Monopolies and Restrictive Trade Practices Commission
Ballarpur Industries Ltd. vs Sinarmas And Anr. on 4 April, 1996
ORDER
S. Chakravarthy, Member
1. This is a keenly contested case where objections have been taken at the threshold of the proceedings with submissions and counter-submissions of all the parties galore. But before proceeding with what we propose to adjudicate in this order, the germane facts need to be set out.
2. Ballarpur Industries Ltd., the applicant herein, is a company registered under the Companies Act, 1956, and is engaged, inter alia, in the manufacture of different varieties of paper. For the purpose of manufacturing paper, the applicant requires pulp which it manufactures in its own mills and which it also purchases from different suppliers. During the year 1992, towards its end, when the applicant required 2,000 metric tonnes of paper grade pulp, Sinarmas Indonesia, the first respondent herein (referred to as "respondent No. 1" hereafter), offered to supply pulp through its fax message dated December 2, 1992, enclosing the specifications of pulp. The applicant after examining the specifications informed respondent No. 1 that the brightness of the pulp has been indicated at 86 per cent. whereas the previous supply had the brightness of 87 per cent. and that similarly the dirt count (5 mm2/m2 down) is also different from that (3 mm2/m2 down) of the previous supply.
3. Respondent No. 1 responded through its fax message dated December 4, 1992, stating that the average brightness would be 87 per cent. and the dirt count 3mm2/m2 down and that it was looking for a long-term relationship with the applicant. It also stated that the specifications as conveyed on December 2, 1992, was only to avoid "legal complications". Subsequently, on December 12, 1992, respondent No. 1 confirmed that it would supply 2,000 metric tonnes of pulp by December 25, 1992, at a price of U.S. $ 420.75 per AD metric tonne. Upon this, the applicant through its letter dated December 14, 1992, confirmed its order for 2,000 AD metric tonnes and opened a letter of credit also. The goods reached Bombay port on January 25, 1993, and respondent No. 1 operated the letter of credit and negotiated the documents. The applicant retired the documents and took delivery of the goods believing the representations of respondent No. 1 to be true and correct with regard to the quality, specifications and standard of pulp in its messages dated December 2 and 4, 1992.
4. On arrival of the pulp at the applicant's unit, it was tested and analysed and it transpired that the pulp supplied by respondent No. 1 was "much below the standard, quality and specifications represented earlier" by it. The applicant informed respondent No. 1 of the analysis report and pointed out the deficiency in the quality of the pulp supplied. This was on February 10, 1993, after which, according to the applicant, it started discussing the matter with respondent No. 1 on its difficulty in using the pulp supplied by the latter.
5. Two representatives of respondent No. 1 according to the applicant, visited its unit on February 22, 1993, for a joint inspection, testing and analysis. Minutes were recorded of the meeting on February 25, 1993, between the said two representatives of respondent No. 1 and the representatives of the applicant. The analysis results were tabulated. According to the same, the brightness was 30 to 40 per cent. lower and the strength properties "much lower than specifications".
6. The applicant, according to his application, attempted to use the pulp in question along with other good quality pulp and extra whitening agents to neutralise the deficiency in brightness and strength properties of.the pulp supplied by respondent No. 1 but the market did not accept the paper produced by the applicant in this manner. Thereupon in order to save its "fair name" in the paper market, the applicant totally stopped using the pulp in question. It requested respondent No. 1 to take back the pulp lying with it and to refund the cost incurred. The applicant also insisted on an early settling of the matter. Various messages were sent on March 2, 9, 15 and 30, 1993, by the applicant to respondent No. 1.
7. A meeting was held on July 21, 1993, attended by the representative of the applicant and by the executive director of the second respondent, Sinarmas Pulp and Paper (India) Ltd. (second respondent referred to as "respondent No. 2" hereafter). According to the applicant, the executive director of respondent No. 2, Shri R. R. Vederah, acted for and on behalf of respondent No. 1, at the meeting. At the meeting, Shri Vederah is reported to have offered to the applicant a lump sum amount of U.S. $ 50,000 as compensation for the inferior quality of pulp supplied by respondent No. 1. It would appear from the letter of respondent No. 2 dated July 22, 1993, that respondent No. 2 would take up the matter of the compensation offer of U. S. $ 50,000 with respondent No. 1. According to the applicant, respondent No. 2 is a company registered under the Companies Act, 1956, is promoted by respondent No. 1 and is acting for and on behalf of respondent No. 1 with regard to its activities and business interest in India. Prior to the meeting on July 21, 1993, respondent No. 1 sent a fax message on July 8, 1993, to the effect that Shri Vederah, who was at that time in Indonesia, would return to Delhi after July 12, 1993, for discussions on the subject. It was clearly indicated therein that Shri Vederah would get in touch with the applicant in the following week.
8. The applicant felt that the offer of Shri Vederah and his communication dated July 22, 1993, were a deliberate effort on the part of respondent No. 1 to "side-track the issue". The applicant through its fax message dated July 27, 1993, informed respondent No. 1 that it would not be interested in the compensation offered by Shri Vederah, that it would take no responsibility for any deterioration of the pulp lying with it and that the cost of the pulp should be refunded to it "without further loss of time".
9. Respondent No. 1 responded on August 24, 1993, through a fax message that the responsibility regarding the safety of the pulp in question was that of the applicant. Respondent No. 2 also communicated a copy of the said fax message dated August 24, 1993, to the applicant.
10. The applicant has alleged that respondent No. 1 has falsely rep're-sented on the specifications, quality and standard of the pulp in question, acting upon which, the applicant has been visited with supplies of deficient quality pulp. There was also a shortage of 3.8 AD metric tonnes in the supply of pulp. Accusing the respondents of having indulged in unfair trade practices within the meaning of Section 36A(l)(i) of the Monopolies and Restrictive Trade Practices Act, 1969, the applicant has sought compensation under Section 12B of the Act of Rs.' 4,02,61,162 for the loss and damage incurred by it as a consequence of the unfair trade practices indulged in by the respondents. Along with its compensation application, it has furnished to the Commission copies of the various letters and messages referred to therein.
11. The respondents were furnished with a copy of the compensation application for their reply and for their appearance at the hearings before the Commission.
12. On November 5, 1993, the marketing manager appeared on behalf of respondent No. 2 and was granted a month to file its reply. Similarly, when counsel for respondent No. 1 put in his appearance on behalf of his client, he was given six weeks for filing his client's reply on February 4, 1994. Subsequently, on March 28, 1994, respondent No. 1 was given a further three weeks time to file its reply to the compensation application.
13. Two applications were filed on May 6, 1994, by respondent No. 1, the first under Section 13(2) of the Act read with regulations 76 and 78 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, read with Section 151 of the Civil Procedure Code, and the other by way of certain "preliminary legal objections".
14. Similarly, respondent No. 2 moved two applications dated December 29, 1993, one under regulation 64(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, and the other under regulation 65(b) and (j) of the same Regulations. In addition, respondent No. 2 filed its reply on March 8, 1994, to the main compensation application, but respondent No. 1 has not.
15. In this order, we will be adjudicating on the four applications (two of respondent No. 1 and two of respondent No. 2) referred to above. On May 13, 1994, the Commission decided to hear arguments on the four applications above.
16. We gave a hearing to Shri B, B. Ahuja, senior counsel for the applicant, Dr. A. N. Singhvi, senior counsel for respondent No. 1, and Shri M. L. Qazi, senior counsel for respondent No. 2.
17. Some of the contentions and averments are common in more than one application and may even constitute an overlap. We deem it convenient and desirable to deal with the two applications of respondent No. 1 together and the other two applications of respondent No. 2 again together for drafting our opinion. For this purpose, we will summarise the averments in the two applications of respondent No. 1, the replies of the applicant in respect of the said applications and arguments of counsel and, ultimately, indicate our findings. Similarly, we will deal with the two applications of respondent No. 2 later.
18. Application of respondent No. 1 under Section 13(2) of the Monopolies and Restrictive Trade Practices Act read with regulations 78 and 76 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, read with Section 151 of the Civil Procedure Code, and application of respondent No. 1 raising certain preliminary legal objections.
19. The two applications under consideration contain the following averments summarised hereinunder :
1. The Commission has served a notice on respondent No. 1 "out of jurisdiction" without complying with the provisions of Section 36C of the Act read with regulation 77(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, and without calling for the comments of the complainee company (respondent No. 1) in the first instance.
2. No direction can be given to the respondents to submit their replies to the compensation application pending determination of the applications filed by respondent No. 2 before the Commission under regulations 64(2) and 65 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991.
3. Respondent No. 1 is "not amenable and subject to the jurisdiction" of the Commission, being a foreign company.
4. The case does not involve any public or consumer interest and is based on a purely contractual or civil dispute.
5. The applicant has to move a civil court for redress and not the Commission.
6. The dispute is with respect to a single transaction and there is no allegation of repetitive action on the part of respondent No. 1.
7. The applicant is not a consumer and, therefore, the compensation is not maintainable ab initio.
8. In terms of Section 14 of the Monopolies and Restrictive Trade Practices Act, 1969, the Commission has no jurisdiction to entertain and adjudicate upon the subject-matter as respondent No. 1 is a foreign company incorporated outside India, Indonesia. Furthermore, the Commission has no jurisdiction to enforce its order against a foreign company, in this case respondent No. 1.
9. Ex facie, the country of origin of the subject-matter in question, namely, pulp, is Indonesia. Pulp manufactured in Indonesia can be dealt with the laws of that country. The "obligated characteristic performance" on the part of respondent No. 1 is grounded and stands in Indonesia. The contract was concluded in Indonesia and pulp was handled before shipment in Indonesia. The contract of shipment of pulp was in Indonesia and the consideration was paid outside the territorial limits of India. The case in hand is, therefore, not maintainable.
10. On the basis of lex loci contractus, the proper and curial law applicable to the case is the domestic law of Indonesia and not the Monopolies and Restrictive Trade Practices Act, 1969.
11. Respondent No. 1 reserves its right to give a detailed reply on the merits after the determination of the issues raised by it before the Commission in its application.
12. The compensation application has been instituted by the applicant "to evade and avoid court fees/stamp duty that would be payable" if the case had been instituted in a civil court of competent jurisdiction.
13. As the controversy involves complex and vexed questions of facts which can be adjudicated upon and determined only by a full trial in a civil suit, the compensation application is not maintainable.
14. An important pre-requisite for a compensation application is a prior finding that there has been a restrictive or unfair trade practice indulged in by respondent No. 1 which in this case does not obtain.
15. A sine qua non for the existence of an unfair trade practice is the actual adverse impact on the large public or consumer interest, which is missing in this case.
16. A detailed preliminary investigation report must precede the issue of a notice to the respondent and in this case such a report is not available.
17. Right at the threshold of these proceedings the applications of respondent No. 1 need to be decided as the decision has to be "logically prior" to the enquiry on merits.
20. The applicant in its reply to the two applications of respondent No. 1 has made the following submissions :
(i) The application has been made by respondent No. 1 "only to delay the enquiry and the course of justice".
(ii) The Commission has jurisdiction to entertain the compensation application.
(iii) The Commission has been moved by the applicant in order to adjudicate on the unfair trade practices indulged in by the respondents and the loss and damage suffered by the applicant.
(iv) Respondent No. 1 has been acting in India through respondent No. 2 "in the matter of its business affairs".
(v) Respondent No. 1 instead of filing its reply to the compensation application, for which purpose, it had twice asked for time from the Commission, has now raised certain preliminary objections which are "totally misconceived and frivolous". This is only to delay the enquiry and course of justice.
(vi) The objections raised by respondent No. 1 are mixed questions of facts and law and cannot be adjudicated upon as preliminary issues.
" (vii) The applicant has suffered substantial loss and damage because of the unfair trade practices on the part of the respondents and is, therefore, entitled to compensation under Section 12B of the Act. The remedy open to the applicant under the Monopolies and Restrictive Trade Practices Act, 1969, is in addition to the remedy available to it by way of civil suits but it has chosen to move the Monopolies and Restrictive Trade Practices Commission under Section 12B of the Act.
(viii) The definition of "trade practice" under the Monopolies and Restrictive Trade Practices Act, 1969, is wide enough to include even a single isolated action of any person in relation to any trade and respondent No. 1 has no justification to raise this as an objection.
(ix) The objection taken by respondent No. 1 that the applicant is not a consumer is misconceived and wrong. The applicant is one of the persons which is covered by the categories of persons specified in Section 12B to move the Commission.
(x) As the facts and incidents reported in the application lead to the carrying on of unfair trade practices by respondent No. 1, the compensation application is entertainable by the Commission even though respondent No. 1 is a foreign party.
(xi) The orders of this Commission can be enforced as provided in the Act itself.
(xii) There is no mandatory requirement of a preliminary investigation report for instituting an enquiry under Section 12B of the Act.
21. Dr. Singhvi, senior counsel representing respondent No. 1, essentially pinned his arguments on the maintainability of the compensation application. In terms of maintainability, he placed his contentions on three dimensions.
22. The first dimension, according to him, is that no large public interest is involved in this case which falls in the realm of a pure civil contractual dispute, plain and simple. Adding that the claim of compensation is arising out of an alleged breach of contract between private parties, he queried as to how the Monopolies and Restrictive Trade Practices Act, 1969, could be brought into play in respect of a private dispute. He styled the applicant's case as a "thinly disguised attempt at a pure breach of contract, civil claim masquerading in the guise of an alleged unfair trade practice". He observed further that the Monopolies and Restrictive Trade Practices Act, 1969, is not intended to supplant and substitute the normal civil court machinery designed to adjudicate private bilateral civil claims and that the applicant has moved the Commission in order to save the court fees. In his view, a case of this nature cannot be adjudicated upon without the panoply of civil trial and without detailed evidence and technical questions being adjudicated upon. This case, according to him, falls eminently within the competent civil court's jurisdiction and not that of this Commission. In support of his contention he cited some case laws--Raymond Woollen Mills Ltd. v. MRTP Commission [1979] 49 Comp Cas 686 (Bom), Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. Bank of India Ltd. [1972] 42 Comp Cas 493 (Guj) and Director-General of Investigation and Registration v. Investwell Publishers Pvt. Ltd. [1990] 69 Comp Cas 516 (MRTPC) [SB] (quoted in S. M. Dugar's book Monopolies and Restrictive Trade Practices Act--1991 edition, pages 338-339), to conclude that the focus of the Monopolies and Restrictive Trade Practices Act, 1969, is general public interest. He added that S. M. Dugar, the author of the book Monopolies and Restrictive Trade Practices Act, 1969, has emphasised the public interest element in the legislative history before the unfair trade practices were introduced in the Act in terms of Section 36A. He concluded the first dimension of his argument on the maintainability of the compensation proceedings stating that the Monopolies and Restrictive Trade Practices Act, 1969, applies only in respect of representations but not in respect of contractual breaches or contractual obligations in dealing with unfair trade practices.
23. Shri Ahuja, counsel for the applicant, in refutation of the arguments (first dimension) of Dr. Singhvi on the maintainability of the application stated that the provisions of Section 12B of the Act have been conceived in the larger public interest so as to provide deterrence to those who indulge in unfair trade practices and cause loss and damage to others. Thus, public interest is writ large in the provisions dealing with the compensation applications in the statute. He pointed out that the Commission invariably frames an issue whether a particular party has indulged in any prohibited trade practice before adjudicating on whether any loss or damage has been caused to any other party consequent on the perpetration of such practice. In view of this, the question of the Commission not having jurisdiction or the question of the compensation application not being maintainable on the ground of public interest not being involved does not arise. It is further contended by Shri Ahuja that if the transactions of the type in question covered by the present controversy, are taken out of the purview of Section 12B, as canvassed by respondent No. 1, the provisions of the Act relating to unfair trade practices will be rendered nugatory to a large extent. He drew our attention to the phraseology of Section 36A and said that unfair trade practice will include adoption of any unfair method or unfair or deceptive practice including false representations which according to him is his client's basic grievance against, both the respondents.
24. Shri Ahuja referred to the argument of Dr. Singhvi that the applicant should approach a civil court for redress and stated that the Legislature has provided an additional forum of redress for consumers in the form of the Monopolies and Restrictive Trade Practices Commission and that the suggestion that the applicant should go to a civil court for redress is totally misplaced.
25. We have given consideration to the arguments of both the parties. At the outset, we would like to state that Section 4 of the Monopolies and Restrictive Trade Practices Act, 1969, clearly lays down that the provisions of the Act are in addition to and not in derogation of any other law for the time being in force. Therefore, a civil court as well as the Monopolies and Restrictive Trade Practices Commission are both available for redress. A party can choose either of the two fora.
26. The Monopolies and Restrictive Trade Practices Commission is a specific forum available to test the trade practice of a party on the touch stone if it is an unfair, restrictive or a monopolistic trade practice. As long as the allegations relate to a prohibited trade practice, the Monopolies and Restrictive Trade Practices Act, 1969, can be invoked without hesitation and the Commission has complete and undiluted jurisdiction to entertain such complaints and deal with them according to the said statute.
27. Furthermore, in every case of an application under Section 12B of the Act, the Commission first ascertains if an unfair, restrictive or monopolistic trade practice has been perpetrated by a party before deciding on the extent of loss or damage incurred by any other party as a consequence of such a trade practice and on the amount of compensation payable to that party. In other words, a Section 12B application is not dealt with purely on the determination of the quantum of compensation, but invariably is preceded by an ascertainment whether any prohibited trade practice has been committed. We see nothing infirm, illegal or untenable in the Commission entertaining an application under Section 12B, even when a main complaint in terms of Section 36B of the Act has not been filed. Dr. Singhvi would have us understand that for the purpose of a Section 12B application, a complaint under Section 36B is a pre-requisite. With respect, we do not subscribe to this proposition.
28. In .stating this, we are fortified by a decision of this Commission in Salig Ram v, Remal Public School (C. A. No. 1317 of 1988, dated November 28, 1989) in which it has been ruled that the language of Section 12B does not make the decision of an enquiry, a condition precedent to the maintainability of applications under the said section and the locus standi of the applicants to bring such applications. It has also been observed therein that there is no need of any existence or decision of a separate independent enquiry as envisaged in sections 37 and 36D of the Monopolies and Restrictive Trade Practices Act in order to entertain compensation applications. We agree with the said observations of this Commission and hold that the compensation application under Section 12B filed before us by the applicant is maintainable and that the objection raised by respondent No. 1 on the ground that a separate enquiry on unfair trade practice has not been initiated has no force.
29. We have also given thought to the argument of Dr. Singhvi relating to the requirement of the element of public interest in monopolies and restrictive trade practices cases. The decisions cited by Dr. Singhvi have been perused by us and we are not in disagreement with any of those in Raymond Woollen Mills' case, [1979] 49 Comp Cas 686 (Bom), Ahmedabad Manufacturing and Calico Printing's case [1972] 42 Comp Cas 493 (Guj) or Investwell Publishers's case [1990] 69 Comp Cas 516 (MRTPC) [SB]. General public interest certainly has been focused in all those decisions. In the instant case, we are dealing with a Section 12B application. We see no conflict whatsoever between the focus of public interest in the Monopolies and Restrictive Trade Practices Act and the provisions of Section 12B of the Act. In fact Section 12B of the Act provides for payment of compensation towards any loss or damage caused by a prohibited trade practice to the Central Government, State Governments, any trader, class of traders or any consumer. This would mean that by bringing in the Central Government, State Government and class of traders and even an individual consumer, the Legislature has taken care of public interest in the section providing for compensation to the aggrieved. We are unable to agree with respondent No. 1 that the compensation application is not maintainable as no public interest is involved. By way of an illustration, in a case of import of deficient quality goods, not only the consumer but the public, the Government and the nation as a whole suffer loss or damage either directly or indirectly.
30. Dr. Singhvi, while dealing with the first dimension of his argument on the maintainability of the compensation application advanced an argument that the purpose of Section 36A of the Act is only to deal with representations and misrepresentations de hors a contract, as in his view, contractual representations which are embedded in the contract cannot be dealt with under the Monopolies and Restrictive Trade Practices Act but under the law of contract. Shri Ahuja responded to this by stating that most of the transactions involving prohibited trade practices arise out of supplies made and provision of services by undertakings and entities to traders or class of traders or consumers under an express or implied contract and that Section 36A is fully invocable on disputes arising out of the said transactions, as they fall in the domain of prohibited trade practices. He cited an order of this Commission in Y. P. Mahana v. Bharat Television [1993] 1 CTJ 547 ; [1994] 81 Comp Cas 277 (MRTPC) [FB] and observed that Section 12B of the Act has been enacted to fill in the gap in the statute arising from the absence of any jurisdiction in the Commission to award compensation for loss or damage suffered as a result of any prohibited trade practice.
31. We are inclined to agree with Shri Ahuja that Section 12B has been provided by the Legislature by way of remedy and with a view to providing a deterrence to prohibited trade practices right from incipiency and motivate the producers and suppliers to desist from indulging in such practices. After the enactment of Section 12B, an aggrieved party can seek remedy and claim compensation by means of a simple application under the said section before the Commission. An application under this section does not require any court fee stamps nor any other expensive and cumbersome formalities that accompany institution of civil suits. It is a simple, cheap and expeditious remedy.
32. In the light of Y. P. Mahana's case [1993] 1 CTJ 547 ; [1994] 81 Comp Cas 277 (MRTPC) [FB] and discussion above, we have no hesitation in holding that the compensation application is maintainable.
33. The second dimension of Dr. Singhvi's contention that the compensation application is not maintainable is the lack of territorial jurisdiction for the Commission, respondent No. 1 being a foreign company--an Indonesian company. According to Dr. Singhvi, certain foreign elements in the transaction in question like (a) the country of origin of the pulp being Indonesia, (b) the pulp having been manufactured in Indonesia, (c) the quality and grade of the pulp having been produced in terms of the laws and norms as obtaining in Indonesia, (d) the obligated characteristic performance on the part of the seller being grounded in Indonesia, (e) the contract having been concluded in Indonesia, (f) the handling of pulp prior, to shipment having taken place in Indonesia, (g) the contract having been concluded in Indonesia, (h) the consideration for the goods having been paid outside the territorial limits of India are all constitutive of negation of territorial jurisdiction for the Commission. He argued that the said foreign elements in the transaction denude the Commission of jurisdiction to deal with the matter. He observed that the proper law governing the transaction is not the Monopolies and Restrictive Trade Practices Act, 1969, but instead a foreign law-Indonesian law. He argued that on the basis of lex loci contractus and the proper and curial law applicable to the subject transaction, it is the domestic law of the seller country namely Indonesia that will come into play and not the Monopolies and Restrictive Trade Practices Act, 1969. In as much as respondent No. 1 is not an Indian party and is not a registered Indian corporate entity, the application is beyond the territorial jurisdiction of the Commission.
34. Shri Ahuja contested this argument by stating that in terms of Section 14 of the Monopolies and Restrictive Trade Practices Act, 1969, where the trade practice involved is a prohibited trade practice, the Commission-has jurisdiction to make enquiries and make an order with respect to that part of the practice which is carried on in India. In the present case, he argued, admittedly the goods were supplied by respondent No. 1, were meant for use in India and were deficient in the matter of quality and standard vis-a-vis what was represented by respondent No. 1 to the applicant. He, therefore, concluded that the Commission has the jurisdiction to enquire into the matter in terms of Section 14 of the Act. He cited an order of this Commission Surlex Diagnostics Ltd. v. Advanced Medical Systems (India) Pvt. Ltd. [1993] 1 CTJ 146.
35. We have given thought to the arguments of both counsel and the applicability of Section 14 of the Act. In Surlex Diagnostics Ltd. v. Advanced Medical Systems (India) Pvt. Ltd. [1993] 1 CTJ 146, the Commission had ruled that it can make an order with respect to that part of the trade practice which is carried on in India irrespective of the fact whether the parties connected with the practice are doing any business in India or not, A perusal of the language of Section 14 of the Act will indicate that even if the party against which action is proposed under the Act does not carry on business in India, the Commission has the jurisdiction to deal with any complaint in regard to the practice which substantially falls within any prohibited trade practice relating to production, storage, supply, distribution or control of any goods or provision of any services. What is, therefore, sought to be brought within the purview of the statute are the trading activities which fall within the mischief of a prohibited trade practice as spelt out in the Act irrespective of the residence of the parties to such practices and regardless of whether the parties connected with such activities are doing any business in India or not. The mere fact that, the party is a foreign company or that it does not carry on any business or engage in trading activities within the jurisdiction of India could not by itself confer any immunity on it from the proceedings launched against it under the Act. We, therefore, do not agree with the contentions of respondent No. 1 in this regard.
36. This particular matter came up for consideration in Universal Petro Chemicals Limited v. Idomitsu Kosan Co. Limited (I. A. No. 108 of 1994-16th November, 1995, it was ruled, that even if a contract had been executed outside the country, it would not preclude the Commission from exercising its jurisdiction with respect to that part of the practice which is carried on in India. Leaning on an earlier decision of this Commission in Jugaldas Damodar Mody Company, In re [1983] 3 Comp LJ 221, it was underscroed that the definition of "restrictive trade practice" as given in the Act would go to show that it is an effect-oriented or result-based definition. If the effects of a restrictive trade practice are visible in India, the trade practice must be taken to be carried on in India.
37. In view of the above cited decisions of this Commission, it is clear that Section 14 will fully cover the issue of process against the respondents and in particular respondent No. 1.
38. Two further arguments were advanced by Dr. Singhvi along with his argument on the applicability of Section 14 of the Act. One relates to his objection that the applicant is not a consumer and, therefore, has no competence to move the Commission under Section 12B of the Act. Shri Ahuja drew our attention to Section 12B of the Act and stated that it clearly covers the Central Government, State Governments, any trader, class of traders or any consumer and that any of the above functionaries can move the Commission under the said provision. He added that for all the practical purposes, the applicant is a consumer and for some reason, even if it is treated as a trader, he has the competence under Section 12B of the Act to move the Commission. We are entirely in agreement with Shri Ahuja's contention. The objection of respondent No. 1 has no force at all.
39. The other allied argument advanced by Dr. Singhvi is that a single isolated action on the part of respondent No. 1 cannot be challenged under the Monopolies and Restrictive Trade Practices Act, 1969, as there is no allegation of repetitive action in the compensation application filed by the applicant. This argument has also no force as Section 2(u) of the Act defines a trade practice, which includes any single or isolated action of any person in relation to any trade. In view of this, merely because there is no repetitivity of the alleged action or alleged omission on the part of respondent No. 1, that cannot render the compensation application itself non-maintainable. We, therefore, hold that the compensation application is eminently maintainable.
40. The third dimension of Shri Singhvi's arguments on the maintainability of the compensation application revolves round the preliminary investigation report. He argued that in terms of regulation 77(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, read with section S6C of the Act, it is compulsory that there should be a preliminary investigation report preceding the issue of process. He added that the complainee's comments, in this case, respondent No. I's comments, have not been obtained before the issue of process. Shri Ahuja in reply stated that the preliminary investigation by the Director-General of Investigation and Registration (DG) is not a mandatory requirement under the Monopolies and Restrictive Trade Practices Act, 1969, or its Regulations.
41. We have given consideration to the arguments of both counsel in this regard. Regulation 77(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, clearly uses the word "may" in stipulating that the Commission, may require the Director-General to make an investigation as may be necessary into the allegations. In many cases, this Commission while dealing with the Section 12B applications has not deemed it fit to call for an investigation by the Director-General. The wording of regulation 77(2) also makes it clearly discretionary for the Commission to order an investigation or not. Furthermore, there is no requirement to obtain the complainee's comments before issuing a process. The very issue of process is to enable, in this case respondent No. 1, to offer its explanation, reply or comments on the allegations in the compensation application. We are clearly of the view that no prejudice is caused to respondent No. 1 by issue of merely a process-a notice calling upon it tq furnish its reply. The Act and Regulations do not support Shri Singhvi's arguments.
42. Dr. Singhvi pleaded that the two applications of respondent No, 1 need to be adjudicated upon, as they are by way of preliminary legal objections and are predicated upon jurisdictional objections. He cited the Supreme Court ruling in Ujjambai v. State of U. P., AIR 1962 SC 1621, and argued that decisions on such objections have to be "logically prior" to the enquiry on the merits of the case. Shri Ahuja controverted this argument by observing that in the questions raised by respondent No. 1 there are mixed issues of law and facts. Those are not pure questions of law.
43. We have gone through the ruling of the Supreme Court in Ujjambai v. State of U. P., AIR 1962 SC 1621. It is worthwhile to reproduce excerpts from the said ruling :
"The jurisdiction of an inferior Tribunal may depend upon the fulfilment of some condition precedent or upon the existence of some particular fact. Such a fact is collateral to the actual matter, which the Tribunal has to try and the determination whether it exists or not is logically prior to the determination of the actual question which the Tribunal has to try. The Tribunal must itself decide as to the collateral fact-when at the inception of the inquiry by a Tribunal of limited jurisdiction, a challenge is made to its jurisdiction, the Tribunal has to make up its mind, whether it will act or not, and for that purpose to arrive at some decision on whether it has jurisdiction or not."
44. In Bettiah Estate v. Bhagwati Saran Singh, AIR 1993 All 2, the High Court clearly observed that an issue of law can be decided as a preliminary issue only where it is such that its decision does not necessitate investigation into facts and it relates either to the jurisdiction of the court or to the suit being barred under any prevailing law. Shri Ahuja cited a catena of case laws in support of his contention. We note that respondent No. 1 has raised his objections as legal objections, as they indeed are, and has specifically raised an objection on the applicability of Section 14 and has consequently challenged the Commission's jurisdiction. We are of the view that these issues should be disposed of, at this stage itself. It is in this context, that we have at length adjudicated on both the applications of respondent No. 1 which are based on legal submissions. We do not have to go into all the case laws cited by Shri Ahuja as they are basically on whether the Tribunal should try at the threshold, issues which are mixed facts and law. Here we deem both the applications of respondent No. 1 as objections grounded on legal issues. We agree with Dr. Singhvi that the two applications of respondent No. 1 should be decided at the threshold itself so that unnecessary expenditure and effort will not be incurred if the decision is in favour of respondent No. 1.
45. Be that as it may, we have already held above that the legal submissions and objections relating to jurisdiction have no force. In this view" of the matter, we are firmly of the view that the Commission has jurisdiction to entertain the compensation application and issue the process which we have already done and that the compensation application is undoubtedly maintainable. We, therefore, dismiss both the applications of respondent No. 1.
46. Applications of respondent No. 2 under regulalion 64(2) and under regulation 65(b) and (j) of the MRTPC Regulations, 1991.
47. In the two applications captioned above, respondent No. 2 has made averments, a summary of which is as follows :
(a) Respondent No. 2 has been vexatiously arrayed as a party in the case though it is a distinct and independent corporate entity from respondent No. 1 having no connection with the subject transaction.
(b) Respondent No. 2 came into existence with effect from April 2, 1993, long after the subject transaction had been executed between the applicant and respondent No. 1.
(c) The joinder of respondent No. 2 as a party to the case is misconceived, illegal and mala fide.
(d) The continuation of the proceedings against respondent No. 2 would occasion failure of justice, abuse of the process of the proceedings in the Commission and visit respondent No. 2 with "culpable prejudice and hardship".
(e) Respondent No. 2 may be struck off the array of respondents.
(f) Reference to respondent No. 2 figures only in paras 3, 17 and 18 of the compensation application and the averments of the applicant are "too laconic and are bereft of materials, facts and particulars".
(g) Respondent No. 2 is a "total stranger to the subject transaction".
(h) The applicant should be directed to furnish further and better particulars to enable respondent No. 2 to meet the case of the applicant effectively.
48. The applicant on being furnished with the copies of the aforesaid two applications of respondent No. 2 has submitted its reply a summary of which is as follows :
(a) Respondent No. 2 has been promoted by respondent No. 1 and has been acting for and on behalf of respondent No. 1 with regard to "its activities and business interest in India".
(b) The compensation application sets out all the facts and material particulars in detail and is in no way vague so as to prejudice respondent No. 2 in any manner.
(c) As respondent No. 2 has filed its reply on the merits to the ' compensation application, no further particulars are required to be furnished.
(d) Respondent No. 2 is a necessary party as the meeting organised on July 21, 1993, for an amicable settlement of the dispute between the applicant and respondent No. 1 was attended by the executive director of respondent No. 2 and as" the minutes of the meeting were also confirmed by him.
49. Shri M. L. Qazi, counsel for respondent No. 2, commencing his arguments observed that the matrix of facts and pleadings set out by the applicant refers to respondent No. 2 only in 3 paragraphs namely paras 3, 17 and 18 of the compensation application which does not carry any allegation of indulging in any prohibited trade practice on the part of respondent No. 2. Inasmuch as respondent No. 2 was not in existence at the time, the subject transaction was mooted, placed and executed and as respondent No. 2 came into being only on April 2, 1993, when it was incorporated under the Companies Act, 1956, there cannot be any charge or allegation against respondent No. 2. He added that respondent No. 2 as a corporate entity is not an agent or subsidiary of respondent No. 1 and, sans nexus, respondent No. 2 cannot be arrayed as a party. Respondent No. 2 is "a 100 per cent. equity company of Sinarmas Mauritius and not a subsidiary of respondent No. 1 which is Sinarmas Indonesia, Even, if it is assumed without admitting, that respondent No. 2 is an agent or subsidiary of one of the companies in the conglomorate of the Sinarmas group, even then it is inconceivable in law to rope in respondent No. 2 with the subject transaction.
50. Shri Qazi added the applicant has attempted to array respondent No. 2 as a party on the premise and proposition that an agent is vicariously liable for the acts of the principal, whereas in law, the principal is vicariously liable for the acts of the agent and that in any case, in this matter respondent No. 2 is not even an agent of respondent No. 1. He urged that the compensation application is not maintainable on the ground of misjoinder of parties. In terms of regulation 64(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, the Commission has the power to strike out the name of any party improperly joined in the case. He invited our attention to Order I, Rules 3, 9, 10 and 13 read with Order XIV, Rules 2, 2(2)(a), 2(2)(b) and Order XIV, Rule 1(4) of the Code of Civil Procedure, 1908, and argued that the objection as to the misjoinder of the parties has been raised at the first blush and that being a legal issue needs to be dealt with and determined at the earliest opportunity.
51. Shri Qazi advanced another argument that applicability of Section 14 of the Monopolies and Restrictive Trade Practices Act, 1969, requires a continuing or subsisting practice on the part of respondent No. 1, which in this case, is absent. According to him, the Commission has no jurisdiction in the case because respondent No. 1 as a foreign party is not carrying on business through an agent or through a branch office nor is any part of the practice being carried on in India.
52. Adverting to the contention of the applicant that Shri Vederah had acted as a functionary of respondent No. 2 on behalf of respondent No. 1, Shri Qazi denied the same and observed that Shri Vederah had acted on his own. In other words, Shri Vederah had acted in his individual capacity and not as the executive director of respondent No. 2.
53. Even though the applications of respondent No. 2 do not specifically refer to the absence of the preliminary investigation report, Shri Qazi, made a mention of the same during his arguments and observed that such an investigation report is mandatory in any enquiry relating to prohibited trade practices.
54. Shri Qazi cited a large number of decisions in support of his prayer to determine the legal issues raised by him at the threshold itself.
55. Shri Ahuja in his arguments drew our attention to the fax message of respondent No. 2, dated July 22, 1993, addressed to the applicant which has been signed by Shri Vederah, executive director of respondent No. 2, for and on behalf of respondent No. 2. He said that the said document shows that Shri Vederah had acted not in his individual capacity but in his capacity as executive director of respondent No. 2 and that in terms of the contents of the document he had offered to take up with respondent No. 1, payment of compensation of US dollars 50,000 in full and final settlement of the dispute between the applicant and respondent No. 1. He further cited the letter of respondent No. 1 to the applicant of date July 8, 1993, to the effect that Shri Vederah would discuss the matter and resolve the matter amicably. That letter was copied to respondent No. 2. A further document which he emphasised was respondent No. 1's letter to the applicant of date August 24, 1993, which was copied by respondent No. 2 "to the applicant implying thereby that both the respondents were acting together.
56. Shri Ahuja produced a copy of an advertisement/insertion given by respondent No. 2 in The Hindu of date September 27, 1994, and drew our attention to the fact that it is mentioned therein that respondent No. 2 is a wholly owned subsidiary of the Sinarmas group.
57. Shri Ahuja contended that even the objections taken by respondent No. 2 are not merely legal in nature but mixed questions of law and facts. He, therefore, resisted the move of respondent No. 2 to get its two applications adjudicated upon at the threshold and suggested that they should be taken up during the stage of final arguments after recording of evidence.
58. We have perused the pleadings before us and given consideration to the arguments of both Shri Qazi and Shri Ahuja. At the outset, we note that the applicant has in its reply categorically mentioned that it has furnished all material particulars in support of its application. This being a compensation case, on the strength of such a statement on the part of the applicant, we do not see any merit in the contention of respondent No. 2 or in its request for better and further particulars. It is for respondent No. 2 to file its reply to the compensation application as it stands. It will have no obligation to answer allegations other than whatever has been stated in the compensation application- We see no prejudice to respondent No. 2 in the light of the applicant's statement in para 2 of its reply that its application "has set out all facts and material particulars in detail" and that "the same is complete in all respects".
59. In the premises the application of respondent No. 2 under regulation 65(b) and (j) is dismissed.
60. In so far as the other application is concerned, which is under regulation 64(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991, the prayer therein is to strike out respondent No. 2 from the array of respondents. It is no doubt a fact that only in three paragraphs namely 3, 17 and 18 of the compensation application does respondent No. 2 figure. It is also a fact that respondent No. 2 came into existence only on April 2, 1993. While the subject transaction, namely, sale of pulp by respondent No. 1 to the applicant was mooted, placed and executed, before respondent No. 2 was born legally, the action of respondent No. 2 in entering the dispute between applicant and respondent No. 1 has not been satisfactorily answered by respondent No. 2 or its counsel at any stage except Shri Qazi's argument that Shri Vederah, executive director of respondent No. 2 acted in his individual capacity. This is indeed a matter of fact which has to be gone into after taking evidence and adjudication. At this stage, we merely take note of the fact that respondent No. 2's fax message to the applicant of date July 22, 1993, has been signed by Shri Vederah as an executive director of respondent No. 2 for and on behalf of respondent No. 2. The said document itself is on the letter head of respondent No. 2. In addition, we have noted respondent No. 2's association with the dispute in more than one document. All these documents require to be proved and further evidence taken. It is not possible, therefore, at this stage to accept the contention of respondent No. 2 or the argument of Shri Qazi that respondent No. 2 has no connection whatsoever with the transaction in question.
61. Shri Qazi forcefully argued that in terms of Section 14 of the Act, there should be a continuing or subsisting trade practice on the part of respondent No. 1. Denying any such continuing or subsisting practice, he argued that the Commission has no jurisdiction in terms of Section 14 of the Act.
62. We have already noted that the compensation application rests on allegations of false representations constituting unfair trade practices falling within the provisions of Section 36A(1) of the Act. The pulp in question was exported by respondent No. 1, was received in India and allegedly found to be deficient in quality and standard. According to the pleadings, a major part of the pulp in question is still lying unused in the premises of the applicant. The dispute regarding the quality of pulp, the compensation payable to the applicant by the respondents and the question whether respondent No. 1 should take back the unused pulp will all constitute continuing and subsisting trade practice. All these will fall within the trade practice which includes anything done by a person which controls the method of trading. Even a single or isolated action of a person in relation to any trade has been categorically brought under the definition of "trade practice" in Section 2(u) of the Act. The argument, therefore, that respondent No. 1 should be continuing with misrepresentations in order to fall under Section 14 of the Act is too far fetched to accept.
63. In this connection, the Commission's order in Jugaldas Damodar Mody Co., In re [1983] 3 Comp LJ 221, is indicative of the correct legal position. In the said order, a ruling of the Division Bench of the Allahabad High Court in R. D. Saxena v. J. K. Synthetics (S. A. No. 249 of 1976) was relied upon by the Commission. The Allahabad High Court had observed that even in case, a prohibited trade practice complained of was a single or isolated action of a person in relation to the trade, there would be no question of its having existed or having continued to exist on the date of commencement of an enquiry under the Monopolies and Restrictive Trade Practices Act, 1969, or during the pendency of an enquiry. The High Court observed further that even if the prohibited trade practice had not continued to exist on the date of commencement or during the pendency of an enquiry under the Act, the Commission can enquire into the alleged trade practice.
64. There is, therefore, no force in Shri Qazi's argument that the subsisting or continuing character of misrepresentation or of false representation is a sine qua non for even issue of process. Further, there are certain aspects relating to the transaction in question which are possibly constitutive of unfair trade practices. Only after evidence is taken, can there be an adjudication whether they do constitute unfair trade practices. Right now they are in the realm of allegations and we are at the stage of having merely issued a process.
65. All that the Commission has so far done is the issue of notices of the compensation application to both the respondents to proffer their replies. At this stage, it would not be proper to adjudicate on the facts or adjudicate on mixed issues of facts and law. The catena of decisions cited by both the advocates do not require any discussion at this stage as we consider that respondent No. 2 is a necessary party to the proceedings and that it cannot be struck off the array of parties now. With respect to Shri Qazi, we disagree with his contention that respondent No. 2 has been misjoined in the array of respondents. We, therefore, dismiss the application of respondent No. 2 under regulation 64(2) of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991.
66. In the premises, all the four applications, two of respondent No. 1 and two of respondent No. 2 are dismissed. Respondent No. 2 has already filed its reply to compensation application. Respondent No. 1 has not. Respondent No. 1 is, therefore, directed to file its reply to the compensation application within eight weeks of the date of this order with a copy furnished to the applicant who shall file thereupon its rejoinder within four weeks thereof. The case shall stand listed for issues on July 18, 1996.
67. We record our deep appreciation of the excellent and constructive assistance rendered to us by Dr. Singhvi, Shri Ahuja and Shri Qazi in this adjudicative effort.