Appeal Nos. 94, 95, 96 and 97/2015. Case: National Insurance Company Ltd. and Ors. Vs Competition Commission of India. COMPAT (Competition Appellate Tribunal)
| Case Number | Appeal Nos. 94, 95, 96 and 97/2015 |
| Counsel | For Appellant: A.N. Haksar, Senior Advocate assisted by Udayan Jain and K.K. Sharma, Advocates and For Respondents: Rajshekhar Rao, Rishad A. Chowdhury, Ayushman Kotwal and Asiya Khan, Advocates |
| Judges | G.S. Singhvi, J. (Chairman), Rajeev Kher and Anita Kapur, Members |
| Issue | Competition Act, 2002 - Sections 19(1), 19(3), 2, 2(b), 2(h), 2(z), 26, 26(1), 27, 27(b), 3, 3(1), 3(3), 3(3) (d), 3(3)(a), 3(3)(d), 4; Constitution of India - Articles 101, 101(1), 12, 36, 39, 39(c), 39(e), 77; General Insurance Business (nationalisation) Act,1972 - Sections 10, 10A, 16(1), 16(2), 17A, 18, 18(1), 18(1) (b) 18(1)(e), 18(1)(a), ... |
| Judgement Date | December 09, 2016 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
-
These appeals have been filed against a common Order dated 10.7.2015 passed by the Competition Commission of India (for short "the Commission") under Section 27 of the Competition Act (for short, the Act). The Commission was of the view that National Insurance Company Limited (NIICL), New India Assurance Company Limited (NIACL), Oriental Insurance Company Limited (OICL),United India Insurance Company Limited(UIICL), (henceforth collectively referred as Appellants) had manipulated the bidding process initiated by the Government of Kerala in regard to the Rashtriya Swasthya Bima Yojna [RSBY]/Comprehensive Health Insurance Scheme [CHIS], in contravention of the provisions of Section 3(1) read with Section 3(3)(d) of the Act. Resultantly, the Commission directed the Appellants to cease and desist from indulging in the practices found anti-competitive and also imposed a penalty on each of the Appellant at the rate of 2% of its average turnover of the last three financial years.
1.1 NIICL was incorporated on 5th December, 1906, NIACL on 23rd July, 1919, UIICL on 18th February, 1938, and OICL on 12th September, 1974. Management of all the undertakings engaged in general insurance business, pending nationalisation of such business, was vested with Government of India by virtue of The General Insurance (Emergency Provisions) Ordinance, 1971. Thereafter, General Insurance Business (Nationalization) Act, 1972 (hereinafter, "GIBNA"), nationalized the general insurance business and various companies were merged with the Appellants and the four Appellants became wholly owned subsidiaries of the General Insurance Corporation of India (hereinafter referred to as "GIC"). The Appellants and GIC had the exclusive privilege of carrying on general insurance business in India, which ceased with the commencement of Insurance Regulatory and Development Authority Act, 1999, when Section 24A was inserted in GIBNA. The General Insurance Business (Nationalization) Amendment Act of 2002, transferred the shares of the four Appellants held by GIC to the Central Government, and GIC ceased to carry on general insurance business.
-
The Commission decided to inquire into the alleged contravention, on its own motion, after it received an anonymous letter in September 2013. This letter was addressed to the Chief Minister of Kerala with endorsement to various authorities in Government of Kerala and Government of India as also to the Chairperson, Competition Commission of India. The relevant extract from the letter is as follows:
"Reg: Cartelization of public sector insurance companies in quoting RSBY Premium
Please see the attached document. It is the clear proof of cheating by four Public Sector Insurance Companies. These Insurance Companies have formed a cartel and increased the premium for RSBY every year and thus cheating the Govt. of Kerala and BPL people also.
This type of cartelization is violation of competition Act. Violation of any act is punishable offence under IPC. The officials who have signed the document presently working in key positions of various public sector insurance companies.
If you verify the records you will find that the premium is shared with private companies also, that means the cartelization is not only with public sector insurance but also with private companies.
As citizen of India I request your good self to intervene in the matter and appropriate decision may be taken to desist the companies from this type of cheating.
Please not that one of the signatories is presently working as CVO of one of the public sector insurance companies. By signing the cartelization agreement he has also violated competition Act and thus lost his institutional integrity. The Supreme Court in P.J. Thomas case has said "the touchstone for the appointment of the CVC is the institutional integrity as well as the personal integrity of the candidate." This is applicable to CVO's also. "
-
The attached document referred to in the anonymous letter is reproduced below:
"UNITED INDIA INSURANCE COMPANY LIMITED
REGIONAL OFFICE:KOCHIInter Company co-ordination Committee (PSU General Insurance Companies)
Minutes of the ICCC Meeting Held at United India Insurance Limited Regional Office, Kochi on 07.12.2009.
THE MEETING WAS ATTENDED BY FOLLOWING OFFICERS:
-
Sri B.Krishnamurthy, DGM, United India Ins. Co. Ltd. RO Kochi
-
Sri Girish Raj.CRM, New India Insurance Co. Ltd. RO Kochi
-
Sri Rajasekharan CRM, National Insurance Co. Ltd., RO Kochi
-
Sri Ramamurthy, Regional manager, Oriental Ins. Co. Ltd. & Other Officer.
Re: Tender Notice on RSBY dated 18/11/2009 of Govt. of Kerala
This ICCC Meeting was held to discuss about sharing of business and submission of quotation for the above business.
It was decided to share the business among the four PSUs with United India as Leader with 70% and other Companies with 10% each. This decision is subject to the approval of Committee of General managers of all four PSU Companies.
As per the above decision United India will be L1 and other three PSUs will be L2 to L4 in the quotation being submitted on 8th December 2009.
-
The Commission decided to consider the matter and in response to a query letter dated 18.10.2013 from the Secretary of the Commission, the Appellants confirmed that the minutes of the ICCC meeting of 7.12.2009 were authentic and that the officers of their respective companies had signed the minutes, and that they had participated in the tender dated 18.11.2009. As regards the purpose of the meeting, the response of the Appellants had the same tenor i.e., the ICCC meetings were held when major tenders, with large premium and large foreseen claims, were expected and as the RSBY scheme of the Government of Kerala was a mass health insurance scheme, a local level meeting was organized at the Kochi regional office of United India Insurance Company Limited (UIICL) to build capacity, and co-share business in order to share risks.
-
The Commission considered the information and the response of the Appellants and took the view that the Appellants were independent enterprises under Section 2(h) of the Act. Commission noted that, the minutes of the ICCC meeting showed discussion regarding submission of quotations for the tender notice for RSBY and prima facie there appeared to be "an agreement or arrangement between the OPs as bidders for rigging bid in tenders issued by Government of Kerala for RSBY Scheme in contravention of the provisions of Section 3(3) of the Act." The Commission, vide its Order dated February 12, 2014, under Section 26(1) of the Act, directed the Director General (DG) to investigate the matter for violation of the provisions of the Act and also to investigate the role of the persons who at the time of such contravention were in-charge of and responsible for the conduct of the business of the Appellant, if any company was found contravening the provisions of the Act.
-
We may note some admitted facts regarding the RSBY/(CHIS) scheme and the tenders issued by Government of Kerala inviting competitive bids for implementation of these schemes.
6.1 Government of India had, in June 2008, launched RSBY for BPL workers in the unorganized sector as defined by the Planning Commission, and their families. Government of Kerala (GOK) vide its order dated 4th July 2008, announced the modalities for implementing RSBY and a Comprehensive Health Insurance Scheme (CHIS) which was extended to all the families other than the BPL families covered under the RSBY. As per this order -
• RSBY would provide annual insurance cover for a maximum amount of Rs. 30,000 for a family of five, including the worker, spouse, children and dependent parents (included in the BPL family list), and the annual insurance premium not exceeding Rs. 750/- was to be decided through tender process.
• Under the scheme, the Union Government was to meet 75 percent of the premium (not exceeding Rs. 565), and also the cost of a Smart Card for each family, estimated at Rs. 60 per card.
• The beneficiaries had to pay an annual registration charge of Rs. 30/- per family (which was part of the insurance premium to be paid to the insurance provider), and the State Government was to pay the rest of the premium, together with the administrative cost.
• The scheme was to be implemented in all the 14 districts of the State.
• Non-RSBY population was covered under CHIS and was to be divided into two categories: (a) those belonging to the BPL (Poor) list of the State Government but not in the list as per definition of the Planning Commission and (b) the APL families that belong neither to the State Government list nor to the list prepared as per guidelines of the Planning Commission. The beneficiary contribution was to be Rs. 100 per annum per family for families belonging to category (a), with the State Government meeting the balance including for the smart card. The entire amount of premium plus the cost of smart card, for families belonging to category (b) was to be met by them.
• Insurance provider companies in both public and private sector were to be considered with the selection through tender process.
• Bulk of insurance premium paid by the Central Government and State Government would flow-back to the public healthcare system itself which was to be used for improving the system. For this: (i) each Public Healthcare Institution would be allowed to retain the insurance premium flow-back that it obtained, at least for the first year, after which the matter would be reviewed; (ii) a system of bonus for the medical staff and other staff in each public institution, based on the magnitude of flow-back, was to be worked out which provided incentives to the individual members of the institution.
• RSBY & CHIS were to be implemented in all the district of State and a separate agency namely Comprehensive Health Insurance Agency of Kerala (CHIAK) was created for implementation of the scheme. A high level Committee of...
To continue reading
Request your trial