India: Appellate Tribunal Of Competition Commission Lifts Penalty Imposed On Cement Manufacturers

Last Updated: 7 January 2016
Article by Agram Legal Consultants

The Competition Commission of India ("CCI") by its order dated June 20, 2012 ("CCI Order") had imposed a penalty of approximately `63,000,000,000 (Indian Rupees Sixty three billion) ("Penalty") on 11 (eleven) major cement manufacturers and also on the Cement Manufacturers' Association, including industry heavyweights - Associated Cements Company Limited, Lafarge India Private Limited ("Lafarge"), Ambuja Cements Limited and Ultratech Cement Limited, for indulging in cartelisation of cement manufacturing, in contravention of the Competition Act, 2002 ("Competition Act").

The CCI Order was passed pursuant to a complaint filed by the Builders' Association of India, alleging that the cement manufacturers were indulging in monopolistic and restrictive trade practices entailing price parallelism, by limiting/ restricting the production of cement as against the available/ actual capacity of production. The CCI had prima facie concluded that the cement manufacturers were involved in cartelisation and had ordered the Director General ("DG") to investigate into the matter, which was subsequently delegated to the Joint DG. The Joint DG's report concluded that the cement manufacturers were controlling the cement market by way of collusion and price fixing and that the top 5 (five) cement companies were controlling more than 50% (fifty percent) of the market share. Thereafter, the CCI after hearing all the parties and providing an analysis on the information available, passed an order that levied the Penalty on the cement manufacturers for cartelisation of the cement manufacturing business.

The cement manufacturers made separate appeals to the Competition Appellate Tribunal ("COMPAT") against the CCI Order and in the interim were made to deposit 10% (ten percent) of their individual penalties with the CCI. The COMPAT consolidated the said appeals and by its order dated December 11, 2015, provided interim relief to the cement manufacturers and overruled the CCI Order. Salient features of the COMPAT order are summarised below:

  1. The COMPAT summarised the findings and observations made in the CCI Order and did not question the findings of the CCI or the Joint DG report;
  2. It was pointed out by the counsels of Lafarge, that the chairperson of the CCI was not present during 3 (three) consecutive hearings and was not made aware of the contentions raised by the cement manufacturers, therefore vitiating the process adopted by the CCI while passing the order;
  3. Further, it was also submitted that the Chairperson had not only been made party to the CCI Order but had in fact authored it;
  4. The counsels for CCI argued that the absence of the Chairperson does not invalidate the CCI Order in any way, it was further submitted that the process of natural justice was duly followed and that the Chairperson was present for the remaining hearings;
  5. However, the COMPAT cited a plethora of judgments emphasising the importance of following due procedure and adopting the principles of natural justice. The COMPAT, relying on various judgements observed that, as per the principles of natural justice, it cannot be argued that a judicial body would have nevertheless arrived at the same decision, regardless of the breach of natural justice or even if the case was conducted as per procedural norms, the decision would have been the same;
  6. The COMPAT further stressed that "justice should not only be done but be seen to be done" and accordingly concluded that it cannot be presumed that the fate of the CCI Order would have been the same, had the Chairperson presided over the all the hearings. The COMPAT held that, due process of natural justice had not been followed, since the Chairperson had not heard the arguments of the cement manufacturers and the presence of the Chairperson during submission of arguments may have affected the final decision arrived by the remaining 6 (six) members;
  7. The COMPAT therefore redirected the case to the CCI for fresh hearings and submission and directed that a fresh order be passed within 3 (three) months.

The COMPAT order emphasizes the importance of following due procedure. It is pertinent to note that the CCI Order was not overruled on merits of the appeal but due to procedural deficiencies. The COMPAT in its order stressed on the requirement to evolve a comprehensive protocol and guidelines for conducting investigations/ inquiry in consonance with the principles of natural justice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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