DIRECTOR GENERAL OF INVESTIGATION And REGISTRATION vs Hawkins Cookers Ltd.

HAWKINS Cookers Limited (respondent hereafter) is facing this enquiry for restrictive trade practices falling under Section 33(1)(e) and Section 33(1)(f) of the MRTP Act, 1969 (Act for brief). The enquiry commenced with an application filed by the Director General (Investigation and Registration) (DC for short) under Section 10(a)(iii) of the Act. The facts in brief as narrated in the application of the DG are as follows :

THE respondent is a Public Limited Company registered under the Companies Act, 1956 and is engaged in the manufacture, distribution and sale of Hawkins Cookers, Idli stand and spare parts, etc. For the purpose of sale and distribution of the aforesaid products and spare parts, the respondent appointed dealers and issued circulars and price lists to them from time to time, containing the terms and conditions of sale including discounts and incentives. In terms of the circulars issued by the respondent, discounts, incentives and bonus were made available by the respondent to the dealers based on certain sales targets. The DG has alleged that discounts, incentives and bonus are restrictive trade practices attracting Section 33(1)(e) of the Act. Furthermore, the price lists issued by the respondent to the dealers do not stipulate that prices lower than those indicated therein can be charged by the dealers. The DG has alleged that this constitutes restrictive trade practices attracting Section 33(1)(f) of the Act.

Based on the application of the DG, a Notice of Enquiry (NOE) was issued on 16th January, 1995, calling upon the respondent to defend itself against the aforesaid restrictive trade practices. A copy of the application of the DG with connected papers was furnished to the respondent.

THE respondent furnished a detailed reply to the NOE. THE following constitutes a summary of its reply : (1) THE DG has neither shown nor averred that the alleged trade practices restrict or discourage competition to any material degree and that they are prejudicial to public interest. THE trade practices referred to are not restrictive in nature to attract the provisions of Section 33(1)(e) or Section 33(1)(f). Consequently the DG''s application is not maintainable. (2) Incentives are given to the dealers in order that the public is protected against injury in connection with the use of pressure cookers and in order that the dealers could avoid spurious and dangerous parts from being used. Furthermore, it is normal and usual to give such discounts and incentives in this trade and industry. (3) THE concept of competition has to be understood in a commercial sense and it is not correct on the part of the DG to make bald allegation without any substance whatsoever that competition has been impaired. (4) THE respondent has "an enviable record for maintenance of the highest quality" of its products and for efficient after sales service to the consumers. It is the recipient of awards and recognition not only in India but outside India as well. (5) THE respondent in offering incentives has ensured that the dealers have adequate stocks of spare parts to provide prompt and efficient service to the customers. (6) THE DG has not understood or appreciated the true meaning and contents of the circulars and the incentives scheme offered by the respondent to its dealers nor has he understood the true meaning and contents of the trade price lists and trade discounts. THE trade price lists and discounts do not set out any condition or stipulation as to resale of the products. (7) Even if the Commission finds a trade practice as restrictive in nature, it has to be satisfied in regard to the circumstances in Clauses (a) to (k) of Section 38(1) of the Act which are gateways available in the Act itself. THE Commission in required to go deep into the matter before passing any order. (8) In any event, none of the alleged trade practices refer to any restriction, directly or indirectly discouraging competition to any material degree. THE respondent is entitled to gateway available in Section 38(1)(h) of the Act. After the pleadings were completed, the following issues were framed : (1) Whether the respondent is or has been indulging in restrictive trade practices as indicated in the NOE ? (2) If the answer to the foregoing issue is in the affirmative, whether restrictive trade practices are not prejudicial to public interest ?

Dg adduced evidence in the form of documents, which were admitted by the respondent. The respondent, also adduced documentary evidence in addition to fielding a witness, namely Shri Ashok Chowkulkar, its Legal Manager. Shri Ashok Chowkulkar furnished his affidavit in evidence by way of examination-in-chief and was cross examined by Mr. V.T. Korde, Advocate for the Dg. We gave a hearing to Mr. J.M. Mukhi and Mr. V.T. Korde, Advocate for the Dg.

ONE of the arguments advanced at the outset by both the Advocates relate to the question whether after the judgment dated 7th February, 1995 of the Hon''ble Supreme Court in Voltas Limited v. Union of India, 1995-3 CTJ 49, S.C. MRTPC, there is any need to examine if the alleged trade practices indulged in by the respondent constitute restrictive trade practices under Section 33(1) of the Act. It is urged by Mr. V.T. Korde, Advocate for the DC that once a trade agreement or any clause thereof, falls under any of the clauses of Section 33(1) of the Act, it is no longer necessary according to Hon''ble Supreme Court''s ruling in the Voltas case (supra) to go into the question whether the agreement or any clause thereof constitutes a restrictive trade practice. Mr. J.M. Mukhi, Advocate for the respondent observed that the Commission has a duty to give a finding that the agreement or any clause thereof falls under one of the clauses of Section 33(1) of the Act and that it is satisfied that such an agreement or any clause thereof constitutes a restrictive trade practice. It will not be correct according to him for the Commission to decide the said issue on a mechanical or literal basis. The Commission needs to take into account, fully and carefully all relevant facts relating to trade and industry in deciding the issue. This particular issue has been decided by the Commission in the light of the law, as interpreted by the Hon''ble Supreme Court in the Voltas case (supra) in a number of cases in this Commission (DG v. Kothari Electronics and Industries Ltd., dated 6th December, 1996 reported in 1997 (5) CTJ (MRTPC), and DG v. All India Organisation of Chemists and Druggists and Others, in RTPE 193/86 dated 1st July, 1996). The ratio laid down in the above cited case laws is that the Commission should be fully satisfied that the impugned agreement or any clause thereof, falls under any of the clauses of Section 33(1) of the Act and that it has the responsibility of recording its satisfaction to that effect. If that satisfaction obtains during any stage of the proceedings of the case, then it is no more open to any one including the Commission to go into the question whether the impugned agreement or any clause thereof constitutes a restrictive trade practice, as Section 33(1) of the Act, has in its formulation a legal fiction that if an agreement is covered by any of the clauses thereof, it is automatically a restrictive trade practice. This is exactly what the Hon''ble Supreme Court has ruled in the Voltas case (supra). In that view of the matter, it needs to be ascertained whether the Commission has indicated its satisfaction at any stage of this enquiry.

MR. V.T. Korde, Advocate for the DG, drew our attention to the NOE and pointed out that it has been indicated in the body of the notice, that the trade practice of offering staggering rates of discounts and rebates linked to the quantum of off-take is a restrictive trade practice attracting Section 33(1)(c) of the Act. Furthermore, the trade practice of issuing price lists without giving liberty to the dealers to sell the products at prices lower than the maximum recommended price is also a restrictive trade practice attracting Section 33(1)(f) of the Act. In as much as, MR. V.T. Korde, Advocate for the DG submits, that the Commission has recorded its satisfaction in the notice itself, there is no further need for the Commission to go into the question whether the alleged trade practices on the part of the respondent constitute restrictive trade practices.

MR. J.M. Mukhi, Advocate for the respondent refuted this line of logic observing that the Notice of Enquiry is after all a process under Regulation 50 of the MRTPC Regulations, 1991, requiring the attendance of the charged party. NOE is like a charge sheet and no final view on the perpetration of the restrictive trade practices can be presumed even before the enquiry has commenced. Only after the Commission indicates its satisfaction that the impugned agreement or any clause thereof falls under Section 33(1) of the Act, thereupon the Hon''ble Supreme Court''s ruling in the Voltas case (supra) will operate and in that event there is no need to go further into the question whether the alleged trade practices are restrictive in nature. We agree with Mr. J.M. Mukhi that NOE is like a charge sheet and there is no warrant to state that as soon as NOE is issued, the Commission has come to the conclusion that a restrictive trade practice under Section 33(1) has been perpetrated by the respondent. Mr. V.T. Korde during this arguments observed that the respondent itself has got the price list registered under Section 35 of the Act which implies that the respondent has felt it necessary to register the agreement because some of its clauses were falling within the mischief of Section 33(1) of the Act. If such registration takes place, the Hon''ble Supreme Court in the Voltas case (supra) has categorically observed that there is no further need for the Commission or any Court to go into the question whether the alleged trade practices are restrictive in nature under Section 33(1) of the Act. In other words, the fact of registering an agreement will automatically imply that the agreement offends the provisions of Section 33(1) of the Act. But in this case very unfortunately the fact of registration has not been brought on record, during the proceedings and it was also not pressed during the oral submissions made by both the Advocates except that Mr. V.T. Korde, Advocate for the DC pointed out the fact of agreement in passing. In our view, it will not be appropriate to reckon the fact of registration unless it had been brought on record during the proceedings, in a formal way.

However, we have gone through the impugned agreement in detail and are of the view that the circular to the dealers offering differential discounts based on the off-take squarely falls under Section 33(1)(e) of the Act and that the price list circulated by the respondent without giving liberty to the dealers to sell its products and spare parts at prices lower than the maximum recommended price is violative of Section 33(1)(f) of the Act. We are, therefore, satisfied that the impugned agreement and in particular the discounts scheme and the price list fall within the mischief of Section 33(1)(e) and Section 33(1)(f) of the Act. This is because of the wording of the said two Sections, namely Section 33(1)(e) and Section 33(1)(f) of the Act. Differential discounts based on off-take are restrictive trade practices under Section 33(1)(e) of the Act, fortified, as we are, by the ruling dated 10th May, 1993 of the Commission in Re : Saraikella Glass Works Pvt. Ltd. 1993 (1) CTJ 292 (MRTPC). Any price list that does not give liberty to the dealers to charge lower prices will squarely fall under Section 33(1)(f) of the Act. We therefore, leaning on the Hon''ble Supreme Court''s decision in the Voltas case (supra), hold that there is no need to go into the question whether the alleged trade practices on the part of the respondent constitute restrictive trade practices.

ALL that is needed to be done, therefore, is to examine whether the respondent is entitled to the gateways under Section 38(1) of the Act. In fact, Mr. J.M. Mukhi, Advocate for the respondent emphasised that the Commission should not act mechanically on the application of the DC but should ascertain whether the respondent is entitled to the gateways under Section 38(1) of the Act. We, therefore, now turn to this aspect of the enquiry, namely whether the respondent should be allowed the facility of any of the gateways under Section 38(1) of the Act. If so allowed, no indictment in terms of Section 37(1) of the Act need be passed at all. Mr. Ashok Chowkulkar, the Legal Manager of the respondent, in his examination in-chief admitted to the discounts/incentives scheme of the respondent as communicated to the dealers. The witness, in his affidavit in evidence, has deposed that the respondent has been laying a lot of emphasis on the safety aspects of the pressure cooker and in the use of genuine spare parts. The safety valve which is an important part of the pressure cooker is manufactured according to the strict standards set by the respondent. Mr. Chowkulkar, the deponent, has observed in his affidavit that there is "spurious trade in the market" and with a view to saving the consumer from danger to life and property because of use of spurious spare parts, the respondent has taken special efforts to provide special packing for the parts, to educate consumers through advertisements about the dangers of using spurious parts, to establish a large net work of 500 service centres so as to make genuine spare parts available to consumers, to give incentives to the dealers to stock genuine parts and also to prosecute the manufacturers of spurious parts. He has further deposed that the trade discounts are given liberally by the respondent to dealers, designed to ensure that genuine parts are used in the pressure cookers to protect the consumer from damage to life and property. He has added that the trade discounts can be passed on the dealers to the consumers, as they deem fit, and that the price lists issued by the respondent are merely indicative of the maximum retail prices implying thereby that the dealers are free to sell at prices below the maximum retail prices.

MR. J.M. Mukhi, Advocate for the respondent argued that all manufacturers of pressure cookers are giving discounts and incentives and brought to our attention the schemes of discount offered by Prestige, Marlex, etc. who also manufacture pressure cookers. He, therefore, prayed that the gateway under Section 38(1)(c) of the Act may be made available to the respondent in this case. He pointed out that in the following cases such a gateway was made available to the charged party : (1) DG v. U.S. Vitamin (India) Ltd., 1995 (3) CTJ 313 (MRTPC) dated 14th July, 1995. (2) DG v. Haryana Distillery, 1995 (3) CTJ 101 (MRTPC) dated 22nd November, 1994. (3) S. C. Shartna v. German Remedies Ltd. and Another, 1997 (5) CTJ 370 (MRTPC) dated 12th August, 1997. (4) DG v. Zandu Pharmaceutical Works Ltd., 1994 (2) CTJ 41 (MRTPC) dated 15th February, 1994.

Mr. J.M. Mukhi further argued that the respondent is entitled to the gateway under Section 38(1)(h) of the Act as the alleged trade practices do not affect competition to any material degree. He cited DG v. Indian Aluminium Co. Ltd. case 1995 (3) CTJ 169 (MrTPC) dated 27th September, 1994) and in Re : Glindia Ltd. case 1995 (3) CTJ 270 (MrTPC) dated 23rd January, 1995) in which the Commission had applied the de minimis rule, Mr. V.T. Korde, Advocate for the DG resisted the application of the de minimis rule on the ground that the respondent has not brought on record, its market share of pressure cookers and spare parts and that consequently there cannot be any inference that competition has not been affected to any material degree. We agree with Mr. V.T. Korde. In the absence of facts or established evidence on market share, it is not possible to extend the gateway under Section 38(1)(h) in favour of the respondent. We are convinced with the argument of Mr. J.M. Mukhi, Advocate for the respondent that the discounts and incentives scheme offered in this case, is specifically designed to ensure that genuine spare parts arc used in the pressure cookers and that through such a scheme, there will be greater responsibility and responsiveness on the part of its dealers to subserve the public and consumers by saving them from harm and injury to their lives and properties. Spurious spare parts and sub-standard safety valves can endanger the lives and the properties of the consumers and in this context any step taken by the respondent to prevent such tragedies has to be supported and not frowned upon. It is also on record that other manufacturers of pressure cookers have similar schemes, perhaps with the same objective as the respondent has. In this view of the matter, we have no hesitation in allowing the gateway under Section 38(1)(c) in favour of the respondent. We arc not inclined to allow the gateway under Section 38(1)(h) of the Act, as no material has been brought on record on the market share of the respondent in pressure cookers and spare parts. But as we have allowed the gateway under Section 38(1)(c) of the Act, by balancing the restriction in the trade practices of the respondent and detriment to public interest, we conclude that the NOE be discharged. We accordingly direct that the NOE shall stand discharged. There shall be no order as to costs. NOE discharged.