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PETITIONER: MAHINDRA & MAHINDRA LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT24/01/1979

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SINGH, JASWANT SEN, A.P. (J)

CITATION:  1979 AIR  798            1979 SCR  (2)1038  1979 SCC  (2) 529  CITATOR INFO :  RF         1989 SC 222  (3)  RF         1989 SC 516  (49)  E          1992 SC2214  (7)

ACT:      Monopolies &  Restrictive Trade  Practices Act, 1969-S. 13(2) and 55-Scope of-Nature of order passed under s. 13(2).      Monopolies &  Restrictive Trade Practices Commission-If should give reasons for its order even in ex-parte orders.      Registrar of  Restrictive Trade  Agreements-Obligations under  the  Act  when  presenting  an  application  alleging restrictive trade practices in an agreement.      Interpretation of  statutes-Reference and incorporation of one  enactment in another-Distinction between-Substantial question of law-Meaning of.

HEADNOTE:      Section 10(a)  (iii) of  the Monopolies and Restrictive Trade  Practices  Act,  1969  empowers  the  Monopolies  and Restrictive Trade  Practices Commission  to enquire into any restrictive trade  practices upon  an application made to it by the  Registrar of  Restrictive Trade  Agreements. Section 13(2) provides that "any order made by the Commission may be amended or revoked at any time in the manner in which it was made." Section  55 provides  that any person aggrieved by an order made by the Central Government or the Commission under s. 13  or s. 37 may prefer an appeal to the Supreme Court on one or  more of  the grounds  specified in  s. 100,  Code of Civil Procedure, 1908.      On the  date on  which the  Act came  into force s. 100 C.P.C. specified  three grounds  on which  a  second  appeal could lie  to the  High Court  one of  them being  that  the decision  appealed  against  was  contrary  to  law.  By  an amendment made  in 1976  s.100  was  substituted  by  a  new section which provides that a second appeal shall lie to the High Court only if the High Court is satisfied that the case involves a substantial question of law.      The appellant,  who was  a manufacturer  of jeep  motor vehicles, their  spare parts  and accessories, submitted for registration  to   the  Registrar   of   Restrictive   Trade Agreements, standard distributorship agreements entered into

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by  it   with  its   distributors.  After   registering  the agreements,  in  his  application  to  the  Commission,  the Registrar alleged  that certain  clauses  in  the  agreement related to restrictive trade practices and that some of them were prejudicial to public interest.      The appellant,  in reply  to the  Commission’s  notice, stated that  it did  not wish to be heard in the proceedings before the  Commission, pointing  out at  the same time that there was  nothing in  the impugned clauses of the agreement which  could   be  said   to  constitute  restrictive  trade practices the  reasons whereof had already been explained in its reply. 1039      The Registrar  filed before the Commission an affidavit in support  of his  application but that too did not contain any further  or additional material than what was set out in his application. No other evidence, oral or documentary, was produced by  him before  the Commission  in support  of  the allegation that  the  agreement  constituted  a  restrictive trade practice.      By its order dated May 14, 1976 the Commission declared certain clauses of the appellant’s distributorship agreement to be  void. While  correspondence was  going on between the Registrar and  the appellant  on the submission of a revised distributorship agreement,  this Court in Tata Engineering & Locomotive  Co.  Ltd.  v.  Registrar  of  Restrictive  Trade Practices, [1977]  2 SCR  685 gave its interpretation on the relevant provisions of the Act. Thereupon the appellant made an application  to the  Commission pointing  out that it did not contest the enquiry proceedings under s. 37 in the first instance because the Commission’s decision in the Telco case was directly applicable; but now that that decision had been reversed by the Supreme Court in appeal, its order dated May 14, 1976 needed amendment/modification. An application under s. 13  (2) read  with regulation 85 was accordingly made for revocation, amendment  or modification  of the  Commission’s order  of   May  14,  1976.  The  Commission  rejected  this application by an order dated 28th February 1978.      In its  appeal under  s. 55  of the  Act impugning  the Commission’s order  dated 28th  February 1978  the appellant contended that  (1)  the  Registrar’s  application  alleging restrictive trade  practices  did  not  set  out  any  facts showing how the appellant’s trade practices were restrictive in nature  and that  the Registrar’s  application not having been made in accordance with the law laid down by this Court in Telco  case the  impugned order  of  the  Commission  was liable to  be revoked  or modified  under s.  13(2); (2) the order did  not give  any reasons for its decision and so was vitiated; and  (3) the  order was a continuing order because it required  the appellant  not merely  to  cease  but  also desist from  the restrictive  trade practices set out in the order  and   was,  therefore   required  to  be  continually justifiable and  since it was, contrary to the law laid down in Telco case it was liable to be revoked or amended; in any event the  decision of  this Court  being subsequent  to the making  of   the  Commission’s   order,  there   was  enough justification for  revoking or  modifying the order under s. 13(2) of the Act.      The respondent,  on the  other hand, contended that (1) on an  application of  the rule of interpretation enacted in s. 8(1) or the General Clauses Act, reference in s. 55 to s. 100 C.P.C.  must be  construed as  a reference to the new s. 100, C.P.C.  and so construed an appeal to the Supreme Court would lie  only if the case involved "a substantial question of law"  and not  otherwise and  since in  this case no such

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question was  involved, the appeal was not maintainable; (2) s. 13(2)  could not be used by the appellant as a substitute for s.  55; and  (3) by  reason of its subsequent conduct in acquiescing in  the Commission’s  order and  unconditionally accepting it,  the appellant  was precluded from raising any contention against its validity in appeal to this Court.      Allowing the appeal, ^      HELD: The  appeal is  maintainable under  s. 55  of the Act. [1064  C] 1(a)  On a  proper interpretation of s. 55 it must be held that the grounds speci- 1040 fied in the then existing s. 100 CPC were incorporated in s. 55 and  the substitution of the new s. 100 did not affect or restrict the grounds as incorporated in s. 55. In any event, the present  appeal raises substantial questions of law, and so is maintainable. [1064 C]      (b) There  is a distinction between a mere reference to or citation  of one statute in another and an incorporation. Where there  is a  mere reference  to  or  citation  of  one enactment in  another without  incorporation, s. 8(1) of the General Clause  Act applies  and the repeal and re-enactment of the provision referred to or cited has the effect set out in that  section and the reference to the provision repealed is required to be construed as reference to the provision as re-enacted.  But   where  a  provision  of  one  statute  is incorporated in  another, the  repeal or  amendment  of  the former  does   not  affect   the  latter.   The  effect   of incorporation is  as  if  the  provision  incorporated  were written out in the incorporting statute and were part of it. Once the  incorporation is  made, the provision incorporated becomes an  integral part  of the  statute in  which  it  is transposed and  thereafter there  is no need to refer to the statute  from  which  the  incorporation  is  made  and  any subsequent amendment  made  in  it  has  no  effect  on  the incorporating statute. [1060 C-G]      Collector of  Customs,  Madras,  v.  Nathella  Sampathu Chetty &  Anr., [1962] 3 SCR 786; New Central Jute Mills Co. Ltd. v. The Assistant Collector of Central Excise, Allahabad JUDGMENT: 63  at  69;  Council  v.  Hindustan  Co-operative  Insurance Society Ltd., 58 I.A. 259, Ramswarup v. Munshi & Ors. [1963] 3 SCR 858; Bolani Ores Ltd. v. State of Orissa, [1975] 2 SCR 138; referred to.      (c)  Section  55  is  an  instance  of  legislation  by incorporation and  not legislation by reference. In enacting s. 55  the legislature  did not  want to confer an unlimited right of appeal but wanted to restrict it. It found that the grounds set  out in  the  then  existing  s.  100  CPC  were appropriate for  restricting the  right of  appeal and hence incorporated them  in s.55. The legislature could never have intended to  limit the  right of  appeal to  any  ground  or grounds which  might from  time to time find place in s. 100 without knowing what those grounds were. [1063 B-D]      (d) Secondly,  the Act  is a self-contained code and it is not  possible to  believe that the legislature could have made the  right of appeal under such a code dependent on the viscititudes of a section in another statute. [1063 F]      (e) That  apart, an indissoluble link between s. 55 and s. 100,  CPC would  lead to  a  startling  result.  If,  for example, s.  100 were  repealed, s.  55 would  be reduced to futility and  the right  of appeal  under the  Act would  be wholly gone.  It would be absurd to place on the language of s. 55  an interpretation  which might  in a  given situation result in  denial of the right of appeal altogether and thus

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defeat the plain object and purpose of the section. [1063 H]      (f) Even  assuming that  the right of appeal under s.55 is restricted  to the ground specified in the new s. 100 CPC the present  appeal would  still be  maintainable because it involves a  substantial question  of  law  relating  to  the interpretation of s. 13(2) of the Act. [1064 D] 1041      (g) The  test for determining whether a question of law raised in  an appeal  is a substantial question of law is to see whether it is of general public importance or whether it directly or  substantially affects the rights of parties and if so whether it is an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the  Federal Court or is not free from difficulty or call for discussion of alternative views. [1064 E]      Sir Chunilal  V. Mehta  &  Sons  Ltd.  v.  The  Century Spinning and Manufacturing Co. Ltd., [1962] Supp. 3 SCR 549; referred to.      In the  present case  the  appeal  clearly  involves  a substantial question  of law  within the meaning of the Act, because  the   interpretation  of   s.  13(2)  directly  and substantially affects  the rights  of the parties and is not finally settled by this Court.      2(a) The  words "in  the manner  in which it was made-’ occurring in  s. 13(2) have no bearing on the content or the scope and  ambit  of  the  power  but  merely  indicate  the procedure to  be followed  by the  Commission in amending or revoking  an order made by it. [1064 H]      (b) The power conferred under s. 13(2) is of the widest amplitude and  in this  respect it  is unlike  s. 22  of the English Act. This power is intended to ensure that the order passed is  and  continues  to  be  in  conformity  with  the requirements of the Act, and the trade practice condemned by the order  is really and truly a restrictive trade practices and it must therefore, be construed in a wide sense so as to effectuate the object and purpose of the grant of the power. [1065 B]      (c) The  powers under  s. 13(2)  and s. 55 are distinct and independent  powers and one cannot be read as subject to the other.  The scope  and applicability  of s. 13(2) is not cut down  by the  provision for  appeal under  s. 55.  It is perhaps because  the right  of appeal  given under  s. 55 is limited to  a question  of law  that a  wide and  unfettered power is  conferred on  the Commission to amend or revoke an order in appropriate cases. [1066 A]      (d) The conferment of such wide and unusual power under s. 13(2)  was necessary to ensure that an erroneous order is capable of  being corrected.  An order  made under  s. 37 or under any other provision of the Act may affect not only the parties before  the Commission  but also  others such as the whole net-work  of distributors  or  dealers  who  were  not before the  Commission. It  may also affect the entire trade in the  product. There  may be  some Facts  or circumstances having a crucial bearing on the determination of the enquiry which, if  taken into  account, may  result in  a  different order being  made or  some fact  or circumstance  may  arise which may  expose the  invalidity of  the order or render it bad.  There  may  be  a  material  change  in  the  relevant circumstances  subsequent   to  the  making  of  the  order. Therefore, by  its very  nature. the order of the Commission is transient or pro-tempore and must be liable to be altered or revoked  according as  there is  material change  in  the relevant economic facts and circumstance. [1366 B-E]      (e) But  howsoever large  may be  the  power  under  s. 13(2), it  cannot be  construed to be so wide as to permit a

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rehearing on  the same material without anything more with a view to showing that the order was wrong on facts. [1067] 1042      (f) When  Regulation 85  says that the provisions of s. 114 and  O. XLVII,  r. 1 CPC shall as far as may, be applied to the  proceedings under s. 13(2) it cannot be read to mean that an application under s. 13(2) can be maintained only on the grounds  set out  in s.  114 and  O. XLVII  r.  1.  This regulation does  not in  any  manner  limit  the  width  and amplitude of  the power under s. 13(2). A good part of it is procedural in  nature and has nothing to do with the grounds on which  an application  under s.  13(2) may be maintained. The words  "as far as may" occurring in its last part do not indicate  that   an  application   under  s.  13(2)  can  be maintained only  on the  grounds set  out in  s. 114  and O. XLVII, r.  1, CPC.  All  that  they  indicate  is  that  the provisions of  s. 114  and O.  XLVII, r. 1 are to be invoked only to  the extent  applicable, and if in a given case they are not  applicable they  may be  ignored; but that does not mean that  the power  conferred under s. 13 (2) would not be exercisable in  such a case. The reference to the provisions of s.  114 and  O. XLVII, r. 1 does not limit the grounds on which an  application may  be made  under s. 13(2). Clearly, therefore, even if a case does not fall within s. 114 and O. XLVII,  r.   1,  the  Commission  would  have  power  in  an appropriate case  to amend  or revoke an order made by it in the exercise of its power under s. 13(2). [1067 E-H]      3(a) The  power of  the Commission  under s.  13(2) was exercisable in the present case and the order dated 14th May 1976 was liable to be revoked. [1077 B]      (b) The submission of the distributorship agreement for registration under s. 33 cannot be construed as admission on the appellant’s  part that  the  clauses  in  the  agreement constituted restrictive  trade practices.  The appellant had possibly submitted  the agreement  for registration  on  the erroneous view (which was also the view of the Commission in the Telco  case) that  the moment  an agreement  contains  a trade practice falling within any of the clauses of s. 33(1) the trade  practice must,  irrespective of  whether it falls within the  definition of  s. 2(o)  or not, be regarded as a restrictive  trade   practice  and  the  agreement  must  be registered. The question whether a particular trade practice is restrictive or not is essentially a question of law based on the application of the definition in s. 2(o) to the facts of a  given case  and no  admission on a question of law can ever be used, in evidence against the make of the admission. Therefore, even  assuming that  there was  an  admission  in submitting the  agreement for  registration it  could not be used as  evidence against the appellant in the enquiry under s. 37. [1075 C-G]      (c) There  was nothing  in the conduct of the appellant which would  amount to  acquiescence or  raise  an  estoppel against it.  The appellant  did not  at any time, accept the impugned order  knowing that  it was erroneous. There can be no acquiescence  without knowledge of the right to repudiate or challenge. [1068 H]      (d) Neither  did the failure of the appellant to prefer an appeal  amount to  acquiescence on  its part  because  an application under  s. 13(2),  which is  An alternative and a more effective remedy, was available to it. [1069 G]      (e) The  fact that  the appellant did not implement the impugned order  by  entering  into  revised  distributorship agreements with  its distributors also showed that there was no acquiescence  on its  part so far as the order dated 14th May 1976 was concerned. [1070 C]

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1043      (f) Estoppel  can arise only if a party to a proceeding had altered his position on the faith of a representation or promise made  by another.  In  the  instant  case  there  is nothing to  show that the Registrar had altered his position on the  basis of  the application for extension of time made by the appellant. [1107 D]      4(a). The  order of  the Commission  was bad because it was based  on no  material and, could not possibly have been made by the Commission. [1076 A-B]      (b) The definition of restrictive trade practice in the Act is,  to some extent, based on the rule of reason evolved by American courts while interpreting a similar provision in the Sherman  Act.  The  rule  of  reason  normally  requires ascertainment  of   facts  or   features  peculiar   to  the particular business,  its condition  before  and  after  the restraint was  imposed, the  nature of the restraint and its effect, actual or probable, the history of the restraint and the evil  believed to  exist, the  reason for  adopting  the particular restraint  and the purpose sought to be attained. It is  only on  a consideration of these factors that it can be decided  whether a  particular act, contract or agreement imposing the  restraint is unduly restrictive of competition so as to constitute restraint of trade. Certain restraint of trade are  unreasonable per  se because  of their pernicious effect on competition and lack of any redeeming virtue; they are conclusively presumed to be unreasonable and, therefore, illegal without  elaborate enquiry  as to  the precise  harm they have  caused or  the business execuse for their use. In such cases  illegality does  not depend  on a showing of the unreasonableness of  the practice  and it  is unnecessary to have a  trial to  show the  nature, extent and degree of its market effect. [1074 A, B; 1075 A-B]      (c) It  is now  settled law  that every  trade practice which  is   in  restraint   of  trade   is  not  necessarily restrictive trade  practice.  If  a  trade  practice  merely regulates and thereby promotes competition it would not fall within the  definition even  if it  is  to  some  extent  in restraint of  trade. Therefore, the question whether a trade practice is  a restrictive  trade practice  or not  has  the decided not on any theoretical or a priori reasoning. but by inquirie whether it has or may have the effect of preventing distorting or  restricting competition.  The peculiar  facts and features  of the  trade would  be very  much relevant in determining this question. [1072 H]      (d) In  the Telco  case this  Court laid  down that  an application by  the Registrar  under  s.  10(a)  (iii)  must contain facts  which in  his opinion  constitute restrictive trade practice  and show  or establish as to how the alleged clauses constitute restrictive trade practice in the context of the  facts. But  even if the application does not set out any facts  or  features  showing  how  the  trade  practices complained of  by the  Registrar are  restrictive practices, the Registrar  can still,  at the hearing of the enquiry, in the absence  of any demand for particulars being made by the opposite  party   produce  material  before  the  Commission disclosing facts  or features  which  go  to  establish  the restrictive nature  of the  trade practice complained of and if that  is done, the defect in the application would not be of much consequence. [1070 G-H]      In  the  instant  case  the  burden  of  producing  the necessary material that the impugned trade practices had the actual or  probable  effect  of  diminishing  or  destroying competition and  were therefore  restrictive trade practices was on  the Registrar  who made  on application  before  the

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Commission. No material 1044 beyond reproducing the impugned clauses of the agreement and the words of the relevant sections having been produced, the application of  the Registrar  was contrary  to the law laid down by  this Court.  Therefore, the Commission had no basis for making its order dated 14th May 1976.      (e) The  argument that  the trade practices referred to in the  offending clauses  were  per  se  restrictive  trade practices and  in any event, even if any supporting material was necessary,  it was  to be  found in the admission of the appellant   contained   in   its   letter   submitting   the distributorship agreement  for registration  was without any force.      5(a). When  the issue  before the  court is  whether  a practice trade  practice set  out in an agreement has or may have the  effect of  preventing, distorting  or  restricting competition  so   as  to   constitute  a  restrictive  trade practice, it  is the  actual or probable effect of the trade practice which  has to be judged and there is no question of contradicting, varying,  adding to  or substracting from the terms of the agreement by admitting extraneous evidence. The various factors stated earlier are required to be taken into account only  for the  purpose of  determining the actual or probable effect  of the  trade practice  referred to  in the particular clause.  In such  a case  it is not right to shut out oral evidence to determine the actual or probable effect of the trade practice. [1078 D-E]      (b) It is not s. 33(1) which invalidates a clause in an agreement relating  to  a  trade  practice  but  it  is  the restrictive nature  of the  trade practice  as set out in s. 2(o) which makes it void. [1079 E]      (c) When  a  question  of  restrictive  trade  practice arises in  relation to  a clause  in an  agreement it is the trade practice  in the  clause that  has to  be examined for determining its  actual or probable effect on competition. A clause  in   an  agreement   may  proprio  vigore  impose  a restraint. Where  such restraint  produces or  is reasonably likely to  produce the  prohibited statutory effect it would clearly constitute  a restrictive  trade  practice  and  the clause would be bad. [1108 D-E]      Tata Engineering & Locomotive Co. Ltd., Bombay,, v. The Registrar of  the Restrictive  Trade  Agreement  New  Delhi, [1977] 2 SCR 685, applied.      Observations in Hindustan Lever Ltd. v. M.R.T.P. [1977] 3 SCR 455; disapproved.      (d) In  a case where a clause in agreement does not by- itself impose any restraint but empowers the manufacturer or supplier to  take some  action which  may be  restrictive of competition, the  mere possibility  of action  being  taken, which may  be restrictive  of competition,  would not in all cases affect the legality of the clause. What is required to be considered  for determining the legality of the clause is whether there is a real probability that the presence of the clause itself  would be likely to restrict competition. This is basically  a question  of market  effect  and  cannot  be determined by  adopting a  doctrainaire approach.  Each case would have  to be  examined on its own facts from a business and commonsense point of view. It cannot, therefore, be said that in every case where the clause is theoretically capable of  being   so  utilised   as  to   unjustifiably   restrict competition  it   would  constitute   a  restrictive   trade practice. [1081 E-H] 1045      6(a).  The  order  dated  14th  May  1976  was  clearly

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vitiated by  an error  of law  apparent on  the face  of the record inasmuch as it contained only the final and operative order without giving any reasons in support of it. [1083 E]      (b) The  two conditions precedent before the Commission can pass  a cease  and desist order are (i) it must be found that the trade practice complained of is a restrictive trade practice and  (ii) where  such  a  finding  is  reached  the Commission must  be satisfied  that none  of the  "gateways" pleaded in answer to the complaint exists. [1082 D-E]      (c) In  the instant  case the  appellant did not appear before the  Commission and  no ’gateways"  were pleaded  and therefore the  question of  the  Commission  arriving  at  a satisfaction  in   regard  to   "gateways"  did  not  arise. Nonetheless the Commission was required to be satisfied that the trade  practices complained  of were  restrictive  trade practices. The order dated 14th May 1976 did not contain any discussion showing  that  the  Commission  had  reached  the requisite  satisfaction.  It  gave  merely  bald  directions without any reasons. The ex-parte character of the order did not absolve  the Commission  from  the  obligation  to  give reasons in  support of the order because the appellant would have been  entitled to  prefer an  appeal  even  against  on ex-parte order  and in the absence of reasons, the appellant would not be in a position to attack the order in appeal. It is well  established that every quasi-judicial order must be supported by reasons. [1082 E-H]      N.M. Desai  v. Textiles Ltd., C.A. 245 of 1970, dec. On 17th Dec.,  1975; Simons  Engineering Co. v. Union of India, [1976] Supp. SCR 489; followed.

&      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 860 of 1978.      From the  Judgment and  Order dated  28-2-1978  of  the Monopolies and  Restrictive Trade  Practices  Commission  in R.T.P. Enquiry No. 91 of 1975.      Ashok H.  Desai,  B.H.  Wani,  Ravinder  Narain,  Talat Ansari, A.N. Haksar and Shri Narain for the Appellant.      Soli J.  Sorabjee, Addl.  Sol. Genl.,  R.B.  Datar  and Girish Chandra for Respondent No. 2.      The judgment of the Court was delivered by      BHAGWATI,  J.-This  appeal  under  section  55  of  the Monopolies  and   Restrictive  Trade   Practices  Act,  1969 (hereinafter referred  to as  the  Act)  raises  interesting questions  of   law  relating   to  the  interpretation  and application of  certain provisions  of the  Act.  The  facts giving rise  to the  appeal are for the most part undisputed and they may be briefly stated as follows:      The appellant  is a  public limited  company engaged in manufacture and  sale of jeep motor vehicles and their Spare parts  and   accessories.  Since   1947  the  appellant  was marketing and distri- 1046 buting jeep  motor vehicles  and it  had set  up a large and complex  net   work  of   dealers,  who  were  described  as distributors, for  marketing and  after sale service of such vehicles.  In   or  about   1956   the   appellant   started manufacturing its  own jeep motor vehicles and since then it has been  manufacturing such  vehicles and  distributing and marketing the same through its net work of distributors. The appellant has appointed these distributors for marketing and sale of  jeep motor vehicles on certain terms and conditions contained  in  a  standard  distributorship  agreement.  The

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material clauses of this agreement read as follows:           "Section  (3):  TERRITORY  OF  DISTRIBUTOR:-‘  The      Company  grants   to  Distributor   the   non-exclusive      privilege (except  as hereinafter  provided) of selling      at re  tail and the right (except hereinafter provided)      to appoint  in writing  by forms of agreements approved      by the  Company, Dealers to sell at retail the products      enumerated in  Section 2  of this agreement, within the      following territory  and also  demarcated  in  the  map      attached  hereto   and  which  forms  a  part  of  this      agreement.           Distributor  accepts   the  above  retail  setting      privileges and  agrees to  develop with  diligence  the      sales of  sale products in said territory in accordance      with this  agreement  and  undertakes  to  achieve  the      quantum of  sales in  the territory  as may be fixed by      the Company from time to time.           Section (4):  LIMITATIONS ON  TERRITORIAL RIGHTS:-      (i) Distributor  agrees not  to solicit  outside of the      territory described  in Section  3-the purchase  of any      products.           *              *              *             *           Section (6):  PRICE AND PAYMENT :-Distributor will      pay for  products the Company’s established Distributor      net prices  in effect  on date on despatch. Price lists      will be  furnished to  Distributor by  the Company, but      the Company  reserves the right to change prices at any      time without notice.           *              *              *              *           Section  (11):  PRICE  CHANGES  :-If  the  Company      reduces its  published suggested retail list price, for      any current model of ’Jeep’ motor vehicles, the company      will 1047      make  an   allowance  to   Distributor  as  hereinafter      provided. The allowance shall be made in respect of new      and unused  ’Jeep’ Motor  Vehicles of  the then current      model in  respect of  which the  price change  has been      made which ‘have been purchased by Distributor from the      Company within  a period  of 30  (thirty) days prior to      the effective  date of  such decrease in suggested list      price, and  which distributor  shall have in his unsold      stock on  such effective  date. The  allowance shall be      equal to  the difference between the net amount paid to      the Company  for such  ’Jeep’ Motor  Vehicle (less  all      allowance thereto  granted), and  the net  amount which      would have  been paid  had such  ’Jeep’ motor  vehicles      been purchased  at the reduced price. No allowance, how      ever, shall  be made unless there is a reduction in the      RETAIL list  price and  increases in discounts, bonuses      and the  like shall  in no  event be  considered  as  a      reduction in price.           *              *              *              *      Section (17):  CARE OF  OWNER AND CUSTOMER RELATIONS :-      Distributor agrees-           *              *              *              *           (a)   To refrain from selling or offering for sale                any competing  product. The  Company shall be                the sole  judge as  to whether  a product  is                competing or not" The  appellant  by  its  letter  dated  27th  January,  1971 submitted to  the Registrar  of Restrictive  Trade Agreement (hereinafter referred  to as the Registrar) certified copies of  agreements  entered  into  by  the  appellant  with  the Distributors for  registration, since  in the opinion of the

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appellant, they were registrable under the provisions of Ch. V of  the Act. The appellant also submitted to the Registrar along with  its letter  dated 19th  May, 1972 four copies of the standard  distributorship agreement  for registration in terms of  cl. (ii)  of Rule 12 of the Monopolies Restrictive Trade Practices  Rules, 1970 (hereinafter referred to as the Rules)  and   the  standard  distributorship  agreement  was registered by the Registrar under section 35 of the Act.      On  17th   December,  1975   the  Registrar   made   an application to  11  the  Monopolies  and  Restrictive  Trade Practices  Commission   (hereinafter  referred   to  as  the Commission) under section 10(a) (iii) of 1048 the Act  pointing out  to the  Commission that  the standard distributorship agreement entered into by the appellant with the distributors was filed by the appellant for registration in the  office of  the Registrar  and the same had been duly registered under  section 35  of the Act. The Registrar drew the attention  of the  Commission to  clauses (3), (4), (5), (6), (11),  (13),  (14),  (17)  and  (20)  of  the  standard distributorship agreement  and claimed  that the  provisions contained in  these clauses  related "to  restrictive  trade practices relating  to imposing  restrictions on persons and classes of  persons to  whom goods  are sold  and from  whom goods are  bought tie-up  sales/full-line forcing; exclusive dealing; granting  or allowing concessions; discounts, over- riding commission,  etc. in  connection with or by reason of dealings;  resale   price  maintenance;  and  allocation  of area/market for  disposal  of  products  covered  under  the agreement, respectively  attracting clauses  (a), (b),  (c), (e), (f) and (g) of section 33(1) and/or section 2(o) of the Act" and  that these  restrictive trade  practices  had  and might  have   the  effect   of  preventing,  distorting  and restricting  competition   and   tended   to   bring   about monopolisation of  prices and  conditions of delivery and to affect the  flow of supplies in the market relating to goods covered under the standard distributorship agreement in such manner as  to impose  on the consumers unjustified costs and restrictions  and   the  same  were  prejudicial  to  public interest.  The  Registrar  prayed  on  the  basis  of  these allegations that  the Commission  be pleased to inquire into the  restrictive   trade  practices   indulged  in   by  the appellant, under  section 37 of the Act and pass such orders as it  might deem fit and proper. The Commission, on receipt of this  application, decided,  in exercise  of  the  powers conferred upon it under sections 10(a) and 37 of the Act, to hold inquiry into the restrictive trade practices complained of by  the Registrar  and issued  notice dated  2nd January, 1976 under  Regulation 53  of the Monopolies and Restrictive Trade Practices  Commission Regulations,  1974  (hereinafter referred to as the Regulations) to the appellant that if the appellant wished  to be  heard in the proceedings before the Commission,  it  should  comply  with  the  requirements  of Regulations 65  and 67  failing which  the Commission  would proceed with  the inquiry  in the absence of respondent. The appellant,  by   its  letter   dated  3rd   February,  1976, acknowledged receipt  of the  notice and  intimated  to  the Commission  that  it  did  not  wish  to  be  heard  in  the proceedings  before  the  Commission  but  put  forward  its submissions in  regard to  the restrictive  trade  practices alleged by  the Registrar  in his application. The appellant pointed   out    that   the    clauses   of   the   standard distributionship agreement  complained of  by the  Registrar did not  constitute  restrictive  trade  practices  for  the reasons explained in the letter

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1049 and  requested   the  Deputy   Secretary  to   place   their submissions before  the Commission at the enquiry to be held by it.  The letter was purported to be submitted in terms of Regulations 36(3),  but the reference to this Regulation was obviously under some misapprehension because this Regulation occurred in  Chapter V  which  provided  the  procedure  for reference under Chapter III and IV and it had no application in case of an inquiry under section 37 of the Act. The Joint Secretary (Legal)  of the  Commission  pointed  out  to  the appellant by  his letter  dated 11th  February, 1976 that if the appellant  wished to  be heard  in the  proceedings, the appellant should comply with the requirements of Regulations 65 and  67 and  it is  only if the appellant did so, that it could file  a reply  in answer  to the  application  of  the Registrar and  moreover, the  reply had to be properly drawn and  duly   verified  and  declared  as  provided  in  those Regulations. The Joint Secretary. (Legal) made it clear that in view  of this  legal position obtaining under Regulations 65 and  67, it  was not possible to take note of contents of the letter  addressed  by  the  appellant  setting  out  the explanation  for   the  various   clauses  impugned  in  the application of  the Registrar.  Though this position, in law was specifically  pointed out by the Joint Secretary (Legal) on behalf  of the  Commission, the  appellant did not comply with the procedure set out in Regulations 65 and 67 with the result  that  the  Commission  decided  to  proceed  exparte against the  appellant. The  Registrar filed an affidavit of the Assistant  Registrar dated  10th May, 1976 in support of the  allegations  contained  in  the  application  but  this affidavit surprisingly  did not contain any further or other material than  that set  out in  the application.  No  other evidence, oral or documentary, was produced by the Registrar and the Commission proceeded to decide the issues arising in the enquiry  on the  basis of  the application  supported by the affidavit  of the  Assistant Registrar.  The Commission, after going through the application and the affidavit of the Assistant Registrar and hearing the Registrar, made an order dated 14th May, 1976, the operative part of which was in the following terms:           "(1)  The  Respondent  is  hereby  restrained  and      prohibited by  any agreement  with any  distributor  to      restrict by  any  method  the  persons  or  classes  or      persons to  whom the goods are sold whether such person      be retail purchaser or a dealer.           (2)  The   Respondent  is  hereby  restrained  and      prohibited  from   restricting  in   any  manner,   any      purchaser whether  a dealer  or otherwise in the course      of its trade from acquir- 1050      ing or  otherwise dealing in any goods other than those      of the Respondent or the goods of any other person.           (3)  The   Respondent  is  hereby  restrained  and      prohibited from  selling any  goods to any distributor,      dealer or  other wise  on the condition that the prices      to be  charged on  resale by the purchaser shall be the      prices  stipulated  by  the  respondent  unless  it  is      clearly stated  that prices lower than those prices may      be charged.  The Respondent  is hereby directed that in      all future price lists it must state on the cover or on      the front page that the prices if any indicated therein      as resale prices are maximum prices and that the prices      lower than those price may be charged.           (4)  The   Respondent  is  hereby  restrained  and prohibited  from  allocating  any  area  or  market  to  any

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distributor or  dealer for  the disposal of the Respondent’s goods.  (5)   The  Respondent   is  hereby   restrained  and prohibited from  preventing any  distributor from appointing any dealer of its own choice on such terms and conditions as may be mutually agreed upon between distributors and dealers in  cases  where  the  Respondent  does  not  undertake  any obligation, liability or responsibility in respect of the dealers.           (6) The  clauses in the agreements relating to the      above restrictive  trade practices  are hereby declared      to be  void. The  practices arising therefore, shall be      discontinued  and   shall  not  be  repeated.  (7)  The      Respondent shall  within 3  months  from  the  date  of      service of  this order on it make and file an affidavit      before the  Commission setting  out the manner in which      this order has been given effect to. A copy of the said      affidavit shall  simultaneously  be  furnished  to  the      Registrar.           (8) There will be no order as to costs."      Since the  appellant was  required to file an affidavit of compliance  within three months as directed by cl. (7) of the Order,  the appellant  filed  an  affidavit  dated  10th September,  1976   stating  that  the  appellant  had  fully implemented  in   practice  the   directions  contained   in Paragraphs (1)  and (5)  of the  Order  and  refrained  from enforcing against  the distributors any of the clauses which had been declared void by the Commission. The appellant also pointed out that a draft of a 1051 new distributorship  agreement was  being finalised  by  the appellant with  a view to giving effect to the "restrictions and prohibitions"  contained in  the  Order.  The  Registrar filed an  affidavit  of  the  Deputy  Registrar  dated  27th September,  1976  seeking  particulars  from  the  appellant showing how  the appellant  had implemented  the  directions contained in  the Order.  The appellant  by its  reply dated 11th November,  1976 pointed  out that  since  the  date  of receipt of  the Order, the appellant had not given effect to the trade  practices covered by paragraphs (1) to (5) of the Order nor  required any  of the distributors to abide by the clauses of  the standard  distributorship agreement relating to those  trade practices  and on the contrary, intimated to the distributors  that  the  old  distributorship  agreement would have to be substituted by a new revised agreement. The appellant submitted  that since  the clauses of the standard distributorship agreement  declared void  by the  Commission were not  enforceable in  law by  the appellant,  it did not make any  difference whether  or not  they were deleted from the existing  distributorship agreement  and in  view of the fact that  a new  revised agreement was being prepared which would comply  with the directions contained in the Order, it was not  necessary, to effect any amendments in the existing distributorship agreement. It seems that there was a hearing before the  Commission on  this issue  as regards compliance with the  directions contained in the Order and the draft of the  revised   distributorship  agreement  prepared  by  the appellant was considered and pursuant to the suggestion made by the Commission, the appellant agreed to amend two clauses in the  draft and  the Commission  by its  Order  dated  7th December, 1976  directed that  the  revised  distributorship agreement should  be filed  by the  appellant by 31st March, 1977.      Now, it  appears that  subsequent to  the Order  of the Commission dated  7th December,  1976 an  important decision was given by this Court in Tata Engineering & Locomotive Co.

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Ltd., Bombay  v. The  Registrar  of  the  Restrictive  Trade Agreement, New  Delhi(’) relating  to the  interpretation of some of  the relevant  provisions  of  the  Act  bearing  on restrictive trade  practices. This decision was given in all appeal preferred  by Tata  Engineering Locomotive  Co.  Ltd. (herein- after  referred to  as the  Telco against  an order made by the Commission in an enquiry under section 37 and it reversed  the  view  taken  by  the  Commission  in  several important respects.  Though this  decision was given on 21st January, 1977,  it was  not fully  reported until March 1977 and on  reading it, the appellant felt that the order of the Commission dated 14th May, 1976 required reconsideration, as it was 1052 contrary  to  the  law  laid  down  in  this  decision.  The appellant accordingly  made an application to the Commission on 31st  March. 1977  where, besides asking for extension of time for  filing  a  copy  of  the  revised  distributorship agreement on the ground that the dealers were spread out all over India and it would take considerable time for execution of  the  revised  distributorship  agreement  by  them,  the appellant pointed  out that it had not contested the enquiry proceedings under  section 37  in the first instance because the decision  given by  the Commission in the Telco case was directly  applicable,   but  since   that  decision  of  the Commission  was  reversed  by  this  Court  in  appeal,  the appellant was  advised to  move a  suitable application  for amendment and/or  modification of  the Order dated 14th May, 1976 and that was also an additional reason why the time for filing  the  revised  distributorship  agreement  should  be extended, so  that  the  revised  distributorship  agreement could be  in accordance  with the  directions, if any. which might  be   given  by   the  Commission   on  the   proposed application. The Commission acceded to the request contained in this  application and  extended the  time for  filing the revised distributorship agreement upto 4th June, 1977.      The appellant thereafter made an application dated 30th May,  1977   under  section  13(2)  of  the  Act  read  with Regulation 85  for revocation,  amendment or modification of the Order  of the  Commission  dated  14th  May,  1976.  The appellant set  out in  this application  various  facts  and features relating  to its  trade of  manufacture and sale of Jeep motor  vehicles and  their spare  parts and accessories and enumerated a number of grounds on which the order of the Commission dated  14th May,  1976 deserved  to  be  revised, revoked, amended  or otherwise modified. The application was opposed by  the Registrar  by filing  a  reply  dated.  17th August, 1977.  The parties  were  thereafter  heard  by  the Commission  on   26th  August,  1977  and  pursuant  to  the directions given  by the Commission. affidavits of documents were filed  and evidence  was recorded  on  both  sides.  It appears that  in the  course of  the evidence  the appellant came to know that in November 1977 Hindustan Motors Ltd. had introduced in  the 6 market diesel trekker which was clearly a competing  vehicle and  the appellant thereupon applied to the Commission  on 30th  January. 1978  for amendment of the application by  adding a  plea  that  the  fact  that  since November 1977 Hindustan Motor Ltd. had started manufacturing and selling  diesel trekker  which was  a highly competitive product  was   another  material   change  in  the  relevant circumstances which  justified the  revocation, amendment or modification  of  the  Order  dated  14th  May,  1976.  This application for  amendment was  opposed by  the Registrar on the ground that it was made at a very 1053

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late stage  of the  proceeding. The  Commission did not pass any order  on this  application for  amendment and  kept  it pending and  proceeded to dispose of the main application by an Order  dated 28th February, 1978 by which it rejected the main application  with costs  and added a short order On the same day  stating that  in view  of the  order on  the  main application, there  would be no order on the application for amendment. The  appellant thereupon  preferred  the  present appeal in  this  Court  under  section  55  challenging  the validity of  the order  made by the Commission rejecting the application of the appellant.      Before we  set out the rival contentions of the parties in the appeal, it would be convenient at this state to refer to the  relevant provisions  of the Act and the Regulations. Section 2  is the  definition section and clause (u) of this section defines  ’trade  practice’  to  mean  "any  practice relating to  the carrying  on of any trade, and includes-(i) anything done  by any  person which  controls or affects the price charged by, or the method of trading of, any trader or any class of traders (ii) a single or isolated action of any person  in   relation  to  any  trade".  ’Restrictive  trade practice’ is  defiled in  section 2,  clause (o)  to mean "a grade 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 or to affect 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." Section  5, subsection  (1) provides  for the establishment of  the Commission  which is  to consist  of a Chairman and not less than two and not more than eight other members to  be appointed  by the Central Government and sub- section (2)  of section  5 lays down that the Chairman shall be a person who is or has been or is qualified to be a judge of the  Supreme Court or of a High Court. It is obvious from these two  sub-sections of  section 5  that the  Legislature clearly  contemplated   that  the  Commission  must  have  a Chairman who  would provide  the judicial  element and there must be  at  least  two  other  members  who  would  provide expertise  in   subjects  like   economics,  law,  commerce. accountancy, industry,  public affairs or administration. so that there  could be a really high-powered expert commission competent and  adequate to  deal with  the various  problems which come  before it. It, however, appears that the Central Government  paid   scant   regard   to   this‘   legislative requirement and though the office of Chairman fell vacant as far back  as 9th August, 1976, it failed to make appointment of Chairman until 1054 24th February,  1978.  Of  the  two  other  members  of  the Commission one  had already resigned earlier and his vacancy was also  not filled  with the  result that  the  Commission continued with  only one  member for  a period  of about  18 months. This was a most unfortunate state of affairs, for it betrayed total  lack of  concern for the proper constitution and functioning  of the  Commission and  complete neglect of its statutory  obligation by the Central Government. We fail to see  any reason why the Central Government could not make the  necessary  appointments  and  properly  constitute  the Commission in  accordance with  the requirements of the Act. It is difficult to believe that legal and judicial talent in the country  had become  so impoverished  that  the  Central Government could  not find  a suitable  person to  fill  the

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vacancy of  Chairman for a year and a half. Moreover it must be remembered  that the  appointments, after all, have to be made from  whatever legal  and judicial  talent is available and the  situation is  not going to improve by waiting for a year or  two: a new star is not going to appear in the legal firmament within  such a  short time  and  the  appointments cannot  be  held  up  indefinitely.  Indeed,  it  is  highly undesirable that  important quasi-judicial or administrative posts should remain vacant for long periods of time, because apart from  impairing the  efficiency of  the functioning of the statutory  authority of the administration. inexplicable delay  may  shake  the  confidence  of  the  public  in  the integrity of the appointments when made. Turning back to the provisions of  the Act,  we find  that section  10(a)  (iii) empowers the  Commission to  inquire  into  any  restrictive trade practice  upon  an  application  made  to  it  by  the Registrar. The  powers of  the Commission  while holding  an enquiry under  the Act  are enumerated  in  section  12  and section 13, sub-section (2) provides that "any order made by the Commission  may be amended or revoked at any time in the manner in  which it was made". Then follow sections 14 to 19 which deal  inter alia  with the procedure to be followed by the Commission.  We are not concerned with Sections 20 to 32 which occur  in Chapters  III and  IV because they deal with topics other  than restrictive  trade practices.  Chapter  V relates  to   registration   of   agreements   relating   to restrictive trade  practices and  it consists of sections 33 to 36  of which  only sections  33 and 35 are material. Sub- section (1)  of  section  33  provides  that  any  agreement relating to  a restrictive trade practice falling within one or more  of the  categories specified there shall be subject to registration  in accordance  with the provisions of Ch. V and proceeds  to enumerate  the  categories  of  restrictive trade practices  covered by  that provision  and section  35 lays down  the time within which an agreement falling within section 33,  sub-section (1)  shall be  registered  and  the procedure to be followed for effectuating such registration. Sections 37 1055 and 38 are the next important sections and they occur in Ch. V headed A "control of certain restrictive trade practices". Sub-section (1)  of section 37 provides that "the Commission may inquire into any restrictive trade practice, whether the agreement, if  any, relating  thereto  has  been  registered under section  35 or  not, which  may  come  before  it  for inquiry and, if after such inquiry it is of opinion that the practice  is   prejudicial  to   the  public  interest,  the Commission may, by order, direct that-(a) the practice shall be discontinued  or shall not be repeated, (b) the agreement relating  there   to  shall  be  void  in  respect  of  such restrictive  trade  practice  or  shall  stand  modified  in respect thereof  in such  manner as  may be specified in the order". Section  38, sub-section  (1) enacts  that  for  the purposes of  any proceedings  before  the  Commission  under section 37,  a restrictive trade practice shall be deemed to be prejudicial  to the public interest unless the Commission is satisfied of any one or more of the circumstances set out in that subsection and is further satisfied, after balancing the competing  considerations, that  the restriction  is not unreasonable. These  circumstances specified  in sub-section (1) of  section 38  render a trade practice permissible even though  it   is  restrictive  and  provide  what  have  been picturesquely described in the English law as "gateways" out of the  prohibition of  restrictive trade practices. Section 55 is  the next  relevant section  and it  provides that any

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person aggrieved by any order made by the Central Government under Ch.  III or  Ch. IV  or as  the case  may be,  of  the Commission under  section 13  or section  37 may,  within 60 days from  the date  of the  order, prefer  an appeal to the Supreme Court  on "one  or more  of the grounds specified in section 100  of the  Code of  Civil Procedure 1908". This is the  section   under  which  the  present  appeal  has  been preferred by  the appellant.  The last  section to  which we must  refer  is  section  66  which  confers  power  on  the Commission to make Regulations for the efficient performance of its  functions under  the Act.  The  Commission  has,  in exercise of  the power  conferred by  this section, made the Regulations of which three arc material. namely, Regulations 65, 67  and 85.  These Regulations,  in so  far as material, read as follows           "Section  65:   APPEARANCE  OF   PARTIES  :  Every      respondent who  wishes to  be heard  in the proceedings      shall within  14 days  of the  service upon  him of the      copy of  the notice  of enquiry, enter an appearance in      the office  of the  Commission  by  delivering  to  the      Secretary six  copies of  a memorandum stating that the      respondent wishes  to be  heard in  the proceedings and      containing the name of his advocate having an office in      Delhi or  New  Delhi  and  duly  authorised  to  accept      service of processes and the Secretary 1056      shall send  one copy of the memorandum to the Registrar      in case  where proceedings  are  initiated  under  sub-      clause (iii)  of clause  (a) of  section 10, and in all      other cases to the Director of Investigation."             "Section   67:  REPLY   TO  THE   NOTICE:  Every      respondent who  has entered  an appearance shall within      four weeks  of his  entering appearance  deliver to the      Secretary a  reply to the notice (5 copies) which shall      include:-           (a) particulars  of  each  of  the  provisions  of      section 38 of Act on which he intends to rely; and           (b) particulars  of the  facts and matters alleged      by him to entitle him to rely on such provisions."           "Section 85:  AMENDMENT  OR  REVOCATION  OF  ORDER      ETC.: An  application under  sub-section (2) of section      13 of  the Act for amendment-or revocation of any order      made by  the Commission  in any  proceedings  shall  be      supported by  evidence on  affidavit  of  the  material      change in  the relevant circumstances or any other fact      or circumstances  on which the applicant relies. Unless      the  Commission   otherwise  directs   notice  of   the      application together  with copies  of the affidavits in      support thereof,  shall be  served on  every party  who      appeared at the hearing of the previous proceedings and      every such  party shall  be entitled to be heard on the      application and the provisions of section 114 and Order      XLVII of the Code of Civil Procedure, ’908 (5 of 1908),      shall as far as may, be applied to these proceedings."      It is against the background of these provisions of the Act and  the Regulations  that  we  have  to  determine  the question arising for consideration in the appeal.      The contention  of the  appellant  in  support  of  the appeal was that the Order dated 14th May, 1976 suffered from various infirmities  and was  liable to be revoked or in any event modified  under section  13(2) of the Act. It was said that the  application of  the Registrar  on which  the Order dated 14th  May, 1976  was made did not set out any facts or features showing  how the trade practices referred to in the application  were   restrictive  of  competition  so  as  to

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constitute restrictive  trade practices and merely contained a  bald  recital  of  the  impugned  clause  and  mechanical reproduction of the language of the relevant 1057 sections without  anything  more.  The  application  of  the Registrar was  thus not in accordance with the law laid down in the decision of this Court in the Telco case and no order could be  made upon  it by the Commission. It was also urged that there  was no  material placed before the Commission by the Registrar  on the  basis of  which the  Commission could possibly come  to the  conclusion that  the trade  practices referred  to  in  the  application  were  restrictive  trade practices.  Even   if  the   Commission  was   justified  in proceeding exparte  against the  appellant, the highest that could be  assumed in  favour of  the Registrar  was that the facts  set   out  in  the  application  and  the  supporting affidavit of  the Assistant  Registrar would be deemed to be admitted, but,  apart from  the impugned  clauses, no  other facts were  set out  either in  the application  or  in  the affidavit  of   the  Assistant   Registrar  and   there  was accordingly no  evidence on  which the order dated 14th May, 1976 could  be made by the Commission. It was also contended that the  Order dated  14th May,  1976 did  not set  out any facts  peculiar  to  the  trade  of  the  appellant  or  the conditions before  and after the imposition of the restraint or the actual or probable effect of the restraint nor did it indicate as  to how  the trade  practices referred to in the impugned clauses constituted restrictive trade practices; it was a  non-speaking order  which did not give any reasons at all for  holding that the trade practices complained of were restrictive trade  practices and  hence it was vitiated by a legal infirmity.  The appellant further urged that the Order dated 14th  May, 1976  was a continuing order as it required the appellant  not merely  to cease  but also to desist from the restrictive  trade practices set out in the order and it was, therefore,  required to  be continually justifiable and since the  facts and  features of  the trade  set out in the application of  the appellant  clearly established  that the trade practices  referred to in the impugned clauses did not constitute restrictive trade practices, the Order dated 14th May, 1976  was not  justified and  in any event could not be continued and  it was  accordingly liable  to be  revoked or amended under  section 13(2).  It was  submitted that in any event the  Order dated  14th May,  l 976 was contrary to the law declared  by this  Court in the Telco case and since the decision in  the Telco  case  was  a  fact  or  circumstance subsequent to  the making  of the  Order, it  justified  the invocation of  the power under section 13(2) for revoking or modifying the  Order. Lastly,  it was  contended that in any view of  the matter  there was  a  material  change  in  the relevant circumstances subsequent to the making of the Order dated 14th  May, 1976  in that  Hindustan Motor Ltd. started manufacturing and marketing competing utility vehicles since June 1976 and this was sufficient to warrant reconsideration of the Order under section 13 (2) . The respondents raised a preliminary 1058 objection against  the maintainability  of the appeal on the ground that under section 55 read with the newly substituted section 100  of the Code of Civil Procedure, 1908, an appeal could lie  to this  Court only  on a substantial question of law and  since the  contentions  raised  on  behalf  of  the appellant did not raise any substantial question of law, the appeal was not maintainable. The respondents also urged that on  a   proper  construction  of  section  13(2)  read  with

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Regulation 85,  the Commission  could revoke  or  amend  the Order dated  14th May,  1976 only  if there  was a  material change in the relevant circumstances since the making of the Order or  any of the grounds specified in Order XLVlI rule 1 of the Code of Civil Procedure, 1908 was available to  the  appellant. The  second and  third grounds specified in Order XLVII,  rule 1  obviously did not exist in the present case and  the claim  of the  appellant for  exercise of  the power under section 13(2) could, if at all, rest only on the first ground,  namely error  of law  apparent on the face of the record. But, said the respondents, there was no error of law apparent  on the  face of the record so far as the Order dated 14th  May, 1976  was  concerned,  nor  was  there  any material change  in the relevant circumstances subsequent to the making  of the  order and  hence section  13(2) was  not attracted. The respondents contended that what the appellant was seeking  to achieve  by the  application  under  section 13(2) was  reconsideration of the Order dated 14th May, 1976 which was clearly impermissible, since section 13(2)  could  not be used as a substitute, for section 55 and that too, without  the restrictive  condition of that section. It was also  urged on  behalf of  the respondents  that, in any event the appellant was precluded from challenging the Order dated 14th  May, 1976  by an application under Section 13(2) by reason  of its  subsequent conduct  in acquiescing in the Order and  unconditionally accepting the same. The appellant clearly waived  the defects  or infirmities  if any  in  the Order dated  14th May,  1976 and  was precluded from raising any contention  against the  validity  of  that  Order.  The respondents disputed  validity of  the contentions raised on behalf of  the appellant and urged that in any event even if any of  these defects  or infirmities were present, they did not render  the Order void as being without jurisdiction and hence the  validity of  the Order could not be challenged in the  collateral   proceedings  under   section  13(2).   The respondents also  contended that  in any  view of the matter the Order dated 14th May, 1976 was justified inasmuch as the trade  practices   complained  of   by  the  Registrar  were restrictive  trade   practices.   These   were   the   rival contentions 1059 urged on  behalf of  the parties and we shall now proceed to examine      The first question that arises for consideration in the preliminary objection  of the  respondents is  as to what is the true scope and admit of an appeal under section 55. That section provides  inter alia that any person aggrieved by an order made  by the Commission under section 13 may prefer an appeal to  this  Court  on  "one  or  more  of  the  grounds specified in  section 100  of the  Code of  Civil Procedure, 1908". Now  at the date when section 55 was enacted, namely, 27th December,  1969, being the date of coming into force of the  Act,  section  100  of  the  Code  of  Civil  Procedure specified three  grounds on  which a  second appeal could be brought to  the High Court and one of these grounds was that the decision  appealed against  was contrary  to law. It was sufficient under  section 100  as it  stood then  that there should be  a  question  of  law  in  order  to  attract  the jurisdiction  of  the  High  Court  in  second  appeal  and, therefore, if  the reference  in  section  55  were  to  the grounds set  out in the then existing section 100, there can be no  doubt that  an appeal  would lie  to this Court under section 55  on a  question of  law. But  subsequent  to  the enactment of  section 55  section 100  of the  Code of Civil Procedure was  substituted by a new section by section 37 of

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the Code  of Civil  Procedure  (Amendment)  Act,  1976  with effect from  1st February,  1977 and  the  new  section  100 provided that  a second  appeal shall  lie to the High Court only if the High Court is satisfied that the case involves a substantial question  of law.  The three  grounds on which a second appeal  could lie  under the  former section 100 were abrogated and in their place only one ground was substituted which was  a highly  stringent ground,  namely,  that  there should be  a substantial  question of  law. This was the new section 100  which was in force on the date when the present appeal was  preferred by  the appellant  and the argument of the respondents  was that  the maintainability of the appeal was, therefore,  required to  be judged  by reference to the ground specified in the new section 100 and the appeal could be entertained  only if  there was a substantial question of law. The  respondents leaned  heavily on section 8(1) of the General Clauses Act, 1897 which provides:           "8(1) Where  this  Act,  or  any  Central  Act  or      Regulation made  after the  commencement of  this  Act,      repeals and  re-enacts, with  or without  modification,      any provision of a former enactment, then references in      any  other  enactment  or  in  any  instrument  to  the      provision so repealed shall, un- 1060      less a  different intention  appears, be  construed  as      references to the provision so re-enacted." and contended  that the  substitution of the new section 100 amounted to  repeal and  re-enactment of  the former section 100 and,  therefore,  on  an  application  of  the  rule  of interpretation enacted  in section  8(1), the  reference  in section 55  to section 100 must be construed as reference to the new  section 100 and the appeal could be maintained only on the  ground specified in the new section 100, that is, on a  substantial  question  of  law.  We  do  not  think  this contention is  well  founded.  It  ignores  the  distinction between a  mere reference  to or  citation of one statute in another and  an incorporation  which in  effect means bodily lefting a provision of one enactment and making it a part of another. Where there is mere reference to or citation of one enactment in  another without  incorporation,  section  8(1) applies and  the repeal  and re-enactment  of the  provision referred to  or cited has the effect set out in that section and the  reference to  the provision repealed is required to be construed  as reference  to the  provision as re-enacted. Such was  the case  in the  Collector of  Customs, Madras v. Nathella Sampathu  Chetty &  Anr. and  the New  Central Jute Mills Co. Ltd. v. The Assistant Collector of Central Excise, Allahabad &  Ors. But  where a  provision of  one statute is incorporated in  another, the  repeal or  amendment  of  the former  does   not  affect   the  latter.   The  effect   of incorporation is as if the provision were written out in the incorporating statute  and were a part of it. Legislation by incorporation is a common legislative device employed by the legislature,  where   the  legislature  for  convenience  of drafting incorporates provisions from an existing statute by reference to  that statute instead of setting out for itself at length the provisions which it desires to adopt. Once the incorporation is made, the provision incorporated becomes an integral part  of the  statute in which it is transposed and thereafter there  is no  need to  refer to  the statute from which the incorporation is made and any subsequent amendment made in  it has no effect on the incorporating statute. Lord Esher, M.R., while dealing with legislation in incorporation in In  re. Wood’s  Estate (1886) 31 Ch.D. 607 pointed out at page 615:

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         "If  a   subsequent  Act  brings  into  itself  by      reference some  of the  clauses of  a former  Act,  the      legal effect  of that,  as has  often been  held, is to      write those sections into the new Act. 1061      just as  if they  had been  actually written in it with      the pen,  or printed  in it,  and, the  moment you have      those clauses in the later Act, you have no occasion to      refer to the former Act at all." Lord Justice  Brett, also  observed to  the same  effect  in Clark v. Bradlaugh (1881) 8 Q.B.D. 63 at 69 :           "..... there is a rule of construction that, where      a statute  is incorporated  by reference  into a second      statute, the  repeal of  the first  statute by  a third      statute does no affect the second." This was  the rule  applied by the Judicial Committee of the Privy Council  in Secretary of State for India in Council v. Hindustan Cooperative  Insurance Society  Ltd. The  Judicial Committee pointed  out in  this case  that the provisions of the Land  Acquisition Act,  1894 having been incorporated in the Calcutta  Improvement Trust  Act,  1911  and  become  an integral part  of it,  the subsequent  amendment of the Land Acquisition Act,  1894 by the addition of sub-section (2) in section 26  had no  effect on  the Calcutta Land Improvement Trust Act,  1911 and  could not  be read into it. Sir George Lowndes delivering  the opinion  of the  Judicial  Committee observed at page 267 :           "In this  country it  is  accepted  that  where  a      statute is  incorporated by  reference  into  a  second      statute, the  repeal of  the  first  statute  does  not      affect the second: see the cases collected in Craies on      Statute Law, 3rd edn. pp. 349, 350.           x             x             x              x               x    x   x    The independent existence of the      two Acts  is, therefore,  recognized; despite the death      of the  parent  Act,  its  offspring  survives  in  the      incorporating Act.     x     x     x           It seems  to be no less logical to hold that where      certain provisions  from  an  existing  Act  have  been      incorporated into  a subsequent Act, no addition to the      former Act,  which is  not expressly made applicable to      the subsequent Act, can be deemed to be incorporated in      it, at  all events if it is possible for the subsequent      Act to function effectually without the addition." So also  in Ramswarup  v. Munshi & Ors., it was held by this Court that  since the  definition of  "agricultural land’ in the  Punjab   Alienation  of   Land  Act,  1900  was  bodily incorporated in the Punjab 1062 Pre-emption Act,  1913, the  repeal of the former Act had no effect on  the continued operation of the latter. Rajagopala Ayyangar, J.,  speaking for the Court observed at pages 868- 869 of the Report:           "Where the  provisions of  an Act are incorporated      by reference  in a  later Act the repeal of the earlier      Act has, in general, no effect upon the construction or      effect of  the Act  in which  its provisions  have been      incorporated.                x           x         x          x           In the circumstances, therefore, the repeal of the      Punjab Alienation  of Land Act of 1900 has no effect on      the continued  operation of the Pre-emption Act and the      expression ’agricultural land’ in the latter Act has to      be read  as if the definition in the Alienation of Land      Act had been bodily transposed into it."

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The decision  of this  Court in Bolani Ores Ltd. v. State of Orissa also  proceeded on  the  same  principle.  There  the question arose  in regard  to the  interpretation of section 2(c) of  the Bihar  and Orissa  Motor Vehicles Taxation Act, 1930 (hereinafter  referred to  as the  Taxation Act).  This section  when  enacted  adopted  the  definition  of  ’motor vehicle’ contained  in section  2(18) of  the Motor Vehicles Act, 1939.  Subsequently, section  2(18) was  amended by Act 100 of  1956 but  no corresponding amendment was made in the definition contained  in section  2(c) Or  the Taxation Act. The  argument   advanced  before  the  Court  was  that  the definition in  section 2(c)  of the  Taxation Act  was not a definition  by   incorporation  but  only  a  definition  by reference and the meaning of ’motor vehicle’ in section 2(c) must, therefore,  be taken  to be  the same  as defined from time to  time in  section 2(18)  of the  Motor Vehicles Act, 1939. This  argument was  negatived by  the Court and it was held that this was a case of incorporation and not reference and the  definition in  section 2 (18) of the Motor Vehicles Act, 1939 as then existing was incorporation in section 2(c) of the Taxation Act and neither repeal of the Motor Vehicles Act,  1939   nor  any  amendment  in  it  would  affect  the definition  of  ’motor  vehicle’  in  section  2(c)  of  the Taxation Act.  It is, therefore, clear that if there is mere reference to  a provision  of one statute in another without incorporation, then,  unless a  different intention  clearly appears, section 8(1) would apply and the reference would be construed as a reference to the provision as may be in force from time  to time in the former statute. But if a provision of one  statute is  incorporated in  another, any subsequent amendment in the former 1063 statute or  even its  total  repeal  would  not  effect  the provision  as   incorporated  in  the  latter  statute.  The question is to which category the present case belongs.      We have  no doubt  that section  55 is  all instance of legislation  by   incorporation  and   not  legislation   by reference. Section  55 provides  for an appeal to this Court on "one or more or the grounds specified in section 100". It is obvious  that the  legislature did  not want to confer an unlimited right  of appeal,  but wanted  to restrict  it and turning to  section 100, it found that the grounds there set out were appropriate for restricting the right of appeal and hence it  incorporated then  in Section  55.  The  right  of appeal was clearly intended to be limited to the grounds set out in  the existing  section 100.  Those were  the  grounds which  were   before  the   Legislature  and  to  which  the Legislature could have applied its mind and it is reasonable to assume  that it  was with reference to those specific and known grounds  that the legislature intended to restrict the right of  appeal. The  Legislature could never have intended to limit  the right of appeal to any ground or grounds which might from  time to  time find  place in section 100 without knowing what  those grounds  were. The  grounds specified in section 100 might be changed from time to time having regard to the  legislative policy relating to second appeals and it is difficult  to see  any valid  reason why  the Legislature should have  thought it  necessary that these changes should also be  reflected in  section 55 which deals with the right of appeal  in  a  totally  different  context.  We  fail  to appreciate what  relevance the  legislative policy in regard to second  appeals has  to the right of appeal under section 55 so  that section 55 should be inseparably linked or yoked to section  100 and  whatever changes  take place in section 100 must  be automatically  read into section 55. It must be

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remembered that  the Act  is a  self-contained Code  dealing with monopolies  and restrictive  trade practices  and it is not possible to believe that the Legislature could have made the right  of appeal  under such  a code  dependent  on  the vicissitudes through  which a  section  in  another  statute might pass  from time  to time.  The scope  and ambit of the appeal could  not have  been intended  to fluctuate  or vary with every  change in  the grounds  set out  in section 100. Apart from  the absence  of any  rational justification  for doing so, such an indissolubleing of section 55 with section 100 could  conceivably lead  to a rather absurd and starting result. Take for example a situation where section 100 might be repealed  altogether by the Legislature a situation which cannot  be   regarded  as   wholly   unthinkable.   It   the construction contended for on behalf of the respondents were accepted. 1064 section 55  would in  such a case be reduced to futility and the right of appeal would be wholly gone, because then there would be no grounds on which an appeal could lie. Could such a  consequence   ever  have   been   contemplated   by   the Legislature?   The Legislature  clearly intended  that there should be  a right of appeal, though on limited grounds, and it would be absurd to place on the language of section 55 an interpretation which  might, in a given situation, result in denial of the right of appeal altogether and thus defeat the plain object and purpose of the section. We must, therefore, hold that  on a  proper interpretation the grounds specified in the  then  existing  section  100  were  incorporated  in section 55  and the  substitution of the new section 100 did not affect or restrict the grounds as incorporated and since the present appeal admittedly raises questions of law, it is clearly maintainable under section 55. We may point out that even if the right of appeal under section 55 were restricted to the  ground specified in the new section 100, the present appeal would  still be  maintainable, since  it  involves  a substantial question  of law  relating to the interpretation of section  13(2). What  should be  the test for determining whether a question of law raised in an appeal is substantial has been  laid down  by this  Court in Sir Chunilal V. Mehta and Sons  Ltd. v. The Century Spinning and Manufacturing Co. Ltd. and  it has  been held  that the  proper test  would be whether the "question of law is of general public importance or whether  it directly  or substantially affects the rights of the  parties, and  if so,  whether it  is either  an open question in the sense that it is not finally settled by this Court or  by the Privy Council or by the Federal Court or is not  free   from  difficulty  or  calls  for  discussion  of alternative  views".   The  question  of  interpretation  of section 13(2)  which arises  in the present appeal, directly and substantially  affects the  rights of the parties and it is an  open question  in the  sense that  it is  not finally settled by  this Court  and  it  is,  therefore,  clearly  a substantial question of law within the meaning of this test. We must,  therefore, reject the preliminary objection raised on behalf  of the respondents against the maintainability of the present appeal.      That takes  us to  a consideration of the merits of the appeal and  the first  question that arises on the merits is as to  the true  scope and  magnitude of  the  curial  power conferred  on  the  Commission  under  section  13(2).  That section provides  that "any order made by the Commission may be amended  or revoked at any time in the manner in which it was made".  The words  "in the  manner in which it was made" merely  indicate   the  procedure  to  be  followed  by  the

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Commission 1065 in amending  or revoking  an order.  They have no bearing on the content  of the  power granted under section 13(2) or on its scope  and ambit.  That  has  to  be  determined  on  an interpretation of  section 13(2) in the light of the context or setting  in which  it occurs  and having  regard  to  the object and purpose of its enactment. Now, one thing is clear that the power conferred under section 13(2) is a corrective or rectificatory  power and  it is  conferred  in  terms  of widest  amplitude.  There  are  no  fetters  placed  by  the Legislature to  inhibit the width and amplitude of the power and in  this respect  it is unlike section 22 of the English Restrictive Trade Practices Act, 1956 which limits the power of the  Court under  that section  to discharge  a  previous order made  by it  by providing  in terms clear and explicit that leave  to  make  an  application  for  discharging  the previous order  shall not  be granted  except on prima facie evidence of  material change  in the relevant circumstances. This provision  is markedly  absent in section 13(2) and not express limitation  is placed  on the  power conferred under that section. It is left to the discretion of the Commission whether the power should be exercised in a given case and if so, to  what extent.  But it  must be  remembered that  this discretion being a judicial or in any event a quasi judicial discretion, cannot  be ’arbitrary,  vague or  fanciful’,  it must  be  guided  by  relevant  considerations.  It  is  not possible to  enumerate exhaustively,  the  various  relevant considerations  which   may  legitimately   weigh  with  the Commission in  exercising its  discretion, nor  would it  be prudent or  wise to do so, since the teeming multiplicity of circumstances and  situations which  may arise  from time to time in  this kalisdozoopic  world cannot  be  cast  in  any definite or  rigid mould  or be  imprisoned in  any straight jacket formula.  Every case  of an application under section 13(2) would  have to be decided on its own distinctive facts and the Commission would have to find whether it is a proper case in  which, having regard to the relevant consideration, the order  made by it should be amended or revoked. The fact that an  appeal lies  against the order under section 55 but has not  been preferred,  would be no ground for refusing to exercise the  power under section 13(2). The power conferred on the  Commission under  section 13(2)  is  an  independent power which has nothing to do with the appellate power under section 55.  It is  not correct  to say that the power under section 13(2)  cannot be exercised to correct an order which could have  been set  right in  appeal under section 55. The argument of  the respondents  that, if such a view is taken, it would permit section 13(2) to be used as a substitute for section 55  and that  too, without its restrictive condition has no force and does not appeal to us. There is no question of using section 13(2) as a substitute for section 55. 1066 Both are  distinct and  independent powers and one cannot be read as subject to the other. The scope and applicability of section 13(2)  is not  cut down  by the provision for appeal under section  55. It is perhaps because the right of appeal given under  section 55 is limited to a question of law that a wide  and unfettered  power is conferred on the Commission to amend  or revoke  an order in appropriate cases. An order under section  37 or for the matter of that, under any other provision of  the Act,  is not  an  order  made  in  a  mere interparties proceeding  having effect  limited only  to the parties  to  the  proceeding.  Not  only  in  its  radiating potencies, but  also by  its express terms, it affects other

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parties such as the whole network of distributors or dealers who are  not before  the Commission.  It  also  affects  the entire trade in the product including consumers, dealers and manufacturers in  the same  line. The  provisions of the Act are infected  with public  interest  and  considerations  of public interest  permeate every  proceeding under  the  Act. Hence it  is necessary  to ensure  that if,  by reason of in attitude or  negligence of  a party  to the proceeding or on account of  any other  reason, an  erroneous order  has been made, it  should be  possible to  correct it,  lest it  may, instead  of   promoting  competition,   produce   an   anti- competitive effect  or may  turn out  to be  prejudicial  to public interest.  It is also possible that there may be some fact or  circumstance which may not have been brought to the attention of the Commission, though having a crucial bearing on the  determination of  the inquiry,  and which,  if taken into account, may result in a different order being made, or some fact  or circumstance  may arise  which may  expose the invalidity of  the order  or render it bad and in such cases too, some  provision  has  to  be  made  for  correcting  or rectifying the  order. So  also, there  may  be  a  material change in  the  relevant  circumstances  subsequent  to  the making of the order which may affect the essential reasoning on which  the order  is based and this too may necessitate a reconsideration of  the order.  After all,  an  order  under section 37  is made  in a  given constellation  of  economic facts and  circumstances and if that constellation undergoes material challenge,  the order  would have to be reviewed in the light  of the changed economic situation. No order under section 37  can be  immutable. It  is  by  its  very  nature transient or pro-tempore and must be liable to be altered or revoked  according  as  there  is  material  change  in  the relevant economic  facts and  circumstances. It is obviously for this  reason that  such a  wide  and  unusual  power  is conferred on  the Commission  under section 13(2) to mend or revoke an  order at  any time. It is a curial power intended to ensure  that the  Order passed  by the  Commission is and continues to  be in  confirmity with the requirements of the Act and  the trade practice condemned by the order is really and truly a restric- 1067 tive trade  practice and it must, therefore, be construed in a wide  sense so  as to effectuate to the object and purpose of the  grant of  the power.  But howsoever large may be the amplitude of  this power,  it must  be pointed  out that  it cannot be  construed to be so wide as to permit rehearing on the same  material without  anything more,  with a  view  to sowing that  the order  is wrong  on facts. This is the only limitation we  would read in section 13(2). Outside of that, the power  of the  Commission is  large and  ample  and  the Commission may,  in the  exercise of  such power,  amend  or revoke an order in an appropriate case.      The respondents relied strongly on Regulation 85 but we fail to  see how  that Regulation assists the respondents in limiting the  width and amplitude of the power under section 13(2). Regulation  85 does not say that an application under section 13(2)  shall be entertained only on certain specific grounds. It is true that it is open to a statutory authority to lay  down broad  parameters for the exercise of the power conferred upon it, so long as those parameters are not based on arbitrary or irrational considerations and do not exclude altogether scope  for exercise  of residuary  discretion  in exceptional cases.  But we  do not  think  that  even  broad parameters for exercise of the power under section 13(2) are laid down in Regulation 85. That Regulation is in two parts.

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The first  part provides  that an  application under section ]3(2) "shall  be supported  by evidence  on affidavit of the material change  in the  relevant circumstances or any other fact or  circumstances on  which the applicant relies." This is a  procedural provision  which  prescribes  that  if  the applicant relies  on any  material change  in  the  relevant circumstances or  011 any  other facts  or circumstances  in support of  the application,  he must  produce the necessary evidence in  proof of the same by affidavits. This provision merely lays  down a  rule of procedure and it has nothing to do with  the grounds  on which  an application under section 13(2) may  be maintained  and it  is difficult to see how it can be  pressed into  service on  behalf of the respondents. The second  part states that unless the Commission otherwise directs "notice  of the  application together with copies of the affidavits  in support  thereof shall be served on every party  who   appeared  at   the  hearing   of  the  previous proceedings and  every such  party shall  be entitled  to be heard on  the application  and the provisions of section 114 and Order  XLVII rule 1 of the Code of Civil Procedure, 1908 shall as  far as may, be applied to these proceedings". This part first deals with the question as to which parties shall be served  with the  notice of the application and who shall be entitled  to appear  at the  hearing of  the application. This is purely 1068 procedural in  nature and  does not  throw any  light on the issue before us. But this part then proceeds to add that the provisions of  section 114  and Order XLVII rule 1 shall, as far  as   may,  be   applied  to   the  proceedings  in  the application. Can  this provision  be read  to mean  that  an application under  section 13(2)  can be  maintained only on the grounds  set out in section 114 and Order XLVII, rule 1? The answer  must obviously be in the negative. The words "as far  as   may"  occurring   in  this   provision  are   very significant. They  indicate that  the provisions  of section 114 and  Order XLVII,  rule 1  are to be invoked only to the extent they are applicable and if, in a given case. they are not applicable,  they may  be ignored but that does not mean that the  power conferred  under section  13(2) would not be exercisable in  such a case. The reference to the provisions of section  114 and  Order XLVII,  rule 1 does not limit the grounds on  which an  application may  be made under section 13(2). In fact, the respondents themselves conceded that the grounds set  out in section 114 and Order XLVII, rule 1 were not the  only grounds  available  in  an  application  under section 13(2)  and that  the application could be maintained on other  grounds such  as material  change in  the relevant circumstances. It is, therefore, clear to our mind that even if a  case does not fall within section 114 and Order XLVII, rule 1,  the Commission  would have power, in an appropriate case, to  amend or  revoke an  order made  by  it.  If,  for example, a  strong case  is made  out showing  that an order made under  section 37  is plainly  erroneous in law or that some vital fact or feature which would tilt the decision the other way  has escaped  the attention  of the  Commission in making the  order or  that the  appellant was  prevented  by sufficient cause  from  appearing  at  the  hearing  of  the inquiry resulting  in the  order being  passed exparte,  the Commission would be entitled to interfere in the exercise of its power  under section  13(2). These  examples given by us are  merely   illustrative  and  they  serve  to  show  that Regulation 85  does not  in any manner limit the power under section 13(2).      Before we proceed to consider whether any case has been

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made out  by the  appellant for  the exercise  of the  power under  section   13(2),  we   may  briefly  dispose  of  the contention of  the respondents  based  on  acquiescence  and estoppel. The  argument of  the  respondents  was  that  the appellant, by  his subsequent  conduct,  acquiesced  in  the making of  the Order  dated 14th  May, 1976  and was, in any event, estopped  from  challenging  the  same.  We  find  it difficult  to  appreciate  this  argument.  We  do  not  see anything in  the conduct of the appellant which would amount to acquiescence  or raise  any estoppel  against it.  It  is obvious that  the appellant  did not wish to be heard in the proceeding before 1069 the Commission because the decision of the Commission in the Telco case  held the  field at that time and it was directly against the appellant. Otherwise, there is no reason why the appellant  should  not  have  entered  an  appearance  under Regulation 65  and filed  a  proper  reply  as  provided  in Regulation 67  and appeared at the hearing of the inquiry to oppose the  application of  the Registrar. The appellant did make its  submissions in  writing by  its letter  dated  3rd February, 1976,  but since  the appellant  did not  enter an appearance as  required by  Regulation 65,  it was precluded from filing  a reply  under Regulation 67 and the Commission was legally justified in refusing to look at the submissions contained in  the letter  of the  appellant, though  we  may observe that  it would have been more consonant with justice if the  Commission had,  instead of adopting a technical and legalistic  approach,  considered  the  submissions  of  the appellant before  making the  Order dated 14th May, ’976. Be that as  it may,  the Commission  declined  to  consider  he submissions of the appellant and proceeded to make the order dated  14th   May,  1976  exparte  in  the  absence  of  the appellant. Now,  once the  order dated  14th May,  1976  was made, it  was the  bounden duty of the appellant to obey it, until it  might be  set aside  in an appropriate proceeding. the appellant,  therefore, stated  preparing a  draft of the revised distributorship  agreement in  conformity  with  the terms of  the O-der  dated 14th  May,  1976  and  since  the preparation of  the draft  was likely to take some time, the appellant applied  for extension  of time  which was granted upto 31st March, 1977. However, before the extended date was due to  expiry, this  Court reversed  the  decision  of  The Commission in the Telco case and as soon as this new fact or circumstance came  to its  knowledge, the  appellant made an application dated  31st March,  1977 stating that in view of the decision  given by  this Court  in the  Telco case,  the applicant was  advised to  move a  suitable application  for amendment and/or  modification of  the Order dated 14th May, 1976 and  the time  for filing  the revised  distributorship agreement should, therefore, be further extended and on this application, the  Commission granted  further  extension  of time upto  4th June,  1977. It  is difficult  to see how any acquiescence or  estoppel  could  be  spelt  out  from  this conduct of  the appellant. It is true that the appellant did not prefer an appeal against the Order dated 14th May, 1976, but he  application under section 13(2) being an alternative and perhaps  a more  effective remedy  available to  it, the failure of  the appellant  to prefer  an appeal  can not  be construed  as   acquiescence  on  its  part.  The  appellant undoubtedly asked  for extension of time from the Commission for the purpose of implementing the Order dated 14th May, H; 1976 but  that also  cannot amount  to acquiescence, because until the  decision of  the Commission in the Telco case was reversed in appeal

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1070 by this  Court, the  appellant had no reason to believe that the Order  dated 14th May, 1976 was erroneous and as soon as the appellant  came to know about the decision of this Court reversing the  view taken  by the  Commission, the appellant immediately pointed out to the Commission that it was moving an application  for amendment  or revocation  of  the  Order dated 14th  May, 1976 under section 13(2). The appellant did not at  any time  accept the  Order  dated  14th  May,  1976 knowing that  it was  erroneous and  it is  elementary  that there can  be no acquiescence without knowledge of the right to repudiate  or challenge.  Moreover, it  may be noted that the appellant  did not,  right upto  the time  it  made  the application under  section 13(2),  implement the Order dated 14th May,  1976 by  entering  into  revised  distributorship agreement with  the distributors.  There was,  therefore, no acquiescence on  the part  of the  appellant so  far as  the Order dated  14th May, 1976 is concerned. Nor could there be any  estoppel  against  the  appellant  precluding  it  from challenging the Order by an application under section 13(2), for estoppel  can arise  only if a party to a proceeding has altered his  position on  the faith  of a  representation or promise made  by another  and here  there is nothing to show that the  Registrar had altered his position on the basis of the application for extension of time made by the appellant. Both the  contentions, one  based on  acquiescence  and  the other on estoppel, must, therefore, be rejected.      That takes  us straight  to the  consideration  of  the question whether the appellant has made out any case for the exercise of the power of the Commission under section 13(2). The first  ground canvassed  by the  appellant was  that the application on which the Order dated 14th May, 1976 was made was not  in accordance  with law  inasmuch as it did not set out any  facts or  features which  would show that the trade practices complained  of by  the Registrar  were restrictive trade practices. Now, it is true, as laid down by this Court in the  Telco case,  that an  application by  the  Registrar under section  10(a) (iii) "must contain facts which, in the Registrar’s opinion,  constitute restrictive trade practice" and it is not sufficient to make "mere references to clauses of the  agreement and  bald  allegations  that  the  clauses constitute restrictive trade practice". The application must set out  facts or  features "to  show or establish as to how the alleged clauses constitute restrictive trade practice in the context  of facts".  The application of the Registrar in the present case was, therefore, clearly contrary to the law laid down  by this  Court in  the Telco  case. but  on  that account alone  it cannot  be said  that the Order dated 14th May, 1976  was vitiated  by a  legal infirmity.  Even if the application did 1071 not set  out any  facts or  features showing  how the  trade practices complained  of by  the Registrar  were restrictive trade practices, the Registrar could still at the hearing of the inquiry,  in the  absence of  any demand for particulars being made  by the  appellant, produce  material before  the Commission disclosing  facts or  features which  would go to establish the  restrictive nature of the trade practices com plained of by him and if the Registrar did so, the defect in the application  would  not  be  of  much  consequence.  But unfortunately in the present case the only material produced by  the   Registrar  was  the  affidavit  of  the  Assistant Registrar which  did nothing  more than  just reproduce  the impugned clauses  of the  distributorship agreement  and the words of  the relevant  sections of  the Act.  There was  no

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material  at  all  produced  by  the  Registrar  before  the Commission which  would show how, having regard to the facts or features  of  the  trade  of  the  appellant,  the  trade practices  set   out  in   the  offending   clauses  of  the distributorship agreement  were restrictive trade practices. The Order  dated 14th  May,  1976  was,  therefore,  in  the submission of the appellant, based on no material at all and was  accordingly   vitiated  by   an  error   of  law.   The respondents, however, contended that it was not necessary to produce any material before the Commission in support of the claim of the Registrar, because the trade practices referred to in  the offending  clauses were  per se restrictive trade practices and  in any event, even if any supporting material was necessary,  it was  to be  found in the admission of the appellant   contained   in   its   letter   submitting   the distributorship agreement for registration under section 33. We do not think there is any force in this contention of the respondents and  the Order dated 14th May, 1976 must be held to be bad on the ground that it was based on no material and could not possibly have been made by the Commission.      It is  now settled  law as  a result of the decision of this Court in the Telco case that every trade practice which is in  restraint of  trade is  not necessarily a restrictive trade practice. The definition of restrictive trade practice given in  section 2(o)  is a  pragmatic and  result oriented definition. It  defines ’restrictive trade practice’ to mean a trade  practice which  has or  may have  the  effected  of preventing, distorting  or restricting  competition  in  any manner and  in  clauses  (i)  and  (ii)  particularises  two specific instances  of trade practices which fall within the category of restrictive trade practice. It is clear from the definition that  it is  only where  a trade practice has the effect, actual  or probable,  of restricting,  lessening  or destroying competition that it is liable to be regarded as a restrictive trade  practice.  If  a  trade  practice  merely regulates and  thereby promotes  competition, it  would  not fall 1072 within the  definition of  restrictive trade  practice, even though it  may be,  to some  extent, in  restraint of trade. Whenever, therefore, a question arises before the Commission or the  Court as  to whether  a certain  trade  practice  is restrictive or  not,  it  has  to  be  decided  not  on  any theoretical or  a priori reasoning, but by inquiring whether the trade practice has or may have the effect of preventing, distorting  or   restricting   competition.   This   inquiry obviously cannot  be in  vacuo but  it must  append  on  the existing constellation  of economic  facts and circumstances relating to  the particular  trade. The  peculiar facts  and features of  the trade  would,  be  very  much  relevant  in determining whether  a particular  trade  practice  has  the actual or  probable  effect  of  diminishing  or  preventing competition and in the absence of any material showing these facts or features, it is difficult to see how a decision can be reached  by the  Commission  that  the  particular  trade practice is a restrictive trade practice      It is  true that  on the  subject of  restrictive trade practices, the law in the United States has to be approached with great  caution, but  it is interesting to note that the definition of "restrictive trade practice" in our Act echoes to some  extent the ’rule of reason’ evolved by the American Courts while interpreting section 1 of the Sherman Act. That section provides  that "every  contract, combination  in the form of  trust or  otherwise, or conspiracy, in restraint of trade or  commerce is  hereby declared  to be  illegal"  and

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literally  applied,,   it  would  outlaw  every  conceivable contract which could be made concerning trade or commerce or the subjects  of such  commerce. The Supreme Court of United States, therefore,  read a  ’rule of reason’ in this section in the  leading decision  in Standard  Oil Company v. United States. It  was held by the Court as a ’rule of reason’ that the term  "restraint of trade" means that it meant at common law and in the law of the United States when the Sherman Act was passed  and it  covered only  those acts or contracts or agreements or  combinations which  prejudice public interest by unduly  restricting competition or unduly obstructing the due course  of trade  or which  injuriously  restrain  trade either because of their inherent nature of effect or because of  their  evident  purpose.  Vide  also  United  States  v. American Tobacco  Co. It  was pointed  out that the ’rule of reason’ does  not freeze the meaning of "restraint of trade" to what it meant at the date when the Sherman Act was passed and it  prohibits not  only those  acts deemed  to be  undue restraints of  trade at common law but also those acts which new times  and economic  conditions make  unreasonable. This ’rule 1073 of reason’  evolved by the Supreme Court in the Standard Oil Company’s case  and  the  American  Tobacco  Co’s  case  has governed the  application of  section 1  of the  Sherman Act since then  and though  it does  not furnish an absolute and unvarying standard  and has  been  applied,  sometimes  more broadly and  some times  more  narrowly,  to  the  different problems coming before the courts at different times, it has held the  field and,  as pointed  out by Mr. Justice Reed in the United States v. E.I. Du Pont, the Supreme Court has not receded from its position on this rule. The ’rule of reason’ has, to  quote again  the words  of the  same learned  Judge "given a  workable content  to anti-trust  legislation". Mr. Justice Brandeis  applied the  ’rule of  reason’ in Board of Trade v.  United States  for holding that a rule prohibiting offers to  purchase during  the period  between the close of the call and the opening of the session on the next business day for  sales of  wheat, corn, oats or rye at a price other than at  the closing  bid, was  not in  "restraint of trade" within the  meaning of  section 1  of the  Sherman Act.  The learned Judge  pointed out  in a  passage which  has  become classical:           "Every   agreement    concerning   trade,    every      regulation of  trade, restrains.  To bind, to restrain,      is of  their very essence. The true test of legality 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. To  determine that question the court must      ordinarily consider  the facts peculiar to the business      to which  the,  restraint  is  applied;  its  condition      before and  after the  restraint was imposed the nature      of the  restraint, and  its effect, actual or probable.      The history  of the  restraint  the  evil  believed  to      exist, the  reason for  adopting the particular remedy,      the purpose  or end  sought to  be  attained,  are  all      relevant facts.  This is  not because  a good intention      will save an otherwise objectionable regulation, or the      reverse; but  because knowledge  of intent may help the      court to interpret facts and to predict consequences."      It will thus be seen that the ’rule of reason’ normally requires an  ascertainment of the facts or features peculiar to the  particular business;  its condition before and after the restraint  was imposed;  the nature of the restraint and

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its effect, actual or probable; the history of the restraint and the  evil believed to exist, the reason for adopting the particular restraint  and the  purpose or  end sought  to be attained and  it is only on a consideration of these factors that it can be decided whether a particular act, contract or agreement, impos- 1074 ing the restraint is unduly restrictive of competition so as to constitute  ’restraint of  trade’. The  language  of  the definition  of  "restrictive  trade  practice"  in  our  Act suggests, that  in enacting  the definition, our legislature drew upon  the concept and rationale underlying the ’rule of reason’. That  is why  this Court  pointed out  in the Telco case in  words almost bodily lifted from the judgment of Mr. Justice Brandeis:           "The   decision    whether   trade   practice   is      restrictive or not has to be arrived at by applying the      rule of  reason and  not  on  that  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 thereby  promotes competition or whether it is such      as  may   suppress  or  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."      These  various  facts  and  features  set  out  in  the Judgment of  Mr. Justice  Brandeis  and  reiterated  in  the decision of  this Court  in the Telco case would, therefore, have to  be considered  before a  decision  can  be  reached whether a  particular trade  practice is restrictive or not. It is  possible that  a trade  practice which may prevent or diminish competition  in a  given constellation  of economic facts and circumstances may, in a different constellation of economic  facts  and  circumstances,  be  found  to  promote competition. It  cannot be said that every restraint imposed by  a  trade  practice  necessarily  prevents,  distorts  or restricts competition and is, therefore, a restrictive trade practice. Whether  it is  so or  not would  depend upon  the various considerations  to which  we have  just referred. Of course, it  must be  pointed out  that there  may  be  trade practices which  are such  that by their inherent nature and inevitable effect they necessarily impair competition and in case of  such trade  practices, it would not be necessary to consider any other facts or circumstances, for they would be per se  restrictive  trade  practices.  Such  would  be  the position in case of those trade practices which of necessity produce  the  prohibited  effect  in  such  an  overwhelming proportion of  cases that  minute inquiry  in every instance would be  wasteful of judicial and administrative resources. Even in  the United  States a  similar doctrine  of  per  se illegality has been evolved in the interpretation of section 1 of  the Sherman  Act and  it has  been held  that  certain restraints of trade are 1075 unreasonable per  se and "because of their pernicious effect on competition  and lack  of any  redeeming virtue" they are "conclusively presumed  to be  unreasonable, and, therefore; illegal without  elaborate inquiry  as to  the precise  harm they have  caused or  the business excuse for their use". In such cases  "illegality does  not depend on a showing of the

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unreasonableness of  the practice  and it  is unnecessary to have a  trial to  show the  nature, extent and degree of its market effect."  Vide American  Jurisprudence 2d. volume 54, p. 687, Art. 32. We are concerned in the present appeal with clauses   of    the   distributorship   agreement   imposing restriction as  to territory,  area or  market and providing for exclusive  dealership and  according to  the decision of this Court  in the  Telco case, such trade practices are not per se  restrictive  trade  practices.  Whether  such  trade practices constitute restrictive trade practices or not in a given case would depend on the particular facts and features of the  trade and  other relevant  considerations  discussed above which would show the actual or probable effect of such trade  practices   on  competition.   It   was,   therefore, absolutely  necessary  to  produce  the  necessary  material before tho  Commission  to  show  that  the  impugned  trade practices had  the actual  or probable effect of diminishing or destroying  competition and  were therefore,  restrictive trade practices. The burden was clearly on the Registrar for it was  the Registrar  who wanted  the Commission  to strike down these  trade practices  as restrictive.  The Registrar, however, did  Dot produce  any material  at all  before  the Commission and  the Order  dated 14th May, 1976 had no basis at all on which it could be sustained.      There is  no doubt  that the  appellant by  its  letter dated 19th May, 1972 submitted the distributorship agreement to the  Registrar for  registration under section 33, but we do not  see how  this act  of the  appellant or  the  letter forwarding the  distributorship agreement  for  registration can be  construed as  admission on the part of the appellant that the  trade  practices  referred  to  in  the  offending clauses  of   the  distributorship   agreement   constituted restrictive  trade   practices.  In  the  first  place,  the question whether  a  trade  practice  is  restrictive  trade practice or  not is  essentially a  question of law based on the application  of the  definition in  section 2(o)  to the facts of  a given case and no admission on a question of law can ever  be used  in evidence  against  the  maker  of  the admission.  Therefore,  even  if  there  was  any  admission involved in  submitting the  distributorship  agreement  for registration, it  could not  be used as evidence against the appellant in  the inquiry  under section 37. Moreover, we do not think  that in  submitting the distributorship agreement for registration, the appellant 1076 made  an   admission  that  any  particular  clause  of  the distributorship  agreement   constituted  restrictive  trade practices. There  is nothing  in the letter of the appellant to  show   which  were   the  particular   clauses  of   the distributorship  agreement  regarded  by  the  appellant  as restrictive trade  practices on  the basis  of which it made the application  for registration.  It is  possible that the appellant  might   have  taken   the  same  view  which  the Commission did in the Telco case, namely, that the moment an agreement contains  a trade  practice falling  within any of the clauses  of  section  33(1),  the  trade  practice  must irrespective of  whether it  falls within  the definition in section 2(o)  or not,  be regarded  as a  restrictive  trade practice and  the agreement  must be  registered and on that view, the appellant might have submitted the distributorship agreement  for   registration.   The   submission   of   the distributorship   agreement    for   registration    cannot, therefore, possibly be construed as admission on the part of the  appellant   that  the   particular   clauses   of   the distributorship  agreement   faulted   by   the   Commission

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constituted  restrictive   trade   practices.   There   was, accordingly, no  admission of  the appellant  on  which  the Commission could  rely for  the purpose  of making the Order dated 14th May, 1976.      We must,  in the  circumstances, hold that, since there was no mate rial at all on the basis of which the Commission could  find   that  the  grade  practices  referred  in  the offending clauses  of  the  distributorship  agreement  were restrictive trade  practices, the Order dated 14th May, 1976 was contrary  to law. This clearly attracted the exercise of the  power  of  the  Commission  under  section  13(2).  The decision of  this  Court  in  the  Telco  case  exposed  the invalidity of the Order dated 14th May, 1976 and showed that it was  bad as  being based  on no material whatsoever. When the commission  passed the  Order dated  14th May  1976, the decision of  the Commission in the Telco case held the field and according  to that  decision, any  trade practice  which fall within  one of  the clauses of section 33(1) would be a restrictive trade  practice and  that is  perhaps the reason why the  Registrar did  not produce  any material before the Commission and  even though there was no material before it, the Commission  proceeded to  invalidate the trade practices referred to  in the  offending clauses  as restrictive trade practices, since  they fell  within one or the other clauses of section  33(1). But  this view was reversed in appeal and it was  held by  this Court that a trade practice which does not fall  within the  definition in  section  2(o)  can  not become restrictive  trade  practice  merely  because  it  is covered by one or the other of the clauses of section 33(1): what  section   33(1)  requires   as   the   condition   for registration is that the agreement must 1077 relate to  a  trade  practice  which  is  restrictive  trade practice  within  the  meaning  of  section  2(o)  and  such restrictive trade practice must additionally fall within one or more  of the categories specified in that section. It was because  of  this  decision  in  the  Telco  case  that  the necessity for  production of material to show that the trade practices complained  of were  restrictive  trade  practices became evident  and it  came to  be realised  that the Order dated 14th  May, 1976 was bad. The conclusion is, therefore, inescapable that  the power  of the Commission under section 13(2) was  exerciseable in  the present  case and  the Order dated 14th May, 1976 was liable to be revoked.      Before we  part with  this aspect  of the case, we must refer to  other decision of this Court which was relied upon on behalf  of the  respondents and  that is  the decision in Hindustan Lever  Ltd. v.  M.R.T.P. The Judgment in this case was delivered  by Beg,  C.J., speaking  on behalf of himself and Gupta,  J. and though Beg, C.J., was also a party to the judgment in  the Telco  case, this judgment seem to strike a slightly different note and hence it is necessary to examine it  in  some  detail.  Two  clauses  of  the  Redistribution Stockists’  Agreement   were  assailed   in  this   case  as constituting restrictive  trade practices.  One was clause 5 which in  its last  portion provided that the redistribution stockists shall  purchase and  accept from  the Company such stock as  the Company  shall at  its discretion  send to the redistribution stockist for fulfilling its obligations under the agreement  and the  other was  Clause  which  imposed  a restriction as  to area  or market  by  providing  that  the redistribution stockist  shall not  rebook  or  in  any  way convey transport or despatch parts of stocks of the products received by  him outside the town for which he was appointed redistribution stockist.  The Commission held, following the

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view taken  by it  earlier in  the Telco case, that the last part of clause 5 as well as clause 9 constituted restrictive trade practices  and  declared  them  void.  This  view  was affirmed by  Beg, C.J., in the appeal preferred by Hindustan Lever Ltd.  We are  not concerned  with the  merits  of  the question whether the last part of clause 5 and clause 9 were on the  facts of  that case  rightly held  to be restrictive trade  practices,  but  certain  observations  made  by  the learned  Chief   Justice   in   that   judgment   call   for consideration, since  they seem to be inconsistent with what was laid  down by  a Bench  of three Judges of this Court in the Telco Case.      In  the   first  place,   the  learned   Chief  Justice distinguished the  judgment in  the Telco  case by observing that the  agreement in  that case  could not  be  understood without reference to the actual facts to which 1078 it was  sought to  be applied  and  extraneous  evidence  in regard to  those facts  for explaining  "the nature  of  the special agreement  for restricting or distribution of areas" was, therefore, admissible under section 92, clause 6 of the Evidence Act, but in the Hindustan Lever case the meaning of the impugned clauses was plain and certain and the principle of Section  92, clause  6 was clearly inapplicable to led in extraneous evidence  and hence no oral evidence could be led to deduce their meaning or vary it in view of the provisions of sections  91 and 92. It was on this view that the learned Chief Justice  held that  oral evidence  for the  purpose of showing that  the trade  practices in  the impugned  clauses were not restrictive was shut out and all that was necessary for the  court to  do was to interpret the impugned clauses. Now, this  view taken  by the learned Chief Justice does not and we  say so with the utmost respect appear to be correct. We do  not see  how sections  91 and  92 of the Evidence Act come into the picture at all when we are considering whether a particular  trade practice  set out in an agreement has or may have the effect of preventing, distorting or restricting competition  so   as  to   constitute  a  restrictive  trade practice. It  is the  actual or probable effect of the trade practice which  has to be judged in the light of the various considerations adverted to by us and there is no question of contradicting, varying,  adding to  or subtracting  from the terms of the agreement by admitting any extraneous evidence. The meaning of the particular clause of the agreement is not sought to  be altered  or varied by reference to the various factors which we have discussed above, but these factors are required to  be taken  into account  only for the purpose of determining the  actual or  probable  effect  of  the  trade practice referred  to in the particular clause. The reliance placed by  the learned  Chief Justice  on sections 91 and 92 was, therefore,  quite inappropriate  and unjustified and we do not  think that  the learned  Chief Justice  was right in shutting out  oral  evidence  to  determine  the  actual  or probable effect  of the trade practices impugned in the case before him.  It may  be pointed out that the decision in the Telco  case  did  not  proceed  on  an  application  of  the principle embodied in section 92, clause (6) of the Evidence Act and with the greatest respect, the learned Chief Justice was in  error in  distinguishing that decision on the ground that extraneous evidence was considered in that case in view of the  principle underlying  section 92, clause 6, while in the case  before him  that principle  was not applicable and hence extraneous  evidence was  not admissible.  The learned Chief Justice  was bound by the ratio of the decision in the Telco case

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    Secondly, the  learned Chief Justice seemed to take the view in  his judgment  at page  465 of  the Report that if a clause in an agreement 1079 relates to  a trade  practice which  infringes  any  of  the clauses of  section 33(1),  it would  be bad and it would be unnecessary to  inquire whether  the  trade  practice  falls within the  definition of  ’restrictive trade  practice’  in section 2(o).  There were  two places  in the judgment where the learned  Chief Justice  used expressions indicating this view. He  said at  one place:  "The last part of clause (5)- would be  struck by section 33(1) (b)", and at another place "inasmuch as  clauses (5)-expressly  gives the  stockist the discretion to  sell at  lower  than  maximum  retail  prices stipulated, the  agreement was  not struck  by section 33(1) (b)". This  view is  plainly and  again we  say 60  with the greatest respect,  contrary to  the law laid down by a Bench of three  Judges of  this Court  in the  Telco case. We have already pointed  out that,  according to the decision in the Telco case,  a trade  practice does not become a restrictive trade practice  merely because  it falls  within one  or the other clause  of section 33(1), but it must also satisfy the definition of  ’restrictive  trade  practice’  contained  in section 2(o) and it is only then that the agreement relating to it would require to be registered under section 33(1). It is with  the greatest  respect to the learned Chief Justice, not correct  to say that a particular clause in an agreement is struck by one or the other clause of section 33(1). It is not section 33(1) which invalidates a clause in an agreement relating to  a trade  practice, but  it is  the  restrictive nature of  the trade  practice as  set out  in section  2(o) which makes  it void  The view  taken by  the learned  Chief Justice on this point can- not, therefore, be accepted.      Lastly,  the   learned  Chief  Justice  held  that  the introduction of  a clause in an agreement itself constitutes a trade  practice and if such clause confers power which can be used  so as  to unjustifiably  restrict  trade  it  would constitute a  restrictive trade  practice. The learned Chief Justice pointed out that the definition of trade practice is wide enough to include any practice relating to the carrying on of  any trade and observed that "it cannot be argued that the introduction  of the  clauses  complained  of  does  not amount to  an action  which relates  to the carrying on of a trade. If the result of that action or what could reasonably flow from  it is  to restrict trade in the manner indicated, it will,  undoubtedly, be  struck by  the provisions  of the Act". The interpretation placed by the learned Chief Justice was that  if a  clause in  an agreement  is capable of being used to  prevent, distort  or restrict  competition  in  any manner,  it   would  be  liable  to  be  struck  down  as  a restrictive trade  practice, regardless  of what is actually done under  it, for  it is  not the  action  taken  under  a clause, but  the clause  itself which  permits action  to be taken which is unduly restrictive of competition, 1080 that  is   material  for  determining  whether  there  is  a restrictive  trade   practice.  The  learned  Chief  Justice emphasised that if a clause in an agreement confers power to act in  a manner  which would  unduly  restrict  trade,  the clause would  be illegal  and it  would be  no answer to say that the  clause is  in fact  being implemented  in a lawful manner. This view taken by the learned Chief Justice cannot, with the utmost respect, be accepted as wholly correct.      It is  true that  a clause in an agreement may embody a trade practice  and such  trade practice may have the actual

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or probable  effect of  restricting, lessening or destroying competition and  hence it may constitute a restrictive trade practice and  the clause  may be voided, but it is difficult to see  how  the  introduction  of  such  a  clause  in  the agreement, as distinguished from the trade practice embodied in the  clause itself,  can be a restrictive trade practice. It is  not the  introduction of such a clause, but the trade practice embodied  in the clause, which has or is reasonably likely  to  have  the  prescribed  anti-competitive  effect. Therefore, whenever a question of restrictive trade practice arises in  relation to  a clause  in an  agreement it is the trade practice  embodied  in  the  clause  that  has  to  be examined for  the  purpose  of  determining  its  actual  or probable effect on competition. Now a clause in an agreement may proprio vigore on its own terms, impose a restraint such as allocating  a territory,  area or  market to  a dealer or prohibiting a  dealer from  using machinery or selling goods of any  other manufacturer  or  supplier  or  requiring  the dealer to  purchase  whatever  machinery  or  goods  in  the particular line  of business  are needed  by  him  from  the manufacturer or  supplier entering into the agreement. Where such restraint  produces or  is reasonably likely to produce the prohibited statutory effect-and that would depend on the various considerations  referred to  by us  earlier-it would clearly constitute  a restrictive  trade  practice  and  tho clause would be bad. In such a case it would be no answer to say  that   the  clause   is  not   being  enforced  by  the manufacturer or  supplier. The  very presence  of the clause would have  a restraining  influence on  the dealer, for the dealer would  be expected to carry out his obligations under the clause  and he  would not  know that  the clause  is not going to be enforced against him. This is precisely what was pointed out  by Mr.  Justice Day  in United  Shoe  Machinery Corporation v.  United States where the question was whether the restrictive-use,  exclusive-use and additional-machinery clauses in  certain lease  agreements of shoe-machinery were struck by  the provisions  of section  3 of the Clayton Act: "The power  to enforce  them", that is, the impugned clauses "is omnipresent and their 1081 restraining influence  constantly operates  upon competitors and lessees.  The fact  that the  lessor, in many instances, forbore to  enforce these provisions, does not make them any less agreements within the condemnation of the Clayton Act". There would  be no difficulty in such a case in applying the definition of restrictive trade practice, in accordance with the law  laid down  in the  Telco case as explained by us in this judgment.      Then there  may be  a clause  which  may  be  perfectly innocent and  innocuous such  as a clause providing that the dealer  will   carry  out   all  directions   given  by  the manufacturer or supplier from time to time. Such a broad and general  clause   cannot  be   faulted  as   restrictive  of competition, for  it cannot he assumed that the manufacturer or supplier  will abuse the power conferred by the clause by giving directions  unduly restricting  trade. So much indeed was conceded  by the  learned Additional  Solicitor  General appearing on  behalf  of  the  respondents.  But  a  genuine difficulty may arise where a clause in an agreement does not by itself impose any restraint but empowers the manufacturer or supplier  to take some action which may be restrictive of competition. Ordinarily,  in such  a case,  it  may  not  be possible to  say that  the mere  presence of  such a clause, apart from  any action  which may  be taken under it, has or may  have   the  prohibited   anti-competitive  effect.  The

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manufacturer or supplier may take action under the clause or he may  not, and  even if  he takes  action, it  may  be  in conformity with  the provisions  of the  Act and  may not be restrictive of competition. The mere possibilities of action being taken  which may  be restrictive  of competition would not in all cases effect the legality on the clause. In fact, a consistent  course of  conduct adopted by the manufacturer or supplier  in acting  under The  clause in a lawful manner may tend to show that The clause is not reasonably likely to produce the prohibited statutory effect. What is required to be considered  for determining The legality of the clause is hot mere  theoretical possibility  that the  clause  may  be utilised  for   taking  action   which  is   restrictive  of competition, for  it does  not necessarily  follow from  the existence of such possibility that actual or probable effect of  the  clause  would  be  anti-competitive.  The  material question to  consider is whether there is a real probability that the  presence of  the clause  itself would be likely to restrict competition. This is basically a question of market effect and it cannot be determined by adopting a doctrinaire approach. There  can be  no hard and fast rule and each case would have  to be  examined on its own facts from a business and commonsense point of view for the purpose Or determining whether the  clause has  the actual  or probable  effect  of unduly, restricting  come petition.  We  cannot  accept  the proposition that in every case where 1082 the clause  is theoretically capable of being so utilised as to unjustifiably restrict competition, it would constitute a restrictive trade practice.      There is  also another infirmity invalidating the Order dated 14th  May, 1976.  We have already pointed out and that is clear from the n decision of this Court in the Telco case that in  an inquiry  under s. 37 the Commission has first to be satisfied  that the  trade practice com plained of in the application is  a  restrictive  trade  practice  within  the meaning of that expression as defined in section 2(o) and it is by  after the  Commission is  so satisfied,  that it  can proceed to  consider whether  any of the ’gateways’ provided in section  38(1) exists  so that the trade practice, though found restrictive,  is deemed  not to  be prejudicial to the public interest  and if  no such ’gateways’ are established, then only it can proceed to make an order directing that the trade practice  complained of shall be discontinued or shall not be  repeated There  are thus  two  conditions  precedent which must  be satisfied before a cease and desist order can be made  by the  Commission in  regard to any trade practice complained of  before it.  One is  that the  Commission must find that  the trade practice complained of is a restrictive trade practice  and the  other is that where such finding is reached, the  Commission must further be satisfied that none of the  gateways pleaded  in answer to the complaint exists. Here in the present case the appellant did not appear at the hearing of  the inquiry and no ’gateways? were pleaded by it in the  manner provided  in the  Regulations and  hence  the question of  the Commission  arriving at  a satisfaction  in regard to  the ’gateways’  did not arise. But the Commission was certainly  required  to  be  satisfied  that  the  trade practices complained  of by  the Registrar  were restrictive trade practices  before it  could validity  make a cease and desist order. The Order dated 14th May, 1976 did not contain any discussion  or recital  showing that  the Commission had reached  the   requisite  satisfaction   in  regard  to  the offending trade  practices. But  we can legitimately presume that the  Commission must  have  applied  its  mind  to  the

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offending causes  of the  distributorship agreement and come to the  conclusion that  the trade  practices refereed to in those clauses  were restrictive  trade practices  before  it made the  Order dated  14th May,  1976.  There  is  in  fact inherent evidence  to show that the Commission did apply its mind to  the clauses  impugned in  the  application  of  the Registrar, because  it struck  down only  a few out of those clauses and  did not  invalidate the rest. This circumstance clearly shows  that the Commission considered with reference to each  impugned clause  whether it  related to restrictive trade practice  and made the Order dated 14th May, 1976 only in respect of those 1083 clauses where it was satisfied that the trade practices were restrictive. The  charge that the Order dated 14th May, 1976 suffered from  non-application of  mind on  the part  of the Commission cannot,  therefore, be  sustained. But  the Order dated 14th  May, 1976 was clearly bad inasmuch as it did not disclose the  reasons which  weighed with  the Commission in directing the  appellant to  cease and desist from the trade practices set  out in  the order.  The Order dated 14th May, 1976 was  a non-speaking  order. It consisted merely of bald directions given  by the  Commission and did not set out any reasons whatsoever  why the  Commission had decided to issue those directions.  It had a sphynx-like face, which goes ill with the  judicial process.  It is true that the Order dated 14th May,  1976  was  an  exparte  order,  but  the  exparte character of  the order  did not absolve the Commission from the obligation to give reasons in support of the order. Even though the  Order dated  14th May,  1976  was  exparte,  the appellant would  have been  entitled  to  prefer  an  appeal against it  under section  55 and it is difficult to see how the appellant  could have possibly attacked the order in the appeal when  the order  did not  disclose the  reasons on  1 which it  was based.  It is  now settled  law that  where an authority makes  an order  in exercise  of a  quasi judicial function, it must record its reasons in support of the order it makes.  Every quasi  judicial order  must be supported by reasons. That is the minimal requirement of law laid down by a long  line of  decisions of  this Court  ending with N. M. Desai v.  Textiles Ltd.  and Simens Engineering Co. v. Union of India.  The Order  dated 14th  May, 1976  was, therefore, clearly vitiated  by an error of law apparent on the face of the record  inasmuch as  it contained  only  the  final  and operative order  made by  the Commission  and did not record any reasons  whatsoever in  support of  is and the appellant was, in  the circumstances, entitled to claim what the Order should be revoked by the Commission      This  view  taken  by  us  renders  it  unnecessary  to consider whether  there  was  any  material  change  in  the relevant circumstances  justifying invocation  of the  power under section 13(2) and hence we do not purpose to deal with the same.  The Commission  has devoted  a part  of the order impugned in  the present  appeal to  a consideration of this question and  taken the  view that  there  was  no  material change in  the  relevant  circumstances  subsequent  to  the making of  the Order dated 14th May, 1976. We do not wish to express any opinion on the correctness of this view taken by the Commission,  since we  are setting  aside  the  impugned order made by the Commission and also revoking 1084 the Order  dated 14th  May, 1976 and sending the matter back so that the application of the Registrar under section 10(a) (iii) may be disposed of afresh.      We accordingly allow the appeal, set aside the order of

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the Com  mission rejecting  the application of the appellant under section  13(2), revoke  the Order dated 14th May, 1976 and remit  the case to the Commission so that the Commission may dispose  of  the  application  of  the  Registrar  under section  10(a)  (iii)  in  the  light  of  the  observations contained in  this judgment.  The Commission  will  give  an opportunity to  the appellant  to file  a  proper  reply  in conformity with  the requirements  of  the  Regulations  and after taking  such relevant  evidence as  may be produced by both parties,  proceed to  dispose Of the application of the Registrar on merits in accordance with law. There will be no order as to costs of the appeal. P.B.R.                                       Appeal allowed. 1085