Government companies, PSUs cannot be left free to contravene Competition Act: Supreme Court

Public sector undertakings (PSU) and government enterprises including monopolies are required by law to avoid anti-competitive agreements and abuse of dominant position, the Supreme Court observed on Thursday [Coal India Limited and anr vs Competition Commission of India and Anr].

A bench of Justices KM Joseph, BV Nagarathna and Ahsanuddin Amanullah said that such entities should not be allowed to contravene the Competition Act, 2002.

"The novel idea, which permeates the Act, would stand frustrated, in fact, if State monopolies, Government Companies and Public Sector Units are left free to contravene the Act", the Court said.

While Competition Act cannot result in transforming government companies into mere profit-making engines, or require of them to be oblivious to their Constitutional obligations that cannot equally mean that they can act with caprice, or unfairly or treat otherwise similarly situated persons or things with discrimination, the Court underlined.

Such companies are expected to imbibe the new economic philosophy post liberalisation of 1991, which differs from the one during the early years of independent India.

"A slew of highly liberal reforms in 1991 set the stage for the Nation to make a paradigm shift ... things moved further in the direction of attaining faster economic growth. The Act is a measure which is intended to achieve the same. The role which was envisaged for the public sector company could not permit them to outlive their utility or abuse their unique position," the Court said.

The observations were made in a judgment holding that the Competition Act, 2002 applies to Coal India Limited, a PSU.

The Court in its judgment the term 'common good' at length, explaining that it depends upon the times, necessities, and the direction a nation wishes to take, among other things.

The bench stated that the idea of fair competition envisioned in the 2002 Competition Act harmonises with the goal of common good as per Article 39(b) of the Constitution.

"As far as the time dictated content of common good goes, it simply means that ‘economics’ itself not being bound in chains, but it is a dynamic concept," the judgment said.

It is the elected representatives that are best placed to understand how common good is best served, the bench emphasised.

Further, India has already 'realised' the advantages of a 'fearlessly competitive economy'.

"Can it be said that free competition as envisaged under the Act which involves avoidance of anti-competitive agreements, abuse of dominant position and regulation of combinations are against the common good? ... Properly construed and operated fairly, the ‘Act’ would, in other words, harmonise with common good being its goal as well," the judgment stated.

Read our detailed coverage of the judgment here.

[Read Judgment]