December 02, 2019

NCLAT dismisses abuse of dominant position charges against BMW India

[ by Kavita Krishnan ]


A two-member Bench of the National Company Law Appellate Tribunal (NCLAT) headed by Chairperson Justice S J Mukhopadhaya dismissed a petition against luxury car maker BMW India, filed by a former dealer – Parsoli Motors (Informant) alleging abuse of dominant position by the car maker.

The NCLAT upheld the earlier order passed by the Competition Commission of India (CCI) which had also rejected Parsoli Motors’ plea.

According to CCI, BMW has a negligible share in the passenger car segment in India and therefore the question of abuse of dominant position did not arise. The NCLAT dismissed the appeal as it found no ground to interfere with the order passed by the CCI.

Parsoli Motors was a dealer selling BMW cars in Gujarat since 2007. BMW India sent a letter dated 7th December, 2017 intimating the Informant that the existing dealership would not be renewed and would expire on 31st December, 2017.

Parsoli Motors approached the CCI alleging abuse of dominant position against the luxury car maker. It had contended that it was not given sufficient time to exit from the business and as a result of termination of its dealership, the company was allowing dealers outside Gujarat to sell BMW cars to customers in the state, which was resulting in loss to the state government also.

Parsoli Motors further alleged that the BMW India not only violated its own policy but also cheated the Gujarat Exchequer. However, the fair trade regulator had found that BMW India has negligible share in passenger car segment in India which is dominated by its formidable competitors like Maruti, Hyundai, Tata etc.

The CCI had concluded that BMW India cannot be said to be a dominant player and the question of abuse of dominant position did not arise at all.

This was challenged by Parsoli Motors before the NCLAT. The appellate tribunal also agreed to the finding of CCI and said that BMW India has “insignificant presence” in the relevant market.

The NCLAT held that “even if it was assumed for the sake of argument that the termination of the dealership of the Informant or refusal on the part of BMW India to further renew dealership in favour of the Parsoli Motors is in derogation of the policy and the Informant had altered its position by raising infrastructure and making investment for running such dealership, breach thereof may give rise to civil liability but not have the consequence of abuse of dominant position.”

According to NCLAT, the mere act of refusal on the part of BMW India to renew dealership of Parsoli Motors beyond 31st December, 2017 may have caused pecuniary loss to the Informant did not raise any competition concern.

Parsoli Motors had obtained loan from BMW India Financial Services – another respondent, for running its business and defaulted it. The BMW India Financial Services filed an insolvency plea before the Ahmedabad bench of National Company Law Tribunal (NCLT) under Section 7 of the Insolvency and Bankruptcy Code, 2016 to recover an amount exceeding Rs. 54 crore. According to NCLAT, the allegations emanating from the Informant raising competition concern was merely a counterblast.

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