Full Judgment Text
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PETITIONER:
H.M.M. LTD.
Vs.
RESPONDENT:
DIRECTOR GENERAL, MONOPOLIES & RESTRICTED TRADE PRACTICESCOM
DATE OF JUDGMENT: 11/08/1998
BENCH:
S.P. BARUCHA, C.B. PATTANAIK
ACT:
HEADNOTE:
JUDGMENT:
THE 11TH DAY OF AUGUST 1998.
Present
Hon’ble Mr. Justice S.P. Bharucha
Hon’ble Mr. Justice G.B. Pattanaik
Ashok Desai, Sr. Adv., Ravinder Narain, Aditya Narain,
Manish, Advs. For M/s.J.B.D. & Co., Advs. with for appellant
A.S. Nambiar, Sr.Adv., C.B.Babu, P.Parmeswaran, Advs. with
him for the Respondent
J U D G M E N T
BHARUCHA, J.
The following Judgement of the Court was deliverd:
Under appeal is the judgement and order dated 11th May,
1989 passed by the Monopolies and Restrictive Trade
Practices Commission (hereinafter referred to as "the
Commission"). It held that the appellants were guilty of an
unfair trade practice within the meaning of The Monopolies
and Restrictive Trade Practices Act, 1969 (hereinafter
referred to as "the said Act"). It required the appellants
to desist from indulging in trade practices similar to that
which had been held to be an unfair trade practice.
The appellants manufacture and market consumer
products, including Hornlike. In September, 1985 the
appellants advertised a scheme they called the "Hidden
Wealth Prize Offer". Coupons were inserted in some bottles
of Hornlike in the various pack sizes. Some of these coupons
indicated that the purchasers of the bottles in which they
were placed would get prizes. The prizes that were offered
were 5 Hotline Colour TVs, 10 gift vouchers of Rs. 2,000/-
each for Hotline appliances and 1400 cash prizes of Rs.100/-
, Rs.50/- and Rs.20/- each. The advertisements of this
scheme made it clear that the prizes were available only to
buyers in Delhi city and they were required to claim their
prizes by 15th January, 1986. The advertisements stated that
even if the buyers’ coupon did not carry a winning message,
he had "several more chances to try. So get the goodness of
Hornlike, now. Because with it, you surely can’t lose!"
The appellants were served with a notice dated 28th
January, 1986 by the Assistant Director General of
Investigation of the said Commission. The notice state that
the said scheme required investigation with a view to find
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out whether it attracted the provisions of the said Act. It
required the appellants to furnish the following
information/documents within 10 days:
"1. Detail note about the
organisation, products manufactured
and sold, composition of board of
directors;
2. Date on which company took the
decision to hold the Hidden wealth
Prize Scheme.
3. Detail of level at which the
decision was taken in the Company
about the contest.
4. Detail note about the "Hornlike
Prize Offer" containing copies of
rules & regulations, number of
participant, description of winners
under the scheme together with
complete printed material about the
scheme;
5. Total expenditure incurred on
the scheme with requisite break-up
such as Expenditure on Prizes,
Advertisement, Published material,
Cost of Administration etc;
6. A copy of standard dealership
agreement;
7. Price lists issued during the
last 18 months including date and
reasons for revisions in prices of
the products including Hornlike;
and
8. Copies of various
incentives/discount schemes for
dealers introduced in the last 2
years with detail note containing
reasons therefore."
The requisite information was supplied by the
appellants on 7th March, 1986. They explained the said
scheme and stated that the expenditure thereon was:
"Expenditure on Prizes Rs. 52,250.00
Advertisements Rs. 184,101.25
Published Material Rs. 45,312.32
Misc. Expenditure Rs. 626.55"
The appellants stated that there had been no violation of
the provisions of the said Act.
On 24th July, 1986 the Secretary of the Commission gave
to the appellants a notice of enquiry under the said Act. It
stated that the appellants had organised the said scheme
from which it "appeared that as prizes were offered by draw
of lots, the respondent had indulged in Unfair Practice of
orgainsing a lottery for purpose of promotion of its sales
and thereby resorted to the Unfair Trade Practice as defined
in Section 36A(3)(b) of the Act. Such a scheme has caused
loss and injury to the consumer as stated in the
application. (b) Further such a scheme also falls under
Section 36A(3)(a) of the Act in-as-much as it appears that
cost of scheme has been added in price of Hornlike." To the
notice of enquiry was annexed a copy of the application of
the Director General of Investigation which stated that the
appellants had "spend an amount of Rs.2.92 lakhs (exclusive
of cost on Administration) and which has necessarily to
result in an increase in total cost of operations and which
in fact shall consequently have a bearing on the Price to be
charged for the Product or Products of the company. As such,
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the trade practice inherently causes loss or injury to the
consumers. This squarely falls within the purview of the
clause (a) of Section 36(A)(3) as the prize Money is partly
or wholly recovered by the amount charged in the transaction
as whole."
The appellants replied to the notice of enquiry and
stated, inter alia, that the giving of prizes to consumers
of Hornlike in Delhi city had been to their advantage. No
loss or injury had been caused to them. They did not have to
pay anything more. The price that was charged to them was
the prices charged elsewhere in the country. There was no
increase in the prices either in Delhi or elsewhere in the
country by reason of the prizes given to purchasers of
Hornlike bottles in Delhi city. It was stated that "the cost
of giving of prizes was neither fully or partly recovered
from the prices charged for the bottles of Hornlike in Delhi
city or in the country as a whole". The Director General had
merely resorted to conjectures and had not even alleged that
the prizes were offered with the intention of creating the
impression that something was being given or offered free of
charge when it was fully or partly covered by the amount
charged in the transaction as whole. No such intention had
been alleged nor had it been shown how the prizes were fully
or partly covered by the mount charged in the transaction as
whole. The burden of proving an allegation was on the person
who made it but the Director General had not even made an
averment in this behalf.
The Commission framed the following issues:
"i) Whether the respondent indulged
in the unfair trade practices as
alleged in the application of the
D.G. and contained a Notice of
Enquiry issued on the basis of
that?
ii) If answer to issue No. (i) is
in the affirmative then whether the
said unfair trade practice is
prejudicial to the public interest
or to the interest of the consumer
in general or to any consumer in
particular?
(iii) Relief."
The Commission, in the order under appeal, found from
the price lists that, in respect of Hornlike and another
product of the appellants called Boost, a price increase had
taken place on 1st July, 1985, but the prices of the
appellants’ other products. Marmite, Pure Silvikrin,
Silvikrin H.D. and Enos Salts till 31st January, 1986 had
remained what they were on 1st October, 1984, 1st April,
1984, 1st April, 1984 and 1st May, 1985 respectively. It was
argued by learned counsel for the Director General that this
increase in price covered the cost of prizes under the
scheme. The Commission found that the price increase that
took place on 1st July, 1985 could "surely be taken to
reflect partly the cost of the gifts". It said that the said
scheme "was intended to wean away the consumers from
Bournvita by allurements of lucky prizes of high value
rather than by fair means which may benefit the general run
of the consumers". It was a small fraction of the buyers of
Hornlike who got the benefit of the said scheme whereas the
multitude got no benefit. The prizes being "manifold
costlier than the price of a bottle of Hornlike, a fact on
account of which the winning of the prize will be of
overriding consideration than the product in question". The
Commission held, "On these postulates it is not difficult to
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say that the trade practice is no better than a lottery and
that the buyer who does not get any prize, does lose it as
against the one who wins it although both take to the same
transaction. So the trade practice that is meant to wean
away the consumer from Bournvita by this allurement is
obviously an instrument of facing competition in the market
by unfair means and, therefore, prejudicial to public
interest. Both the issues are decided accordingly against
the respondent".
Section 36A defines unfair trade practice. So far as is
relevant, it reads:
"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 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:-
xxxx xxxx xxxx
(3) Permits -
(a)the offering of gifts, prizes or
other items with the intention of
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.
(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."
For holding a trade practice to be an unfair trade practice,
therefore, it must be found that it causes loss or injury to
the consumer. Insofar as prizes are concerned, there has to
be the intention of not providing them as offered or
creating the impression that they are being given or are
being offered free of charge when in fact they are fully or
partly covered by the amount charged in the transaction as a
whole. The conduct of a lottery for the purpose of promoting
the sale, use or supply of a product is an unfair trade
practice. It is difficult to see clear, sustainable findings
on these aspects in the judgment under appeal.
There is no material that indicates that there was a
draw of lots or that a price was charged for participation
in the draw. The fact that some bottles of Horlicks
contained a slip of paper which entitled the buyer to a
prize is not a lottery in the ordinary sense of the word.
For the purposes of finding that the offering of prizes
under the said scheme was with the intention of creating the
impression that something was being given free of charge
when it was fully or partly. covered by the amount charged
for the Horlicks, the Commission resorted to speculation
about a price increase in the cost of Horlicks some time
prior to the said scheme. We find from the notice of enquiry
given to the appellants and the application of the Director
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General annexed thereto that it was nowhere indicated to the
appellants that it was the case of the Director General that
the particular price increase that the commission relied
upon was intended by the appellants to offset the cost of
prizes under the said scheme. Had this been indicated in the
notice of enquiry the appellants would have had an
opportunity to deal with it. It was unfair in the
circumstances to urge that the particular price increase was
attributable to the cost of prizes under the said scheme and
the Commission ought not to have so held. The appellants
averred in their reply to the notice of enquiry that the
consumer was not required to make any payment towards the
prizes and there is no proof on the record to the country.
It was the Director General who made this allegation and it
was for him to establish it. Since he did not, the
allegation ought to have been rejected. The Commission
should have noted with advantage the expenditure incurred by
the appellants in the year 1984-85 and 1985-86 on
advertisements and marketing of Horlicks, namely, Rs.
2,33,33,637 and Rs.2,96,69,208 respectively, and contrasted
it with the expenditure on the prizes under the said scheme,
namley, Rs. 52,250/-. that would have indicated fairly
clearly that the appellants were right in stating that no
part of the comparatively insignificant expenditure on the
prizes had been recouped from the consumers of Horlicks.
Lastly, it is difficult to hold that a consumer who
bought a bottle of Horlicks that not entiled him to a prize
suffered a loss.
In the result, the appeal is allowed and the order
under appeal is set aside. There shall be no order as to
costs.