CCI Dismisses Allegations of Abuse of Dominance Against Shriram City Union Finance Limited and Shriram Transport Finance Company Limited

On June 30, 2021, CCI dismissed allegations of violation of Section 3 and Section 4 of the Act by Shriram City Union Finance Limited (‘Shriram City Union’) and Shriram Transport Finance Company Limited (‘Shriram Transport’), made by Mr. Sudhakar. Shriram City Union and Shriram Transport are NBFCs.[1]

Mr. Sudhakar had availed a Small and Medium enterprise (‘SME’) loan from Shriram City Union in 2012. Upon noticing certain irregularities in loan servicing by Shriram City Union, Mr. Sudhakar alleged that Shriram City Union was acting in violation of Fair Practices Code (‘FPC’) issued by the Reserve Bank of India (‘RBI’). He further alleged that Shriram City Union and Shriram Transport were engaged in various malpractices, including: (a) disbursal of loans in smaller cities/rural areas, through loan agreements executed in English despite the majority of population in such areas not being English literate; (b) failure to provide copies of the loan agreement to borrowers; (c) deduction of 1-2% of the loan amount as operational /loan processing fees and begins mortgaging collateral securities offered by the borrower, at the borrower’s expense; (d) forcing borrowers to enroll in insurance schemes under Shriram Life Insurance Company lest they face dire consequences with the Post-Dated Cheques (‘PDCs’) issued by borrowers; (e) understating revenue in their books of accounts and initiation of recovery process under Negotiable Instruments Act, 1881, collecting more than the pending loan, and not disclosing it the authorities; and (f) initiating arbitrations against the borrowers who protest, with arbitrators passing ex parte without verifying the correctness of the claim amounts. In sum, Mr. Sudhakar alleged that Shriram City Union and Shriram Transport (a) had abused their dominant position to disadvantage the borrowers; and (b) were engaged in anti-competitive tying of their loan services with the insurance provided by their group company, Shriram Life Insurance Company.

Noting the allegations made by Mr. Sudhakar, CCI referred the matter to the RBI and also sought responses from Shriram City Union and Shriram Transport in relation to the alleged conduct. Upon completing its analysis, CCI dismissed the allegations against Shriram City Union and Shriram Transport on the following basis:

i.    Lack of information placed on record: Sudhakar neither defined any relevant market in which the alleged abusive conduct took place, nor provided any information in support of the dominant position.
ii.   Absence of dominance: CCI noted that there are many NBFCs across India (let alone Andhra Pradesh) and that apart from NBFCs, there are multiple options for consumers to avail loans from, such as public sector banks, regional rural banks, cooperative banks, etc. Accordingly, CCI did not find it necessary to delineate a relevant market as it would not affect its assessment of dominance. In the absence of dominance, CCI did not delve into the alleged abusive conduct.
iii.   No anti-competitive tying: Apart from the fact that Mr. Sudhakar did not place any evidence on record to support his allegation of anti-competitive tying, CCI noted from Shriram Union City’s submission that “it has never forced its customers to take policy from Shriram Life Insurance Company Limited”. Based on the evidence placed on record by Shriram City Union and Shriram Transport, CCI noted that more than 50% of their borrowers appeared to either not avail insurance or availed insurance through service providers other than Shriram Life Insurance Company.


[1] Case No. 08 of 2020 order dated 30, June 2021.

Published In:Inter Alia Special Edition - Competition Law - September 2021 [ English
Date: September 16, 2021