ADGST (SM) Army Purchase Organisation and M/s Gokul Agro Resources Ltd., M/s Gokul Agri International Ltd.

Ref Case No.03 of 2024 Page 1 of 8 COMPETITION COMMISSION OF INDIA Ref Case No. 03 of 2024 In Re: ADGST (SM) Army Purchase Organisation Informant And M/s Gokul Agro Resources Ltd. M/s Gokul Agri International Ltd. Opposite Party No. 1 Opposite Party No. 2 CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 26(2) of the Competition Act, 2002 1. The present matter was received as a Reference under section 19(1)(b) of the Competition Act, 2002 (‘Act’) from Army Purchase Organisation (‘APO’/ ‘Informant’) through ADGST (SM), APO alleging contravention of the provisions of Section 3 by M/s Gokul Agro Resources Ltd. (‘Opposite Party No. 1’/ ‘OP-1’) and M/s Gokul Agri International Ltd (‘Opposite Party No. 2’/ ‘OP-2’), collectively referred to as ‘OPs’. Ref Case No.03 of 2024 Page 2 of 8 2. As per the Reference, APO is responsible for the procurement of ration items (including tinned, packaged, dry ration and animal ration) for the Armed Forces. 3. The Informant has stated that: 3.1 An indent was received from DGSR (ST-4) for procurement of 31,000 MT Edible Oil for the financial year 2024-25. Based on the indent, a Bid document including Acceptance of Terms and Conditions (‘ATC’), was uploaded on the Government e-Marketplace (‘GeM’) Portal vide GeM Bid No: GEM/2024/B/4693332 dated 26.02.2024. 3.2 Technical Evaluation Committee (‘TEC’) meeting for the bid was scheduled on 18.03.2024. It was seen that 14 firms had participated in the tender out of which 11 were found fit for participating in the subsequent stages of the tendering process. 3.3 Thereafter, Commercial Negotiation Committee (‘CNC’) meeting was scheduled on 08.05.2024 for evaluation of financial bids. During the CNC meeting the Principal Integrated Financial Advisor (‘PIFA’) Army (Q&M) noted that OPs appear to be sister concerns and dominant. Therefore, competition may be restricted. 3.4 The Procurement Committee (‘PC’) recommended retendering of procurement of refined mustard oil on the advice of PIFA Army (Q&M). OPs have been participating in tenders for procurement of Edible Oil with brand names ‘VITALIFE’ and ‘VIVAAN’ respectively. 3.5 OPs have also been found to be competing with each other in course of reverse auction (‘RA’) on the GeM Portal during Financial Year 2024-25. 3.6 PIFA Army (Q&M) was approached by APO vide letter No. 62801/Q/1/ATC/2024-25/Edible Oil/APO (Pur.- IV) dated 26.06.2024 to Ref Case No.03 of 2024 Page 3 of 8 provide reasons/ grounds which point towards the above mentioned two firms being sister concerns as during documents evaluation and factory inspection, TEC did not observe any commonality between both the firms. Also, both these firms participated separately in the RA of “schedules” along with other five firms. They also reduced their rates to emerge as L-1 in 4 schedules each i.e., in a total 8 of the 15 schedules. 3.7 Further vide letter No 42663/PIFA (Q&M)/APO/19/301 dated 10.07.2024, PIFA Army (Q&M) cited Gujarat High Court Order No. O/COMP/36/2015 dated 12.06.2015, wherein as per preamble of the composite scheme of arrangement Gokul Refoils and Solvent Ltd (‘GRSL’), OP-1 and O-2 were all part of the same group of management i.e., Gokul Group. It has been further stated that PIFA Army (Q&M) has also advised to refer the matter to Competition Commission of India (‘CCI’ / the ‘Commission’) in terms of para 7.5.8 of Ministry of Finance Manual for Procurement of Goods, 2022. The said paragraph reads as following: “7.5.8. It is possible that sometimes a group of bidders quote the same rate against a tender. Such pool/cartel formation is against the basic principle of competitive bidding and defeats the very purpose of an open and comparative tendering system. Such and similar tactics to avoid/control true competition in a tender leading to “Appreciable Adverse Effect on Competition” (AAEC) have been declared as an offence under the Competition Act 2002, as amended by the Competition (Amendment) Act, 2007. Such practice should be severely discouraged with strong measures. In case of evidence of cartel formation, detailed cost analysis may be done by associative experts if necessary. Besides, suitable administrative actions can be resorted to, such as rejecting the offers, reporting the matter to the trade associations, the Competition Commission or NSIC, etc., and requesting them, inter-alia, to take suitable strong actions against such firms. New firms may also be encouraged to get themselves registered for the subject goods to break the Ref Case No.03 of 2024 Page 4 of 8 monopolistic attitude of the firms forming a cartel. Changes in the mode of procurement (GTE instead of OTE) and packaging/slicing of the tendered quantity and items may also be tired. A warning clause may also be included in the bid documents to discourage the bidders from indulging in such practices.” 4. The Informant has prayed for the following reliefs before the Commission: i. to examine the shareholding structures of OPs; ii. details of promoters and their stakes in respect of OPs in terms of 7.5.8 of Ministry of Finance Manual of Procurement of Goods, 2022; and iii. verify if OPs are sister concerns and hence the possibility of cartel formation. 5. The Commission considered the matter in its ordinary meeting held on 18.12.2024 and decided to pass an appropriate order in due course. 6. The Commission has carefully perused the information in the Reference and material available on record. 7. The Commission notes that the Informant has alleged possibility of cartel formation in tender invited by the APO. Section 3(3)(d) of the Act deals with bid-rigging and reads as under: “Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which— … (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.” Ref Case No.03 of 2024 Page 5 of 8 8. It is noted by the Commission that both OPs are enterprises and are engaged in identical trade of goods. In the present matter, the Commission, upon perusal of the Reference and documents annexed therein finds that 15 entities participated in the impugned tendering process and 11 of them were found technically qualified for participating in the subsequent stages of the tendering process. 9. On scrutiny of the summarized table of bids relating to tenders, as provided in the Reference, it is observed that OP-1 and OP-2 emerged L-1 on 4 occasions each out of a total of 15 occasions, and the percentage difference between their bids ranges between 0.42% and 10.46%. Further, from the data given for 15 occasions, it is noted that on 7 occasions the winner was a party other than OPs. 10. Further, it is pertinent to mention that one of the prayers in the Reference is to investigate the possibility of cartel formation and commonality of management between the OPs. Previously the Commission has dealt with similar allegations in Case No. 25 of 2021 (XYZ Vs. Continental Milkose India Limited). Relevant paragraphs from the Order of the Commission are reproduced as under: