Complaint by person who is not consumer or trade association cannot be basis of Inquiry under section 36 B of Competition Act

By | December 9, 2015

Brief Facts:-

Competition Commission can inquire into any unfair trade practice on receipt of a complaint from any trade association or from any consumer or a registered consumers’ association, even though the consumer may not be a member of such association or on receipt of a reference made by the Central Government or the State Government or on an application made by the Director General or on its own knowledge or information. This necessarily implies that a complaint made by a person who is not a consumer or a trade association cannot be made basis for making an inquiry under Section 36-B of the Act.

It is apposite to mention that the term ‘consumer’ has not been defined in the Act. However, keeping in view the language of Section 3 of the Consumer Protection Act which declares that the provision of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force, one can safely rely on the definition of ‘consumer’ contained in Section 2 (d) of that Act, which reads as under:—

‘(d) “consumer” means any person who :-

(i) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes.

Explanation – For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.’

The complainant had asked the respondents to supply power packs to be used in the manufacture of three wheelers which were to be sold to third parties. This clearly means that the complaint wanted to purchase goods from the respondents for commercial purpose. It is neither the pleaded case of the complainant nor any evidences has been produced before the erstwhile Commission or this tribunal to prove that the proposed business of selling three wheelers was exclusively for the purpose of earning livelihood of the members of the family of the Managing Director.

Therefore, the complainant cannot be treated as a consumer for the purpose of Section 36-B of the Act and the Commission could not have initiated enquiry into the allegation of unfair trade practice.

COMPETITION APPELLATE TRIBUNAL, NEW DELHI

Surya Scooters (P.) Ltd.

v.

Greaves Cotton & Company Ltd.

G.S. SINGHVI, CHAIRMAN

UTPE NO. 113 OF 1992
CA NO. 207 OF 1992

SEPTEMBER  14, 2015

Sanjeev Sabharwal, Sr. Adv. and Ankush Walia, Adv. for the Applicant. R.S. Suri, Sr. Adv. and Ms. Pallavi Tayal Chaddha, Adv. for the Respondent.

ORDER

 

1. Whether the respondents had made misrepresentation to the complainant about the quality and suitability of the power packs manufactured by them for three wheelers and thus they are guilty of unfair trade practice as defined in Section 36A of the Monopolies and Restrictive Trade Practices Act (for short ‘The Act’) and whether failure of respondents to supply power packs to the complainant to enable it to manufacture 3- wheelers amounts to restrictive trade practice as defined in Section 2(o) of the Act are the questions which arise for consideration in this complaint filed sometime in June 1992 under Section 31 read with Sections 2(o)(i), 10(a)(i) and (iv), Sections 36A and 36B(a) and (d) of the Act with the prayer that an enquiry be conducted against the respondents and a cease and desist order be passed against them. Alongwith the complaint, the complainant also filed an application under Section 12-B of the Act for award of compensation for the loss suffered on account of the alleged restrictive and unfair trade practices adopted by the respondents.

2. Before adverting to the facts of the case and arguments of learned counsel, I deem it necessary to mention that the complaint was originally filed against four respondents, namely M/s. Greaves Cotton & Company Limited, Mumbai (Respondent No. 1), Shri L.M. Thapar (Respondent No. 2), M/s. Lombardini Motori, S.P.A., Italy (Respondent No. 3) and Greaves Lombardini Limited, Aurangabad (Respondent No. 4). However, on a request made on behalf of the complainant, the name of Respondent No. 3 was deleted from the array of parties vide order dated 02.09.1992 passed by the erstwhile Monopolies and Restrictive Trade Practices Commission (for short ‘The Commission’). Simultaneously, the Commission took cognizance of the statement made by learned senior counsel appearing for Greaves Lombardini Limited, Aurangabad that his client has already merged with Respondent No. 1.

3. After filing of reply by Respondent No. 1, the Commission neither framed the issues nor gave opportunity to the parties to adduce evidence in support of their cases. Instead, the arguments were heard on 20.12.1992, 06.11.1992, 08.02.1993, 09.02.1993 and 18.02.1993, on which date the order was reserved. Thereafter, by detailed order dated 28.05.1993 running into 23 pages, the Commission dismissed the complaint. The Commission recorded a finding that the respondents are not guilty of any restrictive or unfair trade practices and held that no case is made out for exercise of power under the Act.

4. The complainant challenged the aforesaid order in Civil Appeal No. 214 of 1994, which was allowed by the Supreme Court on 10.12.2002 by a rather brief order and the matter was remitted to the Commission with the direction to try the matter on merits and allow the parties to lead evidence.

5. On receipt of the Supreme Court’s order, the Commission directed that Notice of Enquiry be issued to the respondents. After completion of pleadings, the Commission framed the following issues:—

UTPE 113/1992

(1) Whether the respondent has been indulging in the unfair/restrictive trade practices as alleged in the complaint petition?
(2) Whether the alleged unfair trade practices are prejudicial to public interest or to the interest of the consumer or consumers generally?
(3) Whether the alleged restrictive trade practices are prejudicial to public interest?

C.A. 207/1992

1. Whether the respondent has been indulging in the Unfair/Restrictive Trade Practices as alleged in the Compensation Application ?
2. Whether the applicant has suffered any loss or damage on account of such Unfair/Restrictive Trade Practices ?
3. Relief, if any.

6. Next five years were spent in admission/denial of documents and recording of evidence. On behalf of the complainant, Shri J.P. Jain filed affidavit dated 15.07.2005. He was cross-examined on 25.04.2006. On behalf of the respondents, Shri V.K. Aggarwal (constituted attorney of Respondent No. 1) filed affidavit dated 11.06.2007. He was cross- examined on 20.08.2008, 02.02.2009, 27.05.2009, 22.09.2009 and 29.01.2010. Shri J.P. Jain filed another affidavit dated 01.12.2010 to show that the respondents had made it known to the public at large that they were going to produce 30,000 auto rickshaw at their plant at Baramati under the trade name of APE and also issued shares for manufacturing auto rickshaws. Both Shri J.P. Jain and Shri V.K. Aggarwal filed large number of documents on behalf of their respective clients. Alongwith additional affidavit also Shri Jain filed papers downloaded from website moneycontrol.com. Some delay was caused because the complainant filed two applications under Regulation 65 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1991 and raised multiple objections to the affidavits filed on behalf of the respondents. The Commission upheld the objections raised by the complainant necessitating filing of fresh affidavit on behalf of respondents.

7. During the pendency of the complaint, the Act was repealed by Section 66 of the Competition Act, 2002 and the cases pending before the erstwhile Commission stood automatically transferred to the Tribunal, which came to be established in October 2007 in terms of Section 53A of the 2002 Act and became functional in May, 2009.

8. On 18.05.2011, the Tribunal heard the arguments and reserved the order. However, after a gap of 13 months, the complaint was listed for fresh hearing. Unfortunately, the arguments could not be heard for almost three years and the case was adjourned on one or the other ground. Finally, the case was partly heard on 22.05.2015. Further hearing could not take place because of vacations in the Tribunal and also because learned senior counsel for the complainant was reported to be unwell. For some time the Tribunal remained busy in hearing other part-heard matters. The matter was again taken up for hearing in the month of August 2015 and the order was reserved on 17.08.2015.

9. The facts culled out from the pleadings by the parties and the documents (since most of the documents filed with the compliant became illegible, learned counsel were directed to file typed copies thereof. They did the needful, but some of the documents contain blank spaces) filed by them are summarised below:

(i) By letter dated 08.03.1983 addressed to Respondent No. 3, the erstwhile management of the complainant introduced itself as a manufacturer of scooter under the brand name ‘Surya 150 CC’ and expressed the desire to develop 3-wheelers based on Lombardini Engines of 5 and 10 H.P. For that purpose a request was made to Respondent No. 3 to supply literature, the price and terms and conditions and also depute a senior representative for detailed discussion.
(ii) In response to the aforesaid letter, the Lucknow office of Respondent No. 1 forwarded the leaflets and four page catalogue containing the technical details of various engines manufactured by it. After three months, the complainant sent letter dated 08.08.1983 mentioning that the first batch of scooters has successfully come on the road and now it has decided to manufacture commercial vehicles. The complainant requested Respondent No. 3 to quote OE rates of LDA 450 and LDA 510 engines for 3-wheelers and 4-wheelers. The complainant also enquired about the cost of accessories along with the total cost of 520 and 522 Engines. In response to that letter, Lucknow office of the Respondent No. 1 sent letter dated 19.08.1983 containing offer for Greaves Lombardini Diesel Engine Model – 80A.
(iii) Shri M.P. Bhuskute (an engineer employed with Respondent No. 3) visited the complainant’s factory on 17.08.1983 only to find the design of 3-wheelers had not been finalized. Thereafter, Respondent No. 1 sent letter dated 23.08.1983 to the complainant and offered a proposal for collaboration with M/s. Atul Auto Industries, Jamnagar for manufacturing of commercial vehicles. In October 1983, Shri S.S. Joglekar visited the complainant’s office and discussed the proposed collaboration with M/s Atul Auto Industries. Shri Joglekar is said to have been given an assurance that technical details, costing etc. of the engines will be made available to the complainant, but no communication was sent in that regard.
(iv) In 1984, Shri J.P. Jain took over the company and became its Managing Director. Thereafter, he entered into correspondence with Respondent No. 1 and Respondent No. 3. He sent letter dated 10.01.1986 to the Lucknow office of Respondent No. 1 for supply of power pack for developing a prototype of 3-wheeler auto-rickshaw for being sent to Automotive Research Association of India (ARAI).
(v) In the meanwhile, the complainant made an application for grant of industrial licence for the manufacture of scooters and 3-wheelers. Initially, the concerned department raised certain objections but finally the licence was granted on 15.01.1986 for manufacture of 1000 scooters and 50 three-wheelers per annum.
(vi) As a sequel to further discussion held between the parties, the representative of Respondent No.1 is said to have submitted a document described as “DIESEL AUTO RICKSHAWS – A SPECIAL NOTE” in which it was mentioned that there is a gap of 40,000 to 50,000 of commercial three wheeler vehicles between demand and supply in the country; that the vehicles proposed to be manufactured will be fitted with “GREAVES LOMBARDINI 530 DIESEL ENGINE GL VARIAMATIC DRIVE” including differential; that the retail price of the vehicle with diesel engine will work out to be Rs. 39,585/- in comparison to the price of the vehicle with petrol engine.
(vii) Although the respondents have denied that their representative submitted any such report, the existence thereof has been admitted in communication dated 22.10.1986 sent by Shri A.R. Chowdhury (representative of Respondent No.1) to his offices at New Delhi and Mumbai incorporating the broad features of the discussions he had with Shri J.P. Jain. That letter reads as under :
‘A. ROYCHOWDHURY – LUCKNOW MR. C.D. GUPTA – NEW DELHI
LOMB LOMB
GREAVES COTTON & CO. LTD., LUCNOW LOMB
L/CON-11569/ABC
OCTOBER 22, 1986

Surya Scooters Pvt. Ltd., Kanpur

Mr. J.P. Jain of Surya Scooters Pvt. Ltd., Kanpur has completed one prototype with Bajaj Chassis, and is awaiting the power pack for fitment. After receiving the project report of 3-Wheeler Auto Rickshaw from SSJ at Aurangabad, Mr. Jain has gone through the whole pricing and has noticed the following points :
1. In the project report, the price for the chassis was mentioned as Rs. 1,500/- but now in the market price of the chassis is Rs. 3,500/-. The price of the half body, with canyas hood, is Rs. 3,000/- at present instead of Rs. 1,500/- as mentioned in the project report. Mr. Jain was mentioning that the present prices of the components have not been considered while preparing the projects report because there is enough price difference in many components.
2. The costing for this vehicle has been done by Mr. Jain which comes to Rs. 39,500/-. As such, in his views, the price of the vehicle in very much in higher side. He therefore, desired reduction in prices for veriamatic drive with 530 and 520 engines by Rs. 2,000/- and he also wanted to know the minimum price for 100 power packs for this year.
3. In his opinion to let more business, dealer’s discount should be increased from Rs. 750/- to Rs. 1250/- as mentioned in the project report and manufacture. A margin should not be less than Rs. 1,000/-.
4. After completing these prototypes, Mr. Jain desired to take 2 nos. more power pack short time and basically we want engine of 350 cc. It was discussed and suggested my SSJ at Aurangabad that Surya Scooters should also use 520 (325 CC) engines as used by KHUSBOO, Jamnagar because we do not have 350 cc engine but Mr. Jain is interested to have the vehicle with engine about than 325 CC but upto 350 CC as the licence is only upto 350 CC.
5. Surya Scooters have selected brand name, for their vehicle, as “VAISHALI 3-WHEELERS”.
6. Mr. Jain also wanted to manufacture 4 prototypes can to be sent to ARAI for testing and other 3 to be sent to different destination for field trials.
7. After completing the prototype job, he is willing to have the agreement for price, delivery supplies and after – sales – service with us.
Regard,
(A. ROYCHOWDHURY)”
(viii) In the meeting held on 15.12.1986 between Shri J.P. Jain, Managing Director of the complainant and Shri A.F. Shah and Shri Arif (both representatives of Respondent No. 1), the former expressed doubts on the suitability of power pack supplied by Respondent No.1. Thereupon, the representatives of Respondent No. 1 made attempts to clear the doubts of Shri Jain.
(ix) Thereafter the parties exchanged correspondence and discussed the issue relating to manufacture of proto-type of 3-wheelers to be sent to Automative Research Association of India (ARAI), Pune for testing. In furtherance of the discussion held on 20.09.1987, the representative of Respondent No. 1 sent letter dated 03.10.1987 to the Managing Director of the complainant, the typed copy of which has been made available by learned counsel for the parties, reads as under :—
“Greaves Cotton & Co. Ltd. GREAVES
Merchants, Engineers & Contractors,
7, Way lane off Ashok Marg, P.B. 286
Lucknow – 226001 – Phone 36491-2-3
Gram : Greaves -Telex 321
Our Ref. : L/CON-110956/ARC
The Managing Director,
Surya Scooters Pvt. Ltd.
117/H-1/241, Model Town,
Kanpur – 208025
Kind Attn. : Mr. J.P. Jain
Dear Sir,
This has reference to our discussions on 20th September, 1987 in the presence of Design Engineer Mr. A.F. Shah from our factory who have attended the power pack fitted in your proto type vehicle and found the following discrepancies :—
1. It was found that the gearbox pulley was running from on the input shaft of the gearbox since key locking nut were missing resulting the vehicle could not run though engine is in running condition. Due to this there was score mark on the gearbox shaft. After fitment of the pulley with key and nut, the vehicle was run and found O.K.
2. On you complaint, when they have dismantled the power pack from the base plate they observed following discrepancies :—
(a) The holes for mounting gearbox and engine on the base plate were cut by gas welding as such they were large and oblong shaped.
(b) The base plate face was uneven.
(c) The gearbox bracket mounting faces were not square and the mounting holes, cut by gas, were abnormally large and oblong.
(d) Engine mounting fool gearbox side has damaged due to lose fitment (the mounting boles become enlarged).
(e) Oil level in the engine was very low.
After rectifying the above discrepancies, the vehicle was run approximate 200 KMs and found satisfactory. During discussions we have suggested the following to maintain the power pack and for getting best result of the trial :—
(a) The power pack should be maintained as recommended by us number of times. It has been found that the maintenance of the power pack is not upto the mark.
(b) It is very essential to maintain the logbook to monitor the performance of the power pack and to get correct feedback for which we have already sent you 50 nos. no book sheets and have already requested to send us information on weekly basis.
(c) Kindly advise us the KM of the new modified gearbox and electrical system fitted by Mr. Pathak of our factory.
(d) It is also very essential to check the engine oil level everyday and took up the same if required.
(e) Low oil level or high oil level both are injurious for this engine which we have noticed all the time while attending the power pack which should be very strictly controlled to the required level everyday.
(f) It was also received that you will manufacture base plates . . . . . . Illegible . . . . .inform us so that we can some our Mr. S.M. Arif to . . . . . . . . Illegible . . . . . . the existing . . . . . . . illegible . . . . . . . . . and the check the align as such, kindly advise us when you are completing the . . . . . . . . . Illegible . . . . . . . . plate.
On your complaint (engine jammed) our Mr. A.F. Shah and Mr. Arif have attended the engine on 07-9-87. After opening the engine, they have found a piece of metal and between cylinder head and piston for which the engine got jammed and damaged cylinder head, Piston, valve sots, valves and stud etc. a piece of metal was also shown to you by our Engineers on the spot. The reason for getting a piece of metal inside the cylinder head and piston is to be investigated by you.
We have already informed our Head Office and Delhi Office on the above subject and requested them that the engine should be overhauled in your factory. We will advise you soon we receive reply from them.
In the meantime, we would request you not to run the vehicle, with this engine, to avoid further damages.

Thanking you,

Yours faithfully,
For GREAVES COTTON & CO. LTD.
(A.ROYCHOWHURY)
LOMBARDINI DIVISION”
(x) Vide letter 07.04.1988, Respondent No. 1 claimed that during continuous running of auto-rickshaw at Aurangabad no difficulty was experienced. In reply, the complainant sent letter dated 18.04.1988 and insisted that all was not well with the power pack supplied by Respondent No. 1. Thereafter, a joint meeting was held on 18.06.1988 between the representatives of the parties to sort out the problems relating to the manufacture of 3-wheelers by using the power pack. In that meeting, the representatives of Respondent No. 1 is set to have noticed that the damages caused to the vehicle during transit and suggested taking of remedial measures.
(xi) Another meeting was held on 07.08.1988 between Shri J.P. Jain and the representatives of Respondent No. 1 in the following minutes were recorded :
MINUTES OF MEETING BETWEEN M/S GREAVES COTTON & CO. LTD. AND SURYA SCOOTERS LTD. HELD ON 7TH AUGUST, 1988 AT AURANGABAD
PRESENT
Greaves Cotton & Co. Ltd. Surya Scooters Ltd.
1. Mr. D. Ramesh Kumar Mr. J.P. Jain
2. Mr. J. Sankaran
3. Mr. M. Srinath
4. Mr. A.F. Shah
1. Mr. Jain had a look at the vehicle which was kept ready for trials. The vehicle was tested inside the factory and Mr. Jain felt more satisfied in noise level, fitment etc.
2. The parts brought by Mr. Jain could not be fitted as there was difference in journal diameter. Hence DRK decided to fit the parts removing from the GLU trial vehicle.
3. The vehicle is complete in all respects mechanically and the vehicle would be painted and will be ready for delivery on 13th August, 1988. It was also decided to paint the vehicle in the same blue colour as painted earlier.
4. The specification details for completing ARAI application was provided to Mr. Jain. It was also indicated GLU/GC would offer all the technical support for power pack. As regards to total vehicle design M/s. Surya will take the responsibility for ARAI trials.
5. M/s. Surya representative and mechanic would reach Pune directly from Kanpur on 16th August, 1988.
6. GLU will make arrangements to send the vehicle along- with the technician on 16th August and confirm to M/s. Surya.
7. GLU would provide modified parts catalogue in manuscript for 4348 engine at the earliest.
8. For maintenance-cum-service manual GLU would provide the following :
(a) Diagram of engine with transmission.
(b) Wiring diagram.
(c) Photograph of engine with variamatic drive.
9. Apart from the engine portion the remaining portion for maintenance manual will be taken care of by M/s. Surya.
10. GLU/GC expressed gratitude to Mr. Jain for giving all the co-operation and enthusiasm shown in developing the vehicle with our engine.
(J. Sankaran) (J.P. Jain) (M. Srinath)”
(xii) In furtherance of the aforesaid discussion, the proto-type of 3- wheeler was sent to ARAI for testing road worthiness. After conducting required tests, ARAI issued certificate dated 04.01.1989, which reads as under :
“The Automative Research Association of India
POST BOX No. 832 POONA 411004
VT/8903 January 4, 1989

CERTIFICARTE

M/s. Surya Scooters Pvt. Ltd.
117/H-1/242 Model Town
Pandu Nagar Kanpur 208 005
The performance trials of your ‘Vaishali 350 Rear Engine Autorickshaw’ have been completed and based on the test results we are glad to certify the above model as roadworthy on Indian roads under the prescribed G.V.W. The service brake system of the vehicle is hydraulically operated on all wheels with a dual circuit using a tandem axle cylinder actuating the front and the rear wheel separately.
The brief technical specification is given below :
(a) Engine type : Four stroke C.I. Engine
(b) Engine displacement : 348.5 cc
(c) Bore x stroke, mm : 82mm x 66 mm
(d) Compression ratio : 17.5 : 1
(e) Vehicle weight : 400 kg.
(f) Max. loading capacity: 1+3 persons + 40 kg.
(g) Gross vehicle weight : 720 kg.
(h) Wheel base, mm : 1910
T.M. BALARAMAN

DY. DIRECTOR”

(xiii) After receiving the aforesaid certificate, Respondent No. 1 sent communication dated 13.02.1989 to the complainant dealing with various aspects of the ‘Greaves Lombardini Variamatic Power Pack’. In that communication, it was made clear that minimum 16 weeks would be required for supply of power packs after receiving confirmation from the complainant. Paragraph 1 of that letter reads as under :
“(1) You had mentioned that you have already advertised in the news paper that you would be starting supply of your Vaishali Diesel Auto Rickshaw with Greaves Lombardini Variamatic Power pack from July 1989 onwards. You had therefore requested us that atleast 1st lot of 5 nos. power packs be supplied to you at the earliest so that vehicles could be given to your dealers and could subsequently start booking orders for diesel three wheelers. We had confirmed to you that lead time required for supply of power packs would be minimum 16 weeks on receipt of your confirmed order. We are, however, considering your request and trying to improve upon the delivery if possible.”
(xiv) The aforesaid communication was followed by exchange of several letters mainly on the issue of pricing. Vide letter dated 12.04.1989, the complainant asked Respondent No. 1 to confirm whether the cost of initial supply of 100 power packs @ Rs. 14,000/- per pack will be exclusive of all taxes. In its reply dated 26.04.1989, Respondent No. 1 indicated that the price for 100 variamatic power packs will be @ Rs. 16,500/- per pack. However, after some further correspondence on the issues of price, warranty conditions and placing of order by the complainant for supply of power packs, the complainant ultimately asked Respondent No. 1 to supply 50 power packs No. 4348 with variamatic gear box.
(xv) However, before the power packs could be supplied by the respondents, the representative of the parties again met on 06.07.1989. In that meeting, Managing Director of the complainant pointed out that the life of indigenous fenner- make fitted in power pack was between 2000 to 2500 Kms. and emphasised that nobody would like to purchase auto-rickshaw with such engine. The Managing Director also complained that his organisation had not been informed about the recurring defects in the belt before sending the vehicle to Pune for roadworthiness certificate. He finally requested Respondent No. 1 to look into the matter and take steps for elimination of the defects.
(xvi) After the meeting, the parties exchanged several letters on the issue of supply of power packs. The complainant sent letter dated 09.08.1989 to Respondent No. 1 and emphasised that even though a formal order has been placed for supply of 50 power packs No. 4348 with variamatic gear box @ Rs.15,275/- exclusive of all taxes and duties and launch of the diesel autorickshaw in July, 1989 had been announced in the press conference, Respondent No. 1 has not taken steps to supply the power packs and adopted negative attitude. The contents of this letter cannot be reproduced because the copies thereof filed in the main paper book as well as the paper book containing the affidavit of Shri J.P. Jain are not fully legible.
(xvii) In the reply to the aforesaid letter, Respondent No. 1 sent communication dated 18.08.1989 and called upon the complainant to attend the meeting to be held at Bombay on 02.09.1980. The complainant objected to this and sent letter dated 22.08.1989. After seven days, the complainant sent letter dated 29.08.1989 to Respondent No. 2 to protest against the supply of defective power packs. That letter reads as under :

“SURYA SCOOTERS PRIVATE LIMITED

Regd. Head Office : 117/H-1, 242, MODEL TOWN, PANDU NAGAR, KANPUR – 208 005

No. : SSL/89-90/231 29th AUG 89
Shri L.M. Thapar,
Managing Director,
Greaves Cotton & Co. Ltd.,
124, Thapar House,
Janpath, NEW DELHI.
Dear Sir,
RE : DEVELOPMENT OF VAISHALI DIESEL AUTO RICKSHAW.
We have the pleasure to write to you that we have developed Vaishali RE Diesel Auto Rickshaw.
2. After a good deal of persuasion and recommendation by M/s. Greaves Cotton & Co. Ltd., Lucknow, we placed an order for two Power Packs in 1986 which were eventually supplied by your Aurangabad Factory.
3. The difficulties and failures experienced by us in the trial and test with the power packs supplied to us, were invariably brought to the notice of your BOMBAY/LUCKNOW Offices. As a result of which your Aurangabad staff had to visit our works several times to attend to such defects but all their efforts proved futile.
4. Finally we were forced to dispatch the vehicle to Aurangabad to check up the same/thoroughly modify/update it.
5. At Aurangabad another Greaves Engine/Power Pack Model 4348 with Vairamatic Gear Box was fitted in our Auto Rickshaw. Finally, our Auto Rickshaw was dispatched to Automotive Research Association of India, Pune by Aurangabad Factory for approval. Several defects, one after the other, cropped up at Pune during testing. Anyhow our Auto Rickshaw was approved by A.R.A.I. Pune on 4th Jan 69.
6. On our representation, Shri P. Sachdev, Group General Manager, informed us the revised price of Power Pack 4348 with Variamatic Gear Box @ Rs. 15,275 each F.O.R. Aurangabad exclusive of all taxes and duties to which agreed and placed a demand for supply of 50 Nos. of Power Packs to which there is no response.
7. Mr. Satish Kumar of Delhi office informed us on 6th July 1989 personally that the life of indigenous Fanner make Fan Belt fitted in the Power Pack was between 2,000 to 2,500 K.Mtrs. We represented that no one would like to purchase our Auto Rickshaw with such a serious defect. Now to our great surprise and sorrow Mr. J.G. Sharma Divi. Manager has informed us that Variamatic already fitted with Power Pack was not suitable in our Auto Rickshaw. This is based on the information supplied by your Aurangabad Factory.
8. We fail to understand that as to how defective variamatic not suitable to our Auto Rickshaw was supplied to us and the circumstances under which our Auto Rickshaw was approved by Automative Research Association of India, Pune (A Govt. of India Under- taking) with defective Variamatic.
9. It is submitted that when we placed an order of your power packs we never know that we have to open the R&D also instead of manufacturing the vehicle. We are struggle hard for the last three years and we have already invested huge amount of our project. A stage has now cone when we are very much worried of our heavy investment made in this regard for which sole responsibility exists with you as constant defects are being pointed out in the Power Pack.
10. Despite the fact we have made ceaseless efforts and incurred heavy expenditure in development of our Auto Rickshaw from 1986 onwards we do not find ourselves in a position to manufacture ZERO defect Auto Rickshaw. We find ourselves in a gear fix.
11. In this connection, it is further stated that during the Press Conference held in our office on 20th Jan 1989 we have already announced that we would launch our Auto Rickshaw in July 1989 in the Market and have placed necessary order on manufacturers/Suppliers for requisite parts/materials for the purpose and made advances to them. We had to face humiliation due to non-supply of Power Pack in time.
12. Therefore, we request you to please issue necessary instructions to all concerned to co-operate with us and to accord priority to our demands placed in this regards. Our successful launching of our Auto Rickshaw in the market is our mutual interest and benefit.

Thanking you,

Yours faithfully,

For SURYA SCOOTERS PVT. LTD.

MANAGING DIRECTOR”

(xviii) A similar communication dated 09.09.1989 was sent by the complainant to Respondent No. 1, who controverted the allegation that the power pack supplied by it was defective. The relevant portions of reply dated 27.09.1989 sent by Respondent No. 1 are reproduced below :

“(3) It appears that the matter has not been clearly understood by you. We wish to reiterate that no now power packs have been developed by us and only the vehicles mentioned at Sr. No. 2 are available till and September 1989. As such the question of sending the power packs of Lucknow/Kanpur does not arise.

(4) We had also clarified that in case you decide to manufacture any of the vehicles mentioned at Sr. No. 2 our scope of supply would be limited to the engine only and that the remaining components would have to be arranged directly by son.
(5) We wish to highlight that we have also incurred heavy expenses in developing variamatic unit to suit your chassis apart from rendering technical help time and again. We have even gone to the extent of deputing our representatives to attend to the problems purely related with your chassis during ARAI trials such as fitment of brakes in tendum etc. even though we were not obliged to do so. Thus you would kindly appreciate that we on our part have not spared any efforts whatsoever to make this product/project a success which is now proving unsuitable/unviable for reasons mentioned at Sr. No. 1 above. You would therefore kindly agree that the reasons resulting in your inability to supply power packs are beyond our control and we cannot be held responsible for any consequence financial or otherwise. In view of the above and the fact that the basic three wheelers mentioned at Sr. No. 2 are already proven in the market we feel that very little further development may be called for. However, you may have to get the vehicle approved from ARAI before proceeding with the bulk production.
We wish to once again clarify that in case you decide to manufacture any of the vehicles mentioned at Sr. No.2 above our scope of supply would be limited to bare engine only and that other sub assemblies/component pertaining to the transmission of power from engine/related mountings such as gear box, differential cradle, AVMs etc. including modifications to chassis if any shall have to be sourced/arranged directly by you.” [Underlining is Mine]
(xix) The aforesaid letter was followed by communication dated 12.10.1989 addressed to Shri J.P. Jain, which is self-speaking and reads as under:—

“GREAVES Manufacturing Marketing & Systems Engineering

BY REGISTERED A/D

OUR REF: JGS/kvt

12th October, 1989

M/s Surya Scooters Private Ltd.,
Model Town, Pandu Nagar,
Kanpur – 208 005
Kind Attn. : Mr. J.P.Jain

Managing Director

Dear Sirs,
Sub: Development of Vaishali Diesel Auto Rickshaw.
This has reference to your letter No. SSL/89-90/249 dated 19th September 1989, marked for the kind attention of our Group General Manager, Mr. P. Sachdev and your letter Nos. SSL/89-90/231 dated 29.8.1989 and SSL/89-90/254 dated 25.9.1989 both addressed to our Chairman, Mr. L.M. Thapar, on the above subject which have been passed on to the undersigned for necessary action. In this connection we have to state as under :
1. We have already replied to your letter No. SSL/89-90/242 dated 9.9.1989 vide our letter No. JGS/kvt dated 27.9.1989, which we are sure you must have since received.
2. It would be recalled that prior to your venturing for the project we had abundantly made it clear to you that even though variamatic unit is trial out in Italy for light duty vehicles, it is a new concept to be adopted to a commercial application such as a 3 wheeler in India. Thus for exploring the feasibility very extensive/elaborate field trials at your end on the proto type vehicles would be necessary. We had however assured our fullest co-operation and help in respect of the power pack to make your project viable as far as possible. Therefore, this exercise was undertaken strictly based on this clear understanding. This point was again clarified/stressed in 2nd para of our letter JSG: mp dated 7.4.1988 and even acknowledged in your letter No. SSL:89:89:94 dated 18.4.1989.
3. We wish to highlight that whatever failures occurred during the trials, the same were attributable to mismatching of the vehicle with the road/environmental/operating conditions prevalent in the country. Nevertheless the same were promptly attended by us every time all through the duration of trials. We have also suffered heavy expenses by way of man and materials in making repeated attempts in develop this application successfully so as to be in line with the original understanding. We also pointed out several times that your own engineering department needs to be much more strengthened to handle the technical problems which are bound to arise in a project of this nature.
4. Only after completion of field trials it was revealed that keeping in view of the relatively short life of belt, road/operating conditions prevalent in our country and the design of your vehicle, the variamatic unit is not ideally suitable for long, trouble free running of autorickshaws by drivers in India. This point was discussed in our meeting at Bombay on 2.9.1989 and you fully concurred with the above.
5. It is not correct to mention that we had forced you to dispatch the vehicle to Aurangabad to modify/update the same. In this connection we draw your attention to your letter No. SSL:88:89:59 dated 31.3.1988 wherein you yourself had expressed the desire to send the vehicle to Aurangabad before road worthiness trials at ARAI, Pune. We had also clearly advised you in our letter No. JGS/M….. dated 7.4.1988 that only after your authorized representative is satisfied you should proceed ahead to take the vehicle for ARAI test.
Since the vehicle was personally seen by you at our Aurangabad works and cleared (please refer minutes of the meeting dt. 7.8.1988 held at Aurangabad) before sending it to ARAI, we cannot be held responsible, even for the expenses incurred on ARAI tests.
Moreover the defects which cropped up during ARAI trials mainly pertained to the brake system of the vehicle which was entirely done by you. Although, as per the understanding (please refer minutes dated 7.8.1988) this was required to be attended by you, yet we in the interest of the success of the project went ahead and helped to overcome the braking problem encountered during the trials.
6. Your purchase order dated 16.5.1989 was received by us only during 3rd week of May 1989. We do not understand as to how you feel that there is no response from our end particularly when our Mr. Satish Jain of Delhi office and the undersigned already informed you the feelings of our technical department regarding the short life of belt and unsuitability of variamatic units for autorickshaws due to reasons explained above.
7. We wish to reiterate that there is nothing wrong with the basic product, i.e. engine and variamatic unit but the performance of the same on 3 wheeler has to be such that the same is acceptable to the customer under prevailing road/loading conditions. Only after field testing it has been observed that due to problems enumerated above commercial usage of the variamatic unit is not recommended.
8. We do not understand as to what R & D work has been carried out by you on power pack at your end. On the contrary we had to do lot of R & D work on your vehicle such as fitment of hydraulic brake system in Tendem and other related works. In fact, we advised you to strengthen your engineering department, which is practically non- existent.
From the foregoing it would be clear that we have not left any stone unturned to make this product/project a success, but the final decision to go ahead commercially rests entirely with you.
We wish to once again stress that we are basically manufacturers of diesel engines and supply the same to various Original Equipment Manufacturers (OEM). The primary responsibility for correct design and manufacture of the final product clearly rests with the . . . . . illegible . . . . . . . such as yourself. It is entirely upto you to decide your own business strategies such as product development, engineering, procurement, stocking, manufacturing, marketing, publicity, pricing etc. In the process, any business gains or losses are also entirely at your own risk and cost. In no way can we be held responsible for the expenses or losses incurred by you in the course of your business.
As far as future development of Autorickshaw with gearbox drive is concerned, we are willing to help you and in this connection please refer to the discussions held at Bombay on 2nd September, 1989, and as confirmed in your letter No.JGS/kvt dated 27th September, 1989. This also serves to reply your recent letter dated 2nd October 1989 marked for the attention of Mr. P. Sachdev.

Thanking you,

Yours Faithfully, for GREAVES COTTON & COMPANY LTD.

(J.S. . . . . . .) . . . . . . illegible. . . . . . . . . . ”

(xx) In response to another communication dated 18.11.1989 received from the complainant, Respondent No. 1 conveyed its willingness to supply power packs subject to the condition that an agreement is reached on the issues relating to prices, delivery, warranty, terms of payment etc. That letter dated 08.12.1989 sent by Respondent No. 1 reads as under :
“OUR REF : CDG/Kut. 8th December, 1989
M/s. Surya Scooters Pvt. Ltd.,
117/H-1/242, Model Town,
Pandu Nagar, Kanpur 208 005.
Kind Attn : Mr. J.P. Jain,
Managing Director.
Dear Sir,
Sub. : Supply of Power Packs.
This has reference to your letter No. SSL/89-90/296 dated 18th November 1989, on the above subject. We wish to advise you as under :—
1. We have already replied to your letters mentioned in para 1 of your above referred letter, vide our letter No. CDG/kvt dated 27th November, 1989.
2. The contents of para 2 of your letter are not correct. As already mentioned in our letter No. JGS/kvt dated 12.10.1989, that we are basically manufacturers of diesel engines and supply the same to various Original Equipment Manufacturers (OEMs). The primary responsibility for correct design and manufacture of the final product clearly rests with the OEM such as yourself.
It is entirely upto you to decide your own business procurement, stocking, manufacturing, marketing, publicity, pricing etc. etc. In the process, any business gains or losses are also entirely at your own risk and cost. In no way can we be held responsible for the expenses or losses incurred by you in the course of your business.
We wish to reiterate that there is nothing wrong with the basic product, i.e. engine and variamatic unit but the performance of the same on 3 wheeler has to be such that the same is acceptable to the customer under prevailing road conditions, overloading and rough usage by driver. Only after field testing it has been observed that due to problems enumerated in our letter No. JGS/kvt dated 12.10.1989, commercial usage of the variamatic unit may not be acceptable in the market.
Keeping in view the above, if you still insist that our diesel engine and variamatic unit may be used by you, in your Vaishali Diesel Auto Rickshaw, we have no reluctance to supply the same. However, price, delivery, warranty, terms of payment shall have to be discussed and mutually agreed upon before commencement of supplies.
You will appreciate that we have been extending our fullest co-operation as and when you desired, to make your project a success and, in that process, we have suffered heavy losses by way of man and materials in making repeated attempt to develop your product.
3. We have carefully gone through the contents of para 3 of your letter and wish to clarify that in case you resort to action which affects the image of our Company, we shall be left with no alternative but to take appropriate legal action against you at your risk and responsibility.
We trust, the mater is now clear to you.

Thanking you,

Yours faithfully,

For GREAVES COTTON & COMPANY LTD.

(C.D. GUPTA)

MARKETING MANAGER LIGHT ENGINE DIVISION”

(xxi) In the maze of correspondence between the parties, the complainant sent letter dated 20.07.1990 to the Director of ARAI and sought the institute’s confirmation that the certificate issued earlier was sufficient proof of the suitability of three wheeler for Indian roads. In its reply dated 16.08.1990, ARAI clarified that the Institute is in no way responsible for the quality of the product or life of the vehicle. The relevant portions of that letter is extracted below:
“Our certificate pertains to the performance of the prototype whether it meets the requirements of the Motor Vehicle Act and other statutory regulations. We are in no way responsible for the quality of your production or on the life of the vehicle. It is also not clear who has told that the design is not fit for the Indian road conditions and therefore we are sorry that we cannot help you any further.”‘

10. Since the parties could not resolve the issue relating to supply of power packs, the complainant sent legal notice dated 01.02.1990 through its advocate and claimed compensation of Rs. Five Crores Five Thousand and Six Hundred from the respondents by alleging that they had indulged in restrictive and unfair practices. The respondents’ advocate sent reply dated 30.04.1990 and categorically denied the allegations that his clients have indulged in restrictive and unfair trade practices. It was averred that the complainant is not entitled to any compensation.

11. In April-May 1991 issue of “Business India”, an article was published suggesting that Respondent No. 1 was planning to develop a diesel engine for 3-wheelers. Soon thereafter, the complainant served legal notice dated 06.07.1991 upon Respondents Nos. 1 and 2 reiterating its plea that the respondents were guilty of restrictive and unfair trade practices. The latter sent reply dated 10.08.1991 through their advocate and denied that there was any plan to develop a diesel engine for 3- wheelers. A similar news item appeared in the December, 1991 issue of ‘Motorcycle” and another notice was sent by the complainant through its advocate. This time, Respondents Nos. 1 and 2 did not respond.

12. After eight months of sending the third notice, the complainant invoked the jurisdiction of the erstwhile Monopolies and Restrictive Trade Practices Commission (for short ‘the Commission’) by filing the present complaint and made prayers to which reference has been made in the opening paragraph of this order by the complainant. The complainant has pleaded that the respondents, being the only manufacturer/distributor of the power packs have unreasonably prevented and lessened competition in the production, supply and distribution of powers packs by adopting unfair methods and unfair/deceptive practices; that the non-supply of power packs amounts to restrictive trade practice within the meaning of section 2(o) of the Act; that the decision of the respondents to withhold supply of power packs has adversely impacted the production of diesel 3- wheelers and as such the same amounts to a restrictive trade practice under Section 2(o)(i) of the Act; that the manipulation of prices and conditions of delivery of power packs has resulted in imposition of unjustified costs on the complainant; that the respondents are guilty of making misrepresentation about the quality of power packs and the deception practised by them lured the complainant to invest money and time in creating infrastructure for the manufacture of 3-wheelers and this amounts to unfair trade practice as defined in Section 36A (iv) and (v) of the Act and that the trade practices adopted by the respondents are prejudicial to the public interest.

13. In the reply filed on behalf of Respondent Nos. 1 and 2, several objections have been taken to the maintainability of the complaint. Some of these are :—

(a) The complaint is barred by limitation because the cause of action had accrued in 1987 when the so called defects in the power pack came to the notice of the complainant, but the complaint was filed after five years.
(b) The Commission could not have taken cognizance of the allegation relating to unfair trade practice and initiated enquiry because the complainant is not a consumer.
(c) Section 33 of the Act is not attracted because no agreement was signed between the complainant and the respondents in the matter of supply of power packs.
(d) The provisions of the Act cannot be invoked to compel the respondents to supply power packs to the complainant which are not commercially manufactured or marketed.
(e) There is no trade practice with respect to the power packs proposed to be manufactured by the respondents and, therefore, there is no question of preventing, distorting or restricting competition or obstructing of capital or resources into the stream of production or which could be said to result in the manipulation of prices and conditions of delivery of the power packs.
(f) The dispute between the parties is purely a civil dispute and the same cannot be decided under the Act.

14. On merits, the respondents have pleaded that they had not made any misrepresentation to the complainant; that they had only agreed to supply a prototype diesel engine for development of a suitable chassis to be manufactured by the complainant for 3-wheelers; that the Special Note was not prepared by the respondents or their representative and in any case the same cannot be termed as a project report; that while supplying prototype of power pack, it was made clear to the complainant that the efficacy of the same would depend on the development of the chassis by the complainant for being tested on Indian roads; that chassis developed by the complainant was defective on various counts and modifications were required to be made with respect to its design and quality; that no assurance was given to the complainant at any stage for supplying of particular number of power packs; that there was no defect in power pack manufactured by incorporating engine Model 520 A; that all the faults/defects in three wheeler were due to faulty design of chassis and not on account of power pack; that the respondents did not make any misrepresentation about the quality and efficacy of power packs and commercial production of power packs was not undertaken because of unsuitability of the vehicle manufactured by the complainant for the Indian roads; that ARAI had issued certificate only in the context of the provisions of the Motor Vehicles Act and it was not a certificate with respect to the life span of the vehicle or the conditions under which it could be used; that the field tests of the power pack incorporated with Engine Model No. 4348 revealed that Indian belts used therein were not long lasting and suffered great wear and tear within 2000 kms. and, therefore, it was decided not to commence production of power packs.

15. In the rejoinder filed by it, the complainant has reiterated the allegations that the respondents had resorted to unfair trade practice and they are guilty of indulging in restrictive trade practice. The complainant has emphasised that the Special Note was prepared by the representative of the respondents and the same contained an unequivocal representation about the efficacy of diesel engine being developed by the respondents. The complainant has also claimed that by refusing to supply power packs, the respondents have prevented it from manufacturing 3-wheelers and thereby caused huge pecuniary loss to it.

16. Shri Sanjeev Sabharwal, learned senior counsel for the complainant referred to the pleadings of the parties, the Special Note on Diesel Autorickshaw, the correspondence exchanged by the parties between 1983 to 1989 on various issues including manufacture of the power packs, their pricing, validity of warranty etc. and argued that the respondents should be declared guilty of indulging in unfair and restrictive trade practices because after inducing the complainant to undertake manufacture of 3-wheelers by giving a categorical assurances about the quality and suitability of the power pack manufactured by them, they arbitrarily refused to supply the power packs on the pretext that the same were not suitable for Indian road conditions and thereby prevented the complainant from manufacturing three wheelers causing huge financial loss to it. Learned senior counsel submitted that if the complainant had succeeded in manufacturing 3-wheelers then it would have earned substantial profits because there was acute shortage of 3-wheelers in the market. Learned senior counsel relied upon the minutes of the meetings held on 18.06.1988 and 07.08.1988 and certificate dated 04.01.1989 issued by ARAI and argued that the abrupt discontinuation of the manufacture of power packs by the respondents was not only contrary to public interest but was also against national interest because there was a gap of 40,000 to 50,000 commercial 3-wheelers between the demand and supply. Shri Sabharwal then submitted that even though no formal agreement was executed between the parties, the long chain of correspondence exchanged between them for a period of over six years and placing of order by the complainant for supply of 50 power packs with variamatic gear box should be construed as a concluded contract for the purpose of Section 33 of the Act and argued that failure of the respondents to supply the required number of power packs to the complainant should be declared as an act of restrictive trade practice within the meaning of Section 2(o) of the Act. Learned counsel emphasised that by negotiating the supply of power packs and getting the prototype 3-wheeler autorickshaw tested by ARAI, the respondents persuaded the complainant to incur huge expenditure for manufacturing 3-wheelers and then refuse to supply the power packs and this should be treated as an act of unfair trade practice.

17. Shri R.S. Suri, learned senior counsel for the respondents referred to the Preamble of the Act to show that the same was enacted primarily for economic justice keeping in view the provisions of Articles 19(1)(g) and 39(b) of the Constitution of India and argued that the decision taken by the respondents not to manufacture power packs with diesel engines to be used in 3-wheelers cannot be condemned as an act of restrictive trade practice. He argued that the Commission was not entitled to initiate enquiry into the allegation of unfair trade practice because the complainant is not a consumer within the meaning of Section 36-B. Shri Suri submitted that the complainant had intended to manufacture 3- wheelers for commercial purpose and not for earning livelihood for the members of its management and their families and, as such, it cannot be treated as consumer. Learned senior counsel emphasised that the correspondence exchanged between the parties from 1983 to 1989 is merely indicative of the fact that they were exploring the possibility of a joint venture for manufacture of 3-wheelers but the parties had not executed a legally enforceable contract. Shri Suri argued that in the absence of a concluded contract, the complainant cannot seek a direction which would amount to specific performance of contract. Shri Suri submitted that the respondents had supplied two power packs to the complainant to enable it to develop a prototype 3-wheeler but commercial production of the powers packs was not undertaken because the same were not found suitable for Indian roads. Learned counsel pointed out that the life of the rubber-belt made of Indian rubber was not at all suitable for 3-wheelers proposed to be manufactured by the complainant because total life thereof would have been only 2000 to 2500 KMs and as per the complainant’s own version nobody would have purchased a three wheeler with such a short life span and then spent money on repairs on a continuing basis. Shri Suri submitted that certificate dated 04.01.1989 issued by ARAI merely shows that the prototype 3-wheeler satisfied the norms prescribed under the Motor Vehicles Act and the Rules framed thereunder and argued that the same cannot be treated as an evidence of the quality, durability and suitability of the product for the particular type of roads. In support of this submission, Shri Suri relied upon letter dated 20.07.1990 sent by ARAI. He emphasised that once ARAI had made it clear that it is not responsible for the quality of the product or life of the vehicle, the certificate issued earlier cannot be relied upon for the purpose of recording a finding that though the power packs were suitable for Indian road conditions and the respondents had deliberately stopped production causing injury to public interest or national interest. As regards the Special Note on Diesel Autorickshaw, Shri Suri submitted that the same cannot be relied upon for recording a finding that the respondents have indulged in restrictive and/or unfair trade practice because the person who prepared the Special Note was not authorised by the respondents. Learned counsel then argued that even if the Special Note is held to have been prepared by any officer/employee of the respondents, it cannot be construed as a representation made on their behalf about the quality and suitability of the product for manufacture of 3-wheelers on commercial basis. An alternative argument made by the learned senior counsel is that the Special Note was not in the nature of a project report, as claimed by the complainant but was merely a compilation of various papers collected by the author in the background of acute shortage of three wheelers in the country and the fact that there were very few manufacturers of three wheelers with limited production capacity. Shri Suri concluded this part of the submission by stating that the complainant has not produced any evidence to prove that it was misled by the Special Note to commence production of 3-wheelers on commercial basis. He read out some portions of the Special Note to show whatever had been written by the author was in the nature of a guideline for a vehicle builder to assist the vehicle design/lay-out and for further details the respondents were to be contacted. Learned senior counsel also submitted that the complainant is not entitled to any compensation because except a bald statement in the affidavit of Shri J.P. Jain about the quantum of loss, no supporting evidence has been produced by the complainant to prove that on account of non-supply of power packs, it had suffered particular loss.

18. I have considered the respective arguments/submissions of the parties and scanned the record produced by them. I have also gone through the affidavits of Shri J.P. Jain and Shri V.K. Aggarwal and their cross-examination.

19. The first question which needs determination is whether the Commission could have initiated an inquiry into the allegations of unfair trade practice levelled by the complainant against the respondents. Section 36-B of the Act which empowers the Commission to inquire into an unfair trade practice reads as under :

“Section 36-B : Inquiry into unfair trade practices by Commission.

The Commission may inquire into any unfair trade practice, –

(a) upon receiving a complaint of facts which constitutes such practice from any trade association or from any consumer or a registered consumers’ association, whether such consumer is a member of that consumers’ association or not; or
(b) upon a reference made to it by the Central Government or a State Government; or
(c) upon an application made to it by the Director General; or
(d) upon its own knowledge or information.”

20. A reading of the plain language of the above reproduced provision makes it clear that the Commission can inquire into any unfair trade practice on receipt of a complaint from any trade association or from any consumer or a registered consumers’ association, even though the consumer may not be a member of such association or on receipt of a reference made by the Central Government or the State Government or on an application made by the Director General or on its own knowledge or information. This necessarily implies that a complaint made by a person who is not a consumer or a trade association cannot be made basis for making an inquiry under Section 36-B of the Act.

21. In the context of the objection raised by learned counsel for the respondents, it is apposite to mention that the term ‘consumer’ has not been defined in the Act. However, keeping in view the language of Section 3 of the Consumer Protection Act which declares that the provision of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force, one can safely rely on the definition of ‘consumer’ contained in Section 2 (d) of that Act, which reads as under:—

‘(d) “consumer” means any person who :-

(i) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes.

Explanation – For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.’

22. The factual matrix of this case shows that after long-drawn correspondence spreading over a period of more than 5-6 years, the complainant had asked the respondents to supply power packs to be used in the manufacture of three wheelers which were to be sold to third parties. This clearly means that the complaint wanted to purchase goods from the respondents for commercial purpose. It is neither the pleaded case of the complainant nor any evidences has been produced before the erstwhile Commission or this tribunal to prove that the proposed business of selling three wheelers was exclusively for the purpose of earning livelihood of the members of the family of the Managing Director. Therefore, the complainant cannot be treated as a consumer for the purpose of Section 36-B of the Act and the Commission could not have initiated enquiry into the allegation of unfair trade practice.

23. Notwithstanding with the above conclusion, I have carefully scrutinized the correspondence exchanged by the parties and the documents produced by them and have no hesitation to hold that the respondents cannot be accused of indulging in unfair trade practice as defined under Section 36-A of the Act. The relevant clauses of Section 36- A, on which reliance has been placed by the complainant, read as under :

‘Section 36-A : Definition of unfair trade practice. – In this Part, unless the context otherwise requires “unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods for the provisions of any services, [adopts any unfair method or unfair or deceptive practice including any of the following practices], namely,—

(1) The practice of making any statement, whether orally or in writing or by visible representation which,—

(i)** ** **

(iv) represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;

(v) represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;

(vi) to (x), (2)** ** **’

24. In the light of the above quoted provision, it is to be seen whether the respondents had adopted any unfair method or unfair or deceptive practice or they had made any misrepresentation about the quality of the diesel engine proposed to be supplied by them for the purpose of promoting the sale/supply of power packs. In this context, it is important to bear in mind that the respondents had not initiated the proposal for supply of diesel engines/power packs to the complainant to be used in manufacturing 3-wheelers. Rather, it is an admitted position that the beginning was made by the erstwhile management of the complainant, which had sent letter dated 08.03.1983 to Respondent No. 3 with the request to supply literature and details of prices and terms and conditions for Lombardini engines of 5 and 10 H.P. which could be used for developing 3-wheelers. After the respondents had supplied the leaflets and technical details of Lombardini engines, the complainant had invited the representative of the respondents to discuss the project. As a sequel to the discussion, the representative of the respondents Shri S.S. Joglekar prepared a Special Note on Diesel Autorickshaws, copy of which was sent to Shri M.P. Jain sometimes in September, 1986. Thereafter both the parties exchanged several letters on the issues of the model of diesel engine, price thereof and warranty period. The respondents did supply two diesel engines to the complainant to facilitate manufacture of prototype 3-wheeler which was sent in the exhibition and also to ARAI for testing. However, when the respondents realised that the 3-wheelers fitted with the power packs will not be suitable for Indian roads, they decided to discontinue the production. At no stage, the respondents had made any misrepresentation about the quality and suitability of their product for Indian roads or otherwise induced the complainant to purchase the power packs for manufacturing 3-wheelers.

25. Although the respondents have disowned the Special Note by stating that the same had not been prepared by their authorised representative, but their stand is wholly unacceptable because the letters ‘SSJ’ with dated 13.02.1989 written on the third page of that Note under the heading ‘Demand and Supply of Motorised Three Wheelers like Autorickshaws’ clearly show that the Note had been prepared by Shri S.S. Joglekar who had also represented the respondents to discuss the proposed collaboration with M/s. Atul Auto Industries. That apart, letter dated 22.10.1986 sent by Shri A.R. Chowdhury contains an unequivocal admission that the Note was prepared by Shri S.S. Joglekar of Aurangabad and was supplied to the Managing Director of the complainant, Shri J.P. Jain.

26. However, the all important point which needs elucidation is whether the Special Note which has been described by Shri Sanjeev Sabharwal as a Project Report (This nomenclature also finds mention in letter dated 22.10.1986 sent by Shri A.R. Chowdhury) can be construed as a representation by the respondents for promoting the sale and/or supply of diesel engines/power packs manufactured by them or an unfair or deceptive practice about the quality and durability of the diesel engines/power packs. A careful reading of the Special Note shows that it is divided into the following chapters :

1. Demand and Availability of Motorised 3-wheelers like Autorickshaw.
2. Technical Specifications
3. Price Working
4. GLL Auto Power Pack
5. Diesel Autorickshaw
6. Comparative Specifications of 3-wheelers
7. Market
8. The Project and its Operational Highlights
9. Why the 3-wheelers should be with Greaves Lombardini Diesel Power Pack.

27. In the first chapter, the author has pointed out that there are different kinds of 3-wheelers in Indian market of different pay-load capacity; that there are three manufacturers of autorickshaws, namely Bajaj Auto Limited (Pune), Automobiles Products of India (Bombay) and Kerala Automobiles (Trivandrum) having capacity of 50000, 15,000 and 10000 autorickshaws per annum respectively. He has then referred to the market surveys conducted by the Government showing the estimated demand of 1,50,000 autorickshaws in 1989-90 and indicated that the estimated production of the three producers in 1985-86 was around 40,000 vehicles leaving a gap of 30,000 to 35,000 vehicles in that year. A mention has also been made about the Scooters India Ltd. manufacturing 600 Kg. pay-load capacity and the fact that Lohia Machines have also indicated their plan to manufacture 8-seater passenger vehicles. At the end of this chapter, Shri Joglekar recorded the following observation :

“Even if we consider the expansion programme of Bajaj Auto still all the manufacturers mentioned above are not in a position to reduce the gap between demand and supply which is expected to remain at the level of 40,000 to 50,000 vehicles unless new manufacturers are licenced to undertake the production of autorickshaw kind of vehicle.”

Chapter-2 of the Note contains technical specifications against the item ‘Power train’. The following has been recorded :

“Greaves Lombardini 4348 diesel engine with GL Varimatic drive including differential.”

In the same chapter, the author has indicated ex-factory price of the vehicle and various other components as Rs. 39,585/-. He has then recorded the following note :

“From the information available, the latest revised prices of the petrol vehicles are around Rs. 28,000 to 29,000 to the end customers. However, considering the economics of operation explained above, diesel vehicle would certainly be preferred as operator recovers the difference between diesel and petrol in seven months and thereafter he earns much more than the petrol vehicle, which will enable him to improve on his pay back against the bank finance. In case of petrol vehicle, the pay-back period for the total cost of the vehicle runs to approx. 18 months whereas the cost of the diesel vehicle, although it is higher than petrol, the owner can recover in around 13 months.”

The third chapter refers to GLL Auto Power Pack. In the opening paragraph of this chapter, it has been mentioned that Greaves Lombardini has developed a power pack for diesel autorickshaw and small 3-wheeled/4- wheeled passenger cars, mini pick-up vans etc. The light weight and compactness of the power pack makes it specially suitable for light vehicles. The power pack consists of engine model 530 rated at 7.5 HP at 3600 RPM and fitted with electric starting motor and flywheel mounted alternator with electronic battery charging system, variamatic drive and gear box mounted on a fabricated under base. The complete unit ready for installation in a vehicle is supplied by GLL. The chapter is then sub- divided under the headings Highlights, Electrical System, Dimensions, Performance Details, Mounting of the power pack in the vehicle, Commissioning and Maintenance, Controls, Precautions. At the end of this chapter, the author has recorded the following note:

“This is only a guideline for the vehicle builder to assist vehicle design/layouts. For any more details contact GLL.”

The following paragraphs under the Chapter of the Special Note with the heading ‘Diesel Autorickshaw’ which have some bearing on the complainant’s allegation of unfair trade practice are extracted below :

“The autorickshaw, which is perhaps the smallest and a functionality fundamental form of commercial vehicle for passenger application, is yet to derive the full benefits of Diesel power in our country. The reason is very simple – so far, there was no suitable small diesel power pack available.

** ** **

Another very important factor in an autorickshaw is the type of transmission to be employed. Here again, the system should be simple in construction, and should employ fewer and inexpensive replacement parts, to keep the running costs low. Considering the conditions of Indian city roads, the traffic density, the variety of vehicles (1 hp to 100 hp & 35 km/hrs. to 150 Km/hr) using the safe lanes, and the unfortunately low levels of road discipline, in vehicular, pedestrian & bicycle traffic (not considering stray animals), an autorickshaw that tackles between 100 to 200 Km of road per shift, must have an easy to operate transmission, to aid fatigue-free driving. It is relevant to point out here that a driver under fatigue is a potential safety hazard.

Greaves Lombardini variamatic transmission, including final reduction, reversing gear & differential, all engineered to couple with their diesel engine, takes a neat package, almost custom built for a rear-engine-rear drive autorickshaw.

And now, all we need is an equally well made vehicle.

** ** **

With all these aspects blended with certain degree of aesthetics and medium volume production as the bases for design, the Consultancy Division of Breeze Bikes Pvt. Ltd., has conceived a 3 wheeler autorickshaw, powered by Greaves Lombardini engine with variamatic drive.

Breeze Bikes is willing to offer the design to interested manufacturers who will commission the Consultancy Division of the Company for the design & development of the vehicle.”

28. In his statement the Managing Director of the complainant Shri J.P. Jain did make a mention of the Special Note and stated that he was impressed by the same but no other evidence was produced on behalf of the complainant to prove that the contents of the Special Note had induced the concerned functionaries to place order for supply of diesel engines/power packs manufactured by the respondents. Even a suggestive argument on this score deserves to be rejected because, as mentioned above, the initiative for manufacture of 3-wheelers had been taken by the erstwhile management of the complainant more than three years prior to the submission of the Special Note and in January, 1986, i.e. 8 months before receiving copy of the Special Note Shri J.P. Jain had asked Respondent No. 1 to supply power pack for developing a prototype 3-wheeler autorickshaw. If the complainant had taken an in principle decision as early as in 1983 to manufacture 3-wheelers using diesel engines of Respondent No. 1, the question of its having been misled or deceived by the Special Note does not arise. It is also significant to note that the letters exchanged between the parties from September, 1986 to December, 1989 do not contain a specific mention about the complainant having been induced by the Special Note to place an order for supply of 50 power packs.

29. For the reasons stated above, I hold that the complainant has failed to prove that by virtue of the Special Note (Project Report) prepared by Shri S.S. Joglekar it was induced to seek supply of power packs from the respondents or that the Special Note contained any misrepresentation about the quality of the diesel engine/power pack. The correspondence made by the parties after submission of the Special Note shows that there was intense discussion on various issues like the quality of power pack, suitability thereof for Indian roads, pricing and warranty. Therefore, it cannot be said that the complainant was misled by the respondents in taking the decision to place order for 50 power packs.

30. The next question which requires consideration is whether the respondents are guilty of indulging in restrictive trade practice. As a prelude to the consideration of this question, it will be useful to notice the definitions of the terms ‘Trade Practice’ [Section 2 (u)], ‘Restrictive Trade Practice’ [Section 2 (o)], and ‘Unfair Trade Practice’ [Section 36A] as also Sections 33, 37 and 38 of the Act, which read as under :

‘Section 2 (u) : “trade practice” means any practice relating to the carrying on of any trade, and includes-

(i) (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;

Section 2 (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 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 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 costs or restrictions.

Section 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, namely:

(a) any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought;
(b) any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
(c) any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person;
(d) any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or on terms or conditions agreed upon between the sellers or purchasers;
(e) any agreement to grant or allow concessions or benefits, including allowances, discounts, rebates or credit in connection with, or by reason of, dealings;
(f) any agreement to sell goods on condition that the prices to be charged on re-sale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged;
(g) any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal of the goods;
(h) any agreement not to employ or restrict the employment of any method, machinery or process in the manufacture of goods;
(i) any agreement for the exclusion from any trade association of any person carrying on or intending to carry on, in good faith the trade in relation to which the trade association is formed;
(j) any agreement to sell goods at such prices as would have the effect of eliminating competition or a competitor;
[(j-a) any agreement restricting in any manner, the class or number of wholesalers, producers or suppliers from whom any goods may be bought;
(j-b) any agreement as to the bids which any of the parties thereto may offer at an auction for the sale of goods or any agreement whereby any party thereto agrees to abstain from bidding at any auction for the sale of goods;]
(k) any agreement not herein before referred to in this section which the Central Government may, [by notification], specify for the time being as being one relating to a restrictive trade practice within the meaning of this sub- section pursuant to any recommendation made by the Commission in this behalf;
(l) any agreement to enforce the carrying out of any such agreement as is referred to in this sub-section.

(2) The provisions of this section shall apply, so far as may be, in relation to agreements making provision for services as they apply in relation to agreements, connected with the [production, storage, supply], distribution or control of goods.

(3) No agreement falling within this section shall be subject to registration in accordance with the provisions of this Chapter if it is expressly authorised by or under any law for the time being in force or has the approval of the Central Government or if the government is a party to such agreement.

Section 37 : Investigation into restrictive trade practices by Commission

(1) The Commission may inquire into any restrictive trade practice, whether the agreement, if any, relating thereto has been registered under section 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.

(2) The Commission may, instead of making any order under this section, permit the party to any restrictive trade practice, if he so applies, to take such steps within the time specified in this behalf by the Commission as may be necessary to ensure that the trade practice is no longer prejudicial to the public interest, and, in any such case, if the Commission is satisfied that the necessary steps have been taken within the time specified, it may decide not to make any order under this section in respect of the trade practice.

(3) No order shall be made under sub-section (1) in respect of –

(a) any agreement between buyers relating to goods which are bought by the buyers for consumption and not for ultimate resale whether in the same or different form, type or specie or as constituent of some other goods;
(b) a trade practice which is expressly authorised by any law for the time being in force.

(4) Notwithstanding anything contained in this Act, if the Commission, during the course of an inquiry under sub- section (1), finds that [the owner of any undertaking is indulging in monopolistic trade practices], it may, after passing such orders under sub-section (1) or sub-section (2) with respect to the restrictive trade practices as it may consider necessary, submit the case along with its findings thereon to the Central Government for such action as that Government may take under Section 31.

Section 38 : Presumption as to the public interest –

(1) For the purposes of any proceedings before the Commission under Section 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 following circumstances, that is to say :

(a) that the restriction is reasonably necessary, having regard to the character of the goods to which it applies, to protect the public against injury (whether to persons or to premises) in connection with the consumption, installation or use of those goods;
(b) that the removal of the restriction would deny to the public as purchasers, consumers or users of any goods, other specific and substantial benefits or advantages enjoyed or likely to be enjoyed by them as such, whether by virtue of the restriction itself or of any arrangements or operations resulting therefrom;
(c) that the restriction is reasonable necessary to counteract measures taken by any one person not party to the agreement with a view to preventing or restricting competition in or in relation to the trade or business in which the persons party thereto are engaged;
(d) that the restriction is reasonably necessary to enable the persons party to the agreement to negotiate fair terms for the supply of goods to, or the acquisition of goods from, any one person not party thereto who controls a preponderant part of the trade or business of acquiring or supplying such goods, or for the supply of goods to any person not party to the agreement and not carrying on such a trade or business who, either alone or in combination with any other such persons, controls a preponderant part of the market for such goods;
(e) that, having regard to the conditions actually obtaining or reasonably foreseen at the time of the application, the removal of the restriction would be likely to have a serious and persistent adverse effect on the general level of unemployment in an area, or in areas taken together, in which a substantial proportion of the trade, or industry to which the agreement relates is situated;
(f) that, having regard to the conditions actually obtaining or reasonably foreseen at the time of the application, the removal of the restriction would be likely to cause a reduction in the volume or earnings of the export business which is substantial either in relation to the whole export business of India or in relation to the whole business (including export business) of the said trade or industry;
(g) that the restriction is reasonably required for purposes in connection with the maintenance of any other restriction accepted by the parties, whether under the same agreement or under any other agreement between them, being a restriction which is found by the Commission not to be contrary to the public interest upon grounds other than those specified in this paragraph or has been so found in previous proceedings before the Commission;
(h) that the restriction does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so;
(i) [that such restriction has been expressly authorised and approved by the Central Government;
(j) that such restriction is necessary to meet the requirements of the defence of India or any part thereof, or for the security of the State; or
(k) that the restriction is necessary to ensure the maintenance of supply of goods and services essential to the community,]

and is further satisfied (in any such case) that the restriction is not unreasonable having regard to the balance between those circumstances and any detriment to the public or to persons not parties to the agreement (being purchases, consumers or users of goods produced or sold by such parties, or persons engaged or seeking to become engaged in the trade or business of selling such goods or of producing or selling similar goods) resulting or likely to result from the operation of the restriction.

(2) In this section “purchasers”, “consumers” and “users” include person purchasing, consuming or using for the purpose or in the course of trade or business or for public purchase; and references in this section to any one person including references to any two or more persons being inter-connected undertakings or individuals carrying on business in partnership with each other.’

31. Whether the particular trade practice can be treated as restrictive trade practice has been considered by the Supreme Court in a number of cases including Tata Engineering and Locomotive Co. Ltd. v. Registrar [1977] 2 SCC 55, Mahindra and Mahindra Ltd. v. Union of India [1979] 2 SCC 529 and Voltas Ltd. v. Union of India [1995] Supp. 2 SCC 498.

32. In Tata Engineering and Locomotive Company Limited Versus the Registrar, the Supreme Court considered the question whether the agreement between TELCO and its dealers allocating territories to its dealers within which they could sell bus and truck chassis constitute a restrictive trade practice as defined under Section 2 (o). The three Judges Bench of the Supreme Court analysed Section 2 (o), 33, 35, 37 and 38 of the Act and observed :

“27. Second, Section 33 of the Act requires an agreement falling within the clauses thereof to be registered. In short an agreement which amounts to a restrictive trade practice will be first registered and then an enquiry will be made under Chapter VI of the Act as to whether the restrictive trade practice is prejudicial to the public interest. Irrespective of the injurious or beneficial consequence of a trade practice which restricts or may restrict competition, it may fall within the definition. Injurious or beneficial result of the restriction is relevant only for purposes of Sections 37 and 38 of the Act.

28. Section 33 of the Act states that any agreement relating to a restrictive trade practice falling within one or more of the categories mentioned therein shall be subject to registration in accordance with the provisions of Chapter V. of the Act. Clauses (a) and (d) in sub-section (1) of Section 33 are relevant in the present case. These are, inter alia, (a) any agreement which restricts or is likely to restrict by any method the persons or classes of persons to whom goods are sold or from whom goods are bought, and (d) any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or on terms or conditions agreed upon between the sellers or purchasers.

29. The definition of restrictive trade practice is an exhaustive and not an inclusive one. The decision whether trade practice is restrictive or not has to be arrived at by applying the Rule of reason and not on the doctrine that any restriction as to area or price will per se be a restrictive trade practice. Every trade agreement restrains or binds persons or places or prices. The question is whether the restraint is such as regulates and thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine this question three matters are to be considered. First, what facts are peculiar to the business to which the restraint is applied. Second, what was the condition before and after the restraint is imposed. Third, what is the nature of the restraint and what is its actual and probable effect.

30. Section 33(1) of the Act deals with registration of certain types of restrictive trade practices which have the subject-matter described in categories mentioned in clauses (a) to (1) of Section 33(1) of the Act. An agreement will be registrable, when it will have both the effect of restricting competition within the meaning of Section 2(o) of the Act and also deal with the subject-matter described in clauses (a) to (1) of sub- section (1) of Section 33 of the Act. Clauses (a) to (1) aforesaid describe some species of agreement which require registration if they are within the genus of restrictive trade practice defined in Section 2(o) of the Act. A practice which is not restrictive under Section 2(o) of the Act cannot be restrictive trade practice only because of clauses (a) to (1) of sub-section (1) of Section 33 of the Act. Section 33 does not provide statutory illustrations to Section 2(o) of the Act but only enumerates some types of trade practices which, if they are restrictive within Section 2(o) of the Act require registration.

31. Section 33 fixes categories of restrictive trade practices. Section 33 states that any agreement relating to a restrictive trade practice falling within one or more of the categories mentioned therein shall be subject to registration. Therefore, before an agreement becomes registrable it has to be a restrictive trade practice in accordance with the definition of Section 2(o) of the Act. At the threshold it has to be found out whether an agreement constitutes a restrictive trade practice. In Section 33 it is stated, for example, that any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought is one of the categories of a registrable restrictive trade practice.

32.——————Therefore, when the authorities under the Act want to challenge any agreement or any practice as a restrictive trade practice, it has to be established that it is a restrictive trade practice within the definition of the Act. If it is found to be a restrictive trade practice the next stage is to register agreements relating to a restrictive trade practice. Section 33 states that any agreement relating to a restrictive trade practice falling within one or more of the categories mentioned therein shall be subject to registration. The authorities have to examine the agreement and find out whether it falls within the vice of a restrictive trade practice before the authorities can ask that the agreement be registered under Chapter V of the Act. [Underlining is Mine]

33. In Mahindra and Mahindra Limited Versus Union of India, another three Judges Bench of the Supreme Court considered various provisions of the Act including Section 2(o). The appellant had appointed distributors for marketing and sale of jeep manufactured by it on certain terms and conditions contained in a standard distributorship agreement. After execution of the agreement, the appellant submitted the same to the Registrar of Restrictive Trade Agreement for the purpose of registration. After registering the agreement, the Registrar made an application to the Commission that the agreement was restrictive in nature. The Commission enquired into the matter and held that the appellant was guilty of restrictive trade practices. After the judgment of the Supreme Court in Tata Engineering and Locomotive Co. Ltd. (supra) the appellant sought review of the order passed by the Commission, but could not succeed. In the appeal filed against the order of the Commission, it was argued on behalf of the respondents that having volunteered to file agreement before the Registrar, the appellant will be deemed to have admitted that it was indulging in restrictive trade practice. While rejecting the argument, the Bench observed:—

’16. There is no doubt that the appellant by its letter dated May 19, 1972 submitted the distributorship agreement to the Registrar for registration under Section 33, but we do not see how this act of the appellant or the letter forwarding the distributorship agreement for registration can be construed as admission on the part of the appellant that the trade practices referred to in the offending clauses of the distributorship agreement constituted restrictive trade practices. In the first place, the question whether a trade practice is restrictive trade practice or not is essentially a question of law based on the application of the definition in Section 2(o) to the facts of a given case and no admission on a question of law can ever be used in evidence against the maker of the admission. Therefore, even if there was any admission involved in submitting the distributorship agreement for registration, it could not be used as evidence against the appellant in the inquiry under Section 37. Moreover, we do not think that in submitting the distributorship agreement for registration, the appellant made an admission that any particular clauses of the distributorship agreement constituted restrictive trade practices. There is nothing in the letter of the appellant to show which were the particular clauses of the distributorship agreement regarded by the appellant as restrictive trade practices on the basis of which it made the application for registration. It is possible that the appellant might have taken the same view which the Commission did in Telco case, namely, that the moment an agreement contains a trade practice falling within any of the clauses of Section 33(1), the trade practice must, irrespective of whether it falls within the definition in Section 2(o) or not, be regarded as a restrictive trade practice and the agreement must be registered and on that view, the appellant might have submitted the distributorship agreement for registration. The submission of the distributorship agreement for registration cannot, therefore, possibly be construed as admission on the part of the appellant that the particular clauses of the distributorship agreement faulted by the Commission constituted restrictive trade practices. There was, accordingly, no admission of the appellant on which the Commission could rely for the purpose of making the order dated May 14, 1976.

17. We must, in the circumstances, hold that, since there was no material at all on the basis of which the Commission could find that the trade practices referred in the offending clauses of the distributorship agreement were restrictive trade practices, the order dated May 14, 1976 was contrary to law. This clearly attracted the exercise of the power of the Commission under Section 13(2). The decision of this Court in Telco case exposed the invalidity of the order dated May 14, 1976 and showed that it was bad as being based on no material whatsoever. When the Commission passed the order dated May 14, 1976, the decision of the Commission in Telco case held the field and according to that decision, any trade practice which fell within one of the clauses of Section 33(1) would be a restrictive trade practice and that is perhaps the reason why the Registrar did not produce any material before the Commission and even though there was no material before it, the Commission proceeded to invalidate the trade practices referred to in the offending clauses as restrictive trade practices, since they fell within one or the other clauses of Section 33(1). But this view was reversed in appeal and it was held by this Court that a trade practice which does not fall within the definition in Section 2(o) cannot become restrictive trade practice merely because it is covered by one or the other of the clauses of Section 33(1): what Section 33(1) requires as the condition for registration is that the agreement must relate to a trade practice which is restrictive trade practice within the meaning of Section 2(o) and such restrictive trade practice must additionally fall within one or more of the categories specified in that section. It was because of this decision in Telco case that the necessity for production of material to show that the trade practices complained of were restrictive trade practices became evident and it came to be realised that the order dated May 14, 1976 were bad. The conclusion is, therefore, inescapable that the power of the Commission under Section 13(2) was exercisable in the present case and the order dated May 14, 1976 was liable to be revoked.

22. 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 prescribed anti-competitive 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 or 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 effect – and that would depend on the various considerations referred to by us earlier – it 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 States15 where the question was whether the restrictive-use, exclusive-use, and additional-machinery clauses in certain lease agreements of shoe-machinery were struck by the provisions of Section 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 would be no difficulty in such a case in applying the definition of restrictive trade practice in accordance with the law laid down in Telco case as explained by us in this judgment.

23. 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 Additional Solicitor General 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 prohibited anti- competitive 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 anti- competitive. 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 fast rule and each case would have to be examined on its own facts from a business and common sense 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.

24. There is also another infirmity invalidating the order dated May 14, 1976. We have already pointed out, and that is clear from the decision of this Court in Telco case, that in an inquiry under Section 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 Section 2(o) and it is only after the Commission is so satisfied, that it can proceed to consider whether any of the “gateways” provided in Section 38(1) exists so that the trade practice, though found restrictive, is deemed not to be prejudicial to the public interest and if 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 a cease and desist order can be made by the Commission in regard to any trade practice complained before it. One is that the Commission must find that the trade practice complained of is a restrictive trade practice and the 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 inquiry and no “gateways” were pleaded by it in the manner provided in the Regulations and 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 trade practices complained of by the Registrar were restrictive trade practices before it could validly make a cease and desist order. The order dated May 14, 1976 did not contain any discussion or recital showing that the Commission had reached the requisite satisfaction in regard to the offending trade practices. But we can legitimately presume that the Commission must have applied its mind to the offending clauses of the distributorship agreement and come to the conclusion that the trade practices referred to in those clauses were restrictive trade practices before it made the order dated May 14, 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 clauses and did not invalidate the rest. This circumstance clearly shows that the Commission considered with reference to each impugned clause whether it related to restrictive trade practice and made the order dated May 14, 1976 only in respect of those clauses where it was satisfied that the trade practices were restrictive. The charge that the order dated May 14, 1976 suffered from non- application of mind on the part of the Commission cannot, therefore, be sustained. But the order dated May 14, 1976 was clearly bad inasmuch as it did not disclose the reasons which weighed with the Commission in directing the appellant to cease and desist from the trade practices set out in the order. The order dated May 14, 1976 was a non-speaking order. It consisted merely of bald directions given by the Commission and did not set out any reasons whatsoever why the Commission had decided to issue those directions. It had a sphynx- like face, which goes ill with the judicial process. It is true that the order dated May 14, 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 May 14, 1976 was ex parte, the appellant would have been entitled to prefer an appeal against it under Section 55 and it 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 a quasi judicial function, it must record its reasons in support of the order it makes. Every quasi judicial order must be supported by reasons. That is the minimum requirement of law laid down by a long line of decisions of this Court ending with N.M. Desai v. Testeels Ltd.16 and Siemens Engineering and Manufacturing Co. v. Union of India17. The order dated May 14, 1976 was, therefore, clearly vitiated by an error of law apparent on the face of the record inasmuch as it contained only the final and operative order made by the Commission and did not record any reasons whatsoever in support of it and the appellant was, in the circumstances, entitled to claim that the Order should be revoked by the Commission.’ [Underlining is Mine]

33. In Voltas Ltd. (supra), the Supreme Court again interpreted the provisions of the Act in the backdrop of the fact that the appellant had entered into an agreement with large number of companies in respect of distribution of different machineries and equipment in different territories within India. The appellant was appointed as buyer of different types of machines and instruments manufactured by the companies. In November, 1986, notices were issued to the appellant under Section 10 (a) (iii) read with Section 37 of the Act that the agreements entered with the companies contain conditions which amount to restrictive trade practices under clauses (a) and (c) of Section 33 (1) of the Act. The appellant contested the notice and pleaded that none of the agreements contained any clause which may be construed as restrictive trade practice. The Commission did not accept the appellant’s plea and directed it to discontinue the restrictive trade practices mentioned in the notice of enquiry and not to repeat the same in future. The Commission also directed the appellant to delete the offensive conditions.

34. Supreme Court referred to the notice issued by the Commission, Sections 2(o), 33 (un-amended and amended) as also Section 37 and observed :

“8. The effect of a statute containing a legal fiction is by now well settled. The legislature by a statute may create a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, but even then Court has to give full effect to such statutory fiction after examining and ascertaining as to for what purpose and between what parties such statutory fiction has been resorted to. In the well known case of East End Dwellings Co. Ltd. v. Finsbury Borough Council, Lord Asquith has said:

“If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. …The statute says that you must imagine a certain state of affairs. It does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.”

This Court in the cases of State of Bombay v. Pandurang Vinayak; Chief Inspector of Mines v. Karam Chand Thapar;J.K. Cotton Spg. And Wvg. Mills Ltd. v. Union of India; M. Venugopal v. Divisional Manager, LIC and recently in the case of Harish Tandon v. Addl. District Magistrate has dealt with in detail the effect of a statutory fiction and the limitation of the court to ignore the mandate of the legislature, unless it is violative of any of the provisions of the Constitution. So far as sub-section (1) of Section 33 is concerned, it mandates that agreements covered under different clauses of sub-section (1) of Section 33 shall be deemed for the purposes of the Act to be agreements relating to restrictive trade practices. By the deeming clause one is not required to treat any imaginary state of affairs as real but to treat the agreements specified and enumerated in sub-section (1) of Section 33 as agreements relating to restrictive trade practices. It can be said that Parliament after having examined different trade practices, has identified such trade practices which have to be held as restrictive trade practices for the purposes of the Act. To keep such trade practices beyond controversy in any proceeding, a deeming clause has been introduced in sub- section (1) of Section 33 saying that they shall be deemed to be restrictive trade practices. In this background, according to us, there is not much scope for argument that although a particular agreement is covered by one or the other clauses of sub-section (1) of Section 33, still it shall not amount to an agreement containing conditions which can be held to be restrictive trade practices within the meaning of the Act.

10. But now with the amendment of main part of sub- section (1) of Section 33 with a statutory fiction the situation has changed. It can be said that clauses (a) to (l) of sub-section (1) of Section 33 provide statutory illustrations of restrictive trade practices. The framers of the Act have now in clear and unambiguous words said that every agreement falling within one or more of the categories specified in clauses (a) to (l) of sub-section (1) of Section 33, shall be deemed for the purposes of the said Act, to be an agreement relating to restrictive trade practices and shall be subject to registration in accordance with the provisions of Chapter V. Now it is no more open to the Commission or to this Court to test and examine any of the trade practices mentioned in clauses (a) to (l) of sub- section (1) of Section 33 in the light of Section 2(o) of the Act, for the purpose of recording a finding as to whether those types of trade practices shall be restrictive trade practices within the meaning of Section 2(o) of the Act. This exercise has to be done only in respect of such trade practices which have not been enumerated in any of the clauses from (a) to (l). Only such trade practices have to be examined in the light of Section 2(o) of the Act, as to whether they amounted to restrictive trade practices. It need not be pointed out that both judgments aforesaid of this Court interpreted the scope of sub-section (1) of Section 33, as it stood prior to the amendment by Act 30 of 1984. But after the amendment of sub-section (1) of Section 33 if an agreement falls within one of the clauses of the said sub-section, specifying a restrictive trade practice, then it is no more open to the Commission or to the Court to say that it shall not amount to restrictive trade practice. Trade practices enumerated in clauses (a) to (l) of sub-section (1) of Section 33 shall be deemed to have now been statutorily determined and specified as restrictive trade practices. Neither the Commission nor the Court can question the wisdom of Parliament for having statutorily determined certain trade practices as restrictive trade practices unless in this process there is contravention of any of the provisions of the Constitution. In this background, if any agreement contains a trade practice which falls in any of the clauses of sub-section (1) of Section 33 then such trade practice shall be deemed to be restrictive trade practice and such agreement has to be registered.

12. On behalf of the appellant, it was pointed out that Section 37 contemplates and conceives inquiry in respect of any restrictive trade practice relating to an agreement which has been registered under Section 35 as well as an agreement which has not been so registered. As such persons who have got their agreements registered on their own in order to escape prosecution, although in such agreements there may not be any clause relating to restrictive trade practices, cannot urge before the Commission, after having got the agreements registered, that they do not contain any clause relating to any restrictive trade practice. On the other hand, persons who for one reason or other have not got their agreements registered under Section 35, will be in an advantageous position inasmuch as in respect of their agreements, Commission will have to examine both aspects (i) whether the agreement relates to any restrictive trade practice (ii) even if it relates to restrictive trade practice, whether the said practice is prejudicial to the public interest. It is true that under Section 37, the Commission has been vested with the power to inquire in respect of agreements which have been registered under Section 35 as well as those which have not been registered. But the fact remains that once the Commission is satisfied that a particular agreement which has not been registered under Section 35, falls within any of the clauses from (a) to (l) of sub-section (1) of Section 33, then no further inquiry is to be done, as to whether such agreement relates to restrictive trade practices or not. The statutory fiction incorporated in sub-section (1) of Section 33 shall also be applicable in respect of such agreements apart from the penalty provided under Section 48 of the Act. As such there is not much scope for discrimination between persons who have got their agreements registered and those who have not got their agreements registered.

13. It was also urged that while amending sub-section (1) of Section 33, Section 2(o) was not deleted or substituted and that has left an apparent conflict between Section 2(o) and Section 33(1) of the Act. According to us, there is no conflict between Sections 2(o) and 33(1). Clauses (a) to (l) of sub- section (1) of Section 33 specify such trade practices which have been statutorily recognised as restrictive trade practices. But there may be other trade practices, not covered by clauses (a) to (l) of sub-section (1) of Section 33, which can be examined by the Commission in the light of Section 2(o).”

35. The Supreme Court then referred to Section 38 (1) (h) and held :—

“17. According to us, the Commission was required to go deeper into the matter and to record findings in respect of different 0agreements whether the objectionable clauses of the registered agreements were prejudicial to the public interest. It need not be impressed that any finding recorded by the Commission under Section 37 and direction given in terms of clauses (a) and (b) of sub-section (1) of Section 37 has a far-reaching effect. As such every aspect of the matter is required to be examined in the light of the provisions of Sections 37 and 38 of the Act before an order to “cease and desist” is passed by the Commission.”

36. At the cost of repetition it deserves to be emphasised that the complainant had initiated the correspondence in 1983 for purchase of Lombardini engines manufactured by the respondents. In next six years, the parties exchanged many dozens letters/communications on the issues of manufacture of power packs by the respondents, their quality, price etc. The respondents did supply two power packs to the complainant to enable it to manufacture prototype of 3-wheeler which was sent to ARAI for testing. Initially, ARAI issued certificate dated 04.01.1989 that the model ‘Vaishali 350 Rear Engine Autorickshaw’ was roadworthy on Indian roads under the prescribed G.V.W. However, in response to letter dated 20.07.1990 sent by the complainant, ARAI made it clear that the certificate issued by it was in respect of the performance of the prototype in the context of the provisions of the Motor Vehicles Act and other Statutory Regulations and that it was in no way responsible for the quality of the production or the life of the vehicle. At the same time, ARAI queried as to who had told the complainant that the vehicle is not fit for Indian road conditions. After getting the certificate from ARAI, the complainant indicated its willingness to purchase 100 power packs at the particular price but finally asked the respondents to supply 50 power packs of model No. 4348 with variamatic gear box. However, the respondents expressed their inability to supply the power packs by saying that 3-wheelers manufactured by using the power packs will not be suitable for the Indian roads. On the insistence of the complainant, the respondents conveyed their willingness to supply power packs subject to the condition that the party should discuss the issues relating to price, warranty etc.

37. It is not in dispute between the parties that neither any formal agreement was executed between the parties for supply of power packs by the respondents to enable the complainant to manufacture 3-wheelers incorporating therein the terms and conditions of supply, price, warranty, responsibility to repair the engine and/or vehicle etc. nor any communication was sent by the respondents conveying their unconditional willingness to supply the required number of power packs. Rather, they expressed their willingness subject to further discussion on the issues relating to price, warranty etc. which never materialised. Therefore, it is not possible to accept the complainant’s plea that the respondents had indulged in restrictive trade practice as defined in Section 2(o) read with Section 33 of the Act. Though Section 37 postulates an investigation into restrictive trade practice, irrespective of the fact that the parties have not entered into any agreement and not got the same registered but the primary question is whether the decision of the respondents had the effect or possibility of preventing, distorting or restricting competition in any manner and this the complainant has miserably failed to prove.

38. It also needs to be emphasised that the complainant has not placed any evidence to disprove the categorical stand taken by the respondents that the life of rubber belt made of Indian rubber was not more than 2000 – 2500 Kms. and in its letter dated 20.07.1990, ARAI had made it clear that the certificate issued by it was only for compliance with the norms under the Motor Vehicles Act and the relevant Rules and that it did not certify the quality and durability of the product. In this background, it cannot be said that the respondents’ decision had the effect of preventing, distorting or restricting competition in the market.

39. In his affidavit, Shri J.P. Jain detailed the correspondence exchanged between the parties from 1983 to 1989, extensively quoted from some of the letters and then made the following assertions :

“47. I state that the complainant/applicant had received a lot of export enquiries, from parties who had seen the prototype of the VAISHALI three wheeler, copies of the said enquiries are already on record, another copies of which are annexed herewith and marked as ANNEXURE – 54 (COLLY.).

48. I state that the facts stated above clearly establish that the representation made by respondent No. 1 in 1986, that it had a developed diesel engine for three wheeler, was totally false and unsupported by adequate tests. That with the joint efforts of the complainant/applicant and respondent No. 1, the diesel engine which was developed was not supplied to the complainant/applicant ton one pretext or the other. That respondent No. 1 being the only manufacturer of the diesel engine (power packs), wanted to capitalise on the diesel three wheeler developed with the joint efforts of the complainant/applicant and respondent No. 1, and, therefore, has planned to vertically integrate its unit, to manufacture diesel three wheeler which will be the first of its kind in India.

49. I state that the complainant/applicant was more than willing to set up the three wheeler autorickshaw unit and in fact in 1986 had written to the U.P. Financial Corporation for allotment of Radha Modern Rice Mill, for setting up aforesaid factory. The complainant/applicant subsequently in an auction purchased the Radha Modern Rice Mill, for Rs. 12.55 lacs. A copy of the letter dated 2.12.86 by the complainant/applicant to U.P. Financial Corporation is already on record, another copy of which is enclosed herewith and marked as ANNEXURE -55.

50. I state that the complainant/applicant is a consumer of goods manufactured by respondent No. 1, who had suffered a great loss and injury at the hands of the respondents, due to unfair trade practices carried on by the respondents, which are enumerated as under :—

(i) That Respondent No. 1/3 being the only manufacturer/distributor of the impugned power packs, has unreasonably prevented and distorted competition in the production, supply and distribution of the power packs, by adopting unfair trade practices putting the complainant/applicant to financial losses;
(ii) that the practice adopted by Respondent No. 1 of eliminating competition and/or a competitor i.e. the complainant/applicant company, the Respondents have put the complainant/applicant to unjustified costs and losses;
(iii) that the adoption of unfair methods and unfair/deceptive practices to lure the complainant/Applicant company, by respondent No. 1 amounted to an unfair trade practice under the M.R.T.P. Act;
(iv) that the practice of falsely representing in 1986 and thereafter that respondents had a power pack suitable for diesel three wheeler amounted to an unfair trade practice under the M.R.T.P. Act;
(v) that the practice of falsely representing in 1986 and thereafter, the performance/efficacy of power packs, without conducting adequate tests to support the representation amounted to an unfair trade practice under the M.R.T.P. Act;
(vi) that the practice of giving false guarantee/warranty on power packs model 4348, amounted to an unfair trade practice under the M.R.T.P. Act.
(vii) that the practice of refusing to sell the power packs model 4348 or make them available for sale, with an intention to raise the cost/price of power packs amounted to an unfair trade practice under the M.R.T.P. Act.

I state that the trade practices stated above are prejudicial to public interest and in particular to the complainant/applicant company as the general public has been denied an alternative choice and cheap mode of transportation resulting in huge losses to the complainant/applicant.”

40. In paragraph 51, to which reference shall be made a little later, Shri J.P. Jain gave particulars of the alleged loss suffered by the complainant. In his cross-examination, Shri Jain made the following statements/admissions :

“. . . . . . . . . . . . . . The witness volunteers to say that respondent No. 1 had approached him since 1983 even before he purchased the company in 1984. I say that respondent no. 1 has manufactured three wheeler at Aurangabad. I have been shown a letter dated March, 1983 which is written by my company to M/s. Surya Scooters. This letter shows that my company had requested to Respondent no. 1 to provide necessary assistance in the supply of 5 HP and 10 HP engines…..….. Two sets of power pack units were supplied to me. The power pack engine was fitted into a three wheeler and it was put on trial which was also sent to ARAI, Pune and they declared it suitable for Indian roads. The three wheeler as such was manufactured in our factory. The power pack engine/unit supplied by R1 was fitted in it. The structure of three wheeler was fabricated in our factory. This project was put on exhibition in Pragati Maidan and as a result I started getting orders from abroad. I don’t remember as to who many orders did I receipt but there were quite many. No advance amount was received against these orders………The defects were found in the power pack supplied by R1 and they were subsequently rectified by R1 at Aurangabad. There was no defect in the chassis, which were developed and fabricated by us…………It is correct that in the minutes of the meeting as on 23rd February, 1987 filed with complaint at page 121 of the documents, all the defects in three wheeler had been pointed out and that I have signed it…….. I don’t agree with the suggestion that Respondent No. 1 did not agree with any production schedule as mentioned in para 29 of my affidavit. I state that this production schedule was communicated to me in writing by R1 but I cannot say at this stage when. I don’t agree with the suggestion that this power pack was introduced in India for the first time by R1 and they had told us accordingly and that its production was subject to being its suitable for Indian condition. The witness further volunteers to say that this product was already operating in Italy. I don’t agree with the suggestion that this power pack could not work in the three wheeler designed by us as the design was defective.”

41. Though the aforesaid statement of Shri J.P. Jain coupled with the cross-examination gives an impression that due to non-supply of power packs, the complainant could not manufacture 3-wheelers but no independent corroborative evidence was produced by him to prove that the complainant had made arrangements for the fabrication of chassis necessary for manufacturing 3-wheelers and that its production of 3- wheelers was halted on account of non-availability of the power packs. In the absence of such evidence, it is not possible to record a finding that the decision of the respondents to discontinue manufacture of power packs falls within the ambit of Section 2(o) of the Act.

42. The issue which remains to be considered is whether the complainant is entitled to compensation. In paragraph 51 of his rather lengthy affidavit (33 pages), Shri J.P. Jain made the following statement :

“51. I state that the complainant/applicant company due to above mentioned unfair trade practice carried on by the Respondents has suffered pecuniary and unpecuniary losses. The losses and injury suffered by the complainant/applicant are quantified herein below :

(i) It is submitted that complainant/applicant is entitled to recover the loss of profit from the respondents. According to the estimate in the project report prepared and given by the respondents to the complainant/applicant, and the three wheeler project was to give profits to the complainant/applicant as under :

1st year 12.96 lakhs
2nd year 45.72 “
3rd year 74.16 “
4th year 103.80 “
Total losses Rs. 236.64 lakhs

It is further submitted that this project was to generate, at least, profits to the tune of Rs. 103.80 Lakhs a year in the subsequent years also and hence compensation for total loss of profits recoverable from Respondents has to be worked out on aforesaid basis till the decision of this enquiry together with resultant losses.

(ii) The complainant/applicant is entitled to recover from the respondents an amount of Rs. 12.55 lakhs being amount of commitment made to U.P. Financial Corporation being purchase price of M/s. Radha Modern Rice Mills for setting up the three wheeler auto rickshaw project. The complainant/applicant has been deprived from setting upo 3 wheeler auto rickshaw project by respondents and has incurred a liability of Rs. 12.55 lakhs, which amount is also recoverable from the Respondents.

(iii) The complainant/applicant was involved in research and development of the aforesaid three wheelers from 1983, and in fact, the type of vehicle envisaged by the complainant/applicant was the first of its kind to be developed in the country. The name of the complainant/applicant was splashed all over the country business circles by the media for this breakthrough. All this came to naught as the respondents did not supply the requisite power pack on flimsy grounds of unsuitability, thus resulting in loss of its fair name and reputation. The estimated loss of goodwill, name and reputation is modestly determined at Rs. 1 Crore.

(iv) According to the project report prepared by the respondents, the cost of machinery and equipment was estimated at Rs. 25.25 lakhs in the year 1986 as the base year and modest rate of 10% as inflation, the estimate works out to be as under:

25.25 x 160/100 = 40.40
Less original estimated cost. 25.25
Rs. 15.15 lakhs

This amount is recoverable from the respondents for causing delay in the implementation of the project of the complainant/applicant and indulging in unfair trade practice of backing out at the last minute after development of the power pack for the complainant/applicant.

(v) It is submitted that the complainant/applicant instead of setting upto their project have been forced to file the complaint/compensation Application under the M.R.T.P. Act before this Hon’ble Commission in 1992. The complainant/applicant has been incurring expenses for each date of hearing. The total estimated cost of litigation and incidental expenses under any circumstances will not be less than Rs. 5,00,000/- (Rupees Five lakhs). This amount is also recoverable from the respondents.

(vi) That respondents are also liable to pay to the complainant/applicant from the year 1983 to 1992. On account of expenses incurred by the complainant/applicant for research and development of the three wheeler autorickshaw. Further the complainant/applicant is also entitled to recover past, pendent life and future interest @ 24 P.A. from the Respondents.”

43. Though in the earlier part of his affidavit, Shri J.P. Jain has stated that he had received several queries from within the country and abroad about the 3-wheelers proposed to be manufactured by the complainant and averred that due to non-supply of power packs, the 3-wheelers could not be manufactured, but not a single person was examined by him to prove that he/she had exhibited interest or shown willingness to buy the 3-wheelers proposed to be manufactured by the complainant. That apart, no evidence has been produced by the complainant to prove the loss suffered by it in undertaking manufacture of prototype 3-wheeler and the anticipated loss as specified in paragraph 51 (i). In the absence of such evidence, it is not possible to entertain the complainant’s claim for award of compensation under Section 12-B of the Act.

44. In the result, the complaint and the application for compensation are dismissed. The parties are left to bear their own costs.

Category: Uncategorized

Leave a Reply