TaxTMI 
TaxTMI 
2019 (10) TMI 1599
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....l, 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 granted to the petitioner to contest the premise on which CCI rejected the DG's report. The petitioner claims that CCI was required to indicate the reasons on the basis of which it proposed to reject the DG's report before proceeding further, in order to enable the petitioner to contest the same and thus, the failure on the part of CCI to do so has resulted in violation of the principles of natural justice. It is also contended that CCI has rejected the DG's report, which stated that certain clauses of the agreement in question were unfair, on the ground that the said agreement was arrived at after negotiation between the concerned parties. It is submitted th....
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....tion 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 under Section 26(1) of the Act, directed the DG to investigate into the matter and complete the same within a period of sixty days from the receipt of the order. The DG conducted the investigation as directed by CCI and submitted a confidential version of its report on 28.12.2015. The DG reported its finding that Clause 2, Clause 4.4, Clause 5.2, Clause 6.1, Clause 9.2, Clause 11.2 and Clause 15 of the GSPA were in contravention of Section 4(1) of the Act read with Section 4(2)(a)(i) of the Act. 10. CCI considered the DG's investigation report on 29.03.2016 and directed GEECL to furnish its balance sheet and profit and loss accounts for the three previous year....
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.... 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 negotiations between the parties (GEECL and SRMB). He submitted CCI could not ascertain any ground to reject the finding that the specified clauses of GSPA were discriminatory as a result of abuse of GEECL's dominant position. Mr Banerji had referred to Clause 5 of the GSPA and submitted that minimum guarantee offtake (MGO) liability imposed by GEECL on SRMB, in terms of Clause 5.2 of the GSPA, was one sided and unfair. He submitted that whereas GEECL had an option to terminate the GSPA in terms of Clause 5.1, no such exit option was provided for SRMB. He stated that GEECL could create the aforesaid situation by unilaterally stopping the gas supply and thus enablin....
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.... 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 GEECL that the petitioner had no locus to prefer the appeal or assail the order of CCI. 21. He submitted that the petitioner was an informant and therefore, would qualify an aggrieved person to file an appeal in case the orders were passed under Section 26(2) or 26(6) of the Act closing the case. He submitted that a certiorari would stand for the reason that the petitioner would continue to be a person aggrieved, if CCI had closed its case notwithstanding that DG's report was in his favour. He also referred to the decision of the Supreme Court in Municipal Corporation for Greater Bombay v. Lala Pancham of Bombay and Ors.: AIR 1965 SC 1008, in support of his con....
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.... 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 Commission. (4) The Commission may forward a copy of the report referred to in sub-section (3) to the parties concerned: Provided that in case the investigation is caused to be made based on reference received from the Central Government or the State Government or the statutory authority, the Commission shall forward a copy of the report referred to in sub-section (3) to the Central Government or the State Government or the statutory authority, as the case may be. (5) If the report of the Director General referred to in sub-section (3) recommends that there is no contravention of the provisions of this Act, the Commission shall invite objections or suggestions f....
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....e 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. However, if the DG's report indicates that there is a contravention of the provisions of the Act, CCI is required to return a finding after completion of the inquiry. If it finds that the action of an enterprise, that is in a dominant position, to be in contravention of the provisions of Section 3 and Section 4 of the Act, it may pass any or all orders as specified under Section 27 of the Act. This is clear from the opening sentence of Section 27 of the Act, which reads as under:- "27. Orders by Commission after inquiry into agreements or abuse of dominant position - Where after inquiry the Commission finds that any agreement referred to in section 3 or act....
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....ied; 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 case straightway, is without any merit. There is no provision in the Act which mandates that CCI must accept the DG's report recommending that there are contraventions of the provisions of the Act. The DG's report is not binding on CCI and it can differ with the DG's findings and reject the same. If on examination of the DG's investigation 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. 31. 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 a....
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....ing 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 interest in the said agreement. Secondly, the substratal premise that GEECL had violated Sections 3 and 4 of the Act, is unmerited. 37. It was contended on behalf of the petitioner that CCI had erred in rejecting the contention that certain clauses of GSPA were discriminatory and/or unfair on the ground that the same were negotiated between the parties. It was contended that once a condition imposed for the purchase and sale of goods and services has been found to be unfair or discriminatory, it would not cease to exist because it was negotiated between the concerned parties. This Court is not persuaded to accept the aforesaid contention, inter alia, for the re....
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...., 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 which fell foul of Section 4(2)(a)(i) of the Act. 42. Before proceeding further, it would be apposite to refer to the relevant clauses of the GSPA, including the ones that were concluded by the DG to be unfair and/or discriminatory. The same are reproduced below:- "2.0 PERIOD OF CONTRACT This CONTRACT shall come into force from the date it is signed. The SELLER will use its best endeavour to lay down the pipeline to the BUYERS premises within 45 days post signing of agreement and submission of the Bank Guarantee and clearance of ROU's from statutory authority thus enabling the SELLER to commence the work for the supply from the day all requisite permissions....
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....R 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 such third party will be binding on both the parties. All expenses of such third party will be borne by BUYER. The BUYER shall pay the penalty and losses occurred or occurring to die SELLER before resumption of the supply. If the amount is not paid by the BUYER within 7 (seven) days from the receipt of Debit Note from the SELLER, this Contract shall be liable to be terminated at the absolute discretion of the SELLER and the equivalent amount shall be deducted from the deposit given to the SELLER by the BUYER. 5.0 QUANTITY OF GAS 5.1 Subject always to the availability of GAS and SELLER's ability to supply the same to the BUYER, the SELLER agrees to sell the GA....
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....uaranteed 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 quarterly reconciliation. This will be settled through credit note by the SELLER to the BUYER in subsequent invoices. 5.3 Provided in any case, if there is any STRIKE (due to labour or any other reason) at BUYER and SELLERS works and, such STRIKE continuous for more than fourteen (14) consecutive days, in such a case provisions related to MGO as mentioned in clause 5.2 shall not be applicable to either party for a period of such strike continues beyond 14 days. 6.0 QUALITY OF GAS 6.1 The quality of Gas to be delivered to the BUYER will conform to, the specification laid down in Annexure-I hereto, which shall form part of this CONTRACT. 6.2 If Gas delivered ....
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....t 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 For the reasons stated in the application, the delay is condoned is caused or results from a FORCE MAJEURE. 9.2 The term FORCE MAJEURE in this CONTRACT means act or God, war, revolt, riot, fire, tempest, flood, earthquake, lightening, direct or indirect consequences of war (declared/undeclared), sabotage, hostilities, national emergencies, civil disturbances, commotion, embargo or any law or promulgation, regulation or ordinance whether Central or State or Municipal, breakage, bursting or freezing of pipeline Upon occurrence of such cause and on its termination, the parties rendered unable as aforesaid shall notify the other party in writing within twenty fou....
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.... 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 Asansol, W.B., or at any other office to be specified in this behalf by the SELLER in writing. 11.4 In case of default/dishonour in payment and subsequent settlement of outstanding dues, the SELLER shall reinstate supply of GAS to the BUYER on receipt of pay-order of the said amount within 24 hours. In the event of disconnection of supply of gas because of non-payment of dues in time or for reasons attributable to the BUYER. The BUYER shall make payment of Rs. 5000/- as reconnection charges. 11.5 SECURITY DEPOSIT: The BUYER shall submit a revolving confirmed Bank Guarantee (BG) which will always remain in place for the amount of the contracted quantity for ....
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.... 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 was no reason for the DG to assume the same. In fact, no such revision was made by GEECL and the DG had returned his finding/opinion on a mere unfounded surmise. 45. The DG had further opined that the Clause 4.4 appeared to be unfair as it empowered GEECL to appoint a third-party inspector. According to the DG, the third party may not be independent and could be a proxy for GEECL. He had also noted that the said clause was a standard feature in all agreements entered into by GEECL except one where the clause provided for appointment of a third-party inspector in consultation with the buyer. The DG found that the said clause was unfair as well as discriminatory....
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....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 is a continuous process standard clause across most long term supply contracts of producers and is intended to cover the risk of the seller in committing to sell a fixed quantity on a long term basis and to assure the buyer of a firm supply of gas. Correspondingly, GEECL is liable for differential fuel cost under SRMB's agreement if its supply falls below the MGO level and therefore, the clause is equitable. The DG's reasoning suffers from a flaw as in the gas contracts of other gas suppliers, upstream suppliers who impose MGO liability are producers themselves. There is no question of discrimination if one considers that GEECL's contracts are negotiated with e....
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.... 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 GEECL would not be supplied to them. As noted earlier, the MGO liability was only mitigate the risks in committing to a long-term supply. Thus, the fact that quantity of gas which was earlier supplied to SRMB was, after termination of the contract, being supplied to other purchasers does not, in any manner, render Clause 5.2 of the GSPA either unfair or discriminatory. 54. The DG found Clause 6 of the GSPA to be discriminatory as well. He found that the price of gas was not fixed to calorific value, which was so fixed as far as other customers are concerned. CCI did not accept the aforesaid view, since it found that terms of the GSPA had been negotiated individu....
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....cerns 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 view is manifestly erroneous. Providing for termination of a contract on the failure of the other party performing its material obligations cannot, by any stretch, be termed as unfair. 58. This Court finds that the entire approach of the DG in expressing its subjective opinion on various clauses is flawed. The DG is required to submit an investigation report after investigating facts and making recommendations on the basis of a factual foundation. In the present case, the DG has considered various clauses of the GSPA and has expressed its subjective opinion regarding the same. This, clearly, is not the only scope of investigation as contemplated under Section 2....