On December 3, 2018, CCI disposed information filed by Hindustan Zinc Limited (‘HZL’) against Western Coalfields Limited (‘WCL’) and Coal India Limited (‘CIL’) alleging inter alia contravention of the provisions of Section 4 of the Act.[1]

HZL is in the business of producing zinc, lead and silver, and WCL is a subsidiary of CIL. On August 1, 2017, HZL had entered into three Fuel Supply Agreements (‘FSAs’) with WCL. However, within a year of the FSAs, WCL failed to supply the agreed quantity and quality of coal, as laid down under the FSA. It was alleged that due to this, HZL had borne losses worth approximately INR 264 crores. HZL drew CCI’s attention to the following conduct of WCL:

(i)      supply of coal below 30% of the contracted quantity, and diversion of coal supply to Independent Power Producers as also non-payment of compensation therefor;

(ii)     unilateral revision of contracted grade of coal from G-9 to G-10;

(iii)    lock-in period of 2 years to terminate the contract;

(iv)    unilateral appointment of a third party agency by WCL for sampling at the time of delivery of coal; and

(v)     failure of WCL to adjust the excess royalty and contributions to District Mineral Foundation and National Mineral Exploration Trust paid by HZL.

Based on the above, HZL alleged that by imposing such unilateral and unfair conduct, WCL was abusing its dominant position, in contravention of Section 4(2)(a) of the Act.

CCI determined the relevant market as the market for ‘production and sale of non-coking coal to thermal power producers including captive power plants in India’. In its analysis of the alleged conduct, CCI noted that it had previously found CIL and its subsidiaries to be in a dominant position in the relevant market, therefore there was no need for a separate assessment of dominance in the present case.

CCI noted that in the previous coal cases[2], similar issues as those raised by HZL had been substantially addressed by issuing appropriate directions to CIL and its subsidiaries. On the issue concerning the lock-in period, CCI found that the FSAs entitled HZL to terminate the agreement without being bound by the lock-in period if such termination was occasioned due to the default at the seller’s end. On issues regarding excessive royalty, CCI held that they were not competition-related issues, therefore outside the purview of CCI. CCI relied on its previous orders dealing with the conduct of CIL and its subsidiaries to state that CCI’s orders are passed in rem, therefore, once an order is issued by CCI to address market failure, it need not order investigations based on successive information brought in by different parties agitating the same issues. An action to the contrary is likely to strain CCI’s and the DG’s limited resources, without achieving any tangible public good. CCI directed CIL and its subsidiaries to abide by the orders of the higher judicial forums in the appeals preferred there. Accordingly, the information was dismissed by CCI.

[1] Case No. 46 of 2018.
[2] Case Nos. 03, 11 & 59 of 2012; Case Nos. 05, 07, 37 & 44 of 2013 and Case No. 08 of 2014.