NCLAT Confirms Bid-Rigging in UP Soil Testing Tenders, Upholds Penalties on Companies and Directors [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has upheld the Competition Commission of India's (CCI) order finding several companies and their directors guilty of bid-rigging in soil testing tenders floated by the Uttar Pradesh Agriculture Department.

The case involved appeals filed by Austere Systems Pvt. Ltd., its Director Rahul Gajanan Teni, Fimo Infosolutions Pvt. Ltd., and its Director Jai Kumar Gupta against the CCI's April 4, 2022 order.

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The CCI had found that these companies had contravened Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Competition Act, 2002 by engaging in collusive bidding practices. The evidence revealed close family and business relationships between the companies, with the NCLAT noting that they had created a "facade of competition" by submitting multiple bids to ensure government tenders wouldn't be canceled due to insufficient participation.

It is a well established principle that in cases of alleged cartelization or anti-competitive practices, direct evidence of an agreement between parties is not required. Instead, a probabilistic standard of proof is sufficient, meaning that the existence of a cartel can be inferred from circumstantial evidence or behaviours.

In the present case the evidence is very direct and is proven from documents on record and conduct of the individuals involved making it a clear case of anti-competitive practices. Based on the material on record; evidence of OP the bench viewed that Commission has correctly and legally held the appellants responsible for violation of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act and there is no error in respect of order passed under Section 27(a) whereby the appellant was directed to cease and desist from such act, from indulging in the practices which were found in contravention of the provisions contained in Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act.

The NCLAT upheld the penalties imposed by the CCI and rejected the appellants' argument that penalties should be calculated based on "relevant turnover" (soil testing business only) rather than total turnover, noting that using relevant turnover would result in no penalty since the companies had no prior experience in soil testing.

The Commission in its findings had also observed that Austere Systems and Yash Solutions had geographically allocated the soil testing tenders of U.P. Government in 2017-18 by not bidding in each other's allocated regions and by submitting supporting bids in favour of each other.

The three member bench of Justice Rakesh Kumar Jain, Member (Judicial), Justice Mohd. Faiz Alam Khan] Member (Judicial) and Mr. Indevar Pandey, Member (Technical) held that in absolute terms also the penalties imposed are not excessive and justified on the basis of role performed by the entities in the tenders floated by Agriculture Department, U.P. In the present case, Austere Systems was acting as the leader of the cartel and had provided support to other members of the cartel for bidding in the tenders, accordingly a higher absolute penalty on Austere is justified.

The bench dismissed the Appeals.

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