Full Judgment Text
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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
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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