9911796707
TMI Blog1979 (1) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 retail 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 selling 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (ii) of rule 12 of the Monopolies and 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 the Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as "the Commission") under section 10(a)( iii) of 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, overriding commission, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obviously under some misapprehension because this regulation occurred in Chap. V which provided the procedure for reference under Chaps. 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 "Rulations 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 the 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 regulation 65 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the agreements relating to the above restrictive trade practices are hereby declared to be void. The practices arising therefrom 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 clause (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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted 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 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 proceeding under section 37 in the first instance because the decision given by the Commission in the Telco's 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 give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before we set out the rival contentions of the parties in the appeal, it would be convenient at this stage 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 defined in section 2, clause (o), to mean" a trade 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, sub-section (1), provides for the establishment of the Commission wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the functioning of the statutory authority or 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 Chaps. 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 speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower 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 are material, namely, regulations 65, 67 and 85. These regulations, in so far as material, read as follows: "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 shall send one copy of the memorandum to the Registrar in cases where proceedings are initiated under sub-clause (iii) of clause (a) of section 10, and in all other cases to the Director of Investigation." "67. Reply to the notice.-(1) Every respondent who has entered an appearance shall within four weeks of his entering appearance deliver to the Secretary a reply to the notice ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 re-consideration 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity 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, unless 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 bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute by a third statute does not 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 Co-operative Insurance Society Ltd. [1931] LR 58 IA 259 ; AIR 1931 PC 149. 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. 349-50......... The independent existence of the two Acts is, therefore, recognized ; despite the death of the parent Act, its offspring survives in the incorporating Act........ It seems to be no less log ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporation and not reference and the definition in section 2(18) of the Motor Vehicles Act, 1939, as then existing, was incorporated in section 2(c) of the Taxation Act and neither the 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 statute or even its total repeal would not affect 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 an instance of legislation by incorporation and not legislation by reference. Section 55 provides for an appeal to this court on "one or more of the grounds specified in section 100". It is obvious that the legislature did not want to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication 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 no 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 kaleidoscopic world cannot be cast in any definite or rigid mould or be imprisoned in any strait-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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission, 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 change, 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 amend or revoke an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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, apply 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 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 provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 regln. 65 and filed a proper reply as provided in regln. 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, 1976. Be that as it may, the Commission declined to consider the submissions of the appellant and proceeded to make the order dated 14th May, 1976, ex parte 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 mig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellant did not, right up to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's case [1977] 47 Comp. Cas. 520 (SC) 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 effect of preventing, distorting or restricting competition in any manner and in clause. (i) and (ii), particularises two specific instances of trade practices which fall within the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or effect or because of their evident purpose. Vide also United States v. American Tobacco Co. (221 US 106 ; 55 L Ed 663). 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 of reason" evolved by the Supreme Court in Standard Oil Company's case (221 US 1 ; 55 L Ed 609) and the American Tobacco Co.'s case (221 US 106 ; 55 L Ed 663) 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 sometimes more narrowly, to the different problems coming before the courts at different times, it has held the field and, as point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute "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's case [1977] 47 Comp. Cas. 520 (SC) 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 jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of probable effect of such trade practices on competition. It was, therefore, absolutely necessary to produce the necessary material before the 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 not 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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's case [1977] 47 Comp. Cas. 520 (SC) 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's case held the field and according to that decision, any trade practice which fell 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) cannot become restrictive trade practice merely because it is covered by one or the other of the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 inconsistentwith what was laid down by a Bench of three judges of this court in the Telco's case [1977] 47 Comp. Cas. 520 (SC). In the first place, the learned Chief Justice distinguished the judgment in the Telco's case by observing that the agreement in that case could not be understood without reference to the actual facts to which 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 Ltd.'s case [1977] 47 Comp. Cas. 581 (SC) the meaning of the impugned clauses was plain and certain and the principle of section 92, clause 6, was clearly inapplicable to let in extraneous evidence and hence no oral evidence could be led to deduce their meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew in his judgment at page 465 of the report ([1977] 3 SCR) that if a clause in an agreement 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 clause (5) expressly gives the stockist the discretion to sell at lower than maximum retail prices stipulated, the agreement was not struck by section 33(l)(b). The view is plainly, and again we say so with the greatest respect, contrary to the law laid down by a Bench of three judges of this court in the Telco's case [1977] 47 Comp. Cas. 520 (SC). We have already pointed out that, according to the decision in the Telco's case, a trade practice does not become a restrictive trade practice merely because it falls within one or the other clauses of section 33(1), but it must also satisfy the definition of "restrictive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice may have the actual 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, 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 supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from any action which may be taken under it, has or may have the prohibited anti-competitive effect. The 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 possibility of action being taken which may be restrictive of competition would not in all cases affect the legality of 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 not 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 offending clauses of the distributorship agreement and come to the conclusion that the trade practices referred 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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