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TMI Blog2024 (10) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific requirements for the signage and stated that the contract would be awarded based on competitive bids in an e-reverse auction process. (ii) Over 44 vendors submitted their applications in response to the EOI. These included prominent vendors in the signage industry such as Amreesh Neon Pvt. Ltd., Opal Signs Pvt. Ltd., Diamond Display Solutions Pvt. Ltd., and several others. (iii) Out of the 44 applications, 9 vendors were shortlisted for further participation in the tender process. On 15.04.2018 SBIIMS invited the shortlisted vendors to submit their bids in the upcoming e-reverse auction. (iv) On 02.06.2018 an email was circulated by Naresh Kumar Dasari/ Respondent No. 13 (of Macromedia Digital Imaging Pvt. Ltd./ Respondent No.7), which was addressed to various vendors, including the appellants. This email outlined a strategy to categorize the 13 regions into three types, with assigned price ranges for each type. For instance: a. Type 1 (Bangalore, Chennai, Hyderabad, Mumbai, Delhi): Rs. 7950 per sq. m. b. Type 2 (Patna, Bhopal, Lucknow): Rs. 8050 per sq. m. c. Type 3 (Jaipur, Chandigarh, Kolkata): Rs. 8150 per sq. m. The email emphasized that the vendors should adhere to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FY 2015-16 FY 2016-17 FY 2017-18 Average Diamond Display Solutions Pvt. Ltd. (OP-1) 24,37,43,557 20,22,79,840 27,00,03,029 23,86,75,475 23,86,755 AGX Retail Solutions (OP-2) 59,46,000 60,35,000 17,78,15,000 6,32,65,333 6,32,653 Opal Signs Pvt. Ltd. (OP-3) 2,23,81,251 2,43,31,612 4,77,09,622 3,14,74,162 3,14,742 Avery Dennison Pvt. Ltd. (OP-4) 11,97,10,000 13,29,80,000 12,36,10,000 12,54,33,333 12,54,333 Amreesh Neon Pvt. Ltd. (OP-5) 28,68,20,406 27,67,23,020 40,11,95,173 32,15,79,533 32,15,795 Macromedia Digital Imaging Pvt. Ltd. (OP-6) 56,26,79,159 53,36,93,807 45,69,24,724 51,77,65,897 51,77,659 Hitch Impex Pvt. Ltd. (OP-7) 7,91,17,515 3,86,70,361 6,05,97,897 5,94,61,924 5,94,619 (xi) OP-4, approached CCI for lesser penalty as it had cooperated during investigation and inquiry before DF as well as Commission; the CCI decided to further reduce the penalty on OP-4 and its indiviuals by 90% in terms of Regulation 4 (a) of the Lesser Penalty Regulatation. Consequently, the penalty on Avery Dennison Pvt. Ltd. (OP-4) was reduced to Rs. 1,25,433/- from Rs. 12,54,333/-. Similarly, for the individual of OP-4 (Shamrendra Kumar) the penalty was further reduced by 90% to Rs. 5,028/- only. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, it could not be included in the imposition of penalty upon the Appellant no. 1. In view of the same the penalty can only be considered to be imposed at serial no. A on an amount of Rs. 19,77,73,440/- (Rupees Nineteen Crore Seventy-Seven Lakhs Seventy-Three Thousand Four Hundred and Forty Only), instead of Rs. 32,15,79,533/- (Rupees Thirty-Two Crore Fifteen Lakhs Seventy-Nine Thousand Five Hundred and Thirty Three. 6. In this regard, the counsel for appellants places reliance on Hon ble Supreme Court s judgment in Excel Crop Care Ltd. vs CCI (Civil Appeal No. 2480 of 2014), which established that penalties must be based on the relevant turnover associated with the contravention, not the total turnover of the company. The Court ruled that including other unrelated product lines in the penalty calculation leads to disproportionate penalties, violating the principles of equity and proportionality. The relevant paragraph 74, sub-para (iv) to (vii) of Judgment is extracted below: (iv) In such a situation even if two interpretations are possible, one that leans in favour of infringer has to be adopted, on the principle of strict interpretation that needs to be given to such st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. If we adopt the criteria of total turnover of a company by including within its sweep the other products manufactured by the company, which were in no way connected with anticompetitive activity, it would bring about shocking results not comprehended in a country governed by Rule of Law. Cases at hand itself amply demonstrate that the CCI s contention, if accepted, would bring about 2 anomalous results. In the case of M/s. Excel Crop Care Limited, average of three years turnover in respect of APT, in respect whereof anti-competitive agreement was entered into by the appellants, was only 32.41 crores. However, as against this, the CCI imposed penalty of Rs. 63.90 crores by adopting the criteria of total turnover of the said company with the inclusion of turnover of the other products as well. Likewise, UPL was imposed penalty of 252.44 crores by the CCI as against average of the three years turnover of APT of Rs. 77.14 crores. Thus, even when the matter is looked into from this angle, we arrive at a conclusion that it is the relevant turnover, i.e., turnover of the particular product which is to be taken into consideration and not total turnover of the violator. (vii) The do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that this Hon ble Tribunal in Compeittion Appeal (AT) No. 24 26, by its judgment dated 27.07.2022, upheld the CCI s order, confirming that OP-5 and its individuals were involved in anticompetitive practices and bid-rigging in violation of Section 3(3). Furthermore, in the same judgement, this Hon ble Tribunal discussed the monetary penalty imposed by the CCI in respect of the OPs, including the Appellants herein. The relavant para 17 of the Judgment are extracted below: 17. In view of the detailed reason assigned by the CCI in its impugned order which have been incorporated hereinabove above the Tribunal is of the view that CCI has committed no error in passing the impugned order. The order passed by the CCI is reasoned one dealing with each and every aspect which requires no interference. Both the Appeals are dismissed without costs. 12. The counsel for respondent submitted that Section 46(1) of the Act allows CCI to impose lesser penalty on a party involved in a cartel alleged to have violated Section 3, provided the party makes a full, true, and vital disclosure regarding the violations. However, the provision specifies that reduced penalty will not be granted if report of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Hon ble Supreme Court has held that a Tribunal cannot substitute its own discretion for that of competent authority, when dealing with penalties. In this matter, the Court clarified that, as long as punishment is imposed following due procedure and based on evidence, it is not within Tribunal's jurisdiction to interfere. 17. Counsel for respondent stated that in view of Appellants' active and undeniable role in the bid-rigging scheme, there is no doubt that their actions had an appreciable adverse effect on competition. Furthermore, the Appellants failed to cooperate during the investigation and have not met the criteria for any reduction of penalty as envisioned under Section 46 of the Act. Bid-rigging is a serious violation that undermines the integrity of, and harms, competitive markets. The penalty imposed in the impugned Order, amounting to merely 1% of the Appellants' relevant turnover, is already lenient and proportionate to the gravity of the offence. Therefore, he prayed that this Hon ble Tribunal reject the Appellants' prayer and not cause any further reduction in the penalties imposed. Analysis and findings 18. We have heard the Ld. Counsels in det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of supply of printed advertising/marketing material which includes signages. By no stretch of imagination, different types of signages be considered as multiple products in terms of the observations of the Hon'ble Supreme Court in Excel Crop Care judgement, rather they constitute different varieties of the same product. [ Emphasis supplied ] 115. In relation to the contention that turnover derived from the Impugned Tender alone should be considered, it is noted that a bare perusal of the Excel Crop Care judgement makes it clear that nowhere it held or otherwise declared that relevant turnover should be limited to the turnover earned from the specific customer or tender. Such a plea would frustrate the underlying policy objective of deterring the cartelists besides providing them a fertile ground for regulatory arbitrage. For example, if owing to the understanding between the bidders, if some or few bidders have refrained from participating in the particular tender under investigation, the turnover of the said parties from the said tender would obviously be nil, resulting in nil penalty. To allow such parties to walk free without incurring any monetary penalty for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic. The Commission has also examined the financial statements submitted by the parties, besides considering the value and size of the Impugned Tender. In this backdrop, on a careful and holistic consideration of the matter, the Commission takes a lenient view and decides to impose the penalty upon the OPs @ 1% of the average of their relevant turnover for the three financial years i.e. 2015-16 to 2017-18. Accordingly, the computation of penalty imposed on each of the OPs is as follows : Relevant Turnover Penalty Imposed @ 1% OP FY 2015-16 FY 2016-17 FY 2017-18 Average OP-1 24,37,43,557 20,22,79,840 27,00,03,029 23,86,75,475 23,86,755 OP-2 59,46,000 60,35,000 17,78,15,000 6,32,65,333 6,32,653 OP-3 2,23,81,251 2,43,31,612 4,77,09,622 3,14,74,162 3,14,742 OP-4 11,97,10,000 13,29,80,000 12,36,10,000 12,54,33,333 12,54,333 OP-5 28,68,20,406 27,67,23,020 40,11,95,173 32,15,79,533 32,15,795 OP-6 56,26,79,159 53,36,93,807 45,69,24,724 51,77,65,897 51,77,659 OP-7 7,91,17,515 3,86,70,361 6,05,97,897 5,94,61,924 5,94,619 21. The CCI has made the reference to the Excel Crop Care Ltd. vs CCI (supra) in its order and mentions that the principle of proportionality as laid down by Hon ble SC was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In 2007, M/s UPL had quoted the price which was much below the price of other competitors. In 2008, all the parties abstained from quoting. while in 2009 only the three appellants, barring Agrosynth Chemicals Ltd., participated and quoted uniform rate of Rs 388, which was ultimately brought down to Rs 386 after negotiations. It was also found that the tender documents were usually submitted in person and the rates were normally filled with hand. 24. It can be seen that the aforesaid companies were in the same business since 2002, and their balance sheets had segment wise reporting, which made it possible to segregate the turnover from the APT business for each year of operation. In such cases, the ratio laid down by Hon ble SC regarding imposition of penalty on the basis of relevant turnover is a very logical and correct way of calculating the penalty, as it brings in the doctrine of proportionality to the penalty for the offences under the Act. 25. 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. We have also seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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