NCLAT affirms CCI’s order dismissing allegations of collusive bid-rigging against Bharat Heavy Electricals Limited, IL&FS Technologies Limited, and Hitachi Systems Micro Clinic Private Limited

On February 26, 2019, the National Company Law Appellate Tribunal (‘NCLAT’) dismissed an appeal filed by Reprographic India (‘Appellant’) filed against the order of CCI dismissing allegations of collusive bid-rigging against Bharat Heavy Electricals Limited (‘BHEL’), IL&FS Technologies Limited (‘ILFS’), and Hitachi Systems Micro Clinic Private Limited (‘Hitachi’) (collectively ‘Respondents’), in violation of Section 3(3) of the Act.[1]

The Appellant was an ancillary to BHEL’s Haridwar unit, engaged in the manufacture of folding and finishing systems as well as the manufacture and distribution of information technology (‘IT’) products and provision of services. The Appellant had been supplying IT products to BHEL directly, or through System Integrators (‘SI’) of Original Equipment Manufacturers (‘OEMs’). ILFS and Hitachi were SIs, which sourced Hewlett Packard (‘HP’) products and provided IT solutions. As per the Appellant, BHEL floated a tender on April 1, 2017, for supply, installation and maintenance of personal computers (‘PCs’) and peripherals for more than 20 locations, for a period of five years on lease basis on ‘Corporate Rate Contract’ (‘Tender’). The total items which were being sought pursuant to the Tender were grouped into two categories, namely, group-A comprising 24 items pertaining to PCs and peripherals, and group-B comprising 47 items pertaining to ‘Enterprise Equipment’. The bidders were at liberty to bid for either group A or both groups A and B. As per the conditions of the Tender, with regard to group A, only OEMs and SIs were eligible to bid. Further, all items in each group were supposed to be of the same OEM. Pursuant to the Tender, only two bids, i.e., of ILFS and Hitachi were received with regard to group A products and ultimately the Tender was awarded to Hitachi. As per the Appellant, both Hitachi and ILFS acted in collusion through out this process in violation of Section 3(3) of the Act.

CCI in its observation noted that the Tender was an open tender with no embargo on any SI or OEM to participate. Moreover, various SIs and OEMs had participated in the pre-bid discussions. It further observed that only ILFS and Hitachi submitted bids with regard to group A since the Tender with regard to group A mandated a provision for maintenance and other services for a five year lease period. CCI noted that the stringent requirements of group A may have resulted in low bidding. Additionally, it stated that the facts on record did not support the allegation of supportive bidding on part of ILFS, or that ILFS and Hitachi were engaged in bid rotation. Moreover, the fact that both ILFS and Hitachi had common business links with HP was not in itself sufficient to confirm an allegation of collusion. Further, CCI also did not consider the fact that some employees of one Respondent were working with the other Respondent at some point of time, as relevant for the purposes of the allegations, clarifying that this was a routine affair in the IT industry. In sum, CCI was of view that a meeting of minds for purposes of bid rigging/collusive bidding could not be inferred from mere proximity and the Appellant had failed to furnish any evidence that would suggest otherwise. Accordingly, CCI through an order under Section 26(2) of the Act had dismissed the allegations.

NCLAT at the outset clarified that directing an investigation to be conducted by the DG is entirely dependent on existence of a prima facie case warranting such investigation, and unless CCI is so satisfied, the informant has no vested right to seek investigation into the alleged contravention of the provisions of the Act. It further clarified that it was the obligation of the informant to make out a prima facie case based on proven facts warranting an investigation by the DG. Further, NCLAT stated that as the successful bidder, Hitachi had the discretion to quote products of any OEM, especially given that it would have to provide maintenance and other services during the entire lease period. Additionally, it reiterated that there may have been business links between ILFS and Hitachi; however, in the absence of any material to suggest any collusion between ILFS and Hitachi, no adverse inference suggesting collusive bidding could be drawn against them. Accordingly, NCLAT affirmed CCI’s observations and dismissed the appeal filed by the Appellant.

[1] Case No. 41/2018.