2025 (10) TMI 275 - AT - Law of Competition

Notification channelising beach sand exports via designated agent not a trade ban; Section 4 inapplicable, Section 26(2) closure upheld

Beach Mineral Producers Association and V Velmurugan, Proprietor M/s Phoenix Agency Versus Government of India Director General of Foreign Trade, Indian Rare Earths Ltd and Competition Commission of India, Delhi-23.

NCLAT held the government notification channeling beach sand mineral exports through a designated canalising agent did not bar foreign trade but required ... Anti-competitive practices - abuse of dominant position - notification by the Government bringing beach sand minerals (BSMs) exports under a State Trading Enterprise (STE) and designating a canalising agent - inquiry u/s 4 of the Competition Act or not - HELD THAT:- It is found that the notification does not stop the appellants to do business with foreign buyers but only says such exports need to be channelized through Respondent No.3, in view of material being related to the 1st Schedule of Mines and Minerals (Development and Regulation) Act, 1957 and Prescribed Substances under the Atomic Energy Act, 1962. Secondly it is found the provisions of Section 4 of the Act shall not be applicable in the present case. Admittedly Section 2(h) clarify enterprise does not include any activity of government relatable to sovereign functions of the government, including all activities carried on by the Central Government, dealing with the atomic energy etc. The learned CCI has rightly closed the information under the provisions of section 26(2) of the Act as vide the appeals, the appellant proposed to challenge the notification dated 21.08.2018, which in fact is a policy issue and this being not a forum to seek orders qua its quashing. In case the appellant has any grievance or intends to get such notification quashed, the appellant may seek its remedy elsewhere. The impugned order does not require interference by this Tribunal, hence the appeal stands dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notification by the Government bringing beach sand minerals (BSMs) exports under a State Trading Enterprise (STE) and designating a canalising agent constitutes conduct amenable to inquiry under Section 4 (abuse of dominant position) of the Competition Act. 2. Whether a Government department/agency designated to implement export policy in respect of atomic/strategic minerals falls within the statutory definition of 'enterprise' under Section 2(h) of the Competition Act, 2002, thereby attracting Section 4 scrutiny. 3. Whether the Competition Commission has jurisdiction to examine or quash policy formulations or notifications issued under the Foreign Trade (Development & Regulation) Act, 1992, and allied policy instruments. 4. Whether the impugned notification prevents private parties from exporting BSMs directly or otherwise effects a complete prohibition on trade by non-designated entities. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Amenability of STE designation and canalisation policy to Section 4 scrutiny Legal framework: Section 4(1) prohibits abuse of dominant position by an 'enterprise or group.' The impugned action arises from a notification under Section 3 of the Foreign Trade (Development & Regulation) Act and the Foreign Trade Policy (FTP), which placed export of BSMs under an STE and designated a canalising agent. Precedent Treatment: The Tribunal follows the principle that pure policy formulations and governmental decisions pursuant to statutory foreign trade powers are not ordinarily susceptible to competition-law adjudication under Section 4 where they constitute exercise of sovereign or sectoral regulatory functions. Interpretation and reasoning: The Court examined the nature of the impugned allegations and the source of the impugned action - a policy notification by the appropriate trade authority - and held that the change in export policy and its implementation are governmental/administrative acts. Such acts, being policy decisions made pursuant to statutory powers in relation to items of strategic importance (atomic/defence/space), are not examinable under Section 4's prohibition on abuse by enterprises. Ratio vs. Obiter: Ratio - A notification designating exports of strategic/atomic minerals to be channelised through an STE, issued as an exercise of statutory policy-making powers, is not, by itself, amenable to inquiry under Section 4 for abuse of dominant position. Conclusions: The Commission rightly treated the allegations as arising from policy formulation and implementation and therefore outside the scope of a Section 4 inquiry; no contravention of the Act was made out on that basis. Issue 2 - Whether a Government activity regarding atomic/strategic minerals falls within 'enterprise' under Section 2(h) Legal framework: Section 2(h) defines 'enterprise' and expressly excludes 'any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.' Precedent Treatment: The Court applied the explicit statutory exclusion in Section 2(h) to activities relatable to atomic energy and other sovereign domains; prior authorities recognising that governmental sovereign functions are not enterprises for competition law purposes inform the approach. Interpretation and reasoning: Given that BSMs are specified as Atomic Minerals under the MMDR Act and as Prescribed Substances under the Atomic Energy Act, activities relating to their export regulation were held to be connected to atomic/sovereign functions. Consequently, the entity implementing the policy in that domain cannot be treated as an 'enterprise' for purposes of Section 4. Ratio vs. Obiter: Ratio - Activities of Government relatable to atomic energy (and similar sovereign functions) are excluded from the definition of 'enterprise'; therefore Section 4's prohibition cannot be invoked against such activities. Conclusions: The notification and implementation by the designated Government entity fall within the statutory exclusion; Section 4 is inapplicable to such conduct. Issue 3 - Jurisdiction of the Competition Commission to examine/ quash policy decisions/notifications Legal framework: The Commission's mandate is to inquire into anti-competitive agreements, abuse of dominant position and combinations as per the Competition Act; it does not have jurisdiction to review or quash executive or policy decisions made under other statutes (FTDR Act/FTP). Precedent Treatment: The Court endorsed the principle that competition authorities are not the appropriate forum for judicial review or quashing of policy instruments; remedies against policy or notification must be sought in appropriate forums (administrative law/other courts). Interpretation and reasoning: The impugned allegations derive from a notification constituting a policy instrument. The Court found that challenging the validity of such a notification qua its quashing is not within the competence of the Competition Commission under Section 4; the remedy for aggrieved parties lies in other fora empowered to adjudicate on policy validity. Ratio vs. Obiter: Ratio - The Competition Commission cannot be used as a substitute forum for quashing governmental notifications or policy decisions; matters of validity of such instruments must be pursued through appropriate judicial/administrative remedies. Conclusions: The Commission acted within jurisdictional limits in closing the information; the Tribunal declines to interfere with the Commission's order on this ground. Issue 4 - Effect of the notification on ability of private parties to trade (interpretation of regulatory scope) Legal framework: The notification channelises exports through the designated STE/ canalising agent; analysis requires construction of the notification's effect on trade rights. Precedent Treatment: The Court considered the text and practical effect of the notification rather than inferring an absolute prohibition. Interpretation and reasoning: The Tribunal observed that the notification does not prevent appellants or other private parties from doing business with foreign buyers; it requires that exports be channelised through the designated canalising agent. Thus, the measure regulates the mode of export rather than imposing a blanket ban on trade by private entities. Ratio vs. Obiter: Obiter with instructive value - The notification regulates export channelisation and does not amount to a complete prohibition on commercial dealings with foreign buyers by private traders. Conclusions: The notification's effect is regulatory/administrative channelisation; it does not extinguish private parties' ability to engage in export trade per se. Overall Conclusion The Commission correctly declined to proceed under Section 4: (a) the impugned action was a policy formulation implemented pursuant to statutory powers and not amenable to Section 4 scrutiny; (b) activities relating to atomic minerals are within the statutory exclusion for sovereign functions in Section 2(h) and therefore not 'enterprise' conduct under the Competition Act; (c) the Competition Commission is not the forum to seek quashing of governmental notifications; and (d) the notification channelises exports but does not prohibit private trade. The Tribunal dismissed the appeal and declined to interfere with the Commission's closure of the matter.