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The Competition Appellate Tribunal (COMPAT) vide its order dated 11th December 2015 has set aside the Rs 6,316.59 crore penalty imposed on 11 cement companies by Competition Commission of India (CCI) for partaking in cartelization. COMPAT has remanded the matter back to CCI for fresh adjudication and announce its verdict within the next three months, for which CCI has heard the matter and reserved its order. COMPAT has also directed CCI to refund the penalty amount which was already deposited by the cement companies, roughly amounting to Rs. 630 crores (10% of the total penalty imposed). However, COMPAT’s ruling is disparate to the merits of the matter and owes its origin to the fact that CCI did not follow the principles of natural justice. It would be a long battle for CCI as its Chairperson, Mr. Ashok Chawla has been replaced by Mr. Devender Kumar Sikri as the Competition regulator’s new Chairperson on 08th January 2016 and given the time-bound nature of the ruling, the competition regulator would need to expedite its functioning based on COMPAT’s directions.

The Builders Association of India (BAI) filed information on 26th July 2010 with CCI under Section 19(1) (a) of the Competition Act, 2002 against the Cement Manufacturer’s Association (CMA) and 11 cement manufacturers with the allegation that they had formed a cartel and that they did not undertake production as per their installed capacity resulting in exorbitant rise in the price of cement. After thoroughly considering the information and subsequent investigation, CCI established that top cement manufacturers were controlling the supply of cement in the market by way of some tacit agreement and noticed that the conduct and activities of CMA was found to be in violation of section 3(1), 3(3)(a), 3(3)(b) of the Competition Act, 2002. The existent appeal was under Section 53-B of the Competition Act, 2002 against order dated 20th June 2012 passed by the CCI in Case No. 29/2010.

The Appellate tribunal dealt with the following issues:

  1. Whether the Director General was in violation of Section 57 and the General Regulations framed under the Act, which highlights the importance of the information supplied by enterprises, which are granted confidential treatment need to be kept confidential
  2. Whether the Chairperson of the Competition Commission of India who did not hear arguments of the learned counsel representing the appellants could become a party to the final order passed under Section 27 of the Competition Act, 2002 in contravention to the principles of natural justice?

COMPAT gave a reasoned order wherein, it opined that the impugned order is vitiated due to the violation of one of the facets of the principles of natural justice and the Director General (DG) was not in violation of his duty to keep information confidential under Section 57 of the Act and Regulation 35 of the General Regulations, 2009. The Appellate regulator ordered CCI to hear the advocates/representatives of the Appellants and BAI and pass fresh order in accordance with law within a period of three months from the date, which would be notified by the CCI after receipt of COMPAT’s order.

The Competition Act recognizes that information obtained from either of the parties could be commercially sensitive and its disclosure could result in harm to an enterprise. COMPAT reasoned out that if any of the information/document supplied by the Applicant (the Appellants) is similar to the information for which ACC or Jaypee or Lafarge (the Opposite parties) has sought and were granted confidentiality by the DG, the same may be considered for confidential treatment by the DG in accordance with the provisions contained in the subject Act and General Regulations.

COMPAT’s coherence for its order is due to the fact that the data collected by DG even otherwise is not for public consumption and remains confidential vis-a–vis public domain and can be used by DG & CCI only for the purposes of the Act, and not otherwise. No official of the CCI can reveal it to the public even if no confidentiality is granted to the party. CCI cannot ask the opposite parties to argue their case without knowing and referring to pricing data of each other and, therefore, it is apparent that the pricing data which was given confidential status by the Commission, cannot continue to be treated as confidential vis-à-vis other opposite parties and give them a fair opportunity to defend themselves. Consequently, DG was directed not to treat the cement pricing data provided by different opposite parties as confidential and subsequently, a non-confidential part of the report was required to be prepared and furnished to opposite parties for final arguments.

However, CCI did not dispute the fact that the Chairperson did not participate in the meetings held on 21st, 22nd and 23rd February, 2012; yet he joined six remaining Members in passing the final order. Each page of both the orders passed on these days were initialed by the Chairperson and the last page was signed by other six Members and the Chairperson himself without putting the date on which they had signed the order, which was against the mandate provided under Regulation 32(1) of the General Regulations, 2009. Thus, COMPAT directed CCI to evolve a protocol and system to conduct investigations so that an investigation directive can be put into place for all upcoming orders to follow.

The signing of each page by the Chairperson indicated that the orders were authored by him and not by any of the six Members, who had heard the arguments on the above noted three dates. COMPAT’s reasoning at this juncture flows from the rule of law and principles of natural justice, which are to be followed in each and every case. The Chairperson did not know what is the nature and contents of the arguments of the seven Senior Advocates and other advocates, who appeared for the parties. The minutes of the meetings recorded on those dates do not show that the remaining six Members had recorded the arguments advanced by the learned advocates. The Chairperson’s participation in the decision- making process had salutary effect on the final verdict and his views must have influenced the other six Members.

COMPAT’s ruling may be a welcome move for the cement companies and CMA, however, it remains to be seen that whether CCI would give fresh adjudication to the matter or appeal in the Supreme Court against this order. All said, COMPAT has not touched the merits of the case and only ruled against non-observance of principles of natural justice during CCI proceedings. A major catch point for this order of COMPAT is that it is one of the few judgments since Mr. Rajeev Kher was appointed as a COMPAT member. Also, it would be interesting to note that it is one of the few cases wherein COMPAT has criticized CCI rationale’s behind investigation protocol and the same has been reiterated by COMPAT in the recent Stem cell (Hiranandani) case, which again has been remanded back to CCI for fresh adjudication. 

 

*The blog has been written by Shuchi Singh, Ikleen Kaur and Partn Sehan*

Shuchi Singh - Shuchi is a practising Competition Lawyer based in New Delhi. Shuchi completed her Master in Laws (LL.M.) from National Law University, New Delhi with a specialization in Corporate and Competition Law. Shuchi also holds B.S.L.LL.B degree from University of Pune.

Ikleen Kaur - Ikleen is a practising Competition Lawyer based in New Delhi. Ikleen completed her Master in Laws (LL.M.) from King's College, London with a specialization in Competition Law. Ikleen also holds degrees in Bachelor of Laws (LL.B) and B.A.(Hons) Economics from the University of Delhi.
 
Parth Sehan - Parth is a fourth year student at JGLS.
Shuchi Singh - Shuchi is a practising Competition Lawyer based in New Delhi. Shuchi completed her Master in Laws (LL.M.) from National Law University, New Delhi with a specialization in Corporate and Competition Law. Shuchi also holds B.S.L.LL.B degree from University of Pune.

Ikleen Kaur - Ikleen Kaur is a practising Competition Lawyer based in New Delhi. Ikleen completed her Master in Laws (LL.M.) from King's College, London with a specialization in Competition Law. Ikleen also holds degrees in Bachelor of Laws (LL.B) and B.A.(Hons) Economics from the University of Delhi.
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