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Case Law Details

Case Name : Ravinder Singh Bawa Vs Oil And Natural Gas Corporation Limited (Competition Commission of India)
Appeal Number : Case No. 13 of 2022
Date of Judgement/Order : 19/10/2022
Related Assessment Year :
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Ravinder Singh Bawa Vs Oil And Natural Gas Corporation Limited (Competition Commission of India)

The moot question that arises for consideration is whether ONGC had sufficiently indicated its requirements upfront while issuing the tender in question so as to enable interested bidders to assimilate and factor such requirements while placing their technical and financial bids or whether it had failed to notify so. Further, whether the blacklisting of the Informant on the purported ground of it not adhering to the terms and conditions of award of contract unilaterally decided by ONGC and any alleged procedural irregularity attendant thereto, amounts to an abuse of dominant position by ONGC.

The Commission notes that the Informant has alleged that the blacklisting clause applied to it, for a period of two years e., from 06.10.2020 to 05.10.2022 by ONGC, stating that the Informant, inter alia, has failed to adhere to the stipulated conditions of submissions of performance security within 15 days of award of contract as well as mobilisation of workforce and thus, has been done in an unfair manner, without any justification and without due opportunity and is thus violative of the provisions of Section 4 of the Act. Per contra, ONGC has submitted that the entire fault lies with the Informant, who placed its bid without having been fully abreast of the stipulations and requirements mainly in relation to the clauses pertaining to the applicability of FWP of ONGC, which was squarely applicable to the tender in question. Further, if the Informant had any lack of understanding or clarity on these aspects it should have sufficiently raised these issues during the pre-bid meetings which Informant failed to do. It has also been submitted that after the Informant having been declared L-1 and it being awarded contract, Informant has raised untenable issues and delayed in performance of its part of the obligations, owing to which the project of ONGC got delayed, award had to be cancelled and new tender had to be floated etc. According to ONGC, all due processes as were envisaged in various clauses of the General Conditions of Contract (GCC) besides other stipulations were scrupulously followed in relation to the termination of award of contract, which was previously issued in favour of the Informant and its subsequent blacklisting by ONGC.

The Commission notes that on the aspect of the invocation of the blacklisting clause by ONGC against the Informant, thereby debarring it to bid in future tenders of ONGC for a period of two years, ONGC has submitted that it has followed a proper procedure by giving sufficient opportunity to the Informant to explain as to why the blacklisting clause not be made applicable on account of the alleged shortcomings on the part of the Informant. ONGC has further submitted that the present matter relates to contractual issues and does not fall within the confines of the competition matrix, over which the Commission has no jurisdiction. Also, the Commission has no powers to grant compensation as has been sought by the Informant, as a separate prayer in its Information. A feeble attempt has also been made to show that only courts at Sivasagar, Assam, will have jurisdiction to deal with the dispute.

The Informant in its further response/rejoinder while interdicting the submissions of ONGC has, inter alia, stated that it is an MSME company and the only Indian company providing specialised field cementing services to oil companies for over 10 years, whilst competing with big international companies in this space. According to the Informant, based on the tender invited by ONGC, hiring of services for operation and maintenance of cement built handling plant and allied cementing equipment and annual maintenance contract for mobile bulk carriers units for cementing services is the relevant product market. The relevant geographic market where both Informant and ONGC operates is the whole of India or, in the alternative, ONGC sought to procure its works in Nazira, Assam, which is the relevant geographic market. ONGC’s oil and natural gas production in the offshore region accounts for 70% of the country’s hydrocarbon output and is one of the top 5 companies in Asia and amongst the top 20 companies in the world in this area and is a dominant procurer of various services related to and operating within the confines of the production and oil and natural gas industry. The Informant has further submitted that ONGC can, as is evident, modify, add and alter the terms of the tender after issuing notification of award and further insist on adherence thereof and also insist on such terms upon a party even when such terms are absent in the present tender, which not only shows abuse of dominant position, but also its dominance to be able to do so. Also dominance of ONGC is also established by the fact that it can get away by introducing different skill set requirements for contract labourers as also different terms in relation to their employment, in different tenders.

The Commission has carefully considered the facts involved, sifted through the evidence submitted and has taken into account the rival contentions of the parties and, at the outset, is of the view that one of the contentions of ONGC, that the Commission has no jurisdiction in contractual matters, is without any merit. The Commission is mindful that to strike a perfect balance in a contract and make it ideal for all the parties to perform their respective obligations and exact financial benefits of other consideration in equal measure may not be possible, more often than not. The Commission, however, observes that it is not without jurisdiction in matters that arise out of contractual arrangements, wherein an entity with significant market power creates and imposes unilateral clauses on the other which impedes the affected party’s freedom of trade and subjects it to onerous obligations without any corresponding concomitant duty on the part of the dominant entity, to act in fairness and without any discrimination.

The Commission, having taken into account the facts and circumstances of the case, is of the opinion that there shall arise no requirement of defining a precise relevant market and assessment of dominance of ONGC in terms of the analysis and findings discussed below.

Having said that, in the present case, the Commission has not found anything that can be prima facie said to be onerous qua the terms and conditions of award of the contract by ONGC to Informant. With regard to the alleged abuse, in relation to the enforcement of such terms and conditions by the Informant, the Commission, in the facts and circumstances, does not propose to give any finding on the factual aspect as to whether ONGC had stipulated any conditions upfront while awarding the tender or subsequent thereto, which prevented Informant from making a quantitative assessment and whether there was any justification on the part of the Informant in non-submission of performance security and mobilisation of workforce, as a step leading towards fulfilment of its obligations and securing performance of awarded work. The Commission is of the prima facie view that these aspects as to who is at fault, in the facts and circumstances of the present case, do not merit consideration from a larger competition standpoint. Suffice to say that procurer is required to disclose the terms of procurement with certainty and in unambiguous terms to enable effective participation by interested parties in the tenders. As regards the more pertinent issue pertaining to blacklisting, the Commission is of the firm view that though blacklisting clauses in a contract per se are not abominable under competition law, they would be open for scrutiny based on the construct of such clauses and the exploitative and/or exclusionary abuse that it may entail on an objective assessment, when applied in a particular factual setting. Any blacklisting clause of a long term nature and which can have a cascading effect in relation to the contract inter se the parties or even inter-parties should receive careful scrutiny, when imposed by an entity with significant market power, as it could foreclose the market for the affected party, not merely in relation to potential contracts with the dominant entity, but sometimes can adversely affect existing relationship or even a potential business opportunity with third parties too. Thus, the disabilities can operate harshly and affect competition by the temporary embargo such clauses inflict by impeding an entity’s right of choice to be in business and offer its goods or services. It will therefore become incumbent upon the competition authority to carefully test, not just the excessiveness that the blacklisting clause can entail, but the manner of its invocation too, by the dominant entity, as it can result in the exit of a market participant, albeit for a limited period, or even permanently where such entities are small and can likely perish with no business activity to conduct and sustain themselves.

In the present case, prima facie, the Commission has not found such blacklisting clauses of ONGC to be onerous as it has been put in place for a duration of two years without affecting any of the contracts already in vogue inter se the parties, but the disability will likely kick-in in respect of future opportunities with ONGC, for the limited period as aforementioned which has expired recently. As regards the process adopted, the Commission in the facts and circumstances, prima facie does not find anything amiss on the part of ONGC in relation to the requirements of procedural fairness, as ample opportunity appears to have been provided to the Informant prior to imposition of the two years ban.

In view of the foregoing, the Commission is of the opinion that no case of contravention of provisions of the Act is made out against the OP, and the matter is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act. Consequently, there is no case for grant for relief(s) as sought by Informant, and the same is also rejected.

FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA

1. The present information has been filed by Mr. Ravinder Singh Bawa, Chairman & Managing Director of MG Well Solutions Project International Private Limited (Informant) under Section 19(1)(a) of the Competition Act, 2002 (Act), alleging contravention of the provisions of Section 4 of the Act by Oil and Natural Gas Corporation Limited (ONGC/ OP).                                                                            

2. The Informant is stated to be a Micro, Small and Medium Enterprise (MSME) and an Indian company which provides cementing services to oil companies. Well cementing is stated to be one of the most crucial operations performed in oil and gas drilling activities which restricts fluid movement from the groundwater reservoir to the borewell. It is also stated to provide a firm structure to casing and prevent the casing from blowouts and corrosion.

3. The Informant is stated to have successfully provided cementing services for the past 11 years to Indian and international oil companies. It is mentioned that the Informant has been consistently awarded for its cementing services contracts in Bangladesh.

4. The Informant has submitted that it is struggling to get any significant business in India from Indian companies like ONGC and Oil India Limited (OIL), both of which have a mandatory condition in their tenders that cement additives (to be supplied with field cementing services) can only be from one of the three international service companies.

5. The Informant has submitted that ONGC Assam Asset, Nazira, vide its E-Tender dated 30.03.2020 (Tender), invited bids for hiring of services for operation and maintenance of cement bulk handling plant and allied cementing equipment and annual maintenance of mobile bulk carriers units for cementing services, Nazira Asset (Cementing Services) for a period of three years, wherein, the Informant emerged to be the L-1 bidder. Accordingly, ONGC placed a notification of award (NOA) dated 31.07.2020 on the Informant for Cementing Services for a period of three years, which was accepted by the Informant.

6. As per the Informant, it was working forward to kickstart the awarded project on time; however, it found the tender to be silent on key issues which the new contractor was bound to strictly adhere to. Accordingly, the Informant reported the issue to ONGC vide its letter dated 03.08.2020 and, inter alia, requested ONGC to provide certain information regarding date of commencement to start service, service manual and maintenance schedule for equipment etc. In response to the request of Informant, NGC, vide its email dated 05.08.2020, asked the Informant to submit the Performance Bank Guarantee (PBG) of Rs. 4,16,000/- as mentioned in NOA and commence the service with effect from 15.08.2020 at Shivasagar Plant. With respect to the other details sought by the Informant, the said email mentioned that the same will be communicated in due course of time.

7. The Informant, vide its email dated 06.08.2020, inter alia, replied to ONGC that it would be difficult for it to start work on 15.08.2020 if ONGC does not provide parts & service manuals and list of spare parts available with ONGC for the listed equipment in the tender. In addition, the Informant sought information of Fair Wage Policy (FWP) from ONGC, based on which contract employees were required to be paid for hired services by Informant.

8. ONGC, vide its email dated 11.08.2020 replied to the Informant that as per the implementation of FWP, the bidder will be required to give preference to and engage the existing experienced contract labour, subject to their willingness. However, the email was allegedly silent on other queries related to spare parts etc. Thus, the Informant reminded ONGC again, vide its email dated 12.08.2020 to advise and resolve the issues. The Informant, inter alia, raised the concern about giving preference to present personnel already providing the services to ONGC, which was not mentioned in the scope of work. Further, the Informant pointed out that its effort to resolve the issues of hiring existing personnel has been blocked, as none of the existing none personnel were willing to accept Informant’s job offer, and they were not even signing in acknowledgment of having received the job offer.

9. As per the correspondences held between the parties, it was submitted that the reason for not accepting the job offer by the personnel was that the existing workers were not willing to cut cement sacks and paint equipment, which were mentioned as job requirements in the job offer issued by the Informant. The Information states that the Informant even had a meeting with local union leader in this regard, wherein ONGC representatives were also present. However, the issue of hiring labour was not resolved as the personnel were not inclined to change the scope of work and asked the Informant to hire additional casual workers for cement bag cutting and pantry which was beyond the scope of work outlined by ONGC in its tender/NOA.

10. In view of the above, the Informant sent a letter dated 12.08.2020 to ONGC detailing the deadlock it was facing on account of the alleged change in the tender conditions. The said letter also indicated that the Informant could not undertake to start its services as outlined in the NOA.

11. With reference to above concerns of the Informant, ONGC replied to the Informant vide its reply dated 13.08.2020, which was further rebutted by the Informant vide email dated 14.08.2020. These correspondences pertained to manpower requirement/s in the tender, clarification related to the tender to be sought prior to submission of the bid as per Notice Inviting Tender (NIT), FWP clauses queries and parts & services manual details. The Informant stated that it is not seeking any clarity on the FWP clauses and was never provided with parts & services manual by the OP. ONGC, via the above-stated correspondences also stated that it cannot solve the labour concerns, if any, as it is a matter pertaining to the bidder and ONGC does not have any direct control over these labours. However, the Informant stated that this issue has arisen because of ONGC’s tender being silent on the issues related to the present ongoing practice on the use of the personnel and, as ONGC is the end user, resolving the issue would be in ONGC’s interest.

12. Further, as per the Information, ONGC vide its email dated 14.08.2020 clarified certain issues raised by the Informant such as scope of work and FWP. It also stated that there have been no changes in the tender as alleged by the Informant and subsequently, ONGC issued a show-cause notice (SCN) dated 19.11.2020 to the Informant seeking an explanation as to why business dealing with it should not be banned for two years due to failure on the part of Informant to submit security deposit and for non-mobilisation of men and material to commence the job at the designated site against the NOA. The Informant was directed to submit the reply of the SCN within 15 days of the issuance of the notice e., by 04.12.2020.

13. In response to the SCN, the Informant submitted its reply vide letter dated 03.12.2020 and mentioned that the delay in commencement of job happened due to inability of ONGC to resolve the issues raised by it. After considering Informant’s reply, ONGC vide its letter dated 30.04.2021, concluded it to be a case of non-compliance of terms and conditions of the tender as well as NOA with respect to submission of PBG and mobilisation of men and materials by the Informant. Accordingly, ONGC banned the Informant for a period of two years from the date of suspension of business dealing, e. from 05.10.2020 to 05.10.2022.

14. The Informant further submitted that ONGC imposed certain unfair and additional tender conditions, which were added after the placement of NOA and were bearing additional unaccounted costs to the Informant. It is also submitted that after raising the aforesaid concern by Informant, ONGC realised the shortfall in its tender and added details in the re-tender floated 08.10.2020 for the same service. Also, as stated by the Informant, new contract for the same service was awarded at 34 % higher than that of price offered to him.

15. In view of the above, Informant has alleged that ONGC has abused its dominant position and has unfairly and discriminatorily banned business dealing with it for a period of two years e., until 05.10.2022.

16. The Informant has also added that such alleged unethical penalties can close and shut down a small MSME company like the Informant, which has the full potential otherwise to become the first and only Indian service company to provide full range of cementing cervices in India, which both ONGC and OIL have been hiring only from international service companies.

17. The Informant also requested the Commission to grant interim relief to it by directing ONGC to immediately withdraw the ban and has also sought: (a) ONGC to compensate the Informant for the missed business opportunities on account of this unethical ban/suspension from ONGC since October 2020 and (b) ONGC management team be held responsible for this unethical ban and be reprimanded.

18. The Commission considered the present Information in its ordinary meeting held on 29.03.2022 and decided to forward a copy of the Information to ONGC, directing the ONGC to file a reply to the same by 29.04.2022 with an advance copy to the Informant. The Informant was directed to file a rejoinder to ONGC’s reply by 13.05.2022. In compliance to the aforementioned order of the Commission, ONGC filed its response vide letter dated 23.07.2022, after obtaining due extension of time. Whereas, the Informant submitted its further response/rejoinder vide application dated 26.09.2022, after obtaining due extension of time.

OP’s Response

19. ONGC, in its preliminary submissions, stated that the Information is devoid of any merit and deserves to be dismissed, as the matter is purely contractual with no violation of the Act. It further submitted that the Informant has not made out any case as to what the ‘relevant market’ is in which the alleged anti-competitive act took place.

20. ONGC asserted that it does not have and never claimed to have any dominant position so as to invoke Section 4 of the Act. ONGC has stated that the Informant has instituted the instant proceedings based on assumptions, presumptions and surmises, and hence, the Information deserves to be dismissed at the outset.

21. It is stated that the Informant has not approached the Commission with clean hands, which is evident from the selective references made to the tender/contractual conditions to the exclusion of relevant terms and conditions.

22. ONGC set out the factual matrix to plead that the Informant is misleading the Commission and stated that on 30.03.2020, ONGC floated an e-public tender for hiring services for the operation and maintenance of cement bulk handling plant and allied cementing equipment and annual maintenance contract of mobile bulk carriers units for cementing services, Nazira, Assam for three years. As per Clause A of the bid evaluation criteria of the aforementioned tender document, the intending bidders were free to raise any query/seek clarification from ONGC before submission of respective bids, however, the Informant did not raise any query.

23. ONGC also submitted relevant salient features of the General Conditions of Contract (GCC), Special Conditions of the Contract (SCC), Consequences of Termination of Agreement and bid evaluation criteria. It submitted that the tender was an indigenous one and received five bids from Indian companies, including four bids from Micro & Small Enterprises (MSE). After evaluation, the Informant was found to be successful and an NOA dated 31.07.2020 was placed on the Informant.

24. ONGC submitted some of the important features of NOA, which are:

(i) Contractor should mobilise sufficient number of suitable manpower within 15 days from placement of NOA.

(ii) Informant was obligated to submit the Performance Bank Guarantee (PBG) of Rs. 4,16,000/- within 15 days of the NOA e., by 15.08.2020.

25. According to ONGC, the Informant conveyed its acceptance of the NOA vide email dated 03.08.2020, whereby, the parties (ONGC and Informant) were governed by the terms and conditions thereof. Thereafter, ONGC reminded the Informant to submit PBG vide emails dated 05.08.2020, 11.08.2020, 13.08.2020, 14.08.2020 and 17.08.2020 and commence the work from 15.08.2020. However, despite having agreed to follow the Fair Wage Policy as contained in Clause 1.21 of the General Conditions of Scope of Works, Clause 3 of the SCC and Clause B.1.4.0 of the Bid Evaluation Criteria, as well as the agreed terms and conditions in respect of submission of the PBG as contained in the NOA, the Informant failed to adhere thereto and did not commence the work, which it was bound by.

26. According to ONGC, as the Informant failed to submit the required PBG and mobilise men and materials to commence the job at the designated site inspite of repeated reminders, it terminated the NOA vide its letter dated 08.09.2020 and forfeited the Bid Security as per Clause 36.2 of the ‘Invitation to Bid’ and Clause 18.5 of GCC of Tender.

27. ONGC has further submitted that, as a consequence to the above, an enquiry was instituted against the Informant and the business dealing with it was suspended. Resultantly, the enquiry officer served an SCN, vide letter dated 19.11.2020, upon the Informant to file his reply by 04.12.2020, which was done by the Informant on 03.12.2020. After examining the relevant documents, the enquiry officer submitted his recommendation to the competent authority to ban the Informant for two years from date of suspension on account of non-submission of PBG and non-mobilisation of labours. Accordingly, the competent authority after consideration of all relevant aspects, accepted the recommendation, and the key Executive of Assam Asset issued the banning order dated 30.04.2021.

28. Thus, in view of the above factual matrix, ONGC has stated that it followed the agreed procedure and terms and conditions, between parties, which cannot be treated as a violation of the Act. As per ONGC, accepting the plea of the Informant would render all such contracts otiose and hamper its business and would also give entities like the Informant to cover up their own wrongs. Thus, ONGC has requested the Commission to find no merit in the Informant’s claims which is seeking to blame ONGC for its own failure to deploy requisite manpower. Moreover, ONGC has asserted that, if the Informant’s plea is accepted, it would lead to ONGC arranging manpower, apart from making payment for the execution of contract which is going against the terms and conditions of the contract.

29.  ONGC has denied the Informant’s allegation that it outlined the FWP after a delay of 11 days of issuance of NOA as FWP was clearly mentioned in the tender condition as mentioned above. Even otherwise, the OP submitted that the Informant was never prevented from raising queries/clarification in terms of Clause A of Bid Evaluation Criteria of bid document. Accordingly, the OP claimed that FWP was a part of the tender conditions and denied that any out of turn conditions were laid by ONGC after placing of NOA.

30. ONGC stated that, in its letter dated 13.08.2020, it had clarified all issues raised by the Informant and that it was for them to complete the contract in a timely manner as per para 2.1 of the scope of work. It further stated that the issues raised by the Informant were post facto and had no significance once the NOA was issued.

31. ONGC submitted that engagement of existing contractual labours is in conformity with the FWP and is the sole responsibility of the contractor, who is bound to perform the works as per the terms and conditions of contract. ONGC further submitted that it extended all assistance to the Informant for smooth commencement of the work but the Informant acted in violation of the terms and conditions of the Contract/ NOA.

32. ONGC also submitted that the tender clearly specified minimum number of manpower considering the workload conditions for proposed work with due recommendations of ONGC management. ONGC, based on previous experiences, mentioned the minimum number of workers that may be required, but the same was not restricted, and the bidder may engage more workers to comply with scope of work.

33. With respect to the Informant’s contention of financial viability, ONGC submitted that the same needs to be ascertained prior to the submission of bids complying with all tender conditions.

34. ONGC furthermore denied that no personal hearing was granted to the Informant and rather stated that personal hearing was offered to the contractor and the latter chose to avail the same through telephonic conference. The Informant vide email dated 04.01.2021 acknowledged that he had a tele-conversation with the enquiry officer in connection with the SCN. Thus, as per ONGC, the enquiry was transparent, giving reasonable opportunity to the Informant to explain his point of view.

35. ONGC stated that, being an employer it is entitled to amend/modify the bid conditions which cannot be imputed by the Informant. As per ONGC, the modifications are only in the nature of explanation and there is no change in the substance of the tender document. This modification is stated to be brought out by ONGC to ensure that in subsequent tender, no bidder could take a plea of being not made aware of the provisions even though explicitly made available in the tender documents.

36. With respect to the pricing of the re-tender, ONGC stated that it went up as there was a time lag between the tender floated in the first instant and the re-tendering process, and inflation and other parameters also were taken into account.

37. With respect to reliefs sought by the Informant, ONGC stated that compensation and withdrawal of ban of business dealing cannot be requested from the Commission.

Informant’s Rejoinder

38. The Informant in its response/rejoinder stated that ONGC is one of the few important players in the niche market of the oil and natural gas industry in India and is the largest oil exploration company in India. It is also submitted by the Informant that ONGC holds a position of strength, which enables it to operate independently of competitive forces prevailing in the market and has the ability to affect its competitors/consumers and other players, such as the Informant, in the relevant market, in its favour. As per publicly available information, ONGC ranks fifth in Asia and 20 among global energy majors in Platt’s Top 250 Global Energy Rankings, 2016, and its oil and gas production in offshore regions accounts for 70% of the country’s hydrocarbon output.

39. The Informant has divided ONGC’s business in the oil and natural gas industry into two major segments, viz. a) upstream sector (exploration and production activities), and b) midstream industry (process, store, market and transport commodities like crude oil, natural gas and natural gas liquids). As per the Informant, it undertakes activities and/or provides services which fall in the upstream sector of ONGC’s industry.

40. It is highlighted by the Informant that the scope of the tender work floated by the ONGC did not call to provide full cementing services, which is usually provided by the Informant and is a technically specialised service; rather, the tender’s scope of work was limited only to a small portion of operation & maintenance of bulk handling plant/equipment, which is owned by ONGC.

41. The Informant has submitted that it is the only Indian company providing specialised field cementing services to oil companies for the last ten years and has not received any support/opportunities from major companies like ONGC.

42. As per the Informant, ONGC is a dominant enterprise in the procurement market and/or has buyer power, and the services provided by the Informant to ONGC is limited scope of work carried out as a part of cementing services of specialised nature exclusively for the oil and gas industry and is not substitutable to any other industry. Thus, ONGC holds a dominant position in the relevant market of ‘hiring of cementing services for operation & maintenance of bulk handling plant/equipment in the oil and gas industry across India’ and in Nazira, Assam, where ONGC is the second largest company as per the works in question. The Informant has averred that ONGC submitted evasive and non-specific denials in its reply with respect to its dominance. Moreover, the Informant has claimed that the ONGC is in a position to float a tender on a ‘take it or leave it’ basis, and the call for bids shows its exercise of dominance.

43. The Informant further stated that ONGC could add, modify and alter the terms after issuing NoA and insist adherence on party, which indicates that it has a dominant position. The Informant also highlighted that, for the same scope of work, in two tenders, ONGC prescribed different skillset requirements for contract labourers in relation to their employment, which shows its position of dominance.

44. With respect to FWP introduction in the tender and its subsequent implementation by ONGC, the Informant has stated that it demonstrates ONGC’s dominance and unfair manner of its exercise as it binds the Informant to additional terms which were neve part of original tender conditions such as additional requirement of labourers and additional term of giving preference and engaging existing labourers of previous contractors.

45. The Informant has added that the FWP was never shared by ONGC with it and there was never a pre-bid meeting set up for the tender in question, and no such meeting took place. Even if there was a pre-bid meeting, the Informant would have no pre-bid queries as the ONGC’s tender was silent on such issues which were dictated by ONGC after issuing NoA by its email dated 11.08.2020. Despite these issues and to move on with the works, the Informant issued job offers to the existing contractor’s personnel but as cement bag cutting and painting works did not form a part of the existing contractor, labourers refused to take up the assignment. The same was intimated to ONGC and clarification sought, but ONGC provided no substantial response and via emails dated 13.08.2020, 14.08.2020, placed unnecessary restrictions on hiring of labourers, thereby, hindering contract performance. Thereafter, the contract was terminated and the Informant was blacklisted, which was unwarranted.

46. The Informant has averred that the new tender which was floated in October 2020 incorporated the earlier tender’s shortfall, which shows that ONGC was wrong, as the same was awarded at 34% higher price than the one awarded to the Informant.

47. The Informant has also submitted that:

i. The FWP was an internal document of ONGC, which was never made part of the tender conditions or even available on ONGC’s website or otherwise;

ii. ONGC never provided a copy of the FWP and only introduced a portion of this policy it in its reply for the first time. The FWP was not provided to the Informant at the relevant time and has no use or reference at this stage.

iii. The reference of FWP in the tender conditions only relates to the payment to be fair and reasonable wages and not in relation to giving preference to the labourers, which was a new term post NoA. Such an incorporation of the term was unfair and discriminatory, considering the previous tender did not contain it.

iv. The fact that ONGC introduced the term in the new tender further bolsters the Informant’s contention that ONGC has unfairly treated the Informant and caused hindrance to the performance of the contract.

v. Even assuming (whilst denying) that the Informant was somehow bound by the clause, the use of the word ‘preference’ is a misnomer, as such a condition was not an option but was treated as a mandatory requirement from the Informant to engage the workers of the present contract.

vi. Any clarifications that were asked as to the FWP were ignored by ONGC. In fact, the ONGC used its dominant position to unilaterally bind all their contractors to this policy without sharing the same in the tender and with an expectation that it would be followed without any question or direction.

vii. ONGC has discriminated against the Informant as opposed to the contract between the subsequent bidders of the re-tender who were and/or are not required of such conditions imposed on the Informant in its tender, and the ONGC rectified the shortfall in its re-tender.

viii. ONGC, despite numerous opportunities to provide clarity to the Informant, abused its dominant position in creating roadblocks for the Informant in executing the contract by imposing impractical interpretation and application of the FWP. As per the tender, all workers were required to meet security and personal protective equipment standards and the Informant could not hire casual daily labourers without the authorisation of ONGC, which was practically not possible to draw on a day to day basis in hiring additional daily wage personal under this contract.

48. The Informant also submitted that, as ONGC had withheld the Bid Bond at the bid stage, it did not submit its PBG, as that would also would have been forfeited.

49. On blacklisting, the Informant stated that ONGC passed the order without a proper and/or personal hearing in derogation of principles of natural justice and this vitiates such procedure of blacklisting. Moreover, punishment of two years blacklisting was disproportionate in quantum and duration, and the issues raised by the Informant were valid, as can be seen from the modifications carried out by ONGC in its re-tender.

50. As per the Informant, it was unfair and discriminatory on ONGC’s part to pass a blacklisting order against the Informant, especially considering that ONGC has taken a lenient and differential view/treatment to their international contractors when they defaulted and has provided example of Halliburton (another vendor of ONGC). The Informant has also submitted that ONGC caused irreparable damage to the Informant’s profits and reputation and it has lost eight tenders within first three months while the inquiry was pending.

51. The Commission considered the above responses in its ordinary meeting dated 11.10.2022 and decided to pass an appropriate order in due course.

Analysis and Observations of the Commission

52. The Commission notes that the primary allegation of the Informant is of ONGC abusing its dominant position by way of imposing unfair and additional conditions in the tender for cementing services, after placement of NOA dated 31.07.2020, which is in contravention of Section 4(2) of the Act.

53. The Commission further notes that ONGC, vide its letter dated 08.09.2020, cancelled the NOA due to the following two reasons: (a) Non-submission of PBG of Rs. 416000/-; and (b) Non mobilisation of men and materials within 15 days from the date of NOA e., by 15.08.2020. Thereafter, ONGC, vide letter dated 05.10.2020, communicated to the Informant that as a consequence to the termination of NOA, an enquiry has been instituted against it. Subsequently, an SCN dated 19.11.2020 was issued by ONGC to the Informant regarding banning of business dealing, allowing the Informant to respond to the notice by 04.12.2020.

54. Further, the Informant submitted its response to the SCN on 03.12.2020 and included all correspondences chronologically exchanged between both the parties after the issue of NOA and, inter alia, mentioned that the delay in commencement of work happened due to the inability of ONGC to resolve the issues raised by it. After considering this response, ONGC allegedly took the unilateral decision of banning all business dealings with the Informant for a period of two years, without allegedly allowing any personal hearing as outlined in Clause 9 of ONGC’s SCN. The Informant, in support of its allegations submitted that when ONGC re-tendered, it incorporated certain changes which were made after ONGC realised the alleged shortfalls brought forward by the Informant.

55. The Commission observes that, in the above backdrop, the moot question that arises for consideration is whether ONGC had sufficiently indicated its requirements upfront while issuing the tender in question so as to enable interested bidders to assimilate and factor such requirements while placing their technical and financial bids or whether it had failed to notify so. Further, whether the blacklisting of the Informant on the purported ground of it not adhering to the terms and conditions of award of contract unilaterally decided by ONGC and any alleged procedural irregularity attendant thereto, amounts to an abuse of dominant position by ONGC.

56. The Commission notes that the Informant has alleged that the blacklisting clause applied to it, for a period of two years e., from 06.10.2020 to 05.10.2022 by ONGC, stating that the Informant, inter alia, has failed to adhere to the stipulated conditions of submissions of performance security within 15 days of award of contract as well as mobilisation of workforce and thus, has been done in an unfair manner, without any justification and without due opportunity and is thus violative of the provisions of Section 4 of the Act. Per contra, ONGC has submitted that the entire fault lies with the Informant, who placed its bid without having been fully abreast of the stipulations and requirements mainly in relation to the clauses pertaining to the applicability of FWP of ONGC, which was squarely applicable to the tender in question. Further, if the Informant had any lack of understanding or clarity on these aspects it should have sufficiently raised these issues during the pre-bid meetings which Informant failed to do. It has also been submitted that after the Informant having been declared L-1 and it being awarded contract, Informant has raised untenable issues and delayed in performance of its part of the obligations, owing to which the project of ONGC got delayed, award had to be cancelled and new tender had to be floated etc. According to ONGC, all due processes as were envisaged in various clauses of the General Conditions of Contract (GCC) besides other stipulations were scrupulously followed in relation to the termination of award of contract, which was previously issued in favour of the Informant and its subsequent blacklisting by ONGC.

57. The Commission notes that on the aspect of the invocation of the blacklisting clause by ONGC against the Informant, thereby debarring it to bid in future tenders of ONGC for a period of two years, ONGC has submitted that it has followed a proper procedure by giving sufficient opportunity to the Informant to explain as to why the blacklisting clause not be made applicable on account of the alleged shortcomings on the part of the Informant. ONGC has further submitted that the present matter relates to contractual issues and does not fall within the confines of the competition matrix, over which the Commission has no jurisdiction. Also, the Commission has no powers to grant compensation as has been sought by the Informant, as a separate prayer in its Information. A feeble attempt has also been made to show that only courts at Sivasagar, Assam, will have jurisdiction to deal with the dispute.

58. The Informant in its further response/rejoinder while interdicting the submissions of ONGC has, inter alia, stated that it is an MSME company and the only Indian company providing specialised field cementing services to oil companies for over 10 years, whilst competing with big international companies in this space. According to the Informant, based on the tender invited by ONGC, hiring of services for operation and maintenance of cement built handling plant and allied cementing equipment and annual maintenance contract for mobile bulk carriers units for cementing services is the relevant product market. The relevant geographic market where both Informant and ONGC operates is the whole of India or, in the alternative, ONGC sought to procure its works in Nazira, Assam, which is the relevant geographic market. ONGC’s oil and natural gas production in the offshore region accounts for 70% of the country’s hydrocarbon output and is one of the top 5 companies in Asia and amongst the top 20 companies in the world in this area and is a dominant procurer of various services related to and operating within the confines of the production and oil and natural gas industry. The Informant has further submitted that ONGC can, as is evident, modify, add and alter the terms of the tender after issuing notification of award and further insist on adherence thereof and also insist on such terms upon a party even when such terms are absent in the present tender, which not only shows abuse of dominant position, but also its dominance to be able to do so. Also dominance of ONGC is also established by the fact that it can get away by introducing different skill set requirements for contract labourers as also different terms in relation to their employment, in different tenders.

59. The Commission has carefully considered the facts involved, sifted through the evidence submitted and has taken into account the rival contentions of the parties and, at the outset, is of the view that one of the contentions of ONGC, that the Commission has no jurisdiction in contractual matters, is without any merit. The Commission is mindful that to strike a perfect balance in a contract and make it ideal for all the parties to perform their respective obligations and exact financial benefits of other consideration in equal measure may not be possible, more often than not. The Commission, however, observes that it is not without jurisdiction in matters that arise out of contractual arrangements, wherein an entity with significant market power creates and imposes unilateral clauses on the other which impedes the affected party’s freedom of trade and subjects it to onerous obligations without any corresponding concomitant duty on the part of the dominant entity, to act in fairness and without any discrimination.

60. The Commission, having taken into account the facts and circumstances of the case, is of the opinion that there shall arise no requirement of defining a precise relevant market and assessment of dominance of ONGC in terms of the analysis and findings discussed below.

61. Having said that, in the present case, the Commission has not found anything that can be prima facie said to be onerous qua the terms and conditions of award of the contract by ONGC to Informant. With regard to the alleged abuse, in relation to the enforcement of such terms and conditions by the Informant, the Commission, in the facts and circumstances, does not propose to give any finding on the factual aspect as to whether ONGC had stipulated any conditions upfront while awarding the tender or subsequent thereto, which prevented Informant from making a quantitative assessment and whether there was any justification on the part of the Informant in non-submission of performance security and mobilisation of workforce, as a step leading towards fulfilment of its obligations and securing performance of awarded work. The Commission is of the prima facie view that these aspects as to who is at fault, in the facts and circumstances of the present case, do not merit consideration from a larger competition standpoint. Suffice to say that procurer is required to disclose the terms of procurement with certainty and in unambiguous terms to enable effective participation by interested parties in the tenders. As regards the more pertinent issue pertaining to blacklisting, the Commission is of the firm view that though blacklisting clauses in a contract per se are not abominable under competition law, they would be open for scrutiny based on the construct of such clauses and the exploitative and/or exclusionary abuse that it may entail on an objective assessment, when applied in a particular factual setting. Any blacklisting clause of a long term nature and which can have a cascading effect in relation to the contract inter se the parties or even inter-parties should receive careful scrutiny, when imposed by an entity with significant market power, as it could foreclose the market for the affected party, not merely in relation to potential contracts with the dominant entity, but sometimes can adversely affect existing relationship or even a potential business opportunity with third parties too. Thus, the disabilities can operate harshly and affect competition by the temporary embargo such clauses inflict by impeding an entity’s right of choice to be in business and offer its goods or services. It will therefore become incumbent upon the competition authority to carefully test, not just the excessiveness that the blacklisting clause can entail, but the manner of its invocation too, by the dominant entity, as it can result in the exit of a market participant, albeit for a limited period, or even permanently where such entities are small and can likely perish with no business activity to conduct and sustain themselves.

62. In the present case, prima facie, the Commission has not found such blacklisting clauses of ONGC to be onerous as it has been put in place for a duration of two years without affecting any of the contracts already in vogue inter se the parties, but the disability will likely kick-in in respect of future opportunities with ONGC, for the limited period as aforementioned which has expired recently. As regards the process adopted, the Commission in the facts and circumstances, prima facie does not find anything amiss on the part of ONGC in relation to the requirements of procedural fairness, as ample opportunity appears to have been provided to the Informant prior to imposition of the two years ban.

63. In view of the foregoing, the Commission is of the opinion that no case of contravention of provisions of the Act is made out against the OP, and the matter is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act. Consequently, there is no case for grant for relief(s) as sought by Informant, and the same is also rejected.

64. Notwithstanding the order passed above, the Commission emphasises that the findings reflect the view of the Commission purely from the standpoint of the provisions of the Act and has not expressed any opinion on merits in relation to alleged shortcomings on the part of the Informant or ONGC in relation to the award of tender or alleged failure of Informant to perform the same. The closure of this case by the Commission shall not preclude the Informant from taking/availing any other remedy(s) available to it in accordance with law.

65. The Secretary is directed to communicate to the Parties accordingly.

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