National Company Law Appellate Tribunal
M/S Delicasy Continental Pvt Ltd vs Competition Commission Of India on 31 May, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Competition Appeal (AT) No. 32 of 2022 &
IA Nos. 2412, 2414 of 2022 & 1452 of 2023
IN THE MATTER OF:
M/s Delicasy Continental Pvt Ltd.
Tricity Plaza, Commercial Space No331 Third Floor,
Peer Muchhala Zirkapur
Mohali Punjab- 140603 ...Appellant
Versus
Competition Commission of India
9th Floor, Office Block-1,
Kidwai Nagar (East)
New Delhi-110023, India ...Respondent
Present For Appellant : Mr. P. Nagesh, Sr. Advocate, Mr. Mahesh Agarwal, Mr. Anshuman Shrivastava, Ms. Geetika Sharma, Mr. Akshay Sharma, Advocates.
For Respondent : Mr. Vaibhav Gaggar, Mr. Mrityunjay Manchanda, Mr. Prerak Khurana, Ms. Aditi Sinha, Ms. Kokila Kumar, Advocates for R-1/CCI.
Ms. Monica Lakhanpal Gaggar, Advocate for CCI.
J U D G E M EN T (31st May, 2024) 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.
Cont'd.../ -2- 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) M/s Saraswati Sales Corporation (v) M/s Lab Traders
(vi) Edward Food Research and Analysis Centre Limited
(vii) Atharva Laboratories Pvt. Ltd.
(viii) M/s Newgen Computers
(ix) Austere System Pvt. Ltd.
4. It was alleged in the complaint that the following participating bidders acted in a concerted manner in respect of Tender No. 1 and Tender No.2 and resorted to bid-rigging in contravention of provisions of Section 3 (1) read with Section 3 (3) (d) of the Competition Act 2022 ('Act'):
(i) Yash Solutions, Bareilly (Unit of Yash Ornaments Pvt. Ltd.) ("Yash Solutions"/OP-1) Competition Appeal (AT) No. 32 of 2022 -3-
(ii) M/s Satish Kumar Agarwal, Bareilly ("M/s Satish Kumar"/OP-2)
(iii) M/s Siddhi Vinayak & Sons, Bareilly ("M/s Siddhi Vinayak"/OP-3)
(iv) M/s Saraswati Sales Corporation, Bareilly ("M/s Saraswati Sales"/OP-4)
(v) Austere System Pvt. Ltd., New Delhi ("Austere Systems"/OP-5)
5. It was further alleged that there were numerous red flags in the documents submitted by the aforesaid entities for Tender No. 1 and Tender No. 2, but the tender inviting authorities preferred to ignore these aspects. Yash Solutions emerged as the successful bidder for the award of work for Tender No. 1 and Tender No.2 for the regions Moradabad and Bareilly, respectively, in the year 2018-19. It was also stated in the complaint, that in the previous year, i.e., 2017-18, Yash Solutions was awarded tender for soil testing for the regions of Bareilly and Moradabad, and Austere Systems was awarded tenders for the regions of Jhansi, Saharanpur and Meerut as a result of such collusive bidding. It was alleged in the complaint that the entities referred above, rigged the tenders of soil testing in the state of Uttar Pradesh by indulging in cover bidding, bid rotation and collusive bidding.
6. The commission considered the complaint and obtained documents like audit report, experience certificates and term deposit receipts submitted by relevant parties. Based on the analysis of records, the commission was of the prima facie view, that despite being competitors, these entities appear to have manipulated the process of bidding in the soil testing tenders in state of UP by indulging in bid-rigging, in contravention of provisions of Section 3 (1) r/w Section 3 (3) (d) of the Act. Accordingly, the commission passed an order dated 30.01.2020 under Section 26 (1) of the Act directing the Director General (DG) Competition Appeal (AT) No. 32 of 2022 -4- to cause an investigation and 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 records submitted by the Department of Agriculture, Government of Uttar Pradesh, during the year 2017-18, the contract for soil testing work was awarded to Yash solutions on L-1 basis for Moradabad and Bareilly divisions, whereas the contract for Jhansi and Meerut divisions was awarded to Austere Systems.
(iii) The investigation revealed that Yash Solutions, M/s Satish Kumar, M/s Siddhi Vinayak, M/s Saraswati Sales and Austere Systems (the Competition Appeal (AT) No. 32 of 2022 -5- Opposite Parties as identified by the Commission at prima facie stage) as well as other parties/bidders, namely, Delicacy Continental Private Limited ("Delicacy Continental"), Fimo Info Solutions Pvt. Ltd. ("Fimo Info Solutions"), M/s Toyfort and Chaitanya Business Outsourcing Pvt.
Ltd. ("Chaitanya Business Outsourcing") indulged in cartelisation and bid-rigging in the 2017 and 2018 tenders pertaining to soil testing work issued by various divisions of the Department of Agriculture, Government of Uttar Pradesh.
(iv) Austere Systems in collusion with Yash Solutions, Delicacy Continental, M/s Toyfort and Fimo Info Solutions, had rigged bids and emerged as the L-1 bidder in soil testing tenders floated by the Department of Agriculture, Government of Uttar Pradesh in Meerut and Jhansi divisions in the year 2017 as well as Saharanpur and Meerut division tenders in the year 2018.
(v) The investigation brought out that Delicacy Continental, Fimo Info Solutions, M/s Toyfort and Chaitanya Business Outsourcing be added as Opposite Parties in the matter.
(vi) Investigation also brought out that Delicacy Continental, a company dealing in the rice exports, was engaged as a sub-contractor in soil testing work by Austere Systems in the year 2017. The investigation revealed that Delicacy Continental, in collusion with Austere Systems had submitted cover bids in the 2018 tenders for Meerut and Saharanpur.
Competition Appeal (AT) No. 32 of 2022 -6-
(vii) The investigation found Yash Solutions, M/s Satish Kumar, M/s Siddhi Vinayak, M/s Saraswati Sales, Austere Systems, Delicacy Continental, Fimo Info Solutions and M/s Toyfort and Chaitanya Business Outsourcing to be in contravention of provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act.
(viii) The investigation also identified individual officials/officers of the Opposite Parties who are found to be responsible under Section 48 of the Act:
(a) Mr. Naresh Kumar Sharma, Proprietor, M/s Saraswati Sales;
(b) Mr. Satish 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 Competition Appeal (AT) No. 32 of 2022 -7- 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 in electronic form to all the 9 OPs mentioned above and the persons/ individuals of the opposite parties identified by the DG as being responsible under Section 48 of the Act for filing their respective objections/ suggestions thereto latest by 16.07.2021. The Commission also directed the Opposite Parties to furnish copies of their audited balance sheets and profit & loss accounts/turnover for the last three financial years, i.e., 2018-19, 2019- 20 and 2020-21 latest by 16.07.2021. The persons/individuals named above were also directed to file their income details including copies of the income tax returns for the last 3 financial years, i.e., 2018-19, 2019-20 and 2020-21. The Commission further decided to hear the parties on the Investigation Report on 05.08.2021.
10. The appellant herein made the following submissions before the Commission:
"38. In its objections and suggestions, Delicacy Continental has averred that most of the conclusions in the DG report qua them are erroneous and misleading. Submissions as filed by Delicacy Continental are similar to those of Austere Systems, M/s Toyfort and Fimo Info Solutions. It has averred that it remained unsuccessful in the tenders of 2018 for the Meerut and Saharanpur divisions and did not participate in other tenders Competition Appeal (AT) No. 32 of 2022 -8- floated elsewhere which, ipso facto, does not imply that there was some coordination/connivance with other bidders. It has contended that the DG has not been able to demonstrate with any cogent evidence, either directly or indirectly, any coordination between Delicacy Continental and other successful bidders in any of the divisions in the State of Uttar Pradesh, and the DG has erroneously concluded that Austere Systems in collusion with Yash Solutions, Delicacy Continental, Fimo Infosolutions and M/s Toyfort had rigged bids to emerge as L-1 in the 2017 tenders for the Meerut and Jhansi divisions. It has further contended that the DG has not been able to demonstrate, even remotely, that there was any meeting of mind, conspiracy to gather undue market power or intent to fix prices/ limit output between various unconnected and competing enterprises. It has also submitted that, simply because Delicacy Continental shares some business relations with Austere Systems, that does not ipso facto disqualify it to carry its own business independently and place bids separately."
11. The commission after careful perusal 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 Competition Appeal (AT) No. 32 of 2022 -9- 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 Sales, M/s Satish Kumar, M/s Siddhi Vinayak and Chaitanya Business Outsourcing,
b) Set 2: Austere Systems, M/s Toyfort, Fimo Info Solutions and Delicacy Continental, and
c) Set 3: Austere Systems and Yash Solutions."
13. Based on the evidence on record, the DG in his investigation had concluded that the bidders, namely, Austere Systems, M/s Toyfort and M/s Fimo Info Solutions, were related concerns and also had an inter se business relationship prior to the issuance of soil testing tenders of 2017. Mr. Rahul Teni, Director of Austere Systems also admitted to have sub-contracted the soil testing work allotted to his company to Delicacy Continental without any permission from the Department of Agriculture, Government of Uttar Pradesh. The DG found the said Opposite Parties in contravention of the relevant provisions of the Act.
14. Austere Systems, in its objections to the Investigation Report has, inter- alia, stated that the DG erred in observing that Austere Systems has contravened the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) Competition Appeal (AT) No. 32 of 2022 -10- of the Act. It has been stated that neither were the prices were getting jointly fixed nor was the output jointly controlled, nor the market being consciously shared, nor any bid being rigged through the practice, and accordingly provisions of Section 3 of the Act are not attracted. With respect to Delicacy Continental, Austere Systems has stated that, except for the relation as enumerated in the Memorandum of Understanding dated 01.09.2017, Austere Systems has no other concern/ relation/ coordination with Delicacy Continental. Thus, the findings of the DG that Delicacy Continental in collusion with Austere Systems submitted cover bids for the benefit of Austere Systems in the 2018 tenders for Meerut and Saharanpur Divisions is erroneous.
15. Delicacy Continental, in their objections and suggestions, filed their submissions, which were similar to those of Austere Systems, M/s Toyfort and Fimo Info Solutions and has refuted the observations made by the DG. It has been averred that simply because Delicacy Continental has business relations with Austere Systems does not, ipso facto, disqualify it from carrying its respective business independently and from bidding separately.
16. While analysing the activities of Delicacy Continental the commission noted that it is engaged in the production and sale or rice. It has three 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.
Competition Appeal (AT) No. 32 of 2022 -11-
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 was associated with your firm for Soil Testing work? A 9. In 2017 one of our employees Mr. Ashok Kumar introduced me to Shri 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 Arun 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 Pradesh. During the telephone discussion Mr. Rahul Teni offered me to help him in soil testing work as his firm had won a tender of soil testing from U.P government Competition Appeal (AT) No. 32 of 2022 -12- Q. 10. Whether your firm had soil testing machine when you had spoken to Shri Rahul Teni?
A. 10. No, my firm did not have soil testing machine Q.11. Why was the offer given to your firm for soil testing when you had no machine and no experience in soil testing work? A. 11. Because of good relationship with Austere they offered a sub- contract to my firm. During end of 2017 and beginning of 2018 we conducted soil testing work for Austere in Saharanpur. We had set-up a lab in Saharanpur for the said work."
20. Mr. Ankur Kumar of Delicacy Continental, had also submitted that a laboratory was set up in Saharanpur for sub-contract work of soil testing for Austere Systems, although he had never visited the said laboratory. Mr. Ankur also submitted that he was not aware of the terms and conditions of the tenders and also was not aware as to whether any MOU existed for the same. The relevant extracts from the statement of Mr. Ankur Kumar are extracted below:
"Q. 12. Where in Saharanpur was your lab and whether you had visited it any time?
A. 12. The Lab was set up in the office of Assistant Director (Culture/soil testing) Saharanpur, I had never visited the lab. Q. 13. How was the company setup in the laboratory in the premises of a Government office?
A. 13. I have no information.
Q14. What were the term and conditions for the soil testing work carried out for M/s Austere Systems and whether any MoU was signed with Austere for the said work and any copy is available with you?
A. 14. I am not aware whether any MOU existed. However, the staff conducting the soil testing work was arranged by one Mr. Competition Appeal (AT) No. 32 of 2022 -13- Arun Bharat and the payment was made by Delicacy. The payment made by Austere for conducting the soil testing work was Rs. 80 to 90 per 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 company issue work orders for soil testing to M/s Delicacy Continental which had no prior experience of soil testing work?
A. 38 As the Entire work was being done under our supervision for this work and M/s Delicacy purchased the ICP machine on our request we sub-let the work to M/s Delicacy.
Competition Appeal (AT) No. 32 of 2022 -14- Q. 40. Have you ever met or had any communication with any of the Directors or any other employee of M/s Delicacy Continental? A. 40. I had interacted with one of the directors of M/s Delicacy on telephone whose name I do not remember regarding the soil testing work. M/s Delicacy was only an investor in soil testing work for Saharanpur, Meerut and Jhansi Division and beyond that they did not have any interest in soil testing work"
22. The Commission noted that the investigation also revealed that Mr. Ankur Kumar of Delicacy Continental submitted two versions of MOUs related to the sub- contract of soil testing work by Austere Systems. The Commission notes that both the copies of the MOU were fabricated to prove that the parties had a contract amongst them, thereby indicating a prior business relationship. Moreover, it was brought out by the investigation that one of the copies of the MOU was sent by Mr. Mandar Teni of Austere Systems just before the recording of the statement of Mr. Ankur Kumar before the DG.
23. Mr. Rahul Teni, in his statement before the DG, also submitted that an MOU was executed with Delicacy Continental for undertaking soil testing work. However, he could not submit any comments on the statement of Mr. Ankur Kumar, Director of Delicacy Continental, that there was no MOU between Austere Systems and Delicacy Continental. The Commission noted that this shows that Austere Systems had complete control over Delicacy Continental and its Directors.
24. The Commission also noted that Mr. Ankur Kumar had also submitted that none of the Directors had decided the bid price to be submitted in the 2018 soil testing tenders for Meerut and Saharanpur divisions, and it was Competition Appeal (AT) No. 32 of 2022 -15- decided by its employees in discussion with Austere Systems. The Commission agrees with the investigation that Mr. Ankur Kumar was evasive in his replies and tried to shift the entire responsibility of collusion and bid rigging upon the employees of Delicacy Continental.
25. The Commission further noted that the experience certificates were issued by Austere Systems to Delicacy Continental with a view 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 Competition Appeal (AT) No. 32 of 2022 -16- 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.
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, who are the persons in charge thereof and responsible for the conduct of business of the respective enterprises under Section 48 of the Act?
30. After establishing the contravention by the Opposite Parties, the Commission then proceeded to analyse the conduct of directors/ proprietors of the Opposite Parties, who were directly involved in the activities and affairs of such parties and had full knowledge and played an active role in the anti- competitive conduct and hence, are liable in terms of Section 48 of the Act. The DG in his investigation identified the following individuals liable in terms of the provisions of Section 48 of the Act:
i. Mr. Praveen Kumar Agarwal, Managing Director (Yash Solutions, Unit of Yash Ornaments Private Ltd.) ii. Mr. Satish Kumar Agarwal, Proprietor (M/s Satish Kumar and M/s Siddhi Vinayak) iii. Mr. Naresh Kumar Sharma, Proprietor (M/s Saraswati Sales) iv Mr. Rahul Gajanan Teni, Director (Austere Systems) v. Mr. Ankur Kumar, Director (Delicacy Continental) vi. Mr. Jai Kumar Gupta, Director (Fimo Info Solutions) vii. Mr. Suresh Kumar Gupta, Proprietor (M/s Toyfort) Competition Appeal (AT) No. 32 of 2022 -17- viii. Mr. Nitish Agarwal, Director (Chaitanya Business Outsourcing)
31. The Commission noted that Mr. Ankur Kumar, Director of the aforementioned company, had placed a bid in the soil testing tenders of UP Government in 2018-19 for the Meerut and Saharanpur divisions. The Commission further noted that Mr. Ankur Kumar knew Mr. Rahul Teni, Director of Austere Systems, and due to their cordial business relationship, Austere Systems had sub-contracted the soil testing work to his company in 2017-18, although his company had no prior experience in soil testing work.
32. The Commission noted that Mr. Ankur Kumar falsely submitted that an MOU was entered into with Austere Systems for sub-contract of soil testing work and copies of the MOU were created just for submission to the investigation.
33. The Commission also noted that the price bids in the 2018 tenders for the Meerut and Saharanpur divisions for his firm were decided by employees 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- Competition Appeal (AT) No. 32 of 2022 -18- 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 their faces, and the Commission was convinced that the Opposite Parties acted in a concerted manner to rig the tenders, which is in violation of Section 3(1) read with Sections 3(3)(c) and 3(3)(d) of the Act. Therefore, the Commission found the identified individuals of the Opposite Parties liable in terms of the provisions of Section 48(1) and 48(2) of the Act.
35. The Commission noted that cartelisation, including bid rigging, is a pernicious form of anti-competitive conduct under the provisions of Section 3 of the Act. None of the Opposite Parties or their individuals have been able to rebut the evidence found against them by the DG of having indulged in anti- competitive conduct and manipulating the bids/bid rigging in respect of tenders floated by the Department of Agriculture, State of Uttar Pradesh. The Commission finds that certain Opposite Parties and their individuals had also resorted to the production and submission of fake invoices and grant of false certificates for making some of the Opposite Parties eligible for participating in the bid process so as to effectively act as cover bidders in respect of the Competition Appeal (AT) No. 32 of 2022 -19- winning bidders. Some of the Opposite Parties did not even have prior experience and were later blacklisted.
36. In view of these findings, the Commission held that Yash Solutions, M/s Satish Kumar Agarwal, M/s Siddhi Vinayak, M's Saraswati Sales Corporation, M/s Austere System Pvt. Ltd., Delicacy Continental Pvt. Ltd, Fimo Infosolutions Private Limited, M/s Toyfort and Chaitanya Business Outsourcing Pvt. Ltd. to have contravened the provisions of Section 3(1) of the Act read with Section 3(3)(c) and 3(3)(d) thereof, as detailed in this order.
37. Further, the Commission, in terms of Section 27 (a) of the Act, directed the Opposite Parties and their respective proprietors and directors who have been held liable in terms of the provisions of Section 48 of the Act to cease and desist from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act, as detailed in the earlier.
38. 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 the Commission may impose such penalty upon the contravening parties as it may deem fit, which shall 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 Competition Appeal (AT) No. 32 of 2022 -20- 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 have averred that, as that they could not derive any income from the soil testing tenders for never being involved in the business of soil testing, zero penalty would naturally arise out of nil income and nil turnover. Some of the Opposite Parties have prayed for mitigation of penalty on the grounds of being Micro Small and Medium Enterprises (MSME).
41. With regard to the submission of the Opposite Parties that they have derived no income from tenders in question and hence zero penalty would arise, the Commission found no merit in the said submission and stated that no narrow interpretation of the relevant turnover can be taken as suggested. The Commission, in this regard, reiterated its decision dated 03.02.2022 in Suo Motu Case No. 2 of 2020 (In Re: Alleged anti-competitive conduct by various bidders in supplying and installation of signages at specified locations of State Bank of India across India):
Competition Appeal (AT) No. 32 of 2022 -21- "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 is held or otherwise declared that relevant turnover should he limited to the turnover earned from the specific customer or tender. Such a plea would fratrate 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 mil, resulting in nil penalty. To allow such parties to walk free without incoring any monetary penalty for their anti-competitive conduct simply because they did not have any turnover from the concerned tender, would not only smultify the Parliamentary intent in providing deterrence through penalties against auch behaviour hut would also run contrary to the underlying spirit of the judgment of the Hon'ble Supreme Court of India in Excel Crop Care Judgment. Taking such a pedantic interpretation would provide a virtual free run to the infringing parties and an effective immunity against any antitrust action for their anti-competitive hehaviour. This cannot be the purport or intent either of the Parliament or the Hon'ble Supreme Court of India 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 Competition Appeal (AT) No. 32 of 2022 -22- 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 Toyfort, are sole proprietorship concerns, no separate penalty was imposed on their respective proprietors.
Submissions of the Appellant
44. The Counsel for the Appellant submitted that he is aggrieved by impugned order dated 4.4.2022 passed by Competition Commission of India (hereinafter referred to as 'CCT'), where by CCI erroneously held the Appellant in contravention of the provision of Section 3(2)(c) and 3(3)(d) of the Competition Commission Act ("Act") for collusive bid rigging with the highest bidder Austere Systems Pvt Limited.
45. The counsel further stated that there was No evidence of meeting of minds between Appellant and Austere at the time of submission of bids in 2018. There was no evidence, direct or circumstantial, before the CCI that an agreement was entered into between such enterprises, persons or their associations engaged in identical or similar trade in respect of the prohibited activity which resulted in bid rigging or collusive bidding. Competition Appeal (AT) No. 32 of 2022 -23-
46. CCI relied only of the fact that there was business relationship existed between the Appellant and Austere in the year 2017, whereby Austere had sub contracted the work of soil testing to the Appellant.
47. It is submitted that a routine affair and meeting of minds for purposes of bid rigging/ collusive bidding could not be inferred from such proximity. Having business links in past is no evidence to suggest that these parties were engaged in bid rigging. Reliance is place on Competition Appeal (AT) No. 09 of 2019 Reprographic India Vs. Competition Commission of India and Ors. Following allegations does not fall under the preview of CCI:
48. The first allegation against the Appellant is that the Appellant is in a business of rice export and had no experience of soil testing.
49. With respect to above, it is submitted that bidding for a tender with no experience does not make Appellant guilty under the Act. Even otherwise, the Appellant had submitted the experience certificate dated 28.2.2018 and 31.3.2018 as per the requirement of bidding.
50. It is submitted that the said experience certificate had obtained by the Appellant from Austere as the Appellant had completed the work of soil testing allotted by the Austere vide MoU dated 01.09.2017 and 04.10.2017.
51. That MoUs clearly state that the same were executed as Appellant has technical knowledge and resource to invest in the project. Further, 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. Competition Appeal (AT) No. 32 of 2022 -24-
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 competition law. Also prior to January. 2018, there was no tender condition or guidelines for no subletting of work and hence Austere sublet the work for soil sample analysis to Delicacy through MoUs.
57. It is only on 22.01.2018 Government of India issued guidelines for outsourcing of soil sample analysis under Health card Scheme, wherein the condition was inserted that no company, to whom the work was awarded, can further sublet the outsourced work.
Competition Appeal (AT) No. 32 of 2022 -25-
58. It is submitted that since the Appellant had already invested in 2017 in setting up the lab and importing machines for soil testing and after the issuance of above guidelines, there was no scope remain to get the work through subcontract, the Appellant took the obvious decision to participate in tender in FY 2018. And to participate and to fulfil the condition of tender of having an experience, Appellant requested Austere to issue Experience certificate so that Appellant would directly submit the bid in 2018 tenders. Penalty imposed is against the law settled by the Hon'ble Apex Court in Excel Crop Care vs CCI
59. Without prejudice, it is submitted that CCI while penalizing the Appellant has taken into account its total earnings from other sources and not the relevant income, if any, which is completely against the law settled by the Hon'ble Apex Court in Excel Crop Care (supra) interpreted section 27 (b) of CCI Act. Appellant had made no earnings from the tenders in question.
60. CCI failed to adhere to the factors contained in Section 19 of the Act which is the sole guiding light for CCI while establishing any offence under Section 3 of the Act.
Submissions of the Respondent
61. The counsel for commission stated that the captioned appeal is part of the batch of appeals ("Appeals") arising out of the CCI Order dated 04.04.2022 ("Impugned Order"), wherein it was held that Delicacy Continental Pvt Ltd. ("Appellant") in collusion with the other Appellants (Austere Systems) had indulged in cover bidding, in contravention of Sections 3(3)(d) read with 3(1) of Competition Appeal (AT) No. 32 of 2022 -26- the Competition Act, 2002 ("Act"). The cause of action arose from a general complaint dated 07.08.2018 received by the CCI alleging bid-rigging in the tenders invited by the Department of Agriculture, Government of Uttar Pradesh ("Department of Agriculture") for soil sample testing.
62. The Director General ("DG") vide its investigation report dated 09.04.2021 ("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.
Competition Appeal (AT) No. 32 of 2022 -27-
(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 of business of the Appellant is the same as of the Department of Agriculture, Saharanpur in its GST registration.
(vi) The Appellant was under compete control of Austere System wherein the entire work sub-contracted to the appellant was supervised by Austere Systems.
63. Keeping in view the facts, clinching evidence, own admissions along with circumstantial evidence, CCI vide the Impugned order, that the Appellant had indulged in bid-rigging and cover bidding, in contravention of Sections 3 (3) (d) read with 3 (1) of the Act and thereby had imposed a penalty of INR 32,99,405/- on the Appellant and penalty of INR 19,307/- imposed on his Director, Mr. Ankur kumar.
64. The Appellant had submitted its bids in the soil testing tenders of the Department of Agriculture for Meerut and Saharanpur divisions in 2018 ("2018 Tender"). However, the Appellant failed to win either of the tenders as a result of bid rigging. The counsel further submitted that the Appellant has approached this Tribunal with unclean hands by submitting different versions of MOU. Further, during the course of arguments, the CCI brought the original records before this Tribunal to show this glaring discrepancy. Competition Appeal (AT) No. 32 of 2022 -28-
65. The Counsel raised the issue of discrepancies in the MOUs submitted before the three authorities namely, the DG, the CCI and this Hon'ble Tribunal:
(a) The Appellant has submitted different MOUs with different dates and signatures before the three Authorities i.e, DG-CCI, CCI and this Hon'ble Tribunal. The Director of the Appellant (Mr. Ankur Kumar), before the DG-CCI stated that he was not aware whether any MOU existed for sub-contracting the soil testing work. At the same time, the CCI noted that the Director of the Appellant had submitted two versions of the MOU related to the work of sub-contracting of the soil testing work, which were fabricated to prove that the parties had a contract between them, thereby indicating a prior business relationship.
(b) In addition to the aforesaid, contrary to the statements made as recorded in the Order dated 18.11.2022 passed in captioned Appeal, during the course of arguments before this Hon'ble Tribunal, (for reasons best known to the Appellant) the Appellant had adopted a shifting stand with regard to execution of the MOU to fit its case.
66. No experience and no understanding in soil testing work and violation of tender condition 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.
Competition Appeal (AT) No. 32 of 2022 -29-
(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 with regard to penalty imposed, The Appellant has placed reliance on Hon'ble SC's Judgement in Excel Corp Limited v. Competition Commission of India and Another (supra), to which, the CCI rightly noted that there is no merit in these submissions and no narrow interpretation of the relevant turnover can be taken, as contended by the Appellant. In support, the CCI had placed reliance on its decision dated 03.02.2020 in Suo Moto Case No. 2 of 2020. Further, the CCI had considered both aggravating and mitigating factors while imposing the penalty at 5% on the Appellant, as the penalty permissible under Section 27(b) is a maximum of 10% of the turnover and further, for violations under Section 3 of the Act, a Competition Appeal (AT) No. 32 of 2022 -30- penalty of up to three times of its profits for each year of the continuance of such agreement or ten percent whichever is higher.
69. In the end the counsel submitted that in cases of cartelisation, if the relevant turnover is to be considered qua the unlawful monies generated from act of cartelisation, which in the present case would be zero, then the entire purpose of the Act would be defeated.
Analysis of evidence and findings:
70. We have considered the evidence on record and heard the counsels in detail. There are two key players in the above matter and their statement before the DG gives a fairly clear idea about relationship between the appellant and Austere Systems. These are Shri Ankur Kumar, Director of Delicacy Continental (Appellant) and Shri Rahul Teni Director of Austere Systems. We examine the relevant portion of their statement before the DG. In addition, we also examine the statement of Smt. Rajesh Rani Director of M/s Delicacy Continental.
71. Extracts from the statement of Smt Rajesh Rani, Director of M/s Delicacy Continental Pvt. Ltd, recorded on 15.12.2020:
Q. 5. Has your Firm ever bid in any tenders floated by Govt. of UP? If yes, please provide details?
A. 5. Yes, in 2018 regarding Soil Health Card Q6 Has your Firm ever bid in any tenders for Soil Testing floated by Govt. of UP? If yes, please provide details A 6 Yes Q7 Please explain your understanding of Government's Soil testing program?
Competition Appeal (AT) No. 32 of 2022 -31- A 7 I am not aware and have no understanding of the government soil testing program Mr Ankur Rana must be aware about this scheme Q8 What are the requirements for soil testing work? A.8 Do not have any knowledge about soil testing work Q. 10 Name 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?
Competition Appeal (AT) No. 32 of 2022 -32- A.20. We have a soil testing machine which is placed in Saharanpur and I am not aware whether we have conducted any soil testing or not. Q. 21. What equipment were available for soil testing in your Lab? A. 21. Our company has two soil testing machines which are currently placed in our company's premises. The said machines were used in Saharanpur division.
Q. 28. I am showing you the Copy of sub-contracting of soil testing work by M/s Austere Systems to M/s Delicacy Continental for 60,000 soil samples of Meerut division and 50,000 soil samples for Jhansi & Saharanpur Divisions).
A. 28. I have seen it but I am not aware of any work of soil testing work given to our firm by M/s Austere Systems Private Limited Q. 29. I am showing you the "Experience Certificates" dated 28.02.2018 & 31.03.2018 issued by M/s Austere Systems Pvt. Ltd, Pune to your firm for analyzing 55,000 soil sample tests for Meerut and 50,000 soil sample tests for Saharanpur and Jhansi Divisions.
A. 29. Yes, I have seen it. I am not aware and I have no knowledge about the certificates shown to me, although the same has been submitted along with the bid documents of my firm in UP soil testing tenders.
Q 30 How did your Firm receive this work as a sub-contract from M/s Austere System Pvt. Ltd as the original contract was allotted by Department of Agriculture. Govt. of UP to M/s Austere System Pvt. Ltd.? A. 30 I am not aware.
Q 36. I am showing you the GST registration certificate of UP obtained by your Firm dated 02.03.2018 giving its Principal place of business as Deputy Director, Agriculture, Saharanpur.
A. 36. Yes, I have seen it.
Q. 37. How and why did you give address for principal place of business of you Firm which belongs to DD, Agriculture. Saharanpur in your GST registration?
A. 37. I am not aware Competition Appeal (AT) No. 32 of 2022 -33-
72. The following emerges from the statements of Smt Rajesh Rani on oath before the DG:
(a) That she was unaware about the terms & conditions for bidders, other bidders who participated in the said tenders & financial bids submitted by her company in the said tenders. She also submitted that she has no understanding of the Government's soil testing programme and Sh Ankur Kumar Rana, Director, M/s Delicacy Continental Pvt Ltd is the person aware about the same.
(b) Smt Rajesh Rani admitted that her firm had experience only of data entry and printing of soil heath cards in Haryana, and they did not have 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? Competition Appeal (AT) No. 32 of 2022 -34- 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 Arün 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 Pradesh. During the telephone discussion Mr. Rahul Teni offered me to help him in soil testing work as his firm had won a tender of soil testing from UP government.
Q. 10 Whether your firm had soil testing machine when you had spoken to Shri Rahul Teni?
A. 10. No, my firm did not have soil testing machine Q.11. Why was the offer given to your firm for soil testing when you had no machine and no experience in soil testing work? A 11. Because of good relationship with Austere they offered a sub- contract to my firm. During end of 2017 and beginning of 2018 we conducted soil testing work for Austere in Saharanpur We had set-up a lab in Saharanpur for the said work.
Q.12 Where in Saharanpur was your lab and whether you had visited any time?
A. 12. The Lab was set up in the office of Assistant Director (Culture/soil testing) Saharanpur, I had never visited the lab. Q13. How was the company setup in the laboratory in the premises of a government office?
A 13 I have no information Q. 14 What were the term and conditions for the soil testing work carried out for M/s Austere Systems and whether any MoU was signed with Austere for the said work and any copy is available with you?
A. 14. I am not aware whether any MOU existed. However, the staff conducting the soil testing work was arranged by one Mr. Arun Competition Appeal (AT) No. 32 of 2022 -35- Bharat and the payment was made by Delicacy. The payment made by Austere for conducting the soil testing work was Rs. 80 to 90 per sample for one type of sample while Rs. 120 to 130 for another type of sample.
Q. 16. Why the copy of MoU dated 01.09.2017 has not been signed by any of the Directors of Delicacy?
A. 16 I am not aware Q 18 Shri Ankur also submitted another copy of MoU (Exhibit-2) signed between M/s Austere System and Delicacy Continental, the said MoU has been signed by Directors of both the companies. The said document is taken on record. Kindly explain which copy MoU is an authentic document?
A 18. Yes, the copy of MoU which is signed by both the parties is the one which is authentic Q.19 Why the above said MoU which you are submit as authentic is without any date?
A. 19. I am not aware Q. 20 Why the said copy of MoU document which has only been signed by Mr Rahul Teni, Managing Director, M/s Austere, been e- mailed to you?
A 20 I am not aware Q 21 What was the period of MoU for soil testing with Austere? A. 21. 2017-2018 Q 22 Why no date and period has 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 Competition Appeal (AT) No. 32 of 2022 -36- 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 employee decide the price to be bid in the tender when you are the Director?
A 37 Because Austere company was introduced to us by our employees Mr Ashok Kumar and Mr. Arun Bharat and accordingly they decided in discussion with Austere Q 46. Whether your firm had any soil testing Lab and where was it located?
A 46 Yes, it was setup in the office premises of Assistant Director (Culture/soil testing), Saharanpür Q.47 What equipment were available for soil testing in your Lab? A 47 We have one soil testing machine which was purchased in the year 2017 from Agilent. Singapore I am submitting the copies of Competition Appeal (AT) No. 32 of 2022 -37- Invoice 20.10.2017 for import of the said machine and Custom Clearing Agent bill dated 01.11.2017 (Exhibits-889) Q. 48 Did you Purchase any Soil testing Machine (ICP-OES) for setting up your lab?
A 48 I am not aware whether machine was ICP-OES Q 49. Whether your Lab was NABL accredited as per Government of India's guidelines, when you had bid in the said tenders in 2018? A 49 I am not aware Q.60 I am showing you the GST registration certificate of UP obtained by your Firm dated 02.03.2018 giving its Principal place of business as Deputy Director, Agriculture, Saharanpur (Exhibit-22). A.60. Yes, I have seen it Q 61 How and why did you give address for principal place of business of you Firm which belongs to DD, Agriculture, Saharanpur in your GST registration?
A 61. I am not aware Q 64 The Questions and Answers in the documents pertains to the Investigation which is being conducted by the DG, CCI in the instant case and are related to soil testing tenders as well as expected questions that may be asked during the Investigation for recording his statement. One of the questions related to any assistance provided by Delicacy to Austere Pvt. Ltd for winning tenders of soil testing floated by UP Government in 2018, What was the purpose behind including questions related to Austere in this document? A. 84 I am not aware
74. The following emerge from the statement on Oath by Shri Ankur Kumar:
(a) It is clear that although M/s Delicacy had no prior experience of soil testing work nor any soil testing machine to conduct soil tests however, on the basis of their good relationship, M/s Austere Systems had subcontracted the soil testing work to M/s Delicacy during 2017-18.
Competition Appeal (AT) No. 32 of 2022 -38-
(b) Shri Ankur Kumar, submitted that a lab was setup in Saharanpur for the said purpose although, he had 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 of Sh Kumar cannot be relied upon, as such decisions involving large financial outflows can only be taken at Director/ Board level in a company. By claiming that the decision was made by his junior employees, he has tried to escape the charges of collusive bid/ Competition Appeal (AT) No. 32 of 2022 -39- bid rigging. He has tried to shift the responsibility to his employees to protect himself.
(f) Questions and Answers with regards to the assistance provided by Mis Delicacy to M/s Austere Systems Pvt Ltd in winning the soil testing tenders floated by U.P Government in 2018 clearly establishes that, it was a pre-emptive action to hide facts regarding their collusive relationship and bid rigging of soil testing tenders, issued by Agriculture Department UP Government in 2018.
(g) There was no explanation as to how the principal place of business of their firm was registered in the firm's GST registration as the Office of Deputy Director, Agriculture. Saharanpur. The same is very perplexing as well as strange that a private firm could manage to register its Principal place of business at the address of a government office however, no objections to the same were raised by the concerned office.
75. Relevant Extracts from the statement of Mr. Rahul Gajanan Teni Director of M/s Austere Systems Pvt. Ltd.:
Q1. What is your role and responsibilities in your firm M/s Austere System Pvt. Ltd?
A 1 My responsibility is mainly related to managing the business as well as technology/technical part. Shri Piyush Gupta, Son of Shri Suresh Kumar Gupta who was a strategic investor in our company looks after finance matter of the company. Shri Shikhir Gupta, another Director looks after the business development work. Q2 Details of the business your company M/s Austere System Pvt. Ltd. is engaged in?
Competition Appeal (AT) No. 32 of 2022 -40- A.2. Software Development, Onshore development, Staffing Augmentation. technology consulting, business consulting, data entry, soil analysis and automation My company M/s Austere is not engaged in any other business other than the above mentioned business.
Q3. Has your company M/s Austere Systems Pvt Ltd, submitted bids in the tenders for Soil Testing floated by Govt. of UP? If yes, please provide details?
A 3. Yes, our company M/s Austere bid for Meerut and Jhansi Divisions in 2017 and in Meerut, Saharanpur and Bareilly Divisions in year 2018 tender Shri Suresh Gupta was strategic investor in our company in mid of 2017 my company 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. Competition Appeal (AT) No. 32 of 2022 -41- Q.32 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 UP Government for soil testing.
Q 33. 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 company issue work orders for soil testing to M/s Delicacy Continental which had no prior experience of soil testing work?
A. 38. As the Entire work was being done under our supervision for this work and M/s Delicacy purchased the ICP machine on our request, we sub- let the work to M/s Delicacy Q. 40. Have you ever met or had any communication with any of the Directors or any other employee of M/s Delicacy Continental? A 40 I had interacted with one of the directors of M/s Delicacy on telephone whose name I do not remember regarding the soil testing work. M/s Delicacy was only an investor in soil testing work for Saharanpur, Meerut and Jhansi Division and beyond that they did not have any interest in soil testing work. Q 41 I am showing you the details/statement of the soil testing experience of your firm which has been submitted in the Saharanpur tender of 2018 (Exhibit- 29). As per the statement it has been certified that M/s Delicacy conducted soil tests of 60000 & 50000 soil samples, for Austere in the Meerut & Jhansi Divisions respectively However, as per experience certificate issued to Delicacy by your company, the said firm had analyzed 55,000 soil sample tests for Meerut and 50,000 soil sample tests each for Saharanpur and Jhansi Divisions. Why no mention of Saharanpur Competition Appeal (AT) No. 32 of 2022 -42- division tests and explain the anomaly in respect of Meerut in your statement vis-à- vis Experience Certificates issued? A. 41 I do not have any justification Q 49 Whether your Firm had executed any agreement with M/s Delicacy Continental for conducting soil testing work for your Firm? A 49 Yes, we had an agreement Q 58 I am showing you reply to Question No 23 of Sh Ankur Kumar, Director M/s Delicacy Continental (Exhibit-33) wherein he confessed that there was no MoU between Austere and Delicacy and an MoU has been created for submission to the Investigation. Your comments?
A. 58. I have seen, however I cannot comment on the statement 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. Competition Appeal (AT) No. 32 of 2022 -43- 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 has been initiated by the UP Government against its employees in this matter?
76. The following findings emerge from the statement of Sh Rahul Teni:
(a) He admitted to have sub-contracted the soil testing work allotted to his company by the Agriculture Department Saharanpur in 2017 to M/s Delicacy Continental Pvt Ltd, without any permission of the Department.
(b) Sh Teni claimed that there was an MoU between Austere and Delicacy for the sub contract work, but he could not submit any comments on the statement of Sh Ankur Kumar that there was no MoU between Austere and Delicacy and an MoU has been created only for submission to the Investigation.
(c) Sh. Teni admitted that though M/s Delicacy Continental had no experience of soil testing work, his company had sub-contracted the work to M/s Delicacy, as the entire work was being executed under M/s Austere's Supervision. Sh. Teni also admitted that M/s Delicacy was only an investor in the said project.
Competition Appeal (AT) No. 32 of 2022 -44-
(d) It is clear from the above statement that the work of soil testing sub- contracted to M/s Delicacy Continental was only for namesake and the actual work was being carried out under the supervision of M/s Austere Systems without any Agreement or MoU only on the basis of an understanding reached by both the parties.
(e) Sh Teni could not submit any explanation for the discrepancy with regards to the details of soil testing work carried out by his company through M/s Delicacy, which was submitted by it in the Saharanpur tenders and the Experience Certificates of soil testing work, issued by him to M/s Delicacy Continental This unexplained discrepancy raises a question mark on the authenticity of data mentioned in the said certificates and only indicates that the said Experience Certificates, ware issued to M/s Delicacy with a view to make M/s Delicacy eligible in the Meerut & Saharanpur division tenders of 2018, as required and mentioned in the tender terms & conditions issued by the respective divisions.
(f) In view of the above statements of Sh. Ankur Kumar & Sh. Rahul Teni and the fact that as only three bidders namely M/s Austere Systems, M/s Yash Solutions & M/s Delicacy Continental had submitted bids in the 2018 Meerut & Saharanpur tenders which was won by Austere Systems, it can be concluded that M/s Austere Systems Pvt Ltd under an arrangement/understanding with M/s Yash Solutions and M/s Delicacy Continental Pvt ltd, had rigged the bids of said soil testing tenders in 2018.
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(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 that the Appellant was a passive investor in the work of soil testing and was working under the control of Austere Systems. Delicacy was working completely under the instruction of Austere Systems. The experience certificate was issued to the Appellant by Austere Systems to make it eligible for participation in the bids of Meerut and Saharanpur Division, so that the tender may Competition Appeal (AT) No. 32 of 2022 -46- not fail due to lack of participation. The bid amounts quoted in the Meerut and Saharnpur tenders of 2018 was decided by the Austere Systems on behalf of the Appellant. All the documents related to bids were filed by the Appellant as per advice and guidance of Austere Systems. All this is akin to a complete takeover of Appellant's operations qua soil testing by Austere Systems, indicating a perfect example of collusive bidding/ bid rigging.
78. Based on the material on record and having examined the same closely we are of the considered opinion that:
"Commission has correctly and legally held the appellant responsible for violation of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act and there is no error in respect of order passed under Section 27(a) whereby the appellant was directed to cease and desist from such act from indulging in the practices which were found in contravention of the provisions contained in Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act."
79. Regarding the punishment both the appellant and commission have cited the judgement of Hon'ble SC in Excel Crop Care (supra). The contention of the appellants being that the penalty is to be imposed based on the relevant turnover. The commission, however, disagreed with the contention of the appellant and stated that such a narrow interpretation of relevant turnover would allow the OPs who are involved in pernicious practice of bid rigging/collusive bidding to go scot-free. This was never the intention of Hon'ble SC nor of the legislature whle enacting the Competition Act. Competition Appeal (AT) No. 32 of 2022 -47-
80. In this context, we looked into the aforesaid Judgment of Excel Corp Care (supra) closely, regarding the facts of the case and whether the aforesaid ratio applies squarely to the present appeal.
81. In the Excel Crop Care matter (supra) the matter related to procurement by FCI for Aluminium Phosphide tablets (for short APT) of 3 gm each between the year 2007-2009. The relevant para of the judgement are extracted below:
3.2. There 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 material was purchased from Central Warehousing Competition Appeal (AT) No. 32 of 2022 -48- Corporation @ Rs 290). In November 2005, though the tenders were invited, all the parties had abstained from quoting. 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.
82. 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.
83. In the present case, the appellant was acting as a member of the cartel and was providing cover bid for the successful bidder Austere Systems. In view of peculiar facts and circumstances of the present case, where almost all bidders for soil testing are first time bidders and relevant turnover of firms from the aforesaid business is NIL, the concept of relevant turnover in such cases would not be correct, as it would lead to NIL penalty and allow the parties involved to go scot-free. Hence, we agree with the Commission's approach of taking the total turnover for computation and imposition of penalty. At the same time considering the fact that the Appellant was in a Competition Appeal (AT) No. 32 of 2022 -49- supporting role in this cartel, by providing the cover bids, we are of the view that the penalty in such cases should be less than for those in the main role.
84. Based on the above discussion, we hold
(i) The order of the Commission in respect of holding the appellant guilty under Section 3(3)(c) and 3(3)(d) read with section 3(1) and order passed under Section 27(a) regarding cease-and-desist order are upheld.
(j) The penalty under Section 27 (b) is reduced to 3% of average annual turnover for last 3 years, instead of 5% as imposed by the commission.
85. The pending IAs if any, are accordingly disposed of.
[Justice Rakesh Kumar Jain] Member (Judicial) [Mr. Indevar Pandey] Member (Technical) sa Competition Appeal (AT) No. 32 of 2022