Excel Crop Care Ltd. v. Competition Commission of India
Supreme Court of India · 8 May 2017 · 2 judges
The Court upheld the finding that three manufacturers of aluminium phosphide tablets had rigged bids for FCI tenders, and held that penalty under Section 27(b) of the Competition Act is computed on relevant turnover, not total turnover.
Facts
In 2011 the Food Corporation of India complained to the Competition Commission that the four manufacturers of aluminium phosphide tablets had for years quoted identical rates in its tenders. The Director General found identical bids, including in the 2009 tender, and a joint boycott of a 2011 tender. The Commission held that three of them, the appellants, had contravened Section 3 and imposed penalties of 9% of their average total turnover for three years. The Competition Appellate Tribunal upheld the contravention but held that the penalty must be on relevant turnover, that is, turnover from the product concerned. The manufacturers appealed against the findings of contravention and the Commission appealed on the penalty point. The appellants argued that Section 3, in force from 20 May 2009, did not apply to the 2009 tender and that the 2011 tender lay outside the complaint.
Questions before the Court
- Could the Commission inquire into the March 2009 tender when bids were submitted before Section 3 came into force on 20 May 2009?
- Could the Director General investigate the boycott of the 2011 tender, which the FCI's complaint did not mention?
- Was the finding of collusive bidding in contravention of Section 3(3) read with Section 3(1) justified?
- Is penalty under Section 27(b) to be computed on the total turnover of the offending enterprise or on its relevant turnover?
What the Court held
- Section 3 applied to the 2009 tender: the bidding process continued after 20 May 2009 through opening of price bids and negotiations, and the identical quoting continued in later tenders up to 2011. 'Bid rigging' in the Explanation to Section 3(3) is read with 'collusive bidding'; both cover the process of bidding.
- The Director General's investigation is not confined to the allegations in the complaint. If other facts showing a prohibited agreement come to light, he may include them in his report; restricting him would defeat the purpose of the Act.
- Identical bids despite different cost structures, and the joint boycott of the May 2011 tender by all the suppliers, proved concerted action in contravention of Section 3(3)(d) read with Section 3(1).
- Penalty under Section 27(b) must be based on relevant turnover, that is, turnover of the product affected by the contravention. Total turnover would give inequitable and disproportionate results for multi-product companies. Both sets of appeals were dismissed.
- Ramana, J. added a two-step method: first determine relevant turnover, then fix a percentage by weighing aggravating and mitigating factors, within the 10% cap.
Why it matters
The judgment settles that penalty for an anti-competitive agreement under Section 27(b) of the Competition Act is computed on relevant turnover, applying purposive interpretation and the doctrine of proportionality. It also holds that the Director General's investigation can extend beyond the specific allegations in the information, and that collusive conduct continuing after Section 3 came into force is within the Act.
In the Court's words
Copied from the official judgment; each passage links to its page.
“In the absence of specific provision as to whether such turnover has to be product specific or entire turnover of the offending company, we find that adopting the criteria of 'relevant turnover' for the purpose of imposition of penalty will be more in tune with ethos of the Act and the legal principles which surround matters pertaining to imposition of penalties.”
“However, while carrying out this investigation, if other facts also get revealed and are brought to light, revealing that the 'persons' or 'enterprises' had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report.”
“It needs to be repeated that there is a legislative link between the damage caused and the profits which accrue from the cartel activity. There has to be a relationship between the nature of offence and the benefit derived therefrom and once this co-relation is kept in mind, while imposing the penalty, it is the affected turnover, i.e., 'relevant turnover' that becomes the yardstick for imposing such a penalty.”
“At the cost of repetition it should be noted that starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter the tribunal should calculate appropriate percentage of penalty based on facts and circumstances of the case taking into consideration various factors while determining the quantum. But such penalty should not be more than the overall cap of 10% of the entity's relevant turnover.”
Provisions interpreted
Case and bench
- Parties
- Excel Crop Care Limited v. Competition Commission of India
- Case
- Civil Appeal No. 2480 of 2014, with Civil Appeal Nos. 53-55 of 2014, Civil Appeal No. 2874 of 2014 and Civil Appeal No. 2922 of 2014
- Decided
- 8 May 2017
- Bench
- A.K. Sikri, N.V. Ramana
- Opinions
- Unanimous. Judgment by A.K. Sikri, J., signed by both Judges; N.V. Ramana, J. wrote a separate concurring judgment on the meaning of 'turnover' in Section 27(b), accepting the conclusions of Sikri, J.
Questions on this case
2 questions in live Law Maker papers mention this case. A few from free papers:
Question 1 · Competition Law Practice Set 1
In Excel Crop Care Ltd. v. Competition Commission of India (2017), bids in a Food Corporation of India tender were submitted under a collusive agreement on 8 May 2009, before Section 3 came into force on 20 May 2009, but the tender process continued after that date. The Supreme Court held that:
- A. Section 3 could not apply, since applying it would give the Act retrospective operation
- B. Section 3 applied only if the Central Government had notified the tender as a continuing contract
- C. Section 3 applied, because the agreement continued to operate and was acted upon after 20 May 2009
- D. Section 3 applied only to the tenders floated after the date on which the Commission was established
Show the answer
C. Section 3 applied, because the agreement continued to operate and was acted upon after 20 May 2009
The Court in Excel Crop Care Ltd. v. CCI (2017) held that the role of the bidders did not end with submission of bids on 8 May 2009; the arrangement continued and was acted upon after 20 May 2009, when Section 3 was brought into force, so the inquiry was covered by Section 3 without any retrospective application.