"Competitive neutrality" meaning creating a level playing field between public and private sector is a bedrock of modern competition laws across the Globe. For instance, in
But it is not as if the concept does not exist in
The jurisprudence on the interpretation of section 2(h) of the Act i.e., the definition of the term "enterprise" (which encompasses the concept of competitive neutrality as aforesaid in
For a detailed analysis on how the above jurisprudence on the definition of the term "enterprise " evolved in
As if furthering the same jurisprudence on the topic, the Hon'ble
The genesis of this case stems from a preceding order passed in 2014 by the
Subsequently, the COMPAT upheld the CCI's decision in the year 2016. Discontented with the verdict of the COMPAT, CIL approached the Supreme Court, interposing a preliminary objection postulating that the Act lacks jurisdiction over CIL, as the company's monopolistic authority was conferred upon it through the enactment of the Coal Mines (Nationalization) Act, 1973 ("Nationalization Act").
Arguments of
Shri
Further it was contended that the appellants, being part of this statutorily mandated monopoly, should be exempt from the Competition Act, as they represent a distinctive form of monopoly referred to as an "Article 39(b) monopoly." Unlike a regular monopoly, an Article 39(b) monopoly aligns with the State's duty to consider the principles of common good and the distribution of scarce resources. The Nationalization Act entrusted the appellants, as a State entity, with the responsibility of operating this monopoly while abiding by the Directive Principles enshrined in Article 39(b) of the
The learned Senior Counsel highlighted that the Competition Act does not specifically address companies like the appellants. Although Section 19(4)(g) of the Act acknowledges the possibility of a statutory monopoly indicating a dominant position, there exists a subtle distinction. The appellants, as an Article 39(b) monopoly, fall outside the scope of the Act. Previous court decisions, such as
Referring to Sections 3 and 11 of the Nationalization Act, Venugopal argued that the broadest interpretation should be given to the general superintendence, direction, control, and management of coal mines specified in the Act. To support this stance, the learned Senior Counsel drew parallels with judgments interpreting similar language in Article 324 of the
The appellants juxtaposed the Nationalization Act with the provisions of the Competition Act, emphasizing the divergences and resulting anomalies that would arise from subjecting the appellants to the latter. They drew attention to the contrasting long titles of both acts. While the object of the Competition Act is to ensure freedom of trade, the Nationalization Act demonstrates the intent to vest ownership and control of coal mines in the State for the optimal distribution serving the common good. It was argued that the
Arguments by CCI and other Respondents
The argument put forth by the Additional Solicitor General on behalf of the
CCI asserted that there is no challenge to the validity of the Act itself and suggested that laws enacted by the state cannot claim immunity when engaging in commercial activities. The composition of the CCI is seen as a sufficient safeguard, with experts in various fields ensuring fair examination of complaints related to abuse of dominant position. The argument also discussed the filters in the Act for determining abuse of dominant position by enterprises and the objective criteria provided for arriving at such a finding.
Additionally, the argument addressed the changing status of coal as an essential commodity and the repeal of the Nationalisation Act. It highlighted the reduction in government shareholding in the first appellant (possibly a government company) and argued that it cannot claim immunity from scrutiny based on its placement in the Ninth Schedule. The argument draws on various legal precedents to support the contention that the immunity of laws placed in the Ninth Schedule is diluted and that fundamental rights are qualified.
Different counsels representing the respondents support the applicability of the Act, emphasizing the common good associated with coal supply and the regulation of power prices. They argue that the acts and omissions of the appellants affect not only private players but also public sector units. The Maharashtra Power Generation company is mentioned as an example.
Supreme Court Findings
The
The
Further, the Apex Court outlined the scheme of the Competition Act the principle of enacting the and noted that that the Law-Giver has taken care to expressly include even Departments of the Government separately within the ambit of the word 'enterprise'. Things could not be more clear. The only activity of the Government, which has been excluded from the scope of Section 2(h) and therefore, the definition of the word 'enterprise' is any activity relatable to the sovereign functions of the Government. Sovereign functions would include, undoubtedly, all activities carried on by the Departments of the Central Government, dealing with atomic energy, currency, defense and space.
The Apex Court noted that Section 19(4)(g) of the Act, explicitly includes monopolies or dominant positions acquired through statutes or as government companies, public sector undertakings, or by any other means. Thus, the Court concluded that legislature intended to include the State Monopolies, Government Companies, Public Sector Units, and entities governed by statutes within the purview of the Act. Thus, CIL being a Monopoly under the Nationalisation Act, would fall within the realm of a dominant position as per Section 19(4)(g).
The
Finally, the Supreme Court noted the wide power possessed by the CCI under the Act and held that though the action of the CIL can be challenged in judicial review and in other forums like Controller of Coal, however, this does not exempt it from the preview of the Competition Act.
Lastly the Supreme Court held that through a notification under Section 54 of the Act can exempt from the application of the Act or any provision and for any period on the ground security of the State and public interest. Therefore, if a genuine case made out by CIL for being taken outside the purview of the Act in public interest, the Government would be powerless.
COMMENT -The Apex Court vide this latest order has further strengthened the concept of competitive neutrality in the Indian competition law by rejecting the defence on ground of the archaic Nationalization Act, put forth vehemently by the Ld. Shri KK Venugopal, former AGI. The
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Mr MM Sharma, Head Competition Law & Policy Practice
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