2017] B-159

Government Departments as Enterprise- An Enigma under the

Competition Act

Tanveer Verma*

Section 2 (h) of the Competition Act, 2002 (the Act) brings government
departments under the definition of enterprise and therefore under the remit of the
Act. Section 2 (h) further lays down certain conditions in the form of set of activities
in which a government department must be engaged into for rendering it to be an
enterprise with the exemption of activities relatable to sovereign functions. The
remit of the Act while dealing with government departments ultimately hinges
upon providing answers to various issues such as tracing the contours of the above
set of activities and the degree of involvement by the government department for
rendering it to be an enterprise and also defining the scope of sovereign functions
exemption. This paper captures the trends and jurisprudence emerging from decisions
of various tribunals and the courts in this regard.

Introduction 3. Section 3 and Section 4 of the

1. The state impacts competition in a
number of ways- 1) as a player, either
through its companies or through
institutions which are not companies but
are directly involved in an economic or
commercial activity (e.g. Public Welfare
Department or various Boards), 2) as a
regulator- by forming such laws, rules,
regulations, by-laws, etc. which may
impact competition, and 3) as a buyer-
when it calls for tenders.
2. To achieve the goals of fair competition,
it is important that the markets are
safeguarded from anti-competitive
conduct not only by the private players
but also by the state and state
intervention is limited to exceptional
circumstances.
Competition Act, 2002 (the Act)
prohibit an enterprise to enter into
anticompetitive agreements and abuse its
dominant position respectively. The
definition of enterprise is given in
Section 2 (h) of the Act as-
enterprise means a person or a
department of the Government, who or
which is, or has been, engaged in any
activity, relating to the production,
storage, supply, distribution,
acquisition or control of articles or
goods, or the provision of services, of
any kind, or in investment, or in the
business of acquiring, holding,
underwriting or dealing with shares,
debentures or other securities of any
other body corporate, either directly or

* The author is a practising advocate working in the fields of competition law and intellectual
property law. He has advised clients and handled cases in a variety of sectors such as
insurance, ports, electricity, oil and natural gas, apparels, real estate, automobiles, engineering,
media, etc. He works as an Associate with Saikrishna & Associates. The views expressed in
this article are solely of the author and not of Saikrishna & Associates. The author could be
reached at vermatanveer@gmail.com or tanveer@saikrishnaassociates.com

COMPETITION LAW REPORTS v MAY, 2017 123

B-160 Competition Law Reports
through one or more of its units or
divisions or subsidiaries, whether
such unit or division or subsidiary is
located at the same place where the
enterprise is located or at a different
place or at different places, but does
not include any activity of the
Government relatable to the sovereign
functions of the Government including
all activities carried on by the
departments of the Central
Government dealing with atomic
energy, currency, defence and space.
4. As is clear from its bare perusal, the
definition comprises of person and
department of Government. The term
person is defined in Section 2 (l) of the Act
and includes any corporation established
by or under any Central, State or Provincial
Act or a Government company as defined
in section 617 of the Companies Act, 1956
(1 of 1956)1. Therefore, both government
companies and government departments
are covered under the definition of
enterprise if they fulfill certain conditions
laid down in Section 2 (h). One of the
conditions is that the institution must be
engaged in any one of the following three
classes of activities-
i. any activity, relating to the
production, storage, supply,
distribution, acquisition or control of
articles or goods, or the provision of
services, of any kind; or
ii. investment; or
iii. the business of acquiring, holding,
underwriting or dealing with shares,
debentures or other securities of any
other body corporate
[Vol. 2
Section 2 (h) further excludes any activity
of the Government relatable to the
sovereign functions from the definition
of enterprise.
5. This paper attempts to capture the
general trends and jurisprudence
emerging from various decisions of the
Competition Commission of India
(CCI), the Competition Appellate
Tribunal (COMPAT) and various other
courts regarding the treatment of
government departments under the Act.2
Functional aspect analysis and its
scope
6. In its order in the case of Shri Surinder
Singh Barmi vs. BCCI3, the CCI stated, The
[Competition] Act focuses on the functional
aspects of an entity rather than institutional
aspects. The scope of the definition on the
institutional front has been kept broad enough
to include virtually all the entities as it includes
person as well as departments of the
government. Therefore while carrying out
a Section 2 (h) analysis, it is important to
look at the functional aspects of the entity
under question.
7. In its order under Section 26 (2) of the
Act in the case of Taj Pharmaceuticals Ltd.
v. The Department of Sale Tax/Professional
Tax,4 while dismissing an Information of
abuse of dominant position by the Sale
Tax/Professional Tax Department, the
CCI stated, the assessment whether a
department of the Government is an
enterprise or not is to be done based on the
activity of the entity under consideration and
the facts of the case. Therefore, as per the
CCIs rulings, the analysis which needs

1 Section 617 of the Companies Act, 1956 defines a Government Company as any company
in which not less than fifty-one per cent of the paid-up share capital is held by the Central
Government, or by any State Government or Governments, or partly by the Central Government
and partly by one or more State Governments and includes a company which is a subsidiary
of a Government company as thus defined.
2 Since the scope of this paper is limited to government companies and government
departments, discussion of case laws involving private players will either not be covered or
will be limited.
3 Case No. 61 of 2010, order dated 08.02.2013
4 Case No. 69 of 2015, order dated 29.09.2015

124 COMPETITION LAW REPORTS v MAY, 2017

2017] Government Departments as Enterprise- An Enigma under the Competition Act
to be carried out is that whether the
impugned activity which has been alleged
to be anticompetitive belongs to any of
the three categories of activities
mentioned in Section 2 (h) or not and
even if other activities being carried out
by the organization would squarely fall
into the above mentioned trappings of
Section 2 (h), the government department
would not be deemed to be an enterprise
unless the impugned activity falls into
such trappings.
8. The decisions by the COMPAT point in
a diametrically opposite direction. In the
case of Wing Cdr. (Retd.) Dr. Biswanath
Prasad Singh v. Director General of Health
and Services & Ors.5, the Informant had
alleged that by authorizing an extra
payment of 15% to hospitals accredited
by NABH in lieu of providing services to
the beneficiaries of Central Government
Health Scheme (CGHS), the Director
General of Health and Services (DGHS)
had created an unfair practice. The
Information was rejected by the CCI upon
a prima facie consideration on the grounds
that The activities being performed by DGHS
cannot be covered in the definition of
enterprise because it is not directly engaged
in any economic and commercial activities.
Its role is limited to control and regulate the
health care system in the country.
9. However, the COMPAT held that since
DGHS was involved in the provision of
healthcare services, it would be deemed
to be an enterprise and therefore
amenable to CCIs jurisdiction. COMPAT
observed, It can be clearly seen that CGHS
is not just a facilitative mechanism but it also
provides healthcare facilities by itself in the
out-patient departments. In cases which
require hospitalization or further specialized
care, references are made to hospitals which
are empanelled for the purpose. It is thus
amply clear by its own admission that
5 Case No. 20 of 2014, order dated 23.06.2014
6 Appeal No. 63 of 2014, judgment dated 01.03.2016
7 Civil Appeal No. 6691 of 2014, judgment dated 07.03.2017
COMPETITION LAW REPORTS v MAY, 2017
B-161
[DGHS] is not just a facilitator for its target
group to seek healthcare in empanelled
hospitals but itself provides healthcare
[services] CGHS is clearly an enterprise
which provides healthcare services to the
target group and in order to do so, in view of
the constraints on its capacity, it laterally
complements its resources by empanelling
hospitals which include private hospitals as
well. Therefore, the process of empanelment
is essentially an expansion of CGHS
activities of providing healthcare to the target
group. It is not facilitation but a clear
provision of service.6
10. It has to be noted that the activity which
was impugned to be anticompetitive was
authorization of extra payment of 15% to
NABH accredited hospitals and not
provision of health services by DGHS.
However, rather than narrowing down the
analysis to the impugned activity alone,
the COMPAT gave a holistic consideration
to all the functions being carried out by
DGHS and CGHS. Therefore, the
methodology adopted by the COMPAT is
significantly different from that of the CCI,
which narrows down the analysis to the
impugned activity.
11. At this juncture, it is pertinent to extract
a passing observation by the Supreme
Court in the case of CCI v. Coordination
Committee7, The notion of enterprise is a
relative one. The functional approach and the
corresponding focus on the activity, rather than
the form of the entity may result in an entity
being considered an enterprise when it engages
in some activities, but not when it engages in
others. The relativity of the concept is most
evident when considering activities carried out
by non-profit-making organisations or public
bodies. These entities may at times operate in
their charitable or public capacity but may be
considered as undertakings when they engage
in commercial activities. The economic nature
of an activity is often apparent when the entities
125
B-162 Competition Law Reports
offer goods and services in the marketplace and
when the activity could, potentially, yield
profits. Thus, any entity, regardless of its form,
constitutes an enterprise within the meaning
of Section 3 of the Act when it engages in
economic activity. An economic activity
includes any activity, whether or not profit
making, which involves economic trade.
Though the issue in this case relates neither
with government departments nor with the
definition of the term enterprise, it appears
that the Supreme Court is tilting towards
the interpretation advanced by the CCI in
the cases referred above.
12. It is pertinent to note that such a
distinction can have immense impact on
the final outcome of the case. In the case
of Prem Prakash v. The Principal Secretary8,
the CCI rejected an Information filed
against Public Works Department on the
grounds that it was not directly engaged
in any commercial or economic activity,
therefore it could not be considered as
an enterprise. The COMPAT reversed
the CCIs order and remitted the matter
back to the CCI with directions for fresh
considerations while considering
Public Works Department to be an
enterprise. In the second round of
consideration, the CCI observed, the
condition imposed by the [various Public
Works Departments] that private
laboratories be approved/ accredited by
NABL seems to be anti-competitive as it
appears to be favouring a single
accreditation body restricting the number
of eligible private laboratories whose
services can be procured indirectly by OPs.
Accordingly, the Commission is of the
considered opinion that imposition of such
a condition by MPPWD and CPWD is in
contravention of the provisions of Section
4(2)(a)(i) of the Act.
13. Therefore, as the issue has far
reaching implications, it requires final
adjudication by the Supreme Court.
8 Case No. 50 of 2014, order dated 17.03.2017
9 Case No. 67 of 2014, order dated 05.12.2014
126
[Vol. 2
engaged in- regularity and continuity
of activities
14. In the case of Shri Uday Sakharam Yadav
v. Excise, Entertainment & Luxury Tax
Department9, while interpreting the words
engaged in appearing in Section 2 (h),
the CCI has stated, words engaged in
preceding the words any activity reflect
both regularity and continuity of the
activities mentioned in [section 2(h)].
Therefore, for rendering a government
department to be an enterprise, it would
be necessary to show that the government
department has carried out the activity
for a considerable period of time.
The three classes of activities
mentioned in Section 2 (h)
The first class of activities and its contours
15. The first class of activities mentioned
in Section 2 (h) is any activity, relating to
the production, storage, supply,
distribution, acquisition or control of
articles or goods, or the provision of
services, of any kind. Various phrases in
the statute, such as, any activity, relating
to, of any kind, etc. are too broad and
raise a number of questions, especially
when dealing with government
departments. The two most significant
questions in this regard are- first, what
should be the degree of involvement in
such acts by a government department to
render it an enterprise and would
indirect involvement suffice; and second,
what should be the nature of activities and
whether those activities of the government
departments are carried in pursuance of
statutory mandate without any profit
earning motif would fall under the
definition of enterprise.
16. With regards to the first question, i.e.,
the degree of involvement, the initial
rulings by the CCI are rather hazy. In the
case of Shri Debapriyo Bhattacharya v. The
COMPETITION LAW REPORTS v MAY, 2017
2017] Government Departments as Enterprise- An Enigma under the Competition Act
Principal Secretary (Home) General A
Department and Galaxy Entertainers Pvt.
Ltd.10, the CCI held, Licensing amounts to
control over the provision of service and,
therefore, any act of the Secretary or the State
Government which relates to control of services
was covered under the purview of the
Competition Commission. Undoubtedly,
issuing the licences for providing cinema
tickets to a party is a function being
exercised in control of services thereby
bringing the activity of regulation by a
government department under the ambit
of Section 2 (h). Whereas, in the case of
XYZ vs. Principal Secretary, Public Works
Department, Government of Madhya Pradesh
and Director General, Central Public Works
Department, New Delhi11, in which it was
alleged that the condition imposed by
Public Welfare Department (PWD) of
testing of certain samples to be carried out
only by labs which have been accredited
by National Accreditation Board for
Testing and Calibration Laboratories
amounted to an abuse of dominant
position by PWD, the CCI held The
activities being performed by the Opposite
Parties do not come under the definition of
enterprise in terms of Section 2(h) of the Act
as they are not directly engaged in any economic
and commercial activities. The Opposite Parties
have no existence in the relevant market, except
for laying down norms as to the authorization
of accreditation bodies for specific purposes.
Their role is limited to planning, designing,
construction and maintenance of Government
assets, as such provisions of Section 4 of the
Act are not attracted against them. The
Opposite Parties have issued circulars only and
they are not operating in the relevant market.
Therefore, the conduct of the Opposite Parties
does not give rise to any competition concern.
17. Similar issue has been dealt by the
COMPAT in the case of The Malwa
Industrial and Marketing Ferti-Chem
10 Case No. 54 of 2011, Section 26 (2) order dated 21.12.2011
11 Case No. 50 of 2014, Section 26 (2) order dated 29.10.2014
12 Appeal No. 25 of 2015, judgment dated 30.04.2015
13 W.P. (C) No. 5770/2011, judgment dated 04.11.2011
COMPETITION LAW REPORTS v MAY, 2017
B-163
Cooperative Society Ltd. v. Competition
Commission of India & Ors.12. While over-
ruling the decision of the CCI by which
the CCI had held that the Registrar of
Cooperative Societies was not an
enterprise, the COMPAT stated, Though
the Commission briefly analyzed the
definition of the term enterprise, it failed to
give due weightage to the words relating to
the production, storage, supply, distribution,
acquisition or control of any articles or goods
appearing in Section 2(h) and was swayed by
the fact that the Registrar had issued the
disputed circulars in exercise of its statutory
powers. In my view, even though the Registrar,
Cooperative Societies, Punjab had issued
circulars in the purported exercise of his
[statutory] powers, the fact remains that the
same were definitely relating to the goods
which could be purchased by Primarily
Agricultural Societies from [Punjab State Co-
operative Supply and Marketing Federation]
only. Therefore, the Registrar would fall with
the ambit of term enterprise as defined in
Section 2(h) for the purpose of the Act and
will be amenable to the jurisdiction of the
Commission.
18. Similar views had also been taken by
the Delhi High Court in the case of Hemant
Sharma & Ors. v. Union of India & Ors.13
where the Delhi High Court considered the
activities of organizing chess tournaments
and providing the required technical
support being carried out by the All India
Chess Federation (AICF) sufficient to
render it an enterprise under Section 2
(h). The Court held, Admittedly, respondent
no.2 [AICF] organises chess tournaments and
provides technical support and expertise for
conduct of such chess tournaments. That, in
my prima facie view, would constitute service
rendered by respondent no.2 to the players who
are registered with it. Such service is being
rendered for a consideration received from the
players, as is evident from the registration form,
127
B-164 Competition Law Reports
A government department
need not be directly
carrying out production,
storage, supply,
distribution, acquisition or
control of articles or goods,
or the provision of services
(the first class of activities
mentioned in Section 2 (h))
and even if it carries out
any activity relating to the
above activities in any
manner, it would be deemed
to be an enterprise
a copy whereof has been filed on record by
respondent no.2. It is also borne by respondent
No.1 for the benefit of all chess players who
provides grants to respondent No.2.
Respondent no.2, prima facie, would also fall
within the expression `enterprise as used in the
Act which is very widely worded to even include
a person or a department of the government
rendering services of any kind. people as well as goods and services, it
19. Hence it is clear from the above judicial
pronouncements that a government
department need not be directly carrying out
production, storage, supply, distribution,
acquisition or control of articles or goods, or
the provision of services (the first class of
activities mentioned in Section 2 (h)) and even
if it carries out any activity relating to the
above activities in any manner, it would be
deemed to be an enterprise.
20. Regarding the second question
relating to those activities of the
government departments which are
carried in pursuance of statutory
14 Case No. 38/2012, Section 26 (2) order dated 18.10.2012
15 Case No. 42 of 2013, order under Section 26 (6) dated 12.05.2015
16 Appeal No. 45/2015, dated 16.02.2016
128
[Vol. 2
mandate without any profit-earning
motive, in an earlier case of All India
Genset Manufacturers Association v. Chief
Secretary, Govt. of Haryana & Ors.,14 the
CCI held the purchase of Gensets obviously
is a commercial activity of the department
and [Director, Supplies and Disposals]
would satisfy the definition of an enterprise
as given in section 2(h) of the Act.
21. However, in the case of Builders Association
of India (Kerala Chapter) v. The State of Kerala
(OP-1), Kerala Public Works Department (OP-
2), The Kerala State Construction Corporation
Ltd. (OP-3) and Finance Department,
Government of Kerala (OP-4)15, in which it was
alleged that Kerala Public Works Department
in collusion with The Kerala State
Construction Corporation Ltd. (a state owned
company) was ousting other private
contractors from government bids for public
works, pursuant to the DGs investigation,
the CCI held that since Public Works
Department was responsible for design,
implementation and maintenance of all
public works undertaken by the Government
of Kerala and facilitate the economic
development of the State by providing
required road infrastructure, development of
inter-state road infrastructure facilities, road
safety and enhancing the mobility of the
cannot be considered as an enterprise
because these functions were its primary
functions. CCI further held that for carrying
out the above mentioned functions, since it
used to consume the services of The Kerala
State Construction Corporation Ltd. and
other private players, it was a consumer and
for this reason too, it could not be considered
as an enterprise.
22. Various decisions by the COMPAT and
other courts have shed some light on the
issue. In the case of Rajat Verma v. Haryana
Public Works (B&R) Department & Ors.16, the
COMPAT overruled the order of the CCI
COMPETITION LAW REPORTS v MAY, 2017
2017] Government Departments as Enterprise- An Enigma under the Competition Act B-165

passed under Section 26(2) where the CCI
held that Haryana Public Works (B&R)
Department could not be regarded as an
enterprise on the grounds that the activity
carried by the Public Works Department,
i.e. of tendering for construction of bridges
was done for the welfare of the public and
did not fall in the category of economic or a
commercial activities as given in Section 2
(h), and closed the case. The COMPAT
while drawing a distinction between
economic and commercial activity held been relied extensively upon by the CCI
that though the activity of tendering for
construction of an over-bridge by the Public
Works Department is not done with a
profit earning motif, it could not be regarded
as a commercial activity but it still is an
economic activity as it strengthens the
economic condition of the society. While
considering the Haryana Public Works
department to be an enterprise, the
COMPAT held, If the term enterprise, as
defined in Section 2(h) is read in conjunction
with the definitions of the terms person and
service, it becomes clear that the legislature
has designedly included government
departments in relation to any activity relating
to storage, supply, distribution, acquisition or
control of articles or goods, or the provision of
services of any kind. .
23. Similar views were taken by the
COMPAT in the case of Indian Trade
Promotion Organization v. Competition
Commission of India & Ors.17 where it was
held, The word service, which finds place
in Section 2(h) has been defined in Section 2(u).
It means service of any description which
is made available to potential users and also
includes the provision of services in
connection with business of any industrial
or commercial matters such as banking,
communication, education, financing,
insurance, chit funds, real estate, transport,
storage, material treatment, processing, supply
of electrical or other energy, boarding,
lodging, entertainment, amusement,
construction, repair, conveying of news or
information and advertising. This shows that
every possible type of activities is
encompassed in the inclusive part of the
definition of the term service. The width
of the definition of enterprise becomes clear
by the definition of the term service.
[Emphasis appears in the original text]
24. Pertinently, both these rulings by the
COMPAT (Rajat Verma (supra) and Indian
Trade Promotion Organization (supra)) have
in the case of Sudarshan Kumar Kapur v.
Delhi Development Authority18 to hold that
the service of developing of apartments
by the Delhi Development Authority was
within the purview of Section 2 (h) despite
this being the statutory mandate of the
Delhi Development Authority.
25. Hence, through various rulings of the
COMPAT, the scope of the first class of
activities mentioned in Section 2 (h) i.e.
any activity, relating to the production,
storage, supply, distribution, acquisition
or control of articles or goods, or the
provision of services, of any kind has
become very wide.
26. However, it should be noted that
when the statute itself demands that the
government body should act in a
particular manner, CCI cannot interfere.
In the case of Sharad Kumar Jhunjhunwala
v. Union of India, Indian Railways & Ors.19,
the COMPAT held, It may be noted that
the relevant charges are imposed as per the
Railway Passenger (Cancellation of ticket and
Refund of fare) Rules 1998 framed under the
Railways Act, 1989. As the levy is statutory
in nature and even otherwise no irrationality
can be found therein, the entire challenge of
the Informant on this count falls flat.
Therefore, when the statute mandates a
government department to act in an
anticompetitive manner, it may not be
considered to be an enterprise.

17 Appeal No. 36 of 2014, judgment dated 01.07.2016

18 Case No. 78 of 2016, order dated 12.01.2017
19 Appeal No. 01 of 2016, judgment dated 11.01.2016

COMPETITION LAW REPORTS v MAY, 2017 129

B-166 Competition Law Reports
The second and third classes of
activities and their contours
27. Pertinently, the Government of India
and the State Governments through
various ministries hold the shares of a
number of government companies. The
second and the third classes of activities
referred in Section 2 (h) are investment
and the business of acquiring, holding,
underwriting or dealing with shares,
debentures or other securities of any other
body corporate respectively. There is a
vacuum of judicial pronouncements in
competition law which could help in
tracing the contours of these activities.
28. Regarding the term investment, the
Supreme Court has quoted the following
interpretation of the term investment
given by the House of Lords in the case
of IRC v. Total Broad Hurst Lee Co. Ltd.20 in
a plethora of cases related to taxation:
The meaning of investment is not its
meaning in the vernacular of the man in
the street but in the vernacular of the
businessman. It is a form of income-
yielding property which the businessman
looking at the total assets of the company
would single out as an investment..... The
businessman would not limit income from
investments to income from the kinds of
securities which are quoted on the stock
exchange, and he. would, I think, regard as
income from investment a profitable rent
from a sublease of office premises, or the
like...
29. It is doubtful whether the above
definition of the term investment which
applies to taxation can also be applied
to competition law because of a number
of reasons- first of all, the objective of
competition law is very different from
that of taxation. As the Act seeks to curb
the mischief of practices having an
adverse on competition, it demands a
very liberal interpretation which could
curb this mischief and since the state can
also carry out practices which could have
20 [I949] 29 TC 352
130
[Vol. 2
an adverse impact on competition, it is
imperative that the Act be interpreted in
such a manner which could curb these
practices by the state too. And second, as
discussed above, while interpreting the
first class of activities, the COMPAT has
clarified that even those activities of the
government departments which are
carried out without any profit earning
motive would be amenable to scrutiny
under Section 2 (h) of the Act (see Rajat
Verma (supra) and Wing Cdr. (Retd.) Dr.
Biswanath Pratap Singh (supra)).
30. On the other hand, if the term
investment is given a very liberal
interpretation, almost every Ministry of
the Central government or the State
governments, as the case may be, would
be subjected to scrutiny under competition
law since these hold shares of various
government companies. Would this not
be an absurd situation?
31. Hence, the issue that whether the term
investment as mentioned in Section 2 (h)
should be given a narrow interpretation
or a liberal interpretation qua government
departments needs final adjudication by
the apex court.
32. Fortunately, there is no such
ambiguity regarding the third class of
activities mentioned in Section 2 (h) of
the Act which is, the business of
acquiring, holding, underwriting or
dealing with shares, debentures or other
securities of any other body corporate.
It is opined that the use of the term
business makes it amply clear that it
should be a commercial activity carried
out with the purpose of earning profit. It
is therefore opined that if a government
department acquires, holds, underwrites
or deals with shares, debentures or other
securities of any other body corporate, it
should be deemed to be an enterprise
only if it has carried out these activities
with a motif to earn profit.
COMPETITION LAW REPORTS v MAY, 2017
2017] Government Departments as Enterprise- An Enigma under the Competition Act
Sovereign Function Exemption and
Section 54
33. The latter part of Section 2 (h) states
that the term enterprise does not
include any activity of the Government
relatable to the sovereign functions of the
Government including all activities
carried on by the departments of the
Central Government dealing with atomic
energy, currency, defense and space.
34. It is pertinent to note that the term
sovereign functions has been given a
very narrow interpretation by the courts.
In the case of Wing Cdr. (Retd.) Dr.
Biswanath Prasad Singh (supra), while
relying upon the landmark judgment of
the Supreme Court in the case of
Bangalore Water Supply and Sewage Board
v. A. Rajappa21, the COMPAT held that
only those functions of the Government
which are inalienable and non-delegable
shall be regarded as its sovereign
functions. These would include
functions like maintenance of law and
order, acquisition and retention of
territories, taxation, etc. Therefore, the
sovereign function exemption does not
have a wide amplitude and a plethora of
activities being carried out by the
Government would fall within the ambit
of Section 2 (h) of the Act.
35. It is important to note that Section 54
(a) of the Act empowers the Central
Government to exempt by notification
any enterprise (including private
enterprise) from the application of the
Act if such exemption is necessary in
public interest. It is opined that by the
insertion of Section 54 (a) in the Act, there
is a presumption by the legislature that
there may be certain cases where
promotion of competition may not be in
public interest. This may be true
especially in the cases of essential
commodities where it is important for the
Government to intervene to promote
21 (1978) 2 SCC 213
22 W.P. (c) No. 993/2012, judgment dated 23.02.2012
COMPETITION LAW REPORTS v MAY, 2017
B-167
equitable distribution. Interestingly
Article 38 and 39 of the Constitution cast
a duty on the state to ensure that the
resources are distributed in such a
manner so as to sub-serve the common
good.
36. Also, Section 54 (c) empowers the
Central Government to exempt any
enterprise from the reach of the Act which
performs a sovereign function on behalf
of the Central Government or the State
Government. While clarifying the
purport of this provision, in the case of
Union of India vs, CCI22, the Delhi High
Court held, an enterprise may perform
some sovereign functions, while other
functions performed by it, and the activities
undertaken by it, may not refer to sovereign
functions. The exemption under Section 54
could be granted in relation to the activities
relatable to sovereign functions of the
Government, and not in relation to all the
activities of such an enterprise.
Conclusion
37. Section 2 (h) of the Act brings not only
the government companies but also
departments of the Government within
the ambit of the Act. Though Section 2
(h) further lay down certain conditions,
the interpretations given by the COMPAT
and various courts have made the ambit
of Section 2 (h) very wide while dealing
with government departments. It is not
necessary that the department of the
Government has to be directly involved
in the activities mentioned in Section 2
(h) and even an indirect involvement
would render the department an
enterprise. Moreover, if a government
department acts in an anticompetitive
manner in pursuance of its statutory
mandate, it shall be amenable to the
jurisdiction of the CCI. The sovereign
functions exemption and Section 54 play
a balancing role.
131
B-168 Competition Law Reports [Vol. 2
38. With a reduction of the Governments achievement of the goals of fair
control of the economy, the role of the CCI competition. It may therefore be desirable
would increase as on one hand it would that Section 2 (h) be given a liberal
have to ensure that private parties do not interpretation to enable the CCI to
abuse the freedom and on the other achieve its mandate of preventing
Government does not carry out such practices having an adverse effect on
activities which would obstruct the competition.

132 COMPETITION LAW REPORTS v MAY, 2017