Monopolies and Restrictive Trade Practices Commission
Madura Coats Ltd. vs Bharat Petroleum Corporation Ltd. on 21 December, 2001
ORDER
R.L. Sudhir, Member
1. In this application filed under Section 12-B of the Monopolies and Restrictive Trade Practices Act, 1969 (referred to as the MRTP Act hereafter), the applicant has claimed damages amounting to Rs. 6,16,576/- with interest @ 18% per annum for the loss suffered on account of the restrictive trade practices alleged to have been adopted by the respondent.
2. The facts in brief are that the applicant, namely, Madura Coats Ltd., is a Company incorporated under the Companies Act, 1956 with its registered office at Madurai in the State of Tamil Nadu. It is engaged in the business of manufacture of textiles. The applicant has been purchasing petroleum products including High Speed Diesel (HSD) oil from the respondent from its delivery point at Cochin which is in the State of Kerala. The respondent, namely, Bharat Petroleum Corporation Ltd., is a public sector enterprise engaged in the business of sale and distribution of petroleum products including HSD oil. The respondent has been making these inter-State sales to the applicant on principal to principal basis on payment of Central Sales Tax @ 4% leviable under the Central Sales Tax Act, 1956 on furnishing C-Forms. The respondent is stated to have discontinued supplies from Cochin and is further stated to have changed the supply point of HSD oil w.e.f. 1.9.1989 from Cochin/ Trivendrum in Kerala to the nearest storage point at Madurai in the State of Tamil Nadu vide its circular/letter dated 31.7.1989. Under the new arrangement the applicant is required to pay local sales tax @ 18%. It is alleged that by resorting to the aforesaid change in the distribution arrangement the respondent has imposed unjustified costs on the claimant. On being approached by the applicant for appropriate relief, the High Court of Madras disposed of the writ petitions vide order dated 27.2.1995 and ordered status quo to be maintained till 22.3.1995 and left the issue relating to restrictive trade practices open for decision by the MRTP Commission,
3. The applicant having made out a prima facie case, a notice of compensation under Section 12-B of the MRTP Act was issued to the respondent. Despite adequate opportunities given, the respondent neither filed a reply to the notice of compensation nor entered appearance in the Court either through an Advocate or through an authorised representative of the Company. In view of this, the proceedings were set ex-parte against the respondent. The applicant filed its affidavit of evidence along with supporting documents.
4. Ex parte arguments were finally heard on 6.12.2001. Learned Counsel for the applicant Shri Naresh Kurnar also filed written submissions which have been taken on record.
5. We have considered the submissions made by the learned Counsel for the applicant and have also gone through the evidence filed on its behalf. This being a claim for compensation, we have to give our findings particularly on the following points :
(a) Whether the respondent's decision to change the delivery point from Cochin to Madurai amounts to restrictive trade practices and attracts the provisions of Section 10(a)(iv) read with Section 2(o) and Section 33(1) read with Section 37 of the MRTP Act as alleged by the applicant ?
(b) If the answer to (a) above is in the affirmative, whether the applicant has suffered any financial loss on account of the restrictive trade practices adopted by the respondent ?
(c) Whether the applicant is entitled to the relief claimed in the compensation application ?
6. The contention of the learned Counsel for the applicant is that by changing the supply point of HSD oil from Cochin/Trivendrum in the State of Kerala to the nearest storage point at Madurai in the State of Tamil Nadu, the respondent has imposed unjustified costs on the applicant because under the revised arrangement, the applicant has to pay local sales tax @ 18% instead of Central Sales Tax (c) 4% under the earlier arrangement which permitted the applicant to draw supplies from the delivery point at Cochin. Learned Counsel for the applicant invited our attention to the Commission's order dated 7.4.1997 by virtue of which, the respondent was directed to maintain status quo in view of an earlier order of the High Court of Madras which directed the respondent to make inter-State sales. He also referred to letter/circular dated 15.6.2000 of the respondent by which the supply point as changed from Cochin to Madurai- He also invited our attention to the order of the MRTP Commission dated 7.4.1995 in RTPE 97/1995 by which, a Notice of Enquiry was ordered to be issued. Though none appeared on behalf of the respondent to enlighten us on the circumstances under which, the respondent had to change the supply point from Cochin to Madurai, we are aware of the fact that in other similar matters, notably RTPE Nos. 32/1994 and 9/1994, the Commission vide its orders dated 18.7.2001 and 5.10.2001 respectively, the complaint petitions were dismissed and the Notice of Enquiry issued against the respondents were discharged on the ground that the terms contained in the agreements had the approval of the Ministry of Petroleum, Government of India.
7. It is important to note that when the impugned Circulars relating to the change in the distribution pattern were challenged before the High Court of Madras, through writ petitions under Article 226 of the Constitution of India, the Single Judge of the Madras High Court had dismissed the writ petitions and observed that the impugned action of the respondent did not violate the fundamental right enshrined in Articles 14 and 19 of the Constitution of India. The Single Judge specifically observed that "the action of the respondent Corporation cannot be said to be unreasonable or arbitrary". When writ appeals were filed against the aforesaid orders, the Division Bench of the Madras High Court ordered "status quo as on date to prevail until further orders" and left the issue relating to the restrictive trade practices open for the decision by the MRTP Commission. In its order dated 6.12.1999 passed in a bunch of RTP Enquiries such as RTPE 97/1995 and RTPE 37/1995 etc., the MRTP Commission observed as follows :
"...We are, therefore, of the opinion that the judgment of the learned Single Judge of the High Court of Madras with respect to the writ petitions in question would remain in the field and would remain binding in view of the Full Bench ruling of this Commission in the case of The Director General (Investigation and Registration) v. Holy Angels School, reported in (1998) 6 CT] at P. 129."
In a subsequent order passed by the MRTP Commission in RTPE 97/1995, the Commission disposed of the contempt application filed under Section 13-B of the MRTP Act and observed as follows :
"...The submission made on behalf of the respondents explaining the reasons for non-supply of HSD to the petitioners w.e.f. 2.6.2000 to 28.6.2000 appears to be justified and we do not see that the respondents deliberately or intentionally, just to violate the order of this Commission dated 7.4.2000, stopped the supply of HSD. As such, in our opinion, no case for taking any action under Section 13B of the Act is made out. Besides that, since the supply of HSD has already been resumed, therefore, we are also of the opinion that no action under the Contempt of Courts Act read with Section 13-B of the MRTP Act is warranted. The application is accordingly disposed of. Rule nisi stands discharged."
8. The allegation of the applicant regarding the restrictive trade practices of the respondent arises mainly from the two circulars/letters issued by the respondent on 31.7.1989 and 15.6.2000 respectively which are reproduced below :
"Circular/Letter Dated 31.7.1989 :
"Regional Coordinator 139 N.H. Road
SOUTHERN REGION MADRAS 600 034
July, 31, 1989
M/s. Madura Coats, Madurai
Sirs,
Sub. : Supplies of High Speed Diesel Oil (H.S.D.).
As a high volume consumer of H.S.D. you will kindly appreciate the need for timely supply of this important input for uninterrupted running of your plant. In order to ensure this, and to make optimum use of our facilities, the Oil Industry has decided to make certain changes in the logistics of supplies which also involves a change in supply points to valued customers like you.
We would like to advise you that effective 1st September, 1989 your requirement of H.S.D. will be met from Madurai Supply Point on delivered basis. By this arrangement, prompt and immediate supplies will be effectively ensured.
Thanking You,
Yours faithfully,
Sd/- Sd/-
(M.B. Ramcadia) (V.K. Singh)
General Manager General Manager
Indian Oil Hindustan
Petroleum
Sd/- Sd/-
(K. Nilkantan) (S. Raghavan)
Marketing Regional
Manager Manager
Bharat IBP Co. Ltd.
Petroleum
Letters/ Circular dated 15.6.2000:
"C. INTR. SALES 15.6.2000
M/s. Madura Coats Limited,
Papavinasam Mills Post 627 422,
Ambasamudram.
Dear Sirs,
SUPPLIES OF PETROLEUM PRODUCTS
In line with the guidelines issued by the Ministry of Petroleum and Natural Gas, the Inter-State supplies of H.S.D. (All types)/FO/LDO/LSHS and Naphtha stands banned.
The supplies of above products would be effected from our nearest supply location within the respective State. In case of all H.S.D. supplies, the supplies will be made only on "delivery basis".
This is for your information.
Thanking you and assuring you of our best services at all times, Yours faithfully, For Bharat Petroleum Corporation Ltd., Sd/-
K. Jayaraman TM (I&C) Cochin CC. : M/s. Madura Coats Ltd., New Jail Road, Madurai - 625 001.
CC. : NVR :
9. The Circular dated 15.6.2000 reproduced -above appears to be a sequel to the circular issued by the Government of India, Ministry of Petroleum and Natural Gases on 1.6.2000. Relevant paragraph of this Circular has been referred to in the Commission's order dated 15.9.2000 passed in RTPE 97/1995 and the same is reproduced below :
"3(ii)--No inter-State road supplies will be made to direct customers with immediate effect, and the customers will be billed at the delivered rate built up on the basis of supplies from the nearest storage point within the same State."
10. The rationale behind the impugned change in the distribution arrangement of HSD oil and other petroleum products is abundantly clear from the above circulars. The motivating factor behind the change in the distribution arrangement appears to be nothing but public interest. Further it has the approval of the Ministry of Petroleum, Government of India. This being so, the respondent cannot be faulted and held guilty of restrictive trade practices in view of the provisions contained in Section 38(1)(i) of the MRTP Act which deals with presumption as to the public interest. Section 38(1)(i) reads as follows :
"Section 38(1)(i)--Presumption as to the public interest---(1) For the purposes of any proceedings before the Commission under Section 37, a restrictive trade practice shall be deemed to be prejudicial to the public interest unless the Commission is satisfied of any one or more of the following circumstances, that is to say--
xxx xxx xxx
(i) that such restriction has been expressly authorised and approved by the Central Government;
xxx xxx xxx
11. In the instant case, the impugned restriction to draw supplies from the State in which the buyer is located has the approval of the Ministry of Petroleum, Government of India and, therefore, it cannot be said to be violative of the provisions contained in Section 33(1) read with Section 37 of the MRTP Act in view of the gateway available under Section 38(1)(i). Nor is it a restrictive trade practice within the meaning of Section 2(o). Since the impugned policy decision is uniformly applicable to all the dealers/buyers and has the approval of the Ministry of Petroleum, Government of India, it cannot be said to have the effect of preventing, distorting or restricting competition. Nor does it impose any unjustified costs or restrictions on the consumers. Whatever the rates of taxation, it is established law that inter-State sales attract Central Sales Tax and the sales within the State attract local taxes. Just because the rate of Central Sales Tax is lower than the rate of local sales tax, the applicant cannot be allowed to circumvent the law to its own advantage on the unsustainable ground that the change in the policy subjects the applicant to higher rate of taxation and as such it amounts to imposing unjustified costs as contemplated in Section 2(o) of the MRTP Act. The clause relating to unjustified costs cannot be read in isolation.
12. Since no case of restrictive trade practice is made out against the respondent, the question of the applicant having suffered any loss on account of such restrictive trade practices and hence claiming compensation for the same does not arise.
13. In view of the facts and circumstances discussed above, the compensation application is dismissed with no order as to costs.