Chemists and Druggists Assn. vs. CCI & Ors.

COMPETITION APPELLATE TRIBUNAL
NEW DELHI
Appeal Nos. 21/2014 to 28/2014 and IA Nos. 31/2014 to 46/2014
[Under Section 53-B of the Competition Act, 2002 against order dated 05.02.2014
passed by the Competition Commission of India in Case No. 60/2012]
CORAM
Honble Shri. Justice G.S. Singhvi

Chairman
Honble Shri Rajeev Kher

Member
In the matter of:
1. Appeal No. 21/2014 and I.A. Nos. 31 & 32 of 2014
Chemists & Druggists Association

Through its President
Shri Chaman Lal Kakkar,
National Drug House, Near Amar Hospital,
Near Railway Bridge, Ferozepur City,
Punjab 152 002 Appellant
Versus
1. Competition Commission of India

Hindustan Times House,
3rd, 4th and 7th Floor,
18-20, Kasturba Gandhi Marg,
New Delhi 110 001.
2. M/s. Arora Medical Hall

Through Partner, Shri Rajesh Arora,
Bazar Krishna Sudama,
Mohalla Peeran Wali,
Ferozepur
Punjab 152 002. Respondents
2. Appeal No. 22/2014 and I.A. Nos. 32 and 33 of 2014
Shri Gurpreet Singh,

Public Relation Officer,
M/s. G.S. Medicine Traders,
7, Preet Nagar, Ferozepur City,
Versus
New Delhi 110 001.
2

Ferozepur
Shri H.C. Gupta,

Vice President,
C/o M/s. H.C. Medical Agencies,
Bazar No. 5, Ferozepur Cantt.,
Versus

New Delhi 110 001.

Ferozepur
Shri A.K. Gupta,

Vice President,
C/o M/s. A.K. Medical Agencies,
# 81, Bazar No. 4, Ferozepur Cantt.,
Versus

New Delhi 110 001.

Ferozepur
3
Shri Shyam Lal Kakkar,

Secretary,
C/o M/s. Rajesh Medical Agencies,
Near Railway Bridge, Ferozepur (City),
Punjab Appellant
Versus

New Delhi 110 001.
2. M/s. Arora Medical Hall,

Ferozepur
Shri R.S. Bakshi,

Joint Secretary,
C/o M/s. Bakson Pharma,
Main Bazar, Ferozepur Cantt.,
Versus

New Delhi 110 001.

Ferozepur
Shri Chaman Lal Kakkar,

President,
C/o M/s. National Drug House,
Near Railway Bridge, Ferozepur (City),
Punjab Appellant
4
Versus

New Delhi 110 001.

Ferozepur
Shri Ashwini Garg,

Treasurer,
C/o M/s. Shiva Medical Stores,
Near Amar Talkies, Ferozepur (Cantt.),
Versus

New Delhi 110 001.

Ferozepur
Appearances : Shri Gauri Shankar Saikumar, Shri Sandeep Bajaj, Shri

Siddharth Jain and Ms. Soumya Saikumar, Advocates for
the Appellants.
Ms. Soni Singh and Shri Pramod Soren, Advocates for

Respondent No.1.
Per Chairman
ORDER
The questions which arise for consideration in these appeals filed against
order dated 05.02.2014 passed by the Competition Commission of India (for
short, the Commission) in Case No. 60 of 2012 titled M/s. Arora Medical Hall,
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Ferozepur versus Chemists and Druggists Association, Ferozepur and seven
others are whether the practice allegedly followed by Chemists and Druggists
Association, Ferozepur (appellant in Appeal No. 21 of 2014) (hereinafter referred
to as, the Association) making it mandatory for anyone desirous of taking up
distributorship of medicines of any pharmaceutical company in Ferozepur to
obtain No Objection Certificate (NOC) and Letter of Credit (LOC) on payment of
Rs. 2100/- per company is violative of Section 3(3)(b) read with Section 3(1) of
the Competition Act, 2002 (for short, the Act), whether the resolution dated
26.05.2012 passed by the Association to boycott Respondent No. 2 - M/s. Arora
Medical Hall and to penalise any retailer purchasing medicine from the said
respondent is anti-competitive and violative of Sections 3(3)(b) of the Act and
whether the penalty imposed by the Commission under Section 27 of the Act is
legally sustainable.
2. The Indian Drug Manufacturers Association (IDMA) and Organisation of
Pharmaceuticals Producers of India (OPPI) are the pan India associations of drug
manufacturers, whereas All India Organisation of Chemists and Druggists
(AIOCD) is the apex association of wholesalers and retailers of drugs at all India
level. The industry norms relating to various commercial aspects get determined
collectively through continuous interaction between these apex associations.
There are various state level and district level associations, who look forwards
the apex association for guidance and follow the rules, regulations and various
guidelines issued by the aforesaid apex association to bring uniformity and
standardisation in the pharmaceutical industry. The pharmaceutical industry in
India is regulated by the Drugs and Cosmetics Act, 1940 (DCA) and the Drug and
Cosmetics Rules (DCR) made thereunder. Under the provisions of the DCA, the
office of the Drug Controller of India (DCI) is responsible for enforcing the
provisions of the law. At the field level, enforcement is done by the State
Governments through their Food and Drug Administration offices.

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3. The spread of various district level associations across India is essential
to harmonize the vertical relationships between the pharmaceutical companies,
the wholesalers and the retailers, as the interests of the said parties are
interlinked and sometimes overlapping. In fact, the chemists and druggists
associations at the district level play a vital role in streamlining the distribution
process and encourage healthy competition at different stages or levels of the
production chain or provision of services, in their respective regions.
4. The Association is an unregistered body of chemists and druggists
operating in District Ferozepur, Punjab. It is affiliated to Punjab Chemists
Association (hereinafter referred to as PCA), which, in turn, is affiliated to All
India Organisation of Chemists and Druggists (hereinafter referred to as
AIOCD). The Association functions as per the rules, regulations and guidelines
framed by the PCA and AIOCD. Though the membership of the Association is
not mandatory, more than 200 chemists and druggists (wholesalers and retailers)
operating in the district are its members. Even those who are not members of
the Association are doing their business of chemists and druggists in the district.
The Association has not framed rules or regulations or issued guidelines of its
own to its members for conducting their business and its main function is to
safeguard the interest of wholesalers and retailers against any discriminatory or
unfair practice of pharmaceutical companies. S/Shri Gurpreet Singh, H.C. Gupta,
A.K. Gupta, Shyam Lal Kakkar, R.S. Bakshi, Chaman Lal Kakkar and Ashwini
Garg, (appellants in Appeal Nos.22 to 28 of 2014) are office-bearers of the
Association.
5. Respondent No.2 is the largest wholesale dealer of the drugs
manufactured by several companies including Ranbaxy, Abbott Solvey, Abbott
Piramal, Abbott India, Ozone, Sun Pharma, Alkem, Alkem Gencare, Hetero,
Johnson & Johnson, Glenmarks Gracewel, Pfizer, Pfizer Pharmacia, Cutic,
Leeford, Canvarzys, Inuida, Apex Labs, Organon, MSD, Fullford, Modi Mundi,
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Biocon, Macleods etc. Its area of operation is in and around District Ferozepur,
Punjab.
6. Respondent No. 2 was a member of the Association till June, 2010. In
2005, the Association initiated disciplinary action against Respondent No. 2
because it was misusing its monopoly position in the district. Letter dated
16.07.2005 was also written by the Association to some pharmaceutical
companies about the highhanded attitude of Respondent No. 2 towards the
retailers and it was requested that they may consider appointing more
wholesalers for covering about 300 retailers operating in Ferozepur district. After
some time, membership of Respondent No. 2 was suspended. That action was
revoked after Respondent No. 2 tendered apology vide letter dated 06.10.2007.
7. In 2010, several retailers complained that Respondent No. 2 was indulging
in fraudulent billing by manipulating computer software and other malpractices.
Thereupon, the Association issued a notice to Respondent No. 2 to explain its
position. However, he did not respond to the notice. Therefore, by an order dated
09.06.2010, the Association terminated the membership of Respondent No. 2.
That decision has become final because the same is not shown to have been
challenged by Respondent No.2 before any court of law or other competent
adjudicatory body.
8. Notwithstanding the termination of its membership, Respondent No. 2
continued to abuse its dominant position. The retailers repeatedly complained
that Respondent No. 2 was not deducting the price of expired medicines from the
total bills and was overcharging them. In the backdrop of these complaints, a
meeting of the general body of the Association was convened on 23.05.2012 for
considering the allegations levelled against Respondent No. 2. The meeting was
attended by 79 members. After discussing the complaints, the Association
passed the following resolution :

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During the course of meeting retailers showed bills where cheating
was done while calculating value of expired medicines. Retailers
were very much annoyed with the scandal of Arora Medical Hall.
They shouted to stop dealing (with sic) M/s. Arora Medical Hall till
the adjusting (sic adjustment) of cheated amount of all bills of
retailers. Now I being Secretary of Chemists Association Ferozepur
asked retailer to decide suitably so that cheating is adjusted,
instead of boycott. Two guests who came from Fazilka District (1)
Mr. Sanjiv Kumar Sanjiwani Medicos (2) Mr. Ashok Kumar Chhabra
(Kdi) President District Fazilka suggested to all retailers to do not
take any harsh decision but give Arora Medical at least 2 days to
explain his status about the cheating done by him. He should
contact President Mr. Chaman Lal Kakkar Ferozepur within two (2)
days. If he do not turn up to contact President then three member
committee can take action for non-cooperation. According non-
cooperation was declared. Members were asked to make payment
of all previous bills to M/s. Arora Medical Hall. This was the whole
episode of M/s. Arora Medical Hall, Ferozepur versus Retail
Chemists who were cheated.
Sd/-
Shyam Lal, Secretary
9. Although, the aforesaid resolution envisaged that if Respondent No.2 does
not turn up to contact the President, then a three Member Committee may take
action for non-cooperation but Respondent No. 2 appears to have defied the
same. Therefore, an extraordinary meeting of the Executive Committee was held
on 26.05.2012 and it was resolved that the members should not purchase the
medicines from Respondent No. 2. It was further resolved that if any member
defy the ban then it will have to pay a fine of Rs.11,000/- for each violation. In
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furtherance of that resolution, the President of the Association issued circular
dated 27.05.2012, which reads as under :
Ref. No Dated : 27.05.2012

Dear Member,
RE : Unity is Strength
Strength is Survival
We are pertinent to mention here that the subject matter
speaks volumes of Strength, we have in our association, you had
recently exhibited in our General Body Meeting held on 23rd instant.
I salute each and every member of our well knot association who
have stood as one unit on one platform. I feel real pride to be one
amongst you and lead this proud family of our beloved chemists
brothers. Hats off to you once again. I would recall and request you
all to show your strength on a common cause Out You are Once
for all. It is scandalous world. No one has right to lead scandalous
life. Isnt it? Do you agree with me. We have to strike this panic and
the decision is yours. We are unanimous in one voice. In order to
meet this serious eventuality, an extraordinary meeting of the
executive under the chair of President was held on 26-05-2012.
Following decisions were taken for the Association and it was
decided that these decisions are implemented most seriously right
from the date of this circular by each and every chemist.
1. It was decided in the General Body Meeting held on 23-05-2012
to give M/s Arora Medical Hall time for 2-3 days to clear his
position before taking further action. He has not responded to
our call so far.

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2. Absolute Boycott with M/s. Arora Medical Hall, Ferozepur City.
He is not member of our Association and gone to the extent to
compromise our dignity in scandals.
3. Stop purchasing goods from him immediately. No more
dealings with him with immediate effect. Any chemist defying
this decision will be fined Rs.11,000/-.
4. Till further orders, you are requested not to make him pending
payments after you check the bills.
5. All the whole-sellers are further requested to stop dealings with
the particular retailer who continue purchasing goods from M/s.
Arora Medical Hall.
I hope it makes you all clear. I always look forward for your whole
hearted cooperation.
Cordially yours
(Chaman Lal Kakkar)

President
(Since the circular has been reproduced ad verbatim from the paper
book of the Appeal the mistakes contained therein have got
repeated hereinabove).
10. Respondent No. 2 challenged the aforementioned resolution and circular
by filing civil and criminal cases, the details of which are given below :
i) Civil Suit No. 311/2012 filed in the Court of Civil Judge (Senior
Division), Ferozepur for award of damages to the tune of Rs.5 lacs.
ii) Civil Suit No.689/2012 filed in the Court of Civil Judge (Senior
Division), Ferozepur for grant of a declaration that resolution dated
26.05.2012 and circular letter dated 27.05.2012 issued by the

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Association were wrong, illegal, null and void, ineffective and
inoperative.
iii) Criminal proceedings under Section 499 and 500 of Indian Penal
Code were filed for defamation.
(In both the suits, Respondent No. 2 impleaded the appellants
herein as party defendants).
11. Some of the members (retailers) of the Association also filed First
Information Report dated 01.09.2012 against Respondent No. 2 at Police Station
Ferozepur City under Section 420 of the Indian Penal Code read with Section
66(1) of the Information Technology Act, 2000. The allegation levelled by the
retailers was that Respondent No. 2 had issued inflated computerised bills
without deducting the amount of expired drugs and medicines returned by them
and this was despite the fact that the billing software automatically deducts the
amount for expired medicines returned to Respondent No. 2.
12. In paragraphs 3, 4, 6, 7 and 8 of the suit filed for declaration, Respondent
No. 2 made the following averments :
3. That the defendant association circulated a letter in the
market with malice and with a plan to defame the business
carried on by the plaintiff firm on 22.5.2012 vide which a
general body meeting was called for 23.5.2012 at J.B. Resort
Ferozepur Cantt at 8 PM on the following Agenda :
i) Scandal of M/s Arora Medical Hall
ii) Misappropriation while calculation in the bills.
The plaintiff firm through its partners have not called in
the said meeting by the defendants.

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4. That the defendant association wrongly and illegally passed
resolution on 26.5.2012 circulated on 27.5.2012 under which
the defendants wrongly and illegally decided and bycott the
plaintiff firm and further asked others to stop dealings with the
plaintiff firm with immediate effect. The defendants further
instructed the dealers to stop dealings and if anybody found
defined the decision of the defendant association, he will be
fined Rs. 11000/-. The defendants further wrongly and
illegally decided and requested other dealers not to make
pending payments to the plaintiff firm and other whole salers
were also requested to stop dealings with the plaintiff firm.
6. That the plaintiff firm deals in medicines and they very well
understand the role of whole saler in the society. The plaintiff
firm have all the qualities of good businessman and is
respected by all, who came in contact with them either as
retailers or as customers and from the society. Since the
plaintiff is having flourishing business and his annual turnover
is approximately Rs. 5 Crores while the defendants being
competitors always feel jealous of it and always expect that
the plaintiff should pay money to the defendant association.
7. That the defendants in the meeting as well as in the resolution
referred above had intentionally used derogatory and
defamatory remarks against the plaintiff firm and by using
defamatory words in the above said meeting as well as
published in the resolution, which intended to be read, heard,
published, imputation concerning the plaintiff firm with the
intention to harm and having reason to believe that such
imputations will harm and reputation of the plaintiff firm, the

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defendants had defamed the plaintiff firm wrongly and illegally
and as such the defendant association is liable to compensate
the plaintiff firm besides to tender unconditional apology. The
plaintiff firm is also entitled to sue the defendants under
criminal law and will also retain their right to challenge the
abovesaid resolution.
8. That the said false imputations against the business dealings
of the plaintiff firm were made by the defendants, which had
lowered the moral and intellect character of the plaintiff firm in
the estimation of others and thus the plaintiff firm is entitled to
claim damages from the defendants. The plaintiff firm have
suffered a great loss to their business and reputation, which
cannot be calculated in terms of money and the false
allegations against the plaintiff firm had caused huge mental
stress, stain and torture to them. The reputation of the plaintiff
firm has been lowered in the estimation of others by serving
agenda, holding meeting and further by passing and serving
resolution on false facts. Several retailers and whole salers
also came to know about the said resolution and agenda and
the publication of the facts alleged in the said resolution. The
reputation of the plaintiff firm in the eyes of office staff,
customers, retailers as well as whole salers including doctors
etc. have been lowered in their estimation, which gave a
cause of action to the plaintiff firm against the defendants for
levelling false allegations.
The prayer made in that suit was :
Hence, it is prayed that a decree of declaration to the effect
that the resolution dated 26.5.2012 circulated vide letter dated

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27.5.2012 passed by defendants whereby they have wrongly and
illegally bycotted the dealings with the plaintiff firm and defamed the
plaintiff firm in the estimation of others is wrong, illegal, null and void,
ineffective and inoperative on the rights of the plaintiff firm and is
liable to be set aside;
With consequential relief of mandatory injunction directing the
defendants to withdraw the said resolution and to tender
unconditional apology on the basis of oral and documentary
evidence may kindly be passed in favour of the plaintiff and against
the defendants with costs of the suit.
13. In the suit filed for damages, Respondent No. 2 repeated the averments
made in the suit for declaration and prayed for award of damages to the tune of
Rs. 5 Lacs with costs along with pendente lite and future interest @ 12% per
annum till realization.
14. In Civil Suit No. 311-1 of 2012, filed for award of damages, learned
Additional Civil Judge (Senior Division), Ferozepur framed the following issues:
1. Whether the defendants defamed the plaintiff? OPP
2. If Issue No.1 proved, whether the plaintiffs are entitled to
damages as prayed for? OPP
3. Whether the suit of the plaintiff is barred under provisions of
Order 2 rule 2 CPC? OPD
4. Whether the suit of the plaintiff is bad for misjoinder and non-
joinder of necessary parties? OPD
5. Relief.
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In Civil Suit No. 689-1/2012 filed for declaring resolution dated
26.05.2010 circulated dated 27.05.2012 as nullity, the learned Civil
Judge (Senior Division), Ferozepur framed the following issues:
1. Whether the plaintiff is entitled for declaration as prayed for? OPP
2. Whether the plaintiff is entitled to the consequential relief of
mandatory injunction against defendants? OPP
3. Whether the plaintiff has got no locus standi to file the present suit?
OPD
4. Whether the suit is not maintainable in the present form? OPD
5. Relief.
15. Both the suits were tried by the Additional Civil Judge (Senior Division),
Ferozepur and were dismissed by common judgment dated 12.05.2015,
paragraphs 12 to 19 of which are reproduced below :
12. I have heard learned counsel for the parties and have gone
through the file carefully. My findings on the aforesaid issues are
as under :-
Issue in Case NO.311-1 of 02.06.2012
ISSUE NO.1. Whether the defendants defamed the

plaintiff? OPP
ISSUE NO.2. If issue No.1 proved, whether the plaintiffs are
Entitled to damages as prayed for?
Issue in Case No.689-1 of 2.06.2012
ISSUE NO.1 Whether the plaintiffs is entitled for declaration
as prayed for?
ISSUE NO.2 Whether the plaintiff is entitled to the
Consequential relief of mandatory injunction
Against defendants?
13. Issues No.1 and 2 of both the suits are taken up together
being interlinked and to avoid any repetition in discussion. To prove

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all these issues the onus was heavily upon the plaintiff. Plaintiff
Rajesh Arora himself appeared into the witness box as PW1 in
support of his own case. He examined Amandeep Singh son of
Bhagwan Singh as PW2 (though he has not come present for his
cross-examination). The plaintiff further examined Sajjan Kumar
Grover son of Udey Shanker Grover as PW3. No other witness
examined by the plaintiff.
14. To rebut the contention of the plaintiff, defendant R.S. Bakshi
himself stepped into the witness box as DW1, whose statement is
corroborated by Sham Lal Kakkar son of Diwan Chand who
appeared as DW2. No other witness examined by the defendants.
15. After hearing the rival contentions of both the counsel for the
parties, I am of the considered opinion that present suit is for decree
of recovery of Rs.5 lacs as damages along with interests on
account of lowering the reputation of the plaintiff in estimation of
others and loss of business. If the plaintiff succeeds to prove that
with the act of defendants he has been defamed and his reputation
has been lowered down, in that event only the plaintiff is entitled for
the recovery as prayed for. The plaintiff is also burdened with the
onus to be discharged that defendants have wrongly and illegally
boycotted the dealings with the plaintiff firm vide resolution dated
26.05.2010 circulated vide letter dated 27.05.2012, therefore,
defendants are liable to be withdraw the said resolution and to
tender unconditional apology. From the entire evidence on the
record I have come to the conclusion that plaintiffs have miserably
failed to discharge this onus that by circulating any resolution by
which the defendants boycotted the dealings with the plaintiffs, the
reputation of the plaintiff in estimation of others have been lowered

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down and there was loss in their business. The cross-examination
of plaintiff clinches the entire matter and helps the court to reach at
the just conclusion of the case. It comes out that plaintiff firm
remained the member of defendant association since the year 1989
to 2010 i.e. from the year when the plaintiff firm started its initial
business in the year 1989. Admittedly the plaintiff firm was expelled
from the membership of association by the defendants and that
expulsion order never challenged by the plaintiffs till today. In these
circumstances as the plaintiff remained no member of the
defendant association, his suit becomes infructuous. The plaintiff
firm is no more member of the defendant association after 2010 and
present suit is filed in the year 2010 without submitting any
representation to the defendant association to reconsider his
expulsion.
16. It is to be seen even otherwise it is not proved on the record
that with the circulation of any resolution by the defendants the
reputation of the plaintiffs has been lowered down in the eyes of
others. Saajan Kumar Grover when stepped into the witness box
as RW3 clarifies that he is medical representative of Hethro Drug
Company and he infact does not know the actual dispute between
the parties. He admits that as per his estimations Rajesh Kumar
being partner of the plaintiff firm is nice person and he has been
dealing with him in the same manner in which he had been dealing
earlier. Though he stated that several of the medical agencies
refused to purchase the medicines from the plaintiff firm, but this
contention is highly baseless and without any cogent proof on the
record. Admittedly this witness is not in position of any document
to prove the fact that the area of Ferozepur which is with him ever
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refused to purchase the medicines from the plaintiff. Except this
witness the plaintiff has not examined any person from the locality
who came and depose that with the circulation of any resolution the
reputation of the plaintiff firm lowered down in the eyes of others.
17. As well as the monetary loss to the plaintiff firm is concerned,
the same is neither pleaded nor proved on the record by any cogent
evidence. Rather it comes out from the cross-examination of
plaintiff itself that he has withheld the best evidence to prove the
fact that due to any act of the defendant he has suffered monetary
loss. Plaintiff failed to bring the account books of his firm from 2008
till date to show the total sale of medicines. It is not out of sight that
he was even directed to produce the original account books for the
relevant period but he failed to bring the same. Adverse inference
is liable to be drawn against the plaintiffs for withholding the best
evidence on the file. Even the statement of Sajjan Kumar PW2
regarding decreasing the sale of medicines and earnings from
Rs.75,000/- to Rs.15,000/- per month is without any documentary
proof. In these circumstances this fact has also not been proved
on the record. Even it is nowhere pleaded that any mental agony
was being faced by the plaintiffs due to the circulation of resolution.
Most importantly it is liable to be added here that the resolution
which the plaintiff is challenging through this suit is never produced
and proved on the record. The cause of action is pleaded to be
accrued on passing of resolution and on refusal by the defendants
to pay the amount but not on account of lower the reputation of the
plaintiffs in estimation of others and as and when there was loss of
business. The other points raised by the parties to the suit are not
the subject matter and the court is not to decide all that controversy
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between the parties. Keeping in view the above discussion all
these issues are decided against the plaintiffs and in favour of the
defendants.
18. The onus to prove all these issue was upon the defendants.
These issues were not pressed by the learned counsel for the
defendants during the course of arguments. So all these issues are
decided against the defendants and in favour of the plaintiffs.
RELIEF.
19. In view of my findings on issues No. 1 and 2 in both the suits,
both the suits are dismissed with costs. Original judgment be placed
in Civil Suit No. 311-1 dated 02.06.2012 titled as M/s. Arora Medical
Hall vs. Chemists and Druggists Association, Ferozepur and
another whereas attested copy of this judgment be placed in
consolidated suit bearing Case No. 689-1 of 2.06.2012 titled as M/s.
Arora Medical Hall Vs. Chemists and Druggists Association,
Ferozepur and another. Decree sheets be prepared separately and
the files be consigned to the Judicial Record Room, Ferozepur.
16. The criminal complaint filed by Respondent No.2 was dismissed by the
concerned court for want of prosecution.
17. During the course of hearing of these appeals, Ms. Soni Singh, learned
counsel for the Commission stated that as per her information, Respondent No.2
has challenged the judgment and decree dated 12.05.2015 by filing appeals and
the order dismissing the criminal complaint has been challenged by filing a
petition in the Court of Session Judge, Ferozepur.
18. While the civil suits and criminal complaint filed by him were pending,
Respondent No.2 filed an information dated 20.09.2012 under section 19(1)(a) of

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the Act with the allegations that the requirement of NOC and LOC prescribed by
the Association as a condition for taking distributorship is violative of Sections 3
and 4 of the Act. Respondent No. 2 further alleged that the Association was
putting pressure on other wholesalers not to supply medicines to the retailers,
who were purchasing medicines from it and this clearly amounts to violation of
Section 3(3) of the Act in as much as it would affect supply of medicine. Another
allegation made by Respondent No. 2 was that in 2010 it had objected to the
mandatory requirement of NOC/LOC and on that account it was expelled from
the primary membership of the Association. According to Respondent No.2,
resolution dated 26.05.2012 and circular dated 27.05.2012 were intended to wipe
out competition from the market and by taking advantage of its dominant position,
the Association was directly and indirectly imposing unfair or discriminatory
conditions on the purchase or sale of medicines. In the end, Respondent No.2
made the following prayers :
1. The acts of the OPs in violation of Section 3(4) and Section
4(2) of the Act, and, the acts of restricting competition and
abusing dominant position in the distribution and sale of
medicines including life saving drugs, be inquired and fined
heavily as per the provisions of the Competition Act, 2002.
2. Grant of Interim Relief by issuing orders to the OPs to
withdraw the boycott letter dated 27.05.2012.
3. The IP be granted damages of Rs.50 lakhs for business lost
from June 2012 till date with interest @ 12% per annum till
realization from OP1.
4. The OPs be directed to pay the costs suffered by the IP.
5. The Commission may pass any other order apart from the
above in favour of the IP as deemed fit including the cost of
the present suit.

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19. The Commission considered the information filed by Respondent No.2 and
felt prima facie satisfied that a case of violation of Sections 3 of the Act is made
out. The Commission also opined that the office-bearers of the Association who
are competitors of Respondent No.2 had a strong motivation to distort
competition in the market by issuing letter dated 27.05.2012. On that premise,
the Commission passed an order dated 30.10.2012 under Section 26(1) of the
Act and the directed the Director General to cause an investigation to be made
into the allegations made by Respondent No. 2.
20. On receipt of the aforesaid order, the Director General entrusted the
investigation to the Joint Director General (Jt. DG). The latter issued notices to
the Association under Section 36(2) read with Section 41(2) of the Act requiring
it to furnish certain information and also produce the relevant rules, regulations,
bye-laws and documents. Similar notices were issued to the other appellants
and they were called upon to explain their role as office bearers of the Association
and also furnish income-tax returns for the assessment years 2010-11, 2011-12
and 2012-13. PCA and AIOCD and some of the wholesalers and retailers
operating in Ferozepur were called upon to explain their stand in the context of
the allegations made by Respondent No. 2. Pharmaceutical companies, namely,
Merck Limited, M/s. Intas Pharmaceutical Limited, M/s. Abbott India Limited, M/s.
Apex Laboratories Limited, M/s. Glenmark Pharmaceuticals Limited, M/s. Invida
India Private Limited, M/s. Macleods Pharmaceuticals Limited, M/s. Sun
Pharmaceuticals Limited, M/s. Zuventus Healthcare Limited, M/s. J.B. Chemicals
& Pharmaceuticals Limited, M/s. Tayal Associates, M/s. Punjab Medical
Agencies, M/s. Ferozepur Medical Agency, M/s. Bhagwati Medilinkers, M/s.
Ganpati Pharmaceuticals and M/s. Dimple Enterprises were also called upon to
file their responses to the allegations made by Respondent No. 2 that NOC/LOC
has been made mandatory by the Association for doing business as Chemists
and Druggists in District Ferozepur.

22
21. The Association filed four replies dated 31.12.2012, 11.02.2013,
25.03.2013 and 08.04.2013 and supplied the required information and
documents to the Jt. DG including circular dated 15.04.2006. Simultaneously, it
controverted allegations made by Respondent No. 2.
22. The office-bearers of the Association, who are appellants in Appeal
Nos.22 to 28 of 2014 filed separate replies, the dates of which are given below :
1. Shri Chaman Lal Kakkar President - 03.12.2012
2. Shri H. C. Gupta Vice President - 03.12.2012
3. Shri A.K. Gupta - Vice President - 06.12.2012
4. Shri Shyam Lal Kakkar Secretary - 29.11.2012, 23.01.2013

and 09.05.2013
5. Shri R.S. Bakshi - Joint Secretary - 29.11.2012, 16.01.2013

and 04.05.2013
6. Shri Ashwani Garg - Treasurer - 06.12.2012
7. Shri Gurpreet Singh PRO - 03.12.2012
23. Respondent No. 2 on whom notice was issued by the DG submitted three
responses on 19.11.2012, 17.04.2013 and 21.04.2013. Shri Rajesh Arora
claiming to be the partner of Respondent No. 2 filed affidavit dated Nil, which
reads as under :
I Rajesh Arora S/o Shri Beli Ram Arora Partner of M/s Arora
Medical Hall, Bazar Krishan Sudama, Mohalla Peeran Wala,
Ferozepur City 152002 (pb) do hereby solemnly affirm and declare
that the sales of M/s Arora Medical Hall, Ferozepur City for
particularly in Ferozepur has been reduced from Rs. 2,23,18,399.82
(Rupees two crore twenty three lacs eighteen thousand three
hundred ninety nine and eighty two paisa) only for the period from
01-06-2011 to 31-03-2012 to Rs. 39,70,718.36 (Rupees thirty nine

23
lacs seventy thousand seven hundred eighteen and thirty six paisa)
only for the period from 01-06-2012 to 31-03-2013 Resulting into a
net loss of sales in Ferozepur is Rs.1,83,47,681.46 (Rupees one
crore eighty three lacs forty seven thousand six hundred eighty one
and forty six paisa) only.
Deponent
The above statements submitted by me are true as per
records and nothing has been concealed by me.
24. PCA and AIOCD filed their replies on 14.05.2013 and 26.02.2013
respectively. They talked about their respective affiliations as also affiliations of
district bodies and referred to the practice of NOC.
25. The pharmaceutical companies to whom notices were issued by the Jt.
DG filed their responses on different dates, which are detailed below :
1. M/s. Merck Limited 25.03.2013
2. M/s. Intas Pharmaceutical Limited 02.04.2013
3. M/s. Abbott India Limited 15.04.2013
4. M/s. Apex Laboratories Limited 21.03.2013 and

07.04.2013
5. M/s. Glenmark Pharmaceuticals Limited 08.04.2013
6. M/s. Invida India Pvt. Ltd. 09.04.2013
7. M/s. Macleods Pharmaceuticals Limited 25.03.2013
8. M/s. Sun Pharmaceuticals Limited 08.04.2013
9. M/s. Zuventus Healthcare Limited 16.04.2013
10. M/s. J. B. Chemicals & Pharmaceuticals Ltd. 09.05.2013
26. Some of the dealers to whom also notices were issued by the Jt. DG also
submitted their replies on different dates which are detailed below :
1. M/s. Tayal Associates 06.04.2013

24
2. M/s. Punjab Medical Agencies 08.04.2013
3. M/s. Ferozepur Medical Agency 02.04.2013
4. M/s. Bhagwati Medilinkers 05.04.2013
5. M/s. Ganpati Pharmaceuticals 08.04.2013
6. M/s. Dimple Enterprises 07.04.2013
27. The Jt. DG also recorded the statements of the office bearers of the
Association, Shri Rajesh Arora (partner of Respondent No. 2 ) and Shri Surjit
Mehta, President, PCA, who also produced copy of the memorandum of
Association. Of course, no opportunity was given to the Association and other
appellants to controvert the averments contained in the responses filed by
Respondent No. 2 or to cross-examine him in the context of his statement.
28. After completing the aforesaid exercise, the Jt. DG submitted report dated
10.06.2013. He briefly adverted to the allegations contained in the information,
the directive given by the Commission under Section 26(1) and formulated the
following issues :
1. Whether the decisions taken by OP1 in its Extra Ordinary
Meeting held on 26.05.2012 and the directions given vide its
Circular dated 27.05.2012 violate any provisions of the
Competition Act, 2002.
2. Whether the office bearers of OP1 had formed a cartel to
eliminate competition in the relevant market i.e. the market
of drugs and medicines in Ferozepur, Punjab.
3. Whether, OP1 stipulates any condition regarding NOC / LOC
necessarily required to be taken from it prior to appointment
of any new or additional stockist in Ferozepur as alleged by
the IP, and if so, whether such stipulation falls foul with any
of the provisions of the Competition Act.

25
4. Whether OP1 and its office bearers are engaged in any other
activities or following any practices in addition to those
alleged by the IP which contravene the provisions of the Act.
5. Examination of the role of State level Association i.e. Punjab
Chemists Association (PCA) and All India Organisation of
Chemists and Druggists (AIOCD).
29. The Jt. DG then recorded the brief summary of the replies/written
submissions filed by the Association and other appellants, Respondent No. 2,
PCA, AIOCD, pharmaceutical companies, namely, M/s. Merck Limited, M/s. Intas
Pharmaceuticals Limited, M/s. Abbott India Limited, M/s. Apex Laboratories
Limited, M/s. Glenmark Pharmaceuticals Limited, M/s. Invida India Private
Limited, M/s. Macleods Pharmaceuticals Limited, M/s. Sun Pharmaceuticals
Limited, M/s. Zuventus Healthcare Limited, M/s. J.B. Chemicals &
Pharmaceuticals Limited, the wholesalers/stockists namely, M/s. Tayal
Associates, M/s. Punjab Medical Agencies, M/s. Ferozepur Medical Agency, M/s.
Bhagwati Medilinkers, M/s. Ganpati Pharmaceuticals and M/s. Dimple
Enterprises, referred to the answers given by the appellants in Appeals Nos. 22
to 28 of 2014 to the particular queries made to them and recorded the following
conclusions:
1. In view of the above, investigation has concluded that the
decisions taken by OP1 in its Extra Ordinary Meeting held on
26.05.2012 and the directions issued vide its Circular dated
27.05.2012 violate clause (b) of sub-section (3) read with sub-
section (1) of Section 3 of the Act as the same limit and control
the supply of drugs and medicines in Ferozepur.
2. Investigation has concluded that OP1 and its office bearers /
Executive Committee members i.e. OP 2 to OP 8, have, by taking
the decisions in the Extra Ordinary Meeting held on 26.05.2012

26
and circulating the same vide Circular dated 27.05.2012
contravened the provisions of Section 3(3)(b) read with Section
3(1) of the Act.
3. Based on the above, investigation has concluded that OP1 has
been following a practice of NOC necessarily required to be taken
from it prior to appointment of a new / additional stockist in
Ferozepur which has the effect of limiting and controlling the
supply of drugs and medicines in Ferozepur thereby contravening
the provisions of Section 3(3)(b) read with Section 3(1) of the
Competition Act.
4. Based on the above, investigation has not come across any
evidence suggesting that OP1 has been indulging in any activities
or following practices other than those detailed in the foregoing
paras of the Report which contravene the provisions of the Act
such as PIS approval and fixation of trade margins.
5. Based on the above facts and analysis, investigation has
concluded that till Punjab Chemists Association amends its Rules
& Regulations regarding authorization given by it to District level
Associations to issue NOC / LOC for appointment of stockists and
till PCA issues formal directions to its affiliated associations to
cease and desist from the practice of NOC / LOC for appointment
of new / additional stockists, PCA does not get absolved from
being a party to the practices being followed by its affiliated
Association viz OP1, which have the effect of limiting and
controlling supplies and as such PCA is contravening the
provisions of Section 3(3)(b) read with Section 3(1) of the Act.
30. Based on his analysis of the allegations contained in the information filed
by Respondent No.2, the statements made by/on behalf of the appellants, the
27
replies of PCA and AIOCD, pharmaceuticals companies and wholesalers as well
as retailers, the Jt. DG submitted report dated 10.06.2013, Chapter-6 of which
reads as under :-
CHAPTER 6
Summary of Findings
6.1 The investigation has clearly established that the decisions
and practices of the OPs contravene the various provisions of the
Competition Act, 2002. A summary of findings are narrated
hereunder:
i) The decision taken by the OPs in their Extra Ordinary
Meeting held on 26.05.2012 as circulated vide
circular dated 27.05.2013 have the effect of limiting
and controlling the supply of drugs and medicines in
Ferozepur district of Punjab.
ii) The OPs by taking the said decisions have restricted
the freedom of trade of not only the IP, but also of
other wholesalers and retailers in Ferozepur as well
as pharmaceutical companies supplying their
products in the said market.
iii) The decisions taken by the OPs have the effect of
driving out existing competitors from the market.
iv) OP 1 is engaged in a practice of NOC necessarily
required to be taken from it prior to appointment of a
new/ additional stockist in Ferozepur which has the
effect of limiting and controlling the supply of drugs
and medicines in Ferozepur.
v) By indulging in the practice of non grant of NOC to
non members, the OP association is foreclosing the
market for such non members.

28
6.2 Investigation has further established that Punjab Chemists
Association by authorizing District level Associations in terms of
Article 17 of the Rules & Regulations, to issue NOC/ LOC for
appointment of new additional stockists, and, by assuming the right
to issue the same in the event of any disputes, is party to the
practices being followed by its affiliated association viz OP 1, that
have the effect of limiting and controlling supplies of drugs and
medicines in the State of Punjab thereby contravening the
provisions of Section 3(3)(b) read with Section 3(1) of the Act.
Conclusion
6.3 The investigation has established that the Opposite Parties
(OP 1 TO OP 8) and Punjab Chemists Association have violated
the provisions of Competition Act, 2002 by taking decisions and
indulging in practices found to be in contravention of the provisions
of Section 3(1) read with Section 3(3)(b) of the Competition Act
2002.
6.4 None of the parties has claimed confidential treatment of
their information in terms of Regulations 35 of CCI (General)
Regulations 2009. However, due care may kindly be taken as per
the provisions of Section 57 of the Competition Act read with
Regulation 37 of CCI (General) Regulations, 2009.
6.5 The investigation Report does not contain any information
which has been granted confidentiality in terms of the aforesaid
Regulations.
6.8 The Report may kindly be placed before the Competition
Commission of India for consideration.
31. The aforesaid report was considered by the Commission in its meeting
held on 20.06.2013 and the Jt. DG was directed to investigate the role of
29
individual office-bearers of the Managing Committee/ Executive Body in terms of
Section 48(2) of the Act. The relevant portions of the decision taken by the
Commission are reproduced below :
It is observed that the DG has not investigated the role of individual
office bearers of the Managing Committee / Executive Body of the
Association in decision making, in terms of Section 48(2) of the
Competition Act.
DG is directed to issue notices to the office bearers of the Managing
Committee / Executive Body of the Chemists and Druggist Association,
Ferozepur, in terms of Section 48(2) of the Act, and give them an
opportunity to explain the role of individual office bearers in the decision
making in respect of practices/circulars/directions etc., which were found
anti-competitive.
32. In compliance of the directive given by the Commission, the Jt. DG issued
notice dated 03.07.2013 to the office bearers of the Association. In response to
the notice, Shri Chaman Lal Kakkar, President of the Association filed his own
affidavit through e-mail dated 18.07.2013. The remaining office-bearers
submitted joint affidavit through e-mail dated 19.07.2013. Subsequently, they
sent original affidavits.
33. The Jt. DG adverted to the allegations made against the office-bearers,
their responses in the form of affidavits and recorded the following observations:
OBSERVATIONS
20. As can be seen from the Affidavits of the Office Bearers /
Executive Committee members of Chemists and Druggists
Association, Ferozepur filed by them in response to the Notices
sent to them, none of the Office Bearers / Executive Committee
members has denied their role with respect to the decision of

30
boycott of the informant by way of Resolution / Circular dated
27.05.2012 and have cited various reasons compelling them to take
the said decision.
21. The primary reason cited by the Office Bearers / Executive
Committee members for taking the decision of boycott is that the
informant was indulging in unfair practices of raising false ills and
over charging retailers by tampering the computer billing software
and refusing to rectify the same and misbehaving with the retailers.
It has been stated that the decision was taken to protect the
interests of the members of the Association and only after affording
reasonable opportunity to the Informant. It has also been informed
that an FIR No. 230 dated 01.09.2012 under Section 429 IPC read
with Section 66(1) of the Information and Technology Act had been
registered against the Informant who was on bail by the Orders of
Learned Session Judge, Ferozepur.
22. As against the above contentions, the Informant had in the
Information filed with the Commission, alleged that Chemists and
Druggists Association, Ferozepur had a rule that stipulated taking
of its NOC on payment of Rs.2100/- per company, prior to taking
up distributorship of any pharmaceutical company. It had been
informed that since the Informant had objected to the said practice
in the year 2010, he was expelled from the membership of the
Association. It had been informed by the IP that in response to a
letter sent by him in the said matter, the Ministry of Health & Family
Welfare had vide letter dated 25th June 2010 informed that only the
Licensing Authority of the State was empowered to limit the activity
under the rules and regulations of the Drugs & Cosmetics Act &
Rules. It was further informed by the IP, that the facts of the said
31
letter were brought into the notice of the area Drug Inspector, since
restricting the business activities of a wholesaler duly appointed by
the State Drug Authority also amounted to violation of the
provisions of Article 19(1)(g) of the Indian Constitution. It had been
informed by the Informant that in view of the above objections
raised by it with respect to the NOC practice, and in view of having
brought the same to the notice of the concerned authorities, the
Association through its President and other interested wholesalers
holding different positions in the Association were making all efforts
since 2010 to stop the business of the Informant to eliminate
competition being posed by it.
23. The Informant had contended that the discrepancy in billing
due to software error which prompted the Association to boycott it,
had been duly rectified by it by issuing credit notes to the affected
parties. The Informant had alleged that taking advantage of the
opportunity arising out of the discrepancy in billing, and with
malafide intent to drive out competition posed by it, a General Body
meeting of Chemists and Druggists Ferozepur was convened on
23.05.2012 having agenda against the Informant. It has been
alleged that natural justice had not been meted to the Informant as
it was not called in the said General Body Meeting of the
Association where after, the boycott decision was taken in the Extra
Ordinary meeting of the Association held on 26.05.2012 and
circulated by the Association amongst its members vide Circular
dated 27.05.2012. As is evident from the above, there are
allegations and counter allegations between the Informant, and the
OP Association & its Office Bearers with respect to the reasons for
the boycott decision of the Association.

32
24. Investigation has already observed in its Investigation
Report dated 10th June 2013, that the Chemists and Druggists
Association is an unregistered association of wholesalers and
retailers of Ferozepur and has no legal or statutory mandate to
regulate the business of distribution and sale and drugs and
medicines. In the said Report, investigation had not delved into the
merits of the allegations and counter allegations, the issue of
incorrect billing being essentially a bilateral issue between the
Informant and the concerned retailers who reportedly had filed an
FIR in the matter. However, without disputing the merits of the
allegations of the Association/ its Office Bearers/ Executive
Committee members with regard to overbilling etc. done by the
Informant, redressal of the grievance of its members should have
been sought by the Association legally at the appropriate forum
rather than resorting to measures that are not legally tenable such
as boycott of the Informant and imposing penalties on those not
complying with its decision which have adverse implications on
competition in the market. Undeniably, the OP Association may be
well within its rights to work for the welfare of its members, however
it was incumbent upon the Office Bearers/ Executive Committee
members, to have prevailed upon the aggrieved members of the
Association to take recourse to legal measures for redressal of their
grievances and the Office Bearers/ Executive Committee members
of the Association should have refrained from taking the boycott
decision, circulating it, and, enforcing compliance of the same by
imposing penalties on those not complying with the said decision.
The contentions in the Affidavit to the effect that the main object of
the decision was rather to increase the efficiency in supply,
distribution, storage, acquisition and control of goods including

33
provision of services besides being not substantiated by any
evidence in support of the contention, the repercussions of the
boycott decision in terms of adverse effect on competition by
limiting and controlling supply of drugs and medicines in the market,
curtailing the freedom of trade of the market intermediate etc.
cannot be overlooked.
25. With regard to the contention of the Office Bearers/
Executive Committee members in their Affidavits that the sales in
the IP had not declined as a result of the boycott decision and that
several retailers of Ferozepur were still purchasing medicines from
the Informant, it may be mentioned that during the course of
investigations, the Informant had vide written submissions dated
17.04.2013, submitted that its turnover had declined from
Rs.223.18 lakhs to Rs.39.71 lakhs between the corresponding
periods of 01.06.2011 to 31.03.2012 and 01.06.2012 to 31.03.2013
respectively i.e. period prior to, and after the boycott decision. The
Informant had also submitted a monthwise break of its sales
pertaining to the above periods with respect to Ferozepur as well
as other regions. However, in view of the rebuttal of the Office
Bearers/ Executive Committee members in their Affidavits
regarding contentions of the Informant regarding decline in sales,
the Informant was asked to substantiate its above contentions and
to submit a Certificate from its Auditor conforming the Sales figures
along with monthwise break up of Sales during the said periods.
The Informant was also directed to swear on Affidavit its written
submissions made by the letter dated 17.04.2013 regarding Sales,
in Ferozepur having declined from Rs.223.18 lakhs to Rs.39.71

34
lakhs between the corresponding periods of 01.06.2011 to
31.03.2012 and 01.06.2012 to 31.03.2013 respectively.
26. In response to the above, the Informant has filed a Certificate
from its Auditors Lal & Associates, Moga, Punjab dated 24.07.2013
confirming the sales figures of the Informant pertaining to
Ferozepur during the periods 01.06.2011 to 31.03.2012 and
01.06.2012 to 31.03.2013 respectively. The Informant has also
filed an Affidavit confirming the above figures in support of its
written submissions made earlier regarding decline of sales in
Ferozepur consequent upon the boycott decision dated
27.05.2012. Copy of the Certificate the Auditor certifying the Sales
figures and copy of the Affidavit of the Informant are enclosed as
Annexures-4 & 5 respectively.
27. In view of the above, the contention of the OP Association
and its Office Bearers as per their sworn Affidavit to the effect that
their decision of boycott was aimed at increasing the efficiency in
supply, distribution, storage, acquisition and control of goods
including provision of services and that the same had not resulted
in decline of sales of the Informant does not hold ground.
28. The Office Bearers/ Executive Committee members of
Chemists and Druggists Association, Ferozepur by signing and
filing identical Affidavits stating therein that The Association has
always been ready to reconsider its resolution dated 27.05.2012
provided Rajesh Arora submit an unconditional apology..and
further assure the Association that he will not indulge in such
malpractices in future is an admittance of their role in the collective

35
decision making process which resulted in the issuance of Circular
dated 27.05.2012 boycotting the Informant.
29. With regard to the practice of NOC/ LOC necessarily
required to be taken from the Association after payment of
prescribed fee and prior to taking up distributorship of any
pharmaceutical company, the Office Bearers/ Executive Committee
members of the Association by perpetuating this anti-competitive
practice which has the effect of limiting and controlling the provision
of drugs and medicines are party to the said practice.
34. The Commission forwarded copies of both the reports of DG to the
appellants and Respondent No. 2. The Association filed detailed comments/
submissions/ objections dated 10th October, 2013 along with seven documents
marked A to G (pages 598 to 693 and 714 to 783 of the paper book), which
included copy of the letter dated 16.07.2005 issued by the Association to the
pharmaceutical companies, copy of letter dated 06.07.2007 sent by Respondent
No. 2 to the President of the Association tendering apology in respect of some
episode, copy of letter dated 09.06.2010 issued by the Chairman, Disciplinary
Action Committee to Shri Rajesh Arora informing him about the expulsion of
Respondent No. 2, copies of bills of purchases made by retailers of Ferozepur
from the wholesalers of the neighbouring town, copy of LOC issued by the District
Chemists Federation, Jalalabad to M/s. Merck Limited for appointment of
Respondent No. 2 as stockist, bills issued by Respondent No. 2 to M/s. Raj
Medicos (a member of the Association) after the alleged boycott, copy of bills
issued by Respondent No. 2 providing 3% discount. The Association filed
additional submissions dated 22.10.2013 with two documents marked annexures
A and B (pages 695 to 706). Annexure A consists of copies of letters written by
M/s. Merck Limited and Jacques Biotech for grant of NOC to appoint Respondent
36
No. 2 as dealer at Ferozepur and Annexure B is copy of the application form
submitted by M/s. Sun Pharmaceuticals Limited for appointment of new stockist.
The Association also filed list marked as Annexure A-21 of persons to whom
NOCs were issued after receiving fees of Rs. 2,100/- and Annexure A-22, list of
80 persons who were doing the business as stockists without obtaining NOC.
The copy of NOC issued by the District Chemists Federation, Jalalabad in favour
of Respondent No. 2 was also annexed. The other appellants filed joint
preliminary submissions on 14.10.2013 (pages 707 to 713) and documents
marked Annexures A-11 to A-26 (pages 714 to 800). They pleaded that the
action proposed to be taken against them under Section 48 is without jurisdiction
because the ingredients necessary for invoking that section were absent in the
case.
35. The first set of objections/ submissions filed by the Association are divided
into seven chapters. In Chapter III, the Association detailed the background in
which the information was filed by Respondent No.2. In Chapter IV, the
Association briefly referred to the findings recorded by the Jt. DG. In Chapter V,
the Association enumerated its comments and objections to the report of the Jt.
DG. In paragraphs 47 to 57 and 59 to 61 of that Chapter, the Association
highlighted its objections to the analysis made by the Jt. DG and conclusion
recorded by him.
36. Since the impugned order contains only cryptic references to the
objections and submissions made by the appellants, we deem it proper to notice
the same in a greater detail so that the stand taken by the Association can be
appreciated in a correct perspective in the light of the stand taken by the others
including PCA, AIOCD, pharmaceutical companies as also the wholesalers/
retailers and the statements recorded by the Jt. DG. The relevant paragraphs of
the objections/ submissions filed by the Association are reproduced below :

37
47. It is submitted that the DG erroneously assumes that the
CDAF is the apex association for the district of Ferozepur.
This erroneous assumption has led the DG to arrive at an
incorrect theory of harm to competition in the relevant
market.
48. The membership of CDAF comprises of wholesalers and
retailers in Ferozepur City and Ferozepur Cantt. The district
of Ferozepur comprises of, amongst other areas, Ferozepur
City, Ferozepur Cantt., Fazilka, Abohar, Jalalabad and Zira.
Wholesalers supply medicines not only to Ferozepur city and
Ferozepur cant. but also to neighbouring towns such as
Faridkot, Kotkapura, Zira, Talwandi Bhai, Mudki,
Guruharsahai, Jalalabad, Farilka, Abohar and other
neighbouring districts. Further, there are no restrictions
placed on retailers of Ferozepurs to purchase the drugs and
medicines from the aforesaid neighbourhood towns, thereby
ensuring unrestricted supply of medicines in the district of
Ferozepur. Copies of bills for purchase made by members
(retailers) of CDAF from wholesalers of neighbouring towns
like Faridkot, Bathinda, Jalandhar are attached as Annexure
D. This is further supported by the fact that the Informant
claims loss of sales in Ferozepur City and Ferozepur Cantt,
while, during the same time, the Informants sales to
Fazilkha grew at over 100%.
49. Also, at the cost of repetition, it is reiterated that the decision
of CDAF not to grant NOC to its member (wholesaler) does
not preclude the wholesaler to obtain the required NOC from
the Chemist and Druggists Association of the neighbouring
areas, like Faridkot, Kotkapura, Talwandi Bhai, Mudki,

38
Guruharsahai, Jalalabad, Fazilka and Abohar. It is pertinent
to note that Informant received a NOC from the Distt.
Chemist Federation, Jalalabad, for its appointment as a
stockists/ wholesaler for M/s. Merck Limited. It is therefore
submitted that there is no restriction on the wholesaler to
supply medicines of pharmaceutical companies, obtained
from neighbouring areas of Ferozepur, to the retailers
situated in Ferozepur. Thus, there is evident supply side
substitutability between Ferozepur and the neighbouring
areas of Faridkot, Kotkapura, Talwandi Bhai, Mudki,
Guruharsahai, Jalalabad, Fazilka and Abohar. In fact, the
DG admits that the Informant being a wholesaler of drugs
and medicines is part of the supply and distribution chain
through which various drugs and medicines manufactured
by pharmaceutical companies are channelized in the market
of such products in the district of Ferozepur and adjoining
areas. A copy of the NOC issued by Distt. Chemist
Federation, Jalalabad, in favour of the Informant is attached
as Annexure E.
50. It is submitted therefore that the DG Report lacks any cogent
material to even assess the allegation of limiting or
controlling the supply of drugs and medicines in Ferozepur
district of Punjab. It presupposes the existence of quantity/
supply restriction even before undertaking a cursory analysis
of the conditions of competition prevailing in the relevant
market.
51. The theory of harm professed by the DG assumes that the
actions of CDAF not only curtail the freedom of trade of the
Informant but also amount to limiting and controlling the

39
supply in the market of drugs and medicines. The DG
erroneously submits that the directions of CDAF to stop
purchasing from the Informant and imposition of fine on the
retailers dealing with the Informant have the effect of driving
out existing competitor (Informant) out of the market without
taking into account that the market is in fact much larger.
The Informant on his part has simply moved its supplies
from one part of the relevant market to another without any
switching costs or significant effort.
Action of boycott merely on grounds of moral persuasion having no
binding effect
52. The DG while noting the malpractices of misappropriation by
the Informant in the bills raised, has concluded that the
decision taken by CDAF vide circular dated 27 May 2012,
not only curtails the freedom of trade of the Informant but
also amount to limiting and controlling the supply in the
market of drugs and medicines. The DG further submits that
the directions of CDAF to stop purchasing from the Informant
and imposition of fine on the retailers dealing with the
Informant have the effect of driving out existing competitor
(Informant) out of the market.
53. It is humbly submitted that the analysis undertaken by the
DG during the course of the investigation suffers on account
of its incompleteness, the reliance it places on certain steps
taken by CDAF without any reference to the context and
backdrop in which the said steps have been taken.
Furthermore, the DG Report has disregarded critical
clarifications and submissions by CDAF and contains an
incomplete and baseless analysis, which has resulted from

40
the DG cherry picking facts/ information/ documents and
drawing illogical assumptions to base the adverse findings
against CDAF.
54. As submitted hereinabove, the DG has based its entire
analysis on certain steps/ actions taken by CDAF without
any regard or reference to the critical facts and
circumstances surrounding the said steps/ actions. It is
submitted that the DG Report has elide on merely two factors
to assess the impact of the impugned action of CDAF,
namely :
i. sales of the Informant has allegedly reduced from INR
223 lakhs during the period 01 June 2011 to 31 March
2012, as compared to INR 39.71 lakhs in the period
after the boycott, i.e., 01 June 2012 to 31 March 2013;
and
ii. alleged directions of CDAF to penalize those retailers
who continue dealing with the Informant and to other
wholesalers not to deal with those retailers who
continue to deal with the Informant.
55. It is submitted that the analysis carried out by the DG (on the
basis of abovementioned steps/ actions taken by the CDAF)
is inherently flawed and suffers on account of the false and
illogical assumptions being drawn in the DG Report.
Furthermore, the DG Report fails to appreciate the critical
fact that none of the abovementioned actions undertaken by
the CDAF (and relied upon by the DG to arrive at its findings
against CDAF) are aimed to distort the competition fabric or
benefit/ promote a particular member or group of the CDAF
to the prejudice of others.

41
xx xx
57. The DG Report has completely failed to substantiate that the
impugned steps/ actions taken by the CDAF are
demonstrative of the collective intent and concerted
behaviour of CDAF to distort competition. In this regard,
CDAF most humbly wishes to clarify the critical facts and
circumstances underlying the abovementioned steps taken
by CDAF, which the DG has wrongly assumed as amount to
anti-competitive behaviour:
A. Reduction in sales of the Informant after alleged
boycott -
i. It is humbly submitted that the DG Report has :
(A) completely glossed over the fact that the action
taken by CDAF against the Informant is in line
with the role and responsibilities of an
association representing an industry group.
From a legal perspective, the DG Report
completely fails to appreciate the essential fact
that while the Act is focused on the larger goal
of protecting and promoting competition in
markets, whereas the impugned action of
CDAF has a much narrower focus, i.e.,
protecting the retailers of Ferozepur from the
fraudulent practices of the Informant. The DG
Report completely fails to appreciate the
divergence in the objectives of the Act and
impugned action of CDAF. If the logic adopted
by the DG is accepted by this Honble
Commission, it would lead to an untenable

42
situation where trade associations
representing the interests of an industry group,
will be barred from adopting any measures
necessary to protect the interests of the
concerned industry; and
(B) without any reason or logic cast aside the
explanation submitted by the President, CDAF
in its Affidavit dated 18 July 2013 that there has
been no reduction in the sales of the Informant
as several retailers of CDAF are still
purchasing from the Informant. Bills issued by
the Informant to M/s. Raj Medicos (member of
CDAF) after the alleged boycott are attached
as Annexure F (Colly.). Thus, the alleged
boycott was merely on paper and carries no
effect on the members, much less on
competition. The DG further failed to consider
the fact that the impugned action of CDAF was
taken only after affording reasonable
opportunity to the Informant to explain his
position. The Circular dated 27th May 2012
itself states that the Informant was given 2-3
days time to clear his position before taking
further action. However, the Informant
remained adamant and non-cooperative with
an intention to hide his fraud. It is further
submitted that the DG, without assigning any
reason, discarded the reply dated 21 March
2013, filed by Apex Laboratories Private

43
Limited, stating that the decision to appoint
M/s. H S Agencies as their stockists in
Ferozepur was taken only after experiencing
non-cooperation from M/s Arora Agencies
which affected their business in the Ferozepur
area. This is evident of the malpractices of the
Informant experienced by all enterprises in the
distribution chain of drugs and medicines in
Ferozepur, AND
(C) failed to take into account the clarification
supplied by CDAF that the alleged reduction in
the sales of the Informant, if any, was only on
account of the malpractices carried out by the
Informant. The retailers, on being made aware
of such malpractices (of issuing inflated bills),
considered it wise not to purchase from the
Informant. This may be one of the reasons
attributable to the alleged fall in sales of the
Informant, which the DG failed to look into.
Without prejudice, it is also submitted that the
reduction in sales of the Informant may also be
attributed to the reduction in commission/
discount offered to the retailers. It is evident
from the bills furnished by the Informant to the
DG with its reply dated 19th November 2012
(Annexure 3 Page No.65), that the cash
discount by the Informant reduced from 5% to
3% thereby resulting in reduction of sales. A
copy of the bills issued by the Informant

44
providing 3% discount is annexed as Annexure
G.
ii. It is also pertinent to note that the same billing
software, Surya was used by other members
of the CDAF also, who did not experience any
such problems as expressed by the Informant.
Even otherwise, the Informant continued with
the aforesaid malpractices after changing the
billing software (Marg), exhibiting the mala
fide intention of the Informant, which was
completely overlooked by the DG.
iii. Given the reasons stated above, it is most
humbly submitted that the DG has, without any
reasons or logic, sought to wrongly assert that
the actions initiated by CDAF on behalf of its
members and the necessary actions/ steps
taken by CDAF and/or its members in order to
sustain the impugned boycott of the Informant
is evidence of limiting or controlling the supply
of drugs and medicines in the district of
Ferozepur.
iv. It is further submitted that the reliance placed
by the DG on the impugned action undertaken
by CDAF to arrive at the flawed and illogical
conclusion that the impugned action
demonstrates limiting or supply of drugs and
medicines in Ferozepur is wholly wrong and
misplaced. If the DG Report is relied upon by

45
this Honble Commission, it would lead to
grave miscarriage of justice.
B. Alleged directions of CDAF to penalize those
retailers who continue dealing with the
Informant and to wholesalers not to deal with
those retailers who continue to deal with the
Informant
i. It is humbly submitted that the biased mindset
of the DG is clearly visible in view of the fact
that the alleged directions, as viewed by the
DG to the members (both wholesalers and
retailers) of the CDAF were mere requests, in
order to take disciplinary action against the
Informant for its malpractices. The DG Report
paints the legitimate trade association
activities undertaken by CDAF with the brush
of illegality without in any manner referring to
the true context and background of such
legitimate trade association activities. Other
than reproducing the submissions made by
CDAF in relation to the issue of malpractices
conducted by the Informant (which the DG has
without reason or logic refused to reply upon),
the DG Report has completely failed to
substantiate its conclusion that these alleged
directions to the wholesalers are retailers led
to limiting or controlling the supply of drugs and
medicines.
46
In paragraph 62 to 68, the Association emphasized that no restriction has been
placed on retailers to purchase the drugs and medicines from neighbouring town
like Faridkot, Kotkapura, Talwandi Bhai, Mudki, Guruharsahai, Jalalabad, Fazilka
and Abohar. These paragraphs read as under :
62. The DG Report completely fails to prove existence of the alleged
fact as to whether the impugned action of CDAF has led to limiting
or controlling the production or supply of drugs and medicines in
the district of Ferozepur.
63. As stated above, there are no restrictions placed on retailers of
Ferozepur to purchase the drugs and medicines from the aforesaid
neighbourhood towns like Faridkot, Kotkapura, Talwandi Bhai,
Mudki, Guruharsahai, Jalalabad, Fazilka and Abohar, thereby
ensuring unrestricted supply of medicines in the district of
Ferozepur. This is clear from the fact that the retailers in this region
regularly procure medicines from wholesalers located throughout
the
64. Moreover, the wholesalers, including the Informant, are free to
obtain the NOC from the aforesaid neighbouring towns and sell
their drugs and medicines in the district of Ferozepur. In fact, the
Informant received a NOC from the Distt. Chemist Federation,
Jalalabad, for its appointment as a stockist/ wholesaler for M/s.
Merck Limited (Annexue D). Thus, there is evident supply side
substitutability between Ferozepur and the neighbouring areas of
Faridkot, Kotkapura, Talwandi Bhai, Mudki, Guruharsahai,
Jalalabad, Fazilka and Abohar, rebutting the claim of the DG that
there is disruption in the business activities of the informant or other
retailers of Ferozepu.
47
65. It is further submitted that the DG has reached its finding on the
likely impact of availability of drugs and medicines to the retailers
and to the end consumers, merely on the basis that Informant is the
biggest wholesaler of drugs and medicines in Ferozepur. The said
finding of the DG is whimsical and based on mere conjectures and
surmises. It is humbly submitted that the DG failed to summon or
question even a single retailer from Ferozepur, to assess the claims
of the Informant on limiting or controlling of supply.
66. In fact, the DG also glossed over the fact that the retailers, had filed
an FIR on 01 September 2012 to report the fraudulent practices of
the Informant issuing inflated computerized bills to the retailers of
Ferozepur, without deducting the amount for expired drugs and
medicines retuned by the retailers. And, it was only after the
Informant continued to abuse its dominant position by refusing to
refund the amount to the retailers, that the members, that the
members urged CDAF to boycott the Informant.
67. The DG further claims that the pharmaceutical companies too stand
to be affected by the alleged disruptions in the business of the
Informant, without posing any such question to the companies. It
is pertinent to note that no pharmaceutical company in its reply has
stated any disruption in their business activities due to the alleged
boycott of the Informant.
68. Most importantly, it is submitted that the actions of CDAF can only
be called into question where the purported object of the decision
is to distort or prevent competition in the relevant market in order to
reap anti-competitive gains. In other words, in the absence of the
intent to gain supra competitive profits, no case under section 3(3)
is made out. The findings of the DG must fall on the basis of its
own findings where the DG concludes that with respect to the

48
remaining office bearers who are engaged in the wholesale
business of drugs and medicines, the allegation of the IP regarding
horizontal cartel also does not appear to be well founded for the
reason that there is no evidence to suggest that the loss of business
of the IP allegedly due to the boycott decision of OP-1, to which
these wholesale office bearers were party, could exclusively be
cornered by these office bearers.
In paragraphs 69 to 77, the Association highlighted that NOC for appointment of
additional stockists was not a condition precedent and the NOCs were issued at
the asking of pharmaceuticals firms. The association also pointed out that
practice of NOC was evolved on the recommendations of Mashelkar Committee
appointed by Union Health Ministry, Government of India. These paragraphs are
also extracted below :
69. At the outset, it is submitted that the practice of NOC was
evolved on the recommendation of the Mashelkar
Committee appointed by the Union Health Ministry of the
Government of India which had recommended that the
chemists and pharmacists through their association should
act as watch dog to prevent entry of spurious/ doubtful
quality drugs of those purchased from unauthorised sources
and had specifically reiterated that AIOCD should play an
active role to educate their members and to cooperate with
regulatory authorities to eliminate sale of spurious and sub
standard drugs by their members.
70. It is further submitted that in the instant case, the practice of
issuing NOC to new/ additional stockists was undertaken at
the behest of the pharmaceutical companies, who were

49
demanding NOC of CDAF, prior to appointment of a new or
additional stockists. Placing reliance on a letter dated 25
March 2013 issued by M/s. Merc Limited, it is submitted that
pharmaceutical company insists on NOC/LOC from persons
desiring to obtain the companys distributorship. M/s. Merck
Limited further admitted that obtaining NOC from the
concerned association was an industry wide practice and the
company was no exception. Further, the DG also mentions
the letter dated 12 September 2009 from M/s. Tayal
Associates, a wholesaler, requesting for LOC on behalf of
M/s. Intas Pharmaceutical Limited for its appointment.
Another letter from M/s Jacques Biotech has also been
furnished seeking NOC for appointment of new stockists.
The DG failed to analyse the different stance taken by
pharmaceutical companies on the practice of issuance of
NOC.
71. Moreover, replies filed by M/s. Ferozepur Medical Agency
and Bhagwati Medilinkers, dated 02 April 2013 and 05 April
2013 respectively; clearly bring out the stance that
pharmaceutical companies demand NOC from the Chemists
and Druggists Associations for the appointment of
additional/ new stockists. The reply of M/s Dimple
Enterprises dated 07 April 2013 attached to the DG Report,
substantiates this submissions. In view of the various
submissions by pharmaceutical companies and wholesalers
of drugs and medicines in Ferozepur, it is evident that the
DG adopted the cherry-picking approach and prepared the
DG Report with a pre-determined mind set. It is humbly

50
submitted that the findings of the DG Report on this issue is
liable to be rejected on this ground alone.
72. It is submitted that the pharmaceutical companies seek a
NOC from the concerned chemists and druggists
association to avoid unhealthy competition and prevent
creating excess supply in the market. The present of excess
supply might lead to expired medicines being left with the
additional stockists, affecting their investment and business.
Keeping in mind the limited shelf life of medicines,
appointment of new/ additional stockists, than otherwise
required, results in huge losses for the pharmaceutical
companies, in the event that expired drugs and medicines
are returned by such additional stockists. The said practice
also harms the stockists, whose investment is blocked, as
the recovery from pharmaceutical companies is a time
consuming process. In other words, NOC is used as a tool
to create an efficient distribution chain in a given district and
restrict the potential conflicts between the pharmaceutical
companies and the stockists, in the event of excess supply.
NOC does not amount to limiting or controlling supplies and
provision of services in the relevant market.
73. Without prejudice to the above, it is reiterated that the
decision of CDAF not to grant NOC to the member/ non-
member (wholesaler of medicines) does not preclude the
wholesaler to obtain the required NOC from the
pharmaceutical company directly or Chemist and Druggists
Associations of the neighbouring area, like Faridkot,
Kotkapura, Talwandi Bhai, Mudki, Guruharsahai, Jalalabad,
Fazilka and Abohar. It is pertinent to note that the Informant

51
received a NOC from the Distt. Chemist Federation,
Jalalabad, for its appointment as a stockist/ wholesaler for
M/s Merck Limited (Annexure D). It is therefore submitted
that there is no restriction on the wholesaler to supply
medicines of pharmaceutical companies, obtained from
neighbouring areas of Ferozepur, to the retailers situated in
Ferozepur.
74. The DG further states that non-grant of NOC to those parties
who are not members of CDAF, has the effect of foreclosure
of the market for such interested parties. It is humbly
submitted that this finding of the DG is without any factual or
legal basis and therefore lacks merit. The NOC process is
entirely voluntary and initiated at the behest of the
pharmaceutical companies or stockists. Further, it is not
necessary to become a member of CDAF, in order to do
business in Ferozepur. The wholesalers, who are not
members of CDAF, are free to approach the pharmaceutical
companies directly and seek for appointment as stockists.
CDAF does not in any manner prevent or restrict the
freedom of wholesalers to perform their business activities in
Ferozepur City or Ferozepur Cantt areas. Nor does it
impose any fetters on wholesalers or retailers in the relevant
market or district of Ferozepur and adjoining areas. The DG
further failed to investigate the ground realities, as there was
no NOC/LOC requirement in case of mergers and
acquisitions between pharmaceutical companies. CDAF has
not issued any separate NOC/LOC in the cases of mergers
and acquisition case of Abbott-Solvay, Pifizer-Wyeth,
Abbott-Piramal, Abbott-Nicholas and Pfizr-Pharmicia. The

52
stockists of any one of such pharmaceutical companies have
been receiving drugs and medicines of the acquired/ merged
entity, without the requirement of fresh NOC from CDAF. In
view of this fact, it is apparent that the DG investigated the
entire matter with a pre-determined mind-set and failed to
analyse any facts/ arguments contrary to its biased view.
75. Without prejudice to the above, it is submitted that there are
a large number of stockists/ wholesalers in Ferozepur, who
are selling drugs and medicines to retailers without obtaining
NOC from the CDAF. The best example of such practice is
the Informant, who admits of being the biggest wholesaler in
Ferozepur, even when the Informant was expelled from the
membership of CDAF in 2010, on behavioural grounds, in
addition, there are various instances of distributor of
pharmaceutical companies operated without any NOC from
the CDAF. The DG further refused to acknowledge and take
into account the submission of various office bearers, who
have stated that CDAF has no objection in the
pharmaceutical company appoints an additional/ new
wholesaler, without a NOC.
76. It is pertinent to note that the DG admits that CDAF is guided
by the motive to protect the interests of its members and the
rules and regulations of the State Level Association, i.e.,
PCA, which clearly stipulates the practice of NOC/LOC
(Article 17 of the Rules and Regulations of PCA). Therefore,
it is humbly requested that alleged practice may kindly be
viewed in light of the bona fide intentions and good faith
exhibited by CDAF in discharging its duties.

53
77. To sum up, the DG has failed to establish the effect of limiting
and controlling the supply of drugs and medicines in
Ferozepur because of the alleged practice of issuance of
NOC by CDAF, prior to appointment of new/ additional
stockists in Ferozepur. This is particularly so, since the
refusal of CDAF to grant a NOC to its member does not
preclude the wholesaler to obtain the required NOC from the
Chemist and Druggists Associations of the neighbouring
areas, like Faridkot, Kotkapura, Talwandi Bhai, Mudki,
Guruharsahai, Jalalabad, Fazilka and Abohar, and sell its
drugs and medicines to the retailers in Ferozepur. This is
evident from Annexure D placed on record. Moreover, the
DG failed to consider the submissions of pharmaceutical
companies stating that the practice of NOC was followed
industry wide.
In the end, the Association pleaded that notwithstanding criticism of the
findings recorded by the Jt. DG, it was prepared to take steps for pro-competitive
activities among the members. This is evident from para 87 of Chapter VI, which
is extracted below :
87. In addition to the various beneficial functions performed by
CDAF for its members, CDAF also wishes to act as a vehicle
to promote pro-competitive activities amongst its members
and develop best practices guidelines for its members to
create awareness of acceptable and unacceptable
behaviour under the Act. In order to initiate this process,
CDAF suo moto, undertakes to execute the following steps,
inter alia, with immediate effect :

54
i. revoking the boycott of the informant;
ii. returning the penalty amount of INR 5000/- imposed
on Sonia Medical Store;
iii. discontinue with the practice of issuance of NOC; and
iv. utilize the amount collected by issuance of NOC
towards welfare needs of the association and its
members in general.
Without prejudice to the submissions contained in the
foregoing chapters, it is humbly requested that if this Honble
Commission comes to the conclusion that the CDAF has
violated any provision of the Act, it may kindly consider the
mitigating factors, submissions and undertakings set out in
this chapter of the instant Reply. Accordingly it is humbly
requested that instead of proceeding against the CDAF
under Section 27(a) of the Act, the Honble Commission may
pass appropriate order(s) under Section 27(g) to guide the
CDAF in complying with the provisions of the Act and
develop a strong competition culture.
37. In their common preliminary reply the office bearers pleaded that Section
48 is not applicable to them and as such they cannot be held liable for the alleged
violation of the Act. They further pleaded that the action for imposition of penalty
could not have been initiated against them because by then no finding was
recorded by the competent authority that the Association had indulged in anti-
competitive activities/ practices.
38. The stand taken by different pharmaceutical companies, as extracted in
the report of the Jt. DG., reads as under :

55
M/s. Merck Limited
4.19. In response to the Notice dated 05.03.2013, it has been
informed that though there are no written guidelines issued by
AIOCD or local district associations regarding NOC/LOC to be
obtained by any person desirous of being appointed a wholesaler,
however AIOCD and its affiliates insist for the same through various
means including boycotting the companys products in case such
NOC/LOC is not obtained by any wholesaler or distributer so
appointed by the company. As such to avoid harassment and
boycott of its products, the company has been asking for NOC/LOC
from persons desiring to obtain the companys distributorship. It
has been stated that this was the industry wide practice and the
company was no exception. A copy of NOC obtained by the IP from
the District Chemist Federation, Ferozepur has been furnished. It
has been informed that the company avails Product Information
Services from the concerned State/District Associations of
Chemists and Druggists affiliated to AIOCD in order to inform the
pharmacies about its new product launches and pays for these
services on account of printing and circulation of the advertisement
as per the advertisement tariff. The company has informed that as
per guidelines issued by NPPA the margin on Scheduled
formulation is 8% to wholesalers and 16% to pharmacies.
Regarding non-scheduled formulation it has been informed that as
per industry practice the margin is 10% for wholesalers and 20%
for pharmacies.
M/s. Intas Pharmaceutical Limited
4.20 The company has informed vide its letter dated 02.04.2013
that in the matter of NOC/LOC/PIS from Chemists & Druggists

56
Associations, the same is not a requirement stipulated by the
company. With regard to margins of wholesaler and retailers, it has
been informed that the same are in accordance with the Drug
Pricing Control Order. In the matter of PIS and trade margins, the
company has informed vide its letter dated 10.04.2013 that before
launching of any new pharmaceutical products / drugs, it furnishes
an information sheet normally known as Product Information
System (PIS) containing the details of the product etc. to the
respective trade Association of Chemists and Druggists which
according to the company was being circulated in the trade for
general information. It has been stated that the company does not
require any NOC /LOC from any trade Association or its affiliates
prior to launching new pharmaceutical products / drugs to
wholesalers or retailers, it has been confirmed that the same are
not prescribed or decided by any apex body or trade Association.
It has been stated that trade margins to wholesalers and retailers
are being implemented at the pre-determined rate in accordance
with the provisions of DPCO.
M/s. Abbott India Limited
that it has not appointed any new stockist for its products in
Ferozepur area for over last three years and is not aware of any
requirement to take any NOC/LOC from Chemists & Druggists
Association, Ferozepur or from Punjab Chemists Association,
Patiala prior to appointment of stockists of companys products in
Ferozepur. The company has denied knowledge about fee, if any
prescribed by the above associations for NOC / LOC. The
company has also stated that it is not aware about any requirement
57
of NOC/LOC/PIS approval required to be taken from the
Associations prior to launching new products in the State of Punjab.
It has however been informed that fees for the purpose of
publication of product information in periodical publications of
Punjab Chemists Association for the purpose of spreading
awareness amongst the trade about the new products has been
paid which as per its records is about Rs. 2000/- for each
publication. In the matter of trade margins of stockists or retailers
of the companys products, it has been informed that the company
is not aware of any apex body or trade association prescribing or
deciding the said margins. It has been informed that margins for
scheduled formulations have been prescribed under the DPCO
1995. Regarding non-scheduled formulations, the company
generally offers 10% margins to stockists and 20% margins to
retailers which as per its understanding is broadly in line with he
prevailing industry practice.
M/s. Apex Laboratories Limited
that appointment of its existing stockist namely H.C. Medical
Agencies at Ferozepur was done due to non-cooperation of the IP
which was affecting the companys business, as well as the desire
expressed by the IP for discontinuation of its stockist ship of the
company. It has further been informed that the existing stockist
had been appointed after duly obtaining NOC from the Association
of Ferozepur. The company has vide its subsequent letter dated
07.04.2013 informed that as per standard practice, before
appointing any stockists in Ferozepur the company has to obtain
NOC from the district association which was also the practice in all
other States. It has been informed that no fees for the NOC had
58
been paid by the company. It has been clarified that there is no
written communication from any apex body or association regarding
the requirement of NOC, however, it was he business practice to
get NOC. Regarding Product Information Service (PIS) it has been
informed that fees on account of advertisement for new products
towards launching of such new products, the company has paid
prescribed fee to the State level Association i.e. Punjab Chemists
Association. Copies of the receipt issued by PCA in this respect
have been enclosed. In the matter of margins (Price of Retailers).
It has been informed that as per trade practice margins are fixed for
retailers at 10% for non-DPCO product sand 8% for DPCO
products.
M/s. Glenmark Pharmaceutical Limited
that appointment of stockist/retailer is as per companys internal
selection criteria for which the company nether consults any
Chemists or Druggists Association nor does it obtain or is required
to obtain any NOC /LOC from any Chemists or Druggists
Association or its affiliated associations for appointment of its
Stockists / retailers. It has further been informed that there are no
directives / decisions in the knowledge of the company of any apex
body or association regulating the pharmaceutical industry in the
matter of NOC/LOC to be obtained by the company from any
Association.
4.24 The company has informed that it does not seek any Product
Information Service (PIS) approval from any trade association or its
affiliates for launch of any new product. However, for creating
awareness in the trade about the new products launched by the
company from time to time, advertisements of the products are got

59
published in the bulletins published by trade associations and / or
their affiliates by payment of prescribed charges for the
advertisements.
In the matter of trade margins, it has been informed that as per
customary industry practice for non DPCO products, the margins
are 10% to stockist & 20% to retailers and as per prescribed
statutory provisions for DPCO products, the margins are 8% to
stockist and 16% to retailers.
M/s. Invida India Private Limited
that it is not required to seek NOC/LOC prior to appointment of its
distributors / CA /stockist for State of Punjab. In the matter of PIS,
it has been informed that the company had launched a product in
the month of February, 2012 in Punjab which it could commence
selling by complying with the formalities and making payment of Rs.
4000/- to Punjab Chemists Association. Regarding margins, it has
been informed that in line with the pharma industry practice, the
company offers minimum margins of 10% and 20% of stockist and
retailers respectively for non-scheduled formulations.
M/s. Macleods Pharmaceuticals Limited
that though it has not taken any NOC /LOC from Chemists and
Druggists Association, Ferozepur for appointment of stockists,
however, parties directly approached the Association and seek
LOC/NOC from their respective District Association. Copies of
some NOC/LOC issued by OP1 have been enclosed and it has
been informed that since the company does not take the NOC/LOC,
it has neither paid any fees for the same nor is it aware of the
60
prescribed fee, if any. The company has informed that there are no
directive to it from any apex body or Association in the matter of
taking NOC/LOC. Regarding PIS charges, it has been informed
that the company is paying the prescribed free for advertisement of
new product information prior to launching new product in the State.
The company has also informed that no margin has been
prescribed or decided by the Trade Association for
wholesalers/retailers of non-scheduled pharmaceutical products.
M/s. Sun Pharmaceuticals Limited
4.27 In response to the clarification sought as to whether prior to
appointment wholesaler/stock/retailer in Ferozepur whether any
NOC/LOC was required to be taken by the company from CDAF or
PCA, the company has informed vide its letter dated 08.04.2013
that there was no requirement of taking NOC/LOC by its
prospective wholesaler/stockist/retailer from the said associations.
The company has stated that it was well aware that NOC before
appointment leading to reduction of supply in the market would be
in contravention of Section 3(3)(b) of the Act. However, while
appointing distributor/stockist, to verify the worthiness and
credentials, the company only enquires from respective
associations, however, the stockist/distributor/retailer is not insisted
upon to obtain any NOC/LOC as pre-requisite to appointment. The
company has denied any information about the details of the fee
prescribed by the associations for grant of NOC/LOC and also
confirmed that there was no requirement as per decision / directive
e of any apex body or associations regulating the pharmaceutical
industry for taking NOC/LOC.

61
4.28 In the matte of NOC/LOC/PIS approval prior to launching
any new pharmaceutical products / drugs of the company, it
has been stated that the company does not have any
information about the prescribed fee / charges for grant of
such approval. It has been stated that in terms of proposition
of law, fixing of PIS charges may lead to fixing of prices of
drugs in violation of Section 3(3)(a) of the Act. The company
has informed that in terms of DPCO directives, whenever a
new drug is introduced in the market information to
wholesalers, retailers and consumers to be given about the
new drug for which the price list of new products is published
in the magazines of respective associations on payment of
applicable publication fee. In the matter of margins the
company has stated that though it was well aware about the
propositions of law that margins do not amount to fixation of
prices under the Act. It follows the provisions of DPCO in
this respect. However, regarding non-scheduled
pharmaceutical products/drugs of the company sold in
Punjab including Ferozepur, the company has stated that
margins of wholesalers / retailers with respect to the same
are not prescribed or decided by any apex body/trade
associations.
M/s. Zuventus Healthcare Limited
4.29 The company vide its letter dated 16.04.2013 informed that
the NOC dated 01.12.2012 from Chemists and Druggists
association, Ferozepur had been furnished to the company
by M/s. Ferozepur Medical Agency a wholesaler. The
company has stated that as per its information no NOC is

62
mandatory for appointment of any party as stockist. The
company has also stated that no directive / decision / MoU
of any apex body or Association has been received by it
regulating appointment of stockist / wholesaler and that no
NOC is required to be obtained from any trade Association
or its affiliates prior to launching any pharmaceutical
products/drugs. It has been stated that the company has not
experienced any delay or refusal in obtaining PIS approval.
License / permission of FDA and other regulatory bodies as
required under the Drugs and Cosmetics Act, the Drugs and
Cosmetics Rules and other applicable statutory regulation is
obtained prior to launch any new drugs and pharmaceutical
products. It has further been informed that it has not
received any communication from any trade Association
prescribing any margin of wholesalers or retailers with
respect to the Non-Scheduled Pharmaceutical products /
drugs.
M/s. J.B. Chemicals & Pharmaceuticals Limited
4.30 The company has vide its letter dated 09.05.2013 informed
that NOC for appointment of Ram Medical Agencies, a wholesaler
of Ferozepur was provided in terms of MOU between IDMA and
AIOCD which as per information received by the company from
IDMA in April, 2012 was terminated w.e.f. December, 2011. The
company has informed that NOC was obtained from Chemists &
Druggists Association Ferozepure with respect to the said
wholesaler prior to April, 2012. The company has submitted copy
each of the NOC dated 28.2.2012 and MOU dated 12.09.2003. the
Company has also informed that after termination of MOU, there is
no need of NOC/LOC /PIS charges for launch of new products.

63
With regard to PIS approval, it has been informed that the
Associations voluntarily provide PIS services at their option. It has
further been informed that the company pays trade margins as per
the provisions of DPCO. It has been informed that for scheduled
products margins of stockists was 8% and for non-scheduled
products the same was 10% excluding excise duty and local taxes.
4.31 Notices sent to M/s. Jacques Biotech, M/s. Coral Biotech, M/s.
Ozone Pharmaceuticals Limited, M/s. RevenMac Pharmaceuticals
Private Limited, M/s. Pharmed Limited and M/s. Sava Medica
Limited were not responded to by these companies.
39. The wholesalers / stockists namely, M/s. Tayal Associates, M/s. Punjab
Medical Agencies, M/s. Ferozepur Medical Agency, M/s. Bhagwati Medilinkers,
M/s. Ganpati Pharmaceuticals and M/s. Dimple Enterprises submitted separate
replies stating that there is a long standing practice that the companies demand
NOC / LOC from the Association but no circular has been issued in this regard.
According to some of the dealers, a decision was taken in the General Body
Meeting to make the NOC mandatory but no document was produced by either
of them to prove this assertion. However, majority of the wholesalers pleaded
ignorance about the requirement of NOC/LOC from the Association as a
condition precedent for appointment of distributor.
40. The Commission noticed the summary of findings and conclusions
recorded by the Jt. DG (paragraphs 10, 11 and 15). In paragraphs 17 to 56, the
Commission briefly adverted to the objections/submissions made by the
Association and other appellants. In paragraphs 59 and 60, the Commission
referred to the allegations made by Respondent No. 2. In paragraph 61, it
referred to the circular dated 27.05.2012 issued by the Association and
proceeded to hold that the impugned conduct of the association is anti-
competitive in as much as it limited/controlled supply/provision of goods/service

64
being in contravention of Section 3(3)(b) read with Section 3(1). The
observations made by the Commission which constitute the foundation of this
conclusion are contained in paragraphs 62 to 72, which are extracted below :
62. From a plain reading of the circular, it is evident that a decision
to boycott the informant was taken by CDAF in its
Extraordinary Meeting held on 26.05.2012. The said decision
was further circulated by CDAF to its members. This aspect
has neither been disputed nor denied by the opposite parties
in their respective replies, though diverse reasons were given
in support of the decision.
63. Furthermore, the above decisions taken by CDAF were also
being implemented by it in letter and spirit. This is evident from
the fact that some office-bearers including the President of
CDAF have during recording of statement confirmed that
penalty had been imposed by CDAF on a retailer (M/s. Sonia
Medical Store) in January 2013 for defying its directives and
continuing dealings with the informant.
64. In response, it was submitted on behalf of CDAF that all the
retailers, who are its members, objected to the abusive
conduct of the informant in not refunding the
inflated/tampered bills raised by the informant, without
deducting the amount for expired medicines returned by the
retailers, as detailed earlier. In this connection, it was pointed
out that in order to resolve the issue, CDAF in its General
Body meeting held on 23.05.2012 provided 2-3 days time to
the informant to settle the accounts of the retailers. However,
the informant refused to discuss the matter with CDAF or clear

65
his position. It was therefore submitted that the impugned
action of CDAF to boycott the informant was taken only upon
deliberation of the retailers, who were suffering due to the
abusive and fraudulent conduct of the informant.
65. It is not in dispute that CDAF is an association of enterprises
engaged in similar trade as far as the issues projected in the
present information are concerned. The Commission is of
opinion that the decision taken by CDAF in its meeting held
on 26.05.2012 and as circulated vide its circular dated
27.05.2012 amounts to limiting and controlling supply in the
market of drugs and medicines. Further, from the tenure of the
decision, it appears that non-membership of the association
was an important consideration for CDAF to take the
impugned decision. From a cumulative reading of the
decisions taken in the meeting as recorded in the circular, the
Commission has no hesitation in holding that the same have
the effect of not only limiting and controlling the supply of
goods and provision of services but also driving existing
competitors out of the market.
66. This is also strengthened from the figures submitted by the
informant whereby it has been pointed out that its sales in
Ferozepur for the period after its boycott by CDAF i.e. from
01.06.2012 to 31.03.2013 and during the corresponding prior
period i.e. 01.06.2011 to 31.03.2012 had declined to Rs.39.71
lakhs from Rs. 223.18 lakhs.
67. The other aspect which needs to be examined in the present
case relates to the stipulation by CDAF regarding NOC/LOC.

66
68. The informant has alleged that the opposite party No. 1 i.e.
CDAF has made it mandatory for any chemist/druggist, who
wishes to take distributorship for medicines of a company in
Ferozepur city, to take an NOC and LOC from it by making a
payment of Rs. 2100/- per company. The informant states that
it objected to the said rule in 2010, because of which it was
expelled from the primary membership of CDAF.
69. It is not in dispute that CDAF issued a circular dated
15.04.2006 wherein the decision taken by the Executive
Committee of CDAF in its meeting held on 13.04.2006 was
recorded. For the felicity of reference, the same is quoted
below:
During EC meeting on 13.04.2006 held at M/s. H.C.
Medical Agencies, Ferozepur, it was decided after
debated and discussions unanimously to receive
N.O.C. fees. Now Rs. 2100/- will be charged for taking
N.O.C. for each Co. any whole seller who added new
Co. is liable to pay Rs. 2100/- for added each Co. and
then start its supply to trade.
70. From a bare reading of the circular, it is apparent that
supplies cannot start without obtaining NOC. CDAF, while
conceding that NOCs are being issued by it, has contended
that the same was being done at the instance of the
pharmaceutical companies who were demanding NOC of
CDAF prior to appointment of a new or additional stockist.
This plea, besides being misconceived and of no bearing, also
stood contradicted from the statements recorded by the DG
of the office-bearers of the opposite party association itself,

67
wherein the office-bearer sought to rationalise the
requirement of NOC.
71. Moreover, it is the case of CDAF itself that it is guided by the
motive to protect the interests of its members and the Rules
and Regulations of the State level Association i.e. Punjab
Chemists Association (PCA) which stipulate the practice of
NOC/LOC. The relevant Article 17 of the Rules and
Regulations of PCA in this regard may be excerpted:
the District President/General Secretary/Office bearers
of the District Chemists Association is authorized to
issue LOC for the appointment of a stockist by the
company in their district. In case of any dispute, if
arises, the President/General Secretary of Punjab
Chemists Association is authorized to issue the LOC.
72. Based on the evidence collected by the DG, it is safe to
conclude that CDAF has been following a practice of
requirement of NOC prior to appointment of a new/additional
stockist in Ferozepur, which has the effect of limiting and
controlling the supply of drugs and medicines in Ferozepur.
41. In paragraphs 74 to 76 the Commission referred to Section 3(1), (2) and
(3) of the Act and recorded its final conclusion in the following words :
74. The Commission notes that in terms of the provisions
contained in section 3(1) of the Act, no enterprise or
association of enterprises or person or association of persons
can enter into any agreement in respect of production, supply,
distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an

68
appreciable adverse effect on competition within India.
Section 3(2) of the Act declares that any agreement entered
into in contravention of the provisions contained in sub-
section (1) shall be void. Further, by virtue of the presumption
contained in sub-section (3), any agreement entered into
between enterprises or associations of enterprises or persons
or associations of persons or between any person and
enterprise or practice carried on, or decision taken by, any
association of enterprises or association of persons, including
cartels, engaged in identical or similar trade of goods or
provision of services, which (a) directly or indirectly
determines purchase or sale prices; (b) limits or controls
production, supply, markets, technical development,
investment or provision of services; (c) shares the market or
source of production or provision of services by way of
allocation of geographical area of market, or type of goods or
services, or number of customers in the market or any other
similar way; (d) directly or indirectly results in bid rigging or
collusive bidding, shall be presumed to have an appreciable
adverse effect on competition.
75. Thus, in case of agreements as listed in section 3(3) of the
Act, once it is established that such an agreement exists, it
will be presumed that the agreement has an appreciable
adverse effect on competition; the onus to rebut this
presumption would lie upon the opposite party.
76. In the present case, the opposite party association could not
rebut the said presumption. It has not been shown by the
opposite party association how the impugned conduct

69
resulted into accrual of benefits to consumers or made
improvements in production or distribution of goods in
question. Further, the opposite party could not explain as to
how the said conduct did not foreclose competition.
42. The Commission then adverted to the supplementary investigation report,
noted the objection raised by the office bearers that Section 48 is not attracted in
the matter and held that Section 27 itself is sufficient for holding the office bearers
guilty of contravention without the aid and assistance of Section 48. Finally, the
Commission imposed penalty on all the appellants @ 10% of their respective
average turnover.
43. We have heard the learned counsel for the parties and perused the record
including the objections submitted by the Association and other appellants, the
replies filed by the pharmaceutical companies, wholesalers/retailers, Respondent
No. 2 and the undated affidavit of Shri Rajesh Arora.
44. Before deciding the questions formulated in the opening paragraph of this
order, we consider it imperative to observe that the procedure adopted by the Jt.
DG for conducting investigation and the final order passed by the Commission
under Section 27 of the Act suffer from several legal infirmities.
(i) The Jt. DG conducted investigation with a pre-determination to return a
finding that the Association and its office bearers are guilty of anti-
competitive conduct and violation of Section 3(3)(b). This is the reason
why he neither confronted the appellants with the material collected in the
form of three responses sent by Respondent No. 2, his affidavit, replies
sent by the pharmaceutical companies and wholesalers and retailers,
some of which contained suggestive references to mandatory character of

70
NOC/LOC. He did ask several leading questions to the Association and
its office-bearers but without disclosing them, the adverse material
proposed to be used for recording findings on the issue of violation of
Section 3. This methodology adopted by the Jt. DG was totally unjustified
and contrary to the basics of fairness and natural justice.
(ii) What is most interesting is that Respondent No. 2 had not produced any
evidence to prove that NOC/LOC was made mandatory by the Association
or that it had suffered particular loss and the Jt. DG conveniently
overlooked the uncontroverted assertion made by the Association and
other office bearers that those including Respondent No. 2, who did not
want to take NOC/LOC from the Association, did so from associations of
the neighbouring district and continued to do business in Ferozepur
without any hindrance and that as many as 80 stockists were doing
business in Ferozepur district without obtaining NOC/LOC from the
Association.
(iii) The Jt. DG went to the extent of brushing aside the most serious allegation
against Respondent No. 2 that he had overcharged the retailers by
tampering with the computer software, which had worked well with other
wholesalers and there was no complaint by the retailers that other
wholesalers were also giving fabricated bills and overcharging them.
(iv) Not only this, while recording a finding that obtaining NOC/LOC was
mandatory for appointment of distributors in Ferozepur, the Jt. DG
completely ignored that majority of pharmaceutical companies had denied
the suggestion that the Association was following such a practice. The
replies given by eight out of ten pharmaceutical companies amply prove
that none of the Associations including the appellant in Appeal No. 21 of
2014 had issued instructions, guidelines etc. making the NOC/LOC

71
mandatory for appointment of a distributor/stockist in Ferozepur district
and that a number of wholesalers were doing business without obtaining
NOC/LOC and that this was sufficient to prove that the requirement of
NOC/LOC was not mandatory.
(v) The supplementary report prepared by the Jt. DG is per se one-sided in
as much as he overlooked the categorical stand taken by the office bearers
that they had not indulged in anti-competitive action and brushed aside
their all arguments by adverting to the bald allegations contained in the
information filed by Respondent No. 2 and the affidavit filed by Shri Rajesh
Arora.
(vi) In so far as the Commission is concerned, it mechanically approved the
findings recorded by the Jt. DG on the issue of violation of Section 3(3)(b).
Under the scheme of the Act, Director General is primarily a fact-finding
authority. He is entrusted with the task of conducting investigation and
submit report keeping in view Regulation 20(4) of the Competition
Commission of India (General) Regulations, 2009 (for short, the 2009
Regulations). In terms of Section 26(7), the Commission can, if it is of the
opinion that further investigation is called for, direct such investigation by
the Director General or cause further inquiry to be made in the matter by
a designated officer or itself proceed further with the inquiry in the matter
in accordance with the provisions of the Act. If the Director General
submits a report with the finding that there is contravention of any of the
provisions of the Act and the Commission is of the opinion that further
inquiry is called for, it is entitled to inquire into such contravention in
accordance with the provisions of the Act. Section 27 empowers the
Commission to pass order after finalisation of the inquiry. For the sake of
convenient reference, Sections 3(1), 3(3), Sections 19(1), 26(1) to (8),

72
Sections 27, 36(1) and 48 of the Act and Regulations 18, 19 and 21 of the
2009 Regulations are reproduced below :
Sec. 3. Anti-competitive agreements.- (1) No enterprise or
association of enterprises or person or association of persons
shall enter into any agreement in respect of production,
supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India.
xx xx xx
(3) Any agreement entered into between enterprises or
associations of enterprises or persons or associations of
persons or between any person and enterprise or practice
carried on, or decision taken by, any association of
enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of
services, which-
(a) directly or indirectly determines purchase or sale
prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) shares the market or source of production or provision
of services by way of allocation of geographical area of
market, or type of goods or services, or number of
customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive
bidding, shall be presumed to have an appreciable
adverse effect on competition: Provided that nothing

73
contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such
agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or
provision of services.
Explanation.- For the purposes of this sub-section, "bid
rigging" means any agreement, between enterprises or
persons referred to in sub-section (3) engaged in
identical or similar production or trading of goods or
provision of services, which has the effect of
eliminating or reducing competition for bids or
adversely affecting or manipulating the process for
bidding.
Sec.19. Inquiry into certain agreements and dominant
position of enterprise.(1) The Commission may inquire into
any alleged contravention of the provisions contained in sub-
section (1) of section 3 or sub-section (1) of section 4 either
on its own motion or on (a) [receipt of any information, in
such manner and] accompanied by such fee as may be
determined by regulations, from any person, consumer or
their association or trade association; or 24 (b) a reference
made to it by the Central Government or a State Government
or a statutory authority.
Sec. 26. Procedure for inquiry under section 19. (1) On
receipt of a reference from the Central Government or a State
Government or a statutory authority or its own knowledge or
information received under section 19, if the Commission is of

74
the opinion that there exists a prima facie case, it shall direct
the Director-General to cause an investigation to be made in
to the matter:
Provided that if the subject-matter of an information
received is, in the opinion of the Commission, substantially the
same as or has been covered by any previous information
received, then the new information may be clubbed with the
previous information.
(2) Where on receipt of a reference from the Central
Government or a State Government or a statutory authority or
information received under section 19, the Commission is of
the opinion that there exists no prima facie case, it shall close
the matter forthwith and pass such orders as it deems fit and
send a copy of its order to the Central Government or the
State Government or the statutory authority or the parties
concerned, as the case may be.
(3) The Director-General shall, on receipt of direction
under sub-section (1), submit a report on his findings within
such period as may be specified by the Commission.
(4) The Commission may forward a copy of the report
referred to in subsection (3) to the parties concerned:
Provided that in case the investigation is caused to be
made based on a reference received from the Central
Government or the State government or the statutory
authority, the Commission shall forward a copy of the report
referred to in sub-section (3) to the Central Government or the
State Government or the statutory authority, as the case may
be.
75
(5) If the report of the Director-General referred to in
sub-section (3) recommends that there is no contravention of
the provisions of this Act, the Commission shall invite
objections or suggestions from the Central Government or the
State government or the statutory authority or the parties
concerned, as the case may be, on such report of the Director-
General.
(6) If, after consideration of the objections or
suggestions referred to in subsection (5), if any, the
Commission agrees with the recommendation of the Director-
General, it shall close the matter forthwith and pass such
orders as it deems fit and communicate its order to the Central
Government or the State Government or the statutory
authority or the parties concerned, as the case may be.
(7) If, after consideration of the objections or
suggestions referred to in subsection (5), if any, the
Commission is of the opinion that further investigation is called
for, it may direct further investigation in the matter by the
Director-General or cause further inquiry to be made in the
matter or itself proceed with further inquiry in the matter in
accordance with the provisions of this Act.
(8) If the report of the Director-General referred to in
sub-section (3) recommends that there is contravention of any
of the provisions of this Act, and the Commission is of the
opinion that further inquiry is called for, it shall inquire into
such contravention in accordance with the provisions of the
Act.
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Sec. 27. Orders by Commission after inquiry into
agreements or abuse of dominant position.- Where after
inquiry the Commission finds that any agreement referred to
in section 3 or action of an enterprise in a dominant position,
is in contravention of section or section 4, as the case may be,
it may pass all or any of the following orders, namely:-
(a) direct any enterprise or association of enterprises or
person or association of persons, as the case may be,
involved in such agreement, or abuse of dominant
position, to discontinue and not to re-enter such
agreement or discontinue such abuse of dominant
position, as the case may be;
(b) impose such penalty, as it may deem fit which shall be
not more than ten per cent. of the average of the
turnover for the last three preceding financial years,
upon each of such person or enterprises which are
parties to such agreements or abuse: Provided that in
case any agreement referred to in section 3 has been
entered into by any cartel, the Commission shall
impose upon each producer, seller, distributor, trader
or service provider included in that cartel, a penalty
equivalent to three times of the amount of profits made
out of such agreement by the cartel or ten per cent. of
the average of the turnover of the cartel for the last
preceding three financial years, whichever is higher;
(c) award compensation to parties in accordance with the
provisions contained in section 34;

77
(d) direct that the agreements shall stand modified to the
extent and in the manner as may be specified in the
order by the Commission;
(e) direct the enterprises concerned to abide by such other
orders as the Commission may pass and comply with
the directions, including payment of costs, if any;
(f) recommend to the Central Government for the division
of an enterprise enjoying dominant position;
(g) pass such other order as it may deem fit.
[Provided that while passing orders under this
section, if the Commission comes to a finding, that an
enterprise in contravention to section 3 or section 4 of
the Act is a member of a group as defined in clause (b)
of the Explanation to section 5 of the Act, and other
members of such a group are also responsible for, or
have contributed to, such a contravention, then it may
pass orders, under this section, against such members
of the group.]
Sec.36. Power of Commission to regulate its own
procedure.--(1) In the discharge of its functions, the
Commission shall be guided by the principles of natural justice
and, subject to the other provisions of this Act and of any rules
made by the Central Government, the Commission shall have
the powers to regulate its own procedure.

78
Sec.48. Contravention by companies.- (1) Where a person
committing contravention of any of the provisions of this Act
or of any rule, regulation, order made or direction issued there
under is a company, every person who, at the time the
contravention was committed, was in charge of, and was
responsible to the company for the conduct of the business of
the company, as well as the company, shall be deemed to be
guilty of the contravention and shall be liable to be proceeded
against and punished accordingly.
Provided that nothing contained in this sub-section
shall render any such person liable to any punishment if he
proves that the contravention was committed without his
knowledge or that he had exercised all due diligence to
prevent the commission of such contravention.
(2) Notwithstanding anything contained in sub-
section (1), where a contravention of any of the provisions of
this Act or of any rule, regulation, order made or direction
issued there under has been committed by a company and it
is proved that the contravention has taken place with the
consent or connivance of, or is attributable to any neglect on
the part of, any director, manager, secretary or other officer of
the company, such director, manager, secretary or other
officer shall also be deemed to be guilt y of that contravention
and shall be liable to be proceeded against and punished
accordingly.
Explanation.-For the purposes of this section,-
(a) "company" means a body corporate and includes a firm
or other association of individuals; and

79
(b) "director", in relation to a firm, means a partner in the
firm.
Regulations 18, 19, 20 and 21:
18. Issue of direction to cause investigation on prima facie
case (1) Where the Commission is of the opinion that a prima
facie case exists, the Secretary shall convey the directions of the
Commission 1[within seven days,] to the Director-General to
investigate the matter.
(2) A direction of investigation to the Director-General shall be
deemed to be the commencement of an inquiry under section 26
of the Act.
19. Communication of order when no prima facie case found.
If the Commission is of the opinion that there exists no prima facie
case, the Secretary shall send a copy of the order of the
Commission regarding closure of the matter forthwith to the
Central Government or the State Government or the Statutory
Authority or the parties concerned, as the case may be, as
provided in sub-section (2) of section 26 of the Act.
20. Investigation by Director-General. (1) The Secretary shall,
while conveying the directions of the Commission under
regulation 18, send a copy of the information or reference, as the
case may be, with all other documents or materials or affidavits
or statements which have been filed either along with the said
information or reference or at the time of preliminary conference,
to the Director-General.
(2) The Commission shall direct the Director-General to
submit a report within such time as may be specified by the

80
Commission which ordinarily shall not exceed sixty days from the
date of receipt of the directions of the Commission.
(3) The Commission may, on an application made by the
Director-General, giving sufficient reasons, extend the time for
submission of the report by such period as it may consider
reasonable.
(4) The report of the Director-General shall contain his
findings on each of the allegations made in the information or
reference, as the case may be, together with all evidences or
documents or statements or analyses collected during the
investigation.
Provided that when considered necessary, the Director
General may, for maintaining confidentiality, submit his report in
two parts. One of the parts shall contain the documents to which
access to the parties may be accorded and another part shall
contain confidential and commercially sensitive information and
documents to which access may be partially or totally restricted.
(5) Ten copies of the report of the Director-General, along
with a soft copy in document format, shall be forwarded to the
Secretary within the time specified by the Commission:
Provided that the Secretary may ask for more copies of the
report as and when required.
(6) If the Commission, on consideration of the report, is of
the opinion that further investigation is called for, it may direct the
Director-General to make further investigation and submit a
supplementary report on specific issues within such time as may
be specified by the Commission but not later than forty-five days.

81
21. Procedure for inquiry under section 26 of the Act. (1) On
receipt of the report of the Director General, the Secretary shall
place the said report before the Commission [within seven days,]
for further orders and, in accordance with the direction of the
Commission, forward [either a hard or a soft copy (in electronic
form)] [of non confidential version] thereof to the Central
Government or the State Government or the statutory authority,
or the parties concerned, as the case may be.
(2) If the report of the Director-General finds no contravention
of the provisions of the Act, the Secretary shall [within seven
days,] convey the directions of the Commission for inviting
objections or suggestions [to be filed within fifteen days] from the
Central Government or the State Government or the statutory
authority, or from the parties concerned, as the case may be on
such report of the Director-General.
(3) If the Commission orders closure of the matter on
consideration of the objections or suggestions, if any, referred to
in sub-regulation (2), an agrees with the findings of the Director-
General, the Secretary shall [within seven days,] convey the
orders of the Commission to the Central Government or the State
Government or the statutory authority or the parties concerned,
as the case may be.
(4) If the Commission, on consideration of the objections or
suggestions, referred to in sub-regulation (2), directs further
investigations in the matter by the Director-General or further
inquiries in the matter to be made by an officer of the Commission
so authorized by it, the Secretary shall [within seven days,]

82
convey the directions of the Commission to the Central
Government or the officer so authorized, as the case may be.
(5) On an application made by the officer authorized by the
Commission justifying the production of specified books or other
documents, as may be required to make further inquiries under
sub-regulation (4), the Commission may direct any person to
produce such specified books or other documents relating to any
trade carried out by such person or enterprise, as per the
provisions of sub section (4) of section 36 of the Act.
Explanation. - For the purpose of this sub-regulation, the word
officer shall include the experts and professionals mentioned
under sub-section (3) of section 17 or sub-section (3) of section
17 or sub-section (3) of section 36 of the Act.
(6) On receipt of the report of the Director-General on further
investigation or report of the authorized officer on further inquiries,
as the case may be, the Secretary shall [with the approval of the
Chairperson, fix the meeting of the Commission within seven days
for consideration thereof].
(7) If the report of the Director-General mentioned under sub-
regulation (1) finds contravention of any of the provisions of the
Act, the Secretary shall obtain the orders of the Commission for
inviting objections or suggestions from the Central Government
or the State Government or the statutory authority or the parties
concerned, as the case may be.
(8) On consideration of the objections or suggestions from the
Central Government or the State Government or the statutory
authority or the parties concerned, or the report of further

83
investigation or further inquiries, as the case may be, if the
Commission is of the opinion that further inquiry is called for, the
Secretary shall fix the meeting of the Commission for
consideration thereof, after issue of notice as per regulation 22,
to the Central Government or the State Government or the
statutory authority or the parties concerned, as the case may be.
(9) The Secretary shall keep the Director-General informed of
the dates of the meetings of the Commission for inquiry under
sub-section (7) or sub-section (8) of section 26 of the Act for
appearing in person or through any of his officers in accordance
with the provisions of section 35 of the Act.
(vi-a). Some of the above reproduced provisions were considered by a three
judge Bench of the Supreme Court in Competition Commission of India
vs. Steel Authority of India Limited [(2010) 10 SCC 744]. In that case, the
Commission had challenged the maintainability of an appeal filed by the
respondent against an order passed under 29 Section 26(1) of the Act.
The Supreme Court analysed the relevant provisions of the Act and the
Regulations and laid down several propositions including the following :
78. Cumulative reading of these provisions, in conjunction
with the scheme of the Act and the object sought to be
achieved, suggests that it will not be in consonance
with the settled rules of interpretation that a statutory
notice or an absolute right to claim notice and hearing
can be read into the provisions of Section 26(1) of the
Act. Discretion to invite, has been vested in the
Commission, by virtue of the Regulations, which must

84
be construed in their plain language and without giving
it undue expansion.
97. The above reasoning and the principles enunciated,
which are consistent with the settled canons of law, we
would adopt even in this case. In the backdrop of these
determinants, we may refer to the provisions of the Act.
Section 26, under its different sub-sections, requires
the Commission to issue various directions, take
decisions and pass orders, some of which are even
appealable before the Tribunal. Even if it is a direction
under any of the provisions and not a decision,
conclusion or order passed on merits by the
Commission, it is expected that the same would be
supported by some reasoning. At the stage of forming
a prima facie view, as required under Section 26(1) of
the Act, the Commission may not really record detailed
reasons, but must express its mind in no uncertain
terms that it is of the view that prima facie case exists,
requiring issuance of direction for investigation to the
Director General. Such view should be recorded with
reference to the information furnished to the
Commission. Such opinion should be formed on the
basis of the records, including the information
furnished and reference made to the Commission
under the various provisions of the Act, as afore-
referred. However, other decisions and orders, which
are not directions simpliciter and determining the rights
of the parties, should be well reasoned analyzing and

85
deciding the rival contentions raised before the
Commission by the parties. In other words, the
Commission is expected to express prima facie view in
terms of Section 26(1) of the Act, without entering into
any adjudicatory or determinative process and by
recording minimum reasons substantiating the
formation of such opinion, while all its other orders and
decisions should be well reasoned.
(vi-b) A careful reading of Section 26(1) shows that once the Commission forms
an opinion that there exists a prima facie case, it shall direct the Director
General to cause an investigation to be made into the matter. In terms of
Regulation 18 read with Regulation 20, the direction of the Commission is
required to be communicated by its Secretary to the Director General
along with a copy of the information or reference with all other documents
or materials or affidavits or statements which have been filed with the
information or reference or at the time of preliminary conference. Section
26(3) requires the Director General to submit a report on its findings within
the time specified by the Commission. Such findings must cover each of
the allegations contained in the information or reference together with
evidence or documents or statements or analysis collected during the
investigation. Section 26(4) enjoins the Commission to forward the report
of the Director General to the parties concerned. If the investigation is
caused to be made based on a reference received from the Central
Government or the State Government or the statutory authority, then the
report is required to be sent to the appropriate Government or the statutory
authority. The object of sending report to the appropriate Government or
the statutory authority or the parties concerned is to enable them to submit
objections or suggestions qua the findings recorded by the Director

86
General. This exercise has to be undertaken by the Commission even if
the Director General finds that there is no contravention of Sections 3 or 4
of the Act. The Commission can close the case if, after considering the
objections or suggestions, it agrees with the recommendations of the
Director General. If the Commission is not satisfied with the report of the
Director General and forms an opinion that further investigation is called
for then it can direct the Director General to make such investigation or
cause further inquiry into the matter through an authorized officer or itself
hold enquiry [Section 26(7) read with Regulation 21 (4)]. If the report of the
Director General discloses contravention of provisions of the Act and the
Commission opines that further inquiry is called for then it shall hold inquiry
into such contravention. In such an eventuality, the Commission is
required to give notice to the Central Government or the State Government
or the statutory authority or the parties concerned [Section 26(8) read with
Regulation 21 (8)] and invite their objections or suggestions. Not only this,
the Secretary of the Commission is obliged to inform the Director General
about the dates fixed for the meetings of the Commission, so as to enable
him to appear in person or through an officer. If as a result of the inquiry
held under Section 26(7) or 26(8) read with the relevant regulations, the
Commission comes to the conclusion that contravention of Section 3 or
Section 4 of the Act is established then it can pass appropriate order under
Section 27 including an order for imposing penalty.
(vi-c). The exercise required to be undertaken by the Commission under
Sections 26(7) or 26(8) read with the relevant regulations and an order
passed under Section 27 which visits the concerned person with civil
consequences makes the functions of the Commission adjudicatory/quasi
judicial. Therefore, before recording an adverse finding against a person
and holding him guilty of violating Section 3 or 4 of the Act, the

87
Commission is obliged to comply with various facets of the principles of
natural justice. This necessarily implies that while holding an inquiry under
Section 26(7) or Section 26(8) the Commission is required to comply with
the rule of audi alteram partem and give an effective opportunity of
hearing to the person against whom a finding is likely to be recorded on
the issue of contravention of Section 3 or Section 4 of the Act not only to
controvert the allegation made against him as also the evidence/material
proposed to be used in support of such allegation but also produced
evidence to show that he/she/it has not violated any provision of the Act.
If the Commission wants to rely upon some information/ material, which
does not form part of the report of the Director General then such
information/material must be disclosed to the person concerned and an
effective opportunity has to be given to him to controvert the same. The
Commission is also required to pass a speaking order to demonstrate
application of mind to the relevant factors/considerations and exclusion of
irrelevant and extraneous factors/considerations.
(vi-d). The ambit and scope of principles of natural justice has been considered
by the Courts across the globe. In India, the High Courts and Supreme
Court have invoked these principles in innumerable cases and quashed
administrative, quasi judicial or even judicial orders the ground of violation
thereof. In Ridge vs. Baldwin, 164 AC 40, the House of Lords made the
following observation :
It may be convenient at this point to deal with an argument
that, even if as a general rule a watch committee must hear a
constable in his own defence before dismissing him, this case
was so clear that nothing that the appellant could have said
could have made any difference. It is at least very doubtful
whether that could be accepted as an excuse. But, even if it

88
could, the respondents would, in my view, fail on the facts. It
may well be that no reasonable body of men could have
reinstated the appellant. But as between the other two
courses open to the watch committee the case is not so clear.
Certainly on the facts, as we know them, the watch committee
could reasonably have decided to forfeit the appellant's
pension rights, but I could not hold that they would have acted
wrongly or wholly unreasonably if they had in the exercise of
their discretion decided to take a more lenient course.
The judgment in State of Orissa vs. Dr. (Miss) Binapani Dei and others
[AIR 1967 SC 1269], contains a lucid exposition of the principles of natural
justice and their applicability to what was then thought as purely
administrative action. The facts of that case were that the respondent had
been retired from service by the State Government by relying upon the
date of birth which was unilaterally changed by the competent authority.
The Orissa High Court quashed the retirement of the respondent by
declaring that it was punitive and amounted to removal from service within
the meaning of Article 311 of the Constitution. The High Court further held
that the order of retirement was vitiated because the writ petitioner had
not been given a reasonable opportunity of showing cause against the
proposed change in the date of birth recorded in her service book. While
approving the second part of the High Courts order, the Supreme Court
made the following observations :
9. The deciding authority, it is true, is not in the position
of a Judge called upon to decide an action between contesting
parties, and strict compliance with the forms of judicial
procedure may not be insisted upon. He is however under a
duty to give the person against whom an enquiry is held an

89
opportunity to set up his version or defence and an opportunity
to correct or to controvert any evidence in the possession of
the authority which is sought to be relied upon to his prejudice.
For that purpose the person against whom in enquiry is held
must be informed of the case he is called upon to meet, and
the evidence in support thereof. The rule that a party to whose
prejudice an order is intended to be passed is entitled to a
hearing applies alike to judicial tribunals and bodies of
persons invested with authority to adjudicate upon matters
involving civil consequences. It is one of the fundamental
rules of our constitutional set-up that every citizen is protected
against exercise of arbitrary authority by the State or its
officers. Duty to act judicially would therefore arise from the
very nature of the function intended to be performed: it need
not be shown to be superadded. If there is power to decide
and determine to the prejudice of a person, duty to act
judicially is implicit in the exercise of such power. If the
essentials of justice be ignored and an order to the prejudice
of a person is made, the order is a nullity. That is a basic
concept of the rule of law and importance thereof transcends
the significance of a decision in any particular case.
12. It is true that some preliminary enquiry was made by Dr
S. Mitra. But the report, of that enquiry officer was never
disclosed to the first respondent. Thereafter the first
respondent was required to show cause why April 16, 1907
should not be accepted as the date of birth and without
recording any evidence the order was passed. We think that
such an enquiry and decision were contrary to the basic

90
concept of justice and cannot have any value. It is true that
the order is administrative in character, but even an
administrative order which involves civil consequences, as
already stated, must be made consistently with the rules of
natural justice after informing the first respondent of the case
of the State, the evidence in support thereof and after giving
an opportunity to the first respondent of being heard and
meeting or explaining the evidence.
(Emphasis supplied)
In Rajesh Kumar vs. CIT [(2007) 2 SCC 181], the Suprerme Court made
the following observation :
48. In any event, when civil consequences ensue, there is
hardly any distinction between an administrative order and a
quasi judicial order. There might have been difference of
opinions at one point of time, but it is now well-settled that a
thin demarcated line between an administrative order and
quasi-judicial order now stands obliterated.
55. Justice, as is well known, is not only be done but
manifestly seem to be done. If the assessee is put to notice,
he could show that the nature of accounts is not such which
would require appointment of special auditors. He could
further show that what the assessing officer considers to be
complex is in fact not so. It was also open to him to show that
the same would not be in the interest of the Revenue.
56. In this case itself the appellants were not made known as
to what led the Deputy Commissioner to form an opinion that
all relevant factors including the ones mentioned in Section

91
142(2A) of the Act are satisfied. If even one of them was not
satisfied, no order could be passed. If the attention of the
Commissioner could be drawn to the fact that the underlined
purpose for appointment of the special auditor is not bona fide
it might not have approved the same.
(Underlining is ours)
In Kothari Filaments and another vs. Commissioner of Customs (Port),
Kolkata and others [(2009) 2 SCC 192], the Supreme Court considered
the correctness of an order passed by the Calcutta High Court dismissing
the writ petition filed by the appellant against the order of the Customs,
Excise and Gold (Control) Appellate Tribunal, Calcutta, which, in turn,
approved the order of confiscation and penalty passed by the competent
authority under the Customs Act, 1962. After noticing the fact that the
appellant had not been given opportunity to explain the material used
against it, the Supreme Court observed:
14. The statutory authorities under the Act exercise quasi-
judicial function. By reason of the impugned order, the
properties could be confiscated, redemption fine and personal
fine could be imposed and in the event an importer was found
guilty of violation of the provisions of the Act. In the event, a
finding as regards violation of the provisions of the Act is
arrived at, several steps resulting in civil or evil consequences
may be taken. The principles of natural justice, therefore, were
required to be complied with.
15. The Act does not prohibit application of the principles of
natural justice. The Commissioner of Customs either could
not have passed the order on the basis of the materials which
92
were known only to them, copies whereof were not supplied
or inspection thereto had not been given. He, thus, could not
have adverted to the report of the overseas enquiries. A
person charged with misdeclaration is entitled to know the
ground on the basis whereof he would be penalized. He may
have an answer to the charges or may not have. But there
cannot be any doubt whatsoever that in law he is entitled to a
proper hearing which would include supply of the documents.
Only on knowing the contents of the documents, he could
furnish an effective reply.
(Emphasis supplied)
In Balchandra L. Jharkihoili and others vs. B.S. Yeddyurappa and others
[(2011) 7 SCC 1], the Supreme Court set aside an order passed by the
Karnataka High Court which had upheld the decision of the Speaker of
the Karnataka Assembly to disqualify the appellant. One of the questions
considered by the Supreme Court was whether the speaker was duty
bound to supply the affidavits filed by the two MLAs, which constituted the
foundation of his order. While answering the question in affirmative, the
Supreme Court observed:
124. The Speaker apparently did not take into consideration
the rule of evidence that a person making an allegation has to
prove the same with supporting evidence and the mere fact
that the allegation was not denied, did not amount to the same
having been proved on 36 account of the silence of the person
against whom such allegations are made. Except for the
affidavit filed by Shri K.S. Eswarappa, State President of the
B.J.P., and the statements of two of the thirteen MLAs, who

93
had been joined in the Disqualification Application, there is
nothing on record in support of the allegations which had been
made therein. Significantly, the said affidavits had not been
served on the Appellants. Since Shri K.S. Eswarappa was not
a party to the proceedings, the Speaker should have caused
service of copies of the same on the Appellants to enable
them to meet the allegations made therein.
125. In our view, not only did the Speaker's action amount
to denial of the principles of natural justice to the Appellants,
but it also reveals a partisan trait in the Speaker's approach in
disposing of the Disqualification Application filed by Shri B.S.
Yeddyurappa. If the Speaker wished to rely on the statements
of a third party which were adverse to the Appellants'
interests, it was obligatory on his part to have given the
Appellants an opportunity of questioning the deponent as to
the veracity of the statements made in the affidavit. This
conduct on the part of the Speaker is also indicative of the hot
haste with which the Speaker disposed of the Disqualification
Petition as complained of by the Appellants.
126. The question does, therefore, arise as to why the
Speaker did not send copies of the affidavit affirmed and filed
by Shri Eswarappa as also the affidavits of the two MLAs, who
had originally withdrawn support to the Government led by
Shri Yeddyurappa, but were later allowed to retract their
statements, to the Appellants. Given an opportunity to deal
with the said affidavits, the Appellants could have raised the
question as to why the said two MLAs, Shri M.P.
Renukacharya and Shri Narasimha Nayak, were treated

94
differently on account of their having withdrawn the letters
which they had addressed to the Governor, while, on the other
hand, disqualifying the appellants who had written identical
letters to the Governor, upon holding that they had ceased to
be members of the Bharatiya Janata Party, notwithstanding
the Show-Cause notices issued to them.
155. As we have earlier indicated, even if the
Disqualification Rules were only directory in nature, even then
sufficient opportunity should have been given to the
Appellants to meet the allegations levelled against them. The
fact that the Show-Cause notices were issued within the time
fixed by the Governor for holding the Trust Vote, may explain
service of the Show-Cause notices by affixation at the official
residence of the Appellants, though without the documents
submitted by Shri Yeddyurappa along with his application, but
it is hard to explain as to how the affidavits, affirmed by Shri
K. S. Eswarappa, Shri M.P. Renukacharya and Shri
Narasimha Nayak, were served on the learned Advocates
appearing for the Appellants only on the date of hearing and
that too just before the hearing was to commence. Extraneous
considerations are writ large on the face of the order of the
Speaker and the same has to be set aside.
(Emphasis added)
In Ayaaubkhan Noorkhan Pathan vs. State of Maharashtra and others
[(2013) 4 SCC 465], the Supreme Court considered the question whether
the caste certificate issued in favour of the appellant could be cancelled
without giving him reasonable opportunity of hearing including an
opportunity to cross-examine the witnesses examined by the department.

95
After noticing the judgment of the Constitutional Bench judgment in State
of M.P. vs. Chintaman Sadashiva Waishampayan [AIR 1961 SC 1623]
and large number of other decisions, a Bench of two judges observed :
24. A Constitution Bench of this Court in State of M.P. v.
Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623,
held that the rules of natural justice, require that a party must
be given the opportunity to adduce all relevant evidence upon
which he relies, and further that, the evidence of the opposite
party should be taken in his presence, and that he should be
given the opportunity of cross-examining the witnesses
examined by that party. Not providing the said opportunity to
cross-examine witnesses, would violate the principles of
natural justice. (See also: Union of India v. T.R. Varma,
Meenglas Tea Estate v. Workmen, M/s. Kesoram Cotton Mills
Ltd. v. Gangadhar & Ors., New India Assurance Company Ltd.
v . Nusli Neville Wadia and Anr., Rachpal Singh & Ors. v.
Gurmit Singh & Ors., Biecco Lawrie 38 & Anr. v. State of West
Bengal & Anr., and State of Uttar Pradesh v. Saroj Kumar
Sinha).
25. In Lakshman Exports Ltd. v. Collector of Central
Excise, this Court, while dealing with a case under the Central
Excise Act, 1944, considered a similar issue i.e. permission
with respect to the cross-examination of a witness. In the said
case, the assessee had specifically asked to be allowed to
cross-examine the representatives of the firms concern, to
establish that the goods in question had been accounted for
in their books of accounts, and that excise duty had been paid.
The Court held that such a request could not be turned down,
96
as the denial of the right to crossexamine, would amount to a
denial of the right to be heard i.e. audi alteram partem.
26. In New India Assurance Company Ltd., v. Nusli Neville
Wadia, this Court considered a case under the Public
Premises (Eviction of Unauthorised Occupants) Act, 1971 and
held as follows :
45. If some facts are to be proved by the landlord,
indisputably the occupant should get an opportunity to
crossexamine. The witness who intends to prove the
said fact has the right to cross-examine the witness.
This may not be provided by under the statute, but it
being a part of the principle of natural justice should be
held to be indefeasible right.
In view of the above, we are of the considered opinion that the
right of cross-examination is an integral part of the principles
of natural justice.
45. From what we have observed above, it is clear that if as a result of the
inquiry the Commission finds that any agreement referred to in Section 3 read
with Section 2(b) or action of an enterprise in a dominant position is in
contravention of Section 3 or Section 4, then it may pass all or any of the orders
enumerated in Clauses (1), (b), (d), (e) or (g) of Section 27. In the scheme of
things, it is bounden duty of the Commission to objectively consider the report of
the Director General together with the findings recorded by him, make its own
analysis of the pleadings and documents to find out whether or not there has
been contravention of Sections 3 or 4. This necessarily implies that the
Commission must consider the allegations made in the information, the replies
received in response to notices issued under Section 36(2) read with Section
97
41(2), the information and documents collected by the Director General/Jt. DG
and then record its own findings. The Commission cannot abdicate its duty and
simply approve the findings of the facts and the conclusion recorded by the
Director General and pass order under Section 27 and/or Section 48 of the Act.
46. As mentioned above, the impugned order does not depict objective
consideration of the responses given by the appellants to the notices issued by
the Jt. DG under Section 36(2) read with Section 41(2), the documents produced
by them, the material collected by the Jt. DG in the course of investigation, which
included the responses of Respondent No. 2, his affidavit, replies sent by PCA
and AIOCD, ten pharmaceutical companies and a number of wholesalers and
retailers. After the Commission had sent the reports (main as well as
supplementary) to the appellants, they filed detailed objections to the findings
recorded by the Jt. DG including the one that the concerned officer had acted in
blatant disregard to the rules of natural justice and fairness and had omitted to
consider the relevant documents and material. Unfortunately, the Commission
did not objectively deal with the objections taken by the appellants and did not
advert to the unequivocal stand taken by the eight out of ten pharmaceutical
companies that NOC/LOC was not mandatory for appointment of a distributor in
district Ferozepur. The Commission also did not take into consideration, the
background in which resolution dated 26.05.2012 was passed by the Association
including the fact that Respondent No. 2 had indulged in several malpractices
and harassed the retailers, many of whom were members of the Association by
issuing inflated bills and refusing to deduct the amount relating to expired drugs
which were returned. The Commission also did not take note of the fact that
Respondent No. 2 had been expelled because of malpractices indulged by it and
that no evidence whatsoever was produced to prove that supply of
medicines/drugs had been adversely affected due to the termination of
membership of Respondent No. 2 or its boycott. The only thing which

98
Respondent No. 2 did was to make a bald statement in his reply and affidavit that
his turnover had reduced from 223.81 Lacs to 39.71 Lacs. However, no
contemporaneous evidence like return filed before the Income Tax Authority or
any other competent authority to show that its boycott had adversely affected its
business. That apart, there was absolutely no evidence to show that the boycott
of Respondent No. 2 had the effect of limiting supply of medicines/drugs in the
market. Respondent No. 2 could have examined some of the wholesalers,
retailers or representatives of the pharmaceutical companies to prove the
allegations on the issue of reduction in the availability of drugs and medicines in
the market, but no such offer was made by him/it and yet the Jt. DG and the
Commission arbitrarily concluded that the action taken by the Association was
contrary to Section 3(3)(B) of the Act.
47. What needs to be emphasised that being an adjudicatory body, the
Commission exercises quasi judicial function. The orders passed by it can have
great adverse impact on the rights of the parties. Therefore, it is bound to act in
consonance with the provisions of the Statute and also rules of natural justice,
which are required to be followed by every quasi judicial authority functioning
under our Constitution. To put it differently, no quasi judicial body has the right
to trample over the fundamentals of the rule of law, constitute an integral part of
democracy in our country. One of the facets of the rules of natural justice is that
every quasi judicial authority must record reasons in support of its order. Such
reasons reflect and demonstrate the application of mind by the quasi judicial
authority. An order which is bereft of reasons is just like inscrutable face of a
sphinx.
48. An extremely lucid exposition of law on the requirement of speaking order
has been made by the Full Bench of Gujrat High Court in Testeels Ltd. Vs. N.M.
Desai and Another [AIR 1970 Guj. 1]. In the judgement authored by him on behalf
of the Full Bench, P.N. Bhagwati, C.J. (as he then was) examined the issue
99
whether the administrative officer discharging quasi judicial functions is bound to
give reasons in support of his order he makes. That question arose in the
backdrop of challenge of an order made by the Conciliation Officer under Section
33(2)(b) of the Industrial Disputes Act, 1947. After examining the various facets
of the question, the Full Bench observed :
3. There are two strong and cogent reasons why we must insist
that every quasi-judicial order must disclose reasons in support of it.
The necessity of giving reasons flows as a necessary corollary from
the rule of law which constitutes one of the basic principles of our
constitutional set up. Our Constitution posts a welfare State in which
every citizen must have justice - social, economic and political and
in order to achieve the ideal of welfare State, the State has to perform
several functions involving acts of interferences with the free and
unrestricted exercise of private rights. The State is called upon to
regulate and control the social and economic life of the citizen in
order to establish socio-economic justice and remove the existing
imbalance in the socio-economic structure. The State has, therefore,
necessarily to entrust diverse functions to administrative authorities
which involve making of orders and decisions and performance of
acts affecting the rights of individual members of the public. In
exercise of some of these functions, the administrative authorities
are required to act judicially. Now what is involved in a judicial
process is well settled and as pointed out by Shah J., in Jaswant
Sugar Mills's case, AIR 1963 SC 677 (supra), a quasi-judicial
decision involves the following three elements:
(1) It is in substance a determination upon investigation of a
question by the application of objective standards to facts found in
the light of pre-existing legal rules:

100
(2) It declares rights or imposes upon parties obligations affecting
their civil rights; and (3) the investigation is subject to certain
procedural attributes contemplating an opportunity of presenting its
case to a party, ascertainment of facts by means of material if a
dispute be on question of facts, and if the dispute be on question of
law, on the presentation, of legal argument, and a decision resulting
in the disposal of the matter on findings based upon those questions
of law and fact.
The administrative authorities having a duty to act judicially cannot
therefore decide on considerations of policy or expediency. They
must decide the matter "solely on the facts of the particular case
solely on the material before them and apart from any extraneous
considerations" by applying "pre-existing legal norms to factual
situations". The duty to act judicially excludes arbitrary exercise of
power and it is, therefore, essential to the rule of law that the duty to
act judicially is strictly observed by the administrative authorities
upon whom it is laid. If any departure from the observance of the duty
to act judicially could pass unnoticed, it would open the door to
arbitrariness and make a serious inroad on the rule of law. To quote
the words of the Supreme Court in S. G. Jaisinghani v. Union of India,
AIR 1967 SC 1427: ". . . . .. the absence of arbitrary power is the first
essential of the rule of law upon which our whole constitutional
system is based. In a system governed by rule of law, discretion,
when conferred upon executive authorities, must be confined within
clearly defined limits. The rule of law from this point of view means
that decisions should be made by the application of known principles
and rules and, in general, such decisions should be predictable and
the citizen should know where he is. If a decision is taken without

101
any principle or without any rule it is unpredictable and such a
decision is the antithesis of a decision taken in accordance with the
rule of law." Now the necessity of giving reasons is one of the most
important safeguards to ensure observance of the duty to act
judicially. If the administrative officers can make orders without giving
reasons, such power in the hands of unscrupulous or dishonest
officers may turn out to be a potent weapon for abuse of power. But
if reasons are required to be given for an order, it will be an effective
restraint on such abuse as the order, if it discloses extraneous or
irrelevant considerations or is arbitrary, will be subject to judicial
scrutiny and correction. As observed by Subba Rao J., as he then
was, in Madhya Pradesh Industries Ltd., v. Union of India, AIR 1966
SC 671, "A speaking order will at its best be a reasonable and at its
worst at least a plausible one". The condition to give reasons
introduces clarity, checks the introduction of extraneous or, at any
rate, minimises arbitrariness in the decision making process it gives
satisfaction to the party against whom the order is made and
guarantees consideration of all relevant factors and discharge of his
functions by the officer in accordance with the requirement of law.
We may in this connection usefully quote the following passage from
"American Administrative Law" by Bernard Schwartz at page 163:
"The value of reasoned decisions as a check upon the arbitrary
use of administrative power seems clear....
The right to know the reasons for a decision which adversely affects
one's person or property is a basic right of every litigant (and that
whether the forum be judicial or administrative). But the requirement
that reasons be given does more than merely vindicate the right of
the individual to know why a decision injurious to him has been

102
rendered. For the obligation to give a reasoned decision is a
substantial check upon the misuse of power. The giving of reasons
serves both to convince those subject to decisions that they are not
arbitrary and to ensure that they are not, in fact, arbitrary. The need
publicly to articulate the reasoning process upon which a decision is
based, more than anything else, requires the Magistrate (judicial or
administrative) to work out in his own mind all the factors which are
present in a case. A decision supported by specific findings and
reasons is much less likely to rest on caprice or careless
consideration. As Judges Jerome Frank well put it in language as
applicable to decision-making by administrators as by trial judges,
the requirement of reasons has the primary purpose of evoking care
on the part of the decider. . . . ." If the administrative officers having
a duty to act judicially are required to set forth in writing the mental
processes of reasoning which have led them to the decision, it would
to a large extent help to ensure performance of the duty to act
judicially and exclude arbitrariness and caprice in the discharge of
their functions. The public should not be deprived of this only
safeguard.
4. Another reason of equal cogency which weighs with us in
spelling out the necessity for giving reasons is based on the power
of judicial review which is possessed by the High Court under Article
226 and the Supreme Court under Article 32. The High Court under
Article 226 and the Supreme Court under Article 32 have the power
to quash by certiorari a quasi-judicial order made by an
administrative officer and this power of review exercisable by issue
of certiorari can be effectively exercised only if the order is a
speaking order and reasons are given in support of it. If no reasons

103
are given, it would not be possible for the High court or the Supreme
Court exercising its power of judicial review to examine whether the
administrative officer has made any error of law in making the order.
It would be the easiest thing for an administrative officer to avoid
judicial scrutiny and correction by omitting to give reasons in support
of his order. The High Court and the Supreme Court would be
powerless to interfere so as to keep the administrative officer within
the limits of the law. The result would be that the power of judicial
review would be stultified and no redress being available to the
citizen, there would be insidious encouragement to arbitrariness and
caprice. The power of judicial review is a necessary concomitant of
the rule of law and if judicial review is to be made an effective
instrument for maintenance of the rule of law, it is necessary that
administrative officers discharging quasi-judicial functions must be
required to give reasons in support of their orders so that they can
be subject to judicial scrutiny and correction.
5. This has always been regarded as a most important reasons
in the United States for insisting that quasi-judicial decisions must
show reasons on their face. To quote from Schwartz's "American
Administrative Law" at page 166:
"In the United States, perhaps the most prominent reasons
advanced for the requirements of reasoned decisions is the role
of such decisions in facilitating review by the courts. If the bases
of administrative decisions are not articulated, it is most difficult
for a reviewing court to determine whether the decision is a
proper one. 'We must know what a decision means before the
duty becomes ours to say whether it is right or wrong', reads an
oft-cited statement of Gardozo J., . . . . . . for judicial control to be

104
of practical value, the administrative tribunal or agency, 'in
making its order, should not make it an unspeaking or
unintelligible order, but should in some way, state upon the face
of the order the element which had led to the decision'. The words
quoted are from a noted judgment of Lord Cairns, L.C., in which
he laid down the distinction between 'speaking' and 'unspeaking'
orders, which has become of basic importance in present-day
English Administrative law. When Lord Cairns speaks of an
'unspeaking or unintelligible order', he obviously means an order
which gives no reasons. If the administrator does not give
reasons, he, in effect, disarms the exercise of the High Court's
supervisory jurisdiction. In such a case, the Court cannot
examine further than the face of the challenged decision, which,
in Lord Sumner's famous phrase, 'speaks' only with 'inscrutable
face of a sphinx'."
It is therefore necessary for giving full meaning and content to the
power of judicial review conferred on the High Court and the
Supreme Court by the Constitution that every administrative officer
exercising quasi-judicial functions must make a speaking order, that
it, give reasons in support of the order. If the order speaks only with
the "inscrutable face of a sphinx" it would be impossible for the High
Court and the Supreme Court to effectively exercise their power of
judicial review by means of certiorari.
6. This view is not only supportable on principle but it is also in
consonance with the trend of juristic thought in the United States
where there is considerable development in the field of
administrative law in recent times. In the United States, as will be
evident from the two passages from Schwartz's "American

105
Administrative Law" quoted above, the American Courts have always
insisted that administrative decisions should be speaking ones, that
is, they must contain at least the findings upon which they are based
and the reasons which have prevailed with them in introducing this
requirement are the same two reasons which have found favour with
us. It is also interesting to find that the administrative law in France
has moved in the same directions. For a long time Conseil d'Etat
consistently refused to require that the administration should give
reasons for its decisions in the absence of a statutory provision
imposing that requirement. But in a decision rendered by it in 1950
Conseil d'Etat opened, in the words of one commentator, "a first
breach in the established jurisprudence under which in the absence
of a legal text requiring it the decisions of the administrative
authorities need not be reasoned ones" and annulled an
administrative decision in which no reasons were given. The
Commissaire du gouvernment there advocated a bold departure
from the prior case law and stated that the Conseil should require
reasoned decision in every case in which the administrator was
exercising quasi-judicial functions, even though the Legislature did
not expressly impose such requirement. Otherwise, he asked, how
could the Conseil really determine the validity of a challenged
decision? In its decision adopting the approach of the Commissaire,
the Conseil d'Etat stated that the obligation to give reasons was
imposed "in order to enable the reviewing court to determine whether
the directions and prohibitions contained in the law have been
followed." This is the same reason which has motivated the
American Courts in requiring that administrative decisions must
contain findings that show their basis and it is the same reason which
has appealed to us for taking the view that in India too, as in the
106
United States and France, administrative officers exercising quasi-
judicial functions must make speaking orders.
xx xx xx
8. So much on principle. But quite apart from principle, there is
in our view clear authority for the proposition that every quasi-judicial
decision must be supported by reasons. The germ of this principle is
to be found in the decision of the Supreme Court in Express
Newspaper (Private) Ltd., v. Union of India, AIR 1958 SC 578. In that
case the validity of the Working Journalists (Conditions of Service)
and Miscellaneous Provisions Act, 1955 was challenged inter alia on
the ground that the impugned Act did not provide for the giving of
reasons for its decision by the Wage Board and thus rendered the
petitioner's right to approach the Supreme Court for the enforcement
of their fundamental rights nugatory. Dealing with this contention. N.
H. Bhagwati J., speaking on behalf of the Supreme Court said:
"It is no doubt true that if there was any provision to be found in
the impugned Act which prevented the Wage Board from giving
reasons for its decision, it might be construed to mean that the
order which was thus made by the wage board could not be a
speaking order and no writ of certiorari could ever be available to
the petitioners in that behalf. It is also true that in that event this
Court would be powerless to redress the grievances of the
petitioners by issuing a writ in the nature of certiorari and the
fundamental right which a citizen has of approaching this Court
under Art. 32 of the Constitution would be rendered nugatory."
The Supreme Court, however, took the view that there was no
provision in the main Act which prevented the Wage Board from
giving reasons for its decision and the challenge was negatived on
107
that ground. But these observations undoubtedly support, the
second reason which we have given for taking the view that reasons
must be given in support of every quasi-judicial decision.
9. There is also another decision of the Supreme Court on the
point and that is the decision in Govindrao v. State of Madhya
Pradesh. AIR 1965 SC 1222. The appellants in that case claiming to
be the descendants of former Ruling Chiefs in some districts of
Madhya Pradesh applied under the Central Provinces and Berar
Revocation of Land Revenue Exemption Act, 1948, for grant of
money or pension as suitable maintenance for themselves. They
held estates in two districts on favourable terms as Jahgirdars,
Maufidars and Ubaridars and enjoyed exemption from payment of
land revenue amounting in the aggregate to Rs. 27,828.5-0 per year.
On the passing of the Act the exemption was lost and they claimed
to be entitled to grant of money or pension under the provisions of
the Act. They applied to the Deputy Commissioner who forwarded
their applications to the State Government. These were rejected
without any reasons being given therefor. The appellants filed a
petition in the High Court of Madhya Pradesh under Article 226 for a
writ of certiorari to quash the order of the State Government. On the
petition being dismissed, the appellants preferred an appeal to the
Supreme Court. One of the grounds of challenge before the Supreme
Court was that the order of the State Government was invalid since
the appellants had not been heard by the State Government before
making the order and the order was not supported by any reasons.
The Supreme Court upheld this ground of challenge observing:
"The next question is whether Government was in making the
order of April 26, 1955? That order gives no reasons at all. The
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Act lays down upon the Government a duty which obviously must
be performed in a judicial manner. The appellants do not seem to
have been heard at all. The Act bars a suit and there is all the
more reason that Government must deal with such cases in a
quasi-judicial manner giving an opportunity to the claimants to
state their case in the light of the report of the Deputy
Commissioner. The appellants were also entitled to know the
reason why their claim for the grant of money or a pension was
rejected by Government and how they were considered as not
falling within the class of persons who it was clearly intended by
the Act to be compensation in this manner. Even in those cases
where the order of the Government is based upon confidential
material this Court has insisted that reason should appear when
Government performs curial or quasi-judicial functions (See M/s.
Hari Nagar Sugar Mills Ltd., v. Shyam Sundar Jhunjhumwala,
(1962) 2 SCR 339 = (AIR 1961 SC 1669). The High Court did not
go into any other question at all because it rejected the petition at
the threshold on its interpretation of S. 5(3). That interpretation has
been found by us to the erroneous and the order of the High Court
must be set aside. As the order of Government does not fulfil the
elementary requirements of a quasi-judicial process we do not
consider it necessary to order a remit to the High Court. The order
of the State Government must be set aside. . . . . . . . . ."
The Supreme Court held that the necessity to give reasons was an
elementary requirement of quasi-judicial process and since the order
of the Government did not fulfil this elementary requirement, it was
liable to be set aside. This decision to our mind is a direct authority
for the proposition that every quasi-judicial decision must be

109
supported by reasons and no further authority is necessary in
support of the proposition.
10. But if any further authority were needed, it is to be found in the
recent decision of the Supreme Court in Bhagat Raja's case AIR
1967 SC 1606 (supra). The order impugned in that case was an
order of the Central Government in exercise of its revisional power
under Rule 55 of the Mineral Concession Rules, 1960 and the
question directly arose whether the order was bad in that it did not
give any reasons in support of it. The Supreme Court after an
elaborate review of various decisions bearing on the point came to
the conclusion that the Central Government was bound to give
reasons in support of the impugned order and since no reasons had
been given, the impugned order was bad. This decision was sought
to be distinguished on behalf of the State on the ground that the
Central Government whose order was impugned in that case was a
tribunal within the meaning of Art. 136 and therefore subject to the
appellate jurisdiction of the Supreme Court under that Article and it
was the existence of this right of appeal to the Supreme Court
against the order of the Central Government which weighed with the
Supreme Court in taking the view that the order of the Central
Government required to be supported by reasons. The argument on
behalf of the State was that the ratio of this decision was confined to
a case of quasi-judicial authority which was a tribunal within the
meaning of Article 136 and it had no application where an order
made by a quasi-judicial authority other than a tribunal was in
question. This argument is in our view not well founded. It ignores
the true ratio of the Supreme Court decision. It is undoubtedly true
that the Central Government was a tribunal within the meaning of

110
Article 136 and the Supreme Court therefore emphasized the
existence of a right of appeal against the decision of the Central
Government under that Article but the reasoning on which the
decision was based is applicable alike to a case of an administrative
authority which is not a tribunal within the meaning of Article 136.
Just as there is a right of judicial review against the decision of a
quasi-judicial authority under Article 226 and 32 and the reasons
which impelled the Supreme Court to import the necessity of giving
reasons because there is a right of appeal under Article 136 must
equally apply in spelling out the necessity of giving reasons when
there is a right of judicial review under Articles 226 and 32. If the right
of appeal under Article 136 would be stultified by absence of
reasons, equally would the right of judicial review under Article 32
and 226 be stultified if no reasons are given. Moreover, we find that
the first reason which we have given above for importing the
necessity of giving reasons is also adverted to by the Supreme Court
in paragraph 13 of the judgment and has been relied upon for the
purpose of holding that the Central Government was bound to give
reasons in support of its order and the validity of this reason does not
depend upon whether the quasi-judicial authority is a tribunal or not.
This decision also, therefore, supports the view we are inclined to
take.
49. The same view had been taken by the Supreme Court in Hari Nagar Sugar
Mills Ltd. Vs. Shyam Sundar Jhunjhumwala-[AIR 1961 SC 1669], Madhya
Pradesh Industries Ltd. Vs. Union of India [AIR 1966 SC 671], Bhagat Raja Vs.
The Union of India and others-[1967 AIR 1606], Siemens Engineering and
Manufacturing Co. of India Limited Vs. Union of India and another-[AIR 1976 SC
1785] and S.N. Mukherjee Vs. Union of India-[(1990) 4 SCC 594].

111
50. We shall now consider the question whether the Association has been
following a practice of making it mandatory for anyone desirous of taking
distributorship of medicines of any pharmaceutical company in Ferozepur district
to obtain NOC/LOC on payment of fees of Rs. 2,100/- per company and the same
is violative of Section 3(3)(b) read with Section 3(1) of the Act.
51. As mentioned above, the Commission mechanically approved the findings
recorded by the Jt. DG without examining the material available on record. While
doing so, the Commission conveniently overlooked the following factors/features:
(i) that the Association had neither taken any policy decision nor issued
circulars making NOC/LOC mandatory for appointment of distributors in
District Ferozepur. It was merely following the directives issued by PAC
with whom it is affiliated;
(ii) that the lack of mandatory character of NOC/LOC is evident from the fact
that as many as 80 stockists were doing business in Ferozepur without
taking NOC/LOC from the Association;
(iii) that the genesis of the concept of NOC lay in the Memorandum of
Understanding dated 12.09.2003 entered into between the Indian Drugs
Manufacturers Association (IDMA), the Organization of Pharmaceutical
Producers of India (OPPI) and the All India Organization of Chemists and
Druggists Association (AIOCD) and the Association has done nothing
except to follow the circulars issued by AIOCD;
(iv) that the practice of NOC was also introduced by the Punjab Chemists
Association with which the Association was affiliated. Article 17 of the
Rules and Regulations of the Punjab Chemists Association authorise the
District President / General Secretary / office bearers of the District
Chemists Association to issue LOC for appointment of stockist by the

112
company in their District and in case of any dispute, the President /
General Secretary of Punjab Chemists Association is authorised to issue
LOC;
(v) that as long as Respondent No. 2 was a member of the association, he
was never refused a NOC and after he ceased to be a member there was
no occasion to issue NOC to him;
(vi) that for appointment as stockist for M/s. Merck Limited, Respondent No. 2
had obtained NOC from District Chemists Federation, Jalalabad and this
shows that absence of NOC from the Association did not have any adverse
effect on the business of Respondent No.2;
(vii) that the fact that the practice of NOC/LOC is not mandatory and sole
objective thereof was to provide mechanism to identify the number of local
stockist for a particular pharmaceutical company. In support of this plea,
the Association relied upon the statement made by the President Chaman
Lal Kakkar on 25.04.2013, statement dated 25.04.2013 made by its Vice
Chairman Shri H.C.Gupta, statement dated 26.04.2013 made by its Vice-
President Shri A.K. Gupta and statement dated 26.04.2013 made by its
Secretary Shri Sham Lal Kakkar and statement dated 26.04.2013 made
by its Treasurer Shri Ashwani Kumar Garg. These statements are
extracted below:
i) Statement of evidence dated 25th April 2013 of Mr.
Chaman Lal Kakkar the President of the Association
11. It has been contended by you that permission is being
demanded by pharma companies before appointing
additional stockists. Why would pharma companies
inquire from your Association the need for
appointment of additional stockists based on demand

113
when they can themselves assess the demand and
the need or otherwise for appointment of additional
stockist paged on demand when they can themselves
assess the demand and the need or otherwise for
appointment of additional stockists?
Ans. The Medical Representatives of pharmaceutical
companies do not reveal the correct picture of
demand to their companies and are only interested in
meeting their sales targets which later results in
disputes related to payments between the company
and the wholesalers. As such, it is the companies
which demand NOC / LOC to avoid such a situation
as well as to check the financial credibility of the
interested wholesalers.
12. It has been stated in your written submissions that
your Association studies the market before NOC is
granted depending upon demand to avoid unhealthy
competition. Please explain what do you mean by
unhealthy competition.
Ans. The pharmaceutical companies pass on extra
discounts to big wholesalers whereas small
wholesalers do not get this benefit and are thus in a
disadvantageous position. Further, because of extra
discounts, the big wholesalers is in a position to pass
on discounts to some retailers who prefer to procure
their supplies from such big wholesaler. This is to the
disadvantage of smaller wholesalers and smaller
retailers. However, since Ferozepur market is not

114
very substantial there is only nominal impact of the
above.
13. What shall be the implications of pharma companies
appointing additional stockists / whole sellers in spite
of low demand of their pharmaceutical products and
why does it call for intervention by your association in
the form of NOC / LOC and should not be left to the
pharma companies to decide?
Ans. In case pharmaceutical companies are allowed to
appoint stockists / wholesalers without any
intervention of the association in the form of NOC /
LOC, it may lead to a situation where some
wholesalers / retailers would be stranded with unsold
stocks and dead investment and may have to
ultimately close down their business.
ii) Statement of evidence dated 25th April 2013 of Mr.
H.C. Gupta, - the Vice President of the Association
4. Does your Association insist for its NOC / LOC before
allowing any pharma company to appoint any new or
additional stockists / whole seller of drug and
pharmaceutical products in Ferozepur and if so,
under whose authority / directions has this condition
been stipulated and what is the justification for the
same?
Ans. It is the pharmaceutical companies which insist for
NOC of our Association to avoid any disputes at a
later stage with the wholesaler / stockist. Moreover,
the medical representatives to meet their targets
insist for appointment of new / additional wholesalers

115
even though the demand does not justify the same.
In such a case, stockists are dumped with stocks
which ultimately expire and their investment is
blocked recovery of which from pharma companies
becomes difficult. As such, to protect the wholesalers
as well as retailers the practice of NOC is justified.
iii). Statement of evidence dated 26th April 2013 of Mr. A.
K. Gupta the Vice President of the association
which is set out below :
5. What would be the implication if additional stockists /
new stockists could be appointed by pharma
companies in Ferozepur without any restriction?
Ans. In such a situation, the existing stockists would be
vulnerable to be exploited by the pharmaceutical
companies in terms of payments / refunds being held
up in respect of returned damaged / expired stocks
etc. of the existing stockists as the company would
appoint new stockist without resolving the issues of
the existing stockists related to payment etc.
iv) Statement of evidence dated 26th April 2013 of Mr.
Shyam Lal Kakkar the Secretary of the Association
5. What would be the implication if additional / new
stockists could be appointed by pharma companies in
Ferozepur without any restriction of NOC / LOC of
your Association?
Ans. Our intention is to protect the existing stockists from
being exploited by pharmaceutical companies. If
there is no NOC requirement, there is possibility that
stockists would suffer and there may be disputes

116
between stockists and between pharma companies
and stockists.
6. Do you agree that the requirement of NOC / LOC acts
as a deterrent to unhealthy competition in the market of
wholesale / retail sales of drugs and pharmaceutical
products as contended by the Association, and if so,
how?
Ans. Yes. In case a pharma company appoints a new
stockiest, the company ignores the interest of the
existing stockist who has already paid for the stocks
and as such to meet the competition from the new
stockist, the existing stockists may resort to passing on
discounts to off load his stocks in the market. This
leads to unhealthy competition in the market.
v) Statement of evidence dated 26th April 2013 of Mr.
Aashwini Kumar Garg the Treasurer of the
Association
3. Your Association insists for NOC / LOC before
allowing any Wholesaler / stockiest to take up
business of any pharmaceutical company.
How does this practice eliminate unhealthy
competition from the market as contended by
your Association?
Ans. In the absence of NOC, pharmaceutical
companies would appoint new / additional
stockists without taking into account the unsold
stocks already lying with existing stockists
which ultimately may have to be returned back
causing loss to the company as well as the

117
wholesaler. This may lead to unhealthy
competition between existing and new
wholesalers.
vi) In their statements dated 25.04.2013 and 26.04.2013
S/Shri H. C. Gupta (Vice-President) and Sham Lal
Kakkar (Secretary) unequivocally denied the
suggestion that the possession of NOC was a
mandatory condition for appointment of a new or
additional stockist. These statements are also
extracted below :
Statement of evidence dated 25th April 2013 of Mr. H.
C. Gupta the Vice President of the Association
5. Under what legal or statutory authority does the
Association stipulate requirement of NOC / LOC prior
to appointment of a new or additional stockiest /
wholesaler and what action, if any, is taken by your
Association on those not following its directives in this
respect?
Ans. We do not insist for NOC, it is the pharmaceutical
companies who ask for NOC from the Association to
avoid unnecessary harassment / disputes between
stockists inter Se, medical representative etc. it is
rare that a company appoints stockists without NOC
of the Association. We have no objection if the
company appoints additional / new stockist without
our NOC.
118
Statement of evidence dated 26th April 2013 of Mr. Shyam
Lal Kakkar the Secretary of the Association
4. As per information, your Association insists of NOC /
LOC before allowing any pharma company to appoint
any new or additional stockists / wholesalers of drug
and pharmaceutical products in Ferozepur. What
action does your Association take in case the
wholesaler or the pharma company does not take
your NOC / LOC and goes ahead with sale of these
products in Ferozepur?
Ans. We have no objection if NOC is not taken from the
Association.
(viii) Unfortunately, the Commission completely overlooked the statements of
all the office-bearers. It also overlooked that the pharmaceutical
companies like Abbot India Limited, M/s. Glenmark Pharmaceuticals
Limited, M/s. Invida India Private Limited, M/s. Macleods Pharmaceuticals
Limited, M/s. Sun Pharmaceuticals Limited, M/s. Zuventus Healthcare
Limited unequivocally rejected the suggestion that an applicant should
have obtained NOC / LOC from the association before he / she could be
appointed as stockists. The replies filed by these pharmaceutical
companies are reproduced below :
Abbot India Limited reply dated 15th April 2013 originally
Annexure 24 to the Director Generals report
2. Now dealing with the information and clarifications sought by
you, based on the information available and records
maintained with us, our reply with respect to each of them is
as follows:
119
a. With respect to para : At the outset we have not
appointed any new stockists for our products in
Ferozepur area for over last three years. We are not
aware of any requirement to take any NOC / LOC from
Chemist and Druggist Association, Ferozepur or from
Punjab Chemist Association, Patiala (hereinafter
collectively referred to as Associations) prior to
appointment of stockists of Companys products in
Ferozepur;
b. With respect to Para 2 : As per the records available with
us, we have not received any NOC / LOC from the
Associations for appointment of stockist of Companys
products in Ferozepur. We are not aware of the free, if
any, prescribed by Associations for such NOC / LOC;
c. With respect to Para 3 : As stated above, we are not
aware of any requirement to take any NOC / LOC from
Associations prior to appointment of stockists of
companys products in Ferozepur and we therefore, do
not have copies of the documents sought for;
d. With respect to Para 4 : We are not aware of any
NOC/LOC/PIS approval required from Associations prior
to launching our new products in the State of Punjab.
Glenmark Pharmaceuticals Ltd. reply dated 8th April 2013
originally Annexure 27 to the Director Generals report
With regard to the information / clarifications requested
for, without prejudice to our legal rights, we hereby
submit as under ad seriatum:
1. We set our own internal selection criteria or norms for
the appointment of stickiest /retailers. We dont

120
consult any Chemist and Druggist Association or any
of its affiliated associations nor are we required to
obtain any NOC / LOC from any Chemist and
Druggist Association or its affiliated associations for
appointment of our stockiest / retailers. We shortlist
and appoint a stockiest / retailers based on our
assessment of its suitability.
2. As stated above we reiterate that we do not obtain
any NOC / LOC from Chemists and Druggists
Association or its affiliated associations.
3. To the best of our knowledge we do not have any
directive/decision of any apex body or association
regulating the Pharmaceutical industry, which we are
required to follow for appointment of the stockist /
retailer and hence the question of following one does
not arise.
Invida India Pvt. Ltd. reply dated nil originally Annexure 28 to the
Director Generals report
1. We were not required to seek NOC / LOC prior to
appointment of our distributor / CA / Stockists for the
state of Punjab.
Macleods Pharmaceuticals Limited reply dated 25th March 2013
1. We are not taking any NOC / LOC from
Chemist & Druggists Association Firozpur for
appointment stockists. However, parties are
directly approaching the association and
sought LOC / NOC from their respective
district association.
121
Sun Pharmaceuticals Industries Limited reply dated 8th April 2013
1. Please note that there is no requirement of taking
NOC / LOC by our prospective wholesaler / stockiest
/ retailer from Chemist & Druggists Association
Ferozpur or from Punjab Chemist Association,
Patiala. We are well aware that as NOC before the
appointment of stockiest / distributor / retailer leads to
reduction of supply in the market, it is a contravention
of Section 3(3)(b) of the Competition Act, 2002. It is
apposite to mention that generally, while appointing
distributor / stockiest, so as to verify quickly and easily
their worthiness and other ethical credentials
including, that they are not involved into any spurious
and objectionable dug business activities, we only
enquire from respective association. Please note we
are not insisting the stockists / distributor / retailer for
obtaining any NOC / LOC as pre-requisite prior to the
appointment.
2. Please be informed that we do not have any such
copies of NOCs / LOCs issued by Chemist and
Druggist Association, Ferozepur or from Punjab
Chemist Association, Patiala permitting appointment
of wholesaler/stockiest/retailers. Furthermore, we
have no material information about the details of the
fee prescribed by the Association (s) for grant of NOC
/LOC.
3. We reiterate that there is no requirement of taking any
NOC / LOC as per directives / decision of any apex

122
body or Association which may be regulating the
Pharmaceutical Industry.
4. There is no requirement for obtaining any
NOC/LOC/PIS approval from any Trade Association
or its affiliates inany district of Punjab, including
Ferozepur, prior to launching any new
pharmaceutical products / drugs by our company.
Further we have not material information about the
details of the prescribed fees / charges payable for
grant of such approval.
Zuventus Health Care Limited reply dated 16th April 2013
M/s. Ferozepur Medical Agency had produced the
NOC dated December 1, 2012 from Chemist & Druggists
Association Firozpur. To our knowledge, no NOC is
mandatory for making appointment of any party as stockiest.
We have annexed hereto the copy of the said NOC.
We have not received any directive / decision / MOU of any
apex body or Association regulating such appointments.
To our knowledge, no NOC is required to be obtained from
any trade association or its affiliates prior to launching any
pharmaceutical products / drugs.
(ix) The Commission also overlooked the statement made by Shri Surjeet
Mehta, Chairman Punjab Chemists Association on 05.06.2013 in which
he unequivocally stated that the relevant rules and regulations will be
amended to dispense with the requirement of LOC. The relevant portions
of statement of Shri Surjit Mehta are reproduced below :

123
7. As per Article 17 of the Rules and Regulations of PCA
furnished by you, PCA has authorized District level
Chemists Associations to issue LOC for appointment
of stockists and in the event of any disputes reserved
the right with itself, to issue LOC. Please explain the
rationale behind the practice of NOC / LOC
necessarily required to be taken by a wholesaler /
pharmaceutical company from the district level
association or your Association prior to appointment
of stockist.
Ans. This authorisation was given to the district level
associations so that they could check the entry of
spurious / sub-standard medicines being introduced
by some unscrupulous manufacturers in the market.
The district level associations were expected to use
their expertise and knowledge in the field to check the
above menace. However, we have stopped this
practice since last 4 -5 years.
8. Please explain under what legal, statutory or other
authority has this authorisation been given by PCA to
district level Associations and under what legal,
statutory or other authority such LOCs, in case of
disputes, are being issued by your Association.
Ans. There was no legal or statutory authority to give the above
authorization, however, it was done with a view to check the
entry of spurious / sub-standard medicine as explained
above.
9. If PCA is not issuing any LOCs as contended, and if district
associations are acting independently, why have you not

124
amended your Rules & Regulations accordingly and
intimated the same to all your affiliated district level
Associations?
Ans. We shall amend our Rules and Regulations and withdraw
the Article under which Authorization for issuing LOC has
been given to District Associations and shall also intimate
them in writing that LOC / NOC condition for appointment of
new/additional stockists should not be imposed by the
Associations. A copy of the minutes of the General Body
Meeting before which the proposal for amendment shall be
put up along with copy of the amended rules and regulations
shall be furnished shortly.
(x) The Commission also failed to take note of the recommendations made
by the report prepared by the Expert Committee under the Chairmanship
of Dr. R.A. Mashelkar to examine all the aspects regarding the regulatory
infrastructure and the extent and problem of spurious/substandard drugs
in the country. The Committee have been asked by the Government of
India to make recommendations and suggest a roadmap for
implementation of the recommended measures so that the problem could
be solved in its entirety. The Committee is consisted of an eminent
scientist, an eminent lawyer and former Police Commissioners as its
members. Officials representing key Ministries/Departments/States/drug
manufacturers, trade, consumer and professional associations were also
inducted as members. After an in-depth study of various facets of the
problems, the Committee submitted a detailed report in November, 2003
running into 137 pages with the title as A COMPREHENSIVE
EXAMINATION OF DRUG REGULATORY ISSUES, INCLUDING THE
PROBLEM OF SPURIOUS DRUGS. In paragraph 4, the Committee

125
recommended steps to be taken by the pharmaceutical industry and
pharmacy associations to tackle the problem of spurious drugs.
Paragraph 4.11 of that chapter reads as under :
4.11 Recommended Action for the Pharma Trade
Association
a. Play a proactive and visible role to contain the
menace of spurious/counterfeit drugs.
b. Develop its mechanism in identifying the
persons directly or indirectly involved in abetting
the distribution of spurious, counterfeit or
questionable quality drugs.
c. Prepare a checklist for the guidance of
members and widely publicize it for information
to all members.
d. Sub Rule 3 of Rule 65 (4) of Drugs & Cosmetics
Rules requires that the supply by retail of any
drug shall be made against a cash/credit memo.
This condition of licence should be strictly
adhered to by all retail licensees.
e. Every chemist/pharmacist to act as a watchdog
to prevent entry of any spurious/doubtful quality
drugs or those purchased from unauthorized
sources or without proper bills in the supply
chain.
Paragraph 9 of the report consists of summary of measures to deal with
the problem of spurious/counterfeit drugs. Paragraph 9.1 of that chapter
reads as under :
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9.1 The Committee endorsed the views expressed by the
DGHS Committee and also the views that emerged as
outcome of discussion at the meeting of State Health
Minsters. The members re-emphasised several of these
suggestions as remedial measures to eliminate/reduce the
menace of spurious drugs in the country. In summary, the gist
of the recommendations is :
Effective interaction between the stakeholders i.e.
industry and regulators, industry and consumers, trade
and regulators and medical professional and
regulators.
Creation of intelligence cum legal cells in State and
Central offices.
Discouraging proliferation of drug distribution outlets.
Changes in law to provide enhanced penalties, making
the offences cognisable and non-bailable in the light of
similar provisions in Narcotic Drugs and Psychotropic
Substances Act.
Designation of special courts to try the cases of
spurious drugs.
Preparation of dossiers of suspected dealers and
manufacturers.
Provision of secret funds and incentives to informers.
Effective networking system between States.
Check on drug supplies to practitioners who buy and
supply drugs to their patients.
Industry to have its counterfeit drug strategies, better
surveillance and efficient complaint handling system.

127
Trade associations to have better surveillance on
defaulting members and to take strict action against
them.
Creation of better awareness amongst consumers.
(xi). Unfortunately, the Commission failed to keep in view the
recommendations made by the Mashelkar Report, which pointed out the
apex body like AIOCD and other similar organisations as also the State
bodies to suggest that the persons desirous to take distributorship of any
pharmaceutical company should obtain NOC/LOC from the concerned
association. This precisely what the Association had done as a practice
though, as mentioned above, it was not mandatory for all to take
NOC/LOC as a condition precedent for appointment of distributor. This is
strengthened from the facts that as many as 90 stockists were operating
in Ferozepur district without obtaining NOC/LOC from the Association.
On the basis of the above discussion, we hold that the conclusion
recorded by the Commission that by insisting on obtaining NOC/LOC as
a condition precedent for the appointment of a distributor of any
pharmaceutical company, the Association had acted in violation of Section
3(3)(b) is legally unsustainable and is liable to be set aside.
52. The next question which merits consideration is whether resolution dated
26.05.2012 passed by the Association, which was circulated among the
wholesalers/retailers vide circular dated 27.05.2012 resulted in curtailment of
supply of medicines/drugs and this amounted to violation of Section 3(3)(b) of
the Act.
128
53. In this context what is most significant is that both the Jt. DG and the
Commission completely overlooked the background in which the resolution was
passed. It is not in dispute that Respondent No. 2 was expelled from the
membership of the Association because of the grave misconduct of overcharging
the retailers by manipulation of the computer software and, as mentioned above,
the decision of expulsion had become final because it has not been questioned
in any court of law. The Jt. DG and the Commission also overlooked another
important aspect of the matter that even after termination of membership,
Respondent No. 2 continued his business as usual. Unfortunately, they have
relied upon wholly unsubstantiated statement of Respondent No. 2 and its
partner (Director, Shri Rajesh Arora) that as a result of resolution dated
26.05.2012 its sale was drastically reduced. Not a shred of evidence was
produced by Respondent No. 2 before the Jt. DG in support of the bald statement
contained in the information, its three responses and the affidavit that its sale had
declined to Rs. 39.71 Lacs from Rs. 223.81 lacs and odd. If there was any grain
of truth in this assertion, it would have certainly produced its account-books and
other records to prove that its sale got reduced by almost 2 crores after passing
of resolution dated 26.05.2012. In the absence of such evidence, the Jt. DG and
the Commission were not entitled to record a finding that the resolution had
adversely affected supply of medicines/drugs in the market and consequential
violation of Sections 3(3)(b) and 3(1) of the Act.
54. The question which remains to be considered is whether the penalty
imposed on the office bearers of the Association is legally sustainable. In our
view, that part of the impugned order is liable to be set aside on the ground that
while remitting the matter to the DG for the limited purpose of fixing the
responsibility of the office bearers, the Commission had unequivocally referred to
Section 48 of the Act and directed the DG to issue notice to the office bearers of
the Managing Committee/Executive Body of the Association under Section 48(2)

129
and give them opportunity to explain their role in the decision making in respect
of practices / circulars / directions etc. which were found anti-competitive. In
compliance of the directive given by the Commission, the DG issued notices
dated 03.07.2013 and gave them opportunity under proviso to Section 48(1) of
the Act and produce evidence to prove that contravention of Section 3(3)(b) read
with Section 3(1) was committed by the Association without their knowledge or
that they had exercised due diligence to prevent the Commission of such
contravention. However, after receipt of supplementary report dated 31.07.2013
in which the Joint DG recorded a conclusion that office bearers were complicit in
anti-competitive practice followed by the Association, the Commission gave up
idea of imposing penalty under Section 48 of the Act apparently after realising
that the ingredients of that section are not satisfied and reverted to Section 27(b)
for the purpose of imposing penalty. This is evident from the paragraphs 80 to
82 of the impugned order, which reads as under :
80. The said office-bearers in their common reply have taken a
preliminary objection that the provisions of section 48 of the
Act (dealing with the liability of the persons in-charge of the
company) are not attracted. The office-bearers have not
disputed the findings of the DG on merits reserving their right
to file additional response.
81. The Commission is of opinion that irrespective of the plea
taken by the office-bearers or its merit, in the factual scenario
of the present case, it is evident that the office-bearers are
parties to the impugned decision of the association.
82. In this scenario, the provisions of section 27 of the Act are
themselves sufficient to hold the office-bearers guilty of
contraventions without the aid and assistance of the
provisions of section 48 of the Act. As per the provisions of

130
section 27(b)of the Act, where after inquiry, the Commission
finds that any agreement referred to in section 3 or action of
an enterprise in a dominant position, is in contravention of
section 3 or section 4, as the case may be, it may impose
such penalty, as it may deem fit which shall be not more than
ten percent of the average of the turnover for the last three
preceding financial years, upon each of such person or
enterprises which are parties to such agreements or abuse.
55. In our view, after having resorted to Section 48, the Commission could not
have reverted to Section 27(b) for the purpose of imposing penalty and that too
without giving an action oriented notice and reasonable opportunity of hearing to
the appellants in Appeal Nos. 22 to 28 of 2014 to show cause why the penalty
may not be imposed on them under Section 27(b) of the Act.
56. We may also mention that if Section 48 (1) was to be invoked for penalizing
the appellants Gurpreet Singh and six others, the Jt. DG was required to prove
that they were in charge of and were responsible for the company (Association)
for the conduct of its business as well as the Association itself. However no such
finding was recorded by the Jt. DG. The Commission realized that these
fundamental ingredients are not satisfied in the present case. Therefore, it
conveniently switched over to Section 27(b) and imposed heavy penalties on the
office bearers. However, no such finding was recorded by the Jt. DG.
57. An ancillary issue which merits consideration is whether the Commission
was justified in overlooking the fact that Respondent No. 2 had filed parallel
remedies. He filed two civil suits, one for grant of a declaration that Resolution
dated 26.05.2012 passed by the Association is nullity and for grant of permanent
injunction and the other for award of damages to the tune of Rs. 5 Lacs for the
131
loss of reputation and business. He also filed criminal complaints under Section
499, 500 506 of Indian Penal Code. During the pendency of the complaints,
Respondent No. 2 filed information under Section 19(1)(a). During the course of
investigation, the Association and other appellants brought to the notice of the
Jt. DG that Respondent No. 2 had already filed remedies by filing civil suits and
criminal complaint, but he did not take cognisance of the same and proceeded
to submit report with the finding that the Association and its office-bearers are
guilty of violating Section 3(3(b) read with Section 3(1) of the Act. The facts
relating to the pendency of the cases before the competent Court was also
brought to the notice of the Commission but it altogether overlooked this
important and crucial factor and proceeded to pronounce upon the issue relating
to violation of Section 3 of the Act and imposed penalty on all the appellants.
58. No doubt Section 62 of the Act declares that the provisions of this Act shall
be in addition to, and not in derogation of, the provisions of any other law for the
time being enforce, meaning thereby that a party availing remedy under any other
law can also initiate proceedings under the Act but this section does not empower
a party to simultaneously avail two remedies which may result in passing of
inconsistent or contradictory orders by two adjudicatory forums as has happened
in the present case because while the Commission has ruled that the practices
adopted by the Association are violative of Section 3(3)(b) read with Section 3(1)
of the Act and imposed penalty on all the appellants, the suits filed by the
respondent for grant of a declaration that Resolutions passed by the Association
are nullity and for award of damage in lieu of the loss suffered by it were
dismissed by the competent Court i.e. Additional Civil Judge (Senior Division),
Ferozepur.
59. It is not in dispute that Respondent No. 2 had filed two suits and a criminal
complaint before filing information dated 20.09.2012 under section 19(1)(a) of the
Act. It is a sheer co-incidence that the information culminated into passing of

132
order dated 05.02.2014 by the Commission vide which the Association was held
guilty of acting in violation of Section 3(3)(b) read with Section 3(1) of the Act and
penalty was imposed on the Association and its office bearers under Section 27
of the Act, but two suits filed for substantially similar were dismissed on
12.05.2015. It is a different thing that Respondent No. 2 had challenged the
judgment and decree dated 12.05.2015 by filing appeals and has also questioned
the order passed by the competent court dismissing the complaint filed by him
under Sections 499 and 500 CPC.
60. In our view, once the DG had been apprised of the facts relating to pending
civil and criminal cases, he should have brought this fact to the notice of the
Commission and sought its guidance and the latter should have as a measure of
proprietary stayed further proceedings. In any case, the Commission should not
have finally pronounced upon the guilt of the Association and the other appellants
and should have waited for the final verdict of the civil and criminal cases.
61. What is most surprising is that even though the Commission had passed
order dated 05.02.2014 and the same was subject matter of appeal under Section
53-B, this development was not brought to the notice of Additional Civil Judge
(Senior Division), Ferozepur, so as to enable her to take appropriate view of the
matter and then decide whether or not she should finally adjudicate the suits.
62. Be that as it may, we are convinced that the Commission should have, on
being apprised of the fact that Respondent No. 2 had already availed remedy by
filing two civil suits and a criminal complaint on the same cause, stayed the
proceeding of the information and should not have passed the impugned order.
63. In the result, the appeals are allowed and the impugned order is set aside.
If any of the appellants has deposited whole or a fraction of the penalty then the
same shall be refunded to it / him within four weeks from today.

133
64. As a sequel to disposal of the main appeals, all the interlocutory
applications are disposed of as infructuous.
[G.S. Singhvi]
Chairman
[Rajeev Kher]
Member
30th October, 2015

Chemists and Druggists Assn. vs. CCI & Ors.

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COMPETITION APPELLATE TRIBUNAL

Appeal Nos. 21/2014 to 28/2014 and IA Nos. 31/2014 to 46/2014

Honble Shri. Justice G.S. Singhvi

Honble Shri Rajeev Kher

In the matter of:

1. Appeal No. 21/2014 and I.A. Nos. 31 & 32 of 2014

Chemists & Druggists Association

1. Competition Commission of India

2. M/s. Arora Medical Hall

2. Appeal No. 22/2014 and I.A. Nos. 32 and 33 of 2014

Shri Gurpreet Singh,

2. M/s. Arora Medical Hall

3. Appeal No. 23/2014 and I.A. Nos. 35 and 36 of 2014

Shri H.C. Gupta,

1. Competition Commission of India

2. M/s. Arora Medical Hall

4. Appeal No. 24/2014 and I.A. Nos. 37 and 38 of 2014

Shri A.K. Gupta,

1. Competition Commission of India

2. M/s. Arora Medical Hall

5. Appeal No. 25/2014 and I.A. Nos. 39 and 40 of 2014

Shri Shyam Lal Kakkar,

1. Competition Commission of India

2. M/s. Arora Medical Hall,

6. Appeal No. 26/2014 and I.A. Nos. 41 and 42 of 2014

Shri R.S. Bakshi,

1. Competition Commission of India

2. M/s. Arora Medical Hall,

7. Appeal No. 27/2014 and I.A. Nos. 43 and 44 of 2014

Shri Chaman Lal Kakkar,

1. Competition Commission of India

2. M/s. Arora Medical Hall,

8. Appeal No. 28/2014 and I.A. Nos. 45 and 46 of 2014

Shri Ashwini Garg,

1. Competition Commission of India

2. M/s. Arora Medical Hall,

Appearances : Shri Gauri Shankar Saikumar, Shri Sandeep Bajaj, Shri

Ms. Soni Singh and Shri Pramod Soren, Advocates for

order dated 05.02.2014 passed by the Competition Commission of India (for

Ferozepur versus Chemists and Druggists Association, Ferozepur and seven

Association, Ferozepur (appellant in Appeal No. 21 of 2014) (hereinafter referred

to as, the Association) making it mandatory for anyone desirous of taking up

distributorship of medicines of any pharmaceutical company in Ferozepur to

obtain No Objection Certificate (NOC) and Letter of Credit (LOC) on payment of

26.05.2012 passed by the Association to boycott Respondent No. 2 - M/s. Arora

respondent is anti-competitive and violative of Sections 3(3)(b) of the Act and

2. The Indian Drug Manufacturers Association (IDMA) and Organisation of

manufacturers, whereas All India Organisation of Chemists and Druggists

collectively through continuous interaction between these apex associations.

guidelines issued by the aforesaid apex association to bring uniformity and

standardisation in the pharmaceutical industry. The pharmaceutical industry in

Governments through their Food and Drug Administration offices.

3. The spread of various district level associations across India is essential

to harmonize the vertical relationships between the pharmaceutical companies,

interlinked and sometimes overlapping. In fact, the chemists and druggists

process and encourage healthy competition at different stages or levels of the

production chain or provision of services, in their respective regions.

4. The Association is an unregistered body of chemists and druggists

operating in District Ferozepur, Punjab. It is affiliated to Punjab Chemists

Association (hereinafter referred to as PCA), which, in turn, is affiliated to All

India Organisation of Chemists and Druggists (hereinafter referred to as

safeguard the interest of wholesalers and retailers against any discriminatory or

unfair practice of pharmaceutical companies. S/Shri Gurpreet Singh, H.C. Gupta,