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TMI Blog2019 (10) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... igation report indicating contraventions of the Act and CCI finds that there are no such contraventions; it is required to close the case, as has been done in the present case - If the petitioner s contention that it is mandatory for CCI to direct further investigation in the event it disagrees with the DG s recommendation is accepted, it would imply that CCI can never disagree with the report submitted by the DG. This, clearly, is not the scheme of Sections 26 and 27 of the Act. The report submitted by the DG under Section 26(3) of the Act is merely recommendatory. CCI is required to examine the same and take a view after hearing the concerned parties. In the present case, CCI has not accepted the DG s report and after hearing the parties has decided to close the case. The contention that this is contrary to the scheme of Sections 26 and 27 of the Act, is bereft of any merit and is, accordingly, rejected - Undisputedly, the impugned order passed by CCI is final and no appeal is provided under the Act against such an order. The contention that the impugned order is an order under Section 27 of the Act was rejected by COMPAT vide its order dated 15.05.2017. The petitioner has accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Mr Rajshekhar Rao, Mr Ram Kumar, Mr Vinayak Mehrotra and Mr Dhruv Dikshit, Advocates for R-2. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the present petition impugning an order dated 16.02.2017 passed by the Competition Commission of India (hereafter 'CCI') in Case No.63/2014, whereby CCI had concluded that a case of contravention of the provisions of Section 4 of the Competition Act, 2002 (hereafter 'the Act') was established against respondent no.2 (Great Eastern Energy Corporation Ltd. - hereafter 'GEECL'). The petitioner contends that the said decision is ex facie erroneous, as CCI had rejected the report submitted by the Director General, Competition of Commission of India (hereafter 'DG') establishing that the provisions of Section 4 of the Act had been contravened. It is earnestly contended that CCI was required to direct further inquiry as contemplated under Section 26(8) of the Act and it was not open for CCI to summarily reject the DG report which, after investigation, had found contravention of provisions of Section 4 of the Act. It is contended that the impugned order is also violative of the principles of natural justice as no further opportunity was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n thirty- one industrial consumers through its pipeline network in the Asansol- Durgapur industrial belt. 5. GEECL started producing CBM from the year 2007 and it is admitted that it was the sole supplier of CBM in the region until 2011- 2012. 6. On 11.05.2011, GEECL entered into a Gas Sale Purchase Agreement (hereafter 'GSPA') with SRMB. 7. On 16.09.2019, the petitioner, who is an employee of SRMB, filed an information under Section 19(1)(a) of the Act before CCI alleging that GEECL had violated the provisions of Section 4(1) of the Act by imposing unfair and discriminatory conditions for supply of CBM in terms of the GSPA. 8. CCI considered the information furnished by the petitioner under Section 19(1)(a) of the Act and formed a prima facie view that GEECL was in a dominant position in the relevant geographical market of Asansol-Raniganj-Durgapur Region in the State of West Bengal. CCI was also of the prima facie view that the terms of the GSPA appeared to be in favour of the seller (GEECL) and against the buyer and therefore, it appeared that GEECL had contravened the provisions of Section 4 of the Act. 9. In view of the above, CCI by its order dated 29.12.2014, passed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to direct the DG to conduct further inquiry. He submitted that CCI could not reject the DG's report without further inquiry. 15. He earnestly contended that it was not open for CCI to close the case in the manner that it has done. 16. Mr Banerji further contended that CCI had the power under Section 27(d) of the Act to modify any agreements to the manner and extent it deems fit, if it finds that an enterprise had directly or indirectly imposed unfair or discriminatory conditions in the purchase and sales of goods or services. He submitted that the findings of the DG were required to be examined in the aforesaid context. 17. Next, he contended that CCI had abruptly closed the matter without addressing all the issues. He submitted that CCI has provided no reasoning in finding as to why Clauses 4.4, 6.0, 11.0 and 15.0 of the GSPA were either unfair or discriminatory. He submitted that the DG has found the aforesaid clauses discriminatory. In addition, the DG report found that not linking the gas price to calorific value was discriminatory. He submitted that this was also not considered by CCI. He stated that CCI had merely rejected the findings on the ground that there were negotia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm supply of gas. He submitted that this finding was not correct, as CBM gas could be produced from several small wells where CBM could be extracted by boring into the wells. He further submitted that CCI's conclusions was based on facts which were not available from the DG's report. He stated that CCI had accepted the objections raised by GEECL without any further inquiry. He also referred to the decision of CCI in Shri Rathi Steel (Dakshin) Ltd. v. GAIL (India) Ltd.: 2017 CompLR 0706 (CCI), whereby CCI had in a similar situation, found it relevant to inquire into several aspects of different sources of gas procurement, the nature of arrangement with each supplier including price and takeover pay liability etc. He submitted that a similar inquiry was also warranted in the present case, however, CCI had decided to close the matter without any such inquiry. Next, he referred to certain specific clauses and submitted that CCI had found no fault with the said clauses simply on the basis that SRMB and GEECL had negotiated on the GSPA. He submitted that the said reasoning was perverse and unsustainable. 20. Lastly, he also countered the preliminary objections raised on behalf of GEEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter: Provided that if the subject matter of an information received is, in the opinion of the Commission, substantially the same as or has been covered by any previous information received, then the new information may be clubbed with the previous information. (2) Where on receipt of a reference from the Central Government or a State Government or a statutory authority or information received under section 19, the Commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. (3) The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within such period as may be specified by the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exists, it is required to close the case and pass such orders as it deems fit under Section 26(2) of the Act. 25. In the event directions to conduct an investigation are issued under Section 26(1) of the Act, the DG is required to submit a report on its findings, within the period as may be specified. In terms of Section 26(4) of the Act, CCI is required to forward a copy of the DG's report to the concerned parties, the concerned government or the concerned statutory authority as the case may be. 26. Sub-section (5) of Section 26 of the Act mandates that the CCI invite objections and suggestions from the concerned parties or the concerned government or the statutory authority as the case may be, if the DG recommends that there is no contravention of the provisions of the Act. If CCI agrees with the recommendation of the DG to close the matter after considering the objections/suggestions as invited under Sub-section (5) of Section 26 of the Act, it shall do so and pass such orders as it deems fit. However, if it is of the view that further investigation is called for, it may proceed with further inquiry by itself or direct that further investigation be conducted by the DG. 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group. 28. Insofar as Sub-section (8) of Section 26 of the Act is concerned, it expressly mandates that CCI shall inquire into the contraventions of the Act in case where (a) the DG's report recommends that there are contraventions, and (b) CCI is of the opinion that further inquiry is called for. If both the aforesaid conditions must be satisfied; further inquiry may be conducted by CCI by itself or by issuing appropriate directions to the DG for such enquiry. 29. In the event CCI is of the view that no further inquiry is required, it would not be necessary for CCI to conduct any further inquiry or issue any such directions for the DG to conduct the same. Such directions can only be issued if CCI is of the opinion that further inquiry is necessary. 30. The contention that if the DG's report recommends that there are contraventions of the Act, CCI cannot close the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order suffers from any infirmity, which warrants interference by this Court under Article 226 of the Constitution of India. It is the petitioner's case that GEECL has abused its dominant position by imposing unfair and/or discriminatory conditions for purchase and sale of CBM. According to the petitioner, the same constituted an abuse of its dominant position as contemplated under Section 4(2)(a)(i) of the Act. 35. It was earnestly contended on behalf of SMRB that CCI was required to view the matter in the light of Section 27(d) of the Act, which empowered CCI to modify an agreement - in this case the GSPA - to the extent it deems fit. Thus, according to the petitioner, CCI ought to have amended the GSPA to the extent it deems fit. 36. This Court finds the said aforesaid contentions to the unmerited for two reasons. First, neither GEECL nor SRMB had approached CCI seeking such relief. Admittedly, the GSPA embodied an agreement which was negotiated between the said parties and neither of them had complained against the same to CCI. It is difficult to accept that CCI ought to have exercised powers to modify the GSPA at the instance of a third party, who clearly has no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract have not made any such allegations, the fact that the contract had been freely negotiated would be of vital importance in determining whether Section 3 or 4 of the Act were violated. 39. In the present case, CCI had noticed that the parties had exchanged drafts of the GSPA before finalising the same. More importantly, some of the clauses which the petitioner claimed were unfair and discriminatory, had not been objected to by SRMB during contractual negotiations. Clearly, in these circumstances, the decision of CCI to take into account that the GSPA was a negotiated contract, cannot be faulted. 40. The petitioner had alleged that Clauses 4.2, 4.3, 4.4, 5.1, 5.2, 6.1, 9.2, 10, 11.2 and 15 of the GSPA were unfair and discriminatory and, thus, fell foul of Section 4(2)(a)(i) of the Act. 41. The DG had found that Clauses 2, 4.4, 5.2, 6.1, 8.2, 9.2, 11.2 and 15 to be imposing conditions constituting an abuse of dominant position under Section 4(1)(a)(i) of the Act. CCI had, after examining the DG's report in this regard as well as considering the submissions made by SRMB and GEECL, rejected the allegations that the said clauses of the GSPA embodied terms and conditions wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S intake arrangements or gas using equipment. 4.3 The BUYER under no circumstances shall sublet/lease/sell/create a change over on part or whole with the gas-related property at any given time, without the prior written consent of the SELLER. Any production losses or any kind of losses whatsoever attributable to the functioning of the equipments/installations mentioned in in 4.2 for any reason whatsoever shall, in no way, be the SELLER's responsibility and accordingly the SELLER shall not be held responsible for any such losses or damages in any circumstances. 4.4 Notwithstanding anything contained in any of the clauses of this contract, in case the BUYER is found to have tampered with the gas metering equipment, the gas supply to the BUYER will be immediately discontinued by the SELLER at his absolute discretion. An Inspection of the metering system & related pipeline shall be carried out by SELLER and his decision in this regard shall be final. However, if BUYER does not agree with the decision of SELLER, the BUYER may ask in writing for a third party inspection. SELLER will then appoint a third party to do inspection and ascertain the cause of tempering and decision of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her clauses, the Minimum Guaranteed Offtake will be reduced on pro-rata basis, considering no. of days in a quarter when the supply to the BUYER was less than k% of the daily quantity mentioned in 5.1 due to reduction or stoppage of supply the SELLER. For e.g. in a quarter if the quantity of gas supplied to the BUYER is less than k% of daily requirement mentioned in 5.1 for N days due to reduction or stoppage of supply by the SELLER. Minimum Guaranteed Offtake for die quarter will be as under: MGO - Daily Contracted Quantity x (no. of days in a Quarter -N) xk Where; K=80% No. of days in a quarter 75 days The BUYER undertakes to pay for such Minimum Guaranteed Offtake or for actual quantity used during the quarter, whichever is higher. In the event of shortfall in supply of gas less than MGO level and due to this the BUYER has to use alternate fuel, the SELLER agrees to compensate the BUYER with the differential cost, which BUYER had to actually incur over and above the agreed gas price (with proof of purchase). The SELLER'S liability in case of differential cost will be maximum to the agreed price of gas and the differential cost will be calculated on the basis of quart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.3 The SELLER shall, likewise inform the BUYER immediately about accidents and/or defects in GAS installations and GAS pipeline of the SELLER calling for discontinuation or complete or partial stoppage of supply of GAS. The SELLER shall not be liable for failure to perform or for the delay is condoned performing any provision(s) of the contract by the BUYER in such conditions and shall not be held responsible for any losses or damages to the BUYER due to partial or complete stoppage of gas supply. The provisions related to the payment of Minimum Guaranteed Offtake by the BUYER in Clause 5.2 shall not apply. 8.4 The SELLER has to check their equipment at BUYER'S premises once in a fortnight to avoid accident and for safety. In case of any problem of equipment arises, the SELLER has to depute his representative for proper rectification for safety and to avoid accidents. 9.0 FORCE MAJEURE 9.1 Neither parties hereto shall be liable for failure to perform nor for the reasons stated in the application, the delay is condoned in performing any provision(s) of the CONTRACT other than those providing for payment for GAS supplied, sold and purchased hereunder, if such failure or F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he BUYER for that quartr or Minimum Guaranteed Offtake (MGO) as per Clause no. 5.2, whichever is higher. The BUYER shall make the balance payment in full within 7 working days of receipt of such invoice. In case there is any dispute regarding billing, the BUYER shall not withhold payment. After making full payment of such invoices, the BUYER shall lodge the claims to the SELLER giving full particulars within a period of fourteen (14) DAYS from the date of making the payment, and such claims if found correct, the SELLER shall adjust the same against the next invoice of supply of GAS. The decision of the SELLER in this connection will be final and binding upon the BUYER. 11.2 The BUYER shall pay interest in all delayed payments @ 15% Delayed payment means any payment not received within the stipulated due date of any invoice raised against the BUYER by the SELLER. The SELLER reserves the right to stop supply of CBM Gas on account of non-payment, till payment is received against the said invoice. 11.3 The BUYER shall nominate the authority who shall receive the invoice(s) and make payments. The BUYER shall make payments at par in the SELLER's bank account with its Bankers at Asa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or operation of the intake arrangements, appurtenances, and properties of the BUYER or others relating to die possession and handling of any GAS supplied and further defend the SELLER at BUYER's sole expense in any litigation involving the SELLER." 43. Insofar as Clause 2 of the GSPA is concerned, the DG had reported that the said clause appeared to be onerous and one sided since it provided extensive powers to GEECL to alter the terms of the contract without concurrence of the buyer (SRMB). The DG had, therefore, opined that the said clause appeared to be unfair. 44. The said interpretation is, ex facie, erroneous. The clause merely enabled GEECL to revise the terms and conditions, including the prices after the fixed price period as defined under Clause 10.2 of the GSPA, had expired. A plain reading of Clause 10.2 of the GSPA also indicates that any revision of the price after the specified period would be subject to SRMB consenting to the same. The said clause cannot be read to mean that SRMB would be bound by any unilateral revision of the GSPA after the expiry of the initial period. It is material to note that GEECL did not understand the contract in this manner and there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his enabled GEECL to unilaterally stop the supply in order to terminate the GSPA at will. A plain reading of Clause 5.1 does not support this view. GEECL could reduce the gas only due to technical, production, interruption and other reasons. Plainly, this clause did not enable GEECL to withhold supply of gas without good reason. Furthermore, SRMB would be well within its rights to raise disputes if GEECL withheld the supply of CBM without sufficient cause. There is nothing unfair in enabling parties to terminate their agreement if the performance of the contract is adversely affected due to certain specified reasons. The expression 'other reasons' is required to be interpreted applying the rule of noscitur a sociis. 48. Insofar as the MGO liability is concerned, the DG had recognised that MGO clauses were standard in gas supply agreements. However, it had sought to distinguish other agreements on the ground that the said agreements were between distributors and purchasers whereas GEECL was a producer. 49. The DG had considered the aforesaid reasoning and had held as under:- "67. On a careful consideration of the matter, it may be observed that production of CBM gas production i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between gas producers and distributors. 51. It is important to note that a certain amount of gas was being flared. Obviously, if the same could be supplied to consumers, there would be no reason to flare the same. This may be for various reasons, including mismatch of demand and supply at a given point of time; inability of GEECL to supply the same; inefficient management of production/distribution; inability to store CBM; and other technical reasons. Nonetheless, it is undeniable that MGO liability would mitigate the risk of loss due to non-acceptance of gas. 52. Mr Banerji had also referred to the additional affidavit to point out that the total gas, which was flared up after the GSPA had been terminated, was less than the contracted quantity. According to him, this implied that the gas earlier being supplied to SRMB was being sold to some other buyer and was not flared. According to him, this established that MGO liability clause was unfair. The said contention is unsubstantial. 53. It is nobody's case that gas could not be supplied to other consumers. It is not SRMB's case that if the customers are available requiring gas at the particular point of time, gas available to GEE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said opinion. The DG had found that the force majeure clause was unfair on the ground that it did not accept certain events like labour action as force majeure events. Plainly, limiting the scope of force majeure clause to certain events and not others cannot be termed as unfair. CCI had also noticed that labour action at GEECL's end would also not fall within the scope of force majeure. Similarly, the DG had expressed its opinion that Clause 11, which provides for payment of interest in case of delay in payments by SRMB, was unfair as no such corresponding liability was placed on GEECL's failure to refund the overcharged amount. CCI had noted that no such concerns had been raised by SRMB and the said clause did not appear to be unfair. Moreover, there was no allegation that GEECL had overcharged SRMB nor had SRMB complained the same. Clauses limiting the interest liability on certain payments are well accepted. It is not necessary that contracts must provide for payment of interest on all amounts payable by either party. 57. Lastly, the DG had also found Clause 15 to be unfair, as it enabled GEECL to terminate the agreement on account of non- payment of dues. Plainly, the DG's vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, GEECL agreed to reduce the MGO from 80% to 75% of the contracted quantity. SRMB stopped taking gas supply from GEECL on 01.05.2014 and thereafter, in June 2014, moved the Calcutta High Court and the Court referred the parties to arbitration. 63. Thereafter, in August 2014, SRMB sought to agitate the matter before the Ministry of Petroleum and Natural Gas. However, it is noted that the matter was closed by the Government after seeking a reply from GEECL. 64. The complaint before CCI was filed in September 2014. It, plainly, appears that the petitioner had been put up by SRMB in view of the disputes that had arisen between SRMB and GEECL. 65. It is also material to note that the petitioner had appealed against the impugned order before COMPAT, which was rejected by an order dated 15.05.2017. The petitioner has, thereafter, waited for almost nine months to file the present petition. Considering that an appeal against an order passed by CCI has to be filed within a period of sixty days, the present petition has been filed after a considerable delay. Bearing the aforesaid in mind, this Court is of the view that the present proceedings are an abuse of the process of law, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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