March 11, 2020

NCLAT upholds CCI order on Adani Gas for abuse of dominant position

[ by Kavita Krishnan ]


The National Company Law Appellate Tribunal (NCLAT) upheld the order passed by the Competition Commission of India (CCI) that Adani Gas Limited (AGL) abused its dominant position while supplying natural gas to industrial consumers in Faridabad.

The CCI upon receiving complaint from the Informant – Faridabad Industries Association (FIA) had noticed that AGL held 100% market share in the Faridabad being the only entity authorized by Government of Haryana to setup and operate CGD (City Gas Distribution) Network in Faridabad.

The FIA (Informant) had inter alia alleged that AGL, grossly abused its dominant position in the relevant market of supply and distribution of natural gas in Faridabad, by putting unconscionable terms and conditions in the Gas Supply Agreement (GSA). which were unilateral and lopsided and also heavily tilted in favour of AGL; that AGL imposed its diktat upon the buyers of natural gas (Members of FIA) under the garb of executing GSA and that the terms of GSA were drafted unilaterally by AGL leaving no scope for Members of FIA, who are solely dependent for supplies upon AGL.

The CCI therefore penalized AGL with a penalty at the rate of 4% of AGL’s turnover which came to approximately Rs. 25.67 crores. The CCI also directed AGL to cease and desist from indulging in contravening conduct.

AGL appealed with the NCLAT against the order passed by the CCI (Faridabad Industries Association Vs. Adani Gas Limited) under Section 27 of the Competition Act, 2002 (Act) holding that the CCI has contravened the provisions of Section 4(2)(a)(i) of the Act by imposing unfair conditions upon the buyers under the GSA

The NCLAT concurred with the CCI findings that according to Clause 13 (Billing and Payment) of the GSA, an excess payment by the Buyer to the Seller due to erroneous billing/ invoicing on the part of Seller gives rise to no liability whatsoever on the part of the Seller including interest whereas a delayed payment by the Buyer renders him liable to pay interest. Further there being no obligation on the part of AGL to pay interest in terms of Clause 13.7, such clause however, imposed unfair conditions upon the Buyers.

The Tribunal observed that the Clauses of the GSA were found to be offending, violative and abusive of the dominant position by AGL in the form of imposing unfair conditions upon Industrial Consumers. The Appellate Tribunal thus upheld the orders passed by the CCI to safeguard the concerns and legitimate interests of Industrial Consumers.

Further it was found that AGL modified certain clauses in the GSA during the course of investigation and enquiry before the CCI to make them more consumer friendly and to protect the interests of Industrial Consumers by removing the disparity as regards revision of gas prices, payment obligations etc. According to the NCLAT, such modifications and the subsequent emergence of competitors of natural gas carved out mitigating factors/extenuating circumstances in favour of AGL outweighing the only aggravating factor i.e. abuse of dominant position.

The NCLAT directed AGL to pay the balance amount of the penalty to be deposited within 30 days of the pronouncement of this judgment. The Tribunal also directed that all other orders/directions given by the CCI shall remain intact.

Finally the Tribunal concluded that, “The revised agreement (GSA) as approved by us shall be made operational with immediate effect.”

The order was passed by Chairperson of NCLAT Justice S.J. Mukhopadhyay and Member (Judicial) Justice Bansi Lal Bhat.

View Full Judgement

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