Tribunal sets aside Rs 6,316-crore CCI fine against 11 cement firms

The tribunal also freed the 11 companies to withdraw the Rs 630 crore deposited by them in compliance of its interim order

The Competition Appellate Tribunal on Friday revoked the Competition Commission of India’s (CCI’s) order imposing a combined penalty of Rs 6,316 crore on 11 cement companies for allegedly forming a price cartel.

The tribunal quashed the commission’s order after observing Ashok Chawla, CCI chairperson, who is scheduled to retire in January, was party to the order despite not being present during hearings. The commission has been asked to issue a fresh order within three months. An email to Chawla’s office remained unanswered.

The tribunal also allowed the 11 cement companies to withdraw the Rs 630-crore deposited by them in compliance of its interim order. The interim order on May 2013 had stayed the penalty but asked the companies to deposit 10 per cent of it pending disposal of their appeal.
 

In June 2012, the commission had fined ACC, Ambuja Cements, UltraTech Cement and Jaiprakash Associates a little over Rs 1,000 crore each for forming a cartel. The other companies fined included Madras Cements, Century Cement, Binani Cement, Lafarge India, JK Cement, India Cements and Grasim Cements (now merged with UltraTech). The Cement Manufacturers’ Association was also a party in this case and it was fined a token amount.

The Builders’ Association of India filed the case at CCI in 2010 against the 11 cement manufacturers, alleging they had formed a cartel and were not producing to capacity, resulting in an exorbitant rise in the price. It was also alleged the manufacturers had deliberately manipulated the price of cement.

Friday’s order did not prevent cement counters on BSE from coming under selling pressure. Jaiprakash Associates’ shares were down 2.53 per cent at Rs 10.77, Ultratech 1.29 per cent at Rs 2,777.45, ACC 0.59 per cent at Rs 1,316.40 and Ambuja Cement 0.53 per cent at Rs 188.75.

“In our view, the prejudice caused to the appellants is writ large on the face of the record … the Chairperson did not have the opportunity of hearing the arguments of the advocates for the parties, which lasted for three days i.e. 21st, 22nd and 23rd February, 2012, and yet he became party to the decision,” the tribunal ruled.

UNFOLDING OF EVENTS

• July 26, 2010: Builders association files case in CCI against 11 cement firms & manufacturer’s association accusing cartelisation
• Sept 15,  2010: CCI orders detailed probe by DG office
• Dec 21, 2011: DG office says firms controlling supply by tacit agreements, gives report to CCI
• Feb 21, 2012: CCI hears arguments on report by DG office
• June 20, 2012: CCI fines firms and association for Rs 6,316.6 crore
• May 17, 2013: COMPAT stays the fine, but asks firms to deposit 10% of it pending the appeal
• Dec 11, 2015: COMPAT sets aside CCI order

“Obviously, he did not know what are the nature and contents of the arguments of the seven senior advocates and other advocates, who appeared for the parties,” it added.

The tribunal found the impugned order (of the commission) to be vitiated due to violation of one of the facets of the principles of natural justice. Consequently, it did not consider it necessary to “deal with and decide other points argued by the counsel for the appellants for assailing the order under challenge”. The commission has now been asked by the tribunal to again hear the arguments of all the cement companies as well as the Builders’ Association of India and issue a fresh order within three months.