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COMPETITION APPELLATE TRIBUNAL

CORAM

Justice V.S. Sirpurkar

Chairman

Mr. Rahul Sarin,

Member

Mrs. Pravin Tripathi,

Member

APPEAL NO. 105 OF 2012

WithI.A. No. 224/2012 & I.A. No. 270/2012

[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010].

In the matter of :

Lafarge India Limited ... Appellant

Versus

Competition Commission of India & Ors. ... Respondents

APPEAL NO. 110 OF 2012With

I.A. No. 222/2012 & I.A. No. 223/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of :

Ambuja Cement Limited ... Appellant

Versus



I.A. No. 218/2012 & I.A. No. 219/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated

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20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of:

Associated Cement Corporation ... Appellant

Versus



I.A. No. 211/2012 & I.A. No. 212/2012

[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of :

Cement Manufacturing Association ... Appellant

Versus



I.A. No. 113 of 2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010].

In the matter of :

Ultra Cement Limited ... Appellant

Versus



I.A. No. 115 of 2012 & I.A. No. 116 of 2012


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In the matter of :India Cement Limited ... Appellant

Versus



I.A. No. 117 of 2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of :

Jai Prakash Associates Limited ... Appellant

Versus



I.A. No. 221 of 2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of :

Binani Cement Limited ... Appellant

Versus



I.A. 214/2012, I.A. 274/2012 & I.A. 275/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010]

In the matter of :

Madras Cement Limited ... Appellant

Versus


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WithI.A. No. 225 of 2012


In the matter of :

J.K. Cement Limited ... Appellant

Versus



I.A. No. 232/2012 & I.A. No. 233/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated20.06.2012 passed by the Competition Commission of India in Case No.29/2010].

In the matter of :

Century Textile Industries ... Appellant

Versus



I.A. No. 267/2012 & I.A. No. 268/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated30.07.2012 passed by the Competition Commission of India in RTPE 52/2006]

In the matter of :

India Cement Limited ... Appellant

Versus


APPEAL NO. 122 OF 2012[Under Section 53-B of the Competition Act, 2002 against the Order dated30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of :

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Cement Manufacturers Association ... Appellant

Versus



I.A. No. 259/2012 & I.A. No. 260/2012[Under Section 53-B of the Competition Act, 2002 against the Order dated30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of :

M/s. Madras Cement Limited ... Appellant

Versus


APPEAL NO. 124 OF 2012[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012passed by the Competition Commission of India in RTPE 52/2006]

In the matter of :

Century Textile Industries ... Appellant

Versus



[Under Section 53-B of the Competition Act, 2002 against the Order dated30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of :

Binani Cement Limited ... Appellant

Versus



In the matter of :

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Ultra Tech Cement Limited ... Appellant

Versus



In the matter of :

Lafarge India Limited ... Appellant

Versus



In the matter of :

J.K. Cement Limited ... Appellant

Versus



In the matter of :

Jai Prakash Associates Limited ... Appellant

Versus



In the matter of :

Ambuja Cement Limited ... Appellant

Versus


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In the matter of :

Associated Cement Corporation ... Appellant

Versus


Appearances : Shri Gopal Subramanium and Shri Parag Tripathi, SeniorAdvocates with Shri Samir Gandhi and Shri Karan VirKhosla, Ms. Hemangini Dadwa Advocates for theappellant.

Shri Iqbal Chhagla, Senior Advocate with Shri AshwathRau, Ms. Anu Tiwari and Ms. Gargi Yadav, Advocatesfor the appellant.

Shri Ramji Srinivasan, Senior Advocate,Dr. Abhishek Manu Singhvi, Senior Advocate with Mrs.

Pallavi S. Shroff, Ms. Shweta Shroff Chopra, ShriHarman Singh Sandhu, Shri Yaman Verma, Ms.Sangeetha Mugunthan and Ms. Kabita Das, Shri RookRay, Advocates for the appellant.

Shri L. Nageshwara Rao, Senior Advocate withShri Pramod B. Agarawala and Shri Prashant Mehra,

Advocates for the appellant.

Mr. Ravi Kadam, Senior Advocate Mr. Aspi Chimoy andMr. Pravin H. Parekh, Sr. Advocate with Mrs. Sonali BasuParekh, Mr. Sameer Parekh, Dr. V.K. Agarwal, Mr. AnandS. Jha, Mr. Aditya Sharma and Mr. Utsav Trivedi, Ms.Nupur Sharma, Advocates for the appellant.

Shri C.S. Vaidyanathan, Senior Advocate with Shri HariShankar, Ms. Kanika Chaudhary Nayar, Shri VikramSobti, Shri Udayan Jain and Ms. Nidhi Singh, Advocatesfor the appellant.

Shri A.N. Haksar, Senior Advocate with Shri G.R.Bhatia, Ms. Kanika Chaudhary Nayar, Shri UdayanJain, Ms. Chitra, Shri Vikram Sobti and Ms. Nidhi Singh,

Advocates for the appellant.

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Shri Sudhir Gupta, Sr. Advocate with Shri Virendergoswami and Shri Abhinay, Advocates for the appellant.

Mr. Arvind Datar, Sr. Advoate with Shri T. SrinivasaMurthy with Shri Rahul Bajaj, Advocates for the appellant.

Shri Krishnan Venugopal, Senior Advocate with ShriP.K. Bhalla, Advocate for the appellant.

Shri Shyam Dewan, Senior Advocate with Shri PramodB. Agarwala, Shri Abhinav Malhotra and Shri PrashantMishra, Advocates for the appellant.

Shri C.S. Vaidyanathan, Senior Advocate with Shri Hari

Shankar, Shri Vikas Singh Jangra and Shri AdityaVerma, Advocates for the appellant.

Shri Dushyant Dave, Sr. Advocate with Shri ManasKumar Chaudhari, Shri Ramesh Singh, Shri VijayChauhan, Shri Sagardeep Rathi and Shri PranjalPrateek, Advocates for the appellant.

Shri Pramod B. Agarawala and Shri Prashant Mehra,Advocates for the appellant.

Shri P.K. Bhalla, Advocate for the appellant.

Shri Balbir Singh with Shri Abhishek Singh Baghel ,Ms. Monica Benjamin, Mr. Abhishek Yadav and ShriMayank Bansal, Advocates with Ms. Shabistan Aquil,DD (Law) for CCI.

Shri O.P. Dua, Senior Advocate with Shri Shubham,

Advocate for the Respondent/Builders Association ofIndia.

ORDER

PER MR. JUSTICE V.S. SIRPURKAR, CHAIRMAN

This order will govern the following 11 Appeals. They are filed by :-

1. Associated Cement Corporation Appeal No.108/2012 133/20122. Gujarat/ Ambuja Cement Ltd. Appeal Nos. 110/ 132 of 20123. Grasim Cement / Ultratech Cement Ltd. Appeal No. 104/ 126 of 20124. Cement Manufacturing Association Appeal No.103/ 122 of 20125. Jai Prakash Associated Ltd. Appeal Nos.107/ 129 of 20126. India Cements Ltd. - Appeal Nos. 106/ 134 of 2012

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7. J.K Cements (JK Group) Appeal Nos. 112/ 128 of 20128. Century Textiles & Industries Ltd.(Century Cement)- Appeal Nos.113/ 124

of 20129. Madras Cement Ltd. Appeal Nos. 111/ 123 of 201210. Binani Cement Ltd. Appeal Nos. 109/ 125 of 2012

11.Lafarge India Pvt. Ltd. Appeal Nos.105/ 127 of 2012

When these appeals came before us, we had issued notice on the

merits as well as on the stay application by order dated 13.09.2012. By the

same order we had directed that no coercive steps should be taken against

the appellants for recovery of the penalty ordered by the Competition

Commission of India (CCI hereinafter) till 11.10.2012. Thereafter, during

the hearing on 11.10.2012, it was pointed out by the appellants that they

were not served with the complete orders inasmuch as the confidential

information was not disclosed to a particular appellant. The learned

counsel arguing for the CCI agreed to supply the order copies maintained

under Regulation 35(13) of the General Regulations, 2009. The appellants

had also sought for relief to amend their Appeal Memos on the basis of the

fresh copy of the order including the confidential data. Accordingly, the

appellants amended their Memo of Appeals. Seven Appellants amended

Memo of Appeals while the remaining did not file any amended Memo of

Appeals. All those amendments were allowed by order dated 6th

December, 2012. While arguing for stay, it was found that there were

some common issues which pertain to very validity of the order passed by

the CCI. The learned counsel for the appellant urged that those common

issues should be addressed first and thereafter appeal should be argued

individually heard on the basis of the individual facts pertaining to that

particular appellant. This suggestion was accepted by the counsel for the

CCI and the interim protection granted was extended up to 29 th January,

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2013 and by order dated 30.1.2013 these appeals along with the second

group of the appeals were ordered to be heard in third week of February,

2013. The first group which covers Appeal Nos. : 105 of 2012 by Lafarge

India Ltd.; 110 of 2012 by Ambuja Cement Ltd.; 108 of 2012 by Associated

Cement Corporation ; 103 of 2012 by Cement Manufacturers Association;

104 of 2012 by Ultra Tech Cement Limited; 106 of 2012 by India Cement

Limited; 107 of 2012 by Jai Prakash Association Ltd.; 109 of 2012 by

Binani Cement Limited and 11of 2012 by Madras Cement Limited are in

the first group while the remaining 14 appeals consist of the second group.

2. The proceedings against the appellants in the second group were

pending under the old MRTP Act. However, after the repeal of the MRTP

Act, they came to be treated as pending under this Act because of Section

66 of the present Competition Act, 2009 (Act for short). It is seen that the

appeals under the first group are against the orders passed by the CCI

wherein the CCI was activated by the informant i.e. Builders Association of

India and since the appellants covered by the first group were awarded with

the penalties by the CCI, the CCI did not choose to award separate

penalty against the appellants in the second group with the exception of

M/s. Shree Cement Ltd. represented by Shri Dushyant Dave, Sr. counsel.

The penalties inflicted by the CCI are as follows :-

Name Net profit 209-10taking into accountperiod of contravention

Post Notification i.e.20.5.2009 on pro-ratabasis (in Rs. crores

0.5 times ofNet Profit ascalculated in

column 2 (inRs. crore)

Net Profit2010-11(in Rs.

crores)

0.5 times ofNet Profit ascalculated in

column 4(in Rs.crore)

Total (inRs. crore)

ACC Ltd 969.92 484.96 1,325.26 662.63 1147.39

AmbujaCement Ltd

1064.19 532.10 1,263.81 631.81 1163.91

BinaniCement

244.13 122.07 90.50 45.25 167.32

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CenturyTextiles Ltd.

308.43 154/22 239.60 119.80 274.02

IndiaCements Ltd

306.85 153.43 68.10 34.05 187.48

J K. Cement 194.46 97.23 62.62 31.31 128.54

Lafarge India 566.61 283.31 413.40 206.70 49001

MadrasCements Ltd.

306.27 153.14 210.97 15.49 258.63

UltratechCement Ltd

946.74 473.37 144.23 72.12 1175.49

JaiprakashAssociatesLtd.

1479.43 739.71 1167.78 583.89 1323.60

Name Gross turnover for2008-09 (in Rs. crores)

Grossturnover

2009-10 (inRs. crore)

Grossturnover2010-11(in Rs.crore)

AverageTurnover forthree years

Penalty atrate of 10%on averageturnover (inRs. crore)

CementManufacturer

Association

9.27 6.65 5.99 7.30 0.73

Thus, they are substantial penalties.

3. The learned counsel arguing for the appellants prayed for passing of

the blanket stay order in view of their objections to the legality of the

impugned order passed by the CCI. Thus, the question of the stay became

essentially linked with the submission on the merits of the whole matter.

According to the learned counsel for the appellants firstly there were some

basic defects in the order which would render the same non-est. And,

therefore, the appellants claimed the blanket stay of the orders of the

penalty. It was also suggested that even on individual merits, the

appellants were entitled to the grant of blanket stay.

4. Insofar as the basic contention regarding the shortcomings in the

order the learned counsel went on to formulate the common issues and

raised contentions thereon. They, however, sought the permission to

address even on the individual facts in each appeal in support of their plea

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for blanket stay. Each appellant culled out these common issues and

addressed us extensively on the common issues as well as on the merits in

support of their contention for the blanket stay. The learned counsel for the

informant Builders Association of India and also the CCI also addressed

us extensively opposing the grant of stay. We have now to see on the

basis of the rival contentions raised as to whether the appellants are

entitled for the blanket stay of the impugned order by the CCI.

5. The Builders Association of India filed an information under Section

19 of the Act on 26.7.2010 against the Cement Manufacturers Association

and 11 other cement manufacturing companies. In their complaint they

alleged violation of the provisions of Sections 3 and 4 of the Act by the

appellants. In their information they describe themselves as a Society

registered under the Societies Registration Act and asserted that the

Cement Manufacturers Association of India was the representative body of

the companies manufacturing cement and that it has 46 members. All the

appellants herein were described as the members. It is alleged that under

that umbrella of the cement manufacturers engaged in the monopolistic

and restrictive trade practices in an effort to control the price of cement

firstly by limiting and restricting the production and supply of cement as

against the available capacity of production. The said cement

manufacturers in connivance with their representative body Cement

Manufacturers Association indulged in collusive price fixing for which they

have divided the territory of India into five zones so as to enable

themselves to control the supply and determine or fix exorbitantly high price

of cement by forming a cartel in contravention of provision of Section 3 of

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the Act. It was alleged that the appellants herein i.e. Cement

Manufacturing companies collectively held more than 57.23% of the market

share in India and thus enjoyed the position of dominance and went on

arbitrarily increasing the price of cement which price was unfair and thus

had abused their dominance in contravention of Section 4 of the Act. It

was alleged further that though Associated Cement Company (ACC

hereinafter) and Gujarat Ambuja Cement Ltd., (GAC hereinafter) had

ceased to be the Members of the CMA w.e.f. 1.11.2009 and had controlled

approximately 21% market share in India amongst themselves and they

had fallen out only to keep their activities of cartelization under a veil since

they had actively participated in the price benchmarking exercise of CMA.

It was alleged that the prices per bag were similar to the prices of other

cement manufacturers who continued to be the members of the opponent.

The news release was also relied upon in support of this complaint.

According to the informant, these two opponents were leading the acts of

cartelization by the cement manufacturers association over the past twenty

years. It was pointed out that their holding company, Holcim has been

penalized and held guilty of acts of anti-competitive activities in some other

countries. It was specifically pointed out that the original opponent No. 12

i.e. Lafarge India which was a subsidiary of the French building materials

major was already been fined in 1994, 2002 and 2008 for committing

irregularities by different jurisdictions which suggested that it is a habitual

offender of the provisions of the competition acts. It was then alleged that

the original opponent Nos. 2 and 3 and original opponent No. 4 to 12

including the other appellant had collectively controlled the supply of

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cement and though they had large capacities they deliberately controlled

the supply, produce less cement and increase the market price the cement

and resulted in market price of the cement. It was then alleged that in

addition to creating the artificial scarcity the opposite party including the

appellants sought the objective of causing artificial increase in the price of

the cement. It was pointed out that irrespective of the areas and regions

and the availability of the cement or artificial scarcity thereof in the markets,

the cement prices were increasing constantly causing adverse affect on the

real estate and affecting the interest of the consumers at large. It was

pointed out further that there were cease and desist order passed in past in

RTPE No. 99/1990 and RTPE No. 21/2001. It was pointed out that these

cement manufacturers had set up their cement manufacturing units at

different places in India and though they were having different costs of

production and transportation. They uniformly and simultaneously

increased prices at the same time and that is the common feature in

respect of all the five zones namely North, East, West, South and Central.

6. Relying on some statistics it was pointed out that the growth in the

construction sector decreased from 10.10% from 2007 to 2010 and so also

the growth in the real estate sector had come down in these three years.

The growth in the cement sector had also witnessed a downward trend on

2006 to 2009 and the utilization of the installed capacity of the cement

manufacturers came down to 85% to 94%. However, it started growth in

the cement sector increased to 11.68%. However, in spite of the growth in

production of cement, the utilization of installed capacity got reduced.

From this, it was urged that despite the slow down the cement industry

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earned profit margins of 26% on the turn over of Rs. 45,717 crore. It was

pointed out that through the inter se agreements Rs. 5/- were increased per

bag of cement between December, 2008 to February, 2009. In addition,

the cement manufacturers increased the price between Rs. 10/- to Rs. 27/-

per bag upto April-June, 2009. The price was further increased in the

range of Rs. 5/- to Rs. 15/- per bag from December, 2009 upto January,

2010. It was pointed out further that some manufacturers were getting the

benefit by using fly-ash and thus increased quantity of product of cement

manifold without any increase in the production cost or input costs. Since

the fly-ash was provided to the cement manufacturer by the thermal power

plants which was primarily owned or controlled by the government or semi-

government undertakings at zero cost.

7. The complaint was also made of the non-utilization of the capacity to

produce by giving the statistics. It is pointed out that the price increase

from Rs. 255 per bag to Rs. 258 per bag in the year 2009 itself. Much

statistics was relied upon in the information to suggest that the price of

cement per bag was kept on rising due to cartelization and the increase

was between Rs. 5/- to maximum of Rs. 39/- per bag. It was urged that

the raise in prices of cement in all the zones cannot be directly attributed to

increase/decrease in demand as conditions in five zones were different. It

was urged that decrease in the capacity utilization from 94% to 82% in

2009-10 was intentional act on the part of the opposite parties to gain by

arbitrarily fixing and escalating the prices. It was urged that the cement

manufacturers working as cartel chose to intentionally under-utilize their

plants and continuously produce less than the demand for cement on

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account of decreasing capacity utilization from 83.33% in April, 2009 to

79.63% in March, 2010. An interview of Shri N. Srinivasan, Managing

Director of India Cement Limited, the fourth largest cement producer in

India was also relied upon by the informant who had claimed that cement

industry had added 78 million tones between 2006-07 and 2009-10. It is

pointed out that cement rose by in the range of Rs.10/- per bag to Rs. 27/-

per bag upto January-March, 2009 and further by Rs. 5 to Rs.15 per bag

upto January, 2010. Relying on the memorandum dated 15.11.2006 of the

CMA addressed to the Finance Minister the informant claimed that per bag

cost of cement should be Rs. 160 however that price was raised to Rs.

350/- per bag, thanks to the concerted action by the cement manufacturers.

They pointed out that the gross profit by M/s. ACC and Gujarat Ambuja

Cements Ltd. increased substantially. It is pointed out that as per the news

item in the Economic Times dated 28.11.2009 forecasted the increase in

price in cement in future. All the cement manufacturers took the clue and

increased price per bag uniformly in December, 2009. This fact was also

reported in Business Standard in its issue dated 3.12.2009. A reference is

made to the appointment of Standing Committee by the Ministry of

Commerce and Industry. On the basis of these averments, it was urged

that all these cement manufacturers had firstly contravened Section 3 by

cartelizing and fixing prices and secondly had abused its dominance in the

market in contravention of Section 4.

8. The CCI referred this information for further investigation by the

Director General. The Director General appears to have consulted 12 top

companies and investigated into their affairs. The DG deduced the profit

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margins being more than 25%. It is seen by him that CMA on the direction

by the Department of Industrial Policy and Promotion was regularly

collecting and submitting the data which was earlier collected by the

Development Commissioner of Cement Industry. The CMA thus was

collecting indicative retail and wholesale prices of cement from across the

country. On the basis of the analysis he found that there was continuous

positive growth in the cement prices for the last five to six years. According

to him, the price of cement is rising faster than input prices. It was found by

the DG that price which was about Rs. 150/- per bag in 2004-05 increased

to Rs. 300/- per bag in March, 2011 whereas the cost of sale had increased

only by 30% and thus there was no nexus between cost of sale and the

sale price. The DG also deduced that the prices were increased not on

the basis of the cost of production but on the basis of the prices charged by

the competitors. The price of cement is changed by the market leaders

was one of the factors for the increase in prices. The DG found

communications between the companies and the dealers which reflected

the price to be charged. It did not show any reason for the change in

prices. He also found that there was no authentic data of demand of

cement nor was their any formal system or mechanism of collection of data

thereby deduced by the DG that the contention by the manufacturers that

the price solely dependant on the market toot back is not tenable. The DG

had also referred to the report of the Tariff Commission indicating that the

price charged by the cement companies was unreasonably high and there

was lot of scope for correction in their prices. After conducting the analysis

of cost audit report of the companies, the DG deduced that the cost of

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sales which also includes the cost of production varies from unit to unit

within a group and also between the companies. However, the data

showed that the margin per bag of cement is Rs. 38 to Rs. 45 showing that

some manufacturers were able to charge prices which was quite high and

above competitive level. As regards the existence of the agreement, the

DG deduced that there was no direct evidence but only circumstantial

evidence. It was found that the co-efficient of correlation of change in

prices or the movement of the prices of all the companies is positive and

was very close to each other giving a strong indication of price parallelism.

The price of the cement used to move upward in the country in the given

time period. According to the DG the price parallelism was on account of

the prior consultation amongst cement manufacturers and the market

leaders have to play role in the same. The examination of small players

showed that they simply follow the trend of major players. The DG

deduced that there was no reason for price parallelism. The movement of

price of the companies in the same range and in the same direction was

not possible unless the prior consultation and discussion.

9. The DG also found the decrease and downward trend in the capacity

utilization. This was a major factor according to DG. According to the DG,

therefore, there was concerted decision of low capacity utilization so that a

higher prices could be charged and abnormal profits earned. The DG

found positive co-relation among all the leading manufacturer. In the

particular region dispatch the data for the period of two years from

January, 2009 to December, 2010 in case of the top companies was

identical. According to the DG this was not possible unless there was

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some kind of meetings. The DG also found the production parallelism as a

result of the concerted behaviour by manufacturers. Insofar as the

geographical markets are concerned, DG found that the markets were

divided by the manufacturers into five regions. The top companies had

market shares in one or more geographical markets which allowed them to

earn maximum profit by charging unreasonable price. It was found that the

big players normally trigger the price rise which is neatly followed by the

other small manufacturers. He also found that the press and media were

exploited and used for the price rise. The big players used TV and media

predicting the price hike in the near future which sent the signal regarding

the price rise to all.

10. It was also found that their existed exchange of price information

amongst the members of CMA on weekly basis across the country and

CMA collected data in 34 different zones on retail and wholesale price of

CMA. This according to the DG was not permissible. According to the

Director General, the common platform of the CMA was being used for

collection and dissemination the price of the different companies helping

the manufacturers to take the decision about the future price rise. It was

also found that a high power committee of the CMA was formulated and the

prices were discussed in the meetings held on 3.1.2011, 24.2.2011 and

4.3.2011 after which the prices of the cement of all the top companies who

were present in these meetings had increased. Two of these meetings

were held in Hotel Orchid, Mumbai and were also attended by the ACC

though they had resigned from the membership of the CMA and it was

obvious that these two companies was acted in co-relation to the ulterior

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motive of profit earning. It was excluded that in the guise of the meeting of

the High power committee, cement manufacturers were entering into some

arrangements to manipulate the price of cement. Thus it was also held by

the DG that it was clear that CMA was providing a platform. CMA was also

engaged in publication for internal circulation between the members which

information contained the details of production in respect of each plant of

the cement companies. Thus the minute details of production, dispatch of

each company became known to member companies to exchange

production related information and decide production strategy in line with

other companies. It was on this basis, the DG came to the conclusion that

the companies were guilty for the contravention of Section 3(1),3(3)(a) and

3(3)(b) of the Act. This report was supplied to all the appellants who filed

their objections.

11. After considering the objections raised which pertained to the

individual case of the appellants and after giving opportunity of hearing the

CCI deduced that these companies had contravened the provision of the

Act more particularly under Section 3 of the Act. The CCI in its impugned

order has recorded the contentions raised by the individual manufacturers

in great detail. Initially the objection was taken that the DG had taken into

consideration the data prior to 20.5.2009. The CCI however rejected this

objection holding that the DG had relied upon only the dominance of the

company as a whole and conduct of the parties in general and mere

examination of the data belonging to the prior period did not suggest that

the provisions of the act were applied retrospectively. In this the DG as

also the CCI relied on the decision of High Court of Bombay in Kingfisher

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Airlines vs. Competition Commission of India W.P. No. 1785 of 2010. It

was also held by the Commission that DG had used the data only

pertaining to the post Act period. Objections was also taken on some

other grounds namely :-

1. Failure to provide opportunity to cross-examination

2. Non-supply of the Tariff Commission Report which was relied upon

by the DG.

3. Inclusion of incorrect facts in the information.

4. The incorrect reliance on motivated information and the members

representative.

However, the CCI rejected all these objections in the nature of preliminary

objection. It has held that firstly parties were given full opportunities. It was

also held that the relevant portion of the Tariff report was available to the

parties which they could have seen by an inspection and thirdly it was held

that the name of the JK Group was wrongly mentioned. However, it was

obvious that though the DG had issued notice to JK Group. JK Lakshmi

Cement Ltd. came on record though notice was not issued. CCI held that

they were taking into consideration the case of JK Cements Limited only.

The CCI also held that there was no question of motivation on the

information filed by Builders Association. Having rejected the so called

preliminary objection, the Commission went on to frame 8 issues in all.

They are :-

Issue l: Whether the Opposite Parties have violated theprovisions of section 4 of the Competition Act, 2002 ashas been alleged by the inform ant?

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Issue 2: Whether the acts and conduct of the Opposite Parties aresubject matter of examination under section 3 of the Act?

Issue 3: Whether there exists an agreement or arrangementamong the cement companies named as the OppositeParties under which they share details of cement prices,production and capacities among each other using theplatform of CMA? If yes;

Issue 4: Whether they have indulged in directly or indirectlydetermining the prices of cement?

Issue 5: Whether they have indulged in limiting and controlling theproduction and supply of cement in the market?

issue 6: Whether there is a case of production and dispatchparallelism among the Opposite Parties?

Issue 7: Whether the aforesaid acts of the Opposite Parties havecaused increase in the prices of cement?

issue 8: If so, whether the Opposite Parties have contravened theprovisions of section 3 (3) of the Competition Act, 2002?

After thoroughly examining the records which are voluminous in nature and

running into more than thousand pages, the CCI ultimately passed the

impugned order. The stay of which is being sought now apart from its

being set aside.

12. The impugned order of the CCI is unanimously passed and all the

seven Members have put in their signatures including the Chairman Shri

Ashok Chawla.

13. For claiming the stay of the operation and effect of the impugned

order the appellant would have to establish a strong prima facie case in

their favour. The learned counsel appearing for the appellants have

extensively addressed us contending that they have very strong case and

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the order inflicting very heavy penalty on them is incorrect in law as well as

on facts.

14. It was firstly submitted by Shri Gopal Subramanium, learned senior

Counsel appearing for the Lafarge that the order itself is non-estas it was

signed by the Chairman of the CCI and in fact he had not attended the

meetings during which the appellants counsel put in the oral arguments.

Thus the principle of he who hears decides was breached in this case as

Chairman had not heard the matter at all. The learned counsel also

pointed out that if a Member of the Tribunal who has not heard the

arguments at all puts his signature on the order then he actually gives an

impression that he is a part of the decision making process and if in reality

he was not the part of the decision making process because of his absence

from the concerned meetings then apart from a basic illegality it also

amounts to denial of natural justice. The learned counsel in support of this

proposition has relied on number of authorities. The learned counsel also

urged that in considering the information and in awarding exemplary heavy

penalties, the CCI was doing adjudicatory function and therefore the CCI

was bound to respect and follow the principles of natural justice.

15. This contention raised by Shri Gopal Subramanium was relied upon

by the other learned counsel appearing for the other appellants.

16. The learned counsel Shri Iqbal Chhagla appearing in Appeal No. 110

of 2012 in Ambuja Cements raised a contention that since the CCI was

inflicting the penalties it was acting as a quasi-criminal court. The learned

Senior Counsel argues that therefore the standard of proof required was

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beyond reasonable doubt whereas such standard was not adopted by the

CCI which went on to adopt the standard adopted in the civil cases that

being preponderance of probability. The learned senior counsel was at

pains to point out that the findings arrived at by the CCI were inferential in

the nature and with no supporting evidence. The learned counsel therefore

urges that the order cannot stand. Voluminous case law was relied upon

by the learned senior counsel in support of his argument. According to the

learned counsel insofar as the finding on the charge of price fixing was

concerned it was a result of non-application of the mind on the part of the

CCI. The learned counsel questioned that if the price went down which

was clear from the facts, there could be no inference of the price fixing. The

learned counsel also urged the only few cement manufacturers were cherry

picked without there being any justifying reason for so doing.

17. Shri Ramji Srinivasan appearing in Appeal No. 108 of 2012 urged

similar to the contention by Shri Inqbal Chhagla that this was a clear

exercise of considering the cases only of 11 or 12 cement manufacturers.

He wondered as to what was the methodology to pick up only few cement

manufacturers when there were admittedly more than 40 cement

manufacturers in the country. The learned counsel also urged that there

was complete dearth of direct evidence to support the findings by the CCI.

The learned counsel also urged that there was a failure on the part of the

CCI to afford the opportunity to cross-examine six witnesses whose

evidence was recorded by the Director General. He pointed out that

though an opportunity was sought for to cross-examine them, it was

refused. Shri Ramji Srinivasan also urged that there was a denial of

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natural justice inasmuch though a request for the documents was made

that was not granted. By reference to various documents, the learned

counsel pointed out that this resulted in grave injustice.

18. Shri Vaidyanathan, learned Senior Counsel appearing in Appeal Nos.

106 of 2012 and134 of 2012 supported the arguments of Shri Chhagla and

pointed out that the CCI was a quasi-judicial body as per two judgments of

the Honble Supreme Court. They being :- Brahm Dutt vs. Union of India

reported in (2005) 2 SCC 431 and CCI versus Steel Authority of India

Limited reported in (2010) 10 SCC 744. It was pointed out by the learned

counsel that in both the cases the Honble Supreme Court had held that the

function of the CCI was of adjudicatory nature. He also supported the

argument of Shri Gopal Subramanium on the issue of the Chairman

contributing his signature to the impugned order though he was not present

to hear any oral arguments. Reliance was put by him on Sections 26(1),

26(8), 27, 33, 35, 36(2) etc. to buttress his contentions that the CCI has to

determining the issue and this task of determination makes it an

adjudicatory body.

19. Shri V. Gupta appearing on behalf of Binani Cement in Appeal Nos.

109 and 125 of 2012 pointed out that the Binani was holding only 2% of the

market which was insignificant. He also pointed out that there was no

allegation against the Binani in the information nor was any relief claimed

against the same. According to him the whole process was faulty as

Director General should not have restricted himself only to the parties who

were named in the information but there should have been a thorough

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investigation of the whole cement manufacturing sector by investigating all

the cement manufacturing companies. He was also at pains to point out

that Binani Cement was not a Member of the Cement Manufacturers

Association nor was its data available to the Cement Manufacturers

Association in its 34 centre from which CMA used to collect data regarding

the wholesale and retail price of the cement in the market.

20. Shri Krishnan Venugopal appearing in Appeal No. 112 of 2012 in J.K.

Cements predominantly relied upon the procedural defects both by the

Director General as well as by the CCI. The learned counsel contends that

though the documents were sought for but they were never supplied. He

also pointed out that one of the learned Members Smt. Geeta Gouri was

the Head of the Economic Division of the CCI and she should have

ordinarily not taken part since the same Economic Division of CCI had

supplied the man power to Director General for investigation in this matter

on the request of the D.G. He urged that thus there was an institutional bias

on the part of Smt. Geeta Gouri. He also supported the argument by Shri

Gopal Subramanium that the Chairman, who is signatory to the order was

not present during three days when the oral arguments were proceeded.

He also complained that at times the Members during the hearings used to

leave and were not available. He thus contended that all the Members

were not there at all times of the days when the matter were heard. He

also pointed out that the Chairman had participated only in the

deliberations in the subsequent meetings which was wholly incorrect. The

learned counsel also relied on number of cases. Finally, the learned

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counsel urged that the CCI has not given any justification of the penalty

and the same tends to be arbitrary.

21. Shri A.N. Haksar, Sr. advocate appearing for J.P. Cement urged that

it was wrong to suggest that the CCI had only regulatory function. The

learned counsel commented on Sections 13, 15 and 22 of the Act and

pointed out that judicial matters can never been settled by voting and for

that matter the use of casting vote is wholly unknown where functions are

adjudicatory. He also supported the other contentions raised by the other

counsel.

22. Shri Arvind Datar appearing on behalf of Madras Cement in Appeals

Nos. 111 and 123 of 2012 invited our attention to the amendment of the

General Regulations (Regulation 20). He also invited our attention to the

directions issued on 15th September, 2010. Inviting our attention to

Regulation 20 the learned counsel pointed out that there need be no

application for cross-examination and cross-examination is a right of the

parties which has been trampled. He also pointed out that the selection of

only few companies for investigation was faulty and the DG had committed

an error. He also pointed out that there was no data available of the South

Zone where Madras Cement was operating. He took us through the

statistics and pointed out the defective approach.

23. Shri Parikh, learned counsel appearing on behalf of Ultra Tech

Cement painstakingly invited our attention to the defects in the procedure.

The learned counsel pointed out the said procedure adopted by the DG

and the CCI breached the rules of natural justice. He pointed out that

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though specific opportunities were sought for, yet no opportunities were

given for cross-examination nor were the documents supplied. The learned

counsel has filed a chart and pointed out that all arguments pressed into

service were not taken consideration.

24. Shri Krishnan Venugopal, learned senior counsel appearing on behalf

of J.K. Group invited our attention to the fact that they had never attended

any meeting. They sought for the documents but they were not provided.

He also pointed out about the mix up of J.K. Lakshmi Group and pointed

out that their market share was merely 1.7%. He wondered as to how he

came to be considered as a leading manufacturer.

25. Dr. Singhvi appeared for Associated Cement Company in Appeal No.

108/2012 and urged that there was a selective cherry picking of the

concerns. He also invited our attention that the same was true of the

period as well as the data. The learned counsel invited our attention to the

data and pointed out that the whole data was misread. The learned

counsel also urged that ACC could not be guilty of cartelization as they

were not the members of the CMA though they had attended the meetings.

He urged that there were 50 manufacturers in the country and 300 mini

manufacturers which had resulted in the loss of market share of so called

the big companies in favour of the smaller players. He took us to the three

meetings of the Association and pointed out that his client was not the

member of the association from 1.11.2009.

26. Shri Sham Diwan appearing on behalf of the Century Textile in

Appeal No. 113 of 2012 pointed out that there was non-supply of

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documents and there was no opportunity offered for cross-examination. He

pointed out that there was no cut in the production.

27. During the debate, it was pointed out that after the three meetings

dated 21.02.2012, 22.02.2012 and 23.02.2012 during which oral arguments

were heard there was a meeting on 14.03.2012 when the Chairman

attended. Our attention was invited to that meeting. It was clear in that

meeting the written submissions of the appellants were considered.

However, it was pointed out that some concerns had not filed their written

arguments before the CCI at all. Thus at least in so far as those companies

are concerned, they did not have the benefit of being heard by the

Chairman nor did they have the benefit of their contentions considered.

The learned counsel Shri Vaidyanathan pointed out that no written

submissions were filed by Lafarge, India Cement and Binani Cements.

28. All these arguments were met with by Shri Balbir Singh, advocate for

the CCI, who first urged that the CCI though was having adjudicatory

function, however, it transacted its business in the meetings. The counsel

cited the examples of the jurisdiction like Australia and New Zealand where

also the Competition Commission of India transacted the business in the

meetings. Our attention was invited to the amendments made to earlier

Sections 22, 23, 24 and 25. Relying on Section 22, the counsel urged that

the Commission had to transact its business through the meetings, unlike

the un-amended Section 22 and unlike un-amended Section 22 there were

no more benefits for the purpose of hearing and now the whole business

was to be transacted in the meetings, where all the questions coming up

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before the meeting are to be decided by a majority of members present and

voting. It was also pointed out that the quorum for such meeting was three

members. The learned counsel therefore urged that even if the Chairman

did not attend the meeting during the oral arguments, he ultimately

attended the meeting held on 14.03.2012 where there was a consideration

of the written arguments and since the Chairman took active part in

considering the written submissions, there was nothing wrong if he

contributed his signature to the final order. In this behalf, the learned

counsel also pointed out to the provisions of Section 15 and more

particularly Clause (c) thereof, which provides that No act or proceeding of

the Commission shall be invalid merely by reason of any irregularity in

the procedure of the Commission not affecting the merits of the case. The

learned counsel argued that even if it is taken that the contribution by the

Chairman of his signature to the impugned order was held to be improper,

it would at the most be viewed as an irregularity of the matter, which did not

have any affect on the merits of the matter. The learned counsel urged that

this was so because admittedly in the meeting where the written

submissions were considered, there was a full quorum and even if the

Chairman was excluded, yet there was a full quorum and therefore, there

was no question of any illegality if the Chairman put his signature on the

order. He pointed out that there was absolutely no prejudiced caused, nor

was there any question of breach of natural justice, merely because the

Chairman signed the judgment. According to him, the judgment was valid

since it was passed by more than three members, even if the signature of

the Chairman must be ignored. Our attention was also invited to

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Regulations 29 and 40 of the General Regulations. It was pointed out that

as per Regulation 29, the parties could declare to the Commission whether

they would make oral submissions or file written arguments during the

course of an inquiry. The learned counsel relying on this provision 29(1),

said that this suggested that making oral submissions was optional and it

was not necessary that a party would make the oral submissions.

According to the learned counsel, this provision in a way diminished the

importance of the oral hearing, since the hearing was not compulsory. Our

attention was also invited to Regulation 40, wherein it was provided that

any failure to comply with the regulations, would not invalidate any

proceeding, merely by reason of such failure, unless the Commission was

of the view that such failure had resulted in miscarriage of justice.

According to the learned counsel, there was no miscarriage of justice in this

case. The learned counsel also pointed out that such miscarriage of justice

had to be shown by the appellants. As regards the other argument that

there was non-application of mind on the part of the CCI, the learned

counsel pointed out that there was clear cut evidence of carteling in this

case, in view of the observations of the Commission in paragraph 6.5.31

and 6.5.36. Relying on those observations, the learned counsel urged that

there was no question of any non-application of mind on that count. The

learned counsel also relied on Section 79 (f) of the Indian Electricity Act as

also Sections 92 and 94 of Indian Electricity Act and Regulation 20. He

urged that at the most this could be an irregularity. According to him, when

the oral arguments were made, the quorum was complete and therefore, it

was a valid meeting. In so far as the question of institutional bias is

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concerned, the learned counsel described the report of the Economic

Division to be by an expert hired by CCI. He pointed out that the experts

could be hired by CCI. He pointed out that in view of the request made by

the DG, the expert was provided. The learned counsel was at pains to

point out that this report was neither considered, nor vetted by the CCI

before it went to the DG from the expert. The learned counsel urged that at

any rate there could be no personal bias on the part of Smt. Geeta Gouri

merely because she was heading the Economic Division. As regards the

failure to give opportunity of cross-examination, the learned counsel

pointed out that there were three sets of witnesses. The first set was the

insiders of the company, the second set was the outsiders and the third set

was consisting of builders or consumers. The counsel therefore, pointed

out that in reality there could not have been any cross-examination of the

witnesses of the first and second set. At any rate, according to the learned

counsel, the CCI had given good explanation about the cross-examination

aspect. He pointed out that again the refusal to allow cross-examination

may at most amount to irregularity in procedure, which would not affect the

merits of the matter in any manner. The learned counsel pointed out that

there was a clinching and unquestionable evidence on record in shape of

minutes of 84th meeting of the Managing Committee of the Cement

Manufacturers Association held on 15th March, 2007 in Mumbai as also the

minutes of 92nd meeting of the Managing Committee of the Cement

Manufacturers Association held on 26th March, 2009 in New Delhi, which

showed a clear cut evidence of carteling on the part of the cement

manufacturers. According to the learned counsel, in the meeting dated

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15.03.2007, prices were discussed and all attempts were made to establish

before the Honble Union Finance Minister and Honble Union Minister of

Commerce and Industry as also the Secretary of Ministry of Commerce and

Industry that a pre-budget ruling cement prices had been lower than the

inflation adjusted prices prevailing in 1995. The learned counsel pointed

out that the minutes suggested that the cement prices were discussed. So

also from the minutes of the meeting dated 26th March, 2009 and it was

shown by the learned counsel that there was a discussion about the

cement prices and Jaypee Cement had agreed to supply the cement to the

government department during the month of March 2009 at the rate of

Rs.245/- per bag. He pointed out that the minutes further record that other

suppliers also responded by offering similar special rate in government

supplies and assuring to meet the requirements. From this, the learned

counsel urged that there could be no doubt about the carteling activities of

the cement manufacturing companies and the further fact was established

that CMA provided platforms to the members for evaluation and

determination of impact of incidence of tax on cost. The learned counsel

referred to the paragraph 6.5.33 and pointed out that the cement

companies were interacting at the platform of CMA, sharing information

about cost, prices, production and capacities which discussion facilitated

interactions among the members for determination and fixation of both

prices and production. Our attention was also invited to the fact of

collection of prices of cement companies from all over the India. In this

behalf, our attention was invited to the 95th meeting of the Managing

Committee of CMA held on 30.11.2009 in New Delhi. The learned counsel

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also relied on the further observations. In short, the learned counsel urged

that whatever would have been the cross-examination, one fact was certain

that all the members of CMA and more particularly the appellants herein

were availing of the platform of CMA.

29. Our attention was also invited by the learned counsel to the contents

of paragraph 6.5.37, 6.5.38 and 6.5.39 and we were taken through the

thorough discussion by the CCI. From all this, the learned counsel urged

that there was no question of any prejudice caused in view of the

voluminous material regarding the carteling and price fixing at the instance

of the appellants.

30. The learned counsel did not, however, address us on the merits of

appeals of the individual cement manufacturer companies. There is a huge

data available, which was considered and discussed by the CCI individually

also. Even during the debate on the question of stakes, some learned

counsel questioned the findings on the merits also. These merits pertain to

the market share of the individual companies and their sales.

31. There can be no dispute that procedural irregularities complained of

by the learned counsel during the debate and the question of stay were

inextricably connected with the individual merits, which entirely depend

upon the statistics regarding the sale and profit as also the prices by the

individual companies.

32. The learned counsel for the appellants urged that on account of the

irregularities in the procedure, which we have discussed above, we would

be justified in setting aside the order at this stage only. We do not agree,

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as the so called procedural irregularities are inextricably connected with the

individual merits of the claims made in these appeals by the cement

manufacturing companies. For example, it may be able to show that a

particular company did not raise the prices or did not hold back the

production on the basis of the statistics provided. It is therefore not be

feasible at this stage to hear and dispose of the appeals without

consideration of the individual merits depending upon the statistics of each

company. At the same time, it cannot be denied that very substantial

points have been raised by the appellants and those points have also been

substantially met by the learned counsel appearing for the CCI as also by

Shri Dua appearing for Builders Association, Informant in this matter.

33. A very substantial issue would be required to be decided in the light

of rival contentions by the parties. That issue will be about the exact role of

Competition Commission of India. It was stated in Brahm Duttcase cited

(supra) by the Honble Supreme Court as under :-

if an expert body is to be created as submitted on behalf of the

Union of India consistent with what is said to be the internationalpractice, it might be appropriate for the respondents to consider the

creation of two separate bodies, one with expertise that is advisory

and regulatory and the other adjudicatory. This followed up by an

appellate body as contemplated by the proposed amendment, can

go a long way, in meeting the challenge sought to be raised in this

Writ Petition based on the doctrine of separation of powers

recognized by the Constitution. Any way, it is for those who are

concerned with the process of amendment to consider that aspect. It

cannot be gainsaid that the Commission as now contemplated, has

a number of adjudicatory functions as well.

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34. The adjudicatory role of the Competition Commission of India was

reiterated by the Honble Supreme Court in SAIL India case cited (supra),

wherein it was unequivocally held that the CCI had the adjudicatory

functions in addition to regulatory and advisory functions. The Honble

Supreme Court also referred to another function of the CCI, which was

advocacy. However, it seems that by the Amending Act No.39 of 2007,

Sections 22, 23, 24 and 25 with effect from 12.10.2007 came to be

amended. Section 23 relating to distribution of business of Commission

amongst the Benches, Section 24 providing for procedure for deciding a

case where Members of a Bench differ in opinion, Section 25 relating to

jurisdiction of the Bench came to be deleted altogether. While Section 22,

which provided for the Benches for exercising the jurisdiction powers and

authority of the Commission, came to be wholly substituted by the present

Section 22. Section 22 as it existed prior to the amendment, provided for

the Benches and it was imperative that every Bench should consist of an at

least one Judicial Member. It was provided by the explanation to Sub-

Section 3 that such Judicial Member meant a Member who is, or has been,

or is qualified to be a Judge of a High Court. The Section, therefore,

specifically took note of and stressed upon the adjudicatory role of the CCI

as contemplated in Brahm Dutt judgment. Once this Section was amended

and it was provided in new Section 22 that the Commission would transact

its business in the meetings and that all the questions in the meeting would

be decided by a majority vote where Chairperson would have a casting

vote in case of an equality of votes, the message was loud and clear that

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inspite of the specific observation of the Honble Supreme Court, the

adjudicatory role was done away with.

35. The Statement of Objects and Reasons in Competition (Amendment)

Bill 2006, Bill No.18, which was earlier to 2007 Bill mentions in para 3 (b)

as under :-

3. The competition (Amendment) Bill, 2006 inter alia, seeks to

make the following amendments to the Competition Act so as to

address various legal issues and to make the CCI fully operational on

a sustainable basis namely :--

(a) to provide that CCI would be an expert body which

will function as a market regulator for preventing anti-

competitive practices in the country and it would also have

advisory and advocacy functions in its role as a regulator;

(b) to omit the provisions relating to adjudication of

disputes between two or more parties by the CCI and to

provide for investigation through the Director General in

case there exist a prima-facie case relating to anti

competitive agreements or abuse of dominant position

under the Competition Act, 2002 and conferring power

upon the CCI to pass orders on completion of an inquiry

and impose monetary penalties and in doing so the CCI

would work as a collegiums and its decisions would be

based on simple majority.

Paragraph (c) relates to the establishment of the Competition

Appellate Tribunal (CAT), which is to be headed by a retired judge of

Supreme Court or Chief Justice of a High Court. There are other

observations also. This Statement of Objects and Reasons is dated

24th February, 2006. In this bill also Sections 23, 24 and 25 were

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sought to be omitted while Section 22 was sought to be amended by

omitting the reference to the Benches of the Competition Commission

of India. There also in place of the Benches, it was provided that the

Commission would transact its business in the meetings. Curiously

enough in the Statement of Objects and Reasons dated 9th August,

2007, which was a Statement of Objects and Reasons for

Competition Amendment Bill 2007 being Bill No.70 of 2007 a

significant change took place, where the earlier mentioned 3(b) was

deleted. However, Section 22 as was proposed in the earlier Bill

remained the same. In fact, what was changed in the Statement of

Objects and Reasons, was the portion of omitting the provisions

relating to adjudication of disputes. In the wake of this, though the

Statement of Objects and Reasons of Act No.39 of 2007 does not

speak about the omitting the adjudicatory role, in fact the said

adjudicatory role stands deleted because of substitution of the old

Section 22 by a new one introduced by that Amendment Act 39 of

2007.

36. A serious issue has, therefore, arisen as to whether what is in fact the

scope and ramification of this amendment and whether the CCI has an

adjudicatory role at all as declared by the Honble Supreme Court in Brahm

Dutt case and in case of SAIL India. Further, whether the CCI would be

bound by the judicial discipline and the norms or it would only be an

advisory, regulatory or an expert body, so as not to be bound by the strict

judicial norms. The amendment to Section 22 will have to be tested

against the observations of the Honble Supreme Court in Brahm Dutt case,

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which was prior to the amendment and SAILs judgment which was

subsequent to the amendment. This being a very complex question, would

require not only the consideration of Section 22, but also Section 15 and

the General Regulations, which also were amended.

37. In that view, we find that there is a prima-facie case for granting of

stay at least in respect of the penalties, which are of very substantial

nature. The total penalties would come in the range of Rs.6000 crores.

While inflicting the penalties, the CCI has also taken into consideration, not

only the 10% turnover, gross-turnover and other factors, it has also taken

into consideration the net profits earned by these appellants, which are to

say the least fabulous. The Commission has chosen to impose the penalty

at 0.5 times of the net profit for 2009-10 that too from 20 th of May, 2009. It

is pointed out by the Commission that the amount of 3 times of net profit

calculated, is higher than 10% of the average turnover. In that view, the

Commission has inflicted the penalties of 0.5 times of the net profit for one

year that is from 2009 to 2010 that too taking from 20th May, 2009 and

2010-11. Under such circumstances, we would chose to grant stay to the

penalties, however with a condition that the appellants deposit 10% of the

penalties inflicted. We make it clear that the deposit of the penalty should

be within one month from today. We also make it clear that if the penalties

are not so deposited, the appeal shall be treated as dismissed without

further reference to the Court.

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38. As regards, the orders of cease and desist, we do not find anything

wrong at leastprima-facie. We, therefore, refuse to stay that order against

the appellants, including the Cement Manufacturers Association.

39. All stay applications are disposed of in above terms.

40. The matter now be posted for further hearing.

Pronounced in open Court on 17th day of May, 2013.

(V.S. Sirpurkar)

Chairman

(Rahul Sarin)

Member

(Pravin Tripathi)

Member

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COMPETITION APPELLATE TRIBUNAL

CORAM

Honble Mr. Justice V.S. Sirpurkar

Chairman

Honble Shri Rahul Sarin

Member

Honble Mrs. Pravin Tripathi

Member


[Under Section 53B of the Competition Act, 2002 (Act 12 of 2003) against

the order dated 16.2.2012 passed by the Competition Commission of Indiain Case No. 25 / 2010]

In the matter of :

Motion Pictures Association, Delhi Appellant

Versus

Reliance Big Entertainment Pvt. Ltd. Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for theAppellant.Mr. Ravindra Suryavanshi, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocatesand Ms. Shabistan Aquil, DD(Law) for R-2


In the matter of :

Central Circuit Cine Association Appellant

VersusReliance Big Entertainment Pvt. Ltd. Respondent

Appearances : Mr. Dhruv Mehta, Sr. Advocate with Ms. Sangeeta Kumarand Mr. Sriram Krishna, Advocates for the AppellantMr. A.N. Haksar, Sr. Advocate with Mr. Akshay Patil, Mr.Chirag M. Shroff and Mr. Narendra Kumar Sayal,

Advocates for Eros International Media Ltd.Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates

and Ms. Shabistan Aquil, DD(Law) for R-2


In the matter of :

Northern India Motion Pictures Association AppellantVersus

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Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for theAppellant

Mr. Ravindra Suryavanshi, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav, AdvocatesandMs. Shabistan Aquil, DD (Law) for R-2

APPEAL NO. 73 OF 2012 with

I.A. No 91 of 2012

In the matter of :

Motion Pictures Association, Delhi Appellant

Versus

Eros International Media Ltd. Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for theAppellantMr. Akshay Patil, Mr. Chirag M. Shroff and Mr. NarendraKumar Sayal, Advocates for Eros International Media Ltd.

Ms. Anupam Sanghi with Mr. Abhishek Yadav, AdvocatesandMs. Shabistan Aquil, DD(Law) for R-2


In the matter of :

Northern India Motion Pictures Association Appellant

Versus

Eros International Media Ltd. Respondent

Appearances : Ms. Mala Goel with Mr. Nitin Bansal, Advocates for theAppellant.Ms. Anupam Sanghi with Mr. Abhishek Yadav, AdvocatesandMs. Shabistan Aquil, DD(Law) for R-2


In the matter of :

Motion Pictures Association, Delhi AppellantVersus

Sun Shine Pictures Pvt. Ltd. Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for theAppellant.Mr. Ravindra Suryavanshi, Advocate for R-1

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Ms. Anupam Sanghi with Mr. Abhishek Yadav, AdvocatesandMs. Shabistan Aquil, DD(Law) for R-2


In the matter of :

M/s. Motion Pictures Association AppellantVersus

UTV Software Communications Ltd. Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for theAppellantMr. Abhishek Singh Baghel, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav, AdvocatesandMs. Shabistan Aquil, DD(Law) for R-2


In the matter of :

Eastern India Motion Pictures Association AppellantVersus

Reliance Big Entertainment Pvt. Ltd. & anr. Respondents

Appearances : Mr. Manas Kumar Chaudhuri, Mr. Vijay Chauhan, Mr.

Sagardeep Rathi and Mr. Pranjal Prateek, Advocates forthe AppellantMr. Rajindra Suryavanshi, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocatesand Ms. Shabistan Aquil, DD(Law) for R-2

APPEAL NO. 66 OF 2012 with

I.A. NO. 07/2013

In the matter of :

Indian Motion Pictures Distributors AppellantVersus


Appearances : Mr. Ramji Srinivasan, Sr. Advocate with Mr.Prateek Jalan,Mr. Rajiv Roy, Mr. Avrojyoti Chatterjee, Mr. Vivek Pauland Ms. Rujuta Joshi, Advocates for the Appellant

Mr. Ravindra Suryavanshi, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocatesand Ms. Shabistan Aquil, DD(Law) for R-2

APPEAL NO. 67 OF 2012 with I.A. No. 13/2013

In the matter of :

Bihar & Jharkhand Motion Pictures Association Appellant

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Versus


Appearances : Ms. Sangeeta Kumar, Advocate for the Appellant.

Mr. Ravindra Suryavanshi, Advocate for R-1Ms. Anupam Sanghi with Mr. Abhishek Yadav,Advocates and Ms. Shabistan Aquil, DD(Law) for R-2

ORDER

PER MR. JUSTICE V.S. SIRPURKAR, CHAIRMAN

This judgment will govern Appeal Nos.69, 70, 71, 73, 96, 97, 102, 78,

66, 67 of 2012. All these appeals were disposed of by the Competition

Commission of India (CCI hereinafter) by a common order. All the

appellants, therefore, have come up by way of the present appeals under

Section 53-B of the Competition Act, 202 (in short the Act). By the

impugned order, the CCI found all the appellants guilty of the contravention

of Section 3(3)(b) read with Section 3(1) of the Act and various penalties

were inflicted against all the appellants. Initially on the basis of the

information led before it by Reliance Big Entertainment P. Ltd., Case No.25

of 2010 was registered before the CCI against the 12 parties in all. So also

the information was led before the CCI by UTV Software Communication

Ltd., in Case No.41 of 2010. Similarly along-with these cases, Case

Nos.45, 47, 48, 50, 58 and 69 of 2010 were also registered on behalf of the

information led before the CCI. All these cases were disposed of by the

CCI, by the impugned order, holding the opposite parties in those cases

guilty of the contraventions as have been stated above. All these cases

were consolidated by the CCI as the basic issue raised by the Informants

were common and identical. Basically, it was stated in the information led

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before the CCI that the appellants were the representative bodies of the

distributors and exhibitors of the cinema-films and they had involved in

various anti-competitive activities in violation of the provisions of Sections 3

and 4 of the Act generally. In particular, it was stated that by their rules,

these Associations were compelling the producers and distributors of

cinema-films to compulsorily register their films with them, forcing them to

abide by their unfair and discriminatory rules. It was stated that these

Associations directed their members not to deal with non-members as also

putting restrictions such as limiting of number of cinema theatres for

exhibition of films. They were also practicing discrimination between non-

regional films against regional films. They were also imposing undue long

hold back period for exploitation of satellite, video, DTH and other rights in

respect of the exhibition of the film. They were also imposing bans,

penalties and giving call of boycott against those, who violated these

unreasonable rules and regulations of the Associations.

2. After the information was received, the CCI got the same investigated

by the Director General (in short the DG), who after investigation firstly

recommended that the appellants Association could not be said to be an

enterprise within the meaning of Section 2(h) of the Act, nor did they

constitute a group within the meaning of Section 4 read with Section 5 of

the Act and as such, they could not be held guilty for contravention of

Section 4. The DG, however, held that the appellants were guilty of the

contravention of Section 3(3)(b) of the Act. The DG found number of

contraventions of individual nature against the appellants and held them

guilty of violating of provisions of Section 3(1), 3(3)(b) and 3(4) of the Act

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on account of the bylaws, rules and regulations and the activities. In his

report, the DG has neatly listed the individual contraventions by each of the

appellants.

3. The DGs report was served on the appellants, who filed their

objections before the CCI. They were heard individually by the CCI. The

CCI framed four issues, they were as under :-

Issue 1 : Whether KFCC and other associations are enterprise

within the meaning of Section 2(h) of the Act and if the

answer to his is in affirmative, can their acts and conduct

be said to be violative of provisions of Section 4 of the Act

as has been alleged by the informant?

Issue 2 : Whether the rules and regulations, acts and conduct of

associations are subject matter of examination under

Section 3 of the Act?

Issue 3 : Whether various acts and conducts of associations are

anti-competitive as alleged in the information in terms of

Section 3(3) read with Section 3(1) of the Act?

Issue 4 : Has the action of KFCC and other associations caused

Appreciable Adverse Effect on Competition in the market?

Has the action of KFCC and other associations caused

Appreciable Adverse Effect on Competition in the market?

4. In so far as the first Issue is concerned, the CCI absolved all the

parties, since the CCI agreed with the DG that the appellants Association

could not be held to be an enterprise within the meaning of Section 2(h)

and as such could not be found guilty for contravention of Section 4 of the

Act. However, on Issue No.2, 3 and 4, the CCI found these against the

appellants and proceeded to inflict the penalties under Section 27(b) of the

Act, which is in challenge before us.

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5. In fact, the majority passed two orders one covering Case Nos.25,

41, 45, 47, 48, 50, 58 and 69 of 2010 and other covering Case Nos.52 and

56 taking the same view.

6. We must at this juncture point out that this was the majority order of

the CCI. However, one of the learned Member Mr. R. Prasad differed with

the majority, mostly on the finding on the question of applicability of Section

3(3). Shri Prasad also has passed a separate dissenting order in respect

of Case Nos.52 and 56.

7. On the question of contravention of Section 3(3), however, the

learned Member took a view that these associations could not be booked

for the contravention of Section 3(3). This view was taken by the learned

Member in view of his interpretation of Section 3(3). The learned Member

firstly considered the language of Section 3(3) and came to the conclusion

that for contravention of Section 3(3) the agreement, practice or decision

must have been taken by the associations engaged in identical or similar

trade of goods or services. The learned Member then considered the

definitions of term agreement in Section 2(b) and practice in Section

2(m). The learned Member then held that there could be no agreement

spellet out in the present case, much less agreement in terms of Section

3(3). The learned Member also held that as there was only one entity in

area, the application of Section 3 had to be ruled out. However, finding the

associations guilty for contravention of Section 4, the learned Member

directed the penalty of 2% of the turnover of each associations.

8. The CCI while passing the order under Section 27, considered the

overall income of the appellants association and directed the penalty to be

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at 10% of the average of the three years receipts/ income. The CCI also

passed the cease and desist order against all the appellants and

restrained them from following the practices. The appellants were also

directed to take suitable measures to modify their tainted rules from their

articles of association, rules and regulations on the basis of the discussions

in the order. The following directions were also given by the CCI, they

were :-

a) The associations should not compel any producer, distributor or

exhibitor to become its members as a pre-condition for

exhibition of their films in the territories under their control and

modify their rules accordingly.

b) The associations should not keep any clause in rules and

regulations which makes any discrimination between regional

and non-regional films and impose conditions which are

discriminatory against non-regional films.

c) The rules of restrictions on the number of screens on the basis

of language or the manner in which a particular film is to be

exhibited should be done away with.

d) Associations should not put any condition regarding hold back

period for release of films through other media like, CD ,

satellite etc. These decisions should be left to the concerned

parties.

e) The condition of compulsory registration of films as a pre-

condition for release of any film and existing rules of

association as discussed in the preceding paras of this order on

the issue should be dispensed with.

Three months time was given for this.

9. We must point out here that against the finding of exonerating the

appellants of the contravention of Section 4, no appeal has been filed

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against majority orders and, therefore, we would not be required to take

into consideration the finding on Issue No.1 by the majority.

10. The CCI in its majority order while giving the history of the cinema

industry, pointed out that for the assignment of film distribution rights,

territory of entire India presently was broadly divided into 12 circuits and

each of these circuits associations of film distributors and exhibitors are

formed either under Section 25 of the Companies Act, 1956 or under the

Societies Registration Act, 1860. These associations regulate the business

of film distribution and exhibition in their area of control in accordance with

their rules formulated in Memorandum and Articles of Association. It is also

pointed out by the CCI that these associations mainly consist of the

members and persons engaged in the business of film distribution and

exhibition, however, in some of the associations, the producers are also the

member. In both the orders, the CCI has neatly given the profile of the

appellants. In the order dated 16.02.2012, the CCI has given the short

profiles of (1) Karnataka Film Chamber of Commerce (KFCC); (2)

Eastern India Motion Picture Association (EIMPA); (3) Central Circuit Cine

Association (CCCA); (4) Telangana Film Chamber of Commerce (TFCC);

(5) Northern India Motion Pictures Association (NIMPA); (6) Motion

Pictures Association, Delhi (MPA); (7) Indian Motion Pictures Distributors

Association (IMPDA); (8) Bihar and Jharkhand Motion Pictures Association

(BJMPA); (9) Chennai Kanchipuram Thiruvallur District Film Distributors

Association (CKTDFDA); and lastly (10) Orissa Films Distributors

Syndicate (OFDS).

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11. In another order of the same date, also while considering the Case

Nos.52 and 56, the profile of some of the appellants has been mentioned,

wherein the CCI has pointed out the area in which these associations were

operating exhaustively. In its first order, the CCI has also given the profiles

of the Informant that is Reliance Big Entertainment Limited, a company

incorporated under the Companies Act and active in the business of film

production, distribution and exhibition. Similarly, the profile of another

Informant Reliance Media Works, which is another member of the Reliance

Big Entertainment Limited. So also the another Informant M/s UTV

Software Communications Limited are considered and the CCI has given

their area and other activities. There can be no dispute that the Informants

have taken cognizance on behalf of all the producers of the Hindi films. In

short this is a fuel between the producers on one side and distributors and

exhibitors on another.

12. The CCI has also pointed out that by way of information, these

Informants and more particularly in Case No.25 the Reliance Big

Entertainment Limited by its complaint-cum-information dated 14.06.2010

submitted that most of the appellant associations, which were named as

opposite parties made it compulsory for every film distributor to become

their member or register his film with them, otherwise he was not allowed to

distribute his films in the territories which are regulated by the appellants. It

is also pointed out that similarly the exhibitors were also threatened and

penalized for exhibiting films of such a distributor who is not a member of

any of the opposite parties or whose film is not registered with the

appellants associations. It was suggested that cinema exhibitors do not

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take the risk of exhibiting the film of a distributor who is not a member of

these associations or whose film is not registered with such associations.

Some specific complaints have been referred to, which is of no

consequence here. It is also informed that in some states cinemas are

regulated through loca

Compat 17 May 2013

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