Bench of Justice S.J. Mukhopadhaya and Justice Bansi Lal Bhat at the National Company Law Appellate Tribunal has on 05.03.2020 dismissed an appeal prefered by Adani Gas Limited (AGL).

Through this Appeal the Company had challenged an order of the Competition Commission of India (CCI) whereby it had imposed a penalty of around Rs.26 crores ie 4% of the average annual turnover of the relevant three years.

The court further upheld that the Appellant Adani Gas had abused its dominant market position by imposing unfair conditions on its buyers under a Gas Supply Agreementand concluded that 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, had 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.

Justice S.J. Mukhopadhaya and Justice Bansi Lal Bhat while reducing the penalty imposed from 4% to 1% held,"…...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, in our considered opinion carve out mitigating factors/ extenuating circumstances in favour of AGL outweighing the only aggravating factor i.e. abuse of dominant position. Keeping that in view we are of the considered opinion that 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. We are of the firm opinion that this reduction would meet the ends of justice and achieve the desired object of the statue in the peculiar facts and circunstances of the Case''.

Faridabad Industries Association (FIA) had alleged 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 favour of AGL. It was further alleged that the terms of GSA had been drafted unilaterally by AGL leaving no scope for Members of FIA, who were solely dependent for supplies upon AGL .AGL was alleged to have imposed its diktat upon the buyers of natural gas under the garb of executing GSA and thus clearly demonstrated abuse of dominant position.

CCI had directed AGL to modify the terms of the GSA which AGL had complied.

Bench observed,''The Commission noticed that AGL held 100% market share in the Relevant Market being the only entity authorized by Government of Haryana to setup and operate CGD Network in Faridabad. The Commission noticed that the regulations framed under the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act) contain provisions to grant 25 years infrastructure exclusivity to lay, expand or operate CGD Network with further provision for three years marketing exclusivity to an existing CGD Network and five years exclusivity to a new CGD Network from the purview of common or contract carrier after which it provides for open access allowing competition and choice to the consumer. Based on the relevant factors including absence of any countervailing buying power, market structure, size thereof and the entry barriers, the Commission found that the AGL was holding a dominant position in the defined relevant field''.

The Court further stated " The only conclusion deducible on the basis of material available on record is that during the relevant period there was no gaseous substitute of natural gas available to Industrial Units in Faridabad. It is emphatically clear that PNG was not interchangeable with other fuels as contended on behalf of AGL. Furthermore, it cannot be ignored that during the relevant period LPG was not available to Industrial Units as an alternate fuel as revealed from the submissions made before the DG. It is therefore futile on the part of AGL to contend that it had successfully demonstrated that PNG was interchangeable with other fuels at the relevant time."

Counsel for Appellant: Mr. Sharad Gupta and Mr. Vinayak Gupta, Advocates for Respondent No. 2.

Counsel for Respondents: Mr. Pallav Sishodiya, Senior Advocate with Mr. Vikram Sobti and Mr. Mehul Parti, Advocates for Respondent No. 1. Mr. Parcival Billimoria, Ms. Avaantika Kakkar, Ms. Neelambera Sandeepan, Mr. Satvik Mohnaty, Mr. Shubhankar Jain, Mr. Aamir Khan, Ms. Marcellina Kalikotey, Mr. Dhruv Rajan and Mr. Shaurya Vardhan, Advocates.

Judgement by NCLAT in Adani Gas Limited vs CCI dt 05.03.2020 (Downloadable PDF)

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