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TMI Blog2012 (2) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... and rendering services for a charge, which, prior to the entering into the aforesaid agreement with the petitioner, was being performed by the petitioner. The petitioner is also carrying out an activity, viz. running the railways, which also has a commercial angle and is capable of being carried out by entities other than the State, as is the case in various other developed countries. It is, therefore, not an inalienable function of the State. Therefore, the submission of the petitioner that it is not covered by the definition of 'enterprise', has no merit and is rejected. - W.P.(C) 993/2012 & C.M. Nos. 2178-79/2012 - - - Dated:- 23-2-2012 - MR. VIPIN SANGHI J. Petitioner: Mr. Mohan Parasaran, ASG with Mr. Zoheb Hossain, Mr. Romil Pathak Mr.Ashwani Bhardwaj, Advocates. Respondents: Dr. A. M. Singhvi Mr. Rajeeve Mehra, Senior Advocates, with Mr.Amitabh Kumar, Ms. Divya Chaturvedi Mr. Gautam Shahi, Advocates for the respondent No.2. JUDGMENT VIPIN SANGHI, J. 1. The petitioner-Union of India (UOI) through the Chairman, Railway Board, Ministry of Railways assails the order dated 03.05.2011 passed by the Competition Commission of India (Commission) in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, accordingly, the Commission passed an order to this effect under Section 26(1) of the Act on 24.01.2011. 4. The Director General in furtherance of the order took up the investigation into the matter and issued notice to the petitioner. The petitioner then preferred a writ petition before this Court to challenge the said notice by raising various jurisdictional pleas. The writ petition was dismissed by the Court on 23.03.2011 by observing that the petitioner may raise all the pleas urged in the writ petition, including the plea that the Commission has no jurisdiction to issue show-cause notice, before the Commission itself and the said issues shall be decided by the Commission. 5. Thereafter the petitioner moved an application dated 30.03.2011 before the Director General praying, inter alia, that the Commission may decide the issue of jurisdiction first, and to consider the case thereafter on merits. Vide the impugned order it is this application of the petitioner, alongwith an application under Section 8 of the Arbitration and Conciliation Act, 1996 which have been rejected by the Commission. 6. The Commission rejected both the objections of the petitioner. It was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er gives the power to the petitioner to fix the rates. He submits that the grievance of respondent No. 2 is with regard to the Haulage Charges fixed vide circulars dated 11.10.2006 29.10.2010. He also submits that under the statutory rules, namely the Indian Railways (Permission for Operators to Move Container Trains on Indian Railways) Rules, 2006, Haulage Charges are notified and fixed by the Railways from time to time, which the operator is obliged to pay. Consequently, the Haulage Charges are statutorily determined. He submits that these are purely contractual disputes which the respondent No. 2 ought to raise before the Arbitrator in terms of the arbitration agreement contained between the parties. It is further submitted that the industrial policy dated 24.07.1991 specifically reserves the railway transport industry for the public sector which shows that the railway transport is being undertaken by the petitioner as a sovereign function. 9. Mr. Parasaran also refers to Clause 3.2 of the Concession Agreement dated 09.05.2008 to submit that the Government has the right to specify certain commodities, which ordinarily would be transported by Railway wagons in train load as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are, firstly, whether the existence of an arbitration agreement between the parties is a bar to the maintainability of the information and the proceedings arising therefrom before the Commission; and, secondly, whether the petitioner is an 'enterprise' within the meaning of the expression as defined in Section 2(h) of the Act. 13. The Commission has been set up with special focus to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto . (See the Preamble of the Act) 14. The Commission is not merely concerned with the aspect of breach of contract or with regard to implementation of the contract, its mandate is to ensure compliance of, inter alia, Sections 3 4 of the Act. The provisions of the Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force (Section 62). This provision is para materia with Section 3 of the Consumer Protection Act, which also states that the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, whose mandate is circumscribed by the contractual terms even if he were to raise issues of breach of Sections 3 and 4 of the Act before the Arbitral Tribunal. Moreover, the Arbitral Tribunal would neither have the mandate, nor the expertise, nor the wherewithal to conduct an investigation to come up with a report, which may be necessary to decide issues of abuse of dominant position by one of the parties to the contract. Therefore, the submission of learned ASG that the proceedings before the Commission are not maintainable, founded upon the arbitration agreement has no merit and is rejected as the said observations of the Supreme Court apply with equal force in relation to the provisions of the Competition Act. 17. Before I consider the submissions of the learned ASG in relation to the meaning of the expression 'enterprise' contained in Section 2(h) of the Act, I may note that by referring to the various reliefs sought by respondent No. 2 before the Commission; the clauses of the agreement between the parties and by reference to the statutory Rules aforesaid, the petitioner is confusing the issue arising for determination, i.e., whether the petitioner is an 'e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 54 of the Act, which provides that the Central Government may, by notification, exempt from the application of the Act, or any provision thereof, and for such period as it may specify in such notification, inter alia, any enterprise which performs a sovereign function on behalf of the Central Government or a State Government (See Section 54(c)). Pertinently, no notification has been issued by the Central Government in relation to the services rendered by the Indian Railways. Even in relation to an enterprise which is engaged in activity, including an activity relatable to the sovereign function of the Government, the Central Government may grant exemption only in respect of activity relatable to sovereign functions. Therefore, an enterprise may perform some sovereign functions, while other functions performed by it, and the activities undertaken by it, may not refer to sovereign functions. The exemption under Section 54 could be granted in relation to the activities relatable to sovereign functions of the Government, and not in relation to all the activities of such an enterprise. Pertinently, there is no notification issued under Section 54 either under Clause (c), or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the activities relating to exercise of sovereign power. The functions of the State not only relate to the functions of the country or the administration of justice (which are recognized as sovereign functions), but they extend to many other spheres as, for example, education, commerce, social, economic and political activities. These activities cannot be said to be related to sovereign power. The running of Railways was held to be a commercial activity. The Supreme Court expressly rejected the reliance placed on the decision in Kasturi Lal (supra). 23. The decisions relied upon by the Commission are also germane. I also consider it appropriate to quote paras 26 to 30 of the impugned order, which, in my view, correctly analyse the legal position. The same read as follows: 26. In Bangalore Water Supply Sewerage Board v. A. Rajappa, (1978) 2 SCC 213, a seven judges Bench of the Supreme Court while interpreting the term industry‟ as defined in Section 2(j) of the Industrial Disputes Act, 1947 exempted the sovereign functions from the ambit of industrial law. However, the Court confined only such sovereign functions outside the purview of law which can be termed st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e new sense may have very wide ramifications, but essentially sovereign functions are primarily inalienable functions which only the State could exercise. In para 32, the Supreme Court held as follows: So, sovereign function in the new sense may have very wide ramification but essentially sovereign functions are primary inalienable functions which only State could exercise. Thus, various functions of the State, may be ramifications of `sovereignty' but they all cannot be construed as primary inalienable functions. Broadly it is taxation, eminent domain and police power which covers its field. It may cover its legislative functions, administration of law, eminent domain, maintenance of law and order, internal and external security, grant of pardon. So, the dichotomy between sovereign and non-sovereign function could be found by finding which of the functions of the State could be undertaken by any private person or body. The one which could be undertaken cannot be sovereign function. In a given case even in subject on which the State has the monopoly may also be non- sovereign in nature. Mere dealing in subject of monopoly of the State would not make any such enterprise sove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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