# RAJASTHAN CYLINDERS AND CONTAINERS LIMITED v. UNION OF INDIA AND ANOTHER

- **Citation:** [2018] 12 S.C.R. 495
- **Court:** Supreme Court of India
- **Decided:** 2018-10-01
- **Case number:** Civil Appeal No. 3546 of 2014
- **Bench:** A. K. Sikri, Ashok Bhushan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rajasthan-cylinders-and-containers-limited-v-union-of-india-and-another-32300
- **Pages:** 70

## Headnote

Competition Act, 2002:
ss. 3, 19 and 27 - Cartelisation, bid-rigging and collusive
bidding - Suo-motu proceedings initiated by Competition Commission
of India - Against bidders/manufacturers of LPG Gas Cylinders -
Investigating into complaint about unfair conditions in the tender
floated by Indian Oil Corporation Ltd. (IOCL) for supply of LPG
Gas Cylinders - Competition Commission held that there was collusive
bidding - Competition Appellate Tribunal affirmed the findings of
Competition Commission - On appeal, held: It is duty of the
Commission to ensure that the conditions which have tendency to
kill the competition are to be curbed - There may not be direct
evidence on the basis of which cartelisation or such agreement
between the parties can be proved - The standard of proof for such
agreement is one of probability - There is a presumption that four
types of agreements mentioned in s. 3(3) will have an appreciable
effect on competition - However, the presumption is rebuttable as
these agreements are not conclusive proof of the fact that it would
result in appreciable adverse effects on competition - If evidence is
led which rebuts the presumption, the Commission shall take into
consideration the factors mentioned in s. 19 - If the evidence
collected by the Commission leads to one or more or all the factors
mentioned in s. 19(3), it would again be treated as an agreement
which may cause or likely to cause an appreciable adverse effect
on competition - In the present case, inferences drawn by the
Commission, on the basis of the evidence collected by it, have been
duly rebutted by the appellants/manufacturers - They have been
able to discharge the onus that shifted upon them - However, at
that stage, the Commission failed to carry the matter further - Thus,
there is no sufficient evidence to hold that there was any agreement
between the appellants for bid rigging - Appeals by the manufactures
[2018] 12 S.C.R. 495
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are allowed - Since no penalty is payable, appeals of the Commission
are dismissed as infructuous - Evidence.
Words and Phrases:
"bid rigging" and "collusive rigging" - Meaning of, in the
context of Competition Act, 2002.
Allowing the appeals filed by the manufactures and
dismissing the appeals filed by the Competition Commission, the
Court
HELD: 1. On the one hand the economic policy of the nation
has ushered in the era of liberalisation and globalisation thereby
giving freeplay to the private sector in the manner of conducting
business, at the same time, in public interest and in the interest
of consumers, a regime of regulators has also been brought to
ensure certain checks and balances. Since competition among
the enterprises or businessmen is treated as service for a public
purpose and, therefore, there is a need to curb anti-competitive
practices. The Competition Commission of India (CCI) is given
the task (as a regulator) to ensure that no such anti-competitive
practices are undertaken. In fact, Section 18 of the Act casts a
specific and positive obligation on CCI to 'eliminate' anticompetitive practices and promote competition, interest of the
consmuer and free trade. [Para 72] [536-G-H; 537-A-B]
Competition Commission of India vs. Steel Authority of
India Limited and Another (2010) 10 SCC 744 : [2010]
11 SCR 112 - relied on.
2. One of the anti-competitive practices is cartelisation,
the essential postulate whereof is agreement between enterprises
or association of enterprises or persons or associations of persons
in respect of production, supply, distribution, storage, acquisition
or control of goods or provisions of service, which causes or is
likely to cause an appreciable adverse effect on competition within
India. Such an agreement is treated as void. The types of
agreement which may fall foul of Section 3 are mentioned in subsection (3) thereof. These include sharing the market by way of
allocation of geographical areas of

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RAJASTHAN CYLINDERS AND CONTAINERS LIMITED
v.
UNION OF INDIA AND ANOTHER
(Civil Appeal No. 3546 of 2014)
OCTOBER 01, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Competition Act, 2002:
ss. 3, 19 and 27 - Cartelisation, bid-rigging and collusive
bidding - Suo-motu proceedings initiated by Competition Commission
of India - Against bidders/manufacturers of LPG Gas Cylinders -
Investigating into complaint about unfair conditions in the tender
floated by Indian Oil Corporation Ltd. (IOCL) for supply of LPG
Gas Cylinders - Competition Commission held that there was collusive
bidding - Competition Appellate Tribunal affirmed the findings of
Competition Commission - On appeal, held: It is duty of the
Commission to ensure that the conditions which have tendency to
kill the competition are to be curbed - There may not be direct
evidence on the basis of which cartelisation or such agreement
between the parties can be proved - The standard of proof for such
agreement is one of probability - There is a presumption that four
types of agreements mentioned in s. 3(3) will have an appreciable
effect on competition - However, the presumption is rebuttable as
these agreements are not conclusive proof of the fact that it would
result in appreciable adverse effects on competition - If evidence is
led which rebuts the presumption, the Commission shall take into
consideration the factors mentioned in s. 19 - If the evidence
collected by the Commission leads to one or more or all the factors
mentioned in s. 19(3), it would again be treated as an agreement
which may cause or likely to cause an appreciable adverse effect
on competition - In the present case, inferences drawn by the
Commission, on the basis of the evidence collected by it, have been
duly rebutted by the appellants/manufacturers - They have been
able to discharge the onus that shifted upon them - However, at
that stage, the Commission failed to carry the matter further - Thus,
there is no sufficient evidence to hold that there was any agreement
between the appellants for bid rigging - Appeals by the manufactures
[2018] 12 S.C.R. 495
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are allowed - Since no penalty is payable, appeals of the Commission
are dismissed as infructuous - Evidence.
Words and Phrases:
"bid rigging" and "collusive rigging" - Meaning of, in the
context of Competition Act, 2002.
Allowing the appeals filed by the manufactures and
dismissing the appeals filed by the Competition Commission, the
Court
HELD: 1. On the one hand the economic policy of the nation
has ushered in the era of liberalisation and globalisation thereby
giving freeplay to the private sector in the manner of conducting
business, at the same time, in public interest and in the interest
of consumers, a regime of regulators has also been brought to
ensure certain checks and balances. Since competition among
the enterprises or businessmen is treated as service for a public
purpose and, therefore, there is a need to curb anti-competitive
practices. The Competition Commission of India (CCI) is given
the task (as a regulator) to ensure that no such anti-competitive
practices are undertaken. In fact, Section 18 of the Act casts a
specific and positive obligation on CCI to 'eliminate' anticompetitive practices and promote competition, interest of the
consmuer and free trade. [Para 72] [536-G-H; 537-A-B]
Competition Commission of India vs. Steel Authority of
India Limited and Another (2010) 10 SCC 744 : [2010]
11 SCR 112 - relied on.
2. One of the anti-competitive practices is cartelisation,
the essential postulate whereof is agreement between enterprises
or association of enterprises or persons or associations of persons
in respect of production, supply, distribution, storage, acquisition
or control of goods or provisions of service, which causes or is
likely to cause an appreciable adverse effect on competition within
India. Such an agreement is treated as void. The types of
agreement which may fall foul of Section 3 are mentioned in subsection (3) thereof. These include sharing the market by way of
allocation of geographical areas of market [clause (c)] and the
agreements which result in bid-rigging or collusive bidding
whether directly or indirectly [clause (d)]. There is a presumption
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that four types of agreements mentioned in sub-section (3) will
have an appreciable adverse effect on competition. [Para 73] [537F-H]
3. Section 19(3) of the Act mentions the factors which are
to be examined by the CCI while determining whether an
agreement has an appreciable adverse effect on competition under
Section 3. However, this inquiry would be needed in those cases
which are not covered by clauses (a) to (d) of sub-section (3) of
Section 3. Reason is simple. The agreeements of nature
mentioned in sub-section (3) are presumed to have an appreciable
effect and, therefore, no further exercise is needed by the CCI
once a finding is arrived at, that a particular agreement fell in any
of the aforesaid four categories. Agreements mentioned in Section
3(3) raise a presumption that such agreements shall have an
appreciable adverse effect on competition. It follows, as a
fortiorari, that the presumption is rebuttable as these agreements
are not treated as conclusive proof of the fact that it would result
in appreciable adverse effect on competition. What follows is
that once the CCI finds that case is covered by one or more of
the clauses mentioned in sub-section (3) of Section 3, it need not
undertake any further enquiry and burden would shift upon such
enterprises or persons etc. to rebut the said presumption by
leading adequate evidence. In case such an evidence is led, which
dispels the presumption, then the CCI shall take into
consideration the factors mentioned in Section 19 of the Act and
to see as to whether all or any of these factors are established. If
the evidence collected by the CCI leads to one or more or all
factors mentioned in Section 19(3), it would again be treated as
an agreement which may cause or is likely to cause an appreciable
adverse effect of competition, thereby compelling the CCI to take
further remedial action in this behalf as provided under the Act.
That, is the broad scheme when Sections 3 and 19 are to be read
in conjuction. [Para 74] [538-A-F]
4. Explanation to Section 3, assigns meaning to 'bid
rigging'. The necessary ingredients of bid rigging, are: (a)
agreement between the parties; (b) these parties are engaged
in idential or similar production or trading of goods or provisions
of services; and (c) the agreement has the effect of eliminating
or reducing competition of bids or adversely affect or manipulating
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the process for bidding. Though the expression 'collusive bidding'
is not defined in the Act, it appears that both 'bid rigging' and
'collusive bidding' are overlapping concepts. [Paras 75, 77] [538G; 539-B-C]
5. Having regard to the scheme of the Act, it cannot be
said that there is no possibility of a competition in the present
cases and, therefore, CCI had no jurisdiction to carry out any
such investigation. Section 3 prohibits anti-competitive
agreements and brings about the prime objective of the
Competition Act. The purpose of the Act is not only to illuminate
practices having adverse effect on the competition but also to
promote and sustain competition in the market. Enforcement
provides remedies to avoid situation that will lead to decrease
competition in the market. Therefore, effective enforcement is
important not only to sanction anti-competitive conduct but also
to deter future competitive practices. In the present case itself,
there are sixty suppliers of the product for which there are three
buyers. After all, each supplier would like to be L-1 or L-2 so
that it is able to get order for larger quantities than the other. In
this sense, there would be a competition among them. Further,
it would also be in the interest of the buyers like IOCL etc. that
the elements of healthy competition persists in the market. [Paras
78 and 79] [543-D; 544-C-E]
6. It is the duty of the CCI to ensure that the conditions
which have tendency to kill the competition are to be curbed. It
is also the function of the CCI to ensure that there is a
competition so that benefits of such competition are reaped by
the consumers. [Para 79] [544-E]
7. The CCI and Competition Appellate Tribunal (COMPAT)
have held that there was collusive bidding in the present case in
view of the fact that there is an active trade association of the
suppliers; a meeting took place couple of days before the date of
bidding; common changes were pointed out by these appellants
who submitted bids on their behalf; and bids were of identical
amounts despite varying cost, which were repetitive in nature.
The respondents may be right in their submission that there may
not be a direct evidence on the basis of which cartelisation or
such agreement between the parties can be proved as these
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agreements are normally entered into in closed doors. The
standard of proof which is required is one of probability. [Para
80] [544-G-H; 545-A]
Technip SA v. SMS Holding (P) Ltd. & Ors. (2205) 5
SCC 465 : [2005] 1 Suppl. SCR 223; Commissioner of
Income Tax, Bombay City I, Bombay v. Jubilee Mills
Ltd., Bombay (1963) 48 ITR 9 - relied on.
8. Even in the absence of proof of concluded formal
agreement, when there are indicators that there was practical
co-operation between the parties which knowingly substitute the
risk of competition, that would amount to anti-competitive
practices.[Para 83] [549-D]
9. The manner in which tendering process takes place
would show that in such a competitive scenario, the bid which
the different bidder would be submitting becomes obvious. It
has come on record that just a few days before the tender in
question, another tender was floated by BPCL and on opening of
the said tender the rates of L-1, L-2 etc. came to be known. In a
scenario like this, that obviously becomes a guiding factor for
the bidders to submit their bids. Keeping in mind the aforesaid
fact situation, the very factors on the basis of which the CCI has
come to the conclusion that there was cartelisation, in fact,
become valid explanations to the indicators pointed out by the
CCI. [Paras 90 and 91] [555-F-G]
10. Identical products along with market conditions for which
there would be only three buyers, in fact, would go in favour of
the appellants. The factor of repetitive bidding, though appears
to be a factor against the appellants, was also possible in the
aforesaid scneario. The prevailing conditions in fact rule out the
possibility of much price variations and all the manufacturers are
virtually forced to submit their bid with a price that is quite close
to each other. Therefore, it became necessary to sustain
themselves in the market. Hence, the factor that these suppliers
are from different region having different cost of manufacture
would lose its significance. It is a situation where prime condition
is to quote the price at which a particular manufacturer can bag
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an order even when its manufacturing cost is more than the
manufacturing cost of others. The main purpose for such a
manufacuring would be to remain in the fray and not to lose out.
Therefore, it would be ready to accept lesser margin. This would
answer why there were near identical bids despite varying cost.
[Para 91] [556-A-D]
11. Insofar as meeting of bidders in Mumbai just before
the date of submission of tender is concerned, some aspects
pointed out by the appellants are not considered by the CCI or
the COMPAT at all. No doubt, the meeting took place a couple
of days before the date of tender. No doubt, the absence of agenda
coming on record would not make much difference. However,
only 19 appellants had attended that meeting. Many others were
not even members or did not attend the meeting. In spite thereof,
even they quoted almost same rates as the one who attended the
meeting. This would lead the Court to the inference that reason
for quoting similar price was not the meeting but something else.
[Para 92] [556-D-E]
12. Monopsony consists of a market with a single buyer.
When there are only few buyers the market is described as an
oligopsony. In such a situation, a manufacturer with no buyers
will have to exit from the trade. Therefore, first condition of
oligopsony stands fulfilled. The other condition for the existence
of oligopsony is whether the buyers have some influence over
the price of their inputs. It is also to be seen as to whether the
seller has any ability to raise prices or it stood reduced/eliminated
by the aforesaid buyers. [Para 95] [558-G-H; 559-A]
13. On a hollistic view of the matter, it is clear that the
appellants have been able to discharge the onus by referring to
various indicators which go on to show that parallel behaviour
was not the result of any concerted practice. [Para 96] [559-A-B]
14. Parallel behaviour does not, by itself, amount to a
concerted practice, though it may provide a strong evidence of
such a practice. Nevertheless, it is a strong evidence of such a
practice. However, before such an inference is drawn it has to
be seen that this parallel behaviour has led to conditions of
competition which do not correspond to the normal conditions of
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the market, having regard to the nature of the products, size and
volume of the undertaking of the said market. [Para 97] [559-B-C]
15. Whenever there is a situation of oligopsony, parallel
pricing simplicitor would not lead to the conclusion that there
was a concerted practice there has to be other credible and
corroborative evidence to show that in an oligopoly a reduction
in price would swiftly attract the customers of the other two or
three rivals, the effect upon whom would be so devastating that
they would have to react by matching the cut. [Para 97] [559-D-E]
16. The inferences drawn by the CCI on the basis of
evidence collected by it are duly rebutted by the appellants and
the appellants have been able to discharge the onus that shifted
upon them on the basis of factors pointed out by the CCI.
However, at that stage, the CCI failed to carry the matter further
by having required and necessary inquiry that was needed in the
instant case. [Para 102] [563-F-G]
17. In such a watertight tender policy of IOCL which gave
IOCL full control over the tendering process, it was necessary
to summon IOCL. This would have cleared many aspects which
are shrouded in mystery and the dust has not been cleared. [Para
103] [563-G-H]
18. Thus, there is no sufficient evidence to hold that there
was any agreement between the appellants for bid rigging. As a
consequence, since no penalty is payable, appeals of the CCI are
rendered infructuous and dismissed as such. [Para 104] [564-A-B]
Union of India vs. Hindustan Development Corporation
(1993) 3 SCC 499 : [1993] 3 SCR 128; Ashoka
Smokeless Coal India (P) Ltd. v. Union of India (2007)
2 SCC 640 : [2006] 9 Suppl. SCR 954; Excel Crop Care
Limited v. Competition Commission of India & Anr.
(2017) 8 SCC 47 : [2017] 5 SCR 901; Union of India
v. Hindustan Development Corporation (1993) 1 SCC
467 : [1993] 3 SCR 108; Union of India v. Hindustan
Development Coproration (1993) 3 SCC 499 : [1993]
3 SCR 128; Punjab Land Developement & Reclamation
Corporation Ltd. v. Presiding Officer, Labour
Court
RAJASTHAN CYLINDERS AND CONTAINERS LIMITED v.
UNION OF INDIA AND ANOTHER
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(1990) 3 SCC 682 : [1990] 3 SCR 111; S. Sundaram
Pillai v. V.R. Pattabiraman (1985) 1 SCC 591 : [1985]
2 SCR 643; CCI v. Artistes & Technicians of W.B. Film
& Television (2017) 5 SCC 17 : [2017] 5 SCR 1; Union
of India vs. Hindustan Development Corporation
(1993) 3 SCC 499 : [1993] 3 SCR 128 - referred to.
Ahlstrom Osakeyhtio v. Commission 31.3.1993, ECJ
("Woodpulp"); Theatre Enterprises v. Paramount Films
346 US 357; Monsanto Co. v. Spray-Rite Service Corp.
346 US 357; Monsanto Co. v. Spray-Rite Service Corp.
465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed. 2Nd 775 (1984);
Matsushita v. Zenith Ratio Corp. 475 U.S.574 (1986)
Bell Atlantic Corp v. Twombly 550 U.S. 544 - referred
to.
Case Law Reference
[1993] 3 SCR 128
referred to
Para 14
[2006] 9 Suppl. SCR 954
referred to
Para 27
[2017] 5 SCR 901
referred to
Para 28
[1993] 3 SCR 108
referred to
Para 32
[1993] 3 SCR 128
referred to
Para 33
[1990] 3 SCR 111
referred to
Para 43
[1985] 2 SCR 643
referred to
Para 45
[2017] 5 SCR 1
referred to
Para 48
[1993] 3 SCR 128
referred to
Para 52
[2010] 11 SCR 112
referred to
Para 72
[2005] 1 Suppl. SCR 223
relied on
Para 80
(1963) 48 ITR 9
relied on
Para 81
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3546
of 2014
From the Judgment and Order dated 20.12.2013 of the Competition
Appellate Tribunal in Appeal No. 59 of 2012.
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WITH
Civil Appeal Nos. 4280/2014, 4346/2014, 4649/2014, 4342/2014,
4879/2014, 4868/2014, 6033/2014, 5771/2014, 5772/2014, 5035/2014,
5773/2014, 5649/2014, 5650/2014, 5651/2014, 4972/2014, 6661/2014,
7214/2014, 7102/2014, 6365/2014, 6025/2014, 5993-5994/2014, 6868/2014,
5774/2014, 5775/2014, 5776/2014, 5832-5833/2014, 5777/2014, 5778/2014,
6371/2014, 8953/2014, 6372/2014, 6373/2014, 6366/2014, 6367/2014,
6374/2014, 6368/2014, 6364/2014, 6369/2014, 6370/2014, 10579/2014,
1724/2015, 5277-5278/2016, 5281-5315/2016, 7359/2016.
Salman Khurshid, Prashanto Sen, Sr. Advs., Manan Verma, Ms.
Nidhi Khanna, Mrs. Sarla Chandra, Ms. Diksha Rai, Arjun Krishnan, O.
P. Gaggar, Aditya Gaggar, Sudipto Sircar, Annam D. N. Rao, Annam
Venkatesh, Rahul Mishra, Amol Sinha, Ms. Anshum Jain, Rahul Kochar,
Naveen Kumar, Deepak Anand, N. S. Nandakumar, N. Krishn Kumar,
K. Krishna Kumar, Sarad Kumar Singhania, Ms. Ruchi Kohli, Ms. Pallavi
Langar, Jaiveer Shergill, Amit Goyal, Rajesh Sharma, Ms. Nidhi Singh
Dubey, Shafiq Khan, Ms. Shalu Sharma, R. Satish Kumar, V. Susheetha,
P. V. Yogeswaran, Rameshwar Prasad Goyal, S. Nanda Kumar, R. Sathis
Kumar, M. S. Saron Kumar, Ms. N. Deepika Nanda Kumar, Naresh
Kumar, Praveen Mahajan, Arjun Krishnan, Ankur Singh, Sumit Srivastava,
Kaustav Som, Ms. Gitanjali Kapur, Antony Julian, Arpit Shukla, Udayan
Verma, Sarvesh Mishra, Amit Sharma, Raj Bahadur, Ms. Anil Katiyar,
Kedar Nath Tripathy, Girija Ballav Das, B. B. Pradhan, Gaurav Agrawal,
Manan Verma, Ms. Diksha Rai, Ms. Palak Mahajan, Kuljeet Rawal,
Ashwani Kumar, Ms. Iti Sharma, Pradeep Aggarwal, Karan Khanna,
Aniket Bhattacharya, Arjun Agggarwal, Advs. for the appearing parties.
The Judgment of the Court was delivered by
A. K. SIKRI, J. 1. All these appeals are filed against the orders
dated 20th December, 2013 passed by the Competition Appellate Tribunal
(hereinafter referred to as 'COMPAT'). The COMPAT by the said
judgment has upheld the findings of the Competition Commission of India
(for short, 'CCI') that the appellants/suppliers of Liquefied Petroleum
Gas (LPG) Cylinders to the Indian Oil Corporation Ltd. (for short, 'IOCL')
had indulged in cartilisation, thereby influencing and rigging the prices,
thus, violating the provisions of Section 3(3)(d) of the Competition Act,
2002 (for short, the 'Act'). The CCI, as a result, imposed severe penalties
in the form of fines under Section 27 of the Act. While maintaining the
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order of the CCI insofar as it found the appellants guilty of contravention
of Section 3(3)(d) and also under Section 3(3)(a) of the Act, the
COMPAT has reduced the amount of penalty. These suppliers have
filed the instant appeals on the ground that there was no cartilisation and
they have not contravened the provisions of the Act. On the other hand,
CCI has also come up in appeal challenging latter part of the order
whereby penalties inflicted on the suppliers stand reduced. For the sake
of convenience these suppliers will be referred to as the appellants
hereinafter.
2. We may point out at the outset that all these appellants are
manufacturing gas cylinders of a particular specification having capacity
of 14.2 kg which are needed for use by the three oil companies in India,
namely, IOCL, Bharat Petroleum Corporation Ltd. (BPCL) and
Hindustan Petroleum Corporation Ltd. (HPCL) [all public sector
companies]. It is also a matter of record that apart from the aforesaid
three companies there are no other buyers for these cylinders
manufactured by the appellants. Insofar as IOCL is concerned, it is a
leading market player in LPG as its market share is 48%. Thus, in case
a particular manufacturer is not able to supply its cylinders to the aforesaid
three companies, there is no other market for these cylinders and it may
force that company to exit from its operations. We may also point out at
this stage itself that inquiry was started against 47 companies. The CCI
exonerated two companies and found that 45 companies had entered
into an arrangement/agreement insofar as statements of bids pursuant
to tenders issued by IOCL are concerned. Out of these 45 companies
one did not challenge the orders before the COMPAT and other 44 had
filed appeals which have been decided by the COMPAT.
3. The manner in which the inquiry was undertaken by the CCI,
culminating into the finding of guilt and imposition of penalty, is succintly
and sequally recorded by the COMPAT in its impugned order. As there
is no dispute about the said factual narration, it would be convenient to
borrow the said discussion as recorded by the COMPAT.
4. The suo-motu proceedings were started by the CCI on the
basis of the information received by it in Case No. 10 of 2010 titled M/
s. Pankaj Gas Cylinders Ltd. Vs. Indian Oil Corporation Ltd. in that
case a complaint was made by M/s. Pankaj Gas Cylinders before the
CCI complaining about unfair conditions in the tender floated by IOCL
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for the supply of 105 lakh 14.2 Kg. capacity LPG Cylinders with SC
valves in the year 2010-11, the tender No. being LPG-O/M/PT-03/0910. While considering the Director General's investigation report in Case
No. 10 of 2010, the CCI in pursuance of its duties under Section 18 felt
that investigation was necessary in the case of all bidders who were the
suppliers of 14.2 kg. LPG cylinders in that tender. In the investigation
report in the said case, the Director General had noted that out of 63
bidders who participated in the tender, 50 bidders were qualified for
opening of price bids, while 12 bidders were qualified as new vendors
who were not required to submit price bids and one bidder was not
qualified for the opening of the price bid. The technical bid of the subject
tender was opened on 3.3.2010 and the price bids of 50 qualified bidders
were opened on 23.3.2010. According to the Director General, there
was a similar pattern in the bids by all the 50 bidders who submitted
price bids for various States. The bids of a large number of parties were
exactly identical or near to identical for different States. The Director
General had observed that there were strong indications of some sort of
agreement and understanding amongst the bidders to manipulate the
process of bidding.
It was on this basis the CCI directed further investigation in the
matter. The Director General after careful consideration submitted a
detailed investigation report to the CCI. After the CCI considered the
freshly ordered investigation report, it directed that a copy of the report
be sent to the parties seeking their objections. In all, 44 opposite parties
submitted their objections. After giving them the opportunity to be heard,
the CCI passed the order in question.
As per the Director General's report, the process of bidding
followed by the IOCL in the tender was as under :-
i) The bidders would submit their quotations with the bid
documents.
ii) The existing bidders, who were existing suppliers, were required
to submit the price bids and technical bids.
iii) The bidders were to quote for supplies in different States of
India in keeping with their installed capacity.
iv) After price bids were opened the bidders were arranged
according to the rates in the categories of L-1, L-2 and L-3.
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v) The rates for the supplies in different States were approved
after negotiations with L-1 bidder. In case the L-1 bidder could
not supply a required number of cylinders in a particular State, the
orders of supplies went to L-2 and also L-3 bidder or likewise
depending upon the requirement in that State as per fixed formula
provided in the bid documents.
vi) Certain bidders were called new parties. They were required
to submit only technical bids and to supply as per L-1 rates
determined after the negotiations.
vii) One bidder could quote for maximum eight States.
7. The Director General after analyzing the bids came to the
conclusion that there was not only a similarity of pattern in the price bids
submitted by the 50 bidders for making supply to the IOCL but the bids
of large number of parties were exactly identical or near to identical in
different States. It was also found that bidders, who belonged to same
group, might have submitted identical rates. It was found that not only
there was identical pricing in case of group concerns but the rates of
other entities not belonging to the group were also found to be identical.
The D.G. painstakingly noted the names of group companies as well as
non-group companies. He came to the conclusion that in all 37 entities
could not be said to be belonging to any single group and were
independently controlled. The Director General found it unusual that
unrelated firms had quoted identical rates in different States. The D.G.
had analyzed the bidding pattern for the various parties for all the 25
States. He found that :-
a. The orders were placed on all the 50 successful bidders.
b. The contracts were awarded to the sets of bidders who had
quoted identical rates or near to identical rates in a particular pattern
in almost all the States.
c. There was a common pattern for quotation depending upon the
State. In case of North East the rates were highest, quoted at Rs.
1240 whereas in case of others rates were Rs.1100, Rs.1127 and
Rs. 1151.
d. It was found that only for Andaman and Nicobar Islands there
was a single party who had quoted the L-1 rate and got the formal
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contract. In other States the contracts were bagged in a group on
the basis of identical or near to identical rates.
e. The similarity of the rates was found even in case of bidders
whose factories and offices were not located at one and the same
place in the States and where they were required to supply was
far off from their factories located in different place.
8.The D.G. had found further that though the factors like market
conditions and small number of companies were different, there was a
large scale collusion amongst the bidding parties. He also arrived at a
finding to the effect that the LPG Cylinder Manufacturers had formed
an Association in the name of Indian LPG Cylinders Manufacturers
Association and the members were interacting through this Association
and were using the same as a platform. The date for submitting the bids
in the case of the concerned tender was 3.3.2010 and just two days
prior to it, two meetings were held on 1st and 2nd March, 2010 in Hotel
Sahara Star in Mumbai. As many as 19 parties took part and discussed
the tender and, in all probability, prices were fixed there in collusion with
each other. The D.G. reported that the bidders had agreed for allocation
of territories, e.g., the bidders who quoted the bids for Western India
had not generally quoted for Eastern India and that largely the bidders
who quoted the lowest in the group in Northern India, had not quoted
generally in Southern India. The D.G. also concluded that this behavior
created entry barrier and that there was no accrual of benefits of
consumers nor were there any plus factors like improved production or
distribution of the goods or the provision of services.
9. Ultimately, the D.G. came to the conclusion that there was a
cartel like behavior on the part of the bidders and that the factors
necessary for the formation of cartel existed in the instant case. It was
also found that there was certainly a ground to hold concerted action on
the part of the bidders. The D.G. had also noted that the rates quoted for
the year 2009-10 and in years previous to that were also identical in
some cases. Thus, he came to the conclusion that the bids for the year
2010-11 had been manipulated by 50 participating bidders. It was
thereafter that the CCI decided to supply the D.G.'s investigation report
to the concerned parties and invite their objections.
10. A common reply came to be filed as also the individual replies.
After considering the same, the CCI formulated the following issue for
determination:-
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"Whether there was any collusive agreement between the
participating bidders which directly or indirectly resulted in bid
rigging of the tender floated by IOCL in March 2010 for
procurement of 14.2 kg. LPG cylinders in contravention of Section
3(3)(d) read with Section 3(1) of the Act?"
11. After considering the oral as well as written submissions, the
CCI answered the issue against the Cylinders Manufacturers and inflicted
the penalties against the present appellants. In its impugned order, while
determining the issue, the CCI, in the first instance, considered the
common replies to the DG's report filed by as many as 44 opposite
parties. It was more or less pleaded that every part of LPG Cylinder is
regulated by the Rules through various Notifications and that the price
of steel constitutes 50% of the total manufacturing cost, so also the
price of the paint, it being an essential raw material. All these factors,
including the taxes which vary from State to State, determine the overall
bidding pattern of the bidders. In para-5.2.3 of the common objection, it
was added that these 44 parties had nominated six agents for depositing
their bids on their behalf and it was a common practice amongst the
bidders to direct their agents to keep close watch on the rates offered by
their competitors in respect of a particular State and this led to the
possibility of copying and matching of the rates quoted in the price bids
by many suppliers in a particular State, who may have appointed common
agents. Due to this reason, cutting and over-writing in the price bids for
the tender in question was noticed by the Director General.
12. It was further pointed out that there were only 62 qualified
tenderers in the whole country, out of whom 12 bidders were classified
as new parties, meaning thereby that they had not supplied Cylinders in
last three years and were not required to bid in the tender. Out of the
remaining 50 bidders, there were group companies controlled by single
management.
13. The CCI in its detailed order began with considering the scope
of constructed bid rigging agreement and cartel. In that the CCI also
considered the 18 famous observations by Lord Denning in case of RRTA
vs. W. H. Smith & Sons Limited regarding the quiet and secret nature
of the agreement between the parties. The CCI then went on to record
its inference holding that there was element of agreement and considered
the following factors in coming to the conclusion. They being:-
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1. Market conditions
2. Small number of suppliers
3. Few new entrants
4. Active trade association
5. Repetitive bidding
6. Identical products
7. Few or no substitutes
8. No significant technological changes
9. Meeting of bidders in Mumbai and its agenda.
10. Appointing common agents
11. Identical bids despite varying cost.
14. After consideration of these factors, the CCI came to the
conclusion that it did suggest collusive bidding. Thereafter, the CCI
analyzed these bids for each States and found that all 50 participating
bidders had secured the order; that the orders were placed on the said
50 bidders who had quoted identical rates or near to identical rates in a
particular pattern common to all the parties. CCI also highlighted the
facts of absence of business justification. According to the CCI, the
material revealed that the supplies were effected at the higher cost.
After discussing the concepts of standards of proof and appreciable
adverse effect on competition, the CCI considered the various arguments
and repelled those arguments. The CCI then went on to consider the
case law, and in particular the judgment of this Court in Union of India
vs. Hindustan Development Corporation1. It also took into consideration
the arguments raised by the individual parties and then came to record
that cases of M/s. JBM Industries and Punjab Cylinders, however, were
exceptional ones and they could be exonerated. After this the CCI went
on to decide the penalty factor under Section 27 of the Act.
15. The COMPAT after discussing the findings of the CCI and
also taking note of the arguments of the appellants which were advanced
before the CCI, proceeded with its own discussion. It started with the
admitted facts of the case, and took note of the following such facts:
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(A) The tender offers were to be made at Mumbai on 03.03.2010.
Admittedly there were meetings in Hotel Sahara Star, Mumbai on
1st and 2nd March, 2010 which were attended by some of the
appellants. The D.G. has held that 19 appellants were represented
by various persons in that meeting. The fact of the meeting having
been held was not disputed.
 Though some of the appellants stated that they did not attend
the meeting and those who attended the meeting maintained that
nothing was disucssed about the tender, the same was not believed
by the COMPAT and it held that these meetings did relate to the
tender offers which were to be submitted on 03.03.2010. This
finding is premised on the basis that nobody came with the
explanation as to what transpired in the meeting or gave any proof
that prices were discussed. Minutes of the meeting were also not
produced.
(B) There is an association of the cylinder manufacturers. All the
parties, except few competing with each other, stated that they
were not the members of that association. A feeble argument
was also raised by some appellants that though they were the
members but they were not the active members thereof. Some of
the appellants also argued that they had abandoned the membership
by not contributing the subscription in the later years. However,
the appellants could not deny the position that there was an
association called Indian LPG Cylinder Manufacturers'
Association.
 It was a registered association, its Memorandum of
Association provided that one of the objectives was to prtoect
common interest and welfare of LPG cylinder manufacturers.
According to COMPAT, there was a definite platform available
for all cylinder manufacturers and practically all the appllants
appear to be the members of that Association.
(C) A common written reply was submitted by as many as 44
parties. Further, the appellants had nominated six agents for
depositing bids on their behalf. These common agents were
instructed to keep a close watch on the price quoted by the
competitors in a particular State.
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 Though some of the appellants had contended that they had
not appointed the common agents, the plea was not accepted by
the COMPAT. The COMPAT, therefore, proceeded on the
'admitted grounds' that there was an association of cyliner
manufactures; practically all the appellants were members of the
said association; this association was an active association; it held
meetings on the eve of entry tender obviously for discussing
tenders, its conditions etc.; these meetings were attended by
representatives of at least 19 appellants; and these appellants had
six common agents at Mumbai who were instructed to watch the
prices offered by the others. A dinner meeting as also a lunch
were held and one Mr. Chandi Prasad Bhartia of M/s. Haldia
Precision Engineering Private Limited paid the bill for the same.
Dinner and lunch held in Sahara hotel were attended by about 50
persons in all. From this the COMPAT inferred that there was no
reason to disbelieve that the parties had an access to each other
through their association which was an active association. The
existence of such an association under the aegis of which meetings
took place just before the submission of tender has been noted as
a very relevant factor by the COMPAT in affirming the findings
of CCI on cartelisation and it summed up the position in the
following manner:
"26. What is important is not whether a particular appellant
was a member of the association or not. The existence of an
association is by itself sufficient, as it gives opportunity to the
competitors to interact with each other and discuss the trade
problems. There will be no necessity to prove that any party
actually discussed the prices by actively taking part in the
meeting. If there is a direct evidence to that effect that is
certainly a pointer towards the fact that such party had a tacit
agreement with its competitors. However, the existence of an
association and further holding of the meetings just one or two
days prior to the last date of making offers and further
admission that the parties had appointed common agents with
the instructions to keep watch on the prices quoted by the
competitors would go a long way in providing plus factors in
favour of the agreement between the parties. All these factors
would form a back drop, in the light of which, the further
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evidence about agreement would have to be appreciated. We
have seen the comments of Director General as also the
findings of the CCI. We are convinced that CCI has not
committed any error in considering all these factors as plus
factors to come to the conclusion that there was a concerted
agreement between the parties on the basis of which the
identical or near identical prices came to be quoted in tenders
for the supply of cylinders to the 25 States. In view of this, we
need not dilate on the individual claims by some of the appellants
that they were not the members of the association or that they
were only the dormant members or that they had abdicated
their membership. We also need not go on the claim that while
the meeting was attended by the 19 parties as held by the D.G.
and confirmed by the CCI, it was not attended by the rest of
the appellants because that would be of no consequence. Once
there was a meeting, there was every opportunity to discuss
or to communicate to each other whatever transpired in the
meeting.
27. We have seen the order of the CCI and while commenting
about the meeting, the CCI has painstakingly noted the details
of that meeting. The CCI has referred to the evidence of Mr.
Dinesh Goyal, who was an active member of the Indian LPG
Cylinder Manufacturers' Association and noted that he had
attended the meeting.