P L D 1986 Karachi 452 (PLP)

Such distributors as are appointed shall not be associated undertakings . inter se ; The Authority may grant exemptions from these orders in cases in which they deem fit so to do ; These orders will apply to the cigarette, soap and shoe industries forth with ; The Authority may vary the number of distributors and the population basis for the appointment of the same as and when it deems fit ; The Authority will notify the dates of‑applicability of these orders to other groups of industries in due course. Secretary, Monopoly Control Authority."

3. On 26th February, 1970, the President of Pakistan, in exercise of its legislative functions, promulgated the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970, (hereinafter referred to as "the Ordinance"), which, according to its preamble was designed to provide for measure against undue concentration of economic power, growth of unreasonable monopoly power and unreasonably restrictive trade practices. For achievement of such purposes, section 8 of the Ordinance provided for constitution of authority known as "Monopoly Control Authority" to perform functions under the Ordinance. It was one of such functions which the Authority was purporting to perform under section 7 of the Ordinance, which has now given rise to the instant petitions. '

4. The case of the petitioner in C. P. No. 1332 of 1974 is that it was acting as distributor for various products including cigarettes and soaps. The petitioner bad business dealings with Pakistan Tobacco Company Limited and its predecessor‑in‑interest, namely, Imperial Tobacco Company of India Limited for more than 50 years. Similarly the petitioner had been acting as distributor for Messrs Lever Brother's (Pakistan) ‑ Limited (respon dent No. 3) with which the petitioner had business dealings for about ten years. The petitioner kept receiving various notices and letters from the respondent No. 1, which were suitably replied by the petitioner. However, going into details of such notices or letters would not be necessary for the purposes of this petition as the same do not appear to be relevant. Suffice it to say, that the Chairman of the petitioner‑Company received notice, dated 3rd September, 1974, from the Authority (respondent No. 1) informing him that it proposed to make certain orders in respect of appointments of distributors for cigarettes produced by Pakistan Tobacco Company Limited (respondent No 2). It was stated in the notice that objections, if any, in respect of the same would be heard by the Authority on 10th September, 1974. The petitioner sent a telegram to the respon dent No. 1, requesting for fixation of another date, but without affording any further opportunity of hearing to the petitioner, the Authority proceed ed to issue a draft General Order on 20th September, 1974, purportedly in exercise of powers conferred on the said respondent under section 7 of the Ordinance. A copy of such telegram has, however, not been filed by the petitioner. The petitioner, thereafter, sent objections, dated 27th September, 1974, in respect of such draft but despite the same, the respon dent No. 1 issued the final General Order, dated 22nd October, 1974, which has now been impugned in the petition. More or less similar facts have been pleaded in C.P. No. D‑1377 of 1974.

5. In the counter‑affidavit filed on behalf of the respondent No. 1 by Mr. Sobhanullah Khan, then Deputy Director (Research and Investiga tion), it was stated that notice, dated 3rd September, 1974 had been served on the petitioner duly in time. As regards the telegram allegedly sent by the petitioner to the respondent No. 1, it was admitted that the same had been received but it was further averred that the request had been rejected by the said respondent by its order, dated 10th September, 1574, as there was no valid cause shown by the petitioner for adjourning the hearing. It was further averred that the petitioner itself failed and neglected to attend the hearing before the respondent No. 1 although notice was served .by it duly in time. The respondent further denied that any prejudice had been caused to the petitioner, since no order under section 12 of the Ordinance had yet been passed against the petitioner. A similar stand was also taken by the Authority in Petition No. D‑1377 of 1974.

6. We have heard Mr. Khalid Anwar on behalf of the petitioners and Mr. Kamal Azfar on behalf of the Authority (respondent No. 1) and Mr. Fateh Ali Vellani on behalf of the respondents Nos. 2 and 3.

7. Mr. Khalid Anwar, the learned counsel for the petitioner in both the petitions, has raised the following contentions before us. Firstly, it has been argued by him that the General Order, dated 22nd October, 1974, had been passed in violation of the provisions of section 7 of the Ordinance, inasmuch as no hearing had been given to the petitioners before issuance of the said order, which was the statutory requirement of sub sections (2) and (3) of section 7 of the Ordinance. Secondly, it has been contended that the Authority (respondent No. 1) has exceeded its statutory powers by giving mandatory directions instead of‑.identifying the Restric tive Trade Practices as contemplated by section 7 of the Ordinance. Lastly, the contention of the learned counsel was that the said Order, passed by the Authority, was hit by the doctrine said Order, passed by the Authority, was hit by the doctrine of excessive delegation, since the same failed to conform to the guidelines provided by sections 4, 5 and 6 of the Ordinance.

8. Mr. Fatehali Vellani, learned counsel for the respondents Nos. 2 and 3, instead of opposing these contentions has supported the same, he further argued that the impugned order was in excess of powers vesting in the Authority as the same purported to create competition which was alien to the purpose of the Ordnance. It was next contended by the learned counsel that the impugned order was discriminatory in nature as the same applied only to such undertakings which were registrable under the Ordinance, but not to others. Mr. Kamal Azfar, learned counsel for the respondent No. 1 very vehemently opposed these contentions. According to him, the impugned order did not suffer from any infirmity.

9. In order to appreciate the proposition raised by Mr. Khalid Anwar, it is necessary to refer to certain relevant provisions of the Ordinance. The Ordinance, according to its preamble, has been designed to provide for measures against undue concentration of economic power, growth of unreasonable monopoly power and unreasonably restrictive trade practices. Although the expression "undue concentration of economic power" and "unreasonable monopoly power" have not been defined in the Ordinance, but "unreasonably restrictive trade practices" has been defined in clause (n) of section 2 (1) of the Ordinance. However, wee shall be referring to this definition later in this judgment. Section 8 of the Ordinance, then refers to the Constitution of Authority, and the same according to the said section is to be constituted by the Federal Government and must consist of not less than three members, one of whom is to be appointed as Chairman. The functions of the Authority are defined under section 10 of the Ordinance. Section 3 of the Ordinance prohibits (al undue concentration of economic power, (b) unreasonable monopoly power, and (c) unreasonably restrictive trade practices. Sections 4, 5 and 6 state the circumstances the existence of which shall be deemed to constitute undue concentration of economic power, unreasonable monopoly power and unreasonably restrictive trade practices. Section 7 of the Ordinance then empowers the Authority to prescribe circumstances in which or con ditions under which undue concentration of economic power, unreasonable monopoly power or practices deemed to be unreasonably restrictive trade practices shall be deemed to exist. As the arguments advanced by the learned, counsel mostly revolve around this section the same is being reproduced in extenso as follows :‑ "

7. Other circumstances constituting concentration of economic power, etc.‑(I) Without prejudice to the provisions of sections 4, 5 and 6, the Authority may be General Order prescribe the circumstances in which and the conditions under which undue concentration of economic power or unreasonable monopoly power shall be deemed to exist and the practices which shall be deemed to be unreasonably restrictive trade practices. (2) Where the Authority is of opinion that the making of a General Order under subsection (11 may be in the public interest, it shall conduct an inquiry affording the persons or undertakings likely to be affected by such Order such opportunity of being heard and of placing before it relevant facts and material as it may deem fit. (3) Before making any General Order under subsection (1), the Authority shall‑ (a) publish in the official Gazette and in such other manner as in its opinion will bring it to the notice of all persons and undertakings likely a notice inviting suggestions or objections to be submitted before a date specified therein; (b) consider any objection or suggestion which may . be received by it from any person or undertaking with respect to the draft ; and (c) where it deems appropriate, afford an opportunity to any such person or undertaking of being heard and of placing before it facts and material. in support of the objection or suggestion."

10. The next relevant section is section 11, which, provides that where the Monopoly Control Authority is satisfied that there has been or is likely to b::, a contravention of the provisions of section 3 or that action is necessary in the public interest, it may make one or more of such orders specified in section 12 as it may deem appropriate. Subsection (2) of section I 1 then provides for giving of the notice by the Authority and an opportunity of being heard to the affected persons before passing an order under section 12 of the Ordinance. Section 12 thereafter refers to passing of orders by the Authority and in case of unreasonably restrictive trade practices the, Authority may :‑ (i) ,require the person or undertaking concerned to discontinue or not to repeat any restrictive trade practice and to terminate or modify any agreement relating thereto in such manner as may be specified in the order, (ii) require the person or undertaking concerned to take such actions specified in the order as may be necessary to restore competition in the production, distribution or sale of any goods or provision of any services." Section 19 refers to penalties which may be incurred by any person or undertaking under the Ordinance and section 20 provides for an appeal which a person aggrieved by an order of the Authority passed either under section 11 or section 19 may file to the High Court.

11. Turning to the first contention of Mr. Khalid Anwar, it has been argued by him that the impugned order has been passed in violation of the provisions of section 7 of the Ordinance, since the respondent No. 1 failed to provide opportunity of hearing to the petitioners, which was a statutory requirement of subsections (2) and (3) of section

7. Mr. Kamal Azfar, the learned counsel for the respondent No. 1, on the other hand, argued that no such provision existed in section 7 which made it obligatory for the respondent No. I to first hear the parties concerned. It was further contended that the authority has been provided with discretion to provide opportunity of hearing to the affected person only in such cases where the Authority deems it fit. Reliance in this respect was placed on S. M. Ilyas & Sons Limited v. Monopoly Control Authority and another (P L D 1976 Lah. 834).

12. Section 7 of the Ordinance, while empowering the Authority to prescribe circumstances or conditions constituting unreasonably restric tive trade practices, prescribes a complete procedure which the Authority has to follow while acting under that section. A minute examination of the provisions of section 7 would show, that before passing an order under A subsection (1) thereof the Authority it' satisfied that making of General Order under subsection (1) may be in the public interest, it shall conduct an inquiry. Subsection (2) of section 7 further enjoins up on the Autho rity to provide to such person or undertaking likely to be affected by the General Order such opportunity of being heard and placing before it relevant facts and material as the Authority may deem fit. The purpose of such preliminary inquiry appears to be to enable the Authority to identify circumstances which may necessitate making of a General Order after the Authority has formed a tentative opinion in that behalf. Subsections (2) and (3) of section 7 make it clearly manifest that the Legislature has con templated two enquiries, first before making of draft General Order and ‑second thereafter. Again the different language used by the Legislature in subsections t,2) and (3) clearly snows that providing of opportunity of bang heard and placing relevant facts and material before the Authority contemplated under subsection (2) of section ? is of mandatory nature. Contrary to that subsection (3) of section 7 makes it discretionary for the Authority to afford such an opportunity to the affected parties. We, therefore, find lot of force in Mr. Khalid Anwar's argument.

13. Mr. Kamal Azfar has, however argued that the petitioners were not entitled as of right to get a personal hearing. Reliance has been placed by him on various Authorities, the first being S. M. Ilyas & Sons Limited, reference to which was made earlier. In that case, provisions of sub sections (2) and (3) of section 7 came under examination before the Lahore High Court and it was held that the parties concerned were not entitled, as a matter of right to a hearing. It was further held in that case that it was within the discretion of the authority to give "such opportunity of being heard. and of placing before it the relevant facts and material, as it may deem fit". It was further held that the principles of natural justice were not attracted in that case since the purpose of inquiry under section 7 was not to saddle any party with a liability. It was further observed in the judg ment that the appointment of more than one distributor by manufacturer could be said to affect any vested right of the existing distributor and as such the principle of audi alteram,partem had no application to the facts of the case. Incidentally, it was the same impugned order, dated 22nd October, 1974, which was being challenged before the Lahore High Court by one of the aggrieved parties which happened to be the sole distributor of cigarettes manufactured by Pakistan Tobacco Company Ltd. for the local area 'of Lahore.

14. With utmost respect to the views expressed in the above case, it may be pointed out that when section 7 (2) of the Ordinance itself pro vides for giving opportunity to hearing to the parties likely to be affected by g the General Order then such requirement must strictly be met with. Any deviation front. such procedure would render a subsequent proceedings illegal and without jurisdiction. It may be pointed out that the judgment of the learned Single Judge in S. M. Ilyas & Sons Ltd. was challenged before two learned Judges of the Lahore High Court as according. to the view expressed by Shameem Hussain Kadri, J. although the Authority while acting under section 7 (2) of the Ordinance, could regulate its own procedure, but it could not deny altogether the right of hearing or disallow a person affected to place before it any relevant fact or material. Mr. Kamal Azfar also referred to some other cases in support of his plea, such as Sind Employees' Social Security Institute v. Messrs Dawood Cotton Mills Ltd. (P L D 1977 S C 177), Quadri Brothers Foundry and Work shop, Karachi v. Sind Employees' Social Security Institute, Karachi (P L D 1977 Kar. 112) and Pakistan Warranted Ware house Ltd. Karachi v. Government of Pakistan and 4 others (P L D 1977 Kar. 954). In the first case, it was held by the Supreme .Court of Pakistan, that notice of hearing before creation of a demand for Social Security contribution was not neces sary to absence of any statutory requirement to that respect. In P L D 1977 Kar. 112, it was held that when the grievance is in respect of violation of a rule of natural justice, then if adequate opportunity of showing cause has been given before final orders are passed the requirements of natural justice would be fulfilled. Again in the case of Pakistan Warranted Warehouse Ltd. the view expressed by a D.B. of this Court was that the rule of audi altaram parienr does not necessarily demand personal hearing and such rule would not be violated if the statute provides for decision upon basis of written representation containing material statements and arguments.

15. As far as the principle enunciated in these . cases is concerned, there can hardly be any cavil against the same. However, the cases cited by Mr. Kamal Azfar are distinguishable as section 7(2) as we have earlier paid, expressly provides for hearing and pacing of relevant facts and material p before the Authority by a person likely to be affected by an order under section 7 (1). Mr. Kamal Azfar has, however, drawn our attention to para. No. 11, of the petition, wherein the petitioner has itself admitted that notice, dated 3rd September, 1974, was received by it from the respondent, but the same was received late. The petitioner, according to its statement in the petition, then sent a telegram requesting for fixation of another date. No copy of such telegram has however been filled by the petitioner. In the counter‑affidavit, the stand taken by the respondent No. 1 is, that the prayer of the petitioner was rejected as no valid cause for adjournment of hearing was shown, by the latter. Whatever be the case, but since the petitioner itself failed to appear before the respon dent No. 1 on the date fixed by the said respondent for the purpose of hearing and the respondent in exercise. of its discretion did not deem it fit to grant an adjournment to the petitioner, it cannot be said that no opportunity of hearing was provided to the petitioner by the respon dent. According to subsection (2) of section 7 ; what the respondent was obliged to do was to provide an opportunity of being heard to the concerned persona or undertakings and placing relevant facts and materials before it. The factual position according to the respective stands taken by the parties shows that a notice in respect of hearing by the respondent No. 1 bad been issued by the said respondent. It was the petitioner who failed to appear and instead asked for adjournment which however was refused. Therefore, in our opinion the provisions of section 7 (2) of the Ordinance bad been sufficiently complied with by the respondent No.

1. We are, therefore. unable to agree with Mr. Khalid Anwar that mandatory require ments of section 7 (Z) had not been met with. As regards ‑providing of opportunity of being heard after publication of the draft General Order i~ concerned. we once again find that an opportunity for placing facts and material in support of objections or suggestions was once again afforded to the petitioner. The petitioner in fact sent its objection, dated 27‑9‑1977, to the respondent No. 1, a copy of which has also been filed with Petition No. D‑1332 of 1974 as Annexure'K'. Therefore, in our opinion. sufficient opportunity of hearing had been provided before passing of the two order under section 7 of the Ordinance, and the contention of Mr. Khalid Anwar that statutory requirement of section 7. had not been met with cannot be accepted.

16. The next argument pressed by Mr. Khalid Anwar is, that the respondent No l. had exceeded its statutory powers by giving mandatory directions instead of identifying restrictive trade practices while purporting to Act under section 7 of the said Ordinance. While elaborating his argu ment, the learned counsel has contended that directions could only be given by the respondent No. 1 under section 11 of the Ordinance, after the said respondent was satisfied that there had been or was likely to be a contraven tion of the provisions of section 3 of the Ordinance and that action was necessary in the public interest.

17. As far as this argument is concerned, it is true that issuance o directions by the Authority is not contemplated by section 7 of the Ordi nance and a General Order as contemplated by section 7 of the Ordinance cannot by similar in terns to an order issued under sections 11 and 12 of the Ordinance. That is because under section 7 the Authority is only empowered to prescribe circumstances or conditions which may constitute unreasonably restrictive trade practices. Section 3 of the Ordinance, inter alia, provides that there shall be no unreasonably restrictive trade practices. A perusal of section 11 of the Ordinance would show that the same may be pressed into service when the Authority is satisfied that there has been or is likely to be a contravention of the provisions of section 3 of the Ordinance and that action is necessary in public interest. It is, therefore. clear that a General Order, as envisaged under section 7 and an order envisaged under sections 11 and 12 cannot be similar in terms but has to be distinct in both its form and substance.

18. Now an examination however, of the General Order, dated 22nd October, 1974, makes it sufficiently clear that what it provides for therein is, that an arrangement or agreement for distribution of any goods which is not in accordance with certain conditions as specified therein by the Authority shall be deemed to be unreasonably restrictive trade practices. The order, then further proceeds to set forth those conditions which would be deemed to be unreasonably restrictive trade practices. This order, there fore, makes it manifestly clear that both according to its form and substance the same only prescribes the circumstances of conditions under which certain practices would be deemed to unreasonably restrictive trade practices. Therefore, it nowhere appears from the General Order that the same con tains directions as contemplated by sections 11 and 12 of the Ordinance. The older, therefore, in our opinion, clearly falls within the purview of section 7 of the Ordinance. and by no stretch of imagination it can be equated with an order contemplated by section 11 of the Ordinance. The arguments of Mr. Khalid Anwar is, therefore, not acceptable.

19. Lastly, it has been contended by Mr. Khalid Anwar that the nature of power conferred upon the Authority under section 7 of the Ordinance is such that the same is to be exercised in conformity with the statutory criterion provided by sections 4, 5 and 6 of the Ordinance, other wise the same would be hit by the doctrine of excessive delegation.

20. Questions as to excessive legislation have been engaging the attention of the Courts as in mordern days there has been a growing tendency to confine legislation to general and broad principles while leaving the administrative details to subordinate authorities. If delegation is in respect. of essential legislative functions; the same would be' hit by the doctrine of excessive delegation, because only functions of ancillary nature can be delegated to a subordinate authority, while essential functions are to ire performed by the Legislature itself. However, delegated authority of this kind must be exercised strictly in accordance with the powers creat ing it and in the spirit of the parent statute. Furthermore, when the power, is delegated, the same is to be exercised within the limits circumscribed by' the legislature otherwise the legislation would be ultra vires the parent statute.

21. Now turning to the contention raised, the same requires examina tion of section .7 of the Ordinance once again, although from a different angle. But before turning to section 7, we may first refer to the definition of the term "unreasonably restrictive trade practice" as the same is also relevant to the controversy. Section 2 (I) (n) defines the terms as "a trade practice which has or may have the effect of unreasonably preventing, restraining or otherwise lessening competition in any manner". Section 6, as has already been shown, refers only to certain' agreements which may be deemed to constitute unreasonably restrictive trade practices. If section 6 of the Ordinance were intended to provide guidelines, as canvassed b\ Mr. Khalid Anwar, then the meaning assigned to the terms "unreasonably restrictive trade practice" would have been more restrictive, because the Legislature could not have on one hand assigned wider meaning to the said expression and on the other narrowed down its scope only to certain agreements as provided in section 6 of the Ordinance. Furthermore, the heading prefixed to section 7 of the Ordinance says "other circumstance constituting concentration of economic powers ere." This indicates that the Authority has been clothed with powers to declare circumstances the existence of which would be deemed to constitute unreasonably restrictive trade practices and the same may be besides those already referred to in section

6. It' would not be out of place to mention that heading prefixed to sections or sets of sections tray act as guide to ascertain the intention of the Legislature when 'some ambiguity arises in respect thereof. However, the power conferred on the Authority by section 7 of the Ordi nance is not an unrestricted power, but the same is restricted by the definition of the term "unreasonably, restrictive trade practice" and the definition Authority, without any doubt, is to be guided by the yardstick provided by the definition. We also think that it was not possible for the Legislator: itself ascertain circumstances or conditions which might have constituted to unreasonably restrictive trade practices, therefore, the Legislature in its own wisdom entrusted such functions to the Authority.

22. The power exercised by the Authority therefore, does not transgress in any manner the limits circumscribed by law. We find that section 6 is nut exhaustive and the Authority can still identify arid declare. circumstances or conditions which may have the effect of unreasonably restricting or lessening competition.

23. Having dealt with the contentions of Mr. Khalid Anwar, we now advert to the arguments raised by Mr. Fateh Ali Vellani, firstly, it was argued that the General Order instead of restraining, or lessening com petition purported to create competition which was outside the limits of the Authority s powers. This argument in our opinion, appears to be completely misconceived. . The purpose of the legislation is not to restrict competition but to restrict unreasonable competition. The General Order first of all provides that an agreement of arrangement which is not in accordance with certain conditions would be deemed to be unreasonably res trictive trade practice. A perusal of the General Order would show that the conditions contemplated therein can have the effect of lessening or restricting unreasonable competitions as the orders contemplates appointment of distributors population wise. If more distributors are appointed, monopolies would be reduced and unreasonable competition may be reduced. We, therefore, do not agree with Mr. Vellani that the Authority has travelled beyond the scope of its powers.

24. Lastly, it was argued by Mr. Vellani that the General Order was discriminatory as it applied to only such suppliers or distributors which were registrable with the Authority under section 16 (1) of the Ordinance and not to others. This argument also appears to be misconceived as the purpose of the Ordinance is to restrict and control monopolies of under takings or individuals having large business. Section 16(1) shows that only such undertakings or individuals having large business are registrable with the Authority. Since the General Order applies to all such undertakings or persons, the same is not discriminatory.

25. We are, therefore, of the opinion that the General Order is not without lawful authority and the same does not suffer from any legal infirmity and for the same reasons these two petitions are dismissed.

26. However, in view of the nature of the questions involved, the parties are left to bear their own costs. M. B. A.. Order accordingly.