Monopolies and Restrictive Trade Practices Commission
Registrar Of Restrictive Trade ... vs Atul Products Ltd. And Ors. on 31 December, 1976
Equivalent citations: [1978]48COMPCAS852(NULL)
ORDER
H.M. Jhala, Member
1. Order on the application dated 12-11-76 of respondent No. 2 : Order on the application dated 22-11-76 of respondent No. 1: Order on the application dated 22-11-76 of respondent No. 3.
2. These are applications by respondents Nos. 1, 2 and 3 praying that certain issues out of the issues framed by the Commission by its order dated the 23rd July, 1976, be treated and tried as preliminary issues. The respondents are limited companies doing business in the manufacture of pharmaceuticals and/or intermediates. An enquiry under Sections 10(a)(iii) and 37 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act "), was started against the respondents on the basis of an application by the Registrar of Restrictive Trade Agreements (hereinafter referred to as " the Registrar "). According to the Registrar, an agreement was entered into between respondent No. 1 and respondent No. 2 and respondent No. 3 for the manufacture of and/or supply by respondent No. 3 of sodium salts of certain sulphanamides (such as sulphathiazole, sulphasomidine, sulphaphenazole) and their intermediates and such other products as may from time to time be mutually agreed upon between respondent No. 2 and respondent No. 3 ; and sodium salts of sulphadiazine and sulphamethazine and such other products as may from time to time be mutually agreed upon between respondent No. 1 and respondent No. 3.
3. The Registrar drew the attention of the Commission to the following provisions in the agreement between the parties:
" 2. Before the beginning of a semi-annual production period, CIBATUL, Atul and Ciba India Ltd. will by mutual agreement draw up a manufacturing programme, this programme being prepared according to the following rules :
(a) CIBATUL will give first priority to the manufacture of CIBA products.
(b) After the requirements of CTBA products have been met, second priority be given to the manufacture of Atul products.
(c) CIBATUL will not manufacture CIBA products or Atul products in excess of the manufacturing programme except as provided in Sub-clause (d).
(d) In the event of there being any non-utilised capacity, CIBATUL will inform CIBA India in writing so that they can investigate whether the surplus capacity could be absorbed and for what products. To the extent that CIBA India agrees to absorb such surplus capacity, goods manufactured by CIBATUL in accordance therewith will be purchased by CIBA India at prices to be mutually agreed between CIBA India and CIBATUL having regard to the market conditions.
To the extent that CIBA India does not absorb the surplus capacity Atul shall be invited to offer to undertake to absorb such surplus capacity and purchase it from CIBATUL on the same basis as mentioned above for the case of CIBA India. In the event that thereafter there is still surplus capacity which CIBATUL decides to utilise, it will first offer the production resulting therefrom for sale to CIBA India. If CIBA India declines to purchase all or any of the products concerned they may then be offered to Atul at the same price and failing purchase by either CIBA India or Atul then CIBATUL shall be at liberty to sell the surplus production to third parties provided that the prices fixed will be at least of the same level as those paid by or offered to CIBA India or Atul and provided further that CIBATUL shall not manufacture sodium salt of sulphaphenazole in such surplus production so long as patents in connection therewith belonging to CIBA India and/or CIBA Ltd., Basle, continue to be in force.
6. A, (iii) In case of Ciba products which are of CIBA standard other than a sodium salt of sulphanamide, CIBA India shall pay to CIBATUL such ex-factory Bulsar price as may be mutually agreed upon between the parties.
(iv) CIBATUL shall purchase raw materials and packing material on a competitive basis and in the suitable qualities. Atul's and CIBA India's supplies of raw materials to CIBATUL (if any) shall be made at prices which shall not exceed the delivered price to CIBATUL from any other supplier."
4. According to the Registrar, by virtue of the agreement as a whole, and in particular, the clauses reproduced earlier, the respondents were indulging in the following restrictive trade practices, viz., (i) limiting, restricting and withholding the output and supply of products ; (ii) restricting persons from whom the goods are bought ; (iii) mutually agreeing, in case of supplies to parties other than the respondents Nos. 1 and 2, to supply only on such terms and conditions as would have the effect of eliminating competition. These trade practices, according to the Registrar, attract Clauses (a), (g) and (h) of Section 33(1) of the Act. The Registrar further alleged that the trade practices set out were indulged in by the respondents and prevented, distorted and restricted competition, or tended to prevent, distort or restrict competition and to obstruct the flow of capital and resources in the stream of production and to bring about manipulation of prices and conditions of delivery and to affect the flow of supplies in the market and impose on the consumers unjustified costs and, restrictions. It was further alleged that the practices were prejudicial to public interest.
5. All the respondents filed their replies to the notice of enquiry.
6. The Registrar filed his rejoinders to the replies by the three respondents. Thereafter, the Registrar applied for directions. Each of the respondents thereafter made applications praying that certain issues be determined and tried as preliminary issues and also praying for certain directions. The Commission by its order dated the 5th September, 1975, issued the directions both, to the Registrar and to the respondents and also held that the question of trying any issues as preliminary issues will be considered when the issues were framed. After the compliance was made by both the sides with the Commission's order the Registrar applied for further affidavit of documents from the respondents with reference to certain documents specified by the former. The Commission by its order dated the 2nd April, 1976, ordered discovery of documents and records relating to manufacturing programme drawn up by respondent No. 3 by the respondents under Clause 2 of the agreement, while in regard to the remaining documents the Commission declined to make an order. The respondents thereafter filed further affidavits of documents as required by the Commission's order, and the Commission by its order dated 23rd July, 1976, framed the following issues:
"(1) Whether the enquiry is maintainable in view of the objections raised in paragraphs 1 to 8, 1 to 11 and 1 to 8 of the replies of respondents Nos. 1, 2 and 3, respectively.
(2) Whether the terms and conditions of the impugned agreement referred to in para. 2 of the Registrar's application relate to restrictive trade practices.
(3) Whether the respondents are indulging in the restrictive trade practices alleged.
(4) If the answers to issues Nos. 2 and 3 are in the affirmative whether the said practices are not prejudicial to the public interest.
(5) Whether the respondents or any of them and if so which of them are entitled to the benefits of Clauses (a), (b), (c) or (h) of Section 38(1) of the Act and the balancing Clause of Section 38(1) of the Act.
(6) General including relief and costs."
7. It is by reference to this order that all the respondents have made applications which are the subject-matter of the present order. It is prayed in those applications that issues Nos. 1 and 2 out of the issues framed by the Commission were issues which raised pure questions of law and did not involve leading of any evidence for the determination of the said issues. It was also submitted that the decision on issues Nos. 1 and 2 would finally dispose of the whole of the enquiry if the said issues were decided in favour of the respondents. It was also pointed out that the trial of the application of the Registrar so far as the other facts and issues were concerned would involve recording of voluminous oral and documentary evidence including evidence of experts which would entail considerable and avoidable expenses. It was claimed that issues Nos. 1 and 2 were such that they could be tried as preliminary issues and the result of the determination of the said issues would put an early end to the enquiry and save the parties considerable time and expense inasmuch as if the application was held not to be maintainable or if it was held that the Commission had no jurisdiction or that the terms and conditions of the Sulpha agreement did not relate to any restrictive trade practices, the application of the Registrar need not be proceeded with to try the other issues which require recording of evidence.
8. The Registrar in his reply to the applications by the respondents objected to the issues being treated as preliminary issues for the following reasons which are extracted, from his joint reply to respondents Nos. 1 and 3 :
" (i) The question at issue in the present inquiry proceedings before the Commission is whether the practices admittedly being indulged into by the respondents in operating the terms of the impugned agreement amount to restrictive trade practices of the nature alleged by the applicant in his application filed under Section 10(a)(iii). The Commission has to come to a finding on the facts of the case whether the terms and conditions of the impugned agreement relate to restrictive trade practices as alleged by the applicant. This has to be enquired into by the Commission after going through all facts and evidence in the matter and there is no scope for deciding the matter on the preliminary point as prayed for by the respondents Nos. 1 and 3.
(ii) The hon'ble Commission in several restrictive trade practice enquiries have held that, the categories embodied in Section 33(1) of the Act are illustrative examples of restrictive trade practices which ipso facto fall within the ambit of Section 2(o) of the Act. There is, therefore, no scope for the Commission to decide this issue once again in the present inquiry much less as preliminary issue.
(iii) The application filed under Section 10(a)(iii) contains sufficient facts which constitute restrictive trade practices. The question as to what are the facts which constitute a restrictive trade practice has been decided by the hon'ble Commission in several restrictive trade practices enquiries. It is the established view of the hon'ble Commission that the complaint should set out the basic facts on which the allegation is founded. This being the settled view of the hon'ble Commission, the allegation of respondents Nos. 1 and 3 made in their reply that the application filed under Section 10(a)(iii) does not set out the facts, does not require consideration at all, much less as a preliminary issue.
(iv) In several restrictive trade practices enquiries the hon'ble Commission have held that setting out all such portions of the agreement as may be necessary to bring out the facts complained of and spelling out the restrictive trade practices would be sufficient compliance of the requirements of Regulation 55 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974. This point as raised by the respondent No. 3 in its reply, therefore, does not require any consideration at all and does not call for a hearing of this point as preliminary issue."
9. It was also pointed out by the Registrar that the Commission by its order dated September 5, 1975, had stated that the question of considering some issues as preliminary issues will be considered when the issues were framed and that the respondents had failed to press the question when the Commission framed the issues by its order dated 23rd July, 1976.
10. At the time of hearing of these applications, the learned counsel for respondents Nos. 1 and 3 indicated the following questions as questions which could be decided as preliminary issues contained in original issues Nos. 1 and, 2 framed :
"(1) Whether any part of the agreement in respect of Sulpha intermediates between the respondents referred to in the Registrar's application constitutes restrictive trade practice within the meaning of Section 2(o) of the MRTP Act. If so, whether an enquiry initiated on the basis of the aforesaid agreement is illegal and without jurisdiction ?
(2) Whether the clauses of Sulpha commercial agreement per se constitute restrictive trade practices as defined in Section 2(o) of the Act ?
(3) Whether the various clauses of the Sulpha commercial agreement attract Clauses (a), (g) and (h) of Section 33(1) of the MRTP Act as alleged in para. 4 of the Registrar's application ?
(4) Whether the satisfaction of the conditions set out in Section 2(o) of the Act is a condition precedent for initiation of an enquiry under Section 37 of the Act ?
(5) Whether the Registrar's application which merely refers to certain clauses of the agreement without ascertaining or stating any further facts as to how the agreement operates and without setting out the facts on the basis of which the allegation of restrictive trade practices is alleged is maintainable ?
(6) Whether the Registrar's application is not in accordance with the mandatory requirements of regulation 55 of the MRTPC Regulations, 1974, and whether it was incumbent upon the Registrar to set out material particulars of facts in support of the allegations of restrictive trade practices ? If not, whether the application should be rejected ?
(7) Whether the inferences alleged and set out by the Registrar in para. 3 of the application as constituting restrictive trade practices are justified on the basis of the clauses of the agreement set out in para. 2 of the application ?
(8) In view of the prices of intermediates manufactured by R. 3 and supplied under the agreement having been fixed under the Drugs (Price Control) Order, 1970:
(A) Whether the sales made at such prices and in view of the control of the Central Government in respect thereof, such sales can constitute restrictive trade practices within the meaning of Section 2(o) of the Act ?
(b) Whether the Registrar's application is properly verified as required under regulation 55 of the MRTPC Regulations, 1974, read with the Code of Civil Procedure ? If not, whether the application ought to be rejected ?
(9) Whether the manufacturing unit of respondent No. 3, being a joint venture in which respondents Nos. 1 and 2 are participants, the provisions of the agreement between the respondents for manufacture and sale of product of the joint venture can be treated as a restrictive trade practice ?"
11. The learned counsel for respondent No. 2 indicated the following questions :
l(a) Whether no part of the Sulpha agreement dated 26th May, 1970, per se constitutes " restrictive trade practice " within the meaning of the Act?
(b) Whether the applicant has made out a prima facie case of there being any practice or trade practice or restrictive trade practice ?
2. Whether the ingredients and conditions contained in Section 2(o) of the Act have to be satisfied before any trade practice can be characterised as restrictive and before any enquiry can be initiated ?
3. Whether in view of the statutory control of prices as mentioned in para. 5 of the reply there can be any "restrictive trade practice" within the meaning of the Act and as alleged in the application ?
4. Whether in view of the absence of any facts in the application of the applicant (apart from the Sulpha agreement dated May 26, 1970) the application discloses no cause of action and does not comply with regulation 55 of the MRTPC Regulations, 1974 ?
5. Whether the manufacturing unit of respondent No. 3 being a joint venture between respondents Nos. 1 and 2 and Ciba Geigy Ltd., Basle, and respondent No. 3 (being a subsidiary of respondent No. 1) the Sulpha agreement dated May 26, 1970, can at all constitute a restrictive trade practice within the meaning of the Act ?
6. Whether a " trade practice " before it could be called a " restrictive trade practice " has to be a practice between two or more persons and such two or more persons should carry on the same or similar type of business having competing interest? If so, whether the Sulpha agreement does not amount to a restrictive trade practice ?
7. Whether the application is maintainable and/or the Commission has jurisdiction to entertain the application and continue the enquiry ?
12. In support of the applications of all the respondents,' the learned counsel for respondent No. 2 relied heavily on the decision dated November 16, 1976, of the Commission in R. T. P. E. No. 15 of 1974 (RRTA v. Rallis India Ltd.) (since reported in [1979] 49 Comp Cas 580 (MRTPC)), He contended that on the principles set out in that decision, the issues indicated by him could be treated as preliminary issues and tried as such. He pointed out that all these issues were indicated in the respondent's replies and could be disposed of as questions of law. He contended that, if necessary, even some evidence could be led and he emphasised in this connection the decision of the Commission in the case of Nylon Yarn Agreement [1976] 46 Comp Cas 357 (MRTPC), where some evidence was permitted which had a bearing on the question whether the impugned agreement had the approval of the Government, The learned counsel for the Registrar, on the other hand, contended that Chap. IX of the Regulations was a self-contained set of regulations for conduct of enquiry under Section 37, that Regulation 15, therefore, was not at all relevant, that Regulation 77 significantly excluded Order 14, CPC, from the application to the proceeding under Chap. IX and that Regulation 74(4) was confined only to the preliminary points relating to the conduct of proceedings. According to her the stage for treating such issues as preliminary issues was long past and that it was not open to any party to move the Commission in regard to this matter any time it liked. It was also contended that in fact the respondents wanted the reframing of issues and that the issues having been framed by a Bench consisting of the Chairman and a Member could not be revised by a single Member Bench. It was next contended that the application of the Registrar placed great emphasis on the actual operation of the agreement and that the actual operation of the agreement required full investigation of facts. It was vehemently contended that the fact of respondent No. 3 being a subsidiary of respondent No. 1 was not at all established and that the issue arising from this allegation was not even raised as an issue in the reply. It was pointed out that in the Rallis case [1979] 49 Comp Cas 580 (MRTPC) the fact that one respondent was a subsidiary of another respondent was an admitted fact, while in the Nylon Agreement case [1976] 46 Comp Cas 357 (MRTPC) the preliminary issues were raised before the other issues were considered at all. She referred to the main issues which the respondents wanted to be treated as preliminary issues and contended that they clearly required examination of facts, that issue regarding application of Section 2(o) could not be decided without examination of relevant facts, that regarding the statutory control the facts are to be ascertained by particular reference to the limitations of the control, that as far as the joint venture was concerned the terms and conditions thereof were to be ascertained and that accordingly no issue could be treated as a pure issue of law. It was also pointed out by the learned Registrar that whereas in Rallis case [1979] 49 Comp Cas 580 (MRTPC) there were only two parties to an agreement, one of which was a subsidiary of the other, in the present case there were three parties of which respondent No. 3 was alleged to be the subsidiary of respondent No. 1 but respondent No. 2 did not come into the picture at all. He also pointed out that there was no manufacturing programme involved in the Rallis case [1979] 49 Comp Cas 580 (MRTPC) and also contended that mere statement in the interrogatories that respondent No. 3 was a subsidiary of respondent No. 1 did not by itself establish the fact.
13. The learned counsel for the respondent No. 2 in his reply contended that the fact of respondent No. 3 being a subsidiary of respondent No. 1 was a matter of public record, that it could be proved beyond doubt by reference to the annual accounts of respondent No. 1 and that the averments made by the respondents in regard thereto were not challenged by the applicant. He emphasised that the Registrar stood or failed by the agreement and that, apart from the agreement or outside the agreement, there were no allegations which he could muster. He referred to Regulation 55 and contended that under that regulation he was bound to indicate the facts which according to him constituted restrictive trade practices and, in the absence of any such facts apart from the clauses of the agreement, the Registrar could not make any allegations de hors the agreement. According to him, the Registrar had not mentioned any facts bearing on the application of Section 2(o) of the Act and he could not now add any facts to the facts already alleged. According to him, even if the respondent failed on the preliminary issues, the only issue that would remain would be one regarding the application of the gateways. He pointed out that in the Nylon case [1976] 46 Comp Cas 357 (MRTPC) also the preliminary issues were framed after the pleadings were closed. He pointed out that the Commission had refrained the issues in Rallis case [1979] 49 Comp Cas 580 (MRTPC) and that the reframing of issues was a normal routine matter which had necessarily to be done for furtherance of justice.
14. I do not find any merit in the preliminary objections raised by the learned counsel for the Registrar to any issues being considered as preliminary issues. The decision of the Commission in Rallis case [1979] 49 Comp Cas 580 (MRTPC) sets down the principles on which preliminary issues should be earmarked and there is no valid ground advanced for modifying the decision taken in that case. The argument that Regulation 74(4) refers to points of procedure is not tenable, Regulation 74(4) provides that the Commission may fix a date for the final hearing of the applications or for determining any points as preliminary points and for such other matters as the Commission may think expedient It is, therefore, clear that Regulation 74(4) refers to a stage either anterior to the final hearing or a stage which synchronises; with the final hearing. At that stage preliminary point can only be preliminary issues which can be disposed of as part of the final hearing. The only points that could be determined as preliminary points would be preliminary issues. (Emphasis' mine). If reference was only to points of procedure, there would be no question of determining them as preliminary points. Moreover, in this case, the respondents have raised certain issues not only as preliminary objections in their replies but they have also pleaded from an early stage in the proceedings that certain issues should be treated as preliminary issues. It is true that the Commission had ordered that the question whether certain issues could be treated as preliminary issues should be decided at the time of framing of the issues and this aspect of the matter was not adverted to by the respondents at the time the issues were framed. But for this lapse alone on the part of the respondents it would not be fair to reject their request for treating certain issues as preliminary issues. Nor have I been impressed by the plea that the respondents want recasting of the issues altogether and that issues framed by a Bench of two Members should not, be recast by a single Member Bench. Recasting or reframing issues is a routine matter and "it is to be resorted to if at all for furtherance of justice so that the controversy between the parties is defined in a precise manner. There is no question of reviewing or reconsidering an earlier Bench's decision on principle when the issues are refrained. However, in the present case, there is not even a refraining of issues involved. All that is involved is division of issues already defined into sub-issues and sub-division is also implicit in the original issues framed. I am, therefore, unable to reject the prayer of the respondents on the preliminary objections raised on behalf of the Registrar.
15. Coming to the merits it will be convenient to examine the issues which the respondents want to be treated as preliminary issues as part and parcel of the original issues Nos. 1 and 2 framed by the Commission by its order dated July 23, 1976, I propose to deal with questions which in my view cannot be considered as preliminary issues. In this category, I include questions Nos. 1, 2, 3, 7, 8(a) and 9 set out in para. 8 and proposed by the learned counsel for respondents Nos. 1 and 3. I also include in the same category questions Nos. 1, 2, 3, 5 and 7 set out in para. 9 and proposed by the learned counsel for the respondent No. 2.
16. The main issue is whether any finding can be given regarding application of Section 2(o) without ascertainment of facts. On a reading of Section 2(o) it is clear that ascertainment of facts was necessary before a finding could be given. This is clear even from the decision of the Commission dated the 25th July, 1975, in Registrar of Restrictive Trade Agreements v. Telco Ltd. (RTPE No. 1 of 1974) ([1976] 46 Comp Cas 470 (MRTPC)). The following observations from the decision of the learned Chairman and my learned brother, Dr. Paranjape, will be apposite in this regard.(p. 482) :
"......the controversy is as to whether the restrictive trade practice has or is likely to have detrimental effect on competition. This is a requirement of Section 2(o) of the Act which has to be satisfied because the trade practice can be accepted as a restrictive trade practice, only if it is shown that the trade practice has or is likely to have injurious effect on competition. It is not necessary to go into the question of public interest at that stage. Simple, direct impact on competition is the criterion by which the restrictive nature of the trade practice is to be judged. The impact may be actual. If it is actual, there is no difficulty at all. But the impact can also be reasonably anticipated on grounds of probability and this anticipation on the grounds of probability can only be on the basis of facts and circumstances against which the trade practice is sought to be perpetrated. The Commission must be satisfied that, on the facts and circumstances of the case, the trade practice in all probability would result in injury to competition. This does not necessarily involve the minute economic analysis of the circumstances against which the trade practice is set but it does enjoin on the Commission the necessity of having broad features of the situation relating to the particular trade in mind. "
17. In my concurring decision in the same case (R.T.P.E. No. 1 of 1974) ([1976] 46 Comp Cas 470, 502 (MRTPC)), I observed in the same vein as under:
" The restrictive nature of the trade practice has to be determined by reference to its effect on competition, i.e., on the relevant area of competition. The competition by reference to which the restrictive nature of the trade practice is to be decided has to be competition in force in a particular trade. It cannot be competition in utopia or an idealised state but competition actually obtaining in the particular trade. It will be pertinent to quote the following observations of Mr. Justice Brandeis of the U. S. Supreme Court in Chicago Board of Trade v. United States [1918] 246 US 231, 238 ; 62 L Ed 683, 687 :
' Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied ; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts'."
18. These observations were made in a case where there was an allegation of price fixing and where there would be a prima facie case for injury to competition, and yet analysis of the nature described in the quoted paragraph was prescribed. I am quite mindful of the fact that there is distinction between the U.S. scheme and the Indian scheme against anti-competitive practices but the methodology prescribed for guaging the effect on competition cannot in principle be different.
19. It is, therefore, clear that before any finding can be given about the effect on competition of a particular trade practice it will be necessary to examine in broad outline the conditions of the relevant trade and the position of the respondent therein and the effect, actual or probable, of the trade practices therein. This will necessarily involve investigation of facts although it may not be necessary to embark on a full-scale economic analysis of the whole of the relevant scene. The contention of the learned counsel for the respondents that facts other than the clauses of the impugn-ed agreement should have been set out in the complaint if the Registrar wanted to rely on the same was not well-founded. It was perfectly open to the Registrar to lead evidence in respect thereof at the time of the hearing. The question whether the Registrar's application is complete or adequate is a different question and the same is considered separately. Regulation 55, on which the learned counsel laid considerable stress, referred to the facts which constituted a restrictive trade practice and will be considered by itself separately. It did not refer to the factual background against which the trade practice was alleged to be perpetrated and which went a long way in making the trade practice restrictive in character. Nor is there any basis for the apprehension of the learned counsel for the respondents that the Registrar would be able to press into service any facts de hors the clauses of the agreement. The main charge of the Registrar is against the agreement with special reference to certain of its clauses and it is the operation of this agreement and these clauses which, according to the Registrar, gives rise to restrictive trade practices. The operation, however, is of the clauses and is against the framework of the trade in question and the relative position of the respondents in the market structure of the trade and those aspects would require investigation before any finding can be given about the restrictive nature of the trade practice under Section 2(o) of the Act. They do not involve any departure from the central theme of the Registrar, viz., the agreement and its clauses and their operation. The Registrar's allegations cannot in any circumstances be delinked from the agreement or its clauses and their operation. The finding regarding restrictive nature of this, however, cannot be arrived at without taking into account the basic facts of the situation in which the trade practices represented by or flowing from the agreement and its clauses operate and the manner of their operation. Even though the trade practices have their origin in the agreement and its clauses their character or quality can only be judged by assessment of the circumstances against which and the manner in which they operate. It is for this reason that evaluation of facts would be necessary before a finding could be given. These facts may come out at the time of pleadings or as a result of the Commission's directions or they may come out in the course of evidence led at the time of hearing. But the finding cannot be given without the availability of the relevant facts. It is on this ground that issues regarding application of Section 2(o) to the facts arid circumstances of the case cannot be decided as a preliminary issue. This will dispose of questions Nos. 1, 2 and 7 set out in para. 8 above and questions Nos. 1, 2 and 7 set out in para. 9 above. Question No. 1 set out in para. 8 has also a sub-question relating to the jurisdiction of the enquiry but since it is dependent on the primary question set out it cannot be separated and treated as a preliminary question. Similarly, the second part of question No. 2 in para. 9 also refers to the propriety of initiating an enquiry but there also this question is linked with the question of applicability of Section 2(o) to a trade practice. Question No. 7 set out in para. 9 is a general question and it cannot be disposed of without answering the earlier question which I have held could not be treated as a preliminary issue.
20. Question No. 3 set out in para. 8 refers to the provisions of Section 33(1) of the Act. The applicability of these provisions to the impugned agreement and/or its clauses would no doubt be a pure question of law. But the difficulty is that settling of that question will not dispose of the controversy about the restrictive nature of the trade practice unless the applicability of the provision of Section 2(o) is also fully considered. This issue, therefore, cannot be considered as a preliminary issue because it will not resolve the dispute between the parties. It may be pointed out that the Commission had also decided this issue but that aspect of the matter is not relevant in deciding whether the issue should be treated and tried as a preliminary issue.
21. Issue No. 8(a) set out in para. 9 also turns on investigation of facts. The learned counsel for the respondent No. 2 very fairly stated that some facts will have to be found but according to him the facts were obvious and could be ascertained from statutes or regulations. But there are some difficulties in accepting the prayer of the learned counsel for the respondents. Firstly, the contents of the control order itself require a good deal of analysis. Secondly, as pointed out by the learned counsel for the Registrar, the limitations of the control order and its applicability to the facts in question would entail examination of facts. Thirdly, the orders prima facie fixed maximum prices and it will have to be found out whether, on the facts and in the circumstances of the case, maximum prices became the effective prices or whether there was room for competition which the agreement curtailed. The applications by the respondents themselves referred to considerations which might have weighed with the Government. It will be necessary to divine these considerations. All these will require examination of facts and without this examination it will not be possible to give a categorical reply to the issue raised. It will, therefore, not be possible to treat this issue as preliminary issues.
22. The same is the position with regard to issue No. 9 set out in para. 8 above and issue No. 5 set out in para. No. 9. Both these issues turn on the claim that there was a joint venture. This claim has to be verified with reference to facts whether there was in fact a joint venture. Whether, on the facts and in the circumstances of the case, there is a joint venture is a highly contentious issue of facts or at any rate a mixed question of fact and law. The terms and conditions of the joint venture will have to be examined in detail. Allied to this question is the question whether respondent No. 3 is a subsidiary of respondent No. 1. Assuming that some evidence could be led regarding this claim, the claim, if established, would not dispose of the controversy in question. Firstly, the facts about the joint venture have to be established as stated earlier; secondly, only respondent No. 1 and respondent No. 3 are linked. Respondent No. 2 remains in the open. The claim, therefore, of a joint venture or of respondent No. 3 being a subsidiary of respondent No. 1 will, therefore, not resolve the controversy. This feature clearly distinguishes this case from the Ralli's case [1979] 49 Comp Cas 580 (MRTPC). On that ground these issues also cannot be treated as preliminary issues.
23. The following issues remain to be considered and they can be treated as preliminary issues :
" 1. Whether the satisfaction of the conditions set out in Section 2(o) of the Act is a condition precedent for initiation of an enquiry under Section 37 of the Act ?
(2) Whether in view of the absence of any facts in the application of the applicant (apart from the Sulpha agreement dated May 26, 1970) the application discloses no cause of action and does not comply with regulation 55 of the Monopolies & Restrictive Trade Practices Commission Regulations, 1974?
(3) Whether the Registrar's application is properly verified as required under regulation 55 of the MRTPC Regulations, 1974, read with the Code of Civil Procedure? If not, whether the application ought to be rejected ?
(4) Whether a 'trade practice' before it could be called a 'restrictive trade practice ' has to be a practice between two or more persons and such two or more persons should carry on the same or similar type of business having competing interest ? If so, whether the Sulpha agreement does not amount to a restrictive trade practice ?"
24. The first issue set out in para. 20 is essentially a question of law and turns entirely on the construction of the Act. The Commission has expressed its views on the issue but that does not change the nature of the issue. Issues Nos. 2 and 3 can be clubbed together. They raise objections about the content of the Registrar's application by reference to the provisions of the Act and the Regulations. They not only cover question No. 8(b) in para. 8 and question No. 4 in para. 9, but also questions Nos. 5 and 6 set out in para. 8. They do not require examination of any further facts apart from the bare application of the Registrar and the relevant provisions of the Act and the Regulations. Even these questions have been answered by the Commission earlier in some cases, but as stated earlier, that does not detract from the preliminary nature of the issue. In regard to question No. 4, the same also turns on the provisions of the Act and does not require any examination of facts. If answer to any of the questions is in the affirmative, the enquiry will have to be discontinued. It is for these reasons that the following questions will have to be tried as preliminary issues:
1. Whether the satisfaction of the conditions set out in Section 2(o) of the Act is a condition precedent for initiation of an enquiry under Section 37 of the Act ?
2. Whether in view of the absence of any facts in the application of the applicant (apart from the Sulpha agreement dated May 26, 1970), the application discloses no cause of action and does not comply with Regulation 55 of the MRTPC Regulations, 1974 ?
3. Whether the Registrar's application is properly verified as required under regulation 55 of the MRTPC Regulations, 1974, read with the Code of Civil Procedure ? If not, whether the application ought to be rejected ?
4. Whether a " trade practice " before it could be called a "restrictive trade practice " has to he a practice between two or more persons and such two or more persons should carry on the same or similar type of business having competing interest? If so, whether the Sulpha agreement does not amount to a restrictive trade practice ?
25. These issues will be treated as part of issue No. 1 as originally framed in the Commission's order dated July 23, 1976. The other questions raised as a part of original issue No, 1 will remain to be considered as issues other than preliminary issues to be disposed of at the time of final hearing in case the decision on the preliminary issues goes against the respondents. The preliminary issues will be heard on January 27, 1977, by the Bench of the Commission as constituted on that date.