BACKGROUND

The Office of the Director General, Competition Commission of India (“CCI”) last week conducted its first-ever ‘dawn-raid’ at the premises of M/s JCB India Ltd., an Indian subsidiary of a UK based construction company (“JCB”). News reports reveal that the raid was apparently conducted due to JCB’s non co-operation in the process of investigation by the Director General (“DG/Investigator”).  The case relates to a complaint filed by M/s Bull Machines Pvt. Ltd. before the CCI alleging abuse of dominance by JCB, under Section 4 of the Competition Act, 2002 (“Act”).

POWERS OF THE INVESTIGATOR

A ‘dawn raid’ refers to unannounced search for documents or evidence in certain geographic locations. The power to conduct such a raid is derived from Section 41(3) of the Act which provides that the Investigator shall have powers akin to an Inspector appointed under Section 235 or 237 read with Sections 240 and 240A of the Companies Act, 1956 in respect of production of documents and evidence and search and seizure.

In order to conduct a ‘dawn raid’ the DG is required to apply to the Chief Metropolitan Magistrate or his designate under Section 41(3) of the Act based on its “reasonable apprehension” that books and papers of, or relating to, any company or other body corporate or managing director or manager of such company or other body corporate may be destroyed, mutilated, altered, falsified or secreted. Notably, such an application is always ex-parte, to maintain an element of “surprise”.

The DG, pursuant to the warrant, is typically authorized to do the following:

  • Enter, with such assistance, as may be required, the place or places where such books and papers are kept;
  • Search that place or those places in the manner specified in the warrant; and
  • Seize books and papers it considers necessary for the purposes of the investigation.

Until now, the DG had only developed a practice of causing production of documents and summoning/ requisitioning witnesses and evidence at the DG’s Office.

HOW DOES IT AFFECT YOU?

Whilst it is the first time that the DG has conducted a dawn raid, it is certainly not the last. Notwithstanding the fact that it is important to co-operate and provide information to the DG to conduct its investigation, it is also important for the companies to be equipped to handle dawn raids at its premises. In order to assist you to handle dawn raids, please find set out below briefly the things that should be kept in mind at the time of the dawn raid. Given that as per Section 43 the Act non-compliance with the orders of the DG is a punishable penalty of up to one crore, non-cooperation can be costly.

On Arrival of the Investigator, Immediately Inform:

  • Legal Advisors of the company (the legal department/external lawyers specialized in competition law);
  • Senior Management; and
  • Corporate Communications Department.

During the Raid

  • Create a Dawn Raid Case Manager and/or Legal Advisor team to deal with the Investigator, who should be the sole point of contact between the Investigator and the company. Accordingly, the Dawn Raid Manager should be carefully chosen by the company to represent its interest in the best possible manner;
  • Check if the Investigator has the necessary warrant to conduct the raid;
  • Check the identity of the Investigator – determine and check thoroughly the legal basis of the investigation and the scope of the investigation (and, if permissible, a copy of all identification and authorizations should be taken);
  • Ask permission to seek external legal advice. If it is refused, do not insist;
  • Do not be hostile or obstruct the Investigator, but do make sure they are shadowed to the extent permitted by the Investigator at all times, by at least one person (preferably not the Dawn Raid Manager/Legal Advisor). The demeanor before the Investigator should be respectful as well as firm and credible;
  • Ensure that a record is kept of all questions and answers and of all documents and records copied or removed by the Investigator;
  • Make a request to identify legally privileged material and exclude those documents from the scope of the investigation;
  • Ensure that the Investigator does not roam unaccompanied around the premises;
  • Any access to the company IT systems/electronic record copying should be under the direction of the relevant company’s technology service provider and information security;
  • Where the Investigator has documentary evidence or some intelligence, it will be put to the officers of the company during interrogation, in order to obtain their views and answers. Accordingly, it is important to send the right person to interact with the Investigator.

Steps to be Taken After the Dawn Raid

  • Ensure that all the necessary information (such as information relating to the questions asked, documents taken and premises checked) has been captured;
  • Immediately debrief the senior management and external counsels;
  • Determine and re-assert confidentiality and legal privilege, wherever possible; 
  • Assess the information provided to the Investigator in terms of its insufficiency, wrong or misleading and a full and correct answer should be sent to the Investigator as soon as possible and retract any wrong information provided to the Investigator; and
  • Consider sending additional relevant material to the Investigator, particularly if it clarifies ambiguous documents or counters a more negative impression which may have been drawn from the documents examined.

CONCLUSION

In the 5 years of CCI’s experience in the country, this particular instance is the first known case of a ‘dawn raid’ in India. It would be interesting to see how and in what manner the power of search and seizure available to the DG under the Act will be exercised in times to come. Significantly, since the exercise of this power is predicated on the “reasonable belief” of the DG, the judicial review of such orders would undoubtedly add to the hitherto unexplored jurisprudence of investigative powers.

Disclaimer:

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or corporate body. No person should act on such information without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned herein. For any further information or queries, please contact suhailnathani@elp-in.com or ravisekharnair@elp-in.com