Appeal No. 33/2016. Case: Anand Parkash Agarwal Vs Dakshin Haryana Bijli Vitran Nigam and Ors.. COMPAT (Competition Appellate Tribunal)

Case NumberAppeal No. 33/2016
CounselFor Appellant: Rajat Agarwal, Advocate and For Respondents: Varun Pathak, Himangini Mehta and Pooja Nawal, Advocates
JudgesRajeev Kher and Anita Kapur, Members
IssueArbitration And Conciliation Act, 1996 - Section 11; Competition Act, 2002 - Section 19, 19(1)(a), 26, 26(1), 26(2), 3, 36, 36(3), 4, 4(2), 4(2)(a), 49, 5, 53A, 54, 60, 62, 64; Constitution Of India - Articles 14, 246; Electricity Act, 2003 - Sections 110, 111, 111(1), 111(6), 121, 127, 128, 130, 14, 142, 146, 15, 16, 173, 174, 175, 176, 177, 1...
Judgement DateFebruary 16, 2017
CourtCOMPAT (Competition Appellate Tribunal)

Order:

  1. This appeal is directed against the order dated 10.02.2016 passed by the Competition Commission of India (hereinafter referred to as 'the Commission') under Section 26(2) of the Competition Act, 2002 (for short, 'the Act') holding that no case of contravention of the provisions of Section 4 of the Act has been made out and, therefore, the matter be closed.

  2. The Appellant, Shri Anand Prakash Agarwal, is a consumer of electricity supplied to his residence at Gurgaon by Respondent No. 1 i.e., Dakshin Haryana Bijli Vitran Nigam (DHBVN). DHBVN is a licensed supplier of electricity in the State of Haryana to the consumers within its area of operation. Haryana Electricity Regulatory Commission (HERC), an independent statutory body corporate, performing functions as an autonomous authority responsible for regulation of the power sector in Haryana in terms of the Electricity Act 2003 (henceforth, "the Electricity Act") and Haryana Electricity Reform Act, 1997, has been arrayed as Respondent No. 2. The State of Haryana, through its Additional Chief Secretary, Power Department has been arrayed as Respondent No. 3. The Appellant had filed an application for impleading the Commission as respondent, which was allowed, vide our Order dated 6.9.2016 and in the amended Memo of Parties, the Commission figures as Respondent No. 4.

  3. The facts of the case are that, the Appellant filed information in terms of Section 19(1)(a) of the Act with the Commission in December, 2015. In the information filed, it was claimed that DHBVN, which was the sole supplier of electricity in the area of residence of the informant, was charging Fuel and Power Purchase Cost Surcharge Adjustment (FSA), which was in the nature of cost pass through, for the uncontrollable cost incurred in the supply chain on account of variations in the input cost prices of fuel, as one of the components of the price of electricity supplied. It was contended that, DHBVN was charging higher FSA from the consumers whose consumption of electricity was higher and thereby directly imposing an unfair and discriminatory price upon consumers and cross subsidizing the FSA cost. Another argument was that, FSA had been steadily increased post 2008 with the approval of HERC, while the fuel costs had steadily declined thereafter, which was not only unfair but it also meant cross subsidization on account of lower consumption of electricity during various seasons which were either not extremely hot or cold, which is in contravention of mandated uniform FSA. The FSA, stated to be unrelated to the economic value of the supplied electricity, was claimed to be demonstrating exploitative conduct of DHBVN and constituted abuse of dominance in contravention of Section 4 of the Act.

  4. The Appellant further alleged that, HERC had been approving the FSA charge exceeding the mandated ceiling prescribed under the Regulations framed by the HERC and was permitting inclusion of the holding/interest costs in the FSA charge on account of unrecovered FSA charges, in contravention of its own Regulations for the charge of the FSA.

  5. The Appellant, therefore sought the following reliefs from the Commission:

    1. Order that DHBVN shall cease and desist its abusive conduct of imposing upon the consumer excessive, exploitative, unfair and discriminatory prices in the form or nature of, or as any component consisting in or as any portion of the Fuel Surcharge Adjustment.

    2. Order that DHBN shall henceforth charge the Fuel Surcharge Adjustment only on the basis of the actual uncontrollable costs related to the variations in the fuel prices of the power generating company.

    3. Pass an order that has a deterrent effect on the opposite parties for acting in contravention of law.

    4. Any other order deemed fit in the circumstances of the information to achieve the object and purposes of the Competition Act, 2002.

  6. The Commission on examination of the information determined that the relevant market in the present case was the market for distribution of electricity in the licensed area of DHBVN in the State of Haryana. The Commission also observed that, DHBVN appeared to enjoy the dominant position in the relevant market in view of the exclusive license granted to it, and the presence of regulatory restrictions for any other player to enter into the relevant market. The Commission noted that, the relevant market was a regulated one and the degree of commercial freedom enjoyed by DHBVN, might be subject to limitation in matters such as tariff, area of distribution. The Commission further observed that, DHBVN being a state owned entity was not functioning on profit motive alone as it had social obligations.

  7. The Commission, while agreeing with the Appellant about dominance of DHBVN in the relevant market, did not agree that differential pricing in this case constituted abuse of dominance in terms of Section 4 of the Act. The Commission was of the view that, classification of consumers and corresponding FSA charged followed a rationale whereby domestic consumers was charged less than the non-domestic consumers and different FSA was levied for different categories of consumers depending upon the socio-economic conditions of the respective class of consumers. The conclusion of the Commission was that, the classification appeared to have economic justification based on market segmentation and did not amount to discriminatory conduct.

  8. In regard to Appellant's claim that FSA had been increasing disproportionately, the Commission found it difficult to construe any unfairness regarding the quantum of FSA levied, as the Appellant had failed to provide the facts or figures to substantiate the purported decline in the price of fuel used for power generation, leading to a decline in the cost of power generation.

  9. The Commission further held that, the case essentially related to the functions discharged by the Electricity Distribution Company and the State Electricity Regulatory Commission in respect of fixation of FSA and no competition issue was discernible from the facts presented in the information. The Commission was of the view that, FSA was computed and levied as per the Regulations framed by HERC and any issue regarding violation of the Regulations was, therefore, to be dealt with by HERC and anyone aggrieved by the decision of HERC could go in appeal to the Appellate Authority under the Electricity Act. The Commission accordingly closed the matter in terms of Section 26(2) of the Act, vide the impugned Order dated 10/2/2016.

  10. The Appellant filed a Writ Petition challenging the order of the Commission. The Hon'ble High Court accepted the contention of the Commission that, the impugned order was appealable under Section 53A of the Act before this Tribunal and dismissed the Writ Petition vide its order dated April 6, 2016, giving liberty to the Appellant to file an appeal against the impugned order. The Appellant has thereafter filed the present appeal.

  11. We have heard Shri Rajat Agarwal, Advocate for the Appellant and Shri Varun Pathak, Advocate for Respondent No. 1 i.e., DHBVN. None appeared for Respondents Nos. 2, 3 and 4.

  12. In the course of hearing, the Advocates for the Appellant and DHBVN made a request for permission to place additional documents on record, which was accepted vide our Order dated November 16, 2016. DHBVN filed additional documents with I.A. No. 01 of 2017 seeking condonation of delay in filing of these documents. We found the explanation offered for the delay in filing valid, and the delay was condoned. The Appellant stated that, he did not want to file any additional documents, which was recorded in our Order dated 05.01.2017.

  13. The counsel for the Appellant made the following arguments to seek setting aside of the impugned order:

    "(i) The Commission should have followed the principles of natural justice as mandated under Section 36 of the Act, at every stage of proceedings and should have given a hearing to the Appellant before passing the final order under Section 26(2) of the Act. The impugned order was prejudicial to the Appellant and Supreme Court had, in the case of Competition Commission of India versus Steel Authority of India Ltd. and Another in Civil Appeal No. 7779 of 2010 [ (2010)10 SCC 744)], affirmed that closure of a case under Section 26(2) of the Act caused determination of rights and affected a party.

    (ii) If the Commission, which was discharging adjudicatory functions, needed more information regarding the price movement of the fuel, it should have given a pre-decisional hearing or sought more information from the Appellant. The mere requirement of more information was sufficient to warrant an investigation by the Director General. Besides, the information was only in the nature of allegation under the Act and the Commission could have called upon experts in terms of Section 36(3) of the Act, if it needed more information.

    (iii) Conclusion of the Commission that, the State owned entity had social obligation was an unwarranted assumption as the Central Government had not declared DHBVN as exempted from the provisions of the Act under Section 54 of the Act.

    (iv) The Commission failed to look into the relevant material in the National Tariff Policy formulated under Section 3 of the Electricity Act, providing that the uncontrollable cost should be recovered as soon as possible so that the future consumers were not burdened with the cost incurred in the past for other consumers. Such a policy direction implied that the FSA, an uncontrollable cost, was a pure cost pass through and was to be allocated equally to every consumer and no consumer could be made to pay for the other consumer in the fairness of the market behavior of the enterprise. Thus there was no possibility of a classification and, therefore, the question of the valid classification did not even arise.

    (v) The function of the electricity regulator i.e., HERC was ex ante while the function...

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