The National Company Law Appellate Tribunal (NCLT) has confirmed the penalty on Adani Gas for abuse of dominant position.
The Adani Gas Limited’ (AGL) has preferred the instant appeal being passed by the Competition Commission of India (Commission) in Case (Faridabad Industries Association Vs. Adani Gas Limited) under Section 27 of ‘the Competition Act, 2002’ (Act) holding that the Appellant has contravened the provisions of Section 4(2)(a)(i) of the Act by imposing unfair conditions upon the buyers under ‘Gas Supply Agreement’ (GSA).
The Commission, apart from directing the Appellant to cease and desist from indulging in conduct found to be in contravention of the provisions of the Act in terms of the impugned order, directed the Appellant to modify the GSA’s in the light of observations and findings recorded in the impugned order and imposed a penalty on Adani Gas Limited @ 4% of the average turnover of the last three years quantified at Rs.2567.2764 Lakh.
The Informant – ‘Faridabad Industries Association’ (FIA) also has filed cross-appeal being TA (AT) (Competition) No. 34 of 2017, Old Appeal No. 57/2014.
The FIA is an Association of Industries registered under the Societies Registration Act, 1860, situated in Faridabad, comprising of about 500 Members operating industries in auto components, medical devices, steel, alloys, textile, chemical, etc.
AGL is a Company incorporated and registered engaged inter alia in the business of setting up distribution networks in various cities to supply natural gas to industrial, commercial, domestic and CNG customers.
It was averred in the information that about 90 Members of FIA were consuming natural gas supplied by AGL to meet their fuel requirements.
The Informant alleged that AGL, by grossly abusing its dominant position in the relevant market of supply and distribution of natural gas in Faridabad, has put unconscionable terms and conditions in GSA which are unilateral and lopsided besides being heavily tilted in favor of AGL.
Thus, AGL was alleged to have imposed its diktat upon the buyers of natural gas (Members of FIA) under the garb of executing GSA. It was further alleged that the terms of GSA have been drafted unilaterally by AGL leaving no scope for Members of FIA, who are solely dependent on supplies upon AGL.
Referring to various clauses of GSA, the Informant alleged that the said clauses and conduct of AGL clearly demonstrated abuse of dominant position by AGL in imposing unfair and discriminatory conditions in GSA’s executed by it with the Members of FIA.
While we propose to refer to allegedly offending clauses at the appropriate stage as we proceed further, be it noticed that on the strength of aforesaid allegations Informant complained of contravention of provisions of Section 4 of the Act seeking various reliefs including the direction to AGL to discontinue such abuse of dominant position, direct modification of offending clauses in GSA by providing fair and non-discriminatory terms and the imposition of the exemplary penalty within the ambit of Section 27(b) of the Act.
The Tribunal comprising of Chairperson, Justice S. J. Mukhopadhaya and Judicial Member, Justice Bansi Lal Bhat pronounced the order based on an appeal filed by M/s Adani Gas Limited.
The bench observed that the Gas Supply Agreements (GSAs) that had been revised by AGL during the course of investigation and inquiry before the Commission came up for further revision of the contravening clauses to make them more consumer-friendly and to protect the interests of Industrial Consumers by removing the disparity as regards the revision of gas prices, payment obligation in case of shutdown of supply and for complete or partial off-take of gas, etc. which came about in compliance to the suggestions put forth by this Appellate Tribunal.
The Tribunal also observed that the modifications which in effect eliminated discrimination qua Industrial Consumers and the subsequent emergence of competitors of natural gas on the scene coupled with the fact that AGL not only came up with a voluntary revision of GSAs even before the conclusion of inquiry by the Commission and was amenable to the advice/ suggestions falling from this Appellate Tribunal resulting in the incorporation of the consumer-friendly clauses substituting the contravening provisions in the GSAs, in our considered opinion carve out mitigating factors/ extenuating circumstances in favor of AGL outweighing the only aggravating factor i.e. abuse of dominant position.
The Tribunal further opined that reducing the penalty imposed on Adani Gas Limited from 4% of the average annual turnover of the relevant three years to 1% would be commensurate with and proportionate to the level of proved abusive conduct of AGL and also opined that this reduction would meet the ends of justice and achieve the desired object of the statue in the peculiar facts and circumstances of the case.
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