ORDER
R.L. Sudhir, Member
1. The Director General of Investigation and Registration (DG in short) has moved an application under Section 10(a)(iii) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the MRTP Act) charging M/s. Godrej – GE Appliances Limited, the respondent No. 1 with the adoption of and indulgence in restrictive trade practices under Section 33(1) of the MRTP Act.
2. The respondent No. 1 is a Public Limited Company engaged in the business of manufacturing, sale and distribution of refrigerators and washing machines. For the
purpose of sale and distribution of the aforesaid products, the respondent has appointed dealers. The respondent No. 2, namely M/s. Venkateshwara Traders is one of the dealers appointed by respondent No. 1. The DG’s application is based on the agreement dated 2.5.1995 entered into between respondent No. 1 and respondent No. 2. It has been alleged that the following clauses of the aforesaid agreement amount to restrictive trade practices under various clauses of Section 33(1) of the MRTP Act :
Clause 17(c). In view of the fact that the Company’s sales network includes several Distributors appointed by the Company for sale of the said products to Retailers, and further in view of the fact that such Distributors have the requisite facilities and infrastructure, the Dealer shall sell the said products only to consumers, and shall not knowingly resell the said products to any person/firm/company is not a consumer and who is purchasing the same for the purpose of resale, save and except, with the prior written approval of the Company.
Clause 21. Notwithstanding anything to the contrary herein contained, the Company reserves to itself the following rights :
To vary the Schedule hereto either by withdrawing therefrom class or classes or products named therein, or by additions thereto, without assigning any reason whatsoever.
Clause 17(d). In order to ensure proper installation and prompt, adequate and efficient service to the consumer in respect of the said products, the dealer agrees to resell the said products to direct consumers (end-users) residing in the areas mentioned hereinbelow :
-HOSPET-
3. It is further stated that the trade practices enumerated in various clauses of Section 33(1) of the MRTP Act are deemed to be restrictive trade practices. It has also been claimed that because of the pernicious effect which the impugned trade practices have, they inevitably impair
competition and therefore, they can be presumed to be unreasonable and illegal even without an elaborate enquiry.
4. A Notice of Enquiry (NOE) was issued to the respondents on 5th December, 1996. The respondent No. 1 has filed a reply to the NOE in which the respondent has not only refuted the charges of restrictive trade practices, but has also given justification for incorporating the impugned clauses in the agreement. The DG filed a rejoinder to the reply of the respondent. After the completion of the pleadings, the following issues were framed :
(1) Whether the respondents have indulged in or is indulging in the restrictive trade practices listed in the NOE ?
(2) Whether the alleged restrictive trade practices are not prejudicial to public interest ?
5. Affidavits of evidence have been filed on behalf of both the parties. With the leave of the Court, the DG eventually withdrew the affidavits of the two witnesses and relied only on the documentary evidence.
6. We have heard the submissions made by the learned Counsel for the parties and have also carefully gone through the pleadings on record.
7. It has been alleged that Clause 17(c) of the agreement which has been reproduced before, attracts the provisions of Section 33(1)(a) of the MRTP Act, which is as follows :
Section 33(1)(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.”
8. It has been explained on behalf of the respondent that the impugned clause merely stipulates that the dealer shall sell the goods to actual consumers and not to resellers so as to ensure free and proper availability of genuine Godrej service to the end-users which can be availed on only from the dealers appointed by the respondent, as they are properly trained to do the job. Further, the unauthorised dealers and retailers will not be able to fulfil other obligations
such as installation, commissioning and warranty etc. It is further added that rendering of after-sale service is the responsibility of the dealer alone who not only gets requisite training, but also acquires infrastructure to provide the same to the customer. This clause also guards against the possibility of supply of spurious parts to the consumers. The explanation given by the respondent is quite satisfactory. In view of this, the restrictions contained in the above clause do not cause any prejudice to the consumers rather they in the interest of the consumers.
9. Clause 21 of the agreement is stated to fall within the ambit of Section 33(1)(g) of the MRTP Act, which is reproduced as below :
Section 33(1)(g): “any agreement to limit restrict or withhold the output, or supply of any goods or allocate any area of market for the disposal of the goods.”
10. Here again, we are inclined to accept the explanation given on behalf of the respondent. The respondent is a multi product Company and it is entirely the privilege of the respondent Company to decide the allotment of various products among its dealers/distributors, depending on their ability and expertise to handle the same. Further, it will be wrong to insist that all the dealers should be allowed to handle the whole range of products, as all of them may not have the required expertise and infrastructure to handle various kinds of products and to provide the required after-sale service. In view of this, restrictions contained in Clause 21 of the agreement does not infringe upon the provisions of Section 33(1)(g) of the MRTP Act.
11. The DG has alleged that Clause 17(d) of the agreement is also violative of the provisions contained in Section 33(1)(g) of the MRTP Act, as it imposes territorial restrictions on the dealers. The explanation furnished on behalf of the respondent in this regard carries weight. It has been stated that this clause ensures the promptest possible after-sales service to the end-users residing in the same area which may not be possible if the dealer is located at a distant place. The decision of Hon’ble Supreme Court in Tata Engineering and Locomotive Co. Ltd. v. Registrar, Restrictive Agreement, (1972) 2 SCC 55, also lends support to this claim.
12. In sum, the impugned clauses of the agreement do not fall within the purview of various clauses of Section 33(1) of the MRTP Act as alleged by the DG. DG’s application, accordingly fails. The NOE is discharged with no order as to costs.