IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 815-816 OF 2002  

M/s. KLM Royal Dutch Airlines           …. Appellant

Versus

Director General of Investigation & Registration …. Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.                     

1. Challenge  is  made  in  the  present  appeals  under  Section  55  of  the

Monopolies and Restrictive Trade Practices Act, 1969 (for short “MRTP

Act”),  whereby  the  final  judgment  and  orders  dated  11.10.2001  and

12.11.2001 passed  by the Monopolies  and Restrictive  Trade Practices

Commission,  New  Delhi  (for  short  ‘MRTP  Commission’)  are  being

questioned.  The appellant is aggrieved by the order and direction issued

against  them by the MRTP Commission  and also  by dismissal  of  the

miscellaneous application filed by them holding that there is no apparent

error on the face of the record.

2. The appellant is a worldwide airlines company with its headquarters at

Amsterdam, Netherlands.  A complaint was filed by M/s. Maharajah &

Co. (hereinafter also referred to as ‘Complainant’) contending inter alia

that they booked a consignment with the appellant airlines vide Airway

Bill  dated 21.09.1995.  The said consignment comprised three parcels

containing Badges and Crests, which were to be used on very specific

tournaments/meetings/conference dates.  The consignment was booked

for carriage from New Delhi to New Orleans, USA. It was stated in the

said complaint that on 26.09.1995 the complainant received a message

from the appellant airlines that two out of the three parcels were missing.

This  message  of  26.09.1995  was  followed  by  another  message  of

03.10.1995 informing the complainant that in spite of efforts made by

the  appellant,  the  baggage  could  not  be  found  and  therefore  it  was

suggested  to  the  complainant  that  a  claim  could  be  filed  with  the

underwriters if the aforesaid shipment was covered by insurance.  The

appellant  airlines  also  asked  the  complainant  to  furnish  necessary

documents to process the claim.  Near about the same time, the appellant

airlines  traced  out  the  said  two  missing  parcels  and  informed  the

complainant  through  its  letter  dated  24.10.1995,  contending  inter  alia

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that the aforesaid two parcels have been traced out and the same have

since been forwarded to the destination on 20.10.1995.  

A stand was, however, taken on behalf of the complainant  that the

aforesaid delivery of the two parcels after the event was over was of no use

to the customer in USA.  The complainant also took up a plea that it had

already lost goodwill due to delay in the delivery of goods to the buyer.  The

complainant, therefore, made a claim of Rs. 6 lakh from the appellant on

account of its negligence and deficiency in service.  It may be stated here

that  the complainant  has also filed a separate complaint  before the Delhi

State Consumer Redressal Forum for payment of compensation in terms of

the Consumer Protection Act, 1986, which is pending for disposal till date.  

3. On receipt of the aforesaid complaint filed by M/s. Maharajah & Co. the

respondent issued a notice to the appellant on 22.01.1996 calling for its

comments on the complaint along with other information and documents.

The  appellant  furnished  its  reply  contending  inter  alia  that  the  rules

relating to loss, damage or delay to cargo and compensation for the same

in international air transportation is governed by the Carriage by Air Act,

1972 and the Schedule attached thereto and in terms of the said Act the

liability  of  the  carrier  is  subject  to  the  rules  relating  to  liability

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established by Warsaw Convention, 1929.  After receiving the aforesaid

reply the respondent, which is a statutory authority, came to the prima

facie conclusion that the appellant failed to render services which were

expected from it and that the trade practice carried on by the appellant

thus constitutes an unfair trade practice falling under clauses (ii), (iv) and

(vi) of Section 36A (1) of the MRTP Act.   Consequently, the respondent

filed an application for registration and investigation before the MRTP

Commission, New Delhi, in terms of the provisions of Section 36 (B) of

the MRTP Act.   

4. The Commission after receipt  of the aforesaid  application took up the

same  for  consideration  and  issued  notice  and  thereafter  heard  the

aforesaid application.  By the impugned judgment and orders the MRTP

Commission found the appellant guilty of adoption of and indulgence in

unfair trade practices to the extent that there was deficiency in service.

Having held thus, the Commission issued a direction to the appellant to

cease the aforesaid trade practice and also file an affidavit stating that the

appellant would desist from the same in future.  Being aggrieved by the

aforesaid order passed by the MRTP Commission, the present appeals

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have been preferred as  statutory appeals  in terms of the provisions of

Section 55 of the MRTP Act.   

5. Mr. A.K. Ganguly,  learned senior  counsel  appearing  for  the appellant

brought to our notice various provisions of the MRTP Act and drew our

attention to the correspondence between the parties, which is a part of

the record and on the basis thereof submitted that the order passed by the

MRTP Commission is illegal  and without jurisdiction as there was no

allegation  anywhere  by the  respondent  before the MRTP Commission

that there was any fraudulent representation on the part of the appellant.

He  also  submitted  that  none  of  the  sub-clauses  of  Section  36  A  is

applicable in the present case, and therefore, the impugned order holding

the appellant to be guilty of the said provision is illegal and unjustified.   

6. Mr.  V.  Shekhar,  learned  senior  counsel  appearing  for  the  Director

General  of  Investigation  and  Registration,  vehemently  supported  the

order passed by the MRTP Commission on the basis of the complaint.

He  drew  our  attention  to  the  contents  of  the  complaint  filed  by  the

Director General before the MRTP Commission to bring home his point

that the appellant is guilty of unfair trade practices.    

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7. In the  light  of  the aforesaid submissions we proceed to  deal  with  the

contentions  raised before us.   The Director  General  in his  application

filed before the MRTP Commission alleged violation of clauses (ii), (iv)

and (vi) of Section 36A (1) of the MRTP Act.  In that view of the matter,

we would like to extract the said provisions along with other relevant

provisions  for  better  appreciation  of  the  issues  arising  for  our

consideration. The said provisions read as under:-

Section 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 good or  for  the  provision  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) xxxxxxxxx

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

(iii) xxxxxxx

(iv)  represents  that  the  goods  or  services  have sponsorship,  approval,  performance,  characteristics,

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accessories,  uses  or  benefits  which  such  goods  or services do not have;

(v) xxxxxxxx

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

36B.   Inquiry  into  unfair  trade  practices  by Commission.-  The  Commission  may  inquire  into  any unfair trade practice,-

(a)   xxxxxxxx

(b)   xxxxxxx

(c)  upon an application to it by the Director General; or

(d)  xxxxxxx

36D.   Powers  which  may  be  exercised  by  the Commission inquiring into an unfair trade practice.-  

(1)  The Commission  may inquire  into  any unfair  trade practice  which may come before it  for  inquiry and,  if, after  such  inquiry,  it  is  of  opinion  that  the  practice  is prejudicial to the public interest, or to the interest of any consumer or consumers generally, it may, by order direct that-

(a)  the  practice  shall  be  discontinued  or  shall  not  be repeated;

(b)  any  agreement  reliant  to  such  unfair  trade  practice shall be void or shall stand modified in respect thereof in such manner as may be specified in the order;

(c) any information, statement or advertisement relating to such unfair trade practice shall be disclosed, issued or

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published, as the case may be, in such manner as may be specified in the order.

(2)  xxxxx

(3) xxxxx

48C.   Penalty  for  contravention  of  order  made  by Commission relating to unfair trade practices.-

If  any  person  contravenes  any  order  made  by  the Commission under section 36D, he shall  be punishable with imprisonment for a term which shall not be less than six months but which may extend to three years and with fine which may extend to ten lakh rupees;

Provided that the court may, for reasons to be recorded in writing,  impose  a  sentence  of  imprisonment  for  a term lesser than the minimum term specified in this section.”

8. There is no dispute with regard to the fact that the consignment of three

parcels were booked for carriage by the original  complainant,  namely,

M/s. Maharajah & Co., out of which two parcels were missing and could

not be delivered to the addressee immediately.  The said missing parcels

were,  however,  traced  out  and  were  forwarded  to  destination  on

20.10.1995.  Allegations have been made that due to the missing of the

aforesaid  two  parcels  in  the  course  of  transmission  the  complainant

suffered  a  loss.  In  the  aforesaid  application,  which  was  filed  by  the

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Director General before the MRTP Commission, complaint is only about

the deficiency of service and whether or not any compensation is to be

paid for the aforesaid loss suffered, is a subject matter which is being

enquired  into  by  the  Delhi  State  Consumer  Redressal  Forum.  In  the

aforesaid application, the MRTP Commission directed the appellant to

cease and desist from unfair trade practice in terms of the prayer made in

the application, wherein it was prayed that a direction be issued against

the appellant airlines directing it to cease and desist from indulgence in

the  unfair  trade  practice  and  not  to  repeat  the  same  in  future.   The

aforesaid application was filed by the Director General giving the factual

position.  In paragraph 4 of the said application, sum and substance of

the allegation and accusations has been made out by the Director General

against the appellant in the following manner:

“4.     It  would  be  observed  from  the  aforesaid information collected during the course of investigation that  the respondent  has  admitted  its  liability caused to the  complainant  due  to  loss,  damage  or  delay  in transportation of the goods booked by the complainant. The services of the respondent have not been found to be of  the  standard  and  quality  of  an  international transporter.  Its services do not have uses or benefits for the customers.  There is an implied representation that the  services  of  the  respondent  would  be  useful  to  the customers and the respondent would transport the goods booked  by  the  customers  within  a  reasonable  time without causing any damage to the goods.  It is clear that

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the respondent has failed to render services which were expected of it.  It has admitted its liability in causing loss to the complainant.  The trade practice carried on by the respondent  thus  constitutes  an  unfair  trade  practice falling under clauses (ii), (iv) and (vi) of Section 36A (1) of the MRTP Act, 1969.”

9. In  terms  of  the  allegations  and  accusation  in  paragraph  4  of  the

application  the  Director  General  has  submitted  that  the  unfair  trade

practice carried on by the appellant is prejudicial to the public interest,

and therefore, a direction should be issued to the appellant  airlines to

cease and desist from indulging in the unfair trade practice and not to

repeat the same in future.  

10.We have already extracted the definition of “unfair trade practice” and

also other relevant provisions.  There is no definition of “deficiency of

service”  or  “deficiency”  provided  in  the  MRTP  Act  but  expression

“service” has been defined in Section 2(r).  In term of such definition,

“service” means which is made available to potential users and includes

the  provision  of  facilities  in  connection  with  banking,  financing,

insurance, chit fun, real estate, transport, processing, supply of electrical

or other energy, board or lodging or both, entertainment, amusement or

the purveying of  news or  other  information,  but  does  not  include  the

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rendering of any service free of charge or under a contract of personal

service.  

11. The  appellant  herein  is  engaged in  the business  of  transportation  of

goods by airlines, and therefore, there could be no dispute with regard to

the fact that they were providing service when they accept baggages to

be carried by air.  A representation is also made that the cargo would be

delivered at the destination with all promptness.  If there is a failure in

carrying out the said representation there would be a case of deficiency

in their service.  Negligence in providing prompt service or service as

expected  may also  be  presumed if  they fail  to  deliver  the said  goods

within a reasonable time at the destination.  But the issue in the present

case is  as  to  whether  any such deficiency in  service could be said  to

amount an unfair trade practice as envisaged under the provisions of the

aforesaid MRTP Act.  

12.The Act,  particularly,  the  provisions  of  Section  36A envisage  that  in

order to be a case of unfair trade practice there has to be unfair method

or  deceptive  practice  indulging  in  false  representation  of  the  kinds

mentioned in various clauses of Section 36A of the MRTP Act.  What is

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sought to be attracted in the present  case by the Director  General are

clauses (ii), (iv) and (vi) of Section 36A (1) of the MRTP Act, clauses

(ii) and (vi) deal with cases of false representation and also a false and

misleading  representation  whereas  clause  (iv)  envisages  of  making  a

representation  that  the  goods  or  services  have  sponsorship,  approval,

performance,  charactertics,  accessories,  uses  or  benefits  which  such

goods or services do not have.  The aforesaid provisions cannot be said

to be attracted in the present case for there is no allegation either by M/s

Maharajah  and  Co.  or  by  the  Director  General  that  any  such

representation  was  made  by  the  appellant  airlines  regarding  their

performance, uses or benefits which their services do not have.  So far as

other  two  clauses  are  concerned  and in  order  to  make out  a  case  for

attracting the said provision, there has to be a case of false statement and

a case of misleading representation made by the service provider.  We

have carefully perused the entire contents of the application filed by the

Director General and on such perusal, we find that there is no allegation

that there was any false representation or misleading representation by

the appellant airlines regarding their services.  

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13.In  Lakhanpal  National  Ltd. v.  M.R.T.P.  Commission reported  in

[(1989) 3 SCC 251], a Bench of this Court held that the object of Section

36-A of the MRTP Act is to bring honesty and truth in the relationship

between the manufacturer  and the consumer and that  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.

This Court also stated that there could be another question posed as to

whether an act leads a reasonable person in the position of a buyer to a

wrong  conclusion.   This  Court  finally  held  that  the  issue  cannot  be

resolved by merely examining whether the representation is correct  or

incorrect in the literal sense. The same ratio came to be reiterated in a

subsequent  decision  of  this  Court  in  Rajasthan  Housing  Board v.

Parvati Devi reported in [(2000) 6 SCC 10] In the said case this Court

has held that to decide whether or not there is unfair trade practice 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 also what  was the effect  of such a

representation made to the common man.

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14.In the case of Colgate Palmolive (India) Ltd. v. MRTP Commission,

reported in [(2003) 1 SCC 129] this  Court  laid  down five ingredients

which have to be established before a trade practice can be said to be an

unfair trade practice, the Court laid the ingredients in following manner:

“16. A  bare  perusal  of  the  aforementioned  provision  would clearly  indicate  that  the  following  five  ingredients  are necessary to constitute an unfair trade practice:

1. There must be a trade practice within the meaning of Section  2(u)  of  the  Monopolies  and  Restrictive  Trade Practices Act. 2. The trade practice must be employed for the purpose of promoting the sale, use or supply of any goods or the provision of any services. 3. The trade practice should fall within the ambit of one or more of the categories enumerated in clauses (1) to (5) of Section 36-A. 4. The trade practice should cause loss or injury to the consumers of goods or services. 5.  The  trade  practice  under  clause  (1)  should  involve making a “statement” whether orally or in writing or by visible representation.”

Before it can be said that the act amount to an unfair trade practice the

complainant is required to show that the trade practice was employed for the

purpose of promoting the sale, use or supply of any goods or the provision

of any services and also that which is the statement or advertisement which

is the false representation of the kind specified in Sub-clauses of clause (1)

of  Section  36-A.  In  this  regard  reference  may  also  be  made  to  the

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observations  made  by  this  Court  in  the  case  of  Man  Roland

Druckimachinen  Ag  v.  Multicolour  Offset  Ltd.,  reported  in [(2004)  7

SCC 447]:

“12. In the case of an unfair trade practice as invoked by Respondent 1 the object of inquiry is a statement which is a false representation of the kind specified in sub-clauses (i), (ii)  or  (iii)  of  clause  (1)  of  Section  36-A  or  is  an advertisement of  the kind specified in sub-clauses  (vii) or (viii)  thereof.  The statement  or  advertisement  is  the trade practice.  The further  requirement under the section is that the trade practice complained of must be for the purpose of promoting the sale, use or supply of goods or for promoting the provision of any service. The sale,  use or supply need not,  for  the  purposes  of  the  section,  actually  have  taken place although it may be relied upon by the complainant to establish the falsity of the representation.”

Whether a statement constitute a false or misleading representation

will depend upon the facts and circumstances of each case. It is not possible

to provide an exclusive list of the statements which may constitute false or

misleading  representation,  nor  can  there  be  any  strait-jacket  formula

evolved thereof for the said purpose. However the statements of the nature

which  are  willfully  made  knowingly  false,  or  made  recklessly  without

honest belief in its truth, and made with the purpose to mislead or deceive

will definitely constitute a false or misleading representation. In addition a

failure to disclose a material fact when a duty to disclose that fact has arisen

will also constitute a false or misleading representation.   

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15.In the backdrop of the aforesaid legal position propounded by this Court,

we  may  now  examine  the  facts  of  the  present  case.   Neither  in  the

complaint filed by M/s Maharajah and Co. before the Director General

nor in the complaint filed by the Director General filed before the MRTP

Commission  there  is  any  allegation  of  any  false  or  misleading

representation.  None of the complaints aforesaid, in fact contains any of

the aforesaid ingredients  as mentioned.   Unless any such allegation is

made in such complaints, the MRTP Commission could not have come

to a conclusion that the appellant has committed an unfair trade practice.

We have  carefully  perused  the  impugned  order  passed  by the  MRTP

Commission. In the findings recorded by the MRTP Commission there is

not even a single finding that there is any such false representation or

misstatement  by  the  appellant  airlines  regarding  their  services.   The

MRTP Act also contains provisions regarding penalties relating to unfair

trade  practices.   Section  48C of  the  MRTP Act  provides  that  if  any

person contravenes  any order  made by the  MRTP Commission  under

section 36D, he shall be punishable with imprisonment for a term which

shall not be less than six months but which may extend to three years and

with fine which may extend to ten lakh rupees.  The aforesaid provision

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is a stringent provision which provides for punishment upto three years

and  also  fine  up  to  ten  lakh  rupees.   Therefore,  the  Commission  is

required to examine the allegations with due care and caution and also

the essential ingredients as contained in the provisions of Section 36A of

the MRTP Act and while passing the order under Section 36 D it must be

fully satisfied that there is in fact contravention of any of the clauses of

Section 36A.  

16.It  was  sought  to  be  submitted  by  Mr.  V.  Shekhar,  Senior  Counsel

appearing for the respondent that the order which is passed by the MRTP

Commission  is  in  respect  of  deficiency  in  service  and  not  about  the

compensation and the said order is passed directing the air career that

they  will  in  future  cease  and  desist  from  the  aforesaid  practice  of

providing deficient service.  The aforesaid contention, however, cannot

be accepted for what is sought to be done by the MRTP Commission is

to hold that the appellant is guilty of unfair trade practice which is not

equal to holding a person guilty of providing deficient service.  Element

of unfair trade practice definitely stands at a higher and onerous platform

than the deficient service.  For making out a case of unfair trade practice

an  element  is  involved  to  the  extent  of  making  false  and  misleading

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statement and representation and in order to make a case of unfair trade

practice such ingredients,  which are part  and parcel  of  the concept  of

unfair  trade  practice  has  to  be  alleged  and  must  be  proved  and

established.  In the present case there is neither such allegation of any

such false and misleading representation nor is there any proof provided

by way of evidence, which also we have perused. Therefore there could

be no finding by the MRTP Commission that the appellant is guilty of

unfair trade practice.  That being so, the order of the Commission cannot

be upheld and the same is set aside.   

17.Accordingly, the appeals are allowed.  There is no order as to costs.

…………………………...J. (Tarun Chatterjee)  

……………………………J. (Dr. Mukundakam Sharma)

New Delhi; October 3, 2008

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