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2016 SCC OnLine Comp AT 240
In the Competition Appellate Tribunal

(BEFORE G.S. SINGHVI, CHAIRMAN)
Appeal No. 34 of 2013

A.R. Polymers Pvt. Ltd., Kanpur No. 105,
Chandralok Complex, No. 26/72-D, Brihana
Road, Kanpur-208007, Uttar Pradesh …
Appellant;
Versus
Competition Commission of India through its
Secretary Hindustan Times House, 18-20,
Kasturba Gandhi Marg, New Delhi-110 001. and
Another … Respondents.
With
M.B. Rubber Pvt. Ltd. 195-Gagan Vihar, Delhi-
110051 … Appellant;
Versus
Competition Commission of India Hindustan Times
House, 18-20, Kasturba Gandhi Marg, New Delhi-
110 001. and Another … Respondents.
With
Tirupati Footwear Private Limited, Basti Baba Khel,
Kapurthala Road, Jalandhar-144021 … Appellant;
Versus
Competition Commission of India Through its
With
H.B. Rubber Pvt. Ltd., A-43, Preet Vihar, Delhi-110
092 … Appellant;
Versus
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With
Rajkumar Dyeing & Printing Works Private Limited,
P-2, Kalakar Street, Kolkata-700 007. (Through
its Director, Mr. Vikas Banka) … Appellant;
Versus
Secretary Hindustan Times House, 3rd, 4th & 7th
Floor, 18-20, Kasturba Gandhi Marg, New Delhi-
With
Preet Footwears D-1 & D-2, Sports & Surgical
Complex, Basti Baba Khel, Jalandhar-144 021 …
Appellant;
Versus
With
S.S. Rubbers, C-8, Sports & Surgical Complex,
Basti Baba Khel, Jalandhar-144 021 … Appellant;
Versus
With
Shiva Rubber Industries, C-5, Kandra Industrial
Area, P.O. Bithia-828109, Dhanbad, Bihar …
Appellant;
Versus
With
Derpa Industrial Polymers (P) Ltd., 56, Rural
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Industrial Estate Loni, Ghaziabad-201102 …

Appellant;
Versus
With
R.S. Industries, Through its Sole Proprietor, Mr.
Arun Tiberwal, 11, Clive Row (1st Floor, Room No.
G), Kolkata-700 001 … Appellant;
Versus
Director General (Supplies & Disposals), Through,
A.V. Murlidharan, Director (WL), Directorate
General of Supplies & Disposals, Department of
Commerce, Ministry of Commerce & Industry,
Jeevan Tara Building, 5 Parliament Street, New
Delhi-110 001. and Another … Respondents.
With
Appeal No. 08 of 2014 and I.A. No. 11/2014
Puja Enterprises, Basti Bawa Khel, Kapurthala Road,
Jalandhar-144 021 … Appellant;
Versus
Appeal No. 34 of 2013* ; Appeal No. 35 of 2013† ; Appeal No. 36 of
2013‡ ; Appeal No. 37 of 2013¶ ; Appeal No. 38 of 2013§; Appeal
No. 39 of 2013*† ; Appeal No. 40 of 2013*‡ ; Appeal No. 41 of
2013*¶ ; Appeal No. 42 of 2013*§; Appeal No. 43 of 2013†* ; Appeal
No. 08 of 2014; and I.A. No. 11/2014†‡
Decided on April 12, 2016
Advocates who appeared in this case :
Shri. Rana S. Biswas and Shri. Matrugupta Mishra, Advocates for the
Appellant.
Shri. Avinash Sharma, Advocate for Competition Commission of
India.
Shri. Anuj Aggarwal and Shri. Rahul Chaudhary, Advocates for Dg
(S&D).
Shri. M.M. Sharma and Ms. Deepika Rajpal, Advocates for the
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appellant.
India.
Shri. Anuj Aggarwal and Shri. Rahul Chaudhary, Advocates for DG
(S&D).
Shri. M.M. Arshi Aquil and Shri. Bharat Aggarwal, Advocates for the
appellant.
India.
(S&D).
appellant.
India.
(S&D).
Shri. Rakesh Sinha and Shri. Pradeep Gupta, Advocates for the
appellant.
India.
(S&D).
Shri. T.S. Ahuja and Shri. Varun Ahuja, Advocates for the appellant.
India.
(S&D).
Shri. Vikram Sobti and Shri. Bharat Aggarwal, Advocates for the
appellant.
India.
(S&D).
Shri. Rajeev Mamta, Advocate for the appellant.
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India.
(S&D).
appellant.
India.
(S&D).
Shri. Pramod Kumar Rai, Advocate for the appellant.
India.
(S&D).
Appeal No. 08 of 2014 and I.A. No. 11/2014
Shri. Rajeev, Advocates for the appellant.
India.
(S&D).
The Order of the Court was delivered by
G.S. SINGHVI, CHAIRMAN:— Whether the appellants could be
accused of bid-rigging/collusive bidding and held guilty of acting in
contravention of Section 3(1) read with Sections 3(3)(a) and 3(3)(d) of
the Competition Act, 2002 (for short ‘the Act’) merely because they
quoted substantially similar price for the product, namely, Polyester
Blended Duck Ankle Boot Rubber Sole (hereinafter described as ‘the
Jungle Boots’), which is required to be manufactured as per the
specifications prescribed by the Director General (Supply and Demand)
(DGS&D) and is mostly purchased by the Government Agencies like
Paramilitary Forces, State Police, Railways etc. on the basis of the Rate
Contracts executed on annual basis, is the moot question which arises
for consideration in these appeals filed against order dated 06.08.2013
passed by the Competition Commission of India (for short, ‘the
Commission’). An ancillary question which calls for the determination is
whether in exercise of powers vested in it under Section 27(b) of the
Act, the Commission could impose penalty on the total turnover of the
appellants for the three preceding financial years.
2. All the appellants are multi-product companies. The details of
their status and production activities are enumerated below:
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I) M/s. A.R. Ploymers Pvt. Ltd. (Appellant in Appeal No. 34 of 2013)

M/s. A.R. Polymers Pvt. Limited is engaged in the business
of manufacturing of Wood Panels, Footwear and Fibre
Reinforced Polymer Products (FRP). The appellant started
operations in year 1997 as a Wood Panel manufacturer. It
acquired the Footwear and FRP businesses in the year 2010
from its group company MKU Pvt. Ltd. The company has two
SSI units located at Rooma, Kanpur and Malwan, Fatehpur in
U.P. The company's facilities are certified and approved by
Ministry of Commerce (DGS&D) and Ministry of Defence
(DGQA). As per the copy of the DGS&D Registration Certificate,
the company is registered for supply of Sleeping Bags, Tents,
Synthetic Web Equipment, Polyester Blended Duck Ankle Boot
Rubber Sole and Ground Sheets.
II) M/s. M.B. Rubber Pvt. Ltd. (Appellant in Appeal No. 35 of 2013)
M/s. M.B. Rubber Pvt. Ltd. was incorporated on 21st July,
1988 and is engaged in the manufacturing of Footwear, Rain
coats and Capes. Ground sheets etc. in its SSI unit located at
Sahibabad Industrial Area, Ghaziabad, U.P. The company
started production of Hawai Chappals in the year 1990-91.
After two years, it commenced manufacturing of canvas shoes.
The company is registered with NSIC, DGS&D, DGQA, Indian
Navy and Ministry of Defence for various items being
manufactured by it. As per the DGS&D Registration
Certificates, the company is registered for supply of various
Footwear Items, Ground Sheets, Coats and Capes, Mosquito
Nets etc. which it supplies to various Government Departments
such as Railways, Paramilitary forces etc.
III) M/s. Tirupati Footwear Pvt. Ltd. (Appellant in Appeal No. 36 of
2013)
M/s. Tirupati Footwears Pvt. Ltd. is a SSI Unit located at
Basti Bawa Khel, Kapurthala Road, Jalandhar. As per the
DGS&D Registration Certificate, the company is registered for
supply of various footwear items and Ground Sheets. The
company is also registered with NSIC.
IV) M/s. H.B. Rubber Pvt. Ltd. (Appellant in Appeal No. 37 of 2013)
M/s. H.B. Rubber Pvt. Ltd. was incorporated on 17th
September, 1983 and is engaged in the manufacturing of
Footwear, Ground Sheets etc. in its SSI unit located at
Sahibabad Industrial Area, Ghaziabad, U.P. As per the DGS&D
Registration Certificate, the company is registered for supply of
various Footwear Items, Ground Sheets, Coats and Capes,
Mosquito Nets etc.
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V) M/s. Rajkumar Dyeing & Printing Works (Pvt.) Ltd. (Appellant in

Appeal No. 38 of 2013)
M/s. Rajkumar Dyeing & Printing Works (Pvt) Ltd. was
incorporated on 08.04.1999. As per the DGS&D Registration
Certificate, the company is registered for supply of various
Footwear Items, Rain Capes, Ground Sheets etc. being
manufactured in its SSI Unit located at Upendra Nath
Mukherjee Road, Kolkata.
VI) M/s. Preet Footwear (Appellant in Appeal No. 39 of 2013)
M/s. Preet Footwears is a partnership firm engaged in the
business of manufacturing of Rubber goods such as Hawai
Chappals, Canvas and other kind of shoes, Ground Sheets, etc.
in its SSI units located at Sports and Surgical Complex, Basti
Bawa Khel, Jalandhar and Una, Himachal Pradesh. As per the
DGS&D Registration Certificate, the company is registered for
supply of various Footwear items and Ground Sheets.
VII) M/s. S.S. Rubbers (Appellant in Appeal No. 40 of 2013)
M/s. S.S. Rubbers is a partnership firm and is engaged
inmanufacturing and supplying of different type of footwear
items, Rain Capes etc., which are supplied to Para Military
Forces and Indian Defence Services. These items are
manufactured in the firm's SSI unit located at Sports &
Surgical Complex, Basti Bawa Khel, Jalandhar. As per DGS&D
Registration Certificate, the firm is registered for supply of
various types of Footwear Items and Ground Sheets.
VIII) M/s. Shiva Rubber Industries (Appellant in Appeal No. 41 of
2013)
M/s. Shiva Rubber Industries is a Sole Proprietorship
concern engaged in the manufacturing of Footwear, Rain Coats,
Ground Sheets, Hospital Rubber sheeting etc. in its Micro SSI
unit located at Kandra Industrial Area, District Dhanbad,
Jharkhand. As per the DGS&D Registration Certificate, the firm
supplies various Footwear items, Ground Sheets, Rain Capes
etc. to Government Departments against DGS&D Rate
Contracts.
IX) M/s. Derpa Industrial Polymers (P) Ltd. (Appellant in Appeal No.
42 of 2013)
M/s. Derpa Industrial Polymers (P) Ltd. was incorporated in
1983. It is engaged in the manufacturing of various types of
Footwear and other Rubberized items such as Rain Capes,
Ground Sheets etc. in its SSI unit located at Rural Industrial
Estate, Loni, Ghaziabad, U.P. As per the DGS&D Registration
Certificate, the company is registered for supply of Rain Capes,
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Footwears, Synthetic Web Equipment, Sleeping Bags, Mosquito

Nets etc.
X) M/s. R.S. Industries (Appellant in Appeal No. 43 of 2013)
M/s. R.S. Industries is a Sole Proprietorship firm which was
established in 1992. It is engaged in manufacturing different
textile, jute and rubber items including Rain Coats, Ground
Sheets, Mosquito Nets, Bags, Footwears, Hospital Rubber
Sheeting etc. in its SSI unit located at Chingrighata Lane,
Kolkata.
XI) M/s. Puja Enterprises (Appellant in Appeal No. 08 of 2014)
M/s. Puja Enterprises is a registered partnership firm. It is
engaged in the manufacture of footwear items in its SSI Unit
located at Basti Bawa Khel, Kapurthala Road, Jalandhar. The
company is registered with DGS&D for supply of various
footwear items such as Boot Combat Rubber insulated White
High Altitude, Shoe, Canvas Rubber Sole, Polyester Blended
Duck Ankle Boot Rubber Sole and Textile Upper Rubber
Moulded Sole PT Shoes.”
3. The appellants and other manufacturers of similar products have
been participating in the exercise undertaken by the DGS&D from time
to time for execution of the Rate Contracts.
4. In response to Tender Enquiry No. AB(Duck/WL/6/RC-
11050000/1112/66 dated 14.06.2011 issued by the DG(S&D) for
finalising of new Rate Contracts for the Jungle Boots for the period
01.12.2011 to 30.11.2012 (the estimated requirement indicated in the
tender enquiry was valued at Rs. 10.45 crores), the appellants and
other manufacturers submitted their respective bids, which were
opened on 29.07.2011. Thereafter, the DGS&D held negotiations and
executed Rate Contracts with the successful bidders in July/August,
2011.
5. After about nine months, DG(S&D) made a reference to the
Commission under Section 19(1)(b) of the Act alleging that the
appellants had indulged in bid-rigging/collusive bidding for
determination of the price of the product and, thereby, caused loss to
the public exchequer. The Commission felt prima facie satisfied that a
case is made out for investigation. Accordingly, an order dated
08.05.2012 was passed under Section 26(1) and the Director General
(DG) was directed to conduct an investigation into the matter.
6. The DG issued notices to the appellants under Section 41(2) read
with Section 36(2) of the Act and called upon them to submit the
specified information/documents. The appellants complied with the
notices and furnished the required information and documents. Similar
notices were issued to M/s. Bihar Rubber Company Limited,
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Kolkata;M/s. Joy Lakshmi Supply Corporation, Kolkata; M/s. M.K.U.

Private Limited, Kanpur; M/s. Techno India, Jodhpur, Rajasthan; M/s.
Trimurti Industries Limited, Kolkata; Federation of Industries of India,
Delhi and M/s. C1 India Private Limited, Noida, and called upon them to
supply certain information and documents. They too responded to the
queries of the DG. He also recorded the statements of the
representatives of the appellants and third parties. After completing the
investigation, the DG submitted report dated 26.12.2012 with the
findings, which are summarised below:
“i) the OPs have repeatedly been quoting identical/near identical
prices against the tenders of DGS&D for conclusion of Rate
Contracts of the product in question under a collusive agreement.
ii) Direct and indirect evidences have established the existence of an
agreement between OPs for quoting identical/near identical prices
and not competitively.
iii) The collusive behaviour of the OPs has defeated the price
discovery mechanism of a competitive market, to the detriment of
the consumers who are government agencies in the instant case.
The OPs have thus been instrumental in determining prices of the
product under an agreement that violates the provisions of the
Act.
iv) The OPs have been engaged in bid rigging under an agreement
for manipulating the process of bidding.
v) The investigation has clearly brought out through direct and
indirect evidences that the quantity restrictions imposed by the
OPs was a result of concerted action of the OPs.
vi) The OPs have under an agreement controlled the supply of the
product in question and shared the market amongst themselves
through mutual allocation.”
7. As a sequel to the above, the DG recorded the following
conclusion:
“The investigation has established that the Opposite Parties have
violated the provisions of Competition Act, 2002 by their collusive
bidding in the tenders floated by DGS&D for the given product. The
conduct of Opposite Parties has been found to be in contravention of
the provisions of Section 3(1) read with Section 3(3)(a), 3(3)(c) & 3
(3)(d) of the Competition Act, 2002.”
8. In paragraphs 5.2 to 5.8 of Chapter 5, which are extracted below,
the DG discussed the nature of product, the relevant market and
position of demand and supply:
“The Product
5.2 Polyester Blended Duck Ankle Boot Rubber Sole commonly
known as Jungle Boots are special purpose boots used by personnel
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of Central Para Military Forces, State Police, Railways etc. mainly for
patrolling purposes. Though Jungle Boots is a commonly used
terminology, however, boots manufactured as per differing
specifications, using different raw materials and with differing
intended end use, prices etc. make them distinct from each other.
The specific product in the matter under reference is, “Polyester
Blended Duck Ankle Boot Rubber Sole confirming to Governing
Specifications G/TEX/Misc/55Boots Rubber (but with detachable sock
thickness 5mm.)”. The said governing specifications, prepared by
DGS&D, makes boots confirming to the aforementioned governing
specifications, distinct and different from boots manufactured with
differing specifications, raw materials, and intended use etc. Boots
confirming to the above mentioned governing specifications are
manufactured to meet the specific requirements of Paramilitary
Forces, State Police, Railways etc.
The Relevant Market
5.3 As aforementioned, Polyester Blended Duck Ankle Boot
Rubber Sole confirming to Governing Specifications
G/TEX/Misc/55Boots Rubber (but with detachable sock thickness
5mm.) is a distinct product meeting the specific requirements of
Central Para Military forces, State Police, Railways etc. for patrolling
purposes. The procurement of this item by various government
agencies is reserved for the Small Scale Sector.
5.4 During the course of investigations it has emerged that the
market of the product manufactured specifically conforming to the
above governing specifications, is restricted to Government agencies,
mainly paramilitary forces, State Police etc. since the laid down
specifications are specific to the requirements of these agencies. The
DDO's procure the product through such manufacturers of this
product who are registered with DGS&D, and who have been
awarded Rate Contracts for the product. As such the Relevant
Product Market has been identified as the market of Polyester
Specifications G/Tex/Misc/55Boots Rubber (but with detachable sock
thickness 5mm.) manufactured by DGS&D registered Rate Contract
holders under Section 2(t) of the Act.
5.5 As aforementioned the product is procured mainly by various
government agencies from DGS&D registered suppliers against the
Rate Contracts awarded to them and that these procurers are
geographically located across India. As such, the Relevant
Geographic Market has been identified as the market of Polyester
Specifications G/Tex/Misc/55Boots Rubber (but with detachable sock
thickness 5mm.) manufactured by DGS&D registered Rate Contract
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holders across India under Section 2(s) of the Act.

5.6 Thus the Relevant market has been identified as the market
across India of Polyester Blended Duck Ankle Boot Rubber Sole
confirming to Governing Specifications G/Tex/Misc/55Boots Rubber
(but with detachable sock thickness 5mm.) manufactured by DGS&D
registered Rate Contract under Section 2(r) of the Act.
Demand & Supply Position in Brief
5.7 The market for Polyester Blended Duck Ankle Boot Rubber
Sole confirming to Governing Specifications G/Tex/Misc/55Boots
Rubber (but with detachable sock thickness 5mm.) being limited to
various Government agencies procuring the same against DGS&D
Rate Contracts, and there being no demand in the open market for
the product no market data with respect demand/supply of the said
product could be found in the public domain. However, based on the
Supply Orders placed by the various government agencies for the
said product against DGS&D Rate Contracts during the previous
three years, a rough estimation of the demand of the said product
during the previous years has been made as under:
Sl. No. Year (Rc Period) Demand (Supply
Order Quantity in
Number of Pairs)
1. 2008-09 4,53,320
2. 2009-10 4,51,401
3. 2010-11 4,43,623
Note : The above details have been derived from copies of Supply
Orders/Performance Statements furnished by the OPs, as well as
details regarding Supply Orders furnished by DGS&D and there may
be minor variations in the figures.
5.8 Detailed party-wise break up of each of the Supply Orders for
the aforementioned Rate Contract periods is placed at Annexure-1, 2
& 3 respectively. The Supply Orders, Performance Statements
furnished by the parties as well as details regarding Supply Orders
furnished by DGS&D are being separately forwarded, in original, with
the files to Secretary, CCI.”
9. In Chapter 6 of the report, the DG discussed the methodology
adopted by the DGS&D for award of Rate Contracts and placement of
supply orders by different Drawing and Disbursing officers (DDOs). He
noted that the decision regarding conclusion of Rate Contracts are
taken at different levels in DGS&D based on the estimated requirement
for the particular period and while awarding Rate Contracts, the DGS&D
takes into consideration the following factors:
i) Rate contract should be awarded to at least to two firms.
ii) There should be enough number of Rate Contract holders (parallel
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RCs) to cater to the requirements.

iii) To the extent possible Rate Contract holders should be located in
different geographical areas to help the DDOs spread all over
India for getting supplies.
iv) When Rate Contracts are awarded, some of the past suppliers
should also be included to the extent possible, instead of having
only new entrants as the performance of new entrants may not be
known before hand and DDOs may have to face problems in
getting the supplies.”
10. In Chapter 7 of his report, the DG noticedthe
replies/clarifications and documents submitted by the DGS&D and
summarised the same in paragraphs 7.1 to 7.8, which are reproduced
below:
“7.1 In response to the Notice sent, DGS&D has submitted its reply,
clarifications and various documents vide its letter dated
02.08.2012, 10.10.2012 and 18.12.2012 DGS&D has explained in
detail about the instrument of Rate Contract, features of items
generally brought on Rate Contract, methodology of approving an
item for conclusion of Rate Contract, preparation of specifications
of the item of Rate Contract, tendering procedure of DGS&D and
factors considered for conclusion of Rate Contracts including
determination of Reasonable Rates. List of DGS&D registered
suppliers (Rate Contract holders) for Polyster Blended Duck Ankle
Boot Rubber Sole (governing specifications G/Tex/Misc./55Boot
Rubber with detachable Socks thickness 5mm.), for the years
2008-09 to 2010-11 has been furnished by DGS&D. With regard
to the query regarding market information, if any, gathered by
DGS&D for assessing prevailing prices of the item for which tender
dated 14.06.2011 was floated and whether any estimation of cost
was done for assessing the Rates quoted in the offers it has been
informed that the product manufactured as per DGS&D
specifications meets the specific requirements of its intended
users i.e. Paramilitary Forces etc. and as such being not readily
marketable it is difficult to ascertain any market price for the
same. It has further been informed that since the product was
already on Rate Contract for year 2010-11, the said Rates were
considered as per the basis, and variation in price indices of major
input materials such as Cotton, Polyester and Rubber along with
variation in general price indices was considered to arrive at
Reasonable Rates and that no cost study was conducted in 2010-
11 or at the time of concluding 2011-12 Rate Contract. It has also
been informed that the specifications of the product were laid
down by DGS&D w.e.f. 11.11.2003. Regarding the query about
the basis of finalization of Rates for the first Rate Contract period
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after finalization of the specifications, it has been informed that

records pertaining to the said period being not available, the
required information was not available with DGS&D. It has further
been informed that while concluding Rate Contracts for 2011-12,
no increases was allowed over the 2010-11 Rate Contract Rates.
7.2 Further, with regard to the details/documents etc. with respect
to the tenders opened on 29.07.2011 against the Tender Enquiry
dated 14.06.2011, DGS&D has furnished copies of initial
proposals. Brief and Minutes of Tender Purchase Committee
Meetings held with respect to conclusion of Rate Contracts against
the said tender enquiry along with copies of the tender enquiry
and copies of offers received from various bidders. DGS&D has
also furnished copies of Tender Enquiries floated by it for the
product for earlier years starting from 2008-09 onwards.
7.3 It has been informed that during 2008-09 and 2009-10, the
tenders were submitted electronically. The price bid details of all
the bidders during the above periods have been furnished by
DGS&D. However, details regarding time and date of submission
of the offers have been informed to be not available on DGS&D
server as the service provider for e-bidding at that time was no
longer associated with DGS&D.
7.4 During 2010-11 and 2011-12 manual tendering was followed
and copies of the tender offers have been furnished. As per the
information submitted, against the Rate Contract of the product
for the period 2010-11, offers from 11 parties were reportedly
received on 11.08.2010 and from one party on 09.08.2010.
Regarding Rate Contract for the period 2011-12, offers from 09
parties were reportedly received on 29.07.2011 and from two
parties on 27.07.2011.
7.5 DGS&D has also furnished details of Supply Orders for the
product placed by DDO's on the Rate contract holders for the Rate
Contract periods 2008-09, 2009-10 & 2010-11 and has informed
that due to certain digital certificate problems, server problems
etc. there could be minor discrepancies in the data furnished.
7.6 DGS&D has furnished clarification regarding basis of its
allegations of total estimated demand being allocated by the
bidders amongst themselves through imposition of quantity
restrictions.
7.7 Regarding the query about any association of manufacturers of
the product, it has been informed by DGS&D that though no
Association has come to its notice, however, Federation of
Industries of India, Delhi had in the past sent a letter to it
regarding delay in conclusion of Rate Contract for the said item.
7.8. DGS&D has informed that at the time of opening of tenders ON
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29.07.2011, representatives from only four of the opposite parties

were present and that there is no information regarding bidders
being represented by a common representatives.”
[Emphasis supplied]
11. The DG then identified the following issues:
“1. Whether conditions prevailing specifically with respect to the
industry, the product in question, its market etc. were conducive
for collusive action by the Opposite Parties.
2. Whether the identical/near identical prices quoted by the OPs
against the Tender Enquiry of DGS&D dated 14.06.2011 were a
result of collusion amongst the OPs and whether there are any
direct or indirect evidences in support of an agreement, formal or
informal between OPs for bid rigging in violation of the provisions
of Section 3(1) read with Section 3(3) of the Act as alleged by the
IP.
3. Whether, the restriction of total quantity to be supplied during the
R.C. period and the restriction of maximum quantity to be
supplied per DDO was a result of collusion amongst the OPs and
whether there are any direct or indirect evidences of collusive
agreement amongst the manufacturers in violation of the
provisions of Section 3(1) read with Section 3(3) of the Act as
alleged by the IP.
4. Whetherthere is any violation of the Act under Section 3(4) as
alleged by the Informant.”
12. In paragraphs 8.8 to 8.14 of his report, the DG noted that the
appellants are registered suppliers of DGS&D for past several years in
respect of various products and have been repeatedly bidding against
the tenders floated for award of the Rate Contracts; that they are
regionally located in close proximity to each other (four in Jalandhar,
three in Ghaziabad, two in Kolkata and one each in Dhanbad and
Kanpur); that in past four years, only one new manufacturer entered
the market in 2009-10 and some of the manufacturers exited the
market; that the demand has remained static during the Rate Contracts
periods 2008-09, 2009-10 and 2010-11 (about 4,50,000 pairs of
Polyester Blended Duck Ankle Boot Rubber Sole) leaving little scope for
other competitors to step in; that there is no substitute of the product
which is required to be manufactured as per the specifications
prescribed by the DGS&D and there are no other buyers of the same
except the Government Agencies; that the Rate Contract is essentially
a mechanism for fixing the price for a specified period with no
assurance of firm orders for the Rate Contract holders and
repeatedlyconjectured that all these factors are conducive to collusive
bidding. In order to show that the DG has been extremely casual in
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making observations suggesting that the appellants had indulged in

collusive bidding, paragraphs 8.8 to 8.14 of the report are reproduced
below:
“8.8 Investigation has revealed that the OPs are registered
suppliers of DGS&D for the past several years and have repeatedly
been bidding over the years against the tenders of DGS&D floated for
awarding Rate Contracts for the product as well as for other items for
which they are registered with DGS&D. The OPs have been
consistently bidding against the Tender Enquiries of DGS&D for the
product during the last few years. Some of these OPs are regionally
located in close proximity to each other-four in Jalandhar, three in
Ghaziabad, two in Kolkata and one each in Dhanbad and Kanpur. As
such, the conditions are conducive for reaching an agreement for bid
-rigging amongst the bidders being the only eligible bidders, bidding
repeatedly against DGS&D tenders over the years.
2. When few businesses have recent entered or are likely to
enter a market, the existing players in that market are protected
from the competitive pressure of potential new entrants.
8.9 In this case, investigation has revealed that during the past
four years, barring one opposite party who entered the market in the
year 2009-10 (another OP who had acquired the business segment
to which the product belongs, from its group company in 2010 has
not been considered as a new entrant) there have been no new
entrants. Rather, few past players have exited and the OPs have
been the only consistent players in the market for the product.
Further, the demand having remained almost static during previous
few years and the high installed capacity of the product of the
existing Rate Contract holders acts as a deterrent for new entrants.
As such, due to the stagnating demand during the last few years and
the already available high installed capacity of the OPs, there have
been no significant new entrants nor likely to enter the market in the
future and the existing suppliers are protected from competitive
pressure of new entrants. The conditions prevailing are thus
conducive for an agreement amongst the existing players for
collusion.
3. Significant changes in demand or supply conditions are
generally not conducive for collusive agreements.
8.10 Investigation has revealed that the demand of the product in
question has been stagnating at almost the same level during the
past three years as per the figures of Supply Orders placed by the
various procurers. As per the data regarding Supply Orders placed
during the Rate Contract period 2008-09, 2009-10 and 2010-11 the
demand has been stagnant at about 4,50,000 pairs during each of
the aforementioned RC periods. As such, the demand and supply
-----------------------------------------------------------------------------------------------------------------------------------------------------------
conditions are conducive for collusion in the instant matter.

xx
8.11 In the instant case, the product being the same for all the
bidders, and since the specifications of DGS&D make the product in
question distinct as the boots manufactured as per differing
specifications cannot be considered substitutable. As such the
product being the same, the probabilities of bidders reaching an
agreement on a common price structure are high.
8.12 In addition to the above conditions, investigation has
revealed that the instrument of Rate Contract has certain features
that are inherently conducive for collusive action.
8.13 Rate Contract being merely an agreement whereby the
Supplier(s) agrees to supply to the Purchaser, specified stores at
specified prices during the period covered by the Contract and there
being no assured minimum purchase quantity, the Rate Contract
holders do not have any incentive to quote rates competitively.
8.14 Rate Contracts being essentially a mechanism of fixing prices
for a specified period with no assurance of firm orders for the Rate
Contract holders, there is no incentive for competitive bidding of
rates which only results in lowering the Rate Contract Rates for all
without any consequential benefits in the form of assured orders.
The above scenario is thus conducive for collusive bidding.”
[Emphasis supplied]
13. The DG then referred to the rates quoted in response to the four
Tender Enquiries dated 16.04.2008 (Rate Contract period from
01.09.2008 to 31.08.2009), 30.07.2009 (Rate Contract period from
01.09.2009 to 31.08.2010), 11.08.2010 (Rate Contract period from
01.09.2010 to 31.08.2011) and 29.07.2011 (Rate Contract period from
01.12.2011 to 30.11.2012), noted that the variation in the prices
quoted by most of the tenderers were identical or there was a
difference of 1% or less, referred to the replies furnished by M/s. A.R.
Polymers Pvt. Ltd., M/s. Derpa Industrial Polymers (P) Ltd., M/s. M.B.
Rubber Pvt. Ltd., M/s. H.B. Rubber Pvt. Ltd., M/s. Preet Footwears, M/s.
Puja Enterprises, M/s. R.S. Industries, M/s. Rajkumar Dyeing & Printing
Works Pvt. Ltd., M/s. S.S. Rubbers, M/s. Shiva Rubber Industries and
M/s. Tirupati Footwears Pvt. Ltd. to specific question put in the context
of identity/similarity of rates and made the following observations:
“8.28 As per the Statements, in the matter of exactly identical
prices quoted by the OPs during the aforementioned Rate Contract
periods, none of the OPs has been able to give any reasonable
explanation as to how the rates quoted were identical.
8.29 In view of the above, it can be stated that the identical
prices quoted by the OPs(including group company of one of the
-----------------------------------------------------------------------------------------------------------------------------------------------------------
OPs) during the RC periods 2008-09 and 2009-10 and thereafter

identical/near identical prices quoted during subsequent years was a
result of collusive agreement amongst the OPs.
8.30 Investigation has thus examined whether there are any
direct or indirect evidences that conclusively establish the existence
of such an agreement. The evidences gathered in this respect are
detailed below:
Identical Cost
8.31 In view of the stand taken by all the OPs with respect to the
identical/near identical rates quoted by them against tender opened
on 29.07.2011 and 11.08.2010, that since the raw material and
other costs for all the manufacturers were more or less same, as
such, their quoted prices were also almost same, it has been
observed from the information gathered during investigation that as
per the copies of Annual Accounts for the year 2010-11 submitted by
the OPs, there are significant differences in the size of operations of
the different OPs in terms of their turnover which ranges from about
Rs. 284 lakhs to Rs. 3971 lakhs. It has been observed that as per
the DGS&D Registration Certificates of the OPs, not only the product
range varies between different OPs but their production capacities of
different items for which they are registered, too are different. Even
with respect to the specific product, the installed capacity of the OPs
ranges from 48,000 pairs per annum to 2,40,000 pairs per annum.
Further, these OPs are also located in different geographical regions.
8.32 During the record of statements the OPs had informed that
raw material cost was a major component of the total cost of the
product and that Rubber and Latex constitute a substantial cost
component in the total cost of the raw materials. It has been
observed that the rates of Rubber and Latex are prone to significant
fluctuations over a given period of time as per the data of prices
posted on the website of Rubber Board. As such identical/near
identical estimation of average cost of raw materials (including cost
of a major raw material whose prices are subject to significant
fluctuations) over the Rate Contract period by different OPs is
improbable.
8.33 Considering all the aforementioned factors, it is concluded
that the cost of production and sales of all the OPs for the product
could not be so similar as to result in identical/near identical prices
quoted by them.
8.34 During the course of investigation, details of cost of
production per thousand pairs of the product in different size slabs
for the previous three years and breakup of the prices quoted against
the Tender Enquiry dated 14.06.2011 in terms of cost component
and profit component were sought from the OPs. However, barring
-----------------------------------------------------------------------------------------------------------------------------------------------------------
few OPs who had furnished a breakup of the quoted prices in terms
of cost component and profit component, the others either expressed
inability to work out the details on the ground of multiple products,
non-availability of information etc. or did not respond with the
details. As such the matter was taken up with the concerned OPs
during the course of recording of statements. As per the details
furnished some of the OPs in their written replies as well as during
the course of recording of statements, it has been observed that the
approximate profit component/margins have been stated by the OPs
to vary from 2% to around 15% as under:
Sl. No. Name of the Company/Firm Approximate Profit
Component/Margin
1. M/S. A.R. Polymers Pvt. Ltd. 10%
2. M/S. S.S. Rubbers 12.80%
3. M/S. H.B. Rubber Pvt. Ltd. 13.70% to 15.62%
4. M/S. M.B. Rubber Pvt. Ltd. 15%
5. M/S. Derpa Industrial Polymers Pvt. 10% to 15%
Ltd.
6. M/S. Tirupati Footwear Pvt. Ltd. 7% to 8%
7. M/S. Shiva Rubber Industries 2% to 3%
8. M/S. Rajkumar Dyeing & Printing 7% to 8%
Works Pvt. Ltd.
9. M/S. R.S. Industries 5% to 10%
8.35 Thus, it is evident that the profit component/margins of
some of the OPs in the quoted prices being at variance, the cost
component too, have to be different, if the final Rates quoted by the
OPs are to remain identical/near identical. The differences in the cost
are thus contrary to the contention of the OPs that the costs between
various manufactures being similar, the rates quoted are identical.
This confirms that the identical/near identical prices are a result of
collusion amongst the bidders. The break up of quoted prices given
by the parties at Sl. No. 1 to 5 of the above table are enclosed as
Annexure-53 and in respect of parties at Sl. No. 6 to 9, the details
are as per their statements enclosed as Annexures-55, 54, 52 & 51
respectively.”
14. The DG also took cognizance of the reasons put forward by the
appellants for quoting identical or near identical prices in response to
the different tender enquiries and observed that even though they had
been adopting different criteria for quoting the rates, the same
culminated in identical/near identical rates and this could not have
been possible without collusive bidding.
15. The DG next considered whether the appellants had shared
-----------------------------------------------------------------------------------------------------------------------------------------------------------
information and concluded that the appellants had acted in

contravention of Section 3(1) read with Section 3(3)(a) and Section 3
(3)(d) of the Act by determining the prices and bid-rigging. Paragraphs
8.44 to 8.54, which contain discussion on this issue, are extracted
below:
“8.44 During recording of statement in case of H.B. Rubber Pvt.
Ltd., it was asked whether the company or its Directors discussed or
shared information regarding prices, market etc. or had dealings
with its competitors. The relevant extract of the statement is
reproduced below:
Q.8 Who are your main competitors for this product?
Ans. The parallel R.C. holders are our competitors.
Q.9. Does the company or its Directors discuss or share
information regarding prices, market etc. or have dealings with these
competitors?
Ans. No. we do not share information regarding prices, market
etc. nor have any dealings/meetings with these competitors.
8.45 However, it has been observed that two of the directors on
the board of M/s. H.B. Rubber Pvt. Ltd. are sons of two directors on
the board of M/s. M.B. Rubber Pvt. Ltd. Further, as per the audited
Annual Accounts submitted by these OPs for the year ended
31.03.2011, not only are there financial transactions in the Annual
Accounts of these companies with respect to the Directors/their
relatives. M/s. H.B. Rubber Pvt. Ltd. has been shown as an
Associated Company of M/s. M.B. Rubber Pvt. Ltd. and there are
Sales & Purchase transactions between these companies. The above
is contrary to the given statement that there are no dealings with
competitors. As such it can be concluded that the identical/near
identical prices quoted by these companies was a result of sharing of
information and meeting of minds due to their inter linkages. Copies
of Audited Annual Accounts of M/s. H.B. Rubber Pvt. Ltd. and M/s.
M.B. Rubber Pvt. Ltd. for the year ended 31.03.2011 are enclosed as
Annexure-59 & 60 respectively.
8.46 Investigation has revealed that certain OPs are either
presently members, or had in the past been members of a trade
federation namely, Federation of Industries of India (FII), Delhi.
Some of the OPs during recording of statements have maintained
that the Federation did not provide a common platform for its
members and that various issues are taken up by the members, as
and when they arise, on an individual basis and not collectively. It
has however been observed from the information gathered from FII
that a meeting of the OPs (members as well as non-members) had
in the past been convened by FII on 20.10.2009 at PSK, Laxmi
Nagar, District Centre, Delhi for eliciting views regarding various
-----------------------------------------------------------------------------------------------------------------------------------------------------------
problems to be discussed with DGS&D in its forthcoming meeting.

Copies of the letter dated 14.10.2009 issued by FII for convening
the meeting and clarifications given by FII vide letter dated
23.11.2012 with regard to the agenda of the meeting, its minutes
and the participants are enclosed as Annexure-61 & 42 respectively
wherein FII has informed that there was no formal agenda for
discussion nor any formal minutes of the meeting and that only few
parties had attended the meeting.
8.47 The above is contradictory to the above statement of some of
the OPs to the effect that issues are taken up individually and FII
does not provide a common platform. The possibility of discussion of
prices etc. amongst competitors in such a forum cannot be ruled out.
(This observation is based on conjectures and is contrary to the
facts established from the record of the Federation of Industries of
India. It is also beyond the apprehension of any reasonable person
as to how in the meeting held on 20.10.2009 at Delhi, which was
attended by the representatives of the few appellants, could have
been used for fixing the price for execution of the Rate Contract for
2011-12).
8.48 In the matter of sharing of information between competitors
which has consistently been denied by the OPs, it has been observed
during examination of various documents submitted by the OPs that
against the Notices sent to them, one of the OPs, namely M/s. Preet
Enterprises, had submitted copies of certain documents being
Performance Statements pertaining to other OPs, namely, M/s. Shiva
Rubber Industries, M/s. R.S. Industries, M/s. S.S. Rubber, M/s. Puja
Enterprises, M/s. MKU Private Limited (Group company of M/s. A.R.
Polymers Pvt. Ltd., one of the OPs), M/s. M.B. Rubber Pvt. Ltd. and
M/s. Derpa Industrial Polymer Pvt. Ltd. It may be mentioned that
Performance Statements contain details of total value of orders
received, value of orders due to supply by the cut of date, value of
orders supplied upto cut of date etc. pertaining to the party
concerned and forms part of the bid documents submitted by the
bidders. The competitors are thus not privy to the information
contained in the Performance Statement being specific to the party
concerned unless shared between the competitors.
8.49 In view of the above, explanation in the matter was sought
from the firm during the recording of statement and response to the
queries was as under:
Q.14 I am showing you a document submitted by you vide
your letter dated 25/08/2012. Please explain what is this
document and confirm whether the same was part of the bid
submitted by you on 14.04.2008 throughe bidding against
-----------------------------------------------------------------------------------------------------------------------------------------------------------
DGS&D enquiry for the item in question for the RC period

01.09.2008 to 31.08.2009.
Ans. This is a performance statement which was submitted with
our e-tender bid on 14/4/2008.
Q. 15 Can the information and documents uploaded with the bid
be accessed by other bidders? Are these details shared between
competitors prior to or after the bids are opened.
Ans. No the information and documents uploaded with the bid
cannot be accessed by other bidders as the same are password
protected and are also not shared between competitors prior to or
after the bids are opened.
Q.16 I am showing you certain document submitted by you vide
your letter dated 30/07/2012 as enclosures of your bid submitted on
29/07/2009 throughe bidding against DGS&D enquiry for the item in
question for the RC period 01.09.2009 to 31.08.2010. Please
reconfirm that these documents have been submitted by you.
Ans. Yes these documents which are performance statements
have been submitted by us.
Q.17 Please explain how these documents, which are performance
statements of some of your competitors, in your possession?
Ans. I am unable to recollect how these documents came in my
possession.
8.50 The documents submitted by M/s. Preet Footwears are
enclosed as Annexure-62.
8.51 It is evident that though the OPs have consistently been
denying that there is any meeting of minds between competitors or
sharing of information between them, the possession of certain
documents of various competitors with one of the OPs, which by its
own admission are otherwise not accessible to others, conclusively
proves that the competitors share information amongst themselves
and the rates being quoted and quantity restrictions being imposed
by them against DGS&D tenders from time to time are a result of
collusion.
8.52 It may be mentioned that as per the DGS&D methodology of
awarding Rate Contracts, offers of rates are invited from registered
suppliers of any items and for assessment of the quotations
received, Reasonable Rates are worked out by DGS&D based on
previous RC rates adjusted by various price indices. These
Reasonable Rates are the ceiling Rates based on which counter
offers, if required, are made to the bidders. As such, the Reasonable
Rates are in the nature of benchmark defining the upper limit of
rates. In the event of rates being received by DGS&D below the
Reasonable/Ceiling Rates, no counter offer is resorted to and Rate
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Contracts can be concluded at rates below the Reasonable/Ceiling

Rates. The OPs being well conversant with the DGS&D methodology
quote identical/near identical in collusion and not competitively since
in the event of lower rates being quoted by the bidders which may
be below the Reasonable/Ceiling Rates worked by DGS&D, the
implication of the same would be lowering of the Rate Contract rates
for all the bidders. As such, the OPs indirectly determine the prices
since in a situation where quoted rates are higher than the
Reasonable/Ceiling Rates, DGS&D is constrained to counter offer the
Ceiling Rates which are not the best rates/competitive rates and
defeat the substantiated by the fact that with respect to the rates
quoted by them against the Tender enquiry of DGS&D dated
14.06.2011 for the RC period 01.12.2011 to 30.11.2012, all the OPs
subsequently accepted the reduced counter offered rates of DGS&D,
being the same rates, as had been fixed for the previous RC period
01.09.2010 to 31.08.2011, without any increase.
8.53 It has thus been established that the identical/near identical
prices quoted by the OPs from time to time against the tenders of
DGS&D for the given product inspite of variations in cost factors
arising out of differences in product range, installed capacities, size
of operations, tax structure, sources of procurement of raw materials,
basis adopted for giving quotations etc. as well as on account of the
OPs being geographically located in different regions and, as also
evidenced by the direct evidence of sharing of information by
competitors, is thus, possible only if the rates quoted were of result
of concerted action of the OPs.
8.54 Based on the above analysis and direct and indirect
evidences, it can be conclusively stated that the OPs have
contravened the provisions of Section 3(1) read with Sections 3(3)
(a) and 3(3)(d) of the Act by determining prices and bid rigging
respectively.”
[Underlining is mine]
16. The DG finally considered whether the restriction of maximum
quantity to be supplied to various DDOs was justified, took cognizance
of the replies given by the appellants and observed as under:
“8.64 As per the statements given by OPs, it has been observed
that the OPs have given different reasons for imposing quantity
restrictions such as manufacturing other footwear items other than
the product using the same facilities, problems arising out of
simultaneous placement of orders such as late delivery charges as
well as untenable reasons such as to secure more orders, to limit
commitment to installed capacity etc. Further, one of the OPs
namely M/s. Preet Footwears when asked to substantiate with
documentary evidences, its contention regarding late delivery
-----------------------------------------------------------------------------------------------------------------------------------------------------------
charges incurred in the past due to simultaneous placement of

orders, submitted vide its letter dated 01.10.2012 copies of some
correspondence with some indentors in the said matter. However, it
has been observed that none of the said letters pertain to the
product in question. As far as the other parties, none of them have
been able to substantiate their so called claim on account of late
delivery charges. Further, in view of the contention of some OPs
regarding same production facilities being used for manufacture of
other footwear items as one of the reasons for imposing quantity
restrictions, clarification in the matter was sought from DGS&D. In
this respect DGS&D has vide its letter dated 20.12.2012 clarified
that the assessed capacities of different footwear items as per the
Registration Certificates are standalone capacities individually
assessed for each footwear item. As such, the above contention of
the OPs is also not tenable. Copy of the reply of DGS&D dated
26.12.2012 is enclosed at Annexure-65.
8.65 Investigation has revealed that imposition of quantity
restrictions by the OPs with the exception of M/s. R.S. Industries had
commenced only from the RC period 2010-11 and that no such
restrictions were being imposed during earlier RC periods. As such, it
is evident that unless taken in collusion, the decision of the OPs to
impose quantity restrictions that too simultaneously from the RC
period 2010-11 would have been based on factors prevailing during
earlier RC periods of 2008-09 & 2009-10.
Quantity Restrictions vis a vis Supply Orders
8.66 Investigation has, gathered details of the Supply Orders
placed by DDO's upon various RC holders when no restrictions had
been stipulated as per following details:
Supply orders for RC period 01.09.2008 to 31.08.2009
Sl. No. Name of the Company/Firm Quantity in
Pairs
1 H.B. Rubber Pvt. Ltd. 6934
2 R.S. Industries 47278
3 M.B. Rubber Pvt. Ltd. 51466
4 Puja Enterprises 30204
5 Derpa Industrial Polymers Pvt. Ltd. 114336
6 Preet Footwears 51632
7 Tirupati Footwears Pvt. Ltd. 16360
8 S.S. Rubbers 75887
9 Shiva Rubber Industries 6261
10 Bihar Rubber Company 2957
11 Mku Pvt. Ltd. 46584
-----------------------------------------------------------------------------------------------------------------------------------------------------------
12 Joy Lakshmi Supply Corpn. 3421

Total 4,53,320
Supply Orders for Rc Period 01.09.2009 to 31.08.2010
Pairs
4 Rajkumar Dyeing & Printing Works Pvt. 21179
Ltd.
11 Bihar Rubber Company 3095
12 Mku Pvt. Ltd. 63684
13 Trimurti Industries 606
Total 4,51,401
8.67 It can be observed from the details of Supply Orders
received by some of the OPs, that the order quantity received by
them during 2008-09 & 2009-10 was not only very low compared to
their installed capacity, there was no justification for fixing the
restriction for maximum quantity at a level, which was much higher
than the Supply Orders received by them during the said RC periods
except that the said restrictions were necessitated under an
agreement between the OPs and had thus to be in line with the
quantity restrictions of others. Had the contentions of these parties
been true, the restriction of quantity would have been in sync with
the Supply Orders being received by them and not in tandem with
the others. It has also been observed that one of the OPs had
imposed quantity restriction at a level which was even higher than
its installed capacity and as such the self imposed restriction had no
justification except that the same, under the agreement amongst the
OPs had to be in line with the quantity restrictions of the other OPs.
The detailed break up of Supply Orders is placed as Annexure-1 & 2.
8.68 The above can be easily appreciated from the following:
Sl. No. Name of Supply Orders Quantity Installed
Company/Firm Restrictions Capacity
-----------------------------------------------------------------------------------------------------------------------------------------------------------
for the Rc
2008- 2009-
Period
09 10
2010-11
1 M/S. H.B. 6934 7645 45000 96000
Rubber Pvt.
Ltd.
2. M/S. Puja 30204 19203 50000 144000
Enterprises
3. M/S. Tirupati 16360 22095 50000 72000
Footwears Pvt.
Ltd.
4. M/s. Rajkumar - 21179 50000 48000
Dyeing &
Printing Works
5. M/S. Preet 51632 26680 50000 120000
Footwears
8.69 On the basis of the above, it can be concluded that the OPs
inspite of having adequate installed capacity and inspite of some of
the OPs securing low quantity orders had imposed restrictions at
similar levels under an agreement/arrangement for sharing the
market.
8.70 Since, the OPs had imposed quantity restrictions against the
RC period 2011-12, the details of Supply Orders during RC Period
2010-11 were also gathered and are tabulated below:
Supply Orders for RC period 01.09.2010 to 31.08.2011.
Pairs
4 Rajkumar Dyeing & Printing Works Pvt. 40575
Ltd.
8 A.R. Polymers Pvt. Ltd. 72013
Total 4,43,623
The detailed break up of Supply Orders as tabulated above is
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placed as Annexure-3.
8.71 As can from the above details of Supply Orders, the total
supply orders placed by various DDOs during the RC Periods 2008-
09, 2009-10 & 2010-11 were as under:
Sl. No. Rate Contract Period Total Supply Orders in
Pairs
1. 01.09.2008 to 4,53,320
31.08.2009
2. 01.09.2009 to 4,51,401
31.08.2010
3. 01.09.2010 to 4,43,623
31.08.2011
8.72 The figures of Supply Orders are derived from the copies of
supply orders/performance statements furnished by OPs and
information furnished by DGS&D and may be subject to minor
variations.
8.73 The figures indicate that the demand for the product during
the last few years has remained static and is much lower than the
total installed capacity of the various manufacturers. The demand
having remained static at levels much below the total installed
capacity and some of the OPs being unable to get adequate Supply
Orders, have under an agreement/arrangement with a view to
equitably distribute the total demand amongst themselves, imposed
total quantity restrictions as well as restrictions per DDO.”
17. The DG also took cognizance of the meeting held on 13.03.2009
under the aegis of the Federation of Industries of India and held that
the discussion made in the meetings is indicative of an agreement
amongst the competitors to share the market.
18. On Issue No. 4, the DG returned a negative finding by observing
thatthe appellants are not at different stages or levels of production
chain and as such, they cannot be held guilty of acting in violation of
Section 3(4) of the Act.
19. In the last part of his report, the DG analysed the provisions of
Section 3 of the Act and recorded the following observations:
“9.3 All the OPs in the instant case are DGS&D registered Rate
Contract holders of Polyester Blended Duck Ankle Boots of Governing
Specifications G/TX/Misc/55/Boots Rubber (but with detachable sole
thickness 5mm), which is procured by various Government agencies
against the Rate Contracts awarded by DGS&D. For securing Rate
Contracts, the OPs have been submitting their bids against the
tender enquiries floated by DGS&D for the said item from time to
time. Investigation has revealed that the OPs have been submitting
identical/near identical rates against the tenders of DGS&D and that
-----------------------------------------------------------------------------------------------------------------------------------------------------------
direct and indirect evidences have established that the identical/near

identical rates are a result of collusion amongst the bidders. These
bidders being well conversant with the DGS&D methodology of
awarding Rate Contract, by not bidding competitively, and by
quoting identical/near identical rates, have, indirectly determined
prices/rates in the Rate Contracts finalized by DGS&D and indulged
in bid rigging or collusive bidding thereby contravening the
provisions of Section 3(1) read with Section 3(3)(a) & 3(3)(d) of the
Act.
9.4 Further, the OPs being the Rate Contract holders of the
product are the only source of procurement for the product in
question by various DDOs. These OPs have imposed quantity
restrictions in terms of total quantity to be supplied by them
individually during the Rate Contract period as well as the maximum
quantity to be supplied to a particular DDO during the said period.
The imposition of quantity restrictions had been started by all the
OPs simultaneously from the RC period 2010-11, and no such
restrictions were being imposed by them in prior periods. The
product in question being an essential item of procurement for
Paramilitary Forces, State Police etc., who procure the same against
the Rate Contracts of DGS&D, as such, left with no alternate sources
of supply for these agencies, DGS&D has been constrained to
conclude Rate Contract with the OPs inspite of the quantity
restrictions imposed by them. Investigation has clearly established
through direct and indirect evidences that imposition of quantity
restrictions by the OPs was an act of collusion aimed at distribution
of total demand of the product amongst themselves.
The OPs by imposing quantity restrictions for the RC period as
well as per DDO have thus controlled the supply of the product in
question and shared the market of the product amongst themselves
under an agreement/arrangement and by bid rigging thereby
contravening the provisions of Section 3(1) with Sections 3(3)(b)
and 3(3)(d) of the Act.”
20. The report of the DG was considered by the Commission in its
ordinary meeting held on 09.01.2013 and it was decided that copies
thereof be forwarded to the informant i.e. DGS&D and the Opposite
Parties (Appellants herein) to enable them to file their
replies/objections.
21. The appellants filed separate detailed replies to controvert the
findings recorded by the DG. They generally pleaded that the findings
recorded by the DG on the issue of bid-rigging/collusive
bidding/cartelisation are based on pure assumptions and conjectures
and no evidence was available to prove the allegation of collusive
bidding or cartelisation. The appellants also justified quoting identical
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or near identical price for the product i.e. Jungle Boots by making the
following assertions:
a) The specification of the product was prescribed by the DGS&D and
all the manufacturers were to comply with the same.
b) The quality and quantity of the raw materials used in
manufacturing the Jungle Boots were the same.
c) The time taken for production of the Jungle Boots, the quantum of
electricity consumed, labour cost, packaging of goods were also
substantially similar.
d) The manufacturers used to quote the rates keeping in view the
rates at which the previous Rate Contract had been executed.
e) The DGS&D finally awarded the contract after holding negotiations
with the bidders.
f) While fixing the price of the product for the Rate Contract, the
DGS&D used to take consideration the following factors:
i) The rates received in the tender.
ii) The rates of direct purchases made by the Central
Government/State Government/PSUs/autonomous bodies for
the item or similar items.
iii) Cost break up collected from the tenderers.
iv) Cost study conducted by DGS&D.
v) Variation in the price indices and raw material prices if such
information is available.
22. The appellants also justified the quantity restrictions on the
following grounds:
(i) The DGS&D had assessed the capacity of the manufacturers in
respect of only one product whereas the bidders were
multiproduct companies.
(ii) After determination of the Rate Contract, the concerned
purchasing authority used to place orders specifying the time for
supply and in case of delay, late supply charges were levied @ 2%
of the total contract price for every month or a part thereof during
which the supply may be delayed. In order to avoid levy of late
supply charges, the bidders quoted rates for limited quantity.
(iii) The appellants and other manufacturers used to bid for award of
contract in respect of other products for which tenders were
issued by other Government Departments/Agencies and they had
to meet the time-schedule fixed for supply of those items. They
are also selling other products in the open market to keep in view
the time-schedule for supply of such items.
23. Along with the replies, the appellants submitted documents to
support their stand of various issues and finally pleaded that it was not
a case of conscious price parallelism and in the absence of any plus-
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factor, the quoting of identical or near identical price cannot lead to a

logical inference that they had indulged in collusive-bidding and
thereby contravened the provisions of Section 3(1) read with Sections 3
(3)(a) and 3(3)(d) of the Act.
24. The Commission gave opportunity of hearing to the parties and
passed the impugned order whereby it approved the findings and
conclusions recorded by the DG and imposed penalty on the appellants
under Section 27(b) @5% of the average of the turnover for the last
three preceding financial years.
25. In paragraphs 21 and 22, the Commission noted the facts
relating to the reference made by the DGS&D, the rates quoted by the
appellants and observed:
“23. From the above, it is noticed that each of the opposite parties
had quoted six rates depending upon the colour/print and the size
slab of the product. Within each category, the bidders quoted almost
similar rates with a price differential in rates in the range of only
about 1%. The DG also examined the quotations given by the
bidders including the opposite parties herein against the previous
tender floated by DGS&D for the product for the relevant Rate
Contract period (01.09.2010 to 31.08.2011) and observed that
within each category the bidders quoted near identical rates and the
variation in the rates was in the range of 1%. The rates quoted by
the opposite parties for the RC period 01.09.2009 to 31.08.2010
were also found exactly identical for each category with a price
differential of only one paisa in two of the six rates quoted. Similarly,
the rates quoted by the opposite parties for the RC period
01.09.2008 to 31.08.2009 were also found exactly identical for each
category with a price differential of only one paisa in four of the six
rates quoted.
24. During the course of the investigation, the DG specifically put
to the opposite parties the identical or near identical pattern of
quotations with a price differential of only about 1%. In response
thereto, the opposite parties maintained that since raw material and
other costs for all the manufacturers were more or less the same, as
such, their quoted prices were also almost same. Besides, some of
the opposite parties were unable to give a reasonable explanation as
to how the rates quoted were so similar. Some simply feigned
ignorance, some termed it as co-incidence and yet some could not
recollect.”
26. The Commission then adverted to the definition of the term
‘agreement’ and made general observations as to how the
suppliersindulged into collusive bidding, discussed the factual matrix of
the case and agreed with the DG on each and every aspect of his
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findings. This is evident from paragraphs 27 to 49 of the impugned

order, which are reproduced below:
“27. In the present case, indistutably the opposite parties quoted
near identical rates with reference to the Tender Enquiry under
reference for RC period 01.02.2011 to 30.11.2012. The Commission
observes that the quotation of near identical rates by the firms is no
doubt suggestive of an indicative of formation of a cartel but the
same in itself is not conclusive and determinative of the issue.
28. In this regard, the Commission notices from the report of the
DG that as per the copies of Annual Accounts for the year 2010-11
submitted by the opposite parties, there are significant differences in
the size of operations of the different opposite parties in terms of
their turnover which ranges from about Rs. 284 lakhs to Rs. 3971
lakhs. Further, from the DG S&D Registration Certificates of the
opposite parties, it was observed by the DG that not only the product
range varies between different opposite parties but their production
capacities of different items for which they are registered, too are
different. Even with respect to the specific product, the installed
capacity of the opposite parties ranges from 48,000 pairs per annum
to 2,40,000 pairs per annum. Moreover, these opposite parties are
also located in different geographical regions.
29. The Commission also agrees with the conclusion of the DG
that the raw material cost was a major component of the total cost of
the product and that Rubber and Latex constitute a substantial cost
component in the total cost of the raw materials. As observed by the
DG the rates of Rubber and Latex were prone to significant
fluctuations over a given period of time as per the data of prices
posted on the website of Rubber Board and, as such, identical/near
identical estimation of average cost of raw materials (including cost
of a major raw material whose prices are subject to significant
fluctuations) over the Rate Contract period by different opposite
parties is improbable. In such a situation, it is difficult to accede to
the explanation and justification advanced by the opposite parties
that since raw material and other costs for all the manufacturers
were more or less same, their quoted prices were also almost same.
30. Moreover, from the DG report, it is apparent that the
approximate profit component/margins of the opposite parties varied
from 2% to 15%. In such a scenario, it necessarily follows that the
cost component of the opposite parties ought to have been different
if the final rates quoted by the opposite parties remained
identical/near identical. This falsifies the explanation and justification
advanced by the opposite parties that manufacturing cost being
same, the rates quoted were identical.
31. It is also a fact that the opposite parties are located in
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different States of the country with differences in the applicable

taxes. The DG noted that at the time of Tender Enquiry dated
14.06.2011, for Punjab, Jharkhand and UP applicable CST/VAT was
13.5% whereas for West Bengal the same was 4%. The opposite
parties had quoted their rates as inclusive of applicable taxes. Thus,
the Commission agrees with the conclusion drawn by the DG that
the bidders from Kolkata had an advantage of 9.5% tax differential
as compared to other bidders and if the rates had been quoted
competitively, the rates of Kolkata based suppliers would have been
lower than the rates of other competitors due to the advantage of
lower tax rate. However, these bidders quoted rates identical/near
identical to the other bidders. Quoting lower rates competitively by
some of the opposite parties would have resulted in lowering of the
Rate Contract Rate by DG S&D, to the detriment of the opposite
parties located in higher tax rate States.
32. Furthermore, the opposite parties gave different and diverse
reasons when asked about the basis for quoting identical rates. In
the statements made before the DG during investigation, the
opposite parties maintained a uniform stand that since raw material
and other costs for all the manufacturers were more or less same, as
such, their quoted prices were also almost same. However, before
the Commission they gave different reasons for quoting same rates
against the tenders of DG S&D. While estimation of cost has been
taken as the basis by some of the opposite parties, some have stated
to have quoted rates based either on the prevailing prices of raw
materials and their estimation of future trend while others have
stated to have quoted on the basis of previous quoted rates or the
rates finalized in the previous Rate Contract adjusted to account for
variation in prices of raw materials and other cost components.
33. From the DG report, it appears that certain opposite parties
were either presently members, or had in the past been members of
a trade federation viz. Federation of Industries of India (FII), Delhi.
Some of the opposite parties, in their statements before the DG,
maintained that the Federation did not provide a common platform
for its members and that various issues were taken up by the
members, as and when they arose, on an individual basis and not
collectively. The DG, however, observed that a meeting of the
opposite parties (members as well as non-members) had in the past
been convened by FII on 20.10.2009 at PSK, Laxmi Nagar, District
Centre, Delhi for eliciting views regarding various problems to be
discussed with DG S&D in its forthcoming meeting. Without delving
into the rival submissions on this aspect, the Commission observes
that the opposite parties did avail a platform under the Trade
Federation to hold meetings.
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34. Before concluding discussion on this aspect, it is pertinent to

note that one of the opposite parties viz. M/s. Preet Enterprises had
submitted copies of certain documents being Performance
Statements pertaining to other opposite parties viz. M/s. Shiva
Rubber Industries, M/s. R.S. Industries, M/s. S.S. Rubber, M/s. Puja
Enterprises, M/s. MKU Private Limited (Group company of M/s. A.R.
Polymers Pvt. Ltd., one of the opposite parties), M/s. M.B. Rubber
Pvt. Ltd. and M/s. Derpa Industrial Polymer Pvt. Ltd. The
performance Statements contain details of total value of orders
received, value of orders due for supply by the cut of date, value of
orders supplied upto cut of date etc. pertaining to the party
concerned and forms part of the bid documents submitted by the
bidders. Ordinarily, the competitors are not privy to the information
contained in the Performance Statement being specific to the party
concerned unless shared between the competitors. From this, it
would not be far-fetched to infer mutual sharing and exchange of
information amongst the bidders prior to submission of bid
documents.
35. On a careful consideration of entire circumstances i.e.
quotation of near identical prices despite these units having been
located in different geographical locations with varying tax structure
and different margins; possession by one bidder of the Performance
Statements of other bidders; meetings under the platform of Trade
Federation; and failure on the part of the opposite parties to provide
any plausible explanation for the same, it is safe to deduce that the
opposite parties entered into an agreement to determine prices
besides rigging the bid.
36. The another aspect which requires consideration is whether
the restriction of total quantity to be supplied during the RC period
and the restriction of maximum quantity to be supplied per DDO was
a result of collusion amongst the opposite parties and whether there
are any direct or indirect evidences of collusive agreement amongst
the manufacturers in this respect.
37. In this regard, it may be noted that in the reference, it is
alleged that all the opposite parties except one by restricting their
offered quantity in spite of having higher installed capacity, had
limited the production and supply and shared the market through
mutual allocation. It has been alleged that by restricting the total
quantity to be supplied during the Rate Contract period as well as
restricting the maximum quantity to be supplied to a DDO, there
was an agreement between the competing enterprises not to
compete or to restrict the competition thereby violating the
provisions of the Act.
38. As noted by the DG, the quantity restrictions imposed by the
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opposite parties against the Tender Enquiry dated 14.06.2011 vis-a-

vis their installed capacities for the product as per DG S&D
Registration Certificates were as under:
S. No. Company/Firm Installed Total Restriction
Name of Capacity Quantity Per Ddo
The in Pairs Restriction (In Pairs)
Per (In
Annum
1. H.B. Rubber Private 96000 50000 not
Limited Indicated
2. M.B, Rubber Private 180000 50000 10000
Limited
3. Puja Enterprises 144000 150000 30000
4. Derpa Industrial 144000 50000 10000
Polymers Pvt. Ltd.
5. Preet Footwears 120000 100000 20000
6. Tirupati Footwears 72000 50000 10000
Pvt. Ltd.
7. S.S. Rubbers 144000 50000 10000
8. Shiva Rubber 240000 50000 10000
Industries
9. R.S. Industries 240000 No -
Restriction
Initially
50000
Subsequently
10. Rajkumar Dyeing & 48000 50000 10000
Printing Works Pvt.
Ltd.
11. A.R. Polymers Pvt. 144000 50000 20000
Ltd.
39. It is evident that nine opposite parties had restricted their
total quantity for the RC period to 50000 pairs and the remaining
two had restricted the same to 100000 and 150000 pairs
respectively for the Rate Contract period 01.12.2011 to 30.11.2012.
Further, six opposite parties had restricted their commitment per
DDO to 10000 pairs, two opposite parties to 20000 pairs and one
opposite party to 30000 pairs.
40. From DG S&D Registration Certificates, it was noted by the DG
that the total installed capacity of all the opposite parties for the
product in question is 15,72,000 pairs per annum whereas the
opposite parties had restricted their total quantity to 7,00,000 pairs
against the tender under reference.
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41. The opposite parties could not give any valid justification in
support of imposing quantitative restrictions. In fact, as noted by the
DG, the opposite parties had started imposing quantity restrictions
only from the Rate Contract period 2010-11 and no such restrictions
were imposed by any of the RC holders during earlier years. Hence,
such an action can only be a result of the collusive action by the
opposite parties for mutual allocation of markets. Resultantly, it is
held that the said opposite parties entered into an
agreement/arrangement to limit/control the supply of the product
and to share the market by mutual allocation.
42. The Commission notes that in terms of the provisions
contained in section 3(1) of the Act, no enterprise or association of
enterprises or person or association of persons can enter into any
agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes
or is likely to cause an appreciable adverse effect on competition
within India. Section 3(2) of the Act declares that any agreement
entered into in contravention of the provisions contained in sub-
section (1) shall be void. Further, by virtue of the presumption
contained in subsection (3), any agreement entered into between
enterprises or associations of enterprises or persons or associations
of persons or between any person and enterprise or practice carried
on, or decision taken by, any association of enterprises or association
of persons, including cartels, engaged in identical or similar trade of
goods or provision of services, which-(a) directly or indirectly
determines purchase or sale prices; (b) limits or controls production,
supply, markets, technical development, investment or provision of
services; (c) shares the market or source of production or provision
of services by way of allocation of geographical area of market, or
type of goods or services, or number of customers in the market or
any other similar way; (d) directly or indirectly results in bid rigging
or collusive bidding, shall be presumed to have an appreciable
adverse effect on competition.
43. Thus, in case of agreements as listed in section 3(3) of the
Act, once it is established that such an agreement exists, it will be
presumed that the agreement has an appreciable adverse effect on
competition; the onus to rebut the presumption would lie upon the
opposite parties.
44. In the present case, the opposite parties could not rebut the
said presumption. It has not been shown by the opposite parties
how the impugned conduct resulted into accrual of benefits to
consumers or made improvements in production or distribution of
goods in question. Neither, the opposite parties could explain as to
how the said conduct did not foreclose competition.”
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27. The Commission distinguished the judgment of the Supreme

Court in Union of India v. Hindustan Development Corporation, [(1993)
3 SCC 499] relied upon by the appellants by observing that apart from
conscious price parallelism, there is overwhelming circumstantial
evidence to infer the anti-competitive nature of the impugned actions.
28. As a sequel to its finding that the appellants have contravened
the provisions of Section 3(1) read with Section 3(3)(a) and 3(3)(d) of
the Act, the Commission imposed penalty on each of the appellants @
5% of their average turnover. The quantum of the penalty imposed on
each of the appellants is indicated in the following chart:
S. Name Gross Gross Gross Average 5% of
No. Turnover Turnover Turnover Turnover Average
for 2008 for 2008 for 2008 for Three Turnover
-09 (In -09 (In -09 (In years (In (In
Lakhs) Lakhs) Lakhs) Lakhs) Lakhs)
1 M/S. A.R. 1421.69 2503.67 3390.29 2438.55 121.93
Ploymers
Pvt. Ltd.
2 M/s. Puja 208.56 173.37 281.72 221.22 11.06
Enterprises
3 M/s. M.B. 2988.47 3169.24 3971.22 3376.31 168.82
Rubber Pvt.
Ltd.
4 M/s. 275.94 276.51 283.72 278.72 13.94
Tirupati
Footwear
Pvt. Ltd.
5 M/S. H.B. 834.97 998.25 1248.67 1027.30 51.36
Rubber Pvt.
Ltd.
6 M/s. 767.86 460.34 791.37 673.19 33.66
Rajkumar
Dyeing &
Printing
Works Pvt.
Ltd.
7 M/s. Preet 710.5 715.29 849.32 758.37 37.92
Footwears
8 M/s. S.S. # 398.34 669.69 534.02 26.70
Rubbers
9 M/s. R.S. ## 1150.47 1352.32 1251.39 62.57
Industries
-----------------------------------------------------------------------------------------------------------------------------------------------------------
10 M/s. Shiva 435.79 242.31 394.4 357.5 17.88

Rubber
Industries
11 M/s. Derpa 1217.39 1244.29 2313.95 1591.876 79.59
Industrial
Polymers
(P) Ltd.
# M/s. S.S. Rubbers expressed its inability to furnish details of
actual production and sales turnover for the previous years and a
copy of its annual accounts for the year 2008-09. The said opposite
party informed the DG that its building and most of its
records/documents were destroyed in a fire accident in February,
2011. Hence, the penalty for M/s. S.S. Rubbers was calculated on
the basis of its turnover details available for the years 2009-10 and
2010-11.
## Ms. R.S. Industries expressed its inability to provide annual
accounts for the year 2008-09 as possession of the factory premises
stated to be disputed and under litigation. Hence, it was informed to
the DG that the relevant records are inaccessible to it. Hence, the
penalty for M/s. R.S. Industries was calculated on the basis of its
turnover details available for the years 2009-10 and 2010-11.”
29. Learned counsel for the appellants argued that the impugned
ordersuffers from multiple legal infirmities and is liable to be set-aside
because the finding recorded by the DG on the issue of collusive-
bidding/bid-rigging which has been approved by the Commission is
based on pure assumptions and conjectures. In support of this
argument, learned counsel referred to the observations contained in
Chapter-8 of the report of the DG. Learned counsel submitted that the
so-called plus factors relied upon by the DG and the Commission were
non-existent and the same could not have been relied upon for
recording a finding that the appellants had acted in contravention of
Section 3(1) read with Sections 3(3)(a) and 3(3)(d) of the Act. They
pointed out that the two meetings of the Federation of Industries of
India held on 13.03.2009 at Kolkata and 20.10.2009 held at Delhi 10
M/s. Shiva Rubber Industries 11 M/s. Derpa Industrial Polymers (P)
Ltd. had nothing to do with the price of the Jungle Boots for which the
Rate Contracts were executed by the DGS&D for the year 2011-12.
Learned counsel emphasised that the Federation of Industries of India
is not a representative body of the appellants who are engaged in
manufacture of rubber products including the Jungle Boots andneither
the issue of price of Jungle Boots to be supplied on the basis of the
Rate Contracts to be executed by the DGS&D for 2011-12 was
discussed in the two meetings nor any decision was taken in that
regard. Shri. M.M. Sharma, learned counsel representing some of the
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appellants pointed out that many of the appellants were not even
membersof the Federation of Industries of India and had not
participated in either of the two meetings. He also emphasised that the
meetings held in 2009 had no nexus with the bids given by the
appellants and others in response to Tender Enquiry dated 14.06.2011
issued by the DGS&D. Learned counsel further argued that the finding
recorded by the DG and the Commission on the issue of sharing of
confidential information by the appellants is ex facie perverse and is
liable to be ignored. They pointed out that the statistics supplied by
M/s. Preet Footwears (Appellant in Appeal No. 39/2013) to the DG were
nothing but copies of the consolidated performance statements dated
17.08.2006, 07.09.2007 and 01.08.2008 in respect of the Rate
Contracts executed in 2006-07, 2007-08 and 2008-09 and they were
very much available in public domain on the website of the DGS&D and
any bidder could download the same for the purpose of bidding in the
subsequent Tender Enquires. Learned counsel submitted that the
performance statements contained only the total value of the order
received and the quantity supplied by each of the vendors in the past
and the same was of no use for submitting the bids in future and, in
any case, the data relating to the Rate Contractsexecuted prior to 2010
was of no use for fixing the rate/quantities to be offered in response to
the Tender Enquiry issued in 2011.
30. Another argument advanced by the learned counsel for the
appellants is that the Commission committed grave illegality by holding
the appellants guilty on the ground that they had imposed quantity
restrictions. Learned counsel pointed out the quantity restriction had
not been imposed for the first time for execution of the Rate Contract
for 2011-12 and as a matter of fact, similar restrictions had been
incorporated in the bids submitted in response to the tender enquiry
issued in 2010 for execution of Rate Contracts for 2010-11. Learned
counsel emphasised that quantity restrictions were imposed keeping in
view the escalation in the cost of rubber from 106.75 per Kg. in
September, 2009 to Rs. 200/- per Kg. in October, 2010, increase in
price of raisins from Rs. 45.5 per Kg. in August, 2009 to Rs. 115/- per
Kg. in October, 2010 and marginal price increase in the cost of clothes.
They also pointed out that the appellants were required to manufacture
other products by using the same machinery, which were sold to the
private parties apart from the Government agencies and this was the
reason why the appellants had indicated that they will be in a position
to supply only the specified quantity of the Jungle Boots.
31. Another argument of the learned counsel for the appellants is
that the penalty imposed by the Commission is ex facie illegal
inasmuch as it is based on the total turnover of three preceding
financial years and not the turnover of the relevant product i.e. the
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Jungle Boots. They submitted that even if the finding recorded by the
Commission that the appellants had acted in contravention of Section 3
(1) read with Sections 3(3)(a) and 3(3)(d) of the Act is upheld, the
turnover of the appellants in respect of the Jungle Boots alone can be
taken into consideration for computing the penalty and not the turnover
of all the products. In support of this argument, learned counsel relied
upon order dated 29.01.2013 passed by the Tribunal in Appeal No. 79
of 2011 - Excel Corp Care Limited v. Competition Commission of India
and two connected appeals bearing Nos. 80/2012 and 81/2012.
32. Learned counsel for the respondents supported the impugned
order and argued that the findings and conclusions recorded by the
Commission on the issue of price parallelism and formation of cartel are
based on correct analysis of the material collected by the DG during
investigation and in exercise of its appellate power under Section 53-B
(2) of the Act, the Tribunal cannot interfere with the concurrent
findings recorded by the DG and the Commission. Shri. Avinash
Sharma submitted that the appellants had deliberately quoted identical
or near identical price for Jungle Boots with a view to compel the
DGS&D to execute Rate contractswith them at a higher price resulting
in loss to the public exchequer. Helaid considerable emphasis on the
plus-factors relied upon by the Commission for holding that the
appellants had violated Section 3(1) read with Sections 3(3)(a) and 3
(3)(d) of the Act and argued that the explanation given by the
appellants for sharing the information regarding bids and quantity
restriction are illusory and the same should not be made basis for
upsetting the well-reasoned order passed by the Commission. Shri.
Sharma also defended the principal adopted by the Commission for
computation of penalty and argued that the word ‘turnover’ appearing
in Section 27(b) of the Act cannot be construed narrowly so as to
restrict it to the relevant product i.e. the Jungle Boots.
33. I have considered the respective arguments and carefully
scrutinized the entire record. I have also gone through the written
submissions filed by some of the appellants and the respondents.
34. The question whether identical or near identical price quoted by
the bidders can be made the basis for recording an affirmative finding
on the issue of cartel formation was considered by the Supreme Court
in Union of India v. Hindustan Development Corporation, which has
been reported in two parts of the Supreme Court Cases. The first part
which contains the facts of that case and conclusions recorded by the
Supreme Court is reported in (1993) 1 SCC 467. The second part which
contains detailed reasons in support of various conclusions is reported
in (1993) 3 SCC 499.
35. The factual matrix of that case is substantially similar to the
cases in hand. Every year, the Railway Board used to invite bids for
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supply of cast steel bogies which were used for building the wagons.
There were 12 suppliers, who were regularly supplying the cast steel
bogies. Two new entrants were Simplex and Beekay. Among the 12
regular suppliers, M/s. H.D.C., Mukand and Bhartiya were having
capacity to manufacture large quantities of steel bogies.
36. In response to a limited tender notice issued by the Railway
Board on 25.10.1991 for procurement of 19,000 cast steel bogies, M/s.
H.D.C., Mukand and Bhartiya quoted identical price of Rs. 77,666/- per
bogie, the other tenderers quoted price between Rs. 83,000/- and Rs.
84,500/- per bogie. The Tender Committee considered all the tenders
and concluded that M/s. H.D.C., Mukand and Bhartiya, who had quoted
identical rates without any cushion for escalation between July 1, 1991
and September 1, 1991, had apparently formed a cartel but ultimately
recommended award of contract to them for supply of bogies @ Rs.
76,000/- per bogie. The day on which the Tender Committee finalised
the recommendations, Member (Mechanical), who was a part of the
Tender Committee received letters from M/s. H.D.C. and Mukand that
they could supply bogies at a reduced rate. Advisor (Finance), Member
(Mechanical), Financial Commissioner and Minister for Railways
recorded their independent views. They, by and large, agreed with the
view of the Tender Committee that the three suppliers had formed a
cartel. However, all of them, except the Minister for Railways,
suggested that the recommendations of the Tender Committee may be
accepted else the public interest would suffer. The Minister accepted
the recommendations subject to reduction in the quantum of bogies for
which contracts were to be awarded to three bidders. The Authorities
also decided that the price should be reduced and a counter offer be
given to the three bidders to supply bogies @ Rs. 65,000/- per bogie
and to nine other manufacturers to supply bogies @ Rs. 76,000/- per
bogie.
37. M/s. H.D.C. and Mukand filed writ petitions in the Delhi High
Court to challenge the counter offer. The High Court passed the interim
order and directed the Railways to accept the allocation of bogies
recommended by the Tender Committee and pay the price @ Rs.
67,000/- per bogie subject to the final decision. In the Special Leave
Petition filed against the order of the High Court, the Supreme Court
modified the interlocutory order.
38. At the final hearing, learned counsel for Union of India reiterated
the views of the Tender Committee, three senior officers and the
Minister that M/s. H.D.C., Mukand and Bhartiya had formed a cartel and
argued that it was not obligatory for Railways to place order for supply
of bogies at the rate quoted by them. He also justified the allotment of
bogies to other manufacturers by contending that this was in
consonance with Article 14 of the Constitution of India. The counsel
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appearing for M/s. H.D.C., Mukand and Bhartiya controverted the

Railways' assertions on the issue of cartelisation by arguing that mere
quoting of identical price cannot justify such an inference.
39. By an order dated 14.01.1993, the Supreme Court disposed of
the Special Leave Petition by recording its conclusions, paragraphs 1
and 6 of which read as under:
“1. There is not enough material to conclude that M/s. H.D.C.,
Mukand and Bhartiya formed a cartel. Because of mere quoting
identical tender offers by the said three manufacturers for which
there is some basis, the conclusion that the said manufacturers had
formed a cartel does not appear to be correct. However since the
offers of the said three tenders were identical and the price was
somewhat lower, the Tender Committee entertained a suspicion that
a cartel had been formed and the same got further strengthened by
the post-tender attitude of the said manufacturers which further
resulted in entertaining the same suspicion by the other authorities
in the hierarchy of the decision making body including the Minister of
Railways. Though there is not enough of material to establish
formation of a cartel as is understood in the legal parlance but at the
same time it cannot be contended that such an opinion entertained
by the concerned authorities including the Minister was per se
malicious or was actuated by any extraneous considerations. After a
careful examination of the entire record and facts and circumstances
of the case we are of view that all the railway authorities including
the Minister acted in a bona fide manner in taking the stand that the
three manufactures formed a cartel.
6. Now coming to the allotment of quota of bogies the Tender
Committee made recommendations on the basis of the existing
practice. The Minister of Railways in his ultimate decision has made
some variations taking into consideration tile recommendations of
the Financial Commissioner and other authorities. He has however
not accepted these recommendations fully. In making these
variations, the Minister accepting ultimately reduced the allotment of
quota to the said three tenderers substantially by way of reprisal. In
view of our finding that the formation of an opinion that cartel was
formed had no firm factual foundation; such a reduction of quota by
way of reprisal cannot be justified. We are, however, not inclined to
accept the contention made on behalf of M/s. H.D.C., Mukand and
Bhartiya that no departure from the recommendations of the Tender
committee is permissible in the absence of any established policy
which was also known by the tenderers. From the records it appears
that in the past also there have been such variations. In our view,
the Minister of Railways as the final authority, after considering
various relevant factors, may be justified in taking a particular
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decision in the matter of allotment of quota but such decision must

be taken on objective basis. But, in this case. It appears to us that
all the smaller manufacturers deserving a favourable treatment in
the matter of allotment of quota, have not been equally treated in
the sense that one or, two of them got larger quantities. Though this
does not appear to be a serious departure, yet in these matters the
Government is expected to be just and fair to one and all. We hope
that in future the authorities would make a proper consideration of
the relevant factors in respect of each tenderer in an objective
manner in allotting the quantities.”
[Emphasis supplied]
The reasons in support of the aforesaid conclusions were recorded
on various aspects of the case including the powers of the State and
its agencies in the matter of award of contract. In paragraph 14 of
the judgment reported in (1993) 3 SCC 499, the Supreme Court
considered the submissions on the issue of formation of cartel by
three big manufacturers, referred to the dictionary meanings of the
word ‘cartel’, took notice of the discussion on cartel in American
Jurisprudence 2d Vol. 54, referred to some decisions of the foreign
jurisdictions and observed that the opinion formed by the Tender
Committee that the three big manufacturers had formed a cartel
because they had quoted identical price was not correct. The
relevant portions of that judgment are extracted below:
“14. First we shall consider the submissions regarding the
formation of cartel by these three big manufacturers. The word
“cartel” has a particular meaning with reference to monopolistic
control of the market. In Collins English Dictionary, the meaning
of the word “cartel” is given as under:
“cartel — 1. Also called : trust, a collusive international
association of independent enterprises formed to monopolize
production and distribution of a product or service, control prices
etc. ….”
In Webster Comprehensive Dictionary, International Edition, the
meaning of the word “cartel” is given thus:
“cartel … 3. An international combination of independent
enterprises in the same branch of production, aiming at a
monopolistic control of the market by means of weakening or
eliminating competition ….”
In Chambers' English Dictionary the word “cartel” is defined thus:
“cartel — A combination of firms for certain purposes especially
to keep up prices and kill competition ….”
In Black's Law Dictionary, Fifth Edition the meaning of the word
“cartel” is given thus:
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“cartel— A combination of producers of any product joined

together to control its production, sale, and price, and to obtain a
monopoly in any particular industry or commodity …. Also, an
association by agreement of companies or sections of companies
having common interests, designed to prevent extreme or unfair
competition and allocate markets, and to promote the interchange
of knowledge resulting from scientific and technical research,
exchange of patent rights, and standardization of products.”
In American Jurisprudence 2d Vol. 54, page 677 it is mentioned
thus:
“A cartel is an association by agreement of companies or
sections of companies having common interests, designed to
prevent extreme or unfair competition and to allocate markets,
and perhaps also to exchange scientific or technical knowledge or
patent rights and to standardize products, with competition
regulated but not eliminated by substituting competition in
quality, efficiency, and service for price-cutting. An international
cartel arrangement providing for a worldwide division of a market
has been held a per se violation of 15 USC S 1. An American
corporation violates the Sherman Act by entering into agreements
with English and French companies to (1) allocate world trade
territories among themselves; (2) fix prices on products of one
sold in the territory of the others; (3) cooperate to protect each
other's markets and eliminate outside competition; and (4)
participate in cartels to restrict imports to and exports from the
United States.”
In A Dictionary of Modern Legal Usage by Bryan A. Garner, it is
noted thus:
“cartelize-to organize into a cartel. See-IZE. Yet cartel has
three quite different meaning : (1) ‘an agreement between hostile
nations’; (2) ‘an anticompetitive combination usu. that fixes
commercial prices’; and (3) ‘a combination of political groups that
work toward common goals'. Modern usage favours sense (2).”
The cartel therefore is an association of producers who by
agreement among themselves attempt to control production, sale
and prices of the product to obtain a monopoly in any particular
industry or commodity. Analysing the object of formation of a cartel
in other words, it amounts to an unfair trade practice which is not in
the public interest. The intention to acquire monopoly power can be
spelt out from formation of such a cartel by some of the producers.
However, the determination whether such agreement unreasonably
restrains the trade depends on the nature of the agreement and on
the surrounding circumstances that give rise to an inference that the
parties intended to restrain the trade and monopolise the same.
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Dealing with the provisions of Sherman Anti-Trust Act, in National

Electrical Contractors Associations, Inc. v. National Constructors
Association. [678 FR 2d 492] it was observed as under:
“We know of no better statement of the rule than that of this
court in United States v. Society of Ind. Gasoline Marketers, [624
F 2d 461, 465 (4th Cir 1979) cert denied 101 S Ct. 859 : 449 US
1078 : 66 L Ed 2d 801] where stated:‘Since in a price-fixing
conspiracy the conduct is illegal per se, further inquiry on the
issues of intent or the anti-competitive effect is not required. The
mere existence of a price-fixing agreement establishes the
defendants' illegal purpose since the aim and result of every price
-fixing agreement, if effective, is the elimination of one form of
competition’.”
It was also observed that:
“The critical analysis in determining whether a particular
activity constitutes a per se violation is whether the activity on its
face seems to be such that it would always or almost always
restrict competition and decrease output instead of being
designed to increase economic efficiency and make the market
more rather than less competitive.”
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corpn., [9 L
Ed 2d 538] is a case where American manufacturers of consumer
electronic products brought suit against a group of their Japanese
competitors in the United States District Court alleging that these
competitors had violated Sections 1 and 2 of the Sherman Act and
other federal statutes. It was alleged that the Japanese companies
had conspired since 1950 to drive domestic firms from the American
market, by maintaining artificially high prices for these products in
Japan while selling them at a loss in the United States. The District
Court after excluding bulk of evidence, finally granted the Japanese
companies' motion for summary judgment dismissing the claims.
The United States Court of Appeal reversed and remanded for further
proceedings. On a certiorari, the United States Supreme Court while
considering the standards supplied by the Court of Appeals in
evaluating the summary judgment, observed thus:
“To survive petitioners' motion for summary judgment,
respondents must establish that there is a genuine issue of
material (475 US 586) fact as to whether petitioners entered into
an illegal conspiracy that caused respondents to suffer a
cognizable injury.”
It was further observed that:
“A predatory pricing conspiracy is by nature speculative. Any
agreement to price below the competitive level requires the
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conspirators to forgo profits that free competition would offer

them. The forgone profits may be considered an investment in the
future. For the investment to be rational (475 US 589) the
conspirators must have a reasonable expectation of recovering, in
the form of later monopoly profits, more than the losses suffered.
* * *
The alleged conspiracy's failure to achieve its ends in the two
decades of its asserted operation is strong evidence that the
conspiracy does not in fact exist. Since the losses in such a
conspiracy accrue before the gains, they must be ‘repaid’ with
interest. And because the alleged losses have accrued over the
course of two decades, the conspirators could well require a
correspondingly long time to recoup. Maintaining supracompetitive
prices in turn depends on the continued cooperation of the
conspirators, on the inability of other would-be competitors to enter
the market, and (not incidentally) on the conspirators' ability to
escape antitrust liability for their minimum price-fixing cartel. Each
of these factors weighs more heavily as the time needed to recoup
losses grows. If the losses have been substantial — as would likely
be necessary (475 US 593) in order to drive out the competition —
petitioners would most likely have to sustain their cartel for years
simply to break even.”
(emphasis supplied)
In this context, one of the submissions is that the price of Rs.
67,000 offered by these manufacturers during the post-tender stage
was not predatory and that the view taken by the authorities that
such an offer of lower price was predatory one confirming the
formation of a cartel, is also unwarranted. In Matsushita case, [678
FR 2d 492] it was observed that predatory pricing conspiracies are
by nature speculative and that the agreement to price below the
competition level requires the conspirators to forgo profits that free
competition would offer them. It was also held therein as under:
“To survive a motion for a summary judgment, a plaintiff
seeking damages for a violation of Section 1 of the Sherman Act
must present evidence ‘that tends to exclude the possibility’ that
the alleged conspirators acted independently. Thus, respondents
here must show that the inference of a conspiracy is reasonable in
light of the competing inferences of independent action or
collusive action that could not have harmed respondents.”
Therefore mere offering of a lower price by itself, though appears
to be predatory, cannot be a factor for inferring formation of a cartel
unless an agreement amounting to conspiracy is also proved.
(emphasis supplied)
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A mere offer of a lower price by itself does not manifest the

requisite intent to gain monopoly and in the absence of a specific
agreement by way of a concerted action suggesting conspiracy, the
formation of a cartel among the producers who offered such lower
price cannot readily be inferred…..
……… In the instant case, initially the Tender Committee formed
the opinion that the three big manufacturers formed a cartel on the
ground that the price initially quoted by them was identical and was
only a cartel price. This, in our view, was only a suspicion which of
course got strengthened by post-tender attitude of the said
manufacturers who quoted a much lesser price. As noticed above it
cannot positively be concluded on the basis of these two
circumstances alone. In the past these three big manufacturers also
offered their own quotations and they were allotted quantities on the
basis of the existing practice. However a mere quotation of identical
price and an offer of further reduction by themselves would not
entitle them automatically to comer the entire market by way of
monopoly since the final allotment of quantities vested in the
authorities who in their discretion can distribute the same to all the
manufacturers including these three big manufacturers on certain
basis. No doubt there was an apprehension that if such predatory
price has to be accepted the smaller manufacturers will not be in a
position to compete and may result in elimination of free
competition. But there again the authorities reserved a right to reject
such lower price. Under these circumstances though the attitude of
these three big manufacturers gave rise to a suspicion that they
formed a cartel but there is not enough of material to conclude that
in fact there was such formation of a cartel……”
[Emphasis supplied]
40. A question similar to the one raised in these appeals was
considered by the Tribunal in Appeals Nos. 13, 15 and 20 of 2014
Escorts Limited v. Competition Commission of India decided on
18.12.2015. In that case, the DG and the Commission concurrently
held that the appellants had formed cartel and indulged in bid-rigging
in the matter of supply of C2N feed valves to Diesel Loco Modernization
Works, Patiala. In support of this conclusion, the DG and the
Commission relied upon the following factors:
“(a) RDSO had approved only three suppliers i.e. the appellants and
there was no new entrants in the field over a period of time and
that gave scope for cartel formation.
(b) Three approved suppliers have given bids from time to time in
response to the tenders issued by different Zonal Railways
quoting identical price.
(c) The demand of feed-valves has remained almost static in last few
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years and the existing operators have prevented new entrants

from entering the market.
(d) The system of awarding contracts by the Railways is conducive to
collusive bidding.
(e) The product specifications approved by RDSO makes cartelisation
very probable.
(f) When the products or services sold or rendered are identical or
very similar and there are few or no substitutes, it is easier for the
bidders to reach an agreement on a common price structure and
probability of the appellants reaching an agreement on a common
price is very high.
(g) Respondent No. 2, who complained of cartel formation, had
placed order on FTRTIL to supply 34 more feed-valves @ Rs.
12,855.47 in addition to the purchase order dated 11.11.2011
and, at the same time, had entered into negotiation with SIL and
ultimately placed order for 67 feed-valves @ Rs. 16499.99. This
was indicative of faulty procurement system adopted by the
Railways resulting in financial loss.
(h) The three bidders had quoted identical price by manipulating the
figures in as much as EL, Faridabad quoted base price of Rs.
17147.54. The other two bidders quoted Rs. 14534.52 (FTRTIL,
Hosur) and Rs. 14,674.28 (SIL, Kolkata) as base price and added
the elements of Excise Duty, Cess on Excise Duty and Central
Sales Tax to make the final price as Rs. 17,147.54.
(i) The assertion of the appellants that their price was based on the
price quoted in previous purchase orders was not correct.
20. The Commission approved the findings and conclusions
recorded by the DG primarily on the basis of identical price quoted
by the appellants by observing that this could not have been
possible because their production units are situated in three different
states. The Commission also relied upon the factum of award of
contracts to the appellants by different Zonal Railways despite the
fact that the price offered by them was identical in several cases and
held that they are guilty of cartelisation. The observation made by
the Commission that the appellants had adopted a strategy which
involved supplementary/complementary bidding by EL and FTRTIL is
based on pure conjectures and is liable to be rejected because before
making this observation, the Commission did not give any
opportunity to the two appellants to have their say. Similarly, the
observation made by the Commission that the Tender Committee
committed an illegality in overlooking the bids of EL and FTRTIL is ex
facie erroneous. Once the competent authority had laid down
particular conditions required to be fulfilled by the tenderer and the
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two of the three tenderers failed to comply with the same, the
Tender Committee and Respondent No. 2 cannot be said to have
committed any illegality by not acting upon their tenders. The
Tender Committee could have recommended for fresh tendering and
Respondent No. 2 could have accepted that recommendation but
their failure to do so cannot lead to an inference that they have acted
with ulterior motive or that the Tender Committee ought to have
waived the defects/deficiencies and allowed the two appellants i.e.
EL and FTRTIL to participate in the bid or called them for
negotiations.”
41. This Tribunal took cognizance of the so-called plus factors relied
upon by the DG and the Commission as also the statement of the
supplies made by the three appellants between January, 2009 to April,
2014 and observed:
“22. A careful scrutiny of the above statement shows that
between January, 2009 and February, 2012, various Zonal Railways
had issued 44 tenders. of them exactly identical price was found only
in one tender dated 15.12.2011 issued by West Central Railway,
where the price quoted by the bidders was Rs. 16,833.16. Out of the
remaining bids, similar price was quoted by SIL and FTRTIL in
response to tenders dated 20.07.2009 issued by Southern Railway,
24.09.2010 issued by Southern Railway and 08.11.2011 issued by
NF Railway. It is thus clear that only in two to three percent of the
total tenders invited by various Zonal Railways, the price quoted by
the appellants or two of them were identical. The variation in the
quantum of price quoted by the appellants is also evident from the
statement furnished by the learned counsel for Respondent No. 2.
Therefore, it must be held that both the DG and the Commission
committed grave error by relying upon the so-called past conduct of
the appellants in quoting identical price as a plus-factor for arriving
at a conclusion that they had formed a cartel.
23. The calculation made by the DG and the Commission on the
price formula indicated in the offer of SIL is also erroneous because
the DG proceeded on an erroneous assumption that the rate of
Central Sales Tax was 5% whereas, in fact, it was 4%. The DG and
the Commission also committed an error in presuming that the
appellants had quoted high price to maximize the profit, ignoring
that the rate of Excise Duty had been increased by the Government.”
42. The special features of the cases in hand reveal the following
important facts:
(i) the Jungle Boots are required to be manufactured strictly as per
the specifications prescribed by the DGS&D;
(ii) the Jungle Boots are not readily marketable and the same are
supplied to Paramilitary Forces, State Police, Railways etc. on the
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basis of the Rate Contacts executed on annual basis and there is

no independent market for the same;
(iii) there is no substitute of the product and there are no other
buyers except the Government Agencies;
(iv) the requirement of the Jungle Boots for the years 2008-09 to
2011-12 has remained static and this is the reason why no new
manufacturer has entered the market. Rather, some of the
existing manufacturers have exited the market;
(v) while fixing the Rate Contracts for 2011-12, no increase was
allowed over the Rate Contract awarded for 2010-11; and
(vi) there is no association of manufacturers of the Jungle Boots but
the Federation of Industries of India had sent letter(s) in the past
regarding delay in conclusion of the Rate Contracts.
43. Unfortunately, neither the DG nor the Commission gave due
weightage to the aforesaid factors and heavily banked on the factors
like identical or near identical price quoted by the appellants in
response to Tender Enquiry dated 14.06.2011 and the so-called plus-
factor for recording a finding that the appellants had contravened
Section 3(1) read with Sections 3(3)(a) and 3(3)(d) of the Act. On a
holistic consideration of the entire record and keeping in view the
judgment of the Supreme Court and the order passed by the Tribunal in
Appeals Nos. 13, 15 and 20 of 2014, I hold that the findings and
conclusions recorded by the DG and the Commission that the
appellants had indulged in collusive bidding/bid-rigging and thereby
violated Section 3(1) read with Section 3(3)(a) and 3(3)(d) of the Act
are legally unsustainable and the impugned order is liable to be set
aside.
44. I am also convinced that the Commission committed grave
illegality by imposing penalty @5% of the average turnover of the
appellants in respect of all the products manufactured by them for the
last three preceding financial years. The respondents have not disputed
that all the appellants are multi-product companies and the Jungle
Boots is only one of the products manufactured by them.
45. The question whether the word ‘turnover’ appearing in Section
27(b) can be construed as total turnover of the person found guilty of
acting in contravention of Section 3 or 4 of the Act by was decided the
Tribunal in Appeals Nos. 47 and 57 of 2015 ECP Industries Ltd. and
SKN Industries Ltd. v. Competition Commission of India, on
01.03.2016. After noticing the definitions of the terms, ‘cartel’,
‘enterprise’, ‘goods’, ‘relevant market’, ‘relevant geographic market’,
‘relevant product market’, ‘service’, ‘trade’ and ‘turnover’ contained in
Section 2(c), (h), (i), (r), (s), (t), (u), (x) and (y) and the provisions of
Sections 3, 4 and 27 of the Act, the Tribunal referred to well-recognised
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rules of interpretation, some judicial precedents and held that the

Commission is not entitled to impose penalty on the defaulting
enterprise/person by taking into consideration its total turnover for the
preceding three financial years. Paragraphs 14 to 30 of order dated
01.03.2016, which have direct bearing on the appellants' challenge to
the quantum of penalty in the present appeals, are reproduced below:
“14. One of the well-recognized rules of interpretation of statutes
is the rule of contextual interpretation. This rule requires that the
Court should examine every word of a statute in its context. In doing
so, the Court has to keep in view preamble of the statute, other
provisions thereof, parimateria statutes, if any, and the mischief
intended to be remedied. Context often provides the key to the
meaning of the word and the sense it carries. Its setting gives colour
to it and provides a cue to the intention of the legislature in using it.
In his famous work on Statutory Interpretation, Justice G.P. Singh
has quoted Professor H.A. Smith in the following words:
“No word”, says Professor H.A. Smith ‘has an absolute
meaning, for no words can be defined in vacuo, or without
reference to some context’. According to Sutherland there is a
‘basic fallacy’ in saying ‘that words have meaning in and of
themselves’, and ‘reference to the abstract meaning of words’,
states Craies, ‘if there be any such thing, is of little value in
interpreting statutes’. … in determining the meaning of any word
or phrase in a statute the first question to be asked is -- ‘What is
the natural or ordinary meaning of that word or phrase in its
context in the statute? It is only when that meaning leads to
some result which cannot reasonably be supposed to have been
the intention of the legislature, that it is proper to look for some
other possible meaning of the word or phrase.”
The context, as already seen in the construction of statutes,
means the statute as a whole, the previous state of the law, other
statutes in parimateria, the general scope of the statute and the
mischief that it was intended to remedy.
In Poppatlal Shah v. State of Madras, 1953 Cri LJ 1105, this
Court while construing the word ‘sale’ appearing in the Madras
General Sales Tax Act, 1939 before its amendment in 1947,
observed:
It is a settled rule of construction that to ascertain the
legislative intent, all the constituent parts of a statutes are to
be taken together, and each word, phrase or sentence is to be
considered in the light of the general purpose of the Act itself.
In Reserve Bank of India v. Peerless General Finance and
Investment Company Limited, [1987] 2 SCR 1, it was observed,
“that interpretation is best which makes the textual interpretation
-----------------------------------------------------------------------------------------------------------------------------------------------------------
match the contextual.” Speaking for the Court, Chinappa Reddy, J.

noted the importance of rule of contextual interpretation and held:
“Interpretation must depend on the text and the context. They
are the bases of interpretation. One may well say if the text is the
texture, context is what gives the colour. Neither can be ignored.
Both are important. That interpretation is best which makes the
textual interpretation match the contextual. A statute is best
interpreted when we know why it was enacted. With this
knowledge, the statute must be read, first as a whole and then
section by section, clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment,
with the glasses of the statute-maker, provided by such context,
its scheme, the sections, clauses, phrases and words may take
colour and appear different than when the statute is looked at
without the glasses provided by the context. With these glasses
we must look at the Act as a whole and discover what each
section, each clause, each phrase and each word is meant and
designed to say as to fit into the scheme of the entire Act. No part
of a statute and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has a place and
everything is in its place. It is by looking at the definition as a
whole in the setting of the entire Act and by reference to what
preceded the enactment and the reasons for it that the Court
construed the expression ‘prize chit’ in Srinivasa (1980) 4 SCC
507 and we find no reason to depart from the Court's
construction.
In R. v. National Asylum Support Services, (2002) 4 All ER 654,
LORD STEYN observed “the starting point is that language in all legal
texts conveys meaning according to the circumstances in which it
was used. It follows that context must always be identified and
considered before the process of construction or during it. It is,
therefore, wrong to say that the court may only resort to the
evidence of contextual scene when an ambiguity has arisen.”
[Underlining in original]
15. The control of monopoly and restrictive business practices
through special legislation became an important aspect of the
economic policies of almost all Western countries in the 19th century.
The United States took lead and enacted the first Federal Legislation
i.e. Sherman Act, 1890. Subsequently, many other laws were
enacted to control monopolies and restrictive trade practices. Similar
laws were enacted in Canada in 1889. After Second World War,
Britain enacted the Monopolies and Restrictive Trade Practices
(Inquiry and Control) Act, which was followed by the enactment of
the Restrictive Trade Practices Act, 1956. The other Western
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countries also enacted laws to contain the problem of monopoly and

constituted various bodies and tribunals to decide the issues relating
to monopolies and restrictive trade practices.
16. By virtue of Article 39(b) and (c), which find place in Chapter
IV of the Constitution of India, it was made mandatory for the State
to ensure that “the ownership and control of the material resources
of the community are so distributed as best to sub-serve the
common good” and that “the operation of the economic system does
not result in concentration of wealth and means of production to
common detriment”. For achieving the aforesaid goal, the State
enacted several legislations and took administrative steps. In 1960,
the Planning Commission appointed Mahalanabis Committee on
Distribution of Income and Levels of Living. In its report, the
Committee expressed the view that concentration of economic power
in the private sector is more than what could be justified as
necessary on functional grounds and that this situation exists both in
generalised and in specific forms. The Committee suggested that the
Government should setup a machinery for collection, examination
and analysis of all relevant statistics on the subject and formulate a
policy, which will combine industrialization with social justice and
economic development with dispersal of economic power. In April
1964, the Government of India appointed a five-member Monopolies
Inquiry Commission. The Commission submitted report dated
31.10.1965, some of the salient features of which were:
(i) Industrywise or productwise concentration existed in so far as
a limited number of producers had a comparatively large share
of the market. In 65 out of 100 selected products, a high
degree of concentration existed in the sense that the share of
the top producers was more than 75 per cent of the total
production.
(ii) As regards countrywise concentration (overall size being the
consideration), the total paid-up capital and assets of the
companies belonging to 75 business groups, each with assets
of not less than Rs. 5 crores, accounted for about 44% and
47%, respectively, of the total paid-up capital and total assets
of the companies in the corporate sector.
(iii) There were instances where some of these monopoly houses
attempted to keep out fresh competitors in various ways.
(iv) There was some evidence of the prevalence on a fairly large
scale of practices, such as hoarding and creating artificial
scarcity, arbitrary price fixation, resale price maintenance,
exclusive dealing contracts and tie-in sales by manufacturers.
The Commission also recommended that a legislation should be
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enacted to control monopolies. After examining the report of the

Commission, the Government introduced Monopolies and Restrictive
Trade Practices Bill in Parliament in August 1967, which was finally
passed as the Monopolies and Restrictive Trade Practices Act, 1969.
The preamble of that Act reads as under:
“An Act to provide that the operation of the economic system
does not result in the concentration of economic power to the
common detriment, for the control of monopolies, for the
prohibition of monopolistic and restrictive trade practices and for
matters connected or incidental thereto.”
17. In 1980s and early 1990s, the economic scenario in the
country underwent a sea change. In pursuit of globalisation, India
opened its economy, removed controls and adopted the policy of
liberalisation. As a consequence, the focus shifted from curbing
monopolies to promoting competition and the Monopolies and
Restrictive Trade Practices Act, 1969, which was enacted with the
primary objective of controlling monopoly and prohibiting
monopolistic, restrictive and unfair trade practices became obsolete
in several aspects in the new dispensation. The Government of India
constituted a High Level Committee to examine various issues
relating to competition. The Committee submitted its report on
22.05.2002. After considering the report and consulting the
concerned segments of the society including the trade and industry
associations, Central Government decided to enact a new law.
Accordingly, a Bill was introduced in Parliament, with the following
Statement of Objects and Reasons:
“1. In the pursuit of globalization, India has responded to opening
up its economy, removing controls and resorting to
liberalization. The natural corollary of this is that the Indian
market should be geared to face competition from within the
country and outside. The Monopolies and Restrictive Trade
Practices Act, 1969 has become obsolete in certain respects in
the light of international economic developments relating more
particularly to competition laws and there is a need to shift our
focus from curbing monopolies to promoting competition.
2. The Central Government constituted a High Level Committee on
Competition Policy and Law. The Committee submitted its
report on the 22nd May, 2000 to the Central Government. The
Central Government consulted all concerned including the trade
and industry associations and the general public decided to
enact a law on Competition.
3. The Competition Bill, 2001 seeks to ensure fair competition in
India by prohibiting trade practices, which cause appreciable
adverse effect on competition in markets within India and, for
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this purpose, provides for the establishment of a quasi-judicial

body to be called the Competition Commission of India
(hereinafter referred to as CCI) which shall also undertake
competition advocacy for creating awareness and imparting
training on competition issues.
4. The Bill also aims at curbing negative aspects of competition
through the medium of CCI. CCI will have a Principal Bench
and Additional Benches and will also have one or more Merger
Benches. It will look into violations of the Act, a task which
could be undertaken by the Commission based on its own
knowledge or information or complaints received and
references made by the Central Government, the State
Governments or statutory authorities. The Commission can
pass orders for granting interim relief or any other appropriate
relief and compensation or an order imposing penalties, etc. An
appeal from the orders of the Commission shall lie to the
Supreme Court. The Central Government will also have powers
to issue directions to the Commission on policy matters after
considering its suggestions as well as the power to supersede
the Commission if such a situation is warranted.
5. The Bill also provides for investigation by the Director-General
for the Commission. The Director-General would be able to act
only if so directed by the Commission but will not have any suo
moto powers for initiating investigations.
6. The Bill confers power upon the CCI to levy penalty for
contravention of its orders, failure to comply with its directions,
making of false statements or enterprise a penalty of not more
than ten per cent. of its average turn-over for the last three
financial years. It can also order division of dominant
enterprises. It will also have power to order demerger in the
case of mergers and amalgamations that adversely affect
competition.
7. The Bill also seeks to create a fund to be called the Competition
Fund. The grants given by the Central Government, costs
realized by the Commission and application fees charged will
be credited into this Fund. The pay and allowances and the
other expenses of the Commission will also be borne out of this
Fund. The Bill provides for empowering the Comptroller and
Auditor-General of India to audit the accounts of the
Commission. The Central Government will be required to lay
the annual accounts of the Commission, as audited by the
Comptroller and Auditor-General and also the annual report of
the Commission before both the Houses of Parliament.
8. The Bill aims at repealing the Monopolies and Restrictive Trade
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Practices Act, 1969 and the dissolution of the Monopolies and

Restrictive Trade Practices Commission. The Bill provides that
the cases pending before the Monopolies and Restrictive Trade
Practices Commission will be transferred to the CCI except
those relating to unfair trade practices which are proposed to
be transferred to the relevant flora established under the
Consumer Protection Act, 1986.”
18. The preamble of the new Act reads thus:
“An Act to provide, keeping in view of the economic
development of the country, for the establishment of a
Commission to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade
carried on by other participants in markets, in India, and for
matters connected therewith or incidental thereto.”
19. Keeping in view the rule of contextual interpretation and the
background in which the Act was enacted as also the objectives
sought to be achieved by it, we shall now analyse the provisions
extracted hereinabove. The term ‘cartel’ as defined in Section 2(c)
includes an association of producers, sellers, distributors traders or
service providers who, by agreement amongst themselves, limit,
control or attempt to control the production, distribution, sale or
price of, or, trade in goods or provision of services. The term
‘enterprise’ as defined in Section 2(h) means a person [this term has
an inclusive definition in Section 2(l)] or a department of the
Government, who or which is, or has been, engaged in any activity,
relating to the production, storage, supply, distribution, acquisition
or control of articles or goods, or the provision of services, of any
kind, or in investment, or in the business of acquiring, holding,
underwriting or dealing with shares, debentures or other securities of
any other body corporate, either directly or through one or more of
its units or divisions or subsidiaries, whether such units or divisions
or subsidiaries, whether such unit or division or subsidiary is located
at the same place where the enterprise is located or at a different
place or at different places, but does not include any activity of the
Government relatable to the sovereign functions of the Government
including all activities carried on by the departments of the Central
Government dealing with atomic energy, currency, defence and
space. The term ‘service’ has been given an exclusive definition in
Section 2(u) which means service of any description which is made
available to potential users and includes the provision of services in
connection with business of any industrial or commercial matters
such as banking, communication, education, financing, insurance,
chit funds, real estate, transport, storage, material treatment,
-----------------------------------------------------------------------------------------------------------------------------------------------------------
processing, supply of electrical or other energy, boarding, lodging,

entertainment, amusement, construction, repair, conveying of news
or information and advertising. The term ‘turnover’ as defined in
Section 2(y) includes value of sale of goods or services.
20. Section 3(1) contains a prohibition against anticompetitive
agreements. Sub-section (1) thereof declares that no enterprise or
association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of
services, which causes or is likely to cause an appreciable adverse
effect on competition within India. Sub-section (2) declares that any
agreement entered into in contravention of the provisions contained
in sub-section (1) shall be void. Sub-section (3) contains a
presumption that any agreement entered into between enterprises or
associations of enterprises or persons or associations of persons or
between any person and enterprise or practice carried on, or decision
taken by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or
provision of services, which, directly or indirectly, determines
purchase or sale prices, limits or controls production, supply,
markets, technical development, investment or provision of services
etc. shall be presumed to have an appreciable adverse effect on
competition. Proviso to this section contains an exception which
includes the agreement which increases efficiency in production,
supply, distribution, storage, acquisition or control of goods or
provision of services. Sub-section (4) deals with tie-in arrangement,
exclusive supply agreement, exclusive distribution agreement,
refusal to deal, resale price maintenance and declares that any
agreement among the enterprises or persons at different stages or
levels of production chain in different markets in respect of
production, supply, distribution, storage, acquisition or control of
goods or provisions of services shall be an agreement in
contravention of sub-section (1) if such agreement causes or is likely
to cause an appreciable adverse effect on competition in India.
Section 4(1) declares that no enterprise or group shall abuse its
dominant position. Sub-section (2) of Section 4 lays down that there
shall be an abuse of dominant position in case the ingredients
specified in any of the five clauses i.e. (a) to (e) of that sub-section
are found existing.
21. A combined reading of the definitions of the terms ‘cartel’,
‘enterprise’, ‘service’, and Sections 3, 4 and 27 of the Act makes it
crystal clear that an enterprise or associations of enterprises or a
person or associations of persons who/which enters into any anti-
competitive agreement or is found guilty of abuse of dominant
-----------------------------------------------------------------------------------------------------------------------------------------------------------
positon can be penalized in more than one ways. If at the end of the
investigation conducted in accordance with the provisions of Section
26 of the Act read with the relevant provisions of the Competition
Commission of India (General) Regulations, 2009, an enterprise or
associations of enterprises or person or associations of persons is/are
found guilty of having acted in violation of Section 3 and/or Section
4, the Commission can pass a cease and desist order and also
impose penalty under Section 27 of the Act. Section 26(1) read with
Sections 18 and 19 empowers the Commission to direct an
investigation into any alleged violation of Section 3 and/or Section 4.
The accusation/allegation against an enterprise may be in relation to
one or more than one product or service. If the Commission feels
prima facie satisfied that the accusation/allegation needs to be
investigated, then it can pass an order under Section 26(1) and
direct the DG to conduct an investigation. Thereupon, the latter
acquires jurisdiction to make investigation in respect the particular
goods, product or service and find out whether there has been
violation of Section 3 and/or Section 4. While making such
investigation into the allegation of breach of Section 3 and/or
Section 4 of the Act, the investigating officer is neither required nor
it is legally permissible for him to investigate into those activities of
the manufacturer, supplier or service provider qua which there is no
allegation of such breach and finding on the issue of violation of
Section 3 and/or Section 4 will have to be confined to the particular
product or service or activity.
22. At the end of the investigation, the DG is required to submit
report with the finding whether or not the accusation/allegation is
factually correct and there is violation of Section 3 and/or Section 4.
On receipt of the report of the investigation, the Commission is
required to give an opportunity to the informant and also the
enterprise(s)/person(s) investigated by the DG to file
reply/objections and then pass an appropriate orders. The
Commission may approve the finding recorded by the investigating
officer but that exercise will also have to be restricted to the
particular product, goods or service qua which the allegation of
violation of Section 3 and/or Section 4 is made and which is
subjected to an investigation. Therefore, the term ‘turnover’ used in
Section 27(b) and its proviso will necessarily relate to the goods,
products or services qua which finding of violation of Section 3
and/or Section 4 is recorded and while imposing penalty, the
Commission cannot take average of the turnover of the last three
preceding financial years in respect of other products, goods or
services of an enterprise or associations of enterprises or a person or
associations of persons. The definition of the term ‘turnover’ which
-----------------------------------------------------------------------------------------------------------------------------------------------------------
includes value of sale of goods or services will necessarily mean the

value of goods or services which are made subject-matter of
investigation under Section 26 and order of punishment under
Section 27. If the accusation/allegation relates to abuse of dominant
positon, then the Commission is required to take into consideration
the factors enumerated in Section 19(4), (5), (6) and (7).
23. Neither the Act nor the Regulations empower the Commission
to order an investigation into the product, goods or service other
than those qua which allegation of anticompetitive agreement or
abuse of dominant positon is levelled. Likewise, the investigating
officer is required to confine his investigation to the particular
product, goods or services. If the enterprise or person against whom
investigation is conducted is engaged in manufacturing multiple
products or providing multiple services, the investigating officer
cannot transgress the boundary of the order passed under Section
26(1) and record a finding in respect of the products, goods or
services other than those which are subject-matter of the allegation
of violation of Section 3 and/or Section 4.
24. The term ‘turnover’ appearing in Section 27(b) and its proviso
came up for interpretation before the Tribunal in Excel Corp Care Ltd.
(Appeal No. 79 of 2012), M/s. United Phosphorous Ltd. (Appeal No.
81 of 2012) and Sandhya Organics Chemicals (P) Ltd. (Appeal No.
80 of 2012) v. Competition Commission of India in the context of an
argument that the appellants were multi-product companies and the
turnover of three preceding financial years except the product qua
which a finding of violation of Section 3(3)(1) and 3(3)(b) had been
recorded, could not have been taken into consideration for the
purpose of imposing penalty. In support of that arguments, reliance
was placed on an order passed by South African Tribunal in the case
of Southern Pipeline Contractors Conrite Walls (Pty) and the
Competition Commission (Case No. 105/CAC/Dec10) (106/CAC/Dec
10) - Page 27. Learned counsel appearing for the Commission did
not dispute that the two of the appellants, namely, United
Phosphorous Ltd. and M/s. Excel Corp Care Ltd. were multi-product
companies, but argued that their total turnover was rightly taken
into consideration by the Commission for the purpose of imposing
penalty under Section 27(b). By an order dated 29.10.2013, the
Tribunal upheld the findings recorded by the Commission on the
issue of violation of Section 3(3)(b) and 3(3)(d) read with Section 3
(1) of the Act but set aside the penalty. Paragraphs 60 to 62 of that
order, which have bearing on these cases, are extracted below:
“60. The arguments put forward by Shri. Ravinder Narain, Shri.
Ramji Srinivasan as also by Dr. V.K. Aggarwal are more or the less
correct when they point out the total absence of reasons as to why
-----------------------------------------------------------------------------------------------------------------------------------------------------------
the CCI decided to inflict the penalty @ 9% of the average turn

over. Time and again we have been reiterating the necessity of
the reasons while ordering the penalty. We hope that the CCI take
serious note of that factor. This is particularly true as the CCI is
an adjudicatory body as declared by two Supreme Court
judgments. The role as an adjudicatory body would cover all the
aspects of hearing and deciding.
61. There can be no dispute that where harsh financial penalties
areinflicted the reasons become all the more necessary.
62. All the learned counsels very seriously canvassed the question
of “relevant turn over”. The argument that the appellants, United
Phosphorous Ltd. and M/s. Excel Crop Limited, are the multi product
companies was not seriously disputed by Shri. Balaji Subramanian,
learned counsel for the CCI. We have no reason not to accept that
factor. As regards the arguments based on EU and OFT guidelines,
we are of the opinion that those guidelines are undoubtedly relevant
in arriving at the issue of deciding upon the turn over. However,
those guidelines cannot be treated as be all and end all in the matter
and would have to be considered in the light of the facts of each
case. We, however, accept the contention that in the circumstances
of this case the relevant turn over should be considered in case of
the two appellants who are multi product companies. To that extent
we generally agree with the sentiment expressed in the relied upon
judgment of the South African Tribunal in the case of Southern
Pipeline Contractors v. The Competition Commission. We must, at
this stage, take into consideration the argument by Shri. Balaji
Subramanian. The learned counsel who supported the penalty on the
basis of the average turn over. The learned counsel invited our
attention to our judgment in the matter of MDD Medical Systems
India Pvt. Ltd. v. Foundation for Common Cause(Appeal No. 93 of
2012) and more particularly to paragraph 23. Relying on those
observations, the learned counsel argues that in that judgment we
had rejected the concept of relevant turn over. We must explain that
firstly the companies which we were dealing with in that case were
not multi-product companies. Secondly, we had specifically pointed
out that the restricted turn over could not be taken into
consideration. A restricted turnover is different from the relevant
turn over. In that case the argument was that we must only consider
the turn over generated in the supplies made only to the
Government Hospitals. We had pointed out that the business of
supply of the materials could not be any different from the supplies
to the other Hospitals. It was on that basis that we had rejected the
argument. We must repeat that we had not rejected the total
concept of relevant turn over. We are accepting the argument
-----------------------------------------------------------------------------------------------------------------------------------------------------------
regarding the relevant turn over in the peculiar circumstances of this

case where the two appellant companies have clearly indicated that
the other products of those companies have no connection and do
not depend upon the product involved in this matter, that is ALP
Tablets. We, therefore reject the argument of Shri. Balaji
Subramanian.”
[Emphasis supplied]
25. In L.H. Hiranandani Hospital v. Competition Commission of
India [Appeal No. 19 of 2014] decided on 18.12.2015, the Tribunal
considered whether average of the total turnover of the appellant for
the last three preceding financial years could be taken into
consideration for the purpose of imposing penalty under Section 27
(b) on the ground of violation of Section 3(1) in respect of one
service i.e. stem cell banking by ignoring that the appellant was a
multi-speciality hospital and was providing various services including
stem cell banking. After noticing the relevant facts and statutory
provisions, the Tribunal observed:
“(ii) It is not in dispute that the appellant is a multi-speciality
hospital and its total annual turnover is the income derived from
the services provided in different specialities and not maternity
services alone. The figures provided by the appellant (paragraph
47 of the written submissions filed on 20.03.2015) show that the
total commission earned by the appellant from Cryobanks was Rs.
85,45,567/- from September, 2011 to August, 2012 and
September, 2012 to August, 2013. The total maternity revenue
generated from maternity patients who availed Cryobanks'
services during the aforesaid period from 2011 to 2013 was Rs.
3,96,76,307/- and overall maternity revenue for the same period
was Rs. 4,92,80,090/-. The average maternity turnover for
preceding three financial years i.e. 2009-10, 2010-11 and 2011-
12 was Rs. 2,01,89,412/-. Unfortunately, the Commission clubbed
the revenue generated from all the services provided by the
appellant hospital and accordingly imposed penalty, which is
legally impermissible in view of the Tribunal's order in Excel Corp
Care Limited v. Competition Commission of India.
(iii) Since the term ‘turnover’ appearing in clause (b) of Section
27 has not been defined, the same must take its colour from the
preamble, definitions of various terms and other provisions of the
Act including Sections 3 and 4, the contravention of which can
invite an order of penalty and other consequences enumerated in
Section 27.
26. The Tribunal then referred to the rule of contextual
interpretation, the judgment of Supreme Court in Central Bank of
India v. State of Kerala, (2009) 4 SCC 94 and observed:
-----------------------------------------------------------------------------------------------------------------------------------------------------------
“Section 3 speaks of anti-competitive agreement and Section 4

deals with abuse of dominant position. A finding that the
particular agreement is anti-competitive or any enterprise or
group of enterprises are guilty of abuse of dominant position can
be recorded only with reference to the particular goods, product or
service. An enterprise may be engaged in manufacture,
production, supply, distribution, etc. of multiple products. Another
enterprise like the appellant may be engaged in providing multi-
dimensional services. Such enterprise may be found guilty either
of entering into anticompetitive agreement with reference to
particular product/goods or services or may be held guilty of
abuse of dominant position in respect of such product/goods or
services, but the finding of violation of Sections 3 and/or 4 of the
Act recorded by the competent authority i.e. the Commission
cannot be made applicable to agreements entered into between
the enterprise and another person in respect of other products,
goods or services qua there is no allegation of anti-competitive
agreements or abuse of dominant position and the turnover of
other products and services cannot be clubbed with the one qua
which a finding of violation of the provisions of the Act is
recorded.
39. At the cost of repetition, it deserves to be emphasised that
the appellant has been providing multiple healthcare services,
maternity service being one of them and stem cell banking which is
being provided by a third party (Cryobanks), can at best be
considered as a small part of the maternity services provided to
those who are desirous of availing such services. Therefore, even if
the finding of the majority of the Commission that the agreement
entered into between the appellant and Cryobanks is violative of
Section 3(1) of the Act is to be upheld, the turnover of the appellant
with reference to stem cell banking services only could be taken into
consideration for the purpose of imposing penalty and not the
turnover with reference to other services or income derived from
other sources.”
27. The issue deserved to be considered from another angle.
Proviso to Section 27(b) (unamended) was couched in a language,
which made it mandatory for the Commission to impose on each
producer, seller, distributor, trader or service provider included in a
cartel, a penalty equivalent to three times of the amount of profits
made out of such agreement by the cartel or 10% of the average of
the turnover of the cartel for the last preceding three financial years,
whichever was higher. It is thus clear that if the proviso to Section
27(b) had not been amended, then the Commission had no option
but to impose penalty on each producer, seller, distributor, trader or
-----------------------------------------------------------------------------------------------------------------------------------------------------------
service provider in cases involving formation of cartel. However, in

its wisdom, Parliament amended the proviso and substituted the
word ‘shall’ with the word ‘may’. This amendment was done to bring
the proviso in tune with the main Section 27, which uses the
expression “it may pass all or any of the following order” and clause
(b), which confers discretion upon the Commission to impose
penalty as it may deem fit, subject to the rider that it shall not be
more than 10% of the average of the total turnover for the last three
preceding financial years. Clauses (c) and (d) also uses the word
‘may’, which signifies that the Commission has the discretion to pass
the particular order, which it may deem proper in the facts and
circumstances of the case.
28. Since the legislature has not laid down any criteria for
imposing penalty, the Commission is duty bound to consider all the
relevant factors like - nature of industry, the age of industry, the
nature of goods manufactured by it, the availability of competitors in
the market and the financial health of the industry etc. and also take
note of the law laid down by the Supreme Court, the High Courts
and the Tribunal. In Dilip N. Shroff v. Joint CIT, 2007 ITR 519, the
Court considered the scope of Section 271(1)(c) of the Income Tax
Act, 1960 and observed:
“The legal history of section 271(1)(c) of the Act traced from
the 1922 Act prima facie shows that the Explanations were
applicable to both the parts. However, each case must be
considered on its own facts. The role of the Explanation having
regard to the principle of statutory interpretation must be borne in
mind before interpreting the aforementioned provisions. Clause
(c) of sub-section (1) of section 271 categorically states that the
penalty would be leviable if the assessee conceals the particulars
of his income or furnishes inaccurate particulars thereof. By
reason of such concealment or furnishing of inaccurate particulars
alone, the assessee does not ipso facto become liable for penalty.
Imposition of penalty is not automatic. Levy of penalty is not only
discretionary in nature but such discretion is required to be
exercised on the part of the Assessing Officer keeping the relevant
factors in mind. Some of those factors apart from being inherent
in the nature of penalty proceedings as has been noticed in some
of the decisions of this court, inheres on the face of the statutory
provisions. Penalty proceedings are not to be initiated, as has
been noticed by the Wanchoo Committee, only to harass the
assesse. The approach of the Assessing Officer in this behalf must
be fair and objective.”
[Emphasis supplied]
29. In Hindustan Steel Ltd. v. State of Orissa, [1970] SC 253, the
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Supreme Court made the following observations on the issue of

imposing penalty:
“An order imposing penalty for failure to carry out a statutory
obligation is the result of a quasi criminal proceedings and penalty
will not ordinarily be imposed unless the party obliged either
acted deliberately in defiance of law or was guilty of conduct
contumacious or dishonest, or acted in conscious disregard of its
obligation. Penalty will not also be imposed merely because it is
lawful to do so. Whether penalty should be imposed for failure to
perform a statutory obligation is a matter of discretion of the
authority to be exercised judicially and on a consideration of all
the relevant circumstances. Even if a minimum penalty is
prescribed, the authority competent to impose the penalty will be
justified in refusing to impose penalty, when there is a technical
or venial breach of the provisions of the Act or where the breach
flows from a bona fide belief that the offender is not liable to act
in the manner prescribed by the statute.”
[Emphasis supplied]
30. Unfortunately, the Commission has, while reiterating the
penalty imposed on the appellants by the original order dated
24.02.2012, altogether ignored the principles laid down by the
Supreme Court and the High Courts on the interpretation of statutes,
which confer power upon the competent authority to impose penalty
on a person who is found guilty of having acted in violation of the
particular provision. Not only this, the Commission distinguished the
order passed by the Tribunal in Appeal No. 79/2012 M/s. Excel Corp
Care Limited and other connected cases without any cogent reason.
In that case, the Tribunal had remitted the matter to the
Commission because it had imposed penalty by taking into
consideration the average of the total turnover of the appellants for
the preceding three financial years ignoring that the two of the
appellants were multi-product companies. In these appeals also,
learned counsel appearing for many of the appellants had argued
that their clients were multi-product enterprises. They also pointed
out various mitigating factors but without giving due consideration
to the argument of the learned counsel and giving due consideration
to the mitigating factors, the Commission reiterated the penalty
imposed vide order dated 24.02.2012. In our considered view, the
Commission committed grave error by passing the impugned order
without calling upon the appellants to furnish the statements of their
turnover of LPG cylinders of 14.2 Kg.”
46. By applying the ratio of the aforesaid order, I hold that the
Commission committed grave error by imposing penalty on the
appellants @5% of their total turnover in respect of all the products
-----------------------------------------------------------------------------------------------------------------------------------------------------------
manufactured by them including the Jungle Boots.

47. In the result, the appeals are allowed, the impugned order is set
aside and the penalty imposed by the Commission on the appellants is
quashed. The appellants shall be entitled to refund of the penalty
deposited pursuant to the interim order passed by the Tribunal. The
concerned authority shall refund the amount within a period of three
months, failing which, the appellants shall be entitled to interest @12%
per annum from the date of this order.
———
*
Under Section 53-B of the Competition Act, 2002 against order dated 06.08.2013 passed by
the Competition Commission of India in Ref. Case No. 01 of 2012.
†
‡
¶
§ Under Section 53-B of the Competition Act, 2002 against order dated 06.08.2013 passed by
*† Under Section 53-B of the Competition Act, 2002 against order dated 06.08.2013 passed
by the Competition Commission of India in Ref. Case No. 01 of 2012.
*‡
Under Section 53-B of the Competition Act, 2002 against order dated 06.08.2013 passed
*¶
*§
†*
†‡ Under Section 53-B of the Competition Act, 2002 against order dated 06.08.2013 passed
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SCC Online Web Edition, © 2024 EBC Publishing Pvt. Ltd.

Page 1 Tuesday, April 23, 2024

2016 SCC OnLine Comp AT 240

In the Competition Appellate Tribunal

Appeal No. 34 of 2013

Industrial Estate Loni, Ghaziabad-201102 …

Shri. Avinash Sharma, Advocate for Competition Commission of

I) M/s. A.R. Ploymers Pvt. Ltd. (Appellant in Appeal No. 34 of 2013)

V) M/s. Rajkumar Dyeing & Printing Works (Pvt.) Ltd. (Appellant in

Footwears, Synthetic Web Equipment, Sleeping Bags, Mosquito

Kolkata;M/s. Joy Lakshmi Supply Corporation, Kolkata; M/s. M.K.U.

holders across India under Section 2(s) of the Act.

RCs) to cater to the requirements.

after finalization of the specifications, it has been informed that

29.07.2011, representatives from only four of the opposite parties

making observations suggesting that the appellants had indulged in

conditions are conducive for collusion in the instant matter.

OPs) during the RC periods 2008-09 and 2009-10 and thereafter

information and concluded that the appellants had acted in

problems to be discussed with DGS&D in its forthcoming meeting.

DGS&D enquiry for the item in question for the RC period

Contracts can be concluded at rates below the Reasonable/Ceiling

charges incurred in the past due to simultaneous placement of

12 Joy Lakshmi Supply Corpn. 3421

direct and indirect evidences have established that the identical/near

factor, the quoting of identical or near identical price cannot lead to a

findings. This is evident from paragraphs 27 to 49 of the impugned

different States of the country with differences in the applicable

34. Before concluding discussion on this aspect, it is pertinent to

opposite parties against the Tender Enquiry dated 14.06.2011 vis-a-

27. The Commission distinguished the judgment of the Supreme

10 M/s. Shiva 435.79 242.31 394.4 357.5 17.88

appearing for M/s. H.D.C., Mukand and Bhartiya controverted the

decision in the matter of allotment of quota but such decision must

“cartel— A combination of producers of any product joined

Dealing with the provisions of Sherman Anti-Trust Act, in National

conspirators to forgo profits that free competition would offer

A mere offer of a lower price by itself does not manifest the

years and the existing operators have prevented new entrants

basis of the Rate Contacts executed on annual basis and there is

rules of interpretation, some judicial precedents and held that the

match the contextual.” Speaking for the Court, Chinappa Reddy, J.

countries also enacted laws to contain the problem of monopoly and

enacted to control monopolies. After examining the report of the

this purpose, provides for the establishment of a quasi-judicial

Practices Act, 1969 and the dissolution of the Monopolies and

processing, supply of electrical or other energy, boarding, lodging,

includes value of sale of goods or services will necessarily mean the

the CCI decided to inflict the penalty @ 9% of the average turn

regarding the relevant turn over in the peculiar circumstances of this

“Section 3 speaks of anti-competitive agreement and Section 4

service provider in cases involving formation of cartel. However, in

Supreme Court made the following observations on the issue of

manufactured by them including the Jungle Boots.

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