In a landmark ruling, a three Judge Bench of the Supreme Court headed by Justice KM Joseph on Thursday ruled that Competition Act applies to statutory monopolies like Coal India Limited (CIL).

“We would hold that there is no merit in the contention of the appellant (Coal India) that the Act (Competition Act) will not apply to the appellants for the reason that the appellants are governed by the Nationalisation Act and that Nationalisation Act cannot be reconciled with the Act”, said the order.

CIL was earlier held to be in violation of the Competition Act, 2002 – by abusing its dominant position – in multiple cases decided by the Competition Commission of India (CCI). In one of these cases – appealed to the Supreme Court – CIL raised an argument that the Competition Act did not at all apply to CIL, and hence there could be no question of CIL violating any provision of the Act. 

By a judgment delivered on Thursday, the apex court rejected this argument and affirmed that the Competition Act applies to CIL. 

The various appeals filed by CIL will now be adjudicated on the merits (i.e. to decide whether CCI was correct in determining that there is abuse of dominant position by CIL). 

In one of these cases, a penalty of ₹ 591.01 crore was imposed on CIL, and the correctness of this imposition will also be adjudicated on the merits. 

Trend-setter verdict

The latest SC verdict is likely to be a trend-setter on application of competition law to public sector firms, especially in the current setting of a free market economy that India has adopted over last three decades. 

CIL was represented in the Supreme Court by KK Venugopal, Senior Advocate, and Shardul Amarchand Mangaldas. CCI was represented by N Venkataraman, Additional Solicitor General, and Rishad Ahmed Chowdhury, Advocate-on-Record. 

The argument advanced on behalf of CIL by KK Venugopal was that the mines operated by CIL had been nationalised pursuant to the Coal Nationalisation Act, 1973. 

CIL further contended that the Nationalisation Act envisaged that the mines would be operated as a monopoly in the national interest, and that it would be wholly incongruous and self-contradictory to apply the principles of competition law to such a company. 

In response, CCI argued that there was no anomaly in a government company such as CIL being subject to the rigour and discipline of the Competition Act, since it is not dominance that is proscribed under the Competition Act but only abuse of such dominant position. 

CCI further contended that CIL claimed the Competition Act would not apply to it without at all explaining how compliance with the Competition Act would in any way impede the social objectives CIL’s establishment was intended to serve.

Coal India’s appeal

CIL had filed an appeal against the final order dated December 9, 2016 passed by the erstwhile Competition Appellate Tribunal (COMPAT). By the said order, COMPAT dismissed the appeal of CIL, upholding the order dated October 27, 2014 passed by the CCI - on an Information filed by Sai Wardha - which found CIL to be guilty of abuse of dominance violating the Competition Act. CIL was directed to cease such anti-competitive conduct.

Subsequent to the filing of the appeal in the Supreme Court, CIL filed an application arguing that the coal mines it operates – pursuant to the provisions of the Coal Mines (Nationalisation) Act, 1973 – would be wholly outside the purview of the Competition Act, 2002. CCI opposed the plea and contended that there is no constitutional challenge to any provision of the Competition Act. 

Related Topics