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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 128 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  129 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. 130 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  131 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               132               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                133               (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.               134               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  135 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. 136 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. 137