Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (‘CCI’): CCI has imposed penalties on 7 cement companies for bid rigging of a tender floated by the Director, Supplies & Disposals, Haryana, in the year 2012, for procurement of cement to be supplied to Government Departments/ Boards/ Corporations in the State of Haryana. A final order has been passed by CCI pursuant to a reference filed under Section 19(1)(b) of the Competition Act, 2002 (‘the Act’) by the Director, Supplies & Disposals, Haryana.

 CCI has held that the cement companies, through their impugned conduct, have engaged in bid-rigging, in contravention of the provisions of Section 3(3)(d) read with Section 3(1) of the Act, which eliminated and lessened competition and manipulated the bidding process in respect of the impugned tender. The bid-rigging has been established from quoting of unusually higher rates in the impugned tender (than rates quoted in tenders of previous years), determining different basic prices for supply of cement at the same destination through reverse calculation, quoting of quantities in the impugned tender such that the total bid quantity almost equalled the total tendered quantity, quoting of rates for the districts in a manner that all cement companies acquired L1 status at some of the destination(s) etc. The anti-competitive conduct was re-affirmed through SMS exchanged and calls made amongst the officials of the cement companies.

 Accordingly, penalty of  Rs. 18.44 crore, Rs. 68.30 crore, Rs. 38.02 crore, Rs. 9.26 crore, Rs. 29.84 crore, Rs. 35.32 crore and Rs. 6.55 crore has been imposed upon Shree Cement Limited, UltraTech Cement Limited, Jaiprakash Associates Limited, J.K. Cement Limited, Ambuja Cements Limited, ACC Limited and J.K. Lakshmi Cement Limited. The penalty has been levied @ 0.3% of the average turnover of the cement companies of preceding three years. While imposing penalties, Commission took note of potential delay which would have occurred in the execution of public infrastructure projects due to cancellation of the impugned tender. At the same time, due consideration was given to factors such as peculiarity of the tender process which created uncertainty in procurement, total size of the impugned tender and competition compliance programmes put in place by some companies while determining the quantum of penalty. The cement companies have been directed to cease and desist from indulging in the acts/ conduct which have been held to be in contravention of the provisions of the Act. [Director, Supplies & Disposals, Haryana v. Shree Cement Ltd., 2017 SCC OnLine CCI 2, decided on 19-01-2017]

Tribunals/Commissions/Regulatory Bodies

Central Information Commission (CIC): In a case relating to a dispute of ownership of 20 bighas of land in Delhi worth around Rs 100 crore, CIC imposed a maximum penalty of Rs 25,000 on two public information officers (PIOs) for repeated non-compliance of order of the First Appellate Authority and directions of the CIC. The penalty was imposed on the present CPIO of SDM office (Civil Lines), GNCTD and also the former CPIO asking their offices to deduct the penalty from their salary and pension respectively. Said order of CIC came upon a complaint filed for non-compliance of CIC order dated 4.9.2012 wherein the PIO was directed to furnish a reply to the complainant. The complainant claimed that his father was joint bhoomidar with one R of around 20 bighas of land in Delhi which is worth around Rs 100 crore. He alleged that Revenue Authorities put forward the files alleging that his father surrendered the status of bhoomidar on June 03, 1977 in favour of R. The complainant approached CPIO of SDM office seeking certified copy of the ‘surrender’ letter, which was not furnished. The complainant alleged that he require the ‘surrender’ document to examine the witness before the Revenue Court, where R is claiming to be an absolute owner. There was no response for his complaint and he was not even informed the name and address of first appellate authority as mandated by RTI Act. Then he filed second appeal wherein CIC directed disclosure of information within a week, which was also not implemented. The officials merely responded that the file was missing, and did not respect the orders of CIC and the First Appellate Authority. The complainant filed another complaint alleging that the CIC order given in 2012 was not implemented. In year 2014, show cause notice was issued to the concerned CPIO. It was contended by the CPIO that he instructed the subordinate staff to trace the missing file but nothing was done to reconstruct the file. The explanation of PIO was not satisfactory on the aspect of not lodging FIR or in regard to construction of an alternative file. After hearing the parties, the Commission observed that, “PIOs are using the ‘defence’ of ‘missing file’ repeatedly to deny the information. Neither RTI Act nor the Public Records Act provided for this defence of ‘missing of file’. The core function of Revenue department is to secure and maintain the key records regarding land to ascertain the ownership and possession issues. If such important orders or records of land revenue are missing it will be difficult to ascertain and defend the right of ownership or possession of the land.” CIC further observed that “If file was lost inadvertently or for any other reason, nothing could have prevented SDM from inquiring into immediately and taking quick decision to lodge FIR and reconstruct the file,” and imposed penalty upon the past and present PIOs of office of SDM Civil Lines GNCTD for adamant attitude refusing RTI application, not responding to complaint and not complying with first and second appeal orders. Harish Kumar Tyagi v. Sub-Divisional Magistrate (Civil Lines), GNCTD, 2015 SCC OnLine CIC 7163, decided on 7-9-2015

Case BriefsHigh Courts

Bombay High Court: In a significant judgment, a bench comprising of G.S. Patel, J dismissed an application for injunction in a defamation action brought by the National Stock Exchange of India (NSE) for an article published in a financial news website. The article in question was based on a letter written by an anonymous whistleblower which alleged that that insiders at the stock exchange had given unfair advantage to certain high-frequency traders.

The Court noted that the journalist who wrote the article, had made repeated attempts to contact the NSE chairman and other NSE members before publishing the article but she had received no response. Instead the journalist and editor of the website were slapped with a 100 crore defamation suit and an injunction seeking removal of the articles.

Dismissing the injunction plea , the Court observed that defamation law is not to be used to gag, to silence, to suppress and to subjugate. The Court went on to say that  “the freedom of speech and expression is arguably the most volatile and the most sensitive to assault and the most precious. We forget that these freedoms have not come easily. They have not come cheap. They were hard won after years of sacrifice and toil and struggle. They have not been given. They have been forged. We surrender them at our peril”.

The Court further commented that it was fashionable these days to deride every section of the media as mere paparazzi but it is forgotten that none of the scams and the leaks of the past two decades would have been possible without journalists, editors, newspapers and television news anchors. The Court also observed that today all our institutions face the crisis of dwindling public confidence and that neither the NSE nor the judiciary were exceptions to this. Terming the actions taken by NSE to be gross abuse of the process of the Court, the Court imposed 50 lakh penalty on NSE of which 1.5 lakh each were to be paid to the journalist and the editor of the website and 47 lakhs to 2 Mumbai hospitals. National Stock Exchange of India vs. Moneylife Media Private Limited, decided on September 9, 2015

Tribunals/Commissions/Regulatory Bodies

National Green Tribunal (NGT): National Green Tribunal has imposed a penalty of Rs 117.35 crore and Rs 22.5 crore on Mantri Tech Zone Pvt. Ltd. and Core Mind Software and Services Ltd. respectively, for commencing the construction work of two projects on the catchment area of Agara and Bellandur lakes in Bangalore even before obtaining the Environmental Clearance. Special Economic Zone (SEZ) project has been constructed by Mantri Tech Zone Pvt Ltd and another project by Core Mind Software and Services Ltd. in the area. NGT arrived at the amount of said penalty by calculating five per cent of the respective project costs. Though usual penalty imposed upon in such cases is 10 per cent, NGT observed that as the projects were big, the penalty was slashed in this case. The Tribunal, though, declined to pass an order or direction to stop further progress or demolition of the project; it imposed restrictions on creating third party rights by way of sale or lease. The order imposing penalty upon the two companies came upon an application filed by The Forward Foundation (a charitable trust), Praja RAAG society and Bangalore Environment Trust seeking direction to save the ecologically-sensitive valley between the Bangalore city’s two lakes; Agara and Bellandur and alleging that two companies were involved in the construction of an SEZ park, hotels, apartments and a mall on around 80 acres of land, which was a catchment area. It was further alleged that the project has encroached an Ecologically Sensitive Area, namely, the valley and the catchment area and “Rajakaluves” (Storm Water Drains) which drains rain water into the Bellandur Lake. After perusal of documents on record which included reports prepared by a Committee chaired by Justice N.K. Patil and also a report prepared by ENVIS, Centre for Ecological Sciences, Indian Institute of Science, Bangalore, NGT noted, “There is sufficient material by way of reports, google images and other documents that the Bellandur Lake and even other lakes for that matter have wetlands and catchment areas.” NGT further noted that there was a definite possibility of environment, ecology, lakes and the wetlands being adversely affected by these projects. While observing that the project’s proponents were liable to pay compensation under the ‘Polluter Pays’ Principle, for the illegal and unauthorised construction carried on in violation of environmental laws and prior to the granting of Environmental Clearance, the Tribunal imposed penalty upon the Companies. The Tribunal also formed an eight-member committee to inspect the projects in question and submit a report to the Tribunal, on continuance of the projects. The Forward Foundation v. State of Karnataka, 2015 SCC OnLine NGT 5, decided on May 7, 2015

Supreme Court

Supreme Court: Deciding the pivotal question as to when and to what extent can the stipulated liquidated damages for breach of a contract be held to be in the nature of penalty in absence of evidence of actual loss and to what extent the stipulation be taken to be the measure of compensation for the loss suffered even in absence of specific evidence, the Court held that in a given case, when highest limit is stipulated instead of a fixed sum, in absence of evidence of loss, part of it can be held to be reasonable compensation and the remaining by way of penalty. The bench of T.S Thakur and A.K. Goel, JJ further held that the party complaining of breach can certainly be allowed reasonable compensation out of the said amount if not the entire amount. If the entire amount stipulated is genuine pre-estimate of loss, the actual loss need not be proved. Burden to prove that no loss was likely to be suffered is on party committing breach.

In the case where the parties were represented by Kundan Kumar Mishra and Binu Tamta, the respondent awarded a contract to the appellant for constructing a sewerage pumping station. However, the said contract was terminated due to delay in execution of the work resulted in loss for which the respondent was entitled to reasonable compensation. Considering the facts of the case, the Court said that evidence of precise amount of loss may not be possible but in absence of any evidence by the party committing breach that no loss was suffered by the party complaining of breach, the Court has to proceed on guess work as to the quantum of compensation to be allowed in the given circumstances. Since the respondent neither showed the extent of higher amount paid for the work got done nor produced any other specific material but it did not do so, the Court awarded half of the amount claimed as reasonable compensation. Construction & Design Services v. Delhi Development Authority, , decided on 04.02.2015

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): A penalty of Rs 10.62 lakhs has been imposed upon Chemist and Druggists Association of Goa for adopting anti-competitive practices of directly or indirectly controlling the supply of drugs in a concerted manner in violation of Section 3(3)(a) and 3(3)(b) of the Competition Act, 2002. In an earlier case also CDAG was found guilty of adopting anti-competitive practices by the Commission and an order under section 27 of the Act dated June 11, 2012 was passed by the Commission vide which a penalty of Rs 2 lakhs was imposed. While alleging continued contravention of the provisions of the Competition Act, 2002, a complaint was filed by Xcel Healthcare before the Commission contending that CDAG was restraining pharmaceutical companies such as Glenmark Pharmaceuticals Ltd and Wockhardt Ltd. from doing business with non-authorised stockists and thereby not complying with the order of the Commission. The Commission took suo-moto cognizance and ordered the Director General to investigate the matter. After a detail perusal of the investigation report, CCI found that in complete disregard to CCI order dated June 11, 2012, CDAG was continuing to exercise control on the supply chain through which drugs and medicines are made available in the market through the practice of requirement of LOC/NOC prior to appointment of stockists by pharmaceutical companies without having any legal or statutory authority in this respect. CCI also observed that by forcing pharmaceutical companies to follow its mandate and threatening the other stockists in Goa to stop taking supplies or suspend receiving supplies from them till such time they stopped supplies to the unauthorised stockists such as Xcel Healthcare, CDAG was responsible for limitation and restriction of supply of medicines in the market. Observing that the case involved continued contravention and utmost disrespect to the Commission’s earlier order, CCI held that, “The said anti-competitive conducts require to be penalized to cause deterrence in future among the erring entities engaged in such activities. Accordingly, it is required that the degree of punishment is scaled to the severity of the violation” and imposed heavy penalty upon CDAG. CCI also directed CDAG to seize and desist from indulging in the practices. (In re: Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa (CDAG), Glenmark Company and, Wockhardt Ltd., 2014 CCI 29, decided on October 27, 2014)

High Courts

Bombay High Court: Dismissing an appeal filed by Income Tax department, a bench comprising of BP Colabawalla and SC Dharmadhikari, JJ levied a penalty of Rs 1 lakh on the department and directed it to recover this from the official responsible for filing a frivolous appeal. The case related to an appeal filed by CIT against a company. Earlier the penalty imposed by IT department under Section 271(1)(c) of Income Tax Act. 1961, was dismissed. The CIT appealed against the decision of the tribunal in the High Court. The Bench after hearing Suresh Kumar, the counsel for the appellant, remarked that they were surprised if not shocked that appeals involving no substantial question of law were being brought before them and precious judicial time was being wasted. The least and minimum that was expected from the revenue officers was to accept and abide by the tribunal’s findings in such matters and when they are based on settled principles of law. The Court further noted that they do not understand why higher officials do not have the courage to take bold decisions particularly of not pursuing such matters up to this court or higher. Just because the assessee was a leading public limited company should not act as a deterrent for them to take an informed, rational decision and subserving larger public interest. The Court observed that the biggest litigant, namely, the State ought to be aware of the pendency of cases in High Courts of Bombay, Madras, Calcutta and Allahabad for example. If their policies particularly on litigations were not aimed at reducing frivolous and speculative litigations, then, the least that can be said was that the State had failed to act for public good and in public interest.

The Court found that merely expressing displeasure orally was not serving any purpose and held that it would be open for the superior/ competent authority to recover the costs personally from the officer responsible and equally take disciplinary action against him if the power to decide about filing such appeals was abused or the decision making authority was utilized to harass innocent assessees. Every case must be dealt with on its merit and no routine exercise ought to be undertaken merely because the revenue impact was higher or the status or financial position of the assessee was influential and strong, cannot be the only yardstick or criteria, the bench observed. Commissioner of Income Tax vs. Larsen and Toubro Ltd, Income Tax Appeal No. 424 of 2012, decided on July 10, 2014