Companies penalized for bid-rigging in soil testing tenders under Competition Act Sections 3(3)(c) and 3(3)(d)

The NCLAT upheld the Competition Commission's finding that companies engaged in bid-rigging and cartelisation in soil testing tenders floated by UP Agriculture Department during 2017-18. Three entities colluded to manipulate the bidding process through geographical allocation and cover bidding arrangements, contravening Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of Competition Act, 2002. The NCLAT confirmed the cease-and-desist order but reduced the penalty from 5% to 3% of average annual turnover for the appellant who played a supporting role by providing cover bids.

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Issues Involved:
1. Allegations of bid-rigging and collusive bidding.
2. Identification of individuals responsible for anti-competitive conduct.
3. Determination of penalty and its calculation.

Summary:

Issue 1: Allegations of Bid-Rigging and Collusive Bidding

The appeal was filed u/s 53(b) of the Competition Act, 2002, challenging the order passed by the Competition Commission of India (CCI) u/s 27 of the Act. The CCI found that the appellant contravened Sections 3(3)(c) and 3(3)(d) r/w Section 3(1) of the Act by engaging in bid-rigging in tenders for soil sample testing invited by the Department of Agriculture, Government of Uttar Pradesh. The complaint alleged that entities including Yash Solutions, M/s Satish Kumar, M/s Siddhi Vinayak, M/s Saraswati Sales, and Austere Systems, among others, colluded to rig the tenders through practices like cover bidding and bid rotation.

The CCI's investigation revealed that despite being competitors, these entities manipulated the bidding process. The Director General (DG) was directed to investigate, and the findings indicated that the parties engaged in cartelisation and bid-rigging in tenders for the years 2017 and 2018. The investigation also identified individuals responsible under Section 48 of the Act.

The commission grouped the opposite parties into three sets for analysis. It was found that Austere Systems, in collusion with other entities, rigged bids to emerge as the L-1 bidder in various divisions. The investigation also revealed that Delicacy Continental, despite having no experience in soil testing, participated in the tenders using fake experience certificates issued by Austere Systems. The commission concluded that there was an arrangement between Austere Systems, Yash Solutions, and Delicacy Continental to manipulate the bidding process.

Issue 2: Identification of Individuals Responsible

The DG identified several individuals liable under Section 48 of the Act, including Mr. Praveen Kumar Agarwal (Yash Solutions), Mr. Satish Kumar Agarwal (M/s Satish Kumar and M/s Siddhi Vinayak), Mr. Naresh Kumar Sharma (M/s Saraswati Sales), Mr. Rahul Gajanan Teni (Austere Systems), and Mr. Ankur Kumar (Delicacy Continental). The commission noted that these individuals played active roles in the anti-competitive conduct and failed to rebut the evidence against them. Consequently, they were held liable under Sections 48(1) and 48(2) of the Act.

Determination of Penalty

The commission imposed a penalty u/s 27(b) of the Act, amounting to 5% of the average turnover for the last three financial years. The commission emphasized that the penalty should reflect the seriousness of the infringement and deter future violations. The appellant argued that the penalty should be based on relevant turnover, as per the Supreme Court's decision in Excel Crop Care Ltd. vs. CCI. However, the commission rejected this narrow interpretation, stating it would allow parties involved in bid-rigging to escape penalties.

Conclusion

The Appellate Tribunal upheld the CCI's findings of contravention of Sections 3(3)(c) and 3(3)(d) r/w Section 3(1) of the Act. However, it reduced the penalty from 5% to 3% of the average annual turnover for the last three years, considering the appellant's supporting role in the cartel. The cease-and-desist order u/s 27(a) was also upheld.

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