Compat stays Rs 1,773-cr penalty on Coal India

CCI had fined CIL for imposing unfair and discriminatory conditions in its fuel supply agreements with various customers

The Competition Appellate Tribunal (Compat) on Tuesday set aside the Rs 1,773-crore penalty imposed on Coal India by the Competition Commission of India (CCI). It also remitted the cases back to the CCI, which will hear them afresh and pass a judgment within two months.

In the meantime, Coal India and its subsidiaries have not been allowed to withdraw the modifications it had to make in fuel supply agreements (FSA) after CCI’s orders. The tribunal quashed the Commission’s orders after observing that many of its members were party to the orders despite not being present during hearings.

“The CCI orders have been set aside on the limited basis of violation of the principles of natural justice. The Compat did not go into the merits of the case and the CCI has been directed to hear the matters afresh,” Shweta Shroff, partner (competition law) at Shardul Amarchand Mangaldas & Co, told Business Standard. Shroff was representing Coal India on this matter.

The fair-trade regulator had imposed a fine on Coal India in December, 2013, after it found the company was abusing its dominant position through fuel FSAs in the relevant market of production and supply of non-coking coal in India. This CCI order came on the complaints filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corporation Limited (GSECL).

Ruing the fact that the case is now "back to square one", a senior official at GSECL commented, "We will wait and see what CCI decides now. However, certain clauses of fuel-supply agreements (FSA) are being reviewed and we are looking forward to the same."

The other companies which had filed complaints against Coal India were West Bengal Power Development Corporation, Madhya Pradesh Power Generation Company, Sponge Iron Manufacturers Association and Gujarat Heavy Chemicals Limited.

In these cases, the CCI did not impose any further penalty on  Coal India but the company was asked to cease and desist from unfair practices and modify the terms of the FSAs. Compat set aside all such orders of the CCI and asked the regulator to hear these matters afresh. However, in all these cases, neither of the parties shall be entitled to adduce any additional evidence before the Commission during these hearings.

"The Commission ought to re-assess its approach to handling cases, as its decisions cannot have the desired impact if they continue to be set aside by the Tribunal on these grounds," said Shroff. In December last year, the tribunal had revoked the Commission's order - imposing a combined penalty of ~6,316 crore on 11 cement companies for allegedly forming a price cartel - on similar grounds.

Following the same argument on Tuesday, the Tribunal said: "It has been repeatedly held by the Supreme Court that the functions performed by the bodies like the Commission - which are clothed with the power to decide the rights of the parties or pass order adversely affecting a person - are quasi-judicial in nature and are bound to comply with different facets of the principles of natural justice."

COMPAT RELIEF: THE STORY SO FAR

2012

• January:  MSPGCL files two complaints in Competition Commision of India (CCI) against Coal India (CIL) and its subsidiaries alleging abuse of dominant position
   
• January and March: CCI finds MSPGCL allegations prima facie true; asks its investigation wing (DG office) to probe
   
• September: GSECL files a similar complaint in CCI against CIL and its subsidiaries alleging abuse of dominant position
   
• December: CCI finds GSECL allegations prima facie true; asks its investigation wing (DG office) to club all the complaints and probe

2013

• February: DG office submits its report to CCI, finds CIL abusing its dominant position through its fuel supply agreements
  

 

December: CCI finds merit in DG office report; penalises Coal India and its subsidiaries for Rs 1,773 crore

2014

• February:  CIL goes to Compat, which stays the penalty till it passes its own judgment
   
• April: In another case, CCI finds CIL abusing its dominant position, asks it to ‘cease and desist’ from such behaviour

2015

• May: Tribunal starts hearing arguments in all these cases

2016

• June:  Compat passes its judgment; sets the penalty aside, asks CCI to hear the matter afresh