1. This is an application under Section 37(2) of the Monopolies and Restrictive Trade Practices Act filed by respondents Nos. 1, 3 and 4 who are the distributors of the products of the respondent No. 1 for the Northern India region. The respondent No. 1 is producer of seamless tubes and pipes made by continuous welding process. The application is for approval of a scheme proposed by the respondents Nos. 2, 3 and 4 by way of taking steps necessary to ensure that the trade practices alleged against them are no longer prejudicial to the public interest.
The facts leading to the present application may be briefly stated.
2. On 3rd November, 1972, Delhi Pipe Dealers Association filed a complaint before this Commission purporting to be under Section 10(a)(i) of the Monopolies and Restrictive Trade Practices Act alleging that the respondent No. 1 and its 3 distributors in the northern region, namely, the respondents Nos. 2, 3 and 4, were indulging in certain restrictive trade practices. As required by Section 11, before issuing any notice, the Commission referred the matter to the Director of Investigation for preliminary investigation for the purpose of satisfying itself that the complaint required to be inquired into.
After the preliminary investigation, the Director of Investigation made a report in which the respondent No. 1, the Indian Tube Co. Ltd., has been completely exonerated from indulging in any restrictive trade practice. But the report found that the respondents Nos. 2, 3 and 4 were with the support of some of the officers of the respondent No. 1 indulging in certain restrictive trade practices. Accordingly, on 8th January, 1974, this Commission ordered an inquiry and issued notice to the respondents. The respondent No. 1 was made party as it was the producer of the goods in respect of which the restrictive trade practices were alleged to exist and in any scheme of distribution which might ultimately be framed its presence would be required. Its presence was also necessary because there were allegations against some of its officers. I must again emphasise that as the result of the investigation carried out by the Director of Investigation there is no charge against the respondent No. 1 of indulging in any restrictive or other unfair trade practice.
3. The report found that the respondent No. 1 had 3 distributors for sale of its products for the Northern India region including the Union Territory of Delhi. These distributors did not normally book orders from dealers and consumers in writing and in rare cases when they did so the commitments were not honoured, that on verbal commitments the dealers were made to suffer losses by manipulation and uneconomic deliveries by the distributors, that the dealers were made to accept deliveries outside the State of Delhi, that the dealers in Delhi who had ordered their goods to be despatched to Delhi were billed from Calcutta office of the company and were made to undergo onerous burden by way of Central sales tax and insurance charges, that the distributors did not maintain any stock book, that if the dealers wrote to the distributors for getting their requirements booked such letters were neither acknowledged nor replied to, that the distributors had floated some concerns and distributed the quota of pipes given to them by the company to the firms floated by them.
4. The respondents entered appearance but have not yet filed their statements of the case. In the meanwhile the respondents Nos. 2, 3 and 4 have filed the present application for the approval of the Commission to the scheme of distribution proposed by them which according to these respondents will eliminate the restrictive trade practices complained of in the notice issued to them. On 18th March, 1974, the respondent No. 1 wrote to the Commission stating that it had seen the scheme proposed by the respondents Nos. 2, 3 and 4 and that the scheme had the approval of respondent No. 1, that the respondents Nos. 2, 3 and 4 had assured the respondent No. 1 that the respondents Nos. 2, 3 and 4 will implement the scheme fully. The respondent No. 1 has stated that it will supervise the operation of the scheme and take appropriate action against any defaulting distributors. It has also agreed to report to the Commission on the working of the scheme at the end of the year. Mr.
Ginwala, appearing for respondent No. 1 has stated before me that although the respondent No. 1 was not party to the alleged restrictive trade practices, it was a party to these proceedings and the scheme submitted by the respondents Nos. 2, 3 and 4.
5. The scheme briefly provides that a year would be divided into four quarters beginning 1st April, 1st July, 1st October and 1st January.
The distributors have agreed to maintain an order book and to open the same for registering the orders of the dealers in the first month of each quarter for delivery within the quarter, for 60% of the quantity likely to be available from Indian Tube Co. The remaining 40% would be delivered to the consumers in accordance with the written orders which would also be entered in the order book. The distributors have also agreed to maintain a stock register and to acknowledge all orders received under a serial reference number and to send a copy to the Delhi office of the respondent No. 1. The stock register would show sizes and quantities received from the respondent No. 1 and sizes and quantities committed to various customers. The stock register will show uncommitted balances at the end of each day for dealers and consumers separately. Dealers' orders in excess of 60% of the expected supply for the quarter will be declined in writing. Correspondence files would be maintained for each quarter. The stock register, order book and correspondence files will be open to inspection, by the Delhi office of the respondent No. 1. The scheme provides for dealers being registered sales-tax payers. A consumer has been reasonably defined in the scheme.
The scheme provides that the expected supplies in any particular quarter are to be indicated by the respondent No. 1. The scheme also provides for carry-over to the next quarter of any quantities booked but not supplied in the previous quarter. Under the scheme the deliveries are to be strictly in order of sequence of entries in the order book.
6. The acceptance of the scheme has been objected to by the Delhi Pipe Dealers Association--the complainant on whose initiative the preliminary investigation leading to the present inquiry was started.
The gravamen of the complaint of the Delhi Pipe Dealers Association against acceptance of the scheme appears to be that it is left out of the distribution scheme. Its view-point is that the best scheme would be to distribute through the Association. I am afraid unlike the relationship between a workman and an employer under the industrial legislation, the producer is still free to choose his own distribution channels. It is not the function of the Commission to substitute its own judgment or wisdom in the place of the judgment or wisdom of a producer on the question of how to carry on the business. The Commission cannot help the Delhi Pipe Dealers Association to get distributorship of the products of the respondent No. 1. The Association has also objected to the limitation of quantities for which the orders are to be booked but this would appear to be necessary in view of the fact that the respondent No. 1 appears to be the sole producer in India of seamless tubes and pipes made by continuous welding process and not only the entire product is in short supply but some of the popular sizes are more so. The limitation of quantities for which orders could be booked will, therefore, appear to be in the interest of the fair distribution of these sizes and products.
7. On behalf of the Registrar, Restrictive Trade Agreements, Mr.
Sanghvi has taken several objections to the acceptance of the scheme.
These objections have been taken in writing and filed in the office of the Commission on 10th April, 1974. The first objection is that the application under Section 37(2) is filed only by the respondents Nos.
2, 3 and 4 and is bad for non-joinder of respondent No. 1. I am afraid there is no substance in this contention. It is open to any party to the proceedings to make an application under Section 37(2). The respondent No. 1 is a party to the proceedings, has appeared and supported the application in writing and has also agreed to perform the role assigned to it in the scheme.
8. The next objection taken on behalf of the Registrar of Restrictive Trade Agreements is that unless an inquiry is held under Section 37(1) and as a result of such inquiry the Commission is of the opinion that the practice is prejudicial to the public interest, the Commission cannot entertain an application under Section 37(2). It is further contended that it is only when such an inquiry is completed that instead of making an order under Section 37(1) the Commission may permit the party to any restrictive trade practice to propose a scheme which would ensure that the trade practice is no longer prejudicial to the public interest. I am afraid I cannot accept this contention also.
In the making of an application under Section 37(2) is an assumption that there is a restrictive trade practice in existence which is prejudicial to public interest. It is only on the basis of this assumption that an application can be made under Section 37(2) and instead of making an order under Section 37(1) the Commission can approve a scheme which would eliminate the restrictive trade practices or to make the trade practice no longer prejudicial to the public interest. In my opinion the scheme could be approved on the assumption of the existence of a restrictive trade practice and it would not be necessary to go through the entire gamut of an inquiry and come to a conclusion as to the existence of a restrictive trade practice prejudicial to public interest before a scheme could be approved. Such a view would result in avoidable waste of time in many cases. It has further been argued that under Section 37(2) only a party who is a party to the restrictive trade practice would have the right to apply and respondent No. 1 not being a party to the restrictive trade practice is not entitled to be a party to the scheme. It appears to me that it is for this very reason that the respondent No. 1 has not made the present application. It denies that it is a party to any restrictive trade practice. On the assumption of the existence of restrictive trade practice as alleged against respondents Nos. 2, 3 and 4 these respondents have filed an application seeking approval of their scheme. There is no restriction on the respondent No. 1 agreeing to supervise the enforcement of the scheme proposed by the respondents Nos. 2, 3 and 4. Apart from the objections taken in the Registrar's reply to the application under Section 37(2), Mr. Sanghi on behalf of the Registrar introduced a matter of certain agreements not filed by the respondent No. 1 while contending that they were not liable to be registered on the ground that they did not contain any restrictive trade practices, I am afraid these are matters extraneous to the scope of this enquiry. This inquiry is not based on any of those agreements, and the Registrar will certainly be free to take such steps as he likes in respect of the agreements referred to by him.
9. It has also been contended on behalf of the Registrar that the scheme does not ensure that the restrictive trade practices will be eliminated. It was further contended that the scheme should be published so that the other consumers in the country should be given a chance to make their comments on the scheme. I am afraid this would enlarge the scope of this inquiry and make it interminable.
10. It was further contended that Section 37(2) envisaged that a time should be stipulated for taking the necessary steps and no order should be made in respect of the trade practices until the Commission is satisfied that necessary steps have been taken to eliminate the restrictive trade practices. In my opinion in this matter the necessary steps are the preparation of a scheme, the implementation of which will be supervised by the respondent No. 1. The necessary steps have been taken. If after the scheme is implemented, there are still restrictive trade practices, Section 10 of the Monopolies and Restrictive Trade Practices Act will always come to the rescue of those who are aggrieved. Although these contentions are not taken in the written reply, I permitted Mr. Sanghi to argue them. But 1 find no substance in these contentions.
11. Mr. Ginwala appearing for the company supported the application.
He, however, stated that he was doing so without prejudice to the contentions that the respondent No. 1 might take in case the scheme was not approved. None of the respondents have filed a statement of the case and there is no doubt that if the scheme is not approved it will be open to the parties to take such contentions as are available to them in law in their statements of the case. Mr. Ginwala particularly took the contention as to the jurisdiction of the Commission against his clients. He also contended that even the allegations made against the respondents Nos. 2 to 4 do not constitute any restrictive trade practices.
12. Mr. Ginwala challenged the locus standi of the Registrar in these proceedings. According to him the Registrar has no locus standi. He argued that under Section 34 the Registrar had been assigned some statutory duties and his appearance in and conduct of these proceedings is not one of those. I am afraid this contention loses sight of Section 66(2)(d) of the Monopolies and Restrictive Trade Practices Act under which this Commission may by regulations prescribe duties and functions of the Registrar. Under the regulations framed by the Commission the Registrar has been assigned the duty of carrying on proceedings such as these. These duties are in addition to those prescribed by the statute.
The Registrar has, therefore, locus standi.
13. Mr. Shah on behalf of the respondents Nos. 2, 3 and 4 also challenged the locus standi of the Registrar and complained that the learned counsel for the Registrar argued more on behalf of the Delhi Pipe Dealers Association than on behalf of the Registrar. Nothing, however, turns on this argument because once the Registrar has locus standi to address the Commission it is open to him to deal with every aspect of the matter in the public interest.
14. I have carefully examined the scheme proposed by the respondents Nos. 2, 3 and 4 and supported by respondent No. 1 who have also agreed to implement it and I am of the opinion that the scheme does ensure that the trade practices will no longer be prejudicial to the public interest and it is not necessary to go through an inquiry under Section 37(1) and to make an order thereunder. I, accordingly, approve the scheme and permit the same to be implemented. In terms of the scheme the respondent No. 1 will report to the Commission at the end of a year from the date on which the scheme comes into force. The scheme comes into force and will be implemented with effect from 1st May, 1974, instead of 1st April, 1974, as proposed in the scheme, because we are already on 11th April, 1974. There will be no other order in this inquiry.
15. Mr. Vasudevan, on behalf of the Delhi Pipe Dealers Association, applied that he should be furnished with a copy of the report of the Director of Investigation. I am afraid this cannot be furnished to him as this is not in evidence. Report of the Director of Investigation is taken on file during the hearing of an inquiry and only then the parties would be entitled to a copy or those portions of the report which are admitted into evidence. Mr. Vasudevan also suggested that the Delhi Pipe Dealers Association should be allowed to have inspection from time to time of the stock register, order book, correspondence files to be maintained by the distributors. I am afraid the duty of the Delhi Pipe Dealers Association has ended on the acceptance of this scheme and they have no locus standi to inspect the books and other papers of the distributors of the respondent No. 1.
16. In the circumstances of the case, there will be no order as to costs.