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Compat stays record $1.15bn fine on cement makers, orders 10% deposit in lawyer-heavy battle

Steep competing demands: Rs 600+ crore
Steep competing demands: Rs 600+ crore
Seth Dua & Associates advised the Builders Association of India (BAI) in the Competition Appellate Tribunal (Compat), which today partly stayed the earlier penalty of Rs 6,300 crore but directed 11 cement companies and the Cement Manufacturers Association of India (CMAI) to deposit 10 per cent of the fine or lose their appeal.

The cement companies had appealed against the Competition Commission of India’s (CCI) order imposing a Rs 6,300 crore ($1.15bn) penalty – the highest in the watchdog’s history equal to 50 per cent of the companies’ average profits – after a complaint of cartelisation by BAI.

The Compat also held that the CCI’s earlier cease and desist order against the cement makers would continue.

Seth Dua designated senior advocate OP Dua, assisted by erstwhile Seth Dua partner Rahul Goel and senior associate Anu Monga until they joined Dhir & Dhir in March, acted for BAI, which had alleged that the cement companies and lobbyist CMAI had colluded in price fixing in 2009-2010 and 2010-2011. Dua was present in today’s hearing, according to Mint.

The 11 cement makers and the cement trade body claimed in their appeal that there had been a violation of natural justice principles by the CCI because the original order was signed by the CCI’s chairman who was not present at hearings.

The appellants also claimed that the parties had not been given adequate opportunity to cross-examine witnesses.

The Compat said that it would have to examine whether the CCI should be held to “strict judicial norms” or whether it was only an “advisory, regulatory or an expert body”, which would enable the chairman to sign orders despite not having been present throughout, and concluded:

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.

On 21 June 2012, the CCI held the companies guilty of cartelisation on the basis of their parallel, coordinated behavior on price, dispatch, and supplies and by underutilising production capacity to pressure supply in times of higher demand.

The cement companies were represented by a raft of senior counsel and law firms.

  1. Lafarge India: AZB & Partners
  2. Ambuja Cement: Amarchand Mangaldas
  3. ACC: Amarchand Mangaldas
  4. Cement Manufacturers Association: Pramod B Agarwala
  5. Ultratech: Parekh & Co.
  6. India Cements: Harishankar
  7. Jai Prakash Associates: Luthra & Luthra
  8. Binani Cement: Virender Goswami & Associates.
  9. Madras Cement: T Srinivas Murthy
  10. J K Cement: P K Bhalla
  11. Century Textile Industries: Pramod B Agarwala

DSK Legal partner Balbir Singh represented the CCI before the Compat.

A second case involving around 40 cement companies that was clubbed with the current case in the CCI after having been referred by the CCI’s predecessor, the Monopolies and Restrictive Trade Practices Commission (MRTP), is also undergoing appeal in the Compat. In that case Shree Cements, represented by Khaitan & Co, was fined Rs 357 crore in June 2012.

Earlier this month the Compat, in the Board of Control of Cricket in India’s (BCCI) appeal against a CCI penalty, ordered the Indian Premier League (IPL) organiser to deposit 25 per cent of the total Rs 52 crore ($9.6m) penalty. Amarchand was advising the BCCI.

Click to read today’s cement Compat order

Photo by Mark Strozier

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