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Tuesday, September 22, 2015

Monopolies and Restrictive Trade Practices Act, 1969 (for brevity hereinafter referred to as ‘the Act’). The practice under scrutiny is of the year 1999 when the appellant was to begin the manufacture and delivery of newly introduced Tata Indica cars into the market with effect from February 1999, with the installed capacity of approximately 60,000 cars in a year=The appellant is a company engaged in manufacture and sale of automobiles. It is aggrieved by the impugned order dated 28.2.2006 passed by the Monopolies and Restrictive Trade Practices Commission (for brevity ‘the Commission’) in U.T.P. Enquiry nos. 86/99, 87/99 and 90/99 whereby the Commission has directed the appellant to cease and desist from continuing with the practices complained of and not to repeat the same in future.= We do not find any material or even allegation in the PIR which could satisfy any of the four unfair trade practices covered by various Clauses such as Clause (i), (ii), (iv) and (vi) of Section 36-A (1) of the Act. A careful perusal of the Notice of Enquiry dated 25.9.2000 reveals that no doubt a copy of the PIR was enclosed but the notice made it clear itself that the Commission came to a considered opinion that the Director (Research) had found the appellant indulging in unfair trade practices falling precisely and only under clauses (i), (ii), (iv) and (vi) of Section 36A(1) of the Act. The enquiry, as per the notice, was to cover:- (a) whether the respondent has been indulging in the above said unfair trade practice(s) and (b) whether the said unfair trade practice(s) is/are prejudicial to public interest. A scrutiny of the judgment under appeal discloses that the Commission failed to keep in mind the precise allegations against the appellant with a view to find out whether the facts could satisfy the definition of Unfair Trade Practice(s) as alleged against the appellant in the Notice of Enquiry. The Commission was apparently misled by the Preliminary Investigation Report also which claimed to deal with reply received from the appellant in course of the preliminary enquiry but patently failed even to notice the stipulation as regards payment of interest on the booking amount although this fact was obvious from the terms and conditions of the booking and was reportedly relied upon by the appellant in its reply even at the stage of preliminary investigation. The Commission noticed the relevant facts including provision for interest while narrating the facts, but failed to take note of this crucial aspect while discussing the relevant materials for the purpose of arriving at its conclusions. Such consideration and discussion begins from paragraph 32 onwards but without ever indicating that the booking amounts had to be refunded within a short time or else it was to carry interest at the rate of 10% per annum. The order of the Commission appears to be largely influenced by a conclusion that the appellant should not have asked for deposit of an amount above the basic price because in the opinion of the Commission it was unfair for the appellants to keep excise and sales tax with itself for any period of time. Such conclusion of the Commission is based only upon subjective considerations of fairness and do not pass the objective test of law as per precise definitions under Section 36A of the Act. The submissions and contentions of Mr. Desai merit acceptance. Even after stretching the allegations and facts to a considerable extent in favour of respondent Commission, we are unable to sustain the Commission’s conclusions that the allegations and materials against the appellant make out a case of unfair trade practice against the appellant. Nor there is any scope to pass order under Section 36-D(1) of the Act when no case of any unfair trade practice is made out. Hence, we are left with no option but to set aside the order under appeal. We order accordingly. As a result the appeal stands allowed. However, there shall be no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2069 OF 2006

Tata Engineering and                           …..Appellant
Locomotive Company Ltd.

      Versus

The Director (Research)                                   …..Respondents
for and on behalf of Deepak Khanna & Ors.


                               J U D G M E N T



SHIVA KIRTI SINGH, J.

This is an appeal under Section 55 of the Monopolies and  Restrictive  Trade
Practices Act, 1969 (for brevity hereinafter referred to as ‘the Act’).  The
appellant is a company engaged in manufacture and sale  of  automobiles.  It
is aggrieved by the impugned order dated 28.2.2006 passed by the  Monopolies
and Restrictive Trade Practices Commission (for  brevity  ‘the  Commission’)
in U.T.P. Enquiry nos. 86/99, 87/99 and 90/99  whereby  the  Commission  has
directed the  appellant  to  cease  and  desist  from  continuing  with  the
practices complained of  and not to repeat the same in future.
Since there is no dispute on facts, the case of  the  parties  on  facts  is
common and to the following effect:
The practice under scrutiny is of the year 1999 when the  appellant  was  to
begin the manufacture and delivery of  newly  introduced  Tata  Indica  cars
into the market with effect from February 1999, with the installed  capacity
of  approximately  60,000  cars  in  a  year The  appellant  invited   the
prospective customers to book the car through dealers.  The  booking  amount
demanded by the appellant was quite high and close to  the  estimated  price
finally  payable  which  would  include   excise   duty,   sales   tax   and
transportation charges. The terms and conditions for booking  of  order  for
purchase of Tata Indica cars were mentioned in detail indicating  the  model
wise price depending upon the city of booking. It  was  indicated  that  the
price of vehicle as well as taxes, duties and cess will be as applicable  on
the date of delivery. Those making valid booking were  to  be  supplied  the
vehicle as per priority numbers generated and allocated  by  a  computerized
technique, for the first 10,000 bookings only. The terms also provided  that
the payments  against  the  remaining  bookings  will  be  refunded  to  the
customers, without interest, at the earliest but in any case within a  month
from the closing of the booking.  For refunds after a month,  interest  will
be paid at the rate of 10% per annum. The order booking  form  mentioned  in
Clause 7 that  the  person  concerned  had  carefully  read  the  terms  and
conditions of the bookings and agreed to the same.
Although the initial  allotment  was  confined  only  to  10,000  cars,  the
appellant received as many  as  1,13,768  booking  applications  along  with
stipulated amount which aggregated  to  Rs.3,216.44  crores.  The  appellant
gave an option to prospective customers to opt for a second phase of  50,000
vehicles likely to be delivered from  April-May  1999  to  March  2000.   It
refunded the balance amounts to those who desired  for  refund,  along  with
interest as represented. No complaint was made to the Commission by  any  of
the persons who made the booking and thereafter either purchased the car  or
withdrew the deposits with or without interest, as the case may be.
However three complaints were made before  the  Commission  by  persons  who
claimed that they had intentions to make the booking but were  dissuaded  by
the high quantum  of  deposit  required  for  the  purpose.  Their  specific
objection was that the demanded amount exceeded the basic price of  the  car
if cess, taxes and transportation cost  were  left  out.  According  to  the
complainants the appellant had indulged in Unfair Trade  Practice  (UTP)  by
demanding an excessive amount for bookings of Indica cars and  by  including
the likely taxes, cess and transportation cost.
Since the defence taken by the appellant was also not disputed on facts,  it
would be relevant to note the same. When the Commission received  the  three
complaints, it sent them to the Director (Research) for  investigation.  The
Director submitted Preliminary Investigation Reports (PIR) in all the  three
matters and three cases were registered as per numbers  noted  earlier.  The
Notices of Enquiry under Sections 36-B (d), 37, 36-D of the  Act  and  under
Regulation 51 were issued to the appellant  who  contested  the  complaints.
The appellant filed its reply to the Notice of  Enquiry  in  which  it  also
raised a preliminary objection  that  the  allegations  of  the  restrictive
trade practice were vague and not permissible by law. Their further  defence
was that there are no facts and material to show that the  alleged  practice
is prejudicial to the public interest requiring an enquiry under Section  37
of the Act and that no facts were disclosed in  the  Notice  of  Enquiry  to
show prejudice to the public interest. On merits  some  of  the  allegations
were denied as incorrect. It was pointed out that none of  the  complainants
had applied for the booking of Tata Indica vehicle  and  hence  they  lacked
locus standi to file the complaints in the capacity of consumers. On  merits
the appellant also took the defence that there was no false  and  misleading
statement made by the appellant for inviting booking of  Tata  Indica  cars,
the applicants made the bookings  with  open  eyes  being  aware  about  the
stipulation for payment of interest. According to appellant by letter  dated
6.2.1999 the successful applicants were intimated  of  the  priority  number
allotted to them and the unsuccessful applicants  were  also  informed  that
they had an option to be considered for the second phase of 50,000 cars  and
such optees would be entitled to receive interest at the  rate  of  11%  per
annum with effect from 1.2.1999 till the date of  delivery.  Those  who  did
not opt for the second phase deliveries were refunded their booking  amounts
along with 10% interest.
The  appellant  explained  their  practice  by  pleadings  which   are   not
controverted, that their past  experience  as  automobile  manufacturer  was
limited to heavy vehicles and hence in their initial venture  into  the  car
segment, they were not sure of public response and they had decided to  plan
their production schedule on the basis of reality test of  car’s  demand  in
the market. For this speculative bookings were required  to  be  discouraged
and the same was sought to be achieved by demanding an amount closer to  the
anticipated price which the customer would be required to pay. According  to
submissions, such practice  could  not  have  promoted  the  sale  of  their
vehicle rather it was discouraging. The large response shows peoples’  faith
in the products of the appellant and also that the interest rate offered  by
the appellants was appreciable and fair.
Learned Senior Counsel Mr. Ashok H.  Desai  highlighted  the  definition  of
Unfair Trade Practice as indicated in Section 36A  of  the  Act.  Since  the
Notice of Enquiry alleged that the appellant had indulged  in  unfair  trade
practices falling under Section 36A (1) (i), (ii),  (iv)  and  (vi)  of  the
Act, the aforesaid provisions need to be noticed. They read as follows:

1     “36A. Definition of unfair trade practice - In this Part,  unless  the
context otherwise requires “unfair trade practice” means  a  trade  practice
which, for the purpose of promoting the sale, use or supply of any goods  or
for the provisions of any services, adopts any unfair method  or  unfair  or
deceptive practice including any of the following practices, namely :-


(1) the practice of making any statement, whether orally or  in  writing  or
by visible representation which,–


(i) falsely  represents  that  the  goods  are  of  a  particular  standard,
quality, quantity, grade, composition, style or mode;


(ii) falsely represents that the services  are  of  a  particular  standard,
quality or grade;


(iii)  xxxxxxxxx


(iv) represents that the goods  or  services  have  sponsorships,  approval,
performance, characteristics,  accessories,  uses  or  benefits  which  such
goods or services do not have;


(v)   xxxxxxxxxx


(vi) makes a false or misleading representation concerning the need for,  or
the usefulness of, any goods or services;”


According to Mr. Desai the allegations against the appellant do not  attract
any of the practices mentioned in the Notice of  Enquiry  and  contained  in
the definition noted above.
The second limb of arguments also flows from the definition in  Section  36A
of the Act. By placing reliance upon  judgment of this Court in the case  of
Rajasthan Housing Board vs. Parvati Devi (Smt) (2000)  6  SCC  104,  it  was
contended that when supplier and consumer have  entered  into  an  agreement
then the Commission, in order to hold the supplier guilty  of  unfair  trade
practice on the basis of allegations made against  it,  is  required  to  go
into the terms and conditions agreed between the  parties  for  finding  out
whether there was unfair trade practice so as to require further  action  on
the basis of complaints. In support of this proposition reliance was  placed
mainly on paragraph 14 of the judgment which is as follows:
“14. For deciding such question, the Commission has to find  out  whether  a
particular act can  be  condemned  as  an  unfair  trade  practice;  whether
representation contained a false statement and was misleading and  what  was
the effect of such a representation  made  to  the  common  man.  The  issue
cannot be resolved by merely holding that representation was  made  to  hand
over the possession within  the  stipulated  period  and  the  same  is  not
complied  with  or  some  lesser  constructed  area  is  given   after   the
construction of the building. The Commission has to  find  out  whether  the
representation, complained of, contains the element of misleading the  buyer
and whether buyers are misled or they are informed in advance that there  is
likelihood of delay in delivering the  possession  of  constructed  building
and also increase in the cost. For this purpose,  terms  and  conditions  of
the agreement are required to be examined by the Commission. Not only  this,
the Commission is required to consider whether the Board has adopted  unfair
method or deceptive practice for the purpose of promoting the sale,  use  or
supply of any goods or for the provisions of any services. Unless  there  is
a finding on this issue, the appellant Board cannot be penalised for  unfair
trade practice.”

On behalf of appellant reliance was also placed upon judgment of this  Court
in the case of  M/s Lakhanpal National Limited vs. M.R.T.P.  Commission  and
Another (1989) 3 SCC  251,  particularly  paragraph  7  and  9  thereof.  In
paragraph 7 it was held that the definition of “Unfair  Trade  Practice”  in
Section 36A is not inclusive or flexible, but specific and  limited  in  its
contents. The Court also considered the object  of  this  provision  with  a
view to resolve the issue as to whether particular acts can be condemned  as
unfair practice or not. We are in full agreement with the view expressed  by
L. M. Sharma, J., as he then was and hence it would be more  appropriate  to
extract para 7 which runs thus:
“7. However, the question in controversy has to be  answered  by  construing
the relevant  provisions  of  the  Act.  The  definition  of  “unfair  trade
practice” in Section 36-A mentioned above is not inclusive or flexible,  but
specific and limited in its contents. The object is  to  bring  honesty  and
truth in the relationship between the manufacturer and the consumer. When  a
problem arises as to whether a particular act can be condemned as an  unfair
trade practice or not, the key to the solution would be to  examine  whether
it contains a false statement and is misleading  and  further  what  is  the
effect of such a representation made by the manufacturer on the common  man?
Does it lead a reasonable person in the position  of  a  buyer  to  a  wrong
conclusion? The issue cannot be resolved by  merely  examining  whether  the
representation  is  correct  or  incorrect   in   the   literal   sense.   A
representation containing a statement apparently correct  in  the  technical
sense may have the effect of misleading the buyer by using tricky  language.
Similarly a statement, which may be  inaccurate  in  the  technical  literal
sense can convey the truth and sometimes more effectively than  a  literally
correct statement. It  is,  therefore,  necessary  to  examine  whether  the
representation, complained  of,  contains  the  element  of  misleading  the
buyer. Does a reasonable man on reading  the  advertisement  form  a  belief
different from what the truth is? The position will have to be  viewed  with
objectivity, in an impersonal manner. It is stated  in  Halsbury’s  Laws  of
England (4th Edn., paras 1044  and  1045)  that  a  representation  will  be
deemed to be false if it is false in substance and in fact; and the test  by
which the representation is to be judged is to see whether  the  discrepancy
between the fact as represented and the actual fact  is  such  as  would  be
considered material by a reasonable representee.  “Another  way  of  stating
the rule is to say that substantial falsity is, on the one hand,  necessary,
and, on the other, adequate, to establish  a  misrepresentation”  and  “that
where the entire representation is a faithful picture or transcript  of  the
essential facts, no falsity is established, even though there may have  been
any number of  inaccuracies  in  unimportant  details.  Conversely,  if  the
general impression conveyed is false, the most  punctilious  and  scrupulous
accuracy in immaterial minutiae will not render  the  representation  true”;
Let us examine the relevant facts of this case in this background.”

In reply Mr. A.K. Sanghi, Senior Advocate defended  the  impugned  order  of
the respondent Commission. According to him the Commission acted  fairly  in
entertaining the complaints from three persons who found the booking  amount
very high and therefore did not deposit the same. According to  him  once  a
Preliminary  Investigation  Report  dated  15.2.2000  was   available   with
conclusion and recommendation to the effect that only  the  basic  price  of
the car ought to have been collected from the public and not further  amount
which can  cover  only  excise  duties  and  sales  tax  that  goes  to  the
Government  and  that  such  amount  should  not  have  been   retained   by
manufacturing units for a long period of time, the Commission  although  did
not find the appellant guilty of any of  the  four  specific  provisions  of
Section   36-A (1) but still it  felt  compelled  to  conclude  against  the
appellant and resultantly  pass  a  cease  and  desist  order  under  powers
conferred upon the Commission by Section 36-D (1) (a) of the Act.
Mr. Sanghi also sought to support the finding of  the  Commission  on  issue
number one that the appellant has  indulged  in  unfair  trade  practice  by
referring to certain narratives  in  the  Preliminary  Investigation  Report
(PIR). As per his submission the Commission had not  only  communicated  the
precise allegations in terms of Section 36-A but had also enclosed with  the
Notice of Enquiry a copy of PIR and therefore findings cannot be  criticized
on the ground that the allegations were not precisely  communicated  through
the Notice  of  Enquiry.  We  find  no  merit  in  these  contentions.   The
Commission could not have travelled beyond the specific allegations  in  the
Notice of Enquiry because such a course would violate rules of fairness  and
natural justice.  The scope of enquiry could have been enlarged  only  after
serving further notice with necessary details of allegations and  supporting
facts.  This was clearly not done by  the  Commission.   It  is  a  flagrant
violation of audi alteram  partem  rule.   It  renders  the  impugned  order
invalid and bad in law.  The order is also bad for non application  of  mind
to requirement of law as stipulated in Section 36A(1) of  the  Act  and  the
relevant facts.
We have gone through the Preliminary Investigation  Report,  the  Notice  of
Enquiry as well as the Order under appeal. We do not find  any  material  or
even allegation in the PIR which could satisfy any of the four unfair  trade
practices covered by various Clauses such as  Clause  (i),  (ii),  (iv)  and
(vi) of Section 36-A (1) of the Act. A careful  perusal  of  the  Notice  of
Enquiry dated 25.9.2000 reveals  that  no  doubt  a  copy  of  the  PIR  was
enclosed but the notice made it clear itself that the Commission came  to  a
considered opinion that the Director  (Research)  had  found  the  appellant
indulging in  unfair  trade  practices  falling  precisely  and  only  under
clauses (i), (ii), (iv) and (vi) of Section 36A(1) of the Act. The  enquiry,
as per the notice, was to  cover:-  (a)  whether  the  respondent  has  been
indulging in the above said unfair trade practice(s)  and  (b)  whether  the
said unfair trade practice(s) is/are prejudicial to public interest.
A scrutiny of the  judgment  under  appeal  discloses  that  the  Commission
failed to keep in mind the precise allegations against the appellant with  a
view to find out whether the facts could satisfy the  definition  of  Unfair
Trade Practice(s)  as  alleged  against  the  appellant  in  the  Notice  of
Enquiry.  The  Commission  was  apparently   misled   by   the   Preliminary
Investigation Report also which claimed to deal  with  reply  received  from
the appellant in course of the preliminary enquiry but patently failed  even
to notice the stipulation as regards payment  of  interest  on  the  booking
amount although this fact was obvious from the terms and conditions  of  the
booking and was reportedly relied upon by the appellant in  its  reply  even
at the stage  of  preliminary  investigation.  The  Commission  noticed  the
relevant facts including provision for interest while narrating  the  facts,
but failed to  take  note  of  this  crucial  aspect  while  discussing  the
relevant materials for the purpose of  arriving  at  its  conclusions.  Such
consideration and discussion begins from paragraph 32  onwards  but  without
ever indicating that the booking amounts had to be refunded within  a  short
time or else it was to carry interest at the rate of 10% per annum.
The  order  of  the  Commission  appears  to  be  largely  influenced  by  a
conclusion that the appellant should  not  have  asked  for  deposit  of  an
amount above the basic price because in the opinion  of  the  Commission  it
was unfair for the appellants to keep excise and sales tax with  itself  for
any period of time. Such conclusion of the Commission  is  based  only  upon
subjective considerations of fairness and do not pass the objective test  of
law  as  per  precise  definitions  under  Section  36A  of  the  Act.   The
submissions and contentions of Mr. Desai merit acceptance.
Even after stretching the allegations and facts to a considerable extent  in
favour of respondent Commission, we are unable to sustain  the  Commission’s
conclusions that the allegations and materials against  the  appellant  make
out a case of unfair trade practice against the  appellant.   Nor  there  is
any scope to pass order under Section 36-D(1) of the Act  when  no  case  of
any unfair trade practice is made out.  Hence, we are left  with  no  option
but to set aside the order under appeal. We order accordingly. As  a  result
the appeal stands allowed. However, there shall be no order as to costs.
                       …………………………………….J.
                       [VIKRAMAJIT SEN]


                       ……………………………………..J.
                                    [SHIVA KIRTI SINGH]
New Delhi.
September 7, 2015.






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