Case No. 59 of 2013. Case: Bijay Poddar Vs Coal India Limited. Competition Commision of India
| Case Number | Case No. 59 of 2013 |
| Counsel | For Appellant: Santosh Kumar, Advocate and Party-in-person and For Respondents: Rajshekhar Rao, Gauri Puri, Harman Singh Sandhu, Yaman Verma and Prateek Bhattacharya, Advocates |
| Judges | Ashok Chawla, Chairperson, M.L. Tayal, S.L. Bunker, Sudhir Mital, Augustine Peter and U.C. Nahta, Members |
| Issue | Competition Act, 2002 - Sections 19(1)(a), 19(4), 19(7), 2(s), 2(t), 26(1), 35, 4, 4(2), 4(2)(a) (i), 4(2)(a)(i) |
| Judgement Date | October 27, 2014 |
| Court | Competition Commision of India |
Order:
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The present information under section 19(1)(a) of the Competition Act, 2002 ('the Act') was filed by Shri Bijay Poddar ('the informant') against M/s. Coal India Limited and its subsidiaries ('the opposite parties'/OPs) alleging inter alia contravention of the provisions of section 4 of the Act.
Facts
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Facts, as stated in the informations, may be briefly noticed.
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The informant states that CIL introduced a scheme called Spot e-Auction Scheme in 2007 ('the Scheme'). According to the terms and conditions of the scheme, initially all the bidders who bid for coal through the spot e-Auction route had to furnish a non-interest bearing Earnest Money Deposit (EMD) at the rate of Rs. 200/- per tonne. The informant further avers and alleges that for the past few years this amount of EMD has been enhanced to Rs. 500/- per tonne from Rs. 200/- per tonne, without reflecting the increase in a transparent way.
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It is further averred that as per clause 9.2 of the terms and conditions if the successful bidder does not lift the booked quantity within the stipulated validity period, the proportionate security deposit @ Rs. 200/- per tonne (as converted from the EMD amount) for the un-lifted quantity would be forfeited. The informant states that such forfeiture would not take place if the coal company has failed to offer full or part of the successful bid quantity within the validity period. In such cases again, no forfeiture would take place if the balance quantity is less than a truck load/rake load.
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The informant avers that it is wrong on the part of CIL and its subsidiaries to forfeit Rs. 500/- per tonne if the bidders/buyers of coal cannot lift the coal while CIL and its subsidiaries do not pay any penalty if they fail to supply coal. It is alleged that they simply refund the coal value without paying any compensation to the buyer/bidder. The informant is aggrieved by the fact that refund of the money is a cumbersome procedure as it takes a long time i.e. about 30 to 60 days from date of expiry of delivery order.
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The informant further laments that the forfeiture clause is arbitrary and illegal and in abuse of monopolistic power enjoyed by the opposite parties. It is further alleged that the scheme itself is illegal and one sided. It is the case of the informant that if the opposite parties fail to supply coal, bidder/buyer incurs losses as detailed below:
(i) The opposite parties retain the money from the successful bidders for more than 112 days (break-up of the days is as follows: 7 days approximately for deposit of coal value; 60 days for lifting of coal and 30 to 60 days for refund after the expiry of the deliver order) and the amount works out to be Rs. 225/- to 300/- per tonne; as a result of this buyer/bidder has to bear interest losses while opposite parties enjoy the credit without incurring any cost.
(ii) In the event of non-delivery, successful bidders/buyers do not get any compensation from the opposite parties.
(iii) Successful bidders/buyers then end up buying coal at high prices from the open market.
(iv) It results in excessive financial strain for the successful bidders/buyers.
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Based on these allegations and averments, the informant prays to the Commission to direct the opposite parties to pay penalty of Rs. 500/- per tonne + interest @ 15% from date of receipt of money till date of refund + compensation for non-supply of coal as bidders/buyers have to buy coal from the open market at high prices; to direct CIL to refund all penalties with interest and compensation; to impose penalty upon CIL for misguiding investors and; to declare the scheme illegal.
Directions to the DG
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The Commission after considering the entire materials available on record vide its order dated 18.11.2013 passed under section 26(1) of the Act, directed the Director General (DG) to cause an investigation to be made into the matter and submit a report.
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The DG, after receiving the directions from the Commission, investigated the matter and filed the investigation report dated 31.07.2014.
Investigation by the DG
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The findings and conclusions of the DG are as under:
Relevant Market
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The DG determined the relevant product market as "sale of non-coking coal to the bidders under Spot e-Auction". Further, the relevant geographic market was taken as whole of India. Accordingly, the DG defined the relevant market as "sale of non-coking coal to the bidders under Spot e-Auction Scheme in India".
Dominance
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After analyzing the factors mentioned in section 19(4) of the Act in light of the facts of the present case, the DG concluded that the opposite parties (CIL and its subsidiaries) are dominant in the said relevant market.
Abuse of dominant position
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The investigation concluded that the OPs have violated the provisions of section 4(2)(a)(i) of the Act, by imposing unfair and/or discriminatory provisions in the sale of non-coking coal under spot e-auction, as detailed in the latter part of the order.
Consideration of the DG report by the Commission
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The Commission in its ordinary meeting held on 12.08.2014 considered the investigation report submitted by the DG and decided to forward copies thereof to the parties for filing their replies/objections thereto. The Commission also directed the parties to appear for oral hearing, if so desired. Subsequently, arguments of the parties were heard on various dates.
Replies/Objections/Submissions of the parties
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On being noticed, the parties filed their respective replies/objections/submissions to the report of the DG besides making oral submissions.
Replies/objections/submissions of the opposite parties (CIL)
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At the outset, CIL took a preliminary objection by submitting that the statements of the representative of CIL were recorded in the absence of CIL's advocates, whose participation was specifically prohibited at those proceedings. Subsequently, an application was stated to be filed with the Commission requesting for the deposition of the representative to be annulled. Given that this application is currently still pending before the Commission, and the issue is to be decided during the final hearing (as per the Commission's order dated 08 May 2014), it was submitted that any reliance by the DG on such statements must be held to be impermissible and ought to be expunged from the DG's report. A failure to do so would result in a violation of the principles of natural justice, submitted the counsel.
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It was submitted that the allegations against CIL and its subsidiaries (all references to CIL henceforth include its subsidiaries) in relation to the alleged abuse of dominant position are unfounded and hence denied. CIL submitted that it has not engaged in any anti-competitive activities in violation of the provisions of the Act. CIL has always acted fairly and in the best interests of its customers and it is a law abiding corporate citizen. Further, being owned and controlled by the Government of India (GoI), it is not driven purely by a profit motive. CIL is fully aware of its social obligations/responsibilities and has always acted and continues to act in the larger national interest, sacrificing its own commercial interests which taken singly or together, would amply demonstrate that it cannot "operate independently of competitive forces prevailing in the relevant market". Further, the DG's finding that CIL has "power to affect its competitors or consumers or the relevant market in its favour" is completely misconceived and contrary to the existing reality where its actions are circumscribed by several other factors which take away any possibility of it acting in an 'independent' manner leave alone render it able to 'abuse' its alleged 'dominant position'.
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Additionally, it was submitted that the terms and conditions of the Spot e-Auction Scheme, 2007 have been set within the framework of the New Coal Distribution Policy 2007 (NCDP), with the objective of providing access to coal to consumers who would otherwise be unable to source coal through the available institutional mechanisms. As such, the Scheme provides for a simple and transparent system for consumers to source coal. Further, the Scheme is based on the NCDP and the directions of the Hon'ble Supreme Court of India in Ashoka Smokeless case. As such, compliance of law could hardly tantamount to be illegal leave alone constituting an alleged abuse of CIL's alleged dominant position.
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On the issue of assessment of relevant market, it was submitted that the DG has failed to conduct a full and comprehensive analysis of the case, and has mechanically relied on the conclusions reached in previous cases decided against CIL despite being specifically directed to investigate into the matter independently. The DG has failed to provide any analysis of the delineation of the relevant market, and has without any analysis in relation to the conditions of the market in relation to supply of coal through e-Auctions, arrived at a completely erroneous market definition.
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It was pointed out that the DG has defined the market as "the market for sale of non-coking coal to the bidders under the Spot e-Auction Scheme in India", without providing any reasons/explanation as to why the relevant product market constitutes only sale of coal from the Spot e-Auction Scheme, and not the Forward e-Auction Scheme. Further, it was argued that the DG has gone solely by the version offered by the informant without even applying its mind independently to the facts and/or conducting any independent investigation into the issue of whether there is a feasible substitute for the non-coking coal consumed by small users of coal in India. It was also contended that while the DG has placed reliance on the e-Auction schemes of competitors to draw a comparison with CIL's scheme, he states that they are not part of the same market, which is clearly contradictory.
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Finally, on the issue of relevant market, it was submitted that the DG has failed...
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