Appeal Nos. 85 and 86 of 2015. Case: GlaxoSmithKline Pharmaceuticals Limited and Ors Vs Competition Commission of India and Ors. COMPAT (Competition Appellate Tribunal)
| Case Number | Appeal Nos. 85 and 86 of 2015 |
| Counsel | For Appellant: Ramji Srinivasan, Senior Advocate assisted by Samir Gandhi, Rahul Rai, Vivek Oriel, Tushar Bhardwaj, Akshat Kulshrestha and Krithika Romesh, Advocates and For Respondents: A.N. Haksar, Senior Advocate, Sandeep Mohapatra, Balish Mukhi and Dhruv Malik, Advocates |
| Judges | G.S. Singhvi, J. (Chairman), Rajeev Kher and Anita Kapur, Members |
| Issue | Competition Act, 2002 - Sections 19(1)(a), 2(b), 2(c), 2(h), 26(1), 27, 27(b), 3, 3(1), 3(2), 3(3), 3(3)(a), 3(3)(b), 3(3)(d), 3(e)(d), 36(2), 4, 4(1), 41(2), 48; Constitution Of India - Articles 14, 226 |
| Judgement Date | November 08, 2016 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
G.S. Singhvi, J. (Chairman)
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These appeals are directed against order dated 04.06.2015 passed by the Competition Commission of India (for short, 'the Commission'), whereby it held the appellants guilty of acting in contravention of Section 3(3)(d) read with Section 3(1) of the Competition Act, 2002 (for short, 'the Act') and imposed penalty at the rate of 3% of their turnover of last three financial years.
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GlaxoSmithKline Pharmaceuticals Limited (GSK) (appellant in Appeal No. 85/2015) is an Indian subsidiary of GlaxoSmithKline plc. It started operations in the Indian market in 1924 and has been supplying various medicines including Quadrivalent Meningococcal Meningitis Vaccine (QMMV) manufactured by its parent company in Belgium. M/s. Sanofi Pasteur India Private Limited (Sanofi) (Appellant in Appeal No. 86 of 2016) is a wholly-owned subsidiary of Sanofi Pasteur S.A., France. Sanofi started its activity in India in 1996. It has been supplying the medicines including QMMV produced in the manufacturing facility in USA by Sanofi Pasteur Inc. to the public (various Government Departments) and private markets in India.
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Respondent No. 2 Bio-Med (P) Ltd. is a company incorporated under the Indian Companies Act, 1956. It was granted license on 21.12.2002 for development of indigenous QMMV. After one year and 10 months, it was granted licence for commercial production of the QMMV.
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From 2002, Director General (Stores), Medical Store Depot, Ministry of Health and Family Welfare, Government of India started inviting tenders for procurement of QMMV to be used for compulsory vaccination of Haj and Umrah pilgrims to protect them against meningitis which is widely prevalent in Sub-Saharan Africa. The details of the bids given by the appellants and Respondent No. 2 in various years between 2002 and 2014 are tabulated below:
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Respondent No. 2 did not participate in the tender process between 2002 and 2004 because it had not started manufacturing QMMV. From 2005 to 2007, Respondent No. 2 could not give bid because it did not satisfy the prescribed eligibility condition, i.e., minimum turnover of Rs. 10 crores in any of the three preceding years. In 2005, Respondent No. 2 filed Writ Petition (C) No. 11205/2005 in the Delhi High Court for quashing the eligibility criteria. During the pendency of the writ petition, Respondent No. 2 produced letter dated 07.07.2005 written by the Private Secretary of the Minister of the concerned department espousing its cause. The Union of India claimed that affidavit and other documents filed by Respondent No. 2 were fabricated. The Division Bench of the High Court took the cognizance of the same and recorded the following observations:
"These incidents give us some insight into the lengths to which private companies and individuals go to for purposes of "lobbying" for their private causes and gains. This is a matter of serious concern because such "behind-the-scenes" activities case grave doubts on the conduct of the parties. However, although Mr. Rajeev Mehra submitted that on the ground of using a forged document alone this writ petition is liable to be dismissed, giving the benefit of doubt to the petitioner, for the time being, we intend to ignore the said letter dated 7.7.2005 and the other purported letters of the Members of Parliament and all averments founded on these suspect documents for the purposes of deciding this writ petition."
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On merits the High Court rejected the appellant's challenge to the eligibility criteria prescribed by the Government of India and dismissed the Writ Petition by recording the following reasons:
"These decisions make it more than clear that the Government has latitude in fixing the pre-conditions or qualifications for tenders. Where these eligibility conditions are stipulated to ensure that the tenderers have the capacity and the resources to execute the works or carry out the supplies the same cannot be faulted. In fact, the Supreme Court has repeatedly held that the terms of the invitation to tender are not open to judicial scrutiny. In the light of these decisions, it becomes immediately clear that the petitioner cannot claim any fundamental right to carry on business with the Government and that all that it can claim is that it should not be unfairly treated and discriminated to the detriment of public interest. If it can be demonstrated by the Government that the tender conditions vis-à-vis eligibility are not arbitrary, not unreasonable and not mala fide, then the petitioner can have no grievance in respect thereof. In the facts of the present case we have already indicated that the records do not display any favouritism in respect of any party. Nor do they disclose any conscious and purposive conduct on the part of the respondents to shut out the petitioner. The tender conditions of three years experience and a turnover of 10 crores in formulations in any of the preceding three years have been introduced as a result of detailed deliberations and as a part of a policy consistent with the suggested tender conditions for procurement of generic drugs. Merely because the petitioner, being the only indigenous manufacturer of the vaccine, does not qualify the prescribed eligibility conditions it cannot be held that these conditions were means to shut out domestic manufacturers deliberately and were tailor-made to promote foreign manufacturers. And, unless we are able to come to such a conclusion, judicial interference is uncalled for. It cannot be said, in the facts of the present case, that the conditions of three years experience and turnover of Rs. 10 crores are wholly unrelated to the object of ensuring that the supply of the vaccines are made on time and that they shall conform to a standard quality.
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Mr. Chandhiok had relied upon the decision of this Court in Dhingra Construction Company (Supra) to challenge the eligibility conditions with regard to three years experience and turnover. In that case one of the pre-qualification conditions was that the tenderer must have satisfactorily performed at least three similar completed works during the last three years of not less than Rs. 480 lakhs each. It was contended that the fixation of this eligibility criteria was unreasonable and arbitrary inasmuch as the MCD itself had never awarded contracts of such size. Mr. Chandhiok particularly referred to paragraph 26 of the said decision to show that the court did in fact go into the question of whether the said eligibility condition which was said to be a part of the policy was fair, reasonable and non-arbitrary. He further submitted with reference to paragraph 35, 36 and 37 thereof that the court had found the aforesaid eligibility condition to be unrealistic and having no reasonable correlation with the value of the contract. He also submitted that the court held that such a condition impacted the need to have a fair and wide participation in a public tendering process. He laid particular stress on the contents of Para 37 of the said decision wherein this court observed as under:
"The public interest, in a fair competition, in this case, in our view, based upon a reasonable and fair assessment of all factors that are relevant, and germane, far outweighs the interest of the State agency in being left alone to formulate its policies, with sufficient "elbow room". The considerations that seemed to weigh with MCD while fixing the criteria in the impugned policy, were based on non-existing, or irrelevant factors. This led to elimination of a large number of tenderers, even though the actual estimated work was far less than Rs. 12 crores. If the estimate for fixing similar works were based upon figures that had some semblance of relationship with the actual estimates, this result would not have ensued. The impugned condition in our view is based upon an assumption or conclusion so unreasonable which no reasonably authority of person could ever have come to having regard to the facts presented in this case. Accordingly, we hold that the overwhelming public interest requires our intervention, under Article 226 of the Constitution."
The present case is entirely different. As noted above we cannot conclude that the eligibility conditions prescribed were so unreasonable that no reasonable authority or person could ever have come to having regard to the facts of this case. Moreover, it cannot be held in the present case that the criteria of experience was based on non existing or irrelevant factors. Insofar as the question of the turnover of Rs. 10 crores in formulations for any one of the past three years is concerned, that too cannot be said to be arbitrary or unreasonable to such an extent as would fail the test of Wednesbury "unreasonableness" or "irrationality". For, when the question is asked as to whether the respondents in introducing the said eligibility conditions have acted in a manner so unreasonable that no reasonable authority could have done, the answer is in the negative. Mr. Chandhiok had made a point that when the estimated contract value itself was approximately Rs. 7.5 crores, the requirement of an annual turnover of Rs. 10 cores was excessive and therefore unreasonable. We are unable to subscribe to this view. The contract value of Rs. 7.5 crores is in respect of one particular type of vaccine whereas the turnover of Rs. 10 crores is in respect of all formulations. If the turnover of a manufacturer/supplier in all formulations is less than Rs. 10 crores, then a legitimate question could be asked - would such a manufacturer/supplier have the wherewithal to fulfil a contract which entails the supply of one particular kind of vaccine alone to the extent of Rs. 7.5 crores? Looked at from this perspective also, the eligibility condition of an annual turnover of Rs. 10 crores in formulations in any one of the proceeding three years does not appear to be excessive or arbitrary. Therefore, the decision in Dhingra...
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