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Vijay Halder v. Chetan and Others
Summary of Order — Competition Commission of India, Case No. 41 of 2023
Factual and Procedural Background
The Information was filed by Mr. Vijay Halder (the Informant) under Section 19(1)(a) of the Competition Act, 2002 alleging cartelisation and contravention of Section 3(3) of the Act in respect of procurement of medicines by the Employees' State Insurance Corporation (ESIC). The Informant named five individuals (Mr. Ramesh, Mr. Chetan, Mr. Sandeep Gupta, Mr. Lakhwinder Singh (Nova Pharma) and Mr. Rajan Sukhija (Hospimax Health Care Pvt. Ltd.)) and the Deputy Medical Commissioner, ESIC as opposite parties. The Informant also alleged contravention by the Commissioner ESIC, the Secretary, Ministry of Labour and Employment, and 29 pharmaceutical companies but did not array them as opposite parties in the prescribed format.
The Informant alleged that there was a cartel arrangement involving the named individuals, ESIC officials and 29 drug manufacturers that resulted in inflated procurement prices (allegedly about 40% over cost) leading to an estimated loss of approximately INR 400 crores per year. The Informant submitted a limited piece of documentary material comparing prices for a Plaster of Paris (POP) bandage in a J&K purchase order and an ESIC purchase document and sought inquiries, cancellation of tenders, extraction of communications, formation of a committee to redecide pricing, and other interim reliefs.
Procedurally, the Commission considered the Information at its meetings on 01.05.2024, 19.06.2024 and 31.07.2024. The Commission noted insufficient particulars and directed the Informant to provide specific details (identities to be arrayed as opposite parties, details of specific tenders, and other relevant particulars). Two opportunities were given (a three-week period following the 01.05.2024 meeting and a final 15-day period following the 19.06.2024 meeting), but the Informant failed to supply the requested information. The Commission therefore proceeded on the material on record and passed the impugned order dated 09.08.2024.
Legal Issues Presented
- Whether the Information, as filed, discloses a prima facie case of contravention of Section 3(3) of the Competition Act, 2002 (i.e., existence of a cartel or anti-competitive agreement among the alleged parties in procurement by ESIC).
- Having regard to the material on record and the Informant's failure to provide specific particulars when directed, whether the matter should be closed under Section 26(2) of the Competition Act, 2002.
- Whether any relief under Section 33 of the Act (remedies in case of contravention) is warranted on the basis of the Information and available material.
Arguments of the Parties
Informant's Arguments
- The Informant alleged a cartel arrangement involving five named individuals, officials of ESIC, and 29 drug manufacturing companies that colluded in tendering to secure contracts at inflated prices.
- The Informant claimed rates were inflated by approximately 40% compared to cost, producing an estimated annual loss to the public exchequer of around INR 400 crores (given an alleged annual contract value of INR 1,000 crores).
- The Informant asserted that tender guidelines and rate structures were being drafted under the influence of this alleged cartel to facilitate over-priced awards.
- The Informant provided a single comparative document showing the price of a POP bandage in a J&K purchase order (₹20.16 per unit) and an ESIC purchase price (₹40.50 per roll), and referenced publicly available information indicating a ₹36 per unit price for a specified minimum quantity.
- Reliefs sought included initiation of enquiry, cancellation of tender allocations, extraction of communications, appointment of an investigation agency, formation of a committee to redecide pricing, and interim measures to ensure transparent bidding.
Opposite Parties' Position
The opinion does not contain a detailed account of the opposite parties' legal arguments or responses to the Information.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Commission's analysis proceeded as follows, based strictly on the material in the record:
- Initial assessment: The Commission observed that the Informant had made broad allegations of cartelisation in ESIC procurements but had not provided specific details identifying the tenders, the precise products or services, the contracts or the parties (beyond naming a few individuals and asserting involvement of 29 companies without properly arraying them).
- Opportunity to cure defects: Noting insufficiency of particulars, the Commission formally requested further details in its meeting dated 01.05.2024, requiring identification of person(s)/enterprise(s) to be arrayed as opposite parties, specifics of the tenders allegedly affected, and any other relevant information — to be filed within three weeks. When no response was received, the Commission granted a final opportunity in its meeting dated 19.06.2024, allowing fifteen days to file the requisite details; again, no response was received.
- Material available on record: The only substantive document supplied by the Informant was an unspecified comparative paper regarding the price of a particular dressing product (POP bandage) showing a J&K purchase order price and an ESIC purchase price. The Commission also noted a publicly available price point for the product.
- Evaluation of sufficiency: The Commission considered the ubiquity and multiplicity of procurements by ESIC and the lack of particulars (tender identifiers, parties to specific procurement, documentary evidence of collusion, communications, or other corroborating material). In the absence of cogent material and despite two opportunities to supply particulars, the Commission found the allegations to be bald and unsupported.
- Legal conclusion: On the basis of the above, the Commission concluded that no prima facie case of contravention of Section 3(3) of the Act (cartelisation/anti-competitive agreement) was made out against any of the opposite parties in the instant matter.
- Outcome under statutory provision: Consequent to the finding in the preceding step, the Commission applied Section 26(2) of the Competition Act, 2002 and ordered that the Information be closed forthwith.
Holding and Implications
Holding: The Commission held that no prima facie case under Section 3(3) of the Competition Act, 2002 is made out on the material available on record and, accordingly, the Information is ordered to be closed under Section 26(2) of the Act.
Implications:
- Direct effect on parties: The Information filed by the Informant is closed and no investigation under Section 26(1) is initiated on the basis of this Information. The reliefs sought by the Informant under Section 33 are rejected as there is no case for grant of such reliefs on the present record.
- Administrative direction: The Secretary of the Commission is directed to communicate the Commission's decision to the Informant.
- Precedential effect: The order closes the Information on the basis of insufficiency of particulars and failure to supply required details; the opinion does not purport to lay down any new legal precedent beyond the application of Sections 26(2) and 3(3) to the facts as found. The opinion does not discuss broader implications beyond the direct effect on this Information.
Order signed by the Chairperson and Members of the Commission. (Place: New Delhi; Date: 09/08/2024.)
Case No. 41 of 2023 Page 1 of 6
COMPETITION COMMISSION OF INDIA
Case No. 41 of 2023
In Re:
Vijay Halder
S/o Bhushan Halder R/o 62, Ganesh Nagar-2, Shakarpur, East Delhi, Delhi-110092
Informant And
Chetan Opposite Party No. 1 Ramesh
(1) 10735 Andha Mughal, Gali No. 12, Pratap Nagar, Delhi-110007
(2) AC Surgipharma Pvt. Ltd., Office No. C 13/1 Basement Block C, Wazirpur Industrial Area.
Opposite Party No. 2 Sandeep Gupta
68 Khaibar Pass
Opposite Party No. 3 Lakhvinder Singh (Nova Pharma)
684, Block A, Mayapuri Industrial Area Phase 1, Mayapuri, New Delhi-110064.
Opposite Party No. 4 Rajan Shukhija (Hospimax Care Pvt. Ltd.)
109, First Floor, DDA Building No. 5, District Centre, Janakpuri, Delhi.
Opposite Party No. 5 Deputy Medical Commissioner, ESIC
Panchdeep Bhavan, Comrade Indrajeet Gupta (CIG) Marg, New Delhi- 110002.
Opposite Party No. 6
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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 Information has been filed by Mr. Vijay Halder ('Informant') under Section 19(1)(a) of the Competition Act, 2002 ('the Act') against five individuals namely Mr. Ramesh, Mr. Chetan, Mr. Sandeep Gupta, Mr. Lakhwinder Singh (Nova Pharma) and Mr. Rajan Sukhija (Hospimax Health Care Pvt. Ltd.) and Deputy Medical Commissioner, Employees' State Insurance Corporation ('ESIC'), alleging cartelization in respect of procurement of medicines by ESIC, in contravention of provisions of Section 3(3) of the Act. The Informant has also alleged contravention of Section 3(3) of the Act by the Commissioner ESIC, the Secretary, Ministry of Labour and Employment, and 29 pharmaceutical companies, but has not specifically arrayed them as opposite parties in the format prescribed for filing of information.
2. The Informant is stated to be an individual residing in Delhi.
3. It is stated in the information that ESIC is a multifaceted social security scheme designed to provide socio-economic protection to employees working in organised sector by way of providing healthcare. To discharge aforesaid function, ESIC procures
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medicines for its huge infrastructure of 144 hospitals, 42 hospitals annexed, 1753 panel of clinics, 795 branch offices and 51 regional and sub-divisional offices in India from its central headquarters situated in Delhi through e-tendering procedure.
4. The Informant has alleged that there is cartel arrangement among five individuals (OP- 1 to OP-5), officials of ESIC and 29 drug manufacturing companies through their directors/ representatives/employees and other departments directly/indirectly involved in the tendering procedure. Due to such cartel arrangement, the prices of the medicines and health care products are inflated in the procurements made by such departments.
5. The Informant further stated that it is never clear that who decides the guidelines along with the rate structure and under whose supervision the policy/rate structure is decided etc. but under influence of this alleged cartel, the guidelines and contract terms of the tender are drafted to facilitate award of tenders at over-priced structure.
6. The Informant has further stated that due to such collusive practice, there is over-pricing to the tune of approximately 40% in comparison to the cost. Since, the annual value of such contracts is approximately 1000 crores, consequently, there is direct loss of 40% amounting to approximately 400 crores per year, due to such connivance of these opposite parties. The same may be considered as 'commission' amount under these cartels who indulge with these companies in order to get the final tender at huge over- valuations.
7. It is further stated that other government bodies also take the ESIC prices as a benchmark for their respective procurements. As per the Informant, malpractice adopted by the opposite parties has not only resulted in huge loss of public money to the government but has also made it difficult for a common man to purchase such medicines even though he is not entitled/enrolled for ESIC scheme.
8. The Informant has prayed for (a) to conduct an immediate enquiry against the masterminds and above stated agencies/companies involved in this, directly or indirectly; (b) to immediately cancel all allocation of tenders given to these companies;
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(c) to appoint an investigation agency to extract emails, phones, messages of Mr. Ramesh and Mr. Chetan in order to get a clear picture of their association with the officials of government department(s) helping them to get these tenders sanctioned at over price; and (d) to form a Committee to redecide pricings of needful healthcare or related items and a fresh open bidding system may be allowed under the supervision of this Commission.
9. The Informant has also prayed for grant of interim relief, inter alia, in the form of initiating enquiry into cartel, cancellation of tender allotted, appointment of monitoring committee for transparency of tendering procedure, investigation of alleged drug cartel masterminds, framing of new guidelines for better pricing.
10. The Commission considered the Information in its ordinary meeting held on 01.05.2024 and noted that the Informant has not provided sufficient details/ material to enable the Commission to examine the matter. Accordingly, the Commission decided to give an opportunity to the Informant to file the following details within three (03) weeks' time from the date of receipt of the order: (a) details of the person(s) and/ or enterprise(s) who were alleged to have indulged in the alleged anti-competitive conduct and need to be arrayed as opposite parties, (b) details of the specific tender(s) in which alleged cartelisation has taken place; and (c) other relevant details, if any. Despite service of the aforesaid order, no response was received from the Informant within the stipulated period.
11. Thereafter, the Commission considered the matter in its ordinary meeting held on 19.06.2024 and decided to grant one last opportunity to the Informant to file the requisite details as mentioned in para 10 above, latest within fifteen (15) days from the date of receipt of the order. However, again, no response was received from the Informant despite service of order dated 19.06.2024.
12. The Commission next considered the matter in its ordinary meeting held on 31.07.2024 and decided to pass an appropriate order in due course.
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13. In the absence of response from the Informant, the Commission decided to proceed in the matter based on material available on record.
14. At the outset, the Commission notes that the Informant appears to be alleging existence of a cartel arrangement amongst certain individuals, probably belonging to certain pharma companies and officials of ESIC/ related government department in respect of procurement of medicines and healthcare products by ESIC through e-procurement system purportedly resulting in procurement at inflated prices causing loss to public exchequer at large on one hand and increasing cost of healthcare for common man on the other.
15. The Commission further notes that in support of its allegations, the Informant has only provided an unspecified document/paper comparing the price of a dressing product - Plaster of Paris Bandage ('POP Bandage') in some 'J&K purchase order' with the purported 'ESIC purchase price'. From the same, it is noted that the price of 10cm x 2.7mtrs POP bandage in J&K purchase order is ₹20.16 rupees per unit; however, rate for the same in ESIC purchase order document is ₹405 for 10 rolls i.e. ₹40.50 per roll. From the publicly available information, it is noted that the price of POP Bandage of dimension 10cm x 2.7mtrs was ₹36 per unit for a minimum quantity of 144 units.
16. The Commission observes that there are numerous medicines and medical/healthcare products which are procured by ESIC and other government bodies. The Informant has not provided details of tenders/ medicines/ parties involved in the alleged conduct. Apart from making bald allegations, the Informant has not placed on record any cogent material to enable the Commission to examine the matter. Rather, the Informant failed to provide the requisite information in spite of being accorded two opportunities.
17. In the facts and circumstances of the present case, the Commission finds that no prima facie case of contravention of the provisions of Section 3(3) of the Act is made out against any of the OPs in the instant matter. Accordingly, the information is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act.
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Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises and the said request is rejected.
18. The Secretary is directed to communicate to the Informant, accordingly.
Sd/- (Ravneet Kaur) Chairperson Sd/-
(Anil Agrawal) Member
Sd/-
(Sweta Kakkad) Member
Place: New Delhi Date 09/08/2024 Sd/-
(Deepak Anurag) Member
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