of the saidclause, the Informants are required to destroy all parent lines or cottongermplasm,whichhasbeenmodifiedtocontainMonsantoTechnology after the sub-license is terminated.They state thatdestroying germplasm (parent line) would effectively amount todestroying their intellectual property, which normally takes about fiveto ten years to develop.

21.Informants allege that MMBL has virtually eliminated allpotential competition for its technology by incorporating restrictiveand unfair conditions in the sub-license agreements.

22.In addition, the informants allege that MMBL and MonsantoGroup has violated Section 4(2)(a)(i) of the Competition Act as theyhave discriminated against the Informants. It is alleged that whereasBt. Technology has been provided to other group companies of theMonsanto Group without entering into any sublicense agreementscontaining unfair conditions; MMBL insists on entering into unfairsublicense agreements with other seed manufacturers. Thus, seedmanufacturing companies that belong to Monsanto Group areprovided the said technology without any such agreement as isrequired to be entered into by the Informants and other seedcompanies. According to the Informants, this has had an appreciableadverse effect on the competition in the downstream market of cottonhybrid seeds.

23.The Informants also allege that MMBL and Monsanto Grouphave restricted technical and scientific development relating to goodsand services and has thus, violated Section 4(2)(b) of the CompetitionAct. They allege that the conduct of MMBL and Monsanto Group hasresulted in denial of market access to the seed companies.

24.The informants further allege that MMBL has been following apolicy of selective licensing and has sub-licensed its Bt. Technologyto major players in the cotton seeds market. Bt. Cotton Hybrid Seedshave gained significant market share and account for 99% of thecotton seeds market in India. This has placed MMBL in position ofdominance where it can leverage the same by licensing Bt.Technology to monopolize the downstream market relating to sale ofBt. Cotton Hybrid Seeds through its affiliates. It is stated thatMMBL’s affiliates have combined market share of 14% in thedownstream marketformanufacturing Bt.CottonSeeds.TheInformants contend that in the circumstances unfairly terminatingsublicenseagreementswithmajorseedsmanufacturers,wouldeffectively result in various affiliates of MMBL gaining largermarket share of the Bt. Cotton Seeds.

25.Next, the Informants claim that the sub-license arrangementsbetween them and MMBL also contravene Section 3(1) and Section3(4) of the Competition Act.

26.MOA&FW’ also filed Reference under Section 19(1)(b) of theCompetition Act, which was registered as Reference Case No.

02/2015.In its reference MOA&FW set out the main allegationsmade by the farmers’ organizations against MMBL and MonsantoGroup. The same are reproduced as under:-

“(i)MMBL is in dominant position in the market for“Bt. Cotton seeds” in India;“Bt. Cotton seeds” in India;

(ii)MMBL’s practice of charging unreasonably hightrait fees for ‘Bt. cotton seeds’ may be ‘abuse ofdominant’ position within the meaning of Section4(2)(a) of the Competition Act;trait fees for ‘Bt. cotton seeds’ may be ‘abuse ofdominant’ position within the meaning of Section4(2)(a) of the Competition Act;

(iii) MMBLS’s sub-licence agreements with Indian seedmanufacturingcompaniesappeartobeanti-competitive within the meaning of Section 3(4) ofthe Competition Act, 2002;manufacturingcompaniesappeartobeanti-competitive within the meaning of Section 3(4) ofthe Competition Act, 2002;

(iv)MMBL is exploiting the permissions given by theGovernment to market Bt. cotton technology bycreating monopoly through restrictive agreement forunjust enrichment by charging high trait value fromits licensees and ultimately from farmers.”Government to market Bt. cotton technology bycreating monopoly through restrictive agreement forunjust enrichment by charging high trait value fromits licensees and ultimately from farmers.”

27.The CCI held that MMBL held dominant position in therelevant market of “provision of Bt. Cotton Technology in India” aswell as the downstream market of “manufacture and sale of Bt. Cottonseeds in India”. The CCI further found the allegations made by theinformants to be prima facie merited. It held that the stringentconditions imposed in the Sub-licence agreement(s) discouraged theSeed companies from dealing with competitors and also amounted torestricting development of alternate technologies. The CCI held thatprima facie MMBL’s conduct violated section 4 of the Competition

Act. The CCI also held that prima facie, the conditions imposed in theSub-licence agreements were harsh and not reasonable for protectingthe IPR rights. Accordingly, the CCI passed the impugned order undersection 26(1) of the Competition Act directing the DG to conduct aninvestigation in the matter.

Submissions

28.The petitioners have challenged the impugned order, essentially,on the ground that CCI does not have any jurisdiction to examine theissues raised before it as they relate to the exercise of rights grantedunder the Patents Act. The petitioners contend that Patents Act is acomprehensive enactment, which exclusively governs and regulates allpractices and contracts that relate to or arise out of exercise of patentrights. According to the petitioners, the remedies against alleged abuseof any rights by the patentee would fall exclusively within theremedies as provided under the Patents Act and, therefore, thejurisdiction of the CCI to entertain such disputes is impliedlyexcluded.The petitioners contend that in order for the CCI todetermine whether the conduct of the petitioners is anti-competitive, itwould be necessary for the CCI to return findings that the royaltyfee/trait value charged is unreasonable and excessive and the terms ofthe sub-license agreement are unreasonable. It is submitted that suchissues are required to be determined by authorities under the PatentsAct, namely, the Controller of Patents (hereafter the Controller). And,without effective findings returned by the Controller, the CCI wouldhave no jurisdiction to proceed in the matter.29.Mr Lal, learned senior counsel appearing for the petitionersearnestlycontendedthatthedecisionofthisCourtinTelefonaktiebolaget L.M. Ericsson v Competition Commission ofIndia & Another: W.P.(C) 464/2014 decided on 30.03.2016 is nolonger good law in view of the subsequent decision of the SupremeCourt in Competition Commission of India v. Bharti Airtel Ltd. AndOrs.: Civil Appeal No. 11843/2018, decided on 05.12.2018. Hecontended that the CCI can examine the question whether there hasbeen abuse of dominance or an unfair trade practice only once afinding as to the jurisdictional facts has been returned by theController. He submitted that the position of the Controller is similarto the Telecom Regulatory Authority of India (TRAI) as the Controlleralso exercises powers to regulate the grant of patents and exercise ofrights under the Patents Act. He submitted that these powers are akinto the powers of TRAI in the field of the telecom industry.

30.Next, it was contended that the field regarding the exercise ofrights under the Patents Act is occupied by the Patents Act and thus,by implication excludes the jurisdiction of the CCI. It was submittedthat the only remedy in case where patentee has unjustifiablywithheld the grant of license, is to seek compulsory license underSection 84 of the Patents Act and the jurisdiction to entertain suchissues would rest with the Controller. Mr Lal contended that theController is bound to take into account whether there is anyappreciable adverse effect on the competition / market whiledetermining the question whether to grant compulsory license. The

petitioners contend that such exercise is similar to the issues thatwould be considered by the CCI while examining whether Sections 3and 4 of the Competition Act have been violated.

31.Mr Lal contended that Section 140 of the Patents Act lists outcases where exercise of patents rights constitutes anti-competitiveconduct. He submitted that bare perusal of Section 140 of the PatentsAct indicates that it mirrors the principles that are embodied inSections 3 and 4 of the Competition Act. He submitted that in terms ofSection 66 and 85 of the Patents Act, patent could be revoked inpublic interest. And, public interest encapsulates promotion of healthycompetition, which is also the objective of the Competition Act. Hesubmitted that, therefore, in cases where patentee is found to beabusing his position of dominance, it would be open for the Controllerto revoke the patent in exercise of powers under Section 85 of thePatents Act.

32.Next, he stated that Section 140 of the Patents Act was retainedon the statute despite enactment of the Competition Act in 2002. Hesubmitted that if the legislature intended that the determinationwhether patentee had abused his position of dominance was requiredto be examined by the CCI, the legislature would have suitablyamended Section 140 of the Patents Act. He submitted that the factthat Section 140 of the Patents Act was not amended is indicative ofthe legislative intent that it did not contemplate the CCI examiningsuch issues and the same were required to be examined by theController.

33.Mr Lal contended that interpreting the provisions of theCompetition Act to confer upon the CCI concurrent jurisdiction toinvestigate allegations and issues, which are within the domain ofController would result in two different bodies simultaneouslyevaluating the same matters resulting in potentially conflictingdecisions. He submitted that keeping the aforesaid principle in mind,the Supreme Court in Bharti Airtel Limited case (supra) hadharmoniously reconciled the provisions of two enactments – theCompetition Act and the Telecom Regulatory Authority Act, 1997 –and held that the CCI could exercise its jurisdiction only after theRegulator (TRAI) had returned the findings on the basis of which anyorder could be passed by the CCI.

34.Next, it was contended that the Court must also look intoeconomic and realistic consequences on the issues of interpretation.Mr Lal placed reliance on the decision of the Supreme Court in ShivaShakti Sugars v. Shri Renuka Sugar Limited: (2017) 7 SCC 729. Hesubmitted that if it is held that the CCI had jurisdiction to examinematters that were within the domain of the Patents Act, it would resultin various parties abusing the same and proceeding directly to CCIinstead of resorting to remedies under the Patents Act. This accordingto him would result in loss of significant resources and cause marketdisruptions.

35.The petitioners further contended that the respondents had alsofailed to establish that the jurisdiction of the civil courts or Controllerwith regard to the issues raised by the Informants was excluded. Mr

Lal relied on the decision of the Supreme Court in Abdul v. Bhawani:AIR 1966 SCC 1718 and contended that civil court has jurisdictionto decide all questions of civil nature and any provision which seeks toexclude the jurisdiction of civil court is required to be strictlyconstrued.

36.Mr Lal further contended that in terms of Section 3(5) of theCompetition Act, the petitioners were well within their right to enterinto agreement to restrain any infringement and this aspect wasexpressly excluded by virtue of Section 3(5) of the Competition Act.He submitted that clauses of the agreement, which are designed torestrain infringement of IPR including patents are excluded from thepurview of the Competition Act and the CCI would have nojurisdiction to examine such agreements. Mr Lal submitted that it wasalso not necessary to examine whether the clauses included in anyagreement to restrain infringements of patents, are reasonable or not asthere was blanket exclusion of such clauses by virtue of Section 3(5)of the Competition Act. The question whether any of the conditionsincluded in the agreements were reasonable or not related to otherconditions included to protect Intellectual Property Rights and not toclauses relating to restraining infringement of such rights includingthose relating to patents. He argued that Section 3(5) of theCompetition Act has two limbs. The first, which provides blanketexclusion in respect of rights to restrain infringement of IntellectualProperty Rights (IPR); and the second, which relates to otherreasonable conditions that may be necessary for protecting the IPR.

He submitted that the Parliament in its wisdom had used the word‘reasonable’ only in respect of other conditions and not in respect ofagreements to restrain infringement of IPR.

37.Next, he submitted that the Informants (the respondents) haddisguised their complaint as one regarding violation of Section 4 ofthe Competition Act. However, their grievances, essentially, related toagreements that were covered under Section 3 of the Competition Act.

Reasons and conclusion

38.In Telefonaktiebolaget L.M. Ericsson (supra), this Court hadelaborately dealt with the question whether the jurisdiction of the CCIto examine matters, which involve one of the parties exercising rightsas Patentee, is excluded. In the present case, the principal contentionadvanced on behalf of the petitioners is that there is an implicitrepugnancy between provisions of the Competition Act and thePatents Act and, therefore, the applicability of the Competition Act isexcluded. It is contended that the Patents Act occupies the entire fieldin respect of not only the grant of patents but also exercise of rightsgranted to patentee. And, this includes provisions regarding abuse ofPatent rights. Therefore, it is implicit that the Competition Act wouldhave no applicability to agreements that are related to exercise ofrights by Patentee.

39.The above contention was also elaborately dealt with by thisCourt in Telefonaktiebolaget L.M. Ericsson (supra). This Court hadalso noted that in conformity with the TRIPS Agreement, the Patents

Act was amended and now contains provisions for grant ofcompulsory licenses in certain cases. Further, Section 140 of thePatents Act also proscribes inclusion of certain restrictive conditionsin certain contracts – contracts relating to sale or lease of patentedarticle, license to manufacture patented article or to work anypatented process. The specified restrictive conditions are statutorilydeclared to be void by virtue of Section 140 of the Patents Act.However, this Court did not accept that the jurisdiction of the CCI toexamine matters relating to certain rights granted under the PatentsAct or to examine any alleged anticompetitive conduct of anyenterprise including abuse of its dominant position, is excluded.

40.The Court also referred to Section 62 and Section 60 of theCompetition Act. Section 60 of the Competition Act contains nonobstante provision and expressly provides that the provisions of theCompetitionActwouldhaveeffectnotwithstandinganythinginconsistent contained in any other law for the time being in force.This Court held that although Section 60 of the Competition Actexpressly provided that the Competition Act would be given anoverriding effect, the same would not whittle down the provisions ofthe Patents Act. This Court is of the view that Section 62 of theCompetition Act which expressly provides that the Competition Actwould be in addition to and not in derogation of the provisions of anyother law for the time being in force, clearly expresses the legislativeintent that the Competition Act is in addition to other laws and not insubstitution thereof.41.This Court next examined the issue whether there was anyirreconcilable conflict between the Competition Act and the PatentsActandwhetherboththeenactmentscouldbeconstruedharmoniously. This Court had noticed that Chapter XVI and Section140 of the Patents Act contained provisions the subject matter ofwhich may be common with the Competition Act. Section 84 of thePatents Act provides for grant of compulsory licenses in certain caseswhere reasonable requirement of public in respect of patentedinventions has not been satisfied. Section 85 of the Patents Actprovides for revocation of patents if after expiry of two years from thedate of grant of compulsory license, the patented invention has notbeen worked in the territory of India and the reasonable requirementsof public with respect to the patent have not been satisfied.Theinstances listed out in Section 84(7) of the Patents Act can in certaincircumstances be considered as an abuse of dominance if the patenteeis dominant in the relevant market. Section 4 of the Competition Actcontains provisions, which indicate abuse of dominant position by anenterprise. And, Section 27 of the Competition Act provides for ordersthat can be passed by the CCI in cases where it finds that anyenterprise has violated provisions of Section 3 and Section 4 of theCompetition Act. This Court had after examining the variousprovisions of the two enactments, concluded that the orders that can bepassed by the CCI under Section 27 of the Competition Act in respectof abuse of dominant position by any enterprise are materiallydifferent from the remedies that are available under Section 84 of thePatents Act. This court also observed that in certain case it may be

open for prospective licensee to approach the Controller for grant ofa compulsory license. However, the same would not be inconsistentwith the CCI passing an appropriate order under Section 27 of theCompetition Act.

42.This Court had also examined the provisions of Section 21Aand Section 21 of the Competition Act In terms of section 21A of theCompetition Act, CCI can make reference to any regulator where incourse of proceedings the CCI proposes to take any decision whichmay be contrary to provisions of any statute, the implementation ofwhich has been entrusted to any statutory authority. Similarly, Section21 of the Competition Act enables any statutory authority, which ischarged with administration of any statute to make reference to CCIif it proposes to take any decision, which may be contrary to theprovisions of the Competition Act.

43.This Court concluded that these provisions of the CompetitionAct clearly indicate that the intention of the Parliament was not torepeal any other statute by enacting the Competition Act but on thecontrary the legislative intent was to ensure that the provisions of theCompetition Act are implemented in addition to the provisions ofother statutes. After elaborately discussing the various provisions ofboth the enactments (Patents Act and the Competition Act), this Courtconcluded that there was no irreconcilable repugnancy or conflictbetween the Competition Act and the Patents Act and, therefore, thejurisdiction of the CCI to entertain complaints regarding abuse ofdominance in respect to patent rights could not be excluded. The

decision of this Court in Telefonaktiebolaget L.M. Ericsson (supra)squarely covers the principal contention advanced on behalf of thepetitioners that the CCI has no jurisdiction to entertain any complaintagainst an enterprise in respect of matters which relate to exercise ofits patent rights.

44.It is also material to note that in Bharti Airtel Ltd. (supra) –which is relied upon by the petitioner – the Supreme Court did notaccept the contention that the jurisdiction of the CCI was ousted byvirtue of the telecom industry being regulated by statutory body(TRAI). Although the functions of TRAI include regulation of thetelecom industry and would encompass all aspects of the telecomindustry, the Supreme Court, nonetheless, held that the focus of theCompetition Act was different and was restricted to regulating andpromoting free market. The Supreme Court noticed that theCompetition Act dealt with three kinds of practices, which are treatedas anti-competitive and are prohibited: (a) where agreements areentered into by certain persons with view to cause an appreciableadverse effect on competition; (b) where an enterprise or group ofenterprises, which enjoys dominant position abuses the said dominantposition; and (c) regulating the combination of enterprises by means ofmergersoramalgamationstoensurethatsuchmergersoramalgamations are not anti-competitive or result in an abuse of thedominant position, which may be resultantly attained. The Courtnoticed that the CCI has been entrusted with function to deal withthe aforesaid kind of anti-competitive conduct and to the aforesaid

extent, the functions assigned to the CCI were distinct from thefunction of TRAI under the TRAI Act. In this view, the SupremeCourt did not accept the contention that the jurisdiction of the CCI inrespect of matters, which are regulated by specialised statutory body,were excluded from the applicability of the Competition Act. Thus,this decision does not support the petitioner’s contention that thePatents Act being special act in respect of patents excludes theapplicability of the Competition Act in respect of the matters thatrelate to patents on account of any implicit repugnancy. As noticed bythis Court in Telefonaktiebolaget L.M. Ericsson (supra), the focus ofthe Patents Act and the Competition Act are different and there is noirreconcilable repugnancy between the two enactments.

45.It was also contended by the petitioners that Section 3(5) of theCompetition Act excludes the applicability of the Competition Act inrespect of any agreement, which relates to restraining infringement ofany patent rights.

46.The aforementioned contention was also examined by thisCourt in Telefonaktiebolaget L.M. Ericsson (supra) and it was heldthat while an agreement, which imposes reasonable condition forprotecting patent rights is permissible any anticompetitive agreementwhich imposes unreasonable conditions would not enjoy the safeharbor of Section 3(5) of the Competition Act. Mr Lal contended thata Patentee could include any condition/obligation in an agreement forrestraining infringement of patent and examination of such clauseincluding the question whether such clause is reasonable or not, is

expressly excluded by virtue of sub-section (5) of Section 3 of theCompetition Act. He contended that the clause (i) of sub-section (5) ofSection 3 of the Competition Act has two limbs. The first limbexpressly recognizestherightofaPatenteetorestrainanyinfringement of any right granted under the Patents Act and excludesthe same from the application of the Competition Act. Resultantly, anyagreement for achieving the same is also excluded from the purviewof any examination by the CCI. He submitted that the questionwhether any agreement or any clause in the agreement is reasonable orunreasonable, would also stand excluded from the purview of anyexamination by the CCI. He submitted that the second limb of theclause(i) of subsection (5) of section 3 of the Competition Actpermitted imposition of reasonable conditions for protecting rightsgranted under the Patents Act and the word ‘reasonable’ qualified onlysuch other conditions. Therefore, the issue whether any the conditionimposed by patentee is reasonable or not could only be examined inrespect of conditions other than those that relate to restraininginfringement of any rights granted under the Patents Act.

47.This Court finds the aforesaid contention bereft of any merit.Clause (i) of sub-section (5) of Section 3 of the Competition Actcannot be dissected in the manner as suggested on behalf of thepetitioners. Clause (i) of Subsection (5) of section 3 must be read in ameaningful manner. Sub section (5) of section 3 is set out below:

“(5) Nothing contained in this section shall restrict—

(i)therightofanypersontorestrainanyinfringement of, or to impose reasonable conditions,as may be necessary for protecting any of his rightswhich have been or may be conferred upon himunder—

(a) the Copyright Act, 1957 (14 of 1957);

(b) the Patents Act, 1970 (39 of 1970);

(c) the Trade and Merchandise Marks Act, 1958(43 of 1958) or the Trade Marks Act, 1999 (47 of1999);

(d)theGeographicalIndicationsofGoods(Registration and Protection) Act, 1999 (48 of1999);

(e) the Designs Act, 2000 (16 of 2000);

(f)theSemi-conductorIntegratedCircuitsLayout-Design Act, 2000 (37 of 2000);

(ii) the right of any person to export goods from Indiato the extent to which the agreement relates exclusivelyto the production, supply, distribution or control ofgoods or provision of services for such export. “

48.As is apparent from the plain language of sub-section (5) ofSection 3 that nothing contained in Section 3 of the Competition Actwould restrict the right of person to restrain any infringement of hisIPR or to impose reasonable conditions for protecting them.Itrecognizes that person has right to restrain infringement of IPRgranted under the specified statutes and any agreement entered for theaforesaid purpose would fall outside rigors of Section 3 of theCompetition Act. However, such rights are not unqualified. Only such

agreements that are “necessary for protecting any of his rights whichhave been or may be conferred upon him under” the specified statutesare provided the safe harbor under Sub-section (5) of Section 3 of theCompetition Act and only to such extent. This also entails right toimpose reasonable conditions. The words “or to impose reasonableconditions” are placed between two commas and thus must beinterpreted as being placed in parenthesis that explains and qualifiesthe safe harbor of Sub-section (5) of Section 3 of the Competition Act.Plainly, the exclusionary provision to restrain infringement cannot beread to mean right to include unreasonable conditions that far exceedthose that are necessary, for the aforesaid purpose.

49.The question whether an agreement is limited to restraininginfringement of patents and includes reasonable conditions that maybe necessary to protect such rights granted to patentee, is required tobe determined by the CCI. Subsection (5) of section 3 of theCompetition Act does not mean that patentee would be free toinclude onerous conditions under the guise of protecting its rights.

50.The next question to be addressed is whether the decision of theSupreme Court in Bharti Airtel Ltd. (supra) effectively overrules thedecision of this Court in Telefonaktiebolaget L.M. Ericsson (supra).It was contended on behalf of the petitioners that in view of thedecision of the Supreme Court in Bharti Airtel Ltd. (supra) it wouldbe essential for the specialised regulator – in this case, the Controller –to first determine whether the agreements (sub-licenses) entered intoby MMBL are an abuse of its rights under the Patents Act before the

CCI could proceed further with the information or the reference filedwith it. It was earnestly contented that since issues relate to patents,the same would be best debated before the Controller.

51.This Court is unable to accept the aforesaid contention. Thedecision of the Supreme Court in Bharti Airtel Ltd. (supra) wasdelivered in the context of the specific disputes that had arisenbetween Reliance Jio Infocom Ltd. (RJIL) and the specific role of theTelecom Regulatory Authority of India (TRAI) in regulating the saidindustry. TRAI is statutory body constituted under the TelecomRegulatory Authority of India Act, 1997 (TRAI Act). Section 11 ofthe said Act sets out the functions that are to be performed by TRAI.In terms of Section 11 of TRAI Act, TRAI is charged to perform twokindsoffunctions:recommendatoryfunctionsandregulatoryfunctions. Clause (a) of Section 11 of the said Act lists out therecommendatory functions of TRAI. In terms of clause (a) of Section11, TRAI is required to make recommendations, either suo moto or onrequest of the licensor (Government of India), on the matters as listedtherein. Clause (b) of Section 11 of the TRAI Act sets out the otherfunctions that are required to be performed by TRAI. Section 11(1) ofthe TRAI Act is set out below:-

“(1) Notwithstanding anything contained in the IndianTelegraph Act, 1885 (13 of 1885), the functions of theAuthority shall be to-

(a) make recommendations, either suo motu or on arequest from the licensor, on the following matters,namely:--

(i) need and timing for introduction of new serviceprovider;

(ii) terms and conditions of licence to serviceprovider;

(iii) revocation of license for non-compliance of termsand conditions of licence;

(iv) measures to facilitate competition and promoteefficiency in the operation of telecommunicationservices so as to facilitate growth in such services;

(v)technologicalimprovementsintheservicesprovided by the service providers;

(vi) type of equipment to be used by the serviceproviders after inspection of equipment used in thenetwork;

(vii)measuresforthedevelopmentoftelecommunication technology and any other matterrelatable to telecommunication industry in general;

(viii) efficient management of available spectrum;

(b) discharge the following functions, namely:--

(i) ensure compliance of terms and conditions oflicence;

(ii) notwithstanding anything contained in the termsand conditions of the licence granted before thecommencement of the Telecom Regulatory Authorityof India (Amendment) Act, 2000 (2 of 2000), fix theterms and conditions of inter-connectivity between theservice providers;

(iii) ensure technical compatibility and effective inter-connection between different service providers;

(iv) regulate arrangement amongst service providers ofsharingtheirrevenuederivedfromprovidingtelecommunication services;

(v) lay-down the standards of quality of service to beprovided by the service providers and ensure thequality of service and conduct the periodical survey ofsuch service provided by the service providers so as toprotect interest of the consumers of telecommunicationservice;

(vi) lay-down and ensure the time period for providinglocal and long distance circuits of telecommunicationbetween different service providers;

(vii) maintain register of inter-connect agreements andof all such other matters as may be provided in theregulations;

(viii) keep register maintained under clause (vii) openfor inspection to any member of public on payment ofsuch fee and compliance of such other requirement asmay be provided in the regulations;

(ix) ensure effective compliance of universal serviceobligations;

(c) levy fees and other charges at such rates and inrespect of such services as may be determined byregulations;

(d) perform such other functions including suchadministrative and financial functions as may beentrusted to it by the Central Government or as may be

necessary to carry out the provisions of this Act:

Provided that the recommendations of the Authorityspecified in clause (a) of this sub-section shall not bebinding upon the Central Government:

Provided further that the Central Government shallseek the recommendations of the Authority in respectof matters specified in sub-clauses (i) and (ii) of clause(a) of this sub-section in respect of new licence to beissued to service provider and the Authority shallforward its recommendations within period of sixtydays from the date on which that Government soughtthe recommendations:

Provided also that the Authority may request theCentral Government to furnish such information ordocuments as may be necessary for the purpose ofmaking recommendations under sub-clauses (i) and (ii)of clause (a) of this sub-section and that Governmentshall supply such information within period of sevendays from receipt of such request:

Provided also that the Central Government may issue alicence to service provider if no recommendations arereceived from the Authority within the period specifiedin the second proviso or within such period as may bemutually agreed upon between the Central Governmentand the Authority:

Provided also that if the Central Government, havingconsidered that recommendation of the Authority,comestoaprimafacieconclusionthatsuchrecommendationcannotbeacceptedorneedsmodifications, it shall refer the recommendation backto the Authority for its reconsideration, and theAuthority may, within fifteen days from the date ofreceipt of such reference, forward to the Central

Government its recommendation after considering thereference made by that Government. After receipt offurtherrecommendationifany,theCentralGovernment shall take final decision.”

52.It is apparent from plain reading of clause (b) of Section 11that TRAI is inter alia charged with the function to ensure technicalcompatibility and effective interconnection between different serviceproviders.

53.In Bharti Airtel Ltd. (supra), the disputes, which were sought tobe placed before the CCI, related to non-provision of Points ofInterconnection (POIs). RJIL alleged that other telecom serviceproviders had delayed/denied provisioning of POIs during the testingphase as well as after the commercial launch of its services. It allegedthat without sufficient POI’s, it was not possible for subscribers or oneservice provider to make calls to subscribers of another serviceprovider.Second, it was alleged that the service providers weredenying mobile number portability requests that were made by thecustomers who wanted to switch to RJIL. Third, it was alleged thatCellular Operators Association of India was acting at the behest ofother service providers against the interest of competing member(RJIL) and not for the common interest of the industry and consumersas whole.

54.The Supreme Court noticed that in terms of the unified licensegranted to service providers, they were obliged to interconnect subjectto compliances with the prevailing regulations and the determinationsissued by TRAI. All service providers were required to establish POIs

in sufficient capacity and number to enable transmission and receptionof messages between interconnected systems. Thus, the subject matterof the disputes fell squarely within the domain of the TRAI and theTRAI was charged with the function of ensuring that the quality ofservices to consumers is not affected.

55.It is also relevant to note that the role of TRAI as regulator ismaterially different from that of Controller. Telecom services areregulated and controlled and TRAI has vital role in regulating theindustry. As noticed above, the nature of functions of TRAI are two-fold. The first is recommendatory in nature. TRAI is required to makerecommendations to the licensor on the matters as specified in Section11(a) of the TRAI. Thus, matters that relate to licensing between thelicensor and the service provider are squarely covered at the said level.In addition to the above, TRAI is required to perform other functionsfor regulating the telecom services. The TRAI’s scope of regulation isall pervasive.In exercise of its powers, TRAI has made severalRegulations, which are required to be complied with. TRAI also fixesthe tariff for interconnection.Thus, the issue whether adequatenumber of POIs had been provided by service providers forconnecting with the service rolled out by RJIL fell squarely within thescope of regulatory powers of TRAI and TRAI was required todetermine it. Controller does not regulate the exercise of patentrights in such pervasive manner. This is for an obvious reason thatpatents is not an industry. Grant of Patent recognizes and confers anintellectual property right. The principal function of the Controller

under the Patents Act is to examine the application for grant of patentsand grant patents if the applicant is entitled to such rights. Although,the Controller also exercises other powers and performs otherfunctions, including issuance of compulsory licenses in given case.But the Controller does not regulate, in pervasive manner, theexercise of patent rights or the agreements that are entered into bypatentees with third parties. The nature of the role performed by aController, thus, cannot be equated to that as performed by the TRAI.

56.The expertise of TRAI in the field of telecommunications ismaterially different than the expertise that Controller bears in regardto grant of patents and exercise of patent rights. There are certaintechnical aspects relating to the telecom industry where TRAI hasdomain expertise. In Bharti Airtel’s case one of the principalquestions to be addressed was whether the service provider hadprovided sufficient number of POIs for interconnecting with theservices rolled out by RJIL. The question whether the number of POIswere sufficient was clearly required to be technically evaluated. In thiscontext, the Supreme Court held that this would be best done by theTRAI, which had the domain expertise. And, the examination by theCCI ought to be deferred till the technical aspects (which formed thefactual basis on which the complaints before the CCI were founded),were determined. The decision of the Supreme Court in Bharti AirtelLtd. (supra) is certainly not an authority for the proposition thatwherever there is statutory regulator, the complaint must be first

brought before the Regulator and examination of complaint by theCCI is contingent on the findings of the Regulator.

57.It is relevant to note that in Bharti Airtel Ltd.(supra) theSupreme Court had upheld the decision of the Bombay High Court tothe effect that the consideration of the information by the CCI must bedeferred. The Bombay High Court had, after examining the role ofTRAI in much detail, expressed its the view that the role of TRAI wasdifferent than the role of Controller of Patents and, therefore, thedecision in Telefonaktiebolaget L.M. Ericsson (supra) was notapplicable.

58.In view of the above, this Court finds no reason to interfere withthe impugned order. It is also relevant to note that an order passed bythe CCI under Section 26(1) of the Competition Act is anadministrative order and, therefore, unless it is found that the same isarbitrary, unreasonable and fails the wednesbury test, no interferencewould be warranted. review on merits is impermissible at this stage,and therefore, this court is refraining from examining the merits of thedispute.

59.The petitioners’ challenge to the order dated 18.02.2016 is alsonot maintainable. By the aforesaid order, the CCI had merely issuednotice and afforded the petitioners for an opportunity to be heardbefore considering the application filed by the informants underSection 33 of the Competition Act. This Court finds no reasonwhatsoever to interfere with the said order. The petition – W.P.(C)

1776/2916 is unmerited and, therefore, dismissed. All pendingapplications are also disposed of.

60.W.P.(C) 3556/2017 is also unmerited. The orders impugnedtherein are premised on the basis that the issues raised in the cases inwhich the said orders are passed are similar to the ones raised inReference Case 2/2015 and Case no. 107/2015. This premise was notdisputed by any of the counsels appearing for the petitioners and theircontentions were confined to challenging the jurisdiction of the CCI inentertaining Reference Case 2/2015 and Case No.107/2015 andpassing the impugned order.

61.Thus, in view of the above, W.P.(C) 3556/2017 is alsodismissed. All pending applications are also disposed of.

62.Parties to bear their own costs.

MAY 20, 2020RK/MK

VIBHU BAKHRU, J