Compat quashes CCI's Rs6,316-cr penalty on cement firms

Cement companies have made a major victory with the Competition Appellate Tribunal (Compat) setting aside a Rs6,316.59-crore penalty imposed on 11 cement firms by the Competition Commission of India (CCI) on charges of cartelisation.

In two separate orders passed today, the Compat asked the fair trade regulator to hear the matter afresh and pass a judgement within three months and allowed the cement companies to withdraw the penalty amount deposited with the CCI.

The tribunal allowed the 10 cement companies - ACC, Ambuja Cements, Binani Cements, Century Textiles Ltd, India Cements, JK Cements, Lafarge India, Madras Cements, Ultratech, JP Associates and Shree Cements - to withdraw the 10 per cent penalty amount already deposited with the CCI.

The Commission shall hear the advocates/representatives of the appellants and pass fresh order in accordance with law, Compat said.

''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.''

The orders come on appeals filed by the cement firms and the industry body Cement Manufacturers Association against two CCI orders passed in June-July 2012, wherein the regulator had imposed a cumulative penalty of Rs6,316.59 crore on cartelisation charges.

CCI had imposed the penalty after investigations into a complaint by the Builders Association of India (BAI) where it was alleged that the CMA and 11 cement manufacturers were acting as a cartel and that they deliberately kept production levels much below their installed capacity, resulting in exorbitant rise in the price of cement.

It was also alleged the cement manufacturers had created artificial shortages to manipulate the price thereby harming the interests of the public at large.

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.

The CCI, comprising the chairman and six members passed the two orders on 20 June 2012, declaring the appellants had acted in violation and imposing cumulative penalty of Rs6,316.59 crore.

The cement companies and their association, CMA, then moved the Competition Appellate Tribunal (Compat) against the CCI orders. 

According to the cement firms, all the pages of both the orders have been initialled by the chairperson and that on the last pages of both the orders the chairperson and six members had appended their signatures without any date.

Counsel for the appellants argued before the Compat 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 did not hear counsel for the cement makers between February 21 and 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.''

''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.