Dawn raids amendment: Small step or giant leap?

By Mihir Kamdar, Udwadia Udeshi & Argus Partners
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The Competition Amendment Bill, 2012, seeks to substantially amend the provisions in relation to search and seizure operations by the director general of the Competition Commission of India (CCI). Search and seizure operations, especially under antitrust law, are popularly known in various jurisdictions as “dawn raids” because generally antitrust regulatory authorities conduct surprise raids before the working day starts or on weekends for the purposes of investigating possible competition law infringements.

Proposed changes

A similar mechanism is found in India’s Competition Act in its present form where the CCI director general may conduct such an operation after obtaining an order of the chief metropolitan magistrate, Delhi. It needs to be considered whether the proposed amendment will serve the purpose of having the element of surprise, as a dawn raid under the proposed amendment can be conducted only after an investigation has commenced, which may accord adequate preparatory time to persons under the scanner of the CCI.

Mihir Kamdar
Mihir Kamdar

The prerequisite of an ongoing investigation exists in the Competition Act in its present form as well.

The proposed amendment seeks to empower the chairperson of the CCI alone to authorize the director general to conduct a dawn raid. The amendment further permits a dawn raid to be conducted in the event of omission, failure or abstinence from providing required information or documents in addition to there being a threat of documents being destroyed, mutilated, altered, falsified or secreted. These additional grounds may deter parties from withholding information and documents that may be crucial for the purposes of an investigation by the CCI.

Safeguards lacking

In spite of the strengthening of powers accorded to the CCI chairperson, there is no specified procedure for challenge to an order authorizing a dawn raid.

This is significant since a dawn raid can only be authorized on certain grounds and fishing inquiries in the garb of raids are not permitted. Furthermore, these raids can be conducted at premises or at any place where such information or documents are expected to be kept.

At present, orders passed by the chief metropolitan magistrate, Delhi, authorizing seizure of documents, etc., are challengeable under the provisions of the Code of Criminal Procedure, 1973.

It is also pertinent to note that such empowerment of an individual forming a part of an antitrust regulator is absent in developed jurisdictions such as the European Union and the US. In the EU, dawn raids need to be conducted in accordance with local laws of member states, which generally prescribe that warrants must be procured.

In the US also, a warrant is required for conducting a dawn raid. A dawn raid without a warrant may breach the provisions of the fourth amendment to the US constitution, which guards persons against unreasonable searches and seizures.

For the CCI’s director general, the amendment would considerably reduce the constraints, including procedural delays, encountered during the course of an investigation since the procedure of obtaining an order of the chief metropolitan magistrate, Delhi, has been done away with, and the director general would only need the approval of the CCI’s chairperson to conduct a dawn raid.

From the perspective of a person whose premises are subjected to a dawn raid, there are other concerns, confidentiality being one of them. At present, the procedure during the course of an investigation is well settled. However, during a dawn raid, persons providing documents and information to the director general may not necessarily be aware of the critical nature of the documents and information that are being provided. Although there is always an option to claim confidentiality, in almost all cases such a claim would be possible only post facto.

A larger concern relates to the use of the data and information that the director general may come across during the course of a dawn raid. The proposed amendment does not limit the director general’s use of such data to the investigation at hand alone. In contrast, in the EU data procured during the course of dawn raids can only be used for the purpose of the antitrust investigation at hand and not otherwise.

Conclusion

In conclusion, the proposed amendment is a step forward, but generates some substantial concerns. At present the bill is pending before the parliament but once passed, among other amendments, the issue of dawn raids will certainly stir many debates and discussions considering the far-reaching implications.

How effectively the CCI uses these powers is something that remains to be seen.

Udwadia Udeshi & Argus Partners is a full-service law firm with offices in Mumbai, Delhi, Bangalore, Kolkata and Chennai. Mihir Kamdar is an associate partner at the firm.

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