COMPAT by its judgment dated 30 October 2015 over-ruled the order penalizing Chemist and Druggist Association, Ferozepur, Punjab in a case filed by Arora Medical Hall, Ferozepur, Punjab.

Arora Medical Hall (the Informant) was the largest wholesale dealer of drugs manufactured by several pharmaceutical companies in Ferozepur. Informant had alleged that the Association had issued circulars to boycott the Informant following allegations made by the member of the Associations that the Informant had indulged in malpractices against the members of Association and issued them inflated bills for orders placed on the Informant by the members of the Association. The Informant also alleged that the Association forced any new wholesaler/retailer to procure an NOC from the Association before it could commence business in the area of Ferozepur and surrounding areas.

The report of the Director General (DG) as well as the CCI considered the above allegations and found the conduct of the Association violating Section 3(3)(b) of the Act, on the basis of the allegations, replies filed by the Association and the pharmaceutical companies as well as an undated affidavit of a partner of the Informant.

The COMPAT noted that, firstly, the Association was not the apex association in the district of Ferozepur and neighboring areas. Various other associations and wholesalers and distributors operated in the district of Ferozepur and neighboring areas, without the membership of Informant. The biggest example of the same was the Informant itself who, despite being expelled by the Association, had stated itself to be the biggest wholesaler in Ferozepur.

COMPAT noted that the CCI failed to take into account that the Informant was expelled from the membership of the Association because of its own highhandedness and unethical conduct of charging inflated bills to the members of the Association. In fact, the Informant had already filed a case against the Association against the expulsion in the District Court of Ferozepur but the same was dismissed with costs for failure to prosecute by the Informant. Further, despite the allegations that the Informant lost revenue due to the boycott by the Association, the DG failed to note that the revenue of Informant from the neighboring Fazilka region had rose 100% since the expulsion. The Association had also submitted that the Informant’s revenue in Ferozepur area dwindled only as a result of its own conduct.

As regards the practice of NOC, the COMPAT noted that the same was not mandatory by the Association. Those stockists who did not want to take NOC/LOC from the Association did so from the associations in neighboring areas and freely operated in Ferozepur. The DG had conducted the investigation with a predetermination to return a finding of violation of section 3(3)(b) of the Act. In doing so, he ignored the replies filed by majority of the pharmaceutical companies that the Association had not imposed a condition of mandatory procurement of NOC. The DG based his entire finding on the basis of an undated affidavit of the Informant, which he did not even present to the Association to defend against. No opportunity of cross-examination of the Informant was provided to the Association. The CCI mechanically approved the finding of the DG on the issue of violation of section 3(3)(b).

The conduct of the DG as well as the CCI amounted to violation of principles of natural justice. After the CCI had sent the reports (main as well as supplementary) to the Appellants, they filed detailed objections to the findings recorded by 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 CCI 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. Resultantly, the CCI arbitrarily concluded that the action taken by the Association amounted to violation of section 3(3)(b) of the Act. The Appeals were allowed and the order of the CCI has been set-aside.