Keshav Bihani v. CCI: NCLAT upholds the Railways polyacetal-tubes cartel penalty and clarifies Section 48 individual liability

The facts in brief

The Competition Commission of India, by a final order dated 22 June 2022, had found seven suppliers of polyacetal protective tubes — components used in axle-box guides for coaches manufactured at the Integral Coach Factory at Chennai and various zonal railway workshops — guilty of forming and operating a sustained bid-rigging cartel in violation of Sections 3(3)(a), (b), (c) and (d) of the Competition Act 2002.

The cartel's modus operandi was reconstructed from a multi-source evidentiary record: emails between cartel members allocating particular tenders to designated winners; revision of allocation patterns when the procurement quantity changed; induction of new firms into the pool to absorb capacity; agreed methods for calculating quoted prices to maintain a coordinated bid spread; complaints amongst members about price under-cutting in particular tenders; and coordinated withdrawal of offers to ensure that the designated winner secured the contract. The investigation was triggered by a leniency application filed under Section 46 of the Act, which gave the Director General access to internal communications and meeting records.

CCI imposed penalties on the seven firms under Section 27 at 5% of average annual turnover for the three preceding financial years — below the statutory maximum of 10% but above the symbolic. It also imposed parallel penalties on the active partners, proprietors and directors of each firm under Section 38 read with Section 48 of the Act, applying the same percentage to their average annual income.

M/s Hari Narayan Bihani, one of the seven implicated firms, and Keshav Bihani — the active partner of that firm — filed Competition Appeals (AT) Nos. 44 and 45 of 2022 before the National Company Law Appellate Tribunal under Section 53A. The Principal Bench at New Delhi heard the appeals together and, on 10 April 2026, dismissed both, upholding the CCI's findings on cartelisation and its quantification of penalties on both the firm and Keshav Bihani as the active partner.

The Section 3(3) cartel finding

The first ground of challenge was that the CCI's reliance on the leniency application — supplemented by contemporaneous emails — did not meet the evidentiary threshold for a Section 3(3) cartel finding. The Bench rejected the contention, applying the well-settled principle that Section 3(3) raises a presumption of "appreciable adverse effect on competition" once horizontal arrangements among competitors are established by direct or circumstantial evidence corroborated to a sufficient standard.

The Bench's reasoning sits with the steadily strengthening NCLAT and CCI line — running through the Beer Cartel (United Breweries, Carlsberg) orders and the Cement Cartel re-imposition orders — that leniency disclosures are not "tainted" evidence merely because they originate from a self-interested co-conspirator. The leniency regime under Section 46 and the CCI Lesser Penalty Regulations is the principal investigative tool against secret cartels; treating leniency disclosures as inadmissible or as second-class evidence would gut the regime.

What matters under the standard the Bench applied is corroboration: leniency disclosures must be tested against contemporaneous documentary record — emails, meeting minutes, call records, internal accounting entries — and accepted only where the corroboration is sufficient. On the Bihani facts, the contemporaneous email exchanges among the cartel members allocating tenders and revising sharing patterns provided the corroborative spine.

The Section 27 enterprise penalty and Excel Crop Care

The second ground was that the CCI had not properly applied the Supreme Court's "relevant turnover" methodology in Excel Crop Care Ltd. v. CCI (2017) 8 SCC 47. Excel Crop Care held that for a multi-product enterprise found to have cartelised in respect of a single product line, the penalty under Section 27 is to be computed on the turnover relevant to that product line, not on the enterprise's aggregate turnover across all activities.

The Bench accepted the Excel Crop Care framework but found that, on the record, CCI had in fact applied a relevant-turnover calibration. The 5% figure was selected with reference to the appellants' turnover from polyacetal-tube supply to Indian Railways — the cartelised segment — not from any unrelated business activity. The 5% sat well below the 10% statutory maximum and was therefore within the range that Excel Crop Care permits and that the Supreme Court's subsequent decisions have endorsed as proportionate.

The Bench also held that the rejection of further mitigation arguments (small-enterprise status, alleged limited role, first-time offender pleas) was within CCI's enforcement discretion. The 5% figure already incorporated mitigation; reducing it further would have undermined deterrence in the public-procurement segment where cartelisation imposes substantial cost on the State exchequer.

The Section 48 question — "punished accordingly"

The most consequential doctrinal contribution of the judgment is on Section 48 individual liability. The Bihani appeal contended that Section 48 cannot be invoked against an active partner of a partnership firm: the phrase "punished accordingly" in Section 48(1) of the pre-2023 Amendment text, it was argued, refers to penal sanction (imprisonment or quasi-criminal punishment) and not to the civil penalty architecture under Sections 27 and 38.

The Bench rejected this construction and laid down a clear interpretive rule for the pre-Amendment text.

Three propositions follow.

First, "punished" and "penalty" are to be read together in the Section 48 context — the legislature did not draw a sharp distinction between penal and civil liability that would insulate individuals from the proportionate-penalty architecture applicable to their enterprises. The Bench's reading treats Section 48 as a derivative-liability provision: where the enterprise has been found liable, the active individual at the helm is liable in the same proportion.

Second, the base of the individual penalty is the individual's income (not turnover, which is an enterprise concept). The methodological switch reflects the structural difference between enterprises and individuals but preserves the proportionality logic.

Third, the percentage applied is the same as that selected for the enterprise — 5% in the Bihani case. This is the "scale-and-proportion" principle: if the enterprise is penalised at 5% of three-year turnover, the active individual is penalised at 5% of three-year income.

The reading settles a question that had divided competition-law practitioners since the inception of Section 48 enforcement. Some had read "punished accordingly" as importing the Section 27 cap (up to 10% of turnover, but with no specific cap for individuals); others had read it as importing a separate penal sanction regime distinct from the civil-penalty architecture. The NCLAT's "same-scale-and-proportion-applied-to-income" formula provides a workable, predictable rule for both enforcement and compliance.

The Excel Crop Care methodological line for Section 48

A subsidiary doctrinal contribution is that the Excel Crop Care "relevant turnover" methodology, which applies under Section 27 to the enterprise, does not displace the Section 48 methodology for the individual. The individual's penalty base is income — and income is, for active partners and senior executives in mid-sized firms, typically not disaggregated by product line in the way that enterprise turnover is. The Bench did not require the CCI to apply a relevant-income calibration on the Bihani facts, treating the individual's aggregate income as the appropriate Section 48 base.

The position may be revisited in future cases involving senior executives of large multi-product enterprises where the executive's income is genuinely traceable to specific business lines (through stock-based compensation tied to product-line performance, for example). For now, the aggregate income base is the operational standard for Section 48 calculations.

The 2023 Amendment and what carries forward

The Competition (Amendment) Act 2023 re-cast Section 48 along with other provisions of the Competition Act. The amended text refines the individual-liability architecture, and the next round of cases under the post-2023 regime will need to reckon with whether the Bihani "same scale and proportion" rule survives the textual changes. The Bench expressly confined its interpretive holding to the pre-Amendment text — a careful judicial economy that preserves the question for first-principles consideration under the new statute.

That said, the underlying proportionality logic — derivative individual liability tracking enterprise liability in scale — has a strong policy and constitutional grounding that is likely to carry through the textual transition. Significant departure from the Bihani framework would require an affirmative statutory direction that the Amendment does not, on its face, provide.

After the judgment

The decision will be cited in pending NCLAT cartel appeals — particularly those involving public procurement across Indian Railways, defence procurement, Food Corporation of India tenders, state Public Works Department tenders, and Bharat Heavy Electricals Limited. A wave of CCI cartel orders from 2020 through 2024 is making its way through the NCLAT appellate calendar; the Bihani doctrinal framework will be the reference point for individual-liability quantification in each.

A Special Leave Petition from Keshav Bihani to the Supreme Court is anticipated, principally to test the Section 48 "punished accordingly" interpretive question. The Supreme Court has not previously had occasion to construe Section 48 individual liability at the merits level. A definitive Supreme Court ruling — particularly one that holds under the pre-Amendment text — would settle the question for the residual stock of pending pre-Amendment cases.

The judgment also strengthens the leniency-application regime. By treating leniency disclosures as substantive evidence when corroborated, the NCLAT preserves the principal investigative architecture against secret cartels. Compliance teams in firms that may have exposure should review their internal protocols and, where appropriate, consider the leniency pathway — the Bihani affirmation that leniency-protected applicants secure penalty reduction while non-applicants face full enforcement is the structural incentive that the Section 46 regime is designed to deliver.

Trade associations involved in tender-pooling or bid-coordination practices — even those that operate informally through email or messaging channels — should treat the Bihani record as a cautionary template. Email and call records have proven, repeatedly, to be the evidentiary spine of CCI cartel cases; informal coordination leaves a documentary trail that contemporary digital forensics readily reconstructs.

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Sources

1. Mondaq — Antitrust and Competition Newsletter, April 2026 (NCLAT polyacetal-tubes cartel appeal coverage): https://www.mondaq.com/india/cartels-monopolies/1789330/antitrust-and-competition-newsletter-|-april-2026
2. Mondaq — "CCI Busts Cartel Of Seven Suppliers Of Polyacetal Protective Tubes For Axle To Indian Railways Through Leniency Route" (background to the 22 June 2022 CCI order): https://www.mondaq.com/india/cartels-monopolies/1206248/cci-busts-cartel-of-seven-suppliers-of-polyacetal-protective-tubes-for-axle-to-indian-railways-through-leniency-route
3. NCLAT cause-list for 10 April 2026 (confirming hearing of Comp. App. (AT) Nos. 44 & 45 of 2022): https://nclat.nic.in/sites/default/files/2026-04/10.04.2026.pdf
4. Cyril Amarchand Blogs — Competition Law 2026 enforcement digest: https://corporate.cyrilamarchandblogs.com/category/competition-law/
5. BarandBench — Competition law coverage 2026: https://www.barandbench.com/news/litigation