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 proceedings have their origin in the letter dated February 04, 2011 written by the Food Corporation of India (for short, 'FCI') to the Competition Commission of India (for short, 'CCI') complaining of an anti-competitive agreement purportedly arrived at between M/s. Excel Crop Care Limited, M/s. United Phosphorous Limited (for short, 'UPL'), M/s. Sandhya 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 entrusted the matter to the Director General (DG) for investigation, who submitted his report on October 14, 2011 giving his prima facie findings affirming the 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 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 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 :
(2.) An Inquiry in this case was initiated by the CCI on the basis of letter/ complaint dated February 04, 2011 written by the Chairman and Managing Director of the FCI to the CCI. It was alleged in this complaint that four manufactures 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 of FCI were also examined. After collecting the aforesaid information, the DG 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 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 Rs.40 crores annually. (b) There were only four manufacturers of APT, namely, M/s. Excel Crop Care Limited, M/s. UPL, M/s. 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, 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 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. (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. 245/- was the rate quoted by these four parties and in the year 2005 it was Rs.310 (though the tender was scrapped in this year and the material was purchased from Central Ware Housing Corporation @ Rs.290). In November 2005, though the tenders were invited, all the parties had abstained from quoting. In 2007, M/s. UPL had quoted the price which was much below the price of other competitors. In 2008, all the parties abstained from quoting, while in 2009 only the three appellants, barring Agrosynth Chemicals Limited, participated and quoted uniform rate of Rs.388, which was ultimately brought down to Rs.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 procurement of fixed quantity of 600 MT with a provision of ± 10%, the three appellants had quoted identical rates of Rs.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. In fact, one Shri S.K. Bose of M/s. 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: (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; (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 the appellants; (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 (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, was an afterthought and did not inspire any confidence. As per the DG, even if the 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. 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.
(3.) 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 their objections, if any, thereupon. Since M/s. Agrosynth Chemicals Limited was ultimately exonerated and spared by the CCI, 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: (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 of inquiry 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 February 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. According to them, as a practice, the Central Warehousing 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 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 of FCI 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 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 Rs.30 lakhs as Earnest Money Deposit (EMD), whereas in the earlier tenders the EMD was only Rs.10 lakhs and Rs.8.25 lakhs. It was 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. 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 to participate. ;