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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

Team Code – S02

Before,

The Supreme Court of Hoegaarden

Civil Appeal No. 10/2018

Under Section 53T of the Competition Act, 2002

Kalyani Industries Pvt. Ltd. ………...…………………………………….…….…….Appellant

v.

Competition Commission of Hoegaarden………………………………………….Respondent

Civil Appeal No. 15/2018

Under Article 136 of the Constitution of Hoegaarden

State of Fosters Pradesh………………………………………...…………………….Appellant

v.

Shri Loki………...………………………………………………………………….Respondent

Civil Appeal No. 27/2018

Under Section 423 of the Companies Act, 2013

Shareholders of MSL………………………………………….…………………….Appellants

v.

John and others………………………………………....…………………………Respondents

Memorial on the behalf of the Respondents


UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

TABLE OF CONTENTS

LIST OF ABBREVIATIONS .................................................................................................. iii

INDEX OF AUTHORITIES..................................................................................................... iv

STATEMENT OF JURISDICTION........................................................................................vii

STATEMENT OF FACTS ....................................................................................................... ix

STATEMENT OF ISSUES ...................................................................................................... xi

SUMMARY OF ARGUEMNTS .............................................................................................xii

ARGUEMNTS ADVANCED ................................................................................................... 1

1. THAT THE COMPETITION COMMISSION OF HOEGAARDEN HAS THE


JURISDICTION TO INQUIRE/INVESTIGATE INTO THE ALLEGATION OF BID
RIGGING IN THE IMPUGNED CASE. .............................................................................. 1

1.1. THE AGREEMENT TO BID FOR A SUGAR MILL FINDS COVERAGE UNDER SECTION 3(3) OF
THE COMPETITION ACT, 2002. ............................................................................................ 1

1.2. THE PHRASE “ENGAGED IN” AS MENTIONED IN SECTION 3(3) OF THE COMPETITION ACT
ALSO COVERS THE FUTURE BUSINESS ACTIVITY OR THE BUSINESS TO BE TAKEN AFTER THE

BIDDING PROCESS. ............................................................................................................... 2

2. THAT KIPL AND BFL HAVE ACTED IN CONTRAVENTION OF SECTION 3 OF


THE COMPETITION ACT, 2002. ........................................................................................ 3

2.1. OBSERVATIONS OF THE DG RAISE A STRONG POSSIBILITY OF COLLUSION AMONGST THE


CONCERNED ENTERPRISES I.E. KIPL AND BFL. ...................................................................... 3

2.2.THE OBSERVATIONS OF THE DG WHICH AMOUNT TO CIRCUMSTANTIAL EVIDENCE IN THE


IMPUGNED CASE SHOULD BE GIVEN DUE REGARD IN THE ABSENCE OF ANY DIRECT EVIDENC

............................................................................................................................................ 7

2.3. THE AGREEMENT BETWEEN THE ENTERPRISES FALLS UNDER THE PURVIEW OF SECTION
3(3) OF THE COMPETITION ACT, 2002. ................................................................................. 9

2.4. THE DEFENCE OF ‘SINGLE ECONOMIC ENTITY’ CANNOT BE AVAILED BY THE CONCERNED
ENTERPRISES I.E. KIPL AND BFL. ..................................................................................... 10

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

2.5. THERE IS ENOUGH INCENTIVE FOR THE ENTERPRISES, I.E. KIPL AND BFL TO ACT IN
CONTRAVENTION OF THE COMPETITION ACT, 2002 AND RIG THE BIDDING PROCESS FOR THE

SALE OF THE IMPUGNED UNDERTAKINGS. .......................................................................... 11

3. THAT THE PENALTY IMPOSED BY THE COMPETITION COMMISSION OF


HOEGAARDEN ON KIPL AND BFL IS IN LINE WITH THE SCHEME OF
COMPETITION ACT, 2002 AND NECESSARY FOR THE PURPOSES OF
DETERRENCE.................................................................................................................... 12

3.1. THERE IS NO REFERENCE TO THE TERM ‘RELEVANT TURNOVER’ IN SECTION 27(B) OF


THE COMPETITION ACT, 2002. .......................................................................................... 12

3.2. KEEPING IN MIND THE HARMFUL EFFECTS OF HORIZONTAL ANTI-COMPETITIVE

AGREEMENTS AND THE SUBSEQUENT NEED TO DETER ENTERPRISES FROM ENTERING THEM,

HEAVY PENALTIES SHOULD BE IMPOSED. ........................................................................... 13

4. THAT SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR


UNDERTAKING (ACQUISITION) AMENDMENT ACT, 2009 ARE
CONSTITUTIONALLY INVALID. ................................................................................... 14

4.1. SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR UNDERTAKING ACQUISITION
(AMENDMENT) ACT, 2009 ARE REPUGNANT TO THE PROVISIONS OF IDR ACT, 1951 AND

THEREFORE, OUTSIDE THE LEGISLATIVE COMPETENCE OF THE STATE OF FP. ..................... 15

4.2. SECTIONS 3-C AND 3-D BROUGHT IN BY THE AMENDMENT ACT OF 2009, RUN AGAINST
THE SCHEME OF THE ORIGINAL ACT OF 1971 (FP SUGAR UNDERTAKING ACQUISITION ACT,

1971). ............................................................................................................................... 17

5. THAT THE DIRECTORS OF MSL AND FEL ARE NOT LIABLE FOR THE PROFITS
MADE PURSUANT TO THE LAND DEAL BY FEL IN THE REAL ESTATE
TRANSACTION. ................................................................................................................ 18

5.1. THE SHAREHOLDERS DO NOT HAVE THE LOCUS STANDI TO BRING ACTION AGAINST THE
DIRECTORS. ....................................................................................................................... 18

5.2. THE INVESTMENT MADE BY THE DIRECTORS OF MSL IN FEL WAS VALID AND IN

FURTHERANCE OF THEIR OBLIGATION TOWARDS MSL. ..................................................... 19

PRAYER ................................................................................................................................ xiii

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LIST OF ABBREVIATIONS

FP Fosters Pradesh
FPSSCL Fosters Pradesh Sugar Corporation Limited
FPSSCDL FP State Sugar and Cane Development Limited
GoFP Government of Fosters Pradesh
GoH Government of Hoegaarden
BIFR Board of Industrial and Financial Reconstruction
KIPL Kalyani Industries Private Limited
BFL Black Fort Limited
SCM Swiss Challenge Method
DG Director General
ZPL Zingaro Private Limited
MSL Mellifluous Sugars Limited
FEL Fresh Co. Estates Limited
SGL Sanguine Grass Limited
MC MeckKissy Company
CCH Competition Commission of Hoegaarden
CCI Competition Commission of India
COMPAT Competition Appellate Tribunal
NCLT National Company Law Tribunal
CA 2002 Competition Act, 2002
CA 2013 Companies Act, 2013
EU European Union
ICN International Competition Network
TFEU Treaty on the Functioning of European Union
SICA Sick Industrial Companies (Special Provisions) Act, 1985
SLP Special Leave Petition
SC Supreme Court

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INDEX OF AUTHORITIES
Cases

BALCO v Kaiser Aluminium Technical Services Inc, (2012) 9 SCC 552. .............................. 12
Builders Association of India v Cement Manufacturer Association and ors, [2012] CCI 42. .. 8
Burland v Earle, [1902] AC 83; Cook v Deeks, [1916] 1 AC 554. ......................................... 18
C-194/14 P AC-Treuhand v European Commission, [2015] ECLI 717. ................................. 10
Carew and Company Ltd v Union of India, 1975 AIR 2260. .................................................... 2
Chini Mill Karamchari Sangh v State of UP, 2010 SCC OnLine All 413. ............................. 15
Delhi Jal Board v Grasim Industries, 2017 SCC OnLine CCI 48........................................... 10
Diesel Loco Modernization Works, Indian Railways, Patiala, Punjab v M/s Stone India Ltd and
ors, [2014] CCI 32. ............................................................................................................ 4, 8
DKV Prasad Rao v Govt of Andhra Pradesh, AIR 1984 AP 75.............................................. 17
Films & Television Producers Guild of India v Multiplex Association of India, Mumbai, 2013
SCC OnLine CCI 89. ............................................................................................................. 8
General Manager, Southern Railways v Rangachari, AIR 1962 SC 36. .................................. 1
Har Prasad v Hansram, AIR 1966 All 124. .............................................................................. 1
Hingir Rampur Coal Co Ltd and others v The State of Orissa and others, AIR 1961 SCR 459
.............................................................................................................................................. 15
In Re: Aluminium Phosphide Tablets Manufacturer, [2012] CCI 24. ....................................... 8
In Re: Cartelization case of UPSSCL, 2017 SCC OnLine CCI 72. ........................................... 7
In Re: M/s Sheth & Co and ors, [2015] CCI 12......................................................................... 5
Ishwari Khetan Sugar Mills (P) Ltd and others v State of Uttar Pradesh and others, 1980 (4)
SCC 136. .............................................................................................................................. 17
IT Commissioner v Chunilal, AIR 1968 Pat 364. ...................................................................... 1
Makers UK Ltd v Officer of Fair Trading, [2007] CAT 11. ...................................................... 5
MDD Medical Systems India Private Ltd v Foundation for Common Cause,[2012] CCI 21 ... 8
Nagrik Chetna Manch v Fortified Securities Solutions & ors, 2018 SCC OnLine CCI 9. ....... 9
Nowegijick v The Queen, [1983] CTC 20. ................................................................................. 1
Paterson v Chadwick, [1974] 2 All ER 772 (QBD) .................................................................. 1
Prabhudas Damodar Kotecha v Manhabala Jeram Damodar, (2013) 15 SCC 358............... 12
R v Brisbane Licensing Court, [1920] 28 CLR 23................................................................... 17
Raghunath Rai Bareja v Punjab National Bank, (2007) 2 SCC 230 ....................................... 12
Regal Hastings v Gulliver, [1942] UKHL 1. ........................................................................... 19

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Registrar of Restrictive Trade Agreements v WH Smith and Sons, (1968) 3 All ER 721. ........ 8
Renusagar Power Company Ltd v General Electric Company and Anr, 1985 AIR 1156 ........ 1
Shri Surendra Prasad v M/s Maharashtra State Power Generation Co Ltd, [2013] CCI 84.... 6
Shyamakant Lal v Rambhajan Singh, AIR 1939 FCR 193. ..................................................... 18
SS Light Railway Co Ltd v Upper Doab Sugar Mills Ltd & Anrs, (1960) 2 SCR 926. ............. 1
State of Orissa v MA Tulloch and Co, AIR 1964 SC 1284. .................................................... 15
Vaishnav Shorilal Puri v Kishore Kundanlal Sippy, (2006) 69 SCL 349 (Bom HC DB). ...... 19
VLS Finance Ltd v Union of India, (2013) 6 SCC 278 ............................................................ 12

Statutes

Industries (Development and Regulation) Act 1951, s 18A. ................................................... 16


Industries (Development and Regulation) Act 1951, s 18AA. ................................................ 16
Industries (Development and Regulation) Act 1951, s 18EF. ................................................. 16
Industries (Development and Regulation) Act 1951, s 18FD. ................................................. 16
Industries (Development and Regulation) Act 1951, s 18FE(7).............................................. 16
Industries (Development and Regulation) Act 1951, s 20. ...................................................... 16
The Competition Act 2002, s 19(6) ......................................................................................... 13
The Competition Act 2002, s 19(7). ........................................................................................ 13
The Competition Act 2002, s 2(b). ............................................................................................ 8
The Competition Act 2002, s 2(r) ............................................................................................ 13
The Competition Act 2002, s 2(s) ............................................................................................ 13
The Competition Act 2002, s 2(t) ............................................................................................ 13
The Competition Act 2002, s 27(a).......................................................................................... 13
The Competition Act 2002, s 27(b). ........................................................................................ 12
The Competition Act 2002, s 3(3)(d). ........................................................................................ 3
The Competition Act 2002, s 3(3). .......................................................................................... 13
The Competition Act 2002, s 4(2)(e) ....................................................................................... 13
The Competition Act 2002, s 6 ................................................................................................ 13
The Sale of Goods Act, 1930. .................................................................................................... 2
UK Companies Act, 2006. ....................................................................................................... 18

Regulations

European Regulation (EU) 1/2003 Guidelines on the method of setting fines imposed (2006/C
210/02). ................................................................................................................................ 14

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Books

MP Jain, Indian Constitutional Law (6th edn, LexisNexis 2011) 594. ................................... 17
Oxford English Dictionary (5th edn, 2002). .............................................................................. 1

Online Journals

‘Completing the Structure’, (The March White Paper, 2005) <http://www.dti.gov.uk/bbf/co-


act-2006/white-paper.html>. ................................................................................................ 19
‘Setting of fines for cartels in ICN jurisdiction’ (April 2008)
<http://www.internationalcompetitionnetwork.org/uploads/library/doc351.pdf> accessed
19 August 2018. ................................................................................................................... 14
Ahmore Burger-Smidt, ‘COMMON SHAREHOLDING AND CROSS DIRECTORSHIP – A
COMPETITIVE CONUNDRUM WHEN INVESTING’ (Werksmans Attorney, September
2017) <https://www.werksmans.com/wp-content/uploads/2017/09/17541-September-
Legal-Brief_Competiton-FA.pdf> accessed 15 August 2018. ............................................. 5
BC Jana Mareckova, ‘Detection of bid rigging – theoretical and empirical analysis’(Charles
University in Prague, 17 May 2013) <https://is.cuni.cz/webapps/zzp/download/120126299>
accessed 11 August 2018. ...................................................................................................... 7
Elisabetta Lossa, ‘Red Flags on Bid Rigging in Public Procurement’ (University of Rome)
<https://economia.uniroma2.it/.../YTo0OntzOjI6ImlkIjtzOjM6IjQyNSI7czozOiJpZGEi>
accessed 18 August 2018. ...................................................................................................... 6
Enzo Moavero Milanesi and Alexander Winterstein, ‘Minority shareholdings, interlocking
directorships and the EC Competition Rules – Recent Commission practice’ (Competition
Policy Newsletter, February 2002)
<http://ec.europa.eu/competition/publications/cpn/2002_1_15.pdf> accessed 20 August
2018........................................................................................................................................ 5
Fiona Carlin and Joost Haans, ‘Bid-Rigging Demystified’ (2006) 2 In-House Presp 11
<https://heinonline.org/HOL/Page?collection=journals&handle=hein.journals/inhouse2&id
=12&men_tab=srchresults> accessed 20 August 2018. ........................................................ 4
K Shiva, ‘Curtailing cartelisation through single economic entity doctrine’ (The SCC Online
Blog, 6 February 2018) <https://blog.scconline.com/post/2018/02/06/curtailing-
cartelisation-single-economic-entity-doctrine/> accessed 21 August 2018. ....................... 11

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Lowry J, ‘Codifying the corporate opportunity doctrine: The (UK) Companies Act 2006’
(International Review of Law 2012) <http://dx.doi.org/10.5339/irl.2012.5> accessed 12
August 2018. ........................................................................................................................ 19
Oorvi Mehta, ‘Application of the Single Economic Entity Doctrine to Anticompetitive
Agreements’ (IndiaCorpLaw, 9 February 2018) <indiacorplaw.in/2018/02/application-
single-economic-entity-doctrine-anticompetitive-agreements.html> accessed 18 August
2018...................................................................................................................................... 10
Ray Rees, ‘Tacit Collusion’ (Oxford University Press, 2005)
<https://www.jstor.org/stable/pdf/23606305.pdf?refreqid=excelsior%3Aad6aa9233d54116
54ae0e4aa9cf49900> accessed 31 August 2018. .................................................................. 8

Reports

‘REPORT ON THE NATURE AND IMPACT OF HARD CORE CARTELS AND


SANCTIONS AGAINST CARTELS UNDER NATIONAL COMPETITION LAWS’
(DAFFE/COMP 2002) < http://www.oecd.org/competition/cartels/2081831.pdf> accessed
20 August 2018. ............................................................................................................. 13, 14
Antonio Capobianco, ‘DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS
COMPETITION COMMITTEE’ (Organisation for Economic Co-operation and
Development Reporter, 5 December 2017)
<https://one.oecd.org/document/DAF/COMP/WD(2017)58/en/pdf> accessed 18 August
2018........................................................................................................................................ 9
Nishith Desai, ‘Competition Law in India: A Report on Jurisprudential Trends’ (Nishith Desai
Associates, June 2015)
<http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Competiti
on_Law_in_India.pd> accessed 8 August 2018. .................................................................. 4

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STATEMENT OF JURISDICTION

1. In the present Appeal No. 10/2018 under Section 53T of the Competition Act, 2002
concerning the matter of KIPL v Competition commission of Hoegaarden. The
respondents humbly submit to the jurisdiction of the Hon’ble Supreme Court.
2. In the present Appeal No. 15/2018 under Article 136 of the Constitution of Hoegaarden
concerning the matter of State of Fosters Pradesh v Shri Loki. The respondents humbly
Submits to the jurisdiction of the Hon’ble Supreme Court.
3. In the present Appeal No. 27/2018 under Section 423 of the Companies Act, 2013
concerning the matter of shareholders of MSL v John and others. The respondents
humbly submits to the jurisdiction of the Hon’ble Supreme Court.

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STATEMENT OF FACTS
BACKGROUND

The Union of Hoegaarden is a sovereign, socialist, secular, democratic and republic country
which earlier was a colony of the Heineken Empire. FP is one of the largest states in
Hoegaarden and is highly dependent on sugar cane for its economy. The state economy was
dependent upon the sugar industry so in order to protect the economy the Government acquired
the sick sugar mills and vested the said sugar mills in the Government Company namely
‘FPSSCL’.

GOVERNMENT’S ACTION TO REHABILITATE SICK INDUSTRIES

Government after acquiring the sick mills took all reasonable measures, discharged the huge
financial recurring of the sugar mills on account of cane prices and wages by means of
extending loan and thereby converting the loans into shares. GoFP and FPSSCL invested huge
amount in order to rehabilitate the Mills, but yet after three decades all their efforts went futile.
Therefore on 21st August 1995, FPSSCL was referred to BIFR under SICA, 1985. BIFR
declared FPSSCL to be a sick company and appointed IFCI limited for revival of FPSSCL.
The overall losses with respect to 11 operating sugar mills remained with FPSSCL grew to Rs
432 crores in the year 2007

DISINVESTMENT PROCEDURE

GOFP decided to privatise all sugar mills under FPSSCL and FPSSCDL simultaneously. SOFP
promulgated an ordinance which was later replaced by the legislation Fosters Pradesh Sugar
Undertaking (Acquisition) Amendment Act, 2009 (‘Amendment Act 2009’).

Independent valuers carried out the valuations of mills as per the valuation guidelines issued
by the disinvestment commission of GoH and GoFP. IFCI suggested expected price to the
CGS, which was duly accepted by them. Government and by means of “EOI cum RFQ” and
“RFP” bids were invited from bidders for purchase of 11 sugar units of FPSSCL through
“Slump Sale Agreement” and “as is where” basis.

BIDDING PROCESS

Financial bids were received from three companies namely KIPL, ZPL and BFL It was further
alleged that the bidders who had participated in the bidding cartelized by quoting lower prices.
CCH started investigating into the matter even when the matter was pending before the GOFP.

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DG’S OBSERVATION AND FURTHER PROCEEDINGS

It was observed that KIPL and BFL submitted bids close to 50 percent of the expected price
and did not participate against each other in SCM round. The DG also examined that two
companies had common directors and shareholders, there were also documentary evidences
found during investigation. DG found no involvement of ZPL in bid rigging. DG concluded
that KPL and BFL violated section 3 of the Competition Act, 2002 of Hoegaarden.

KIPL challenged the Jurisdiction of CCH to investigate, CCH rejected the arguments by KPL
and imposed a penalty of 10 percent .KIPL filed an appeal before COMPAT which was
dismissed, against the order of the COMPAT KIPL filed Civil appeal before the Hon’ble SC.

CHALLENGE TO LEGISLATIVE COMPETENCE OF SOFP AND FURTHER PROCEEDINGS

Shri Loki, challenged the constitutional validity of Sections 3-C and 3-D of the amendment
act, 2009. The Hon’be High Court of FP struck down said provisions of the amended act.
Review petition was filed by SOFP which was dismissed by the High Court, against this order
the SOFP filed an SLP before the Supreme Court which was admitted as Civil Appeal.

ALLEGATIONS AGAINST DIRECTORS OF MSL AND FURTHER COURT PROCEEDINGS

MSL which was a subsidiary of FPSSCL was not well in the era of industrialization. It owned
five small sugar mills located on adjacent piece of land. The board realised that the land could
be congregated into one and utilised for either construction pf a larger mill or could be sold in
entirety for profit. MSL intended to acquire the adjacent land of SGL either by sale purchase
or long term lease to increase the value of property two fold. The owner of SGL refused to sell
the land but agreed to give it on a long term lease. MSL created a subsidiary, FEL for the
acquisition of the two leaseholds. During incorporation of FEL, MSL acquired a share capital
of Rs 20 lakhs. MSL committed only to a maximum amount of Rs 20 lakhs after the directors
agreed to not invest anymore of MSL’s money in FEL. To fund the share capital of deficit, all
directors of MSL subscribed to the shares of FEL to the extent of Rs 5 lakhs without obtaining
authorization from MSL shareholders.. It was later revealed that while incorporation, MSL has
Rs 1 crore lying in free reserves and securities premium account.

An application was filed by the shareholders against the directors before NCLT. NCLT rejected
the petition. Further, NCLAT also rejected the appeal. On which the shareholders filed a civil
appeal before the Hon’ble SC.

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STATEMENT OF ISSUES

ISSUE I

WHETHER COMPETITION COMMISSION OF HOEGAARDEN HAS THE JURISDICTION TO


INVESTIGATE/INQUIRE INTO THE ALLEGATIONS OF BID RIGGING IN THE IMPUGNED CASE.

ISSUE II

WHETHER KIPL AND BFL HAVE ACTED IN CONTRAVENTION OF SECTION 3 OF THE


COMPETITION ACT, 2002.

ISSUE III

WHETHER THE PENALTY IMPOSED BY THE COMPETITION COMMISSION OF HOEGAARDEN ON


KIPL AND BFL IS IN LINE WITH THE SCHEME OF COMPETITION ACT, 2002 AND NECESSARY FOR
THE PURPOSES OF DETERRENCE.

ISSUE IV

WHETHER SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR UNDERTAKING
(ACQUISITION) AMENDMENT ACT, 2009 ARE CONSTITUTIONALLY VALID.

ISSUE V

WHETHER THE DIRECTORS OF MSL AND FEL ARE LIABLE FOR THE PROFITS MADE PURSUANT TO
THE LAND DEAL BY FEL IN THE REAL ESTATE TRANSACTION

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SUMMARY OF ARGUEMNTS

1. THAT THE COMPETITION COMMISSION OF HOEGAARDEN HAS THE


JURISDICTION TO INQUIRE/INVESTIGATE INTO THE ALLEGATION OF BID
RIGGING IN THE IMPUGNED CASE.

It is humbly submitted that the CCH has the jurisdiction to inquire/investigate into the
allegation of bid rigging in the impugned case. The agreement to bid for a sugar mill finds
coverage under Section 3(3) of the Competition Act, 2002. Furthermore, it is submitted that
the phrase ‘engaged in’ as mentioned in Section 3(3) of the Act also covers the future business
activity or activity to be taken after the bidding process. If the parties were allowed to escape
the grasp of the Act by the mere consideration that they are actually engaged in varied
businesses which are distinct from the cartel activity, it would amount to defeating the very
purpose of the provisions of section 3(3) (d) of the Act.

2. THAT KIPL AND BFL HAVE ACTED IN CONTRAVENTION OF SECTION 3 OF


THE COMPETITION ACT, 2002.

It is submitted that KIPL and BFL have acted in contravention of Section 3 of the Competition
Act, 2002. Observations of DG raise a strong possibility of collusion amongst the enterprises.
Secondly, in the absence of any direct evidence, the observations of the DG which amount to
circumstantial evidence in the impugned case should be given due regard. Thirdly, the
agreement between the concerned enterprises i.e. KIPL and BFL falls under the purview of
Section 3(3) of the Competition Act, 2002. Furthermore, it is submitted that the defence of
‘single economic entity’ cannot be availed by the concerned enterprises. Lastly, it is submitted
that there is enough incentive for the enterprises, i.e. KIPL and BFL to act in contravention of
the Competition Act, 2002 and rig the bidding process for the sale of the impugned
undertakings.

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3. THAT THE PENALTY IMPOSED BY THE COMPETITION COMMISSION OF


HOEGAARDEN ON KIPL AND BFL IS IN LINE WITH THE SCHEME OF
COMPETITION ACT, 2002 AND NECESSARY FOR THE PURPOSES OF
DETERRENCE.

It is humbly submitted that the penalty imposed by the CCH on KIPL and BFL i.e. a penalty
of 10% of the average of the turnover for the last three preceding financial years of KIPL and
BFL, is in line with the scheme of the Competition Act, 2002 and necessary for the purposes
of deterrence. There is no reference to the term ‘relevant turnover’ in Section 27(b) of the
Competition Act, 2002. Secondly, keeping in mind the harmful effects of horizontal anti-
competitive agreements and the subsequent need to deter them, high penalties should be
imposed.

4. THAT SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR


UNDERTAKING (ACQUISITION) AMENDEMNT ACT, 2009 ARE
CONSTITUTIONALLY INVALID.

The counsel humbly submits that Sections 3-C and 3-D of the FP Sugar Undertaking
(Acquisition) Amendment Act, 2009 are constitutionally invalid. Section 3-C and 3-D of the
concerned Act are repugnant to the provisions of the IDR Act, 1951 and therefore, outside the
legislative competence of the State of FP. Secondly, Sections 3-C and 3-D brought in by the
Amendment Act of 2009 run against the scheme of the original Act of 1971 (FP Sugar
Undertaking Acquisition Act, 1971).

5. THAT THE DIRECTORS OF MSL AND FEL ARE NOT LIABLE FOR THE
PROFITS MADE PURSUANT TO THE LAND DEAL BY FEL IN THE REAL ESTATE
TRANSACTION

The counsel humbly submits that the directors of MSL and FEL are not liable for the profits
made pursuant to the land deal by FEL in the real estate transaction. Firstly, a contention has
been raised by the counsel against the very locus standi of the shareholders to bring action
against the directors in the impugned case. Secondly, it is submitted that the investment made
by the Directors in FEL was valid and in furtherance of their obligation towards MSL.

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ARGUEMNTS ADVANCED

1. THAT THE COMPETITION COMMISSION OF HOEGAARDEN HAS THE


JURISDICTION TO INQUIRE/INVESTIGATE INTO THE ALLEGATION OF BID
RIGGING IN THE IMPUGNED CASE.
It is humbly submitted that the CCH has the jurisdiction to inquire/investigate into the
allegation of bid rigging in the impugned case. The agreement to bid for a sugar mill finds
coverage under Section 3(3) of the Competition Act, 2002. Furthermore, it is submitted that
the phrase ‘engaged in’ as mentioned in Section 3(3) of the Act also covers the future business
activity or activity to be taken after the bidding process. If the parties were allowed to escape
the grasp of the Act by the mere consideration that they are actually engaged in varied
businesses which are distinct from the cartel activity, it would amount to defeating the very
purpose of the provisions of section 3(3) (d) of the Act.

1.1. THE AGREEMENT TO BID FOR A SUGAR MILL FINDS COVERAGE UNDER SECTION 3(3) OF
THE COMPETITION ACT, 2002.

The language used by the legislature in section 3(1) qualifies ‘production, supply, storage,
acquisition and control of goods’ with the phrase ‘in respect of’. In common parlance the
phrase means ‘as regards’, ‘with reference to’, ‘concerning’, ‘attributable to’ etc. 1

Irrespective of the subject matter, the courts, including the Hon’ble Supreme Court and courts
in foreign jurisdictions2, have given a wide amplitude to the words ‘in respect of’. Various
courts have, time and again, given an extensive dimension to the term ‘in respect of’ and have
used it in the sense of being ‘connected to’, ‘attributable to’.3 Not only have the courts not
hesitated in giving an amplified interpretation to the term in cases ranging from taxation law4
to criminal law5, but in India the same approach figures out in the interpretation of the
Constitution. 6

1
Oxford English Dictionary (5th edn, 2002).
2
Paterson v Chadwick, [1974] 2 All ER 772 (QBD); Nowegijick v The Queen, [1983] CTC 20.
3
Renusagar Power Company Ltd v General Electric Company and Anr, 1985 AIR 1156;
SS Light Railway Co Ltd v Upper Doab Sugar Mills Ltd & Anrs, (1960) 2 SCR 926.
4
IT Commissioner v Chunilal, AIR 1968 Pat 364.
5
Har Prasad v Hansram, AIR 1966 All 124.
6
General Manager, Southern Railways v Rangachari, AIR 1962 SC 36.

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The words ‘in respect of’ forming part of section 3(1) are immediately followed by the words
production, supply, storage, acquisition and control of good and/or provision of services.
Having regard to the interpretation given by the courts to the words ‘in respect of’ and
assigning to the phrase ‘in respect of production of goods…..’ its natural meaning, it is clear
that section 3(1) will not only apply to bare activities of production, supply, storage etc. but
will encompass every activity that is ‘in respect of production, supply, storage etc. of ‘goods’
and/or provision of services’.

Thus, a sugar mill, even though not a good under the Sale of Goods Act 19307, is a
manufacturing unit undertaking the process that is directly related to or in respect of production
of sugar. This makes an agreement to bid for a sugar mill find coverage under the provisions
of section 3(3) of Act for the simple reason that the legislature intended to include all
agreements ‘in respect of’ production, supply etc. under the purview of the Act.

1.2. THE PHRASE “ENGAGED IN” AS MENTIONED IN SECTION 3(3) OF THE COMPETITION ACT
ALSO COVERS THE FUTURE BUSINESS ACTIVITY OR THE BUSINESS TO BE TAKEN AFTER THE

BIDDING PROCESS.

A careful perusal of the language of section 3(3) shows that any agreements, practice, or
decision, including cartels, by enterprises, persons or association thereof is amenable to the
jurisdiction of the Commission if the parties are engaged in identical or similar trade of goods
of provision of service which directly or indirectly engaged in bid rigging/ collusive bidding
which basically means that they are competitors in the market.

As per Black’s Law Dictionary, 9th Edition, engage means: ‘to employ or involve oneself; to
take part in; to embark on.’

When a person or enterprise participates in the process of bidding for a tender there may exist
a situation where he/it may have conceived of the idea of entering into a particular business for
the first time and may not, at that point of time, be in that business at all.

It is submitted that the phrase “Is engaged in production', in the context, takes in not merely
projects which have been completed and gone into production but also blueprint stages,
preparatory moves and like ante-production points.”8

7
The Sale of Goods Act, 1930.
8
Carew and Company Ltd v Union of India, 1975 AIR 2260.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

It is the business activity of the parties that they are actually bidding for and the one regarding
which the violation of law has been alleged which is relevant for the purpose of the applicability
of Section 3(3)(d) Act9 rather than any other business activity that the parties ‘were’ or ‘are’
engaged in. If the parties were allowed to escape the grasp of the Act by the mere consideration
that they are actually engaged in varied businesses which are distinct from sugar production, it
would amount to defeating the very purpose of the provisions of section 3(3) (d) of the Act.
Any construction other than this would mean to say that the new entrants are totally exempt
from the provisions of bid rigging.

2. THAT KIPL AND BFL HAVE ACTED IN CONTRAVENTION OF SECTION 3 OF


THE COMPETITION ACT, 2002.
It is submitted that KIPL and BFL have acted in contravention of Section 3 of the Competition
Act, 2002. Observations of DG raise a strong possibility of collusion amongst the enterprises.
Secondly, in the absence of any direct evidence, the observations of the DG which amount to
circumstantial evidence in the impugned case should be given due regard. Thirdly, the
agreement between the concerned enterprises i.e. KIPL and BFL falls under the purview of
Section 3(3) of the Competition Act, 2002. Furthermore, it is submitted that the defence of
‘single economic entity’ cannot be availed by the concerned enterprises. Lastly, it is submitted
that there is enough incentive for the enterprises, i.e. KIPL and BFL to act in contravention of
the Competition Act, 2002 and rig the bidding process for the sale of the impugned
undertakings

2.1. OBSERVATIONS OF THE DG RAISE A STRONG POSSIBILITY OF COLLUSION AMONGST THE


CONCERNED ENTERPRISES I.E. KIPL AND BFL.

It is submitted that the observations of the DG raise a strong possibility of collusion amongst
the concerned enterprises i.e. KIPL and BFL. The bidding pattern of the two enterprises raises
a strong indication towards the employment of a cover-bidding pattern, which is one of the
most popular forms of bid rigging. Secondly, firms with cross-directorship and shareholding
structures are less likely to compete with each other, as in the impugned case. Thirdly, factors
like consecutive serial numbers of demand drafts, same address etc. raise a strong indication
towards ‘meeting of minds’ between the concerned enterprises. Lastly, it is submitted that the
possibility of bid rigging amongst related enterprises increases in a low competition level
bidding process, with only three bidders.

9
The Competition Act 2002, s 3(3)(d).

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

(i) The bidding pattern of the two enterprises raises a strong indication towards the
employment of a cover-bidding pattern, which is one of the most popular forms of bid
rigging

Complementary bidding or cover bidding occurs when competing bidders agree to submit
token bids that are either too high, do not meet the criteria of the tender, or contain particular
conditions that are unacceptable to the buyer, and are consequently almost certain to be
excluded from the tender. The aim is to create the appearance of competitive bidding taking
place while, in reality, the competing bidders have agreed which company will make the
'winning' bid.10 It is submitted that the bidding pattern of the two enterprises, i.e. KIPL and
BFL raises a strong indication towards the employment of a cover-bidding pattern, which is
one of the most popular forms of bid rigging.

A specific reference must be made to the bidding for three mills: Buckleberry, Blackgate and
Shire. In bidding for the above-mentioned mills, KIPL and BFL were the only competitors.
BFL submitted a technically deficient bid as far as bidding for all the three above- mentioned
mills was concerned and KIPL submitted a bid close to or just above 50 percent of the expected
price11. The concerned enterprises tried to create the appearance of competitive bidding taking
place while, in reality BFL and KIPL knew that BFL’s bids were technically deficient and
therefore, KIPL would automatically become the highest bidder by submitting a bid close to or
just above 50 percent of the expected price, and consequently, win the bid.

In the DLMW Cartelization case12, where two parties out of the three submitted defective bids,
the Competition Commission of India concluded that, “parties had provided complementary /
cover bids to give the façade of compliance and transparency while they were doing so only
with the intention of being rejected to enable the other party to succeed.” Commission thus
concluded that parties which were passed over and the selection of the meritorious bidder was
all part of a preconceived plan in which two other parties would submit defective bids only to
enable the third party to be selected.13 A regard must also be given to the case of Makers UK

10
Fiona Carlin and Joost Haans, ‘Bid-Rigging Demystified’ (2006) 2 In-House Presp 11
<https://heinonline.org/HOL/Page?collection=journals&handle=hein.journals/inhouse2&id=12&men_tab=srchr
esults> accessed 20 August 2018.
11
Moot Proposition, Annexure I.
12
Diesel Loco Modernization Works, Indian Railways, Patiala, Punjab v M/s Stone India Ltd and ors, [2014] CCI
32.
13
Nishith Desai, ‘Competition Law in India: A Report on Jurisprudential Trends’ (Nishith Desai Associates,
June 2015)
<http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Competition_Law_in_India.pd>
accessed 8 August 2018.

4
UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

Ltd. v OFT14, where the Competition Appellate Tribunal (CAT) recognized cover pricing as
one of the common forms of bid rigging and held that, “ Cover pricing gives the impression of
competitive bidding but in reality, contracts agree to submit token bids that are not acceptable.”

Therefore, in light of the above-mentioned authorities, it is submitted that BFL had provided
cover bids to give an impression of competitive bidding, while it was only doing so with the
intention of being rejected by the management authorities to enable the other party, i.e. KIPL
to succeed. The same event happening in the bidding not just for one, but three mills raises a
strong possibility of a pre-conceived plan of the two parties to rig the bidding process.

(ii) Firms with cross-directorship and shareholding structures are less likely to compete
with each other

There are some natural anti-competitive concerns which are attached to firms with cross-
directorship and shareholding structures. One of the concerns raised by horizontal
shareholdings as well as cross-directorships is that firms are less likely to compete vigorously
with each other if they have common owners or shareholders.15 The second concern can be
explained through the support of an example. If X holds significant shares in both Y and
competing Z, X will try to further his interests in both Y and Z, which is apt to lessen
competition between the latter two. Thirdly, interlocking directorships may act as a conduit for
anti-competitive transfer of price and strategic information.16 Even the Indian Competition
Authorities have recognized the above-mentioned concerns. In Bomb Containers17, the CCI
held that, “The statements of the representatives of some of the Opposite Parties set out below
show that the companies are closely related with common or related directors. This clearly
indicates that out of the thirteen manufacturers i.e. Opposite Parties in the market, the modus
operandi of at least ten of these firms is governed by the principles of mutual understanding
and benefit. The Commission is convinced that common ownership and cross-directorship of
a large number of Opposite Parties coupled with the fact that a number of Opposite Parties

14
Makers UK Ltd v Officer of Fair Trading, [2007] CAT 11.
15
Ahmore Burger-Smidt, ‘COMMON SHAREHOLDING AND CROSS DIRECTORSHIP – A
COMPETITIVE CONUNDRUM WHEN INVESTING’ (Werksmans Attorney, September 2017)
<https://www.werksmans.com/wp-content/uploads/2017/09/17541-September-Legal-Brief_Competiton-
FA.pdf> accessed 15 August 2018.
16
Enzo Moavero Milanesi and Alexander Winterstein, ‘Minority shareholdings, interlocking directorships and
the EC Competition Rules – Recent Commission practice’ (Competition Policy Newsletter, February 2002)
<http://ec.europa.eu/competition/publications/cpn/2002_1_15.pdf> accessed 20 August 2018.
17
In Re: M/s Sheth & Co and ors, [2015] CCI 12.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

quoted same rates indicates to a conclusion that the Opposite Parties acted pursuant to an anti-
competitive agreement/ understanding to manipulate the bidding process in the present case.”

Drawing a direct parallel to the case at hand, it is submitted that the cross directorship and
shareholding structure between the concerned enterprises i.e. KIPL and BFL gives rise to some
natural anti-competitive concerns as stated above. In addition to this structure, KIPL had
declared BFL as an enterprise where its key management personnel were able to exercise
significant influence.18 There is a strong possibility that using the said influence the key
management personnel of KIPL were able to influence the bidding policy of BFL. Furthermore,
it is important that the fact of common directorship and cross-shareholding structure must not
be viewed in isolation. When coupled with the bidding behaviour of the two enterprises, it
gives rise to a strong possibility of ‘meeting of minds’ and collusion.

(iii) Factors like consecutive serial numbers of demand drafts, same address etc. raise a
strong indication towards ‘meeting of minds’ between the concerned enterprises

Elisabetta Lossa, a Professor at the University of Rome and an authority on European


Competition Law, in her presentation titled ‘Red Flags on Bid Rigging in Public Procurement’
noted that similarity in bid documents is a major warning sign of collusion. She recognized
factors such as use of another bidder’s letterhead or fax number, packaging from different
companies containing similar postmarks or post metering machine marks etc. as major red flags
on bid rigging.19 A regard must also be given to the case of In Re Surendra Prasad 20, wherein
CCI rejected the argument of ‘mere secretarial task’ pertaining to similarities in tender
documents (purchasing of tender documents on the same day, consecutive serial number of
receipts etc.) and stipulated that, “The Commission finds no merit in the plea of OP-4 that
procurement of tender documents is a mere secretarial task which involves no discussion or
meeting of minds. The Commission notes that such behaviour coupled with other factors in no
uncertain terms reflects the close coordination amongst these OPs when they were expected to
compete to secure maximum business for their firms.”

Drawing a direct parallel to the case at hand, it is submitted that factors like consecutive serial
numbers on the demand drafts submitted by KIPL and BFL, the withdrawal of demand drafts

18
Moot Proposition ¶ 12.
19
Elisabetta Lossa, ‘Red Flags on Bid Rigging in Public Procurement’ (University of Rome)
<https://economia.uniroma2.it/.../YTo0OntzOjI6ImlkIjtzOjM6IjQyNSI7czozOiJpZGEi> accessed 18 August
2018.
20
Shri Surendra Prasad v M/s Maharashtra State Power Generation Co Ltd, [2013] CCI 84.

6
UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

on the same date by debiting the account of KIPL, same address on the stamp papers submitted
by both the Companies for Performance Guarantee etc. raise a strong indication towards
‘meeting of minds’ between the concerned enterprises. Such factors are not mere coincidences
and when coupled with the bidding pattern of KIPL and BFL give rise to a strong possibility
of collusion amongst the enterprises.

(iv) The possibility of bid rigging amongst related enterprises increases in a low competition
level bidding process, with only three bidders

A low level of competition is one of the potential supporting factors of bid rigging. The
mechanism is simple. The smaller the number of competitors is, the lower are the transaction
costs to make a bid rigging deal. Potential gains from bid rigging are profitable for all members.
The forms of bid rigging supported by low level of competition are cover bidding and bid
rotation. Cover bidding and bid rotation arise when firms know in advance that there is no other
competitor or very few competitors and therefore, make a bid rigging deal in advance. 21 Even
the Performance Audit Report of the Comptroller and Auditor General of India on Sale of
Sugar Mills of UPSSCL augmented the above-mentioned proposition.22 The report dealing
with similar facts as in the impugned case stated that, “there was lack of Competition due to
participation by only three Companies of which two were closely related to each other resulting
in receipt of bids far below the Expected Price in respect of three mills.”

Drawing a direct parallel to the case at hand, it is submitted that there was a lack of Competition
in the bidding process giving rise to higher probabilities of bid rigging. The bidding process
saw the participation of only three Companies, i.e. KIPL, ZPL and BFL out of which KIPL and
BFL are related enterprises. Their (KIPL and BFL) knowledge of the fact that there is only one
other competitor gives rise to high chances of cover bidding because of substantial influence
on each other’s actions and low transaction costs of bid rigging.

2.2. THE OBSERVATIONS OF THE DG WHICH AMOUNT TO CIRCUMSTANTIAL EVIDENCE IN THE


IMPUGNED CASE SHOULD BE GIVEN DUE REGARD IN THE ABSENCE OF ANY DIRECT EVIDENCE

It is submitted that the observations of the DG which amount to circumstantial evidence in the
impugned case should be given due regard. The behaviour of the concerned enterprises i.e.
KIPL and BFL has all the characteristics of tacit collusion or concerted action. Tacit collusion

21
BC Jana Mareckova, ‘Detection of bid rigging – theoretical and empirical analysis’(Charles University in
Prague, 17 May 2013) <https://is.cuni.cz/webapps/zzp/download/120126299> accessed 11 August 2018.
22
In Re: Cartelization case of UPSSCL, 2017 SCC OnLine CCI 72.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

refers to a situation where competing firms co-ordinate their actions in order to reach an anti-
competitive objective without the presence of any formal and explicit agreement.23
Competition Act 2002 covers tacit collusion under the definition of agreement by stipulating
that, ““agreement” includes any arrangement or understanding or action in concert, — (i)
whether or not, such arrangement, understanding or action is formal or in writing”24.

The existence of direct evidence being rare in cases of tacit collusion for anti-competitive
objectives is a known fact. CCI in In Re: Diesel Loco Modernization Works25 observed that,
“There is rarely a direct evidence of action in concert and in such situation the commission has
to determine whether those involved in such dealings had some form of understanding and
were acting in cooperation.” People who combine together to keep up prices do not shout it
from the housetops. They keep quiet, they make their own arrangements in cellular, where no
one can see. They will not put anything into writing nor even words.26

It is submitted that in the absence of any direct evidence, as in the impugned case, the
circumstantial evidence should be given a high regard as an analysis of circumstantial evidence
coupled with the behaviour of the firms is the means through which the determination of anti-
competitive conduct can be made. This proposition has been supported by the CCI in a number
of cases.27 In the orders such as Aluminium Tablets manufacturer order28, the CCI clarified that
the standard of proof in cartel cases was based on preponderance of probability, where proof
beyond reasonable doubt need not be established. It was stated that in cases of collusive
bidding, the concerted conducted of cartel members may provide evidence of the type that
conclusively points to the existence of cartelization. For instance, identical bids submitted by
the bidders, along with a common entry for all the three firms in the visitor’s register and
common behaviour was held by the CCI to be conclusive proof of cartelization among the three
29
entities. The same view was also stipulated in the infamous Cement Cartel case. A regard

23
Ray Rees, ‘Tacit Collusion’ (Oxford University Press, 2005)
<https://www.jstor.org/stable/pdf/23606305.pdf?refreqid=excelsior%3Aad6aa9233d5411654ae0e4aa9cf49900>
accessed 31 August 2018.
24
The Competition Act 2002, s 2(b).
25
Diesel Loco Modernization Works, Indian Railways, Patiala, Punjab v M/s Stone India Ltd and ors, [2014] CCI
32.
26
Registrar of Restrictive Trade Agreements v WH Smith and Sons, (1968) 3 All ER 721.
27
MDD Medical Systems India Private Ltd v Foundation for Common Cause,[2012] CCI 21; Films & Television
Producers Guild of India v Multiplex Association of India, Mumbai, 2013 SCC OnLine CCI 89.
28
In Re: Aluminium Phosphide Tablets Manufacturer, [2012] CCI 24.
29
Builders Association of India v Cement Manufacturer Association and ors, [2012] CCI 42.

8
UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

must also be given to the rule in foreign jurisdictions. According to EU guidelines, assessment
of infringement can be based on circumstantial evidence if an overall

pattern of guilt emerges.30 OECD report mentions that the better practice is to use the
circumstantial evidence holistically, giving it a cumulative effect rather than on an item-by-
item basis.31

Drawing a direct parallel to the case at hand, it is submitted that in the absence of any direct
evidence in the impugned case, the observations of the DG which act as circumstantial evidence
should be given due regard by the courts. Factors like cross-directorship and shareholding
structures between KIPL and BFL, documentary evidences like consecutive serial number on
demand drafts issued on the same date debiting the bank account of KIPL, same address on the
stamp papers submitted by both the Companies for Performance Guarantee etc. when viewed
holistically, coupled with an analysis of the behaviour of the enterprises in the bidding process,
raises a strong indication towards collusion between the enterprises.

2.3. THE AGREEMENT BETWEEN THE ENTERPRISES FALLS UNDER THE PURVIEW OF SECTION
3(3) OF THE COMPETITION ACT, 2002.
It is submitted that the agreement between the enterprises falls under the purview of Section
3(3) of the Competition Act, 2002. The contravention of Section 3(3) of the Competition Act,
2002 does not restrict itself to agreements between enterprises engaged in similar or identical
production or trading of goods or provision of services. The scope of the section extends to
agreements where the enterprises are not engaged in similar or identical production or trading
of goods or provision of services, as in the impugned case.

One of the leading authorities to support the abovementioned proposition is Nagrik Chetna
Manch v Fortified Securities Solutions & Ors.32. The CCI rejected the claims that the parties
are not covered under the scope of Section 3(3) of Competition Act, 2002 merely because they
are not engaged in similar trade, they would still be covered under section 3(3)(d) of the Act if
they participated in cartel like activity. The CCI further observed: “if the parties were allowed
to escape the grasp of the Act by considering them as not competitors on the pretext that they

30
Antonio Capobianco, ‘DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION
COMMITTEE’ (Organisation for Economic Co-operation and Development Reporter, 5 December 2017)
<https://one.oecd.org/document/DAF/COMP/WD(2017)58/en/pdf> accessed 18 August 2018.
31
ibid.
32
Nagrik Chetna Manch v Fortified Securities Solutions & ors, 2018 SCC OnLine CCI 9.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

are actually engaged in varied businesses, it may defeat the very purpose of the provisions of
Section 3(3) (d) of the Act”.

Even in the European Union, agreements between enterprises which are not engaged in similar
or identical production or trading of goods or provision of services fall under the purview of
anti-competitive agreements under Article 101 of the TFEU.33

Drawing a direct parallel to the case at hand it is submitted that even though KIPL and BFL
are engaged in different business activities and trading or production of goods or provision of
services, an agreement between them to collude for the purposes of the bid process would fall
under the purview of Section 3(3) of the Competition Act.

2.4. THE DEFENCE OF ‘SINGLE ECONOMIC ENTITY’ CANNOT BE AVAILED BY THE CONCERNED
ENTERPRISES I.E. KIPL AND BFL.

The single economic entity doctrine lays down that, irrespective of their legal status, two or
more enterprises can be said to form a single economic unit for the purposes of competition
law. The basic implication of the doctrine is that a single economic entity cannot attract the
application of Section 3 of the Competition Act, since it cannot collude with itself. The central
guiding logic behind the doctrine is that, if the enterprises never were in a competitive
relationship to begin with, the relationship is not capable of being restricted by any
agreement.34 It is submitted that the defence of single economic entity cannot be availed by the
concerned enterprises i.e. KIPL and BFL in the impugned case.

The CCI in the recent case of Delhi Jal Board v. Grasim Industries35, rejected the plea of
‘single economic entity’ as urged by GIL and ABCIL. CCI held that the ABCIL companies are
separate legal entities and they participated in the tenders individually and separately. It
observed that where two or more entities of the same group decide to separately submit bids in
the same tender, they have consciously decided to represent themselves to the procurer that
they are independent decision-making centres.

Furthermore, the doctrine has attracted widespread criticism from a number of competition
authors around the world. The main objective behind the enactment of Section 3 is to prevent
collusion among the players of market that causes disturbance to new entrants or the pre-

33
C-194/14 P AC-Treuhand v European Commission, [2015] ECLI 717.
34
Oorvi Mehta, ‘Application of the Single Economic Entity Doctrine to Anticompetitive Agreements’
(IndiaCorpLaw, 9 February 2018) <indiacorplaw.in/2018/02/application-single-economic-entity-doctrine-
anticompetitive-agreements.html> accessed 18 August 2018.
35
Delhi Jal Board v Grasim Industries, 2017 SCC OnLine CCI 48.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

existence players. The single economic entity doctrine provides for vast exploitation of the
basic objective of the Act. Many foreign investors purchase the shares of multiple companies
indulged in a particular field to enter the Indian market but would not exercise any substantial
control over those companies. This would be sufficient for Indian players to enter into anti-
competitive agreement and evade themselves from the purview of Competition Act and defraud
the administration by invoking the doctrine of single economic entity. Thus, this doctrine is
paving a way for a very dangerous jurisprudence, which gives a legal yet morally wrong way
to use the vacuum present in the antitrust litigation.36

Drawing a direct parallel to the case at hand, it should be noted that KIPL and BFL represented
themselves as independent decision-making centres by separately submitting bids for the sale
of sugar mills. If they had to represent themselves as one economic unit, they should have
submitted joint bids for the sugar mills. Furthermore, looking at the misuse of the doctrine in
the recent times, it is submitted that the scope of the doctrine shouldn’t extend to enterprises
such as KIPL and BFL, where neither a parent subsidiary relationship nor an agency
relationship exists. There is no existence of common ownership of the two companies either.
Therefore, it is submitted that the defence of ‘single economic entity’ cannot be availed by the
said enterprises.

2.5. THERE IS ENOUGH INCENTIVE FOR THE ENTERPRISES, I.E. KIPL AND BFL TO ACT IN

CONTRAVENTION OF THE COMPETITION ACT, 2002 AND RIG THE BIDDING PROCESS FOR THE

SALE OF THE IMPUGNED UNDERTAKINGS.

The counsel humbly submits that there is enough incentive for the enterprises i.e. KIPL and
BFL to act in contravention of the Competition Act, 2002 and rig the bidding process for the
sale of the impugned undertakings. KIPL is a manufacturer, distiller and refiner of and deals in
methylated spirit rectified spirit, alcohol, molasses, sugar and its business activity include
manufacturing & sale of sugar cane products etc. and BFL’s main business activities is to
manufacture, process, prepare, pressure, refine, bottle and dealing in foods meats eggs, poultry,
canned and tinned and processed foods, protein, health and instant foods of all kinds including
baby and dietetic foods etc.37

36
K Shiva, ‘Curtailing cartelisation through single economic entity doctrine’ (The SCC Online Blog, 6 February
2018) <https://blog.scconline.com/post/2018/02/06/curtailing-cartelisation-single-economic-entity-doctrine/>
accessed 21 August 2018.
37
Moot Proposition ¶ 9.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

Looking at the nature of the business activities of both the enterprises, it cannot be disputed
that sugar is an essential resource for the business activities of both the enterprises. The
concerned sugar mills even though loss making, could have been improved (in terms of
production capacity and other technical capabilities) by subsequent investment by the
enterprises, using the money which was saved on account of a low-price cover bidding policy
which was followed by the enterprises. The sugar mills would provide more sugar to the
enterprises, at a lower cost and would mean a bargain to the enterprises due to the low pricing
policy adopted by them in the bidding process in comparison to their expected price.

3. THAT THE PENALTY IMPOSED BY THE COMPETITION COMMISSION OF


HOEGAARDEN ON KIPL AND BFL IS IN LINE WITH THE SCHEME OF
COMPETITION ACT, 2002 AND NECESSARY FOR THE PURPOSES OF
DETERRENCE.
It is humbly submitted that the penalty imposed by the CCH on KIPL and BFL i.e. a penalty
of 10% of the average of the turnover for the last three preceding financial years of KIPL and
BFL, is in line with the scheme of the Competition Act, 2002 and necessary for the purposes
of deterrence. There is no reference to the term ‘relevant turnover’ in Section 27(b) of the
Competition Act, 200238. Secondly, keeping in mind the harmful effects of horizontal anti-
competitive agreements and the subsequent need to deter them, high penalties should be
imposed.

3.1. THERE IS NO REFERENCE TO THE TERM ‘RELEVANT TURNOVER’ IN SECTION 27(B) OF


THE COMPETITION ACT, 2002.

Clause (b) of Section 27, in clear terms, stipulates penalty on the ‘turnover’ i.e. average of the
turnover for the last three preceding financial years and it plainly suggests that this ‘turnover’
has to be of the enterprise which had contravened the provisions of Section 3 or Section 4. The
clear intention of the legislature was to take into consideration the entire turnover of the
enterprise. Reading the word ‘relevant’ into the provision thereto, would be doing violence to
the plain language of the statute, by adding a word which is not there.

The courts ought not to add words to limit or alter the meaning of the statute, where the
language of a statute is plain and clear.39 A plain reading of Section 27, which includes Section

38
The Competition Act 2002, s 27(b).
39
Prabhudas Damodar Kotecha v Manhabala Jeram Damodar, (2013) 15 SCC 358; Raghunath Rai Bareja v
Punjab National Bank, (2007) 2 SCC 230; VLS Finance Ltd v Union of India, (2013) 6 SCC 278; BALCO v Kaiser
Aluminium Technical Services Inc, (2012) 9 SCC 552.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

27(a)40 as well clearly indicates that the target of the penalty is the ‘person’ or the ‘enterprise’
that has acted in violation of the Act, and not the ‘product’ or the ‘service’ alone which is made
subject to the violation. Furthermore, it must be noticed that wherever the Act wanted to
introduce the concept of ‘relevance’ the word ‘relevant’ has in fact, been used in the
Appropriate Sections. A reference should be given to Section 2(r), 2 (s), 2(t), 4(2) (e), 6, 19(6),
19(7)41 etc. where the expression ‘relevant’ has been used.

3.2. KEEPING IN MIND THE HARMFUL EFFECTS OF HORIZONTAL ANTI-COMPETITIVE

AGREEMENTS AND THE SUBSEQUENT NEED TO DETER ENTERPRISES FROM ENTERING THEM,

HEAVY PENALTIES SHOULD BE IMPOSED.

Horizontal anti-competitive competitive agreements are the most serious form of anti-
competitive conduct, and therefore a stricter approach in dealing with such offences has been
stipulated in the Competition Act, 2002 which is evident by the employment of the ‘rule of
presumption’ if such conducts are established.42

(i) The role played by and need for heavy penalties for deterrence

Looking at the extra-ordinary harmful effects that horizontal agreements produce43, there is a
need to deter enterprises from entering them and that can be achieved by the imposition of
heavy penalties. The above-mentioned proposition is the main philosophy behind Section 27(b)
of the Act. The principle purpose behind such a provision is to give a message that the persons
and enterprises should not indulge in such anti-competitive agreements as otherwise they will
be inflicted with heavy penalties. A regard must also be given to the 2008 report of the
International Competition Network. Deterrence (either general or specific) has been identified
as one of the overarching objectives of the fining policy by the agencies of the EU, the US,
Canada, Japan, Germany, the Netherlands, Hungary, Italy, the Czech Republic, Austria,
Norway, Switzerland, Serbia, Russia, New Zealand, Jordan, Brazil and France. Where fines
are the only sanction (as in India), they must bear the entire burden of deterrence, and a priori
may need to be higher than in jurisdictions where they are combined with other sanctions (such

40
The Competition Act 2002, s 27(a).
41
The Competition Act 2002, s 2(r), The Competition Act 2002, s 2(s), The Competition Act 2002, s 2(t), The
Competition Act 2002, s 4(2)(e), The Competition Act 2002, s 6, The Competition Act 2002, s 19(6) and The
Competition Act 2002, s 19(7).
42
The Competition Act 2002, s 3(3).
43
‘REPORT ON THE NATURE AND IMPACT OF HARD CORE CARTELS AND SANCTIONS AGAINST
CARTELS UNDER NATIONAL COMPETITION LAWS’ (DAFFE/COMP 2002) <
http://www.oecd.org/competition/cartels/2081831.pdf> accessed 20 August 2018.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

as incarceration).44 The principal purpose of sanctions in cartel cases is deterrence. Strong


sanctions against enterprises and individuals increase the effectiveness of leniency programs
in uncovering cartels and provide incentives to cartel participants to co-operate with a cartel
investigation.45

(ii) Position in foreign jurisdictions

It is important to give regard to the practice of setting fines in other jurisdictions as well. In
Serbia the fine is determined as a percentage between 1% and 10% of the total turnover of the
undertaking concerned, taking into account the seriousness and the impact of the infringement,
as well as its circumstances, the degree of fault, the personal conditions of the offender and its
conduct after the commission of the infringement. A similar position is followed in the case of
Ireland as well.46 Paragraph 21 of the EU regulation no.1/2003 as a general rule, the proportion
of the value of sales taken into account will be set at a level of up to 30% of the value of sales.
Paragraph 30 of the same regulation talks about specific increase in penalties for deterrence.47
Therefore, the rule of imposing penalty on the entire turnover of the involved enterprise and
the imposition of high magnitude penalties is not exclusive to India.

Drawing a direct parallel to the case at hand it is submitted that a penalty of 10% of the average
of the turnover for the last three preceding financial years of KIPL and BFL as imposed by the
CCH is necessary for the purposes of deterrence. The Indian Competition Law does not provide
for sanctions such as incarceration, and therefore, fines must bear the entire burden of
deterrence.

4. THAT SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR


UNDERTAKING (ACQUISITION) AMENDMENT ACT, 2009 ARE
CONSTITUTIONALLY INVALID.
The counsel humbly submits that Sections 3-C and 3-D of the FP Sugar Undertaking
(Acquisition) Amendment Act, 2009 are constitutionally invalid. Sections 3-C and 3-D of the
concerned act are repugnant to the provisions of the Industries (Development and Regulation)

44
‘Setting of fines for cartels in ICN jurisdiction’ (April 2008)
<http://www.internationalcompetitionnetwork.org/uploads/library/doc351.pdf> accessed 19 August 2018.
45
‘REPORT ON THE NATURE AND IMPACT OF HARD CORE CARTELS AND SANCTIONS AGAINST
CARTELS UNDER NATIONAL COMPETITION LAWS’ (DAFFE/COMP 2002) <
http://www.oecd.org/competition/cartels/2081831.pdf> accessed 20 August 2018.
46
‘Setting of fines for cartels in ICN jurisdiction’ (April 2008)
<http://www.internationalcompetitionnetwork.org/uploads/library/doc351.pdf> accessed 19 August 2018.
47
European Regulation (EU) 1/2003 Guidelines on the method of setting fines imposed (2006/C 210/02).

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

Act, 1951 (IDR Act) and therefore, outside the legislative competence of the State of FP.
Secondly, Sections 3-C and 3-D brought in by the Amendment Act of 2009 run against the
scheme of the original Act of 1971 (FP Sugar Undertaking Acquisition Act, 1971).

4.1. SECTIONS 3-C AND 3-D OF THE FOSTERS PRADESH SUGAR UNDERTAKING ACQUISITION
(AMENDMENT) ACT, 2009 ARE REPUGNANT TO THE PROVISIONS OF IDR ACT, 1951 AND

THEREFORE, OUTSIDE THE LEGISLATIVE COMPETENCE OF THE STATE OF FP.

Sections 3-C and 3-D are in direct repugnance with several provisions of the IDR Act, 1951.
Repugnancy arises when two competent enactments by two different legislatures collide and
the Constitution gives superseding powers to one of them. However, this is not the only criteria
for the test of repugnancy. The co-existence of two enactments in which one affects the
functioning of the other also amounts to repugnancy. Where such is the position, the
inconsistency is demonstrated not by a detailed comparison of provisions of the two statutes
but by the mere existence of the two pieces of legislation.48

Keeping in mind the above-mentioned authorities, it is submitted that permitting the State to
legislate to close the scheduled undertakings and to permit change of land use is nothing but
making entrenchment in the field occupied by 1951 Act. The same proposition was augmented
by the Hon’ble Allahabad High Court, in the case of Chini Mill Karamchari Sangh v State of
UP49. The court provided an illustration depicting the repugnance between the two legislations
and observed that, “Supposing the State Legislature due to increase of number of diabetic
patients in the State of U.P. decides that all sugar industries be closed and marketing complexes
be constructed there on, whether such legislative enactment of the State to close all the sugar
undertakings shall not entrench the field covered by the 1951 Act? The answer has to be that
State cannot be conceded such legislative power which may have the effect of closure of sugar
industries. The 1951 Act was enacted with the object of development and regulation of a
number of important industries, the activities of which affect the country as a whole and the
development of which must be governed by economic factors of all-India import. It is common
knowledge that there are certain scheduled industries which are located in one particular State
or in few particular States but they cater the entire country for example industries relating to
fuels. If it is conceded that State Legislature is empowered to close all such industries in
particular State, the purpose and object of 1951 Act shall be frustrated making the development

48
Hingir Rampur Coal Co Ltd and others v The State of Orissa and others, AIR 1961 SCR 459; State of Orissa
v MA Tulloch and Co, AIR 1964 SC 1284.
49
Chini Mill Karamchari Sangh v State of UP, 2010 SCC OnLine All 413.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

and regulation of industries under 1951 Act impossible.” Therefore, it is submitted that in the
impugned case the provisions of IDR Act and Sections 3-C and 3-D of the Amendment Act,
2009 are in repugnance with each other. Section 3-C and 3-D directly affect the functioning of
the provisions of the IDR Act, consequentially frustrating the object and purpose of the 1951
Act as stipulated in the Chini Mills case.

Furthermore, a brief analysis and comparison of provisions of the IDR Act with Sections 3-C
and 3-D of the Amendment Act would show the clear repugnance. The counsel states that on a
clearer insight of the said affected sections by the enactment of the provisions of the
Amendment Act, it can be discerned that Sections 3-C and 3-D cannot co-exist with the
provisions of the IDR Act. The following sections under the IDR Act, 1951 are in conflict with
Sections 3-C and 3-D of the Amendment Act.

COMPARATIVE ANALYSIS

Section 18A50 contains the provisions empowering the Central Government to assume
management or control of an industrial undertaking in certain cases. Section 18AA51 is another
provision where the Central Government may take over industrial undertakings without
investigation under certain circumstances. Section 18FD52 empowers the Central Government
to take decision with regard to managed companies. There are certain other provisions in the
Act of 1951 which provide for several kinds of control and fields in which Central Government
can take steps with regard to regulation and management of scheduled undertakings. Section
18FE53 again contains the concept of sale to the highest bidder as running concern. One more
noticeable provision is Section 18FE(7)54, which provides that where no offer of price is equal
to, or more than the reserve price, the industrial undertaking shall be purchased by the Central
Government at the reserve price. Section 20 of the IDR Act55 states the general prohibitions of
taking over the management or control of the industrial undertakings. It denudes the State
government to take over the management or control of the industrial undertakings under any
law for the time being in force which authorises any such Government or local authority to do
so.

50
Industries (Development and Regulation) Act 1951, s 18A.
51
Industries (Development and Regulation) Act 1951, s 18AA.
52
Industries (Development and Regulation) Act 1951, s 18FD.
53
Industries (Development and Regulation) Act 1951, s 18EF.
54
Industries (Development and Regulation) Act 1951, s 18FE(7).
55
Industries (Development and Regulation) Act 1951, s 20.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

It is to be noted that the primary object of the IDR Act is the development and regulation of
the undertakings. The word ''regulation' has a wide import. The word ''regulation' is a broad
impact having wide meaning comprehending all facets not only specifically, enumerated in the
Act, but also embraces within its fold the power incidental to the regulation envisaged in good
faith with an eye to the public welfare.56 On a comprehensive understanding of the sections, it
is deduced that the Centre’s power to control and manage the scheduled industries invariably
extends to the power to acquire. On the other hand, Section 3-C of the Amendment Act, 2009
permits change of land use depicting nothing but a provision enabling the state government to
close the running sugar mills and permit alternative usage of the same land which was meant
to be used for growing of sugarcanes. Section 3-D of the Amendment Act, 2009 permits the
closure of the sugar mills. There cannot be a co-existence of the two enactments at the same
time. When the Centre is enabled to control, manage and acquire the sugar mills then
automatically the state of FP is denuded of the power to change the use of land and close the
sugar mills.

Therefore, Sections 3-C and 3-D of the Amendment Act, 2009 are repugnant to the provisions
of the IDR Act and therefore, lie outside the legislative competence of the State Legislature.

4.2. SECTIONS 3-C AND 3-D BROUGHT IN BY THE AMENDMENT ACT OF 2009, RUN AGAINST
THE SCHEME OF THE ORIGINAL ACT OF 1971 (FP SUGAR UNDERTAKING ACQUISITION ACT,

1971).
There may be inconsistency in the actual terms of the competing statutes.57 Sections 3-C and
3-D of the Amendment Act, 2009 being not related to acquisition or requisition of the property
run contrary to the FP Sugar Undertaking Acquisition Act, 1971 which was enacted with the
object of renovating and rehabilitating the sugar mills which were not being properly run and
managed by owners of the sugar mills. The Amendment Act, 2009 has been enacted with object
of selling or closing the operating sugar mills which is not the subject matter of acquisition and
requisition. The Amendment Act, 2009 is diagonally opposite to the principal Act, 1971. The
Amendment Act, thus, is a colourable exercise of power by the State Legislature.58 If that is
so, the legislation in question is invalid.59 The provisions of the later enactment are so
inconsistent with or repugnant to the provisions of the earlier one that the two cannot stand

56
DKV Prasad Rao v Govt of Andhra Pradesh, AIR 1984 AP 75.
57
R v Brisbane Licensing Court, [1920] 28 CLR 23.
58
Ishwari Khetan Sugar Mills (P) Ltd and others v State of Uttar Pradesh and others, 1980 (4) SCC 136.
59
MP Jain, Indian Constitutional Law (6th edn, LexisNexis 2011) 594.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

together.60 In such a case, repeal by implication is the only suitable course of action. Thus,
Sections 3-C and 3-D of the Amendment Act, 2009 run against the scheme and objective of
the Act of 1971 and hence is inconsistent to the latter.

5. THAT THE DIRECTORS OF MSL AND FEL ARE NOT LIABLE FOR THE
PROFITS MADE PURSUANT TO THE LAND DEAL BY FEL IN THE REAL ESTATE
TRANSACTION.
The counsel humbly submits that the directors of MSL and FEL are not liable for the profits
made pursuant to the land deal by FEL in the real estate transaction. Firstly, a contention has
been raised by the counsel against the very locus standi of the shareholders to bring action
against the directors in the impugned case. Secondly, it is submitted that the investment made
by the Directors in FEL was valid and in furtherance of their obligation towards MSL.

5.1. THE SHAREHOLDERS DO NOT HAVE THE LOCUS STANDI TO BRING ACTION AGAINST THE
DIRECTORS.

The shareholders in the impugned case are aggrieved by the fact that the directors, instead of
investing corporate’s money, invested their own money for raising the remaining 50% of the
capital required by FEL. The shareholders themselves implicitly authorized that the remaining
50% of the Share Capital will be raised from anywhere but MSL when they authorized that
MSL will only commit up to 20 Lakhs i.e. 50% of the share capital of FEL to acquire the lands.

Also, a reference should be made to Section 263 of the UK companies Act, which lays down
the conditions to be met by a member seeking the court’s permission to bring a derivative claim
and states that permission will be refused if the director’s conduct in question has been
authorised or ratified by the company.61

The courts have declared that such authorization by shareholder will take away their right to
bring a derivative action.62

Therefore, the prior ratification on the part of company by the shareholders resulted in loss of
their locus standi for this particular matter.

60
Shyamakant Lal v Rambhajan Singh, AIR 1939 FCR 193.
61
UK Companies Act, 2006.
62
Burland v Earle, [1902] AC 83; Cook v Deeks, [1916] 1 AC 554.

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UMCS, 2018 SUMMER EDITION – MEMORIAL ON THE BEHALF OF RESPONDENTS

5.2. THE INVESTMENT MADE BY THE DIRECTORS OF MSL IN FEL WAS VALID AND IN

FURTHERANCE OF THEIR OBLIGATION TOWARDS MSL.

It is humbly submitted that the investment made by the directors of MSL in FEL was valid and
in furtherance of their obligation towards MSL. The directors were not involved in a situation
where their direct or indirect interest conflicted with the interests of the company. Furthermore,
MSL did not plan to take all the risks of investment on its own, and therefore created a
subsidiary in the first place to raise extra capital.

(i) The directors were not involved in a situation where their direct or indirect interest conflicted
with the interests of the company.

The question arises as to when can it be said that an ‘opportunity’ is an opportunity of the
company? The English jurisprudence surrounding the corporate opportunity doctrine reveals
that opportunity is the one that falls within the company’s contemplation or expectation. 63

The contention of the shareholders in the impugned case that the directors misused the
corporate opportunity will fall flat as the remaining 50% of the investment made by the
directors was never contemplated by MSL in the first place, on the other hand, the shareholders
already authorized that the remaining 50% of the capital will be taken from somewhere else.

As per settled law in India, directors cannot be held liable for deviating a corporate opportunity,
if the corporate was not in a position to exploit the opportunity.64

The law should only prevent the exploitation of business opportunities where there is a clear
case for doing so.65

(ii) MSL did not plan to take all risk of investment on its own, therefore it created a subsidiary
in first place to raise extra capital

It was argued in the case of Regal Hastings v Gulliver66 that the directors of Regal did not want
to expose the company to the risks of running the Cinema de Luxe and the Elite, so it formed

63
Lowry J, ‘Codifying the corporate opportunity doctrine: The (UK) Companies Act 2006’ (International Review
of Law 2012) <http://dx.doi.org/10.5339/irl.2012.5> accessed 12 August 2018.
64
Vaishnav Shorilal Puri v Kishore Kundanlal Sippy, (2006) 69 SCL 349 (Bom HC DB).
65
‘Completing the Structure’, (The March White Paper, 2005) <http://www.dti.gov.uk/bbf/co-act-2006/white-
paper.html>.
66
Regal Hastings v Gulliver, [1942] UKHL 1.

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a subsidiary company, Hastings Amalgamated Cinemas Ltd (‘Amalgamated’), with a nominal


capital of 5,000 £1 shares, to take a lease of those two cinemas.67

The facts of Regal Hastings correspond to that of the impugned case to a large extent, and
therefore, it is submitted that it was the duty of the directors to not expose MSL to significant
risks of investment as the company was already running in loss. To fulfil that objective, they
first formed a subsidiary and decided not to spend more than Rs. 20 lakhs in investment,
considering any contingent risk thereupon.68

67
ibid.
68
Moot Proposition ¶ 20.

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PRAYER

Wherefore in the light of the facts of the case, issues raised, arguments advanced and authorities
cited, may the Hon’ble Court be pleased to hold, adjudge and declare that:

In Civil Appeal No. 10/2018

 That the CCH has the jurisdiction to investigate into the matter.

 That KIPL has entered into an agreement with BFL to rig the bidding process.

 That the penalty imposed by the CCH is in line with the scheme of the Competition

Act, 2002 and necessary for the purpose of deterrence.

In Civil Appeal No. 15/2018

 That Sections 3-C and 3-D of the Fosters Pradesh Sugar Undertaking (Acquisition)

Amendment Act, 2009 are unconstitutional.

In Civil Appeal No. 27/2018

 That the Directors are not liable for the profits made pursuant to the land deal by FEL

in the real estate transaction.

All of which is most respectfully submitted

Counsels on the behalf of the Respondents

xiii