Excel Crop Care Limited v. Competition Commission of India and Another
- ByPravleen Kaur --
- 06 May 2025 --
- 0 Comments
1. Introduction
This judgment deals with an appeal filed by Excel Crop Care Limited, United Phosphorus Ltd., and Sandhya Organics Chemicals (P) Ltd. (the "Appellants") against the order of the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT). The CCI had found the Appellants guilty of engaging in anticompetitive practices concerning tenders issued by the Food Corporation of India (FCI) for the supply of Aluminium Phosphide Tablets (APT) between 2007 and 2009. [Para 1]
2. Background
In 2011, the FCI filed a complaint with the CCI alleging collusion among four manufacturers of APT, including the Appellants and Agrosynth Chemicals Limited. The Director General (DG) of the CCI investigated the matter and found evidence supporting the allegations, leading to the opinion that the manufacturers had violated the Competition Act. [Para 2]
The CCI considered the DG's report and provided the manufacturers with an opportunity to respond. Agrosynth Chemicals Limited was exonerated, while the Appellants contested the report on factual and legal grounds. They argued that Sections 3 and 4 of the Competition Act were not in force at the time of the tenders, and that the increase in prices was due to market forces, not cartel formation. [Para 3]
3. CCI's Findings and Penalties
The CCI rejected the Appellants' contentions and concluded that they had engaged in anticompetitive activities while submitting their bids to the FCI. Consequently, the CCI imposed penalties on the Appellants for violating Section 3 of the Competition Act, totaling ₹63.90 crores for Excel Crop Care Limited, ₹1.57 crores for Sandhya Organics Chemicals (P) Ltd., and ₹252.44 crores for United Phosphorus Ltd. [Paras 4, 5]
4. Appeals before COMPAT
The Appellants filed appeals before COMPAT, challenging the CCI's findings on legal and factual grounds. COMPAT rejected most of their arguments but ruled that the penalty should be based on the relevant turnover related to the product for which the cartel was formed, rather than the total turnover of the companies. This led to a substantial reduction in the penalties for Excel Crop Care Limited and United Phosphorus Ltd. However, for Sandhya Organics Chemicals (P) Ltd., the relevant turnover and total turnover were the same, as they only produced APT tablets. COMPAT reduced their penalty from ₹1.57 crores to ₹15.70 lakhs due to their small production capacity. [Paras 6, 53, 54]
5. Issues before the Supreme Court
The following issues were raised before the Supreme Court in these appeals: [Para 8]
1. Whether the CCI could investigate the March 2009 tender, as Section 3 of the Competition Act was operationalized only by a notification dated May 20, 2009?
2. Whether the CCI was barred from investigating the March 2011 tender floated by the FCI, as the FCI had not complained about this tender in its initial complaint?
3. Whether the CCI's conclusion that the Appellants had entered into an anticompetitive agreement and pursued collusive bidding by forming a cartel, resulting in a violation of Section 3(3)(a), 3(3)(b), and 3(3)(d) read with Section 3(1) of the Act, was justified?
4. Whether the penalty under Section 27(b) of the Act should be based on the total turnover of the offending company or only on the "relevant turnover" related to the product in question?
6. Jurisdiction of CCI to Investigate the March 2009 Tender
The Appellants argued that the CCI could not investigate the March 2009 tender, as Section 3 of the Competition Act was notified only on May 20, 2009, and allowing such an investigation would amount to introducing the provisions of Section 3 retrospectively. [Para 12]
The CCI contended that the bidding process did not end with the submission of bids on May 8, 2009, but continued with the opening of bids on June 1, 2009, and negotiations with the Appellants on June 17, 2009. The CCI relied on Section 18 of the Act to argue for the applicability of the principle of retroactivity. [Para 13]
The Supreme Court agreed with the CCI's view, stating that the bidding process continued after May 20, 2009, and the Appellants manipulated the bidding. The Court also referred to the Bombay High Court's decision in Kingfisher Airlines v. Competition Commission of India, which described the statute as retroactive. The Court held that the Act applies to existing agreements upon its enactment, and any actions taken in pursuance of these agreements that are now prohibited would be considered illegal. [Paras 23, 27, 28]
7. Jurisdiction of CCI to Investigate the March 2011 Tender
The Appellants argued that the CCI was barred from investigating the March 2011 tender, as the FCI had not complained about this tender in its initial complaint. [Para 35]
The Supreme Court rejected this argument, agreeing with COMPAT's view that the DG has the power to investigate based on the order passed by the Commission. The Court stated that the investigation should not be limited to a specific tender but should cover all relevant facts until completed, including considering information provided by the FCI about anti-competitive behavior. [Paras 29, 36]
8. Collusive Bidding and Cartelization The CCI and COMPAT found that the Appellants had engaged in collusive bidding and cartelization based on the following evidence: [Paras 37, 38]
1. The Appellants had quoted identical prices for various tenders, including those of other government bodies, even before and after the 2009 tender.
2. Despite different cost structures and geographical locations, the Appellants quoted identical prices for 10 years, indicating a trend of collusion.
3. The Appellants' decision not to participate in the May 2011 tender was seen as a concerted action, strengthening the case for collusion.
The Supreme Court rejected the Appellants' argument that the parallelism in pricing was due to the monopolistic situation of the buyer (FCI) and the oligopolistic market structure. The Court stated that the parallelism argument does not apply in bid cases, and the consistent identical pricing by the Appellants could not be a coincidence. [Paras 39, 40, 44]
9. Penalty under Section 27(b) of the Competition Act
The primary issue before the Supreme Court was whether the penalty under Section 27(b) of the Competition Act should be based on the total turnover of the offending company or only on the "relevant turnover" related to the product in question. [Para 56]
The CCI argued that Section 27(b) does not refer to "relevant turnover," and the intention of the Legislature was to consider the entire turnover of the enterprise. The CCI contended that adding the word "relevant" would be doing violence to the plain language of the statute. [Para 57]
The Appellants, on the other hand, argued for the application of the doctrine of proportionality and cited laws in other jurisdictions, such as the European Union and the United Kingdom, where the turnover of the infringing product is considered when determining the penalty, especially for multiproduct companies. [Paras 68, 69]
The Supreme Court agreed with the Appellants' interpretation and held that the penalty under Section 27(b) should be based on the relevant turnover related to the product or service affected by the contravention. The Court reasoned that a literal interpretation of a penal statute should be avoided if it leads to an unjust or absurd result, and the intention of the Legislature should be the focus. [Paras 74, 75]
The Court emphasized the need to consider the principle of proportionality when imposing penalties under Section 27(b) to avoid excessively high fines that may discourage potential investors. The Court also noted that while other jurisdictions have specific guidelines for exercising discretion in imposing penalties, India does not have similar guidelines, which could lead to disastrous results. [Paras 69, 74]
10. Conclusion
The Supreme Court dismissed the appeals of the Appellants and the CCI, upholding COMPAT's decision to base the penalty on the relevant turnover related to the product in question. The Court provided guidelines for determining the appropriate penalty, including considering the relevant turnover, nature and gravity of the contravention, role of the infringer, duration and intensity of participation, market circumstances, product nature, market share, barriers to entry, company involvement, and profit. [Paras 12, 13, 75]
Justice N.V. Ramana provided a concurring judgment on the aspect of imposing penalties under Section 27(b) of the Competition Act, emphasizing the need for a fresh consideration of the interpretation of this section and the importance of serving the intent and purpose of the statutory provision. [Paras 7, 8]
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