(1.) THIS is an application under Section 10(a)(iii) read with Section 37 of the Monopolies and Restrictive Trade Practices Act, 1969, filed by the Director-General (Investigation and Registration) against Bombay Paints and Allied Products Ltd. of Bombay (hereinafter referred to as "the respondent"). The respondent is engaged in the sale and distribution of paints. The respondent has appointed selling agents on terms and conditions specified in an agreement--specimen copy of which is "annexure A". The Director-General has challenged Clauses 3, 4 and 6 of the agreement contending that these give rise to restrictive trade practices as defined in Clauses (c), (e) and (g) of Sub-section (1) of Section 33 of the Monopolies and Restrictive Trade Practices Act. The said clauses as given in the application of the Director-General read as follows :
4. 3 per cent, on turnover towards scheme rebate can be given directly as a flat percentage or by way of quantity rebate. Can be used as product rebate to fight competition.
(i) the company with a view to marketing its products, viz., paints, varnishes, distemper, enamels, etc., properly and promoting the sales and effective recovery thereof efficiently within the time-limit as specified by the company from time to time to the best advantage possible within the territory of ..... (hereinafter referred to as "the said territory") was desirous of appointing a suitable party as its selling agent.
6. During the subsistence of this agreement, the selling agent shall not, in the said territory, represent or act on behalf of any other person, firm or company dealing in similar products as those of the company."
(2.) The respondent controverted the allegations of restrictive trade practices and in the reply filed by them it is stated that the Director-General misunderstood the information furnished to him while the factual position is summarised as below :
(i) The sole selling agents appointed by the respondent for various territories are Ashoka Agencies of Ludhiana for the territory of Punjab, Haryana, Jammu and Kashmir ; Sharad Enterprises of Patna for the State of Bihar ; Pinakin Shah and Co., Ahmedabad for the State of Gujarat; J.S. Paintal and Co., New Delhi for Delhi District and towns Faridabad, Ghazia-bad and Hardwar, and Bans Sales Organizers, Lucknow, for the State of Uttar Pradesh. It is stated that the respondent has sent to the Director- General copies of price list and statement of discounts of the dealers on net price list, and 38th annual report along with letter No. 9938, dated August 9, 1986. It is submitted by the respondent that not all the selling agents purchase the goods from the respondent for they merely took orders from customers on the stationery of the respondent and then the goods are despatched either from the factory or from the depot. The bills are raised in the name of the respondent while the agents merely follow up the customers and collect sales tax and also collect cheques from customers and deposit the same in the bank account of the respondent. Of course, the selling agents employ their own field-staff for booking orders and for the collection of dues and the travelling expenses of the field-staff are borne by the selling agents.
(ii) Agents are paid commission at the rate of 6.25 per cent, on net sales. The selling agents are responsible for looking after the maintenance of stocks in the godown of the respondent situated in their respective territories.
(iii) The selling agents prepare the bills and challans on behalf of the respondent in the name of the respondent. In the case of sales to Government Departments, the selling agents are paid commission at the rate of not less than 2 1/2 per cent, and not more than 6.25 per cent.
(iv) The Central Government accorded approval to the appointment of selling agents on terms and conditions mentioned in the respective agreements.
It is stated that the selling agents do not occupy the position of stockists, dealers, distributors or purchasers. Instead of appointing its own sales manager and other staff, the respondent has, in a few territories, appointed persons as agents to book orders and promote the sale of the products. The allocation of territory is merely for administrative convenience for the booking of orders. Since they are not stockists, distributors or purchasers, the arrangement of territory does not bring the trade practice within the mischief of Section 33 of the Monopolies and Restrictive Trade Practices Act.
(3.) AS regards the impugned Clause (6), it is stated that it is not hit by Clause (e) of Sub-section (1) of Section 33 of the Monopolies and Restrictive Trade Practices Act inasmuch as the said clause applies only to purchasers and not to selling agents. Since the respondent is hot the seller and the selling agent is not the purchaser of the goods, the restriction that the selling agent will not act on behalf of any other person, firm or company dealing in similar products as that of the respondent company is not a restriction as contemplated under Clause (c) of Sub-section (1) of Section 33 of the Monopolies and Restrictive Trade Practices Act.;