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TMI Blog2024 (6) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... mission noted that only three bidders, namely, Austere Systems, Yash Solutions and Delicacy Continental, had submitted bids in the 2018 Meerut and Saharanpur tenders. From the above, the Commission notes that there was an arrangement/ agreement between the said three entities to manipulate the process of bidding in the soil testing tenders of 2018. The Commission agreed with the findings of the DG that Austere Systems, under an arrangement/understanding with rival company Yash Solutions, had geographically allocated the soil testing tenders issued by the Department of Agriculture, Government of Uttar Pradesh, in 2017 and 2018 by not bidding in each other's allocated regions and by submitting supporting bids in favour of each other. If the Opposite Parties are found to have contravened the provisions of Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act, then who are the persons in charge thereof and responsible for the conduct of business of the respective enterprises under Section 48 of the Act? - HELD THAT:- 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGEMENT INDEVAR PANDEY , MEMBER ( TECHNICAL ) This appeal has been filed under Section 53 (b) of the Competition Act, 2002 (hereinafter called the Act) challenging the final order and judgment passed by the Competition Commission of India (hereinafter called the Commission) under Section 27 of the Act, wherein the Commission held that the appellant had contravened Sections 3(3)(c) and 3(3)(d) r/w Section 3 (1) of the Act. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submit the investigation report in the matter. The commission also observed that if the DG came across anti-competitive conduct of any other entity in addition to those mentioned in the information, the 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 commission considered the investigation report of the DG in its meeting on 08.06.2021 and noted the findings that Yash Solutions, M/s Satish Kumar, M/s Siddhi Vinayak, M/s Saraswati Sales and Austere System along with other entities namely, M/s Delicacy Continental, Fimo Infosolutions, M/s Toyfort and M/s Chaitanya Business Outsourcing indulge in cartelisation and bid rigging in the soil testing tenders floated by Government of U.P. 9. Thereafter, commission decided to add M/s Delicacy Continental, Fimo Info solutions, M/s Toyfort and M/s Chaitanya Business Outsourcing as parties to the proceedings and they were arrayed as Opposite Party (OP) Nos. 6, 7, 8 9 respectively. The commission thereafter forwarded a copy of investigation report i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the investigation report, the objections/suggestions thereto received from OPs and the submissions made by the OPs during the hearing on 16.12.2021 framed two issues, these are as follows: Issue 1: Whether the Opposite Parties have directly or indirectly rigged/ manipulated the tenders of soil testing issued by the Department of Agriculture, Government of Uttar Pradesh, in various regions for the year 2017 and 2018, by indulging in bid rigging, collusive bidding and sharing of market, resulting in contravention of provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. Issue 2: If the Opposite Parties are found to have contravened the provisions of Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act, then who are the persons in charge thereof and responsible for the conduct of business of the respective enterprises under Section 48 of the Act? Issue 1 12. For the analysis of the first issue the commission grouped the opposite parties in 3 sets are as under: For the sake of brevity, the analysis of the first issue in the present case is being carried out by grouping the Opposite Parties in sets, as under: a) Set 1: Yash Solutions, M/s Saraswati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree Directors, namely, Mr. Ankur Kumar, Ms. Rajesh Rani and Mr. Abhijeet Singh. The company was not engaged in soil testing work at any prior point in time. 17. Delicacy Continental, despite having no experience in soil testing work, had participated in the 2018 soil testing tenders for Meerut and Saharanpur divisions. However, it also could not win in any of those tenders. 18. The Commission also took notice of the fact that the investigation revealed that Delicacy Continental had submitted experience certificates of soil testing issued by Austere Systems and it had no experience of soil testing work. 19. The Commission noted that Mr. Ankur Kumar, Director of Delicacy Continental, had submitted that he was introduced to the soil testing work through Mr. Rahul Teni of Austere Systems and was offered sub-contract work of soil testing by Austere Systems, which had won the tender. Mr. Ankur Kumar submitted that although his entity did not have any soil testing machine, they were offered the contract due to good relations with Austere Systems. The relevant extracts of the statement of Mr. Ankur Kumar, Director, Delicacy Continental, recorded before the DG are as under: Q. 9. Who else ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sample for one type of sample while Rs. 120 to 130 for another type of sample. 21. The Commission further noted that no permission of the Department of Agriculture, Government of Uttar Pradesh, was taken before Austere Systems sub-contracted the work to Delicacy Continental. In his statement, Mr Rahul Teni admitted that, although Delicacy Continental had no experience of soil testing work, his company had sub-contracted the work, as the entire work was being executed under Austere System's supervision. The relevant extracts of Mr Rahul Teni's statement in this respect are as under: Q32. Why did your Firm sub-let this work to M/s Delicacy Continental, which is a separate entity altogether, as the original contract was allotted by Department of Agriculture, Govt. of UP to your Firm i.e. M/s Austere System Pvt. Ltd? A. 32. The tender was sub-let by my company to Delicacy as our company did not have financial resources to undertake the soil testing work for aforesaid three Divisions of U.P Government for soil testing. Q33. Did you take permission/NOC from Government before sub-letting as such subletting are not allowed in Government tenders? A. 33. No Q. 38. Why did your com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to make Delicacy Continental eligible in the Meerut and Saharanpur division tenders of 2018. 26. Mr. Ankur Kumar, in his statement recorded before the DG stated that the bid price in soil testing tenders of Meerut and Saharanpur in 2018 tender were decided in consultation with Austere Systems. In this regard, Mr. Rahul Teni submitted that he was not aware if any other directors or employees had discussed the bid price with Delicacy Continental. 27. In view of the above, the Commission took a view that Delicacy Continental colluded with Austere Systems to rig the soil testing tenders of 2018 for Saharanpur and Meerut divisions. 28. The Commission noted that only three bidders, namely, Austere Systems, Yash Solutions and Delicacy Continental, had submitted bids in the 2018 Meerut and Saharanpur tenders. From the above, the Commission notes that there was an arrangement/ agreement between the said three entities to manipulate the process of bidding in the soil testing tenders of 2018. 29. The Commission agreed with the findings of the DG that Austere Systems, under an arrangement/understanding with rival company Yash Solutions, had geographically allocated the soil testing tenders i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his company in discussion with Austere Systems, and the bidding process in the tenders were manipulated. The Commission noted the active role played by Mr. Ankur Kumar in perpetuating the anti-competitive conduct, which remained unrefuted on his part, and he is thus liable under Section 48 of the Act. 34. It noted that aforementioned individuals have not been able to rebut or deny before the Commission the respective roles played by them in cartelization, for which the DG has gathered cogent and clinching evidences, which are primarily based on their active conduct in perpetuating the anti-competitive conduct with a view to manipulate and vitiate the tender process as discussed in the foregoing paragraphs. None of these individuals have been able to credibly refute the evidence against them unearthed by the investigation nor been able to explain the conduct. From the statements of the individuals, it can be discerned that they have chosen to be evasive in submitting before the investigation. Mere perfunctory justifications have been proffered to escape their liability Neither the Opposite Parties nor their individuals have been able to rebut the presumption that stares them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreement. 39. The commission noted that the twin objectives behind the imposition of penalty are. (a) to reflect the seriousness of the infringement, and (b) to ensure that the threat of penalties will deter the infringing undertakings from indulging in similar conduct in the future. Therefore, the quantum of penalty imposed must correspond to the gravity of the offence, and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case. 40. On the issue of penalty, most of the Opposite Parties in their objections to the Investigation Report and subsequent submissions have averred, referring the decision of the Hon'ble Apex Court in the case of Excel Corp Limited vs Competition Commission of India and others [(2017) 8 SCC 47], that the turnover to be calculated under Section 27 of the Act has to be the relevant turnover, which relates to the product in question, in respect whereof, the provisions of the Act are found to be contravened. The Opposite Parties hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia in laying down the parameters and perimeter for Imposition of monetary penalty upon the contravening parties. Therefore, such contentions by the OPs need to be rejected. 42. The Commission noted that the instant case emanates out of conduct pertaining to public procurement in soil testing tenders and, as such, is a fit case to impose penalties upon the infringing parties. On a holistic appreciation of the facts and circumstances of the case and the mitigating factors put forth by the Opposite Parties, the Commission observed that the findings of the DG clearly indicate the active role played by each of the Opposite Parties in rigging the tenders. The Commission accordingly imposed the penalty upon the Opposite Parties @ 5 percent of the average of their turnover for the three financial years, i.e, 2017-20. 43. The Commission further deemed it appropriate and necessary to impose penalty on the individuals identified above for being liable under Section 48 of the Act at the rate of 5 percent of their average income of the financial years 2017-18, 2018-19 and 2019-20 filed with the Commission. However, since M/s Satish Kumar Agarwal, M/s Siddhi Vinayak, M/s Saraswati Sales and M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it clarifies that the project was to be executed under the supervision of Austere and their staff. The Molls were executed under ordinary business relation which is established from the fact that the Austere was gaining profit from the same. 52. Further Appellant has placed on record the Ledger from the period 01.04.2017 till 02.04.2018 of the Appellant, wherein substantial amount towards purchase of the soil testing machine has been made. 53. Also, Invoice dated 29.09.2017 by Agilent Technologies, Singapore were place of record by the Appellant which clearly shows the purchase of the machine for the said soil testing work. 54. It is submitted that the CCI while passing the impugned order has been able to give any cogent reasons to ignore the above-mentioned records evidence. 55. Another allegation is that Austere had sub contracted the work of soil testing in the year 2017 to the Appellant vide MoU dated 01.09.2017 and 04.10.2017 without permission for department of agriculture. 56. It is submitted that not seeking of permission to sub contract from the Department of Agriculture is a separate cause of action and cannot be reason to hold Appellant in contravention of competitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 ( DG Report ) before the CCI concluded that the Appellant had contravened the provisions of the Act, inter alia: a. The Appellant in collusion with Austere Systems, had rigged the bids by submitting cover-bids to ensure that Austere Systems emerges as Ll bidder in the soil testing tenders floated by the Department of Agriculture, in Meerut and Saharanpur divisions in 2018. The modus operandi of the Appellant was as follows: (i) No experience and understanding in soil testing-The Appellant is engaged in production and sale of rice. (ii) Submission of fake experience certificate The Appellant had submitted fake experience certificates which were issued by Austere Systems, to bypass the tender conditions. (iii) Discrepancies in the Memorandum of Understanding ( MOU ) submitted before 3 authorities viz. the DG, the CCI and this Hon'ble Tribunal The Appellant has submitted 3 different MOU executed between itself and Austere Systems having different dates and signatures. (iv) Employees of the Appellant and Austere Systems fixed price of the tenders - Employees of the Appellant and employees of Austere Systems had colluded to fix price of the Tenders. (v) Address of principal place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on prohibiting sub-contracting of soil testing works: (a) The Appellant's own admission stating that it had no knowledge about soil testing work and neither the Appellant had any experience of it and it was engaged as a sub-contractor in soil testing work in 2017 because of its relationship with Austere Systems. (b) The Appellant in collusion with Austere Systems, decided and submitted cover bids in the 2018 Tenders for Meerut and Saharanpur. Further, it was explicitly mentioned in the tender conditions that sub-contracting was prohibited and prior experience in soil testing work is a must for participating in tender process of 2017 and 2018 tender of Meerut and Saharanpur. 67. The Counsel for Commission stated that Fake experience certificate was submitted by the Appellant provided by Austere Systems i.e., rival bidder.The Appellant had submitted fake experience certificates to bypass the tender conditions and requirements, which were issued by Austere, and the CCI noted that the experience certificates were issued by Austere to the Appellant with a view to make the Appellant eligible in the Meerut and Saharanpur division tenders of 2018. 68. The counsel further stated that wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of your competitors/companies who are engage in soil testing activities. A 10 I am not aware about other competitor/companies engaged in so testing activities Q.13. What was the eligibility criterion for bidding in those tenders? A. 13. I am not aware. Although I had submitted my bids. Q.14 Who were the other bidders in the said tenders? A. 14 I am not aware Q.16. Did you or your Firm have any experience in soil testing work when you had bid in the Soil testing tenders of Saharanpur Meerut divisions of UP Government in the year 2018? A. 16. My company had experienced of printing and preparation of soil health card in Panipat and Karnal division of Haryana. As per my knowledge my company did not have any experience in soil testing work. Q 17. If not how did your firm become technically eligible A. 17. I am not aware Q. 18 Details of any other related firms or sister concerns who may be engaged in soil testing business A. 18. None Q. 19. Who decided your firm's financial bids for tenders floated by Department of Agriculture, Govt. of UP during 2017-18 2018-19 for Soil testing? A. 19. I am not aware Q. 20. Whether your firm had any soil testing Lab and where was it located? A.20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any experience in soil testing work. She was totally unaware about the experience certificates issued by Ms Austere Systems to Delicacy Continental. Regarding soil testing work she unaware as to how her firm received the soil testing work from Austere Systems although she admitted that her company had two soil testing machines which were used in Saharanpur. 73. Extracts from the statement of Shri Ankur Kumar, Director of M/s Delicacy Continental: Q6. Has your Firm ever bid in any tenders for Soil Testing floated by Govt of UP? If yes, please provide details 6. Yes, in year 2018-19 for Meerut and Saharanpur divisions Q. 8 What are the requirements for soil testing work? A. 8 I am not aware. Q9 Who else was associated with your firm for Soil Testing work? A. 9. In 2017 one of our employees Mr. Ashok Kumar introduced me to Sh Arun Bharat, who was a retired government servant of Haryana Government and had experience in soil testing work as he was looking after soil testing work in the Government department during his service Shri Ar n Bharat introduce me Mr. Rahul Teni of M/s Austere Solution Pvt. Ltd. I had a telephone discussion with Shri Rahul regarding soil testing work in Uttar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been mentioned in the copy of the MoU which has been submitted by you in the Investigation? A 22 I am not aware Q. 23. On the basis of above replies given by you it is clear that there was no MoU between your firm and Austere and the said documents have been created for submission to the investigation? A 23 Yes, I agree Q 24 Sh Ankur Kumar also submitted a copy of the mail dated 04.12.2020 sent by Shri Mandar Teni from e-mail id [email protected]? Whether Sh Mandar Teni is an employee of Austere System Pvt Ltd? (Exhibit-3) A 24. I am not aware. Q. 25. Why Shri Mandar Teni has sent mail dated 04.12.2020 in attaching delicacy zip file? A 25. I am not aware Q 34. Who decided your firm's financial bids for tenders floated by Department of Agriculture, Govt of UP during 2018-19 for Soil testing A 34 I am not aware Q. 35. You are director of the firm and you are unaware of the bid prices submitted during 2018-19, then who submitted the bids for your company? A. 35. My employees submitted the bid but the price was not decided by me Q. 36. Who decided the bid price? A. 38 None of my firm's Directors decided the price. And it was decided by my employees. Q 37 How can the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never visited the said lab and was not aware whether any MoU existed for the same. (c) His statement clearly shows that M/s Delicacy Continental was a partner only for namesake in the said sub contract for soil testing work, while the actual work was being managed and executed by M/s Austere Systems Pvt. Ltd. (d) At a later stage in proceedings before DG, Sh Ankur Kumar submitted two versions of a purported MoU with Austere for undertaking soil testing work as a sub contract in the year 2017-18 Sh Ankur confessed that both the copies of the MoU were created for submission to the investigation and one of the copies was in fact sent by Sh Mandar Teni of M/s Austere Systems Pvt Ltd, just before the recording of his statement. It only shows that M/s Austere Systems had complete control Over M/s Delicacy and its Directors, to the extent that they attempted to submit false evidence to the investigation. (e) Sh Ankur Kumar submitted that none of the Directors of his firm Delicacy Continental decided the bid price to be submitted in the 2018, soil testing tenders for Meerut and Saharanpur Divisions and it was decided by his employees in discussion with Austere Systems Pvt Ltd.. statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any had purchased a second-hand soil testing machine from Mumbai based vendor, in which Shri Suresh Gupta had invested majority of the capital. Q4 Who else was associated with your company for Soil Testing work? A 4 Sh Suresh Gupta Q.5 Name of your competitors who are/were engaged in soil testing activities A. 5. M/s Edward Food Research and Analysis Centre (EFRAC) which was leading company in soil testing business in 2017 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.32 Why did your Firm sub-let this work to M/s Delicacy Continental, which is a separate entity altogether, as the original con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Sh Ankur Rana Q 62 Sh. Ankur Rana in his statement on oath stated that the bid price in soil testing tenders was decided in consultation with Mis Austere A. 62 I have never discussed the bid price with Mis Delicacy however am not sure if any other Director/Employee of my company discussed the bid price with M/s Delicacy. Q. 70 Why your company submitted bids in Meerut and Saharanpur divisions soil testing tenders of 2018? A. 70 As we were having limited resources. Q.74. Whether your company M/s Austere Systems Pvt Ltd, has been blacklisted and your contract for soil testing cancelled by the Uttar Pradesh Government? A.74. Yes, Austere Systems was blacklisted Soil testing Contract was cancelled by UP Government Q.75. On what grounds your contract was cancelled by the UP Government? A 75 Because of Collusion Bid Rigging by the bidders. Q 76 Whether any recovery notice for the payments made to your company for soil testing was issued by UP Government? A. 76. Yes, our company received the recovery notice Q.77. Which other companies were also blacklisted by the UP Government in the matter of soll testing tenders? A.77 M/s Austere System and Yash Solution Q.78. Whether any action h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltd, had rigged the bids of said soil testing tenders in 2018. (g) Further, M/s Austere Systems Pvt Ltd under an arrangement/ understanding with rival company M/s Yash Solutions Pvt. Ltd, had geographically allocated the soil testing tenders issued by the UP Government in 2017 2018 and were either not bidding in each other's regions or submitting supporting bids for each other. 77. The above evidence clearly points to the following: (i) The MoU between the appellant and Austere System has been prepared subsequent to receipt of notice from DG by the Appellant, the said MoU was sent from an email in the name of Mandar Teni, who is the brother of Rahul Teni and is an IT expert in Austere Systems. Apart from discrepancies between the two versions submitted to DG and the commission, the Appeal file before us has a third version of the MoU. Ld. Counsel for the commission has brought out the discrepancies among the three versions, very clearly and succinctly, which clearly indicates that the aforesaid MoU has been created in a hurry after receipt of Notice by the Appellant from the DG and it has no connection with the work subcontracted to delicacy. (ii) It also comes out clearly tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tender. The tender concerned had two-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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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