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PETITIONER: NIRMA INDUSTRIES LTD.

       Vs.

RESPONDENT: DIRECTOR GENERAL OF INVESTIGATION & REGISTRATION

DATE OF JUDGMENT:       06/05/1997

BENCH: CJI, S. P. KURDUKAR

ACT:

HEADNOTE:

JUDGMENT: Present:                  Hon’ble the Chief Justice                  Hon’ble Mr. Justice S.P. Kurdukar Dushyant     A. Dave,     Sr. Adv.,     Gaurav     Banerjee, R.N. Karanjawala,  Ms. Ruby  Ahuja,  Ms. Manik  Karanjawala, Kishore Gajria, Advs, with him for the appellant A.K. Ganguli,  Sr.   Adv.,  Dilip   Tandon,  N.K.  Aggarwal, C.S. Bhardwaj and Parmeswaran, Advs. with him for the Respondent                       J U D G M E N T The following Judgment of the Court was delivered; S.P. KURDUKAR, J.      This appeal  under Section  99 of  the  Monopolies  and Restrictive Trade  Practices Act, 1969 (for short ‘the Act’) is filled  by the  appellant challenging  the  legality  and correctness of  the judgment  and order dated January 4,1996 passed by  the Monopolies  and Restrictive  Trade  Practices Commission, New  Delhi (for  short  ’the  Commission’).  The appellant has  suffered an order of ’cease and desist’ under Section 36-D  of the  Act for having indulged in under trade practices under Section 36A(3)(a) of the Act. 2.   Briefly stated the facts of the case are as under:-      The appellant  a public  limited company (for short the company) having  its  registered  office  at  Ahmedabad,  is engaged in  manufacture and  sale of  Nirma washing  powder, Nirma detergent  cakes and Nirma bath soaps. The company has been manufacturing  these products  since seventies  and its products are  marketed and  sold all  over the county. It is the claim  of the   appellant that having established a good market for  sale of  its various  products and  having  been captured  the   confidence  of  the  consumers,  thought  of offering a  scheme as  an incentive to the consumers for its products. The  appellant,  therefore,  on  April  29,  1991, floated a  scheme of  awarding and  distributing  of  prizes through a  lottery. According  to the  scheme, the appellant placed a   coupon  bearing  a number in each one kg. pack of detergent/washing powder.  The said  scheme was  valid  till July 3,  1991 and  the draw of lots was to be held on August 30, 1991.  The coupon  kept in  the one Kg. bag of detergent mentioned  that   prizes  worth  Rs.  71  lacs  were  to  be

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distributed which included Contessa Car, Maruti 800 car, BPL TV set,  golden chain, Titan watch, Steel jug, ladies purse, Steel Bawl set and  Cash. 3.   On July,  24, 1991,  a complaint  was received  by  the D.G.(I &  R) from  Azad Singh,  New Delhi,  alleging,  inter alia, that  the company  while floating a scheme in question did not  inform the  customer as  to in  which newspaper the result would  be published:  the company  had increased  the price of  the detergent  along with  prize scheme;  the said scheme is  harming the  interest of  the other  companies in this competition  and the  condition of the coupon is so bad that while opening the bag, it would get torn and the winner of the  prize   will have  to face difficulty in getting the prize  which   would  help   the  company   in  evading  the responsibility to  give the  prize. Azad  Singh,  therefore, prayed that  action be  taken against  the company and "save the poor  people  being  robbed."  The  D.G.  very  promptly responded to  the complaint  of  Azad  singh  and  filed  an application  on  July  26,1991  before  the  commission  for investigation  and   registration  of  the  complaint  under Section  36B   [c]  of  the  Act.  The  D.G.  requested  the Commission  to   held  an  inquiry  into  the  unfair  trade practices under Section 36 D(I) of the Act and pass an order of cease  and desist  against the company. It was alleged in the complaint  that the  scheme in  question floated  by the Company was  with  a  view  to  promote  the  scale  of  its detergent powder:;  that it  lured the customers to purchase more and more Nirma detergent powder under the temptation of getting the  prizes:; that  such avoidable and the excessive purchases more  and more  nirma detergent  powder under  the temptation of  getting the  prizes; that this trade practice of offering  prizes would  lead to  excessive purchases  and consumption by  the customers  in the expectation of getting prizes; that such avoidable and the excessive purchases were real loss  to the  consumers and  that  it  had  deleterious impact on  competition inasmuch  as extraneous consideration other than  quality and  the price  of the  product tend  to determine the  consumer preference;  that there  are several detergent manufacturers  in India;  that the impugned scheme of  the   respondent  affected,   distorted  and  restricted competition among  the various  manufacturers  of  detergent powder and that conduct of lottery or game of chance for the purpose of  promoting the  sale, use  or supply of detergent powder by  appellant amounted  to an  unfair trade  practice within the  meaning of section 36A(3)(a) and (b) of the Act. It was  then alleged  by the  D.G.  in  his  complaint  that company had increased the price of its detergent powder just prior to  the launching  of the  scheme with an intention to recover the  value of  the prizes  fully or  partly from the consumers  by  raising  the  prices  of  its  products.  The company, therefore,  had indulged  in unfair  trade practice under Section  36A (3)(a)   and  (b) of  the Act.  The D.G., therefore, recommended  that the  Commission  would  inquire into the  complaint and  pass cease and desist order against the company. 4.   The Commission  on perusal  of the  application of  the D.G. and  examining the  documents  annexed  thereto  issued notice of inquiry to the company. 5.   On receipt  of the  said notice,  the company filed its detailed reply  denying the  allegations  contained  in  the complaint.  The  Company,  however,  accepted  that  it  had floated the  scheme in  question with a view to give  prizes to the customers. The company denied that it had indulged in any unfair  trade practice  for the purpose of promoting the sale or  it had  caused loss  and injury to the customers or

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eliminated or  restricted competition.  That the  scheme had come to  an  end  on  July  31,  1991;  and  therefore,  the complaint the  D.G. has  become infructuous  . That the draw was held  and  the  prizes  were  declared  and  distributed according to  the  scheme.  That  there  is  no  cogent  and sufficient material  to hold that the scheme in question had infringed either  the provisions  of  Section  36A(3)(a)  or Section 36A(3)(b)  of the  Act. That there is no averment in the complaint  which would prima facie show that company had indulged in  unfair trade  practice being prejudicial to the public interest or the interest of any consumer or consumers generally. That  the impugned  prize scheme was approved and authorised by  the District  magistrate, Ahmedabad under the Bombay Lotteries  (Control and  Tax) and  Prize  Competition (Tax) Act,  1958 and  the rules  framed thereunder. That the increase in  the price  of  its  product  was  not  with  an intention to  cover the  prize money either fully or partly. on the contrary, the prices were increased on July 26, 1990, November 19,  1990 and  April 2, 1991 because of increase in the prices  of raw material and other costs. That the scheme floated did not lure the customers to purchase more and more washing Powder  under the temptation of getting prizes. That the demand and supply the demand and supply of such products are governed  by several  factors  in  the  market  and  the consumers were nearer influenced by mere introduction of the impugned scheme. That no public interest had been prejudiced by the  impugned scheme. The company, therefore, prayed that the complaint  and the Application being devoid of any merit and the same be dismissed. . 6.   The Commission  on the  basis of  the  above  pleadings formulated four  issues for  its consideration and heard the advocates for  the parties. The Commission vide its impugned of found  that the  company has  not committed the breach of Section 36A(3)(b)  of the  act and the charge in that behalf is unsustainable.  The Commission,  however, found  that the charge against  the company  under Section  36A(3)(a) of the Act is  proved and  accordingly directed  the company not to repeat  the  same  in  future.  It  is  this  order  of  the Commission   dated January  4, 1996 which  is subject matter of challenge in this appeal. 7.   In this  appeal, we  are called  upon to  decide as  to whether  the  company  had  indulged  in  any  unfair  trade practice as  provided under  Section 36A  of the  Act as  it stood between Ma 21, 1984 and September 24, 1991. Section 2U defines trade practices as under:      "2U  -  Trade  practice  means  any      practice relating to carrying on of      any trade, and includes.      i)  anything  done  by  any  person      which controls or affects the price      charged by or the method of trading      of, any  trader  or  any  class  of      trader,      ii) a  single or isolated action of      any  person   in  relation  to  any      trade". 8.   The Act  came to  be amended  Act No. 30 of 1984 called the Monopolies  and Restrictive  Trade Practices (Amendment) Act, 1984.  Section 36A  was brought on Statute in Chapter V part B called "Unfair Trade Practices." Section 36 A defines Unfair Trade  Practices and  the relevant  provisions are as under:-      36A -  Definition of  Unfair  Trade      practice;-      "In this  part, unless  the context

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    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 adopts  one or more      of  the   following  practices  and      thereby causes  loss or  injury  to      the consumers  of such  goods or by      service, whether  by eliminating or      restricting competitions otherwise,      namely:-      1. xxxxx       xxxxxx         xxxxx      2. xxxxx       xxxxxx         xxxxx      3.  (a)   Permits-the  offering  of      gifts, prizes  or other  items with      the intention of not providing them      as 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.      4.  xxxx                    xxxxxxx      xxxxxx      5.  xxxx                     xxxxxx      xxxxxx      Section 36C  provides investigation by Director General before an  issue of process in certain cases. In the present case, the  Director General  on receipt  of the complaint on July 24, 1991 from one Shri Azad Singh, perused the same and immediately on July 26,1991 submitted his application to the Commission for  making inquiry and for suitable action under Section 36D of the act. 9.   On perusal  of the  scheme of Section 36A to 36E, it is clear that  whenever a  complaint is  received by  the  D.G. alleging unfair  trade practice having been committed by the company, the  D.G. under  Section 36  C is obliged to make a preliminary investigation  including issuance  of notice  to the complainant  for the  purpose of  investigation  and  on being satisfied  that the  complaint requires to be inquired into, submit  his application  to the commission for inquiry under Section  36 d  of the  Act. In the present case, it is common premise  that the presence of Azad singh could not be secured and the only material before the D.G. at the time of making an  application to  the Commission  was the complaint dated July  24, 1991.  The company  on receipt  of notice of inquiry from  the Commission  filed its detailed reply along with the  certificate granted  by the  District  Magistrate, Ahmedabad (Lottery) granting permission to the scheme. 10.  As indicated earlier, the commission recorded a finding that no charge under Section 36A(3)(b) of the Act was proved against the  company. No  appeal against  that part  of  the order of  the Commission  was filed  in this Court. The Said finding and  order thereof passed by the Commission is final and is  not the  subject matter of challenge in this appeal. What survives  for reconsideration  in this  appeal is as to whether on  the material  placed before  the Commission, the order passed  against the company under Section 36A(3)(a) is

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sustainable. 11.  Mr. Dushyant A. Dave, Learned senior Advocate appearing in support  of this  appeal urged  that  the  order  of  the Commission holding  that the  company had indulged in unfair trade practice  under Section  36 A(3)(a)  is  unsustainable because    there     was    no     material    except    the complaint/application of  D.G. before the Commission to hold the charge  proved. He urged that the Commission erroneously assumed that  the offering  of prizes  was with an intention 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.  While elaborating this submission, he urged  that the  increase in  the prices  of detergent on April 2,1991  was a  baonafide exercise  on the  part of the company and  the same  was not done with a view to wholly or partially cover  the amount of prizes to the consumers under the Scheme.  The offering  of such  prizes to  the consumers under the  Scheme. The offering of such prizes was merely an incentive to  the consumers  for their " brand and loyalty". learned counsel  urged that  in order  to prove  the  charge under Section  36 A  (3)(a) of  the Act,  there has  to be a cogent evidence  before the  Commission  to  hold  the  said charge proved.  In the  present case, he urged that except a complaint of  Azad  Singh  received  by  the  D.G.  on  July 24,1991, there  was no other material either before the D.G. was wholly  perfunctory. The complaint filed by D.G. on July 26,1991 was nothing but an ipse dixit based on the complaint dated April  24,1991 filed  by  Azad  Singh  whose  presence despite best efforts could not be secured either at the time of preliminary  inquiry or  before the  Commission. He  then urged that Section 36 A  does not equate specified practices in sub  Section (1)  to sub  Sections (5)  as  unfair  trade practices but  merely enumerates them as trade practices. It is only  when such trade practices result in causing loss or injury to consumers of such goods or services by eliminating or restricting  competition  or  even  otherwise  when  they become "Unfair  trade practices".  The legislature  did  not characterise the  specified trade  practice as  unfair trade practices. Therefore,  on a  plain construction  of  Section 36A, it is necessary that every ingredient must be satisfied and particularly  because of  the  use of word and after the words ’  the following practices" as also the words "thereby causes loss  or injury"  before the words " to the consumers of such  goods  or  services."  To  substantiate  the  above argument, counsel drew our attention to the sachar committee report which  recommended to  specify certain  unfair  trade practices and  prohibit them  altogether as indicated in the bill But,  however, the  legislature by amendment Act No. 30 of 1984 redefined Section 33 but did not choose to redefined Section 36  A  despite  the  recommendation  of  the  Sachar Committee. He, therefore, urged that in the absence of proof of trade  practices resulting  in causing  loss or injury to consumers of  such  goods  or  services  by  eliminating  or restricting competition  or even  otherwise, they  would not become unfair  trade practices.  The commission  erroneously assumed  that   there  was  per  practices.  The  Commission erroneously assumed  that there was unfair trade practice in the scheme which view is unsustainable. 12.  Mr. Ganguly,  Learned Senior Advocate appearing for the respondent/Commission seriously  countenanced the  aforesaid contention raised  on behalf of the appellant and urged that the  plain   reading  of   Section  36A  which  defines  the expression unfair  trade practices  to mean a trade practice which, for  the purpose of promoting the sale, use or supply

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of any  goods, adopts  (a) one  or  more  of  the  practices enumerated therein; and (b) thereby causes loss or injury to consumers  of  such  goods  by  eliminating  or  restricting competition or  otherwise. In  order to constitute an unfair trade practice  under Section  36  A,  it  is  necessary  to establish that  the  trade  practice  concerned  is  one  of several kinds  of trade  practices mentioned in sub Sections (1) to (5) thereof and once it is established that the trade practice complained  of falls  in one  or more  of the trade practices mentioned  in sub  sections (1)  to (4) of Section 36A, it would then be only question of inference to be drawn by the  Commission as  to whether such trade practice causes loss or  injury to the consumers of goods or services either by eliminating  or restricting competition or otherwise. The Words "  or otherwise"  are of wider import and they signify not only actual loss or injury offered by consumers but also probable or  likelihood of  the consumers  suffering loss or injury in  any form.  The object  of the  amending Act 30 of 1984 is  to extend an additional protection to the consumers from  being   subjected  to   unfair  trade   practice  and, therefore, it  is not  necessary to prove any loss or injury actually suffered  by the  consumers. Consistent  with  this object, Section 36D empowers the Commission to issue a cease and desist order and can prevent execution of trade practice which may  fall in one or more of the practices mentioned in sub sections (1) to (5) of Section 36 A. 13.  On careful analysis of unfair trade practice defined in Section 36A  it is quite clear that the trade practice which is undertaken  by the  company for  the purpose of promoting the sale, use or supply of any goods or for the provision of any service/services  adopts one or more following practices and thereby  causes loss  or injury to the consumers of such goods or  service  whether  by  eliminating  or  restricting competition  or  otherwise  would  amount  to  unfair  trade practice. The  above key  words used  in Section  36 A while defining the  unfair trade practices have laid emphasises on "thereby causes  loss or  injury to  the consumers  of  such goods or  services whether  by  eliminating  or  restricting competition or  otherwise. " it must, therefore, follow that any such  unfair trade  practice which causes loss or injury to  the  consumers  of  such  goods  or  service  either  by eliminating or  restricting competition  or otherwise  would attract the  panel  consequences  as  provided  under  this, chapter. Each  of the  clauses employed  in Section  36 A is interwoven by use of the conjunction and would indicate that before determining  a  trade  practice  being  unfair  trade practice, the  commission has  to be satisfied as to whether the necessary ingredients contained therein are satisfied or not. The  words "  or otherwise" in Section 36A assuming are of wider  import and  would signify  not only actual loss or injury suffered by consumers but also would include probable or likelihood  of consumers  suffering loss or injury in any form. But for that purpose also, there has to be some cogent material before  the commission  to  support  a  finding  of unfair trade  practice and  any inferential finding would be contrary to  Section 36A of the Act. It is necessary for the Commission to  call upon  the parties  to  substantiate  the allegations. The  burden of  proof, the  nature of proof the nature of  proof and  adequacy thereof would depend upon the facts and circumstances of each case. 14.  The Commission  in its  impugned order  held  that  the gift/prize scheme  floated by the company amounted to unfair trade practices  under section  36A(3)(a) of  the Act and to support this  finding. the  only material  placed before the Commission was the Complaint filed by the D.G. containing an

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averment that  the company  had raised  the  prices  of  its detergent a few days before the impugned scheme was floated. The finding of the Commission in this behalf precedes on the footing that  the prize  money under the impugned scheme was either fully  or partly covered by the amount charged in the transaction  as   a  whole.  Should  this  averment  in  the complaint of  the D.G. be presumed to be valid being a proof of an  unfair trade  practice under Section 36(3)(a)_ of the Act? The  Commission appears  to have been influenced by its own unreported  decisions wherein  such a view was taken and followed. Mr.  Dushyant, Learned  Senior  Advocate  for  the appellant urged  that the  Commission  had  not  taken  into account the  reply filed  on behalf  of the company that the prices of  the detergent  powder were  required to be raised because of  rise in  the prices of the raw materials. If the Commission were  to call  upon the  company to  justify  the increase in  the prices  of the  detergent powder dehors the prize money-the  company would have produced the material to dislodge the  assumption that this increase in the prices of the detergent  powder  was  not  bonafide  and  in  fact  an exercise to  cover fully  or partly  the  prize  money.  The learned counsel  for the appellant stated before us that the audited balance  sheets  and  other  evidence  is  in  their possession which  would indicate  that the  increase in  the prices of  the detergent  powder was necessitated because of increase in  the prices of raw materials and other connected factors therewith.  For want  of sufficient  opportunity and under the  misconception  of  law,  the  company  could  not produce the  evidence on  record and, therefore, prayed that the matter  be remitted  back to the Commission with liberty to the company to produce the relevant evidence or record to substantiate its contentions. Having regard to the facts and circumstances of  the case and having come to the conclusion that the inference of per se presumption against the company under section  36A(3)(a) of the Act was unsustainable. Along with this  appeal, the  company  had  produced  on  recorded certain documents  to justify  the increase in the prices of the detergent  powder and  also sought  to  prove  that  the increase in  the prices  of the  detergent powder  and  also sought to  prove that  the increase  in the  prices  of  the detergent powder  has no  nexus with the prize money covered by the  impugned scheme  either fully  or  partly.  However, without expressing  any opinion in this behalf and to do the justice between  the parties, we are of the opinion that the company needs  to be  given an opportunity to prove its case that they have not committed any unfair trade practice under Section 36A(3)(a) of the Act. Such a finding is necessary in order to determine whether such an unfair trade practice had caused loss  or injury  to the  consumers of  such goods  by eliminating or  restricting competition   or  otherwise.  As stated earlier,, except the complaint of the D.G., there was no other  material before the commission which would justify the finding  in this  behalf. Such  an exercise is necessary since any  order passed under Section 36D attracts the penal consequences. 15.  For the  aforesaid conclusions,  we are  of the opinion that the  impugned orders  of the  Commission  passed  under Section  36D  of  the  Act  holding  that  the  company  had committed unfair  trade practice  under Section  36(3)(a) of the Act  is unsustainable  and it is accordingly quashed and set aside. The matter is remitted back to the Commission for afresh disposal  in accordance  with  law  after  giving  an opportunity to  both the  parties to  lead such  evidence as they deem fit. The appeal is accordingly disposed of. In the circumstances of  the present  case, parties are directed to

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bear their own costs.