Case: Mahindra &amp; Mahindra Ltd Vs. Union Of India &amp; Anr

The facts giving rise to the appeal are for the most part undisputed and they may be briefly stated as follows : The appellant is a public limited company engaged in manufacture and sale of jeep motor vehicles and their spare parts and accessories. Since 1947, the appellant was marketing and distributing jeep motor vehicles and it had set up a large and complex network of dealers, who were described as distributors, for marketing ande service of such vehicles. In or about 1956 the appellant started manufacturing its own jeep motor vehicles and since then it has been manufacturing such vehicles and distributing and marketing the same through its network of distributors. The appellant has appointed these distributors for marketing and sale of jeep motor vehicles on certain terms and conditions contained in a standard distributorship agreement. The material clauses of this agreement read as follows :" Section (3) : Territory of distributorThe Company grants to Distributor thee privilege (except as hereinafter provided) of selling at retail and the right (except hereinafter provided) to appoint in writing by forms of agreements approved by the Company, Dealers to sell at retail the products enumerated in section 2 of this agreement, within the following territory and also demarcated in the map attached hereto and which forms a part of this agreementDistributor accepts the above retail selling privileges and agrees to develop with diligence the sales of sale products in said territory in accordance with this agreement and undertakes to achieve the quantum of sales in the territory as may be fixed by the company from time to time.Section (4) : Limitations on territorial rights(i) Distributor agrees not to solicit outside of the territory described in Section 3the purchase of any productsSection (6) : Price and paymentDistributor will pay for products the Companys established Distributor net prices in effect on date on despatch. Price lists will be furnished to Distributor by the Company, but the Company reserves the right to change prices at any time without noticeSection (11) : Price changesIf the Company reduces its published suggested retail list price, for any current model of Jeep motor vehicles, the Company will make an allowance to Distributor as hereinafter provided. The allowance shall be made in respect of new and unused Jeep motor vehicles of the then current model in respect of which the price change has been made which have been purchased by Distributor from the Company within a period of 30 (thirty) days prior to the effective date of such decrease in suggested list price, and which distributor shall have in his unsold stock on such effective date. The allowance shall be equal to the difference between the net amount paid to the Company for such Jeep motor vehicle (less all allowance thereto granted), and the net amount which would have been paid had such Jeep motor vehicles been purchased at the reduced price. No allowance, however, shall be made unless there is a reduction in the RETAIL list price and increases in discounts, bonuses and the like shall in no event be considered as a reduction in priceSection (17) : Care of owner and customer relations(e) To refrain from selling or offering for sale any competing product. The Company shall be the sole judge as to whether a product is competing or not ".The appellant by its letter dated 27th January, 1971, submitted to the Registrar of Restrictive Trade Agreements (hereinafter referred to as " the Registrar ") certified copies of agreements entered into by the appellant with the distributors for registration, since in the opinion of the appellant, they were registrable under the provisions of Chap. V of the Act. The appellant also submitted to the Registrar along with its letter dated 19th May, 1972, four copies of the standard distributorship agreement for registration in terms of cl. (ii) of r. 12 of the Monopolies and Restrictive Trade Practices Rules, 1970 (hereinafter referred to as " the Rules "), and the standard distributorship agreement was registered by the Registrar under s. 35 of the ActOn 17th December, 1975, the Registrar made an application to the Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as " the Commission ") under s. 10(a)(iii) of the Act pointing out to the Commission that the standard distributorship agreement entered into by the appellant with the distributors was filed by the appellant for registration in the office of the Registrar and the same had been duly registered under s. 35 of the Act. The Registrar drew the attention of the Commission to cls. (3), (4), (5), (6), (11), (13), (14), (17) and (20) of the standard distributorship agreement and claimed that the provisions contained in these clauses related " to restrictive trade practices relating to imposing restrictions on persons and classes of persons to whom goods are sold and from whom goods are bought ;e forcing ; exclusive dealing ; granting or allowing concessions ; discounts, overriding commission, etc., in connection with or by reason of dealings ;resale pricemaintenance ; and allocation of area/market for disposal of products covered under the agreement, respectively, attracting cls. (a), (b), (c), (e), (f), and (g) of s. 33(1) and/or s. 2(o) of the Act " and that these restrictive trade practices had and might have the effect of preventing, distorting and restricting competition and tended to bring about monopolisation of prices and conditions of delivery and to effect the flow of supplies in the market relating to goods covered under the standard distributorship agreement in such manner as to impose on the consumers unjustified costs and restrictions and the same were prejudicial to public interest. The Registrar prayed on the basis of these allegations that the Commission be pleased to inquire into the restrictive trade practices indulged in by the appellant, under s. 37 of the Act and pass such orders as it might deem fit and proper. The Commission, on receipt of this application, decided, in exercise of the powers conferred upon it under ss. 10(a) and 37 of the Act, to hold inquiry into the restrictive trade practices complained of by the Registrar and issued notice dated 2nd January, 1976, under regln. 53 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974 (hereinafter referred to as " the Regulations "), to the appellant that if the appellant wished to be heard in the proceedings before the Commission, it should comply with the requirements of reglns. 65 and 67 failing which the Commission would proceed with the inquiry in the absence of the respondent. The appellant, by its letter dated 3rd February, 1976, ackowledged receipt of the notice and intimated to the Commission that it did not wish to be heard in the proceedings before the Commission but put forward its submissions in regard to the restrictive trade practices alleged by the Registrar in his application. The appellant pointed out that the clauses of the standard distributorship agreement complained of by the Registrar did not constitute restrictive trade practices for the reasons explained in the letter and requested the Deputy Secretary to place their submissions before the Commission at the enquiry to be held by it. The letter was purported to be submitted in terms of regln. 36(3), but the reference to this regulation was obviously under some misapprehension because this regulation occurred in Chap. V which provided the procedure for reference under Chaps. III and IV and it had no application in case of an inquiry under s. 37 of the Act. The Joint Secretary (Legal) of the Commission pointed out to the appellant by his letter dated 11th February, 1976, that if the appellant wished to be heard in the proceedings, the appellant should comply with the requirements of reglns. 65 and 67 and it is only if the appellant did so, that it could file a reply in answer to the application of the Registrar and, moreover, the reply had to be properly drawn and duly verified and declared as provided in those Regulations. The Joint Secretary (Legal) made it clear that in view of this legal position obtaining under reglns. 65 and 67, it was not possible to take note of the contents of the letter addressed by the appellant setting out the explanation for the various clauses impugned in the application of the Registrar. Though this position in law was specifically pointed out by the Joint Secretary (Legal) on behalf of the Commission, the appellant did not comply with the procedure set out in reglns. 65 and 67 with the result that the Commission decided to proceed ex parte against the appellant. The Registrar filed an affidavit of the Assistant Registrar dated 10th May, 1976, in support of the allegations contained in the application but this affidavit surprisingly did not contain any further or other material than that set out in the application. No other evidence, oral or documentary, was produced by the Registrar and the Commission proceeded to decide the issues arising in the enquiry on the basis of the application supported by the affidavit of the Assistant Registrar. The Commission, after going through the application and the affidavit of the Assistant Registrar and hearing the Registrar, made an order dated 14th May, 1976, the operative part of which was in the following terms:"(1) The respondent is hereby restrained and prohibited by any agreement with any distributor to restrict by any method the persons or classes of persons to whom the goods are sold whether such person be retail purchaser or a dealer(2) The respondent is hereby restrained and prohibited from restricting in any manner, any purchaser whether a dealer or otherwise in the course of its trade from acquiring or otherwise dealing in any goods other than those of the respondent or the goods of any other person(3) The respondent is hereby restrained and prohibited from selling any goods to any distributor, dealer or otherwise on the condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the respondent unless it is clearly stated that prices lower than those prices may be charged. The respondent is hereby directed that in all future price lists it must state on the cover or on the front page that the prices if any indicated therein asresalepricesare maximumpricesand that thepriceslower than thosepricesmay be charged(4) The respondent is hereby restrained and prohibited from allocating any area or market to any distributor or dealer for the disposal of the respondents goods(5) The respondent is hereby restrained and prohibited from preventing any distributor from appointing any dealer of its own choice on such terms and conditions as may be mutually agreed upon between distributors and dealers in cases where the respondent does not undertake any obligation, liability or responsibility in respect of the dealers(6) The clauses in the agreements relating to the above restrictive trade practices are hereby declared to be void. The practices arising therefrom shall be discontinued and shall not be repeated.(7) The respondent shall within 3 months from the date of service of this order on it make and file an affidavit before the Commission setting out the manner in which this order has been given effect to. A copy of the said affidavit shall simultaneously be furnished to the Registrar(8) There will be no order as to costs. "Since the appellant was required to file an affidavit of compliance within three months as directed by cl. (7) of the order, the appellant filed an affidavit dated 10th September, 1976, stating that the appellant had fully implemented in practice the directions contained in paragraphs (1) and (5) of the order and refrained from enforcing against the distributors any of the clauses which had been declared void by the Commission. The appellant also pointed out that a draft of a new distributorship agreement was being finalised by the appellant with a view to giving effect to the " restrictions and prohibitions " contained in the order. The Registrar filed an affidavit of the Deputy Registrar dated 27th September, 1976, seeking particulars from the appellant showing how the appellant had implemented the directions contained in the order. The appellant by its reply dated 11th November, 1976, pointed out that since the date of receipt of the order, the appellant had not given effect to the trade practices covered by paragraphs (1) to (5) of the order nor required any of the distributors to abide by the clauses of the standard distributorship agreement relating to those trade practices and, on the contrary, intimated to the distributors that the old distributorship agreement would have to be substituted by a new revised agreement. The appellant submitted that since the clauses of the standard distributorship agreement declared void by the Commission were not enforceable in law by the appellant, it did not make any difference whether or not they were deleted from the existing distributorship agreement and in view of the fact that a new revised agreement was being prepared which would comply with the directions contained in the order, it was not necessary to effect any amendments in the existing distributorship agreement. It seems that there was a hearing before the Commission on this issue as regards compliance with the directions contained in the order and the draft of the revised distributorship agreement prepared by the appellant was considered and pursuant to the suggestion made by the Commission, the appellant agreed to amend two clauses in the draft and the Commission by its order dated 7th December, 1976, directed that the revised distributorship agreement should be filed by the appellant by 31st March, 1977.Now, it appears that subsequent to the order of the Commission dated 7th December, 1976, an important decision was given by this court in Tata Engineering & Locomotive Co. Ltd. v. Registrar of Restrictive Trade Agreements [1977] 2 SCR 685   ; 47 Comp Cas 520 (SC), relating to the interpretation of some of the relevant provisions of the Act bearing on restrictive trade practices. This decision was given in an appeal preferred by Tata Engineering & Locomotive Co. Ltd. (hereinafter referred to as " the Telco ") against an order made by the Commission in an enquiry under s. 37 and it reversed the view taken by the Commission in several important respects. Though this decision was given on 21st January, 1977, it was not fully reported until March, 1977, and on reading it, the appellant felt that the order of the Commission dated 14th May, 1976, required reconsideration, as it was contrary to the law laid down in this decision. The appellant accordingly made an application to the Commission on 31st March, 1977, where, besides asking for extension of time for filing a copy of the revised distributorship agreement on the ground that the dealers were spread out all over India and it would take considerable time for execution of the revised distributorship agreement by them, the appellant pointed out that it had not contested the enquiry proceeding under s. 37 in the first instance because the decision given by the Commission in the Telcos case was directly applicable, but since that decision of the Commission was reversed by this court in appeal, the appellant was advised to move a suitable application for amendment and/or modification of the order dated 14th May, 1976, and that was also an additional reason why the time for filing the revised distributorship agreement should be extended, so that the revised distributorship agreement could be in accordance with the directions, if any, which might be given by the Commission on the proposed application. The Commission acceded to the request contained in this application and extended the time for filing the revised distributorship agreement up to 4th June, 1977.The appellant thereafter made an application dated 30th May, 1977, under s. 13(2) of the Act read with regln. 85 for revocation, amendment or modification of the order of the Commission dated 14th May, 1976. The appellant set out in this application various facts and features relating to its trade of manufacture and sale of jeep motor vehicles and their spare parts and accessories and enumerated a number of grounds on which the order of the Commission dated 14th May, 1976, deserved to be revised, revoked, amended or otherwise modified. The application was opposed by the Registrar by filing a reply dated 17th August, 1977. The parties were thereafter heard by the Commission on 26th August, 1977, and pursuant to the directions given by the Commission, affidavits of documents were filed and evidence was recorded on both sides. It appears that in the course of the evidence the appellant came to know that in November, 1977, Hindustan Motors Ltd. had introduced in the market diesel trekker which was clearly a competing vehicle and the appellant thereupon applied to the Commission on 30th January, 1978, for amendment of the application by adding a plea that the fact that since November, 1977, Hindustan Motors Ltd. had started manufacturing and selling diesel trekker which was a highly competitive product was another material change in the relevant circumstances which justified the revocation, amendment or modification of the order dated 14th May, 1976. This application for amendment was opposed by the Registrar on the ground that it was made at a very late stage of the proceeding. The Commissipn did not pass any order on this application for amendment and kept it pending and proceeded to dispose of the main application by an order dated 28th February, 1978, by which it rejected the main application with costs and added a short order on the same day stating that, in view of the order on the main application, there would be no order on the application for amendment. The appellant thereupon preferred the present appeal in this court under s. 55 challenging the validity of the order made by the Commission rejecting the application of the appellant.Before we set out the rival contentions of the parties in the appeal, it would be convenient at this stage to refer to the relevant provisions of the Act and the Regulations. Section 2 is the definition section and cl. (u) of this section defines " trade practice " to mean," 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. "" Restrictive trade practice " is defined in s. 2, cl. (o), to mean " 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, 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. "Section 5,. (1), provides for the establishment of the Commission which is to consist of a chairman and not less than two and not more than eight other members to be appointed by the Central Government and. (2) of s. 5 lays down that the chairman shall be a person who is or has been or is qualified to be a judge of the Supreme Court or of a High Court. It is obvious from these twos of s. 5 that the legislature clearly contemplated that the Commission must have a chairman who would provide the judicial element and there must be at least two other members who would provide expertise in subjects like economics, law, commerce, accountancy, industry, public affairs or administration, so that there could be a reallyd expert commission competent and adequate to deal with the various problems which come before it. It, however, appears that the Central Government paid scant regard to this legislative requirement and though the office of the chairman fell vacant as far back as 9th August, 1976, it failed to make appointment of a chairman until 24th February, 1978. Of the two other members of the Commission one had already resigned earlier and his vacancy was also not filled with the result that the Commission continued with only one member for a period of about 18 months. This was a most unfortunate state of affairs, for it betrayed total lack of concern for the proper constitution and functioning of the Commission and complete neglect of its statutory obligation by the Central Government. We fail to see any reason why the Central Government could not make the necessary appointments and properly constitute the Commission in accordance with the requirements of the Act. It is difficult to believe that legal and judicial talent in the country had become so impoverished that the Central Government could not find a suitable person to fill the vacancy of chairman for a year and a half. Moreover, it must be remembered that the appointments, after all, have to be made from whatever legal and judicial talent is available and the situation is not going to improve by waiting for a year or two : a new star is not going to appear in the legal firmament within such a short time and the appointments cannot be held up indefinitely. Indeed, it is highly undesirable that importantl or administrative posts should remain vacant for long periods of time, because apart from impairing the efficiency of the functioning of the statutory authority or the administration, inexplicable delay may shake the confidence of the public in the integrity of the appointments when made. Turning back to the provisions of the Act, we find that s. 10(a)(iii) empowers the Commission to inquire into any restrictive trade practice upon an application made to it by the Registrar. The powers of the Commission while holding an enquiry under the Act are enumerated in s. 12 and s. 13,. (2), provides that " any order made by the Commission may be amended or revoked at any time in the manner in which it was made ". Then follow ss. 14 to 19 which deal, inter alia, with the procedure to be followed by the Commission. We are not concerned with ss. 20 to 32 which occur in Chaps. III and IV because they deal with topics other than restrictive trade practices. Chapter V relates to registration of agreements relating to restrictive trade practices and it consists of ss. 33 to 36 of which only ss. 33 and 35 are material.n (1) of s. 33 provides that any agreement relating to a restrictive trade practice falling within one or more of the categories specified there shall be subject to registration in accordance with the provisions of Chap. V and proceeds to enumerate the categories of restrictive trade practices covered by that provision and s. 35 lays down the time within which an agreement falling within s. 33,. (1), shall be registered and the procedure to be followed for effectuating such registration. Sections 37 and 38 are the next important sections and they occur in Chap. V headed " Control of certain restrictive trade practices ".n (1) of s. 37 provides that " the Commission may inquire into any restrictive trade practice, whether the agreement, if any, relating thereto has been registered under s. 35 or not, which may come before it for inquiry and, if, after such inquiry it is of opinion that the practice is prejudicial to the public interest, the Commission may, by order, direct that" (a) the practice shall be discontinued or shall not be repeated ; (b) the agreement relating thereto shall be void in respect of such restrictive trade practice or shall stand modified in respect thereof in such manner as may be specified in the order ". Section 38,. (1), enacts that for the purposes of any proceedings before the Commission under s. 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 circumstances set out in thatn and is further satisfied, after balancing the competing considerations, that the restriction is not unreasonable. These circumstances specified in. (1) of s. 38 render a trade practice permissible even though it is restrictive and provide what have been picturesquely described in the English law as " gateways " out of the prohibition of restrictive trade practices. Section 55 is the next relevant section and it provides that any person aggrieved by any order made by the Central Government under Chap. III or Chap. IV or, as the case may be, of the Commission under s. 13 or s. 37 may, within 60 days from the date of the order, prefer an appeal to the Supreme Court on " one or more of the grounds specified in s. 100 of the Code of Civil Procedure, 1908 ". This is the section under which the present appeal has been preferred by the appellant. The last section to which we must refer is s. 66 which confers power on the Commission to make regulations for the efficient performance of its functions under the Act. The Commission has, in exercise of the power conferred by this section, made the regulations of which three are material, namely, reglns. 65, 67 and 85. These regulations, in so far as material, read as follows:"65. Appearance of partiesEvery respondent who wishes to be heard in the proceedings shall, within 14 days of the service upon him of the copy of the notice of enquiry, enter an appearance in the office of the Commission by delivering to the Secretary six copies of a memorandum stating that the respondent wishes to be heard in the proceedings and containing the name of his advocate having an office in Delhi or New Delhi and duly authorised to accept service of processes and the Secretary shall send one copy of the memorandum to the Registrar in cases where proceedings are initiated undere (iii) of clause (a) of section 10, and in all other cases to the Director of Investigation. "" 67. Reply to the notice(1) Every respondent who has entered an appearance shall within four weeks of his entering appearance deliver to the Secretary a reply to the notice (5 copies) which shall include :(a) particulars of each of the provisions of section 38 of the Act on which he intends to rely ; and(b) particulars of the facts and matters alleged by him to entitle him to rely on such provisions ...... "" 85. Amendment or revocation of order, etcAn application undern (2) of section 13 of the Act for amendment or revocation of any order made by the Commission in any proceedings shall be supported by evidence on affidavit of the material change in the relevant circumstances or any other fact or circumstances on which the applicant relies. Unless the Commission otherwise directs, notice of the application together with copies of the affidavits in support thereof, shall be served on every party who appeared at the hearing of the previous proceedings and every such party shall be entitled to be heard on the application and the provisions of section 114 and Order XLVII of the Code of Civil Procedure, 1908 (5 of 1908), shall, as far as may be, apply to these proceedings.t is against the background of these provisions of the Act and the Regulations that we have to determine the question arising for consideration in the appeal.

Reasoning:
It is true that a clause in an agreement may embody a trade practice and such trade practice may have the actual or probable effect of restricting, lessening or destroying competition and hence it may constitute a restrictive trade practice and the clause may be voided, but it is difficult to see how the introduction of such a clause in the agreement, as distinguished from the trade practice embodied in the clause itself, can be a restrictive trade practice. It is not the introduction of such a clause, but the trade practice embodied in the clause, which has or is reasonably likely to have the prescribede effect. Therefore, whenever a question of restrictive trade practice arises in relation to a clause in an agreement, it is the trade practice embodied in the clause that has to be examined for the purpose of determining its actual or probable effect on competition. Now, a clause in an agreement may proprio vigore on its own terms, impose a restraint such as allocating a territory, area or market to a dealer or prohibiting a dealer from using machinery or selling goods of any other manufacturer, supplier or requiring the dealer to purchase whatever machinery or goods in the particular line of business are needed by him from the manufacturer or supplier entering into the agreement. Where such restraint produces or is reasonably likely to produce the prohibited statutory effectand that would depend on the various considerations referred to by us earlierit would clearly constitute a restrictive trade practice and the clause would be bad. In such a case, it would be no answer to say that the clause is not being enforced by the manufacturer or supplier. The very presence of the clause would have a restraining influence on the dealer, for the dealer would be expected to carry out his obligations under the clause and he would not know that the clause is not going to be enforced against him. This is precisely what was pointed out by Mr. Justice Day in United Shoe Machinery Corporation v. United States (258 US 708 ; 66 L Ed 451), where the question was whether thee andy clauses in certain lease agreements ofy were struck by the provisions of s. 3 of the Clayton Act : " The power to enforce them ", that is, the impugned clauses " is omnipresent and their restraining influence constantly operates upon competitors and lessees. The fact that the lessor, in many instances, forbore to enforce these provisions, does not make them any less agreements within the condemnation of the Clayton Act. " There could be no difficulty in such a case in applying the definition of restrictive trade practice in accordance with the law laid down in the Telcos case [1977] 47 Comp Cas 520 (SC) as explained by us in this judgment.Then there may be a clause which may be perfectly innocent and innocuous such as a clause providing that the dealer will carry out all directions given by the manufacturer or supplier from time to time. Such a broad and general clause cannot be faulted as restrictive of competition for it cannot be assumed that the manufacturer or supplier will abuse the power conferred by the clause by giving directions unduly restricting trade. So much indeed was conceded by the learned Additionall appearing on behalf of the respondents. But a genuine difficulty may arise where a clause in an agreement does not by itself impose any restraint but empowers the manufacturer or supplier to take some action which may be restrictive of competition. Ordinarily, in such a case, it may not be possible to say that the mere presence of such a clause, apart from any action which may be taken under it, has or may have the prohibitede effect. The manufacturer or supplier may take action under the clause or he may not, and even if he takes action, it may be in conformity with the provisions of the Act and may not be restrictive of competition. The mere possibility of action being taken which may be restrictive of competition would not in all cases affect the legality of the clause. In fact, a consistent course of conduct adopted by the manufacturer or supplier in acting under the clause in a lawful manner may tend to show that the clause is not reasonably likely to produce the prohibited statutory effect. What is required to be considered for determining the legality of the clause is not mere theoretical possibility that the clause may be utilised for taking action which is restrictive of competition, for it does not necessarily follow from the existence of such possibility that the actual or probable effect of the clause would be. The material question to consider is whether there is a real probability that the presence of the clause itself would be likely to restrict competition. This is basically a question of market effect and it cannot be determined by adopting a doctrinaire approach. There can be no hard and fastruleandeach case would have to be examined on its own facts from a businessandcommonsense point of view for the purpose of determining whether the clause has the actual or probable effect of unduly restricting competition. We cannot accept the proposition that in every case where the clause is theoretically capable of being so utilised as to unjustifiably restrict competition, it would constitute a restrictive trade practice.There is also another infirmity invalidating the order dated 14th May, 1976. We have already pointed outandthat is clear from the decision of this court in the Telcos case [1977] 47 Comp Cas 520 (SC) that in an inquiry under s. 37 the Commission has first to be satisfied that the trade practice complained of in the application is a restrictive trade practice within the meaning of that expression as defined in s. 2(o)andit is only after the Commission is so satisfied, that it can proceed to consider whether any of the " gateways " provided in s. 38(1) exists so that the trade practice, though found restrictive, is deemed not to be prejudicial to the public interestandif no such " gateways " are established, then only it can proceed to make an order directing that the trade practice complained of shall be discontinued or shall not be repeated. There are thus two conditions precedent which must be satisfied before aceaseanddesist order can be made by the Commission in regard to any trade practice complained of before it. One is that the Commission must find that the trade practice complained of is a restrictive tradepracticeandthe other is that where such finding is reached, the Commission must further be satisfied that none of the gateways pleaded in answer to the complaint exists. Here, in the present case, the appellant did not appear at the hearing of the inquiryandno " gateways " were pleaded by it in the manner provided in the Regulations,, hence, the question of the Commission arriving at a satisfaction in regard to the " gateways " did not arise. But the Commission was certainly required to be satisfied that the trades complained of by the Registrar were restrictive trades before it could validly make aceaseanddesist order. The order dated 14th May, 1976, did not contain any discussion or recital showing that the Commission had reached the requisite satisfaction in regard to the offending trade. But we can legitimately presume that the Commission must have applied its mind to the offending clauses of the distributorship agreementandcome to the conclusion that the trades referred to in those clauses were restrictive trades before it made the order dated 14th May, 1976. There is in fact inherent evidence to show that the Commission did apply its mind to the clauses impugned in the application of the Registrar, because it struck down only a few out of those clausesanddid not invalidate the rest. This circumstance clearly shows that the Commission considered with reference to each impugned clause whether it related to restrictive tradepracticeandmade the order dated 14th May, 1976, only in respect of those clauses where it was satisfied that the trades were restrictive. The charge that the order dated 14th May, 1976, suffered fromn of mind on the part of the Commission cannot, therefore, be sustained. But the order dated 14th May, 1976, was clearly bad inasmuch as it did not disclose the reasons which weighed with the Commission in directing the appellant toceaseanddesist from the trades set out in the order. The order dated 14th May, 1976, was ag order. It consisted merely of bald directions given by the Commissionanddid not set out any reasons whatsoever why the Commission had decided to issue those directions. It had ae face, which goes ill with the judicial process. It is true that the order dated 14th May, 1976, was an ex parte order, but the ex parte character of the order did not absolve the Commission from the obligation to give reasons in support of the order. Even though the order dated 14th May, 1976, was ex parte, the appellant would have been entitled to prefer an appeal against it under s. 55andit is difficult to see how the appellant could have possibly attacked the order in the appeal, when the order did not disclose the reasons on which it was based. It is now settled law that where an authority makes an order in exercise of al function, it must record its reasons in support of the order it makes. Everyl order must be supported by reasons. That is the minimal requirement of law laid down by a long line of decisions of this court ending with N. M. Desai v. Testiles Ltd. (C.A. 245 of 1970, decided on 17th Dec., 1975)andSiemens Engg. & Mfg. Co. of India Ltd. v. Union of India [1976] Supp. SCR 489 ; AIR 1976 SC 1785  . The order dated 14th May, 1976, was, therefore, clearly vitiated by an error of law apparent on the face of the record inasmuch as it contained only the finalandoperative order made by the Commissionanddid not record any reasons whatsoever in support of itandthe appellant was, in the circumstances, entitled to claim that the order should be revoked by the Commission.This view taken by us renders it unnecessary to consider whether there was any material change in the relevant circumstances justifying invocation of the power under s. 13(2), hence, we do not propose to deal with the same. The Commission has devoted a part of the order impugned in the present appeal to a consideration of this questionandtaken the view that there was no material change in the relevant circumstances subsequent to the making of the order dated 14th May, 1976. We no not wish to express any opinion on the correctness of this view taken by the Commission, since we are setting aside the impugned order made by the Commissionandalso revoking the order dated 14th May, 1976,andsending the matter back so that the application of the Registrar under s. 10(a)(iii) may be disposed of afresh.