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In Re: Sarabhai M. Chemicals P. - Court Judgment

LegalCrystal Citation
CourtMonopolies and Restrictive Trade Practices Commission MRTPC
Decided On
Judge
Reported in(1979)49CompCas887NULL
AppellantIn Re: Sarabhai M. Chemicals P.
Excerpt:
.....rights of persons participating in the proceedings, viz., the right to be present, the right to be heard, the right to cross-examine witnesses and the right otherwise to take part in the proceedings, that the right to be heard was only one of the rights and had to be clearly distinguished from the right to otherwise take part in the proceedings.it was further held that there was nothing in the regulations to confine that right to the final hearing. the word used in the regulations was " proceedings " and it would cover the proceedings from the filing of the complaint to the passing of final order under section 37(1). it was also held that it was within the discretion of the secretary of the commission and the commission whether to furnish copies of such documents to the complainant and.....
Judgment:
1. The question for consideration in the present order has arisen because respondent No. 1 in the present case, viz., M/s. Sarabhai M.Chemicals Private Ltd., refused to give a copy of its application.

dated the 24th March, 1977, to the learned counsel for M/s. Jayant Vitamins Ltd. (hereinafter for the sake of brevity referred to as " JV "). It was, therefore, decided to hear hath the parties on the question whether JV had any locus standi in the proceedings before the Commission in R.T.P. Enquiry No. 45 of 1975.

2. Before examining the issue it will be pertinent to give the background of the case. Respondent No. 1 in the inquiry is a private limited company manufacturing fine chemicals, pharmaceutical chemicals, vitamins, etc , in India, and respondent No. 2, viz., M/s. E. Merck Aktiengesselschaft of . West Germany, is a manufacturer of fine chemicals, pharmaceutical chemicals, vitamins, etc., in West Germany.

Respondent No. 1 had entered into an agreement dated 15/24th July, 1969, with respondent No. 2, under . which respondent No. 2 agreed to provide and make available to respondent No. 1 technical and other data and know-how necessary for the manufacture of the products listed in the agreement, numbering over 400, under the terras and conditions set out therein. The Commission issued a notice dated the 25th August, 1975, to respondents Nos. I and 2 for inquiry under Sections 10(a)(iv) and 37 of the MRTP Act, 1969, into certain restrictive trade practices which were alleged to be indulged in by these two respondents, with particular reference to cl. No. 9 of the agreement between them. The said cl. No. 9 read as under : " 9. E.M. agrees that from the date both parties signed this agreement up to the 28th October, 1978, E.M. shall not directly nor indirectly either by itself or by its licensees or agents manufacture within the Union of India any of the LISTED ITEMS and shall not package, sell or distribute such products within the Union of India. E.M., however, shall be free to import into the Union of India any such products and shall be free to package, to sell and to distribute such imported product within the Union of India whether by itself or a licensee or an agent." 3. By a letter dated the 5th September, 1975, the Deputy Secretary of the Commission sent a copy of the notice to JV for its information.

This was because JV had given information to the Commission about the existence of the agreement, Clause 9 of which was impugned in the notice. It was also requested to indicate whether it would like to take part in the proceedings and if so, enter appearance by giving the name of the advocate having an office in Delhi/New Delhi on whom the processes could be served in the proceedings on their behalf. In response to this letter, JV appointed Shri R. H. Dhebar, Advocate, Supreme Court, to file a vakalat-nama before the Commission on its behalf. After some delay, the memorandum of appearance was filed on behalf of JV on or about 31st October, 1975.

4. Respondent No. 1, after filing its memorandum of appearance, filed its reply to the notice on November 4, 1975. The Director of Investigation thereafter filed his rejoinder to the reply by respondent No. 1. In regard to respondent No. 2, the Director applied for ex parte proceedings because it had failed to file its memorandum of appearance and also to file its reply. The Director also applied for directions in respect of respondent No. 1 for making discovery on oath of the documents relating to all matters in question in its power or possession, etc. The Commission by its order dated the 30th January, 1976, directed respondent No. 1 to make and file an affidavit of documents in Form 5 of Appendix C of the Schedule I of the Code of Civil Procedure. It also directed for inspection of documents disclosed. Respondent No. 1 made the affidavit of documents on or about the 27th February, 1976.

5. The Commission by its order dated the 26th April, 1976, framed the following issues : " 1. Whether inquiry is incompetent and without jurisdiction as alleged in paragraph 1 of the reply 2. Whether an individual restriction imposed on an individual manu-fraturer in connection with or as a condition of an agreement setting or assigning patent know-how or similar rights can constitute a restrictive trade practice in law in view of the submissions contained in the amended reply 3. Whether Clause 9 of the agreement dated 15th/24th July, 1969, relates to restrictive trade practices as alleged in the notice of enquiry 4. If the said clause of the agreement relates to restrictive trade practices, whether the respondents are entitled to avail themselves of Section 38(1 )(b), (e), (f) or (h) of the Act, and the balancing clause of Section 38(1) of the Act? 6. The case, however, did not come up for hearing for one reason or the other, and respondent No. 1 made an application dated the 24th March, 1977, making several prayers and, inter alia, the following prayer i "(a) the notice of enquiry dated 25th August, 1975, under Section 10(a)(iv) of the Act be rejected and/or withdrawn and/or terminated and/or dropped." 7. This application is said to have jbeen prompted by the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520 I AIR 1977 SC 973. It is this application the copy of which was denied by respondent No. a to the learned counsel for JV, and it is as a consequence of that denial that the present question has arisen.

8. The learned counsel for JV contended that the Commission had wide powers under Section 18(2), that under that section the Commission could determine the extent to which persons interested or claiming to be interested in the subject-matter of any proceedings before it were allowed to be present or to be heard or to cross-examine witnesses or otherwise to take part in the proceedings, and that under the Section JV had every right to participate in the proceedings in the fullest possible manner. He also contended that it was not open to respondent No. 1 to raise any objection at this stage, because notice to file a memorandum of appearance was issued to JV and, as a matter of fact, the delay in filing of the memorandum of appearance by JV had duly been condoned by the Commission by an order dated the 30th January, 1976, after hearing the parties. In the circumstances, according to the learned counsel for JV, respondent No. 1 was estopped from raising the present objection, and he requested the Commission to direct respondent No. 1 to give a copy of the application, dated the 24th March, 1977, to JV or in the alternative to ask the Director to furnish JV with a copy of the same. He then referred to the whole scheme of the Act with particular reference to the preamble and contended that the whole purpose of the Commission was to ensure that the operation of the economic system did not result in the concentration of economic power to the common detriment and the control of monopolies and the prohibition of monopolistic and restrictive trade practices and to effectuate these purposes the Commission had to exercise its powers under Section 18(2). He contended that there was no lis between the parties, viz., the respondents on the one hand and JV on the other and that the Commission could not be bogged down by rigid considerations which might be relevant in applying the Code of Civil Procedure, and the power given under Section 18(2) cannot be hedged round as if the proceedings before the Commission were proceedings before a civil court. He then referred to regln, 73(5) and contended that the proceedings referred to therein were the entire proceedings from the beginning to the end and that even regln. 73(5) had to be read in the context of Section 18(2) and that in the later part of regln. 73(5) the word " may " has to be equated with the word " shall", and the Secretary of the Commission and the Commission had no alternative but to give copies of the documents mentioned in regln. 73(5) to JV. He also contended that the Commission was a court of original record and, therefore, in any case, JV was entitled to get any papers filed with the Commission in regard to this inquiry.

9. Learned counsel for respondent No. 1 laid great stress on regln.

73(5) and pointed out that out of the several deemed parties referred to in that regulation the Registrar and the Central Government were taken care of by other regulations also and that it was only the complainant and the informant whose position was defined by regln.

73(5), and according to him the rights given to these two were of limited nature. He pointed out that the whole 'scheme of the regulations made clear distinction between deemed parties on the one hand and ordinary or full-fledged or regular parties on the other. He emphasised that respondent could not apply for delivery of interrogatories to or ask for discovery of documents by JV. He also contended that reglns. 72(4) and 73(5) can only be reconciled on the assumption that deemed parties were to be clearly distinguished from regular parties and that while regular parties were entitled to copies of the amendments ultimately accepted, the issue of such copies to informant or complainant was dependent on the discretion of the Secretary or the Commission. He also pointed out that even the right of inspection by the informant or complainant was extremely limited. He pointed out that both under regln. 74(1) and 74(2) the informant and the complainant were not given any right to make any applications for directions. He emphasised that the right of the informant or the complainant was merely a right to be heard and that he could not either lead evidence or cross-examine witnesses produced by either the applicant or the respondent. He also referred to regln. 84 and pointed out that the regulation made it clear that it was only before the passing of the final order that the informant or the complainant had the right to be heard. He also pointed out that apart from being heard all that the informant or the complainant was entitled to do was to approach the Director with whatever request he had and if the request was reasonable in the context of the case, the Director would certainly see to it that the request was put before the Commission at his own request. He pointed out that particularly the informant had no locus standi even under Section 10(a) and that he was not even a recognised source of inquiry. He, however, went on to contend that in essential respects there was no difference between a complainant who was a recognised source of inquiry and an informant who was not so recognised, because once the complaint was processed the proceedings were carried only by the Director of Investigation even in the case of a complaint under Section 10(a)(i). He conceded that in order that the right to be heard to which the informant or the complainant was entitled may be elective or purposeful, it might be necessary in certain circumstances for the Commission to give copies of certain documents to them but that according to him was essentially within the discretion of the Commission under regln. 73(5) and that discretion would be exercised by the Commission according to the circumstances of each case. He referred in this connection to reglns. 12(1) and 12(2) and pointed out that even under these regulations the Commission could exercise its discretion to grant copies subject to provisions of Sections 17, 18 and 60 of the Act. He also pointed out that Section 18(2) itself referred to different modes of participation in the proceedings and that the right to be heard was only one of the modes of such participation in the proceedings, the other modes being the right to be present, the right to cross-examine and the right otherwise to participate in the proceedings. He made it clear that his clients reserved the right to apply to the Commission to debar JV from any participation in the proceedings.

10. The learned Director of Investigation stated that according to the scheme of the Act and the regulations there was a clear distinction between a complainant and an informant, that a complainant was a recognised source of inquiry under Section 10(a) and that an informant was not such a recognised source. He contended that neither a complainant nor an informant had any statutory right to be a party to the proceedings and it was entirely within the discretion of the Commission to decide whether either of them could be a party to the proceedings. He emphasised in this connection that Section 18(2) gave wide powers to the Commission and this power included even the power to determine the extent to which a person could participate in the proceedings. According to him a complainant or an informant was a party with limited, rights. However, he went on to contend that Section 18(2) referred to the right to cross-examine and such a right may in appropriate circumstances be available to the informant. He also contended that regln. 73(5) covered all the proceedings in the inquiry under Section 37 and that it was not confined to the final hearing.

11. Learned counsel for JV in reply contended that the provision in the later part of regln. 73(5) was made for persons who became parties at a later stage of the proceedings. He also contended that Section 18(2) overrode all the regulations and that under the basic provisions of that section an informant had a right to participate in the proceedings.

12. The controversy raised in the present case has been to a certain extent considered in the Commission's order dated the 20th May, 1977, in R. T. P. Enquiry No. 3/1973 [Sivakasi Chamber o] Match Industries v.Western India Match Co.--since reported in [1979] 49 Comp Cas 836 (MRTPC)]. In that case, the question was whether the complainant had a locus standi to make an application for interim injunction in respect of a restrictive trade practice alleged in the complaint made by the complainant. It was held in that case that the entitlement to be heard is a limited right, that Section 18(2) clearly enumerated certain rights of persons participating in the proceedings, viz., the right to be present, the right to be heard, the right to cross-examine witnesses and the right otherwise to take part in the proceedings, that the right to be heard was only one of the rights and had to be clearly distinguished from the right to otherwise take part in the proceedings.

It was further held that there was nothing in the Regulations to confine that right to the final hearing. The word used in the Regulations was " proceedings " and it would cover the proceedings from the filing of the complaint to the passing of final order under Section 37(1). It was also held that it was within the discretion of the Secretary of the Commission and the Commission whether to furnish copies of such documents to the complainant and unless the Commission ordered the Secretary to furnish the copies of the documents he was not entitled to the same. These documents included memoranda of appearance given by the respondents, reply given by the respondents, rejoinder given by the applicant and amendments ordered by the Commission. It was pointed out that while regln. 74(2) provided that the copies of the amendments shall be furnished to all other parties to the proceedings, regln. 73(5) left it to the discretion of the Secretary and the Commission whether the copies of the amendments should be furnished to the complainant. This suggested that the parties referred to in regln.

72(4) were, so to speak, full-fledged parties while parties referred to in regln. 73(5) were parties with limited rights. It was also held that the complainant could not reasonably be included in the category of parties referred to in reglns. 74 and 75 which were concerned with the right of parties to apply for directions, because the complainant could not claim as of right to get even replies of the respondent or the rejoinder of the applicant.

13. As pointed out, it was held that the right to be heard was not confined to the final hearing and at any stage of the proceedings, which from his point of view was crucial the complainant could make an application for being heard and according to the merits of the application the Commission might or might not allow his submissions.

The fate of his submissions, it was held, would depend on the nature and relevance of the submissions, on his own credentials as complainant, on the nature of the original complaint, the nature of the restrictive trade practice alleged, the stage of the inquiry at which the request was made, the ground given for the request, etc. In that particular case, it was held that the complainant's right to be heard included the right to submit to the Commission that an interim injunction should be issued if the inquiry on which the Commission had embarked was not to be defeated or the damage likely to be caused by the perpetuation of the restrictive trade practice was to be effectively halted.

14. In the present case, the claimant is not a complainant who could be a valid source of inquiry under Section 10(a)(i). It may best be described as an informant for the purpose of regln. 73(5). As a matter of fact, the Act does not recognise any entity called informant. It only recognises persons interested or claiming to be interested in the subjept-matter of any proceedings. The Commission will, therefore, have to decide whether any informant in any case is a person interested in the subject-matter of proceedings or whose claim to be interested in the subject-matter of the proceedings is well founded. The interest in the subject-matter of the proceedings will necessarily have to be evaluated by reference to the subject-matter of the proceedings. This evaluation will have to be done separately for each proceeding and if a proceeding has more than one subject-matter for each subject-matter of that proceeding, and the right to be heard which the informant acquires under regln. 73(5) will be conditioned by the extent and the nature of his interest in the subject-matter of the proceedings as determined by the Commission. It is not as if the informant has an inherent or fundamental right to participate fully in the proceedings before the Commission. At every stage, for every proceeding the informant will have to establish his interest in the subject-matter and then exercise his right to be heard in the context of that interest. At the final hearing, his right to be heard would be more or less undoubted because the inquiry would have been started in respect of a restrictive trade practice by which he is victimised but then that right is only the right to be heard, that is to say, to state his point of view regarding the restrictive trade practice alleged to have been indulged in by the respondent. But at interlocutory stages, his right to be heard will be conditioned by the nature and extent of his interest in the subject-matter of the proceedings. His right to be heard will at the threshold be the right to be heard about his interest in the subject-matter of particular proceedings and only if he satisfies the Commission about the soundness of his interest in the subject-matter of the proceedings, the Commission will hear him on the subject-matter of the proceedings.

15. In this connection, it has got to be borne in mind that there is an essential difference between the status of a complainant and that of an informant. The complainant is a recognised source of inquiry under Section 10(a)(i). It has to satisfy certain statutory requirements laid down under Section 10(a)(i) and even then the legislature has taken care to provide for a screening process. If the complaint even from a group of consumers satisfying the statutory requirements is found to be flimsy or frivolous no inquiry can be started. This shows the anxiety of the legislature not to clothe even the complainant with the authority to trigger off an inquiry. The position of the informant is much less authentic. He was obviously not qualified even to register a complaint under Section 10(a)(i). He can only bring some facts to the notice of the Commission which the Commission after proper scrutiny may find good enough to start an inquiry under Section 10(a)(iv). But the information on the strength of which the Commission starts the inquiry becomes the Commission's own knowledge or information. The informant is, therefore, one place removed from the source of inquiry. He could be said to set in train the inquiry only by proxy. He is not in the arena of conflict as the complainant is. He is only an interested spectator. His right to be heard, therefore, is more limited than that of the complainant. His right to get the documents specified in regln.

73(5) will also be greatly circumscribed by his position and by the nature of his interest in the subject-matter of the proceedings.

16. It was not possible to accept the contention of the learned counsel for JV that just because its memorandum of appearance was accepted somewhat belatedly its right to participate in the proceedings was conceded either by the respondent or by the Commission. Regulation 73(5) clearly gives JV, , as an informant, the status of a deemed party and the right to be heard in the proceedings. In order to exercise that right it had to file a memorandum of appearance. It is important to note that under regln. 65 only the respondent has an obligation to enter appearance and there is no mention there either of the complainant or the informant. But for both the complainant and the informant, it would be necessary by parity of reasoning, that if they wanted to be heard in the proceedings, they had necessarily to file a memorandum of appearance. The filing of memorandum of appearance and acceptance thereof only ensured the informant's right to be heard under regln, 73(5) and nothing more.

17. Nor was it possible to accept the contentions of the learned counsel for JV that under the basic provision of Section 18(2) it was entitled to full participation in the proceedings. Section 18(2) no doubt gave wide powers to the Commission to regulate its own proceedings but it was in exercise of that power read with the power given under Section 66 that the Commission had framed the Regulations and provided a drill which had to be followed for the purpose of several proceedings before the Commission. The Regulations contained under Chap. IX provided a complete code or drill for an inquiry under Section 37, and till those Regulations are replaced they governed the rights and obligations of parties in the course of an inquiry under Section 37. There is nothing in the Regulations which is repugnant to the provisions of Section 18(2) and, therefore, the Regulations must govern the rights and obligations of the parties. The reference to the general purposes of the Act were also somewhat out of place. It is true that the Commission's main objective is to eliminate concentration of economic power to the common detriment and to control monopolistic and restrictive trade practices. At the same time, the legislature was anxious, as is clear from the provision of Section 11, that before an inquiry is started the Commission must satisfy itself that the complaint deserved to be inquired into, even though the complaint was made by an association with at least 25 members or a group of 25 consumers. It followed that it required greater circumspection and more caution in starting an inquiry at the instance of persons not recognised as proper sources of inquiry, and that circumspection and caution had necessarily to be exercised while pursuing the inquiry under Section 37 within the framework of the Regulations. The idea is that though all manner of information which would lead to the identification and control of restrictive trade practices should be welcomed, the process of the Commission should not be allowed to be used for settling personal scores or even commercial disputes which have no direct bearing on the restrictive trade practices. In other words, the participation of the complainant or the informant in the proceedings of inquiry was welcome only in so far as it subserved the public interest.

18. Applying these principles to the controversy before us it was not possible to say that JV had any interest in the subject-matter of the proceeding set in motion by the respondent's application dated the 24th March, 1977. That application was provoked by the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520. There have been several such applications by several respondents before the Commission in several inquiries. The main thrust of the attack is against certain alleged defects in the notice of enquiry. The application, in short, is ventilating grievances against notice issued by the Commission. It is true that the informant would be interested in the proceedings going on. But, as far as the validity or the adequacy of the notice is concerned, he is not at all in the picture and he is not concerned with the semantics of the inquiry with which only the Commission, the Director of Investigation and the respondents were concerned. If the notice was completely blank or meaningless or purposeless the inquiry would be discontinued. If the notice could be repaired or amended by appropriate action under the Regulations, whether by the Commission or by the respondent or by the Director of Investigation, no submission on the part of the informant was going to make any difference. The interest of JV in the subject-matter of the proceedings relating to the application by the respondent dated March 24, 1977, is not at all established and is in any case too remote to justify its right of being heard, and consequently its claim for getting a copy of the application. Its right to be heard in other proceedings will be determined by the nature and extent of its interest, if any, in the subject-matter of the other proceedings.

19. There will be no order as to costs. The respondent's application dated the 24th March, 1977, is now fixed for hearing on--------. (sic)


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