2022 (11) TMI 705 - AT - Law of Competition

Tribunal Upholds Anti-Competitive Penalties, Orders Reassessment for Leniency Due to Firm Status in Cartel Case.

The National Company Law Appellate Tribunal upheld the findings of the Competition Commission of India regarding cartelization and bid rigging in tenders ... Anti-competitive conduct - allegation of bid rigging was in the tenders invited by the Department of Agricultural, Govt of UP for soil sample testing in respect of e-tender - contravention of provisions of Section 3(1) read with 3(3)(d) of Competition Act - HELD THAT:- The Commission has correctly and legally held the appellant responsible for violation of Section 3(3)(c) and 3(3)(d) reading with Section 3(1) of the Act and there is no error in respect of order passed under Section 27(a) whereby the appellant was directed to cease and desist from such act from indulging in the practices which were found in contravention of the provisions contained in Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. So far as imposition of penalty is concerned it is evident that appellant was a proprietor firm. Of course imposition of penalty was entirely within the discretion of the CCI and in respect of exercising discretion same may not be interfered with. However, it is also settled that discretion is to be exercised not indiscreet manner. In peculiar facts and circumstances of the present case particularly the fact that the appellant was found by the Commission that he being a Member of the Cartel the appellant was providing cover for the success of the bidder, Yash Solutions, it would be difficult to consider penalty on the basis of relevant turn over and as such total turn over which has been considered by the Commission may not termed as erroneous. However, considering the fact that the appellant was a proprietorship firm the Commission may consider to reduce the percentage of average income of the appellant. While approving the order of Commission in respect of holding the appellant guilty under Section 3(3)(c) and 3(3)(d) read with Section 3(1) and order passed under Section 27(a) regarding cease and desist order it is felt appropriate to remit back the matter to Commission to reconsider imposition of penalty which has been imposed under Section 27(b) of the Act - appeal disposed off. Issues Involved:1. Cartelization and bid rigging.2. Submission of fake invoices and certificates.3. Imposition of penalty.4. Determination of relevant turnover for penalty calculation.Detailed Analysis:1. Cartelization and Bid Rigging:The case involved allegations of cartelization and bid rigging in tenders floated by the Department of Agriculture, State of Uttar Pradesh. The Competition Commission of India (CCI) found that the parties involved, including Yash Solutions, M/s Satish Kumar Agarwal, M/s Siddhi Vinayak, M/s Saraswati Sales Corporation, and others, manipulated the bidding process. The Commission noted that these entities engaged in anti-competitive conduct by submitting cover bids to ensure the success of certain bidders, thereby violating Section 3(1) read with Sections 3(3)(c) and 3(3)(d) of the Competition Act, 2002.2. Submission of Fake Invoices and Certificates:The investigation revealed that some parties submitted fake invoices and false certificates to qualify for the bidding process. For instance, Yash Solutions issued fake work orders and experience certificates to M/s Satish Kumar and M/s Siddhi Vinayak. Additionally, it was found that the tax invoices submitted by Today Tech Solutions for lab consumables to Yash Solutions, M/s Siddhi Vinayak, and M/s Satish Kumar were identical and appeared to be forged. The Commission observed that these actions were intended to manipulate the bidding process and ensure the success of certain bidders.3. Imposition of Penalty:The CCI imposed penalties on the parties involved under Section 27(b) of the Act. The penalties were calculated at 5% of the average turnover for the three preceding financial years (2017-18, 2018-19, and 2019-20). The Commission emphasized that the penalties aimed to reflect the seriousness of the infringement and deter future anti-competitive conduct. The penalties imposed on the parties ranged from Rs. 36,442 to Rs. 84,31,706, depending on their average turnover.4. Determination of Relevant Turnover for Penalty Calculation:The parties argued that the penalty should be based on the relevant turnover related to the product in question, as per the decision in Excel Corp Limited vs. CCI. They contended that since they did not derive any income from the soil testing tenders, a zero penalty should be imposed. However, the Commission rejected this argument, stating that a narrow interpretation of relevant turnover would undermine the deterrence objective of the Act. The Commission reiterated its stance from a previous case, emphasizing that penalties should not be limited to turnover earned from specific tenders, as this would provide immunity to parties who refrained from participating in certain tenders.Separate Judgments:The judgment does not mention separate judgments delivered by different judges. Therefore, it is presumed that the judgment was delivered collectively by the bench.Conclusion:The National Company Law Appellate Tribunal upheld the CCI's findings of cartelization and bid rigging, as well as the imposition of penalties. However, it remitted the matter back to the CCI to reconsider the quantum of the penalty, suggesting a lenient view given the appellant's status as a proprietorship firm. The judgment underscores the importance of penalizing anti-competitive conduct to maintain fair competition and deter future violations.