EXCEL CROP CARE LTD VS COMPETITION COMMISSION OF INDIA: CASE SUMMARY

The Supreme Court in Excel Crop Care Ltd Vs. Competition Commission of India (Civil Appeal No. 2480 of 2014 )  held that penalty under the Competition Act, 2002 has to be imposed on “relevant turnover” rather than “total turnover” on erring enterprises.

BRIEF FACTS

Food Corporation of India (FCI)  filed a complaint before the Competition Commission of India ( CCI)  against four manufacturers of APT pesticides. It was alleged in the complaint that these manufacturers had made a cartel and were quoting identical rates in tenders invited by FCI for purchase of APT. The CCI assigned the investigation to Director General (DG).  The DG found that there was pattern of quoting identical pricing in violation of Sections 3(3)(a), 3(3)(b) and 3(3)(d) read with Section 3(1) of the Competition Act.  The CCI passed order to the affect  that the appellants had entered into an agreement or understanding, and indulged in anti-competitive activities while submitting their bids in response to the tenders issued by the FCI. CCI imposed penalties  @ 9% of average 3 years turnover under Section 27 (b) of the Act. Penalty of 63.90 Crore, 1.57 Crore and 252.44 Crore was imposed on M/s Excel Crop Care Ltd, Sandhya Organics Chemicals (P) Ltd.  and UPL respectively.

Appeals were filed before COMPAT. COMPAT rejected all contentions except qua penalty. COMPAT held that penalty cannot be on the basis of “total turnover” but on the basis of “relevant turnover”. Penalty has to relate to the goods in question and turnover of other products have to be excluded.

Aggrieved parties filed appeal before the Supreme Court.

FINDINGS OF THE SUPREME COURT

The first  issue related with applicability of Section 3 as Section 3 has come in force after submission of tender. The Supreme Court noted that provisions of Competition Act, 2002 have been notified on different dates. Section 3 of the Act was notified on 20^th May, 2009. The Supreme Court held that inquiry into the tender of March 2009 by the CCI is covered by Section 3 of the Act inasmuch as tender process though initiated prior to the date when Section 3 became operational continued much beyond enforcement of Section vide notification dated May 20, 2009. The Supreme Court also applied principle of retroactivity.

The second issue was whether investigation will cover tender issued in 2011 which was not  subject matter of complaint filed by FCI. On this aspect  the Supreme Court held that if new facts are brought into light , DG will within his powers to investigate such matter.

The third issue was concerned with whether appellants had indulged in collusive bidding and formed a cartel. The  Supreme Court noted that there was tendency of quoting identical price by the parties. The appellants contended  that APT pesticides are only required FCI and Central and State Warehousing Corporations creating an oligopoly market dominated by few buyers resulting in parallel pricing by suppliers. This argument was rejected by the Supreme Court on the ground that parallel pricing is applicable in realm of market economy and not in bid cases. The Court noted that there can not be coincidence that on all occasions price quoted by three appellants are identical.

The fourth issue was whether penalty will be imposed on “total turnover” or “relevant turnover”. The Supreme Court held 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. The concept of total turnover may bring out inequitable results. The Court noted that Interpretation which brings out such inequitable or absurd results has to be eschewed.

The judgment of COMPAT was affirmed and appeals were dismissed by the Supreme Court.

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