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Compat Quashes CCI's Rs 6,316 Crore Penalty On Cement Firms
In a major verdict, the Competition Appellate Tribunal on Friday (11 December) set aside Rs 6,316.59 crore penalty imposed on 11 cement firms by CCI on cartelisation charges and asked the fair trade regulator to hear the matter afresh
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In a major verdict, the Competition Appellate Tribunal on Friday (11 December) set aside Rs 6,316.59 crore penalty imposed on 11 cement firms by CCI on cartelisation charges and asked the fair trade regulator to hear the matter afresh.
The tribunal also allowed the cement manufacturers to withdraw the 10 per cent penalty amount already deposited with the CCI (Competition Commission of India), which has been asked to pass a fresh order within three months.
The judgment follows appeals filed by the cement firms and their industry body Cement Manufacturers Association against the two CCI orders passed in June—July 2012, wherein the regulator has imposed a cumulative penalty of Rs 6,316.59 crore on cartelisation charges.
The companies included ACC, Ambuja Cements, Binani Cements, Century Textiles Ltd, India Cements, JK Cements, Lafarge India, Madras Cements, Ultratech, JP Associates and Shree Cements.
The CCI had passed the orders after an investigation into complaints, including from Builders Association of India (BAI) against alleged price cartelisation among cement firms.
The orders were later challenged at Compat, which today ordered that “the impugned order is set aside and the matter is remitted to the Commission (CCI) for fresh adjudication of the issues relating to alleged violation” of the relevant sections of the Competition Act.”
“The appellant shall be entitled to withdraw the amount deposited by them in compliance of the interim order passed by the Tribunal,” Compat ruled.
The companies had earlier deposited 10 per cent of their respective penalty amounts.
In two separate orders passed today, the Compat also said, “The Commission (CCI) shall hear the advocates/representatives of the appellants and BAI and pass fresh order in accordance with law.
“We hope and trust the Commission shall pass fresh order as early as possible but within a period of three months from the date, which may be notified after receipt of this order.”
The Tribunal also said “before parting with this order, we consider it necessary to mention that we have referred to various provisions of the Act (un—amended and amended) and Regulations and analysed the same to emphasise the proceedings held under the Act and the Regulations should be just and fair and in consonance with the principles of natural justice as engrafted in the Act and the Regulations.
“We also feel the time has come for the Commission to evolve a comprehensive protocol and lay down guidelines for conducting investigation/inquiry in consonance with the rules of natural justice.
“It should be realised that much of the appellate litigation would be obviated if a just and fair procedure is adopted for conducting investigation and inquiry and passing of orders under Section 27, 28 and the provisions contained in Chapter VI of the Act.”
These sections relate to the cartelisation and other violations. The CCI’s penalty against cement manufacturers has been one of the biggest imposed so far by the regulator and the Tribunal’s verdict in this case may have repercussions for other cases also where CCI has imposed hefty penalties.
The Compat order said that whether the CCI Chairperson, who did not hear arguments of the learned counsel representing the appellants could become a party to the final order passed by the CCI, was one of the questions which arose in the appeals filed against CCI order of June 20, 2012.
Compat further said the case records showed that after about two months of the presentation made by BAI and the CCI before the Parliamentary Standing Committee in the context of allegation of cartelisation by the manufacturers of cement and manipulation of prices by them, BAI had filed a complaint with CCI on July 26, 2010.
In the complaint, it was alleged that the CMA and 11 cement manufacturers formed a cartel and did not undertake production as per their installed capacity resulting in exorbitant rise in the price of cement. It was also alleged the cement manufacturers had deliberately manipulated the price of cement affecting the public at large.
Consequently, CCI ordered a probe into the matter, which found major cement manufacturers were controlling the cement market in India and were in violation of various provisions of the Competition Act.
On June 20, 2012, the CCI comprising the Chairperson and six Members passed two orders and declared that the appellants had acted in violation and imposed cumulative penalty of Rs 6,316.59 crore.
All the pages of both the orders have been initialled by the Chairperson. On the last pages of both the orders the Chairperson and six Members appended their signatures without any date.
It was argued before the Compat by counsel for one of the appellants that the “impugned order is vitiated due to violation of the rule that ‘only the one who hears can decide’ They pointed out that even though the CCI Chairperson was not a party to the hearing held between February 21—23, “and had no idea about the contentions raised by the counsel appearing for the parties, not only became a party to the final order but also authored the same.”
“According to the learned senior counsel, this amounts to gross violation of the rule of fairness and impartiality and casts a shadow on the integrity of the process adopted by the Commission for adjudicating the issues raised in the information filed by BAI,” the Compat order observed.
Six appellants namely —— Lafarge, Century Textile, JK Cement, UltraTech, CMA and India Cement initially attacked the impugned order on the ground that the CCI Chairperson was not entitled to participate in the decision making process.
The remaining appellants took this ground by way of amendment.
“In any case, this is not a matter in which the appellants are trying to take advantage of some order passed by the Tribunal in which the issue relating to illegality committed due to participation of Chairperson of the Commission had already been decided,” Compat said.
It ruled the arguments of the counsel for CCI that “no prejudice has been caused to the appellants due the participation of the Chairperson in the decision—making process cannot be accepted.
“It is not possible to make a guesswork of what would have been the fate of the case if the Chairperson had not taken part in the decision—making process.
“One does not know whether the remaining six Members would have reached a positive conclusion that the appellants are not guilty of violating Sections... the Act and/or they would not have imposed the particular penalty under ... (the relevant section of the Act,” it added.