Competition Commission of India
Of 2021 (Xyz vs . Continental Milkose India Limited). ... on 4 February, 2025
COMPETITION COMMISSION OF INDIA
Ref Case No. 03 of 2024
In Re:
ADGST (SM) Army Purchase Organisation Informant
And
M/s Gokul Agro Resources Ltd. Opposite Party No. 1
M/s Gokul Agri International Ltd. Opposite Party No. 2
CORAM
Ms. Ravneet Kaur
Chairperson
Mr. Anil Agrawal
Member
Ms. Sweta Kakkad
Member
Mr. Deepak Anurag
Member
Order under Section 26(2) of the Competition Act, 2002
1. The present matter was received as a Reference under section 19(1)(b) of the Competition Act, 2002 ('Act') from Army Purchase Organisation ('APO'/ 'Informant') through ADGST (SM), APO alleging contravention of the provisions of Section 3 by M/s Gokul Agro Resources Ltd. ('Opposite Party No. 1'/ 'OP-1') and M/s Gokul Agri International Ltd ('Opposite Party No. 2'/ 'OP-2'), collectively referred to as 'OPs'.
Ref Case No.03 of 2024 Page 1 of 82. As per the Reference, APO is responsible for the procurement of ration items (including tinned, packaged, dry ration and animal ration) for the Armed Forces.
3. The Informant has stated that:
3.1 An indent was received from DGSR (ST-4) for procurement of 31,000 MT Edible Oil for the financial year 2024-25. Based on the indent, a Bid document including Acceptance of Terms and Conditions ('ATC'), was uploaded on the Government e-Marketplace ('GeM') Portal vide GeM Bid No:
GEM/2024/B/4693332 dated 26.02.2024.
3.2 Technical Evaluation Committee ('TEC') meeting for the bid was scheduled on 18.03.2024. It was seen that 14 firms had participated in the tender out of which 11 were found fit for participating in the subsequent stages of the tendering process.
3.3 Thereafter, Commercial Negotiation Committee ('CNC') meeting was scheduled on 08.05.2024 for evaluation of financial bids. During the CNC meeting the Principal Integrated Financial Advisor ('PIFA') Army (Q&M) noted that OPs appear to be sister concerns and dominant. Therefore, competition may be restricted.
3.4 The Procurement Committee ('PC') recommended retendering of procurement of refined mustard oil on the advice of PIFA Army (Q&M). OPs have been participating in tenders for procurement of Edible Oil with brand names 'VITALIFE' and 'VIVAAN' respectively.
3.5 OPs have also been found to be competing with each other in course of reverse auction ('RA') on the GeM Portal during Financial Year 2024-25.
3.6 PIFA Army (Q&M) was approached by APO vide letter No. 62801/Q/1/ATC/2024-25/Edible Oil/APO (Pur.- IV) dated 26.06.2024 to Ref Case No.03 of 2024 Page 2 of 8 provide reasons/ grounds which point towards the above mentioned two firms being sister concerns as during documents evaluation and factory inspection, TEC did not observe any commonality between both the firms. Also, both these firms participated separately in the RA of "schedules" along with other five firms. They also reduced their rates to emerge as L-1 in 4 schedules each i.e., in a total 8 of the 15 schedules.
3.7 Further vide letter No 42663/PIFA (Q&M)/APO/19/301 dated 10.07.2024, PIFA Army (Q&M) cited Gujarat High Court Order No. O/COMP/36/2015 dated 12.06.2015, wherein as per preamble of the composite scheme of arrangement Gokul Refoils and Solvent Ltd ('GRSL'), OP-1 and O-2 were all part of the same group of management i.e., Gokul Group. It has been further stated that PIFA Army (Q&M) has also advised to refer the matter to Competition Commission of India ('CCI' / the 'Commission') in terms of para 7.5.8 of Ministry of Finance Manual for Procurement of Goods, 2022. The said paragraph reads as following:
"7.5.8. It is possible that sometimes a group of bidders quote the same rate against a tender. Such pool/cartel formation is against the basic principle of competitive bidding and defeats the very purpose of an open and comparative tendering system. Such and similar tactics to avoid/control true competition in a tender leading to "Appreciable Adverse Effect on Competition" (AAEC) have been declared as an offence under the Competition Act 2002, as amended by the Competition (Amendment) Act, 2007. Such practice should be severely discouraged with strong measures. In case of evidence of cartel formation, detailed cost analysis may be done by associative experts if necessary. Besides, suitable administrative actions can be resorted to, such as rejecting the offers, reporting the matter to the trade associations, the Competition Commission or NSIC, etc., and requesting them, inter-alia, to take suitable strong actions against such firms. New firms may also be encouraged to get themselves registered for the subject goods to break the Ref Case No.03 of 2024 Page 3 of 8 monopolistic attitude of the firms forming a cartel. Changes in the mode of procurement (GTE instead of OTE) and packaging/slicing of the tendered quantity and items may also be tired. A warning clause may also be included in the bid documents to discourage the bidders from indulging in such practices."
4. The Informant has prayed for the following reliefs before the Commission:
i. to examine the shareholding structures of OPs;
ii. details of promoters and their stakes in respect of OPs in terms of 7.5.8 of Ministry of Finance Manual of Procurement of Goods, 2022; and iii. verify if OPs are sister concerns and hence the possibility of cartel formation.
5. The Commission considered the matter in its ordinary meeting held on 18.12.2024 and decided to pass an appropriate order in due course.
6. The Commission has carefully perused the information in the Reference and material available on record.
7. The Commission notes that the Informant has alleged possibility of cartel formation in tender invited by the APO. Section 3(3)(d) of the Act deals with bid-rigging and reads as under:
"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--
...
(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition."Ref Case No.03 of 2024 Page 4 of 8
8. It is noted by the Commission that both OPs are enterprises and are engaged in identical trade of goods. In the present matter, the Commission, upon perusal of the Reference and documents annexed therein finds that 15 entities participated in the impugned tendering process and 11 of them were found technically qualified for participating in the subsequent stages of the tendering process.
9. On scrutiny of the summarized table of bids relating to tenders, as provided in the Reference, it is observed that OP-1 and OP-2 emerged L-1 on 4 occasions each out of a total of 15 occasions, and the percentage difference between their bids ranges between 0.42% and 10.46%. Further, from the data given for 15 occasions, it is noted that on 7 occasions the winner was a party other than OPs.
10. Further, it is pertinent to mention that one of the prayers in the Reference is to investigate the possibility of cartel formation and commonality of management between the OPs. Previously the Commission has dealt with similar allegations in Case No. 25 of 2021 (XYZ Vs. Continental Milkose India Limited). Relevant paragraphs from the Order of the Commission are reproduced as under:
"19.... Be that as it may, the Commission, in the facts and circumstances of the instant case, observes that merely having common Directors/Partners may not, ipso facto, give rise to anti-competitive concerns, in the absence of other material factors to indicate that such common relationship facilitated a few entities to come together and manipulate the bid process and reduce the strategic uncertainty required in such process. It may not be entirely uncommon, where a common Promoter/Director acts as a link between two entities, to facilitate anti-competitive behaviour. However, there is no presumption that it has to be that way at all times; instead, it will depend upon the attendant factual matrix. Thus, the Commission is of the view that merely having common business linkages between the bidders as projected by the Informant, in itself, cannot be the sole basis to suggest meeting of minds or assentio mentium between the bidders in the bidding process.
20. The Commission has previously held that common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act. In Ref Case No.03 of 2024 Page 5 of 8 Re: Alleged cartelization in road construction work in the State of Uttar Pradesh (Suo Motu Case No. 03 of 2018), it was held that:
"Having examined the DG report and the material available on record, the Commission, at the outset, notes that as regards related parties submitting bids or parties having common ownership, the Commission is of the opinion that mere commonality of ownership of participating firms, in itself, is not sufficient to record any conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in tenders. The Commission has consistently held that mere common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act. In this regard, reference may be made to a few of such previous orders passed by the Commission. In Re: Ved Prakash Tripathi v. Director General Armed Forces Medical Services & Ors. (Case No. 10 of 2020), the Commission held that: "...mere commonality of directors or ownership of participating firms, in itself, is not sufficient to record any prima facie conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in the impugned tender.... Further, In Re: Reprographics India v. Hitachi Systems Micro Clinic Pvt. Ltd. & Ors. (Case No. 41 of 2018), the Commission held that: "...merely having common business linkages between the OPs as projected by the Informant, cannot be the basis to suggest collusion in the bidding process. Moreover, there is no material on record to suggest that the OPs were engaged in Bid Rotation etc. Therefore, the allegation of supportive bid does not find favour with the Commission....". Resultantly, mere commonality of ownership does not imply contravention of the provisions of Section 3(3)(d) of the Act, unless there is material on record to substantiate the allegations of bid rigging by way of collusion."
11. The Commission notes that mere commonality of ownership does not by itself imply contravention of the provisions of Section 3(3) (d) of the Act.
12. The Commission notes that the Informant has also annexed a copy of the Order of the Hon'ble High Court of Gujarat (Company Petition Nos. 36, 37 & 38 of 2015) wherein the then scheme of de-merger of Gokul Refoils & Solvent Limited, OP-1 and OP-2 was approved. Paragraph number 5 of the said Order reads as under:
Ref Case No.03 of 2024 Page 6 of 8"5. It is envisaged that the restructuring exercise would inter alia achieve the following:
a. Restructuring would result in two independent listed companies, which would provide opportunities to the respective businesses to attract different set of investors, strategic partners, lenders and other stakeholders, thereby unlocking the value of respective businesses and existing shareholders. b. Restructuring of businesses would enable respective management(s) to concentrate on core businesses and strengthen competencies, and provide independent opportunities to increase scale of operations, etc.; c. Restructuring would result in focused management attention to the respective businesses, and segregation of businesses with distinct risk - reward profiles. This would be beneficial to its shareholders as well as creditors."
13. On the perusal of the above-mentioned Order of the Hon'ble High Court of Gujarat, the OPs appear to be independent entities. Further, from the information given in the Reference, it is noted that OPs are listed companies with no common directors.
14. Regarding competition dynamics in the tendering process, the Commission notes from the data furnished with the Reference for the 15 occasions of bidding, that bidders other than the OPs had also participated as well as won. Besides, there is no evidence to indicate any collusion between OPs.
15. In view of the facts and circumstances of the Reference and analysis carried out in the preceding paragraphs, the Commission does not find evidence which would suggest the presence of bid-rigging in the impugned tendering process. On the contrary, the Commission, upon perusal of the Reference and documents annexed therein, finds that several entities have been participating in the impugned tendering process. In view of the same, the Commission does not find any occasion to intervene in the matter under the provisions of the Act.
Ref Case No.03 of 2024 Page 7 of 816. In light of the above, the Commission directs that the matter be closed forthwith under Section 26(2) of the Act.
17. The Secretary is directed to communicate to the Informant, accordingly.
Sd/-
(Ravneet Kaur) Chairperson Sd/-
(Anil Agrawal) Member Sd/-
(Sweta Kakkad) Member Sd/-
(Deepak Anurag) Member New Delhi Date: 04.02.2025 Ref Case No.03 of 2024 Page 8 of 8