The Dilemma of Supremacy: Resolving the Jurisdictional Conundrum of CERC vs CCI through Harmony

The authors are Vidhi Maharishi and Vaanya Mathur, fourth-year students at Institute of Law, Nirma University.

Introduction

Section 18 of the Competition Act bestows the Competition Commission of India (“CCI”) the power to oversee fair market regulation and protect interest of the consumers across all sectors of the economy. However, the jurisdictional tussle with sectoral regulatory bodies such as TRAI, SEBI, CERC and others has been a topic of debate over the recent past. A notable example of such overlooked jurisdictional overlap involves the Central Electricity. Regulatory Commission (“CERC”), responsible for regulating the electricity sector.    Regulation of electricity is a shared affair at both the central and state levels. There is the State Electricity Regulatory Commission (“SERC”) and  CERC, with the former dealing with the regulation of tariff, generation, supply, transmission, and wheeling of electricity at the state level while the latter operates at the central level.

CERC also has a general responsibility to ensure fair market competition- Section 60 of the Electricity Act 2003 gives CERC the  power to issue directions in case a licensee or a company enters into any anti-competitive agreement or abuses its dominant position or enters into a combination that is likely to cause an adverse effect on the competition in the electricity industry. The section clearly overlaps with the jurisdiction of the CCI and can lead to potential conflict if it is not managed properly. The lack of clear demarcation of jurisdictions between the two bodies creates a breeding ground for ambiguity. This ambiguity can be exploited by litigants as a loophole for forum shopping, which can potentially lead to multiplicity of proceedings. This article addresses the jurisdictional overlap between CCI and CERC by examining various legal precedents and principles. It also proposes solutions to harmonise these overlapping jurisdictions.

Jurisdictional Overlap Between the CCI and CERC

In India's electricity game, one of the significant triggers for competition issues in the sector is the dominance of a few key players in the market which increases the likelihood of collusion due to the reduced coordination and monitoring costs. The sparks of the power play primarily come into the picture with Section 60 of the Electricity Act as well as Sections 174 and 175 of the Electricity Act. Section 174 asserts the supremacy of the Electricity Act over other legislation, except for specific Acts like the Consumer Protection Act 1986, the Atomic Energy Act 1962, or the Railways Act 1989. This implies that, except for these acts, the Electricity Act prevails in case of inconsistencies with other legislation. Conversely, Section 175 emphasizes that the legislation should complement existing laws without nullifying them.

In India, it is a well-settled principle of law, that when there is a conflict between a general law and a specific law, the special law prevails over the general law, as declared by Justice Griffiths in the landmark case of R vs. Greenwood. Further, even if we consider competition law as a special statute, the general principle of leges posteriores priores contrarias abrogant would be applicable, i.e., the later special statute will prevail, which in the present case is the Electricity Act. From a plain reading, one might assume that the jurisdiction of sectoral regulators would prevail over the CCI in such a case. However the legal scenario does not depict the same. Just like the Electricity Act, Section 60 of the Competition Act also provides for the ‘non-obstante’ clause which gives the Competition Act overriding effect over any other legislation in case of inconsistency. In the case of Shri Arun Mishra and State of U.P. & Ors. while deciding the issue of jurisdiction of sectoral electricity regulators and the commission, CCI held that although the principle of leges posteriores priores contrarias abrogant is prevalent, still, the statutory construction is not absolute in nature, and the jurisdiction of the Competition Act extends to every sphere of the economy. Ostensibly there is no conflict between the statutes as both have mutually exclusive regimes. In addition, the fact that sectoral regulators do not have exclusive jurisdiction under the Electricity Act was also held in the case of Shri Neeraj Malhotra, Advocate vs. North Delhi Power Ltd. & Ors. wherein although the Delhi Electricity Regulatory Commission (“DERC”) had jurisdiction to deal with issues of anti-competitive behaviour of distribution companies, nonetheless the DERC referred the competition-related matters to the CCI.

However, in the case of Anand Prakash Agarwal v. Dakshin Haryana Bijli Vitran Nigam Limited, the court emphasized that the jurisdiction of the Electricity Act should take precedence over the Competition Act. It deemed that as the Electricity Act is  a 'later special statute,' it would wield an overriding effect on the non-obstante clause of the Competition Act. This legal stance, however, contributes to a conflicting landscape of judicial precedents and overlapping legislation, leaving the matter still unsettled. Even with the introduction of the Competition Amendment Act in 2023, the persistent issue of jurisdictional overlaps remains unaddressed. This evident gap signals a pressing need for a legal transformation to provide clarity and resolve the ambiguity surrounding the jurisdictional tug-of-war between the Electricity Act and the Competition Act.

Suggestions to Resolve the Jurisdictional Tussle

To tackle the issue of overlapping jurisdiction between electricity sector regulators and competition authorities, a clear delineation of their respective roles is necessary. Exclusive authority granted to either entity may fail to serve the interests of justice. Instead, a harmonious relationship must be established to prevent potential conflicts. One plausible solution involves defining distinct roles for ex-ante and ex-post assessments. Sectoral regulators possess deeper insights into market structures, tariff frameworks, and consumer behaviours, making them well-suited for ex-ante evaluations of companies within the sector This includes assessing the potential impact of new projects or policies on the market, as well as ensuring that companies are complying with regulatory requirements. Conversely, competition authorities are better equipped to handle ex-post assessments, given their expertise in identifying patterns of anti-competitive behaviour among companies. This includes investigating and addressing anti-competitive practices, such as price-fixing, bid-rigging, and formation of cartels. This delineation of responsibilities can streamline regulatory processes and foster more effective oversight.

Alternatively, another option can be creating a system where the sectoral regulators formally communicate or refer to the CCI any competition-related issues in a case.  It is suggested that these regulators sign a mandatory agreement (Memorandum of Understanding or MoU) to harmonise the coordination of their powers. The consultation process can happen on two levels: firstly, the regulators can engage in discussions with CCI about policies and regulations related to their respective sectors, ensuring that any potential competition concerns are identified and addressed early on , and  secondly, the state and central regulators can collaborate on specific cases or issues that arise by seeking the CCI's expertise on competition-related matters and the CCI's input on the potential impact of sectoral regulations on competition. This approach would ensure that different authorities work together smoothly, combining competition-based policies with sector-specific rules for a well-rounded regulatory framework.

Conclusion

Achieving clarity in the jurisdictional framework is crucial for ensuring an efficient and coherent regulatory system for the electricity sector in India. The clash between the Electricity Act and Competition Act has led to confusion in the regulatory landscape for the electricity sector. The problem lies in the overlapping powers of regulators like CERC and SERCs with the CCI, a situation that even the 2023 Competition Amendment Act has failed to address. Ensuring clear understanding in the jurisdictional framework is crucial for ensuring an efficient and coherent regulatory system for the electricity sector in India.

The Electricity Act and the Competition Act must therefore be harmonised to prevent overlapping jurisdictions, and there needs to be a straightforward demarcation of powers of respective regulators involving clearly defining the roles of each party, which would allow them to focus on their respective strengths in assessing scenarios before and after market activities. Additionally, it would be worthwhile to establish clear procedures for communication and collaboration between sectoral regulators and the CCI. Such an approach would help prevent the ambiguity of overlapping jurisdictions, promote fair competition, and  protect consumer interests.