The Competition Commission of India (CCI) has ordered an investigation against public sector GAIL India for alleged unfair business practices regarding supply and distribution of gas to industrial players.
The watchdog called for a detailed probe after clubbing five complaints which alleged unfair business practices.
It has prima facie found violation of competition rules, after looking into complaints filed by automotive components manufacturers Rico Auto Industries, Omax Autos and Rico Castings.
"In pursuance of the GSA (gas supply agreement), the opposite party (GAIL) imposed take or pay liability and encashed the letter of credit furnished by the informants. These acts of the opposite party, when seen in conjunction with other conducts ... cannot be treated as mere non-compliance of contractual terms. Rather such high-handed approach of the opposite party in dealing with its customers is indicative of abusive conduct," CCI said in a 22-page order dated October 3. It was made public on Wednesday.
The regulator noted that a holistic look of the facts and circumstances suggested that the aforesaid conducts of GAIL "prima facie" contravened competition norms, and this deserved investigation.
Among others, the allegations pertained to suspension of gas supply without notice, denial of dispute resolution mechanism as envisaged under the agreement and forcing payments against incomprehensible invoices.
To assess the complaints, CCI considered "supply and distribution of natural gas to industrial consumers" as the relevant market. For three complaints, Gurgaon district was taken as the relevant one while it is Rewari district for the remaining two cases.
It was also alleged that GAIL imposed "take or pay liability", wherein buyer was required to pay even for the quantities of gas which GAIL was unable to supply due to some deficiency.
Terming GAIL's activities as "unexpected business behaviour", CCI said the company did not come forward for amicable settlement for the dispute as provided in the GSA.
The watchdog also noted the company suspended supplies of the informants for more than a month which was likely to have serious impact on the business of the informants.
The probe would be done by the CCI's investigation arm.
The informants were represented by advocates Sharad Gupta and Vinayak Gupta while advocates Balbir Singh, Abhishek Singh Baghel, Harsha Rathore and Nikita Ved appeared for GAIL.