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

2. Brief facts which are necessary to dispose of this appeal are as under:A Notice of Enquiry under section 10 (a)(iv) and section 37 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the MRTP Act) was issued to the appellants wherein it was alleged that the appellants had indulged in restrictive trade practice within the meaning of section 2(o)(ii) and section 33(1)(b) and of the MRTP Act.3. In order to comprehend the controversy involved in this case properly, sections 2(o)(ii) and 33 (1)(b) of the MRTP Act are reproduced asIn this Act, unless the context otherwisexxx xxxxxx xxx xxx(o) "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.................(ii) which tends to bring about manipulation of prices, or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified cost or restrictions."33. Registrable agreements relating to restrictive trade practices.(1) Every agreement falling within one or more of the following categories shall be deemed, for the purposes of this Act, to be an agreement relating to restrictive trade practices and shall be subject to registration in accordance with the provisions of this Chapter,.............(b) any agreement requiring a purchaser of goods, as a condition of such purchase to purchase some other goods;xxx xxxThe appellants herein denied the allegations made in the Notice of Enquiry and it was categorically stated that it neither manufactured nor sold any garments and such allegations ofrestrictive trade practice made against it was without any foundation.5. The Commission directed respondent no. 1 [Director General (I&R)] to furnish a copy of the Preliminary Investigation Report on the basis of which the Notice of Enquiry was issued to the appellants.6. Respondent no. 1 in evidence produced one Viren Shah, partner of M/s Roop Milan, Bombay and hision was recorded. In his evidence, he referred the following documents:i) Letter dated 23.7.87ii) Letter dated 15.1.88iii) Letter dated 12.9.87iv) Refund Memo dated 28.9.87.7. The appellants filed the affidavit of evidence of Pradeep H. Paranandan, Sales Manager of appellant no. 2. The said witness was alsoon behalf of the Director General (I&R).8. The complainant/informant M/s Roop Milan complained that it was appointed as a retail dealer on 19.4.1982 and that it was getting regular supplies of blazers, suits, safaris and trousers till December 1986 when the appellants stipulated that blazers, suits and safaris would be supplied only if substantial orders were placed for readymade trousers. From the information furnished by the complainant/informant, it transpired that out of 139 items supplied by the appellants, 119 were trousers and the balance 20 were blazers and suits.9. The complainant in his statement further stated that his dealings with the appellants came to an end in July 1987 when appellant no. 2 compelled him to place an order for trousers along with order for blazers, safaris and suits.10. Pradeep H. Hiranandani appeared as a witness on behalf of appellant no. 2 herein. He stated that the readymade garments including trousers manufactured and marketed by appellant no. 2 enjoyed good demand in the market and the supply of garments was made to the dealers on the basis of order placed by them and subject to availability of stock. It was also stated by him that the manufacture of readymade garments was reserved for the small scale sector and the appellants had a negligible market share.11. The Commission, after evaluating the evidence, observed that 133 trousers were supplied to the complainant/informant in the yearHowever, no record of the order placed with the appellants could be produced, but the complainant/informant stated that he was compelled by the appellants to place substantial order for trousers in order to get supplies of blazers, safaris and suits. The invoices which were produced as part of evidence revealed the quantity of garments supplied by the appellants and undoubtedly, the quantity of trousers was substantial. It was further observed that there was pressure on the dealers to accept higher quantity of trousers than required and when he showed his unwillingness to accept the large quantity of trousers, his dealership was terminated and the security deposit was refunded to him. The Commission arrived at the conclusion that the allegation ofof sales of trousers with other garments supplied by appellant no. 2 appeared to have been fully established.12. On the basis of the aforementioned complaint, the Commission arrived at the conclusion that the appellants had indulged in restrictive trade practice within the meaning of sections 2(o)(ii) and 33(1)(b) of the MRTP Act.13. The Commission further observed that the termination of the dealership or appellants refusal to deal with a well established retailer was bound to have an adverse effect and impact on competition in so far as it would reduce the number of retail dealers in the local market and thus would have the effect of restricting and lessening of the competition in the sale and supply of readymade garments and, therefore, would also be prejudicial to public interest. It was further observed that by restricting and reducing the supply of ready to wear garments would also attract the provisions of section 2(o)(ii) of the MRTP Act.14. The Commission directed the appellants to cease the aforementioned restrictive trade practice forthwith and furnish an undertaking that they shall not repeat or indulge in same or similar trade practices in future. The Commission further directed the appellants to file an affidavit of compliance within six weeks of the pronouncement of the order.15. The appellants, aggrieved by the said order of the Commission, preferred this appeal.

Court's reasoning:
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.