Presence of foreclosure or entry barrier due to the purported non-compete clause is necessary for contravention u/s 3 and 4 of the Competition Act: Competition Commission of India

 COMPETITION COMMISSION OF INDIA Case No. 221 Opposite Party In Re: Mr. Anand Moudgil Orbit Aviation Private Limited Mr. Ashok Kumar Gupta Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Order under Section 26(2) of the Competition Act 2002 1. The present Information has been filed under Section 19(1)(a) of the Competition Act 2002by Mr. Anand Moudgilagainst Orbit Aviation Private Limitedalleging contravention of the provisions of Sections 3 and 4 of the Act. 2. The Informant as the proprietor of M s Hermes International was stated to be engaged in the business of running buses between the IGI Airport Delhi and certain cities of Punjab. The operation of buses was commenced from 30.11.2016. Subsequently the Informant started receiving alleged threats from one of its competitors namely M s Indo Case No.221 concern of OP. Canadian Transport Companywhich is also stated to be a sister 3. According to Information a complaint was made by OP before the State Transport Commissioner Punjab and Delhi Airport Parking Services stating that the permits were obtained by the Informant on false premises. Taking cognizance of complaint STC issued Show Cause Notice and suspended the permits temporarily ex parte vide its order dated 08.12.2016. Due to temporary suspension of permits Informant was forced to halt the operations. Thereafter Informant filed a writ petition before the Hon’ble High Court of Punjab and Haryana to set aside the temporary suspension of the permits. ICTC also filed writ petition before the Hon’ble High Court of Punjab and Haryana to set aside the permits issued by STC to the Informant. The Hon’ble High Court vide its order dated 15.12.2016 directed the STC to decide the issue expeditiously and the order whereby the authorizations permits were suspended by STC were directed to remain in abeyance and not to be enforced. 4. Thereafter the Informant filed LPA before the Hon’ble High Court of Punjab and Haryana. The Hon’ble Court vide its order dated 21.12.2016 disposed of the appeal stating that if any adverse order is passed against the Informant by the STC the same shall be kept in abeyance for a period of 30 days to enable him to file an appeal. On 26.12.2016 the Office of the STC cancelled the permits of the Informant for breach of certain conditions contained in the permits to run the operations. Subsequently the Informant filed the writ petition before the Hon’ble High Court of Punjab and Haryana and vide order dated 25.01.2017 obtained the stay on the suspension. Case No.221 5. The Informant has stated that even after getting a stay order from the Hon’ble High Court he continued to receive threats. Consequently on 02.02.2017 the Informant sold the buses to OP by entering into the sale of busesagreementwith the OP. It has also been stated that a clause on Non Compete was forcefully inserted at the time of signing of Agreement by the OPof the agreement reads as under: “10. It has also been admitted and agreed by the party of the First Part that it will not undertake the similar business running of luxurious travel coach AC Non AC buses etc. from any town city of Punjab to Delhi Airport and back. Party of the First Part will not in any way compete with the existing business and business transferred by it to party of the second part. In case of any breach of this term party of the first part will have to compensate the party of second part through adequate damages…” 6. On 24.09.2019 Informant took a loan to the tune of INR 4 Crores to buy fournew buses and got permits for All India Tourist vehicles by the Transport Department of Punjab. 7. As per Information before the commencement of the operation of the buses on Punjab to Delhi IGI Airport route the OP filed an application for grant of ad interim injunction restraining the Informant from undertaking similar business of running buses between Punjab and Delhi and from competing with the said existing business of OP invoking the Clause 10 of the Agreement dated 02.02.2017. The Ld. Trial Court at Ludhiana granted relief by restraining the Informant to operate the similar business. Case No.221 8. As per the Information OP is not engaged in carrying out any business of plying buses from Punjab to Delhi Airport rather its sister concern ICTC is running the same business. Therefore OP is not allowing the Informant to compete by plying buses with ICTC. 9. Thereafter Informant filed appeal before First Appellate Court of Additional District Judge Ludhiana which came to be dismissed vide its order dated 18.01.2021 with the following observations: “15. …As appellant has already obtained INR 60 Lakhs from respondent not to carry on similar business to compete respondent therefore certainly prima facie case exist in favour of the respondent. Respondent has paid relatively huge amount towards profit and hence the balance of convenience also lies in its favour and in the considered opinion of this court that if appellant is not restrained from carrying on similar business it will result into irreparable loss to the respondent. It is necessary to mention here with the agreement in question is not for total restraint upon appellant to carry on business because only reasonable restraint has been agreed. As appellant agreed not to run his buses on a specific route i.e. Delhi Airport to various towns cities of Punjab thus he is at liberty to carryon business of transport on any other route.” “16….Once appellant has admitted execution of agreement received consideration thereof and acted upon it therefore he cannot now claim that he was forced to enter into agreement due to pressure of political party which was in power in Punjab at that time.” Case No.221 law. 10. Aggrieved thereby and dissatisfied therewith the Informant is stated to have preferred an appeal before the Hon’ble High Court of the Punjab and Haryana for setting aside the order dated 18.01.2021. 11. Now the Informant has approached the Commission alleging that Clause 10) of the Agreement dated 02.02.2017 to be anti competitive and violative of Sections 3 and 4 of the Act with the following reliefs: i) The Non compete Clause 10 of the agreement dated 02.02.2017 be set aside with its operation retrospectively if permissible under ii) Appropriate compensation be awarded to the Appellant due to applicability of Clause 10 of the alleged agreement. iii) To pass appropriate order inquiry under relevant provisions of the Competition Act earlier judgments passed by the Commission along with in light of any relevant judgments rendered by the NCLAT OR Hon’ble Supreme Court of India to declare the impugned clause nullity illegal to set aside in the present appeal. 12. The Informant has also sought interim relief during the pendency of the matter as envisaged under Section 33 of the Act by seeking restrained upon the execution operation of Clause 10 of the Agreement. 13. The Commission considered the present Information in its ordinary meeting held on 28.09.2021 and decided to pass an appropriate order in due course. Case No.221 14. Having considered the averments and allegations made in the Information the Commission notes that the primary grievance of Informant is that he is restricted by the OP from re entering into business of running of buses between IGI Airport Delhi and certain cities of State of Punjab by invoking Clause 10 i.e. Non compete clause of the Agreement which was entered between the Informant and the OP as detailed supra. The Informant has alleged that Clause 10 of the Agreement is in violation of Sections 3 and 4 of the Act. 15. On perusal of the Information and the documents filed therewith it appears that the Informant has not been able to place any material before the Commission wherefrom any entry barrier much less any insurmountable entry barrier can be deciphered. It is an admitted position on record that the Informant himself has re entered into the same business without any difficulty. Admittedly the Informant obtained the registrations and permissions from the STC twice within a short span of time. No other entry barrier has been pleaded much less established. As regards the purported non compete clause it is evident that it is the Informant only who appears to have been restricted to enter the said market and this clause does not create entry barrier for any other person or enterprise to enter the similar business. 16. In view of the above the Commission is of the considered opinion that in the absence of any foreclosure or entry barrier in the market due to the purported non compete clause entered into by and between the Informant and the OP as also considering the nature of the clause and the consideration paid therefor and the attendant litigations and observations made therein the Informant has failed to make out any case of contravention of the provisions of Sections 3 or 4 of the Act against the OP. Case No.221 17. Resultantly the Commission is of the opinion that no case of contravention of the provisions of the Act is made out and the matter is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act. 18. It is made clear that nothing stated in the present order shall preclude the Informant from taking availing any other remedy(s) available to him in accordance with law. 19. The Secretary is directed to communicate to the Informant accordingly. Sd Ashok Kumar Gupta) Chairperson Sd Sangeeta Verma) Member Bhagwant Singh Bishnoi) Sd Member New Delhi Date: 12 10 2021 Case No.221 

Summary: The informant was not able to present any material to the Commission from which any entry barrier, let alone an unstoppable entry barrier, could be comprehended. Therefore, any contravention of sections 3 and 4 could not be found. This was held in the case of Anand Moudgil and Orbit Aviation Private Limited [ Case. No. 27 of 2021], before Hon’ble Chairperson Mr. Ashok Kumar Gupta, Members, Ms. Sangeeta Verma and Mr. Bhagwant Singh Bishnoi. The brief facts of the dispute are as follows; the Informant was the owner of M/s Hermes International, which runs bus services between the IGI Airport in Delhi and various cities in Punjab. Quoting Clause 10 of the Agreement dated 02.02.2017, the OP filed a petition for grant of ad interim injunction restraining the Informant from conducting similar business of running buses between Punjab and Delhi and from competing with the said existing business of OP.  The Trial Court in Ludhiana prohibited the Informant from engaging in a similar business. OP is not in the business of transporting passengers from Punjab to Delhi Airport; rather, its sister company, ICTC, is in this business. As a result, OP is not permitting the Informant to compete by operating buses alongside ICTC. The informant appealed the decision before the First Appellate Court of Additional District Judge, Ludhiana, but it was dismissed. Aggrieved and unsatisfied, the Informant is said to have filed an appeal with the Hon’ble High Court of Punjab and Haryana and  filed a complaint with the Commission, insinuating that Clause (10) of the Agreement dated 02.02.2017 is anti-competitive and violates Sections 3 and 4 of the Act. The Commission held that, “The Informant has not been able to place any material before the Commission wherefrom any entry barrier, much less any insurmountable entry barrier, can be deciphered. It is an admitted position on record that the Informant himself has re-entered into the same business without any difficulty. Admittedly, the Informant obtained the registrations and permissions from the STC twice within a short span of time. No other entry barrier has been pleaded much less established. As regards the purported non-compete clause, it is evident that it is the Informant only, who appears to have been restricted to enter the said market and this clause does not create entry barrier for any other person or enterprise to enter the similar business……in the absence of any foreclosure or entry barrier in the market due to the purported non-compete clause entered into by and between the Informant and the OP, as also considering the nature of the clause and the consideration paid therefor and the attendant litigations and observations made therein, the Informant has failed to make out any case of contravention of the provisions of Sections 3 or 4 of the Act against the OP.” Click Here to Read the Order Judgement Reviewed by Vagisha Sagar