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 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 On 5.8.87, a reply to the notice of enquiry was made by the 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 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 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 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
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
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
(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.
GIVEN under my hand and seal of the Commission
at New Delhi, this the 10th day of February,
1987.
SD/-
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 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 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. 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.