Case: Colgate Palmolive (India) Ltd Vs. Hindustan Lever Ltd

These two appeals under Section 55 of the Monopolies and Restrictive Trade Practices Act (hereinafter referred to as the MRTP Act) are directed against the order of the Monopolies and Trade Practices Commission under Section 12A of the MRTP Act dated 30th April, 1998 in matter No. UTPE 415 of 1997. The matter pertains to Colgate toothpaste, a product of Colgate Palmolives India Ltd. and by reason of a complaint from M/s. Hindustan Lever Limited being the appellant in the 2nd appeal. Whereas CA No. 2620 of 1998 is against the order of the Commission containing an order of restraint as regards the display of the ring round the family as "Suraksha Chakra" in Colgate Palmolives hoardings, print advertisements and T.V. commercials, the CA No. 3288 of 1998 filed by M/s. Hindustan Lever Ltd. is against the order of refusal on the part of the Commission to put a total ban on the product of the Colgate Palmolive as noticed above.2. Before adverting to the rival contentions, be it noted that the M.R.T.P. Act as originally framed did not confer an power on to the Commission to grant temporary injunction during the course of inquiry. The Sachhar Committee report, however, recorded that power to issue temporary injunction order ought to be made available to the Commission in order to give effect and strengthen the jurisdiction and authority of the Commission and it is by reason therefor the Legislature thought it fit to incorporate Section 12A in the body of the Act by MRTP Amendment Act, 1984 conferring such a power to the Commission.3. While it is true that the conferment of power, under Section 12A, has very wide ramifications but the Legislature was itself conscious enough to record in the body of the section certain in-built requirements to be fulfilled in order to clothe the Commission with the authority and jurisdiction in the matter of grant of an order of injunction and it is on this perspective that Section 12A ought to be noticed at this juncture. Section 12A reads as belowPower of the Commission to grant temporary injunction(1) Where, during an inquiry before the Commission, it is proved, whether by the complainant, Director General, any trader or class of traders or any other person, by affidavit or otherwise, that any undertaking or any person is carrying on, or is about to carry on, any monopolistic or any restrictive, or unfair, trade practice and such monopolistic or restrictive, or unfair trade practice is likely to affect prejudicially the public interest or the interest of any trader, class of traders or traders generally or of any consumer or consumers generally, the Commission may, for the purposes of staying or preventing the undertaking or, as the case may be such person from causing such prejudicial effect, by order, grant a temporary injunction restraining such undertaking or person from carrying on any monopolistic or restrictive, or unfair, trade practice until the conclusion of such inquiry or until further orders.(2) The provisions of Rule 2A to 5 (both inclusive) of order XXXIX of the First Schedule to theCode of Civil Procedure, 1908 (5 of 1908) shall, as far as may be, apply to a temporary injunction issued by the Commission under this section, as they apply to a temporary injunction issued by a Civil Court, and any reference in any such rule to a suit shall be construed as a reference to an inquiry before the Commission.[Explanation I - For the purposes of this section an inquiry shall be deemed to have commenced upon the receipt by the Commission of any complaint, reference or as the case may be, application or upon its own knowledge or information reduced to writing by the Commission.Explanation II - For the removal of doubts, it is hereby declared that the power of the Commission with respect to temporary injunction includes power to grant a temporary injunction without giving notice to the opposite party.]"On a plain reading of the provision the following requirements thus emerge :(a) Temporary injunction can be granted only during an inquiry.(b) There must be proof of certain practices mentioned therein to have been carried on or are about to be carried on by the person specified therein.(c) Such practices are likely to affect prejudicially the public interest and there must be some evidence either by way of an affidavit or otherwise.5. The situation thus after the incorporation of the Act of 1984, in the Statute Book emerges that the Commissions power can be invoked under Section 12A within however such limits and restrictions as noticed above. Be it placed on record, that for an appreciation of the powers under Section 12A and to read the same in its proper perspective, Regulations 76 and 77(2) of the MRTP Regulations, 1991 ought also to be noticed. Regulation 76 provides that an application for grant of temporary injunction ought to be supported by an affidavit stating therein thetemporary injunctions is somewhat akin to that of the Civil Court under2A to 5 of order XXXIX of the Code of Civil Procedure.8. Having dealt with however, the broad legislative perspective in the matter of conferment of power and authority on to the Commission in regard to the grant of injunctions and whilst on the subject let us however discuss the state of the law in the matter of grant of an order of injunction be it statutory or otherwise involving equitable considerations and the same being purely discretionary in nature though ordered only on the exigencies of the situation and not as a matter of course in accordance with the known principles of law.9. Generally, however, the interlocutory remedy by way of a grant of an order of injunction is intended to preserve and maintain in status quo the rights of the parties and to protect the plaintiff, being the initiator, of the action against incursion of his rights and for which there is no appropriate compensation being quantified in terms of damages. The basic principle of the grant of an order of injunction is to assess the right and need of the plaintiff as against that of the defendant and it is a duty incumbent on to the law Courts to determine as to where the balance lies.10. Another redeeming feature in the matter of grant of interlocutory injunction is that, in the event of a grant of injunction in regard to a party defendant where the latters enterprise has commenced and in that event the consideration may be somewhat different from that where the defendant is yet to commence its enterprise.11. The decision of this Court in Wander Ltd. v. Antox India P. Ltd., 1990 Supplement(SCC) 727, lend support to the observations as above.This Court in paragraph 9 of the Report observedthe prayer for grant of an interlocutory injunction is at a stage when the existence of the legal right asserted by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. The Court, at this stage, acts on certain well settled principles of administration of this form of interlocutory remedy which is both temporary and discretionary. The object of the interlocutory injunction, it is stated....... is to protect the plaintiff against injury by violation of his rights for which he could not adequately be compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The Court must weight one need against another and determine where the balance of convenience lies.The interlocutory remedy is intended to preserve in status quo, the rights of parties which may appear on a prima facie case. The Court also, in restraining a defendant from exercising what he considers his legal right but what the plaintiff would like to be prevented, puts into the scales, as a relevant consideration whether the defendant has yet to commence his enterprise or whether he has already been doing so in which latter case considerations somewhat different from those that apply to a case where the defendant is yet to commence his enterprise, are attracted."Incidentally, the House of Lords prior to the decision in American Cyanamid Co. v. Ethican Ltd., 1975 HL 25, in J. T. Stratford & Sons Ltd. v. Lindley, 1964 CA 99, in no uncertain terms laid down that the plaintiff had to show a strong prima facie case that his rights have been infringed and thereafter the plaintiff was required to show that the damages would not be an adequate remedy in the event of there being a success of the plaintiff at the trial and that the balance of convenience favoured the grant. This requirement, however, in the matter of grant of an injunction so far as the English Courts are concerned, stands slightly diluted by reason of the decision in American Cyanamids case (supra) which records that in the event of there being a serious issue to decide, the grant would be available to a plaintiff on, however, compliance with the other fundamentals as noticed below. A strong prima facie case, therefore, stands substituted by a serious issue to be decided.13. At this juncture, however, the decision of the House of Lords in American Cyanamids case though raised certain eye-brows lately, ought to be considered in slightly more greater detail.14. Lord Diplock in Cyanamids case laid down the following guiding principles for the grant of interlocutoryThe plaintiff must first satisfy the Court that there is a serious issue to decide and that if the defendants were not restrained and the plaintiff won the action, damages at common law would be inadequate compensation for the plaintiffs loss.(2) The Court, once satisfied of these matters will then consider whether the balance of convenience lies in favour of granting injunction or not, that is, whether justice would be best served by an order of injunction.(3) The Court does not and cannot judge the merits of the parties respective cases and that any decision of justice will be taken in a state of uncertainty about the parties rights.It would seem to follow, therefore, that what should be borne in mind, in addition to what hap been phrased in Lord Diplocks speech, is that if there is uncertainty, the Court should be doubly reluctant to issue an injunction, the effect of which is to settle the parties rights once for all.16. On a clear analysis of the speech of Lord Diplock, it appears that if damages, recoverable at common law, would be an adequate remedy and the defendant would be in a financial position to pay the same, no interlocutory injunction should normally be granted, howsoever strong the plaintiffs claim appear to be at that stage. Lord Diplock went on to observe further that in the event of there being any doubt, as to the adequacy of the respective remedies and damages available to either party or both, then and in that event, the question of balance of convenience arises and the same will vary from case-to-case.17. Similar view has also been expressed by the House of Lords in the case of Dimbleby & Sons Ltd. v. National Union of Journalists, 1984 HL 40.18. In Power Control Appliances v. Sumeet Machines Ltd., 1994 SC 19, this Court did follow the decision of this Court in Antox Indias case (supra) and expressly approved the main dicta of the House of Lords in American Cyanamids case.19. In Gujarat Bottling Co. Ltd. v. Coca Cola Co. & Ors., 1995 SC 1001 : 1995 SC 1001,  this Court however sounded a different note, though however, emphasised the discretionary power in the matter of grant of interlocutory injunction and in paragraph 43 this Court observedThe grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the Court. While exercising the discretion the Court applies the following tests - (i) whether the plaintiff has a prima facie case; (ii) whether the balance of convenience is in favour of the plaintiff; and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection, has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The Court must weigh one need against another and determine where the "balance oflies. (see : Wander Ltd. v. Antox India (P) Ltd., 1990 (supp) SCC at pp. 731-32. In order to protect the defendant while granting an interlocutory injunction in his favour the Court can require the plaintiff to furnish an undertaking so that the defendant can be adequately compensated if the uncertainty were resolved in his favour at the trial."As noted above, lately the triable issue concept as introduced by Lord Diplock in Cyanamids case has been thought to be much too rigid and wide even conceptually and doubts are even raised as to its legal efficacy having regard to the facts of adequate compensation theory. As a matter of fact the Courts in England have even gone to the extent of ascribing the judgment to be beneficial for the richer sections of the society ! We however cannot subscribe to such a view, neither find any justification for such uncharitable comments and it seems that Cyanamids decision has been more misunderstood than understood and in this regard we record our concurrence with the views expressed by Laddie J. in Series 5 Software v. Clarke and Others, in 1995 CHD 30, wherein the learned Judge has explained the judgment of American Cyanamid with extreme competency and in our view also correctly Laddie, J. observedmany cases before American Cyanamid the prospect of success was one of the important factors taken into account in assessing the balance of convenience. The Courts would be less willing to subject the plaintiff to the risk of irrecoverable loss which would befall him if an interlocutory injunction was refused in those cases where it thought he was likely to win at the trial than in those cases where it thought he was likely to lose. The assessment of the prospects of success, therefore, was an important factor in deciding whether the Court should exercise its discretion to grant interlocutory relief. It is this consideration which American Cyanamid is said to have prohibited in all but the most exceptional case. So it is necessary to consider with some care what was said in the House of Lords on this issue.Lord Diplock said 1975 HL 25at 511, 1975 HL 25 at 409)if the extent of the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each partys case as revealed by the affidavit evidence adduced on the hearing of the applicant .... The Court is not justified in embarking on anything resembling a trial of the action on conflicting affidavits in order to evaluate the strength of either partys case.It appears to me that there is nothing in this which is inconsistent with the old practice. Although couched in terms it may not be improper, this means that it is legitimate for the Court to look at the relative strength of the parties case as disclosed by the affidavits. The warning contained in the second of the quoted sentences is to avoid Courts at the interlocutory stage engaging in mini-trials, which is what happened, at least in the Court of Appeal, in American Cyanamid itself. Interlocutory applications are meant to come on quickly and to be disposed of quickly.The supposed problem with American Cyanamid centres on the following statement by Lord Diplock 1975 HL 25 at 409 :[Assessing the relative strength of the parties cases], however, should be done only where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one partys case is disproportionate to that of the other party.If this means that the Court cannot take into account its view of the strength of each partys case if there is any dispute on the evidence, as suggested by the use of the words only and no credible dispute, then a new inflexible rule has been introduced to replace that applied by the Court of Appeal. For example, all a defendant would have to do is to raise a non-demurable dispute as to relevant facts in his affidavit evidence and then he could invite the Court to ignore the apparent strength of the plaintiffs case. This would be inconsistent with the flexible approach suggested in Hubbard v. Vosper, 1971 CA 134at (1972) 2 QB 84 which was cited with approval earlier in American Cyanamid 1975 HL 25at 1975 HL 25 at 407. Furthermore, it would be somewhat strange, since American Cyanamid directs Courts to assess the adequacy of damages and the balance of convenience, yet these two are topics which will almost always be the subject of unresolved conflicts in the affidavitmy view Lord Diplock did not intend by the last-quoted passage to exclude consideration of the strength of the cases in most applications for interlocutory relief. It appears to me that what is intended is that the Court should not attempt to resolve different issues of fact or law on an application for interlocutory relief. If, on the other hand, the Court is able to come to a view as to the strength of the parties cases on the credible evidence, then it can do so.The learned Judge, thereafter went on to record that the House of Lords in American Cyanamid did not suggest that it was changing the basis upon which most Courts had approached the exercise of discretion in this important area.22. Thus on an analysis of the decisions as noticed above, there does not seem to be any difficulty in appreciating the view as expressed by Lord Diplock in American Cyanamid. As a matter of fact, Laddie, Js decision in Series 5 Software case (supra) has been able to revolve the issue without any departure from the true perspective of the judgment as noticed above.23. We, however, think it fit to note hereinbelow certain specific considerations in the matter of grant of interlocutory injunction, the basic being-non-expression of opinion as to the merits of the matter by the Court, since the issue of grant of injunction, usually, is at the earliest possible stage so far as the time-frame is concerned. The other considerations which ought to weigh with the Court hearing the application or petition for the grant of injunctions are as below :(i) Extent of damages being an adequate remedy;(ii) Protect the plaintiffs interest for violation of his rights though however having regard to the injury that may be suffered by the defendants by reason therefor;(iii) The Court while dealing with the matter ought not to ignore the factum of strength of one partys case being stronger than the others;(iv) No fixed rules or notions ought to be had in the matter of grant of injunction but on the facts and circumstances of each case - the relief being kept flexible;(v) The issue is to be looked from the point of view as to whether on refusal of the injunction the plaintiff would suffer irreparable loss and injury keeping in view the strength of the parties cases;(vi) Balance of convenience or inconvenience ought to be considered as an important requirement even if there is a serious question or prima facie case the grant;(vii) Whether the grant or refusal of injunction will adversely affect the interest of general public which can or cannot be compensated otherwise.24. It is on this backdrop that exercise of discretion by the Commission shall have to be considered and it is at this juncture certain further factual details ought to be noted.25. On the factual score it appears that the appellant started its advertisement campaign for Colgate Dental Cream using the phrase "Stop bad breath" and "Fight tooth decay" from 1960. The user of the words Suraksha Chakra commenced however from the year 1985.26. The records depict that in March 1997 the respondent in Civil Appeal No. 2620 of 1998 being Hindustan Lever, complained to the Advertising Standards Council of India (ASCI) against appellants advertisement in respect of Colgate Dental Cream. The Consumer Complaints Council of ASCI scrutinised the appellants advertisement in detail and came to a finding that the same does not in any way be termed to be unfair or deceptive. Significantly, however, though there is existing a provision for review, the respondent has chosen not to proceed with the matter and allowed the matter to be set at rest.Subsequently, however on 15th October, 1997, the appellant herein filed a complaint before the MRTP Commission being No. UTPE 405 of 1997 against respondent by reason of the respondents advertisement wherein it has been stated that the respondents product "New Pepsodent" had 102% more germ-fighting capability as compared to the leading toothpaste. According to the appellant this leading toothpaste cannot but refer to Colgate Toothpaste and as such the advertisement is directly aimed at disparagement of appellants product namely Colgate Dental Cream and it only thereafter the respondent herein on 22nd October, 1997 filed a complaint before MRTP Commission against appellants advertisement in respect of Colgate Dental Cream which is ascribed to be purely as a counter blast. We are not however expressing any opinion in that regard.28. Be that as it may, records depict that the complaint initiated by the respondent herein contained three specific grievances relevant extracts thereof are set outthe purpose of promoting the sale, use and supply of its said product, Colgate Dental Cream, the respondent has been using television, PoP (Point of Purchase), hoardings, radio and press advertisement campaigns, which contain statements which are false and misleading. T.V. advertisements and storyboards of the same in Hindi, alongwith their English translation, is annexed hereto and marked as Annexure 1 (collectively). A copy PoP is also enclosed as Annexure 2.In the said advertisements for promotion of sale of Colgate Dental Cream (CDC), the respondent has, inter alia, made the following claims, which it is submitted, are both false and misleading :(a) The respondents CDC toothpaste is claimed to have action of Germ Fighter, which is projected as a process by which germ activity (which is the root-cause of oral problems viz. tooth decay and bad breath) is controlled.(b) The respondents CDC toothpaste is stated to have the ability to fight tooth decay.(c) The respondents toothpaste is stated to have the ability to stop bad breath.The above mentioned claims are false and highly misleading qua the consumers and trade.It is submitted that the advertisement of the respondents CDC toothpaste purport to set up "germs" as the cause of both toothdecay and bad breath. It then suggests that Colgate Dental Cream has a special "Germ Fighter". The advertising then goes on to suggest that as a result the toothpaste offers the benefit of Stops Bad Breath, Fights Toothdecay" and provides a ring or circle of safety or protection. The complainant craves leave to refer to and reply upon cassettes of all these TV advertisements at the time of hearing.The complainant/informant believe the impugned advertisement of Colgate Dental Cream has been on air since August 1996 claiming "Germ Fighter" proposition. Prior to the impugned advertisement no claim of any "Germwas made in respect of CDC. However, for last more than one year the respondent have introduced new advertising in which this new claim has been made even though there has been no change in the ingredients of Colgate Dental Cream. Storyboards of the advertising before August, 1996 are annexed hereto and marked Annexure 3."It, therefore, appears that the principal grievance of the respondent herein before the Commission is that the claim of the appellant that its toothpaste is Germ Fighter having the ability to Stop Bad Breath and its ability to Fight Tooth Decay are highly misleading qua the consumers and the trade. The complaint itself further records that the advertisement of the appellant purports to suggest that Colgate Dental Cream has a special germ fighter and thereafter the complainant records as a result, the toothpaste offers the benefit of stoppage of Bad Breath and Tooth Decay and thus provides the ring of safety or protection and it is on this perspective Mr. Desai contended that since the principal grievance pertains to the three broad-heads as above and the ring cannot but be termed to be an incidental issue on which, the order of injunction is wholly unwarranted.Mr. Desai, in support of the appeal further contended that the allegations of unfair and restrictive trade practices is rather a serious allegation of misconduct as regards the trade and there ought to be specific pleading in the complaint as also in the notice of inquiry together with full particulars thereof and in the absence of which, question of any credence thereto does not arise, for less the grant of an order of injunction as has been granted by the Commission and impugned in this appeal.

Court's reasoning:
45. In fine, the submission of Mr. Desai as regards the bona fides of the application under Section 12A cannot also be brushed aside and in our view non-consideration thereof by the Commission has resulted in a clear error on the part of the Commission. The fact that within a period of 10 days of the application by the appellant herein-before the Commission, the respondent files the instant complaint with an application for an interim prayer - though, however, this "Suraksha Chakra" admittedly, is available in the commercial advertisement since 1985 and in the visual advertisement in Hindi at least since 1987 - there was no lodgment of any protest or complaint in public interest but it only filed as a backlash on the appellants complaint as noticed above and the motive therein in our view cannot also be ruled out.The appeal preferred by the complainant as against the failure of the Commission to pass orders on the other three elements of the advertisement in our view at this stage cannot be entertained and we record our concurrence with the finding of the Commission that without going through the evidence, it is neither feasible not proper in any event to pass any orders thereon at this juncture. We are dismayed however by the fact that after recording a finding on that score as noticed above, the Commission passed an order of injunction in regard to an issue without however any material on record.47. As a matter of fact there is no evidence of a single consumer being misled and not a whisper as to what constitutes an unfair trade practice pertaining to "Suraksha Chakra". The Commission also thought it fit not to record any reason or justification for the grant of an interim order of injunction in spite of finding as above and before the matter is investigated and complaint is finally heard. This apart, the factum of non-availability of any explanation of more than 13 years delay has also not been delved into by the Commission at all.48. In that view of the matter question of there being any order of injunction at this stage of the proceeding on the face of the finding as passed by the Commission itself does not and cannot arise.