Monopolies and Restrictive Trade Practices Commission
Director-General Of Investigation And ... vs Cement Manufacturers Association And ... on 28 January, 1991
Equivalent citations: [1991]71COMPCAS46(NULL)
ORDER
H.C. Gupta, Member
1. This order shall finally dispose of an injunction application under section 12A of the Monopolies and Restrictive Trade Practices Act, 1969, read with Order XXXIX of the Civil Procedure Code and shall be read in conjunction with the ad interim order dated September 14, 1990. By the aforesaid order dated September 14, 1990, an ad interim ex parte temporary injunction was issued restraining respondents Nos. 1 to 45 from carrying on the restrictive trade practice of raising the prices of cement any further from today till further orders. The respondents were also called upon to show cause on October 22, 1990, as to why the injunction order issued above be not made absolute for the duration of enquiry.
2. On October 10, 1990, Shri. G. Ramaswami, Senior Advocate, appeared on behalf of respondents Nos. 23, 36 and 37 along with Shi P. R. Seetharaman and moved four applications praying for the suspension of the ad interim injunction order dated September 14, 1990. Copies of these applications were furnished to learned counsel for the Director-General and the Director-General was directed to file reply to the aforesaid application on October 22, 1990. Replies on behalf of the Director-General were filed to the application of respondents Nos. 23, 32 and 36. On the same date, respondents Nos. 1, 3, 4, 6, 7, 9, 10, 11, 12, 14, 18, 20, 21, 24, 25, 26, 28, 32, 33, 35, 38, 40, 41, 42, 45 filed replies to the injunction application. The injunction application was fixed for further hearing on 29th October, 1990, at 2.30 p.m. Reply to the injunction application was filed at this stage by the remaining respondents except respondents Nos. 15, 17, 22, 23, 34, 37 and 39. Thereafter, the arguments on the injunction application were heard from day-to-day on the request of learned counsel for the respondents.
3. On October 31, 1990, Shri G. Ramaswami, Senior Advocate for respondent No. 32, made a prayer to say that the relief granted by the Commission on the application of the Director-General under Section 12A of the Monopolies and Restrictive Trade Practices Act, 1969, should not go beyond the prayer made by the Director-General in the application for injunction. It was made clear that the relief granted on the injunction application of the Director-General under Section 12A of the Monopolies and Restrictive Trade Practices Act is in terms of the prayer made by the Director-General.
4. On November 1, 1990, Shri 0, P. Dua, learned counsel for the Director-General, sought permission of the Commission to file a rejoinder to the counter-affidavit filed by the respondents before the Commission in respect of the vacation of the injunction order dated September 14, 1990. Shri J. M. Mukhi, learned counsel for respondent No. 28, opposed the filing of the rejoinder by Shri 0. P. Dua on the grounds as stated in my order dated November 1, 1990. The filing of the rejoinder by the Director-General was allowed. There after, arguments were advanced before the Commission for the vacation of the ad interim temporary injunction by various counsel representing the various respondents and, ultimately, they concluded their arguments on November 27, 1990, and the enquiry was posted for the hearing of the arguments on behalf of the Director-General on December 10, 1990, who concluded his arguments on December 18, 1990, and order was reserved. Various counsel for the respondents raised a few common preliminary objections touching upon the jurisdiction of the Commission and maintainability of the injunction application. They are stated as follows :
1. The impugned order restraining the respondent from raising the prices of cement any further with effect from September 14, 1990, has been passed in excess of the power conferred under Section 12A of the Monopolies and Restrictive Trade Practices Act. The powers under Section 12A are circumscribed by the power to pass final orders under Section 37, as the Commission can only pass an order of "cease and desist" under Section 37 of the Monopolies and Restrictive Trade Practices Act in the event restrictive trade practice is proved at the end of the enquiry. The order under Section 12A freezing prices cannot go beyond the final orders which this Hon'ble Commission can pass.
2. The impugned order has the effect of fixing the price of cement which by laws enacted by Parliament can only be done by the Central Government in exercise of its legislative functions delegated under the Industries (Development and Regulation) Act and or the Essential Commodities Act. The impugned order is, therefore, beyond the scope and purview of the Monpolies and Restrictive Trade Practices Act as is more particularly evident from the Statement of Objects and Reasons of the Monopolies and Restrictive Trade Practices Act.
3. The impugned order has been passed in violation of Order 39, Rule 3 of the Civil Procedure Code.
4. Admittedly, there has been a rise in the cost of production, but the allegation is that the rise in price is not proportionate to the rise in the cost of production. This basis has no material and if this allegation is eschewed nothing survives. The cost of production has increased by 11.44% whereas the selling price has increased only by 10.45%.
5. For a temporary injunction under Section 12A more than a prima facie case is required because Section 12A requires "proof of the facts and not a prima facie suspicion.
6. While investigation is going on, no enquiry can be initiated, this is impliedly barred.
7. The affidavit filed on behalf of the Director-General is totally untenable and not in accordance with law.
8. The Commission is not legally constituted and as such could not pass the impugned order.
9. It was also argued that there is no uniformity of prices in each region ; in a competitive market cost of production is irrelevant and market forces maintain the price equilibrium.
10. The price hike is not 30% as alleged by the Director-General but much less ; reference was made to paras 7, 8, 9, 10, 39, 36, 32, 37, 40, 42 of the reply filed by respondent No. 1.
11. The allegations in the application of the Director-General do not suffice or are not adequate in law for a plea of cartel ; no material or evidence or other proof has been placed on the record which would disclose or make out a case of cartelisation. The newspaper report is inadmissible and unreliable as evidence of cartel. There is absolutely no material to show meeting of minds or common interest or purpose.
5. Besides the aforesaid preliminary objections, learned counsel for the various respondents also raised a few common points on the merits to meet the case of the Director-General :
It was argued that production exceeded the target during the first quarter of 1990-1991 ; the target of production is fixed and checked by the Development Commissioner for cement and this rules out cartel since a cartel cannot function without the manipulation of production ;
2. It is admitted by the Director-General in his application that cement prices in the market is determined by the forces of demand and supply and free market situation is prevailing at present ; there cannot be a blanket order of injunction preventing the respondents from raising their prices without a corresponding order to the raw material/input industries not to raise the prices.
3. An order freezing prices of the respondent irrespective of rise in the price of inputs is harsh and without jurisdiction and if such power is claimed or exercised, it would violate Article 19(1)(g) of the Constitution of India.
4. The contention of the Director-General that there is a uniformity of prices in each region is not correct and the prices are not uniform even as per each region. Cost of production in a competitive market is irrelevant and market forces maintain the price equilibrium.
5. It was also argued that injunction can only be issued if the following conditions are satisfied, namely :
(a) Prima facie case ;
(b) Irreparable injury ;
(c) Balance of convenience ;
(d) Compensation to defendant.
The injunction order dated 14th September, 1990, has been obtained by suppression of facts. The Director-General did not apply his mind properly inasmuch as respondents Nos. 15, 34 and 39 who have ceased to manufacture cement much before the injunction order also have been impleaded.
6. Rise in cement prices, during the relevant period is not 30%. It was 20% in Delhi ; 10% in Shimla, 9% in Calcutta, 10% in Bombay, 14.5% (sic) and in Madras it was 31%.
Cartel proceeds on three basis :
(a) Quantity control, i.e., less production ;
(b) Market control, i.e., less supply in the market.
(c) Price control.
There is absolutely no evidence of cartel. Price parallelism by itself is not a cartel in the instant case. There is not even a price parallelism.
7. Time of cartel has not been given ; place of cartel has not been given and the parties to the cartel have not been given and the cartel does not stand proved.
8. Industries have been suffering losses and the price of inputs is much more than the price rise in cement.
9. Cement Corporation of India (a public sector undertaking) is also selling cement at Rs. 89 per bag almost at the same price as sold by the other manufacturers. The prices in a free economy are fixed on the basis of market forces, economic factors and an independent market is the master in fixation of prices.
The Director-General's complaint is based , upon news reports which have no evidentiary value. It has been argued that as per the law laid down by the Supreme Court in Samant N. Balakrishna v. Geroge Fernandex, AIR 1969 SC 1201, a newspaper report is a second hand secondary evidence.
10. Section 12A is an added dimension of Order 39 of the Civil Procedure and in the instant case Rules 3, 3A and 4 of the Order 39 have not been complied with.
11. Bureau of Industrial Costs and Prices which is a Government body gave the price per bag at Rs. 85. As against this the per bag cost of the industrial is Rs. 90.
13. Reliance also has been placed on the following admini-sions made by the Director-General in his application, namely :
(a) Production target has been fulfilled ;
(b) Cement has not been held back from the market ;
(c) Price of fuel and freight has gone up ;
(d) The Director-General has admitted that prices in the North are higher than in the other parts of the country and it shows the absence of cartel ;
(e) There is no hike of 30%.
There is absolutely no evidence of cartel and the Director-General is relying upon news report, annexure II, which is not an evidence of cartel.
14. Shri O. P. Dua, learned counsel for the Director-General, has very laboriously and with extraodinary thoroughness replied to the various preliminary objections raised by learned counsel for the respondents and has also argued the injunction application on merit. He has argued that the Commission is legaly constituted and has relied upon the Supreme Court judgment in the case of Mahindra and Mahindar Ltd. [1979] 49 Comp Cas 419.
15. He has also argued that the Director-General was fully competent to move the present application under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act, 1969, and reliance has been placed by learned counsel upon Section 11(2) of the Monopolies and Restrictive Trade Practices Act, 1969.
16. Relieance has also been placed by the learned counsel upon M. A. Rasheed v. State of Kerala, AIR 1974 SC 2249, H. N. Rishbud v. State of Delhi, AIR 1955 SC 196 and ITC Ltd. v. M. R. T, P. Commission [1976] 46 Comp Cas 619, 620 (Cal) ; learned counsel also argued that objections raised by learned counsel in respect of verification being not in order in accordance with Civil Procedure Code is also not correct inasmuch as the same does not apply to interlocutory applications. Attention of the Commissioner has been invited to Rule 3(1) of Order XIX which reads as under :
"3. Matters to which affidavits shall be confined.--(1) Affidavits shall be confined to such facts as the deponent is able of his own knowledge to prove, except on interlocutory applications, on which statements of his belief may be admitted: provided that the grounds thereof are stated."
6. Learned counsel has contended that it is the association, that is, respondent No. 1, who is fixing the prices of cement from time to time on behalf of respondents Nos. 2 to 45 and all the respondents are bound by the aforesaid action of respondent No.1. Reliance is placed by learned counsel upon Explanations II and III of Section 35 of the Monopolies and Restrictive Trade Practices Act, 1969. Learned counsel has also argued that the present is a case of price cartel and he has placed reliance upon the letter dated July 17, 1990.
7. It has also been argued that non-filing of the rejoinder by the applicant does not mean that the facts of the respondent stated in their replies to the notice of enquiry stand proved; reliance has been placed by learned counsel on a ruling of the Madras High Court in Veerasekhara Varmarayar v. Amirthavalliammal, AIR 1975 Mad 51, at page 54, para 7. Learned counsel has dwelt at length on the standard of proof required to determine the existence of a cartel; reliance has been placed, inter alia, on Inter State Circuit, INC v. U.S. at page 308 and American Tobacco Co. v. U.S. at page 313 of Anti-Trust by Posner and Easter Brook; reliance has also been placed upon Excel Industries Ltd., In re [1988] 64 Comp Cas 531 (MRTPC) at pages 535 and 542, Bengal Tools Ltd., In re [1988] 63 Comp Cas 468 (MRTPC) at pages 474 and 476, Association of State Road Transport Undertakings v. Premier Tyres Ltd. [1988] 64 Comp Cas 868 (MRTPC).
8. I have gone through the replies filed by the various respondents for the vacation of the interim injunction along with annexures ; I have orally heard learned counsel for the respondents and the Director-General at great length; I have gone through the various rulings cited by learned counsel.
9. It has been argued by various counsel on behalf of the respondents that order dated September 14, 1990, granting the ad interim injunction is without jurisdiction inasmuch as the Commission was not properly constituted on that date in terms of Section 5 of the Monopolies and Restrictive Trade Practices Act. Reliance has been placed on the observation made by the Supreme Court in M. L. Sachdev v. Union of India [1991] 1 SCC 605. The Supreme Court made the following observations in the aforesaid case (at page 607) :
"It is not disputed that the chairman of the Commission died in harness on December 11, 1989. One of its members retired on December 31, 1989. The third member has retired on February 28, 1990. Mr. Manchanda, the other member who was acting chairman retired on March 22, 1990. It is said that the term of one member only has been extended after notice was issued in the case.
Under the Act, the Commission becomes functional with a Bench of two members and in view of the fact that it has only one existing member for some time, the Commission has not been functioning."
10. Learned counsel for the Director-General, Shri O. P. Dua, has contended that the Commission was legally constituted with only one member functioning and has relied upon the earlier judgment of the Commission in the case of Graphite India Ltd., In re [1979] 49 Comp Cas 212 at pages 222 and 223 (MRTPC). Learned counsel has also relied upon the Supreme Court ruling in Mahindra and Mahindra v. Union of India [1979] 49 Comp Cas 419, at pages 433 to 434.
11. I do not find any merit in the aforesaid objection raised by learned counsel for the respondents about the non-functioning of the Bench of the Commission at a time when the impugned order was passed. No doubt Section 5 provides that the Government shall establish a Commission which shall consist of a chairman and not less than two and not more than eight members, that is, the constitution of the Commission when it is, so to speak, full-fledged, but the Act also makes a provision for contingencies when the chairman and some of the members may not be available, either because one of them has resigned or retired or because they are on leave or because they are busy elsewhere. Section 16(2) clearly provides that the powers and functions of the Commission may be exercised or discharged by the Benches formed by the chairman of the Commission from among the members. There is nothing in this provision to suggest that it comes into force when the Commission has more than three members. There is also the provision of Section 18(1)(c) according to which the Commission shall have power to regulate the delegation to one or more members of such powers or functions as the Commission may specify. Moreover, Section 6(4) also provides that no act or proceeding of the Commission shall be invalid by reason only of the existence of any vacancy among its members or any defect in the constitution thereof. The observations made by the Supreme Court in Sachdev's case [1991] 1 SCC 605 are at the most in the nature of obiter and do not make the functioning of the Commission in any way illegal or without jurisdiction. The above observation was made in the background of an application under Article 32 filed as a public interest litigation for a direction to the Union of India to fill up the posts of the chairman and members of the Commission under the Monopolies and Restrictive Trade Practices Act, 1969. The Legislature could not possibly have intended that the proceeding under the Monopolies and Restrictive Trade Practices Act should be kept in abeyance or that there should be a complete standstill in its working just because either the chairman and/or one of its members is not available. The legislation aimed at preventing the concentration of economic power to the common detriment could not be put in cold storage for administrative exigencies of this kind. The first contention put forward by learned counsel for the respondents, therefore, cannot be upheld.
12. It has been argued by learned counsel for the respondents that as per para 11 of the injunction application the preliminary investigation is still in progress and no final conclusion has emerged. It is submitted that the question of enquiry would arise only after the investigation is completed under Section 11 of the Act and the application of the Director-General made under Section 10(a)(iii) before completing such investigation is not maintainable; it has been argued that the applicant cannot interfere or pre-empt the investigation ordered by the Commission by an application under Section 10(a)(iii) of the Act. learned counsel for the Director-General, Shri O.P. Dua, has argued that the Director-General has acted under Section 11 (2) of the Monopolies and Restrictive Trade Practices Act which reads as under:
"11(2). The Director-General may, upon his own knowledge or information or on a complaint made to him, make, or cause to be made, a preliminary investigation in such manner as he may think fit to enable him to satisfy himself as to whether or not an application should be made by him to the Commission under Sub-clause (iii) of Clause (a) of Section 10."
13. Reliance has been placed by learned counsel on ITC Ltd. v. MRTP Commission [1976] 46 Comp Cas 619, 629 (Cal) and H. N. Rishbud v. State of Delhi, AIR 1955 SC 196.
14. I have gone through Section 11(1) of the Monopolies and Restrictive Trade Practices Act which empowers the Commission to order a preliminary investigation to be made by the Director-General and to submit his report to the Commission to enable it to satisfy itself as to whether or not the complaint requires to be inquired into; as per the provision of Section 11(2) as reproduced above, the Director-General may, upon his own knowledge or information or on a complaint made to him, make, or cause to be made, a preliminary investigation in such manner as he may think fit to enable him to satisfy himself as to whether or not an application should be made by him to the Commission under Sub-clause (iii) of Clause (a) of Section 10. Section 11 of the Act confers powers upon the Commission to ask the Director-General to make an investigation into a complaint received by the Commission; similarly, Section 11(2) confers such power upon the Director-General to suo motu investigate into the allegation made in a complaint independent of the order of the Commission. The Monopolies and Restrictive Trade Practices Act does not impose any prohibition upon the Director-General to exercise the powers under Section 11(2) in case he has already been ordered by the Commission to investigate the same matter under Section 11(1) of the Act. A plain reading of the Act makes it abundantly clear that these two powers are independent of each other and are statutory powers; moreover, the powers conferred upon the Director-General under Section 11(2) of the Monopolies and Restrictive Trade Practices Act is for a limited purpose of enabling him to satisfy himself as to whether an application should be made by him to the Commission under Sub-clause (iii) of Clause (a) of Section 10 of the Act. The investigation under Section 11(2) is limited in its scope. The Director-General is not required to submit any preliminary investigation report when he investigates under Section 11(2) and this is for the limited purpose of his satisfaction either to file or not to file an application. Moreover, the Director-General's power to make an application under Section 10(a)(iii) of the Act cannot be curtailed or controlled by an order passed by the Commission under Section 11 requiring the Director-General to investigate into a matter. The intention of the law-makers is very clear from a plain reading of sections 10 and 11 together. It is also necessary to mention here that in an urgent matter the Director-General's statutory power to move an application under Section 12A shall be curtailed if he is not permitted by law to make an application under Section 10(a)(iii) till he completes the investigation as ordered by the Commission under section, 11(1). I, therefore, hold that the Director-General is empowered to make an application under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act even before he completes the investigation as ordered by the Commission under Section 11(1) of the Monopolies and Restrictive Trade Practices Act. This contention put forward by learned counsel for the respondents, therefore, cannot be upheld.
15. The next objection taken by learned counsel for the respondent even at the threshold is that as per Section 12A of the Act it must be proved by the petitioner that the respondents are carrying on the alleged restrictive trade practice and such trade practice is likely to affect prejudicially the public interest, etc., and the proof of the aforesaid allegation must be by affidavit or otherwise. It has also been argued that as per regulation 84B of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974, an application under Section 12A shall be supported by an affidavit of the person by making such application. The point made out by learned counsel for the respondents in this behalf is that the affidavit filed by the Director-General along with the injunction application is not in accordance with Order 19, Rule 3(1) of the Civil Procedure Code and verification on the application under Section 12A is not in accordance with Order 6, Rule 15 of the Civil Procedure Code. Reliance has been placed by learned counsel for the respondents on the observations made by the Supreme Court in the case of State of Bombay v. Purushottam Jog Naik, AIR 1952 SC 317 ; reliance has also been placed on another ruling of the Supreme Court in the case of A. K. K. Nambiar v. Union of India, AIR 1970 SC 652. As against this, learned counsel for the Director-General, Shri. O. P. Dua, has invited my attention to Order 19, Rule 3(1) of the Civil Procedure Code to say that the aforesaid provision of law is not attracted to interlocutory applications.
16. No doubt, the Supreme Court has held that an affidavit should be modelled on the lines of Order 19, Rule 3 of the Civil Procedure Code and the reasons for verification of affidavits are to enable the court to find out which facts are to be set to be proved on the affidavit evidence of rival parties. Allegations may be true to the knowledge or the allegations may be true to the information received from persons or the allegations may be based on records. The importance of verification is to test the genuineness and authenticity of the allegations and also to make the deponent responsible for the allegations. It is correct that in the instant case verification is not in accordance with Order 19, Rule 3 and Order 6, Rule 15 of the Civil Procedure Code. While this is so, it is to be seen as to what are the consequences in the instant case of non-compliance with Order 19, Rule 3 of the Civil Procedure Code. Firstly, Order 19, Rule 3, is not attracted to interlocutory applications ; admittedly, the present order is dealing with an interlocutory application of injunction under Section 12A of the Monopolies and Restrictive Trade Practices Act; secondly, the allegations made in the application under Section 12A are permitted to be proved by affidavit or otherwise; the use of the words "otherwise" means that other annexures which are a part of the injunction application can be looked into for the purpose of arriving at the conclusion as to whether the allegations made by the petitioner stand proved or not. I, therefore, hold that any defect in the verification of the injunction application or affidavit accompanying it is not fatal to its maintainability.
17. Another point raised by learned counsel for the respondents is that the impugned order restraining the respondents from raising the price of cement any further with effect from September 14, 1990, has been passed in excess of the powers conferred by Section 12A of the Monopolies and Restrictive Trade Practices Act. It has been contended that the powers under Section 12A are circumscribed by the power to pass a final order under Section 37 of the Act and the Commission can only pass an order of "cease and desist* under Section 37 of the Act in the event restrictive trade practice is proved at the end of the enquiry. This argument is simply stated to be rejected inasmuch as the impugned order has been passed well within the four corners of Section 12A of the Monopolies and Restrictive Trade Practices Act and such like order can also be passed at the end of the enquiry. Needless to state that the impugned order is not in respect of freezing the prices of cement but is an injunction to restrain the respondents from carrying on restrictive trade practice (emphasis supplied) of raising the price of cement.
18. It has also been argued at length that fixation of the price is not a judicial function but an executive function in exercise of the statutory powers vested therein; reference was made to Shri Sitaram Sugar Co. Ltd. v. Union of India, AIR 1990 SC 1277, at page 1278, and also to RTPE No. 78 of 1984 and also to Alkali and Chemicals Corporation of India Ltd. v. Bayer (India) Ltd. [1984] 3 Comp LJ 268 (MRTPC). I have considered this aspect of the matter and it is straightaway conceded that fixation of the price is not the function of the Monopolies and Restrictive Trade Practices Commission, nor has the Commission by its order dated September 14, 1990, fixed the prices of the cement. The impugned order is for restraining the respondents from indulging in the restrictive trade practices and not for fixation of prices of the cement.
19. It has also been argued that Rule 4 of Order 39 has been violated inasmuch as certain facts which have been stated in the injunction application are false and misleading, namely :--
(a) 30% hike is not there ;
(b) cartel is not there ;
(c) These representations have been made knowingly and deliberately.
20. Rule 3 of Order 39 has not been complied with and if the affidavit o f the Director-General is not in order, nothing remains to sustain the injunction. The aforesaid argument advanced by learned counsel for the respondents pertains to the merits of the case and I shall deal with this aspect of the matter hereinafter.
21. Now, the only question which remains to be discussed is as to:
(a) whether, in the facts and circumstances of the case, there was a necessity for passing the impugned order ?
(b) whether that necessity continues even today ?
22. It is seen from the impugned order dated September 14, 1990, that it was passed on the basis of the following assumptions, namely :
(a) that there is an unprecedented hike of 30% in the prices of cement in six months from February, 1990, to August, 1990;
(b) the aforesaid increase in price has no nexus with the cost of production ;
(c) and the same is the result of cartelisation.
23. It has to be determined as to whether all or any of the three assumptions stated above stand judicial scrutiny after the matter has been discussed at length and the parties have been allowed to place before the Commission prima facie evidence in respect thereof.
24. The Director-General has alleged in para 6 of his application under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act that during the period from February to August, 1990, the increase in the prices of cement is more than 30% ; he has elaborated this with the help of a table in respect of price trend from February 28, 1990, to August 27, 1990, in the four metropolitan cities of Delhi, Bombay, Calcutta and Madras and also has furnished a copy of the information regarding price trend obtained from the Development Commissioner for Cement Industry, New Delhi, as annexure II. Respondent No. 1, that is, the Cement Manufacturing Association, and also other respondents have controverted the aforesaid allegation of the Director-General and have pleaded that the conclusion's drawn from annexure II by the Director-General are not only incorrect but are highly misleading. It has been stated that the average increase in the Northern Zone is 18%; in the Eastern Zone 15%, in the Western Zone 12% and in the Southern Zone 17% and as against the alleged percentage increase of 30%, the actual increase in the price is only 16% which has ranged between a low of 12% and a high of 18%.
25. I have examined the respective contentions of the parties along with the evidence placed before me by them to find out the increase in the price of cement from February, 1990 to August, 1990. The allegation of the Director-General in para 6 of his application that increase in price is more than 30% does not stand substantiated even from annexure II on which reliance has been made by him. In the Northern Region the price increase as per annexure II comes to 20.25%, in the Eastern Region it comes to 21.25%, in Western Region it comes to 19.29% and in Southern Region it comes to 25.20%. The average increase all over the country comes to approximately 21%. As against this, as per the respondents, the average price increase is 16%. Summarising the whole situation, indisputably the increase in the period from February, 1990, to August, 1990, is not 30% as alleged by the Director-General and it is much less than 30% somewhere ranging between 16% to 21% as stated above. The first assumption on which the ad interim injunction was granted, therefore, does not stand proved.
26. The second assumption for granting the ad interim injunction was that the increase in price has no nexus with the cost of production. The contention of learned counsel for the Director-General in this behalf is that though the prices of some of the raw materials and other inputs like coal, power, transport, etc., might have gone up during the period from February to August, 1990, however, it is contended that cost of production of all units is not uniform and price increases during the period from February to August, 1990, was not justified on the basis of data regarding increase in the input costs. As against this, it has been contended on behalf of the respondents that there has been substantial increase in the cost of production in the recent past after March 31, 1990, as a result of increase in railway freight, increase in cost of transportation as a consequence of the increase in the oil price, increase in the cost of packing to the extent of Rs. 2 per bag and also increase in electricity tariff and cost of coal. The respondents have also argued before me that they have been incurring huge losses while selling the cement at the prevalent price as it cannot meet the cost of production and other overall expenditure. It has also been argued at length that in a free economy prices are fixed on the basis of market forces, economic factors and an independent market is the master in fixation of prices. It has also been controverted that in a free economy cost of production would not be the basis of the prices. It has also been argued and pleaded that increase in the prices of inputs is much more than the price increase in the last six months.
27. I have heard the parties at some length on this point of increase in the prices of inputs ; I have gone through the pleadings of the parties also. Even the Director-General has admitted that there is increase in the prices of inputs ; while he conceded this, the Director-General's case is that it does not have any nexus with the increase in the prices of cement. It is fair and just to say that the prices of cement cannot be pegged/controlled without pegging the prices of the inputs used for the manufacture of cement. While the Director-General alleged in his application that the rise in prices of cement in the last six months is more than 30%, he has not stated the percentage of increase in the prices of inputs and as such it cannot be stated with any certainty the percentage of increase in the price of inputs. The second assumption for granting the injunction also does not stand proved at this stage for lack of evidence.
28. The all important question that remains to be discussed is as to whether there is an existence of a concerted price parallelism ? Shri O. P. Dua addressing the arguments on behalf of the Director of Investigation has drawn my attention to important factors in this situation which taken together would point to the existence of a concerted price parallelism. The first factor which was emphasised by Shri Dua is the fact that there was simultaneous increase in prices in all parts of the country irrespective of the fact whether there is a shortage of cement in a particular region or the region is surplus in production, the prices have not come down even during the period of monsoon season when the demand is admittedly less. The inference drawn by Shri Dua is that the manufacturers have manipulated the prices of cement in various parts of the country, taking advantage of the volatile market conditions. Learned counsel has argued that simultaneity and frequency of increase in prices during the last six months could not be considered coincidental. What sealed the case, according to Shri Dua was the second factor, namely, the arbitrariness of price increase. The respondents, he argued have failed to provide justification for price increases despite the fact that opportunities were given to them to do so.
29. Shri Dua admitted that there was no direct proof of concert behind the respective increase in prices, but he argued that a concert, like a conspiracy can seldom if at all be proved by direct evidence and has to be adjudged from circumstantial evidence available. In this connection, Shri Dua, inter alia, referred to a letter dated July 17, 1990, addressed to the Secretary, Ministry of Industry, on behalf of Cement Manufacturers Association, i.e., respondent No. 1, to say that respondent No, 1 is fixing and monitoring the prices of cement on behalf of all the respondents from time to time. Shri Dua has argued that as is seen from this letter respondent No. 1 agreed to reduce the prices in a meeting held with senior officials of the Government of India on April 19, 1990, and agreed to price reduction prevailing on March 31, 1990. Shri 0, P. Dua has argued that the aforesaid letter provides strong circumstantial evidence to establish that in the last six months prices have been fixed by the association on behalf of its members and this establishes the charge of concert against them. Learned counsel has relied upon the Case Book of MRTP Act Cases by Rajendra referring to cases the learned author discusses at pages 323, 324 and also at pages 23 and 24 of his book. He argued that this position stands good in terms of Explanation II to Section 35 of the Monopolies and Restrictive Trade Practices Act.
30. The respondent's case has been argued by many eminent lawyers from the Bar to say that there is not even an iota of evidence to establish the charge of cartel against them. Following factors have been pressed in support of the aforesaid contention, namely:--
1. Production has been higher than earlier ;
2. Time of cartel has not been given ;
3. Place of cartel has not been given ;
4. Names of the parties to the cartel have not been given.
31. Industries have been suffering losses and the price rise of inputs is much more than the price rise in cement. It has also been argued that the Cement Corporation of India is also selling cement at Rs. 89 per bag almost at the same price as sold by the other manufacturers. It has also been argued alternatively the cost of production would not be the basis of the price in a free economy and the price is based upon the forces of demand and supply. It has also been argued that the Director-Generals complaint is based upon newspaper reports which have no evidentiary value. It has also been argued that the cartel proceeds on three bases :
(a) Quantity control ;
(b) Market control, i.e., lesser supply of goods in the market;
(c) Price control.
32. It has also been argued that price parallelism by itself is not a cartel and in the instant case there is no price parallelism even.
33. I have heard very eminent counsel on behalf of the respondents as well as the Director-General at great length. I have given my utmost consideration to the facts and circumstances of the case. The initial onus of proof of concert lies squarely on the Director-General of Investigation and Registration. According to Shri Dua, the onus has been discharged by producing effective circumstantial evidence. As I view it, the circumstantial evidence on which Shri O. P. Dua is relying may not be enough to arrive at the conclusion that the conditions for granting the injunction under Section 12A stand satisfied. Section 12A of the Monopolies and Restrictive Trade Practices Act is reproduced below for the sake of facility :
"12A (1). Where during an inquiry before the Commission, it is proved, whether by the complainant Director-General, any trader or class of traders or any other person, by affidavit or otherwise, that any undertaking or any person is carrying on, or is about to carry on, any monopolistic or any restrictive or unfair trade practice and such monopolistic or restrictive or unfair trade practice is likely to affect prejudicially the public interest or the interest of any trader, class of traders or traders generally or of any consumer or consumers generally, the Commission may, for the purposes of staying or preventing the undertaking or, as the case may be, such person from causing such prejudicial effect, by order grant a temporary injunction restraining such undertaking or person from carrying on any monopolistic or restrictive or unfair trade practice until the conclusion of such inquiry or until further orders.
(2) The provisions of Rules 2A to 5 (both inclusive) of Order XXXIX of the First Schedule to the Code of Civil Procedure, 1908, shall as far as may be, apply to a temporary injunction issued by the Commission under this section, as they apply to a temporary injunction issued by a civil court and any reference in any such rule to a suit shall be construed as a reference to an inquiry before the Commission."
34. A plain reading of the aforesaid section demonstrates that in order to obtain an injunction the petitioner must prove by affidavit or otherwise, namely (emphasis* supplied) :
(1) that any undertaking or any person is carrying on, or is about to carry on, any monopolistic or any restrictive or unfair trade practice ; and
(ii) that such monopolistic or restrictive or unfair trade practice is likely to affect prejudicially the public interest or the interest of any trader, class of traders or traders generally or of any consumer or consumers generally.
35. In addition to this, it is well settled law that for the grant of temporary injunction petitioner must be able to prove not only that he has a prima facie case and that the balance of convenience is in his favour but also that irreparable loss or injury would be caused to him if the injunction is not granted. The burden of proving the prima facie case, balance of convenience and irreparable loss or injury is on the petitioner. The majority of the High Courts hold the view that the existence of a prima facie case is a sine qua non for considering the grant of temporary injunction but that itself is not sufficient and the temporary injunction could not be granted until and unless the balance of convenience is in his favour and there is a likelihood of irreparable loss or injury.
36. In considering whether to grant a temporary injunction or not, the right course for me is to look at the case as a whole. Regard shall have to be given not only to the strength of the claim but also to the strength of the defence and then to decide what is the best to be done. The best judicial approach in this behalf would be to exercise broad discretion having regard to the entirety of the facts of the case. The remedy of the interlocutory injunction is to be kept flexible and the basis should be one of fairness, justice and common sense in relation to relevant law and facts.
37. As already discussed above, three assumptions on which ad interim injunction dated September 14, 1990, was granted do not prima facie stand proved inasmuch as the price hike in the relevant period is not 30% or above 30% as alleged by the Director-General and it is much less. The price of cement cannot be frozen without the price of the inputs used for the manufacture of cement, being also frozen simultaneously. At this stage there is no evidence before the Commission as to the increase in the price of inputs vis-a-vis the price increase for cement during the relevant period and as such it cannot be said with any certainty that the increase in the price of cement during the six months is arbitrary and has no nexus with the increase price of inputs.
38. As already discussed, it has been held by the Commission in the case of Alkali and Chemical Corporation of India Ltd., Calcutta v. Bayer (India) Ltd., Bombay [19841 3 Comp LJ 268 (MRTPC) that price parallelism by itself does not amount to a restrictive trade practice and it has to be shown that the price parallelism was the result of a concert and on facts in the absence of any direct evidence of cartel and the circumstantial evidence not going at the most beyond price parallelism without there being even a shred of evidence in proof of any plus factor to bolster the circumstances of price parallelism, it is unsafe prima facie to conclude that the respondents indulged in any cartel for raising the prices. The letter dated July 17, 1990, annexure VI with reply to respondent No. 28 on behalf of respondent No. 1 to the Secretary, Ministry of Industry, Government of India, does not prima facie establish the allegation of the Director-General that respondent No. 1 is fixing and monitoring the price of cement for the following reasons, namely :
(a) A promise was made to reduce the price only for a period of six weeks up to May 31, 1990;
(b) The letter reads that it had clearly brought out while agreeing to reduce the price that the prices prevailing on March 31, 1990, were not economical at many locations and did not have any element of 1990-91 budgetary increases arising out of the Union Finance Bill, 1990. The aforesaid letter also states that there were indications of the electricity tariff being increased in many States and also increase in railway freights from April 1, 1990, to September 30, 1990, going up to 10% from October 1, 1990. Special mention is made of para 6 of the aforesaid letter which reads as under :
"As a result of the above cost escalations, the cost of production of the industry has gone up further. In this connection, we enclose a sheet showing the average cost profile of the industry as updated (annexure-I). It will be seen from the annexure that based on a lead of 650 kms., the average price per cement bag at the retail level to the consumer comes to Rs. 89, which must be realised in all the markets throughout the year. However, if the variations in the lead of movement of cement, sales tax/octroi rates and other local costs in different States were to be taken into account, the prices would vary within a range of Rs. 82 to Rs. 106 per bag. You will, therefore, kindly note that the organised sector of cement industry are no longer in a position to maintain ruling prices of cement at the levels fixed at the meeting held in your office on May 11, 1990."
39. Moreover, it has been argued before me that most of the respondents-manufacturers have not acted upon this letter and have taken the stand that they are not bound by the commitment to reduce the price even for a short period made before the senior official of the Government of India by respondent No. 1. All these issues are contentious issues and with all the limitations of limited evidence before me at this stage cannot be decided finally. Prima facie the aforesaid letter is not sufficient to arrive at the conclusion that respondent No. 1 is fixing and monitoring the prices on behalf of all the other respondents.
40. In view of the above premises, I am constrained to vacate the temporary injunction dated September 14, 1990. The ex parte ad interim injunction dated September 14, 1990, is hereby vacated. I hasten to make it clear that what has been stated in this order shall not prejudice the ultimate decision of the enquiry. I would like to pay my compliments to all counsel who appeared on behalf of the respondents and who so ably argued the case before me and assisted the Commission. I would also like to pay my compliments to Shri O. P. Dua, the learned counsel for the Director-General who argued the case so ably even on scanty material as in the instant case.
Pronounced.