M/s KSD Zonne Energie LLP And Canara Bank Limited

Case No. 35 of 2024 Page 1 of 8 COMPETITION COMMISSION OF INDIA Case No. 35 of 2024 In Re: M/s KSD Zonne Energie LLP Through its Designated Partner: Mr. S. Kandasamy Registered office 5/273, MG Layout, Gandhinagar, Udumalpet, Tiruppur (Dt.), Tamil Nadu- 642154 Informant And Canara Bank Limited Head Office: 112, J C Road, Halsurpete, Nagarathpete, Bengaluru, Karnataka- 560002 Opposite Party CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Case No. 35 of 2024 Page 2 of 8 Order under Section 26(2) of the Competition Act, 2002 1. The present Information has been filed by M/s KSD Zonne Energie LLP (‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (‘Act’) alleging contravention of the provisions of Sections 3 and 4 of the Act, by Canara Bank Limited (‘Opposite Party’/‘OP’). 2. It is stated that the Informant is a Limited Liability Partnership Firm and involved in the process of manufacturing electricity, gas, steam, air conditioning supply and is primarily engaged in the electric power generation using solar energy. 3. It is stated that the OP is a bank constituted under the Banking Companies (Acquisitions & Transfer of Undertakings) Act, 1970 having its Head Office and relevant Branch Office at Bengaluru, Karnataka. OP is a Public Sector Undertaking (‘PSU’) under the Government of India and therefore falls under the definition of ‘enterprise’ as provided under Section 2(h) of the Act. 4. As per the Informant, the relevant market in this case, is the ‘market for the provision of banking and loan services in India’. OP has a substantial share in the relevant market and is the third largest nationalized bank which gives it a dominant position, enabling it to exercise influence over loan terms and rates without competitive pressures. 5. The Informant has stated that it had sought financial support for a 3 MW solar plant project under the Priority Sector Lending Guidelines from OP for the purpose of establishing solar power generation firm. The OP sanctioned a Term Loan dated 12.07.2016 of Rs. 13.25 crores but disbursed only Rs. 12.62 crores to the Informant. Despite initial assurance of favourable interest rates, the OP imposed an unexpectedly high interest rate of 16.20% instead of the promised 11.50%, later changing it to 14.20% without full transparency of facts and reasons. It is further stated that a concession in the interest rate from 14.45% p.a. to 11% was granted to the Informant by OP vide letter dated 06.03.2018 in compliance of Credit Approval Committee (‘CAC’) order dated 02.03.2018 with annual reset due on 03.09.2018 which was permitted as per order dated 24.06.2016 of General Manager at Central Office for Credit Approval Committee (‘GM-CO-CAC’). Case No. 35 of 2024 Page 3 of 8 6. It is stated that on 26.06.2020, during Covid-19 pandemic, the Informant availed GUARANTEED EMERGENCY CREDIT LINE (‘GECL’) 1.0 loan from the OP for an amount of Rs. 1.49 crores vide loan account no. 2342755000013 for a term of 4 years. It is stated that though the rate of interest mentioned in the sanction letter was 7.50% p.a., the OP arbitrarily raised and revised it to 9.25% p.a. for the purpose of sending demand notice under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’). The Informant stated that the acts of OP show a case of unfair trade practice towards its consumer thereby violating Section 3 of the Act. 7. As per the Informant, through letter dated 11.01.2021, the OP retrospectively imposed an increased interest rate, demanding an additional Rs. 76,75,894/- as back interest from the Informant for the period 04.09.2018 to 16.07.2020, stating that 11% rate of interest was not applicable during the said period instead 14.45% was applicable. It is stated that the bank's branch office committed error to reset the interest rate which was acknowledged by the bank but still the Informant was being charged without his fault. 8. It is stated that the Informant was compelled to take further Working Capital Term Loan GECL 1.0 of Rs. 51,00,000/- for a term of 5 years on 05.05.2021 so as to fulfil the financial liabilities. It is stated that the rate of interest though mentioned in the sanction letter as 7.50% p.a. was arbitrarily raised and revised by the OP to 9.25% p.a. for the purpose of sending demand notice under SARFAESI Act. It is stated that this also shows unfair trade practice on the part of the OP towards its consumer thereby violating Section 3 of the Act. 9. As per the Information, on 22.07.2021, under the Resolution Framework 2.0 of the Reserve Bank of India (‘RBI’), the OP bank converted the differential interest and interest arrears accumulated due to sudden imposition of higher interest rate totalling Rs.111.67 Lakhs into a separate Funded Interest Term Loan (‘FITL’) at 11% rate of interest for a tenure of 5 years. This was accompanied by rescheduling the principal outstanding amount of Rs. 9.93 crores of Term Loan into a new loan with 10.95% floating rate of interest with an increased tenure of 2 years. It is alleged that by way of rescheduling the loan, the OP was actually charging interest on interest, charging Case No. 35 of 2024 Page 4 of 8 further interest on principal amount of the Term Loan without any adjustments towards the principal amount, further compounding the burden on the Informant. 10. It is stated that the Informant also availed additional GECL under the Resolution Framework 2.0 to an extent of 10% as on 29.02.2020 under Emergency Credit Line Guarantee Scheme 1.0 of National Credit Guarantee Trustee Company Ltd. of Rs. l,00,00,000/- for a term of 5 years at 7.50% p.a. interest rate vide separate loan account no. 1730000981060; so as to overcome the compelling resolution framework principal amount, interest rates and interest on interest rates to protect the business operations under Covid-19 induced economic crisis. 11. The Informant alleged that due to these anti-competitive agreements and subsequent arbitrary changes made in the interest rates by the OP, the business of the Informant was hampered which ultimately led to forceful exit of the Informant from the solar energy manufacturing market. 12. As per the Information, when the Informant attempted to transfer the loan to other banks offering lower rates, the OP obstructed the process by withholding collateral documents required by competing lenders. These tactics restricted the Informant's ability to secure fair market rates and suppressed competition by forcing reliance on the OP’s unfavourable terms. 13. It is stated that the OP under pressure and to retain the loan accounts of the Informant, lowered the rate of interest for a very short term and later charged the interest at a much higher interest rate thereby purposely causing damage, undue loss to the Informant and illegal gain to itself. 14. The OP without following due process under the SARFAESI Act, appointed a valuer on their own terms. It is stated that a good running solar plant is being undervalued by the OP’s valuer only for the sole purpose of selling easily in auction thereby denoting anti-competitive agreements between the valuers and the OP bank. It is further stated that the securitized properties are purposely brought under SARFAESI proceedings and then undervalued so as to erase competition in the market. 15. The Informant alleged that the OP’s actions demonstrate an abuse of market dominance through restrictive clauses, hidden fees and an inflated interest burden, culminating in Informant's inability to meet monthly EMIs and resulting in an Non-