TaxTMI 
TaxTMI 
2024 (7) TMI 321
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.... of the Act challenging the impugned order 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 bidde....
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....e DG would be at a liberty to investigate the same. The DG was also directed to investigate the role of the persons/officers who were in charge of and responsible 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 M....
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....39;s bank accounts. However, none of the Directors/Proprietors could submit any explanation for their conduct, which reaffirmed that, through collusion and concerted action, the said entities created a façade 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 Outso....
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....imited resources in terms of both financial and technical expertise. M/s Toyfort, in its own business wisdom, decided not to further engage/ bid in other tenders which might have been floated by the Department of Agriculture, Government of Uttar Pradesh. Merely because M/s Toyfort participated 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 acco....
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....nvestigation Report has, inter-alia, stated that the DG erred in observing that Austere Systems has contravened the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. It has been stated that neither were the prices were getting jointly fixed nor was the output jointly controlled, nor the market being consciously 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 div....
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....oncern had no experience of soil testing work and did not fulfil the eligibility for said tenders. 21. The Commission further noted that Mr. Suresh Kumar Gupta, proprietor of M/s Toyfort, admitted in his statement before the DG that he had submitted bids in the 2017 soil testing tenders for Meerut and Jhansi divisions on the suggestion of his employees. The Commission also noted that 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....
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....ission then proceeded to analyse the conduct of directors/ proprietors of the Opposite Parties, who were directly involved in the activities and affairs of such parties and had full knowledge and played an active role in the anti-competitive conduct and hence, are liable in terms of Section 48 of the Act. The DG in his investigation identified the following individuals liable in terms of the provisions 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 wa....
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....d manipulating the bids/bid rigging in respect of tenders floated by the Department of Agriculture, State of Uttar Pradesh. The Commission finds that certain Opposite Parties and their individuals had also resorted to the production and submission of fake invoices and grant of false certificates for making some of the Opposite Parties eligible for participating in the bid process so as to effectively act as cover bidders in respect 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....
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....egard, reiterated its decision dated 03.02.2022 in Suo Motu Case No. 2 of 2020 (In Re: Alleged anti-competitive conduct by various bidders in supplying and installation of signages at specified locations of State Bank of India across India): "115. In relation to the contention that turnover derived from the Impugned Tender alone should be considered, it is noted that a bare perusal of the Excel Crop Care judgement makes it clear that nowhere 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 no....
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....rected the Director General ('DG') to initiate an investigation and submit an investigation report which was submitted to the Commission on 08.04.2021. 39. The DG in its investigation focused on nine tenders as under : Year- 2017 1. Moradabad Yash Solutions on L-1 Basis 2. Bareilly Yash Solutions on L-1 Basis 3. Jhansi Austere Systems 4. Meerut Austere Systems Year- 2018 1. Moradabad Yash Solutions 2. Bareilly Yash Solutions 3. 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 re....
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....s required to give due regard to all factors contained in Section 19(3) of the Act, however, in the present case, none of the factors enumerated under Section 19 (3) of the Act are even remotely made out and the same is a major flaw that plagues the impugned judgement. 44. The appellant submitted that the Commission failed to appreciate that the investigation, while noting that the parties were related through familial and business ties, was unable to demonstrate a breach of Section 3 of the Act. It is an admitted fact that 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 inten....
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....ved by the Commission alleging bid- rigging in the tenders invited by the Department of Agriculture, Government of Uttar Pradesh ("Department of Agriculture") for soil sample testing. 48. The DG vide the Investigation Report dated 09.04.2021 ("DG Report") concluded that the Appellant contravened Sections 3(1) read with 3(3)(d) of the Competition Act, 2002 ("Act"), inter alia a. No experience in soil testing b. Common Shareholding between the Appellant and Austere Systems c. Earnest Money Deposit of the Appellant was submitted 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 A....
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....in question, therefore zero penalty would arise, to which, the Commission had rightly noted that there is no merit in this submission and no narrow interpretation of the relevant turnover can be taken, as contended by the Appellants. In support, the Commission had placed reliance on its decision dated 03.02.2020 in Suo Moto Case No. 2 of 2020". Further, Commission considered both aggravating and mitigating factors while imposing the penalty at 5% on the Appellants, as the penalty permissible under section 27(b) is a maximum of 10% of the turnover and further, for violations under section 3 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 ....
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....ent for general exercise etc., however no mention has been made regarding soil testing work. Why? A 10. As my firm did not have any soil testing work experience hence, no mention has been made regarding the said work. Q. 11. As per condition no 16 of the terms and conditions for the Meerut tender issued in 2017 (Exhibit 2) the Bidder should have experience of 12 parameters soil testing This experience should be from Government/ Semi Government or standard Agencies. Further, the company/firm's Proprietor/Director should also have experience of soil testing work of 15 years, for which experience certificate is to be enclosed with bid. As your firm Toyfort was a Proprietorship 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 th....
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.... Q. 21. I am showing you the bid submitted by Austere Systems Pvt Ltd in the Jhansi tenders of 2017 and the minutes of the tender committee dated 31.08.2017 (Exhibit-9 & 10), wherein the bid documents of the said firm have been signed & submitted by you and M/s Austere was represented in the tender committee meeting by you. Why did you submit bid of your rival firm in the Soil testing tender of the Government of Uttar Pradesh? A. 21. Yes, I had submitted the aforesaid bids but I do not remember why I signed the said bids. Q 22. What was your & your firm's relationship with Austere System Private Limited, when bids were submitted in the aforesaid tenders issued in 2017? A. 22 No relationship. Q. 23. What was Piyush Gupta's relationship with Austere System Private Limited, when bids were submitted in the aforesaid 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 a....
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....ter finance matter of the company Shri Shikhir Gupta, another Director looks after the business development work. Q.2. Details of the business your company M/s Austere System Pvt Ltd. is engaged in? A.2. Software Development, Onshore development, Staffing Augmentation. technology consulting, business consulting, data entry, soil analysis and automation. My company M/s Austere is not engaged in any other business other than the above mentioned business. Q.3 Has your company M/s Austere Systems Pvt Ltd, submitted bids in the tenders for Soil Testing floated by Govt. of UP? If yes, please provide details? A.3. Yes, our company M/s Austere bid for Meerut and Jhansi Divisions in 2017 and in Meerut, Saharanpur and Bareilly Divisions in year 2018 tender Shri Suresh Gupta was strategic investor in our company. In mid of 2017 my company had purchased a second hand soil testing machine from Mumbai based vendor in which Shri Suresh Gupta had invested majority 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....
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..... I am showing you the GST Registration receipt (Exhibit 5) generated from Maharashtra which was submitted in the Meerut tenders. As per details of GST registration of your company (Exhibit-6). the Principal place of business of your company is mentioned as the office of the Assistant Director (Soil Testing/Culture), Regional Soil testing laboratory, Meerut. How and why did you register your company at the address of the Regional Soil Testing Lab Meerut to the GST Department? A 15 There was no permission from any authority to use the address of the Assistant Director (Soil testing) for using their address in the GST registration. However, I do not remember whether the soil testing authorities has given me any No objection certificate (NOC) for using their address in the GST registration. Q. 16. As per reply of ICICI Bank (Exhibit-7), the Demand Draft Bearing No. 505282 in respect of your company M/s Austere Systems, which was submitted in the Meerut tenders of 2017 (Exhibit 8), was made by Ms Esha Gupta, a Director, M/s FIMO INFO Solutions Pvt. Ltd, from her own account. How and why did the Director of another Firm got prepared a Demand Draft for your company from....
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....lated concerns shows? A. 30. I have no justification. Q. 31. Why bids from all three related /sister concerns having no experience of soil testing work as mentioned in the terms of conditions, wherein bid & EMD were submitted for each other? A. 31.1 have no justification 61. We have seen from the aforesaid statement of Sh. Suresh Kumar Gupta on oath and Sh. Rahul Teni that Sh. Gupta gave false statement on oath and accepted to facts only confronted with documents. The statement of Sh. Rahul Teni fills the gaps perfectly in regarding the relationship between M/s Toyfort, M/s Fimo Info Solutions Pvt. Ltd. and M/s Austere System Pvt. Ltd. The following emerges from the statement of Sh. Gupta and Sh. Teni and the documents on record: (i) M/s Toyfort had no experience in soil testing and dealt in sale of Toys. The firm was not eligible to bid for soil testing tenders and still it participated in the tender. (ii) The bids submitted by M/s Toyfort in the aforesaid tenders were not submitted with intention to compete, but only to create a façade of competition, so that tender could fructify and not fail due to no. of bidders falling be....
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....a). The contention of the appellants being that the penalty is to be imposed based on the relevant turnover. The commission, however, disagreed with the contention of the appellant and stated that such a narrow interpretation of relevant turnover would allow the OPs who are involved in pernicious practice of bid rigging/collusive bidding to go scot-free. This was never the intention of Hon'ble SC nor of the legislature, while enacting the Competition Act. 66. In this context, we looked into the aforesaid Judgment of Excel Corp Care (supra) closely, regarding the facts of the case and whether the aforesaid ratio applies squarely to the present appeal. 67. In the Excel Crop Care matter (supra) the matter related to procurement by FCI for Aluminium Phosphide tablets (for short APT) of 3 gm each between the year 2007-2009. The relevant para of the judgement are extracted below : 3.2. There were only four manufacturers of APT, namely, M/s Excel Crop Care Ltd.. M/s UPL, M/s Sandhya Organics Chemicals (P) Ltd. (which are the three appellants herein) and Agrosynth Chemicals Ltd. 3.3. It was noted that FCI had adopted the process of tender, which is normally a global....