2003 (9) TMI 540 - SC - Companies Law

Whether the policy of the Government of India to introduce CAS has really come into force in this country if so whether the said CAS requires the distribution only through HITS or not? Held that - From the perusal of the impugned order, unable to come to the conclusion that the Commission has addressed itself to the various issues which arise for its consideration even at an interim stage before making the impugned order. As noticed any conclusive opinion expressed by us in this regard in these appeals is likely to pre-empt the arguments that may be addressed before the Commission in its future proceedings, therefore, we do not intend to discuss any further, the correctness or otherwise of those contentions except to state that there is some justification in the argument addressed on behalf of the appellants that, as a matter of fact, the Commission by the impugned order without assigning any reason has changed the existing distribution system

Summary

Issues Involved:
1. Allegations of unfair, unethical, and restrictive trade practices.
2. Granting of interim injunction by the Monopolies and Restrictive Trade Practices Commission (the Commission).
3. Scope of the Commission's power under section 12A of the Monopolies and Restrictive Trade Practices Act, 1969.
4. Compliance with the principles laid down in the case of Haridas Exports v. All India Float Glass Manufacturers' Association.
5. Requirement for the Commission to provide reasons for its orders.

Issue-wise Detailed Analysis:

1. Allegations of Unfair, Unethical, and Restrictive Trade Practices:
The complainants filed a complaint under section 10, read with section 36B of the Monopolies and Restrictive Trade Practices Act, 1969, alleging that the appellants engaged in unfair, unethical, and restrictive trade practices by not permitting the complainants and their associates to use the latest technology in Telecommunication known as 'Headend In The Sky' (HITS). This technology, approved by the Government of India, would facilitate easy distribution of television channels through a satellite to various Multiple System Operators (MSOs) and cable operators. The complainants argued that HITS is superior to the existing terrestrial distribution, economically cheaper, and would generate higher revenues in terms of higher entertainment and service tax to the Government by 100% declaration. They also alleged that the denial of such facilities was to prevent the introduction of Conditional Access System (CAS) and to secure a monopoly over the distribution market by unfairly promoting the appellants' affiliates, violating the provisions of the Act.

2. Granting of Interim Injunction by the Commission:
The complainants also filed an application under section 12A of the Act seeking an interim injunction against the appellants from preventing/obstructing the distribution of signals of the appellants' pay channels to cable operators/consumers. The Commission, by an interim order on 27th August 2003, directed the appellants to provide signals to the complainants and other cable operators and consumers, stating, "They shall, therefore, continue to provide and distribute the signals as an interim measure which will be subject to further orders till the next day of hearing. List on 10th September, 2003."

3. Scope of the Commission's Power Under Section 12A:
The appellants contended that the Commission made the impugned order without granting sufficient opportunity to the appellants to produce materials to oppose the issuance of an interim order. They argued that the Commission's interim order did not indicate the grounds which persuaded it to pass the order, a basic requirement of law, as the Commission could pass an interim order only on proved facts. The appellants emphasized that the Commission has a conditional power to grant an interlocutory order, which should be based on proved facts, as per the language of section 12A of the Act.

4. Compliance with Principles Laid Down in Haridas Exports v. All India Float Glass Manufacturers' Association:
The appellants relied on the judgment in Haridas Exports v. All India Float Glass Manufacturers' Association [2002] 6 SCC 600, where the Supreme Court held that the Commission's power to grant temporary injunction arises only after it is satisfied that a restrictive trade practice or unfair trade practice is being carried on, which is likely to affect prejudicially the public interest or the interest of traders. The Commission must be satisfied on proved facts before granting an interim order. The appellants argued that the Commission did not address the various issues arising for consideration even at an interim stage before making the impugned order, and thus, the order was contrary to the principles laid down in Haridas Exports' case.

5. Requirement for the Commission to Provide Reasons for Its Orders:
The Supreme Court noted that the Commission's order did not disclose any reasons for the exercise of its power under section 12A of the Act, nor did it indicate that the order was based on proved facts. The absence of reasons and basis for the impugned order rendered it liable to be quashed on this preliminary ground alone. The Court emphasized that the appellate court has the right to know the reasons and basis of the impugned order, which were missing in the Commission's order.

Conclusion:
The Supreme Court set aside the impugned order on the grounds that the Commission did not assign any reason for exercising its power under section 12A of the Act, did not indicate that the order was based on proved facts, and did not provide the basis for such a conclusion. The Court directed that the matter be reconsidered by the Commission, allowing the parties to raise all issues before the Commission, which should then decide the application for injunction filed under section 12A of the Act or the main complaint in accordance with the law. The Court also directed that the appellants continue to distribute their programmes through the terrestrial system as an interim measure, as it is in public interest, but clarified that none of the complainants, MSOs, and Cable Operators have any right to use the facilities of HITS for distribution of such signals until further orders from the Commission. The appeals were disposed of accordingly.