Government push on ethanol blending has set the booming sector ripe for cartelisation

The National Company Law Appellate Tribunal (NCLAT) recently set aside an order of Competition Commission of India (CCI) that imposed a penalty of ₹38 crore on various sugar mills and their two associations in 2018. The CCI imposed penalties upon sugar mills for rigging bids for tenders floated by oil marketing companies for ethanol procurement to blend with fuel.

The joint tender was floated as government made it mandatory to blend 5 per cent ethanol with fuel.BPCL invited quotations from alcohol manufacturers for supply of ethanol as the coordinator of the tender process. 

The contention

The aforesaid ruling of CCI was challenged by sugar mills before NCLAT on the ground that CCI did not comply with the principles of natural justice as the matter was heard by CCI on various occasions by six members, but the final judgment was signed and pronounced by only three members, and therefore, the principle of ‘one who hears must decide’ was not adhered to. 

The ruling raised troubling questions as the case was chaired by members who did not attend the whole proceedings, but signed the final ruling and thereby breached the principle ‘one who hear must decide’. 

The ruling was signed by three members who were present on every day of the proceedings of the Commission during final hearing.

Curious reasoning

The other reasoning advanced by NCLAT in setting aside the ruling is equally curious. The NCLAT reasoned that the impugned order did not comply with the requirement of adherence to the principles of natural justice as the same was passed ‘…after almost 13 months from the date the matter was reserved for orders, after conclusion of final arguments’. T

The NCLAT while setting aside the ruling of CCI referred to the two decisions of Supreme Court in the cases of Anil Rai vs. State of Bihar and Ram Bali vs. State of U.P. and opined that the issue of delayed delivery/pronouncement of judgment is a serious issue. Reference was also made to CCI Regulations which stipulate that CCI may deliver final judgment within 21 days from the date it reserved the matter for final judgment.

In the present case, it is not apparent whether any prejudice was indeed caused to the parties or otherwise pleaded by them, due to any delayed pronouncement of judgement. Legal experts believe that it is settled cannon of law that in the absence of any prejudice, an otherwise reasoned order of a regulator cannot be lightly interfered with by the appellate tribunal.

In fact, the most jarring aspect of the NCLAT ruling is the absence of cognizance of a recent judgment of the Delhi High Court in the case of Alliance of Digital India Foundation vs. Competition Commission of India decided on April 24, 2023 which virtually provided a carte blanche to CCI in respect of any plea relating to quorum.  In fact, this order paved the way for CCI to continue with its adjudicatory functions even without statutory ordained quorum of minimum three members.

In this case, the Delhi High Court emphatically ruled that “the submission that the constitution of CCI less than three members would create lack of jurisdiction of CCI as an adjudicatory authority, would fail”. Legal experts opine that “if this being the case and CCI can issue rulings without the statutorily mandated minimum quorum of three, it is indeed surprising that a final ruling of CCI with a requisite quorum of three can be lightly interfered by the Appellate Tribunal”.

Published on October 20, 2023