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TMI Blog2019 (4) TMI 2167X X X X Extracts X X X X X X X X Extracts X X X X ..... as the sole prerogative of cement manufacturers. It also found that KCDA had no role in regard to supply of cement by the cement manufacturers to dealers, which purely depended on market considerations. The supplementary investigation report thus further reinforced conclusions arrived at in the main investigation report - the Commission closed the matter largely agreeing with the recommendation of DG though disagreeing with its finding regarding contravention of Section 3 noticed hereinabove passing the order within the ambit of Section 26(6) of the Act which is appealable in terms of Section 53-B r/w Section 53-A clause (a) of the Act. Objection raised by the Commission in regard to maintainability of appeal being devoid of merit is accordingly overruled. Whether the Commission was justified in overturning the finding of DG in regard to alleged contravention of Section 3 of the Act? - HELD THAT:- Clause 05 of Annexure A11 provides that any new appointment of stockists/dealers shall be as per understanding with KCDA. Normally, grant of dealership or appointment of stockists should rest exclusively with the cement manufacturing company. Merely because the cement manufacturer has an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hura, Ms. Kritihanda, Ms. Damini K., Advocates for R-1. Mr. T. Srinivasamurthy and Ms. Shruti Iyer, Advocates for R-2. JUDGMENT BANSI LAL BHAT, J. The aforetitled three appeals arise out of a common order dated 24th May, 2018 passed by the Competition Commission of India (hereinafter referred to as 'CCI') closing the matter as in its opinion no case of contravention of Section 3(3) r/w Section 3(1) of the Competition Act, 2002 (hereinafter referred to as 'Act') was made out. These appeals were heard together and are proposed to be disposed of by a common judgment. 2. The Appellants filed informations separately and independent of each other alleging contravention of provisions of Section 3 and 4 of the Act. First and foremost information was filed by 'Saifudheen E.' - Informant in Case No.75 of 2012 alleging that the 'Kerala Cement Dealers Association' (hereinafter referred to as 'KCDA') was interrupting or blocking the supply of cement to the Informant by 'Ramco' as he ignored the instructions of KCDA to sell cement at an unjust price. CCI, being satisfied that a prima facie case of contravention of Section 3(3) of the Act was made out, passed order dated 6th May, 2013 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CDA for termination of his dealership. Thus, the investigation did not find involvement of KCDA in termination of dealership of Shri Muraleedharan. Investigation also noticed that there were large number of cement dealers in Kerala and all of them were not associated with KCDA as members which clearly demonstrated that there was competition between cement manufacturers and dealers in the State, which could not be curtailed by blocking supply to one or the another dealer by the manufacturer. Regarding appreciable adverse effect on competition, the investigation was of the view that since Ramco had only about 20% share in the relevant market during the relevant period, same was not at all probable. 3. Report of investigation submitted by DG came to be considered by the CCI, which found some deficiencies in the investigation. DG was accordingly directed to examine all the relevant issues including the deficiencies pointed out by CCI. This led to filing of supplementary investigation report by DG, wherein DG observed that KCDA had no role in appointing or terminating the dealers, which was the sole prerogative of cement manufacturers. It further observed that supplies to dealers were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any anticompetitive conduct covered under the provisions of the Act but it frowned upon 'KCDA', 'Dalmia' and 'Ramco' for its common appeal to dealers to not to sell cement below the invoice price. CCI concluded that no case of contravention of Section 3(3) r/w Section 3(1) of the Act was made out. Thus, the matter was closed. 6. Heard learned counsel for the parties and perused the record. 7. It is contended by learned counsel appearing on behalf of the Appellants that the main controversy involved at the bottom of the informations/complaints has escaped the attention of CCI which focused on peripheral issues and failed to consider that KCDA had the pivotal role in insisting upon its consent/NOC as a mandatory requirement for award of cement dealership with non-compliance resulting in choking/ blocking/ reducing supply of cement to the dealers. It is contended that the CCI has erred in evaluating the material on record and failed to appreciate the same in proper perspective. Per contra it is submitted on behalf of the Respondents that these appeals are not maintainable in terms of provisions of Section 53-B r/w Section 53-A of the Act. It is further submitted that the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provision it is abundantly clear that Section 3 (1) prohibits agreements, inter-alia in respect of supply of goods between enterprises and persons and their associations which causes or is likely to cause an appreciable adverse effect on competition within India. It lays down that such agreements shall be void. Such agreements between enterprises, persons or their associations including cartels engaged in identical or similar trade of goods or provisions of services which determine purchase or sale price, limit or control, production, supply, markets, shares the market or source of production, etc. by allocating geographical areas of markets or type of goods or services or number of customers in market in any conceivable manner or directly or indirectly results in bid rigging or collusive bidding is presumed to have an appreciable adverse effect on competition. Joint venture agreements designed to increase efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services have been kept out of purview of Sub-section (3) which means that the presumption relating to such agreement shall not be available qua joint venture agreements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment or a statutory authority or on its own knowledge or information, under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter. (2) The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within such period as may be specified by the Commission. (3) Where on receipt of a complaint under clause (a) of sub-section (1) of section 19, the Commission is of the opinion that there exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of costs, if necessary. (4) The Commission shall forward a copy of the report referred to in sub-section (2) to the parties concerned or to the Central Government or the State Government or the statutory authority, as the case may be. (5) If the report of the Director General relates on a complaint and such report recommends that there is no contravention of any of the provisions of this Act, the complainant shall be given an opportunity to rebut the findings of the Director-General. (6) If, after he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 26 of the Act, it appears that Sub-section (8) mandating inquiry into contravention reported by Director General comes into play after report of investigation submitted by Director General in terms of Section 26(3) recommends contravention of any of the provisions of the Act and the Commission is of the view that further inquiry is called for. It is manifestly clear that Sub-section (8) of Section 26 bears nexus with Sub-section (3) of Section 26 and operates independent of Sub-section (5), (6) and (7) of Section 26. It envisages a situation where the Director General submits a report on his findings with recommendation that there is contravention of any of the provisions of the Act. The provision embodied in Section 26 of the Act takes care of different eventualities but one thing is clear that inquiry contemplated under this Section is of quasi-judicial nature and investigation by Director General is only a component of such inquiry. The findings reported by the Director General in its report of investigation are merely recommendatory in nature and cannot be a substitute for judicial findings. The Commission is required to follow the rules of procedure apart from the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported contravention of Section 3 of the Act, by 'Ramco', 'KCDA' and 'Dalmia Cements' attributable to their conduct qua a meeting held on 23rd October, 2013 at Horizon Hotel, Thiruvanathapuram organized by Cements Dealers Association wherein the representatives of the organizers exhorted the cement dealers not to sell cement below the invoice price. The Commission, after providing opportunity to the Informants to file objections and according consideration thereto was of the view that there was no evidence to persuasively establish indulgence into any anti- competitive conduct covered under the provisions of the Act. However, it expressed its displeasure with the conduct of 'KCDA', 'Dalmia' and 'Ramco' in making a common appeal to the dealers. It is abundantly clear that the Commission, while disagreeing with the second supplementary investigation report of the DG in regard to contravention of Section 3 of the Act for lack of substantive evidence, accepted the conclusions arrived at by DG in main as well as supplementary investigation report that complicity of KCDA in award or termination of cement dealership was not disclosed by the material assembled during investigation and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 2014 forming Annexure A11 at page 77 of the paper book wherein Clause 05 reads as under:- "05. Dealership Appointment Any new appointment of stockists to be as per the understanding with KCDA and any complaints to you in this from district committee on the eligible cases may be referred to state committee for smooth operations." Clause 05 of Annexure A11 provides that any new appointment of stockists/dealers shall be as per understanding with KCDA. Normally, grant of dealership or appointment of stockists should rest exclusively with the cement manufacturing company. Merely because the cement manufacturer has an understanding with the Cement Dealers Association in regard to grant of dealership or appointment of stockists does not imply that a role is assigned to KCDA in appointment of stockists/dealers. 'Understanding with KCDA' does not necessarily speak of an agreement between KCDA and the cement manufacturers. It may be for regulating even and equitable distribution besides ensuring regular supplies at fair and reasonable prices to protect the interests of consumers. The allegations emanating from the Appellants /Informants in regard to termination of dealership and st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination system which has no direct and proximate nexus with the dealers or their association. The Commission has noted that there are a number of cement brands and thousands of dealers across Kerala and in view of the same cartelization of only two cement manufacturers with the dealers association for fixing the sale price would be repugnant to common sense. The Commission also noted that 'Ramco' has been suggesting its dealers to desist sales below the invoice price as the practice of issuing credit notes lead to dealers being forced to pay the VAT on an amount on which 'Ramco' had already paid VAT. It also noted that 'Ramco' has stopped issuing credit notes to avoid losses of dealers arising out of dealer's sales below the invoice price. Commission observed that sale of cement by dealer below invoice price would incur loss to the dealer. Therefore, any exhortation to refrain from loss making sales cannot be construed as a price fixation agreement. This cannot be explained on any hypothesis other than the one that the manufacturer warned the dealers and their association of the disastrous consequences of loss making sales with a clear message that the manufacturer would not comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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