TaxTMI 
TaxTMI 
2015 (12) TMI 1773
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....dated 23.07.2012 was awarded to M/s. Stone India Limited for supply of 67 feed valves @ Rs. 16,499/- each. M/s. Stone India Limited completed the supply in next 8 1/2 months. 2. Even before the Tender Committee could consider the tenders of the appellants, Respondent No. 2 filed an information dated 31.05.2012 under Section 19(1)(a) of the Competition Act, 2002 (for short, 'the Act') alleging formation of cartel by the appellants for the purpose of jacking up the price of feed valves. The Competition Commission of India (for short, 'the Commission') prima facie felt satisfied that the allegations levelled by Respondent No. 2 need investigation and passed order dated 30.12.2012 under Section 26(1) of the Act and directed the Director General (for short, 'the DG') to cause an investigation into the matter. 3. In compliance of the direction given by the Commission, the DG issued notices under Section 36(2) read with Section 41(2) of the Act and called upon the appellants to provide specified information and documents. Each of the appellants furnished the required information and documents. 4. In the course of investigation, the DG took cognizance of th....
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....only on 5.6.2012 and no other participating vendors had been called for discussion/negotiation. 5.12 DLMW, Patiala upon opening the bid in question has observed the formation of the cartel by the three vendors and found that all the three vendors have quoted the identical price which is as follows :- 5.13 Further, from perusal of the minutes of the tender committee dated 30.5.2012 and 29.6.2012 (copy enclosed at Annexure-5). It is observed that in the evaluation made by the tender committee for its tender No. 201320510 in Para 5 of the minutes the issue of identical bid has been discussed along with the tabulation statement. The bid of Escorts Limited Faridabad which have quoted @ Rs. 17,147.54 each inclusive of ED and CST inclusive @ of 5.25% on FOR has been rejected on the plea the firm has not submitted the cost of the tender document in terms of condition No. 10 of tender (SN-19) the offer without tender document cost are liable to be rejected. The bid of the FTIL has not been considered by the DLMW Patiala on the plea that the firm (FTIL) has not accepted the warranty clause as per the IRS condition of contract as well as has also not accepted sta....
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....e the purchase quantity on 13.6.2012 with an all inclusive updated rate of Rs. 13095.56 each. 5.17 From the minutes of the Tender Committee (TC) of the DLMW Patiala, it's a fact that in response to the Tender No. 201320510 opened on 27.04.2012 by the DLMW Patiala in which none of the tenderers have been approved though they are RDSO approved firm to supply the Feed valves. After the said tender is open DLMW has called of the firm (Stone India Limited) and entered in to negotiation. The Stone India Limited have been given Purchase Order but till this date they have not supplied Feed Valves to the DLMW, Patiala. xxx xxx 7.2 The investigation has examined into following question in this case : (I) Whether there are conditions in the tendering process which are considered to be conducive for collusion. (II) Whether the identical/near identical prices quoted by the OPs against the e-tender No. 201320510 dated 14.3.2012 was a result of collusion amongst the OPs and whether there are any direct or indirect evidences in support of an agreement, formal or informal between OPs for bid rigging. Issue I : Assessm....
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....generally not conducive for collusive agreements. Investigation has revealed that the demand of the product in question has been stagnating at almost the same level during the past few years. As such, the static demand and supply conditions are conducive for collusion in the instant matter. 7.7 When the products or services sold or rendered are identical or very similar and there are few or no substitutes, it is easier for bidders to reach an agreement on a common price structure. In the current case, the product being the same for all the bidders, and since the specifications of RDSO make the product in question distinct it cannot be considered substitutable with any other product. As such the product being the same, the probabilities of bidders reaching an agreement on a common price structure are high. In addition to the above conditions, investigation has revealed that the system of awarding the contract by the Railways is conducive for collusive bidding. 7.8 In the present case, the product in question is same for all bidders and since the specifications and installed capacity has been approved by the RDSO for feed valves, and cannot be considered....
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....mittee dated 22/30.5.2012 DLMW in its another meeting held on 12/29.6.2012 has placed an order to SIL for supply of 67 Nos. of feed valves 16,499.99 all inclusive after negotiation with SIL which had agreed to reduce its last tender bid price by Rs. 554.15 each on the basic price. 7.12 No doubt DLMW has placed two different purchase order for supply of feed valves for the alleged tender to M/s. FTIL (34 feed valves) and to SIL (67 feed valves) but the same have been ordered on two different prices i.e. Rs. 12855.47 and Rs. 16,499.99. it is due to the faulty E-biddina process of the railway. Due to the faulty procurement system adopted by Railways the Government has been put to loss by paving higher price to the SIL whereas FTIL or other vendors would have been called for similar negotiation to reduce the price of feed valves. Apart from the losses being occurred process of tender has direct impact on consumer that the Railway imposed a burden on the public at large therefore, the faulty tender process not only affect the competition but equally brings adverse effect on the consumers. 7.13 Based on the above analysis, it has been concluded that the cond....
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....here is no question of the company in any manner entered into any arrangement or understanding with EL or FTIL since they are direct competitors for the brake system components supplied by them to the Railways. SIL is of the view that had there been any collusive bidding, the same would have extended to the brake system components and not limited to feed valve the company is stated to have the cost per set of Rs. 12,728.48 the cost of the each feed valves has been awarded contract for supply of feed valves on the basis of purchase order 18.1.2012 for basic price of Rs. 12,893.16 for WCR and similarly a Purchase Order dated 10.4.2012 @ of the Rs. 13,000 basic price of per unit of feed valve by NEFR. 7.16 Further, the SIL in their statement has also stated that :- Q. No. 4 It has been alleged in the complaint that you have quoted a price of Rs. 17,147.54 for the supply f feed-valves to DMW and your other competitors have also quoted the identical price as such you have formed a cartel while submitting the bid. Please explain the justification and reasoning for quoting the above price. Ans. At the outset, SIL denies the allegation for forming any carte....
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....e purchase order along with the quotation. I also undertake to provide few more purchase orders where railway had issued purchase orders against identical prices of the vendors for supply different items on or before 17.1.2013. 7.17 Similarly, FTIL has also denied all the allegations made in the notice and has objected by them on the plea that their records would justify the basis of their offer and prove their case that they have not contravenes in any manner for the formation of cartel in aforesaid tender. Further, it has also submitted that their commercial offer for quoting a price was based on last PO No. 26111569 1 04659 dated 18.1.2012 for supply of 30 No. of feed valve to southern Railway for the alleged tender. The company is stated to be in the business of manufacture of feed valve since 2010 and its install capacity is 900 No. of feed valve per annum and till August 2012, it has only supplied 488 feed valves to the different zones of Railways. The breakup cost of the feed valve of FTIL is Rs. 12,147 of FTI feed valve. It is further been claimed that FTIL have quoted the basic price of Rs. 14,534.52 for the tenders submitted by it to the different Zonal Off....
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....any is stated to have supplied 254 feed valves till July 2013 for the financial year 2013. It is pertinent to mention that it has quoted a basic price of Rs. 14,500 for the supply of 151 feed valves to DLMW Patiala and basic price Rs. 12,740 for supply of 55 feed valves to Central Railway. Further in their statement they have stated that :- Q. No. 5 Given in the situation on as mentioned above why you have quoted consolidated price for supply of feed valves to DMW, Patiala for the tender No. 201320510 for supply of 151 feed valves ? Ans. The tender provision for quoting the basic price or the all inclusive price in the E-Tendering process (inclusive of Excise duty and sales tax). While we have quoted all inclusive price clearly stating in the remarks columns the rate at which the excise duty and sales-tax have been included in the price. While it does not have any bearing on the result as the tabulation is done based on the ranking of the all inclusive price, sometimes we derive certain mileage in case the statutory levies go up during the pendency of the tender giving us an opportunity to absorb the increase in the statutory levies as an additional....
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....r bid for the supply of feed valves. DLMW has also been asked whether it enter into pre-bid discussion before awarding the contract of supply of feed valves to L1 and L2 bidders or not. A copy of the letter issued to DLMW dated 30.11.2012 is annexed at Annexure -6. Statement of IP with regard to its information 7.20 Further, while making deposition Shri R.S. Rawat Senior Materials Manager/PII Patiala has stated that: Q. No. 5. What was your actual requirement for the tendered bid No. 201320510 which was opened on 27.4.2012? Has any party been awarded the tender for supplying the entire quantity required by you in the aforesaid alleged tender ? Ans. Our requirement for feed valves was 151 Nos. for which tender was called vide tender No. 201320510. On opening of bids it was found that the rates were higher than the previous purchase order dated 11/11/2011 placed on M/s. Faiveley hence, the quantity of the previous purchase order was increased by 30% as per the quantity option clause available in the previous year purchase order (PO). Therefore, the procurable quantity came down to 151-34 = 117 Nos. feed valves. In the aforesaid....
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....l condition of contract for store department wherein cartel formation clause appears vide para No. 12.0 is being tendered herewith. Q. No. 9 After the negotiations, whether Stone India Limited was awarded the contract to supply the entire quantity or not. If not, what is the exact quantity awarded and what happened to the remaining quantities ? Ans. No. Stone India Limited was not awarded the entire procurable quantity i.e. 151-34=117. However, they were awarded 67 No. only and the reasons are duly indicated in the aforesaid TC minutes. A decision was made to procure the remaining quantity for 2013-14 along with the subsequent tender for the next purchase cycle for the year 2014-15. The purchase cycle for the requirement of 2014-15 will start from April, 2013. Q. No. 10. From your statement it is observed that the contracting party i.e. Stone India Limited has not supplied any feed valve for the tender dated 27/4/2012. Why you have not waited for the decision of CCI for the outcome of your complaint for formation of cartel by the Stone India & Others ? Ans. Since we can not anticipate the timing that is required for delivering the decision by CCI....
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....noted from the bid documents that Escorts ltd. have actually quoted the basic price at Rs. 17147.54 inclusive of all taxes. There is nothing on record to show that Escorts Ltd. had offered the bid based on certain calculations. In fact the Escorts Ltd. had offered the unit price at Rs. 17147.54 just with the purpose of matching with the others. 7.24 In the light of the above finding it is clear that the identical unit price of Rs. 17147.54 was bid in consultation with the other bidders. It may be relevant to mention here that this was an electronic bid and the prices bid by each of the bidders must have been made through their own computer system and therefore, the price so tendered would not be available with others. Obviously this could have been possible only if there was consultation on sharing of the bid price by each of the bidders. It is important to note that the bid price tendered by the three bidders matches to the last paisa which just could not been possible without meeting of mind and sharing of the price data amongst the bidders. 7.25 It is also relevant to mention here that the bidders in the present bid had raised the price of unit by 3....
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....ts Limited (for short, 'EL') are reproduced below: "3. Escorts has diversified business operations under four different segments : (a) Escorts Agri Machinery (EAM) is the main division of Escorts and provides more than 70% of its business. It offers a comprehensive range of tractors (45 variants starting from 25 to 80 HP) to its customers. Escort, Powertac and farmatrac are widely accepted and preferred brands of tractors in India and Escorts also exports the tractors to various countries. (b) Escorts Construction Equipment (ECE) is a leading material handling and construction equipment manufacturer. It manufacturers and markets a diverse range of equipment like cranes, loaders, vibratory rollers and forklifts. (c) Escorts Railway Products (ERP) has been one of the main suppliers to the Indian Railways for nearly five decades. Product offerings include brakes, couplers, shock absorbers, rail fastening systems, composite brakes etc. ERP is focusing on technology upgradation to cater to the growth of Indian Railways. (d) Auto Products Business (APB) supplies parts such as shock absorbers and telescopic....
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....oned draft was duly encashed; (e) chart depicting quantity of feed valves supplied to the Indian Railways for the period of April 2009 to July 2012; (f) list of other products supplied to Indian Railways along with name and address of competitors; (f) copies of various e-tenders submitted by Escorts and relied by Mr. Murali in the statement made to the office of Director General; and (h) details of excise duty. It is submitted that the office of Director General has not taken into consideration these important documents brought on record by Escorts. This is apparent from the statement made by the office of Director General in Para 7.23 at page 41 of the DG Report. 9. xx xx xx xx 10. xx xx xx xx 11. It is submitted that Escorts has independent operating policies and overcharging compliance principles which all officers of the company agree to adhere to as a part of the standard norms and practice within Escorts. There has never been any discussion / understanding between Escorts and any competitors at any point of time. The rates at which earlier tenders have been awarded to successful bidders and the quoted price of each bidder are in th....
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....g entry of new vendors." This restriction has led to a situation where there are limited vendors. The DG Report has also observed that "the entry restriction imposed by the RDSO is limiting fair competition......."(p. 30 of the DG Report). 19. In Para 7.12 of the DG Report, it has been observed that the procurement system of Railways is faulty and that the faulty tender process not only affect the competition but equally brings adverse effect on the consumers (p. 31 of the DG Report). 20. Further, the DG Report in Para 7.35 and Para 7.42 has finally concluded that the RDSO has limited competition by restricting the entry of new vendors and create conditions which are conducive for anti-competitive agreements in the nature of bid rigging in violation of the provisions of the Competition Act. (p. 46 and 48 of the DG Report) 21. From the above, it is clearly evident that the DG has examined the market dynamics and the role of RDSO at length and concluded without any doubt that the RDSO is an integral player in shaping the nature of the relevant market. The RDSO has indeed played a key role in determining the number of players in the market ....
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.... been quoted by Escorts in four earlier occasions : (a) SWR Tender No. 11111398 dated 05.10.2011 (b) WCR Tender No. 10112237 dated 15.12.2011 (c) CR Tender No. 47115146 dated 13.01.2012 (d) WCR Tender No. 10115119 dated 11.04.2012 28. It is submitted that these rates had enable Escorts to emerge as the lowest bidder. However, in SWR tender, the Indian Railways negotiated a lesser rate even though Escorts was the lowest bidder. In the Central Railway tender Escorts was the only tenderer, as the tender called for only Escorts make feed valve, even in such a scenario Escorts had quoted the same rate despite being the only eligible tenderer. We would also highlight that even in such a case Indian Railways negotiated the price with Escorts. 29. In this context, it is also important to take note of the statement of Shri R.S. Rawat, Senior Material Manager/P-II, Diesel Loco Modernization Works, Patiala. Please see Annex 1 of the DG Report. In response to question No. 13 relating to reliance placed on last purchase order by the Railways, Mr. Rawat has stated that "The purchase orders placed by Zonal R....
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....he DG Report clearly show that the Indian Railways as well as the vendors refer to the prior purchase orders/quoted bids while submitting and/or reviewing the bids (in case of Indian Railways). Other Factors 33. The DG has observed that the Respondent have been the only consistent players in the relevant market and the demand for feed valves has remained static during the last few years. In addition, the DG has also observed that the Respondents have high installed capacity. On the basis of the above, the DG has concluded that there have been no significant new entrants in the relevant market and the existing suppliers are protected from competitive pressures of new entrants. It is submitted that all these factors have to be considered in the context of the role of RDSO and the faulty procurement policy of the Indian Railways. 34. The demand for feed valves is primarily dependent on the Indian Railways. Escorts cannot in any manner change the demand dynamics for feed valves. As regard the high installed capacity, it is submitted that as observed by the DG in Para 7.9 of the DG Report, the installed capacities of the vendors are also fixe....
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.... and the faulty procurement system of the Indian Railways, and free availability of information in relation to price bids has resulted in the structure of the relevant market to be an oligopoly. 38. The position of oligopoly has been acknowledged by the Hon'ble Commission in the Cement Cartel case in Para 6.5.47 : "In an oligopoly since there are not many firms, interdependence is inevitable. Each firm's price and output decision anticipates the probable actions of other firms at any given time. Each of the firm has to concern itself with the strategic choices of its competitors. These strategic choices can be price, quantity or quality......" 39. The Hon'ble Commission in the Tyre Cartel order has also recognized that in a concentrated market with homogenous product price parallelism per se may not fall foul of the Competition Act unless the same is a result of concerted action. 40. The essence of price parallelism has been very clearly stated in the OECD definition of conscious parallelism contained in its Glossary of industrial Organisation Economic and Competition Law : "Under conditions of o....
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.... to expect orders if same price is quoted. They are fully aware that there is a specific clause that defeats attempts to cartel. The buyer is a giant and is used to imposing terms. Therefore the allegations in the complaint and the findings in the report of the Director General are baseless and farfetched. f. Very truly considered, it could be seen that these vendors are bitter and fierce competitors in the market. They are rivals and they have their own production facilities and market strategies. They have to take into account the investments made by them to deploy valuable and skilled resources. Commercial enterprises would not do anything that would defeat their objective. g. In view of the prevailing practices, possesses and methodology followed by Indian Railways and RDSO, there is no scope of anti-competitive agreements. h. There is absolutely no truth in the finding that there is any agreement as alleged by the DG in his report. As already explained if the standard terms and conditions governing the contract contains a specific clause with respect to cartel and there is a provision by which the Indian Railways would reject offers....
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....arts etc., automatically affect the need / availability of number of buyers as well as their commercial constraints. Further, the Indian Railways who is in dominant position being virtually a monopoly buyer and there approver of the Suppliers has also protected itself with ample inbuilt safeguards including. * A mandate to the supplier to conform with the price list quoted * A fall clause requiring the contractor to reduce the sale price in the event sales are made or offered to any other purchaser at a price lower than the price chargeable under a particular contract. * Right to increase / decrease existing Purchase Order to the extent of 30% till the last date of delivery * Power to place order on any one vendor and exclude others when cartelization is suspected. Hence it cannot and does not necessarily follow that the existence of a static demand, restricted number of vendors and the current supply conditions are per se conducive for collusive bidding. m. In any event the vendors have no choice and they don't have any role or ability to prevent any new entrants at all. Opposite Party No. 2 has no role to play ....
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....to the Indian Railways is not attributable to anything on the part of this Opposite Party. As already elaborately said, the price quoted by this Opposite Party was based on previous purchase order and to that extent this findings in this Paragraph are not only incorrect but also perverse. s. With reference to Para 6.10 of the report, the Opposite Party No. 2 humbly submits that the finding of DG that market conditions are conducive for the opposite parties to reach an agreement for bid-rigging and mutual allocation of market is incorrect." 8. Without prejudice to the above submissions, the Opposite Party No. 2 humbly makes the following para-wise submissions, as regards Issue No. 2 "a. With reference to Para 6.10 of the report, the Opposite Party No. 2 humbly submits that from the information furnished by the opposite parties, it is established on record that the price quoted by the Opposite Party No. 2 is exactly the price offered in a previous purchase order issued to the Opposite Party No. 2 by Southern Railway and the difference between the offer price and previous offer price has arisen only due to rates of taxes and duties as appli....
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.... h. With reference to Para 6.10 of the report, the Opposite Party No. 2 submits that the though the price has been raised, the bid price quoted was the same that had been quoted and accepted in many tenders in the interregnum. A copy of the Purchase Order at the enhanced bid price was also provided to the DMW which has been overlooked. i. With reference to Para 7.26, the Opposite Party submits that the observations of the Technical Committee are based on conjectures and does not constitute any evidence. It cannot be relied upon by the Hon'ble Commission as it is an independent quasi-judicial authority and cannot base it conclusions on the basis of the Technical Committee. j. With reference to Para 7.27, the Opposite Party submits that the fact that the tenders were submitted on the same date is not relevant. It is common that tenders are submitted just before the last date. k. With reference to Para 7.28, the Opposite submits that the conclusion of the DG is baseless. Submission on the day prior to the closing of the tender does not per se show meeting of mind/concerted action. l. With reference to Para 7....
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....for new products have been floated by RDSO / Railways. Normally there will be a joint meeting and all participants and they will discuss draft specification and finalize the specification. ii. In respect of existing product like "Feed Valves, names of enlisted approved vendors are notified by RDSO with all details and this takes place once in 6 (six) months. This information is also in the public domain. Any new entrant will be able to see the specification number and also note how many vendors are in Part 1 and Part 2 categories. So if anyone wants to enter as a new entrant, he can buy the specification and Standard Terms and Conditions and develop the product. Once the development of the product meeting the requisite specifications is done, there is no barrier to make representation to RDSO in the prescribed vendor registration form and if satisfied RDSO inspection takes place. Thereafter manufacturing of proto type of the product could be undertaken. This is again followed by another inspection to ensure that the product will be on trial in service. Only if performance is satisfactory, enlisting takes place. This is how competitors are created. iii. The existin....
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....perate for even a moment or get implemented by bidders. It lost is characteristics of cartel the moment DLMW decided to negotiate unconditionally. 9. That, it is undisputed that in case of a cartel, the operation of the cartel for a particular period of duration forms the basis of finding contravention in terms of Section 27 of the Competition Act. However, in the present case, for the sake of argument even if there was a uniformity of bid price when basic price of all the three bids was different, the alleged cartel could not operate even for a moment. It is reiterated and reaffirmed that the other two Opposite Parties were already disqualified by the Tender Committee from the tender process on 27 April 2012 and hence only SIL remained as the sole qualified bidder. Further, DLMW complained to the CCI about the tender quotes on 31 May 2012, the same day itself when SIL was called for negotiations. Therefore, the cartel, if any, did not operate for a single moment, and therefore, no contravention can be found in terms of Section 27 of the Competition Act. Fluctuating market shares - uncharacteristic of cartel behaviour 10. The market shar....
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....ate of the submission of the tenders and has never been found to have involved in anti-competitive conduct as pernicious as "cartelisation" or "bid-rigging" - supporting documents to corroborate the foregoing facts are enclosed for ready reference as Annexure 8 (Colly.)" 9. The Commission briefly adverted to the replies of the appellants but expressed its agreement with the DG that the appellants have indulged in bid- rigging/collusive bidding and thereby contravened the provisions of Section 3(1) read Section 3(3)(a) and 3(3)(d) of the Act. The discussion made by the Commission on the cartel formation by the appellants is contained in paragraphs 29 to 55 of order dated 05.02.2014 (the impugned order). For appreciating the contentions of the parties in a correct perspective, these paragraphs are extracted below : "Whether the opposite parties have contravened the provisions of section 3 of the Act? 29. The present case relates to Tender No. 201320510 which was floated by DLMW for procurement of feed valves used in diesel locomotives. The tender was opened on 27.04.2012. The Tender was opened on 27.04.2012. The Tender Committee evaluated the offers r....
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....rs may incur being well known, it is normal for the activities which those practices and those agreements entail to take place in the clandestine fashion, for meeting to be held in secret and for the associated documentation to be reduced to a minimum. Even if the commission discovers evidence explicitly showing unlawful conduct between traders, such as the minutes of a meeting, it will normally be only fragmentary and sparse, so that it is often necessary to reconstruct certain details by deduction. In most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia which, taken together, may, in the absence of any other plausible explanation, constitute evidence of the existence of an agreement. 34. Applying the aforesaid tests to the present case, it may be noted that EL quoted an all-inclusive quote of Rs. 17,147.54/- per unit whereas the other parties viz. FTRTIL and SIL quoted basic prices of Rs. 14,532.52/- and Rs. 14,674.28/- respectively to reach a total unit price of Rs. 17,147.54/- which is identical to the all-inclusive quote of Rs. 17,147.54/- made by EL. It may be observed that though FTRT....
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.... participate in the bid process to actually compete with the successful bidder but submit 'complementary' or 'cover' or 'courtesy' bids only so that the procurement process does not get stalled due to lack of enough competition. Complementary bidding is done when some competitors agree to submit bids that are either too high to be accepted or contain special terms that will not be acceptable to the buyer. Such bids are not intended to secure the acceptance of a procurer, but are merely designed to give the appearance of genuine competitive bidding. Complementary bids tend to defraud procuring entities by creating a camouflage of genuine competition to conceal the inflated bid prices. The present is such text-book case, as shall be shown presently, where EL and FTRTIL submitted complementary bids in response to the tender inquiry under consideration as they were not, as a matter of fact, competing with SIL in the procurement process. 38. Factually also, the submission is thoroughly misconceived. It is true that offers of EL, FTRTIL were 'passed over' due to non-submission of the cost of tender documents and non-acceptance of the warranty clau....
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....the quotes in its earlier bids and not on the prices in any purchase orders placed by any zonal office of Railways or DLMW. There is nothing on record to show that EL offered bids based on any ascertainable calculations. Thus, no fault can be found with the findings of the DG that EL offered the unit price Rs. 17,147.54/- just to match the bids placed by other bidders. Hence, no sustenance can be drawn therefrom by EL on this count as well. In fact, EL tried to trivialize the entire issue of identical quotes by arguing in its reply that Indian Railways has the final say in deciding the outcome of the tenders irrespective of the rates quoted by the participants in the tender. This plea is devoid of any substance and the Commission is of the view that bid rigging is possible even if contracts are awarded at negotiated rates. Bid rigging can still take place if bidders collude and keep the bid amount at a predetermined level. Such pre-determination is by way of intentional manipulation by members of the bidding group. So even if the successful bid was subject to negotiation post tender, this cannot be said that there will be no impact on price, simply because if the successful tender ....
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....dit report/cost production data from the parties. From the information submitted, it was noticed by the DG that EL's cost of each feed valves was Rs. XXX/- whereas it has quoted the basic price of Rs. 14,500/- in the present tender. In the case of FTRTIL, it was found that it had a cost of each feed valve of Rs. XXX/- against which it quoted the basic price of Rs. 14,534.52/- for the tender in question. Similarly, SIL's cost of each feed valve was Rs. XXX/- but it quoted the basic rate of Rs. 14,674.28/-. In these circumstances, when all the opposite parties have their manufacturing unit located at different places i.e. Haryana, West Bengal and Tamil Nadu with different cost of production, it was not possible to supply the feed valves at identical unit price of Rs. 17,147.54/-. Further, no justification or explanation was provided by the parties in this regard. In such a scenario, the Commission agrees with the findings of the DG that such facts and figures clearly evidence meeting of minds and concerted action taken by the opposite parties. 45. Various conspiracy theories including 'corporate espionage' were also sought to be advanced by SIL to justify the....
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....t cost of production; filing of the bids on the same date containing minor technical defaults and failure on the part of the opposite parties to provide any plausible explanation for any of the above and the past conduct of the bidders, it is sufficient to establish that the opposite parties entered into an agreement to determine prices besides rigging the bid. 49. The Commission notes that in terms of the provisions contained in section 3(1) of the Act, no enterprise or association of enterprises or person or association of persons can enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Section 3(2) of the Act declares that any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. Further, by virtue of the presumption contained in Sub-section (3), any agreement entered into between enterprises or associations of enterprise or persons or association of persons or between any person and enterprise or practice carried on, or decision taken by, any a....
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....sions filed on 08.07.2013 to challenge the validity of the proceedings of the Commission by arguing that in view of the different compositions of the Commission during its ordinary meetings held on 18.06.2013 and 02.07.2013 when the arguments of SIL were heard, principle of natural justice 'he who decide must hear' got violated and the final order shall be in nullity. 55. The Commission observed that this plea is not sustainable. It may be noted that the Commission transacts its business in the meetings. As per the provisions contained in section 22 of the Act, the Commission has to transact its business through the meetings where all the questions coming up before the meetings are to be decided by a majority of members present and voting. The quorum for such meeting is three members. Reference may also be made to the provisions contained in clause (c) of section 15 of the Act which provides that "No act or proceeding of the Commission shall be invalid merely by reason of - any irregularity in the procedure of the Commission not affecting the merits of the case". No prejudice was caused or alleged in the present case or otherwise shown by the parties. It may be poi....
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.... have been found guilty for the bid rigging for the first time by the Commission, however, while investigating the present bid rigging case, the Commission had opportunity to look into the past conduct of the parties in giving bids and the Commission has already noted in para 47 above as to what was the conduct of the parties. A distinction needs to be maintained between the 'first time contraventions' and the 'first time established contraventions'. As noted by the DG also, past conduct of the opposite parties is far from edifying. Though such past conduct was not brought to the attention of the commission but that is hardly any solace for the opposite parties to take the plea of leniency on the count that it was never found in breach of any provision of the Act. In light of the above, the Commission is of the view that the argument of leniency for being the first offender is not available to the opposite parties in view of the past conduct as noted above. In fact, one of the opposite parties viz. FTRTIL even tried to brazen out the conduct by arguing that there is 'no occasion' for the Commission to levy any penalty upon it. 59. It may be observed....
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....over. SIL has also filed details of the turnover and profits for the relevant period for the whole business and the business related to feed valve separately. It has been mentioned illustratively that the turnover arising out of sales of the relevant product (Rs. 70.67 Lakhs during the period 27.04.2012 to 31.03.2013) constituted a small fraction of the total turnover (Rs. 9499.51 Lakhs during the same period). Similar plea has been taken by EL on the issue of quantum of penalty though no disaggregated figures were supplied. 62. Considering the totality of facts and circumstances of the present case including the size of the tender and the nature of contravention as also the revenues generated from the product under consideration, the Commission decides to impose a penalty on each of the contravening company at the rate of 2% of the average turnover of the company. The total amount of penalty on each company is given in the chart below:-" 11. Learned counsel for the appellants argued that the impugned order is liable to be set aside because the findings recorded by the DG and the Commission on the issues of formation of cartel and bid rigging/ collusive bidding is perve....
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.... reflect that they had formed cartel and the Commission was not at all justified in drawing an adverse inference against the appellants. Learned counsel for SIL made a pointed reference to reply dated 21.11.2012 filed by his client in response to the notice issued by the Joint DG to show that in each of the three previous tenders dated 18.01.2012, 14.12.2011 and 08.11.2011, his client quoted the same base price i.e. Rs. 14,674.28 as was done in the bid given in response to tender dated 14.03.2012. He also referred to paragraphs 7.14 and 7.21 of the DG's report to show that even though while analysing the bid given by SIL, the concerned officer had noted that the price quoted by SIL was based on additional Central Sales Tax @ 4% but in paragraphs 7.21 and 7.22, he rejected the arguments of identical nature of price between the previous and current bids by wrongly assuming that the Central Sales Tax was 5%. Learned counsel also referred to pages 478 to 482 of Volume-3 of the reply filed on behalf of SIL in response to the notice issued by the to show that the difference in the price at which the contract was awarded to his client in pursuance offender dated 14.03.2012 and the ear....
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.... formation of cartel by them and their involvement in bid-rigging, Section 3 was not attracted. In support of her submission, learned counsel referred to paragraphs 7.16 to 7.20 of the DG's report, page 92 of the statement of objections filed by EL, page 103 of the statement of objections made by FTRTIL and pages 75 to 80 of the statement of objections filed by SIL to show that the appellants had not been able to explain the identical price quoted in their bids. She also submitted that in an oligopolistic market like the present one, the possibility of the bid-rigging can be legitimately presumed and the Commission rightly held that the appellants are guilty of bid-rigging because the appellants could not justify offering of feed-valves at an identical price despite the fact that their production units are situated in different parts of the country. She also relied upon the principles evolved by the American and European Competition Courts/Authorities on the issue of cartelization and submitted that the three appellants had taken advantage of restricted approval granted by RDSO for the suppliers of feed valves and always given identical bids and grabbed the contracts, causing p....
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....mendations, Member (Mechanical), who was a part of the Tender Committee received letters from M/s. H.D.C. and Mukand that they could supply bogies at a reduced rate. Advisor (Finance), Member (Mechanical), Financial Commissioner and Minister for Railways recorded their independent views. They, by and large, agreed with the view of the Tender Committee that the three suppliers had formed a cartel. However, all of them, except the Minister for Railways, suggested that the recommendations of the Tender Committee may be accepted else the public interest would suffer. The Minister accepted the recommendations subject to reduction in the quantum of bogies for which contracts were to be awarded to three bidders. The Authorities also decided that the price should be reduced and a counter offer be given to the three bidders to supply bogies @ Rs. 65,000/- per bogie and to nine other manufacturers to supply bogies @ Rs. 76,000/- per bogie. M/s. H.D.C. and Mukand filed writ petitions in the Delhi High Court to challenge the counter offer. The High Court passed the interim order and directed the Railways to accept the allocation of bogies recommended by the Tender Committee and pay the pric....
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....f bogies the Tender Committee made recommendations on the basis of the existing practice. The Minister of Railways in his ultimate decision has made some variations taking into consideration the recommendations of the Financial Commissioner and other authorities. He has however not accepted these recommendations fully. In making these variations, the Minister accepting ultimately reduced the allotment of quota to the said three tenderers substantially by way of reprisal. In view of our finding that the formation of an opinion that cartel was formed had no firm factual foundation; such a reduction of quota by way of reprisal cannot be justified. We are, however, not inclined to accept the contention made on behalf of M/s. H.D.C., Mukand and Bhartiya that no departure from the recommendations of the Tender committee is permissible in the absence of any established policy which was also known by the tenderers. From the records it appears that in the past also there have been such variations. In our view, the Minister of Railways as the final authority, after considering various relevant factors, may be justified in taking a particular decision in the matter of allotment of quota but s....
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.... combination of firms for certain purposes especially to keep up prices and kill competition...." In Black's Law Dictionary, Fifth Edition the meaning of the word "cartel" is given thus: "cartel- A combination of producers of any product joined together to control its production, sale, and price, and to obtain a monopoly in any particular industry or commodity.... Also, an association by agreement of companies or sections of companies having common interests, designed to prevent extreme or unfair competition and allocate markets, and to promote the interchange of knowledge resulting from scientific and technical research, exchange of patent rights, and standardization of products." In American Jurisprudence 2d Vol. 54, page 677 it is mentioned thus: "A cartel is an association by agreement of companies or sections of companies having common interests, designed to prevent extreme or unfair competition and to allocate markets, and perhaps also to exchange scientific or technical knowledge or patent rights and to standardize products, with competition regulated but not eliminated by substituting competition in quality, ef....
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....ing agreement establishes the defendants' illegal purpose since the aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition'." It was also observed that: "The critical analysis in determining whether a particular activity constitutes a per se violation is whether the activity on its face seems to be such that it would always or almost always restrict competition and decrease output instead of being designed to increase economic efficiency and make the market more rather than less competitive." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corpn. [9 L Ed 2d 538] is a case where American manufacturers of consumer electronic products brought suit against a group of their Japanese competitors in the United States District Court alleging that these competitors had violated Sections 1 and 2 of the Sherman Act and other federal statutes. It was alleged that the Japanese companies had conspired since 1950 to drive domestic firms from the American market, by maintaining artificially high prices for these products in Japan while selling them at a loss in the United States. The ....
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....as not predatory and that the view taken by the authorities that such an offer of lower price was predatory one confirming the formation of a cartel, is also unwarranted. In Matsushita case [678 FR 2d 492] it was observed that predatory pricing conspiracies are by nature speculative and that the agreement to price below the competition level requires the conspirators to forgo profits that free competition would offer them. It was also held therein as under: "To survive a motion for a summary judgment, a plaintiff seeking damages for a violation of Section 1 of the Sherman Act must present evidence 'that tends to exclude the possibility' that the alleged conspirators acted independently. Thus, respondents here must show that the inference of a conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed respondents." Therefore mere offering of a lower price by itself, though appears to be predatory, cannot be a factor for inferring formation of a cartel unless an agreement amounting to conspiracy is also proved. (emphasis supplied) A mere offer of....
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....in last few years and the existing operators have prevented new entrants from entering the market. (d) The system of awarding contracts by the Railways is conducive to collusive bidding. (e) The product specifications approved by RDSO makes cartelisation very probable. (f) When the products or services sold or rendered are identical or very similar and there are few or no substitutes, it is easier for the bidders to reach an agreement on a common price structure and probability of the appellants reaching an agreement on a common price is very high. (g) Respondent No. 2, who complained of cartel formation, had placed order on FTRTIL to supply 34 more feed-valves @ Rs. 12,855.47 in addition to the purchase order dated 11.11.2011 and, at the same time, had entered into negotiation with SIL and ultimately placed order for 67 feed-valves @ Rs. 16499.99. This was indicative of faulty procurement system adopted by the Railways resulting in financial loss. (h) The three bidders had quoted identical price by manipulating the figures in as much as EL, Faridabad quoted base price of Rs. 17147.54. The other two bidders ....
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....e is reproduced below: 22. A careful scrutiny of the above statement shows that between January, 2009 and February, 2012, various Zonal Railways had issued 44 tenders. Of them exactly identical price was found only in one tender dated 15.12.2011 issued by West Central Railway, where the price quoted by the bidders was Rs. 16,833.16. Out of the remaining bids, similar price was quoted by SIL and FTRTIL in response to tenders dated 20.07.2009 issued by Southern Railway, 24.09.2010 issued by Southern Railway and 08.11.2011 issued by N F Railway. It is thus clear that only in two to three percent of the total tenders invited by various Zonal Railways, the price quoted by the appellants or two of them were identical. The variation in the quantum of price quoted by the appellants is also evident from the statement furnished by the learned counsel for Respondent No. 2. Therefore, it must be held that both the DG and the Commission committed grave error by relying upon the so-called past conduct of the appellants in quoting identical price as a plus-factor for arriving at a conclusion that they had formed a cartel. 23. The calculation made by the DG and the Commission on the price fo....
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....n of "relevant turn over". The argument that the appellants, United Phosphorous Ltd. and M/s. Excel Corp Limited, are the multi product companies was not seriously disputed by Shri Balaji Subramanian, learned counsel for the CCI. We have no reason not to accept that factor. As regards the arguments based on EU and OFT guidelines, we are of the opinion that those guidelines are undoubtedly relevant in arriving at the issue of deciding upon the turn over. However, those guidelines cannot be treated as be all and end all in the matter and would have to be considered in the light of the facts of each case. We, however, accept the contention that in the circumstances of this case the relevant turn over should be considered in case of the two appellants who are multi product companies. To that extent we generally agree with the sentiment expressed in the relied upon judgment of the South African Tribunal in the case of Southern Pipeline Contractors & Anr. v. The Competition Commission. We must, at this stage, take into consideration the argument by Shri Balaji Subramanian. The learned counsel who supported the penalty on the basis of the average turn over. The learned counsel invited our....
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....e was whether Section 38-C of the Bombay Sales Tax Act, 1959 (for short "the Bombay Act") and Section 26-B of the Kerala General Sales Tax Act, 1963 (for short "the Kerala Act") and similar provision contained in other State legislations by which first charge has been created on the property of the dealer or such other person, who is liable to pay sales tax etc., are inconsistent with the provisions contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short "the DRT Act") and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Securitisation Act") for enforcement of 'security interest' and whether by virtue of non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act, two Central legislations will have primacy over State legislations. The Supreme Court referred to some of the principles of interpretation of statutes and observed : "As a prelude to the consideration of question relating to conflict between Central and State legislations and priority, if any, given to the dues of banks, financial institutions an....
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....e and Investment Company Limited: [1987] 2 SCR 1, it was observed, "that interpretation is best which makes the textual interpretation match the contextual." Speaking for the Court, Chinappa Reddy, J. noted the importance of rule of contextual interpretation and held: Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase a....
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.... the reasons mentioned above, I hold that the penalty imposed by the Commission is based on erroneous interpretation of Section 27(b) and is liable to be set aside. 29. In the result, the appeals are allowed. The impugned order is set aside and the penalty imposed on the appellants by the Commission is quashed. The appellants shall now be entitled to refund of the 20% penalty, which they had deposited pursuant to the interim orders passed by the Tribunal. ============= Document 1 SN Particulars M/s. Escorts Ltd.; M/s. Faridabad a) Basic Price 17,147.54 b) Add Excise Duty Inclusive @ 12% c) Add Cess on ED Inclusive @3% on ED of 12% d) Sub Total 17,147.54 e) Add CST Inclusive @ 5.25% f) Total Unit price inRs. 17,147.54 Faiveley M/s. Stone India Transport India Limited Kolkata Ltd.; Hosur 14,534.52 @12% i.e. Rs. 1744.1424 @3% on ED i.e. Rs. 52.3243 16330.9867 @ 5% i.e. Rs. 816.5493 17,147.54 14,674.28 @ 12% i.e. Rs. 1760.9136 @3% on ED i.e. Rs. 52.8274@ 16,488.02 @4% i.e. Rs. 6589.52 17,147.54 Document 2 SN Particulars M/s. Escorts Ltd.....