TATA ENGINEERING & LOCOMOTIVE CO. LTD., BOMBAY versus THE REGISTRAR OF THE RESTRICTIVE TRADE AGREEMENT, NEW DELHI

Citation: [1977] 2 S.C.R. 685 · Decided: 21-01-1977 · Supreme Court of India · Bench: A.N. RAY · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

,.... 
\ ., 
685 
TATA ENGINEERING & LOCOMOTIVE CO. LTD.,. BOMBAY 
v. 
THE REGISTRAR OF THE RESTRICTIVE TRADE 
AGREEMENT, ·NEW DELHI 
January 21, 1977 
[A. N. RAY, C.J.; M. H. BEG AND JASWANT SINGH, JJ.] 
Monopolies & Restrictive Trade Practices Act, 
1969-ss. 2(o) 
and· 33-
Scope of. 
· 
Agree111~11t-lf amounts to a restrictive trade practice-Tests for deciding. 
Section 2(o) of the Restrictive Trade Practices Act, 1969 defines "restrictive 
trade practice" to be a trade practice which tends to bring about manipulation 
of prices or conditions of dt;_livery or to affect the flow of supplies in the market 
relating to goods or services in•such manner as to impose on the 
consumers 
unjustified costs or restrictions. 
Section 33 provides that any agreement relating 
to a restrictive trade practice falling within one or more of the categories (a) 
to (1) specified in sub-s.(1) thereof shall be registered. 
Section 
37 
enacts 
that the Monopolies and Restrictive Trade Practices Commission may inquire 
into any restrictive trade practice, whether the agreement relating thereto had 
been registered under s. 35 or not. 
Under section 38 when the Commission 
finds that such restrictions are necessary or justified, in the circumstances men-
tioned in the section, it may permit such restrictions. 
The appellant is a manufacturer of heavy and medium commercial vehicles. 
The appellant enters into an agreement with dealers in regard to sale of its 
vehicles. 
Clause 1 (a) of the agreement provides that a dealer shall buy from 
the Regional Sales Office of the company a new Tata diesel truck for resale 
within the territory described in accordance with the provisions of the 
agree-
ment. 
Clause (b) provides that the agreement shall not preclude the company 
from entering into any dealership agreement with. any other person or persons 
within the said territory. 
Clause 3 prohibits the dealer from selling the vehicles 
either directly or indirectly to any person outside the territory. 
Clause 6(a) 
provides that the dealer shall maintain an organisation for the 
sale 
of the 
vehicles in accordance with the directions of the appellant. Clause 14 prohibits 
the dealer from handling or selling vehicles manufactured or supplied by any 
other company. 
In a petition under s. !O(a) (iii) of the Act, the Registrar of the Restrictive 
Trade Practices alleged that els. (l) and (3) of the· agreement between the 
appellant and its dealers provided for territorial restrictions or allocation 
of 
areas or market, cl. (6) provided for resale price maintenance, cl. 14 provided 
for exclusive dealership and all these clauses of the agreement showed that the 
appellant was indulging in restrictive· trade practices relating to alloc~ti:;" of 
territories or areas among its dealel·s and that the appellant was not w11lmg to 
abandon the restrictive trade practices. 
The Commission held inter alia that els. (1) and (3) of the agreement 
constituted restrictive trade practiees and, therefore, void. 
It was contended on behalf of the respondent that irrespective of the inju-
rious or beneficial consequences of a trade practice which may restrict competi-
tion, an al'reement may fall 'Yithin the _difinition o\ t~at t_erm in s. 2( o) of the 
Act. 
An injurious or beneficrnl result of the restnctton is relevant only 
for 
purposes of s. 37 and s. 38 and not for the purposes of s. 33. 
. 
Allowing the appeal, 
HELD : The agreement in the present case was not within the vice of res-
trictive trade practice and was not registrable. 
c 
686 
SUPREME COURT REPORTS 
[1977] 2 $.C.R. 
.A 
( 1) An agreement will be registrable when it will have both the e!l'ect of 
restricting competition within the meaning of s. 2(o) and also deal with the 
subject matter described in ss. 33(1)(a) to (I). A practice which is not res-
trictive under s. 2 ( o) of the Act cannot be a restrictive trade practice only 
because of els. (a) to (I) of s. 33(1). Section 33 does not provide statutory 
illustratiqns to s. 2 ( o) of the Act but only enumerates some types of trade 
practices which, if they are. restrictive within s. 2 ( o), require regiitration. 
B 
E 
F 
G 
[693 F-G] 
(2) The definition of restrictive trade practice is an exhaustive and not an 
inclusive one. The decision whether a trade practice is restrictive or not has 
to be arrived at by applying the rule of reason and not on doctrine that any 
restriction as to area or price will per se be a restrictive trade practic

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