Holding

The Commission lacks jurisdiction because no element of competition exists, so no restrictive trade practice under Section 2(o) can be established.

Summary

The State of Uttar Pradesh introduced an irrigation programme that affected the agricultural lands of Gir Prasad, who filed a complaint under the Monopolies and Restrictive Trade Practices Act, 1969 alleging that the State had manipulated the conditions of water supply and engaged in a restrictive trade practice. The M.R.T.P. Commission held it had jurisdiction, reasoning that a government department rendering a "service" falls within the Act. On appeal, the Supreme Court held that a restrictive trade practice under Section 2(o) requires the presence of commercial competition, which was absent in the State’s provision of irrigation water. Consequently, the Commission lacked jurisdiction to entertain the complaint. The Court set aside the Commission’s order, dismissed the complaint, and allowed the appeal.

Issues considered

Whether the M.R.T.P. Commission has jurisdiction to entertain a complaint against a State department providing irrigation water under the Monopolies and Restrictive Trade Practices Act, 1969.
Whether the supply of irrigation water by the State constitutes a "service" and an "undertaking" within the meaning of the Act.
Whether the element of commercial competition is necessary for a practice to be deemed restrictive under Section 2(o).
Whether the complaint could be entertained under the deeming clause of Section 33(1) of the Act.

Legislation cited

Monopolies and Restrictive Trade Practices Act, 1969s. 10, s. 2(o), s. 2(v), s. 33(1)

Subjects

Monopolies and Restrictive Trade Practices Actjurisdictionrestrictive trade practicecompetitiongovernment serviceirrigation waterpublic sector undertakingSection 2(o)Section 33(1)

Judgment

- STA TE OF UTTAR PRADESH A
v.
GIR PRASAD AND ORS.

FEBRUARY 25, 2004

[RUMA PAL AND P. VENKATARAMA REDDT, JJ.] B

Monopolies and Restrictive Trade Practices Act, 1969-Sections 2(o)
and I 0-Complaint of restrictive trade practice against State-Element of
competition between the State and any other party not alleged-Jurisdiction
of Restrictive Trade Practices Commission to entertain the complaint-Held:
c
For restrictive trade practice, element ofcommercial competition is necessary-
In the present case 'service' provided by the State not having element of
competition, there was no restrictive trade practice-Hence Commission did
not have jurisdiction to entertain the complaint.
D
Appellant-State introduced an irrigation programme in respect of
certain lands including that of the respondent-complainant. Respondent filed
a complaint under Monopolies and Restrictive Trade Practices Act, 1969
charging the appellant with having manipulated the conditions of delivery of
service of supplying irrigation water and having indulged in restrictive trade
practices within the meaning of the Act. Appellant questioned the jurisdiction E
of the Commission to entertain the complaint. The Commission held that it
had the jurisdiction as Government Departments which render "service" in
terms of Section 2 of the Act, are covered by the provisions of the Act. Hence
the present appeal.

Allowing the appeal, the Court
F

HELD: 1. Unless there is a "restrictive trade practice" as defined in
Section 2(o) of Monopolies and Restrictive Trade Practices Act, 1969, the
Commission would not have the power to entertain the complaint. The
jurisdictional facts as prescribed under Section 2(o) are (i) that there is a trade
G
practice and (ii) that the trade practice has, or may have the effect of

-
preventing, distorting or restricting competition in any manner. The two
instances which ha~e been particularized as clauses (i) and (ii) of Section 2(o)
do not narrow down the definition of restrictive trade practice nor do they
exclude the necessity of establishing the prevention, distortion or restriction
637 H
638 SUPREME COURT REPORTS [2004] 2 S.C.R.

A of competition. [639-G-H)

Hindusthan Lever Ltd v. Director General, (200112SCC474, referred
to.

2. The element of competition must be present before the question of
B · any restrictive trade practice would arise and that the concept of competition
is to be understood in a commercial sense. [640-B]

Tata Engineering and Locomotive Co. Ltd., Bombay v. The Registrar of the
Restrictive Trade Agreement, New Delhi, [1977] 2 SCC 55 and Mahindra and
Mahindra ltd v. Union of India and Anr., [1979] 2 SCC 529, relied on.
c
3. In the present case, it has not been alleged that there is any element
of competition involved between the State and any other party. Even if one
were to assume that the State was an undertaking as defined in Section 2(v)
and that the activity of arranging for the supply of water is a "service" as
D contemplated under the Act, in the absence of this vital element of competition,
the Commission could not have held that there was any restrictive trade
practice within the meaning of Section 10 of the Act giving it the jurisdiction
to entertain the complaint. (640-H; 64t-A)

Valtas Limited, Bombay v. Union of Jmtia and Ors., [1985] Supp. 2 SCC
E 498, referred to.

CIVIL APPELLATE JURI<;DICTION : Civil Appeal No. 16809 of
1996.

From the Judgment and Order dated 1.7.96 of the M.R.T.P. Commission,
F New Delhi in R.T.P.E. No. 241 of 1995.

N.S. Gahlot and Jatinder Kr. Bhatia, for the Appellants.

Jeevan Prakash and K.B. Sounder Rajan for the Respondents.

The Judgment of the Court was delivered by
G
RUMA PAL, J. The question to be decided in this appeal is whether
the Monopolies & Restrictive Trade Practices Commission had the jurisdiction
to entertain a complaint filed by the respondent No. I relating to an irrigation
programme sought to be implemented by the appellant-State. According to
H the appellants, the irrigation programme or "Warbandi" had been introduced
639

-
STATE v. GIRPRASAD [PAL,J.]

w.e.f. 19th August 1995 in respect of certain lands including that of the A
respondent-complainant. The allegation in the complaint was that by the
irrigation programme, the complainant's agricultural crops would be affected.
The complaint charged the appellants with "having manipulated the conditions
of delivery of service of supplying irrigation water" and having indulged in
restrictive trade practices within the meaning of the Monopolies and Restrictive B
Trade Practices Act, 1969 (referred to as 'the Act')

The appellant questioned the jurisdiction of the Commission to entertain
the complaint. The Commission negatived the preliminary objection raised
by tlie appellant holding that Government Departments which render "service"
in terms of Section 2 of the Act are covered by the provisions of the Act. It C
was found as a matter of fact that the State was rendering a "service". The
Commission, therefore, issued a notice qf inquiry against the appellant. The
proceedings before the Commission were stayed by this Court on the special
leave petition filed by the appellants.

We are unable to sustain the decision of the Commission. The D
Commission's jurisdiction with regard to alleged restrictive trade practices
has been provided for under Section I 0 of the Act. A restrictive trade practice
has been defined in Section 2 (o) as meaning:

"a trade practice which has, or may have, the effect of preventing,
destorting or restricting competition in any manner and in particular:- E
(i) which tends to obstruct the flow of capital or resources into the
stream of production, or
(ii) which tends to bring about manipulation of prices, or conditions
of delivery or to effect the flow of supplies in the market relating
to goods or services in such manner as to impose on the consumers
F
unjustified costs or restrictions;"

Unless there is a "restrictive trade practice" as defined in Section 2(o),
the commission would not have the power to entertain the complaint. The
jurisdictional facts as prescribed under Section 2(o) are (i) that there is a G
trade practice and (ii) that the trade practice has, or may have, the effect of
preventing, distorting or restricting competition in any manner. The two
instances which have been particularised as clauses (i) and (ii) of Section
2( o) do not narrow down the definition of restrictive trade practice nor do
they exclude the necessity of establishing the prevention, destortion or
restriction of competition. (See Hindusthan Lever Ltd. v. Director General, H
640 SUPREME COURT REPORTS [2004] 2 S.C.R.

A (20011 2 sec 474,478, para 11.)
Section 2(o) has also been construed by this Court in Tata Engineering
& Locomotive Co. Ltd, Bombay v. The Registrar of the Restrictive Trade
Agreement, New Delhi, (1977] 2 SCC 55 and Mahindra and Mahindra Ltd.
v. Union of India and Anr., (1979] (2) SCC 529. Both decisions have held
B that the element of competition must be present before the question of any
restrictive trade practice would arise and that the concept of competition is
to be understood in a commercial sense.

The law was summed up in Mahindra and Mahindra (supra) where it
C was s.aid:

"It is clear from the definition that it is only where a trade practice
has the effect, actual or probable, of restricting, lessening or destroying
competition that it is liable to be regarded as a restrictive trade practice.
If a trade practice merely regulates and thereby promotes competition,
it would not fall within the definition of restrictive trade practice,
0
even though it may be, to some extent, in restraint of trade. Whenever,
therefore, a question arises before the Commission or the Court as to
whether a certain trade practice is restrictive or not, it has to be
decided not on any theoretical or a priori reasoning, but by inquiring
whether the trade practice has or may have the effect of preventing,
destorting or restricting competition."

The amendment to Section 33(1) of the Act in 1984 has, subsequent
to the decisions noted earlier, introduced a deeming clause by which
agreements in named categories would be treated for the purpose of the Act
to be agreements relating to restrictive trade practice. It was made clear by
this Court in Valtas Limited, Bombay v. Union of India and Ors., (l 985]
Supp. 2 SCC 498, 508 that in respect of the agreements so specified under
Section 33(1) after the l 984 amendment, the Commission/Court cannot hold
that the trade practices enumerated are not restrictive trade practices for the
purpose of the Act with reference to Section 2(o) .
....
J
The present case does not involve any agreement of the kind specified
in Section 33. It will, therefore, have to come under the definition of Section
2(o) to b~ CJ, restrictive trade practice at all. It has not been alleged by learned
counsel appearing on behalf of the respondents that there is any element of
competition involved between the State and any other party. Even if one
-{ were to assume that the State was an undertaking as defined in Section 2 (v)
STATE v. GIRPRASAD [PAL,J.] 641

and that the activity of arranging for the supply of water is a "service" as A
contemplated under the Act in the absence of this vital element of competition,
the Commission could not have held that there was any restrictive trade
practice within the meaning of Section I 0 of the Act giving it the jurisdiction
to entertain the respondent No. l's complaint.

In the aforesaid circumstances, we set aside the decision of the B
Commission, reject the complaint as not maintainable and allow this appeal.
There will be no order as to costs.

K.K.T. Appeal allowed.