AT THE CRACK OF DAWN: AN ANALYSIS OF DAWN RAIDS IN INDIA
Author: Anindita Deb, Advocate from Gauhati High Court
The term “Dawn Raids” as the name suggests, refers to surprise raids conducted by the Director General, the investigative wing of the Competition Commission of India. The distinctive feature of a dawn raid is the element of surprise attached to it. The underlying purpose is to catch the suspect off guard by conducting a raid at an hour when it is least expected.
Dawn Raids can be considered as the harbinger of a new era in detecting anti competitive practices. While the dawn raids conducted by the CCI is a potent weapon in the hands of the Commission to unearth anti-competitive practices but in the event of such occurrences it is imperative to be aware of the procedural intricacies of a dawn raid in order to avoid the abuse of the process sanctioned by law.
A Slew of Raids Conducted By the CCI Over the Span of 8 Years
The first ever dawn raid was conducted on JCB India in 2014
Two years later, in 2016, a raid was conducted on the premises of Eveready Industries Limited, Indo National Limited, and Panasonic Energy India Co. Limited.
The year 2018 witnessed raids being conducted at Anheuser-Busch InBev, Carlsberg India Private Limited and United Breweries Limited.
A slew of raids were conducted in 2019 on enterprises such as Glencore India, Export Trading Group and Edelweiss Financial Services Limited, the Indian arm of the French company, Mersen SA along with the Hyderabad and Kolkata offices of Assam Carbon Products Limited, Climax Synthetics Private Limited, Shivalik Agro Poly Products Limited, Arun Manufacturing Services Private Limited and Bag Poly International Limited were subjected to such raids.
In 2020, Ultratech Cement Limited, Ambuja Cements Limited, ACC Limited, Shree Cements Limited were subjected to raids.
In 2021, Dawn Raids were conducted on United Breweries Limited, Carlsberg India Private Limited, SABMiller India Limited, All India Brewery Association
An Analysis of the Procedural Aspects of a Dawn Raid
The power to conduct a dawn raid has been derived from Section 41 of the Competition Act,2002. Section 41(3) of the Act makes Section 240 and 240A of the Companies Act,1956 applicable to the investigation made by the Director General. Interestingly, an observation from a vantage point reveals that the provisions contained in Section 217,220 of the Companies Act of 2013 are strikingly similar to the Sections 240,240A of the erstwhile Act of 1956.
A conjoint reading of Section 41 of the Competition Act,2002 alongwith Section 220 of the Companies Act,2013 leads to the understanding that the Director General has been empowered to conduct search and seizure operations where a reasonable belief exists that books and papers of, or relating to, any company or other body corporate or managing director or manager of such company are likely to be destroyed, mutilated, altered, falsified or secreted. The search and seizure operations are not confined solely to books and papers but may also include e-mails, electronic devices, data stored in storage devices, servers etc. These operations are however, subject to the principles contained in the Code of Criminal Procedure as has been mandated by Section 220(3) of the Companies Act of 2013.
The Competition (Amendment) Bill of 2012 introduced the concept of Dawn Raids with the highlight that the presence of a reasonable suspicion that the parties under investigation have failed to make a true and full disclosure of information relevant to the investigation or that there exists a probability of the evidence getting tampered or destroyed is a condition precedent for conducting a dawn raid. The term ‘reasonable suspicion’ however, has an expansive connotation attached to it.
The Supreme Court in Calcutta Discount Company Limited vs. Income Tax Officer states that “ The expression " reason to believe " postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction…..If it be asserted that the Income Tax Officer had reason to believe that income had been under assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable.” The Andhra Pradesh High Court’s interpretation of the term in Rai Bahadur Seth Sreeram vs Deputy Collector bears testimony to the expansive connotation attached to the term. It was noted that “It is not possible to lay down precisely or exhaustively as to what constitutes 'reason to believe'. It would depend on various circumstances.”
Once the presence of such belief is established, obtaining a Search Warrant duly issued by the Chief Metropolitan Magistrate is the first requirement for conducting a Dawn Raid. The Warrant should clearly demarcate the area in which the raid shall take place and the document or other things for which the search and seizure operation has to be conducted. Two independent witnesses should also be present during the raid.
Rights of an Enterprise Being Subjected to a Dawn Raid
To be granted a reasonable amount of time to seek legal assistance
To ask for the warrant issued by the Chief Metropolitan Magistrate authorizing the dawn raid in order to verify the scope of the raid, the premises in which the raid is to be conducted, the identity of the Investigating Officials
To verify the identity of the officials conducting the raid by asking for their identity cards
To voice objection in the event that a document classified as ‘confidential information’ is copied or reviewed
To obtain a copy of the ‘Seizure Memo’
To keep a detailed record of the storage devices, emails, documents accessed by the investigating officials
To keep a record of the questions asked and the answers given
To insist on the presence of independent witness
Obligation of an Enterprise Being Subjected to a Dawn Raid
It is the foremost responsibility of the enterprise being subjected to a dawn raid to not obstruct the search and seizure operation. The use of force of any kind is not advisable. The Enterprise should also refrain from tampering evidences or relevant documents. Furthermore, all questions should be answered to the best of their knowledge.
Once the Dawn Raid is over, the Enterprise should arrange for an internal meeting to discuss the following issues:
The documents, files and information accessed or seized by the investigating officials
The questions put forth by the DG and the answers to such questions
Implications of the Raid
The steps that should be taken to address the issue if the information provided to the DG is untrue
The course of action that should be adopted if a privileged document has been seized by the Investigating Officials
Combating Anti Competitive Practices Globally
Section 32 of the Competition Act,2002 deals with situations in which anti competitive practices happening outside the territories of the Indian sub continent leave their impact on competition in India. Such issues can be addressed by exercising the powers derived from Section 18 of the Act which enables the CCI to enter into MOUs with authorities of other nations in order to facilitate hassle free investigations globally. Such MOUs have been entered into with US Department of Justice and the US Federal Trade Commission, European Commission, Canadian Competition Bureau, Australian Competition and Consumer Commission and the Russian Federal Anti-Monopoly Service, The Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa (BRICS countries).
Although it can be said without an iota of doubt that the provisions supporting a Dawn Raid have been made with the noble intention of curbing the rise of anti competitive practices but these raids are invariably intrusive and run the risk of dampening the future business prospects of the companies under the radar. It is hence, imperative for the enterprises to be acquainted with their rights when faced with such an event. However, it will be erroneous to believe that the legislations supporting dawn raids are free from shortcomings. The vague interpretation of the term ‘reasonable suspicion’ should be discarded to give way to a more concrete definition. There exists a huge gap in the legislations regarding the course of action which should be resorted to in the event of illegal raids or when there are procedural lapses while conducting a raid. Under the present circumstances, writ petitions can be filed to challenge such procedural lapses but this will invariably result in delay to the ongoing investigation and will cast a show of doubt upon the credibility of the investigating agencies. It is thus, desirable that adequate safeguards in the form of regulations or guidelines or amendments in legislations are introduced to provide clarity in procedural matters and to avoid the possibility of exploitation of small players in the hands of regulatory agencies.