With the overhang of a hefty penalty by the Competition Commission of India (CCI) on alleged cartelisation, Adani Group companies, Ambuja Cements and ACC, have withdrawn their membership from the Cement Manufacturers’ Association.
The development comes when the Adani group is still attempting to battle out allegations levelled by the US-based short-seller Hindenburg Research.
Lowering penalty
The group has deleveraged the balance sheet by repaying $2.65 billion and the last thing it wants now is to fight a case on price cartelisation in the cement business, sources said. Last September, Adani Group had acquired both Ambuja Cements and its subsidiary ACC through a deal worth $6.4 billion to become the country’s second largest cement maker.
The withdrawal of CMA membership will also provide an opportunity for Adani group companies to plead for lowering the penalty, though the Supreme Court will take the final call, said the source. While the Adani group took over the liabilities including the CCI penalty, it was not the owner of the firms when the alleged cartelisation charges were levied.
A recap
In August 2016, the CCI had slapped about ₹6,300 crore in penalties on 11 cement companies for indulging in price cartelisation.
The penalty on Ambuja Cement and ACC was about ₹1,164 crore and ₹1,148 crore, respectively. The industry body, CMA, was fined ₹73 lakh. The CCI had also directed all the firms to “cease and desist” from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market.
Following this, cement companies challenged the penalty at the Competition Appellate Tribunal and it was stayed with a clause to shell out 10 per cent of the penalty. Later, the National Company Law Appellate Tribunal (earlier Competition Appellate Tribunal) dismissed the cement makers’ plea, following which they moved the Supreme Court.
In 2018, a two-judge bench headed by Justice Rohinton Nariman stayed the NCLAT order and directed the affected cement companies and industry body to deposit 10 per cent of the penalty.