Explained: SC is hearing landmark case involving Coal India which will impact all PSUs

New Delhi: The Supreme Court is currently hearing a crucial case involving state-run Coal India Limited (CIL) which will have an impact on all PSUs in India. On May 11, the apex court reserved its order on a civil appeal filed by Coal India through which the coal miner is seeking immunity from the applicability of India’s Competition Law. Coal India had submitted that it was set up under a statute, the Coal Mines (Nationalisation) Act 1973 (Nationalisation Act), as a statutory monopoly with the objective of fulfilling the State’s constitutional obligations.

The respondent in the case is the Competition Commission of India (CCI) which has rejected Coal India’s contention that it, being a statutory corporation (with the stated objective of accomplishing the State’s responsibilities under Article 39(b) of the Constitution), implied that it cannot possibly be subject to the Competition Act 2002. The Supreme Court’s judgment in the case is likely to be a landmark one as it will decide the applicability of competition laws on public sector enterprises (PSEs).

CCI says immunity for Coal India will mean permitting ‘monopoly’

Additional Solicitor General N Venkatraman, who is representing CCI, has argued before the court that the complete grant of immunity to Coal India from the application of the Competition Act should be eschewed and not allowed as it would result in permitting this “monopolist” company to abuse their dominant position. “An anti-competitive practice of abuse of dominance will have the effect of a common detriment, and parliamentary legislation (competition law) preventing and regulating the same should not be held to be inapplicable,” said Venkatraman.

He was concluding his arguments before the three-member Division Bench of Justice KM Joseph, Justice BV Nagarathna, and Justice Ahsanuddin Amanullah on the concluding day of hearing on the matter on May 11.

The CCI, in its submission, has argued that being a statutory corporation does not exempt PSEs from compliance with the general law of the land and for the same reason, PSUs cannot be exempted from the purview of the Competition Act. It added that the definition of “enterprise” in the Competition Law makes it clear that public sector companies are covered within its ambit and are subject to the rigour and discipline of the Competition Act, including the prohibitions on anti-competitive agreements and abuse of dominant position enshrined in Sections 3 and 4, respectively.

“There is no anomaly in a statutory monopoly such as Coal India being subject to the rigour and discipline of the Competition Act since it is not dominance that is proscribed under the Competition Act but only abuse of such a dominant position (however such a dominant position might have been acquired),” said the CCI.

Importance of SC judgment

The Supreme Court’s judgment in the matter will be a landmark judgment on the applicability of the competition law to PSUs, many of whom enjoy a dominant position in the sectors they operate in. According to competition law experts, for the apex court, the decision will be one between the old economic policy thought process and the policies shaping new India. In a protected economy, the dominance of PSUs was the norm, however, if the SC rules against Coal India, it will be difficult for PSUs to take recourse in the Nationalisation Act to shield themselves from any abusive conduct due to their dominant position in the economy.

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