Holding

Section 36A requires both the adoption of an unfair trade practice and the actual loss or injury to consumers; the conditions are conjunctive, not disjunctive.

Summary

The appellant, Hindustan Ciba Geigy, placed an advertisement claiming its product Aerocol was manufactured by it and was a market leader in the UK. A complaint was filed alleging unfair trade practice under Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969, leading the MRTP Commission to issue a notice of enquiry. The Commission held that actual loss or injury to consumers need not be proved, relying on an earlier decision of the Commission. On appeal, the Supreme Court examined whether causation of loss or injury is a necessary condition for invoking Section 36A. The Court held that the two conditions in Section 36A—adoption of a prohibited practice and resulting loss or injury to consumers—must be read conjunctively, and actual loss or injury is essential. Consequently, the Commission’s finding was a manifest error, the impugned judgment was set aside, and the appeal was allowed without any order as to costs.

Issues considered

Whether causation of loss or injury to the consumer is a sine qua non for initiating proceedings under Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969.

Legislation cited

Monopolies and Restrictive Trade Practices Act, 1969s. 36A

Subjects

unfair trade practiceSection 36Aconsumer losscausationadvertisement misrepresentationMonopolies and Restrictive Trade Practices Actlegal interpretationcompetition

Judgment

A HINDUSTAN CIBA GEIGY
v.
UNION OF INDIA AND ORS.

NOVEMBER 20, 2002

B [G.B. PATTANAIK, CJ., H.K. SEMA AND S.B. SINHA, JJ.]

Interpretation of Statutes:

Monopolies and Restrictive Trade. Practices Act, 1969: Section 36A-
C Unfair Trade Practices-Principles-Invoking of-Held, practices, as a result
of which actual loss or injury caused to the consumer by eliminating or
restricting competition-These conditions must be read conjunctively for
invoking the provisions of law.

D The question which arose in the appeal was whether under Section
36A of the Act, (as it stood then.), causation of loss or injury to the
consumer of goods or service is a sine qua non for initiation of a proceeding
thereunder.

Allowing the appeal, the Court
E HELD: A bar~ perusal of the provisions under Section 36-A of the
M.R.T.P. Act would clearly go to show that an unfair trade practice would
mean 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 practices specified therein adopted and as a result thereof loss
••
F or injury has been caused to the consumers of such goods or services, either
by eliminating or restricting competition 'or otherwise. It would
fui:-thermore clearly go to show that the two conditions precedent
mentione!J therein are required to be read conjunctively and not
disjunctively. The provision leaves no manner of doubt that an inquiry
can be initiated against the notice not only when it adopts or one or more
G practices specified therein but also thereby it must cause loss or injury to
the consumers. The Commission committed a manifest error in holding
that the actual loss or injury need not be caused to the consumers.
(229-8-EJ

HMM Ltd. v. Director General, Monopolies and Restrictive Trade
H 226
HINDUSTAN CIBA GEIGY v. U.0.1. [S.B. SINHA. J.} 227

Practices Commission, [1998[ 6 SCC 485, relied on. A
Colgate Pab110/ive (India) ltd. v. A1.R. T.P. (~0111111ission and Ors., in
u:r.P.E. No.41 of 1984 decided on 19th June, 1991, overruled.
CIVIL APPELLATE JURISDICTION Civil Appeal No. 3224 of
1993. B
From the Judgment and Order dated 4.3.1993 of the MRTP Commission.
New Delhi in U.T.P.E. No. 3 I of 1987.

R. Narain, for Mis. J.B.D. & Co. for the Appellant.

N.N. Goswami, C.K. Sµcharita and P. Parmeswaran, for the Respondents.
c
The Judgment of the Court was delivered by

S.B. SINHA, J. The substantial question of law involved in this appeal
under Section 55 of the Monopolies and Restrictive Trade Practices Act, 1969 D
('the Act') is whether under Section 36A of the Act, (as it stood then), causation
of loss or injury to the consumer of goods or service is a sine qua non for
initiation of a proceeding thereunder.

One H.D. Murzello made a complaint before the Director General of
Investigation and Registration alleging unfair trade practice against the E
appellant herein as regards an advertisement issued by them which appeared
in "The Times of India" dated 16th September, 1986 to the following effect:

"Aerocol's family background: Aerocol's credibility as a wonder
wood adhesive stems from 2 facts
F
• An addition to the Araldite and Aerolite family, it is a product
from Hindustran Ciba Geigy;

• Already a market leader in UK, it is known for living up to its
promise."

On the said complaint. the Director General was directed to make a G
preliminary enquiry. Upon such inquiry, a report was submitted on 15th April,
1987. On the basis of the recommendations made in the said investigation
report, a Notice ofEnquirywas issued by the Commission on 30th July, 1987
against the appellant herein; the relevant portion thereof is as under :-

"The respondent above mentioned is engaged in selling adhesive under i:-_·
-r
228 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A the trade name Aerocol. It had issued an advertisement that appeai ed
in Times of India dated 16.9.1986, making claim that the product is
manufactured by it. It has come to the notice of the Commission that
the said product is manufactured by M/s Kiran Industries. The
respondent by misrepresenting to the public that the product is
manufactured by it while it is manufactured by some other company
B has caused loss and injury to the consumers and thereby indulged in
the unfair trade practice falling within the purview of Section 36A( I )(v)
of the Act.

The respondent had also claimed that its product is the market leader
in United Kingdom. It has come to the notice of the Commission that
c the claim made by the respondent has not been duly substantiated by
it. The respondent, by making such tall claim, has caused loss and
injury to the consumer and indulged in the unfair trade practice falling
within the meaning of Section 36A(l)(i) of the Act."

Pursuant to or in furtherance of the aforementioned Notice of Enquiry,
D the appellant filed their reply not only controverting the allegations raised
therein but also raised preliminary objection as regards maintainability thereof;
whereupon the Commission, framed the following issues:-

"(1) ls the enquiry not legally maintainable?
E (2) Did the respondent indulge in any unfair trade practice as alleged
in the N.I.E. and PIR?

(3) In case Issue No.2 is decided in the affirmative, is the unfair
trade practice prejudicial to the public interest or to the interest
of any consumer or consumers generally?
F (4) Relief."

The Commission accepted the arguments raised on behalf of the counsel
for the Director General and held that the words "thereby causes loss or
injury to the consumer" would not mean actual loss or injury. The Commission
in aid of its aforementioned finding, relied upon the decision of larger Bench
G in Colgate Palmolive (India) Ltd. v. MR. TP. Commission and Ors. in U. TP.E.
No.41 of 1984 decided on 19th June, 1991.

Section 36A of the Act, as it stood then, reads as under :-

"36A. Definition of unfair trade practice.- In this Part, unless the
H contest otherwise requires, "unfair trade practice" means a trade
HINDUSTAN CIBA GEIGY i·. U.0.1. [S.B. SINHA. J.] 229

practice which, for the purpose of promoting the sale, use or supply A
of any goods or for the provision of any services, adopts one or 1nore
of the following practices and thereby causes loss or injury to the
consu1ners of such goods or services, whether by eli1ninating or
restricting competition or otherwise, namely :-

"A bare perusal of the aforementioned provision would clearly go to B
show that an unfair trade practice would mean 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 practices specified therein adopted
and as a result thereof loss or injury has been caused to the consumers of
such goods or services, either by eli1ninating or restricting competition or C
otherwise. It would furthermore clearly go to show that the. two conditions
precedent mentioned therein are required to be read conjunctively and not
disjunctively.

Thus, the aforementioned provision, in our considered opinion, leaves
no 1nanner of doubt that an inquiry can be initiated against the noticee not D
only when it adopts or one or more practices specified therein but also thereby
it must cause loss or injury to the consumers.

Furthermore from a perusal of the notice dated 30.7.1987 itself it would
appear that definite allegations were made therein that by reason of the
impugned action on the part of the Appellant, the consumers suffered loss or E
injury.

The Commission, therefore, in our opinion, committed a manifest error
in holding that the actual loss or injury need not be caused to the consumers.
This aspect of the matter has been considered by this Court in H.MM ltd.
v. Director General, Monopolies and Restrictive Trade Practices Commission, F
[1998] 6 sec 485, wherein it was held :

"For holding a trade practice to be an unfair trade practice,
therefore, it must be found that it causes loss or injury to the consumer.
Insofar as prizes are concerned, there has to be the intention of not
providing them as offered or creating the impression that they are G
being given or are being offered free of charge when in fact they are
fully or partly covered by the amount charged in the transaction as
a whole. The conduct of a lottery for the purpose of promoting the
sale, use or supply of a product is an unfair trade practice. It is
difficult to see clear sustainable findings on these aspects in the H
230 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A judgment under appeal."

Be it noted that the decision of the larger Bench of the Commission in
Colgate Palmolive (India) Ltd., whereupon the Commission relied upon has
been reversed by this Court in Civil Appeal Nos.891 of 1993 etc. by a
judgment delivered this date.
B
For the aforementioned reasons, the impugned judgment cannot be
sustained, which is set aside accordingly. The appeal is allowed but in the
facts and circumstances of the case, there will be no order as to costs.

S.K.S. Appeal allowed.