REGISTRAR OF RESTRICTIVE TRADE AGREEMENTS Vs. ATUL PRODUCTS LTD
LAWS(NR)-1977-4-2
MONO POLIES AND RESTRICTIVE TRADE PRACTICES COMMISSION
Decided on April 22,1977

Appellant
VERSUS
Respondents

JUDGEMENT

H.M.Jhala, - (1.) THIS is an application by the Registrar of Restrictive Trade Agreements (hereinafter referred to as "the Registrar ") seeking to amend his application dated March 7, 1975, under Section 10(a)(iii) of the Monopolies & Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act "). The application is said to be made under regulation 72 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974 (hereinafter referred to as " Regulations "), read with Order 6, Rule 17, of the Civil Procedure Code. The respondents are limited companies doing business in the manufacture of pharmaceutical and/or intermediates. An enquiry under Sections 10(a)(iii) and 37 of the Act was started against the respondents on the basis of an application by the Registrar. According to the Registrar an agreement was entered into between respondent No. 1 and respondent No. 2 and respondent No. 3 for the manufacture of and/or supply by respondent No. 3 of sodium salts of certain salphanamides (such as sulpha thiazole, sulphasomidine, sulphaphenazone) and their intermediates and such other products as may from time to time be mutually agreed Upon between respondent No. 2 and respondent No. 3 ; and sodium salts of sulphadiazine and sulphamethazine and such other products as may from time to time be mutually agreed upon between respondent No, 1 and respondent No. 3.
(2.) The Registrar drew the attention of the Commission to the following provisions in the agreement between the parties : " 2. Before the beginning of a serai-annual production period, CIBATUL, Atul and Ciba India Ltd. will by mutual agreement draw up a manufacturing programme, this programme being prepared according to the following rules : (a) CIBATUL will give first priority to the manufacture of CIBA products. (b) After the requirements of CIBA products have been met second priority be given to the manufacture of ATUL products. (c) CIBATUL will not manufacture CIBA products or ATUL products in excess of the manufacturing programme except as provided in Sub-clause (d). (d) In the event of there being any non-utilised capacity, CIBATUL will inform CIBA India in writing so that they can investigate whether the surplus capacity could be absorbed and for what products. To the extent that CIBA India agrees to absorb such surplus capacity, goods manufactured by CIBATUL in accordance therewith will be purchased by CIBA India at prices to be mutually agreed between CIBA India and CIBATUL having regard to the market conditions. To the extent that CIBA India does not absorb the surplus capacity then ATUL shall be invited to offer to undertake to absorb such surplus capacity and purchase it from CIBATUL on the same basis as mentioned above for the case of CIBA India. In the event that thereafter there is still surplus capacity which CIBATUL decides to utilise, it will first offer the production resulting therefrom for sale to CIBA India. If CIBA India declines to purchase all or any of the products concerned they may then be offered to ATUL at the same price and failing purchase by either CIBA India or ATUL then CIBATUL shall be at liberty to sell the surplus production to third parties provided that the prices fixed will be at least of the same level as those paid by or offered to CIBA India or ATUL and provided further that CIBATUL shall not manufacture sodium salt of sulphapbenazole in such surplus production so long as patents in connection therewith belonging to CIBA India and/or CIBA Limited. Basle, continue to be in force. 6. A(iii) In case of CIBA products whicb are of CIBA standard other than a sodium salt of sulphanamide CIBA India shall pay to CIBATUL such ex-factory Bulsar price as may be mutually agreed upon between the parties. (iv) CIBATUL shall purchase raw materials and packing material on a competitive basis and in suitable qualities. Atul's and CIBA India's supplies of raw materials to CIBATUL (if any) shall be made at prices which shall not exceed the delivered price to CIBATUL from any other supplier." According to the Registrar, by virtue of the agreement as a whole, and in particular, the clauses reproduced earlier, the respondents were indulging in the following restrictive trade practices, viz., (i) limiting, restricting and withholding the output and supply of products ; (ii) restricting persons from whom the goods are bought ; (iii) mutually agreeing, in case of supplies to parties other than the respondents Nos. I and 2, to supply only on such terms and conditions as would have the effect of eliminating, competition. These trade practices, according to the Registrar, attracted Clauses (a), (g) and (h) of Section 33(1) of the Act. The Registrar further alleged that the trade practices set out were indulged in by the respondents and prevented, distorted and restricted competition or tended to prevent, distort or restrict competition and to obstruct the flow of capital and resources in the stream of production and to bring about manipulation of prices and conditions of delivery and to affect the flow of supplies in the market and impose on the consumers unjustified costs and restrictions. It was further alleged that the practices were prejudicial to public interest.
(3.) ALL the respondents filed their replies to the notice of enquiry. Respondent No. 1 in its reply, inter alia, made the following submissions : " The various clauses of the aforesaid agreement referred to in paragraph 2 of the Registrar's application do not per se constitute restrictive trade practices as defined by Section 2(o) of the Act. It is submitted that the application is misconceived and ought to be rejected. The various clauses of the agreement referred to in the Registrar's application also do not attract Clauses (a), (g) & (h) of Section 33(1) of the Act as alleged in paragraph 4 of the Registrar's application. None of the clauses of Section 33(1) of the Act referred to by the Registrar is applicable to the aforesaid agreement and the agreement does not in any event constitute restrictive trade practice within the meaning of Section 2(o) of the Act. Satisfaction of the conditions set out in Section 2(o) of the Act is a condition precedent for initiation of an enquiry under Section 37 of the Act. The application of the Registrar is, therefore, misconceived and ought to be rejected. The Registrar in his application has merely referred to certain clauses of the agreement without ascertaining or stating any further facts as to how the agreement operates and no facts have been stated on the basis of which it is alleged that the same results in restrictive trade practice. Certain clauses of the aforesaid agreement are merely set out by the Registrar without reference to any facts and _ certain clauses of Section 33(1) of the Act are merely stated without any specific reference to any particular clause of the aforesaid agreement. The application filed by the Registrar in this manner is misconceived and is not maintainable and ought to be dismissed with costs." "The Registrar's application purportedly filed under Section 10(a)(iii) of the Act is not in accordance with the mandatory requirements of regulation 55 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974. Any application which is not in accordance with the aforesaid regulation ought to be rejected. Before the Hon'ble Commission can take cognizance of any application filed by the Registrar, it must be such as containing facts which constitute the alleged restrictive trade practice and if the alleged practice relates to any agreement, in addition to setting out such facts, it is incumbent upon the Registrar to set out in the said application such portions of the agreement as may be necessary to bring out the facts complained of. In the present application, the Registrar has not set out any facts which have been purported to constitute the alleged restrictive trade practice. On the contrary, the Registrar has merely reproduced certain clauses of the aforesaid agreement without avering as to how the said clauses or the operation thereof, as a matter of fact and practice, constitute restrictive trade practice within the meaning of Section 2(o) of the Act. The Registrar's said application is, therefore, bad in law and not maintainable," " In the Registrar's application, after reproducing certain clauses of the aforesaid agreement in paragraph 2 of the application, certain inferences alleged by the Registrar are set out in paragraph 3 of the application. These inferences which are sought to be made on the basis of the clauses of the agreement reproduced in paragraph 2 of the application are misconceived and are arrived at on a total misconception and misreading of the provisions of the agreement. This inference set out in paragraph 3 of the Registrar's application which are alleged to constitute restrictive trade practices are wholly misconceived and the reproduction of the various clauses of the agreement do not justify any such inference and as such the Registrar's application ought to be rejected with costs. " "In paragraph 4 of the Registrar's application Clauses (a), (g) and (b) of Section 33(1) have only been referred to. The various clauses of the aforesaid agreement referred to in paragraph 2 of the Registrar's application are not of the type as contemplated in Clauses (a), (g) and (h) of Sub-section (1) of Section 33 of the Act. As the Registrar's application is based only on the basis of the aforesaid clauses of Section 33(1) of the Act, the same is liable to be rejected. Moreover, as no averment at all has been made by the Registrar with regard to the satisfaction of the conditions contemplated under Section 2(o) of the Act, the Registrar's application ought to be rejected in any event. ";


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