COAL INDIA LIMITED AND ANR. v. COMPETITION COMMISSION OF INDIA AND ANR.

The Judgment of the Court was delivered by A K. M. JOSEPH, J.

1Copy pinpoint1. The Civil Appeal is directed against the Order passed by the Competition Appellate Tribunal, New Delhi(hereinafter referred to as ‘Tribunal’), by which Order, the Tribunal affirmed the findings and conclusion recorded by the CompetitionCommission of India (hereinafter referred to as ‘CCI’) on various facets of abuse of dominant position. The abuse of dominant position was ascribed to the appellants. The appeal was dismissed.

2Copy pinpoint2. The second respondent had provided information to the CCI which the CCI proceeded to consider and it found the abuse of dominant position by the appellants.

3Copy pinpoint3. The appellants have filed Interlocutory Application, viz., I.A. No. 66587 of 2017 being an application seeking permission to take additional grounds. Parties exchanged pleadings in the interlocutory application.We have allowed the application seeking permission to urge the new grounds.

4Copy pinpoint4. When the matter came up on 16.09.2022 before a Bench of two learned Judges, the Court felt that since modification of order dated 03.08.2017 was sought, it would be appropriate that these matters are heard by a Bench of three learned Judges. It is, accordingly, that the matter stood posted before a Bench of three learned Judges.

5Copy pinpoint5. The principal bone of contention of the appellants in the I.A. 66587 of 2017 appears to be that Coal India Limited, the first appellant (hereinafter referred to as ‘CIL’) being a monopoly created by a statute and what is more important, geared and duty bound to achieve the objects declared in Article 39(b) of the Constitution of India and the second appellant,Western Coalfields Limited, a subsidiary company of the first appellantcannot be bound by the Competition Act, 2002 (hereinafter referred to as the ‘Act’). In other words, having regard to the very object and purpose for which it was brought into being and the law surrounding such a body, applying the Act would produce such anomalous results as would stultify the sublime goal enshrined in Article 39(b) as also the statute under which CIL witnessed its birth. Since it was found that there were proceedings pendingbefore the Commission/Tribunal wherein a similar question would directly arise,transfer petitionswere filed to call for such proceedings to this Court. It is hence, that the H

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A Transfer petitions which we are dealing with came to be allowed. This is however, on the understanding that the Court would not go into the merits of the individual cases but would confine itself to ruling on the question of law raised by the appellants, viz., the applicability of the Act to them.

6Copy pinpoint6. We have heard Shri K.K. Venugopal, learned Senior Counsel, B ably assisted by Shri Yaman Verma, learned Counsel. Shri Maninder Singh, learned Senior Counsel, also appears on behalf of the appellant. Also, we have heard Shri N.Venkataraman, learned Additional Solicitor General, on behalf of CCI and Shri Ranjit Kumar, learned Senior Counsel, appearing on behalf of the second respondent in the Appeal/Application. We have further heard learned Counsel appearing in the transferred cases. SUBMISSIONS OF THE APPELLANTS/APPLICANTS

7Copy pinpoint7. Shri K. K. Venugopal, learned Senior Counsel, would submit that the coal mines operated by the appellants pursuant to the provisions of the Coal Mines (Nationalization) Act, 1973 (hereinafter referred to as the ‘Nationalisation Act’) would be wholly outside the purview of the Act. This is for the reason that the very purpose and policy underlying the Nationalization Act, was to monopolise the operation of the coal mines and coal mining in the hands of the Central Government and its agencies such as the appellants. It is not an ordinary monopoly. It is a E monopoly created by the Nationalization Act; it is, having regard to the need to immunize it from challenge, that it was accorded protection of Article 31B of the Constitution of India; it has been inserted in the Ninth Schedule to the Constitution; Article 39(b) of the Constitution of India takes it out of the category of ordinary monopoly; this is for the reason that the State has been charged with the duty to bear in mind the principles of ‘common good’ being secured by the ‘distribution of scarce resources’; coal, with which mineral we are concerned with, is, indeed, a mineral of the highest importance in the economic life of the nation; its equitable distribution in the manner so as to secure the common good which is the directive contained in Article 39(b) led to the creation of a statutorily mandated monopoly; when such is the thrust of the Nationalisation Act, then, it is wholly inconceivable that the Act would still be applicable to the appellants. It is pointed out, with reference to the Nationalisation Act, that the superintendence of the mines vests with the Central Government or with a corporate body or the company, which it may create. The first appellant is the holding company and there are subsidiary

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companies under it. This is contemplated under the Nationalisation Act. A The mantle of operating the monopoly therefore, fell on the appellants. The appellants are State within the meaning of Article 12 of the Constitution. Theycontinue to be charged with the duty to be guided by the Directive Principles contained in Article 39(b). Learned Senior Counsel would point out that the Act does not deal with a company like the appellant. In other words, while there may be indication in Section 19(4)(g) of the Act that the fact that a body is a monopoly under the statute may indicate the presence of dominant position, there is a subtle distinction. Unlike an ordinary monopoly, a corporate body like the appellant represents a case of a monopoly with the added and unique feature that it is an ‘Article 39(b)’ monopoly.Such a monopoly is outside the purview of the Act. Reliance is placed on decisions of this Court to emphasize the point that the Nationalization Act was enacted with a view to give effect to the provision of Article 39(b) (See Ashoka Smokeless Coal India (P) Ltd. and Others v. Union of India and Others1 following Sanjeev Coke Mfg. Co. v. Bharat Coking Coal D Ltd. and Another2).

8Copy pinpoint8. Learned Senior Counsel drew our attention to Sections 3 and 11 of the Nationalisation Act to contend that general superintendence, direction, control and management of the affairs and business of a coal mine,inter alia, as contained in Nationalisation Act, must be given the widest interpretation. In this regard, reliance is placed by appellants on E Judgments interpreting similar words in Article 324 of the Constitution (See In Re Gujarat Assembly Election matter 3 and Election Commission of India v. Ashok Kumar and Others4). Our attention is drawn also to Article 31C of the Constitution for the proposition that a law which gives effect to Article 39(b) or 39(c) cannot be impugned on F the ground that it is inconsistent with Articles 14 and 19 of the Constitution. Such a law is to be treated as reasonable. On the other hand, if an action is inconsistent or runs counter to the Directive Principles, it may,prima facie, be brushed with the tarnish of it being unreasonable.(See Kasturi Lal Lakshmi Reddy and Others v. State of Jammu and Kashmir and Another5).It is further pointed out by the appellants that on a conspectus G

1 (2007) 2 SCC 640 2 (1983) 1 SCC 147 3 (2002) 8 SCC 237 4 (2000) 8 SCC 216 5 (1980) 4 SCC 1 H

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A of the Nationalisation Act and on placing it side-by-side with the provisions of the Act, the divergence and the consequent anomalous results of bringing the appellant under the Act, would clearly emerge. Our attention is drawn to the long title of the Act. It is pointed out that the object of the Act is to ensure freedom of trade. This is contrasted with a long title of the Nationalisation Act which indicates that the Law-Giver intended to B vest ownership and control of the coal mines in the State so that the said resource is so distributed as to best serve the common good. It is contended that CIL does not operate in the commercial sphere. Great emphasis is laid on the fact that out of 462 mines operated by CIL, 345 have suffered losses amounting to Rs.9,878 Crores in the year 2012-

C 2013. As part of its constitutional responsibility, it engages 51 per cent of its manpower which is about 1,80,726 persons in such mines. Despite the fact that these underground mines only contribute 9 per cent to its total coal production, it is emphasized that the appellants are not free as a private player to lay off its employees.

9Copy pinpoint9. Section 4(2)(a) of the Act prohibits unfair and discriminatory price fixation or conditions for the sale or purchase of goods or services. It is submitted that the Court may bear in mind that price fixation of coal,as far as the appellants and the coal companies under it is concerned, it is based on the Constitutional mandate under Article 39(b) which may be inconsistent with market principles. E

10Copy pinpoint10. Under the Nationalisation Act as much as under Article 39(b), the appellants may have to follow differential pricing mechanism to encourage captive coal production. Applying the Act would adversely affect pursing such a differential pricing mechanism. This again would defeat the object underlying the Nationalization Act. F

11Copy pinpoint11. Next, the point of contrast consists of Section 4(2)(b) declaring it to be an abuse of the dominant position where an enterprise limits or restricts production of goods, provision of services or market. The impact ofthe provisions would have on policy decisions taken by the Ministry of Coal to encourage certain industries through a coal supply and pricing G mechanism is emphasized. As an illustration, it is pointed out that the Ministry of Coal takes action to encourage growth in backward areas by allocating more coal supply. If such policy or actions thereunder are to be tested on the anvil of Section 4(2)(b) of the Act, it may not pass muster. This again would undermine the object of the Nationalisation H Act and what is more, the wholesome principle enshrined in Article 39(b).

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Section 3 of the Nationalisation Act, it is next pointed out, vests the A ownership of the coal mines in the Central Government. However, under Section 19 the CCI is obliged to take into consideration the monopoly position whether controlled by the Government or not, as a factor to determine the dominant position.

12Copy pinpoint12. Next, it is contended that Section 27(a) of the Act, clothes the B CCI with the power to order the cessation of abuse. This would be inconsistent with the appellants pursuing welfare policy in relation to pricing and distribution of coal.Under Section 32 of the Nationalisation Act, the mining companies cannot be wound up. This stands in contrast to Section 28 of the Act which empowers the CCI to divide enterprises abusing dominant position including adjustment of contracts, formation C of winding up of enterprises among other things.

13Copy pinpoint13. Next, it is pointed out that Section 28 of the Nationalisation Act declares that the provisions of the said Act would prevail notwithstanding anything inconsistent therewith contained in any other law in force, inter alia. (Reliance is placed on the Judgments of this D Court in Employees Provident Fund Commissioner v. Official Liquidatorof Esskay Pharmaceuticals Limited6 as also Sanwarmal Kejriwal v. Vishwa Coop. Housing Society Ltd. and Others7). Section 60 of the Act, which declares that the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, may not assist the second respondent or the CCI in the stand that a Nationalisation Act must make way for the operation of the Act on its own terms.It is contended that the appellants even if they constituted a monopoly, they cannot act independently of Presidential Directives, which are binding on them. The policy framed by the Central Government must be mandatorily followed. This brings about an inevitable clash between the actions of the appellant with the requirements which are stipulated in the Act. The appellants are not to be driven by a profit motive. The appellants are the extended arms of the welfare State. The activities of the appellantsare not any ordinary commercial activities. They must not be so perceived when a complaint of abuse of dominant position is considered under Section 4 of the Act. The mines in question were cost plus mines operated by the appellants to ensure more availability of coal. They may lose their viability if they are operated at notified prices. 6 (2011) 10 SCC 727 7 (1990) 2 SCC 288 H

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14Copy pinpoint14. Shri K. K. Venugopal, learned Senior Counsel, would submit that the actions of the appellants are susceptible to judicial review in proceedings under Article 226 or even Article 32. It is, infact, pointed out there are other forums such as the Coal Controller wherein complaints of the nature, viz., quality of coal as for illustration could be ventilated. Subjecting the appellants to the provisions of the Act is wholly unjustified. B SUBMISSIONS OF THE RESPONDENTS

15Copy pinpoint15. Per contra, the learned Additional Solicitor General on behalf of the CCI,stoutly contended that the Act, indeed, applies inspite of the non-obstante clause contained in Section 28 of the Nationalisation Act. C He would point out that the object of the Act is to bring out a paradigm shift in the economic policy of the nation. There is no conflict between the Nationalisation Act and the Act inkeeping with the changing times and the imperative need to ensure the best economic interest of the Nation. The Act was born after great deal of contemplation. A Committee known as the Raghavan Committee, a high-level Committee, went into the issue relating to State monopoly as well. A perusal of the said Report would indicate that it was realized that the operation of the State monopolies did not conduce to secure the best interest of the Nation. The State monopoly could not be allowed to operate in a state of inefficiency. It had to set its house in order and pull up its socks. It was specifically contemplated that such State monopolies must fall in line and operate in the midst of forces of competition. He would point out that the Court should keep in mind that an examination of the merits of the case would clearly indicate that the attempt of the appellants is to wriggle out of the situation when its actions have been found to be violative of the Act and the fine questions which have been raised do not actually even arise on the defense actually set up before the CCI. He poses the question as to whether the appellants could justify the supply of substandard goods and justify it on the high pedestal of a Constitutional goal being imperiled if the same is questioned under the Act.

16Copy pinpoint16. He would point out that there is no challenge mounted to the vires of the Act. There is no scope for reading down the law in the absence of the challenge. He also relied upon the Judgment of this Court in the New Delhi Municipal Council v. State of Punjab &others8 to contend that when the instrumentality of the State proceeds to enter the 8 (1997) 7 SCC 339 H

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commercial field and is carrying on a business activity, it cannot claim immunity from the laws of the land. Though the said case was delivered in the context of Article 286, he would submit that the principle is apposite.

17Copy pinpoint17. It is submitted that the Act provides for a detailed procedure where information is received or it acts suo motu.Invariably,it calls for a report by the investigation wing. The Constitution of the CCI is sufficient safeguard as it is composed of people who are experts in various branches of knowledge. Complaints such as abuse of dominant position are gone into at great length, full opportunity is given to the persons concerned to place their objections. It is only when a clear case of abuse of dominant position, inter alia, is found established, that the CCI acts. He would contend that the appellant is a government company within the meaning of Section 617 of the erstwhile Companies Act. He would point out that it is not the law that such an entity can claim that its acts are placed beyond the pale of scrutiny by reason of the fact that the law under which they operate has been placed in the Ninth Schedule. He would point out that there are three filters provided in the Act insofar as information relating to abuse of dominant position is concerned. In the first place, an entity must answer the description of an enterprise as contained in Section 2(h) of the Act. Once the said hurdle is crossed, the CCI must ascertain whether the enterprise occupies a dominant position. This is a matter which is covered in Section 19(4) of the Act. There are several factors which are indicated. The rear is brought up by the residuary clause, viz., Section 19(4)(m) which provides for any other factor which the Commission may consider relevant for the enquiry. Thisis the second filter. In other words, it is not the abuse by any entity but it must be abuse by an enterprise. Next, the enterprise must enjoy a dominant position. As to what is a dominant position, has been detailed in the second explanation to Section 4(2) of the Act. Thus, the Commission is governed by pre-determined and objective criteria to arrive at a finding as to whether an enterprise occupies the dominant position both with reference to the explanation provided in Section 4(2) as also the factors which have been elaborately laid down in Section 19(4). It is after the second filter is passed, that CCI must pass on to actually find whether there is abuse of its dominant position. Section 4(2) appears to provide for what shall be abuse of dominant position. This being the scheme of the Act, he contends that there may be no merit in the attempt of the appellants to extricate themselves from a well thought out law provided by the same Law-Giver. H

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18Copy pinpoint18. He would point out that initially coal was an essential commodity under the Essential Commodities Act, 1955. When this Court delivered the Judgment relied upon by the appellants as well, viz., Ashoka Smokeless Coal India (P) Ltd. and Others v. Union of India and Others9, coal was an essential commodity. The Court proceeded on the said basis as well. However, in February, 2007, coal ceased to be an B essential commodity. Next, it is pointed out that the Nationalisation Act itself, which is projected as the sheet anchor of the appellants entire case was itself taken out from the Ninth Schedule in the year 2017. The Nationalisation Act itself stands repealed. Therefore, he would point out that the Court is being invited to pronounce on the basis of the ‘hallowed’ C position that the Nationalisation Act occupied,which itself is no longer the case. (We must notice here that even in his opening submissions Shri K. K. Venugopal, learned Senior Counsel, pointed out these developments. However, it is his contention that the contracts with which this Court is concerned all arose during the period of time when the Nationalisation Act continued to grace the Ninth Schedule.) D

19Copy pinpoint19. Shri N. Venkataraman would point out again that the Court may not lose sight of the fact that while thefirst appellant was fully owned bythe Central Government in terms of its shareholding, after 2010, following disinvestment, the Government shareholding has declined to nearly 67 per cent. The balance of the shareholding is in private hands. E Reliance is placed on the Judgment of this Court in Waman Rao and Others v. Union of India and Others10. Considerable support is sought to be drawn from the I.R Coelho (dead) by LRs v. State of T.N.11 for the proposition that the immunity,laws enjoyed on their insertion in the Ninth Schedule and the laws, which may be placedin the Ninth Schedule, F stands considerably diluted. It is pointed out further with reference to Judgment in Khoday Distilleries Ltd. v. State of Karnataka &others12 (paragraph-25) that Fundamental Rights are not absolute and they are ‘qualified Fundamental Rights’. Placing reliance on the Judgment in Parag Ice& Oil Mills &anotherv. Union of India 13,it is pointed out that unlike the law which may be protected under Article 31C, an order G passed under the law may not be entitled to the same immunity. He 9 (2007) 2 SCC 640 10 (1981) 2 SCC 362 11 (2007) 2 SCC 1 12 (1995) 1 SCC 574 13 H (1978) 3 SCC 459

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would caution the Court against adjudicating matters which may at best arise in the abstract. Questions must be answered when they arise on facts.

20Copy pinpoint20. He would contend that the Court may place an interpretation as would advance the object of the law, which in this case, is to bring about a transformation in the economy for the greater good of the common man (See in this regard Ajaib Singh v. Sirhind Coop. Marketing-cum-Processing Service Society Ltd. and another14).

21Copy pinpoint21. Shri Ranjit Kumar, learned Senior Counsel for the second respondent, would point out that concept of common good so heavily relied upon by the appellant, found in Article 39(b), must be interpreted as meaning the interest of the common man or the citizens. 80 per cent of the coal is supplied by CIL to power companies. Second respondent is a power company. The second respondent it is pointed out in fact supplies power generated using coal to distribution companies (represented, in fact, before us incidentally by the Maharashtra State Agency), who, in turn, would finally supply power to the end consumer. D The continual supply of coal and prompt performance of the contracts and the reasonableness of the rates and quality of coal, in other words, according to the second respondent, are related to the very common good, which is emphasized by the appellants. He would further point out that the Nationalisation Act was an expropriatory legislation. E

22Copy pinpoint22. Next, he would point out that the predecessor enactment, viz., the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as MRTP Act),which stood repealed by the Act, may be borne in mind. In the said Act, Section 3 clearly declared that, unless it was otherwise notified, the MRTP Act would not apply to Government F Agencies, as indicated therein. There is no such provision in the Act. He drew our attention to Section 21A of the MRTP Act. Drawing inspiration from the preamble to the Act, he emphasizes that the center stage of attention in the Act is occupied by the consumer. Common good in other words, must be associated with the good of the consumer. He drew our attention to Section 54 of the Act which provides for power to exempt. G He pointed out two notifications granting exemptions which were in favour of rural regional banks. If the appellants legitimately wished to be taken out of the purview of the Act, Section 54 holds the key and there is a 14 (1999) 6 SCC 82 H

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A lawful way. As long as there is no exemption, the Act applies to the appellants. He would further contest the case of the appellants that the appellants were running at a loss as a result of a number of mines running at a loss.He would purport to provide figures to demonstrate that the appellants have been making huge sums by way of profits andwhat is more, making it over to the Government of India by way of dividend. B This is besides highlighting the dilution of the shareholding of the Government of India.He would point out that there can be no claim by the appellants that it is carrying on of any sovereign functions. In this regard, he drew our attention to the following decisions. Bangalore Water Supply & Sewerage Board v. A. Rajappa15 (See paragraphs- C 163 and 168), N. Nagendra Rao & Co. v. State of A.P. 16 (See paragraphs-9, 13, 19 and 25),Chairman, Railway Board and others v. Chandrima Das(Mrs.) and others17(See paragraphs-38, 41 and 42) and Agricultural Produce Market Committee v. Ashok Harikuni and another18(See paragraphs-21 and 32).

23Copy pinpoint23. Shri M. Mishra, learned Counsel appearing on behalf of one of the parties in the Transferred Cases would support the respondents in the Appeal. He would point out that in fact, he appears for the Maharashtra Power Generation company. He would submit that the Court may bear in mind that it is not as if the complaint against the appellants is being voiced only by private players like the second respondent in the Appeal. E The acts and omissions of the appellants is being objected to even by public sector units such as his client. He would point out that under the Electricity Act, 2003, the price of power is regulated by the Commission under the said Act. The return on investment is highly regulated. Coal constitutes 60-70 per cent of the costs. The price of coal has a bearing on both the Consumer Price Index as also the Wholesale Price Index. F He would submit that the report of the Director General under the Act brings out the facts. Regarding the contention of the appellants that Writ Courts can go into the question,it is pointed out that the cases may involve facts, which are best dealt with by a Body like the CCI. He drew our attention to the Judgment of this Court in Hasan Murtza v. State of Haryana 19 and also Employees Provident Fund Commissioner v. G Official Liquidator20.Similar contention in support of the CCI and the 15 (1978) 2 SCC 213 16 (1994)6 SCC 205 17 (2000) 2 SCC 465 18 (2000) 8 SCC 61 19 (2002) 3 SCC 1 H 20 (2011) 10 SCC 727

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second respondent has been voiced by the other respondents in the A Transferred Cases.

24Copy pinpoint24. In response to the submissions, Shri K.K Venugopal would point out that it is not the case of the appellants that the appellant is immune from all laws. He would further point out that the deletion of the Nationalisation Act from the Ninth Schedule may not affect his contentions as the contracts in question relate to the period when the Nationalisation Act was very much in the 9th Schedule. He would submit that as held in Ashoka Smokeless Coal India (P) Ltd. and Others v. Union of India and Others21,it is not as if the actions of the appellants are immune from judicial review under Article 14. He would reiterate that an affected party could seek redress in other forums. He would emphasize again that the Act and even the Raghavan Committee Report does not refer to the species of public sector company which are geared to achieve the common good under Article 39(b) and whose operation was immunized from challenge by their insertion in the 9th Schedule at the relevant point of time. The words in Article 39(b) “so distributed” is a continuing command to the State even after the Nationalisation Act was passed. Thisis by way of countering the argument that with the NationalisationAct all was done and it was aone-time affair.In other words, the command of Article 39(b) is that the State shall bear in mind the common good and, therefore, coal even if it is taken out of the Essential Commodities Act, remains a material resource of the country, which must be distributed to achieve common good. He reiterates his contention in this regard. He drew our attention to the distinction between an ordinary monopoly and a State Monopoly, which is covered by Article 39(b). They are not birds of the same feather, it is pointed out. In fact, Shri Yaman Verma, learned Counsel ably supplemented by pointing to the constraints under which the appellants are bound to operate. He points out to the new coal policy and the Presidential Directives. He would then point out that even if the Act were found to be applicable, the Court may clarify that the appellants could claim justification of their actions by relying on criteria, which they are bound to follow. We must, here at this juncture, record that when we queried Shri K. K. Venugopal, learned SeniorCounsel, as to whether he was claiming that the appellants were carrying on activities, which can be described as sovereign functions, the answer was clear and forthright, namely, that he was not having such a case. 21 (2007) 2 SCC 640 H

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25Copy pinpoint25. When the aspect about the Presidential Directives and the policy of the Government was pointed out to the learned Additional Solicitor General, N. Venkataraman, he would ask the question as to what is it that prevents such a contention being raised is not pointed out. The case must be decided on the basis of the actual contentions raised and the relevant facts. He would exhort the Court that bearing in mind the paramount need to allow the Act to succeed in its operation, the Court may not allow the appellants to wriggle out of the well thought out provisions of the Act which law will subserve the highest public interest. He would submit that if a defenseis set up that bonafide adherence to Presidential Directives is being made under the Act, it would be a matter which may have to engage the CCI. ANALYSIS

26Copy pinpoint26. As we have noticed the question, we are called upon to decide is whether the Act applies to the appellants or not. It is necessary that we tread carefully so that we skirt an incursion into the merits, which can be undertaken only when theAppeal is heard on merits.

27Copy pinpoint27. Before we pass on to the Act, it may be necessary to look at the law, which it repealed. The MRTP Act was enacted in the year

1969. It was intended to deal with monopolistic and restrictive trade practices as the very long title suggests. It held sway till the Act repealed it in the year 2002. However, the Act itself was actually brought into force in the year 2009. What is relevant is to notice some of the provisions of the MRTP Act.

28Copy pinpoint28. Section 2(d) of the Act, as substituted by Act 30 of 1982, provided for definition of the words ‘dominant undertaking’. The definition itself appears to be fairly convoluted. The word ‘goods’ was, indeed, defined as goods as defined in the Sale of Goods Act, 1930, and pertinently, it included products mined in India, inter alia. The MRTP Act went on to deal with concepts like associated persons, interconnected undertakings and finally, the word ‘undertaking’.Sans the three explanations, the word G ‘undertaking’ was contained in Section 2(v) and it read: “2(v) “undertaking” means an enterprise which is, or has been, or is proposed to be, engaged in the production, storage, supply, distribution, acquisition or control of articles or goods, or the provisions of services, of any kind, either directly or through one or more of its units or divisions, whether such unit or division is H

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located at the same place where the undertaking is located or at a A different place or at different places. Explanation I.—In this clause,— (a) “article” includes a new article and ”service” includes a new service; B (b) “unit” or “division”, in relation to an undertaking includes,— (i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods; (ii) any branch or office established for the provision of any service. C Explanation II.—For the purpose of this clause, a body corporate, which is, or has been, engaged only in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate shall be deemed to be an undertaking. D Explanation III.—For the removal of doubts, it is hereby declared that an investment company shall be deemed, for the purposes of this Act, to be an undertaking;” The MRTP Act also provided for definition of the words, monopolistic trade practice as also, restrictive trade practices. E

29Copy pinpoint29. Section 3 of the MRTP Act, read as follows: “3. Act not to apply in certain cases.—Unless the Central Government, by notification, otherwise directs, this Act shall not apply to— F (a) any undertaking owned or controlled by a Government company, (b) any undertaking owned or controlled by a Government, (c) any undertaking owned or controlled by a corporation (not G being a company) established by or under any Central, Provincial or State Act, (d) any trade union or other association of workmen or employees formed for their own reasonable protection as such workmen or employees, H

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A (e) any undertaking engaged in an industry, the management of which has been taken over by any person or body of persons in pursuance of any authorisation made by the Central Government under any law for the time being in force, (f) any undertaking owned by a co-operative society formed and B registered under any Central, Provincial or State Act relating to co-operative societies, (g) any financial institution. Explanation.—In determining, for the purpose of clause (c), whether or not any undertaking is owned or controlled by a C corporation, the shares held by financial institutions shall not be taken into account.”

30Copy pinpoint30. In other words, inter alia, the provisions of the said Act did not apply to an undertaking owned or controlled by a government company or any undertaking owned or controlled by a corporation (not being a D company established by or under a central, provisional or State Act) unless it was expressly made applicable by a notification. It also did not apply to any undertaking, the management of which was taken over by any person or body of persons in pursuance of any authorization made by the Central Government under any law enforced for the time being in force [Clause (e)]. Conspicuous by its absence, is any such provision in the Act.

31Copy pinpoint31. The CollieryControl Order came to be passed in the year 1945 under the Rules. It is the said Order,which came to be continued under the Essential Commodities Act. The Coal Controller controlled the quality and quantity as noticed in Ashoka Smokeless Coal India (P) Ltd. and Others22.Considering its vital importance, it became the only mineral which was nationalized in terms of the CokingCoal Mines Nationalization Act, 1972 and the Coal Mines Nationalisation Act 1973. The Colliery Control Order 1945 was repealed and replaced by the Colliery Collar Control Order 2000 w.e.f. 01.01.2000. G

32Copy pinpoint32. The Preamble to the Nationalisation Act reads as follows: “An Act to provide for the acquisition and transfer of the right, title and interest of the owners in respect of the coal mines specified 22 Ashoka Smokeless Coal India (P) Ltd. and Others v. Union of India and Others H (2007) 2 SCC 640

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in the Schedule with a view to re-organising and reconstructing such coal mines so as to ensure the rational, co-ordinated and scientific development and utilisation of coal resources consistent with the growing requirements of the country, in order that the ownership and control of such resources are vested in the State and thereby so distributed as best to subserve the common good, and for matters connected therewith or incidental thereto.”

33Copy pinpoint33. Section 3(1) of the Nationalisation Act reads as follows: “3. Acquisition of rights of owners in respect of coal mines.—(1) On the appointed day, the right, title and interest of the owners in relation to the coal mines specified in the Schedule shall stand transferred to, and shall vest absolutely in, the Central Government free from all incumbrances.”

34Copy pinpoint34. It came to be amended by the Coal Mines (Nationalisation) Amendment Act, 67 of 1976. There was subsequent amendment, viz., Act 47 of 1993 dated 09.06.2003. After the amendment, Section 3(3) D reads: “3(3) On and from the commencement of section 3 of the Coal Mines (Nationalisation) Amendment Act, 1976 (67 of 1976),— (a) no person, other than— E (i) the Central Government or a Government, company or a corporation owned, managed or controlled by the Central Government, or (ii) a person to whom a sub-lease, referred to in the proviso to clause (c), has been granted by any such Government, company F or corporation, or (iii) a company engaged in— (1) the production of iron and steel, (2) generation of power, (3) washing of coal obtained from a mine, or (4) such other end use as the Central Government may, by notification, specify, shall carry on coal mining operation, in India, in any form; G

(b) excepting the mining leases granted before such commencement in favour of the Government, company or corporation, referred to in clause (a), and any sub-lease granted by any such Government, company or corporation, all other mining H

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A leases and sub-leases in force immediately before such commencement, shall, in so far as they relate to the winning or mining of coal, stand terminated; (c) no lease for winning or mining coal shall be granted in favour of any person other than the Government, company or corporation, referred to in clause (a): Provided that the Government, company or corporation to whom a lease for winning or mining coal has been granted may grant a sub-lease to any person in any area on such terms and conditions as may be specified in the instrument granting the sub-lease, if the Government, company or corporation is satisfied that— (i) the reserves of coal in the area are in isolated small pockets or are not sufficient for scientific and economical development in a co-ordinated and integrated manner, and (ii) the coal produced by the sub-lessee will not be required to be transported by rail.”

35Copy pinpoint35. Under Section 4, the Central Government was to become the lessee of the State Government when vesting took place under Section

3. Section 5 read as follows: “5. Power of Central Government to direct vesting of rights in a E Government company.— (1) Notwithstanding anything contained in sections 3 and 4, the Central Government may, if it is satisfied that a Government company is willing to comply, or has complied, with such terms and conditions as that Government may think fit to impose, direct, by an order in writing, that the right, title and interest of an owner in relation to a coal mine referred to in section 3, shall, instead of continuing to vest in the Central Government, vest in the Government company either on the date of publication of the direction or on such earlier or later date (not being a date earlier than the appointed day), as may be specified in the direction. (2) Where the right, title and interest of an owner in relation to a coal mine vest in a Government company under sub-section (1), the Government company shall, on and from the date of such vesting, be deemed to have become the lessee in relation to such H

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coal mine as if a mining lease in relation to the coal mine had been granted to the Government company and the period of such lease shall be the entire period for which such lease could have been granted under the Mineral Concession Rules; and all the rights and liabilities of the Central Government in relation to such coal mine shall, on and from the date of such vesting, be deemed to have become the rights and liabilities, respectively, of the Government company. (3) The provisions of sub-section (2) of section 4 shall apply to a lease which vests in a Government company as they apply to a lease vested in the Central Government and references therein to the “Central Government” shall be construed as references to the Government company.”

36Copy pinpoint36. Section 11 is significant for the purpose of the case. It read: “11. Management, etc., of coal mines.—(1) The general superintendence, direction, control and management of the affairs and business of a coal mine, the right, title and interest of an owner in relation to which have vested in the Central Government under section 3, shall,— (a) in the case of a coal mine in relation to which a direction has been made by the Central Government under sub-section (1) of section 5, vest in the Government company specified in such direction, or (b) in the case of a coal mine in relation to which no such direction has been made by the Central Government, vest in one or more Custodians appointed by the Central Government under sub-section (2),and thereupon the Government company so specified or the Custodian so appointed, as the case may be, shall be entitled to exercise all such powers and do all such things as the owner of the coal mine is authorised to exercise and do. (2) The Central Government may appoint an individual or a Government company as the Custodian of a coal mine in relation to which no direction has been made by it under sub-section (1) of section 5.” G

37Copy pinpoint37. Suffice it for the purpose of this case that we notice next Section 28: “28. Effect of this Act on other laws.- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any H

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A instrument having effect by virtue of any law other than this Act, or in any decree or order of any court, tribunal or other authority.”

38Copy pinpoint38. Finally, we notice Section 32. It read as follows: “32. No proceeding for the winding up of a mining company, the right title and interest in relation to the coal mine owned by which B have vested with Central Government called a government company under this Act or for the appointment of a receiver in respect of the business of the company, shall lie in any Court except with the consent of the Central Government.”

39Copy pinpoint39. The Nationalisation Act came to be inserted in the Ninth C Schedule to the Constitution. It remained in the Ninth Schedule till it is removed therefrom in the year 2017.

40Copy pinpoint40. Article 31B of the Constitution of India reads as under: “31B. Validation of certain Acts and Regulations Without prejudice to the generality of the provisions contained in Article 31A, none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by, any provisions of this Part, and notwithstanding any judgment, decree or order of any court or tribunal to the contrary, each of the said Acts and Regulations shall, subject to the power of any competent Legislature to repeal or amend it, continue in force.”

41Copy pinpoint41. Article 31C of the Constitution of India reads: F “31C. Saving of laws giving effect to certain directive principles Notwithstanding anything contained in Article 13, no law giving effect to the policy of the State towards securing all or any of the principles laid down in Part IV shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any G of the rights conferred by Article 14 or Article 19 and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy: Provided that where such law is made by the Legislature of a State, the provisions of this Article shall not apply thereto unless such law, having been reserved for H

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the consideration of the President, has received his assent Right A to Constitutional Remedies.”

42Copy pinpoint42. The working of the MRTP Act was found to be inadequate particularly in the context of changes which happened not only in the country but also on a larger scale.

43Copy pinpoint43. A high-level Committee known as Raghavan Committee delved B into the issues. It is, inter alia, stated in the Report as follows: “the object of competition policy is to promote efficiency and maximize welfare. In this context, the appropriate definition of welfare is the sum of consumer surplus and producer’s surplus and also includes any taxes collected by the Government.”(See paragraph-2.1.1) C We notice the following observations as well: “2.1.1 Competition policy is defined as “those Government measures that directly affect the behaviour of enterprises and the structure of industry” (Khemani, R.S. and Mark A. Dutz, 1996). The objective of competition policy is to promote efficiency and maximize welfare. In this context the appropriate definition of welfare is the sum of consumers’ surplus and producers’ surplus and also includes any taxes collected by the Government.1[1] It is well known that in the presence of competition, welfare maximization is synonymous with allocative efficiency. Taxes are generally welfare-reducing.”

44Copy pinpoint44. After referring to the reforms initiated in 1991 and dealing with public sector, it is stated as follows: “2.6.4 Public sector F In 1991, Government abolished the monopoly of the public sector industries except those where security and strategic concerns still dominated. These include arms and ammunition and allied defence equipment, atomic energy and nuclear minerals and railway transport. Major industries including iron and steel, heavy electrical equipment, aircraft, air transport, shipbuilding, telecommunication G equipment and electric power are now open for private sector investments. A large number of loss-making public enterprises were referred to the Board for Industrial and Financial Reconstruction (BIFR). Essentially two different types of reforms were envisaged: greater autonomy for public sector enterprises and greater private sector ownership.” H

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45Copy pinpoint45. We may next notice paragraph-2.8.5: “2.8.5 Public Sector To a large extent, the imperative for privatisation of the public sector has arisen from fiscal considerations. From the point of view of economic efficiency and competition policy, it is important that the public sector does not enjoy monopoly power and is subject to market disciplines through competition. Most of the sectors where the public sector operates have in recent years been opened up to entry by private sector firms. However, as we have noted earlier, the public sector is given preferential treatment in Government procurement. We are of the view that the public sector should be exposed to competition and not given any preferential treatment.”

46Copy pinpoint46. State Monopolies Policy is seen dealt with under paragraphs- 3.4.5 and 3.4.6. They read as follows: “3.4.5 State Monopolies Policy State monopolies are not only a D reality but are regarded by many countries as inevitable instruments of public growth and public interest. While ideology may have played some role in spurring the growth of State monopolies, much of this increase can be attributed to the pragmatic response to the prevailing milieu, which is frequently an outcome of the historical past in different countries. A view shared by many is that State monopolies and public enterprises in India have played a vital role in its developing process, have engineered growth in critical core areas and have performed social obligations. Nonetheless, there is also a recognition, consequent on the adverse financial results and the resultant pumping of budgetary oxygen from the Government treasury to those enterprises, that there is not only scope for their reformation but also for structural and operational improvements. This recognition has led to the trend towards privatising some of them. This is also a part of the general process of liberalisation and deregulation. Privatisation involves not only divestiture and sale of Government assets but also a gradual decline in the interventionist role played by them. 3.4.6 State monopolies may lead to certain harmful effects, anti- thetical to the scheme of a modern Competition Policy. They are: A. The dominant power enjoyed by State monopolies may be abused because of Government patronage and support. H

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B. Because of the said patronage, State monopolies may adopt policies which tantamount to restrictive trade practices. For example, preference to public sector units in tenders and bids, insistence on using public sector services for reimbursement from Government (travelling allowance for Government officials). C. State monopolies suffer from the schemes of administered prices, contrary to the spirit of Competition Policy.”

47Copy pinpoint47. In paragraph-3.4.7, it is, inter alia, stated that in the interests of the consumer the State Monopolies and Public Enterprises need to be competitive in production of goods and service delivery. Thereafter, it is stated: C “3.4.7 It is well accepted that competition is a key to improving the performance of State monopolies and public enterprises. The oft-noted inefficiency of Government enterprises stems from their isolation from effective competition (Aharoni, Yair, 1986). In the interest of the consumers, State monopolies and public enterprises need to be competitive in the production and service delivery. While Government should reserve the right to grant statutory monopoly status to select public enterprises in the broad national interest, it is desirable for the Government to always keep in mind that de-regulation of statutory monopolies and privatisation are likely to engender competition that would be healthy for the market and consumers.”

48Copy pinpoint48. In the summary contained in paragraph-3.5.2, we only notice the following: “3.5.2 Summary F xxx xxx xxx

6. Government should divest its shares and assets in State monopolies and public enterprises and privatise them in all sectors other than those subserving defence and security needs and sovereign functions. All State monopolies and public enterprises G will be under the surveillance of Competition Policy to prevent monopolistic, restrictive and unfair trade practices on their part.”

49Copy pinpoint49. Under the head, the Contours of Competition Policy, in paragraphs-4.2.2 and 4.2.4, we notice the following: H

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A “4.2.2 Scope State Monopolies and Government Procurement. In a number of countries, Government enterprises are excluded from the purview of the Competition Law. With the exception of Government entities engaged in sovereign functions, there is no valid justification for B such exclusion and all other Government enterprises should be within the ambit of the law. 4.2.4 By the same logic, Government enterprises and departments engaged in any sovereign function (like defence, law and order, currency functions) may not be subjected to the rigours of C Competition Law.” (Emphasis supplied)

50Copy pinpoint50. In paragraph-4.4.7, we notice the following: “4.4.7. Before assessing whether an undertaking is dominant, it is important, as in the case of horizontal agreement, to determine what the relevant market is. There are two dimensions to this – the product market and the geographical market. On the demand side, the relevant product market includes all such substitutes that the consumer would switch to, if the price of the product relevant to the investigation were to increase. From the supply side, this would include all producers who could, with their existing facilities, switch to the production of such substitute goods. The geographical boundaries of the relevant market can be similarly defined. Geographic dimension involves identification of the geographical area within which competition takes place. Relevant geographic markets could be local, national, international or occasionally even global, depending upon the facts in each case. Some factors relevant to geographic dimension are consumption and shipment patterns, transportation costs, perishability and existence of barriers to the shipment of products between adjoining geographic areas. For example, in view of the high transportation costs in cement, the relevant geographical market may be the region close to the manufacturing facility.” G

51Copy pinpoint51. In the summary, we may notice paragraph-4.8.8, it is stated as follows: “4.8.8. Summary

1. The State Monopolies, Government procurement and foreign H companies should be subject to the Competition Law. The Law

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should cover all consumers who purchase goods or services, regardless of the purpose for which the purchase is made.

2. Bodies administering the various professions should use their autonomy and privileges for regulating the standard and quality of the profession and not to limit competition.

3. If quality and safety standards for goods and services are designed to prevent market access, such practices will constitute abuse of dominance/exclusionary practices.

4. Certain anti-competitive practices should be presumed to be illegal. Blatant price, quantity, bid and territory sharing agreements and cartels should be presumed to be illegal. C

5. Abuse of dominance rather than dominance needs to be frowned upon for which relevant market will be an important factor.

6. Predatory pricing will be treated as an abuse, only if it is indulged in by a dominant undertaking. D

7. Exclusionary practices which create a barrier to new entrants or force existing competitors out of the market will attract the Competition Law.

8. Mergers beyond a threshold limit in terms of assets will require pre-notification. If no reasoned order, prohibiting the merger is E received within 90 days it should be deemed to have been approved. In adjudicating a merger, potential efficiency losses from the merger should be weighed against potential gains.”

52Copy pinpoint52. It is following the said Report, that in the year 2002, the Act came to be enacted. The Preamble to the Act reads: F “An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other G participants in markets, in India, and for matters connected therewith or incidental thereto.”

53Copy pinpoint53. We notice the scheme of the Act by taking note of the following provisions. H

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54Copy pinpoint54. Section 2(h) defines the word ‘enterprise’: “2(h) “enterprise” means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space. Explanation.-For the purposes of this clause,— D (a) “activity” includes profession or occupation; (b) “article” includes a new article and “service” includes a new service; (c) “unit” or “division”, in relation to an enterprise, includes E (i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods; (ii) any branch or office established for the provision of any service;”

55Copy pinpoint55. Section 2(i) defines the word ‘goods’: “2(i) “goods” means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes— (A) products manufactured, processed or mined;

G (B) debentures, stocks and shares after allotment; (C) in relation to goods supplied, distributed or controlled in India, goods imported into India;”

56Copy pinpoint56. Section 2(l) defines the word ‘person’: “2(l) “person” includes— H

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(i) an individual; A (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whether B incorporated or not, in India or outside India; (vi) any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); C (vii) any body corporate incorporated by or under the laws of a country outside India; (viii) a co-operative society registered under any law relating to co-operative societies; (ix) a local authority; D (x) every artificial juridical person, not falling within any of the preceding sub-clauses;”

57Copy pinpoint57. The words ‘relevant market’, ‘relevant geographical market’, ‘relevant product market’, are all separately defined: E “2(r) “relevant market” means the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets; 2(s) “relevant geographic market” means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas; 2(t) “relevant product market” means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use;”

58Copy pinpoint58. Section 3 prohibits anti-competitive agreements. They are declared void. H

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59Copy pinpoint59. We are, in the main, concerned in this case, with Section 4. Section 4 prohibits abuse of dominant position. Section 4 reads as follows: “4. (1) No enterprise or group shall abuse its dominant position. (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group.—- B (a) directly or indirectly, imposes unfair or discriminatory— (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. C Explanation.— For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or (b) limits or restricts— (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access in any manner; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.

G Explanation.—For the purposes of this section, the expression— (a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to— (i) operate independently of competitive forces prevailing in the H relevant market; or

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(ii) affect its competitors or consumers or the relevant market in A its favour. (b) “predatory price” means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. B (c)”group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.”

60Copy pinpoint60. Section 5 deals with regulation of combinations. At this stage, we may only sum up and state that the law prohibits anti-competitive agreements and also abuse of dominant position. It also regulates C combinations as explained in Section 6. Chapter 3 deals with the establishment of the CCI. Section 9 provides that the Selection Committee for appointment of Members of the CCI, including Chairperson, will include the Chief Justice of India or his nominee among others.

61Copy pinpoint61. Section 8 speaks about the composition of the Commission. D There must be a chairman and not less than two and not more than six other members to be appointed by the Central Government.

62Copy pinpoint62. Section 8(2) reads as follows: “8(2) The Chairperson and every other Member shall be a person E of ability, integrity and standing and who has special knowledge of, and such professional experience of not less than fifteen years in, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters, including competition law and policy, which in the opinion of the Central Government, may be useful to the F Commission.”

63Copy pinpoint63. Section 17 reads as follows: “17. (1) The Commission may appoint a Secretary and such officers and other employees as it considers necessary for the efficient performance of its functions under this Act. G

(2) The salaries and allowances payable to and other terms and conditions of service of the Secretary and officers and other employees of the Commission and the number of such officers and other employees shall be such as may be prescribed. H

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A (3) The Commission may engage, in accordance with the procedure specified by regulations, such number of experts and professionals of integrity and outstanding ability, who have special knowledge of, and experience in, economics, law, business or such other disciplines related to competition, as it deems necessary to assist the Commission in the discharge of its functions under this Act.” B

64Copy pinpoint64. The duties of the CCI are spelt out in Section 18. It reads as follows: “18. Subject to the provisions of this Act, it shall be the duty of the Commission to eliminate practices having adverse effect on C competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India: Provided that the Commission may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, D with any agency of any foreign country.”

65Copy pinpoint65. The aforesaid provisions indicate the width of the power lodged with CCI to bring about the sweeping changes in the economy. Section 19 empowers the Commission to make inquiries into agreements which are anti-competitive within the meaning of Section 3. More importantly, E Section 19(4) deals with inquiring into the question as to whether an enterprise enjoys a dominant position.

66Copy pinpoint66. Being a crucial provision, we notice the same. “19(4) The Commission shall, while inquiring whether an enterprise F enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely:— (a) market share of the enterprise; (b) size and resources of the enterprise; (c) size and importance of the competitors; G (d) economic power of the enterprise including commercial advantages over competitors; (e) vertical integration of the enterprises or sale or service network of such enterprises; H (f) dependence of consumers on the enterprise;

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(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise; (h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers; (i) countervailing buying power; (j) market structure and size of market; (k) social obligations and social costs; C (l) relative advantage,by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider relevant for the inquiry.” D

67Copy pinpoint67. Section 19(5) declares that for determining whether the market constitutes a relevant market for the purpose of the Act,the CCI shall have due regard to the relevant geographic market and relevant product market.

68Copy pinpoint68. Section 19(6) deals with the factors which are relevant for determining the relevant geographic market.

69Copy pinpoint69. Section 19(7) deals with matters which are relevant for determining the relevant product market.

70Copy pinpoint70. Section 27 provides for orders which the CCI may pass after inquiring into agreement or abuse of dominant position: “27. Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:— G (a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be; H

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A (b) impose such penalty, as it may deem fit which shall be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has B been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent. of its turnover for each year of the continuance of such agreement, whichever is higher. C (c) Omitted by Competition (Amendment) Act, 2007 (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; D (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; (f) Omitted by Competition (Amendment) Act, 2007 (g) pass such other order or issue such directions as it may deem E fit. Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, F and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group.”

71Copy pinpoint71. Section 28 provides for power to order division of enterprise enjoying dominant position. G

72Copy pinpoint72. The CCI is given power to pass interim orders in Section 33. The CCI can regulate its procedure as provided in Section 36. Section 41 provides for the duty of the Director General. He is to assist the CCI by investigating into any controversies. Penalties are contemplated under the Act. An appeal is provided to the Tribunal and Section 53T provides H

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for an appeal to the Supreme Court against the order of the Tribunal. A Section 54 deals with the power to exempt. It reads: “54. Power to exempt.— The Central Government may, by notification, exempt from the application of this Act, or any provision thereof, and for such period as it may specify in such notification— B (a) any class of enterprises if such exemption is necessary in the interest of security of the State or public interest; (b) any practice or agreement arising out of and in accordance with any obligation assumed by India under any treaty, agreement or convention with any other country or countries; C

(c) any enterprise which performs a sovereign function on behalf of the Central Government or a State Government: Provided that in case an enterprise is engaged in any activity including the activity relatable to the sovereign functions of the D Government, the Central Government may grant exemption only in respect of activity relatable to the sovereign functions.”

73Copy pinpoint73. Section 60 reads as follows: “60. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the E time being in force.”

74Copy pinpoint74. We must proceed on the basis that there is no challenge to the Act. This means that we must take the Act as it is and place an interpretation on it as would be most suitable in accordance with well- established principles. In other words, this is not a case where the Court F has been invited to pronounce on the vires of the Act.

75Copy pinpoint75. Coal continues to be an important and scarce natural resource. Nothing more is required to establish the same than the very lis over it. It forms an important raw material in the production of vital final products. Also, it forms a kind of fuel, which drives power plants. A monopoly, G undoubtedly, stood created by the Nationalisation Act. The mines, which were the subject matter of the Act, stood vested with the Central Government. The first appellant is a Government Company, which came into being, as contemplated under Section 5 of the Nationalisation Act. The appellant-Company operates the mines. It is tasked with the power H

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A and the duty to distribute coal. This attracts the Directive Principle enshrined in Article 39(b). The said Directive Principle contemplates that the ‘State’ should direct its policy towards securing that the ownership and control of the ‘material resources’ are so ‘distributed’ so as to ‘subserve the common good’. The argument of the appellants is partly based on the dictate of Article 31(B), which, together with the Ninth B Schedule, the insertion in which Schedule, immunizes laws from being invalidated on the ground that they take away or abridge Fundamental Rights. The Nationalisation Act was inserted in the Ninth Schedule on 10th August, 1975. We are not, in this case, called upon to sit in Judgment over the insertion of the Nationalisation Act on the basis that it is violative C of the basic structure of the Constitution in terms of what has been laid down in I.R. Coelho (supra). We proceed on the basis, therefore, that the Nationalisation Act was insulated by virtue of Article 31B. Equally, we proceed on the basis that it can be treated as a law giving effect to the policy of the State towards securing the principles enshrined in Article 39(b). D

76Copy pinpoint76. Here we are not dealing with a plea to overturn the Nationalisation Act on the score that it is violative of any of the Fundamental Rights. The Nationalisation Act was enacted to vest in the Central Government, the rights of the lessees in the coal mines so that they could be operated so as to ensure the rational, coordinated and E scientific development and utilization of the coal resources consistent with the growing requirements of the country. The Preamble clearly indicates that the Law-Giver had in mind the goal in Article 39(b), viz., acquiring ownership over coal mines so that coal mined from the mines could be so distributed so that common good was best subserved. The F Statement of Objects and Reasons of Act 67 of 1976, by which the Nationalisation Act was amended, indicated that after the nationalisation took place, persons holding mining leases took to unauthorized mining and in a most reckless and unscientific manner. This was noted to be without bearing in mind considerations of conservation, safety and the welfare of the workers. A valuable national asset was being destroyed. G There were safety concerns. Large profits were being reaped but by paying very low wages to the workers. All privately held coal leases were brought under the umbrella of the Nationalisation Act except those held by privately owned steel companies. The Nationalisation Act came to be again amended by Act 22 of 1978. Thereafter, again it was amended H by Act 57 of 1986 and finally by Act 47 of 1993. Suffice it to notice that

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with the commencement of the Coal Mines Nationalisation (Amendment) A Act, 1976 on 29.04.1976, carrying on a coal mining operation or leasing for mining coal by any private party, was prohibited.

77Copy pinpoint77. Section 11 of the Nationalisation Act contemplates that the general superintendence, direction, control and management of the affairs and business of a coal mine, where the right of an owner, stood vested in the Central Government under Section 3, would stand vested in the Government Company specified in terms of the direction made by the Central Government under Section 5. The first appellant is a Government Company, which was wholly owned by the Central Government and was the Company contemplated under Section 5 and, therefore, the general superintendence, direction, control and management of all the mines, ownership of which stood vested in the Central Government, vested with the first appellant. The first appellant is the holding Company and there are subsidiary companies. Reliance is placed on the Judgment of this Court rendered in the context of Article 324 of the Constitution. It is true that the said Article, which deals with the powers of the Election D Commission of India, employs the words general superintendence, direction and control of, inter alia, for the conduct of all elections to Parliament and the State Legislatures, apart from elections to the Office of the President and the Vice-President. It is, undoubtedly, true that this Court has held that the words ‘superintendence, direction and control’, are words of the widest import. It is subject to limitations, flowing from constitutional provisions, binding laws and directions, which may be issued by the Courts.It is true that the Election Commission of India has been clothed with the plenary jurisdiction. We must, no doubt, not lose sight of the fact that Article 324 deals with one of the most important Constitutional Functionaries. The importance of holding free and fair elections, cannot be understated. Even, according to the appellants, the appellants are bound to act in accordance with Presidential Directives and the extant policy in the superintendence, control and management of the affairs of the nationalized mines. It may not be appropriate to describe the power, therefore, as fully akin to the powers that vests with the Election Commission of India under Article 324. However, we do agree that subject to such directives and policy considerations, there is a large measure of power with the appellants. The appellants cannot, however, seek immunity from the operation of laws, which otherwise bind them. In fact, Shri K.K. Venugopal did state at the bar that the appellants are not impervious to the operation of laws, which would otherwise apply. H

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78Copy pinpoint78. Exception, however, is taken by the appellants to the applicability of the Act. This objection is founded upon the inconsistencies and consequent anomalous results, which would arise from the Act being applied to the appellants. We have already captured the various perceived inconsistencies in paragraphs-10-12.

79Copy pinpoint79. Before we proceed to deal with the grievances of the appellants, we must undertake a survey of the Act to ascertain, whether the Act, in any manner, advances the case of the appellants. The Act has been made in the year 2002 and it was not a pre-existing Statute. When the National Act was made,central to the scheme of the Act, is the expression ‘enterprise’, as defined in Section 2(h) of the Act. Let us decode it. An C ‘enterprise’ is defined as a person or a Department of the Government. Let us pause here for a moment. The word ‘person’ has been defined in Section 2(l) as including a company, a corporation established by or under any Central, State or Provincial or a Government Company, as defined in Section 617 of the Companies Act, 1956. We need not probe further. D The appellant is a Government Company within the meaning of Section 617 of the Companies Act, 1956. Therefore, the appellant is a person within the meaning of Section 2(h). The next limb of Section 2(h) contemplates that the person is one, ‘who’ or ‘which is’.Being an artificial person, the appropriate word is ‘which’. Therefore, the first appellant is a person, which is or has been engaged in any activity. The activity must relate to the production, storage, supply, distribution, acquisition or control of articles or goods. There can be an enterprise under Section 2(h) equally, if the activity relates to the provision of services of any kind, inter alia. We need not deal with the wide width of the other part of Section 2(h). The word ‘goods’ has been defined in Section 2(i) to mean goods, as defined in Sale of Goods Act, 1930 and includes products manufactured, processed or mined. There cannot be the slightest amount of doubt that the appellant is a person, which is engaged in activity relating to production, storage, supply, distribution and control of goods, as defined in the Act. It may also be within the ambit of Section 2(h) in regard to services it may provide, having regard to the wide words used in Section G 2(h).

80Copy pinpoint80. It is noteworthy that the Law-Giver has taken care to expressly include even Departments of the Government separately within the ambit of the word ‘enterprise’. Things could not be more clear. The only activity of the Government, which has been excluded from the scope of Section H

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OF INDIA [K. M. JOSEPH, J.]

2(h) and therefore, the definition of the word ‘enterprise’ is any activity relatable to the sovereign functions of the Government. Sovereign functions would include, undoubtedly, all activities carried on by the Departments of the Central Government, dealing with atomic energy, currency, defense and space.

81Copy pinpoint81. As we have noted earlier on, in answer to a specific query, as to whether the appellants are carrying on any sovereign functions, both Shri K.K. Venugopal and Shri Yaman Verma, would contend that they are not carrying on any sovereign functions. This relieves the Court of undertaking a discussion, which, even otherwise, may be unnecessary, having regard to the nature of the function. The first appellant is not a Department of the Government. It is a Government Company. In fact, what is excluded from the definition of the expression ‘enterprise’, is a Government Department carrying on Government functions. Carrying on business in mining, cannot, by any stretch of imagination, be described as a sovereign function.There is nothing in the definition which excludes a State monopoly which is even set up to achieve the goals in Article D 39(b) of the Constitution.

82Copy pinpoint82. As mentioned earlier, the Act aims at tabooing anti-competitive agreements and thereby promoting competition. It also prohibits abuse of dominant position. What is prohibited is, however, abuse of dominant position by an enterprise or a group. A group has been defined in the context of Section 5 which deals with regulation of combination. We find that the appellant answers the description of an enterprise as defined.

83Copy pinpoint83. When it comes to Section3, dealing with anti-competitive agreements, it encompasses a prohibition of such agreements by not merely enterprises or association of enterprises but by any person or association of persons.

84Copy pinpoint84. Dealing with abuse of dominant position being the theme of the lis, Section 4(1) declares that no enterprise or group shall abuse ‘its’ dominant position. What is dominant position? The second explanation in Section 4(2) defines that dominant position for the purposes of Section G 4 to be ‘a position of strength enjoyed by an enterprise in the relevant market in India’. Relevant market has been defined in Section 2(r) to mean “the market which may be determined by the CCI with reference to the relevant product market or the relevant geographic market or with reference to both the markets”. The words, relevant product market H

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A has been defined in Section 2(t) as meaning “a market comprising all of those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of its products or services, their prices and intended use”.Section 2(s) defines ‘relevant geographic market’, as meaning “a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas”. Thus, the lawgiver has provided for a position of strength enjoyed by an enterprise not in the vacuum. It is not based on any subjective criteria. The question of dominant position must stand answered with reference to carefully thought-out objective norms, as aforesaid. Continuing with the definition of the words‘dominant position’, it means a position of strength enjoyed by the enterprise in the relevant market which in turn involves adverting to the relevant geographic market or relevant product market or both as defined and it should enable the enterprise to enjoy the position of strength to operate independently of competitive forces prevailing in the relevant market. Another test to find out whether the enterprise enjoys a dominant position is to find out the said position with reference to its ability to “affect its competitors or consumer or the relevant market in its favour”.

85Copy pinpoint85. The Act further expatiates and dwells on the method to find out dominant position. Section 19(4) enumerates the factors to be considered. We have referred to Section 19(4)in paragraph-66.

86Copy pinpoint86. The CCI is bound to take into consideration the factors which have been indicated. Section 19(4) in fact, empowers the CCI to have regard to “all” or “any” of the factors to arrive at the finding that an enterprise enjoys a dominant position or not. Does not this mean that even a single factor being “any” factor may form the foundation to find whether an enterprise enjoys dominance? We would think that in a given case the answer would be in the affirmative. Closer home in the facts we find that Section 19(4)(g) declares that “monopoly” or “dominant position”, whether acquired as a result of the Statute or by virtue of being a Government Company or a Public Sector Undertaking or otherwise,is to be a relevant factor. We will at once notice that this is a clear indication that far from excluding governmental bodies like a government company, a public sector undertaking or a body under a Statute from the purview of the Act, the lawgiver has evinced its intention H