MAHINDRA AND MAHINDRA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This appeal under S. 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:

(2.) 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 distributing jeep motor vehicles and it had set up a large and complex network 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 distributing such vehicles and distributing and marketing the same through its network 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:

(3.) On 17th Dec., 1975 the Registrar made an application to the Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as the Commission) under S. 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 S. 35 of the Act. The Registerer drew the attention of the Commission to Cls. (3), (3), (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, 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 Sec. 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 Sec. 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 Ss. 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 Jan., 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 which the commission would proceed with the inquiry in the absence of the 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 distributorship agreement complained of by the Registrar did not constitute restrictive trade practices for the reasons explained in the letter 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 Regulation 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 Chapters III and IV and it had no application in case of an inquiry under S. 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 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 Regulations 65 and 67 with the result that the Commission decided to proceed ex parte 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: