Compat sets aside Rs 1,773-crore CCI penalty on Coal India Ltd

The Competition Appellate Tribunal on Tuesday set aside the Rs 1,773 crore fine imposed on Coal India for unfair business ways and asked CCI to consider the matter afresh. At least two other orders passed by the Competition Commission of India (CCI) related to Coal India where the former did not impose any penalty have also been set aside. 

The orders have been quashed on the ground that the regulator did not follow the principles of natural justice while hearing the parties concerned.Finding the state-owned miner violating fair trade norms with regard to fuel supply pacts, CCI had penalised the company in December 2013.

 Following an appeal by Coal India, the tribunal had stayed implementation of the regulator’s order in February 2014. “... in view of the conclusion reached by us that the said order is vitiated due to violation of the principles of natural justice, the same will have to be set aside in its entirety and the appellants in these two cases shall be free to advance their arguments afresh before the Commission,” the tribunal said in its 78-page order.

Apart from Coal India, the appellants were Mahanadi Coalfields, Western Coalfields and South Eastern Coalfields. In another case, along with Coal India, there were seven other appellants, including South Eastern Coalfields, Bharat Coking Coal and Central Coalfields.

The tribunal said the impugned orders are set aside and the matters be remitted to the Commission for deciding the issues arising out of the information filed by Maharashtra State Power Generation Company, Gujarat State Electricity Corporation, Madhya Pradesh Power Generating Corporation, West Bengal Power Development Corporation, Sponge Iron Manufacturers Association and GHCL afresh.

Compat said it hopes CCI would make an endeavour to hear the parties and pass appropriate orders as early as possible, “not later than two months of the receipt of this order”. The penalty of Rs 1,773 crore was also the first major one by CCI on a state-owned entity. In a statement, Shardul Amarchand Mangaldas & Co said the tribunal has set aside the CCI order imposing a fine on Coal India, as well as two related orders, and has remitted the matters back to the regulator for fresh consideration.

SAM & Co acted as the legal advisor to Coal India and its subsidiaries on the matter. “CCI’s orders have been set aside as the CCI did not follow the principles of natural justice while hearing the parties (the members who signed each of the three Orders had not all heard the oral arguments in the three respective cases),” it said.  

Following complaints filed by Maharashtra State Power Generating Company and Gujarat State Electricity Corporation, CCI had imposed Rs 1,773 crore on Coal India for abusing its dominant position by imposing unfair and discriminatory conditions in its fuel supply agreements.

“CCI then passed subsequent orders in cases filed by the West Bengal Power Development Corporation, Madhya Pradesh Power Generation Company, Sponge Iron Manufacturers’ Association, and Gujarat Heavy Chemicals, which did not impose a further penalty but required Coal India to cease and desist from its unfair conduct and modify the terms of its agreements,” SAM & Co said in the statement. 

“These have all been set aside by the Compat.” The tribunal also made it clear that “neither of the parties shall be entitled to adduce any additional evidence before the Commission nor Coal India and its subsidiaries shall be allowed to withdraw the amendments / modifications made in the fuel supply agreements or concessions granted during the pendency of the cases before the Commission”.

While penalising Coal India in December 2013, CCI had said it was operating independently of market forces and enjoys an undisputed dominance in the country over production and supply of non-coking coal.