The Competition Act Applies To Psus: The Supreme Court Rejects Coal India Ltd's Challenge Since It Is A Business, Not A Sovereign Function

SUBJECT 

The Competition Act, of 2002 applies to Coal India Ltd. and its subsidiaries, the Supreme Court said in a thorough decision, as it is a Government Company and not a Department of the Government and manages a mining operation, which is not a sovereign duty. The bench further determined that the entity meets the requirements for an enterprise under Section 2(h) of the Act, further supporting the Act's applicability.

BRIEF FACTS 

• The Civil Appeal is directed against an Order made by the Competition Appellate Tribunal, New Delhi (hereinafter referred to as "Tribunal"). In that Order, the Tribunal upheld the findings and conclusions made on various aspects of abuse of dominant position by the Competition Commission of India (hereinafter referred to as "CCI"). The appellants were held responsible for the abuse of power. The appeal was turned down.
• The CCI received information from the second respondent, which it then reviewed and determined the appellants had abused their dominating position. The appellants have submitted an interlocutory application, I.A. No. 66587 of 2017, asking for permission to provide more grounds. The parties to the interlocutory application exchanged pleadings. The application for authorization to present the new grounds has been approved by the court.
• The court decided that a bench of three learned judges should consider these cases since a modification of the decision from the 03.08.2017 date had been requested when the subject was brought before a bench of two learned judges on September 16, 2022. As a result, the case was put before a bench of three experienced judges.

ARGUMENTS ON BEHALF OF APPELLANT 

• It was argued that the Coal Mines (Nationalisation) Act, 1973's requirements would not apply to the coal mines that the appellants operate in full compliance with those provisions. The Nationalisation Act's primary goal was to provide the Central Government and its agencies, including the appellants, a monopoly on the operation of coal mines and coal mining.
• It was further maintained that the monopoly was not a typical one, and protection under Article 31B of the Indian Constitution was approved o shield it from legal challenges.
• It was argued that because of coal's significance, the Ninth Schedule to the Constitution and Article 39(b) of the Indian Constitution exempt it from the definition of an ordinary monopoly and require it to adhere to the notion that the "common good" is secured through the "distribution of scarce resources."
• Additionally, it was argued that the CCI's authority to mandate the end of misuse under Section 27(a) of the Competition Act conflicts with the appellants' pursuit of a welfare policy on coal pricing and distribution.
• Additionally, it was argued that Section 32 of the Nationalisation Act prohibits the winding up of mining companies, in contrast to Section 28 of the Competition Act, which gives the CCI the authority to split up businesses that abuse their dominant position through, among other things, contract adjustments and business winding up.

ARGUMENTS ON BEHALF OF RESPONDENT 

• In support of its claim that the remaining shareholdings are in private hands, the respondent noted, among other things, that the first appellant had been fully owned by the Central Government as of 2010, but that after disinvestment, the Government's shareholding had dropped to just over 67%.
• The rulings in Waman Rao and Others v. Union of India and Others (1981) 2 SCC 362 were cited. The argument that the immunity laws enjoyed on their inclusion in the Ninth Schedule and the laws, which may be placed in the Ninth Schedule, stands greatly diminished was highlighted in the I.R. Coelho (dead) by LRs v. State of T.N. (2007) 2 SCC 1.
• Regarding the "common good" argument, the respondent claimed that the Nationalisation Act constituted an expropriation law.
• It was further argued that Section 3 of the earlier Act's Monopolies and Restrictive Trade Practises Act, 1969, which was repealed by the Act of 2022, clearly stated that the MRTP Act would not apply to government agencies unless it was specifically stated otherwise. However, the Act does not contain such a clause.
• Furthermore, it was argued that Section 54 contains the key and offers a legal route if the appellants wanted to be exempt from the Act's reach. The Act applies to the appellants if there is no exemption.

ANALYSIS OF COURT 

• The bench first noted the significance of coal by pointing out that it serves as a significant raw resource in the creation of essential final products. Additionally, it produces a type of fuel that powers power plants. The Nationalisation Act unquestionably resulted in the creation of a monopoly. The Central Government had ownership of the mines that were the focus of the Act. The first appellant was created by Section 5 of the Nationalisation Act and is a Government Company. The mines are run by the appellant-Company. It has the authority and responsibility to distribute coal. This invokes Article 39(b)-referenced Directive Principle. According to the aforementioned Directive Principle, "the State" should focus its policy on making sure that ownership and control of "material resources" are "distributed" in a way that "serves the common good."
• However, the bench pointed out that the observations were made on December 1, 2006, when coal was still a necessary commodity, citing Ashoka Smokeless Coal India (P) Ltd. v. Union (2007) 2 SCC 640, where the Court determined that holding an e-auction did not amount to price fixing. Even if it is no longer a necessary good as of the judgment date in February 2007.
• It was further said, "In this case, we are not dealing with a request to invalidate the Nationalisation Act because it violates any Fundamental Rights. The Nationalisation Act was passed to transfer ownership of the coal mines from the lessees to the central government, allowing for the operation of the mines in a way that ensures the rational, coordinated, and scientific development and utilization of the coal resources by the expanding needs of the nation.
• The appellants could not request immunity from the application of the law, which would otherwise bind them, the decision added.
• The learned counsel would argue that they are not doing any sovereign functions, as we have already indicated in response to a specific question about whether the appellants are performing any sovereign functions. This spares the Court from having a conversation that, even otherwise, might not be essential given the nature of the role. The initial appellant is not a government agency. It belongs to the government. In actuality, a government department performing government duties is not included in the meaning of the word "enterprise." By no means can the operation of the mining industry be referred to be a sovereign role. Nothing in the definition disallows a State monopoly that is even established to carry out the objectives of Article 39(b) of the Constitution, the judgment said.
• The appeal was therefore submitted by the bench for consideration on its own merits.