Monopolies and Restrictive Trade Practices Commission
All India Plastic Industries ... vs Polyolefine Industries Ltd. on 13 April, 1993
Equivalent citations: [1994]81COMPCAS259(NULL)
ORDER
Sardar Ali, Member
1. This order will dispose of an enquiry initiated upon an application filed by the All India Plastic Industries Association (hereinafter referred to as "the complainant"), under Section 10(a)(i) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as "the Act"), against Polyolefine Industries Ltd. (hereinafter referred to as "the respondent"). The aforesaid complaint accompanied by an affidavit was filed before the Commission on February 26, 1986, which was considered by the Commission on March 5, 1986, and notice of enquiry was directed to be issued against the respondent because in the view of the Commission it was necessary to start enquiry forthwith.
2. Briefly stated the charges in the notice of enquiry, which are based on the application of the complainant, an association of manufacturers and traders in various plastic materials having a membership of 384, are that the respondent has indulged in the trade practice of offering a huge discount to selected major units at Rs. 2,500 per metric tonne on extrusion grade and Rs. 3,500 per metric tonne on injection moulding grade and the respondent had denied the aforesaid rebate to all other small consumers, though they happen to be the respondent's consumers for the past several years and are dependent on their material. In this process, the respondent has manipulated the prices and supply of its products to small consumers, imposing unjustified costs and restrictions on them and the said discriminatory trade practice distorts, prevents and restricts competition between the large/major units and small-scale units. Thus, the Commission was prima facie of the view that the respondent-company is indulging in activity of restrictive trade practice as defined under Section 2(o) of the Act and the said restrictive trade practice is prejudicial to the public interest.
3. The complainant also alleged in its complaint that the respondent is the sole indigenous manufacturer of high density polyethylene (hereinafter referred as "HDPE"), which the members of the complainant are using as their raw material for manufacturing their products ; that the production of the respondent is stated to be about 45,000 tonnes per annum as against the country's demand of over 1 lakh tonnes per annum and the balance demand is met through imports, which only the major manufacturer can do directly ; that the respondent has been selling their raw material at a high margin of profit and instead of reducing their rate to lessen the gap between their prices and the international prices, they have adopted the system of offering huge discount/rebate to selected major units ; that the aforesaid rebate, is denied to all small consumers, who are suffering in their production and their market is now usurped by the major units and the small-scale units are, thus, being ruined as they cannot compete with large units, who get substantial rebates ; that the consequences of this system of discriminatory rebate to large units is that they would draw large quantities and as a result during tight supply positions when imports are restricted, the respondent would supply their material to the large units on the basis of past offtake.
4. Pursuant to the issuance of the notice of enquiry dated March 10, 1986, the respondent filed a reply to the said notice in May, 1986, after the matter was adjourned twice and subject to payment of Rs. 300 as cost, which was awarded on April 25, 1986. An objection was raised in the reply that the facts as disclosed in the complaint did not constitute any restrictive trade practice within the meaning of Section 2(o) of the Act and that under the circumstances there is no question of making any enquiry under the Act. The respondent had stated that the complaint is mala fide and is an abuse of the process of law. The respondent is the manufacturer of plastic, viz., HDPE, manufacturing injection, blow moulding and extrusion grade material. In the year 1984, the production of HDPE was 39,245 tonnes and almost an equivalent quantity in the year 1985 as against the country's total demand of 1,20,000 tonnes. The remaining gap of the material in the Indian market is entirely met by import of HDPE, which was available in the market at a cheaper rate in comparison to the product of the respondent on account of excessive imports. The complainant and their members have been purchasing for their own requirements from the imported material available to them by totally ignoring their quota on the basis of their past/previous offtake, which they should have bought from the respondent, which resulted in accumulation of huge stocks of HDPE with the respondent during the relevant period and to reduce its production of HDPE to almost half that it manufactured in the immediate past. The respondent-company, therefore, with a view to survive offered a discount on December 9, 1985, to those consumers, who would purchase minimum quantity of 100 metric tonnes per month of HDPE on a uniform basis. The respondent has stated that from March 9, 1986, it had discontinued the giving of any discount to those consumers, whose purchase was a minimum of 100 metric tonnes per month. The respondent emphatically denied that the offering of trade discount by the respondent is a restrictive trade practice and contended that the same does not directly or indirectly restrict or discourage competition to any material degree in the relevant trade or industry and was not likely to do so and that the restriction was not unreasonable having regard to the complaints between the circumstances in detriment to the public (sic) and in any event the alleged restrictive trade practice is not in any way prejudicial to public interest.
5. Further, the case of the respondent, inter alia, was that during the year 1985 Saudi Arabia and Brazil dumped a huge quantity of HDPE in the Indian market at a price 25 per cent. price than that prevailing in the year 1984. The respondent had to increase the prices of the product in question because of the increase of the administered price of "naphtha" controlled by the Central Government. The respondent was fully dependent on basic raw material ethylene and other petroleum-based products, the prices of which were controlled by the Government of India and prices of basic raw material constitute almost 85 per cent. of the total cost of the respondent.
6. The Director-General of Investigation and Registration had filed the rejoinder to the reply of the respondent on July 14, 1986. Along with the rejoinder the Director-General has also filed an application under Regulation 74 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974 (hereinafter referred to as "the Regulations"), for administering interrogatories on the respondent as per annexure I and for discovery of documents of affidavit as per annexure II. On August 22, 1986, the reply to interrogatories and discovery of documents which were filed by the respondents have been ordered to be taken on record. The Commission also find that the respondent had also filed a reply to the rejoinder of the Director-General. As the reply to the rejoinder of the Director-General was without authority of law and there was no provision for such reply by the respondent, it was directed that the reply to the rejoinder shall be returned to the party.
7. On August 22, 1986, the complainant also wanted to deliver interrogatories on behalf of the complainant and wanted that the framing of issues be deferred for the time and he be allowed to move the application under Order XI, Rule 1 of the Civil Procedure Code. The Commission observed that the proceedings before the Commission are being conducted by the Director-General. Under Rule 13A of the Monopolies and Restrictive Trade Practices Rules, 1970, the Director-General is entitled to appear before the Commission in all the proceedings in his own right. The complainant and the Director-General cannot be allowed to conduct the enquiry independently of each other, the result of which may be that the respondent will have to face two parties in the same enquiry and such a situation will confuse the entire matter. The complainant has to get in touch with the Director-General for this purpose and if there is any case for delivering a further set of interrogatories, the matter can be considered afresh. Such application will have to be made through the Director-General and not independently by the complainant. The Commission further observed that the complainant cannot produce evidence or make application for the purpose of delivering interrogatories and/or seeking discovery of documents independently of the Director-General. The only extent to which the complainant can be permitted to participate in the proceedings will be that the copies of the pleadings and other proceedings can be supplied to the complainant for rendering assistance to the Director-General in the proper conduct of the enquiry before the Commission. The complainant can also be allowed to address oral arguments on any matter during the proceedings and obviously at the end. Beyond that the complainant cannot be heard in the course of proceedings.
8. On the same date referred to above in the preceding para, the respondent also stated that an issue be framed whether the complaint is mala fide and an abuse of the process of the court. However, this submission of the respondent was rejected by the Commission because while issuing the notice of enquiry, the Commission was satisfied about the prima facie case requiring an enquiry into the allegations and, therefore, the question of framing an issue, as wanted by the respondent, does not arise. On the basis of the pleadings of the parties, the following issues were framed :
(1) Whether the respondent has indulged or is indulging in the restrictive trade practice as stated in the notice of enquiry ?
(2) If the answer to issue No. 1 is in the affirmative, whether the said trade practices are restrictive trade practices within the meaning of Section 2(o) and/or Section 33 of the Monopolies and Restrictive Trade Practices Act ?
(3) If the answer to issue No. 2 is in the affirmative, whether the said restrictive trade practice is not prejudicial to the public interest as contended in para 2(iv) of the reply of the notice of enquiry ?
(4) Relief ?
9. Thereafter, the case was fixed for the evidence of the Director-General for August 27, 1986. On that date the evidence of the Director-General was not recorded because in the meantime the Director-General moved an application under Regulation 74 on September 26, 1986, praying that another set of interrogatories as mentioned in annexure I and discovery of documents as per annexure II be served/made upon the respondent. The respondent wanted some time for addressing arguments for the disposal of this application before proceeding to record evidence and the enquiry was postponed to November 7, 1986, for the argument on the aforesaid application.
10. On November 7, 1986, the matter was argued by the parties on the aforesaid application and administering of further interrogatories as per annexure I of the application under Regulation 74 of the Director-General was not allowed. However, the respondent was directed to submit the guidelines issued by the respondent to its regional/branch managers on. December 9, 1985, which was subsequently filed by the respondent on November 27, 1986. There was another application duly supported by an affidavit under regulation 86 and it was stated that the statement as embodied in annexure I to the said application gave the correct statement in reply to interrogatories No. 4 earlier served by the Director-General. That statement was directed to be taken on record, although of course the veracity thereof can be tested in the course of evidence whether by cross-examination of the respondent witness or by other evidence and with these observations that application along with the annexures was allowed.
11. On February 13, 1987, the Director-General produced Shri R. N. Gupta as his sole witness and also produced three admitted documents, which were exhibited as A-1 to A-3. With this the Director-General closed his evidence and the enquiry was fixed for recording the evidence of the respondent on May 8, 1987. On that date the statement of two witnesses, viz., S/Shri Gurbachan Singh and S. B. Gadre. were recorded and the case was adjourned to August 7, 1987, as the respondent wanted to produce one more witness, namely, Shri P. N. Gupta, Regional Sales Manager of the respondent. The evidence of that witness was only completed on September 8, 1989, that is, after two years and four months. During this intermittent period, the adjournment was necessitated on one pretext or other by both the parties. After completing the evidence of the respondent the case was fixed for the argument of the parties and after adjourning the matter a number of times on one pretext or other, the case was heard on July 25, 28, 29 and 31, 1992, on which date the orders were reserved after concluding the arguments by the parties.
12. Before we may discuss the issues as framed by the Commission on August 22, 1986, it is pertinent to note that initially along with the complaint under Section 10(a)(i) the complainant has also filed an application under Section 12A of the Act praying therein that the respondent be directed to supply HDPE to the members of the competent complainant association and other consumers at uniform prices and grant the same rebate which is being given to some other major manufacturers during the pendency of the enquiry. In response to notice of this application, the respondent had filed a reply and contested the application for ad interim injunction. The plea therein taken by the respondent was on the same lines as in the reply to the main complaint. However, he has made a categorical statement that since March 9, 1986, the discount offered has been withdrawn and, therefore, there is no basis whatsoever for application for interim stay and the stay application under Section 12A for interim injunction may be dismissed. After hearing both the parties on May 11, 1986, a Bench of the Commission comprising Mr. Justice G. R. Luthra, the then Chairman and Mr. S. D. Manchanda, the then Member, had taken note of the aforesaid situation and decided the application accordingly. However, it is worthwhile to reproduce paragraphs 8 and 9 of the said order, which are as under :
"8. We have heard learned counsel for the parties. It is common ground between the parties that the respondent has already stopped giving discounts to bulk consumers. At the time of arguments an assurance was given by learned counsel for the respondent that the respondent had no intention of giving any discounts in future in respect of sale of HDPE and it was contended that hence there was hardly any necessity or justification for issue of an injunction. He explained that it was on account of huge accumulation of stocks that the respondent had to resort to giving of rebates with a view to save himself from the losses.
9. In our opinion, having regard to the aforesaid circumstances, and the assurances aforesaid, there is hardly any good ground for issue of an injunction immediately. In case, however, during the pendency of the enquiry, the applicant feels any difficulty, he can come up immediately for the issue of an injunction and the matter can he taken on a priority basis. The present application is dismissed, but it is made clear that in case of need during the pendency of the enquiry, the applicant will be at liberty to bring a fresh application which will be taken up and considered on priority basis and appropriate orders in accordance with law will be passed. This application stands disposed of."
13. Issues Nos. 1 and 2.--To find out whether the respondent has indulged or is indulging in restrictive trade practices within the meaning of Section 2(o) and/or Section 33 of the Monopolies and Restrictive Trade Practices Act, 1969, at the outset we have to see what is the impugned scheme. Initially when the complaint was filed before the Commissioner the impugned scheme was not before the Commission and only the averments made by the complainant in his complaint dated February 24, 1986, exhibit A-4 in this regard were relied upon by the Commission and the notice of enquiry was directed to be issued on March 5, 1986, by the Commission. During the course of trial, the Director-General, who was prosecuting the enquiry before the Commission by virtue of Rule 13A of the Monopolies and Restrictive Trade Practices Rules, served a set of interrogatories on the respondent. Interrogatory No. 1 and its answer by the respondent is relevant in this regard, which are reproduced as under:
14. Question : Did the respondent issue any circular offering discount at Rs. 2,500 per metric tonne on extrusion grade and Rs. 3,500 per metric tonne on injection moulding grade ?
15. Answer : The company had not issued any circular offering discount on HDPE to any customer. The marketing manager of polymer division had only issued guidelines to the regional managers/branch managers on December 9, 1985, with regard to the discounts that could be offered to the actual users purchasing 100 tonnes or more of HDPE.
16. Pursuant to this reply to the interrogatories, the Director-General served another set of interrogatories along with an application for discovery and production of the said guidelines dated December 9, 1985, on oath by the respondent. The respondent contested the second application of the Director-General for serving interrogatories and documents to be discovered and produced. However, on November 7, 1986, after hearing the arguments it was directed that all the guidelines shall be filed before the Commission and except to that extent the application under regulation 74 was dismissed by the Commission. In compliance with the order of the Commission dated November 7, 1986, on November 27, 1986, the respondent has filed copies of the two letters dated December 9, 1985, and December 16, 1985, which were marked confidential and issued by the Marketing Manager, Polymer Division of the respondent company to the Northern Region, Southern Region, Eastern Region and Western Region, Ahmedabad branch and Bangalore branch through an affidavit of Shri K.S. Balasubramanian. Thus, these were the circumstances under which the impugned scheme dated December 9, 1985, and the clarificatory letter to the said impugned scheme dated December 16, 1985, were brought on the record of the Commission on November 27, 1986.
17. The circumstances under which the respondent had introduced the impugned scheme of December, 1985 (exhibit R-26) is given in the opening para of that letter as under :
"As you are aware, our Hostalen sales in the last few months have suffered considerably due to availability of cheap imported grades. We were, however, still able to sell approximately 2,000 tonnes per month at our current prices. Obviously, we do not want to disturb these sales at normal prices but, would like to increase our sales by obtaining business from large customers who are at present not purchasing from us.
With the above in mind, we have decided to introduce with immediate effect a discount scheme . . ."
18. So, we have seen that the purpose of the scheme introduced by the respondent, who was the sole manufacturer of this product, was to attract the large customers, who were not customers of the respondent at that time. The details of the scheme, as given in exhibit R-26, were for actual users and dealers were excluded from that scheme ; discounts were available only for those who take 100 tonnes per month or more which can be made of one or more grades ; that in the month of December, 1985, any actual user purchasing 100 tonnes or more was entitled to get the discount ; however from January onward the scheme had to work on a quarterly basis, i.e., the actual user would have to purchase at least 300 tonnes in the quarter to be eligible for the discount and this quantity should be equitably distributed over three months at an approximate rate of 100 tonnes per month, but a small quantity (5-10%) can be carried over to the last month of the quarter for making up the overall quantity ; that the discount would be given by a credit note at the end of December for the month of December, 1985, and at the end of March, 1986, for the quarter January-March, 1986 ; that the discount was Rs. 3,500 per tonne on injection moulding grade and Rs. 2,500 per tonne for all other grades. Subsequently the respondent had also issued a clarificatory letter as confidential on December 16, 1985, exhibit R-27, in which the respondent confirmed that the discount mentioned would be applicable to all actual users which can either be one company or different companies managed by one group. Now, in the following paras, on the basis of pleadings, interrogatories, evidence both oral and documentary and arguments, we shall discuss the issue in hand.
19. The respondent had issued the two impugned circulars, exhibits R-26 and R-27, as "confidential" to its various offices/branches in the country. The respondent had not circulated to its customers which were, according to him, approximately 3,332 in the country. The list of the number of customers region-wise, as given by the respondent in response to interrogatory No. 3 served by the Director-General, is as follows :
20. RW 2, Shri S. B. Gadre, General Manager (Marketing), of the respondent, during the examination in response to a question put up by the Commission stated that they had not circulated the scheme of discount to all the customers on an individual basis, but we had intimated the customers through our salesman. Similarly, RW 3, Shri P. N. Gupta, Regional Sales Manager (Marketing), New Delhi, of the respondent, has affirmed that the discounting facility was communicated to their consumers all over India by personal contact and by telephone, but the respondent did not issue any circular and also did not advertise or communicate in writing. He has further stated that it is difficult to say to how many parties he had communicated this discounting facility on the telephone in the northern region and he had no knowledge as to who communicated, how it was communicated and if at all it was communicated about other regions in the country. Except for this, the respondent has not offered any other explanation why he has not communicated or publicised the discount scheme. Thus, there is no difficulty in arriving to a conclusion that the impugned scheme was designed to favour some selected customers and in the opening portion of exhibit R-26, which has also been reproduced above, the Respondent had clearly stated that the scheme is meant only for large customers, who were not purchasing from them at that time. So the apprehension of the complainant stated in para 6 of exhibit A-4 is proved that the consequences of the rebate to large units are that they would draw quantity and as a result during the tight supply position when imports are restricted, the respondent, who is a monopolist of HDPE, would supply its material to large units on the basis of this past offtake and as a direct result of this policy of special huge discount, a few major customers would get large quotas.
21. The respondent had not disclosed in the impugned scheme exhibit R-26, up to which time the scheme would operate. Exhibit R-26 merely states, that the discount scheme is introduced with immediate effect and there is not a word about its ending. In para 3 of the said exhibit, the respondent stated that the scheme would work on a quarterly basis from January onward. The intention of the respondent from the said document was to continue the scheme according to his wish. However, at the time of hearing the application for injunction, as stated above, the respondent had clearly stated that he had stopped the discount scheme with effect from March 9, 1986. The question before us is why the scheme introduced by the respondent was stopped in the middle without even waiting for the result of the first quarter, i.e., January, 1986, to March, 1986. We find the answer to this question from the proceedings before the Commission, which were filed on February 26, 1986. In all probability, the respondent might have come to know about these proceedings somehow and thereafter the scheme was discontinued even without waiting for the result of the first quarter. This sort of assumption we are bound to take because the respondent had not offered any explanation in this regard in the entire bulky pleadings/documents, which are running into more than 400 pages. If we see it from the other angle also and assuming that the scheme was in order, this abrupt closure of the scheme was also prejudicial to the interest of those customers, who have participated in the scheme or intend to participate in the scheme because all those persons, who have participated in the scheme or intended to participate in the scheme were not given the benefit of the scheme. Since this is not a matter before us, therefore, we leave it as it is, except for the observation that the practice of non-mentioning of closure of the scheme in exhibit R-26 or any other document is definitely prejudicial to the customers at large.
22. The respondent allowed the benefit of the discount scheme only for those who take 100 metric tonnes per month or more, which can be made up of one or more grades in its letter dated December 9, 1985, exhibit R-26, who are actual users and dealers were excluded from the said scheme. In exhibit R-27 the respondent confirmed that the discount scheme would be applicable to all actual users which can either be one company or different companies managed by one group. The criteria of fixing such a huge quantity for becoming eligible for the discount scheme is unex-plainable by the respondent in its pleadings. What prompted him to fix a quantity of 100 metric tonnes per month for participating in the discount scheme particularly when the respondent was aware that its maximum number of customers are small scale units, whose consumptions are much less than the quantity fixed by the respondent. Shri R. N. Gupta, AW-1, stated that almost 99 per cent. of the members of the complainant's association were denied the discount scheme because they were not in a position to lite the minimum quantities stipulated for being eligible for the discount scheme. The witness volunteered that no uniform yardstick was fixed by the respondent and as a result of which the benefit of the scheme was available only to selected customers. Shri Gurbachan Singh, RW-1, states that he is a partner in Premier Plastic Industry and his wife and two sons are partners in Bittoo Plastic Products. In cross-examination the said witness stated that Bittoo Plastic Products consumes 20 to 25 tonnes of HDPE per month whereas Premier Plastic Industry 180 to 200 tonnes of HDPE and IDPE per month. However, the said witness states that he did not remember whether and if so how material was obtained from the respondent subsequent to March, 1986, up to June, 1986. He has placed 20 invoices issued during the month of February 10, each in favour of Premier Plastic Industry and Bittoo Plastic Products, which marked exhibit R-1 to R-20. The total purchase according to these bills were 100 metric tonnes, 50 metric tonnes, in the name of each firm as stated above. The witness has also tendered exhibits R-21 to R-24 which were the Credit Notes Nos. DG/011, DG/012, DG/013, DG/014, dated March 12, 1986, showing the amount of discount given by the respondent on the purchase of 100 metric tonnes of HDPE purchased by both the firms in the month of February, 1986. The Director-General through interrogatory No. 4 asked the respondent to furnish the quantities of HDPE lifted by each of the companies to whom the aforesaid discount was given during the period: (i) During the year 1984, (ii) January 1, 1985, to December 8, 1985 ; (iii) December 9, 1985, to March 9, 1986, and (iv) March 10, 1986, to June 30, 1986. In response to this interrogatory, the respondent submitted the statement as annexure 'B' to the reply to the interrogatories. The quantity of 100 metric tonnes or more supplied to the customers during the period of the scheme is notable. In the Ahmedabad branch out of 11 customers only one customer had purchased 100 metric tonnes. In the Bangalore branch three customers were supplied the product, but none of them had purchased the quantity of HDPE 100 metric tonnes. In Bombay goods were supplied to three parties and all the parties purchased products more than 100 metric tonnes. In Calcutta out of five customers to whom goods were supplied only one had not met the requirement of 100 metric tonnes. Lastly, in Delhi out of 13 customers, only 4 customers have purchased the quantity of 100 metric tonnes or more.
23. However, subsequently on November 4, 1986, the respondent had filed an affidavit along with annexure I in substitution of the figures of quantities of HDPE lifted by certain parties from the respondent for the period from December 9, 1985, to March 9, 1986, because there was an omission on the part of the respondent to make a separate statement giving combined offtake of such group in annexure 'B' of reply to interrogatories in answer to interrogatory No. 4 for the said period of three months. The respondent stated that the present annexure I to this affidavit gave the correct position of the quantities of HDPE lifted by the parties, whose name has been set out in annexure 'B' of the reply to the interrogatories during the period from December 9, 1985, to March 9, 1986 This annexure I was taken on record subject to the veracity thereof to be tested in the course of evidence. Shri S. B. Gadre, RW-2, stated that there were only 19 to 20 companies or group of companies which availed of this discount, scheme. Thus, we have come to the conclusion that the scheme was designed to benefit only the selected one to the exclusion of other consumers, most of them are small-scale units. Therefore, the small general consumers of the product of HDPE suffer in their production.
24. The respondent had introduced the offer of a huge discount at the rate of Rs. 3,500 per tonne on injection moulding grade and Rs. 2,500 per tonne for all other grades with effect from December 9, 1985, but the respondent was unable to explain the basis of fixing such discount on the purchases of 100 metric tonnes or more. To find out the basis of this huge discount by the Commission is not an easy task particularly when the respondent has kept mum over this matter. Therefore, it is necessary to examine and discuss the overall circumstances under which this discount was offered. RW-3, Shri P. N. Gupta, had stated that due to the availability of cheap imported grade at the relevant time resulting in considerable decline in the sale of product in question, the respondent introduced such discount scheme. He has stated that in the end of November, 1985, their stocks were in excess to the tune of 7,000 metric tonnes. The prices of their product at that time ranged from Rs. 24,250 per metric tonne to Rs. 26,000 per metric tonne depending on different grades and in April, 1986, the prices per metric tonne ranged from Rs. 20,000 to Rs. 23,000. The prices as on January 1, 1985, March 26, 1985, and March 11, 1986, as per exhibits A-5, A-6 and A-7 respectively were as under :
Whereas Shri S. B. Gadre, RW-2, stated that the prices of our material was Rs. 25,000 to Rs. 26,000 per metric tonne depending upon the grade during that period without discount and the prices of raw material during the discount scheme period was nearly Rs. 22,000 per metric tonne whereas the market price of the imported material was in the range of Rs. 19,000 to Rs. 20,000 per metric tonne. This witness has also stated that the main purpose of the introduction of the discount scheme was to reduce the accumulated stocks of the respondent. However, Shri R. N. Gupta, AW-1, had answered in response to a question put by the counsel for the respondent during the cross-examination that during the relevant time the price of imported material of injection moulding grade was Rs. 19,000 per tonne. The witness stated that this price may not be the market price available to the consumers. He further stated that a grade similar or identical to the one produced by the respondent was not available in the international market. He has stated that the price at which he had purchased the imported material was Rs. 20,779 per tonne more than the designated price of the respondent. It has been stated by the witness that during the relevant period of the scheme, imports were freely opened and imported material was available in the market. Smaller consumers depend on purchasers on a day-to-day basis and cannot afford to open letters of credit for import of larger quantities even though such import facilities may be under open general licence. Thus, it is clear that a grade similar or identical to the one produced by the respondent was not available in the international market and even if the imported raw material can be obtained without obtaining licence under the O.G.L. procedure, the small consumers were depending on purchases on a day-to-day basis, which were not available to them at a concessional rate either of imported material or of the raw material produced by the respondent. On the basis of the documents we also think that the respondent has introduced this discount scheme of giving such a huge discount keeping in view the market price of the imported material available to the small scale units, who were picking up their consumption on day-to-day basis. Thus, we can only, infer that there may not be much difference in the prices as the imported material available to the small scale units and the discounted price of the respondent's product available to the major units. Therefore, the respondent has manipulated the conditions of sale of its product HDPE by offering huge discount to large units in such a manner as to impose on the small scale units, who are its consumers, the unjustified restriction of not supplying the goods at the same rate and discount as available to the large units, which is a restrictive trade practice under Section 2(o) of the Act.
25. The respondent in the impugned circular, exhibit R-26, stated that the discount scheme was available only for actual users and dealers were excluded from the impugned scheme. The product HDPE was refused to AW-1 during the period of discount on this ground alone. AW-1 had stated that he wanted to purchase 100 tonnes, the purpose of which was his own use and to sell the surplus in the market as others were doing. Similarly, RW-2, Shri Gadre, has not ruled out the possibility in this regard. He has stated that it is possible that the company may not be able to know whether the consumer to whom discount has been offered actually used the discount material or not. On a question being asked by the Commission the said witness replied that on account of constant dealings with their customers we have knowledge which of them are actual users or which of them partly use for their own consumption and partly sell in the market. Whatever may be the reasons, but a possibility cannot be ruled out that those who have purchased the HDPE after availing of the discount during the discounted period can also further resell the product to smaller units particularly when the impugned scheme, exhibit R-26, initially was meant only for the purpose of attracting the large consumers, who were not purchasing the product from the respondent at that time.
26. The respondent has stated that it cannot reduce its prices because of its dependence for its basic raw material ethylene and other petroleum products derived from "naptha", the price of which is controlled by the Government of India. The prices of basic raw material constitute almost 85 per cent. of the total cost of production of the respondent company, which is Rs. 9,000 per tonne as against the cost of Rs. 4,000/4,500 per tonne in Europe and Rs. 1,000 per tonne in Saudi Arabia. The question that arises before us is that if the respondent can offer such a huge discount, what was the difficulty in reducing the prices even if the raw material ethylene, etc., was derived from naphtha. Even if it is presumed that the respondent could not reduce the price of its product HDPE, it could have given the benefit of the discounted scheme to its consumer as per the list annexed as annexure 'A' to the reply to the interrogatories or any one who is approaching him. The condition of putting a condition precedent to the availability of the discounted scheme of Rs. 100 per metric tonne, the intention of the respondent appears cloudy as also appeared from our foregoing paragraphs.
27. In the premises of discussion in the foregoing paragraphs, it is a clear cut case to hold that the respondent has manipulated the conditions of sale of its product HDPE by offering huge discount to large units in such a manner as to impose on the small scale units, who are its consumers, unjustified restriction of not supplying the goods at the same rate and discount as available to the large units. This practice adopted by the respondent is a restrictive trade practice within the meaning of Section 2(o) and more specifically under Section 2(o)(ii) of the Act. Thus, issues Nos. 1 and 2 are decided in the affirmative and against the respondent.
28. Issue No. 3 : The respondent had stated that the restriction does not directly or indirectly restrict or discourage competition to any material degree in the relevant trade or industry and was not likely to do so and the restriction was not unreasonable having regard to the complaints between the circumstances in detriment to the public and in any event the alleged restrictive trade practice is not in any way prejudicial to the public interest. The decision to offer discount having been taken by the respondent in the interest of its business and on more consideration as any prudent and reasonable person would take under the circumstances. According to us, we have discussed each and every aspect of the impugned discount scheme (exhibits R-26 and R-27) and for the reasons recorded, as above, the restriction placed by the respondent in the above exhibits must directly or indirectly restrict or discourage competition to a material degree in the trade of HDPE as majority of the buyers of the product from the respondent are having small scale units. The restriction was unreasonable and in detriment to the interest of the consumers of HDPE, who are buying the product from the respondent in the circumstances of the case explained above and the aforesaid restrictive trade practice is bound to be prejudicial to the public interest. Accordingly we decide this issue.
29. The respondent had during the course of arguments relied on a number of judgments, viz., which are mainly dealing with the Clause (e) of Sub-section (1) of Section 33 of the Act pertaining to, inter alia, discriminatory/quantity discount. We have given our considered thought over this matter and come to the conclusion that it is not necessary for us to discuss each and every judgment referred to above during the course of arguments because the facts and circumstances and the law point involved in the present case is altogether different from the facts and circumstances and the law points involved therein. Therefore without making any reference to these judgments, we refrain ourselves from discussing these judgments.
30. Before we may conclude, we think it fit and proper to discuss the point raised by the respondent about the locus standi, although it was not necessary to discuss the same in view of the Commission's order dated August 22, 1986. By the said order the Commission rejected the request of the respondent regarding the framing of the issue whether the complaint is mala fide and an abuse of the process of the court. Thus, no issue with regard to the maintainability of the notice of enquiry was framed on that date as a first issue. The respondent has taken another objection that in view of the order on the injunction application in RTF No. 481 of 1988 between the same parties, the question of locus standi was left over to be decided after the evidence on February 25, 1992, and as the same very question is involved in this case as well, hence the same is to be taken up and decided. We are not agreeable with this contention of the respondent which is belatedly raised. Once the Commission has decided the point on August 22, 1986, how this can point be raised after taking the assistance of an order of 1992 in another enquiry, though it is between the same parties. Thus we also reject this objection as a belated attempt on the part of the respondent. The other objection about the maintainability of the complaint is without any merit and the answer was given to the respondent in the same order referred to above, wherein the rights of the complainant were decided and the prosecution of the proceedings was entrusted to the Director-General under order 13A of the Monopolies and Restrictive Trade Practices Rules. We are sorry to record that all these objections could not have been raised in view of our decision dated August 22, 1986.
31. As a result of the foregoing discussion, we hold that the respondent has indulged in the restrictive trade practice under Section 2(o)(ii) of the Act of manipulating the conditions of sale of its product HDPE by offering substantial discount to large units in such a manner as to impose unjustified restriction on the small-scale units of not supplying the goods at the same rate and discount as available to the large units. The onus of issue No. 3 in terms of Section 57(1) was on the respondent. The respondent has failed to establish that the said practice is not prejudicial to public interest. The foregoing discussion has also shown that it impedes competition and, therefore, it is prejudicial to public interest as well. Therefore, issue No. 3 is decided against the respondent. In conclusion, we pass a cease and desist order against the respondent directing it not to continue with the aforesaid restrictive trade practice and is also directed not to introduce any such scheme, as discussed above and as made out in exhibits R-26 and R-27 in future. The respondent shall file the affidavit of compliance in this regard within eight weeks of the receipt of this order. In the facts and circumstances of the case and the restrictive trade practice adopted by the respondent, we award a cost of Rs. 4,000. We also direct that the aforesaid cost shall be deposited by the respondent within the same period as aforesaid with the Director-General.
32. Pronounced in the open court.