On May 14, 2020, CCI dismissed allegations against State Bank of India (‘SBI’), M/s Patanjali Ayurveda (‘Patanjali’) and M/s International Traders (‘IT’) of committing fraud and colluding with the objective of taking the informant’s basmati rice processing unit in the garb of debt recovery under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’)^[1]. The informant had alleged that SBI being the leader of a consortium of lender banks had declared its account as a Non-Performing Asset (‘NPA’), and initiated debt recovery proceedings under the SARFAESI Act. To this extent, SBI had invited bids for sale of the informant’s basmati rice processing unit which was mortgaged as the primary security to the consortium. The Informant alleged that SBI committed fraud by undervaluing the processing unit for the purposes of inviting public bids with a view to ensure a favourable treatment to Patanjali and IT during the auction. It further alleged that while Patanjali and IT participated as independent bidders in the bidding process, they were working in tandem as Patanjali had paid the token money on behalf of the latter, to enable it to participate as an independent bidder. Lastly, it also alleged that SBI had abused its dominant position by conducting the auction in an illegal fashion, violating Section 4 of the Competition Act, 2002 (‘Competition Act’).

As a preliminary objection to CCI’s jurisdiction on the issue, SBI argued that the auction was conducted under the SARFAESI Act which was a special act and therefore, such auction could not be investigated under any other law. However, CCI rejected this argument citing Section 62 of the Competition Act which clarifies that the Competition Act is applicable in addition to all the existing enactments, to all matters that fall within its purview. Since the allegations in the information were those of bid-rigging (specifically provided for under Section 3(3)(d) of the Competition Act), CCI had jurisdiction to assess those allegations.

CCI at the outset noted that any bank under the SARFAESI Act had a right to enforce its security interest and classify the account of a defaulter as an NPA. It further noted that SBI being a secured creditor was not similarly placed as Patanjali and IT, which were both traders; and therefore, an allegation against SBI under Section 3(3)(d) of the Competition Act would not materialise. Specifically, with regard to Patanjali and IT, it noted that the informant did not adduce any evidence to support its allegation that Patanjali and IT acted in tandem during the bidding process.

Lastly, it was also noted that an auction/transaction initiated by a bank/financial institution for the purpose of recovery in terms of provisions of the SARFAESI Act may not amount to violation of the provisions of the Competition Act. Accordingly, CCI rejected the allegation of abuse of its dominance position against SBI closed the matter in terms of Section 26(2) of the Competition Act.

[1] RH Agro Private Limited v. State Bank of India & Ors., Case No. 44 of 2019, order delivered on 14 May 2020.