TMI Blog1977 (4) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... siness regulated by the terms of an agreement, known as the redistribution stockists agreement of the company, found in a standard printed form, entered into with each stockist. The agreement has 23 terms or clauses in it. The clauses complained of are 5 and 9, which may be reproduced here: 5. The Redistribution Stockist shall use his best endeavours to maintain and in- crease the trade of the Products in the said town and for this purpose he shall at all times keep and 'maintain adequate stocks of the Products in all its packings and he shall carry. out all instructions and directions including those as to the maximum resale price which may from time to time be given by the Company or by the Company's accredited representatives in respect of the sale or resale or disposal by the Redistribution Stockist of stocks of the Products supplied to him in pursuance of this Agreement. The Redistribution Stockist is prohibited from charging in excess of the maximum resale prices stipulated by the Company, but he may, at his discretion, charge prices lower than the said maximum resale prices. The Redistribution Stockist shall purchase and accept from the Company such stock as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) The practice of area allocation to which clause 9 of the Agreement (Exhibit F) related, shall be discontinued and shall not be repeated. (5) In all future price circulars or lists to be issued by the Respondents, it shall be clearly stated that the prices there- in mentioned are maximum prices and that prices lower than these prices may be charged. (6) This order shall come into force with effect from 1st July, 1976. On or before the said date, the Respondents shall intimate all Redistribution Stockists of the modifica- tions in Clauses 5 of the Agreement (Exhibit F) and the voidity of clause 9 of the Agreement (Exhibit F) . There was some argument before us on the question whether proceedings before the Commission were maintainable at the instance of a complainant who had reasons to nurse. a grievance. against the Company and whose motives could be questioned. It was pointed out that the agreement of the company with the informant had been terminated. The version of the informant was that this had been done because his firm had sold Vanaspati at the rate of ₹ 127/- per tin which was below the price of ₹ 129.05 per tin fixed by the Company. The informant st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses is meagreor even absent, the clauses are innocuous and should not be modified or struck down because we are only concerned with what is actually being practised under them or with the use that is being made of such clauses and not with what is permissible or possible under the clauses of the agreement of the kind before us. This argument seems to us to overlook the definition of restrictive trade practice contained in section 2(0) of the Act which lays down: (0) restrictive trade practice means a trade practice which has, or may have, the effect of preventing distorting or restricting competition in any manner and in particular (i) which tends to obstruct the flow of capital or resources into the stream of production, or (ii) which tends to bring about manipulation of prices, or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions. It is clear from a bare perusal of the above-mentioned definition that it is not only the actual practice of a restriction under a clause which is struck by the provisions of the Act, but also a trade pract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept of competition is to be understood in a commercial sense. Territorial restriction will promote competition whereas the removal of territorial restriction would reduce competition. As a result of territorial restriction there is in each part of India open competition among the four manufacturers. If the territorial restriction is removed there will be pockets without any competition in certain parts of India. If the dealer in Kashmir is allowed to sell anywhere in India wealthy cities like Delhi, Bombay, Calcutta will buy up trucks allocated for Kashmir and the buyer in Kashmir will not be able to get the trucks. The other three manufacturers whose trucks are not in equal demand will have Kashmir as an open field to them without competition by Telco. Therefore, competition will be re- duced in Kashmir by the successful competition being put out of the field . It is evident that in the Telco case this Court was considering the territorial restrictions placed upon the stockists of Telco in the Light of the special facts and circumstances of that particular case. Each type of business has, undoubtedly, its peculiarities, its own mode of operation, the special features relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance and repair of the vehicles supplied. It would mount to an application of the law in a thoroughly doctrinaire fashion if we were to deduce some general principles, from the very different facts of the Telco case and attempt to apply them to those of the case now before us. Thus, the contention advanced on behalf of the appellant, against a doctrinaire approach in such cases, really weighs against the appellant company. In the Telco case, the agreement could not be understood without reference to the actual facts to which they were sought to be applied. Those facts explained the nature of the special agreements for restriction or distribution of areas. In the case before us, the problem entirely different. This is not a case in which certain terms of the agreement require to be explained by the facts to which they were meant to be applied. It is a Clear case in which the meanings of the clauses are decisive. If these clauses are capable of being so used, on the meanings which appear unambiguously from them, as to undoubtedly restrict trade, the intention to so use them to restrict trade could reason- ably be inferred without any difficulty. Otherwise, why have them ? No or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be taken through the oral evidence, as has been attempted to be done, because that is shut out by an application of provisions of ss. 91 and 92 of the Evidence Act if all we need do is to interpret the agreement. We are unable to see why these provisions do not apply here. Not much argument appears to us to be needed to demonstrate that the last sentence in paragraph 5 of the above mentioned clause places the redistribution stockist at the mercy of the company which can dictate to him what amounts of various commodities he shall purchase and accept from the company in the form of a total lot supplied to him. The company need only send to the redistribution stockists what it shah at its discretion send to the Redistribution Stockists for fulfilling its obligations under this Agreement . The meaning and effect are obvious here. The introduction of the word shall does not bind down the exercise of the discretion by reference to any requirements of the consumers in a particular area which the stockists may convey to the company. Hence, if the stockists want to remain on the list of the redistribution stockists of the company. the stockist is bound to accept and carry out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission modifying clause 5 only makes the position crystal clear. Inasmuch as clause 5, even before deletion of the last sentence of it by the Commission, expressly gives the stockist the discretion to sell at lower than maximum resale prices stipulated, the agreement was not struck by s. 33(1)(b) of the Act. But, the deletion of the last sentence was essential to prevent possible misuse of the company's powers, by resort to it, so as to even regulate prices contrary to express provisions found earlier in the clause. Turning now to clause 9 of the agreement, we think that the Commission was right in rejecting the argument that evidence led on behalf of the company was enough to establish that clause 9 fell within one of the gateways provided by section 38 of the Act. A power to impose restrictions falling under this provision had to be justified by the company by actual proof of a public interest which could not be better served without it. The submission that section 38 could be applied here amounts at least to a concession that a clause conferring such wide power upon the manufacturer may be so used as to amount to a restrictive practice. It is the practice of putting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be a very exceptional set of facts indeed which could justify lodging of such a power in the manufacturer. The Commission has dealt with a good deal of evidence to justify its conclusion that the need to justify the lodging of such a power in the company has not been established. We see no reason to disturb it. Under the provisions of section 55 of the Act, an appeal lies to this Court only on one of the grounds mentioned in section 100 of the Code of Civil Procedure. It is, therefore, necessary in all such cases for counsel to clearly formulate and direct our attention to only questions of law which arise so that these may be decided. It is not permissible to go over the whole range of evidence led as was attempted before us. Learned counsel for the appellant when asked by us to formulate the questions of law which arise mentioned the following questions: Firstly, whether the Commission was right in applying what he described as the perse rule as opposed to the rule of reason . It was submitted that the correct rule which should have been applied is stated in Board of Trade of the City of Chicago v. United States of America, as follows (at p. 237): Every agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of trade fixed prices at which they could buy or sell during an important part of the business day is an illegal restraint of trade under the Anti-trust Law. But the legality of an agreement or regulation cannot be determined by so simple a test as whether it restrains competition . Apparently, Dr. Singhvi means, by his plea against the use of a perse rule , nothing more than an assumption, that a restriction is illegal in itself, should not be made without examining its impact upon the particular trade involved. As contrasted with any such assumption what the learned counsel describes as the rule of reason was stated in the earlier passage quoted above giving the nature of facts to be considered so as to determine the context in which the restraint was imposed. This Court accepted the correctness, in the Telco case (supra), of the approach that no bald or simple test, divorced from the context or surrounding circumstances, should be adopted in judging the legality of a restraint upon trade. Such a view, applicable to actual restrictions imposed, has really nothing to do with the rules relating to interpretation of documents which are used in finding out the effect and inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of trade, lay down rules of reason at variance with the ones we are applying here. The rules of reason applicable to a case like the one before us may be simply stated as follows: Firstly, the meaning of the impugned clause or clauses in an agreement said to offend the law must be determined according to law; secondly, the possible effects of such a clause upon competition in the trade to be regulated must be determined. We think that the Commission had rightly applied these rules and found the clauses to be capable of misuse. We think that this was enough to vitiate the impugned clauses. We would like to make it clear that we are really concerned only with the law as we find it in our own statute and can only examine evidence in the light of our own law of evidence. We think that the confusion which may be created by using terms--such as perse rule---which could perhaps be more usefully applied to indicate doctrines or to describe practices developed under very different sets of circumstances in other countries with statutory provisions couched in language which differs from that before us, should be avoided so far as possible. Secondly, it was submitted that we should lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere declaration of intention to exercise a power so as to benefit the public. We are not satisfied, on the evidence actually adduced and placed before us, that this power was necessary so as to benefit the public. Furtherfore, we cannot reassess evidence. Actual benefit to the public is a question of fact on which findings cannot be reopened unless some error of law is revealed. No error of law in assessing evidence is disclosed. This is an additional reason for not disturbing the findings of fact recorded by the Commission. Sixthly, it was submitted that the Commission had ignored the last sentence of clause 9 in interpreting it. We have, however, considered it and find that, far from making clause 9 more acceptable and reasonable, the last part of it makes it more objectionable and unreasonable inasmuch as it enhances the powers of the Company. Learned counsel for the appellant company has pointed out that the order of the Commission was to come into force from 1 July 1976,' so that the appellant company had nearly four months to rewrite the agreements which are over four thousands in number. He prays for extension of time for six months from today for executing fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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