TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. versus THE DIRECTOR (RESEARCH) FORAND ON BEHALF OF  DEEPAK KHANNA & ORS.
[2015] 10 S.C.R. 373, Supreme Court of India, 2015
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2015] 10 S.C.R. 373 
TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. 
A 
v. 
THE DIRECTOR (RESEARCH) FORAND ON BEHALF OF 
DEEPAK KHANNA & ORS. 
(Civil Appeal No. 2069 of 2006) 
SEPTEMBER 7, 2015 
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] 
B 
Monopolies and Restrictive Trade Practices Act, 1969 -
c 
ss. 36A(1)(i),(ii),(iv) and (vi) and 360(1) - Complaints -
Against company engaged in manufacturing and selling of 
automobiles - Alleging indulgence in unfair trade practice 
by demanding excessive amount for booking of cars and by 
including the likely taxes, cess and transportation cost -
D 
Preliminary Investigation Reports were submitted - Notice 
of Enquiry issued alleging indulgence of the company in 
unfair trade practices falling u/s. 36(1)(i),(ii),(iv) and (vi) -
Monopolies and Restrictive Trade Practices Commission 
directed the company to cease and desist from continuing E 
with the practices complained of - On appeal, held: The 
allegations and materials against the company do not make 
out a case of unfair trade practice - The Commission has 
travelled beyond the specific a/legations in the Notice of 
Enquiry, which is violative of the rules of fairness and natural F 
justice- It being flagrant violation of audi alteram partem rule, 
renders the impugned order invalid and bad in law - Since 
no case of any unfair trade practice is made out, there is no 
scope of order u/s. 360(1). 
Allowing the appeal, the Court 
HELD 1. The order of the'Monopolies and Restrictive
Trade Practices Commission appears to be largely 
G 
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[2015] 108.C.R. 
A influenced by a conclusion that the appellant should not 
have asked for deposit of an amount above the basic 
price, because in the opinion of the Commission it was 
unfair for the appellants to keep excise and sales tax .with 
itself for any period of time. Such conclusion of the 
B Commission is . based- only upon subjective 
considerations of fairness and do not pass the objective 
test of law as per precise definitions under Section 36A 
of the Monopolies and Restrictive Trade Practices Act, 
C 1969. [Para 13] [365-B-D] 
2. The Commission could not have travelled beyond 
the specific allegations in the Notice of Enquiry because 
such a course would violate rules offairness and natural 
justice. The scope of enquiry could have been enlarged 
D only after serving further notice with necessary details 
of allegations ;:tnd supporting facts. This was clearly not 
done by the Commission. It is a flagrant violation of audi 
alteram partem rule. It renders the impugned order invalid 
and bad in law. The order is also bad for non application 
E of mind to requirement of law as stipulated in Section 
36A(1) of the Act and the relevantfacts. [Para 10] [383-G-
H; 384-A] 
3. The enquiry, as per the notice, was to cover:- (a) 
F whether the respondent has been indulging in the above 
said unfair trade practice(s) and (b) whether the said 
unfair trade practice(s) is/are prejudicial to public interest. 
The Commission failed to keep in
mind the precise 
allegations against the appellant with a view to find out 
G whether the facts could satisfy the definition of Unfair 
Trade Practice(s) as alleged against the appellant in the 
Notice of Enquiry. The Commission was apparently 
misled by the Preliminary Investigation Report. [Paras 
11 and 12] [384-0-F] 
H 
4. The allegations and materials againstthe appellant
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 375 
BEHALF OF DEEPAK KHANNA 
do not make out a case of unfair trade practice against A 
the appellant. Nor there is any scope to pass order under 
Section 36-0(1) of the Act when no case of any unfair 
trade practice is made out. [Para 14] [385-E] 
Rajasthan Housing Board vs. Parvati Devi (Smt) 
(2000) s sec 104:2000 (3) scR 934 ; Mis 
Lakhanpal National Limited vs. M.R. T.P. 
Commission and Anr. (1989) 3 SCC 251: 1989 
(2) SCR 979 - referred to. 
Case Law Reference 
2000 (3) SCR 934 
1989 (2) SCR 979 
referred to. 
referred to. 
Para 7 
Para 8 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
2069 of 2006. 
B 
c 
D 
From the Judgment and Order dated 28.02.2006 of 
Monopolies and Restrictive Trade Practices Commission New E 
Delhi in U.T.P.E. No 86, 87 and 90of1999. 
Ashok H. Desai, Ravinder Narain, Kanika Gamber, Kishan 
Rawat, Sidharth Banthia, Rajan Narain for the Appellant. 
A.K. Sanghi, Madhavi Diwan, Sadhana Sandhu, Sushma 
F 
Suri, P. Parmeswaran, for the Respondents. 
The Judgment of the Court was delivered by 
SHIVA KIRTI SINGH, J. 1. This is an appeal under G 
Section 55 of the Monopolies and Restrictive Trade Practices 
Act, 1969 (for brevity hereinafter referred to as 'the Act'). The 
appellant is a company engaged in manufacture and sale of 
automobiles. It is aggrie\i'ed by the impugned order dated 
28.2.2006 passed by the Monopolies and Restrictive Trade H
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[2015] 10 S.C.R. 
A Practices Commission (for brevity 'the Commission') in U.T.P. 
8 
c 
D 
E 
F 
G 
H 
Enquiry nos. 86/99, 87 /99 and 90/99 whereby the Commission 
has directed the appellant to cease and desist from continuing 
with the practices complained of and not to repeat the same 
in future. 
2. Since there is no dispute on facts, the case of the 
parties on facts is common and to the following effect: 
(i) The practice under scrutiny is of the year 1999 when 
the appellant was to begin the manufacture and delivery 
of newly introduced Tata lndica cars into the market with 
effect from February 1999, with the installed capacity of 
approximately 60,000 cars in a year. The appellant invited 
the prospective customers to book the car through 
dealers. The booking amount demanded by the appellant 
was quite high and close to the estimated price finally 
payable which would include excise duty, sales tax and 
transportation charges. The terms and conditions for 
booking of order for purchase of Tata lndica cars were 
mentioned in detail indicating the model wise price 
depending upon the city of booking. It was indicated that 
the price of vehicle as well as taxes, duties and cess will 
be as applicable on the date of delivery. Those making 
valid booking were to be supplied the vehicle as per 
priority numbers generated and allocated by a 
computerized technique, for the first 10,000 bookings 
only. The terms also provided that the payments
against 
the remaining bookings will be refunded to the 
customers, without interest, at the earliest but in any case 
within a month from the closing of the booking. For refunds 
after a month, interest will be paid at the rate of 10% per 
annum. The order booking form mentioned in Clause 7 
that the person concerned had carefully read the terms 
and conditions of the bookings and agreed to the same.
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 377 
BEHALF OF DEEPAK KHANNA[SHIVA KIRTI SINGH, J.] 
(ii) Although the initial allotment was confined only to A 
10,000 cars, the appellant received as many as 1, 13, 768 
booking applications along with stipulated amount which 
aggregated to Rs.3,216.44 crores. The appellant gave 
an option to prospective customers to opt for a second 
phase of 50, 000 vehicles likely to be delivered from April-
B 
May 1999 to March 2000. It refunded the balance 
amounts to those who desired for refund, along with 
interest as represented. No complaint was made to the 
Commission by any of the persons who made the 
booking and thereafter either purchased the car or C 
withdrew the deposits with or without interest, as the case 
maybe. 
(iii) However three complaints were made before the 
Commission by persons who claimed that they had D 
intentions to make the booking but were dissuaded by 
the high quantum of deposit required for the purpose. 
Their specific objection was that the demanded amount 
exceeded the basic price of the car if cess, taxes and 
transportation cost were left out. According to the E 
complainants the appellant had indulged in Unfair Trade 
Practice (UTP) by demanding an excessive amount for 
bookings of lndica cars and by including the likely taxes, 
cess and transportation cost. · 
3. Since the defence taken by the appellant was also not 
disputed on facts, it would be relevant to note the same. When 
F 
the Commission
received the three complaints, it sent them to 
the Director (Research) for investigation. The Director 
submitted Preliminary Investigation Reports (PIR) in all the G 
three matters and three cases were registered as per numbers 
noted earlier. The Notices of Enquiry under Sections 36-B (d}, 
37, 36-D of the Act and under Regulation 51 were issued to 
the appellant who contested the complaints. The appellant filed 
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[2015] 10 S.C.R. 
A 
its reply to the Notice of Enquiry in which it also raised a 
preliminary objection that the allegations of the restrictive trade 
practice were vague and not permissible by law. Their further 
defence was that there are no facts and material to show that 
the alleged practice is prejudicial to the public interest requiring 
B an enquiry under Section 37 of the Act and that no facts were 
disclosed in the Notice of Enquiry to show prejudice to the 
public interest. On merits some of thea!legations were denied 
as incorrect. It was pointed out that none of the complainants 
had applied forthe booking of Tata lndica vehicle and hence 
C they lacked locus standi to file the complaints in the capacity 
of consumers. On merits the appellant also took the defence 
that there was no false and misleading statement made by the 
appellant for inviting booking of Tata lndica cars, the applicants 
0 
made the bookings with open eyes being aware about the 
stipulation for payment of interest. According to appellant by 
letter dated 6.2.1999 the successful applicants were intimated 
of the priority number allotted to them and the unsuccessful 
applicants were also informed that they had an option to be 
E considered for the second phase of 50,000 cars and such 
optees would be entitled to receive interest at the rate of 11 % 
per annum with effect from 1.2.1999 till the date of delivery. 
Those who did not opt for the second phase
deliveries were 
refunded their booking amounts along with 10% interest. 
F 
4. The appellant explained their practice by pleadings 
which are not controverted, that their past experience as 
automobile manufacturer was limited to heavy vehicles and 
hence in their initial venture into the car segment, they were 
G .not sure of public response and they had decided to plan their 
production schedule on the basis of reality test of car's demand 
in the market. For this speculative bookings were required to 
be discouraged and the same was sought to be achieved by 
demanding an amount closer to the anticipated price which 
H the customer would be required to pay. According to
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 379 
BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.] 
submissions, such practice could not have promoted the sale A 
of their vehicle rather it was discouraging. The large response 
shows peoples' faith in the products of the appellant and also 
that the interest rate offered by the appellants was appreciable 
and fair. 
5. Learned Senior Counsel Mr. Ashok H. Desai 
highlighted the definition of Unfair Trade Practice as indicated 
B 
in Section 36A of the Act. Since the Notice of Enquiry alleged 
that the appellant had indulged in unfair trade practices falling 
under Section 36A (1) (i), (ii), (iv) and (vi) of the Act, the C 
aforesaid provisions need to be noticed. They read as follows: 
"36A. Definition of unfair trade practice - In this Part, 
unless the context otherwise requires "unfair trade 
practice" means a trade practice which, for the purpose o 
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, namely:-
( 1) the practice of making any statement, whether orally 
or in writing or by visible representation which,-
E 
(i) falsely represents that the goods are of a particular 
standard, quality, quantity, grade, composition, style or F 
mode; 
(ii) falsely represents that the services are of a particular 
standard, quality or grade; 
(iii) 
xxxxxxxxx 
(iv) represents that the goods or
services have sponsor-
ships, approval, performance, characteristics, accesso-
ries, uses or benefits which such goods or services do 
G 
not have; 
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SUPREME COURT REPORTS 
(2015) 1 O S.C.R. 
(v) 
xxxxxxxxxx 
(vi) makes a false or misleading representation concern-
ing the need for, or the usefulness of, any goods or ser-
vices;" 
6. According to Mr. Desai the allegations against the 
appellant do not attract any of the practices mentioned in the 
Notice of Enquiry and contained in the definition noted above. 
7. The second limb of arguments also flows from the 
C definition in Section 36A of the Act. By placing reliance upon 
judgment of this Court in the case of Rajasthan Housing 
Board vs. Parvati Devi (Smt) (2000) 6 SCC 104, it was 
contended that when supplier and consumer have entered into · 
0 
an agreement then the Commission, in order to hold the 
supplier guilty of unfair trade practice on the basis of allegations 
made against it, is required to go into the terms and conditions 
agreed between the parties for finding out whether there was 
unfair trade practice so as to require further action on the basis 
E of complaints. In support of this proposition reliance was placed 
mainly on paragraph 14 of the judgment which is as follows: 
F 
G 
H 
"14. For deciding such question, the Commission has 
to find out whether a particular act can be condemned 
as an unfair trade practice; whether representation 
contained a false statement and was misleading and 
what was the effect of such a representation made to the 
common man. The issue cannot be resolved by merely 
holding that representation was made to
hand over the 
possession within the stipulated period and the same is 
not complied with or some lesser constructed area is 
given after the construction of the building. The 
Commission has to find out whether the representation, 
complained of, contains the element of misleading the 
buyer and whether buyers are misled or they are informed
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 381 
BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.] 
in advance that there is likelihood of delay in delivering A 
the possession of constructed building and also increase 
in the cost. For this purpose, terms and conditions of the 
agreement are required to be examined by tile 
Commission. Not only this, the Commission is required 
to consider whether the Board has adopted unfair method 
B 
or deceptive practice for the purpose of promoting the 
sale, use or supply of any goods or for the provisions of 
any services. Unless there is a finding on this issue, the 
appellant Board cannot be penalised for unfair trade 
practice." 
C 
8. On behalf of appellant reliance was also placed upon 
judgment of this Court in the case of Mis Lakhan pal National 
Limited vs. M.R.T.P. Commission and Another (1989) 3 
SCC 251, particularly paragraph 7 and 9 thereof. In paragraph 
D 
7 it was held that the definition of "Unfair Trade Practice" in 
Section 36A is not inclusive or flexible, but specific and limited 
in its contents. The Court also considered the object of this 
provision with a view to resolve the issue as to whether 
particular acts can be condemned as unfair practice or not. 
E 
We are in full agreement with the view expressed by L. M. 
Sharma, J., as he then was and hence it would be more 
appropriate to extract para 7 which runs thus: 
"7. However, the question in controversy has to be 
F 
answered by construing the relevant
provisions of the Act. 
The definition of "unfair trade practice" in Section 36-A 
mentioned above is not inclusive or flexible, but specific 
and limited in its contents. The object is to bring honesty 
and truth in the relationship between the manufacturer G 
and the 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 would be to 
examine whether it contains a false statement and is 
H 
misleading and further what is the effect of such a
382 
A 
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SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
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. 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 form a belief 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 (4th Edn., paras 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 
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 
representation is a faithful picture or transcript of the 
essential facts, no falsity is established, even though there 
may have been any number of inaccuracies in 
unimportant details. Conversely, if the general impression 
conveyed is false, the most punctilious and scrupulous 
accuracy in immaterial minutiae will not render the 
representation true"; Let us examine the relevant facts of 
this case in this background."
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 383 
BEHALF OF DEEPAK KHANNA[SHIVAKIRTI SINGH, J.] 
9. In reply Mr. AK. Sang hi, Senior Advocate defended the A 
impugned order of the respondent Commission. According to 
him the Commission acted fairly in entertaining the complaints 
from three persons who found the booking amount very high 
and therefore did not deposit the same. According to him once 
a Preliminary Investigation Report dated 15.2.2000 was B 
available with conclusion and recommendation to the effect 
that only the basic price of the car ought to have been collected 
from the public and not further amount which can cover only 
excise duties and sales tax that goes to the Government and 
that such amount should not have been retained by C 
manufacturing units for a long period of time, the Commission 
although did not find the appellant guilty of any of the four 
specific provisions of Section 36-A ( 1) but still it felt compelled· 
to conclude against the appellant and resultantly pass a cease D 
and desist order under powers conferred upon the Commission . 
by Section 36-D (1) (a) of the Act. 
10. Mr. Sang hi also sought to support the finding of the 
Commission on issue number one that the appellant has 
indulged in unfair trade practice by referring to certain narratives E 
in the Preliminary Investigation Report (PIR). As per his 
submission the Commission had not only communicated the 
precise allegations in terms of Section 36-A but had also 
enclosed
with the Notice of Enquiry a copy of Pl Rand therefore F 
findings cannot be criticized on the ground that the allegations 
were not precisely communicated through the Notice of Enquiry. 
We find no merit in these contentions. The Commission could 
not have travelled beyond the specific allegations in the Notice 
of Enquiry because such a course would violate rules of G 
fairness and natural justice. The scope of enquiry could have 
been enlarged only after serving further notice with necessary 
details of allegations and supporting facts. This was clearly 
not done by the Commission. It is a flagrant violation of audi 
alteram partem rule. It renders the impugned order invalid and 
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[2015] 10 S.C.R. 
A bad in law. The order is also bad for non application of mind to 
requirement of law as stipulated in Section 36A(1) of the Act 
and the relevant facts. 
11. We have gone through the Preliminary Investigation 
B Report, the Notice of Enq1:1iry as well as the Order under 
appeal. We do not find any material or even allegation in the 
PIR which could satisfy any of the four unfair trade practices 
covered by various Clauses such as Clause (i), (ii), (iv) and 
(vi) of Section 36-A ( 1) of the Act. A careful perusal of the Notice 
C of Enquiry dated 25.9.2000 reveals that no doubt a copy of 
the PIR was enclosed but the notice made it clear itself that 
the Commission came to a considered opinion that the Director 
. (Research) had found the appellant indulging in unfair trada 
practices falling precisely and only under clauses (i), (ii), (iv) 
D and (vi) of Section 36A(1) of the Act. The enquiry, as per the 
notice, was to cover:- (a) whether t~e respondent has been 
indulging in the above said unfair trade practice(s) and (b) 
whether the said unfair trade practice(s) is/are prejudicial to 
public interest. 
E 
12. A scrutiny of the judgment under appeal discloses that 
the Commission failed to keep in mind the precise allegations 
against the appellant with a view to find out whether the facts 
could satisfy the definition of Unfair Trade Practice(s) as alleged 
F against the appellant in the Notice of Enquiry. The Commission
was apparently misled by the Preliminary Investigation Report 
also which claimed to deal with reply received. from the 
appellant in course of the preliminary enquiry but patently failed 
even to notice the stipulation as regards payment of interest 
G on the booking amount although this fact was obvious from 
the terms and conditions of the booking and was reportedly 
relied upon by the appellant in its reply even at the stage of 
preliminary investigation. The Commission noticed the relevant 
H facts including provision for interest while narrating the facts, 
but failed to take note of this crucial aspect while discussing
TELCO LTD. v. THE DIRECTOR (RESEARCH) FOR & ON 385 
BEHALF OF DEEPAK KHANNA [SHIVA KIRTI SINGH, J.] 
the relevant materials for the purpose of arriving at its A 
conclusions. Such consideration and discussion begins from 
paragraph 32 onwards but without ever indicating that the 
booking amounts had to be refunded within a short time or 
else it was to carry interest at the rate of 10% per annum. 
13. The order of the Commission appears to be largely 
influenced by a conclusion that the appellant should not have 
asked for deposit of an amount above the basic price because 
in the opinion of the Commission it was unfair for the appellants 
B 
to keep excise and sales tax with itself for any period of time. C 
Such conclusion of the Commission is based only upon 
subjective considerations of fairness and do not pass the 
objective test of law as per precise definitions under Section 
36A of the Act. The submissions and contentions of Mr. Desai 
merit acceptance. 
D 
14. Even after stretching the allegations and facts to a 
considerable extent in favour of respondent Commission, we 
are unable to sustain the Commission's conclusions that the 
allegations and materials against the appellant make out a E 
case of unfair trade practice against the appellant. Nor there 
is any scope to pass order under Section 36-0(1) of the Act 
when no case of any unfair trade practice is made out. Hence, 
we are left with no option but to set aside the order under 
appeal. We order accordingly.
As a result the appeal stands F 
allowed. However, there shall be no order as to costs. 
Kalpana K. Tripathy 
Appeal allowed.