COMPETITION APPELLATE TRIBUNAL
Kanazia Digital Systems (P.) Ltd.
Competition Commission of India
APPEAL NO. 14 OF 2011
DECEMBER 14, 2012
V.S. Sirpurkar, Chairman
The appellant – Kanazia Systems Pvt. Ltd. (hereinafter referred to as the ‘appellant’) challenges the order passed by the Competition Commission of India (hereinafter referred to as ‘CCI’) under Section 26(2) of the Competition Commission Act, 2002 (hereinafter referred to as ‘Act’) refusing to make a reference to the Director General for conducting investigation is in challenge here.
2. The appellant is a registered company and is engaged in development of telecommunication networks, security systems such as video surveillance system, display systems and traffic management systems. etc. both for public and private sector companies. In the information the appellant complained against the Airport Authority of India (‘AAI’ for short) a body constituted by an Act of Parliament under the Ministry of Civil Aviation, Government of India for its alleged anti-competitive action. The other party complained against the Central Vigilance Commission which is the Chief vigilance body of the Government of India entrusted with the tasks of framing and endorsing guidelines on procurement governance for the government body.
3. It was alleged in the information that AAI had floated a notice for inviting the tender for procurement and installation of tyre killers and Bollards by its notice dated 15.5.2010. However, the said notice was cancelled on the same day by AAI without citing any reasons. Another notice came to be floated being a tender notice on 13.9.2010. This was also for procurement and installation of bollards in respect of the five airports named in the notice. Significantly enough in the first notice the AAI had not indicated the airports in respect of which it was floating the tender nor was its requirement about particular type of bollards specifically stated. In the later notice, however, the AAI clarified that the bollards were required for five airports and they were to be electro Hydraulic operated / controlled tyre killers and bollards. Some other conditions like previous experience and proof of having done similar work was also required along with the tender bids. It was stated in the information that bollards are rigid or retractable posts used for closing the road or path to vehicles. Bollards can be mounted at entrances of the security sensitive infrastructures. They are installed below the road surface and their retractibility takes place either through Pneumatic cylinders and pumps or Hydraulic cylinders and pumps or more sophisticated electro-mechanical motorized mechanism. With the said information the informant also pointed out the difference between the terms and conditions in the two notices floated by AAI i.e. on 15.5.2010 and 13.9.2010. It was pointed out that in the first notice the tender forms were to be issued to firms having experience in supply and providing of modern security equipments and further the bidders had to produce certificate from the clients of having satisfactorily completed similar work in other projects during the last seven years ending 30.9.2010 along with the proof of annualized minimum average financial turnover of Rs.114.07 lakhs during the last three years ending 31.3.2010. It was pointed out that in contradistinction to the earlier tender notice in the later notice dated 13.9.2010 there were some other conditions introduced in respect of the Indian firms having association with the foreign manufacturers. Such Indian firms were required to submit the credentials of the foreign firms with all details. Indian firms were required to state about their experience of at least one work of execution of installation, testing and commissioning of similar type of equipment supplied by the same manufacturer in India and a letter of undertaking from original manufacturer for technical support and after sales service for the equipment. The requirement of hydraulic Bollards was also included for the first time. It is then stated in the complaint that the informant along with its partner Sagem Communication (now Aximum, a French Company and European leader in road safety) had the required annual turnover of 1.2 Billion Euros in all over Europe, Japan, US, Phillippines, Singapore and Middle East and had already installed more than 10000 Bollards all over the world. The AAI, however, rejected the application for pre-qualification for citing the following reasons :-
1. The work experience of supply and installation of ROLM EPABX’s executed with M/s. Air India, Mumbai and work experience of SITC of Train and Describe System / Train Management System with the Western Railway was not a work similar to the system of bollards.
2. The necessary certificates were not submitted.
3. It is alleged in the information that AAI being one of the large public sector undertaking was abusing its dominant position by specifying a particular technology i.e. Hydraulic Bollards in its procurement tender invitation notice for bollards and therefore creating technical entry barriers for other type of bollards like one which were being produced by the informant company. It was also alleged that imposing unfair and discriminatory conditions in the tender invitation notice by creating a regulatory, financial, high capital cost, marketing and technical entry barriers in the bollards purchase market the AAI has contravened section 4(2)(a)(i) of the Act. Some other alleged irregularities were also reported.
4. The CCI firstly held that there was no evidence available on record or in a public domain which could show that AAI is a dominant buyer of bollards in India. This inference was reached on account of the fact the bollards were not specifically required for AAI alone but there were many organizations like Urban Development Authorities, Road Transport Authorities infrastructure companies and number of private companies including hotels etc, who require the said bollards for security as well as for traffic management. The CCI, therefore, held that the AAI could not be said to be a dominant purchaser of bollards in India.
5. It was also found that the informant had failed in the prequalification scrutiny because of technical reasons and for want of relevant experience in executing similar work as desired by the AAI. It was also observed that the conditions laid down by the AAI in the notice inviting tenders were uniformly applicable to all the parties and there could be no unfair or discriminatory terms and conditions in this notice inviting tender. It was also held that the AAI could not be said to be creating barriers to entry or driving out the existing competitors from the relevant market. It was therefore held that there was no violation of Section 4 of the Act in the matter. Similar finding was also given in respect of the applicability of Section 3 of the Act, the violation of which was in fact not averred by the appellant in the complaint.
6. Shri M. M. Sharma, learned counsel for the appellant averred before us and mainly relied on the language both the notices inviting tenders. He was at pains to point out that while in the first notice it was stated that the scope of the work was design supply installation testing and commissioning of track rated tyre killer and bollards the said notice cancelled without giving any reason and in the second notice dated 13.9.2010 the AAI specify the scope for the work to be of supply, installation, testing and commission of crash rated electro Hydraulic operated/controlled tyre killers and bollards at various airports. He admitted that the appellant was not producing Hydraulic Bollards. Shri Sharma earnestly argued that since there was no reason given for withdrawal of second notice inviting tender dated 13.9.2010 was deliberately issued and AAI deliberately specified its requirement for hydraulic operated controlled tyre killer and bollards. Shri Sharma goes on to argue that on the basis of the first notice any other type of bollard manufacturer could have taken part in the tender process. Because of the specification provided in the second notice inviting tender for Hydraulic Bollards the competition was left only amongst the hydraulic bollards manufacturer. Thus the other equally efficient technologies such as motorized electro mechanism bollards were excluded even from taking part in it. This according to Shri Sharma was a classic example of creating entry barrier. Shri Sharma also urged that the appellant was one of the top most companies dealing in the motorized electro mechanism bollards. He also tries to urge that the technology adopted by the appellant was the better technology than the one required in the second tender notice. He also pointed out that though the number of letters were sent to the Bureau of Civil Aviation Security and more particularly to the Additional Commissioner Shri Rajendra Dhoke, all these letters were not even taken note of and the Bureau of Civil Aviation security remained sinisterly silent. Shri Sharma has given voluminous record regarding the appellant company and also its strong points. He, therefore, urged that in limiting the choice to the electro Hydraulic operated/controlled tyre killers and bollards the AAI had created entry barriers and had kept the other manufacturer of other system bollards out of the competition. According to him this action went totally against the spirit of competition. He also pointed out that the finding of the CCI regarding the AAI not being the dominant player was also incorrect. According to him the relevant market should have been only the airports as the AAI was dealing only with the Airports.
7. Before we take up the contentions for consideration, we must refer to the prayer clause in the information-cum-complaint relief sought by the informant was as under:-
1. That the Airport Authority of India should be directed to issue open tender without specifying particular technology.
2. That the Airport Authority of India NIT, terms and conditions are Anti-competitive and can also favour few players and create business monopolies and corrupt practices. The AAI should be directed to revise the laid down terms and conditions so that all competitive suppliers can participate in the bidding.
3. That the Competition Commission should address itself to Vigilance Commission so that its procurement guidelines are also based on environment of competition, transparency and fairness. Their focus should be not on myopic observation of procedures but rather on out comes and innovation, fair dealings with suppliers fair value to the tax payer and a competitive environment.
8. When asked about these prayers, Shri Sharma very specifically relied on all the three prayers made in the complaint-cum-information and reiterated them
9. We have seen the prayers in this appeal, which is only for setting aside the order of the CCI.
10. The learned counsel for the AAI and also the counsel for the CCI supported the order and relied on the order passed by the CCI.
11. We cannot accede to any of the prayers in the information, as it is not for this Appellate Tribunal to re-write the tender conditions. It is also not for this Tribunal to frame the policies of the bodies like Airport Authority of India. Lastly, it is also not for this Tribunal to direct the CCI to address it to Vigilance Commission.
12. We cannot accept the contention raised by Shri Sharma that in requiring specific type of Bollards i.e. Hydraulic operated bollards the AAI has in any way breached any of the provision of the Section 4. The AAI was acting in its capacity as a consumer and as argued by the representative for the AAI it was equipped with technical committee to advise the AAI for a purchase of particular type of bollards. According to Shri Sharma, the other type of bollards were superior to Hydraulic operated bollards. We are afraid we cannot go in to the question of superiority of one type or the other. That is neither our task nor our jurisdiction. The only question we have to consider is that in requiring a particular type of bollard whether AAI created any entry barrier for other manufacturer. The plain and simple answer to this question is obviously in negative. Every consumer knows its own needs and requirements and is free to purchase the same. Accordingly, merely because a consumer requires a particular type of commodity does not mean that by inviting tenders for that commodity the entry barriers are created for any other commodities. If we take such a view then there would be no element of choice left for a consumer in any market. Shri Sharma was not able to counter the argument of the representative of AAI that its requirement was as per the recommendations of the technical committee. It cannot be imagined that a body like AAI was not equipped with the technical advice and would be acting without any such technical assistance. Therefore, if the AAI had a free choice to purchase a particular type of commodity, its hands could not be tied by taking the recourse to the competition act and the provisions there under. After all in the market the consumer would have to be given consumers dew i.e. basically his choice. The contention raised by Shri Sharma is, therefore, rejected.
13. We do not see any justification to hold that there was any breach of any of the provisions under Section 4 of the Act. Similarly, we cannot accept the argument of Shri Sharma that AAI was a dominant purchaser and had abused its dominance. In fact for the purposes of deciding the dominance, we would have to take into consideration both the product market as well as geographical market. Insofar as the product market is concerned, it related to all the kinds of bollards whether hydraulic operated or otherwise. It is commonly known that bollards are used everywhere. The bollards are used even for the entry into the star hotels. They are used even for controlling the traffic. They are used everywhere where security and safety is required to be maintained. Therefore, there is nothing relevant about a particular type of bollards. They are required by not only AAI but by number of other institutions. Therefore, it cannot be said that the AAI would be a dominant player. Further argument of Shri Sharma was that only the airports should be taken as geographical market. In the first place AAI operates and controls the airports all over in India. All the airports require the security. So also the security is required in hotels and other organizations. Therefore, we cannot restrict the market to be only the five airports named in the notice inviting tender. That would be simply travasity of the matter. Once the AAI held not to be in a dominant position, there would be no question of going further into the breach or otherwise of Section 4 of the Act. However, in order to clarify the situation, we have already dealt with Section 4(2)(a)(i). In short there is no merit in this appeal and we dismiss the same.