Background
In a recent order dated 20.04.2021, the Competition Commission of India ("CCI") has dismissed allegations of bid rigging against Genus Breeding India Private Limited ("Genus Breeding") in the tender process for establishing a facility for producing and supplying sexed semen of indigenous, crossbred cattle and buffalo breeds in Uttar Pradesh. The Information was filed by Inguran Sorting Technologies LLP ("Informant") under Section 19(1) (a) of the Competition Act, 2002 (Act) . The Informant alleged that the opposing parties had engaged in cover bidding, thus contravening Section 3(3)(d) of the Competition Act, 2002, and prayed to the Commission to direct the Director General to cause an investigation into the matter and to ban the OPs from any future public tenders for two years.
The Uttar Pradesh Livestock Development Board ("Uttar Pradesh Board"), formed under Societies Registration Act, 1860, initiated a tender process for the purpose of The Uttar Pradesh Board inviting a Global Expression of Interest ("EOI") on 19.06.2018 for establishing laboratory/facility at Babugarh, Uttar Pradesh for producing and supplying bovine sexed semen. The contract was for a five-year period and included the production of a minimum of 3,50,000 gender specified sexed semen doses every year for the stipulated period from raw semen harvested from indigenous bulls of cattle and buffaloes by the said Board. Further, it also included a consent from the vendor to transfer technology and required equipment for such processing at the option of the Uttar Pradesh Board at mutually agreed terms including prices at the end of the contract period.
In response to the invitation for EOI dated 19.06.2018, three entities, viz Genus Breeding India/ABS India (OP-1), Indian's Pharmacare Pvt. Ltd. (OP-2) and Truvet (OP-3) submitted the bids. The informant alleged that OP-2 and OP-3 were not eligible to participate in the tender, as they were not having the requisite technology nor any prior experience in the area of sexed sorting of bovine semen. OP-2 did not have a website and OP-3 was even not named in the Company/LLP Master Data of the Ministry of Corporate Affairs. The Informant raised allegation of collusive bidding on the ground that there was a nexus between the Opposing Parties; while OP-2 was listed as a distributor of OP-1 for the State of Uttar Pradesh, and OP-3's Managing Director was a former employee of OP-1.
It was also brought into the notice of the CCI by the Informant that such participation by the Opposition Parties amounted to anti-competitive behaviour, which was prohibited under clause 18.2 of the Procurement Manual, as it impedes the transparency, fairness and progress of the procurement process. The Informant had also brought these serious discrepancies to the notice of the Uttar Pradesh Board in writing but to no avail.
Thereafter, the Uttar Pradesh Board sent the Request for Quotation ('RFQ') involving technical and financial bid, to these three entities. It is pertinent to note here that clause 8.11(2) of the Procurement Manual contemplates that the RFQ shall be requested from as many potential bidders as practicable, subject to a minimum of three vendors. Pursuant to the RFQ, the three entities had submitted bid documents to the Uttar Pradesh Board. According to the Information, the three OPs created a façade of competition by creating sham bids to mislead the Uttar Pradesh Board into believing that the tendering process of the Impugned Tender was competitive in nature and to fraudulently satisfy Clause 8.11(2) of the Procurement Manual.
CCI's Observations
The CCI considered the Information and decided to seek response from the Uttar Pradesh Board on the allegations. The Commission notes that the Informant appears to be aggrieved from the fact that the award of the Impugned Tender was made in OP-1's favour by alleged distortion of tendering process by OP-1 through cover bidding by OP-2 and OP-3, who were otherwise not competent to participate in the impugned tender. The Commission also noted that the informant had not itself participated in the tender, despite being technically qualified to do so, as it believed the Uttar Pradesh Board had diluted the technical requirements, and therefore, the collusion between the Opposing Parties was possible.
Based on the response filed by the Uttar Pradesh Board and upon perusal of the bid documents, the Commission observed that OP2 is a company established in 2011 and deals in all kinds of veterinary products and medicines and genetic needs of dairy farmers in India with an idea to provide one stop solution to dairy farmers and is stated to have presence across Western Uttar Pradesh. Similarly, OP-3 is stated to have been set up as a partnership firm in 2015 to cater to the genetic and nutritional needs of the progressive dairy farmers. From the bid Page 7 of 8 documents submitted by OP-2 and OP-3, the Commission noted that both OP-2 and OP3, while submitting their EOI to Uttar Pradesh Board, amply disclosed that they did not own technology and were authorized distributors of OP-1. The Commission further noted that the fact that OP-2 and OP-3 did not own technology and were acting as authorized representatives of OP-1 in the said EOI was well within the knowledge of the procurer i.e., Uttar Pradesh Board. The Commission also took cognizance of the fact that the committee constituted for technical evaluation of the bid documents received in response to the RFQ carried out the assessment of the technical evaluation of these three bidders and upon finding all the three bidders to be technically qualified, the financial bid of those bidders was opened on the scheduled date and award of contract was made to the L-1 bidder i.e., OP-1.
Therefore, the CCI , based on the past precedents of its decisions involving public procurements by public sector buyers , dismissed the Information after finding no prima facie case of bid rigging and held that there was " no material on record to suggest that the procurer has either, overtly or covertly allowed OP-2 and OP-3 to participate in the tender process, which ultimately led to the selection of OP-1 and that the said OPs acted at the behest of OP-1 and manipulated the bid process. The Commission found no substance in the contention of the Informant that though it was technically qualified to participate in the Impugned Tender, but it took a strategic commercial decision not to participate in the Impugned Tender as the technical requirements in the EOI were significantly diluted and at the same time it is aggrieved that the procurer allowed OP1 to be selected. "
The CCI also held that the Informant should have brought his grievances regarding the dilution of the terms of the EOI to the notice of the Uttar Pradesh Board, i.e., the procurer, at the first instance. The CCI also took cognizance of the fact that the limited number of participants in the tender process could be attributed to the nascent and highly specialized nature of the field of providing sex selected bovine semen, especially in India. Further, owing to the specialized nature of the activity, the CCI observed the Board was at liberty to decide and follow its own and conditions of the tender as per its requirements, which is why the EOI and RFQ were issued.
The CCI accordingly closed the case under Section 26(2) of the Act finding no prima facie case of contravention of the provisions of Section 3(3)(d) of the Act was made out against OP-1.
COMMENTS: The present CCI order is on expected lines considering the existing jurisprudence on buyer's choice being held as sacrosanct, at least, in respect of public procurements in India. Without prejudice, the order shows a maturing of jurisprudence on cartels and bid rigging in India and CCI is now not convinced to direct a full- fledged investigation on mere suspicion of possible links between the bidders, such as, vertical relationship between them, in the absence of any evidence of active coordination between them. Moreover , the fact that both OP-2 and OP3, while submitting their EOI to Uttar Pradesh Board, amply disclosed that they did not own technology and were authorized distributors of OP-1, weighed heavily in the minds of the CCI and was based on its previous decision with similar facts in the case of procurement of signalling cables by the Indian Railways wherein similar allegations against few Opposite Parties , who had structural links and even had common directors and or closely related directors was closed. The author had argued as the main counsel in that case.
The order also takes apt note of the fact that the Informant did not avail the opportunity to raise apprehensions about the dilution in the widely publicised pre-EOI conference, which was global in nature. Finally, the Commission has also noted that the Informant did not participate in the bidding process. Although the order does not make an express reference, but apparently the prayer of the Informant to debar the Opposing Parties from participating in public tenders has not gone down well with the Commission, especially in light of its observation that the field of producing and supplying bovine sexed semen is not one with a large number of suppliers and is still at a nascent stage in India.
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