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Six years after the National Company Law Appellate Tribunal (NCLAT) ordered a probe into alleged abuse of dominance by Flipkart, the Supreme Court has now reportedly set aside that ruling and sent the matter back to the appellate tribunal for a fresh review.
As per a report by Bar and Bench, the SC bench, which comprised of CJI Surya Kant and Justices Joymalya Bagchi and Vipul Pancholi, ruled that the NCLAT must independently decide whether there is enough basis to order an investigation, without relying on material that may not be legally relevant under the Competition Act.
Further, it noted that the earlier NCLAT ruling appeared to rely on observations made during income tax proceedings against Flipkart India. Those findings were later overturned by the Income Tax Appellate Tribunal (ITAT).
The case dates back to a 2018 complaint filed by the All India Online Vendors Association (AIOVA), which represents over 2,000 online sellers. The association had accused Flipkart of abusing its position by favouring large sellers and enabling deep discounting that hurt smaller vendors.
While the CCI had earlier closed the complaint, holding that neither Flipkart nor Amazon was dominant in India’s online marketplace, the NCLAT overturned that finding in March 2020, saying that the agency had applied an unduly high threshold at the preliminary stage.
The NCLAT had based its judgement on an April 2018 ITAT Bengaluru order, which said that Flipkart sold goods below cost to build market share. Later, the ITAT struck down the tax implication, ruling that such losses could not be treated as capital expenditure under the Income Tax Act.
Despite this, the NCLAT had relied on the factual observations on pricing practices and the links between Flipkart’s wholesale and marketplace arms to pass its judgement.
Flipkart told the SC that these income tax findings were no longer valid, as the ITAT had set aside the assessment order. It argued that conclusions drawn from those proceedings could not be used to justify a competition probe.
On the other hand, AIOVA argued that while the ITAT overturned the tax order on legal grounds, it did not reject the factual observations about pricing and business structure.
With this, the NCLAT must reassess the case without relying on the disputed income tax material. The appellate tribunal will once again decide whether there is enough ground to direct the CCI to investigate Flipkart’s marketplace practices.
The post SC Sets Aside NCLAT Order On Flipkart, Sends Dominance Case Back for Fresh Review appeared first on Inc42 Media.
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