Full Judgment Text
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PETITIONER:
RAYMOND WOOLLEN MILLS LTD.
Vs.
RESPONDENT:
M.R.T.P. COMMISSIONS AND ANR.
DATE OF JUDGMENT26/02/1993
BENCH:
MOHAN, S. (J)
BENCH:
MOHAN, S. (J)
KULDIP SINGH (J)
CITATION:
1993 SCR (2) 127 1993 SCC (2) 550
JT 1993 (2) 201 1993 SCALE (1)734
ACT:
The Monopolies and Restrictive Trade Practices Act 1969/The
Monopolies and Restrictive Trade Practices Commissions
Regulation, 1974.
Sections 2(o), 33(1)(f), 37(1) and 55/Regulation 74-
Restrictive trade practice-Price lists-No indication in
price lists that rates prescribed are maximum recommended
rates-Held appellant indulged in restrictive trade practice-
Cease and desist’ order of M.R. T.P. Commission upheld.
HEADNOTE:
The M.R.T.P. Commission issued a notice of enquiry on
10.2.1987 suo motu alleging that the appellant in the appeal
was indulging in the trade practice of re-sale price
maintenance by not mentioning in its price list that the
prices lower than those prices may be charged, and that this
amounted to restrictive trade practices within the meaning
of Section 33(1)(f) of the Monopolies and Restrictive Trade
Practices Act, 1989. An application was filed by the
appellant on 29A.1987 for further and better particulars
seeking directions from the Commission and requesting for a
copy of the Preliminary Investigation Report and in
pursuance thereto the Director- General (I & R) was directed
to furnish the specific instances in support of the
allegations in the notice of enquiry.
A reply was filed by the appellant to the notice of the
enquiry on 5.8.1987 and on 7.10.1987 a rejoinder was riled
by the Director General under Regulation 74 of the
Commission’s Regulation, 1974 serving interrogatories upon
the appellant.
The Commission passed an order on 7.12.1987 upholding the
objections raised by the appellant and modifying the
interrogatories and on 22A.1988, issues were duly framed by
the Commission.
On 3.8.1989 the Marketing Director of the appellant Hied an
affidavit rebutting the allegation of re-sale price
maintenance and stating that the price lists Issued by the
appellant were merely recommendatory in nature
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and to ensure that the dealers do not re-sale their products
at prices higher than those mentioned in the price lists,
and that they have always been understood by the dealers to
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be the maximum recommended prices.
On 3.5.1991 the Commission passed an order holding that the
appellant had been indulging in the restricting trade
practice of re-sale maintenance and consequently passed a
cease and resist order against the appellant.
In the appeal against the aforesaid order to this Court
under Section 55 of the Act, it was contended on behalf of
the appellant relying on Tata Engineeringg & Locomotive
Company Ltd v. R.S. T,A., [1977] 2 SCR 685 and Mahindra &
Mahindra Ltd. v. Union of India, [1979] 2 SCR 1038 at 1074
that the definition of restrictive trade practice in Section
2(o) of the Act "is a pragmatic and result-oriented
definition", and that the legality of an agreement or
regulation does not depend upon whether or not it restrains
competition but the test is whether the restraint imposed is
such as merely regulates, and perhaps thereby promotes
competition or whether it is such as may suppress or even
destroy competition.
Dismissing the appeal, this Court,
HELD: 1. Section 33 deal with agreements relating to
restrictive trade practices. Therefore, it is not correct
to content that this is only for the purpose of registration
of agreements. Exhibits A-2 to A-5 are the copies of price
list issued by the appellant. The dealers are required to
display the price list in their show rooms. [134C, G]
2. The price lists indicate the rate per metre of each of
the textile product manufactured. There is nothing to
indicate that the dealers could charge a price lower than
those mentioned in the price list. [134H,135A]
3. The Commission has rightly pointed out that there is
not even an indication in the price list that the rates
prescribed are the maximum recommended rates. In the
absence of the same, the dealers could sell their products
even at lower rates. This will encourage the consumers to
ask any rebate in the rates indicated in the price list.
[135B]
4. The definition of ’restrictive trade practice’ in
section 2(o) of the Act is an exhaustive one and not an
inclusive one. It is for the price list, not having any
indication as to the maximum price, that the charge is made
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in the notice of the Commission dated 10.2.1987 of violation
of restrictive trade practice under section 33(f) failing
under section 2(o)(ii) of the Act. The whole case depends on
the admitted price list issued by the appellant. In such a
case no further evidence is necessary. [133B]
Tata Engineering and Locomotive Co. Ltd. v. R.R. T-A.,
[1977] 2 SCR 685 at 694, not applicable. [131B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 41.26 of
1991.
From the Judgment and Order dated 3.5.91 of the M.R.T.P.
Commission in R.T.P. Enquiry No.5/86.
Ashok K. Desai, Ravinder Narain, Rajan Narain and Aditya
Narain for the Appellant.
The Judgment of the Court was delivered by
MOHAN, J. This is an appeal under Section 55 of the
Monopolies and Restrictive Trade Practices Act, 1969
(hereinafter referred to as the Act) against the order
passed by the Monopolies and Restrictive Trade Practices
Commission, New Delhi (hereinafter referred to as the
Commission), being a ’cease and desist’ order dated 3.5.91
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under Section 37 (1) of the Act. The short facts leading to
this appeal are as under:
On 10.2.87, a notice of enquiry was issued suo motu by the
Commission inter alia alleging that the appellant was
indulging in the trade practice of re-sale price maintenance
by not mentioning in its price lists that the prices lower
than those prices may be charged. It amounted to
restrictive trade practices within the meaning of Section 33
(1)(f) of the Act.
On 29.4.87, an application was filed by the appellant for
further and better particulars seeking directions from the
Commission, requesting therein for a copy of the Preliminary
Investigation Report.
On the same date i.e. 29.4.87, an order was passed by the
Commission directing the Director-General (I & R) to furnish
to the appellant specific instances in support of the
allegations in the notice of enquiry. Accordingly, a copy
of the Preliminary Investigation Report was furnished to the
appellant.
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On 5.8.87, a reply to the notice of enquiry was made by the
appellant.
On 7.10.87, a rejoinder was filed by the Director General (I
& R) along with an application under Regulation 74 of the
Commission’s Regulation 1974 serving interr rogatories upon
the appellant.
On 7.12.87, an order was passed by the Commission upholding
the objections raised by the appellant and modifying the
interrogatories.
On 21.4.88, the appellant riled its affidavit in reply to
the interrogatories.
On 22.4.88, issues were duly framed by the Commission.
Director General (I & R) did not produce any witness to
prove the allegation of re-sale price maintenance, but
merely relied on the price list furnished by the appellant.
On 3.8.89, an affidavit of the Marketing Director of the
appellant was riled rebutting the allegation of re-sale
price maintenance and stating that the price lists issued by
the appellant were merely recommendatory in nature and to
ensure that the dealers do no resell their products at
prices higher than those mentioned in price fists. It was
further stated therein that the prices mentioned in the
price lists issued by the appellant are the maximum
recommended prices and have always been understood by the
dealers to the maximum recommended prices. The retailers
have, in fact, been selling at prices lower than the maximum
recommended prices. These statements made by the witnesses
of the appellant were not controverted by the Director
General (I & R).
On 3.5.91, the impugned order was passed by the Commission
inter alia holding that the appellant has been indulging in
the restrictive trade practice of resale maintenance And
consequently passed a cease and resist order against the
appellant.
It is against this order the appellant has preferred this
appeal under Section 55 of the Act.
Mr. Ashok H. Desai, learned counsel for the appellant would
urge the following for our consideration:
The definition of restrictive trade practice in Section 2(o)
of the Act ’is
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a pragmatice and result-oriented definition". The legality
of an agreement or regulation does not depend upon whether
or not it restrains competition but the test is whether the
restraint imposed is such as merely regulates, and perhaps
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thereby promotes competition or whether it is such as may
suppress or even destroy competition. In this connection,
he places reliance on Tata Engineering and Locomotive Co.
Ltd. v. R.R. T-A., [1977] 2 SCR 685 at 694 and Mahindra and
Mahindra Ltd. v. Union of India, [1979]2 SCR 1038 at 1074.
The Director General has to establish:
(1) What facts are peculiar to the business to which the
restraint is applied?
(2) What was the condition before and after the restraint
is imposed?
(3) What is the nature of restraint and what is its actual
and probable effect?
From this point of view the Director General will have to
establish each of these points. Only when it is proved that
there is a restrictive trade practice the burden shifts to
the respondent to prove that it is entitled to pass through
the gateways set out in Section 38(1) of the Act.
In the present case, the notice of enquiry makes no
allegation about the facts and features of the trade, about
the nature of restraint and its impact on trade and why it
is anti-competitive. The notice only sets out that there is
a price list. There was no evidence led in by the Director
General to the effect that the dealers did not sell the
goods of the appellant below the price in the price list.
In any event, the evidence clearly demonstrates that the
dealers understood the price list to mean that the dealers
could charge lower prices and in fact did charge lower
prices. The competition was not affected in any material
degree and the gateway as under Section 38(1)(h) of the Act
was fully available.
In order to appreciate the above submissions, it is
necessary to look at the following provisions of the Act.
Section 2(o) of the Act defines restrictive trade practice.
It reads as under:
"(o) "restrictive trade practice" means a
trade practice
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which has, or may have, the effect of
preventing, distorting or restricting
competition in any manner and in particular,-
(i) which tends to obstruct the flow of
capital or resources into the stream of
production, or
(ii) which tends to bring about manipulation
of prices, or conditions of delivery to effect
the flow of supplies in the market relating to
goods or services in such manner as to impose
on the consumers unjustified costs or
restrictions."
(Emphasis supplied)
This definition of restrictive trade practice is an
exhaustive one and not an inclusive one. No doubt, this
court laid down in Tata Engineering and Locomotive Co. Ltd.
(supra) as follows:
"The decision Whether a trade practice is
restrictive or not has to be arrived at by
applying the rule of reason and not on the
doctrine that any restriction as to area or
price will per se be a restrictive trade
practice. Every trade agreement restrains or
binds persons or places or prices. The
question is Whether the restraint is such as
regulates and there by promotes competition or
whether it is such as may suppress of even
destroy competition. To determine this
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question three matters are to be considered.
First, what facts are peculiar to the business
to which the restraint is applied. Second,
what was the condition before and after the
restraint is imposed. Third, what is the
nature of the restraint and what is its actual
and probable effect."
The notice was issued to the appellant in the
following terms:
"The Commission has information that the
respondent above mentioned, Which manufactures
and sells textile goods, has been indulging in
the following trade practices:-
(1)indulging in the trade practice of resale
price maintenance by not mentioning in its
price lists that prices lower than those
prices may be charged; and
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(2)induling in the trade practice of
discriminatory pricing by offering varying
rates of bonus linked with the quantity or
material bought by dealers.
It appears to the Commission that the above
trade practices are restrictive trade
practices within the meaning of clauses (f)
and (e) of section 33(1) of the Monopolies and
Restrictive Trade Practices Act, 1969.
Further they have got the effect of
manipulation of prices of textile goods in
such a manner as to impose unjustified costs
or restrictions on the consumers and thereby
making them restrictive trade practices within
the meaning of Section 2(o)(ii) of the
Monopolies and Restrictive Trade Practices
Act, 1969.
AND THEREFORE, in exercise of the powers under
section 10(a)(iv) and 37 of the M.R.P.T. Act,
1969, the Commission has ordered that an
enquiry be instituted against the respondent
above mentioned at the Commission’s office in
New Delhi to enquire into as to whether:
(a)the said trade practices are restrictive
trade practices as alleged; and
(d)the said restrictive trade practices are
prejudicial to public interest;
AND NOW THEREFORE a Notice under Regulation 58
of the M.R.T.P. Commission Regulations, 1.974
is hereby given to the Respondent that if it
wishes to be heard in the proceedings before
this Commission it should file a reply 10 days
before the date of hearing to the Notice of
Enquiry and comply with the provisions of
Regulation 11, 57, 65 and 67 copies of which
are enclosed herewith for facility of
reference, failing which the enquiry shall
proceed ex-parte in the absence of the
Respondent.
IT IS FURTHER notified that the case shall
come up before the Commission for a hearing on
23.3.1987 at 11.00 A.M.
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GIVEN under my hand and seal of the Commission
at New Delhi, this the 10th day of February,
1987.
BY ORDER OF THE COMMISSION
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SD/-
(S.K. CHATTOPADYAY)
DEPUTY SECRETARY"
From this, it will be clear that what is alleged against is
restrictive trade practice within the meaning of the above
definition under Section 2(o)(ii). Section 33 deals with
agreements relating to restrictive trade practices. That
inter alia says:
"33. Registerable agreements relating to
restrictive trade practices.
(1) Every agreement falling within one or
more of the following categories shall be
deemed, for the purposes of this Act, to be an
agreement relating to restrictive trade
practices and shall be subject to registration
in accordance with the provisions of this
Chapter, namely-
(a) to (e)
(f) any agreement to sell goods on condition
that the, prices to be charged on resale by
the purchaser shall be the prices stipulated
by the seller unless it is clearly stated that
prices lower than those prices may be charged;
(g) to (1)
(Emphasis supplied)
It has to be carefully noted that this Section applies for
the purposes of the Act. Therefore, it is not correct to
contend that this is only for the purpose of registration of
agreement. Exhibits A-2 to A-5 are the copies of price list
issued by the appellant. The dealers are required to
display the price list in their show rooms. In so far as it
was admitted by the appellant that there are no separate
price lists for the Mill’s own outlets and for the dealers.
The price lists indicate the rate per metre of each of the
textile product manufactured. There is nothing to indicate
that the
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dealers could charge a price lower than those mentioned in
the price Est.
As rightly pointed out by the Commission there is not even
an indication in the price list that the rates prescribed
are the maximum recommended rates. In the presence of the
same, the dealers could sell the products even at lower
rates. This will encourage the consumers to ask any rebate
in the rates indicated in the price list.
The Commission observes as follows:
"The object of clause (f) of Section 33 is
that when specified rates are mentioned in the
price list issued by the manufacturer and the
sale and purchase including resale of the
products was governed by those rates, there
should be a clear mention in the price list
that the dealers can sell at prices lower than
those shown therein so that the ultimate
consumers may not be led or misled by the fact
that the prices mentioned in the price list
are final and not subject to negotiation. In
this view of the matter, the fact that in
actual practice some of the retailers might
have sold the products at prices lower than
those mentioned in the price list would not be
material and the situation would be fully
covered by clause (f)."
We are in entire agreement with this finding.
The submission of Mr. Desai, relying on Tata Engineering and
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Locomotive Co. Ltd. case (supra), that no evidence was let
in by the Director General cannot be accepted. It is on the
price list, without any indication as to the maximum price,
the charge is made of violation of restrictive trade
practice under section 33 (f) falling under section 2(o)(ii)
of the Act. In such a case, we are unable to see as to why
evidence is necessary. The whole case depends on the
admitted price list issued by the appellant. The ruling of
Tata Engineering and Locomotive Co. Ltd. (supra) has no
application to the facts of the present case because that
was a case of distributorship where distributor takes care
of the post sale service that is peculiar to the nature of
the trade there, namely, the Locomotives, which cannot be so
in this case, the trade being of textile and nothing
peculiar to this trade.
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Accordingly, we find no merit in the appeal which is hereby
dismissed. However, there shall be no orders as to cost.
N.V.K. Appeal
dismissed.
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