TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 321
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....of the Commission. Brief facts of the case 2. The commission received a general complaint dated 07.08.2018 alleging bid-rigging in tenders invited by the Department of Agriculture, Government of Uttar Pradesh for soil sample testing. The complaint pertains to alleged bid-rigging in respect of two e-tenders namely, Tender 2018_AGRUP_210583_1 (Moradabad) dated 31.05.2018 ("Tender No. 1") and Tender 2018_AGRUP_212591_1 (Bareilly) dated 18.06.2018 ('Tender No. 2"), invited for the soil sample testing by the Department of Agriculture, Government of Uttar Pradesh. 3. It was stated in the complaint that the following parties participated in the aforesaid two tenders of soil testing in Uttar Pradesh: (i) Yash Solutions (ii) M/s Satish Kumar Agarwal (iii) M/s Siddhi Vinayak and Sons (iv) M/s Saraswati Sales Corporation (v) M/s Lab Traders (vi) Edward Food Research and Analysis Centre Limited (vii) Atharva Laboratories Pvt. Ltd. (viii) M/s Newgen Computers (ix) Austere System Pvt. Ltd. 4. It was alleged in the complaint that the following participating bidders acted in a concerted manner in respect of Tender No. 1 and Tender No.2 and resorted to bid-rigging in contraven....
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....sponsible for the conduct of the businesses of the parties at the time the alleged contravention was committed, as well as persons/officers with whose consent or connivance the alleged contravention was committed, in terms of the provisions of section 48 of the Act. The DG, pursuant to the directions of the Commission, investigated the matter, and after seeking due extensions of time, submitted the investigation Report dated 08.04.2021. 7. The relevant findings of the investigation report relating to the appellant's role are the following: (i) Investigation covered 9 tenders namely, tenders of (a) 2017 and 2018 for Moradabad division, (b) 2017 and 2018 for Bareilly division, (c) 2017 for Jhansi division, (d) 2018 for Sharanpur division, (e) 2017 and 2018 for Meerut division, and (f) 2018 for Aligarh division. (ii) As per the records submitted by the Department of Agriculture, Government of Uttar Pradesh, during the year 2017-18, the contract for soil testing work was awarded to Yash solutions on L-1 basis for Moradabad and Bareilly divisions, whereas the contract for Jhansi and Meerut divisions was awarded to Austere Systems. (iii) The investigation revealed that Yash Soluti....
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....çade of competition and rigged bids in the 2017 Meerut and Jhansi soil testing tenders, with the common objective of ensuring that Austere Systems wins the said tenders. (viii) The investigation found Yash Solutions, M/s Satish Kumar, M/s Siddhi Vinayak, M/s Saraswati Sales, Austere Systems, Delicacy Continental, Fimo Info Solutions and M/s Toyfort and Chaitanya Business Outsourcing to be in contravention of provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. (ix) The investigation also identified individual officials/officers of the Opposite Parties who are found to be responsible under Section 48 of the Act: (a) Mr. Naresh Kumar Sharma, Proprietor, M/s Saraswati Sales; (b) Mr. Satish Kumar Agarwal, Sole Proprietor, M/s Satish Kumar and de facto owner of M/s Siddhi Vinayak; (c) Mr. Praveen Kumar Agarwal, Managing Director, Yash Solutions; (d) Mr. Nitish Agarwal, Director, Chaitanya Business Outsourcing; (e) Mr. Ankur Kumar, Director, Delicacy Continental; (f) Mr. Jai Kumar Gupta, Director, Fimo Info Solutions; (g) Mr. Suresh Kumar Gupta, Proprietor, M/s Toyfort; and (h) Mr. Rahul Gajanan Teni, Director, Austere Systems 8. The co....
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....cipated in two tenders and did not participate in other tenders, it cannot be construed that M/s Toyfort was part of an alleged cartel, if any. It has been submitted that the DG is not able to demonstrate with any cogent evidence, either directly/ indirectly, any coordination between M/s Toyfort and other bidders in any other divisions in U. P. Merely because Austere Systems, M/s Toyfort and Fimo Info Solutions have family relations, that does not ipso facto disqualify them to carry their own respective businesses independently and place bid separately. The finding of investigation that the proprietor of M/s Toyfort has submitted bids on behalf of rival bidder Austere Systems for the tender of 2017 in Jhansi and the fact that EMD in respect of Austere Systems and M/s Toyfort in the tender of 2017 for Meerut was submitted by a Director of a rival bidder, Fimo Info Solutions from her husband's account is highly erroneous and misleading. It has been submitted that EMD with respect to M/s Toyfort was prepared by Shikhir Gupta (son of Mr. Jai Kumar Gupta, the brother in law of Mr. Suresh Kumar Gupta, proprietor of M/s Toyfort). Merely because of the fact that the EMD was prepared by....
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....ly shared, nor any bid being rigged through the practice, and accordingly provisions of Section 3 of the Act are not attracted. M/s Austere systems in their submissions stated that the DG has only tried to establish the case simply on account of the fact that Austere Systems, M/s Toyfort and Fimo Info Solutions are connected with each other through family relations. It has been submitted that the said three Opposite Parties are acting independently of each other for the last twenty years, and merely because they are related does not ipso facto disqualify them from carrying their businesses independently. 15. M/s Toyfort, in their objections/ suggestions, have made submissions, which are similar to those of Austere Systems as discussed in the paragraph above. It has averred that, in relation to the 2017 soil testing tenders for Meerut and Jhansi divisions, it remained unsuccessful in view of tough competition and limited resources in terms of both financial and technical expertise, and in its own business wisdom, decided to not further engage in other tenders, which might have been floated by different divisions of the Department of Agriculture, Government of Uttar Pradesh. It has ....
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....at Mr. Piyush Gupta, son of Mr. Suresh Kumar Gupta and Director of Austere Systems, had submitted the bids for M/s Toyfort. Mr. Suresh Kumar Gupta, on being questioned by the DG as to why Mr. Piyush Gupta submitted bids for M/s Toyfort when Mr. Suresh Kumar Gupta was the proprietor, he replied "I do not know". Further, Mr. Rahul Teni, on being questioned about the same, had no explanation in this regard. The Commission also took cognizance of the finding of the investigation, that the bid documents of Austere Systems in the soil testing tenders of 2017 for the Jhansi division were signed and submitted by Mr. Suresh Kumar Gupta. In his statement recorded before the DG, Mr. Suresh Kumar Gupta feigned ignorance as to how he submitted the bids of his rival bidder. In his statement, he stated that he had no relationship with Austere Systems. However, he accepted that he and his son, Mr. Piyush Gupta were shareholders in Austere Systems and had a combined shareholding of 30 percent in Austere Systems. Further, on being asked why and how the sole proprietor of M/s Toyfort submitted a bid on behalf of Austere Systems for the said soil testing tender, Mr. Rahul Teni did not have any answer.....
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....ovisions of Section 48 of the Act: "(i) . . (vii) Mr. Suresh Kumar Gupta, Proprietor (M/s Toyfort)" 26. The Commission noted that Mr. Suresh Kumar Gupta, Proprietor of M/s Toyfort, manages the entire business affairs of his firm and is responsible for all the decisions. It noted that Mr. Suresh Kumar Gupta had no experience of soil testing work and did not even fulfil the terms and conditions for eligibility in the tenders in question. Further, he could not give an explanation for the submission of bids by his firm in the 2017 soil testing tenders of Meerut and Jhansi divisions. The Commission also notes that Mr. Suresh Kumar Gupta could not submit any explanation as to why EMD in the 2017 soil testing tender of Meerut division in respect for his firm was submitted by Mr. Shikhir Gupta, son of Mr. Jai Kumar Gupta, Director, Fimo Info Solutions, from his own bank account, in the said tender. The Commission also notes that Mr. Suresh Kumar Gupta submitted false replies and attempted to hide his and his son's shareholding in Austere Systems, which was the beneficiary of both Jhansi and Meerut divisions soil testing tenders of 2017. Further, Mr. Suresh Kumar Gupta admitted....
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....pect of the winning bidders. Some of the Opposite Parties did not even have prior experience and were later blacklisted. 29. In view of these findings, the Commission held that Yash Solutions, M/s Satish Kumar Agarwal, M/s Siddhi Vinayak, M's Saraswati Sales Corporation, M/s Austere System Pvt. Ltd., Delicacy Continental Pvt. Ltd, Fimo Infosolutions Private Limited, M/s Toyfort and Chaitanya Business Outsourcing Pvt. Ltd. to have contravened the provisions of Section 3(1) of the Act read with Section 3(3)(c) and 3(3)(d) thereof, as detailed in this order. 30. Further, the Commission, in terms of Section 27 (a) of the Act, directed the Opposite Parties and their respective proprietors and directors who have been held liable in terms of the provisions of Section 48 of the Act to cease and desist from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act, as detailed earlier. 31. The Commission found the present case fit for imposition of penalty, under the provisions contained in Section 27(b) of the Act. Under the aforesaid section the Commission may impose su....
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....here is held or otherwise declared that relevant turnover should he limited to the turnover earned from the specific customer or tender. Such a plea would fratrate the underlying policy objective of deterring the cartelists besides providing them a fertile ground for regulatory arbitrage. For example, if owing to the understanding between the bidders. If some or few bidders have refrained from participating in the particular tender under investigation, the turnover of the said parties from the said tender would obviously be mil, resulting in nil penalty. To allow such parties to walk free without incoring any monetary penalty for their anti-competitive conduct simply because they did not have any turnover from the concerned tender, would not only smultify the Parliamentary intent in providing deterrence through penalties against such behaviour hut would also run contrary to the underlying spirit of the judgment of the Hon'ble Supreme Court of India in Excel Crop Care Judgment. Taking such a pedantic interpretation would provide a virtual free run to the infringing parties and an effective immunity against any antitrust action for their anti-competitive behaviour. This cannot be....
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..... Saharanpur Austere Systems 4. Meerut Austere Systems 5. Aligarh Yash Solutions 40. The Appellant submits that he had participated in only two tenders, namely Meerut, 2017 and Jhansi 2017, and is not a relevant entity in the remaining 7 tenders. The DG, in the course of its investigation narrowed on and primarily based its findings on the familial relations connecting the parties. The Commission, while adjudicating the same, divided the parties into two sets and the Appellant herein was put in set-2 along with Austere Systems, Fimo Info Solutions and Delicacy Continental and concluded that the parties were related concerned through family and business relationships and that the parties had, through concerted efforts, rigged the bids in 2017 for Meerut and Jhansi Division with a common objective to ensure that Austere Systems won the two tenders. 41. The appellant further submits that the Commission failed to appreciate that the investigation did not conclusively prave or indicate exactly how the Appellants participation contributed to hid rigging and further failed to appreciate that the bids of the Appellant were nothing but commercial misadventure. The appellant ....
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....at the Appellant and the other parties that find mention in Set-2 in the impugned order are parties that are related by familial and blood ties, however, mere presence of ties, whether they be familial or business, is ground for the Commission to find a plausible basis of concluding, in affirmative, the presence of bid rigging in the tenders. It is further submitted that the Commission's appreciation of the MoU dated 19.02.2018 was flawed, as the same was executed between the Appellant and Austere Systems only after the 2017 bids placed by the Appellant had been finalised and awarded. Furthermore, the MoU does not indicate in any manner whatsoever, any intention on part of the Appellant to be a part of any consortium or act in any manner which could be considered anti-competitive in contravention of the Act. It is highlighted that such MoUs are a common practice across industries with two entities tying up with each other to learn about and enter into new areas of business, as was the case here. Any contrary understanding of the MoU goes directly against the terms of the MoU and is accordingly, flawed. 45. It is submitted that barring the MoU dated 19.02.2018, no document has ....
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.... by the Director of Fimo d. Same registered address for Fimo (a rival bidder) and the Appellant 49. The counsel submitted that the Appellant is a proprietorship concern engaged in the business of sale of toys, stationery items etc. Mr. Suresh Kumar Gupta is the proprietor of the Appellant, and the Appellant has no experience of soil testing work, when the bids were submitted for Meerut and Jhansi divisions in the year 2017. Mr. Suresh Kumar Gupta also admitted before the DG that the Appellant has no experience of soil testing and did not fulfil the eligibility for the said tenders. 50. It was further submitted that Austere Systems had formed a consortium with the Appellant in which the Appellant had undertaken printing of soil health cards for Austere Systems in 2018. To this effect, a Memorandum of Understanding dated 19.02.2016 was also signed between them. Even the directors could not provide any explanation or justification as to why the sister concerns, with no soil testing work and without meeting the eligibility criteria stated in the tender documents, had submitted their bids. 51. The counsel highlighted the common shareholding between the Appellant and Austere System:....
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.... of the Act, a penalty of up to three times of its profits for each year of the continuance of such agreement or ten percent whichever is higher. 56. The counsel further submitted that in cases of cartelisation, if the relevant turnover is to be considered qua the unlawful monies generated from act of cartelisation, which in the present case would be zero, then the entire purpose of the Act would be defeated. 57. He further submitted that the section 3 violations are considered the most egregious violations under the Competition law regime. In so far as reliance on the decision of the Excel Crop Care Limited (supra) is concerned, it was nowhere held or otherwise declared that the relevant turnover should be limited to the turnover earned from the specified customer or tender. If such an interpretation is permitted, then it would frustrate the entire objective of the imposing penalty to deter cartelists, and this could not have been the intent of the Parliament or the Hon'ble Supreme Court. Analysis of evidence and findings : 58. We have considered the evidence on record and heard the counsels in detail. There are two key players in the above matter and their statement befo....
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....etorship concern, did you and your firm fulfil the aforesaid condition before submission of bids in the aforesaid tender? A. 11. No. my firm M/s Toyfort did not have any experience of soil testing work and hence, as per the terms and conditions of the Meerut soil testing tender issued in 2017 and my firm did not fulfil the aforesaid conditions. Q. 12. As per condition no 18 for the Meerut Division tender (Exhibit -2) and condition 14 of the Jhansi Division tender (Exhibit -3) of the terms and conditions for soil testing tenders of 2017, it was required that the bidder should have experience of working on high tech equipment ICP (Indictivity Cupeled Plasma Spectrometer). Did your firm had any experience of soil testing on ICP machine/ high tech soil testing machine? A. 12. No, my firm had no experience of working on high tech equipment ICP (Inductivity Cupeled Plasma Spectrometer) and hence, as per the terms and conditions of the Meerut and Jhansi soil testing tender issued in 2017 my firm did not fulfil the aforesaid conditions. Q 13. As Toyfort was a Proprietorship concern, did you or your firm had any experience of working on ICP machine/ high tech soil testing machine? ....
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....foresaid tenders issued in 2017? A. 23. I do not know Q.24. I am showing you list of shareholders as on 31.03.2018 in Austere System Private Limited, wherein your's and your son Piyush's shareholding in the firm is 30% and the remaining shareholding is with Rahul Teni and Shikhir Gupta. Who is Shikhir Gupta and Rahul Teni? A. 24 Yes, I have seen it. I am one of the shareholders and Director of M/s Austere Systems Pvt. Ltd. However, I do not know who is Mr. Shikhir Gupta or Mr. Rahul Teni I had only signed the documents as shown in the Exhibit. "Q.25 I am showing you a copy of the Demand Draft Nos 505279 (Exhibit -12) issued by ICICI Bank Gurgaon Suncity Branch Gurgaon, to M/s Toyfort, which was submitted in the soil testing tenders of 2017 in Meerut Division. A. 25. Yes, seen. Q 26 As per reply of ICICI Bank (Exhibit 13) the Demand Draft in respect of M/s Toyfort was made by Sh Shikhir Gupta, from his own account. Why was a Demand Draft for submission in a Government soil testing tender by Toyfort was got prepared by Shikhir Gupta who is associated with another firm M/s FIMO Infosolutions which was also your rival bidder in the Jhansi & Meerut tender, from his o....
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....of the capital. Q.6. Did you or your firm have any relation with any other firm or their Directors/Proprietors which had submitted bids in the 2017 & 2018 soil testing tenders of UP Government? A.6. I was aware about M/s Fimo Info and M/s Toyfort. I had some prior business relation related to data entry work with Fimo while Toyfort was a strategic investor in our company. Q.10. Did you or your company had any experience in soil testing work when you had bid in the soil testing tenders of UP Government during 2017? If Yes give details. A.10. No, my company was not having any soil testing work experience at the time of submitting bids for the above tenders. Q.11. The terms & Conditions of the soil testing landers issued by Meerut Division in the year 2017, Clause No 18 prescribed that the Bidder should have experience of soil testing of 12 parameters (Exhibit-3). Did your company had any experience of soil testing? A.11. No, my company did not have any soil testing experience Q12. The terms & Conditions of the soil testing tenders issued by Meerut (Clause 18) & Jhansi (Clause 14), Divisions in the year 2017 prescribed that the Bidder should have experience of working on....
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..... How and why did the Director of another Firm got prepared a Demand Draft for your company from her own account despite the fact that both were rival bidders in the said tenders? A. 16. I do not know. I knew Mrs. Esha Gupta who is wife of Shri Shikhir Gupta a Director in my company and she is my Professional friend and also a Director of M/s Fimo Info. I have no information how the demand draft submitted by my firm was got prepared by Mrs. Esha Gupta from her own bank account and I do not have any justification for the same Q. 25 I am showing you the schedule forming part of the balance sheet of M/s Toyfort (Exhibit 14). There is a transaction mentioned as "Advanced Paid to Suppliers" between your company and M/s Toyfort, which shows both the firms were well known to each other and had business relationship. A. 25 As explained earlier my company formed a consortium M/s Toyfort in which Toyfort has to do printing of soil health cards for my company and the above said payment was made for the card printing work. Further, my company prepared domain name and website hosting for M/s Toyfort for which our company received a payment of Rs. 3500 from M/s Toyfort. Q 26.1 am showing....
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.... below threshold. (iii)There is clear cut business and family relationship between M/s Toyfort, M/s Fimo Info Solutions Pvt. Ltd., and M/s Austere System Pvt. Ltd., which was the beneficiary of both Meerut and Jhansi tenders. This comes out very clearly from the fact that EMD for 2017 tenders of Meerut division for M/s Toyfort was submitted by Sh. Shikhir Gupta a director of M/s Fimo Info Solutions Pvt. Ltd. who was a rival bidder. Sh. Suresh Kumar Gupta also signed and submitted bids for rival firm M/s Austere System Pvt. Ltd. in the Jhansi tenders, although his firm M/s Toyfort was also participating in the same tender. The relationship also comes out clearly from the fact that M/s Fimo Info Solutions Pvt. Ltd. was registered at the address of Sh. Suresh Kumar Gupta, proprietor of M/s Toyfort. Sh. Suresh Kumar Gupta's son was a direction in M/s Austere System Pvt. Ltd. and father and son together held 30% of shares of M/s Austere System Pvt. Ltd. 62. Based on the above and evidence on record, we are of the view that M/s Toyfort along with other bidders namely M/s Austere System Pvt. Ltd. and M/s Fimo Info Solutions Pvt. Ltd., colluded to rig bids in the 2017 soil testing tende....
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....-bid system, that is, first techno-commercial and then the financial bid. On the basis of the bids, the rate running contracts are executed with successful bidders. The DG found that there was also a committee comprising of responsible officers for evaluation of technical and price bids. As per the practice, the lowest bidder is invited by the Committee for negotiations and after negotiations, the Committee submits the report giving its recommendations and the contracts are awarded and after that the payment for the purchased tablets is released by the regional offices concerned. 3.4. It was found that right from the year 2002, up to the year 2009, all the four parties used to quote identical rates, excepting for the year 2007. In 2002, Rs 245 was the rate quoted by these four parties and in the year 2005 it was Rs 310 (though the tender was scrapped in this year and the material was purchased from Central Warehousing Corporation @ Rs 290). In November 2005, though the tenders were invited, all the parties had abstained from quoting. In 2007, M/s UPL had quoted the price which was much below the price of other competitors. In 2008, all the parties abstained from quoting. while in....