ORDER
M. Satyapal, J. (Member)
1. This pertains to an application submitted by the respondents under Section 13(2) of the Monopolies and Restrictive Trade Practices Act, 1969, read with Section 114 and Order XLVII of the Code of Civil Procedure, 1908, and regulation 85 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974, for amendment/review of the Commission’s order dated June 4, 1986.
2. The Commission had directed in its order dated June 4, 1986, in the aforesaid enquiry that Clause 12 of the agreement entered into by the respondents is void and should be deleted. It further directed that respondents Nos. 1 and 2 should enter into a new agreement within one month’s time without incorporating Clause 12 of the present agreement. Clause 12 of the agreement provides that “ILB (respondent No. 2) shall not, without the consent of UB (respondent No. 1), during the currency of this agreement, engage or be concerned or interested, whether directly or indirectly, in the manufacture of beer other than such as will be manufactured by ILB in pursuance of this agreement.” It was this clause which was directed to be deleted by the order of the Commission.
3. Through this application, the respondents have prayed for a partial amendment of the order dated June 4, 1986, on the ground that there had apparently been an oversight inasmuch as the Commission has not taken into account the reference made by learned counsel, who argued the case on behalf of the respondents, to the decision of the Commission in RTP Enquiry No. 65 of 1984 in the matter of Additional Director-General v. Mohan Meakins Limited decided on April 11, 1986. It is submitted that learned counsel had cited this order and had proposed in the course of argument that in case the Commission found that Clause 12 of the agreement between the respondents in its present form could not be upheld, the Commission may order the modification of the clause in the manner in which a clause of a similar nature appearing in the franchise agreement of respondent No. 1 in Restrictive Trade Practices Enquiry No. 65 of 1984, was directed to be modified by the order of the Commission dated April 11, 1986. In Restrictive Trade Practices Enquiry No. 65 of 1984, the particular clause was ordered by the Commission to be modified as follows :
“The manufacturer shall manufacture the products at the plant strictly according to know-how and instructions of the company and the samples approved by it using only raw material sold by the company for the purpose and the manufacturer shall not manufacture/bottle at the plant any other products which are liable to be confused with the company’s products.”
4. It is further submitted that the purpose of including Clause 12 in the agreement between the respondents is to protect the quality and purity of the products and to ensure that beer of inferior quality was not mixed up with the beer which is marketed by respondent No. 1. As the Commission has held in the case of Mohan Meakins Ltd. “that reasonable restrictions on the franchise holders to protect the quality of the products will be in public interest and are justified”, it is prayed that the respondents also be permitted on the same analogy from the point of view of protecting quality of the products to retain Clause 12 in the agreement deleting only the undesirable parts having a taint of restrictiveness. It is, therefore, submitted that the order of the Commission dated June 4, 1986, be partially amended to provide the retention of non-objectionable part of Clause 12 of the agreement and to order that the manufacturer (respondent No. 2) shall not manufacture/bottle at the plant any other products which are liable to be confused with respondent No. 1’s products.
5. The application was opposed by the Director-General in a written reply to it. According to the Director-General, there is no similarity between these two cases, namely, the case of Mohan Meakins Ltd. and the instant case as the allegations are different from each other. Oral arguments were subsequently addressed by learned counsel, Shri O.P. Dua, on behalf of the Director-General. Learned counsel, Shri S.S. Kumar, argued on behalf of the respondents.
6. The first issue to be considered is whether there are sufficient grounds for reconsideration of the order of the Commission and whether circumstances put forward are such as would justify a review within the powers conferred on the Commission under Section 13(2). Citing the observations of the Supreme Court in the case Mahindra and Mahindra Ltd. v. Union of India [1979] 49 Comp Cas 419 (SC) that (at p. 444): “there are no fetters placed by the Legislature to inhibit the width and amplitude of of the power” conferred on the Commission under Section 13(2) and (at p. 444): ” it is left to the discretion of the Commission whether the power should be exercised in a given case and, if so, to what extent”. Shri Kumar argued that the Commission was fully competent to review its own decisions. The Supreme Court had also referred to the considerations which are relevant in exercising the power under Section 13(2) and had, inter alia, noted that (at p. 445): “there may be some fact or circumstance which may not have been brought to the attention of the Commission, though having a crucial bearing on the determination of the enquiry, and which, if taken into account, may result in a different order being made, or some fact or circumstance may arise which may expose the invalidity of the order or render it bad and, in such cases too, some provision has to be made for correcting or rectifying the order “. The
only limitation the Supreme Court felt should apply in the exercise of the power conferred under Section 13(2) is that it cannot be construed to be so wide as to permit rehearing on the same material without anything more, with a view to showing that the order is wrong on facts. Shri Kumar argued that in the light of the observations of the Supreme Court cited above, the Commission was well within its powers to review its decision in this case.
7. Shri Kumar submitted that while the case of Mohan Meakins related to the manufacture of soft drinks only, the instant case is concerned with the manufacture of beer. He pointed out that the precautions for the protection or quality and purity of beer are far more stringent than in the case of soft drinks. The deletion of Clause 12 of the agreement as ordered by the Commission totally eliminates an essential safeguard to protect the purity and quality of the beer produced in accordance with the know-how developed by respondent No. 1.
8. In opposing this application, Shri Dua pointed out that there existed a number of other Clauses in the agreement intended to ensure purity and quality of the beer. In fact, it has been admitted that respondent No. 2 had been selling appreciable quantities of beer to other parties. It has also been stated by the respondent that production of beer is undertaken in batches; therefore, the question of mix up should not arise. Proceeding further, learned counsel, Shri Dua, argued that the case of Mohan Meakins Ltd. is not on a parallel footing with the present case. Whereas the allegation in the former case relates to purchase of raw materials, namely, syrups and concentrates for the purpose of manufacture of soft drinks and was, therefore, violative of Section 33(1)(a)(g) of the Monopolies and Restrictive Trade Practices Act, the present case falls under Section 33(a)(g) (sic) of the Act. It is the nature of the restriction flowing from the agreement vis-a-vis the manner in which the production is carried out by respondent No. 2 that is relevant in the present enquiry. Respondent No. 2 does not purchase any raw material from respondent No. 1 but uses only the technical know-how made available to it by respondent No. 1. The order of the Commission in Mohan Meakins’ case being not relevant, there is no justification for a review of the order of the Commission,
9. It is true that Mohan Meakins’ case is not exactly similar in all respects to the present case under consideration. Mohan Meakins had entered into a franchise agreement with bottlers for bottling and selling its products under the trade marks of the former. As a part of this agreement, Mohan Meakins imparts technical assistance to the bottlers, permits them to use its trade mark on the soft drink bottles and also supplies beverages bases/concentrates/syrups used as raw materials in the preparation of soft drinks.
Under this franchise agreement, the soft drinks are actually sold by the bottlers while they have to obtain the raw materials from Mohan Meakins Ltd. and ensure that the products are made in accordance with the technical know-how provided by Mohan Meakins Ltd. In the present case, however, the agreement is purely limited to the manufacture of beer based on the know-how provided by UB. Respondent No. 2 is not restricted in the matter of purchase of raw materials nor has it the right to sell the products on its own. The entire output has to be sold at an agreed price only to respondent No. 1.
10. While there are basic differences in the two agreements and manufacture of beer involves fairly complicated processes unlike the preparation of soft drinks from concentrates and syrups, the nature of the restrictions placed in both cases is somewhat similar. In Mohan Meakins’ case, the franchise agreement prevents the bottlers from bottling any products other than those of Mohan Meakins. In the instant case, respondent No. 2 is prevented from manufacturing and bottling any beer other than that produced in accordance with the know-how and instructions of respondent No. 1 and to be sold exclusively to it. In both cases, therefore, one party is placing restriction on another party by virtue of the know-how and trade mark being provided to it, in manufacturing and dealing in another product. In both cases, the arguments advanced for placing such restrictions are also similar, namely, that in order to protect the purity and quality of the product, it becomes necessary to restrain the users of the know-how from producing and dealing in any other products.
11. We have taken the view that in Restrictive Trade Practices Enquiry No. 65 of 1984 that reasonable restriction on the franchise holders to protect quality of the products will be in public interest and are justified. On the same analogy, if respondent No. 2 were to decide to undertake the manufacture of another quality of beer and market it on its own, it should not lead to any confusion in the product of respondent No. 1.
12. Subject to the proviso that the manufacture and sale of any product by respondent No. 2 should not lead to the infringement of the rights of respondent No. 1 in regard to its technical know-how, trade marks and other distinguishing features on the quality, get up, standard and purity of the beer, there should be no restriction placed on respondent No. 2 in the production and marketing of any other product. Keeping this in view, we agree to modify our earlier order to the extent that instead of deleting Clause 12 altogether from the present agreement, it will be modified on the following lines :
” ILB shall be free to produce, market and sell any other product including beer based on its own know-how or that of a third party, as the
case may be, except that in engaging itself in any such activities, it shall be ensured that it will not infringe the rights of UB to the technology, quality, purity, trade mark and get up of UB’s products and will not undertake production and sale of any products likely to be confused with UB’s products. ”
13. In view of this modification in our previous order dated June 4, 1986, the time for the compliance of the order in terms of the new agreement to be entered into between UB and ILB is extended by a period of two months from today. Within this period, they will enter into the new agreement incorporating the modified Clause 12 as proposed in the above paragraph. Our previous order stands in all other respects.
Pronounced.