Gubba Cold Private Ltd. Vs. Vishakapatnam Port Logistics Park Ltd. and Other

COMPETITION COMMISSION OF INDIA Case No. 06 of 2024

In Re:

Gubba Cold Private Ltd. Informant Plot No. 25, P&T Colony, Near RTA Office, Triumulgherry, Secunderabad Telangana- 500015

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And

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Vishakapatnam Port Logistics Park Ltd. Opposite Party No. 1 21, Netaji Subhas Road, Kolkata-700001

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Vishakapatnam Port Logistics Park Ltd. Opposite Party No. 2 Survey No. 1Pand 2P/, Mulagada (V) Near Mindi railway Siding, Gajuwaka Area, Vishakapatnam- 530012

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CORAM

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Ms. Ravneet Kaur Chairperson

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Mr. Anil Agrawal Member

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Ms. Sweta Kakkad Member

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Mr. Deepak Anurag Member

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Order under Section 26(2) of the Competition Act, 2002

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The instant Information has been filed by Gubba Cold Private Ltd. (“ Informant ”) alleging contravention of provisions of Sections 3 and 4 of the Competition Act, 2002

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Case No. 06 of 2024 Page 1 of 7

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(“ Act ”) by Vishakapatnam Port Logistics Park Limited, Kolkata (“ Opposite Party No.1/OP-1 ”) and Vishakapatnam Port Logistics Park Limited, Vishakapatnam (“ Opposite Party No.2/OP-2 ”) (hereinafter, OP-1 and OP-2 are collectively referred to as ‘ OPs ’).

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The Informant is stated to be engaged in the business of providing storage facilities to consumers, including FMCG companies, pharmaceuticals companies, farmers, etc . which require to preserve their products by way of a temperature controlled cold storage plant.

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It has been stated that OP-1 is a joint venture between M/s Balmer Lawrie and Company Limited and Vishakapatnam Port Authority and that Vishakapatnam Port at Visakhapatnam, Andhra Pradesh was constructed and maintained by OP-1. Further, OP-2 is stated to be the branch office of OP-1. It has been stated that the OPs have also established a frozen cold storage plant for storing and preserving material meant for export and import at Vishakapatnam Port. It is stated that the OPs lease out space classified as chambers within the frozen cold storage plant to various consumers including the Informant.

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The Informant has stated that it entered into a Leave and License Agreement dated 11.08.2022 with OP-1 for a portion of the cold storage plant having a built-up area of 3,156 square metres comprising 15 chambers of 3,780 pallet capacity along with a separate 626 square feet of office space outside the chambers with all the easement rights of ingress and egress including loading and unloading facilities for trucks, etc .

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The Informant has stated that it was vital for it to obtain a number of chambers for warehousing its goods which include perishable items and FMCG goods. The Informant has also stated that it was compelled to execute a Lease Deed camouflaged as a ‘Leave and License Agreement’ dated 11.08.2022 (‘ Leave and License Agreement ’) for avoiding stamp duty and registration charges to the State exchequer, in violation of the Indian Stamp Act, 1899. It has been alleged that the terms and conditions of the Leave and License Agreement were exclusively prepared by the OPs and the Informant was in a ‘take it or leave it’ situation.

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Case No. 06 of 2024 Page 2 of 7

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It has been stated that there is a clause in the Leave and License Agreement containing ‘lock-in-period’ of 18 months with effect from date of possession which states that if the Informant vacates the leased chambers prior to the said date, it stands to forfeit the security deposit.

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The Informant has alleged that the entire temperature control mechanism, which is crucial for operating the cold storage units/ chambers for preserving the goods, is under the exclusive control and custody of OP-1 and the lessees of chambers cannot operate the temperature control mechanism except, the limited right to regulate the temperature within the chamber.

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It has been alleged that a representative of OP-2 issued standing instructions that whenever and wherever, any lessee violates any of the terms and conditions of contract, the power supply be cut off, thereby ruining the entire material kept in the cold storage.

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The Informant has further stated that that an unregistered lease deed is entirely inadmissible in evidence and the terms and conditions contained in the lease deed cannot be enforced by either of the parties.

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It has been alleged that the OPs are repeatedly threatening the Informant that if it does not continue the tenancy till the ‘lock-in-period’ of 18 months, the security deposit amount shall stand forfeited by way of liquidated damages for breach of the contract. As stated by the Informant, there is also a threat of cutting off the power supply by the OPs in case the Informant wants to adjust the security deposit amount against the rent due for the months of November, 2023, December, 2023, January, 2024 and February, 2024.

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The Informant has also alleged that it is compelled to follow instructions of the OPs under threat of stoppage of power. The Informant has alleged that the said illegality of cutting off the power supply and forfeiture of the security deposit constitutes an abuse of dominant position as contemplated under Section 4 of the Competition Act, 2002.

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Case No. 06 of 2024 Page 3 of 7

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It has been stated that the Informant issued a notice dated 16.12.2023 to the OPs narrating the entire sequence of events, terminating the lease and vacating the premises covered under the agreement dated 11.08.2022 on or before 10.02.2024 by adjusting the rents for the intervening period against the security deposit amount of Rs. 52,16,400/-. The Informant also asked the OPs to reconcile the accounts and agreed to pay the amount due to OPs. The Informant further stated that if the OPs continued to threaten the Informant to cut off the power supply during the intervening period by compelling the Informant to forego the security deposit, the Informant would be constrained to file a complaint before the Competition Commission of India. Thereafter, the OPs issued a reply dated 29.01.2024 to the legal notice dated 16.12.2023 stating that OPs are entitled to forfeit the entire security deposit amount. The OPs, in their response to legal notice, stated that an amount of Rs. 56,63,178/- being the outstanding license fee and electricity charges are due from the Informant and are required to be paid at the earliest.

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The Informant has alleged that despite the OPs retaining the security deposit amount the OPs compelled the Informant to pay additional amount as well as make a commitment for paying the rents during the ‘lock-in-period’ under the threat of disconnection of power supply and preventing the access of the Informant’s staff to the cold storage unit.

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It has been stated that though the Informant has terminated the lease and is in the process of removing its entire stored material from the cold storage plant, the security staff of the OPs deployed at the site are preventing the entry of the Informant's staff, lorries etc. , for removing the stored material, which is valued around Rs. 100 crores.

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The aforesaid facts allegedly bring out that there is an abuse of dominant position by the OPs as the OPs have a monopoly in respect of provision of logistic services including cold storage facilities and movement of goods at the Visakhapatnam Port.

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In view of the above, the Informant has alleged contravention of Sections 3 and 4 of the Act by the OPs and has sought following relief: (a) declaring attempts of the OPs to compel the Informant to enforce ‘lock-in-period’ clause and consequent liquidated damages clause occurring in Leave and License Agreement; preventing the Informant from

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Case No. 06 of 2024 Page 4 of 7

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removing its stored goods in the cold storage plant; and threatening to cut off the power supply to the premises within the cold storage plant, as illegal; (b) directing the OPs to permit the Informant to remove its stored goods from the cold storage plant; (c) directing the OPs to refund the security deposit amount of Rs. 52,16,400/- (Rupees Fifty-Two Lakhs Sixteen Thousand Four) after adjusting the entire rental arrears; and (d) imposing maximum penalty as per the Act on the OPs.

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The Informant has also sought interim relief under Section 33 of the Act by way of direction to the OPs to: (a) grant uninterrupted access to the Informant and its staff and vehicles to the cold storage plant situated at Visakhapatnam Port Trust; (b) allow Informant to remove the entire stored material in the premises without disconnecting power supply to the cold storage plant during the interim period; and (c) pass such other orders as the Commission may deem fit and proper in the circumstances of the case.

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The Commission considered the matter in its ordinary meeting held on 05.06.2024 and decided to pass an appropriate order in due course.

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The Commission has perused the Information and observed that the Informant appears to be aggrieved by the following conduct of the OP i.e. the lease agreement being camouflaged as a ‘Leave and License Agreement’ for the purpose of avoiding stamp duty and registration charges to the State exchequer; enforcing the ‘lock-in-period’ clause in the Leave and License Agreement and refusal by the OPs to adjust the rental arrears against the security deposit; repeated threats to forfeit the security deposit and restricting access of Informant's staff to the cold storage plant and threatening to switch off the power supply to the cold storage plant.

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The above conduct has been alleged to be abuse of dominant position by the OPs in contravention of provisions of Section 4 of the Act. The Commission notes that the Informant has also alleged violation of Section 3 of the Act by stating that OPs have indulged in unfair monopolistic trade practice, however, the same has not been substantiated.

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Case No. 06 of 2024 Page 5 of 7

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The Commission observes that the Informant entered into Leave and License Agreement with OP-1 for a period of 5 years for a portion of the cold storage plant with a lease rent of INR 17,38,800/- per month and on payment of security deposit of a sum of INR 52,16,400/- (equivalent to 3 month’s rent). The said agreement also contains a clause pertaining to a ‘lock-in-period’ of 18 months from the date of taking possession of the cold storage plant during which the said agreement cannot be generally terminated unless there is a breach of the terms and conditions of the said agreement.

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The Commission notes that the alleged conduct of OPs of the lease agreement camouflaged as a ‘Leave and License Agreement’ for the purpose of avoiding stamp duty and registration charges to the State exchequer is not a competition issue and does not fall within the four corners of the Competition Act, 2002. Furthermore, other alleged actions against the OPs viz enforcement of the ‘lock-in-period’ clause in the Leave and Licence Agreement, refusal by the OPs to adjust the rental arrears against the security deposit, threat to the Informant to forfeit the security deposit due to premature termination of tenancy and non-compliance with the ‘lock-in-period’ clause, stopping access of Informant's staff to the cold storage plant and threatening to cut off the power supply to the cold storage plant appear to be in the nature of inter se dispute between the parties. These alleged actions do not appear to give rise to competition concerns as envisaged within the provisions of the Competition Act, 2002.

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In view of the foregoing and in the facts and circumstances of the present matter, the Commission is of the view that there is no prima-facie case of contravention of provisions of the Act warranting an investigation into the matter.

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Accordingly, the Information is ordered to be closed forthwith in terms of Section 26(2) of the Act. Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises.

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Case No. 06 of 2024 Page 6 of 7

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The Secretary is directed to communicate the order to the Informant, accordingly.

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Sd/(Ravneet Kaur) Chairperson

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Sd/(Anil Agrawal) Member

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Sd/(Sweta Kakkad) Member

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Sd/(Deepak Anurag) Member

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New Delhi Date: 30.07.2024

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Case No. 06 of 2024 Page

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Gubba Cold Private Ltd. v. Vishakapatnam Port Logistics Park Ltd. and Other

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Gubba Cold Private Ltd. v. Vishakapatnam Port Logistics Park Ltd. and Other

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