Shri Saurabh Tripathy v. Competition Commission of India & Anr.

14. Mr Gourab Banerji, learned senior counsel appearing for the petitioner submitted that CCI passed the impugned order under Section 26(8) of the Act. In terms of the said Section, it was incumbent upon CCI to have issued directions for further investigation by the DG to inquire into the contraventions of the provisions of the Act as pointed out by the DG and if necessary, to direct the DG to conduct further inquiry. He submitted that CCI could not reject the DG’s report without further inquiry.

15. He earnestly contended that it was not open for CCI to close the case in the manner that it has done.

16. Mr Banerji further contended that CCI had the power under Section 27(d) of the Act to modify any agreements to the manner and extent it deems fit, if it finds that an enterprise had directly or indirectly imposed unfair or discriminatory conditions in the purchase and sales of goods or services. He submitted that the findings of the DG were required to be examined in the aforesaid context.

17. Next, he contended that CCI had 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 enabling it to invoke Clause 5.[1] of the GSPA and exit the said agreement. He submitted that CCI had premised its decision on the assumptions that once CBM was produced, it could not be stored. If the same was not off-took, GEECL would have no option but to flare up the gas as there was no provision to stock CBM. He submitted that these assumptions are without any basis. He also referred to the additional affidavit and submitted that the details as provided therein indicated that GEECL’s market was expanding and the quantity of gas being flared was being reduced constantly. He submitted that this indicated that after termination of the GSPA, the total quantity of gas flared by GEECL was less than the contracted quantity of CBM.

18. According to Mr Banerji, the same indicated that the quantity contracted to be sold to SRMB was not flared but was sold to some other buyer. He submitted that in the event the gas was flared on account of SRMB not accepting the contracted quantity, GEECL would not have to pay either royalty (at the rate of 10%) to the State Government or the production level payment at the rate of 12.25% of the Government of India. However, there was no corresponding reduction in the MGO liability. Next, he submitted that GEECL had clearly mentioned that it had secured aggregate commitments to purchase up to 412 SCM of CBM as against 88 SCM. He submitted that the demand for CBM cost was thus, much in excess of the quantity produced by SRMB.

19. Next, he submitted that CCI had erred in observing that MGO liability was a standard clause across most long-term supply contracts and negotiated to cover the risk of the seller in committing to sell a fix quantity on long term basis and to assure the buyer a firm supply of gas. He submitted that this finding was not correct, as CBM gas could be produced from several small wells where CBM could be extracted by boring into the wells. He further submitted that CCI’s conclusions was based on facts which were not available from the DG’s report. He stated that CCI had accepted the objections raised by GEECL without any further inquiry. He also referred to the decision of CCI in Shri Rathi Steel (Dakshin) Ltd. v. GAIL (India) Ltd.: 2017 CompLR 0706 (CCI), whereby CCI had in a similar situation, found it relevant to inquire into several aspects of different sources of gas procurement, the nature of arrangement with each 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 contention that the expression ‘any aggrieved person is required to be given widest amplitude’. He submitted that since the object of the Act was to provide for regulation of markets, even members of general public would have sufficient interest to maintain a complaint.

22. Mr Rao, learned counsel appearing for GEECL countered the submissions made on behalf of the petitioner. Mr Rao contended that the petitioner had elected to file an appeal before COMPAT, which was rejected by an order dated 16.05.2017. He submitted that COMPAT had rejected the appeal as not maintainable but also noticed that violations of principles of natural justice was an afterthought, as the same had not been canvassed before the CCI.

COMPAT had also observed that CCI had examined the GSPA at length even though it may not have commented on specific clauses. He submitted that the said findings had become final. The petitioner could not be heard to contend to the contrary. Next, he submitted that the impugned order did not suffer from any patent illegality or perversity and therefore, CCI’s decision could not be interfered with in these proceedings. Next, he referred to the impugned order and submitted that CCI had given sufficient reason for rejecting the DG’s report with regard to specific clauses. Reasons and Conclusion

23. The first and foremost question to be addressed is whether it was incumbent upon CCI to pass an order directing further inquiry under Section 26(8) of the Act in the event it did not agree with the report submitted by the DG. Before proceeding to address this question, it would be necessary to refer to Section 26 of the Act, which is set out below:- “26. Procedure for inquiry under section 19.—(1) On receipt of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter: Provided that if the subject matter of an information received is, in the opinion of the Commission, substantially the same as or has been covered by any previous information received, then the new information may be clubbed with the previous information. (2) Where on receipt of a reference from the Central Government or a State Government 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 from the Central Government or the State Government or the may be, on such report of the Director General. (6) If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission agrees with the recommendation of the Director General, it shall close the matter forthwith and pass such orders as it deems fit and communicate its order to the Central Government or the State Government or the may be. (7) If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission is of the opinion that further investigation is called for, it may direct further investigation in the matter by the Director General or cause further inquiry to be made in the matter or itself proceed with further inquiry in the matter in accordance with the provisions of this Act. (8) If the report of the Director General referred to in sub-section (3) recommends that there is contravention of any of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such contravention in accordance with the provisions of this Act.”

24. A plain reading of sub-section (1) and (2) of Section 26 of the Act indicates that on receipt of a reference or on its own knowledge or information received under Section 19, the CCI is required to form an opinion as to whether there exists a prima facie case. If CCI is of the opinion that such a case exists, it is required to direct the DG to cause an investigation to be made in the matter. However, if CCI is of the opinion that no prima facie case exists, it is required to close the case and pass such orders as it deems fit under Section 26(2) of the Act.

25. In the event directions to conduct an investigation are issued under Section 26(1) of the Act, the DG is required to submit a report on its findings, within the period as may be specified. In terms of Section 26(4) of the Act, CCI is required to forward a copy of the DG’s report to the concerned parties, the concerned government or the concerned statutory authority as the case may be.

26. Sub-section (5) of Section 26 of the Act mandates that the CCI invite objections and suggestions from the concerned parties or the concerned government or the 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:-

43. Insofar as Clause 2 of the GSPA is concerned, the DG had reported that the said clause appeared to be onerous and one sided since it provided extensive powers to GEECL to alter the terms of the contract without concurrence of the buyer (SRMB). The DG had, therefore, opined that the said clause appeared to be unfair.

44. The said interpretation is, ex facie, erroneous. The clause merely enabled GEECL to revise 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. CCI did not accept the same, as it noted that the said clauses are commonplace in commercial contracts of this nature. It also noted that SRMB had a recourse to dispute mechanism in case of any dispute regarding the independence of the third-party inspector. It is relevant to note that metering equipment was placed in effective control of SRMB and thus, GEECL had retained the power to inspect the same and in case of any dispute, refer to it for third party inspection. CCI had not found the same to be unfair and this Court finds no infirmity with the said view.

46. It is important to note that neither the DG nor CCI were required to substitute the commercial wisdom of the contracting parties and evaluate clauses in the manner as suggested by the petitioner. In order for any term or condition of a contract to be considered as unfair, as contemplated under Section 4(2)(a)(i) of the Act, it must be established to be patently unfair and one that no party, who has any negotiating ability, would accept the same. Thus, plainly, clauses which are commonly used and are found in various commercial contracts, would not fall within the scope of Section 4(2)(a)(i) of the Act. There is no material on record to indicate that Clause 4.[4] is, in any manner, commercially unconscionable and had found its place in the GSPA on account of unilateral imposition by GEECL by virtue of its dominant position.

47. The petitioner’s principal grievance is with regard to Clause 5 of the GSPA, inasmuch as, it obliges SRMB to pay for the minimum guaranteed off-take (MGO). In terms of Clause 5.1, SRMB and GEECL were entitled to terminate the GSPA, in the event GEECL failed to supply gas for a period of three months. DG reasoned that this enabled GEECL to unilaterally stop the supply in order to terminate the GSPA at will. A plain reading of Clause 5.[1] does not support this view.

GEECL could reduce the gas only due to technical, production, interruption and other reasons. Plainly, this clause did not enable GEECL to withhold supply of gas without good reason. Furthermore, SRMB would be well within its rights to raise disputes if GEECL withheld the supply of CBM without sufficient cause. There is nothing unfair in enabling parties to terminate their agreement if the performance of the contract is adversely affected due to certain specified reasons. The expression ‘other reasons’ is required 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:-

50. It is contended on behalf of the petitioner that the aforesaid reasoning is flawed since there was no material on record, which would lead CCI to believe that GEECL could not divert gas to other consumers and the same would have to be flared. It is also pointed out that GEECL’s market was expanding and the amount of gas being flared was reducing progressively. The aforesaid contentions are unpersuasive. Undisputedly, clauses providing for MGO liability are common in gas supply agreements and it makes little difference that the DG had found them in agreements between distributors of gas and consumers. The rationale for including such clauses is to mitigate risks resulting from non-acceptance of gas supply. This would apply equally, irrespective of whether the supplier is a producer or a distributor. There is also no evidence to suggest that such clauses are not included in agreements between gas producers and distributors.

51. It is important to note that a certain amount of gas was being flared. Obviously, if the same could be supplied to consumers, there would be no reason to flare the same. This may be for various reasons, including mismatch of demand and supply at a given point of time; inability of GEECL to supply the same; inefficient management of production/distribution; inability to store CBM; and other technical reasons. Nonetheless, it is undeniable that MGO liability would mitigate the risk of loss due to non-acceptance of gas.

52. Mr Banerji had also referred to the additional affidavit to point out that the total gas, which 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 individually with various customers. It is also relevant to note that the DG had not found the price charged as discriminatory or violative of Section 4(2)(a)(i) of the Act on the ground that the different prices had been fixed for various customers depending upon respective terms and conditions. Clearly, in this view, the finding of the DG that Clause 6 was discriminatory on the ground that prices had been fixed on the basis of calorific value of the gas supplied in other cases, is unmerited and was rightly rejected by CCI. The DG had also noted that SRMB had not raised any complaint regarding quality of gas and further, GEECL’s assertion that it had provided the specifications of the gas supplied on the request of customers was also not disputed. CCI held that such clauses are common to the relevant trade.

55. It is relevant to note that in most parts, the DG’s report does not report facts; the DG has merely expressed his subjective opinion about the given clauses. This includes his opinion that Clause 8.[3] of the GSPA appears onerous and one sided, inasmuch as, the GSPA does not provide for any payment of any compensation to the buyer if GEECL stops the supply of CBM. However, SRMB would continue to be liable for the MGO if it fails to offtake the CBM supplied. As noticed above, CCI did not agree with the DG’s view. It noted that such MGO clauses were common in gas supply contracts.

56. Similarly, the DG had also expressed an opinion that clauses 9.2, 11 and 15 of the GSPA were unfair. A plain reading of the DG’s report indicate that the said finding was mainly on the basis of its opinion and was not founded on any empirical investigation regarding the usual practice in the trade. CCI had differed from the said opinion. The DG had found that the force majeure clause was unfair on the ground that it did not accept certain events like labour action as force majeure events. Plainly, limiting the scope of force majeure clause to certain events and not others cannot be termed as unfair. CCI had also noticed that labour action at GEECL’s end would also not fall within the scope of force majeure. Similarly, the DG had expressed its opinion that Clause 11, which provides for payment of interest in case of delay in payments by SRMB, was unfair as no such corresponding liability was placed on GEECL’s failure to refund the overcharged amount. CCI had noted that no such concerns 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 nonpayment 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 26(3) of the Act.

59. It was contended on behalf of the petitioner that CCI ought to have remanded the matter back to the DG for further inquiry instead of relying on the submissions made on behalf of SRMB. This contention is unmerited, as most of the recommendations made by the DG with regard to various specific clauses of GSPA were based on its subjective opinion and therefore, there was no necessity for remanding the matter back for further inquiry. CCI was well within its jurisdiction to examine the DG’s subjective opinion and take an informed view after considering the submissions made by the concerned parties.

60. This Court finds the present petition unmerited. This Court is also of the view that the proceedings instituting by the petitioner are an abuse of the process of law. The petitioner is an employee of SRMB and SRMB had issued no authority in favour of the petitioner to espouse its cause.

61. It is relevant to note that GEECL and SRMB had entered into the GSPA on 11.05.2011. At the material time, no grievance has been raised by SRMB regarding the GSPA.

62. The DG’s report indicates that SRMB commenced negotiation with ESSAR for supply of CBM in 2013. Thereafter, on 22.04.2014, it requested GEECL to waive the MGO clause.

GEECL responded on 24.04.2014 accepting the request on a condition that the gas price be increased by a sum of ₹5/- per SCM. On 25.04.2014, SRMB entered into an agreement with ESSAR for supply of CBM. Thereafter, on 16.05.2014, SRMB declined GEECL’s offer to waive the MGO liability subject to increase in the price by ₹5/- per SCM. It instead called upon GEECL for reduction of the price of CBM by ₹5/- per SCM. This was declined by GEECL on 23.05.2014. However, GEECL agreed to reduce the MGO from 80% to 75% of the contracted quantity. SRMB stopped taking gas supply from GEECL on 01.05.2014 and thereafter, in June 2014, moved the Calcutta High Court and the Court referred the parties to arbitration.

63. Thereafter, in August 2014, SRMB sought to agitate the matter before the Ministry of Petroleum and Natural Gas. However, it is noted that the matter was closed by the Government after seeking a reply from GEECL.

64. The complaint before CCI was filed in September 2014. It, plainly, appears that the petitioner had been put up by SRMB in view of the disputes that had arisen between SRMB and GEECL.

65. It is also material to note that the petitioner had appealed against the impugned order before COMPAT, which was rejected by an order dated 15.05.2017. The petitioner has, thereafter, waited for almost nine months to file the present petition. Considering that an appeal against an order passed by CCI has to be filed within a period of sixty days, the present petition has been filed after a considerable delay. Bearing the aforesaid in mind, this Court is of the view that the present proceedings are an abuse of the process of law, whereby the petitioner has been put up by SRMB to pursue the present proceedings.

66. In view of the above, the present petition is dismissed with costs quantified at ₹50,000/- to be paid to each of the respondents.

VIBHU BAKHRU, J OCTOBER 10, 2019 MK/RK