2011 (9) TMI 688 - HC - Indian Laws

Application of provisions of Standards of Weights and Measures Act, 1976 - industrial consumer, institutional consumer, retail sale - held that it is not in dispute that the petitioner is a manufacturer of industrial product. On the packet, it is expressly stated that it is meant for industrial use. The product which is manufactured by him is high end industrial welding products, such as electrodes, brazing rods, powders and fluxes. Petitioner No. 2 is their selling agent. Petitioner No. 2 is selling these through a network of stockist spread all over India, 90% of the sales are generated through the involvement of core team of sales/service engineers of petitioner No. 2 who are trained in specialized Eutectic Castolin Welding Process. These products are used in the process of reconditioning, remaking, rejuvenation and restoration of the machinery or equipment. Depending on the surface of the machinery to be welded, the particular specialized type of welding electrodes and fluxes are recommended to the customer. The sales team suggests the mix of the products, the price and the stockist from whom these can be purchased. Therefore, in the facts of this case, it cannot be said that the person to whom these petitioners are selling the products are customers in the sense it is understood under the Customer Protection Act for whose protection this particular Act and Rules were enacted. Therefore the impugned notices issued are one without authority, illegal and contrary to the express provisions contained in the enactment and cannot be sustained.

Summary

Issues Involved:
1. Applicability of the Standards of Weights and Measures Act, 1976, and the Rules framed thereunder to the petitioners' packaged goods.
2. Definition and applicability of 'industrial consumer' and 'institutional consumer' under Rule 2-A of the Rules.
3. Requirement of compliance with Rule 6 for packages sold through stockists to industrial consumers.

Detailed Analysis:

Issue 1: Applicability of the Standards of Weights and Measures Act, 1976, and the Rules framed thereunder to the petitioners' packaged goods
The petitioners sought a declaration that the provisions of the Standards of Weights and Measures Act, 1976, and the Rules framed thereunder are not applicable to their packaged goods. They argued that their products are meant for industrial consumers and are not sold through retail sales agencies. The respondents contended that all provisions of the Act and Rules apply to the petitioners' packages kept for sale at the premises of the third petitioner. The court noted that the Act was enacted to protect consumers in respect of commodities commonly used by them, facilitating the purchase and comparison of prices. It was held that the Act's main object is to protect individual consumers and not industrial consumers.

Issue 2: Definition and applicability of 'industrial consumer' and 'institutional consumer' under Rule 2-A of the Rules
The petitioners challenged the definition of 'industrial consumer' and 'institutional consumer' in Rule 2-A, arguing it was contrary to the Act's scheme. Rule 2-A exempts packages meant for industrial or institutional consumers from the provisions of Chapter II. The court observed that the explanation to Rule 2-A defines these consumers as those who buy packaged commodities directly from manufacturers/packers. The court disagreed with the Bombay High Court's interpretation, which extended this definition to the proviso of Rule 2(p). The court held that Rule 2-A and Rule 2(p) operate in distinct fields, and the meaning assigned to industrial and institutional consumers in Rule 2-A should not be attributed to Rule 2(p).

Issue 3: Requirement of compliance with Rule 6 for packages sold through stockists to industrial consumers
The petitioners argued that Rule 6, which prescribes declarations on packages, does not apply to their products as they are meant for industrial use. The respondents contended that the petitioners' packages are retail packages and must comply with Rule 6. The court noted that Rule 6 applies to packages intended for retail sale to ultimate consumers, excluding industrial or institutional consumers. The court concluded that the requirement of Rule 6 does not apply to manufacturers selling packaged goods to industrial consumers through stockists. The court held that the impugned notices issued to the petitioners were without authority, illegal, and contrary to the Act's provisions.

Conclusion:
The court allowed the writ petition, quashing the impugned notices and holding that the requirement of Rule 6 is not applicable to the petitioners' packages sold to industrial consumers through stockists. The court emphasized that the Act and Rules are meant to protect individual consumers and not industrial or institutional consumers.