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PETITIONER: RAJASTHAN HOUSING BOARD

       Vs.

RESPONDENT: SMT.  PARVATI DEVI

DATE OF JUDGMENT:       03/05/2000

BENCH: M.B.Shah, R.P.Sethi

JUDGMENT:

     Shah, J.

     These  appeals  are  filed  under Section  55  of  the Monopolies  And  Restrictive  Trade   Practices  Act,   1969 (hereinafter  referred  to  as the MRTP Act)  against  the judgment  and  order dated 30.05.1996 of the Monopolies  And Restrictive   Trade   Practices    Commission,   New   Delhi (hereinafter  referred to as  the MRTP Commission)  passed in  RTPE No.100 of 1994 and UTPE/RTPE No.15 of 1994, whereby the  Commission  has held that appellant  Rajasthan  Housing Board has indulged in restrictive trade practices attracting Section  2(o)(ii)  of the Act and in unfair trade  practices covered  by  Section  36-A(1)(i) and (vi) of the  MRTP  Act. Admittedly,  the Central Government has issued  Notification under  Section  3 of the MRTP Act on 27.9.1991 applying  the provisions of the MRTP Act, to the appellant Board.

     Before  deciding  the  question   involved,  we  would narrate few facts of each appeal.

     CIVIL  APPEAL NO.14994 OF 1996.  (Arising out of  RTPE No.100 of 1994)

     It  is  admitted that the Rajasthan Housing  Board  is established  under the provisions of Rajasthan Housing Board Act,  1970  and  it  builds houses and allots  the  same  to persons  who  are  registered with the Board  under  various schemes  framed by it from time to time.  The land is placed at  the  disposal  of the Board by the State  Government  on payment  being made by it and houses of different categories are  constructed  after securing loans from HUDCO and  other agencies  under the schemes known as Self Financing Schemes. It  is stated that respondent got herself registered for the house  being allotted to her in low income group category on 12.05.1983  and paid a sum of Rs.1800/- as registration fee. It  is also stated that the Board has issued a brochure  for general   registration,  wherein   certain  conditions   for registration,  the  amount  of  advance   which  was  to  be deposited  by the applicant, the estimated cost of different

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categories  of the house to be constructed and the amount of instalment  money which was to be paid etc.  were mentioned. It  is also stated therein that the Board would try its best to  make  the house available within a period of four  years from  the  date of registration and the applicant  would  be entitled  to payment of interest on the amount deposited and also  to refund of money with interest if the house was  not allotted  within  stipulated period.  It is  further  stated that by letter dated 27.4.1988 respondent was intimated that house had been reserved for her as a result of lottery drawn in  that  year and she was required to pay advance money  in three  instalments and if there was delay in payment of  the said  instalments,  respondent was further required  to  pay interest  @  18%  p.a.  by way of  penalty.   Thereafter  by letter  dated 29.2.1992 the respondent was intimated by  the Board  that  total  cost of house allotted to her  had  been worked  out  at  Rs.57,500/-  and she  should  start  making payment  of  the remaining amount by instalments @  Rs.715/- per month from 15.4.1992.

     After  receipt  of  the said letter  respondent  filed complaint  before  the District Consumer  Protection  Forum, Jodhpur, which was withdrawn.  Thereafter, in the year 1993, respondent  filed  complaint under Section 36-A and 36-B  of the  MRTP  Act before the MRTP Commission at New Delhi.   In the  said  complaint,  it was mentioned that action  of  the Board  amounted  to  unfair  trade  practice  under  Section 36-A(1)  of the Act;  even though the house was allotted  to the  respondent on 29.11.1988 yet on account of unfair trade practice,  the possession of the house had not been given to her  till  31.03.1993  and that as a result of  the  alleged unfair  trade  practice, respondent has suffered a  monetary loss of Rs.26000/-.  It was prayed that demand of Rs.57000/- as  the cost of the house and monthly instalment of Rs.715/- with  interest  @ 14% be set aside and it be  declared  that Board  has  indulged in unfair trade practice and it may  be restrained from indulging in such practice.

     On  show-cause notice being issued by the  Commission, the  Board filed a reply raising a preliminary objection  to the  maintainability of the complaint and also giving  reply on  merits.   As the Commission was not satisfied  with  the contentions  raised  by the Board, it started enquiry.   The Commission  by its order dated 30.5.1996 held that the Board has  indulged  in restrictive trade practice as  defined  in Section  2(o)(ii) of the MRTP Act and directed the Board  to file an affidavit to the effect that it would not repeat the same.  Against that judgment, this appeal is filed.

     CIVIL  APPEAL  NO.15096  OF  1996.   (Arising  out  of UTPE/RTPE No.15 of 1994)

     In  this appeal, it is the case of respondent that the Board  registered  him  as  applicant  under  Self-Financing Scheme  and he deposited a sum of Rs.10,000/- at the time of initial  registration  with  the  Board.   By  letter  dated 06.02.1988  the Board informed the respondent that a  house, as  opted  by  him, had been reserved and he  was  asked  to deposit  the  various instalments indicating amount and  due dates.  On 05.02.1992 the Board informed the respondent that he  should  deposit a sum of Rs.1,10,714/- as the  remaining amount  towards the cost of house (measuring 12x18 mt.) that

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had  been  allotted to him.  The respondent was given  three months time to deposit the amount and take the possession of the  house  by  09.05.1992.  It is stated  that  instead  of depositing the amount he filed writ petition No.2682 of 1992 in  the  High Court of Rajasthan at Jodhpur challenging  the demand  for  the  balance  amount as  alleged.   During  the pendency  of the writ petition, respondent filed a complaint under  Sections 36 and 37 of MRTP Act, 1969 stating  therein that  appellant Board had indulged in unfair trade  practice by  delaying  the  construction of the house  and  demanding additional  cost  of construction than the agreed amount  of Rs.1,85,000/-.   After receipt of the show-cause notice from the   Commission,  the  Board  filed   a  reply  raising   a preliminary  objection  as  to the  maintainability  of  the complaint  and  also  denied   allegations  that  Board  had indulged  in  unfair trade practice.  By the impugned  order dated  30.5.1996,  the  Commission held that the  Board  has indulged   in  unfair  trade   practice  and  directed  that applications  filed by the respondent under Section 12-B  of the  MRTP  Act would be heard by the Commission at  a  later stage.  Aggrieved by the said order, the Board has preferred this appeal.

     CONTENTIONS FOR DETERMINATION:-

     (A)  Whether  the order passed by the Commission  that appellant  has  indulged in restrictive trade  practice  and further  directions  to  file affidavit not to  repeat  such practices in future are at all justifiable?

     (B) Whether the decision rendered by the Commission in UTPE/ RTPE No.15 of 1994 holding that appellant has indulged in  restrictive and unfair trade practice attracting Section 2(o)(ii)  and Section 36-A(1)(i) and (vi) of the MRTP Act is at all justifiable?

     CONTENTION A

     The  learned counsel for the appellant submitted  that the  finding given by the Commission that the Board indulged in  restrictive  trade  practice as  defined  under  Section 2(o)(ii)  of the MRTP Act is, on the face of it, illegal and erroneous.   It  is apparent that the act of the  respondent cannot  be termed as restrictive trade practice which has or may have the effect of preventing, distorting or restrictive competition  in  any  manner.   Section  2(o)  reads  thus:- S.2(o)  restrictive trade practice means a trade practice which has, or may have, the effect of preventing, distorting or restricting competition in any manner and in particular,

     (i)  which  tends to obstruct the flow of  capital  or resources into the stream of production, or

     (ii)  which  tends  to  bring  about  manipulation  of prices,  or conditions of delivery or to effect the flow  of supplies in the market relating to goods or services in such manner  as  to impose on the consumers unjustified costs  or restrictions.

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     It  appears  that Commission has considered  that  the acts   of  the  Board  would  be  covered  by  clause   (ii) particularly  last  portion  of   the  said  clause  namely, services  in  such  manner as to impose  on  the  consumers unjustified  costs.   In our view, the Commission ought  to have read the said part along with the main ingredient which requires  that  a trade practice which has or may  have  the effect  of preventing, distorting or restricting competition in  any  manner would be restrictive trade practice  and  in particular   which   inter  alia,   tends  to  bring   about manipulation of services in such manner as to impose on the consumers  unjustified costs.  For this purpose no case  is made  out by the respondents that the Board has prevented or restricted  competition  in  any manner  which  affects  the services  in  such  a  manner  as  to  impose  on  consumers unjustified costs or restrictions.  Section 2(o) will not be applicable  in  case where a trade practice has  no  effect, actual  or probable of preventing, distorting or restricting competition in any manner.

     This question is considered in detail by this Court in Mahindra and Mahindra Ltd.  v.  Union of India [(1979) 2 SCC 529].   In  this case the Court observed (in para 14)  that: It  is now settled law as a result of the decision of  this Court  in the Telco case {Tata Engineering & Locomotive  Co. Ltd.,   Bombay  v.   Registrar  of  the  Restrictive   Trade Agreement,  New  Delhi [(1977) 2 SCC 55] (Sic)}  that  every trade  practice  which  is  in restraint  of  trade  is  not necessarily a restrictive trade practice.  The definition of restrictive  trade  practice  given  in Section  2(o)  is  a pragmatic   and  result-oriented   definition.   It  defines restrictive  trade practice to mean a trade practice which has  or  may  have the effect of preventing,  distorting  or restricting competition in any manner and in clauses (i) and (ii),  particularises  two  specific   instances  of   trade practices  which  fall  within the category  of  restrictive trade  practice.  It is clear from the definition that it is only  where  a  trade  practice has the  effect,  actual  or probable,   of   restricting,    lessening   or   destroying competition   that  it  is  liable  to  be  regarded  as   a restrictive  trade  practice.   If a trade  practice  merely regulates  and  thereby promotes competition, it  would  not fall  within  the definition of restrictive trade  practice, even  though  it  may be, to some extent,  in  restraint  of trade.   Whenever,  therefore, a question arises before  the Commission  or  the  Court  as to whether  a  certain  trade practice  is restrictive or not, it has to be decided not on any  theoretical  or  a priori reasoning, but  by  inquiring whether  the  trade practice has or may have the  effect  of preventing,  distorting  or restricting  competition.   This inquiry  obviously cannot be in vacuo but it must depend  on the   existing   constellation  of    economic   facts   and circumstances  relating  to  the   particular  trade.    The peculiar  facts and features of the trade would be very much relevant  in determining whether a particular trade practice has  the  actual  or  probable   effect  of  diminishing  or preventing  competition  and in the absence of any  material showing  these facts or features, it is difficult to see how a  decision  can  be  reached by  the  Commission  that  the particular trade practice is a restrictive trade practice.

     The Court further observed (in para 15) that:  It is possible that a trade practice which may prevent or diminish competition  in a given constellation of economic facts  and

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circumstances  may, in a different constellation of economic facts  and  circumstances, be found to promote  competition. It  cannot  be said that every restraint imposed by a  trade practice   necessarily  prevents,   distorts  or   restricts competition  and  is, therefore, a restrict trade  practice There  may  be trade practices which are such that by  their inherent  nature  and  inevitable  effect  they  necessarily impair  competition  and in case of such trade practice,  it would  not  be  necessary  to consider any  other  facts  or circumstances,  for  they would be per se restrictive  trade practices.   Such  would  be the position in case  of  those trade  practices  which of necessity produce the  prohibited effect  in  such  an overwhelming proportion of  cases  that minute  inquiry  in  every  instance would  be  wasteful  of judicial and administrative resources...

     (Emphasis supplied)

     In  the  present  case,  there  is  no  allegation  or evidence  to  hold  that  the   appellant  has  indulged  in restrictive  trade  practice.   In this view of  the  matter learned  counsel for the respondents were not in a  position to  support the said finding.  Hence, the direction given by the  Commission that the appellant shall discontinue alleged restrictive  trade  practices  and not repeat  the  same  in future  and shall file an affidavit in compliance within six weeks  from the date of the order passed in both the matters requires to be set aside.

     CONTENTION B

     The  learned counsel for the appellant next  contended that  without  considering the terms and  conditions  agreed between  the parties the Commission has given a finding that because  of  delay in constructing the building  or  handing over  its possession or because of increase in the cost,  it would amount to unfair trade practice.  He further submitted that  there  is  no evidence on record to justify  the  said finding  and, therefore, the order passed by the  Commission may  be set aside.  As against this, learned counsel for the respondent relied upon the provisions of Section 36-A(1)(ii) and  (ix) of the MRTP Act for contending that respondent has made  out  a case for proceeding under the  said  provisions and,  therefore, the Commission has rightly proceeded in the matter.

     We would refer to Section 36-A (1)(ii) and (ix) of the MRTP  Act,  which reads as under:  S.36-A.   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,

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

     (ix)  materially  misleads the public  concerning  the price  at  which  a  product or like products  or  goods  or

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services,  have  been, or are, ordinarily sold or  provided, and, for this purpose, a representation as to price shall be deemed  to refer to the price at which the product or  goods or  services has or has been sold by sellers or provided  by suppliers  generally  in  the relevant market unless  it  is clearly  specified to be the price at which the product  has been  sold  or services have been provided by the person  by whom or on whose behalf the representation is made.

     Considering  the aforesaid provisions and  allegations made  against  the  Board, it appears  that  Commission  was justified  in  proceeding  with the matter.   However,  with regard to the claim made by the respondent in each case, the matter is still not decided by the Commission by considering the  relevant  documents.  At the time of deciding the  said matters, the Commission is required to go into the terms and conditions  agreed  between  the  parties and  to  find  out whether the appellant has indulged in unfair trade practices so  as  to take any further action against the Board on  the basis  of the applications filed by the respondents in  each case.

     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 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 mislead 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  finding on this  issue,  appellant  Board cannot be penalized for unfair trade practice.

     This  aspect is also considered by this Court in Nirma Industries  Ltd.   v.  Director General of  Investigation  & Registration,  [(1997) 5 SCC 279] and the Court has held (in para  14)  as under:- On careful analysis of  unfair  trade practice defined in Section 36-A, 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 adopts one or more  of the 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

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amount  to unfair trade practice.  The above key words  used in  Section  36-A while defining the unfair trade  practices have  laid emphasis 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 penal 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 36-A 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 36-A 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 and adequacy thereof would depend upon  the facts and circumstances of each case.

     In the present case, the Commission has not considered the  necessary  evidence  and has accepted the plea  of  the respondent  in arriving at the conclusion that the appellant Board has indulged in unfair trade practice.  We would again note  that  the  Commission  was not very  clear  about  the application  of  the provisions of Section 2(o)(ii)  of  the MRTP Act and it proceeded on the basis that the said Section is  also applicable.  Further, as there is no proper finding of  fact based on necessary evidence, we are of the  opinion that  the impugned order dated 30th May, 1996 passed by  the Commission  in  UTPE/RTPE  No.15 of 1994  holding  that  the appellant Board has indulged in unfair trade practices under Section   36-A   (1)(i)  and  (vi)  of  the  MRTP   Act   is unsustainable.

     In  the  result,  the  impugned order  passed  by  the Commission in RTPE No.100 of 1994 holding that the appellant Board has indulged in restrictive trade practices attracting Section  2(o)(ii)  of the MRTP Act and further direction  is quashed  and set aside.  Similarly, the order passed by  the Commission  in  UTPE/RTPE  No.15 of 1994  holding  that  the appellant Board has indulged in restrictive and unfair trade practices  as alleged attracting Sections 2(o)(ii) and  36-A (1)(i)  and  (vi) of the MRTP Act is quashed and set  aside. The matters are remitted back to the Commission for disposal afresh  in  accordance with law after giving opportunity  to both  the  parties to lead such evidence as they  deem  fit. The   appeals   are  accordingly   disposed  of.    In   the circumstances  of  the  case, parties are directed  to  bear their own costs.