HINDUSTAN LEVER LTD., BOMBAY versus THE MONOPOLIES & RESTRICTIVE TRADE PRACTICES COMMISSION, NEW DELHI & ORS.

Citation: [1977] 3 S.C.R. 455 · Decided: 07-04-1977 · Supreme Court of India · Bench: M. HAMEEDULLAH BEG · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

455 
HINDUSTAN LEVER LTD., BOMBAY 
A 
v. 
" 
THE 
MONOPOLIES & 
RESTRICTIVE TRADE 
PRACTICES 
COMMISSION, NEW DELHI & ORS. 
April 7, 1977 
[M. H. BEG C.J., AND A. C. GUPTA J.) 
AfonopoTies & Restrictive Trade Practices Act, 1969 s. 2(o) and 2(u)-Scope 
of-Stipulation in tht• agree1nent that the stockist "shall purchase and .accept 
frotn the contpany such stock as the co1npa11y at its discretion send" and as to 
1he quantity of goods to be purchased by the stockist-If amounts to restrictive 
trade practice. 
Complaint to the Commission-Who could lodge. 
B 
According to s. 2(o) of the ~fonopolies & Restrictive Trade Practices Act a 
C 
"restrictive trade practice" means inter alia a trade practice which has, or may 
have, the effect of preventing, distorting or restricting competition in any manner. 
The appellant, who was a manufacturer of consumer goods such as soaps and 
toilet preparations, entered into agreements with redistribution stockists for the 
·wholesale distribution of its products. Clause 5 of the agreement, inter alia, 
provides that a stockist shall keep and maintain adequate stocks and shall carry 
out instructions and directions given by the appellant. He is prohibited from 
charging anything more than the stipulated maximum resale price. 'rhe last 
part of the clause provides that "the redistribution stockist shal1 purchase and 
accept from the company such stock as the company shall, at its discretion, send 
to the redistribution st1)ckist for fulfilling its obligations under this agreement". 
Clause 9 prohibits the redistribution stockist from re-booking or in any way con-
veying, transporting or despatching parts of stocks of the products received by 
him outside the town except when he was so expressly directed in writing by the 
appellant. He shall also, whenever so required by the appeJlant, make available 
from the stocks such part as the appellant directs him to do. 
D 
E 
. ''"! , 
On a complaint made to the Monopolies & Restrictive Trade Practices Com-
) 
mission by one of the stockists the Commission, after examining els. 5 and 9 of 
the impugned agreement, held that the practice of resale price n1aintenance and 
full line forcing to \vhic:h the origin'al cl, 5 related, shall be discontinued and 
shall not be repeated. It directed deletion of the last sentence of cl. 5 and 
declared cl. 9 as void. 
Dismissing the appeal to this Court. 
HELD : The Commission was right in reframin.e: cl. 5 in the way it did. 
Deletion of the ]ast sentence of cl. 5 was essential to prevent possible misuse of 
the appe1Iant's power so as to regulate the prices contrary to the express provi-
sions in the clause. [465 B; G] 
1 (a) The last part of cl. 5 placed the redistribution stockist at the mercy of 
the appellant which could dictate to him what amounts of various commodities 
he "shaH purchase and accept from the company". It also empowered the 
appellant to allocate send to the redistribution stockist only what it "shall, at 
its discretion, send to the redistribution stockist for fulfilling its obligations" 
under the agreement. [464 GJ 
(b) The word "shall" used in the clause did not bind down the exercise of 
the appellant's discretion by reference to any requirements of the consumers in 
a particular area in which .the stockist might sell. The stockist was bound to 
accept and carry out the appellant's decisions. [464 H] 
2(a) The contention that though the clauses gave power to the appellant to 
regulate trade. in practice they did not operate as restrictions is not well-founded. 
It is not possible to isolate the terms of a contract from ' the practice. The 
appellant did not intend that the clauses in the agreement would be treated as 
F 
G 
A 
B 
c 
D 
E 
F 
G 
456 
SUPREME COURT REPORTS 
(1977] 3 S.C.R. 
dead letter. Although the practice of imposing restrictions under such clauses 
and the practice of introducing such clauses are separate practices, introduction 
of a clause like cl. 5 is itself a trade ptactice. 
Moreover, even if the power 
given in such wide terms was not meant to be exercised unreasonably, its pre-
sence in the agreement was a needless surplusage which could be used to impede 
freedom of competition and trade and this made it objectionable. [465 A] 
(b) Inasmuch as the introduction of clauses in an agreement, taken by itself. 
is a practice it would be specious reasoning to separate the clauses in the agree-
ment from action under the agreement and then urge that the clause

Excerpt shown. Read the full judgment & AI analysis in Lexace.