Supreme Court states government companies and PSUs are not authorized to defy Competition Act

Supreme Court states government companies and PSUs are not authorized to defy Competition Act

The observations were made in a judgment on the Coal India Limited case

The Supreme Court has held that Public Sector Undertakings (PSUs) and government enterprises, including monopolies, cannot avoid anti-competitive agreements and abuse of dominant position under the law.

In the Coal India Limited and Anr vs Competition Commission of India and Anr case, a bench of Justice KM Joseph, Justice BV Nagarathna, and Justice Ahsanuddin Amanullah said that such entities should not be allowed to contravene the Competition Act, 2002.

The Court ruled, "The novel idea, which permeates the Act, would stand frustrated, if state monopolies, government companies and public sector units are left free to contravene the Act.”

The bench stated that while the Act could not be expected to result in transforming the government companies into mere profit-making engines, or require them to be oblivious to their Constitutional obligations, it also does not mean they can act with caprice, or treat persons or things with discrimination.

Post the 1991 liberalization, such companies were expected to imbibe the new economic philosophy. This differed from the early years of independent India.

The Court underlined, "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 envisaged for the public sector companies could not permit them to outlive their utility or abuse their unique position.”

In its judgment, the bench explained about the term 'common good' at length. It said that it depended upon the times, necessities, other aspects, and the direction a nation wished to take.

It stated that the idea of fair competition envisioned in the Competition Act harmonized with the goal of the common good as per Article 39(b) of the Constitution of India.

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

Emphasizing that the elected representatives are best placed to understand how common good is best served, it added that the country realized the advantages of a 'fearlessly competitive economy.'

The Judges questioned, "Can it be said that free competition as envisaged under the Act, which involves avoidance of anti-competitive agreements, the abuse of dominant position and regulation of combinations are against the common good?”

They added, “Properly construed and operated fairly, the Act would harmonize with common good being its goal.”