2024 (10) TMI 836 - AT - Companies Law

Contravention of Sections 3(3)(c) and 3(3)(d) r/w Section 3 (1) of the Competition Act, 2002 - guilty of bid rigging and cartelisation in a Tender process initiated by SBI Infra Managemnt Solutions Pvt. Ltd. (SBIIMS) - whether the penalty imposed on Appellant No.1 is proportionate to the offence and whether it meets the criteria laid down in Excel Crop Care Ltd. vs CCI 2017 (5) TMI 542 - SUPREME COURT ? HELD THAT - The CCI has made the reference to the Excel Crop Care Ltd. vs CCI in its order and mentions that the principle of proportionality as laid down by Hon ble SC was in the context of multi- product companies only. The CCI noted that in the present matter the OPs are engaged in the business of supply of printed advertising/ marketing material which includes signages. It is not possible to classify different types of signages in multiple products in terms of Hon ble SC s Judgmemnt in Excel Crop rather the signages constitute different varieties of the same product. The CCI also differentiated that the contention of the OPs that turn over derived from impugned tender alone should be considered is in the teeth of Excel Crop Care. In the present case the appellant is main business is that of signage and the other items of turn over relates to the same business activity. Such artificial distinction in segmental turn over cannot be accepted. It is also seen that CCI has taken a very lenient view while levying Monetary Penalties upon the OPs most of whom are MSMEs. The Section 27 of the Act provides for Penalty upto 10% of the average of the turnover or income, as the case may be, for the last 3 preceedings financial years, but the CCI taking a lenient view has only imposed penalty of 1% of the average and average of their relavant turnover for the 3 financial years i.e. 2015-16 to 2017-18. The CCI has passed a well considered order in the instant case which has been upheld in two separate appeals by this Tribunal. In one of the matter Hon ble Supreme Court has dismissed the appeal and in another matter no appeal was preferred so the order has attained finality. There are no merit in the present appeal and the same is hereby dismissed.

Summary

Issues Involved:

1. Allegations of bid-rigging and cartelization under Sections 3(3)(c) and 3(3)(d) of the Competition Act, 2002.
2. Proportionality of penalties imposed by the Competition Commission of India (CCI).
3. Consideration of relevant turnover versus total turnover for penalty calculation.
4. Application of the doctrine of proportionality as per the Supreme Court's judgment in Excel Crop Care Ltd. vs CCI.
5. Eligibility for a lesser penalty under the Competition Act, 2002.

Detailed Analysis:

1. Allegations of Bid-Rigging and Cartelization:

The case involves a tender issued by SBI Infra Management Solutions Pvt. Ltd. (SBIIMS) for the procurement and installation of signboards across SBI branches in India. The appellants, Amreesh Neon Pvt. Ltd. and its MD, were found guilty by the CCI of contravening Sections 3(3)(c) and 3(3)(d) of the Competition Act, 2002, through bid-rigging and cartelization. The CCI's investigation, initiated suo motu, revealed that the appellants and other vendors colluded to manipulate the tender process by fixing prices and allocating market territories, as evidenced by emails dated 02.06.2018 and 04.06.2018.

2. Proportionality of Penalties Imposed by CCI:

The CCI imposed penalties on the appellants, calculated as 1% of their total turnover for the last three financial years. The appellants contested the penalties, arguing they were disproportionate to their involvement in the alleged bid-rigging. They claimed that their role was minor, as they were only marked as "CC" in the incriminating emails and did not actively participate in discussions or meetings related to the bid-rigging.

3. Consideration of Relevant Turnover vs. Total Turnover:

The appellants argued that the CCI erred by considering their total turnover instead of the relevant turnover linked to the tender in question. They contended that the penalty should have been based on the average turnover of illuminated products, which was significantly lower than the total turnover considered by the CCI. They relied on the Supreme Court's judgment in Excel Crop Care Ltd. vs CCI, which emphasized penalties should be based on the relevant turnover associated with the contravention.

4. Application of the Doctrine of Proportionality:

The CCI, in its order, referenced the Supreme Court's judgment in Excel Crop Care Ltd. vs CCI, stating that the principle of proportionality was applicable to multi-product companies. In the present case, the CCI noted that the appellants were primarily engaged in the business of supplying printed advertising/marketing material, including signages, and different types of signages could not be considered as multiple products. The CCI concluded that the penalty should be based on the total turnover, as the appellants' business activities were not segmented like in Excel Crop Care.

5. Eligibility for Lesser Penalty:

The appellants sought a reduction in the penalty under Section 46 of the Competition Act, which allows for a lesser penalty if the party makes a full, true, and vital disclosure regarding the violations. However, the CCI and the Tribunal found that the appellants did not meet the qualifying criteria for a lesser penalty, as they failed to cooperate during the investigation and actively concealed their involvement in the anti-competitive practices.

Conclusion:

The Tribunal upheld the CCI's order, finding no merit in the appellants' arguments for reducing the penalty. The Tribunal emphasized that the penalties were already lenient, considering they were only 1% of the average turnover, and the CCI had taken a considerate view due to the appellants being MSMEs. The Tribunal dismissed the appeal, affirming the CCI's findings and the proportionality of the penalties imposed.