Compat quashes CCI's Rs 6,316 crore fine on cement companies

New Delhi: In a major ruling, the Competition Appellate Tribunal Friday set aside Rs 6,316.59 crore penalty imposed on 11 cement manufacturers by CCI for cartelisation and directed the fair trade regulator to pass a fresh order in three months.

The tribunal also allowed the cement companies to withdraw the 10 percent of the penalty amount already deposited with the Competition Commission of India (CCI).

The judgement 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 watchdog had slapped 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.

When contacted, a senior CCI official said it would comply with the Compat order.

According to Compat, 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.

"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," the tribunal said.

Following the Compat order, the shares of cement companies, including JK Cement, Ambuja Cements, ACC and UltraTech Cement, today rose by up to 4.5 percent on BSE.

CCI had passed the orders after an investigation into complaints, including from the 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 the 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," the tribunal ruled.

In two separate orders passed today, Compat 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."

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 tribunal said.

"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 added.

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.

Compat further said the case records showed that after about two months of the presentation made by BAI and 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 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 that 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.