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TMI Blog2007 (3) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The question that arises in these petitions is whether it is impermissible for the Petitioners to charge their customers/guests the any price above the maximum retail price (MRP) mentioned on mineral-water packaged and bottled by third parties. This conundrum is common both to hotels and restaurants. The character and nature of the service provided by hotels has already received jural scrutiny in State of H.P. -vs- Associated Hotels of India, AIR 1972 SC 1131 [also reported as The State of Punjab -vs-Associated Hotels of India Ltd, (1972) 1 SCC 472 : (1972) 2 SCR 937]. The Constitution Bench of the Supreme Court made the following enunciation of the law which in my view conclude the debate and is better extracted than paraphrased by us: 13. What precisely then is the nature of the transaction and the intention of the parties when a hotelier receives a guest in his hotel? Is there in that transaction an intention to sell him food contained in the meals served to him during his stay in the hotel? It stands to reason that during such stay a well equipped hotel would have to furnish a number of amenities to render the customer's stay comfortable. In the supply of such amenit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be prepared after consideration of the costs of meals, but that would be so for all the other amenities given to the customer. For example, when the customer uses a fan in the room allotted to him, there is surely no sale of electricity, nor a hire of the fan. Such amenities, including that of meals, are part and parcel of service which is in reality the transaction between the parties. 15. Even in the case of restaurants and other such places where customers go to be served with food and drink for immediate consumption at the premises, two conflicting views appear to prevail in the American courts. According to one view, an implied warranty of wholesomeness and fitness for human consumption arises in the case of food served by a public eating place. The transaction, in this view, constitutes a sale within the rules giving rise to such a warranty. The nature of the contract in the sale of food by a restaurant to customers implies a reliance, it is said, on the skill and judgment of the restaurant-keeper to furnish food fit for human consumption. The other view is that such an implied warranty does not arise in such transactions. This view is based on the theory that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation to receive and entertain guests. An innkeeper, that is to say, in the present days a hotel proprietor, in his capacity as an innkeeper is, on the other hand, bound by the common law or the custom of the realm to receive and lodge in his inn all comers who are travellers and to entertain them at reasonable prices without any special or previous contract unless he has some reasonable ground of refusal. (Halsbury's Laws of England, 3rd Ed., Vol. 21, 445-446). The rights and obligations of hotel proprietors are governed by statute which has more or less incorporated the common law. The contract between such a hotel proprietor and a traveller presenting himself to him for lodging is one which is essentially a contract of service and facilities provided at reasonable price. 17. The transaction between a hotelier and a visitor to his hotel is thus one essentially of service in the performance of which and as part of the amenities incidental to that service, the hotelier serves meals at stated hours. The Revenue, therefore, was not entitled to split up the transaction into two parts, one of service and the other of sale of food stuffs and to split up also the bill charged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right of property can be said to attach. Before consumption title does not pass; after consumption there remains nothings to become the subject of title. What the customer pays for is a right to satisfy his appetite by the process of destruction. What he thus pays for includes more than the price of the food as such. It includes all that enters into the conception of service, and with it no small factor of direct personal service. It does not contemplate the transfer of the general property in the food supplied as a factor in the service rendered. 3. This very question again came up for the consideration of the Constitution Bench in K. Damodarasamy Naidu Bros. -vs- State of T.N., (2000) 1 SCC 521 and the following extract thereof is instructively topical: 4. A review petition was filed in respect of the judgment in Northern India Caterers and all three Judges found that it should be dismissed. The order of the majority noted that it appeared from the submissions that were made in the review petition that the States were apprehensive that the judgment in Northern India Caterers would be invoked by restaurant-owners in those cases also where there was sale of food and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Measures Act, 1976 and the Rules framed thereunder( SWM Act in brief). 5. The Gazette of India, Ext., Pt.II, S.1, dated 8.4.1976 contains a concise statement of the Objects and Reasons of the SWM Act. It recounts that India is a signatory to the Metre Convention in the context of which unanimous recommendation came to be made suggesting the replacement of the Standards of Weights and Measures Act, 1956 by a more comprehensive legislation on the subject. The intendment of the Bill was to provide for consumer protection in respect of packaged commodities by providing for the proper indication on the package of net quantity by weight, measures or number, the identity of the commodity contained therein, name of the manufacturer as well as the price of the package. The Preamble to the SWM Act is "to establish standards of weights and measures, to regulate inter-State trade or commerce in weights, measures and the other goods which are sold or distributed by weight, measure or number. ......". In terms of Section 2(v) "sale" means -"the transfer of property in any weight, measure or other goods by one person to another for cash or for deferred payment or for any other valuable cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other valuable consideration, and includes a commission agent who carries on such business on behalf of any principal, but does not include a manufacturer who manufactures any commodity which is sold or distributed in a packaged form except where such commodity is sold by such manufacturer to any other person other than a dealer. 2 (o) "retail dealer", in relation to any commodity in packaged form, means a dealer who directly sells such packages to the consumer and includes, in relation to such packages as are sold directly to the consumer, a wholesale dealer who makes such direct sale. 2 (q) "retail sale", in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer. 2(r) "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on the package, there shall be printed on the packages the words[Maximum or Max. retail price].... inclusive of all taxes [or in the form MRP Rs..... inclusive of all taxes.]] Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any case, be higher than the extent of increase in the tax or in the case of imposition of fresh tax higher than the fresh tax so imposed: Provided that publication in any newspaper, of such revised price shall not be necessary where such revision is due to any increase in, or in imposition of, any tax payable under any law made by the State Legislatures: Provided further that the retail dealer or other person shall not charge such revised prices in relation to any packages except those packages which bear marking indicating that they were pre-packed in the month in which such tax has been revised or fresh tax has been imposed or in the month immediately following he month aforesaid: Provided also that where the revised prices are lower than the price marked on the package the retail dealer or other person shall not charge any price in excess of the revised price, irrespective of the month in which the commodity was pre-packed.] (5) Nothing in sub-rule (4) shall apply to a package which is not required under these rules to indicate the month and the year in which it was pre-packed. (6) No retail dealer or other person shall obliterate, smudge or alter the [re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which precedents unequivocally state that the frontiers of Rules cannot be wider further or broader than those established by the statute or Act under whose umbrella the Rules have been created. Attention has rightly been drawn by Mr. Bhasin to Bharathidasan University -vs-All-India Council for Technical Education, (2001) 8 SCC 767 in which the Supreme Court has opined that where powers to make rules and regulations are confined by the statute to certain limits, rules and regulations which are not within those limits must be ignored by the Court. 10. Mr. Jayant Nath has relied on the definitions and provisions of the SWM Act to contend that the supply of mineral water in hotels and restaurants is fully covered by the said Act and Rules. He has placed reliance on paragraphs 36 to 41 of ITC Ltd. -vs- Commissioner of Central Excise, New Delhi, (2004) 7 SCC 591. The Apex Court has observed that the "SWM Act as well as the Packaged Commodities Rules have been enacted to protect the consumers who are entitled to pay only such price as has been printed thereon. The purpose of printing the MRP on cigarette packages is to achieve a standardisation of prices throughout the country and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1986 Act and thereby encourage the retailers or distributors of foreign-made goods to charge prices according to their convenience without letting the consumer know the actual price of the commodity". In all humility their Lordships have articulated a summation of the SWM Act; it enjoins a declaration of weight, measure, number and price. It imposes punishment where a declaration has not been made or has been incorrectly made. 13. Mr. Midha has supported the contention of Mr. Nath and has also taken me through the provisions of the SWM Act and the Rules. He emphasised, in particular, on the definition of sale contained in the SWM Act which, as has already been seen, envisages a transfer of property. This is conspicuously absent in the case of service or supply of eatables and drinks by hotels and restaurants. Mr. Midha has also laboured on Rule 5 of the SWM Rules and the fact that the commodities mentioned in the Third Schedule included aerated soft drinks, mineral water and drinking water. This may be so but the sweep and intendment of the SWM Act and Rules are palpably obvious from the fact that in respect of these commodities it is the packaging thereof which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of CP Act in such circumstances would run counter to the law lay down in Associated Hotels and Northern India Caterers. These observations are obviously made en passant. 16. In the above analysis I hold that charging prices for mineral water in excess of MRP printed on the packaging, during the service of customers in hotels and restaurants does not violate any of the provisions of the SWM Act as this does not constitute a sale or transfer of these commodities by the hotelier or Restaurateur to its customers. The customer does not enter a hotel or a restaurant to make a simple purchase of these commodities. It may well be that a client would order nothing beyond a bottle of water or a beverage, but his direct purpose in doing so would clearly travel to enjoying the ambience available therein and incidentally to the ordering of any article for consumption. Can there by any justifiable reason for the Court or Commission to interdict the sale of bottled mineral water other than at a certain price, and ignore the relatively exorbitant charge for a cup of tea or coffee. The response to this rhetorical query cannot but be in the negative. Although the vires of Rule 23 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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