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PETITIONER: H.M.M. LTD.

       Vs.

RESPONDENT: DIRECTOR GENERAL, MONOPOLIES & RESTRICTED TRADE PRACTICESCOM

DATE OF JUDGMENT:       11/08/1998

BENCH: S.P. BARUCHA, C.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                 THE 11TH DAY OF AUGUST 1998. Present              Hon’ble Mr. Justice S.P. Bharucha              Hon’ble Mr. Justice G.B. Pattanaik Ashok Desai,  Sr.  Adv.,  Ravinder  Narain,  Aditya  Narain, Manish, Advs. For M/s.J.B.D. & Co., Advs. with for appellant A.S. Nambiar,  Sr.Adv., C.B.Babu,  P.Parmeswaran, Advs. with him for the Respondent                       J U D G M E N T BHARUCHA, J. The following Judgement of the Court was deliverd:      Under appeal is the judgement and order dated 11th May, 1989  passed   by  the   Monopolies  and  Restrictive  Trade Practices  Commission   (hereinafter  referred  to  as  "the Commission"). It  held that the appellants were guilty of an unfair trade  practice within  the meaning of The Monopolies and  Restrictive  Trade  Practices  Act,  1969  (hereinafter referred to  as "the  said Act"). It required the appellants to desist  from indulging in trade practices similar to that which had been held to be an unfair trade practice.      The  appellants   manufacture   and   market   consumer products,  including   Hornlike.  In   September,  1985  the appellants advertised  a  scheme  they  called  the  "Hidden Wealth Prize  Offer". Coupons  were inserted in some bottles of Hornlike in the various pack sizes. Some of these coupons indicated that  the purchasers  of the bottles in which they were placed  would get  prizes. The prizes that were offered were 5  Hotline Colour  TVs, 10 gift vouchers of Rs. 2,000/- each for Hotline appliances and 1400 cash prizes of Rs.100/- , Rs.50/-  and Rs.20/-  each.  The  advertisements  of  this scheme made  it clear that the prizes were available only to buyers in  Delhi city  and they were required to claim their prizes by 15th January, 1986. The advertisements stated that even if  the buyers’ coupon did not carry a winning message, he had  "several more chances to try. So get the goodness of Hornlike, now. Because with it, you surely can’t lose!"      The appellants  were served  with a  notice dated  28th January,  1986   by  the   Assistant  Director   General  of Investigation of  the said Commission. The notice state that the said  scheme required  investigation with a view to find

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out whether  it attracted the provisions of the said Act. It required   the   appellants   to   furnish   the   following information/documents within 10 days:      "1.   Detail    note   about    the      organisation, products manufactured      and sold,  composition of  board of      directors;      2. Date  on which  company took the      decision to  hold the Hidden wealth      Prize Scheme.      3. Detail  of level  at  which  the      decision was  taken in  the Company      about the contest.      4. Detail  note about the "Hornlike      Prize Offer"  containing copies  of      rules  &   regulations,  number  of      participant, description of winners      under  the   scheme  together  with      complete printed material about the      scheme;      5. Total  expenditure  incurred  on      the scheme  with requisite break-up      such  as   Expenditure  on  Prizes,      Advertisement, Published  material,      Cost of Administration etc;      6. A  copy of  standard  dealership      agreement;      7. Price  lists issued  during  the      last 18  months including  date and      reasons for  revisions in prices of      the  products  including  Hornlike;      and      8.      Copies      of      various      incentives/discount   schemes   for      dealers introduced  in the  last  2      years with  detail note  containing      reasons therefore."      The  requisite   information  was   supplied   by   the appellants on  7th March,  1986.  They  explained  the  said scheme and stated that the expenditure thereon was:      "Expenditure on Prizes          Rs. 52,250.00      Advertisements                  Rs. 184,101.25      Published Material              Rs. 45,312.32      Misc. Expenditure               Rs. 626.55" The appellants  stated that  there had  been no violation of the provisions of the said Act.      On 24th July, 1986 the Secretary of the Commission gave to the appellants a notice of enquiry under the said Act. It stated that  the appellants  had organised  the said  scheme from which  it "appeared that as prizes were offered by draw of lots,  the respondent  had indulged in Unfair Practice of orgainsing a  lottery for  purpose of promotion of its sales and thereby resorted to the Unfair Trade Practice as defined in Section  36A(3)(b) of  the Act.  Such a scheme has caused loss  and   injury  to   the  consumer   as  stated  in  the application. (b)  Further such  a scheme  also  falls  under Section 36A(3)(a)  of the  Act in-as-much as it appears that cost of  scheme has been added in price of Hornlike." To the notice of  enquiry was  annexed a copy of the application of the Director  General of Investigation which stated that the appellants had  "spend an amount of Rs.2.92 lakhs (exclusive of cost  on Administration)  and which  has  necessarily  to result in  an increase in total cost of operations and which in fact shall consequently have a bearing on the Price to be charged for the Product or Products of the company. As such,

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the trade  practice inherently  causes loss or injury to the consumers. This  squarely falls  within the  purview of  the clause (a)  of Section 36(A)(3) as the prize Money is partly or wholly recovered by the amount charged in the transaction as whole."      The appellants  replied to  the notice  of enquiry  and stated, inter  alia, that  the giving of prizes to consumers of Hornlike  in Delhi  city had  been to their advantage. No loss or injury had been caused to them. They did not have to pay anything  more. The  price that  was charged to them was the prices  charged elsewhere  in the  country. There was no increase in  the prices  either in Delhi or elsewhere in the country by  reason of  the prizes  given  to  purchasers  of Hornlike bottles in Delhi city. It was stated that "the cost of giving  of prizes  was neither  fully or partly recovered from the prices charged for the bottles of Hornlike in Delhi city or in the country as a whole". The Director General had merely resorted to conjectures and had not even alleged that the prizes  were offered  with the intention of creating the impression that something was being given or offered free of charge when  it was  fully or  partly covered  by the amount charged in  the transaction  as whole. No such intention had been alleged nor had it been shown how the prizes were fully or partly covered by the mount charged in the transaction as whole. The burden of proving an allegation was on the person who made  it but  the Director  General had not even made an averment in this behalf.      The Commission framed the following issues:      "i) Whether the respondent indulged      in the  unfair trade  practices  as      alleged in  the application  of the      D.G.  and  contained  a  Notice  of      Enquiry  issued  on  the  basis  of      that?      ii) If  answer to  issue No. (i) is      in the affirmative then whether the      said  unfair   trade  practice   is      prejudicial to  the public interest      or to  the interest of the consumer      in general  or to  any consumer  in      particular?      (iii) Relief."      The Commission,  in the  order under appeal, found from the price  lists that,  in respect  of Hornlike  and another product of the appellants called Boost, a price increase had taken place  on 1st  July,  1985,  but  the  prices  of  the appellants’  other   products.  Marmite,   Pure   Silvikrin, Silvikrin H.D.  and Enos  Salts till  31st January, 1986 had remained what  they were  on 1st  October, 1984,  1st April, 1984, 1st April, 1984 and 1st May, 1985 respectively. It was argued by learned counsel for the Director General that this increase in  price covered  the cost  of  prizes  under  the scheme. The  Commission found  that the  price increase that took place  on 1st  July, 1985  could "surely  be  taken  to reflect partly the cost of the gifts". It said that the said scheme  "was  intended  to  wean  away  the  consumers  from Bournvita by  allurements of  lucky  prizes  of  high  value rather than  by fair means which may benefit the general run of the  consumers". It was a small fraction of the buyers of Hornlike who  got the benefit of the said scheme whereas the multitude  got   no  benefit.  The  prizes  being  "manifold costlier than  the price  of a bottle of Hornlike, a fact on account of  which the  winning of  the prize  will  be    of overriding consideration  than the product in question". The Commission held, "On these postulates it is not difficult to

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say that  the trade practice is no better than a lottery and that the  buyer who  does not get any prize, does lose it as against the  one who  wins it although both take to the same transaction. So  the trade  practice that  is meant  to wean away the  consumer from  Bournvita  by  this  allurement  is obviously an  instrument of facing competition in the market by  unfair  means  and,  therefore,  prejudicial  to  public interest. Both  the issues  are decided  accordingly against the respondent".      Section 36A defines unfair trade practice. So far as is relevant, it reads:      "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  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:-      xxxx         xxxx             xxxx      (3) Permits -      (a)the offering of gifts, prizes or      other items  with the  intention of      not providing  them as  offered  or      creating   the    impression   that      something is being given or offered      free of  charge when it is fully or      partly  covered   by   the   amount      charged in  the  transaction  as  a      whole.      (b) the  conduct  of  any  contest,      lottery, game  of chance  or skill,      for  the   purpose  of   promoting,      directly or  indirectly, the  sale,      use or supply of any product or any      business interest." For holding a trade practice to be an unfair trade practice, therefore, it must be found that it causes loss or injury to the consumer.  Insofar as prizes are concerned, there has to be the  intention  of  not  providing  them  as  offered  or creating the  impression that  they are  being given  or are being offered  free of charge when in fact they are fully or partly covered by the amount charged in the transaction as a whole. The conduct of a lottery for the purpose of promoting the sale,  use or  supply of  a product  is an  unfair trade practice. It is difficult to see clear, sustainable findings on these aspects in the judgment under appeal.      There is  no material  that indicates  that there was a draw of  lots or  that a price was charged for participation in  the  draw.  The  fact  that  some  bottles  of  Horlicks contained a  slip of  paper which  entitled the  buyer to  a prize is not a lottery in the ordinary sense of the word.      For the purposes of finding that the offering of prizes under the said scheme was with the intention of creating the impression that  something was  being given  free of  charge when it  was fully  or partly. covered by the amount charged for the  Horlicks, the  Commission resorted  to  speculation about a  price increase  in the  cost of  Horlicks some time prior to the said scheme. We find from the notice of enquiry given to  the appellants and the application of the Director

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General annexed thereto that it was nowhere indicated to the appellants that it was the case of the Director General that the particular  price increase  that the  commission  relied upon was  intended by  the appellants  to offset the cost of prizes under the said scheme. Had this been indicated in the notice  of   enquiry  the   appellants  would  have  had  an opportunity  to   deal  with   it.  It  was  unfair  in  the circumstances to urge that the particular price increase was attributable to the cost of prizes under the said scheme and the Commission  ought not  to have  so held.  The appellants averred in  their reply  to the  notice of  enquiry that the consumer was  not required  to make  any payment towards the prizes and  there is  no proof on the record to the country. It was  the Director General who made this allegation and it was  for  him  to  establish  it.  Since  he  did  not,  the allegation ought  to  have  been  rejected.  The  Commission should have noted with advantage the expenditure incurred by the  appellants   in  the   year  1984-85   and  1985-86  on advertisements  and   marketing  of  Horlicks,  namely,  Rs. 2,33,33,637 and  Rs.2,96,69,208 respectively, and contrasted it with the expenditure on the prizes under the said scheme, namley, Rs.  52,250/-.  that  would  have  indicated  fairly clearly that  the appellants  were right  in stating that no part of  the comparatively  insignificant expenditure on the prizes had been recouped from the consumers of Horlicks.      Lastly, it  is difficult  to hold  that a  consumer who bought a  bottle of Horlicks that not entiled him to a prize suffered a loss.      In the  result, the  appeal is  allowed and  the  order under appeal  is set  aside. There  shall be  no order as to costs.