The Competition Commission of India (CCI) ruled that when entities which participated in bid-rigging were cover bidders and were not even present in relevant market of Solid Waste Management business, and their relevant turnover was nil, then their egregious nature of conduct and their repeated participation in illegal practices, attracts maximum penalty in terms of Section 27(b) of the Competition Act, 2002, i.e. at 10 per cent of their average global turnover, for preceding three financial years was to be imposed upon such entities.
Since entire bid-rigging arrangement had been proven to be at behest of certain individuals who rigged not only one or two, but rather at least seven tenders issued by State Municipal Corporation over a period of two years and got other entities, who were not even involved in business of Solid Waste Processing, to be a part of their bid-rigging arrangement, with sole intent of manipulating impugned tenders and ensure failure of competitive bidding process therein, the CCI, after considering egregious nature of conduct and their repeated participation in illegal practices, imposed on these entities.
The Bench, comprising Ravneet Kaur (Chairperson), along with Anil Agrawal, Sweta Kakkad and Deepak Anurag (Members), observed that in terms of Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024, the CCI shall, for purposes of determination of penalty, if any, to be imposed under section 27(b) of the 2002 Act, begin its consideration with ‘relevant turnover’ of the enterprise concerned.
The Bench further observed that where the determination of ‘relevant turnover’ is not feasible, then the CCI may consider the global turnover of the enterprise concerned, derived from all products and services, for the purpose of determining of amount of penalty. As in the present case, the entities that participated in bid-rigging/collusive bidding arrangement were cover bidders and were not even present in the relevant market of the Solid Waste Management business; their ‘relevant turnover’ in terms of the CCI (Determination of Monetary Penalty) Guidelines, 2024, would be Nil.
At the same time, the Bench clarified that if the determination of penalty amounts on basis of ‘relevant turnover’ leads to an inequitable result creating an anomalous situation that would render objectives of the Competition Act infructuous, then, in terms of Penalty Guidelines, the ‘global turnover’ of entities would be considered for purpose of determination of amount of penalty to be imposed upon them.
Briefly, an information was filed by Nagrik Chetna Manch, a public charitable trust, under section 19(1)(a) of the Competition Act, 2002, alleging bid-rigging/collusive-bidding by Fortified Security Solutions and Ecoman Enviro Solutions Pvt Ltd. in various tenders issued by Pune Municipal Corporation for ‘Design, Supply, Installation, Commissioning, Operation and Maintenance of Municipal Organic and Inorganic Solid Waste Processing Plant(s)’, during December 2014 to March 2015.
After considering the investigation report submitted by the Director General (DG), the Commission passed two final orders in the matters finding all Opposite Parties (except Pune Municipal Corporation) guilty of bid-rigging/collusive bidding in tenders issued by the Pune Municipal Corporation, in contravention of the provisions of section 3(3)(d) read with section 3(1) of the 2002 Act. Five individuals of these Opposite Parties, as identified by the DG, were also held liable for the conduct of their respective entities, in terms of section 48 of the 2002 Act. Accordingly, such parties were directed to cease and desist from indulging in such anti-competitive conduct in future, and penalties were imposed upon them.
On appeal, the NCLAT opined that sufficient evidence was brought on record to show formation of cartelisation by the appellants in influencing the tenders in contravention of the provisions of section 3(3)(d) read with section 3(1). However, with respect to the penalty, the NCLAT asked the Commission to reconsider the levy and pass a fresh order.
The Commission challenged this aspect before the Supreme Court, which was dismissed, and directed the Commission to discharge Lahs Green India (one of the opposite parties), subject to the deposit of the penalty amount by it. Later, as per the directions of the NCLAT and the Supreme Court, the LGIPL deposited a penalty of Rs. 10 lacs. However, noting that LGIPL has failed to deposit the remaining penalty amount of Rs. 11.00 lacs along with the due interest in terms of the Notice of Demand and the Recovery Certificate issued to it, the CCI took suo motu cognisance.
Case Distinguished:
Excel Crop Care Ltd. vs. CCI [(2017) 8 SCC 47]
Appearance:
Advocates Rishabh Jaitley, Aditi Sharma and Kartik Nagarkatti, for the Appearing Parties
