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TMI Blog2008 (5) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... P Act are reproduced as under : "2. Definitions.-In this Act, unless the context otherwise requires- (o)'restrictive trade practice' means a trade practice which has, or may have, the effect of preventing, distorting or restricting competition in any manner and in particular, - (i)****** (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. 33. Registrable agreements relating to restrictive trade practices.-(1) Every agreement falling within one or more of the following categories shall be deemed, for the purposes of this Act, to be an agreement relating to restrictive trade practices and shall be subject to registration in accordance with the provisions of this Chapter, namely:- (a)****** (b)any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;" 4. The appellants herein denied the allegations made in the Notice of Enquiry and it was categorically stated that it neither manufactured nor sold any garments and such allegations of restrictiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r trousers in order to get supplies of blazers, safaris and suits. The invoices which were produced as part of evidence revealed the quantity of garments supplied by the appellants and undoubtedly, the quantity of trousers was substantial. It was further observed that there was pressure on the dealers to accept higher quantity of trousers than required and when he showed his unwillingness to accept the large quantity of trousers, his dealership was terminated and the security deposit was refunded to him. The Commission arrived at the conclusion that the allegation of tie-up of sales of trousers with other garments supplied by appellant No. 2 appeared to have been fully established. 12. On the basis of the aforementioned complaint, the Commission arrived at the conclusion that the appellants had indulged in restrictive trade practice within the meaning of sections 2(o)( ii) and 33(1)(b) of the MRTP Act. 13. The Commission further observed that the termination of the dealership or appellants' refusal to deal with a well-established retailer was bound to have an adverse effect and impact on competition insofar as it would reduce the number of retail dealers in the local market and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i)That the evidence clearly establishes that a practice of "tie up" of sales of "trousers" as a condition of sales and supply of "other garments" like blazers, coats, safaris, suits was insisted upon. (ii)That the aforesaid trade practice, in fact, had the effect of restricting or distorting competition within the meaning of section 2(o) of the MRTP Act. (iii)That such competition is affected to a material degree in the relevant trade and industry. According to the appellants, it is only when the above aspects have been established that an order of "cease and desist" can be passed under section 37 of the MRTP Act. 19. According to the appellants, on the basis of the record, none of the above conditions is satisfied in the present case. 20. The evidence of the sole witness produced by the respondent, being Viren Shah, partner of M/s. Roop Milan, the complainant retail dealer, would show that even the allegation of "tie up" of sales of "trousers" as a condition for sale of "other garments" like blazers, coats, safaris, suits has not been established. On the contrary, the evidence of the said witness establishes that there was no "tie up", as alleged. In fact, the evidence sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g & Locomotive Co. Ltd. v. Registrar of the Restrictive Trade Agreement [1977] 2 SCC 55. In this case, the scope of restrictive trade practice, as defined under section 2(o) of the MRTP Act, has been considered by this Court. The practice of imposing territorial restriction and exclusive dealings in the agreements with dealers were considered in the context of section 2(o) of the MRTP Act. It was alleged that the restriction not to deal outside the prescribed territory and not to deal with competing products was a restriction which affected and restricted competition within the meaning of section 2(o) of the MRTP Act. This Court, while dealing with these allegations applied the "rule of reason" while dealing with the scope of section 2(o) of the MRTP Act and not the doctrine that any restriction as to area will "per se" be a "Restrictive Trade Practice". The relevant portion reads as under : "... 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 considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to public interest". In a case where the alleged restrictive trade practice does not have the impact of restricting competition to any 'material degree' in any relevant trade or industry, such trade practice cannot be considered as "prejudicial to public interest" and no order of "cease and desist" can be passed under section 37 of the Act. 31. Similarly, for invoking section 38(1)(h) of the MRTP Act to show that in any event, it could not be said that competition was affected to any "material degree" in the relevant trade or industry, the appellants' witness Pradeep H. Hiranandani has clarified in para 8 of the affidavit of evidence that in view of the negligible market share of the appellants in the relevant trade, it cannot be even alleged that the competition was affected to any "material degree". 32. The relevant portion of the evidence of Pradeep H. Hiranandani reads as under : "I say and submit that there are several manufacturers of readymade garments in India including several small scale manufacturers. . ." "in the circumstances, the market share of the second respondent is very negligible in the relevant trade in India and accordingly circumstances exist within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examination, cannot be looked into. This is without prejudice to the contention that there is nothing stated in the preliminary investigation report, which in any way establishes that any competition was affected within the meaning of section 2(o) of the Act and that competition was affected to any "material degree" in the relevant trade or industry, as contemplated under clause (h) of section 38(1) of the Act. 37. The appellants submitted that the findings given by the Commission that the dealership of the complainant was "terminated" by the appellants herein and held it to be a "restrictive trade practice", was wholly uncalled for and untenable. 38. The appellants submitted that no finding with regard to termination of dealership could be made since there was no such charge or allegation made in the Notice of Enquiry. A reference has been made to the case of Lakhan Pal National Ltd. v. MRTP Commission [1989] 3 SCC 251. This Court in para 9 of the said judgment observed as under : ". . .The argument was rightly repelled on behalf of the appellant on the ground that this aspect cannot be examined in the present case in view of the limited scope of the charges as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "tie-up" of sales could be resorted to by appellant No. 1. Therefore, the Commission was not justified in passing any order against appellant No. 1. The appellants submitted that the impugned order of the Commission ought to be set aside and the notice of enquiry be discharged. 43. We have carefully gone through the entire record in this case and heard the learned counsel for the parties at length. From the proper analysis of the entire evidence on record, we reach to an irresistible conclusion that no "tie-up" of sales of trousers as a condition has been established. Therefore, the Commission's passing any consequential order on the basis of tie-up is wholly untenable and unsustainable in law. 44. The court would be justified in passing the order on alleged restrictive trade practice only when it is "prejudicial to public interest" under clause (h) of section 38(1) of the MRTP Act. The pre-condition for passing such an order is that the restriction as imposed directly or indirectly when restricts or discourages competition to any "material degree" in any trade or industry, then only it would be considered as "prejudicial to public interest". The court should not pass an order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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