Monopolies and Restrictive Trade Practices Commission
Dr. K.N. Singh vs Dynavision Ltd. And Anr. on 29 December, 1997
ORDER
Dr. S. Chakravarthy.
1. Dynavision Limited ("respondent No. 1" hereafter) and Hyderabad Radio House ("respondent No. 2" hereafter) are facing this enquiry on charges of alleged unfair trade practices under Section 36A(1)(i) and (iv) of the Monopolies and Restrictive Trade Practices Act, 1969. The enquiry was triggered by a complaint received from Dr. K.N. Singh ("complainant" hereafter) under Section 36B(a) of the Act. The averments of the complainant are as follows :
2. Respondent No. 1 is a company registered under the Companies Act, 1956, engaged in the business of manufacturing colour TV sets. Respondent No. 2 is one of its authorised dealers. When the complainant visited the show room of respondent No. 2 he was lured to purchase a new Dyanora Quintrix colour TV set of 51 cm. size. It was represented to him that the said Quintrix model TV set was a product of National Panasonic technology from Japan. In the newspaper "Deccan Chronicle" of date January 10, 1988, an advertisement appeared reading as follows :
" 'The most envied TV' Envies Quintrix New Dyanora Quintrix Colour TV Backed by National Panasonic Technology From Japan The largest selling colour TV in Andhra Pradesh"
3. The complainant purchased the said TV set from respondent No. 2 who gave him a cash receipt dated January 27, 1988, for Rs. 9,900. A TV set was given to him packed in a cardboard box. On returning home when he opened the box, the complainant did not find the insignia "National" or any other indication that the TV set was manufactured with National Panasonic technology from Japan. Even the instruction hook and guarantee card did not mention anything about National Panasonic technology.
4. The complainant has stated that "National", "Panasonic" and "Quintrix" are some of the models of TV sets manufactured by Matsushita Electric Industrial Company Limited, Japan. Thus the respondent has made a false representation to the public by using the word "National" to make it appear that the manufacture of its new Dyanora Quintrix Colour TV set is backed by National Panasonic technology from Japan. This false representation that its TV sets are of a particular standard, quality, grade, composition, style or model attracts Section 36A(1)(i) of the Act being an unfair trade practice. Furthermore, by making it appear to the public that it has the sponsorship and approval of Matsushita Electric Industrial Company Limited of Japan, it has indulged in the unfair trade practice falling within the mischief of Section 36A(1)(iv) of the Act.
5. The complainant has further alleged that the use of a foreign brand name in the manufacture and sale of its colour TV sets is in violation of the policy of the Government of India notified as Resolution No. 23(20)/ Secy. (FC), dated January 1, 1986, of the Department of Electronics. The said policy categorically prohibited the use of foreign brand names in the manufacture and sale of colour TV sets. This constitutes an unfair trade practice within the meaning of Section 36A of the Act.
6. The complainant prayed for the institution of an enquiry. The Commission after examining the complaint application of Dr. K.N. Singh issued a notice of enquiry (NOE) on April 7, 1988, summarising the allegations and calling upon the respondents to defend themselves against the charges.
7. In the meanwhile, the Commission on the prayer of the complainant directed the respondent-company to refrain from issuing advertisements using the statement "Quintrix Colour TV and National Panasonic Technology from Japan" till further orders. This was on March 25, 1988. Subsequently, on May 6, 1988, the said restraint order was modified to the extent that the use of the statement "Backed by National Panasonic Technology from Japan" would be permitted to be used in the advertisements with the direction that the respondent-company should refrain from using the 4-star symbol and the words "Quintrix Colour TV" in any form.
8. The respondents furnished their reply to the NOE with respondent No. 2 adopting the reply of respondent No. 1. The following constitutes a summary of their reply :
1. Section 36A of the Act requires satisfaction that the impugned trade practices have caused loss or injury to the consumers. This element of loss or injury is "conspicuous by its very absence in this case". The TV sets are manufactured by using sophisticated machinery imported by respondent No. 1 from Matsushita Electric Industrial Company Limited and by following the technology of the said Japanese company.
2. The arrangement of respondent No. 1 with the said Japanese company has resulted in the benefits of Japanese technology being available to the consumers with regard to the performance, characteristics, and use of its products.
3. The brand names of the said Japanese company "have not and are not being used by the respondent as alleged or at all".
4. The impugned advertisement gives the correct representation that Dyanora Quintrix Colour TV set is backed by National Panasonic Technology from Japan.
5. The said colour TV sets manufactured by respondent No. 1 comprise parts directly imported from Matsushita Electric Industrial Company Limited, Japan. The model's circuitary functions are designed with vital components manufactured by the said Japanese company. Respondent No. 1 has imported "highly sophisticated machinery" from the Japanese company. The respondent has also trained its engineers at the factories in the Japanese company. The engineers of the Japanese company visit respondent No. 1's factory from time to time.
6. The only brand names of the Matsushita group of companies in Japan are "National" and "Panasonic". "Quintrix" is only "a pet name" allowed by Matsushita Electric Industrial Company Limited to respondent No. 1 to be used. Respondent No. 1 does not use or display foreign brand names in respect of any TV manufactured by it. It may be noted that the respondent is using the name "Dyanora" clearly and conspicuously in bold capital letters in the impugned advertisement. None of the TV sets of respondent No. 1 bears the insignia "National".
7. The respondent has never claimed any collaboration with a Japanese company either in its advertisement or otherwise. Yet the respondent had taken pains to ensure that the fruits of collaboration "are made available to its products in full measure" by arrangement with the Japanese company in the interests of the consumer.
8. The Government of India has not banned the use of foreign technology nor has it banned the import of parts and components.
9. The impugned advertisement does not contain any facts or features pertaining to the alleged false or misleading representations.
9. After the pleadings were completed, the following issues were framed :
1. Whether the enquiry is not maintainable for the reasons given in the preliminary objections ?
2. Whether the respondent has indulged in or is indulging in the unfair trade practices as alleged in the NOE ?
3. Whether the Japanese company has permitted the respondent to use the word "Quintrix" on the colour television model No. TC-2001N manufactured by the respondent ? If so, with what effect ?
4. Whether the unfair trade practice as proved against the respondent is prejudicial to the public interest or to the interest of the consumers ?
5. Relief.
10. The Director-General adduced only documentary evidence. The following documents were admitted by the respondents and marked exhibits "A-1" to "A-6".
1. Advertisement in the Deccan Chronicle, dated January 10,1988-- Exhibit "A-1".
2. Operating instructions for the TV set-Exhibit "A-2".
3. Guarantee card-Exhibit "A-3".
4. National Magazine, 1986-87 showing different models of colour TV sets with 4-star symbol and the word "Quintrix" appearing on them-- Exhibit "A-4".
5. Cash memo, dated January 27, 1988-Exhibit "A-5".
6. Copy of the Government of India Gazette Notification, dated January 18, 1986, containing the resolution No. 23(20)/Secy. (FC) of the Department of Electronics of date January 1, 1986--Exhibit "A-6". Respondent No. 1 adduced the evidence of Shri G. Lakshma Reddy, its Deputy Manager (Marketing) who was cross-examined by Shri S. Gupta for the Director-General.
11. We gave a hearing to Ms. Madhavi Narang, advocate, for the Director-General and Shri S.S. Kumar, advocate, for the respondents.
12. At the outset, an issue which has tormented the proceedings from time to time needs to be resolved. The issue is whether the Director-General (Investigation and Registration) (Director-General for short) has any locus standi to prosecute the case, as the NOE has been issued under Section 36B(a) and not under Section 36B(d) of the Act, The issue arose for the first time when two rejoinders to the reply of the respondents were filed, one by the Director-General and the other by the complainant, Dr. K.N. Singh. Enquiries under Section 36B(a) are generally initiated at the instance of complainants who are consumers. Such enquiries can also be entertained on complaints received from consumers' associations and trade associations. Enquiries under Section 36B(c) or 36B(d) are initiated on an application from the Director-General or suo motu on the information or knowledge of the Commission. In the enquiries under Section 36B(a) of the Act, it is the complainants or consumers' associations or trade associations who undertake the prosecution of the case. Director-General will not be normally in the picture. On the other hand, in inquiries under Section 36B(c) and 36B(d), it is the Director-General who is the prosecuting arm for the Commission. In such cases, the Director-General undertakes the responsibility of prosecution in public and consumer interest.
13. It is the objection of the respondents that, in the current enquiry under Section 36B(a), the Director-General has no role to play and that he has no locus standi to furnish pleadings or adduce evidence or participate in the arguments. As noted earlier, after the reply of the respondents was received and when two rejoinders, one by the Director-General and the other by the complainant Dr. K.N. Singh, were filed by way of replication, the objection of the respondents was brought to the fore. The Commission after hearing the advocates for the Director-General, the complainant and the respondents, observed as follows on April 24, 1989 :
"The difficulty arose because both Director-General and the complainant filed their independent rejoinders to the replies field by the respondent. Mr. M.L. Sachdev, advocate, however, has no objection to the withdrawing of the rejoinder filed by him on behalf of the complainant. He acquiesces in the rejoinder filed by the Director-General in his representative capacity as a public servant in public interest. That disposes of the point involved in this discussion today".
14. Thus this issue has been laid to rest but still the issue surfaced on November 23, 1995. It has to be pointed out here that in para. 8 of the injunction order of the Commission, dated March 25, 1988, a direction was given that a copy of the complaint should be furnished to the Director-General so that he may pursue the enquiry before the Commission under Rule 13A of the Monopolies and Restrictive Trade Practices Rules, 1970. It is, therefore, amply clear that the Director-General had entered the case with the leave of the Commission in his capacity as a public servant in public interest. In any case, the fourth issue among the five issues framed, relates to the question whether the alleged unfair trade practice on the part of the respondents is prejudicial to public interest or to the interest of the consumers. The onus for answering this question is on the Director-General, as seen from the docket order of the Commission, dated August 21, 1989. Now we proceed to adjudicate on the main controversy.
15. The first issue before us is on the maintainability of the enquiry. The main objection of the respondents to the maintainability of the enquiry is that the element of loss or injury to the consumers, which is a necessary ingredient of an unfair trade practice under Section 5BA of the Act, is absent in the case, Section 36A of the Act was amended on September 27, 1991, by Act No. 58 of 1991. But as the cause of action in this case was before September 27, 1991, we have to apply the law as it stood at the time of the cause of action. Section 36A of the Act as it stood before September 27, 1991, read as follows :
"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 :-- . . ..."
16. The key element in the above definition is loss or injury to the consumers. The Supreme Court in a recent ruling in Nirma Industries Ltd v. Director-General of Investigation and Registration [1997] 89 Comp Cas 537, 545 ; [1997] 5 CTJ 161 (SC), dated May 6, 1997, analysing Section 36A, as it stood before the amendment, observed as follows ;
"The above key words used in Section 36A while defining the unfair trade practices have laid emphasis on 'thereby causes loss or injury to the consumers of such goods or services whether by eliminating or restricting competition or otherwise'. It must, therefore, follow that any such unfair trade practice which causes loss or injury to the consumers of such goods or services either by eliminating or restricting competition or otherwise would attract the penal consequences as provided under this chapter. Each of the clauses employed in Section 36A is interwoven by the use of the conjunction and would indicate that before determining a trade practice as being an unfair trade practice, the Commission has to be satisfied as to whether the necessary ingredients contained therein are satisfied or not. The words 'or otherwise' in Section 36A, assuming, are of wider import and would signify not only actual loss or injury suffered by consumers but also would include probable likelihood of consumers suffering loss or injury in any form. But for that purpose also, there has to be some cogent material before the Commission to support a finding of unfair trade practice and any inferential finding would be contrary to Section 36A of the Act. It is necessary for the Commission to call upon the parties to substantiate the allegations."
17. Nothing more needs to be added to the above extract in the ruling of the Supreme Court for the purposes of deciding the first issue. Loss or injury to the consumers has not been established by the Director-General in the evidence he adduced through documents. Even Dr. K.N. Singh, the complainant, was not produced for oral testimony. In the absence of establishment of the ingredient of loss or injury to consumers, Section 36A of the Act cannot he deemed to be satisfied for bringing about an indictment of the respondents.
18. During the arguments, Shri S.S. Kumar, advocate, for the respondents relied on a ruling of this Commission in Arora Contractors and Builders Ltd., In re [1994] 2 CTJ 64 (MRTPC), dated November 12, 1993, and argued that before a cease and desist order is passed against the respondents, it has to be proved affirmatively that the unfair trade practice is prejudicial to the public interest and that prejudice itself cannot be presumed in the unfair trade practice. He added that the Director-General has not established any prejudice to the public interest in his evidence, all documentary.
19. We agree with Shri S.S. Kumar and hold that the enquiry is not maintainable for the objections taken by the respondents in their reply and by Shri S.S. Kumar, their advocate, during the arguments.
20. Furthermore, even on the merits of the case we note that in the impugned advertisement (exhibit "A-1") the representation is that the respondent's Dyanora colour TV set is "backed by National Panasonic technology from Japan". The respondents have categorically averred that they stand by the said representation in support of which they have in their reply, explained how respondent No. 1's TV set has components imported from Matsushita Electric Industrial Company Limited and how respondent No. 1 has adopted the Japanese company's technology. Yet another document which has relevance is the letter dated September 9, 1988, of Matsushita Electric Industrial Company Ltd. addressed to the managing director of respondent No. 1 to the effect that the Japanese company has permitted respondent No. 1 to use the word "Quintrix" in respondent No. 1's model as the model has been manufactured by respondent No. 1 with the Japanese company's components, assistance and technology. There is, therefore, no misrepresentation or effort to mislead the consumers on the part of respondent No. 1 or respondent No. 2.
21. In the premises, we hold that the enquiry is not maintainable and direct that the notice of enquiry shall be discharged. No order as to costs.