2012 (2) TMI 503 - HC - Law of Competition

Railway Ministry Can Be Investigated for Competition Issues, Court Rules in Favor of CCI's Authority.

The court dismissed the petition, affirming the Competition Commission of India's (CCI) jurisdiction to investigate the complaint against the Ministry of ... 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? - whether the petitioner is an 'enterprise' within the meaning of the expression as defined in Section 2(h) of the Act? - Held that:- 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 under the proviso. This clearly shows that the Central Government does not consider any of the activities of the petitioner as relatable to sovereign functions. The petitioner has entered into a Concession Agreement under its PPP policy. It is, therefore, clear that respondent No. 2 is performing a commercial activity 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. Issues Involved:1. Jurisdiction of the Competition Commission of India (CCI) to entertain the complaint.2. Whether the petitioner, the Ministry of Railways, qualifies as an 'enterprise' under Section 2(h) of the Competition Act, 2002.3. The impact of the arbitration agreement between the parties on the maintainability of the proceedings before the CCI.Detailed Analysis:Jurisdiction of the Competition Commission of India (CCI):The petitioner, Union of India through the Chairman of the Railway Board, challenged the CCI's jurisdiction to entertain the complaint filed by respondent No. 2 under Section 19(1) of the Competition Act, 2002. The CCI rejected the petitioner's argument that it is not an 'enterprise' as defined under Section 2(h) of the Act. The CCI also dismissed the petitioner's objection that the existence of an arbitration agreement between the parties should refer the matter to arbitration under Section 8 of the Arbitration & Conciliation Act, 1996. The CCI held that the issues before it pertain to the alleged abuse of dominant position by the Railways, which is distinct from contractual obligations covered under the arbitration agreement.Whether the Ministry of Railways Qualifies as an 'Enterprise':The petitioner argued that it performs a sovereign function in running the Railways and hence should not be classified as an 'enterprise' under Section 2(h) of the Act. The CCI and the court relied on Supreme Court decisions, including Bangalore Water Supply and Sewerage Board Vs. A. Rajappa and N. Nagendra Rao & Co. Vs. State of A.P., to conclude that the Ministry of Railways does not perform a sovereign function. The court observed that the Ministry is engaged in commercial activities related to the provision of services, making it an 'enterprise' under the Act. The court also noted that the Central Government had not issued any notification under Section 54 of the Act to exempt the Railways from the Act's provisions, indicating that the government does not consider the Railways' activities as sovereign functions.Impact of the Arbitration Agreement:The petitioner contended that the arbitration agreement between the parties should bar the maintainability of the proceedings before the CCI. The court rejected this argument, citing Section 62 of the Competition Act, which states that the Act's provisions are in addition to and not in derogation of any other law. The court referred to the Supreme Court's decision in Fair Air Engineers (P) Ltd. Vs. N.K. Modi, which held that the existence of an arbitration agreement does not preclude the jurisdiction of statutory bodies like the CCI. The court emphasized that the CCI's focus is on ensuring compliance with competition laws, which is different from the contractual disputes typically addressed in arbitration.Conclusion:The court dismissed the petition, affirming the CCI's jurisdiction to investigate the complaint against the Ministry of Railways. It held that the Ministry qualifies as an 'enterprise' under the Competition Act and that the arbitration agreement does not bar the CCI's proceedings. The court emphasized that the CCI's mandate is to address issues related to competition law, which are distinct from contractual disputes subject to arbitration.