Heard Dr. A Saraf, learned Senior Counsel assisted by Mr. P. Das learned counsel appearing for the petitioner. Also heard Mr. T.J. Mahanta, learned Sr. Counsel assisted by Mr. D. Das, learned ...
No Acts & Articles mentioned in this case
Page No.# 1/45
GAHC010204292018
2024:GAU-AS:8600
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/6342/2018
STAR CEMENT LTD.
(FORMERLY KNOWN AS CEMENT MANUFACTURING CO LTD) A CO
INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT
1956 AND HAVING ITS OFFICE SITUATED AT MAYUR GARDEN
2ND FLOOR
OPP RAJIV BHAWAN
G S ROAD
GUWAHATI- 781005
ASSAM
REP. BY MR. NIRMAL KUMAR AGARWAL
THE DEPUTY GM (FINANCE AND ACCOUNTS)
VERSUS
THE COMPETITION COMMISSION OF INDIA AND 2 ORS
THE HINDUSTAN TIMES H NO. 18-20 KASTURBA GANDHI MARG
NEW DELHI- 110001
2:DIRECTOR GENERAL
CCI
B WING
HUDCO VISHALA
14 BHIKAJI CAMA PLACE
NEW DELHI- 110066
3:JOINT DIRECTOR GENERAL
CCI
B WING
HUDCO VISHALA
14 BHIKAJI CAMA PLACE
NEW DELHI- 110066
------------
Advocate for : DR. A SARAF
Advocate for : MR. WISE IMRAN (R1-R3) appearing for THE COMPETITION Page No.# 1/45
GAHC010204292018
2024:GAU-AS:8600
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/6342/2018
STAR CEMENT LTD.
(FORMERLY KNOWN AS CEMENT MANUFACTURING CO LTD) A CO
INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT
1956 AND HAVING ITS OFFICE SITUATED AT MAYUR GARDEN
2ND FLOOR
OPP RAJIV BHAWAN
G S ROAD
GUWAHATI- 781005
ASSAM
REP. BY MR. NIRMAL KUMAR AGARWAL
THE DEPUTY GM (FINANCE AND ACCOUNTS)
VERSUS
THE COMPETITION COMMISSION OF INDIA AND 2 ORS
THE HINDUSTAN TIMES H NO. 18-20 KASTURBA GANDHI MARG
NEW DELHI- 110001
2:DIRECTOR GENERAL
CCI
B WING
HUDCO VISHALA
14 BHIKAJI CAMA PLACE
NEW DELHI- 110066
3:JOINT DIRECTOR GENERAL
CCI
B WING
HUDCO VISHALA
14 BHIKAJI CAMA PLACE
NEW DELHI- 110066
------------
Advocate for : DR. A SARAF
Advocate for : MR. WISE IMRAN (R1-R3) appearing for THE COMPETITION
Page No.# 2/45
COMMISSION OF INDIA AND 2 ORS
WP(C)/6343/2018
STAR CEMENT LTD.
(FORMERLY KNOWN AS CEMENT MANUFACTURING CO. LTD) A
COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES
ACT 1956 AND HAVING ITS OFFICE SITUATED AT MAYUR GARDEN, 2ND
FLOOR, OPP RAJIV BHAWAN, G S ROAD, GHY- 781005, ASSAM AND REP. BY
MR. NIRMAL KUMAR AGARWAL THE DEPUTY GENERAL MANAGER
(FINANCE AND ACCOUNTS) OF THE PETITIONER COMPANY
VERSUS
THE COMPETITION COMMISSION OF INDIA AND 4 ORS
THE HINDUSTAN TIMES H NO. 18-20, KASTURBA GANDHI MARG, NEW
DELHI- 110001
2:ASSAM REAL ESTATE AND INFRASTRUCTURE DEVELOPERS
ASSOCIATION
REP. BY ITS PRESIDENT ER. P K SHARMA
S/O- LATE K N SHARMA
LANDMARK BUILDING
GROUND FLOOR
M G ROAD
MACHKHOWA
GUWAHATI- 781009
3:RAJESH PRASAD
COMMISSSIONER AND SECRETARY
DEPTT OF FOOD CIVIL SUPPLIES AND CONSUMER AFFAIRS
GOVT OF ASSAM
ASSAM SECRETARIAT
DISPUR
GHY- 781006
4:DIRECTOR GENERAL
CCI
B WING
HUDCO VISHALA
14 BHIKAJI CAMA PLACE
NEW DELHI- 110066
5:JOINT DIRECTOR GENERAL
CCI
Page No.# 3/45
B WING
HUDCO VISHALA
14
BHIKAJI CAMA PLACE
NEW DELHI- 11006
Advocate for the Petitioner : DR. A SARAF, MR. P BARUAH,MR. Z ISLAM,MR. N N
DUTTA,MR. P DAS,MR. S P SHARMA
Advocate for the Respondent : MR J SHARMA (R2), MR G KAKOTI (R2),MR. H J RAI (R2),MR.
M A CHOUDHURY (R1, R4, R5),MR. WISE IMRAN (R1, R4, R5)
BEFORE
HON’BLE MR. JUSTICE KAUSHIK GOSWAMI
Advocates for the petitioner : Dr. A. Saraf, Sr. Adv.
Mr. P. Das.
Advocates for the respondents: Mr. T.J. Mahanta, Sr. Adv.
Mr. D. Das.
Mr. D. Nath Sr. GA for State respondent.
Dates of Hearing : 09.04.2024, 19.04.2024, 23.04.2024.
Date of Judgment : 30.08.2024.
JUDGMENT & ORDER (CAV)
Heard Dr. A Saraf, learned Senior Counsel assisted by Mr. P. Das learned
counsel appearing for the petitioner. Also heard Mr. T.J. Mahanta, learned Sr.
Counsel assisted by Mr. D. Das, learned counsel for respondent Nos. 1, 4 and 5
(the Competition Commission of India) and Mr. D Nath, learned Sr. Government
Advocate for the State respondents.
2. In WP(C) 6343 of 2018, the petitioner company is seeking inter alia quashing
of the proceedings of Case No. 77 of 2016 with Reference Case No. 4/2016
Page No.# 4/45
registered with the Competition Commission of India (herein after referred to as
the CCI) and the impugned Order dated 06.12.2016 passed by the CCI under
Section 26(1) of the Competition Act, 2002 (herein after referred to as the said
Act, 2002) and the impugned Order dated 08.08.2018 passed by the CCI rejecting
the application seeking review/recall of the Order dated 06.12.2016 passed by the
CCI on 08.09.2016 and 15.09.2016 respectively filed by the petitioner.
3. Whereas, in WP(C) No. 6342/2018, the writ petitioner company is assailing the
impugned Order dated 27.08.2018 passed by the CCI in Case No. 77/2016 with
Reference No. 4/2016 imposing a penalty of Rs. 5,00,000/- (Rupees Five Lakhs)
under Section 43 of the said Act, 2002 to the petitioner for non-compliance with
the direction of the Director General pursuant to the impugned Order dated
06.12.2016, which is the subject matter in WP(C) 6343/2018.
4. Both the writ petitions are taken up together for hearing as the consequential
action of the CCI in levying penalty upon the petitioner company for non-
compliance of the direction passed by the Director General, pursuant to the
direction of the CCI under Section 26(1) of the said Act, 2002 to the Director
General to cause an inquiry which is under challenge in WP(C) No. 6343/2018 is
challenged in WP(C) 6342/2018.
5. The facts of the instant case are as follows:-
6. The petitioner is a company registered under the provisions of the
Companies Act, 1956 and is engaged in the manufacture and sell of clinker and
cement.
7. On 08.09.2016, the respondent No. 2, i.e., Assam Real Estate and Developer
Association filed information under Section 19(1)(a) of the said Act, 2002 before
the CCI, alleging inter alia that the petitioner company alongwith some other
Page No.# 5/45
cement manufacturing companies have been indulging in cartelization and abuse of
dominants to manipulate the prices of their respective brands of cement in North
East Region of India. Accordingly, a case was registered being Case No. 77/2016.
Thereafter, on 15.09.2016, similar information was filed under Section 19(1)(b) of
the said Act, 2002 before the CCI by one Shri Rajesh Prasad, IAS, Commissioner &
Secretary, Govt. of Assam (respondent No. 3) alleging inter alia that three major
cement manufacturing companies including that of the petitioner company had
been indulging in anti-competitive activities by entering into Anti-Competitive
Agreements in contravention of Section 3 of the said Act, 2002. Accordingly, the
said information was registered and numbered as Reference Case No. 4/2016.
8. Thereafter, the CCI by impugned Order dated 06.12.2016 in terms of Section
26(1) of the said Act, 2002 prima facie formed an opinion that the petitioner
company and some other cement manufacturing companies by seeking stifle
competition in the market through collusive practices have indulged in anti-
competitive activities in violation of the provisions of Section 3(3) r/w 3(1) of the
said Act, 2002. The CCI therefore, under Section 26(1) of the said Act, 2002
directed the Director General to cause an investigation into the matters and
complete the investigation within a period of 60 days from the date of receipt of
this order. It was further provided that during the course of investigation, if
involvement of any other party/parties was found, the Director General shall
investigate the conduct of such other party/parties and the Director General was
also directed to investigate the role, if any, of other persons who were in charge of
and were responsible for the alleged conduct of the petitioner or with his consent
or connivance, the alleged conduct of the petitioner company took place.
9. After almost one year since the aforesaid order was passed, the Joint Director
General issued a Notice on 08.12.2017 under Section 36 (2) read with Section
41(2) of the said Act, 2002, whereby the petitioner company was directed to
Page No.# 6/45
furnish various information as called for in the said notice. Pertinent that the Order
dated 06.12.2016 however was not furnished to the petitioner company, despite
the same is said to have been annexed with the said notice.
10. By letter dated 19.12.2017, the petitioner company requested the CCI to
provide with additional details and till date the said details are not furnished, the
timeline for submission of the requisite information be extended.
11. Thereafter, the petitioner company was served with the impugned Order
dated 06.12.2016 passed by the CCI.
12. Accordingly, on 30.05.2018, the petitioner company filed an application for
review and recall of the said impugned Order dated 06.12.2016 passed by the CCI.
13. The said application filed by the petitioner company was heard and thereafter,
the CCI by review Order dated 08.08.2018 rejected the application for
review/recall.
14. Aggrieved, by the aforesaid order of the CCI rejecting the review application
as well as the order of the CCI drawing prima facie opinion against the petitioner
company and the order of investigation thereof, the instant petition under Article
226 of the Constitution of India, i.e., WP(C) No. 6343/2018 is being filed.
15. Pursuant to the registration of the investigation, the Director General issued
notice to the petitioner company under Section 36(2) read with Section 41(2) of
the said Act, 2002 directing the petitioner company to furnish various information
as enumerated in the said notice.
16. Though various responses and submissions are made by the petitioner, the
CCI by impugned Order dated 27.8.2018, without appreciating the submission of
the petitioner company in the correct perspective held that the petitioner company
has not only failed to provide complete information to the Director General, but
Page No.# 7/45
also did not show any reasonable cause for not providing the same within the
stipulated time and thereafter, by invoking the provisions of Section 43 of the said
Act, 2002 imposed a penalty of Rs. 5,00,000/- (Rupees Five Lakhs) for non-
compliance.
17. Aggrieved by the aforesaid Order dated 27.8.2018 passed by the CCI in Case
No. 77/2016 with Reference Case No. 4/2016, the petitioner company filed the
instant petition, i.e., WP(C) No. 6342/2018 under Article 226 of the Constitution of
India.
18. Dr. A. Saraf, learned counsel for the petitioner company submits that the CCI
Authorities without existence of a prima facie case as contemplated under Section
3 of the said Act, 2002, ordered investigation under Section 19(1) of the said Act,
2002, and therefore, it is in total contravention of the provision of the said Act,
2002. According to him, there has to be first a prima facie finding as regards the
existence of the agreement entered into by enterprise or association or person or
association of person and thereafter, there has to be a determination as to whether
such an agreement is anti-competitive agreement within the meaning of the said
Act, 2002 and once it is found to be so, other provisions relating to the treatment
that needs to be given thereto shall get attracted. He further submits that as such,
before issuing direction under Section 26(1) of the said Act, 2002, the CCI must be
of the opinion that there exist a prima facie case and any action taken without the
fulfillment of the aforesaid pre-condition, shall be totally illegal and void ab initio.
19. He accordingly submits that the impugned Order dated 06.12.2016 and
Review Order dated 08.08.2018 are wholly illegal and without jurisdiction and
thereby warrants setting aside and quashing thereof.
20. He further submits that the consequent penalty imposed upon the petitioner
company as such is unwarranted.
Page No.# 8/45
21. Mr. T.J. Mahanta, learned Sr. Counsel for the respondent Nos. 1, 4 and 5 on
the other hand submits that the instant writ petition is not maintainable, inasmuch
as, the writ petition is pre-mature and the investigation directed by the CCI
Authorities is based on a prima facie opinion without involving an adjudicatory
process and once the Director General submits the final report, the same can be
appealed before the National Company Law Appellate Tribunal under Section 53-A
of the said Act, 2002. In reliance of the aforesaid submission, he relies upon the
decision of the Apex Court in the case of Competition Commission of India vs.
State of Mizoram reported in (2002) 7 SCC 73. He further submits that the CCI
Authorities does not have the power and jurisdiction for review of its order on
merits. In support of the aforesaid submission, he relies upon the decision of the
Apex Court, in the case of Kapra Mazdoor Ekta Union Vs. Birla Cotton
Spinning and Weaving Mills Limited & Another, reported in (2005) 13 SCC
777 and the decision of the Delhi High Court in the case of Eaton Power Quality
Private Limited Vs. Competition Commission of India & Ors reported in
2021-DHC-2804.
22. He further submits that the investigation being at threshold, the same is
ought not to be interfered or stopped. In support of the aforesaid submission, he
relies upon the following decisions-
1) Competition Commission of India Vs. Grasim Industries Limited,
reported in (2019) SCC Online DEL 10017.
2) Flipkart Internet Private Limited Vs. Competition Commission of
India, reported in MANU/KA/3124/2021.
23. He further submits by relying on the decision of the Apex Court in the case of
the Competition Commission of India Vs. Bharti Airtel Limited & Others
reported in AIR 2019 SC 113, that the order under Section 26(1) of the said Act,
Page No.# 9/45
2002 being administrative in nature, the High Court ought not adjudge the validity
of such an order on merits.
24. He further submits that the grounds raised by the petitioner are all on merits,
which this Court is not empowered to adjudicate upon in terms of the powers
conferred upon it under Article 226 of the Constitution of India.
25. I have given my prudent consideration to the submissions made by the
learned counsels for the parties and perused the materials available on record
including the case laws cited by them.
26. The two Orders under challenge in W.P (C) 6348/2018 are:-
(i) Order dated 06.12.2016 vide which the CCI after having received
information under Section 19 (1)(a) and 19(1)(b) of the said Act, 2002
respectively, from a) Assam Real Estate and Infrastructure Developers
Association (respondent No. 2) and b) Shri Rajesh Prasad, I.A.S.,
Principal Secretary, Food, Civil Supplies & Consumer Affairs
Department, Government of Assam (respondent No. 3), alleging anti-
competitive practices and cartelization carried out by Star Cements
Limited (petitioner company) along with other cement manufacturers
in the North-East region, caused an inquiry into the alleged
contravention of the provisions contained in sub-section (1) of Section
3 formed a prima facie opinion under Section 26(1) of the Act and
directed the Director General to cause an investigation into the matter.
(ii) Order dated 08.08.2018 vide which the CCI rejected the petitioner's
application seeking a review and recall of the above mentioned Order
dated 06.12.2016.
Page No.# 10/45
27. The consequent order under challenge in WP(C) No. 6342/2018 is:-
(i) Order dated 27.08.2018 passed by the CCI imposing penalty to the
tune of Rs. 5,00,000/- (Rupees Five Lakhs) under Section 43 of the said Act,
2002 against the petitioner company for non-furnishing information as
sought by the Director General for the purpose of conducting the
investigation as directed by the impugned Order dated 06.12.2016.
28. It appears that the said impugned Orders dated 06.12.2016 and 08.08.2018
were triggered by information received from respondent No. 2 and reference from
the Govt. of Assam and that the information as alleged in the said letters were that
there had been cartelization amongst the cement manufacturers as the said
manufacturers had simultaneously increased the price of cement within the State
of Assam approximately within the same time frame and that post such
synchronies price hike, the price of cement in the State of Assam became
substantially higher than the price of cement sold by the same manufacturers in
the neighbouring State, where the price of cement deferred between manufactures
unlike the case in the State of Assam.
29. It further appears that by Order dated 27.08.2018, the petitioner company
was directed to pay a penalty to the tune of Rs. 5,00,000/- (Rupees Five Lakhs)
under Section 43 of the said Act, 2002 for non-furnishing information as directed
by the Director General.
30. Before adverting on the merits of the case, it would be apposite to refer to
the historical timelines which made it necessary to regulate competition in the
market.
31. The origin of competition law in world history can be traced back to the
United States first and then parallel in the European Union and India. In the 1800s,
giant business houses in the United States were known as “Trusts”. The four major
Page No.# 11/45
sections of the economy like railroads, oil, steel and sugar were controlled by these
business houses. One of the famous business houses was Standard Oil Company
which held a monopoly in the Oil Industry, thereby dictating the price and
controlling the supply of their products. Thus, there was no choice left for the small
businesses but to agree to the said price, which was increasing beyond limits at the
discretion of the said company for which the market was abused, disrupted and
competition was hampered. This led the then President Roosevelt to break up their
trusts by enforcing the very first antitrust law, known as the Sherman Antitrust Act
of 1890. Pertinent that this is the very reason for the Competition Law to be known
as Antitrust Law in the United States. Subsequently, in 1914, Congress passed two
more antitrust legislations in the United States namely, Federal Trade Commission
Act and Clayton Act. Pertinent also that the objectives of all these antitrust
legislation throughout the year had remained the same, namely, consumer welfare,
economic welfare, promoting healthy competition and curving anti competitive
practices.
32. The origin of competition policy in the European Union evolved as an
aftermath of World War-II. It was accepted by the independent nations with
mature industrialized economics as one element in the project of economic
integration. The immediate goal of the project was to promote economic prosperity
and was ancillary to its fundamental political purpose, which was “to substitute for
age old rivalries, the merging of essential interests; to create, by establishing an
economic community, the basis for a broader and deeper community among
peoples long divided by bloody conflicts”. Pertinent that the same can be traced in
two major documents, the Schuman Plan and Spaak Report.
33. After independence, India followed a centrally planned economy, thereby
vesting all the power to make economic decision upon the public sector and the
Government. This model was known as the Nehruvian Socialism Model (Mixed
Page No.# 12/45
Economy Model), also known as “Command and Control” economy. It was a mid
way between an extreme market economy and socialist economy. Both the private
and public sector were co-existing but there was more restriction, control and
supervision on the private sector. Public sector businesses were also failing
miserably and the Government was burden with debt and the restriction on the
private sector made it impossible for those businesses to contribute positively to
the Indian economy. Therefore, in 1991 through liberalization, privatization and
globalization movement, it became imperative for India to change the ways to
meet up with their international obligation and for the efficient working of the
economy. The Hazari Committee in 1951 was the first Committee to undertake a
study to access the viability of the Industrial Licensee Procedure under the
Industries (Development and Regulation) Act, 1951. After few more studies being
undertaken, it was decided that there was a need to enact a legislation to prevent
the concentration of economic power leading to common detriment of the economy
of the nation. Accordingly, the Monopolistic and Restrictive Trade Practices Bill was
introduced in the Parliament in the year 1967, which was passed and finally came
into force w.e.f. 1
st
June, 1970. The objectives of this Act were:-
1. Prevention of Concentration of Economic Power to the common
detriment.
2. Control of Monopolist.
3. Prohibition of Monopolist Trade Practices.
4. Prohibition of Restricted Trade Practices.
34. There were many amendments made to the Act, major ones being in 1984
Page No.# 13/45
and 1991, The Monopolies and Restrictive Trade Practices Act, 1969 (herein after
referred to as the MRTP Act). The MRTP Act being too restrictive in nature and
after the LPG reform of 1991, there was a need to introduce a legislation which is
liberal, promotes healthy competition and has positive reinforcement. The
provisions of the MRTP Act were just preventative and prohibitive and the concept
of MRTP Act was becoming obsolete, since India was moving from the Nehruvian
model to a more liberalize form of economy. To combat all short coming of the
MRTP Act, a High Level Committee on Competition Policy and Competition Law was
set up by the Govt. of India in October, 1999. The Committee was appointed to
advice regarding a modern competition law for the Country in line with
international developments and to suggest a legislative frame work which may
entail a new law or amendments related to the MRTP Act. The said Committee,
having being appointed under the Chairmanship of Mr. SVS Radhavan, was
popularly known as Radhavan Committee Report and the said Act, 2002 is based
on a commentary of the Radhavan Committee Report, apart other
recommendations. This is how the MRTP Act was repealed and the said Act of 2002
was passed and brought into force w.e.f. 31.03.2003.
35. Apt to reproduce hereunder, the statements and objects and reason of the
said Act, 2002 for ready reference:-
“The Monopolies and Restrictive Trade Practices Act, 1969 has become
obsolete in certain respects in the light of international economic developments
relating more particularly to competition laws and there is a need to shift our
focus from curbing monopolies to promoting competition.
2. The Central Government constituted a High Level Committee on Competition
Policy and Law. The Committee submitted its report on the 22nd May, 2000 to
the Central Government. The Central Government consulted all concerned
including the trade and industry associations and the general public. The
Central Government after considering the suggestions of the trade and industry
and the general public decided to enact a law on Competition.
Page No.# 14/45
3. The Competition Bill, 2001 seeks to ensure fair competition in India by
prohibiting trade practices which cause appreciable adverse effect on
competition in markets within India and, for this purpose, provides for the
establishment of a quasi-judicial body to be called the Competition Commission
of India (hereinafter referred to as CCI) which shall also undertake competition
advocacy for creating awareness and imparting training on competition issues.
4. The Bill also aims at curbing negative aspects of competition through the
medium of CCI. CCI will have a Principal Bench and Additional Benches and will
also have one or more Mergers Benches. It will look into violations of the Act, a
task which could be undertaken by the Commission based on its own
knowledge or information or complaints received and references made by the
Central Government, the State Governments or statutory authorities. The
Commission can pass orders for granting interim relief or any other appropriate
relief and compensation or an order imposing penalties, etc. An appeal from the
orders of the Commission shall lie to the Supreme Court. The Central
Government will also have powers to issue directions to the Commission on
policy matters after considering its suggestions as well as the power to
supersede the Commission if such a situation is warranted.
5. The Bill also provides for investigation by the Director-General for the
Commission. The Director-General would be able to act only if so directed by
the Commission but will not have any suo moto powers for initiating
investigations.
6. The Bill confers power upon the CCI to levy penalty for contravention of its
orders, failure to comply with its directions, making of false statements or
omission to furnish material information, etc. The CCI can levy upon an
enterprise a penalty of not more than ten per cent of its average turn-over for
the last three financial years. It can also order division of dominant enterprises.
It will also have power to order demerger in the case of mergers and
amalgamations that adversely affect competition.
7. The Bill also seeks to create a fund to be called the Competition Fund. The
grants given by the Central Government, costs realized by the Commission and
application fees charged will be credited into this Fund. The pay and allowances
and the other expenses of the Commission will also be borne out of this Fund.
The Bill provides for empowering the Comptroller and Auditor-General of India
to audit the accounts of the Commission. The Central Government will be
required to lay the annual accounts of the Commission, as audited by the
Comptroller and Auditor-General and also the annual report of the Commission
before both the Houses of Parliament.
Page No.# 15/45
8. The Bill aims at repealing the Monopolies and Restrictive Trade Practices Act,
1969 and the dissolution of the Monopolies and Restrictive Trade Practices
Commission. The Bill provides that the cases pending before the Monopolies
and Restrictive Trade Practices Commission will be transferred to the CCI except
those relating to unfair trade practices which are proposed to be transferred to
the relevant fora established under the Consumer Protection Act, 1986.
9. The Bill seeks to achieve the above objectives.
Statement of Objects and Reasons of Amendment Act 39 of 2007-
The Competition Act was enacted in 2002 keeping in view the economic
developments that have resulted in opening up of the Indian economy, removal
of controls and consequent economic liberalization which required that the
Indian market be geared to face competition from within the country and
outside. The Competition Act, 2002 provided for the establishment of a
Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other participants in
markets, in India, and for matters connected therewith or incidental thereto”.
36. Reading of the said statements and objects of the said Act, 2002, amply
clarifies that CCI was established mainly to prohibit trade practices which cause
appreciable adverse effect on competition on market in India. In order to curb such
anti competitive agreement and practices, CCI is entrusted quasi judicial powers. In
pursuance with the said objects, the Director General for the CCI is empowered to
conduct investigation but such powers cannot be exercised by the Director General
suo moto.
37. Apt to refer to the relevant provisions of the said Act, 2002. Section 2(b)(c) of
the said Act, 2002 is quoted hereunder for ready reference:-
“2. Definitions.—In this Act, unless the context otherwise requires,—
(a) “acquisition" means, directly or indirectly, acquiring or agreeing to
acquire-
Page No.# 16/45
(i) shares, voting rights or assets of any enterprise; or
(ii) control over management or control over assets of any enterprise;
(b) “agreement” includes any arrangement or understanding or action
in concert,-
(i) whether or not, such arrangement, understanding or action is formal
or in writing; or
(ii) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceedings;
[(ba) "Appellate Tribunal" means the National Company Law Appellate
Tribunal referred to in sub-section (1) of Section 53-A;]
(c) "cartel" includes an association of producers, sellers, distributors, traders or
service providers who, by agreement amongst themselves, limit, control or
attempt to control the production, distribution, sale or price of, or, trade in
goods or provision of services;”
38. Section 3(a)(b)(c) of the said Act, 2002 is quoted hereunder for ready
reference:-
“3. Anti-competitive agreements.—(1) No enterprise or association of
enterprises or person or association of persons shall enter into any agreement
in respect of production, supply, distribution, storage, acquisition or control of
goods or provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in
sub-section (1) shall be void.
(3) Any agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any person and
enterprise or practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in identical or
similar trade of goods or provision of services, which-
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) shares the market or source of production or provision of services by
way of allocation of geographical area of market, or type of goods or
services, or number of customers in the market or any other similar way;”
39. Section 4 of the said Act, 2002 is quoted hereunder for ready reference:-
“4. Abuse of dominant position.—[(1) No enterprise or group shall abuse its dominant
position.]
(2) There shall be an abuse of dominant position [under sub-section (1), if an
Page No.# 17/45
enterprise or a group]—
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of
goods or service.
Explanation. ---For the purposes of this clause, the unfair or
discriminatory condition in purchase or sale of goods or service
referred to in sub-clause (i) and unfair or discriminatory price in
purchase or sale of goods (including predatory price) or service
referred to in sub-clause (ii) shall not include such discriminatory
condition or price which may be adopted to meet the competition;
or
(b) limits or restricts—
(i) production of goods or provision of services or market therefor;
or
(ii) technical or scientific development relating to goods or services
to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access
'[in any manner]; or
(d) makes conclusion of contracts subject to acceptance by other parties
of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such
contracts; or
(e) uses its dominant position in one relevant market to enter into, or
protect, other relevant market.
Explanation.-- For the purposes of this section, the expression-
(a) "dominant position" means a position of strength, enjoyed by an enterprise,
in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant
market; or
(ii) affect its competitors or consumers or the relevant market in
its favour;
(b) "predatory price" means the sale of goods or provision of services, at a price
which is below the cost, as may be determined by regulations, of production of
the goods or provision of services, with a view to reduce competition or
eliminate the competitors.
[(c) "group" shall have the same meaning as assigned to it in clause (b) of
the Explanation to Section 5.]”
40. Section 19 of the said Act, 2002 is quoted hereunder for ready reference:-
“19. Inquiry into certain agreements and dominant position of enterprise.-(1)
The Commission may inquire into any alleged contravention of the provisions
contained in sub-section (1) of Section 3 or sub-section (1) of Section 4 either
Page No.# 18/45
on its own motion or on—
(a) 27 [receipt of any information, in such manner and] accompanied by
such fee as may be determined by regulations, from any person,
consumer or their association or trade association; or
(b) a reference made to it by the Central Government or a State
Government or a statutory authority.
(2) Without prejudice to the provisions contained in sub-section (1), the powers
and functions of the Commission shall include the powers and functions
specified in sub-sections (3) to (7).
(3) The Commission shall, while determining whether an agreement has an
appreciable adverse effect on competition under Section 3, have due regard to
all or any of the following factors, namely:-
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of
services; or
(f) promotion of technical, scientific and economic development by
means of production or distribution of goods or provision of services.
(4) The Commission shall, while inquiring whether an enterprise enjoys a
dominant position or not under Section 4, have due regard to all or any of the
following factors, namely:-
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages
over competitors;
(e) vertical integration of the enterprises or sale or service network of
such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any
statute or by virtue of being a Government company or a public sector
undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial
risk, high capital cost of entry, marketing entry barriers, technical entry
barriers, economies of scale, high cost of substitutable goods or
service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic
development, by the enterprise enjoying a dominant position having or
Page No.# 19/45
likely to have appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant for
the inquiry.
(5) For determining whether a market constitutes a "relevant market" for the
purposes of this Act, the Commission shall have due regard to the "relevant
geographic market" and "relevant product market".
(6) The Commission shall, while determining the "relevant geographic market",
have due regard to all or any of the following factors, namely:—
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after sales services.
(7) The Commission shall, while determining the "relevant product market",
have due regard to all or any of the following factors, namely:—
(a) physical characteristics or end-use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in house production;
(e) existence of specialised producers;
(f) classification of industrial products.”
41. Section 26 of the said Act, 2002 is quoted hereunder for ready reference:-
“[26. Procedure for inquiry under Section 19.---(1) On receipt of a reference
from the Central Government or a State Government or a statutory authority or
on its own knowledge or information received under Section 19, if the
Commission is of the opinion that there exists a prima facie case, it shall direct
the Director General to cause an investigation to be made into the matter:
Provided that if the subject matter of an information received is, in the opinion of
the Commission, substantially the same as or has been covered by any
previous information received, then the new information may be clubbed with
the previous information.
(2) Where on receipt of a reference from the Central Government or a State
Government or a statutory authority or information received under Section 19,
the Commission is of the opinion that there exists no prima facie case, it shall
close the matter forthwith and pass such orders as it deems fit and send a copy
of its order to the Central Government or the State Government or the statutory
authority or the parties concerned, as the case may be.
(3) The Director General shall, on receipt of direction under sub-section (1),
submit a report on his findings within such period as may be specified by
the Commission.
Page No.# 20/45
(4) The Commission may forward a copy of the report referred to in sub-section
(3) to the parties concerned:
Provided that in case the investigation is caused to be made based on a
reference received from the Central Government or the State Government or
the statutory authority, the Commission shall forward a copy of the report
referred to in sub-section (3) to the Central Government or the State
Government or the statutory authority, as the case may be.
(5) If the report of the Director General referred to in sub-section (3)
recommends that there is no contravention of the provisions of this Act, the
Commission shall invite objections or suggestions from the Central Government
or the State Government or the statutory authority or the parties concerned, as
the case may be, on such report of the Director General.
(6) If, after consideration of the objections or suggestions referred to in sub-
section (5), if any, the Commission agrees with the recommendation of the
Director General, it shall close the matter forthwith and pass such orders as it
deems fit and communicate its order to the Central Government or the State
Government or the statutory authority or the parties concerned, as the case
may be.
(7) If, after consideration of the objections or suggestions referred to in sub-
section (5), if any, the Commission is of the opinion that further investigation is
called for, it may direct further investigation in the matter by the Director General
or cause further inquiry to be made in the matter or itself proceed with further
inquiry in the matter in accordance with the provisions of this Act.
(8) If the report of the Director General referred to in sub-section (3)
recommends that there is contravention of any of the provisions of this Act, and
the Commission is of the opinion that further inquiry is called for, it shall inquire
into such contravention in accordance with the provisions of this Act.]”
42. Section 27 of the said Act, 2002 is quoted hereunder for ready reference:-
“27. Orders by Commission after inquiry into agreements or abuse of
dominant position.- Where after inquiry the Commission finds that any
agreement referred to in section 3 or action of an enterprise in a dominant
position, is in contravention of section 3 or section 4, as the case may be, it may
pass all or any of the following orders, namely:--
(a) direct any enterprise or association of enterprises or person or association of
persons, as the case may be, involved in such agreement, or abuse of
dominant position, to discontinue and not to re-enter such agreement or
discontinue such abuse of dominant position, as the case may be;
2
[(b) impose such penalty, as it may deem fit which shall be not more than ten
Page No.# 21/45
per cent. of the average of the turnover or income, as the case may be, for the
last three preceding financial years, upon each of such person or enterprise
which is a party to such agreement or has abused its dominant position:
Provided that in case any agreement referred to in section 3 has been entered
into by a cartel, the Commission may impose upon each producer, seller,
distributor, trader or service provider included in that cartel, a penalty of up to
three times of its profit for each year of the continuance of such agreement or
ten per cent. of its turnover or income, as the case may be, for each year of the
continuance of such agreement, whichever is higher.
Explanation 1.--For the purposes of this clause, the expression "turnover" or
"income", as the case may be, shall be determined in such manner as may be
specified by regulations.
Explanation 2.--For the purposes of this clause, "turnover" means global
turnover derived from all the products and services by a person or an
enterprise.]
(c) [***]
(d) direct that the agreements shall stand modified to the extent and in the
manner as may be specified in the order by the Commission;
(e) direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment of
costs, if any;
(f) [***]
(g) pass such other
5
[order or issue such directions] as it may deem fit:
[Provided that while passing orders under this section, if the Commission comes
to a finding, that an enterprise in contravention to section 3 or section 4 of the
Act is a member of a group as defined in clause (b) of the Explanation to
section 5 of the Act, and other members of such a group are also responsible
for, or have contributed to, such a contravention, then it may pass orders, under
this section, against such members of the group.]”
43. Section 53A of the said Act, 2002 is quoted hereunder for ready reference:-
“[53A. Appellate Tribunal.--The National Company Law Appellate Tribunal constituted
under section 410 of the Companies Act, 2013 (18 of 2013) shall, on and from the
commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate
Tribunal for the purposes of this Act and the said Appellate Tribunal shall--
(a) hear and dispose of appeals against any direction issued or decision made or order
passed by the Commission under [sub-sections (6) of section 6, sub-sections (2), (2A),
(6) and (9) of section 26], section 27, section 28, section 31, section 32, section 33,
section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of
this Act; and
Page No.# 22/45
(b) adjudicate on claim for compensation that may arise from the findings of the
Commission or the orders of the Appellate Tribunal in an appeal against any finding of
the Commission or under section 42A or under sub-section (2) of section 53Q of this
Act, and pass orders for the recovery of compensation under section 53N of this Act.]”
44. Perusal of the aforesaid provisions indicates that an ‘Agreement’ means any
kind of arrangement or understanding or action whether or not in writing. It further
appears that in order to constitute a ‘cartel’, it includes the association of
seller/distributor/manufacturer who by agreement amongst themselves limit,
control or attempt to control the production, distribution, sell or price of, or trade in
goods or provisions of services.
45. It further appears that the CCI is empowered to conduct enquiry into certain
agreements and dominant possession of enterprise upon receipt of any information
as provided under Section 19 of the said Act, 2002. However, it appears that under
Section 26(1) of the said Act, the CCI before directing the Director General to
cause an investigation, has to form an opinion on the basis of the information
received thereof that there exist a ‘prima facie’ case. Therefore, it is amply
apparent that only after the CCI is of the opinion that there exists a ‘prima facie’
case, it shall direct the Director General to cause an investigation to be made in the
matter. In other words, the information received must prima facie indicates that
there exist agreement which is likely to cause an appreciable adverse effect on
competition within India and such agreement or decision taken by any association
of enterprises, including cartel engaged in identical or similar trade of goods or
provision of services which directly or indirectly determines purchase or sell prices;
limit or control production, supply, market, technical development, investment or
provisions of services; share the market or source of production or provisions of
services by way of allocation of geographical area of market, or types of goods or
services, or number of customer in the market or any other similar way; directly or
indirectly result in bid rigging or collusive bidding shall be presumed to have an
Page No.# 23/45
appreciable adverse effect on competition. Further, it appears that under Section 4
of the said Act, 2002, there shall be abuse of dominant position if an enterprise or
a group directly or indirectly imposes unfair or discriminatory condition in purchase
or sell of goods or service; or price in purchase or sell of goods or service; or limits
or restricts productions of goods of provision of service or market thereof; or
indulges in practice or practices resulting in denial of market assess; or makes
conclusion of contract subject to acceptance by other parties of supplementary
obligation which, by the nature or according to commercial usage, have no
connection with the subject of such contract; or uses its dominance position in one
relevant market enter into, or protect, other relevant market.
46. The definition of “Appreciable Adverse Effect” though is not clarified in the
said Act of 2002 but under Section 19(1) of the said Act, 2002, the factors for the
determination of “Appreciable Adverse Effect” are stipulated therein. Thus, if the
information received prima facie indicates existence of any such agreement or
decision between the enterprises which is causing appreciable adverse effect on
competition within the territorial limit of India and or indicates abuse of dominant
position by any such enterprise or group or person, the CCI shall direct the Director
General to cause an investigation to be made into the matter. This is consonance
with the statements and objects of the said Act, 2002.
47. Pursuant such inquiry, Section 27 of the said Act, 2002 confers the CCI to
pass appropriate directions/orders of penalty etc. for contravention of the
provisions contained under Section 3 or Section 4 of the said Act, 2002, as the case
may.
48. Section 53A of the said Act, 2002 stipulates the order or decision passed by
the CCI which are appealable before the appellate Tribunal i.e. the National
Company Law Appellate Tribunal (NCLAT). Apparent thus, that the orders passed
Page No.# 24/45
by the CCI after inquiry into agreement or abuse of dominant position, is
appealable under the said provision. However, the order of the CCI directing the
Director General to investigate as provided under Section 26(1) of the said Act,
2002 is not included in the said list of appealable orders. As such, such orders of
the CCI directing the Director General to investigate, which is the order impugned
in the present writ petition is not an appealable order under the provision of
Section 53A of the said Act, 2002.
49. At this juncture, it would be relevant to refer to the said two letters of
information received based on which the CCI has directed the Director General to
investigate into the subject matter by the impugned Order dated 06.12.2016.
50. Para 1 to 11 of the letter dated 02.09.2016 submitted by the respondent No.
2 is reproduced hereunder for ready reference:-
“1. The petitioner is an association of bulk purchasers of cement as their
members are in the business of construction and real estate development
across the state of Assam. The members of the petitioner association are
engaged in building homes including homes for the common people under the
affordable housing category.
2. The respondents above named are three dominant cement manufacturers in
the North Eastern Region of India. Their operations are heavily financed by the
government with the taxes paid by the common citizens; in the form of
huge subsidies under the North East Investment and Industrial Policy first
notified in 1997 and extended in 2007.(NEIIP).
3. The aforesaid subsidies are as follows:-
a. 100% Income tax exemption.
b. Exemption of excise duty.
c. Transport subsidy on transportation of raw materials and finished products.
d.Manpower subsidy.
e.Power subsidy.
f. Genset subsidy.
g. 30% Capital subsidy.
h. 99% Vat exemption.
i. Interest subsidy on working capital.
j. 100% reimbursement of insurance premium.
Page No.# 25/45
4. The combined impact of the subsidies as listed above is estimated to be
giving the manufacturers a reimbursement of approx Rs 150/-(Rupees one
hundred and fifty only) per bag of cement. We have filed an RTI application
with the Industries Department on the exact impact of these subsidies per bag
of cement and beg leave of your honour to allow us to submit the same as soon
as the RTI reply is received.
5. The respondents have been leading a rampant syndicate of cartelisation by
controlling and manipulating the market price of cement making it the highest
in India inspite of the drawing huge subsidies as aforesaid, and violating Clause
3 and 4 of the THE COMPETITION ACT, 2002. Based on the artificial price hike
effected by tactic agreements between the respondents, the entire market price
gets artificially inflated as even the smaller manufacturers who may or may not
be in the cartel soon follow with price hikes. We enclose herewith cash memos
documenting market price of cement of the three respondent companies as
of end August 2016, which clearly demonstrates that the price of all three
companies are exactly the same i.e Rs 360/=(Rupees three hundred and sixty
only) per bag of 50 kgs. This also documents a Rs 40/-(Rupees forty only) hike
in price during the month of August 2016 and that too by exactly the same
amount by all three respondent companies. The other smaller companies are
now following suit with similar unfair increases in market price without any
justifying reason other than cartelisation. This has loaded an additional burden
of 20% to housing costs affecting the interests of a large segment of
the population across the region. The petitioner being a consumer Association is
therefore highly aggrieved by such acts.
6. We beg to bring to the notice of the Commission that the respondents are
also transporting their products to distant regions and selling the same goods
manufactured in the North East at a much lower price in neighbouring States.
We have collected data from our CREDAI chapters in Siliguri(Assam
West Bengal border), Kolkata, Ranchi and Patna amongst a host of other
regions and submit herewith the some of the figures obtained of average price
of these three brands per bag. We have also indicated the road distance of
these markets from Guwahati.
Kolkata
(550kms)
Rs/bag
Siliguri
(500kms)
Rs/bag
Ranchi
(1100 kms)
Rs/bag
Patna
(900kms)
Rs/bag
Guwahati
(Rs/bag)
225 250 250 260 360
The above figures proves that there is blatant cartelisation by the respondents
as there is neither any impact on additional transport cost nor competition
between the parties as they are selling at similar price in all neighbouring
Page No.# 26/45
areas outside as well as within the north east.
7. The above table also demonstrates that inspite of the liberal subsidies the
price of cement has been artificially hiked by these cartels and the citizens of
this part of the country has been fleeced into paying the highest rates in India.
8. We have recently had a discussion with the Dungsam Cement Corporation
Ltd of Bhutan, the manufacturers of Dragon Cements, and they are willing to
supply cement @ Rs 215/- Rupees two hundred and fifteen only) for ppc,
landed cost at Guwahati. This despite the fact that the Government of India
does not extend any subsides to them. It follows therefore, from this fact as
well as the table above, that a legitimate expectation of the people of Assam
and North East would be a price not more than aprox.(Rs 150/= (Rupees one
hundred and fifty only) in Guwahati, for the subsidised cements.
9. National brands of cement which have already been comprehensively proved
to be guilty of cartelisation and your honour has been pleased to impose a
penalty on them after due process of law, are also selling their products in the
North East. These brands like ACC, Ultratech, Lafarge, Ambuja, etc are not
entitled to any of the subsidies under the NEIIP and have to pay a significant
additional transportation costs as their factories are located in other parts of
India. In this context we beg to bring to your esteemed notice that Inspite of
such huge difference in production and transportation costs the selling price is
only marginally higher than the subsidised variety produced by
the respondents; but here again similar pricing is noticed from this category.
This goes to prove that cartelisation takes place at various level. All India as
well as regional level and there is understanding between all India as well as
local brands. Prevailing retail market price of All India brands in Guwahati:-
Ambuja
Rs per bag
Lafarge
Rs per bag
ACC
Rs per bag
Ultratech
Rs per bag
380/- 380/- 380/- 380/-
10. The North East is a notified backward region of India and the highest
cement price illegally enforced by the cartels of the respondents have, besides
fleecing the consumers been a severe drain on national resources both in terms
of subsidy payouts, as well as the increased cost of all infrastructure projects.
11. Under the circumstances the petitioner begs to makes the following humble
prayers both in public as well as in national interest:-
(a) It is humbly prayed that your honour would be pleased to initiate
proceeding against the respondents as per the Competition Act 2002.
Page No.# 27/45
(b) Until such time as this matter is not disposed off by your honour, direct the
respondents to maintain a price range not more than the price being charged in
Siliguri, which is Rs 250/- (Rupees two hundred and fifty only) per bag
delivered at site.
Money receipts documenting site delivered price at Siliguri is enclosed for your
kind verification.
(c) Allow the petitioner to place additional relevant facts, figures and supporting
evidence before your honour as may be required to establish the truth from
time to time.
(c) Impose a penalty of Rs 10,000/= crores (Rupees ten thousand crores only)
on each of the respondent companies, namely Star Cements, Topcem Cements
and Dalmia Cements aggregating a total of Rs 30,000/= crores (Rupees thirty
thousand crores only) on account of the illegitimate gains made from the tax
payers money in the form of subsidies received since inception and further
illegitimate gain made by cartelisation and manipulating the market price.”
51. Relevant portion of the information submitted by the respondent No. 3 by
Letter dated 05.09.2016 is also reproduced hereunder for ready reference:-
“From: Shri Rajesh Prasad, IAS
Commissioner & Secretary, Food, Civil Supplies & Consumer Affairs
Government of Assam
Dispur
To: The Competition Commission of India
Hindustan Times Building
Kasturba Gandhi Marg
New Delhi
Subject: Information under Section 19(1)(b), Competition Act, 2002 regarding
cartelization by cement manufacturing companies in Assam, in contravention of
Section 3 of the Act.
Sir,
With reference to the above, I have the honour to inform you that it has come
to the notice of the Government of Assam that three cement manufacturing
companies in Assam, namely M/s. Calcom Cement India Ltd. (Dalmia Brand),
M/s. TOPCEM India (Topcem Brand) and M/s. Star Cement Ltd. (Star Brand)
Page No.# 28/45
have been indulging in anti- competitive activities by entering into anti-
competitive agreements, in contravention of Section 3, Competition Act, 2002.
These three companies, which together have a market share of 60% in Assam,
have suddenly increased the price of cement substantially through cartelization,
without any corresponding increase in costs of inputs like limestone, clinker, fly
ash etc.
In spite of stable input cost and no demand-supply mismatch, these three
major cement manufacturing companies i.e. M/s. Calcom Cement India Ltd.
(Dalmia Brand), M/s. TOPCEM India (Topcem Brand) and M/s. Star Cement Ltd.
(Star Brand) formed a cartel in August, 2016 and all of them increased their
billing prices per bag of their respective brands of cement by an amount
ranging between Rs. 20/- to Rs 40/- per bag, clearly indicating an anti-
competition agreement under Section 3(3)(a) of the Act. This apart, these
three aforementioned companies also resorted to reduction in post invoice trade
discount in such a manner from 17/08/2016 onwards that there is net increase
of about Rs. 40/- per bag of cement.
This may be illustrated by the evidence given below in regard to the net sale
prices of their cement in Guwahati, collected with great difficulty as the
companies as well as the dealers have not cooperated, refusing to give copies
of the bills :-
1. M/s. Calcom Cement India Ltd. (Dalmia Brand) billed a bag of cement for Rs.
347/- on 16/08/2016. This was increased to Rs. 375/- per bag on 17/08/2016.
(The details of movement of prices between 1/08/2016 and 30/08/2016 has
been shown in Annexure I enclosed herewith which is supported by relevant
Invoices in Annexure II.)
2. M/s. TOPCEM India (Topcem Brand) billed a bag of cement for Rs. 325/- on
16/08/2016. This was increased to Rs. 365/- per bag on 17/08/2016. Similarly
the MRP of a bag of cement which was Rs. 345/ on 16/08/2016 was increased
to Rs. 385/-on 17/08/2016. (The details of movement of prices between
1/08/2016 and 30/08/2016 has been shown in Annexure I enclosed herewith
which is supported by relevant Invoices in Annexure III.)
3. M/s. Star Cement Ltd. (Star Brand) billed a bag of cement for Rs. 345/- on
16/08/2016. This was increased to Rs. 366/per bag on 17/08/2016. Similarly
the MRP of a bag of cement which was Rs. 370/- on 16/08/2016 was increased
to Rs. 400/- on 17/08/2016. (The details of movement of prices between
1/08/2016 and 30/08/2016 has been shown in Annexure I enclosed herewith
which is supported by relevant Invoices in Annexure IV.)
A market study of whole sale prices prevailing in Siliguri (West Bengal) market
during the month of August, 2016 reveals that the same bag of Topcem /Dalmia
/Star Cement was available in the open market at a much lower price in Siliguri
Page No.# 29/45
(West Bengal) as compared to the prevailing prices of the same in Assam.
Moreover after 16/08/2016, though the prices in Assam were raised but the
same remained more or less constant in Siliguri.
For example, a bag of TOPCEM cement was billed at Rs. 310/- on 16/08/2016 in
Siliguri while the same was billed at Rs. 325/- in Guwahati. Again on
17/08/2016 a bag of TOPCEM cement was billed at Rs. 310/- in Siliguri whereas
the same was billed at Rs. 365/- in Guwahati. (Annexure V)
Selling cement in Siliguri at prices lower than those in Guwahati by all the three
companies, in spite of additional transportation costs, establishes the collusion
and cartelization between the companies, when viewed in the light of facts
given below:
All these three brands are being manufactured in Assam, and the manufacturers
have been granted Mega Status (granted for investment of more than Rs 100
crore, or employing more. than 1000 persons) and are, therefore, enjoying a
host of incentives including VAT and CST exemption, Entry Tax exemption and
power subsidy etc). These brands are also enjoying various benefits under
NEIIPP 2007 like capital subsidy, transport subsidy, interest subsidy, insurance
subsidy, Excise Duty exemption, Income Tax exemption etc.
It may be noted that these units of Assam save Rs. 40 to Rs. 45/- per bag on
account of VAT exemption alone, in respect of sale of cement effected in
Assam; whereas if they sell such cement in West Bengal they are liable to pay
such VAT; and in addition, as mentioned above, the cement manufacturers have
to incur substantial transportation costs for carrying cement from Assam to
West Bengal. The pricing data given above, therefore, clearly
establishes cartelization.
To further substantiate our point of view, we would like to submit that the input
cost of cement, transportation, electricity duty, labour costs etc have remained
unaltered for last six months to one year. Further, in respect of demand-supply
issue, the supply is found to be more or equal to the demand of the state and
other parts of India and North Eastern states. Moreover, due to local availability
of raw material and close proximity to market, the logistical costs for both raw
materials and finished goods are also substantially lower for the local cement
manufacturing companies vis-a-vis the
out-of-state manufacturing companies, with the local cement manufacturers
also reaping the benefits of substantial tax incentives and other subsidies as
mentioned earlier. In spite of all such favourable factors the consumers of the
State have been forced to pay higher prices of cement compared to the
other states.
It is further submitted that these cement companies are deliberately restricting
or limiting their production by resorting to the utilization of less than half of
Page No.# 30/45
their installed capacity and/or indulging in chocking up supply in the market, in
contravention of Section 3(3)(b) of the Act.
Meanwhile the entire matter has got wide range of public scrutiny with both
electronic and print media paying due attention to the matter. (Annexure VI)
In view of the above, this information about contravention of Section 3,
Competition Act, 2002 is being submitted under Section 19(1)(b) of the Act, for
kind consideration, investigation, and appropriate orders by the Competition
Commission of India.”
52. Based on the aforesaid two letters of information, the CCI by the impugned
Order dated 06.12.2016 directed the Director General to cause an investigation into
the matter and to complete the investigation within a period of 60 days from the
date of receipt of this order under provision of Section 26(1) of the said Act, 2002.
Relevant paragraphs of the said impugned Order dated 06.12.2016 is also
reproduced hereunder for ready reference:-
“5. The Informants appear to be aggrieved by the conduct of the OPs in
simultaneously raising the prices of their respective brands of cement in North
Eastern states during August, 2016 without any corresponding increase in Input
costs for manufacturing cement or demand-supply mismatch in the market of
cement in North Eastern states. The Informants have averred that even though
the OPs are availing huge subsidies under NEIIPP for cement production in
North Eastern states, they are not passing on the benefits of the same to the
consumers. Rather, they are charging higher prices per bag of cement for their
respective brands compared to the prices at which they are selling the same
bag of cement in neighbouring states such as West Bengal, Bihar, etc.
Consequently, the Informants have alleged cartelisation by the OPS in the
determination of their sale prices of cement and limiting of production of
cement in North Eastern states in contravention of the provisions of Sections
3(3)(a) and 3(3)(b) of the Act.
6. The submissions of the Informants in support of their allegations of
cartelisation by the OPs and the observations of the Commission upon the same
are highlighted below:
(i) OPs simultaneously raised prices of their respective brands of cement in
tandem on 17.08.2016. From the price data submitted, as compiled from the
tax invoices of OPs during different dates in the month of August, 2016, it is
observed that on 17.08.2016, OP 1 has raised the net sale price of per bag of
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cement from Rs. 345/- to Rs. 366/-, OP 2 has raised the net sale price of per
bag of cement from Rs. 325/- to Rs. 365/-, and OP 3 has raised the net sale
price of per bag of cement from Rs. 347/- to Rs. 375/-,
(ii) OPs are selling cement at lower prices in the neighbouring states
compared to the North Eastern states. From the cement prices data collected
from CREDAI chapters in Kolkata, Siliguri, Ranchi and Patna as stated in the
information, it is observed that the OPs are charging higher prices per bag of
their respective brands of cement in North Eastern states as compared to the
neighbouring states despite incurring additional costs for transportation of
cement to those states. From the informations, it is observed that on
16.08.2016, the billing price of a bag of cement of OP 2 was Rs. 310/- in Siliguri
whereas it was Rs. 325/- in Guwahati. Similarly, the billing price of a bag of
cement of OP 2 on 17.08.2016 was Rs. 310/- in Siliguri and the same was Rs.
365/- in Guwahati.
(iii) From the submissions of the Informants, it is also observed that other
major cement brands like ACC, Ultratech, etc. which are not enjoying any
subsidies under NEIIPP and incurring additional transportation costs as their
factories are located in other parts of the country are selling cement at
marginally higher prices than the OPs in the North Eastern states.
7. Based on the above observations, the Commission is of the view, that there
exists a prima facie case and there was meeting of minds amongst the OPs to
determine the price of cement in the North Eastern states. The Commission
observes that all the OPs have simultaneously raised the prices of their
respective brands of cement on 17.08.2016 and simultaneously reduced the
prices on 22.08.2016. There seems to be no economic logic for such
simultaneous increase and reduction in prices by the OPs on same dates.
There may be certain market situations which require change in the price of a
product by the producers, but changing the prices together on the same date
shows some concerted action by the OPs. It is also observed that the prices of
OPS followed a similar trend during the month of August, 2016 indicating a
parallel movement of prices.
8. Further, from the analysis of the regional and monthly average cement prices
data collected from CRISIL research for the period August, 2015 to August,
2016, the Commission observes that the average cement price in the North East
region has been higher than the price prevailing in the North, West and Central
regions of India in most of the months during the said period. The Commission
also notes that in the month of August, 2016, except for North- East region
where there was a rise in cement price vis-a-vis the previous month, all other
regions in India witnessed a fall or stability in the cement prices vis-a-vis the
previous month. In fact, In North East region, there was a falling trend in the
cement prices beginning from May, 2016 which was reversed only in August,
2016. Thus, the Commission is of the opinion that the OPs have prima facie
Page No.# 32/45
indulged in cartelisation in contravention of the provisions of Section 3(3) of the
Act.
9. In view of the foregoing, the Commission is of the prima facie opinion that
the OPs, by seeking to stifle competition in the market through the above said
collusive practices, have indulged in anti-competitive activities in violation of the
provisions of Section 3(3) read with Section 3(1) of the Act.”
53. Reading of the impugned Order dated 06.12.2016 makes it apparent that the
Director General has been directed to cause an investigation wherein no right of
the parties is adjudicated. However, the basic requirement under the provisions of
Section 26(1) of the said Act, 2002 requires the CCI Authorities to form a ‘prima
facie’ opinion as regards existence of anti competitive activities in violation of the
provision of Section 3 and/or 4 of the said Act, 2002 before directing investigation
into the matter. Therefore, the mandate of law is that it is mandatory for the CCI to
arrive at a prima facie opinion upon reading the information received as whether if
the said information is taken on its face value, to be true, the provisions of Section
3 and/or Section 4 of the said Act, 2002 are being contravened or not. Therefore,
an investigation cannot be directed by the CCI mechanically and/or in a routine
manner. Though the CCI is not required to conduct a mini trial or determine the
reasonableness or credibility of the information received before directing such
investigation, however, it is a condition precedent for the CCI for directing
investigation that the information received discloses prima facie contravention of
Section 3 and/or Section 4 of the said Act, 2002.
54. Therefore, the issue that arises at the outset is whether at the stage of the
CCI directing investigation under Section 26(1) of the said Act, 2002, a writ petition
under Article 226 of the Constitution of India is maintainable.
55. Reiterated that, the CCI at this stage of directing the investigation under
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Section 26(1) of the said Act, 2002, is obliged under the statute to apply its mind
upon the information received and take a decision as regards the existence of a
prima facie case showing contravention of Section 3 and/or 4 of the said Act, 2002.
Therefore, it is imperative for the CCI to exercise the powers of directing
investigation under Section 26(1) of the said Act, 2002 strictly in accordance with
the parameters provided therein. Certainly CCI is not adjudicating the information
received at this stage and is merely directing an investigation thereof. However,
since the manner of exercising such power/jurisdiction is provided under the
statute itself, such power/jurisdiction has to be strictly followed in the manner
provided thereof and any other manner is statutorily forbidden. Reiterated that
existence of prima facie case is sine qua non for the CCI to exercise
power/jurisdiction under Section 26(1) of the said Act, 2002. Therefore, any
investigation directed under Section 26(1) of the said Act, 2002 without the
existence of the prima facie case is totally without jurisdiction. In fact, the CCI
derives jurisdiction to direct investigation only upon the fulfillment of the said
condition precedent. This Court, under Article 226 of the Constitution of India in
the considered opinion of this Court is certainly empowered to intervene if the
investigation is directed under Section 26(1) of the said Act, 2002 without the
existence of the prima facie case. The issue of maintainability of writ petition under
Article 226 of the Constitution of India against an Order passed under Section
26(1) of the said Act, 2002 is accordingly decided.
56. Reference is made to the decision of the Apex Court in Competition
Commission of India Vs. Bharati Airtel Limited & Others reported in (2019)
2 SCC 521, wherein the Apex Court was considering the question as to whether a
writ petition challenging the order passed under Section 26(1) of the said Act, 2002
was maintainable.
Page No.# 34/45
57. Para 115 - 120 of the said decision is reproduced hereunder for ready
reference:-
“115. Here comes the scope of judicial interference under Article 226 of the
Constitution. As per the RJIL as well as CCI, the High Court could not have
entertained the writ petition against an order passed under Section 26(1) of the
Competition Act which was a pure administrative order and was only a prima
facie view expressed therein, and did not result in serious adverse
consequences. It was submitted that the finding of the High Court that such an
order was quasi-judicial order is not only erroneous but it is contrary to the law
laid down in SAIL14. The respondents, on the other hand, have submitted that
the judgment in the above case had no application in the instant case as it did
not deal with the sector that is regulated by a statutory authority. Moreover,
such an order was quasi-judicial in nature and cannot be treated as an
administrative order since it was passed by CCI after collecting the detailed
information from the parties and by holding the conferences, calling material
details, documents, affidavits and by recording the opinion. It was submitted
that judicial review against such an order is permissible and it was open to the
respondents to point out that the complete material, as submitted by the
respondents, was not taken into consideration which resulted in an erroneous
order, which had adverse civil consequences inasmuch as the as the
respondents were subjected to further investigation by the Director General.
116. We may mention at the outset that in SAIL, nature of the order passed by
CCI under Section 26(1) of the Competition Act [here also we are concerned
with an order which is passed under Section 26 (1) of the Competition Act] was
gone into. The Court, in no uncertain terms, held that such an order would be
an administrative order and not a quasi-judicial order. It can be discerned from
paras 94, 97 and 98 of the said judgment, which are as under (SAIL case14,
SCC pp. 785 & 787)
"94. The Tribunal, in the impugned judgment, has taken the view that
there is a requirement to record reasons which can be express, or, in any
case, followed by necessary implication and therefore, the authority is
required to record reasons for coming to the conclusion. The proposition
of law whether an administrative or quasi-judicial body, particularly
judicial courts, should record reasons in support of their decisions or
orders is no more res integra and has been settled by a recent judgment
of this Court in CCT v. Shukla & Bros, wherein this Court was primarily
concerned with the High Court dismissing the appeals without recording
any reasons. The Court also examined the practice and requirement of
providing reasons for conclusions, orders and directions given by the
quasi- judicial and administrative bodies.
Page No.# 35/45
97. The above reasoning and the principles enunciated, which are
consistent with the settled canons of law, we would adopt even in this
case. In the backdrop of these determinants, we may refer to the
provisions of the Act. Section 26, under its different sub-sections,
requires the Commission to issue various directions, take decisions and
pass orders, some of which are even appealable before the Tribunal.
Even if it is a direction under any of the provisions and not a decision,
conclusion or order passed on merits by the Commission, it is expected
that the same would be supported by some reasoning. At the stage of
forming a prima facie view, as required under Section 26(1) of the Act,
the Commission may not really record detailed reasons, but must express
its mind in no uncertain terms that it is of the view that prima facie case
exists, requiring issuance of direction for investigation to the Director
General. Such view should be recorded with reference to the information
furnished to the Commission. Such opinion should be formed on the
basis of the records, including the information furnished and reference
made to the Commission under the various provisions of the Act, as
aforereferred. However, other decisions and orders, which are not
directions simpliciter and determining the rights of the parties, should be
well-reasoned analysing and deciding the rival contentions raised before
the Commission by the parties. In other words, the Commission is
expected to express prima facie view in terms of Section 26(1) of the
Act, without entering into any adjudicatory or determinative process and
by recording minimum reasons substantiating the formation of such
opinion, while all its other orders and decisions should be well-reasoned.
98. Such an approach can also be justified with reference to Regulation
20(4), which requires the Director General to record, in his report,
findings on each of the allegations made by a party in the intimation or
reference submitted to the Commission and sent for investigation to the
Director General, as the case may be, together with all evidence and
documents collected during investigation. The inevitable consequence is
that the Commission is similarly expected to write appropriate reasons on
every issue while passing an order under Sections 26 to 28 of the Act."
117. There is no reason to take a contrary view. Therefore, we are not inclined
to refer the matter to a larger Bench for reconsideration.
118. It was, however, argued that since SAIL was not dealing with the telecom
sector, which is regulated by the statutory regulator, namely, TRAI under the
TRAI Act, that judgment would not be applicable. Merely because the present
case deals with the telecom sector would not change the nature of the order
that is passed by CCI under Section 26(1) of the Competition Act. However, it
raises another dimension. Even if the order is administrative in nature, the
question raised before the High Court in the writ petitions filed by the
Page No.# 36/45
respondents touched upon the very jurisdiction of CCI. As is evident, the case
set up by the respondents was that CCI did not have the jurisdiction to
entertain any such request or information which was furnished by RJIL and two
others. The question, thus, pertained to the jurisdiction of CCI to deal with such
a matter and in the process the High Court was called upon to decide as to
whether the jurisdiction of CCI is entirely excluded or to what extent CCI can
exercise its jurisdiction in these cases when the matter could be dealt with by
another regulator, namely, TRAI. When such jurisdictional issues arise, the writ
petition would clearly be maintainable as held in Barium Chemicals Ltd. v.
Company Law Board and Carona Ltd.
119. In Carona Ltd. this Court held as under: (SCC pp. 569 & 571, paras 26-28
& 36)
"26. The learned counsel for the appellant Company submitted Eastern
Book Company v. D.B. Modak, that the fact as to "paid-up share capital"
of rupees one crore or more of a company is a "jurisdictional fact" and in
absence of such fact, the court has no jurisdiction to proceed on the
basis that the Rent Act is not applicable. The learned counsel is right.
The fact as to "paid-up share capital" of a company can be said to be a
"preliminary" or "jurisdictional fact" and said fact would confer
jurisdiction on the court to consider the question whether the provisions
of the Rent Act were applicable. The question, however, is whether in the
present case, the learned counsel for the appellant tenant is right in
submitting that the "jurisdictional fact" did not exist and the Rent Act
was, therefore, applicable.
27. Stated simply, the fact or facts upon which the jurisdiction of a court,
a tribunal or an authority depends can be said to be a "jurisdictional
fact". If the jurisdictional fact exists, a court, tribunal or authority has
jurisdiction to decide other issues. If such fact does not exist, a court,
tribunal or authority cannot act. It is also well settled that a court or a
tribunal cannot wrongly assume existence of jurisdictional fact and
proceed to decide a matter. The underlying principle is that by
erroneously assuming existence of a jurisdictional fact, a subordinate
court or an inferior tribunal cannot confer upon itself jurisdiction which it
otherwise does not possess.
28. In Halsbury's Laws of England (4th Edn.), Vol. 1, Para 55, p. 61;
Reissue, Vol. 1(1), Para 68, pp. 114-15, it has been stated:
'Where the jurisdiction of a tribunal is dependent on the existence of a
particular state of affairs, that state of affairs may be described as
preliminary to, or collateral to the merits of, the issue. If, at the inception
of an inquiry by an inferior tribunal, a challenge is made to its
jurisdiction, the tribunal has to make up its mind whether to act or not
Page No.# 37/45
and can give a ruling on the preliminary or collateral issue; but that
ruling is not conclusive.' The existence of a jurisdictional fact is thus a
sine qua non or condition precedent to the assumption of jurisdiction by
a court or tribunal.
36. It is thus clear that for assumption of jurisdiction by a court or a
tribunal, existence of jurisdictional fact is a condition precedent. But once
such jurisdictional fact is found to exist, the court or tribunal has power
to decide adjudicatory facts or facts in issue."
120. Thus, even when we do not agree with the approach of the High Court in
labelling the impugned order as quasi-judicial order and assuming jurisdiction to
entertain the writ petitions on that basis, for our own and different reasons, we
find that the High Court was competent to deal with and decide the issues
raised in exercise of its power under Article 226 of the Constitution. The writ
petitions were, therefore, maintainable.”
58. Thus, the question that arises for determination now is how to adjudge
whether a “prima facie” case existed or not for the CCI to direct investigation by
the Director General.
59. The test is to take the information received at its face value and examine
whether there has been any prima facie violation of Section 3 and/or 4 of the said
Act, 2002. By applying the aforesaid test, if it appears that a prima facie case exist,
this Court shall not thereafter go into the merits of the matter. However, if it
appears that no prima facie case exists, then in such a situation, this Court for the
ends of justice, is entitled to quash such proceedings.
60. The power of this Court to quash such registration of proceeding for
investigation is akin to the powers of this Court under Section 482 of Cr.PC for
quashing FIR/complaints, parameters of which has been well settled by the Apex
Court in the case of State of Haryana & Others Vs. Bhajan Lal & Others,
reported in (1992) Supp(1) SCC 335.
Page No.# 38/45
61. The relevant portion of the State of Haryana & Others Vs. Bhajan Lal &
Others (Supra) is reproduced hereunder for ready reference:-
“102. In the backdrop of the interpretation of the various relevant provisions of the Code
under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions
relating to the exercise of the extraordinary power under Article 226 or the inherent powers
under Section 482 of the Code which we have extracted and reproduced above, we give the
following categories of cases by way of illustration wherein such power could be exercised
either to prevent abuse of the process of any court or otherwise to secure the ends of justice,
though it may not be possible to lay down any precise, clearly defined and sufficiently
channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad
kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the first information report or the complaint, even if
they are taken at their face value and accepted in their entirety do not prima facie
constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and other materials, if any,
accompanying the FIR do not disclose a cognizable offence, justifying an investigation by
police officers under Section 156(1) of the Code except under an order of a Magistrate
within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence
collected in support of the same do not disclose the commission of any offence and
make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a cognizable offence but
constitute only a non-cognizable offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently
improbable on the basis of which no prudent person can ever reach a just conclusion
that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or
the concerned Act (under which a criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a specific provision in the Code or
the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the
proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on
the accused and with a view to spite him due to private and personal grudge.”
62. Thus, the order under Section 26(1) of the said Act, 2002 being merely a
prima facie opinion directing the Director General to carry the investigation, the
Page No.# 39/45
Writ Court under Article 226 of the Constitution of India shall not adjudge the
validity of such order on merits. However, the Writ Court is competent to test the
information on the face of it to satisfy itself as whether a prima facie case exist for
the CCI to direct investigation under Section 26(1) of the said Act, 2002 or not.
63. Having laid down the test as hereinabove, what is relevant to be seen is that,
if the information received by the CCI even if taken at its face value, then, whether
there exist some ‘agreement’ or ‘understanding’ between the various cement
manufacturers including the petitioner company to determine the price of cement
in contravention of Section 3 and/or 4 of the said Act, 2002.
64. The sum and substance of the information received under Section 19(1)(b) of
the said Act, 2002 regarding cartelization by the cement manufacturing companies
in Assam in contravention of Section 3 of the said Act, 2002 are as follows:-
i) Three cement manufacturing companies in Assam, namely, M/s Calcom
cement India Limited (Dalmia Brand), M/s TOPCEM India (Topcem Brand)
and M/s Star Cement Limited (Star Brand i.e. petitioner company), which
together have a market share of 60% in Assam have suddenly increased the
price of cement substantially through cartelization without any corresponding
increased like limestone, clinger, fly ash etc.
ii) In spite of stable in put cost and no demand supply mismatch, these three
cement manufacturing companies formed a cartel in August 2016 and all of
them increased their billing prices per bag of their respective brands of
cement by amount ranging between Rs.20/- to Rs.40/- per bag, clearly
indicating anti-competition agreement under Section 3(3)(a) of the Act 2002.
iii) This apart, these three companies also resorted to reduction in post in
voice trade discount in such a manner from 17.08.2016 onwards that there is
Page No.# 40/45
net increase of about Rs. 40/- per bag of cement.
(iv) M/s Calcom Cement India Limited billed a bag of cement for Rs. 347/- on
16.8.2016. This was increased to Rs. 375/- per bag on 17.8.2016.
v) M/s Topcem India billed a bag of cement for Rs. 325/- on 16.08.2016. This
was increased to Rs.365/- per bag on 17.08.2016. Similarly, the MRP of a bag
of cement which was Rs. 345/- on 16.08.2016 was increased to Rs. 385/- on
17.08.2016.
vi) M/s Star Cement Limited (petitioner Company) billed a bag of cement of
Rs. 345/- on 16.08.2016. This was increased to Rs.366/- per bag on
17.08.2016. Similarly, the MRP of a bag of cement which was Rs. 370/- on
16.08.2016 was increased to Rs. 400/- on 17.08.2016.
vii) A market study of whole sale prices prevailing in Siliguri (West Bengal)
market during the month of August 2016 reveals that the same bag of
Topcem/ Dalmia/ Star cement was available in the open market at a much
lower price.
viii) Selling cement in Siliguri at prices lower than those at Guwahati by all
the three companies, in spite of additional transportation cost, establishes
the collusion and cartelization between the companies.
65. It further appears that the CCI mainly on the three grounds stated below as
recorded in paragraph No. 5 of the impugned Order dated 06.12.2016 directed the
impugned investigation under Section 26(1) of the said Act, 2002.
(i) The Petitioner and other two cement companies simultaneously raised the
prices of their respective brands of cement in North Eastern States during
August 2016 without any corresponding increased in the inputs cost of the
manufacturing cement or demand-supply mismatch in the market of cement
in North Eastern states.
Page No.# 41/45
(ii) Though the Petitioner and other two cements companies were availing
huge subsidies under NEIPP for cement production in North Eastern States,
they were not passing on the benefits of the same to the consumers.
(iii) The three cements companies were charging higher prices per bags for
their respective brands compared to the prices at which they were selling
same bags of cement in the neighbouring States such as West Bengal, Bihar
etc. and thereby the three companies were alleged cartelization in the
determinations of sale price of cement and limiting of production of cement
in North Eastern States in contravention of the provisions of Sections 3(3)(a)
and 3(3)(b) of the said Act, 2002.
66. In fact, in the review Order dated 08.08.2018, the CCI in paragraph No. 4
stated as under:
"In Reference Case No. 04 of 2016, it has been alleged that the Ops had formed cartel
and suddenly increased the prices of their respective brands of cement substantially in
the month of August, 2016 in Assam. It was further averred that despite stable input
costs and no demand-supply mismatch, Ops have increased their billing prices per bag
by an amount ranging between Rs. 20 to Rs. 40."
67. Thus, it appears that the three cement companies were alleged to have
formed a cartel for increasing of sale price of cement per bag, which was by an
amount ranging between Rs. 20/- to Rs. 40/-. In fact in the impugned Order dated
06.12.2016 in paragraph No. 6(i) the CCI observed as under:
"Ops simultaneously raised prices of their respectives brands of cement in tandem on
17.08.2016. From the price data submitted, as compiled from the tax invoices of Ops
during different dates in the month of August, 2016, it is observed that on 17.08.2016,
OP 1 has raised the net sale price of per bag of cement from Rs. 345/- to Rs. 366/-
and OP has raised the net sale price of per bag of cement from Rs.347/- to Rs. 375/-."
Page No.# 42/45
68. Apparent thus, that the cement company namely Calcom Cement Limited
increased its prices by Rs. 21/- i.e. Rs. 345/- to Rs. 366/- whereas, the another
cement Company namely, Topcem Cement Limited raised the sale price of cement
bag by Rs. 40/- i.e. from Rs. 325/- to Rs. 365/- and the petitioner raised the sale
price of cement bag by Rs. 28/- i.e. from Rs. 347/- to Rs. 375/-. As such, there was
no uniform increase in the prices of cement by the three cement companies.
Whereas, one cement company increase the price by Rs. 21/-, the second
company increase the price by Rs. 40/- and the petitioner increase the price by Rs.
28/-. The prices of the cement after increase is also stated to be different i.e. Rs.
365/- and Rs. 375/-. When there was no uniform rising of the prices by the three
cement companies, it cannot be said by any stretch of imagination that there was
any agreement entered into by three cement companies, which directly or
indirectly determined the purchase of sale price. Infact, the different increase in
prices and different sale prices of cement instead of having adverse effect of
competition would lead to better competition between the cement companies.
Further, the claim of the informant that one of the cement companies of Bhutan
was willing to supply cement at a rate of Rs. 215/- per bag at Guwahati itself would
show that the fixed prices of the petitioner and other two companies has no
adverse effect on the competition and the prices depends on the quality and brand
of the cement. The aforesaid factors cannot be said to limit or control productions,
supply, markets, technical development, investment or provision of services under
Section 3(3)(b) of the said Act, 2002. In fact, the different prices of all the three
bags of cement are indicative of a better competition instead of having an adverse
effect of competition. Therefore, I am of the considered view that the aforesaid
factors could not have a basis for forming an opinion by the CCI about the
existence of a prima facie case of the contravention of Section 3(3)(a) and Section
Page No.# 43/45
3(3)(b) of the said Act, 2002.
69. The second allegation that the three cement companies were availing huge
subsidy under NEIPP for cement production in North Eastern States and were not
passing on the benefits of the same to the consumers is not a ground at all which
falls under Section 3(3)(a) and Section 3(3)(b) of the Act, 2002, inasmuch as, the
subsidy which are given for establishment of new Industries in this region is by
way of an incentive and the same is not to pass to the consumers as has been held
by the Divisional Bench of this Court in the case of PVR Ltd. Vs. State of
Assam & Ors, reported in (2017) 5 GLR 117. Therefore, I am of the considered
view that such allegations also cannot be considered to have an adverse effect on
competition and thereby, the direction under Section 26(1) of the said Act, 2002,
issued by CCI, is not tenable.
70. The third allegation that the three cement companies were selling the cement
at a higher price in the North-Eastern Region then at a lower price in the other
States appears to be misplaced, inasmuch as, the prices of the cement sold by the
petitioner is fixed and the said cement is sold to the wholesaler after granting of
the discount which varies from the quantities purchased by the wholesaler which is
named as incentives discount and the said wholesaler may in his discretion pass
over a part of the said discount to the customer. Be that as it may, I am of the
considered view that the aforesaid allegation even if the same is taken to be true
on the face of it also cannot be said to be a factor of making an adverse effect on
the competition and thereby violating Section 3(3)(a) and Section 3(3)(b) of the
said Act, 2002.
71. Thus, it is apparent that the information received does not disclose existence
of the prima facie case as regards contravention of the provisions of the Section 3
Page No.# 44/45
and/or 4 of the said Act, 2002, and since the same is a sine qua non for CCI to
direct the investigation, the decision of the CCI in directing investigation without
fulfillment of the said mandatory pre-condition is totally without jurisdiction and is
therefore, null and void.
72. In Central Council for Research in Ayurvedic Sciences and Anr. Vs.
Bikartan Das & Ors, reported in 2023 SCC OnLine SC 996, the Apex Court at
paragraph 58 held as under:
"58. From the aforesaid, it could be said in terms of a jurisdictional error that
want of jurisdiction may arise from the nature of the subject matter so that the
inferior court or tribunal might not have the authority to enter on the inquiry. It
may also arise from the absence of some essential preliminary or jurisdictional
fact. Where the jurisdiction of a body depends upon a preliminary finding of fact
in a proceeding for a writ or certiorari, the court may determine, whether or not
that finding of fact is correct. The reason is what by wrongly deciding such a
fact, the court or tribunal cannot give itself jurisdiction.”
73. The arguments of the learned counsel for the respondents, to the effect that
the writ petition is pre-mature and as such, is not maintainable is not well founded
and accordingly, rejected.
74. Pertinent that the decision of the Apex Court in the case of Competition
Commission of India Vs. State of Mizoram & Ors, reported in (2022) 7 SCC
73, relied by the respondents, wherein the Apex Court held that intervention of the
High Court at the stage of the order under Section 26(1) of the said Act, 2002 is
pre-mature and ought to have waited for the CCI to come to a conclusion is not
relevant in the present context inasmuch as in the said case, the order passed
under Section 26(1) of the said Act, 2002 was not challenged on the ground that
the pre-conditions of the exercise of the jurisdiction under Section 26(1) of the said
Act, 2002 were wholly absent.
Order downloaded on 04-08-2025 10:06:42 PMPage No.# 45/45
75. Therefore, the impugned Order dated 06.12.2016 having been passed
without fulfillment of the precondition of the Section 26(1) of the said Act, 2002,
i.e., without arriving a prima facie finding under Section 3(1) and 3(3) of the said
Act, 2002 is without jurisdiction and as such, is a nullity.
76. Resultantly, the Review Order dated 08.12.2018 is also null and void.
77. Accordingly, in WP(C) No. 6343/2018, the impugned Order dated 06.12.2016
passed by the CCI under Section 26(1) of the said Act, 2002 and the Review Order
dated 08.08.2018 passed by the CCI stands quashed and set aside.
78. Consequently, in WP(C) No. 6342/2018, the impugned Order dated
27.08.2018 passed by the CCI imposing penalty to the tune of Rs. 500,000/-
(Rupees Five lakhs) under Section 43 of the said Act, 2002 also stands quashed
and set aside.
79. Hence, the two writ petitions succeeds.
80. Accordingly, the two writ petitions stands disposed of.
JUDGE
Comparing Assistant
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