TMI Blog2013 (2) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... estige. Some credit has to be given to MDD for this purpose. We would, therefore, bring down the penalty of MDD to 3%. In that view, showing due consideration to all the other factors, and to maintain the parity between the parties, we would bring down the penalty from 5% of the average turnover of last three years to 3% of the average turnover of last three years even in case of PES and MPS also. Calculated in that light, the penalty would be as per the following table:- We, therefore, inflict the penalty as shown in the table. The penalties imposed by the CCI in the impugned order dated 16.04.2012 shall stand modified to that extent. The three enterprises on whom the penalties have been imposed are directed to deposit the amount of penalties within 90 days of the receipt of this order. - Appeal No. 93 of 2012 with IA No. 151 of 2012 [Alongwith Appeal No. 94 of 2012 with IA No. 154 of 2012 and Appeal No. 95 of 2012 with IA No. 157 of 2012] - - - Dated:- 25-2-2013 - V.S. Sirpurkar, Rahul Sarin, and Pravin Tripathi, JJ. For Appellant: Shri Dhruv Mehta, Sr. Advocate with Shri Neeraj Malhotra, Shri Shailendera Singh, Shri Abhishek Puri, Advocates for MDD, Shri Kamal Mehta, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged that there was bid rigging in the tender for supply, installation, testing and commissioning of MOT and MGMS for SIC, Safdarjung Hospital, New Delhi. This tender was floated through Hospital Services Consultancy Corporation Limited (HSCC for short) which is a government Public Sector Undertaking on behalf of the hospital. In this information, it was alleged that the procurement process for MOT and MGMS for SIC was initiated in the 10th Project Monitoring Committee Meeting on 26.8.2009 chaired by the then Joint Secretary, Ministry of Health and Family Welfare, Government of India. The Committee expressed an opinion that smooth coordination between the two works was required though these were conventionally two different product segments. In a further meeting dated 28.8.2009 under the then Additional Director General and Medical Superintendent of the Hospital, Dr. Jagdish Prasad, it was recorded that in other hospitals like Goa Medical College, KEM Hospital, Mumbai and Institute of Liver and Biliary Sciences, New Delhi for smooth coordination, the work of MOT and MGMS was awarded as combined work for a single firm. The informant alleged that this information was not correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e informant these deficiencies were overlooked and the bids of MDD and PES were favourably considered for evaluation. While the bid of MPS was rejected in the technical committee meeting held on 13.11.2009. It was alleged that the signatures of all the persons present during the bid opening on 29.9.2009 were not there on the cover page/envelop of the price bid of MDD which suggests that the price bid of MDD had been illegally replaced at a later date. It is further pointed out that on 16.11.2009 commercial evaluation of bids submitted by MDD and PES was carried out. It was further pointed out that the allocated budget for the project was ₹ 10 crores which in addition to MOT and MGMS works also included warranty for five years, comprehensive maintenance contract for five years and operational and running cost of 10 years from the date of installation. It was pointed out that MDD bid was lowest one (L1) was for ₹ 24,32,55,406.73/- and PES bid was for ₹ 35,24,98,545.27/- and since the bid of MDD was the lowest, it was awarded the contract. It is pointed out in the information that in the meeting dated 3.12.2009 there was misrepresentation of the fact on the justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irms manipulated and rigged the tender process with the active support of government officials associated with the project. It was further alleged that they have indulged in cartelization and manipulation of bids in number of projects concerning other government hospitals also. It is clear that these companies with connivance with each other had rotated the bids in order to win the contracts in other projects amongst themselves thereby killing competition in the market in violation of the provisions of the Act. 2. The CCI formulated prima facie opinion that there existed a prima facie case against the appellants and directed investigation by the Director General (DG) under Section 26(1) of the Act. 3. The Director General submitted his report of investigation on 10.8.2011. For the purpose of investigation, technical and financial bids submitted by the three firms were looked into by the Director General. He also called from the various entities dealing in MOT, MGMS. He also took consideration of the submissions of SIC, Safdarjung Hospital, New Delhi and enquires from the various other firms and submitted his report on the basis of his investigation. The investigation report s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re typed or filled at the same place and this also established that the three bidders acted in concert while filling and submitting the financial bids of the tender. These three firms explained the common typographical mistakes and common computer used on the ground that there was shortage of time for submitting the tender and that price schedule submitted which showed these common mistakes was complicated as there were 75 items which needed to be indicated in the price schedule the three competing firms thought it convenient to get it typed from the nearby computer caf and hence there were common mistakes. The DG, however, concluded that these claims and explanations were hardly satisfactory as all these formats were already available on their website right from the time of inception of the tender. According to the DG the similarity in the price schedule format was on account of mutual consultation with each other which clearly reflected that there was meeting of minds and collusive action. According to the DG there was patent contravention of Section 3(3) of the Act. Further according to the DG, PES had inflated its price though it was exclusive dealer of Stryker for installatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etailed replies seem to have been given by all the three appellants, which are not necessary to be quoted here. In addition to that, even Ministry of Health and Family Welfare gave a reply. The Ministry claims that since it was not a necessary party, it should be deleted from array of parties under Rule 26 of the CCI Regulations, 2009. According to it, its actions were also justifiable. According to Ministry, there was no procedural lapse. It was further contended that the entire process was transparent and the task undertaken by HSCC was completed without any lapse in procedure. It was pointed out that highly qualified experts and senior officers were involved in the process. They also justified the combined tender in view of the time bound nature of work and for ensuring smooth execution of work in coordinated manner. The other examples for the hospitals were not relevant where only two or three bidders had participated and in some cases only one single bidder had participated. It is pointed out that amongst the three bidders the contract was awarded to the lowest bidder. They outrightly rejected the charge of cartelization. In short, they justified the whole process. The informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h that the quotation of MPS, PES and MDD was 268%, 252.40% and 143.20% respectively in comparison of the estimated cost of ₹ 10 crore. The CCI then criticised the tendering authority that had ignored the high offers in comparison to their own estimated tender cost. According to the CCI this was all the more necessary in view of the commonality of behaviour and conduct of the competing firms. It then went on to compare the common typographical and other errors in tender offers. From paragraphs 6.29 to 6.35 the CCI has in details dealt with these errors which were not possible unless the competing firms were acting in concert. In further paragraphs, the CCI considered the statement of Shri Rajan Verma, Director MDD. The representative of MPS and also the representative of PES and compared the contradictory nature of justification of those common errors. Ultimately, it is mentioned that it was unbelievable that all the appellants who were going to bid for contracts worth crores of rupees and whose turnover were also in crores would use common cyber caf for getting the bids schedule typed. CCI goes on to hold that it cannot be a mere coincidence that though different stands had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took into account the letter of MPS to the tendering agency dated 23rd October, 2009 and wondered as to how the date 26th October, 2009 of the Bank guarantee could have been quoted in the same. From all this, the CCI concluded that there was manipulation of the entire bid process which was in contravention of the provision of Section 3(3)(d) of the Act. According to the CCI, PES and MPS had submitted only complementary bids and they were actually not participating in the bid process to compete with MDD. They were submitted only to complement, cover or as courtesy bids so that the procurement process did not get stalled due to the lack of enough competition. The CCI also found in paragraph 6.58 that the MDD had quoted inflated price which was substantially higher than the price of procurement. The CCI observed because of this escalation, MDD was able to make huge profit. The CCI also observed that all this caused appreciable adverse affect on the competition. In paragraph 6.61, the CCI observed that technical and financial evaluation committee did not adhere to the initial tender conditions at least in respect of Item III of Section 1 since the operation and maintenance which was so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it came to the tenders for OTS and Gas manifolds. Shri Balbir Singh, advocate for the CCI also very fairly submitted before us that he was not relying on the observations made in paragraph 6.49 and 6.50 and that he was not in a position to support the same. We therefore, hold that at least on this count the CCI committed a factual error. Again it could not be said that the bid of MPS was only a complementary bid to MDD. In our opinion, therefore, this circumstance could not have been taken into consideration while examining the question involved. 8. Shri Mehta then took serious exception to the observation made in paragraph 6.47 where the CCI had observed that two losing firms-PES and MPS had quoted identical rates for comprehensive annual maintenance contract (CMC). He was at pains to point out that the CCI was incorrect in deducing that the rates quoted by MPS and PES were identical. In this behalf, the learned counsel contends that for CMC while MDD had given absolute figures, MPS and PES had quoted the rates percentage wise. This percentage, according to the learned counsel, was to depend on the price quoted by the MPS and PES in their price schedule. The learned counsel g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted into the percentage. Therefore, Shri Dhruv Mehta invited our attention to the Hon'ble Supreme Court decision in: (1993) 3 SCC 499, Union of India and others vs. Hindustan Development Corporation and Ors. This was a case where the Court was examining the validity of a tender process. The Delhi High Court at an interlocutory stage, pending the Writ Petitions challenging the counter offer given by some parties had directed the Ministry of Railways to accept allocation of bogies recommended by Tender Committee at a price of ₹ 67,000/- per bogie. This order was unsuccessfully challenged before the Hon'ble Supreme Court in the first round. Thereafter, High Court took up Writ Petitions for final hearing and allowed the same. The High Court maintained its directions given at the interim stage and set-aside the quantity allocation and directed the fresh consideration of the whole matter on a reasonable basis. It was this judgment which was impugned in the aforementioned matter. The Court went on to examine the validity of the whole tender process. It transpired that there was a formation of cartel at the instance of three big manufacturers. The Court went on to expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servations in this paragraph, the learned counsel says that a mere quotation of identical price by itself could not justify the inference of cartelisation, though it would raise a suspicion to that effect. The learned counsel, therefore, says that merely because MDD, PES and MPS had quoted identical percentages that by itself could not be held to be a circumstance against the two concerns. We have examined the facts of this case very carefully. It must be said here that even in the reported decision, the Apex Court at the end of the paragraph has called such inference to be a reasonable suspicion. In fact, the Apex Court has not exonerated the parties who had quoted the identical prices. The Court came to the conclusion that this suspicion of cartelisation was then got strengthened by post tender attitude of the said big manufacturers. Thus, the Court took into account the post tender attitude shown by the parties to the cartelisation also. In the present matter, the things are slightly different. The three competitors are not being viewed adversely only because of the identical pricing between PES and MPS. There are number of other circumstance like the common typographical error ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o committed by PES and MPS. The CCI noted that such identical and common mistakes had also been committed for Item Nos. 32, 34, 35, 36, 38 to 46 by all the three companies in the price schedule. In paragraph 6.33 the CCI found that in the price schedule MDD had amended government's original format and mentioned different size of three OTs on the top left at page 18. Similar identical additions were made by other firms PES and MPS at pages 42 and 47 respectively. In Paragraph 6.34 the CCI observed that the DG had shown the common typographical errors in the bid documents. The CCI had described these common typographical errors in a long tabular form and covered them from letter (a) to (s). We have carefully examined these common errors. They are not only the common errors but the typographical errors also. For example at serial H it was found that the word 'of' is mis-typed as 'o' and the same mistake was committed by MDD, PES and MPS. At serial i, j, k, l, m, n, o and p it was found that they were identically typed with the identical mistakes or fonts. Even in item (6) the common spelling mistake in the word 'over lapping' was committed as in all the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nison. We have carefully seen the observation of the CCI in paragraph 6.42, 6.43, 6.44 and 6.45 and we are thoroughly convinced about the mix up of dates which has been shown by the CCI. The learned counsel argued that the CCI had not considered the statements recorded of the representatives of MDD, PES and MPS. When we see the impugned order, this argument clearly falls to the ground as the CCI has very meticulously considered all the explanations and found them to be frivolous. In our opinion, this finding regarding the common typographical errors is a correct finding. 11. The CCI has also adversely commented about the written submission by PES to the effect that all the parties had filled price quotations at their own respective offices. The CCI has rightly questioned as to how could PES know that the other two parties filed quotations at their respective offices. Similarly, the CCI has rightly commented about the PES quoting comparatively higher price when in fact it was the sole distributor of Stryker from whom even MDD was to obtain the components. In our opinion, no fault can be found with the reasoning given by the CCI in paragraph 6.46. We therefore endorse the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess in contravention of provision of Section 3(3)(d) of the Act. 15. While arriving at a finding regarding Section 3(3)(d), the CCI has explained that there was a manipulation of entire bid process in as much as it was proved that all the three competitors acted in such a manner so as to adversely affect and manipulate the process of bidding. The CCI has further held that these three parties actually had an understanding between them and it was in pursuance of that understanding that PES and MPS submitted complementary bids which were uncomparably high to the bid by the MDD. Inference drawn by the CCI that MPS and PES were not participating in bid process to compete with MDD but were only submitting complementary/cover or courtesy bids appears to be correct. It appears to be correct from the bids given by PES and MPS in pursuance to the bid given by MDD. Shri Dhruv Mehta invited our attention to the comment made by the CCI about another tender of JPNA Hospital, the CCI has referred to the fact that the contract therein was awarded to PES when MDD and MPS had submitted complementary bids in order to show that there was enough competition in the above tender. Shri Mehta criticiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case the factors proved like the huge disparity in the rates between the MDD on one hand and PES and MPS on another, the identical price bids in respect of the O M percentages between PES and MPS, as also the common typographical errors and other common errors do drive us to hold that there was guilty meeting of minds in between the three competitors. A conspiracy in criminal law does not normally have a support of direct evidence. The finding there is more or less inferential. In this case, the facts held proved by us do reach us to a clinching inference that there was meeting of minds of a nature as would be in contravention of Section 3(3)(d). 18. Shri Mehta again adversely commented on the observations by the CCI in para 6.64 that the Central Vigilance Commission and Comptroller and Auditor General had adversely commented on manipulation of the process of tender. We must make it clear that we are not impressed by any action by these authorities, but we have arrived at the conclusion on the basis of available evidence before us. 19. This takes us to the orders of penalty against the three firms. A very severe comment was made by Shri Dhruv Mehta and two other coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that such course would be necessary as there is an essential difference in the supplies made to the Government Hospitals through tender and the supplies made to the private hospitals. The learned counsel argued that the prices on which the material supplied to the private hospitals and services offered to them would depend on so many other factors like the need of the private party, the urgency of the need, the availability of the materials in the market and profit negotiations on the basis of which the supplies are made and the services offered. According to the learned counsel these factors may not be present in the matter of supply of material and the services to the Government Hospitals on the basis of tender. The learned counsel, therefore, argued that the figures regarding the supplies of materials and services offered to the Government Hospitals through tenders should alone be taken into consideration for fixing the amount of penalty. 22. The term turnover has been defined in the Act under Section 2(y), as per which turnover includes value of sale of goods or services. From plain reading of Section 27(b), it is evident that the maximum penalty can be 10% on the avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated moves were taken for that purpose. We, therefore, cannot accept the contentions raised in this behalf. 24. This takes us to the last question as to whether the CCI was right at fixing the penalty at 5% of the average turnover. The learned counsel relied on the reported decision in Hindustan Steel Ltd. vs. State of Orissa reported in: AIR 1970 SC 253 wherein it is observed if there is discretion, authority is bound to take into account aggravating or mitigating circumstances and exercise discretion laid down under the law, judicially. 25. There is catena of Supreme Court decisions which have unhaultingly held that in the absence of any justifying reasons the exercise of discretion tends to become arbitrary. In reported decision of Kranti Associates Pvt. Ltd. anr. Vs. Sh. Masood Ahmed Khan Ors. reported in: (2010) 9 SCC 496, after discussing the earlier case law on this subject, the Hon'ble Supreme Court has reiterated the necessity of giving reason in paragraph-15 and has observed that, though initially there was a demarcation between administrative orders and quasi-judicial orders, but with the passage of time the distinction between the two got blurred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this was a contract for building a Operation Theatre for the Sports Injury Centre (SIC) which subject itself is relatively new. This Sports Injury Centre was to be created before the Commonwealth Games. The said games were to be held in India in the year 2010. The MDD seems to have completed this exercise within time and at least there is no evidence to suggest that the said Operation Theatre has not worked well. The Commonwealth Games were undoubtedly a matter of national importance and prestige. Some credit has to be given to MDD for this purpose. We would, therefore, bring down the penalty of MDD to 3%. In that view, showing due consideration to all the other factors, and to maintain the parity between the parties, we would bring down the penalty from 5% of the average turnover of last three years to 3% of the average turnover of last three years even in case of PES and MPS also. Calculated in that light, the penalty would be as per the following table:- 30. We, therefore, inflict the penalty as shown in the table. The penalties imposed by the CCI in the impugned order dated 16.04.2012 shall stand modified to that extent. The three enterprises on whom the penalties have been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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