NTPC LTD v. EMAMI POWER LTD; NTPC LTD v. ORIENTAL SALES AGENCIES (INDIA)

1. The appeals are received on transfer. At joint request, they are taken up for disposal.

2. This appeal impugns the order dated 03.01.2018 passed by the learned Single Judge in W.P.(C) No. 7493/2016 on the ground that it has erred in not holding that the two bidders: i) Emami Power Ltd and Oriental Sales Agencies (India) Private Limited („OSAPL‟) as group companies and ii) that they had colluded in the bid. The learned counsel for the appellant submits that there was collusion between Emami and OSAPL. Referring to page 836 of the paper-book, he states that there is cross holding between Emami and OSAPL. However, the said chart only shows five sets of shareholdings in each Emami Power Ltd. and OSAPL with some common shareholding. This shareholding pattern by itself does not establish or mean that they are group companies or one and the same company.

3. The learned counsel for the respondent states that the appeals are without basis; pursuit of the same is causing much prejudice and harassment to the respondents, both of whom had withdrawn their applications for bids, before the bid took place.

4. The impugned order has rightly held, indeed it was conceded by the appellant, that Emami and OSAPL were not group companies; there was nothing on the record to establish that the two companies which are otherwise independent and separate entities, could be said to have colluded or otherwise conspired to cause any monetary loss or injury or impediment in the affairs of the appellant. The impugned order has reasoned as under:

47. It is important to note that the communication dated 02.06.2016, which according to the respondents was a show cause notice, sought clarification on two points: (i) whether the petitioners had common ownership and were group companies; and (ii) whether submission of their bids through common authorized representative amounted to “collusive practice”. Insofar as the petitioners being under common ownership and/or group companies is concerned, it was conceded during the course of arguments that Emami and OSAPL are not group companies even though some of the shareholders of Emami are also shareholders of Emami Agroteh Private Ltd, which owns less than 50% shares of OSAPL. Thus, the only allegation against the petitioners is that they had indulged in collusive practice, which constitutes a fraudulent practice in terms of clause 3.31 (a)(ii). xxx

50. Although, the respondents also claim that there was an agreement/arrangement between the petitioners to cartelize, however merely because the initial bids made by the petitioners were known to each other does not establish that they had entered into an anticompetitive agreement or arrangement to establish prices at anticompetitive levels. There is no material to establish any agreement to rig the bids or make collusive bids that fall foul of section 3 of the Competition Act 2002. In the facts of the case it is difficult to accept that having a common representative established that the petitioners had indulged in any fraudulent practice.

51. The next question to be considered is whether NTPC had suffered any loss which would justify encashment of bank guarantees. Plainly, NTPC has been unable to establish that it has incurred any loss on account of the bids submitted by the petitioners. The offers made by the petitioners were not accepted by NTPC during the term of their validity, and thus, the question of NTPC suffering any loss on account of the bids submitted by the petitioners does not arise. Further, no arguments were advanced on behalf of the respondents to counter the submission that NTPC had neither suffered nor could have suffered any loss on account of the bids submitted by the petitioners. However, in the written submissions filed on behalf of NTPC after the conclusion of the arguments, it has been contended that various research reports/articles on the internet suggest that fraud/corruption/unethical practices in public procurement enhances the cost of procurement by 10 to 30 percent. According to NTPC, it would have suffered a loss of 21.20 crores if the petitioners had been successful in the technical evaluation stage and their fraud had not been detected. It is further contended that if the fraud had been detected after issuance of the letter of intent, the respondents would have suffered a loss of approximately

1.50 crores computed as loss of trading margin of 7 Paisa Per Kwh.

52. The said contentions cannot be accepted for several reasons. First of all, there are no pleadings to support the above contentions. Further, no such contentions were in fact advanced during the course of arguments and have been slipped in the written submissions filed after conclusion of the hearing. Lastly and more importantly, these contentions are wholly bereft of any merit. The loss as claimed is plainly illusory. Indisputably, the respondents have not suffered any loss. It is also relevant to state that no communication rejecting the bids was issued to the petitioners prior to the expiry of the validity of the bids. The first communication indicating that NTPC had rejected the bids was issued on 04.07.2016 much after the validity of the bids had expired. The NTPC had made their efforts to persuade the petitioners to extend their validity of the bids which the petitioners had declined. Since, the offer was neither rejected nor accepted during the term of its validity, the question of forfeiture of EMD does not arise.”

5. As has been discussed in the impugned judgment the respondents had applied for bidding in an auction; they deposited the EMD but much before the bid could take place they withdrew their application. Yet, for the reasons best known to the appellant, the latter declined to return the EMD and went on to blacklist both Emami and OSAPL. The reason for blacklisting of the said companies cannot be on the basis of an afterthought or on speculative loss. No collusion was established between them and no loss has been caused to the appellant. In the circumstances, withholding the monies is unjustified and the blacklisting too is arbitrary and without reason. The Ministry of New and Renewable Energy („MNRE‟) too had blacklisted Emami and OSAPL. The impugned judgment has set aside the blacklisting done by the MNRE. Half a decade has passed, the MNRE has not filed an appeal against the said order. It can be assumed that MNRE has accepted the setting aside of the blacklisting and that the blacklisting should be treated as non-est.

6. Article 2 of the RFS which defines the terms “Affiliate” and “Group Company” have been examined in the impugned order as under: