Cement makers to approach SC after NCLAT upholds CCI’s penalty

30th july 2018

Major cement manufacturers in India are set to move the Supreme Court after the National Company Law Appellate Tribunal dismissed their plea against the Rs 6,300-crore penalty imposed by the Competition Commission of India (CCI).

The CCI had first issued an order in July 2012, imposing a penalty on 10 cement makers, including Ambuja Cement, ACC, Ramco Cements, UltraTech, JK Cement and India Cement, among others, for observed price collusion between May 2009 to March 2011. It reiterated the order in August 2016, after the matter was referred to it again by the Competition Appellate Tribunal (COMPAT).

The NCLAT on Wednesday said it found no merit in the appeals filed by cement companies. It also upheld the fine imposed by CCI and stated that the commission had imposed minimum penalty.

However, cement companies say there is enough ground to appeal against the NCLAT order in the Supreme Court. “It believes that on merit it has sufficient grounds for a successful appeal and intends to file the same with the Supreme Court,” Ambuja Cements said.

After the CCI had reiterated its order in August 2016, several companies had knocked the doors of COMPAT.

According to UltraTech Cement, COMPAT granted a stay on the order and the company was directed to deposit an amount of Rs 117.55 crore, which was deposited. Similarly, JK Cement, too, had filed an appeal with COMPAT against the Rs 128.54 crore penalty imposed against it, and was directed to deposit Rs 6.55 crore, which it had done.

Subsequently, matters before the COMPAT were transferred to the NCLAT, which has now upheld the penalty on cement firms. “The company has been legally advised that it has a good arguable case on merits. Accordingly, the company shall file an appeal to Supreme Court,” said JK Cement.

Most cement stocks were trading higher on Thursday, as benchmark indices hit new record highs. However, analysts remain cautious.

“The penalty was imposed at 0.5 times the net profits earned for the two-year period—even though it could impose penalties of up to 10 per cent of turnover or 3 times the net profits, whichever is higher,” according to Abhishek Poddar, analyst at Kotak Institutional Equities.

The quantum of penalty accounts for one to four per cent of the market capitalisation of pan-India companies, Poddar estimates.

Source: THE WEEK