TaxTMI 
TaxTMI 
2013 (5) TMI 215
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.... quantity. It is also alleged that the quoted rate was about 10% higher than the neighboring Railways' last purchase rate. Suspecting cartelization by the bidders in fixing the price and distributing the tender quantity of the materials amongst themselves, the instant reference has been filed by Principal Chief Engineer, South Eastern Railway. 3. The reference was considered by the Commission in its ordinary meeting held on 18.10.2011 and vide its order of the even date, the Commission noted that the rate quoted by the various bidders was inclusive of excise duty, VAT and freight. It was also observed by the Commission that as the bidders were located across the country, the cost of freight for supplying the product from different parts of the country could not have been the same assuming that all the bidders had the same input costs for the product. The fact that identical rates were quoted by a large number of bidding firms, the same was prima facie found to be indicative of some kind of meeting of minds with a purpose to manipulate the tender under reference. Hence, the Commission was of the opinion that prima facie a case of contravention of the provisions of section 3(3)(d)....
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....rt of the DG and the replies/ objections of the opposite parties thereto besides perusing the material available on record. The following points fall for consideration before the Commission: Whether the opposite parties have contravened the provisions of section 3 of the Act? 9. To intercept increased instances of theft and sabotage in various parts of rail lines, the South Eastern Railway floated a tender dated 14.06.2010 for procurement of 45.50 lacs anti-theft elastic rail clips with circlips from RDSO approved vendors. In response thereto, 1 unapproved firm, 4 Part-II approved firms and 28 Part-I approved firms submitted their respective bids. The tender was opened on 21.07.2010. From the minutes of the Tender Committee and the comparative statements filed by the South Eastern Railway, it appears that all 28 Part-I RDSO approved firms and 1 unapproved firm quoted the same rate i.e. Rs. 66.49 to 66.51 per piece and offered the quantity ranging from 70,000 pieces to 14,70,475 pieces in their respective bid documents. As noted above, the total tender quantity was for 45,50,000 pieces. These firms combined together quoted for 46,45,475 pieces and, fur....
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.... reference, notes that all the participating opposite parties i.e. 28 Part-I firms and 1 Part-II firm quoted an all-inclusive rate of Rs. 66.50 each for the supply of the tendered material. Further, the quantity quoted by the each of the bidders was less than 50% of the total quantity. These facts have not been denied or disputed by any of these opposite parties. 13. The quotation of identical rates by large number of firms is no doubt suggestive of and indicative of formation of a cartel but the same in itself is not conclusive and determinative of the issue. 14. In this regard, a reference may be made to the other corroborative evidences gathered by the DG during the course of the investigations. 15. The DG, after considering the bid documents, report of Evaluation Committee and statement of the opposite parties, found that all the 29 firms have quoted identical bids which were in the range of Rs.66.49 to Rs.66.51. The examination of firms and their statement recorded by the DG did not show any plausible reason for quoting such identical bid price. In fact, most of the firms admitted such identical bid price and were not able to give any satisfactory explanation as to ho....
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....d similar handwriting in which the prices were quoted in figures and words in their respective bid documents. Similarly, the bid documents of 4 firms and 2 firms respectively were having the similar handwriting in which the prices were mentioned in their bid documents. Further, the DG noted that during recording of statements of the firms a specific question was posed regarding offering of the identical price in the same handwriting in the bid documents. The firms on being shown their bid documents accepted that the bids were identical with that of other firms and also the handwriting was similar. They did not, in specific, name the person who wrote the price in the tender documents. In respect of other firms, although the handwriting was different in their bid documents, the price quoted by them was identical. 18. From the above, it was gathered by the DG that the bids having the identical price mentioned in figures and words indicated that tender documents were filled by a person who is common to all the firms covered in the three groups, as noted above. Thus, it was deduced by the DG that there was meeting of minds or collusion among the parties for fixing the price of the bi....
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....he covering letters and the contents thereof were also found to be similar. This was found suggestive of some understanding amongst the parties for participating in the bid process with the motive of rigging the bids. 22. Further, South Eastern Railway, Kolkata was requested by the DG to provide details of the bank drafts submitted by various firms which were not registered with National Small Industries Corporation Ltd. (NSIC) and, as such, were required to submit the tender document fee of Rs. 2,000. From the replies received from South Eastern Railways, Kolkata, it was noted by the DG that the Demand Drafts (DDs) amounting to Rs. 2000/- towards payment of tender documents fee of M/s Mam Kaur Poly Machines Pvt. Ltd., New Delhi and M/s Vee Kay Industries, Delhi vide Nos.663178 and 663177 respectively both dated 19.07.2010 were in sequence and hence made from the same banker and at the same time. Similarly, DDs amounting to Rs. 2000/- of M/s Vikrant International, Faridabad, Haryana and M/s Modern Ex-serviceman Engineering Pvt. Company Pvt. Ltd., Punchkula, Haryana vide Nos.036441 and 036440 respectively both dated 17.07.2010 were in sequence and hence made from the same banker ....
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....travention of the provisions of section 3(3)(d) read with section 3(1) of the Act. 25. Further, the DG noted that such agreements by virtue of the presumptions contained in section 3(3) of the Act are presumed to have appreciable adverse effect on competition. Nonetheless, the DG examined the relevant factors of section 19(3) of the Act to determine the appreciable adverse effect on competition arising out of such agreements. In terms of the factors contained in section 19(3) of the Act, the Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors viz. creation of barriers to new entrants in the market; driving existing competitors out of the market; foreclosure of competition by hindering entry into the market; accrual of benefits to consumers; improvements in production or distribution of goods or provision of services; promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. 26. In this connection, it was noted by the DG that there were about 114 prospective RDSO approved suppli....
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....ing by these firms harmed the railways because it could not allocate the tendered quantity among these suppliers because of their cartel formation. The Railways also suffered in the exercise because it could not ascertain the right competitive price with quality from the suppliers because these 29 firms restricted the competition by manipulating the biding. It resulted in the wastage of its resources at the cost of public money. By implication, the conclusion of the DG is that this action by these units had none of the beneficial effects mentioned in section 19(3) of the Act. 30. The Commission notes that in terms of the provisions contained in section 3(1) of the Act, no enterprise or association of enterprises or person or association of persons can enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Section 3(2) of the Act declares that any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. Further, by virtue of the presumption contained in subsec....
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....evidence on the basis of benchmark of 'preponderance of probabilities'. 33. In view of the above and further considering the fact that since the prohibition on participating in anti-competitive agreements and the penalties which offenders may incur are well known, it is normal for the activities which those practices and those agreements entail to take place in a clandestine fashion, for meetings to be held in secret and for the associated documentation to be reduced to a minimum. Even if the Commission discovers evidence explicitly showing unlawful conduct between traders, such as the minutes of a meeting, it will normally be only fragmentary and sparse, so that it is often necessary to reconstitute certain details by deduction. In most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of the existence of an agreement. 34. In the instant case, the opposite parties neither before the DG nor before the Commission have disputed the above noted evidence against them. In the result, it is safe to infer from a n....
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.... of presumption of appreciable adverse effect on competition as incorporated in section 3(3) of the Act went on to independently examine the appreciable adverse effect on competition arising out of anticompetitive agreements in the light of the factors given in section 19(3) of the Act. The opposite parties having not rebutted the presumption, through their replies, which are in the nature of admissions and undertakings for future conduct, have only strengthened such presumption. 39. Reliance was made by the opposite parties on the decision of Hon'ble Supreme Court of India in the case of Union of India v. Hindustan Development Corpn. [1993] 3 SCC 499 to contend that even pure conscious price parallelism is not unlawful. The ruling is of no assistance as in the facts of the present case, apart from conscious price parallelism. There is overwhelming circumstantial evidence, as discussed in earlier paras, to infer the anti-competitive nature of the impugned actions. 40. At this stage, another plea advanced by the opposite parties in their defence may be dealt with. It has been contended that there was no power with the opposite parties even with remote possibility to control th....
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....oods or provision of services, had the effect of eliminating or reducing competition for bids/ adversely affecting or manipulating the process for bidding. Thus, the opposite parties have contravened the provisions contained in section 3(3)(d) read with section 3(1) of the Act. ORDER 43. In view of the above discussion, the Commission directs the opposite parties to cease and desist from indulging in such anti-competitive conduct in future which resulted in bid rigging. 44. As regards penalty under section 27 of the Act, the Commission notes that there are circumstances in this case which require the issue of penalty to be looked into somewhat differently. The facts as projected in the present reference reveal a complete lack of awareness by the opposite parties which are small and micro enterprises. The replies of many of these parties are effectively incriminating in nature. Further, none of these parties quoted for more than 50% quantity which was a requirement under the tender. Thus, right in the beginning the offers made by these parties were not in accordance with the requirement of the tender and hence they could not have got supplies as per the tender conditions. M....