DIRECTOR GENERAL OF INVESTIGATION And REGISTRATION vs EXIM INDIA OIL CO.

EXIM India Oil Company (respondent hereafter) is facing this enquiry on an application preferred by the Director General, Investigation and Registration (DC for short) alleging that it has indulged in certain restrictive trade practices attracting Clauses (a), (b), (c) and (f) of Section 33(1) of the MRTP Act, 1969. The respondent is a proprietary concern engaged in the business of sale and distribution of superior kerosene oil (SKO), lubricants and greases. For the purpose of sale and distribution of the aforesaid products, the respondent appointed dealers on certain standard terms and conditions, in respect of which it entered into an agreement with them. The DC on a perusal of the standard agreement has pointed out that Clauses 5, 16, 17, 18, 19, 20 and 28 attract the various clauses of Section 33(1) of the Act. He has, therefore, prayed in his application that an enquiry may be instituted against the respondent. Based on the DG''s application a Notice of Enquiry (NOE) was issued on 20th October, 1994. In brief, the clauses in the standard agreement constituting restrictive trade practices are as under : Clause 5 : The clause requires the dealers to lift certain minimum quantity of the products as specified by the respondent. As the dealers are required to purchase even goods for which there may not be adequate demand, the charge is that Clause 5 attracts Section 33(1)(b) of the Act. Clauses 16, 17 and 28 : Under these clauses, the dealers cannot sell or buy the products of other oil companies without the previous consent of the respondent. They are restrained from dealing in competitors'' products and from purchasing goods from any party or person other than the respondent. These restrictions attract Section 33(1)(c) of the Act. Clauses 18 and 19 : In terms of these clauses, the dealers are prohibited from selling the petroleum products purchased from the respondent to such parties to whom supplies have been stopped by the respondent. The dealers are also restrained from selling the petroleum products to any dealer, agent or distributor appointed by any other oil company. These restrictions attract Section 33(1)(a) of the Act. Clause 20 : The dealers are prohibited under this clause from selling the respondent''s products at higher prices or rates than those which the respondent fixed from time to time. This attracts Section 33(1)(f) of the Act.

IN its reply the respondent has made the following averments : 1. The respondent is a proprietary concern which has ceased to exist with effect from 31st March, 1995 and the dealership agreement executed by it with its dealers also ceased to exist from the same date. 2. The NOE does not disclose any ground or cause of action and is "bald, vague and ambiguous".

In view of Section 33(3) of the Act as the trade practices alleged are expressly authorised by or under law for the time being in force or have the approval of the Central Government, and the Government is a party to the standard agreement, the enquiry is not maintainable.

The Central Government through its Notification dated 2nd September, 1993 permitted a parallel market scheme for import and distribution of SKO similar to the public distribution system at market related prices.

THE respondent is "fully and solely responsible for compliance with the Government orders for marketing/ distribution of kerosene oil under the parallel scheme". Kerosene is a scarce and essential commodity and it is imperative that the said product is made available in all the locations in an equitable manner. THE standard agreement is same or similar to the one entered into by Indian Oil Corporation Ltd. (Government of India Undertaking) with its dealers. The respondent has been furnishing the monthly returns under 7(a) and 7(b) of the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993 Notified by the Ministry of Petroleum and Natural Gas on 2nd September, 1993,

THE respondent is entitled to gateways under Sections 38(1)(a), (b), (h), (i) and (k) of the Act. 3. After the pleadings were completed, the following issues were framed : 1. Whether the NOE is not maintainable for the preliminary objections taken by the respondent in its reply ? 2. Whether the respondent is or has been indulging in the restrictive trade practice alleged in the NOE ? 3. If answer to issue No. 2 is in the affirmative, whether the restrictive trade practices are not prejudicial to public interest ? 4. We gave a hearing to Ms. Renu Sehgal, Advocate for the DC and Dr. V.K. Aggarwal, Advocate for the respondent. 5. THE DC furnished only documentary evidence. THE respondent furnished the affidavit of Shri B.K. Tibarewal, its ex- proprietor alongwith supporting documents. Both the parties agreed on 27th January, 1997 to advance their arguments on the basis of the record and evidence produced by them.

THE first issue is on the maintainability of the enquiry. THE essential argument of the respondent is that under Section 33(3) of the Act, if the trade practice is expressly authorised by or under any law or has the approval of the Central Government or if the Government is a party to the agreement containing the trade practice, the enquiry becomes not maintainable. In support, the respondent has made a submission that in terms of the Central Government''s Notification dated 2nd September, 1993, a parallel marketing scheme for import and distribution of SKO has been brought into existence and that the respondent entered into a memorandum of understanding with Indian Oil Corporation Ltd. (a Government of India Undertaking) based on which the said Corporation has to render assistance to the parallel marketeer to import and distribute SKO. Further, runs its submission, kerosene is an essential commodity and in order to achieve equitable distribution of SKO, the impugned clauses in the agreement had been included. Further more, the agreement between the respondent and the Indian Oil Corporation Ltd., is almost same or similar to the agreement between the said Corporation and its dealers. All the charges relate to Section 33(1) of the Act. 7. We have gone through the memorandum of agreement that the Indian Oil Corporation Ltd. has executed with its dealers and also the agreement between the Indian Oil Corporation Ltd. and the respondent. We are unable to see anything in the said agreements that the Government has approved them, which will then imply that Government has approved the impugned clauses in the agreement constituting restrictive trade practices attracting Section 33(1) of the Act. All that we have is the Central Government''s Notification dated 2nd September, 1993 which permits the parallel marketing scheme for import and distribution of SKO. The said order Notification 2nd September, 1993 has been issued by the Ministry of Petroleum and Natural Gas and is styled the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993. It has laid down certain stipulations governing the parallel marketing system. Except for certain stipulations and certain procedures relating to maintenance of registers, accounts and records and submissions of returns by dealers, no specific trade practice as impugned in this enquiry, has been specifically approved in the said Notification. We are, therefore, unable to accept the defence of the respondent that the impugned trade practices have the approval of the Government through the said Notification in order to avail of the gateway in Section 33(3) of the Act. In any case, the impugned agreement between the respondent and the Indian Oil Corporation Ltd. does not have the stamp of the approval of the Government. If it has been so approved by the Government, nothing has been placed before us in proof of such approval. We, therefore, hold that the enquiry is maintainable. The first issue is decided in the negative against the respondent.

FOR the second and third issues, the essential argument of the respondent is in the gateways pleaded by it. The respondent has submitted that it is entitled to gateways under Sections 38(1)(a), (b), (h), (i) and (k) of the Act. In particular Dr. V.K. Aggarwal, Advocate for the respondent has articulated the gateway under Section 38(1)(h) of the Act, which provides for the De Minimis principle. Stating that the market share of the respondent is less than 1%, submits the respondent, the impugned trade practices even, if held restrictive, would not directly or indirectly discourage competition to any material degree. Dr. V.K. Aggarwal, Advocate for the respondent cited a decision of this Commission in the Director General of Investigation & Registration v. Franco Indian Pharmaceuticals Pvt. Ltd., in RTPE No. 286/88 dated 8th February, 1996 wherein the principle of De Minimis was applied, in which the offering of quantity discount in respect of "Relaxyl" was of such a marginal degree that it was considered unlikely to restrict or discourage competition in any material manner and was also unlikely to prejudicial to public interest. Shri B.K. Tibarewal, ex-proprietor of the respondent firm in his affidavit in evidence at para 10 thereof has deposed that the respondent had a turn over during the relevant period of less than Rs. one crore annually in the marketing of the product in question and that the total market turn over of all suppliers was of the order of Rs. 26,000 crores annually. There has been no refutation of these figures or the deposition of Shri B.K. Tibarewal by the DC. We, are, therefore, inclined to accept the contention of the respondent and its argument on the De Minimis gateway. The respondent is entitled to the gateway under Section 38(1)(h) of the Act.

IN view of this, even if the restrictive trade practices alleged in the NOE are held to be established, they are not prejudicial to public interest in view of the gateway under Section 38(1)(h) available to the respondent. IN the premises, we discharge the Notice of Enquiry. No order as to costs. NOE discharged. _______________