Case Law Details
MB Geeta Education Society Vs Varthana Finance Pvt. Ltd (Competition Commission of India)
The Commission observes that the main grievance of the Informant is that the OP allegedly abused its dominant position by filing a case against it under Section 25 of the Payment and Settlement Systems Act, 2007 before the Court of Learned Metropolitan Magistrate, 7th Court, Calcutta, which relates to “dishonour of electronic funds transfer for insufficiency, etc., of funds in the account”.
The Commission further notes that the Informant has not delineated any relevant market, nor has substantiated its claim that the OP is dominant in the market.
The Commission is of the prima facie view that the OP does not appear to hold any market power in respect of its activities, as many other bigger institutions/banks/ non-banking financial companies are providing loan facilities for various personal and business purposes, thereby allowing it to operate independent of many other entities offering similar services for the provision of various types of loans to consumers. Therefore, further analysis in relation to the allegations of abuse as contained in the Information is not required.
Moreover, with regard to the filing of the criminal case against the Informant, the Commission notes that the same cannot be examined from the competition law perspective in the fact and circumstances of this case, as such litigation is not with any object of affecting competition but appears to be in the nature of proceedings toward recovery.
In view of the foregoing, the Commission is of the opinion that there exists no prima facie case of contravention of any of the provisions of either Section 3 and/or Section 4 of the Act against the OP and therefore, the matter be closed forthwith under the provisions of Section 26(2) of the Act. Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises, and the same is also rejected.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 26(2) of the Competition Act, 2002
1. The present information has been filed by MB Geeta Education Society (hereinafter, the ‘Informant’) against Varthana Finance Pvt. Ltd. (formerly known as Thirumeni Finance Pvt. Ltd.) (hereinafter, the ‘OP’) under Section 19(1) (a) of the Competition Act, 2002 (hereinafter, the ‘Act’), alleging contravention of provisions of Sections 3 and 4 of the Act by the OP.
2. The Informant is stated to be a society registered under the Haryana Registration and Regulation of Societies Act, 2012, and the OP is stated to be a non-listed company based in Bangalore, India.
3. The Informant has submitted that, on 18.10.2018, it had taken land in Malakpur Village of Gharaunda Tehsil in Karnal, Haryana on lease for 21 years from Mrs. Sharmishtha, subject to payment of annual lease of Rs. 30,000/- and started a school on the said land.
4. It is submitted that the Informant took a loan of Rs. 22,18,432/- from the OP on 10.06.2019 for construction of the school building on aforementioned land. As stated on its website, the OP “aims to meet the needs of affordable private school owners by providing loan capital so that they can expand their infrastructure, invest in teacher-training, and introduce new learning methods into their classrooms”.
5. As per the Informant, it was paid the monthly instalments for the aforesaid loan on a timely basis, and the OP has issued the loan repayment statements. However, due to COVID-19 and the consequent closure of the school as well as the death of one of its members, it was unable to pay some instalments of the aforesaid loan in time. Nevertheless, the same were repaid to the OP, along with the accrued rate of interest, after the pandemic.
6. Thereafter, the OP filed an illegal criminal case under Section 25 of the Payment and Settlement Systems Act, 2007 before the Court of Learned Metropolitan Magistrate, 7th Court, Calcutta against the Informant, its members, and Mrs. Sharmishtha, who was neither the borrower nor a guarantor of the loan.
7. The Informant has alleged that the OP intentionally evoked wrong jurisdiction of the Learned Metropolitan Magistrate Court at Calcutta by furnishing false information and misusing Clause 15(b) sub-clause (iv) of the loan agreement, which provides that: “To Assign the debt, whether in full or part along with the underlying security in favour of one or more entities on such terms and conditions at the company discretion, without seeking consent from Borrower”.
8. The Informant has alleged that, before the entry of players like the OP, a majority of private educational institutions in towns like Gharaunda built their school infrastructure either using their own resources or by taking loans from the banks. However, the educational institutions were trapped by false loan promises of the players like OP after their entry into the market. It is averred that such players are forcibly closing the educational institutions by allegedly misusing their dominant position.
9. The Informant has alleged that the OP and its officers have abused their dominant position and harassed the Informant by abusing the process of law and minting money illegally beyond the scope of the loan agreement.
10. It is submitted that the aim of the OP is to eliminate the Informant from the field of education services in the district of Karnal, Haryana, which is a Tier-III city, and to provide undue benefits to other educational institutions of their choice and favour. This is alleged to be against the provisions of Section 4 of the Act.
11. The Informant has also averred that the OP, owing to its dominant position, has created entry barriers in the education services providers market in Tier-II and Tier-III towns of India by trapping the educational institutions through sanctioning school infrastructure loans and getting loan agreements signed with abusive clauses as well as compelling the loan defaulted schools to close their institutions. The same, as per the Informant, is causing appreciable adverse effect on competition (AAEC) in India and contravening the provisions of Section 3(3) of the Act.
12. The Informant has, inter alia, requested the Commission to declare the loan agreement between the Informant and the OP to be in contravention of the provisions of the Act and issue a direction to the OP to discontinue its abuse of dominant position and penalise it accordingly. The Informant has also sought interim relief under Section 33 of the Act stating, inter alia, that it has suffered irreparable loss due to abusive clauses in the aforesaid loan agreement.
13. The Commission considered the matter in its ordinary meeting held on 28.06.2022 and decided to pass an appropriate order in due course.
14. The Commission observes that the Informant availed a loan facility from the OP in 2019 for the purpose of construction of its school infrastructure and a loan agreement was stated to be entered thereto between the parties accordingly. However, as per the Informant, due to COVID-19, it was unable to pay some loan instalments to the OP in time, which were repaid later with interest.
15. The Commission observes that the main grievance of the Informant is that the OP allegedly abused its dominant position by filing a case against it under Section 25 of the Payment and Settlement Systems Act, 2007 before the Court of Learned Metropolitan Magistrate, 7th Court, Calcutta, which relates to “dishonour of electronic funds transfer for insufficiency, etc., of funds in the account”.
16. The Commission further notes that the Informant has not delineated any relevant market, nor has substantiated its claim that the OP is dominant in the market.
17. The Commission is of the prima facie view that the OP does not appear to hold any market power in respect of its activities, as many other bigger institutions/banks/ non-banking financial companies are providing loan facilities for various personal and business purposes, thereby allowing it to operate independent of many other entities offering similar services for the provision of various types of loans to consumers. Therefore, further analysis in relation to the allegations of abuse as contained in the Information is not required.
18. Moreover, with regard to the filing of the criminal case against the Informant, the Commission notes that the same cannot be examined from the competition law perspective in the fact and circumstances of this case, as such litigation is not with any object of affecting competition but appears to be in the nature of proceedings toward recovery.
19. In view of the foregoing, the Commission is of the opinion that there exists no prima facie case of contravention of any of the provisions of either Section 3 and/or Section 4 of the Act against the OP and therefore, the matter be closed forthwith under the provisions of Section 26(2) of the Act. Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises, and the same is also rejected.
20. Notwithstanding the order passed above, the Commission emphasises that the findings reflect the view of the Commission purely from the standpoint of the provisions of the Act and has not expressed any opinion on the existence or otherwise of violations alleged in the Information.
21. The Secretary is directed to communicate the order to the Informant accordingly.
