The National Company Law Appellate Tribunal (NCLAT) has upheld the Competition Commission of India’s (CCI) decision to impose a ₹6,700-crore penalty on 11 cement companies for cartelisation.
In their order on Wednesday, Justice SJ Mukhopadhaya, NCLAT Chairperson, and Justice Bansi Lal Bhat, Member (Judicial), said the cement companies had reduced production and dispatches across all sectors during a period when the demand from the construction sector was positive.
“Some of the cement companies...stopped booking in the non-trade segment and there was a shortage of supply of cement,” the order noted.
“So far as the quantum of penalty order is concerned,” the NCLAT said, “as we find that the Commission has imposed a mere minimum penalty, no interference is called for against the same. We find no merit in these appeals. They are accordingly dismissed.”
The verdict by the appellate tribunal comes two years after the CCI imposed the penalty. The Builders’ Association of India filed the petition in August 2016 against 11 leading cement companies. The CCI had also asked the cement companies to desist from reducing production to keep prices high.
The 11 companies that have to cough up the penalty include Aditya Birla Group company UltraTech Cement (₹1,175 crore), Jaypee Cement (now acquired by UltraTech: ₹1,323 crore), ACC (₹1,148 crore), Ambuja Cement (₹1,163 crore), JK Cement (₹128 crore) and Century Textiles (₹274 crore).
Binani Cement, which may be acquired by UltraTech under insolvency proceedings, was also penalised ₹167 crore.
According to industry sources, most of these companies will now take the fight to the Supreme Court.
“While the company is yet to receive the order of the NCLAT, it believes that on merits it has sufficient grounds for a successful appeal and intends to file the same with the Supreme Court,” Ambuja Cement said in a statement to the stock exchanges. ACC issued a similar statement.
Added woes
The NCLAT order will add to the woes of the cement industry. Despite an increase in demand, cement companies’ profitability is under pressure due to a rise in production costs.
Higher power and fuel (increase in coal and pet coke prices) and freight costs (increase in diesel prices) are expected to put further pressure on the profitability margins and debt metrics of cement companies.