Supreme Court of India
M/S PHILIPS MEDICAL SYSTEMS (CLEVELAND) INC.versusM/S INDIAN MRI DIAGNOSTIC & RESEARCH LTD. & ANR.
- Citation
- 2008 INSC 1104
- Decided
- 29 September 2008
- Disposal
- Appeal(s) allowed
- Bench
- ALTAMAS KABIR
Holding
Section 36A does not apply in situations where goods are not sold; therefore the appellant cannot be held guilty of an unfair trade practice.
Summary
The appellant, a US‑based manufacturer of medical diagnostic equipment, negotiated with the respondents for the supply of a whole‑body CT scanner. The first offer lapsed, and a second quotation for a refurbished scanner was accepted, but the respondents failed to open a correct letter of credit and did not obtain the required Indian import licence, so the transaction never materialised. The respondents complained to the MRTP Commission alleging that the appellant had made false representations about the production and quality of the scanner, constituting an unfair trade practice under Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969. The Commission held the appellant guilty and ordered compensation. On appeal, the Supreme Court examined the object and legislative history of Section 36A, applying the mischief rule and principles of ejusdem generis and noscitur a sociis, and concluded that the provision applies only where goods are actually sold. Since no CT scanner was ever supplied, the Court set aside the Commission’s order and allowed the appeal.
Issues considered
- Whether a party can be held guilty of an unfair trade practice under Section 36A of the MRTP Act when no goods were actually sold.
Legislation cited
Subjects
unfair trade practiceSection 36AMRTP Actfalse representationcontractual breachconsumer protectionmisrepresentation
Judgment
[2008] 13 S.C.R. 1140
A M/S PHILIPS MEDICAL SYSTEMS (C~EVELAND) INC.
v.
MIS INDIAN MRI DIAGNOSTIC & RESEARCH LTD. &
ANR.
(Civil Appeal No. 2461 of 2006)
B SEPTEMBER 29, 2008
[ALTAMAS KABIR AND MARKANDEY KATJU, JJ.)
Monopolies and Restrictive Trade Practices Act, 1969 -
c s. 36 A (as amended in 1991) - Definition of unfair trade prac-
fices - Interpretation of - Situation where seller not selling
good at all to purchaser - Application of s. 36A - Held: Per
Kalju J: s. 36A does not apply in a situation where goods are
not sold at all - It only applies where goods in fact are sold -
By 1991 amendment, definition of unfair trade practice was
D
made inclusive and not exhaustive - However, while interpret- ~
ing amended s. 36A, the object of s. 36A should not be disre-
garded - Per Kabir J: s. 36A cannot in absolute terms be said
not to apply to a situation where goods may not have been
sold at all - Where supplier knows that he is not in a position
E to supply a particular good but he promises to supply the.same
with a motive of promoting of some other model, then even
without actua/esa/e of goods, such act of supplier could a/so
amount to 'unfair trade practice' - However, in the instant case,
since the manufacturer/seller did not sell CT Scanner at all to
F the purchaser, s. 36A not attracted.
"
Appellant company is engaged in the business of
manufacturing and selling of various medical diagnostic
equipment, including whole body CT Scanner. Respon-
dent No. 1 negotiated with the appellcint and respondent
G
No. 3 for purchase of Whole Body CT Scanner. It is al-
leged that the appellant and respondent Nos. 3 to 5 falsely
represented to respondent No. 1 about the production
and quality of CT Scanner and induced respondent Nos. '
H 1140
MIS PHILIPS MEDICAL SYS, (CLEV.) INC. v. MIS 1141
IND. MRI DIAG. & RESEARCH LTD. & ANR.
1 and 2 to enter into an agreement with them, though they A
had knowledge that the CT Scanner ordered by respon-
· dent No. 1 was not in production. Respondent Nos. 1 and
2 filed a complaint before the MRTP Commission against
the appellant and respondent Ncrs.3 to 5. It is alleged that
.... the respondent Nos. 1 and 2 had to procure CT Scanner B
from Japan, i:tnd as such suffered a loss of Rs. 32,31,885/
. -. MRiP Commission held the appellant guilty of unfair
~J
trade practic9. It res~rained the appellant in indulging in
·the said restrictive trade practice and directed the appel-
- lant to pay compensation of Rs.5,71,439/- with interest@ c
.9% p.a. to the respondent. Hence the prese_nt appeals.·
The question which arose for consideration in these
. appeals was whether a party can be held guilty of unfair
trade practice as referred to in section 36A of the Mon.opo-
..... lies and Restrictive Trade Practices Act, 1969 although D
· 'he did not sell any goods at all.
Allowing the appeals, the Court
· HELD: Per Markandey Kalju, J.:
1.1 In the original Act 'Monopolies and Restrictive E
Trade Practices Act, 1969' there was no specjfic provi$ion
for regulating unfair trade practices like misleading ad-
vertiseinents, bargain selling, etc. It was realized that the
consumer needs to be protected not only from the effects
~ of restrictive trade practices, but also from practices F -
which are resorted to by certain unscrupulous business-
men who mislead or dupe the consumers. Hence, the
MRTP Act was amended in 1984 and the Statement of Ob-
jects and Reasons of the amendment has given the rea-
sons as to why this amendment was nece$sary. [Para 21] G
[1154,B-D]
1.2 The 1984 amendment was in pursuance of the
' recommendations of the Sachar Committee. The object
of the amendment was broadly to prevent false or mis-
H
1142 SUPREME COUf3J REPO~TS [2008] 13 S.C.R.
A leading adv~rtis.ements, or false r-epresentations claim-
ing that the goods sold are of a certain standard or have
certain qualities,which, in fact, they do not po~sess. Thus,
the very. object of the 1984 amendment was to ensure that
the persons buying certain goods were not duped or mis-
B led by a representation or advertisement whic.h stated that
these goods have certain features or qualities which, in
fact, they do not possess. Thus, the amendment had noth-
ing to do with a situation where goods ·are not sold at an:
[Paras 22 and 23] !1154,D; 1154,G-H; 11?5,A] , .
. .
C 1.3 In the original Section 36A which was fntroduced
·by 1984 amendment, it was 11ecessary. to attract the pro-
vision tharsome injury or the unfair trade pra·ctice should
·have caused.some loss to the consumer. By the 1991
· amendment to Section 36A, the requirement to· establish
D loss or injury to the consumer- has been deleted. Also,
another change brought out by the 1991 amendment was
that while the original Section 36A had adopted an ex-
haustive definition of unfair trade· practice, the 1991
amendment_has given ah inclusive and not an ~~haus-
E tive definition of unfair trade practice. However, the prin-
ciples of ejusdem generis ~nd noscitur a SOCiis Will apply to .
the interpretation of Section 36A as amenaed in 1-991. ·
Applying these well-known principles of interpretatiol) ~hat
Section 36A" does not apply in a situation where goods
F are not sold· at all. It only applies where goods in fact are
sold. [Paras 24 and 25] [1155,8-E]
1.4 It is a settled principle of interpretation that when
an amendment is made to an Act, or when a new enac!-
ment is made, Heydon's mischief rule is often utilized in
G interpreting.the same~ Applying this principle, it is opined
that s. 36A was inserted in the IVIRTP Act because there
was no provision therein .for protection of consumers
against false or misleading advertisement or other simi-
lar unfair trade practices. It is well-known that in a trade
H suppliers often have a dominant bargaining position, and
MIS PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1143
IND. MRl.DIAG. & RESEARCH LTD. & ANR.
the bargaining power in the market is often weighed A
against the consumer. In this situation, it was realized by
Parliam~nt in its wisdom when it inserted Section 36A that
the public must be prevented from being made victims of
false representations about the products sold, even
"'
though itmay have no adverse effect on competition. The B
purpose of Section 36A was to prev,mt frauds against the
consumers who may be falsely induced to buy goods
which do not possess the qualities which they are given
out to have by advertisement or other representations.
[Para 26] [1155,E-H; 1156,A] c
1.5 No doubt by the 1991 amendment the definition
of unfair trade practice was made inclusive and not ex-
haustive, but this does not mean that when interpreting
the amended Section 36A, the object for which s. 36A was
enacted should be disregarded. [Para 28] [1156,D] D
1.6 Taking the object of Section 36A into account it
is obvious thats. 36A was never meant to deal with a situ-
ation where goods are not sold at all. Section 36A was
really meant to protect consumers against defective
goods or goods sold which do not have features or quali- E
ties which they were represented to have. Since the ap-
pellant did not sell the CT Scanner at all to the respon-
dent, it cannot be understood as to how s. 36A was at-
·-i . tracted at all. Thus, the impugned judgment and order
passed by the MRTP Commission cannot be sustained F
and is set aside. [Paras 27 and 30] [1156,B-C; 1157,B]
South Gujarat Roofing Tile Manufacturers Association
vs .. St9te of Gujarat AIR 1977 SC 90; Hindustan Aluminium
Corporation vs. State of UP AIR 1981 SC 1649; Vanguard
G
Fire and General Insurance Co. Ltd., Madras vs. Fraser and
Ross AIR 1960 SC 971 - referred to.
' Hemens (Valuation Officer) vs. Whitsbury Farm and Stud
Ltd 1988 (1) 1 All ER 72 (HL) - referred to.
H
1144 SUPREME COURT REPORTS [2008] 13S.C.R.
A Per Kabir, J. (Concurring with the conclusion, but giving
his own views on the interpretation of s. 36 A of the Monopo-
lies and Restrictive Trade Practices Act, 1969):
HELD: The interpretation of s. 36 A of the Monopo-
lies and Restrictive Trade Practices Act, 1969, that s. 36 A ...
8 would not apply in a situation where goods are not sold
at all, is too rigid and situations may arise, which though
falling under the wider concept of unfair trade practice,
may not strictly be covered by Section 36-A of the 1969
Act. There may be situations where a promise to supply a
C particular good, which the supplier knew that he was in
no position to supply, with a motive of promoting of some
other model, as has happened in the instant case, could
occur. In such a case a customer may be forced to obtain
the same material from some other party and suffer losses
D in the process. Even without actual sale of goods, such
an act on the part of the supplier could also amount to
'unfair trade practice' and Section 36-A cannot in abso-
lute terms be said not to apply to a situation where goods
may not have been sold at all. In fact, such a situation
E may also be covered even by the provisions of Sub-clause
(ii) or (vi) of sub-section (1) of Section 36-A of the 1969
Act. [Para 5] [1159,D-G]
Case Law Reference
1988(1) 1 AllER Referred to. Para 28 Of the
F
72(HL)
AIR 1977 SC 90 Referred to. Para 29 judgment by
AIR 1981 SC 1649 Referred to Para 29 Katju J.
AIR 1960 ·SC 971 Referred to. Para 29
G
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2461
of 2006
From the final Judgment and Order dated 29.11.2005 of
the Monopolies and Restrictive Trade Practices Commission,
H.
M/S PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1145
IND. MRI DIAG. & RESEARCH LTD. & ANR.
New Delhi in Restrictive Trade Practices Enquiry NO. 172 of A
1995
WITH·
C.A No. 5889 of 2008
8
A.N. Haksar, Rashmi Virmani and Rajeev K. Virmani for
the Appellant.
R.K. Abi Chandhani, A. Sumatj)i, R. Ramesh, Smitarani
and V. Mohana for the Respondents. ..
The Judgment of the Court was delivered by c
MARKANDEY KATJU, J. 1. Leave granted.
2: These appeals have been filed against the judgment
and final order dated 29.11.2005 passed by the Mono~lies
and Restrictive Trade Practices Commission, New Delhi in Re- D
strictive Trade_Practices Enquiry No. 172 of 1995 and Com-
pensation Application No. 258 of 1994.
3. Heard learned counsel forthe parties and perused the record.
4. The appellant is a company incorporated in accordance · E
with the laws of the State of New York, USA which is engaged in
the business, inter alia, of manufacturing and selling of various
medical diagnostic equipment, including whole body CT Scan-
ner. Respondent No. 1 wanted to ptlrchase a whole body Whole
Body CT Scanner and held negotiations for the same with the F
appellant and respondent No. 3, Mis. UB Picker Ltd. It is al-
leged that on 10.4.1989, the appellant sent its proforma invoice
No. PMS/S/CT/001 /89 (hereinafter referred to as the 'First Of-
fer') for the supply of a new CT Scanner (Picker Synerview 1lOO
SX Whole Body Computer Tomography Scanner, 4th Genera- G
tion Stationary Detector Technology sy$tem) including spares
and accessories at a price of US $ 1,282,500.00 (US Dollar
one million two hundred eighty two thousand five hundred only).
This First Offer was a comprehensive and composite offer and
could not be split and /or partly accepted.
H
1146 SUPREME COURT REPORTS [2008] 13 S.C.R.
A 5. The relevant terms of the First Offer were, inter-alia, as
follows:-
"a) The system offered was 'Picker Synerview 1200 SX
Whole Body CT Scanner 4th Generation Stationary
Detector Technology' consisting of Module AC, J3,
B K1, M, Q, 02, B, including spares/Savs System/B.M.
Analysis Package/3D Package/Xenon Blood Flow
Package/Dynamic Scanning/IOR-11.
b) The total System Price was US $ 1, 282,500.00
C c) The price quoted was CIF Madras;
d) The prices were valid for 90 days;
e) The payment was to be made in US Dollars by
irrevocable and confirmed Letter of Credit (L/C) in
D favour of the appellant;
f) Delivery was to be within 3-4 months ex-factory after
the receipt of confirmed order with irrevocable Letter
of Credit.
E 6. It is alleged that respondent No. 1 neither communi-
cated any acceptance of the First Offer nor opened an L/C for
the sum of US$ 1, 282,500.00 within the aforesaid validity pe-
riod of 90 days. It is an admitted fact that respondent No. 1
never opened an UC for the sum of US $ 1,282,500.00. The
F appellant was required under the applicable US laws to obtain
an export licence from the US Authorities for exporting the equip-
ment to India. In order to apply forthe necessary export licence,
the appellant was required to attach a copy of an import licence
from the Indian Government.The said import licence was to be
G procured by respondent No. 1. The appellant could not apply
for the export licence since respondent No. 1 did not forward
the Indian Import licence to the appellant within the aforesaid
validity period of 90 days. As a result, the First Offer dated
10.4.1989 lapsed without being accepted on the expiry of 90
H days from 10.4.1989. Towards the end of 1989, respondent Nos.
MIS PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1147
IND. MRI DIAG & RESEARCH LTD. &ANR. [MARKANDEY KATJU, J.] ·
1 and 2 began fresh discussions with the appellant for purchase A
of a refurbished CT Scanner. The appellanf offered to sell to
respondent Nos. 1 & 2 a refurbished CT Scanner Model 1200
SX Solid State CT System for US$ 595,000.00 (US Dollar five
hundred ninety five thousand only) vide its quotation Nci. QR/
j 4896/90 dated 03.1.1990 (hereinafter referred to as the 'Sec" B
ond Quotation'). The relevant terms of the Second Quotation
were, inter alia, as follows:
"a) The Second Quotation was for a refurbished 1200
SX Solid State CT System, including, inter alia, Split
OperatorNiewing Console; C.
b) The lead time for supply of the system was to be 90
days after receipt of UC. The lead time was also
dependant upon the timely receipt of 1.ndian Import
· Certificate and US Export licence and was likely to
0
be extended if documentation of the Government of
India or USA was not available within the time period .
.c) The system was to be sent from USA to India by
'Ocean Freight"'
. 7. After negotiations, the Second Quotation was duly ac- E
. cepted by respondent No. 1 with the condition that the total sys-·
tern price would be US $ 570,000.00 (US Dollar five hundred
seventy thousand only) and this would include shipment of the
system 'by Air' instead of by 'ocea_n frejght', which was one of.
the terms_oJthe Second Quotation. The break-up of the totai F
systen1 price was US $ 560,0oo,oo (US Dollar five hundred
sixty thousand only) for the system and US $ 10,000.00 (US
. Dollar ten thousand only) towards the cost of the shipment 'by ·
Air'. This was duly endorsed by respondent No. 2, on.16/23~
01.1990. At the relevant time~ respondent No: 2 was the Chair-· G
man of the Board of Directors of respondent No. 1. Respon:.
dent No. 1 opened an UC dated 24.02.1990 jn the amount of
US$ 700,000.00 (US Dollar seven hundred thousand only).
8. It is alleged that the appellant was surpris"ed to find that
H
1148 SUPREME COURT REPORTS [2008] 13 S.C.R.
A the UC had been opened for a sum of USS 700,000.00(US •
Dollar seven hundred thousand only) instead of the agreed price
of US $ 570,000.00 (US Dollar five hundred seventy thousand
only) and also that respondent No. 1 had referred to the old
proforma invoice No. PMS/B/CT/001/89 dated April 10, 1989
8 instead of the duly accepted Second Quotation, being Quota-
tion No. QR/4896/90 dated 03.01.1990.
9. It is alleged that the said UC could not have related to
the First Offer dated 10.04.1989 as the validity of the same had
expired after 90 days of the date of the First Offer without the
c same having been accepted.
10. It is further alleged that the fact that the Second Quota-
tion was duly accepted and was in contemplation of the parties
is further borne out of the correspondence exchanged between
the parties, and more particularly respondent No. 1's letter dated
D
11.04.1990, two letters both dated 20.04.1990 and appellant's
letters dated 30.04.1990 and 01.05.1990.
11. The appellant alleged that it asked respondent No. 1
to amend the UC so as to bring it in conformity with the Second
E Quotation. Respondent No. 2 refused to amend the UC and
wanted the appellant to falsify the shipping documents and show
that a new CT Scanner was being supplied instead of a refur-
bished system. Respondent No. 2 wanted the appellant to draw
down the entire amount of US $700,00.00 and to repay the ex-
F cess amount of US$ 130,000.00( US Dollar one hundred thirty
thousand only) to him in Malaysia. The appellant did not agree
to any of the proposals of respondent No. 2.
12. Meanwhile, the production of the refurbished CT Scan-
ner was also taking some time as there was some delay in
G procuring all the components required for producing the refur-
bished CT Scanner as the production of the same had been
phased out in March, 1990. This fact was not known in January,
1990 when the parties had agreed on the terms and conditions
of the Second Quotation dated 03.01, 1990. However, it is al-
H leged that respondent No. 1 in total breach of its obligations, -
MIS PHILIPS MEDICAL SYS, (CLEV.) INC. v. MIS 1149
IND. MRI DIAG. & RESEARCH LTD. & ANR. [MARKANDEY KATJU, J.] ·
refused, failed and neglected to amend the UC to bring it in A
conformity with the Second Quotation. Respondent No .. 1 did
not obtain an Indian Import Certificate as per the terms of the
Second Quotation, nor did it ever apply for the same as admit-
ted in its evidence as recorded during cross-examination. The.
UC was never encashed by the appellant and was returned to B
respondent No. 1. Respondent No. 1 was in breach of its obli-
gations that were to be performed by respondent No. 1 before
the appellant could perform or could be called upon to perform
its obligations. Consequently, the occasion for supply of the CT
Scanner by the appellant to respondent No. 1 never arose. c
13. The respondent Nos. 1 & 2 filed a complaint before
the MRTP Commission against the appellant and respondent
Nos. 3 to 5, being RTP Enquiry No. 172of1995 making therein
various allegations including the allegation that appellant and ·
respondent Nos, 3 to 5 had falsely represented to respondent D ~
No'. 'f about the production and quality of the goods and ser-
vices and it induced respondent Nos. 1 &2 into entering into an
agreement with them, although they had knowledge that the CT
Scanner ordered by respondent No. 1 was not in production~
14. It is alleged that in these circumstances, respondent E
Nos. 1 & 2 was left with no option but to procure the CT Scan~ ".
ner from Hitachi, Japan. It is also alleged that respondent Nos.
1 & 2 thereby suffered a huge loss of Rs. 32,31,885/-, which
should be paid to them as damages.
F
15. On the aforesaid complaint, the MRTP Commission
issued a notice dated 28.6.1995 to the appellant and respon-
dent Nos. 3 to 5 calling upon them to file a reply. The appellant ·
filed its reply on 6.2.1996 and submitted that.no unfair and re-
strictive trade practice was committed by the·appellant and the· G
appellant is not liable to pay any compensation.
·16. By the impugned judgment dated 29.11.2005, the
~ MRTP Commission allowed the complaint and has held the
appellant guilty of unfair trade practice. The Commission has
passed an order restraining the appellant in indulging in the ~ H
1150 SUPREME COURT REPORTS [2008] 13 S.C.R.
A aforesaid alleged restrictive trade practice and directing it to
pay compensation of Rs.5, 71,439/- with interest@ 9% per an-
num to the respondent.
17. Several submissions have been made by Shri A.N.
Haksar, IE~arned senior counsel for the appellant, but it is not
8 necessary to deal with all of them since we are of the opinion
that these appeals deserve to be allowed on the first submis-
sion.
18. The legal question involved in the first submission is
c whether a party can be held guilty of unfair trade practice as
referred to in Section 36A of the MRTP Act, although he did not
supply any goods at all.
19. Section 36Awhich was inserted in 1984 and amended
in 1991 now reads as follows :-
D
"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 promoting the sale, use or supply of any goods
E 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,-
F
(i) falsely represents that the goods are of a
particular standard, quality, quantity, grade,
composition, style or model;
(ii) falsely represents that the services are of a
G particular standard, quality or grade;
(iii) falsely represents any re-built, second-hand,
renovated, reconditioned or old goods as new
goods;
H (iv) represents that the goods or services have
M/S PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1151
IND. MRI DIAG. & RESEARCH LTD. & ANR. [MARKANDEY KATJU, J.]
sponsorships, approval, performance, A
characteristics, accessories, uses or benefits
which such goods or services do not have;
(v) represents that the seller or the supplier has a
sponsorship or approval or affiliation which such
.;
seller or supplier does not have; B
(vi) makes a false or misleading representation
concerning the need for, or the usefulness of,
any goods or services;
(vii) gives to the public any warranty or guarantee of c
the performance, efficacy or length of life of a
product or of any goods that is not based on an
adequate or proper test thereof;
Provided that where a' defence is raised to the effect that
D
... such warranty or guarantee is based on adequate or proper
test, the burden of proof of such defence shall lie on the .
person raising such defence;
(viii) makes to the public a representation in a form
that·purports to be - E.
(i) a warranty or guarantee of a product or of
any goods or services; or
(ii) a promise to replace, maintain or repair an
article or any part thereof or to repeat or continue F
·a servic~ until it has achieved a specified result,
- .
if such purported warranty or guarantee or
promise is materially misleading or if there is
no reasonable prospect that such warranty,
. guarantee or promise will be Ci'!rried out; G·
(ix) materially misleading the public concerning the
price at which a product or like products or
goods or services, have been, or are, ordinarily
sold or provided, and, for this purpose, a H
1152 SUPREME COURT REPORTS [2008] 13 S.C.R.
A representation as to price shall be deemed to
refer to the price at which the product or goods or
services has or have been sold by sellers or
provided by suppliers generally in the relevant
market unless it is clearly specified to be the price
B 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;
(x) gives false or misleading facts disparaging the
goods, services or trade of another person.
c
Explanation : For the purposes of clause (1 ), a
statement that is -
(a) expressed on an article offered or displayed
for sale, or on its wrapper or container; or
D
(b) expressed on anything attached to, inserted
in, or accompanying, an article offered or
displayed for sale, or on anything on which the
article is mounted for display or sale; or
E (c) contained in or on anything that is sold, sent,
delivered, transmitted or in any other manner
whatsoever made available to a member of the
public,
shall be deemed to be a statement made to the public by,
F and only by, the person who had caused the statement to
be so expressed, made or contained;
(2) permits the publication of any advertisement whether
in any newspaper or otherwise, for the sale or supply at a
G. bargain price, of goods or services thatare not intended
to be offer.ed for sale or supply at the bargain price, or for
a period that is, and in quantities that are, reasonable,
having regard to the nature of the market in which the
business is carried on, the nature and size of business,
and the nature of the advertisement.
H
M/S PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1153
IND. MRI DIAG & RESEARCH LTD. & ANR. [MARKANDEY KATJU, J.]
Explanation: For the purpose of clause (2), "bargain price" A
means -
(a) a price that is stated in any advertisement to be
a bargain price, by reference to an ordinary price or
otherwise, or
.J B
(b) a price that a person who reads, hears, or sees
the advertisement, would reasonably understand to
be a bargain price having regard to the prices at
which the product advertised or like products are
ordinarily sold; c
(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
D
... 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 E
any business interest;
(4) permits the sale or supply of goods intended to be
used, or are of a kind likely to be used by consumers,
knowing or having reason to believe that the goods do not F
. comply with the standards prescribed by competent
authority relating to performance, composition, contents,
design, constructions, finishing or packaging as are
necessary to prevent or reduce the risk of injury to the
person using the goods; _G
(5) permits the hoarding or destruction of goods, or refuses
to sell the goods or to make them available for sale, or to
provide any service, if such hoarding or destruction or
refusal raises or tends to raise or is intended to raise, the
cost of those or other similar goods or services." H
.......
1154 SUPREME COURT REPORTS [2008] 13 S.C.R.
A 20. In this connection it may be mentioned that as origi-
nally enacted the MRTP Act 1969 was made with the object of
ensuring that the operation of the economic system does not
result in a concentration of economic power to the common detri-
ment, for the control of monopolies, and for the prohibition of
B monopolistic and restrictive trade practices.
21. There was no provision like Section 36A in the original
Act. However, it was later felt that there was need for some modi-
fication of the Act. In the original Act there was no specific provi-
sion for regulating unfair trade practices like misleading adver-
C tisements, bargain selling, etc. It was realized that the consumer
needs to be protected not only from the effects of restrictive trade
practices, but also from practices which are resorted to by cer-
tain unscrupulous businessmen who mislead or dupe the con-
sumers. Hence, the MRTP Act was amended in 1984 and the
D Statement of Objects and Reasons of the amendment has given
the reasons as to why this amendment was necessary.
22. The 1984 amendment was in pursuance of the recom-
mendations of the Sachar Committee. This committee expressed
the view that the Act contained no provision for the protection of
E .· the consumers from false or misleading advertisements or other
similar unfair trade practices, and that the provisions of the Act
directed against restrictive or monopolistic trade practices pro-
ceeded on the assumption that if th§! manufacturer, producers or
dealer can be prevented from distorting competition, the con-
F sumer would automatically get a fair deal. Since this was found
to be only partly true, the committee was of the opinion that the
consumer need to be protected not only from the effects of re-
strictive trade practices, but also from the practices which are
resorted to by some businessmen to mislead or dupe the con-
G sumers. The object of the amendment was broadly to prevent
false or misleading advertisements, or false representations
claiming that the goods sold are of a certain standard or have
certain qualities, which, in fact, they do not possess.
23. Thus, the very object of the 1984 amendment was to
H
M/S PHILIPS MEDICAL SYS, (CLEV.) INC. v. MIS 1155
IND. MRI DIAG & RESEARCH LTD. &ANR. [MARKANDEY KATJU, J.]
ensure that the persons buying certain goods were not duped A
or misled-by a representation or advertisement which stated
that these goods have certain features or qualities which, in
fact, they do not possess. Thus the amendment had nothing to
_, do with a situation where goods are not sold at all.
24. In the original Section 36A which was introduced by 8
1984 amendment, it was necessary to attract the provision that
some injury or the unfair trade practice should have caused
some loss to the consumer. By the 1991 amendment to Sec-
tion 36A, the requirement to establish loss or injury to the con~
sumer has been deleted. Also, another change brought out by . C ·
the 1991 amendmentwas that while the original Section 36A.
had adopted an exhaustive definition of unfair trade practice,
the 1991 amendment has given an inclusive and not an exhaus-
tive definition of unfair trade practice.
25. However, we are of the opinion that principles of ejus- D·
dem genf!ris and noscitur a sociis will apply to the interpreta-
tion of Section 36A as amended in 1991. Applying these well-
known principles of interpretation we are of the opinion that
Section 36A does not apply in a situation where goods are not E
sold at all. It only applies where goods in fact are sold.
26. It is a settled principle of interpretation that when an
amendment is made to an Act, or when a new enactment is
made, Heydon's mischief rule is often utilized in interpreting
.. the same. Applying this principle we are of the opinion that Sec- F
tion 36A was inserted in the MRTP Act because there was no
provision therein for protection of consumers against false or
misleading advertisement or other similar unfair trade practices.
It is well-known that in a trade suppliers often have a dominant
bargaining position, and the bargaining power in the market is G
often weighed against the consumer. In this situation, it was re-
alized by Parliament in its wisdom when it inserted Section 36A
t that the public must be prevented from being made victims ·of
false representations about the products sold, even though it
may have no adverse effect on competition. The purpose of H
1156 SUPREME COURT REPORTS (2008) 13 S.C.R.
A Section 36A was to prevent frauds against the consumers who
may be falsely induced to buy goods which do not possess the
qualities which they are given out to have by advertisement or
other representations.
27. Taking the above object of Section 36A into account it '
B is obvious that Section 36A was never meant to deal with a
situation where goods are not sold at all. Section 36A was re-
ally meant to protect consumers against defective goods or
goods sold which do not have features or qualities which they
were represented to have. Since the appellant did not sell the
c CT Scanner at all to the respondent, we fail to understand how
Section 36A was attracted at all.
28. No doubt by the 1991 amendment the definition of un-
fair trade practice was made inclusive and not exhaustive, but
D
this does not mean that when interpreting the amended Section ,..
36A we should disregard the object for which Section 36A was
enacted. Thus in Hemens (Valuation Officer) vs. Whitsbury Farm
and Stud Ltd (1988) 1 All ER 72 (HL), in construing Section 2(3)
of the Rating Act, 1971 which defines 'Livestock' to include any
mammal or bird kept for the production of food or wool or for the
E purpose of its use in the farming of land, the word livestock was
not given the wide meaning (in contradiction to deadstock) to
include any animal whatsoever and was held not to extend to
thorough bred horses not kept for use in the farming of land.
F 29. Similarly, in South Gujarat Roofing Tile Manufactur- ...
ers Association vs. State of Gujarat AIR 1977 SC 90 (vide pp
93-94) and Hindustan Aluminium Corporation vs. State of UP
AIR 1981SC1649, the inclusive definition was given a restric-
tive meaning. As observed by Wanchoo, J. in Va~guard Fire
and General Insurance Co. Ltd., Madras vs. Fraser & Ross
G
AIR 1960 SC 971, the Court has not only to look at the words
but also to look at the context, the collocation and the object of
such words relating to such matter and interpret the meaning ;
intended to be conveyed by the use of the words under the cir-
cumstances. No doubt, because of the inclusive definition the
H
M/S PHILIPS MEDICAL SYS, (CLEV.) INC. v. M/S 1157
IND. MRI DIAG & RESEARCH LTD. &ANR. [MARKANDEY KATJU, J.]
meaning of the expression 'unfair trade practice' goes beyond A
the specific clauses mentioned in Section 36A, but that does
not mean that the meaning will go beyond the very object of
Section 36A.
_, 30. In view of the above discussion, we are of the opinion
that the impugned judgment and order dated 29.11.2005 B
passed by the MRTP Commission cannot be sustained and it
is hereby set aside. The appeals are allowed. There shall be
no order as to costs.
ALTAMAS KABIR, J. 1. Having had an opportunity of go- c
ing through the draft judgment prepared by my learned brother,
while I generally agree with the same, I would like to add a few
words of my own with regard to the interpretation of Section 36-
A of the Monopolies and ~strictive Trade Practices Act, 1969,
(hereinafter referred to as 'the 1969 Act') which has been intro-
D
duced in the Act by way of amendment in 1984 and further
amendment in 1991.
2. As was submitted by Mr. A.N. Haksar, learned Senior
Advocate for the appellant, the ·1969 Act, as originally enacted,
lacked definition of the term 'unfairtra~e practice'. While 'trade E
practice' was defined in Section 2(u) of the original enactment
in the following terms:
"2. Definitions-In this Act, unless the context otherwise
.. requires,-
F
(u) "trade practice" means any practice relating to the
carrying on of any trade, and includes -
(i) anything done by any person which controls or affects
the price charge by, or the method of trading of, any
trader or any class of traders. G
(ii) A single or isolated action of any person in relation
to any trade."
the term 'restrictive trade practice' was aiso defined in
Section 2(o) in the following terms: H
1158 SUPREME COURT REPORTS [2008] 13 S.C.R.
-
,
A "2.Definitions-ln this Act, unless the context otherwise
requires,-
(o) 'restrictive trade practice' means a trade practice
which has, or may have the effect of preventing,
distorting or restricting, competition in any manner
B 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
c prices, or conditions of delivery or to affect the
flow of supplies in the market relating to goods
or s.ervices in such manner as to impose on the
consumers unjustified costs or restrictions;
(iii) "retailer," in relation to the sale of any goods,
D
includes every person other than a wholesaler,
who sells the goods to any other person, and in
respect of the sale of goods by a wholesaler, to
any person for any purpose other than re-sale,
includes that wholesaler."
E
3. The expression "unfair trade practice" was not defined
in the 1969 Act, as originally enacted. The said defining was
removed by the amendment effected in 1984 by introducing
Section 36-A which has been fully reproduced by my learned
F brother in his judgment. In paragraph 18 of the judgment my
learned brother has formulated the following question:
"The legal question involved in the first submission is
whether a party can be held guilty of unfair trade practice
as referred to in Section 36A of the MRTP Act, although
G he did not supply any goods at all."
4. My learned brother has interpreted the provisions of
Section 36-A of the 1969 Act as amended in the context of the
question formulated by him. After having analysed the object
H and reasons for the enactment of the 1969 Act, my learned
MIS PHILIPS MEDICAL SYS, (CLEV.) INC. v MIS 1159
-; IND. MRI DIAG & RESEARCH LTD. &ANR [MARKANDEY KATJU, J.]
brother has indicated that the very object of the 1991 Amendment A
was to prevent a person from doing certain acts such as publish-
ing false or misleading advertisements, or false representations,
claiming that the goods sold are of a certain standard or have cer-
tain qualities, which, in fact, they do not possess. My learned brother,
therefore, was of the view that the Amendment had nothing to do in 8
1 a situation where goods were not sold at all. While also observing
· that by the 1991 amendment Section 36-A was given an inclusive
and not an exhaustive definition of unfair trade practice, my learned
brother was also of the opinion that the principles of ejusdem
generis and noscitur a sociis will apply to Section 36-A as C .
amended in 1991 and applying the said principles the High Court
was of the opinion that Section 36-A would not apply in a situation
where goods are not sold at all.
5. The said view has been reiterated throughout the latter
part of my learned brother's judgment, but I am of the view that o
• such an interpretation is too rigid and situations may arise, which
though falling under the wider concept of unfair trade practice,
may not strictly be covered by Section 36-A of the 1969 Act. In
my view, there may be situations where a promise to supply a
particular good, which the supplier knew that he was in no posi- E
tion to supply, with a motive of promoting of some other model,
as has happened in the instant case, could occur. In such a case
a customer may be forced to obtain the same material from sbme
other party and suffer losses in the process. In my view, even
--{
without actual sale of goods, such an act on the part of the sup-
plier could also amount to 'unfair trade practice' and Section 36- F
c A cannot in absolute terms be said not to apply to a situation
'
where goods may not have been sold at all. In fact, such a situa-
j tion may also be covered even by the provisions of Sub-clause·- ---
1 (ii) or (vi) of sub-section (1) of Section 36-A of the above _Act.
G
J 6. I, however, agree with my learned brother that the judg-
ment of the MRTP Commission cannot be sustained and is re-
quired to be set aside. I would, therefore, also allow the appeal,·
but without any order as to costs. ..
N.J. Appeal allowed. H·
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "unfair trade practice"Sign in to search