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In Re: Anil Hardboards Ltd. and - Court Judgment

LegalCrystal Citation
CourtMonopolies and Restrictive Trade Practices Commission MRTPC
Decided On
Judge
Reported in(1979)49CompCas278NULL
AppellantIn Re: Anil Hardboards Ltd. and
Excerpt:
.....made clear either on the front page or on the first page that the prices set out were the maximum prices and prices lower than the maximum prices could be charged by the dealer or distributors. (viii) respondent no. 1 will send a copy of the price list, if any, issued after the date of this order and also the list of its distributors to the director of investigation. (ix) the respondents will file affidavits of compliance with the terms of this order on or before 1-5-77. copies of the affidavits shall also simultaneously be sent to the director of investigation, (x) there will be no order as to costs." 5. it may be pointed out that the terms of the order were settled on 2nd march, 1977, and the matter was adjourned to march 15, 1977, to enable the counsel to take instructions from the.....
Judgment:
Order on the applications dated the 17th June, 1977, and 23rd October, 19771 from respondents Nos. 1 and 2.

1. These are applications by respondents Nos. 1 and 2 seeking amendments to the Commission's order dated the 18th March., 1977, which was passed by the Commission on the 'footing that all the three respondents were willing to submit to an order by the Commission without prejudice to their contentions that the respondents were not resorting to any restrictive trade practices but on the assumption that conditions for passing an order under s. 37(1) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act "), existed.

2. This was an inquiry started suo motu by the Commission under Sections 10(a){iv) and 37 of the Act. The first respondent is a limited company doing business, inter alia, in hardboards, respondent No. 2 is doing business in hardboards in New Delhi and respondent No. 3 is a private limited company having its head office in Bombay and doing hardboard business at Madras. As far as the subject-matter of the present order is concerned, respondent No. 3 is not in the picture at all.

3. On the basis of its own knowledge and information the Commission had issued a notice dated October 16, 1976, to the three respondents making the following allegations : Respondent No. 1 has assigned specific areas for the distributors/stockists for the sale of their products.

(i) The agreement dated 13-4-72, with its validity as extended, between respondents Nos. 1 and 2 provides at para. 6 as under : ' The chief stockists will be supplied with the materials as per the price list in force and the chief stockists agree to sell the same at the prices .applicable to the consumers mentioned in the company's price list to the best of their ability.' (ii) The agreement dated 21-10-74 between respondents Nos. 1 and 3 at para. 6 provides as under : ' The prices of the hardboard will be on par with those of Western India Plywood effective from time to time and for the time being it has been agreed as under : Hardboards large size 4' x 4' and above 60 paise f.o.r. destination.

. Hardboards smaller size 4' x 4', 58 paise f.o.r. destination. At present as indicated by you and verified by us, the price of Western India Plywood is 0'62 paise sq. ft. for standard size.' (c) (i) Respondent No. 1 giving a trade discount of 5% on orders of value of Rs. 5,000 or more for supply at a time.

(ii) Respondent No. 1 giving graduated bonus to authorised stockists/ dealers on the basis of annual turnover, i.e., 4. There was no reply from respondents Nos. 1 and 2 to the notice although respondent No. 3 filed its reply dated February 21, 1977. At the hearing on March 15, 1977, however, the learned counsel for all the three respondents stated that without prejudice to their contentions that the respondents were not resorting to any restrictive trade practices but on the assumption that conditions for passing order under Section 37 existed, the respondents were willing to submit to an order by the Commission. The Director of Investigation, while reiterating his stand that the respondents were indulging in restrictive trade practices referred to in the notice by the Commission, had no objection to an order being passed on that basis. Accordingly, an order was passed on 18th March, 1977, incorporating the following terms : " (i) Respondent No. 1 is restrained and prohibited' from allocating any area or market for the disposal of its goods.

(ii) Respondents Nos. 1 and 2 are restrained and prohibited from selling goods on condition that price to be charged on resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that the prices stipulated were the maximum prices and the dealer or the purchaser was free to resell them at prictes below the maximum prices.

(iii) Respondent No. 1 is restrained and prohibited from fixing the prices of hardboard at which it will sell them to respondent No. 3 in a manner different from that determined by free forces of the market.

(iv) Respondent No. 1 is restrained and prohibited from granting or allowing concessions or benefits including bonus, trade discounts, rebates, etc., in connection with or by reason of dealings.

(v) The provisions in the agreement or arrangements between respondent No. 1 on the one hand and respondents Nos. 2 and 3 on the other hand shall, in so far as they relate to restrictive trade practices indicated in the notice, be void.

(vi) The restrictive trade practices referred to in the notice to which the provisions in the agreement/arrangements between respondent No. 1 on the one hand and respondents Nos. 2 and 3 on the other relate shall be discontinued and shall not be repeated.

(vii) In the price list which the respondents may issue hereafter it shall be made clear either on the front page or on the first page that the prices set out were the maximum prices and prices lower than the maximum prices could be charged by the dealer or distributors.

(viii) Respondent No. 1 will send a copy of the price list, if any, issued after the date of this order and also the list of its distributors to the Director of Investigation.

(ix) The respondents will file affidavits of compliance with the terms of this order on or before 1-5-77. Copies of the affidavits shall also simultaneously be sent to the Director of Investigation, (x) There will be no order as to costs." 5. It may be pointed out that the terms of the order were settled on 2nd March, 1977, and the matter was adjourned to March 15, 1977, to enable the counsel to take instructions from the clients. The matter was adjourned to March 18, 1977, and it was understood that the order would be finally issued on March IS, 1977, unless the counsel had any comments to offer. It was accordingly on March 18, 1977, that the order was issued.

6. In terms of the order, respondent No. 3 had filed its affidavit of compliance. As far as respondents Nos. 1 and 2 were concerned, they filed the two applications referred to earlier. In the first application dated the 17th June, 1977, the respondents Nos. 1 and 2 made the following prayers: " It is submitted by the applicants/respondents that the aforesaid orders under clauses (i), (ii), (iii), (iv), (vii), (viii), (ix) and (x) of paragraph 4 of the said order dated March 18, 1977, are beyond the powers of the Commission under Section 37(1) of the Act and are beyond the submission made by the applicant/respondents to the Commission.

Without prejudice to the aforegoing, the applicants/respondents submit that the said orders, couched as they are in general terms and applicable as they are indefinitely and in all circumstances, are likely to lead to great hardship and injustice to the applicants/respondents and deprive the applicants/respondents of their right to carry on busineSections The applicants/respondents, therefore, pray that the Hon'ble Commission be pleased to delete the impugned orders in terms of clauses (i), (ii), (iii), (iv), (vii), (viii), (ix) and (x) of paragraph 4 of its order dated March 18, 1977, and/or to grant such other relief and/or pass such other orders relative thereto as the Commission deems fit. " 7. Subsequently, in another application dated the 23rd October, 1977, the respondents gave some clarifications of their earlier application and detailed the hardships which according to them would be caused to them because of the operation of the order.

8. The learned counsel for the respondents in support of the application contended that the terms of the order of the Commission dated the 18th March, 1977, were beyond the powers and jurisdiction of the Commission under Section 37(1) of the Act and were made operative adinfinitum contrary to the provisions of Section 2(o) of the Act and also contrary to the judgment of the Supreme Court in the Telco's case [1977] 47 Comp Cas 520 (SC). He pointed out that according to Clause 1 of para. 4 of the Commission's order the respondents were restrained and prohibited from allocating any area for marketing their goods, and this according to the learned counsel prohibited the applicants from appointing any dealers or distributors who were made primarily responsible for servicing the area allotted to them without any restriction placed on the sphere of their actual operations. He then referred to Clause (iii) of para. 4 of the Commission's order and contended that while in the notice the trade practice impugned was that of resale price maintenance the clause in question placed a restriction on the sale price of hardboard sold by the respondent-company. He next referred to Clause (iv) of para. 4 of the same order and contended that the order went far beyond the scope of the notice of enquiry and whereas the notice of enquiry was confined to trade discount on the basis of bulk and graduated bonus on the basis of annual turnover, the order restrained and prohibited the respondent-company from granting any concession or benefit in connection with or by reason of dealings, including bonus, trade discount, rebates, etc. It was contended that Clause (iv) of the order would make it impossible for the respondents to conduct its business effectively and to meet the changing demands of competition and requirements of the market. It was also contended that Clause (viii) of the order imposed an obligation on the respondents to send copies of every price list to the Director of Investigation and this would cause great hardship to the respondents for the -reason that the order was for an unlimited duration.

9. The learned Director of Investigation pointed out that the respondents had signified their willingness to submit to an order of the Commission on 2nd March, 1977, that a draft order was given to the counsel and the Director for comments, that the matter was ultimately postponed to March 18, 1977, by which the comments were to be given and the counsel had agreed to the order being passed after consultation with the clients. He next contended that the applications of the respondents were purportedly under reglns. 17 and 78 and that such applications were not relevant to the points at issue. He also pointed out that the respondents had made two applications and the second application was not signed by respondent No. 2. He also pointed out that respondent No. 3 had already complied with, the Commission's order and had filed an affidavit of compliance. He next contended that the order of the Commission dated the 18th March, 1977, could not be sought to be amended by reference to the decision of the Supreme Court in Telco's case [1977] 47 Comp Cas 520 because the Supreme Court's decision in that case was given on January 21, 1977, and it was reported in the important newspapers on January 22, 1977, and that the order passed by the Commission was passed after taking into consideration the decision of the Supreme Court. He next contended that the order was essentially a consent order, that it was passed even before replies by the respondents Nos. 1 and 2 were filed and that any amendment as suggested by the respondents at this stage would result in injustice to respondent No. 3 and the Director of Investigation. He also emphasised that there was no evidence to show that the earlier counsel for the respondents had not consulted the respondents before the order was finalised.

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

The question to be decided is whether under Section 13(2) of the Act and reglns. 85 and 86 it was possible to accede to any or all of the prayers made On behalf of the respondents. But before tackling that issue it is necessary to clear the ground by disposing of certain side issues. Firstly, there was reference in the applications to the Supreme Court's decision in Telco's case [1977] 47 Comp Cas 520. That decision, however, has no bearing on the issue before the Commission. The decision of the Supreme Court was given some time in January, 1977, and the Commission passed the order in the present case in dispute on 18th March, 1977. The decision of the Supreme Court was, therefore, undoubtedly before the Commission and being a part of the law of the land on the subject it was only in the context of the law in force at the time the order was passed that the order must o*e read and interpreted. There is also nothing in the order which runs contrary to the decision of Supreme Court. The order was clearly passed on an assumption that conditions for making such an order existed and one of the conditions for passing such an order was that the respondents were resorting to certain restrictive trade practices. No doubt the order was without prejudice to the contentions of the parties but that did not derogate from the strength of the assumption on which the order was passed.

11. It is true that the mere fact that the order was a consent order did not deprive the respondents of any of their rights under the Act.

The consent order carried with it all the rights and obligations which an ex parte order would carry or which an order passed after both the parties had staked their claims had been passed. The real issue, therefore, is whether being barred by time in respect of an appeal to the Supreme Court against the order of the Commission the respondents were entitled to any of the reliefs claimed. It is true that the relief claimed by the respondents is under wrong provisions of the Act and under wrong regulations. But that by itself would not vitiate the strength of their prayer if there was any basis for the same under any of the other provisions of the Act or any other regulations.

12. It will be convenient to consider the prayers put forward on behalf of the respondents seriatim. The first item in the operative part of the Commission's order restrained and prohibited respondent No. 1 from allocating any area or market for the disposal of its goods. This is by reference to the restrictive trade practice of area restriction. There is no merit in the objection now raised that this direction goes beyond the powers of the Commission. As a matter of fact, under Clause (vi) of the order, it is directed that restrictive trade practices referred to in the notice to which the provisions in the agreements/arrangements between respondent No. 1 on the one hand and respondents Nos. 2 and 3 on the other relate, shall be discontinued and shall not be repeated.

Directive in Clause (i) does not go beyond Clause (vi). As a matter of fact, direction under Clause (i) is out of abundant caution. There is, therefore, no merit in the suggestion made on behalf of the respondents that this direction goes beyond the powers of the Commission. The respondent has now pointed out certain difficulties which it would experience if this direction of the Commission is interpreted in a particular manner. If this difficulty was really apprehended there was nothing to stop the respondents from raising this difficulty when the order was hammered out. If according to their interpretation of the direction of the Commission the working of the directive would be suicidal, that was a point that could have been and should have been raised when the order was being passed. That was also a point which could have been raised in appeal before the Supreme Court. The respondents having missed two buses cannot now be heard to raise this point under the provisions of Section 13(2} and reglns. 85 and 86, The revision under these provisions is possible only on good and proper grounds. Section 13(2) does not give a carte blanche to amend or revoke orders passed by the Commission earlier without good or proper grounds.

Regulations 85 and 86 have to an extent elucidated the grounds which can be good or proper. Some of the grounds are also elucidated in Sections 114, 152 and 153 and Order 47 of the Code of Civil Procedure.

In course of time some other facts or circumstances may be shown to be good or proper grounds, e.g., absence of any notice to the respondent of a proceeding in respect of which an ex parte order is passed, has been accepted by the Commission as a good ground for revision. But each case will have to be examined on its own facts. A possible difficulty in business which could have been envisaged when the order was agreed to or before the time for filing of an appeal before the Supreme Court expired cannot be considered to be such a ground. Moreover, the decisions of the Commission, especially the one in the case of RRTA v.Usha Sales Private Ltd. (RTPE No. 8 of 1974) [1977] 47 Comp Cas 472, leave ample room for making arrangements which will safeguard the business of a manufacturer. The prayer in regard to Clause (i) of the order, therefore, cannot be accepted.

13. The next prayer is regarding Clause (iii) of the order which restrains and prohibits respondent No. 1 from fixing the prices of hardboard at which they will sell them to respondent No. 3 in a manner different from that determined by free forces of the market. This is a somewhat strange request because respondent No. 3, which is also a party to the arrange- ment, has accepted the verdict of the Commission.

The main objection to this direction is that it relates to a trade practice which is mentioned in the notice under the head of resale price maintenance. But the practice is separately mentioned and the mere fact that it is mentioned under a wrong head in the notice did not detract from its restrictive nature. As a matter of fact, the direction does not create a restriction on respondent No. 1 or respondent No. 3.

It removes a restriction which respondent No. 1 had imposed on itself so as to eliminate competition between itself and Western India Plywoods. There is no merit in this prayer and the same is, therefore, rejected.

14. The next prayer is regarding item 4 according to which respondent No. 1 is restrained and prohibited from granting or allowing concessions or benefits including bonus, trade discounts, rebates, etc., in connection with or by reason of dealings. This direction is given by reference to the trade practice of granting discounts or bonus by reference to quantities ordered either at the time or over a year.

No doubt the direction is given in general terms but the idea is to eliminate the trade practice of the kind impugned in the notice and even if Clause (iv) were not there Clause (vi) of the order would take care of such a trade practice. Clause (iv) of the order is clearly added out of abundant caution as is Clause (i) referred to earlier.

What is prohibited is concession or benefit in connection with or by reason of dealings. Quantity discounts or graduated bonus are such concessions by reason of dealings. Any other similar concessions are no doubt prohibited. The underlying assumption is that they are restrictive in character and affect the competition between the recipients adversely. If it was the case of the respondents that such discounts were not anti-competitive in character or that they were justified in public interest, they should not have agreed to the order.

There is also no suggestion that there in any material change in the relevant circumstances now as compared to the circumstances which prevailed when the order was passed. There is also no suggestion of a mistake or error apparent from the record. As stated earlier, the mere fact that the direction would cause difficulties in carrying on the business would be of no avail because these difficulties could have been envisaged when the order was passed, and it will not be a good or proper ground for revising the order. This prayer is also rejected.

15. In regard to Clause (viii) of the order it will be fair to restrict the obligation of respondent No. 1 to send a copy of the price lists whenever issued after the date of the order. It will be restricted and it is hereby restricted to the copy of the first price list issued hereafter. Copy of this price list will also be sent to the Director of Investigation along with a list of distributors to whom the price list is sent.

17. The respondents will pay to the Director of Investigation Rs. 150 each by way of costs of these proceedings.


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