Penalty under Section 27(b) of the Competition Act, 2002, must be calculated based on "relevant turnover" (turnover of the infringing product) rather than "total turnover" to ensure proportionality, especially for multi-product companies. The "process for bidding" covers all stages until the contract award.

JUDGMENT :

A.K. Sikri, J.

All these Civil Appeals arise out of the common judgment and order dated October 29, 2013 passed by the Competition Appellate Tribunal (for short, 'COMPAT'). These proceedings have their origin in the letter dated February 04, 2011 written by the Food Corporation of India (for short, 'FCI') to the Competition Commission of India (for short, 'CCI') complaining of an anti-competitive agreement purportedly arrived at between M/s. Excel Crop Care Limited, M/s. United Phosphorous Limited (for short, 'UPL'), M/s. Sandhya Organics Chemicals (P) Ltd. respectively (the appellants in CA Nos. 2480, 2874 and 2922 of 2014 and hereinafter referred to as the 'appellants') and Agrosynth Chemicals Limited, in relation to tenders issued by the FCI for Aluminium Phosphide Tablets (for short, 'APT') of 3 gms. between the years 2007 and 2009. The CCI entrusted the matter to the Director General (DG) for investigation, who submitted his report on October 14, 2011 giving his prima facie findings affirming the allegations of the FCI that the appellants had entered into an anti-competitive agreement, which was violative of Section 3(3) of the Competition Act, 2002 (hereinafter referred to as the 'Act'). On receipt of this complaint, the CCI issued notices to the appellants who filed their objections. After hearing the parties, the CCI passed the order dated April 23, 2012 whereby it concluded that the appellants had entered into the anti-competitive agreement in a concerted manner thereby offending the provisions of Section 3 of the Act. As a consequence, it imposed penalty @ 9% on the average total turnover of these establishments for last three years. Appeals were filed by the appellants before the COMPAT under Section 53-B of the Act. In these appeals, the issue on merits has been decided against the appellants by COMPAT in its judgment dated October 29, 2013. These appeals question the validity of the order of the COMPAT on the aforesaid aspect.

Now the facts in detail :

2. An Inquiry in this case was initiated by the CCI on the basis of letter/ complaint dated February 04, 2011 written by the Chairman and Managing Director of the FCI to the CCI. It was alleged in this complaint that four manufactures of APT had formed a cartel by entering into an anti-competitive agreement amongst themselves and on that basis they had been submitting their bids for last eight years by quoting identical rates in the tenders invited by the FCI for the purchase of APT. It was alleged that the requirement for APT was almost got doubled during the period 2007-2009 and was likely to rise further in view of the requirement of large quantity of these tablets by the FCI, Central Warehousing Corporation and other State agencies for preservation of food grains, which these agencies were storing in their godowns. The CCI assigned the complaint to the DG for investigation. The DG collected required information from the FCI and other Government agencies dealing in warehousing and storage of food grains and also from Central Insecticides Board and Registration Committee, Faridabad. Representatives of FCI were also examined. After collecting the aforesaid information, the DG submitted his report with the following findings:

(a) The main market of APT in India was that of the institutional sales and a majority of buyers were Government agencies. The number of private buyers was insignificant. APT is sold in the box of 3 gms. tablets, 12 gms. tablets, and a sachet of 10 gms. in powder. Out of this, 3 gms. tablets constitute 56% of the total sale. Sale of these 3 gms. tablets was restricted to the Government agencies and approved pest control operators, which could not be sold in the open market. These Government agencies were procuring APT tablets of Rs. 40 crores annually.

(b) There were only four manufacturers of APT, namely, M/s. Excel Crop Care Limited, M/s. UPL, M/s. Sandhya Organics Chemicals (P) Ltd. (which are the three appellants herein) and Agrosynth