The Consumer Protection

Act, 1986
[Act No. 68 of Year 1986]
 Objects of the Act
To provide for better protection of the
interests of consumers and
For that purpose to make provision for the
establishment of consumer councils and
other authorities
To empower the Consumer Councils and
other authorities for the settlement of
consumers' disputes and for matters
connected therewith.
 Basic Definitions
(d) 'consumer' means any person who
buys any goods for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes
any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised, or under any
system of deferred payment when such use is made with the approval of such
person, but does not include a person who obtains such goods for resale or
for any commercial purpose; or

hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred
payment and includes any beneficiary of such services other than the person
who 'hires or avails of the services for consideration paid or promised, or partly
paid and partly promised, or under any system of deferred payment, when such
services are availed of with the approval of the first mentioned person but does
not include a person who avails of such services for any commercial
purposes;
Explanation: For the purposes of this clause, commercial purpose does
not include use by a person of goods bought and used by him and services
availed by him exclusively for the purposes of earning his livelihood by
means of self-employment;
Basic Definitions
(f) 'defect' means any fault, imperfection or shortcoming
in the quality, quantity, potency, purity or standard which
is required to be maintained by or under any law for the
time being in force under any contract, express or
implied or as is claimed by the trader in any manner
whatsoever in relation to any goods.

(g) 'deficiency' means any fault, imperfection,

shortcoming or inadequacy in the quality, nature and
manner of performance which is required to be
maintained by or under any law for the time being in
force or has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation
to any service
Basic Definitions
(b) 'complainant' means
(i) a consumer; or
(ii) any voluntary consumer association registered under the
Companies Act, 1956 (1of 1956) or under any other law for the time
being in force; or
(iii) the Central Government or any State Government,
(iv) one or more consumers, where there are numerous consumers
having the same interest;
(v) in case of death of a consumer, his legal heir or representative;
who or which makes a complaint
 complaint
(c) 'complaint' means any allegation in writing made by a complainant that
(i) an unfair trade practice or a restrictive trade practice has been adopted by any
trader or service provider;
(ii) the goods bought by him or agreed to be bought by him; suffer from one or more
defects;
(iii) the services hired or availed of or agreed to be hired or availed of by him suffer
from deficiency in any respect;
(iv) a trader or service provider, as the case may be, has charged for the goods or
for the service mentioned in the complaint a price in excess of the price
(a) fixed by or under any law for the time being in force
(b) displayed on the goods or any package containing such goods ;
(c) displayed on the price list exhibited by him by or under any law for the time being in
force;
(d) agreed between the parties;
(v) goods which will be hazardous to life and safety when used or being offered for
sale to the public,--
(A) in contravention of any standards relating to safety of such goods as required to be
complied with, by or under any law for the time being in force;
(B) if the trader could have known with due diligence that the goods so offered are unsafe
to the public;
(vi) services which are hazardous or likely to be hazardous to life and safety of the
public when used, are being offered by the service provider which such person
could have known with due diligence to be injurious to life and safety;;
Basic Definitions
(nnn) restrictive trade practice means a trade
practice which tends to bring about manipulation of price
or conditions of delivery or to affect flow of supplies in
the market relating to goods or services in such a
manner as to impose on the consumers unjustified costs
or restrictions and shall include
(a) delay beyond the period agreed to by a trader in supply of such
goods or in providing the services which has led or is likely to lead
to rise in the price;
(b) any trade practice which requires a consumer to buy, hire or
avail of any goods or, as the case may be, services as condition
precedent to buying, hiring or availing of other goods or services;
Basic Definitions
(i.) 'goods' means goods as defined in the Sale of
Goods Act, 1930
(o) 'service' means service of any description which is
made available to potential users and includes, but not
limited to, the provision of facilities in connection with
banking, financing insurance, transport, processing,
supply of electrical or other energy, board or lodging or
both, housing construction, entertainment, amusement
or the purveying of news or other information, but does
not include the rendering of any service free of charge or
under a contract of personal service;
Basic Definitions
(r) 'unfair trade practice' means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or for the provision of any
service, adopts any unfair method or unfair or deceptive practice including
any of the following practices, namely;
(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 standard, quality,
quantity, grade, composition, style or model;
(ii) falsely represents that the services are of a particular standard, quality or
grade;
(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old
goods as new goods;
(iv) represents that the goods or services have sponsorship, approval,
performance, characteristics, accessories, uses or benefits which such goods or
services do not have;
(v) represents that the seller or the supplier has a sponsorship or approval or
affiliation which such seller or supplier does not have;
(vi) makes a false or misleading representation concerning the need for, or the
usefulness of, any goods or services;
Basic Definitions
(vii) gives to the public any warranty or guarantee of the
performance, efficacy or length of life of a product or of any goods
that is not based on an adequate or proper test thereof;
Provided that where a defense is raised to the effect that such warranty
or guarantee is based on adequate or proper test, the burden of proof of
such defense shall lie on the person raising such defense;
(viii) makes to the public a representation in a form that purports to
be
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof
or to repeat or continue a service until it has achieved a specified result,
if such purported warranty or guarantee or promise is materially
misleading or if there is no reasonable prospect that such warranty,
guarantee or promise will be carried out;
(ix) materially misleads the public concerning the price at which a
product or like products or goods or services, have been or are,
ordinarily sold or provided
 Rights of Consumers
Right to Safety
the right to be protected against the marketing of goods and services
which are hazardous to life and property;
Right to be Informed
the right to be informed about the quality, quantity, potency, purity,
standard and price of goods or services, as the case may be so as to
protect the consumer against unfair trade practices;
Right to Choose
the right to be assured, wherever possible, access to a variety of goods
and services at competitive prices;
Right to be Heard
the right to be heard and to be assured that consumer's interests will
receive due consideration at appropriate forums;
Right to Seek Redressal
the right to seek redressal against unfair trade practices or restrictive
trade practices or unscrupulous exploitation of consumers; and
Right to Education
the right to consumer education.
Consumer Disputes Redressal Agencies

Secs 928 of the Consumer Protection Act deal with the establishment,
jurisdiction, and functioning of the District Forum, State Commission, and
the National Commissionthe agencies to deal with consumer redressal
Consumer Redressal System

Filing a complaint under Sec. 9A of the Act : a complaint may be filed

on a complaint form or even on a simple paper, which must have the
following important details:
(a) The name and address of the complainant and the opposite party
(b) Facts of the case
(c) Documents in support of the allegations
(d) The relief which the complainant is seeking
(e) It must be signed by the complainant or his authorized agent
(f) Please note: no lawyer is required

Limitation period: Under Sec. 24A of the Act, the grievance must be
filed with any of the redressal forum within the 2 years from the date on
which the cause of action has arisen.
Consumer Redressal System
Procedure on admission of complaint: Under the Consumer Protection
Amendment Act, 2002, Secs 13, 18, and 22, upon admission of the
complaint, the appropriate authority shall refer a copy of the same to the
opposite party, directing him to present his version within 30 days, which
may be extended by another 15 days. In the event the opposite party
denies and fails to do anything about it, the authority shall conduct
necessary investigation within 45 days and then issue an appropriate
order.

Final orders: Under Sec. 24 of the Act, the orders of the agencies will be
final if no appeal has been preferred against such orders.

Appeals: Under Sec. 15 of the Act, appeals against the district forum will
be made to the state commission. Under Sec. 19 of the Act, the state
commission appeals will be made to the central commission.
Consumer Redressal System
Enforcement of orders: Under Sec. 25 of the Act, the authority
may take such action as attachment of the property not
complying with the orders, and will appropriately execute the
order in favour of the aggrieved.

Penalties: Under Sec. 27A, the penalties for not complying with
an order may be not less than `2000 and not above `10,000, and
imprisonment ranging from a month extended to three years;
both fines as well as imprisonments may be imposed.

Dismissal of frivolous or vexatious complaints: Under Sec. 26 of

the Act, the authorities have the power to dismiss as well as to
penalize frivolous or vexatious complaints and to impose fine not
exceeding `10,000.
CASE

Section 2(d): Consumer means any person who:

(i): Buys any good for consideration ...or

(ii) hires or avails of any services for a

consideration

Abhijit bought a television set for using it at

home from an electronics store. The television
was defective. Is Abhijit a consumer?

16
CASE

Section 2(d): Consumer means any person who:

(i): Buys any good for consideration ...or

(ii) hires or avails of any services for a

consideration

Sumit took a cell phone connection for personal

use from a cell phone company under a pre-paid
plan. The service was deficient.

17
CASE

Raman bought an electric iron for using it at

home for his family. In the first use itself, while
his wife Rima was using it, there was a spark
from the iron, injuring Rima.

Is Raman a consumer? Is Rima a consumer?

18
CASE

Anand runs a laundry shop. He bought a

washing machine from an electronics shop for
using in his shop. The machine was installed in
his shop. The machine was defective from the
time it was delivered.

Is Anand a consumer?

19
CASE

Balu is a distributor for computer accessories.

He bought 100 pen drives from the
manufacturers for selling to other computer
vendors.

Is Balu a consumer?

20
CASE

Arvind bought cycles for the purpose of hiring it

out to tourists visiting the area. Santosh was a
tourist who had hired a cycle. The cycles were
defective. The handle of the cycle broke injuring
Santosh.

Are Arvind and Santosh consumers?

21
CASE

Baman bought a laptop and gifted it to his son,

Suman. Suman is a tax consultant and uses the
laptop for his business.

Are Baman and Suman consumers?

22
CASE

Abhijit bought a pressure cooker for using it at

home. He had paid only 30% of the price will
buying it. The remaining 70% was to be paid a
week later. The pressure cooker was defective.
It burst in the second use.

Is Abhijit a consumer?

23
CASE

Sujit bought a pressure cooker for using it at

home. The money for it was to be paid next
week. The pressure cooker was defective. It
burst in the second use.

Is Sujit a consumer?

24
CASE

Suman bought a cell phone for personal use.

The payment for the phone was to start next
month. The payment was to be done in six
monthly instalments. The phone was defective.

Is Suman a consumer?

25
CASE

A manufacturer of pens was distributing its pens

free to the visitors of an exhibition. The pens
were defective and leaking. The pens spoilt the
clothes of several persons. Sweta is one of the
persons who has spoilt her clothes.

Is she a consumer?

26
LAXMI ENGINEERING WORKS
VS.
PSG INDUSTRIAL INSTITUTE

27
CONSUMER:
LEGAL PROVISION
ExplanationFor the purposes of sub-clause (i),
commercial purpose does not include use by a
consumer of goods, bought and used by him
exclusively for the purpose of earning his
livelihood, by means of self-employment;

28
JUDGEMENT: SUPREME COURT

The explanation reduces the question, what is a

"commercial purpose", to a question of fact to be
decided in the facts of each case. It is not the
value of the goods that matters but the purpose
to which the goods bought are put to. The
several words employed in the explanation, viz.,
"uses them by himself", "exclusively for the
purpose of earning his livelihood" and "by
means of self-employment" make the intention
of Parliament abundantly clear, that the goods
bought must be used by the buyer himself, by
employing himself for earning his livelihood.
29
 Cont

A person who purchases an auto-rickshaw to ply

it himself on hire for earning his livelihood would
be a consumer. Similarly, a purchaser of a truck
who purchases it for plying it as a public carrier
by himself would be a consumer. A person who
purchases a lathe machine or other machine to
operate it himself for earning his livelihood would
be a consumer.

30
 Cont

As against this a person who purchases an

auto-rickshaw, a car or a lathe machine or other
machine to be plied or operated exclusively by
another person would not be a consumer. This
is the necessary limitation flowing from the
expressions "used by him", and "by means of
self-employment" in the explanation. The
ambiguity in the meaning of the words "for the
purpose of earning his livelihood" is explained
and clarified by the other two sets of words.

31
BALA ENTERPRISES
VS.
CHIEF POST MASTER
GENERAL

32
FACTS

Bala Enterprises sent cut and polished

diamonds to M/s. Nofi Jewellers, Dubai by
Speed Post through the Foreign Post Office in
Delhi. The consignments did not reach their
destination. Bala Enterprises filed a case for
damages and compensation. According to the
Foreign Post Office, the diamonds, after
completion of necessary formalities, were
handed over to Emirate Airlines and were to be
airlifted by its flight No. EK-703 dated
26.11.1995.
33
 Cont

All was not well when the consignment reached

Dubai Airport. Case of the Foreign Post Office
thus was that mischief took place only after the
bag containing consignments had been handed
over to Emirate Airlines staff. Bala Enterprises
applied to make Emirates Airlines a party to the
case. This is called impleading the party.

Can this be allowed?

34
JUDGEMENT:
NATIONAL COMMISSION

It is difficult to understand how on the averment

of the Foreign Post Office, complainant can
claim any cause of against Emirate Airlines.
There was no privity of contract between the
complainant and the Emirate Airlines.
Complainant did not pay any charges to the
Emirate Airlines to carry the goods to Dubai.

35
K SYED MOHAMED COMPANY
VS.
PUNJAB NATIONAL BANK

36
FACTS

K. Syed Mohamed Company is based in

Singapore. He has account with the Indian Bank,
Singapore. The Indian Bank in Singapore sent to
the Punjab National Bank relevant documents
for presentation to the buyer in India. The
Punjab National Bank failed to do this.

37
JUDGEMENT:
NATIONAL COMMISSION

It is not the bank of the complainant (Company)

and there is no consideration, which passed
through the complainant to the opposite party
(PNB) to hold the opposite party (PNB) guilty of
negligence and thus deficiency in service. This
complaint fails.

38
R. BALRAJ
VS.
GRINDLAYS BANK AND THE
STATE BANK OF INDIA

39
FACTS

Mr. Budhar has a bank account with the

Grindlays Bank, Bombay Branch. He requested
the bank to make Telegraphic Transfer of
money to his brother T. Balraj in his account in
the State Bank of India, Kaveripattinam. The
Grindlays Bank in Bombay transferred the
money through the State Bank of India in
Mumbai. By mistake, the State Bank of India
sent the money to its Dharmapuri District
Branch. It was a telegraphic transfer to
expeditiously receive money, Mr. Balraj received
the money after two and half months.
40
 Cont

Mr. Balraj moved the State Commission against

the Grindlays bank and the State Bank of India
claiming compensation for negligence and
deficiency in service.

41
JUDGEMENT:
NATIONAL COMMISSION
Neither the complainant nor his brother had hired
the services of the State Bank of India at any time
for any consideration. There was no privity of
contract or hiring of the services of the State Bank of
India. The State Bank of India acted only as agent of
the Grindlays Bank in effecting transfers and is thus
not responsible to the complainant or his brother .
The complainant is not a consumer qua the State
Bank of India. A consumer means any person who
hires or avails of any service for consideration. It
cannot be said on the facts established on record
that the complainant is a consumer who has hired
the services of the State Bank of India for
consideration. The complaint against the State Bank
of India, therefore fails on this short ground and is
hereby dismissed.
42
GAUHATI COOPERATIVE
URBAN BANK LIMITED
VS.
SANTOSH KUMAR TEWARI

43
FACTS

Santosh Kumar Tewari, in response to an advertisement,

applied in the prescribed form for allotment of equity
shares of Rs. 10/- each of Tata Elaxi Ltd. He was
unsuccessful in getting the allotment. The company sent
refund vouchers, through its banker, the Gauhati
Cooperative Urban Bank Limited. The refund voucher
was an account payee cheque in favour of Santosh
Kumar Tewari. It appears that the Bank did not send the
cheque by registered post. The next Mr. Tiwari learnt
was that the cheque was encashed from one of their
branches. Another person had managed to get
possession of the cheque, created an account
pretending to be Mr. Tewari and encashed the cheque.
This had happened to several people. 44
 Cont

The Reserve Bank of India investigated the

fraud. According to its investigations, in most of
the cases the branch officials of the Banks had
not strictly followed guidelines/instructions for
opening new account and which facilitated
fraudulent encashment. The Reserve Bank of
India had advised that as per the existing
instructions the Banks are expected to
reimburse the genuine investors/account
holders.

45
JUDGEMENT:
NATIONAL COMMISSION
Hiring of services for consideration is a condition
precedent to make a person consumer. The
complainants (Tiwari and others) had to
establish the hiring of the services for
consideration. In fact no evidence was led by the
complainants before the State Commission that
the services of the Appellant or other Banks
were hired by the complainants for
consideration.

46
BANK OF INDIA
VS .
H.C.L. LIMITED

47
FACTS
HCL Ltd. is engaged in the business of manufacturing,
leasing and selling computers. It entered in an
agreement with Dealwell Estates Pvt. Ltd. to supply it
computer equipment. Towards supply of equipment,
HCL Ltd. got DealWell Ltd. to arrange an irrevocable
bank guarantee in its favour. DealWell arranged for this
with the Bank of India. The Company invoked the bank
guarantee and asked the Bank to make the payment.
The bank refused to make the payment. The HCL Ltd.
filed a complaint before the State Commission claiming
deficiency in service. The case has come before the
National Commission in appeal. The bank has raised the
contention that the Company there is no privity of
contract and thus, the company is not a consumer.
48
JUDGEMENT:
NATIONAL COMMISSION

The bank guarantee got issued by the Firm

(DealWell) from the Bank favouring the
Company (HCL). Company is therefore clearly
the beneficiary of the contract of service that is
entered into between the Firm and the Company
and, therefore, the Company falls under the
definition of "consumer" as given in Section
2(1)(d) of the Act.

49
MUMBAI GRAHAK PANCHAYAT
VS.
DR. RASHMI B. FADNAVIS

50
FACTS

Dr. Fadnavis, gynaecologist, operated upon Mrs.

Pilanker, who died immediately after the
operation. It was a case of medical negligence.
The anaesthetist was arranged by Dr. Fadnavis.
The State Commission gave an order that there
was no privity of contract between the
Anaesthetist and the patient. Thus, even if the
Anaesthetist was negligent, the patient would
not have a claim against him. The case came
before the National Commission.

51
JUDGEMENT:
NATIONAL COMMISSION
The National noted the following two points:

1. Services of the Anaesthetist are invariably paid

for by the patients themselves, their charges
being generally shown separately in the bill.

2. CPA defines consumer as one who "hires or

avails of any services for a consideration"; this
definition does not refer to any privity of
contract for that purpose.
52
 Cont

Section 2(1)(g) defines "deficiency in service" as:

fault, imperfection or shortcoming or inadequacy

in the to be maintained by or under any law for
the time being in force or has been undertaken
to be performed by a person in pursuance of a
contract or otherwise in relation to any services."

53
 Cont

The words "in pursuance of a contract or

otherwise" in the Section make it amply clear
that a privity of contract is not needed for a claim
to be made under CPA, so long as there is hiring
or availing of services for a consideration. Thus,
the Anaesthetist who participated in the process
of delivery of medical services to the beneficiary
is as much liable as the main surgeon herself if
her negligence had been established.

54
SPRING MEADOWS HOSPITAL
VS.
HARJOT AHLUWALIA
THROUGH K. S. AHLUWALIA

55
FACTS

Harjot, a minor brought in to the hospital. Wrong

medication injected to the child. Child collapsed. He
had to be put on manual respirator.

All India Medical Institute doctors examined Harjot

and informed the parents that the child is critical and
even if he would survive, he would live only in a
vegetative state.

The National Commission awarded damages to

Harjot and Mr. and Mrs. Ahluwalia for their suffering.

56
CONTENTION OF THE HOSPITAL
1. No payment has been made to the hospital. Thus,
within the Consumer Protection Act, it cannot be
said that the services of the hospital has been
availed for consideration.

2. The complaint has been filed by the Harjot, through

his parents. It is only Harjot who can be a
consumer under the Consumer Protection Act. As
Mr. and Mrs. Ahluwalia are not consumers, the
Commission cannot award them compensation for
their mental agony and suffering. Thus, the award
of Rs. 5 lakhs to them was not justified. A
reference was made to the definition of consumer
and Section 14 on award by consumer
forum/commission.

57
JUDGEMENT:
SUPREME COURT
When a young child is taken to a hospital by his
parents and the child is treated by the doctor,
the parents would come within the definition of
consumer having hired the services and the
young child would also become a consumer
under the inclusive definition being a beneficiary
of such services. The definition clause being
wide enough to include not only the person who
hires the services but also the beneficiary of
such services, which beneficiary is other than
the person who hires the services
58
SIGNET CORPORATION
VS.
MCD

59
FACTS

Clauses (a) to (x) of Section 42 of the Delhi Municipal

Corporation Act, 1957 enumerate the obligatory
functions which the Corporation is required to
discharge under the Act.

(a) The construction, maintenance and cleaning

of drains and drainage works and of public
latrines, urinals and similar convenience;

(c) The scavenging, removal and disposal of filth,

rubbish and other obnoxious or polluted matters;"

60
JUDGEMENT:
NATIONAL COMMISSION
This is not a work to be performed by the
Corporation under any arrangement of hiring of
service for consideration entered into between it
and any private party.

It is well established by the rulings of the

Supreme Court as well of this Commission that
payment of a tax which is levied in the exercise
of the sovereign function of the State cannot
constitute consideration even remotely as quid
pro quo for any service rendered or likely to be
rendered
61
SC: IMA V. SANTHA

A contention has also been raised that even in

the Government hospitals/health
centres/dispensaries where services are
rendered free of charge to all the patients the
provisions of the Act shall apply because the
expenses of running the said hospitals are met
by appropriation from the Consolidated Fund
which is raised from the taxes paid by the tax
payers. We do not agree.

62
 Cont

The essential characteristics of a tax are that (i)

it is imposed under statutory power without the
taxpayers consent and the payment is enforced
by law; (ii) it is an imposition made for public
purpose without reference to any special benefit
to be conferred on the payer of the tax and (iii) it
is part of the common burden, the quantum of
imposition upon the tax payer depends generally
upon his capacity to pay.

63
 Cont

. tax paid by the person availing the service at

a Government hospital cannot be treated as a
consideration or charge for the service rendered
at the said hospital and such service though
rendered free of charge does not cease to be so
because the person availing the service
happens to be a tax payer.

64
 Cont

The Supreme Court identified three categories:

1. Fully free for all (including nominal registration

charge)
2. Paid for
3. Free for those who cannot afford

65
 Cont

it is necessary to bear in mind that the Act

has been enacted "to provide for the protection
of the interests of "consumers" The protection
that is envisaged by the Act, is protection for
consumers as a class. The word "users" (in
plural), `potential users' enable a complaint
to be filed by any recognised consumer
association or one or more consumers where
there are numerous consumers lend support
to the view that the Act seeks to protect the
interest of consumers as a class.

66
SECTION 3

Section 3: Act not in derogation of any law: The

provisions of this Act shall in addition to and not
in derogation of the provisions of any law for the
time being in force.

67
POST OFFICE, MADRASV DR.
U. SHANKER RAO

68
FACTS

A person sent a consignment of handloom

towels by lorry. The lorry receipt was sent to the
Syndicate bank by registered post for the buyer
to collect by paying. The next the person heard
was that the Syndicate bank never received the
registered letter and another person had
produced the lorry receipt and collected the
consignment.

69
SECTION 6:
POST OFFICE ACT, 1898

6. Exemption from liability for loss,

misdelivery, delay or damage.- The
Government shall not incur any liability by
reason of the loss, misdelivery or delay of, or
damage to, any postal article in course of
transmission by post, except in so far as such
liability may in express terms be undertaken by
the Central Government as hereinafter provided

70
JUDGEMENT:
NATIONAL COMMISSION

Section 3 of the Act clearly lays down that the

Provisions of the Act are "in addition to but not in
derogation of the" provisions of any other law for
the time being in force. This shows that the Act
provides additional means of obtaining remedy
by a consumer but if the remedy is barred under
any other Act, then the various Forums
constituted under the Act cannot grant the
remedy prayed for.

71
SUPERINTENDENT OF POST
OFFICER AND ORS
VS.
UPOVOKTA SURAKSHYA
PARISAD

72
FACTS

A person lost admission in ITI because the local

post office delivered the letter a week after the
stamp indicating the day on which it was
received.

73
JUDGEMENT:
NATIONAL COMMISSION

In the present case, however, what we find is

that even under the provision of Section 6, as it
is, there is a patent default on the part of the
Postal Department based on the admission of
the peon that the letters were stamped late and
delivered late resulting in a loss of one year in
the educational career of the recipient. Not doing
something what one ought to do is also an act of
Will and, therefore, covered by "wilful act"
mentioned in Section 6 as one of the
circumstances, where, the liability can be fixed
on the Postal Department and its functionaries. 74
MRS. HELEN WALLIA
VS.
CATHAY PACIFIC AIRWAYS
LIMITED

75
LETTER FROM CATHAY PACIFIC
Our immediate concern is to settle your claim.
As stated in our passenger ticket, airlines liability
for checked baggage is limited to 20 USD per
kilo unless a higher value is declared in advance
and additional charges are paid prior to the
commencement of carriage. For passengers
travelling on the transpacific route. Canada and
USA, the maximum weight of each piece of
checked baggage is 32 Kilos. This therefore,
allows us to settle your claim for USD 640. We
do try to settle all baggage claims in a manner
that will result in mutual satisfaction as we are a
service industry and customer satisfaction is all
important.
76
CARRIAGE BY AIR ACT, 1972.

Rule 22(2) (a) In the carriage of registered

baggage and of cargo, the liability of the carrier
is limited to a sum of 250 francs per kilogram,
unless the passengers or consignor has made,
at the time when the package was handed over
to the carrier, a special declaration of interest in
delivery at destination and has paid a
supplementary sum if the case so requires. In
that case the carrier will be liable to pay a sum
not exceeding the declared sum, unless he
proves that, that sum is greater than the
passengers or consignors actual interest in
delivery at destination. 77
RULE 25

25. The limits of liability specified in rule 22 shall

not apply if it is proved that the damage resulted
from an act or omission of the carrier, his
servants or agents, done with intent to cause
damage or recklessly and with knowledge that
damage would probably result; provided that in
the case of such act or omission of a servant or
agent, it is also proved that he acting within the
scope of his employment.

78
JUDGEMENT:
NATIONAL COMMISSION
If we examine the provisions of Carriage by Air
Act, 1972, there is a limit placed on the liability of
the carrier where damages can be awarded @
US $ 20 per Kg of the weight of the lost
baggage. This limit would not apply if it was
done with the intent to cause damage or
recklessly and with knowledge that damage
would probably result. There is no such plea in
spite of assertion by the learned counsel for the
complainant that the baggage of the
complainant was lost intentionally by the
opposite party. We do not find any merit in this
complaint. It is dismissed. 79
BHARATI KNITTING COMPANY
VS.
DHL COURIER

80
FACTS

Bharati Knitting sent important original documents

relating to an export consignment to a party in
Germany with DHL. Only the original documents
would have enable the party in receiving the
consignment. DHL lost the courier causing losses to
Bharati Knitting. Bharati Knitting was demanding the
actual losses suffered by it.

DHL made its customers sign a form containing the

terms. Clause 5 of the terms of courier had limited
the liability of the DHL in the event of loss of courier
to $100.
81
JUDGEMENT:
CONSUMER COURT
It is manifest that the appellant ( DHL) was
negligent in not delivering the consignment
and due to the deficiency in service the
consignment was lost. and because of the
negligence, loss has occurred to the
complainant (Bharati). However, we are of the
view that the loss has to be restricted as per the
terms of the contract. Under clause 5 of the
agreed terms the liability of the appellant for any
loss or damage to the shipment is limited to the
lesser of US $ 100 or the amount of loss actually
sustained In this case, therefore, the loss has
to be restricted in the sum of US $ 100.
82
JUDGEMENT:
SUPREME COURT
a person who signed, a document containing
contract and terms is normally bound by them
even though he has not read them, and even
though he is ignorant of their precise legal effect.

(The only exceptions are obtaining signature by

coercion, fraud or misrepresentation)

83
ADVERTISING AND UNFAIR TRADE
PRACTICES

84
 The following claims are made in
advertisements without basis. Identify whether
these are Unfair Trade Practices, with reference
to the provisions.

85
CASE

Water was being sold as mineral water.

Fabric was advertised as pure cotton when it

was cotton-polyester mix.

A bank claims to provide 24 hours service.

A mutual fund advertises to have certain

performance ratings conducted by a rating
organisation.
86
 Cont...

A car company advertises that the car

components are made by Suzuki in Japan.

A company claims that the washing machines

goods are made by technology from a reputed
company, while the company is still negotiating
for a joint venture.

A software advertises to be an associate of IBM

when it only uses IBM machines.

87
TRUSTWEL INC

TMH Copyright 2010 88

ADVERTISEMENT
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We can advance you term loans at easy rates of
interest against mortgage of immovable property -
land, buildings, factory and project finance.
And we have loans tailor-made for a variety of needs.
For business expansion or diversification. For new
ventures or new projects. For additional working
capital or to purchase existing property. Come to
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We're on your side.
Trust us. We'll help you build a better life.

89
JUDGEMENT:
MRTP Commission
advertisement categorically misled prospective
borrowers that the respondent's services are of a
particular standard of quality, and that they have
uses or benefits which they do not have.
Furthermore, the respondent has made a false and
misleading representation concerning the
usefulness of its services of advancing loans to
industrialists and businessmen. The impugned
advertisement offers a further representation
purporting to be a guarantee in respect of the
respondent's services of advancing loans which
guarantee has been materially misleading and false.
unfair trade practices attracting the provisions of
Section 36A(1)(ii), (iv), (vi) and (viii) of the Act.
90
 Cont

by the use of the word 'Inc.' in its name, the

respondent has created a false impression that it
is a company incorporated under the company
laws of U.K. or U.S.A. The respondent has
merely denied this allegation but has not
established its innocence in any manner. use
of the expression 'Inc.' certainly tends to mislead
the readers of the advertisement that the
respondent is incorporated under the U.K. or
U.S.A. company law.

91
NOVINO BATTERIES

92
FACTS

Lakhanpal National Limited manufactures `Novino'

batteries in collaboration with Mitsushita Electric
Industrial Co. Ltd., Japan. It put out advertisements
that `Novino' batteries were manufactured in
collaboration with National Panasonic of Japan
using National Panasonic techniques. There is no
entity called National Panasonic with which
Lakhanpal National Limited could have got into
collaboration. Mitsushita Electric Industrial Co. Ltd.
manufactures products which it has named
"National" and "Panasonic".

93
JUDGEMENT:
SUPREME COURT
the key to the solution would be to examine
whether it contains a false statement and is
misleading and further what is the effect of such
a representation made by the manufacturer on
the common man? Does it lead a reasonable
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.

94
 Cont

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 statement, which may be inaccurate in
the technical literal sense can convey the truth and
sometimes more effectively than a literally correct
statement. It is, therefore, necessary to examine
whether the representation, complained of, contains
the element of misleading the buyer. Does a
reasonable man on reading the advertisement from
a belief different from what the truth is? The position
will have to be viewed with objectivity, in an
impersonal manner.

95
 Cont

The Mitsushita Ltd., is not a popular name in this

country while its products "National" and
"Panasonic" are. An advertisement mentioning
merely Mitsushita Ltd., may, therefore, fail to convey
anything 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 effect is produced by the
impugned advertisements.

96
 Cont

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 indicated by its
accurately correct name or by its description with
reference to its products. We, therefore, hold that
the erroneous description of the manufacturing
company in the advertisements in question does not
attract Section 36-A of the Act

97
JAMILA KHATOON CASE

98
FACTS
Jamila Khatoon purchased a five horsepower
pumpset for Rs. 5,208 from Jaynco Engineering
Company on 9th June, 1989. Jaynco gave a
one-year guarantee for satisfactory performance
of the pumpset, including timely repair or
replacement in case of any defect. The machine
went out of order within a few months of the
purchase. Despite repeated requests by Jamila
Khatoon, Jaynco did not set the machine right
nor replace it. Thus, the pumpset almost did not
work at all. She had claimed the following
damages before the Monopolies and Restrictive
Trade Practices Commission.
99
 Cont

1.cost of pump (mono-block) set: Rs. 5,

208.00
2. interest at 12 per cent
for 24 months: Rs. 1,
249.92
3. loss of crop for four seasons: Rs. 24,
000.00

Total: Rs. 30,

457.92
100
JUDGEMENT:
MRTP COMMISSION
We hold that the applicant has suffered loss as a
consequence of the unfair trade practice
indulged in by the respondent in terms of
clauses (vii) and (viii) of section 36A(1) of the
said Act.

101
 Cont

As regards the amount of compensation, the

applicant is entitled to a total refund of the price
paid by her plus interest at 12 per cent per
annum for two years under heads (i) and (ii)
above.

102
 Cont

The loss under head (iii) is not at all proved.

Apparently, if the machine did not work at all, the
applicant cannot be heard to say that she should have
earned a sum of Rs. 24, 000 by irrigating the crop with
the help of the said machine. There is not an iota of
evidence on record to show that the applicant owns any
agricultural land or that she has suffered any additional
loss by reason of non-workability of the machine
purchased by her. A reasonable person under such
circumstances must be presumed to have his/her work
done by purchasing or hiring another machine. So the
claim made under head (iii) above cannot be allowed
for want of evidence.

103
COMPARATIVE ADVERTISING

104
LEGAL PROVISION

Sec 36 A (1) the practice of making any

statement, whether orally or in writing or by
visible representation which, -

XXX

(x) gives false or misleading facts disparaging

the goods, services or trade of another person.

105
REGAUL V. UJALA

A television advertisement promoting Ujala liquid

blue showed that 2-3 drops were adequate to
bring striking whiteness of clothes while several
spoons of other bands were required. A lady
holding a bottle of Ujala was looking down on
another bottle and exclaiming chhi, chhi, chhi!
in disgust. The Commission elaborated the
meaning of the provision:

106
 Cont

In order to bring home a charge under clause (x) of

section 36A(1) it must be established that the
disparagement is of the goods, services or trade of
another. ... the words "goods of another person"
have a definite connotation. It implies
disparagement of the product of an identifiable
manufacturer.

The Commission was of the view that a mere claim

to superiority in the quality of one's product by itself
is not sufficient to attract clause (x).

107
COLGATE V. VICCO

In a television advertisement promoting Vicco

tooth powder, a can of oval shape, without any
label, is shown. White powder coming out from
the can was described as useless. The shape
and colour combination of the can shown in the
television commercial resembled Colgates tooth
powder can.

108
COLGATE DENTAL DOUBLE
PROTECTION
... for the purpose of disparaging something or
some product, some comparison with what is
inferior is necessary. ... disparagement or an act
of disparaging would occur only by comparison
with some identifiable product

... the words "goods of another person" have a

definite connotation. It implies disparagement of
the product of an identifiable manufacturer

109
 Cont

The word 'ordinary' has to be understood in

contradistinction with the word special,
uncommon, unusual, extraordinary and the like
synonyms. The word 'ordinary' is defined to
mean customary, usual or normal, of the usual
kind, not distinguished in any important way from
others.... not characterised by peculiar or
unusual circumstances. The word 'ordinary' as
an adjective would not refer to any particular or
special item, product or thing.

110
INTERIM INJUNCTION-
PEPSODENT
... not free from all sorts of complications and
complexities. It is not shown to us how many
manufacturing units the respondent has for its
toothpaste production. It is also possible that it
might get its toothpaste products manufactured
by some small scale units on supply of its
formulations. It would, therefore, be difficult
exactly to find out what would be the extent of
injury in clear terms on account of loss of the
market share in toothpaste on the part of
Colgate.
111
 Cont

... such comparisons might affect the sales of

similar products and more particularly, of the
product which enjoys the market leadership.

As against this, the respondent is not likely to

suffer much on account of grant of interim relief
inasmuch as the amount saved on the
advertisement
campaign at present can always be spent with
greater vehemence and vigour if it ultimately
succeeds at trial.
112
HOLDING OF GAMES, LOTTERY
AND SCHEMES

113
LEGAL PROVISION
Section 36-A. .... In this Part, unless the context
otherwise requires "unfair trade practice" means
a trade practice which, for the purpose of
promoting the sale, use or supply of any goods
or for the provisions of any services, adopts any
unfair method or unfair or deceptive practice
including any of the following practices,

XXX

114
 Cont

permits

(a) the offering of gifts, prizes or other items with

the intention of not providing them as offered or
creating the impression that something is being
given or offered free of charge when it is fully or
partly covered by the amount charged in the
transaction as a whole.

(b) the conduct of any contest, lottery, game of

chance or skill, for the purpose of promoting,
directly or indirectly, the sale, use or supply of
any product or any business interest;

115
CASE : USHA FANS

Usha International Ltd. had announced a gift

scheme to promote Usha fans where a person
could get a discount of Rupees 30 or opt to be a
part of the scheme which entitled him to prizes
through a draw.

116
CASE : WHIRLPOOL

Towards the end of January 1997, Whirlpool Ltd.

had launched a 'Scratch a Gift Scheme'. Every
purchaser of Whirlpool refrigerator or washing
machine was to pick a card and scratch the
opaque strip on the card. Underneath the
opaque surface, the gift offered was mentioned.
This became visible on scratching the card. The
gifts ranged from one kilogram of Aerial washing
powder to a two-bed room apartment.

117
CASE : COCA-COLA

Coca Cola Ltd. had introduced a promotional

scheme for its drink Coke. A lucky winners could
get a flat in Mumbai, Honda City Car, Mobile
phones and Walkmans. The case was brought
before the Commission by its rival Pepsi.

118
CASE : HORLICKS

The HMM limited, manufactured and marketed

Horlicks. In September 1985, it advertised a
scheme called the "Hidden Wealth Prize offer"
for the buyers in Delhi. A lucky purchaser of a
bottle of Horlicks could find a coupon inside the
bottle. The coupons indicated the prize. This
included 5 Hotline Colour TVs, 10 gift vouchers
of Rs. 2000 each for Hotline appliances and
other cash prizes. The prizes were to be claimed
by January 15, 1986.

119
 Cont

The Supreme Court, in its short judgement in

1998 commented that this was not a case of
lottery as there was no:

... draw of lots or that a price was charged for

participation in the draw... The fact that some
bottles of Horlicks contained a slip of paper
which entitled the buyer to a prize is not a
lottery in the ordinary sense of the word.

120
WHIRLPOOL RE-VISITED

Citing similarity with the HMM case, the MRTPC

observed:

In this case also there is no draw of lots nor

any price charged for participation in the
scheme. Each participant got the value for his
or her money and in addition stood a chance for
winning a prize.

121
 Cont

According to the Commission, the Whirlpool

case was on even sounder foundation as:

... while some purchasers of Horlicks in the

'Hidden Wealth Prize Offer' did not get any
prize, in the 'Scratch a Gift Scheme' of the
respondent, every purchaser of scheme would
get gifts though of varied values.

122
USHA FANS: EARLIER
POSITION
That the impugned scheme has an element of
chance cannot be denied as the bigger prizes are
predicated on chance rather than skill. A game in
which chance rather than skill determines the
outcome, is a game of chance ... it also has an
element of chance for a prize for a price. The
essential elements of a lottery are consideration,
prize and chance and any scheme by which a
person for a consideration is permitted to receive a
prize as may be determined predominantly by
chance. In other words, the receipt of a prize in a
game of chance is not a result of human reason,
foresight, sagacity or design but is a result of
chance.
123
USHA FANS: AFTER HMM
CASE
In a lottery or game of chance while some
participants get the prizes offered, other remain
deprived of the same. This does not appear to be
the case with the respondent's scheme. The
distinguishable feature of the impugned scheme is
that every buyer gets some prize or the other be it
small or big cash discount or some other prize. This
eliminates the possibility of the gift-scheme being
totally a game of chance. This being so, the prize
scheme of the respondent does not infringe upon
the provisions of section 36A(3)(b).

124
NATIONAL PANASONIC
CASE
The National Panasonic India Private Limited
had launched a prize contest in 1997. A person
had to buy a Panasonic television to enter the
contest. The prizes included a trip for two
persons to witness the Winter Olympics in
Japan, the second prize was two Panasonic Mini
Hi-Fi systems with 5 CD changer and the third
prize three Panasonic G-400 cellular phones
and 500 consolation prizes.

125
 Cont
The Commission, relying on the HMM Case,
summarised its position :

This Commission had an occasion to consider the

aforesaid binding ruling of the Hon'ble Supreme Court in
several cases where the prize scheme was floated by
certain business houses. ... It has been held by this
Commission in those cases that such prize scheme
would not fall within the purview of Section 36A(3)(b) of
the MRTP Act for the simple reason that the purchaser
of an item with which the prize scheme is attached gets
his money's worth and he gets the additional benefit of
participating in the scheme in question.

126
 Cont

The Commission extended it to all schemes. It

further noted:

This Commission has also considered what

would be a lottery in its acceptable meaning.
It has been understood to mean payment of a
price for winning a prize. That would be
applicable even for a game of chance or a
contest in its strict sense. In order to win a
prize in a contest or in a game of chance or in
a lottery one has to pay a price.
127
 Cont

... not free from all sorts of complications and

complexities. It is not shown to us how many
manufacturing units the respondent has for its
toothpaste production. It is also possible that it
might get its toothpaste products manufactured
by some small scale units on supply of its
formulations. It would, therefore, be difficult
exactly to find out what would be the extent of
injury in clear terms on account of loss of the
market share in toothpaste on the part of
Colgate.
128
THE COMPETITION ACT

129
THE COMPETITION ACT

The first competition law in India was the Monopolies

and Restrictive Trade Practices Act, 1969 (MRTP Act).
When the Indian economy was liberalised and the
controls were removed, the nature of the economy
transformed. The MTRP Act was found to be
inadequate. The MRTP Act has been replaced by the
Competition Act, 2002. The enforcement of the Act
was held in abeyance for several years. In May 2009,
the provisions on anti-competitive agreements and
abuse by dominant enterprises were brought into
effect. The provisions on mergers have come into
effect since June 2011.
130
 Cont
Competition laws recognise three broad activities that
could result in limiting competition in a market.
Existing enterprises can enter into agreements
among themselves that are aimed at limiting
competition in the market.
An enterprise that is dominant in a market segment
can abuse its dominant position by limiting
competition.
A merger of two or more companies can lead to the
formation of monopolies and thus, give rise to the
possibility of an abuse of the monopoly position to
reduce competition. 131
ADMINISTRATIVE MECHANISM

The Act constitutes a Competition Commission

consisting of up to 6 members. The Commission is
charged with the duty to eliminate practices
having adverse effect on competition, promote and
sustain competition, protect the interests of
consumers and ensure freedom of trade carried on
by other participants, in markets in India. The
Commission performs judicial functions under the
Act.
AGREEMENT AMONG
ENTERPRISES

Firms are free to enter into agreements with each

other. Every agreement binds one party and
imposes restrictions on the other. Without these
mutual restrictions, no exchange would be
possible. Some agreements, however, have the
potential of restricting or distorting competition in a
segment of the economy. Such agreements can
be in writing, oral, informal or even an
arrangement. Agreements can be of two kinds,
horizontal and vertical.
 Cont

Horizontal agreements are between two or more

enterprises, in the same market, which are at the
same stage of the production chain.

For example, an agreement between two airlines

operating in domestic routes would be a horizontal
agreement.

Some kinds of horizontal agreements are taken to

be inherently anti-competition.
 Cont

Vertical agreements are agreements between

enterprises that are at different stages or levels of
the production chain.
For example, an agreement between a
manufacturer and a distributor.

Vertical agreements can also strengthen the

capability of the production chain and thus, foster
competition. For example, a manufacturer may
insist that a distributor deals only with him.
PROHIBITION OF AGREEMENTS
ANTI-COMPETITIVE AGREEMENTS

Section 3 prohibits anti-competitive agreements among

enterprises. An abridged version of the section is as
follows:

(1) No enterprise or association of enterprises or person or

association of persons shall enter into any agreement in respect
of production, supply, distribution, storage, acquisition or control
of goods or provision of services, which causes or is likely to
cause an appreciable adverse effect on competition within India.

(2) Any agreement entered into in contravention of the provisions

contained in Sub-section (1) shall be void.
 Cont
(3) Any agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any person
and enterprise or practice carried on, or decision taken by, any association
of enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services, which
a)directly or indirectly determines purchase or sale prices;
b)limits or controls production, supply, markets, technical development,
investment or provision of services;
c)shares the market or source of production or provision of services by
way of allocation of geographical area of market, or type of goods or
services, or number of customers in the market or any other similar
way;
d)directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on competition:
Provided that nothing contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition
 Cont
(4) Any agreement amongst enterprises or persons at different
stages or levels of the production chain in different markets, in
respect of production, supply, distribution, storage, sale or price of,
or trade in goods or provision of services, including a
a) tie-in arrangement;
b) exclusive supply agreement;
c) exclusive distribution agreement;
d) refusal to deal;
e) resale price maintenance,

shall be an agreement in contravention of Sub-section (1) if such

agreement causes or is likely to cause an appreciable adverse
effect on competition in India. ...
ADVERSE EFFECT ON COMPETITION
WITH REFERENCE TO THE RELEVANT
MARKET

Section 19(5) provides the factors to be taken into

account while determining the relevant market. A
relevant market can be determined on the basis of the
relevant geographic market' and the relevant product
market. Section 19(5) states:

(5) For determining whether a market constitutes a

"relevant market" for the purposes of this Act, the
Commission shall have due regard to the "relevant
geographic market'' and "relevant product market".
 Cont
(6) The Commission shall, while determining the "relevant
geographic market", have due regard to all or any of the
following factors, namely:
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales
services.
 Cont

(7) The Commission shall, while determining the "relevant

product market", have due regard to all or any of the
following factors, namely:
(a) physical characteristics or end-use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products.
FACTORS TO BE CONSIDERED WHILE DECIDING
WHETHER AN AGREEMENT WOULD HAVE AN
APPRECIABLE ADVERSE EFFECT ON COMPETITION
Section 19(3) has provided the factors that are to be taken into
account while deciding whether an agreement would have an
appreciable adverse effect on competition. It reads:

(3) The Commission shall, while determining whether an agreement has an

appreciable adverse effect on competition under section 3, have due regard
to all or any of the following factors, namely:
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of
services;
(f) promotion of technical, scientific and economic development by means
ABUSE OF DOMINANCE

A firm can acquire a dominant position in a

relevant market and act independently of the
competition and the competitors.
Being a dominant organisation per se, is not bad
or objectionable. What is objectionable is the
abuse of the position of dominance.
 SECTION 4
PROHIBITS ABUSE BY ENTERPRISES IN
DOMINANT POSITIONS

4. Abuse of dominant position. (1) No enterprise or group shall abuse its

dominant position.
(2) There shall be an abuse of dominant position under sub-section (1), if
an enterprise or a group -
(a) directly or indirectly, imposes unfair or discriminatory
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or
service.
Explanation. For the purposes of this clause, the unfair or discriminatory
condition in purchase or sale of goods or service referred to in sub-clause
(i) and unfair or discriminatory price in purchase or sale of goods (including
predatory price) or service referred to in sub-clause (ii) shall not include
 Cont
(b) limits or restricts
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to
the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access in
any manner; or
(d) makes conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts;
or
(e) uses its dominant position in one relevant market to enter into, or
protect, another relevant market.
 Cont
Explanation.For the purposes of this section, the expression

(a) "dominant position" means a position of strength, enjoyed by an

enterprise, in the relevant market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant
market; or
(ii) affect its competitors or consumers or the relevant market in its
favour.
(b) "predatory price" means the sale of goods or provision of services, at a.
price which is below the cost, as may be determined by regulations, of
production of the goods or provision of services, with a view to reduce
competition or eliminate the competitors.
(c)group shall have the same meaning as assigned to it in clause (b) of
the Explanation to section 5.
 SECTION 19 (4)
FACTORS THAT THE COMMISSION SHOULD TAKE
INTO ACCOUNT IN DECIDING WHETHER THE
ENTERPRISE ENJOYS A DOMINANT POSITION

(4) The Commission shall, while inquiring whether an enterprise enjoys a

dominant position or not under section 4, have due regard to all or any of
the following factors, namely:
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages
over competitors;
(e) vertical integration of the enterprises or sale or service network of such
enterprises;
(f) dependence of consumers on the enterprise;
 Cont

(g) monopoly or dominant position whether acquired as a result of any

statute or by virtue of being a Government company or a public sector
undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial
risk, high capital cost of entry, marketing entry barriers, technical entry
barriers, economies of scale, high cost of substitutable goods or service for
consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic
development, by the enterprise enjoying a dominant position having or
likely to have an appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant for the
MERGERS
When two companies decide that one company will
merge into the other and the shareholders of the
merging company will be given shares in the other
company, it is called a merger.
When two companies decide to merge together to
create a new company, it is called an amalgamation.
In other cases, a company can acquire a business of
another company, not by purchase but by changing its
shareholding structure and giving shares to the other
company -- this is called an acquisition. All these forms
of agreements are called combinations.
 Cont

The Act recognises that only when the combining

enterprises are of a certain threshold size or the
combined enterprise would be of a certain size that
the combination would have the potential of
adversely effecting competition. The Act defines
these threshold limits and requires the enterprises
above these limits to refer any combination they
are contemplating to the Commission for its
approval. There are several threshold limits for
group companies, companies with assets only in
India and companies with assets in Indian and
outside.
 Cont
The asset limits have been set as follows:

Where both the enterprises have assets/turnover only in India:

Combined assets of the enterprises value more than 1,000 crores or
their combined turnover is more than 3,000 crores.

Where either or both the enterprises have assets/turnover outside India

also: Combined assets of the enterprises value more than US$ 500
millions, including at least 500 crores in India, or turnover is more than
US$1500 millions, including at least 1,500 crores in India .

Where the acquiring enterprise is a group of companies with assets or

turnover only in India: Combined assets of the group are more than
4,000 crores or turnover is more than 12,000 crores after acquisition or
merger.

Where the acquiring enterprise is a group of companies with assets or

turnover outside India also: Combined assets of the group value more
than US$ 2 billion, including at least 500 crores in India; or turnover is
more than US$6 billion, including at least 1,500 crores in India after
CASE : BELAIRE OWNERS
ASSOCIATION V. DLF LIMITED
Belaire Owners Association was an association of apartment allottees of
a building complex, Belaire, situated in DLF City, Phase-V, Gurgaon,
being constructed by DLF Limited. The association approached the
Competition Commission to get relief against abuse of dominant position
by the DLF Limited. The alleged abuse was in the DLF Limited setting
stringent and onerous terms on the allottees and its conduct in
completing the project. Corresponding to this, the Commission set up the
following three issues and proceeded to answer them:

Issue 2: What is the relevant market, in the context of section 4 read

with section 2 (r), section 19 (5), section 19(6) and section 19(7) of the
Competition Act, 2002?
Issue 3: Is DLF Ltd. dominant in the above relevant market, in the
context of section 4 read with section 19 (4) of the Competition Act?
Issue 4: In case DLF Ltd. is found to be dominant, is there any abuse of
its dominant position in the relevant market by the above party? 152
 Cont

The Commission imposed a penalty under Section 27 as follows:

The facts of this case and the conduct of the OP-1, as discussed,
particularly the size and resources of OP -1 and the duration during
which this abuse has continued to the advantage of DLF Ltd. and to the
disadvantage of consumers, warrant imposition of a heavy penalty.
Keeping, in view the totality of the facts and circumstances of the case,
the Commission considers it appropriate to impose penalty at the rate of
7% of the average of the turnover for the last three preceding financial
years on OP-1. Therefore, in exercise of powers under section 27 (b) of
the Act, the Commission imposes penalty on DLF Ltd. Penalty
rounded off to nearest number Rs. 630 crores.

153