Monopolies and Restrictive Trade Practices Commission
Kevin Corporation vs Cadbury Schweppes And Ors. on 6 September, 2001
ORDER
C.M. Nayar, Chairman
1. This present compensation application has been filed by the applicant under Section 12B of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the Act) on the basis of the following averments as contained in paragraphs 1, 2, 3, 4, 5 and 6 of the application, which may be reproduced as below :
(1) That as per discussions of the respondents with the applicant regarding distribution rights for distribution of water, respondent No. 1 along with respondent Nos. 2 to 5, vide letter dated 23.12.1997, had submitted a proposal which depicted high prospects of profitability to the applicant. As per the proposal, the picture visualised for net profit after incurring the fixed and variable expenses amounting to Rs. 32,40,000/- and thereby gross realisation at Rs. 50,00,000/- and hence resulting in net profit of Rs. 17,60,000/-.
(2) That the applicant was induced by the rosy picture by respondent Nos. 1 to 5 and respondent Nos. 1 to 5 had issued a letter dated 5.2.1998 wherein the applicant was certified as authorised and exclusive distributor for entire Delhi for the brand Schweppes Diamond of Waters. Respondents also informed about the appointment of the applicant as the authorised exclusive distributor to the various patrons and a copy of the same was also sent to the applicant by fax.
(3) That respondent Nos, 1 to 5, inspite of having given the exclusive distribution rights for the water as mentioned above, the water was distributed in violation of the terms settled between the applicant and respondent Nos 1 to 5.
(4) That the applicant tried to stop this malpractice by sending a letter dated 9.5.1998 to respondent Nos. 1 and 3. Also, the applicant sent another letter dated 11.5.1998 stating that since the applicant was the exclusive representative for the purpose of distribution of water, distribution by another company was against the terms stipulated between respondent No. 1 and the applicant. Again, the applicant wrote another letter dated 13.5.1998 to stop the illegal distribution of water.
(5) That since the malpractice/unfair trade practice was not stopped, the applicant moved the Court for permanent injunction in the Court of Shri Sanjay Sharma, Civil Judge, Delhi. The Hon'ble Court of Shri Sanjay Sharma had opined in para 5 of the order dated 29.5.1998 that the contract existed as on 30.3.1998 and the alleged letter of termination dated 7.3.1998 at least makes the same suspicious and doubtful at this stage. Under the circumstances, it is quite clear that the letter dated 7.3.1998 is false and fabricated if alleged to have been written by the respondents to the applicant. Also fax received showed that the letter dated 7.3.1998 had been faxed later on and there was no letter dated 7.3.1998 in existence on 7.3.1998. Also letter dated 30th March, 1998 from the respondents clearly shows that the Agency was still in existence. Also as per the statement of account submitted before the Civil Judge, Delhi by the respondents, clearly shows that sales taken place from 12.3.1998 to 21.4.1998. This is also confirmed by the various invoices dated 12.3.1998 and lasting 27.4.1998.
(6) That appointment of another distributor after giving exclusive distribution rights to the applicant was an unfair trade practice within the meaning of Monopolies and Restrictive Trade Practices Act and, as such, the respondents are liable to pay to the applicant damages incurred by the applicant due to unfair trade practice."
The applicant on the above basis has claimed compensation for a sum of Rs. 10.00 lakhs along with interest @ 24% per annum from 30th June, 1998 for the alleged unfair trade practices as committed by the respondents. The reply has been filed on behalf of respondent No. 1 wherein inter alia it is alleged as under :
(a) The compensation application as filed by the applicant is wholly misconceived, untenable, incompetent and liable to be dismissed inasmuch as this Commission has held in a number of cases that appointment or termination of distributors would not attract the provisions of the M.R.T.P. Act.
(b) The applicant had not conformed to the terms and conditions set out in the letter of appointment as distributor dated 6th February, 1998 and consequently respondent No. 1 had no alternative but to terminate the distributorship arrangement which it had executed with the applicant. The following facts are cited in the reply to reiterate this contention :
(i) The answering respondent No. 1 is a Private Limited Company formerly engaged in the business of manufacturing soft drinks and non-carbonated drinking water under the brand/trade mark 'Cadbury Schweppes'. The non-carbonated drinking water was marketed under the brand name/trade mark 'Schweppes Diamond of Waters".
(ii) It may be pertinent to state that the answering respondent No 1 has with effect from on or about 29th July, 1999 sold all its brands including 'Canada Dry', 'Crush' and 'Schweppes Products' and is currently not carrying any business in India much less the business manufacture or sale of concentrates, beverages bases, non-carbonated drinking water, etc.
(iii) The applicant is a proprietor firm which was distributing non-carbonated water under the trade mark of the respondent No. 1 under an arrangement dated 6.2.1998.
(iv) The answering respondent No. 1 had entered into a Memorandum of Under standing with one M/s.
Perennial Springs Private Limited, B-5/186, Safdarjung Enclave, New Delhi - 110029 for the purpose of manufacturing, bottling, marketing and distributing its non-
carbonated water under the trade mark of the answering respondent viz. "Schweppes Diamond of Water" in the month of June, 1997. In terms of the said Memorandum of Understanding, the said Perennial Springs Private Limited was required to fulfil certain conditions specified in the said Memorandum of Understanding and subsequent to the said Perennial Springs Private Limited fulfilling the said conditions, the answering respondent and Perennial Springs Pvt. Ltd. entered into an agreement on 14.1.1998 whereby M/s. Perennial Springs Pvt. Ltd. was authorised to manufacture, bottle, market and distribute the then product of the answering respondent No. 1 viz. "Schweppes Diamond Of Waters" (non-carbonated drinking water). Thereafter, the answering respondent No. 1 entered into a distribution arrangement with the applicant herein on 6.2.1998, vide a communication dated 6.2.1998. The said communication clearly specified the terms and conditions which governed the said arrangement and which are as set out hereunder :
"1. You will have minimum stock of 2000 cases of Schweppes non-carbonated water in your godown at all times.
2. You will put in ten 407/ 709 trucks for distribution of our product.
3. You will place all orders with us in writing along with a demand draft for the same.
4. Maximum Retail Price shall be Rs. 126.00 for a box of twelve bottles; M.R.P. can be changed with a notice of one month and mutual discussion.
5. You will be paid a commission of Rs. 10.00 per case which can be changed with a notice of one month and mutual discussion.
6. You will be given a scheme of four bottles on a 'per case basis' which can be changed by giving one month's notice and mutual discussion.
7. All schemes and incentives will be borne by you."
(c) The applicant committed serious breach of the terms of appointment as distributor in respect of the then product of respondent No. 1 and failed to perform the obligations undertaken by the applicant in terms of the said appointment letter dated 6.2.1998. Despite this having been brought their breaches to the notice of the applicant, it failed to adhere to the terms of appointment as distributor and continued to disregard obligations undertaken by the applicant.
(d) That after receipt of letter of termination dated 7.3.1998 the applicant started dealing directly with the company known as Perennial Springs Pvt. Ltd. for procurement of the product of respondent No. 1, which was unethical.
(e) The applicant also filed a suit before the Civil Judge, Delhi being Suit No. 126/1998 seeking relief of permanent injunction restraining the respondent No. 1 and Perennial Springs Pvt. Ltd. from distributing the then product of respondent No. 1.
2. The learned Civil judge, Delhi passed an order of injunction in favour of the applicant on 29.5.1998, which was appealed against before the High Court of Delhi in Civil Revision No. 530/1998 which was disposed of by an order dated June 10, 1998 by the learned Judge. Thereafter the Senior Civil Judge, Delhi on 31st July, 1998 permitted the applicant to withdraw the suit with liberty to prefer a suit for damages.
3. The only question which arises for consideration in the present application is as to whether the termination of distributorship agreement can be termed as unfair and will amount to a restrictive trade practice. The agreement with the applicant was terminated vide letter dated 7th March, 1998 which may be reproduced as below:
"M/s. Kevin Corporation, C-118, Shivalik, Malviya Nagar, New Delhi-110017 Attn : Mr. Baath/Ms. Manpreet This refers to our letter of 6th February, 1998 regarding the distribution of our Schweppes Diamond of Waters in Delhi.
We are unhappy with your performance and would like to bring to your notice that you have not conformed to the terms and conditions mentioned in the above said letter. You have not fulfilled the important conditions of the number of trucks, minimum stocks, advance payment etc. Hence we have no alternative but to terminate our arrangement.
Keeping in view of our business relationship, we would recommend to our franchises, M/s. Perennial Springs Pvt. Ltd. to consider accommodating you in their distribution system. Kindly get in touch with their Managing Director, May Gen. B.S. Kataria, VSM, Rtd. at 6105716/ 6190081.
For and On behalf of Cadbury Schweppes Beverages India Pvt. Ltd.
Sd/- (Baljinder Gill) Regional Manager (North) CC : Maj. ,Gen. B.S. Kataria."
4. The respondent No. 1 has given reasons for terminating the distributorship agreement with the applicant and the same are reiterated in the reply as referred to above. The termination of the services of distributor cannot be held to formulate an unfair trade practice. The issue has been concluded by a judgment of this Commission reported as 1999 CTJ 217 in the matter of Devidas Tekchandani & Ors. v. Godfrey Philips India Ltd. & Anr. We may refer to paragraphs 8 and 9 of the said judgment as below :
"8. We are unable to accept the suggestion made to us by the learned Advocate Mr. Sachdeva for the applicants/complainants to the effect that the present complaint should be treated as information for the purposes of Section 10(a)(iv) and Section 36B(d) of the MRTP Act and we should institute an inquiry proceeding against the respondents. In the first place, the dispute between the parties arise from the contractual transaction of, commercial nature between them. Any breach of a contract of commercial nature would involve some kind of restrictive or unfair trade practice. Such breach of contract of commercial nature would not be amenable to the jurisdiction of this Commission in view of Section 4 of the MRTP Act. This piece of legislation is designed to supplement and not to supplant ordinary law. The applicants/complainants have their remedies under the ordinary law for breach of contractual obligations of commercial nature between the parties as alleged. The indirect way of espousing grievances by resorting to Section 10(a)(iv) or Section 36B(d) of the MRTP Act need not be countenanced. What the applicants/complainants cannot do directly, they cannot and need not be permitted to do indirectly.
9. Even otherwise, non-supply of goods to distributors or termination of their distributorship would not amount to restrictive or unfair trade practices for the purposes of the MRTP Act in view of the Division Bench ruling of this Commission in the case of Masvi Fabrics v. Arvind Mills Ltd., reported in (1993) 4543 (MRTP)=(1993) 3 Company Law Journal 117. We are, therefore, of the opinion that, even apart from the maintainability of the present proceeding, it is difficult to find adoption of and/or indulgence in any kind of restrictive and/or unfair trade practices on the part of the respondents on the ground of non-supply of tobacco cigarettes to the applicants/complainants."
5. The applicant also took recourse to a remedy before a Civil Court and was permitted to withdraw the proceedings and liberty was granted to file suit for damages. It will not be appropriate to encourage parallel proceedings in two different Forums particularly when the applicant took the chance and instead of taking recourse of remedy to file a suit for damages in a Civil Court took proceedings by moving compensation application in this Commission.
In view of the above we are of the view that the present compensation application is devoid of merit and is dismissed accordingly. There will be no order a to costs.