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2026 (4) TMI 801
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....n 53B of the Competition Act, 2002 ("Competition Act") read with 151 of the Civil Procedure Code, 1908 ("CPC") against impugned order under Section 27 of the Competition Act dated 09.06.2022 (received on 15.06.2022) (hereinafter referred to as "Impugned Order 1'') read with order dated 22.06.2022 (received on 30.06.2022). Competition Commission of India is the main contesting Respondent (Respondent No.1) in both the appeals herein. M/s Hari Narayan Bihani is the Respondent No.2 in Competition Appeal No. 44 of 2022 herein. 2. The Appellants submitted that the initiation of proceedings under Section 48 of the Competition Act against the Appellants is inconsistent with the provisions of the Competition Act. The Appellants contended that, Section 48 of the Competition Act cannot be invoked for violations which do not provide for 'imprisonment'. The Appellants stated that it is only in cases where the person committing a contravention is a company and such contravention/breach is 'punishable' with imprisonment that the CCI is required to initiate Section 48 and identify the 'person' who, at the time of contravention, was responsible for the conduct of business of the co....
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....ny. The Appellants reiterated that the legislature has used the word 'penalty' under Section 27 and the words 'proceeded against and punished accordingly' under Section 48 of the Competition Act. The Appellant argued that, in the present case, for the alleged breach of Section 3(3) read with Section 3(1) of the Competition Act, the CCI has already passed an order under Section 27 and imposed penalty against Respondent No.2 (of which Keshav Bihani is a partner). 6. The Appellants clarified that it is not the CCI's case that M/s Hari Narayan Bihani has violated Section 27 of the Competition Act, necessitating invocation of Section 42 and therefore consequential invocation of Section 48 of the Competition Act. The Appellants submitted that the CCI's application of Section 48 is legally and factually flawed and based on incorrect/wrong interpretation of the provisions of the Competition Act and accordingly, the Impugned Orders are void ab initio and bad in law and are liable to be set aside. 7. The Appellants contended that the CCI's application of 'penalty on turnover' as prescribed under Section 27 of the Competition Act to 'income' of an individual is bad in law and impermissi....
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....lation of the provisions of the Competition Act before proceeding against the Keshav Bihani. The Appellants argued that the CCI's initiation of proceedings under Section 48 is also inconsistent with the intent of the statute and binding orders of the erstwhile COMPAT, which has unequivocally held in numerous cases that in the absence of a determination by the CCI that the company has committed contravention of any of the provisions of the Act or any rules, regulations etc., proceedings against officers or executives of such a company cannot be initiated. The Appellants stated that Section 48(1) as well as Section 48(2) of the Competition Act uses the term 'contravention' and not 'alleged contravention', which makes it clear that Section 48 can be invoked only after it is proved that a contravention has been committed by the company. The Appellant relied on the judgment of the COMPAT in Shib Shankar Nag Sarkar and another v. Competition Commission of India and others (Appeal No. 34 of 2014, decided on 10.05.2016), wherein it was observed that the deeming provisions contained in the two sub-sections of Section 48 of the Competition Act can be invoked only after it is found that the c....
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....e Competition Act in a discriminatory and arbitrary manner, rendering the Impugned Orders void and liable to be set aside. 15. The Appellants submitted that the final order under Section 27 as well as Section 48 of the Competition Act was passed in the absence of a judicial member, in direct violation of the judgement of the Hon'ble High Court of Delhi in Mahindra Electric Mobility Ltd. v. Competition Commission of India (2019 SCC Online Del 8032) and the Hon'ble Supreme Court's judgment in State of Gujarat v. Utility Users Welfare Association ((2018) 6 SCC 21). The Appellants contended that the Hon'ble High Court of Delhi held that the CCI shall ensure that at all times, during the final hearing, the judicial member is present and participates in the hearing. The Appellants argued that on this ground alone the Impugned Order 1 dated 09.06.2022 and consequently Impugned Order 2 dated 22.02.2022 are liable to be set aside. 16. The Appellants submitted that there has been denial of a fair hearing and violation of principles of natural justice by not disclosing the complete information emails to the Appellants as part of the DG Report and placing reliance on the said undisclosed....
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....s have been imposed without consideration of mitigating and aggravating factors; penalties have been imposed in an arbitrary and discriminatory manner and the penalty imposed on the Appellant is disproportionate and more than 50% of the relevant turnover of Hari Narayan Bihani. 20. Concluding the arguments, the Appellants requested this Appellate Tribunal to allow both appeals and set aside the Impugned Orders. 21. On the other hand, CCI denied the averments of the Appellants as misleading and baseless. 22. The CCI contended that after a detailed examination of the DG investigation reports, objections filed by the Opposite Parties, and all other material on record, the CCI concluded that the Appellants, along with six other Part 1 RDSO-approved vendors of polyacetal protective tubes for axle box guides to Integral Coach Factory and various zones of Indian Railways, formed a bid-rigging cartel in contravention of Section 3(3)(a), (b), (c) and (d) read with Section 3(1) of the Competition Act, 2002. 23. The CCI submitted that the cartel operated from 10.06.2015 to 29.06.2020. The M/s Hari Narayan Bihani, a partnership firm of two partners (Mr. Keshav Bihani and Mr. Om Nar....
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..... Market conditions involved a monopsony buyer (IOCL) that unilaterally determined prices and even negotiated with L-1 bidders, which negated the need for a cartel. In contrast, the present case features overwhelming direct evidence of emails shared by the leniency applicant, multiple tenders floated by different railway zones, and only seven RDSO Part 1 vendors. The CCI pleaded that the defence of the Appellants based on similar market conditions of oligopsony is unsustainable. The requirement to examine the buyer does not arise given the direct evidence available. 29. The CCI submitted that the emails relied upon are duly accompanied by certificates under Section 65B of the Indian Evidence Act, 1872, as recorded in Paragraphs 23 and 24 of the Impugned Order. The Appellant's contention that the emails lack proper certification is factually incorrect and liable to be rejected. 30. The CCI contended that the penalty imposed on Mr. Keshav Bihani (active partner of the M/s Hari Narayan Bihani) vide Impugned Order dated 22.06.2022 under Section 48 of the Act (pre-2023 amendment) is legally valid. It was imposed at the same rate of 5% of the average of the last three years' annual....
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.... disputes over share allocation (reduction from 16.67% to 14.30%) and indirectly admit prior cooperation with the cartel. The Appellant's failure to deny receipt of the emails, coupled with non-application for cross-examination of Ms. Shanta Sohoni (the central communicator), further establishes tacit acquiescence. 34. The CCI contended that mere receipt of cartel-related emails without protest or dissociation over an extended period amounts to participation through tacit acquiescence and a "meeting of minds". The CCI submitted that this principle finds support in the decision of this Appellate Tribunal in Sundram Brake Linings Ltd. & Ors. v. Chief Materials Manager, South Eastern Railways & CCI (Competition Appeal (AT) No. 19/2020, decided on 02.04.2024), which has attained finality. 35. The CCI submitted that the plea regarding absence of judicial members in the Commission does not render the proceedings or the Impugned Order a nullity. The Hon'ble Delhi High Court in Cadd Systems and Services Private Limited v. Competition Commission of India (W.P.(C) 6661/2019, held that while appointment of a judicial member is necessary, no direction restrained the CCI's functioning in ....
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....rther seen that the DG observed a modus operandi which was being followed by the Opposite Parties and concluded that the Appellants indulged in contravention of the provisions of Section 3(3)(a), 3(3)(b), 3(3)(c), and 3(3)(d) read with Section 3(1) of the Act. In terms of Section 48 of the Competition Act, the DG identified certain individuals of the Opposite Parties who had played an active role in contravention of the provisions of the Competition Act by the respective Opposite Parties and/or who were in-charge of and responsible for the conduct of the business of the respective Opposite Parties during the period of contravention, and accordingly, fixed liability. 39. We observe that the issue involves allegations of cartelisation relating to the product 'polyacetal protective tube' for axle box guide in Integral Coach Factory (ICF). It has been brought out that the Indian Railways, in order to ensure reliability, availability, and safe working of Railway assets, follows the practice of maintaining lists of approved vendors for certain specific items which included polyacetal protective tube. Research Designs and Standards Organisation (RDSO), the nodal agency of the Indian Ra....
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....g the prices to be quoted. It has been brought out by evidence in the DG's report that Ms. Shanta Sohoni kept a record of all the forthcoming tenders of Indian Railways updated online on the Indian Railways E-Procurement System (IREPS) and allocated tenders on the basis of allotment value (a decided percentage (%) distribution of tenders) to each member, which was maintained similar to an account statement. It was also brought out in DG's report that, allocation tables were also maintained which also mentioned earlier shortage/excess value and allocated value with net excess. Tenders were allocated in compliance with *the allocation done and allotment share. It has been submitted by the CCI that there were also instances where tenders were allocated to more than one supplier as agreed between alleged operators and in such cases, members mutually agreed to a price before filing the bids. Ms. Shanta Sohoni communicated the basic price, which the designated vendor should quote in the allocated tender. Thereafter, the vendors communicated the price based on their respective additional taxes and arrived at a mutually agreed price over e-mails for submitting the bids. Ms. Shanta Sohoni a....
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....ails to any of its competitors. Thus, it may be implied and observed that M/s Hari Narayan Bihani was a part of the cartel arrangement post July 2019, when it became a Part I vendor as a percentage share and multiple tenders were allocated to M/s Hari Narayan Bihani, and by even receiving such emails from its competitors, M/s Hari Narayan Bihani was privy to the information contained in these e-mails, which also at times related to prices to be quoted by the vendors in the tenders floated. 43. We put a pointed query to the Appellants regarding receipt of emails by the Appellants which was not denied by the Appellants. This prima facie establish that the Appellants was in full knowledge about cartel especially share allocation to Hari Narayan Bihani and never objected to any such communications. The arguments of the Appellants that it never acted on email is not convincing as very rarely cartel is established in direct admissions by the Opposite Parties. 44. We also find the active participation of the Opposite Parties in discussing the bids and controlling the supply and allocation of market for polyacetal protective tubes in various Railway tenders, establishes manipulation ....
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.... evidence to the contrary on record; however, it is noted that it is upon the contravening parties to rebut the presumption of AAEC by showing positive effects emanating from the cartel activity such as accrual of benefits to the consumers (in the instant case, the Indian Railways), improvement in production or distribution of goods or provision of services or promotion of technical, scientific, and economic development by means of production or distribution of goods or provision of services. We find this quite logical in given context of the present case. In this regard, the relevant part of the Hon'ble Supreme Court decision in Rajasthan Cylinders (supra) reads as under: "We may also state at this stage that Section 19 (3) of the Act mentions the factors which are to be examined by the CCI while determining whether an agreement has an appreciable adverse effect on competition under Section 3. However, this inquiry would be needed in those cases which are not covered by clauses (q) to (d) of sub-Section (3) of Section 3. Reason is simple. As already pointed out above, the agreements of nature mentioned in sub-Section (3) are presumed to have an appreciable effect and,....
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....At this stage, we reproduce the relevant portion of the Impugned Order concerning the Appellants which reads as under: (10) Mr. Keshav Bihani, Partner of M/s Hari Narayan Bihani 61. Mr. Keshav Bihani is the Partner of OP-7. As such, he was in-charge of and responsible for the conduct of business of OP-7, which responsibility has not been denied by Mr. Bihani in his suggestions/objections to the DG Report. Further, the DG has noted that e-mails, as detailed above, sent to OP-7, were to the e-mail ID of Mr. Keshav Bihani. The DG has also noted that Mr. Bihani decided the final price to be quoted by OP-7 in the protective tube tenders. 62. Hence, in view of the above, the Commission finds Mr. Keshav Bihani liable in terms of Sections 48(1) and 48(2) of the Act, for the cartel conduct of OP-7. 63. It has been argued on behalf of OP-7 that no finding against Mr. Bihani can be given in terms of Section 48 of the Act before a finding of contravention against the firm OP-7 has been given. In this regard, it is noted that, in the paras above, OP-7 has already been found guilty of contravention of the provisions of the Act. Hence, only after determination ....
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....ssion decides to impose penalty @5% average of their incomes, for the last three preceding financial years, whi calculated as under: Mr. Keshav Bihani of OP-7 (In Rs.) FINANCIAL YEAR INCOME 2017-18 1,60,04,421 2018-19 1,62,76,749 2019-20 1,63,72,630 Total 4,86,53,800 Average 1,62,17,933 Penalty 8,10,897 ........ 76. In view of the above, the Commission passes the following: ORDER 7. M/s Hari Narayan Bihani 11,50,054 Rupees Eight Lacs Ten Thousand Eight Hundred and Ninety Seven Only 9. Mr. Keshav Bihani, Partner of M/s Hari Narayan Bihani 8,10,897 Rupees Eight Lacs Ten Thousand Eight Hundred and Ninety Seven Only 50. We take note that the CCI vide its order dated 09.06.2022, in Suo Motu Case No. 06 of 2020( "Impugned Order 17) after examination of the DG investigation report(s) objections filed by the Opposite Parties and other material available on record arrived at a finding that the appellants along with 6 other Part 1 RDSO approved vendors /suppliers of 'polyacetal protective tube' for axle box guide to the various zones and ICF of the Indian Railways, were guilty of forming a bid riggin....
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....fense of merely relying upon only somewhat similar "market conditions" of oligopsony (not monopsony, since each Zonal Railway had its own benchmark of last purchase rates is not sustainable in the light direct evidence of communication between the parties shared by the leniency applicant (Opposite Party 4 i.e. Jai Polypan Private Limited) in this case and the defense of not examination of the buyer,( like IOCL in the Rajasthan Cylinder case ) is also not available since unlike over 80 parties in the Rajasthan Cylinder Case (supra) submitting bids in response to a single tender floated by IOCL, there were multiple tenders floated by different railway zones in this case and the number RDSO Part 1 vendors, the Opposite Parties, was also only seven. In the present case, given the existence of evidence in the form of e-mails demonstrating coordination among cartel participants, the requirement of examining the procurer, as sought to be implied by the Appellants, do not seems to be convincing. 55. It is significant to note that e-mails relied upon by the CCI are accompanied by certificates under Section 65B of the Indian Evidence Act as recorded in Paragraphs 23 and 24 of Impugned Ord....
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.... this aspect of in its judgement. 57. We observe that there exists direct as well as circumstantial evidence implicating the Appellants in the cartel as the Appellants remained actively involved in the cartel during the period from July 2019 to June 2020.°, the evidence relied upon by the CCI includes, inter alia, the leniency application filed by Jai Poly Pan Pvt. Ltd. (OP No.4 during the CCI proceedings) admitting its involvement with other 6 members, including the Appellants in the cartel, and contemporaneous eight incriminating emails exchanged between the Appellant and other cartel members. 58. Now we will examine the defence of the Appellants about not furnishing all e-mails to the Appellants. In this connection we note that ten emails were exchanged between the Appellants and other cartel participants on 25.07.2019, 20.09.2019, 07.10.209, 11.11.2019, 12.11.2019, 15.11.2019, 03.02.2020, 10.02.2020, 08.06.2020, and 29.06.2020. During the proceedings before this Appellate Tribunal, the contents of each of these emails were placed on record indicating evidence about the allocation of market shares and distribution of tenders amongst the Appellant and other cartel membe....
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....icial member in the CCI. In this connection, we have taken response of the CCI into consideration that the Hon'ble High Court of Delhi in Cadd Systems and Services Private Limited vs Competition Commission of India, W.P.(C) 6661/2019, decided on 17.07.2019, while deciding the contention whether the Orders passed by the CCI in the absence of the judicial member were in contravention of the law laid down by the Division bench of this Hon'ble Court in Mahindra & Mahindra Ltd. & Ors v. Competition Commission of India & Anr.: W.P.(C) 11467 of 2018. The Hon'ble High Court held in Cadd Systems (supra) that although the appointment of a judicial member was held to be "necessary", there was no direction restraining the functioning of the CCI in its absence, and, therefore, the adjudicatory function of CCI could continue. It further relied on Section 15 of the Competition Act to hold that any vacancy or defect in the constitution of the CCI does not invalidate its proceedings. Consequently, orders passed by the CCI during the period of such vacancy cannot be set aside on this ground alone. Moreover, the judgment of the Delhi High Court in Mahindra & Mahindra (supra) has been challenged by th....