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TMI Blog2016 (3) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... e mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it. The term 'turnover' used in Section 27(b) and its proviso will necessarily relate to the goods, products or services qua which finding of violation of Section 3 and/or Section 4 is recorded and while imposing penalty, the Commission cannot take average of the turnover of the last three preceding financial years in respect of other products, goods or services of an enterprise or associations of enterprises or a person or associations of persons. The definition of the term 'turnover' which includes value of sale of goods or services will necessarily mean the value of goods or services which are made subject-matter of investigation under Section 26 and order of punishment under Section 27. If the accusation/allegation relates to abuse of dominant position, then the Commission is required to take into consideration the factors enumerated in Section 19(4), (5), (6) and (7). Whether while deciding the issue relating to imposition of penalty under Section 27(b) or its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guilty of formation a cartel/collusive bidding must be punished so that others may learn a lesson from this. This approach is wholly inconsistent with the objective sought to be achieved by the Act, which is not only aimed at preventing practices having adverse effect on competition, but also to promote and sustain competition in market and to protect the interest of consumers. The Commission could not have over looked the fact that the appellants had reduced their rates after negotiations with IOCL and there was no evidence that they had made unwarranted profits by supplying cylinders at the particular rates. The matter is again remitted to the Commission for deciding the issue relating to imposition of penalty under Section 27(b). - Appeal Nos. 47 and 57 of 2015 - - - Dated:- 1-3-2016 - G.S. Singhvi, J. (Chairman) and Rajeev Kher, Member For the Appellant: Kedarnath Tripathy, Advocate For the Respondent: Prashanto Chander Sen, Advocate ORDER G.S. Singhvi, J. (Chairman) 1. The questions which arise for consideration in these appeals filed against order dated 06.08.2014 passed by the Competition Commission of India (for short, the 'Commission' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 26(1) of the Act, the Commission directed the Director General (for short, the 'DG') to conduct investigation into the allegations made by M/s. Pankaj Cylinders Ltd. After conducting investigation, the DG submitted report with the finding that Clause 6 of Annexure-2 appended to the tender notice issued by IOCL was unfair and discriminatory and IOCL had acted in contravention of the provisions of Section 14(4)(2)(a)(i) and 14(2)(c). The DG also opined that the bidders appear to have formed a cartel for fixing the price of the LPG cylinders. (v) The Commission considered the report of the DG and directed that copies thereof be supplied to the parties. On behalf of IOCL, detailed objections were filed to contest the findings recorded by the DG. Thereafter, the Commission gave opportunity of hearing to the parties and passed order dated 22.06.2011, whereby it held that IOCL is not guilty of abuse of dominant position. (vi) In the meanwhile, the Commission took suo-moto cognizance of the observations made by the DG that the bidders appear to have formed a cartel for fixing the price of the cylinders and suo-moto ordered registration of Case No. 3 of 2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by these two parties, the perusal of record reveals that JMB Industry Limited is not a member of the cylinder Manufacturers Association and it(s) presence at the meeting held on 01-02 March, 2010 is also not recorded. The averment made by the company that it did not participate in the last year tender floated by IOCL is substantiated from the record submitted by IOCL for the year 2009-10. Similarly Punjab Gas Cylinder Limited also did not participate in the last year tender and its present at the meeting in Mumbai is not verified. In case of JBM the cylinder business forms very small part of a business and both were either not participating or were not awarded supply orders in last 3 years. Therefore, their cases stand on afferent footing and the plus factors which are available in case of other bidders are not available in toto in the case of these 2 companies. Hence, the fact of their being part of a cartel and colluding with other bidders does not seem to having been conclusively established by the evidence available on record. Based on above, the Commission feels that the additional circumstances obtaining in case of these two companies do not warrant an interference that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om this list that in the case of Konark Cylinders Containers Pvt. Ltd., Tee Kay Metals Pvt. Ltd., Sahuwala Cylinders, M/s. Universal Cylinders, Mahaveer Cylinders Ltd., Omid Engineers Pvt. Ltd., Bhiwadi Cylinders Pvt. Ltd., Shri Ram Cylinders, International Cylinders, Tirupati LPG Industries Ltd., Surya Shakti Vessels Pvt. Ltd., Faridabad Metal Udyog Pvt. Ltd., S.M. Cylinders Pvt. Ltd., M.M. Cylinders Pvt. Ltd., GDR Cylinders Pvt. Ltd., Kurnool Cylinders Pvt. Ltd., Triputi Cylinders Ltd., SKN Industries Ltd., M/s. Supreme Technofab P. Ltd., Balaji Pressure Vessels Ltd. are the companies where only last two years' of average turnover was considered. 54. However, in the following cases, three years' turnover was taken into consideration for fixing the penalties. They were the ECP Industries Ltd., Sunrays Engineers Pvt. Ltd., Jesmajo Industrial Fabrications Karnataka Ltd., Him Cylinders Ltd., Krishna Cylinders, Rajasthan Cylinders, Haldia Precision Engineering Pvt. Ltd., Carbac Holdings Ltd., Andhra Cylinders, Confidence Petroleum India Ltd., Sarthak Industries Ltd., R.M. Cylinders Pvt. Ltd., Sanghvi Cylinders Pvt. Ltd., North India Wires Ltd., BTP Structural (I) Ltd., Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on some observations made in Southern Pipeline Contractors Anr. v. The Competition Commission. We had also referred to the guidelines by the European Union (EU) and Office of the Fair Trade (OFT). We had quoted the five EU guidelines, where it was provided that is appropriate for the Commission to refer to the value of the sales of goods or services to which the infringement related. We had also referred to the OFT guidelines to the same effect and we had commented upon the factor of a relevant turnover. Ultimately, we had held that where a particular concern is a multi-commodity company, the relevant turnover should be considered and not the total turnover. 58. We find that in this case, no such effort has been made by the CCI. This may be due to the reason that the question of penalty was not addressed by the learned counsel. Long and protracted arguments were made before us on the question of penalty. It was suggested that number of companies were smaller companies and would be wiped out, if the hefty penalty is inflicted against them. Some other counsel argued that they were the multi-commodities companies and manufacturer of the cylinders was merely one of the activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y protected. We direct the Competition Commission of India to decide the penalty within a period of three months from today. In the event, any penalty is fixed by the Competition Commission of India; the same shall be subject to the result of the present appeals. Similar appeals filed by other manufacturers have also been admitted and are pending before the Supreme Court. 4. In the meanwhile, application dated 30.01.2014 was filed on behalf of M/s. ECP Industries Ltd. for extension of the time for hearing. However, without passing any orders on that application, the Commission fixed the date of hearing as 12.03.2014 and the Secretariat of the Commission informed the counsel for the parties including those of the appellants that they may appear on 12.03.2014 for hearing. 5. In compliance of the directive issued by the Commission, learned counsel for the appellants and other manufacturers of LPG cylinders appeared on the appointed date and argued that there was no justification, legal or otherwise, for imposing penalty @ 7% of the average of the turnover of three preceding financial years. They further argued that many of the bidders were engaged in manufacture of multip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexed herewith and marked as ANNEXURE A1. (iv) The penalty if levied on the Company, it will lead to closure of this industry leading to a reduction of profit as the profits margins are only 3-4% of the total cost of a cylinder. (v) The Appellant is a Small/Medium enterprise and the Appellant has only got a tender of 2,00,000 cylinders i.e. about 1.9% of 105 lacs cylinders making it impossible for the Company to form a cartel or bid rig in the said tender. The Company submits that the company also did not receive any tender from IOCL in the F.Y. 2008-09, 2009-10. (vi) The Company was not present in the meeting at hotel Sahara, nor a member of the association and had no common agents and the Commission had reached to the conclusion of collusive bid based on the meeting held at Hotel Sahara on 01.03.2012/02.03.2012 attended by the alleged 19 manufacturers. Thus there was no evidence on which the Company could have been held guilty and penalized. (vii) In some instances the manufactures quoted identical rates. However, IOCL at its own whim an fancy chooses pick and drop option and did not give the tenders to all who have quoted the same rates, as can be seen from some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e available in case of ECP Industries Ltd., which have been overlooked by the CCI and the COMPAT, as under a) ECP Industries Ltd. was not the member of LPG Cylinder Manufacturers Association. b) ECP Industries Ltd. has not attended the alleged meeting at Mumbai on 01.03.2010 and 02.03.2010. c) ECP Industries Ltd. has never used the common agent for submission of alleged tenders. Mr. Shridhar was the sole agent of ECP Industries Ltd., who directly submitted the tender in IOCL Mumbai Office. d) ECP Industries belongs to the category of Small Scale Industry (SSI Unit). A copy of the SSI UNIT certificate issued by appropriate authority is enclosed here with as Annexure-2. e) During the past 3 years ECP has made meager net profit to the extent of 1-2% of net sales only. Copies of the (Balance sheets for the years 2009-10 to 2012-13) are enclosed herewith as Annexure-3 to form an opinion on reconsideration of penalty. This is very low for any industry norms and financial institutions expectations, as the financial institutions expect a minimum net profit of 5-6% post tax on sales. f) ECP's term loan had to be rephased by the financial institution twice in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Ref. Case filed by Shri B.P. Khare, Principal Chief Engineer, South Eastern Railway, Kolkata v. M/s. Orissa Concrete and Allied Industries Ltd. Ors.) found 29 opposite parties indulging in the act of cartelization including bid rigging under Section 3(3)(d) of the Act. But CCI did not impose the penalty by observing that: 44. As regards penalty under section 27 of the Act, the Commission notice that there are circumstances in this case which require the issue of penalty to be looked into somewhat differently. The facts as projected in the present reference reveal a complete lack of awareness by the opposite parties, which are small and micro enterprises. The replies of many of these parties are effectively incriminating in nature. Further, none of these parties quoted for more than 50% quantity which was a requirement under the tender. Thus, right in the beginning the offers made by these parties were not in accordance with the requirement of the tender and hence they could not have got supplies as per the tender conditions. Moreover, the bid given by these parties was not the lowest and so they could not have been awarded the contract. 45. In view of the above facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty @ 7% of the average of the turnover of the last three preceding financial years. Some of them pointed out that they are multi-product manufacturing enterprises and the turnover of the products other than 14.2 Kg. LPG cylinders cannot be taken into consideration for passing an order under Section 27(b) of the Act. They also highlighted various mitigating factors to persuade the Commission to take a lenient view. Some of the manufacturers also pleaded that they should be treated at par with JBM Industries Ltd. and Punjab Cylinders Ltd. because their financial health was extremely poor and they had not participated in the meetings held at Mumbai. 9. The Commission did notice the plea raised by the cylinder manufacturers (paragraphs 21 to 114 of the impugned order), but rejected the same. The Commission also distinguished the orders passed by it in the case of M/s. Orissa Concrete and Allied Industries Ltd. as also the order of the Tribunal in Appeal No. 79 of 2012 and connected matters. This is reflected in paragraphs 122 to 137 of the impugned order, which are reproduced below: 122. Various pleas were pressed in mitigation. Few of them may be catalogued as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of another plausible explanation, constitute evidence of the existence of an agreement. 124. Resultantly, a contravention may be found based on indirect evidence and no contravening party can be permitted to raise such plea in mitigation. 125. A lot was made of the fact that input costs are regulated and final prices are determined consequent upon negotiations. The Commission is of opinion that this plea is devoid of any force in as much as regulated environment can hardly be pleaded by the firms to seek mitigation as it gives them no license to indulge in anti-competitive activities. 126. The nascent stage of competition jurisdiction was also taken as a plea to seek leniency. Besides, it was also pleaded that this being the first instance of contravention, a lenient view may be taken. 127. The Commission is of opinion that these pleas may have some merit and will be given due account while quantifying penalties by not imposing maximum penalties as prescribed under the law. 128. Another plea which was also vehemently taken before the Commission was that the firms are small scale industries and as such any penalty imposed upon them would ruin their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er plea which was advanced by some of the parties was based on the multi-product nature of the business and issue of relevant turnover. 134. In this connection, reliance was placed upon the decisions of the Hon'ble Tribunal in various matters. The following paragraph of the remand order was cited: 57. We also do not find any reason, why the CCI has chosen to inflict the penalty at 7%. We have considered question of necessity of reasons in MDD Medical Systems India Pvt. Ltd. v. Foundation for Common Cause Ors. (Appeal No. 93 of 2012).In the aforementioned decision of MDD's case, where the CCI fixed the penalty at 5% of the average turnover, relying on a reported decision in Hindustan Steel Ltd. v. State of Orissa reported in: AIR 1970 SC 253 wherein it was observed if there is discretion, authority is bound to take into account aggravating or mitigating circumstances and exercise discretion laid down under the law, judicially , we had held that the Hon'ble Supreme Court has always insisted upon the reason and that in the absence of reason, the discretion tends to become arbitrary. We had also relied on the judgment of the Hon'ble Supreme Court in Kranti Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a mere ₹ 23.33 crores. He also asserts that insofar as the total amount of supplies of ALP to FCI in the year 2009-10 was concerned it was merely ₹ 8.49 crores which was merely 0.3% of the total turnover of the company. He wonders as to how the exorbitant penalty of ₹ 252.44 crores be imposed against the appellant in respect of the supply of ALP tablets to FCI for a total price of ₹ 8.49 crores in the year 2009-10. Shri Ravinder Narain also brought to our notice a decision of the Competition Appeal Court of South Africa in the case of Southern Pipeline Contractors anr. v. The Competition Commission and pointed out that Section 59 of the Competition Act of 1998 of South Africa provided for maximum penalty of 10% of the annual turnover in that. He relied on subsection (2) of the Act. He then invited our attention to paragraphs 51 to 53 of the judgment which dealt with the question as to what should be the relevant turnover to determine the appropriate amount of penalty to be imposed. It was held by that Tribunal that the appropriate amount of penalty had to be determined keeping into consideration the damage caused and the profits which accrue from the car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies 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. 136. The Commission has perused the said orders of the Hon'ble Tribunal. The parties while taking the plea of relevant turnover have sought to confine the same to the restricted turnover relatable to the revenue generated from the sale of 14.2 Kg cylinders to IOCL. The argument is totally misconceived. Nowhere in its orders, the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservation that the same shall be given due weight age while quantifying the penalty, it proceeded to impose penalty @ 7% of the average of the turnover of the last 3 preceding financial years completely overlooking the mitigating factors. 11. Shri Prashanto Chander Sen argued that the term 'turnover' has been rightly taken into consideration by the Commission as the total turnover of the bidders who were found guilty of having acted in violation of Section 3(3) read with Section 3(1) of the Act. He submitted that the definitions of the term 'turnover' contained in Section 2(y) is inclusive and this clearly shows that the legislature intended that widest possible ambit should be given to the term. He referred to the EU guidelines on methods of setting fines, namely, Regulation No. 1/2003 (2006/C210/020, order passed in Sigma Technologies v. Commission of European Communication, T-28/1999 whereby Article 15(2) of Regulation 17 was interpreted and it was held that the word 'turnover' means the total turnover. Learned counsel also pointed out that in numerous other jurisdictions, i.e., Switzerland, France, Serbia and Brazil, total turnover of the enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space. Explanation.--For the purposes of this clause,- (a) activity includes profession or occupation; (b) article includes a new article and service includes a new service; (c) unit or division , in relation to an enterprise, includes- (i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods; (ii) any bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which- (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Explanation.--For the purposes of this sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999); (d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999); (e) the Designs Act, 2000 (16 of 2000); (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000); (ii) the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export. Sec. 4. Abuse of dominant position. - (1) No enterprise or group shall abuse its dominant position. (2) There shall be an abuse of dominant position under sub-section (1),if an enterprise or a group,- (a) directly or indirectly, imposes unfair or discriminatory- (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. Explanation.--For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or services referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has been entered into by any cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten per cent of its turnover for each year of the continuance of such agreement, whichever is higher. *** (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; *** (g) pass such other order or issue such directions as it may deem fit: Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the statute and the mischief that it was intended to remedy. In Poppatlal Shah v. State of Madras 1953 CriLJ 1105, this Court while construing the word 'sale' appearing in the Madras General Sales Tax Act, 1939 before its amendment in 1947, observed: it is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statutes are to be taken together, and each word, phrase or sentence is to be considered in the light of the general purpose of the Act itself. In Reserve Bank of India v. Peerless General Finance 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 kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to monopolies and restrictive trade practices. 16. By virtue of Article 39(b) and (c), which find place in Chapter IV of the Constitution of India, it was made mandatory for the State to ensure that the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good and that the operation of the economic system does not result in concentration of wealth and means of production to common detriment . For achieving the aforesaid goal, the State enacted several legislations and took administrative steps. In 1960, the Planning Commission appointed Mahalanabis Committee on Distribution of Income and Levels of Living. In its report, the Committee expressed the view that concentration of economic power in the private sector is more than what could be justified as necessary on functional grounds and that this situation exists both in generalised and in specific forms. The Committee suggested that the Government should setup a machinery for collection, examination and analysis of all relevant statistics on the subject and formulate a policy, which will combine industrialization with social justice and economic development wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istic, restrictive and unfair trade practices became obsolete in several aspects in the new dispensation. The Government of India constituted a High Level Committee to examine various issues relating to competition. The Committee submitted its report on 22.05.2002. After considering the report and consulting the concerned segments of the society including the trade and industry associations, Central Government decided to enact a new law. Accordingly, a Bill was introduced in Parliament, with the following Statement of Objects and Reasons: 1. In the pursuit of globalization, India has responded to opening up its economy, removing controls and resorting to liberalization. The natural corollary of this is that the Indian market should be geared to face competition from within the country and outside. The Monopolies and Restrictive Trade Practices Act, 1969 has become obsolete in certain respects in the light of international economic developments relating more particularly to competition laws and there is a need to shift our focus from curbing monopolies to promoting competition. 2. The Central Government constituted a High Level Committee on Competition Policy and Law. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realized by the Commission and application fees charged will be credited into this Fund. The pay and allowances and the other expenses of the Commission will also be borne out of this Fund. The Bill provides for empowering the Comptroller and Auditor-General of India to audit the accounts of the Commission. The Central Government will be required to lay the annual accounts of the Commission, as audited by the Comptroller and Auditor-General and also the annual report of the Commission before both the Houses of Parliament. 8. The Bill aims at repealing the Monopolies and Restrictive Trade Practices Act, 1969 and the dissolution of the Monopolies and Restrictive Trade Practices Commission. The Bill provides that the cases pending before the Monopolies and Restrictive Trade Practices Commission will be transferred to the CCI except those relating to unfair trade practices which are proposed to be transferred to the relevant flora established under the Consumer Protection Act, 1986. 18. The preamble of the new Act reads thus: An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising. The term 'turnover' as defined in Section 2(y) includes value of sale of goods or services. 20. Section 3(1) contains a prohibition against anti-competitive agreements. Subsection (1) thereof declares that no enterprise or association of enterprises or person or association of persons shall 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. Sub-section (2) declares that any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. Subsection (3) contains a presumption that any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which, directly or indirectly, determines purchase or sale prices, limits or controls production, supply, markets, technical dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds to be investigated, then it can pass an order under Section 26(1) and direct the DG to conduct an investigation. Thereupon, the latter acquires jurisdiction to make investigation in respect the particular goods, product or service and find out whether there has been violation of Section 3 and/or Section 4. While making such investigation into the allegation of breach of Section 3 and/or Section 4 of the Act, the investigating officer is neither required nor It is legally permissible for him to investigate into those activities of the manufacturer, supplier or service provider qua which there is no allegation of such breach and finding on the issue of violation of Section 3 and/or Section 4 will have to be confined to the particular product or service or activity. 22. At the end of the investigation, the DG is required to submit report with the finding whether or not the accusation/allegation is factually correct and there is violation of Section 3 and/or Section 4. On receipt of the report of the investigation, the Commission is required to give an opportunity to the informant and also the enterprise(s)/person(s) investigated by the DG to file reply/objections and then pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies and the turnover of three preceding financial years except the product qua which a finding of violation of Section 3(3)(1) and 3(3)(b) had been recorded, could not have been taken into consideration for the purpose of imposing penalty. In support of that arguments, reliance was placed on an order passed by South African Tribunal in the case of Southern Pipeline Contractors Conrite Walls (Pty) and the Competition Commission (Case No. 105/CAC/Dec10) (106/CAC/Dec 10) - Page 27. Learned counsel appearing for the Commission did not dispute that the two of the appellants, namely, United Phosphorous Ltd. and M/s. Excel Corp Care Ltd. were multi-product companies, but argued that their total turnover was rightly taken into consideration by the Commission for the purpose of imposing penalty under Section 27(b). By an order dated 29.10.2013, the Tribunal upheld the findings recorded by the Commission on the issue of violation of Section 3(3)(b) and 3(3)(d) read with Section 3(1) of the Act but set aside the penalty. Paragraphs 60 to 62 of that order, which have bearing on these cases, are extracted below: 60. The arguments put forward by Shri Ravinder Narain, Shri Ramji Srinivas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the restricted turn over could not be taken into consideration. A restricted turnover is different from the relevant turn over. In that case the argument was that we must only consider the turn over generated in the supplies made only to the Government Hospitals. We had pointed out that the business of supply of the materials could not be any different from the supplies to the other Hospitals. It was on that basis that we had rejected the argument. We must repeat that we had not rejected the total concept of relevant turn over. We are accepting the argument regarding the relevant turn over in the peculiar circumstances of this case where the two appellant companies have clearly indicated that the other products of those companies have no connection and do not depend upon the product involved in this matter, that is ALP Tablets. We, therefore reject the argument of Shri Balaji Subramanian. [Emphasis supplied] 25. In L.H. Hiranandani Hospital v. Competition Commission of India and Another [Appeal No. 19 of 2014] decided on 18.12.2015, the Tribunal considered whether average of the total turnover of the appellant for the last three preceding financial years could be taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r service. An enterprise may be engaged in manufacture, production, supply, distribution, etc. of multiple products. Another enterprise like the appellant may be engaged in providing multi-dimensional services. Such enterprise may be found guilty either of entering into anti-competitive agreement with reference to particular product/goods or services or may be held guilty of abuse of dominant position in respect of such product/goods or services, but the finding of violation of Sections 3 and/or 4 of the Act recorded by the competent authority i.e. the Commission cannot be made applicable to agreements entered into between the enterprise and another person in respect of other products, goods or services qua there is no allegation of anti-competitive agreements or abuse of dominant position and the turnover of other products and services cannot be clubbed with the one qua which a finding of violation of the provisions of the Act is recorded. 39. At the cost of repetition, it deserves to be emphasised that the appellant has been providing multiple healthcare services, maternity service being one of them and stem cell banking which is being provided by a third party (Cryobanks), ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the High Courts and the Tribunal. In Dilip N. Shroff v. Joint CIT [2007] ITR 519, the Court considered the scope of Section 271(1)(c) of the Income Tax Act, 1960 and observed: The legal history of section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants had argued that their clients were multi-product enterprises. They also pointed out various mitigating factors but without giving due consideration to the argument of the learned counsel and giving due consideration to the mitigating factors, the Commission reiterated the penalty imposed vide order dated 24.02.2012. In our considered view, the Commission committed grave error by passing the impugned order without calling upon the appellants to furnish the statements of their turnover of LPG cylinders of 14.2 Kg. 31. Another error committed by the Commission is that even though it took cognisance of the mitigating factors highlighted by the appellants and others, it brushed aside the same simply because they were found guilty of forming a cartel and indulging in bid-rigging. The fact that many of the appellants were small scale units was also not given due weightage by the Commission while passing the impugned order. 32. The impression which we gather from the impugned order is that the Commission proceeded to decide the issue of penalty with a determination that the appellants who were found to be guilty of formation a cartel/collusive bidding must be punished s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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