Principal,
Apeejay School Vs. The M.R.T.P. Commission & Anr [2001] Insc 531 (9 October 2001)
N. Santosh
Hegde & P. Venkatarama Reddi.Santosh Hegde, J.
This
is a statutory appeal under Section 55 of the Monopolies & Restrictive
Trade Practices Act, 1969 (for short the Act) preferred against the order of
cease and desist passed on 24.4.1991 under Section 37(1) of the Act by the
Monopolies & Restrictive Trade Practices Commission (the Commission).
The
Commission instituted a suo motu enquiry under Section 10(a)(iv) of the Act
vide order dated 11.12.1987 against the appellant alleging 3 specific
violations of the Act. Since the first two charges thus levelled against the
appellant having been found not established, it is unnecessary for us to go
into the facts of those charges. By the impugned order, the Commission held
that the appellant has violated the provisions of Section 2(o)(ii) of the Act,
hence, it had passed the order of cease and desist against the appellant under
Section 37(1) of the Act, as stated above, and has further directed the
appellant to pay interest at the prevalent bank rate on all the securities
collected from the students of the appellant Institution as refundable security
deposit.
The
charge with which we are presently concerned in this appeal, reads thus :
3. The
School is reported to have accepted refundable Security to the extent of
Rs.500/-. The Security does not carry interest and to that extent an
unjustified cost is imposed on the parents of the students to whom education is
being imparted. It also attracts section 2(o) of the M.R.T.P. Act, 1969.
Pursuant
to the issuance of the said charge, a notice of enquiry was issued to the
appellant by the Director General of the Commission enumerating the materials
relied against the appellant in support of the above charge. The appellant had
replied to the said charge stating that it does not carry on any trade or
render any service as contemplated under the Act. It also contended that it has
not indulged in any restrictive trade practice within the meaning of Section
2(o)(ii) or Section 2(r) of the Act nor has it imposed any unjustified costs on
the parents of the students undergoing studies in the School. After hearing the
parties, the Commission held in regard to the third charge that the non-payment
of interest on the refundable security is prima facie objectionable and is a
restrictive trade practice within the meaning of Section 2(o)(ii) of the Act
inasmuch as it brings about manipulations of prices so as to impose on the
consumers unjustified costs and not paying interest on the refundable security
is prejudicial to public interest. Therefore, the Commission passed the
impugned order.
In
this appeal, it is contended on behalf of the appellant that collection of
refundable deposit without payment of interest is a general practice obtaining
in all public Schools and the said practice does not amount to restrictive
trade practice.
Elaborating
this argument, it is contended that the restrictive trade practice is a trade
practice which prevents, restricts or distorts competition in any manner as per
Section 2(o) of the Act. The practice of non-payment of interest on caution
money which is followed by almost all public Schools is an extremely relevant
factor which demonstrates that the said practice does not prevent, distort or
restrict competition in any manner and this relevant fact is not taken note of
by the Commission. Based on this, the appellant contends that so long as this
practice is prevalent in all Schools, the question of the said practice being a
restrictive trade practice within the meaning of Section 2(o) of the Act does
not arise. Therefore, the Commission did not have the power to proceed against
the appellant under Section 37(1) of the Act. It is also alternatively
contended by the appellant that the Commission did not have the power,
authority or jurisdiction under the provision of Section 37(1) of the Act to
direct the appellant to pay interest on the prevailing bank rate on all
refundable securities since Section 37(1) of the Act does not empower issuance
of such direction. It is also contended that the Commission has no jurisdiction
to pass an order of cease and desist under the said Section particularly in
view of the fact that the allegation in the notice of inquiry related only to
imposition of unjust costs by collecting the security deposit without payment
of interest which, assuming it to be true, does not by any stretch of
imagination constitute restrictive trade practice within the meaning of Section
2(o)(ii) of the Act.
The
appellant also strongly placed reliance on two judgments of this Court in Mahindra
and Mahindra Ltd. v. Union of India & Anr. (1979 2 SCC 529) which was
followed by a subsequent judgment of this Court in Rajasthan Housing Board v. Parvati
Devi (Smt.) (2000 6 SCC 104).
On
behalf of the respondents, it is contended that this argument presently placed
for our consideration in this appeal was not raised by the appellant before the
Commission, therefore, the same should not be permitted for the first time in this
appeal.
We are
not impressed with this argument addressed on behalf of the respondents. This
being a statutory appeal and the question raised before us being a question
involving the jurisdiction of the Commission to pass the impugned order, we
reject this objection raised on behalf of the respondents and will proceed to
consider the case of the appellant on merits.
This
Court in the case of Mahindra & Mahindra (supra) had held :
Now,
it is true, as laid down by this Court in the Telco case, that an application
by the Registrar under Section 10(a)(iii) must contain facts which, in the
Registrars opinion, constitute restrictive trade practice and it is not
sufficient to make mere references to clauses of the agreement and bald
allegations that the clauses constitute restrictive trade practice. The
application must set out facts or features to show or establish as to how the
alleged clauses constitute restrictive trade practice in the context of facts.
Bearing
this principle of law in mind, if we consider the complaint of the appellant,
it can be seen that the charge alleged against the appellant is not supported
by the factual matrix so as to make the allegation of restrictive trade
practice as defined in the Act applicable to the appellants case. In the absence
of any material to establish that the practice adopted by the appellant has in
any manner the effect of preventing, distorting or restricting competition, the
question of applying Section 2(o) will not arise. Based on the material
available on record, it is the case of the appellant that this is a practice
which is adopted by almost all public Schools and by adopting this practice of
collecting refundable security deposit without payment would not in any manner
be a restrictive practice, hence, the Commission could not have come to a
contrary conclusion so as to attract the provision of Section 2(o)(ii) or
Section 37(1) of the Act. We find considerable force in this argument. This
Court in the case of Rajasthan Housing Board (supra) while considering the
applicability of Section 2(o)(ii) of the M.R.T.P.Act, following the earlier
decision of this Court in Mahindra & Mahindra (supra) held that in the
absence of any evidence to hold that the appellant (in that case) had indulged
in restrictive trade practice, the direction given by the Commission that the
appellant shall discontinue the alleged restrictive trade practice and not
repeat the same in future, cannot be sustained. While coming to the said
conclusion, this Court in Rajasthan Housing Board (supra) placed reliance on
the following passage in the judgment of this Court in Mahindra and Mahindra
case (supra) wherein it was held :
14. 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 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.
If the
above principles laid down by this Court in the case of Mahindra & Mahindra
(supra) and Rajasthan Housing Board (supra) are to be applied to the facts of
this case, then, we are convinced that the impugned order has to be set aside
solely on the ground that there was no material before the Commission to come
to the conclusion that the appellant by collecting refundable security deposit
without interest has committed any restrictive trade practice within the
meaning of Section 2(o)(ii) of the Act. In the said view of the matter, this
appeal succeeds and the same is hereby allowed. The impugned order is set
aside.
..J.
(N. Santosh
Hegde) ...........J.
(P. Venkatarama
Reddi) October 9, 2001.
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