In the Matter Coal India Limited and its subsidiary Western Coalfields Limited had contended that they cannot be bound by the Competition Act, 2002 as both are governed by the Coal Mines (Nationalization) Act, 1973.
The appellants made the case that applying the Competition Act to monopolies would lead to such bizarre outcomes as to stifle the lofty objective entrenched in both Article 39(b) of the Constitution and the Nationalisation Act.
Supreme Court verdict
The Supreme Court’s three-judge panel led by Justices KM Joseph, BV Nagarathna, and Ahsanuddin Amanullah rejected the argument, noting that “If Parliament has intended that State monopolies even in the matter of distribution must come under the anvil of the new economic regime, it cannot be found flawed by the Court on the basis that subjecting the State monopoly would detract from the common good which the earlier Nationalisation Act when it was passed did not address Even for the sake of achieving the objectives in the Directive Principles, the court sees no justification for concluding that a State Monopoly operated through a Government Company will fall beyond the ambit of the Act.
The Court cited Section 19(4) as giving the CCI the authority to consider all relevant considerations when determining whether a business has a dominant position. According to Section 19(4)(g), monopoly is to be considered a relevant factor whether it was gained as a result of the Statute, by virtue of being a Government Company, a Public Sector Undertaking, or for any other reason. This shows that rather than excluding governmental entities like government companies, public sector undertakings, or bodies acquired under statutes from the scope of the Act, the lawmaker has expressed its intention to include these entities within the Act’s ambit.
The Court stated that a government department performing government functions is not included in the definition of the word “enterprise.” Therefore, conducting business in the mining industry cannot in any way be considered a sovereign role. Holding that the appellants cannot resist the imposition of standards of fairness and the duty to avoid discriminatorily practises when a specialized forum has been created by Parliament under the Act where, in addition to the CCI being an expert body, it can seek and receive useful input from experts, there is nothing in the definition that excludes a State monopoly that is even set up to achieve the goals in Article 39(b) of the Constitution. The Court further noted that the Director General of Investigation’s report came before the matter.