Appeal No 680 of 1976
From the Judgment and Order dated the 17th March 1976 of the Monopolies and Restrictive Trade Practices Commis sion New Delhi in RTP Enquiry No 11 of 1974
LM Singhvi Ravinder Narain Talat Ansari and Shri Narain for the Appellant
LN Sinha SolGeneral B Datta and Girish Chandra for Respondents Nos 1 and 2
GA Shah and N Nettar for Respondent No 13 The Judgment of the Court was delivered by CJ
This is an appeal under section 55 of the Monop olies  Restrictive Trade Practices Act 1969 hereinafter referred to as the Act  against the order and judgment of the Monopolies  Restrictive Trade Practices Commission New Delhi hereinafter referred to as the Commission  in proceedings started under section 10a iv of the Act against the appellant Ms Hindustan Lever Ltd hereinafter referred to as the Company  upon information furnished by Bhogilal Manilal Shah of Ms Shah Manilal Motichand  Sons of Poona hereinafter referred to as the informant 
The informant was a redistribution stockist of the appellant company carrying on business 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 5The 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 repre sentatives 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 459 Stockist shall purchase and accept from the Company such stock as the Company shall at its discretion send to the Redistribution Stockist for fulfilling its obligations under this Agreement
In order to ensure equitable and reasonable distribution of stocks at fair prices the Redistribution Stockist shall not rebook or in any way convey transport or despatch parts of stocks of the products received by him outside the aforesaid town except when he is so expressly directed in writing by the Company
He shall also whenev er so required by the Company make available from the stocks of Company s merchandise purchased by him such part as the Company directs him
to do for purposes of resale on his behalf by the Company s employee
It is alleged that the two clauses set out above found in identical agreements entered into by the Company with its stockists whose number is quite large constitute or autho rise restrictions which are unreasonable and illegal
Hence it was submitted by the respondents that it must be struck down or modified so as to make the business and trade of the appellant company and its stockists conform to the requirements of law
The Commission had accepted the case brought to its notice by the informant and made the following order  1
Clause 5 of the Agreement Exhib it F shall stand modified so that the follow ing shall be substituted in place thereof 5
The Redistribution Stockists shall use his best endeavours to maintain and in crease the trade of the products in the said town and for this purpose he shah at all times keep and maintain adequate stocks of the products in all its packings and he shall carry out the instructions and directions including those as to maximum resale price which may from time to time be given by the Company or by the Company s accredited repre sentatives 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 Redistribu tion 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 2
The practices of resale price maintenance and full line forcing to which original clause 5 of the agreement related shall be discontinued and shall not be repeat ed
3 Clause 9 of the Agreement Exhibit F shall be void
4 The practice of area allocation to which clause 9 of the Agreement Exhibit F related shall be discontinued and shall not be repeated
460 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 Agree ment 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 Rs 127 per tin which was below the price of Rs 12905 per tin fixed by the Company
The informant stockist said that the price had to be reduced by him to remove public discontent
We think that the motives of the informant are quite irrelevant in such a case
All that the Commission and on appeal this Court has to examine is whether what would undoubtedly be a practice by the appellant company of introducing the two clauses complained of in its agreements with its stockists amounted to a restrictive trade practice
The distinction sought to be made on behalf of the appellant between a practice and clauses in a contract which give a company the power to regulate trade in a manner which may constitute a restriction appears to be inconse quential here
We do not think that we can isolate the terms of a contract from the actual practice of the company
It is not the case of the company anywhere that the clauses in its agreement with its stockists are to be treated as deadletter
Its case is that they do not operate as restrictions
The introduction of such clauses in so many agreements meant to regulate relations either between a principal and an agent or the seller and the stockist who acquires complete proprietary rights in the stock of goods purchased is itself a trade practice
The simple question before us is Can powers conferred upon the company under such clauses be exercised in such a way as to constitute restrictive trade practices
It is true that the practice of imposing restrictions under such clauses is one thing and the practice of intro ducing such clauses is quite another thing
Both may con stitute separate practices
Nevertheless the introduction of such clauses into an agreement between the manufacturer and the seller who purchases and stocks his goods is in itself something practised
It is immaterial that the use of powers under such clauses may constitute another set of practices which depend upon the existence of such clauses as sources or springs
Inasmuch as the introduction of clauses in such an agreement is a practice taken by itself the question whether such a practice amounts to a restric tive trade practice or not could only be decided by consid ering 461 whether the clauses could be so used as to unjustifiably restrict trade It would be specious reasoning in such a case to separate the clauses in the agreement from action under the agreement and then to urge that as evidence of action under the clauses is meagre or 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 20 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 pro duction or ii which tends to bring about manipula tion 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 0 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 practice which may have the effect of restrictions falling within the mischief provided for
In other words if the introduction of the clause in itself is a trade practice and could be used to prevent distort or restrict competition in any manner it may be struck down
A trade practice is defined by section 2u of the Act as follows  u trade practice means any practice relating to the carrying on of any trade and includes i anything done by any person which controls or affects the price charged by or the method of trading of any trader or any class of traders
ii a single or isolated action of any person in relation to any trade
This definition is wide enough to include any trade practice if it is in relation to the carrying on of a trade
It cannot be argued that the introduction of the clauses complained of does not amount to an action which relates to the carrying on of a trade
If the result of that action or what could reasonably flow from it is to restrict trade in the manner indicated it will undoubted ly be struck by the provisions of the Act
Reliance was sought to be placed by learned counsel for the appellant company on a recent decision of this Court in Tata Engineering  Locomotive Co Ltd vs The Registrar of the Restrictive 3 502 SCI77 462 Trade Agreements New Delhi1 hereinafter referred to as the Telco case where it was held The definition of restrictive trade practice iS an exhaustive and not an inclusive one
The decision whether trade practice is restrictive or not has to be arrived at by applying the rule of reason and not on the doctrine that any restriction as to area or price will per se be a restrictive trade practice
Every trade agreement restrains or binds persons or places or prices
The ques tion is whether the restraint is such as regulates and thereby promotes competition or whether it is such as may suppress or even destroy competition
To determine this ques tion three matters are to be considered
First what facts are peculiar to the business to which the restraint is applied
Second what was the condition before and after the restraint was imposed
Third what is the nature of the restraint and what is its actual or probable effect
It was also held there The question of competition cannot be considered in vacuo or in a doctrinaire spirit
The concept of competition is to be understood in a commer cial sense
Territorial restriction will promote competi tion 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 busi ness has undoubtedly its peculiarities its own mode of operation the special features relating to the market for it and the requirements of distribution of particular goods which may be the subject matter of an agreement so as to secure a just and equitable distribution consistently with maintenance of freedom of competition so that prices are not artificially pushed up
In the Telco case the subject matter of the agreement was sale of trucks of a type in which the Telco had a monopoly inasmuch as no other firm produced trucks which were of such special quality and specifications
Hence there was great demand for these trucks which were in short supply
Again for the mainte nance and running of those especially designed trucks the manufacturer had to provide especially trained and skilled personnel and special equipment and tools so as to enable stockists to service and repair trucks distributed
Unless the manufacturers were able to impose restrictions upon sales outside the areas in which they had 1  463 established their stockist cum servicing suppliers they could not at all render the kind of service they were giving in addition to selling
In other words it was a mixed practice for purchase of trucks and provision of specialised service to the consumers through the stockists
On the peculiar facts and circumstances of that case it was found that the agreements did not on the whole result in re stricting trade or curtailing competition
The facts of the case before us are entirely different
We are concerned here with a manufacturer of mixed consumer goods of different varieties
The appellant company pro duces dehydrogenated oil known in the market as Vanas pati toilet preparations of various kinds such as soaps shaving creams toothpastes and baby milk powder and animal feeds
The soaps manufactured by it are undoubtedly the main type of goods supplied
But it manufactures other type of goods too
It can therefore compel stockists to by them whether stockists want these other goods or not if the terms of the agreement are to be held to be binding and enforceable
The manufacturer is under no obligation to render any service in relation to maintenance of the goods supplied
The whole trade is completely unlike that of manufacture and sale of motor trucks for which the stock ists selling to the actual consumers had to as already pointed out also have the services of the manufacturer s trained personnel for the purposes of maintenance 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 oral evidence could be led to deduce their meaning or to vary it in view of the provisions of sections 91 and 92 of the Evidence Act
the principles of which were we think rightly applied by the Commission
The Telco case on the other hand was one in which extraneous evi dence could be led under section 92 proviso 6of the Evidence Act which may be set out here with Section 92 92When the terms of any such contract grant or other disposition of property or any matter required by law to be reduced to the form of a document have been proved 464 according to the last section no evidence of any oral agreement or statement shah be admit ted as between the parties to any such in strument or their representatives in interest for the purpose of contradicting varying adding to or subtracting from its terms Proviso 6 Any fact may be proved which shows in what manner the language of a document is related to existing fact
The principle embodied in section 926 of the Evidence Act which was applicable in Telco case supra is not for the reasons given above applicable in the case now before us
Indeed no attempt has been made by reference to any case law apart from the Telco case supra which we have dis tinguished above to show that extraneous evidence could have been led herein order to apply section 92 proviso 6 of the Evidence Act
In the Telco case this provision was not directly referred to but we think that it could have been applied there
Thus we think that the basic difficulty placed before us by learned counsel for the appellant in the way of examining the plain meaning and effect of clauses 5 and 9 of the Distribution Stockists agreement does not exist at all in the case now under consideration
We must therefore proceed to examine the meanings of these clauses from the point of view of what could be done by the Company under them
If what may be done under these clauses could be a restrictive practice as defined by the Act it was enough to vitiate them
A clause having been introduced in an agreement entered into as a part of the settled practice of the company could be struck by the provisions of section 20 of the Act set out above quite apart from what is actually done under it
We do not think that any other question is really relevant or need be considered by us at all in such a case
It is not a case in which we could be taken through the oral evidence as has been attempted to be done because that is shut out by an application of provisions of sections 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 demon strate 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 Agree ment
The meaning and effect are obvious here
The intro duction 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 decision of the company
Even if in view of some other practice adopted by the company 465 a power given in such wide terms was not meant to be exer cised unreasonably its presence in the agreement would be a needless surplusage which could whenever the company wanted it be used to impede freedom of competition and trade
This result was enough to make it quite objectionable
We therefore think that the Commission was quite right in reframing clause 5 in the way it did
We are unable to find any flaw in the detailed reasons given by the Commission for doing that
The Commission rightly points out that among agreements the registration of which is compulsory according to the provisions of Chapter V of the Act is under section 331b is any agreement requiring a purchaser of goods as a condition of such purchase to purchase some other goods
The last part of clause 5 as we have observed clearly makes it necessary for the stockist to purchase such goods and in such combination as the company may de cide
Hence it would be struck by section 331b of the Act
It has not been shown to have been registered under the Act
It is also submitted on behalf of the respondent that clause 5 of the agreement infringes section 331f of the Act which requires registration of 
any agreement to sell goods on condi tion that the prices to be charged on resale by the purchaser shall be the prices stipulat ed by the seller unless it is clearly stated that prices lower than those prices may be charged 0 The Commission held that clause 5 of the agreement meant provision for prices stipulated and that it had been so treated by the company in its circulars stating that prices lower than the maximum resale price stipulated by the company may be charged
If that was clear there was no reason why the company should have attempted to clarify by means of its circulars what according to it the stockist is free to do under the agreement
Even if the practice of the company by issuing circulars is established it does not justify the retention of clause 5 in a form which can be used to compel stockists to act on the company s behests whether reasonable or not
On the other hand it justifies its clarification by an alteration of it in the manner directed by the Commission so as to make the clause covering price regulation also very clear
The order of the Commis sion 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 section 331b 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 estab lish that clause 9 fell within one 466 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 in such a clause which has to be justified
The power given to the company under clause 9 is very wide
The manufacturer can compel the redistribution stock ists to make available to the company any stocks purchased by the stockist
It also compels the stockist to take the permission of the company for conveying transporting or despatching parts of stocks of the products received by him outside a specified town except when he is so expressly directed in writing by the company
It directly prevents him from doing so without the company s permission
If the stockist violates this condition the whole agreement can be revoked by the company so that the stockist loses his right to carry on business under the agreement
If what had to be justified is not how this power is actually used but the practice of conferring such powers upon the company by placing the stockist at the mercy of the company the evi dence of facts showing how the power is exercised could be relevant only very indirectly
However if it could be shown that some facts did exist which make it imperative to confer such a power on the company for the benefit of  the public that may be relevant to establish the existence of a gateway under section 38
But it could certainly not be used to determine the meaning of a clause for which it is not necessary here to go beyond the language of the clause involved
We are primarily concerned in this case as we have repeatedly emphasized with the clear meanings of the two clauses
As the Commission pointed out it is immaterial that a purchaser from outside may be able to get round clause 9 by purchasing across the counter from the stockist inside a town
The clause itself however gives to the company an unreasonably wide power of deciding what is actually fair and equitable distribution
The Commission very rightly points out that this is more properly a part of the duty of governmental authorities which may be entrusted with powers of rationing such consumers  goods if this is found to be necessary in public interest
However before any question of reasonableness of a power to ration any goods is entrusted by any method to any person or authority those goods must be shown to be scarce or in Short supply
That was the position in the Telco case supra
Evidence establishing such a need has not been shown to exist
And in any case it 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 467 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 per se 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 vs United States of America as follows at p 237 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 per haps 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 re straint 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 adopt ing the particular remedy the purpose or end sought to be attained are all relevant facts
This is not because a good intention will save an otherwise objectionable regulation or the reverse but because knowledge of intent may help the court to interpret facts and to predict consequences
We find no objection whatsoever in adopting the rule indi cated above in cases to which it applies
That was a case in which a rule adopted by the Board of Trade of the City of Chicago supra prohibiting offers to purchase during the period between the close of the call and the opening of the session on the next business day for sales of wheat corn oats or rye at a price other than at the closing bid was challenged
Hence questions relating to effects of the rule arose so as to determine its reasonableness
Such questions could not be determined without examining evidence of facts to which the rule was meant to apply and findings as to how it operated
The issue was whether the rule having regard to the facts to which it was to be applied offended against the Anti trust laws
The Government s case was thus stated by Mr Justice Brandeis at p 237  The Government proved the existence of the rule and described its application and the change in business practice involved
It made no attempt to show that the rule was designed to or that it had the effect of limiting the amount of 1 62 Lawp 231468 grain shipped to Chicago or of retarding or accelerating shipment or of raising or depressing prices or of discriminating against any part of the public or that it resulted in hardship to anyone
The case was rested upon the bald proposition that a rule or agreement by which men occupying positions of strength in any branch 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 agree ment or regulation cannot be determined by so simple a test as whether it restrains competi tion
Apparently Dr Singhvi means by his plea against the use of a per se 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 sur rounding 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 intent of words used in a document
It is after a difficulty of interpretation if any is resolved and a rule or a clause in an agreement is found to have either a clear meaning or to be ambiguous that its effect can be considered
No doubt that effect has to be examined to determine how a restraint actually imposed affects trade
It is one thing to say that the impact of the restraint imposed on trade should be considered with refer ence to the nature of the trade or business to be regulated
It is quite another to say that the effect cannot be gauged sometimes even by a bare examination of the meaning of a clause giving power to impose restraints apart from other evidence of what its actual effects are or may be
In some cases the effect itself is given primarily by the clear meaning of the language used in the clause which is alleged to infringe the law We do not think that any per se rule if we may use this somewhat quaint expression is adopted whenever a Court determines the meaning and effects of the words of a rule or a clause in an agreement
All that the Court does in such a case is simply to interpret the clause the effect of which may become obvious on a bare determina tion of the meaning or may be seen from other evidence too
Where that effect is not obvious as we have already indi cated evidence may be led to show how the language used is actually applied to the facts to which it was meant to apply
That is also a recognised rule of interpretation
It is the function Of Courts to indicate and explain the vary ing facts and circumstances to which different rules of interpretation may apply
Where meaning and intent of lan guage used is given by the words used nothing more is needed
469 Furthermore the Commission held that taking into account the nature of goods or the business to be regulated by the agreement under consideration the clauses as they stood were not permissible
It had applied the rule of reason in arriving at the conclusion that upon the facts of a business in commonly used consumer goods of several varie ties Which are not shown to be scarce clauses under con sideration having the obvious meaning and effect which their language carried with them are unreasonable and illegal
We are unable to see how any law laid down in American deci sions dealing with Anti trust laws or in English cases dealing with agreements in restraint 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 compe tition 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 con cerned 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 per se rule which could perhaps be more usefully applied to indicate doctrines or to de scribe 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 look at evi dence of what takes place in the trade under consideration rather than clauses 5 and 9 of the agreement we have consid ered
We have already indicated the correct procedure in such cases as the one before us
Indeed we think that a consideration of extraneous evidence is not required at all when the practice complained of is the introduction of clauses conferring wide powers which may be used to impose restrictions contrary to the Act
In such a case the introduction of clauses constitutes the restrictive prac tice
Hence their interpretation is all that we are really concerned with here in accordance with our law
Evidence of what is actually practised could only be relevant 1or pur poses other than a determination of the meaning and the effect which follows logically or reasonably from such determination
Thirdly it was submitted that in holding clause 9 to be invalid the purpose of equitable distribution which imposes a limit on the powers of the company was overlooked by the Commission
For the reasons already given we do not think that this supposed limitation reasonably restricts the company s power to decide what to distribute
The company is left entirely to itself to decide what is equitable distri bution
An interpretation of a document according to well established rules cannot be dispensed with by labelling it as an application of a per se doctrine
We think that the clause as it stands 470 confers too wide a power and has to be struck down wholly as unreasonable on that ground
Fourthly our attention was sought to be drawn to the absence of evidence of distortion of competition and the presence of evidence that competition prevails in the market despite these clauses
We have already held such oral evidence to to really unnecessary for judging the possible effects of the clauses
The probability of the effect is only part of the rule of reason to be applied where extrane ous evidence is admissible
In the instant case we are only as already indicated above concerned with a reasonable and natural interpretation of the clauses of the agreement and their reasonably possible effects
Fifthly it was submitted that there was clear evidence of public benefit from an equitable distribution in actual practice so that the requirements of a gateway under section 38 were satisfied
We cannot assume public benefit from a mere declaration of intention to exercise a power so as to bene fit 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 find ings 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 agreements
It is not really necessary for us to fix any particular time within which the company will print or get new agreements executed on freshly printed forms in accordance with law
That is a matter for parties themselves to each agreement to decide and work out  All that we need make clear is that all agreements which are operative and binding between parties will be so interpreted now as if clause 9 was not there at all and clause 5 was there only in the modified form which omits the last sentence from clause 5 as it originally stood
However if the company wants to complete any for malities for bringing each individual agreement into line with the law as declared by this Court it may do so and it will file within six months from today an affidavit showing that it has done this
The requirement to file 471 such an affidavit showing compliance will ensure that the company has taken due steps to inform each stockist of the correct legal position
The time given for doing this wilt not however authorise it to act under those parts of the agreement which this Court has declared to be illegal
Subject to the observations made above we uphold the Commissions order and dismiss this appeal with costs
PBR Appeal dismissed


Summary:
According to section 20 of the Monopolies  Restric tive Trade Practices Act a restrictive trade practice means inter alia a trade practice which has or may have the effect of preventing distorting or restricting competi tion in any manner
The appellant who was a manufacturer of consumer goods such as soaps and toilet preparations entered into agreements with redistribution stockists for the wholesale distribution of its products
Clause 5 of the agreement inter alia provides that a stockist shall keep and maintain adequate stocks and shall carry out instructions and direc tions given by the appellant
He is prohibited from charg ing anything more than the stipulated maximum resale price
The last part of the clause provides that the redistribu tion stockist shall purchase and accept from the company such stock as the company shall at its discretion send to the redistribution stockist for fulfilling its obligations under this agreement
Clause 9 prohibits the redistribution stockist from re booking or in any way conveying transport ing or despatching parts of stocks of the products received by him outside the town except when he was so expressly directed in writing by the appellant
He shall also when ever so required by the appellant make available from the stocks such part as the appellant directs him to do
On a complaint made to the Monopolies  Restric tive Trade Practices Commission by one of the stockists the Commission after examining cls
5 and 9 of the impugned agreement held that the practice of resale price mainte nance and full line forcing to which the original el
5 related shall be discontinued and shall not be repeated
It directed deletion of the last sentence of cl 5 and declared cl 9 as void
Dismissing the appeal to this Court
HELD The Commission was right in reframing cl 5 in the way it did
Deletion of the last sentence of cl 5 was essential to prevent possible misuse of the appellant s power so as to regulate the prices contrary to the express provisions in the clause
a The last part of cl 5 placed the redistri bution stockist at the mercy of the appellant which could dictate to him what amounts of various commodities he shall purchase and accept from the company
It also empowered the appellant to allocate send to the redistri bution stockist only what it shall at its discretion send to the redistribution stockist for fulfilling its obliga tions under the agreement
464 G b The word shall used in the clause did not bind down the exercise of the appellant s discretion by reference to any requirements of the consumers in a particu lar area in which the stockist might sell
The stockist was bound to accept and carry out the appellant s decisions
464 H 2a The contention that though the clauses gave power to the appellant to regulate trade in practice they did not operate as restrictions is not well founded
It is not possible to isolate the terms of a contract from the practice
The appellant did not intend that the clauses in the agreement would be treated as 456 dead letter
Although the practice of imposing restrictions under such clauses and the practice of introducing such clauses are separate practices introduction of a clause like cl 5 is itself a trade practice
Moreover even if the power given in such wide terms was not meant to be exercised unreasonably its presence in the agreement was a needless surplusage which could be used to impede freedom of competition and trade and this made it objectionable
465 A b Inasmuch as the introduction of clauses in an agree ment taken by itself is a practice it would be specious reasoning to separate the clauses in the agreement from action under the agreement and then urge that the clauses are innocuous and should not be modified
460 H 461 A 3
From the definition of restrictive trade practice it is clear that if the introduction of the clause in itself is a trade practice and could be used to prevent distort or restrict competition in any manner it could be struck down
The definition of trade practice is wide enough to include any trade practice if it is in relation to the carrying on of a trade
If the result of introduc tion of a clause is to restrict trade it would be struck by the provisions of the Act
461 E G 4a Each type of business has its peculiarities its own mode of operation the special features relating to the market for it and the requirements of distribution of par ticular goods to secure a just and equitable distribution consistently with the maintenance of freedom of competition so that prices are not artificially pushed up
462 G b The Telco case is distinguishable from the present on the ground that in that case the manufacturer who had the monopoly of special quality trucks had to provide specially trained and skilled personnel with special equipment and tools for their maintenance and running
Therefore the agreements did not restrict trade or curtail competi tion
462 H c In the instant case the appellant could compel the stockist to buy the goods manufactured by it irrespective of whether the stockist wanted the goods or not
The appel lant was under no obligation to render any service for the maintenance of the goods supplied
Secondly the present is not a case in which the terms of the agreement were required to be explained by the facts to which they were meant to be applied
463 C D Tata Engineering  Locomotive Co Ltd vs The Registrar of Restrictive Trade Agreements  distin guished
If it was clear from the agreement that prices lower than the maximum re sale price stipulated might be charged by the stockist then there was no reason why it was necessary to clarify by circulars what the stockist was free to do under the agreement
Even if the appellant s practice of issuing circulars was established it did not justify retention of cl 5 in a form which could be used to compel the stockist to act at the appellant s behests
The last part of cl 5 made it necessary for the stockist to purchase such goods and in such combination as the appellant might decide
Hence it would be struck by section 331b of the Act
465 C b Inasmuch as
the original el 5 gave the stockist the discretion to sell at lower than maximum resale prices the agreement was not struck by section 33 1  b
But the deletion of the sentence was essential to prevent possible misuse of the appellant s power by resort to it
465 G The Commission was justified in declaring cl 9 as void and inoperative
465 H 7a The power to impose restrictions falling under section 38 had to be justified by the appellant by actual proof of public interest which could not be better served without it 466 A
b Clause 9 gave the appellant an unreasonably wide power of deciding what is actually fair and equitable distribution which is more a part of the duty of governmen tal authorities entrusted with powers of rationing such consumer goods in public interest
Before any question of reasonableness of a power to 457 ration any goods is entrusted to any person or authority those goods must be shown to be scarce or in short supply and evidence establishing such a need has not been shown to exist in this case
466 F G c The appellant was wrong in its contention that in holding cl 9 to be invalid the purpose of equitable distribution was overlooked by the Commission
This sup posed limitation did not restrict the appellant s power to decide what to distribute
The appellant was left to itself to decide what is equitable distribution
The clause conferred too wide a power and is unreasonable
469 H 9
Under section 55 an appeal lies to the Supreme Court only on one of the grounds mentioned in section 100 CPC
It is necessary for the parties to formulate questions of law that arise for decision
467 A 10a The plea against use of per se rule referred to by the appellant means that on the assumption that a restriction is illegal in itself should not be made without examining its impact upon the particular trade involved
On the other hand the rule of reason envisages consideration of facts of each case so as to determine the context in which the restraint was imposed
468 C Board of Trade of the City of Chicago vs United States of America b In Telco case this Court accepted the correctness of the approach that no bald or simple test should be adopted in judging the legality of a restraint upon trade
Such a view has nothing to do with rules _relating to inter pretation of documents used in finding out the effect and intent of words used in a document
Whenever a court deter mines the meaning and effect of the words of a rule or a clause in an agreement it does not adopt what is termed as per se rule
All that the court does in such a case is to interpret the clause the effect of which may become obvious on a bare determination of the meaning or may be seen from other evidence
Where that effect is not obvious evidence may be led to show how the language used is actually applied to the facts to which it was meant to apply
468 D F In the instant case the Commission has correctly ar rived at the conclusion that the clauses were unreasonable and illegal after taking into account the relevant fac tors
The rules of reason applicable to a case like the present are i the meaning of the impugned clause or clauses in an agreement must be determined according to law and ii the possible effects of such a clause upon competition in the trade to be regulated must be determined
469 B C c Consideration of extraneous evidence is not required at all when the practice complained of is the introduction of clauses conferring wide powers Which may be used to impose restrictions contrary to the Act
In such a case the introduction of clauses constitute restrictive practice
Evidence of what is actually practised could only be rele vant for purposes other than a determination of the meaning and the effect which follows logically or reasonably from such determination
469 F G d No oral evidence could be led to adduce the meaning of the clauses in the agreement in view of sections 91 and 92 of the Evidence Act
Section 92 proviso 6 is not applicable to the present case
464 C e It is unnecessary to admit extraneous evidence as to the absence of distortion of competition
The probability of the effect is only part of the rule of reason to be applied where extraneous evidence is admissible
470 B f It is not possible to assume public benefit from a mere declaration of intention to exercise a power so as to benefit the public
On the evidence adduced it was not shown that this power was necessary so as to benefit the public
470 D g 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 was disclosed
E 458 h The confusion which may be created by using such terms as per rule which could be applied to describe prac tices developed in other countries with different statutory provisions should be avoided
469 D E 10
Proceedings before the Commission  are maintainable at the instance of a complainant whose motives in making the complaint are quite irrelevant
All that the Commission and on appeal this Court has to examine is whether a practice by a company of introducing clauses complained of in the agreements with the stockists amounted to a restric tive trade practice
460 D