TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD.versusTHE DIRECTOR (RESEARCH) FORAND ON BEHALF OF DEEPAK KHANNA & ORS.

                    [2015] 10 S.C.R. 373


TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD.                    A
                              v.
THE DIRECTOR (RESEARCH) FORAND ON BEHALF OF
           DEEPAK KHANNA & ORS.
               (Civil Appeal No. 2069 of 2006)                   B
                   SEPTEMBER 7, 2015
    [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.]
     Monopolies and Restrictive Trade Practices Act, 1969 - c
ss. 36A(1)(i),(ii),(iv) and (vi) and 360(1) - Complaints -
Against company engaged in manufacturing and selling of
automobiles - Alleging indulgence in unfair trade practice
by demanding excessive amount for booking of cars and by
including the likely taxes, cess and transportation cost - D
Preliminary Investigation Reports were submitted - Notice
of Enquiry issued alleging indulgence of the company in
unfair trade practices falling u/s. 36(1)(i),(ii),(iv) and (vi) -
Monopolies and Restrictive Trade Practices Commission
directed the company to cease and desist from continuing E
 with the practices complained of - On appeal, held: The
allegations and materials against the company do not make
out a case of unfair trade practice - The Commission has
travelled beyond the specific a/legations in the Notice of
Enquiry, which is violative of the rules of fairness and natural F
justice- It being flagrant violation of audi alteram partem rule,
renders the impugned order invalid and bad in law - Since
no case of any unfair trade practice is made out, there is no
scope of order u/s. 360(1).
                                                                  G
     Allowing the appeal, the Court

    HELD 1. The order of the'Monopolies and Restrictive
Trade Practices Commission appears to be largely
                          373                           H
374       SUPREME COURT REPORTS                [2015] 108.C.R.


A influenced by a conclusion that the appellant should not
  have asked for deposit of an amount above the basic
  price, because in the opinion of the Commission it was
  unfair for the appellants to keep excise and sales tax .with
  itself for any period of time. Such conclusion of the
B Commission is . based- only upon subjective
  considerations of fairness and do not pass the objective
  test of law as per precise definitions under Section 36A
  of the Monopolies and Restrictive Trade Practices Act,
C 1969. [Para 13] [365-B-D]
       2. The Commission could not have travelled beyond
  the specific allegations in the Notice of Enquiry because
  such a course would violate rules offairness and natural
  justice. The scope of enquiry could have been enlarged
D only after serving further notice with necessary details
  of allegations ;:tnd supporting facts. This was clearly not
  done by the Commission. It is a flagrant violation of audi
  alteram partem rule. It renders the impugned order invalid
  and bad in law. The order is also bad for non application
E of mind to requirement of law as stipulated in Section
  36A(1) of the Act and the relevantfacts. [Para 10] [383-G-
  H; 384-A]
      3. The enquiry, as per the notice, was to cover:- (a)
F whether the respondent has been indulging in the above
  said unfair trade practice(s) and (b) whether the said
  unfair trade practice(s) is/are prejudicial to public interest.
  The Commission failed to keep in mind the precise
  allegations against the appellant with a view to find out
G whether the facts could satisfy the definition of Unfair
  Trade Practice(s) as alleged against the appellant in the
  Notice of Enquiry. The Commission was apparently
  misled by the Preliminary Investigation Report. [Paras
  11 and 12] [384-0-F]
H
      4. The allegations and materials againstthe appellant
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 375
          BEHALF OF DEEPAK KHANNA

do not make out a case of unfair trade practice against A
the appellant. Nor there is any scope to pass order under
Section 36-0(1) of the Act when no case of any unfair
trade practice is made out. [Para 14] [385-E]
     Rajasthan Housing Board vs. Parvati Devi (Smt)                 B
     (2000) s sec 104:2000 (3) scR 934 ; Mis
     Lakhanpal National Limited vs. M.R. T.P.
     Commission and Anr. (1989) 3 SCC 251: 1989
     (2) SCR 979 - referred to.

                    Case Law Reference
                                                                    c
  2000 (3) SCR 934           referred to.           Para 7

  1989 (2) SCR 979           referred to.           Para 8
                                                                    D
   CIVIL APPELLATE JURISDICTION: Civil Appeal No.
2069 of 2006.

    From the Judgment and Order dated 28.02.2006 of
Monopolies and Restrictive Trade Practices Commission New           E
Delhi in U.T.P.E. No 86, 87 and 90of1999.

   Ashok H. Desai, Ravinder Narain, Kanika Gamber, Kishan
Rawat, Sidharth Banthia, Rajan Narain for the Appellant.

     A.K. Sanghi, Madhavi Diwan, Sadhana Sandhu, Sushma             F
Suri, P. Parmeswaran, for the Respondents.

    The Judgment of the Court was delivered by

    SHIVA KIRTI SINGH, J. 1. This is an appeal under G
Section 55 of the Monopolies and Restrictive Trade Practices
Act, 1969 (for brevity hereinafter referred to as 'the Act'). The
appellant is a company engaged in manufacture and sale of
automobiles. It is aggrie\i'ed by the impugned order dated
28.2.2006 passed by the Monopolies and Restrictive Trade            H
376       SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A Practices Commission (for brevity 'the Commission') in U.T.P.
  Enquiry nos. 86/99, 87/99 and 90/99 whereby the Commission
  has directed the appellant to cease and desist from continuing
  with the practices complained of and not to repeat the same
  in future.
8
        2. Since there is no dispute on facts, the case of the
  parties on facts is common and to the following effect:

         (i) The practice under scrutiny is of the year 1999 when
c        the appellant was to begin the manufacture and delivery
         of newly introduced Tata lndica cars into the market with
         effect from February 1999, with the installed capacity of
         approximately 60,000 cars in a year. The appellant invited
         the prospective customers to book the car through
D        dealers. The booking amount demanded by the appellant
         was quite high and close to the estimated price finally
         payable which would include excise duty, sales tax and
         transportation charges. The terms and conditions for
         booking of order for purchase of Tata lndica cars were
E        mentioned in detail indicating the model wise price
         depending upon the city of booking. It was indicated that
         the price of vehicle as well as taxes, duties and cess will
         be as applicable on the date of delivery. Those making
         valid booking were to be supplied the vehicle as per
 F       priority numbers generated and allocated by a
         computerized technique, for the first 10,000 bookings
         only. The terms also provided that the payments against
         the remaining bookings will be refunded to the
         customers, without interest, at the earliest but in any case
G        within a month from the closing of the booking. For refunds
         after a month, interest will be paid at the rate of 10% per
         annum. The order booking form mentioned in Clause 7
         that the person concerned had carefully read the terms
         and conditions of the bookings and agreed to the same.
H
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 377
 BEHALF OF DEEPAK KHANNA[SHIVA KIRTI SINGH, J.]

     (ii) Although the initial allotment was confined only to A
     10,000 cars, the appellant received as many as 1, 13, 768
     booking applications along with stipulated amount which
     aggregated to Rs.3,216.44 crores. The appellant gave
     an option to prospective customers to opt for a second
     phase of 50, 000 vehicles likely to be delivered from April- B
     May 1999 to March 2000. It refunded the balance
     amounts to those who desired for refund, along with
     interest as represented. No complaint was made to the
     Commission by any of the persons who made the
     booking and thereafter either purchased the car or C
     withdrew the deposits with or without interest, as the case
     maybe.

     (iii) However three complaints were made before the
     Commission by persons who claimed that they had D
     intentions to make the booking but were dissuaded by
     the high quantum of deposit required for the purpose.
     Their specific objection was that the demanded amount
     exceeded the basic price of the car if cess, taxes and
     transportation cost were left out. According to the E
     complainants the appellant had indulged in Unfair Trade
     Practice (UTP) by demanding an excessive amount for
     bookings of lndica cars and by including the likely taxes,
     cess and transportation cost. ·
                                                                F
     3. Since the defence taken by the appellant was also not
disputed on facts, it would be relevant to note the same. When
the Commission received the three complaints, it sent them to
the Director (Research) for investigation. The Director
submitted Preliminary Investigation Reports (PIR) in all the G
three matters and three cases were registered as per numbers
noted earlier. The Notices of Enquiry under Sections 36-B (d},
37, 36-D of the Act and under Regulation 51 were issued to
the appellant who contested the complaints. The appellant filed H
378        SUPREME COURT REPORTS                   [2015] 10 S.C.R.


A  its reply to the Notice of Enquiry in which it also raised a
   preliminary objection that the allegations of the restrictive trade
   practice were vague and not permissible by law. Their further
   defence was that there are no facts and material to show that
   the alleged practice is prejudicial to the public interest requiring
B an enquiry under Section 37 of the Act and that no facts were
   disclosed in the Notice of Enquiry to show prejudice to the
   public interest. On merits some of thea!legations were denied
   as incorrect. It was pointed out that none of the complainants
   had applied forthe booking of Tata lndica vehicle and hence
C they lacked locus standi to file the complaints in the capacity
   of consumers. On merits the appellant also took the defence
   that there was no false and misleading statement made by the
   appellant for inviting booking of Tata lndica cars, the applicants
   made the bookings with open eyes being aware about the
0
   stipulation for payment of interest. According to appellant by
   letter dated 6.2.1999 the successful applicants were intimated
   of the priority number allotted to them and the unsuccessful
   applicants were also informed that they had an option to be
E considered for the second phase of 50,000 cars and such
  optees would be entitled to receive interest at the rate of 11 %
  per annum with effect from 1.2.1999 till the date of delivery.
  Those who did not opt for the second phase deliveries were
  refunded their booking amounts along with 10% interest.
F
        4. The appellant explained their practice by pleadings
  which are not controverted, that their past experience as
  automobile manufacturer was limited to heavy vehicles and
  hence in their initial venture into the car segment, they were
G .not sure of public response and they had decided to plan their
  production schedule on the basis of reality test of car's demand
  in the market. For this speculative bookings were required to
  be discouraged and the same was sought to be achieved by
  demanding an amount closer to the anticipated price which
H the customer would be required to pay. According to
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 379
 BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.]

submissions, such practice could not have promoted the sale A
of their vehicle rather it was discouraging. The large response
shows peoples' faith in the products of the appellant and also
that the interest rate offered by the appellants was appreciable
and fair.
                                                                  B
      5. Learned Senior Counsel Mr. Ashok H. Desai
highlighted the definition of Unfair Trade Practice as indicated
in Section 36A of the Act. Since the Notice of Enquiry alleged
that the appellant had indulged in unfair trade practices falling
under Section 36A (1) (i), (ii), (iv) and (vi) of the Act, the C
aforesaid provisions need to be noticed. They read as follows:

       "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         o
     of promoting the sale, use or supply of any goods or for
     the provisions of any services, adopts any unfair method
     or unfair or deceptive practice including any of the
     following practices, namely:-
                                                                     E
     (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, quantity, grade, composition, style or F
     mode;

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

     (iii)     xxxxxxxxx                                             G

     (iv) represents that the goods or services have sponsor-
     ships, approval, performance, characteristics, accesso-
     ries, uses or benefits which such goods or services do
     not have;                                                H
380'         SUPREME COURT REPORTS                 (2015) 1OS.C.R.


 A          (v)      xxxxxxxxxx
            (vi) makes a false or misleading representation concern-
            ing the need for, or the usefulness of, any goods or ser-
            vices;"
 B
           6. According to Mr. Desai the allegations against the
       appellant do not attract any of the practices mentioned in the
       Notice of Enquiry and contained in the definition noted above.

        7. The second limb of arguments also flows from the
 C definition in Section 36A of the Act. By placing reliance upon
   judgment of this Court in the case of Rajasthan Housing
   Board vs. Parvati Devi (Smt) (2000) 6 SCC 104, it was
   contended that when supplier and consumer have entered into ·
   an agreement then the Commission, in order to hold the
 0
   supplier guilty of unfair trade practice on the basis of allegations
   made against it, is required to go into the terms and conditions
   agreed between the parties for finding out whether there was
   unfair trade practice so as to require further action on the basis
 E of complaints. In support of this proposition reliance was placed
   mainly on paragraph 14 of the judgment which is as follows:

            "14. For deciding such question, the Commission has
            to find out whether a particular act can be condemned
            as an unfair trade practice; whether representation
 F
            contained a false statement and was misleading and
            what was the effect of such a representation made to the
            common man. The issue cannot be resolved by merely
            holding that representation was made to hand over the
 G          possession within the stipulated period and the same is
            not complied with or some lesser constructed area is
            given after the construction of the building. The
            Commission has to find out whether the representation,
            complained of, contains the element of misleading the
 H          buyer and whether buyers are misled or they are informed
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 381
BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.]

     in advance that there is likelihood of delay in delivering A
     the possession of constructed building and also increase
     in the cost. For this purpose, terms and conditions of the
     agreement are required to be examined by tile
     Commission. Not only this, the Commission is required
     to consider whether the Board has adopted unfair method B
     or deceptive practice for the purpose of promoting the
     sale, use or supply of any goods or for the provisions of
     any services. Unless there is a finding on this issue, the
     appellant Board cannot be penalised for unfair trade
     practice."                                                 C

    8. On behalf of appellant reliance was also placed upon
judgment of this Court in the case of Mis Lakhan pal National
Limited vs. M.R.T.P. Commission and Another (1989) 3
SCC 251, particularly paragraph 7 and 9 thereof. In paragraph        D
7 it was held that the definition of "Unfair Trade Practice" in
Section 36A is not inclusive or flexible, but specific and limited
in its contents. The Court also considered the object of this
provision with a view to resolve the issue as to whether
particular acts can be condemned as unfair practice or not.          E
We are in full agreement with the view expressed by L. M.
Sharma, J., as he then was and hence it would be more
appropriate to extract para 7 which runs thus:

      "7. However, the question in controversy has to be             F
      answered by construing the relevant provisions of the Act.
      The definition of "unfair trade practice" in Section 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 G
      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 H
      misleading and further what is the effect of such a
382   SUPREME COURT REPORTS                     [2015] 10 S.C.R.


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
      resolved by merely examining whether the representation
      is correct or incorrect in the literal sense. A representation
8     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 inaccurate in the technical literal sense can convey
      the truth and sometimes more effectively than a literally
c     correct statement. 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
D
      with objectivity, in an impersonal manner. It is stated in
      Halsbury's Laws of England (4th Edn., paras 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
E     the representation 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,
 F    necessary, and, on the other, adequate, to establish a
      misrepresentation" and "that where the entire
      representation is a faithful picture or transcript of the
      essential facts, no falsity is established, even though there
      may have been any number of inaccuracies in
G     unimportant details. Conversely, if the general impression
      conveyed is false, the most punctilious and scrupulous
      accuracy in immaterial minutiae will not render the
      representation true"; Let us examine the relevant facts of
      this case in this background."
H
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 383
 BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.]

     9. In reply Mr. AK. Sang hi, Senior Advocate defended the A
impugned order of the respondent Commission. According to
him the Commission acted fairly in entertaining the complaints
from three persons who found the booking amount very high
and therefore did not deposit the same. According to him once
a Preliminary Investigation Report dated 15.2.2000 was B
available with conclusion and recommendation to the effect
that only the basic price of the car ought to have been collected
from the public and not further amount which can cover only
excise duties and sales tax that goes to the Government and
that such amount should not have been retained by C
manufacturing units for a long period of time, the Commission
although did not find the appellant guilty of any of the four
specific provisions of Section 36-A (1) but still it felt compelled·
to conclude against the appellant and resultantly pass a cease D
and desist order under powers conferred upon the Commission .
by Section 36-D (1) (a) of the Act.

     10. Mr. Sang hi also sought to support the finding of the
Commission on issue number one that the appellant has
indulged in unfair trade practice by referring to certain narratives   E
in the Preliminary Investigation Report (PIR). As per his
submission the Commission had not only communicated the
precise allegations in terms of Section 36-A but had also
enclosed with the Notice of Enquiry a copy of Pl Rand therefore        F
findings cannot be criticized on the ground that the allegations
were not precisely communicated through the Notice of Enquiry.
We find no merit in these contentions. The Commission could
not have travelled beyond the specific allegations in the Notice
of Enquiry because such a course would violate rules of                G
fairness and natural justice. The scope of enquiry could have
been enlarged only after serving further notice with necessary
details of allegations and supporting facts. This was clearly
not done by the Commission. It is a flagrant violation of audi
alteram partem rule. It renders the impugned order invalid and         H
384        SUPREME COURT REPORTS                    [2015] 10 S.C.R.


A bad in law. The order is also bad for non application of mind to
  requirement of law as stipulated in Section 36A(1) of the Act
  and the relevant facts.

          11. We have gone through the Preliminary Investigation
B Report, the Notice of Enq1:1iry as well as the Order under
    appeal. We do not find any material or even allegation in the
    PIR which could satisfy any of the four unfair trade practices
    covered by various Clauses such as Clause (i), (ii), (iv) and
    (vi) of Section 36-A (1) of the Act. A careful perusal of the Notice
C of Enquiry dated 25.9.2000 reveals that no doubt a copy of
    the PIR was enclosed but the notice made it clear itself that
    the Commission came to a considered opinion that the Director
  . (Research) had found the appellant indulging in unfair trada
    practices falling precisely and only under clauses (i), (ii), (iv)
D and (vi) of Section 36A(1) of the Act. The enquiry, as per the
    notice, was to cover:- (a) whether t~e respondent has been
    indulging in the above said unfair trade practice(s) and (b)
    whether the said unfair trade practice(s) is/are prejudicial to
    public interest.
 E
        12. A scrutiny of the judgment under appeal discloses that
   the Commission failed to keep in mind the precise allegations
   against the appellant with a view to find out whether the facts
   could satisfy the definition of Unfair Trade Practice(s) as alleged
 F against the appellant in the Notice of Enquiry. The Commission
   was apparently misled by the Preliminary Investigation Report
   also which claimed to deal with reply received. from the
   appellant in course of the preliminary enquiry but patently failed
   even to notice the stipulation as regards payment of interest
 G on the booking amount although this fact was obvious from
   the terms and conditions of the booking and was reportedly
   relied upon by the appellant in its reply even at the stage of
   preliminary investigation. The Commission noticed the relevant
 H facts including provision for interest while narrating the facts,
   but failed to take note of this crucial aspect while discussing
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 385
BEHALF OF DEEPAK KHANNA [SHIVA KIRTI SINGH, J.]

the relevant materials for the purpose of arriving at its A
conclusions. Such consideration and discussion begins from
paragraph 32 onwards but without ever indicating that the
booking amounts had to be refunded within a short time or
else it was to carry interest at the rate of 10% per annum.
                                                                  B
     13. The order of the Commission appears to be largely
influenced by a conclusion that the appellant should not have
asked for deposit of an amount above the basic price because
in the opinion of the Commission it was unfair for the appellants
to keep excise and sales tax with itself for any period of time. C
Such conclusion of the Commission is based only upon
subjective considerations of fairness and do not pass the
objective test of law as per precise definitions under Section
36A of the Act. The submissions and contentions of Mr. Desai
merit acceptance.                                                 D

     14. Even after stretching the allegations and facts to a
considerable extent in favour of respondent Commission, we
are unable to sustain the Commission's conclusions that the
allegations and materials against the appellant make out a E
case of unfair trade practice against the appellant. Nor there
is any scope to pass order under Section 36-0(1) of the Act
when no case of any unfair trade practice is made out. Hence,
we are left with no option but to set aside the order under
appeal. We order accordingly. As a result the appeal stands F
allowed. However, there shall be no order as to costs.

Kalpana K. Tripathy                              Appeal allowed.