2026 (1) TMI 1401 - AT - Law of Competition

Coal handling charges at port found imposed through mandatory coordination fees; impugned order set aside and remitted.

Increase in coal handling charges concerned definition of the relevant product and geographic market and whether the terminal was dominant and abused ... Increase of coal handling charges by the PORT (CICTPL) - Relevant product market - relevant geographic market - market definition - substitutability - hinterland analysis - transport costs - abuse of dominant position - dominant position - appreciable adverse effect on competition - coordination and liaisoning charges - Competition Commission of India - Director General investigation - National Company Law Appellate Tribunal -whether the CICTPL was dominant in the relevant market in terms of Section 2(r) of the Act and if so whether the CICTPL has abused its position of dominance violating section 4 of the Act. - HELD THAT:- Since, the CICTPL is an only player, it automatically become dominant as stipulated under Section 2(r) of the Act. We have already analysed in great detail the reason for the same by treating relevant market only to CICTPL at Kamarajar Port and excluding Krishnapatnam Port. Therefore, we do not agree with the findings of the CCI on this aspect and concur with the finding of the DG in supplementary report holding the CICTPL to be dominant player. Once we have given our finding on the aspect of relevant market as well as the CICTPL, being the dominant player in the relevant market, we are left to decide only the final point i.e., whether the CICTPL was involved in abuse of its dominant position violating Section 4 of the Act, having AAEC on the Appellant. It is the case of the Appellant that coordination and liasoning charges were imposed by three entities, namely, (a) Breeze Enterprises Pvt. Ltd. (BEPL), (b) Original Innovative Logistics (India Pvt. Ltd.) (OIPL) and (c) Futuristic Handling Services Pvt. Ltd. (FSHPL) which were shadow entities of the CICTPL. We also note that it is the case of the Appellant that the CICTPL was required to give 52.33% of its gross revenue to the KPL/ Respondent No. 3 and to avoid such payments, the CICTPL created these entities. The CICTPL has further argued that no financial benefits have flown back to the CICTPL from any of these three entities which is undisputed facts. The CICTPL stated that there was no force or compulsion for the Appellant to use these services of three entities and these services were voluntary in nature. The CICTPL as further pleaded that no evidence has been shown by Appellant in this connection making the CICTPL responsible for making mandatory so-called mandatory co-ordination & Liasoning Charges. On this issue, we take into consideration that both the DG and the CCI have agreed that these charges were mandatory in nature. The CCI although did not agree to the Appellant contention that this was abusive practice violating Section 4 of the Act, but the CCI treated these Act as “Opportunistic” not falling in the definition of abuse of dominance position. The CICTPL was not found as dominant by the CCI in the Impugned Order in relevant market. The DG has taken into consideration the submissions made by the members of the Appellant and submission made by the CICTPL along with other stakeholders. The DG called them for interaction during its investigation. The DG noted that out of 9 power producers, 5 stated that coordination and liasoning charges were mandatory and they were made to pay the charge during relevant period. Similarly, out of non-IP producer entities like Zuari Cement also submitted to the DG that they were also made to such payments and they also treated such charges exclusive as mandatory. Similarly, five out of nine importers of non-IP trader’s category agreed to have mandatorily paid coordination and liasoning charges. These important included Adani Enterprises Limited and Sakthi Energy etc. The CCI prima-facie agreed to findings of the DG. The CCI in its analysis in para 110 of its report indicated that once the CICTPL has been found to be non-dominance in the relevant market, the examination of abusive conduct on point of the CICTPL was not required under the provision of the Act. However, the CCI indicated that for sake of completeness, the CCI has gone ahead to examine this aspect also. The CCI indicated that coordination and liasoning charges do not exists as of today. The CCI have noted the various finding on this issue given by the DG in main and supplementary investigation report (which we have already noted in our earlier preceding discussion). The CCI taken into consideration every deponent before the DG who confirmed during main as well as supplementary investigation by the DG that the coordination liasoning charges were mandatory during 2011-12 to 2014-15. The CCI found that coordination & liasoning charges were paid by Appellant members as well as by non-informant members through three entities and were mandatory in nature. The CCI stated that there seem to be no reason why user would pay additional charges to third party for availing services which ought to have been provided by the CICTPL. The CCI also noted that there was no economic sense for any importer to pay separate charge for coordination and liasoning charges to third party service provider and these charges were rather imposed upon users. The CCI also taken into consideration the DG’s finding regarding the relationship between these three entities with the Chettinad Group and held that the DG has successfully established the linkage even the no flow of funds from these companies to the CICTPL was found. The CCI also agreed that observation of the DG that these companies are not officially as part of Chettinad Group and however, the affairs and conduct of these three entities were manged and controlled by employees of the Chettinad Group. However, the CCI in para 128 of the Impugned Order treated conduct of the CICTPL as being “opportunistic” and not abusive since, the CICTPL was not held to be dominant in the Impugned Order by the CCI. It tantamount that had the CCI treated the CICTPL as the dominant player in the relevant market, then the said conduct of the CICTPL charging coordination and liasoning charges through three entities would have been treated as abusive. We tend to agree with the findings of the DG which has been concurred by the CCI that the coordination and liasoning charges was collected during relevant period through 2011-12 to 2014-15, relevant period by these three entities were mandatory in nature. We also concur with the finding of the DG and the CCI that the Chettinad Group and group were found to be in control in conduct of affairs of these three entities collecting Coordination & Liasoning charges. This tantamount to abuse of its dominant position by the CICTPL. Keeping all the facts into view and circumstances of this case and for the reason mentioned herein before, the Impugned Order passed by the CCI does not stand the test of law and is required to be set aside. We set-aside the Impugned Order accordingly. The appeal is hereby allowed and the matter is remanded back to the CCI for deciding it afresh in accordance with law after providing an opportunity of being heard to the parties including all fresh evidence. In view of our comprehensive finding as above, the Impugned Order is set aside. Issues: (i) Whether the relevant market should be defined as the provision of common user coal terminal services in and around Kamarajar Port excluding Krishnapatnam Port; (ii) Whether Chettinad International Coal Terminal Pvt. Ltd. (CICTPL) held a dominant position in the relevant market during the relevant period; (iii) Whether CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through third-party entities.Issue (i): Whether the relevant geographic market is confined to in and around Kamarajar Port or includes Krishnapatnam Port.Analysis: Consideration was given to transport costs, plant proximity, consumer preferences of fixed-location thermal power producers, hinterland analysis (captive versus contestable), sample user data collected by the DG, and comparative port volumes. Evidence showed most affected power producers were located near Kamarajar Port, significant transport cost disadvantages existed for alternative ports, and the DG's supplementary analysis delineated a distinct hinterland for Kamarajar Port. The CCI's inclusion of Krishnapatnam rested on overlapping usage and larger aggregate volumes, but the DG's focused analysis on end-user locations and switching behaviour indicates limited practical substitutability for the fixed consumers at issue.Conclusion: The relevant geographic market is confined to the provision of common user coal terminal services in and around Kamarajar Port; Krishnapatnam Port is excluded for the purpose of assessing market power as applied to the aggrieved users.Issue (ii): Whether CICTPL was dominant in the defined relevant market during the relevant period.Analysis: Market shares, number and strength of competitors within the defined geographic market, presence of only one common-user coal berth at Kamarajar Port, high entry barriers, user dependence due to transport economics, and growth of traffic at CICTPL despite tariff increases were examined. DG supplementary findings showed CICTPL was the sole common-user provider at the port and that sizable proportions of relevant users coal volumes were handled at CICTPL, supporting an ability to operate independently of competitive forces within the defined market.Conclusion: CICTPL held a dominant position in the relevant market during the relevant period.Issue (iii): Whether CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through third-party entities.Analysis: The findings reviewed include user responses to DG enquiries showing many importers treated the charges as mandatory, documentary evidence of links between the third-party entities and the Chettinad Group, the absence of transparent commercial justification for the services, and the fact that such charges were collected outside published tariffs thereby avoiding port revenue sharing. The DG and the CCI recorded that the charges were effectively mandatory; when combined with a finding of dominance, imposition of such mandatory, non-transparent third-party charges amounts to conduct that imposes unfair conditions and diverts commercial value from the competitive tariff framework.Conclusion: CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through related third-party entities, amounting to an appreciable adverse effect on competition.Final Conclusion: The impugned order that excluded Krishnapatnam Port from the relevant market assessment and declined to treat CICTPL as dominant is set aside; the matter is remitted to the Commission for fresh consideration consistent with the corrected market definition, the finding of dominance, and examination of abuse and remedies after hearing the parties and considering further investigation if necessary.Ratio Decidendi: For assessing dominance and abuse under Section 4, the relevant market must be defined with regard to end-use, transport costs, and consum­er-specific substitutability; where a single common-user terminal services a distinct local hinterland and users are transport-cost constrained, that terminal can possess dominance, and imposition of mandatory, opaque third-party charges by related entities constitutes abuse.