2026 (1) TMI 393 - AT - Law of Competition

Bid rigging in public tender bids-common IPs, call records and shared EMD led to s.3(3) breach upheld.

The dominant issue was whether the appellant and other bidders engaged in bid rigging/collusive bidding contravening s.3(3) of the Competition Act in a ... Cartelisation and bid rigging/collusive bidding in Tender floated by the Pune Zilla Parishad for supply of Picofall-cum-Sewing Machine - contravention of the provisions of Section 3 of the Competition Act, 2002 - persons/officers in charge of and responsible for the conduct of the business of the OPs concerned at the time of the said contravention - HELD THAT:- The allegations in the complaint/information were pertaining to the rigging in bids invited by Respondent No. 5 from eligible vendors for the purpose of procurement of Picofall-cum-sewing machine with ISI mark for distribution amongst certain classes of persons living in the rural area under some scheme of the State Govt. It is found that in order to arrive at a finding that the Appellant and other two Respondents were indulged in bid rigging / collusive bidding in respect of the impugned tender floated by Respondent No. 5 the Commission considered price parallelism and examined the rates quoted by the bidders and in para 40 of the impugned order has provided the rates quoted by bidders including the Appellant and the difference in rates quoted by them - The main argument which has been taken by the Appellant is with regard to the lowering of bid price by him, from Rs. 12,621/- to Rs. 12,521/- and further reduction of same to Rs. 12,250/- and also that had there been a cartelization or bid rigging there was no occasion for him to reduce quoted price any further. The NCLAT is agreed with the observations made by the Commission that the direct evidence of formation of any cartelization or bid rigging is seldom available. The conspiracies with regard to the such illegal acts are hatched in isolation and executed with precision and therefore it would only the circumstances by which the formation of cartelization or bid rigging may be inferred. The strong evidence of the close association of the Appellant with Respondent No. 3 and 4 and submission of the bids by using the same IP address of the Appellant and their close association on phone calls as well as through the CDR records and the fact that the EMD of the Respondent No.3 and 4 was managed by the appellant, clearly establishes that they were not fairly competitive with each other and rather they have formed a cartelization in order to bid rigging. It is also found that once an agreement as defined in Section 2(b) of the Act is established and found to be established in respect of the specified clauses of Section 3(3) of the Act then a presumption may be safely drawn with regard to the fact that such an agreement was having an AAEC and the onus in such scenario is shifted to the other party to rebut this presumption, once the burden has been discharged by the reliable evidence collected by the DG. Thus, keeping in view all the evidence and material which is available on record before the Commission, there are no illegality so far as the holding of the Appellant guilty in terms of Section 27(a) of the Act and the directions issued by the Commission therein, is concerned - having regard to the formation of illegal cartelization and gravity of the illegal act, commensurate and proportionate penalty has been awarded by the Commission - there are no good ground to interfere in the impugned judgment passed by the Commission and resultantly the appeal filed by the Appellant is hereby dismissed and the impugned order passed by the Commission is hereby affirmed. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1) Whether the evidence on record established a horizontal anti-competitive agreement amounting to bid rigging/collusive bidding in relation to the impugned tender, attracting Section 3(3)(d) read with Section 3(1) of the Act. 2) Whether, upon establishing bid rigging under Section 3(3)(d), the statutory presumption of appreciable adverse effect on competition (AAEC) applied, and whether it stood rebutted on the evidence relied upon by the appellant. 3) Whether the penalty imposed under Section 27 was legally sustainable and proportionate, including whether it was computed on an appropriate 'relevant turnover' basis and at an appropriate level. ISSUE-WISE DETAILED ANALYSIS 1) Proof of bid rigging/collusive bidding under Section 3(3)(d) read with Section 3(1) Legal framework: The Court proceeded on the basis that bid rigging/collusive bidding is covered under Section 3(3)(d) read with Section 3(1), and that an 'agreement' (including inferred coordination) must be established on the evidence. Interpretation and reasoning: The Court upheld the finding of collusion based on cumulative circumstantial and documentary evidence: (i) extreme proximity of bid prices among the three bidders (differences of only Rs. 11/-, Rs. 17/-, and Rs. 28/-), considered highly unlikely under normal competitive conditions without coordination, especially since no cost data or other evidence was produced to justify such minuscule variation; (ii) the filing of bids (including the commercial envelope) using the same IP address belonging to the appellant's cyber café, which the Court found improbable for independent competitors; (iii) the financial trail showing the appellant facilitated tender fee/EMD payments for the other two bidders and that refund of their EMD ultimately came back to the appellant, treated as strong evidence of coordinated participation and 'cover bidding'; and (iv) call data records showing frequent and sustained communication between the bidders immediately before bid submission, treated as inconsistent with independent competitive conduct in the context of the other incriminating circumstances. The Court also agreed that direct evidence of cartel formation is rarely available and that collusion may legitimately be inferred from a coherent chain of circumstances. Conclusions: The Court concluded that the evidence established a 'meeting of minds' and coordination among the bidders, constituting bid rigging/collusive bidding in contravention of Section 3(3)(d) read with Section 3(1), and found no illegality in the Commission's finding of contravention and cease-and-desist direction. 2) Presumption of AAEC under Section 3(3) and rebuttal Legal framework: The Court accepted that once an 'agreement' falling within Section 3(3) is established, a presumption of AAEC follows, and the onus shifts to the contravening parties to rebut the presumption. Interpretation and reasoning: The Court rejected the contention that AAEC was not shown, holding that the established bid rigging attracted the statutory presumption. It further held that the appellant's explanations-such as subsequent price reduction after bid opening, the claim of operating a tender-filling cyber café business, alleged familiarity among local bidders, and purported documentary material to show other clients-did not rebut the presumption, particularly because the asserted tender-filling justification was not substantiated by credible evidence and certain supporting documents were found infirm/liable to rejection. The later reduction of price was held not to negate prior collusive conduct established from the surrounding evidence. Conclusions: The Court held that the presumption of AAEC validly arose and was not rebutted; the conduct was therefore treated as having AAEC for purposes of Section 3(3)(d). 3) Sustainability and proportionality of penalty under Section 27 Legal framework: The Court noted that the Commission applied the principle of proportionality and determined penalty with reference to 'relevant turnover,' treating revenue from the implicated product line (supply of sewing machines) during the relevant period as the appropriate base. Interpretation and reasoning: The Court rejected the challenge that the Commission used overall turnover, finding instead that the Commission relied on product-specific revenue for the relevant period and then imposed a penalty amount that was substantially below 10% of that revenue. Given the gravity of cartelisation/bid rigging found proved, the Court held the quantum to be commensurate and proportionate. Conclusions: The Court upheld the penalty amount as lawful and proportionate and found no ground to interfere with the Commission's penalty determination.