' The three Appeals bearing Nos, 45, 46 and 47 of 1979, have been filed under section 20 of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)
(hereinafter referred to as the Ordinance), to challenge the orders of the Authority constituted under section 2(1)(c) of the said Ordinance. Appeal No, 45 of 1979 has been filed by Messrs Searle (Pakistan) Limited, Appeal No, 46 of 1979 has been filed by Messrs Muller and Phipps (Pakistan)
Limited, and Appeal No, 57 of 1979 has been jointly filed by Messrs Searle (Pakistan) Limited and Ibrahim Qasim, Managing Partner of Premier Agencies. In. Each of these appeals the Authority under the Ordinance is impleaded as the respondent. Common questions of law and fact arise in these 3 appeals and therefore, these appeals are being disposed of by this single judgment.
2. 1 have heard Mr. Salim Akhtar for the appellants in each one of these appeals and Mr. A. H. A. Kazi appearing for the respondent in each one of these appeals.
3. The impugned crder in Appeals Nos, 45 and 46 of 1979 is the same whereas the impugned order in Appeal No, 47 of 1979 is separate, although the points involved are the same.
4. The brief facts of the case are that Messrs Searle (Pakistan) Limited, who are the manufacturers of pharmaceuticals, entered into agreements with Messrs Muller and Phipps (Pakistan) Limited and Ibrahim Qasim in regard to distribution of their manufactured goods. For the sake of brevity Messrs Searle (Pakistan) Limited is referred to as "the manufacturer" and Messrs Muller and Phipps (Pakistan) Limited as also Ibrahim Qasim as "the distributor". The manufacturer and the distributor entered into agreements in regard to sale and distribution of the goods of manufacturer by the distributors. Such agreements were registered with the Authority under the Ordinance as required by clause (k) of subsection (1) of section 16 of the Ordinance. Such agreements contemplated that Messrs Muller and Phipps (Pakistan) Limited were appointed as distributors of the products of the manufacturer for entire Pakistan except for the City of Karachi and Ibrahim Qasim of Premier Agencies as the Stockists for goods of the manufacturer for the City of Karachi only. It would thus seem that the manufacturer had appointed Messrs Muller and Phipps and Ibrahim Qasim as distributors or stockists respectively for the areas in Pakistan i,e, the first for entire Pakistan except the City of Karachi and the second for the City of Karachi only. On an examination of the agreements the Authority took the view that some of clauses had the effect of unreasonably preventing, restraining or lessening competition within the meaning of the term "unreasonably restrictive trade practice "as defined in clause (n) of section 2(1) of the Ordinance. On the assumption that the agreements were violative of clause (n) of section 2(1) of the Ordinance the Authority deemed that section 3 of the Ordinance had been contravened and for such reason the Authority issued notice under section 11 of the Ordinance both to the manufacturer and the distributors. In the case of agreement which is the subject-matter of Appeals Nos, 45 and 46 of 1979, the Authority took the tentative view that the preamble of the agreement as well as clauses (1), (2), (8), (9), (10), (11), (13) and (19) of the agreement contravened the Ordinance. Both the manufacturer and the distributor were called upon to show cause why an order under sub-clause 1(ii) of clause (c) of section 12(1) of the Ordinance should not be passed requiring them to discontinue the restrictive trade practice and to terminate or modify the agreement that had been entered into between them. Upon hearing the parties, the Authority came to the conclusion that by entering into agreements demarcating the territory within which the distributors were to carry on their business the parties had obtained the result of preventing, restraining, or otherwise lessening competition. The Authority came to the conclusion that section 3 of the Ordinance had been offended inasmuch as unreasonably restrictive trade practices or unreasonable monopoly power had been created and therefore, the agreements needed to be amended in order to make them consistent with the intention of the Legislature underlying section 3 of the Ordinance. In order to achieve that object the Authority amended the agreements between the manufacturer on the one hand and the distributors on the other so that the territorywise rights of distribution contemplated by the agreements were modified, the provisions in the agreements concerned discounts and quantity bonus were also deleted, the provisions in regard to special efforts for sale of goods at concessional prices to the traders were omitted and the provisions in regard to restriction on exports by the distributors were also deleted.
5. Before the Authority the parties had raised the contention that section 3 of the Ordinance did not create a law so that contravention of section 3 by itself would not be sufficient to attract the jurisdiction of the Authority. In juxta position the parties have contended that the Ordinance seeks to Jay down the offending provisions in sections 6 and 7 as distinct from section 3. This argument was propounded with a view to demonstrate that while section 3 was a general provision in the nature of objects of legislation, the specific provisions attracting the jurisdiction of the Authority are regulated and maintained in sections 6 and 7 of the Ordinance. It was further contended that the agreement between the parties had been permitted by the Controller of Capital Issues under the Companies (Managing Agency and Election of Directors) Order of 1972.
6. Mr. Salim Akhtar, appearing for the appellants in each one of these appeals has raised the following contentions before me :-
(i) Section 3 of the Ordinance is only a .Provision defining the ambit of objects of Legislature and does not by itself create prohibition.
(ii) That the jurisdiction of the Authority cannot be invoked unless the agreement between the parties was hit by section 6 or was in violation of the General Order under section 7 of the Ordinance.
(iii) That the agreement between the parties having been entered into with prior approval of the Controller of Capital Issues under Article 7 of the Companies (Managing Agency and Election of Directors) Order (2 of 1972), the Authority under the Ordinance had no powers to pass an order of the nature as the impugned order in the cases, and
(iv) That the evidence in support of the findings was insufficient.
7. For the purposes of these appeals it is necessary to examine the provisions of the Ordinance.
Section 2 of the Ordinance defines the various terms used in the following sections of the Ordinance. The relevant definitions are contained in clauses (k), (1) and (n) of subsection (1) of section 2. These three clauses may be profitably reproduced and the same read as follows :- ' AO 'Trade' means any business, industry, profession or occupation relating to the production, supply or distribution of goods or the control of production, supply or distribution of goods, or to the provision or control of any service ;
(i) 'Trade practice' means any act or practice relating to the carrying on of any trade or business ;
(n) 'Unreasonably restrictive trade practice' means a trade practice which has or may have the effect of unreasonably preventing, restraining or otherwise lessening competition in any manner."
' On a reading of these 3 clauses it would appear that such act or' practice relating to the carrying on of a trade or business which is or may Lave the effect of preventing, restraining or lessening competition in an unreasonable manner shall be "unreasonably restrictive trade practice". A In other words, the jurisdiction of the Authority would be attracted only if it is demonstrated that the agreement between the parties did or had a tendency not merely to lessen or prevent or restrict competition to such restraints were unreasonable.
' Section 3 of the Ordinance again reads as follows :- "3. Undue concentration of economic power, etc. Prohibited.-There shall be no undue concentration of economic power, unreasonable monopoly power or unreasonably restrictive trade practice."
8. It would appear that the Legislature envisaged a result of doing away with unreasonably restrictive trade practices.
' Section 6 of the Ordinance is in the nature of a deeming provision which in circumstances illustrates "unreasonably restrictive trade practices". Clause (b) of subsection (1) of section 6 of the Ordinance reads as follows :- "6. Unreasonably restrictive trade practices.-(1) Unreasonably restrictive trade practices shall be deemed to have been resorted to or continued if there is any agreement . . .
(b) between a supplier and a dealer of goods fixing, minimum resale prices, including- (i)an agreement with a condition for the sale of goods by a supplier to a dealer which purports to establish or provide for the minimum prices to be charged on the resale of the goods in Pakistan ; or
(ii) an agreement which requires as a condition of supplying .Goods to a dealer to the making of any such agreement."
The exceptions which are protecting provisions are again contained in subsection (2) of section 6 and the same read as follows: "(2) No such agreement as is referred to in subsection (1) shall be deemed to constitute an unreasonably restrictive trade practice if it is shown-
(a) That it contributes substantially to the efficiency of the production or distribution of goods or of the provision of services or to the promotion of technical progress or export of goods ;
(b) That such efficiency or promotion could not reasonably have been achieved by means less restrictive of competition; and
(c) That the benefits from such, efficiency or promotion clearly out-weight the adverse effect of the absence or lessening of competition."
' Apart from the provisions of section 6, the relevant portion whereof has been reproduced, section 7 of the Ordinance confers on the Authority additional powers enabling it to issue a General Order to prescribe the circumstances in which such practices which in the view of the Authority could be termed "unreasonably restrictive trade practices" could be formulated. Before passing a General Order which is always to bear a relation to "public interest" the Authority has to conduct an enquiry affording the persons or undertakings like to be affected by such General Order, an opportunity of being heard and producing relevant facts and material before the Authority. Under subsection (3) of section 7 the Authority has before passing a General Order to publish in the official Gazette, a notice to all persons and undertakings likely to be affected by the proposed General Order so that such persons or undertakings as are likely to be affected may submit their suggestions or objections before the Authority. On receipt of such suggestions or objections the Authority in appropriate cases has to afford an opportunity to all such persons or undertakings as are likely to be affected by the General Order. Section 7 of the Ordinance needs to be reproduced and the same reads as follows :- "7. Other circumstances constituting concentration of economic power, etc.-(1) Without prejudice to the provisions of sections 4, 5 and 6, the Authority may by General Order prescribe the circumstances in which and the conditions under which undue concentration of economic power or unreasonable monopoly power shall be deemed to exist and the practices which shall be deemed to be unreasonably restrictive trade practices.
(2) Where the Authority is of opinion that the making of a General Order under subsection (1) may be in the public interest, it shall conduct an inquiry affording the persons or undertakings likely to be affected by such Order such opportunity of being heard and of placing before it relevant facts and material as it may deem fit.
(3) Before making any General Order under subsection (1), the Authority shall-
(a) publish in the official Gazette and in such other manner as in its opinion will bring it to the notice of all persons and undertakings likely to be affected thereby a draft of the proposed General Order together with a notice inviting suggestions or objections to be submitted before a date specified therein ;
(b) consider any objection or suggestion which may be received by it from any person or undertaking with respect to the draft ; and (c)where it deems appropriate, afford an opportunity to any such person or undertaking of being heard and of placing before it facts material in support of the objection or suggestion."
9. On an examination of sections 2, 3, 6 and 7 it would appear that in the cases of the nature with which I am dealing the Authority would assume jurisdiction on arriving at a tentative conclusion that the parties to an agreement had acted or were likely to act in a manner which unreasonably prevented, restrained or lessened competition. The second conclusion is that the Ordinance envisaged elimination of "unreasonably restrictive trade practices". Again clause (b) of subsection
(1) of section 6 lays down the conditions under which agreement between a supplier and a dealer of goods shall be deemed to be "unreasonably restrictive trade practices". This clause like other clauses of section 6(1) is subject to the riders contained in section 6(2); so that if a person could show that the agreement substantially contributes to the efficiency of the production or distribution of goods or for the providing of services or that such efficiency or promotion could not reasonably be achieved by less restrictive competition or if the rarties could show that the benefits from such efficiency or promotion clearly outweigh the adverse affect of the absence or lessening of competitions, the agreements would be protected. Section 7 is again in the nature of delegated powers which enable the Authority to consider situations arising in trade and any situation in regard to which the Authority is of the view that action is necessary in the interest of prohibition of unreasonable restriction of competition, a General Order binding affected opportunity of representing his case before the Authority prior to the passing of General Order.
10. Mr. Salim Akhtar has vehemently argued that in the face of existing provisions contained in sections 6 and 7 of the Ordinance recourse cannot be had to the general and blanket provisions of section 3 of the Ordinance for the purpose of taking action by way. Of striking down some provisions in agreements between private parties. It is conceded case that no provision of clause
(b) of section 6(1) was attracted to the instant case nor had the Authorities issued an- General Order under section 7 of the Ordinance. The learned Authority was conscious of such position at the time of hearing before him as this point had been fully agitated. The learned Authority on that aspect of the case has relied upon a judgment of the Lahore High Court in the case of S. M. Ilyas & Sons v. Monopoly Control Authority (1) and recorded its views as follows :- "From tie provisions of the Ordinance as stated above it is quite clear that section 6 (1) of the Ordinance is not the only section which lays down whether any agreement can be said to be covered by the term "unreasonably restrictive trade practice". In fact section 6(1) deals with only those "situations which are deemed to constitute unreasonably restrictive trade practices. The word "deemed" has been used a great deal in legislation and it is sometimes used to impose for the purpose of a statute, an artificial construction of a word or phrase that would not otherwise prevail. It has sometimes been used to put beyond doubt particular construction that might otherwise be uncertain. With regard to circumstances and conditions regarding agreements specified in section 6, by use of word "deemed" it has been settled that the same are the statement of an undisputable conclusion. The scope of the term "unreasonably restrictive trade practices" is however much wider than the particular situations stated in section 6(1) which only deals with particular types of agreements. The definition of the term in section 2(1)(n) of the Ordinance is not restricted to agreements alone but embraces any trade practice which prevents, restrains or otherwise lessens competition in any manner. That also explains why a separate section for registration of agreements other than those covered by section 6(1) of the Ordinance has been mentioned in section 16(1)(k) of the Ordinance. Apart from this, there is section 7 of the Ordinance according to which the Authority can deem situations other than those prescribed in section 6 to be deemed as unreasonably restrictive trade practices. It is common knowledge that there are a number c' restrictive trade practices without the existence of any agreement or example, any undertaking having monopoly
(1) PLD 1976 Lah. 834 position can fix prices which can eliminate or lessen competition. In all such instances section 7 comes to help for prescribing new situations involving unreasonably restrictive trade practices. As observed by K. M. A. Samadani, J., in the decision reported in PLD 1976 Lah. 834 it was not possible for the Legislature to carry out a survey of all restrictive trade practices likely to be resorted to in future and to classify them into the 'reasonable' and `unreasonable' categories. The learned Judge observed that the Legislature was, therefore, perfectly justified in leaving the question to be decided by a body of experts in case of each industry and each situation. The definition of "unreasonably restrictive trade practices" is very wide. By the provisions of section 6(1) and also by stating categories of agreements relating to restrictive trade practices which are registrable under section 16, the Legislature has provided a clear guideline without attempting to make a complete survey of restrictive trade practices and classifying them as unreasonable. In view of this discussion it is not possible to agree with the contention that only section 6 deals with the situation of unreasonably restrictive trade practices or that the "Authority" is not empowered to issue orders under section 12(c) of the Ordinance in cases which directly fall within the definition of section 2(1)
(n) of the Ordinance in cases which directly fall with in the definition of section 2(1)(n) of the Ordinance or are covered by General Orders issued under section 7 of the Ordinance."
' In that context the observations of the learned Judge in the case of Messrs S. M. Ilyas & Sons also need consideration. It must be stated straightaway that the learned Judge was dealing with a petition under Article 199 of the Constitution and what was challenged before the learned Judge was a General Order issued under section 7 of the Ordinance on the ground of excessive delegation. It must however be said that the learned Judge has not in that judgment specifically stated that section 3 by itself gives any powers to declare an agreement between private parties violative of law except by aid of provisions of section 6 or 7 of the Ordinance. With such observations I am in respectful agreement but I have not been able to pursuade myself to agree with the contention of Mr. A. H. A. Kazi appearing for the respondent that in a given case the Authority can despite no aid from section 6 or 7 strike down an agreement between the parties by assuming to itself full powers of both the Executive as well as the Legislature. I cannot overlook that while dealing with cases of legality or otherwise qua the agreements between citizens, the dominant consideration should be to save the transactions unless the same are patently violative of the dictates of law. The object of legislation is to achieve the result of breaking monopolies or unreasonably restrictive trade practices. The object of he Ordinance is not to interfere with B undertakings involving individual trade unless of course such undertakings violate the manifest intention of the statute. Such powers of the Authority have also to be exercised only in public interest and not otherwise. While dealing with the determination of these issues the justification underlying the terms of the agreement are of no lesser significance.
11. On an examination of the provisions of the Ordinance on cannot escape the conclusion that section 3 is couched in general word C while sections 6 and 7 clearly postulate specific matters which would attract the jurisdiction of the Authority. In cases of a nature when general an specific words are associated together in a Statute, then the general an the specific words take colour from each other so that the general wor are restricted to a sense analogous to the specific words. The significan of the general terms has to be understood as being limited by subsequen specific terms in the same Statute. I would wish to clearly stafe that th rule of ejusdem generis, when general words follow specific provisions the the general words will ordinarily be presumed to mean and will construed as restricted by the specific words so as to include only thing and persons of the same class. The general words are never used to widen the extent which those might bear while standing alone, as sue general provisions have to be related to the more definite words appearin in the Statute. The point was considered by the Privy Council in the case o Corporation of the City of Montreal v. Montreal Industrial Land Company (1). Lord Wright who delivered the judgment referred to the case of Barker v. Edgar (2) in which the situation had been examined and Lord Hobhouse had expressed as follows :- "When the Legislature has given its consent to a separate subject and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the subject provision unless it manifest that intention very clearly."
' This dictum was followed by Lord Wright. In that case, the general provisions had followed the special provisions and even in such a situation the judicial opinion was that the latter general provisions do not extend the scope of the specific provisions. If that is so then specific provisions following the general provisions in the same Statute would attract the rule with greater force. The position was also examined by Anwarul Haq, J., (as he then was) in the case of Tahira Haq v. A. H.
Khan Niazi (3) and the present Chief Justice of Pakistan had taken the view that where special provisions are made in special Statute then such special provisions exclude the operation of a general provision. No doubt, his Lordships was then considering the exclusion of general law qua specified law but the principle that is clearly deducible is that when a Statute postulates a general situation and also makes specific provision in extension of the genera provisions, the specific provisions will prevail and the general provisions can E only serve as a guide to determine whether the specific provisions ar relatable to the general provisions in the statute. The reason underlying the rule is obvious. While the general provisions contain a sort of guideline the specific provisions run only as provisions lending exactness to the objects of legislation.
12. In the instant case, one cannot lose sight of the fact that section 7 of the Ordinance also provides for a power in the Authority to pass a General Order as and when it seems to be necessary for the purpose of fulfilling the objects of the Statute. In fact these powers are in the nature of delegated powers of legislation. A considerable controversy was raised in the case of S. M. Ilyas & Sons, before Mr. Justice K. M. A. Samadani and the provisions of section 7 of the Ordinance were sought to be defeated on the ground that either such provisions indicate a total abdication of the powers of legislation by the Legislature in favour of the Authority or at least the provision was hit by the rule of excessive
(1) AIR 1932 P C 252 (2) 1898 A C 749
(3) P LD 1.968 Lath 344 delegation. Samadani, J., has dealt with that aspect of the case in a very able and detailed manner and arrived at the conclusion that section 7 was intra vires. I agree with him on that point. The question in regard to general and specific provisions in the same Ordinance then arises more prominently because if the Legislature intended the provisions of section 7 to occupy the place of specific legislation in the field it would hardly have conceded a power in favour of the Authority to pass a General Order in cases that come before it on the filing of agreements or even by its own knowledge of business dealings. It is inconcievable that the Legislature had couched in general provisions in favour of the Authority while giving the power of making a General Order to the Authority.
13. While closing the topic I cannot do better than quoting the Supreme Court of Pakistan in the case of Yousuf Ali Choudhry v. The Province of East Pakistan (1) in which case the Supreme Court was dealing with interpretation of such Statutes as encroached on rights of subject in relation to property. In such context the Supreme Court observed that such Statute which encroaches on the rights of the subject, whether as regards to person or property, are subject to a strict construction and they should be so interpreted, if possible, as to respect such rights. This Ordinance also deals with rights of citizens in matters of their business and therefore, the extent to which such rights are excluded have to be given a very strict interpretation. I have given my anxious consideration to the provisions of section 3 of the Ordinance and I have not been able to escape the conclusion that these provisions, which are only of a general nature, cannot be pressed into service specially when specific provisions exist in the same Ordinance and the Authority has the power even to issue General Orders in proper cases. Mr. A. H. Kazi was asked by me to state the number of agreements entered into by manufacturers of medicines, and he has submitted a statement in writing that 9 manufacturers had registered their agreements with the Authority. Curiously enough the Authority has not examined all these cases together so that a General Order could be passed in order to make the law more definite but instead the Authority had thought it fit to examine the agreements individually by reference to the general provisions of section 3 of the Ordinance.
14. There is still another angle from which these cases have to be considered. On a reading of the provisions of section 7 of the Ordinance it would appear that "public interest" is the dominant and paramount consideration underlying action under section 7. It is not every kind of restrictive trade practice which would attract jurisdiction of the Authority but the Authority has to act only when such action is required in public interest. This is a recognized concept in all Statutes dealing with respective trade practices. In that context a paragraph appearing in the book "Restrictive Trade Practices and Monopolies" by Lord Wilberforce (Sweet and Maxwell) 1966 Edition, deserves to be reproduced. Paragraph 506 reads as follows :- "506. Conditions under which Restrictive Practices' develop.-Before approaching a detailed classification -and analysis of restrictive trade practices it may be of use to examine briefly the question under what conditions such practices tend to develop. This is not merely of theoretical interest, for the reason that, under the Act of 1956, it is necessary to consider and to reconsider from time to time whether any particular restriction is contrary to the public
(1) PLD 1959 SC (Pak.) 467 interest. However much or little this may have been the approach followed by the common law, it is at any rate clear that since the intervention of the Legislature by means of the Act of 1956, the question whether a restriction is or is not contrary to the public interest is a relative question, relative to the economic and the social conditions prevailing at the time when the Court is called upon to examine the practice. There may be many practices which were necessary and even beneficial at the time when they were introduced which, with a change in economic climate-from an epoch of depression to one of expansion, from a time of unemployment to one of over- employment, from a period of inflation to one of deflation-can no longer be justified. It may consequently be of practical importance in applying the Act of 1956 to appreciate the conditions in which restrictions, whether generally or in particular cases, tend to grow up, as a preliminary to considering whether such conditions continue to prevail or have been superseded by conditions of a contrary tendency."
15. The last point in regard to public interest underlying action by the Authority is also of considerable significance. The learned Authority has struck down such conditions in the agreements whereby the distributors were appointed territorywise. According to the learned Authority such agreement allocating any area or market for disposal of the goods is a restriction within the meaning of the term "unreasonably restrictive trade practice" and the learned Authority further came to the conclusion that it was unreasonable and against public interest to appoint sole sellers, agents or distributors because such practice amounts to what may be termed "tie-in- sales". It is common knowledge that the manufacturers do not directly sell to the consumers. The object underlying such practice is to avoid cumbersome business as selling manufactured goods directly to consumers would on the one hand result in monopoly and on the other hand land the business in unmanageable difficulties. Channels of distribution are usually adopted in trade on the hypothesis that the goods could travel from manufacturers to selling agent or wholeseller, then to retailers and from them to the customer. Such agreements are no doubt agreements which are described as "exclusive dealings" agreements but still the question is whether such agreements should be struck down on the ground that the same lessen competition. What has to be considered is whether such agreements do not advance convenience in trade. If such convenience could be obtained by appointing distribution agents no fault could be found with it. The underlying idea is that the manufacturer should not have to face a situation of directly dealing with customers as the process would involve opening of thousands of retail shops. If the manufacturers were to directly sell to consumers the enormity of expenditure involved might turn the otherwise lucrative business into losing bargains. In the instant case, according to Mr. A. H. A. Kazi the territory wise allocation of the right of distributors tends to lessen competition. 1 do not agree with the learned counsel for more than one reason. Firstly, the manufacturers deal in production of medicines and retail prices of medicines are controlled by the Government. The distributor would only have a share from the difference between the wholeseller's price and the retail price. Secondly both the distributors in these cases deal with products of the same manufacturer and it is inconceivable that they would enter into the field of competition in respect of the goods of the same manufactuter specially when the prices are' also fixed. 1 cannot conceive of enlargement of the scope of competition if the territory-wise allocation of the right of distribution is eliminated. Even if both the distributors are appointed for entire Pakistan still they could not possibly enter into a field of competition on account of fixation of prices and the goods being of the same manufacturer. It would have been another thing if the Authority had ordered ,appointment of more distributors then two but that is not the case here. The learned Authority has referred to the provisions of clause (k) of section 16(1) of the Ordinance and pointed out that the provision provides a guideline and indication of the will of Legislature that such allocation of territory-wise distribution rights amounts to "unreasonably restrictive practice", I cannot agree with such finding of the Authority. I am, therefore, of the view that the action of the Authority could not be protected as action taken in public interest.
16. To conclude I am of the view that specific provisions and powers having been provided under sections 6 and 7 of the Ordinance recourse could not have been taken by the Authority under section 3 of the said Ordinance and I am also of the view that the action of the Authority is not relatable to public interest. On that view of the matter I allow these 3 appeals but there shall be no order as to costs.