Madras High Court directs CBI probe into allegations of cartelization by Cement manufacturers

The Madras High Court on Wendesday directed a Central Bureau of Investigation (CBI) enquiry into allegations that cement manufacturers in the country have conspired to cartelize the cement industry, by creating artificial scarcities and fixing higher prices (Class I Contractor Welfare Association – Mangadu v. CBI and anr). .A petition moved by the Class I Contractor Welfare Association came up before Justice V Bhavani Subbaroyan, who directed the CBI to file its report in the matter before posting the case next on June 3. Advocate Srinivasan accepted notice for the CBI in the matter..The petition raised allegations against major cement players in India, including ACC Limited, Ambuja Cements Limited, Grasim Cement, Ultra Tech Cement Limited, Jaiprakash Associate Limited, The India Cements Limited, JK Cement Limited, Century Textiles and Industries Limited, The Ramco Cements Limited, Binani Cement Limited and Lafarge India Private Limited. ."The above said companies have indulged in various anti-competitive activities and have collectively sought to control the supply of cement. Despite having large capacities, the above Cement Manufacturers, with the sole intention to control the supply, produce less cement and increase the market price of cement deliberately... The acts of cement manufactures, in the past as well as in the present, have had an adverse effect on the competition in the real estate sector and affect interest of consumers at large ... They are causing wrongful gain for themselves and wrongful loss to the buyers ... the manufacturers are liable to be proceeded against for cheating the public," the petitioner claimed..It was highlighted that a cement bag was priced at Rs 385 in Tamil Nadu during July 2019. Five months prior to this, it was sold at Rs 340. However, the cost was increased by 13.23% and cement is now sold at Rs 420-430, it was submitted. ."The increase of the cement was not made on the basis of any increase of cost of the manufacturing materials. Because of sudden increase of the cement price business was heavily affected. Because of the sudden increase of the cement price up to 25% between July 2019 to April 2021, the contractors and the consumers have to incur heavy loss ... Due to their large market share in the Indian market, ACC Limited and Ambuja Cements Limited are in a position to fix price and also curtail competition by controlling the supply of cement in the market," the petitioner went on to contend..The petitioner further accused ACC Limited and Ambuja Cements of leading the acts of cartelisation by cement manufacturers over the past couple of decades. As per the petitioner, this is evident from enquiries made into the functioning of their holding company, Holcim, by various Courts and Commissions. In this regard, it is also stated that action has earlier been taken against the Holcim Group for anti-competitive activites all over the world. ."Lafarge India Private Limited, "Lafarge India”, a subsidiary of the French building materials major 'Lafarge', has already been fined in 1994, 2002 and 2008 by the Competition Commission of India for committing irregularities in different jurisdictions, which shows that they are habitual offender under the provisions of Competition Act," the petitioner added. .It was alleged, citing "reliable sources, that ACC Limited and Ambuja Cements Limited, in collusion with the Cement Manufacturing Association, "sought to cartelise, limit the production, supply of cement in the market and thereby causing artificial scarcity of cement and fix the price of cement thereby eliminating competition in the market." .While so, the petitioner notes that the State has earlier submitted before the Madras High Court that the State government does not have the power to regulate the price of cement as the "cement industry is deregulated."The same submission was made in a counter-affidavit filed in response to a writ petition by the Coimbatore Corporation Contractors Welfare Association last year, wherein the State's refusal to regulate cement price hikes was challenged. ."Thus, the Government made its stand that they will not take any action to regulate cement price and cartelization for unlawful gainby the cement companies," the petitioner noted..While so, it was also pointed out that the petitioner had filed a complaint on the issue with the CBI on March 30, 2021, which yielded no response. This prompted the petitioner-association to approach the High Court with its prayer. .The petition was filed through Advocates-on-Record, S Doraisamy, and V Elangovan.