Tender Conditions Generally Fall Under Procurer's Discretion, Can't Be Termed Anticompetitive: CCI Dismisses Information Against Bareilly Nagar Nigam

Brief Facts:

The Informant was a registered vendor of Bareilly Nagar Nigam (“Nagar Nigam”) and was engaged in the business of advertisement and publicity. The Nagar Nigam invited registrations/renewal applications for advertisement agencies interested in working with it. The registration fee was Rs. 50,000/- and the Earnest Money Deposit (EMD) was Rs. 2,00,000/-. The deadline was extended by 5 days for those agencies which were not able to deposit the EBD within the initial deadline. Two entities namely SB Telecommunications and Indulge Sign & Graphics (“Indulge Sign”) submitted their EMDs one day after the extended deadline. Despite the delay, they received their registration receipts.

Subsequently, the Nagar Nigam also issued an e-tender invitation for the allotment of advertising spaces within its jurisdiction. It stated that only agencies with a turnover exceeding Rs. 20 Crore were eligible. Due to this qualification, only Adtek Print & Media (“Adtek”) was eligible to apply. Further, the Nagar Nigam reduced the turnover qualification to Rs. 9.5 Crore after a few days and also extended the submission deadline for the e-tender.

Allegedly, SB Telecommunication and Indulge Sign were also dummy entities of Adtek. They shared connections through common directors and shared addresses with related entities. As per the Informant, the Nagar Nigam acted in concert with Adtek, SB Telecommunications and Indulge Sign to limit the opportunities to only these three entities.

Eventually, the tender was awarded to Adtek, despite delays in mandatory payments. As per the terms of the tender, the awarded party was required to deposit 10% of the EMD and 50% of the tender amount within 15 days. However, Adtek exceeded the stipulated timeline by over two months. Additionally, SB Telecommunications allegedly submitted a bid worth Rs. 4,11,12,121/- without completing its registration fee payment on time. Moreover, the Nagar Nigam's website displayed tenders from August 16, 2014, to September 23, 2022, except the tender published on May 5, 2022. It suggested the possible intent to obscure critical information.

Feeling aggrieved, the Informant requested an investigation against Adtek, SB Telecommunications, Indulge Sign and the Nagar Nigam, before the Competition Commission of India (“CCI”). The allegations were filed under Section 3(3)(d), read with Section 3(1) of the Competition Act, 2002 (“the Act”).

Observations of the CCI:

The CCI observed the clarifications provided by the Nagar Nigam. It clarified that a total of 28 firms initially registered for the advertisement services, out of which 25 firms were successfully shortlisted after fulfilling the requirements. The other three were disqualified for non-payment. The Nagar Nigam further contended that a turnover condition of Rs. 20 Crore was put without any concerted practice due to which only SB Telecommunications, Indulge Sign, and Adtek qualified for the tenders. The CCI observed that the registration process for these firms concluded by mid-May which allowed all eligible firms to participate in the tender.

In response to the Informant's claim that SB Telecommunications and Indulge Sign registered beyond the due date, the Nagar Nigam clarified that the required EMDs were submitted on time. Only the registration was finalized after the Commissioner approved it at a later date. The Nagar Nigam also denied that SB Telecommunications and Indulge Sign acted as dummy firms for Adtek. Further, it clarified that the tender process was transparent and compliant with regulations.

The CCI also referred to the Nagar Nigam's explanation that the bid deadline was extended only to ensure greater participation. The extension aligned with the terms of the e-tender notice. Adtek duly deposited the required amount after being awarded the work order without delay. Based on the aforementioned considerations, the CCI found that the Informant's allegations lacked sufficient basis and did not warrant investigation under Section 3(3) of the Act. It further held that tender conditions generally fall under the procurer's discretion. Consequently, the CCI directed the closure of the matter under Section 26(2) and dismissed the request for interim relief under Section 33 of the Act.

Case Title: Harish Kumar vs M/s SB Telecommunication and Ors.

Case No.: 38 of 2023

Date of Pronouncement: 11.11.2024

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