2020 (2) TMI 855 - SC - Indian Laws

Charging higher for SMS - participants in the HSHS contest were required to pay ₹ 2.40 per SMS message to Airtel, which was higher than the normal rate for SMSes - Whether an unfair trade practice has been committed by the Appellants in the conduct of the HSHS contest, in terms of Section 2(1)(r)(3) of the 1986 Act? HELD THAT - The National Commission had no basis to hold that the Appellants had admitted that the prize money for the HSHS contest was distributed out of the revenue collected from the SMSes sent in pursuance of the contest. It is true that the Appellants had not specifically denied that the prize money was paid out of the increased SMS charges. However, they had clarified in their submissions that Airtel was merely a sponsor/advertiser of the program, and the commercial arrangement between the parties was that Airtel would pay sponsorship charges, whereas Star India would be independently liable for paying the prize money out of its pocket regardless of the revenue earned by Airtel - apart from the aforementioned facts, there is no other cogent material on record upon which the National Commission could have placed reliance to render the finding of unfair trade practice under Section 2(1)(r)(3) (a) of the 1986 Act. There exists a services cum-sponsorship agreement between the Appellants, which contains the specific details of the commercial arrangement between them. They did not produce the same before the National Commission, claiming that the said agreement contained a confidentiality clause, and could only be produced in accordance with law if required. The Appellants case is that they would have offered to produce the agreement if the National Commission had given a specific direction to that effect. However, no such direction was rendered at any point during the proceedings before the National Commission. Even the complainant did not, throughout the course of the proceedings, seek a direction to the Appellants to produce the services cum-sponsorship agreement. Thus, it is evident that Star India was liable to pay the prize money irrespective of the profits earned by Airtel. It is needless to say that the sponsorship money paid by Airtel would come from various sources of revenue, which includes the money earned from the tariff rates for the HSHS contest. Similarly, Star India may have had many sources of revenue from which the prize money could have been paid. This is a part and parcel of the ordinary business dealings of the Appellants, and the complainant has failed to establish any direct linkage between the increased SMS tariff rates and the prize money so as to show that the prize money was deceptively recovered in the guise of increased SMS rates charged to the participants. The complainant has clearly failed to discharge the burden to prove that the prize money was paid out of SMS revenue, and its averments on this aspect appear to be based on pure conjecture and surmise. There is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, or that Airtel and Star India had colluded to increase the SMS rates so as to finance the prize money and share the SMS revenue, and the finding of the commission of an unfair trade practice rendered by the National Commission on this basis is liable to be set aside. The finding of the commission of an unfair trade practice under Section 2(1)(r)(3)(a) in the impugned judgement is bad in law - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the Appellants committed an 'unfair trade practice' under Section 2(1)(r)(3)(a) of the Consumer Protection Act, 1986.
2. Whether the National Commission had jurisdiction over the complaint.
3. Appropriateness of the award of punitive damages by the National Commission.

Detailed Analysis:

1. Unfair Trade Practice under Section 2(1)(r)(3)(a) of the Consumer Protection Act, 1986:
- Context: The complaint alleged that the Appellants, Star India and Airtel, engaged in unfair trade practices by creating a false impression that participation in the 'Har Seat Hot Seat' (HSHS) contest was free, while the cost was covered by increased SMS charges.
- National Commission's Findings: It concluded that the Appellants created an impression that the prize money was free, while it was actually covered by the SMS charges. The Commission relied on a newspaper report and presumed a revenue-sharing agreement between Star India and Airtel.
- Supreme Court's Analysis: The Court found no admission by the Appellants that the prize money was paid from SMS revenue. The Appellants clarified that Airtel was merely a sponsor and the prize money was paid by Star India independently. The Court noted the absence of corroborative evidence for the newspaper report and the survey. It examined the services-cum-sponsorship agreement and found no provision for revenue-sharing or financing the prize money from SMS revenue. The Court concluded that the increased SMS charges constituted a value-added service, which was compliant with TRAI regulations.
- Conclusion: The Supreme Court found no basis for the National Commission's conclusion of unfair trade practice, as the complainant failed to prove that the prize money was paid from SMS revenue.

2. Jurisdiction of the National Commission:
- National Commission's Findings: It held that the complaint was maintainable under the Consumer Protection Act and need not be referred to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
- Supreme Court's Analysis: The Court noted that the argument regarding jurisdiction was not seriously pressed by the parties. Hence, it did not adjudicate on this issue but left the question of law open for future consideration.

3. Award of Punitive Damages:
- National Commission's Findings: It awarded punitive damages of ?1 crore and litigation costs of ?50,000 to the complainant.
- Supreme Court's Analysis: The Court found that punitive damages could not be awarded as the complainant did not pray for them or prove any actual loss suffered by consumers. It referred to the precedent set in General Motors (India) Private Limited v. Ashok Ramnik Lal Tolat, which required proof of actual loss for awarding punitive damages.
- Conclusion: The award of punitive damages was not justified.

Final Judgment:
The Supreme Court set aside the National Commission's judgment, finding that the commission of an unfair trade practice under Section 2(1)(r)(3)(a) was not established. The appeals were allowed, and the impugned judgment was set aside.