COMPETITION APPELLATE TRIBUNALĊ

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CORAMĊ Justice V.S. SirpurkarĊ ChairmanĊ
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Mr. Rahul Sarin,Ċ MemberĊ
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Mrs. Pravin Tripathi,Ċ MemberĊ APPEAL NO. 105 OF 2012 With I.A. No. 224/2012 & I.A. No. 270/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010].

In the matter of : Lafarge India Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 110 OF 2012 With I.A. No. 222/2012 & I.A. No. 223/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : Ambuja Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 108 OF 2012 With I.A. No. 218/2012 & I.A. No. 219/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated

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20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : Associated Cement Corporation Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 103 OF 2012 With I.A. No. 211/2012 & I.A. No. 212/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : Cement Manufacturing Association Versus Competition Commission of India & Ors. APPEAL NO. 104 OF 2012 With I.A. No. 113 of 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010].

... Appellant ... Respondents

In the matter of : Ultra Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 106 OF 2012 With I.A. No. 115 of 2012 & I.A. No. 116 of 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

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In the matter of : India Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 107 OF 2012 With I.A. No. 117 of 2012

... Appellant ... Respondents

[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : Jai Prakash Associates Limited Versus Competition Commission of India & Ors. APPEAL NO. 109 OF 2012 With I.A. No. 221 of 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

... Appellant ... Respondents

In the matter of : Binani Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 111 OF 2012 With I.A. 214/2012, I.A. 274/2012 & I.A. 275/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : Madras Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

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APPEAL NO. 112 OF 2012 With I.A. No. 225 of 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010]

In the matter of : J.K. Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 113 OF 2012 With I.A. No. 232/2012 & I.A. No. 233/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 20.06.2012 passed by the Competition Commission of India in Case No.29/ 2010].

In the matter of : Century Textile Industries Versus Competition Commission of India & Ors. ... Respondents ... Appellant

APPEAL NO. 134 OF 2012 With I.A. No. 267/2012 & I.A. No. 268/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006]

In the matter of : India Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 122 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of :

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Cement Manufacturers’ Association Versus Competition Commission of India & Ors.

... Appellant ... Respondents

APPEAL NO. 123 OF 2012 With I.A. No. 259/2012 & I.A. No. 260/2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of : M/s. Madras Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 124 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006]

... Appellant ... Respondents

In the matter of : Century Textile Industries Versus Competition Commission of India & Ors. APPEAL NO. 125 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of : Binani Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 126 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of :

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Ultra Tech Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 127 OF 2012

... Appellant ... Respondents

[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of : Lafarge India Limited Versus Competition Commission of India & Ors. APPEAL NO. 128 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of : J.K. Cement Limited Versus Competition Commission of India & Ors. APPEAL NO. 129 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of : Jai Prakash Associates Limited Versus Competition Commission of India & Ors. APPEAL NO. 132 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

... Appellant ... Respondents

In the matter of : Ambuja Cement Limited Versus Competition Commission of India & Ors. ... Respondents ... Appellant

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APPEAL NO. 133 OF 2012
[Under Section 53-B of the Competition Act, 2002 against the Order dated 30.07.2012 passed by the Competition Commission of India in RTPE 52/2006].

In the matter of : Associated Cement Corporation Versus Competition Commission of India & Ors. Appearances : ... Respondents ... Appellant

Shri Gopal Subramanium and Shri Parag Tripathi, Senior Advocates with Shri Samir Gandhi and Shri Karan Vir Khosla, Ms. Hemangini Dadwa Advocates for the appellant. Shri Iqbal Chhagla, Senior Advocate with Shri Ashwath Rau, Ms. Anu Tiwari and Ms. Gargi Yadav, Advocates for the appellant. Shri Ramji Srinivasan, Senior Advocate, Dr. Abhishek Manu Singhvi, Senior Advocate with Mrs. Pallavi S. Shroff, Ms. Shweta Shroff Chopra, Shri Harman Singh Sandhu, Shri Yaman Verma, Ms. Sangeetha Mugunthan and Ms. Kabita Das, Shri Rook Ray, Advocates for the appellant. Shri L. Nageshwara Rao, Senior Advocate with Shri Pramod B. Agarawala and Shri Prashant Mehra, Advocates for the appellant. Mr. Ravi Kadam, Senior Advocate Mr. Aspi Chimoy and Mr. Pravin H. Parekh, Sr. Advocate with Mrs. Sonali Basu Parekh, Mr. Sameer Parekh, Dr. V.K. Agarwal, Mr. Anand S. Jha, Mr. Aditya Sharma and Mr. Utsav Trivedi, Ms. Nupur Sharma, Advocates for the appellant. Shri C.S. Vaidyanathan, Senior Advocate with Shri Hari Shankar, Ms. Kanika Chaudhary Nayar, Shri Vikram Sobti, Shri Udayan Jain and Ms. Nidhi Singh, Advocates for the appellant. Shri A.N. Haksar, Senior Advocate with Shri G.R. Bhatia, Ms. Kanika Chaudhary Nayar, Shri Udayan Jain, Ms. Chitra, Shri Vikram Sobti and Ms. Nidhi Singh, Advocates for the appellant.

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Shri Sudhir Gupta, Sr. Advocate with Shri Virender goswami and Shri Abhinay, Advocates for the appellant. Mr. Arvind Datar, Sr. Advoate with Shri T. Srinivasa Murthy with Shri Rahul Bajaj, Advocates for the appellant. Shri Krishnan Venugopal, Senior Advocate with Shri P.K. Bhalla, Advocate for the appellant. Shri Shyam Dewan, Senior Advocate with Shri Pramod B. Agarwala, Shri Abhinav Malhotra and Shri Prashant Mishra, Advocates for the appellant. Shri C.S. Vaidyanathan, Senior Advocate with Shri Hari Shankar, Shri Vikas Singh Jangra and Shri Aditya Verma, Advocates for the appellant. Shri Dushyant Dave, Sr. Advocate with Shri Manas Kumar Chaudhari, Shri Ramesh Singh, Shri Vijay Chauhan, Shri Sagardeep Rathi and Shri Pranjal Prateek, Advocates for the appellant. Shri Pramod B. Agarawala and Shri Prashant Mehra, Advocates for the appellant. Shri P.K. Bhalla, Advocate for the appellant. Shri Balbir Singh with Shri Abhishek Singh Baghel , Ms. Monica Benjamin, Mr. Abhishek Yadav and Shri Mayank Bansal, Advocates with Ms. Shabistan Aquil, DD (Law) for CCI. Shri O.P. Dua, Senior Advocate with Shri Shubham, Advocate for the Respondent/Builders’ Association of India. ORDER PER MR. JUSTICE V.S. SIRPURKAR, CHAIRMAN This order will govern the following 11 Appeals. They are filed by :1. Associated Cement Corporation – Appeal No.108/2012 133/2012 2. Gujarat/ Ambuja Cement Ltd. – Appeal Nos. 110/ 132 of 2012 3. Grasim Cement / Ultratech Cement Ltd. –Appeal No. 104/ 126 of 2012 4. Cement Manufacturing Association – Appeal No.103/ 122 of 2012 5. Jai Prakash Associated Ltd. – Appeal Nos.107/ 129 of 2012 6. India Cements Ltd. - Appeal Nos. 106/ 134 of 2012

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7. J.K Cements (JK Group) – Appeal Nos. 112/ 128 of 2012 8. Century Textiles & Industries Ltd.(Century Cement)- Appeal Nos.113/ 124 of 2012 9. Madras Cement Ltd. – Appeal Nos. 111/ 123 of 2012 10. Binani Cement Ltd. – Appeal Nos. 109/ 125 of 2012 11.Lafarge India Pvt. Ltd. – Appeal Nos.105/ 127 of 2012

When these appeals came before us, we had issued notice on the merits as well as on the stay application by order dated 13.09.2012. By the same order we had directed that no coercive steps should be taken against the appellants for recovery of the penalty ordered by the Competition Commission of India (‘CCI” hereinafter) till 11.10.2012. Thereafter, during the hearing on 11.10.2012, it was pointed out by the appellants that they were not served with the complete orders inasmuch as the confidential information was not disclosed to a particular appellant. The learned

counsel arguing for the CCI agreed to supply the order copies maintained under Regulation 35(13) of the General Regulations, 2009. The appellants had also sought for relief to amend their Appeal Memos on the basis of the fresh copy of the order including the confidential data. Accordingly, the appellants amended their Memo of Appeals. Seven Appellants amended Memo of Appeals while the remaining did not file any amended Memo of Appeals. All those amendments were allowed by order dated 6th

December, 2012. While arguing for stay, it was found that there were some common issues which pertain to very validity of the order passed by the CCI. The learned counsel for the appellant urged that those common issues should be addressed first and thereafter appeal should be argued individually heard on the basis of the individual facts pertaining to that particular appellant. This suggestion was accepted by the counsel for the CCI and the interim protection granted was extended up to 29th January,

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2013 and by order dated 30.1.2013 these appeals along with the second group of the appeals were ordered to be heard in third week of February, 2013. The first group which covers Appeal Nos. : 105 of 2012 by Lafarge India Ltd.; 110 of 2012 by Ambuja Cement Ltd.; 108 of 2012 by Associated Cement Corporation ; 103 of 2012 by Cement Manufacturers Association; 104 of 2012 by Ultra Tech Cement Limited; 106 of 2012 by India Cement Limited; 107 of 2012 by Jai Prakash Association Ltd.; 109 of 2012 by Binani Cement Limited and 11of 2012 by Madras Cement Limited are in the first group while the remaining 14 appeals consist of the second group. 2. The proceedings against the appellants in the second group were

pending under the old MRTP Act. However, after the repeal of the MRTP Act, they came to be treated as pending under this Act because of Section 66 of the present Competition Act, 2009 (Act for short). It is seen that the appeals under the first group are against the orders passed by the CCI wherein the CCI was activated by the informant i.e. Builders’ Association of India and since the appellants covered by the first group were awarded with the penalties by the CCI, the CCI did not choose to award separate

penalty against the appellants in the second group with the exception of M/s. Shree Cement Ltd. represented by Shri Dushyant Dave, Sr. counsel. The penalties inflicted by the CCI are as follows :Name Net profit 209-10 taking into account period of contravention Post Notification i.e. 20.5.2009 on pro-rata basis (in Rs. crores 969.92 1064.19 244.13 0.5 times of Net Profit as calculated in column 2 (in Rs. crore) 484.96 532.10 122.07 Net Profit 2010-11 (in Rs. crores) 1,325.26 1,263.81 90.50 0.5 times of Total (in Net Profit as Rs. crore) calculated in column 4 (in Rs. crore) 662.63 1147.39 631.81 45.25 1163.91 167.32

ACC Ltd Ambuja Cement Ltd Binani Cement

Ċ Century Textiles Ltd. India Cements Ltd J K. Cement Lafarge India Madras Cements Ltd. Ultratech Cement Ltd Jaiprakash Associates Ltd. Name 308.43 306.85 194.46 566.61 306.27 946.74 1479.43

ěěĊ 154/22 153.43 97.23 283.31 153.14 473.37 739.71 239.60 68.10 62.62 413.40 210.97 144.23 1167.78 119.80 34.05 31.31 206.70 15.49 72.12 583.89 274.02 187.48 128.54 49001 258.63 1175.49 1323.60

Gross turnover for 2008-09 (in Rs. crores)

Gross turnover 2009-10 (in Rs. crore) 6.65

Cement Manufacturer Association

9.27

Gross turnover 2010-11 (in Rs. crore) 5.99

Average Turnover for three years 7.30

Penalty at rate of 10% on average turnover (in Rs. crore) 0.73

Thus, they are substantial penalties. 3. The learned counsel arguing for the appellants prayed for passing of

the blanket stay order in view of their objections to the legality of the impugned order passed by the CCI. Thus, the question of the stay became essentially linked with the submission on the merits of the whole matter. According to the learned counsel for the appellants firstly there were some basic defects in the order which would render the same non-est. And, therefore, the appellants claimed the blanket stay of the orders of the penalty. It was also suggested that even on individual merits, the

appellants were entitled to the grant of blanket stay. 4. Insofar as the basic contention regarding the shortcomings in the

order the learned counsel went on to formulate the common issues and raised contentions thereon. They, however, sought the permission to

address even on the individual facts in each appeal in support of their plea

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for blanket stay.

Each appellant culled out these common issues and

addressed us extensively on the common issues as well as on the merits in support of their contention for the blanket stay. The learned counsel for the informant – Builders’ Association of India and also the CCI also addressed us extensively opposing the grant of stay. We have now to see on the basis of the rival contentions raised as to whether the appellants are entitled for the blanket stay of the impugned order by the CCI. 5. The Builders’ Association of India filed an information under Section

19 of the Act on 26.7.2010 against the Cement Manufacturers’ Association and 11 other cement manufacturing companies. In their complaint they alleged violation of the provisions of Sections 3 and 4 of the Act by the appellants. In their information they describe themselves as a Society

registered under the Societies Registration Act and asserted that the Cement Manufacturers Association of India was the representative body of the companies manufacturing cement and that it has 46 members. All the appellants herein were described as the members. It is alleged that under that umbrella of the cement manufacturers engaged in the monopolistic and restrictive trade practices in an effort to control the price of cement firstly by limiting and restricting the production and supply of cement as against the available capacity of production. The said cement

manufacturers in connivance with their representative body Cement Manufacturers Association indulged in collusive price fixing for which they have divided the territory of India into five zones so as to enable themselves to control the supply and determine or fix exorbitantly high price of cement by forming a cartel in contravention of provision of Section 3 of

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the Act.

It was alleged that the appellants herein i.e. Cement

Manufacturing companies collectively held more than 57.23% of the market share in India and thus enjoyed the position of dominance and went on arbitrarily increasing the price of cement which price was unfair and thus had abused their dominance in contravention of Section 4 of the Act. It was alleged further that though Associated Cement Company (ACC hereinafter) and Gujarat Ambuja Cement Ltd., (GAC hereinafter) had ceased to be the Members of the CMA w.e.f. 1.11.2009 and had controlled approximately 21% market share in India amongst themselves and they had fallen out only to keep their activities of cartelization under a veil since they had actively participated in the price benchmarking exercise of CMA. It was alleged that the prices per bag were similar to the prices of other cement manufacturers who continued to be the members of the opponent. The news release was also relied upon in support of this complaint. According to the informant, these two opponents were leading the acts of cartelization by the cement manufacturers association over the past twenty years. It was pointed out that their holding company, Holcim has been penalized and held guilty of acts of anti-competitive activities in some other countries. It was specifically pointed out that the original opponent No. 12 i.e. Lafarge India which was a subsidiary of the French building materials major was already been fined in 1994, 2002 and 2008 for committing irregularities by different jurisdictions which suggested that it is a habitual offender of the provisions of the competition acts. It was then alleged that the original opponent Nos. 2 and 3 and original opponent No. 4 to 12 including the other appellant had collectively controlled the supply of

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cement and though they had large capacities they deliberately controlled the supply, produce less cement and increase the market price the cement and resulted in market price of the cement. It was then alleged that in addition to creating the artificial scarcity the opposite party including the appellants sought the objective of causing artificial increase in the price of the cement. It was pointed out that irrespective of the areas and regions and the availability of the cement or artificial scarcity thereof in the markets, the cement prices were increasing constantly causing adverse affect on the real estate and affecting the interest of the consumers at large. It was pointed out further that there were cease and desist order passed in past in RTPE No. 99/1990 and RTPE No. 21/2001. It was pointed out that these cement manufacturers had set up their cement manufacturing units at different places in India and though they were having different costs of production and transportation. They uniformly and simultaneously

increased prices at the same time and that is the common feature in respect of all the five zones namely North, East, West, South and Central. 6. Relying on some statistics it was pointed out that the growth in the

construction sector decreased from 10.10% from 2007 to 2010 and so also the growth in the real estate sector had come down in these three years. The growth in the cement sector had also witnessed a downward trend on 2006 to 2009 and the utilization of the installed capacity of the cement manufacturers came down to 85% to 94%. However, it started growth in the cement sector increased to 11.68%. However, in spite of the growth in production of cement, the utilization of installed capacity got reduced. From this, it was urged that despite the slow down the cement industry

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earned profit margins of 26% on the turn over of Rs. 45,717 crore. It was pointed out that through the inter se agreements Rs. 5/- were increased per bag of cement between December, 2008 to February, 2009. In addition, the cement manufacturers increased the price between Rs. 10/- to Rs. 27/per bag upto April-June, 2009. The price was further increased in the range of Rs. 5/- to Rs. 15/- per bag from December, 2009 upto January, 2010. It was pointed out further that some manufacturers were getting the benefit by using ‘fly-ash’ and thus increased quantity of product of cement manifold without any increase in the production cost or input costs. Since the ‘fly-ash’ was provided to the cement manufacturer by the thermal power plants which was primarily owned or controlled by the government or semigovernment undertakings at zero cost. 7. The complaint was also made of the non-utilization of the capacity to It is pointed out that the price increase

produce by giving the statistics.

from Rs. 255 per bag to Rs. 258 per bag in the year 2009 itself. Much statistics was relied upon in the information to suggest that the price of cement per bag was kept on rising due to cartelization and the increase was between Rs. 5/- to maximum of Rs. 39/- per bag. It was urged that

the raise in prices of cement in all the zones cannot be directly attributed to increase/decrease in demand as conditions in five zones were different. It was urged that decrease in the capacity utilization from 94% to 82% in 2009-10 was intentional act on the part of the opposite parties to gain by arbitrarily fixing and escalating the prices. It was urged that the cement manufacturers working as cartel chose to intentionally under-utilize their plants and continuously produce less than the demand for cement on

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account of decreasing capacity utilization from 83.33% in April, 2009 to 79.63% in March, 2010. An interview of Shri N. Srinivasan, Managing

Director of India Cement Limited, the fourth largest cement producer in India was also relied upon by the informant who had claimed that cement industry had added 78 million tones between 2006-07 and 2009-10. It is pointed out that cement rose by in the range of Rs.10/- per bag to Rs. 27/per bag upto January-March, 2009 and further by Rs. 5 to Rs.15 per bag upto January, 2010. Relying on the memorandum dated 15.11.2006 of the CMA addressed to the Finance Minister the informant claimed that per bag cost of cement should be Rs. 160 however that price was raised to Rs. 350/- per bag, thanks to the concerted action by the cement manufacturers. They pointed out that the gross profit by M/s. ACC and Gujarat Ambuja Cements Ltd. increased substantially. It is pointed out that as per the news item in the Economic Times dated 28.11.2009 forecasted the increase in price in cement in future. All the cement manufacturers took the clue and increased price per bag uniformly in December, 2009. This fact was also reported in Business Standard in its issue dated 3.12.2009. A reference is made to the appointment of Standing Committee by the Ministry of Commerce and Industry. On the basis of these averments, it was urged that all these cement manufacturers had firstly contravened Section 3 by cartelizing and fixing prices and secondly had abused its dominance in the market in contravention of Section 4. 8. The CCI referred this information for further investigation by the

Director General. The Director General appears to have consulted 12 top companies and investigated into their affairs. The DG deduced the profit

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margins being more than 25%. It is seen by him that CMA on the direction by the Department of Industrial Policy and Promotion was regularly collecting and submitting the data which was earlier collected by the Development Commissioner of Cement Industry. The CMA thus was

collecting indicative retail and wholesale prices of cement from across the country. On the basis of the analysis he found that there was continuous positive growth in the cement prices for the last five to six years. According to him, the price of cement is rising faster than input prices. It was found by the DG that price which was about Rs. 150/- per bag in 2004-05 increased to Rs. 300/- per bag in March, 2011 whereas the cost of sale had increased only by 30% and thus there was no nexus between cost of sale and the sale price. The DG also deduced that the prices were increased not on

the basis of the cost of production but on the basis of the prices charged by the competitors. The price of cement is changed by the market leaders was one of the factors for the increase in prices. The DG found

communications between the companies and the dealers which reflected the price to be charged. It did not show any reason for the change in prices. He also found that there was no authentic data of demand of

cement nor was their any formal system or mechanism of collection of data thereby deduced by the DG that the contention by the manufacturers that the price solely dependant on the market toot back is not tenable. The DG had also referred to the report of the Tariff Commission indicating that the price charged by the cement companies was unreasonably high and there was lot of scope for correction in their prices. After conducting the analysis of cost audit report of the companies, the DG deduced that the cost of

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sales which also includes the cost of production varies from unit to unit within a group and also between the companies. However, the data

showed that the margin per bag of cement is Rs. 38 to Rs. 45 showing that some manufacturers were able to charge prices which was quite high and above competitive level. As regards the existence of the agreement, the DG deduced that there was no direct evidence but only circumstantial evidence. It was found that the co-efficient of correlation of change in

prices or the movement of the prices of all the companies is positive and was very close to each other giving a strong indication of price parallelism. The price of the cement used to move upward in the country in the given time period. According to the DG the price parallelism was on account of the prior consultation amongst cement manufacturers and the market leaders have to play role in the same. The examination of small players showed that they simply follow the trend of major players. The DG

deduced that there was no reason for price parallelism. The movement of price of the companies in the same range and in the same direction was not possible unless the prior consultation and discussion. 9. The DG also found the decrease and downward trend in the capacity

utilization. This was a major factor according to DG. According to the DG, therefore, there was concerted decision of low capacity utilization so that a higher prices could be charged and abnormal profits earned. The DG

found positive co-relation among all the leading manufacturer. In the particular region dispatch the data for the period of two years from

January, 2009 to December, 2010 in case of the top companies was identical. According to the DG this was not possible unless there was

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some kind of meetings. The DG also found the production parallelism as a result of the concerted behaviour by manufacturers. Insofar as the

geographical markets are concerned, DG found that the markets were divided by the manufacturers into five regions. The top companies had market shares in one or more geographical markets which allowed them to earn maximum profit by charging unreasonable price. It was found that the big players normally trigger the price rise which is neatly followed by the other small manufacturers. He also found that the press and media were exploited and used for the price rise. The big players used TV and media predicting the price hike in the near future which sent the signal regarding the price rise to all. 10. It was also found that their existed exchange of price information

amongst the members of CMA on weekly basis across the country and CMA collected data in 34 different zones on retail and wholesale price of CMA. This according to the DG was not permissible. According to the Director General, the common platform of the CMA was being used for collection and dissemination the price of the different companies helping the manufacturers to take the decision about the future price rise. It was also found that a high power committee of the CMA was formulated and the prices were discussed in the meetings held on 3.1.2011, 24.2.2011 and 4.3.2011 after which the prices of the cement of all the top companies who were present in these meetings had increased. Two of these meetings were held in Hotel Orchid, Mumbai and were also attended by the ACC though they had resigned from the membership of the CMA and it was obvious that these two companies was acted in co-relation to the ulterior

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motive of profit earning. It was excluded that in the guise of the meeting of the High power committee, cement manufacturers were entering into some arrangements to manipulate the price of cement. Thus it was also held by the DG that it was clear that CMA was providing a platform. CMA was also engaged in publication for internal circulation between the members which information contained the details of production in respect of each plant of the cement companies. Thus the minute details of production, dispatch of each company became known to member companies to exchange production related information and decide production strategy in line with other companies. It was on this basis, the DG came to the conclusion that the companies were guilty for the contravention of Section 3(1),3(3)(a) and 3(3)(b) of the Act. This report was supplied to all the appellants who filed their objections. 11. After considering the objections raised which pertained to the

individual case of the appellants and after giving opportunity of hearing the CCI deduced that these companies had contravened the provision of the Act more particularly under Section 3 of the Act. The CCI in its impugned order has recorded the contentions raised by the individual manufacturers in great detail. Initially the objection was taken that the DG had taken into consideration the data prior to 20.5.2009. The CCI however rejected this objection holding that the DG had relied upon only the dominance of the company as a whole and conduct of the parties in general and mere examination of the data belonging to the prior period did not suggest that the provisions of the act were applied retrospectively. In this the DG as also the CCI relied on the decision of High Court of Bombay in Kingfisher

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Airlines vs. Competition Commission of India W.P. No. 1785 of 2010. It was also held by the Commission that DG had used the data only pertaining to the post Act period. Objections was also taken on some other grounds namely :1. Failure to provide opportunity to cross-examination 2. Non-supply of the Tariff Commission Report which was relied upon by the DG. 3. Inclusion of incorrect facts in the information. 4. The incorrect reliance on motivated information and the members representative. However, the CCI rejected all these objections in the nature of preliminary objection. It has held that firstly parties were given full opportunities. It was also held that the relevant portion of the Tariff report was available to the parties which they could have seen by an inspection and thirdly it was held that the name of the JK Group was wrongly mentioned. However, it was obvious that though the DG had issued notice to JK Group. JK Lakshmi

Cement Ltd. came on record though notice was not issued. CCI held that they were taking into consideration the case of JK Cements Limited only. The CCI also held that there was no question of motivation on the information filed by Builders Association. Having rejected the so called preliminary objection, the Commission went on to frame 8 issues in all. They are :Issue l: Whether the Opposite Parties have violated the provisions of section 4 of the Competition Act, 2002 as has been alleged by the inform ant?

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Issue 2: Issue 3:

Whether the acts and conduct of the Opposite Parties are subject matter of examination under section 3 of the Act? Whether there exists an agreement or arrangement among the cement companies named as the Opposite Parties under which they share details of cement prices, production and capacities among each other using the platform of CMA? If yes; Whether they have indulged in directly or indirectly determining the prices of cement? Whether they have indulged in limiting and controlling the production and supply of cement in the market? Whether there is a case of production and dispatch parallelism among the Opposite Parties? Whether the aforesaid acts of the Opposite Parties have caused increase in the prices of cement? If so, whether the Opposite Parties have contravened the provisions of section 3 (3) of the Competition Act, 2002?

Issue 4: Issue 5: issue 6: Issue 7: issue 8:

After thoroughly examining the records which are voluminous in nature and running into more than thousand pages, the CCI ultimately passed the impugned order. The stay of which is being sought now apart from its being set aside. 12. The impugned order of the CCI is unanimously passed and all the

seven Members have put in their signatures including the Chairman Shri Ashok Chawla. 13. For claiming the stay of the operation and effect of the impugned

order the appellant would have to establish a strong prima facie case in their favour. The learned counsel appearing for the appellants have

extensively addressed us contending that they have very strong case and

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the order inflicting very heavy penalty on them is incorrect in law as well as on facts. 14. It was firstly submitted by Shri Gopal Subramanium, learned senior

Counsel appearing for the Lafarge that the order itself is non-est as it was signed by the Chairman of the CCI and in fact he had not attended the meetings during which the appellant’s counsel put in the oral arguments. Thus the principle of “he who hears decides” was breached in this case as Chairman had not heard the matter at all. The learned counsel also

pointed out that if a Member of the Tribunal who has not heard the arguments at all puts his signature on the order then he actually gives an impression that he is a part of the decision making process and if in reality he was not the part of the decision making process because of his absence from the concerned meetings then apart from a basic illegality it also amounts to denial of natural justice. The learned counsel in support of this proposition has relied on number of authorities. The learned counsel also urged that in considering the information and in awarding exemplary heavy penalties, the CCI was doing adjudicatory function and therefore the CCI was bound to respect and follow the principles of natural justice. 15. This contention raised by Shri Gopal Subramanium was relied upon

by the other learned counsel appearing for the other appellants. 16. The learned counsel Shri Iqbal Chhagla appearing in Appeal No. 110

of 2012 in Ambuja Cements raised a contention that since the CCI was inflicting the penalties it was acting as a quasi-criminal court. The learned Senior Counsel argues that therefore the standard of proof required was

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“beyond reasonable doubt” whereas such standard was not adopted by the CCI which went on to adopt the standard adopted in the civil cases that being “preponderance of probability”. The learned senior counsel was at pains to point out that the findings arrived at by the CCI were inferential in the nature and with no supporting evidence. The learned counsel therefore urges that the order cannot stand. Voluminous case law was relied upon

by the learned senior counsel in support of his argument. According to the learned counsel insofar as the finding on the charge of price fixing was concerned it was a result of non-application of the mind on the part of the CCI. The learned counsel questioned that if the price went down which was clear from the facts, there could be no inference of the price fixing. The learned counsel also urged the only few cement manufacturers were cherry picked without there being any justifying reason for so doing. 17. Shri Ramji Srinivasan appearing in Appeal No. 108 of 2012 urged

similar to the contention by Shri Inqbal Chhagla that this was a clear exercise of considering the cases only of 11 or 12 cement manufacturers. He wondered as to what was the methodology to pick up only few cement manufacturers when there were admittedly more than 40 cement manufacturers in the country. The learned counsel also urged that there was complete dearth of direct evidence to support the findings by the CCI. The learned counsel also urged that there was a failure on the part of the CCI to afford the opportunity to cross-examine six witnesses whose evidence was recorded by the Director General. He pointed out that

though an opportunity was sought for to cross-examine them, it was refused. Shri Ramji Srinivasan also urged that there was a denial of

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natural justice inasmuch though a request for the documents was made that was not granted. By reference to various documents, the learned

counsel pointed out that this resulted in grave injustice. 18. Shri Vaidyanathan, learned Senior Counsel appearing in Appeal Nos.

106 of 2012 and134 of 2012 supported the arguments of Shri Chhagla and pointed out that the CCI was a quasi-judicial body as per two judgments of the Hon’ble Supreme Court. They being :- Brahm Dutt vs. Union of India reported in (2005) 2 SCC 431 and CCI versus Steel Authority of India Limited reported in (2010) 10 SCC 744. It was pointed out by the learned counsel that in both the cases the Hon’ble Supreme Court had held that the function of the CCI was of adjudicatory nature. He also supported the argument of Shri Gopal Subramanium on the issue of the Chairman contributing his signature to the impugned order though he was not present to hear any oral arguments. Reliance was put by him on Sections 26(1), 26(8), 27, 33, 35, 36(2) etc. to buttress his contentions that the CCI has to “determining” the issue and this task of “determination” makes it an adjudicatory body. 19. Shri V. Gupta appearing on behalf of Binani Cement in Appeal Nos.

109 and 125 of 2012 pointed out that the Binani was holding only 2% of the market which was insignificant. He also pointed out that there was no allegation against the Binani in the information nor was any relief claimed against the same. According to him the whole process was faulty as

Director General should not have restricted himself only to the parties who were named in the information but there should have been a thorough

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investigation of the whole cement manufacturing sector by investigating all the cement manufacturing companies. He was also at pains to point out that Binani Cement was not a Member of the Cement Manufacturers’ Association nor was its data available to the Cement Manufacturers’ Association in its 34 centre from which CMA used to collect data regarding the wholesale and retail price of the cement in the market. 20. Shri Krishnan Venugopal appearing in Appeal No. 112 of 2012 in J.K.

Cements predominantly relied upon the procedural defects both by the Director General as well as by the CCI. The learned counsel contends that though the documents were sought for but they were never supplied. He also pointed out that one of the learned Members Smt. Geeta Gouri was the Head of the Economic Division of the CCI and she should have ordinarily not taken part since the same Economic Division of CCI had supplied the man power to Director General for investigation in this matter on the request of the D.G. He urged that thus there was an institutional bias on the part of Smt. Geeta Gouri. He also supported the argument by Shri Gopal Subramanium that the Chairman, who is signatory to the order was not present during three days when the oral arguments were proceeded. He also complained that at times the Members during the hearings used to leave and were not available. He thus contended that all the Members were not there at all times of the days when the matter were heard. He also pointed out that the Chairman had participated only in the deliberations in the subsequent meetings which was wholly incorrect. The learned counsel also relied on number of cases. Finally, the learned

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counsel urged that the CCI has not given any justification of the penalty and the same tends to be arbitrary. 21. Shri A.N. Haksar, Sr. advocate appearing for J.P. Cement urged that

it was wrong to suggest that the CCI had only regulatory function. The learned counsel commented on Sections 13, 15 and 22 of the Act and pointed out that judicial matters can never been settled by voting and for that matter the use of casting vote is wholly unknown where functions are adjudicatory. He also supported the other contentions raised by the other counsel. 22. Shri Arvind Datar appearing on behalf of Madras Cement in Appeals

Nos. 111 and 123 of 2012 invited our attention to the amendment of the General Regulations (Regulation 20). He also invited our attention to the directions issued on 15th September, 2010. Inviting our attention to

Regulation 20 the learned counsel pointed out that there need be no application for cross-examination and cross-examination is a right of the parties which has been trampled. He also pointed out that the selection of only few companies for investigation was faulty and the DG had committed an error. He also pointed out that there was no data available of the South Zone where Madras Cement was operating. statistics and pointed out the defective approach. 23. Shri Parikh, learned counsel appearing on behalf of Ultra Tech He took us through the

Cement painstakingly invited our attention to the defects in the procedure. The learned counsel pointed out the said procedure adopted by the DG and the CCI breached the rules of natural justice. He pointed out that

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though specific opportunities were sought for, yet no opportunities were given for cross-examination nor were the documents supplied. The learned counsel has filed a chart and pointed out that all arguments pressed into service were not taken consideration. 24. Shri Krishnan Venugopal, learned senior counsel appearing on behalf

of J.K. Group invited our attention to the fact that they had never attended any meeting. They sought for the documents but they were not provided. He also pointed out about the mix up of J.K. Lakshmi Group and pointed out that their market share was merely 1.7%. He wondered as to how he came to be considered as a leading manufacturer. 25. Dr. Singhvi appeared for Associated Cement Company in Appeal No.

108/2012 and urged that there was a selective cherry picking of the concerns. He also invited our attention that the same was true of the

period as well as the data. The learned counsel invited our attention to the data and pointed out that the whole data was misread. The learned

counsel also urged that ACC could not be guilty of cartelization as they were not the members of the CMA though they had attended the meetings. He urged that there were 50 manufacturers in the country and 300 mini manufacturers which had resulted in the loss of market share of so called the big companies in favour of the smaller players. He took us to the three meetings of the Association and pointed out that his client was not the member of the association from 1.11.2009. 26. Shri Sham Diwan appearing on behalf of the Century Textile in

Appeal No. 113 of 2012 pointed out that there was non-supply of

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documents and there was no opportunity offered for cross-examination. He pointed out that there was no cut in the production. 27. During the debate, it was pointed out that after the three meetings

dated 21.02.2012, 22.02.2012 and 23.02.2012 during which oral arguments were heard there was a meeting on 14.03.2012 when the Chairman attended. Our attention was invited to that meeting. It was clear in that meeting the written submissions of the appellants were considered. However, it was pointed out that some concerns had not filed their written arguments before the CCI at all. Thus at least in so far as those companies are concerned, they did not have the benefit of being heard by the Chairman nor did they have the benefit of their contentions considered. The learned counsel Shri Vaidyanathan pointed out that no written submissions were filed by Lafarge, India Cement and Binani Cements. 28. All these arguments were met with by Shri Balbir Singh, advocate for

the CCI, who first urged that the CCI though was having adjudicatory function, however, it transacted its business in the meetings. The counsel cited the examples of the jurisdiction like Australia and New Zealand where also the Competition Commission of India transacted the business in the meetings. Our attention was invited to the amendments made to earlier Sections 22, 23, 24 and 25. Relying on Section 22, the counsel urged that the Commission had to transact its business through the meetings, unlike the un-amended Section 22 and unlike un-amended Section 22 there were no more benefits for the purpose of hearing and now the whole business was to be transacted in the meetings, where all the questions coming up

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before the meeting are to be decided by a majority of members present and voting. It was also pointed out that the quorum for such meeting was three members. The learned counsel therefore urged that even if the Chairman did not attend the meeting during the oral arguments, he ultimately attended the meeting held on 14.03.2012 where there was a consideration of the written arguments and since the Chairman took active part in considering the written submissions, there was nothing wrong if he contributed his signature to the final order. In this behalf, the learned

counsel also pointed out to the provisions of Section 15 and more particularly Clause (c) thereof, which provides that “No act or proceeding of the Commission shall be invalid merely by reason of – any irregularity in the procedure of the Commission not affecting the merits of the case”. The learned counsel argued that even if it is taken that the contribution by the Chairman of his signature to the impugned order was held to be improper, it would at the most be viewed as an irregularity of the matter, which did not have any affect on the merits of the matter. The learned counsel urged that this was so because admittedly in the meeting where the written submissions were considered, there was a full quorum and even if the Chairman was excluded, yet there was a full quorum and therefore, there was no question of any illegality if the Chairman put his signature on the order. He pointed out that there was absolutely no prejudiced caused, nor was there any question of breach of natural justice, merely because the Chairman signed the judgment. According to him, the judgment was valid since it was passed by more than three members, even if the signature of the Chairman must be ignored. Our attention was also invited to

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Regulations 29 and 40 of the General Regulations. It was pointed out that as per Regulation 29, the parties could declare to the Commission whether they would make oral submissions or file written arguments during the course of an inquiry. The learned counsel relying on this provision 29(1), said that this suggested that making oral submissions was optional and it was not necessary that a party would make the oral submissions. According to the learned counsel, this provision in a way diminished the importance of the oral hearing, since the hearing was not compulsory. Our attention was also invited to Regulation 40, wherein it was provided that any failure to comply with the regulations, would not invalidate any proceeding, merely by reason of such failure, unless the Commission was of the view that such failure had resulted in miscarriage of justice. According to the learned counsel, there was no miscarriage of justice in this case. The learned counsel also pointed out that such miscarriage of justice had to be shown by the appellants. As regards the other argument that there was non-application of mind on the part of the CCI, the learned counsel pointed out that there was clear cut evidence of carteling in this case, in view of the observations of the Commission in paragraph 6.5.31 and 6.5.36. Relying on those observations, the learned counsel urged that there was no question of any non-application of mind on that count. The learned counsel also relied on Section 79 (f) of the Indian Electricity Act as also Sections 92 and 94 of Indian Electricity Act and Regulation 20. He urged that at the most this could be an irregularity. According to him, when the oral arguments were made, the quorum was complete and therefore, it was a valid meeting. In so far as the question of institutional bias is

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concerned, the learned counsel described the report of the Economic Division to be by an expert hired by CCI. He pointed out that the experts could be hired by CCI. He pointed out that in view of the request made by the DG, the expert was provided. The learned counsel was at pains to point out that this report was neither considered, nor vetted by the CCI before it went to the DG from the expert. The learned counsel urged that at any rate there could be no personal bias on the part of Smt. Geeta Gouri merely because she was heading the Economic Division. As regards the failure to give opportunity of cross-examination, the learned counsel pointed out that there were three sets of witnesses. The first set was the insiders of the company, the second set was the outsiders and the third set was consisting of builders or consumers. The counsel therefore, pointed out that in reality there could not have been any cross-examination of the witnesses of the first and second set. At any rate, according to the learned counsel, the CCI had given good explanation about the cross-examination aspect. He pointed out that again the refusal to allow cross-examination may at most amount to irregularity in procedure, which would not affect the merits of the matter in any manner. The learned counsel pointed out that there was a clinching and unquestionable evidence on record in shape of minutes of 84th meeting of the Managing Committee of the Cement Manufacturers’ Association held on 15th March, 2007 in Mumbai as also the minutes of 92nd meeting of the Managing Committee of the Cement Manufacturers’ Association held on 26th March, 2009 in New Delhi, which showed a clear cut evidence of carteling on the part of the cement manufacturers. According to the learned counsel, in the meeting dated

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15.03.2007, prices were discussed and all attempts were made to establish before the Hon’ble Union Finance Minister and Hon’ble Union Minister of Commerce and Industry as also the Secretary of Ministry of Commerce and Industry that a pre-budget ruling cement prices had been lower than the inflation adjusted prices prevailing in 1995. The learned counsel pointed out that the minutes suggested that the cement prices were discussed. So also from the minutes of the meeting dated 26th March, 2009 and it was shown by the learned counsel that there was a discussion about the cement prices and Jaypee Cement had agreed to supply the cement to the government department during the month of March 2009 at the rate of Rs.245/- per bag. He pointed out that the minutes further record that other suppliers also responded by offering similar special rate in government supplies and assuring to meet the requirements. From this, the learned counsel urged that there could be no doubt about the carteling activities of the cement manufacturing companies and the further fact was established that CMA provided platforms to the members for evaluation and determination of impact of incidence of tax on cost. The learned counsel referred to the paragraph 6.5.33 and pointed out that the cement companies were interacting at the platform of CMA, sharing information about cost, prices, production and capacities which discussion facilitated interactions among the members for determination and fixation of both prices and production. Our attention was also invited to the fact of

collection of prices of cement companies from all over the India. In this behalf, our attention was invited to the 95th meeting of the Managing Committee of CMA held on 30.11.2009 in New Delhi. The learned counsel

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also relied on the further observations. In short, the learned counsel urged that whatever would have been the cross-examination, one fact was certain that all the members of CMA and more particularly the appellants herein were availing of the platform of CMA. 29. Our attention was also invited by the learned counsel to the contents

of paragraph 6.5.37, 6.5.38 and 6.5.39 and we were taken through the thorough discussion by the CCI. From all this, the learned counsel urged that there was no question of any prejudice caused in view of the voluminous material regarding the carteling and price fixing at the instance of the appellants. 30. The learned counsel did not, however, address us on the merits of

appeals of the individual cement manufacturer companies. There is a huge data available, which was considered and discussed by the CCI individually also. Even during the debate on the question of stakes, some learned counsel questioned the findings on the merits also. These merits pertain to the market share of the individual companies and their sales. 31. There can be no dispute that procedural irregularities complained of

by the learned counsel during the debate and the question of stay were inextricably connected with the individual merits, which entirely depend upon the statistics regarding the sale and profit as also the prices by the individual companies. 32. The learned counsel for the appellants urged that on account of the

irregularities in the procedure, which we have discussed above, we would be justified in setting aside the order at this stage only. We do not agree,

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as the so called procedural irregularities are inextricably connected with the individual merits of the claims made in these appeals by the cement manufacturing companies. For example, it may be able to show that a particular company did not raise the prices or did not hold back the production on the basis of the statistics provided. It is therefore not be feasible at this stage to hear and dispose of the appeals without consideration of the individual merits depending upon the statistics of each company. At the same time, it cannot be denied that very substantial

points have been raised by the appellants and those points have also been substantially met by the learned counsel appearing for the CCI as also by Shri Dua appearing for Builders’ Association, Informant in this matter. 33. A very substantial issue would be required to be decided in the light

of rival contentions by the parties. That issue will be about the exact role of Competition Commission of India. It was stated in Brahm Dutt case cited (supra) by the Hon’ble Supreme Court as under :“if an expert body is to be created as submitted on behalf of the Union of India consistent with what is said to be the international practice, it might be appropriate for the respondents to consider the creation of two separate bodies, one with expertise that is advisory and regulatory and the other adjudicatory. This followed up by an appellate body as contemplated by the proposed amendment, can go a long way, in meeting the challenge sought to be raised in this Writ Petition based on the doctrine of separation of powers recognized by the Constitution. Any way, it is for those who are concerned with the process of amendment to consider that aspect. It cannot be gainsaid that the Commission as now contemplated, has a number of adjudicatory functions as well.”

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34.

The adjudicatory role of the Competition Commission of India was

reiterated by the Hon’ble Supreme Court in SAIL India case cited (supra), wherein it was unequivocally held that the CCI had the adjudicatory functions in addition to regulatory and advisory functions. The Hon’ble

Supreme Court also referred to another function of the CCI, which was advocacy. However, it seems that by the Amending Act No.39 of 2007, Sections 22, 23, 24 and 25 with effect from 12.10.2007 came to be amended. Section 23 relating to distribution of business of Commission amongst the Benches, Section 24 providing for procedure for deciding a case where Members of a Bench differ in opinion, Section 25 relating to jurisdiction of the Bench came to be deleted altogether. While Section 22, which provided for the Benches for exercising the jurisdiction powers and authority of the Commission, came to be wholly substituted by the present Section 22. Section 22 as it existed prior to the amendment, provided for the Benches and it was imperative that every Bench should consist of an at least one ‘Judicial Member’. It was provided by the explanation to Sub-

Section 3 that such Judicial Member meant a Member who is, or has been, or is qualified to be a Judge of a High Court. The Section, therefore,

specifically took note of and stressed upon the adjudicatory role of the CCI as contemplated in Brahm Dutt judgment. Once this Section was amended and it was provided in new Section 22 that the Commission would transact its business in the meetings and that all the questions in the meeting would be decided by a majority vote where Chairperson would have a casting vote in case of an equality of votes, the message was loud and clear that

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inspite of the specific observation of the Hon’ble Supreme Court, the adjudicatory role was done away with. 35. The Statement of Objects and Reasons in Competition (Amendment)

Bill 2006, Bill No.18, which was earlier to 2007 Bill mentions in para 3 (b) as under :-

“3. The competition (Amendment) Bill, 2006 inter alia, seeks to
make the following amendments to the Competition Act so as to address various legal issues and to make the CCI fully operational on a sustainable basis namely :-(a) to provide that CCI would be an expert body which

will function as a market regulator for preventing anticompetitive practices in the country and it would also have advisory and advocacy functions in its role as a regulator; (b) to omit the provisions relating to adjudication of disputes between two or more parties by the CCI and to provide for investigation through the Director General in case there exist a prima-facie case relating to anti competitive agreements or abuse of dominant position under the Competition Act, 2002 and conferring power upon the CCI to pass orders on completion of an inquiry and impose monetary penalties and in doing so the CCI would work as a collegiums and its decisions would be based on simple majority.” Paragraph (c) relates to the establishment of the Competition Appellate Tribunal (CAT), which is to be headed by a retired judge of Supreme Court or Chief Justice of a High Court. There are other observations also. This Statement of Objects and Reasons is dated 24th February, 2006. In this bill also Sections 23, 24 and 25 were

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sought to be omitted while Section 22 was sought to be amended by omitting the reference to the Benches of the Competition Commission of India. There also in place of the Benches, it was provided that the Commission would transact its business in the meetings. Curiously

enough in the Statement of Objects and Reasons dated 9th August, 2007, which was a Statement of Objects and Reasons for Competition Amendment Bill 2007 being Bill No.70 of 2007 a significant change took place, where the earlier mentioned 3(b) was deleted. However, Section 22 as was proposed in the earlier Bill remained the same. In fact, what was changed in the Statement of Objects and Reasons, was the portion of ‘omitting the provisions relating to adjudication of disputes’. In the wake of this, though the Statement of Objects and Reasons of Act No.39 of 2007 does not speak about the omitting the adjudicatory role, in fact the said adjudicatory role stands deleted because of substitution of the old Section 22 by a new one introduced by that Amendment Act 39 of 2007. 36. A serious issue has, therefore, arisen as to whether what is in fact the

scope and ramification of this amendment and whether the CCI has an adjudicatory role at all as declared by the Hon’ble Supreme Court in Brahm Dutt case and in case of SAIL India. Further, whether the CCI would be bound by the judicial discipline and the norms or it would only be an advisory, regulatory or an expert body, so as not to be bound by the strict judicial norms. The amendment to Section 22 will have to be tested

against the observations of the Hon’ble Supreme Court in Brahm Dutt case,

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which was prior to the amendment and SAILs judgment which was subsequent to the amendment. This being a very complex question, would require not only the consideration of Section 22, but also Section 15 and the General Regulations, which also were amended. 37. In that view, we find that there is a prima-facie case for granting of

stay at least in respect of the penalties, which are of very substantial nature. The total penalties would come in the range of Rs.6000 crores. While inflicting the penalties, the CCI has also taken into consideration, not only the 10% turnover, gross-turnover and other factors, it has also taken into consideration the net profits earned by these appellants, which are to say the least fabulous. The Commission has chosen to impose the penalty at 0.5 times of the net profit for 2009-10 that too from 20th of May, 2009. It is pointed out by the Commission that the amount of 3 times of net profit calculated, is higher than 10% of the average turnover. In that view, the Commission has inflicted the penalties of 0.5 times of the net profit for one year that is from 2009 to 2010 that too taking from 20th May, 2009 and 2010-11. Under such circumstances, we would chose to grant stay to the penalties, however with a condition that the appellants deposit 10% of the penalties inflicted. We make it clear that the deposit of the penalty should be within one month from today. We also make it clear that if the penalties are not so deposited, the appeal shall be treated as dismissed without further reference to the Court.

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38.

As regards, the orders of ‘cease’ and ‘desist’, we do not find anything

wrong at least prima-facie. We, therefore, refuse to stay that order against the appellants, including the Cement Manufacturers Association. 39. 40. All stay applications are disposed of in above terms. The matter now be posted for further hearing. Pronounced in open Court on 17th day of May, 2013.

(V.S. Sirpurkar)Ċ ChairmanĊ
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(Rahul Sarin)Ċ MemberĊ
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(Pravin Tripathi)Ċ Member

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COMPETITION APPELLATE TRIBUNALĊ
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CORAM Hon’ble Mr. Justice V.S. Sirpurkar Chairman Hon’ble Shri Rahul Sarin Member Hon’ble Mrs. Pravin Tripathi Member APPEAL NO. 69 OF 2012 [Under Section 53B of the Competition Act, 2002 (Act 12 of 2003) against the order dated 16.2.2012 passed by the Competition Commission of India in Case No. 25 / 2010] In the matter of : Motion Pictures Association, Delhi … Appellant Versus Reliance Big Entertainment Pvt. Ltd. Appearances : … Respondent

Ms. Mala Goel and Mr. Nitin Bansal, Advocates for the Appellant. Mr. Ravindra Suryavanshi, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates and Ms. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 70 OF 2012

In the matter of : Central Circuit Cine Association Versus Reliance Big Entertainment Pvt. Ltd.

… Appellant … Respondent

Appearances : Mr. Dhruv Mehta, Sr. Advocate with Ms. Sangeeta Kumar and Mr. Sriram Krishna, Advocates for the Appellant Mr. A.N. Haksar, Sr. Advocate with Mr. Akshay Patil, Mr. Chirag M. Shroff and Mr. Narendra Kumar Sayal, Advocates for Eros International Media Ltd. Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates and Ms. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 71 OF 2012 In the matter of : Northern India Motion Pictures Association Versus … Appellant

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Reliance Big Entertainment Pvt. Ltd.

… Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for the Appellant Mr. Ravindra Suryavanshi, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates andMs. Shabistan Aquil, DD (Law) for R-2 APPEAL NO. 73 OF 2012 with I.A. No 91 of 2012 In the matter of : Motion Pictures Association, Delhi Versus Eros International Media Ltd. … Respondent

… Appellant

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for the Appellant Mr. Akshay Patil, Mr. Chirag M. Shroff and Mr. Narendra Kumar Sayal, Advocates for Eros International Media Ltd. Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates andMs. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 96 OF 2012 … Appellant

In the matter of : Northern India Motion Pictures Association Versus Eros International Media Ltd.

… Respondent

Appearances : Ms. Mala Goel with Mr. Nitin Bansal, Advocates for the Appellant. Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates andMs. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 97 OF 2012 In the matter of : Motion Pictures Association, Delhi Versus Sun Shine Pictures Pvt. Ltd. … Appellant … Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for the Appellant. Mr. Ravindra Suryavanshi, Advocate for R-1

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Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates andMs. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 102 OF 2012 In the matter of : M/s. Motion Pictures Association Versus UTV Software Communications Ltd.

… Appellant … Respondent

Appearances : Ms. Mala Goel and Mr. Nitin Bansal, Advocates for the Appellant Mr. Abhishek Singh Baghel, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates andMs. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 78 OF 2012 In the matter of : Eastern India Motion Pictures Association Versus Reliance Big Entertainment Pvt. Ltd. & anr. … Appellant … Respondents

Appearances : Mr. Manas Kumar Chaudhuri, Mr. Vijay Chauhan, Mr. Sagardeep Rathi and Mr. Pranjal Prateek, Advocates for the Appellant Mr. Rajindra Suryavanshi, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates and Ms. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 66 OF 2012 with I.A. NO. 07/2013 In the matter of : Indian Motion Pictures Distributors Versus Reliance Big Entertainment Pvt. Ltd. … Appellant … Respondent

Appearances : Mr. Ramji Srinivasan, Sr. Advocate with Mr.Prateek Jalan, Mr. Rajiv Roy, Mr. Avrojyoti Chatterjee, Mr. Vivek Paul and Ms. Rujuta Joshi, Advocates for the Appellant Mr. Ravindra Suryavanshi, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates and Ms. Shabistan Aquil, DD(Law) for R-2 APPEAL NO. 67 OF 2012 with I.A. No. 13/2013 In the matter of : Bihar & Jharkhand Motion Pictures Association … Appellant

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Versus Reliance Big Entertainment Pvt. Ltd. … Respondent

Appearances : Ms. Sangeeta Kumar, Advocate for the Appellant. Mr. Ravindra Suryavanshi, Advocate for R-1 Ms. Anupam Sanghi with Mr. Abhishek Yadav, Advocates and Ms. Shabistan Aquil, DD(Law) for R-2 ORDER PER MR. JUSTICE V.S. SIRPURKAR, CHAIRMAN

This judgment will govern Appeal Nos.69, 70, 71, 73, 96, 97, 102, 78, 66, 67 of 2012. All these appeals were disposed of by the Competition All the

Commission of India (“CCI” hereinafter) by a common order.

appellants, therefore, have come up by way of the present appeals under Section 53-B of the Competition Act, 202 (in short the “Act”). By the

impugned order, the CCI found all the appellants guilty of the contravention of Section 3(3)(b) read with Section 3(1) of the Act and various penalties were inflicted against all the appellants. Initially on the basis of the

information led before it by Reliance Big Entertainment P. Ltd., Case No.25 of 2010 was registered before the CCI against the 12 parties in all. So also the information was led before the CCI by UTV Software Communication Ltd., in Case No.41 of 2010. Similarly along-with these cases, Case

Nos.45, 47, 48, 50, 58 and 69 of 2010 were also registered on behalf of the information led before the CCI. All these cases were disposed of by the CCI, by the impugned order, holding the opposite parties in those cases guilty of the contraventions as have been stated above. All these cases were consolidated by the CCI as the basic issue raised by the Informants were common and identical. Basically, it was stated in the information led

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before the CCI that the appellants were the representative bodies of the distributors and exhibitors of the cinema-films and they had involved in various anti-competitive activities in violation of the provisions of Sections 3 and 4 of the Act generally. In particular, it was stated that by their rules, these Associations were compelling the producers and distributors of cinema-films to compulsorily register their films with them, forcing them to abide by their unfair and discriminatory rules. It was stated that these

Associations directed their members not to deal with non-members as also putting restrictions such as limiting of number of cinema theatres for exhibition of films. They were also practicing discrimination between nonregional films against regional films. They were also imposing undue long hold back period for exploitation of satellite, video, DTH and other rights in respect of the exhibition of the film. They were also imposing bans,

penalties and giving call of boycott against those, who violated these unreasonable rules and regulations of the Associations. 2. After the information was received, the CCI got the same investigated

by the Director General (in short the “DG”), who after investigation firstly recommended that the appellants’ Association could not be said to be an “enterprise” within the meaning of Section 2(h) of the Act, nor did they constitute a “group” within the meaning of Section 4 read with Section 5 of the Act and as such, they could not be held guilty for contravention of Section 4. The DG, however, held that the appellants were guilty of the contravention of Section 3(3)(b) of the Act. The DG found number of

contraventions of individual nature against the appellants and held them guilty of violating of provisions of Section 3(1), 3(3)(b) and 3(4) of the Act

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on account of the bylaws, rules and regulations and the activities. In his report, the DG has neatly listed the individual contraventions by each of the appellants. 3. The DG’s report was served on the appellants, who filed their

objections before the CCI. They were heard individually by the CCI. The CCI framed four issues, they were as under :Issue 1 : Whether KFCC and other associations are ‘enterprise’ within the meaning of Section 2(h) of the Act and if the answer to his is in affirmative, can their acts and conduct be said to be violative of provisions of Section 4 of the Act as has been alleged by the informant? Issue 2 : Whether the rules and regulations, acts and conduct of associations are subject matter of examination under Section 3 of the Act? Issue 3 : Whether various acts and conducts of associations are anti-competitive as alleged in the information in terms of Section 3(3) read with Section 3(1) of the Act? Issue 4 : Has the action of KFCC and other associations caused Appreciable Adverse Effect on Competition in the market? Has the action of KFCC and other associations caused Appreciable Adverse Effect on Competition in the market? 4. In so far as the first Issue is concerned, the CCI absolved all the

parties, since the CCI agreed with the DG that the appellants’ Association could not be held to be an “enterprise” within the meaning of Section 2(h) and as such could not be found guilty for contravention of Section 4 of the Act. However, on Issue No.2, 3 and 4, the CCI found these against the appellants and proceeded to inflict the penalties under Section 27(b) of the Act, which is in challenge before us.

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5.

In fact, the majority passed two orders one covering Case Nos.25,

41, 45, 47, 48, 50, 58 and 69 of 2010 and other covering Case Nos.52 and 56 taking the same view. 6. We must at this juncture point out that this was the majority order of

the CCI. However, one of the learned Member Mr. R. Prasad differed with the majority, mostly on the finding on the question of applicability of Section 3(3). Shri Prasad also has passed a separate dissenting order in respect of Case Nos.52 and 56. 7. On the question of contravention of Section 3(3), however, the

learned Member took a view that these associations could not be booked for the contravention of Section 3(3). This view was taken by the learned Member in view of his interpretation of Section 3(3). The learned Member firstly considered the language of Section 3(3) and came to the conclusion that for contravention of Section 3(3) the agreement, practice or decision must have been taken by the associations engaged in identical or similar trade of goods or services. The learned Member then considered the

definitions of term “agreement” in Section 2(b) and “practice” in Section 2(m). The learned Member then held that there could be no agreement spellet out in the present case, much less agreement in terms of Section 3(3). The learned Member also held that as there was only one entity in area, the application of Section 3 had to be ruled out. However, finding the associations guilty for contravention of Section 4, the learned Member directed the penalty of 2% of the turnover of each associations. 8. The CCI while passing the order under Section 27, considered the

overall income of the appellants’ association and directed the penalty to be

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at 10% of the average of the three years receipts/ income. The CCI also passed the ‘cease’ and ‘desist’ order against all the appellants and restrained them from following the practices. The appellants were also

directed to take suitable measures to modify their tainted rules from their articles of association, rules and regulations on the basis of the discussions in the order. The following directions were also given by the CCI, they were :“a) The associations should not compel any producer, distributor or exhibitor to become its members as a pre-condition for exhibition of their films in the territories under their control and modify their rules accordingly. b) The associations should not keep any clause in rules and regulations which makes any discrimination between regional and non-regional films and impose conditions which are discriminatory against non-regional films. c) The rules of restrictions on the number of screens on the basis of language or the manner in which a particular film is to be exhibited should be done away with. d) Associations should not put any condition regarding hold back period for release of films through other media like, CD , satellite etc. These decisions should be left to the concerned parties. e) The condition of compulsory registration of films as a precondition for release of any film and existing rules of association as discussed in the preceding paras of this order on the issue should be dispensed with.” Three months time was given for this. 9. We must point out here that against the finding of exonerating the

appellants of the contravention of Section 4, no appeal has been filed

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against majority orders and, therefore, we would not be required to take into consideration the finding on Issue No.1 by the majority. 10. The CCI in its majority order while giving the history of the cinema

industry, pointed out that for the assignment of film distribution rights, territory of entire India presently was broadly divided into 12 circuits and each of these circuits associations of film distributors and exhibitors are formed either under Section 25 of the Companies Act, 1956 or under the Societies Registration Act, 1860. These associations regulate the business of film distribution and exhibition in their area of control in accordance with their rules formulated in Memorandum and Articles of Association. It is also pointed out by the CCI that these associations mainly consist of the members and persons engaged in the business of film distribution and exhibition, however, in some of the associations, the producers are also the member. In both the orders, the CCI has neatly given the profile of the appellants. In the order dated 16.02.2012, the CCI has given the short profiles of – (1) Karnataka Film Chamber of Commerce (KFCC); (2) Eastern India Motion Picture Association (EIMPA); (3) Central Circuit Cine Association (CCCA); (4) Telangana Film Chamber of Commerce (TFCC); (5) Northern India Motion Pictures Association (NIMPA); (6) Motion Pictures Association, Delhi (MPA); (7) Indian Motion Pictures Distributors Association (IMPDA); (8) Bihar and Jharkhand Motion Pictures Association (BJMPA); (9) Chennai Kanchipuram Thiruvallur District Film Distributors Association (CKTDFDA); and lastly (10) Orissa Films Distributors Syndicate (OFDS).

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11.

In another order of the same date, also while considering the Case

Nos.52 and 56, the profile of some of the appellants has been mentioned, wherein the CCI has pointed out the area in which these associations were operating exhaustively. In its first order, the CCI has also given the profiles of the Informant that is Reliance Big Entertainment Limited, a company incorporated under the Companies Act and active in the business of film production, distribution and exhibition. Similarly, the profile of another

Informant Reliance Media Works, which is another member of the Reliance Big Entertainment Limited. So also the another Informant M/s UTV

Software Communications Limited are considered and the CCI has given their area and other activities. There can be no dispute that the Informants have taken cognizance on behalf of all the producers of the Hindi films. In short this is a fuel between the producers on one side and distributors and exhibitors on another. 12. The CCI has also pointed out that by way of information, these

Informants and more particularly in Case No.25 the Reliance Big Entertainment Limited by its complaint-cum-information dated 14.06.2010 submitted that most of the appellant associations, which were named as opposite parties made it compulsory for every film distributor to become their member or register his film with them, otherwise he was not allowed to distribute his films in the territories which are regulated by the appellants. It is also pointed out that similarly the exhibitors were also threatened and penalized for exhibiting films of such a distributor who is not a member of any of the opposite parties or whose film is not registered with the appellants’ associations. It was suggested that cinema exhibitors do not

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take the risk of exhibiting the film of a distributor who is not a member of these associations or whose film is not registered with such associations. Some specific complaints have been referred to, which is of no consequence here. It is also informed that in some states cinemas are regulated through local enactments, as for example, in Karnataka where it is regulated by the Karnataka Cinemas (Regulation) Act. However,

according to the Informant, the appellant associations enjoyed the position of strength in their territory of operations and by virtue of such position of strength, they are able to influence the cinema exhibitors in their area. It was pleaded by the Informants that the associations also have the power of boycotting a particular distributor who refuses to become their member or by not registering his film with such associations. It is also pointed out that the other members of the associations of distributors or exhibitors are directed to boycott such a distributor and also any film sponsored by it. The order further provides about the attitude of the KFCC in issuing a directive to the effect that a non-Kannada film can be released only in 21 cinemas that is 17 in Bangalore city and 4 in district headquarters, while as per their directive, a Kannada film can be released in 200 cinemas in Karnataka. Alternatively a non-Kannada film can be released in all the cinema in Karnataka provided it is released two weeks after its release in other film territories. According to the information the KFCC have also

imposed restriction on number of prints in relation to non-Kannada films. Similar complaint was made against the FDA Kerala in respect of the films in other language than Malayalam. Specific example given in respect of the film ‘Kites’. According to the Informants they are forced to comply with

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the directives of KFCC and was able to screen its film only in 24 theatres in Karnataka. The Informants also complained of a large adverse impact on the revenues arising from exploitation of the film ‘Kites’ in Karnataka and pointed out that Informants has to suffer a loss to the extent of Rs.2.30 crores. It was pointed out that though KFCC was requested by Film and Television Producers of Guild of India Ltd. to revoke such decision, it was of no consequence. 13. The Informants had also stated that the associations impose unfair

hold back restrictions for exploitation of satellite, video, DTH and other rights of a film for a certain period from the date of theatrical release of the film. That these associations compel a distributor to accept the holdback restrictions by executing an undertaking to this effect as a condition to the membership. An example was given as regards CCCA, Bhusawal, which has inflicted a condition that a film distributor would not exhibit or exploit his film through the medium of video, cable TV, satellite or any other network through VCD, DVD or any other form for a period of one year from the date of theatrical release in India and in the event the distributor breach this condition, he would be compelled to distribute amongst the distributors, 50% of the income/ realizations on the basis of prevalent realizable ratio in accordance with the agreement between AIFPC Mumbai, FMC Mumbai and CCCA Bhusawal dated 16th June, 2010. The Informants also had

circulated a letter dated 21.06.2000 regarding these arrangements between the above mentioned associations. According to the Informants, these

restrictions created a terrible situation for the producers as also the other distributors who were not the members of these associations, who were

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desirous of exhibiting their films in the territories controlled by these associations. Some specific examples given in respect of some Hindi films and Telugu films. The complaint also related to the contravention of

Section 4(2)(a) and 4(2)(e). However, we need not go to that aspect in view of what we have observed above. Some other complaints were also made, more particularly against KFCC in respect of a particular film called “Raavan”. In respect of that, it was complained that KFCC had banned

film “Raavan” and “Raavanan” which were in fact two films and directed all the exhibitors not to distribute these films. Some interim orders were also sought in this information against KFCC. The CCI has proceeded to

consider all the information placed in Case No.45 of 2010 by Reliance Media Works Ltd.; in Case No.47 of 2010 by Reliance Big Entertainment Ltd.; in Case No.41 filed by UTV Software Communications Limited. The information in Case No.48 of 2010 filed by FICCI Multiplex Association of India referring to the preferential treatment directed to be given to Kannada films in multiplex cinema and their compulsory exhibitions. They have also referred to the specific information in Case No.50 of 2010 filed by Eros International Media Ltd. by giving specific example of the regionalism practiced by the association BJMPA as also in Case No.58 filed by UTV Software Communication Limited against BJMPA. The CCI has in detail referred to the allegations made. It seems that some interim orders were passed in Case No.25, 45, 41, 47, 48, 50, 58 and 69. We are however, not concerned with those interim orders for the purpose of this judgment. 14. The CCI then referred the matter to DG for investigation, which it had

ordered against all the appellants in these cases as well as in other case

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for which a separate judgment has been passed by the CCI. After referring to the investigation by the DG, who has carried out an exhaustive investigation against all the appellants by calling them and by recording the statements etc., the CCI has referred to the findings by the DG to the effect that KFCC was contravening the provisions of Section 3(3)(b) by prohibiting its members to deal with the non-members; by forcing the provision of mandatory registration of each film in its territory; by enforcing the restrictions on the number of cinema halls; by enforcing number of multiplexes, by enforcing restriction of 5 maximum shows daily; by not allowing dubbing in Kannada language of other language movies; by imposing ban/boycott against the producers, distributors and exhibitors; by issuing letters to the theatres to withhold the share amounts of the producers and distributors. Similar findings have been noted against the other associations like EIMPA, BJMPA, MPA Delhi, CCCA, NIMPA Jalandhar and IMPDA. 15. The CCI then referred to the replies by all these associations in detail

and more particularly to the main defence that these associations were acting as a regulatory body and justifying the preference for the films in a particular language in a particular territory. They had taken a stand that the membership of these associations are not compulsory nor had the members any obligation to continue as their member. However, so long as the Informant remains a member, it is contractually and morally bound to abide by all its decisions, rules and regulations. A stand was taken that no Informant while continuing as a member of the society or association can complain of contravention of any of the provisions of the Act. It was urged

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that the right to form associations is a constitutional and legal right cannot be subservient to the provisions of the Competition Act. The CCI has also noted that the membership of these associations was always voluntary and there was no compulsory element in it. In short all the associations seem to have justified their action, their rules and regulations and actions to safeguard the interest of the cinema industry in general and distributors and exhibitors in particular. The associations also pointed out the benefits and the advantages that the distributors reap from membership of such associations. The associations also denied that they could be booked

under any of the Section/ sub-Section 4 of the Act. The DG’s report was also criticized by the associations on some other grounds. Some

associations denied that they imposed any financial penalties or had boycotted any film. One major defence by the associations was that they were not in ‘business’ activity or ‘trade’, particularly in picture or film or cinema. The CCCA also pointed out that it deal with the inter-se disputes as regards the payments of dues between its members namely distributors and exhibitors and that there were rules providing for arbitration and thus helping the distributors and producers, whose interest was safeguarded under those arbitration rules. In short all the associations justified their rules and tried to suggest that they were in fact working for the welfare of the distributor and the exhibitors. 16. The CCI also dealt with the replies filed by the Informants to these

objections and it thereafter went on to formulate the issues, which we have already referred to earlier.

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17.

Lengthy arguments were advanced on behalf of the appellants

individually. The learned counsel appearing on behalf of the appellants took us through the Memorandum of Articles of Association and the rules of all these associations at great length. It was tried to be argued that these associations in fact were doing yeoman services to the cinema industry in as much as the associations were providing a platform to the distributors and exhibitors for redressal of their grievances. It was also urged by most of the learned counsel that these associations were in fact solving the dispute inter-se between distributors and in fact reducing the risk of the distributor members by at times pressurizing producers to pay the legal dues of the distributors. It was also suggested that years back, the leaders in this industry had formulated organizations and these organizations had passed resolution particularly to save cine industry from the menace of piracy. It was argued that with the advent of television and the video

parlours, the existence of the cinema industry was in peril and therefore, the representative organizations had passed resolution to the effect that there would have to be a certain period commencing from the first exhibition of the film for which there would be no selling of the video tapes, the compact disks, the television rights or the satellite rights. It is pointed out that initially this period was for five years or 10 years and ultimately it came to be reduced. The learned counsel urged that it was in view of those resolutions that all these associations had formulated the rules whereby the distributors were barred from selling the rights regarding the movie for a particular period and it was also provided that if they breach this rule and issue the rights to the TV, satellite or by way of creating

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compact disks, 50% of the money earned, would have to be paid/ distributed to the other distributors, who are the members of the appellants’ association. In short, it was urged that this could not amount to boycotting of the movies or restricting their entry into the market. It is also urged that the member distributors or exhibitors as the case may be, had voluntarily joined the organization and had resolved as per the rules of the associations that they would not deal with the non-member distributors in the sense that the exhibitor member of a particular association in a particular area would not exhibit the films of non-member distributor and if they do so, they would be liable for a penal action by the associations. It was also tried to be urged that any distributor committing breach of the rules of the association, could be expelled by way of a penal action and the other members of the association could not deal with such distributor. The arguments went on to suggest that all this was extremely necessary in the interest of the industry and more particularly in the interest of the distributors. We were taken through the rules and regulations of almost all the appellants associations, which have almost identical or common provisions. For the sake of convenience, we will take up for consideration those common features, but even before that we must state the nature of this industry, so as to properly understand the role of these associations. 18. All these associations have actually been constituted years back

when the cinema industry and more particularly the Hindi cinema industry was in its infancy, that is in the early 50s. The cinema industry being an all India industry, the whole country was divided into some circuits. Presently there are 12 such circuits. These circuits have drawn a certain territory and

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each association controls that particular territory in the sense it regulates the business of film distribution and exhibition in their area of control in accordance with their rules formulated in Memorandum and Articles of Association. We are concerned with 10 such associations, whom we have dealt with earlier. We may state here that there was a body called Film Distributors Council (FDC) which was an apex body of all India film distributors. It had few members like Motion Pictures Association, Delhi; The Indian Motion Picture Distributors Association, Bombay; The Northern India Motion Pictures Association, Jalandhar; the Central Circuit Cine Association, Bhusawal; The Bihar Motion Pictures Association, Patna; Motion Pictures Association, Calcutta etc. All these came together under the banner of Film Distributors’ Council. They entered into an agreement dated 10.06.1994 with an apex body called Film Makers Combine. Film Makers Combine had its members like Indian Motion Picture Producers’ Association, Bombay; The Western India Film Producers’ Association, Bombay; Association of Motion Pictures and T.V. Programme Programme Producers, Bombay; and Film Producers’ Guild of India Ltd., Bombay claiming themselves to be the representatives of Distributors on one side and producers on another. The FDC and FMC came out with an

agreement under which an Executive Committee formed out of the members of the FMC, which empowered and authorised six members namely – Shri Shakti Samanta, Shri G.P. Sippy, Shri G.P. Shirke, Shri Pahlaj Nihalani, Shri Shree Ram Bohra and Shri K.D. Shorey to negotiate/ sign the present agreement for and on behalf of the FMC. It was

expressed that with the passage of time video cassettes and cable TV

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came in circulation and Doordarshan and satellite channels were getting popularity and as a result it had affected the business of cinematograhic films at the box office and therefore, to save the industry, they came together. It was stated in this agreement that these factors were causing problems and given birth to the disputes between the production sector and the distribution sector. The representative members of the association, that is FMC and FDC held meetings and tried to find out the solution, which cropped up in the film trade. It was then suggested that since the two bodies namely FDC and FMC representing the distributors on one hand and the producers on other, sort out their differences, under which they had agreed on the following :1) The FMC had agreed to direct all its affiliated members associations that none of the producers shall deliver or cause to be delivered the video cassettes-delivery to the distributors for home-viewing video rights for a minimum period of two weeks from the theatrical release of the film in India. 2) That the FMC would direct its members not to sell and or dispose of in any manner directly or indirectly the cable TV rights of their films for telecast in India and Nepal for a minimum period of six months from the premier theatrical release of the film in India. 4) The producer would first offer the cable TV rights after six months period to the distributors holding the theatrical rights of the film. In case the said distributors decline such rights, it

could be sold to any other entity.

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5)

It was also agreed that FDC and FMC would cooperate with each other to stop any illegal and unauthorized showing of their films by cable TV operators in any part of the country.

6)

It was then agreed that FMC will direct its producers not to deliver their pictures to any channel or Doordarshan or satellite TV directly or indirectly before expiry of five years from the first theatrical release and that they shall not be entitled to charge any dupe charges from the distributors at the time of delivering the prints of any cinematograph films for its first release.

7.

It was agreed that all agreements between producers and distributors in respect of distribution, exhibition and exploitation rights of Hindi feature film would be for a minimum period of ten years, except where the rights are acquired on advance or commission basis. All these were to be applicable to the films for which shooting commenced on or after 01.01.1994. Some other clauses for violation etc. were also the part of this agreement.

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A fresh agreement came to be drawn in pursuance of that agreement

and a Circular was issued dated 21.06.2000 incorporating the following Clauses : “a) In case of M.G. Royalty or Out-right agreement, if the amount exceeds Rs.25 lakhs, for a major territory no producer of any constituent of AIFPC/FMC shall screen and or exploit in any manner whatsoever directly or indirectly the video rights & cable TV rights as well as the Television and/or Satellite rights or any other formats of his film anywhere in India for a minimum

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period of twelve (12) months from the premier theatrical release of his film in India. b) In the event for whatever reasons any producer decides to supply the film before the said period of twelve (12) months for telecasting whether through any channel of Doordarshan, any Satellite Channel for telecasting or for showing through any video or cable network, 50% of the amount received by the producer for assigning the aforesaid rights shall be retained by the producer concerned and the balance 50% shall be divided proportionately among the distributors circuitwise all over India. c) In case of any agreement other than M.G. Royalty or Out-Right basis or not exceeding Rs.25 lakhs for a major territory or if the producer decides to release the film himself, he shall be free to dispose of all the rights as mentioned in the foregoing paragraphs any time after six months of its premier theatrical release. d) e) All theatrical rights or public exhibition in all formats without any exception shall belong to distributors. A joint committee comprising of five representatives each from AIFPC, FMC & CCCA will be set up immediately to ensure the implementation or the arrangements herein contained. f) Subject to the above, the producer and the distributor shall be free to decide all other terms of agreement and the same will not be subject to any guidelines/ directives of the respective associations and they will not be required to sign any declaration contrary to the terms and conditions of the Agreement between them. All differences and the disputes arising between the producer and the distributor relating to the terms of agreement shall be referred to the JT. Committee of AIFPC, FMC & CCCA and the decision of such JT. Committee in the matter shall be final and binding.”

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20.

A look at these clauses would suggest that the period of five years

embargo was curtailed to one year. It was also provided that where the producers decides to supply the film before the period of one year, for telecast through any channel on Television or any satellite channel, then 50% of the amount received by the producer for assigning the aforesaid rights, shall be retained by the producer concerned and the balance shall be divided proportionately amongst the distributors circuitwise all over India. It was also decided that a joint committee of AIFPC, FMC & CCCA would be formulated for resolving the disputes. It is commonly argued that the rules particularly regarding the distribution rights and the embargo of period of one year for the exhibition of the film on TV and satellite etc. are based on these resolutions and as such these associations were justified in formulating such rules regarding the hold back period. Of course, we may state here that the hold back period though have a common feature in rules of all the associations, differs in some cases that is in some associations it is of six months instead of one year. However, the common feature of all the rules is that there shall be a hold back period. 21. It must be stated here at this juncture that in the film industry, the

producer while arranging the finances for production of the film have to see the arrangement with the distributors, who may acquire the exclusive distribution rights in a particular territory in lieu of the finances offered by him to the producer. The distributor may also have a different kind of contract like minimum guarantee of finances to the producer. The

distributor may also take the film for the distribution on the commission basis wherein all the revenue collected by the movie with film theaters

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would go to the producer and only commission would be given to the distributor. In the minimum guarantee agreement, the distributors agreed to provide minimum guarantee to the producers and if there was an overflow, the over-flow was to be shared by the producers, the distributors and the exhibitors in different proportions. Thus, the distributors and the

producers depend on each other for successful running of the film, while the producer produce the film by arranging the finances, the distributor was responsible for the distribution of the same and its exhibition in a particular territory. These rights were purchased for a particular territory depending upon the capacity of the distributor. At times, the distributor even purchase the film outright for all the territories in India. So a common feature in all these associations is they became exclusive in-charge of their own territory and the whole business of distribution and exhibition was controlled by these associations, at least in respect of their own territory. 22. It is also an admitted fact and a common feature that no association

interferes in the territory of any other association. There appears to be an agreement in between all the associations, not to interfere in the territory of any other association. We must also observe here that there is no sanction by the Government to these carved out territories. It is not as if the territories come by way of the sanctioned of particular State, thus there appears to be a tacit agreement in between all these associations who are admittedly the members of FDC, which is an apex body and which had entered into the agreement dated 19.06.2000 with FMC a representative body of the producers. After their formation, they formulated the by-laws,

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rules etc. and also worked as dispute resolution agencies for the disputes between the exhibitors, between the producers and the distributors and between the distributors on one hand and the exhibitors on the other. 23. Another common feature in all these rules appears to be the

compulsory registration of the film. If the distributor wanted to distribute and exhibit the film of which he had distribution rights, he had to register his film with a particular association controlling that particular territory in which he wanted to exhibit his film. Of course, there were charges which he had to dole out to the associations for this purpose. The other common feature of these rules was that these associations provided for the arbitration and the office bearers of these associations were to act as the arbitrators for this purpose. While registering the film with a particular association, the registration form had to bear the signatures of even the producer along with the distributor, so that he becomes amenable to the arbitration proceedings, in case something went wrong in between the producers and the distributors. 24. Still another common feature in the rules of all these associations is

their power of boycott and to inflict the punishment. The rules of all these associations commonly provide that where they find any member distributor guilty of breaching the rules, the associations will have the power to expel such member. Ordinarily, there appears to be nothing wrong with this rule, but the matter do not stop here, and it is further provided almost commonly in the rules of all the associations that in case of any expelled member distributor, the other member distributors or the other exhibitors in that particular territory will not deal with them in any way with that particular

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expelled member distributor. With the result that there is total boycott ordered under the rules. Not only this, but in case any existing member distributor deals with such expelled member distributor, the associations have the power under the rules to expel such a member distributor also. 25. Another common feature in the rules of all the associations appears

to be that the associations will deal with and allow the distribution of the films of the member distributors only, that too in the theaters hold by the exhibitors in their territory. No exhibitor in that territory who is a member of the association can exhibit the film of the distributor, who is not a member of this particular association. So also of the expelled member distributor and in case that happens, the association can proceed and expel such member exhibitors which will deprive him of the opportunity to exhibit the films of the other members distributors also. 26. It is also a common feature in this respect that every member

distributor, who desires of exhibiting his film in the territory controlled by the association has to register his film with the association for which he pays the association. Thereafter, he is bound by the conditions in the registration form, which essentially include that the registration form must have also been signed by the purchaser of the film along with the member distributor. The matter do not stop here, but there is a clause in all the registration form for almost all the appellants' associations that the producer would have to agree to the arbitration clause provided therein, whereby he cannot insist on any other independent arbitrators, but has to essentially depend upon the arbitral tribunal selected by the association, which arbitral tribunal invariably includes the office bearers of that particular association only.

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27.

We must point out at this juncture that all the learned counsel tried to

argue that their dealings were extremely fair with the member distributors and the learned counsel of some of the appellants also suggested that they had never taken any action either of inflicting the penalties or boycotting the member distributors and therefore, such clauses remained only in the books, without being acted upon. It was pointed out by some of the appellants that they had now altogether removed the clause regarding holding back. 28. After perusing Section 3 in its entirety and after considering the

nature of the rules, Commission held that though the associations themselves did not engage in any activity, enabling them to be termed as an ‘enterprise’, but since they were taking decisions relating to the production or distribution or exhibition for safeguarding the interest of the members engaged in similar or identical business of production or distribution or exhibition of the films, the practices carried on under the rules or the decisions taken by them as association of enterprises are covered within the scope of Section 3(3). The Commission, however, held that there were no vertical agreement between the associations and any of the Informants in terms of Section 3(4). Accordingly, it was held by the Commission that there could be no case against these associations for the contravention of Section 3(4). The CCI also held that the market for which such anti-competitive activities would be examined was the market of distribution and exhibition of films in the areas under the control of the associations in India to find out whether any appreciable adverse

competition had been caused in such a market.

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29.

On the basis of the evidence brought before it and after considering

the rules and regulations of number of appellants associations, the Commission came to the conclusion that these associations clearly provided in their rules that there would be restrictions in terms of dealing with the non-members. In that Commission also considered that the members were not permitted under the rules to deal with the non-members. The Commission also referred to certain rules and the findings of the DG that the rules as well as the conduct of some of appellants like CCCA, BJMPA, EIMPA, NIMPA and MPA as also KFCC established that these associations prohibited their members from dealing with the non-members. It was also found by the Commission that it was impossible for any producer, distributor or exhibitor to conduct his business in the territories under the control of the associations, unless they become members of the respective associations and after becoming such members, if they deal with non-members, they face the suspension penalty and get boycotted. The Commission also noted that though it was not compulsory to become a member of association, which was also the argument of the associations, yet the restrictive provision and the rules of not permitting their members to deal with non-members made it mandatory for every distributor or exhibitor to take their membership and further register the film with that particular association. The Commission also referred to in this behalf the statements of Basant Kumar Patil, President KFCC, Bijan Bose of PVR Pictures, Dharampal Arora of NIMPA, Arun Mehra, proprietor of Aum Movies, Rajiv Khanna a theater owner, that if a film is exhibited, the distributor of which is not a member, a penalty would be levied on all the exhibitors screening the

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film released by a non-member. The exhibitors may also face the action of blacklisting and therefore, it was impossible to carry on any business of distribution unless the distributor obtains the membership. Ultimately, on the basis of these restrictive practices, which was sanctioned by the rules of the associations, the CCI came to the conclusion that the rules and regulations of MPA, EMPA, NMPA, CCCA, BJMPA reflecting the collective behaviour of all the members comprising of producers, distributors and exhibitors prohibited dealing with non-members who were the competitors in their business of production, distribution and exhibition and thus the nonmembers even being a competitor were prevented from competing effectively in the market. The CCI also observed that this collective intent and behaviour found reflection in the rules and regulations of the associations and the decision of the association as well as those rules in a way amounted to an agreement at horizontal level of the nature provided in Section 3(3) of the Act and therefore, the decision not to deal with nonmembers in effect limited the supplies and distribution of the films in the territory under the control of the appellants' associations, which was violative of Section 3(3)(b). found guilty. Thus on this count, the associations were

It was not argued before us that the references to the

evidence of various persons or the rules relied upon by the CCI were in any manner incorrect. In fact no learned counsel questioned the evidence and the documents relied upon or the rules in any manner. The CCI then took for consideration the common feature of compulsory registration of the films imposed by the association relying on the oral evidence and the specific complaints.

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30.

The CCI also referred to the members being forced to accept the

conditions at the time of registration of the film. It also referred to the argument to the effect that it was only in the interest of the member distributor and to protect their interest that such rules were being operated upon. The Commission rejected this argument by observing that the associations were keeping a complete control over the business affairs of the producers, distributors and exhibitors, both members and nonmembers. On this count also the appellants were found guilty of contravening the provisions of Section 3(3)(b). 31. The Commission then considered the third aspect of restriction

imposed on the number of screens for exhibition of non-regional films in a particular territory. This was mostly in case of KFCC, whose appeal is already dismissed by us for non-compliance of the order. Nobody argued on their behalf. However, on the basis of the evidence and the facts which were revealed before the CCI in the evidence and through the report of the DG, the CCI came to the conclusion that the KFCC was guilty of section 3(3)(b) because of restricting of the exhibition of non-Kannada film and limiting the exhibition of such films in the area of Karnataka. KFCC was, therefore, found guilty of violation of Section 3(3)(b). However, that would not detain us because that question was not argued before us. 32. Fourthly, the Commission considered the clauses regarding the unfair

hold back period for exhibition of satellite, television, video, DTH and other types. The CCI has thoroughly discussed the investigation report of the DG, which reveal that MPA, CCCA, NIMPA, BJMPA and IMPDA were

forcing the producers to accept the terms and conditions relating to the

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release of the films on satellite, television and video before registration of the film in their respective territories. The CCI has considered the specific evidence in this behalf, taking the specific examples. It has also taken the stock of rules that in case of breach of the hold back period, the producer or the distribution as the case may be would be compelled to distribute amongst the distributors, 50% of the income realized on the basis of the prevalent realizable ratio. The CCI has also taken into consideration the aforementioned resolution between AIFPC, FMC and CCCA dated 19.06.2000 and the circular which we have already referred to in the earlier portion of this judgment. The CCI has referred to number of specific

instances in case of film called Raavan, Kites etc. We again reiterate that these specific instances were not controverted by any of the learned counsel before us. In short the CCI has found six associations of

contravening of Section 3(3)(b) on this count also. 33. Lastly, the CCI in detail took into consideration the power of these

associations in imposing penalties, in banning the films, in issuing of call of boycott and withholding the share of the distributors. After a detailed

discussion, the CCI noted that the rules had the potential to punish the members who did not abide by the directions of the association and wanted to compete in the market with their films and deal with non-members. All these rules were, therefore, held as restrictive in nature and thus anticompetitive. Again the Commission took into account the specific

examples in respect of films “Kites” and the restriction on its exhibition in the State of Karnataka by KFCC. It was observed that these adversely impacted the market as also the producers and distributors, who were to

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distribute their films in such territories as Karnataka. The CCI also referred to some correspondence of KFCC regarding some specific films in respect of the films – “Peepli Live” and “The Expendables” and other correspondence of KFCC in respect of films like “Lafangey Parindey” was also referred to. As regards CCCA, it found that its rules 5(a), 23 and 24 had the potential of disciplining the members in order to enforce its restrictive and anti-competitive conduct. So also the rules of MPA, EIMPA as also BJMPA were considered wherein the power of these associations to punish the so called erring members were considered and the CCI as a matter of fact found the hefty penalties inflicted against UTV Software

Communication, Eros Multi-media, Eros International Media Ltd., Filmkraft Production, Shri Ashtavinayak Cine Vision and Dharma Production etc. for various films which according to the association were released in breach of the rules of BJMPA. On that count also the rule 22 of IMPDA was found to be anti-competitive. Ultimately, it was held by the Commission in para 6.89 that such acts and conducts of enforcing their norms only help such associations in maintaining their market power of the members and denies the non-members or the deviant members, the opportunity to compete. 34. Lastly, on Issue No.5, after considering the provisions of Section

19(3), the CCI came to the conclusion that by these actions and the rules discussed resulted in appreciable adverse effect of competition. This

finding in our opinion was not necessary as there is a presumption in favour of the appreciable adverse effect of competition, once the appellants are held guilty for contravention of Section 3(3)(b) and then it was up to the associations to say that they did not have any appreciable adverse effect

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on competition. We do not see any attempt on the part of the appellants’ association to discharge that burden. The CCI also exonerated some other associations against whom no evidence was found. In short, this is how the Commission has proceeded to found the appellants guilty. 35. We will now consider the individual arguments by various learned

counsel. 36. Mr. Dhruv Mehta appearing in Appeal No.70 of 2012 firstly argued Informant in his case to lodge

that there was no locus-standi to the

complaint. According to the learned counsel, the association (CCCA) was the association of the distributor or exhibitors, who were the members and the prohibition was also only against members. A person who was the producer and was not a member, was not governed by the rules of the association. He invited our attention to the definition of 'member' in clause 2(d) as also to Regulation 4(a), which according to him operated only against the member. The learned counsel therefore, tried to argue that since the association did not deal with non-members, it could not lodge any information or any information by such non-members should not have been acted upon by the CCI as it did. The learned counsel took us through various articles of association as also the rules for registration, more particularly inviting our attention to the rules 4 and 5. Our attention was also invited to the form, which the member distributor had to fill as also the agreement, which he was required to enter into on account of registering of the film with the association. Our attention was also invited to the arbitration rules. Shri Mehta also took us through agreement dated 19.06.2000, which we have already referred to in the earlier part of the judgment.

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37.

Considering the overall argument, we are of the clear opinion that the

Informant in this case did not lack any locus-standi merely because the rules of its association were binding only on the members. It must be remembered that the CCI has the suo-moto power also and therefore, anybody could have activated and invited the attention of the CCI to the anti-competitive agreements or actions or rules, as the case may be. Further, it cannot be denied that the interest of the Informant was involved in the matter and the Informant was feeling the heat of the rules because of which the appellant association was wielding asphyxiating control over the member distributors and exhibitors. We cannot forget that for registering any film with the association, a form has to be signed by the distributor as also the producer, even if that producer is not a member of the association. Thus, the association would be controlling the producers also. The CCI has already given clear cut examples of the kind of control that the association wielded on the member distributors and exhibitors. We do not think that the argument regarding the locus-standi is correct and proceed to reject the same. 38. The other argument of Shri Mehta was that in order to come under

mischief of Section 3, there has to be an agreement between the entities engaged in identical or similar business and this not being the case here, there could be no breach of Section 3. In our opinion, the argument is clearly incorrect. There can be no dispute that the rules of this association which followed the practices of boycotting of the non-members and the further rules of compelling the members, not to deal with the non-members, as also other practices discussed by the CCI in detail, would amount to an

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agreement between the members and the associations. There can be no doubt that the rules and the practices limited and controlled the production, supply etc. of the films and thereby directly coming within the mischief of Section 3(3)(b). The association may not have been held to be an 'enterprise' (we have our own reservation for that finding, however, we cannot go into that finding in view of their being no appeal in respect of the contravention of Section 4), but only on that basis, it cannot be said that there is no agreement. The CCI has given good reasons to support its finding regarding the contravention of Section 3(3)(b) to the effect that this association was a representative association of its members, who themselves were acting as per the anti-competitive rules and engaging themselves into anti-competitive practices. In our opinion, therefore, the finding regarding the contravention of Section 3(3)(b) is a correct finding. The learned counsel also tried to urged that article 4(a) of the articles of association, prohibiting from dealing with the non-members, was merely in the nature of self-regulation. It was also tried to be urged that the nonmember distributors and exhibitors were surviving on piracy. It was also tried to be urged that this regulation was for the benefit of the members and members of the appellant association themselves had agreed to curtail their power by agreeing to become a member of the association, which is a corporate entity and therefore, no fault can be found with this decision of the distributors member in agreeing to bind themselves to a particular code of conduct, whereby they required the producer and non-member producer also to respect the code of conduct by agreeing to sign the declaration. The argument is clearly incorrect. It is not that everybody was happy with the

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rules and in fact, the Informant has shown that they were not happy with the rules at all, but were compelled to follow the rules of the associations. In that view, this argument that the members are benefited would be of no consequence. 39. It was then urged that the rules and regulations of CCCA are an

internal agreement amongst members, not to deal with non-members and the same did not attract Section 3(3)(b) of the Competition Act and particularly because the conditions therein were not fulfilled. We do not agree. The decision taken by the association were certainly decision by the 'association of enterprise' or 'association of persons'. Secondly, these persons were certainly in the trade of identical 'goods' or 'services' and lastly their action certainly resulted or had the effect of restricting or limiting the supply. The decision of the CCI is absolutely correct in this case. It was then urged that there was no evidence that there has been restricting/ limiting the supply of the films because of the rules of the associations. The learned counsel urged that there had to be some material to show that there has been limiting of supply of films or that the competition had been effected. In this behalf, it was suggested that some evidence should have been brought. We have also referred to the common evidence, which is fully applicable in case of the present association and the CCI has also referred to the present association. The learned counsel did not deny any of the facts, which had been held/ proved by the CCI on the basis of the oral evidence examined before the DG. The learned counsel also did not questioned the findings regarding some films, the examples of which were given by the CCI. If the rules are capable of committing the mischief, which

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the Act wanted to restrict, then even if there is no such tangible evidence available, the rule would still be invalid. The Hon'ble Supreme Court has unanimously on this point taken a stand that if a provision is even capable of creating the mischief or discrimination, such provision has to be held constitutionally invalid. Similar is the decision in the present matter where the rules can be per-se held anti-competitive, being capable of restricting the market and effecting the competition. The learned counsel tried to rely on Section 3(5)(i), which is as under :“3(5) Nothing contained in this section shall restrict – (I) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under – (a) the Copyright Act, 1957 (14 of 1957);

(b), (c), (d), (e) and (f) are not relevant. 40. It is suggested that in order to save themselves from piracy of the

film, the provisions in the rules like hold back period and other provisions were necessary. It was also tried to be urged that rationale behind the compulsory registration is the efficient running of industry and that it resulted in discouraging piracy, prevented multiple sales, protected copyrights and facilitated ultimate resolution of disputes to avoid litigation. We have nothing against these provisions and it may be that such results may be flowing out of the registration, however, the fact of the matter is that the matter do not stop there, the compulsory registration also brings along with it the compulsions in the rules regarding the boycotting of the nonmembers as also the direction, not to deal with those who have breached

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the rules. The rules also result into area restriction in as much as the member distributor cannot operate outside the territory of the association. When all these rules are considered with each other, the strong hold of the association becomes all the more pronounced. argument based on Section 3(5)(i). 41. It was then urged by learned counsel that the effect of the agreement We, therefore, reject this

between FDC and FMC in the year 1994 and 2000 was not considered by the CCI. These were after all the apex bodies of producers, distributors and exhibitors. We have already taken into account the effects of those agreements, however, those agreements were prior to the Act came into force. They have not fallen the consideration of the CCI, nor are they before us. At any rate, these agreements could not give a colour of legality to the rules, which are otherwise anti-competitive in nature as per the present Act. It was urged in this behalf that there was a gate way for the producer by sharing 50% of his profit. In our opinion, such condition was wholly anti-competitive, apart from being restrictive. The element of

compulsion in the rules of the association makes the things worse. It was urged by the learned counsel that there was no undertaking was extracted by the producers by way of force and that the clauses in form 3A had been arrived at mutually. We are not impressed by this argument at all in as much as the producer, who is even a non-member is totally made powerless to release his film to the satellite or TV or video, because of the rules providing hold back, if he has to survive in the market and sell his film. It clearly amounts to the restraint of trade. The learned counsel tried to rely on some observations of the Hon’ble Supreme Court in Mahindra and

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Mahindra v. Union of India & Anr. In (1979) 2 SCC 529. In the wake of various instances given by the CCI in its order on the basis of the oral evidence examined before the DG, it cannot be stated that there was no material to suggest that associations were acting innocuously. This is apart from the fact that law laid down in Mahindra and Mahindra v. Union of India and Anr. is entirely in different sphere and enactment, in which the factual circumstances were entirely different. The observations in

paragraphs 14 and 15 of the judgment relied upon by the learned counsel do not take this case any further. 42. Almost desperate arguments were advanced that this was a clear

example of approbate and reprobate by the producers. For this purpose, letters dated 06.03.2012 and 18.03.2013 by Eros International and Reliance Big Entertainment were relied upon. They both are the

Informants in these matters. They may have written those letter and may have taken the help of the association for redressing their grievance. They may also be the members of CCCA in the capacity of distributors and may for that purpose submit to the rules of CCCA, but that does not mean that the association may go ahead with its rules, which were inherently anticompetitive. We, therefore, do not find any merit in this appeal and

proceed to dismiss the same. 43. Mrs. Mala Goel, appearing in Appeal Nos.69, 71, 73, 97, 96 and 102

of 2012 also reiterated almost same arguments. She pointed out that the evidence of Informant was not recorded and that was, according to her, fatal. She also pointed out that one of the association had already

removed the provision of hold back period. We have nothing to say about

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that because that is admittedly the post judgment development.

The

counsel tried to rely on the investigation report of the DG, wherein the DG had exonerated such associations. In our opinion, that is also of no

consequence in view of the supplementary report by the DG, wherein the DG found certain articles of association as anti-competitive. She pointed out that at least in case of Motion Pictures Association, there was no rule regarding the regional and non-regional films. There was also no rule

regarding the restriction of number of screens on the basis of language in which the movie could be exhibited. She further pointed out that the clause regarding the hold back period was already dropped in the new form, through which the film is registered with the association. The learned

counsel argued that in the case of Motion Pictures Association, the memorandum of articles were approved by the Delhi High Court in Company Petition No.58 of 1979. She also urged that there was no

evidence about any losses suffered due to any act of Motion Pictures association. Our attention was invited to the nature of this business, which we have already alluded to in the earlier part of our judgment. She also urged that there were 200 other exhibitors, who were not the members of the MPA, but were running their business in the territory. A list of such exhibitors was filed before us by way of written submission. The learned counsel urged that it was a laudable object of saving the industry from piracy and safeguarding the interests of the member distributor that the association was working. The whole working pattern of the association was explained to us. The learned counsel also urged that association was taking no decision regarding the production and the association comes into

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the picture only when the distributor has acquired the rights for distribution from producer. In short, the contention raised was that the association was in the best interest of the distributors and its activities, rules and the practices could not be viewed as anti-competitive. We have already

considered all these contentions raised by Mr. Mehta earlier. Relying on the oral statements of ten persons, who were examined by the DG, the learned counsel pointed out that the MPA had almost no role and that there were no complaints against the MPA. It was pointed out that one of the Informant was himself a member of the MPA and that he had concealed his membership. In our opinion, all these arguments would be of no

consequence, particularly in view of the clear cut reasoning given by the CCI. It was urged that the allegations in the information were not proved. We have already considered the contention in that behalf. The learned counsel contended that she had filed an application under Section 53(o) of the Act praying for statement on oath of the Informant. We do not think

that would be in any manner relevant in the present issue in view of the admitted position of existence of anti-competitive rules of the associations. The learned counsel pointed out that even if there were restrictions, they were reasonable restrictions. We do not think so, in view of the gagging power of the association on its members, which resulted into the restrictions being brought on against them. We do not see any merits in the arguments of the appellant and would chose to dismiss the same as also the appeal. 44. Mr. Ramji Srinivasan addressed us on behalf of Indian Motion

Pictures Distributions Association (IMPDA) in Appeal No.66 of 2012. Even

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this association requires compulsory registration of the film by the member distributor and they also have the hold back period of six months. Curiously, it is stated that the association was not called for any hearing before the Commission at any stage, prior to the passing of the impugned order. However, that does not appear to be correct, in view of the admitted position that the notice to the office bearers of the appellant’s was issued on 21st October, 2011 requiring them to file their reply/objections to the DG’s report and also to file profit and loss account and annual balance sheet for three years. The learned counsel argued that this association did not have any provision for compulsory membership, nor did it disallow a member to deal with non-member. However, the two other conditions,

which have been found as contravening Section 3, are the compulsory registration of the film, as also providing the hold back period. According to the learned counsel, compulsory registration was not an issue as stated by the Informant in his information. We do not think that such argument can prevail for the simple reason that condition of compulsory registration of the film exclusively with the association, as also providing hold back period for six months would clearly come under the mischief of Section 3. According to the learned counsel, since the membership was voluntary and the rules were in the nature of self-regulatory rules, there would be no question of contravention of Section 3. It was argued that the appellant was not the only association of distributors and there were several other distributors were operating in the territory, who were not the members of the appellant’s association. Much has been said about the voluntary nature of the rules and that only a person who chooses to be a member is bound by

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the rules.

It was suggested that only 35% of the films released in the The CCI has already

Mumbai area are registered with the appellant.

correctly held that the compulsory registration would by itself amounts to an anti-competitive practice because thereby the association controls both the distribution of the film as also the distributor and even the producer who is required to put his signature on the registration form. 45. It was suggested by the learned counsel that the rule regarding the

hold back period was only advisory in nature and that appellant has never imposed such condition or implemented it. It was also suggested that

unlike the other association, the appellant did not have any provision for collecting any amount from its members or from producers with respect to the hold back period for distribution among distributor or otherwise and no such amount has ever been collected and that the rule was incorporated on the basis of the earlier agreement in 2000 between FMC and FDC, which is referred to as master agreement. We do not think that the argument is correct. Once there is rule of hold back period, even if the association has not chosen to act upon it, the necessary damage is done. The learned counsel also complained against the procedure and urged that the CCI should not have adopted a general attitude against all the associations and should have separately treated each association. The argument does not impress us, as adequate care seems to have been taken by the DG in recording the evidence of the persons relating to the industry. We,

therefore, do not find any merit in this appeal also and dismiss the same. 46. Almost similar are the arguments in Appeal No.78 of 2012. Mr.

Manas Kumar Chaudhuri pointed out that the period before 20th of May,

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2009 could not be calculated in the matter of penalty. We do not think that the contention is correct. A clear language in Section 27 permits that. It is urged by Mr. Chaudhuri that the penalty inflicted is very heavy and we do not agree. However, his reliance on the Guidelines of European Union, on quantum of penalty cannot be taken into consideration, as there is nothing on record to suggest that the penalty as inflicted would irretrievably jeopardize the economic viability of the undertaking like Eastern India Motion Picture Association. There is no evidence to support that position. The learned counsel also submitted that there was no evidence about the agreements between the various associations under Section 3 and that the similarity in the rules/ by laws was due to the historic nature of the association and that there was no evidentiary proof adduced by the Informant. It is also submitted that the constituent members of the

appellant association did not have horizontal relationship with each other. This contention is also incorrect as all the persons, who were having their business of distributors, were competitors to each other. All these

distributors would be bound by the rules and practices of the appellant association which by itself amounts to the agreement contemplated under Section 3. It was urged that the members had dissimilar business and therefore, there could be no question of contravention of Section 3(3). We have already explained this aspect. All the members of the association had the similar business. The association was also day-in and day-out dealing with that business only. The association has rightly been held by the CCI to be ‘representative’. and dismiss the same. We, therefore, do not find any merit in this appeal

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47.

Identical contentions were raised by Ms. Sangeeta Kumar in Appeal

No.67 of 2012 on behalf of BJMPA, which we have already discussed. Hence, this appeal is also dismissed. 48. Mr. A.N. Haksar, appearing for the respondent-Eros in Appeal No.70

of 2012 tried to urged before us, relying on Section 36 of the Companies Act, that the rules of the individual association would amount to the agreement between the association and members as also between inter-se members. For this he relies on a judgment of Hon’ble Supreme Court in Naresh Chandra Sanyal vs. Calcutta Stock Exchange Association

Ltd. reported in (1971) 1 SCC 50 and more particularly para-14 thereof. We have absolutely no doubt that the rules and also the practices would amount to an agreement, as has been described by the learned counsel. We hold this particularly in view of the broad definition of the word ‘agreement’ in the Act. However, the other contention of Mr. Haksar is not acceptable to us. The learned counsel urged that though all these

associations have been exonerated of the contraventions of Section 4, he could still urge the contravention of Section 4 before us. For this, the

learned counsel pointed out that there are Hon’ble Supreme Court decisions which suggest that the respondent can support the judgment on offer ground also and can also assail the finding, which has been recorded against him. We have no quarrel with the proposition, but here the

situation will be slightly different. In a civil matter such finding is possible, however, here there were two specific issues, one, the contravention of Section 3; and the other the contravention of Section 4. The majority

judgment has exonerated the appellants from contravention of Section 4,

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that is totally a separate issue distinct from the issue of contravention of Section 3 and in reality while supporting the finding of contravention of Section 3, it cannot be said that the CCI had erred in exonerating the appellants of Section 4. There is no nexus between the two. They are separate and distinct contraventions. Therefore, in the garb of supporting Section 3 contraventions, the respondent cannot fall back upon the contravention of Section 4 and urge that we at the appellate stage should also book the appellants for contravention of Section 4, particularly when there is no appeal against such finding of exoneration of contravention of Section 4. We would not therefore go into that question. 49. Ms. Anupam Sanghi, appearing for CCI supported the majority orders

in all these appeals and urged that those orders cannot be faulted. She also supported the findings on the contravention of Section 3(3)(b) on account of the obvious anti-competitive nature of the rules and practices which were almost common in case of all appellant associations Our attention was also invited to the minority orders by Shri Prasad. In view of the earlier discussion in this judgment we are unable to agree with him at least on his interpretation of Section 3 and the consequent finding. We need not consider the finding of contravention of Section 4 in view of the fact that there is no appeal before us by informant on that issue. 50. Much has been said about the penalty. However, considering the

stakes and the finances involved in the Film making business and the overall circumstances, in our opinion the penalties are insignificant. Needless to mention that in all appeals, appellants have already paid the penalties as per our directions. It is true that the CCI should have given

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some reasons, as to why it has determined 10% of the average income of the associations as the penalty, but considering the nature of activity and stakes involved, we feel that the penalties inflicted are actually insignificant. We will not therefore go into that question. Similar is the case with the directions issued by CCI. In our opinion all the directions are well justified. All the appeals are ordered to be dismissed without any costs. Pronounced in open Court on 17th day of May, 2013. (V.S. Sirpurkar) Chairman

(Rahul Sarin) Member

(Pravin Tripathi) Member
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