Arshiya Rail Infrastructure Ltd. ... vs Ministry Of Railway (Mor) & Ors. Main ... on 14 August, 2012

[Cites 39, Cited by 0]

Competition Commission of India

Arshiya Rail Infrastructure Ltd. ... vs Ministry Of Railway (Mor) & Ors. Main ... on 14 August, 2012

CQl;'4%FiE"§'°ET.EG§*~§ EGMMISSEGN $51: Eﬁmiﬁ wage 355;. 5?*4?vfE§1i9 93§2,I§2i§3y1 aaéiidﬁ izfgﬁil} . 3 Dee: i£»r?'7?« r%:fW"§3"'3 M/5. Arshiye Rail Infrastructure Ltd. -» lnfm*man"t/Appieicant M/s. KRIBHCO Infrastructure Ltd, ~ Infermant/App§%£;an*t VS.

Chairman, Raiiway Board, -. --~ Resgmndent Ministry of Raiiways, CONCZOR & Qrs These three cases imrotve common issues and are, *cherefere,e decided by a conseiidated career. The first case, Le. Case noﬁe of 2010, was ﬂied by Arshiya Rail infrastructure Ltd; the second case Le ease :10. - 02 mi' 2011 by KRIBCHC3 infrastructure 'Ltd, and the thirci case HQ, 12 of 2011 were fiﬁed by Arshiya. Aii these cases were med against the Miﬁiﬁtry cf RaiEwa_ys (MGR) and the Ccmtainer Corpmatien of indie ailegﬁng therein that they have abused thew dominant position.

eLa_eeATme:s V '2. These cases have arisen out csf the ;3<:3i§cy [If the Government aii:ow'ing the runn'in§ of c:0m:ainer services on the reiiwav nfetwer§< by private operators. The main griwance of an the parties is that when the advertisement fer meaning 0? the centainerised '£z*eans;3p_rt on the railway network was formulated and advertised by the government, he restrictive conditions were there. But after the parties depcjsiteﬁ :3? Earge sum of mcmey and the agreement between the Raiiwaysf. and the private operators were epmoved, theugh not signed, the railways changed the conciiticms of the concession agreement. This is nethingl but Changing Qf the gcaalpcisi: after a match had started. It has been alleged Z3'! both the parties that the Ministry <3?" Raiiways and the Container Corporation .0'?

India were bath abusing 'their daminance, It was stated. that 'there was an Page 1 oflﬁil irnpositien of unfair conditions in the concession agreement signed between the Raiiways and the Infermants.

3° Tiii 2006, Ministry of Reiiways through CDNCCBR was the soie ciperator of container trains far both Exim and inland traffic, Due to the gmwizn of the ecencirny, there was an increase in traffic: cm the reiiway netwerk: and a; need was felt by the Ministry of Reiiweye to» augment more transpertaﬁen on the reii netwerk, it has been stated in the infermeisien that between the periods 1994 'tea ';>.i}G6 the introduction er' the pi'-Nate train container operators was an faiiure due re a lack of ciarity on paiicy end objections from CONC-OR. in 22885 after the §;?i{'i'I'i{;}L3n{_2ei"i"_IE['i?§i in the Pariiameni: by the Reiiway Minieter for opening the container traffic on Indian Raiiways, the Railways directed a study on the nperatian of container trains on Indian Reiiways to be carried out by RETES; an inciian Raiiway undertaking, The M':n'isi:ry of Reiivimxe came nut W'ii:n e rsoiicy decision vide its notificaizien i2QO2;'IT«--1:i1_,="1S/3§ an 09.Q'l.C120§36, The pciiicy decision stated that there wouiti be e "nen~ci§s;:rim'inatery 'access fer private raii container eperaters on the raii netweri<, The pniicy decisiron was netiﬁeci an 23"' September ZOGB. In the advertisement wnicn cerne out in pursuance of this pci»i'i(:y, CRT ruies anti rnociei cencessien agreements were mentioned. when the edvertisemﬁnt was piubiisned there 'was inn restriction on ~C~Cili\iC-OR to maize I:§)i1'ii1'iCiC:'iili*E:S in the ' C£3i'itEi'iF~i*e3"S en the .re'ii network, 15 .privete xznnitafinerr train epereters appiieci in response tn the iaciviertisernenit, The ;i'«"ii'n,iste_r made an announcement that the 1S 'PC':i13.s-wou'id'be given ievei playing iiieicii 4, The Infermarit Arsniya entered iinite the cencessien agreement wjiiin raiiways en 19.032008, The Znfnrmant "has; stated that for _running coni.ei'ner trains on the -raii network, brai<ervens"e-nci~ ~i=ei<es_ were' r~equ_ire-ci:

to be purchased and far that an 'investment of 'R»s.ii.c5QO cmres was needeci. According to the Inferinents, the 'FCTOS 'required 'pern.'n:ssii3ri tn operate frem container reiiway terrninais which were requiired to be notified by the Inciien 'Raiiweysi In 'February, .;'2,@USi the Reiiway Board Page 2Di'.1--i.5.i3 issued an instrtiction to the 'Zonal raiiweys that PCTQS ceuici not be eiiewed to operate from private sittings, The Raiiway suioeequentiy increased hauiage charges vide notification RG25 of 2010i Prior to this riotitication the charges were ievied en the ioeci atiiiity and the cziistaricge. But by this notification the haulage charges were increased by 100 percent for 90 commodities cm five 'comm_eciity specifications, The fixed tiauiage charges cm the goods ettre«:t.eo' the highest rate for the transportation ei' goods, As there was en agitation against RiC+T3.i5, Reiiwavs wittidrew this netificetion and came «not with another notifiizaticm of 'I2.Q'10, this ciaseificetioris were made instead of five mentioned in R_t:'.«.2¥S, it": this nameiy iRC-3{i In notification riirie eemmeditiee mariner transpertiing goods by open; wagons became Cheaper than the transportation of goods in c:eritainers.. As feree brake vans were concerned in the container trains, the Reiiweys used to eiierge for the ;brei<e vans even if the brake vans beiorigeti to the F'C?TQs. Stibsequeritiy, the Re'i.iw.eys came out with eoether notification vRCwS9c. Ey this notification there was a suostantiai increase in the terminai access charges. when empty rakes were meveoi fer meintzeneece by the "Reiivézays it started charging PCTOS for the mevement in edditizrsri to the maintenencei Ttie itﬁorment has stated 'i:.¥'ic?:i.§ according 1:63 the COHCESSEOR agreement, the PCTOS couiti have their awn m'ainte:riam:e Cit "the .rei<es, taut the Retiiweys .riever ipermiitted the -PCTOS to have 'th.e'it own rneinteiia~nce., It has eiso been a'iie_geci in the iniermatioii that in rvioietioti cit erticie 7.,6.,2 'of the concession 'agreement, that 'there couici riot an increase in stabiing charges "but the 'Rai'iways vioes its Fegtiiatiori no. PC/1/98/201/4 dated .'i..7-.2DCi8 the .substa;ntiaiiy, Again, erccoreinlg to articie 6,4,1 Qf the conce.ssion mcreaseci stebciiing charges tuevnrebate of 2% was to be giver: cm the h'a'iJ"i»e§ie chargeetny 'iri::iia_n Raiiweys but it was nexier given. Enitiaiiy, the Raiiways permitted its goods sheds to be used as ceritainer termineis anti. the ettiffing and tie- stutfing of the PCT{) container trairis were ca;rrier:i out at these CRTs, It was csteteci that as CRTs; were not eveiiataie in \..fa¥'iOU.S 'pieces, P-CTOS couio Page 3 of 163 not take cargo from most of the places. It has eise been aiiegeci that the timeframe was not reduced for setting up internal container depots (Ices). The infermants have argued that vide miatification dated 18.10.2006 the PCTOS were required to purchase their own takes and brake vans but nu such restriction was pissed on CQi\iC£iR, a By' notiﬁcation dated 1.3.1G.2Cs07, the PC"i'C>s were required ta use their own CRTs and it was aiso stated in the said instiruetiens iitiat priority Wilitiid be given to the conventionai trains and not to the trains i'i.ii'i by i3CTQs. it was stated that in this manner access were denied ts §i3% at the reievant market and 80% of the nomrestricted cemmedities. It has been stated that as there was a margin squeeze due to an increase in the hauiege charges it neariy ousted the infermants from business,

5. In this cennect.ion the informants have furnished tietaiis at their accounts 'showing that the transportation tit contamers on the raiiway net'wer.i< had resuiteid in substa'ntiafi iess to them. It was argued that access 12:; essentiai faciiities had been disaiiciwed tee the infermants and no ievei piaying fieitis exists anti there was a diseriminaticm against the PC'i'Os. It was further stated tinagt as there was a deviation tram the PP'?

eeiicy it ied to restrictive at credit from banks and the finaiitiai institutiens. It was aise eiiegetzi that the ii/iiir'i'istr*y Qt Railways perpetuates dominance amzi diseri'minate.s between iCON;C3OR "end the P{:Ti".£_::s. It was further eiiegeti that price tiiscriminatitm was «zreeteei -set that the consumers went to the Raiiways and not tn the PCTQ5s TWS is an abuse at dominance and thus the Ra'ilway.s and CONCDR have icentrevened the D§'.t"_}\!ESi{)i"iS of feiiewiifng Sections of the -Cempetiticm. Act viz. Sections 4<f2.)(a)<i>, stzitaicnii sc2i<c>, 4~<2>(d3 and .J.e(»2)iei..-

6. The second case is 'cf i<'RIBCi-iii) 1'nt'ta.structure Ltti,' The infermatieri in this case is simiiarte that in the case of Airshiyat. It was stated that the tiehavieur patterns of Raiiways and CQNCOR. were that at a dominant tpiayer and that the conduct was exciusienary and discriminatory and these twci entities have vicaiateci Sections 4(2}(a)_(i), e{.2)(b)(ii and Page ii at 160 4(2)(c) of the Act. It was aiso sizateci that the pricing wee EiXDiC}i'CE3'Ti\;'Er3 in vioietiori of Sections 4(2)(a)(ii) "arid 4(2j(c)oi° the Act, It was iurtiiier argued that unfair trade conditions in vioiation of Sections 4(2)(a)(i) and 4(2)(c) of the Act aiso existed in this case, it was further stated the railways. was iieveregitig dominance in one market (rfaii services} to protect another itiarkiet [reii freight services) in vioiatioii of SE3CtiOi"i 4(2)(e) of the Act. It was stated that contravention arose due to the foiiowirig facts ~ is Prohiizaitionion specific commodities from operatiori by CTOS

-a Provision oi' land. owned by i'!'iii"i§Siii"¥ of Raiiweye oiifevotirabie terms and conditions to CONCUR, giving them an unfair advantage over other private CTQS in setting up terminaiss;

as Denying access to termiriais and siciirigs owoeci by CQNCGR, 'resetting in E§Ei"tiBi1Oi: effective market eeeess to CTQS.

It has been aiiegeci that the aforesaid actions, inter eiia, of the Railway entities, have the effect of foreoiosing a stibstantiei pert of the reievent market to the competitors and has ieici to an appreciable reduction and/or comoiete eiiminetion of competition in the reievaiit "maricet, to the deer tietriment of competitors such as KRZBHCO Infrastructure Ltd, and _ uitimateiy to the detriment of the consumers, 7%. Inthe case "no. 12 of 2012 the IP has, inter eiia, 'a!ie._g_ed':-» is That untii zooe, the Moe, operating through eomeoe, wee the soie operator of container trains in intiia for both iiibomesiiiiz Traffic and Export import Traffic: (Exim).

a That with tiie increase in trade volume, tiotii Domestic and Exim and the r-esuitarii: growtii of container traffic: in India, ii need was feii: to augment the transportation over reii n_etwori<., The Piariniiig Commission of India and the iviCiR under took the initiatives to open the goods 'traffic on the taii networic for privatization.

Page 5 o'f'150 /* "-'/3' /- ./_3€'£'$'}».';'~' 'V I-, «.2 5,7, 5,' J e That the iriitiai two initiatives in the years 1994 end 2004 to eiiew private container train operators (i-'>CTi3e) were a. feiiure, primatiiy due to 'tack of ciarity, the reie of CONCGR vis«a~vis other opeteters, and CQNCOPJS opposition, e That MGR appointed RITES L-tdi in 2085 to study "cigaeratiazm at i Container trains on Indian Raiiways" and RITES submitted its remit in 2005.

-ii That during the Raiiﬁauciget of Ft' 2005-06, it was ennotinced that in order to meet the growing demands for cenminer trains, private parties would be invited to carry gomis ever the taii network.

us That MGR issued a policy vitie its circuiar no. 20012;'iT~II:/15/39 datecii39.{i1.;ii06 (PP? Peiicy) te permit VBi'iQi,iS opereters to move centaimer trains en the raii network by .pn:widing nenvciiscriminetory access on the same iines as EZONCGR, a That MGR came out with an advertisement in the month :31' January' 2006 'inviting appiiceticm/pmpesai trcim 'interested eiigiisie parties to operate ccmtainer trains on the rail ¥'iEt'i_a'~JOi'§<. _ e That in continuatitm at its initiative at assuring private eperaters of non discriminatory access iii) the rail network and providiﬁia further sanctity ta its policy commitment, 'MGR notified the indian Reiiweys (permission of operators te move mntaiifier tra'i'fis of Indian

-Rzafiiweyjs) Ruies, 2006 (C705 Ruiesi cm 2Q,ﬂSu.2@l;i}6,-g'tantii1g zameng ether things-; i

(i) Uniform heritage charges for aii icoti'ta'iner 'ti'E:'iiﬁ operators

(ii) Access to the entire Raii netwerk inciuding such {}'iZh,tE'i' .f'ietWOt'k where Reiiway Administration has a :tigiit'ti:._i operate LEG private eidings i

(iii) Permission to carry eii goods.

9 That in response to the aftiresaid initiative at MGR, 15 new entratits cabtaineti iii:-ences to run ccmtainer trains after depositing Rsiﬁéiil er.

as registration 'fee.

I Page 6 of 160 is That in the rail budget speech for FY 20U6--D7, the ti0n"bie Minister assured that e ievei {staying fieid wouid tie made evaiiebie ta ail stake heiders without any discrimination ta aiiay eitimehensions of the PCTOS given the dominamze at the incumbent piayer.

is That soon after the PGTQS had paid iiizerise fee and initiated investments, MGR eating in compiete deviatien from its peiiity and rules issued a circular bearing ietter tie, 2006/ET-i1I,'73,.'12 cit, 11.10.2008, restricting ores, min_erais, ceei and coke for trarisportaticm in containers.

.3 That by restricting the above mentiened commodities; the 'MGR fcirecicised 65% of the maritet te PCTQS, as That iii'*Ci'iE3 year 2808 Arshiya lnternatitinei Ltd, submitted a. written request for obtaining a cetegery ORE iicerise to the WEQR with the prescribed fees of R550 CF.

is That can O9,Q5.2QQ8, the ccmisessitin agreement U:-oiicessioti) was entered 'iritti trsetween Raiiwey Administration, Government 01' India and Arshiya Internetianai Lté. And the iiceifise was transferred to its subsidiary company ARIL on :i3._ii'J.2i3€38..

e That the very premise, On which private investment was based, was non discriminatory access to the entire reii network, which has been severeiy curtaiied by 'i~.iCi.R by restricting trarisportetien oi" ieur fcommeciities in conte_'iners., ~s T1tiat:i3eseti en the ass..ute'nces in the PP'? iioiicy, Os -Rtiies and the concession, ARIL deveiopeci a business mticiei, which envisaged fa tetai inveetmeiit ef Rs. 1600 Ci', in twc "phases.

8.. The Commission ccainsiciereci the above inforiiietieii in these ttiree cases anti i'e:"meti a prima--fei:ie View that there was a case for» imrestigation into the :aiiegatiens and thus, referred the' three cases fer irwestigation by the Diiecteir Gerierai under Section 263(1) of the Competition Act, fFZEiNEI N GS A50?-' THE .31 RE E1730 E N E Page-'J' H.160

9. The Director General then issued a detailed questiermaire to Ministry of Railways, C€3i'~iCOR., 'informants and the different PCTOS. The Railway did riot furnish must of the informetieri en the plea that the Ministry of Reiiways had statutery powers to frame ruies and regulations and issue circuiars in accordance with the Railways Act of 1989, It was else stated by the Raiiways 'that the file netirlg er the commercial decisiens cannot be submitted as making them pubiic: might impair the interest tn' the Railways. It was also argued that even under the 'RTI. Act such disciosure of information .eei.i_id not be given. The D6 recorded statements of different persons beieriging to the infermeetsf Ministry of Railways, CONCOR anti the PCTQS. On the basis ef the materiai gathered I the HG fcltirici. that the Indian raiiway system came into existence in the 18S0s'end that it was the rnajer transperter for moving freight anti passengers across India. in the eariier Clays many of the railway systems in India were private but in 1951 they were all rlationeiiseci and the resuitant railway netwerit was divided in various zones each ef which were headed by a general manager. The Indian Reiiway. system is the secend iargest in the world 'having a raii network of neariy €3S,CiOi) km. Fer the accounting year .'lG09«-1% gross itreffic receipts ef the Indian Raiiways were Rs. 8E>,964c:r. In the same year the Reiiways .mtweci freight :3? 888 -million tonnes and earned revenue of .Rs..;5Ei,91.2cr.. In the same year tram the passenger traffic Railways V-earned revenue of-§Rs.23&i»14er. Tithe mevemem:

of geecis Oi"! Indian 'Rail network was carried. mat in wagons and in containers, Transportation of C{I},f'itE1§i'i€El'S was started by Indian Reiiways sometimes in 1981 but in Marc'h 1988 e :l.iIli3% subsidiary icniziwn es CONCGR was incorporated' and the transportation of gems threugh coriteiners were transferred by the,inj;iianiReiiways to CQNCOR. The trenspertetion of goods by CONCUR was started in 1989, 'vifiieii the Government perrnittetl private operators to run ceiitalner trains on the Indian raiiway network, 15 r:emparile.s eppiieci for the license fer the concession agreement in 2067.. CONCOR was aiso made to eppiry end therefore there were new 16 operators which run Cemalne-r services ever Page .8 ofliéﬁ the Indian Raiiway network. The DC; examiineci 'the>a.i'i:riuai accounts as' the Raiiways and found that the Raiiways carried very iittle ameunt of gems in containers operated by the CTOS, The figures fer the nicwemehi of goods in vvagens and containers are given in the chart beiow:

Year Total railways in Railway traffic Raiiway traffic ' Reiiway Vtraffic A Railway trafiicﬂi M miiiioh tones in wagons in in wagens as a in containers in in izcmtainers i million tonnes 0./a of tetai miliieri tonnes as es "fa of 3 T W traffic V W theta! traffic 2{}07--{)8 793.89 '£72.75 T 97.2% 21.13 ' 2i.ee% __gci0e~c~.9 833.3%} M 803,05 J 96.3% 3C}_,3<i f 3.5% I-ZOCi9--~1£i 887,79 852.851? 9Ei.0f:3% 34.95 3.93% T 10° The DG took up the .dominence ei' lniiiian Railways in the reievaht market to examine whether the Railways had cohtrvavened any provision of the Cempetitieii Act. The DE assessed the suhstitutabiiity 01' various mecies of i:rarisp«ori:at'ion of goecis. The EEG has retarded a finding that trensportei:'ieh ef the goods can be carried out by sea, iencl, air and road, It was therefore ~e><emined as to whether there existed a i'Li,m':ti0h'ai subsizitutabilityamong the \fE3i'li}LiS medee ei' trehspert. The DG then went into the substitutahiiity between the available mcides of suiface ti'ai'iS§3C}i"tEiti(3i'i.. The modes avaiiehie are mad.s and railway netwi3ri<, In the cipinieh of the 'DG the movement on raiiwey hetwerk was geiieiiaily more appropriate for icing distehce.. The D623 treateci the trehsportatien sf goods through mad as e ciistinci: -product market from raiiways. The D6 then

-reiieri on the jutigemenii: 01' the 'ELii"OpeEii"i COmmi$S'iC}i'i in the case of i Beutsche Behn/PCC "Logistics and came to the conciusieh that a separate market existed for the rail freight transport. The Dis has also recorded a finding that the 'iIi"E:ii'iSp(_\;'i'tEii£§Cm of goods on the raii netwerii can be undertaken either threugh cmtainers or wageha The DE has recorded a finding that freight mm/emeht an the raii hei:wei'i< is either in wagons of Inciien "Railways or containers run by the CTDS. The DG has aise recerdeii a finding that before the opening up of its container segment for the 'i?»'CTC>s there was he :prohibii:ion on CZONCQR from carrying any comme:;iity in containers. The enquiries carried Gui; by the D.C5, showeiii that the same Page 9 01' 155i) games could be carried bath in wagens and eeiatainers, Thus, it is poesibie to carry buik geods in meditied container trains, But Indian Reiiways was ' of the View that diversion ef t:suii< traffic through containers wouid resuit in a national toss as it wouie iead to the underutiiisation of the rail infrastructure.i It was stated on behaif at the Indian Raiiways that in a rake at opericenventienai wagons it was possibie to move ¢'i0G£ii'v'ijT of ibuik geocis iii-ce iron ore and coal against ZSOGMT whim ceuid be carried out in a take of containers. It was stated that in WSW ef this fact, against five conventienai trains for r:ei*ri,/irig buik commotiities eight Container trains wouid be required to carry the same Seed, It was ergtieci on beheit of the Indian Raiiways that containerisation was not required for 'ouii< cemmeciities, it was stated that the PCTOs were required to aggregate the piece meai nenebuik cemmeeitiee iosi: by reii to read and net to divert the tnuik conventienai traffic: of the reiiways. {Lin the ether hand? the Dis, fame that these stibmiesmns of the reiiways ciid not find a metition in the Poetic Private Peiicy dated i3'9.€}1t20{}6. In fact the peiicy tstatement it nowhere mentitmeci that CTQS were required ta meve goods by aggregation and that the CTQS would not deai in bulk goods' Cm the tiesis of these facts, the D13: fauna substitutaeiiity between Wagens and centeiners for mmiement of genes en mi} network from the consumers' perspective, The D.G. tttieretere heid that the 'me\:emei'ﬁ_1 eff goeds on reiiway 'network "through wagons and containers constituted iziie relevant product market defined .un<_:iet Section '2{t) of the Act etteif Considering the factors mentioned in Section 190') ef the Act

11. The ELG, then reiieci on Mimstty of Raiiweys ietter dated i31.{13,2{}11 wherein it was stated that the area of opieratien ef i.ndie'n Reiiweys inciudes the whoie ZR network, 'port sittings, private SiC3ii'igSVE1i'id" eieo foreign territory as per iVi_DU=.: with neighbouring t:i3untties., Cm the basis of this iettet the D.G. came to the conciusion that the movement of wagons is confined to the raii network Where the raiiwev administration has a right to operate. Fer this reason the 'DE. defined the reievant geegtaphir:

Page 16 oi"1ﬁ{} market as the raii networit as the raii netwcirk in India Le. 'the same manner as defined in the concession agreement.

12, After considering the reievant pmtiuct market and the reievant gecigraphic market, the D.G. defined the teievani: market as the transportation of goocis/freight either in wagens at centéiners on the raii »i'iEiZW{Z}i'i( as defined in the concessitm agreementi,

13. The D.G. then set out to examine the dominance of the UPS and whether iintiian Raiiways anti CQNCOR couid he c_cinsii:ie_reci as a greup, As the Indian Raiiways on behaif of Gcwt. of India, which as a trustee of the peopiie at indie, hoids 63% equity of CGNCQRI the .i3..G, came to the conciusion en the basis of the pr0vis'i0ns of Secticen Sit) of the Act that iinciian Raiiways and CDNCOR constitute a grotip. '

14. The next issue is whether i*«'iini.sti*y of Raiiways and C<I)NCOit constitute an enterprise in .aicccar.tiancie with Section ;T3{h) of the Competition Act. The D.G. considered the *provision of Secticm _.?.(h) at the Act and heid that Raiiwaye and CQNCOR are hath ente.rpri:ses under the Competition Act. MGR had i::ia'in"ieci that it is a sovereign entity, The Ctimmiss'ion had considered the claims oi' i\'iDR and heiti that "at MGR was

-inveived. in cemmetciai iunctiions, it was an enterprise under the Competition Act. 'iViC3i3:. t:h;aiiengeiﬁ this View ef'the 'Comimissit;n by way of a writ in the Deihi High -Chart, The High -Court heid -that MGR was an enterprise.

15. The {)6 started examinatihh hf dominance hf the i\.'ii;nis'try cf Raiiways and the gratin companies en the basis hi' the data which has already been reganziciuceti abeve, The gcaods carried by wagons of Indian Raiiweys éimciunt to 96.1% hi' the total ttaftic in financiai year 2QU9i~2i33_i3 and the baiance 3.9% at the gaecis in the same 'year' was carried iziy ttmtainersi CDNCOR transported .26.6{i miiiitsn tonnes.' oi' ttitai 34.95 metric tons cartieci in containers. 'Thus the DC; came tea the conciusinn that the Ministry of R2:-iiiways group transported 9.9% of the goods in the Page 11 i3i".1E0 reievant rnarketi Therefore the raiiway group was a dominant piayer in the reievant market according to the DE. The DG then examined the size and resources ef the enterprises. He found that the Indian raiiway network is one of the iargest and busiest raii netwerks in the werid transporting »~'i,2 biiiien tieeeie and ever 909 miiiirznn tons freight on 65,000 i«:_n1_s sf track.

The iznciian Raiiways had mere than 1.4 miiiien empioyeesi In addition to this, Indian Raiiways had about 9000 iocemotives and a wagon ﬂeet 219E931 units, The capitai base of Endian Raiiwaye. was Rs.;?.O331<Ii crimes. As far as the container segment was cencerned CONCQR had the first entry advantage as it had entered the business segment in 1989, in 2OD§3~ 10 CONCOR had totai ntirnber at wagens amounting to 1t3,194 and the number ef containers in centre? of CONCUR were 153754, it rewned 61 ccmtainer terrriiriais against 10 terrninais by the PCTDS. on thee basis :3? the fact, D5 cenciuded that the iVii.'3R group was a deminant pieyer in the reievant market.

15, The EEG then considered the size and importance of the competitors. The ES founci that the private CTDS tied a very smaii share in the mevement of genes on the 'lndien Rail network. Therefore the size and imipertance tit" competiters were "insignificant when comgaareti to the MOR QFCJ Li 1?. 'The -DG considered the erzrynomic power Oi" entverprises inciuciing advantage over competitors. The EDG found that the PCTQS possessed very insiginificant infrastruettwe as compared te tne MGR greupi Therefore the DE observed that in the reievant market the economic power inciuding cernmerciai advantage was wiitii the MOR grout).

18, The DG then. examined the vertical integration ef enterprises saies am! the service netwerk etc. The DC; found that Ministry at Raiiways had a huge network and centroiied of the entire reii networic which was 'supperted by iocernetzives, goods sheds, signaiiing, wiring etc. The Ministry of Raiiweys aise had a supervisery 'rode and was aise irwoived in -eoiicy making and impiementation of ail the ruies and guideiines for the Pageiloflﬁﬂ operation of eii the entities on the raii ne'tw<:>ri<.. By virtiie at Indian Raiiways Act, 1989 the Raiiwey Board was the competent aiithority ta take decisions regarding freight and other charges. Thus the Ministry or Railways was the iicenser, the regtiiator and also an operator in the relevant market. The DG tiheriefore feurici e trerticai integration of the various arztivities perfermeci by the Mei-1 group in the reievant market.

19. The DG then examined the moneeoiy or the dominant pesiticin of the iviiriistry oi' Reiiweys. ihcidenteiiy many areas er' the reiiwey netwerk were setup by private companies 'arid when they were iietionaiised they became a part of the Indian Raiiways i"ie'i'.WOi'"i<. with effect from 1951. "thus the menepeiy position er Raiiways erase dtie ta a statute, When the trade in India started picking up it was reunci that the Raiiweys was not in he pesitien to cope up with the increased traffic. Fer this purpose the government decided to open up the railway network to private e_;:ieri:itc:«rs Whﬂ were ta use centaineriseci; system of trensp.ert'ation. Sefere the US it was cieirned that the 'Indian Raiiways performed severeign ftinctitihs end the:-ercire any behavietir er the Indian Raiiways couici not be a subject matter under the Cernpetitien Asst. The 'er; did. not accept this claim and came te the conciusieh that the rrienerieiy i30s"ii:ieri was acquired by the Indian Raiiweys through a .st_ati.ite of Pariiamerit,

23. The BS then _censiciereci the -entry barriers sL.ic:h as r'egiiiatery _trarr'iers anti .services etc. ihdien Raiiways was the crniy eperrater ei' wageris on Indian raiiway netweric. The iicense for the private CtZii'i'£E-3,iiiE3'ii"

train epereters were required ti: be ebteineti from the 'Ministry at Reiiweys through a concessien agreement. The 'BS thererere came to the cenciusion that regii_iAater_y; and rinanciai baririers existed in the reievant rriari-tet in the form or iicense requirement, high capitzai cast of entry and the rec:iLiiremeni:

for estabiishing expensive infrastructures iike rakes etc.

21. The DC; eiso examined the cencept cit ceunterveiiing buying power.

The D43 feunci that the CTQS 'itardiy "had any presence on the raii iietwerit as the Ministry at Reiiweys was itse ch as ceai, ,.,.w.

.-""1 f; .:

rifrw ' Page13oi:i.6ﬂ cake, rniherai etc: and these cornrneditties constituted 503% ef the relevant market. This aiiewed he choice ta the censumers es the evaiiahie faeiiities of private operators were iirriiteci. in fact the consumer's were rnaihiy dependent on the indian Reiiweys. _ Therefore the [)6 came te the cenciusien that the consumer tiidhet possess any materiai ceiintervsiiing buying pewter in the reievant market.

22' Market structure and size of the market was the next issue ccinsiitiered by the D6. The DG teunci that the MDR group had cehtrei ~ over 99% of businesses in the reievant market and that the MOR was ex moinep«:>iy.i As the MDR was :a itionopeiy the market structure afiili Size was entireiy centreiieci by the MGR group.

2.3. The DEE aisci exarniheti the contribution to economic izieveiopmerit by the Indian Raiiweys and the PC"i'Gs, The DE: found; that by i'€St{'iC§iii'i»§} the PCTDS for carrying various varieties of cernmeciities the mtiiah Raiiways.

had deprived the consumers at their choice. Further the PCTOS had invested a iarge amount funds en the infrastructure 'fer the rnevemeht of goods an the reiiway netwerk. There was no cieuht that Ihcjian Reiiweys had contributed iargeiy to economic ciexreiepmerit and had many .sQ<:iai ehiigetiohs to perform. But when the sectnr was opened to the private G'{3*E'FatC}'i'S they eiso cehtrihuted to the 'ecoriemic tietrveicrhrnent of the tzousritry.

24.. On the basis at this discussion the 136 came te the t:i:>ni:ius'i0n that many «iii the factors hientieheti in the Section 19(4) ef the iiompetitioh Act: sheweci that the Ministry at Reiiweyis aieng with CCii\_iCOR. enjeyeti e cieminierit position in the reievant market, This eneiysis has been done witheut any reference to the expianatieni to Sectieh 4 of the {iempetition Act.

ZS. The DG then teak into eccciunt the .sui3hnissien~s ef the Ministry at Raiiways, CDNCOR and container train or.ieraters., it was argued en heheir oi' »Rai!wayss that though it was the iergest 'i'Zi"c'Eii'iS'}Z7{)i"°£>E3i' in Ihdia in Page 14 oilﬁﬁ 1950s it was icasing business to road transport censistentiy ever the years. In 19803 the Raiiways introduced the container business and butiatei"

staiftied its focus to carry ;buii<;-ccrnmedity iike coat, steei etc. Accerding its the Raiiways in circier to divest the_transpertatio:n 0'? Run buii: traffic: it started ccmtainer traffic. Subsequentiy in order to feicus attention en the bulk traffic, ccmtainer traffic was transferreci ts CZONCQR whicii started operations in 3.989.

25. The opening up :3'? the railway netwcriz to private centainer train operators was initiated in 2005 by Es statement of the Rfaiiway Minister in the Parliament. In January EDGE», MGR came up with the advertisement inviting private piayers for the eperatien at private container trains on the raii network. On 2iEs.09i2G0;6 MGR came cut with a paiicy statement which was gazetted in respect. of the opening at the taii netwerk fat the private container train eperators.

27. The saiierit features of PP? the Gazette Notificatioiri and the model MCA are as under:

a The scheme was man to at! eiigibfe interested companies.

*5 Depending upon route and access to ports, iicences are divided in four categories, we There is no Limit can number of companies who can be given permission..

2,: There is no limit on number of trains on any csfthe routes far the permission is given.

a The container trams of verieus separators wifi norma!/y be dispatched on e rmn~discriminating manner on first come first serike'basis, ' e For meviement of containers, the operator wifl procrujre his ciwn. roiiing stock/cciritainers.

we {W5 Freigfat Operation Iriformation .53/stem (F015) wiil aigo cater to the partyis requirements for an integratet! mtsmagement and penetration mformation services.

' V Page 15 Cat 150 a The operator" wiif charge his customers for raii heuiege, i'ermin.--:2i,, heririiing, ground rem': etc. on a marker determined basis and railways will not exercise any centroi over sucri pri"ci_r>g, ' as The veiiciiry er' permission is fer_ a _peri'ori of .20 years. The permission can be exte.r':+ded by 10 years to the same part); eﬁfer expiry of the velicii;t"y er' perniissim.

9 Concession agreement has been framed keeping in View the best internetienei preafices being feiioweo' and is iegeiigr seumzi, benkesbiei, ensures a ievei pieying fieici and ecieeiiieteiy addresses the netionai and pubiic: interest perspective. It ensures a iei/ei pieyirig fieiri in key erea to the new players. V e The Ceritrai Government sheii have the right :0 specify c:'ertein Commodities, which erdiriariiy move in railway wagons in train iced as notified commaciitiies Wi'iiCh may be siiibjecteci to ciiffeirent tariff and conditions "fer iieiiiege. ' a Cast of procuring ierici required for esteeiishing, designing of, constructing, opereiirig and maintaining a rail iermiiiai and reii feciiities sheil be beme by the z:ence.ssier2eire.

It was envisaged their greater pubiii: private partnership wiii iieip in creation of railway" assets by we}; of setting up of new termiriei in me i~iint'erierze' and ecceiereteci addition in Waigans.

Prior to opening up inf the sector to Private piayers, there was no specific agreement signea' between CONCGR eriiri iViOi?€ for zfrenspartatien of geecis throiugh containers an reiis, However, at the "time introduction of Pi-'P pioiicy, feir that an agreement wouici be 'neceissergx to govern mnieiiier treiri opereticm in imiiti apereifor regime iiaving private operators. To maintain ievei pieyihg ﬁeld among different operators CONCOR was eiso mecie ti) sign the same concession agreement as e CTO with iiiie prescribed iieense fees.

Presen'i'ly, Ministry of Railways is engegeizi in Reii 'treneperfeﬁon ca?' games in ggiienerei purposehwegons whereas container ifrein operators Page 3.6 M160 including CONCGR are Engaged in the transportaion of containerized trafﬁc, Since I'/IOR is not directly in ccmzfainer logistics business, after estaisiishment of CDNCOR 'the role of the lVii'nistry of Raiiways has been that of a facilitator pm/idiiig rail i'ie;r;w:3ri< and train ciperation to trains of container train aperator with sale aim to im::,rease_r'aii Sl"I:3i'£3 in containerizecl EXIi'V_i traffic and also in cammodities wiiim are cronveiitianaily not being carries? by railways, The FD/E3 of railways attains furlfiier impartaiice wizfii the entry of other container train operator.

Railways have always actively encouraged the parficipation Q2' container train operators to attract more traffic to raiiways, 3 fuel efficient' nan-poiiuting mode of transport.

Ail poiicies made by MGR are non discriminatary among various CTGS and this provicies a level playing field among 'the epsrators inciuding CONCOR. Aii Operating Circulars and Rates Circulars stipulariiig guidelines regarding permissicm to operate container' trains by coritaineer train operators at railway ewneci terminals and also for the levy of iiauisge charges for movemem' of contéilnersi are unifarmiy spplicabie to ali -ccmtainer traiii Qpleratars including CONCGR.

After signing of concessionl agreement, similar £':"e;é37"_ffI?;'-:'l"_iif Wffl7OLlt cii'scrimination is being given to ali operators as per ;:irm»'i'sions of ccmcessian agreement. All circtilarsfletzfer policy ijecisianfissues and key changes are uniformly applicable is CONCOR and Qflier CTGS, Certain pmactive steps by ivi£3R including permissiori to use railway container during recession period iieipecl in gmwtii .07' business.

'Ti'ioiigh CONCOR is a piibliic sector undertaking of MCJR, it is not operated by' iifie Min.isi:ry* of Railways. CCWCOR is eastabiished uncier Page 1? mi? 159 /4__,.,,,..,.,..._~w' ,1"

the Companies Act and is presently a iisteti Cempany. It has its own board of directors for management of the company. i33eiati<:»ri between CONCUR and MOR is at arrrre iengttii, Chairmen (won Executive) and Government Directors are the two representatives from i*«iCii~2 in the Board at £9 Directersn There is no i'_e,{3WfSei"?fEifiOn of MOR in day to day management of CONCDR. There is no vertical or imrizentei integration between MGR arse' CONCGR except that i'viO.r"~3 holds 63.ﬁ9% shares of campeny an beheif of President of India.

Previcieei container train opereter operates within the frame werir of czcmcessicm agreement eiigned and adhere to objective for aperiing up of the setter, there is no cenﬁiet 02' interest tzetween the business carried out by the operators aim' Reiivva}/.

Indian railways have a large fleet of open, covered end tank W_EiQOi'iS to 'feciiitete i'i'iO\.»'ei'i'it3i?i' of i:»_uii< commodities iike ere, ceei steel etc; in open wagons end izaaggea' camrnoiziities -in covered wagons and iiquiaj traffic in tanir wagcms. As on 31" March, 2010, titre size of IRS wagon ﬂeet ceiieisted or" 219,931 units c:om,Dri'5i.ng of .5'?688 covered 112,992 men riaigkh ,sia'ee', .?024 open iow siriee', 31,058

-other "types and 11,159 breice vans/depertmeritei wagons. Coritaiiner sector is the onriy sector which ties been opened and funetiening so far where the third party .eperator has been permitted to depiey its awn specie! type of rakes for mm/ement on reii network and charge its customers fer reii trerispoiitetitm at ecinteiners on these 'trains.

For conventional railway traffic moving in generei pumese wagons, reiiway has its ewr: business pien tiiett was riot within the scope of PPP ijrepesed in budget, MQR never ccintemzieti that PPP Policy was oriiy for EXIM trerﬁc. PPP Policy is for bath .-EXIM and Domestic Container I':-'aff]£§ iii/'itfi opening up of the sector, i¥'iCiR soie aim is to increase Reii 5i7ei'e in Page 18 M160 conteinerized traffic which includes centeinerized EXIM tre.ﬁ'ic and eiso in camnmdities which are not" ineing carried by reiiways but cenventioneiiy not being carried by railways but can be ijive.ri:ed to railways: Using m:.iifi~mr3dai advantages of container, Tiie container traffic moving on Indian Raiimsy prevides eddi'tic>nei trafﬁc and earns revenue to Railway system and therefore, it is in the interest ef railways to encourage container bu5ii?e55 bi'if'?Q?.liTQ ee'cii'i:ionai business to raiiwevs.

Te =E3i?C{3Ui"E3§]E container trei"i°ic, Railways iiewse taken a number of posiz':ive steps.

a Theugh raii gems shed are not deveioped for iianciiing of container traffic, es en imferim arrangement .3 niim.2E3er' of goods shed have been permitted for handiing traffic moved by container train opereters.

e Reiiwey yards have been earmarked fer C&W E;=:'amine;ti.an Ci?"

container trains beionging ta CTQS.

0: For access to private sidings, instructions have been issued re Raiiways.

28.. Before the 13.6., MGR raised various jurisdiction 'issues, It was stated that in the concession agreement, a pmper and comgpiete mechanism was previded for dispute resoiution. It was argued that in ail the Cencessiien agreements, the .agreemem';s were arrived after mumai discussion and that the concerned 'parties were bound by the concession agreements.' It was ales stated that the ccmcession agreements were entered into in furtherance of the sovereign functions cf the Government of indie. It was argued that the Competitidn Act was enacted to curb the nuisance of Unfair Trade Practice and that tax prexient the misuse ef the provisions, Section 54 has been enacted. Attention was invited to Sectian {:32 of the Campetitionﬁct which states that the pr'«3'\ii.E-iC§i'1S of the Competition Act are in addition and not in ciercigatien of the provisions of Page 19 M160 any other Act. It was argued that if Arshiya was aggrieved against the actions of IVIOR, it couid have gone for arbitration in accerdance with the provisions of the Cencession Agreement. It was stated that the eppreach of Arshiya ti: the CC: was not cempeteni: and that the grievances of the iiifermation providers were net severed by the Ccimpetition Act. It was furtiier argued that MGR functions in iarscorciante with the Aiiotzaticm of Business ituies iaid down by the Govt. at India, It was stated that EVEDR was inveived in sovereign functions and any in'i:erferem:e in the turictiening at MGR weuid affect the finances of the government.

29: CONCOR aiso appeared befere the D.(_3._ it was argued that the primary aim of setting up CONCOR was to undeitake the miiitmodati trarispertation at Iritemaizionai and domestic containers between gateway ports and iniand i::iest'inatii3ns, i:Qi'~iCOR during its peiriod Oi' operatiszm has setup container termineis in India which were used for both exim and domestic traffic. CONCUR operates as a carrier iniand, port Operator and terminai service providers. it was eiso stated that 'MGR i'i0iC1S 63.Ci9% equity at CONCUR. The Chairman of CONCOR is -the Member, Traffic, Raiiway Board and that the Executive Director, Traffic in the 'Raiiway Beard is e directer of CONCOR. it was stated that the position at CONCOR is the same as that of any PCTO with referericie ta MGR. It was stateti that CONCOR ciiizi not get any finamziai support "i'ri:im MGR, The same conditions and rates were eppiicaiziie ta CONCOR and aii 'the CTGS. Prim to the signing of PPP, NOR was signing yeeriy MOD with CONCQR, In substance, it was stated that CONCOR was not getting any favoiiratnie treatment'frtim MGR.

3%. The t).G. tztmsiiiereci the arguments and the retici iaiij downi in the cases :3'? Latin Lat Jain 3 SCR 624 (-SKCP} and Eiarigaiore Water Suppiy anti» Sewage Bearti QISWCC 213 (SE3 and heici as foiiows;

Fmm the aforesaie' analysis it has been caristrued that Effie aczf1iw't.ies of MOR whicii are subject matter of we present investigation are essentiaiiy commerciei in nature and not such' wfzich can be Page 20 of 160 ccm5i'dered to be sovereign function to the Govcr'nment. Hence, it is felt that the activities and conduct of MOR Grow is cowsred within the scope of the Competition Act. Having permitted entry of private piayers in the reievant market: any attempt' to resm'c't, inhibit, ' fareciose competition thereon canncit' be jc*stiﬁ'ed on account 0?' pleas such as sac/'ai obligations, likely loss of !"E3'V'E:"}i..§e, diversion cf trafﬁc etc.

31. The Dis than cmrssidered the issue cf arbitraticn under the Ccmcession Agreement. Keeping intc mind Section 60 of the Ccimpetition Act which is an overriding effect, the DG came to the ccriciusion that the ('ICE had exciusive jurisdiction to cieai with any breach cf the provisions cf the Ccmpetitiori Act, It was a View of the 336 that there couici be situaticxns where different remedies vware avaiiabie to a perscm on the same set of 'facts, ism: ccncemcci party wc:ui_.d apprcach each separate authorities for reciressai of his grievance, To come to this conciusicm the DE reiied on the decision of the Eeihi High Court in the case of _Ani<ur Expert Private Ltd. vs, MRTPC, W.P,(C} Noe 1.28? of 280.1, .32. The BS than ccnsidered the aitemaize remedy avaiiabie under the 'Raiiway Rate Tribunai. Under Secticn 36 of the Raiiways Act a ccimpiaint can be made to the raiiway rate tribunai in the foiiowing circumstances, if the raiiway admiinistraticn;

as is ccirztravening 'the prcwision of Section 78;

e is charging for the carriage of any iccmmodity between twc: staticns or a rate which is umfcasoraabie or is is ieawing any cther charge. which is UjﬁFf33SQT"iEibiE,.

Section 37 provides for certain decisions of the raiiway adrninist:'a.i:_ion which have been kept. out of the jurisdicticn cf the tribunvai. These are;

«a ciassification or re~ciassification of any ccrnmod.ii:y; is fixationi of wharfage and demurrage charges {inciuciing conditions attached in such charges); V Page 3.1 of 1&0 as fixation of fares ievieci for the carriage of passengers anczi freight ievieci for the carriage of iguggagie, parceis; reiiwey rnateriei anti rriiiitery traffic and a fixation of iurnp sum rates.

On the basis. of these submissions, it was stated before the Dsgthat ebove--mentio;rieci provisions of the Raiiways Act were not avaiiabie to the information providers. For this reason there is no option to the information providers but to approach CCL Incicientaiiy, it may be mentioned that as the raiiway administration functions under a statute, the Supreme Court in various decisions has heici that it aooeai is not orovideti the statutory authority before enforcing the iaw has to give a reasonebie opportunity of hearing the oarties before coming out with its judgement. On behaii' of the raiiway, it was argued that it an issue of unfair treatment has been made it was for the concerned .;Da:rties to move under Section 7t') of the Reiiway Act and that no eomtsiaints cotiid be ' made to the CCI. The M3 considered the arguments raised and the D95 View was that the aiternate rernetiies avaiieoie wouid not diiute the right of the information provider tn take up the cornpetition iissu,-e that had been raised in the information stiiirriiitteti to the CCE.

33. Ministry of 'Reiiways (ii/ioi'-1) 'had argueti that the -agreements were executed on the basis of mutuai terms and conciitions and th_ere"r'ore the agreements -were 'binding on aii the tiarties to the agreernerit. The 136's View is that the agreement may be binding on the parties,' Emit the issue to beexarnineci is whether there are certain cieuses under the agreement whittri were anti competitive.. According to the D6 it has to be seen whether by this agreement an entry' harrier has been created or an exietirig enterpri.se has been thrown out the niarket or there was a foreciostire of market. This is the titity given to the Commissien under the Competition Act. Therefore, in View of the .DG; no 'protection can he ciaimeti on the ipretext of rntituaiiy agreed terms of .C{3i'it'i"Ei.C'£. it was for Page 211-: of .166 the Commission to exernine the contract and come to e fintiiiiéi Whether there were anti competitive agreements in the contract,

134. The next issue discussed by the D6 is the contintiing nature of the policies. The concession egteernent was entered by the PCTOS with MoR prior to 20"" hiey, 200?. The issue is therefore whether the anti competitive eiements in the contract were continuing even after 20"' May, 2009. Incicienteiiy, 20"' May, 2809 is a date on which the provisions of sections 3 and 4 were brought into force by the government, Regarding continuing affect of any enti competitive agreements the DE considered the decision of the Bombay High Court in the case of Kingfisher vs. CCI ~ writ petition 1I3"85 of 2009. f

35. The DG then examined the arguments of Mon with reference to CONCUR and he came to a finding that as Reiiweys has huge 63% share in the equity of CONCOR and that as high otficiaie of the Railway Board were on the Board of CONCUR, CZONCOR and MoR beiong to the same group and have to be considered together under the Competition Act.

36. The Reiiways had asked the Commission to keep the preceedings in abeyence as it had chaiiengeti the 3'uris<:1iction of the Comrnission, This 'issue had been examined by the Commission and the pies was rejected. The DC; has reiieci on the .on:ier of the Cornm.ission stating that the Commission had _jorisciiction to hendie the tissues of competition with reference to the inforrnetion provided by the 'infor,rnation providers,

37. The .06 "then starteci enaiysing the issues raised by '€115 information provider's. [The first issue was with reference to cirooier No. EOOE-/'i"T-- 111f7'3/"12 dated 11.10.2006 issued by which Indian Reiiwieys which prohibited the movement of coai, coite, rninerais and ores by the PC"i'Os.. iincidenteiiy, it may be mentioned that the advertisement which came out in lanuerv, 2006 and the poiiczy decision of the government which was issued in September, 2006 did not prohibit the movement of the four above mentioned conmiociitiesi by the PCTCJS. On the other hano' the Page 23 of 160 poiicy of September H306 stated that the private parties wouid he aiicswed to move containers on the same tines as CONCUR for both E>{Z_i\'i and domestic traffic. The DG examined the argurrsentis submitted by the parties and the MGR and came to the ccmciusion that the argument of MQR that thenpurpose behind the PPP poiicy was te increase the reii share in container in the tetei traffic carried in indie was not refiected in the PPP peiicy. The DB observed that the PP'? poiicy suggested ROY?"

ciiscriminatery access te the PCTOS era the same times as for CONCOR, The DE aise observed that after the iicense fees were paid -by the PCTQS the commodity ciessificetien of coat, coke, ore and minereie was restricted to the PCTOS. The inferrnahts have stated that speciai exemptions have been made for CONCOR vicie Raiiway Beard Better Ne. 2G06,«'TT~111,'73,f12 of 12"' March, 2907.. The informant argued that this directieh ef the Raiiway Bear-ti was discriminatery. Arshiye has else argued that though it was not gperemitted to carry (2? coke for varieus custemers CONCOR was aiiewed te toad this restricted game an '2?.:E.t3.13*.i):i.C). This was 5123:) stated to be ciiscriminatery. The informant in this case did net find any reeseh fer the insistence of i\'ioR that the goods sheuid be carried in its wagehs and net in containers. informants have therefere argued that the contract of MGR tproh'ijbitih_g certain commodities fair being transported in containers amounts to an abuse under the Cempetititm. Act. it is aiso stated that behavieur of MGR was discriminatory, The interment aise breught irate 'focus Ruie 132(8) of the PCTCBS rules which did net empewe'r the MGR te prehibit any certimodity to be carried in containers, Accerding to the informants 'Ruie 12(8) premetes the PCTOS ta carry ail goods and the eniy restriction was that the conditions at r:arriege shouici be chargect. Thus NOR kept the services for transportation of certain commodities in its share. It has been argued that the action of MOR ferecieses the market for the PCTOS and thereby restricts the previsicm of services to the customers. Therefore the MOR had centravened Section 4(2')(ti)(i) and .sectie;n 4(2)(c') of the Act. The interment in this case reiieti on the ratio Said. down in the case of British ihformeh_ts stated that Page .24 M150 Post vs. Deutsche Post AG, C33 2811 - 331/40. In this case Eurepean ' Cernrnission had held that both the British Post and Deutscne Post were monopoiists and both limited the development sol' new market and development of the use of new technology to the projects of operaters and their customer who were prevented to make efficient use of the existing teiecornmunication system. The D13 then ecmsidered the eejections raised by other operators such as KRIBHCQ, Boxtones, Indian Infrastrur:tu_re and Logistics Private Ltci, ETA, B28 and Hind Terrnineis. Ali these enterprises argued on the same lines as the informants in this case. in fact these enterprises were aiso PCTQS. It ties been stated that there were restrictéons in rnevement of certain commeciities which were breught to the notice of these enterprises wlten they signed the concession agreement. Further prior to the signing of the cencesséon agreement they had aiready made huge investrnente in starting the container tram operations. They eiso argued that many of the consumers wanted to move goods in containers esoecialty the smaller producers of cement, steel, sugar etc. But by dernmring them of the containers Railways had rcompeiied these smaii producers to transport-their goods by read. 'it is also stated that the raiiways was suffering tron'; ﬁnancial crunch and was not in a position to order railway wagons and by not altewing the PCTOS, the 'railways had brought in deficiencies in .ser\;ice to the consumers. They argued that because of the bemtviaur of railways mast of the rakes of PCTOS were kyiyng iclie.

438.. Before the DG CQNCC-R and MGR suemitteti their side of the arguments. According to the submissions the restrictions on movements of commodities like Dres, minerals, coat and coke by containers were in the knowledge ofeit CTOs at the time of the execution ottne Concession Agreement. it was argued that this restrictien en the commeciities was within the powers of the Min'istr;} of Railways. It was Stated en behaif of CONCCDR the consolidation was an integral feature of contejinerisation and that many ef the Customers used to stuff more than «one cemrnodéty in a singte centainer for a particular destination. It was stated. that in; such a Page 25 offtsﬂ case the freight rates were not dependent on the type of the commodity and therefore the commodity was described as "i\'ii><e.d.",: it was argued that after 11.1D.2€iD6 CDNCOR had transported coke -after obtaining permission from MGR. CQNCOR stopped the movewieht of Coke in bags after December 2010. It is aiso stated that CONCUR had never moved ouik items iiite ore, coai, coke and miriereis ii': containers at any time. Regarding the other mihereis CONCOR agreed that it used to move bauxite, magnetite, iimestone etc. in piecemeal quantities ih the containers between the period 2004-05 and 2065-36, It was stated that this was done as no restriction had been pieced on their movement by the Ministry of Raiiways.

39. As far as Ministry of Raiiway was concerned it was stated on its heheif that in order to avoid diversion of cohvehtiohai ouik traffic from raiiwey wagons to container trains, necessary safeguards were made in the Concession Agreement under articie '3.3,2. Under this articie the Cehtrai Government had the right to specify certain commodities which ordinarily moved in raiiwayvwagohs in ttaihioad as notified commodities which may be subjected to different tariff under the conditions for haulage. It was stated: that this £Z§i'CLij1£-Bi' was a part of the concessions Agreement signed on 09.DfS.2tiD8 by Arshiye. It was argued that as this issue was eiready in the khowiedge of the informant, the informant muici not at this stage take the pies that it had: no knowledge of this fact. It was aiso stated on behaif of Raiiways that ioose and btiiik commodities were not conducive for ttansotirtetioin in containers because Indian Raiiways had the inhererit strength to carry heavy weight ouik and ioose commodities more etticiehtiy and ecoriomiceiiiy. But no rhateriai was sutimitted 'to'~s'how to 'how-the carriage in open wagons tor~certei<r-1-i commodities brought more efficiency and more economy in the railway system. It was again repeated that in coovehtiohai geherai purpose wagon coai to the extent of about 4500 metric Tonnes oer traih couid be carried whereas in container train. ohiy '.2500 metric Tonnes couid be carried. It was therefore stated that it the goods were moved by " Page as 017160 rM,"...,,.

/ Containers it wouid have led to under Litiiisatioh of the track, it was further stated that the CTOS were requiredto aggregate piecemeai hoh~ huik commodities iost by raii to road over the years and hot to tiiveiﬁt the bulk convehizionai traffic of the Raiiways.. it aiso stated that as the Ministry of Raiiways had statutory powers to frame mies and regiiiatiohs and issue Circi..iiars under the Raiiway Act M89, no disoiosute was required to he made of the decisions taken iri the officiai fiie. it was iwther stated that transportation of huik cargo and containers were hot:

the purpose for which the sector was opened. it was argued that Ihtiiah Raiiwaysi is one of the piiiars oi'1hdi_a's inftastructure and has a symboiic: reiationship with the country's Wei! being and with the ecohomy, It was further argued that a uniform haiiiage rate was provided both for ciomestic and ihterhatiohai container traffic iri'E5S§J€C'Ci\'E of the commodity ioaded. This is known as FAK rate, It was argued_ that the detaiis of voiume of goods transported by CONCOR were hot maintained by the Indian Raiiways prior to .2i3D?i, It was further stated that the movement oi' CP Coke by containers of CONCOR was aiiowed ohiy fair the ii{)i"Ci'i~*€E3S*_C region.

48. The DE then examined the private ptitiiic poiicy and aiso recorded statements of the officiais of the different PiiZTOs during the course of his investigation, The DE has observed that the PP? hoiicy as Wei! as their advertisements did not mention that the i:ii.iii< commodities eouid he carried ohiy by thie."Raiiways., Oh the basis of the suhmfissiohs the DG observed that since 'MDi?. wagons did not move goods which were iess than train ioaci of a sihgie commodity, the private CTOS were expected to piay an important role in the movement of pieﬁemeai tti'Eii°"i"'it: by aggregation oh 'i5'i"'1i3~--"i"aii'i'iEi;WOi'i€: and thereby increase the movement of « goods by raiis. It was aiso the understanding of the' PCTQS that the infrastructure of 'private sidihgs goods as 'termihais aiiaiiahie with the CDNCOR for ioadihg and uhiioadiihg wouici he made aveiiahie to the PCTOs. "

Page 37 ofiiﬁfi /,,.......m....,,,_q _

- :- _ -~.__ , i,.,.w -.

41. The DG then examined the issue of the movement of i::>uii< commodities in containers on the raiiway neitwork. The DG o_i3setvec:_i that 90% of the totei Freight business of inoian Raiiweys constitutes boiit commodities such as coai, feed grains, iron and steei cement etc, The De has recorded a finding that :e><c:iuding the tiuik commodities from transportation by CTDs ied to the exciusion of 90% oi' the totei freight movement on the Raiiways. The 88 observed that the PPP ooiicy did not envisage a bianket exciusion of bulk commodities. The DE: eiso found the fact that CDNCOR was moving freight ioacis of goods of .ouii< commodities on the reiiway networ'i<, On this basis the DG foiinti no justification for prohibition of commodities feiiing under the category coai, coke, iron, ore anti minerals on account of their being ooik oomniooities,

42. The DG then took up the issue of oontainetiza_tion on the taiiway network. According to the Concession Agreement container means an articie of transport equipment soeciaiiy designed to faciiitate the czarriage of goods by one or more modes of transport without intermeciieate 'reioadiing and handieo as a unit ioao. It was found that this cietinition snowed door--to~door delivery and rntiitirnociai transportation of cargo', The nature of goods end not 'appear to be an i.SS.U:E as iionene 'they couici be carried in containers. it did not mean that the 'aggregation ottne miiitipie goods was one of the main aims of PPP poiity, in fact the investigation showed that there were soecieiiy designed containers evoitiebie to carry' buik commodities and therefore it wooid not correct to hoid that ijoik COi'Ti_i'iiOdiiZiES oouiol oniy be carried by wagons.

43. The DC; tnen examined the movement of prohibited Comjmotiities in containers prior to tneooeningﬂof the matitet for the CTCis, The {JG found that prior to '11,1i3.20ii):6~ there §vasMnioAfotohibit'ion on the movement of buik commodities in containers by CONCOR, As far asMi_ni.stry oi' Reiiways is concerned it was stated that the prohibition on the movement of non ouiit containers was that iose and iouiiq commodities were not conducive for transportation by containers. The Raiiweys conceded that prior to Page 23 o'f16(} 11.10.2006 CONCOR may have mmxed bulk. ccmmodities in containers, On the basis of the facts the DE came to the ccmciustian that CDNCOR had been transtaarting at least same of the commadities prim ta prohibititm and the entry of the PCTQS in the raievant market, Hence the D6 gfeit that the CTQS had; a ratianai basis to mid a View that same of the bulk commodities wouéd be aiiowed to be carried for transportatttm in cc:mtai;nerst

44. The DE then examined the issue at mtwement tn' prehitrited commtxdities in aggregaticm Le, Eess than 'train Read. in View of the prohibttion on the carriage of buiik goods by ccmtairsers, ctmsujmer had no option avaiiabte to it for mavement an the raii netwark 0!' the prehébtited grands when it had less thanttrain Goad at gocscis, During the Erwestigatitm by the D6, D6 came to the concsusisn that CQNCJOR had been moving at Eeast some of thesse commodities in containers after aggregation prior to the imposition at restrictions. The informant had stated that Envestments in the tan infrastructure by taiiways had became stagnant and the infrastructture was not aﬁbée ta match the growth in Qther sectors of the Inciian ectmomy. This had ted to capacity constraints and a staitt friam raw to road traffic even of bulk COfT1mC=d§t§E.S. The 336 taunt that it was rrmiy the commarciai censtderation of the consumers which. ted ta a shift tram raii transportation to read transpm~tation.'The {JG then examined the rail coefficient which is "nothing but a ..percentage at 'tota§ tautput divided by trroduction plus -imports of major items carried by Raiiwaytst On the carriage at the buik commoditiestﬁike coal, irdtx, ore the raik Coefficient varied between 60% and 65% which -showed that the batante amotmt at these commedities couid be trangported by read. Aszcortﬁng to the DC; this showed that the raiiway was not abie ta cater to the compiete demand, Accmrding to DG if the C.TOs were not prohibited ta carry these bulk tomnwociities the trait coefficient wouéd go up which was {me of the main Qbjectives at the 'PPP. On an anaiysis of these fact: the DE came to the <:om:iu.sicm that there may be sttn 'rE';'{2;Uii"€§'T3€3f'i"C fat the customer for the tmtwement at at Eeast some of the goads in iess than trainioad. Because at Page 29 (#160 the Railways the consumers were denied an eption af mevement of goods on the raié network which amounts to vieietien ef provisiens oi the Act. The D8 is of the View that e customer's choice has been reduced, Fmzher as Railways was not i::atering to the complete demand as is evident frem the raii ceefﬁcient and this resuiteci in Sewer efficiency for the raiiweys. There was petentiei of these cemmedéties being 'moved, in containers.

45. The DG then examined the argument at' MGR regarding the carriage of buii-< commodities in containers. The DC; investigated the facts aﬂd heid as feiiewsiz "From the aforesaid it has enverged that whiie wagons may be better suited for movement of certain buik eemrneciities in rake Iced, the same may not be true fer ea'! buik commeditfes. It is noted from the information aveilebie on reeerci that there are containers with features to meet the requirement of bulk cemmodities. This aspect has been deaf? in detail eariier in the report While defining the reievanz' market. Pessibiiities as' further designing, innovations and tecrimoiegicef advancements in containers in accordance with the requir'eme_m.'s of specific comnmeiities cannot be ruieci out: Rather in View of the prohibition of the movement of several bulk cemmedities, there is me .ir2ceni:ive for CTOS" to exeiere deveieping or procuring technofegiceiiy advanced containers [and this wouici ieeci to restriction of technical and scientific deveiopmeni' erneunting to vieietion of the provisions of the Act. "

46. The DG aieo examined the rati<3naie_ of Moafer the impeeiizion tn' erohibitiensi. The DG wanted ta 'exe-ininﬂe the fehcte for arriving at this decision by MGR.' But the documents were not produced on the ground

- that they were poiicy decisions. MGR stated that the poiicy decisions were taken to safeguard the interest 03" the raiiw:-aye. it was argued that the retienaie behindi the PPP peiicy was to increase the traneperteizien of Page 30 oi"16ﬂ goods by containers and not to divert the tieik corwehtiohei traffic carried by the reiiweys. It was argued that for these reasons that Ruie 3.3.2. was incorporated in the concession agreement. Ii: was stated on behaii of MOR that since a uniform FAK rate was offered for aii corrimociities to the CTQS, it was decided to prohiioit the movement of coke, coei, mirierai. and ore to the PCTDS. ii: was further argued that the decision taken was a ooiicy decision of the government and it was an exercise of a sovereign ftirictiori. The DG's view is that the action of MoR was an e><ierr:i;:e of power to finish of? competition after eiiowihg entry to private pieyers. in his view, MGR is a regulator, an operator and a competitor in the relevant market. There was therefore a coihfiict of iriteresi: whieh went against the concept of opening up a closed sector. in fact, it was stated that i\*ioR in the garb of policy was ﬁnishing off competition in the reievant market. The DG then came to the cohciusiori that there was no justification for the prohibition on the carriage of certain ciasses oi' goods by the PCTOS 'iii ctonteihers. According to the 'D6, there were 'infringements of the competition iaw on these facts. in fact as aireaciy discussed above because of the orohibitiori in the carriage oi' izoei, ores "etc. 69°/o of the market was cioseci to the PCTDS. This amounts to a deniai oi' access of the reievant market to the CTOS and resuited in ooifitravehtiion of the Competition Act.

4?'. The DC} then considered the issues raised by the prohibition of goods to he carried by the jPCTO.s in containers. He found that at the time of the signing of the concession agreement oriiy the circoiar of ivioiii reiatirig to hauiege charges were encioseci end there was no mention of the mohioited items. The D6 fugrtiher heid that ii/ioR~ had imiiatereiiy imposed the prohibitions due to the abuse of its dominanmziositioh in the reieveht market. In fact the '¥'CTOs had "paid the iicense fees; and pieced orders for rakes and brei<e.,vahs before the imposition of tirohitiitiorie. Thus, according to the D8 there was a ciear vioiation of sectioii .:{i.(21i'a}{ ii .Q;'iI.?';ii..§..E.\_Q;..

i'age 3'1 of 153

48. The DG then took up the issue of discrimination iris a. vis CDi\iCC.iR on prohiiaited goods. On beheif of Moi? it was argued that the prohibition imposed by the circular dated 11.10.2006 was Lmiformiy aooiicatiie to CQNCOR and the other CTOS. When the issue was teiteri up with CONCDR it Stated that it was eiiowed to carry t:_P. Cake in bags after obtaining permission from iv'ioR._ But after December 2010 it was stopped. by iVioR from icarrying coke in bags. In fact this decision was taken by MQR after the ccsmpieirit was fiieci by Arehiya before the CC}, CONCQF2. aiso conceded that it was carrying biue dost wiiicii was a mineral even after the issue of the cireuier dated 11.:i.0.2DO6. On the tiasis of these facts, the iriformant's ciaim of discrimination izetween CONCUR anti the other PCTDs was established, This aiso estebiishes that: i'i'1§fiEi"EiiS» etc. couici be carried in containers. The DS iC§'iE3i"€fOi"& heid that the oiscriminatirzg behavior by MOR between CONCDR and the PCTQS was in vioietioo of section. 4(2§{e',ii'i§ ff the Act.

49. The DG was aiso of the V§E5Vii that prohibitiori of the carriage or certain goods by the PCTDs was a foreciosore of Competition in the reievar'rt market. According to the DG it amounts to an imposition of unfair competition in the carriage of goods and therefore ceotravention of section ai{2)ieii'ii of the Act.

SQ. Again considering the prohibition of the carriage of t:er.tefiii soecifieo goods in containers as weii as the fact that raiiways aiiows its wagcms to be used for carriage oniy when train ioad of goods were reouireci to be carried, if some customer had iess than a train ioeci of the prohibited goods, it cotiid not get the goods .traosoori:ed on the reii network' The oroi1ii:ii_ti_on was therefore unfair and iimitserici restrittts the provision of services; :T?'iiS' aiso ieads to the carriage at goods of the prohibited. va.r'iety to roads and ioss tit reventier to the iridiari Reiiweyei in any case according to the {)6 it ieecie to a vioiatiori of section 4g'2i:'h) o__i'__ the Aci:._ S1. The US has eieo coiiciocieci that the prohibition of Certain specified goods t;iec:reeses the iocentiives to the PCTGS to ir'inova;te and tiring into Page 32 of ".160 operation modified wagons for the carriage of bulk. goods. Therefore according to the .D{3,. the conditions imposed by MOR. has iimited the technicai and scientific deveiopment teiatihg to services to the prejudice of consumers in vioiation of section eizifbiiioii of the Act.

' 52. Regarding the prohibition of the Carriage of certain goods by the containers Fed, to e deniai of market access to 59% of the existing market of buii-: goods. It is a practice which ied to the deniei of market access. According to the DE this is in vioiation of section -<l§2)§::-3 ofthe Act'

53. The iD.G. then took up the grievance caused to the PCTQS by the increase in homage charges for the PCTOS in pursuance of the issue of RC 25, RC 30 and RC 5 circuiars issued by MGR. Eariier the hauiage charges were based on ioed aioiiity and distance. aut by these czitcoiars, the hatiiage charges were increased with reference to the type of goods carried in the containers by the EDCTOS. Even the notified commodities were subjected not on the carrying capacity of the wagons but were based on container ciass rate. The hauiage charges had nothing to do with the ecttsai ioed. By the issue of these circuiars, the heuiege charges on wagonsgwhich were run by MGR were not increased. 1n this way, the carriage of goods in the wagons were much cheaper than in the containers. These circoiiacs were therefore discrimiriatiity and 16.63 ta a shift of customers from the -containers to wegoiis. These rate c§'rt;u'§ats in respect of the hauiage charges were not aopiicabie to exim 'traffic.. It has been aiieged that this was done to benefit CQNCQR because 85% of the receipts of CONCQR came from E><;iiivi traffic. it has aiso been aiieged that the tater 'rate circuiars aiso favoured CONCQAR as some commodities which were maitiiy ,carried by CONCDR. were tai<_en to the exempted iist of commodities. it has been argued that the PCTDS by "these rate CiI'C:Lilai'S have been priced out of the 'market. The hzauiage charges for goods "t:r'ahsporta;tion by MGR in its own wagons is based on parameters such as the ciessificatiori of goods ouoiished vide goods traffic tariffs No- 433 Pt':

per km. rates as poiaéishied vide Goods Traffic NO, 44 carrying capacity of '~16 MN »""»'*T-W ..

Page 33 of 16%

wagons. But the basis of fixation of hauiage charges fer Containers has not been mentioned.

54. Differehtiei treatment of the PCTOS in respect of the charges have been given in the term of charts «reproduced on page 125 and 12.6 of DG's

- report. The charts show that CQNCOR and raiiway wagehs have been favoured by the rate izircuiars cm the hauiage charges, The i.rifermants have argued that there was no diversieri of traffic from the raiiways to the PCTOS and therefore the fears of MOR were unfeunded. In fact the unfair conditions pieced cm the PCTDS would ieaci tti the exit of the PCTOS from iausinessei" transpertatiori Oh the raii network. it was stated: that in the PP? poiity, the PCTQS were premised hen discriminatory behavieur for both Exim and domestic traffic. It was aism argueci that non discriminatory behaviour was required even for the purpose of haulage charges. It was argued that the ciaim of the reiiways that the main aim of the PP? peiicy was to tiring traffic to the raiiways tram road was misplaced and there is no mention at this fact in the poiicy statement.'

55.. It was argued that by the rate circuiar RC 5 Of 2011, certain commetiities were pieced in the ciassified iist and this COi'iS'i;itLit€Ci 28.4% of the market of goeds mevement on raiis. Thus the PCTDS were ~exciucieci from 88.4% tit the market. As "far as the tiassified lists were Concerned, the PCTOS wouici have to pay higher charges as the hauiage charges far these -gotzads were much 'higher than that for these games carrieti by the raiiways wagens, It was argued that by ciassifvihg these gcoeds there was an iHCE':.i'if§V€ for these goods ta shift from the raii 'network to reads.

L7:

to CQNCOR. as mentitmeci in Cilxe-'.5 report. These are iisteci as LJi{'iCiE-1i'2»* (2) MOR transferred 17293 Ctmtainers to cericoe at the time at the incorporation ef CONCUR, free of cost.

{ii} under load rtmhihg trains by CONCQR.

Page 34 M163

5. Arshiya then highiighted the beneveient tteatmehtgiveri by i~'iOR-- V -

(iii) Hauiage charges for MGR owned brake vans attached with container trains of CDNCOR were either not recovered or were recovered iess. _ " (iv) Nowimpiementation/nonaavaiiabiiity of mechanism for monitoring movement of containers by CGNCQR.

(V) Uric:ier--recovery of iicerise fee for ianci iicenseo to CONCGR.

(vi) Non recovery of excess amount deducted on account cost of two rakes of BLC wagons taken over by Raiiway,

(vii) Non-recovery of arnoimrt reported through Error Sheets,

(viii) Non recovery of shooting ctiarc_;es.

(ix) Damage to bridge caused by movement of over oimensionai containers.

(Xi) Norerecovery oi' haulage charges in respect of empty containers.

Hence, it is submitted that CAG Report stipports ARIL_'s contention in Case No. 64/203.0 that MGR discriminates against PCTOS 'anti thereby orw:iei'mir:es competition.

57'. Another issue raised was that ivioiit had agreed to suopiy the iocomotives wittiin 12 hours of the request and if there was a oeiay in the rebate of 2% of the hatiiage Charges was to be paid by the railways' it was stated 1';i'iEi'iI'i'iE3iti"iEi' the timeiirie has been maintained for the 'SLiDi)i',~' of iocomotives nor rebates tiarve been given to the PCTQS. 'Even there was no mechanism for representation in .such_ cases,

58.. The Raiiways were to aiiow 10% on transportation of goods in 4G feet containers as per the Concession Agreement. But this rebate has been withdrawn by MGR without any reason arid' without any comm Lii'ii'CE§'t§Di'i to the"i'r€3TDs.

59. Another issue raised was that the brake varis were to be acquired by the PCTOS according to the Conciessiori agreements, But though Arshiya had acquired 9 "brake vans and was using them Moit was stiii Page 35 of 160 charging fer the brake vans. This was stated ta be an issue ef abuse by MGR.

60. It was aiso argued before the DC; that if PCTOS were recguired to have its awn roiiirig stock but such a conditidn was not giver: te CONCOR and CONCOR stiii using roiiirig stack proiéided by MGR. it was aise stated that CONCOR has not been asked to purchase its own brake vans and was using the brake vans tn' the Raiiways. it was stated that this action of the raiiweys was discriminatory as' it gave a clear advantage in terms emf lower irwesitrrient and zero recurring expenditures te CONCOFL

61.. On beheif of KRIBHCC», it was argued with the 1:38 that the freight rate eppiicaizie to the wagens eperated by the reiiways was revised by 4 to 5% 'E§'ii'i3Ugi'i RC 33 issued by 3. MOR but the freight testes appiicebie freight service operators was not revised by ivii3R and it remaineci cdnstant from My 2:306 to Secemizzer 3.810.. It was therefore argued that there was disparity in the pieying fieid. between the 'PCTOS and the i'-eii freight eperattirs in terms of eppiicabie freight ,«' heuiege charges, it was ftirt.h_er argued that the increase on ecceunt of heuiege charges wouid atieiy to the cargo carried out by the rajiiways as weii as bytthe CTGS. 'There was no reason to have a different heuiage charges centeinerized movements and for reiiwey wagons. This was in the epiriion. of .i<i*it3hr:o, it was stated that tyy this practice the raiiweys have ied tn the shift: of traffic from the containers tit: the wegoris. ri<ritih::-0 argued that the rates have been increased in order tin feveur CONCUR. The main revemie at the CONCOR was the EKIM sector but as the Exim eenteiner has been exempted from the draccmian rates circuier, CGi\iCO§R has been given a benefit. it has aise been argued "that as CONCQR was in business since 1989 it was better piiadczecihite' abserb the shock then what had been Heated due to certain and ertiitrary changes in ccmtainer freight structure. It was stated that CDNCOR had e iarge number tit terminais where they ceuici eggtegate and distribute containers where the ether 'pie;/ers am not have such E3 faeiiity. It 'was further stated that pi'iDi" ti:

Page 36 at 16% 2006 the freight rates for container traffic were determined by considering the containers and not the commodity inside but after the issue oi' a circoiar RC 2'5 differential rates were ievieci on containeis on the basis of the ifJi'C3Cii.i{3iZS carried in the containers. Eariier cherging was done on the basis of the rate of the containers and the distance treveiieci. It was further stated that the circular RC 25 covered many commodities which norinaiiy ciici not move by treinioaci anti hence was not in inconforrriity with dense 3.32. of the Concession Agreement, After the issue of RC 25 KRIBi~iiZ{3 moved the Chairman Raiiway iiioerci against the draconian issues raised in the rate circoiars. In response to the representation the Moia came out with the rate circiiiar 3.0 which was even more draconian than the rate circuier 25. The hauiege charges werie now to be ievieci on the hesis of higher ciass rate oi' commodities which the container contained. Kribhco again made a preseriiatiion to ivioil to withdraw the circiiiar RC 30 but the MGR came out with the circuiei' no, 32 for increasing the iiaoiage charges for the rriovenieni: of containers in nrivateiy owned container wagons. it was stated thi-ii: this attitude oi' the Raiiway Board was against the spirit of the Concession Agreement and this wouici uitimateiy ieati torthe exit of the PCTDS 'form the business.

$2. it was stated that the MoR had coiiecteiti 640 crores as iicence fees and "Rs, 585 crores es ennuaiizeci haiiiage ch&iige.s i'i'.0m the FETUS, The PC'.i'Os had made an investment of between .2503 crores and they provided direct and inciirect ernpioyrneni: to over Biiiiﬂ peopie for increase customer access to the Indian Reiiways rietwoi'i<. The .PCT{iis were not aiioweiti to continue the business without non-discrirninpation in rail freight services segment in india. As this has not happened, the Indian eonsiimer has been a ioseri

63. The BS on this issue examined the other 'freight operators and aii oi' them had the same grievances which Ai*shiy'e and KREBHCO had.

54, The i'.>G then considered the siibn'iiss'ions of MOR and CONCUR, CONQQR stated that MGR had not discriminated against PCTOS end in Page 3*? of 150 ﬁn,"

, . "es, 6' /3)., ' 4:

*e'»;<§-'in _. _ 3 ' '_ ' i,j;r.2'3%5ﬁ<;

favour of CQNCOR. It was stated that the commodity ciassifisation. and the payment of hauiage charges were appiiizabie to CQNCQR in the same manner as it was aotiiicatiie to the other PCTQSQ As far as raiiway was concerned it was stated that the container hatiiage rates were prescribed for three categories. It was further stated that the container ciass rates had been prescribed for certain comrnociities moving in trairiioaci in " raitways geherai~ourp<:3se wagons and was aooiicabie to domestic traffic oniy. it was stated' that the provisions appiieti uhiformiy to aii the CTCis inciuciirig CONCDR. it was stated that according to the para 3,3.2 of the Concession Agreemeriti' Centrai government had the right to specify certain commodities with orciiriariiy move in railway wagons in train ioatis as notified commodities which wiii be subjected to ciiffereint tariffs ahci conditions "for haulage. The purpose of the Cohceshsiciri Agreement was the aooiicatiori cf the piece rheai traffic: with the ebjetztive for the Concession Agreement. It was stated that fixation of hauiage rates was based on fuiiy iciistriiouteci cost of the raiiways arrived from time to time, It was arise arcgued that the rates were iini<ei.:i with the aublic tariff cihargeci by the railways for transportation of such notified commodities in railway wagons, It was further argued that MGR was the competent authority to take the decisions regarciigng freight and other charges. It was further stated that regarding disputes in the matters in Raiiway Rates Triiotmai, The MQR favour Chennai is the designated agthority for redressai of grievances. denfiedi that it was tiiscrirhihating against PCTCIS 'iii srcier to tosses. it see stated that under the Raiiwaysact 1989 the MOR statutory powers to frame ruies and reguiatiohs and issue c:ircuiars.. It was had conceded that the rates were revised in order to stcapthe diversion of traffic from-'raiio to >C0i'iiZEi§i'iE3i'S. It was aiso considered that the rates were not revised for Exim traffic: charges which had been totaiiy exciurieci frsrh the ievy or coritairier class rate and were stiii being charged at FAR hauiage rate, it was aiso conceded that RC 30 arid RC 5 were issued to restrict mmrem-eht of tiuiic comrnoditie.s in container trains at FAK rates and this wouid have resuiteci in revenue ioss to public: exchequer and Page 38iof1€-30 under-utilisation er" infrastructure due to poor tcmnage% per train in container in comparison ta railways freight train. Regerdmg the-discount of 10% on an charges it was stated that this discount was given is": the Erma; years and was withmewn as and when the market was ebie to sustain. Regarding the charges Eeviecl cm brake vans it was stated; that the PCZTOS. were entitled ta refund as per ruies.

55. on the basis of these arguments the 3363 observed that the C.TQs were offered a Uniform Hauéege rate which was tower thaﬁ the freight rate in wegens irrespective of the commodity being meveci at the time at' introducing private. piayers in -container movement. The a§se obeerved that there were previsiens under dense 3.3.2 ef the Cencesséeen Agreement forvspecifying certain commodities which ceuici be subjected te different tariff and cenciitiens fer hauiage, The DG eise held as fofiowsw It is felt that any eat or atfempt to use the a£.:;thorit'3J to invoke the aferesaid -ciause of me agreement ire put CTOS at the crest disadvantage, fmpairv their ebiiity to compete effectiveiy er scuttie competition in any manner would amaunt to imposition of unfair and cfiscriminatery condition in v:'oiat.?en of the provisions cf me Cempetition Act.

Hence, the fact that the CTQS were aware and had signed the

-Concession Agreement containing provisions which autfmrized MGR to stipulate dffferenetiei Haulage rates fer nofifiecf commodities vvouizj not in any manner (mute the obiigatiens of NOR as the deminant pie;/er in the reievent market in terms cf the Compefitfen Act:

The BC; aiso observed in respect of increase heutage charges as foliowew It is observed from the aferesaid tebie that for certem notified cemmeciity classes such as from 8: steel, Aiumine, POL, Coax' Tar, Kerosene of! there has been an increase in haufage charges by more than 100% (110-.I50%) in pursuant to RC."--30 as .::om;:2.arec2' to the Page 354 sf 161) . . . . . . . . . . . . . . . . . . . . » - . . . . . . . . . . . . , , . , , , , H appiicebie iieuiege rate the time of entry of CTOS. For the ether notiﬁed corrimoziity ciesses the increase. varies between 35% ~ 90%, The increase in the Hauiage rate for eii the notified ccimmociiiies was subsrenriaiiy more than the increase in the rFAK rate for commodities other than nefified commaditiesg ~iienee;_. me contention of CTCis that there has been steep increase in the Hauiage merges fer notified commodities pursuant in RC 30 stands esrainiisiied from the aforesaid arieiysisg i On the perusei ei above facts the DES has retarded trze>ﬁri_d'mgs as feiiawsz The investigation has revealed that the increase in the GTE (49%) has been .substani:ieiiy iewer than the percentage increese in the Heuiage Rate fer movement of notified commoiciities in centainers ever the period i\iov-i35 to Dec-13 (35--15G%}. The extent of increase is eiso iewer than the increase in the iiauiage rates: :(FA_i<f) for movement' 9:' commodities other than nerifieai cemmociities ciiiririg the period ('14~I9%).

From the aforesaid tables, it is observed that at the time cf the entry of the CTOS the eppiicabie hauiage rates :__'FAi<.' rate) was substantiaiiy lower (35-~ﬁI% of me Gi"R',J than the e::eri'esponc:iing GTR rate even for the commodities which were later notified vicie RC .38.

Whiie the izeuiege rates for the notiﬁed commodities are stiii fewer then the corresponding GTR rates, the comparative ,{3£>Sfi?i£3i'i hes drasticeiiy changed under RC.' 3:). As can be seen from above, the haulage rates as a percentage of freight rates (GTR) ?€Oi'h_i_?_Qf§ffed commodities after RC 30 are in the range ef (80-590% er" the GTR).

It is noted that even after ccmsidering the increase in ifiie GTR rates broiught about in .Der:ember 2010, the comparative position of CTOS Page 40 of 160 w.r.t. the notiﬁed commodities in terms of appiicebie rates is signiﬁcantly different from what" it was at the time of entry, tinder this scenario, the investigafien has reveaied that on account of the increase in the haulage charges for notified commodities the ' CTOS have been subject to cost disadvantage and r'esuitanti;r would be priced out as compared to wagons when these ether costs being imturreei are taken inie account. Hence it is observed that unfair and discriminatory has been imposed an fZT_O's as ea resuit' of issuance of RC 30 / RC 5' in vioiation of the pmvisiohs cf the Act.

Hence it is observed that substeniriei increase in the hauiage rates fer CTOS for notified ccmmsciities stipuiated imcier RC 30 by MGR has put them to considerable cost disadvantage she?' has adverseiy impacted their abiiity to compete effectiveiiy witii Wagons witii respect to these commadities in the relevant market. Ittiiere-fore amounts to imposition of unfair and discriininiatciry conditions by i»iiZiR in provision and price of service sf CTGS in the re.levant_ mari<et in vioiation of provisions ef the Act.

On eccouni of these unfavourebie and discrimiriaifeify terms iimits have been imposed on the CTOs by MGR in provision of service in the reievarst market resuiting in cieniei 0?' market access ii? i.»'ioietiei'i cf the pravisions 02' the Act, In the process the choice of the customers have eise .i;:=eei'I iirnited.

Hence, it is found that since RC 30 was applicable oriiy for' domestic traffic it ameunteci to imposition of discriminatory condition by MGR on CTOs having business COiiC€3i?ti'c3?Cc'53iii on non EXIM' Trafﬁe vis»--s~vis CONCOVR in vioietion oi' the ;:ii"ew'si'ciii of the Act, The aforesaid date reveeis that the imzified commocmfies constitute 25%*30% of rate! frei'ght movement in i*eieven.t market" and contribute epprmc 35% of the itotai revenue earned. It is Clear tiiait these commodities are a'msiei* source of business and revemie for Page 41 of 160 MGR. an the basis of the aforesaid facts and analysis it can be stated that the haulage rates for notified commadities were 'increased to keep the business of these gcrods Wi;th_i..ﬂ the eicciusive ciczmain of wagoins.

As approx 50% of the relevant market was aireaciy foreciosed for CTOS due ta prohibitions. Another 25~_30"~'/o have heen practicaiiy denied on account of increase in hauiage rates for notiﬁed commodities. The CTO's have been {aft with ahprax 10% of the relevant market in which they heeci to compete amongst themselves as we?! as with Wagons.

Considering the adverse impact on the Cﬁmpﬁfifiﬂi? emanating out of the impiementatioh of the policy change, the conduct cf i's4C3R cannct be justified on account of argumenta related to COf?CE'i't'?S D2' ioss cif rea_ienue.. -Rather the acts squareiy constitute violation of the provisiens of the Act.

an the basis of the aforesaid fact and anaiysis it is hated that the conditions stipuiatea' under RC 85 Far avaiiihg FAK rate are ciperationaiiiy ciifficuiit to be .fuifiiied. -R05 has faciiitateci Imivement of notified commodities in .,ag_c;iregation eniy to a very iimited extent and most of the restrictions emerging out of "RC .30 have Continued under RC-0.3. Further, for 'train ioaafs as' notified commodities the cost competitiveness of CTOs icohtinues 'ta he impaired via--a-w's Wagons. Thais, it' is observed that even under RC (35 unfair" and ciiscriminatory conditioins discussed in the 'preceding paragraphs have continued having adverse effect oh competitihn in the reievanc market, amounting ta vioiation 0:' the provisiehs of the Act by i¥~'iD«i<'i,~ Hawever, from a iarger perspective since the entitled rebate is iikeiy to affect the cost of operations in some manner it in a «gay constitutes one of the many factors which cietermihe the corncveticiveness of the services being offered by $1.03») Page 132 01" 1:36 On the basis of the said finding it can be stated tiiéii' the cost of the operation of the CTQS and their abiiity to compete in the rslevant marker has been ariverseiy affected on account of the liinposition :21' Hauiage Charges for brake vans owned by them. The arnoumts to iinpositian of unfair condition and price by MGR in provision of service of the CTOS in the refevanr maricet in vioiation of the pravisions of the Act.

65. Initiaily when the PCTQS entered the business a unifarm haulage rate far ail commodities was available far movement 02' goods in containers. MGR also ievieci haulage charges when they wsuid return ta their base without any goods, By the issue of RC 35 and RC 3% view the haulage charges were increased considerably, The haulage charges had no correlatisn with the increase in costs and therefore. it was commarciaily Lmviabié for a new entrant ta <:c:»'ntinue in business. Similariy directing tiral:

buik mmmodities cannot be carried in csntalners the 'Railliiays created field i:»f business which was detrimental to 'the interests of the CTOS, According to the D6 this ammunted ta imposition af unfair and discriminatary cssnditiszms with the idea of driving Quiz campetition totaiiy. It was stated that RC 25, RC 30 anti 'RC 5 were issued by MGR in exercise of its dominant power. In View :3? these facts the 'DC; fourici that the 'behaviour cf the MOR was violative cf Secticiris 4{2)'(_a}(i), 4(2){a){ii'), 4(2)(b}(i), 4(2)(a){ii) and 4--(2){i:) of trie"Act, ' ' E7'. The DC; then took up the allegaticzins regardlri9_'ih_e rséistrictlons imposed on the PCTOS in -respect of access to private siciirigs. Private sidings are setup and do mat beiang to the Indian Railways but are liniced to fiche Indian Railway system. Al'Sl'li_',{aV_Ah_aS alleged that MGR impcasecl restrictions cm ioading and unloading containers fmm 'private sidings by the PCTOS. In fact in February 2089 NOR directed the zonal railways to stop providing container' access to private sidirigs, Accorciing 'ca the iristruciziens status qua was to be maintained for CONCOR and the PCTOS were 'to continue handling container trains from their own private siclings Page 413 0921.60 only and no access to any new private sittings were to be aiioweci. The «DE has recorded a finding that though CONCUR operates through various private siciihgs Arshiya was aiioweci to operate from ohiy one private sidings and therefore the action ofiViDR was discriminatory, it was itirther stated that Arshiya had obtained certain soeciai containers gbutihecause of the cieriiai of the private sioirigs the soeciai containers couid not be brought to use. Ar.shiya argued before the DG that after the information was submitted to the CC; MGR had issued a ietter on 1Ci,12,2QtL0 granting permission to PC'i"Os to access private sidiings. it was argued. before the Arshiya that this was a mere eyewash heizatise many conditions were pieced before the private sittings couici be used. Thus the permission given was a mere eye wash. In fact the coriciitions for the use of private sidirigs on (ii) Issue of NQC by the private sioiirigs owner in favour of the private CTO (ii) Ari apoiicatioh to the Zonai Raiiway in whose jurisdiction the private sidihgs faiis (iii) The ciecision granted co~use subject to the discretionary powers of the concerned zonai Raiiways (iv) the permission was for a period not exeeecziihg six months and (vi The permission was ohiy for the cargo. of the private »si-:.iings owner and not any third party cargo. it was aiso stated that CQNCOR was .aiiowe.d to access private sidihgs whereas it was not aiioweo to the other CjTOs, It was aiso argued that CONCGR was being aiioweci to imiid termihai /' sidirigs without foiiowihg any of the "norms priesrsribeci for the CTOS. 'Even. the permission to access private sittings for ioaciihg "anti oisch.argi,ag was at the discretion of the 'Raiiways and the Raiiways did not iook at the primary motive of increasing its share in a transparent manner. it was also stated that on various occasions the goocis at a private sidihgs were moved by road due to itihe_v_hoh-avaiiabiiity of the raiiway wagons,

68. According to the CONCUR, private sitiirigsicooid be accessed by CONCUR with the permission oi' the Raiiways and that of the owriers of the sittings. It was stated that presehtiy only the 'traffic of the private siding "owner couid "be ioaded from a private siding, It was aiso states' that the access to private sitiihgs was -soieiy dependent on the whims of V Page 44of16(i Raiiways. it was further stated that on tzerieif of CONCOR Cmiy 3% of the totai traffic: was booked by CONCUR from private sioingsu

69. According to the Ministry of Raiiways, the Concession Agreement regarding the traffic oi' CTOS was permitted to be handled from the raii termioais and not from eii private sidirigs. Raiiways reiied on the Concession Agreement which is reproduced as orider:~ "A Ref! terminef Sheff mean a iocation with siding and faciiities to handle container trains, including inieno' container depots, port reii terminals, Railway goods erred where container operations are feasioie and other privately Owned rail terminals. "

"A Private Siding means a siding laid out to serve factory, rim'! or other industrfai premises inciudirig an inland container deport or ref!' terminal to handle trains and not befonging to any Railway"

Administration".

it was therefore argued that a private siding is different from a raii terjminai. it was aiso stateci that the private sittings were meant for ouik commodities anti not for cargo which the PCTCis were requires: to carry, It was stated that the main aim of the PCTOS was -to take over the cargo of the itaiiweye and not to eoiarge their own revenues in a different maopnet. It was aiso stated that the ptovision was aoioiioaioie to aii the CTQS inciuciirig CC>'i\iCC2'R. It was further steteczi that private freight termiriais were arise in vogue from 1'S.D6,2i}10 tidroogh which CTOS couici tienciie 'thiro_-;3erty cargos from private sidirigs. The Reiiways argued that the purpose of opening of the sector was to increase the share of Raiiweys in the carriage of containers and 'for this purpose the CTQS were required to set up the raii terminai infrastructure but the C"i:"Os had feiieci to create the new infrastructure. In View of the fact it was stated that the 'prohibition of the third-party cargo from private sidings was eppiicabie.

170. The BS found that in View of the 'aforesaid facts and 'enaiysis of the restrictions pieced by the Mott in 2009.denying access to private sidings " ' ..»-vrr*"*_"~_-~.,\ Page 45 of 1863 was unfair and discriminatory. tn the CTOs and was in vielatiah of the provisions of the Act. The DG aiso found that theugh CQNCOR had access ta severe? private sidihgs the new PCTQs were not ahowed to use the séciihgst for' their business. This Eh the opinicm of the DG was discrimihatery. The case ef the Raifways is that access ta private sidihgs « was not aiiewed after 20083 to prevent diversion at rahways hulk (serge btssiness ta CTOs. The CTQS case is that CONCOR was teliowed to do business in bulk cemmhdities from the sidihgs prior ts entry of F-'CTC)s. According ta CTOS under the scheme of PPP for the waning of the setter, the'CTOs required to be aiiczswed to operate an the same tines at that aiiewed ta CONCUR. The PCTDS case is that in the Cohczessich Agreement no bar was stipuiated on the mcwemeht at huék gases by the CZTCT2s_, There was aisa no restriction in the area hf speration and the aggtegatéan of h0n~hui!<. txiecemeai traffic. It was stated that in the Concession Agreement ac:<:es:sihi%ity was to be ahowted to the PCTQS on the entire rah network and this hetwetk extended wherever the raiéwsy admihistratitm had the right to operate. it was the argument of Atshhsa; that as MGR e;3ereted wagons tram private sidihgs this wcmid mhstitute a part at the rah 1hetworE< in terms of the Concession Agreement and the same should £3550 be avaiiahie tea the PCTOs. It was considered by the Atshiya that the main 'ihtentttm (3? Matt was ta protect its own business, For this 're:a.s«:3n "access to private sidtngs was disallowed to the »P-'CTOS, In the C3DiF"1iOT"1 at the DE, this restricting is in violation at the Ccampetttttion Act, It was hmught ta the notice of the Commisséeh that on 1€3.,.1.2_.2£)1€3 a ctércuiar was issued by the 'MOR where private sidings were aﬁlowed to PCT{)s under certain ccmditions. This happened after Arshiya ﬂied its Cmmpiaint before the Commisshzm. According to Arshiya this showed aht§»seh.1p«etitEve behavicmr of MOR.

71. The DE 'held attettthe investigation that the restriction pieced an the CTQs in respect of private sittings were unfair and vthmtive of the Competition Act. It resuited in denial of market access to the CTDS and fess of choice for the custornets at PCTGS. It was stated "that it was a ' Page as wfltit} process that wouid iead to diversion of traffic from raii ta road. The D63 eiso found the behaviour of MOR to be discrimiinatery, Therefere the D6 found vioiation of the pmvisicms of Sections .éi(2)(a')(i), 4{2){i:s)(i) and r-*i~{2)((:) by MGR

72., The [36 than tsoii; into accdunit the aiiecatien of land by MGR ta CTGS for buiiding terminais. The {)6 found that CDNCOR had over 50 terminals most of which were buiit an Bend given by MGR, The rent fixed for the iand was based on the TELis hanciied at the depot, On the ether hand, MGR charged. PCTOS rent equivaient to 6% of the prevaiiing meme':

value even for previding connectivity from main iine tie a private siding. This metheci was feiiowed fer CONCOR by 'MGR circuiars dated 24J01V2Uﬂ8Q Arshiya had stated that this poiicy of discrimination between the PCTOs and CONCOR had ieci to heavy issses for MGR! it has been argued by Arshiya; that as the ieases to PCTQS for just years an investment on the !and could be made by the PC'.T{).s.. iiii'shiiya'iS Case is aise that as CDNCOR had exciusive access tn these "terminals and PCTOs did not have sufficient number of terminais, there was a lack of ievei piaying fieici in the reievant market. It was argued that ta foster competitien MGR shouid; have feiioweci neutraiity rather than pursue cieiibereteiy a strategy to tiit the piieying fieicis in 'faiieuif of CDNCOR. it was aiso argued that -CO'NCOR's terminai on MGR isnd were gerieraiiy buiii: and iocateci near an existing stations er genes sheds and therefore 'heal a strategic 'iucai:ir;m advantages .1n'fac:t same 0? the termineis of CONCOR were existing goecis sheds which were handed over ten CDNCQR and they were converted by CONCDR inte cciritainer termfinai with very; iiiztie investment, It was steizeci that no assistance was given ts the PCTOS and the PCTDs were not given access ta CQNCQR *;erminais, Ii: was stated that CONCUR did nut foiiow a poiicy of giving access to a stiiii'd party far"

the use of its terminais, Cm behaif of Arshiya it was argued that it had asked for iand from the Raiiways for constructing a teirminai but raiiweys had failed to give any lanai. It was bmughi: its the netice cf the DC; that out of the S9 terminais of CGNCDR aii are censtructed Oi': i"aiiW&WS laﬁfi ' Page ii? (if 16:) except three. It was argued that in accordance with provisien ef the railway eoiicies terminai feciiities made on reiiwey ianci were common. use terminate, But CONCOR does not share these terminais with anyone and even if it shares the charges were very high. The other PCTOS have else submitted similar arguments in respect of iand aiiotteci to CONCDR but not te them'

73. The 'DIS then teak the views of CQNCOR on the issue and CONCUR stated that whenever iend was acquired by Enciian raiiweys on betieit' of CONCUR, the payment fer the land was borne by CONCDR. CONCUR stated the': after the notification of PP? peiicy Raiiways had met aiietized any cit its Eerie ta CONCQR except at Reuriceia and Raitiam, CONCQR % agreed that tent} at tow rent was previded ta it and the Send rent was fixed on TE-ti basis, CQNCOR eiso agreed that sometimes access in PCTOS were aiiowed tn: the terminals on case to case basis, VCONCQR agreed that raiiways ceuid operate frem their terminais by making same payments which was lower than that charged to the PCTOS.

7'4. As far as raiiwey was concerned it else agreed that tend to CUNCQR was given an TEL} basis and that CGNCOR was sharing its terminals with the Raiiways.

75. The D6 then examined the iend teasing poiicy at Mirzistry at Reiiweys. Raiiway stated that most of the land was givers te CQNCOR prior to 2688.. But the Reiiways accepted that as far as CDNCQR is cencemed no upfrent lease rentei is taken when the iend is 'eiiicsttecsi to COMIQR, But according to the peiicy it any other Gevernment agency or department teices tend, it has to deposiit 99°./0 'rent of the iand as advance tie the Raiiways.\1t was aise stated that vitie circular dated 10,{}2.I20OES 'me raiiway {and could be teased to private inciiviciueis fer setting up shape and commerciai efﬁces etc. if it was not cormected, with the Raiiwey working. The DC; ebserveti that there was he appiicabie poiicy for the eiiocetion of raiiway {and to private 'CTOS wtierees for CDNCOR there was provision fer aiiocetien at raiiway tend. The {JG therefere etnserved that " Page 48 eflﬁﬂ .u.... .. .

.//"' 4-A"'.

.. "u i:>oVmpetition i_a_w__eiid in the DES View fer esseritiai feciiities do this practice of Raiiwaye was discriminatory and in vioietioh ef section 4 oi' the Act. After 17.03.2008 Raiiways started fei appiicabie for any new iend being ieased to either CDNCOR. er the other iciwirig an unifarm poiicv CTUS. But the disparity in the manner at charging rent eentinues. This in the opinion of the DG was eise unfair and diiscriminatery to the CTOS as the iicence fee for iand aiietted te CONCO previsions :31' Section 4 of the Act. The DC; found that the iease td R cdntimies in vieietiori of the CQNCOR was for a period at 30 years whereas fer the PCTOS it was just d that restriictiens were imposed on {'5 PCTOS where as CONCOR was for 05 years. The [)6 aise feuri erection at permanent structures 0 'permitted to erect permanent structures.

The Reiiweys admitted before the DE: that the termineis en raiiway iy private sittings and if CDNCDR had 00

76. built by CONCQR were technicai dinjeetion PCTOS couid very weii use their sidiiigs for their eperatitms. The US found that on the be CONCQR 'had cempiete d tmiit can reiiway tend. Raiiweys had not pieced any sis of the avaiiabie facts and ihformaticm that iscreticm in deciding whether at not to grant access td its termirieis obiigetien on CCii\_iCCiR'to eiiow access te privacy CTOS to these terminals. As a resuii: very few termina CTDS. On the ether head or MGR is niaking it mendetery for CTOS te share with other raii users iriciuding CTOS, the termineis buiit en MOP.

is have been aiieweci to _be accessed E2»; the owned lend. The":;D'<3 found that in View ei the two peiicies adopted by the Reiiweys, it amounts to a discriminatory treatment of the CTQS viz~e»vi::

CONCQR.

77. The {)6 then. examined the "'Essentiei Facility Doctrine" in brought irate operation the enterprise in questieii Shﬂtiidnbﬁ demihent piayer that 'there weuid be a waste of national resources to repiicate the infrastructure. Considering the facts ef the case as CCJNCCJR terminals were buiit en 'MGR iend, in the opiiriieri ef the DG, the iiwftestructtire had to tie treated as an essentiei fac:iiii:y.. Based on these, the {JG came to Page 49 cf 1,60 ctrine to be conclusion that this faciiity should have been made avaiiatzie to the other players in the market at the reasonable rates. Thus the doctrine of essentiai faciiity was found to be vioieted by both CDNCOR end i\'iOR.. According to the DG the behaviour of CONCOR. and MGR distorts the ievei piaying ﬁeids and is in vioietion of Sections e(2)(a}, 4(2_){b) and 4(:>_){c) of the Act, %

78. The DG trier: enquired into access to container reii termirzais eiiowed by MGR to the CTOS. The main eiiegetion is that CRTs were not made available to the CTQS on tong term basis and that termiriei access charges had been increased steepiy by MGR In this coonetttion, the DE: examined Arshiya, Adeni, Kribhco, Boxtrans etc. The main idea was to maximise the use of goods sheds where MGR traffic was quite low, Same of the goods sheds were "notified as CRTs for about six months to {me year arid were deanotiﬁed at the discretion ef MGR; Arshiye stated that CRTS are notified and demotified at the whims and fancies of the MOR, The main grieverme of the Arshiya is that no iong term business can be done on the basis of short duration of CRTs made ieeaiiaeie to it. The termiriei access charges were increased substantially by way of rate circuiar 59 of 2009 dated 23.10.2009, The concession agreement envisaged ts first cure first served ooiicy for the orovisieras of iocemotives but MGR priortarises its rakes at the cost of PCTGS. Such delays make CTDS service to its eiients deficient and severeiy effects its competitiveness in the rrieri<et.~ Other czcmtainer train operators advanced the same arguments,

79. {in the other hand CONCGR stated that eii the reii terminais arid good sheds can be used as CRTs by CGNCQR and the other PCTOsi MGR on the other hand stated that terroineis had been constructed for reiiweys traffic: in reiiwa~,i"wagoos. The guideiiries for CJRTS were iseued vide circular no. 66 of 2007 which was valid for .5 period of six months and that the same has been extended sutasequentiy, it was stated that CRTs were not owned by any of the CTOs.. It was eiso argued that goods sheds were made for wagons and riotior containers but MGR permitted handiing Page 59 or lee in the geod sheds despite terminal capacity constraints. it was also stated that out at the tcitai 888 miiiiciri tone traffic carried by iriciiaii Raiiways in 2.009~10, Container traffic was oniy 34.36 miiiion tons. Fer this reason Raiiwsys goods preference was given to its awn trains vise- vis the izontainers trains. This was appiicabie ts ail the CTQs inciuciing CGNCQR.

' 80. The DG examined the facts at the case an this issue and came to the cenciusitiri that essentiai faciiity doctrine is sise eppiicabie and reievant to the facts of this case. The DG was aise ef the View that in absence of the iorig term permission the CTBS were not abie to miake business commitments, The ether issues raised were of opetatiimai nature and needed to be sorted ciut through censuitaticm with the concerned authorities in MGR. The DG's investigation indicated that no

--evidence was feurici to suggest that peiiey was used by i.«'iOR_ to restrict eempetitien in the reievant market. Therefore; an this issue no ctiritraveriticiri of provisions ef the Act was fotiiitzi bi' the D6, Regarding the increase in the terminais_ access chargers the DG feund mi: evidence that tetmiriai access thargeslwere increased with the intention of stifiing CCii"€'iDi€ﬁti(3ii'i. investigation aiso reveaied that there was rm obiigatien en i~'iC)R to provide access ts its own GOGCZE Siietis, But in erciei" te iaciiitate business of the C"i'Os tiii they buiit their awn terminais' access was provided by iv'iCiR te them. Therefore, the D13 feund tie evidence sf noi'-i suitability of geecis sheds 'fer 'meeting timeir business recitiiremeiits. The DC} aise feit that a bianketistipuiatien that pritirity te tie given to MGR, own trains over ctmtainer 'i2i'a5i"iS does in a Wail amount to imposition of discriminatory and unfair condition at yioiatzion of the provisitms tn' the Act' But the B6 was of tiie View that ttie optimum Litiiisatieifi of resources wouid be in the fitness cf things and maize the existing infrestmt:ture tn "the extent pessibie aveiiabie to CTDS. The D6 fcitinti no tiiscriminatery citiiiciiict of 'MGR on this issue, Page 51 of 160

81. The BS also censidereci atiegations regairtiing maintenance of wagans. Arshiya the intormatieni provider has 'stated that raii maintenance at rakes to be carried out by the raiiways, the hauiage Charges tar maving the rakes tram the terminais to maintenance depots ' was ta be tieme by the raiiway administration. in this connection, it reiied an the extract of the concession agreement that is paras 5.10, 5.10,: and 5.192, It was stated that the charge retcivereci by MGR were in vioiatitm of concession agreement. It is aise stated that there existed an aftermarket fer arsiiiya container trains as MGR tied mgenepoiizeci by insisting such maintenance can be eniy sr.:iurr;eti tram M09" The mfermatiein provider has aiso reiieci on 5.8.2 at the concession agreement where it was mentiened that maintenance charges were te be part at hauiage charges. The cericiessien agreement aiso stated that I3i'E5Ei'it hauiage-charges weuid 'mcsiude 5% by way ofmaintenance charges if the PCTDS were ebiiged to get their hardware maintained by MGR. it was stated that the work. of maintenance can be carried out by PCTOS themseives er by any their party. But the suppiementary eiaiigation insisted upon by MGR it is an ariti-ccimpetitive f'i"iea.sure that infringes the Section -'=i{2){d;) at the Act because it forces a suppiemeintargr ebiigatien on the iﬁtarmant which has ne cenneetien with the subject at the cencessiea. it is aiso argitieci that MGR was not aiiawingi PCTGS ta maintain their wagons and was thus restricting competition in the said derivative market for its own beneﬁt, it was stated ta be a vioiatian of secztieri 4(2){e) of the Act. It was further stated that by insisting on mairitenance clause . MGR had eiiminated the very pessibiiilty at cempetition in the said. aftermarket. It was stated that this was in centraverititmr of section .3(=i)(a) of thenﬁxct. fer aii thisﬁrsttiyfa relied on the ciecisitm of Supreme Court in the case of Eastman i<odai< Ce, Vs, Image Technicai Services; the decisitm at European Court of First Instarice and another US 5UjJ1"'€3i'Ti_E Court ciecisien in the case of Northera Pacific Railways CO,'_E3S weii as anether decision of the 1.1.5., Supreme Caurt in the case at Standard Dii C0. of Caiifomia.

Page 52 af16;[}

82. The DC; area examined the other PCTOS operators on this issue, They stated that the raitway entities were very n0n--c:edperat§ve and this had Eed to huge iesses to the CTOS in terms of capacrty. There was aisd e non-evailabiiity of raiiway staff for maintenance whereas according to the ccmcession agreement time iimit ﬁxed by maintenance was, six hours. They aisd painted cut in the ceeeessidn agreement that there was a dense fer mairzterxance of rakes to be carried by entities other than raiiway entities. it was further stated that in the maintenance depots space was not avaiiabie and repairs CCvU§d net be carried wt,

83. CONCOR stated that its maintenance was carried dut entirely by Raiiways though Railways had directed CGNCOR ta develop its ewe faciiities df maintenance. CONCUR stated that w,e,f, 1,11.2C}Q6 maintenance charges ievied by raiéways came ':0 45760/a as haulage charges. It was stated that CONCUR had td egree to the terms :21' the concessidn agreement. NOR stated that an CTUS were required to create examination feciiities inside the railway 'terminala Sui. as 'cdnstructien of red terminaés would take time in the irzitiaﬁ years same er the railway yards were nermnated for exeminatien of the CTDS rakes. Regar-ding private meintersarzce raiiways stated that norms were not finaiised and that it was mandatory on the €:1TCvs'_te get the maintenance carried outby the Raiiwaye.

84. The BS examined true -facts and found 'that in accordance with the .

agreement with CDNC{3R no ihauiage charges were to be recovered for mdving the rakes for maintenance. Considermg this fact the DG herd as fdiiewe:

"Thus it is observed that imposition of Haulage Charges for mevemenr of rakes for maintenance was in v:'eiation of Concession Agreement and had adverse implicafidn on the over:-3!! cost df operation 0}' C705, and their competitiveness. It is observed rrem the 5Ub'fTI_f.E='S.iOr"3S of the CTOS that-substentie¥ amounts have been paid b}»'*.CTC3S Page 53 mi 15!} in ccmnection with the same. As regards i'/iC>Rs contention that <:Z"i"Cis have faiied to set up the examination feciiity, the matter needs to be cieait with se;3eratei'§/ tux MGR. Hence, it is observed that by imposititin of Hauiage Charges for maintenance in violation of the pmvisions oi' the Ceiicessiim Agreement, imfeirv conditions are being imisesed by MGR in the service and ..ti7e price of the CTOS emnimting to vioietien of the provisions of section -'~ii'2)(a_A),

-4(2)(b),. 4'(2)(c) of the Acts. *"

85. The [)6 aﬁiet examination of the facts ef the case also observed as foiiewsz "The investigation has thus reveaieci that by net permitting the private entities to undertake maintenance of waecins of CTOS, despite there being a prmxisien in Concession Agii'een2ent MGR has made it mandatory for CTGS to get the maintenance through MGR. By doing so supplementary obiigation have been imposed by MGR on CTDS under the Concession Agreement in vioietien at pravisions of Section ==i(.2)(ci). This weuiii eiso censtitute a tie in arrangement by MGR in visitation of the previsions of Section 3(4) of the Act, It is noted that MGR is earning revenue by providing riieintenaiice services to CTOS. The maintenance servicies for wagons are part (if the aftermarket and as such constitutes a sieparete market'. Hence it is observed that by not permitting private entities in this area, competition has been Compieteiy eliminated and afteijmerket of mainiienence of wagons continues to be within e>:eiusAive dcimein of MOR.

Accortiingiy it can be stated that MGR has in this regard used its dciminant pesition in' tune reiievant market to pretest aftermarket in vioiation of provision .02' Section £i{';2)(e) of the Act, "

Page 54 af'Zi.6D In this way the DG has found vioistion or sections 4i(2}(a){i), 4(_2){a)(ii), 4(i2)(c} and 4{2){ci) in respect ef hauiage charges in mmxement of rakes for maintenance. Regarding maintenance itseif, MGR was 'insisting on meinteixence services, the DC; is of the View that as it is in violation of ccmcessicm agreement, contravention er section »'ii(2)(d) is made est, r Regarding the tie in arrangement the {X3 is ef the View that it is in viaiatien of 3(-<i)(a) of the Act. Further as MGR was claiming exclusivity iii the area of maintenance there was a violation of section s(2){e') eiso,

86. Next issue taken by the DG was the aiiegetieri regarding increase in . stetiiing charges in vieiatien of the concession agreement. Stabiing charges were imposed er: the (F05 for temporary detention er their "trains at the container reii terminais for reasons attributable re the C"i"Qs, 'me inrerrriatien provider has eiieged that MGR had violated Articie 16;: of the concessieri agreement by increasing stiatiiing charges by 50% vizrie circuiar dated 1.7.2808.

87, The EP has stated that MGR had started a eractice of riauiage er rakes to the nearest yards to sicebie the rake and in the process started ievying hauiage charges. It was stated that sernetimes; rakes were taker':

to different iocatieris and hauiage charges were ievieti. This adds to the costs of the CTOS. It is also stated that tiiough as per the co*ncessic>n agreement stabiing charges ceuidi net be increased .by more than 10% in each year, 'i'~'i(3iR. had increeseci it by 30%, It was eiso argued that the services eeerated by the railways were not subjected to stebiing charges and therefore the ievy or stabiing charges from the CTQs was discriminatew. It was aise stated that when is rake was beoked from CONCQR terminai and the same ceuid net be pieced in the termirsei due to lack of space no sizatiiing charges were recevereci from CGNCQR but on the ether head when a rake of the PCTDs was booked for e termine! and the space was not avaiiabie stabiing charges were ievieci. It was aise argued that there was no itrarisparency in ail the tieaiirigs of the raiiways and that though there has been¢,:s'rc:r.ests but raiiwevs tied 'into: 'responded, Page 55 of 16%)

88. MGR stated that stabiing Charges were increased w.e.f. 33.1.2008 Le. price' to the signing at' the concession agreement on 9_.S..2i:)i38' and therefere aii the arguments are. irreievant. it was stated. that after signing the concession agreement increase in si;ebiing charges nee been ievieci strictiy as per the ccincessicm agreement.

89. The DE noted that the stabiing charges tied been increeseci by more than 50% in vieiatien of the concession agreement. DG'e View was that he was not concerned with the heneuring ef the contractual ebiigations but the impiications ef the same an conditiens ef competition in tne relevant market. The DG aise en the basis of investigation found that the PCTDS have passed on the entire extra charges to the consumers who aveiiee the services of PCTOs. The DG aiso found that had net stabiing charges been ievieci en the mevement of wagons it wouid have ameunted te the impcssition of unfair practices by MGR as far asitiie CTQS' are concerned, The. DG tiiereferei cenciudeci that as steiziing charges were increased it put the CTOS at cost disadvantage thereby iimiting the previsions of services and denying market access in the reievent mari<et.

The DG therefere came tie the conclusion that there was a vieiatien of setztiens 4{2){e)(i), 4(2)(i.:i)(ii), 4(2){b)(i) and 4-(2)(c) of the Cempetition Act.

90. Next issue taken up by the DE was in respect of cieieys in granting 'permission to the CTOS for setting up termineis. On investigation of the facts the D23 came to the coinciusien that the terminals ta constructed were common user feciiities which shouid aiiew aii rake eeereters to use faciiitiee on a 'pay per use' basis. The members of PCTOS nenweiy B-extrans found 'that though the permission was asked for in. August, 200? the approve! in principle was granted after 9 nienths on 25.5.2088. After iarge number cit' correspondences the propesai of Bextrans was rejected on 16.6.2810. When 'Reiiwayswere esiizeci abeut these facts it was steted that reiiweys was making best effort to speed up the ai:iprc>vai Page 56 of 16$ process. It was stated that the delays were en the part ef the CTCis who were taking abnormal time in submitting the cieteiied project repert.

91. The De observed that the process :31' grant of approx/ais and permission by MGR. to CTOS was time. consuming. According to D8 it shtiweci a delay in precedurai forrneiities and the investigation did not reveei any evidence fer the iiitentioh of curtaiiihg cerhpetitioh. Thereftire the DG observed an this issue there were no competition concerns.

92. Another issue that the EEG ioeiteci into was the differential treatment accorded by MGR to i>CTQs vis~a-vis CGNCOR in respect ef the number of wagons. it was aiiegeci that a container raice consisted st 45 wagons and the carrying capacity at the rake was 2500 MT. if one wageh was defective as unit comprised of S wagcms, S wegens were detached. from the rake. Thus PCTOs ceuici run 48 wagons ih case sf she defect, Aceerciing te 'reiiweys the minimum compesitieh of a rake is 40 Wagehs. As far as the PCTDS were cehcerheti MGR was insisting that there sheuid atieast be 40 wsgeris in the rake but in the case of CQNCOR 3.0535 wagons were aiioweci 'E3 be eperateci in the capacity of 16Qiii to .1800 iViT.. The Raiiweys stated that no distzrimihatieh was made because CONCUR uses aid type of container wagons and as the iciatiihg capacity was higher a rake sf 35 wagons were aiioweci. it was thus stated; that the rakes depended on the type ef wagons which were being used» CDnSideFii'i§}Vth'~'3 facts of the case DG found no discrimination between 'PCT.Os ahci CCWCOR and therefore there was he vioiation of the Cempetiticih est. The iast 'aiiegatieh the DE investigeteci was the time iirhit in the concession agreement with the CTOs. This issue is in respect ef the short duretiioh at . iicehse given by the reiiways ta the CTOs. . CTDS had been given permission 2.0 years its run containers ti"a"ii".iS en the reiiways system which . cotiici be extended by ahether Lit} years whereas the iiie er a rake is 2.5 years. Therefore after the first 5 years the CTDs weuiij riot have any incentive to invest in rakes. It was eiso ergtieci that the concession agreemeiit was siient about the status of i_hfrestr.iict.ure anti roiiihg stock _,...»»~:* Page 57 of 158 that the CTOS had acquired at the time at the iexpiry or" iicerice. it was eise argued that the concession agreement was deficient in the sense that no rietaiieci provision on ebiigaitions of MOR were mentioned, Even the erovision of qtiaiity of services was not mentioned and there were discriminatory prnvisiohs which favoured MGR, it was therefore stated' that unfair conditinns were pieced in the concession agreement and that i\'iCiR was using its dominant position by insisting on enforcing certain enthizompetitive practices.

Q3. The Dﬁebserved that MGR was peritirmingj the roie of regulator anti en eperator and therefore there was certain cnnfiict of interest on this account. The DG else t'eunr:i that there were many eiements in the cencessien agreement which were iiinisir to CTOS and entmztimpetitive in nature. Prehiisitinii impeseci on mtwenient of coke, ceei, minerais and ores had resuiten in denial sf access to the extent sf 50°/o on market. 'Further cieuse 3.3.2 eenferred; vast powers en MGR tin increase the hauiage charges and that MGR by invoking the provisions had aciverseiy impacted the ebiiitir of CTOS to cernpete. The 'DES therefnirie has some to a conciusioni that the concession egreernent entered by MGR were ioatieci in favour of iviciii. The D665 opinion t.herefere is that MGR has put in unfair condithsns an CTOS in vioietion of section -<i~(2){a_) of the eat. Therefere, in the epinien at the DG there was a need to separate poiicy making, reguieterir end operetinnei working of MOR in the reievant market to eveiti cnnfiict nt" interest.

£34. Qn the receipt of EiG"s 'report, the Ccimrnission decided ts have the responses hi the Ministry of Raiiways, CDNCQR and {the inferrnatien provider. Copies oi' DG's rei:sr:irt and ennexures thereto were sent to the concerned parties and they submitted their replies.

95.. Ministry sf Reiiweys in its response has sheiiengeci the jurisdiction at the Comrnissign. it was argued on behaii of Raiiweys that he reiience Pageﬁs of 150 on the judgment dated 23.02.2810 in W.P.{C} No. 993,i'2{3.'i2, passed by the Hon'oie singie Judge of the Deihi High Court shouid be pieced because the apoeai filed against the said order before the Division i-.':'»erit:h in LPA No. 1.69»/'E0012 has been admitted. It was argued that the iseueof jurisdiction is furiciamentai to this case because the DC3's report questions the ectionsicieeisions of the Ministry which arises out of an exercise of statutory' power in the form of ijeiegateci iegisiation, it was aiee argued that the powers exercised by the Ministry of iiaiiiways feiie uotier the ooiicy making power of the Cetitrai Government tinder Attieles S3 and 373 of the Constitution of India. It has been stated that the policy deeitione couici not be the subject matter of a ohiieiienge before the Commission as being antioomoetitive. Further that MGR cannot be ciassifieci as a part of a Group. Itwas further argued that the main aim of the informant was to getting setaside Rate Circuiate 2'5_,»'2i)1{i and 30/2010. it was etateci that the rate circulate are poiioy ciecisiens and erise due to the exercise of the statutory and sovereign powersof the raiiwaye. It was further' argued that the reiiets ciaimeti by the informant couiti oniy be granted by e juciiciai auttiority and some not be the subject matter adjudication try a cfuasi~judici:e;i body iike the Commission. it was stated that the Commission had no powers of juciiciai review or that of court exercising constittitionai powers and that it was not even a Civii Cﬁltirt in 'the sense of issuing oee::rees.tor specific oerfermance of an aiiegeti contravention, it was stated that the Commission was a 'forum which was not required to suppiant out suppiement the existing jutiicziai system, For this proposition, reiianee was pieced on para 18 of Supreme Court's otieeirvatiotie in Lexmi Engineering Works vs. F.S.<3. Intiustriai iristittiiie 3S£E$g3<

96. It was further argued that the Commission's jtwistziiotioti W35 to enquire into atztioomoetitixre agreements and abuse of dominance as mentioned in Seetiori 19 of the Competition Act, it was stated that the Commission had no juriediction over poiicy decisions taken by the {Zeritrai Government in exercise of its iegisiative/etatutoryjsovereign functions. it -

Page 59 of 1513

was stated that the actions of the Ministry of Reiiweys was in exercise of powers conferred upon the MDR by the 'Indian Raiiways Act.198§i._ it was stated that the Commission had no jotisidfictioo to interfere with the exercise of such powers.

97. It was further stated that the Ministry of Réiiweys acts through the Raitwey Board under the Aiiocatioo of Business Rules framed under Article 77(3) of the Constitution oft-indie, The Railway Board, by virtue of Section 2 of the inciieo Railway Board Act, 1965 has been vested with powers and functions of the Central Govt, under the Indian Railway Act, 19289 with respect to or any raiiweys, iociuoing the power to make tuies for Railways administered by the Govt. Subsequently, the Ceotrei Govt. by way of notification has vested the Reiiwey Board with ail the powers anti functions of the Centre! Govti under the various provisions of the Raiiweys Act inciudlirig Section 38, 31, 71 and 89(1) oi' the Raiiways Act, 1989. It was stated that in the iight of above, it is tiear that MGR was oniy seeking to regulate the various PCTOS and was not performing a coromerciai function but rather an executive function Liiitier the Constitution of indie, the Raiiweys Act and the Indian Reiiwey Board ASE' Further, it was stated that underuthe scheme of the Competition Act reguiatiory functions do not feii within the jutisdliction of the Com.mis.sio_n.

98. It was further stated that price fixation is essentiaiiy a iegisiative function and that a Court does not have the .e>:oertise to fix prices. It was eiso stated that a Court is neither»-concemeci with ooiicy hot with rates. A court wouio not revaiuate the considerations to he tekein into account even it the prices are ciemonstrehiy injurious LO some trienotectorets or producers.

99. It was therefore stated that the question of low which needed to be resolved by the Commission before it proceeds with the 'case is "whether a chelierige to oeiegeteci iegisiation in the nature of a rate citcuiet being is subject matter of writ jurisojmtion "before High Courts aticifor the Supreme Court of India can he rzguestioheci by a statutory body iike the Competition "'.\ ?age 50 of 163 ﬂ,.,..........,__"

vf' ~.«:_ "'>-9., ~. ., Cemmissien of India arid whether it can go irate the questien at vaiidity of such a circuier which is esseritieiiy in the nature :31' cieiegated iegisiatiori"..

100. some other iegai issues have been raised which are that the i'/i{)_R was aware {if its iegei ebiigetieris and therefore it wanted ta ensure ievei G pieying ﬁeicis to aii the C}§3€ii'Bt0F'Sk and that the rate cittuiars and other pr-evisiens were appiicetiie to an the ciiaerettirs, It was stated that historicai facts cannot be gene which have beneﬁtted CONCOR prior to the PPP poiicy and that the same carmet new tie reopened and ctieiieriged before the Cemmiseiori. it was aisc: arigueci that as CONCDR was 3 PSU, it was permissible to provide same benefits ta it under Articie 19('6)(,ii.',i ef the Constitution of Indie. it was therefore argued that the Cemrnissien was not cenipetent to 0'u'€:'.i"i'iEiE3 the previsions of the Ctmstitutien of India and Indian Raiiways Act, 1§8E3.._ it was eiso submitted that the eoncessicm agreement eriiy granted a priviiege 'er concession and that it did net amount to whciiesaie privatizatien or the abrogation at the 'rights of the raiiweys; In this connection, reiierite was pieced on the decision of the Supreme Court in the case of M, Jtiangir Bhatusha 'vs. Union at indie 8:

ore 1989 Supp (2) SEC 291. In that cease it was ineici that a PSU, an instrumeriteiity, agent or neminee of the state -entering in the area of ordinary cernmerciai activity can be given favoured treatment for the purpese at giving effect to the poiicy of the Gcivernment and that such an action wcziuici not teii totii at Article 14 at the Constitution. It was therefore stated that the Commission - cennet override 'the settied jurisprudence and bring within its Scope sovereizgm peiity decisicm of the QDVEl"Ri'TiEEi'it.

101. Another iegei issue raise-ti was that the iviinistry of Raiiways in its exercise at iegisiative and/er poiicy making funetitme canrmt tie czaiieti er:

"enterprise" within the meaning tit Section 201) of the Competition Act nor can it be a part of a grmip acting in concert with QDNCQRV The Learned Courisei for -reiiways then went through the §Zii"DVi5iOi'iS of Section 2(h) of the Competitieri Act. In his opinion, the test to be cerrieci eat is Page 61 at 1&0 whether or not the activity of a government department is caiiooie of being performed by private operators for the purpose of determining if that activity is economic in nature or not. it is stated that if an activity cannot be carried out by a private operator then that body cannot be considered to be an enterprise within the meaning of Section 4201} of the Act. it was argueo that no private botiy can fix hauiage chargesi or in exercise of soxiereign functions enter into concession agreements to aiiow the use of raiiway iano or determine that buik commodities cannot be transported in containers. it was therefore argued that these activities iaii in the soie ciomain of Indian Railways and cannot he performed by private oiayers and therefore inciian Railways cannot faii within the definition of enterprise.

1.92. It was furtheristateci that under the definition of Section 2{h) of the Competition Act only those government departments are covered as enterprises which undertook economic activities reiating to storage, distribution etc. it was stated that functions relating to sovereign functions oi' the State cannot be inciotieo in the definition of the enterprise. it was stated that expression "incioc:iino" in Section 2{h) signifying what about arnounts to "sovereign functions iike. atomic energy', defence is not an exhaustive iist and shouiti necessariiy be interorieteo" to include raiiways. Reiianrze was piacieci on the inoostriei Poiicy oi 1.991_in which aiotng with .ato;mir: energy 8: defence reiiways was aiso inciooedg. it was aiso stated that said items are iinoeeci strategic: in nature and reiete to core sovereign functions carried out by government,

103. it was aiso argued that expression "ins::iooes" or "inc:io;ciing" eniarges the expression oetioeci. These two words are used in interpretation of statutes in order to eniarge the meaning oi' the words or phrases occurring in the both; of the statute. For this proposition, reiiance was pieced on the decision of the Supreme Court in U) South Gujarat Roofing Tiles Manufacturers Association 8: Ant. Vs, The State of Gujarat St Anr. 4 SEC 601 {ii')C'¢:{.fT'l; A.-P. vs. Taji Mahei Hotel 3 SCC 55%.

Page 62 oi 15%)

104. The iearrieci Counsei for reiiways then reiied on the Commissions' decision in the case of Eintiai Steei & Power Ltd... vs. SAIL, Case NO. 11 of 2009 wherein it was heiti that the Ministry of iiaiiweys was vested with the roie of poiicy formulation or discharging function aspect reietihg to the reiiway industry in India, it was argued that he ruie of cohsistericy has to be foiiowed by the Commission arid therefore the Commission cannot tzeke a ciiametricaiiy opposite view, Therefore on this fact of sovereignty raiiweys cannot be regarded as an enterprise tiricier the Competition Act or as part of a group in accordance with Section 503) of the Competition Act. On the ruie of consistency, ratio iaici down in the foiiowihg cases were cited (i) Govt. of AP. vs. AR Jeiswai ESCC "R41. (ii) 5,1, Roopiai vs, Ltgi Governor Through Chief Secretary, Deihi 1 Sci: 641 (iii) Commission tit Centre! Excise vs. Matador jFoarri_ 2 SCC 59, Para 16. it was argued that in View of the principles ieici down in these cases, the Commission has to treat MGR as not being an enterprise, It was stated that poiiey making exercise of MOR is a sovereign function. it was argued that in tax cases the tax department has riot been aiiowed to deviate from its practices in the eeriier assessment years except on justiiietiie grounds iike change of circumstances or statutory provisions. In this connection, reiiarice was pieced oh the ratio iaio down in (E) Berger Paints vs, C_.I.'i"., iCaicLiti:a .256 ITR 99(S.C.), (ii) C.I.T. vs. Goei Suiiders 331 1'i"R'Li-'i4i~ (eii) . arid (iii) C.Z.T. vs. Heryana Tourism 32;? ITR, 26 (P&i~i_)_. it was further argued that as MCJR was hoten enterprise it conic! not be a part of any group.

105' The Learned Couhsei then took into account the treatment and uncle:-stericiing of the reievent market in the European Court of Justice in the case or Contineritei Can, Case err: (1973) see 215, (1973) :::iaii.e 199, Fare 32., in this case, the Commission heti ciefiheti the cans, in which the enterprise was dominant, es cans for 'meat, cans for fish anti rhetei tops but the reasons for separetirig the rrraritet for three types of cans was not given thy the Comririission. For this reason, the Commission foe defined and reasons given, it L5?,>-/:N Page E3 oilﬁiii was argued that the Indian competition Law is based on the European haw and therefore the demand stole interchangeabiiity or substitutabiﬁéty has to be examined, Even the SSNEP test was not carried out by the [L6, The Learned Counsei reiieo on the ratio laid down in the tases of freightiiner/Deutsche Post AG andtheutsche Bahn X Transfer wherein it was heid that haulage and by containers and freight forwarding are interchangeabie between rail and road. It was also argued that the reiiance pieced by the 313. on the case of Deutsche Bahn: / FCC Logistic was mtspiaced tzecautse thereto, it was held that partiai substitutabiiity existed between freight forwarding services by' rail and road, it was ' argued that the US had raised to identify, examine and provide cietaéied reasoning as to which products acted as competitive constraints in the reievant proejuct market. It was also argued that the EELS, had faited to give reasons as to why the had treated transporta'tE.0n of goods through rat: and road as distinct product markets.

10%. On behaif of MDR it was then argued that the raéi share in freight transport had gone down from 89% to 3{},0;8% between the period 1950- 51 to 20€}?'----G8 in accordance wﬁth a report brought by RITES $12099, In this report, tin addition to héghways, raiis, coastal sh'ipoi:f§g, pépeiirxes and 'miarad water transport have at! been considered. Reﬁrance was aiso osated on a report of Mckinsey in which Mckinsey had hate that contairzerizeci. transport inciuded ran and road. The observations «in ~tlr-as report submﬁtted by MGR "is at great reievance. 1t'is.reprodLn:ed as .under.:

"Freight transport in India is dominated by roads Further, the higher dependence on road transport is adverse for the environment as emissions from roacf~t'ransport' are higher. than emissions from ran' and waterrrays, Road transport errrits 849 of CO2 equivaient per ton~kr_r2 compared' to .3389 for railways and 13g

-for waterways, Yet, [India continues to transport _a maioritr of its goods we roads inciudino buik materia! Iike street, cement and toe}.

' Page 64 of 160

A moderate shift from road to rail can herd Indie save dose to 0.?

g_§3_!' cent of its total mmrrierciei enerav consumzarian. "~.

A report or Geguramen and Rachna Gangwar was relied on writ: have stated that CTDS moved more cemmodities and introduced new services on routes where road were a monopeiy. But ever a period of time that the reievent market or contaxineriseri transperi: was shifting from reii ta read: A report get prepared by Arshiye shows that buik cemmedities were iesi: by Reiiways as e resujit s::3'r' the pricing peiicy. It was argued that custemers were shifting from raii to road as they teuriti 'them to be substitutebie, In View of this fact the transpertatiop of genes in centainers by mad and raii are net erziy substittrtebie but aise interchengeabie§ It was therefore argued that the definitien {pf reievant market by the 33.13., was incorrect. In the contaiperised mm./ement by raii and road it was therefore argued that raiiweys was not a: dominant piaver. But for this propositien, the movement of containers by road via a vis the movement of containers by the raii netwerk was met furnished. It wiii be erreneous to paid that the entire freight mevemept era reed is through containers. In fact, the movement of containers by read is a very smaii percentage 01' the road treffirz.

107. The Learned Ceunsei er MGR then reiieci er: a Piermirrg Commission report. Accerciing to this report 81 miliien metric tonnes of Cﬂﬂtaifiﬁtif traffic: were henciied at the Indian ports. Out of the Eixirm traffic emy 3i_6.'1 miliion rtermes were mtived by rail Le. 26% air the Exim 'traffic, {in this basis it was stated that the reiiways come not be treated as a dominant piayer in the movement at centainerieed traffic, But: in 'this erzaiysie, the domestic movement of cerrtaiineriseci traffic was not ceneicieredi.

108. The Learned Ceunsei for MGR stated that tmik icommc-riéties transportation is different nature from centainerised traffic and it felts outside the reievent product market and that any prehibitien on the mevement cif bulk cemmodities carmet amciurat. ta an abuse of cic~rninen<:e..

In this connectiers, reiiance was pieced era UNESCAP Publication on PageES oflﬁﬁ 'Visuideiines for Deveioemerit of Raiiweys Marketing System anti Procedures", chapter 6 refers to freight market segmentation. In the said report it has been stated that container traffic is a segment in its own right. Each segment has its owri requirement of ioarjirig, transport cycie, wagon requirement arid tariff. The Shipping Ministry's Maritime Agenda 2010 is on similar iines. It was argued that CF05 and other industry piayers support the View that buik commodities are not suitatiie for carriage by containers. it was therefore stated that buik commodities cannot be considered as a part of the reievarit product market for transportation of goods in containers.

109. it was argued that as buik commodities were not part of the reievent product vmaritet, the prohibition on movement of such rsorrimociities cannot be considered as an abuse of dominance. Further the prohibition was in exercise of statutory powers of MDR. it was aiso argued that the prohibitions were pert of egreernent between MGR and the CF05. Therefore, appiyirig the principie of estoppei, the CTQS HOW cannot Cieim that the protiibitio_ns are enticorneetitive,

110. it was further argued that in corwentionai trains eiiiliti M.T, cotiid be carried whereas in container trains 2600 ¥\*i."i'. couici be cerriied. It was argued that carrying iess weight in trains was not in ptibiiﬁ interest ie. for the same ioati more 'trains wouirf. be required. This in turn wouici ieeti to congestion on the raiiwey network.

111. Regarding the issue of RC~2':-3', P.C--3£.i arid RC-S, it was stated that the circuiers were issued as a resuit of exercise of statutory power and these cannot be a case of abuse of domirierice. Regarding the deriiei of access to private sidings, it was stated that the rei_iwe';/S eiiow private siitiings for use of the concerned industry and the same could not be eiioweci for izoriteirier operations. It was stated that essenti;-ii facility doctrine has wrongiy been epriiied to private sitiirigs anti eontairier freight termiriais. it was stated; "that essentiai ifaciiity doctrine applies to a new Page 66 of 168

112. Regarding the éssue of and alietted by raiiways to CQNCOR eréer to the opening up the sector cannot be raised now, as stated by MGR. It was stated that the Cemmisséon cannet cempei MDR to Wesate the ctmcession agreement. Regarding Amaéntenence ex" wagcms it was argued that it was net a tie in arrangement but a safety reqeétement which cernpeiied MGR to carry out the maintenance.

113. Additionei submissions were given on behalf ef Ministry 01' Raiiways some issues raised are the same as were raised in the otigmai submissions. In these submissions it was again stated that raiiweys is a sovereign entity and come not be a subject matter of competititm essessmenst' It was again stated that MGR was a peiicy making body and couid not be treated as an enterprise under the Cempetitien Act. It was further argued that sectiens 2(h) and 54 of the Competition Act have te be read hermonieusiy and that it sheuﬁd net be assumed that Pariiement had given with one hand what it teak away with the other. Em. this connection reievance was placed an the toiiewingj (5) Dormer v. Newcastie-.-on~Tyne Carpn. (1940) 2 é'-'\.§i ER. 521, $3.52? (CA) {ii} . Tehsfider Singh V9 State cf U.P,, AIR 1959 SC 1012, §3.1€)22:'19S9 Supp (2) SCR 875;

(3%) K. M. Nanawetf V. State ef .Sombey, 'AIR 1961 SC 1012., g::_. 1022:('1961) 1 SCR 497 (N) Centre} Bank effndia v. ~RavEne're, AIR 2001 SC; 3095,. p, 311%"

114. It was further stated that there are at number of deeisiens in which it was heﬁd that one secticm of a statute cannot be used to defeat these at e"m3'ti"ier." For this prepesition reiiance were pieced on certeé--e»---cases: as fonows:

a. Sanjeevayye D. v. Eiection Tribune}, Andthre Pradest», AIR 196?' SC 1.211, p. 1213 (pares?) Page 67' of 166 b. Krishna Kumar v. State of Rajasthan', AER 1992 SC 1789, pp, 1793, 1?§4: 1991 (4) SEC 258.

It was therefore stated that the argument at the informant that the government departments are renterprises and must at? need exemption under sectitm '54 that cannot be heici to be the correct View as sovereign functians are 'exempt under Sectitm .?.{h_) of the Acxt,

115. in these submissions the issue of relevant market was again taised. and reiience was pieced on the preambie at m-recession agreement, it is repreduced as under:

"With a view to ingress??? ra.r'!way's Share at earttainer traffic and intmducing competition "in railway «santaiﬁzer transpart services in India, Ministry of Railways, Gevernment of India decided to grant eligibie parties the right to recguire the Railway Administraticn ta haul' their Container trains on fndiarz Raiiwagr netwerk for mmxement of both Export and Import Traffic as weli as Domestic Trafﬂ'c, subject to various terms and conditions."

118. The 'budget speech of the Htm'.bie Minister of Raiiways was arise referred to wherein the Minister had stated that the contairner traffic woutd. grow by 15% growth and for this 'reason Czrganisations other than CONCQR weuid also be considered for movement of container traffic. Reiéance was pieced on the report at the Pianrﬁng Commission where Manning Cemmission stated that tote! containers traffic; in India was 5 rniiiitm TEUS out which 40% was enty by raiéways. Ptianning Cromnwisstan Hyvabs at:%ttj_e(_'y§e_w that for increasing the share of ctmtainetr traffic and far intreducing ctsrnpetiticm in raii freight services the Ministry efWRétltr\xa§rs announced as liberei peﬁicy in Ziantsary 2005, permitting private entities to undertake movement at freight an privetety owned container trains. It was thus stated that 'PPP was Eimited 'ta increasing Ran share tn' Page 68 of 169 containerised traffic and not for diversion of existing raii borne traffic to its containers.

117. In this submission it was stated that advaritegje of containers were:

{i) Ease in transhipment, iifitermoi:iai--no damage .

(ii) Security ens safety of Cargo

(iii) Less packaging cost {iv} Smaii package size/ iow volume It was further stated that containers are used in cargo and its size is smeii but raii transport is necessary when the cargo is moved; in buik.

118. The BS has heid that there was sutistitutataiiity and interchetigeatrsiiity between the wagons and containers toir movement of goods on raii network from the consumers oerspecitive as wen the point of View of provision of service. It was stated that this xiiewwas erroneous because of commerciai and economic reality and aiso because consumer preference teveeis that there was substitutabiiity and interchangeabiiiw tietweien wagons and containers for the movement of goods on taii 'network. It was therefore stated ti'ia:t wagons and containers couici not be considered as part of the same market.

119. It was therefore stated that section 2(t}\of the Competition Act tsiks about the demand side substitutatiiiity from the point of View of consumers. 'The 'interchengeebiiity is so feit by the consumer by the consumer bettause of the characteristics of the products or services, their prices or intended use. In view of these facts there was no substitutability between wagons and containers.

120. iieiiaritfe 'wast pieced on the report prepared by RITES for the Pienning Commission, In; this report it was stated that the ciontainer traffic depends on suitabiiity of iconteinerisetion and the extent of cargo ioading. The estimated potential of domestic container in different heads have been anaiysed and the summary is as foiiowst-.--.

Page 69 of 16:3

a. Less than 480 km - Cargo would not be containerized (Le. mainiy moved by con\rent§0n%a1 trucks.

b' 400 km --~ 1500 km --- patentiai far ccmtainerisatéon is 8,47 mmion TEUS.

' r:._. Above 1§0O km - Potentiai far centainerisaticm is 2.1.2 mmian TEUS.

121. Reiiance was also piaceﬁ on report 01' Arshiya which Es repraduced as unden "The overdependen%ce on road transport has c:o.nft"i;'3:,;i";2i€3' to many grievances within the country, 'me over congestion of roads, piiferage of cargo, and environmentaf costs are a few _ irnpacts impiicitiy heme by customer and prmfucrers afiﬁaa In additien, time and cost can be sigmficant and unregulatecf, Sfatistics repart that road transport accounts for as high as 60% of 5!! products 'that move. 0;': an average, 5 vehicle on Indian reads ioses 24 to 48 hours ccmpiying with paperwork and formalities at different check pasts. Fuel worth 2.5 biifian ciailars is wasted on a»::c0urzt_ sf truaks waiting at Check posts every year. Arshiya Rafi wif! fake transportation off the mad, dearing up congested reads, providing .unprecedented efficiencies. In addition, -Rafi Transport emits a 'fI'a:::t:'on' of CO2 compared to what is emitted via Road Transpartation, reducing our carbon footprint."

1122. Regarding the arguments taken that under sectian 363432 .0? the Raiiways Act, the MGR. had nu statutory basis for fixing the rates. Attention was anvited %:::5"3ec:t§0n_ 71 of the Raﬁways Act! Acc:»ard~ir:g Us -3125 « section "if it is in pubiic interest than by generat or' speciaﬁ Qrcier the Centrm Gavernment can restrict car refuse acceptance 3? such goods or class of goods at or ts such statian far carriage. Therefezie, it is necessary to estabiish that whether any Carder passed by the Centrai Gctwernment is in pubiic interest or not. It was therefore stated that the argument 'that " Page 3'3 0f 3.5a the prohibition on the movement of i:ii_iii< goods by conteignerisation did riot have statutory support whim was stated to be not correct, 1:23. it was further argued that both Arshiya and KRIBHCO has deposited necessary licence fees and they had signed the agreements on §,S,2i1iiii8 and 14.5.20(i7 respectiveiy, It was argued that they tied deoosited. the fees on 21.1.2Ci£i8 arid 31.1,2Cii;'J" respectiveiy, it was therefore argued that there was prohibition imposed by the circtiier dated 1130,2006, it was therefore ergued that the principie of estopoei wotiid be appiicebie as after agreeing: to the rights, duties and restrictions the informants are new abusing the authority of the Commission. It was further stated that Arshiye needs business pies. MGR had stated that it shouid iimit its business oriiy to container traffic. Further neither Arshiye nor KRIBHCQ had made any representation to MGR against prohibition on carriage of coei, coke, mirierais and ores in containers. it was further argued that any iriterferemte by the CC: wouici need to be in pubiic interest and as it wouid affect the couritr;/"s ecoriemy in the iong term,

124. The next issue taken up was in respect of increase in tiauiege charges as to whether it. amounted to an EDUSE of dominance. it was stated that the Cii'C2Liiai'.S> were issued in exercise of statutory powers and such statutory ortier is a sovereign oowert Further the increase ﬂows from the concession agreement. The arguments were 'ti"i€i'i raised about the different rates charged by the rsiiweys. The rates are as foiiowsr {ii FAR (Freight Aii Kind) »~ This is for EXIM traﬁit and domestic tariff. This rate is weight sisb rate and is eppiicabie to coritairiers irrespective of the commesdities in the containers, This rate is below the"e<::tu'ai terifi' ciis~rged'-"fa-i' moving various somiiiodities iri rariiwa;=y» ~ = » wagons.

{ii} CCR (Container Ciass Rate) .-- it is ei comrriodity based hauiege ciiarges.. The hauiage rate is .iirii<ed; to pubiic tariff (GTR) prescribed for the commodity if transported in eonveritionei wagoris.

Page ?1 of 1:66 it is equei 0.85 times of GTR. But a chart was submitted for threie cemmociities wherein CCR is 371°/0 of the pubic tariff rate, whereas the FAR rates are 40% :2»? the pubic tariff.

(iii) Goods Tariff rate ii: was argued that some of the (BT05 started diverting conventicmei traffic at FAK rates and thus undercutting the raiiways. It was argued that the CTC:s were to complement raiiweys efforts to increase raii share compared to road and were not required to divert existing raiiway introduced CCR (centeiner ciess rate) for certairi commodities iike cement, steei etc. which are normeily carried out by the raiiirxraysi The container ciess rate was kept iower than the pubiic tariff, in accordance with the concessimi agreement. It was eiso argued that as 75% of the container traffic was EXEM traffic, as FAK rates were appiicabie to such traffic, hardiy any harm was caused to the CTOS.

125. Arguments were then advanced in respect of ciessificeticm of commodities. isome commodities can be moved in containers ei: CCR rates wiiereee buiic commedities are banned frem; being carried in containers. Fiecentiy with effect from O1.{)-$201.2 out ef the notified commodities seme more commodities can be carried in containers at CCR rates. Ii: wesisteteci that in order te premoie piecemeai aggregation of genes, they ceuid be carried in containers at FAK_'ra'£eS prcwided they ere ioecied in 30 eontainers in e raiie. It was fuirther argued. that even before

-the concessimfi agreements, when oniy CONCQR was operating, there was a system of ciessiiicatien of goods for carriage. It was further argued that efterthe notification of goods CONCOR was the main ioser as its revenues had dropped from '@l'1VEjFJ§-v2O11~tD' 31.032012, ii: is "thus cieer W. that izhe increase in the heuiege charges have ieci to erosion in the revenues of CTOS.

126, The -next issue raised in izhe arguments was in respect of the restrictions imposed on the CTOS3 in accessing i:»riv'ete siciirigs. "it was Page 7'2 of 160 argued that private sidings were not envisaged in the concession agreements. It was stated that this aspect was djeait in Sectiati 5 of the concession agreements. According to the said section, as stated, a CTO 'was to have ssuitetiie access to two raii iinketi 1_iCDs {iniand Container Sepcit) and they were required tn deveiop ICDS at twci iecations within « three years at their own cost. It was conceded that access tn the rail network ceuici be eiiowed tnreugii (i) a goods shed (ii) private terrninai

(iii) container terrnineis inciuciirig of COi\iCCi'R. It was argued that the traffic «:3? the CTOS were to tie gpe_rm'itteci from reii termineis and not from ' private sittings.

127. In this tiiscussien the deﬁnition of reii terniiriai and private siding in the cenceseien agreement was aiso mentioned, In the cenceeeien agreement a container terrninai means a iecatien with siding and feciiit'Tes tn nanciie container trains and inciudee an ZCD, pert graii terminais, raiiway geecis sheds where container operations are feaeieie and other privateiif ewned reii terrninais, A pi'i\f8tE siding means a siding iaid out to serve a fectery, miii or ether inciustriai premise inciuding an ice or reii tenninai to nanciie trains. and not tieienging to raiiway adrninietratien.,

128. It was conceded that in the iriitiai years, the use of eriveite sidings was net permitted by the reiiweye but in the budget annmincement of 2009, container service ceuiri be initiated trem .prfNa;t;e Siding in order to attract piecerneai 'i:raftic:'not carried by the raiiwaysi EU'; the permission was granted by Raiiway iiciercifs lnstructien dated 16.12.2818. But a number of conditions have been kept which are cietirinientai ten the functioning of the CTUS and need eimpiificetion.

129. The issue ofceiioeetion F5iii'¥NEi'f""'§'E3E3d try MOR to CTOS was then argued. The Poiicy notification on this issue states that CTOS wouid deveiep their own terrnineis or enter into an agreement with the existing conteirier terrnineis. It was stated that in the PPP agreement, tinere was in) item which aiiewed access to CDji\iCQ'R siding. But even then CONCUR has aiicswecij its .siciings to be aiioweti by serne CTQS. As far as ienci is Page?30f16G cencerned, it was stated that raiiway ianci was given to CONCUR prior to the PPP ptiiicy fer a period at 30 years at very iew rate. it was stated that it cannet be questioned now. A5 far as the PCTOS are caneerneci ianci was given te them at 6% of the market vaiue but a period at titre years. The reasan of five years fer PCTOS and thirty years for CGNCDR has ne ratienaie when both are using the ianci for rail use.

130. Another issue raised was the issue of maintenance of wagens. It was argued that in the eencessicin agreement maintenance ef Wagnrie vxias to be carried out by the raiiways against the recovery at prescribed charges from the operator. Eariier aise the wagons of COi'«iCOR were rnairitained by the raiiways. It was stated that maintenance is necessary from the point oi' safety. The private maintenance mentioned in the CQiiC8SSiC}F1 agreement is stated ta be eniy an enabling rirovisien, The raiiweys had permitted examination ef CTC)s trairi in reiiway yards. In such cases, wagons are required te be taken fer exeniiriation after ioaciing/uniioatiing terminais to raiiway yards.

1131. The next issue is increase in the stabiiing charges by i'~'iD.R.. Staeiing charges are ievieti when stebied in railway yard fer teaeoniasztzeuntabie to private ewnere. it was stated that etebiing on raiiway area is e eerieus impediment in the running at nerniai train services. Stabiing charges were argued to be tieterreriize for not ciegging the raiiway system. it was stated that it is a very smeii Chairge though there has been an increase, the charges are very smaii and is aptaiieatiie to aii Cj:TOs._ It was stated that increase in staiziiing charges is net anticempetitive.

132. It was further argued that the raiiwaye is working in public interest, Therefore, the Commission eheuiti not .i:.e....i.:eeci by preﬁteering private entities against an agency which is serving a; pubiit interest, It was stated that intentien of the PPP was to 'increase raiiway's share in the rnarizet and not to give its share te private parties at the cost of the raiiweys. it was 'therefere stated that DGYS report shouici be setasieie.

Page W1 at 1.58 SLEBMISSIGNS QF CQNCQR ...__.........._........_....................._.._..........._..

133. CONCUR in its submissicn argued that a ii/iQR'was not an Ei'itEi"i3i'iSE3 under Section 201} of the Act and that no exemption under Section 54 was required. It was argued that the MOR was a sovereign entity in accordance with sscticn 2(h) cf the Act. The need for exemptian Lihcisr Section 54 of the Act wouid arise cmiy when MGR was an enterprise. It was further argued that in the SAIL case the Commissinn itseif had hsid that the Indian Raiiways performed an econemic hmcticm and the MOR performed poiicy and sovereign; fuhcticms. A distinction was therefore drawn between two functimhs. Ruins of consistency was argued upon and the case iaws cited by the ivioit were again cited, it was further argued that even the PCTOS miss of 2006» distinguishes iastwesn MOLR hi' iii. it was further argued that the Competition Act is for practices and was nut against the exercise of stwersigh pciwer. Ts. support this izizmtehtieh rsiisnce was pissed on the ratio iaitij dawn the case of Cartistatian of City at Nagpur vs. Empiaiiees ESCR 942. It was further stated that the fixation of circuiars, hauiaée rate circuiars and iand iicenss tees circulars were a scaversigh activity and in this csnriectioh reiiahce was pissed cm the ratia iaid dawn in the cases c>f.Sitaram Sugar Ce. Ltd 3 SCC .223 and FTC India Ltd 4 SCC 603. It was aisci argued that price ﬁxation was ':3 iegisiative functiah and that the -Competitish -Act wouid not affect the support price mechanisms To supipsrt this ctmtentisn it was statsci that the Ministry of Corporate Affairs hefesre the Standing Committee at 'Pariiamsnt had stated that the food procui'ei'n'en;'i: price fixed by the gtivemmant was as savereigh function anti citiuid not come under the Ctimpetitian Act. it was argued tiist on this ansiogy the issue of rate circuiars is a smeteign function and " -i wouici not come under the COiI"ii§€'-Eit'sDi'i"' ct. it wags ﬂirther stated that aiiotment of ianci at CONCUR was a sovereign tuhttitm and to support this view reiiarice was placed cm the ratio iaid c:ic:w"h in the case of iv.'ii3 HSIDC is Ors. Vs. Hari Om .Enteri3rises AIR RG09 SC'; 218, it was sise argiied that the 'MOE. exercises piznwers under the iliaiiwiay Act and the PCTUS rules meat oi' business miss ' Pageﬁcifliéiﬁ ~"i;iQi'i'}§i'ivEiﬁCB. It was argued the at 1961 under articies 77(3) 01' the Cohstitutien of Ihd;ie_the Railways acquired the right to reguiate and conduct Raiiways as deiegated iegis-éetion. Thus the fu!'tCt§€.ii'1 performed by MQR was Ei sovei'ei9h ftmctieh, it was argued that the ruEe~ma;i<ing pewer given to the Cehtrei government under Sectieri .198 of the Raiiway Act was the basis on which the concession agreement with the C705 were drawn, It was eiso artgued that the power of MOR comes from the Raiiway Act and that this ctitiiti not be a case at abuse of dominance. It was further argued that the rate circulars of hauiage iicence etc. were issued under the iaw of the iahd anti net as a consequence of dominance, 1.34. It was argued that the circutars issued were in exercise of i'EgLii4BtOi"Y ptriwers given to the Indian Reiiways and exercising the reguietory powers under Section. 32 the raiiweys get the power to fix the rates. The rate circuiars were issued by the Raiiway Beard in exeirctse of statutory and savereigh powers: It was stated that regulatory powers cenhet be reviewed by the Ctimmissieh and that section 4 at the Cempetitioh Act requires operation by enterprise and as the MDR does not operate anything the Competiition Act weuéd net appty to it, It was stated that reguietioh of a market does net amount to eperation at the market and therefere regu'iatcm,r functions cannot be -come within the eurview of the Commission.

.135. Arguments were then. advanced on the reieve:-mt market. It was argued that the MOR carries out regulation anti that regulation does not amount to service. It was stated that as there was no retevaht predutt market and there was he consumer hence there was no case of abuse of DB report dues not diseuss the reiex/-eat gecigrephic: market. It was argueti that there he an access between service and ccmsideratieh fer the prim/isioh to appty to MGR: For this preposition reiiarice was pieces' on two case Eews (i) Appie & Peer Deveiopmerit Cotmcii vs. CCai'T'ifTif'. Of Customs EL Excise 2'Ci~'iLR .384. {ii} Cochin Inti. Aitpwt vs, Comm. Oi' CE .200? (7) STR 468 {Tri Bang.) The Page ?,6 of SLED , I, 6%,'. *9'!§3i,s; 30 ;' 'iv .

~"ﬂa~( reiiwey market was stated to he the market for transportation of goods over raii and road. it was stated that in the reievaht product market the transportation of goods can take piece either over road or raii and that both the services are ioterchengeabie and suhstitutatriie in accordance with section ?.(t) of the Act. It was argued that MGR ioses due to over pricing of the services and therefore the consumers prefer road transport over reiiway transport. It was aiso stated that the MGR had 30% of the market of transportation by both road and raii. It was also argued that in the reievarit rrieritet CONCOR was not dominant and that it was not covered by expianation to Section 4 of the Act, It was argued that COi\iCDR entered the market in 1989 much before the oi:»ei'ii_i'i§,i of the sector to the other oiayers. It was eiso stated that CONCUR aiso smiffered due to the hike in rates and that iizseif shows that it is different from them MGR. It was argued that there was no coordination between CQNCOR and 'MGR, It was stated that cirttiiar dated 11,:tU,2i306 issued by MGR was aopiicebie to it eiso. it was conceded that CDNCOR was transporting coke in Bags and biue dust with the permission of Raiiweys but that stopped with effect from 27,1G.201U. It was argued that many. commodities other than coke, coei, minereis etc. were tiehned for the carriage by the CTDS prior to the concession agreements. it was stated that riot oriiy CQNCOLR was in the EXEM business but that some otheyr 'PC"i'C)s were etso in this business, it was stated that Raiiways had aiiotted iahd te CQNCOR for the piirpose of ECDS but this was much before the depending of the set:t:or.s, The ieases were given to CONCQR for e period of 35 years arid provisioh for the increase of rent existed in this teases but the Reiiweys had not ioi:re.ased the rent, Reiience was eiso pieced on decisions of the Etiropeen _CQi'Vi'_isifi'iiSSiOi'i in the case of_{3rineii's case and Trini<o's case, "Reference was invited to the Cabinet decision where iarici cotiid be ieased to PSUs for 35 years and to a private party for .5 years. It was therefore argued that no extra favour was shown by the 'Railways to CUNCORV

136. it was further stated that it was a ooiicy matter of the government to favour a PSU, A Government can discriminate or; eeootirit of pubiic T ' ' Paigevr m_"'t1.6,ii interest in favour of PSU. For this proposition reiiance was oiaced; tin the toiiowing cases {i} Si'iBSi'iiKEirid Lakshmikant Kaie vs. Union of India 1990(4) SCC 366 (ii) M, Jhangir Bhatusha vs, Union of India 1989 (Supp

2) SEC 201. It was therefore argued that COi\iCCiR had to be treated as a different entity.

13?. it was further argued that essentiai faciiity doctrine is not in the Indian jurisprudence and cannot be imported to India. It was argued that under the Competition Act it was not justified as that essentiai faciiities doctrine is antmomoetitive, It was argued that in the SAj}Zi.'s case Supreme Court had heio that economic: efficiency shouiisi be promoted and as the essentiai faciiities doctrine did not oronnote econorriic efficiency it shoaid not be considered at aii. it was stated that essentiai faciiity doctrine may be appiied in Europe but it has noappiication in india, It was therefore argued that the terrninais of CUNCOR for its own business and icouici not he shared with its competitors on the ground that they were essentiai taciiities.

ARGUMENTS BF gRSi>-ilwt INFRASTRESCTURE i..TD_.

138;. The information provider, Arshiya Infrastructure Ltd, argued before the Commission in .sui:n:iert of its aiiegations made against MGR and CONCUR. It was stated that MGR carries out \.fE3i"iO.LiS functions such as that of the sovereign power of the government, a regulator anti an operator. Thus, 'MGR wears various hats. it was .arguec:i that the _ Competition Act, 2002 maintains rzeutraiity between a private enterprise and pubiit: sector enterprise. it was stated that this is ciear from the wording oi' Section 201) of the Act, Aggrieveti against the orders of the tiomrnissiion on j-urisciiction, MGR ﬂied a writ in the Deihi High C;Di.iiI'£,»-«--Ti"ie singie i~ion'bie Judge of the High Court heid that the PPP agreements between MGR and the PCZTUS were in respect of a commercial activity which eariier was being performed by MGR. It was stated that MGR was carrying out a cornmerciai "activity i..e, running of raiiways which is capabie of being carried out by entities other than the state, as is the Page 'Is of 16%) case in various other countries. Therefore this commerciai activity cannot be an ioaiienabie function of the state. Therefore, the High Court tzeici that MGR was an enterprise. It has therefore been argued that the issue ofjiuristiiction has wrongiy been raised, :39. Regarding the rate circulars, it was stated that the rate circuiars have not been issued under the provision of Indian Raiiways Act, 1985-}, it was further argued that they have not been issued under the powers conferred on the Board underttze Raiiway Act, 1989. it was argued that the Raiiway Board functions under the :indian Raiiwayect, 1.890 but that it had no statutory recognition under the Raiiways Act, 1989. It was argued that the raiiway adsministraizion has been defined under section 2(3Z) of the Indian Raiiways Act, 1989 and it means a General Manager of Zonai Railway and that Raiiway Board has not been mentioned. But the fact is that Centrai Government has been mentioned in various sections of the Act and the powers of the Centrai Governments had been deiegated to the Raiiway Board. It was argued that even under the concession agreement, the word raiiway administration had been mentioned and net the Centrai Gioveroroent/Raiiway Board, it was argued that as the rate circulars had not been issued by the raiiway administration, 'there was no statutory autherittr for such. rate c:ircu_iar, it was argued that the powers cieiegated by the Central goverrrmeint under the Raiiways Act? 18% were oniy an enabiirrg provisions read that -the - powers of the Centrai Government hati to be deiegateti ta the 'Raiiway Board by ootiﬁcation. It was argued that the powers at the Centrai Government under sections 30 and 31 of the Fiaiiway Act had not been delegated to the Raiiway Board. It was further argueci that sections 30 see 31 of ti:ier»r-iteiéwsay Act are meant-for tariff fixation~'fore~ati eorisurae-rs for the transportation of goods over the raiiway network. it was argued that the relationship between the PCTDS and M{)iR_ were govemeti by a contract he, the concession agreement. It was argued that the rate circuiars issued by the MOR was in the nature or 'pricetiist, It was stated that such a price iist cannot be considered to be deiegated iegisiation, it . _M Page 3'3 of 160 was further argued that under section 32 of the Act, the powers vested in the raii-way administration and not the Railway Board, it was further argued that ever: if the rate circuiar had been issued by the raiiway administration, it would not amount to deiegeteci iegisiation and is therefore subject to review by the Commission, it was argued that even if the rate fixing was a subordinate legislation, in View of the decision of the 'Supreme Court in the case of Li Chandra Kumar vs, State oi' AP. '3SCC26;t, the Commission can iook into the rate circuiars. in this connection reliance was aiso oiaceo on the decisions of the Supreme Court in the'cases of S. P. Samoeth Kumar 8.: ors. 1SCCi124i, Union of India vs. R. Gandhi 201{Zi{5) SCALES14 and Giobai 'Energy Ltd. it was therefore argued that even if the rate circoiers were subordinate iegisiation, they are antioomoetitive and repugnant to the Competition Act. It was therefore argued that the rate czircoiars be set aside soy the Commission.

14o. Reiianee was aiso pieced on the ratio ieio down in the Case of Supreme Court Empioyees Weifare Association vs, Union of indie 4SCC:i.87 wherein it was heio that a subordinate iegisietion is open to A question if it is oitre virus to the Constitution or a government Act. or repugnant to the gerierei: principles of iew or is so arbitrary or on:-easone.bie that no feir~;mirid£ed person cotiid have ever: made it. Simiiariview was expressed by the' Supreme Court in the case of Sitarem Sugar Co. Ltd. vs. Union of India ISCR 909. It was therefore argued that the actions of NOR, whether they amounted to subort.i_'matei iegisietion or not would be subject to review by the Commission, _1_si1., %Aq1_oV.'¢the \wi'itteri_,"ergumeots the foiiowirig submissions have been made:

"Moreover, it is important to note that sections 30~3.2 provide for powers to for rates end classify commodities. It does not give MoR the power to -exciude certain commociities from the market, It may be noted that Moi»? vide its Railway Cireuier A ' Page SE} of 3.60 J"

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e° 73-" r'\ i ~ -

5 ' ':5 §§. .

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No' .2006/TT~III,/73/I2 dated 11.10.2006 has entirely exciudecf ores, minerais, coa! and cake from being transported in containers. Hence, the said rate circuiar, ever: if issued under section 30-32 of the Railways Act, is beyond the pcmfers vested in the centra! government under these sectiens. Simiiariy, RC~30/.2010 and RC-05/2011 have the iiﬂﬂact of exciuding the PCTOS from the domestic market, This has been accepted by MGR in its various subrnissions to D6 and CCI, Ir:

fight of this, it is submitted that the said Rate Cirﬁuiars could not have been issued under section 30~--32 G1' the Rasifways Act. Hence, these r:ircuiars are subject in review by ihis Honbfe Cammission. "

142. it was further argued that the conduct of MGR was not under chalienge but it was the misuse of the powers and discrimmatary haulage charges foisted can the PCTQS by MGR?

- 143. The informatiun pmvicier then brought on record a repart of the Task Farce cifthe Ministry «sf Commerce and Industry which is reproduces:

as under;

Issue 1 ~ Rationaiising high freight charges far inland Rail Transport» "The f:'e}'ght rates charged by CON'CC3R are one {If the highest in . the woricf, As per White Paper on Indian Raiiways (ﬁecember 2009) freight earnings today account for ever 66% 02' its tcztai traffic earnings, Freight 'tariff an Indian Raiiways 55 among rim highest in the worid as would be seen by 5 comfiarfsan Witt'? the freight' ratés per"tii§§::§é' kiiofnetreu cf the other world raifméays.

Particularly, as compared to the major freight raifways iike US Raiirczads, Chinese and Russian Raiiwag/5, the freight rates of Indian Railways are exztremeiy high. In fact, the rates an US Raiiroa::is% are one-fourth that of India Railways", Page 81 m' 16:} A comparison was made with the growth of the Chinese Raiiways and the facts are reproduced be!c:w:.~ Increase" in Freight M Eiectrified No, at' No cf Maxfspeed I Employee track since carried Rcsute Km Loccsmoetives Freight. of Freight '~ Pmductivity 1 1947 (Route {miiiien Wagons Trains K (MT/Empitjy 1 Kms) tons as on ' ' ee) 4 1 J date} T J 3 Indie Al:sC:ut10,0C}O M 1,350 .-'?.1,{}Gi3 9,000 'Z,-40,080 T100 Km/'h E 1144.65 5. (From $3,596 annuaily ' ! 7 'C0 54_:2§L5§e T T _ ' ".1 China 69,200 (mm 3,543 42,000 18,922 s,n3_,ae;: 120 km/h 1 7?_2.os 1 21,800 to annuaiky } 91,000) 1 1

144. These studies shewed that Indian Rsiiweys instead of being a feciiitator of a fast growing ecenomy has become a bottieneck, It was argued that MGR due to its 'menopoEistE«c behaviour had become a Eiebiiity, The reiiways were thus Eagging behind in the grewth sf the ecogmamy.

145' It was further argued that mereiy because the informant had signed the concessﬁen agreement, it does not mean that semen 4 of the Act wouid not be eppiicable. It was stated that the impesitéon sf onerous canditicms in en agreement against the business interest of the informant is procaf of significant market power at' MDR. Such a behaviour was treated as an abusive behaviour in the case of Hoffmaxrm La Roche 8: Ce. AG vs. Cemmissien :3? European Communities V[19?«7'9e] ECR 461. The ceurt in this case heid that the existence of an agreement 'is not 'a ciefence ageinsi a case of abuse ef dorﬁinant epositiene, An sextraect fram the said judgement is reprsduced es underzw _ "An undertaking which is In e dczminent position on a market and ties purchasers._ --~ even if it does so at their request ~ by an obiigatiae er promise omtheir pgart to obtain 52!! or most of their requfremeents excfusiveiy from the said underteidng abuses its dominant pasition within the meaning of Arficie 85 of the Treaty, whether the obfigetion in questien is stipulete:_:2' Awithout further quaiificetion ax' wlvetiizer it is .underta£<en In consideration of the gram' of a rebate"'.

Page 82 sf 150

146. It was aiso argued that not oniy the behaviour of MOR was abusive. it was discriminatory in the behaviour pattern in reiatiogrx to CQNCOR in the foiiowmg manner:

0)» Grant. of and to CONCUR on favourabieferms

(ii) Deniei of aecess to private sidings as reiiweys has aiiowed access to 16 orwate sidings to CONCOR Whereas the other private CTOS have hardiy been aiiowed any access,

(iii) CDNCOR's access to free breakvane - The ﬁCTC}.=a have been asked to purchase their own brake vans whereas CONCOR. is being suppiied brake vans by reirways, Further heuiage charges are being charged from the PCTQS for the PCTQS own.

brake' vans.

(iv) Rate circulars terror made to suit CQNCQR - This is dome by charging F-AK rates for EXIM traffic and excrusicn of Certain commodities carried. by CONCUR from CCR rates, CZC3NiZ:OR's main revenue is from EXIM traffic, V {V} Speciai concession to CONCUR -- These concessions for certain commodities were aiiowed in 28537 but have been withdrawn in 2018.

147., It was argued that the present matter is against the conduct of 'business :e'ch'ics of MOR.

148. It was further argued that MGR was 'trying' to rnisivead the Commission by "trying to inciude the market for transportation by raii or road in the reievant market. It was stated that there are many cases in other jur§sd§::ti?r.ms in which the market for *:_ranspos't of freight through rail network has been taken as re:§even,t -:=ner=ket. In this r:on_raectEo;n,. relrancze was placed on the Norweigian case of Cargotmk AS V. Cargomet: AS. in this case, the Norwegian court defined the reievant rﬁarket as the raiiway goods transport rrrrarket. In the similar way in the case of Czech rR_:-mways Company, Czech competition authority deﬁned the reievant market as the market for the raii fre§ght transport, it was therefore argued the relevant.

Page S3 of 16$} 5/.~--?"5'/"' .-"I'$.'v ' a.' rd:

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15 L,-» "Jr-°r.:

market is the market for transport of goods over the raii network, it was further argueci that raii network for the transport of goods against transport by road do not form part of the same product market. There _V has been a shift in freight market from rail to road in India. This has happened because MGR has faiied to meet the freight transport needs in inciian market and aiso because of the increase in voiume of trees. This capacity constraint of raiiways has been admitted in a white paper Submittﬁd to the Pariia;me*nt by the MCR. In the report it is stated that there was inadequate network capacity and infrastructure of roliing stock and the inadequacies do not keep pace with the increase in traffic output. It was stated that due to this capacity constraint there has more movernent of goods by road tiieri raii. iieiiaoce was aiso ~oiar:eti on Canadian report on competitive raii access. The report aiso states that trucks and rail each had inherent cost advantages depending on the distance of goods transported? It was further argued that 'the 'reievarit market cannot be defined in abstract by stating that freight can ai-so be transported on road. It was stateci that freight can be carried by a roan ohysicaiiy or both by animais, ouiiock or horse C&i"ES_ Wotiirri this transportation belong to the same market. Rirther wouiri consumer use raii services for transporting goods within the city. It was stated that such a; View is iilogicai and gives an incorrect picture of the market, it was stated that raiiways 'i3i'iI}Cii,iC'1i market must be defined on the basis of factors given in section 19{?) of the Act.

149. Discossing the reievarit market it was argued that theme ruie in the 'i_ndustry is that transport of good over raii rietwori-t is 25% cheaper than the transport of goods oxrer road. it was aiso not oossibie to trarisport high voiume to goods by roati. "'j.i'i'fE'JCt ti<eos~»;ort byraii is more efficient for ioog distances. A rake may be sufficient against iarge riomoer of trucks required. it was stated that for this reason that iarge scaie production units have their own private sidings for ioedirig aoo oriioaoing of gootis by raiiways, it was argued that transport of raiiways offers better faciiities and better protection against oiiferege and damage of Page 8&1 ofiiﬁii goods. It was aéso stated that transport of freight by railways is a speciahsed service,

150. It was therefore argued that the characteristics of trahspertatioh of gases by rah are different from the transport of genes by road and even the prices are different for the services, Further the tensemer preference is mairtiy for the 'transportation er goods by rah especiaihg in the case of big votume consumers, Thus it was argued that the deﬁnitierz at reﬁevarat market by the DC; was ehseiurteiy cerrect.

151. It was aise argued that MOP. had imptrsed ségniﬁcent restraints on PCTCss and the PCTOS had accepted these restraints because MGR was 8 rhenopoiistic entity. Since MGR was present ohiy in the rtetevaht market at transport of genes ever rah eetwerkg 31: cannot be argued that services for transport at goods an read farms a part efreteveht market. it was stated that there was no substitutahihty and a read transport service provider eermet provide rah trahsport services, Further infrastructure required-and the business envfzrenmeht between these twe markets were totaiéy different. It was therefere argued that the reievant market has eorrectiy' been defined by the DG.

' 152. Regarding the fact that railways is an enterprise and that the' CONCUR beéohgs te the same grow, it was stated that the iaw as taid' dawn in Cempetitieh Act is quite steers For this reason DC} has cerrectiy hem that CONCOR 'is the part of MGR green,

153. Next issue which was raised was that a rake at rehway wagons can carry 4083 tonnes whereas a rake at Containers weulti terry 2500 tonnes. It had been argued on hehaif of MOR that if genes are transported by centaihers more trains wouidhheﬂreeuired en theWrs'ivkv~Q_ay hetwerk which wouid net be in the national interest' It was further argued that the U03 can carry enly 2500 tonnes in at rate because MGR Reguietiehs restrict the numtaer of wagons per rake tc:r45., Technicaiiy it was pessibte fer CTQS te carry 6:000 tonnes, if they are raliewed te add more wagons to their rakes, Page 85 M169 It was aisc argued that RDSO which is an organisatian of raiiways has advised to iritraduction of BOXN rakeis with higher carrying capacity whereas raiiways was maving buik cemmsdities in ordinary BQXC wagons. The carrying capacity of BOXN wagens is higher than the carrying capacity of BDXC which is 56.18 tones, Further as per the recorrimeridiation oi' RDSD S9 BOXN wagons can be used in a rake against 45 BOXC wagans, Recentiy BQXN wagons have been u;3gr'aded to BDXNHL wagon whose carrying capacity is 171 MT. it was argued that CTDs are new using BF-K,/i3Fi<ii wagsris for carrying containers and that the CTQS are using BLC rakes. But the maximum perrriissibie speed of ELC wagons rakes is 106 KMPH; whereas for raiiway wagons the maximum speed is €30--7{i KMPH. RDSQ advised increase in carrying capacity at BLC rakes but the wagim upgradatien was net impiemented by MGR inspite of RDSQ Setter to the raiiways. it was stated that this has resuited in carriage sf iesser ideas in the rakes by the CTOs. Thus by not accepting the suggestien of RDSC) MGR has iirriited the technicai arid scientific deveiogarnerit in the reievant maritet in vieiatien of section ~*ii{2)(bfi(i) of the Act.

154. it was stated that MGR had agreed that the restrictiaris on transport sf coai, cake, minerals etc. "was in the interest at' raiiways but it is keeping back the fact that this restriction was imposed after the PCTOS had paid the iicerise fee.' 'Further the existence of the agreernerit cities not advance the case at the raiiways that it was net in cidrni_riant 'pasii:iQii.- F02" this preposition reiiance was -placed on the decision or the 'Eurapean court of iustice in the case of i~ieffmanr1~La Roche 8: Ce. AG V CommiSSi0n. 0? the European Communities. it was argued that by permitting CONCDR in carrying some restricted gscacis discriminatory practice was foiiowed by '"iviDR, " ' ' 1525. Regarding hauiage cjhargesi MGR had argued that it was much "bE'.iOW the Good Tariff Rates appiicabie to MGR custamers taut MGR had defiriiteiy overiooked the tweraii costs barns by C'i"Os for movement at its rakes, The cost df'tr'ans;:»orting gases by PCTOS including hauiage charges paid to Page 86 of 1513 A m \ ''''''"i-» .V _ e 4 3,3», , , . .. .

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X MOR PLUS cost of capitai and other operating iexpenses e,g. iicehse fee. cost, asset utilization cost, depreciation, interest on borrowed catiitai, administrative and merketingi expenses etc. which increased the cost much above the GTR rates. It was stated thatthis is due to a iack of understanding or specific ihterition of the MOR which ieci to this situation. In fact the position was so had, Arshiya had to his the information to the Commission. A chart was submitted to show the heavy cost involved in addition to the hatiiage charge for the operation by the CTQS. It was hot necessary give the chart as the arguments have taken care of the facts. The hauiage charges ievieci exceeds the ievei of MDR charges to its customers. Arshiya would have no choice but to exit the itiarket it the situation continues as it is. 'it was stated; that MGR was intentionaiiy squeezing the margins of PCTOS and destroying the ievei playing fieids in the market. it was argues that there was no reason Wi"i';'- Exit" QGDGS shouio be favoured for transport by PCT(I}.s over the other Ci0;fTiE:S'ffiC goodéi or the so caiieo aggregation oi" oiecemeai goods,

156. it was aiso argued that there was no material anywhere or even in the agreement which shows that PCTDS were reqoireo to aggregate piecerneai traffic and not offer their services to boiiiz carriers.

15?. it was further argued that restrictions at private sittings were unreasohaoie espetiaiiiy as the oerrmssion was initiaiiy granted oriiy for six months anti many times' subsequentiy withdrawn. The aiiotment of private sidirigs was dependent on the whims anti fancies of the raiiway administration. Further the C'i"Cis had to give an ontiertaiting that they wouid ooh; carry the cargo tieionging to the Conceiﬂiid private siciirig iziwneritanti cannot carry third party of otherﬂparties, This aiso oimihishes the ievei oiaying between CONCOR and the other PCTDs. Theretoreéit was argued that the restrictions were anthcompetitive.

158. Regarding iariti iease it was argued that lease of raiiway iano to CONCOP; was given for 30 year period and the rentais were haseti oh the number of containers hanoied anti not on the Cost of the land. On the Page S?oi16{i other 'name as far as the PCTOs are concerned the iease was given for ooiy 5 years with rent on armuai basis at 6% of the market vaiue of ianci. it was argued that the whoie basis of iease between two entities was discriminatory especiaiiy as the container termioais wereah esserztiai taciiity. To support its case Arshiya relied on 8&1. Line Pic xx Seaiink Harbours Ltd and Seaiinit scene' Ltd. (IV/34.174) 13.992} SeC:vM§LvR 2.55 and iviagiil ~-- Radio Teiefio Eiraon (RTE) \!'¢ Commission [1995] E_.C,R._Z1'43.

159. It was argued that the issue of essential faciiities is inouiit in provisions in the Indian Competition Law. This is evident in section <=t(2)(c:;) of the Act which forbids practices which deny mari<et access in' any manner. It was stateci that in the iight of the action of MGR denying access to raii networi»: for certain commodities to be transported by containers constitutes a oeriiai of esseotiai 'fa<:iiities and contravenes the V abuse of dominance provisions under section 4- of the Act.

160. Regarding the maintenance of wagons, though the PPP poiicy states that the PCTOS can get maintenance carried a the private person, MGR states that it was ooh: an enabiing position, It was stated by MGR that for safety reasons, the maintenance has to be carried out by 'MGR, 'it was argued that it is six years since the PPP 'policy has been in opei*atimi but MGR has tiii now not made any rules and regoiations for ~mairitenaoce of wagons and opening up the sector for private goiayers. it was aiso stated that the levy of haoiage charges for maintenance was unjustified. It was aiso stated that though for carrying out the raii container business Arshiya had iost 50 crores in the year ending 31,12,2i;i:i:t, Raiiways states that Arshiya had earned a profit. To justify its ciaim Arshiiya submitted copies of its oaiarice sheet.

161. It was argued that the object or the PPP was to introduce competition in raii freight services and that MGR was eooveoieotiy forgetting this aspect of the report and was destroying competition in the market It was therefore stated that MGR had «abused its dominant position, V ' 5 i"age$8of?..5ﬁ

162. On behalf of the other information provider Le. KRIBHCQ Infrastructure Ltd. submissions were made. it was ai*g;.ied that the issue of jurisdiction of the Commission over the activities of MOR was estabiisheo by Deitii High Court judgement in the case of Ui'iiOi"i Di' India vs. Competition Commission of india. it was aiso stateci that though the appeai tied been admitted by the Division Bench of Deitii High Ceurt stay has not been granted by the iliivisiori "Bench; of the High Court and for 'this reason Commission is competent to decide the issue. it was aiso argued that the CH3 had tieid that MGR earns revenues from 'the provision oi' raii freight services and therefore the business of MOR. and CDNCOR. are ccirnmerciai and faii within the definitien of "enterprise" under section Zfii) of the Competition Act.

163.. It was argued; that a department of g.overrirnent is covered under the Act as eriter;:irise- under section 2{i'i) oi' Campetition Act if the department is engaged in any activity which has an affect cm production, .

storage, suppiy, distribution, acquisition or coritroi of articies of goods Oi' the provision of services. it was stated that "any activity" is a wide, sweeping, aii~encompassing expression anti has to tie given a. very wide meaning. But. on the other hand the words "but does not iri::.iu_oe'" is an exciusioiiary expression and that it is an estaioiistied rtiie of interpretatio'n that an e><ciusionery ciaose 'must be "interpreted .strir:ti'iI Eifici narrowiy. But those departments whose activities are reiateci to sovereign function of the gavemment has to be excioded. But the 'term "'so\1ereig*n function"

~must be subject to strict and narrow iriterpretation. The commerciai activities of MDRWare net covered under ciatise of "sovereign a<:tivit:y". Such sovereign entity can aiso tie exempt utittier section 54 (C) of the Corripetitiooﬁct read with section 2(a) oi" the Act. It is ctheretore argued that iviOR was an enterprise under the Cempetitien Act.

1&1. The next issue raised in the argument. was the appiicatiori of Com'oeti'tiori Law-to state owned enterprises. An issue was raised that Page B9 of 151} the economic situation in India was different from the situation abroad and as in many of these countries raii freight services had been prixratised Competition Law wouid eppiy to them. But the fact is that the Competition not is e neutrai Act appiicabie both to private institutions and state owned enterprises. It was aiso stated that state run monopolies have a tendency to abuse the dominance when the sector is privatised. It was furtiier argued that in Hungary as weii as in Romania raiiweys were abusing their ciorninant position and the Competition Commission in these two countries fined them for the abuse of dominance, incidenteiiy, in both the Countries the raiiweys undertakings were pubiic sector enteriiirisest

165. Even the European Commission has found state undertakings guilty of infringing the Competition Law. In fact in the case of La Posts the French nationai postei service operator, it was iieici by the Eurorseaii Commission that it was induiging in abuse of dominant 'position. The European Commission aiso noted that when a; state owned enterprise was empowered with both reguiatory and commercial 'iLii'iCi2ii'.3i"lSg it resuits in a_ coinfiict of interest. This confiict of interest itseif was neid to amount to an abuse. In the case of MGR which performed both reguiation and cornrnerciai functions some tornflict of interest had arisen. European Commission eiso found in the case of La Posts that the power of a state undertaking was to determine teciinicai standards and levy of charges to cornrnerciei partners reiying on its rnonopoiy services upstream had encouraged La Posts to abuse its dominance.

1.66. The next issue raised was the eppiicetion of Competition Act to government poiicies. incidentaiiy, the Competition Act does not protiinit antimonipetitive government pwoiicies as was submitted try CQNCOR. But the Regnavan Committee on Competition Law and Poiicy has stated that reguiations and poiicies of aii state monopoiies and public enterprises must fail under the surveiiiance of competition poiicy, to prevent monopolistic, restrictive and unfair trade pre<::tices on their part, i'~'iDR's Page 30 oi: 15$) ceritenticm is that laws in India seek to differentiate tzetween the government and non-government enterprises were not acceptable in View of the provisions of the Cempetiti-Lin Act, it was argued that the Competition Act weuid appiy irrespective of the fact that whether the enterprise was a private enterprise or a putiiic: enterprise and it expiicitiy . includes a department of the gavernment under the defiiiitiiari of an enterprise. Therefore, it was impiieci that the government peiicies which affect cempetiticin faii within the jurisdiction of the Cempetitirm Commission.

167'. The next issue raised in the argument was that MGR "anti CDNCOR ftmctiori as a "Group". The provisiens of the Act were ptiinteti out and it was stated that in WSW at the deer pravisions CONCUR is a part at the MOR group. The argument raised an behaif of the MOR was that? it was not an enterprise arici tiiereftire CQNCOR wciuiti riot tie a part of its group, The argument raised en beiieif of 'KRIBHCD was their MGR. is an enterprise and in View of the provisions riithe Act CONCUR is a part of that group:

168. The next issue raised in the e_rgtimerits4 was the determination of reievarit markets. it was argtieri that in defining the reiexrarit proditgct market it is impertant to exam'irie whether they had efiectivei substitutes far 'freight .servii:.es by raii that a consumer may pi'i3Ci_ii"€. The entire market ef trarispertatien can be either by i'Q€3d, rail; sea or air, As far as terrestriai jurisdiction is i;'.O£'iCe'i"i"iE":d it can be by man, beast, raii er trucics.

But physical and tunctienai efficiencies of each at them are different anti cannot be repiicateti by any other mode at transpert causing it its be confined as a separate maritet. It was argued that Indian raiiway track has me effective substitute in India and 'that tie other metiitirn of trarisport in Indian subctmtinent couiti possibiy serve as a substitute. Further, consumer preferences indicate that reii is considered a more efficient mode of transport given its inherent infrastructure! ativariteges. Further raii caters ta 'point to point' transpertatieri and net. 'door to tit:-or' transpertatien. Itwas aisci argued that the wagons C}i3€i"T_éi'CE3Ci for raii Page 31 at" 159 freight services are fonctiohaiiy interchangeahie with the containers operated by the CTOS. '

159. in addition to the above KRIBHCD has argued that there are two markets that have reievance for the purpose of this case (i) Raii freight services iii) Provision of Raii services in India. The 136 haci cohciuded that a reievaht maritet is the market for freight service on ihciiao rail network, On the other hand MGR had stated as the reievant market wouici be aii the modes of transport, it was argued that the issue was whether the road transport can serve as a substitute to rail freight not whether raii freight can service as a substitute for transport by road, 'it was argued that even if the prices or raii freight were increased by 5% to 10% customers of raii are uniikeiy to shift from raii to road as raii services are more efficient, specialised and iriciucie the possihiiity of transporting huik quantities uhiike roar.i~trafi'ic, It was argued this is evident from the fact that customers continue to use a preferred raii freight services ihspite of substahtiai increase in the cost of private CTQS resetting from iViOR's ahth competitive behaviour. It was aiso argued that a shift from raii to road . for a iarge number or customers was due to raiiways inefficient services. It was further stated that though MGR hati "argued that the reievarit market shouid ihciurie aii the modes of transport but they have aiso stated that the issue ihthis case is iimiteci to container traffic only, It was

-stated that this is an ihconsiistent stand of raiiways. It was further argued that MGR faiis to understand that the changes in the market shares are caused by the increased freight that has occurred over the iast 60 years. it was further stated that i'~'iC)h faiis to take into account the growth of freight market over the said periocii According to the statistics of MOR the voiume of traffic of ieiiways had increased in 60 years from 73.2MT to '768i~iT. It was -stated that this estabiishes that the rcrad trarispcrt poses no competitive constraint oh raii freight. Further, the pricing of raii freight was not in any way discioiiheci by either road or any other mode of transtioirt which is necessary oreereauisite to estaoiish that other modes of transport form part or the same reiexraht market as rail ' Page 92i:«r"16{} freight services. It was stated that operationai sutastitutabiiity may exist but the road does not act as a competitive constraint over raii freight as the purpose of the reievant market was to determine the; competitive rconstraints on the dominant enterprise.

':78. The iearneci counsei for KRIBHCO then argued on the issue of asymmetric substitutabiiity between raii and read freight services. it was argued that if they were a part of one product market then We to 10% increase of road freight services couid resuit in a shift from road to raii as raii freight offers certain infrastrticturai advantages, it was further argued that if price increases in raii services by i{}%_, customers are not iii-rely to shift from raii to road, it was aiso stated that the European Commission considered the concept of asymmetric substitutabiiity irs Wanadoo Interactive case ( COM%:P;'38,233 ibid at para 19:5. In this Case the issue was the functionai substitutabiiity between high speed and iow speed iriternet services, The -European Commission states in that case that when there is' an asymmetric substitutabiiity between the two products, then they are not part of the same reievarit niariteii, Low Speed and high speed iriternei: access present sorrie degree of stibstitutabiiity in assessing whether the two are functioriaiiy interchangeabie. The qmastiori is whether iow speed subscribers would switch to high speed facility, The European Commission rieid that some migration from iovii speed to high speed interreet access does ieaci to the coriiziusitin that there was sufficient and significant sobstitutaibiiity "between the two serv'ices.§ we Europeari Commission found that though some form of stitistitutabiiity does exist its operation is eiztremeiy asymmetrical given the vaiue attached by users to the 'intrinsic advantages of high speed internet accessi The European Commission observed that on anir:=::rease in the price of high speed interriet faciiity the customers migration to iow speed services were quite iow as opposed to price increase in iow speed services, 'iiiitiicii restiiteci in greater shift to high speed 'faciiity, The Commission aiso observed that customers were wiiiiing to ipaig 5% to 10% increase in piritze for high speed and better tiuaiity services. The European Commission tiier'efore came to ' - T 3 Page 93 of 1230 r" itiifci;

the conciusioh that iow speed intiemet access does hat serve as a competitive ctmstreiht on high speed and that the rates cf migration were tiissimiiar and not symmetric. Therefere the Eurepeah'Ctimmissien heid that the market for high speed internet connection and iew speed cenniection were separate markets. Itwas argued that an the same iihee there was an asymmetric substitutebiiitv between raii freight and road transport services. Reiiance was aisci pieced on the observation at the [)6 who held that each mode er' transport therefore constituted a distinct preciuct market A separate relevant market for rail services had eise been defined by the Hungerein Competition Authority, It was argued that the Hungarian competition authority had ﬂied a case egaihst Hungarian State Reiiway enterprise and identified the feiiowing upstream and downstream markets:

0) Access te the public netienei raiiwav 'hetwer_i<; and

(ii) Access to downstream pubiic rail tracks 1'31. The reieverit down stream market identiﬁed hv the i-ixmgeriah authority as a raii freight transport services which was requireid predeminehtiv fer the suppiy of buiio: goods in Hungary, Uh this basis the PZRZBHCQ argued that he separate market existed for the 'rzrevisicm of raii freight ~servic:ee.

1:72; It was argued that in the 'inferrriatiera submitted can -8.,1.2D1fi 'KRIBHCD had defined a .seperate reieverit market for 'rail serviczes. It was stated that the D63 did net deai with this market definition in his reiﬁort. The ieerheci ceunsei reiieci on the provisiens of section 19(7) of the Act and came to the cendusioh that no effective substitutabiiity for raii services ether than the theieit Reiiways:e>;is':- in 'indie. In fact, MGR' enjoys a rrieriepeiy in the prevision, of raii freight by vvagcms and in the provision of raii passenger.services_. it was therefore argued. that in View of the fact that in secticm '19 of the Act there was a separiete market for reii S€Ei"v"iC€S within the inciiah reiiwevs network. The definition or separate market for raii services was submitted by KRIBHCO in Greer to I V' Page 94 cm' 168 assess the ciairn that MDR had ieverageti its dominance in the raii services market to protect and advance its position in the rail freight services mariteti

173. It was argued that the DG had not considered this definition and has therefore not considered the" ieveraoiog of the tiaim made by i<R.ii8i~iCO. in fact it was argued: that rail services maritet consisted of movement of freight by wagons anti the provision of raii passenger services. It was argued that railway was aiso a regoiator anti had a control over the movement of goods by wagons and raii passenger and therefore enjoyed a dominant position in market for raii services. This aiiows the raiiways to protect its position in raii freight services in an the antmompetitive manner to the "detriment of the orivate CTQS. It was aiso argued that it was necessary to define two markets so as to estabiisii abuse of dominance under section 4(2)(e) of the Act. it was therefore submitteci that iviOR had jieveraged its tiomirieote io raii services. (ineiudirig its oreferentiai access to tracks, terminals etc, and its reguiatory powers) to protect its position in the raii [freight services market.

"174, The next issue taken up by the ieamed counsel was with reference to the reievant geographic market, It was stated that the i'a«.::tors to be seen are mentioned in section 19(6) of the Competition Act, It was "argued that both the "passengers and the goods in Iooia Weuio -ne<_:ess'a;riiy have to travei through the Indian 'raiiways network within the boundaries of iinciia, Th_erefQre the geographic pmar-i<et wiii be Zinciia it5eif.,_ "ring is further strengthened. by the feet 'that the 'reguiatory barriers are alopiitabie across India. It was aiso argtied as the aonsomrer prefetences «ziiti not indicate that the reievant {geographic was any ssmaiier or iarger than irioiia. It was stated that on the other hanti the US had taken the reievarit geographic market as an entire broad-gauge network of the Government railways and it intziuoes .such raiiway network where the Raiiway Administration has a right to operate, w~""" ., _,.s r V Page 95 of 186 175? It was further argued that MGR had given cerrect definitien of the market. It was eiso argued that there is no substitute for the provision of rail services and therefore a separate market deﬁnition of provision of reii Services has got to be adopted, it was argued that the eiiiy' reason that MGR argued that the market was wider was to reduce its market shares in the relevant market in order to estabiish that it was not a domiiiant in this wider market. it aise stated that MGR stiii enjeyed a ddmirieiit position fer freight services across aii modes of transeert, as it centiriues td operate independentiy ei' 'competitive forces prevaiiirig in the reievant market. It was therefore argued that the reievarit market was Consisting of twe markets i_.e. raii freight market and rail services market in India.

176. Then the learned counsei explained the dominance oi' the Indiana Raiiways in India, The ceurisei considered the expienatien te section 4 of the Act which defines dominance as a position at strength erijeyed by the enterprise in the reievant market whicti enabies it to operate independentiy of the competitive forces preveiiirig in the market or effects its competitors or consumers er the reievarit market in its ieveiir, 177'. The TOG had observed that MGR was a ddminenit piayer in the reievarit: market in terms oi' the factors iaid down under sectieri 19(4) of the Cempetitien Act.

.1';-'8., The meritet share in railways freight market in respect of traffic of - -- wagcms was far 96% arid the ceritairier traffic was 3%, It was thus argued that the Indian Raiiweys had tetai tit 99% of the tdtai reii freight traffic. This figure has ridt been disputed by MGR. Further in the wagon freight market MGR was dominant wtiereas in the ceiiteiner me:-i<et ~.i~~-CQNCOR was dominant. It was th-=.-is.r:-bserved that .i'-tiCiR enjoyed. a monepeiy in the market for the provision or rail services in India, It was further stated that MGR had huge reseurces and infrastructure as »::omi:aered to the PCTDS, MGR aise "performed the 'ftii'iC?Ii(3Fi,S of iicensor, reguiater! seririce provider and an operater. It was 'therefore argued that MDR was 'a derriinent piayer in bath the reievent m,er»i<ets. It was further ' Page as dilﬁti stated that there were a number of entry barriers in the two relevant markets defined by KRIBHCO. The entry barriers were licence requirements, financial barriers, expensive infrastructure, high sunk costs and capital costs of entry. Capital cost and entry some costs include 'construction of terrriirreis and» containers as the cost couio riot be recovered if an enterprise decided to exit the market. it was also argued . that MGR enjoyed the advantage of being a verticeiiy inicegreteci enterprise. it provided rail freight services, access to essential L irlfrestruc.ture, aliocation of land for infrastructure cieveiooment enci also formulation of the poiicy ruies and reguiatioiis that governed the functioning of the relevant market, It was therefore argued that i'riOR was in a position to determine and change the entire dynamics of the reievant magri-sets in its favour. MGR group also isossesseci substantial econioroic power and significant commercial paciirentages over its competitors. In fact the private CTOS operated oriiy in the re_rrieiriin.g 1% oi' the market for raii freight services. They were dependent on the --i\/iC);R for orovitiing access to essential teciiities such as tracks, terrriinais etc, The PCTGS were completely dependent on MGR and had no countervailing buying power.

179. It was argued that MOR's mooopoiy in the market for rail passenger services had augmented the economic strength of MOR, The fact that MGR 'had increased 'charges leviebie from the PCTDS by several folds cieerly indicated that MGR operated indeoenderitiy of the maritet without facing competition constraints from other market oiayers. It was argued. that this cieeriy showed that MGR enjoyeci a dominant position in the market for raii freight and rail services, it was further erguecl that even if the "re'i'event' market was widened so as ECi""'i'Fi£§U(i§e toad tiseligiiiit services MGR wouid still enjoy a dominant position based on the factors orovicied in section :i.9(4') of the Competition Act. It was thus stated "that taking into account the cumulative effect of its large market share, significant size and resources, lack of countervailing buyer power, entry barriers "and Page S3? of 160 integrated veirticai operations, MGR was dominant in the reievant market for the provision of raii freight and raii services in India.

180. The iearned counsei for KRIBHCO went through the various abuses committed by MOR. It was .argueci that by denying access to certain commodities which constituted 60% of the reievant market foréraii freight services MOP. had vioiated section 4{_2)(c) of the Competition Act. It was further stated that the conditions imposed on the PCTOS were unfair and iimited to the provisions of services in the market. Therefore, there was a violation of sections 4(2)(a)(i) and 4-(?_)(b) of the Act. Mi3R's contention was that in the reievant market as rciefineti by it they prehibited; commodities and therefore they denied the market ai:r:ess/to CTQs. it was stateci that this argument of MGR was incorrect because in the raii freight market transport of restricted commodities coristituteti neariy 60% of the reievant mariazet.

181. The iearrieci counsei for KRIBHCO then argued that 'there was a compiete ftrnetionai interchangeabiiity between wagons and containers and the argument that wagons are better suited for carryirig i::uii<; goods was not correct. It was argued that this had to be iooitetri in terms of consumer preference to transport the buik commodities in containers rather than wagons. in fact, coretainerisation in the railways system of other r;ount_ri;es is on the increase and in some ju-risdietions it consisted neariy 40% to 45% of 'the freight carried by the raii network. It was argued that new containers are availabie for the transportation of bulk goods and therefore the argumerrcs of MOR. are without any basis,

182. The next issue taker: up was the argument of MOR that PC1735 had % i ' 'agrees to-ferospective prohibition on the carri.a;ge~~oﬁ certain gooes...a.s..m,!as provided in the concession agreement. it was stated that it was facttiaiiy irir:orrec:t. In the poiicy dated 9.1.2006 and the ruies dated 28.9.2006 'there was no prohibition, on the traffic of restricteci eommociities. The prohibition was got into "force wide cireuiar dated 1:i..1.D;2UD5 which was inserted as an annexure to the Concession Agreement by 'Ni'iiCh time Page 9801' 16.6 C A '-" h A -.~._ .9.

' i-' " -. '.

€)$'ﬂé' .3. " --. I 2' .. N. \ 'X ».\ K v-\-«'': we l ..s. <.',:>;/ i_''._ v ' ' I r > _.-f Nit?-"§:,..~> "'--*'~'vumm.w~tv~""

./Wt.' / l<RiBi~iC0's participaltion as a CTD was a fait accompli and was executed by KR:BHCUon 14.5.2007. Therefore, KRIBHCEB neck no knowleclge of the restriction of commodities until the signing' of the concession agreement, Al: the time of signing of the concession agreement iicense fee had already been deposited by KREBHCO. It was therefore argued that there was no justification for the said argument that KREBHCQ had knowledge of the restriction on commodities.

183. The next issue taken up was that the transportation of certain commodities was restricted due to severe infrastrulcture and capacity constraints on the rail networit. 'MGR may be inefficient butlit snouiof not have denied the infrastructure to the PCTDS. it was argued that _MOR;'s defence was that Indian Railways was faced with capacity' constraints but that did not justify an absolute ban on specific tomrnoclities, Further in favour of genuine taoaoity constraints it was the duty of MOR to permit the PCT{3s the freedom to choose the category of goocis "which they wished to carry rnainly on the basis of consumer oemalno, Further PCTQS also added to the infrastructure by investing their resources and acitling value through efficient services. In the long run MGR wes not a ioser and wouid have earned by imposing haulage and .st'al:)ling Charges for the transportation of goods by the private CTOS. it was stated that MGR cannot 'foreclose the m'ari<et in order to orornote its commercial interest and justify the same on the grounds of capacity constraints.

184-. It was further argued that the approach of MDR was discriminatory and as it had aiiowed CGNCDR to carry Ci' coke and Bllut? Dust whereas KRIBHCO was denied this permission. It was argued that though these W_ite?njs_ were; inirigierals or built items' CONCDR had, ﬁtransponzed these commodities in containers.

185. It was argued that there was no objective jListi'l'le:atio.i'i prohibiting 'PCTOs from the carriage of bulk goods. It was stated that this was "mainly done to protect its market which in itseif was an anti tomoetititre action on tne part of MOR. It was stated that icornolete freedom was not A ..»f""T~' Page 99 of tea given to the PCTOS. This itself consisted an abuse especiaiiy as there was ' no objective justiﬁic:atien can account of trade or efficiency, The pronibitien was put in piece by MOR ta pretest its own economic interest wiiirzh is detrimentai te the other service providers who ciffered eomgnetitive services. To support this View reiiante was pieced on the case at iviA\_/ , where the Hungarian Competition riuthority whiie cieaiing with the state run Hungarian raiiways heici that restriction cm the access ta industriai side tracks cannot be placed as it weuid be detrimeritai through an untiertaidng in economic terms. It was stated that prohibition of EiO% of the market cannet be justified in the garb of raii reguiatien. it was tiierefere stated that iviO;R's cieiiiai of access; to the market for the transport or these prehitaited commodities amounts to a contravention under section ritof the Cempetiticm Act. It aiso has the effect of fereiziosing the market, as the prohibition was egri exclusionary conduct of MOR.

186. The next issue taken up was the arbitrary increase in hauiage charges ranging from 60% to 200% rnaifirig it cemnierciaiiy' unviabie for the PCTOS to operate the private c:erita'iners an the raiiwaye rietwerk, it was argued that the D6 has cieait with this aspect anti found. centraventiciri in terms of section ¢i_(2}(a), 4i(2){b) and ~4(_.2}(_C')i .0?" the Competition Act. MGR -had argued that as the CDi'i'iiTi'iSSiC'.iii iaekeci the jurisdiction te inqi.ii_re and investigate the -issue er Rates Circuiars and as it feii within the purview of cieiegateri iegisiaticm. It was argued that the Deihi High Court had haze that Moe was an enterprise under the Cemeetition Act and far this reasen MGR was net a_ sovereign e'nt'ity, It was stated treat in View of the ciecisien ei' Deiiii High Court there was no the arga..irn.ernts- regardirig the issue of 'jurisdietieni ieii. the Commission. It was argued that though the iiauiage charges for the notified commodities ranged between 35% to 150% there was no change in the goecis tariff rates {GT;R) payabie by ctisterners for the movement cf goods in wagons. MGR had argued that GTR rates were higher than Freight AH Kind (FAK) rates anti that the container ciass rates were eriiy Page 1100 of 150 85% or the GTE rates. it was stated that the charges payatiie by the and consumers for transportation of geads by containers were far greater than the charges payabie by the end censurners far wagon; freight, it was stated that raiiways wagon freight was carried by NOR and no adtiitionai cost was invoiveci far the mavemerit of goods by wagons. But as far as the PCTQS were concerned in addition to the hauiage tiharges, cast reiating to containers maintenance and repairs, rzanstructiors, infrastructure and marketing expenses were aisa incurred.' Further P(:TQsi aiso had to incur haulage charges for empty. rakesi Thus the ciiargéﬁ borne by the PCTBS were much higher than the FAK and the GTR rates.

18?. MGR had argued that the purpose of privatisation (if the tztiritairier raii freight was ta ciiveri: the raii; traffic from road to raii and that the decision ta irriptise excessive hauiage charges were to prevent CTQs tram eating into the traffic at MGR, It was stated that the argument that the PPP pciiicy was only to divert traffic iest ta roati and that MGR vietiici riat aiiow container te cempete with; wageris was, in itseif, an acimissien of anti competitive ccmtiuct by MGR, It was stated that this was centrary ti) PP? poiicy wherein' ntwiriiscriminatary aceess were to be granted to ail PCTQS. it was argued that the ciiscriminatary cizinciiticzns iiiiiloseci on the PCTGS was not tr-ega'rcied as .abuse by raiiways but it was argueci tiiagt raiiways were justified in Suing it in order ta protect its "market share, it was stated that MGR behaviour was antimnmpetitive as it prevented private CTOS tram ccirriizaetirig with wagcsri 'r"re'ight,

188. The next issue taken up was the iappiicatien at FAK. rates at iiatiiage to EXIM traffic. Incitientaiiy, EXIM traffic is "}'S% of market 0'? freight by centainers. It was stated that KRZBHCO dees net carry out any activities in EXIM 'tr'a"i"ficqa'nci was&i:c>'iiyi;i'rieci ta' domestic raii freight ii': India. "'Ii:"was stated that the impositien at increase in haulage charged for domestic 'tra'tfi<: was discrirriinatery as it favoured the Exiivi traffic: Thus this was in vioiation of section »4{2}(a)(i) of Competitien Act, Page 101 of 160

189. it was argued that it was rather strange that the market of raii freight ta; containers was opened by a government pcziicy but MGR by increased haulage charges had fereciesed the market, Thus by increasing hauiage charges margins avaiiabie. to PCTOS were being squeezed and many privat'e CTOS were new termiriating their raii freight business and are exiting the market. This was stated ta be an evidence of arsti~ competitive behaviour by the fareciesure 01' market of rail freight services, It was further argued that MGR had not only vieiateci sectien 4(2)(a') but aise sectiens «ii{2}(b} and 4(2)(_c) ef the Cerripetitien Act,

-190. The next issue taker: up was the arbitrary increase in stabiirig charges. it was stated that according to dense 7.62. rat the Cericessieri Agreement a cap of 1i:i% as anriuai increase fer stabiing charges was prevideci, But MGR in vioiatitm at said ccxncessicsn agreement: had increased the statiiing charges by 5Ci%. It was argued that the 'D6 had ' stated that this amount was in vieiation of section 4(2)(a), 4(2)(i':i) and 4(2)(c) of the Competition Act. It was stated that the BG's 'findings were carrect and the main aim; of MOR was to put heavy burden on PCTOs whti weuici have no eption but to exit market of raii freight services;

191. Regarding private sidings it was argued that theugh CONCOR had been aiiaweci to use private siciirigs the ether PCTQS had been denied the use of private sid'ing1s and that there was 'HQ basis on which MGR had hem that orziy the Carvgoef the "privatewsitiing owners can be carried from the private sidings. It was further argued that 'there was no justification for aiiowirig use at private sidings for eniy a peried of six months. Even the iand breionging to -raiiways theugh aiiotted ta CDNCOR cm favourabie terms for a icziag periad were aiiotted to the PCTDS for a period of 5 years. The IPCTOS cciuiti riot buiid arrf Eéemanéni structure On this iand. It: was argued that the DG had tieait with it and had correctiy found vieiatien; of the different provisions of section 4 er? the Act.

192. The next issue taken up was the access to CONCUR siciings and terminais. "in the 'advertisement pubiished an E3 January ;2QD6 "there was Page 1102 M160 an assurance that the private CTQS wouid be treated on par with CONCUR ' and that the PCTOs couidiae aiiowed access to private sldirigs as weii as that of CDNCOR. The definition of "Ram Terminai-" under terms of concession agreement inciuded "private sittings". it was further stated that the construction of raii terminais required 64 ciearances from different authorities. It was argued that CONCUR was given corripiete discretion for the use of termirieis by the other PCTOS. It was eiso argued that reiiwey iarid was given on extremeiy favourabie conditions to COMCOR for a period ofr3O years. It was argued that by denying access to the terrniriais and sidings MGR & CONCUR had committed anticompetitive acts. it was therefore the duty of the Commi.ssiori to take necessary corrective steps.

193'. It was argued that CONCOR terminais were ouiit on iahd Qwned by * MGR, therebyepiacing CONCQR at a competitive advantage in relation to private C'.i'0s. Avaiiabiiity of these termiriais to PCTQs was criticei to ensure a ievei -piayirsg fieid in the reieverit market. Construction of terminais by PCTOS involved substantiai costs and dupiication of the same wouid amount to a wastage of scarce riaturei resources, It was therefore argued that the terminate on railways iand were i;:ons'ider_ed an essémtiai faciiity. Mos. had not direczteci CGNCOR to aiiow PCTDS to use the terrninais oi' COi\iCQ'i?.i But as no access was aiiowed to CCsi\1C{)'R 'termiriais there was a 'discrimination -by MGR between CONCUR and PCTOS. This also gives an advantage to CONCOR when there couid heave been better utiiisation of the ii'ifi"aSti{'L.iC'£ZL.if'€ faciiities. KREBHCO had agreed with the suggestions of the US that MGR shouid grant access on reesoneisie terms to CRTs, especiaiiy the ones which were currently un+:ier--utiiised. it was argueel that threworactices and corsduct of i'v'iOR in denying the access to raiiway infrastructure had a Cumuiatiive adverse effect on competition in the rail "freight market resuiting in an abuse of dominance by MGR in contravention of section 4 of Competition Act.

Page 163 of 163

194. The next issue taken up was that of maintenance of wagons. Accerding to the provisions at the Cencessien Agreement, maintenance of rakes was to be undertaken by MGR for which PCTOS were rec;i_.iired to pay charges te MGR. MGR taiieci to carry out tirnety maintenance despite the payment of maintenianzce charges. It was aise stated that the neuiege charges for the rnevement of rakes for maintenance diiti not contempiete such a charge and therefore the imposition ef nauiege charges for movement of rakes for maintenance was in vieiation at the concession agreement. On the ether hand, the DG had heiti tnei: the action at MGR was in vioiatien of section 4(2)(a}, 4(2)(b), 4(2)(<:) anti <4{2){d} of the Competitien Act as weii es vieiatien of the Act under section 3(iv) read with sectien 3(i) of the Cernpetition Act.

195. It was argued that the safety issue breugnt in maintenance of rakes did not serve any ebjective justificetitin for an abuse by e i:iernina'nt enterprise. Even an action preventing 'éterivete participation in maintenance of wagons was net justified. In ttiis ctinnetztion, reliance was pieced in the case at Eurefix-Bauco in Hiiti. It was argued that the main reasen fer net opening up of the "area of maintenance tn} private pieyers en the standards laid down by MGR was to reserve an edditienei source at i revenue. This siso ameuntectto an abuse of dominance, It was argued that the maintenance serviices ef MGR were inefficient and resulted in deiays causing iess te PCTCis, On the ether 'hand, i_.itiii$itig3<- market for V m_eintenance.and repairs of wagons wouici infuse competition and resuit in more efticiency.,

195. It was argued that the DG had not discussed; ieveraging ciaiin mede by KRIBHCQ in the intormetiori. It was argued that MGR. tied a dominant pesitien in the market reii "service 'preferential access to Indian Reii network infrastructure termineis and sittings. In .ac_iciitieri MGR was else a reguiator which eiiows it to enjoy a dominant position in the market at reii serviiqes and aisti enabieci MGR to ieverege itsdeminence iri raii services to pretest its position in reii freight services. It was ti'i,erefere .-:-

Page 104 M160 stated that MGR had leveraged raii services market in the raii freight services market. It was argued that this amoontis of infringement of section 4(2){e) of the Competition Act.' V ' 19?. The iast argument advanced was that MGR was weariiig different heads as reguiator, operator, poiicy maker etc. 'There was an inherent confiiet of interest between the 'mi.iitipie roles piayed by it. It was stated that in the case of La Paste the European Commission had formed a view that to the monopoiy services upstream La Paste faced a confiict of interest. La Posts was a statutory monopoiist for the proviisiori of basic oostai services in France and that its function Created a conﬂict of interest whicti aiiowed it with prefer to its own subsidiaries, This resuited into an abuse of dominant position. It was argued that simiiar position exists in 'India as far as MGR is concerned. It was theirefore requested that the report of the DE should be accepted in foii and an appropriate order under sectiori 27? of the Act should be passed. It was aiso requested that an order be 'passed for setting up of an independent reguiator to take poiicy decisions and decide hauiage charges etc, It was also reooestedi that orders be passed for ini'i*astr*u_ctore and operatioin segment. of raii freight seirvices to facilitate equal access rights to essential faciiities and infrastiructure.

BA€§(G'Rﬁ§_NB

198. in this case it is necessary to 'C0;l"iSiCi&i' a report .of11M+»%h:medabad on the competition in the container movement by raii. When containerization started on the different raii road system in different courdries in the worid MGR aiso introduced containers in 1966 on the

-Indian Raiiway Network foi*-»»carr3ririg goods. Subsequentiig, MGR incorporated a company known as CONCUR which was 100"/a subsidiary oi' Iiidiari Raiiways. Ail the assets inciuciing roiiirig stock were transferred by indian Raiiways to CONCUR without any consideration. CONCOR started operation in 1989 for the carriage of goods in containers. In 33005 *- the iviiriister of 'Railways announced that Government of India wooid ' Page'1ﬂS of 180 permit private operators to run coritainer trains which were eariier the moriopoiy of CONCQR Earlier a poiicy to aiiew operators other than CONCOR was aiso announced in 1994. But the poiicy did not cieariy bring out the roie of CQNCQR vis~a~vis new operators and the guideiiries were . found to be restrictivie. In 2001 Centre! Warehousing C.0rporatic:m (CWC) obtained ciearance to run container trains. in 2004 'ER aiso permitted Pipavav Rail Corporation Ltd. to i'i..ii'i container trains between Pipavav. port arid 15 hinteriarid CONCQR ICDS spread across the country, But there " was resistance frorn CONCUR and tiitimateiy MGR decided to come up with a separate poiicy. The Minister speech in 2005 stated that container' traffic wouid grow at the rate of 15%. it was therefore decided to open up the sector of container traffic to other piayers. Stitzsequeritiy, the Committee on Infrastructure of Goverrimerit of India under the Chairmarisifiip of the Prime ,iViini.ster decided 'ti'iai: MGR. would prepare a scheme to aiiow entry to various operators. Subseﬁiiiaetiy RITES as a izorieuitarit was asked to carry out a study in respect of operiirig up of the SECEOE'.

199.. RITES projected that 30% of the totai cdritairier traffic wouici. be carried by ER in 2i31«=i.~1S starting from their current estimate of 21%.

R1"i"ES aiso studied the fact at starting 28 container raii corridors for meeting the growing traffic 'requirements. RITES recorrimended deveidpment of dedicated freight corridors between i3ei_iiii--iviumbai. and i3eii'ii--Caicuti:a. RITES aiso interacted with seizerai piayers in the market who stated that CD'NCCiR had its optima! ievei of operations and in the absence of competition may not be atiie to "bring efficiency arid Qtowth in the coritairier business. According to them a ievei piayirig 'fieid vis--a--~\/is ~' ~-~*==CC2i\i(3OR was essentiai arid that vttie.-entire riatwori<.~e-hotiid. tie made avaiiabie to the private operators rratjher than iimitirig them to one segment. It was stated that IR imust provide guarantee of transit time and introduce a system of penalties and rewards. REYES aiso recommended that the operators 'must have proper raid! access in the hinteriarid iorzation for haridiirig container trains, Ttie report aiso Page 105 oflﬁii suggested that operators shouid have an agreement or MQU with an existiing EZCD owner. The operators were required to dE3\_iEiOp their own ECO in two years time. RITES aiso recommended that as oniy CONCOR has raii iink faciiities, it was the duty of the IR to encourage the development of common user termineis with private sector participation. Rates for such common user iaciiities were to be designed in the same way as was the practice in the UK and Thaiiahti. RITES aiso proposed that R shouid consider making unused assets, such as sheds and surpius ianti aveiiataie to the private parties on ieese basis.

EGG. Subsequently, the Pierming Cerhmi.ssiori got invoived in the interrhiriisteriai consuitatioris before the issue of the new poiicy. The debates revoiveci aroaursci ii) entry barrier (ii ievei oiaying iieiti \»*is--e--vis CONCOR and (iii) protection of user interests. Pianning Commissioriis view was that prescribing an 'entry fee' amounted to tiotibie jeopaftiy since CONCOR had a monopoiy power and first mover advantage. it was the opinion of the Pienriing Commission that CQNCCIR was weii entrenched . whereas the new entrants would have risks of irwestment in roiiihg stock and termineis as entry barriers for prospective entrants. MGR in this meeting raised the issue of protection of its revenues. Thus the committee came up with the deizision that MGR shouiti some up with .aiterna'ti\.:e oroposei for the protection of its revenues, ensure ievei A piaymg rieios and ensuring that there are no entry barriers for "protecting CC}i\iCOR's monopoly. The representative of Ministry of Commerice also stated in the iritermiriisteriai rmeetirig that a; provision Si'i0i..i§d_ tie inciuded in the guicieiiries to ensure ithet private operators are treated on par with CQNCOR. in the view of the representative it was neczessary because "CCii'iiCDR, the track and the iocornotives'*w.s.re ova.-r.eci by entithat there was a risk of discrimination -against the ririvete operators. The Departments of Commerce and Shipping were of the View that a need was to have is reguiator for protecting interests of the users. Fears of carteiize-tion by the private operators were 'feit by Commerce 8; Shipping ' kn and MGR felt that comisetitioh in ' ~ Page 107 of 1.50 Ministries. 'But theiPiarariir:g Cog .

the market would take care of user concerns. Arse if that was not sufficient and MGR fett that competition in the market weuict 'take care or user concerns. And if that was not sufficient Clomhetttieh Commission coutd take care of the users' interest. The Committee was of the View that as the prices were set uhiietereiiy by CONCUR keeping into account the competition from the read sector, the users' Shterest week} be safe.

20:. Pﬁenhihg Cemrhissieh theh cércrﬁeted another paper for the EMS group in October, 2005. It was proposed in this paper that there shouid be no entry fee, Further, cempetitien was in the interest of reiiways because uttimateiy it wouie in the epinieh of the Ptehnihg, Commission increase the share of container rhevement by rah as compared to read, it weuéci also increase the revenue of rahways sue te ihcreesee haulage charges. It was etse 'pointed out in; this paper that the new eperetors weuid become the izeptive customers of ER end. weuid have ﬁnvested ccmsiderahée sums of money in railing stocks and cehtaiher terminals before commencing business. It was prephsed that sit CTQS wouid get ievei praying fields on first came first served in respect hf mevemeht of trains. The paper stressed as need to ensure a Eevei pieyﬁhg heir} in terms of awning fieasihg rail Etnked 'terminate, utiiizatieh of unused IR f.ar:i%ities, hauiage charges, deeumentatieh and iegai Siebihtiesr The operators were 'tr: have the fiexihhitr at' fixing the tariff rates 'fer services offered; by them.

202. Reshehses were received hem the Raitway Board and the other The Raiiway Beard stated that 'it deserved the right to determine the freight rates and iheiudihg haulage charges, HM had but it was IR which stetrehoiders.

stated in its paper that the freight rates were falimg had tgtjenﬂhat authority to fix retes, 'Because of the overuse er the reihmiey F'hEitWQr'§<, IR was not in a position to give guarerrteetintrehsitv tithe end' departures to any of the train operators. Reitway Beard wanted to have entry fees fer new entrants just as there were entry' fees in the teiecerh market. -On the other harm, the other stekehotders were net in feveur at Page 108 eflﬁﬂ entry fees for the new operators.

preferences sheuid be given to CCiNCOR..

it was aiso stated that no operationai 'Z03. In November. 2005 the iriterrninisteriei group decided to issue a draft poiicy.

fMinieter for Railways announced the poiicy on 8S.Ols2G{}6. were invited to eppiy and 14 persons eppiieci for iicerise.

aiee made to eppiy.

After the draft eoiicy, the finai poiicy was readied. Operators Th8 CGNCOR was The applicants deposited ;Rs.S~4Cicrores as registration fees. After the modei concession agreement and corisiiitetion with the eppiicents and the other stake hoitiers, the interministeriai group drafted the mociei coricessien agreement which wouiti tiitimateiy ieed to the 'finaiization oi' contractual agreement.

poiicy reieased on 85.81.2806 are as under;

1. Eiigibiiity 1.1 The scheme is open to at! registered Indian sector companies/persons either individaueiiy er The saiierit features in the oubiic/private in jeint venture. It wiii iriciude Indian registered companies :31' tereigfi entities.

EXIM "Traffic:

Domestic Traffic 1.2 1.3 Regulation of Raii Container Operations 3"

Financial Caoebiiity Approvai Process » 'Registration Fee Modalities of Granting New 'Licenses

-is:neii:r=~i-i . Terms and Conditions 'EH1 The container trains of various operators wiii riormaiiy be "tiiiepett:hetiA on e non---discriminating mariner er: _"'r"irsi_: came first served' basis, subject te any operational exigencies and / or restrictions from time to time.

Page 109 of 160

ECDS wiii be treated iike private sidings with the extant ruies 'xi N and procedures ieid down fer private siciirigs' eppiyirig mutatis-mutariciis te thﬂm.

7&3 Land and other related faciiities required for reiiway eperatien and the track connecting the ICE) te the nearest raii heed wiii have to be proviried by the operator at his own test, However, if raiiway land is evaiiabie he can appiy for the Same on the normal terms and crmciitions ieid down by M~Cii'«'..i 14 For movement at containers, the oper.etor wiii preczure his own roiiing stocir/containers accorciirig to RDSC3 approved desigra. The reiiing stock wiii be inspected as per ruies in force.

7.5 Leading and tiriieedirig of containers in the i3€;i!*'CS;"iCDs shaii be reeperisibiiity of the operator.

7.6 Maintenance of track wiii be done by the operater at his Own cast, with ER being paid for inspection/supervision arzcerciirig to the prescribed prevaiiing rates, Maintenance of reiiirugi Stock wiii be done by IR, fair which the prescribed chargee wiii be recovered from the operator, TL? The operater wiii aiiew IR to enter any of its premises fer inspiecticin and for scrutiny er documents peirteiriing ta ra.ii-- reiated eperatiens and provide necessary and reiaeonebie 'feciiities fer deing 50., I 75.8 The operater can carry aii geedrs subject in crmditiorns specified in the gentle tariff, red tariff and under provision ef Indian Reiiwey Act and any other instrtictieris issueti on the subject by MGR from time to time, ' 3.9 The mmereent of ceriteiners/fiats wiii only be in tnieck rakes of prescribed stariciard sizes fer different 'types ef wagons as rmtiﬁeti by the Raiiways from time to time.

7.,1'Cs 'lnfermetion system: IRE Freight Operatitm Information System {F6315} wiii aisca cater to the party's requirements for an integrated management erici operatieris irir"c>rrrieti'c.»ri Page 110 of 16!) 7.11 7.12

-7.13 37.14 77.15 7.18 irieien Reiiway fxct.

service. The operator wiii provide aii reiex_za'r:t data as required by FQIS. He wiii be given 'read oniy' access to this system at reasronabie cost' Haulage charges: The operator wiii pay to the reiiways heuiage charges appiicebie uniformly to aii operators, as ootiﬁireci/fixed by the Reiiways from time to time, For payment oi' haulage charges the provisions of Comrrierciai Manuel and other guioeiiries issoee from time to time wiil be foiioweci.

ineiueiing issue of_Reiiwey "Receipt (RR) will be done by Raiiway staff pasted by The cost of such staff wiii be hornet by Decumentation work, for heuiage charges Raiiways in the ICE).

the operator anti wiii be charged eeparateiy.

Operator Tariff: the operator Wiii charge his cuetomers for raii haoiage, terminai horioiing: ground rent etc, on a market determined basis anti raiiweys wiii not exercise any coritroi over such orieing.

Ail operations iike shunting, placement, with.drewai'_, formation etc, within the ICE wiii tie done on oartfs advice and party wiii be charged separately for such services: as per the agreement signed between the two.

Demorrege: There wiii be no oemorrage charges. Rejiiway wiii hOWE:Ver ievy stao'ii.ng charges as per rates notified from time to time in Case roiiing stock belonging to the ope-raters stabiee on ER network, ' The raii operator wiii be a common carrier eetiefioed; under Norma! ruies in respect of ciaims wiii be appiicaoie eecordirig to the indiiao raiiway Act, 1989.

8. Period of Vaiidity of Permission for Operating Co;ntainer'Treins.

9.. Canceiiatiora of the Permission and Dispute Setiziement Page of 188 'f .

'10. This poiicy is in supersessiori of alt eariier decisions are running of container trains on IRianci shalt be in effect from the date notified. in the Gfficial Gazette of India.

204. in the report of RETES it has been mentioned that CGNCOR hero been tesponsibie fer the deveiopritent of the business of raii based container movement in india. CQNCOR had received support and protection from its parent organization Le. iiidian; Railways which iiati feciiitateci its growth in the intermotiei rail operations. For exempie, the tariff payebie to {R for container movements were gen.e_iiaiiy kept in Erie"

with the iowest Commodity ciass of IR and this helped CCWCOR in pricing its services over 40"/o of its costs. CONCOR had grown as a monopolist in a specific domain of rail based container movement even without expiioii:

machinations on the part of COCNDR, its large presence is, to say the ieast, ciatmtirig. The proximity of IR, its pareiit, sets the context for the confiict of interest 'putting pressure for significant wetchdeg iike efforts to move towards a ievei pieying ﬁeid, The fact that as its, 50 to-rore iicerise fee paici by CUNCQP. was viewed as unnecessary by IR refiects tiiis, especieiiy when CONCDR was already contributing over Rs, 1009 crere as haulage charges in 2005---07, anti oaying dividends on its profits to ER. In the said? RITES report though efforts were taken to move towards a ievei I oiayiog fieicis by making -exp-iicit the operating discioiioe, the issues wouici be deeper due to the very proximity refiected in the ownershigti and management ceritroi of CONCUR by IR.

205. In 2i)D«-"H35 CONCQR tied over 1100 modem rakeis, each of 45 wagons and speed potential. of 3.00 kms, per hour. The Wagons were designed for two TEUS end capabie of carrying upto 45 foot containers, it heci over Siii terfminais out of tiirhich 33 were raii iiniied ICDS in merry interior towns, serving eii the -regions of India, it also heci some road iinketi depots? Though CONCQR had a Anatienei presence, SC:% of the total contairier traffic handled by it came by the northern region inciti-ding the major ICDS in Tugtiiakabad and Ludhiana.

Page "112 of 3,5!)

206. in the HM report it has been mentioned that distortions were caused due to icenfiict in the muiitipie roie of IR as iicenser, regeiator, service previder and eperater. The report aiso states that though there was a need for private investment arid cornpetitmh was necessary it couici eniy be achieved through creation of a peiicy €3i"i','iF'Qi"2'E'Tii'Z'.'i'i'E where compeititien and private sectet pe.r'ticip.ei:ion were not stifled by acts at resistance on the part of incumbents. in this partitiuier case the peiicy had remained stiii born from 1994 uhtii 2006. But for extemai participation in the evoiutioh of this peiicy, even in after the 2005 budget eriiititmcement the poiicy weuici have met the same fate as the 1995; ihitietive, In particuieijthe repert states that e>::tei'nei gpressutes eh creation of ievei piaying fieid especieiiy through the 'first came iirst served' peiicy were crititei and cateiytic in heiping IR to roii out the paiicy ehneunicement cf MOP...

207. In the repert given by the Pianning Commissieiih, it was stated that eii opereters shouid have equei access to the entire reii i'ieiCWDi'i>< at par with the existing eeerators so that the custemers have a reei eheieei It was eiso stated that the Reiiweys wouid not incur any portion at the cost at capacity charge, and it the epereters feiied to provide traffic, i'iCi taiiwey capacity has te be reserved at earmarked for the operators, Therefore the need for stipuiating minimum traffic cemmitment from the operators was net considered necessary. The iiiienniihrgg Cemmissioh ehvisegeci thetthe new eeereters weuid offer container traffic from their ewe sidings and on their awn reiiing steci; for carriage by Raiiways on iaaymenjt ef freight which was ceieuiateci on fuiiy distributed cost pies profit, This was in conformity with the Reiiweys' business modei. Whatever raiiweys wished te reeiizie wceuid he Charged thteL.sgh"'freight and that investing in reii infrastructute sheuiici net be e prerequisite fer runnihg Container' trains. _ The Piarmihg Cemmissiews View was that as container i23USii'iESS€S constituted oniy 2*3°/0 of total freight business of the IR, even theugh this share is iikeiy to increase, it would remain margihei, It was therefore the View of the Pienning Commission that it wouid not be fair to ask the """' Page 13.3 omen container operators to finance line capacity when they wouid utiiize cmiy a smeii fraction ef it. As far as sharing at revenue on increments: traffic was t;on:erned Warming Commissien's View was that the sharing woeid ccmtraciiczt railways' awn poiicy of effering voiume discounts te its custcirriers and weuid be a disincentive for increasing votumes, Further the cenditiorzs eppiicabie to CQNCCER sheuid eise eppiy t0 the new elperators. The Pianning Commissitufs View was also that the maintenance ef rotting steak may iriitiaiiy be carried out by ER and the cost wouid be borne by the operators. But IR sheuid consider etiewing the opereters to engage other agencies far this work. it was View of the Pierming Commission that ER may not eiweys have' requisite resources to suit the requirements of the operators. And that the Reiiwey maintenance couie then become a constraint in terms at detention of roiiing stack. In the opinion ef the Pienning Cemmissier: it weuiti be more efficient if maintenance was carried eut by other agemfzies subject ':0 " raiiway "inspection and supervision relating to safety, Regarding the services for shunting and fermetier: of trains it was the View of the Pﬁennirzg Commission that IR cotiicl ievy charges but 'm any case the same rules which eppiy te CONCOR shouid eiso 'epg::Iy' to the ether eperetors, Regarding the suggestien that the return on investments shetsid be 15% and payback period for operaters .sheuEci be 12-13 years, the Pianriing Commission was of the View that as the services weuid be Opened te cempetition such a erojectien was not necessary,

208. Railways started in India for the first time by the moxrement cit passenger train between Mumtrai and Thane in 1853. The investments in the raiiway infrastructure came either from governrrient er private sources. Thus there were swsitipie raitwegr ieystemsi in Inciie which were either government owned er private owned. As India is e subcentinerxti the railways became the iifeiine of transportation 01' passengers and geeds ferthe entire ceuintry. In mid 19"' century the interest COETlbt§StEUi1 engine had not been invented and therefore there was me trenspertatiee 0%' Ce reiiweys Page iii} of 15% entered the foiklore anti it led to the cieveiopment oi' railway towns. The eervice inoust.ry to cater to the meciianicai, eiectrical and the civil maintenance of the railways aiso developed. Bridges were built all over the csountry. Factories were set up for the pikrpose of the infrastructure «faciiities of the raiiways such as wagon and coach factories. But the iocomotives were imported from abroad tiii 1947. In 1951, 42 private railway companies were merged and the Indian Raiiways came into being. The area of the raiiweys was divided into different zones which were each headed by a Genera! Manager.

209. In order to reguiate the affairs of the raiiway system.' in 189[i.ti'ie first Indian Raiiwaya Act was enacted. This was to apply to both the' private and the government owrieci railways, in 1905, the Indian Raiiways Board Act was enacted and sotiseoueritiy by a notification the powers of the Centrail Government was vested in the Railway Board, As the Indian Railways Act 1989 t'c':iii(S of Centrai Government in certain.

sections, it is necessary to examine the provisions of the said Act.

210. The Raiiways Act of 1989 was enacted on 03.06.1989 but it was notified on 12.06.1990 by the Ceritrai Government. The objects and the reasons states that Indian 'Raiiways Act of '189U was enacted when the majority of the railway system was managed by private companies, At "that time, the Govt. of Ericiia piayeci the roie of reguiator such coordination, inteeraiiway movement of traffic, fixation of rate, sharing of revenue etc. This roie was refiected in the Act. But as in 1989, the entire raiiways was owned by the Government of india, 'and in View of arnenoiments. carried out of the Aotat different times, it was coneiciereti necessarxg to have a new Raiiways Act. in the new Act power has been oiven to the {Zentrai Goxrernraieotllto 'fix 'tiiel1Lr-atelsl tor the carriage of pas.seri_gers and goods. in the earlier Act of 1899, the Centrai Government had the power to fix the maximum and minimum rates for carriage leaving the fixation of specific rates to the iraiiwayatiministratioo.

Fags: 1115 of 1663 ' In addition, the raiiway adminEstrati0ns_ was aisa authczrised to spgcify iump sum rates for the carriage of goods.

211. in the Act of 1989, raiiway administratisn has been defined in respect of government raiiway as the Generai Manager of the Zonal Raiﬁway. Raiiways in the 1989 Act has been defined in Sectigoﬁﬁa .2{3§1_§ as f0ii0ws:~ "rai{way" means a raifway, car any partion of a .raiiWEU*'; -.1' 0!' the pubfic carriage of passengers or goods, and im:Judes~ (as) 3!! lands within the fences or other boundary marks indicating the limits of the fend appurtenanr': to a raiiway;

(£3) 5!! :':'nes% of raifs, sidings, or yards, or branches: used for the purposes of, or in connection with, a raiiway;

(C) aii electric traction equipments, power sugtzpiy and distribution instaliatians used far the purposes of, or in connectiﬂﬂ with, a. raifway;

(cf) ai! roiiing stock, stations, offices, wa:'eii:ouses, wharves, workshops, manufacfories, fixed piant and mac,m'nery,« roads and streets, running rooms, rest houses, institutes, hospitais, water works and water Suppiy :'nsta*f!a'fians, staff dweiiinvgs and any other warks constructed for the purpose of, or in connection with, raiiway;

{ej aii vehicies which are uséd can any road far the gurposes of traffic of a raiiway and owned hired car war: ked by as railway;

and ail ferries, ships, boats and rafts whim are used on any canaf, river, lake or other n%aviga!:u'e iniantf vvairers far the purposes of the traffic efa raifway but does not inciude ---

(E) a tramw%ay wholfy within a municipai area; and

(ii) lines of raiis bum': in any exhibition gmund, fair, park, or any ether mace saieiy far the purpose ofrecreation.

P833 118 of 159

212. Commodity means specific item of goods. Freight: has been defined as the charge ievied for the carriage of goods inciuding transshipment charges. Goeds inciude containers, paikets or similar erticﬁes ef transpert used to consaiidate goods. Section 2(4) ciassification has been defined as the classification of commedities made under Section 31 fer the pwpese cf deteremining the rates to be charged for the carriage of such Cemmodities, The reéevantprevisions fer the purpose of this analysis are sections 30, 31, 32 and ?1 of the Raiiways Act, 1989.

which were simihar to the provisiens were The reéevam:

provisions in the 1989 Act sections 29, 42, 46 8: 27A of 1890 Act.

Secﬁon 39 Fewer to fix rates - (1) The Central Gmaerﬂmenf may, from time to time, by genera! or specie! Qrder fix, for the carriage of passengers and goods, rates for the whole Or any pare 0:' "the raffway and different rates may be ﬁxed far different' ciasses 0:' goods and specify in such order the conditions subject fee which sum'? rates Sheff appiy. (2) The Central Government may, by a iike czrder, fix the rates of any ether charges incidemfai be or connected with such carriage includineg _demurrege and wharfage far the whole or .any part of the railway ants' specify in the order me c:Qnditfon.s subject to which such rates shah' apply, Section .3: .

The i':entrai Government shah' have power to --- (a) classify or Power ta dassify .ca_mme:di:ties or after rates *-

re-

classify any commodity for the purpose of determining the rates to be merges' for the carriage of such commodities; and (£9) increase or reduce the class rates and other charges.

Sectian 3:2,. Pawer of raiiway Aae'min;istret,ie.:w e-'techarge rsertaez rates -- Notwithstanding anything contained in this Chapter, .3 raiiway acfminissfration may, in respect of the carriage of any ccammodity and .sui:>ject to such concmfions as may be specified -

(er) quoete a station to station rate;

Page 11? M160 -

(£3) increase or reduce or cancel, after due notice in the manner determined by the Centre! Government, a statien to station rate, not being a station to station rate introduceti ii'? comoiiance with an order made by the Tribune};

(c) withdraw, alter or amend the conditions attached to a station to station rate other ti1an%cono'itions introduced in compliance with an order made by the Tribunal; and (of) charge any lump sum rate, Section :31. Power to give eiireetien in; regard ta carriage at' certain geods - (1) The Centre! Government may, if it is of T the opinion that if is necessary in the pubiic? inrereat so re do, by genera! or speciai order, direct any railway administration -

(a) to give specie! facilities ﬂair, or preference 'ITO, the carriage of such goods or class of goods consigned by or to the -Central Government or the isovernrnenr of any State or of such other goods or eiass of goods;

(5) to carry any goods or class of goods by such route or routes and at such rates;

~ (5) to restrict or refuse acceptance of such geeds or ciass of goods at or as may be speciﬁed in the order.

(2) Any order made under eubeezrtion, (1) snail cease to have effect after the expiration of a period of one year from the date ef such order, but may, by a iike order; be reneweo' from rjirne ice time for such period not exceeding arse year at 5? time as may he specified in the order! (3) Notwithstanding anything centained in this Acre every ___reiivgay administration eiiaii be bound to compi}/V with any order given under sub-section (1) and any actiorii:ai~re.n i::3.r}.ab rvaiimray N administration in pursuanece of any such order sriaii not be deemed to be a contravention of Section 70.

Ciass rate has been deﬁned as the rate 'fixed for a class of commedity in the ckassificaitien. Vcontairaer and hauiage charges have met been defined Page 118 {if 169 in thesct. In the policy clecisicm on 5,1.?.0{)6 it has been mentioned that each operator will pay to . the raiiways hauiage charges appiicabie unifm-miy ta aii the speraters, as notified/fixed; by the raiiwaygs from time to time. Thus haulage charges are different frczam the rates which the Central Government can fix for the carriage csf goods and passengers under Secticm 30 of the Raiiway Act. Ansther interesting aspect. in the Act is that one cannot approach the Railways Rates "i'ri;t»ur'iai against the levy cs? rates and classification under Sectien 30 and 31 of the Railways Act respectively. In this cannectien Sectiun 37 of the Act is reievsnt which is as underw-

Ssction 3?. Matters nut within the jurisdictian of the Tribune! »---- Nothing intirhis Chapter shall confer jurisdiction on the Tribunal in respect cf -

(3) ciassiﬁcatian car reclassification of any commodity;

..(b) ﬁxation sf wharfsge and demurrage charges (incfuding conditions attached to such charges};

(C) ﬁxation of fares levied for the carriage of passengers and freight levied for the carriage of iuggage, parcels, raﬂway materiaianﬁ miiitary traffic; and l (0') fixatien of iump sum rates.

213. It is new necessary to discuss the functiclning cf the ragilweys in India. The first 'train which carried passengers ciperateci from Mumiaai ts Thane in 1853, Prior to 1853 railway iines were used in Smuth Indila fer civil mnstructian work. But the first commerciai service started in l_8S3.., Initiaily, the investment in the railways came from private sources but the gcsverni-neat was -also 'mvaived in imiiding some railway lines...The ii1itiag,,,__ funding in the railways was mostly by citizens oi' the Uiiited 'l'5;i[ﬂ§}{jCIl"i'i who used ts receive interest of 5% an the investment in the raiiway netwmrk, As already discussed indies Railways. as s mogrwpoly carrier came into being in 1951 after "the acquisition of 42 private railways iiﬁdai' Governmenthf India Act. in 194-? the totai length of the 1nc:li'an Railways "' ' Page 13,9 M1611 was 53,596 kms. which has increased to 64,215 isms. in 2812, On the other hand China had 21,800 kms. of reiiwey iiries in 1947 which increased to 91,000 icms. in N12. The freight carried by Indian Reiiweys is amunci 1050 miiiion metric tennes. tbet the Chinese raiiway Carries 3643 ' miiiitm metric itenries every year. Ae far as the number ef freight Wagons are concerned the number of freight wagons with the Indian Raiiways are 2,4Ci,ti0i3 and whereas with China they are 6,Ci3_,082, This weiiici Cieeriy show that the Indian Raiiweys has not kept pace with the grewth ef the Indian economy and has became a bettieneck.

214. A study carried out by the Ministry of Commerce and ihdustiry estabiisheti that the freight rates charged by CQNCDR. are {me of the highest in the werici. Simiieriy the freight tariff en the Intiien Raiiways was found te be one of the highest in the world' in fact the freight rates and the Chinese & Russian Raiiweys were iewer. .1Everz the freight rates an US railroads was ene-i'eurtii ef that tn the Indian; Raiivveys, Further the everdependerute on the road transport in India centributeci to many grievances within the eeuntry. These are ever cehgestitm on roads, piiterege of carge and ehvironmentai costs which are borne by bath the corisumer and the producers, Read transport accounts for 60% of the freight movement in 'ihciia. But this comes at a huge (zest due to the fact that Eat of paper work and fermaiities are to tie cempieted in the 'freight check pests. It has been was estimated that en eceeuht of waiting at the check "pests costs the natieh ieses ~.$12.-5 traiiiien in the form of fuei costs every year, if the movement of freight eh raiiway system irmrarewres it wouid ieed te censtimer satisfaction and increased efficiency, in fact ahptherh__'repert sbh4ey_ve___that the biiii: commedities were test to the raiiways as e resuit of tirieing peiicy as weii es the neneggreéietieh er the eiecemeei goods, The Raiiways carries eniy a take at geecie ei' i:=uii< commciriities and the pieceme'ai czemmedities ere iest to the F'-ieiiways and gained by the read transport. Another rejeert prepared by Meiciheey shews that road transport emits 289 of carbon iziiexide per tonne Page 1128 at 168 kiiorneters compared to 15g for Raiiways. But even then indie conizinues to transport the majority of its goods by roads inciuriing bi.iii< materiei iii<e steei, cement and coei. An increrrientai shift from road to reii can heir) India save 03% of its totai commerciai energy and consumption. The Government of India was aware of Vaiiathis and therefore it sought to open up the goods carrying on the Indian Raiiways to private container train operators This is evident from the ipreernbie to the concession agreement which states (i) increasing the raiiway share in container services and {ii} introducing competition in reiiway container transport services in India and (iii) hauiege of goods of the Indian reiiwey network. both for export 8:

import domestic "traffic, in the background of these facts this case has to be decided.

Anaiggsis

215. The first issue to be decided in this ease is the chaiienge of jurisdiction. The argument raised on izieifiaif of the Raiiways is that reiiweys was not an enterprise and therefore couiti not be the subject matter tmtier the Competition Act 2382. The Commission in its various orders has eireaciy heid that Raiiways was a corrirnerciei venture anti therefore it was an enterprise for the "purpose of examination under the Competition Act 2002. it was argued on behalf of Raiiweys that no reiiarir:e stiouiti be pieced on the judgment oi"tne i-iorioreinie Sirrgie Iitidge oi' the Delhi High Court who tied heici that Raiiways was en eriterorise. it was stated that an sepoeai 'had. gtieen fiieci before the Division Bench of the High Court and for this reason the Commission shotiici not treat Reiiwafrs as an enterprise, Arguiiients were raiseci that the actions and decisions of MOR arose out of an exercise of statiutory power in the form of tieiegated iegisietion. It was further stated that the powers exercised by 'MGR. ieiib under the ooiicy making power of the Centrei government under Articies S3 and 73 of the Constitution of 'indie It was aiso argued that e poiicy decision cotiici not be the subject matter of ciiaiienge before the Commission as being entivcompetitive. It was further' oieeded that iv'iOR Page 121 of 15:3' and CONCOR couid not be ciassified as a group under the Competition Act. Further the rates circuiars were ooiicy decision and arose due to the exercise oi' statutory and sovereign powers of the raiiways, It was further stated that if the rates circuiars were chaiiengeci it couid Di'ii'§' be decided by a Court and not by Commission wiiicii had no oower ofjudiciei review and that the Commission was oniy a forum to suppiement the exiistirig judicial system. It was further stateci that MGR acts thrioogh the Raiiway Board under the Aiiocetion of Business Ruies under Artieie 7??(3) oi' the Constitution. It was aiso argued that the Railway Board by the virtue of the Indian" Raiiway Boards Act of 1905 had been vested with the sovereign powers of Centrai government and the Indian Raiiwey Act 198% inoiooing the power to make ruies for Raiiways administered by the government. it wasfurther stated that the Centre! Government by way of notiﬁcation vessteci the Raiiway Board with aii the powers and functions of the Centre! Government, It was eiso stated that MGR was oniy reguiatirig the various PCTOS and was not .oerform'ing e commerciei function and under the scheme of the Competition Act regoiatory functions do not faii within the jurisdiction of the Commission. A question was raised which reads as foiiows:

V "whetrier a challenge to deiegated iegisiation in the nature of a rate circuiar being a subject matter of writ jurisdiction before High Courts .and/or the Supreme Court of India can be questioned by a 'statutory body' like the Competition Commission of India and whether it can go into the question of ivaiidity of suco e c:ircL;!_£-ir virriich is essentiaiiy in the nature of deiegateo' iegiislation. "

216, In the iight of the SUbi'i"iiSS_§Oi1;S trite issue of jurisdiction has to be ciecided first before proceeding with the case. Under section 2(ii) of the Competition Act an enterprise has been defined as foiiows. "enterprise" means .5: person or a department of the {Ear/errnment, who or which is, or has been, engaged in any activity, :"e1£:'3i"iFig;i to the production, si:or.:~3_ge, supply, distribution, acquisition or conrroi Page 12?. of '.1'6{l or articles or goocis, or the provisicm of services, of any kind, Or' in investment, or in the business of acquirihg, holding, underwriting or dealing with shares, debentures ar other securltiesi of any other body corporate, either directiy or through one er more af its units or divisions or subsidiaries, whether such unit or division ill' at a different place or at different places, but dues net l:"ic:lL:c3'e any activity of the Government reiatable to the sovereign functians of the Government inclucziing all activities aarrieci' on by the departnients sf the Central Government dealing with atomir: energy, curr'e_n:,v,, defence and space.

217. A perusal of the definition would Show that any government department which is engaged in any activity relating '£0 carrying a business would be an enterprise under the Competmon Act 200.23, New 'in this case the Henmahie Single Judge: cf the Delhi high r.:<:surt'had held that the Iinciién Railways was carrying nut c:c:>'mme;'t:§a! functions and was therefore an enterprise. Further if the argumant of Indian. Railways is accepted then no Government Department wouid fail Lmcier the cleflinition of esnterprise because they do not Cami any business. But a Derusallof the section wcsulci Show that if any activity which affects the carrying an Business is conducted by a Gcwemment Department "then it would be an enterprise. This View has been upheld by Deihi -High Court. There is, A therefore, no reasan to hcgid i:hat'1ndian'Ra§tway is not an enterprise.

218. The second argument raised is that with reference to the last part: of section which allows exemption ta any activity relating to sovereign. ﬁmcticm «of the Gcnxrernment including ail activities carried an by Department of Centrai (':3<)'vem'ment deaiiingi with atomic energy, currency, defence and space, It was 'stated that this is an exctusienary item and far this reason the MGR which carries nut scrivereign functions has tn be exempted fionw the definition of enterprise, The fact is that the first " portion sf this section ta'ii<s about any activity whereas the iast _p::3rti0n cal theﬁsecticn talks of any activity relating to smvereign 'functiens, As this is Page 123 cu' 16G an exciusionary item in the stétute, the interpretation has to be strict and narrow. It was therefore 'necessary on the part of the Raiiways to estabiish that ii: was carrying on cif sovereign functions and this has met been done. Mereiy because the MOP. wcirks under the statute 0i 'Pariiament it does not become a sévereign power. if MGR was carrying' Gui: sovereign iuncticms than it woiuici have been included aiong with atcsmic energy, currency, defence etc. There is no doubt that MGR is ' Carrying out cammerciai functicsns as heid by Deihi High Court and MGR _ has not estabiished as its what sovereign functions it is CEii"i"y'ii'i9» 32?' the argument of MQR is accepted then any gcwernment authmiity which is working under a statute iike Ccimmissionei' Customs car Commissioner Inceame Tax wcmid aii be carrying on sovereign functions, 'This wmuici 'cake the question of sczvereignty in an area; which has not been envisaged in any of the Acts of the Pariiament. Therefore, the argument that the MOR is an enterprise performing sovereign functions does mi: imici good and has to be rejectedii 219, Under the Government of India Business Ruies 1961 the aiiocaiticm :3? the business given ta MGR is as foiiows:

(1) Government Railways - AH matfesfs, inciudirig those reiating to Raiivvay revenues and expenditure, but exrzziuding Raiiway Inspectorate and Railway Audit.

(2) Nan~G0ver'nment Raifways ---- Matters in so far as provision for cronitroi by the Ministry of Raiiway, Railway Board as pravided in the raiiway Act, 1.989 (2%? of 1989) er in NEE' contracts between the Government iancs' Raiiways, or In any atiier stator enactments, _n.2_3'me»iy,_ ireguigﬁigvgg _ in respecé sf safety, maximum and minimum rat':es and farés, etc. e;s:c'iuding the item of wank' allocated in the Department of Urban Deveiopmenir.

Page 124 of 16:0

(3) Pariiament questions regarding offences reiating to pifferage of railway propeety other than offences re_!at:'ng to crime on government Raiiways and Non~GovemmentRaiiways1t (:1) Admin:'strat:'on of pension rules eppiicabie to Raiiway' empfoyees. " 4

220. In this connection it is necessary to state the controt of Raikways revenue and expenditure cannot be cﬁassiﬁed; as a sovereign fuoetéone Even answering Pariiament question and administration of pension rates:

cannot be etassiﬁed as a sovereign 'function otthe state.

221, A The Indian Raétways performs various functions. It is an operator, a regulator and a tieensor which has a tote} monoooty over the entire raiiway networhz It has power to make ruies aiso and therefore performs legistative functions in addition to its administrative and adjutoicatory functions. 'Therefore 'Indian Raiiways performs different functions and the Supreme Court in the case of Eﬁectricity Authority reported in 2010(4) SEC 603 has approved; such a rote for on enterprise. {Joe important issue which has been raised as to whethter to poﬁcy tormuiation amounts to a.

discharge of sovere':gn functions, 222$ Before taking the issue further it is necessary to e:=::r:1m'ine that what are the functions of the Competition Commission of 1od'so_. The duties of the Commission have beteo enumterateo in fraction 18 of the Competition Act 230.2 as foilows ﬂuties of Commfsssion; Subject to the provisions of this Act, it shat'! be the duty of the Ciomtnission to efiminate practices hawrtg adverse effect on competition, 'promote toned sustoin Competition, protect the interests of consumer's and ensure freedom of traofe carﬁeci on by other participants, in marétet in Iradief:

Provided that the Icommission may, for the purpose of o:'scoorg.ing its duties or performing its functions under this Act, enter into any 1'' "'3 :31 :4"; Pagellﬁ oflﬁﬂ fk : ' .' . ..E_', .

' "\'-\.~ 3:» ' ._\_\ 1_'\,\\?»§~ 3» K3' xx"; ., )3, U,' v~z-«ww-""""

\ memorandum or arrangement with the prior approve! of the Centre?

Government, with any agency of any fereign country. Sectien 63 of the Competition Act reads as fohowsz Ace to have everridfng effect: The provisiahs of this Act shall have effect notwithstanding anything inconsistent therewith contained in any ether law for the time being in farce Section 52 ef the Competition Act reads as feiiows:

Appiicatien ef ether Eewe net barred: The previsions hf this Act sheii be in addition to, and not in deregatien of, the provisions of any other Jaw for the time being in force.

223. The question is whether fixing a rate amounts to a eeiegated Eegisﬁetioh, whether the CCE ceuid gt: into quesﬁoeh of vaiidity ef such a circuier whéczh was stated ta be in the nature of delegated, tegisietieh.

224. it was stated that mice fixation was essentiatly e iegieiethxe function and that Courts d§ci not have power to ﬁx the price' It was further argued that a court was neither cencerhed with peticy her with rates. It was also stated that a court couid not evaiuate and consider the prhzes wouid be 'injurious some manufacturers or producers, The prepositien given by the authorised cmmsei of reiiways 1'35 earth: correct, Fixation :33' price 'is an admihistr.at'we function and net 'a'1eg%s!et'we fuhctieh. It has been held by verieus courts that ﬁxing ef>pr'i<:es required expertise which a Ceuhi GOES.

not have. Courts eiso do not interfere in policy decisicme and with rates because the peiicy as wen es the rates are framed and fixed by an expert eedy and :3 Court is normeiiy not cempeteht to lock 'ante these aspects. But {he Comméesion is he: a court and iris an ectoherrgiis body which can Eook 'into the ecohemic aspects of the decisieh taken. The Commission has no jurisdiction te »e><amihe the -vaiidity sf action taken in 'ar:c:ordz.~mr;e with the statute. A ceurt can interfere 'en a poiicy decisieh if it is against pubiic interest ehd aiso interfere in fixation Q? rates if the fixatiehs rates Page 126 ex' 16{) are discriminatory or vioietes part III or the Constitution of India, In soczh a case the Court has a power to seteside the poiicy and the fixation of rates. But the' Commission does not have any restriction in examining a ooiicy cierzisiori or a fixation of rates. Incidentaiiy or: this very issue the Supreme Court of India in the case of State of UP. vs, Hindustan i Aiumrnium corp. and others (tore) BSCC 229 decided the issue oi' subordinate / tieiegated iegisiation. in pore 41 of the said. report the Supreme Court has decided this issue. According to the Supreme CQLi!"*C the vaiidity of subordinate iegisiatiori may be ciieiiengeci on the ground that the power to make the iew couici not have oeen exercised iri the circumstan;cfes'wiiich were prevaiéirig at the time when it was made, or that condition precedent to the making of the iegisietiori Ciici riot: exist, or that the authority which made the order was not competent to do so, or that the order was not made according to the procedure prescrioeti by the iaw or that provisions were outside the scope of the eriaoiing power in the parent act or otherwise vioietive of its provisions A statute. Incicieriteiiy the Raiiways Act 1890 was enecteci witiii the idea of rreguiation of the business of raiiweys wihich oonsisteci oi' various private companies. .Sui:sequeritiy in 1.989 the second Raiiways Act was enacted by the Pariiamentt The difference between 1890; Act and the 1989 Act in respect of fixation of -rates was that in the :i.E3'~3Ci Act the maximum and rniriimurri rates eouio be fixed by the Centrai govt, whereas the specific "rates were to be by the raiiway administration. But in the 1989 Act 'the Centre! Government has been given the power to fix the rates for carriage Oi' messengers and goods. It is not imowrs as to whether Lieder the Raiiway E'>oerci.s Act of 1905, after the enactment of 1989 Act the Ceritrei Gotre'rnmen~t tied authorised the Reiiwey Board to function as the Ceritrei Government. In 'Fact if there is such a notification it has not tieeriiorotigiit on reitoro' by the railways. Another question whicii arises is whether the rates fixed for the carriage of goods wouici epoiy to the eriti consumers or to parties who had entered into a eontrecttiei agreement' with the Indian Reiiways.

Pagelﬁ? or 15::

225. Fixing of rates in accordance with the Section 30 to 32 in the Reiiways Act has normaiiy to be done by the Centrai govemment. The question is whether this is a deiegated iegisiation or not, Any ruie or reguiaticin made under an Act is e cieiegated iegisiatien and woiiid; have the force of iaw. in the absence of any notification by the Ceritrei Government authorising the fixation of rates by the Raiiiivey Board, the competence of the Board in fixing the rates is subject to ciieiieiige. The fixation of rates was not made for the regulation of different raiiwagi systems. ii: was argued that the rates were fixed and certain goecis could".

not be carried was a power which was exercised by the Reiiway Board N under Section 781 inf the Reiiwey Boerti Act of 1989. But whenever Section ?1 of the Reiiwey Beard Act is invoked it is necessary to Show that it was in pubiic interest. in this perticuiar case the poiicy of the Governmem of indie was -that the container business on the Indian Reiiwey system; shouid be opened to the private pieyers, Therefore puibiic interest ciemendeci that the poiicy of the Government of Indie eheuid. be foiioweci. When the advertisement for the concession was issued there was no clause which was in respect of rates or restrictions for carrying certain commedities. Fixation of rates couiti be e cieiegated iegisiaticin and (III cannot go into the vaiiciity of such iegisietion. Eu: if the said cieiegateci iegisiation vioiiates the proviisions of the Competition Act then the CC1 can state that is vioiative of Competition Act though it c:em'iot go into the 'issue of ciercuiers fixing rates and restrictions en the carriage of cei'tain commodities. But the CCI in View of the Supreme Qourt decision in the case of Hindustan Aiuminium Corp. (Supra) can mention that it is e vioietive of the Competition Act. Therefore in View of the Section 60 of the Competition Act: and the Supreme Court decision tije CC1 ties the power to state that certain actions otthe MOR are entircompetitixie, It is necessary mandate given by the Pariiament under Section 18 of the Competition Act.

Page 128 ef 1.53

226. The next issue to be decided is the issue whether the Commission has jurisdiction to go into the poiics? decisions of MOR. It was stated that the issue of rate circulars, ciebarring CTOS from carrying certain commodities, increasing hauiage charges, stopping the CTOS from using private sidings, ievying stabiing charges are policy decisions and Cannot be questioneci by the Commission. If these were poiicy ciecisions then the idea of opening up the sector to private container operators on the raiiway system couid not be a poiicy decision, if the arguments of MOR are accepted.

22?. Before taking up the issue it is necessary to examine the variotis decisions of the Supreme Court before deciding the issue, in the case of Centre for Pciiziiic interest Litioation vs. Union Indira, W.i3._(Civiii_ Nor 423 of 2818, the Suorerrie Court came up with the 'Doctrine of Public Trtisl:;s', According to this doctrine, the owner of the assets of the railways are the peopie of india and the government is oniy the trustee and the governrnent in respect oi' the properties acts tnrnugh MGR, The apex court neid that if any benefit is to be given by government to 'anyone it has to be non discrirninatiory, transparent and ciiscern'ii;>lr3. The oniy . aspect to tie seen is wnetlier pubiic interest has been protected or not, There snouid not b8 any bias, jobtiery or nepotism. The apex court in this case also held -that normally a court siioulri not interfere in matters at poiicy as poiicy is made try a team of experts. But a court can examine whether the irnpiementation of poiicy is contrary to nubiic interest or vloiative of constitutional principies. In fact, as laid down by the Supreme Court, a court has to see the larger public interest.

228. The Supreme court in the case of Secretary, Qﬁogngagogetlg Broadcastino vs. Cricket Association of Ber_i_g__a_i Civii Appeal Nos, 1-.=i29*30 of 1995 held that rnubiic property is iimiteti and has to be used in the best interest of society. .Wi"iei:l'ier a iicense has to be given is a matter of Page 12% 16:8 poiicy. Further it was heid that monopoiy at any time ie Liiiecceotebie, whether it is of state or private parties.

2'39. In the case reported in (1980) 3 SCR 1338, the Supreme CD_i_.1_ﬂ_ iieidi that the constitutional power conferred on the government ceimot be exercised by it arbitrarily er caoriciousiy or in an unprincipied manner, ii:

has to be exercised for oubiic good. Every activity of the gov_ernmerii". has a oubiii: eiemerii: in it and therefore be informed with reason and guided ' by eubiic interest, Further in the ease of Dinesh Trivecii vs_i.inion of _i_{i_:_ij_a;L the Supreme Court further iieici that right to know is rieiceesery for democracy anti that the reasons for the decieiori taken has to be imown. in some other iziecisions, the Supreme Court: has iieid that in some of the statutes there is no mechanism to inform the ettecteci persons, But it the statutory power is to be invoked then the affected pertiesﬁiouid i:3e'gi\/61":

a right to be heard, 2353. in e simiier vein, the Apoeiiate Tribunei for Eiectricity in its orders ciateci i:i5.1iiii.2ii09 in Aooeai No, 50 of 2089 {heio that administrative ' instructions issued by one iimt: of government to companies wouici not be a poiicy decision. it was heid: in this case that a oujbiic poiicy can be formuieteti after the formeiities ere met under Aiticie ?2 of the Constitution of indie, 231, In the case of Lucknow Deveiooment Aut»hority vs. M.i<. Gug};_e__;994 AIR "787 1994 SCC. (1) 243, the Supreme Court was deciding the issue of jurisdiction of the Netioneicommissioni the State Comenissioii and the District Foriim Linderitiie Consumer Protectiori Act, 1986. The Supreme Court heid that the iegisietion was a miiestone iii iii'etoi'y of." socioeconomic iegisiation and is directed towards achieving imzbiic benefit. What is 'mciusive definition has been expieineo in this Aot, The definition of service end consumer in the Consumer Protection Act is simiier to the iiege 138 of 158 definition in the Competitien Act. An extract from the judgement is reproduced as ur:<:ier:--~ ~ "Tnisi takes us to the iarger issue if the public aiitiicfirities under different enactments are amenable its jurisdiction under the Act. it was ivenementiy argued that the iocsi autnori.ties or gave:-nmeni badies eieveiop land and construct houses in discharge of their statutory sfunction, tiierefore, they rsouid not be stibjecieci to the provisions sf the Act. The learned counsei urged that if ifiie anibii of the Act wsuid be wicieneci to inciude even sucii suthsrities if wouigi vitally affect the functioning of ofﬁciai bodies. The iearneci counsel submitted that the entire objective of the As: is in pretest a consumer against maipractises in .bUSi{}ESS£ The argumeini proceeded on cnmniete misapprehension of nine purpose cif Act and even its expiicii: ianguage. in fact the Act requires prsniider of service to be ninre abjeetive and c:aretai<'ing. It is stiii mare so in public services. When private undertakings are taicen over by the Gevernment or corpnraztions are created to discharge what is otherwise State's function, ﬁne cf the inherent objective 0:' such saciai weifare measures is in prsvicie better, efficient and cheaper services to the people. Any attempt, therefore, to exciune services offered by statutory or ciﬁiciasi bodies to the coniman man wouici be against" the prmiisions of the Act and the spirit behind it, It is indeed unfnrfunate that .sini:e -enforcement of the Act there a demand and even poiiticai pressure is biiiit up its exclude some air the other class from operation sf the Act. How ironies! it is that offici;-ii or semi-officiei bodies which insist on numemus beriefits, 'wiiicn are oti3erwise_avaiis.bie in private sector, succeed in bargaining for it on threat of strike mainiy beceiuse of larger inceme accruing time to rise in number of consumers and not due to better and efficient functioning ciaim exeiusion when it CC3i'i'3E:'S to accountabiiiiy' from operation .oi°ftiie Act. The spirit of cansumerism is so ieeiaie and dormant that rm association, public or private spirited, raises any Page 131 of 183 finger on regular hike in prices not because it is necessary but' either because it has not been done for sometime er because the ioperaticiraai cost has gene up irrespective of the efficiency without any regard to its impact an the common man. In our opinion, the entire argument found an being statutory bodies daes not: appears to have any substance. .4 government or serm-government body or e iocai authority is as much emenabie re the Act as any other private body rendering similar service. Truiy speaking if wouid be a seirviese to the society if such bedies instead of cieiming exciusian subject themselves to i the Act and feet their acts and omissions be scrutinised as pubiic ecceunfebifify is necessary for heeitiw growth of Society. "

It was further hem that the theoretical cencept that King can do wrong has been abandoned in Engianci itsetf end, the State is new held respensibie for tertuoue act ef its servants. The court further heid "Under our Censtifutien sovereignty vests in the people. Every ﬁrm': of the canstitutionai machinery is obiiged ti: be peopie oriented. No functionery in exercise of statumry power can claim immunity, except to the extent spratecreci by the statute itseif. Pubiic authorities eating in violation of censtitutionei or statutory provisions oppressiveiy are eccountabie for their behaviour before euishorities creereci under the statute iike the commission or the ceurts entrusted with 'reS;t30nSi:f}iHf)=' of maintaining the ruie of few, Each hierarchy in the Act is empowered to entertains complaint by the consumer for veiue of the goods or services and compensation. " The Court, therefore, hate that the Eegisiative in'terﬁ:ien is thus Cieax' to gtzmtect a consumer against serviees by statutory bodies. On a perusai of the decision of the apex ceurt, no authority which e><e__rcEseS statutery pewere can ciaim exempticm frem Competition Law, which is for censumers beneﬁt Such reuthority is answerable to the Commission if it contravenes the Competition Act.

Page 132 of 180

232. In the case of Union of India & Cirs. vs. Hindustan Deveiog meet Corooration 1994 AIR 9823 1993 SCR (311281 the Supreme Court heici as uncier:~ "There are different manifestations of economic power in different fieirris of economic activity. 'V On such manifestation is the achievement by one or more units in an industry of such a dominant position that they are aoie to conrroi the market by regoiarihg prices or output or eliminating competition, Another is the adoption by some producers and distributors, even though they do not enjoy such a dominant position of practices which restrain competition and thereby deprive the community of the oeneficent effects of the rivairy between producers and producers, and distrioiitors and distributors to give the best: services. It is needless to say that such practices must inevitably impede the best utiiisecioh of the hairiorfs means of production economic power may eiso manifest itseif in obtaining controi of large areas of economic activity' by a few inciustriaiists by diverse means, Apart from affecting the economy of the country, this often results in the creation of iridustriai empires, tending to cast their shadows over poiiticai democracy and socioi vaiues."

Therefore, the avowed policy of the Government particoiariy from the point of View of pubiic mteresr is to prohibit concentration of economic power enci to controi monopoiies so that the ownership.

and controi of the maceriai resources of the Community are so distributed as best 'to subserve the common good and to ensure that whiie promoting indostriei growm there is reciuciion in concentration of weeiizh and thatjthe economic power is orooght about to secure sociai and economic justice.

233. In View of these decisions of the Supreme Court and the provisions of the Competition Act, the Commission has jurisdiction over MDR, 'if:

makes no difference even if MGR is working under the Raiiways Act.

Page 133 of 186

Further, protection of competition in India and its markets are in oubiic interest. Moreover, as protection of rights of consumers either under the Consumer Act or under the Competition Act ieadto the same effect, the Commission has the duty and ooiigatiion to question the anti competitive behaviour it any of MDR .

Section 2(h) is very wide and Further, the phrase 'any activity' n"ie*_ntioned_ n.

inciudes eii noiicies which are anticompetitive. But in any case the fixation of rates under Section 30 to 32 of the Raiiweys net, 1989 or denying the PCTOS from carrying Certain goods under Section ?1 of the Raiiways Act cannot be regarded as a ooiicy decision and being in ptitiiii: interest. The poiicy itiecisiopn was the ooiicy which was formuiateci in January 2006 for opening the reiiwey sector to the private players and which was uitirnateiy gazetted, Sections 30-32 and 71 of the Raiiways Act, 1989 are enebiing provisions for.MOR for the purpose oi' reguietion of the raiiway system. But the use of these powers to the detriment of the consumers is an anticornpetitive practice.' MGR cannot take the pies that it had the power to act in any manner to the detriment of the consumers and against the neiicir' which it torrntiiateci itseif on pressure from the other wings of the government.

it has therefore got to be neiti that commerciai decisions not taken in oobiit interest cannot be ciassitieci as poiicy.

234. 'Further, the argument that the i'.2ornrniss'ion has no jurisdiction over MGR as it was a reguietor is without any basis.

No jmateriai has been given as to how a reguietor cannot be treated as an enterprise under Section 2cm of the Act.

A reguietor eiso has an activity which effects business and -is therefore has to be treeteci as an enterprise under the Competition Act. But it wouio teii foui of the C'.omf:ietition Act onh; when 335 activities 85$? enticomoetitive. ' .235. In the consultation process which took piece before the poiicy announcement, the fears expressed by the other iﬁirancifies Oi' U16 government regarding the behaviour of MOR appears to have been Page .134 of 166 proved ta be Certect. By its behaviour MGR has seen ta it that the policy which it formulated an extemai pressure was defeated' 236' Another issue raised is that once the private CTOS had antareti into an agreement with MGR, now they cannot raise the issue of competition at a tater stage. The Supreme »Court has heid that the ttsrivity at ccmtract is a 19"' century tancept and is not the correct View of iaw. it was further heiti any Contract which is between a iarga ecanamy entityahti a smali person may he a void contract, This was the View which was t:-raaountied t in the case at Brajonath Ganguiy AIR 1986 at 1571, Subsaquentiy the Supreme Court heid that any contract which is in \f3Q1Eii:§Cii'i of Part 111 and Part IV of the Constitution GE' appaseci to pubiic: poiicy is a. void Canttact, Further in this case, when the pciicy armaumziement came in Jantiaty 2006 and 15 petsans applied, they hati no itnawietiga that the tztmtracts which they woaid Sign wauici have restrictive masses. After the C'i'{_Z>fs deposited the fees, an 11"' Cictober 2.006 the Raiiway Board came cut with restricticms ariithe carriage. of certain commodities. As the PCTQS had aireaciy made investments and had piacad orders far the railing stack, they ctiuici hat back wt, Further, they were *m;1t'aware ciftha izircuiar at 11"' October .2808 because there was no cahsuitation tiafare the issue of the Circular', in fact Ki'"ibi'iCO the 'ini"tirmation provider came its itaow at it when it signed the agreement in 200?.

237. We have to examine the Dactrine of Leaitimate Expectation on this issue. The doctrine at iagitimate expectation was first propotinded by the Supreme Court in the case of the Navjoti Coa;:=--C~;roup Htsusing satiety vs. the Linioh at India and athers (19%?) 2SCALE 548. The Supreme Court referteci to Haisizauryts Laws of Engianti as vxieii as *the_dei:ision oi' the Hausa of Lords in Cmmcii of Civii Service Unian and athergggs. Ministagfgg Civii Services reported in (1985) 3 Aii Engianci Rawrtat pajga 935. it has been haid in the said decision that an aggriavaci per.sc)n was antitietii ta judicial review if he couid Shaw that a decision of the puhiii: au.thai'ity Page 135 of 159 affected him of some benefit er advantage which in the pest he had permitted to cehtinue to enjey either until he was given reasehs for withdrewai and the oppertunity ta cemmeni: on such reesehs, in Heisburws Laws ef England, iegitirnaize expectation has been expiained as foiiows: "a person may have a legitimate expectation of being' treated in a certain way by. an administrative authority even though he has no legal right in private iaw to receive such treatment. The expectation may erise either from representation made by the authority, incfuding an imisiied representation or from consistent pest practice." Whiie discussing ithis doctrine the Supreme Court was of the View that administrative ectien is subject to contrei by judiciai review on the foiiowing issues: (1) iiiegaiity wherethe decision making authority has been guiiizy of an errer of iaw rather by purporting ta exercise a power it does not possess (2) irretioneiity where the decisien-making autharity has acted so unreasohabiy that no reasonahie autherity, week} have meicie the decision (3) procedurai impreeriety where the ciecision~mai~<ihg authority had feited in its duty to actifairiy. The Supreme Court has discussed this doctrine in detaii in its judgement in the case {if Hindustan Deveiopmeht Cerporetien (Supra). In "fact -this ciectrine was introduced in Britain for the first time in 1969 and new it is being used in various cases.

238.' Accerciihg to the ciectrihe the courts new expect gevemmeht departments te honour the puhiic statemehtser treat the citize'he' persenai censicieratien. In 'fed: in respect cf uhreasehebtehess cases, which are close ta unfairness in the form eif vioiatien Bf nature! justice, the doctrine ef iegitimete expectations can operate, This prihcipie woukzi uitimateiy Lmciermihe same of the estebiished ruies and advice which stand to eperete unfairiy. The ﬁrs: right which the ihdNiCii}ial get through this cio::trine is the right to be heard before any eiicy diecisiion or administrative aictien is 'taken against him, in fact iegitimete expectatian in a sense imposes a duty te act fairéy, if the Government comes with a new poiicy then under the doctrine the Geverhmeht has a chance to Page 13$» (if 169 examine the poiicy which needs to be pubiisheci, Legitimate expectstien is a concept which feiis .short of e iegei right. The Supreme Court heid that tnefere examining the issue of iegitimate expectation, it is riecessary to examine as to how these expectations arose such as what are the factors which ied tn the expectations. The Court aiso heid that the pretectimi of iegitirriate expectations does not require the fuifiimentef expectation when averriding pubiii: interest requires otherwise. In etheur wards if a persorrs legitimate expectiatien is not iuifiiied by taking a pertictiier View by the decisieii makers, there ceuid be e deniai of such expecteti-on by showing some overriding pubiic interest. The ceurt heid that whiie iieeiirig with iegitirriate expectation it has to be seen as to whether the ciecisien taken by the authority was arbitrary urireescinaiziie and not in pubiic interest if it is a question of pciiicy by a change of an aid poiicy the courts cannot interfere in the decision. é Legitimate expectation ought to be ignroteizteczi but met guaranteed.

239. In this particular case when MGR came eut withiiedvertisement ' caiiing fer tenders for the mevement of gaocis in containers by prii/ate pieyers an the inriien Raiiway System, each er' the tencierere were of the View that the treatment which given to CONCOR wouiti eiso be given its 'them by 'MCiR. 'This means that the iegitimete e:»;;3ectet'i0n existed and the tenderers were of the bcmafircie 'beiief that 'there weuid be no 'restriction rm mtiverrierit trf .buii< gases, the rates .c:tiarc_ieti'tewCCii\iC()R viiciuici be rates charged tr; the private CTOS and the railway iariei weuid be made avaiiebie to the PCTOS err the same basis as they were rriariie eveiiabie to CONCUR. The PCTQS beiieved that as the government Wes ' irweived iri the "transactions, the expectatieri of the i3'C_Ti3s was that there wmiici be me discrimination between CONCUR and others. Tiierefiiie there was a raticmai basis to have expectations and such expectations ceuid be treated as iegitimete EXDEC.t.E§fi0FiS«a N» Page 137 cf 16.0 '-* I 'ifs' .2'; -. , , '-.'.<' K "/2, 1,2,4; 2,3 ' _,.

"N. X, 3 am J

240. The issues irwoiveci in these three cases are abuse of dominance by MGR. MGR is involved in the transportation of passengers and goocis throughout the iength and breadth of India. it is therefore'renciering a service to passengers as weii as carrying goods; Both these activities are carrieci out on which the network of reiiwey iiries Wiizh sigﬁai equipments, iiocomotives and roiiing stock. Therefore, reiiway is oriiy rendering a service on its network. A censumer has been defined in the Act under Section as .a person who buys goods or services for consideretien whether Duroose, Thus, in for his own use or for resaie or any other commercial this particuier case private train operators couici be regarded as a consumer eiong, with the end consumers i.e_. the uitimete beneﬁciary at the services of the reiiweys. If the railways increased its rates then the intermediaries which are consumers nerneiy the PCTOS are not going to beer the charges themseives but were going to pass on these charges to the end consumers. Therefere the ievy of charges he the enci consumers wouid increase if the charges on the intermediaries were raised. Therefore by the reason of increase in charges for the PCTOS, the uitimete sufferers were the end consumers. If the end consumers refused to pay the iexira charges and shifteci to some other mode of 'transport, the interrrieciiery wouici ioose business and may uitimateiy be driven out of business, thus iessening competition in the market .,

241. The railways network which has been ouiit over a period Di' time is E:

facility which cannot be repiiceteci in any country where raiiways exists, in India, this is the passengers. It is, therefore, an esseritiei feciiityi, In Tiriciie thougri the main metiium or transportation of goods and truetiee Qwnershiti or the Raiiweye vests in the peooie of iriciia, MGR is e on beraaif of the peopie of India and it runs passengers trains and cjooris train on its vast network. If the reiiway system ciid not exist iife wouici not be what it considered under Section 4 of the Competition Act.

is "today. Thus MGR is a monopoiiist, its .i:1ei'ieviour can oniy be Page 138 of 1130

242. Any competition anaiysis has to start with the effect of the competition cencerne in a market, There cannot be a cernpetitien ctmcern in a xractzum. Thus, when a case is seiected for investigation under the Competition Act, it is only on the basis of the effects it has in a market or a certain behaviour of an enterprise in the market, The Coinpetitien Autnerity has to examine as to whether there was anti competitive agreement or an abuse of dominance by the enterprise, This weuid be ptzssibie oniy by the examination of the entitempetitive bei'ta'xfiOUi' under the Camp-etition Act. Tnerefere, any analysis has tci be carried out with a; reference to the effects in the market and not the other way i'C3Ui"id, Thie means that it is not correct to first define a reievent market and then ~ exarnine a pesition of strength when an anaiysie is taken up, An eneiysis wouid oniy arise with reference tn the enticomrietitive effects iivtiicii behaviour causes in the market.

243. Expianatien (at) to Section 4 at' the Competition Act tietinee dominant pesitien. Deminani: position means a pesitien of strength; enjoyed by an enterprise, in the relevant market, in India; White BHOWS it to operate inciependentiy of competitive ferces prevaiiirag in the reietiant rriericet er affect its cempetiters or consumers er the reievant market in its favour. R.eatiing of this expienation taiks at position of strengtti in an reievant market. 'Therefore, the first issue to be decided in this case is whether "iViC-'R was in a pesitien of -strength. For "this 'purpose we have ta 9:) to Section 19(4) of the Act. But tiefere ciieciciing this 'issue We have 're define of the reievent .ma;'§{et, The reason for this is thet e pesitieri of strength weuici eppiy eniy in the reievarit market.

24-4.. The concept of reievant market has to be with referentze to service or product. in this rparticuiar case we are tieeiing with tranepertetitin of goods. Therefore, the issue wouici be at service as defined under Sectien 2(a) of the Competition Act, Under Section 2(_r) reiex/ant market rneerie e rnaritet which has tobe determined by the Commission with reference to Page 139 of .160 the reievant product market or the reievani; geographic mrariket or with reference to both the-markets. Thus if the Commission defines either the relevant precinct market or the relevant geograotiic rriariiet then the relevant market is defined. it may not be necessary or oossiioie to ciefine both the reievant geographic rnar_i_<ei: as weii as the relevant product rriari-zet. Section 2(5) defines the reievant geographic market which means a market comprising the area in which the conditions of competition for suopiy of goods or provision of services or demand of goods or services are riistinctiy hornogenous and can be distinguished from the conditions orevaiiing in the neighbouring areas. Reiievaint product rriaritet is defined under Section 2{t) of the Act. it means a market comprising ali those 'products or services which are regarded as interchangeaoie or suostitotaoie by the coinsurner, by reason of characteristics of the products or services, the prices and interioeci use.

245. In this particuiar case the railways performs a service of transportation of persons as weii as goods over the raiiway nietworlti. Thus, the raiiways on the whole can be stated to be operating raii services over its network. This raii network is an essential faciiity because it cannot be repiicateti. In this pagrtiouiar case we are cleaiing with the * carriage or goods in oosintainers over a raiiway network, The container service is 'part of freight services of the railways which it transports over its network Though the carriage of 'freight over the raiiway netwoirk is a part of the railway services market, it can be regarded as a separate rriaritet after the opening of the container sewiczes to private players on the raiiway network.

246. MGR has argued that the reievant market would be the services on rear: trarisoori: as weii as the raii transport. Tire question is whether this deﬁnition of the relevant market by the railways is correct or not, Goods are transported on the surface in four different ways i.e. by road, rail, pioeiines and sniper in India the ships operate mainly in the coastal areas i'z.-zge 140 of tee and there is harciiy river transport existing in India. Through: oipeiines oniy gases and iiquids can be transported whereas soiio cannot be transported through oipeiines. This ieaves oniy road and raii transport, The question is whether the characteristics of services both by raii and road are same or not. The characteristics are totaiiy ciifferent; ixiormaiiy by road transport goods are carried from one piece to nearby piece and it means a door to door service. As far as buik goods are concerned the carrying capacity of trucks is iow and they are not in a position to «::ari"i! tiuik goods as the voiurne of transport is nigh. Therefore raii i_S Preferred as each wagon or container can carry huge voiiorne of goods. Therefore characteristics of road and reii are totaiiy different and they are not substitutable. Even the prices charge for the services by raiiweys and trucks are different and therefore even by the prices aneiogy they are not substittitehiet The intended use of the services aiso have to be iooi<.e<:i into. The factors which affect the intended use by a consurner are prices, tirne comfort and personai income. it was mainiy due to reiiways inefficiency and time taken that there has been a shift from reii to road. Time is a factor which comes into piay as raiiways 'take abnorrnei time to transport goods from one piece to another as compared to roadways, The services rendered by both rail and road are sirniiar and but the characteristics and intended use are different. Therefore, raii and road are not substitutable services though the finai resoit is 'transportation of goods. tncidentaiiy wniie oeai with lenses the Cornrnission heici in the case of GKB Heeithcere (case no.U1/2010} that piastic coated ienses are different from giass coated ienses. The functions performed by the piastic coated ienses and giass coated ienses are the same but the Commission considered them to he beionging to separate markets. VSin"iiiari\,/ in the case of 'i:iTi-i operators (case no. 021.2039) the Commission has neio that for the transmission of teievision signais, the reievant market for DTH services are different from the cabie services, The functions performed by the DTH operators and cabie services for teievision were same. Even the European Commission in the case of Waneooo (supra) hao neid that Page 141 of 168 r..A 07?':;')I,'.,__ -'5 fv.

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3 / high speed interoet arid iow speed internet are not the same market though they perform a sirniiar function. Considering ail these facts the raii transport services and the road transport services have to he treated as separate markets.

~ 247. The ELG. after investigation found that the movement of goods on the raiiway networic by wagons and containers constituted the relevant product market as defined under Section 20:) of the Competition Act. The DiG. had aiso considered the factors under Section 19(7) of the Act to some to thishcohciusion; Further the D.G., or: the basis of the ietter of _ MGR dated 31.83.2011,' came to the tonciusion, that as the operation of raiiways is on the entire raii network consisting of port sidings, private sidings iet».::., the geographicei "market wouiti he the entire rail. network in India. The D.G, further during his investigation found that goods either ioose or buik can be carried both by wagons and containers, in fact, in the opinion of the i3.(«3. wagons oouid be substituted by Coritairaers arid vice versa. The D.G. therefore deﬁrieti the reieverit market as the "transportation of goodsifreight either in wagons or containers on the raii network". Dri the other hand the argument of the reiiways is that raii and road constitute the same market. 1 have eiready heid that rail and mad have different characteristics, the services rendered on road and raii have different prices and even the intended use on 'both these modes of transport are different. For this reason they cannot be part of the 'same market. But even if road and raii constituted the same 'freight market, where raii had 30% share, there _we_s__ho other enterogjse otherwmeg railways which had a oosition of strength to act indepehoenthr' of eernpetiition and effect its Competitors, tonstimers 'a1nr.'e. the imariket in its favour. Oh the other hand the ieerned czotmsei for Arshiya agreed with the deiterrrrmation of the reievant market by the t2_.Ca'., KRIBCHQ argued that there are two markets which are relevant to this case (i) iche orovisiori of raii services in iridia and (ii) raii freight Services. ACCUTCEEFIQ -- to the KRIBCHO the rail services market on the Indian Raiiwav network Page 142 of 169 ctmstitute a market by itself. Ira this market the railways tzarries out the service of moving passengers and freight. in the railway freight market the raiiwsys carry only freight either thrmigh eonteineris or through wageris. There is total substitutebiiity between wagtms and containers. Therefore, they ere regarded as part of the same freight rriaritet of rail services. Though the freight market a part of raii services rna_ri<«et it can be regarded as a separate market because the reii freight market of the reilweys sutisitiises reii services market where pesserigers are carried an the railway network. KREBCHQ therefore argued that reiiweys operated in the rail services market as well as the rail freight market and this constituted the reievent product market. in this connection the factors mentieneti in Section 19(7) of the Act were else explained. As far as the relevant geographic market is concerned the fecters m.ehti0rieci in Section 19(6) of the Competition Act were rconsidereci and it was therefore argued that the geegrephic market reievarit to this eriaiysis wciuici he entire indie.

248. Ctmsidering the facts ef the case, the raii freight services on the raii network are treated as the reievarit predurzt market, As 'far as the geographic market is concerned as the railways etereteti eii over India, the geographic market is entire 'India. There is no deubt that reirlweys operates in a iarger market known as raii services in India and in this 'A market net oniy freight but passengers have raise te be lcon_sidtered.,

249., The next issue to be ctmsitiereci is the issue of position ef strerigth in the relevant market. In the railway services market or the railway freight market thereis he other eperemrs other than the iritiien RaiiWa\_rs... Thus? in this rherket the Indian reiiways is e mencipeiist. in fact. in the market of raii freight services there is he substitutainiliti' and interchangeability with any other service. The chances of stihstitutahiiity and intercharigeebility is more ~evic_:lent when we are eerisirzleririg a i;1i'OClLiCiC butt when we are considering a .service the issueef iﬂterchangeatuility and sutnstitutatiiiity are less iikeiy teoccur, Thereforre in this reievant product Fage 143 of 15!} V market of raii services / raii freight services there is ne sutistitutabiiity Oi' interchangeabiiity with any other service. The DE had considered the factors mentioned in Section 1§(4) of the Competition Act and he came to the concussion that the rnontipeiist Indian Raiiways has a pesition of dominance in this market. I agree that the factors mehtieneci by the BS in Section 19(4) support the viewlthat raiiweys was tiorniniant iii the market at raiiway freight services,

250. Now we have ts examine whether the raiiweys abused its cieminant pesition in the reievent market, When the advertisement came out for opening up the services of raiiway freight to private epereters, the position at that time is required te he examined. The persehs whn eppiieci in response to the tender had the iegitirnete expatiatiens that the ruies which eppiied to CONCDR weuici also sppiied to the new container train operators. The iegitimate expectations were justified; CUNCQR at that time was paying hauiege charges tie the reiiweys at FAK tetes though it was seiiing its services at a margin of 40%., But in subsequent years the railways came out with rate circuiers R.C~25, R036 and 'R305 which has he reiatienship with the rates which were being paid the eehtaiher operator, CUNCOR at the time that it was operating -aione (en the raiiway system. No justiﬁcaticm has been produced ta Show the basis at the casts _ ihvoiveti on which -rates were raised. Further, in accerdence with the doctrine of iegitimate expectetiens which has been appreved by the Supreme Cetirt es weii es same other Supreme Court decisions which states that hefere using the statutory sewers an eitiperttinity of heariing has to be aiieweti to the affected parties, the raiiways ignereeseci the rate on ecihec basis. Even the justification for raising these haulage charges have not been estabiisheci by bringing on record the the netings can the ground that they cannot be produced as it weuici tie cietrirnentai to the interest of the railways. 'Thus, not oriiy he opportunity was given but even the reasons fer increasing the rates were eise not furnished. There is he materiai to held that the increase in the hauiage changes was an Page lriiti mi' 160 'account at increased casts, ii: is quite pessibie that the aiiegatitms made against the raiiways by the PCTOs that this was done to eiiminate the PC"i"£)s from the business of running eantainer trains over the raiiway network could be a vaiici reason. Thus by increasing the rates Oi' transportation which was cietrimentei to the i>i':"i"Os it has to be tieiti that the rates were increased so that izeiripetitiori on the raiiway network, seemed an the basis of government's policy decision, is finished,

251. The next issue is the issue at having a different rate known as caritainer ciass rate ie. CCR, Prier to the iritriziduction of CCR the raiiways had twe rates riameiy FAK rates and GTR rates. The container Ciass rates are 85% of the GTR rates. The basis of arriving at the ctiritairier ciass rate was neither furnished t0 the DG nor the Cemmissmn during the course cf the riearirig. it is an accepted pririrzipie that any increase in rates has to have relationship with the costs incurred by the raiiways and this is one at the basis an wtiicti the PP? poiicy was drawn. The Irii'orm'atien prtiviciers have stated that the container ciass rate was intredueed with the primary purpose of eiimiriaizing the private container train operaters from the transpertatieri business. The raiiways has not given a jiistificaticm as to why the carriage of geecis in coritairiers was increased from FAK rates ta CCR rates. N0 jtistificaticiri has been given as ta how the CCR rates wouid tie areurid 85% to the GTR rates. The cietsii of the costs invaiveij in increasing the rates has aiso not been furnished. There is theraiaie RD transparency in fixing the rates. The information Previciers have also aiieged that by fixing the OCR rates at 85% cf the GTE rate, the rsiiiways has seen to it that the amount paid by the PCTCrs to the raiiways is much retire than the GTR rates. This is so because in aijriititin to the CCR rates, the t)peret.c:2r's had to pay stai:ilirig charges, maintenance charges to the raiiways and aiso incurred: expenses an finance, settiing etc, As 'a ctmseciuence of the behavieur of the rsiiways the rakes tit the FCTQS are lying iciie as the PCTOs have been priced cut of the market, It was tiierettnre argues that Liitimateiy 'they wiii have to exit the reievant market Page 145 at 'L56 and this would lead to zerci competition in the said rhariget.' Thus, the rnenepeiisi: which is the railways would be in a position to continue with its menopely and inefficiency. Raiiways had no answer tci these siiegetiens. Further, the legitimate expectations of the PCTOs were beiied. There is no doubt that e mcihopeiist would behave in the market A in this manner so as to eiirninate competition favour.

252. Anether issue raised is that the Railway Eiciarci hes not been authorised by the Ceritrai Government by a notification that it heci powers ' ef the Central Gevetnrnent fer the purpese of Sections 38, 31, 32 and ?'1 of the Railways Act 1989. in absence of the netiﬁcatlien by the Central gcwernmehi: reiiways had he power te change the rates for haulage. The next issue which raised was the fact that the rates to be fixed under Section '3i3~32 of the Raiiweys Act 1989 were for the end consumers and net for the container epereters, it was argued that ester as the private train epereters were cohcerneizi the rates were to be fixed on the basis at the agreements entered ihte by the epereters with the railways, When the advertisements were issued in Eenuary 2986 and when the PCTQS ruies were ncitifieci in September 2856 there was he mention of the issue in the change of rates, But after the PCTOS had paid the fees at the time of signing the agreement, the issue of the provision fer' the increase in rates under the Raiiways Act was added. These rates were to eppiy to CONCUR. as well as the ether epereters and 'thereicire as 'far as the rates are concerned there is ne ciiscriminaticin between CONCQR and the PCTDS. But the fact is that hy increasing tstes net csniy the PCjTQs are being priced out at the market but even the 'prefit of the CQNCDR is suffering. There is no scientific hesis on which the rates have increeiseci and it has he relationship with the costs incurred by the raiilwevs. Therefore the increase in the rates is witheugt any tiesis and may lead to the exit ef the PCTGS car even CONCUR, from business. This would net he in putsiic interest. Further, as the fixation at haulage charges was on adhec basis withhut reference to the casts involved. and in vieietieh of Page 146 of 150 iegitirriate expectations of the container operators, it was unfair. it is aiso a fact that prior to the opening of transportation by containers to iorivate operators there was no reason for charging FAK rates to CQNCQR, After the opening of the sector the reasons for the raiiways to increase the hauiage charges to CCR rates from FAR rates is known. The Opacitv iii the decision making has to he treated as unfair. Moreover, as CC3i\iCiC)R was an estaoiisheci piayer in the market and received good treatment at the hands of raiiways by transfer of roiiing stock at zero cost arid. sidings on raiiway i-and at good iocatioris, it couio survivor out or; the other hand, the other operators wouid have been corripieteiy eiiminateti from the reievaht rriarizet. Thus, the fixation of the higher hauiage charges were unfair.

253. soothers issue raised by the information providers is that the hauiage rates for EXIM goods at FAK rates was _ori_ma'_riiy with the idea of promoting CGNCGR to the detriment of the other operators. It was stated that for the domestic movement of goods by containers, the hauiaoe rates were at container ciass rates. it was further stated that out of the totai revenue, CDNCOR earned ?S% ~ 843% revenue from the EXIEM traffic. It was aiso stated that the private CTOS were mainiy operating in the ciorriestic movement of goods. It was therefore argued that the action of the raiiways was discriminatory, To these aiiegatioris, raiiways had no vaiio answer, There is no justification for the railways to have two rates --- one of 'EXIM traffic and aiiotheiffor domestic. traffic. The Consumers who do riot rexoort are therefore put to a ioss and therefore the action of the raiiways is unfair. It is ciiscriminatorv in the way that the hauiage rates for CONCOR is different from the rates charged to the other C"i'Os.

254. The second issue which arose was with reference to the circuiar of the raiiways -riateci 1oi..10i.2iZi{i6 by which the iritiiari Raiiway orohioiteo the movement of coat, coke, miherais and ores by the jP{";"i'C3s, These are aii buiir: comrooditieél iiicicieritaiiy, oriorto 11.10.2066 when oriiy CQNCOR Page 14? Diiiiifi was the operator of containers on the Indian Raiéways system, there was no restriction on the movement of buik goods of containers. Normeihr reiiways carry buik goods when there was rake fun of goodé. in the consequence, a party who did not have a rake Seed of goods wanted to transport goods such as coal, coke, rmnerais and ores etc, Le, pork goods then they wouid have to send the goods by road, in the advertisement of January 2006 there was no restriction on the carriage of buik goods by the container train operators and further CONCUR was ahowed to carry huik good in its cohtaiheris. The CTGS were required to apply in response to the tender. The Segitirnate expectations of theCTQs was that they would be aiiowed to transfer hulk goods from one piece to another just iike CONCOR, But by the circuter of 11,1G.2CI£36 the transportation of huﬁk goods by container train operators was stopped hy the raitways. Thus there was a dehiat of access to 68°/o of the existing mrarket because on the railway network of transportation, the butt goods constituted 60% of the market. The information providers have stated that in the ceselof comcpe the Rahway Board by circuiar dated 12,o3,2oo'7 had ahowed the _carriage of huh: goods. Butthe container train operators were not ehowed to carry any buik goods even though they had asked the permission of railways for the same. According to the container train operators this action of raiiway was discrinfmatory. Indian Rehways insistedthrat buik goods shouid he carried onhz in wagons and notfm; containersr hut no "reason" was submitted as to why they couid not be carried in containers though there was specialty designed containers to carry buik goods. Thus, the raiiways saw to it that the transportation certain commodities rememed within its control. This aroounteo to foreciosure of the market and restriction on the provisfron of services offered by the container train operators. This behaviour of the reitways aiso deprived the smaii producers of both goods from the transporting goods in train and the transportation of goods of these persons. was lost to reiiweys forever. It was also stated that no restriction could be pieced.

Page 148 of 3.56

on the movement ef goods in aceerdance with ruie 12(8) :31' the PCTOS Ruies.

.255. As-far as raiiway was cencerned, it was stated that raéiwm/S had the autherity under the statue to put' a restrictien en the centainer tram eperaters from transporting a conﬁnﬁedity. Reiiways else stated; that after December 2010 CQNCOR was stepped frem rzarryéng any bulk geods in its cnntainere. It was eise stated "that CCJNCOR had never rneved buﬁk items iike tee}, cake, minerais, are etc, at any time, Railway arise ergued that to avoid the diversien ef cznnventrenak butk trafﬁc frem raiiwey wagene to container trains, necessary safeguards were made under the ertfrcie 3.3.2 of the Cencession Agreement, But the reiiway was net ebie the establish as te how the carriage of bun»; goeds in epen wagons fer certain commedities brought more efficiency and economy in the raiiwey syetem, The reihwey eiso argued that if Cronteiner trains were ailewedj then they weuid be ebie te carry onhz 2500 metric tennes in ene rake whereas in E3 wager: rake 4690 metric tonnes ceuid he carried: The container train operators stated that if the raiiweys permitted mere wegens to be Coupled in the centainer rake then the emeunt of goods crarried; weu_h__:§_ be more than 4800 metric tennes. It was stated that it is the faeit ef rraiiweys and not ef the container train 'operators. The reikways never permitted, the container train eperetnrs; to have mere than 45 wegens in a container rake, Reiiways ease argued that it was a statutery eutherity that there was no necessity to state as te why the decision We this in respect ef buik drugs was taken by the raiéweys. Raiiways else stated that the power of restricting the transpert of bukk drugs 'through container was given in the raitweys by Section 71 of the Rei§way.s_Aet. 1989, The raiiways aiso stated that ence the container trefm eperators had signed the agreernent: they cannot now say that they weuid not be covered by the agreement.

Page 1439 of 151}

256. There is no doubt that raiiweys had a statutory authority to ban carriage of certain commodities on the reiiwey network system, Btit under Section 71 of Reiiweys Act 1989 such a ban couici tie pieced in outniic interest, The raiiway has not been aoie to Show as to whet ouoiic interest was invoiveci in oermiog the carriage of tiuik goods in containers. The action of the railways has also beiied the legitimate expectations of the train operators, Regarding the argument that as the CTQS had entered into an agreement with raiiweys they are bound by, it has to be seen in ttieiigiit of the decision of the Supreme Court in the case of Brojooeth Geogoii (Supra). In this case it was iieid that or: agreement between a big economic oiayers iike raiiweys and srriaii pieyers- iike the private container train operators could be ciieiieriged because the " agreement may not be out of free. The agreement if it is one sided, it cooiti oe void. Further in View of the decision of the European Commission which has been cited by KRIBCHQ an agreement restricting competition wouici not oe vaiici. Competition is norroaiiy for pobiic good emti if an agreement restricts competition, it would not be enforceable. Further the entire operation of decision makiog ifirocess of the lociian Railways on this issue is totaiiy opaque and no valid reesori has been given for potting a restriction; on the transportation of boik goods by containers. Even an opportunity was not graoteci to the PC.'TCis for expieimrig as to why the restrictions were oiaszeci. {Doe of the reasons given was the ioroe congestion on the raiiwey network and for this reason. the PCTDS were not aiioweo to carry ouik goocisi But the main reaitoo was that reiiweys dict not want to iose main source of income viiiiicii was the carriage of ooik goods. No exoianatiori was ftirnisheci es to why 'permission was given to CONCUR for carriage of buik goods even for a iirniteci period of three years, Thus, the behaviour of the iooian reiiways teed to foreoiosure of the market for the private container train operators eodthe discriminatory favour has been shown to CONCGR which "is: 5-1 Dari:

oi' the reiiwey group. The practice toiioweci by the reiiways was unfair enci*restr'ici:~ex:i the market for the PCITOS further, if the PCTii)s were Page 158 of 168 alieweci to carry bulk goods, railways weuld have'eernei:i more revenue through haulage charges, Further the PCTOS were so smaii compared to raiiweysithat they weuid not have threatened the businiess Of railways. in fact they had a market share of 1% (all feurreen cembined) egeinst 99% of raiiways & CONCUR.

257. Anether issue to be censiciereci is the issue of fermaizieri of rakes, it was argued on hehaif ef the irlformatien provizziers that norrriaily a rake of container train consists (if 45 wagens, if one wagon was found defectives then five wegons are remevecl from the rake. A private contlainer train eperater is eiiewecl to reeve a rake ei' 45 wagons. But in the case (if CQNCQR even if the rake is of 3i3--35 wagons it is allowed to he moved by the reiiways. This was stated to be discrirrsinatory. The railways have not given any reason as to why this practice has been felieweci. They have aiso denied that this practice was not beiing followed by the railways. Therefore, it has to be held this practice carried Dﬂti by the Tmciieri Reiiwey is discriminatery as far as PCTDS are cehcerned,

258. An important issue raised by the information previciers was that as piecemeal goods were not ailowed to be aggregated especially of coal, coke, minerals, are etc i.e. bulk drugs, the persons wanted -such gciods to ~ he trarisporteci movecl the gases by road. This ameunted to e "foreciosure of the market fer the igziecerneai goods especialiy of biiikvgoecis. It aisle reduced the efficiency er the raiiway system and as the business er moving such games were inst it amounted to a iess of bueiriess tciizhe 'i3CT€Zis and the railways. Further, as the goeds were carriecl by road it iecl lie cengestien and peiiutien en the reads. it was the*reiere argued that the aggregation of piecemeai geeds should not be treated: on par with the movement of the bulk goods.

25% Another issue raised was 'the issue of the use ef raiiwey siclinge to be used by the PC'i'Os. when the policy was announced in January 2036 Page 151 ofiﬁﬂ there are no restrictions by the raiiways and the private eidings cetiici be ailowed to be used by the PCTOS. But in February 2009 the Railway Beard iesueci an iristriirztien ta the zonal raiiways that the private container train operators wouid not aiioweci to operate iirem ririvate sidiregs. The DG had ccmsidered this issue and he faurici that CQNCOR , was eperatirig from various private eidings whereas PC3TQs were not aiiewed the use of private sidirags, The {)6 aise found that after the compiaint' was fiied in {)ecemi3e_r 2010 Raiiwey~ Beard withdrew its iristructions of February 2909 and aiiewed the use of private_ sidings with some cenditiene, One at the restrictiaris was that eriiy the goecia at the private sittings owner come he aiiowed from the private sittings. Further, the private sidirigs which were ta be used, were permitted to be used fer oriiy for six months. Before the DG, MGR expiained that the PCTO cotiid be permitted te iiaridie goods oniy from raii terminai and not from at! private sitiings. it was stated that in the cancession agreerrient the raii terminai has been defined in a different mariner from private eiciiriga. MGR aiso stated that the private sittings were made for buik commodities and not far the cargo which the PCTOS were i'eC§Lpi§i'£3C§ to carry, It was aiso stated that this 'provision was appiicabie to aii Container trairi operators including CONCUR. MGR aisci stated that the PCTOS failed. tr: create new infrastructure in respect of centainer terminate, The DE after censiciering ' aii these facts, fauna that as iZ20i\i:COR was 'aiiowed ta tiae certain -private siciings he was er the View that this 'behaviour ef MGR was tiisczrimiriatory, it was aise er the View of the [)8 that deriiai or access to private siding to prevent ciiversien of business from raiiways to the PCTC) was in itseif antitorripetitive. The PCTCTS Case was that there was rici bar in the concession agreement of carriage at gtzede from private sidings because the PCTGS were aiiewed by the concession agreement ta eperate from the entire raiiway network. Private sidings, centairier termiriais etc, were part at the raiiway rietwerk and therefore the use of the network. Could not be denied to the PCTOS. Ali the 'private sittings were connected to the raiiway network and therefore the 'PCTOS use erivate sittings, Restr'ict.ian Page 152 es' 166 ,,.",,.,,M ., ., 4- .,.r/"

$'.§'\ 5 '< _ 6 \I\nvvuuu -"' pieced by MQR on the PCTOS to operate from private sidings ERTTECEUWLS te deniai of access to business, Further even if the railways eiieiwed the feciiity of theuse at private sidings for six months it efieeteti thetwerking cf the PCTOS and was discriminatory, There is rm reasgn why this facility of the raiiweys was denied to the PCTOS for efficient functioning. The information providers stated that the denial of the privete siciirigs was mainiy due to the fact that the raiiweys wanted to protect its business and this itseif ceristituteti anti competitive practice. The iniermetion prcividets aiso stated that this practice of Indian raiiweys ameuntetii diversitm of traffic from raii to read. in conciusicm the DG tieid that the' behaviour of MGR was discriminatory as weii as it was a practice whicii denied market access to the PCTOS. '

260. The next issue taken up by the EMS. is the eiiotzatieri at ierid by the railways. The reiiways is erie of the biggest CiWi"i_Ei'S Qt iand in Iridiai But the reei 0Wi'iEi".S- of the land; are the peopie cf India e'nCi the MGR is a trustee of the ianti. Reiiways had given iarge pertion oi' the ietnti owned by it ta CONCOR and CGNCOR had buiit terminals an the ianti at its awn cost. when the sector was opened to» the private piayers in 20065 the private container ~i:_rein operaters had a iegitimate expectation that ianci weuiti be made evaiiabie to them an the same condition made avieiiabie to CQNCDR. But these legitimate expectations of the 'PC."i°Os were not fuifiiied because different ruies were appiied to the PCTQS as compared to CONCOR. Land was aiietted to CONCGR and the rent for the ianci was on the basis of TEUS hentiieci. Further, iand was given 'ta :CC_iNCOR for at gseried of 30 years. Or: the other hand, ienti was given to the PC"i'Os foif a period of oniy 5 years and the rent was 6% of the iend xieiue. The other factors to be considered are that CONCOR ceuici ibuiiti permanerit .structures are the Send aiietteti whereas the PCTOS t_;ouid" net erect permanent structure as the iand was eveiiabie oniy for five years. Subseqtsentiy the raiiways moved a propcssai to the Cetiitnet that tend can be aiiotteci te CONCZOR for thirty years and to private parties 'for a period Page.15'3 M161) or five years eraiy. The Cabinet approved this protiesei. But this ariprevai ef the railways prepesei does not maize a difference as the ectiee of the railways remain discriminatory, The expiahatieri at the reiiweys is that - iarid was aiicitteci to CONCQR much before the eperiing of the sector and this issue cannot be raised new. But the issue is that when iand was eiiotted te CONCUR there was a erevisior: that raiiways couid change the cenitiitioris of charging rent. But he expianation was given as to why the charge of rent for the ianci was net increased and as to why tiitfererit 'y'ai"dStiCi(S are feiieweci fer CONCOR and PCTGS, Therefere the behaviour of MOR was discriminatory.

261. The t3*.G. then censidered the issue {if the use of container terminais, Any new teritainer terrriinai buiit riri reiiwey iariti was stated to be for the use of reiiways, aii the PC'i'Os and CONCQR, Sui: the Ctmtaiher teirrnineis buiit on reiiway Band by CONCUR were not eiitiwed te be used by the other PCTO.s. Mariy goods shed which were not being aiiciweci were converted into cehtainer terminate for the use at the PC"i'Os, There was no necessity for the raiiways to 'give this faciiity in eecertiance with the COnCESS§C}i'i agreement but the faciiitywas aiioweti, But this 'teciiitif was withdrawn at short notice' This was detrirheritai tn the business er the PCTOs. Further the DB. heir} that not eniy the railways hetwerk but the raiiwey sidihgs and centairier terrninais which termed a part at the railways network were 'esseritiai ta;ciiities'.~ Further; MC)?» heirig 63% owner of CONCOR couici have directed CONCGR te eiiow the fetiiity to the PCTOs especiaiiy when container 'terminals buiit on raiiwey ienti, net ewneci by CONCQR, wags aiieweci to be used by eii the users, Being an essehtiai terziiity, the eptiiriai use cit' the taciiity en the payment of Charges was the correct approach. But CGNCOR was of the View that it was net necessary for it te give the faciiities to its cempetiters, The iteiiweys aise argued that the objections of the PCTOS are riot vaiiti primariiy because they themseives had not -buiit the container termiriais. But CONCOR stated that it had made its centairier terminais avaiiebie to some PCTOS, Page 354 (V6160 But the majority of the PCTOS were not aiioweizi the faciiities by CQNCOR and even if it was aiieweci, the rent was iexttemeiy high, in any case, there is a denial of the faciiity. The actien of CONCOR. and MGR is net cmiy discriminatory, it is aise unfair and it is a practice which Eiiiiﬂunts to deniai efmatket access tea the PCTOS. {

262. As far as the maintenance of wagons is ccmcemed, the argument of the IP55 is that the approach of MGR is anticempetitive. eccordiﬁg to the we the hauiege charges fer meving the rakes from the terminais ti:

maintenance depots were not to be separateiy charged but were to be a part of the iiauiage charges. Fer this prepesitien reiiance was piaceti an paras 5.10, 5.13.1 and 5.3.0.2 of the concession agreement'. in fact, 5% at the hauiege charges were for thepurpose at the maintenance :3'? rakes and no separate charges were to be ievied. Further, accerding to the concession agreement the PCTUS were to deveiep their own. faicuities fer maintenance. In the meantime, tiii these facilities were djeveiopeci by the PCTQS, the reiiways were ta carry eat the maintenance and couici charge for the same. The View at the ii/iCiR is that main.tenan_c:e by the PCTOS was enebiing ciause but from the safety view point the mairite-name had te be carried out by the raiiways only. an 'the other hand, the £PCTC'S grouse is that for maintenance, many times the persormei. is not exxeiiaisie and for this reason the ma'iritenatnce required more time than the mandated six' i'iOLii'.S. Considering tiiese facts, the D..G.. considers it an aftermarket abuse and a vioiatian oi' Section i=<i(2){d;") as the autism oi the raiiweys is an anticempetitive agreement, It eiso amounts to iexietege the dominance it} one market to ancither market and therefere it v'i:::ia;tes Secticm 4{;2)(eji of the Act.

263;. The next issue censiciereci by the $2.6. was the increase in the stabiing charges in vioietitm at the concession agi'e_.ei'nerit. Stabiiiig charges were recevered tram the PCTC)S_'fCii' the temporary detention of the takes on the raiiway 'i'ietwoifi< "For the fault of the PCTOS. This charge Page 155 of 16$ was ievieci for the purpose hf decreasiirig the congestion on the n.etwori<, ~ MGR levies heuiage charges for stabiinig the rakes in the yard, But many times the rakes are taken to different ieclatiofns and then to the stabiiiig yard, Higher hauiege charges are thus ievied wiiich is causes extra cost to the PC"i"Qs and is cietrimehtai to its business, It was stated that when a rake of CONCDR is taken to a terminai but the terriiiihai is occupied, no stabiirig charge is recovered from CONCOR, But in the case of PCTOS, sitahiing charges are recovered, Further, stabiing charges cannot be increased by 10% in a year according to the concession agreemeht but by circuiar ciated O1,0?,2008_, it was increased by 53%. The case of the raiiways is that it was increased w.e.f. 17.01.2008 i,e. prior to the signing of the agreement and therefore there is no error, The D,G. found that the expiariation of the raiiways was not proper and further the: the costs were passed on to the end consumers. This created a cost disadvantage to the PCTOs ieedirig to "a cieniei of market access and that the ectiori of ifi_D':R was unfair and discriminatory, Or; the faicts, the viiew of the DIE. is correct.

264. Another issue raised in the eiiegatiori is against the case oi' brake vans, According to the concession; agreegmegnt, the PC3705 were required to have their own brake evens', But tiii the time the tiraitervans were not procureci by the PCTOs,§ raiiways used to provide the brake vans for which charges were ievieti by the railways. But when the PCTQS acquired their C3Wi'i brake vans, which were used in the rakes the railways stiii kept on 9 charging fer the use of the brake vans. The raiiways iater stated that it was incorrect to charge for the brake vans and wanted to refimti the charges, But in the case of CONCOP. though none of the brake vans were ewhed by CONCOR but were actuaiiy owned hi; the raiiways, no charges were levied. This is a discriminative behaviour on the part oi' MGR as different yarcisticics were foiiowed for CONCUR end the other PC7635. I Page 155 of'16D

265. One of the issues that arose during the course of the i.'i_iSt:L!SSitL'-i'i between MGR onto the other government departments westhe issue of first come first served. This means that if the rake of any of the PCTOS was ready for movement prior to a :rai<e of the raiiways, the rake of the PCTQS wouid be moved first. MGR agreed to do hot when the operations started, MGR gave priority to its reioes on the ground that it carries more ioaci and important goods. Thus, MGR had a oii'fe_rerii: behaviour then what it had agreed to. The question is whether it was an anticompetitive behaviour on the part of the raiiways, Accortiihg to the D,G. it was not an eihticorhoetitive behaviour. The Vi8\N of the D_.G. is correct but the whoie behaviour oi'. the raiiways shows a behaviour which is that of a rrionoooiist.

266. This method of opening oh the sector was designed: on the some rrseriner as that in the United Kingdom and in Theiianci. ihlthie U.._i<, the reiiways system was nationaiiseo in 1948 out when British Rail was privatised, the raiiway network beionged to a different Company and the other companies which used the raiiways networic had their own rakes and iocomotives and these companies used to pay the owner of the network: charges. In that case, there was no confiict of interest anti therefore it wo'r.i<ed very weiii. But in the case of 'incite, MDR is the iicehsor, the regoietor, the owner and operator on the raiiway hetworie For this reason, oi! the anornaiies arise. If the ownershio of the network is transferred eiong with the -duties of regulator to another company, the system might work. Further MGR being a monopoiisi: beiieves that the private container train operators are its c:orh_oetitors« though the fact is ' that on the reiiwey network MGR end its subsidiary Carry 99% of the "freight and the beiance 1% is carried out by the PETQEP Even if the share of MGR decreases, MGR wouio not be e ioser as its revenue from hauiege charges would increase, Further the economic strength of the raiiways as weii es the protection which it gets from the Raiiways Act of '.1989 Keeps it weii protected and the PCTOS cannot in the long rL.3i'i ioomgmete with the iege 15'? of 180 raiiways. But the competition ushered in by the concessioii agreement wouid bring in competition which would uiizimeteiy iead to efficiencies and greater consumer satisfaction.

'FINQINGS 1 26?. Considering the findings in Peres 24?' onwards of this order, iVi(3R's behaviour is abusive in terms of [Sections 4{2}(e){i), -ii{2){a){iiji,, 4(2)(b)(i), 4(2)(i:>)(ii}, 4{2){cji, 4i(2)i{c:i) and <ii{2)(e) of the Competition Act, 2002, ' 258. A reading of Section 27 wouici show that an order Liritiei' this Section can be passed oniy when there was a contravention of Section 3 or Section 4 of the Competition Act, The question is as to what wouici happen ii' the Commission iincis that there no case is made out after the DC; fiends Ha contravention. Such a situation is not provided in the Rfdtf This is due to the fact that once the Commission had formed a prima facie opinion under iieicizion 25('1)of the Competition Act then ii: cannot revisit its opinion again and drop the case. If the DG's investigation has conﬁrmed the prime iacie view of the Commission by ﬁiictiing contravention of the Act then the Commission cannot ciose the ease in View of its prima facie view. For ciropoirig a case provisions haxie to be provided in iaw. If siich 'a provision does not eiiisii then the Commission cannot import the provision in the Act. Therefore after the Commissiori has formed the prime facie View and the [)8 has found contravention then oniy View left to the Commission is to 'pass an order under Section 2",? of the Competition Act. Under Section '2? ofthe Act, an order can only he passed when a contravention is estebiished, Therei"'oi'e tiroooirsg of case after {)G has found a contravention is not authorised under the Competition Act of 2002. This proposition is further strengthened by the ' fact that -apoeeis are provided against orders under Sections 26(2) and 26(6) of the Act An order oi" drooping is an order and suich an order cannot be passed in the absence of provisions, Forthe~r an order of non Page 158 of 16% admission of a case or ciosure of case after the DG finds no contravention can be appeaieci against, it does not appear to be Eogicai to hoici that no appeai wouid be provided against an orcier of ciosure where the Commission had formed a prima facie view under Section 26(1) of the Act and the {)6 had found contravention. 'The Legislature had not' envisaged such a situation as in such a case the togicai course wouici be an order under Section 2? of the Act, Iricidentaiiy, no order of ciosure can be passed under Section 2? of the Act.

269. Exrder under section 27 of the Act

iii) in View of the above, I hoici that the conduct of the Indian Raiiways is in vioietiori of sections 4(2ji(e)(i), e(2)(a)(i.i), 4(2)(b)(i): -4(2)(b)(i); 4(2)(b}(ii): 4(2){C); 46?'-.}(d) and 4{?-)(e) 0*"

the Competition Act, 2032, {ii} Accerdingisr, I decide to impose penalty @ 5% on averageior three years turnover' under section '27(b) of the Competition Act as under:

? ? (RS, In creres) Name of F.Y.. FA'. T iF.Y.,. --aB;$r§eVra;g;e Penaity Firm l20ﬁ8-439 2&3?-19 .2G1Q-.-.11 U§fT§'¥5'E:E at 5 "lo 1.21? years «Mreraga Turswvier Turnover Ii'icIian i T M; " at A_ i 'i 4 393 i Ranways 79,861.85 8,a,9e3,97 94,s35.m 8;,12e.,§.e vr 9530

(iii) I aiso direct iInrii"ar1 Railways to 'immediateiy withdraw the circutar Eesued vide ieitter No. 2806,/IT--'i;II/73;'12 dated 1'1.,1Ci,2DQE» which restricteti ores, minerais, coai and coke for transportation '9 containers.

(iv) The Indian Raiiways is aiso directed to provide 'non-«discriminatory access to the I? over the entire raii network and to withdraw ail Page 159 of 163 discriminatcry circuiars, notifications, batters etc that have created an uneven ievei playing fieici for freight operatcrs.

(V) I aisc: advise Indian Raiiways to consider creating a separate independent reguiatury heady ta deal with issue of gcwerning freight market" in indie; to ensure izransparency in devising Hauiage Charges, Stabiing Charges and ether charges appiicabie to freight operators for eperation of cczntainer trains.

(vi) The afciresaici directians must be compiieci wiiitiri within a period 0'?

96 clays imam the date of receipt 9? this «arcies:

(vii) Secretary is directed to canvey the ciecisicm tri' the Eommissian to the Parties as per reguiatictsns accordingiyi mi"

(R, Prasad)' Member, CC} 2 _' ikzisissiarzi $'?S'E§:s\§'c,'ag' *' 3 («tibia '-n-.*.'.:::s3~.r'r'=és~:a«Ez3r~. <2-fizisiia « New iluaiizii

-is K 'V '«*_'w *' M .

3*' "V, <1" #,.»~§KR3,.¢9°'\"}/6.', *\~*\" .}i5-v- .531. f;§§\§"3§...«'3§3..3"§' Page 160 C21' .153

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Competition Commission of India

Arshiya Rail Infrastructure Ltd. ... vs Ministry Of Railway (Mor) & Ors. Main ... on 14 August, 2012