Holding

The advertisement does not constitute an unfair trade practice under s.36‑A; the erroneous description of the manufacturing company does not attract s.36‑A of the MRTP Act.

Issues considered

Whether the advertisement claiming collaboration with ‘National Panasonic of Japan’ constitutes an unfair trade practice under s.36‑A(i) and (v) of the MRTP Act.
Whether describing the manufacturer by its product names rather than its corporate name is a false or misleading statement under the Act.
Whether the amendment to the MRTP Act in 1984 introduced provisions applicable to such advertisements.

Legislation cited

Monopolies and Restrictive Trade Practices Act, 1969s. 36-A, s. 36-B, s. 36-D, s. 55

Subjects

unfair trade practicefalse advertisingmisleading representationMRTP Actconsumer protectionadvertisementcollaboration claimSection 36-A

Judgment

LAKHANPAL NATIONAL LTD.
A
---·. v.
M.R.T.P. COMMISSION AND·ANOTHER

MAY 2, 1989

[LAUT .MOHAN SHARMA AND
.~ S. RATNAVEL PANDIAN, JJ.)
{

-
Monopolies and Restrictive Trade Practices Act, 1969: Section
36A(l)(i) and (v)-Unfair Trade practice-Test to be applied-
Examine whether representation contains a false statement-Contains
an element of misleading a reasonable person.
c
The MRTP Commission-respondent-in the appeal issued a
show cause notice under Section 36-B of the Monopolies and Restrictive
Trade Practices Act, 1969 to the appellant company informing that a
proceeding had been instituted for making an inquiry whether the said
Company was indulging in certain unfair trade practices prejudicial to D
the public interest within the meaning of s. 36-A of the Act. It was
alleged in the notice that although the appellant company was manu-
facturing 'Novino' Batteries in collaboration with M/s Mitsushita
Electric Industrial Co. Ltd. and not with National Panasonic of Japan,
it was issuing advertisements announcing that 'Novino' Batteries were
manufactured in collaboration with National Panasonic of Japan using E
National Panasonic techniques, and that the said representation was
false and misleading and thereby ·causing loss or injury to the
consumers.

The Company in its reply to the said notice denied having made
any wrong representation in its advertisement, and asserted that the f'
company had actually entered into a collaboration agreement with M/s
··~ Mitsushita Electric Industrial Ltd. for the manufacture of dry cell bat-
teries, and was adopting the process employed by Mitsushita Ltd .. for
manufacturing 'Novino' Batteries. The Company further stated that
Mitsushita Ltd. of Japan was bette~ known by i.ts products described by
the names 'National' and 'Panasonic' and that there was therefore 110 O
question of misleading anybody by the description of the Japanese
Company by its products.

Rejecting the Company's explanation the Commission held that
bearing in mind the Indian conditions the use of 'National' and 'Pana-
sonic' to signify collaboration will have a misleadi.ng effect on the minds H
979
980 SUPREME COURT REPORTS (1989] 2 S.C.R.

of common class of customers particularly when Novino Batteries is
A
projected and advertised side by side with National, Panasonic and
Techics Batteries iu advertisements. The Commission also refused to
accept the plea of the Company that the advertisements have mentioned
the brand names instead of the manufacturing company since
'National' and 'Panasonic' were well known names in India while the
B manufacturing company Mitsushita Ltd. was not as a plea of good
defence.

On the question whether the appellant company indulged in
unfair trade practice under clauses (i) and (v) of s. 36-A(l) of the
J
M.R.T.P. Act, 1962. -
c Allowing the appeal, the Court,

HELD: l.(a) The M.R.T.P. Act as it originally stood did not
contain any provision for protection of consumers against false or
misleading advertisements or other similar and unfair trade practices.
D By providing for measures against restrictive and monopolistic trade
practices, it was perhaps assumed that the consumers also, as a result,
will get a fair deal. However, experience indicated otherwise, and
following the recommendations of a Committee, it was considered
necessary to amend the Act. Accordingly, sections 36-A to 36-E in
part B were inserted in Chapter V of the Act by an amendment in
E 1984. [984E-F; G]

2. It would be more proper for the appellant Company to give the
full facts by referring to Mitsnshita Ltd. by its correct name and further
stating that its products are known by the name "National" and
"Panasonic". [986C]
F
3. An advertisement mentioning merely Mitsushita Ltd. may,
therefore, fail to convey anything to an ordinary buyer unless be is also
told that it is the same Company which manufactures products known
to him by the names "National" and "Panasonic". If such were the
position there would not have been any scope for objection. However,
G the same effect is produced by the impugned advertisements. There is no
other company with the name of 'National' and 'Panasonic', and there
is no scope for any confusion on that score. [985G-H; 986A]

4. Where the reference is being made to the standard of the
quality, it is not material whether the manufacturing company is indi-
H cated by its actually correct name or by its description with reference to
its products. (9868 I
LAKHANPAL NATIONAL v. M.R.T.P. COMMISSION [SHARMA, ·J.] 981

5. The definition of 'unfair trade practice' ins. 36-A is not inclu-
A
sive or flexible, but specific and limited in its contents. The object is.to
bring honesty and truth in relationship between the manufacturer and
consumer. When a problem arises as to whether a particular act can be
condemned as an unfair trade practice or not, the key to the solution
wouid be to examine whether it contains a false statement and is
misleading and further what is the effect of such a representation made B
by the manufacturer on the common man? Does it lead a reasonable
·r person in the position of a buyer to a wrong conclusion? The issue
\,cannot be resolved by merely examining whether the representation is
correct or incorrect in the literal sense. The position will have to be
• viewed with objectivity in an impersonal manner. [98SA-D I

Halsbury's Laws. of England, 4th Edn. paras 1044 and 1045; c
relied on.

6. The erroneous description of the manufacturing Company in
the advertisements in question does not attracts. 36-A of the M.R.T.P.
Act. [986B] D

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 764
(NM) of 1988.

From the Judgment and Order dated 13.11.1987 of the Mono-
polies and Restrictive Trade Practices Commission in unfair Trade E
Practices Enquiry No. 76 of 1985.

G.L. Sanghi, Parveen Anand, S.K. Mehta, Dhruv Mehta, S.M.
Sarin and Atul Nanda for the Appellant ..

Anil Dev Singh and Hemani Sharma for the Respondents. F

The Judgment of the Court was delivered by

SHARMA, J. This appeal under s. 55 of the Monopolies and
Restrictive Trade Practices Act, 1969 (hereinafter referred to as the
Act) is directed against the decision of the Monopolies and Restrictive G
1Trade Practices Commission dated November 13, 1987 in the Unfair
Trade Practices Enquiry No. 76 of 1985 passed under s. 36-D(l) of the
Act forbidding the appellant Company from issuing certain type of
advertisement as indicated in the order.

2. The Commission issued a show cause notice under s. 36-B of H
982 SUPREME COURT REPORTS [1989] 2 S.C.R.

the Act to the appellant Company informing it that a proceeding had
been instituted for making an inquiry whether the Company was in-
dulging in certain unfair trade practices prejudicial to public interest
within the meaning of s. 36-A. A copy of the notice has been attached
to the petition of appeal as Annexure 'C', wherein it was alleged that,

B (i) although the Company was manufacturing 'Novino'
batteries in collaboration with M/s Mitsushita Electric ., ,l..,, .
Industrial Co. Ltd. and not with NatiQ11.al Panasonic of .J
Japan, it was issuing advertisements announcing that
'Novino' batteries are manufactured in collaboration with
National Panasonic of Japan using National Panasonic -
techniques, and

(ii) the representation that 'Novino' batteries are manu-
factured by joint venture or collaboration with National
Panasonic was false and misleading and thereby causing
loss or injury to the consumers.
D
In its reply the Company (appellant before us) denied to have made
any wrong representation in the advertisements. It was asserted that
the Company has actually entered into a collaboration agreement with
M/s Mitsushita Electric Industrial Ltd. of Japan for the manufacture of
dry cell batteries, and was adopting the process for manufacturing
E 'Novino' batteries as is employed by Mitsushita Ltd. The agreement

-
has been duly approved by the Ministry of Industry, Government of
India. It is further stated that the Mitsushita Ltd. of Japan is better
known by its products described by the names "National" and "Pana-
sonic" and there is no question of misleading anybody by the descrip-
tion of the Japanese Company by its products. Rejecting the appel-
F !ant's explanation, the Commission passed the impugned order.

3. As i~ clear from the show cause notice, it has been assumed
that the appellant Company is manufacturing 'Novino' batteries in
collaboration with Mitsushita Ltd., but the question is whether, in the
circumstances, it can claim that it is making "batteries in collaboration
G with National Panasonic of Japan", and further whether the act, com-
plained of, will be cover,ed by the provisions of s. 36-B and 36-D of the
Act authorising the respondent Commission to make an enquiry and
issue appropriate directions. The expression "unfair trade practice"
has been defined in s. 36-A as a trade practice which adopts any or
more of the practices enumerated in the section. It has been contended
H before us by the learned counsel for the respondent, and the judgment
LAKHANPAL NATIONAL v. M.R.T.P. COMMISSION [SHARMA, J.J 983

~ under appeal also ho)ds, that the case is covered by clauses (i) and (v)
A
of s. 36-A(l) of the Act. The relevant portion of s. 36-A is reproduced
below:

"36A Definition of unfair trade practice.

In this part, unless the context otherwise requires, B
'Unfair trade Practice' means a trade practice which, for
the purpose of promotion the sale, use or supply of any
goods or for the provision of any services, adopts one or
more of the following practices and thereby causes loss or
injury to the consumers of such goods or services, whether
by 1!liminating or restricting competition or otherwise,
namely: c
(1) The practice of making any statement, whether
orally or in writing or by visible representation which,

(i) falsely represents that the goods are of a particular D
standard, quality, grade, composition, style or model;

(v). represents that the seller or the supplier has a sponsor-
ship or approval or affiliation which such seller or supplier E
does not have;"

r 4. It is the admitted position that "National" and "Panasonic"
are the names given by the Mitsushita Ltd. to some of its products, and
are not the names of the manufacturing company itself. The advertise-
ments XXX therefore, do not state correctly when they claim that the f
appellant Company is working in collaboration with "National" and
"Panasonic". Instead, they should have mentioned the Company by
its correct name in the advertisements. The question is as to whether
these advertisement come within the scope of clauses (i) and (v). The
Commission in the impugned judgment has said:
G
"It is true that the Director (Research) has not carried out
any practical research to discover how far the National &
Panasonic Batteries of Japan and the Novino Batteries
manufactured by the respondent company vary in or con-
form to quality, benefits and durability and to what extent
the use of the names Panasonic and National to signify H
984 SUPREME COURT REPORTS [1989) 2 S.C.R.

collaboration has been confusing for the customer in his
A
choice of Novino Battery. Yet I do feel that bearing in
mind the Indian conditions the use of National and Pana-
sonic to signify collaboration will have a misleading effect
on the minds of the common class of customers, particu-
larly when Novino Battery is projected in the setting of
B lidvertisement Ex. A-1/a side by side the National, Pana-
sonic and Techics Batteries."
1'
5. The show cause notice served on the appellant does not take
any exception to the use of the word "collaboration" in the advertise-
ment in question. The grievance is against the use of the names of the
product "National" and "Panasonic" in place of the Company which is
c manufacturing them. The issue thus is confined by the charge in the
show cause notice which is very limited in its scope. The Commission
has taken note of the case of the appellant that since "National" and
"Panasonic" are well-known names in India while their manufacturing
company, the Mitsushita Ltd., is not, the advertisements have
D mentioned the brand names instead of the manufacturing company;
but has refused to accept this plea as a good defence. We do not agree.

6. The Act as it originally stood did not contain any provision
for protection of consumers against false or misleading advertisements
or other similar and unfair ttade practices. By providing for measures
E against restrictive and monopolistic trade practices, it was perhaps
assumed that the consumers also, as a result, will get a fair deal.
However, experience indicated otherwise, and following the recom-
mendations of a Committee, it was considered necessary to amend the
Act. In the fast changing modern world of today advertising goods is a
well-recognised marketing strategy. The consumers also need it, as the
F articles which they require for their daily life are of a great variety and
the knowledge of an ordinary man is imperfect. If the manutacturers
make available, by proper publicity, necessary details about their pro-
ducts, they come as great help to the man in the street. Unfortunately,
some of the advertisements issued for this purpose make exaggerated
and sometime baseless representations about the quality, standard and
G performance, with an object of attracting purchasers. It was, there-
fore, considered necessary to have statutory regulations insisting that,
while advertising, the seller must speak the truth. Accordingly sections
36-A to 36-E in part B were inserted in Chapter V of the Act by an
amendment in 1984.

H 7. However, the question in controversy has to be answered by
LAKHANPAL NATIONAL v. M.R.T.P. COMMISSION [SHARMA, J.] 985

f construing the relevant provisions of the Act. The definition of "unfair
trade practice" ins. 36-A mentioned above is not inclusive or flexible,
A
but specific and limited in ·its contents. The object is to bring honesty
and truth in the relationship between the manufacturer and the con-
sumer. When a problem arises as to whether a particular act can be
condemned as an unfair trade practice or not, the key to the solution
would be to examine whether it contains a false statement and is mis- B
~ leading and further what is the effect of such a representation made by
'C the manufacturer on the common man? Does it lead a reasonable
person in the position of a buyer to a wrong conclusion? The issue can
not be resolved by merely examining whether the representation is
correct or incorrect in the literal sense. A representation containing a
statement apparently correct in the technical sense may have the effect
of misleading the buyer by using tricky language. Similarly a state- c
ment, which may be inaccurate in the technical literal sense can convey
the truth and sometimes more effectively than a literally correct state-
ment. It is, therefore, necessary to examine whether the representa-
tion, complained of, contains the element of misleading the buyer.
Does a reasonable man on reading the advertisement form a belief D
different from what the truth is? The position will have to be viewed
with objectivity, in an impersonal manner. It is stated in Halsbury's
Laws of England (Fourth Edition, paragraphs 1044 and 1045) that a
··~. representation will be deemed to be false if it is false in substance and
in fact; and the test by which the representation is to be judged is to
see whether the discrepancy between the fact as represented and the E
actual fact is such as would be considered material by a reasonable
representee. "Another way of stating the rule is to say that substantial
falsity is, on the one hand, necessary, and, on the other, adequate, to
establish a misrepresentation" and "that where the entire representa-
.., tion is a faithful picture or transcript of the essential facts, no falsity
is established, even though there may have been any number of F
inaccuracies in unimportant details. Conversely, if the general impres-
' sion conveyed is false, the most punctilious and scrupulous accuracy in

"" immaterial minutiae will nol ri:nder the representation true." Let us

.. examine the relevant facts of this case in this background.

8. The Mitsushita Ltd. is not a popular name in this country G
while its products "National" and "Panasonic" are. An advertisement
mentioning merely Mitsushita Ltd. may, therefore, fail to convey any-
thing to an ordinary buyer unless he is also told that it is the same
Company which manufactures products known to him by the names
"National" and "Panasonic". If such were the position, there would
not have been any scope for objection. However, in our view the same H
986 SUPREME COURT REPORTS [1989] 2 S.C.R.

A effect is produced by the impugned advertisements. It has to be
remembered that there is no other company with the name of
"National" and "Panasonic" and there is no scope for any confusion
on that score. Where the reference is being made to the standard of the
quality, it is not material whether the manufacturing Company is indi-
cated by its accurately correct name or by its description with
B reference to its products. We, therefore, hold that the erroneous
.....__
description of the manufacturing Company in the advertisements in
question does not attracts. 36-A of the Act, although we would hasten J
to add that it would be more proper for the appellant Company to give
the full facts by referring to Mitsushita Ltd. by its correct name and
further stating that its products are known by the names "National"
C and "Panasonic".

9. The learned counsel for the respondent Commission sug-
gested that the appellant was not entitled to claim "collaboration"
with the Japanese Company on the basis of the agreement mentioned
earlier. As the appellant Company is only getting technical knowledge
D and assistance under the agreement, it is not permissible to claim
'Novino' batteries as the product of joint venture. The argument was
rightly repelled on behalf of the appellant on the ground that this
aspect cannot be examined in the present case in view of the limited
scope of the charges as mentioned in the show cause notice quoted
above. If so advised, the Commission will have to hold a fresh inquiry
E after issuing another show cause notice if it desires to pursue this
aspect.

F
10. The learned counsel for the appellant also raised several
other points in support of the appeal, one of them being that from the
facts and circumstances of the case it can not be held that the im-
pugned advertisements are capable of causing any loss or injury to the
consumers. In view of our decision, as mentioned earlier, it is not
necessary to deal with the other arguments.
'
11. For the reasons mentioned above the impugned judgment is
set aside and the appeal is allowed, but in the circumstances, without
G costs.

N.V.K. Appeal allowed.