Kalpit Sultania Vs. IREL (India) Ltd.

Public Version Case No. 22 of 2021 Page 1 of 39 COMPETITION COMMISSION OF INDIA Case No. 22 of 2021 In Re: Kalpit Sultania, H. No. G-401, Rashmi Apartment, Harsh Vihar, Pitampura, Saraswati Vihar S.O., North-West Delhi, Delhi - 110034. And Informant IREL (India) Ltd., Plot No. 1207, ECIL Building, Veer Savarkar Marg, Opp. Siddhivinayak Temple, Prabhadevi, Mumbai - 400028. Opposite Party CORAM: Ravneet Kaur Chairperson Anil Agrawal Member Sweta Kakkad Member Deepak Anurag Member Present: For Informant: Ankur Sood, Advocate Roshan Santhalia, Advocate Puja Jakhar, Advocate For Opposite Party: Tarun Gulati, Senior Advocate Abhay Joshi, Advocate Aayushi Sharma, Advocate Kumar Sambav, Advocate Bhaavi Agrawal, Advocate G. Balasubramanian, GM, IREL Public Version Case No. 22 of 2021 Page 2 of 39 O R D E R Brief Facts as per Information 1. This order shall dispose of the Information filed under Section 19(1)(a) of the Competition Act, 2002, (‘Act’) by Mr. Kalpit Sultania (‘Informant’), alleging contravention of the provisions of Section 4 of the Act by IREL (India) Ltd. (‘OP’/ ‘IREL’). 2. As stated in the Information, OP is a Government of India (‘GOI’) undertaking under the administrative control of Department of Atomic Energy (‘DAE’) and is engaged in production and sale of minerals such as Ilmenite, Rutile, Zircon, Monazite, Sillimanite and Garnet as well as various value-added products through four operational units located in the States of Odisha, Kerala and Tamil Nadu. The Information relates to the actions of OP vis-à-vis Beach Sand Sillimanite and does not concern OP’s other activities. 3. As per the Informant, Sillimanite is a natural sand-based product generated during the extraction of rare earth compounds from beach sand and is of two types viz., Beach Sand Sillimanite/ Sillimanite and underground mined Sillimanite; which are qualitatively different from each other. Beach Sand Sillimanite is used primarily by refractory manufacturers for lining furnaces and it is also used in the ceramic industry. It is also stated that underground mined Sillimanite available in India has excessive impurities that diminishes the quality of the refractory and is therefore, neither cost effective nor can it replace Beach Sand Sillimanite. 4. The Informant has averred that imported Andalusite is the closest replacement of Sillimanite in terms of quality; however, the former is expensive vis-à-vis the latter, which makes Andalusite not an effective substitute of Beach Sand Sillimanite. 5. It is stated that earlier, mining and supply of Beach Sand Sillimanite was permitted to be undertaken by both public and private enterprises. In 2016, Sillimanite was included in the category of atomic minerals by Central Government Notification Public Version Case No. 22 of 2021 Page 3 of 39 No. S. 0. 2356 (E) dated 11.07.2016. Subsequently, the DAE, vide Notification S.O. 2685 (E) dated 27.07.2019, prohibited grant of operating rights in respect of atomic minerals in any offshore areas in the country to any person, except the Government or a Government Company or a Corporation owned or controlled by the Government. This prohibition made OP the only corporation engaged in the production of Beach Sand Sillimanite in India. 6. In relation to the allegations, the Informant has suggested the relevant market to be “mining and supply of Beach Sand Sillimanite in India”. 7. As per the Informant, OP has abused its dominant position in the relevant market by: i. indulging in prohibitive increase in the prices of Sillimanite from Rs. 9000/- Per Metric Ton in 2016-17 to Rs. 14000/- Per Metric Ton in 2020-2021; ii. following discriminatory pricing against the interests of the Micro, Small & Medium Enterprises (‘MSMEs’) in the domestic market, while favouring multi-nationals and/or foreign parties - it was stated that rates for domestic MSMEs was Rs. 14000/- Per Metric Ton which was higher than the rate of Rs. 11,000/- being charged from foreign companies/ multi-nationals; and iii. fixing the supply of Beach Sand Sillimanite as per its whims and fancies and forcing its customer to accept arbitrary quantity. 8. In view of the above, the Informant has alleged that the OP has contravened the provisions of Section 4(2)(a)(i) and Section 4(2)(b)(i) of the Act. Prima-facie consideration by the Commission 9. The Commission considered the Information in its ordinary meeting held on 01.09.2021 and directed OP to file para-wise reply/ response(s) along with documents, if any, by 04.10.2021, with an advance copy to the Informant. The Informant was also directed to file comments to the reply/ response(s) of OP, if any, latest by 22.10.2021. In compliance of the direction of the Commission, both OP Public Version Case No. 22 of 2021 Page 4 of 39 and Informant filed their respective reply/response(s) on 16.11.2021, and 06.12.2021, after seeking extension of time. 10. In view of the submission of the Informant and OP, the Commission was of the prima facie opinion that OP is an ‘enterprise’ under extant provision of Section 2(h) of the Act. The Commission noted that the Informant has delineated the relevant market as “mining and supply of Beach Sand Sillimanite in India”, which has not been denied by the OP. For the reasons adduced by the Informant, the Commission was of the opinion that the relevant market in the instant case is ‘mining and supply of Beach Sand Sillimanite in India’. On the issue of dominance of OP in the relevant market, the Commission noted that the OP has acquired a dominant position by virtue of it being a government owned company having exclusive right to undertake mining and supply of BSM (including Sillimanite) in India. Based on facts and circumstances of the case, the Commission noted that OP enjoys economic power and commercial advantage which allows it to operate independently of the market forces. Accordingly, the Commission was prima facie satisfied that there existed a case of contravention of Section 4 of the Act, as alleged by the Informant and vide an order dated 03.01.2022 passed under Section 26(1) of the Act, directed the Director General (‘DG’) to cause an investigation into the matter and submit a report. DG Investigation Report 11. The DG submitted its Investigation Report on 22.07.2022, in confidential and non- confidential version, after seeking extensions of time. The findings of the Investigation Report are summarised below. 12. As per the Atomic Energy Act, 1962, Beach Sand Minerals is a suite of seven minerals which includes Monazite (a prescribed substance) besides Zircon, Ilmenite, Rutile, Leucoxene, Garnet & Sillimanite. In the process of extraction, through sequential concentration of Monazite & Zircon, Sillimanite is produced as a by-product. Since all these minerals occur together, in order to conserve the strategic mineral in the beach sand, entire BSM was included in the list of atomic Public Version Case No. 22 of 2021 Page 5 of 39 minerals under Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR’). By virtue of Atomic Minerals Concession Rule, 2016 and notification dated 27.07.2019, mining of Sillimanite by private companies stood completely prohibited. Further, Ministry of Mines, vide its order dated 01.03.2019, terminated all mineral concessions of BSM found in the teri ore beach sand, held by private companies. However, the private enterprises were allowed to procure, process and trade the beach sand minerals except Monazite. 13. The DG found that OP is an ‘enterprise’ for the purpose of the present case as the allegations pertain to its activities with respect to the Beach Sand Sillimanite and not the other activates/operations carried out by it. Further, the DG noted that Sillimanite is a by-product and a not a strategic mineral obtained during the extraction process of BSMs. Beach Sand Sillimanite is not used by OP in atomic energy, currency, defense and space, hence mining/production of the same is not a sovereign function performed by the OP. 14. Based on the submission of OP, Informant and third parties, the DG concluded that underground mined Sillimanite is not substitutable with Beach Sand Sillimanite on account of two major factors: a. Underground mined Sillimanite contains impurities and high iron content material which is not usable in manufacturing high quality refractory bricks. b. Underground mined Sillimanite available in India is of poor quality and is not cost effective as crushing and grinding processes are required before using it. 15. The DG also analysed substitutability between Sillimanite and Andalusite, Sillimanite and Kyanite, Sillimanite and Bauxite and Sillimanite and grogs & aggregates etc. On the basis of price, physical/chemical properties, presence of impurities etc., the DG concluded that Beach Sand Sillimanite is not substitutable with Kyanite/Andalusite/Bauxite and others. The DG also compared the average price charged by OP and Kerala Minerals and Metals Ltd. (‘KMML’) (a government of Kerala undertaking) and found that the price charged by KMML is much higher than the price charged by OP, which indicates high consumer