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The case against Power Generating Companies in Maharashtra reorients entities falling under Section 4 of the Competition Act

Amrutha Krishnan R

The said particular case was filed by Mr. Surendra Prasad (the ‘Informant’) against M/s Maharashtra State Power Generation Co. Ltd. (OP-1), M/s Nair Coal Services Ltd. (OP-2), M/s Karam Chand Thapar & Bros. (OP-3) and M/s Naresh Kumar & Co (OP-4) claiming contravention of the provisions of sections 3 and 4 of the Act. However the CCI did not find any violation prima facie, and closed the case in its majority order on 11th December 2013, without ordering any investigation.

One of the observations in the said order was that the OPs do not fall under the definition of “group” and that as a result, the allegation of contravention of Section 4 does not stand. OP-1 is a company created by the Government of Maharashtra for the purpose of generation of power for supply in the State of Maharashtra. As per Section 2(h), since the OP 1 is a “Government” company and since its purpose is “supply” of power, it can be established that OP 1 is an “enterprise”. Moreover in Shri Vijay Menon vs MAHAGENCO case, it was decided that MAHAGENCO is a “public sector undertaking engaged in business of power generation and supply [….]”. Provisions of Section 4 of the Act apply to “enterprise or group” and since it has been established that OP 1 is an enterprise, it alone can be charged under the provisions of section 4.

Further, the minority order states that the case in question is fit for investigation by the Director General under Section 26(1) of the Act.  A tender was proposed by OP 1 for transportation, supply of coal and its supervision. Despite being the lowest bidder BSN Joshi failed to acquire the tender. This was successfully challenged. In M/s B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. case, it was noted by the Supreme Court that OP-2 to OP-4 had formed a cartel. BSN Joshi’s application for the aforementioned services was directed to be reconsidered. Even though Supreme Court upheld BSN Joshi’s eligibility and gave appropriate order, its bid was not considered for tender by OP-1. Subsequently, BSN Joshi filed a contempt petition before the Supreme Court for non-compliance of its directions. In the contempt petition, Supreme Court accepted the allegations of cartel-like behaviour made by BSN Joshi. Thereafter, BSN Joshi was awarded the tender. However, the contract in favour of BSN Joshi was terminated prematurely on the ground of unsatisfactory performance.

The Supreme Court judgment holds over all, and since cartel-like behavior between OP-2, OP-3 and OP-4 was already proved, the information alleging distribution of tenders on the basis of geography in the said case warranted DG’s investigation under Section 26 (1) of the Act.

In conclusion, the majority order has limited persuasive power when compared with the minority. The judicial precedent was clear for the said case and the Appellate Tribunal rightly ordered DG, setting aside the majority order, to conduct investigation under Section 26(1) of the Act. Ultimately the investigation was conducted and a report was submitted to the CCI on 6th March 2016. The commission then levied a penalty of Rs. 7.16 crore on OP-2; Rs. 111.60 crore on OP 3 and Rs. 16.92 crore on OP-4.