1. B-392016]
COMPETITION LAW REPORTS MARCH, 2016
Technicality Triumphs Over Merit! The Cement Cartel case
Sudipto Banerjee*
* Legal Editor, Taxindiaonline.com ACS, LL.B., LL.M. 4/16 A 3rd Floor Jangpura-B New
Delhi - 110014, Mb: 9911078936
1 Case No.29/. 2010, Commission’s order dated June 20, 2012.
2 Appeal No. 110/12, COMPAT’s order dated December 11, 2015.
The unprecedented quantum of penalty
imposed in the short history of Indian
competition law has been set aside. In
2012, the Competition Commission of
India (Commission) passed an order1
imposing a whopping penalty of
approximately Rs. 6,300 crores (highest
penalty order given by any regulatory
authority at that time) on the cement
manufacturing companies for indulging
in cartelization, was recently quashed by
the Competition Appellate Tribunal
(COMPAT).2
However, the noteworthy
fact is that even after a long drawn legal
battle of three and half years before the
COMPAT, the order has been struck
down and penalty set aside not on merits
but on grounds of procedural lapses.
147
The article "Technicality triumphs over merit! the Cement cartel case" attempts
to analyze the recent Competition Appellate Tribunal (COMPAT) order which
quashed the record penalty imposed by the Competition Commission of India
(Commission) on the cement manufacturing companies, remanding the same to
the Commission for fresh hearing. The article argues that the spirit of competition
and the intended deterrent effect in this cement cartel case matter is somewhat
diluted due to this long drawn legal battle and technicalities, especially when
the ground on which the order has been recently quashed was already raised
before the COMPAT back in 2013. The article attempts to understand whether
this was a fit case of application of the legal principle of "One who hears shall
decide" under the present scheme of the Competition Act. Finally, the article
briefly draws attention to the growing trend where one after another Commission's
order are being over-ruled by the COMPAT.

2. Competition Law ReportsB-40 [Vol. 1
COMPETITION LAW REPORTS MARCH, 2016
With this, one more episode is added to
the basket of Commission’s decisions
which have been overruled by the
COMPAT in the recent past.
So, let’s briefly understand what exactly
led to the setting aside of this landmark
order. If one looks at the intimidating two
hundred and ten pages COMPAT order,
the crux is that when the Chairman of
the Commission was not present on three
consecutive oral hearings held before the
Commission, but became privy to the
final order, it rendered the proceedings
invalid. The COMPAT observed that the
final order of the Commission contained
initials of the Chairman on every single
page and it was only the last page of the
order which carried signatures of all the
members. This observation constituted
the basis of deduction that the order has
been authored by the Chairman of the
Commission. With this analysis and the
background fact that the Chairman was
not present in three oral hearings, the
COMPAT concluded that this major
procedural lapse tantamount to violation
of principles of natural justice having
caused prejudice to the parties. The legal
principle behind the analysis was ‘one
who hears shall decide’. While the
jurisprudential principle holds ground,
the relevant question is whether this was
a fit case for applying the said principle.
The quorum under the Competition Act,
2002 (the Act) for any meeting is three
members and any issue before the
Commission has to be decided by
majority of the members present and
voting. The provision also allows the
senior most member to preside the
meeting in the absence of the Chairman.3
These provisions are almost identical to
the procedure set out in the Insurance
Regulatory and Development Authority
of India Act, 1999 and the Securities and
Exchange Board of India Act, 2002. Prior
to the Competition Amendment Act,
2007, the expression used in Section 22
was “Benches of Commission” which
was later changed to the Meetings of
Commission. It is logical to state that this
amendment was made in consonance
with the regulatory role of the
Commission and to distance it from the
procedural complications of quasi-
judicial bodies.
The reasoning of the COMPAT that the
final order was authored by the
Chairman who was absent from the
hearings, merely because he has initiated
all the pages of the order, denies the
respective roles played by other expert
members. Besides the Chairman, the
remaining six members attended the oral
hearings which fulfilled the quorum
requirement. Moreover, the order
confirming the charges of cartelization
under Section 3 of the Act was passed
unanimously by all the members.
Hypothetically, if there would have been
a case of divided opinion only then the
vote of the Chairman could have made a
difference. The COMPAT also presumed
that the Chairman is in such a position
that he could have influenced other
members in the decision making process,
a theory which again undermines the
collective wisdom of the Commission. It
must be understood that the Chairman
only acts in a representative capacity on
behalf of the Commission. The
conclusion of the COMPAT that the order
was authored by him virtually makes the
Chairman as the sole decision making
authority is certainly against both
express and implied intent of the Act.
Another practical dimension that needs
to be considered here is that members
come to the Commission for a fixed period
whereas competition matters drag for
years. Even in the case of other regulatory
authorities and Tribunals, there is
always a possibility that the person
hearing the matter was not present at the
148
3 Competition Act, 2002 - Section 22.

3. B-412016]
COMPETITION LAW REPORTS MARCH, 2016
Technicality Triumphs Over Merit! The Cement Cartel case
attended the oral hearings were already
present in the written submissions filed
by the parties, which must have been
considered by him before signing the order.
It is also a matter of fact that the Chairman
did attend the final meeting when the
written submissions were considered
by the Commission. Furthermore, as
per the Act, the Commission allows
representation by the parties either in
written submissions or oral hearings.4
So
once the written submissions have been
made, oral hearing is given only as a
matter of option. This is also substantiated
by the Supreme Court ruling wherein it
was held that opportunity to make
representation does not necessarily
include the right of oral hearing.5
Coming to the issue of prejudice caused
to the appellants, the Supreme Court has
categorically held in several decisions
that prejudice must be established before
seeking invalidation of the proceedings.6
When extensive oral hearing was given
by remaining six members followed by
consideration of written submissions by
all the members including the Chairman,
it is difficult to understand how come
the appellants were so prejudiced that it
affected the merits of the case. Having
said that when the Act clearly provides
that any irregularity in the procedure of
the Commission will not invalidate the
proceedings, unless it affects the merits
of the case7
, was it appropriate for the
time of delivering the final order due to
various reasons. For this very reason, the
Commission works in a collegium system
acting through majority. Moreover,
assuming that the Chairman signing the
order although when he did not hear the
parties amounts to procedural lapse, but
equating the same with a situation that the
order has been solely authored by him and
the other six members played a mere mute
role is a far-fetched observation. It is matter
of record that there have been several
dissenting orders in the past like Sugar
cartel case, tyres cartel case etc., which
stands testimony to the fact that the voice
of dissent has not been choked in the
Commission.
It was repeatedly argued by the parties
that when the Chairman did not attend
the hearings, how could he have decided
the case? Even if it is assumed for a moment
that the Chairman authored the decision,
as far as the issue of hearing the arguments
by the Chairman is concerned, they were
already contained in the detailed and
voluminous written objections and replies
filed by the parties before the oral hearings
were held. It must be noted that there were
total eleven cement manufacturing
companies who contested the case and
therefore, the possibility of any particular
line of contention raised only during the
oral hearings but being totally missed out
in the entire set of written submissions
filed by all the parties, is highly unlikely.
Secondly, the copy of Director General
investigation report is always provided
to the parties on the basis of which the
parties frame and submit their replies and
objections. In other words, it would be
correct to mention that all crucial
arguments which could have influenced
the decision of the Chairman, had he
149
4 Competition Commission of India (General) Regulations, 2009 - Regulation 29.
5 Madhya Pradesh Industries Ltd. v. Union of India AIR 1966 SC 671.
6 Securities and Exchange Board of India v. Akshya Infrastructure Private Ltd (2014)11 SCC112.;
K.L.Tripathi v. State Bank of India and Ors (1984)1SCC 43, Managing Director, ECIL Hyderabad
and other v. B. Karunakar and others (1993) 4 SCC 737.
7 Competition Act, 2002 - Section 15.
Prejudice must be
established before seeking
invalidation of the
proceedings

4. Competition Law ReportsB-42 [Vol. 1
COMPETITION LAW REPORTS MARCH, 2016
COMPAT to set aside the order.
Moreover, the argument of violation of
principle of natural justice and prejudice
was already raised way back in 2013
before the COMPAT at the time of seeking
stay on the penalty order, but the same
was not entertained by the COMPAT.8
Now after a gap of three and half years,
unfortunately the penalty order is
rendered void on the very same ground.
So after several years of fierce litigation,
things are back to square one since the
Commission has been directed to hear
the matter once again. The Commission
has already decided not to appeal before
the Supreme Court but in all likelihood
the outcome would not be favourable for
the cement companies. And if that
happens, the appeal proceedings will
start afresh before the COMPAT, and this
time hopefully the matter will be decided
on merits. In other words, it is wastage of
time and public resources but most
importantly, it dilutes the intended
deterrent effect on cartelization practices
in India. As per the Commission’s
Annual Report 2013-14, only a negligible
0.741% of the total penalty imposed have
been realized. The present COMPAT
order will only further push down this
penalty realization rate. Moreover, the
present situation also raises larger
questions like the role of the Commission
i.e., whether it has the trappings of an
adjudicatory or quasi-judicial body? This
issue still remains to be decided by the
Supreme Court especially after the
Competition Amendment Act, 2007. The
next troublesome question is why so
many orders of the Commission are being
overruled by the COMPAT? Is it similar
to the case of the Securities and Exchange
Board of India whose decisions were
mostly overturned by the Securities
Appellate Tribunal, when it was an
evolving institution, or is it something
else? Looking at the present conundrum,
the only beneficiary is the legal fraternity
whereas the concern of combating
cartelization is somewhere lost in hyper-
technicalities.
Experience of anti-trust authorities in
other jurisdictions suggest that cement
manufacturing sector provides enough
congenial conditions to indulge in
cartelization. The international
experience also shows that penalty
imposed on cartels after it is conclusively
established in the Court of law, often gets
offset by huge profits already gained from
such concerted practice. It is true that
Commission is an evolving body and
needs to address several issues in its
functioning and over-all approach.
Considering the gravity of the Cement
cartel case; there is no doubt that the
Chairman should have attended all the
oral hearings. But then quashing the
entire order on this very ground is a
setback to Commission’s combating
spirit against collusive practices. Since
law is not like physics, arguments can
continue endlessly from both the sides.
And therefore, the moot question
whether the need for meeting procedure
has triumphed over the competition
concern will remain?
150
8 Appeal No. 105 of 2012, COMPAT’s order dated May 17, 2013.