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Bcda Compat PDF
Bcda Compat PDF
NEW DELHI
CORAM
In the matter of :
VERSUS
ORDER
10th May, 2016
members of the Executive Committee have jointly filed this appeal against order
dated 11.03.2014 passed by the Competition Commission of India (for short ‘the
Commission’) under Section 27 of the Competition Act, 2002 (for short ‘the Act’)
prepared by the Additional Director General (Addl. DG) and the Joint Director
General (Jt. DG) respectively, and held that BCDA and its District and Zonal
indirectly, determining the sale prices of drugs and controlling / limiting the supply
3(3)(a) and 3(3)(b) read with Section 3(1) of the Act and also imposed penalty @
10% of the turnover/ income / receipts of BCDA and its office-bearers and @7%
1950, its name was changed to ‘Bengal Chemists and Druggists Association’.
(2) To promote and protect the trade and find out ways
Trade.
and Industry.
……………
13
such matters.”
2. One Shri Arun Kumar Singh claiming himself to be a member and an office-
bearer of the All India Drug Action Network sent an e-mail dated 28.08.2012 to the
as it has been directly or indirectly determining the sale prices of the drugs and
3(3)(a) and 3(3)(b) of the Act. The Commission suo-moto took cognizance of the
allegations contained in the e-mail and passed an order dated 11.10.2012 under
Section 26(1) of the Act whereby the Director General (DG) was directed to cause
3. The Addl. DG, to whom the investigation appears to have been entrusted,
issued notices to BCDA, Director (Directorate of Drugs Control, West Bengal) and
M/s. Medplus Global Mart Pvt. Ltd., Jatindra Mohan, Dhanwantary House, Chemist
Corner, Charu Medical Store, Charu Marketing Agency, Life Drug House Pvt. Ltd.,
Life Line, Life Line Medical Stores under Section 41(2) read with Section 36(2) of
the Act and called upon them to reply to the specific queries and furnish certain
The Addl. DG also recorded the statements of 8 persons including the General
Secretary of BCDA.
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20.04.2013 that it shall not initiate any organisational movement against any
wholesaler / retailer offering discounts below the Maximum Retail Price (MRP). In
response to Query No. 6 put to him during the recording of his statement on
following assertions :
State BCDA has adopted policies which not only protect the
consumers…….
freedom of trade.”
[Emphasis supplied]
discount as per their own decision and that the BCDA shall take
manner and till to date BCDA has never initiated any unlawful
decision but that the BCDA shall also desist from the same in
future.”
Executive Committee held between 2011 and 2013 and recorded the following
conclusions :
“23.3 Thus, it may be observed that the BCDA has taken a plea
23.5 In view of the above, it is stated that the BCDA and its
3 of the Act.”
7. The report of the Addl. DG was considered by the Commission in its ordinary
meeting held on 18.06.2013 and it was decided to direct an investigation into the
the basis of that decision, the Commission passed an order of the same date, the
ORDER
30 days.
confidentiality issue.”
Jt. DG, to whom the matter appears to have been transferred, issued notices to
Committee of BCDA under Section 41(2) read with Section 36(2) of the Act and
called upon them to produce evidence to prove that the contravention of the
provisions of the Act had been committed by BCDA without their knowledge or that
they had exercised due diligence to prevent the commission of such contravention.
For the sake of reference, notice dated 03.07.2013 issued to one of the members
19
of the Executive Committee, namely, Shri Shib Shankar Nag Sarkar, is reproduced
below :
Dated : 03.07.2013
By Speed Post
To,
decisions, and
20
Act, and
(Manoj Saksena)
Joint Director General”
[Emphasis supplied]
21
9. On receipt of the notices issued by the Jt. DG, many office-bearers and
the investigation report to enable them to file their response. Their request was
placed before the Commission, which decided not to supply copy of the
way of illustration, letter dated 07.08.2013 sent to one of the members of the
Dated : 07.08.2013
By Speed Post
To,
Report in Suo Moto Case No. 02/2012, your request has been
(Manoj Saksena)
Joint Director General”
10. After completing the exercise of issuing notices/ letters to the office-bearers
the meetings held from time to time. The relevant portions of the supplementary
proceedings.
members till filing of this report while one Notice has been
hereunder :
xxx xxx
xxx xxx
28
xxx xxx
xxx xxx
xxx xxx
xxx xxx
that a meeting was held with Life and Metro and it was
under cut from 1st April 2012. He has also stated that a
that both the Charu's have been told not to give discount.
stated that the new traders coming in this trade are giving
safeguarded.”
xxx xxx
xxx xxx
xxx xxx
36
xxx xxx
xxx xxx
xxx xxx
CONCLUSION
(Underlining is ours)
11. It is borne out from the record that Shri Arun Kumar Singh had made similar
complaints to the Director, Directorate of Drug Control, West Bengal vide e-mails
dated 24.06.2012 and 27.06.2012. Thereupon, Respondent No. 3, who was then
holding the post of the Director, constituted a team for verifying the allegations
contained in the e-mails. The team visited the medical shops in Chinsurah and
report with the finding that the allegations were correct. Thereafter, Respondent
No. 3 made a reference under Section 19(1)(b) of the Act with the allegation that
retailers not to give any discount to the consumers and in this manner it had acted
in contravention of the provisions of Section 3 of the Act. The same was registered
as Case No. 1 of 2013. The Commission issued order dated 27.05.2013 and
directed the DG to conduct an investigation into the reference along with Suo-moto
Case No. 2 of 2012. On receipt of that order, the DG sent communication dated
submitted can also be read for the purpose of Reference Case No. 01 of 2013.
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replies/objections along with their profit and loss accounts, balance sheets and
turnover for the last three financial years. The Commission also directed the
Association in the form of his own affidavit dated 21.12.2013 to contest the findings
recorded by the Addl. DG and the Jt. DG. He claimed that the investigation was
conducted in violation of the principles of natural justice and the findings were
recorded without considering the relevant facts and documents. Some members
of the Executive Committee also filed their replies to contest the findings and
conclusion recorded by the Jt. DG in the supplementary report that they were
responsible for the decisions taken by BCDA to impose restriction on the sale of
drugs below the MRP and actions taken for enforcing those decisions.
14. The Commission considered the two investigation reports and formulated
15. The Commission then considered the record of the main investigation report,
16. After recording the aforesaid conclusion, the Commission referred to the
supplementary investigation report and held that the office-bearers and the
of the provisions of the Act by the Association. The discussion on this aspect of
18. On the basis of the aforesaid findings and conclusion, the Commission
imposed penalty on BCDA and its office bearers @ 10% of the average turnover /
income / receipts. (The table showing the quantum of penalty imposed on BCDA,
its office-bearers and members of its Executive Committee is not being reproduced
because the same is not necessary for the purpose of deciding the issues raised
in the appeal).
19. The appellants have questioned the impugned order on the ground of
violation of principles of natural justice and also on the ground that the penalty
gravity of the contravention of Sections 3(3)(a) and 3(3)(b) read with Section 3(1)
of the Act committed by BCDA. The appellants have pleaded that due to non-
supply of the main investigation report, the office-bearers and the members of the
controvert the allegation that they were incharge of and responsible for the anti-
competitive decisions taken by BCDA. Another plea taken by the appellants is that
the Jt. DG could not have called upon the office-bearers and members of the
proving that they were incharge of and were responsible to BCDA for the conduct
of its business. Yet another plea taken by the appellants is that even though BCDA
movement against any wholesaler / retailer offering discounts below the MRP and
30.04.2013, who also filed affidavit dated 03.05.2013, the Commission arbitrarily
imposed the maximum penalty on BCDA and substantially heavy penalty on the
20. We have heard learned counsel for the parties and carefully perused the
record.
21. By an order passed today in Appeal No. 34 of 2014 – Shib Shankar Nag
Sarkar and another Vs. Competition Commission of India and others, the Tribunal
has set aside the penalty imposed on both the appellants, who were members of
the Executive Committee of BCDA. The relevant portions of that order are
reproduced below :
of the Act, the appellants had made written requests for supply
read with Section 3(1) of the Act. The decision taken by the
liable to be quashed.
20. The other reason for setting aside the penalty imposed
***
costs, if any;
***
group.”
such contravention.
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individuals; and
the turnover for the last three preceding financial years, upon
issued by it under Sections 27, 28, 31, 32, 33, 42A and 43A of
the Act. Under Section 42 (2), the Commission can impose fine
to the extent of rupees one lakh for each day during which such
may deem fit. Section 42A provides for making any application
extend to rupees one lakh for each day during which such
sections.
Section 48 makes it clear that for the purpose of Section 48, the
incharge of, and was responsible for the conduct of its business
the Act or any rule, regulation etc. Under the scheme of the
Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.
because it has not been proved that they were incharge of the
BCDA or that their case falls within the ambit of Section 48(2).
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held that the burden to prove that the particular person was
under:
55
accordingly:
in the firm.”
Company.
[Emphasis supplied]
27. The ratio of the above noted judgment is that the primary
makes such allegation and only after evidence has been led to
to the company for the conduct of its business, the burden shifts
the conduct of its business, the Jt. DG did not have the
Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act by
BCDA and the burden to prove the negative was upon them
had held Shri T.K. Haridas, who was Branch Manager and Shri
Shri Johnson Mathew. While dealing with the cases of the two
Ltd. and Others – (2008) 17 SCC 285 and held that unless it is
Clauses (a) to (g). That section does not deal with role of
etc. The very fact that the Legislature has chosen to enact a
and Others. The facts of the case show that even though
payment of costs.
penalty on him.
the title box indicating the quantum of penalty), but did not
22. For the reasons recorded in the order passed in Appeal No. 34 of 2014, which
shall be read as part of this order, the penalty imposed on Appellants Nos. 2 to 76
is liable to set aside because no evidence was produced to prove that they were
incharge of and were responsible to BCDA for the conduct of its business and, in
any case, the Jt. DG could not have determined their liability under Section 48 of
the Act by assuming the existence of factors enumerated in Section 48(1) or 48(2)
of the Act. No doubt, some of the appellants were office-bearers of BCDA and
some others were members of the Executive Committee and they had taken part
in various meetings where the decisions to impose restriction on the sale of drugs
below the MRP and to limit/restrict the supply of drugs were taken, but that by itself
cannot lead to a conclusion that they were incharge of and responsible to BCDA
for the conduct of its business. The Jt. DG was under obligation to collect evidence
BCDA for the conduct of its business. Then and then only, penalty could have
been imposed on them with the aid of Section 48(1) or 48(2) of the Act.
23. The penalty imposed on Appellant No. 1 i.e. BCDA, also deserves to be
modified. Although, the findings recorded by the Addl. DG, which has been
practices and, thereby, contravened Section 3(3)(a) is not vitiated by any error of
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law and the Commission was justified in imposing penalty under Section 27 of the
Act, but while doing so, it ought to have given due weightage to the fact that during
discontinue the anti-competitive practice and its General Secretary filed affidavit
dated 03.05.2013 clearly stating that the wholesalers / retailers may give any
discount as per their own decision and no action would be initiated / taken by BCDA
to restrict their right to carry on their trade. In paragraphs 23.0, 23.1 and 23.2 of
main investigation report dated 29.05.2013, the Addl. DG did make a reference to
30.04.2013 made by Shri Tushar Chakraborty and affidavit dated 03.05.2013 filed
by him, but the Commission did not take cognisance of the fact that BCDA had
revoked the anti-competitive decisions. That apart, there is nothing on record from
which it can be inferred that BCDA had repeatedly indulged in similar anti-
competitive activities in the past and no evidence was produced to prove the
impact of the anti-competitive decisions taken by BCDA between 2011 and 2013.
In this scenario, the Commission was not justified in imposing the maximum
penalty @ 10% of the average of its turnover for three preceding financial years.
In our view, the remedial measures taken by BCDA to withdraw the anti-
competitive decisions and its resolve not to resort to similar practices in future
warrants a lenient view and the ends of justice will be adequately served by
reducing the penalty imposed by the Commission from 10% to 1% of the average
of the turnover of BCDA for the last three preceding financial years.
24. In the result, the appeal is partly allowed. The finding recorded by the
Commission that BCDA has acted in contravention of Sections 3(3)(a) and 3(3)(b)
read with Section 3(1) of the Act is upheld. However, the penalty imposed on the
office-bearers and the members of the Executive Committee of BCDA is set aside
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and the penalty imposed on BCDA is reduced from 10% to 1% of average of its
25. While issuing notice in appeal, the Tribunal had directed that status quo as it
dated 13.11.2014, the Tribunal modified the interim order and directed that the
status quo shall operate only qua the penalty imposed by the Commission.
Therefore, Appellant No. 1 i.e. BCDA, shall deposit the modified penalty within a
period of 60 days. If the needful is not done, then BCDA will make itself liable to
26. All the pending interim applications shall stand disposed of.
[G.S. Singhvi]
Chairman
[Rajeev Kher]
Member