Adani Gas abused dominant position says company law board but reduces penalty

The NCLAT has upheld the fair trade regulator CCI's order, holding Adani Gas Limited (AGL) "guilty of of abuse of dominant position" while supplying piped natural gas to industrial customers in Faridabad.However, a two-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya reduced the quantum of penalty from four per cent of the average annual turnover of the relevant three years to one per cent, observing that it would be "commensurate with and proportionate to the level of proved abusive conduct of AGL".

Competition Commission of India (CCI) had on July 3, 2014 imposed a penalty of Rs 25.67 crore on AGL after finding its Gas Supply Agreement (GSA) imposing unfair conditions upon the complaints of Faridabad Industries Association.

CCI had also directed AGL to cease and desist from indulging in conduct found to be in contravention of the provisions of the Competition Act.

This was challenged by AGL before the NCLAT, which is an appellate authority over the CCI. Faridabad Industries Association, an informant before CCI, also appealed before the tribunal.

The National Company Law Appellate Tribunal (NCLAT) also found AGL's GSA imposed unfair conditions on the industrial customers of Faridabad.

"Having found that AGL, being the only supplier of natural gas and there being no gaseous substitute for the same, we find that AGL abused its dominant position qua the Industrial Customers by imposing unfair conditions upon the buyers under GSA as it existed in original form," the bench said.

The tribunal observed that under clause 13 (Billing and Payment) of GSA, the terms and conditions provides that an excess payment by the buyer to the seller due to erroneous billing/ invoicing on the part of seller would give rise to no liability whatsoever on the part of the seller, including interest whereas a delayed payment by the buyer renders him liable to pay interest and there being no corresponding obligation on the part of AGL to pay interest in terms of Clause 13.7.

Besides, the NCLAT also found some other clauses of GSA imposing unfair conditions.

"Both the appeals are accordingly disposed of upholding the impugned order passed by the Commission holding AGL guilty of abuse of dominant position with the orders and directions passed by the Commission with modification in imposition of penalty on AGL as indicated hereinabove.

"Balance amount of the penalty as reduced be deposited by AGL within thirty days of pronouncement of this judgment. All other orders/directions given by the Commission shall remain intact. The revised GSA as approved by us shall be made operational with immediate effect," the NCLAT said.

The appellate tribunal noted that GSA was revised by AGL during the course of investigation, to make it more consumer friendly and to protect the interests of Industrial Consumers.

"Keeping that in view we are of the considered opinion that reducing the penalty imposed on AGL from 4 per cent of the average annual turnover of the relevant three years to 1 per cent 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 circumstances of the case," it said.

AGL operates City Gas Distribution (CGD) Networks to supply piped natural gas (PNG) to the industrial, commercial, domestic (residential) and compressed natural gas (CNG) to the transport sector.