Memorial On Behalf of Respondents: 7Th Nliu National Corporate Law Moot

1
7th NLIU NATIONAL CORPORATE LAW MOOT TC6
IN THE HONBLE SUPREME COURT

OF MOCANDO
--------------------------------------------------------------------------------------------------------------------
APPEAL UNDER SECTION 53T OF THE MOCANDON
COMPETITION AND FAIR PRACTISES ACT 2004
--------------------------------------------------------------------------------------------------------------
TP Mocando Ltd & Another………………………………………….APELLANT
Vs.
Competition Appellate
Tribunal……………………………………………………….……..RESPONDENT
__________________________________________________________________________
ON THE SUBMISSION TO THE HON’BLE SUPREME COURT OF MOCANDO
MEMORIAL ON BEHALF OF RESPONDENTS
MEMORANDUM FOR RESPONDENTS

2
7th NLIU NATIONAL CORPORATE LAW MOOT
TABLE OF CONTENTS.
LIST OF ABBREVIATIONS………………………………………………………………4
INDEX OF AUTHORITIES………………………………………………………………..5
STATEMENT OF JURISDICTION………………………………………………………..8
STATEMENNT OF FACTS………………………………………………………..………9
ISSUES FOR CONSIDERATION…………………………………………………………11
SUMMARY OF ARGUMENTS……………………………………………………………12
WRITTEN SUBMISSIONS
ISSUE I
MISPLACEMENT OF THE LUBRICANT CIRCULAR
1.1Retrospective effect of the lubrication circular………………………………………….13
1.2Reasonable justifications for imposing such restriction…………………………………16
ISSUE II
VARIOUS RESTRICTION IN THE DISTRIBUTION AGREEMENT
2.1Territorial restrains:……………………………………………………………………. 17
2.2Violative of section 3(4) of the competition act………………………………………….18
2.3Restriction on online sales………………………………………………………………...19
ISSUE III
RELIABILITY OF THE EVIDENCE OBTAINED
3.1 Liability of a subsidiary company and the parent company…………….21
3.2 perincuriam of the high court order……………………………………….22

3
ISSUE IV
4 WHETHER THE IMPOSITION OF PENALTY ON TML FOR NOT FILING A NOTICE

OF PRIOR APPROVAL UNDER SEC 6 (2) IS MAINTAINABLE
4.1 Lack of clarity of the provision …………………………………………………23
4.2The de minimis notification……………………………………………………...24
4.3The FAQ circular………………………………………………………………..25
4.4 Law in USA……………………………………………………………………..26
5) WHETHER THE PENALTY AMOUNT IMPOSED ONLY ON TML IS JUSTIFIED?
5.1Influence of Ms Daza…………………………………………………………………...28
5.2 Excuse of MCA on the punishment……………………………………………………...29
Issue VI
6) WHETHER THE RESTRICTION IMPOSED BY TPL THROUGH TML ON THE

LUBRICANT CIRCULAR IN THE AFTERMARKET IS VALID?
6.1 Aftermarket justified by MCA………………………………………………31
6.2 No violation in the aftermarket…………………………………………....31
PRAYER…………………………………………………………………………..................34

4
LIST ABBREVIATIONS
A.I.R All India Reporter

vs Versus
SC Supreme Court
SCC Supreme Court Cases
TPL Tundra private ltd
TML TP Mocando Ltd
JV Joint Venture
MCA Mocandon Competition Authority
CCI Competition Commission of India
DG Director General
OES Original equipment supplier
OEM Original Equipment manufacturer
FTC Federal Trade Commission
IP Intellectual property
MEMORIAL ON BEHALF OF THE RESPONDENT

5
INDEX OF AUTHORITIES
[A] INDIAN CASE LAWS
Cause Title Citation Page

Number
West Ramnad Electric Distribution Co ltd Vs 1962 AIR 1753, 1963 SCR (2)
State of Madras 747 13
Rao Shiv Bhadur Singh and Anr. Vs State Of 1953 AIR 394, 1953 SCR 1188
Vindhya Pradesh 13
Kingfisher Airlines Limited Vs Competition COMPETITION
Commission of India COMMISSION OF INDIA Case 14
No: 36/ 2016
Union of India vs Tushar Ranjan Mohanty 1994 SCC (5) 450, JT 1994 (4) 14
and other 397
Rafiquennessa vs. Lal Bahadur Chetri 1964 AIR 1511, 1964 SCR (6) 14
876
Ashok Kumar Yadav Vs State of Haryana 1987 AIR 454, 1985 SCR Supl. 14
(1) 657
Shri Abdelbaset Vs DLF Universal Ltd (civil) 7960 of 2004 14
Appeal
Subash Yadav vs. Force motor limited Competition Commission O.F 16
Case No. 32 of 201
Pandrol Rahee Technologies Private ltd Vs COMPETITION 16
Delhi Metro Rail and anr. COMMISSION OF INDIA
CASE No. 3/2010
Hindustan lever ltd vs The Monopolies and AIR 1977 SC 1285, 1977 3 SCR 17
Restrictive, 455

6
Automobiles Dealers ... vs. Global COMPETITION 19

Automobiles COMMISSION OF INDIA
Case No.33/2011
Nagar Palika, Nataurvs. U.P. Public Services 1998 SCC (L&S) 567 22
Tribunal, Lucknow
Maharashtra State Financial Corpn. V 1994 AIR 2657, 1994 SCC (5) 22
Suvarna Board Mil 566
. Shri RamakantKini v. Hiranandani Hospital, Case 39/2012 (CCI) 29
Powai, Mumbai,
Delhi Jal Board v Aditya Birla Chemicals Case 3/2013 & 4/2013 (CCI) 29
India Ltd,
Magnus Graphics v. Nilpeter India pvt. Ltd [44]2015 Comp LR 93 31
[B] INTERNATIONAL CASE LAWS
Wong Sun v. United States, 371 U.S. 471 (1963) 22
DHN Ltd. v Tower Hamlets [1976] 1 WLR 852 22
Pierre Fabre Dermo-Cosmétique SAS v ECLI: EU: C: 2011:649 20

President de
Standard Oil Company vs United State s 221 U.S. 1 (1911) 18

7
[C] STATUTES
INDIAN COMPETITION ACT 2002…………………………………………….Passim
INDIAN CONSTITUTION
CLAYTON ACT 1890
FEDERAL TRADE COMMISSION ACT
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976
[D]BOOKS
DR.H.K.SAHARAY,”TEXTBOOK ON COMPETITION LAW”, Second edition.2016

………………………………………………………………………………………….passim
VINOD DHALL,”COMPETITION LAW TODAY…………………………………passim

8
STATEMENT OF JURISDICTION
The petitioner has approached this Hon’ble Court under section 53 T of the Competition and
Fair Practices Act, 2004. The respondents submit to the jurisdiction of the court.

9
STATEMENT OF FACTS
1. The country of Mocando is a small island nation in the Indian Ocean. In 2004
Mocandian Competition and Fair practices Act was passed which came into force on6
June 2013. There was a famous car manufacturer called TPL which was engaged in
the production of luxury cars through its wholly owned subsidiary TML in Mocando.
One of the famous car which it sold in Mocando is Tundra fire 1500 series which
occupied a decent market share of 32%.
2. TPL through TML has a distributor in each major city of Mocando. TPL enters into a
distribution agreement with these distributors which contained conditions such as not
to sell in the online platform, no two distributors can operate in the same territory
etc... Also TPL through TML issues a lubricant circular to all the distributors stating
that the distributors should ensure that FPX and DHL brand of lubricants are not sold
in the market as they are affecting the engines of the cars. Also it mentioned an expiry
of warranty to those cars if the consumers used these lubricants
3. FeminaDaza was an old distributor and also had a co which produced DHL brand of
lubricants. So her interests were affected as her co was prevented from selling by the
lubricant circular. So she filed a case through a consumer rights group alleging that
the lubricant circular and distribution agreements are violative of sec 4 and section
3(4) respectively
4. The MCA on 23 may passed an order asking the Dg to conduct an investigation. The
Dg without proper scope of authority engaged a search and seizure operation in the
offices of TML without proper notice and recovered various evidences. TML and all
distributors except Daza approached the high court challenging the search and seizure
as being beyond the scope of investigation. The high court granted an interim stay in
favor of TML and the distributors. And on 2 Jan 2016 upheld the challenge of TML
but couldn’t restrict the data obtained from Daza and co as they were not part of the
petition

10
5. Meanwhile the DG used the evidence of Daza and co and submitted the report on 26
July 2015.on 29 Jan 2016 MCA passed a final order under section 27 of the act by
finding out that various clauses of the distribution agreement were held to be violative
of section 3(4) of the act. Also since all the car manufacturers were 100% dominant
in the supply of spare parts and diagnostics.so the lubricant circular was found to be
violative of section 4 and 3(4) of the act.
6. Also the investigation of the dg revealed that TML and GG Marquez and co entered
into a JV agreement for producing CNG kits for vehicles which involved a transfer of
trademark , technical assistance and knowhow and also some machinery in lease to
the JV from the parent cos. On 31 Aug 2015, the MCA sent a show cause notice
under section 43A regarding the failure to file notice for prior approval. Both TML
and GG Marquez and co were of the view that they were exempted from the
aforementioned provision as they were covered under the de minimis threshold. MCA
rejected this view and imposed a penalty of 5 million Mocandian on TML
only.(“section 43 A order”)
7. TML filed an appeal with CAT and CAT passed the decision on 12 May. CAT upheld
the decision of MCA on account of various restrictions of the distribution agreement
but had a contradictory opinion on the lubricant circular issue. Also CAT held that the
Mocandon law doesn’t state that illegal search and seizure operation cannot be held as
an evidence. Also on 20 may CAT upheld the 43A order of the MCA but removed the
penalty imposed on TML connoting the lack of clarity of provisions relating to
combination of JV. Aggrieved by the orders of CAT both TML and MCA have
approached the SC of Mocando under section 53T of the act.

11
ISSUES FOR CONSIDERATION
(I)
WHETHER THE LUBRICANT CIRCULAR WAS MISPLACED?
(II)
WHETHER THE RESTRICTIONS IN THE DISTRIBUTION AGREEMENT WERE

REASONABLE?
(III)
WAS THE EVIDENCE OBTAINED BY DG RELIABLE?
(IV)
WHETHER THE IMPOSITION OF PENALTY ON TML FOR NOT FILING A NOTICE

OF PRIOR APPROVAL UNDER SEC 6 (2) IS MAINTAINABLE
(V)
WHETHER THE RESTRICTION IMPOSED BY TML THROUGH THE LUBRICANT

CIRCULAR IN THE AFTERMARKET IS VALID?

12
SUMMARY OF ARGUMENTS
1. WHETHER THE LUBRICANT CIRCULAR WAS MISPLACED?
The Lubricant circular was issued before the act came into force. Hence the lubricant circular
issued cannot be given retrospective effect and hence the lubricant circular is not violative of
section 3(4) and section 4 of the act
2. WHETHER THE RESTRICTIONS IN THE DISTRIBUTION AGREEMENT WERE

REASONABLE?
The restrictions in the distribution agreement which restricted territory, prohibited online
sales and created an exclusive distribution agreement was held to be violative of section 3(4)
of the act.
3. WAS THE EVIDENCE OBTAINED BY DG RELIABLE?
The evidence obtained by the DG was clearly a violation of the principles of natural justice as
the search and seizure operation was without sufficient authority and equal representation
was not given to TML
4. WHETHER THE IMPOSITION OF PENALTY ONLY ON TML FOR NOT FILING A

NOTICE OF PRIOR APPROVAL UNDER SEC 6 (2) IS MAINTAINABLE
The penalty amount imposed by MCA on TML alone was considered to be a biased decision
as ignorance of law cannot be a valid excuse. Also since there were no clear provisions worth
regards to the filing of notice for prior approval under the act. Hence the penalty amount is
not justifiable.
5. WHETHER THE RESTRICTION IMPOSED BY TPLTHROUGHTMLON THE

The restriction imposed by TPL through TML on the lubricant circular was held to be a
reasonable restriction as TML did not exert a dominant position. It issued the lubricant
circular merely to protect its cars from the damage caused by FPX and DHL brand of
lubricants.

13
WRITTEN SUBMISSIONS
ISSUE I
1) WHETHER THE LUBRICANT CIRCULAR WAS MISPLACED?
In the year April 2013, TPL issued the lubrication circular intimating the distributors to use
ZERO brand lubricants for the TPL cars. Further it was specified that the warranty would
expire if the customers use FPX and DHL lubricants since it was found to harm the engines
of the TML cars. This circular was misplaced mainly on two ground:
1) Validity of being a subject matter of investigation
2) Reasonable justification for imposing such restrictions
1.1) Retrospective effect of the lubrication circular
Retrospective means looking backward; contemplating what is past; having reference to a

statute or things exiting before the act in question. A retrospective law is one which is given
effect before the law was passed. [1]The lubrication circular was issued on April 2013 which
was two months ahead from the enforcement of the competition and fair practices act. At the
time when the circular was issued it was neither unlawful nor void. By using the expression
“law in force” both the parts of Art 20(1) the constitution has clearly indicated that even if a
criminal law was enacted by any legislature retrospectively, its retrospective operations
would be controlled by Art 20(1) [2]
Article 20 (1) sates that no person shall be convicted of any offence except for violation of a
law in force at the time of the commission of the Act charged as an offence, nor be subjected
to a penalty greater than that which might have been inflicted under the law in force at the
[3]
time of the commission of the offence .Benami Transactions (Prohibition Act) which
contains a similar provision has been held by the Supreme Court to be prospective in nature.
He cites to us a decision reported in R. Rajagopal Reddy (dead) by Lrs. v. Padmini
Chandrasekharan (dead) by L.Rs[4]. The Supreme Court has held in the said
__________________________
1- A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier.
Published 1856
2- West Ramnad Electric distribution Co ltd Vs State of Madras 1962 AIR 1753, 1963 SCR (2) 747
3- Rao Shiv Bhadur Singh And Another VS State OF VINDHYA PRADESH 1953 AIR 394, 1953 SCR 1188
4. R.Rajagopal Reddy Vs Padmini Chandrasekharan (1995) 2 SCC 630

14
decision that the Act is not retrospective we, however, find that even the Benami Transaction
Act operates in a similar manner as that of Competition Act, 2002.
The retrospectively has to be enacted specifically in the fiscal statue and it is more so in
respect of penal provision else it would be derogatory to Article 20(1). If this ratio is to be
applied, it must be said that the Competition Act is not retrospective since there is no
provision to that effect at all in the statute. For this reason, too, we find that the Competition
Act is not retrospective and is therefore not hit by Article 20(1) even if it is assumed to be
penal for the sake of the argument. [5]
A law in force at the time postulates actual factual
existence of the law at the relevant time and excludes the retrospective application of any
subsequent law. [6]
Today’s equal cannot be said tomorrow unequal by saying that they were
unequal 20 years ago and we will restore that position by making a law today and making it
retrospective. Constitutional rights, constitutional obligations and constitutional
consequences cannot be tampered with that way. A law which is made today will be plainly
invalid as offending the constitutional provides in the context of the existing situation cannot
become valid by being made retrospective. Past virtue cannot be made to wipe out present
vice by making retrospective laws. [7]. It was observed in the case of stoot vs stoot that the
constitutional prohibition of the passage of retroactive laws refers only to retroactive las that
injuriously affect some substantial or vested right and does not refers to those remedies
adopted by legislative body for the purpose of providing a rule to euchring for its citizens
natural right.
The legislature had the power to make laws with retrospective effect and it is well
recognized. But when such legislation is passed public interest at large should be considered.
[8]
When vested rights are affected by any statutory provision the said provision should be
normally constructed to be prospective in the operation and not retrospective until the
provision in question relates to procedural matter. [9]Therefore, the lubrication circular being
issued before the act came into force and cannot be taken as a subject matter of investigation.
_____________________________________
5- Kingfisher Airlines Limited Vs Competition Commission of India CCI Case No: 36/ 2016
6- Supra, 2
7- Union of India vs Tushar Ranjan Mohanty and others, 1994 SCC (5) 450, JT 1994 (4) 397
8- Rafiquennessa vs Lal Bahudur Chettri 1964, AIR 1511, 1964 SCR (6) 876
9- Ashok Kumar Yadav Vs state of Haryana. , 1987 AIR 454, 1985 SCR Supl. (1) 657

15
In the case Saurabh Prakash Vs DLF universal Ltd [10] dismissed he matter on the grounds of
lack of retrospective effect and stated that all the allegations could not be considered as it was
made prior to the enforcement of Section 4 of the Act. Therefore it’s humbly submitted
before this Hon’ble court that the lubrication circular was issued before the commencement
of the act and could not be taken into consideration.
___________________________
10. Saurabh Prakash Vs DLF Universal Ltd Appeal (civil) 7960 of 2004

16
1.2) Reasonable justifications for imposing such restriction.
The aim and the object of the act, is to prevent the practices having adverse effect on the
competition, to promote competition and thereby to protect the interest of the customers [11].It
is a well-known fact that TML has a very strong research and development unit and it keeps
on issuing circulars for the benefit of its distributors. One such circular was the lubrication
circular which was mainly issued because the ZERO brand lubricants were found to be best
suited for TML cars. In addition to it was also found that FPX and DHL lubricants were
harmful to the engines of TPL’s cars. It is also imperative on the part of the omission to
prevent practices having adverse effect on the competition, to promote and sustain
competition in markets and to protect the interest of the consumers as a part of its mandate,
which is seen clearly from the lubrication circular issued by TML.
Hence it is for the ultimate benefit of the consumers. It is also imperative on the part of the
omission to prevent practices having adverse effect on the competition, to promote and
sustain competition in markets and to protect the interest of the consumers as a part of its
mandate [12], which is seen clearly from the lubrication circular issued by TML. Hence it is
for the ultimate benefit of the consumers. In addition, there are several small level
manufactures involved in the process of manufacturing lubricants and TML has not placed
any such restrictions on them. The main aim of TML is ensures the consumer’s well-being
and in order to which the distributors where asked to ensure that the consumers did not the
above said lubricants brands.
Hence it’s humbly submitted before this honorable court that there was a misplacement in the
lubrication circular.
_________________________________
11.Subash Yadav vs force motor limited ,CCI Case No. 32 of 201
12- Pandrol Rahee technologies private ltd Vs Delhi metro rail and another COMPETITION COMMISSION
OF INDIA CASE No. 3/2010

17
ISSUE II
2. WHETHER THE RESTRICTIONS IN THE DISTRIBUTION AGREEMENT

WERE REASONABLE?
It’s humbly submitted before this Hon’ble court that the distribution agreement of the TML
places various restriction pertaining to the online sales, price maintenance and the territorial
restrains.
2.1) Territorial restrains
Restrictive trade practices mean a trade practice which has, or may have, the effect of
preventing, distorting or restricting competition in any manner and in particular. [13]In the
distribution agreement TML States that “the distributor undertakes to make best efforts to sell
the cars only within a pre-defined territory” which clearly restricts the distributors from
carrying on an effective trade.
The preamble talks about economic justice and the equality of opportunity. In
accordance with equality and economic justice in the market, there is a necessity to prevent
practices resulting in adverse effect on competition and to protect the interest of consumers
and also to ensure freedom of trade carried out by participants in the market. For this purpose,
if someone enters into an agreement which efforts to fix prices, limits or controls production
or controls production and provision of services or allocating markets is presumed to have
appreciable adverse on the competition. Even exclusive distribution agreement is considered
[14]
to have an adverse effect on the competition . Exclusive distribution is the type of
distribution followed by the TML that is allocating one distributor for one territory.
Therefore, any public procurement which has anti-competitive elements is hit by the
provision of competition act.
Section 1 of the Sherman act provides that “every contract, combination in the form
of trust or otherwise restraint of trade or commerce hereby declared to be illegal “ [15] and
___________________________________________
13-Hindustan lever ltd vs the monopolies and restrictive AIR 1977 SC 1285, 1977 3 SCR 455
14 – Supra, 11
15 - Sherman act 1890
18
literally applied, it would outlaw every conceivable contract which could be made concerning
trade or commerce or the subject of such commerce.
Every person who shall make any contract or engage in any combination or conspiracy
hereby declared to be illegal shall be deemed guilty of felony and on conviction thereof shall
be punished [16]. Therefore, it is humbly submitted before this Hon’ble court various
restrictions arises due to the distribution agreement and it curtails the free movement of trade
which is the essence of the competition act.
2.2) Violative of section 3(4) of the competition act
Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price
of, or trade in goods or provision of services, including—
(a) Tie-in arrangement;
(b) Exclusive supply agreement;
(c) Exclusive distribution agreement;
(d) Refusal to deal;
(e) Resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely
to cause an appreciable adverse effect on competition in India.
This clearly shows that the distribution agreement is clearly violating section 3(4)
(C) of the competition and fair practices act. Furthermore under section 19(3), an agreement
is found to have an appreciable adverse if it drives the exciting competitors out of the market
as well as if it creates barriers to new entrants to the market. Under the distribution agreement
it prevents the dealers from taking the distributorship of any other cars and in consequences
of it M/S .Daza request to take up the distributorship of gudi was denied
___________________________________________
16. Standard oil company vs united states ,s 221 U.S. 1 (1911)

19
In the case U.S. v. Dentsply International, Inc., 399 F3d 181, 3rd Cir , the court held that
Although not illegal in themselves, such exclusive dealing arrangements, when orchestrated
by a monopolist, can be an unlawful means to maintain a monopoly. Dentsply was motivated
by an explicitly anticompetitive intent reserve for itself the key dealers in the industry thus
foreclosing its competitors from also using this vital market channel to reach customers. The
same type of arrangement with dealers may pass antitrust scrutiny where the manufacturer
does not have monopoly power. Similarly,TML also plays an unlawful means in the course of
exercising their dominance. In fact, the distributorship of one M/s. PolarTermer was
terminated due to the failure to comply with the territorial restrain. An agreement which is
said to foreclose the market or which restricts the choice available to the dealer and
subsequently causes an apprehensive effect on the competition is considered to be violative
as per section 3(4) of the act.[17]Thus a manufacture using exclusive distribution, gains a
better chance of promoting his goods in comparison to other players and that is not a fair
game or a fair means of competition [18].
2.3) Restriction on online sales
The distribution agreement further states that the distributors are not allowed to carry on
online sales. Generally, competition authorities view the internet as a powerful competitive
tool. Restrictions on internet sales are viewed with suspicion [19]. For example:
1. The European Commission’s guidelines on Vertical Restraints state that: “The internet is a
powerful tool to reach a greater number and variety of customers than by more traditional
sales methods”
2. The UK Competition and Markets Authority’s press release in its recent decision
fining Ping for restrictions on sales on the internet said: "The internet is an increasingly
important distribution channel and retailers’ ability to sell online, and reach as wide a
customer base as possible, should not be unduly restricted.”
___________________________________________
17- Automobiles Dealers ... vs 1. Global Automobiles

18 - Milap C. Dholakia, Competition Law- Exclusive Supply Agreements – No Exclusivity Under Competition
19 burges salmon .com
20
Restrictions on online sales unnecessarily curtails the freedom of trade as well as it

hampers the economic growth. In Pierre Fabre [20] the European Court of Justice (ECJ) ruled
that to place a restriction on online sales there should be objectively justified which is clearly
missing from the part of TML. Restriction on online sales is a restriction on competition by
object. Therefore, it humbly submitted before this honourable court that distribution
agreement places various restrains on the trade which against the competition law as well as
is against the fundamental right. There the court is humbly requested to consider the
agreement as violative of section3 (4) of the act.
___________________________________________
20- Pierre Fabre Dermo-Cosmétique SAS v Président de l ECLI: EU: C:2011:649.

21
ISSUE III
3. WAS THE EVIDENCE OBTAINED BY DG RELIABLE?
Notably, communication was hardly through TML and mostly through TPL. TPL sends
emails to group ID which has all the distributors in Macondo. Access to M/s. Daza and Co’s
email effectively gave access to all the ‘relevant‘ communication .An inspector may examine
on oath-(a) any of the persons referred to in sub- section (1); and(b) with the previous
approval of the Central Government, any other person, in relation to the affairs of the
company, other body corporate, managing agent, secretaries and treasurers or associate, as
the case may be; and may administer an oath accordingly and for that purpose may require
any of those persons to appear before him personally.[21]Since most of the transactions are
through TML it also makes them liable to produce all the needed information before the
director general and their failure led to subsequent seizure of the respective materials.
On 06July 2014, a noticed was issued to TML asking them to provide “all email
communication(s) of Mr. Gaitonde, Mr.Vikram Chandra and Mr. Sartaj Singh. But TML
refused to provide the needed information stating that all the named officers were from TPL
and not from TML. The commission also has the power to carry out the needed additional
information. [22]
3.1) Liability of a subsidiary company and the parent company.
Section 1159 of the Companies Act 2006 of United Kingdom says “A company is a
“subsidiary" of another company, its “holding company", if that other company—
(c) Is a member of it and controls alone, pursuant to an agreement with other members, a
majority of the voting rights in it?[23
21. Indian competition act section 41 (3)

22. - Indian competition act, section 29 (5)
23-companies act 2006, of United Kingdom

22
Lord Denning put forward the need to treat a group of companies as one since in reality it
works like a single economic entity. [24] .Furthermore, all the transactions are through TPL
and it is a prerequisite to investigate into the accounts of the officials of TML. In addition to
this all the communication are through a common ID which facilitates to get the needed
information by accessing the accounts of any one of the distributors. So, the materials
collected from Daza Co effectively gave access to all the ‘relevant’ communication. Under
section 41(2) of the Mocandian competition and fair practices act the director general is
conferred with powers to carry out the seizure operations to discover the needed information.
Thus, there is no illegality in the evidences nor in the means of obtaining the evidences.
3.2) Perincuriam of the high court order
One important corollary to the Exclusionary Rule is the “fruit of the poisonous tree” doctrine.
This rule holds that in addition to the material uncovered during the illegal search being
inadmissible, any evidence that is later gathered as an indirect result of the illegal search will
also be excluded. [25] but since there was no illegality in the evidences obtained as only the
email communication of only M/s Daza was used which very well fits into the capacity of the
director general and thus this principle is not applicable. In the case of Nagar Palika, Nataur
vs. U.P. Public Services Tribunal, Lucknow [26], despite reminders, the employee neither
submitted reply to the charge sheet, nor appeared before the enquiry officer, and neither did
he inspect the records, in spite of the opportunity given to him. In such cases, the findings of
the enquiry officer on the basis of the available records that the charges were proved, was
held not violative of the rules of natural justice. Once a notice being issued is sufficient for
the subsequent action against the party and it’s well suited within the scope of natural justice.
[27]
. Thus, it is humbly submitted before this honourable court that the director general acted
within his scope and there in illegality neither in the evidences nor in the means of obtaining
the evidences.
24.DHN Ltd. v Tower Hamlets [1976] 1 WLR 852

25-Wong Sun v. United States, 371 U.S. 471.
26.Nagar Palika, Nataur vs. U.P. Public Services Tribunal, Lucknow [26], 1998 SCC (L&S) 567
27- Maharashtra State Financial Corpn. V Suvarna Board Mil

23
ISSUE IV
4. WHETHER THE IMPOSITION OF PENALTY ON TML FOR NOT FILING A

NOTICE OF PRIOR APPROVAL UNDER SEC 6 (2) IS MAINTAINABLE?
The Mocandon Competition and Fair Practises Act 2004 is not clear relating to the
provisions of entering into a joint venture agreement and also the excuse given by the MCA
for not imposing penalty on Gg Marquez and Co is not a reasonable excuse
4.1)Lack of clarity of the provision

The Mocandon Competition and Fair Practises Act 2004 in section 6(2) makes a compulsory
requirement for filing a notice for prior approval of any combination attracted by section 5 of
the act. Sec 6(2) is attracted only when section 5 is fulfilled. If the conditions prevailing in
section 5 are not fulfilled or not applicable, then the provisions of section 6(2) cannot be
provoked since the fundamental idea of attracting this section is to regulate the
combinations entered as per sec 5.
If we closely analyse section 5 it states that “acquisition of one or more enterprise by one or
more persons or merger or amalgamation shall be a combination”. [28] Here the provision
mainly appears to concentrate on existing enterprises. There isn’t even a slight ray of light
which connotes that joint ventures are included in this section as the structure of the sentence
in section 5 gives a meaning as if it only captures and attracts an existing enterprise
Also the term joint venture isn’t mentioned anywhere in the act except under section 3 which
states that joint ventures are stated to be exempt from the application of Section 3 sub-section
3 of the Act dealing with presumption of appreciable adverse effect on competition if they
increase efficiency in production, supply distribution, storage, acquisition or control of goods
or provision of services. But its cope is only limited to section 3
___________________________________
28. Please refer section 5 of the competition act 2002

24
Also another statement which gives a strong opinion that section 5 of the act applies mainly
to existing enterprises is explanation (c) of section 5 which states that “ the value of the
assets shall be determined by taking the book value of the assets as shown, in the audited
books of account of the enterprise , in the financial year immediately preceding the financial
year in which the date of the proposed merger falls”[29] .Here the calculation of the value of
assets is done by taking the book value of the assets of the previous year of the acquirer and
the acquired.. But in the case of a joint venture there isn’t any assets available solely to it
which can be considered as it is a new undertaking.
4.2THE DE MINIMIS NOTIFICATION.

Also the MCA which introduced the de minimis notification[30] on 4th March 2011 which
exempted the requirement of filing a notice of prior approval as per section 6(2) if the
enterprise which is being acquired had assets of value less than 250 crores Mocandian dollars
or a turnover of 750 crores Mocandian dollars. Here the notification focused only on
acquisitions and not on mergers and amalgamations. So the hint of including joint ventures
under the purview could not be established clearly as even mergers and amalgamations
weren’t concentrated on the notification issued on 2011.
Also there wasn’t any clear provision whether to include the value of intangible assets also
while calculating such threshold. Here in our present case majority of the assets which were
transferred to the joint venture by the parent companies were intangible in nature such as
trademark, technical assistance and know how. So the parties involving in the joint venture
were not sure whether to include the value of the intangible assets while calculating the target
enterprise threshold. So even though the target enterprises TML and Gg Marquez and Co had
assets and turnover more than the threshold limits, the parties might have been under an
impression that since even mergers and amalgamations weren’t considered in the MCA
notification and also since the majority of the assets which they transferred were intangible in
____________________________________
29. Supra,28.
30.https://www.cci.gov.in/sites/default/files/notification/SO479%28E%29%2C480%28E%29%2C481%28E%29
%2C482%28E%29240611.pdf

25
nature and no clear provision was present there would have been under an impression that the
joint venture agreement didn’t come under the purview of sec 5 at all
Only in 2017 after revising the threshold in 2016 of assets of the target enterprise worth 350
crores Mocandian dollars and turnover limits to 1000 crores Mocandian dollars the MCA
issued clarifications to the de minimis provision stating that
1) “In addition to acquisitions, the Revised Target Exemption now extends to

mergers/amalgamations as well;
2)The manner in which the value of assets or turnover is to be computed has been clarified
under the Revised Target Exemption, with the value of intellectual property rights (i.e., brand
value, value of goodwill, value of copyright, etc.), if any, being included in the calculation;
and
3) The Revised Target Exemption does not apply to transactions entered into prior to 29
March 2017. Such transactions will continue to be governed by the earlier Target Exemption
provisions and its interpretations.”[31]
Considering the above clarification it is evident that there was confusion and absence of
clarity in the 2011 de minimisnotification and so the parties were under an impression that
joint venture doesn’t come under the purview of a combination.
4.3 THE FAQ CIRCULAR
Only after the CCI issued an FAQ circular [32] in India which specifically provided that a joint
venture should also be considered under the scope of the de minimis circular while the
combinations laws are attracted. There was a dilemma between many companies entering
into a joint venture agreement whether to file a notice for prior approval or not. Only in
certain cases such as the joint venture agreement between Mumbai International Airport
Private Limited; Indian Oil Corporation Limited; Bharat Petroleum Corporation Limited;
Hindustan Petroleum Corporation Limited; and Mumbai Aviation Fuel Farm Facility Ltd.[33]
____________________________________
31.https://www.cci.gov.in/sites/default/files/notification/S.O.%20988%20%28E%29%20and%20S.O.%20989%
28E%29.pdf
32. Question 7, https://www.cci.gov.in/sites/default/files/whats_newdocument/FAQ%27s_Combinations.pdf

33.(See Case No. C-2014/04/164, MAIL/IOCL/BPCL/HPCL/MAFFFL).

26
and also in the case of Ethicon and Google ltd[34], the parties to the joint venture have filed a
notice for prior approval. But that doesn’t imply that there is a clear law prescribed. They
have played the safer side.
Only after issuing an FAQ circular which specifically stated about considering joint ventures
into the scope of section 5 and de minimis exemption, the law became clear.
So before the FAQ circulars were passed the companies entering into a joint venture
considered giving a notice for prior approval only if such joint venture was brown field as it
can come under the purview of section 5. But this was still a practise which was carried and
was not definite Lawyers have taken a cue from such decisional practice of the CCI,
Avaantika Kakkar, a partner at law firm Khaitan & Co. told Bloomberg Quint.
“The clarification in the FAQ document confirms the position of the CCI on the
notifiability of joint ventures. We have maintained that Greenfield joint ventures need not be
notified; however, a brownfield joint venture i.e. where the joint venture parent/s contribute
assets to the joint venture entity is notifiable if it meets the thresholds. [35]]”
In our case even though the joint venture agreement between TML and Gg Marquez and Co
was considered to be a brown field joint venture , that doesn’t mean they had to file a notice
for prior approval since the law relating to joint ventures coming under the purview of
section 5 and section 6(2) was not clear
The laws in United States were clearer in comparison with the Indian law as to the mandatory
requirement for filing a notice for prior approval by the joint ventures
4.4) LAW IN USA
The laws in the United States relating to the filing of notice for prior approval was clearly
connoted in by the Federal Trade Commission [36] with respect to section 7 of the Clayton act.
Section 7 of the Clayton act is similar but not Pari Materia to section 4 of the competition
____________________________________
34.Case No. C-2015/06/283, Google/Ethicon
35. Avantika Kakkar,Competition Regulator Clarifies Law On Joint Ventures, Bloom Berg Quint
36. Herein referred to as FTC

27
and fair practises act. Also the FTC through section 5 of the Federal Trade Commission act
has given power to check for unfair trade practises. In response to all this the FTC has passed
the “Hart-Scott-Rodino Antitrust Improvements Act of 1976” (the HSR Act) to give the
federal agencies responsible for reviewing the antitrust implications of mergers and
acquisitions by way of a compulsory prior approval notice. Now the act has clearly added in
the code of federal regulations under section 801.40 that Joint ventures are to be considered
for calculating the threshold limits of combinations as the combination of a joint venture is
considered under section 801.2 regarding the determination of acquiring persons and acquired
persons. So this means that joint ventures are recognised as a combination and are considered
for calculating the size of entity and size of transaction thresholds for filing a notice for prior
approval under section 801.40.

28
ISSUE V
5. WHETHER THE PENALTY AMOUNT IMPOSED ONLY ON TML IS

JUSTIFIED?
5.1 INFLUENCE OF MS DAZA

The decision to impose penalty on the parties of the joint venture was a sole decision of the
MCA based on the sole evidence and report supplied by the director general. There is a clear
violation of the principles of natural justice as only TML was penalised by the MCA. This
indirectly gives us a question as to why MCA imposed penalty only on TML and not on Gg
Marquez and Co. A reasonable assumption would be that since it is a well-known fact that
FeminaDaza is a very influential person[37] and also is a close friend of Marquez and co [38],
This clearly shows that the MCA has been influenced by FeminaDaza to punish only TML
as TML was also against Ms Daza in the case of lubricant circular which prohibited her
company ‘DHL’ from supplying lubricants. This clearly shows a malicious intention to take
revenge on TML and exclude Gg Marquez and Co. since the MCA considered filing of notice
for prior approval by a joint venture for prior approval was mandatory, then the just thing
which MCA should have done based on their purview of law was to punish both the parties
instead of one.
Also even in India the CCI has been under a bad impression for ordering erroneous decisions
in many cases. Also recently one of the orders of CCI in India was reverted by the Compat
because of the lack of natural justice in the decision of the CCI. In Gujarat Industries Power
______________________________
37. Refer to paragraph 11 of the moot proposition

29
Company Limited v. Competition Commission of India (Appeal No. 3 of 2016) [39].There has
been a number of cases where the CCI in India has ordered decisions based on following up
blind precedents and without proper analysis. Also sometimes the commission has not
maintained consistency in applying the precedents which are just and right. In the
Hiranandani Hospital case [40], the CCI had passed an order finding a violation of Section
3(1) without coupling it with either of Section 3(3) or Section 3(4) of the Act. This was in
contrast to an earlier order where it was of the view that “Section 3(1) of the Act should not
be evoked independently.” Again, in its order in the Aditya Birla case,[41] the CCI ruled
against the precedent set by the COMPAT in the Lamborghini case[42] for the satisfaction of
the group test under section 5 as the relevant parameter to qualify as a single economic entity
for Section 3 offences. Owing to the rule of precedence, the CCI reproduced this erroneous
and ignorant approach in Aditya Birla case and the Rail Coach Factory [43] case as well. The
competition appellate tribunal in many cases has reverted the decision of CCI because of the
lack of proper analysis of the facts of the case and the provision related to it and the blind
adherence to the evidence.
The CAT doesn’t say that the evidence produced by the director general is false and rigged.
The CAT connotes that proper analysis based on the evidence and report of the dg was not
done by the MCA. So these cases clearly implies that the CAT has every power to modify the
decision of the MCA and issue a decision based on its own analysis as the CAT being an
appellate body has overarching powers over the MCA.
5.2) EXCUSE OF MCA ON THE PUNISHMENT
The MCA while imposing penalty on the joint venture agreement held a reason for not
imposing penalty on Gg Marquez and Co. It was held that Gg Marquez and Co being a first
timer was not imposed the penalty amount [44]. This cannot be taken as a valid consideration
39. (Appeal No. 3 of 2016)

40. Shri RamakantKini v. Hiranandani Hospital, Powai, Mumbai, Case 39/2012 (CCI).
41.Delhi Jal Board v Aditya Birla Chemicals India Ltd, Case 3/2013 & 4/2013 (CCI)
42.Exclusive Motors Pvt Ltd v Automobili Lamborghini, Case 52/2012 (CCI)
43.Shri DK Shrivastava v Daulat Ram Engineering and Services Pvt Ltd, Reference Case 4/2014 (CCI).

30
based on the doctrine of ‘ignoratia juris non excusat’ which states that ignorance of law is
not an excuse.
Even in the English law it was not agreed that ignorance of law of the competition act is not a
valid excuse. In one of the cases where all the top British schools engaged in price fixing, the
officer of fair trading held that such a practise is violative of section 2(1) of the competition
act 1998. The schools claimed that they thought that they were exempted from the
aforementioned section and also added that sharing of information regarding the future fees
to be set was quite common and so they weren’t aware of the law. The officer of fair trading
did not accept this view and imposed a penalty of 10,000 euros to the schools. [45].Taking this
into account the MCA cannot hold a view that since Gg Marquez and Co was a first timer he
wasn’t punished. Law is flexible in aggregate but not flexible to each and every situation.
Even in New Zealand many companies and organisations aren’t aware of the commerce act
of 1986. But that doesn’t act as an excuse to the officials of law in imposing penalty on the
parties concerned.
Courtney J in the case observed that:
"If the senior members of the industry could fall into this error then it must be a risk for other
members in the industry and other industry bodies."
So nowhere in the world has law been a flexible one in case of a first timer or a second timer.
So if the MCA was under a presumption that the joint venture was under the purview of
section 5 and section 6 of the competition act then the MCA should have penalised both the
parties
45.CA98/05/200.
31
ISSUE VI
6) WHETHER THE RESTRICTION IMPOSED BY TML THROUGH THE

6.1) Aftermarket justified by MCA
To answer the above question one must analyse what an aftermarket is. The term aftermarket
is a market for a product which supplements a main product. The aftermarket maybe of a
product or a service. The term 'aftermarket' is generally used in the automobile industry and it
is generally a secondary market dealing in spare parts, accessories and other components for
motor vehicles. It is also concerned with the service, maintenance and customization of
vehicles in the automobile sector.
The MCA connoted that the primary market for cars and the aftermarket for repairs and
maintenance was totally in the hands of the car manufacturers and hence created a unified
systems market. Here MCA considered the aftermarket as the entire service and repairs
market. But the clarifications related to the moot proposition clearly hold that there were
other local manufacturers who constituted 20% of the market share. This clearly holds that
the car manufacturers did not have a 100% dominance in the aftermarket as independent and
private manufacturers were also present
6.2) No violation in the after market
The claim made by MCA relating to the abuse of dominant position and violation of section
3(4) of the act comes into consideration only when TPL through TML has restricted
independent local manufacturers in supplying the lubricants. It would be considered to be an
abuse of dominant position if they are the only suppliers of the lubricants. The case of
Magnus Graphics v. Nilpeter India pvt.Ltd [46] is worth noting. Here the respondent who was
a manufacturer, distributor, service provider for Nilpeter brand printing machines. Here the
petitioner buys a machine from him. After a few months the manufacturer refuse to provide
repair services since the warranty has expired. The petitioner claims it as an abuse of
__________________________
46.Case No. 65/2013
32
dominant position. The commission held that the petitioner had every option to go to another
local service provider and hence the neglecting to offer service maybe held under a breach of
contractual duty but is not considered as an abuse of dominant position. Also in another case.
Similarly in the present case TML by way of notice from TPL had put up a restraint on the
distributors not to sell Fpx and Dhl brand lubricants. But the prime motive of such restraint
was to prevent their cars from getting damaged as Fpx and Dhl brand lubricants were not
suitable for the cars. TPL through TML did not have any other intention to create a restriction
as the sole purpose of such circular was to protect the usable life of the car.
The case of Eastman Kodak Co. v. Image Technical Servs., Inc.,[47]is worth noting in which
the claim made by Kodak was that they had exclusive patent rights for preventing third party
suppliers .
The Ninth Circuit said the case presented a question of first impression. "At the border of
intellectual property monopolies and antitrust markets lies a field of dissonance yet to be
harmonized by statute or the Supreme Court." Some weight, but not decisive weight, must be
given to the intellectual property rights of a monopolist. The court concluded it should use
this test to resolve the question of whether one in Kodak's position should be held liable:
"while exclusionary conduct can include a monopolist's unilateral refusal to license a [patent
or] copyright," or to sell its patented or copyrighted work, a monopolist's "desire to exclude
others from its [protected] work is a presumptively valid business justification for any
immediate harm to consumers." The court said that using such a "presumption should act to
focus the factfinder on the primary interest of both intellectual property and antitrust laws:
public interest. “This presumption could be rebutted if the justifications for invoking
intellectual property rights were merely pretextual and just an excuse for exclusionary
conduct. After reviewing the evidence, the court said that "it is more probable than not that
the jury would have found Kodak's presumptively valid business justification rebutted on
grounds of pretext."
Even in the present case even though doesn’t involve a patenting issue there is an exert of
influence by TML. But here the restriction imposed on TPL through TML on its distributors
________________________
47.2015 Comp LR 93 (CCI)
33
was clearly an exert of influence on them for public interest and not for their personal gain as
there is no relationship between TML and the lubricant supplier zero.
And the consumers had every right to buy lubricants from other local lubricant manufacturers
who constituted 20% of the market share as TML did not prevent such sale in any manner.
Also nowhere in the distribution agreement has any clause been provided in restricting those
independent local manufacturers in dealing with lubricants.
Hence the lubricant circular is not held to be violative of section 3(4) and section 4 of the act

34
PRAYER
Wherefore in the issues raised, arguments advanced and authorities cited, it is humbly prayed
before those Hon’ble court to upheld the decision passed by CAT
AND/OR
Pass any other order, direction or relief that it deems fit in the interest of equity justice and
good conscience
For this acts of kindness the Appellants shall be duly bound to pray
Sd/-
(Counsel for the petitioners)

Memorial On Behalf of Respondents: 7Th Nliu National Corporate Law Moot

Uploaded by

Copyright:

Available Formats

Memorial On Behalf of Respondents: 7Th Nliu National Corporate Law Moot

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Memorial On Behalf of Respondents: 7Th Nliu National Corporate Law Moot

Uploaded by

Copyright:

Available Formats

1

7th NLIU NATIONAL CORPORATE LAW MOOT TC6

IN THE HONBLE SUPREME COURT

TP Mocando Ltd & Another………………………………………….APELLANT

ON THE SUBMISSION TO THE HON’BLE SUPREME COURT OF MOCANDO

MEMORIAL ON BEHALF OF RESPONDENTS

MEMORANDUM FOR RESPONDENTS

ISSUES FOR CONSIDERATION…………………………………………………………11

MISPLACEMENT OF THE LUBRICANT CIRCULAR

1.1Retrospective effect of the lubrication circular………………………………………….13

1.2Reasonable justifications for imposing such restriction…………………………………16

VARIOUS RESTRICTION IN THE DISTRIBUTION AGREEMENT

2.2Violative of section 3(4) of the competition act………………………………………….18

2.3Restriction on online sales………………………………………………………………...19

RELIABILITY OF THE EVIDENCE OBTAINED

3.1 Liability of a subsidiary company and the parent company…………….21

3.2 perincuriam of the high court order……………………………………….22

MEMORANDUM FOR RESPONDENTS

4 WHETHER THE IMPOSITION OF PENALTY ON TML FOR NOT FILING A NOTICE

4.1 Lack of clarity of the provision …………………………………………………23

4.2The de minimis notification……………………………………………………...24

4.3The FAQ circular………………………………………………………………..25

4.4 Law in USA……………………………………………………………………..26

5) WHETHER THE PENALTY AMOUNT IMPOSED ONLY ON TML IS JUSTIFIED?

5.2 Excuse of MCA on the punishment……………………………………………………...29

6) WHETHER THE RESTRICTION IMPOSED BY TPL THROUGH TML ON THE

6.1 Aftermarket justified by MCA………………………………………………31

6.2 No violation in the aftermarket…………………………………………....31

MEMORANDUM FOR RESPONDENTS

A.I.R All India Reporter

MEMORIAL ON BEHALF OF THE RESPONDENT

[A] INDIAN CASE LAWS

Cause Title Citation Page

MEMORIAL ON BEHALF OF THE RESPONDENT

Automobiles Dealers ... vs. Global COMPETITION 19

[B] INTERNATIONAL CASE LAWS

Wong Sun v. United States, 371 U.S. 471 (1963) 22

DHN Ltd. v Tower Hamlets [1976] 1 WLR 852 22

Pierre Fabre Dermo-Cosmétique SAS v ECLI: EU: C: 2011:649 20

MEMORIAL ON BEHALF OF THE RESPONDENT

INDIAN COMPETITION ACT 2002…………………………………………….Passim

CLAYTON ACT 1890

FEDERAL TRADE COMMISSION ACT

HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976

DR.H.K.SAHARAY,”TEXTBOOK ON COMPETITION LAW”, Second edition.2016

VINOD DHALL,”COMPETITION LAW TODAY…………………………………passim

MEMORIAL ON BEHALF OF THE RESPONDENT

MEMORIAL ON BEHALF OF THE RESPONDENT

MEMORIAL ON BEHALF OF THE RESPONDENT

MEMORIAL ON BEHALF OF THE RESPONDENT

ISSUES FOR CONSIDERATION

WHETHER THE LUBRICANT CIRCULAR WAS MISPLACED?

WHETHER THE RESTRICTIONS IN THE DISTRIBUTION AGREEMENT WERE

WAS THE EVIDENCE OBTAINED BY DG RELIABLE?

WHETHER THE IMPOSITION OF PENALTY ON TML FOR NOT FILING A NOTICE

WHETHER THE RESTRICTION IMPOSED BY TML THROUGH THE LUBRICANT

MEMORIAL ON BEHALF OF THE RESPONDENT

1. WHETHER THE LUBRICANT CIRCULAR WAS MISPLACED?

2. WHETHER THE RESTRICTIONS IN THE DISTRIBUTION AGREEMENT WERE