ICAI’s CPE program not an abuse of dominant position: HC quashes CCIs Order against ICAI

Delhi High Court in the matter of the Institute of Chartered Accountants of India (ICAI) vs The Competition Commission of India (CCI) has held that ICAI’s CPE program cannot be said as an abuse of its dominant position.

Relevant Text:

59. The CPE program is an education program run by ICAI. This is not interchangeable with any of the services provided by any other agency. A seminar of ASSOCHAM or other Chambers of Commerce are not education programs run by ICAI or a part of the professional educational program prescribed by ICAI. It is, thus, difficult to appreciate as to how any other service provider or any other persons holding the seminar can profess to impart a professional education, which is the sole preserve of ICAI.

60. As observed above, Article 10 of the Statement sets out the powers and functions of the CPED. This includes the function to approve formation of CPE chapters / CPE study groups; to review and monitor the programs conducted by various POUs; to allocate and assign responsibilities to various persons and or organizations as the case may be for development of CPE background material; and to take action against CPE study circles, CPE chapters / CPE study groups, who do not facilitate achieving of the object of the Statement.

61. The CPE structured learning activities are to be conducted by POUs and they are required to seek prior approval of the CPED. They are required to upload the details of the programs to be organized by them and to maintain records of the programs organized in the manner as stipulated by the CPED. They are also required to upload the attendance on the CPE portal and follow the directions as issued by ICAI and the CPED from time to time. A plain reading of the Statement clearly indicates that the CPE program is not an unsupervised program; ICAI determines the content and the manner in which the CPE programs are to be organized and conducted. Recognizing seminars organized by ASSOCHAM and other Chambers of Commerce as a part of the structured learning would, essentially, mean that ICAI would have to supervise the contents of those seminars and ensure that they are conducted in accordance with its guidelines. If the Informant’s contention is accepted, ICAI is obliged to do that, as not doing so is anti-competitive. This Court is unable to accept the aforesaid contention. ICAI being a statutory body and charged with taking the necessary powers to take decisions regarding the conduct of the CPE program for enrolling as a chartered accountant as well as for maintaining the standards of the profession; its decisions in this regard cannot be a subject matter of review by the CCI. Such decisions do not operate in any market of trade or commerce. Such decisions do not operate in any market of trade and commerce.

62. It is relevant to state that there are several statutory corporations and bodies, which are constituted under legislative enactments and are charged with specific functions. Some of them may also involve providing of services. If those economic activities are not a part of its regulatory functions, the same would obviously be subject to scrutiny by the CCI. However, a decision in exercise of regulatory powers, is required to be taken by the regulator and its discretion to do so can only be fettered by the provisions of the statute, which clothes the regulator with such powers. The regulatory powers are not subject to review by the CCI.

63. In terms of Clause (k) of Section 30 of the CA Act, subject to the prior publication and approval of the Central Government, ICAI also has the power to make regulation for “the regulation and maintenance of the status and standard of professional qualifications of members of the Institute”

64. It is important to note that apart from conducting CPE program, ICAI also conducts the educational program for qualifying as a chartered accountant. ICAI has evolved a detailed program for ensuring imparting of training to the students and further evaluating them for granting them the requisite qualification as an accountant. The said qualification then entitles the successful student to be enrolled as a member of ICAI and to practice as a chartered accountant. The logical sequitor of the Informant’s arguments is that ICAI is also obliged to recognize other educational institutions and the programs run by them as educational programs to qualify as a chartered accountant. There are numerous universities that run degree courses in the subject of accountancy. Some universities have also designed specialized courses, which teach the same subjects that are part of the syllabus of the educational program run by ICAI. Accepting the Informant’s arguments would mean that ICAI would now be obliged to also recognize such other universities and colleges as imparting the qualifying education for the purposes of enrolling members as chartered accountants. It is at once clear that the said argument is flawed. This is for the same reason that ICAI is charged with the function of prescribing the qualification for entry of a person’s name in the Register. [See Section 15(2)(d) of the CA Act; to approve academic courses and their contents]. This function is required to be performed by ICAI and it has been granted the statutory powers to do so. Such exercise of statutory powers are not subject to a review by the CCI. In terms of Section 15(2)(e) of the CA Act, the Council / ICAI has the power and the function to recognize foreign qualification and training for the purposes of enrolment. The discretion to recognize certain foreign qualifications is vested with ICAI. Plainly, this would not be subject to any review by the CCI. It is relevant to note that the CCI exercises powers conferred under the Competition Act, which in terms of Section 62 of the Competition Act, is in addition and not in derogation of other statutes.

65. In view of the above, the decision of ICAI to frame the CPE Program for maintenance of professional standards cannot be considered as abuse of its dominant position.

66. It is important to note that the CCI’s power is for regulating of markets; it does not extend to addressing any grievance regarding arbitrary action by any statutory authority. In the present case, the CCI has proceeded on the basis that there is a relevant market “for organising recognised CP Seminars/Workshops/ Conferences”. Clearly, the said view is erroneous. There is no market for organising CPE seminars, workshop or conferences. As noticed above, ICAI is charged with the function of maintaining professional standards and it conducts the educational program for structured CPE Credits, in-house or through its organs. Thus, in essence, the Informant seeks that the said function be outsourced. Such outsourcing would create a market as the other entities would be entitled to participate as market players in that market.

67. This Court is unable to accept that the jurisdiction of the CCI extends to compelling a statutory body to outsource functions that it performs in discharge of its statutory duties notwithstanding that the same may fall within the sphere of economic activity. It would be erroneous to assume that if any activity falls within the broad definition of economic activity, it would be necessary to create an open market for the same. This Court is unable to accept that the CCI can compel an organisation or an enterprise to outsource its activities.

68. The learned counsel appearing for CCI has relied on the decision of this Court in Uttarakhand Agriculture Produce Marketing Board and Ors. v. Competition Commission of India and Anr.: 2017 SCC OnLine Del 10906 and on the strength of the said case, contended that the Division Bench of this Court had not interfered with the decision of the CCI to investigate information that Uttarakhand Agriculture Produce Marketing Board had denied market access by restricting the procurement of Indian Made Foreign Liquor (IMFL). He had submitted that although the procurement of IMFL was pursuant to a policy framed by the Board and in discharge of its statutory functions, the jurisdiction of the CCI to examine the same was upheld.

69. The point in issue in Uttarakhand Agriculture Produce Marketing Board and Ors. v. Competition Commission of India and Anr. (supra) was somewhat different. The canalising of IMFL brands was an activity relating to distribution of IMFL. The said decision to directly related to the market for sale of IMFL and the Court found that canalising of IMFL could not be considered as a sovereign function. Procurement of goods from open market, by its very nature, is a matter which involves the commercial market.

70. As noted above, this Court has not accepted the contention that ICAI is not an “enterprise” within the meaning of Section 2(h) of the Competition Act. The controversy, as noticed earlier, is whether the grievance regarding ICAI not outsourcing the activity of conducting the CPE program in discharge of its functions, can be considered as abuse of dominance even at a prima facie stage.

71. In the impugned order, the CCI has expressed a prima facie view that the decision of ICAI to restrict organising CPE seminars to itself and its organisations is, prima facie, arbitrary. This is on the premise that there is a market for conducting structured CPE program, which is required to be regulated by the CCI as a market regulator. The said assumption lies at the centre of the controversy in this case. This Court is unable to accept that all decisions made by authorities, which have any relation to economic activities, are liable to be subject matter of investigation by the CCI on the ground that they are prima facie arbitrary notwithstanding that the same are not relevant to any market which involves entities engaged in trade or commerce. The CCI has wide powers under the Competition Act but this Court is unable to accept that the said powers extend to reviewing all decisions made by statutory bodies or a foreign government, which are not relatable to a sovereign function of the Government. The scope of examination must be confined to only those areas of economic activities, which have a bearing on the market that engages entities involved in trade and commerce.

72. The learned counsel for the CCI had relied heavily on the decision in the case of Ordem dos Técnicos Oficiais de Contas v. Autoridade da Concorrência of the Court of the Justice of the European Union. In that case, the Quality Control Regulation (Regulamento do Controlo de Qualidade, Diário da República, 2nd series, No 175, of 27 July 2004) were assailed as violating Article 101 and 102 of the TFEU. Article 101 of the TFEU prevents restriction or distortion of competition. Article 102 of the TFEU requires that abuse by one or more undertaking of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with internal market insofar as it may affect trade between Member States.

73. Article 3 of the Regulations impugned in the said case provided that Ordem Dos Tecnicos Oficiais De Contas (Order of Chartered Accountants – OTOC) promoted two types of training, namely, institutional training and professional training. In terms of Article 5 of the OTOC could offer all types of training relevant to the exercise of the profession. However, institutional training could only be provided by OTOC. The professional training could be provided by higher education establishments and bodies authorised by law to provide training and bodies registered with OTOC. Two training bodies had approached the Court alleging that the impugned regulations unduly restricted their freedom to provide training for chartered accountants. The Court, at the first instance, found that the impugned regulations offended Article 101 and 102 of the TFEU. OTOC had challenged the said decision before the Lisbon Commercial Court (tribunal do comércio de Lisboa). The said Court held that OTOC had distorted competition on the market of compulsory training for chartered accountants and the impugned regulations were likely to hinder trade between the Member States. However, the Court did not accept that OTOC had abused its dominant position in the relevant market. OTOC sought annulment of the decision of the Commercial Court by contending that its training activity fell outside the economic activity and therefore, outside the scope of Article 101 of the TFEU. However, the said contention was rejected by the Court of Second Chamber. The Court held that OTOC should be required to be regulated in its entirety as an association of undertakings.

74. In that case, the Court found that on one hand OTOC itself provides training for chartered accountants, and on the other, access to other providers wishing to offer such training is subject to standards as set out in the impugned Regulation. Consequently, the Regulations in question had deep impact on the economic activity on the market of compulsory training for chartered accountants.

75. The Court further held that the fact that OTOC was required to put in place a system of compulsory training for its members did not remove it from the source of Article 101 of the TFEU.

76. This court has reservations as to the said decision. However, it is material to note that the said decision was rendered in the context where both OTOC and professional institutions and other higher educational establishments were authorised to provide the training. And, OTOC as well as those institutions were engaged in providing courses as a part of the professional training of chartered accountants. Further OTOC is not the only professional body in the wider European Market. In the present case, there is no other institute which is providing any verifiable training other than ICAI. The structured program is conducted only by ICAI and its organs. The credits for unstructured training are based on self- declaration, the same in effect requires the professional chartered accountants to certify that they have devoted certain time for professional development. Importantly, there is no other body or institution, which is engaged in the activity of providing professional training to acquire the classification of a chartered accountant or for the continuing education program.

77. In view of the above, the petition is allowed. The impugned order is set aside. All pending applications are also disposed of.

78. The parties are left to bear their own costs.

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