Competition continues: CCI approves energy acquisition while COMPAT sets CCI penalty aside

CCI approves acquisition of 49.86% stake in SGL by petroleum companies

By an order dated February 10 2016(1) the Competition Commission of India (CCI) approved the acquisition of a 49.86% stake in Sabarmati Gas Limited (SGL) by public sector undertakings Gujarat State Petroleum Corporation Limited (GSPC), Gujarat State Petronet Limited (GSPL) and Bharat Petroleum Corporation Limited (BPCL).(2) This stake is currently held by the India Infrastructure Development Fund, the India Infrastructure Fund and IFCI Venture Capital Funds Limited in equal proportions.

GSPC is engaged in exploration and production, gas transmission, city gas distribution and power generation, among other things. GSPL is involved in building infrastructure for the transmission of natural gas across the state of Gujarat, allowing last-mile linkage to the end user. BPCL is a public limited company primarily engaged in the business of refining and marketing oil and gas. SGL operates a city gas distribution network in the Gandhinagar, Mehsana and Sabarkantha districts of Northern Gujarat.

The CCI noted that the proposed combination will likely lead to the exit of the India Infrastructure Development Fund, the India Infrastructure Fund and IFCI Venture Capital Funds Limited from the market. Keeping in mind their existing affirmative veto rights, the CCI observed that this exit is unlikely to result in a change to competition dynamics in any market, and that the proposed combination is therefore unlikely to result in an appreciable adverse effect on competition in any market. Consequently, the proposed combination was approved.

COMPAT sets aside CCI penalty following failure to observe principles of natural justice

By an order dated January 13 2016(3) the Competition Appellate Tribunal (COMPAT) set aside the penalty imposed on Himachal Pradesh Chemist & Druggist Alliance (HPCDA) by the CCI and ordered a reinvestigation into HPCDA's alleged cartelisation.(4) The case was filed by Rohit Medical Store, which alleged that pharmaceutical companies had – among other things – failed to appoint stockists in the absence of notices of compliance from HPCDA and charged product information fees before the introduction of new medicines in the market.

One of HPCDA's defences was that the director general had violated principles of natural justice by relying on allegedly forged and fabricated documents without providing HPCDA with an opportunity to cross-examine the informant. It was alleged that despite the original parties' requests for cross-examination, the director general himself had cross-examined the witness – thus positioning himself simultaneously as the informant, pleader and judge. Another of HPCDA's defences was that the director general had relied on his personal knowledge in his finding, which was contrary to the basic principle that "no one should be a judge in his own cause".

COMPAT noted that although the CCI had briefly acknowledged some of the appellants' objections, it did not deal with their specific pleas that the director general's investigation had been vitiated due to violation of the principles of natural justice and that his findings were perverse. COMPAT considered that this allegation was serious and merited further investigation by the director general affording cross-examination of the informant. The CCI's failure to adopt this course of action had resulted in a grave miscarriage of justice.

COMPAT directed the director general to conduct a fresh investigation into the matter, with a further direction that the CCI issue a new order after giving the parties the opportunity to file their objections and submissions in respect of the director general's findings and have their advocates and representatives heard.

For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525) or email ([email protected]). The Vaish Associates website can be accessed at www.vaishlaw.com.

Endnotes

(1) For further information, please see "CCI approves acquisition of 49.86% stake in Sabarmati Gas Limited(SGL) by PSU petroleum companies".

(2) For further details, please see www.cci.gov.in.

(3) For further information, please see "COMPAT sets-aside penalty imposed on Himachal Pradesh Chemist & Druggist Alliance (HPCDA) on account of failure to observe principles of natural justice during investigation by the DG".

(4) For further details, please see www.compat.nic.in.

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