Adani Gas was liable for penalty for abusing dominant position

Adani Gas Limited Vs Competition Commission of India (NCLAT)

Conclusion: Penalty was leviable on assessee for contravention of provisions of section 4(2)(a)(i) of ‘the Competition Act, 2002’ (Act) by imposing unfair conditions upon the buyers under ‘Gas Supply Agreement’ (GSA) and for abusing dominant position.

Held: AGL-company was engaged in the business of setting up distribution networks in various cities to supply natural gas to industrial, commercial, domestic and CNG customers. FIA (Faridabad Industries Association) was an Association of Industries situated in Faridabad, comprising of about 500 Members operating industries in auto components, medical devices, steel, alloys, textile, chemical, etc. FIA contended that AGL, by grossly abusing its dominant position in the relevant market of supply and distribution of natural gas in Faridabad, had put unconscionable terms and conditions in GSA which were unilateral and lopsided besides being heavily tilted in favor of AGL and referring to various clauses of GSA, FIA 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. Assessee-company (AGL) had filed 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 assessee had contravened the provisions of Section 4(2)(a)(i)  by imposing unfair conditions upon the buyers under ‘Gas Supply Agreement’ (GSA).  It was held that Commission while imposing penalty noticed that only few clauses out of the GSA had been found to be in contravention of the provisions of the Act. It also noticed the changes effected by AGL during investigation and pendency of proceedings before the Commission in the agreements (GSAs). Having regard to the same, it decided to impose penalty @ 4% of average turnover of AGL for financial years 2009-10, 2010-11 and 2011-12 worked out at Rs.2567.2764 Lakhs. The Gas Supply Agreements (GSAs) that had been revised by AGL during course of investigation and enquiry 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 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. Such modifications which in effect eliminated discrimination qua Industrial Consumers and subsequent emergence of competitors of natural gas on the scene coupled with the fact that AGL not only came up with voluntary revision of GSAs even before conclusion of enquiry by the Commission and was amenable to the advice/suggestions falling from this Appellate Tribunal resulting in incorporation of the consumer friendly clauses substituting the contravening provisions in the GSAs, carved out mitigating factors extenuating circumstances in favour of AGL outweighing the only aggravating factor i.e. abuse of dominant position. Thus, reducing the penalty imposed on AGL 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. 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.

FULL TEXT OF ORDER OF  NATIONAL COMPANY LAW APPELLATE TRIBUNAL, DELHI

‘Adani Gas Limited’ (AGL) has preferred the instant appeal being appeal No. TA (AT) (Competition) No. 33 of 2017, Old Appeal No. 50 of 2014 against order dated 3^rd July, 2014 passed by the Competition Commission of India (Commission) in Case No. 71 of 2012 (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 @ 4% of average turnover of the last three years quantified at Rs.2567.2764 Lakh.

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