Transvahan Technologies India Pvt. Ltd. & Another And Sepson AB and its group entities & Another

Case No. 30 of 2022 1 COMPETITION COMMISSION OF INDIA Case No. 30 of 2022 In Re: Transvahan Technologies India Pvt. Ltd. Site-1, 88/1 Basavanahalli Kasaba Hobli, Nelamangala Bengaluru – 562123 Karnataka Informant No.1 S.R. Venkatesan 202, KT-35, 89/1 6th Main, 16th Cross Malleshwaram Bangalore Informant No.2 And Sepson AB and its group entities Kyrkbyvagen 1 786 33 Vansbro, Sweden Opposite Party No.1 Sepson India Private Limited Plot Nos. 21-A1 & 21-A2 KIADB Veerasandra Industrial Area, Electronic City Post Hosur Road Bangalore-560100, Karnataka Opposite Party No.2 CORAM Ms. Ravneet Kaur Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member Case No. 30 of 2022 Page 2 of 12 Order under section 26(2) of the Competition Act, 2002 1. The present information has been filed by Transvahan Technologies India Pvt. Ltd. (“Transvahan”/ “Informant No. 1”) and Mr. S.R Venkatesan (“Informant No. 2”) (Informant No.1 and Informant No.2 are collectively referred to as “Informants”) under section 19(1)(a) of the Competition Act, 2002 (“Act”) alleging contravention of the provisions of sections 3(4) and 4 of the Act by Sepson AB, Sweden and its group entities (“Sepson AB/ Opposite Party No.1”) and Sepson India Private Limited (“Sepson India/Opposite Party No.2”) (Sepson AB and Sepson India are collectively referred to as “Opposite Parties”). Facts and allegations, as per Information 2. Informant No.1 is a company registered under erstwhile Companies Act, 1956 and is stated to be engaged in manufacturing of recovery winch systems, battery operated electric vehicles, automotive components and operates in defence sector. Informant No. 2, Mr. S.R. Venkatesan is the Promoter and Managing Director of Informant No.1. 3. Sepson AB is stated to be a company incorporated in Sweden and is engaged in manufacturing and marketing of winch systems. Sepson India is wholly owned subsidiary of Sepson AB. 4. In November 2006, Sepson AB reached out to Informant No. 2 to collaborate with the Informants for promoting its winches in Indian market. In September 2007, Sepson AB formed a strategic alliance with Informant No.1 for cooperation in the Indian market for winches system. While the alliance with Informant No.1 commenced in 2007, the approval of Ministry of Defence (MoD) for winches was granted around the year 2013- 14. The first major order for vehicles with Sepson AB’s winches was issued by MoD during March, 2015. As per the Informants, until now, Sepson AB is the only approved vendor of winches for military vehicles in India leading to its absolute monopoly in the business. As per the Informants, only approved vendors are allowed to supply such winches for Indian Army. Case No. 30 of 2022 Page 3 of 12 5. During the period between 2007 to 2013, Informant No.1 was engaged by Sepson AB as its distributor in India. Thereafter, Sepson AB and Informant No.1 entered into a Sub-Contracting and Manufacturing agreement on 25.06.2014 (SCM-2014) for deeper cooperation. This agreement, inter alia, envisaged that Informant No.1 would manufacture and assemble the winches to be supplied by Sepson AB for use in military vehicles by the Indian Army. Based on this agreement and the obligations contained thereunder, the Informant No.1 stated to have invested a huge sum of money and established a manufacturing plant in Bengaluru in the year 2014-15. 6. Sepson AB incorporated a wholly owned subsidiary, Sepson India in 2014 and Informant No. 2 joined the board of Sepson India as a non-executive Director. Further, at the behest of Sepson AB, the Informant No.2 signed an employment agreement dated 07.09.2015 for being the Managing Director (MD) of Sepson India (Employment Agreement-2015). On the same day, a further detailed Sub-Contracting and Manufacturing Agreement was also executed between Sepson India and Informants, whereunder Informant No.1 was designated as the exclusive manufacturing contractor for Sepson India (“SCM-2015”). It has been stated that one of the conditions of SCM 2015 was that the relationship of Sepson India with Informant No.1 would be co- terminus with the employment of Informant No.2 as Managing Director of Sepson India. In other words, the agreement between Sepson India and Informants would be terminated if Informant No.2 ceases to be the Managing Director of Sepson India. It has been stated that imposition of this subsequent condition was not made known to the Informants either in 2007 when the strategic alliance between the parties commenced or at least when Informant No.1 made huge investment to set up a manufacturing unit in Bengaluru. 7. In furtherance of the SCM-2015, Informant No.1 manufactured and supplied 433 units of Sepson winches to Tata Motors between June, 2015 and August, 2016. In the meantime, on 17.03.2016, the Informant No.2 resigned from the position of Managing Director of Sepson India due to personal reasons. 8. Since the supply orders for high mobility vehicles with winches were issued, the Informants observed certain conduct on the part of the Opposite Parties. These included Case No. 30 of 2022 Page 4 of 12 delay in providing orders to Informant No.1, providing wrong drawings of winches to be manufactured, delay in taking delivery and arbitrarily fixing higher import costs for Swedish components of kit. The Informants eventually understood that Sepson AB was not interested in manufacturing winches through Informant No.1 and it was gearing up to start its own arm in India for manufacturing and supply of winches used in military vehicles. 9. Thereafter, in June 2016, Sepson AB imposed onerous conditions in the revised sub- contracting and manufacturing agreement which included the requirement that Informant No.2 need to sign certain documents of Sepson India as a prerequisite for awarding work to Informant No.1 for continuance of its relationship with Informants. Since August 2016, Sepson AB stopped dealing with Informant No.1 and started direct supplies to Original Equipment Manufacturers (OEMs). Further, the non-compete duration was increased from two years to five years. The said agreement also proposed that Sepson AB would procure components for winches and thus, Informant No.1 need not deal with the vendor base which it had created. With no option left, Informant No.2 resigned from the directorship of Sepson India. As a result, Sepson AB terminated its relationship with Informant No.1 and allegedly wiped it out from the business of manufacturing winches for defence vehicles. 10. As per the Informants, the relevant market is ‘market for supply of self-recovery winches for high mobility vehicles used by Indian Army’. As per the Informant, only the vendors approved by the MoD could supply winches for military vehicles and the approval entails a very long gestation period on account of extensive field evaluation. Until now, Sepson AB is the only entity operating in this relevant market as it is the only vendor approved by the MoD for supply of winches for military vehicles. Thus, Sepson AB enjoys monopoly in the said relevant market and no entry is expected in the relevant market in any foreseeable future. 11. It has been alleged that the condition of employment imposed upon Informant No.2 is an unfair imposition in contravention of the provision of section 4(2)(a)(i) of the Act. It has been also stated that the employment condition of Informant No. 2 is an unfair Case No. 30 of 2022 Page 5 of 12 conclusion of contract subject to acceptance of supplementary obligations which, by their nature or according to commercial usage, have no connection with the sub- contracting and manufacturing contracts between the parties. This is also in contravention of section 4(2)(d) of the Act. The impugned conduct of Opposite Parties tantamount to denial of market access to Informants in the market for supply of self- recovery winches for high mobility vehicles used by Indian Army. This has been alleged to be in contravention of section 4(2)(c) of the Act. The anti-competitive practices of Opposite Parties are also in contravention of section 4(2)(b) of the Act. It has been stated that the refusal to deal with Informants is alleged to be anti-competitive strategy to use its dominance in the supply of winches market to monopolise the market for manufacturing of winches. This is alleged to be a vertical restraint as well as abuse, in contravention of the provisions of sections 3(4) and 4(2)(e) of the Act.