Suo Moto Case No. 03 of 2014. Case: In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items Vs. Competition Commision of India
| Case Number | Suo Moto Case No. 03 of 2014 |
| Judges | S.L. Bunker, Sudhir Mital and U.C. Nahta, Members |
| Issue | Competition Act, 2002 - Sections 19(3), 26(1), 27, 27(b), 3, 3(1), 3(2), 3(3), 3(3)(c), 3(3)(d), 41(2), 46, 48, 48(1); Indian Evidence Act, 1872 - Section 65B |
| Judgement Date | January 18, 2017 |
| Court | Competition Commision of India |
Order:
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This case was taken up by the Commission suo moto, based on the information received from the Superintendent of Police, Anti-Corruption HQ, Central Bureau of Investigation (CBI), New Delhi vide letter dated 01.04.2014 wherein it was stated that the CBI, during an inquiry into certain alleged misconduct by a public servant, had found that three firms i.e., M/s. Pyramid Electronics, Parwanoo (hereinafter 'OP 1'), M/s. R. Kanwar Electricals, Noida (hereinafter 'OP 2') and M/s. Western Electric and Trading Company, Delhi (hereinafter 'OP 3') (collectively OP 1, OP 2 and OP 3 referred to as 'OPs') had cartelised in respect of the tenders floated by the Indian Railways and the Bharat Earth Movers Limited (hereinafter 'BEML') for the supply of Brushless DC fans (hereinafter 'BLDC fans') and other electrical items.
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Facts:
2.1 As per the letter dated 01.04.2014, the CBI, while enquiring into the alleged misconduct, found an e-mail dated 17.03.2013 in the e-mail inbox of Shri Ramesh Parchani, a partner of OP 3 (hereinafter 'Shri Ramesh Parchani'), along with an attachment providing details of four tenders of Indian Railways and BEML for procurement of BLDC fans. It contained the quantity unit value, rates to be quoted by OPs and quantities to be shared amongst them in these four tenders. A copy of the said e-mail along with the attachment was provided to the Commission. The Information contained in the said attachment is as below:
2.2 It was further stated that CBI had sought information from North Eastern Railway (NER) and Northern Railway (NR) regarding the two tenders mentioned in the said attachments i.e., tender No. 30120402OT460 dated 27.2.2013 and tender No. 4102130113 dated 25.3.2013, in order to verify whether the rates mentioned in the e-mail attachment were the same as quoted by the OPs in the said railway tenders. It was found from the information received that the rates mentioned in the e-mail against each OP were same as the rates quoted by them against the said two tenders.
2.3 After examining all the material on record, the Commission was of the prima facie view that the case involved contravention of provisions of Section 3(1) read with Section 3(3)(d) of the Competition Act, 2002 (hereinafter 'Act'). Therefore, the Commission vide its order dated 23.06.2014 directed the Director General (hereinafter the 'DG') to conduct an investigation into the matter under Section 26(1) of the Act and submit an investigation report. The Commission also noted that apart from the three OPs identified by the CBI, the probability of other bidders also indulging in the bid rigging could not be ruled out and required investigation. The DG, accordingly, conducted an investigation and submitted its investigation report dated 27.03.2015 to the Commission.
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DG's Investigation:
3.1 During the investigation, the DG found that as per the tendering system followed by the Indian Railways', the Research Designs & Standards Organisation, Lucknow ('RDSO') approved vendors are divided into two categories - Part I source/supplier and Part II source/supplier. Part I supplier is an older approved vendor which has earlier supplied as a Part II supplier for a certain period of time and whose supplies have received favourable report from the user (railway unit). As per the system, Part I supplier is eligible for 100% of tender quantity in case it emerges as L1 and 75% of tender quantity in case a Part II supplier becomes L1. However, the Part I supplier is eligible to supply at the higher rate quoted by it against the L1 rate of Part II supplier. On the other hand, a Part II supplier is eligible only upto 25% of the tender quantity, provided it emerges L1 amongst all the bidders.
3.2 In the instant case, the DG noted that amongst the parties that participated in the subject tenders, OP 1, OP 2 and OP 3 were Part I suppliers and M/s. Light Engineering Corporation, Parwanoo (OP 4), M/s. Kapson Industries Ltd., Jalandhar (OP 5) and M/s. General Auto Electric Corporation, Mumbai (OP 6) were Part II suppliers and M/s. BBC Corporation (OP 7) was an unapproved supplier. The details of OPs have been provided in the investigation report as below:
i. M/s. Pyramid Electronics, Panchkula (OP 1): A partnership firm engaged in the business of manufacturing of UPS invertors, battery charges, voltage stabilizers etc. It started manufacturing BLDC fans from 2012. Till May 2013, Smt. Sangita Rani Goyal and Shri Sandeep Goyal were partners in the firm. It was a Part I source with the Indian Railways in the relevant period.
ii. M/s. R. Kanwar Electrical, Noida (OP 2): A partnership firm engaged in the manufacturing of electrical goods like mixi motors etc. since 1980. It started manufacturing BLDC fans and railway carriage (RC) fan from 2003-04. Shri Ashish Jain is the managing partner in this firm and his mother, Smt. Aruna Jain is a sleeping partner. It was a Part I source with the Indian Railways in the relevant period.
iii. M/s. Western Electric and Trading Company, Delhi (OP 3): A partnership firm engaged in trading of BLDC fans, and spares of equipment used in electric and diesel locomotives. It does not manufacture BLDC fans; though it has claimed that it is an authorized agent of M/s. Crompton Greaves Ltd. (hereinafter 'CGL'). In operation since 1971, it started bidding for BLDC fans in tenders of Indian Railways around 10 years back. Shri Ramesh Parchani and his brother, Shri Vidya Sagar are partners in the firm. It was a Part I source with the Indian Railways in the relevant period.
iv. M/s. Light Engineering Corporation, Parwanoo (OP 4): A partnership firm engaged in supply of BLDC fans to Indian Railways. Shri Karanveer Singh and Shri Maninder Singh are its two partners. It was a Part II source with the Indian Railways in the relevant period.
v. M/s. Kapsons Industries Ltd., Jalandhar (OP 5): A company engaged in the business of providing customized engineering solutions to electrical, automobile, energy, engineering and appliance manufacturing industry; with good market shares across a wide spectrum of products including electrical stampings, die cast rotors, high pressure die cuttings, electrical motors, alternators, fan for railways, pumps etc. It was a Part II source with the Indian Railways in the relevant period.
vi. M/s. General Auto Electric Corporation, Mumbai (OP 6): A partnership firm engaged in supply of LED signals, hand signal torches, battery chargers, B type choke, and BLDC fans. Its partners are Shri Hetal R Gandhi, Shri Nehal G Gandhi, Shri Ramesh N Gandhi, Smt.Poorna G Gandhi and Shri Geet N Gandhi. It was a Part II source with the Indian Railways in the relevant period.
vii. M/s. BBC Corporation, Mumbai (OP 7): A proprietorship concern having Shri Chandrakant Kamdar as the proprietor, and engaged in the manufacture of locomotive spare parts for Indian Railways besides BLDC fans. It was not an approved source during the relevant period.
3.3 For the purpose of investigation, the DG examined whether OP 1, OP 2 and OP 3 had violated the provisions of Section 3(3)(d) read with Section 3(1) of the Act. In accordance with the directions of the Commission, the DG also examined if there was any other bidder that had violated Section 3(1) read with Section 3(3)(d) of the Act.
3.4 On the issue whether OP 1, OP 2 and OP 3 had violated Section 3(3)(d) read with Section 3(1) of the Act, the DG analysed the e-mail dated 17.03.2013 furnished by CBI to the Commission. It was noted that Shri Sandeep Goyal, partner of OP 1 (hereinafter 'Shri Sandeep Goyal'), had sent this e-mail to Shri Ashish Jain, partner of OP 2 (hereinafter 'Shri Ashish Jain'), on 17.03.2013. Shri Ashish Jain had then forwarded this mail to Shri Gulshan Kapoor, the office executive of OP 3.
3.5 The DG compared the rates submitted by OP 1 for the four tenders and found that the rate submitted by OP 1 for tender No. 3012042OT460 dated 27.02.2013 was exactly the same as the rate mentioned in the attachment to the e-mail and the rate submitted for tender No. 4102130113 dated 25.03.2013 was almost identical. The comparison of the rates quoted by OP 1 vis-à-vis. the rates suggested in the e-mail, is as follows:
M/s. Pyramid Electronics
Rates suggested in e-mail vis-à-vis. rates quoted in the tenders
3.6 Having noted the similarity of rates quoted by OP 1 with the rates proposed in the e-mail attachment, the DG observed that Shri Sandeep Goyal had admitted in his statement made on 17.02.2015 that he had sent the e-mail dated 17.03.2013 to Shri Ashish Jain, with an attachment providing the distribution of bidding rates for the BLDC fans with respect to OP 1, OP 2 and OP 3. He stated that he had consulted Shri Ashish Jain of OP 2 before quoting the bid in all the railway tenders and that approximately the same rates were also quoted by the others in these tenders. Shri Sandeep Goyal confirmed that he, along with Shri Ashish Jain and Shri Ramesh Parchani had rigged the tenders for BLDC fans. He submitted that he used to receive frequent phone calls from his competitors i.e., OP 2 and OP 3 for purposes of coordinating their bids and in support thereof furnished copy of the call data records of his mobile for the period between 20.03.2013 to 31.03.2013 which showed several incoming and outgoing calls from and to Shri Ashish Jain and Shri Ramesh Parchani. Based on the evidence gathered from the e-mail, call data records and the statement made by Shri Sandeep Goyal, the DG concluded that OP 1 had colluded with OP 2 and OP 3 to rig the bids.
3.7 With respect to OP 2, the DG observed that the fact that Shri Ashish Jain had forwarded the e-mail dated 17.03.2013 to an executive of OP 3 by itself indicated active involvement of OP 2 in the cartel.
3.8 On comparison of the rates submitted by OP 2 for the four tenders with the rates mentioned in the attachment, the DG noted that OP 2 had quoted same rates as in the attachment for tender No. 30120402OT460 dated...
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