Compat quashes Rs1,773 crore CCI penalty on Coal India3 min read . Updated: 18 May 2016, 04:07 AM IST
Compat sent the case back to the Competition Commission of India to be heard again within two months
New Delhi: The Competition Appellate Tribunal (Compat) on Tuesday quashed a 2013 decision of the antitrust regulator which imposed a ₹ 1,773 crore fine on Coal India Ltd (CIL) and three of its subsidiaries for misusing their monopoly to supply poor quality coal and fixing prices.
At least two other Competition Commission of India (CCI) orders against CIL and subsidiaries were also similarly set aside. Compat sent the cases back to the CCI to be heard again within two months.
CCI, in December 2013, had found CIL and its three units—Mahanadi Coalfields Ltd, Western Coalfields Ltd and South Eastern Coalfields Ltd—guilty of abusing their dominant position for supplying non-coking coal and having unfair fuel supply contracts.
The tribunal’s decision is on a preliminary finding that not all the members of the CCI who signed off on the ruling were present during the hearings.
“The question whether a person, who is a member of an adjudicatory body and has not heard the parties, can adjudicate upon their rights and/or pass an order adversely affecting either party …must be answered in negative in view of the judgements of the Supreme Court...
“The functions performed by the bodies like the Commission which are clothed with the power to decide the rights of the parties or pass order adversely affecting a person are quasi-judicial in nature and are bound to comply with different facets of the principles of natural justice," the 78-page Compat ruling said.
The antitrust regulator has the right to move the apex court against this ruling. No final decision has been taken at CCI regarding this yet, said a CCI official, on the condition of anonymity.
“The Compat has set aside the penalty on Coal India, which was the biggest fine on an individual entity and the first on a public service undertaking. This was done on similar grounds as the December 2015 decision in the cement cartel case. The Tribunal said that the CCI, being a quasi-judicial body, had to comply with principles of natural justice, that is ‘he who heard the case, must decide’," said Shweta Shroff Chopra, who represented Coal India before the Compat.
In December, Compat set aside a ₹ 6,316.15 crore penalty on 11 cement firms and asked the CCI to hear the case again.
The tribunal’s decisions in these two cases show an emerging trend where the CCI is being made more accountable.
Vaibhav Gaggar, a lawyer who works with competition law cases, said that these decisions “raised the bar higher for the Commission".
“What the Compat has done in the past year, over 8 or 9 decisions, is that it has said that principles of natural justice are salutary and have to be adhered to in the strictest manner. While the Competition Act says that the Commission should be guided by these principles, the Compat says that you’re bound by them.
“In a way therefore it raises the bar for the Commission as well and brings about even greater accountability. Whether it serves the purpose of the Act or brings about greater public interest is another debate by itself," Gaggar said.
The CCI, in its December 2013 decision (and two other subsequent rulings) found the state-run company and its subsidiaries supplying low-quality coal at high prices, retaining the right to unilaterally terminate contracts with buyers, not providing a fair dispute redressal mechanism, and preferring other state-owned companies over private buyers of coal.
Additionally, Coal India was found violating the provisions of the Competition Act by imposing unfair conditions in its fuel supply agreements with power producers for non-coking coal.
The CCI acted on the complaints made by the Maharashtra Generating Co. Ltd, Gujarat State Electricity Corp. Ltd, Madhya Pradesh Power Generating Corp. Ltd, West Bengal Power Development Corp. Ltd and the Sponge Iron Manufacturers Association.
“Our stand is vindicated. The CCI order has been set aside and the matter has to be heard de nuevo (afresh) by the Commission," said S.N. Prasad, director (marketing), Coal India Ltd.
On Tuesday, the company’s stock price rose 0.37% to close at ₹ 283.90, while the BSE’s benchmark Sensex rose by 0.47% to 25,773.61 points.
Gireesh Chandra Prasad contributed to this story.