NCLAT refuses to overturn 6,300 crore penalty imposed by CCI on cement cartel

The National Company Law Appellate Tribunal (NCLAT) today upheld the decision by which the Competition Commission of India (CCI) imposed a cumulative penalty of Rs. 6,300 crore on eleven companies forming part of the cement cartel..In an order passed today, the NCLAT Bench headed by Chairperson Justice (Retd.) SJ Mukhopadhaya dismissed the appeals filed by the cement companies, which challenged the CCI order passed in August 2016..On a complaint filed by Builders Association of India back in 2010, Ambuja Cements, ACC Limited, Jaiprakash Associates, Cement Manufacturers’ Association, Century Textiles, Ramco Cements, India Cements, UltraTech Cements, Nuvoco Vistas, Binani Cement and JK Cement were found guilty of contravening Sections 3(3)(a) and (b) of the Competition Act, 2002..In June 2012, the CCI had found 11 cement companies guilty of cartelization on the basis of price parallelism, production parallelism and dispatch parallelism, and had imposed a penalty at the rate of 0.5 times of their profit for the years 2009-10 and 2010-11..This order was appealed against in the now defunct Competition Appellate Tribunal (COMPAT), which set aside the CCI order and remanded the case for fresh adjudication vide an order dated December 11, 2015..The CCI went on to uphold its decision and the imposition of penalty amounting to Rs. 6300 crore on the companies. In a separate order, a penalty of 397.51 crore on Shree Cements was upheld..This order was then challenged by the companies before the NCLAT..The following are the counsel who represented various parties in the case:.CompanySenior CounselLaw Firm/Assisting CounselAmbuja CementsAryama Sundaram, Ramji SrinivasanTrilegal (led by Partner Nisha Kaur Uberoi)ACCGopal Subramanium, Ramji SrinivasanShardul Amarchand Mangaldas (led by Partner Harman Singh Sandhu)Jaiprakash AssociatesAmit SibalLuthra & Luthra (led by Partners GR Bhatia and Kanika Chaudhary Nayar)Cement Manufacturers’ AssociationRamji SrinivasanJeevan Prakash, Tushar BhardwajCentury Textiles–Pramod B Agarwala, Aayush AgarwalaRamco CementsMohan ParasaranT Srinivasa Murthy, Shruti IyerIndia CementsCS VaidyanathanAditya VermaUltraTech CementsGourab BanerjiSameer ParekhNuvoco Vistas–Somasekhar Sundaresan, assisted by Trilegal team led by Nisha Kaur UberoiBinani Cement–Abhinav S Raghuvanshi, Prateek Tiwari and Sagarika RawatJK CementAN HaksarPK BhallaCCISalman KhurshidGaggar & Partners (led by Vaibhav Gaggar), Chambers of Samar Bansal (led by Samar BansalBuilders Association of India–Seth Dua Associates (Now Advaita Legal).After hearing the parties, the NCLAT noted that the most significant piece of evidence was the fact that the appellant were acting in concert to use the Cement Manufacturers’ Association as a platform to discuss pricing, sensitive information relating to production, capacity, dispatch etc. with each other..Before dismissing the appeal, the issue that cropped up before the Bench was whether such agreement between the cement companies attracted Sections 3(3)(a) and (b) of the Act. It noted,.“…there being a percentage change in the prices and particularly in the month of October over September (2007-2011) for the Southern States and for the month of February over January (2007-2011) for Central, Northern and Eastern States highlighting the unprecedented trend for the percentage increase in the prices which was not the case in the previous years for the corresponding months, shows that the agreement has direct bearing on Section 3(3)(a).”.The order also states,.“…the test to be adopted for proving a cartel under Competition law in India as well as globally is one of ‘balance of probabilities’ as distinguished from ‘beyond reasonable doubt’ as envisaged under criminal law….…In the present case, even if the strictest standard was to be adopted, there is no doubt that the Appellants have violated both sections 3(3)(a) and (b) of the Competition Act and deserve to be punished as such.”.As far as the quantum of penalty, the NCLAT noted that the CCI imposed mere minimum penalty and held that no interference was called for on its part..Read the order: