Hans Ltd. Vs. Union of India & Anr  Insc 215
(8 April 2003)
Kumar & B.N. Srikrishna. Brijesh Kumar, J.
is an appeal preferred by the complainant M/s.Pawan Hans Ltd. against the order
of the Monopolies and Restrictive Trade Practices Commission (for short 'the
Commission'), New Delhi rejecting the complaint preferred against the
respondent no.2- M/s.Lokhandwala Construction Industries Ltd. (hereinafter to
be referred to as 'respondent' only) under Section 10 of the Monopolies and
Restrictive Trade Practices Act (for short 'the Act') for inquiry. The order
refusing to initiate inquiry proceedings under Section 10(a)(i) of the Act has
been dismissed as per the majority opinion of the Commission.
complainant - M/s.Pawan Hans Ltd. needed some flats for its employees at Bombay
and for that purpose issued a tender notice in Times of India dated 4.5.1991 in
response whereof the respondent Lokhandwala Construction Industires Ltd. made
an offer for sale of 40 flats at Kandiwali, Bombay. The respondent, it is said,
had also offered to sell some more flats in Green Meadows. Negotiations, in
regard to the above flats, started between the parties. Offers and revised
offers were exchanged between them. Apart from other conditions it is said to
be agreed that price of the flat would be at the rate of 780 per sq.ft. of the
saleable area. It is also said to have been given out that the respondent would
be able to complete the construction within 12 months of receiving the letter
of intent along with the first instalment.
against the advance payments which were to be made by the complainant, the
respondent is said to have agreed to furnish bank guarantee on release of the
amount by the complainant. The offer was valid up to 31.8.1991.
correspondence, however, ensued raising the question regarding costs as quoted
which also said to have included the cost of bank guarantee. The validity of
the offer was extended up to 31.12.1991. The complainant is also said to have
issued confirmation letter of intent dated 7.1.1992 for purchase of 40 flats.
They had also written for providing bank guarantee towards 5% of the total
consideration by January
25, 1992. But it
appears that there has been one or the other query from either side regarding furnishing
of the bank guarantee etc. It is said that the respondent had again by letter
dated 10.4.1992 asked for some more time to provide bank guarantee. The
complainant also furnished a draft Memorandum of Understanding to the
respondent on 16.3.1992. Certain changes are said to have been suggested by the
respondent in regard to furnishing of the bank guarantee. According to the
complainant though the respondent had agreed to furnish unconditional bank
guarantee regarding the advance release of amount by the complainant but by
letter dated 18.5.1992 they wanted waiver of that condition. Ultimately the
Memorandum of Understanding was not signed, nor bank guarantee was furnished by
the deal fell through. According to the complainant the respondent avoided the
agreement without any lawful cause but with a view to enhance the prices of the
flats. It is further alleged in the complaint that the respondent in order to
cause wrongful gain to itself and wrongful loss to the complainant had backed
out to sign the Memorandum of Understanding. It is averred in the complaint
"the respondent wants to take benefit of the enhanced prices of the flats.
Had the respondent not assured the complainant to furnish the bank guarantee,
the complainant would have negotiated with some other builder for purchase of
the flats". According to the complainant, the respondent exercised
pressure upon the complainant to pay the enhanced prices.
case of the complainant on the basis of the facts indicated above in a
nut-shell is that the respondent manipulated conditions of rendering services
with a view to cause unjustified cost increase to the detriment of the
complainant attracting Section 2(o)(ii) of the Act. Hence a prayer was made to
institute an inquiry and pass an appropriate order including award of
costs/damages so that government agencies like the complainant and others are
prevented from being cheated by adopting the restrictive trade practices by the
respondent. An application for interim injunction was also filed under Section
12(A) of the Act.
case of the respondent is that there was no agreement whatsoever between the
parties for the bank guarantee for the flats in the building 'Reviera'. The
complainant had itself corrected the draft of Memorandum of Understanding and
made the counter-suggestions which never attained the stage of agreement
between the parties.
throughout been only negotiations, offers and counter offers. It was also
indicated that the complainant could not be allowed to plead mistake by
oversight as a ground of enforcing term of unconditional bank guarantee which
was never agreed to between the parties. Some other pleas also seem to have
been raised but suffice it to mention that one of them being that the complainant
if at all could file a civil suit for specific performance of the agreement
etc. but no case of restrictive trade practice is made out merely on the
allegation of refusal by the respondent to enter into an agreement with a term
of unconditional bank guarantee. It was also pleaded that the case does not
fall within the purview of Section 2(o) or Section 33 of the Act.
the Members of the Commission, namely Shri N.C.Gupta, after detailed
discussion, arrived at the following conclusions in paragraph 15 of his order
holding that the complaint is not maintainable. Paragraph 15 of the order of Shri
N.C.Gupta is quoted below :
The negotiations between the parties did not result into a concluded contract
and as such there has been no agreement between the parties.
money whatsoever was paid or advanced by the complainant by way of
consideration or otherwise in continuation or furtherance of the negotiations
for purchase of the flats.
After the negotiations broke down, the flats were sold by the Respondent to
various persons as per details furnished by the Respondent for valuable
consideration and therefore the legal rights of the subsequent purchasers in
the property have come into being; and therefore no order whatsoever can be
passed without adjudicating upon the rights of such persons and making them the
parties to the proceedings.
The flats were sold by the respondent to those purchasers at the same price at
which negotiations for sale of the flats to the complainant were in progress.
Therefore, there is no question of any restriction, limitation or distortion of
competition or any manipulation on the part of the Respondent in terms of
Section 2(o) of the MRTP Act.
There is no plea before us about any alleged restrictive trade practice in
terms of Section 33 of the Act. The plea, whatsoever, is confined to the
alleged practice in terms of Section 2(o) of the Act.
Assuming without admitting that any right accrued in favour of the complainant
as a result of such negotiations the same is a right of a civil nature and the
proper remedy, if any, is by way of civil suit. The Commission has no
jurisdiction in the matter." According to the other Hon'ble Member of the
Commission, at the initial stage it is only to be examined as to whether there
was a prima facie case against the respondent for institution of a regular
inquiry under the provisions of the Act or not. Considering the facts of the
case, it has been observed that it was only on 18th May, 1992 that the respondent had approached the applicant to
consider the modification in the terms relating to bank guarantee for the full
value of the flat based on progressive payment plus a performance guarantee.
But for the condition relating to guarantee, the respondent was prepared to sign
the Memorandum of Understanding. The respondent had also given out that the
applicant could send its confirmation within seven days and that the work which
had already commenced would be completed and they would be able to handover the
possession by May 15,
letter of confirmation was received. Hence the respondent wrote another letter
on June 1, 1992 in reference to earlier letter dated May 18, 1992 saying that
since the period of two weeks had already elapsed and no confirmation of
modification in the condition relating to bank guarantee was received, it would
be presumed that modification was not accepted, in the circumstances it was not
possible to execute the memorandum of understanding.
the respondent started selling the flats on June 8, 1992 at the rate of Rs. 650/- per sq.
ft. The learned Member then observed that the above conduct of the respondent
was suspicious as there could be no occasion to start selling the flats from
June 8, 1992 without waiting for any reply from the applicant and that too at
lesser price whereas agreed price to sell to the applicant was at the rate of
Rs.800/- or Rs,780/- per sq. ft. In the opinion of the learned Member, the
respondent had manipulated the condition of delivery of flat to the applicant in
such a manner as to impose unjustified costs or restriction on applicant.
case, therefore, prima facie would squarely be covered under Section 2(o)(ii)
of the Act. Therefore, it would be a fit case for inquiry.
order of the Commission, however, was delivered by the Chairman of the
Commission Justice A.N. Verma. He agreed with the view expressed by Shri N.C.
Gupta and held that the complaint was liable to be dismissed. It was only a
case of breach of condition of contract, if at all, and would not fall within
the ambit of Section 2(o)(ii) of the Act. It has been observed as follows:-
"A distinction must, in my view, be drawn between a mere refusal of non-fulfilment
of a contractual obligation simplicitor without having any overtones of
preventing or distorting competition in any manner and one involving a
conscious and calculated manipulation of prices or conditions of delivery in
such a manner as to impose unjustified costs or restrictions on the consumer,
and, of course, gaining some advantage for itself. It is only the latter class
of the cases which falls within the mischief of the provision of clause (ii) of
Section 2(o) of the MRTP Act." The learned Chairman, thereafter,
considered the meaning of the word 'manipulation' and took note of the definition
in Black's Law Dictionary, which has been quoted as follows:- "The aptest
definition I could lay my hands on is that to be found in Black's Law
Dictionary (Sixth Edition) in which manipulation is stated to mean :-
Manipulation:- Series of transaction involving the buying or selling of a
security for the purpose of creating a false or misleading appearance of active
trading or to raise or depress the price to induce the purchase or sale by
others. Such acts are prohibited by Sec. 10(b) of the Securities Exchange Act
of 1934, 15 U.S.C.A 781 j See also Wash sale.
as used in provision in Securities Exchange Act of 1934 (15 U.S.C.A 78n (e)
prohibiting use of manipulative practices in tender offers cannotes conduct
designed to deceive or defraud investors by controlling or artificially
affecting price of securities. Schreiber v. Burlington Northern. Inc. 472 U.S. 1, 4, 105 S. Ct.
2458, 2461, 86 L. Ed. 2nd 1".
above background, the Chairman also observed that there was no reason to
disbelieve the explanation of the respondent declining to furnish unconditional
bank guarantee in view of their previous experience with the applicant in
regard to the flats in Green Meadows. He found that there was no question of
manipulation on the part of the respondent in refusing to furnish the
unconditional bank guarantee.
feel it would be appropriate to peruse the definition of the word 'restrictive
trade practice' as defined under the Act. It reads as follows:- "Section
2(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,
tends to obstruct the flow of capital or resources into the stream of
tends to bring about manipulation of prices, or conditions of delivery or to
affect 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."
the definition quoted above it is evident that the conduct of party complained
against should be such which may have the effect of preventing , distorting or
restricting, competition in any manner which may tend to obstruct flow of
capital into the stream of production or may bring about manipulation of prices
or conditions of delivery resulting in imposition on the consumers unjustified
costs or restrictions.
conduct or violation of a condition of a contract between two parties not
resulting in the consequences enumerated above, obviously cannot amount to
restrictive trade practice.
case in hand the negotiations took place between two parties regarding sale and
purchase of flats in "Reviera".
from the initial stage there seems to have been some differences between the
parties in relation to furnishing of the bank guarantee. In that regard letters
were also exchange between them. The applicant wanted unconditional bank
guarantee whereas the respondent was not agreeable for the same and wanted
modification of that condition as suggested in the Memorandum of Understanding
for providing bank guarantee on progressive payment and performance basis. On
failure to reach to any consensus, the respondent wrote back that, in such a
situation, it was not possible to execute memo of understanding. This is how
the negotiations fell through and the contract could not be completed. Even for
the sake of argument, it is accepted that the contract had been completed
without signing of Memorandum of Understanding or any agreement, then too, it
would be nothing more than a mere breach of a condition of an agreement which
may, if at all, give rise to filing of a civil suit, for enforcing that
condition of the contract, or in damages, or as it may be found to lie
according to the law.
facts, it is there on the record that the flats were sold by the respondent at
a lower price as compared to the price which was being negotiated between the
is no averment of facts to substantiate the allegation in the complaint that
respondent wanted to extract higher price from the applicant to benefit itself
or to cause harm to the applicant. It is not understandable in what manner the
complaint of the appellant was covered under Section 2(o)(ii) of the Act. It
cannot be said that the conduct of the respondent was designed or manipulated
in a manner so as to gain some advantage or profit to itself and to impose
unjustified costs or restrictions on the applicant. The facts do not indicate
any devious method adopted by the respondent which could be resulted in its own
advantage and to the disadvantage of the other. It has been observed by the
Commission that the respondent had the unpleasant experience of furnishing
unconditional bank guarantee, in relation to the sale of flats in "Green
Meadows". Instead of unconditional bank guarantee, they only wanted it to
be based on progressive payment and performance guarantee.
refer to a decision reported in 2002 (6) SCC p. 600, Association and Ors., more
particularly to observation made in paragraph 42 of the Judgment, which reads
as follows: - "Section 2(u) does state that "trade practice"
means any practice relating to the carrying on of any trade then it adds that
such a trade practice would include anything done by any person which controls
or affects the price charged by, or the method of trading of, any trader or any
class of traders. The Act and the aforesaid section, in particular, is,
therefore, concerned specifically with the incidence of the restrictive trade
practice within India which in Section 2(o)(i) refers to the obstruction to the
flow of capital or resources into the stream of production, while Section
2(o)(ii) talks of manipulation of prices or conditions of delivery or to affect
the flow of supplies in the market but which must be such as to impose on the
consumers unjustified costs or restrictions. To put it differently, mere
manipulation of prices or conditions of delivery would not be a restrictive
trade practice under Section 2(o)(ii) unless it is done in such a manner so as
to impose on the consumers unjustified costs or restrictions.
of prices cannot be regarded as imposing on the consumers unjustified costs or
restrictions." (Emphasis supplied) In the case in hand, admittedly, after
negotiations failed, the respondent had sold the flats at a lower price to
others. It is, thus, clear that no undue advantage was sought to be extracted
by respondent by dropping the matter, much less from the applicant. There is no
allegation that the respondent had demanded or expected higher price from the
complainant. It is also not the case of the complainant that the respondent
created such a situation which could compel the complainant to purchase the
flats from the respondents on respondent's term to the detriment of the complainant.
applicant could also not compel the respondent to sign the Memorandum of
Understanding on applicant's own terms. The respondent could validly suggest a
change in draft Memorandum of Understanding sent by the complainant and if on
that point the negotiations broke and the transaction fell through the case
would not fall within the ambit of Section 2(o)(i) or (ii) of the Act. We may
observe that the view taken on the point by the Chairman commends approval. Yet
another decision on the point that may be referred to is reported in 1979 (2)
SCC page 529, Mahindra SCC page 55) observing that in absence of relevant and
proper facts, mere use of words as used in the provision, would not be of any
help and it would not constitute restrictive trade practice. In the present
case we find that no such facts have been averred which may be said to have
constituted restrictive trade practice on the part of the respondent.
view of the discussion held above, the appeal lacks merit and it is accordingly
dismissed with costs.