1. This is an application by the Registrar of Restrictive Trade Agreements under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act, 1969. The respondent is registered under Section 26 of the Monopolies and Restrictive Trade Practices Act. It is engaged, inter alia, in the manufacture of animal feeds. The Registrar complains that the respondent has entered into agreements with stockists which contain the following clauses; " 2. You have agreed to work as our registered stockist at ............
4. We will furnish you from time to time the current price list for the said merchandise. The prices mentioned in the price list will be exclusive of taxes and levies such as sales tax, octroi, municipal taxes or any other local levies. You will use your best endeavours to promote and increase the sale of our above-mentioned goods within the above area and with a view thereto you will market or sell the said merchandise at the prices specified in the price list after adding octroi or municipal charges, sales tax and local levies payable by you and in that behalf follow the instructions and directions issued by us.
12. You will receive a rebate of 5% on the ex-factory value of the goods or at any other appropriate rate as we may decide from time to time.
15. During the continuance of this appointment, you will not sell, handle or deal directly or indirectly in cattle feed or ready-mixed balanced animal feed stuff or any article of similar nature of other manufacturers or be interested either directly or indirectly in any company, firm or concern manufacturing and/or selling articles similar to our said merchandise.
16. Should you in our opinion commit breach of any of the terms and conditions herein or this arrangement is found unsatisfactory, we reserve the right to cancel this letter of appointment by giving you a fortnight's notice. We are to be the sole judges as to whether your work and/ or this arrangement is satisfactory or not.
21. You are requested to lift a minimum quantity of ......... bags cattle/poultry feed per month from ......... It should be your endeavour to increase this minimum monthly off-take at a reasonable rate every month, thereafter." According to the Registrar, the above clauses in the agreement result in restrictive trade practices of the following nature: (i) Full-line-forcing, (ii) Exclusive dealership.
The respondent filed its reply on 23rd September, 1974, and the Registrar filed his rejoinder on 28th November, 1974.
" 1. Whether the application is not maintainable on any of the grounds set out in paragraphs 2 to 6 of the reply 2. Whether the terms and conditions of the agreement referred to in paragraph 4 of the Registrar's application dated 27th June, 1974, relate to the restrictive trade practices 3. If the answer to issue No. 1 is in the affirmative, whether the respondent is entitled to the benefits of any one of Clauses (a), (b), (c) and (h) of Sub-section (1) read with the balancing provision of Section 38 of the M.R.T.P. Act? 4. To what reliefs, if any, the applicant is entitled?" To-day, Mr.
Desai on behalf of the respondent states that with regard to quantity discount paid by the respondent to its stockists during the year 1974-75, it has been 1% on quantities exceeding 50 tonnes bought in a month and that the amounts actually paid to the stockists are Rs. 857 paid by the Bombay sales office as against Rs. 1,71,000 paid as uniform discount and Rs. 741 paid in the Northen zone as against Rs. 1,08,000 paid as uniform discount.
The respondent closes its case. The Registrar does not wish to lead any evidence. The matter is argued and we pass the following order : (1) Mr. Desai states that in clause 2 of the agreement which is the subject-matter of the present application, after the word " stockists ", there will be a full stop and the remaining part of the paragraph will be deleted.
(2) He further states that in paragraph 4 of the said agreement, the words " within the above area " will be deleted.
(3) He states that some of the clauses of the said agreement have since been revised and the revised clause 4 is reproduced in the statement of the case of the respondent in paragraph 5(g). In that paragraph also the words " within the above area " will be deleted.
(4) In clause 4 of the present agreement, the words are " you will market or sell the said merchandise at the prices specified in the price list". Mr. Desai states that in revised clause 4 of the agreement which has been reproduced in paragraph 5(g) of the statement of the case of the respondent the following words will be added at the end of the revised clause, namely, " you will be free to charge prices lower than those stated in our price list".
(5) Mr. Desai states that in the price lists which are being issued, it is stated that the prices mentioned in the price list are only maximum prices and that the stockists will be at liberty to charge prices lower than those. He says that such statement will continue to appear in all future price lists.
(6) Clause 12 of the said agreement reads as follows: " You will receive a rebate of 5% on the ex-factory value of the goods or at any other appropriate rate as we may decide from time to time." Mr.
Desai has stated before us that the quantity of discount at present being allowed is at the rate of 1 % on the value of goods sold in case of sales to a stockist which exceed 50 tonnes in a month and that only small amounts like Rs. 857 have been paid by the Bombay sales office as against Rs. 1,71,000 paid as uniform discount and Rs. 741 have been paid in the Northern zone as against Rs. 1,08,000 paid as uniform discount. We hold that payment of a discount based on quantity is a restrictive trade practice, but in view of the fact that the rate as well as the amounts of discount paid are negligible the restriction will not directly or indirectly restrict or discourage competition to any material degree and is not likely to do so and will pass under Section 38(1)(h) of the Monopolies and Restrictive Trade Practices Act, 1969. We may, however, add that should the rate of discount or the quantities on which the discount is paid be changed hereafter the new discount may or may not pass through the said gateway.
(7) Mr. Desai states that without prejudice to the respondent's contention that Clause 15 of the said agreement does not constitute a restrictive trade practice the respondent is willing to delete Clause 15 from the agreement. We, however, hold that Clause 15 constitutes a restrictive trade practice and we direct that the said clause shall be void and the practice in respect thereof shall be discontinued and not be repeated.
(8) In our opinion, Clause 16 does not constitute a restrictive trade practice.
(9) Clause 21 of the said agreement does not appear to us to constitute a restrictive trade practice. But the words thereof are capable of leading to a restrictive trade practice. Mr. Desai has agreed that at the end of the said clause the following words will be added, namely, " you will be at liberty to place orders on the company for such quantities of such feed as you may require ".
(10) The respondent will make a report to the Commission within 3 months from to-day on affidavit showing how the statements made and assurances given to the Commission have been carried out. If the same are not carried out, necessary orders will be passed.
(11) The respondent will pay to the Registrar costs of these proceedings fixed at Rs. 1,000.