# MAHINDRA & MAIDNDRA LTD~ v. UNION OF INDIA & ANR

- **Citation:** [1979] 2 S.C.R. 1038
- **Court:** Supreme Court of India
- **Decided:** 1979-01-24
- **Case number:** Civil Appeal No. 860 of 1978
- **Bench:** P. N. Bhagwati, Jaswant Singh, A. P. Sen
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mahindra-maidndra-ltd-v-union-of-india-anr-7560
- **Pages:** 47

## Headnote

Monopolies & Restrictiv-e Trade Practices Act, 1969-S. 13(2) and .55·-
Scope of-Nature of order passed under s. 13(2).
Monopolies & Restrictive Trade Practices Commission-If shr!dd give
reasons for its order even in ex~parte orders.
C
Registrar of Restrictive Trade
Agreements·-~Obligations under the Act
____j_
when presenting an application alleging restrictive trade practices in an agreement.
l.Maerpretation of statutes-Reference and· incorporation of one enactment in
llnother-D1Jtinction between-Substantial que:;1io11 of law-Meaning of.
D
SectiOn lO(a) (iii) of the Monopolies and Restrictive Trade Practices Act,
1969 empowers the Monopolies and Restrictive Trade Practices Commission
to enquire into any restrictive trade practices upon an application made to it
by th~ Registrar of Restrictive Trade Agreements.
Section
13 (2)
provides
that "any order made by the Commission _may be amended or revoked at
any time i11 the manner in which it was made." Section 55 provides that any
person aggrieved by an order made by the
Central
Government or the
E
Commission under s. 13 or s. 37 may prefer an appeal to the Supreme Court
on one or more of the grounds specified in s. 100, Code of Civil Procedure~
1908.
On the date on which the Act came into force s. 100 C.P.C. specified
three grounds on which a second appeal could lie to the High Court one of
them being that the decision appealed against was contrary to law. By an
F
amendment made in 1976 s. 100 was substituted by la new
section
which
provides that a second appeal shall lie to the High Court only if the High
Court is satisfied that the case involves a substantial question, of law.
G
B
The appellant, who wns a manufacturer of jeep
motor
vehides, their
spare parts and accessories, submitted for registration to the
Registrar
of
Restrictive Trade Agreements, standard distributorship
agreements
entered
into by it with its distributors. After registering the
agreements, in his
application to the Commission, the Registrar alleged that certain clauses
in
the agreement related to restrictive trade practices and that some of them were
prejudicial to public interest.
The appellant, in reply to the Commission's notice, stated that it did not
wish to be heard in the proceedings before the Commission, pointing out at
the same time that there was nothing in the impugned clauses of the
agree~
ment which could be said to constitute restrictive trade practices the reasons
whereof had_ alreadv been explained in itS reply.
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MAHINDRA LTD. v. UNION
1039
The Reg;r;trar flied before the Commission an alfidavit in support of his
A
.application but that too did not contain any further or additional
material
J:han ~'hat \Vas set out in his application. No other evidence, oral
or
docu·
mentary, \Vas produced by him before the Commission in support of the
al1eg<1tion that the agreement constituted a restrictive trade practice.
By its order dated May 14, 1976 the Comn1ission declared certain clauses
,of the appellanfs distributorship agreement to be void.
While correspondence
B
·was going on between the Registrar and the appellant on the submissiori of a
revised distr;brnorship agrecn1cnt, this Court in Tata Enghwcting & l.ocon1oti1·e
Co. Ltd. v. REgistrar of Restrictive Trade Practices, [1977] 2 SCR 685 gave its
interpretation on the relevant provisions of the Act.
Thereupon the
appel~
Jant made an application to the Comn1ission p0inting out that it did not
contest the enquiry proceedings under s. 37 in 1he first instance because the
·Commission's decision in the Telco case
\Va~ directly applicable; but
now
C
that that decision had been reversed by the Supreme Court in
appeal,
its
order dated May 14, 1976 needed amendn1cr.i:/modification.
An ::ipplication
under s. 13(2) read V.'ith regulation 85 \vas accordingly 1nade for revocation,
amendment or modification of the Con1mission's order of
May 14,
1976.
The Commission rejected this application by an order dated 28th February
197

## Text

_Characters 0–39,775 of 133,661. This is a partial read: ask again with offset=39775 for what follows._

A
if-;.
1038
MAHINDRA & MAIDNDRA LTD~
v.
UNION OF INDIA & ANR.
January 24, 1979
[P. N. BHAGWATI, JASWANT SINGH AND A. P. SEN, JJ.j
Monopolies & Restrictiv-e Trade Practices Act, 1969-S. 13(2) and .55·-
Scope of-Nature of order passed under s. 13(2).
Monopolies & Restrictive Trade Practices Commission-If shr!dd give
reasons for its order even in ex~parte orders.
C
Registrar of Restrictive Trade
Agreements·-~Obligations under the Act
____j_
when presenting an application alleging restrictive trade practices in an agreement.
l.Maerpretation of statutes-Reference and· incorporation of one enactment in
llnother-D1Jtinction between-Substantial que:;1io11 of law-Meaning of.
D
SectiOn lO(a) (iii) of the Monopolies and Restrictive Trade Practices Act,
1969 empowers the Monopolies and Restrictive Trade Practices Commission
to enquire into any restrictive trade practices upon an application made to it
by th~ Registrar of Restrictive Trade Agreements.
Section
13 (2)
provides
that "any order made by the Commission _may be amended or revoked at
any time i11 the manner in which it was made." Section 55 provides that any
person aggrieved by an order made by the
Central
Government or the
E
Commission under s. 13 or s. 37 may prefer an appeal to the Supreme Court
on one or more of the grounds specified in s. 100, Code of Civil Procedure~
1908.
On the date on which the Act came into force s. 100 C.P.C. specified
three grounds on which a second appeal could lie to the High Court one of
them being that the decision appealed against was contrary to law. By an
F
amendment made in 1976 s. 100 was substituted by la new
section
which
provides that a second appeal shall lie to the High Court only if the High
Court is satisfied that the case involves a substantial question, of law.
G
B
The appellant, who wns a manufacturer of jeep
motor
vehides, their
spare parts and accessories, submitted for registration to the
Registrar
of
Restrictive Trade Agreements, standard distributorship
agreements
entered
into by it with its distributors. After registering the
agreements, in his
application to the Commission, the Registrar alleged that certain clauses
in
the agreement related to restrictive trade practices and that some of them were
prejudicial to public interest.
The appellant, in reply to the Commission's notice, stated that it did not
wish to be heard in the proceedings before the Commission, pointing out at
the same time that there was nothing in the impugned clauses of the
agree~
ment which could be said to constitute restrictive trade practices the reasons
whereof had_ alreadv been explained in itS reply.
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MAHINDRA LTD. v. UNION
1039
The Reg;r;trar flied before the Commission an alfidavit in support of his
A
.application but that too did not contain any further or additional
material
J:han ~'hat \Vas set out in his application. No other evidence, oral
or
docu·
mentary, \Vas produced by him before the Commission in support of the
al1eg<1tion that the agreement constituted a restrictive trade practice.
By its order dated May 14, 1976 the Comn1ission declared certain clauses
,of the appellanfs distributorship agreement to be void.
While correspondence
B
·was going on between the Registrar and the appellant on the submissiori of a
revised distr;brnorship agrecn1cnt, this Court in Tata Enghwcting & l.ocon1oti1·e
Co. Ltd. v. REgistrar of Restrictive Trade Practices, [1977] 2 SCR 685 gave its
interpretation on the relevant provisions of the Act.
Thereupon the
appel~
Jant made an application to the Comn1ission p0inting out that it did not
contest the enquiry proceedings under s. 37 in 1he first instance because the
·Commission's decision in the Telco case
\Va~ directly applicable; but
now
C
that that decision had been reversed by the Supreme Court in
appeal,
its
order dated May 14, 1976 needed amendn1cr.i:/modification.
An ::ipplication
under s. 13(2) read V.'ith regulation 85 \vas accordingly 1nade for revocation,
amendment or modification of the Con1mission's order of
May 14,
1976.
The Commission rejected this application by an order dated 28th February
1978.
In its appeal under s. 55 of the Act itnp1igning the Comn1ission"s
order
dl3..ted 28th February 1978 the appellant contended that (1) the Registrar's
application alleging restrictive trade pn1cticcs did not set out any facts sho\1/~
ing hov.' the appellant's trade practices were restrictive in nature and that the
Registrar's application not having been made in
accordance
with the Jaw
laid do\vn by this Court in Telco case the impugned order of the Commis·
sion \vas liable to be revoked or n1odified under s. 13(2); (2) the order did
.not give any reasons for its decision and so was vitiated; afld · (3)
the
order
was
a
continuing
order
because
it
required the appellant not 1nerely
to cease bnt also desist from the restrictiYe:
lrad~ practices set out in the
order and was, therefore required to be continual1y justifiable and since
it
was, contrary to the law. laid down in Tc!co case it \vas liable to be revoked
.or amended; in any event the decision of this Court beini subsequent to the
making of the Commission's order, there was enough justillcation for revoking or modifying the order under s. 13 (2) of the Act.
The respondent, on the other hand, contended that (l) on an application
of the n.de of interpfetation enacted in s. 8(1j or the General Clauses Act,
reference in s. 55 to s. 100 C.P.C. must be construed as a reference
to
the
new s. 100, C.P.C. and so constn1ed an appeal to the Supreme Court \vould
tie only if the case involved "a substantial question of Ja\v" and not otherwise
and since in this case no such question :nas
involved,
the
appeal was
not
maintainable~ (2) s.13(2) could not be used by the appeliant as a substitute
ior s. 55; and (3) by reason of its subsequent conduct in acquiescing in the
Commission's order and unconditionally accepting it, the appe11ant \Vas pre-
·cfud.ed from raising any contention against its
validity
in
appeal
to
thi:r.
-Court.
AJ!owing the r,ppcal,
HELD : The appeal is maintainable under s. 55 of the Act. [1064 CJ
1 (a) On a ·proper interpretation of s. 55 it n1ust be held that the grounds i;pcci~
1O-J19SCl/7'
D
E
F
H
A
B
c
D
F
G
H

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1040
SUPREME COURT REPORTS
[1979] 2 s.c.R.
fied in the then existing s. 100 CPC were incorporated ins. 55 and the substitution
of the ne\v s. 100 did not affect or restrict the grounds as
incorporated
in
s. 55. . In l;ny event, the present appool raises substa-ntia) questions of law,
and so is mainlainable. [1064 C]
(b) There is a distinction bet\veen a mere reference to or citation of one
statute in another and an incorporation. Where there is a mere reference to
or citation of one _enactment in another without incorporation, s. 8(1) of
the (Jeneral Clause Act applies and th~· repeal and re-i!nactment of the provision referred to or cited has the effect set out in that section and the reference
to the provision repealed is required to be
construed
as
reference to
the
provision as re-enacted. But ¥.'here a provision of one statute is incorporatf'.d
in another, the repeal or amendment of the former does not affect the
latter.
The effect of incorporation is as if the provision incorporated were \Vritten
out in the incorporting statute and were -part of it.
Once the incorporation
is n1ade, the provision incorporated becomes an integral 'part of the statute
in which it is transposed and thereafter there is no need to
refer
to
the
statute from which the incorpora'tion is made and any subsequent amendn1ent
made in il has no effect on the incorporating st:1tute. [1060 C-01
Collector of Custonu, Madras, v. Nathe/la Sa1npathu Clietty
&
Ant.,
[1962] 3 SCR 786; Ne1v Central Jute Mills Co. Ltd. v. The Assistant Collector
of Central Excise, Allahabad & Ors., [1971] 2 SCR 92; Clarke v. Bradlaug1i,
[1881] 8 QBD 63 at 69; Council v. Hind11S<tan Co-operative Insurance Society
f,td., 58 I.A. 259, Ra111swarup v. Munshi & Ors. [l963J 3 SCR 858; Bolani Ores
Ltd. v. 'state ·of Orissa, [1975] 2 SCR 138: t!'.'ferred to.
( c) Section 55 is an instance of legislation by incorporation and not legislation by reference.
In enacting s. 55 the legislature did not ·want to confer
an unlim:ted right of appeal but wanted to restrict it.
It found that the
grounds set out. in the then existing s. 100 CPC were appropriate for restricting the right of appeal and hence incorporated them in s. 55.
The legislature
could never have intended to limit the right of appeal
to
any ground
or
grounds which might from time to time find place in s. 100 without knowing
what those A1ounds were. rt063 B~DJ
l'..'d) Seco!ldly, the Act is a self-contained code and it is not possible
to
believe that the legislature could have made the right of appeal under such
a. code depr.n•lenl on the viscititudes of a qection in another statute. [1063 F]
(e) That apart, an indissoluble Jink between s. 55 and s. 100, CPC would
lead to a startling result. If, for example, s. 100 were repealed, s. 55 would
be reduced 'to futility and the right of appeal under the Act would be wholly
gone. It would be absurd to place on the language of s. 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. [1063 1-I]
(f) Even assuming that the right of appeal under s.55 is
restricted to the
ground speCified in .the new s. 100 CPC: the present appeal would still be·
1naintainable because it involves a substant1<1l question of la\V relating to the
inter1lrelation of s. 13(2) of the Act. [1064 D]
,
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MAHINDRA LTD. v. UNION
1041
(g), The test for determining whether a question of law
raised
in an
A
appeal is a substantial question of law is to see whether it
is
of general
public importance or whether it directly or substantially affects the rights of
parties and if so whether it is .an open question in the sense that it is not
finally settled by this Court or by the Privy Council or by the Federal Court
or is not free from difficulty or call for discussion of alternative views.
[1064 El
r
B
~
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Sir Ch::ni/al V. Mehta & Sons Ltd. v. Th::. C'er!fury Spi1111in<.; and Ntanufac~
turing Co. Ltd., [1962] Supp. 3 SCR 549; referred to.
Jn the present case the appeal clearly involves a substantial question of
law within the meaning of the Act,
becau~::! the interpretation of s. l3t2)
directly and substantially affects the rights of the parties and is not finally
settled by this Court.
2(a) The words "in the manner in which it was made"
occurring
in
s. 13(2) have no bearing on the content or the scope and ambit of the power
but merely indicate the procedure to be followed by
the
Commission
~n
an1end:ng or revoking an order made by it. :1064 H]
(b) The power conferred under s. 13 (2) is •of the widest amptitude and
in this respect it j5 unlike s. 22 of the En~ish Act. This power is intended
to ensure that the order passed is and continues to be in conformity with the
requirements of the Act, and the trade practice condemned by the order is
really and truly a restrictive trade practices and it must therefore, be construed
in a wide ~c.nse so a~ to effectuate the object and purpose of the grant of the
powec. [1065 BJ
c
D
(c) The powers under s. 13(2) land s. 55 are distinct
and
independent
powers and one cannot be read as subject to the other. The scope and appliE
cability of s. 13 (2) is not cut down by the provision for appeal under s. 55.
It is perhaps bedause the right of appeal given under s. 55 is limited to a
question of law that a wide and unfettered power is conferred on the Comm_i:,siC•il to cin1end or revoke an order in a·pp.:opriate cases. [1066 A]
(d) 'fl1e conferment of such wide and unusual power under s. 13(2) was
necessary to ensure that an erroneous order is capable of being corrected.
F
An order· made under s. 37 or under any other provision of the Act
may
affect not only the parties before the Commission but also others such as
the whole net-work of distributors or dealers who were not before the Com7
mission. Jt may also b:tr"ect the entire trade in the product. There may be
some facts or circumstances having a crucial bearing on the determination of
the enquiry which, if taken into account, may result in a
different
order
being made or some fact or circumstance may aris~ which may expose the
G·
invta·lidity of the order or render it bad. There may be a material change in
the relevant c:1cnmstances subsequent to the making of the order.
There·
fore, by its very nature, the order of the Commission is transient or
proten1ro1 e nnd must be liable to be altered or revolced according as there is
inaterial ch:'lnge in the relevant economic facts and circumsta·nccs. [1066 B-E]
(e) But howsoever large may be the power under s. 13(2), it ctannot be
construet; to be so wide as to permit a rehearing on the satn~ n:ate.~ial without
H
anythir:g niore with a view to showing that the 1)rder 'vas wrong on facts. [lOf17
BJ
B
I 042
SUPREME COURT .REPORTS
[1979] 2 S.C.R.
(f) When Regulation 85 says that the prov1s1ons of s. 114 and 0. XLVII,
r. 1 CPC shall as far as may, be applied to the proceedings under s. 13(2) it
cannot be read to mean that an application under s.13(2) can be maintained
only on the grounds set out in s. 114 and 0. XLVJI r. 1. This regulation does
not in any manner limit the width and amplitude of the power under s.13(2).
~;),· good part of it is procedural in nature and has nothing to
do with
the
grounds on which an application under s. 13(2) may be maintained. The
words "as far as may" occurring in its last part do not indicate that an
ttpplication under s. 13(2) can be maintainell only on the grounds set out in
s. 114 and 0. XLVII, r. 1, CPC.
All that they indicate is that the provisions
of s.114 and 0. XLVIl, r. 1 are to be invoked only to the extent applicable,
and
if
in
a
given
case
they
are
not
applicable
they
may
be
igriored;
but
that
does
not
mean
that
the
power
conferred
under
s.
j 3 (2)
would, not
be
exercisable
in
such
a
c~e.
The
reference
to
the provisions
of s. 114
and 0. XLVII, r. 1 does not limit the
grounds on which an application may be ·made under s.
13'(2). Clearly,
therefore, even if a case does not fall within s. 114 and 0. XLVII, r.1, the
Comn1ission would have poWer in an appropriate case to amend or revoke an
order made by it in the exercise of its power under s. 13(2). [1067 E·H]
3(a) The Power of the Co1nn1ission under s.13(2) was exercisable in the
;.
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D
present case and the ofder dated 14th May 1976 \Vas liable to be revoked.
E
[1077 B]
(b) The subn1ission of the distributorship agreement for registration under
s. 33 cannot be construed as ndn1ission on the '0:ppellant's part that the clauses
in the agreement constituted restrictive trade practices.
The
appellant.
had
possibly s~bmitted the agreement for registfation on the erroneous view (which
was also the view of the Commission in the Telco case) that the moment
an agreement contains a trade practice falling within any of the clauses. of
s. 33(1) -the trade practice must, irrespective of Whether· it falls within the
definition of s. 2(o) or not, be regarded as a restrictive trade practice and the
agreement n1ust be registered. The question whether a particular trade prac~
tice is restrictive or not is essentita.Uy a question of law based on the applica-
.... ~.
tion of !he definition _in s. 2(o) to the" facts of a given case and no adn1is-
-
sion on a question of law can ever be used, in evidence against the
make of
F
the admission. Therefore, even assuming that there was an
admission in
~-
submitting the agreement for registration it could not be used as evidence
ag,;iinst the appellant in the enquiry under s. 37. [i075 C·G]
( c) There was nothing in the conduct of the appellant which would amount
to acquiescence or raise an estoppel against it.
The appellant did :qot,
at
any time, l;i.-c;cep""t the impugned order knowing that it •vas erroneous.
There
·G
can be no acquiescence without knowledge of the
right
to
repudiate
or
challenee. l'J 068 H1
(d) Neither did the failure of the bppellant to prefer an appeal amount to
acquiescence on -its part because an application under s. 13 (2). which is tin
alternative ;:iud a more effective remedy, w;:i,~ available to it. [1069 G]
(e) The fact that the appellant did not implement the
by' entering into revised distributorship agreements
with
its
showed that there was no acquiescen,ce on it5 part so far as
14th Mriy 1.976 'vas concerned. [1070 C]
impugned order
distributors also
the· order dated
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MAHIND~ LTD. V. UNION'
1043
(f) Estoppel can arise only if a party to a proceeding had altered bis .\j
position on the faith of a represent&tion or promise made by another. In the
instant case 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. [1070 D~
4(a). The order of the Commission was bad oecause it was b~ed on no
material an<l, could not possibly have been m~de by the Com1nission. [1076 A-B]
B
(b) The definition of restrictive trade practice in the Act
is,
to some
extent, based on the rule of reason evolved by American courts while interpreting •a similla,1r provision in the Sherman Act.
The rule of reason normally
requires ascertainment of facts or features peculiar to the particular business,
its condition before and after the restraint was imposed, the nature of the
res~raint .ind !ts effect, actual or probable, the history of the restraint and the
C
evil believed to exist, the reason for adopting the particular restraint and the
purpose sought to be attained. It is only on a consideration of these factors
that it can be decided whether a particular la.ct, contract or agreement imposing the ·restraint is unduly restrictive of competition so as to constitute
restraint of trade. Certain restraint of trade are unreasoable per se because of
their pervicious effect on competition and lack of any redeeming virtue; they
ere conclusively. presumed to be unreasonable and, therefore, illegal ,without , D
elaborate enquiry as to the precise harm they have caused or the business
execuse for their use. In such cases illegality does not depend on a showing
of the unreasonableness of the practice and it is unnecessary to have
a
trial
to show the nature, extent and degree of its market effect. [1074 A, B; 1075 A-BJ
(c) It is now settled law that every trade practice which is in restraint;
of trade is not necessarily restrictive trade practice .. If a trade practice F'.'.::!::eE
ly regulates and thereby promotes competition it would not fall within the
definition even if it is to some extent in restraint of trade. Therefore, the
question whether ft trade practice is a restrictive trade practice or not has t~
be decided not on any theoretical or a priori reasoning, but by
inqu1n~
whether it l~as or ma-y have the effect of preventing distorting or restrictir),,.
comretition. The peculiar facts and ~atures of the trade would be very mu~~n
relevant in determining this question. [1072 HJ
F
(d) In the Telco case this Court laid down that an application by
the.
Registrla:r under s. lO(a) (iii) must, contain facts \Vhich in his opinion constitute
restrictive trade practice and show or establish, as to hoW the alleged clauses
constitute restrictive trade practice in the context of the facts.
But even if
the application does not set out any facts or features showing how the
trade
practices
complained
of
by
the
Registrar
are
restrictive
pt1actices,
G
the Registrar can still, at the hearing of the enquiry, in the absence of any
demand for particulars being made by the opposite party produce
material
before the Commission disclosing facts or features which go to establish the
restrictive tivture of the trade practice complained of and if that is done, the
defect in the application would not be of much consequence. [1070 G-Hl
In the instant case the burden of producing the necessary material that the
impugned trade practices had the actual or porbab!e effect _of diminishing
or
H
destroying competition and were therefore restrictive trade practices was on
the Registrar who made 1an application before the Commission. No material
'•
1044
SUPREME COURT REPORTS
(1979] 2 S.C.R.
A . beyond reproducing the impugne~ clauses of the agreement and the words of
the relevant sections having been pro~uced, the application of the Registrar
was contrary to the law laid down by this Court. Therefore, the Commission had no basis for making it-s order dated 14th May 1976.
( e) The argument that the trade practices referred to in the offending
clauses \Vere per se restrictive trade practices and in any event, even if
any
B
supporting material was necessary, it was to 1 be found in the admission of
the appellant contained in its letter submitting the distributorship agreement
for registration was without any force.
5(n.). When the issue before the court is whctht'r a pa•rticular trade p;.:.ctice
set out in_ an agreement has or may have the effect of preventing, distorting
ohr restricting combpebti
1
tionffso as to constitute a. restrictive trade practic~, it is
_ _L
~c
t e actual or pro a e e ect of the trade practice which has to
be
Judged
and there is no question of contradict,ing, varying, adding to or substracting
from the terms of the agreement by
admitting extraneous
evidence. The
various factors stlated earlier are 1equired to be taken into account only for
the purpose of determining the actual or probable effect of the trade practice
referred t0 in the particular clause.
In such a case it is not right to shutout oral evidence to determine the actual or probable effect
of the
trade
D
practico. [10'/8 D-E]
Jb) It is not s. 33(1) which invalidlates a clause in an agreement relating
to a trade practice but it is the restrictive nature of the trade practice as set
out in s. 2(0) which makes it void. [1079 E]
(c) When a question of restrictive trade practice arises in relation to a
clause in an agreen1ent it is the trade pr\lctice in the clause that ha~ to be
E
examined for determining its actual or probable effect
on
competition. A
clause in an agreement may proprio vigore impose a restraint.
\Vhere
~uch
restraint produces or is reasonably likely to produce the prohibited statutory
effect it would clearly constitute a restrictive trade practice and the clause
would be bad. [1080 D-El
Tata Engineering & Loco1notive Co. Ltd., Bombay,, v. The Registrar of
F
the Restrictive Trade Agreenient New Delhi, rt977] 2 SCR 685, applied.
G
II
Observations in Hindustan Lever Ltd. v. 'Af.R. T.P., [1977] 3 SCR 455; disapproved.
( d) In a clase where a cl a use in agreement does not by itself impose any
re~traint but empowers the mMluf.acturer or supplier to take son1e action which
may be restrictive of competition, the mere possibility of action being taken,
which tnay be restrictive of competition, would not in all cases
affect the
legality of the clause. What is required to be considered for determining the
legality of the clause is whether there is a real probability that the presence
of the dau~e itself would be likely to restrict competition. This
is
basically
a question of market effect and cannot be determined by adopting a doctrRin ...
aire approach. Each case would have to be examined on its own facts from
a business and commonsense point of view. It cannot, therefore, be said that
in every case where the cJause is theoretically capable of being so utilised
as
to unjustifiably restrict competition it
would
constitute
a
restrictive trade
practice. f1081 E-Hl
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MAHINDRA LTD. v. UNION (Bhagwati, J.)
1045
6(a). The order dated 14th May 1976 was clearly vitiated by an error of
A
Jaw apparent on the face of the record inasmuch as it contained only the
final and operative order without giving: any reasons in support of it. [1083 E.]
(b) 1be two conditions precedent before the Commission can pass a cease
and desist order are ( i) it must be found that the trade practice complained
of is a restrictive trade practice and (ii) where such a finding is reached the
Commission must be satisfied that none of the "gateways" pleaded in answer
B
to the complaint exists. [1082 D-El
( c) In the instant case the appellant did not appear ·before the Commission and no "gateways" were pleaded and therefore the question of the Commission arriving at 'at satisfaction in regard to "gateways"
did
not
arise.
~ ..
etheless the Commission was required to be satisfied that the trade prac-
-
1ices complained of were restrictive trade practices. The order dated 14th
C
May 1976 did not contain any discussion showing that the Commission had
reached the requisite satisfaction. It gtl'Ve merely bald directions without any
reasons. The ex-parte character of the order did not absolve the Commission
from the obligation to give reasons in support of the order
because
the
appellant would have been entitled to prefer an appeal even against on
ex-parte order and in the absence of reasons, the appellant would not be
in
a pos1ti0n to attack the order in appeal.
Tt is well established that every
D
quasi-judicial order must bei supported by reasons. [1082 E-H1
N. M. Desai v. Textiles Ltd.; C.A. 245 of 1970, dee, on 17th Dec., 1975;
Simons Engineering Co. v. Union of India, [1976] Supp. SCR 489; followed.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 860 of 1978.
From the Judgment and Order dated 28-2-1978 of the Monopolies
and Restrictive Trade Practices Commission in R.T.P, Enquiry No. 91
of 1975.
Ashok H. Desai, B. H. Wani, Ravinder Narain, Talat Ansari,
A. N. Haksar and Shri Narain for the Appellant.
Soli J. Sorabjee, Addi. Sol. Genl., R. B. Datar and Girish Chandra
for Respondent No. 2.
The Judgment of the Court was delivered by
E
F
BnAGWATI, J<-This appeal under section 55 of the Monopolies
and Restrictive Trade Practices Act, 1969 (hereinafter referred to
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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 slated as fo11ows :
The appellant is a public limited company engaged in manufacH
ture and sale of jeep motor vehicles and their spare ·parts and
accessories.
Since 1947 the appellant was marketing and
distri-
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SUPREME COURT REPORTS
(1979] 2 s.c.R.
buting jeep motor vehicles and it ha.d s·et up a large and complell'
net work 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 manufacturing such vehicles and distributing
and marketing the same through its net work of distributors.
Thee
appellant hae appointed these distributors for marketing
and
salec
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:-
.r·
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 setting privileges
and agrees to develop with diligence the sales of sale pro·
ducts in said territory in accordance with this agreement and
E
undertakes to achieve the quantum of sales in the territory
as may be fixect by the Company from time to time.
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Section (4):
LIMITATIONS ON
TERRITORIAL
RIGHTS :-(i) Distributor agrees not to solicit outside of
the territory described in Section 3-the purchase of any
products.
*
*
•
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Section (6)
PRICE AND PAYMENT :-Distributor
will pay for products the Company's established Distributor net prices in effect on date on despatch. Price lists will
be furnished to Distributor by the Company, but t_he
Company reserves the right to change prices at any time
without notice.
*
*
*
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Section (11) : PR/CB CHANGES :-If the Company
reduces its published suggested retail list price,
for
any
current model of 'Jeep' motor vehicles, the company will
,
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MAHINDRA LTD. v. UNION (Bhagwati, J.)
make an allowance to Distributor as hereinafter provided.
The allowance shall be made in respect of new and nnused
'Jeep' Motor Vehicles of the t)len current model in respect
of which the price change has been made which !have been
purchased by Distributor from the Company within a
period of 30 (thirty) days prior to the effective date of such
decrease in suggested list price, and which distributor shall
have in his unsold stock on such effective idate. The allowance shall be equal to the · difference
between the net
amount paid to the Company for such 'Jeep' Motor Vehicle
(less all allowance thereto granted), and the net amount
which would have beeu paid had such 'Jeep' motor vehicles
been purchased· at the reduced price. No allowance, however, shall be made unless · there is a reduction in the
RETAIL tist price and increases in discounts, bonuses and
the like shall in no event be considered as a reduction in
price.
*
*
*
*
I 047
Section (17) : CARE OF OWNER AND CUSTOMER
RELATIONS :-Distributor agrees-
•
•
•
•
(a) To refrain from selling or offering
for
sale
any
competing product. The Company shall be the sole·
judge as to whether a product is competing or
not".
The appellant by its letter dated 27th Januafy, 1971 submitted
to
the Registrar of Restrictive Trade Agreement (hereinafter referred
to as the Registrar) certified' copies of agreements entered into by
the appellant with the Distributors for registration, since in the opinion
of the appellant, they were registrable under the provisions of Ch.
V of the Act.
The appellant also submitted to the Registrar along
with its letter dated 19th May, 1972 four copies of the
standard
distributorship agreement for registration in terms of cl. (ii) of Rule
12 of the Monopolies 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.
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,On 17th December, 1975 the Registrar made an application to
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the Monopolies and Restrictive Trade Practices Commission (here•
inafter referred to as the Commission) under section lO(a) (iii) of
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SUPREME COURT REPORTS
[ 1979] 2 s.c.R.
the Act pointing out to the Commission that the standard distribntorship 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,
over-riding 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
agrnement,
respectively
attracting clauses (a), (b), (c), (e), (f) and (g) of section 33(1)
and/ or section 2 ( o) of the Act" and that these restrictive trade practices had and rllight 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 section 3 7 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 sections !O(a) and 37 of the Act, to hold inquiry into the
F
restrictive trade practices complained of by the Registrar and issued
notice dated 2nd January, 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 ComG
H
mission, it should comply with the requirements of Regulations 65 and
67 failing which the Commission would proceed with the inquiry
in the absence of 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 distributionship agreement complained of by the Registrar did not constitute restrictive trade practices, for the reasons explained in the letter
•
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MAHINDRA LTD. v. UNION (Bhagwati, J.)
1049
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 iu terms of Regulations 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 Chapter III and IV and it had
no application in case· of an inquiry under section 3 7 of the Act.
The Joint Secretary (Legal) of the Commission pointed out to the
appellant by his letter dated I Ith February, 197 6 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 contents of the letter addressed by the appellant setting
'Out the explanation for the various clauses impugood 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
appliclltion.
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 :
" (I) The Respondent is hereby restrained and prohibited by any agreement with any distributor to restrict by
any method the persons or classes or persons to whom the
goods ar" sold wh.ether such person be retail purchaser or a
dealer.
(2) The Respondent is hereby restraiood and prohibited from restricting in any manner, any purchaser whether
a dealer or otherwise in the course of its trade from acquirA
B
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B
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D
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1050
SUPREME COURT REPORTS
[1979] 2 S.C.R.
.ng or otherwise dealing in any goods other than those of
the Respondent or the goods of any other person.
(3) The Respondent is hereby restrained and prohibited
from selling any goods to any distributor, dealer or otherwise on the condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the
respondent unless it is clearly stated that prices lower than
those prices may be charged.
The Respondent is hereby
directed that in all future price lists it must state on the
cover or on the front page that the prices if any indicated
therein as resale prices are maximum prices and that the
prices lower than those price may be charged.
( 4) The Respondent is hereby restrained and prohibited
from allocating any area or market to any distributor or
dealer for the disposal of the Respondent's goods ..
(5) The Respondent is hereby restrained and prohibited from preventing any distributor from
appointing any
dealer of its own choice on such terms and conditions as
may be mutually agreed upon between
distributors
and
dealers in cases where the Respondent does not undertake
any obligation, liability or responsibility in respect of the
dealers.
(6) The clauses in the agreements relating to the above
restrictive trade practices are hereby declared to be void.
The practices arising therefore, 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 cl. (7) of the Order, the appeliant
filed an affidavit dated 10th September. 1976 stating that the appell;mt
had fully implemented in practice the directions contained in Paragraphs (l) and ( 5) of the Order and refrained from enforcing against
the distribqtors any of the clauses which had been declared void by
the Commission.
The appellant also pointed out that a draft of "'
l
•
• '
•.
MAHINDRA LTD. v. UNION (Bhagwati, J.)
1051
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
Registrar dated 27th September, 1976 seeking particulars from the
.appellant showing how the appellant had implemented the directions
contained in the· Order.
The
appellant by its reply dated
11th
November, 1976 pointed out that since the date of receipt of the
Order, the appellant had not given effect to the trade practices covered
by paragraphs ( 1) to ( 5) of the Order nor required any of the distributors to abide by the clauses of the standard distributorship agreement relating to those trade practices and on the contrary, intimated
to the distributors that the old distributorship agreement would have to
be substituted by a new revised agreement.
The appellant submitted
that since the clauses of the standard distributorship agreement declared void by the Commission were not enforceable in law by the
.appellant, it .