I.A. No. 152/2016 in Appeal No. 40 of 2016. Case: Lupin Limited and Ors. Vs Competition Commission of India, The Hindustan Times House and Ors.. COMPAT (Competition Appellate Tribunal)
| Case Number | I.A. No. 152/2016 in Appeal No. 40 of 2016 |
| Counsel | For Appellant: Amit Sibal, Senior Advocate assisted by Manas Kumar Chaudhuri, Sagardeep Rathi, Pranjal Prateek, Tahir Siddiqui and Rohan Alva, Advocates and For Respondents: Naveen Nath and Manish Paliwal, Advocates |
| Judges | G.S. Singhvi, J. (Chairman), Rajeev Kher and Anita Kapur, Members |
| Issue | Competition Act, 2002 - Sections 19, 19(1), 19(1)(a), 19(3), 2(b), 26, 26(1), 27, 27(b), 3, 3 (4)(d), 3(1),3(3)(b), 3(4), 3(4)(d), 36(2), 4, 41, 41(2), 44, 46, 48, 48(1), 48(2), 53B(2); Income Tax Act, 1961 - Sections 271, 271(1)(c); Indian Evidence Act, 1872 - Sections 59 63, 65, 65A, 65B, 78(2), 81 |
| Judgement Date | December 07, 2016 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
G.S. Singhvi, J. (Chairman)
I.A. No. 152/2016
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I.A. No. 152/2016 filed by Respondent No. 3 for condonation of delay in filing the reply is allowed in terms of the prayer made.
Appeal No. 40/2016
This appeal filed against order dated 28.07.2016 passed by the Competition Commission of India (for short, 'the Commission') in Case No. 71 of 2013 is illustrative of how the appellants have become victim of rivalry between different factions of Karnataka Chemists and Druggists Association (Respondent No. 3) and they have been penalized by the Commission under Section 27 of the Competition Act, 2002 (for short, 'the Act') on the premise that there was an anti-competitive arrangement/understanding between Appellant No. 1, M/s. Lupin Ltd. and Respondent No. 3 in violation of Section 3(1) of the Act.
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Appellant No. 1 is engaged in the manufacturer of various pharmaceutical products including those relating to the treatment of diabetes. Respondent No. 2 is a stockist/wholesaler/distributor of pharmaceutical products of about 60 pharmaceutical companies operating in Bangalore. It is a member of Respondent No. 3 and also of Bangalore Chemists & Druggists Association and Bangalore Pharma Distributors Association. In his capacity as District Representative of Bangalore Pharma Distributors Association, Shri Sardar Mal Surana, Managing Director of Respondent No. 2 participated in the meetings of the Managing Committee of Respondent No. 3.
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In 2001, Eli Lilly and Company (India) Private Limited (for short, 'Eli Lilly') appointed Respondent No. 2 as a stockist for its insulin related products. For next about 10 years, Eli Lilly supplied the products to Respondent No. 2. Neither at the time of appointment as a stockist nor at any time thereafter Eli Lilly asked Respondent No. 2 to obtain 'No Objection Certificate' (NOC) from Respondent No. 3.
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Appellant No. 1 and Eli Lilly entered into a collaboration agreement sometime in August, 2011, whereby marketing and selling rights of insulin related products of Eli Lilly were given to Appellant No. 1. Between August, 2011 and August, 2013, Respondent No. 2 placed more than 100 orders for the supply of insulin related products of Eli Lilly through e-mail 'umeshsurana@marutiandco.com' sent to Bangalore Depot of Appellant No. 1, which had e-mail address as 'depotbangalore@lupinpharma.com' and the products were supplied to Respondent No. 2 without asking it to procure/obtain NOC from Respondent No. 3.
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In June 2013, Respondent No. 2 approached Appellant No. 1 for appointment as a stockist of the products of its Diabetes Care Division. Appellant No. 1 agreed to do so because it was already supplying insulin related products of Eli Lilly to Respondent No. 2. At that time, neither any formal agreement was executed between the parties nor Respondent No. 2 was asked to obtain NOC from Respondent No. 3, but Appellant No. 2, who was then posted as Regional Manager of Appellant No. 1 at Bangalore, sent letter dated 05.06.2013 to the President/Secretary of Respondent No. 3 informing them about the appointment of Respondent No. 2 as a stockist and requested that all members of Respondent No. 3 may be informed about the same. That letter reads thus:
Date: 05/06/2013
From AMIT KUMAR DHIMAN
REGIONAL SALES MANAGER - BANGALORE
LUPIN DIABETES CARETo
The President/Secretary
Karnataka Chemists & Druggists Association
BangaloreDear Sir,
As you are aware that, all these years we were marketing our products in BANGALORE district through following stockists:
1. AVENUE PHARMACEUTICALS ASSOCIATES
2. MAHENDRA DPVG AGENCIES
3. MOHAN & CO.
4. RAJSONS PHARMA INDIA LTD.
5. RSM PHAMRA PVT. LTD.
6. SADTHAGIRI PHARMA DISTRIBUTORS
7. SRI PARSHVA DRUG HOUSE
8. VARDHMAN PHARMA PVT. LTD.
We are glad to inform you that in order to have a better penetration of sales, in the district, we have appointed M/s. MARUTHI & COMPANY COXTOWN, BANGALORE as our stockist who is having good reputation in the market. In this respect, we request you to inform all your members about the new appointment of our stockist so that they can start dealings with newly appointed stockist.
We hope you will do the needful in this regard and oblige.
Thanking you,
Yours faithfully,Sd/-
Regional Manager/State Incharge
RSM-LUPIN Diabetes Care -
Notwithstanding its appointment as a stockist of Diabetes Care Division of Appellant No. 1, Respondent No. 2 did not place any order for supply of the products though it continued to obtain supply of Eli Lilly products by placing order on Bangalore Depot of Appellant No. 1 through e-mail 'umeshsurana@marutiandco.com', as was being done earlier.
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After two months, Respondent No. 2 sent legal notice dated 05.08.2013 to Respondent No. 3 alleging that despite the order passed by the Competition Commission of India in Case No. 20 of 2011 that the dealers/stockists need not obtain NOC from the Association, it was insisting on obtaining of such NOC and that the Diabetes Care Division of Appellant No. 1 had asked it to obtain NOC from Respondent No. 3 as a pre-condition for supply of the products. This is evident from paragraphs 3 to 6 of the notice, which read as under:
"3. You are aware that in view of the order passed in Case No. 20/2011 by Competition Commission of India, the dealers/stockist need not obtain NOC from your association. Inspite of this, you have been insisting my client to obtain NOC from your association.
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My client approached LUPIN DIABETES CARE for supply of stocks so as to start its sale transactions of its products. LUPIN DIABETES CARE asked my client to obtain NOC from The Karnataka Chemical & Druggists Association for short "KCDA" i.e. yourself, as a pre-condition before starting supply of its products though my client is not required to obtain the same.
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That on 16-07-2013 & 18-07-2013 my client sought clarification from Sri. Prakash, President of KCDA i.e., Second of you, but my client was warned that it should obtain NOC from KCDA before commencing the business and failing which no stocks would be supplied to my client and further threatened that KCDA would not allow my client to carry on business without obtaining said NOC. Second of you also threatened that if my client do not obtain NOC and buy stocks from Lupin, then he would ask other companies to stop supplies to my client i.e. Maruti and Company.
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My client believes that KCDA has asked LUPIN DIABETES CARE not to supply stocks to my client till NOC is obtained though NOC is not at all required. You may kindly note that insisting my client to obtain NOC from KCDA is not only contrary to law but also against the said order passed by Competition Commission of India."
(Paragraphs 4 and portion of 6 of the notice has been underlined because in the investigation report submitted by the Joint Director General and the impugned order, it has been mentioned that as per Respondent No. 2, no order was placed for supply of products of Appellant No. 1 till 24.08.2013 because the latter's representation did not come for taking order).
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Respondent No. 3 sent reply dated 28.08.2013 and denied the allegations that it had asked Respondent No. 2 to obtain NOC as a precondition for supply of the products of Appellant No. 1. Paragraphs 3, 4 and 5 of the reply sent on behalf of Respondent No. 3 are reproduced below:
"3. The allegation that our client has asked your client to obtain NOC from our client is emphatically denied as false. Our client does not issue any NOC to any of its members or chemists in the state and hence the question of calling upon your client to obtain such NOC from our client does not arise. Even otherwise, our client has no relationship with LUPIN DIABETES CARE or with your client and therefore the said company calling upon your client to obtain NOC from our client is figment of imagination of your client.
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Our client instructs us to state that your client is associated with certain vested interest persons who have been time and again trying to fling mud on our client and that your client has not disclosed the true and complete facts of the matter. Our client reiterates that it does not issue NOC to any person and it is always open to your client to call upon the LUPIN DIABETES CARE to supply medicines to it. Whether to supply the medicines or not is not a matter over which our client has any say nor did our client prevent the said company from supplying medicines to your client. It is purely a subject matter between your client and the said company.
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Our client emphatically denies the allegation made by your client that when your client approached LUPIN DIABETES CARE for supply of stocks to start its sale transactions of its products, the said company asked your client to obtain the NOC from our client. The further allegation that when your client approached the president of KCDA, your client was warned that it should obtain NOC from KCDA before commencing the business and failing which no stocks would be supplied and also threatened that KCDA would not allow your client to carry on business without obtaining the said NOC is denied as false. It is absolutely false to allege that the president of our client threatened that if your client do not obtain NOC and buy stocks from Lupin, then our client would ask other companies to stop supplies to your client. Whether to supply medicines or not is left to the company. Our client is interested in catering to the needs of its members and does not issue NOC to chemists for supply of drugs by companies. The further allegation that your client believes that our client has asked LUPIN DIABETES CARE not to supply stocks to your client till NOC is obtained though NOC is not at all required is denied as false."
[Emphasis supplied]
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After 19 days of sending legal notice to Respondent No. 3, Respondent No. 2 sent order dated 24.08.2013 to Appellant No. 1 for supply of 275 drugs. The order was addressed to M/s. Lupin Pharma No. 854/1, P.P. Industrial Area...
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