Monopolies and Restrictive Trade Practices Commission
Director-General (Investigation And ... vs Voltas Ltd. And Anr. on 14 September, 1993
Equivalent citations: [1994]79COMPCAS274(NULL)
JUDGMENT
Sardar Ali, Member
1. By way of this order, which is being written in the enquiry bearing RTPE No. 200 of 1986 (mentioned at Sl. No. 1 above), 15 enquiries stand disposed of. In the remaining enquiries, mentioned at serial Nos. 2 to 15 above, a copy of the judgment is being placed "in every file while the original one is in RTPE No. 200 of 1986.
2. Although the restrictive trade practice(s) alleged in these enquiries are covered within the definition of Section 33(1)(a) and (c) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as "the Act"), yet it would be appropriate to give some details of each enquiry highlighting the product(s) manufactured by the respondents other than Voltas and which are marketed/sold by the respondent, M/s. Voltas Ltd. Thus, what follows now is the description of each enquiry seriatim as mentioned above.
RTPE No. 200 of 1986 ;
3. Respondent No. 2 is engaged in the business of manufacturing jig boring machines, measuring machines and instruments, whereas respondent No. 1 (Voltas Ltd.) is a marketing company. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the agreement dated November 22, 1956/November 29, 1956, between the respondents, Voltas Ltd. and SOCIETE GENEVOSTE, the seller. The Director-General (Investigation and Registration) (hereinafter referred to as "the Director-General") has taken exception to the following clauses of the said agreement :
" 2. The buyer shall not sell the goods of the seller to any person who is not residing or carrying on business within the territory nor to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory."
"3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods which could compete with those of the seller."
" 6. For the consideration aforesaid the seller agrees not to sell any goods as mentioned before to any individual or firm within the territory other than the buyer and all enquiries and orders received by the seller from the territory shall be referred to the buyer. The seller shall further not quote nor not deliver his goods to any firm outside the territory for import into the territory except with the previous consent of the buyer and at terms agreed upon with the buyer."
4. The contention of the Director-General is that the terms and conditions referred to above are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 121 of 1986 :
5. Respondent No. 2, which is a foreign company, is engaged in the business of manufacturing automatic cold nutformers, automatic progressive coldheaders and automatic hot forging machines, whereas respondent No. 1 (Voltas) is a marketing company of Indian origin. For the purpose of sale and distribution of the aforesaid products, respondent No. 1 has been appointed as buyer on the terms and conditions contained in the agreement dated December 24, 1963/November 13, 1963, entered into between respondent No. 1 (Voltas) and M/s. F. B. Hatebur, Switzerland (seller). The Director-General has taken exception to Clauses 2, 3 and 6 of the said agreement. While Clauses 2 and 6 are the same as mentioned above in RTPE No. 200 of 1986 which are not reproduced for the sake of brevity, Clause 3 of this agreement is slightly different though the substance is the same, which is as under :
"3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods as above other than those of the seller."
6. The contention of the Director-General is that the terms and conditions referred to in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 122 of 1986 :
7. Respondent No. 2, which is a foreign company, is engaged in the business of manufacturing twist drilling milling machines and grinding machines and second operation lathes, etc., whereas respondent No. 1 (Voltas) is a marketing company of Indian origin. For the purpose of sale and distribution of the aforesaid products, respondent No. 1 has been appointed as buyer on the terms and conditions contained in the agreement entered into between respondents Nos. 1 and 2, dated January 29, 1963/ January 21, 1963. The Director-General has taken exception to Clauses 2, 5 and 6 of the said agreement, which are reproduced as under :
"2. The seller agrees not to sell any of the aforementioned goods to any individual or firm within the territory other than the buyer, and all enquiries and orders received by the seller from the territory shall be referred to the buyer.
5. The buyer shall not deal in nor sell, either directly or indirectly, any goods as above other than those of the seller.
6. The buyer shall not sell the goods of the seller to any person or firm not residing or carrying on business within the territory, nor to any person or firm carrying on business within the territory for purpose of resale by such person or firm outside the territory."
8. The contention of the Director-General is that the terms and conditions referred to above are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act, RTPE No. 125 of 1986 :
9. Respondent No. 2, M/s. Scniess Aktiengessellschaft, which is a foreign company, is engaged in the business of manufacturing model KE highspeed single column vertical turret lathes, etc., whereas respondent No. 1 (Voltas) is a marketing company of Indian origin. For the purpose of sale and distribution of-the aforesaid products, respondent No. 1 has been appointed as "buyer" on the terms and conditions contained in the agreement entered into between respondent No. 1 (Voltas) and respondent No. 2 (M/s. Schiess Aktiengessellschaft, Dusseldorf-Oberkassel (Germany), Hansaallee--245, the seller on the terms and conditions contained in the agreement dated April 1, 1956. The Director-General has taken exception to Clauses 2, 3, 6 and 8 of the said agreement, which are mentioned as under :
"2. The buyer shall not sell the goods of the seller to any person who is not residing or carrying on business Within the territory nor to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory.
' 3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods as above other than those of the seller.
6. For the consideration aforesaid the seller agrees not to sell any goods as mentioned before to any individual or firm within the territory other than the buyer and all enquiries and orders received by the seller from the territory shall be referred to the buyer. The seller shall further not quote for nor deliver his goods to any firm outside the territory for import into the territory except with the previous consent of the buyer and at terms agreed upon with the buyer.
8. The buyer is not permitted to take over the representation of competitors without the previous agreement of the seller."
10. The contention of the Director-General is that the terms and conditions referred to above are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 126 of 1986 ;
11. Respondent No. 2 is engaged in the business of manufacturing gear cutting, grinding machines and testing instruments and tools accessories, whereas respondent No. 1 (Voltas Ltd.) is a marketing company. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the memorandum of agreement dated May 1, 1963, between the respondents M/s. Voltas Ltd. and M/s. Maag Gear Wheel Company Ltd. Zurich Switzerland, the seller. The Director-General has taken exception to the following clauses of the said agreement :
"2. The buyer shall not sell the goods of the seller to any person who is not residing or carrying on business within the territory nor to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory.
3. During the currency of this agreement, the buyer shall not without the seller's written consent deal in or sell goods as above other than those of the seller.
6. The seller agrees and undertakes not to sell the goods covered by this agreement to any firm or individual within the territory other than the buyer and such enquiries or orders as may be received by the seller from the, territory shall be referred to the buyer. The seller further undertakes not to quote for nor effect delivery of the goods to any firm or individual outside the territory for import into the territory except with the previous written consent of the buyer and at terms agreed upon with the buyer."
12. The contention of the Director-General is that the terms and conditions referred to above in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 130 of 1986 :
13. Respondent No. 2 is engaged in the business of manufacturing Boko Universal Rapid Milling Machines, Boko Spinning and Planishing Lathes, whereas respondent No. 1 (Voltas Ltd.) is a marketing company. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the memorandum of agreement dated June 12, 1957, between the respondents, M/s. Voltas Ltd. and M/s. Bohner and Kohle GmbH and Co., Post Fach 67, 7300 Esslingen A.N, W.Germany, the seller. The Director-General has.taken exception to Clauses 2, 3 and 6 of the agreement, which are reproduced as under :
"2. The buyer shall not sell the goods of the seller to any person who is not residing or carrying on business within the territory nor to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory.
3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods as above other than those of the seller.
6. For the consideration aforesaid the seller agrees not to sell any goods as mentioned before to any individual or firm within the territory other than the buyer and all enquiries and orders received by the seller from the territory shall be referred to the buyer. The seller shall further not quote for nor deliver his goods to any firm outside the territory for import into the territory except with the previous consent of the buyer and at terms agreed upon with the buyer."
14. The contention of the Director-General is that the terms and conditions referred to above in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 131 of 1986 :
15. Respondent No. 2 is engaged in the business of manufacturing Hurth Vertical Toolroom and Milling Machine Type 10, etc., whereas respondent No. 1 (Voltas Ltd.) is a marketing company. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the memorandum of agreement dated June 1, 1957, between the respondents, M/s. Voltas Ltd. and M/s. Harl Hurth Maschinen-Und Zahnrad-Fabrik, Munchen-5, Holzstr 17-27, the seller. The Director-General has taken exception to Clauses 2, 3 and 6 of the agreement, which are similar to those clauses mentioned in para 8 above. For the sake of brevity the same are not being reproduced here.
16. The contention of the Director-General is that the terms and conditions referred to above in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 134 of 1986 :
17. Respondent No. 2 is engaged in the business of manufacturing Optical Comparators Workshop measuring microscopes, whereas respondent No. 1 (Voltas Ltd.) is a marketing company. For the purpose of sale and distribution of the above products respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the agreement dated January 1, 1967, between the respondents, M/s. Voltas Ltd. and M/s. Isoma Ltd. 2500 Biel-Bienne, 7 Ch Des Cinsons,. Switzerland, the seller. The Director-General has taken exception to Clauses 2(a), 2(b) and 3 of the agreement, which are reproduced hereunder :
"2(a) The buyer shall not sell the said goods to any person who is not residing or carrying on business within the territory nor knowingly to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory.
(b) The seller agrees and undertakes not to sell the goods covered by this agreement to any firm or individual within the territory other than the buyer and such enquiries or orders as may be received by the seller from the territory shall be referred to the buyer. The seller further undertakes not to quote for nor effect delivery of the goods to any firm or individual outside the territory for import into the territory except-with the previous written consent of the buyer and at terms agreed upon with the buyer.
3. During the currency of this agreement, the buyer shall not without the seller's written consent deal in or sell goods as above other than those of the seller : Provided that notwithstanding anything contained in this agreement, the buyer shall always be free to sell such goods as the buyer may, in their absolute discretion manufacture from time to time."
18. The contention of the Director-General is that the terms and conditions referred to above in Clauses 2(a) and (b) and 3 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 197 of 1986 :
19. Respondent No. 2, M/s. Schandt Maschinenbau GmbH, (Hedel-fingen), Postfach 85, West Germany, is engaged in the business of manufacturing external grinding machines, internal grinding machines and some special kinds of machines, whereas respondent No. 1, M/s. Voltas Ltd., is a marketing company. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the agreement dated September 30, 1958, between the respondents, M/s. Voltas Ltd. and M/s. Schandt Maschinenbau GmbH, D-7000 Stuttgart 61 (Hedelfingen), Postfach. 85, West Germany, the seller. The Director-General has taken exception to the following Clauses 2, 3 and 6 of the agreement :
"2. The buyer shall not sell the goods of the seller to any person who is not residing or carrying on business within the territory nor to any person residing or carrying on business within the territory for the purpose of resale by such person outside the territory.
3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods as above other than those of the seller.
6. For the consideration aforesaid the seller agrees not to sell any goods as mentioned before to any individual or firm within the territory other than the buyer and all enquiries and orders received by the seller from the territory shall be referred to the buyer. The seller shall further not quote for nor deliver his goods to any firm outside the territory for import into the territory except with the previous consent of the buyer and at terms agreed upon with the buyer."
20. The contention of the Director-General is that the terms and conditions referred in Clauses 2, 3 and 6 above are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 198 of 1986 :
21. Respondent No. 2 is a foreign company engaged in the business of manufacturing copying lathes and work drivers, etc., whereas respondent No. 1 (Voltas Ltd.) is a marketing company of Indian origin. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the memorandum of agreement dated May 1, 1956, between the respondents, M/s. Voltas Ltd. and M/s. George Fischer Ltd., 8201, Schaffhaussen, P.O. Box 685, Switzerland, the seller. The Director-General has taken exception to Clauses 2, 3 and 6 of the said agreement. While Clauses 2 and 6 are the same as are in the agreement of RTPE No. 197 of 1986 mentioned at page 281, Clause 3 is slightly different. For the sake of brevity Clauses 2 and 6 are not being reproduced and clause 3 is mentioned hereunder :
"3. The buyer shall use his best endeavours to promote the interests of the seller and specifically shall not deal in or sell goods as above other than those of the seller. Should any doubt arise as to whether a product is competitive or not the buyer will seek the seller's agreement on the matter."
22. The contention of the Director-General is that the terms and conditions referred to above in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 199 of 1986 :
23. Respondent No. 2 is engaged in the business of manufacturing Manurhin automatic lathes and MBO gauging apparatus, etc., whereas respondent No. 1 (Voltas Ltd.) is a marketing company of Indian origin. For the purpose of sale and distribution of the above products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained, in the memorandum of agreement dated January 1, 1957, between the respondents, M/s. Voltas Ltd. and M/s. Manufacture De Machines Du Haut Rhin, 20, Rue De Kingersheim, 68200, Mulhouse, France, the seller. The Director-General has taken exception to Clauses 2, 3 and 6 of the agreement. The contents of Clauses 2, 3 and 6 are similar to those of Clauses 2, 3 and 6 of RTPE No. 197 of 1986, cited at page 281 and thus are not being repeated here for the sake of brevity.
24. The contention of the Director-General is that the terms and conditions referred to in Clauses 2, 3 and 6 of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 202 of 1986 :
25. Respondent No. 2 is engaged in the business of manufacturing non-AC machines, NC machines accessories, tooling and programming systems, etc., whereas respondent No. 1 (Voltas Ltd.) is a. marketing company. For the purpose of sale and distribution of the aforesaid products, respondent No. 1 (Voltas) has been appointed as buyer (sole importer) on the terms and conditions contained in the agreement between M/s. Voltas Ltd. and M/s. Trumpf GmbH & Co. Johann-Mans Street 2, D-7257, Ditzingen, the seller. The Director-General has taken exception to the following Clauses 2, 3 and 14 of the agreement :
"2. All enquiries which Trumpf received from/or concerning the territory will be passed on to Voltas to be dealt with, or alternatively, will be answered by Trumpf only in consultation with or on the instructions of Voltas.
3. Voltas undertakes to energetically promote the sale of the above-mentioned Trumpf products and not to sell or distribute any other products competing with the products of Trumpf.
14. Within the "territory" Trumpf reserves the right to sign licences or co-operation agreements with other partners for production and, if. suitably, distribution of certain Trumpf machines, not mentioned in this contract."
26. The contention of the Director-General is that the terms and conditions contained in the aforesaid clauses of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 483 of 1987 :
27. Respondent No. 1 is engaged in the manufacture and sale of guillotine shearing machines, press brakes, universal workers, beam bending and straightening machines, plate bending rolls, etc., and respondent No. 2 is a marketing company. For the purpose of sale and distribution of the aforesaid products, respondent No. 2 (Voltas Ltd.) has been appointed as distributor on the terms and conditions contained in the agreement entered into between M/s. Simtools Ltd. and M/s. Voltas Ltd. The Director-General has taken exception to the following Clauses 3(a) and (b) of the agreement :
"3. Exclusive purchase/selling rights :
(a) The COMPANY hereby appoints Voltas as the sole and exclusive distributors and Voltas hereby accepts such appointment for the said products in the territory for the period of this agreement. During the currency of this agreement, the company shall not sell or supply the said products (whether under the same trade mark/brand name/label hereinafter mentioned in Clause 4 or under any other trade mark/brand name/ label) within the territory to any party other than Voltas and Voltas shall not resell the products anywhere outside the territory. All enquiries and orders for the products arising from the said territory, which may be received by the company direct shall promptly be passed on to Voltas for necessary action.
(b) Voltas shall not sell in the territory products of the same kind, types and sizes as those covered by this agreement, of any other make, indigenous or foreign so long as the COMPANY is in a position to satisfy the demand for the products in the territory."
28. The contention of the Director-General is that the terms and conditions contained in the aforesaid clause of the agreement are restrictive trade practices under Clauses (a) and (c) of Section 33(1) of the Act.
RTPE No. 554 of 1987 ;
29. Respondent No. 1, M/s. New Bharat Engineering Works (Jamna-gar) Ltd., Jamnagar, is engaged in the manufacture and sale of energy radial drilling machines, lathes and tooth rounding machines, whereas respondent No. 2 is a marketing company. For the purpose of sale and distribution of the aforesaid products, respondent No. 2 (Voltas Ltd.) has been appointed as distributor on the terms and conditions contained in the agreement entered into between M/s. New Bharat Engineering Works (Jamnagar) Ltd. and M/s. Voltas Ltd. The Director-General has taken exception to the following Clause 3 of the agreement :
"3. Exclusive setting rights.--During the currency of the agreement we shall not sell or supply the said products within the territory to any party other than you. All enquiries and orders for the products arising from the said territory, which may be received by us directly, shall promptly be passed on to you for necessary action."
30. The contention of the Director-General is that the terms and conditions contained in the aforesaid Clause 3 of the agreement are a restrictive trade practice under Clause (a) of Section 33(1) of the Act.
RTPE No. 637 of 1987 :
31. Respondent No. 1, M/s. Nichrome Metal Works, Pune, is engaged (in the manufacture of automatic packaging machines toolings, spares, components and accessories, whereas respondent No. 2 is a marketing company. For the purpose of sale and distribution, respondent No. 2 (Voltas Ltd.) has been appointed as exclusive marketeer on the terms and conditions contairied in the agreement entered into between M/s. Nichrome Metal Works, 46, Dr. Ambedkar Road, Pune-1 and M/s. Voltas Ltd. The Director-General has taken exception to the following Clauses 3.2, 3.3 and 7 of the agreement : --
"3.2 During the currency of this agreement, NMW shall not sell or supply or offer to sell or supply the products to any party other than Voltas for their sale and distribution within the territory.
3.3 All enquiries and orders for the products arising from the territory received by NMW shall be passed on to Voltas for necessary action.
7. Direct sa/es.-Should NMW make a direct sale in the territory in order to meet an unusual circumstance, Voltas shall, without prejudice to its other rights, be entitled to be paid compensation equivalent to 15% of the sale proceeds (exclusive of taxes and levies) of the products covered by such direct sales and NMW shall of its own accord and forthwith furnish Voltas with copies of the relevant invoices and remit the amount of such compensation. NM shall, however, obtain Voltas concurrence prior to making such direct sale."
32. The contention of the Director-General is that the terms and conditions contained in the aforesaid clauses of the agreement are restrictive trade practices under Clauses (a) and (e) of Section 33(1) of the Act.
33. Thus, we have seen that in the first 12 enquiries agreements have been entered into between Voltas Ltd. and foreign companies whereas in the remaining three enquiries shown at items Nos. 13, 14 and 15, the agreements were entered into between Voltas Ltd. and Indian companies. As in the notice of enquiries Voltas Ltd. has been shown as respondent No. 1 in the first 12 enquiries and as respondent No. 2 in other remaining three enquiries, therefore, in our subsequent paras, we may refer to "Voltas" only and to the other respondent as "manufacturer". It is also seen that except in the enquiry mentioned at serial No. 14 (RTPE No. 554 of 1987) where only Clause (a) of Section 33(1) is attracted and in item No. 15 (RTPE No. 637 of 1987), where the clauses of agreement covered under Clauses (a) and (e) of Section 33(1) of the Act, in the rest of the enquiries, as also stated above, the clauses of the agreements pertain to violation of Clauses (a) and (c) of Section 33(1) of the Act.
34. All these enquires have been instituted pursuant to the filing of statutory applications under Section 10(a)(iii) of the Act by the Director-General of Investigation and Registration (hereinafter referred to as the Director-Genera!) for enquiring into the alleged restrictive trade practices as stated above. In the first 12 enquiries initially the Director-General did not make the foreign companies respondents. However, on October 20, 1986, it has been pointed out on behalf of the Director-General that in view of Section 14 of the Act notwithstanding that the business concern, which entered into agreement with the respondent, Voltas, is carrying on business in a foreign country, the Commission can take cognizance of the restrictive trade practice because the said trade practice is being carried on in India. Therefore, the Commission was of the opinion that notice of enquiry (NOE) should not be issued to Voltas alone and notice to the other party to the impugned agreement should be issued, though the other party is a foreign concern. The Commission directed that issuance of notice to the foreign company is absolutely necessary for completely and effectually deciding the existence or otherwise of the alleged restrictive trade practice and in that way the foreign company is a necessary party within the meaning of Order 1, Rule 10 of the Civil Procedure Code. Similarly, in RTPE No. 554 of 1987 mentioned at item No, 14 in the application of the Director-General under Section 10(a)(iii) of the Act the manufacturer was not shown as respondent. So, the Commission, on its own, directed the issuance of notice of enquiry to the manufacturer also. In the rest two enquiries mentioned at serial Nos. 13 and 15 the manufacturers are shown as respondent by the Director-General in his application. Therefore, the notice of enquiry was also ordered in these two enquiries against both the respondents.
35. In all these enquiries, different notices of enquiries were issued to the respondents. In the first 12 enquiries, notice of enquiries were issued to the manufacturers after obtaining their complete addresses from Voltas with whom they have entered into the agreement. "Voltas" was also given liberty to seek instructions whether the manufacturers can authorise Voltas to represent them in these enquiries on their behalf. Since no one appeared on behalf of the manufacturer in these 12 enquiries relating to foreign companies in spite of service of notice of enquiry nor Voltas put in appearance on their behalf, therefore, the ex parte proceedings were ordered against the manufacturer in these 12 enquiries. Likewise, in enquiries mentioned at serial Nos. 14 and 15 no one appeared on behalf of the manufacturers in spite of service and ex parte proceedings were, therefore, ordered against the manufacturers. Only in RTPE No. 483 of 1987 (the enquiry mentioned at serial No. 13) the manufacturer was represented before the Commission.
36. Voltas have filed their replies to the notice of enquiry in all these enquiries, as also the manufacturer in RTPE No. 483 of 1987. Rejoinders were filed by the Director-General and the Director-General also served an application for administering interrogatories and for discovery of documents on representing the respondent before us. The replies to those applications were furnished by the respondents and after completing the pleadings, following similar issues were framed :
(1) Is the present enquiry not legally maintainable for the reasons stated in the reply of M/s. Voltas Ltd ?
(2) Did the respondents indulge in restrictive trade practices as alleged by the Director-General and as mentioned in the notice of enquiry ?
(3) In case issue No. 2 is decided against the respondents, are all restrictive trade practices or any of them not prejudicial to public interest?
(4) Relief.
37. Thereafter, the case was fixed for the evidence of the Director-General.
38. The Director-General in support of his cases tendered in evidence the various agreements entered into between Voltas and the manufacturers, which were ordered to be marked exhibit A-1 in each file and the matter was fixed for recording the evidence of the respondents.
39. Before the evidence of the respondents was recorded, an application was moved by Voltas for consolidating the proceedings in enquiries mentioned at serial Nos. 2 to 13 with the enquiry file mentioned at serial No. 1, i.e., RTPE No, 200 of 1986. It was stated in the application that Voltas has several divisions and it. would be proper to consolidate all cases relating to one particular division because there would be common evidence and also the clauses, which according to the Director-General constitute the restrictive trade practices, are common. The application was opposed by the Director-General on the ground that though the evidence might be common and the enquiries might be involving the same question of fact and law, yet the products are different and different counsel have been engaged for different enquiries. However, the Commission saw no force in the objection of the Director-General because when the evidence and the question of fact and law are to be the same, it is proper that they are dealt with together and unnecessary duplication and repetition of dealing with them should be avoided. The consolidation will obviously save cost and time of the parties as well as of the court. The application for consolidation of the respondents was ultimately accepted by the Commission, vide its order dated February 21, 1989, and thereafter the proceedings were recorded in RTPE No. 200 of 1986.
40. The affidavit of two witnesses, namely, Shri V.G, Menon and Shri R. N. Mukherjee (RW-1 and RW-2 respectively), were filed by Voltas in the consolidated file RTPE No. 200 of 1986. On behalf of the manufacturer, M/s. Simtools Ltd., in RTPE No. 483 of 1987, the affidavit of Shri M.K.M. Pandya (RW-3) was filed. On March 28, 1989, both the witnesses of Voltas were tendered for their evidence and were cross-examined by the Director-General in RTPE No. 200 of 1986. However, the Director-General also proposed to cross-examine these two witnesses of Voltas in RTPE No. 483 of 1987, and the witnesses were directed to be present for that purpose on the next date. On March 30, 1989, while the cross-examination of Shri M.K.M. Pandya was recorded in RTPE No, 483 of 1987, the representative of the Director-General reminded that he would be allowed to cross-examine the two witnesses RW-1 and RW-2 of Voltas, who were cross-examined on March 28, 1989, in RTPE No. 200 of 1986. At that point of time, counsel for Voltas suggested that Voltas might have to produce further evidence.
which would be indicated if the case may be fixed for direction to some other date and it would be more convenient for Voltas if the cross-examination relating to RTPE No. 483 of 1987 of RW-1 and RW-2 of Voltas, who were already examined in RTPE No. 200 of 1986, was also done on the same date on which the cross-examination of new witnesses, if any, was to be recorded. However, the Director-General raised an objection that Voltas had already produced its evidence and could not be allowed to produce further evidence in respect of any case and it was more convenient for the Director-General to do the cross-examination on that date itself. After hearing the parties on March 50, 1989, Voltas was allowed to lead further evidence.
41. It appears that pursuant to the order dated March 30, 1989, of the Commission in RTPE No. 200 of 1986, Voltas has filed the separate affidavits of its two witnesses in each of the consolidated file on August 1, 1989. The affidavits were of the same witnesses, who were examined in RTPE No. 200 of 1986. These two witnesses were cross-examined again on January 2, 1991, and January 3, 1991, by the Director-General. While the cross-examination of these two witnesses was recorded in RTPE No. 121 of 1986 by the Director-General, the further cross-examination in the remaining respective enquiries was limited to the specific products involved in the agreement pertaining to each enquiry. The general cross-examination recorded in RTPE No. 121 of 1986 was regarded as a part of the cross-examination in the other enquiries also.
42. It may be mentioned here that in RTPE No. 554 of 1987 (mentioned at serial No. 14), Voltas has examined the same witnesses and with regard to the cross-examination of these two witnesses, the position was the same as all other enquiries stated above. However, so far as the position with regard to RTPE No. 637 of 1987 is concerned, Voltas has also produced two witnesses, one Shri V. G. Menon, who is common in the other enquiries, and the other witness was Shri P. J. Buhariwala. Both these witnesses were examined on June 20, 1991. It may also be mentioned here that the last two enquiries were not initially consolidated with RTPE No. 200 of 1986.
43. Initially, the arguments were concluded by the parties on April 10, 1992, and they wanted to file a synopsis with reference to the relevant extracts of the documents. Time was given by the Commission. The Director-General submitted his synopsis in the month of July, 1992. However, the respondent, as requested, could not file the same till April, 1993. We are conscious that the matters are old and awaiting decision since then. We are sorry to record that the judgment could not be delivered earlier because of pressing circumstances and the records of these cases are bulky. Now we may record our findings on the issues as framed by the Commission on the basis of the pleadings of the parties, evidence produced and both the arguments orally as well as written submissions of the parties.
Issue No. 1 :
44. This issue relates to the maintainability of the enquiry. In the replies filed by the represented respondents, a number of preliminary objections have been taken regarding the enquiries being not legally maintainable. During the course of the argument as well as through written submissions the respondents have drawn the attention of the Commission to the decisions of the Hon'ble Supreme Court in the case of Telco, AIR 1977 SC 973 ; [1977] 47 Comp Cas 520 and in the case of Mahindra and Mahindra Ltd., AIR 1979 SC 478 ; [1979] 49 Comp Cas 419 in support of their contentions. On the other hand, counsel for the Director-General has cited the Full Bench decisions in India Cements Ltd. [1987] 62 Comp Cas 382 and T.T.K. Pharma Ltd. [1990] 68 Comp Cas 89. Counsel for the Director-General in a nutshell emphasized that the scenario has changed after the amendment of Section 33 through the amendment of Act No. 30 of 1984. According to him, the amendment of 1984, incorporating the words "shall be deemed for the purpose of the Act" in Section 33(1) was designedly ma'de so as to overcome the effect of the decisions of the Supreme Court referred' to above by the respondents.
45. Voltas, in their written submission in para 11, have stated that recently a Bench of this Commission has heard the arguments in RTPE No. 1547 of 1987 (DGIR v. Indian Aluminium Corporation Ltd.) where the submissions of counsel for the respondents were regarding the reconsideration of the decision of India Cements [1987] 62 Comp Cas 382 by a Full Bench. It is further stated that if this Commission directs constitution of a Full Bench for hearing arguments on the aforesaid issue regarding the reconsideration of the decision in the case of India Cements [1987] 62 Comp Cas 382, then the said order would equally apply to the present case also since the same issue was also raised in the present case. It may be mentioned that the respondents were represented by the same counsel in both the cases.
46. On April 23, 1993, a Bench comprising Mr. Justice A. N. Varma, Chairman and Mr. Sardar Ali has decided the matter pertaining to Indian Aluminium Corporation (RTPE No. 1547 of 1987-23-4-93). In the said dicta, after discussing at length the arguments of the parties and the cases referred to therein held as under :
"With respect we entirely agree with the aforesaid decisions of the Commission and hold that agreements falling under one or more of the clauses under Section 33(1) as amended are illustrations of per se restrictive trade practices. It is another matter that the complainee may satisfy the Commission that it is entitled to get out of one or the other of the gateways set out under Section 38 of the Monopolies and Restrictive Trade Practices Act."
47. In view of the aforesaid decision, the present issue necessarily fails. We decide this issue accordingly.
Issues Nos. 2 and 3 ;
48. Once, it has been held that the agreements falling under one or more of the clauses under Section 33(1) as amended are per se restrictive trade practices, we have no choice but to hold that the respondents have indulged in the restrictive trade practices as alleged in the notice of enquiries. After holding that the respondents have indulged in the restrictive trade practices, we have to see whether the aforesaid practices are prejudicial to public interest. According to Section 38, there is a presumption that a restrictive trade practice shall be deemed to be prejudicial to public interest unless the Commission is satisfied of any one or more of the circumstances given in Clauses (a) to (k) of Sub-section (1) of Section 38. The respondents in these proceedings have stated that it is to be seen whether by having such an arrangement any competition is restricted in the relevant trade or industry of machine tools, and if so, whether it is so effective to any material degree within the meaning of Section 38(1)(h) of the Act and whether removal of such restriction would not deny to the public the benefits which are available on account of the appointment of an exclusive distributor within the meaning of Section 38(1)(b) of the Act.
49. Voltas in support of their contention have produced the two witnesses, one from the commercial side and another from the technical side of their organisation. RW-1, Shri V.G. Menon, Commercial Manager of Machine Tools Division of Voltas, in his evidence, stated that the activities of Voltas range from project engineering and manufacturing to marketing of diverse goods manufactured by it as well as other manufacturers. It manufactures a number of engineering items, such as air-conditioning and refrigeration equipment, centrifugal water chilling packages and compressors, room air-conditioners, Water coolers, refrigerators, switchgear and transformers, mine haulages, diamond core drills, fork lift trucks and cranes. In addition to that Voltas has one of the most comprehensive and well knit national distribution net work which covers the whole of India with numerous outlets with its head office in Bombay and branches or offices located in as many as 30 cities/towns. It has a net work for distribution and sale covering a vast territory with the help of 9 fullfledged branches and 21 other offices with a number of service stations and employing about 1,000 technical persons. The Voltas has a fullfledged machine tools division which represents internationally renowned machine tools manufactured from Switzerland, West Germany, Japan and the U.S.A. apart from the Indian manufacturers, The distribution net work established by Voltas has established close contact with the users including railway workshops, automobile industry and defence establishments all over the country. The distribution net work has developed considerable expertise in engineering and marketing activities. Voltas has also set up a specialised service centre at Bombay for servicing the sophisticated computerised numerically controlled machines. According to the witness, Voltas have set up a readymade all India distribution and after sales service net work. It is, thus, possible for the, manufacturer to concentrate on manufacturing and leave the distribution and after sales service to the Voltas. The segregation between manufacturing and marketing leads to specialisation for both manufacturing and distribution undertakings. It is not economical for the manufacturer to set up distribution and service net work throughout the length and breadth of the country for marketing and servicing the product manufactured by it.
50. RW-1 in his affidavit has further stated that on account of the exclusive nature of the agreement between the parties, Voltas will have an incentive to have in its employment well-qualified, experienced and trained technical and sales personnel and to keep inventory of parts and set up service stations only if it is assured of an all-India market. Appointment of several distributors by the respondent for the same product would, instead of promoting competition, impede competition. That is because several distributors of the same manufacturer would be quoting for the same equipment thereby resulting in unhealthy and self-defeating competition and confusion to the customers. The central purchasing organisation of the Central Government, viz., D.G.S.&D., as well as other organisations of the Government, such as the Director-General of the Ordnance Factory, Railways, the Central Purchase Organisations of the State Governments, etc., insist on dealing only with the sole distributors or sole selling agents of a manufacturer.
51. The other witness, RW-2, produced by the respondent was Mr. R. N. Mukherjee, Group Product Manager of the Machine Tools Division of Voltas. This witness has mainly described the nature and uses of the various products in different enquiries and also pre and after sales services advised/ rendered by Voltas including the installation, commissioning and training of the particular machine. In RTPE No. 637 of 1987 the respondent has produced P. J. Buhariwala as second witness instead of Shri R. N. Mukherjee. However, this witness has also made averments similar to those made by Mukherjee.
52. In all the enquiries before us the manufacturers were not present except in RTPE No. 483 of 1987 where the manufacturer has produced one witness, Shri M.K.M. Pandya, Mr. Pandya was the Chief Executive of the manufacturer--Simtools Limited, which is according to him a small organisation employing 112 workmen. The respondent is primarily engaged in the manufacture of plate and bart working machines, i.e., guillotine, shears, plate bending rolls, press brakes, etc. The products by their very nature require specialised marketing skills for building up the market and for servicing the same and Simtools neither have any infrastructure/ facilities nor does it have expertise in marketing the product. If Simtools Limited undertakes to market the products on its own, it would involve setting up and maintenance of a marketing net work at a considerable cost. The products manufactured by it also require pre-sales and after sales service, the setting up of the infrastructural facilities would require considerable expenses, which would ultimately be built into the cost of the product and make the product of Simtools uncompetitive. Therefore, for selling and servicing the product Simtools has to depend on a marketing organisation like Voltas and therefore has entered into an agreement with it for marketing the products.
53. It has been argued on behalf of the respondent that Voltas has set up and is maintaining a net work of branches and offices for selling and servicing the equipment distributed or marketed by it and a handsome amount has been invested in setting up service centres, spare parts inventories and recruiting and training of technical personnel, to render pre and after sales service. The technical personnel are being trained from time to time at the factories of the concerned manufacturers with a view to making them familiar with the particular equipment being marketed by Voltas and also enabling them to instal and commission the machine and also render after sales service. It is also argued that the exclusive dealings between Voltas and the manufacturers results in an arrangement quite useful to the customers because Voltas provides them prompt and after sales service to keep the sophisticated machines in working order and in good condition. The removal of the exclusive nature of the dealings . between Voltas and the manufacturer would deny to the public (as purchaser, consumers or users of the goods covered by the agreements) the specific and substantial benefits and advantages enjoyed by them within the meaning of Clause (b) of Section 38(1) of the Act. Therefore, the impugned clauses are justified under Section 38(1)(h) of the Act as they are in fact beneficial to the public interest.
54. On behalf of Voltas, it was argued that appointment of a distributor on an exclusive basis, by and large, enhanced competition and has not restricted it. The following cases, in support of their contention, were referred to by counsel for the respondents :
1. Telco v. Union of India [1977] 47 Comp Cas 520 ; AIR 1977 SC 973.
2. Mahtndra and Mahindra Ltd. v. Union of India, AIR 1979 SC 798 ; [1979] 49 Comp Cas 419 (SC).
3. Registrar of Restrictive Trade Agreements v. Usha Sales Pvt. Ltd. [1977] 47 Comp Cas 472 (MRTPC).
4. DGIR v. K. K. Dani, Consultants and Engineers Pvt. Ltd. (RTPE No. 99 of 1985, decided on June 28, 1988).
5. Sandvik Asia [1985] Tax LR 2169.
6. RRTA v. Cooper Engg. Ltd. [1979] Tax LR 1607.
7. DGIR v. Christine Hoden (India) Pvt. Ltd. (RTPE No. 1230 of 1987, decided on July 22, 1991).
8. DGIR v. Mysore Snack Foods Ltd. (RTPE No. 498 of 1987, decided on October 30, 1991).
9. DGIR v. Wander Ltd. (RTPE No. 385 of 1988).
55. On behalf of the Director-General, it has been stated that the justification for grant of some relief under the gateways was pleaded by Voltas in the earlier enquiry before the Commission in DGIR v. Bhagwati Industries (RTPE No. 1231 of 1987, decided on July 22, 1991), and the same after consideration by the Commission were not accepted. According to the Director-General, perusal of the evidence produced by Voltas reveals that the contentions as to the special benefits by resorting to these restrictive trade "practices are not available to the consumers. The tools that are required are of very routine nature and in some cases no after sales service is required. The Government organisations maintain their workshop for repairs and, therefore, they do not require any help. Exclusive dealings lessen the rigour of competition by imposing on the rival sellers a frequently prohibitive cost disadvantage and thus erects serious barriers to entry. Thus, once the entry is competitively blocked, the marketing giant can charge the maximum monopoly price without fear of attracting rivals. The clauses in the agreements create absolute compulsions both on the seller and the buyer. Most of the agreements prevent transfer of technology to the country. According to the Director-General, the gateways pleaded by the respondent on the basis of the percentage of market share, which is not such as to affect competition, does not apply to items which are tailor-made and when a market giant enters into such an agreement, the competition is surely affected. In support of their contention the case decided by the Supreme Court in Hindustan Lever Ltd. [1977] 47 Comp Cas 581 was referred to. With reference to the various judgments such as that of Sandvik Asia Ltd. [1985] Tax LR 1607 referred to on behalf of the respondent, it has been stated by the Director-General that the pleadings do not contain the contention that the agreement was between principal and agent or that it was an agency agreement. With regard to another case of K. K. Dani referred to by the respondent, it is stated on behalf of the Director-General that the finding of the Hon'ble Commission in that case rather supports the case of the Director-General because the defences taken in that case would not be available because of the dominant position of Voltas. With reference to Christine Hoden (India) Pvt Ltd.'s case, it is stated that relief was given where the exclusivity was at the stage of the distributor and the distributor was not selling it directly to the consumer, but, in the case of Voltas, they are selling it directly to the consumers. It has been argued that on the basis of the materials produced, none of the gateways under Section 38(1) are available to the respondents.
56. It may be pertinent to note that in all the 15 enquiries except one enquiry, RTPE No. 483 of 1987 (mentioned at Serial No. 13 above), none of the manufacturers was present before the Commission. In all such cases the agreements were entered into between Voltas and the manufacturers. Thus, the manufacturers were aware of the pendency of the proceedings before the Commission as notice of enquiries were also served on them. The first 12 enquiries, as mentioned above, relate to foreign parties, who are manufacturers and party to the agreement in each case. That is why the Commission, in the initial stage of the enquiry, recorded that notice of enquiry should not be issued to Voltas alone and the notice to the other party to the impugned agreement should also be issued, though the other party is a foreign concern. Issuance of notice to the foreign company is absolutely necessary for completely and effectually deciding . the existence or otherwise of the alleged restrictive trade practices. Pursuant to this, notices of enquiry were served on the foreign companies-manufacturers and they did not opt to appear before the Commission in spite of service of notice. To give another attempt the Commission asked Voltas to seek instruction whether manufacturers can authorise Voltas to represent them before the Commission. But, in spite of this also, the foreign companies did not put in appearance before this Commission so as to determine the existence or otherwise of the alleged restrictive trade practices completely and effectually by the Commission. The only inference which can be drawn by the absence of the foreign company-manufacturer and one party to the agreement in each case is that they do not have any case before the Commission to plead. Contrary to this, the clauses of the agreement falling under one or the other clauses of Sub-section (1) of Section 33 of the Act are per se restrictive trade practices and there is a presumption under Section 38(1) that they are against public interest. Thus, on behalf of the foreign companies-manufacturers, no one has pleaded any gateways and the Commission was left with no other alternative except to direct the foreign companies--various manufacturers to delete such clauses which constitute restrictive trade practices because those practices are carried on in India in terms of Section 14 of the MRTP Act. Similar direction to the manufacturers in the remaining two enquiries (mentioned at serial Nos. 14 and 15-RTPE No. 554 of 1987, and RTPE No. 637 of 1987, respectively) for deletion of impugned restrictive clauses can be issued for the reasons stated above.
57. We have gone through the voluminous records and pleadings pertaining to these enquiries, the evidence produced by the parties, the oral arguments, the written submissions and the cases referred to by the parties and are of the view that no case for gateways under Section 38(1), as pleaded, has been made out by Voltas in these proceedings. Likewise the manufacturer Simtools Limited in RTPE No. 483 of 1987, has also failed to make out any case for the gateways. Therefore, we hold that the respondents have indulged in the restrictive trade practices as. alleged in the notice of enquiry, and those practices are prejudicial to the public interest in each of the 15 enquiries.
58. In the premises, we direct the respondents in each of the 15 enquiries to discontinue the restrictive trade practices as mentioned in the notice of enquiry and they shall not repeat the same in future. We also direct the respondents to delete the restrictive clauses, as mentioned in the notice of enquiry, in each case from the respective agreements entered into between the parties within 8 weeks of the receipt of this order. The respondents are also directed to file an affidavit of compliance within next 8 weeks about the deletion of the impugned clauses from the respective agreements.
59. In the facts and circumstances of the case, each of the respondents in all the 15 enquiries mentioned above is also directed to pay costs, which we assess at the rate of Rs. 2,000 per respondent in each enquiry, to the Director-General (Investigation and Registration) within 4 months from the date of the receipt of the order.
60. A copy of this order may be sent to each of the respondents in the above enquiry through Registered A.D. A copy of this order shall also be sent to the "Anti Trust Division" of the respective countries wherein the first 12 enquiries the manufacturer is a foreign company, for their information and necessary action. This may be done after ascertaining the full addresses of the Anti-Trust Divisions of those countries from their respective Embassies/High Commissions in New Delhi or otherwise.
61. With these findings and observations all the 15 enquiries mentioned above stand disposed of.