National Company Law Appellate Tribunal
Amreesh Neon Private Limited & Anr vs Competition Commission Of India & Ors on 16 October, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Competition Appeal (AT) No. 30 of 2022 &
I.A. No. 2242, 2243 of 2022
IN THE MATTER OF:
AMREESH NEON PRIVATE LIMITED
Having Registered Office At:
Gala No 114, Gurunanak Ind Estate,
LBS Marg, Bhandup, Mumbai City,
Maharashtra-400078.
Ph. No.: 0252-2662 766/2662 816 ...Appellant No. 1
E-Mail: [email protected]
2. MR. MANISH THAKKAR
S/o Sh. Pratap M. Thakkar
Managing Director of:
Amreesh Neon Private Limited
Having registered office at:
E/15/B, Gali No.11,12,13,
Harihar Corporation Mankoli Naka Road,
Dapode, Bhiwandi, Thane-421301.
Ph. No.: +91 98201 26379 ...Appellant No. 2
E-Mail: [email protected]
Versus
COMPETITION COMMISSION OF INDIA
Through its Director General,
Dr. Atul Verma
Having its Office at:
9th Floor, Office Block - 1
Kidwai Nagar (East)
New Delhi: 110023.
Ph. No.: 011-26172895; 011-26701666;
011-24668801. ...Respondent No. 1
E-Mail: [email protected]
2. SBI INFRA MANAGEMENT SOLUTIONS PVT. LTD.
Having its Office at;
Delhi Circle, 5th Floor, State Bank of India, Local Head Office, 11, Sansad Cont'd.../ -2- Marg, New Delhi-110001.
Ph. No.: 011-23407366 ...Respondent No. 2E-Mail: [email protected]
3. DIAMOND DISPLAY SOLUTIONS PVT. LTD.
Having its Registered Office At:
No: 8, 1st Floor, 5th Main Road, Near Ramamurthy Nagar Police Station Vijinapura Extension., Bangalore-560016.Ph. No: +91 80 42461000. ...Respondent No. 3
E-Mail: [email protected]
4. AGX RETAIL SOLUTIONS Having its Registered Office At:
24, 9th A Cross Road, Park Area, Wilson Garden, Bengaluru, Karnataka - 560027.Ph. No: +91 8181000016 ...Respondent No. 4
E-Mail: [email protected]
5. OPAL SIGNS PRIVATE LIMITED Having its Registered Office At:
No. 4D/9, Vijay Towers, 3rd Floor Collector Office Road, Cantonment Tiruchirappalli Tiruchirappalli, Tamil Nadu - 620001. ...Respondent No. 5 E-Mail: [email protected]
6. AVERY DENNISON PRIVATE LIMITED Having its Registered Office At:
P-24, Green Park Extension, New Delhi South Delhi, Delhi-110016 ...Respondent No. 6 E-Mail: [email protected]
7. MACROMEDIA DIGITAL IMAGING PVT. LTD.
Having its Registered Office At:
Plot No.44, Apparel Export Park, Autonagar, Gajuwaka Vishakhapatnam, Andhra Pradesh-530012. ...Respondent No. 7 E-Mail: [email protected]
8. HITH IMPEX PRIVATE LIMITED Having its Registered Office At:
Gala No.14, Ground Floor, Gundecha Industrial Complex, Near Growel's 101 Mall, Akurli Road, Kandivali (East), Mumbai-400101.
Competition Appeal (AT) No. 30 of 2022 -3- Maharashtra, India Ph. No: +91 9323772431 ...Respondent No. 8 E-Mail: [email protected]
9. MR. R.G VENKATESH Managing Director, Diamond Display Solutions Private Limited Having its Registered Office At:
No: 8, 1st Floor, 5th Main Road, Near Ramamurthy Nagar Police Station Vijinapura Extension., Bangalore-560016.Ph. No: +91 80 42461000 ...Respondent No. 9
E-Mail: [email protected]
10. MR. ARJUN REDDY Managing Director, AGX Retail Solutions Having its Registered Office At:
24, 9th A Cross Road, Park Area, Wilson Garden, Bengaluru, Karnataka - 560027 Ph. No: +91 8181000016 ...Respondent No. 10 E-Mail: [email protected].
11.MR. RAMESH BHARADWAJ Managing Director, Opal Signs Private Limited Having its Registered Office At:
No. 4D/9, Vijay Towers, 3rd Floor Collector Office Road, Cantonment Tiruchirappalli Tiruchirappalli, ...Respondent No. 11 Tamil Nadu -620001 E-Mail: [email protected]
12.MR. SHAMRENDRA KUMAR Formerly Business Head-Graphics (India), Avery Dennison Private Limited Having its Registered Office At:
P-24, Green Park Extension, New Delhi South Delhi, Delhi-110016 ...Respondent No. 12 E-Mail: [email protected]
13.MR. NARESH KUMAR DASARI Managing Director, Macromedia Digital Imaging Private Limited Having its Registered Office At:
Plot No.44, Apparel Export Park, Competition Appeal (AT) No. 30 of 2022 -4- Autonagar, Gajuwaka Vishakhapatnam ...Respondent No. 13 Andhra Pradesh - 530012 E-Mail: [email protected]
14. MR. MANISH JODHAVAT Managing Director, Hith Impex Private Limited Having its Registered Office At:
Gala No. 14, Ground Floor, Gundecha Industrial Complex, Near Growel's 101 Mall, Akurli Road, Kandivali (East), Mumbai - 400101.Maharashtra, India. ...Respondent No. 14
Ph. No: +91 9323772431 E-Mail: [email protected] Present:-
For Appellants : Mr. Rakesh Kumar, Ms. Preeti Kashyap, Mr. Ankit Sharma, Mr. Varun Pandit, Mr. Yash Dhawan & Mr. Yash Tiwari, Advocates.
For Respondents : Mr. Robin Ratnakar David, Mr. Febin M. Varghese, Mr. Nihar Baijal, for CCI.
Mr. Srashti Parashar & Ms. Mini S. for CCI/ R-1.
Dr. Navdeep Singh Suhag, Deputy Director for CCI/ R-1.
Ms. Manika Brar, Mr. Aman Singh Sethi,
Mr. Ramchandra Madan, Mr. Shivek Endlaw, for
R-2.
J U D G M EN T
(16th October, 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 CCI) under Section 27 of the Act. The Appeal challenges the order passed by the Commssion in Suo Moto Case No. 02 of 2020 dated 03.02.2020, wherein the Competition Appeal (AT) No. 30 of 2022 -5- Commission held that the appellants had contravened Sections 3(3)(c) and 3(3)(d) r/w Section 3 (1) of the Act. M/s Amreesh Neon Pvt. Ltd. (Appellant No.1) and Manish Thakkar (Appellant No.2) along with other parties were found guilty of bid rigging and cartelisation in a Tender process initiated by SBI Infra Managemnt Solutions Pvt. Ltd. (SBIIMS). Brief facts of the case
2. The present case relates to a tender issued by SBIIMS, a wholly owned subsidiary of the State Bank of India (SBI). The tender, floated on February 8, 2018, called for the procurement and installation of signboards across various SBI branches in India. The scope of the tender covered 13 regions or "circles," and the winning bidder was to be the vendors responsible for supplying and installing the signage in these regions. The details of the same are as follows:
(i) The tender document laid out specific requirements for the signage and stated that the contract would be awarded based on competitive bids in an e-reverse auction process.
(ii) Over 44 vendors submitted their applications in response to the EOI.
These included prominent vendors in the signage industry such as Amreesh Neon Pvt. Ltd., Opal Signs Pvt. Ltd., Diamond Display Solutions Pvt. Ltd., and several others.
(iii) Out of the 44 applications, 9 vendors were shortlisted for further participation in the tender process. On 15.04.2018 SBIIMS invited the Competition Appeal (AT) No. 30 of 2022 -6- shortlisted vendors to submit their bids in the upcoming e-reverse auction.
(iv) On 02.06.2018 an email was circulated by Naresh Kumar Dasari/ Respondent No. 13 (of Macromedia Digital Imaging Pvt. Ltd./ Respondent No.7), which was addressed to various vendors, including the appellants. This email outlined a strategy to categorize the 13 regions into three types, with assigned price ranges for each type. For instance:
a. Type 1 (Bangalore, Chennai, Hyderabad, Mumbai, Delhi): Rs. 7950 per sq. m.
b. Type 2 (Patna, Bhopal, Lucknow): Rs. 8050 per sq. m. c. Type 3 (Jaipur, Chandigarh, Kolkata): Rs. 8150 per sq. m.
The email emphasized that the vendors should adhere to these price floors to prevent undercutting and to maintain consistent pricing across the regions.
(v) A follow-up email dated 04.06.2018 from Naresh Kumar Dasari refined the pricing strategy and provided additional instructions to the vendors.
The revised price points were slightly adjusted, with a new category added:
a. Type 1 (Bangalore, Chennai, Mumbai, Delhi): Rs. 7850 per sq. m. b. Type 2 (Hyderabad, Lucknow, Bhopal): Rs. 7950 per sq. m. c. Type 3 (Patna, Jaipur): Rs. 8050 per sq. m. d. Type 4 (Chandigarh, Kolkata): Rs. 8150 per sq. m. The email also included a request to avoid bidding in specific regions where the vendor did not have local alignments, ensuring that the predetermined price floors were maintained.
Competition Appeal (AT) No. 30 of 2022 -7-
(vi) CCI received a complaint on 28.06.2018 alleging that the vendors had engaged in bid-rigging and cartelization. The complaint asserted that the vendors, including Amreesh Neon Pvt. Ltd., had colluded to manipulate the tender process, fix prices, and allocate market territories.
(vii) Based on the aforesaid complaint The CCI initiated a suo motu investigation under Section 19(1) of the Competition Act, 2002, based on the complaint and other internal reviews. The CCI directed the Director General (DG) to conduct an investigation into the allegations of anti-
competitive behavior.
(viii) The DG submitted his final Investigation Report on 22.06.2021, concluding that Amreesh Neon Pvt. Ltd. and several other vendors had contravened Sections 3(3)(c) and 3(3)(d) of the Competition Act. The report cited the June 2 and June 4 emails as clear evidence of price- fixing and market allocation.
(ix) The CCI passed its order on 03.02.2022, after reviewing the DG's report, and hearing all the opposite parties (OPs) and found that the OPs in violation of Sections 3(3)(c) and 3(3)(d) of the Competition Act. Accordingly, the CCI under Section 27 of the Act imposed penalties on the OPs involved, including Amreesh Neon Pvt. Ltd./ Appellant No.1 and the MD of the firm Sh. Manish Thakkar /Appellant No. 2. The penalties were calculated as 1% of the total turnover for the last three financial years. The CCI found that the vendors had engaged in bid-rigging and cartelization, resulting in inflated prices and reduced competition. Competition Appeal (AT) No. 30 of 2022 -8-
(x) The details of penalities imposed by CCI are given in the table below:
(In Rupees) Relevant Turnover Penalty Name & Number FY 2015-16 FY 2016-17 FY 2017-18 Average Imposed of OP @ 1% Diamond Display 24,37,43,557 20,22,79,840 27,00,03,029 23,86,75,475 23,86,755 Solutions Pvt.
Ltd. (OP-1) AGX Retail 59,46,000 60,35,000 17,78,15,000 6,32,65,333 6,32,653 Solutions (OP-2) Opal Signs Pvt. 2,23,81,251 2,43,31,612 4,77,09,622 3,14,74,162 3,14,742 Ltd. (OP-3) Avery Dennison 11,97,10,000 13,29,80,000 12,36,10,000 12,54,33,333 12,54,333 Pvt. Ltd. (OP-4) Amreesh Neon 28,68,20,406 27,67,23,020 40,11,95,173 32,15,79,533 32,15,795 Pvt. Ltd. (OP-5) Macromedia 56,26,79,159 53,36,93,807 45,69,24,724 51,77,65,897 51,77,659 Digital Imaging Pvt. Ltd. (OP-6) Hitch Impex Pvt. 7,91,17,515 3,86,70,361 6,05,97,897 5,94,61,924 5,94,619 Ltd. (OP-7)
(xi) OP-4, approached CCI for lesser penalty as it had cooperated during investigation and inquiry before DF as well as Commission; the CCI decided to further reduce the penalty on OP-4 and its indiviuals by 90% in terms of Regulation 4 (a) of the Lesser Penalty Regulatation.
Consequently, the penalty on Avery Dennison Pvt. Ltd. (OP-4) was reduced to Rs. 1,25,433/- from Rs. 12,54,333/-. Similarly, for the individual of OP-4 (Shamrendra Kumar) the penalty was further reduced by 90% to Rs. 5,028/- only.
Submissions of the Appellant:
3. The appellants, Amreesh Neon Private Limited and its MD Sh Manish Thakkar/ Appellant No. 2, have challenged the Competition Commission of India's (CCI) order dated 03.02.2022 which found the appellants guilty of bid-
Competition Appeal (AT) No. 30 of 2022 -9- rigging and cartelization under Sections 3(3)(c) and 3(3)(d) of the Act and imposed penalties.
4. In their initial pleadings the appellants had prayed for setting aside the impugned order dated 03.02.2022, but subsequently in their oral and written submissions, they have submitted, only for reduction in the penalty imposed on Appellant No.1 on the argument that the penalties imposed are disproportionate to their involvement and role.
5. The CCI has imposed the following penalties on appellants:
a. Amreesh Neon Private Limited/ Appellant No. 1: Rs. 32,15,795/- b. Mr. Manish Thakkar/ Appellant No.2 (MD of Amreesh Neon):
Rs. 31,200/-
The appellants contend that these penalties are disproportionate, particularly considering that their role in the alleged bid-rigging was minor. The appellants argue that the CCI erred by considering the total turnover of Amreesh Neon Private Limited, instead of focusing on the relevant turnover linked to the tender in question. The counsel submitted that the relevant turnover pertains only to illuminated products, which averaged ₹19,77,73,440 over three years (FY 2015-16 to FY 2017-18). The CCI, however, included unrelated product lines, such as unilluminated products, furniture, and trading activities, inflating the turnover to ₹32,15,79,533. The details of the relevant turnover as submitted by their CA are given below:-
Particulars FY 2015-16 FY 2016-17 FY 2017-18 Total Average
Turnover Turnover
Illuminated 19,21,33,435 17,30,87,781 22,80,99,105 59,33,20,321 19,77,73,440
Products
Unilluminated 5,85,94,753 8,90,90,224 10,44,06,400 25,20,91,377 8,40,30,459
Products
Competition Appeal (AT) No. 30 of 2022
-10-
Furniture 3,13,20,881 1,95,69,023 2,76,81,585 7,85,71,489 2,61,90,496
Other 47,71, 338 -50,24,009 4,10,08,083 4,07,55,412 1,35,85,137
(Including
Trading)
Total 28,68,20,406 27,67,23,020 40,11,95,173 96,47,38,599 32,15,79,533
Turnover
The appellants submit that the penalty should have been based on the average relevant turnover of ₹19,77,73,440, and not the total turnover of ₹32,15,79,533. The rest of the items i.e. item no. B, C and D as mentioned above, were unrelated to the products of the tender, therefore, it could not be included in the imposition of penalty upon the Appellant no. 1. In view of the same the penalty can only be considered to be imposed at serial no. A on an amount of Rs. 19,77,73,440/- (Rupees Nineteen Crore Seventy-Seven Lakhs Seventy-Three Thousand Four Hundred and Forty Only), instead of Rs. 32,15,79,533/- (Rupees Thirty-Two Crore Fifteen Lakhs Seventy-Nine Thousand Five Hundred and Thirty Three.
6. In this regard, the counsel for appellants places reliance on Hon'ble Supreme Court's judgment in Excel Crop Care Ltd. vs CCI (Civil Appeal No. 2480 of 2014), which established that penalties must be based on the relevant turnover associated with the contravention, not the total turnover of the company. The Court ruled that including other unrelated product lines in the penalty calculation leads to disproportionate penalties, violating the principles of equity and proportionality. The relevant paragraph 74, sub-para
(iv) to (vii) of Judgment is extracted below:
"(iv) In such a situation even if two interpretations are possible, one that leans in favour of infringer has to be adopted, on the principle of strict interpretation that needs to be given to such statutes.
Competition Appeal (AT) No. 30 of 2022 -11-
(v) When the agreement leading to contravention of Section 3 involves one product, there seems to be no justification for including other products of an enterprise for the purpose of imposing penalty. This is also clear from the opening words of Section 27 read with Section 3 which relate to one or more specified products. It also defies common sense that though penalty would be imposed in respect of the infringing product, the 'maximum penalty' imposed in all cases be prescribed on the basis of 'all the products' and the 'total turnover' of the enterprise. It would be more so when total turnover of an enterprise may involve activities besides production and sale of products, like rendering of services etc. It, therefore, leads to the conclusion that the turnover has to be of the infringing products and when that is the proper yardstick, it brings home the concept of 'relevant turnover. ,
(vi) Even the doctrine of 'proportionality' would suggest that the Court should lean in favour of 'relevant turnover'. No doubt the objective contained in the Act, viz., to discourage and stop anti-competitive practices has to be achieved and those who are perpetrators of such practices need to be indicted and suitably punished. It is for this reason that the Act contains penal provisions for penalising such offenders. At the same time, the penalty cannot be disproportionate and it should not lead to shocking results. That is the implication of the doctrine of proportionality which is based on equity and rationality. It is, in fact, a constitutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution. The doctrine of proportionality is aimed at bringing out 'proportional result or proportionality stricto sensu'. It is a result oriented test as it examines the result of the law in fact the proportionality achieves balancing between two competing interests:
harm caused to the society by the infringer which gives justification for penalising the infringer on the one hand and the right of the infringer in not suffering the punishment which may be disproportionate to the seriousness of the Act. No doubt, the aim of the penal provision is also to ensure that it acts as deterrent for others. At the same time, such a position cannot be countenanced which would deviate from 'teaching a lesson' to the violators and lead to the 'death of the entity' itself. If we adopt the criteria of total turnover of a company by including within its Competition Appeal (AT) No. 30 of 2022 -12- sweep the other products manufactured by the company, which were in no way connected with anticompetitive activity, it would bring about shocking results not comprehended in a country governed by Rule of Law. Cases at hand itself amply demonstrate that the CCI's contention, if accepted, would bring about 2 anomalous results. In the case of M/s. Excel Crop Care Limited, average of three years' turnover in respect of APT, in respect whereof anti-competitive agreement was entered into by the appellants, was only 32.41 crores. However, as against this, the CCI imposed penalty of Rs. 63.90 crores by adopting the criteria of total turnover of the said company with the inclusion of turnover of the other products as well. Likewise, UPL was imposed penalty of 252.44 crores by the CCI as against average of the three years' turnover of APT of Rs. 77.14 crores. Thus, even when the matter is looked into from this angle, we arrive at a conclusion that it is the relevant turnover, i.e., turnover of the particular product which is to be taken into consideration and not total turnover of the violator.
(vii) The doctrine of 'purposive interpretation' may again lean in favour of 'relevant turnover' as the appropriate yardstick for imposition of penalties. It is for this reason the judgment of Competition Appeal Court of South Africa in the Southern Pipeline Contractors Conrite Walls19, as quoted above, becomes relevant in Indian context as well inasmuch as this Court has also repeatedly used same principle of interpretation. It needs to be repeated that there is a legislative link between the damage caused and the profits which accrue from the cartel activity. There has to be a relationship between the nature of offence and the benefit derived therefrom and once this co-relation is kept in mind, while imposing the penalty, it is the affected turnover, i.e., 'relevant turnover' that becomes the yardstick for imposing such a penalty. In this hue, doctrine of 'purposive interpretation' as well as that of 'proportionality' overlaps."
7. The counsel for appellants argue that their role in the alleged contravention was peripheral. They were only marked as "CC" in emails dated 02.06.2018 and 04.06.2018 and did not participate actively in any bid-rigging Competition Appeal (AT) No. 30 of 2022 -13- discussions or meetings. The key participants were OP-6 and OP-7, yet the penalty imposed on the appellants was uniform, without considering their lesser involvement.
8. Accordingly, the counsel for Appellant No.1 prayed for reduction in the penalty from Rs.32,15,795/- to a figure based on the relevant turnover. Submissions by the respondents:
9. The counsel for main Respondent CCI submitted that this Tribunal has upheld the Impugned Order passed by the CCI and the penalties imposed on the OPs, including those on OP-5 (Appellant No. 1) and Mr. Manish Thakkar (Appellant No. 2) were upheld, in Competition Appeal (AT) No. 24 & 26 of 2022 on 27.07.2022 and further in Competition Appeal (AT) No. 21 & 65 of 2022 dated 23.05.2023.
10. The counsel for Respondent stated that at the hearing on 09.09.2024, the Ld. Counsel for the Appellants made a submission that the Appellants no longer wished to argue the matter on merits, but prayed for a reduction of the penalty imposed by the Impugned Order as the same is not commensurate with the offence. The Counsel for the CCI opposed the prayer on the ground that the Impugned Order is well-reasoned and the penalty ought not to be reduced as the Appellants took active part in the bid rigging.
11. The counsel submitted that this Hon'ble Tribunal in Compeittion Appeal (AT) No. 24 & 26, by its judgment dated 27.07.2022, upheld the CCI's order, confirming that OP-5 and its individuals were involved in anticompetitive practices and bid-rigging in violation of Section 3(3). Competition Appeal (AT) No. 30 of 2022 -14- Furthermore, in the same judgement, this Hon'ble Tribunal discussed the monetary penalty imposed by the CCI in respect of the OPs, including the Appellants herein. The relavant para 17 of the Judgment are extracted below:
"17. In view of the detailed reason assigned by the CCI in its impugned order which have been incorporated hereinabove above the Tribunal is of the view that CCI has committed no error in passing the impugned order. The order passed by the CCI is reasoned one dealing with each and every aspect which requires no interference. Both the Appeals are dismissed without costs."
12. The counsel for respondent submitted that Section 46(1) of the Act allows CCI to impose "lesser penalty" on a party involved in a cartel alleged to have violated Section 3, provided the party makes a full, true, and vital disclosure regarding the violations. However, the provision specifies that reduced penalty will not be granted if report of the investigation directed under Section 26 is received before such disclosure. Additionally, the party must continue cooperating with CCI throughout the proceedings to remain eligible. If CCI finds that party failed to meet conditions, provided false evidence, or made non-vital disclosures, the party may be tried for the original violation and face full penalty.
13. He further stated that the relevant regulations governing this are the CCI (Lesser Penalty) Regulations, 2009 ("Regulations"). Regulation 3 outlines the conditions for obtaining a lesser penalty under Section 46. To qualify, the applicant must: "... a) cease to have further participation in the cartel from Competition Appeal (AT) No. 30 of 2022 -15- the time of its disclosure unless otherwise directed by the Commission; b) provide vital disclosure in respect of contravention of the provisions of section 3 of the Act; c) provide all relevant information, documents and evidence as may be required by the Commission; d) co-operate genuinely, fully, continuously and expeditiously throughout the investigation and other proceedings before the Commission; and e) not conceal, destroy, manipulate or remove the relevant documents in any manner that may contribute to the establishment of a cartel."
14. The counsel for respondent argued that the Appellants in the given case, failed to meet any of the given qualifying criteria. OP-5 was fully involved in the cartel, as evidenced by their bids mirroring the prices stated in the concerned emails, as well as the many communications between the OPs. There was no cooperation from the Appellants' side w.r.t the Director General's investigation in CCI's suo motu proceedings and the Appellants actively concealed their involvement in the anti-competitive practices. Further, the present stage is not at all appropriate for raising the prayer of lesser penalty.
15. The counsel stated that the Hon'ble Supreme Court has held in a catena of judgments that the power of judicial review to interfere with a penalty should be exercised extremely sparingly, and only in cases where the punishment appears to be so disproportionate that it shocks the judicial conscience. Reliance in this regard is placed on Chief Executive Officer, Krishna District Cooperative Central Bank Ltd. & Anr. v K. Hanumantha Rao & Anr. [(2017) 2 SCC 528].
Competition Appeal (AT) No. 30 of 2022 -16-
16. The counsel places further reliance on Union of India v Parma Nanda [(1990) 1 SCC (Jour) 11] wherein the Hon'ble Supreme Court has held that a Tribunal cannot substitute its own discretion for that of competent authority, when dealing with penalties. In this matter, the Court clarified that, as long as punishment is imposed following due procedure and based on evidence, it is not within Tribunal's jurisdiction to interfere.
17. Counsel for respondent stated that in view of Appellants' active and undeniable role in the bid-rigging scheme, there is no doubt that their actions had an appreciable adverse effect on competition. Furthermore, the Appellants failed to cooperate during the investigation and have not met the criteria for any reduction of penalty as envisioned under Section 46 of the Act. Bid-rigging is a serious violation that undermines the integrity of, and harms, competitive markets. The penalty imposed in the impugned Order, amounting to merely 1% of the Appellants' relevant turnover, is already lenient and proportionate to the gravity of the offence. Therefore, he prayed that this Hon'ble Tribunal reject the Appellants' prayer and not cause any further reduction in the penalties imposed.
Analysis and findings
18. We have heard the Ld. Counsels in detail and gone through the records of the case. In his arguments and the written submissions the counsel for appellants have restricted his prayer to reduction in penalty awarded to Appellant No.1. He has not argued the case on its merits. Competition Appeal (AT) No. 30 of 2022 -17-
19. We have come across two Judgments of this Tribunal wherein the aforesaid order of CCI in the present case, was challenged by other OPs in Competition Appeal (AT) No. 24 & 26 of 2022 passed on 27.07.2022 and further in Competition Appeal (AT) No. 21 & 65 of 2022 dated 23.05.2023. These appeals were heard and dismissed on merit and this Tribunal did not find any fault with the order of CCI. No appeal was filed before the Hon'ble SC in the first set of appeals decided in this Tribunal. In the second set of appeal decided by this Tribunal upholding the order of CCI, an appeal was filed in Hon'ble Supreme Court and the same has already been dismissed.
20. The only issue under consideration here is whether the penalty imposed on Appellant No.1 is proportionate to the offence and whether it meets the criteria laid down in Excel Crop Care Ltd. vs CCI (supra). In this regard, we have looked into the relavant paras 113-117 of the impugned order, which is reproduced below:
113. The twin objectives behind imposition of penalties are: (a) to reflect the seriousness of the infringement; and (b) to ensure that the threat of penalties will deter the infringing undertakings from committing contraventions. Therefore, the Commission is of the view that the quantum of penalties imposed must correspond with the gravity of the offence, and the same must be determined after having due regard to the mitigating as well as aggravating circumstances of a case. The Commission is also guided by the judgment of the Hon'ble Supreme Court of India in Excel Crop Care (supra), which enunciates the principle of proportionality.
Competition Appeal (AT) No. 30 of 2022 -18-
114. The OPs have also relied on the above-mentioned judgement of the Hon'ble Supreme Court of India to assert that either the turnover derived from the Impugned Tender or from a specific type of signage to be considered for the computation of the penalty. In this regard, it is noted that the principle of proportionality as envisaged in Excel Crop Care Judgment (supra) by the Hon'ble Supreme Court was in the context of multi- product companies only. The Commission notes that in the present matter, the OPs are engaged in the business of supply of printed advertising/marketing material which includes signages. By no stretch of imagination, different types of signages be considered as multiple products in terms of the observations of the Hon'ble Supreme Court in Excel Crop Care judgement, rather they constitute different varieties of the same product.
[Emphasis supplied]
115. In relation to the contention that turnover derived from the Impugned Tender alone should be considered, it is noted that a bare perusal of the Excel Crop Care judgement makes it clear that nowhere it held or otherwise declared that relevant turnover should be limited to the turnover earned from the specific customer or tender. Such a plea would frustrate the underlying policy objective of deterring the cartelists besides providing them a fertile ground for regulatory arbitrage. For example, if owing to the understanding between the bidders, if some or few bidders have refrained from participating in the particular tender under investigation, the turnover of the said parties from the said tender would obviously be nil, resulting in nil penalty. To allow such parties to walk free without incurring any monetary penalty for their anti-competitive conduct simply because they Competition Appeal (AT) No. 30 of 2022 -19- did not have any turnover from the concerned tender, would not only stultify the Parliamentary intent in providing deterrence through penalties against such behaviour but 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 behaviour. 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.
116. In this backdrop, the Commission proceeds to examine the plea raised by OP-6 that it has no income/ revenue from the signage business. As previously detailed in this order, after the award of work to OP-1, OP-6 executed the work in Andhra Pradesh and Telangana in respect of the Impugned Tender on behalf of OP-1. Further, as per the contention of OP-6 itself, MMDD manufactured a small volume of the works allotted to OP-1 in the Impugned Tender and billed the same to OP-6 who, in turn, billed the same at the same price to OP-1. Moreover, as already noted, Mr. Naresh Kumar Dasari of OP-6 has authored the two critical e-mails dated 02.06.2018 and 04.06.2018 which formed the basis for manipulation of the rigging of the Impugned Tender. Therefore, for the reasons already mentioned in the previous paragraph, OP-6 cannot be allowed to go scot- free, and an appropriate penalty needs to be crafted for its conduct taking its revenue into account.
Competition Appeal (AT) No. 30 of 2022 -20-
117. As regards the impositions of monetary penalty in terms of the provisions contained in Section 27 of the Act, the Commission has given its thoughtful consideration on the issue and has examined the matter carefully. In the present matter, one party has filed lesser penalty application besides cooperating during investigation as well as inquiry process. The Commission has also noted that most of the OPs are MSMEs. Further, some of them have even acknowledged their conduct during the inquiry. Accordingly. the Commission has taken a considerate view while levying monetary penalties upon MSMEs during the ongoing pandemic. The Commission has also examined the financial statements submitted by the parties, besides considering the value and size of the Impugned Tender. In this backdrop, on a careful and holistic consideration of the matter, the Commission takes a lenient view and decides to impose the penalty upon the OPs @ 1% of the average of their relevant turnover for the three financial years i.e. 2015-16 to 2017-18. Accordingly, the computation of penalty imposed on each of the OPs is as follows:
Relevant Turnover Penalty
OP FY 2015-16 FY 2016-17 FY 2017-18 Average Imposed
@ 1%
OP-1 24,37,43,557 20,22,79,840 27,00,03,029 23,86,75,475 23,86,755
OP-2 59,46,000 60,35,000 17,78,15,000 6,32,65,333 6,32,653
OP-3 2,23,81,251 2,43,31,612 4,77,09,622 3,14,74,162 3,14,742
OP-4 11,97,10,000 13,29,80,000 12,36,10,000 12,54,33,333 12,54,333
OP-5 28,68,20,406 27,67,23,020 40,11,95,173 32,15,79,533 32,15,795
OP-6 56,26,79,159 53,36,93,807 45,69,24,724 51,77,65,897 51,77,659
OP-7 7,91,17,515 3,86,70,361 6,05,97,897 5,94,61,924 5,94,619
21. The CCI has made the reference to the Excel Crop Care Ltd. vs CCI (supra) in its order and mentions that the principle of proportionality as laid down by Hon'ble SC was in the context of multi- product companies only. The Competition Appeal (AT) No. 30 of 2022 -21- CCI noted that in the present matter the OPs are engaged in the business of supply of printed advertising/ marketing material which includes signages. It is not possible to classify different types of signages in multiple products in terms of Hon'ble SC's Judgmemnt in Excel Crop (supra) rather the signages constitute different varieties of the same product. The CCI also differentiated that the contention of the OPs that turn over derived from impugned tender alone should be considered is in the teeth of Excel Crop Care Judgment supra.
22. In this context, we have 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.
23. 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 Competition Appeal (AT) No. 30 of 2022 -22- 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 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.
Competition Appeal (AT) No. 30 of 2022 -23-
24. It can be seen that the aforesaid companies were in the same business since 2002, and their balance sheets had segment wise reporting, which made it possible to segregate the turnover from the APT business for each year of operation. In such cases, the ratio laid down by Hon'ble SC regarding imposition of penalty on the basis of relevant turnover is a very logical and correct way of calculating the penalty, as it brings in the doctrine of proportionality to the penalty for the offences under the Act.
25. In the present case the appellant is main business is that of signage and the other items of turn over relates to the same business activity. Such artificial distinction in segmental turn over cannot be accepted. We have also seen that CCI has taken a very lenient view while levying Monetary Penalties upon the OPs most of whom are MSMEs. The Section 27 of the Act provides for Penalty upto 10% of the average of the turnover or income, as the case may be, for the last 3 preceedings financial years, but the CCI taking a lenient view has only imposed penalty of 1% of the average and average of their relavant turnover for the 3 financial years i.e. 2015-16 to 2017-18.
26. We are of the view that the CCI has passed a well considered order in the instant case which has been upheld in two separate appeals by this Tribunal. In one of the matter Hon'ble Supreme Court has dismissed the appeal and in another matter no appeal was preferred so the order has attained finality.
Competition Appeal (AT) No. 30 of 2022 -24-
27. In view of the facts and circumstances of the present case, we do not find any merit in the present appeal and the same is hereby dismissed. There would be no order as to costs.
[Justice Rakesh Kumar Jain] Member (Judicial) [Mr. Naresh Salecha] Member (Technical) [Mr. Indevar Pandey] Member (Technical) sa Competition Appeal (AT) No. 30 of 2022