Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6597 OF 2008
Star India (P) Ltd. Appellant(s)
VERSUS
Society of Catalysts & Anr. Respondent(s)
WITH
CIVIL APPEAL NO. 6645 OF 2008
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
These appeals arise out of the judgment dated 11.9.2008 of
the National Consumer Disputes Redressal Commission (“National
Commission”) allowing the consumer complaint filed by Respondent
Signature Not Verified
Digitally signed by
ASHWANI KUMAR
Date: 2020.01.23
16:57:39 IST
Reason:
No. 1 in both these appeals against the Appellants.
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2. The brief facts giving rise to these appeals are as follows:
2.1 Star India (P) Ltd., the Appellant in C.A. No. 6597/2008
(hereinafter “Star India”) used to broadcast the programme ‘Kaun
Banega Crorepati’ (“KBC”) between 22.1.2007 and 19.4.2007. The
programme was sponsored by Bharti Airtel Limited, the Appellant in
C.A. No. 6645/2008 (hereinafter “Airtel”), amongst others. During
the telecast of this programme, a contest called ‘Har Seat Hot Seat’
(“HSHS contest”) was conducted, in which the viewers of KBC were
invited to participate. An objectivetype question with four possible
answers was displayed on the screen during each episode, and
viewers who wished to participate were required to send in the
correct answer, inter alia through SMS services, offered by Airtel,
MTNL and BSNL, to a specified number.
2.2 The winner for each episode was randomly selected out of the
persons who had sent in the correct answers, and awarded a prize
money of Rs. 2 lakhs. There was no entry fee for the HSHS contest.
However, it is not disputed that participants in the HSHS contest
were required to pay Rs. 2.40 per SMS message to Airtel, which was
higher than the normal rate for SMSes. Hence, Respondent No. 1,
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which is a consumer society (hereinafter “the complainant”), filed a
complaint before the National Commission against Star India and
Airtel (but not against BSNL and MTNL), contending that they were
committing an ‘unfair trade practice’ within the meaning of Section
2(1)(r)(3)(a) of the Consumer Protection Act, 1986 (“the 1986 Act”). It
was alleged that the Appellants had created a false impression in
viewers’ minds that participation in the HSHS contest was free of
cost, whereas the cost of organizing the contest as well the prize
money was being reimbursed from the increased rate of SMS
charges, and the profits from these charges were being shared by
Airtel with Star India.
2.3 Further, it was alleged that an unfair trade practice had also
been committed inasmuch as the contest was essentially a lottery
as the questions were simple, and the winners were finally picked
by random selection. The purpose of this contest was to promote
the business interests of the Appellants by increasing the
viewership and Television Rating Points (TRP’s) of the KBC
programme, and thus to command higher advertising charges, and
also by increasing the revenue earned from SMS messages. Hence
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the Appellants were culpable for conducting a lotterylike contest to
promote their business interests under Section 2(1)(r)(3)(b) of the
1986 Act.
2.4 It is relevant to note that the complainant is only a voluntary
consumer organization which has filed this complaint as part of its
objective of furthering the consumer protection movement. It is not
their case that they have participated in the HSHS contest and
incurred any loss on account thereof. It is further relevant to note
that the complainant’s assertions are solely based on a survey
which it had carried out, in which the majority of participants
apparently stated that they were under the impression that
participation in the HSHS contest was free and the SMS charges
were retained only by the service provider, i.e. Airtel and most of the
viewers felt that the contest was carried out to increase the
popularity of the KBC programme. The conclusions of this survey
were apparently confirmed by a newspaper report dated 15.7.2007
published by the Hindustan Times. As per this newspaper report,
Airtel received 58 million SMS messages, and the revenue earned
from the SMSes was shared by Star India and Airtel.
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3. The National Commission in the impugned judgment observed
that though the Appellants had not disclosed the revenue earned
from the HSHS contest on grounds of confidentiality of proprietary
information, it was apparent that they had created an impression
that the prize money was being given free of charge, even though
they had not disputed that the prize money for the HSHS contest
was paid out of the money collected through SMS charges. The
Commission relied upon the figures stated in the newspaper article
dated 15.7.2007 (supra), and found that since the Appellants had
not denied that they had received 58 million SMSes, they would
have collected Rs. 13.92 crore from the participants of the HSHS
contest for such messages, whereas a total sum of only Rs. 1.04
crores was paid as prize money. Thus, the gross earnings of the
Appellants were disproportionate to the cost of the prizes offered.
3.1 The Commission further found that no viewer could discern
from the onscreen advertisements that the costs of the contest
were being met through the SMS charges, and the Appellants had
clearly not notified viewers about the same. It found a contradiction
between the Appellants’ stances as to whether the HSHS contest
was advertised as ‘free’ or not. It was also observed that the
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Appellants had not brought any evidence on record to show that the
transmission of SMS messages for the HSHS contest was a value
added service such that the higher SMS cost was justified, and
hence the same could not be construed as a value added service. It
was presumed by the National Commission that the special
business relationship between Star India and Airtel included an
undisclosed revenue sharing agreement.
3.2 Hence, it was held that since the prize money for the HSHS
contest was fully or partly covered by the revenue earned from
increased SMS charges, the Appellants had committed an unfair
trade practice under Section 2(1)(r)(3)(a) of the 1986 Act. In light of
this finding, the National Commission found it unnecessary to deal
with the complainant’s contention regarding commission of an
unfair trade practice under Section 2(1)(r)(3)(b).
3.3 The National Commission additionally held that the complaint
was maintainable under the 1986 Act and need not have been
preferred before the Telecom Disputes Settlement and Appellate
Tribunal (“TDSAT”) under the Telecom Regulatory Authority of India
Act, 1997 (“TRAI Act”). Further, it was held that the complaint was
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not bad for nonjoinder of parties as there was nothing on record to
suggest that BSNL and MTNL had also recovered large amounts
from the SMS charges for the HSHS contest and that the amount so
recovered by them was used for sharing the cost of the prize money.
3.4 Hence, the complaint was accordingly allowed by the National
Commission. Since the complainant is only a consumer
organization, the National Commission observed that there were no
grounds for granting compensation. However, it awarded punitive
damages of Rs. 1 crore under the Proviso to Section 14(1)(d) of the
1986 Act, for which both Appellants were held jointly and severally
liable. The National Commission also directed them to pay litigation
costs of Rs. 50,000 to the complainant. Hence these appeals before
us.
4. Learned senior counsel for Star India, Shri Gaurav
Pachnanda, submitted that the entire finding of ‘unfair trade
practice’ was based on inferences and speculation, and on reliance
on a newspaper report without corroboration of its contents, which
was impermissible. He disputed the finding of the National
Commission that the Appellant had admitted that the prize money
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was paid out of the revenue earned from increased SMS rates. It
was stressed that the National Commission had omitted to inquire
into the source of the prize money. It was also stressed that Airtel
had not shared the revenue earned from the increased SMS rates
with Star India at all. The only monetary flow between them was a
fixed periodic lumpsum to be paid by Airtel under the servicescum
sponsorship agreement between them, which bore no relation to the
revenue received from the SMSes, and that there was no evidence to
suggest that the SMS revenue was used to pay the prize money. The
learned counsel emphatically argued that the expression “covered
by the amount charged in the transaction as a whole” under
Section 2(1)(r)(3)(a) of the 1986 Act only meant direct recovery from
the price paid for the transaction, and not from advertisements or
sponsorship, citing the decision of this Court in v.
HMM Ltd.
Director General, Monopolies & Restrictive Trade Practices
, (1998) 6 SCC 485.
Commission
4.1 It was further submitted that Airtel was entitled to charge a
higher rate for the SMSes sent in pursuance of the HSHS contest,
since the transmission of SMSes to register options in a multiple
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choice question game required a special software, the use of which
constituted a valueadded service; and that Star India had complied
with the relevant TRAI regulations mandating that such increased
tariff be displayed on the television screen as well as on the KBC
programme website. Therefore, though the participants bore the
cost of sending the SMS messages, they were duly informed of the
same, while participation in the contest itself remained free of
charge. In such circumstances, the National Commission could not
have attributed recovery of prize money to the increased tariff rate
of the SMSes without even inquiring into the breakup of cost, value
addition and profit in the tariff.
4.2 The learned counsel also challenged the award of damages, for
lack of proof of loss or legal injury to the participants in the contest,
which he submitted was required as per Section 14(1)(d) of the
1986 Act. Lastly, he argued that “punitive damages” could not have
been awarded without a specific prayer for the same in the
complaint.
5. Learned counsel for Airtel, Shri Aditya Narain, urged that as
far as the commission of an unfair trade practice was concerned,
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the only finding rendered by the National Commission was
regarding the creation of a wrongful impression that the contest
was conducted free of charge, which is covered under the second
part of Section 2(1)(r)(3)(a) of the 1986 Act, and that the same was
not attracted in the present case. He took us through the TRAI
direction regarding advertisement of premium rate services,
pleading compliance with the same. Finally, he submitted that the
jurisdiction of the consumer fora was ousted by Section 14(a)(iii)
read with Section 15 of the TRAI Act, which provide that any
dispute between telecom service providers and “a group of
consumers” have to be referred to the TDSAT, and that the
complainant organisation was essentially nothing but a group of
consumers since it was purporting to represent the interest of
consumers at large.
6. Learned Counsel for the complainant, Ms. Madhumita
Bhattacharjee, on the other hand, argued in favour of the decision
of the National Commission, submitting that the Appellants had
given the wrongful impression to consumers that the HSHS contest
prize money was not paid out of the revenue generated from
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increased SMS tariff rates. She also averred that the complaint
contained a prayer as to punitive damages, and thus the National
Commission had not erred in awarding punitive damages. Finally,
she submitted that the complaint was maintainable under the 1986
Act since the complainant had filed an individual complaint under
the Act, and not acted on behalf of a group of consumers, thus
attracting the exemption available to individual consumers under
proviso (B) to Section 14 (a)(iii) of the TRAI Act.
7. We have heard all the parties and given due consideration to
the material on record.
8. It is apparent that the crucial question to be determined in the
instant case is whether an unfair trade practice has been
committed by the Appellants in the conduct of the HSHS contest, in
terms of Section 2(1)(r)(3) of the 1986 Act. We hasten to emphasize
at this juncture itself that though the complainant had also pleaded
violation of Section 2(1)(r)(3)(b) of the 1986 Act in their complaint,
there was no express finding rendered on this issue by the National
Commission, and subsequently, no contentions were made before
us in this respect. Thus, the limited question before us is whether
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an unfair trade practice has been committed only within the
meaning of Clause (a) of Section 2(1)(r)(3). It would be useful to
begin by referring to the relevant portion of the definition of “unfair
trade practice” under Section 2(1)(r)(3):
“(r) “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 service,
adopts any unfair method or unfair or deceptive practice
including any of the following practices, namely;—
…
(3) permits—
(a) the offering of gifts, prizes or other items with the
intention of not providing them as offered or creating
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;…”
8.1 Evidently, the mischief that the clause seeks to address may
be in two forms: firstly , the offering of gifts, prizes or other items
with the intention of not providing them as offered, and ,
secondly
the creation of the impression that something (i.e. a gift, prize or
other item) is being given or offered free of charge in spite of the
cost of the item actually being covered either fully or partly by the
amount charged in the relevant transaction, as a whole. This would
be, for example, where the vendor of a good or service deceptively
increases the price of the good or service being sold, and covers the
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cost of a prize or gift offered for ‘free’ along with the good or service
through such increased price.
8.2 In the instant matter, the controversy regarding the
commission of an unfair trade practice pertains to the second part
of the clause. This is because the Appellants are questioning the
conclusion of the National Commission that the amount of prize
money paid in the HSHS contest was in fact at least partly covered
by the increased SMS tariff rate charged to participate in the
contest, and that the Appellants had created a false impression to
the contrary, i.e., that participation in the HSHS contest was free of
charge. Thus, the primary bone of contention between the parties is
the source of the funds out of which the prize money has been paid
by Star India.
9. At the outset, after going through the written submissions of
the Appellants before the National Commission, we are compelled to
conclude that the National Commission had no basis to hold that
the Appellants had admitted that the prize money for the HSHS
contest was distributed out of the revenue collected from the SMSes
sent in pursuance of the contest. It is true that the Appellants had
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not specifically denied that the prize money was paid out of the
increased SMS charges. However, they had clarified in their
submissions that Airtel was merely a sponsor/advertiser of the
program, and the commercial arrangement between the parties was
that Airtel would pay sponsorship charges, whereas Star India
would be independently liable for paying the prize money out of its
pocket regardless of the revenue earned by Airtel.
10. Importantly, we further find that apart from the
aforementioned facts, there is no other cogent material on record
upon which the National Commission could have placed reliance to
render the finding of ‘unfair trade practice’ under Section 2(1)(r)(3)
(a) of the 1986 Act. The National Commission had sought to rely on
the newspaper report dated 15.7.2007 published in the Hindustan
Times (supra) regarding the amount of revenue and profit earned by
the appellants from the HSHS contest. We are of the considered
opinion that such reliance was unwarranted, inasmuch as there
was absolutely no corroboration for the allegations therein with
respect to the number of SMSes received, and the breakup of
revenue earned into cost, value addition from service, and profit.
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Moreover, the survey report on the basis of which these allegations
were made was not even produced before the National Commission
or before us.
11. It is further relevant to note that there exists a servicescum
sponsorship agreement between the Appellants, which contains the
specific details of the commercial arrangement between them. They
did not produce the same before the National Commission, claiming
that the said agreement contained a confidentiality clause, and
could only be produced in accordance with law if required. The
Appellants’ case is that they would have offered to produce the
agreement if the National Commission had given a specific direction
to that effect. However, no such direction was rendered at any point
during the proceedings before the National Commission. Even the
complainant did not, throughout the course of the proceedings,
seek a direction to the Appellants to produce the servicescum
sponsorship agreement. Be that as it may, to establish whether
there was any substance in the National Commission’s conclusion
that the prize money was paid out of the revenue earned from
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Airtel’s SMS services during the HSHS contest, we deemed it fit to
examine the agreement ourselves.
11.1 Our perusal of the servicescumsponsorship agreement
reveals that Airtel had the sole and exclusive right to charge fees or
charges towards the services rendered by it to facilitate
participation in the HSHS contest, through SMS, telecalling, etc.,
and thus, Star India had no role in determining the same. Further,
Airtel was liable to pay a monthly lumpsum as fees to Star India,
irrespective of whether such amount was realized from its
subscribers or not. There is no provision in the agreement for
revenuesharing between the parties, or requiring Airtel to finance
any part of the prize money paid by Star India towards the HSHS
contest.
11.2 Thus, it is evident that Star India was liable to pay the
prize money irrespective of the profits earned by Airtel. It is
needless to say that the sponsorship money paid by Airtel would
come from various sources of revenue, which includes the money
earned from the tariff rates for the HSHS contest. Similarly, Star
India may have had many sources of revenue from which the prize
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money could have been paid. This is a part and parcel of the
ordinary business dealings of the Appellants, and the complainant
has failed to establish any direct linkage between the increased
SMS tariff rates and the prize money so as to show that the prize
money was deceptively recovered in the guise of increased SMS
rates charged to the participants.
12. Further, since the National Commission failed to conduct any
inquiry whatsoever into the breakup of the price of Rs. 2.40 per
SMS fixed for the purpose of participation in the HSHS contest, we
are of the view that the finding of the National Commission that the
SMS service offered by Airtel under the HSHS contest did not
constitute a valueadded service is liable to be set aside. Indeed, the
servicescumsponsorship agreement reveals that Airtel was liable
to set up the hardware and software required for the HSHS contest
at its own cost, which suggests that the services regarding the
participation in the HSHS contest through SMSes offered by Airtel
constituted a valueadded services separate from its ordinary SMS
service. It is reasonable to assume that such cost would have been
recovered by Airtel, at least in part, through the increased cost of
SMSes sent by subscribers participating in the HSHS contest. The
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direction on ‘Premium Rate Services’ dated 3.5.2005, issued by
TRAI, which was referred to by the Appellants, also states that
televoting and participating in quizzes, etc. through SMS
constitutes a value added service, and that in most of these cases,
the charges for these services are more than the normal tariff rate.
The notification is reproduced below:
“ F. No. 3058/2004QOS
TELECOM REGULATORY AUTHORITY OF INDIA
A2/14, Safdarjung Enclave, New Delhi110029
rd
Dated : 3 May, 2005
To,
All Cellular Mobile Service Providers
All Unified Access Service Providers
Subject : Direction on Premium Rate
Services .
1. The Authority has observed that in the last few
months, a number of operators and also some
independent agencies have started providing
value added services like quiz, ringtones,
televoting etc. through SMS. In most of these
cases, the charges for these services are more
than the normal published tariffs. The
customers are informed about these value added
premium rate services through SMS,
advertisements in newspaper or T.V. But in this
communication, the cost implication of the
service is not intimated. Sometimes the
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messages are only followed by wordings “T&C
Apply”.
2. In the present multioperator multi service
scenario, such premium rate services have
increased considerably. The service provider is
aware of the pulse rate for these services as
either the service provider is providing such
services or it has an agreement with the provider
of such premium services. However, the cost for
such premium services is generally known to the
customer only after the service has been utilized
and the bill is received. This practice of service
providers is against the interest of the
consumers.
3. In view of the above, in the consumer’s interest,
the Authority in exercise of its power conferred
upon it under Section 13 read with Section 11(1)
(b)(i) and (v) of the Telecom Regulatory Authority
of India Act, 1997 and clause 9 and 11 of the
Telecommunication Tariff Order 1999 hereby
directs all the Cellular Mobile Service Providers
and Unified Access Service Providers to publish
in all communications/advertisements relating
to premium rate services, the pulse rate/tariff
for the service.
This issues with the approval of the Authority.
(Sudhir Gupta)
Advisor (QOS)”
13. However, we need not dwell on this issue much longer, since
not much turns upon it with regard to the determination of the
commission of an unfair trade practice, except to note that the
transmission of SMSes for the purpose of the HSHS contest being a
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value added service, the Appellants had also taken care to comply
with the TRAI direction dated 3.5.2005 (supra) which mandated the
communication/advertisement of any increase in the cost of cellular
services on account of the rendering of such a valueadded service.
Thus, even if the SMS charge is taken as the ‘cost’ of participating
in the contest for the purpose of Section 2(1)(r)(3)(a) of the 1986 Act,
it cannot be said that the Appellants had wrongfully advertised the
charges for the same.
14. Hence, we find that the complainant has clearly failed to
discharge the burden to prove that the prize money was paid out of
SMS revenue, and its averments on this aspect appear to be based
on pure conjecture and surmise. We are of the view that there is no
basis to conclude that the prize money for the HSHS contest was
paid directly out of the SMS revenue earned by Airtel, or that Airtel
and Star India had colluded to increase the SMS rates so as to
finance the prize money and share the SMS revenue, and the
finding of the commission of an “unfair trade practice” rendered by
the National Commission on this basis is liable to be set aside.
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15. With regard to the award of punitive damages made by the
National Commission, the same could not have been done in as
much as the complainant in the present case had not prayed for
punitive damages in the complaint or proved that any actual loss
was suffered by consumers (See
General Motors (India) Private
v. , (2015) 1 SCC 429). However,
Limited Ashok Ramnik Lal Tolat
we need not delve further into this aspect since we have found that
there was no unfair trade practice committed by the Appellants in
the first place.
16. On an ancillary note, it was briefly contended before us by the
learned counsels for the Appellants, as mentioned supra, that the
National Commission did not have jurisdiction over the complaint
and it should have been referred to the TDSAT. However, this
argument was not seriously pressed by either of the parties. Hence,
we do not find it relevant to adjudicate upon this issue for the
purpose of the present matter. However, the question of law, as
regards the maintainability of complaints filed by consumer
organisations against telecom service providers before consumer
fora may be kept open.
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17. Thus, we find that the finding of the commission of an unfair
trade practice under Section 2(1)(r)(3)(a) in the impugned judgement
is bad in law. The appeals are allowed and the impugned judgement
is set aside in the aforesaid terms.
…..…………................................J.
(MOHAN M. SHANTANAGOUDAR)
….…………………………...............J.
(R. SUBHASH REDDY )
New Delhi;
January 23, 2020
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