2015 (9) TMI 1130 - SC - Companies Law

Monopolies and Restrictive Trade Practices - Booking of cars - three complaints were made before the Commission by persons who claimed that they had 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 complainants the appellant had indulged in Unfair Trade Practice (UTP) by demanding an excessive amount for bookings of Indica cars and by including the likely taxes, cess and transportation cost. Held that - The Commission noticed the relevant facts including provision for interest while narrating the facts, but failed to take note of this crucial aspect while discussing the relevant materials for the purpose of arriving at its 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. 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. 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. 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 case of unfair trade practice against the appellant. Nor there is any scope to pass order under Section 36-D(1) of the Act when no case of any unfair trade practice is made out. - Decided in favor of appellant.

Issues Involved:
1. Allegation of Unfair Trade Practice (UTP) under Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969.
2. Validity of the Commission's Notice of Enquiry and Preliminary Investigation Report.
3. Locus standi of the complainants.
4. Compliance with principles of natural justice.

Detailed Analysis:

1. Allegation of Unfair Trade Practice (UTP) under Section 36A of the Act:
The appellant, a company engaged in the manufacture and sale of automobiles, was accused of indulging in unfair trade practices by demanding excessive booking amounts for Tata Indica cars, which included anticipated taxes, cess, and transportation costs. The Commission directed the appellant to cease and desist from such practices. The appellant contended that their actions did not fall under any of the unfair trade practices defined in Section 36A, particularly clauses (i), (ii), (iv), and (vi). The Supreme Court agreed, noting that the definition of "unfair trade practice" is specific and limited, requiring a false or misleading representation that prejudices public interest. The Court found no evidence that the appellant's practices misled consumers or were prejudicial to public interest.

2. Validity of the Commission's Notice of Enquiry and Preliminary Investigation Report:
The Commission initiated an enquiry based on complaints and a Preliminary Investigation Report (PIR). The appellant argued that the allegations were vague and not supported by facts. The Supreme Court noted that the Commission failed to communicate precise allegations and relied excessively on subjective considerations of fairness rather than objective legal standards. The Court emphasized that the enquiry should be based on specific allegations as per the notice, which was not adhered to in this case. This failure violated principles of natural justice and rendered the Commission's order invalid.

3. Locus Standi of the Complainants:
The complainants had not applied for the booking of Tata Indica vehicles but claimed they were dissuaded by the high booking amount. The appellant challenged their locus standi, arguing that they were not consumers and thus lacked standing to file complaints. The Supreme Court did not explicitly rule on this issue but implicitly supported the appellant's position by emphasizing the need for concrete allegations and evidence from actual consumers affected by the practice.

4. Compliance with Principles of Natural Justice:
The Supreme Court criticized the Commission for not adhering to the principles of natural justice, particularly the audi alteram partem rule, which requires that parties be given a fair hearing. The Commission did not provide the appellant with detailed allegations or an opportunity to respond adequately. The Court highlighted that the scope of the enquiry could only be expanded with proper notice and supporting facts, which was not done. This procedural lapse further invalidated the Commission's order.

Conclusion:
The Supreme Court set aside the Commission's order, finding no evidence of unfair trade practices as defined under Section 36A of the Act. The Court emphasized the need for precise allegations, adherence to natural justice, and objective legal standards in such enquiries. The appeal was allowed, and the cease and desist order was nullified, with no order as to costs.

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