ORDER
D.C. Aggarwal
1. This is an enquiry under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act, 1969, instituted on an application made by the Director-General (hereinafter referred to as “the applicant”) against M/s. Simpson and Co. Ltd., Madras (hereinafter referred to as “the respondent”). The respondent company manufactures and sells Simpson automotive and agricultural/industrial diesel engines, spare parts and accessories thereof. It is stated by the applicant that the respondent appoints dealers for the sale of its products by a dealer agreement which has to be executed by each dealer so appointed. The applicant has taken exception to Clause 5 of this agreement which reads as follows :
“The dealer shall carry such minimum stock fixed by the distributor from time to time. The distributor shall fix from time to time in consultation with the dealer the quantum and/or net value calculated at the dealer’s buying prices of the products for which the dealer shall place orders with the distributor. If the dealer fails to place orders for the minimum quantum of stock and/or net value at the dealer’s buying
prices, which he has to carry, the distributor will be at liberty to proceed on the basis that the dealer has placed the orders for the minimum value of stock and the quantum fixed by the distributor from time to time.”
2. It is stated that this clause relates to a restrictive trade practice within the meaning of Section 2(o) of the Monopolies and Restrictive Trade Practices Act read with Section 33(l)(b) and (d) of the Act. According to the applicant, if the trade practice is allowed to continue under this clause of the agreement, it will result in higher inventory cost for the dealers and will ultimately tell upon the consumers in the shape of unjustified price.
3. The respondent also appoints accredited dealers by virtue of letters, a specimen of which is to be found in annexure B. The stipulations which are said to offend the provisions of the Monopolies and Restrictive Trade Practices Act read as follows :
“You will be required to carry at all times a minimum parts stock… at net dealer value : You should also guarantee us a minimum monthly parts offtake of Rs… at net dealer value : You should place regular monthly stock order for our comprehensive range of parts, in keeping with the above obligations……
Your requirements of spare parts are to be obtained from us in bulk once in every month, covering fast, medium and slow moving parts. Parts not supplied against such bulk indents will be registered in our back order system for supply to you on receipt of stocks. ”
4. It is submitted that these stipulations are in the nature of restrictive trade practices within the meaning of Section 2(o) of the Monopolies and Restrictive Trade Practices Act read with Section 33(1)(b) of the Act. A notice of enquiry was issued to the respondent in terms of regulation 58 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974. The respondent filed a written reply admitting the pro formas of the agreement but pleaded that the impugned clauses did not amount to restrictive trade practices. The Director-General applied for delivery of interrogatories and seeking discovery of documents. Now, the respondent has moved an application praying that a “cease and desist” order be passed. It seems that the agreements with the dealers have come to an end by lapse of time and the same have to be renewed for a further period. This being so, the respondent submits to the order of the Commission and it is prepared to delete or modify the impugned clauses in accordance with the directions of the Commission. So, we direct that Clause 5 of the dealers’ agreement shall be substituted by the following :
” The dealers shall maintain reasonably adequate stock to match the demand at all times and make sincere efforts to promote sales.”
5 As regards the terms and conditions offered to the accredited dealers as per annexure B, we hereby direct that the impugned stipulations shall be substituted by the following :
” Your requirements of spare parts are to be obtained from us in bulk once in every month. Parts not supplied against such bulk indents shall be registered in our back order system for supply to you on receipt of stocks. Adequate stock of all parts to meet the demand shall be maintained. ”
6. The rest shall be deleted. In this way, to the extent the impugned clauses in both the agreements have not been allowed to be repeated, shall be deemed to have been declared void under Section 37(1) of the Monopolies and Restrictive Trade Practices Act. A cease and desist order is passed that the respondent shall discontinue the alleged restrictive trade practices and shall not repeat the same and with that object in view, the new agreements with the dealers and accredited dealers shall be made inserting therein the clauses directed by us in substitution of the existing clauses.
7. No order as to costs. Pronounced in open court.