RTPE 32/2006. Case: The Director General of Investigation and Registration Vs Gujarat Ambuja Cements Ltd. and Ors.. COMPAT (Competition Appellate Tribunal)
| Case Number | RTPE 32/2006 |
| Judges | Rajeev Kher and Anita Kapur, Members |
| Issue | Monopolies And Restrictive Trade Practices Act, 1969 - Sections 10(a)(iii), 11(2), 2(o), 2 (o)(ii), 33, 33(1), 33 (1)(g), 37 |
| Judgement Date | February 16, 2017 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
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The Director General of investigation and Registration (DG) filed this application under Section 10 (a) (iii) read with Section 37 of the MRTP Act, 1969 (the Act) on 17.07.2006, alleging indulgence in cartelization by the respondents, by limiting supplies of cement in Hyderabad region and creating consequent shortage and increase in prices to abnormal levels thereby engaging in restrictive trade practices.
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M/s. Gujrat Ambuja Cements Limited (Respondent No. 1 name subsequently changed to M/s. Ambuja Cements Ltd.), M/s. Associated Cement Companies Limited (Respondent No. 2 name subsequently changed to ACC Ltd.) and M/s. Grasim Industries Limited (Respondent No. 3 name subsequently changed to M/s. Ultra Tech Cement Limited) are public limited companies, incorporated under the Companies Act, 1956 engaged, inter alia, in manufacturing and sale of cement.
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According to the application, the Respondent No. 1 sells cement through C & F agents and stockists/dealers/distributors. The Respondent No. 2 has 11 Regional Marketing Offices (RMOs) throughout the country. The RMOs have stocking points called "Warehouses" under them and these are around 160 in number. Supplies are made either directly from the Works or through Warehouses. ACC has around 9000 authorized dealers under the RMOs. Dealers' appointments are decentralized and handled by the respective RMOs. RMOs have the freedom in determining price ranges in marketing and they accordingly fix prices from time to time. The Respondent No. 3 is engaged in manufacture and sale of several products including cement. It sells and supplies cement to consumers through its dealers/stockists who get supplies either directly from the factory or from company's depots.
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The Government in the then Ministry of Company Affairs ordered an inspection under Section 209A of the Companies Act, 1956 against the Respondent Nos. 1 to 3. During the course of the inspection, inter alia it was gathered that major cement producers controlled predominantly the entire business of manufacture and sale of cement in particular region. They also control the method and manner of the working of stockists who are not allowed free hand in the matter of prices and distribution of cement. It has been stated that major cement producers assembled at pre-selected places with an intent to affect the flow of cement supply in the market by declaring "despatch holidays" with the prime object of manipulating the prices. The common period of nil supply of cement is called 'despatch holiday'. It was reported that southern region is vulnerable from the point of view of formation of cartel. According to the application, the inspection was confined to daily despatches of OPC-Grade 43 cement from Hyderabad in southern region for the period from September, 2002 to November, 2002. A scrutiny of the details of despatches carried out by the auditors with a focus on common dates of nil despatches by the three respondents in Hyderabad region revealed the following situation in respect of each of the respondent:
It is seen from the above table that during the period of two months from 19.9.2002 to 11.11.02, the prices of cement rose from Rs. 92/- to Rs. 135/- per bag (increase in price by 47%)
It is observed that during the period of about two months, the price has increased from Rs. 85/- to Rs. 126/- per bag (increase in price by 48%).
Thus, during the period of about two months, the price has gone up from Rs. 102/- to Rs. 134/- (price increase by 31%)"
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According to the inspection report the dates of nil supply at Hyderabad were 20.02.2002 to 23.09.2002, 01.10.2002 to 03.10.2002, 10.10.2002 to 11.10.2002, 01.11.2002 to 04.11.2002 and 10.11.2002 to 11.11.2002. It has been stated that these dates were common for all the three respondents. It has also been noted that prices went up immediately after resumption of despatches by the respondents on the very next day, most of the time. The increase in price of cement offered by each respondent over a period of September, 2002 to November, 2002 was 47% (Respondent No. 1), 48% (Respondent No. 2) and 31% (Respondent No. 3) respectively. It has been stated that inspection revealed that all the three respondents have acted in tandem and regulated the despatches of cement in Hyderabad region during September-November 2002 so as to create an artificial scarcity of cement supplies and cause price rise in the market.
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The application also refers to "a number of complaints from Builders' Association of India, Mumbai alleging that various cement manufacturing companies have jacked up cement prices by informal arrangements among themselves." One such complaint dated 21.02.2006 addressed to DG (I&R), MRTPC on behalf of Builder's Association of India was filed as an Annexure with the application. The letter complains of steep upward movement in cement price between December 2000 to March 2001 and refers to RTP Enquiry No. 174 of 2000 and RTP Enquiry No. 21 of 2001. The letter, apart from raising issues relating to high prices of cement and explaining some reasons for high price does not make a specific mention of a violation. However, the application refers to allegations that uniform price increase is announced by producers not on the same dates but on different dates. The producers allegedly do not curtail the production but supplies to a given market are choked to create shortage situation while there is no change in the demand perception.
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In the application, it has been mentioned that the inspection was confined to sale and supply of cement of Grade OPC 43 only. The extent of inspection was limited to the supply of the relevant grade of cement and did not cover actual users or other customers. The DG on the basis of the inspection report and responses received by him in furtherance of his investigation has summarized that the three respondents observed despatch holidays during the relevant period of inspection and thereby through a concerted action manipulated supplies of cement to the market and consequently created supply shortages for prices to go up thereby violating the provisions of the MRTP Act by indulging in restrictive trade practices. It has been stated that the concerted action is well planned and circumstantial evidence supported that these trade practices were the result of prior consultation among the respondents. The application states that though no positive evidence of respondents having met and decided upon despatch holidays and hike in prices is available, yet parallel behaviour on the part of all the respondents cannot be without informal consultation with one another. It was requested that a cease and desist order from indulging in such restrictive trade practices may be issued and costs should be awarded.
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A notice of enquiry was issued on 31.08.2006. The respondents filed their replies on 21.11.2006, 28.12.2006 and 15.01.2007 respectively. DG filed a rejoinder on 03.08.2007. On the basis of pleadings following issues were framed:
"A. Whether the enquiry is maintainable?
B. Whether the respondent has been indulging in unfair trade practices as alleged in the Notice of Enquiry?
C. Whether the alleged unfair trade practices are prejudicial to the interest of the complainant and/or public in general?"
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The parties were asked to carry out admission/denial of documents filed by the DG. Three affidavits of evidence were filed by Shri G. Venkatesh, Shri J. Bose and Shri Amardeep Singh on 07.05.2008 on behalf of the applicant. These deponents were the inspection officers in respect to the respondent companies under Section 209A of the Companies Act. Shri J.L. Bose was also cross examined by the Respondents over three dates.
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Applications were filed on behalf of the Respondent Nos. 1 to 3 seeking production of the individual reports of the officers mentioned therein. It may be recalled that the application was filed by the DG before the erstwhile MRTPC, enclosing a joint report of inspection under Section 209A of the Companies Act. This was stated to be 'Part-II' of the report specifically on issue of cartel. It has been stated on behalf of DG and by the witness Shri J.L. Bose that all three of the inspection officers had prepared individual reports of limited inspection in respect to the companies they were assigned (i.e. the respondents). The report attached to the application however, was a combined report made out of inputs received from each of the inspection officer specifically on the issue of formation of a cartel by the three respondents in sale of cement in the Hyderabad region.
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The respondents filed applications under Regulation 65 of the MRTPC Regulations, 1991 requesting that since combined report was made out of individual reports prepared by the inspecting officers, applicant should be directed to file individual reports so that witnesses could be cross examined in the light of these individual reports. In response to these applications the DG submitted that "the Ministry of Corporate affairs has informed that the initial inspection reports prepared by the individual officers under Section 209A of the Companies Act, 1956 are confidential document and cannot be shared with the companies. However, copies of these reports will be made available to this Tribunal if so directed for the perusal of this Hon'ble Tribunal". Rejoinders were filed on behalf of the respondents. Finally, on directions of the Tribunal individual inspection reports were filed by the DG. Even while copies of the individual reports were made available to the Tribunal, a clear statement was made on behalf of the applicant that the applicant would not rely upon the three individual reports. It was further stated by the learned counsel for the DG that if there is any adverse inference to be drawn that may be so drawn. In view of this statement further evidence was not considered necessary by the applicant and the matter was fixed for final hearing on 17.09.2012.
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