TaxTMI 
TaxTMI 
2017 (5) TMI 542
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.... by the Competition Appellate Tribunal (for short, 'COMPAT'). These proceedings have their origin in the letter dated February 04, 2011 written by the Food Corporation of India (for short, 'FCI') to the Competition Commission of India (for short, 'CCI') complaining of an anti-competitive agreement purportedly arrived at between M/s. Excel Crop Care Limited, M/s. United Phosphorous Limited (for short, 'UPL'), M/s. Sandhya Organics Chemicals (P) Ltd. respectively (the appellants in CA Nos. 2480, 2874 and 2922 of 2014 and hereinafter referred to as the 'appellants') and Agrosynth Chemicals Limited, in relation to tenders issued by the FCI for Aluminium Phosphide Tablets (for short, 'APT') of 3 gms. between the years 2007 and 2009. The CCI entrusted the matter to the Director General (DG) for investigation, who submitted his report on October 14, 2011 giving his prima facie findings affirming the allegations of the FCI that the appellants had entered into an anti-competitive agreement, which was violative of Section 3(3) of the Competition Act, 2002 (hereinafter referred to as the 'Act'). On receipt of this complaint, the CCI issued notices to the appellants who filed their objections.....
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....ld in the open market. These Government agencies were procuring APT tablets of `40 crores annually. (b) There were only four manufacturers of APT, namely, M/s. Excel Crop Care Limited, M/s. UPL, M/s. Sandhya Organics Chemicals (P) Ltd. (which are the three appellants herein) and Agrosynth Chemicals Limited. (c) It was noted that the FCI had adopted the process of tender, which is normally a global tender. The concerned tender had two-bid system, that is first techno commercial and then the financial bid. On the basis of the bids, the rate running contracts are executed with successful bidders. The DG found that there was also a Committee comprising of responsible officers for evaluation of technical and price bids. As per the practice, the lowest bidder is invited by the Committee for negotiations and after negotiations, the Committee submits the report giving its recommendations and the contracts are awarded and after that the payment for the purchased tablets is released by the concerned regional offices. (d) It was found that right from the year 2002, up to the year 2009, all the four parties used to quote identical rates, excepting for the year 2007. In 2002, Rs. 245/-....
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....ed their concerted action, which happened again in March 2011 when the FCI had issued e-tender, which was closed on July 25, 2011. According to the DG, explanation given by the appellants and M/s. Agrosynth Chemicals Limited for boycotting the said tender to the effect that tender conditions were very stringent, was an afterthought and did not inspire any confidence. As per the DG, even if the conditions were stringent, the appellants could discuss the same with the FCI as there was sufficient time between March 2011 and July 25, 2011, but it was not done. On the basis of the aforesaid findings, the DG framed an opinion that the appellants had contravened the provisions of Sections 3(3)(a), 3(3)(b) and 3(3)(d) read with Section 3(1) of the Act. 3) The CCI took up the report of the DG for consideration and for this purpose sent a copy thereof to all the four manufacturers inviting their objections, if any, thereupon. Since M/s. Agrosynth Chemicals Limited was ultimately exonerated and spared by the CCI, it may not be necessary to deal with the objections of the said party. The three appellants contested the report on facts as well as in law. Identical legal submissions w....
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....uld be drawn therefrom. Boycotting of tender of May 2011 was tried to be justified on the ground that there were unreasonable conditions prescribed in the tender making it impossible to submit the bid, particularly, the condition of depositing `30 lakhs as Earnest Money Deposit (EMD), whereas in the earlier tenders the EMD was only `10 lakhs and `8.25 lakhs. It was further submitted that, notwithstanding the same price quoted by the appellants, each time the tender was evaluated by a Committee of Officers of the FCI and no such suspicion was raised by the Committee. On the contrary, this aspect was specifically gone into and the Committee was satisfied that quoting of identical price was not due to any cartalisation. M/s. Sandhya Organics Chemicals (P) Ltd. raised an additional plea qua non-participation in the 2011 tender by submitting that it did not have the capacity to supply 75 MT per month, which was the requirement in the said tender and, therefore, it chose not to participate. 4) The CCI passed the order discussing all the aforesaid aspects in detail and rejecting each and every contention of the appellants, and, thereby concluding that the appellants had entere....
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....ies, we shall be referring to the reasons adopted by the COMPAT. 8) Having painted the canvas with seminal and essential facts, it becomes manifest that following issues arise for consideration in these appeals: (i) Whether the dispute regarding violation of Section 3 of the Act by the appellants could not be gone into in respect of tender of March, 2009, as Section 3 was operationalised only by notification dated 20th May, 2009? (ii) Whether CCI was barred from investigating the matter pertaining to the tender floated by FCI in March, 2011 because of the reason that FCI in its complaint dated 4th February, 2011 given to the CCI had not complained about this tender? (iii) Whether, on the facts of the case, conclusion of CCI that the appellants had entered into an agreement/arrangement and pursuant thereto indulged in collusive bidding by forming a cartel, resulting into contravention of Section 3(3)(a), 3(3)(b) and 3(3)(d) read with Section 3(1) of the Act, is justified? (iv) Whether penalty under Section 27(b) of the Act has to be on total/entire turnover of the offending company or it can be only on "relevant turnover", i.e., relating to the....
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....y, distribution, storage, acquisition or control of goods or provision of services. Explanation.-For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding (4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including- (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. Explanation.-For the purposes of this sub-section,- (a) "tie-in arrangement" includes any agreeme....
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....he appointed date. However, vide this notification, some of the provisions of the Act, and not all the provisions, were enforced. Many other provisions came into force vide notification dated 19th June, 2003 and thereafter by notification dated 20th December, 2007 some more provisions were notified. Insofar as Section 3 of the Act is concerned, this provision along with many other provisions came into force on 20th May, 2009 vide S.O. 1241(E) dated 15th May, 2009 on which date the said notification was published in the Gazette of India as well. Remaining provisions were notified by subsequent notifications. It is, thus, a unique example where the entire Act was not enforced by one single notification but different provisions of the Act were enforced in bits and pieces by issuing various notifications over a span of time. 12) NIT in question was issued by FCI on 28th March, 2009. Last date for submission of bids was 8th May, 2009. Few days thereafter, i.e., on 20th May, 2009, Section 3 of the Act was notified. It is on these facts, the argument constructed by the appellants is that as on 8th May, 2009 when the appellants had submitted their bids, Section 3 of the Act was not in o....
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....d offered the negotiated price on 17th June, 2009. This would mean that process of bidding was still on which went well beyond the date of notifying provisions of Section 3 of the Act. Relevant discussion in this behalf of the COMPAT is as under: '15. ...In this behalf the CCI has also recorded a finding in paragraph 7.13 that 8.5.2009 is not the crucial date but even 1.6.2009 and 17.6.2009 are equally crucial. This discussion would mean that the illegality of collusive bidding or rigging the bidding which commenced on 8.5.2009 was continued thereafter on 1.6.2009 and 17.6.2009 also. The negotiation of prices with the lowest bidder, and in this case all the three appellants were the lowest bidders, undoubtedly forms the part of the process of bid rigging and cannot be seen separately from the process of bidding. For that matter the process of bidding cannot be restricted to only one date i.e. on 8.5.2009. We have seen in this behalf the investigation report by the D.G. as also the finding arrived at by the CCI which in our opinion is a correct finding. In this behalf it cannot be ignored that all the three appellants were informed by identical letters by the FCI one of whi....
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....of the M.P. State Warehousing Corporation, and tender dated February 14, 2011 of the Punjab State Cooperative SS & Marketing Federation and found that even against these tenders the appellants had quoted identical prices. Keeping in view the said pattern of quotation, the COMPAT opined that notwithstanding any objection of the appellants premised on retrospective application of Section 3, the anti-competitive conduct of APT manufacturers, i.e. the appellants, continued right up to the year 2011, much after Section 3 of the Act had come into force. Therefore, even if 2009 tender was to be completely ignored, the provisions of the Act would nevertheless be attracted in the instant case. We are in complete agreement with the aforesaid view taken by the COMPAT. We are also of the firm view that provisions of Section 3 are applicable to 2009 tender as well. 16) Chapter II of the Act deals with three kinds of practices which are treated as anti-competitive and prohibited. These are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys ....
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....ter economic growth and development through improvements in economic efficiency and the reduction of wastage in the production of goods and services. The market is therefore able to more rapidly reallocate resources, improve productivity and attain a higher level of economic growth. Over time, sustained economic growth tends to lead to an enhanced quality of life and greater economic development. 2.2.1.3 Consumer Welfare: Competition policy contributes to economic growth to the ultimate benefit of consumers, in terms of better choice (new products), better quality and lower prices. Consumer welfare protection may be required in order to redress a perceived imbalance between the market power of consumers and producers. The imbalance between consumers and producers may stem from market failures such as information asymmetries, the lack of bargaining position towards producers and high transaction costs. Competition policy may serve as a complement to consumer protection policies to address such market failures." 18) The aforesaid guidelines also spell out few more benefits of such laws incorporating competition policies by highlighting the following advantages: "....
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....the following manner: "International Competition Network - Economic Growth and Productivity: Competition contributes to increased productivity through: Pressure on firms to control costs. In a competitive environment, firms must constantly strive to lower their production costs so that they can charge competitive prices, and they must also improve their goods and services so that they correspond to consumer demands. Easy market entry and exit. Entry and exit of firms reallocates resources from less to more efficient firms. Overall productivity increases when an entrant is more efficient than the average incumbent and when an exiting firm is less efficient than the average incumbent. Entry - and the threat of entry -incentivizes firms to continuously improve in order not to lose market share to or be forced out of the market by new entrants. Encouraging innovation. Innovation acts as a strong driver of economic growth through the introduction of new or substantially improved products or services and the development of new and improved processes that lower the cost and increase the efficiency of production. Incentives to innovate are affec....
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.... enforcement agencies, which include CCI and COMPAT, have to ensure that these objectives are fulfilled by curbing anti-competitive agreements. 22) Once the aforesaid purpose sought to be achieved is kept in mind, and the same is applied to the facts of this case after finding that the anti-competitive conduct of the appellants continued after coming into force of provisions of Section 3 of the Act as well, the argument predicated on retrospectivity pales into insignificance. One has to keep in mind the aforesaid objective which the legislation in question attempts to sub-serve and the mischief which it seeks to remedy. As pointed out above, Section 18 of the Act casts an obligation on the CCI to 'eliminate' anti-competitive practices and promote competition, interests of the consumers and free trade. It was rightly pointed out by Mr. Neeraj Kishan Kaul, the learned Additional Solicitor General, that the Act is clearly aimed at addressing the evils affecting the economic landscape of the country in which interest of the society and consumers at large is directly involved. This is so eloquently emphasised by this Court in Competition Commission of India v. Steel Authority o....
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....he provisions of Sections 3 and 4 read with Section 19 of the Act. In exercise of the powers vested in it under Section 64, the Commission has framed regulations called the Competition Commission of India (General) Regulations, 2009 (for short "the Regulations"). 10. The Act and the Regulations framed thereunder clearly indicate the legislative intent of dealing with the matters related to contravention of the Act, expeditiously and even in a time-bound programme. Keeping in view the nature of the controversies arising under the provisions of the Act and larger public interest, the matters should be dealt with and taken to the logical end of pronouncement of final orders without any undue delay. In the event of delay, the very purpose and object of the Act is likely to be frustrated and the possibility of great damage to the open market and resultantly, country's economy cannot be ruled out. xx xx xx 125. We have already noticed that the principal objects of the Act, in terms of its Preamble and the Statement of Objects and Reasons, are to eliminate practices having adverse effect on the competition, to promote and sustain competition in the market, to prot....
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....l process, their financial bids were to be opened. The appellants had submitted their bids on May 08, 2009, which was the last date for this purpose. Bids were to be submitted by 2.00 pm on that day and were to be opened at 3.00 pm on the same day. The committee of responsible officers for evaluating the technical price bids was constituted. As per the practice, the lowest bidder is invited by the committee for negotiations. And after negotiations, the committee submits the report giving its recommendations on the basis of which contract is awarded. If there was variation in the prices quoted by the appellants in their bids, things would have been different. Then L-I could have been called for negotiations. However, all the three appellants quoted identical rates of Rs. 388/-. Because of this reason all the appellants were LI and had to be called for negotiations. Therefore, bidding process did not come to an end on May 08, 2009 as argued by the appellants. It continued even thereafter when the appellants appeared before the committee for negotiations, much beyond May 20, 2009 the date on which provisions of Section 3 of the Act were enforced. 26) In the aforesaid conspectus, pr....
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..... The parties as on today certain propose to act upon that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and cannot be questioned. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy. We would say that the Act could have been treated as operating retrospectively, had the Act rendered the agreement void ab initio and would render anything done pursuant to it as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and subsisting even after coming into force of the Act, which prohibits an agreement of such nature, such an agreement cannot be said to be valid from the date of the coming into force of the Act. If the law cannot be applied to the existing agreement, the very purpose of the implementation of the public policy would be defeated. Any and every person may set up an a....
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....gging' may cover larger and more varied activities than 'collusive bidding'. It was submitted that in view of the specific exclusion of 'collusive bidding' from the 'Explanation', an activity which squarely falls within the scope of 'collusive bidding' would not be covered by the 'Explanation' and would be excluded from it. Submission is that since the allegation in the present case relating to identical pricing or identical reduction in price squarely falls within the term 'collusive pricing', the 'Explanation' has no relevance to the present case. 31) Mr. Neeraj Kishan Kaul, learned Additional Solicitor General, refuted the aforesaid submission with vehemence by urging that bid rigging and collusive bidding are not mutually exclusive and these are overlapping concepts. Illustratively, he referred to the findings of the CCI, as approved by the COMPAT, in the instant case itself to the effect that the appellants herein had 'manipulated the process of bidding' on the ground that bids were submitted on May 08, 2009 collusively, which was only the beginning of the anti-competitive agreement between the parties and this continued through the opening of the price bids on June 01, 200....
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.... [This shows collusive bidding and bid rigging are treated as one and the same] (c) OECD Guidelines for fighting bid rigging "Bid rigging (or collusive tendering) occurs when businesses, that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process." (d) United States Office of the Inspector General, Investigations (Fraud Indicators Handbook) "Collusive bidding, price fixing or bid rigging, are commonly used interchangeable terms which describe many forms of an illegal anti-competitive activity. The common thread throughout all these activities is that they involve any agreements or informal arrangements among independent competitors, which limit competition. Agreements among competitors which violate the law include but are not limited to: (1) Agreements to adhere to published price lists. (2) Agreements to raise prices by a specified increment. (3) Agreements to establish, adhere to, or eliminate discounts. (4) Agreements not to advertise prices. (5) Agreements to maintain sp....
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....ffect on competition. It is in this backdrop and context that 'Explanation' beneath sub-section (3), which uses the expression 'bid rigging', has to be understood and given an appropriate meaning. It could never be the intention of the Legislature to exclude 'collusive bidding' by construing the expression 'bid rigging' narrowly. No doubt, clause (d) of sub-section (3) of Section 3 uses both the expressions 'bid rigging' and 'collusive bidding', but the Explanation thereto refers to 'bid rigging' only. However, it cannot be said that the intention was to exclude 'collusive bidding'. Even if the Explanation does contain the expression 'collusive bidding' specifically, while interpreting clause (d), it can be inferred that 'collusive bidding' relates to the process of bidding as well. Keeping in mind the principle of purposive interpretation, we are inclined to give this meaning to 'collusive bidding'. It is more so when the expressions 'bid rigging' and 'collusive bidding' would be overlapping, under certain circumstances which was conceded by the learned counsel for the appellants as well. We are, therefore, of the opinion that the two expressions are to be interpreted using the....
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.... interests of the consumers. There can be no dispute about the proposition that the Director General on his own cannot act and unlike the Commission, the Director General has no suo-moto power to investigate. That is clear from the language of Section 41 also, 28 which suggests that when directed by the Commission, the Director General is to assist the Commission in investigating into any contravention of the provisions of the Act. Our attention was also invited to the Regulations and more particularly to Regulation 20, which pertains to the investigation by the Director General. Sub-regulation (4) of Section 20 was pressed into service by all the learned counsel, which is in the following term :- "The report of the Director-General shall contain his findings on each of the allegations made in the information or reference, as the case may be, together with all evidences or documents or statements or analyses collected during the investigation:" (proviso not necessary) From this, the learned counsel argued that the Director General could have seen into the tender floated on 08.05.2009 only, and no other tender as the information did not contain any allegation about....
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....The said prima-facie view could not restrict the Director General, if he was duty bound to carry out a comprehensive investigation in keeping with the direction by CCI. In fact the DG has also taken into 30 account the tenders by some other corporations floated in 2010 and 2011 and we have already held that the DG did nothing wrong in that. In our opinion, therefore, the argument fails and must be rejected." We entirely agree with the aforesaid view taken by the COMPAT. 36) If the contention of the appellants is accepted, it would render the entire purpose of investigation nugatory. The entire purpose of such an investigation is to cover all necessary facts and evidence in order to see as to whether there are any anti-competitive practices adopted by the persons complained against. For this purpose, no doubt, the starting point of inquiry would be the allegations contained in the complaint. However, while carrying out this investigation, if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would....
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....pplies Corp. 28/04/2008 260 260 - - 3. Central Warehousing Corp. 06/08/2008 450 - 450 - 4. U.P. State Warehousing Corp. 19/09/2008 449 449 - - 5. Punjab State Co-op SS & Mktg. Fed. 26/12/2008 419 419 - - 6. Central Warehousing Corp. 06/01/2009 414 414 - - 7. Punjab State Civil Supplies Corp. 27/02/2009 409 409 - - 8. Food Corporation of India 08/05/2009 388 388 388 - 9. Punjab State Civil Supplies Corpn. 15/06/2009 399 - - 399 10. U.P. State Warehousing 03/11/2009 399 399 - - 11. Director, SS & Disposal, Haryana 01/12/2009 - - 399 399 12. Punjab State Civil Supplies Corp. 18/03/2010 419 - - 410 13. Central Warehousing Corp. 13/07/2010 421 421 421 - 14. M.P. State Warehousing Corp. 15/07/2010 436 - 436 - 15. Punjab State Co-op SS & Mktg. Fed. 14/02/2011 415 415 - - &nbs....
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....itted that merely because same price was quoted by the appellants in respect of the 2009 FCI tender, one could not jump to the conclusion that there was some 'agreement' as well between these parties, in the absence of any other evidence corroborating the said factum of quoting identical price. In respect of this submission, Mr. Venugopal had also referred few judgments. 40) The aforesaid argument is highly misconceived. A neat and pellucid reply of Mr. Kaul, which commands acceptance, is that argument of parallelism is not applicable in bid cases and it fits in the realm of market economy. It is for this reason the entire history of quoting identical price before coming into operation of Section 3 and which continued much after Section 3 of the Act was enforced has been highlighted. There cannot be coincidence to such an extent that almost on all occasions price quoted by the three appellants is identical, not even few paisa more or less from each other. That too, when the cost structure, i.e. cost of production of this product, of the three appellants sharply varies with each other. Following factors in this behalf need to be highlighted: (a) there is a 10 years' hist....
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....e arrangements of different forms are also made between colluding parties. One system which has been noticed by certain competition authorities in other countries is to notify intended quotes to each other, or more likely to a central secretariat, which will then cost the order and eliminate those quotes that it considers would result in a loss to some or all members of the cartel. Another system, which has come to light, is to rotate orders. In such a case, the firm whose turn is to receive an order will ensure that its quote is lower than the quotes of others. 43) We are here concerned with parallel behaviour. We are conscious of the argument put forth by Mr. Venugopal that in an oligopoly situation parallel behaviour may not, by itself, amount to a concerted practice. It would be apposite to take note of the following observations made by U.K. Court of Justice in Dyestuffs (1972) ECR 619: "By its very nature, then, the concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. Although parallel behaviour may not itself if identified with a concerted practi....
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.... the appellants. 46) The conditions which are perceived as 'onerous' by these appellants are the following: 2) Earnest money deposit was raised from `10 lakhs to `30 lakhs. 3) Supply required as per this standard was 75 MT per month which was too high a demand/requirement and it was difficult to effect supplies of this magnitude every month. M/s. Sandhya Organics Chemicals (P) Ltd. additionally submitted that they had placed on record that their production capacity was much less and supplying 75 MT of APT every month was beyond their means. Therefore, they were unable to tender against the said NIT. Before the COMPAT, M/s. Excel Crop Care Limited attempted to project their bona fides by showing that they had even written letter dated May 26, 2011 to the FCI conveying their inability to take part in that tender. 47) The COMPAT, after discussing the matter, arrived at the conclusion that it was clearly an after-thought move, inasmuch as the tender was published on April 28, 2011 and the last date for submitting the price bids was May 27, 2011, but only a day before i.e. on May 26, 2011, such a letter was sent by M/s. Excel Crop Care Limited to the FCI....
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....hree appellants) in the market for this product. Reaction of not participating in the said tender by four suppliers could have been perceived otherwise, had there been a number of manufacturers in the market and four out of them abstaining. Abstention by hundred percent (who are only four) makes the things quite obvious. Events get quite apparent when examined along with past history of quoting identical prices, an aspect already commented above. 49) Since collusion stands proved by the aforesaid conduct of the appellants in abstaining from the bidding in respect of May 2011 tender, requirement of Section 3(3)(d) of the Act read with 'explanation' thereto stands satisfied, viz., concerted action based on an agreement/arrangement between the appellants, resulted in restricting or manipulating competition or process of bidding, since the said act was collusive in nature. 50) We, therefore, agree with the conclusions of the COMPAT on this aspect as well. 51) Issue No. 4 Re: Penalty After giving its finding that there was a contravention of the provisions of Section 3 of the Act by the appellants, the CCI imposed the following penalties on the three entities/ appellants:....
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....awarded by CCI i.e. `15.70 lakhs. 55) The CCI is not happy with the aforesaid outcome whereby penalty imposed by it is sharply reduced by the COMPAT. Against this part of the impugned judgment, CCI is in appeal. 56) In the aforesaid backdrop, the moot question is as to whether penalty under Section 27(b) of the Act has to be on 'total/entire turnover' of the company covering all the products or it is relatable to 'relevant turnover', viz., relating to the product in question in respect whereof provisions of the Act are contravened. Section 27 of the Act stipulates nature of the orders which the CCI can pass after enquiry into agreements or abuse of dominant position. This Section empowers CCI to pass various kinds of orders the nature whereof is spelt out in clauses (a), (b), (d) and (g) (clauses (c) and (f) stand omitted). As per clause (b), CCI is empowered to inflict monetary penalties, the upper limit whereof is 10% "of the average of turnover for the last three preceding financial years". Operative portion of Section 27 of the Act is reproduced below: "27. Orders by Commission after inquiry into agreements or abuse of dominant position. - Where after inquiry the....
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....hnical Services Inc. (2012) 9 SCC 552. 59) Mr. Kaul also placed heavy reliance on the following discussion in the case of Steel Authority of India Ltd. Footnote 1 in the context of the Competition Act: "52. A statute is stated to be the edict of legislature. It expresses the will of legislature and the function of the court is to interpret the document according to the intent of those who made it. It is a settled rule of construction of statute that the provisions should be interpreted by applying plain rule of construction... xx xx xx 56. Thus, the court can safely apply rule of plain construction and legislative intent in light of the object sought to be achieved by the enactment. While interpreting the provisions of the Act, it is not necessary for the court to implant, or to exclude the words, or overemphasise language of the provision where it is plain and simple. The provisions of the Act should be permitted to have their full operation rather than causing any impediment in their application by unnecessarily expanding the scope of the provisions by implication." 60) According to him, a plain reading of Section 27 as a whole, which includes Section 27(a) a....
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....pellants in this case is a clear example of 'hardcore cartel' behaviour which is deprecated by even the OECD as such hardcore cartels benefit only the cartel members and are extremely injurious to the interest of all others, with extraordinary adverse affect on the market and the consumers. He further submitted that formation of cartels reduces social welfare and the COMPAT has ignored these factors as well while giving restricted interpretation to 'turnover' by making it product specific and not person/enterprise specific. 64) Advancing this very argument further, he even drew parallel with the laws in other jurisdictions by stating the comparative legal position in European Union, United Kingdom, Australia, etc. and submitted that it could be discerned from the law enacted in those jurisdictions that everywhere overall cap is of 10% of 'worldwide turnover' and is not restricted to 'relevant turnover'. 65) He further submitted that the aforesaid provision imposed a cap on the penalty by stipulating that it shall not be more than 10%. Thus, the CCI had the discretion to impose the penalty from 0% to 10% and this was sufficient safeguard to take care of the proportionality asp....
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....here would be no justification for prescribing such differential maximum limits. Keeping this aspect into consideration, it is all the more reason for interpreting Section 27(b) on the basis of its plain language as the word 'total' was also not prefixed with 'relevant' by the Legislature. Since it was a provision relating to penalty, which was to be imposed on 'turnover', the said 'turnover' was necessarily relatable to the offending product only and Legislature never intended to punish any person or enterprise even in respect of unblemished product. It was also emphasized that penalty under Section 27(b) is to be levied for contravention of Section 3 in respect of any 'agreement' resulting in appreciable adverse effect on competition. Therefore, it would not relate to all the products of the company included in the total turnover of the enterprise. As such, when penalty is being imposed in respect of any infringing product, the turnover of that product would be relevant. The learned counsel criticised the approach of the CCI in imposing penalties by taking the maximum penalty as the starting point of determination and then purporting to reduce it suitably, as totally incorrect ap....
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....y of `252.44 crores, which was highly disproportionate as even the total production and sale of APT tablets, for the three years, was much less than the aforesaid penalty. It was pointed out that the average total turnover of the APT tablets comes to `77.14 crores only, which is hardly 3% of the total turnover. On that basis it was argued that by taking total turnover for the purpose of penalty clearly amounted to disproportionate penalty as it was more than 300% of the total turnover of APT tablets. This, according to the learned counsel, itself provided full justification in the approach of the COMPAT by reading the concept of 'relevant turnover' while interpreting Section 27(b) of the Act. 71) We have given our serious thought to this question of penalty with reference to 'turnover' of the person or enterprise. At the outset, it may be mentioned that Section 2(y) which defines 'turnover' does not provide any clarity to the aforesaid issue. It only mentions that turnover includes value of goods or services. There is, thus, absence of certainty as to what precise meaning should be ascribed to the expression 'turnover'. Somewhat similar position appears in EU statute and in orde....
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....the concerned company Southern Pipeline Contractors was a multi-product company and the 'affected turnover' was comparatively small. 73) It is interesting to note that the parties on either side are resting their cases on the same principle of statutory interpretations. Pertinently, Section 27(b) of the Act while prescribing the penalty on the 'turnover', neither uses the prefix 'total' nor 'relevant'. It is in this context, taking aid of the applicable and well-recognised principle of statutory interpretations we have to determine the issue. 74) In the absence of specific provision as to whether such turnover has to be product specific or entire turnover of the offending company, we find that adopting the criteria of 'relevant turnover' for the purpose of imposition of penalty will be more in tune with ethos of the Act and the legal principles which surround matters pertaining to imposition of penalties. For arriving at this conclusion, we are influenced by the following reasons: (a) Under Section 27(b) of the Act, penalty can be imposed under two contingencies, namely, where an agreement referred to in Section 3 is anti-competitive or where an enterprise which enjo....
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....ative purpose, while broad, is not without limits. In particular, the legislative interest in safeguarding the environment for "uses" requires only that it be preserved for those "uses" that are normal and typical, or that are likely to become normal or typical in the future. Interpreted literally, s. 13(1)(a) would capture a wide range of activities that fall outside the scope of the legislative purpose underlying it, and would fail to meet s.7 overbreadth scrutiny. There is, however, an alternative interpretation of s.13(1)(a) that renders it constitutional. Section 13(1)(a) can be read as expressing the general intention of s. 13(1) as a whole, and paras. 13(1)(b) through (h) can be treated as setting out specific examples of "impairment(s) of the quality of the natural environment for any use that can be made of it". When viewed in this way, the restrictions place on the word "use" in paras. (b) through (h) can be seen as imported into (a) through a variant of the ejusdem generis princile. Interpreted in this manner, s.13(1)(a) is no longer unconstitutionally overbroad, since the types of harms captured by paras. (b) through (h) fall squarely within the legislative intent under....
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....ssets so far as computation of income of the assessee is concerned then bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, and if another construction is possible apart from strict literal construction then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. Furthermore, in the instant case we are dealing with an artificial liability created for counteracting the effect only of attempts by the assessee to reduce tax liability by transfer. It has also been noted how for various purposes the business from which profit is included or loss is set off is treated in various situations as assessee's income. The scheme of the Act as worked out has been noted before. In Southern Motors vs. Sta....
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....find any escape from the tyranny of literal interpretation. It is said that it is now well-settled Rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even "do some violence" to it, so as to achieve the obvious intention of the legislature and produce a rational construction. In such a case the court may read into the statutory provision a condition which, though not expressed, is implicit in construing the basic assumption underlying the statutory provision.... 34. As would be overwhelmingly pellucid from hereinabove, though words in a statute must, to start with, be extended their ordinary meanings, but if the literal construction thereof results in anomaly or absurdity, the courts must seek to find out the underlying intention of the legislature and in the said pursuit, can within permissible limits strain the language so as to avoid such unintended mischief." (iii) The principle of strict interpretation of a penal statute would support and supplement the aforesaid co....
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....ciple of strict interpretation that needs to be given to such statutes. (v) When the agreement leading to contravention of Section 3 involves one product, there seems to be no justification for including other products of an enterprise for the purpose of imposing penalty. This is also clear from the opening words of Section 27 read with Section 3 which relate to one or more specified products. It also defies common sense that though penalty would be imposed in respect of the infringing product, the 'maximum penalty' imposed in all cases be prescribed on the basis of 'all the products' and the 'total turnover' of the enterprise. It would be more so when total turnover of an enterprise may involve activities besides production and sale of products, like rendering of services etc. It, therefore, leads to the conclusion that the turnover has to be of the infringing products and when that is the proper yardstick, it brings home the concept of 'relevant turnover'. (vi) Even the doctrine of 'proportionality' would suggest that the Court should lean in favour of 'relevant turnover'. No doubt the objective contained in the Act, viz., to discourage and stop anti-competitive practices h....
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....h is to be taken into consideration and not total turnover of the violator. (vii) The doctrine of 'purposive interpretation' may again lean in favour of 'relevant turnover' as the appropriate yardstick for imposition of penalties. It is for this reason the judgment of Competition Appeal Court of South Africa in the Southern Pipeline Contractors Conrite Walls19, as quoted above, becomes relevant in Indian context as well inasmuch as this Court has also repeatedly used same principle of interpretation. It needs to be repeated that there is a legislative link between the damage caused and the profits which accrue from the cartel activity. There has to be a relationship between the nature of offence and the benefit derived therefrom and once this co-relation is kept in mind, while imposing the penalty, it is the affected turnover, i.e., 'relevant turnover' that becomes the yardstick for imposing such a penalty. In this hue, doctrine of 'purposive interpretation' as well as that of 'proportionality' overlaps. In fact, some justifications have already appeared in this behalf while discussing the matter on the application of doctrine of proportionality. What needs to be repeated is ....
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....s results which happened in the instant case itself with the imposition of penalty by the CCI. Thus, we do not find any error in the approach of the order of the COMPAT interpreting Section 27(b). 75) The upshot of the aforesaid discussion would be to dismiss the appeals of the appellants as well as the appeals filed by the CCI. There shall, however, be no order as to costs. N. V. RAMANA, J . 1. I have had the privilege of going through the erudite and well considered judgment of my learned brother. In view of well considered judgment, in the usual course, it may not have warranted another concurring judgment. But when the issue at hand is being grappled by jurisdictions across the globe, a concurring judgment cannot be treated as a repetitive exercise. Although I accept the conclusions reached by my learned brother, there was a need felt by me to pen down my own thoughts on a small aspect concerning imposition of penalty under Section 27(b) of the Competition Act, 2002 [hereafter 'Act' for brevity]. Though my opinion is only limited to the legal question involved in this case, a brief reference to facts might be necessary. 2. On a complaint being instituted by the F....
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....lant companies had indulged in anti-competitive practices in violation of Section 3 of the Act and imposed 9% of average 3 years' of total turnover under Section 27(b) of the Act in the following manner- TABLE 1.2 - penalty as imposed by the CCI NAME OF THE COMPANY AVERAGE OF THREE YEARS TURNOVER (IN CRORE) PENALTY OF 9% OF AVERAGE TURNOVER (IN CRORE) ECCL 710.09 63.9 UPL 2804.95 252.44 SOCL 17.52 1.57 4. Aggrieved by the order of the CCI, appellants approached COMPAT by way of separate appeals. By a common order, dated 29.10.2013, COMPAT held that in case of multi-product companies, only 'relevant turnover' of the product/service in question should be taken into consideration while imposing penalty in the following manner- TABLE 1.3 - penalty as imposed by the COMPAT NAME OF THE COMPANY AVERAGE OF THREE YEARS TURNOVER (IN CRORE) AVERAGE OF THREE YEARS RELEVANT TURNOVER (IN CRORE) REDUCED PENALTY AT 9% OF RELEVANT TURNOVER (IN CRORE) ECCL 710.09 32.41 2.92 UPL 2804.95 77.14 6.94 SOCL The penalty was reduced to on the consideration of SOCL being a small ente....
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....ge which was brought about by the aforesaid amendment is that the mandatory nature of the Proviso was made discretionary by substitution of 'shall' with 'may'. This amendment was done to bring the proviso in tune with the rest of Section 27, which uses the expression "it may pass all or any of the following order" and main part of clause (b), which confers discretion upon the Commission to impose penalty as it may deem fit, subject to the rider that it shall not be more than 10% of the average of the turnover for the last three preceding financial years. It is important to note that Clauses (c) and (d) of Section 27 also uses the word 'may', which signifies that the Commission has the discretion to pass a particular order, which it may deem proper in the facts and circumstances of the case. 7. Two interpretations were canvassed before us, wherein either the turnover, as occurring under Section 27(b), is equivalent to the 'relevant turnover' or is equivalent to the 'total turnover'. In order to strengthen their arguments, respective Counsel have drawn our attention to various interpretations of 'turnover' applied across the globe, such as the judgment of Bundesgerichtshof (German....
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....et this phrase is indicative of the discretionary power provided for the fining authority under the Act. As the law abhors absolute power and arbitrary discretion, this discretion provided under Section 27 needs to be regulated and guided so that there is uniformity and stability with respect to imposition of penalty. This discretion should be governed by rule of law and not by arbitrary, vague or fanciful considerations. Here we may deal with two judgments which may be helpful in deciding the concerned issue. In Dilip N. Shrof v. Joint CIT (2007) 6 SCC 329, this Court while dealing with the imposition of the penalty has observed that- The legal history of section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate p....
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....o-operative Bank Employees Assn., (2007) 4 SCC 699 this Court has explained the concept of 'proportionality' in the following manner- "'proportionality' is a principle where the Court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of the decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise- the elaboration of a rule of permissible priorities. De Smith states that 'proportionality' involves 'balancing test' and 'necessity test'. Whereas the former ('balancing test') permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations, the latter ('necessity teat') requires infringement of human rights to the least restrictive alternative' In consonance of established jurisprudence, the principle of proportionality needs to be imbibed into any penalty imposed under Section 27 of the Act. Otherwise excessively high fines may over-deter, by discouragin....