A stipulation in a contract intended for the advancement of trade shall not be regarded as being in restraint of trade.

Mr. Justice C.M. Nayar, Chairman—The Director General (Investigation and Registration) has filed an application under Section 10(1)(iii) of the Act wherein it is contended that the respondent is a company registered under the Companies Act, 1956 which is inter alia engaged in the business of manufacturing, bottling and sale of beverages under the brand name of Coca Cola, Fanta, Gold Spot, Limca, Thumpsup, Citra, Kismet, Bisleri Club Soda, etc. The subject matter of the present proceedings relates to Clause-3 of the Dealership Agreement which reads as below :

“The wholesale dealer agrees to keep for sale only the products manufactured by the company and shall not keep or store any other similar goods for sale. The wholesale dealer further agrees not to create any sub dealer unless authorised by the company.”

2. It has been alleged in the DG’s application that in terms of this clause the dealer is prevented from taking up business activity relating to any other similar beverages except those manufactured by the respondent and is thus prevented to deal with the similar products of competitors which restricts competition and is a deemed restrictive trade practice within the meaning of Sub-clauses (a) and (c) of Section 33(1) of the Act.

3. We have considered the impugned clause in the agreement as also the submissions made by the respective learned Counsel of the parties. It has been urged before us that the aforesaid stipulation in Clause-3 is not intended to be a restraint in trade but is intended for advancement of trade. Our attention has been drawn to the Commission’s order passed in RTP Enquiry Nos. 89 of 2000 and 90 of 2000. The aforesaid order of the Commission was passed in the light of the order of the Hon’ble Supreme Court in the case of Gujarat Bottling Co. Ltd. v. Coca Cola Company, reported in AIR (1995) Supreme Court, page 2372, wherein it has been observed as under :

“a stipulation in a contract which is intended for advancement of trade shall not be regarded as being in restraint of trade”. It has been further held therein that “there is a growing trend to regulate distribution of goods and services through franchise agreements providing for grant of franchise by the franchisor on certain terms and conditions to the franchisee. Such agreements often incorporate a condition that the franchisee shall not deal with competing goods. Such a condition restricting the right of the franchisee to deal with competing goods is for facilitating the distribution of the goods of the franchisor and it cannot be regarded as in restraint of trade.”

4. In view of the above, we do not find that the respondent, is in any manner, guilty of adoption of or indulgence in restrictive trade practices within the meaning of Sections 33(1)(a) and (c) of the Act. Accordingly, the enquiry is dropped and the Notice of Enquiry dated 21.9.1998 is hereby discharged, with no order as to costs.

N.O.E. discharged.