M/S Voltas
Limited, Bombay. Vs. Union of India & Ors [1995] INSC 121 (7 February 1995)
Singh
N.P. (J) Singh N.P. (J) Ahmadi A.M. (Cj) Mohan, S. (J)
CITATION:
1995 AIR 1881 1995 SCC Supl. (2) 498 JT 1995 (2) 261 1995 SCALE (1)455
ACT:
HEAD NOTE:
1. These
appeals have been filed under Section 55 of the Monopolies and Restrictive
Trade Practices Act, 1969 (here- inafter referred to as 'the Act') against the
judgment and order of the Monopolies and Restrictive Trade Practices Commission
(hereinafter referred to as 'the Commission').
2.The
appellant had entered into agreements with large number of companies, who are
respondents in different ap- peals, in respect of distribution of different
machineries and equipments within different territories of India. The companies, 264 who are
respondents, to the different appeals have been manufacturing different types
of machines and instruments, which under the terms of the agreements are to be
distributed by the appellant as the Marketing Company. The appellant has been
appointed as Buyer (Sole Importer) on the .terms and conditions mentioned in
different agreements.
3. On
26.11.1986, notices were issued under Section 10(a)(iii) read with Section 37
of the Act, informing the appellant that the agreements between the appellant
and the different companies, some of which have their Head Offices in foreign
countries contain conditions which amount to restrictive trade practices under
clauses (a) and (c) of Section 33(1) of the Act. In the notices aforesaid, the
terms and conditions in different agreements which are alleged to be violative
of Section 33(1)(a) and (c) of the Act were reproduced. Pursuant to the notices
aforesaid, show cause was filed in different cases initiated by the Commission
against the appellant. Documents and affidavits were also filed on behalf of
the appellant in support of its stand that none of the agreements referred to
in the notices issued to the appellant related to restrictive trade practices,
calling for any action under the Act. The Commission, however, by the impugned
judgment and order directed the appellant in respect of each of the 15
enquiries to discontinue the restrictive trade practices as mentioned in the
Notice of Enquiry, and not to repeat the same in future. It was also directed that
the objectionable clauses, as mentioned in the Notices be deleted from the
respective agreements, within 8 weeks of the receipt of the said order.
4. All
the appeals were heard together, since the controversy, which has been raised,
is more or less similar in all the appeals, and as such facts are being
referred to from Civil Appeal No. 2252 of 1994, which was heard as the leading
case. It appears that the agreement in that case had been entered into between
the appellant and Respondent No.4 M/s. Societe Genevoise D, Instruments De
Physique, Geneve. through its Secretary, on 29.11.1956. The Director General of
Investigation and Registration (hereinafter referred to as the 'DG') took
objection in respect of three of the clauses of the agreement and on his
application being filed before the Commission, notice was issued to the
appellant on 26.11.1986 saying that the following terms of the agreement
amounted to restrictive trade practices, within the meaning of the Act:
"2.
The Buyer shall not sell the goods of the Seller to any person who is not
residing or carrying on business within the Territory nor to any person
residing or carrying on business within the Territory for the purpose of resale
by such person outside the Territory." "3. The Buyer shall use his
best endeavours to promote the interests of the Seller and specifically shall
not deal in or sell goods which could compete with those of the Seller."
"6. For the consideration aforesaid the Seller agrees not to sell any
goods as mentioned before to any individual or firm within the territory other
than the Buyer and all enquiries and orders received by the Seller from the
Territory shall be referred to the Buyer. The Seller shall further not quote
for not deliver his goods to any firm outside the Territory for import into the
Territory except with the previous consent of the Buyer and at terms agreed
upon with the Buyer."
5. It
is proper to refer to some of the provisions of the Act.
5A.
Section 2(o) defines "restrictive trade practice":
(o)"restrictive
trade practice" means a trade practice 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 or 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;" In view of Section 10, the
Commission may inquire into any restrictive trade practice
(i) upon
receiving a complaint of facts from any trade association or from any consumer
or
(ii) upon
a reference made to it by the Central Government or a State government, or
(ill)
upon an application made to it by the Director General, or
(iv) upon
its own knowledge or information.
Subsection
(1) of Section 33 which is relevant is as follows:- "33. Registerable
agreements relating to restrictive trade practices.- (1) Every agreement
failing 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) any
agreement which restricts, or is likely to restrict, by any method the persons
or classes of persons to whom goods are sold or from whom goods are bought;
(b)any
agreement requiring a purchaser of goods, as a condition of such purchase, to
purchase some other goods;
(c)any
agreement restricting in any manner the purchaser in the course of his trade
from acquiring or otherwise dealing in any goods other than those of the seller
or any other person;
(d)any
agreement restricting in any manner the purchaser in the course of his trade
from acquiring or otherwise dealing in any goods other than those of the seller
or any other person;
(e)any
agreement to grant or allow concessions or benefits, including allowances,
discount, rebates or credit in connection with, or by reason of, dealings;
(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)any
agreement to limit, restrict or withhold the output or supply of any goods or
allocate any area or market for the disposal of the goods;
(h)any
agreement not to employ or restrict the employment of any method, machinery or
process in the manufacture of goods;
(i)any
agreement for the exclusion from any trade association of any person carrying
on or intending to carry on, in good faith the trade in relation to which the
trade association is formed;
(j) any
agreement to sell goods at 266 such prices as would have the effect of
eliminating competition or a competitor;
(ja)
any agreement restricting in any manner, the class or number of wholesalers,
producers or suppliers from whom any goods may be bought;
(jb)
any agreement as to the bids which any of the parties thereto may offer at an
auction for the sale of goods or any agreement whereby any party thereto agrees
to abstain from bidding at any auction for the sale of goods;
(k)
any agreement not hereinbefore referred to in this section which the Central
Government may, by notification specify for the time being as being one
relating to restrictive trade practice within the meaning of this sub-section
pursuant to any recommendation made by the Commission in this behalf,
(i) any
agreement to enforce the carrying out of any such agreement as is referred to
in this subsection." Clauses (a) to (1) of Section 33(1) specify different
types of agreements, which shall be deemed for the purposes of the Act, to be
agreements relating to restrictive trade practices and shall be subject to
registration, in accordance with the provisions of Chapter V of the said Act.
Section
35 requires the Central Government to specify a day by notification in the
Official Gazette on and from which every agreement falling within Section 33
shall become Registerable under the Act. Section 37 vests power in the
Commission to inquire into any restrictive trade practice, the relevant part
whereof is as follows:- "37. Investigation into restrictive trade practices
by Commission.-(1) The Commission may inquire into any restrictive trade
practice, whether the agreement, if any, relating thereto has been registered
under Section 35 or not, which may come before it for inquiry and, if, after
such inquiry it is of opinion that the practice is prejudicial to the public
interest, the Commission may, by order, direct that - (a) the practice shall be
discontinued or shall not be repeated, (b) the agreement relating thereto shall
be void in respect of such restrictive trade practice or shall stand modified
in respect thereof in such manner as may be specified in the order." The
Commission may inquire into any restrictive trade practice in connection with
any agreement which has been registered under Section 35 or not. If after such
inquiry, the Commission is of the opinion that the practice is prejudicial to
the public interest, the Commission may direct that the practice shall be
discontinued or shall not be repeated and the agreement relating to any such
restrictive trade practice shall be void and shall stand modified in respect
thereof. In view of Section 38(1) the restrictive trade practice shall be
deemed to be prejudicial to the public interest unless the Commission is
satisfied about the existence of the circumstances specified in clauses (a) to
(k) in the said sub-section 1 of Section 38 and is further satisfied that
restriction is not unreason- able having regard to the balance between those
circumstances and any detriment to the public.
6. It
may be pointed out that originally the main part of sub-section (1) of Section
33 said:
"33.Registerable
agreements relating to 267 restrictive trade practices.-(1) Any agreement
relating to a restrictive trade practice falling within one or more of the
following categories shall be subject to registration in accordance with the
provisions of this Chapter,namely:-" By Act No.30 of 1984 that part was
substituted w.e.f 1.8.1984:
"33.
Registerable agreements relating to restrictive trade practices - (1) Every
agreement failing 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 (emphasis supplied) In the
substituted sub-section (1) of Section 33 a deeming clause has been introduced
by the Parliament saying that every agreement failing within one or more of the
categories mentioned in the said subsection (1) shall be deemed, for the purposes
of the Act, to be an agreement relating to restrictive trade practices. While
amending and substituting that part of subsection (1) of Section 33, the
Parliament determined and specified that agreements falling within one or more
of the categories mentioned in clauses (a) to (1) to subsection (1) of Section
33, shall be deemed, for the purposes of the Act, to be the agreements relating
to restrictive trade practices. This was not the position in the original
sub-section (1) of Section 33.
7. The
effect of a statute containing a legal fiction is by now well settled. The
Legislature by a statute may create a legal fiction saying that something shall
be deemed to have been done which in fact and truth has not been done, but even
then Court has to give full effect to such statu- tory fiction after examining
and ascertaining as to for what purpose and between what parties such statutory
fiction has been resorted to. In the well known case of East End Dwellngs Co.Ltd.
v. Finsbury Borough Council, (1952) A. C. 109(B), Lord Asquith has said:-
"If you are bidden to treat an imaginary state of affairs as real, you
must surely, unless prohibited from doing so, also imagine as real the
consequences and incidents which, if the putative, state of affairs had in fact
existed, must inevitably have flowed from or accompanied it..... The statute
says that you must imagine a certain state of affairs; it does not say that
having done so, you must cause or permit your imagination to boggle when it
comes to the inevitable corollaries of that state of affairs." This Court
in the cases of State of Bombay v. Pandurang Vinayak and others, AIR 1953 SC
244 = 1953 SCR 773, Chief Inspector of Mines, and another etc. v. Karam Chand Thapar
etc. AIR 1961 SC 838 = 1962(1) SCR 9, M/s J.K. Cotton Spinning and Weaving
A-fills Ltd. and another v. Union of India and others, AIR 1988 SC 191 =
1988(1) SCR 700, M. Venugopal v. The Divisional Manager, Life Insurance
Corporation of India, Machilipatnam,Andhra Pradesh &
Anr. JT 1994(1) SC 281 = 1994(2) SCC 323 and recently in the case of Harish Tandon
v. The Addl.District Magistrate, Allahabad, JT 1995(1) SC 291, has dealt with in detail the effect of a statutory
fiction and the- limitation of the Court to ignore the mandate of the
Legislature, unless it is violative of any of the provisions of the,
Constitution. So far sub- section (1) of Section 33 is concerned, it mandates
that agree- 268 ments covered under different clauses of sub-section (1) of
Section 33 shall be deemed for the purposes of the Act to be agreements
relating to restrictive trade practices. By the deeming clause one is not
required to treat any imaginary state of affairs as real but to treat the
agreements specified and enumerated in sub-section 1 of Section 33 as
agreements relating to restrictive trade practices. It can be said that
Parliament after having examined different trade practices, has identified such
trade practices which have to be held as restrictive trade practices for the
purposes of the Act. To keep such trade practices beyond controversy in any
proceeding, a deeming clause has been introduced in subsection (1) of Section
33 saying that they shall be deemed to be restrictive trade practices. In this
background, according to us, there is not much scope for argument that although
a particular agreement, is covered by one or the other clause of subsection 1
of Section 33, still it shall not amount to an agreement containing conditions
which can be held to be restrictive trade practices within the meaning of the
Act.
8.
According to Mr. Desai, the learned counsel, who appeared on behalf of the
appellant, inspite of the amendment in subsection 1 of Section 33 , the power
of the Commission or of this Court has in no way been curtailed or abridged and
the Commission or this Court, can examine an agreement for recording a finding
as to whether any of the clauses of such agreement relates to restrictive trade
practices. He pointed out that Section 37 which vests power in the Commission
to examine and investigate any agreement relating to restrictive trade
practices is in two parts, (i) the Commission is required to examine and
ascertain as to whether any of the terms of a particular agreement relates to
restrictive trade practices (ii) if such agreement relates to restrictive trade
practices whether it is prejudicial to the public interest. Unless the finding
is recorded in respect of the agreement in question on both counts, no order
under Section 37 of the Act can be passed.
In
other words, first it has to be examined as to whether the agreement relates to
any of the restrictive trade prac- tices and if the Commission is satisfied
that it relates to one or more restrictive trade practices within the meaning
of Section 2(o) of the Act, then the Commission has to examine as to whether
such agreement is prejudicial to the public interest. The Commission can direct
that the prac- tice be discontinued or should not be repeated or the agreement
or part thereof shall be void, only after the Commission is satisfied that any
of the clauses of the agreement relates to any restrictive trade practice,
within the meaning of Section 2(o) of the Act and such restrictive trade
practice is prejudicial to public interest. In this connection, reliance was
placed on the judgment of this Court, in the case of Tata Engg. and Locomotive
Co. v. Reg- istrar, (1977) 2 SCC 55. From the facts of that case, it will
appear that Tata Engg. and Locomotive Co. (hereinafter referred to as the
'TELCO') used to sell vehicles and had of its own initiative introduced certain
procedures for distribution of its vehicles. It had notified to its dealers the
maximum price for each model of vehicle which they can charge from consumers.
When the vehicles were sold it was the responsibility of TELCO to provide
facilities for servicing and repairing of the vehicles marketed by it. For
that, after sale services had been provided for in different parts of the
country It had a net work of 269 dealers service centres and zonal offices. An
application was filed by the Registrar', Restrictive Trade Agreements, under
Section 10(a)(iii) of the Act before the Commission, for inquiry under Section
37 of the Act into restrictive trade practices alleged therein. Special
grievance in re- spect of territorial restriction and allocation of area or market
for exclusive' dealership was made. It was pointed out to the Commission by the
Registrar, Restrictive Trade Agreements, who had then the power to file an
application before the Commission under Section 10(a)(iii) that some of the
clauses of the dealership agreement, imposed restriction on the dealers in
respect of territories, the maximum price at which goods could be resold, and
in respect of dealing in products of other manufacturers which amounted to restric-
tive trade practice. The Commission held that the practice of allocation of
territories to Telco's dealers was not justified. But this Court said--
"The decision whether 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 person or places or prices. The question is
whether the restraint is, such as regulates and thereby promotes competition or
whether it is such as may suppressor even destroy competition. TO determine
this 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." It was further said in respect of sub-section 1 of Section 33 as
it stood then that it deals with registration of certain types of restrictive
trade practices, which had been prescribed in categories mentioned in clauses
(a) to (1) of sub-section 1 of Section 33 of the Act. It was then said:-
"An agreement will be Registerable, when it will have both the effect of
restricting competition within the meaning of Section 2(o) of the Act and also
deal with the subject matter described in Clauses (a) to (1) of sub- section
(1) of Section 33 of the Act. Clauses (a) to (1) aforesaid describe some
species of agreement which require registration if they are within the genus of
restrictive trade practice defined in Section 2(o) of the Act.
A
practice which is not restrictive under Sec- tion 2(o) of the Act cannot be
restrictive trade practice only because of Clauses (a) to (1) of sub-section
(1) of Section 33 of the Act. Section 33 does not provide statutory
illustrations to Section 2(o) of the Act but only enumerates some types of
trade practices which, if they are restrictive within Section 2(o) of the Act
require registration." Court in the aforesaid judgment on basis of
sub-section 1 of Section 33 as it was then held that a practice which is not
restrictive trade practice under Section 2(o) of the Act, cannot be held to be
restrictive trade practice, only because of clauses (a) to (1) of sub-section 1
of Section 33 of the Act. Again in the case of Mahindra and Mahindra Ltd. v
Union of India, (1979) 2 SCC 529, after making reference to the aforesaid case
of Tata Engg. and Locomotive Co. (supra) it was said:- "It is now settled
law as a result of the decision of this Court in the Telco case that every
trade practice which is in restraint of trade is not necessarily a restrictive
trade practice. The definition of 270 restrictive trade practice given in
Section 2(o) is a pragmatic and result-oriented definition. It defines 'restrictive
trade practice' to mean a trade practice which has or may have the effect of
preventing, distorting or restricting competition in any manner and in clauses
(i) and (ii), particularises two specific instances of trade practices which
fall within the category of restrictive trade practice. It is clear from the
definition that it is only where a trade practice has the effect, actual or
probable, of restricting, lessening or destroying competition that it is liable
to be regarded as a restrictive trade practice. If a trade practice merely
regulates and thereby promotes competition, it would not fall within the
definition of. restrictive trade practice, even though it may be, to some
extent, in restraint of trade. Whenever, therefore, a question arises before
the Commission or the Court as to whether a certain trade practice is
restrictive or not, it has to be decided not on any theoretical or a priori
reasoning, but by inquiring whether the trade practice has or may have the
effect of preventing, distorting or restricting competition. This inquiry
obviously cannot be in vacuo but it must depend on the existing constellation
of economic facts and circumstances relating to the particular trade. The
peculiar facts and features of the trade would be very much relevant in
determining whether a particular trade practice has the actual or probable
effect of diminishing or preventing competition and in the absence of any
material showing these facts or features, it is difficult to see how a decision
can be reached by the Commission that the particular trade practice is a
restrictive trade practice."
9. But
now with the amendment of man part of sub-section 1 of Section 33 with a
statutory fiction the situation has changed. It can be said that clauses (a) to
(1) of Sub- Section 1 of Section 33 provide statutory illustrations of
restrictive trade practices. The framers of the Act have now in clear and
unambiguous words said that every agreement falling within one or more of the
categories specified in clauses (a) to (1) of sub-section 1 of Section 33,
shall be deemed for the purposes of the said Act, to be an agreement relating
to restrictive trade practices and shall be subject to registration in
accordance with the provisions of Chapter V. Now it is no more open to the
Commission or to this Court to test and examine any of the trade practices
mentioned in clauses (a) to (1) of sub-section 1 of Section 33 in the light of
Section 2(o) of the Act, for the purpose of recording a finding as to whether
those types of trade practices shall be restrictive trade practices within the
meaning of Section 2(o) of the Act. This exercise has to be done only in
respect of such trade practices which have not been enumerated in any of the
clauses from (a) to (1).
Only
such trade practices have to be examined in the light of Section 2(o) of the
Act, as to whether they amounted to restrictive trade practices. It need not be
pointed out that both judgments aforesaid of this Court interpreted the scope
of sub-section 1 of Section 33, as it stood prior to the amendment by Act 30 of
1984. But after the amendment of sub-section 1 of Section 33 if an agreement
falls within one of the clauses of the said sub-section, specifying a
restrictive trade practice, then it is no more open to the Commission or to the
Court to say that it shall not amount to restrictive trade practice. Trade
practices enumerated in clauses (a) to (1) of sub-section (1) of Section 33
shall be deemed to have now been statutorily determined and specified as
restrictive trade Practices. Neither the Commission nor the Court can question
the wisdom of the Par- 271 liament for having statutorily determined certain
trade practices as restrictive trade practices unless in this process there is
contravention of any of the provisions of the Constitution. In this background,
if any agreement contains a trade practice which falls in any of the clauses of
sub-section 1 of Section 33 then such trade practice shall be deemed to be
restrictive trade practice and such agreement has to be registered.
10.Now
the question which still remains to be answered is as to whether after the
amendment in sub-section 1 of Section 33 and after registration of an
agreement, the scope of inquiry by the Commission under Section 37 in respect
of the agreement, has been curtailed and the Commission has now to examine only
one question as to whether such practice is prejudicial to the public interest.
ll. On
behalf of the appellant, it was pointed out that Section 37 contemplates and
conceives inquiry in respect of any restrictive trade practice relating to an
agreement which has been registered under Section 35 as well as an agreement
which has not been so registered. As such per- sons who have got their
agreements registered on their own in order to escape prosecution, although in
such agreements there may not be any clause relating to restrictive trade
practices, cannot urge before the Commission, after having got the agreements
registered, that they do not contain any clause relating to any restrictive trade
practice. On the other hand, persons who for one reason or other have not got
their agreements registered under Section 35, will be in an advantageous
position inasmuch as in respect of their agreements, Commission will have to
examine both aspects (i) whether the agreement relates to any restrictive trade
practice (ii) even if it relates to restrictive trade practice, whether the
said practice is prejudicial to the public interest. It is true that under
Section 37, the Commission has been vested with the power to inquire in respect
of agreements which have been registered under Section 35 as well as those
which have not been registered.
But
the fact remains that once the Commission is satisfied that a particular
agreement which has not been registered under Section 35, falls within any of
the clauses from (a) to (1) of subsection 1 of Section 33, then no further
inquiry is to be done, as to whether such agreement relates to restrictive
trade practices or not. The statutory fiction incorporated in sub-section 1 of
Section 33 shall also be applicable in respect of such agreements apart from
the penalty provided under Section 48 of the Act. As such there is not much
scope for discrimination between persons who have got their agreements
registered and those who have not got their agreements registered.
12.It
was also urged that while amending sub-section 1 of Section 33, Section 2(o)
was not deleted or substituted and that has left an apparent conflict between
Section 2(o) and Section 33(1) of the Act. According to us, there is no
conflict between Sections 2(o) and 33(1). Clauses (a) to (1) of sub-section 1
of Section 33 specify such trade practices which have been statutorily recognised
as restrictive trade practices. But there may be other trade practices, not
covered by clauses (a) to (1) of sub-section 1 of Section 33, which can be
examined by the Commission in the light of Section 2(o).
13.It
was pointed out on behalf of the appellant that after the amendment of sub- 272
section 1 of Section 33, there is no forum where a person can show that
although at a first look, it may appear that any of the clauses of the
agreement, relates to a re- strictive trade practice specified in clauses (a)
to (1) of sub-section 1 of Section 33, but such clauses cannot be held to be
covered by any of the clauses. According to us, in this respect a decision has
to be taken by the person who is a party to the said agreement whether to get
such agreement registered under Section 35. But once he gets the agreement
registered, then he is debarred from questioning whether contains any clause
relating to a restrictive trade practice. Sub-section 1 of Section 33 specifies
in different clauses various types of trade practices, which have now been recognised
as restrictive trade practices.
Any
person who is a party to any agreement has to examine the agreement in light of
those clauses. If according to such person, the agreement in question does not
contain any clause relating to any of the restrictive trade practices specified
in clauses (a) to (1), such person need not get the agreement registered under
Section 35. He will be at liberty to satisfy the Commission on that question.
But once the agreement is registered, then such agreement cannot be inquired
into by the Commission, for the purpose as to whether it relates to any
restrictive trade practice; of course inspite of registration of the agreement,
the person concerned can satisfy the Commission that such practice is not
prejudicial to the public interest.
14. At
this stage it shall be proper to refer to Section 38 of the Act. Sub-section 1
of Section 38 also contains a statutory fiction because it says that for
purposes of any proceedings before the Commission under Section 37,a
restrictive trade practice shall be deemed to be prejudicial to the public
interest' unless the Commission is satisfied of any or more of the
circumstances specified in clauses (a to (k) of sub-section 1 of Section 38.
The scheme of the Act appears to be that first it specifies some trade
practices, under sub-section 1 of Section 33, as restrictive trade practices.
Then it has prescribed a forum under Section 37, to inquire as to whether any
such trade practice is prejudicial to the public interest. This question has to
be examined in the light of Section 38 which in many judgments have been
described as 'gateways'. In other words, inspite of a finding that a particular
agreement contains a clause which is related to a restrictive trade practice,
if the Commission is satisfied in respect of the existence of any of the
circumstances specified in clauses (a) to (k) of sub-section 1 of Section 38,
no order under Section 37 is to be passed to desist or discontinue such
practice or to declare any part of the agreement as void.
One of
the circumstances specified in clause (h) of sub- section 1 of Section 38 is:-
"38.(1)(h) that the restriction does not directly or indirectly restrict
or discourage competition to any material degree in any relevant trade or
industry and is not likely to do so;
If the
Commission is satisfied that any practice which has been held to be restrictive
trade practice does not directly or indirectly restrict or discourage
competition to any material degree in any relevant trade or industry then it
can resist passing any order under Section 37 directing the per son concerned
to desist or to discontinue the practice.
It may
be mentioned that in connection with old sub-section 1 of Section 33 in the
case of Tata Engg. and Lo- 273 comotive Co. (supra) this Court pointed out that
the exclusive dealings do not impede competition but promote it.
It was
said:- "The exclusive dealings do no impede competition but promote it.
Such dealings lead to specialisation and improvement in after-sales service.
The exclusive dealership agreements do not restrict distribution in any area or
prevent competition. The customer has the choice of buying any make he likes.
The advantage of exclusive dealership is that a dealer specialises in his own
type of vehicles with all the attending advantages of trained personnel. special
service stations, workshops and spare parts." It was also said that by specialising
in each make of vehicle and providing the best possible service that the
competition between the various makes is enhanced. In that connection it was
also said:- "By making its dealers exclusive to Telco, there cannot be
said to be any prevention, distortion or restriction of competition in the
territory in which a dealer operates, either between manufacturers of the same
type of vehicles or between dealers in these vehicles. Any manufacturer of
vehicles such as those of Telco may manufacture and sell its vehicles in a
territory in which Telco's dealers operate. Any other manufacturer of vehicles
similar to those of Telco is also free to appoint dealers of its choice in the
same territory covered by Telco'-, dealers.
The
channels for outlet for vehicles have not been blocked by the fact that the
dealers appointed by Telco arc exclusive to Telco nor it can be said that Telco
has by its exclusive arrangement with its dealers affected the flow of supplies
of vehicles into the market." Again in the case of Mahindra and Mahindra
Ltd. v. Union of India (supra), it was said that after the Commission is
satisfied in respect of restrictive trade practices then it has to proceed to
consider whether any of the 'gateways' provided in Section 38(1) exist so that
the trade practice, though found restrictive, is deemed not to be prejudicial
to the public interest.
15.In
the light of what has been said above, if the order of the Commission is
examined, it shall appear that the Com- mission has set out briefly the facts
of 15 cases. Then the Commission has pointed out that the Director General in
support of his case has tendered the various agreements.
Thereafter
reference has been made to the affidavits file on behalf of the appellant and
other documents. The real dis- cussion is only in para 40 of the Order under
appeal which is as follows:
"We
have gone through voluminous records and pleadings pertaining to these
enquiries, evidence produced by the parties, oral arguments, written
submissions and cases referred to by the parties and are of the view that no
case for gateways under Section 38(1), as pleaded, has been made out by the Voltas
in these proceedings. Likewise the manufacturer Simtools Limited in RTP Enquiry
No.483 of 1987 has also failed to make out any case for the gateways.
Therefore, we hold that the respondents have indulged into the restrictive
trade practices, as alleged in the Notice of Enquiry, and those practices arc
prejudicial to the public interest in each of the 15 enquiries."
16.
According to us, the Commission was required to go deeper into the matter and
to record findings in respect of different agreements whether the objectionable
clauses of the registered agreements were 774 prejudicial to the public
interest. It need not be impressed that any finding recorded by the Commission
under Section 37 and direction given in terms of clauses (a) and (b) of
sub-section 1 of Section 37 has a far reaching effect. As such every aspect of
the matter is required to be examined in the light of the provisions of
Sections 37 and 38 of the Act before an order to 'cease and desist' is passed
by the Commission.
17.
Accordingly, the appeals are allowed. The impugned order passed in the 15
enquiries by the Commission is set aside and the Commission is directed to
examine the questions involved afresh on the basis of the material produced on
behalf of the parties. It will be open to the Commission to require any of the
parties to adduce further evidence, oral or documentary, in order to enable it
to come to the conclusion one way or the other. In the facts and circumstances
of the cases, there shall be no orders as to cost.
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