In a recent pivotal judgment, the National Company Law Appellate Tribunal (NCLAT) addressed the question of whether a business can be deemed complicit in cartel activities if it passively receives competitively sensitive information from a competitor without objection. This decision emerged from the dismissal of appeals by Mr. Keshav Bihani and his partnership firm, M/s Hari Narayan Bihani, who challenged penalties imposed by the Competition Commission of India (CCI) for bid-rigging in Indian Railways tenders.
Legal Context and NCLAT’s Decision
The CCI had previously determined that M/s Hari Narayan Bihani, among six other vendors, engaged in bid-rigging for the supply of polyacetal protective tubes, leading to penalties under Sections 27 and 48 of the Competition Act, 2002. The NCLAT’s ruling upholds these findings, emphasizing the risks associated with passive receipt of sensitive information. The tribunal noted that merely receiving such information without protest or dissociation, while continuing to participate in the tender process, could be construed as evidence of cartel involvement.
Arguments and Counterarguments
The appellants argued procedural unfairness, citing non-disclosure of evidence by the CCI, and contended that the penalties imposed on Mr. Keshav Bihani were improper. They claimed that the CCI’s documentation was heavily redacted, denying them a fair opportunity to respond. Additionally, they argued that Section 48 of the Competition Act should not allow for monetary penalties akin to those under Section 27, asserting that income should not be equated with turnover.
The CCI countered by presenting direct evidence, including emails detailing tender allocations and pricing coordination, which were sufficient to establish a ‘meeting of minds’. They maintained that the statutory presumption of an appreciable adverse effect on competition (AAEC) under Section 3(3) of the Competition Act was not rebutted by the appellants, shifting the burden of proof onto them.
Key Takeaways from the Judgment
The NCLAT underscored the significance of passive receipt of information, noting that the appellants received emails outlining tender allocations without any objection or dissociation. The tribunal emphasized that their silence and continued participation in the tender process indicated complicity in the cartel. This aligns with the CCI’s previous stance that passive attendance or silence during cartel discussions does not absolve liability.
Furthermore, the NCLAT clarified that Section 48 permits penalties on individuals, aligning with penalties imposed on enterprises. The tribunal stressed that individual and enterprise liabilities are independent, reinforcing that senior management and business leaders remain exposed to penalties under the Competition Act.
Implications for Businesses
This ruling serves as a stark reminder for businesses about the perils of passive involvement in anti-competitive practices. Companies must actively object and dissociate from any communication involving sensitive information, ensuring a clear and documented stance against such practices. The decision also highlights the continuous risk of individual liability under Section 48 for those in charge of business conduct.
Rohan Arora, a Partner, Ritesh Puri, a Senior Associate, and Khushi Dharewa, an Associate at Shardul Amarchand Mangaldas & Co., contributed to this analysis.
Disclaimer: The opinions expressed in this article are those of the authors and do not necessarily reflect the views of Bar & Bench. For publication inquiries, please visit the Bar & Bench website.
