In his reply, Shri Watel, learned counsel for the Director-General, cited the observations of the learned judges in the case of Ramlal Sao v. Tan Singh Lal Singh, AIR 1952 Nag 135, in which it was held that " the right of a party to deliver interrogatories to his opponent and get answers from him is a valuable one in conducting his cause and he should not lightly be deprived of it." He also pointed out that the proceedings before the Commission are not in the nature of advisory proceedings but are covered by the principle of public interest. The relevance of the interrogatories has, therefore, to be judged from that angle. Regulation 74 empowers the Commission to direct suo motu an investigation of the cost in respect of any class of goods, if considered necessary. The respondents cannot refuse to furnish information on cost of production, if directed to do so by the Commission. Adverting to the relevant provisions in the Evidence Act, he pointed out that information on cost of production cannot be regarded as privileged or confidential and withheld on that account. In order to prove the charge of concert it becomes extremely important to show that the prices quoted by the various companies have no relationship to the actual cost of production. The cost data are, therefore, of immediate and direct relevance to the issue under consideration.
Monopolies and Restrictive Trade Practices Commission
Association Of State Road ... vs Premier Tyres Ltd. And Ors. on 9 July, 1986
Equivalent citations: 1988 64 CompCas 868 NULL
Bench: S Manchanda, M Satyapal
1. During the course of proceedings in RTPE No. 78 of 1984 in the matter of Association of State Road Transport Undertakings v. Premier Tyres, the Director-General sought, with the leave of the Commission, replies to interrogatories as contained in annexure I and discovery of documents as mentioned in annexure II from the respondents. Replies to interrogatories and affidavit of documents have been filed by respondents Nos. 1 to 7, 9 and 10. Respondent No. 8 has stated that it is not carrying on any business and, therefore, does not propose to file replies to interrogatories, etc. The Commission did not see any justification for non-compliance of direction given to respondent No.
8. In view of this and the continued absence of respondent No. 8 in subsequent proceedings, the allegations against respondent No. 8 are to be taken to have been not controverted. In fact, he has been set ex parte in subsequent proceedings.
2. The replies furnished by the respondents were, however, not found satisfactory by the Director-General. In the circumstances, we have heard arguments on behalf of the Director-General, complainants and the respondents on the relevance of the interrogatories and the documents sought to be discovered and of the adequacy or otherwise of the replies furnished.
3. The information sought by interrogatory No. 1 has been furnished by all the respondents. In regard to interrogatory No. 2, respondent No. 1 has stated that the exact break-up of prices in terms of cost of production and margin of profit/loss on each of the dates in respect of the tyres intended to be purchased by the complainants has not been worked out for practical reasons and as such could not be given. It is, however, the respondent's estimate that it would have incurred heavy losses if the supplies were made at the original and revised quoted prices. Other respondents who have replied to the interrogatories have generally objected to this interrogatory on the ground that it is irrelevant or immaterial to the subject-matter of the enquiry and is in the nature of fishing and roving enquiry and involves collection and tabulation of information which cannot be sought to be done by way of an interrogatory. Respondent No. 5 has also stated that it is not possible to give the exact break-up of prices in terms of cost of production and margin of profit on each of the dates when offers were made by the respondent to the complainants.
4. Coming to interrogatory No. 3, respondent No. 1 has furnished information on production and stocks as in January/February, 1984, to the extent considered relevant by it. Respondent No. 5 has furnished data on production and stocks held by the respondent at their works and depots throughout India during the period January, 1984, to March, 1984. All other respondents who have replied to the interrogatories have objected to the interrogatory as being irrelevant. Further, it is submitted that it is not possible to compile the required data in view of the fact that there is a continuity of production, despatch of tyres to various selling outlets, receipts of tyres at the various outlets and sale from the said outlets as well as from the factory. No separate record is maintained of supplies made to APSRTC or RSRTC. In any event, the interrogatory is of a roving and fishing nature and the respondents cannot be asked to compile data by way of an interrogatory.
5. So far as the discovery of documents is concerned, the position is as follows : with respect to serial No. 1 of appendix II, all the respondents who have replied have agreed to provide for inspection of the documents pertaining to quotations/offers made in response to tender enquiries floated by APSRTC and RSRTC during the relevant periods/dates. In response to serial No. 2 of the affidavit of documents sought by the Director-General, respondent No. 1 has stated that no exact break-up of cost of production and selling price against the said tenders has been worked out and as such could not be given, but has agreed to provide the company's published accounts for the relevant years. Respondent No. 5 has also expressed inablity to produce cost statements of cost of production and selling price of the tyres offered by it against the said tenders and has considered that the cost statements in any case are irrelevant and immaterial for the purpose of the enquiry. Respondent No. 7 has stated that there is no definite statement of cost of production and selling price of the tyres but voluminous ledgers and accounts and books are maintained at various points. All other respondents, who have replied, have stated that no separate statements of cost of production are maintained in respect of tyres offered against the two tenders floated by the APSRTC and RSRTC ; further, these documents are irrelevant for the purpose of the enquiry. Coming to serial No. 3, respondent No. 1 and respondent No. 5 have agreed to produce the stock register of tyres for inspection. All other respondents who have replied have taken the view that the documents sought to be produced are irrelevant or are not available in the form in which they are required to be produced.
6. From a perusal of the replies, the main contentious issue, therefore, revolves around interrogatories Nos. 2 and 3 of annexure I and documents at serial Nos. 2 and 3 of annexure II.
7. On behalf of the complainants, learned counsel, Dr. Singhvi, argued that there was no substance in the plea advanced by the respondents in their replies that the interrogatories Nos. 2 and 3 and documents at serial Nos. 2 and 3 are irrelevant and that these are in the nature of fishing and roving enquiries. The main allegation, he pointed out, is of concerted action by the respondents by way of significant increase in their rates to an identical or near identical level of prices and of limitation or reduction in the quantity of tyres offered for sale. A decision to increase the prices and to reduce the quantities of tyres was taken simultaneously by the respondents overnight. The revised prices offered were, therefore, not cost-based but concert-based. As such, information relating to the cost of production sought to be obtained through interrogatory No. 2 becomes a material factor in proving the allegation of concert or collusion among the respondents. According to learned counsel, it is precisely for this reason that the respondents are unwilling to provide this information.
8. Dr. Singhvi also rebutted the argument advanced by the respondents that detailed information on cost of production of specific varieties of tyres is not maintained or readily available and therefore the collection and collation of such information will take considerable time. He pointed out that the tyre companies are required to maintain information on cost of production for being supplied to Government Departments including the Bureau of Industrial Costs and Prices. In any case, large and organised companies do, in the normal course of business, maintain cost statements and it was inconceivable that such information is not available readily with them. The tyre companies, on their own admission, have stated that the prices offered by them to the State Road Transport Corporations would have resulted in a loss to them, implying thereby that they have knowledge of the cost of production. In the circumstances, the argument that considerable effort will have to be made for collection and collation of information is not sustainable.
9. Coming to interrogatory No. 3, learned counsel argued that this information was very relevant in the context of a sudden diminution and limitation in the offer of supply of tyres overnight. Information on the stock position and production data is of material significance to substantiate whether or not there has been a deliberate and concerted attempt to withhold supplies.
10. Shri Watel, learned counsel for the Director-General, endorsed the arguments advanced by learned counsel for the complainants in regard to the relevance of the information sought under interrogatories Nos. 2 and 3. Further, he drew attention to the Cost Accounting Records (Tyres and Tubes) Rules, 1967, under the Companies Act, 1956, under which the tyre companies are required to maintain proper books of account containing, inter alia, the particulars of the cost of manufacture of tyres and tubes in types and sizes and underlined the point that the absence of such data on readily available basis as claimed by the respondents was totally incorrect.
11. Learned counsel, Shri Ashok Desai, appearing on behalf of respondent No. 7, Dunlop India Limited, argued that interrogatories relating to the cost of production were irrelevant to the matter under enquiry. As the allegation was one of collusion, the relevant issue was whether there has been a meeting of minds among the respondents ; this issue has nothing to do with the cost of production of tyres. Apart from the question of relevance, the interrogatories do not satisfy the principles governing the permissible nature of interrogatories for the following reasons :
(i) The information sought is of a confidential character. The cost structure has a considerable bearing on the competitive position in the market and therefore cost data are closely guarded commercial secrets, the revelation of which in public can do considerable damage to the companies. This is particularly so in the context of the present enquiry which includes a number of competing tyre manufacturers whose legitimate commercial interests will be vastly prejudiced by the disclosure of the cost structure to each other.
(ii) The discovery of documents can be sought only as they exist. The break-up of the cost of production or sale price on particular dates is not maintained by the respondent. The respondent cannot be asked to generate new documents by collecting and collating information.
(iii) The main object of seeking information through interrogatories and discovery of documents is to save time by avoiding the need for examination of witnesses. However, in seeking such information, the inconvenience caused to the respondent should not be oppressive. In other words, the advantage/disadvantage to both sides should be reasonably well balanced.
12. Shri S.S. Kumar, learned counsel appearing for respondent No. 1, pointed out that interrogatories Nos. 1 and 3 have been answered by respondent No. 1. Interrogatory No. 2 has also been answered to the extent possible. He cited instances of past decisions about the relevance of interrogatories and pointed out that interrogatories have to be directly relevant to the matter under consideration. As the issue involved is not of predatory pricing, cost calculations are not of direct relevance to the allegations.
13. In his reply, Shri Watel, learned counsel for the Director-General, cited the observations of the learned judges in the case of Ramlal Sao v. Tan Singh Lal Singh, AIR 1952 Nag 135, in which it was held that " the right of a party to deliver interrogatories to his opponent and get answers from him is a valuable one in conducting his cause and he should not lightly be deprived of it." He also pointed out that the proceedings before the Commission are not in the nature of advisory proceedings but are covered by the principle of public interest. The relevance of the interrogatories has, therefore, to be judged from that angle. Regulation 74 empowers the Commission to direct suo motu an investigation of the cost in respect of any class of goods, if considered necessary. The respondents cannot refuse to furnish information on cost of production, if directed to do so by the Commission. Adverting to the relevant provisions in the Evidence Act, he pointed out that information on cost of production cannot be regarded as privileged or confidential and withheld on that account. In order to prove the charge of concert it becomes extremely important to show that the prices quoted by the various companies have no relationship to the actual cost of production. The cost data are, therefore, of immediate and direct relevance to the issue under consideration.
14. We have given careful thought to the arguments advanced by learned counsel for the parties. Our conclusions and directions are as follows :
(1) Interrogatory No. 1 :
As replies have been furnished by the respondents, there is no need to give any direction.
(2) Interrogatory No. 2 :
We find that it will be difficult to provide a meaningful reply to the interrogatory in the form in which it is framed by the Director-General. This is so because apart from the difference in the methodologies adopted for working out the cost of production from company to company, costs are not normally worked out for different products on a day-to-day basis. In the premise, it will be difficult to provide information on the cost of production and margin of profit of each variety of tyres on particular dates as sought in interrogatory No. 2.
At the same time, the tyre companies are required to keep information on the cost of production of tyres and tubes, type-wise and size-wise, on a standard pattern in accordance with the provisions of the Cost Accounting Records (Tyres and Tubes) Rules, 1967. While data on cost of production on particular dates may not be readily available, it should be possible for the respondents to provide information on cost of production of the appropriate varieties of tyres for the relevant periods as maintained by them.
15. The question of relevancy and confidentiality of information will still need to be considered. In matters involving concerted action as alleged it is often very difficult to find direct evidence to establish a meeting of minds ; concerted action is generally resorted to under conditions of great secrecy. Therefore, it is often possible to adduce only indirect evidence. If it were possible to show that there were significant differences in the cost of production and as yet there was a close identity in the prices quoted by the respondents, it may be an indirect evidence to indicate a possible meeting of minds among the respondents. To this extent, information sought in interrogatory No. 2 can be regarded as relevant to the matter under consideration. The further question is whether the disclosure of this information will injure the competitive position of the respondents and on this ground it should not be sought to be divulged. The published annual reports, including the balance-sheets and profit and loss account statements of companies, generally provide considerable information to have a broad, appreciation of the overall costs of production and profits of the company. This is, however, insufficient to arrive at production costs of every type and size of the products separately. Such information is generally not published, and often withheld from competitors. Even when such information is furnished to the Government, it is treated on a confidential basis. Unless there are compelling reasons to the contrary, we consider that the practices generally in vogue in the matter of disclosing information on cost data should be respected.
16. Having regard to these considerations, we direct the respondents to furnish information on a confidential basis in a sealed cover to the Commission on production costs under major heads on the lines of pro forma "C" and pro forma "D" of Schedule II of the Cost Accounting Records (Tyres and Tubes) Rules, 1967, with respect to the classes/types of tyres which were offered to the APSRTC and RSRTC for the relevant periods covered by the tenders/offers. The information may pertain to monthly, quarterly or any other such periods for which data is normally maintained by the respondents, the relevant periods being those in which the dates of the tenders/offers fall. As this data is already available with the respondents, it should not present any fresh effort of collation and compilation of data.
17. While this procedure will enable the Commission to analyse the data and draw its own conclusions, the confidentiality of the information will be maintained.
Interrogatory No. 3 :
The information relating to production and stocks held by the respondents is important, in our view, for establishing the availability of tyres in the context of the reduction in supplies offered by the respondents to APSRTC and RSRTC on the respective dates. It is, however, accepted that the information on a day-to-day basis of stocks and production may not bs readily available. It has been further submitted that the collection of information on stocks held at various points may be cumbersome. If information cannot be furnished exactly on the basis indicated in the interrogatory, it is directed that the following information be furnished :
1. Production during January, 1984,
2. Production during February, 1984,
3. Production during March, 1984,
4. Stocks as on 31-12-1983,
5. Stocks as on 31-1-1984,
6. Stocks as on 29-2-1984, and
7. Stocks as on 31-3-1984.
This information should pertain to the classes/types of tyres tendered/offered. As far as stocks are concerned, information on stocks held at the factory and principal depots/agents as on the aforesaid dates shall be furnished. The information shall, as far as possible, be on a comparable basis.
Documents :
1. We direct that the documents sought to be discovered are relevant and should be furnished, if available, by the respondents for inspection by the Director-General ;
2. As statements on cost of production are directed to be furnished to the Commission in reply to interrogatory No. 2, these documents need not be provided for inspection at this stage.
3. As information on stocks and production of different varieties of tyres are required to be furnished, relevant documents corresponding to such information shall be made available for inspection, if necessary.
18. This disposes of the issues raised in the context of replies furnished by the respondents to the interrogatories and request for discovery of documents under regulation 74 of the Monopolies and Restrictive Trade Practices Commission Regulations, 1974.
19. Pronounced this day in the open court.
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