JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL)

1. The present Appeal has been filed under Section 53B of the Competition Act, 2002 by the Appellant/Sun Electronics Pvt Ltd. The Appeal has been preferred against an order passed under Section 26(2) of the Competition Act, 2002 (hereinafter referred to as ‘Act’). By order dated 22.04.2019 the Competition Commission of India (hereinafter referred to as CCI) after considering the facts and circumstances of Case No.2/2019 concluded that no case of contravention of the provisions of Section 3 or Section 4 of Act was made out and accordingly it was ordered to be closed forthwith.

2. Short fact of the case is that the Appellant on 06.05.2017 issued a work order to Respondent No.1 through purchase order No.4500015629 amounting to Rs.66,31,363/- for installation and commission of home automation solution. The Informant had arrayed M/s Electek Solutions Pvt Ltd as OP No.1, Miantic AV Distribution Pvt Ltd, OP No.2, M/s RTI India Pvt Ltd, OP No.3 and one Remote Technologies Incorporate, Minnesota in USA as Opposite Party No.4. The Appellant as Informant in its application filed under Section 19(1)(a) of the Act had alleged contravention of provisions under Section 3 and 4 of the Act against aforesaid opposite parties. . It was alleged in the information application that even after receipt of the payment as per work order, installation, programming and commissioning of the project was not done within the stipulated time. Instead OP No.1 started demanding that the Informant should purchase additional equipment, otherwise OP No.1 would not be able to install or commission the project. It is noticed from the materials available on record that the Informant replied to such demand through email but the same was not acceded to. The Informant failing to convince the OP No.1 approached OP No.2 who was the sole distributor and also authorised dealer of OP No.3. The OP No.4 was supplier of products in India of OP No.1. It was Informant’s case that OP No.2 was reluctant to provide any support for installation and commission of RTI home solutions to the Informant in absence of No Objection from O P No.1. The other facts in the Information Petition are reflected in the impugned order.

3. After receipt of the information filed by the Appellant it was registered as Case No.2/2019. The Learned CCI on examination of entire matter available on record did not notice violation of either Section 3 or 4 of the Act and as such closing the proceeding passed the order under Section 26(2) of the Act which has been assailed in the present Appeal.

4. Mr. Anirudh, learned counsel for the Appellant tried to persuade this Tribunal that though there were materials available on record reflecting violation of Section 3 of the Act and also exercise of dominant position in violation Section 4 of the Act by the Opposite Parties who are Respondents herein the Ld. CCI incorrectly passed the impugned order. Learned counsel for the Appellant by way of referring to paragraph 18 of the impugned order submits that despite the fact that there were sufficient material to show contravention of Section 3(3) of the Act and also Section 4, on an incorrect assumption the CCI has recorded that Section 4 of the Act does not provide for joint or collective dominance. It is appropriate to reproduce paragraph 18 of the impugned order which is as follows:-

“18. In this regard, the Commission observes that so far as the allegation pertaining to contravention of the provisions of Section 3(3) of the Act are concerned, suffice to note that the Informant has not been able to show any ‘agreement’ amongst the OPs which can be examined within the framework of Section 3(3) read with Section 3(1) of the Act. Similarly, the Commission notes that the Informant has alleged abuse of dominance by all the OPs by averring in the Information that “…[A]ll the respondents together in collusion are tactically are accomplishing such unlawful acts or are able to make such demands due to the dependence of the consumer on the enterprise.” Such allegations made by the Informant alleging abuse of dominance by all the OPs, do not warrant any examination as the present scheme of Section 4 of the Act does not envisage or provide for joint or collective dominance.”

5. Learned Counsel for the Appellant submits abuse of the dominant position has been well defined and explained in Explanation No.(c) of Section 4(2) of the Competition Act. He has also tried to persuade the Tribunal that Explanation of ‘Group’ incorporated in Explanation to Section 4(2)(c) has further been clarified in Explanation (b) to Section 5 of the Act. Both the provisions are reproduced hereinbelow:

“4. Abuse of dominant position

Explanation-For the purposes of this section, the expression-

(c) “group” shall have the same meaning as assigned to it in Clause (b) of the Explanation to Section 5.

5. Combination

Explanation-for the purposes of this Section-

(b) “group” means two or more enterprises which, directly or indirectly, are in a position to-

(i) exercise twenty-six per cent, or more of the voting rights in the other enterprises; or

(ii) appoint more than fifty per cent, of the members of the board of directors in the other enterprise;or

(iii) control the management or affairs of the other enterprise;”

By way of referring to aforesaid provisions it has been highlighted by the learned counsel for the Appellant that despite the fact there were four groups of Respondents which had exercise dominant position, the Learned CCI ignoring the statutory provisions has excluded the Respondents from the application of Section 4 of the Act.

6. Regarding application of Section 3(3) of the Act, learned counsel for the Appellant tried to persuade the Tribunal by way of referring to the impugned order that the order impugned suffers from inherent illegality which needs to be interfered with. According to learned counsel for the Appellant on the materials placed by the Informant/appellant in its information petition there were sufficient ground to hold all the Respondents responsible for violation of Section 3 and 4 of the Act and were liable to be imposed heavy penalty.

7. In the present appeal despite appearance of all the Respondents, at the time hearing only Mr. Jasdeep Singh Dhillon, learned counsel for the Respondent No.1 has appeared whereas reply and Notes of Written submissions were filed by all the Respondents. In the present appeal though the Appellant has assailed the order of CCI, however, to the reasons best known to the Appellant the CCI was not arrayed as party/respondent. It is true that the Appeal was filed in 2019 but even subsequently no steps were taken by the Appellant to implead CCI as party/respondent. In view of the judgement of Hon’ble Supreme Court in the case of Competition Commission of India Vs Steel Authority of India Limited and Another (2010) 10 Supreme Court Cases 744, [LQ/SC/2010/950] it was necessary to implead CCI as party/respondent. Mr. Jasdeep Singh Dhillon, learned counsel for the Respondent No.1 tried to persuade the Tribunal that the appellant by way of suppression of several facts filed the information petition before the CCI making incorrect allegations against the Respondent, the Appellant even in the present Memo of Appeal has not disclosed entire facts and important facts were suppressed by the Appellant. He submits that in any event the dispute which has been raised by the Appellant cannot be termed as a dispute to be adjudicated by the CCI. According to the Learned Counsel for Respondent No.1, in view of the facts which have been noticed by Learned CCI in its impugned order, it appears that the dispute was either Consumer dispute or Commercial dispute which was not at all required to be raised before the CCI under the Competition Act. According to learned counsel for Respondent No.1 the order impugned does not warrant any interference and the Appeal is liable to be rejected outrightly imposing exemplary cost.

8. Though the Appellant has filed the present appeal assailing the order passed by the CCI the very basis for passing of the impugned order i.e. information application, is not available on record. In absence of information petition it would be difficult for this Tribunal to examine true facts. The facts disclosed in the Memo of Appeal or even in the reply filed by the Respondent may not form. All materials can be the basis for faulting the impugned order.

In such situation it is necessary to examine the order impugned. Accordingly it would be appropriate to reproduce the order impugned passed dated 20.04.2019 by the CCI as follows:-

“Order under Section 26 (2) of the Competition Act, 2002

1. The present information has been filed under Section 19 (1) (a) of the Competition Act, 2002 (hereinafter, “the Act”) by Sun Electronics Private Limited, Vadodara (hereinafter, “the Informant”) against ElecTek Solutions Private Limited, Mumbai (OP-1); Miantic AV Distribution Private Limited, Hyderabad (OP-2); RTI India Private Limited, Bengaluru (OP-3); and Remote Technologies Incorporated, Minnesota, USA (OP-4) (collectively, OPs), inter alia alleging contravention of the provisions of Sections 3 and 4 of the Act.

2. The Informant is stated to be a private limited company registered under the provisions of the erstwhile Companies Act, 1956 with its registered office at Vadodara, Gujarat. OP-1 is stated to be an integrator and supplier of RTI products in the State of Maharashtra having its registered office at Mumbai. OP-2 is stated to be the sole authorised dealer of OP-3, engaged in the distribution and integration of RTI Home Automation Solutions across India with its registered office at Hyderabad. It is also stated to be the supplier of OP-1. OP-3 is stated to be the Indian Company of OP-4 having its office at Bengaluru and OP-4 is stated to be a global company providing Home Automation Solutions in India through OP-2 and OP-3, with its office at Minnesota, USA.

3. The Informant has submitted in the information that based on the recommendations of its architect for RTI Home Automation Solutions, it conducted an analysis of a few vendors and then finalised OP-1 who is the supplier and integrator of RTI Home Automation Solutions for the State of Maharashtra for its residential project.

4. Subsequently, the Informant issued a work order to OP-1 through Purchase Order (hereinafter, “PO”) No. 4500015629 dated 06.05.2017 for a sum of ₹66,31,363/- (Rupees Sixty Six Lac Thirty One Thousand Three Hundred and Sixty Three Only) for 41 items (40 material and 1 installation and commissioning) for availing complete RTI Home Automation Solutions. The PO was inclusive of taxes and duties for supply, installation, freight forwarding, transportation, loading, unloading, leads and lifts, programming, testing and commissioning of the materials for complete RTI Home Automation Solutions.

5. It is stated by the Informant that as per the terms of payment mentioned in the above-said PO, the payment was to be made in three phases: 50% advance payment at the time of placing the PO; 35% payment to be done within 7 working days from delivery of materials at site or receiving of bill at Head Office, whichever is later; and 15% payment after 7 working days but before 15 working days from handover of project to the Informant or receiving of final bill received at Head Office, whichever is later. It is further stated that despite making payments of ₹51,08,185/- (Rupees Fifty One Lac Eight Thousand One Hundred and Eighty Five Only) by 28.06.2017 as per the work order, the installation, programming and commissioning of the project was not done by OP-1 within the stipulated time frame.

6. It is alleged that OP-1 rather started demanding that the Informant should purchase additional equipment i.e. AV (Audio-Visual) equipment stating that OP-1 would not be able to install or commission the project without this item. The Informant replied to such demand of OP-1 through an e-mail stating that the initial PO was inclusive of programming including installation and commissioning of complete RTI Home Solutions, and the work may be completed as per the same. However, OP-1 did not agree to the same.

7. Finding it difficult to convince OP-1, the Informant approached OP-2 who was the sole distributor and authorised dealer of OP-3 and OP-4’s products in India as well as the supplier of OP-1. However, as per the Informant, OP-2 was reluctant to provide any support for the installation and commissioning of the RTI Home Solutions to the Informant unless a ‘No Objection Certificate (hereinafter, “NOC”)’ was obtained from OP-1.

8. It is further alleged that with the intention of exploiting and harassing the Informant since it was not willing to purchase the additional AV equipment from OP-1, OP-1 also sent a revised demand through an e-mail dated 16.08.2018 seeking additional amount of ₹10,00,000/- (Rupees Ten Lac Only) plus taxes for installation and commissioning of RTI Home Solutions at the Informant’s project site. OP-1 also demanded the Informant to appoint a Mechanical Electric and Plumbing Consultant (hereinafter, “MEP”) thereby adding more financial burden on the Informant. The Informant stated that such programming, installing and commissioning charges including taxes were already included in the initial PO. Hence, the further demand so made was utterly illegal.

9. Further, the Informant stated that OP-1 also unlawfully withheld the XP8S license key of RTI Home Solutions from the Informant for which the Informant had duly made payment as per the work order. In this regard, the Informant relied on an e-mail dated 15.11.2018 sent by Mr. Manoj Manchala, Director (Technical) of OP-3 to the Informant whereby it was conveyed that the said license for the Informant’s project was already billed and delivered to OP-1 by OP-3.

10. Based on above facts and assertions, the Informant alleged violation of Sections 3 and 4 of the Act, and apart from seeking certain interim reliefs requested the Commission to intervene in the matter; to grant exemplary costs of ₹10 lacs in favour of the Informant; and to impose penalty on the OPs as per the provisions of the Act.

11. The Commission has perused the information and the material available on record.

12.It is observed that the Informant approached the OP-1 to supply, install and commission of RTI Home Solutions for its residential flats located at Vienna Apartments, Vile Parle (W), Mumbai as per the work order dated 06.05.2017. Subsequently, the project location was changed with the consent of the parties (Informant and OP-1) to Vini Villa, Mumbai.

13. The grievance of the Informant emanates from non-completion of the aforesaid work at the project site of the Informant by OP-1. In nutshell, the case of the Informant against OP-1 is that OP-1 has not abided by its obligation as per the work order dated 06.05.2017; has sought additional sum of ₹10 Lac from the Informant for completing the assigned work; has insisted that the Informant should buy additional AV equipment, appoint a MEP consultant and has withheld the XP8S license key from the Informant. The Informant’s case against OP-2 (dealer and distributor) as well as OP-3 and OP-4 is that though they are the manufacturers of RTI Home Solutions and suppliers of OP-1, they have not taken any action against OP-1 despite repeated complaints by the Informant. On the contrary, OP-2 has asked the Informant to obtain an NOC from OP-1 for assigning the said work relating to RTI Home Solutions to some other vendor. Thus, the Informant has alleged violation of the provisions of Section 3 and Section 4 of the Act by the OPs.

14. In order to gather the true nature of the issues between the parties, it may be useful to refer to some of the correspondences that were exchanged between the Informant and the OPs which have been annexed by the Informant to the Information.

15. The Informant vide letter dated 23.08.2018 had sent a communication to OP-1 with the subject “Deficiency in services and incomplete work as per the order no. 4500015629 dated 06.05.2017.” The contents of the aforesaid letter mostly relate to deficiency in services by OP-1. At para 7, it was stated by the Informant that “we are forced to write this, to bring to your notice that you have not been completing the installation, programming, designing, testing and commissioning of the system, which shall be considered as violation of Order terms and be considered as deficiency in your services.” It can be seen from the above communication that the Informant was not satisfied with the services rendered by OP-1 as per the work order dated 06.05.2017 for its residential project.

16. Later on 18.09.2018, the Informant sent a legal notice to OP-1 with the subject “Legal Notice regarding incompletion of work as per the work order number 4500015629 dated 06.05.2017, and for deficiency in services and Unfair Trade Practice.” It is observed from the contents of the said notice that the same focused on not adhering with the contractual obligations by OP-1 as per the work order and that the language of the notice at many places indicates that the issues are apparently relatable to “deficiency of service” and “unfair trade practices”.

17. In the aforesaid factual backdrop as narrated by the Informant in the Information, the Commission proceeds to examine the various allegations within the framework of the Act.

18. In this regard, the Commission observes that so far as the allegation pertaining to contravention of the provisions of Section 3(3) of the Act are concerned, suffice to note that the Informant has not been able to show any ‘agreement’ amongst the OPs which can be examined within the framework of Section 3(3) read with Section 3(1) of the Act. Similarly, the Commission notes that the Informant has alleged abuse of dominance by all the OPs by averring in the Information that “…[A]ll the respondents together in collusion are tactically are accomplishing such unlawful acts or are able to make such demands due to the dependence of the consumer on the enterprise.” Such allegations made by the Informant alleging abuse of dominance by all the OPs, do not warrant any examination as the present scheme of Section 4 of the Act does not envisage or provide for joint or collective dominance.

19. For the reasons noted below, even the individual conduct of the parties does not appear to contravene the provisions of Section 4 of the Act.

20. In this regard, based on the facts and circumstances of the case, Commission is of the view that the relevant product market appears to be ‘the market for supply and installation of smart home solutions’ as this product cannot be substituted with the traditional market of designing the interiors of a residential unit. This product is unique in many aspects viz., it provides online security features, enables maintaining/ controlling the temperature of the residence from a remote location with the help of a mobile application etc. This product is totally different and can be distinguished easily based on its unique features, characteristics, comforts and services.

21. With respect to the relevant geographic market, the Commission is of the view that Smart Home Solutions can be bought from anywhere in India as there are many suppliers of the same providing a variety of services on customized basis. As such, it appears that the relevant geographic market would be ‘India’.

22. Accordingly, the Commission is of the view that the relevant market in the instant matter appears to be ‘the market for supply and installation of smart home solutions in India.’

23. In this market, the Commission observes that there are many players providing smart home solutions in India. Some of these players are Schneider, Electric, Smartify, Z-wave, Pert, Cubical, Odessi, Infineon etc., who provide Smart Home Automation Solutions to the consumers by offering a variety of services. As such, in the view of the Commission, the OPs are not found to be dominant in the relevant market delineated supra, be it OP-1 or OP-2, owing to the presence of several other integrators/ distributors who are vendors of the competitors of OP-3/ OP4. Further, in the absence of any material to the contrary, it is also observed that OP-3/ OP-4 as supplier/ manufacturer of RTI Home Automation Solutions may also be facing inter-brand competition from other suppliers/ manufacturers operating in the relevant market defined supra. Upon perusing the material and literature in public domain, it appears that this market is evolving in India with the presence of many players who are offering Smart Home Solution to the consumers. Further, there is nothing on record to suggest that OP-1 is the only integrator to design Smart Home Solution in Mumbai or that OP-2 is the only distributor offering Smart Home Solutions or that the consumers are dependent on OP-1 and/ or OP-2, as the case may be. Based on the above assessment, the Commission is of the view that none of the OPs individually are found to be dominant in the relevant market defined supra.

24. In the absence of the dominance of an entity, the question of assessment of abuse does not arise.

25. Coming to the allegations made by the Informant pertaining to contravention of the provisions of Section 3(4) of the Act, it is observed that it inter alia proscribes any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

26. Thus, for a case to be examined under Section 3(4) of the Act, the parties should be operating at different stages or levels of the production chain in different markets. In this regard, it is observed that while OP-1 is stated to be an integrator and supplier of RTI Home Automation Solution in the State of Maharashtra, OP-2 is the dealer and distributor of such products across India. Similarly, OP-3 and OP-4 are companies engaged in the business of providing RTI Home Solutions and Automation products in India and abroad respectively.

27. In this factual scenario, it is evident that the Informant (who issued a work order to OP-1 vide Purchase Order dated 06.05.2017 for availing complete RTI Home Automation Solutions), is not part of the production chain of RTI Home Automation Solutions. Moreover, from the Information, it appears that the said work order was placed to provide RTI Home Automation Solutions for the residence of one of the Directors of the Informant company.

27. In this factual scenario, it is evident that the Informant (who issued a work order to OP-1 vide Purchase Order dated 06.05.2017 for availing complete RTI Home Automation Solutions), is not part of the production chain of RTI Home Automation Solutions. Moreover, from the Information, it appears that the said work order was placed to provide RTI Home Automation Solutions for the residence of one of the Directors of the Informant company.

29. The Secretary is directed to communicate to Informant accordingly.”

9. On perusal of the facts noticed by the CCI in its impugned order, prima facie it appears that it was a consumers’ dispute without application of provisions contained either in Section 3 or Section 4 of the Competition Act. Learned CCI has rightly observed that Informant/appellant itself had admitted in letter dated 23.08.2018 sent to OP-1 with the subject “Deficiency in services and incomplete work as per the order No.4500015629 dated 06.105.2017”. Besides this it has been noticed by the CCI that there were number of players providing Smart Home Solutions in India and in such a situation there can not be element of dominance in the relevant market. So far as argument advanced by the learned counsel for the appellant relating to Explanation of Scope of “group” as explained in Explanation (c) of Section 4 or Explanation relating to “Group” in Section 5 of the Act which have been quoted hereinabove, the appellant has not brought on record any material to show as to how either of the Respondents were having control over the Management or having their shares, voting rights in consonance with three categories in Explanation (b) of Section 5 of the Act.

10. On examination of the order impugned and considering the submissions of the parties prima facie we are of opinion that there is no infirmity in the order and appeal is fit to be dismissed. Accordingly, the Appeal stands dismissed without costs.