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CASE NO.: Appeal (civil)  7244 of 1999

PETITIONER: Man Roland Druckimachinen AG

RESPONDENT: Multicolour Offset Ltd. & Anr.

DATE OF JUDGMENT: 19/04/2004

BENCH: Ruma Pal & P.Venkatarama Reddi.

JUDGMENT: J U D G M E N T

RUMA PAL, J.

       The appellant has challenged the order of the  Commission set up under the Monopolies and Restrictive Trade  Practices Act, 1969 (referred to as the Act) by which the  Commission held it had the jurisdiction to entertain the  respondent’s claim for compensation under Section 12 B of the  Act against the appellant and the respondent No.2.          The appellant carries on its business of manufacturing  printing machines in Germany.  It was incorporated under  German Law and has its registered office at Offenbach, Main,  Germany.  The respondent No. 1 and the respondent No.2  have their registered offices at Mumbai.  Pursuant to the agreement a printing machine was sold to  the respondent No.1 by the appellant.  The machine was   shipped by the appellant  from Germany to Mumbai on 16th  June 1994.  It was off-loaded at Mumbai on 5th August 1994  and cleared by the respondent No.1 from the customs  warehouse on 22nd April 1997.         In November, 1997 the respondent No. 1 filed two  applications before the Commission viz. Unfair Trade Practices  Enquiry (UTPE) No. 388 of 1997  in effect complaining of unfair  trade practices by the appellant and the respondent No.2  relating to the supply of the printing machine. Compensation  Application (CA) No. 383 of 1997 was filed claiming over Rs. 13  crores towards the cost of the machine, customs duty paid by  respondent No.1 on the machine interest on the cost and  customs duty and damages.  However,  UTPE No. 388 of 1997  was withdrawn in August 1999.         The appellant had raised objections to the Commission’s  jurisdiction to entertain the respondent’s application for  compensation.  The first ground was that the parties had  agreed that the applicable law in the event of any dispute would  be German Law. It was also agreed that disputes between the  parties should be resolved either by  proceedings brought in  German Courts or alternatively through arbitration conducted in  accordance with the International Chamber of Commerce  Rules.  The second ground on which the jurisdiction of the  Commission was questioned by the appellant was that the  appellant  neither provided any service nor carried on any trade  or trade practice in India for the purpose of the Act and even  the machine in question had been sold to the respondent No. 1  outside India.               The Commission rejected both the submissions of the  appellant.  As far as the first ground was concerned, it was  

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held that the clause regarding the choice of forum was contrary  to Section 28 and 23 of the Contract Act and was void.   

The memorandum of understanding executed between  the appellant and the respondent NO.1 on  21st December 1993  contained a clause to the following effect:

"13. Arbitration: As claims and disputes arising out of the  Contract shall be settled amicably  between the parties as far as possible.  But in case of failure all disputes arising  in connection with this Contract shall be  finally settled under the Rules of  Conciliation and Arbitration of the  International Chamber of Commerce by  one or more arbitrators appointed in  accordance with the Rules.  The venue  of such Arbitration shall be Paris  (France) and the proceedings shall be  conducted in English language."

       Pursuant to this memorandum, a formal offer was sent by  the appellant to respondent No. 1 on 24th January 1994 to sell  the printing machine.  This was accepted by the respondent No.  1’s letter dated 2nd February 1994 to the appellant.   On the  same date, the appellant acknowledged receipt of the order and  the fact of sale of the machine subject to, inter-alia, the  following condition: "XVI. Jurisdiction and Arbitration 1.  The place of jurisdiction for all  disputes arising out of the contract \026  including actions on negotiable legal  instruments and documents \026 shall be  the place of the Works supplying the  goods concerned i.e. Augsburg or  Offenbach MR may also bring an action  at the place of the Purchaser’s  registered office.   2.      In the event arbitration  proceedings being agreed with a  Purchaser having his registered office  outside the Federal Republic of  Germany any disputes arising out of the  contract or in respect of its validity or the  validity of the arbitration agreement shall  be finally settled to the exclusion of legal  proceedings under the Rules of  Conciliation and Arbitration of the  International Chamber of Commerce in  Paris by a court of arbitration composed  of three arbitrators appointed under  such Rules.  As long as no recourse to  arbitration has been made the  contracting parties shall be free to bring  an action at the competent court of law  at the place of the defendant’s party’s  registered office."                      Undoubtedly when the  parties have agreed on a  particular  forum, the Courts will enforce such  agreement.  This  is  not because of a lack or ouster of its own jurisdiction by  reason of consensual conferment of  jurisdiction on another

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Court,  but because the Court will not be  party to a breach of an  agreement.  Such an agreement  is not contrary to public policy  nor does it contravene Section 28 or Section 23 of the Contract   Act.  This has been held in Hakkam Singh V. M/s Gammon  (India) Ltd.  AIR 1971 SC 740;   A.B.C Laminart Pvt. Ltd. V.  A.P. Agencies 1989 (2) SCC 163 and Modi Entertainment  Network V. W.S.G. Cricket Pte. Ltd. 2003 (4) SCC 341, 351.   The decision of the Delhi High Court in Rajendra Sethia V.  Punjab National Bank AIR 1991 Del. 285 relied on by the  Commission which holds to the contrary is, therefore,  clearly  erroneous.          But although the Commission rejected the first  submission of  the appellant on an untenable ground,  nevertheless the conclusion arrived at was correct.  The  principle which we have outlined in the previous paragraph is  applicable to a situation where the Court is called upon to  enforce rights arising under a contract which contains such a  jurisdictional clause.  The principle does not apply to  proceedings under the Act which  provides  for statutory  remedies in respect of statutorily defined offences.  The  remedies available under the Act are additional to the usual  remedies available  under the Contract Act to the parties.  This  is clear inter alia from Sections 4(1) and 12 B (1) of the Act,  both of which indicate that the proceedings under the Act are  additional to, and therefore distinct from, proceedings before a  Civil Court. The powers invoked by the complainant under the  Act are not exercisable otherwise than under the Act  and it is  certainly not exercisable by Courts in Germany.  The  jurisdictional clause in the contract would therefore not apply to  proceedings before the Commission.  This is so even assuming  that the Commission is a "Court" as contended by the appellant  on the basis of Canara Bank V. Nuclear Power Corporation  of India Ltd. 1995 Supp (3) SCC 81 and P. Sarathy V. State  Bank of India 2000 (5) SCC 355. The question then arises whether the Commission  can at all exercise jurisdiction in respect of the  complaint of unfair trade practice made by the  respondent No.1 before it? An ’unfair trade practice" has  been defined in Section 36A  as meaning "a trade practice  which, for the purpose of promoting the sale, use or supply  of any goods or the provision of any services, adopts any  unfair method or unfair or deceptive practice" including any of  the practice specified in that section.  The respondent has in its  complaint relied on the following provisions in Section 36B:.  (1)     the practice of making any statement, whether orally  or in writing or by visible representation which, -

(i)     falsely represents that the goods are of a  particular standard, quality, quantity, grade,  composition, style or mode;

(ii)    falsely represents that the services are of a  particular standard, quality or grade;

(iii)   falsely represents any re-built, second- hand, renovated, re-conditioned or old  goods as new goods;

\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005..

(vii)     gives to the public any warranty or guarantee  of the performance, efficacy or length of life of a  product or of any goods that it is not based on an  adequate proper test thereof:

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Provided that where a defence is raised to the  effect that such warranty or guarantee is based on  adequate or proper test, the burden of proof of  such defence shall lie on the person raising such  defence;

(viii)  makes to the public a representation in a  form that purports to be \026

(I)     a warranty or guarantee of a  product or of any goods or  services; or

(II)    a promise to replace, maintain or  repair an article or any part  thereof or to repeat or continue a  service until it has achieved a  specified result.

If such purported warranty or guarantee or  promise is materially misleading or if there  is no reasonable prospect that such  warranty, guarantee or promise will be  carried out;"                           In the case of an unfair trade practice as invoked by the  respondent No. 1 the object of inquiry is a statement which is a  false representation of the kind specified in clauses  (i),(ii) or (iii)  of sub-section  (1) of  Section 36A or is an advertisement of the  kind specified in clauses (vii )or (viii) thereof.  The statement or  advertisement is the trade practice.  The further requirement  under the section is that the trade practice complained of must  be for the purpose of promoting the sale, use or supply of  goods or for promoting the provision of any service. The sale,  use or supply need not,  for the purposes of the section,  actually have taken place although it may be relied upon by the  complainant to establish the falsity of the representation.  The unfair trade practices alleged to have been  committed by the appellant, according to the respondent No.1,   were as follows:- (a)     Falsely representing that the machine in  question was of a particular standard  and model whereas in fact the machine  supplied was a machine which was  obsolete and out of production.

(b)     Representing that the old goods were  new and passing off the same as such  to the respondent No.1.  

(c)     Giving guarantees and warranty in the  purchase agreement regarding the  performance, installation and  commissioning of the machine but  ensuring that the said clauses could not  be invoked  

(d)     inspite of being obliged under the  contract to repair the goods insists on  the payment of an additional sum of  Two lakhs as initial payment to the  second respondent for carrying out  repairs.

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(e)     and inspite of making the said payment  not carrying out of any repairs.  

       The appellant’s contention is that if the party alleged to  have indulged in unfair trade practice does not reside in India  the practices complained of must take place within India as the  Act has no extra-territorial operation.         As a proposition of law  this is correct and follows from section 14 of the Act which  deals with "Orders where party concerned does not carry on  business in India" and says:  "Where any practice substantially falls within  monopolistic, restrictive or unfair, trade practice,  relating to the production, storage, supply,  distribution or control of goods of any description or  the provision of any services and any party to such  practice does not carry on business in India, an  order may be made under this Act with respect to  that part of the practices which is carried on in  India."

The subject matter of complaint of an unfair trade practice  must be such that relief under Section 36D can be granted in  respect of it. As the Commission can grant relief only in respect  of practices within India, it necessarily follows that the practice  complained of must have taken place in this country.  This has  also been held in Haridas Exports  vs. All India Float Glass  Manufacturers Association & Others:  2002 (6) SCC 600.  The appellant has relied on Haridas Exports also to  contend that  if the sale or supply in respect of which complaint  is made had taken place outside India then the Commission  would not have the jurisdiction to proceed with the complaint. In  that case the complaint alleged was a restrictive trade practice  and related to the sale and import of goods (float glass) into  India at predatory prices. It was found that the sale by the  foreign manufacturers of the goods had taken place outside  India. It was in that context that the Court held: "If the float glass was ready and available,  then being ascertained goods the sale would  be regarded as having taken place where the  goods existed at the time of sale i.e. in  Indonesia.  If the glass had to be  manufactured and was not readily identifiable,  then the sale would take place outside India  when the goods are appropriated to the  contract by the foreign exporter.  Here the  appropriation would take place in Indonesia  when the glass is earmarked and exported to  India.  In either case, the MRTP Commission  would have no jurisdiction to stop that sale.  If  the said sale cannot be stopped and the  import policy permits the Indian exporter to  import on payment of duty then we fail to see  what jurisdiction the MRTP Commission can  possibly have till a restrictive trade practice  takes place after the float glass is imported  into India."  

               In the present case, the respondent No.1 has alleged that  the appellant and the respondent No.2 have made statements  which were false because the appellant had not only sold, but  also the respondent No.2 had failed to repair, the machine  which was not in keeping with such statements.  We are not  required to decide on the correctness of these allegations in  this appeal.                   An objection to jurisdiction can either be taken by way of

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demurrer or raised as an issue in the proceeding.  In the first  case the objection will have to be decided on the basis of the  allegations contained in the complaint, taking the statements  contained therein to be correct. Otherwise an objection to the   jurisdiction of a Court may be raised as a preliminary issue.  In  such event, the issue would have to be adjudicated upon after  giving the parties an opportunity to lead evidence.  The  Commission proceeded on the basis that both the objections  raised by the appellant, were by way of demurrer.                  The appellant’s first objection to the Commission’s  jurisdiction based on the clause in the agreement was in fact in  the nature of a demurrer and could be decided as such. But  in  our opinion the second objection to the jurisdiction of the  Commission was not.  It would have to be determined an  evidence.         The Commission held that it had the jurisdiction to  entertain the complaint because (1) the appellant carried on  its  trade practice of supply of the printing machinery to the  respondent No.1 in India through the respondent No.2 who  "admittedly" was its Indian Agent (2) the contract between the  appellant and the respondent No.1 was required to be  performed in India and (3) the supply of the printing machinery   pursuant to the sale transaction was within the definition of  "trade practice" in Section 2(u) of the Act and the effect of such  trade practice "would certainly be on the Indian soil as the  printing machinery was to be supplied in India". The issue of  passing of title was not gone into by the Commission, because  the Commission felt it was  not necessary to be considered  at  that stage.           The Commission erred in holding that the respondent No.  2 was ’admittedly’ the Indian Agent of the appellant in view of  the fact that the assertion of the respondent No.1 to that effect  has been specifically controverted in the counter affidavit  of the  appellant. But then it certainly is not an issue which could  be  determined without taking evidence.  The Commission would  have to enquire into the question whether the respondent No.2  was in fact involved in the capacity of the appellant’s agent  as  alleged by the respondent No.1.  If it is so found the appellant  may be said to carry on business in India  thus giving the  Commission the necessary jurisdiction to determine the  respondent No. 1’s complaint.                 Even if it be found that the respondent No.2 was not the  agent of the respondent No.1, the question would still remain to  be determined on evidence as to whether the alleged  representations were made and if so, whether the  representations were falsified by the actions of the appellant. In  this case there is also an allegation by the respondent No.1  relating to the carrying out of repairs to the machine. The  appellant says that there was no obligation under the contract  to repair the goods because the warranty period in the contract  had expired long before the goods were cleared by the  respondent No.1 and also because the goods had admittedly  been damaged in the Customs Warehouse by fire.  These are  all questions of fact which require adjudication. Having regard  to the nature of the allegations noted in clauses (a) and (b) of  the complaint as noted earlier, the Commission’s refusal to  consider the question of passing of title in the machine as  unnecessary to the question of jurisdiction was, particularly in  the light of this Court’s decision in Haridas Exports (supra),  erroneous.  According to the appellant, the sale was completed  in Germany and the appellant was required to deliver the  machine at Bombay Port C.I.F.  It is contended  that the  property in the machine had passed from the appellant to the  respondent No.1 before the goods were imported by the  respondent No.1, It is not necessary to consider these

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arguments as the Commission has not addressed its mind to  this aspect at all.  It must do so. The appellant has also  contended that the machine had been inspected in Germany  prior to its sale by the respondent No.1.  This again pertains to  the defence of the appellant on merits.  The contract dated 21st  December, 1993 envisaged not only the supply of the machine  by the appellant to the respondent No.1, but also provided for  the appellant No.1 helping in the erection and installation of the  machine at the respondent No.1’s site.  According to the  appellant, the contract was signed by it "without any obligation".   This would also have to be tried and determined on evidence.   The  appellant has also claimed that the portion of the contract  providing for installation of the machine had been subsequently  deleted and a proportionate part of the price paid by the  respondent No.1 had been remitted to it.  These are all matters  to be adjudicated upon. But the Commission erred in law when it held that it would  have jurisdiction because the effect of the unfair trade practice   would be in India.   Haridas Exports (supra) also dealt, inter- alia, with the contention that even if the ’practice’ took place  outside India but the resultant adverse effect was experienced  in India, then the MRTP Commission had the jurisdiction to  entertain the complaint.   This Court after considering the definition of "goods",  "trade",  "trade practice" and Sections 14 and 33 came to the  conclusion that the ’effect doctrine’ would apply provided that  the ’effect’ amounted to a restrictive trade practice in India: "Even if an agreement is executed outside  India or the parties to the agreement are not  in India and agreement may not be  registrable under Section 33, being an  outside-India agreement, nevertheless, if any,  restrictive trade practice, as a consequence  of any such outside agreement, is carried out  in India then the Commission shall have  jurisdiction under Section 37(1) in respect of  that restrictive trade practice if it comes to the  conclusion that the same is prejudicial to the  public interest." \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005  "The counsel for the respondents is right in  submitting that if the effect of restrictive trade  practices came to be felt in India because of  a part of the trade practice being  implemented here the MRTP Commission  would have jurisdiction.  This ’effect doctrine’  will clothe the MRTP Commission with  jurisdiction to pass an appropriate order even  though a transaction, for example, which  results in exporting goods to India at  predatory price, which was in effect a  restrictive trade practice, had been carried  out outside the territory of India if the effect of  that resulted in a restrictive trade practice in  India."     

Therefore, merely because the effect of an unfair trade  practice is felt in India, this would not clothe the Commission  with jurisdiction unless the ’effect’ is itself an ’unfair trade  practice’ within India.  This follows from the reasoning in  Haridas Exports as well as the nature of the powers conferred  on the Commission under section 36D read with Section 14.   The Commission, therefore, erred in holding that it would have  jurisdiction only because the effect of the trade practice was felt

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in India.     We therefore, dispose of the appeal by directing the  Commission to deal with the second aspect of the preliminary  objection on evidence which may be adduced by either party  and in the light of the legal issues determined by us.  It is  clarified that in the event the Commission finds on the evidence  that the appellant does not carry on business in India through  the respondent No.2 and that the alleged unfair trade practice  did not take place in India, the Commission will dismiss the  respondent No.1’s complaint without deciding the matter on  merits.  The appeal is accordingly disposed of without any order  as to costs.