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Six Pune Municipal Corporation contractors fined ₹3.57 crore for rigging bids
The Competition Commission of India takes action based on the of complaint filed by Nagrik Chetna Manch
The Competition Commission of India (CCI) in its final order has imposed a fine of ₹3.57 crores on six firms for colluding with Pune Municipal Corporation (PMC officials) and undertaking bid rigging while filing tenders for thermal composting garbage plants in 2014.
The nexus between PMC officials and contractors for rigging the bids was exposed in detail by Hindustan Times in a series of reports in October 2017.
The CCI conducted an enquiry on the basis of a complaint from Nagrik Chetna Manch, an NGO of alert citizen-activists.
Hindustan Times during October 2017 reported in detail the nexus citing how the contractors and officers had telephonic conversations on multiple occasions and tender documents were uploaded through a computer belonging to the municipal corporation.
The tenders pertained to seven thermal composting plants at various locations including Kharadi, Ghole Patil road and Peshwe Park, and were worth ₹14 crore.
In their order issued on Tuesday, the Commission observed that various individuals including proprietor, partner and director of the firms coordinated to “rig the tenders by way of submitting proxy/cover bids.”
The CCI, established under the ministry of corporate affairs for the administration, implementation and enforcement of the Competition Act, 2002, has directed all the parties to deposit the penalty amount within 60 days from the receipt of the order.
The investigative report said there is prima facie evidence that there was a meeting of minds among Fortified Security Solutions, Ecoman Enviro Solutions Pvt. Ltd., Lahs Green India Pvt Ltd, Sanjay Agencies, Mahalaxmi Steels and Raghunath Industry Private Limited in response to tender numbers 34, 35, 44, 62 and 63 of 2014 floated by PMC during December, 2014 to March, 2015 “for inviting the turnkey contract for ‘Design, supply, installation, commissioning, operation and maintenance of municipal organic and inorganic solid waste processing plant(s)’.
The CCI has also indicted Pune Municipal Corporation (PMC) saying the civic body “failed to detect cartelization in its own tenders. “It is clear from investigation that PMC did not exercise due diligence while scrutinizing the bid documents. Even though there were several apparent indications of collusion like same IP addresses, common proprietor/ director, same office address, consecutive serial number for DDs etc., these were not taken into consideration by OP-3 while determining the eligibility of the bidders,” noted CCI in its order.
Maj Gen SCN Jatar (retd), president, Nagrik Chetna Manch while reacting to the order, said the Commission’s order clearly shows how tendering process at PMC was being carried out. “The commission has fined contractors but because of limited mandate, it could not act against PMC officials. We have now decided to take up the matter with authorities concerned for action against PMC officials responsible for facilitating the cartel.”
After perusing the information, the CCI was of the prima facie view that the case involved “big rigging” or “collusive bidding” in violation of section 3(3) read with section 3(1) of the Competition Act, 2002. The CCI in its report observed that there was understanding among the firms who participated in the bidding to ensure that the tender went to Ecoman Enviro Solutions Pvt Limited. The same company, noted CCI, has borne the cost of demand draft for the other participants.
Earlier, to inquire the allegations of cartel levelled by Nagrik Chetna Manch, CCI asked its Director General to investigate the matter. Accordingly, CCI Director General collected evidence from various sources by issuing probe letters to the parties and third parties including telecom operators, banks, etc. and also recorded statements on oath and submitted report to the Commission on August 30, 2017. Following the report from Director General conducted hearing on November 16, 2017.
The CCI while hearing petition reduced the penalty on four firms under provisions of section 46 of the Competition Act (Lesser Penalty Regulation). Eventually, CCI imposed penalty of ₹13,07,240 against Fortified Security Solutions, ₹33,90,500 against Ecoman Enviro Solutions Pvt. Ltd, ₹21,00,258 against Lahs Green India Pvt Ltd, ₹90,63,874 against Sanjay Agencies, Rs. 1,68,10166 against Mahalaxmi Steels and ₹30,54,943 against Raghunath Industry Private Limited. The Commission has also imposed penalty of ₹361368 against five individual holding key positions in the six firms
Firms admit role during probe
The six firms against whom the Competition Commission of India (CCI) has imposed fines have admitted their role in “rigging” bids, based on which the Commission has reduced penalty.
Following a complaint from Nagrik Chetna Manch, an NGO of citizen-activists, the CCI conducted an enquiry and found that a bidders’ cartel was at work while filing the tender for the thermal composting garbage plants in 2014. The Hindustan Times during October 2017 reported in detail the nexus citing how the contractors and officers had telephonic conversations on multiple occasions and tender documents were uploaded through a computer belonging to the municipal corporation.
In its order on Tuesday, CCI said all the six firms admitted of rigging bids and sought reduction in penalty under provisions of section 46 of the Competition Act (Lesser Penalty Regulation). Eventually, CCI after hearing the case reduced penalty on four bidders Ecoman Enviro Solutions Pvt. Ltd, Lahs Green India Pvt Ltd, Sanjay Agencies, and Mahalaxmi Steels while penalty for Raghunath Industry Private Limited and Fortified Security Solutions were not reduced.
The Commission reduced the penalty within the range of 25% to 50% bringing down the total fine from ₹6,18,10,154 to Rs3,57,26,981.
In its earlier report, Hindustan Times had reported that Bipin Vijay Salunke, managing director of Ecoman Enviro Solutions, which won the ₹14 crore bid for setting up municipal waste processing plants confessed in his statement under oath that he knew all the competitors bidding in tender nos. 34, 35, 44, 62 and 63 of 2014.
These tenders were floated by PMC during December, 2014 to March, 2015 “for inviting the turnkey contract for ‘Design, Supply, Installation, Commissioning, Operation and Maintenance of Municipal Organic and Inorganic Solid Waste Processing Plant(s)’.
Salunke said that the other bidders for the tenders were known to him one way or the other while adding that he gave the phone numbers belonging to Parimal Salunke (an employee of Ecoman and his cousin) as the contact person for various bidders in the tenders. He confessed that he sent Parimal Salunke to the Pune Municipal Corporation for purchasing/procuring the digital key for M/s Fortified Security Solutions, M/s Lahs Green India Pvt. Ltd., M/s Sanjay Agencies and M/s Mahalaxmi Steels by submitting all the relevant documents and registered his mobile numbers as mentioned above for telephonic verification by the PMC.
Another businessman Vijay Raghunath Salunke, Director of Raghunath Industry Private Limited, disclosed during his submission that on the insistence of his son Bipin Vijay Salunke, he agreed to give authorization to other parties as authorized distributor of Raghunath Industry to help them qualify for PMC tenders. “It has been stated by Vijay Salunke that the objective of alleged cartelisation was bonafide so as to ensure that PMC does not extend the tender period and the bid placed by Ecoman Enviro Solutions Pvt Ltd should be considered without extension,” noted the order.
Activists demand action
Civic activists reacting to the CCI order said while the Commission has held six firms responsible for rigging the tenders, the civic body needs to act against its own officials besides blacklisting the contractors.
“Rigging bids is not new in PMC though it has come out clearly this time from CCI. The PMC now needs to take action against firms and civic officials responsible for manipulating the process,” said Vijay Kumbhar, prominent civic and RTI activist.
Kumbhar along with another civic activist Vivek Velankar had written a letter to Maharashtra chief minister Devendra Fadnavis and PMC Commissioner Saurabh Rao demanding action against PMC officials and firms.
