Company penalized for bid rigging in soil testing tenders, penalty reduced from 5% to 3% under Section 3(3)(d)

NCLAT Principal Bench upheld Competition Commission's finding that appellant company colluded with other bidders to rig soil testing tenders for UP Agriculture Department in 2017, violating Section 3(1) read with Section 3(3)(d) of Competition Act 2022. Appellant provided cover bids to prevent tender cancellation due to insufficient participation in Meerut and Jhansi divisions. NCLAT confirmed cease-and-desist order but reduced penalty from 5% to 3% of average annual turnover for last three years, considering appellant's supporting role rather than main role in the cartel. Application disposed.

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Issues Involved:
1. Alleged bid-rigging in tenders for soil sample testing by the Department of Agriculture, Government of Uttar Pradesh.
2. Determining whether the Opposite Parties manipulated the tenders by indulging in bid rigging, collusive bidding, and sharing of the market.
3. Identifying the persons responsible for the contravention under Section 48 of the Competition Act, 2002.
4. Imposition of penalties on the contravening parties.

Issue-wise Detailed Analysis:

Issue 1: Alleged Bid-rigging in Tenders
The Competition Commission of India (CCI) received a complaint alleging bid-rigging in tenders for soil sample testing in Uttar Pradesh. The tenders in question were Tender No. 1 (Moradabad) and Tender No. 2 (Bareilly). The complaint named several entities, including Yash Solutions, M/s Satish Kumar Agarwal, M/s Siddhi Vinayak and Sons, M/s Saraswati Sales Corporation, and Austere System Pvt. Ltd., among others. The complaint alleged that these entities engaged in cover bidding, bid rotation, and collusive bidding.

Issue 2: Manipulation and Collusion in Bidding
The CCI's investigation revealed that the named entities manipulated the bidding process by engaging in cartelization and bid-rigging. The investigation covered nine tenders from 2017 and 2018 across various divisions. It was found that Yash Solutions and Austere Systems, among others, manipulated the bidding process to ensure specific entities won the tenders. The investigation showed that these entities had no prior experience in soil testing and did not meet the tender requirements, indicating collusion.

Issue 3: Identification of Responsible Persons
The CCI identified individuals responsible for the contravention under Section 48 of the Act. These included Mr. Naresh Kumar Sharma (M/s Saraswati Sales), Mr. Satish Kumar Agarwal (M/s Satish Kumar and M/s Siddhi Vinayak), Mr. Praveen Kumar Agarwal (Yash Solutions), Mr. Nitish Agarwal (Chaitanya Business Outsourcing), Mr. Ankur Kumar (Delicacy Continental), Mr. Jai Kumar Gupta (Fimo Info Solutions), Mr. Suresh Kumar Gupta (M/s Toyfort), and Mr. Rahul Gajanan Teni (Austere Systems).

Issue 4: Imposition of Penalties
The CCI imposed penalties on the contravening parties under Section 27(b) of the Act. The penalties were based on the average turnover of the entities for the last three financial years. The CCI rejected the argument that penalties should be based on the relevant turnover from the specific tenders, citing the need to deter anti-competitive behavior. The CCI imposed a penalty of 5% of the average turnover on the entities and individuals involved.

Analysis of Evidence and Findings:
The CCI grouped the opposite parties into three sets for analysis:
- Set 1: Yash Solutions, M/s Saraswati Sales, M/s Satish Kumar, M/s Siddhi Vinayak, and Chaitanya Business Outsourcing.
- Set 2: Austere Systems, M/s Toyfort, Fimo Info Solutions, and Delicacy Continental.
- Set 3: Austere Systems and Yash Solutions.

The investigation revealed that Austere Systems, M/s Toyfort, and Fimo Info Solutions were related through family and business relationships and colluded to rig bids. The CCI found that these entities submitted bids not to compete but to create a facade of competition, ensuring Austere Systems won the tenders.

Key Findings:
- The entities had no prior experience in soil testing and did not meet the tender requirements.
- There were clear business and family relationships between the entities, indicating collusion.
- The bids submitted by M/s Toyfort and Fimo Info Solutions were cover bids to support Austere Systems.

Conclusion:
The CCI upheld the findings of bid-rigging and collusion, directing the entities to cease and desist from such practices. The CCI imposed penalties on the entities and individuals involved, reducing the penalty for the appellant to 3% of the average annual turnover for the last three years, considering their supporting role in the cartel.

Final Orders:
1. The order holding the appellant guilty under Section 3(3)(c) and 3(3)(d) read with Section 3(1) is upheld.
2. The cease-and-desist order under Section 27(a) is upheld.
3. The penalty under Section 27(b) is reduced to 3% of the average annual turnover for the last three years.

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