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In Re: Blaze Advertising (Delhi) - Court Judgment

LegalCrystal Citation
CourtMonopolies and Restrictive Trade Practices Commission MRTPC
Decided On
Judge
AppellantIn Re: Blaze Advertising (Delhi)
Excerpt:
.....as declared by the supreme court by reference to section 2(o) of the monopolies and restrictive trade practices act, 1969 (hereinafter referred to as "the act "), and the respondents, therefore, should not be required to comply with the said order. it is also submitted in the alternative that the order of the commission dated 30th september, 1976, may be recalled. it is further submitted that the notice of inquiry dated 1st may, 1976, issued by the commission was bad in law and deserved to be and ought to be revoked or cancelled or discharged and the proceedings in the enquiry be terminated or dropped.3. in order to appreciate the contentions raised in the application, it is necessary to have the background of the case. the respondents are private limited companies doing business in.....
Judgment:
2. This is an application by the respondents in the above noted enquiry claiming that the order of the Commission dated 30th September, 1976, on the application of the Director of Investigation dated August 23, 1976, is not in conformity with the law as declared by the Supreme Court by reference to Section 2(o) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as "the Act "), and the respondents, therefore, should not be required to comply with the said order. It is also submitted in the alternative that the order of the Commission dated 30th September, 1976, may be recalled. It is further submitted that the notice of inquiry dated 1st May, 1976, issued by the Commission was bad in law and deserved to be and ought to be revoked or cancelled or discharged and the proceedings in the enquiry be terminated or dropped.

3. In order to appreciate the contentions raised in the application, it is necessary to have the background of the case. The respondents are private limited companies doing business in the exhibition of advertisement, film shorts and slides in Delhi, Bombay, Calcutta and Madras.

4. A notice of enquiry dated 1st May, 1976, was issued to the respondents in this case under Sections 10(a)(iv) and 37 of the Act and Regulation 58 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974 (hereinafter referred to as " the Regulations"). The relevant portions of the preamble and the substantive part of the notice read as under : " AND WHEREAS the respondents above mentioned have entered into agreements/arrangements for the exhibition of advertisement, film shorts and slides with the owners/lessees of various cinema houses in the country and that these agreements/arrangements, relate to the following trade practices : (i) Securing sole concession from the various cinema houses for exhibiting advertisement film shorts and slides at such cinema houses.

(ii) Imposing restrictions on the cinema houses who have entered into such agreements/arrangements with the respondents not to enter into any other contract with any other party regarding such exhibition of advertisement, film shorts and slides.

(iii) Making the cinema houses liable to refund, the amount of the entire instalment paid or payable by the respondents, besides other compensation, for the loss of revenue, if a breach of the condition mentioned at S. No. (ii) above is noticed.

(iv) Making the cinema houses to forward all enquiries received by them from any party in respect of showing advertisement, film shorts and slides which are received by them during the currency of such arrangement/ agreement with the respondents.

(v) The respondents' right to have the exclusive say in the matter of determination of the exhibition rates.

(vi) Making it an imperative condition that in case of transfer of rights of the theatre/cinema houses with whom agreements/arrangements have been entered into to a third party by way of sale/gift or other alienation or on a theatre or cinema houses being given on lease or on hire for exhibition of feature films, the transferee/lessee or hirer shall be bound aud subject to the agreement/arrangement for exhibition of advertisement film shorts and slides entered into with the respondents.

AND THAT the trade practices referred to above which are being indulged in by the abovementioned respondents by virtue of their agreements/arrangements with the owners/lessees of the various cinema houses are in the nature of restrictive trade practices and have the effect of preventing/distorting and restricting competition amongst proprietors/lessees of the concerned cinema houses/or those who are engaged in the business of screening advertisement, viz., exhibition of advertisement, film shorts and slides in the cinema houses and tend to affect the flow of supplies in the market relating to screen advertisement services in such manner as to impose on the consumers unjustified costs and restrictions.

AND WHEREAS it appears to the Commission that an enquiry under Sections 10(a)(iv) and 37 of the Monopolies and Restrictive Trade Practices Act, 1969, should be made regarding such restrictive trade practices which appear to be indulged in by the above-mentioned respondents.

THEREFORE, in exercise of the powers conferred upon it by Section 10(a)(iv) and Section 37 of the said Act, the Commission has decided to hold an enquiry at its office in New Delhi as to whether the said clauses of the agreements relate to, and the operation thereof constitute the alleged restrictive trade practices and whether such trade practices are not prejudicial to public interest." 5. In response to the notice M/s. Shroff and Co. filed a memorandum of appearance on behalf of the respondents dated May 17, 1976. The reply was due to be filed by the respondents on or before June 14, 1976, but on an application from the respondents time for filing the reply was extended up to July 12, 1976. On July 12, 1976, the respondents filed a reply in which at the conclusion it was stated that since the notice of enquiry dated 1st May, 1976, was based upon the old agreements which did not exist at the date of the notice of enquiry, the respondents were unable to and craved leave not to deal with the notice of enquiry on merits.

6. The Director of Investigation filed his rejoinder under Regulation 69 of the Regulations on August 16, 1976, and on August 23, 1976, he filed an application under Regulation 74 for further directions. On behalf of the respondents a preliminary objection was raised about the jurisdiction of the Commission to continue the enquiry and consequently issuing further directions in respect of the application of the Director of Investigation. The Commission by its order dated 30th September, 1976, overruled the objection observing as under ([1977] TLR 1985, 1987): " There is no reference in the notice to any specific agreement or agreements. There is no question, therefore, of the termination or cessation of these agreements whether by efflux of time or by notice of parties or under any other circumstances. The reference in the notice is to agreements/ arrangements in general. Under the Act 'agreement' includes any arrangement or understanding. The reference to agreements/arrangements would, therefore, include reference to understandings/arrangements. Moreover, reference to agreements/arrangements is a prelude to the central charge, viz., that of restrictive trade practices to which the agreements/arrangements relate. There is also reference to the operation of agreements/ arrangements. These agreements/arrangements, restrictive trade practices, to which they relate and the operation of the agreements/arrangements are subject-matters of inquiry. The inquiry would, therefore, include the questions of existence of the agreements/arrangements, the operation of the agreements/arrangements and the existence of the restrictive trade practices. These questions will turn on relevant facts and circumstances, which will have to be inquired into. They will be determined on an examination of evidence which is brought on record by both the parties. These questions cannot be determined by the mere assertion of the respondent that some specific agreements between the respondents and the cinema owners have been terminated and fresh agreements entered into. The ambit of the inquiry is not confined to any specific agreements. It covers agreements in the wider sense of the term which includes arrangements and understandings. It also includes restrictive trade practices which may or may not exist without agreements/arrangements. It would also include, as stated earlier, the operation of the arrangements. Such an inquiry cannot be stifled by reference to certain agreement referred to by the learned counsel for the respondents. The decision of the Allahabad High Court relied upon by the learned counsel was based on a particular agreement which had expired by efflux of time and it was common ground between the parties in that case that there were no restrictive trade practices involved apart from the clauses of the impugned agreement. The facts in the present case, as discussed earlier, are entirely different, and the ratio of the decision of the Allahabad High Court has no application here. The issues in the present case turn on arrangements and restrictive trade practices and do not hinge on any specific agreement. The issues can be determined only after a full-scale inquiry." 7. The Commission also granted to the Director of Investigation leave to deliver to the respondents interrogatories in terms of annexure-I to his application. The respondents were also directed to make and file an affidavit of documents in Form No. 5, appendix ' C ' to the First Schedule to the Code of Civil Procedure on or before 9th November, 1976. Thereafter, the Commission planned to proceed with the consideration of the application of the Director but there were adjournments on one ground or the other and in the meantime the respondents filed the application dated 2lst March, 1977, which is the subject-matter of the present order. It referred to the decision of the Supreme Court in Telco [1977] 47 Comp Cas 520 (SC) and claimed that the notice of inquiry in the present case dated May 1, 1976, did not contain facts or features which constituted a restrictive trade practice and beyond making a mere reference to some clauses of the obsolete agreements and bald allegations that agreements/arrangements constituted restrictive trade practice, no facts or features were set out in the notice of enquiry to show or establish as to how the agreements/arrangements allegedly constituted restrictive trade practice in the context of facts. It accordingly prayed that the respondents should not be required to comply with the order of the Commission dated 30th September, 1976, because it was not in conformity with the exposition of the law by the Supreme Court of the relevant provisions of Section 2(o) of the Act. It was also prayed in the alternative that the order dated 30th September, 1976, may be recalled.

It was further prayed that the notice of inquiry dated 1st May, 1976, deserved to be and ought to be revoked or cancelled or discharged and the proceedings in the enquiry deserved to be and ought to be terminated or dropped in view of the fact that the notice did not comply with the requirements which appeared to be envisaged by Section 2(o), Section 10(a)(iv) and Section 37 of the Act.

8. The learned counsel for the respondents referred to paras. 12, 13, and 14 of the application dated March 21, 1977, and reiterated the submissions contained therein. He relied on the decision of the Supreme Court in Telco [1977] 47 Comp Cas 520 (SC) referred to earlier and also the decision of the Commission in Atul's case (RRTA v. Atul Products Ltd. [1978] 48 Comp Cas 852). The learned Director of Investigation, on the other hand, contended that the notice clearly disclosed the charge and set out all the constituent facts as required under the decision of the Supreme Court in Telco [1977] 47 Comp Cas 520 and the decision of the Commission in Atul's case [1978] 48 Comp Cas 852.

9. I have considered the contentions of the parties with great care.

The learned counsel for the respondents is quite right in his contention that the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520 (SC) was concerned with the requirements of Regulation 55 which in its turn was concerned with the application of the RRTA as the source of inquiry under Section 10(a)(iii). But the requirements of Regulation 55 as spelt out by the Supreme Court for a source of inquiry under Section 10(a)(iii) would hold good also in respect of requirements for the source of inquiry under Section 10(a)(iv) wherein the Commission initiates the inquiry suo motu on the basis of its own knowledge and/or information. That would only mean that the notice of inquiry issued under Section 10(a)(iv) should contain facts or features showing or establishing how the trade practices alleged were restrictive in character, i.e., to say how the trade practices were interfering with the working of competition in the relevant field. This has already been made clear in the decisions of the Commission in R.T.P.E. No. 24A of 1974, RTPE No. 5 of 1975 and RTPE No. 15 of 1974, in the cases of Atul Products Ltd. [1978] 48 Comp Cas 852, Telco [1979] 49 Comp Cas 30 and Rallis India Ltd. [1979] 49 Comp Cas 797, respectively. It was, however, not possible to agree with the contention of the learned counsel that the notice of inquiry should also contain and set out clearly and unambiguously the source and details of the knowledge or information of the Commission on the strength of which the allegations contained in the notice of enquiry have been made. The question was never in issue before the Supreme Court in Telco's case [1977] 47 Comp Cas 520 since Telco's case was a case of inquiry under Section 10(a)(iii) and the Supreme Court had no occasion to examine the issue whether the source of inquiry should also trace its own source. On the other hand, the Commission in some of its earlier decisions has held that the respondents were not entitled to the information referred to in the notice of enquiry upon which the Commission thought it fit to institute the inquiry, i.e., RTPE No. 27 of 1974 (In re Raymond Woollen Mills Ltd, [1976] 46 Comp Cas 395) and RTPE No. 31 of 1974 (In re Singer-TVS Ltd. [1976] 46 Comp Cas 183).

This view has been upheld by the Bombay High Court in the same cases*.

The contention of the respondents in so far as it relates to the details of the knowledge or information on the strength of which the notice of enquiry was issued has, therefore, to be rejected.

10. Even in regard to the requirements of Regulation 55 in the case of an inquiry under Section 10(a)(iii) and corresponding requirements under an inquiry under Section 10(a)(iv), the prayer of the respondents is misconceived. The decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520 was considered at some length by the Commission in its decisions in the cases of Atul Products Ltd. [1978] 48 Comp Cas 852 and Rallis India Ltd. [1979] 49 Comp Cas 797, mentioned supra and it was pointed out in those decisions that the Supreme Court did make observations on Regulation 55 and its exact implications, but it was no part of the Supreme Court's decision that any omission to give any constituent facts to the application or reference or complaint or charge-sheet would render it a nullity, or that it would automatically fail to disclose the cause of action or the inquiry 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 Regulation 55 as interpreted by the Supreme Court. All that the Supreme Court laid down was that Regulation 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 the facts. The Supreme Court spelt out the exact requirement of Regulation 55 but it refrained from spelling out the consequences of the failure to satisfy fully or in part the requirements so spelt out, for the simple reason that the matter came before it after a finding was given at the end of a full scale enquiry. It was, therefore, not correct on the part of the learned counsel for the respondents to contend that, in view of the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520, the notice and the enquiry started as a result thereof and the interlocutory orders passed in the enquiry were null and void.

11. On the other hand, it has been held by the Commission in the cases of Telco [1979] 49 Comp Cas 30 and Rallis [1979] 49 Comp Cas 797 referred to above that the only basic requirement whether of a complaint under Section 10(a)(i) or reference under Section 10(a)(ii) or application under Section 10(a)(iii) or a charge-sheet under Section 10(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 and all that was necessary was to set out a prima facie case but that prima facie case must indicate the grievance of the complainant or the referor or the applicant or the Commission about the damaging effect on competition of the trade practice. The source must indicate the constituent facts only and these facts comprise the fact which constitutes the cause that brings out the effect on competition, the facts which show the process or chain of causation by which that effect is brought about and the facts which represent the effect on competition. If there was a gap of a deficiency or a missing link in the complaint or a reference or the application by the Registrar or the charge-sheet by the Commission, the inquiry could not be dropped if the restrictive trade 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 far-reaching as to leave the allegation without any meaning or purpose.

12. Applying these principles to the facts of the present case, the trade practices are clearly set out in the notice of enquiry dated 1st May, 1976. The relevant field of competition is also defined, the field covering competition among the proprietors and/or lessees of the cinema houses and competition between those who are engaged in the screening of cinema advertisements, film shorts, and slides in cinema houses. The only deficiency in the notice is the omission to indicate the manner in which the trade practices brought out the adverse effect on the relevant competitive field. This deficiency was not so far-reaching as to make the notice completely meaningless.

13. In similar situations arising under the Civil Procedure Code, 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 nonsuited. Applying the same principle to the inquiry under the Act, the test would be if the allegations made in the notice were 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. This is the position at which we arrive oven by applying the strict test evolved by the civil courts in regard to disclosure of the cause of action, and 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 the respondent is called upon to meet, the frame-work 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. The prayer of the respondents for discharging of the notice or termination of the inquiry cannot, therefore, be entertained and must be rejected.

14. Coming to the prayers relating to the order of the Commission dated 30th September, 1976, it followed that if the inquiry is allowed to proceed all the orders in the course of the inquiry should not be disturbed. In view, however, of the fact that there is some gap in the communication of the constituent facts, to the respondents, I consider it a fit case to invoke Regulation 70 and require the Director of Investigation to file a supplemental pleading indicating the manner in which the competition among proprietors/ lessees of the concerned cinema houses and the competition among those who are engaged in screening the advertisements, film shorts and slides in the cinema houses, is affected. The Director of Investigation is accordingly required to file his supplemental pleading on or before August 26, 1977, giving these particulars. The compliance by the respondents with the terms of the Commission's order dated September 30, 1976, is stayed "till further directions on the Director's supplemental pleadings.


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