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In Re: Guest Keen Williams Ltd. - Court Judgment

LegalCrystal Citation
CourtMonopolies and Restrictive Trade Practices Commission MRTPC
Decided On
Judge
Reported in(1979)49CompCas816NULL
AppellantIn Re: Guest Keen Williams Ltd.
Excerpt:
.....that the notice of enquiry dated the 10th june, 1976, issued by the monopolies and restrictive trade practices commission (hereinafter referred to as " the commission ") be discharged and that the inquiry initiated as a result of the said notice be terminated or dropped.2. the respondent is a public limited company doing business, inter alia, in the sale and supply of electrical stampings and laminations.the commission started a suo motu inquiry against the respondent under sections 10(a)(iv) and 37 of the monopolies and restrictive trade practices act, 1969 (hereinafter referred to as " the act "), on the basis of their own knowledge and information. a notice of enquiry dated the 10th june, 1976, was issued to the respondent alleging that in the sale and supply of motor stampings,.....
Judgment:
1. This is an application by the respondent praying that the notice of enquiry dated the 10th June, 1976, issued by the Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as " the Commission ") be discharged and that the inquiry initiated as a result of the said notice be terminated or dropped.

2. The respondent is a public limited company doing business, inter alia, in the sale and supply of electrical stampings and laminations.

The Commission started a suo motu inquiry against the respondent under Sections 10(a)(iv) and 37 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act "), on the basis of their own knowledge and information. A notice of enquiry dated the 10th June, 1976, was issued to the respondent alleging that in the sale and supply of motor stampings, fan stampings and standard type laminations, the respondent had been and was indulging in the following restrictive trade practices : " Giving rebate on the selling price for the sale of motor stampings, fan stampings and standard type laminations on the basis of quantity ordered and supplied, i.e. ; 3. It was also alleged in the notice that this trade practice appeared to have or might have the effect of preventing, distorting or restricting competition amongst the buyers of motor stampings, fan stampings and standard type laminations.

4. The respondent filed its memorandum of appearance on or about the 30th June, 1976. It also filed a reply dated the 11th September, 1976, to the notice of enquiry. In para. 4 of its reply the respondent stated that it admitted that it granted a rebate at the rates specified in the notice and the granting of such rebates was dependent upon the quantities of such stampings and laminations ordered by or sold to a particular buyer. It also stated that the rebates were granted uniformly to all buyers of the respondent without any discrimination whatever.

5. The learned Director of Investigation filed a rejoinder dated the 26th October, 1976, to the reply of the respondent. He also made an application for delivery of certain interrogatories to the respondent and also for asking the respondent to discover certain documents. The Commission by its order dated the 30th November, 1976, issued certain directions on the basis of the Director's application. The respondent filed the affidavits in compliance and on 31st March, 1977, also filed an application, which is the subject-matter of this order.

6. The respondent stated in its application dated the 31st March, 1977, that the notice issued to the respondent did not set out any fact or feature which could show or establish how the granting of rebates by the respondent constituted a restrictive trade practice within the meaning of the Act, either generally or in the context of facts and circumstances of the trade, that in view of the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520, an application under Section 10(a)(iii) must contain facts, which in the Registrar's opinion, constituted a restrictive trade practice, that even a notice under Section 10(a)(iv) must contain the facts constituting the restrictive trade practice, that in the present case, no facts constituting the restrictive trade practice had been set out, that the mere fact that the respondent granted rebates to buyers dependent on the quantities of such stampings and laminations sold, would not by itself establish that the respondent was indulging in any restrictive trade practice, unless the necessary facts were set out showing that the respondent's practice of granting rebates had the effect, in any way, of preventing, distorting or restricting competition having regard to the facts and circumstances in the trade in question, and that accordingly the notice was not maintainable and must be dismissed in limine. It was further submitted that it would be a waste of time of the Commission and incurring of unnecessary costs by the parties to proceed with the hearing of the said notice, having regard to the fact that the said notice was not maintainable in law. It was accordingly prayed that the said notice of enquiry dated the 10th June, 1976, be discharged and the inquiry initiated as a result of the said notice be terminated or dropped.

7. The learned counsel for the respondent, in support of the application, pointed out that there had been no reply from the Director of Investigation to the respondent's application, and there was also no application from the Director for amendment of the notice. He contended that the notice was totally blank and did not contain all the constituent facts which were necessary to make a proper notice according to the decision of the Supreme Court in the Telco's case [1977] 47 Comp Cas 520. He referred to the decision of the Commission in the case of Atul Products Ltd. (R.T P.E. No. 24-A/ 1974) [1978] 48 Comp Cas 852 and particularly to paras. 22, 23 and 25 thereof, and contended that the Commission also had held that constituent facts were necessary for every notice, that those facts comprised facts showing how the trade practice was anti-competitive and facts showing the anti-competitive effects, and that, in the absence of any of these ingredients, the notice would be incomplete and had necessarily to be discharged. He contended that the Commission's view that the incompleteness of the notice could be rectified was not correct but that, in the present circumstances, even on the basis of the Commission's own decisions in Atul's case [1978] 48 Comp Cas 852, the notice in the present case must be discharged. He pointed out that discharge of notice and termination of the proceedings at this stage will not prejudice the case against the respondent because a fresh notice satisfying the requirements as spelt out by the Supreme Court could always be issued again by the Commission.

8. The learned Director of Investigation referred to the application made by the respondent and pointed out that the respondent had not prayed for further and better particulars, that the notice did not require any amendment and, therefore, he had not applied for any amendment, and that the reply to the application by the respondent need not be given in writing and that it could effectively be given at the time of the hearing of the application. He referred to the decisions of the Commission in Atul Products Ltd. (R.T. P.E. No. 24-A/1974) [1978] 48 Comp Cas 852, Telco (R.T.P.E. No. 5 of 1975) [1979] 49 Comp Cas 30 and Rallis India Ltd. (R.T.P.E. No. 15 of 1974) (see p. 797 supra) and contended that in the present case the notice was quite self-sufficient, that it set out all the necessary constituent facts and that the facts about the trade practices resorted to by the respondent were admitted by the respondent both in its reply and in its affidavit on interrogatories. He also contended that, according to the Commission's decision in the case of Carona Sahu (R.T.P.E. No. 2/1974) [1976] 46 Comp Cas 431, there was a clear possibility of injury to competition both in the first line and in the second line, i.e., in regard to competition between manufacturers and competition between purchasers of the goods manufactured by the respondent. He also contended that, according to the decisions given by the Commission, any lacuna in the notice could always be made good and did not justify either the discharge of the notice or the termination of the inquiry.

9. The learned counsel for the respondent, in his reply, pointed out that, according to the notice itself the area of competition was clearly set out, that it did not include competition between the manufacturers and that as far as the competition of the second line was concerned, the sales were not to intermediaries but to actual users.

According to him, the notice had omitted to indicate the manner in which the competition was affected by the trade practice, and this, according to him, was a very serious lacuna which could not be made good especially because there was no application for amendment hitherto.

10. I have considered the contentions of the parties with great care and I am unable to uphold the contentions put forward on behalf of the respondent. The principles governing the decisions on whether the notice of enquiry issued under Section 10(a) read with Section 37 of the Act was complete or not and what were the consequences following the lack of completeness in the notice, if any, have been considered by the Commission in its decisions in Atul Products Ltd. (RTPE No.24-A/1974) [1973] 48 Comp Cas 852, Telco (RTPE No. 5/1975) [1979] 49 Comp Cas 30 and Rallis India Ltd. (RTPE No. 15/1974) (see p. 797 supra) in the light of the decisions of the Supreme Court in the cases of Telco [1977] 47 Comp Cas 520 ; AIR 1977 SC 973 and Hindustan Lever Ltd. [1977] 47 Comp Cas 581 ; ATR 1977 SC 1285. It had been held in these decisions by the Commission that : (i) the liability to set out the constituent facts by the complainant or the referor or the applicant Registrar was always there and was in no manner abridged by the decisions of the Commission or the Bombay High Court in the cases of Raymond Woollen Mitts [1979] 49 Comp Cas 686 (Bom) and Crompton Greaves [1979] 49 Comp Cas 757 (Bom) or by any of the Regulations, viz., regln. 35 or (ii) The ratio laid down by the Supreme Court in the case of Telco [1977] 47 Comp Cas 520 was that in an enquiry in the restrictive trade practice the initial responsibility would be on the Registrar to show that the trade practices to which the clauses in the agreement impugned by him related were restrictive in character by reason of the in jury caused by them to the competition and it was only thereafter that the respondent would have to rebut the presumptions which would arise against it regarding the public prejudice as consequence of the trade practices and which it could rebut only by successfully claiming exit through one or more of the gateways provided in Section 38(1); (iii) the Supreme Court did make observations on regln, 55 and its exact implications but it was no part of the decision of the Supreme Court that any omission to give any constituent parts of the application would render it a nullity or that it would automatically fail to disclose the cause of action or that enquiry was liable to be terminated merely by reason of the fact that it did not contain some of the essential components of the application as required under regln. 55 as interpreted by the Supreme Court. All that the Supreme Court laid down was that regln. 55 enjoined on the Registrar to set out facts or features showing how the trade practice alleged had adverse effect on competition in the context of facts.

(IV) In its decision in Hindustan Lever's case [1977] 47 Comp Cas 581 ; AIR 1977 SC 1285, the Supreme Court laid down that in certain cases the very introduction of clauses in an agreement might constitute a restrictive trade practice if on a a reasonable and natural interpretation of the clauses of the agreement and their reasonable possible effects it was found that the introduction of the clauses conferred wide powers which would result in adverse effect on competition. The Supreme Court had no occasion in that decision to consider regln. 35 or the adequacy or otherwise of the notice of enquiry. There was also no suggestion in the decision that responsibility of the Registrar to disclose relevant facts was in any manner relaxed.

(v) The difference in the nature of proceedings between the enquiry before the Commission and the civil suit would not in any manner reduce the Registrar's responsibility to disclose constituent facts.

The only basic requirement, whether of a complaint under Section 10(a)(i) or reference under Section 10(a)(ii) or application under ?. 10(0)(iii) and/or charge sheet under Section I0(a)(iv) was that the charge of restrictive trade practice should be spelt out with sufficient precision so that the other party knew what was alleged against it and was not taken by surprise about the nature of his burden. But all that was necessary was to set out a prima facie case and that prima facie case must indicate the grievance of the complainant or the referor or the applicant about the damaging effect on competition of the trade practice. The source must indicate the constituent facts only and these facts comprised the facts which constitute the cause that brings about the effect on competition, the facts which show the process or chain of causation and the facts which represent the effect on competition.

(vi) If there was a gap or a deficiency or a missing link in the complaint or the reference or the application by the Registrar, the enquiry could not be dropped if the restrictive practice was indicated although in a cryptic or laconic manner and if the sufficiency could be achieved by the procedure permitted by the Regulations of the Commission. The lack of sufficiency would not be fatal to the start of the enquiry unless the lack was so vital as to leave the allegation without any meaning or purpose.

(vii) In regard to regln. 55 as indicated by the Delhi High Court, the question turns on sufficiency of the material. If there are deficiencies in the notice by reason of which it becomes completely meaningless or futile, then of course, the notice must be discharged. But if there are deficiencies which could be made good by resorting to any of the procedures set out in the Regulations, such a drastic step was not necessary. In fact, in similar situations arising under the Code of Civil Procedure, the courts have evolved a test and that test was to find out whether even if all the prayers set out in the plaint were accepted as true, the plaintiff will be non-suited. Applying the same principle to the inquiry under the Act, the test would be if the allegations made in the complaint are assumed to be true, can the inquiry properly proceed against the respondent, and appropriate orders under Section 37(1)(a) and (b) of the Act be passed. The answer to that question will determine the sufficiency or otherwise of the notice.

11. The Supreme Court decision in Telco's case [1977] 47 Comp Cas 520 was concerned with an inquiry under Section 10(a)(iii) and the observations of the Supreme Court, related to the requirement of regln.

55, which applied to inquiry under Section 10(a)(iii). The present inquiry is a suo motu inquiry under Section 10(a)(iv), in respect of which there is no regulation corresponding to regln. 55. But the requirements underlined by the Supreme Court for an application under Section 10(a)(iii) would be equally relevant to the charge sheet contained in the notice under Section 10(a)(iv). When the inquiry is initiated suo motu by the Commission it should undoubtedly conform to the requirements expected from the complainants or the applicant before it. This principle has been followed by the Commission in earlier cases and is in fact borne out in the decisions summarised earlier.

12. Applying these principles to the facts of the present case, it is not disputed that the trade practice had been set out clearly in the notice. In fact, it is not even disputed that the trade practice is being resorted to by the respondent. This trade practice is the practice of granting discounts based on quantities orderd by the customers in respect of motor stampings, fan stampings and standard type laminations. It is also clear that the notice defines the area of competition, viz., the competition between buyers of motor stampings, fan stampings and standard type laminations. There is no hint or suggestion in the notice about the competition between the manufacturers of these products. The suggestion of the learned Director of Investigation that even this aspect of the competition is under review is, therefore, not well founded. But it cannot be suggested that the notice did not define the relevant area or field of competition.

The notice also emphasised the effect on the relevant area of competition. All that it has failed to do is to indicate the manner in which the relevant field of competition is affected. Out of the constituent facts considered necessary by the Supreme Court for satisfying the requirements of the Regulations and of the constituent facts considered necessary by the Commission for all sources of inquiry under Section 10(a), only one set of facts relating to the manner in which the competition is affected or the process according to which the competition is affected or that chain of causation between the trade practice and the effect on competition is not set out in the notice.

The middle term of the syllogism, so to speak, is left out. But applying the test given earlier, it could not be inferred that the notice was completely blank or bald, as alleged by the learned counsel for the respondent. If the allegations contained in the notice were assumed to be true, an order under Section 37(1) could be passed against the respondent. This is the position at which we arrive even by applying the strict test evolved by the civil courts in regard to the disclosure of the cause of action. The position would be stronger still in the case of an inquiry of the kind conducted under the Act, So long as there is material in the notice which would make the inquiry meaningful or purposeful, the inquiry cannot be dropped, although all ways and means possible under the Regulations must be utilised to ensure that the notice indicates with a reasonable degree of precision the charges that the respondent is called upon to meet, the framework of the inquiry is unmistakably defined so as to make it clear to all the parties and the subject-matter of the inquiry is beyond dispute. In the present case, the subject-matter of the inquiry is the restrictive trade practice of discounts based on quantities and the relevant field of competition is the competition between the purchasers of the products manufactured by the respondent. It cannot be suggested that the notice is meaningless or purposeless or that the framework of the inquiry is completely out of joint or the subject-matter is undefined.

The notice is undoubtedly suffering from some infirmity as indicated earlier, but that infirmity is not such as could not be remedied by appropriate action under the Regulations. I do not see any merit in the contention of the learned counsel for the respondent that once there is a deficiency in the notice in respect of one of the components of the notice or complaint or application, the notice would fail and the inquiry will be terminated. This aspect of the matter will depend on the sufficiency of the material in the notice issued or application made or complaint filed. In the present case, the deficiency is by reason of an omission to indicate the manner in which the trade practice has anti-competitive effects as between the purchasers of the products manufactured by the respondent. The Director has not applied for amendment on the assumption that the original notice was quite self-sufficient. The respondent has not applied for further and better particulars on the assumption that the notice was liable to be discharged. Both the assumptions strike me as somewhat extreme in nature. The reasonable course, as often, in such cases, lies in between. I, accordingly, consider this a proper case in which to invoke regln. 70 and require the Director of Investigation to file a supplemental pleading indicating the manner in which the competition between the purchasers of the respondent's products is affected or is likely to be affected by reason of the trade practice of granting discounts based on quantities in respect of the three products. The Director of investigation is accordingly required to file his supplemental pleading on or before July 20, 1977, giving these particulars. There will be no order as to costs.


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