TaxTMI 
TaxTMI 
2016 (12) TMI 1734
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....a Swasthya Bima Yojna [RSBY]/Comprehensive Health Insurance Scheme [CHIS], in contravention of the provisions of Section 3(1) read with Section 3(3)(d) of the Act. Resultantly, the Commission directed the Appellants to cease and desist from indulging in the practices found anti-competitive and also imposed a penalty on each of the Appellant at the rate of 2% of its average turnover of the last three financial years. 1.1 NIICL was incorporated on 5th December, 1906, NIACL on 23rd July, 1919, UIICL on 18th February, 1938, and OICL on 12th September, 1974. Management of all the undertakings engaged in general insurance business, pending nationalisation of such business, was vested with Government of India by virtue of The General Insurance (Emergency Provisions) Ordinance, 1971. Thereafter, General Insurance Business (Nationalization) Act, 1972 (hereinafter, "GIBNA"), nationalized the general insurance business and various companies were merged with the Appellants and the four Appellants became wholly owned subsidiaries of the General Insurance Corporation of India (hereinafter referred to as "GIC"). The Appellants and GIC had the exclusive privilege of carrying on general insuranc....
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....L OFFICE:KOCHI Inter Company co-ordination Committee (PSU General Insurance Companies) Minutes of the ICCC Meeting Held at United India Insurance Limited Regional Office, Kochi on 07.12.2009. THE MEETING WAS ATTENDED BY FOLLOWING OFFICERS: 1. Sri B.Krishnamurthy, DGM, United India Ins. Co. Ltd. RO Kochi 2. Sri Girish Raj.CRM, New India Insurance Co. Ltd. RO Kochi 3. Sri Rajasekharan CRM, National Insurance Co. Ltd., RO Kochi 4. Sri Ramamurthy, Regional manager, Oriental Ins. Co. Ltd. & Other Officer. Re: Tender Notice on RSBY dated 18/11/2009 of Govt. of Kerala This ICCC Meeting was held to discuss about sharing of business and submission of quotation for the above business. It was decided to share the business among the four PSUs with United India as Leader with 70% and other Companies with 10% each. This decision is subject to the approval of Committee of General managers of all four PSU Companies. As per the above decision United India will be L1 and other three PSUs will be L2 to L4 in the quotation being submitted on 8th December 2009. 4. The Commission....
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....this order - "* RSBY would provide annual insurance cover for a maximum amount of Rs. 30,000 for a family of five, including the worker, spouse, children and dependent parents (included in the BPL family list), and the annual insurance premium not exceeding Rs. 750/- was to be decided through tender process. * Under the scheme, the Union Government was to meet 75 percent of the premium (not exceeding Rs. 565), and also the cost of a Smart Card for each family, estimated at Rs. 60 per card. * The beneficiaries had to pay an annual registration charge of Rs. 30/- per family (which was part of the insurance premium to be paid to the insurance provider), and the State Government was to pay the rest of the premium, together with the administrative cost. * The scheme was to be implemented in all the 14 districts of the State. * Non-RSBY population was covered under CHIS and was to be divided into two categories: (a) those belonging to the BPL (Poor) list of the State Government but not in the list as per definition of the Planning Commission and (b) the APL families that belong neither to the State Government list....
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....icers of the Appellants met at Kochi and the minutes of the said meeting have been extracted in paragraph 3 above. Seven insurance companies including the four Appellants submitted the tender documents. Of the four Appellants, UIICL quoted the lowest price and this was in accordance with the decision taken in the ICCC meeting on 7.12.2009. All the bidders were considered as qualifying in the first meeting of the Technical Evaluation Committee (TEC) but in its second meeting on 21.12.2009, the TEC evaluated the bids on the basis of a scoring system and decided that bidders scoring 50% and above would be declared successful in the technical rounds. UIICL and OICL were declared successful in the technical rounds and the financial bid of UIICL at Rs. 464 being the lowest was accepted for implementation of RSBY and CHIS scheme in Kerala for a period of three years with effect from 1.4.2010 subject to yearly renewal. In September 2010, UIICL wrote to CHIAK for a review of the premium payable under the scheme for the coming years, claiming adverse claim experience during the past year and the current year. Vide another letter dated 10.11.2010, UIICL reiterated to re-consider the position ....
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....ipate in the process quoting appropriate higher premium jointly with other PSUs. 8. In the above circumstances we may seek Head Office approval for our following recommendations: a. To issue a formal letter to CHIAK asking for increased premium for our continuation in the Scheme for the next year. b. If CHIAK/State Government does not agree to the above, to exit the Scheme through the Cancellation Provision of the Agreement." 6.5 On 6.12.2011 a final Agreement without the premium adjustment clause was executed. UIICL vide letter dated 9.12.2011 gave a termination notice as per clause 21(ii) (c) of the said Agreement on the ground that they were making losses and their request for increase of premium to Rs. 1100 was not accepted. 6.6 Thereafter, CHIAK issued fresh tender with last date for submission of bids being 30.12.2011. An internal Office Note of OICL signed on 28.12.2011, after the fresh tender was published, is reproduced below: OFFICE NOTE RE:RSBY FOR THE YEAR 2012-13 The RSBY Scheme of Kerala Government was insured by United India Insurance company right from 2008. In 2010-11, Oriental took a 15% share. From....
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....f the Commission under Section 26(1) of the Act, the DG conducted investigation into the actions of the Appellants relating to the tenders issued by the GOK for the years 2010-11 to 2012-13. DG's findings were as follows: "1. The authenticity of the ICCC document was established. 2. The conduct of the Appellants was clearly collusive in nature and as decided in the ICCC meeting, UIICL quoted the lowest bid amount amongst the Appellants for the year 2010-11 to 2012-13 to win the bid and cut the competition among themselves. The bid amount quoted for these years and even the increase in the bid amount by the Appellants showed a clear pattern of growth as evident from the table below: 3. In a competitive environment in a tendering process for selection, those who were not placed as L1 would have a tendency to competitively outbid the L1 i.e UIICL, to get the business. However, in this case the other Appellants rather increased their quote price at higher percentage in subsequent years, showing a clear pattern of formation of cartel which was in violation of Section 3(3) (d) of the Act. 4. The Appellants not only formed a ....
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....s, which was explicitly prohibited under the Act. In his view, this was a case of per se violation of competition laws, presumed to have an appreciable adverse effect on competition and did not require a test of rule of reason to establish the contravention. 8. The Commission after receiving the DG's report considered the same and forwarded electronic copies to the Appellants and they were asked to file their response. The Appellants filed preliminary objections challenging the DG's report on the ground that it suffered from a fundamental error of failure to consider that all the Appellants being controlled by the same parent i.e Government of India, through the Department of Financial Services (DFS) were part of a 'single economic entity' and hence there could not be any collusion between them under Section 3(3) of the Act. The Commission, however, asked the Appellants to file their objections on the merits of the report also. The Appellants filed their objections to the main report and the parties were admittedly heard on 14.5.2015 over various aspects including the issue of single economic entity. Copies of letter dated 14.5.2015 which was sent by DFS to the o....
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....ly under the overall supervision of the Central Government, each of the OPs placed a separate bid in response to the tenders issued by the Government of Kerala for implementation of RSBY/CHIS schemes. Further, parties themselves have admitted before the DG that all decisions relating to submission of bids, determination of bid amounts, business sharing arrangements, etc. were taken internally at company level without any ex ante approval/directions from Ministry of Finance. Even the decisions taken by the companies were not notified ex post to the Ministry. Thus, it is apparent that the OPs participated in the impugned tenders independent of Ministry of Finance and the DG also did not come across any contra evidence. 26. In view of the above, the Commission notes that the conducts of OPs in relation to the RSBY/CHIS tenders issued by the Government of Kerala during the period between 2010-11 and 2012-13 were based on their own volition and the Ministry of Finance had no role to play. On this basis, the Commission holds that the ministry of Finance did not exercise any de facto or de jure control over OPs' business decision in submitting bids for impugned tenders.....
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....ppellants' conduct relating to tenders issued by the Government of Kerala in the year 2011-12 to 2012-13 also and concluded that a clear bidding pattern was evident and in this context tabulated the rate bids of the Appellants in the following table in paragraph 47 of the impugned Order: "Details of OP's rates bids in relation to the tenders of 2011-2012 and 2012-2013 " 8.3 The Commission supported its finding of clear bidding pattern by noting that in relation to both the tenders- (i) The Appellants had quoted substantially higher premium and no plausible explanation to explain the rise was forthcoming; (ii) UIICL repeatedly secured the L1 position and entered into business sharing arrangements with, National Insurance Co. Ltd. and New India Assurance Co. Ltd. (iii) While the contracts were awarded for a period of three years but UIICL repeatedly invoked the exit clause of the contracts, thereby, forcing the Government of Kerala to initiate re-tendering after completion of the first year of the contract." 8.4 The Commission analyzed two internal documents i.e. internal Office Note dated 1.12.2011 of UIICL and inte....
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....rded to Reliance General Insurance Company Limited at an annual premium of Rs. 738/- per family for a period of three years and this contract was renewed for the year 2014-15 at the same price. The Commission also notes that representatives of Reliance General Insurance Company Limited have confirmed that the company is not incurring any losses for providing health insurance services under the RSBY/CHIS schemes. On this basis, the Commission holds that the explanations offered by OPs are false assertions. 56. Thus, the agreement amongst OPs to manipulate the tendering process initiated by the Government of Kerala/CHIAK for implementation of RSBY and CHIS for the years 2010-11, 2011-12, 2012-13 in accordance with the provisions of Section 2(b) of the Act is clearly and unequivocally established." 8.6 The Commission also held that, "The entire modus operandi resorted to by OP-4 in concert with the other PSUs to exit from the tender year after year forcing re-tendering and consequent quotation of higher quotation of premium in collusion is a virtual fraud perpetrated upon the State of Kerala with regard to a social welfare scheme which was directed at BPL families". 8.7....
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....or a co- insurance arrangement; 3. Whether the Appellants have any escape from the presumption of bid rigging having appreciable adverse effect on competition; 4. Whether Investigation by the DG and the impugned Order of the Commission went beyond the period covered by the Order under Section 26(1) of the Act passed by the Commission; 5. Whether the principles of natural justice were violated, vitiating the impugned Order, by non-signing of the order by the Chairman who was present during the deliberation in the Commission; 6. Whether finding of the Commission of virtual fraud is valid; 7. Whether the penalty was leviable and if so whether the quantum was to be calculated with reference to the total turnover or with reference to the turnover of the transactions relating to bid rigging." 11. The provisions of the Act and the General Insurance Business (Nationalization) Act, 1972,(GIBNA) which are relevant for adjudicating the aforesaid issues, are extracted below: The Competition Act, 2002 Section 2 Definitions - In this Act, unless the context otherwise requires, - ................... (b) "agreement" includes any arrangement or unders....
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....local authority; (x) every artificial juridical person, not falling within any of the preceding sub-clauses; ............................................ (z) words and expressions used but not defined in this Act and defined in the Companies Act, 1956 (1 of 1956) shall have the same meanings respectively assigned to them in that Act. Section 3 Anti-competitive agreements - (1) No enterprise or association of enterprises or person or association of persons shall 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. (2) Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void. (3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade o....
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....vided that all the functions of the Corporation specified in this sub-section, on and from the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2002, shall be performed by the Central Government. (2) In issuing any directions under sub-section (1), Central Government shall keep in mind the desirability of encouraging competition amongst the acquiring companies as far as possible in order to render their services more efficient. Section 19 - Functions of acquiring companies. (1) Subject to the rules, if any, made by the Central Government in this behalf and to its memorandum and articles of association, it shall be the duty of every acquiring company to carry on general insurance business. (2) Each acquiring company shall so function under this Act as to secure that general insurance business is developed to the best advantage of the community. (3) In the discharge of any of its functions, each acquiring company shall act so far as may be on business principles and where any directions have been issued by the Central Government or the Insurance Regulatory and Development Authority established under sub-secti....
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....surance Division of DFS, Government of India, and the following arguments were made in support thereof : "(i) The Central Government held 100% of the shares of the Appellants and, therefore, had decisive control over them. (ii) The Central Government under Article 77 of the Constitution of India allocates business to various ministries. Ministries in turn allocate work to their various departments which execute business either directly or through their instrumentalities like the Appellants in the present case. (iii) Various provisions of GIBNA make it clear that apart from the corporate control, the Government of India, has statutory control over the Appellants and therefore there can be no dispute that they constituted a single economic enterprise. GIBNA was enacted for securing the development of general insurance business for the best interest of the community and to ensure that the operation of the economic system did not result in concentration of wealth to the common detriment, as postulated in Article 39(c) of the Constitution of India. This intention was reflected in the Preamble and the declaration of the policy under Section 2 of GIBNA. Section ....
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....ns." (v) Especially relevant in this regard were strategy direction dated 24.5.12 with the following statements: "At a time, when there is a financial strain on these Companies on account of abolition of motor pool & shifting to declined motor pool and other factors, the Public Sector Insurance Companies to be incurring losses to an extent of Rs. 1500 crores and above every year on Group Health Insurance policies is totally unacceptable. This is especially when the total dividend declared by these Companies during 2010-11 was only Rs. 30 crores. A closer examination of these losses and a relative comparison with the private sector, it is clear that that these losses are due to the lack of prudent underwriting and a very unhealthy and self-destructive inter-company competition among these four Companies. Heavy discounts are being offered on premiums, so as to snatch the business from the other Public Sector Undertaking Companies. Such unhealthy competition has led to a state where premiums for Group Health Insurance policies are settling down to a very low level and such policies become loss making the very moment they are underwritten. ....
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....d. Homes, properties, motor vehicles, factories, machinery etc. deserve to be insured. The spread of health insurance is a significant pointer to development. Therefore, the number of policies issued by each PSIC is indeed a measure of performance. This must be suitably reflected in the new SOI from 2007-2008 onwards. 4. The employee strength of PSICs is extremely high. This is a legacy issue. Because of huge recruitment in the mid 1980s the present date of attrition is low. Issue that needs to be addressed by the PSICs. 5. There is a huge backlog in suit claims and non-suit claims. Every year, a larger number of suit claims and non-suit claims are filed. The number of claims settled in each year should be more than the new claims filed each year, otherwise, they backlog will never be liquidated. So far as suit claims are concerned, PSICS must review their panels of lawyers, the performance of each lawyer measured by the number of cases disposed of and put in place a system where more suits are heard and decided by the Tribunals. In addition, they must examine the possibility of settling up Adalats to dispose of these claims. If they approach the....
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.... Sd/- (P. Chidambaram) Finance Minister 11.01.2007 SECRETARY (FS)" (vi) Control has to be seen from 100% shareholding and from facts and circumstances and instruction for each transaction to flow from the parent, was not required. (vii) Letter of DFS dated 14.5.15 confirmed the factual position of instruction being issued by the Government. (viii) Transfer and postings of the officers inter se among the Appellants took place routinely under the directions of DFS, in terms of Section 22 of the GIBNA. (ix) The Appellants were 'State' under Article 12 of the Constitution and participation in health insurance scheme, irrespective of the losses suffered, was in discharge of mandatory obligations under the Constitution and could not be considered as a conspiracy. The fact of Appellants implementing the social sector schemes of the Government was noted in all the Annual Reports tabled by the Ministry of Finance in Parliament and special reference be made to Annual Report for the year 2008-2009 which recorded participation by the Appellants in Universal Health Insurance Schemes. Ann....
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....Ors. should also be applied to the Appellants as they were under the shadow of their 100% shareholder which controlled all aspects of their functioning. DFS held an all pervasive decisive influence over the functioning of the PSGICs and therefore they were part of the same enterprise. The rationale applied to confirm 'single economic entity' in international jurisprudence viz American Needle Inc. v. National Football League 560 U.S. 183 (2010, Case No. COMP/M.6113-DSM/SINOCHEM/JV. of the European Union, Consten and Grundig Case 56 [1966] ECR 299, of the European Court of Justice, Case T-102/92, Viho Europe BV v. Commission [1995] ECR II-117, Case C-73/95 P, Viho Europe BV v. Commission [1996] ECR 1-5457,S/V v. Commission [1992] ECR-II 1403, UAB Milsa and UAB Torita of the Lithuanian Competition Council, supported the case of the Appellant." 12.2 Another facet of a 'single economic entity' presented by Shri Krishnan Venugopal, Learned Senior Counsel for the Oriental Insurance company was that DFS was engaged in providing general insurance services through the Appellants, and DFS together with the Appellants formed a single 'enterprise' and therefore, the C....
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....d assistance to the acquiring companies in setting up standards of conduct and sound practice in general insurance business and in rendering efficient services to holders; (ii) advice in controlling expenses; (iii) advice in investing funds; and (v) issuing directions in relation to the conduct of general insurance business. (c) Under Section 17A, the Central Government could regulate the terms and conditions of service of officers of the GIC and of all acquiring companies; (d) Under Section 22, the Central Government had the power to transfer employees among the Appellant Insurance Companies as it chooses; (v) The Articles of Association of the four Appellants further reinforced the conclusion that the Central Government wholly owned and controlled the Appellants. Not only does the Central Government appoint the Directors and the Chairmen and Managing Directors of the Appellant Insurance Companies, it can also remove them, fill vacancies, etc. (vi) Section 18(2) of GIBNA is for the Central Government to keep in view, but that cannot vest Commission with jurisdiction under Section 3 of the ....
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....ental scheme of the Act, particularly when viewed in the light of legislative history under the Monopolies & Restrictive Trade Practices Act, 1969." 13. In order to consider the arguments of the Appellants and the Respondent in regard to the 'single economic entity', it is necessary to first note the legal structure of the Appellants and the statutory framework in the form of GIBNA impacting their operations. It's an admitted position that the Appellants are Companies, with each of them having separate Memorandum and Articles of Association. Appellants were in existence when the nationalisation of general insurance business was effected through GIBNA in 1972. The Preamble to GIBNA reads as follows: "An Act to provide for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business in the best interests of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and....
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....(1) of GIBNA whereby functions of GIC as enumerated under Section 18(1) of GIBNA were to be performed by the Central Government. Therefore, by virtue of this amendment, Central Government could if it so desire, carry on general insurance business in terms of Section 18(1)(a) of GIBNA and also had to perform the functions of aiding, assisting, advising and issuing directions to the 'acquiring companies' i.e the Appellants in terms of Section 18(1) (b) to 18(1)(e) of GIBNA. 13.3 So in terms of Section 18(1) of GIBNA, the Central Government and the Appellants are distinct and separate entities. Central Government can independently do insurance business and the Appellants have a separate right to do insurance business. This is further reinforced by Section 18(2) of GIBNA, which circumscribes the powers of Central Government to issue directions and Section 19 of GIBNA, which lists functions of the Appellants and requires the Appellants to be guided by the directions issued by the Central Government or the IRDA and Section 23 of GIBNA, which vests Central Government to issue directions in matters of policy involving public interest. Therefore, DFS which is the part of the Mini....
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....ity with DFS, which is not engaged in any commercial activity. They are not under each other's influence and do not hold any management or shareholder position in each other. The influence, if any, of the DFS does not detract from the independent, commercially and economically separate status of each of the Appellant, who as per GIBNA owe their separate existence to the need to compete in interest of efficiency. In fact, the letter of DFS dated 14.5.2015 on which strong reliance was placed to assert the confirmation by the Government of exercising decisive influence and hence supporting 'single economic entity' proposition, specifically apprised the Commission that the advisories were not to undermine competition, in the following words: "Therefore, although the advisories referred to in your aforementioned letter are towards regulating the operational activities of the four Public Sector General Insurance Companies (PSGICs) the same were sent out with a view to protect and safeguard them against any imprudent business action, and achieving the above objective of the Government. It is also pertinent to mention here that these advisories are consistent ....
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.... defined in the Companies Act, shall have the same meaning as assigned in that Act. The definition of 'subsidiary' in the Companies Act, 1956 (which was applicable for the period of tenders) is as follows: "4. MEANING OF "HOLDING COMPANY" AND "SUBSIDIARY" (1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if, - (a) that other controls the composition of its Board of directors; or (b) that other - (i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company; (ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or (c) the first-mentioned company is a subsidiary of any company which is that other's subsidiary. ILLUSTRATION ............ ....
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....nsaction entered into in the ordinary course of that business. (4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary. (5) In this section, the expression "company" includes anybody corporate, and the expression "equity share capital" has the same meaning as in sub-section (2) of section 85. (6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not. (7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporat....
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.... is based on an incorrect premise. There is no constitutional obligation on the Appellants under the Directive Principles to provide health insurance to all. The following paragraphs from the Supreme Court Judgement in the case of Manubhaidharamsinhbhai Gajera (ibid) clarify as to what are the obligations of the Appellants when acting as 'State': "23. There is no escape from the fact that the appellant is a 'State' within the meaning of Article 12 of the Constitution. It has been created under the 1972 Act. The said Act, as the preamble shows, was enacted for achieving certain purposes, economic benefit of the people and/or group of people, being one of it. At the point of time when the 1972 Act was enacted the insurance companies enjoyed a monopoly status. But would it mean that only because it ceases to enjoy the same by itself is sufficient to hold that it is not required to follow the constitutional or statutory norms? 24. If it is a 'State' its action must be fair and reasonable. It has been so held in a catena of decisions of the Court as for example Peacock Plywood Plywood (P) Ltd. v. Oriental Insurance Co. Ltd. (2006) 12 SCC 6....
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....te sector. When a business is regulated, all concerned would be governed thereby. 30. It is one thing to say that the terms and conditions of a contract are statutory in nature but is another thing to say that the statute governs or controls the business itself. It is the latter which is applicable to the fact of the case. Two things are apparent. One, the Central Government has come out with a new economic policy. The monopoly status has been taken away from the General Insurance Corporation of India and its subsidiaries. The insurance companies are required to compete with others in the field, but the same may not necessarily mean that despite the statutory interdicts the public sectors insurance companies must have a level playing field with the private insurance companies. 31. We have, despite the new economic policy of the Central Government, no option but to proceed on the assumption that the public sector insurance companies being a State have a different role to play. It is not to say that as a matter of policy statutory or otherwise the insurance companies are bound to regulate all contracts of insurance having the statement of Directive Principles in mind but there ....
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....3.13 Our decision in the case of Wing Cdr. (Retd.) Dr. Biswanath Prasad Singh v. Director General of Health Services (DGHS) (Appeal No. 63 of 2014), cited by the Appellants to support their claim of DFS being an 'enterprise', is premised on different facts. In that case, the finding of fact was that DGHS was not just a facilitator for its target group to seek healthcare in empanelled hospitals but itself provided healthcare in its 273 allopathic dispensaries, 19 polyclinics, 73 labs and 85 Ayush hospitals. In the present case, DFS is not providing insurance services. 13.14 We do not agree that the Appellants are a 'single economic entity' or that DFS was an 'enterprise' in terms of Section 2(h) of the Act, engaged in providing general insurance services through its subsidiaries i.e the Appellants. 14. Once we hold that the Appellants are not a 'single economic entity', we have to assess their conduct in the tender process and analyze the agreement recorded in the minutes dated 7.12.2009 extracted in paragraph 2 of this Order, to determine whether there was a contravention of Section 3 of the Act on account of bid rigging. The admitted facts rev....
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....tended to engage in co-insurance was stated to be entirely untenable, since such an arrangement ought to have been disclosed to the Government of Kerala, and only one Company should have entered a bid in the tender process. It was stressed that even the coinsurance Agreement which was placed on record by the Appellant demonstrated that, 'Co-insurance necessarily required participation as a Consortium with pre-determined shares being disclosed to the Client and a lead Consortium Partner being identified to take on day-to-day responsibility for the transaction'. It was underlined that, no such common bid was tendered and the four purportedly independent bids were entered which created an illusion of competition which would have convinced the Government of Kerala that a robust market mechanism had determined the correct price, although this was far from the truth. 14.2 We agree with the conclusion of the Commission that, the Appellants did enter into an Agreement as defined in Section 2(b) of the Act, in contravention of Section 3 of the Act, which resulted in bid rigging. The minutes of the meeting which caused the initiation of inquiry by the Commission are a contemporane....
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.... 8.3 of this Order. The Appellants, through their separate bids created an impression of genuine competition. This misleading facade resulted in UIICL not ending up as a lone qualifying bidder. It is relevant to note that the Kerala High Court, which was the jurisdictional court, had in its judgement in WA No. 3332 of 2001 dated 29.10.2001, held that when there was only one bidder and the contract was awarded to that bidder, there was demonstrable prejudice to public interest. On the facts of this case for the tender for the year 2010-2011, there were only 2 qualifying bidders i.e UIICL and OICL and for the year 2011-2012 also there were only two qualifying bidders i.e NIACL and UIICL. If OICL or NIACL had not bid, this would have been an instance of lone qualifying bidder. Viewed from this perspective, cartelization ensured success of UIICL. 14.5 The Appellants, if they wanted to share risks could have bid as a consortium without contravening Section 3 of the Act. There is no bar on their forming a consortium and as per information in public domain they did form a consortium under the lead of NIACL and won a bid for insuring the fleet of Air India. 14.6 We are of the view th....
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.... of Section 3 of the Act creates a presumption that any agreement which results in bid rigging, has an appreciable adverse effect on competition. The Proviso to this sub-section carves out an exception by stipulating that any agreement entered into by way of joint venture which increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services, is not covered by such presumption. The Appellants have not established as to how they constituted a joint venture or how even on the presupposition of a joint venture, they delivered the benefits as enumerated in the said Proviso. 15.2 The presumption under Section 3(3) of the Act takes away the applicability of rule of reason. Bid rigging has been statutorily determined to be anticompetitive. Presumption in a substantive law is irrefutable and conclusive. Once a conclusion of bid rigging is reached, contravention of Section 3(1) of the Act is also established. We see no reason to interfere in the conclusion of the Commission that the Appellants entered into an Anti-competitive Agreement, resulting in bid rigging which had an appreciable adverse effect on competition. 16. The ne....
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....tted that a specific question was raised by the Chairman as to whether the Government of India supported the argument advanced by the Appellants that they were a 'Single Economic Entity' and the matter was adjourned for a final hearing on 14.05.15, on which date the Appellants filed a letter dated 14.05.15 issued by the DFS, responding to the Chairman's query, but a quorum of four members without the Chairman, heard the arguments and reserved the order. The Appellants asserted that on inspection, they had found that the Chairman participated in the internal deliberations of the Commission on 10.06.15 when submissions of the parties were considered and a decision to call for financial details was taken, which in effect meant a decision to impose penalty. Therefore, their stand is that the Chairman was part of deliberations and the decision making of the case but chose not to sign the final order. The contention was that, the entire order was vitiated on account of Quorum Non Judice and on account of the violation of the important principle of 'one who hears must decide without any influence'. Reliance was placed on our decision in the case of 'Lafarge v. CCI&....
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....to public. The presence of Justices' clerk, who was interested in the proceedings, being member of the firm of solicitors representing a client in a civil suit for damages in respect of the same collision, while the justices were considering their decision, led to quashing of the conviction. In the present case, there is no material to indicate personal interest of the Chairman or how his presence in some of the meetings vitiated arriving at a just decision by the Members, or the kind of influence he allegedly exercised. The impugned Order is by the Members of the Commission, who heard the Appellants and the Chairman was rightly not party to the Order, as admittedly he was not present during all the proceedings when the Appellants were heard. 18. The Appellants have contested the observations of the Commission in paragraph 60 of the impugned Order that, the entire modus operandi resorted to by UIICL in concert with the other Appellants to exit from the tender year after year forcing re-tendering and consequent quotation of higher quotation of premium in collusion, was a virtual fraud perpetrated upon the State of Kerala with regard to a social welfare scheme directed at B....
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....re-tendering. It was submitted that there was no impact on competition in the State and consumers benefited and only because there was a power to impose penalty, it did not mean that a penalty must be imposed. Reliance was placed on judgement of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa, (1970) AIR 253 and our observations in the case of A.R. Polymers Private Limited v. Competition Commission of India and Anr.(Appeal No. 34/2013). Another argument was that, the Commission failed to give a show-cause notice regarding the penalty to be imposed, which should have been given after the Appellants had seen the impugned Order on the merits of the case. Further, it was pointed out by the counsel for OICL that the Commission did not even take into account the mitigating factor in the case of OICL which did not share business with UIICL after 2010-11 on the ground of losses being too heavy. 19.1 The quantum of penalty imposed was challenged on the ground of it being totally disproportionate to the turnover under the RSBY Scheme in Kerala. It was contended that, the Commission had ignored the principle of "relevant turnover" upheld in a series of judgment viz....
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.... of cases interpreted the term 'turnover' for the purposes of Section 27(b) of the Act to mean value of goods and services which are made subject matter of investigation under Section 26 of the Act and hence liable for punishment under Section 27 of the Act. Some of such cases have been cited by the Appellants as mentioned in paragraph 19.1 above and we see no reason to take a different view in this case. Penalty has to be calculated with reference to the gross premium received by UIICL as insurance provider under RSBY/CHIS scheme and penalty for each of the Appellants will be a proportion of their share in such premium. 19.6 In determining the rate of penalty at 2%, the Commission has considered the peculiarities of the insurance sector and the importance of insurer solvency for the consumer, as a mitigating circumstance. Bid rigging in public procurement for a social welfare scheme was treated to be an aggravating circumstance. While we agree with the conclusion of the Commission in regard to the mitigating circumstance, we are of the view that the aggravating circumstance identified by the Commission does not apply to the facts of this case. It cannot be denied, and t....
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....Yes 53.00 497 548 Insurance Co. Ltd.(OP-3) 3. ICICI Lombard No 47.50 409 51 General Insurance Co. Ltd. 4. Cholamandalam MS No 35.50 499 555.40 General Document 4 insurance Co. Ltd. 5. The New India No 39.50 480 529 Assurance Co. Ltd. (OP-2) 6. National No 37.50 490 540 Insurance Co. Ltd. (OP-1) 7. Star Health and No 40.50 675 745 Allied Insurance Co. Ltd. Document 5 Total Business Generated for OP-4 - Rs. 78,93,64,054 S. No. Name of the Public Sector Insurance Company Business Sharing Business Business Sharing (in terms of (in terms revenues) of %) 1. National Insurance Co. Ltd. 10 7,89,36,405 Document 6 OP-1) 2. The New India Assurance 10 7,89,36,405 Co. Ltd. (OP-2) 3. The Oriental Insurance Co. 15 11,84,04,609 Ltd. (OP-3) 4. United India Insurance Co. 65 51,30,86,635 Ltd. (OP-4) Document 7 S. Name of the Public Price Bids for Price Bids for Price Bids for No. Sector Insurance 2010-11 2011-12 2012-13 Company 1. National Insur....