Veer Vardhman Textile Mills Ltd. vs Claus Hirschburger Gmbh on 6 September, 2002

Monopolies and Restrictive Trade Practices Commission
Veer Vardhman Textile Mills Ltd. vs Claus Hirschburger Gmbh on 6 September, 2002
Equivalent citations: II (2003) CPJ 19 MRTP
Bench: R Anand, R Sudhir


R.L. Sudhir, Member

1. M/s. Veer Vardhman Textile Mills Limited, Panipat, has filed this petition under Section 12-B of the Monopolies and Restrictive Trade Practices Act, 1969 (referred to as the MRTP Act hereafter), for grant of compensation amounting to Rs. 5,45,73,000/- with interest at the rate of 24% for the loss suffered by the applicant, due to alleged adoption of unfair trade practices by the respondent namely, M/s. Claus Hirschburger GmbH.

2. Briefly, the facts of the case are that the applicant which is a company registered under the Companies Act, 1956, wanted to import second-hand spinning machines of the specification given in the compensation application for its spinning unit at village Pasina Kalan, Panipat, Haryana. It is stated that the Managing Director of the applicant’s company had detailed discussions with the Delhi based representative of the respondent company which is based in Germany, for the supply of two second-hand machines. The respondent is stated to have agreed to supply the secondhand machines of 1985 make. It is stated that in pursuance of the said agreement, the applicant placed an order with the respondent. The respondent despatched the said machines vide Profurma Invoice No. 1195 dated 18.9.1995 in which the year of manufacture of the machines has been shown as 1983. It is further stated that when the machines were opened and inspected by a qualified Engineer at the site, they were actually found to be of 1981 make. It has been further alleged that the respondent also failed to supply four belts which were an integral part of the machines and as a result of this, the applicant was forced to buy the same from the market at an additional cost of Rs. 48,000/-. It has been contended that non-supply of machines of the agreed year of manufacture, is an act of gross misrepresentation amounting to unfair trade practices within the meaning of Section 36A of the MRTP Act.

3. The Commission issued a Notice of compensation on 4th March, 1997. The respondent filed its response to the aforesaid Notice in which the allegation of unfair trade practice has been denied and it has been reiterated that the machines supplied to the applicant were of 1983 make. The applicant filed a rejoinder to the reply of the respondent. On completion of pleadings, the following issues were framed :

(1) Is the respondent guilty of adoption of and indulgence in any restrictive and/or unfair trade practices as mentioned in the Compensation Application ?

(2) Does the Commission have no jurisdiction to try this proceeding as contended by the respondent ?

(3) If answer to issue No. 1 is in the affirmative, have such trade practices caused any damage or loss to the applicant ?

(4) What relief or reliefs, if any, is the applicant entitled to claim in this proceeding ?

(5) What final order is required to be passed in this case ?

4. Although, the respondent filed its reply, it failed to appear before the Commission, either through an authorised representative or through a Counsel. The proceedings were, therefore, set ex parte against the respondent on 13.12.2000. Ex partc arguments were heard on 5.8.2002. Learned Counsel for the applicant, Mr. P.K. Mittal, also filed written submissions on 12.8.2002 which have been taken on record.

5. On the issue of jurisdiction, we accept the contention of the applicant that if the effect of unfair trade practice adopted by a foreign party, is felt in India, the MRTP Commission can exercise jurisdiction in such matters. This view is further strengthened by a recent judgment of the Hon’ble Supreme Court in Haridas Exports v. All India Float Glass Mfrs. Assn. and Ors., reported in II (2002) CPJ11 (SC)=IV (2002) SLT 452=2002 CTJ 353 (Supreme Court) (MRTP), in which it has been held as follows ;

“A competition law like the MRTP Act is a mechanism to counter cross border economic terrorism. Therefore, even though such an agreement may enter into outside the territorial jurisdiction of the Commission, but if it results in a restrictive trade practice in India then the Commission will have jurisdiction under Section 37 to pass appropriate orders in respect of such restrictive trade practice.”

6. The main plank of the applicant’s argument is that the respondent has failed to abide by the agreement arrived at between the parties because the second-hand machines supplied by it were neither of 1985 make as agreed during the discussions held before the supply of machines, nor were they of 1983 make as promised in the letter of Invoice dated 18.9.1995. On the contrary, the machines supplied were of 1981 make.

7. On behalf of the applicant, it has been further submitted that in the certificate dated 27.10.1995 given by Shri R. Siegmann, the Chartered Engineer of the respondent, it has been specifically mentioned that the residual life of the machines supplied will be 10 years. On this basis, it has been argued that since the machines supplied were actually of 1981 make and not of 1983 make, the residual life of the machines has been reduced by two years i.e. against 10 years, the residual life of the machines supplied would be only eight years. The applicant has, accordingly, worked out loss suffered by it in a period of two years. The total loss has been estimated at Rs. 5,40,00,000/- at the rate of Rs. 22 lakhs of conversion charges recoverable per month.

8. From the documents on record, there appears to be no truth in the contention of the applicant that the respondent had agreed to supply machines of 1985 make and for the supply of the four belts for which the applicant had to incur an additional cost of Rs. 48,000/-. There is no agreement on record to this effect, nor any other evidence to support the claim of the applicant.

9. As regards the applicant’s contention that the machines supplied were of 1981 make and not of 1983 make as stated in the Proforma Invoice dated 18.9.1995, it is a disputed claim. In its reply, the respondent has stated that the machines in question were bought by the respondent from M/s. Vogel and they were sold to them as 1983 models. It is further stated that the Chamber of Commerce had declared the machines as 1983 models. Certificates by Chartered Engineer, to this effect were sent to the applicant and the applicant was also given a chance for inspection of machines before despatch but it never availed of the same. It is further clarified that second hand parts are used in such machines and, therefore, from the plates put on any of these parts, it cannot be inferred that the machines were of 1981 make and not of 1983 make. It is further stated that the respondent accepted only the plate that was put on machine Nos. 12341 + 12342 and no other plates were noticed by the Chartered Engineer of the respondent. These submissions cast doubts on the veracity of the applicant’s claim that the machines were of 1981 make. Further, the applicant had an opportunity to verify this fact before the despatch of machines, but it did not avail of it. In view of this, we are unable to accept the contention of the applicant that the machines supplied were of 1981 make. Hence, the claim of the applicant for the loss suffered on the hypothetical ground of having lost the conversion business for two years is also unsustainable.

10. In view of the foregoing discussion, the Compensation Application No. 281/1996 is rejected with no order as to costs.

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