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PETITIONER:

RAYMOND WOOLLEN MILLS LTD.

Vs.

RESPONDENT:

M.R.T.P. COMMISSIONS AND ANR.

DATE OF JUDGMENT26/02/1993

BENCH:

MOHAN, S. (J)

BENCH:

MOHAN, S. (J)

KULDIP SINGH (J)

CITATION:

1993 SCR (2) 127 1993 SCC (2) 550

JT 1993 (2) 201 1993 SCALE (1)734

ACT:

The Monopolies and Restrictive Trade Practices Act 1969/The

Monopolies and Restrictive Trade Practices Commissions

Regulation, 1974.

Sections 2(o), 33(1)(f), 37(1) and 55/Regulation 74-

Restrictive trade practice-Price lists-No indication in

price lists that rates prescribed are maximum recommended

rates-Held appellant indulged in restrictive trade practice-

Cease and desist' order of M.R. T.P. Commission upheld.

HEADNOTE:

The M.R.T.P. Commission issued a notice of enquiry on

10.2.1987 suo motu alleging that the appellant in the appeal

was indulging in the trade practice of re-sale price

maintenance by not mentioning in its price list that the

prices lower than those prices may be charged, and that this

amounted to restrictive trade practices within the meaning

of Section 33(1)(f) of the Monopolies and Restrictive Trade

Practices Act, 1989. An application was filed by the

appellant on 29A.1987 for further and better particulars

seeking directions from the Commission and requesting for a

copy of the Preliminary Investigation Report and in

pursuance thereto the Director- General (I & R) was directed

to furnish the specific instances in support of the

allegations in the notice of enquiry.

A reply was filed by the appellant to the notice of the

enquiry on 5.8.1987 and on 7.10.1987 a rejoinder was riled

by the Director General under Regulation 74 of the

Commission's Regulation, 1974 serving interrogatories upon

the appellant.

The Commission passed an order on 7.12.1987 upholding the

objections raised by the appellant and modifying the

interrogatories and on 22A.1988, issues were duly framed by

the Commission.

On 3.8.1989 the Marketing Director of the appellant Hied an

affidavit rebutting the allegation of re-sale price

maintenance and stating that the price lists Issued by the

appellant were merely recommendatory in nature

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and to ensure that the dealers do not re-sale their products

at prices higher than those mentioned in the price lists,

and that they have always been understood by the dealers to

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be the maximum recommended prices.

On 3.5.1991 the Commission passed an order holding that the

appellant had been indulging in the restricting trade

practice of re-sale maintenance and consequently passed a

cease and resist order against the appellant.

In the appeal against the aforesaid order to this Court

under Section 55 of the Act, it was contended on behalf of

the appellant relying on Tata Engineeringg & Locomotive

Company Ltd v. R.S. T,A., [1977] 2 SCR 685 and Mahindra &

Mahindra Ltd. v. Union of India, [1979] 2 SCR 1038 at 1074

that the definition of restrictive trade practice in Section

2(o) of the Act "is a pragmatic and result-oriented

definition", and that the legality of an agreement or

regulation does not depend upon whether or not it restrains

competition but the test is whether the restraint imposed is

such as merely regulates, and perhaps thereby promotes

competition or whether it is such as may suppress or even

destroy competition.

Dismissing the appeal, this Court,

HELD: 1. Section 33 deal with agreements relating to

restrictive trade practices. Therefore, it is not correct

to content that this is only for the purpose of registration

of agreements. Exhibits A-2 to A-5 are the copies of price

list issued by the appellant. The dealers are required to

display the price list in their show rooms. [134C, G]

2. The price lists indicate the rate per metre of each of

the textile product manufactured. There is nothing to

indicate that the dealers could charge a price lower than

those mentioned in the price list. [134H,135A]

3. The Commission has rightly pointed out that there is

not even an indication in the price list that the rates

prescribed are the maximum recommended rates. In the

absence of the same, the dealers could sell their products

even at lower rates. This will encourage the consumers to

ask any rebate in the rates indicated in the price list.

[135B]

4. The definition of 'restrictive trade practice' in

section 2(o) of the Act is an exhaustive one and not an

inclusive one. It is for the price list, not having any

indication as to the maximum price, that the charge is made

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in the notice of the Commission dated 10.2.1987 of violation

of restrictive trade practice under section 33(f) failing

under section 2(o)(ii) of the Act. The whole case depends on

the admitted price list issued by the appellant. In such a

case no further evidence is necessary. [133B]

Tata Engineering and Locomotive Co. Ltd. v. R.R. T-A.,

[1977] 2 SCR 685 at 694, not applicable. [131B]

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 41.26 of

1991.

From the Judgment and Order dated 3.5.91 of the M.R.T.P.

Commission in R.T.P. Enquiry No.5/86.

Ashok K. Desai, Ravinder Narain, Rajan Narain and Aditya

Narain for the Appellant.

The Judgment of the Court was delivered by

MOHAN, J. This is an appeal under Section 55 of the

Monopolies and Restrictive Trade Practices Act, 1969

(hereinafter referred to as the Act) against the order

passed by the Monopolies and Restrictive Trade Practices

Commission, New Delhi (hereinafter referred to as the

Commission), being a 'cease and desist' order dated 3.5.91

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under Section 37 (1) of the Act. The short facts leading to

this appeal are as under:

On 10.2.87, a notice of enquiry was issued suo motu by the

Commission inter alia alleging that the appellant was

indulging in the trade practice of re-sale price maintenance

by not mentioning in its price lists that the prices lower

than those prices may be charged. It amounted to

restrictive trade practices within the meaning of Section 33

(1)(f) of the Act.

On 29.4.87, an application was filed by the appellant for

further and better particulars seeking directions from the

Commission, requesting therein for a copy of the Preliminary

Investigation Report.

On the same date i.e. 29.4.87, an order was passed by the

Commission directing the Director-General (I & R) to furnish

to the appellant specific instances in support of the

allegations in the notice of enquiry. Accordingly, a copy

of the Preliminary Investigation Report was furnished to the

appellant.

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On 5.8.87, a reply to the notice of enquiry was made by the

appellant.

On 7.10.87, a rejoinder was filed by the Director General (I

& R) along with an application under Regulation 74 of the

Commission's Regulation 1974 serving interr rogatories upon

the appellant.

On 7.12.87, an order was passed by the Commission upholding

the objections raised by the appellant and modifying the

interrogatories.

On 21.4.88, the appellant riled its affidavit in reply to

the interrogatories.

On 22.4.88, issues were duly framed by the Commission.

Director General (I & R) did not produce any witness to

prove the allegation of re-sale price maintenance, but

merely relied on the price list furnished by the appellant.

On 3.8.89, an affidavit of the Marketing Director of the

appellant was riled rebutting the allegation of re-sale

price maintenance and stating that the price lists issued by

the appellant were merely recommendatory in nature and to

ensure that the dealers do no resell their products at

prices higher than those mentioned in price fists. It was

further stated therein that the prices mentioned in the

price lists issued by the appellant are the maximum

recommended prices and have always been understood by the

dealers to the maximum recommended prices. The retailers

have, in fact, been selling at prices lower than the maximum

recommended prices. These statements made by the witnesses

of the appellant were not controverted by the Director

General (I & R).

On 3.5.91, the impugned order was passed by the Commission

inter alia holding that the appellant has been indulging in

the restrictive trade practice of resale maintenance And

consequently passed a cease and resist order against the

appellant.

It is against this order the appellant has preferred this

appeal under Section 55 of the Act.

Mr. Ashok H. Desai, learned counsel for the appellant would

urge the following for our consideration:

The definition of restrictive trade practice in Section 2(o)

of the Act 'is

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a pragmatice and result-oriented definition". The legality

of an agreement or regulation does not depend upon whether

or not it restrains competition but the test is whether the

restraint imposed is such as merely regulates, and perhaps

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thereby promotes competition or whether it is such as may

suppress or even destroy competition. In this connection,

he places reliance on Tata Engineering and Locomotive Co.

Ltd. v. R.R. T-A., [1977] 2 SCR 685 at 694 and Mahindra and

Mahindra Ltd. v. Union of India, [1979]2 SCR 1038 at 1074.

The Director General has to establish:

(1) What facts are peculiar to the business to which the

restraint is applied?

(2) What was the condition before and after the restraint

is imposed?

(3) What is the nature of restraint and what is its actual

and probable effect?

From this point of view the Director General will have to

establish each of these points. Only when it is proved that

there is a restrictive trade practice the burden shifts to

the respondent to prove that it is entitled to pass through

the gateways set out in Section 38(1) of the Act.

In the present case, the notice of enquiry makes no

allegation about the facts and features of the trade, about

the nature of restraint and its impact on trade and why it

is anti-competitive. The notice only sets out that there is

a price list. There was no evidence led in by the Director

General to the effect that the dealers did not sell the

goods of the appellant below the price in the price list.

In any event, the evidence clearly demonstrates that the

dealers understood the price list to mean that the dealers

could charge lower prices and in fact did charge lower

prices. The competition was not affected in any material

degree and the gateway as under Section 38(1)(h) of the Act

was fully available.

In order to appreciate the above submissions, it is

necessary to look at the following provisions of the Act.

Section 2(o) of the Act defines restrictive trade practice.

It reads as under:

"(o) "restrictive trade practice" means a

trade practice

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which has, or may have, the effect of

preventing, distorting or restricting

competition in any manner and in particular,-

(i) which tends to obstruct the flow of

capital or resources into the stream of

production, or

(ii) which tends to bring about manipulation

of prices, or conditions of delivery to effect

the flow of supplies in the market relating to

goods or services in such manner as to impose

on the consumers unjustified costs or

restrictions."

(Emphasis supplied)

This definition of restrictive trade practice is an

exhaustive one and not an inclusive one. No doubt, this

court laid down in Tata Engineering and Locomotive Co. Ltd.

(supra) as follows:

"The decision Whether a trade practice is

restrictive or not has to be arrived at by

applying the rule of reason and not on the

doctrine that any restriction as to area or

price will per se be a restrictive trade

practice. Every trade agreement restrains or

binds persons or places or prices. The

question is Whether the restraint is such as

regulates and there by promotes competition or

whether it is such as may suppress of even

destroy competition. To determine this

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question three matters are to be considered.

First, what facts are peculiar to the business

to which the restraint is applied. Second,

what was the condition before and after the

restraint is imposed. Third, what is the

nature of the restraint and what is its actual

and probable effect."

The notice was issued to the appellant in the

following terms:

"The Commission has information that the

respondent above mentioned, Which manufactures

and sells textile goods, has been indulging in

the following trade practices:-

(1)indulging in the trade practice of resale

price maintenance by not mentioning in its

price lists that prices lower than those

prices may be charged; and

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(2)induling in the trade practice of

discriminatory pricing by offering varying

rates of bonus linked with the quantity or

material bought by dealers.

It appears to the Commission that the above

trade practices are restrictive trade

practices within the meaning of clauses (f)

and (e) of section 33(1) of the Monopolies and

Restrictive Trade Practices Act, 1969.

Further they have got the effect of

manipulation of prices of textile goods in

such a manner as to impose unjustified costs

or restrictions on the consumers and thereby

making them restrictive trade practices within

the meaning of Section 2(o)(ii) of the

Monopolies and Restrictive Trade Practices

Act, 1969.

AND THEREFORE, in exercise of the powers under

section 10(a)(iv) and 37 of the M.R.P.T. Act,

1969, the Commission has ordered that an

enquiry be instituted against the respondent

above mentioned at the Commission's office in

New Delhi to enquire into as to whether:

(a)the said trade practices are restrictive

trade practices as alleged; and

(d)the said restrictive trade practices are

prejudicial to public interest;

AND NOW THEREFORE a Notice under Regulation 58

of the M.R.T.P. Commission Regulations, 1.974

is hereby given to the Respondent that if it

wishes to be heard in the proceedings before

this Commission it should file a reply 10 days

before the date of hearing to the Notice of

Enquiry and comply with the provisions of

Regulation 11, 57, 65 and 67 copies of which

are enclosed herewith for facility of

reference, failing which the enquiry shall

proceed ex-parte in the absence of the

Respondent.

IT IS FURTHER notified that the case shall

come up before the Commission for a hearing on

23.3.1987 at 11.00 A.M.

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GIVEN under my hand and seal of the Commission

at New Delhi, this the 10th day of February,

1987.

BY ORDER OF THE COMMISSION

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SD/-

(S.K. CHATTOPADYAY)

DEPUTY SECRETARY"

From this, it will be clear that what is alleged against is

restrictive trade practice within the meaning of the above

definition under Section 2(o)(ii). Section 33 deals with

agreements relating to restrictive trade practices. That

inter alia says:

"33. Registerable agreements relating to

restrictive trade practices.

(1) Every agreement falling within one or

more of the following categories shall be

deemed, for the purposes of this Act, to be an

agreement relating to restrictive trade

practices and shall be subject to registration

in accordance with the provisions of this

Chapter, namely-

(a) to (e)

(f) any agreement to sell goods on condition

that the, prices to be charged on resale by

the purchaser shall be the prices stipulated

by the seller unless it is clearly stated that

prices lower than those prices may be charged;

(g) to (1)

(Emphasis supplied)

It has to be carefully noted that this Section applies for

the purposes of the Act. Therefore, it is not correct to

contend that this is only for the purpose of registration of

agreement. Exhibits A-2 to A-5 are the copies of price list

issued by the appellant. The dealers are required to

display the price list in their show rooms. In so far as it

was admitted by the appellant that there are no separate

price lists for the Mill's own outlets and for the dealers.

The price lists indicate the rate per metre of each of the

textile product manufactured. There is nothing to indicate

that the

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dealers could charge a price lower than those mentioned in

the price Est.

As rightly pointed out by the Commission there is not even

an indication in the price list that the rates prescribed

are the maximum recommended rates. In the presence of the

same, the dealers could sell the products even at lower

rates. This will encourage the consumers to ask any rebate

in the rates indicated in the price list.

The Commission observes as follows:

"The object of clause (f) of Section 33 is

that when specified rates are mentioned in the

price list issued by the manufacturer and the

sale and purchase including resale of the

products was governed by those rates, there

should be a clear mention in the price list

that the dealers can sell at prices lower than

those shown therein so that the ultimate

consumers may not be led or misled by the fact

that the prices mentioned in the price list

are final and not subject to negotiation. In

this view of the matter, the fact that in

actual practice some of the retailers might

have sold the products at prices lower than

those mentioned in the price list would not be

material and the situation would be fully

covered by clause (f)."

We are in entire agreement with this finding.

The submission of Mr. Desai, relying on Tata Engineering and

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Locomotive Co. Ltd. case (supra), that no evidence was let

in by the Director General cannot be accepted. It is on the

price list, without any indication as to the maximum price,

the charge is made of violation of restrictive trade

practice under section 33 (f) falling under section 2(o)(ii)

of the Act. In such a case, we are unable to see as to why

evidence is necessary. The whole case depends on the

admitted price list issued by the appellant. The ruling of

Tata Engineering and Locomotive Co. Ltd. (supra) has no

application to the facts of the present case because that

was a case of distributorship where distributor takes care

of the post sale service that is peculiar to the nature of

the trade there, namely, the Locomotives, which cannot be so

in this case, the trade being of textile and nothing

peculiar to this trade.

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Accordingly, we find no merit in the appeal which is hereby

dismissed. However, there shall be no orders as to cost.

N.V.K. Appeal

dismissed.

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