Case: Raymond Woollen Mills Ltd. (Now known as M/s. Raymond Ltd.) &amp; Another Vs. Director General (Investigation &amp; Registration) &amp; Another

by evidence, can be looked into. The preliminary investigation report, as such, is not evidence on record. As such, any reference to the contents thereof, which have not been put in evidence and subjected to cross examination, cannot be looked into. This is without prejudice to the contention that there is nothing stated in the preliminary investigation report, which in any way establishes that any competition was affected within the meaning of section 2(o) of the Act and that competition was affected to any "material degree" in the relevant trade or industry, as contemplated under clause (h) of section 38(1) of the Act.37. The appellants submitted that the findings given by the Commission that the dealership of the complainant was "terminated" by the appellants herein and held it to be a "restrictive trade practice", was wholly uncalled for and untenable.38. The appellants submitted that no finding with regard to termination of dealership could be made since there was no such charge or allegation made in the Notice of Enquiry. A reference has been made to the case of M/s. Lakhanpal National Ltd. v. MRTP Commission and Another [(1989) 3 SCC 251] . This court in para 9 of the said judgment observed as under: "The argument was rightly repelled on behalf of the appellant on the ground that this aspect cannot be examined in the present case in view of the limited scope of the charges as mentioned in the Show Cause Notice quoted above." 39. The appellants contended that since there was no allegation of "restrictive trade practice" on account of the alleged termination of the agreement, no order in respect thereof could be passed by the Commission. The order passed in respect of the same is clearly illegal and without jurisdiction.40. The appellants further contended that, in any event, the evidence in the present case clearly establishes that the complainant firm M/s Roop Milan had itself asked for return of its security deposit from appellant No.2, which was duly returned and thereafter, there was no dealing between the parties. As such, there can be no case of termination of dealership. The said complainant firm was mainly dealing with the products of other manufacturers and out of its total turnover of Rs.25 lakhs per annum, its purchases from appellant no. 2 was only to the extent of Rs.50,000 per annum. In these circumstances, the said complainant firm did not desire to continue to deal with the appellants products and as such sought refund of its security deposit, which was duly made. The relevant extract in this behalf from the evidence of Viren Singh, partner of the complainant firm is reproduced as under: "It is correct that in our letter we had asked a refund of the security deposit which was refunded to us by the respondent no. 2 along with their aforesaid letter dated 28.9.1987. In fact we received the refund as per memo dated 28.9.1987. It is not a letter as such and this is Exh. AW1/R-18." 41. The appellants submitted that, in any event, mere termination of dealership agreement does not affect competition within the meaning of section 2(o) of the MRTP Act and cannot be treated as a "Restrictive Trade Practice". Further, the termination, if any, of a single retail dealer cannot affect competition to any "material degree" in the relevant trade or industry, within the meaning of clause (h) of section 38(1) of the Act.42. The appellants submitted that the Commission was not justified in passing any order regarding termination of dealership. The appellants also submitted that appellant no. 1 is only a holding company of which appellant no. 2 is a subsidiary company. There is no transaction of sale or dealing by appellant no. 1. No manufacturing or selling activity is carried out by appellant no. 1 and as such, no "tie-up" of sales could be resorted to by appellant no. 1. Therefore, the Commission was not justified in passing any order against appellant no. 1. The appellants submitted that the impugned order of the Commission ought to be set aside and the notice of enquiry be discharged. 43. We have carefully gone through the entire record in this case and heard the learned counsel for the parties at length. From the proper analysis of the entire evidence on record, we reach to an irresistible conclusion that no "tie-up" of sales of trousers as a condition has been established. Therefore, the Commissions passing any consequential order on the basis of tie-up is wholly untenable and unsustainable in law.44. The court would be justified in passing the order on alleged restrictive trade practice only when it is "prejudicial to public interest" under clause (h) of section 38(1) of the MRTP Act. The pre-condition for passing such an order is that the restriction as imposed directly or indirectly when restricts or discourages competition to any "material degree" in any trade or industry, then only it would be considered as "prejudicial to public interest". The court should not pass an order of "cease and desist" where the alleged restrictive trade practice does not have the impact on restricting competition to any material degree.45. When the evidence on behalf of the appellants clearly shows that there are several manufacturers including small scale manufactures, the little share of the complainant/informant does not affect the competition in the relevant trade or industry and, accordingly, in these circumstances, to pass any order under section 38(1)(h) cannot be justified.46. In the instant case, the complainant/informant had requested for refund of the security amount and, therefore, it was refunded. It was really not a case of "termination of dealership". There was no charge or allegation of termination of dealership in the notice of enquiry, therefore, the Commission was not justified in passing the order based on "termination of dealership". Even otherwise also, the termination of single dealership cannot affect competition to any "material degree" in the relevant trade or industry within the meaning of clause (h) of section 38(1) of the MRTP Act.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]43. We have carefully gone through the entire record in this case and heard the learned counsel for the parties at length. From the proper analysis of the entire evidence on record, we reach to an irresistible conclusion that noof sales of trousers as a condition has been established. Therefore, the Commissions passing any consequential order on the basis ofis wholly untenable and unsustainable in law.44. The court would be justified in passing the order on alleged restrictive trade practice only when it is "prejudicial to public interest" under clause (h) of section 38(1) of the MRTP Act. Thefor passing such an order is that the restriction as imposed directly or indirectly when restricts or discourages competition to any "material degree" in any trade or industry, then only it would be considered as "prejudicial to public interest". The court should not pass an order of "cease and desist" where the alleged restrictive trade practice does not have the impact on restricting competition to any material degree.45. When the evidence on behalf of the appellants clearly shows that there are several manufacturers including small scale manufactures, the little share of the complainant/informant does not affect the competition in the relevant trade or industry and, accordingly, in these circumstances, to pass any order under section 38(1)(h) cannot be justified.46. In the instant case, the complainant/informant had requested for refund of the security amount and, therefore, it was refunded. It was really not a case of "termination of dealership". There was no charge or allegation of termination of dealership in the notice of enquiry, therefore, the Commission was not justified in passing the order based on "termination of dealership". Even otherwise also, the termination of single dealership cannot affect competition to any "material degree" in the relevant trade or industry within the meaning of clause (h) of section 38(1) of the MRTP Act.The evidence of P. H. Hiranandani reveals that all garments including trousers were in short supply and had great demand. Therefore, the allegation that the supply of trousers had been tied up with any other garment for sale is without any basis.With regard to "territorial restriction" and "exclusive dealings", this court held in para 61 that these conditions were not "prejudicial to public interest" and that both these restrictions were in public interest.Similarly, for invoking section 38(1)(h) of the MRTP Act to show that in any event, it could not be said that competition was affected to any "material degree" in the relevant trade or industry, the appellants witness Pradeep H. Hiranandani has clarified in para 8 of the affidavit of evidence that in view of the negligible market share of the appellants in the relevant trade, it cannot be even alleged that the competition was affected to any "materialthe present case, there is no allegation of any "Agreement" entered into between the parties, either oral or in writing under which any practice ofsales was specified. As such, section 33 has no relevance to the present case.