EXCEL CROP CARE LIMITED v. COMPETITION COMMISSION OF INDIA AND ANOTHER

The Judgments of the Court were delivered by A. K. SIKRI, J. 1. All these Civil Appeals arise out of the common judgment and order dated October 29, 2013 passed by the Competition Appellate Tribunal (for short, 'COMPAT'). These F proceedings have their origin in the letter dated Febrnary 04, 2011 written by the Food Corporation of India (for short, 'FCI') to the Competition Commission oflndia (for short, 'CCI') complaining ofan anti-competitive agreement purportedly arrived at between Mis. Excel Crop Care Limited, Mis. United Phosphorous Limited (for short, 'UPL'), Mis. Sandhya G Organics Chemicals (P) Ltd. respectively (the appellants in CA Nos. 2480, 2874 and 2922 of 2014 and hereinafter referred to as the 'appellants') and Agrosynth Chemicals Limited, in relation to tenders issued by the FCI for Aluminium Phosphide Tablets (for short, 'APT') of 3 gms. between the years 2007 and 2009. The CCI entrnsted the matter to the Director General (DG) for investigation, who submitted his H

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COMMISSION OF INDIA [A. K. SIKRI, J.]

report on October 14, 2011 giving hisprimafacie findings affirming the A allegations of the FCI that the appellants had entered into an anti- competitive agreement, which was violative of Section 3(3) of the Competition Act, 2002 (hereinafter referred to as the 'Act'). On receipt of this complaint, the CCI issued notices to the appellants who filed their objections. After hearing the parties, the CCI passed the order dated B April 23, 2012 whereby it concluded that the appellants had entered into the anti-competitive agreement in a concerted manner thereby offending the provisions of Section 3 of the Act. As a consequence, it imposed penalty@ 9% on the average total turnover of these establishments for last three years. Appeals were filed by the appellants before the COMPAT under Section 53-B of the Act. In these appeals, the issue on c merits has been decided against the appellants by COMPAT in its judgment dated October 29, 2013. These appeals question the validity of the order of the COMPAT on the aforesaid aspect. Now the facts in detail :

2Copy pinpoint2. An Inquiry in this case was initiated by the CCI on the basis of letter/ complaint dated Febrnary 04, 2011 written by the Chairman and Managing Director of the FCI to the CCI. It was alleged in this complaint that four manufacturers of APT had formed a cartel by entering into an anti-competitive agreement amongst themselves and on that basis they had been submitting their bids for last eight years by quoting identical rates in the tenders invited by the FCI for the purchase of APT. It was alleged that the requirement for APT was almost got doubled during the ·period 2007-2009 and was likely to rise further in view of the requirement of large quantity of these· tablets by the FCI, Central Warehousing Corporation and other State agencies for preservation of food grains, which these agencies were storing in their godowns. The CCI assigned the complaint to the DG for investigation. The DG collected required information from the FCI and other Government agencies dealing in warehousing and storage of food grains and also from Central Insecticides Board and Registration Committee, Faridabad. Representatives ofFCI were also examined. After collecting the aforesaid information, the DG G submitted his report with the following findings: (a) The main market of APT in India was that of the institutional sales and a majority of buyers were Government agencies. The number of private buyers was insignificant. APT is sold in the box of 3 gms. tablets, 12 gms. tablets, and a sachet of 10 gms. in H

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A powder. Out of this, 3 gms. tablets constitute 56% of the total sale. Sale of these 3 gms. tablets was restricted to the Government agencies and approved pest control operators, which could not be sold in the open market. These Government agencies were procuring APT tablets of ~40 crores annually. B (b) There were only four manufacturers of APT, namely, Mis. Excel Crop Care Limited, Mis. UPL, Mis. Sandhya Organics Chemicals (P) Ltd. (which· are the three appellants herein) and Agrosynth Chemicals Limited. ( c) It was noted that the FCI had adopted the process of tender, c which is normally a global tender. The concerned tender had two-bid system, that is first techno commercial and then the financial bid. On the basis of the bids, the rate running contracts are executed with successful bidders. The DG found that there was also a Committee comprising of responsible officers for evaluation of technical and price bids. As per the practice, the D lowest bidder is invited by the Committee for negotiations and after negotiations, the Committee submits the report giving its recommendations and the contracts are awarded and after that the payment for the purchased tablets is released by the concerned regional offices. E (d) It was found that right from the year 2002, up to the year 2009, all the four parties used to quote identical rates, excepting for the year 2007. In 2002, Rs. 2451- was the rate quoted by these four parties and in the year 2005 it was ~310 (though the tender was scrapped in this year and the material was purchased from Central Ware Housing Corporation@ ~290). In November 2005, though the tenders were invited, all the parties had abstained from quoting. In 2007, Mis. UPL had quoted the price which was much below the price of other competitors. In 2008, all the parties abstained from quoti1ig, while in 2009 only the three appellants, barring Agrosynth Chemicals Limited, participated and quoted uniform rate of~388, which was ultimately brought down to ~386 after negotiations. It was also found that the tender documents were usually submitted in-person and the rates were normally filled with hand. ( e) In respect of the tender floated in the year 2009 for H

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COMMISSION OF INDIA (A. K. SJKRI, J.]

procurement of fixed quantity of 600 MT with a provision of± A I 0%, the three appellants had quoted identical rates of~388. It was found that the tender documents were to be submitted by 2:00 p.m. on May 08, 2009 and bid was to be opened at 3:00 p.m. on the same day. For submitting the bids, representatives of the three appellants made common entries in the Visitors' Register. B In fact, one Shri S.K. Bose of Mis. Excel Crop Care Limited made these entries on behalf of the representatives of other competitors as well. (f) By analysing the aforesaid bids carefully and taking into consideration the total number of 16 tenders, including tenders dated May 08, 2009, the DG recorded that: c (i) pricing pattern definitely showed the practice of quoting identical pricing by all the three appellants or at some other times by two appellants, including M/s. Agrosynth Chemicals Limited; D (ii) the explanation given by the appellants was unconvincing. Though, the appellants had stated that rise in price was mostly attributed to increase in price by China during the Beijing Olympics, but it was noticed that even during the period when the Phosphorous prices had fallen, no reflection thereof was seen in the high prices quoted by tl~e appellants; E

(iii) examination of the cost structure of each company reflected that there was nothing common between the appellants as far as the said cost structure was concerned and, therefore, quoting of identical prices by all the appellants was unnatural; and F (iv) joint boycotting by the appellants, at times, showed their concerted action, which happened again in March 2011 when the FCI had issued e-tender, which was closed on July 25,

2011. According to the DG, explanation given by the appellants and M/s. Agrosynth Chemicals Limited for boycotting the said tender to the effect that tender conditions were very stringent, G was an afterthought and did not inspire any confidence. As per the DG, even ifthe conditions were stringent, the appellants could discuss the same with the FCI as there was sufficient time between March 2011 and July 25, 2011, but it was not done. H

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A On the basis of the aforesaid findings, the DG framed an opinion that the appellants had contravened the provisions of Sections 3(3 )(a), 3(3)(b) and 3(3)(d) read with Section 3(1) of the Act.

3Copy pinpoint3. The CCI took up the report of the DG for consideration and for this purpose sent a copy thereof to all the four manufacturers inviting B their objections, if any, thereupon. Since M/s. Agrosynth Chemicals Limited was ultimately exonerated and spared by the CCl, it may not be necessary to deal with the objections of the said party. The three appellants contested the report on facts as well as in law. Identical legal submissions were made, which are pointed out, in capsulated form, as under: c (a) Since Sections 3 and 4 of the Act were activated and brought into force only with effect from May 20, 2009, tenders prior to this date could not be the subject matter ofinquiry for ascertaining whether there was any violation of Section 3 of the Act or not. Qua March 2009 tender, it was contended that last date of submission of tender was May 08, 2009 and the bids were submitted by the appellants on that date, i.e., before the enforcement of Section 3, which came into operation on May 20,

2009. No doubt, the tender was evaluated and awarded only after May 20, 2009, but insofar as role of the appellants is concerned, that came to an end on the submission of the tender and, therefore, tender of March, 2009 could not be the subject matter of enquiry. (b) Insofar as tender of 2011 is concerned, it was contended that inquiry in respect of boycotting the said tender by the appellants was without jurisdiction inasmuch as the FCI in its complaint dated Febrnary 04, 2011 did not mention about the said tender. (c) On merits, increase in the price over a period of time, particularly between years 2009 and 2011, was sought to be justified on the ground that the 'price of yellow phosphorous, which was to be procured from China, had increased'. It was further submitted that merely because there was identity of prices quoted by the appellants, it would not mean that there was any bid rigging or formation of cartel by the appellants. Submission in this behalf was that the market forces brought the situation where the prices became so competitive and it had led to the aforesaid trend. H

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COMMISSION OF INDIA [A. K. SIKRI, J.]

According to them, as a practice, the Central Warehousing A Corporation finalised the tender in the beginning of a particular year which used to be considered as the benchmark for other tenders for that year resulting in likelihood of identical pricing. As far as common entry having been made by Mr. S.K. Bose of M/s. Excel Crop Care Limited on May 08, 2009 on behalf of the B representatives of the other competitors as well in the Visitors' Register is concerned, it was stated that since the representatives knew each other well and had entered the premises ofFCI at the same time, Mr. Bose mentioned the names of others as well which was neither unnatural nor abnormal and no inference of cartel formation could be drawn therefrom. Boycotting of tender of C May 2011 was tried to be justified on the ground that there were unreasonable conditions prescribed in the tender making it impossible to submit the bid, particularly, the condition of depositing ~30 lakhs as Earnest Money Deposit (EMO), whereas in the earlier tenders the EMD was only ~I 0 Iakhs and ~8.25 lakhs. It was D further submitted that, notwithstanding the same price quoted by the appellants, each time the tender was evaluated by a Committee of Officers of the FCI and no such suspicion· was raised by the Committee. On the contrary, this aspect was specifically gone into and the Committee was satisfied that quoting of identical price was not due to any cartalisation. E M/s. Sandhya Organics Chemicals (P) Ltd. raised an additional plea qua non-participation in the 2011 tender by submitting that it did not have the capacity to supply 75 MT per month, which was the requirement in the said tender and, therefore, it chose not fo participate. F

4Copy pinpoint4. The CCI passed the order discussing all the aforesaid aspects in detail and rejecting each and every contention of the appellants, and, thereby concluding that the appellants had entered into an agreement or understanding, and indulged in anti-competitive activities while submitting their bids in response to the tenders issued by the FCI. G

5Copy pinpoint5. For indulging in anti-competitive practices in violation of the provisions of Section 3 of the Act, the CCI imposed penalties upon all the three appellants at 9% ofaverage 3 years' turnoverofthese appellants under Section 27(b) of the Act. Quantifying the same, penalty to the tune of ~63.90 crores was imposed upon M/s. Excel Crop Care Limited, H

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A ~1.57 crores uponMis. Sandhya Organics Chemicals (P) Ltd., and UPL was fastened with the penalty of~252.44 crores.

6Copy pinpoint6. The appellants filed three separate appeals before the COM PAT. The legal and factual arguments remained the same before COMPAT as well. In addition, argument was raised on the quantum of penalty. B The COM PAT has, vi de common judgment dated October 29, 2013, rejected all the contentions, except qua penalty, of the appellants. Insofar as imposition of penalty is concerned, COMPAT has held that though penalty@ 9% of three years' average turnover was not unreasonable, the penalty cannot be on the 'total turnover· of these establishments, and has to be restricted to 9% of the 'relevant turnover', i.e. the turnover c in respect of the quantum of supplies made qua the product for which cartel was formed and supplies made. In other words, it had to relate to the goods in question, namely, APT and turnover of other products manufactured and sold by the establishments. which were without blemish, could not be included for calculating the penalty.

7Copy pinpoint7. As noted above, before us, three appeals are filed by these manufacturers/suppliers against the findings of the COM PAT holding that there was violation of Sections 3(3)(a), 3(3)(b) and 3(3)(d) of the Act on the part of the appellants. On that basis. it is pleaded that those findings be declared as untenable and penalty imposed be set aside. On ·E the other hand, the CCI has also preferred Civil Appeal Nos. 53-55 of 20 l 4 against that part of the impugned order whereby penalty imposed upon these suppliers is restricted to 'relevant turnover· instead of 'total turnover'. Since submissions before us remain substantially the same. we are not pointing out the reasons given by the COM PAT which weighed with it after taking the aforesaid course of action, inasmuch as, while F discussing the submissions of the parties, we shall be referring to the reasons adopted by the COMPAT.

8Copy pinpoint8. Having painted the canvas with seminal and essential facts, it becomes manifest that following issues arise for consideration in these appeals: G (i) Whether the dispute regarding violation of Section 3 of the Act by the appellants could not be gone into in respect of tender of March, 2009, as Section 3 was operationalised only by notification dated 20'11 May, 2009? (ii) Whether CCI was barred from investigating the matter H

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COMMISSION OF INDIA [A. K. SIKRI, J.]

pertaining to the tender floated by FCI in March, 2011 because of the reason that FCI in its complaint dated 4•h F ebrnary, 2011 given to the CCI had not complained about this tender? (iii) Whether, on the facts of the case, conclusion of CCI that the appellants had entered into an agreement/arrangement and pursuant thereto indulged in collusive bidding by fo1ming a cartel, resulting into contravention of Section 3(3)(a), 3(3)(b) and 3(3)(d) read with Section 3( 1) of the Act, is justified9 (iv) Whether penalty under Section 27(b) of the Act has to be on total/entire turnover of the offending company or it can be only on "relevant turnover", i.e., relating to the product in question? c

9Copy pinpoint9. First two issues are in the nature of preliminary objections that were raised by the appellants, which are jurisdictional issues as the attempt of the appellants is to show that CCI was not even empowered to look into the merits of the case because of those objections. Therefore, in the first instance, we deal with these issues. D

10Copy pinpoint10. Issue No. 1 Re: Applicability of Section 3 of the Act in respect of Notice Inviting Tender (NIT) dated 28 11 ' March, 2009 Section 3 is the first provision in Chapter II of the Act. Chapter II E is titled as "Prohibition of certain agreements, abuse of dominant position and regulation of combinations". It sta1ts by specifying those agreements which are prohibited under this Chapter and Section 3 enumerates such prohibitive agreements. It reads as under: "3. (!)No enterprise or association of enterprises or person or E 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. (2) Any agreement entered into in contravention of the provisions contained in subsection ( 1) shall be void. G

(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 H

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A 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; B (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; C (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section · shall apply to any agreement entered into by way ofjoint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Explanation.-Forthe purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding (4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including- (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive distribution agreement; G (d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of sub-section (I) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. H

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COMMISSION OF INDIA [A. K. SIKRI, J.]

Explanation.-For the purposes of this sub-section,- A (a) "tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods; (b) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade B from acquiring or otherwise dealing in any goods other than those of the seller or any other person; (c) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or supply of any goods or . allocate any area or market for the disposal or sale of the goods; C (d) "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought; (e) "resale price maintenance" includes any agreement to sell D goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged. (5) Nothing contained in this section shall restrict- E (i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under- (a) the Copyright Act, 1957 (14of1957); F (b) the Patents Act, 1970 (39 of1970); (c) the Trade and Merchandise Marks Act, 1958 (43of1958) or the Trade Marks Act, 1999 (47of1999); (d) the Geographical Indications of Goods (Registration and G Protection) Act, 1999 (48 of 1999); · ( e) the Designs Act, 2000 ( 16 of 2000); (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of2000); H

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A (ii) the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export."

11Copy pinpoint11. At this juncture, it is the applicability of this Section which is B dealt with. Though, the Competition Act is of the year 2002 and was passed by the Legislature on 13 111 January, 2003, as per the provisions of Section 1(3), the Act was to come into force from the date to be notified by the Central Government in the Official Gazette. Notification was issued by the Central Government wherein 31" March, 2003 was specified as the appointed date. However, vide this notification, some of c the provisions of the Act, and not all the provisions, were enforced. Many other provisions came into force vide notification dated 19 11' June, 2003 and thereafter by notification dated 20 111 December, 2007 some more provisions were notified. Insofar as Section 3 of the Act is concerned, this provision along with many other provisions came into D force on 20'11 May, 2009 vide S.0. 124l(E) dated 1S 1h May, 2009 on which date the said notification was published in the Gazette oflndia as well. Remaining provisions were notified by subsequent notifications. It is, thus, a unique example where the entire Act was not enforced by one single notification but different provisions of the Act were enforced in bits and pieces by issuing various notifications over a span of time. E

12Copy pinpoint12. NIT in question was issued by FCI on 28 1h March, 2009. Last date for submission of bids was 811t May, 2009. Few days thereafter, i.e., on 2011t May, 2009, Section 3 of the Act was notified. It is on these facts, the argument constructed by the appellants is that as on 811t May, 2009 when the appellants had submitted their bids, Section 3 of the Act F was not in operation and, therefore, tender of March, 2009 could not be the subject matter of inquiry by the CCL According to the appellants, if this is allowed, it would amount to introducing the provisions of Section 3 of the Act retrospectively though the provision was introduced only prospectively that is from the date of the notification.

13Copy pinpoint13. The answer to the aforesaid argument given by Mr. Neeraj Kaul, learned Additional Solicitor General appearing for the CCI, was that the NIT in question did not come to an end with the submission of bid on May 08, 2009. He pointed out that this bid was opened only on June 01, 2009, on which date Section 3 of the Act had already been H activated. Not only this, bidders, that is all the appellants, were called

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COMMISSION OF INDIA [A. K. SIKRL J.]

for negotiations on June 17, 2009 and thereafter the award of work was given by placing requisite orders. He, thus, submitted that principle of retroactivity is to be applied as the process of finalisation of the tender was still on. For the applicability of doctrine ofretroactivity. Mr. Kaul referred to Section 18 of the Act which casts duty upon the CC I to examine adverse effect on the competition and enumerated following factors for the applicability of this principle: (i) Continuing effect of agreements/arrangement arrived at by the appellants. (ii) Negotiations with the appellants were held after the promulgation of Section 3 of the Act. c (iii) From 2007 to 2011, the rates quoted by the appellants/tenderers were identical and in order to find out whether there was cartelisation or not, studying of this entire trend became relevant. In this continuing arrangement of cartalisation, period of 2009 and even thereafter gets included. D (iv) Even boycott of201 l tender by all the appellants depicted their common intention which was the result of arrangement/ agreement between them.

14Copy pinpoint14. It is not in dispute that against this tender of 2009, all the appellants had offered price of~388, even though their cost of production diffe~ed. The COMPAT, in the impugned order, has held that merely because 81h May, 2009 was the last date for submitting the tender, that would not be the end of the matter as that is not the relevant date for the purpose of applicability of Section 3 when the tendering process continued, as the appellants had participated in the said tender process on I" June, 2009 when the price bids were opened and offered the negotiated price on l 7'h June, 2009. This would mean that process of bidding was still on which went well beyond the date of notifying provisions of Section 3 of the Act. Relevant discussion in this behalf of the COMPAT is as under: G '15 ... .In this behalf the CCI has also recorded a finding in paragraph 7.13 that 8.5.2009 is not the crucial date but even 1.6.2009 and 17 .6.2009 are equally crucial. This discussion would mean that the illegality of collusive bidding or rigging the bidding which commenced on 8.5.2009 was continued thereafter on 1.6.2009 and 17.6.2009 also. The negotiation of prices with the H

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A lowest bidder, and in this case all the three appellants were the lowest bidders, undoubtedly forms the part of the process of bid rigging and cannot be seen separat€1y from the process of bidding. For that matter the process ofbidding cannot be restricted to only one date i.e. on 8.5.2009. We have seen in this behalf the investigation report by the D.G. as also the finding arrived at by B the CCI which in our opinion is a correct finding. In this behalf it cannot be ignored that all the three appellants were informed by identical letters by the FCJ one of which is found in Appeal No. 80/2012 more particularly on pages 361-362. The letter is in the following terms :- c "Sub.: Tender Enquiry No. Pur-15(4)/2008 dated28.3.2009 for supply of 600 MTs ± 10% Al. Phosphide conforming to BIS Specification No. IS:6438-l 980 with up to date amendments, Technical Bid opened on 08.05.09; Price Bid opened on 01.06.2009 and negotiation held on 17.06.09. D Gentlemen, Please refer to your offer letter No. UPLD : FCI:HQ : ALP : VKJ : 09 dated 07 .05.2009 and letter of negotiated offer dated 17.06.2009 against the above mentioned tender enquiry.

E Your offer for supply (ALP( @ 386000/- per MT i.e. Rs. 386/- per 18 kg net... is hereby accepted for a quiintity of 200 MT ± 10% strictly as per the terms and conditions as contained in the tender for including detailed NIT." This letter thus clarifies and proves that all the three appellants had given the offer at Rs.386/- per kg. which was identical offer for all the three appellants. It is thus clear that the anti-competitive agreement which commenced on 8.5.2009 continued thereafter also and manifested itself in the post date, negotiations which was the direct'fall out of the original identical offer and at which the offer was reduced by the identical amotmts. Each of the appellant had the option of reducing the offer by a different amount or not reducing the offer or not reducing the offer at all and instead the three appellants chose to continue their anti- competitive agreement right up to that date.

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COMMISSION OF lNDIA [A. K. SIKRI, J.]

17. The term "process for bidding" used in the explanation in A Section 3(3) would thus cover every stage from notice inviting tender till the award of the contract and would also include all the intermediate stages such as pre-bid clarification and bid notifications also. Once this inference is reached on the basis of the interpretation of Section 3(3) explanation there would be no B question of dearth ofjurisdiction on the part of the CCI to firstly order the investigation into the matter and also to inquire itself into the complained illegality.'

15Copy pinpoint15. The COMPAT has also noted that the anti-competitive conduct of the appellants was not limited to the 2009 tender alone. It had considered tender dated November 03, 2009 floated by the U.P. State C Warehousing Corporation, tender dated July 13, 2010 of the Central Warehousing Corporation, tender dated July 15, 2010 of the M.P. State Warehousing Corporation, and tender dated February 14, 2011 of the Punjab State Cooperative SS & Marketing Federation and found that even against these tenders the appellants had quoted identical prices. D Keeping in view the said pattern of quotation, the COMPAT opined that notwithstanding any objection of the appellants premised on retrospective application of Section 3, the anti-competitive conduct of APT manufacturers, i.e. the appellants, continued right up to the year 2011, much after Section 3 of the Act had come into force. Therefore, even if 2009 tender was to be completely ignored, the provisions of the Act E would nevertheless be attracted in the instant case. We are in complete agreement with the aforesaid view taken by the COMPAT. We are also of the firm view that provisions of Section 3 are applicable to 2009 tender as well. F

16Copy pinpoint16. Chapter II of the Act deals with three kinds of practices which are treated as anti-competitive and prohibited. These are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys G dominant position, abuses the said dominant position; and (c) regulating the combination of enterprises by means of mergers or amalgamations to ensure that such mergers or amalgamations do not become anti-competitive or abuse the dominant position which they can attain. H

932 SUPREME COURT REPORTS [2017] S S.C.R.

17Copy pinpoint17. In the instant case, we are concerned with the first type of practices, namely, anti-competitive agreements. The Act, which prohibits anti-competitive agreements, has a laudable purpose behind it. It is to ensure that there is a healthy competition in the market, as it brings about various benefits for the public at large as well as economy of the nation. In fact, the ultimate goal of competition policy (or for that matter, B even the consumer policies) is to enhance consumer well-being. These policies are directed at ensuring that markets function effectively. Competition policy towards the supply side of the market aims to ensure that consumers have adequate and affordable choices. Another purpose in curbing anti-competitive agreements is to ensure' level playing field' c for all market players that helps markets to be competitive. It sets 'rules of the game' that protect the competition process itself, rather than competitors in the market. In this way, the pursuit of fair and effective competition can contJibute to improvements in economic efficiency, economic growth and development of consumer welfare. How these benefits accrue is explained in ASEAN Regional Guidelines on D Competition Policy, in the following manner: ""2.2 Main Objectives and Benefits of Competition Policy 2.2.1.1 Economic efficiency: Economic efficiency refers to the effective use and allocation of the economy's resources. E Competition tends to bring about enhanced efficiency, in both a static and a dynamic sense, by disciplining firms to produce at the lowest possible cost and pass these cost savings on to consumers, and motivating firms to undertake research and development to meet customer needs.

F 2.2.1.2 Economic growth and development: Economic growth- the increase in the value of goods and services produced by an economy-is a key indicator of economic development. Economic development refers to a broader definition of an economy's well- being, including employment growth, literacy and mortality rates and other measures of quality of life. Competition may bring G about greater economic growth and development through improvements in economic efficiency and the reduction of wastage in the production of goods and services. The market is therefore able to more rapidly reallocate resources, improve productivity and attain a higher level of economic growth. Over H

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COMMISSION OF INDIA [A. K. SIKRI, J.]

time, sustained economic growth tends to lead to an enhanced A quality oflife and greater economic development. 2.2.1.3 Consumer Welfare: Competition policy contributes to economic growth to the ultimate benefit of consumers, in terms of better choice (new products), better quality and lower prices. Consumer welfare protection may be required in order to redress B a perceived imbalance between the market power of consumers and producers. The imbalance between consumers and producers may stem from market failures such as information asymmetries, the lack of bargaining position towards producers and high transaction costs. Competition policy may serve as a complement to consumer protection policies to address such market failures." c

18Copy pinpoint18. The aforesaid guidelines also spell out few more benefits of such laws incorporating competition policies by highlighting the following advantages: "2.2.2 In addition, competition policy is also beneficial to D developing countries. Due to worldwide deregulation, privatisation and liberalisation of markets, developing countries need a competition policy, in order to monitor and control the growing role of the private sector in the economy so as to ensure that public monopolies are not simply replaced by private monopolies. E 2.2.3 Besides contributing to trade and investment policies, competition policy can accommodate other policy objectives (both economic and social) such as the integration of national markets and promotion of regional integration, the promotion or protection of small businesses, the promotion of technological advancement, the promotion of product and process innovation, the promotion of industrial diversification, environment protection, fighting inflation, job creation, equal treatment of workers according to race and gender or. the promotion of welfare o.f particular consumer groups. In particular, competition policy may have a positive impact on employment policies, reducing redundant employment (which often results from inefficiencies generated by large incumbents and from the fact that more dynamic enterprises are prevented from entering the market) and favouring jobs creation by new efficient competitors. H

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A 2.2.4 Competition policy complements trade policy, industrial policy and regulatory reform. Competition policy targets business conduct that limits market access and which reduces actual and potential competition, while trade and industrial policies encourage adjustment to the trade and industrial structures in order to promote productivity-based growth and regulatory reform B eliminates domestic regulation that restricts entry and exit in the markets. Effective competition policy can also increase investor confidence and prevent the benefits of trade from being lost through anticompetitive practices. In this way, competition policy can be an important factor in enhancing the attractiveness of an c economy to foreign direct investment, and in maximizing the benefits of foreign investment."

19Copy pinpoint19. In fact, there is broad empirical evidence supporting the proposition that competition is beneficial for the economy. Economists agree that it has an important role to play in improving productivity and, D therefore, the growth prospects of an economy. It is achieved in the following manner: "International Competition Network - Economic Growth and Productivity: Competition contributes to increased productivity through: E Pressure on firms to control costs. In a competitive environment, films must constantly strive to lower their production costs so that they can charge competitive prices, and they must also improve their goods and services so that they correspond to consumer demands. F Easy market ently and exit. Entry and exit of firms reallocates resources from less to more efficient firms. Overall productivity increases when an entrant is more efficient than the average incumbent and when an exiting firm is less efficient than the average incumbent. Entry- and the threat of entry-incentivizes firms to continuously improve in order not to lose market share to or be forced out of the market by new entrants. E11co11ragi11g innovation. Innovation acts as a strong driver of economic growth through the introduction of new or substantially improved products or services and the development of new and improved processes that lower the cost and increase the efficiency

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of production. Incentives to innovate are affected by the degree A and type of competition in a market. Pressure to Improve Infrastructure. Competition puts pressure on communities to keep local producers competitive by improving roads, bridges, docks, airpo11s, and communications, as wdl as improving educational opportunities. B Benchmarking. Competition also can contribute to increased productivity by creating the possibility of benchmarking. The productivity of a monopolist cannot be measured against rivals in the same geographic market, but a dose of competition quickly will expose inferior performance. A monopolist may be content c with mediocre productivity but a firm battling in a competitive market cannot afford to fall behind, especially ifthe investment community is benchmarking it against its rivals." Productivity is increased through competition by putting pressure on firms to control costs as the producers strive to lower their production costs so that they can charge competitive prices. It also improves the quality of their goods and services so that they correspond to consumers' demands. Competition law enforcement deals with anti-competitive practices arising from the acquisition or exercise of undue market power by firms that result in consumer harm in the forms of higher prices, lower quality, limited choices and lack of innovation. Enforcement provides remedies to avoid situations that will lead to decreased competition in markets. Effective enforcement is important not only to sanction anti-competitive conduct but also to deter future anti-competitive practices. F

20Copy pinpoint20. When we recognise that competition has number of benefits, it clearly follows that cartels or anti-competitive agreements cause harm to consumers by fixing prices, limiting outputs or allocating markets. Effective enforcement against such practices has direct visible effects in terms of reduced prices in the market and this is also supported by various empirical studies. G

21Copy pinpoint21. Keeping in view the aforesaid objectives that need to be achieved, Indian Parliament enacted Competition Act, 2002. Need to have such a law became all the more important in the wake of liberalisation and privatisation as it was found that the law prevailing at that time, namely, Monopolistic Restrictive Trade Practices Act, 1969 H

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A was not equipped adequately enough to tackle the competition aspects of the Indian economy. The law enforcement agencies, which include CCI and COMPAT, have to ensure that these objectives are fulfilled by curbing anti-competitive agreements.

22Copy pinpoint22. Once the aforesaid purpose sought to be achieved is kept in B mind, and the same is applied to the facts of this case after finding that the anti-competitive conduct of the appellants continued after coming into force of provisions of Section 3 of the Act as well, the argument predicated on retrospectivity pales into insignificance. One has to keep in mind the aforesaid objective which the c legislation in question attempts to sub-serve and the mischief which it seeks to remedy. As pointed out above, Section 18 of the Act casts an obligation on the CCI to 'eliminate' anti-competitive practices and promote competition, interests of the consumers and free trade. It was rightly pointed out by Mr. Neeraj Kishan Kaul, the learned Additional Solicitor General, that the Act is clearly aimed at addressing the evils affecting the economic landscape of the countly in which interest of the society and consumers at large is directly involved. This is so eloquently emphasised by this Court in Competition Co111111issio11 oflndia v. Steel Authority ofIndia Limited & Am: 1 in the following manner: "6. As far as the objectives of competition laws are concerned, they vary from country to countly and even within a country they seem to change and evolve over the time. However, it will be useful to refer to some of the common objectives of competition law. The main objective of competition law is to promote economic efficiency using competition as one of the means of assisting the creation of market responsive to consumer preferences. The advantages of perfect competition are threefold: allocative efficiency, which ensures the effective allocation of resoui·ces, productive efficiency, which ensures that costs of production are kept at a minimum and dynamic efficiency, which promotes innovative practices. These factors by and large have been accepted all over the world as the guiding principles for effective implementation of competition law. xx xx JG\:

I (2010) IOSCC744 H

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8. The Bill sought to ensure fair competition in India by prohibiting A trade practices which cause appreciable adverse effect on the competition in market within India and for this purpose establishment of a quasi-judicial body was considered essential. The other object was to curb the negative aspects of competition through such a body, namely, "the Competition Commission of B India" (for short "the Commission") which has the power to perform different kinds of functions, including passing of interim orders and even awarding compensation and imposing penalty. The Director General appointed under Section 16( 1) of the Act is a specialised investigating wing of the Commission. In short, the establishment of the Commission and enactment of the Act C was aimed at preventing practices having adverse effect on competition, to protect the interest of the consumer and to ensure fair trade carried out by other participants in the market in India and for matters connected therewith or incidental thereto.

9. The various provisions of the Act deal with the establishment, powers and functions as well as discharge of adjudicatory functions by the Commission. Under the scheme of the Act, this Commission is vested with inquisitorial, investigative, regulato1y, adjudicatory and to a limited extent even advisory jurisdiction. Vast powers have been given to the Commission to deal with the complaints or infonnation leading to invocation of the provisions of Sections 3 and 4 read with Section 19 of the Act. In exercise of the powers vested in it under Section 64, the Commission has framed regulations called the Competition Co1mnission oflndia (General) Regulations, 2009 (for short "the Regulations").

10. The Act and the Regulations framed thereunder clearly indicate the legislative intent of dealing with the matters related to contravention of the Act, expeditiously and even in a time- bound programme. Keeping in view the nature of the controversies arising under the provisions of the Act and larger public interest, the matters should be dealt with and taken to the logical end of pronouncement of final orders without any undue delay. In the event of delay, the ve1y purpose and object of the Act is likely to be fmstrated and the possibility of great damage to the open market and resultantly, country's economy cannot be ruled out. H

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A xx xx xx

125. We have already noticed that the principal objects of the Act, in terms of its Preamble and the Statement of Objects and Reasons, are to eliminate practices having adverse effect on the competition, to promote and sustain competition in the market, to B protect the interest of the consumers and ensure freedom of ·trade carried on by the participants in the market, in view of the economic developments in the country. In other words, the Act requires not only protection of free trade but also protection of consmner interest. The delay in disposal of cases, as well as undue continuation of interim restraint orders, can adversely and c prejudicially affect the free economy of the country. Efforts to liberalise the Indian economy to bring it on a par with the best of the economies in this era of globalisation would be jeopardised if time-bound schedule and, in any case, expeditious disposal by the Commission is not adhered to. The scheme of various provisions of the Act which we have already referred to including Sections 26, 29, 30, 31, 53-B(5) and 53-T and Regulations 12, 15, 16, 22, 32, 48 and 31 clearly show the legislative intent to ensure time-bound disposal of such matters." ·

23Copy pinpoint23. Having regard to the aforesaid objective, we are of the opinion that merely because the purported agreement between the appellants was entered into and bids submitted before May 20, 2009 are no yardstick to put an end to the matter. No doubt, after the agreement, first sting was inflicted on May 8, 2009 when the bids were submitted and there was no provision like S. 3 on that date. However, the effect of the arrangement continued even after May 20, 2009, with more stings, as a F result of which the appellants bagged the contracts and fmits thereof reaped by the appellants when Section 3 had come into force which frowns upon such kinds of agreements.

24Copy pinpoint24. We are, thus, of the opinion that inquiry into the tender of March 2009 by the CCI is covered by Section 3 of the Act inasmuch as G the tender process, though initiated prior to the date when Section 3 became operation, continued much beyond May 20, 2009, the date on which the provisions of Section 3 of the Act were enforced. We agree . with the COMPAT that the role of the appellants did not come to an end with the submission of bid on May 08, 2009. H

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25Copy pinpoint25. in this behalf, it is to be emphasised again that merely by submitting the tenders, role of the appellants as tenderers had not come to an end. As already pointed out, the DG in its report noted that FCI resorted to global tender which had two-bid systems: techno-commercial bid and financial bid. Those who qualified in techno-commercial process, their financial bids were to be opened. The appellants had submitted their bids on May 08, 2009, which was the last date for this purpose. Bids were to be submitted by 2.00 pm on that day and were to be opened at 3.00 pm on the same day. The committee of responsible officers for evaluating the technical price bids was constituted. As per the practice, the lowest bidder is invited by the committee for negotiations. And after negotiations, the committee submits the report giving its recommendations c on the basis of which contract is awarded. lfthere was variation in the prices quoted by the appellants in their bids, things would have been different. Then L-1 could have been called for negotiations. However, all the three appellants quoted identical rates of~388/-. Because of this reason all the appellants were LI and had to be called for negotiations. D Therefore, bidding process did not come to an end on May 08, 2009 as argued by the appellants. It continued even thereafter when the appel Ian ts appeared before the committee for negotiations, much beyond May 20, 2009 the date on which provisions of Section 3 of the Act were enforced. · 26. In the aforesaid conspectus, principle of retroactivity woul-d E definitely apply. For this, we may usefully refer to the judgment of this Court in R. Rajagopal Reddy (Dead) by LRs. & Ors. v. Padmiui Chmulrasekhara11 (Dead) By LRs. 2 wherein it was held that merely because an agreement relating to benami transaction was entered into prior to the coming into force of the Benami Transactions (Prohibition) Act, 1988, it would not mean that the provisions of the said Act would not apply retroactively to such an agreement and render it void. Likewise. in Zile Singh v. State of Haryana & Ors. 3, this Court held that rule against retrospectivity may not apply to a declaratory statute.

27Copy pinpoint27. Following these judgments, the Bombay High Court has described this very statute, with which we are dealing, to be retroactive in operation in Kingfisher Airlines v. Competition Commission of India4. Following discussion from that judgment needs to be reproduced: 2 (1995) 2 sec 630

'(2004J s sec 1 '(2010) 4 Comp. LJ 557 (Born) H

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A "8. Shri Seervai, the learned Senior Counsel, submits that the very wording of Section 3 of the Act would make it clear that the Act is prospective in nature. He submits that even a plain reading of the provisions would go to show that. He contends that the legislatme in its wisdom has not added any words in the section to say that it would affect the agreement already entered B into. He submits that if it wanted to bring the agreement, prior to coming into force of the Act, into its sweep, it would have and could have said so in ve1y many words .... xx xx xx

c The Act nowhere declares the agreement already entered into as void. lfthe Section is read, it says that after coming into force of the Act, no person shall enter into an agreement in contravention of the provisions of the Act and if entered into, same shall be void. This, to our mind, at the most, would mean that the Act does not render the agreement entered into, prior to coming into force of the Act, void ab initio. Had the Act been retrospective in operation, it would render the agreement void ab initio. The agreement prior to coming into force of the new act was, therefore, certainly valid, for it was not in breach of any law or affected any law then existing. The question here is whether this agreement, which was valid until coming into force of the Act, would continue to be so valid even after the operation of the law. The parties as on today certain propose to act upon that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and cannot be questioned. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy. We would say that the Act could have been treated as operating retrospectively, had the Act rendered the agreement void ab initio and would render anything done pursuant to it as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and subsisting even after coming illto force of

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the Act, which prohibits an agreement of such nature, such an agreement cannot be said to be valid from the date of the coming into force of the Act. If the law cannot be applied to the existing agreement, the ve1y purpose of the implementation of the public policy would be defeated. Any and eveiy person may set up an agreement said to be entered into prior to the coming into force of the Act and then claim immunity from the application of the Act. Such thing would be absurd, illogical and illegal. The moment the Act comes into force, it brings into its sweep all existing agreements. This can be explained further by quoting the following example: "A and B enter into agreement of sale of land on 2/1/2008. It c is agreed between them that sale-deed would be executed on or before 2/1/2009. Meanwhile, i.e. on 10/8/2008, the Government decides to impose a ban on transfer of the land and declares that any such transfer, if effected, shall be void. The question is, could the parties say that since their agreement D being prior to Government putting a ban on transfer, their case is not covered by the ban? The answer has to be in the negative, as on the day the contract is sought to be completed, it is prohibited." Similar would be the result in the instant case." E

28Copy pinpoint28. We approve the aforesaid view taken by the Bombay High Court. It may be added that had the anti-competitive agreement between the appellants been executed and completed in its entirety prior to May 20, 2009, i.e. nothing further was left to be done and all actions as contemplated by the agreement had already been accomplished, it could F perhaps be argued that the Act was not applicable to such an agreement or actions taken pursuant to the agreement. However, that is not the factual position in the instant case as the purported arrangement entered into by the appellants continued to be acted upon even after May 20, 2009. G

29Copy pinpoint29. The COMPAT has referred to the explanation to Section 3(3)(d) also while arriving at the conclusion that May 08, 2009 cannot be the dete1minative date on which the bid was submitted, as 'manipulating the process of bidding' is also covered by virtue of the said explanation and this process of bidding continued even after May 20, 2009. H

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30Copy pinpoint30. Learned counsel for the appellants submitted that this explanation has no application as it referred only to 'bid rigging' which is different from 'collusive bidding'. In an attempt to distinguish the two expressions, it was argued that although the terms 'bid rigging' or 'collusive bidding' may, in certain contexts, overlap or even may be referred to as 'synonyms', in certain context they may cover activities 8 which are not identical. 'Bid rigging' may cover larger and more varied activities than 'collusive bidding'. It was submitted that in view of the specific exclusion of 'collusive bidding' from the 'Explanation·. an activity which squarely falls within the scope of 'collusive bidding' would not be covered by the 'Explanation' and would be excluded from c it. Submission is that since the allegation in the present case relating to identical pricing or identical reduction in price squarely falls within the term 'collusive pricing', the 'Explanation' has no relevance to the present case.

31Copy pinpoint31. Mr. Neeraj Kishan Kaul, learned Additional Solicitor General, D refuted the aforesaid submission with vehemence by urging that bid rigging and collusive bidding are not mutually exclusive and these are overlapping concepts. Illustratively, he referred to the findings of the CCI, as approved by the COMPAT, in the instant case itself to the effect that the appellants herein had 'manipulated the process of bidding' on the ground that bids were submitted on May 08, 2009 collusively, which E was only the beginning of the anti-competitive agreement between the parties and this continued through the opening of the price bids on June 0 I, 2009 and thereafter negotiations on June 17, 2009 when al I the parties reduced their bids by same figure of~2 to bring their bid down to ~386 per kg. from ~388 per kg. From this example, he submitted that on May F 08, 2009 there was a collusive bidding but with conce11ed negotiations on June 17, 2009, in the continued process, it was rigging of the bid that was practiced by the appellants. We are inclined to agree with this pellucid submission of the learned Additional Solicitor General.

32Copy pinpoint32. Richard Whish and David Bailey5, in their book, have given illustrations ofvarious fonns of collusive bidding/bid rigging. which include: (a) Level tendering/bidding (i.e. bidding at same price - as in the present case).

H 'Competition Law. 7th Edition. page 536

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(b) Cover bidding/courtesy bidding. A ( c) Bid rotation. (d) BidAllocation.

33Copy pinpoint33. Even internationally, 'collusive bidding' is not understood as being different from 'bid rigging'. These two expressions have been B used interchangeably in the following international commentaries/ glossaries and websites of competition authorities: (a) UNCTAD Competition Glossary dated June 22, 2016 "Bid Rigging or Collusive Tendering is a manner in which conspiring competitors may effectively raise prices where c business contracts are awarded by means of soliciting competitive bids. Essentially, it relates to a situation where competitors agree in advance who will win the bid and at what price, undermining the very purpose of inviting tenders which is to procure goods or services on the most favourable prices and conditions." (b) OECD Glossary of Industrial Organisation Economics & Competition Law. "Bid rigging is a particular form of collusive price-fixing behaviour by which firms coordinate their bids on procurement or project contracts. There are two common fonns of bid rigging. In the first, firms agree to submit common bids, thus eliminating price competition. In the second, firms agree on which firm will be the lowest bidder and rotate in such a way that each firm wins an agreed upon number or value of contracts. Since most (but not all) contracts open to bidding involve governments, it is they who are most often the target of bid rigging. Bid rigging is one of the most widely prosecuted forn1s of collusion." G Collusive bidding (tendering) - See Bid Rigging" [This shows collusive bidding and bid rigging are treated as one and the same] (c) OECD Guidelines for fighting bid rigging I-I

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A "Bid rigging (or collusive tendering) occurs when businesses, that would othe1wise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process." B (d) United States ·office of the Inspector General, Investigations (Fraud Indicators Handbook) "Collusive bidding, price fixing or bid rigging, are commonly used interchangeable terms which describe many forms of an illegal anti-competitive activity. The common thread throughout c all these activities is that they involve any agreements or informal arrangements among independent competitors, which limit competition. Agreements among competitors which violate the law include but are not limited to: ( 1) Agreements to adhere to published price lists. D (2) Agreements to raise prices by a specified increment. (3) Agreements to establish, adhere to, or eliminate discounts. (4)Agreements not to advertise prices. (5) Agreements to maintain specified price differentials based on quantity, type or size of product." (e) Australian Competition & Consumer Commission "Bid rigging, also referred to as collusive tendering, occurs when two or more competitors agree they will not compete genuinely with each other for tenders, allowing one of the cartel members to 'win' the tender. Participants in a bid rigging cartel may take turns to be the 'winner' by agreeing about the way they submit tenders, including some competitors agreeing not to tender."

34Copy pinpoint34. As the Leigman of the law, it is our task, nay a duty, to give proper meaning and effect to the aforesaid 'Explanation': it can easily be discussed that the Legislature had in mind that the two expressions are inter-changeably used. It is also necessary to keep in mind the purport behind Section 3 and the objective it seeks to achieve. Sub-section ( 1) of Section 3 is couched in the negative terms which mandates that no enterprise or association of enterprises or person or association of persons