Chief Materials Manager, Eastern Railway vs BIC Auto Pvt. Ltd. & Ors

Justice Rakesh Kumar Jain (Oral)

The present appeal is directed against the order dated 10.07.2020 passed by the ‘Competition Commission of India’ (hereinafter referred to as ‘The Commission’) while deciding as many as five references filed under Section 19 (1) (b) of the Competition Act, 2002 (hereinafter referred as to ‘The Act’), at the instance of the Chief Materials Manager, South Eastern Railway, the Controller of Stores, Central Railway, the Chief Materials Manager, Eastern Railway, the Chief Materials Manager-I, North Western Railway and The Chief Materials Manager-Sales, North Western Railway .

The present appeal, however, has been filed by the Chief Materials Manager, Eastern Railway with the grievance that the ‘Commission’ has not imposed suitable penalty upon the Respondents in terms of the provisions of the Act.

Since, the grievance of the Appellant is only in regard to the imposition of penalty, therefore, we need not to go into the detailed facts and it would be suffice to refer to the conclusion drawn by the Commission after a detailed discussion, which read as under:

“49. In view of the above, the Commission holds OP-1 to OP-10 to have contravened the provisions of Section 3 (3) (a), 3 (3) (c) and 3 (3) (d) read with Section 3 (1) of the Act during the period 2009 to 2017, as detailed in this order.

The Commission, in terms of Section 27 (a) of the Act, directs the OP-1 to OP-10 and their respective officials who have been held liable in terms of the provisions of Section 48 of the Act, to cease and desist in future from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3 of the Act, as detailed in the earlier part of the present order.

So far as the issue of imposition of penalty is concerned, the Commission has carefully examined the matter. It is observed that in the present matter, initially 4 Reference Cases were received from different Railway Zones/ Divisions and the same were clubbed on different occasions. Accordingly, a common investigation was carried out by the DG in these cases and also a consolidated investigation report was submitted. During the final stage of investigation, the Commission received one more Reference Case from a Railway Zone with similar set of allegations and accordingly, the Commission kept this Reference Case in abeyance to await the investigation report in the clubbed cases. As such, after receipt of consolidated investigation report, the Commission clubbed this subsequent Reference Case with the initial batch of 4 Reference Cases and forwarded the investigation report to the parties in all the 5 Reference Cases. Further, apart from examination of various tenders covering a period starting from 2009 to 2017, the present matter also involved 12 OPs and their 28 individuals. In such a wide ranging and complex investigation carried by the DG spanning across various tenders floated by various Zones/ Divisions of Indian Railways Reference Case Nos. 03 of 2016, 05 of 2016, 01 of 2018, 04 of 2018 and 08 of 2018 64 over a long period of time, the concerned parties have not only cooperated but have even admitted their respective role/ conduct in the said tenders as brought out by the DG. It cannot be gainsaid that cooperation to such an extent by the parties concerned is one of the consideration which may be taken into account by the Commission in quantifying the penalties. Moreover, the Commission notes that some of the OPs are Micro Small and Medium Enterprises (MSMEs). In fact, the Commission has also looked at the relevant turnover arising out of Composite Brake Block (CBB) in the present matter and observes that most of the OPs are having small annual turnover in this segment. At the same time, the Commission is also cognizant of the prevailing economic situation arising due to the outbreak of global pandemic (COVID-19) and the various measures undertaken by the Government of India to support the liquidity and credit needs of viable MSMEs to help them withstand the impact of the current shock. In this backdrop, considering the matter holistically and cumulatively, the Commission, in the interest of justice, refrains from imposing any monetary penalty in the peculiar circumstances of the case, as noted above. As pointed out earlier, the Commission is also persuaded of the fact that the OPs have fully cooperated during investigation and inquiry before the DG and the Commission respectively by not denying the material confronted by the DG. Needless to add, such cooperative conduct optimizes the resources of the DG as also expedites the adjudicatory process besides lessening the regulatory burden. The ultimate object of the Act is to correct the market distortions and to discipline the behaviour of the market participants. In such backdrop, the Commission holds that the objectives of the Act would be met if the parties in the present matter cease such cartel behaviour and desist from indulging in similar behaviour in future, as directed earlier. The parties are however, cautioned to ensure that their future conduct is strictly in accord with the provisions of the Act, failing which any such future behaviour would be viewed seriously constituting recidivism with attendant consequences.

It is made clear that nothing contained in this order shall be deemed to be confidential as the same has been used in terms of provisions of Section 57 of the Act.”

During the course of hearing, counsel for Appellant has been repeatedly asked to refer to the provision of law in which the penalty should have been imposed but he miserably failed to mention any provision. However, counsel for the Respondent, while assisting the court, referred to Section 27 (a) of the Act and contended that the punishment has been awarded in the aforesaid provision which is well within jurisdiction of the ‘Commission’. In this regard, it is relevant to refer to Section 27 of the Act which read as under:

“Section 27 in the Competition Act, 2002

Orders by Commission after inquiry into agreements or abuse of dominant position.—Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:—

(a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;

(b) impose such penalty, as it may deem fit which shall be not more than ten per cent. of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has been entered into by any cartel, the Commission shall impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or ten per cent. of the average of the turnover of the cartel for the last preceding three financial years, whichever is higher;

(c) award compensation to parties in accordance with the provisions contained in section 34;

(d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;

(e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;

(f) recommend to the Central Government for the division of an enterprise enjoying dominant position;

(g) pass such other order as it may deem fit.”

Section 27 of the Act provides that if the ‘Commission’ after inquiry finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the orders mentioned in the said provision.

The ‘Commission’ found that it would be just and expedient to invoke only the provisions of Section 27(a) of the Act which further provides for a direction to any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be. Thus, from a careful reading of Section 27, it appears that the ‘Commission’ has the jurisdiction either to pass all or any of the order which are so mentioned in the said Section. In the present case, the ‘Commission’ has invoked Section 27(a) of the Act and made the following observations:

“In such backdrop, the Commission holds that the objectives of the Act would be met if the parties in the present matter cease such cartel behaviour and desist from indulging in similar behaviour in future, as directed earlier. The parties are however, cautioned to ensure that their future conduct is strictly in accord with the provisions of the Act, failing which any such future behaviour would be viewed seriously constituting recidivism with attendant consequences.”

We are satisfied with the order passed by the ‘Commission’ in regard to the invocation of Section 27(a) of the Act for the reasons which have been mentioned in para 51 of the impugned order itself (reproduced hereinabove), therefore, there is no reason to interfere in the well-considered order passed by the Commission. No other point has been raised.

In view of the aforesaid facts and circumstances, we do not find any merit in the present appeal and accordingly, the same is hereby dismissed. No order as to costs.