CCI Imposes Rs 2.7 Crore Penalty On 3 Companies For Rigging Tender [Read Order]

The Competition Commission of India held three companies liable for bid-rigging in tender for conducting tree-census in Pune and imposed a penalty of Rs. 2.7 crore on them.

Background

The Pune Municipal Corporation (OP-4) had been directed by the Bombay HC in PIL No.93/2009 to carry out geo-enabled tree census under the provisions of Maharashtra (Urban Areas) Protection and Preservation of Trees Act, 1975. Consequently, tenders were floated by the Corporation.

OP-4 floated four online tenders viz. Tender No. 2 & 3 of 2015, Tender No. 250 of 2015 and Tender No. 338 of 2015, for selection of an agency to undertake the tree census. Tender No. 2 of 2015 was for Zones 1 and 2 and Tender No. 3 of 2015 was for Zones 3 and 4 of OP-4. However, these two tenders were cancelled and Tender No. 250 of 2015 was floated for the entire area of OP-4. This tender was also cancelled and another Tender No. 338 of 2015 was floated for tree census for the entire area of OP-4.

Informant's stand

The Informant filed a complaint before the Competition Commission of India (the Commission) under Section 19(1)(a) of the Competition Act, 2002 (the Act) alleging that the cancellation of first three tenders and then finally grant of fourth tender in favour of SAAR IT Resources Private Limited (OP-1) was done by way of collusive bidding in contravention of Section 3(3)(d) read with Section 3(1) of the Act.

It was alleged that OP-1 was the pre-determined winner in the fourth tender and that CADD Systems and Services Private Limited (OP-2) and Pentacle Consultants (I) Private Limited (OP-3) were merely acting as proxy bidders, all in collusion with OP-4. He based his arguments on the following grounds:

1. OP-1 made four revisions in the tender conditions, three of which were recommended by OP-1. These included conditions like "minimum permanent employees, average annual turnover and single tender for the entire area rather than zone wise tender", solely to eliminate competition and narrow down the number of bidders thus, leaving only one as the pre-determined winner and two proxy bidders in the field.

2. OP-2 and OP-3 had neither taken any interest nor any effort to participate in the first three tenders floated by OP-4 and participated in the last tender only as proxy bidders.

3. As per the tender conditions, the bidders should have had necessary software before bidding and should demonstrate the same at the technical bid stage. However, OP-4 allegedly exempted the requirement for demonstration by OP-2 and OP-3 clearly because they were proxy bidders

Enquiry by the Director General

Based on the aforementioned allegations, the Commission was of the view that a prima facie case against the OPs was formed and it thereby directed an enquiry in the matter by the Director General (DG). The DG observed that:

1. There was an understanding among the OPs w.r.t. Demand Drafts for Earnest Money Deposit (EMD) for the tender as the same were arranged for both OP-2 and OP-3 by OP-1 from its own coffers;

2. There was communication between OP-1 and OP-2 during tender period signaling an understanding between key officials;

3. The tenders of OP-1 and OP-3 were submitted by a common IP Address.

4. There were similarities in the tenders of the OPs in terms of formatting of the documents.

OPs Submissions

Firstly, the OPs requested the Commission to defer the final hearing of the matter till the appointment of judicial member, in light of judgment of the Delhi High Court in Mahindra Electric Mobility Limited & Anr. v. Competition Commission of India, W.P. No. 11467 of 2018.

Further, OP-4 in its defence submitted that it had no involvement in bid rigging and that it had followed all the guidelines of the tender and abided by all parameters set by the court. OP-1 to OP-3 also made categorical submissions whose essence is given below:

Firstly, the OPs relied on a number of cases asserting that DG had failed to prove that the OPs had an agreement. They relied on various cases wherein it was held that existence of an 'agreement' must be proved in an unequivocal, precise and coherent manner to establish infringement of Section 3(3) of the Competition Act.

Secondly they contended that the DG had failed to prove Appreciable Adverse Effect on Competition (AAEC) on account of the alleged anti-competitive conduct of OPs.

Further, on the observations made by the DG, the following defence was taken:

1. That there was no understanding among the OPs in terms of EMD and that whatever help was extended to file the EMD was only based on professional co-operation due to their familiarity.

2. That OP-1 and OP-2 had executed numerous projects in collaboration with each other and they continue to do so, therefore, no adverse inference should be drawn on the basis of the exchange. It was explained that OP-1 helped OP-2 only in filing the tender documents owing to the past business relations between them. It was then contended that the call detail records relied upon by the DG were not supported by a certificate under Section 65B of the Evidence Act and thus could not be relied upon.

3. That initially OP-1 and OP-3 were to participate in the tender through a JV but due to certain reasons the JV could not materialize and they decided to submit their respective bids independently. Thus, OP-3's bid was submitted from the office of OP-1's office only as a matter of business co- operation whereby the IP addresses for their submissions were same.

4. That similarities in the bid documents submitted by OP-2 with the bid document submitted by OP-1 & OP-3, were indicative of nothing but a mere coincidence and that it did not establish prior meeting of minds of the co-bidders.

Commission's Decision

Addressing the request put forth by the OPs regarding appointment of a judicial member, the court held that "per Section 15 of the Act, orders passed by the Commission cannot be called in question on account of any vacancy or any defect in the constitution of the Commission." It further relied on K.R.Tamizhmani & Ors. v. State of Tamil Nadu & Ors., M.A No.2217 of 2018 in T.C.(C) No.137/2015, wherein it was clarified that 'till such time a reconstitution of the tribunal does not take place arising from a retirement of a member from the legal field, the existing Tribunal will decide all the cases'.

Addressing the contention that DG had failed to prove Appreciable Adverse Effect on Competition (AAEC) the bench held that if, the collusive conduct of the OPs falls within the provisions of Section 3(3) of the Act, it is presumed to have AAEC and no further analysis is required. Notably, the bench went on to hold that the OPs, owing to their collusive conduct, had manipulated the bidding process and violated the provisions of Section 3(3)(d) of the Act. Reliance was placed on Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television and Ors., (2017) 5 SCC 17.

Assessing the material on record, the bench comprised by Chairperson Ashok Kumar Gupta and Members U. C. Nahta and Sangeeta Verma held that the OPs could not counter the evidence laid against them and they merely tried to evade the objections. "There was a tacit understanding between OP-1 and OP-2 as well as between OP-1 and OP-3, pursuant to which OP-2 and OP-3 merely acted as proxy bidders or cover bidders for OP-1. Lack of proper scrutiny by OP-4 ensured that OP2 and OP-3 could qualify in the technical round and be in the reckoning so as to benefit OP-1, to get the tender", the bench stated.

Answering each of the OPs' contentions, the court held that:

1. "OP-1 by arranging the DD towards EMD for both OP-2 and OP-3, from its own coffers, and by facilitating submission of online bid of OP-3 from the computer systems located in its own office, ensured that sufficient number of bidders are available to participate in the tender."

2. "The Commission also observes from the call detail records and screenshots of messages as contained in the Investigation Report that there was an understanding between key officials of OP-1 …in relation to submission of bids by OP-2"

3. "Also based on the evidence gathered by investigation, showing similarities observed in documentation, it can be strongly inferred that even the documentation for the bids was arranged by OP-1 and OP-2 as well as by OP-1 and OP-3, in concert with each other."

It was further held that the threshold of applicability of factors under Section 19(3) of the Act requires that the party charged with has to give some evidence which is adequate enough to dispel the presumption against it, which the OPs herein did not.

Accordingly, the OP-1, OP-2 and OP-3 were directed to cease and desist from indulging in anti-competitive conducts and to pay penalty at the rate of 10 % of the average turnover for three financial years through revenue from operations, amounting to Rs. 2.7 crore in total.

The Informant was represented by Maj. Gen. S. C. N. Jatar, OP-1 by Director Ajay Rao and Advocates Vaibhav Gaggar, Neha Mishra and Niti Richhariya, OP-2 by MD Pankaj Bobra and OP-3 by director Chetan Pathare. 

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