2004 (3) TMI 435 - SC - Companies Law

Restrictive trade practices and unfair trade practices Jurisdiction power and procedure of Commission

Summary

Issues Involved:
1. Legality of the findings on charges (iii) and (v) of restrictive trade practices.
2. Jurisdiction of the Commission to direct the amendment of Clause 7 of the Agreement.
3. Validity of the Commission's direction to restore the dealership and supply of products.
4. Requirement for the Commission to find that the restrictive trade practice is prejudicial to public interest before passing a 'cease and desist' order.

Issue-wise Detailed Analysis:

Re: Contention No. 1 [Charges (iii) & (v)]

Charge No. (iii):
The Commission found that the appellant imposed a restriction on the complainant from selling products from Sarafa Bazar, which was deemed to be a restrictive trade practice under section 33(1)(g) of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The Commission's finding was based on evidence, including the complainant's letters, which the appellant did not respond to, indicating the restriction. The appellant's argument that the Agreement did not explicitly restrict territorial sales was rejected, as the actual practice of restricting sales from Sarafa Bazar was deemed to fall within the ambit of restrictive trade practices.

Charge No. (v):
The Commission held that the appellant discriminated against the complainant by allowing M/s. Evergreen to sell products from Sarafa Bazar while restricting the complainant from doing so. This was considered discriminatory treatment under section 2(o)(ii) of the MRTP Act. However, the Commission did not address the allegation that there was discrimination in the supply of goods, and there was no evidence to support a finding that the restriction imposed unjustified costs on consumers. Consequently, the finding on charge No. (v) was deemed legally erroneous and set aside.

Re: Contention No. 2 (Clause 7 of Agreement)

Clause 7 of the Agreement, which allowed the appellant to arbitrarily withhold or delay the supply of goods without liability, was deemed by the Commission to be a restrictive trade practice per se. The Commission's directive to amend Clause 7 was upheld, as it fell within the scope of section 33(1)(g) of the MRTP Act. The appellant's argument that the issue of Clause 7 was not part of the original charges was rejected, as the Commission has the power to suo motu enquire into restrictive trade practices. The termination of the Agreement did not preclude the Commission from addressing the potential for future restrictive practices inherent in Clause 7.

Re: Contention No. 3 (Termination of Agreement)

The Commission's direction to restore the dealership and resume supplies was found to be beyond its jurisdiction. The Commission did not provide a specific finding that the termination of the Agreement was a device to perpetuate restrictive trade practices. Without such a finding, the Commission could not justify reviving the terminated contract. The appellant's right to terminate the Agreement under Clause 29 was acknowledged, and the direction to restore supplies was deemed unsustainable.

Re: Contention No. 4 (Legality of 'cease and desist' order)

The 'cease and desist' order under section 37(1)(a) was found to be inoperative due to the termination of the contract. The Commission did not need to determine whether the restrictive trade practice was prejudicial to public interest, as the Agreement had already been terminated. The complainant's remedy was to pursue compensation under section 12B for losses suffered due to the restrictive trade practice covered by charge No. (iii).

Conclusion:

1. The finding on charge No. (iii) was upheld.
2. The finding on charge No. (v) was unsustainable.
3. Clause 7 of the Agreement was correctly identified as a restrictive trade practice, and the appellant must amend similar clauses in other agreements.
4. The Commission exceeded its jurisdiction in directing the restoration of the dealership and supplies.
5. The 'cease and desist' order became inoperative due to the termination of the Agreement, and the complainant should seek compensation under section 12B.

The appeal was disposed of accordingly without costs.