Case No. 71 of 2012. Case: Faridabad Industries Association Vs Adani Gas Limited. Competition Commision of India
| Case Number | Case No. 71 of 2012 |
| Counsel | For Appellant: Sharad Gupta, Advocate and For Respondents: Nisha Kaur Oberoi, Aditya Sondhi, Gauri Chabbra and Bhashit Dholakia, Vice-President |
| Judges | Ashok Chawla, Chairperson, Anurag Goel, M.L. Tayal and S.L. Bunker, Members |
| Issue | Arbitration And Conciliation Act, 1996 - Section 20; Competition Act, 2002 - Sections 13, 19(1)(a), 19(4), 2(r), 2(s), 2(t), 26(1), 27(b), 4, 4(1), 4(2)(a)(i) |
| Judgement Date | July 03, 2014 |
| Court | Competition Commision of India |
Order:
-
The present information under section 19(1)(a) of the Competition Act, 2002 ('the Act') was filed by Faridabad Industries Association (FIA) against M/s. Adani Gas Limited alleging inter alia contravention of the provisions of section 4 of the Act. The Commission after considering the entire material available on record vide its order dated 27.12.2012 passed under section 26(1) of the Act directed the DG to cause an investigation to be made into the matter and to submit a report.
-
The informant is an association of industries, registered under the Societies Registration Act, 1860 situated in Faridabad having about 500 members. The members' industries comprise auto component, medical devices, steel, alloys, textile, chemical etc.
-
The opposite party i.e. M/s. Adani Gas Ltd. (AGL) is a company incorporated and registered under the provisions of the Companies Act, 1956 and is engaged inter alia in the business of setting up distribution network in various cities to supply natural gas to industrial, commercial, domestic and CNG customers.
-
It is averred in the information that about 90 members of the informant association consume natural gas supplied by the opposite party to meet their fuel requirements.
-
It is further alleged in the information that the opposite party by grossly abusing its dominant position in the relevant market of supply and distribution of natural gas in Faridabad has put unconscionable terms and conditions in Gas Sales Agreement (GSA), which are unilateral and lopsided, besides being heavily tilted in favour of AGL. The opposite party (AGL), in the garb of executing GSA, has imposed its diktat upon the buyers of natural gas, who are members of FIA.
-
It is also alleged that terms of GSA have been drafted unilaterally by AGL, without leaving any scope for the members of FIA, who are hapless buyers of gas and are solely dependent for supplies upon the opposite party.
-
Accordingly, it is alleged that AGL being in the driver's seat, is imposing its terms in complete disregard of basic principles of law of contract and has created a situation of 'take it or leave it' for the buyers of gas in Faridabad.
-
Referring to the various clauses of GSA as detailed in the information, the informant has alleged that the said clauses and conduct of the opposite party are only illustrative examples of abuse of dominant position by the opposite party in imposing unfair and discriminatory conditions in GSAs executed by it with the members of the informant association.
-
The informant has also made various other allegations which are not necessary to be reproduced here.
-
Based on the above averments and allegations, the informant had alleged contravention of the provisions of section 4 of the Act and has sought inter alia the following reliefs:
-
To pass an order under section 26(1) of the Act directing the Director General to cause an investigation to be made into the matter.
-
To direct the opposite party i.e. AGL to discontinue such abuse of its dominant position.
-
To impose an exemplary penalty upon the opposite party in terms of the provisions of section 27(b) of the Act.
-
To direct the modification of the impugned clauses of the agreement.
-
To require the opposite party to provide terms in GSA, which are fair and nondiscriminatory between the supplier and the buyer, as required under the provisions of section 4 of the Act.
-
To direct the opposite party to pay to the informant such costs as may be deemed reasonable by the Commission, keeping in view the financial loss suffered by the individual industrial units on account of the highly discriminatory conditions imposed by AGL in the sale of natural gas by it abusing its dominant position.
-
To direct the opposite party to remove the unfair and discriminatory conditions imposed by it in the Gas Sales Agreement.
-
To direct the opposite party to transparently share the data relevant to the fixation of prices before revising the natural gas prices.
-
To pass any other or further order(s) which the Commission deems fit and proper.
Directions to the DG
-
-
The Commission after considering the entire material available on record vide its order dated 27.12.2012 directed the Director General (DG) to cause an investigation to be made into the matter and to submit a report within a period of 60 days from receipt of the order.
Investigation by the DG
-
The DG, after receiving the directions and subsequent extensions from the Commission, investigated the matter and filed the investigation report on 07.02.2014. The findings and conclusions of the DG have been summarized in the succeeding paras.
-
The DG identified Relevant Market in the instant matter to be the market of supply and distribution of natural gas to industrial consumers in district Faridabad in terms of the definition of Relevant Market as provided in section 2(r) of the Act.
-
Investigation also concluded that the opposite party is in a dominant position in the said relevant market in terms of Explanation (a) to section 4 of the Act.
-
The DG concluded that sub-clause 9.4 of Clause 9 (Quality), sub-clauses 10.2, 10.5 & 10.6 of Clause 10 (Measurement and Calibration), sub-clause 11.2.4 of Clause 11 (Shutdown and Stoppage of Gas), sub-clause 12.6 of Clause 12 (Contract Price), sub-clauses 13.4, 13.6 & 13.7 (partially) of Clause 13 (Billing and Payment) and sub-clause 14.1 of Clause 14 (Payment Security) of Gas Sales Agreement (GSA) of the opposite party with its industrial consumers are not reflective of the abusive conduct of the opposite party attributable to its dominant position.
-
The DG further concluded that sub-clause 13.5 of Clause 13 (Billing & Payment) of GSA to the extent of stipulating 'any such rates as may be decided by the Seller in future' and sub-clause 13.7 of Clause 13 (Billing & Payment) to the extent of absolving the opposite party from paying any interest on excess amount in dispute paid by the consumers, amounts to imposition of unfair conditions by the opposite party upon consumers in contravention of section 4(2)(a)(i) of the Act.
-
The DG has concluded that sub-clause 16.3 under Clause 16 of GSA to the extent that the opposite party has reserved the right at its sole discretion to accept or reject request of customers for force majeure and sub-clause 11.2.1 under Clause 11 of GSA to the extent that the Buyer is obliged to meet its Minimum Guaranteed Off-take (MGO) payment obligation even in the event of emergency shutdown calling for complete or partial off take of Gas, amounts to imposition of unfair conditions in contravention of section 4(2)(a)(i) of the Act.
-
The DG has also concluded that sub-clause 17.4 of Clause 17 (Expiry and Termination) of GSA empowering the opposite party to terminate the agreement in the event of Buyer's failure to take 50% or more of the cumulative Daily Contracted Quantity (DCQ) during a period of forty five consecutive days amounts to imposition of unfair condition by the opposite party upon consumers in contravention of section 4(2)(a)(i) of the Act.
-
Lastly, investigation concluded that in so far as the allegations of the informant regarding irrational and arbitrary increase in gas prices by the opposite party are concerned, the conduct of the opposite party in the said matter cannot be construed to be a reflection of abuse of its dominant position. Further, the investigation also concluded that the allegations of the informant regarding non-adherence to the PNGRB Regulations by the opposite party in the matter of fixation of Transportation/Network tariff are not based on facts.
Consideration of the DG report by the Commission
-
The Commission in its ordinary meeting held on 19.02.2014 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 19.03.2014.
Replies/Objections/Submissions of the parties
-
On being noticed, the parties filed their respective replies/objections to the report of the DG besides making oral submissions.
Replies/objections/submissions of the informant
-
The informant, while agreeing with the findings of the DG where contraventions were found, filed its objections to the report with reference to other findings. The informant, at the outset, submitted that it is presumed that only in case of duress a buyer signs a sale agreement with unfair or discriminatory conditions incorporated by a dominant enterprise and that such act of the dominant enterprise amounts to abuse of dominance under the Act. It was submitted that in such cases what needs to be ascertained is whether those clauses directly or indirectly impose an unfair or discriminatory conditions in the sale of goods and not whether the dominant enterprise has, in practice, abused those clauses. The informant has contended that even if the Gas Sale Agreement provides for recourse to arbitration in case of disputes, the abusive action of the opposite party in incorporating unfair and discriminatory conditions in the agreement cannot be negated.
-
The informant further contended that the DG has failed to examine the real contention of the informant. It argued that even though the opposite party had provided the details of key quality parameters of gas in the invoices based on the certificate provided by GAIL, clause 9.4 of the Agreement still stands to be abusive since it gives unfettered discretion to the opposite party to issue certificate without any reference to the certificate provided by GAIL. In other words, there is no stipulation in clause 9.4 which puts the opposite party under obligation to base the certificate on the certificate provided by GAIL to the opposite party. The informant further stated that the DG's finding that under clause 9.4 consumers have alternate option to corroborate the...
To continue reading
Request your trial