The Supreme Court on Thursday ruled that Coal India Limited (CIL), a public sector undertaking, and its subsidiary companies are covered under the Competition Act, 2002, and the competition watchdog Competition Commission of India can act against it for abuse of its dominant position in the coal sector.

Holding that Coal India Limited is not exempted from the purview of the Competition Act, a bench of Justice K.M. Joseph, Justice B.V. Nagarathna and Justice Ahsanuddin Amanullah in a judgment today said, “We would hold that there is no merit in the contention of the appellants (Coal India Limited) that the Competition Act will not apply to the appellants (CIL) for the reason that the appellants (CIL) are governed by the Coal Mines (Nationalisation) Act and that Coal Mines (Nationalisation) Act cannot be reconciled with the Competition Act.”

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However, the court said that this is subject to Coal India Limited having “all the rights to defend their actions under the law …”

The core question that court addressed was whether the Competition Act applies to Coal India Limited – a creation of the Coal Mines (Nationalization) Act, 1973 – and its subsidiary Western Coalfields Limited as they are “geared and duty bound” to achieve the objects declared in Article 39(b) of the Constitution of India cannot be bound by the Competition Act, 2002.

Article 39 provides for “Certain principles of policy to be followed by the State” and 39(b) says that “the ownership and control of the material resources of the community are so distributed as best to subserve the common good”.

Initially the matter was before a two-judge bench but in the course of the hearing since CIL sought modification of an earlier August 3, 2017 order, it was referred to a three-judge bench. A two-judge bench cannot modify an earlier order passed by another bench of the same strength.

The top court judgment has come on Coal India Limited’s challenge to December 2016 ruling of the then Competition Appellate Tribunal (COMPAT) – now the National Company Law Appellate Tribunal (NCLAT) – which had dismissed its (CIL) appeal against October 2014 order of the Competition Commission of India (CCI).

The CCI had held CIL guilty of abuse of dominant position in the production and supply of non-coking coal to thermal power producing plants in different states. The companies producing electricity from coal fired power plants had objected to CIL increasing the coal prices from Rs. 1,631 per metric tonne to Rs. 2,177 per metric tonne.

They had contended that the hike in price was without any justification and had imposed discriminatory pricing on buyers.

Asking CIL to refrain from its anti-competitive practices, the CCI had imposed a penalty of Rs. 1733/- crores on the CIL. But the same was reduced to Rs. 591/- crores by the COMPAT, which remanded the matter back to CCI for fresh consideration.