Competition Act applies to public sector undertaking

Table of Contents

Recently, the Supreme Court has ruled that the Competition Act, 2002 applies to public sector undertakings (PSUs) like Coal India Limited (CIL).
PSU vs. Government Company:
  • A company which has more than 51% shares and is managed and controlled by the Indian Central, State, or Local Government is termed Public Sector Undertaking.
  • A Government company has 100% shares and is solely run by the State government or Central government.
  • The Competition Commission of India (CCI) had imposed a penalty of Rs.1773.05 crore on Coal India for imposing unfair/discriminatory conditions in Fuel Supply Agreements with power producers for supply of non-coking coal.
  • The Competition Appellate Tribunal had, however, reduced the penalty to Rs.591 crore.
  • The CIL has approached the Supreme Court against the order of the appellate tribunal.
What was Supreme Court’s stand?
  • The Court held that, “there is no merit in the contention of the appellants (Coal India Ltd) that the (Competition) Act will not apply to the appellants for the reason that the appellants are governed by the Nationalisation Act and that Nationalisation Act cannot be reconciled with the (Competition) Act“.
  • It also mentioned that “we see no reason to hold that a State monopoly being run through the medium of a Government Company, even for attaining the goals in the Directive Principles, will go outside the purview of the Act”.
Arguments in favour of the decision:
  • The Court observed that, the first appellant (CIL) is not a Department of the Government. It is a Government Company.
  • In fact, what is excluded from the definition of the expression ‘enterprise’ is a government department carrying on government functions.
    • “Carrying on business in mining, cannot, by any stretch of imagination, be described as a sovereign function. There is nothing in the definition which excludes a state monopoly which is even set up to achieve the goals in Article 39(b) of the Constitution.”
Article 39(b) says the ownership and control of the material resources of the community are so distributed as best to subserve the common good.
 Role of Competition Commission of India (CCI):
  • The Competition Commission of India (CCI) is a statutory body of the Government of India responsible for enforcing the Competition Act, of 2002; it was duly constituted in March 2009.
  • The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of the Raghavan committee.
  • Composition:
  • The Commission consists of one Chairperson and six Members who shall be appointed by the Central Government.
The Competition Act, of 2002:
  • Details:
    • The Competition Act, 2002, regulates competition in the Indian market and prohibits anti-competitive practices such as cartels, abuse of dominant market position, and mergers and acquisitions that may have an adverse effect on competition.
    • The Act has been amended by the Competition (Amendment) Act, 2007.
  • The Competition Commission of India (CCI) is responsible for implementing and enforcing the Act.
  • Judicial bodies:
    • The Competition Appellate Tribunal is a statutory body created in accordance with the Competition Act, 2002 to hear and regulate on appeals against any rules made, decisions made, or orders made by the Competition Commission of India.
    • The government replaced the Competition Appellate Tribunal with the National Company Law Appellate Tribunal (NCLAT) in 2017.

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