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PETITIONER: LAKHANPAL NATIONAL LTD.

       Vs.

RESPONDENT: M.R.T.P. COMMISSION AND ANOTHER

DATE OF JUDGMENT02/05/1989

BENCH: SHARMA, L.M. (J) BENCH: SHARMA, L.M. (J) PANDIAN, S.R. (J)

CITATION:  1989 AIR 1692            1989 SCR  (2) 979  1989 SCC  (3) 251        JT 1989 (2)   543

ACT:     Monopolies  and Restrictive Trade Practices  Act,  1969: Section 36A(1)(i) and (v)--Unfair Trade practice--Test to be applied-Examine  whether  representation  contains  a  false statement--Contains  an element of misleading  a  reasonable person.

HEADNOTE:     The MRTP Commission--respondent--in the appeal issued  a show  cause notice under Section 36-B of the Monopolies  and Restrictive  Trade  Practices  Act, 1969  to  the  appellant company informing that a proceeding had been instituted  for making an inquiry whether the said Company was indulging  in certain  unfair  trade practices prejudicial to  the  public interest  within the meaning of s. 36-A of the Act.  It  was alleged  in the notice that although the  appellant  company was  manufacturing ’Novino’ Batteries in collaboration  with M/s  Mitsushita  Electric Industrial Co. Ltd. and  not  with National  Panasonic of Japan, it was issuing  advertisements announcing  that  ’Novino’ Batteries  were  manufactured  in collaboration with National Panasonic of Japan using Nation- al  Panasonic techniques, and that the  said  representation was false and misleading and thereby causing loss or  injury to the consumers.     The  Company  in  its reply to the  said  notice  denied having  made any wrong representation in its  advertisement, and  asserted that the company had actually entered  into  a collaboration agreement with M/s Mitsushita Electric  Indus- trial  Ltd. for the manufacture of dry ceil  batteries,  and was  adopting  the process employed by Mitsushita  Ltd.  for manufacturing ’Novino’ Batteries. The Company further stated that  Mitsushita  Ltd.  of Japan was  better  known  by  its products  described by the names ’National’ and  ’Panasonic’ and  that  there  was therefore no  question  of  misleading anybody  by the description of the Japanese Company  by  its products.     Rejecting the Company’s explanation the Commission  held that  bearing in mind the Indian conditions the use  of  ’N- ational’ and ’Panasonic’ to signify collaboration will  have a misleading effect on the minds 980 of  common class of customers particularly when Novino  Bat-

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teries is projected and advertised side by side with Nation- al, Panasonic and Technics Batteries in advertisements.  The Commission  also refused to accept the plea of  the  Company that  the  advertisements  have mentioned  the  brand  names instead  of the manufacturing company since  ’National’  and ’Panasonic’  were well known names in India while the  manu- facturing company Mitsushita Ltd. was not as a plea of  good defence.     On  the question whether the appellant company  indulged in  unfair  trade practice under clauses (i) and (v)  of  s. 36-A(1) of the M.R.T.P. Act, 1962. Allowing the appeal, the Court,     HELD: l.(a) The M.R.T.P. Act as it originally stood  did not  contain  any  provision  for  protection  of  consumers against false or misleading advertisements or other  similar and  unfair  trade  practices.  By  providing  for  measures against restrictive and monopolistic trade practices, it was perhaps  assumed that the consumers also, as a result,  will get  a fair deal. However, experience  indicated  otherwise, and  following  the recommendations of a Committee,  it  was considered necessary to amend the Act. Accordingly, sections 36-A to 36-E in part B were inserted in Chapter V of the Act by an amendment in 1984. [984E-F; G]     2. It would be more proper for the appellant Company  to give  the full facts by referring to Mitsushita Ltd. by  its correct name and further stating that its products are known by the name "National" and "Panasonic". [986C]     3.  An advertisement mentioning merely  Mitsushita  Ltd. may, therefore, fail to convey anything to an ordinary buyer unless  he  is also told that it is the same  Company  which manufactures  products known to him by the names  "National" and  "Panasonic". If such were the position there would  not have been any scope for objection. However, the same  effect is  produced  by the impugned advertisements.  There  is  no other  company with the name of ’National’ and  ’Panasonic’, and  there  is  no scope for any confusion  on  that  score. [985G-H; 986A]     4. Where the reference is being made to the standard  of the  quality, it is not material whether  the  manufacturing company is indicated by its actually correct name or by  its description with reference to its products. [986B] 981     5. The definition of ’unfair trade practice’ in s.  36-A is  not inclusive or flexible, but specific and  limited  in its  contents. The object is to bring honesty and  truth  in relationship  between the manufacturer and consumer. When  a problem arises as to whether a particular act can be condem- ned  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  re- solved  by  merely examining whether the  representation  is correct or incorrect in the literal sense. The position will have to be viewed with objectivity in an impersonal  manner. [985A-D]     Halsbury’s  Laws  of England, 4th Edn.  paras  1044  and 1045; relied on.     6. The erroneous description of the manufacturing Compa- ny  in  the advertisements in question does not  attract  s. 36-A of the M.R.T.P. Act. [986B]

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JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 764  (NM) of 1988.     From  the  Judgment and Order dated  13.11.1987  of  the Monopolies  and  Restrictive Trade Practices  Commission  in unfair Trade Practices Enquiry No. 76 of 1985.     G.L.  Sanghi,  Parveen Anand, S.K. Mehta,  Dhruv  Mehta, S.M. Satin and Atul Nanda for the Appellant. Anil Dev Singh and Hemant Sharma for the Respondents. The Judgment of the Court was delivered by     SHARMA, J. This appeal under s. 55 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter  referred to  as  the  Act) is directed against the  decision  of  the MonopOlies and Restrictive Trade Practices Commission  dated November 13, 1987 in the Unfair Trade Practices Enquiry  No. 76 of 1985 passed under s. 36-D(1) of the Act forbidding the appellant Company from issuing certain type of advertisement as indicated in the order. 2.  The Commission issued a show cause notice under s.  36-B of 982 the  Act to the appellant Company informing it that  a  pro- ceeding  had been instituted for making an  inquiry  whether the Company was indulging in certain unfair trade  practices prejudicial to public interest within the meaning of s.  36- A. A copy of the notice has been attached to the petition of appeal as Annexure ’C’, wherein it was alleged that,               (i)  although  the Company  was  manufacturing               ’Novino’  batteries in collaboration with  M/s               Mitsushita  Electric Industrial Co.  Ltd,  and               not  with National Panasonic of Japan, it  was               issuing advertisements announcing that  ’Novi-               no’  batteries are manufactured in  collabora-               tion  with National Panasonic of  Japan  using               National Panasonic techniques, and               (ii) the representation that ’Novino’  batter-               ies  are  manufactured  by  joint  venture  or               collaboration  with  National  Panasonic   was               false and misleading and thereby causing  loss               or injury to the consumers. In  its  reply the Company (appellant before us)  denied  to have made any wrong representation in the advertisements. It was  asserted that the Company has actually entered  into  a collaboration agreement with M/s Mitsushita Electric  Indus- trial Ltd. of Japan for the manufacture of dry cell  batter- ies, and was adopting the process for manufacturing ’Novino’ batteries  as is employed by Mitsushita Ltd.  The  agreement has been duly approved by the Ministry of Industry,  Govern- ment of India. It is further stated that the Mitsushita Ltd. of  Japan is better known by its products described  by  the names "National" and "Panasonic" and there is no question of misleading anybody by the description of the Japanese Compa- ny  by its products. Rejecting the appellant’s  explanation, the Commission passed the impugned order.     3.  As is clear from the show cause notice, it has  been assumed that the appellant Company is manufacturing ’Novino’ batteries  in  collaboration with Mitsushita Ltd.,  but  the question is whether, in the circumstances, it can claim that it  is  making  "batteries in  collaboration  with  National Panasonic of Japan", and further whether the act, complained of, will be covered by the provisions of s. 36-B and 36˜D of the  Act  authorising the respondent Commission to  make  an enquiry  and  issue appropriate directions.  The  expression "unfair  trade  practice" has been defined in s. 36-A  as  a trade  practice  which adopts any or more of  the  practices

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enumerated  in the section. It has been contended before  us by the learned counsel for the respondent, and the judgment 983 under appeal also holds, that the case is covered by clauses (i)  and (v) of s. 36-A(1) of the Act. The relevant  portion of s. 36-A is reproduced below: "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  promotion the sale, use or supply  of  any               goods  or for the provision of  any  services,               adopts one or more of the following  practices               and  thereby  causes  loss or  injury  to  the               consumers  of such goods or services,  whether               by  eliminating or restricting competition  or               otherwise, 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, grade,  compo-               sition, style or model; ’                  ................................................               (v) represents that the seller or the supplier               has  a sponsorship or approval or  affiliation               which such seller or supplier. does not have;"     4.  It  is  the admitted position  that  "National"  and "Panasonic"  are the names given by the Mitsushita  Ltd.  to some of its products, and are not the names of the  manufac- turing company itself. The advertisements XXX therefore,  do not  state  correctly  when they claim  that  the  appellant Company  is  working in collaboration  with  "National"  and "Panasonic". Instead, they should have mentioned the Company by  its correct name in the advertisements. The question  is as  to whether these advertisement come within the scope  of clauses (i) and (v). The Commission in the impugned judgment has said:               "It  is true that the Director (Research)  has               not  carried  out any  practical  research  to               discover  how  far the  National  &  Panasonic               Batteries  of Japan and the  Novino  Batteries               manufactured by the respondent company vary in               or conform to quality, benefits and durability               and to what extent the use of the names  Pana-               sonic and National to signify               984               collaboration  has  been  confusing  for   the               customer m his choice of Novino Battery. Yet I               do feel that bearing in mind the Indian condi-               tions  the  use of National and  Panasonic  to               signify  collaboration will have a  misleading               effect  on  the minds of the common  class  of               customers, particularly when Novino Battery is               projected in the setting of advertisement  Ex.               A-1/a side by side the National. Panasonic and               Technics Batteries."     5.  The show cause notice served on the  appellant  does not  take any exception to the use of the  word  "collabora- tion"  in  the advertisement in question. The  grievance  is against  the use of the names of the product "National"  and "Panasonic"  in place of the Company which is  manufacturing them.  The issue thus is confined by the charge in the  show cause notice which is very limited in its scope. The Commis- sion has taken note of the case of the appellant that  since

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"National"  and  "Panasonic" are well-known names  in  India while  their manufacturing company, the Mitsushita Ltd.,  is not,  the  advertisements  have mentioned  the  brand  names instead  of  the manufacturing company; but has  refused  to accept this plea as a good defence. We do not agree.     6.  The Act as it originally stood did not  contain  any provision  for  protection  of consumers  against  false  or misleading advertisements or other similar and unfair  trade practices. By providing for measures against restrictive and monopolistic  trade practices, it was perhaps  assumed  that the  consumers  also,  as a result, will get  a  fair  deal. However,  experience indicated otherwise, and following  the recommendations of a Committee, it was considered  necessary to amend the Act. In the fast changing modern world of today advertising  goods is a well-recognised marketing  strategy. The  consumers  also  need it, as the  articles  which  they require for their daily life are of a great variety and  the knowledge  of an ordinary man is imperfect. If the  manufac- turers  make available, by proper publicity,  necessary  de- tails  about their products, they come as great help to  the man in the street. Unfortunately, some of the advertisements issued for this purpose make exaggerated and sometime  base- less  representations about the quality, standard  and  per- formance,  with an object of attracting purchasers. It  was, therefore,  considered necessary to have  statutory  regula- tions  insisting  that, while advertising, the  seller  must speak the truth. Accordingly sections 36-A to 36-E in part B were  inserted  in Chapter V of the Act by an  amendment  in 1984. 7.  However, the question in controversy has to be  answered by 985 construing  the relevant provisions of the Act. The  defini- tion  of "unfair trade practice" in s. 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  can  not  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 inaccu- rate in the technical literal sense can convey the truth and sometimes  more effectively than a literally correct  state- ment.  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  (Fourth Edition, paragraphs 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 representa- tion  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,

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adequate, to establish a misrepresentation" and "that ’where the  entire  representation is a faithful picture  or  tran- script  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  impres- sion conveyed is false, the most punctilious and  scrupulous accuracy  in immaterial minutiae will not render the  repre- sentation  true." Let us examine the relevant facts of  this case in this background.     8.  The  Mitsushita Ltd. is not a popular name  in  this country  while its products "National" and "Panasonic"  are. An  advertisement  mentioning merely  Mitsushita  Ltd.  may, therefore,  fail  to convey anything to  an  ordinary  buyer unless  he  is also told that it is the same  Company  which manufactures  products known to him by the names  "National" and "Panasonic". If such were the position, there would  not have been any scope for objection. However, in our view  the same 986 effect is produced by the impugned advertisements. It has to be  remembered that there is no other company with the  name of "National" and "Panasonic" and there is no scope for  any confusion  on that score. Where the reference is being  made to  the standard of the quality, it is not material  whether the  manufacturing  Company is indicated by  its  accurately correct  name  or by its description with reference  to  its products. We, therefore, hold that the erroneous description of the manufacturing Company in the advertisements in  ques- tion does not attract s. 36-A of the Act, although we  would hasten to add that it would be more proper for the appellant Company  to give the full facts by referring  to  Mitsushita Ltd.  by  its  correct name and  further  stating  that  its products are known by the names "National" and "Panasonic".     9.  The  learned counsel for the  respondent  Commission suggested  that  the  appellant was not  entitled  to  claim "collaboration"  with the Japanese Company on the  basis  of the agreement mentioned earlier. As the appellant Company is only  getting technical knowledge and assistance  under  the agreement, it is not permissible to claim ’Novino’ batteries as  the product of joint venture. The argument  was  rightly repelled on behalf of the appellant on the ground that  this aspect cannot be examined in the present case in view of the limited scope of the charges as mentioned in the show  cause notice quoted above. If so advised, the Commission will have to  hold  a fresh inquiry after issuing another  show  cause notice if it desires to pursue this aspect.     10.  The learned counsel for the appellant  also  raised several  other points in support of the appeal, one of  them being  that from the facts and circumstances of the case  it can not be held that the impugned advertisements are capable of  causing any loss or injury to the consumers. In view  of our  decision, as mentioned earlier, it is not necessary  to deal with the other arguments.     11.  For the reasons mentioned above the impugned  judg- ment  is  set aside and the appeal is allowed,  but  in  the circumstances, without costs. N.V.K.                                Appeal allowed. 987