In a significant legal development for the e-commerce sector, the Supreme Court of India on Tuesday set aside a 2020 order by the National Company Law Appellate Tribunal (NCLAT) that had directed a probe into alleged competition law violations by Flipkart.
A three-judge bench, comprising Chief Justice Surya Kant, Justice Joymalya Bagchi, and Justice Vipul M. Pancholi, has remanded the case back to the NCLAT for a fresh review. The court emphasized that the appellate tribunal must reconsider the matter after accounting for subsequent legal developments that may have invalidated the primary evidence used in the original ruling.
The legal battle originated from a complaint filed by the All India Online Vendors Association (AIOVA), which alleged that Flipkart had violated Section 4 of the Competition Act, 2002. This section pertains to the abuse of a dominant position, including practices like predatory pricing.
While the Competition Commission of India (CCI) initially closed the complaint, the NCLAT intervened on March 4, 2020. At that time, the tribunal ruled that a prima facie case existed against the e-commerce giant and directed the Director General of the CCI to initiate an investigation. Flipkart subsequently challenged this directive in the apex court.
Representing Flipkart Internet Pvt Ltd, Senior Advocate Abhishek Singhvi argued that the NCLAT’s decision was fundamentally flawed. He pointed out that the tribunal’s order leaned heavily on observations made by an assessing officer during income tax proceedings. However, those specific tax-related findings were later overturned and set aside by the Income Tax Appellate Tribunal (ITAT).
Singhvi further contended:
- There was no factual finding that Flipkart held a “dominant position” in the relevant market.
- The CCI’s own internal assessment had previously concluded that Flipkart was not a dominant player.
- Market dynamics suggest that Amazon, rather than Flipkart, was the dominant entity.
- The criteria for dominance and abuse, as established by the Supreme Court in the Coal India Ltd. judgment, were not met in this instance.
The bench observed that since the foundational evidence from the income tax proceedings—on which the NCLAT relied—had been set aside by the ITAT, a reconsideration was necessary.
“We request the NCLAT to decide the appeal afresh, keeping in mind the principles stated by this Court in a catena of decisions, including Coal India Ltd,” the bench ordered.
The court clarified that it has not expressed an opinion on the merits of the case, leaving all issues open for the NCLAT to evaluate. The parties involved are now at liberty to present their arguments to determine if a prima facie case truly exists and whether a probe by the CCI is warranted based on factors other than the now-defunct tax findings.
