Suit No. 3677 of 1999

26th July, 1999

Petitioner Counsel: MR. I. M. CHAGLA with MR. J. P. SEN and MR. D. J. KAKALIA i/b MULLA & MULLA & CRAGIE BLUNT AND CAROE
Respondent Counsel: MR. N. G. THAKKAR with MR. D. J. KHAMBATA & MRS. ZIA MODY i/b LITTLE

Cases Cited:
Jupiter General Insce. Co. Ltd. v/s Corporation of Calcutta, AIR 1956 Calcutta 470 [Para 6]
M/s. Neelkantan and Bros. Construction v/s. Superintending Engineer, National Highways, Salen, AIR 1988 SC 2045 [Para 6]
Union of India v/s. Jyoti Prakash Mitter, AIR 1971 SC 1093 [Para 6]
K.I. Shephard v. Union of India , AIR 1988 SC 686 [Para 8]

JUDGMENT

JUDGMENT :- Leave under Rules 147 and 148 of the High Court of Judicature at Bombay (O.S.) Rules, 1980 is granted to the Plaintiffs to take out the Notice of Motion in terms of the draft Notice of Motion handed in. Notice of Motion made returnable on 3rd September, 1999. Defendant waives service of Notice of Motion.

2. The plaintiffs have filed this suit for perpetual injunction restraining the defendant from acting in furtherance of the two orders dated 24th December, 1998 and 29th April, 1999. Notice of Motion has been taken out for restraining the defendants from acting in furtherance of the aforesaid two orders during the pendencey of the suit.

3. The Defendants are a Company registered under the Companies Act, 1956. They have been permitted to drop the word "Limited" after obtaining approval from the Central Government under Section 25 of the Companies Act, 1956. The main objects of the Defendants are set out in its Memorandum of Association. The Consumer Complaints Council, hereinafter referred to as "the CCC" has been constituted under Article 55 of the Articles of Association of the Advertising Standards Council of India, hereinafter referred to as "ASCI". The CCC examines and investigates complaints received from consumers and general public including members with regard to any breach of ASCI's code of conduct and recommend action to be taken in this regard.

4. It appears that a complaint was received by the Defendant with regard to an advertisement of the plaintiffs which was published in Times of India on 27th September, 1998. On receipt of this complaint, a letter was sent by the Defendant to the Plaintiffs on 26th October, 1998. In this letter it is stated that the Defendant has adopted a code for self regulation in advertising. Complaints pertaining to advertisement are received by the Defendant. These are judged by a 14 Member independent CCC consisting of persons representing a wide range of professions and disciplines. The plaintiffs were put to notice that a complaint has been received regarding the advertisement which appeared in the Times of India on 27th September, 1998. This complaint was said to have been received on 13th October, 1998. It was alleged in the letter that as per the complaint the following claims made in the advertisement are misleading.

" Internationally proven anti-borer chemicals technology has been introduced in the Indian Plywood industry through Century Powder proof ply."

" The advanced technology has been perfected by Century over the last two years to assure long term protection under different climatic conditions."

" Termite proof plywood is only 50% safe. For 100% protection, your plywood must also be borer proof."

" Termite proof certainly does not mean borer proof."

It was stated that the advertisement is cleverly designed to mislead the unwary consumers of wood panel products and the general public regarding the evolution and present status of wood preservation technology in the country. The Plaintiffs were "invited" to offer any comments which would be placed for the deliberation of the CCC. The Plaintiffs were directed to ensure that the comments should reach by November 17, 1998 failing which the complaint will be decided experte. The Plaintiffs were directed to treat this matter as urgent. The plaintiffs were informed that it would be in the interest of the plaintiffs to ensure that comments include or are supported by adequate substantiation of the claims in the advertisement which should also not be in contravention of any other provisions of the ASCI Code. Technical substantiation of the claims in the advertisement were to be supported by authentic tests/trials reports provided or validated by a recognized independent testing facility. The plaintiffs sent a reply on 13th November, 1998 giving various explanations and proof of the claims made in the advertisement. It seems that another complaint was received against the plaintiffs on llth November, 1998. This was also communicated to the Plaintiffs by a letter dated November 16, 1998. This pertains to the identical advertisement which appeared in the Times of India on October 8, 1998. On 16th November, 1998 the plaintiffs were sent another letter asking for further information about point Nos.4, 5 and 6. On 15th December, 1998 the Plaintiffs wrote to the defendant. The Plaintiffs clearly expressed its apprehension that the complaint is being pursued by and or on behalf of one of the competitors of the Plaintiffs. It is stated that the competitors are merely trying to get more information about the invention and the defendant is being wrongly used for such collateral purpose. The letter expresses the confidence of the plaintiffs that the bona fides of the defendant are not being disputed. At the same time in no uncertain terms, the plaintiffs expressed the apprehension that Defendant No.1 is being misused by the competitors of the plaintiffs. It is, therefore, requested that defendant first check up and ensure the credibility of the complainant and to furnish to the plaintiffs the identity of the complainant. The plaintiffs were not given the identity of the complainant. They were also not given a copy of the complaint. An order was passed on 24th December, 1998 where the complaint had been upheld The Plaintiffs were directed to suspend the ad campaign. It was further stated that falling such an assurance of compliance the Defendant will be constrained to request the concerned agency/media not to place or carry the advertisement in its present form. The Plaintiffs sought review of the order. Personal hearing was also sought. It was, however, mentioned that the personal hearing may be given, if so desire Subsequently by another letter again personal hearing was requested. It is the common case of the parties that no personal hearing was ever given. The Review Application was also dismissed on 29th April, 1999.

5. Mr. Chagla, learned Counsel appearing for the Plaintiffs, has submitted that this Company may be within its power to issue directions to its members. It, however, cannot in the guise of issuing directions to the members affect the business interest'of non-members. Plaintiffs admittedly are not a member of the Defendant. They, therefore, are not bound by any directions issued by the Defendant. He further submits that since virtually all the advertising agencies are members of Defendant, they would be bound to carry out the directions issued by the Defendant. In fact, in both the impugned orders it has been categorically stated that unless the directions are obeyed by the Plaintiffs, the members will be directed to implement the orders. Therefore, according to the learned Counsel, the directions issued in fact mean that they have been issued against the Plaintiffs. He submits that there has been a violation of the rules of natural justice. He submits that the issue of directions by the defendant would also be directly violative of the provisions of Article 14 and 19 of the Constitution of India. He submits that grave harm has been done to the reputation of the Plaintiffs as the advertisements have been labelled as false.

6. Mr. Thakkar, learned Counsel appearing for the defendant, submits that these arguments do not lie in the mouth of the plaintiffs. The plaintiffs submitted to all the proceedings before the Defendant. The plaintiffs supplied all the necessary documentation. In clarificatory letters given in response to the letters sent by the Plaintiffs, the defendant has even attached reports from the IPI RTI. He submits that the complaint was received not against the product but against the advertisement which was carried in Times of India. Thus, it was not the product which was under investigation but it was the falsity of the advertisement which was under investigation. He submits that CCC is a wholly independent organisation within the defendant. It consists of experts from a very wide spectrum of the society. In the constitution of the CCC there are representatives of the Industry, educational institutions and other expert bodies. Very few of the members have anything to do with the field of advertising. He submits that not only have the plaintiffs accepted the jurisdiction of the Defendant but they have repeatedly expressed their confidence in the working of the defendant. Having done so they cannot now be permitted to say that the action taken by the defendant is either in breach of the principles of natural justice or against law. They are estopped from raising these defences. For this proposition the learned Counsel has relied upon a judgment of Calcutta High court in the case of Jupiter General Insce. Co. Ltd. v/s Corporation of Calcutta (AIR 1956 Calcutta 470) and a judgment of the Supreme Court in the case of M/s. Neelkantan and Bros. Construction v/s. Superintending Engineer, National Highways, Salen (AIR 1988 S.C. 2045). Mr. Thakkar further submits that opportunity of personal hearing is not an essential ingredient of natural justice. For this proposition the learned Counsel has relied upon another judgment of the Supreme Court in the case of Union of India v/s. Jyoti Prakash Mitter (AIR 1971 S.C. 1093). Apart from this, the learned counsel has submitted that the Plaintiffs cannot be granted any relief as they are guilty of having suppressed material facts from this Court. The Plaintiffs have suppressed letters dated 4th December, 1998, 15th December, 1998, 10th February, 1999 and 19th February, 1999. A perusal of these letters would show that the plaintiffs were aware that no personal hearing was to be given to any of the parties. They were also aware that CCC was to decide the entire matter by taking into consideration all these materials. They were also aware that the identity of the Complainant is not getting to anybody. From the letter dated 19-2-99 it becomes apparent that the code of conduct of the defendant is accepted by the Plaintiffs.

7. I have considered the arguments put forward by the learned Counsel for the parties. Undoubtedly defendant is a Company which is governed by the provisions of the Companies Act. Therefore, the members of the company would be bound by all the directions which are issued by the Board of Directors of the Company. Any directions issued by this Company are not binding on the plaintiff. Restrictive orders can only be passed by the State in exercise of its powers under Article 19 of the Constitution. This article permits the State to impose reasonable restrictions on the Rights to Freedom, guaranteed in this Article. No individual or Company can arrogate to themselves the powers of the State, Statutory Authorities or Instrumentalities of the State. I am prima facie of the view that this Company cannot be elevated to the status of State, Statutory Corporation or Instrumentality of the State. That being so, any action taken by the company which would infringe the rights of a citizen of India guaranteed under Articles 14 and 19 would be without jurisdiction. No directions issued by the Company to the members can be held to be binding on a non-member. Therefore, if the directions issued by the company to the members have the effect of adversely affecting the trade or profession of a non-member, the directions would be without jurisdiction. Interestingly in the Memorandum and Articles of Association it is provided that the Code is not in competition with law. Its rules, and the machinery, through which they are enforced, are designed to complement legal controls, not to usurp or replace them. But the directions contained in the two impugned orders clearly have the effect of a mandatory injunction. This kind of order can be granted only by Courts duly constituted under law. A voluntary association of persons, even a company such as the Defendant, cannot usurp the jurisdiction of the Courts, Tribunals and Fora duly constituted by Parliament.

8. Coming now to the breach of Rules of natural justice, Mr. Thakkar has submitted that the plaintiffs had submitted to the jurisdiction and, therefore, no complaint of the breach of rules of natural justice can be made. The two judgments relied upon by the learned counsel in the case of Jupiter (Supra) and Neelkantan (Supra) are given in relation to Arbitration Awards. I am unable to, at this stage, agree to the submission of Mr. Thakkar, that the recommendations given by CCC are in the nature of any arbitration proceedings. The replies which have been given by the plaintiffs have been in response to the "requests" made by the Defendant. There was hardly any choice left with the Plaintiff. Not replying to the "notice" would have entailed an "exparte decision". It is so mentioned by the Defendants in the letter dated 26-10-1998. The defendant was quite prepared to adjudicate in the absence of the plaintiffs. Prima facie, I am of the view that the participation of the Plaintiffs, was not wholly voluntary. The adjudication by the CCC, in my view, cannot be elevated to the status of arbitration proceedings. The other judgment relied upon by Mr. Thakkar in the case of Union of India v/s. Jyoti Prakash (supra) is for the proposition that personal hearing is not a necessary ingredient of rules of natural justice. A perusal of the aforesaid judgment would show that it has been given whilst considering the scope and ambit of Article 217(3) of the Constitution. The powers of the President of India for determining the correct age of the Judge of a High Court were under consideration of the Supreme Court. These observations cannot be stretched to such an extent that any authority whilst passing orders which may vitally affect the individual can pass the same without giving him an opportunity of hearing. Such a situation had in fact arisen before the supreme Court in the case of K.I Shephard v. Union of India (AIR 1988 S.C. 686). In that case on amalgamation of one bank with another one group of employees were sought to be excluded from absorption in the new Undertaking. The Supreme Court observed that an opportunity of hearing is an essential ingredient of rules of natural justice. This was sought to be countered by saying that the Bank is prepared to give a post decisional hearing. The Supreme Court, however, rejected this on the ground that giving such a hearing would be futile, as once a decision has been taken there is a tendency to uphold it. In other words an opportunity of hearing is so cardinal that it cannot even be replaced or substituted by a post decisional hearing. In such circumstances I am unable to accept the submission of Mr. Thakkar that it was not necessary to give an opportunity of personal hearing to the Plaintiffs. Even otherwise I am prima facie of the view that the Defendant has acted discriminately against the plaintiffs. The two impugned orders passed by the defendant had adversely affected the plaintiff's reputation. In the letter dated 19th February, 1999 the plaintiff brought to the notice of the defendant that the competitor company has been conducting a misleading, vicious and unsubstantiated vilification campaign against the plaintiffs. Taking advantage of the first order dated 28-12-1998. Indian Plywood Manufacturing Company Ltd. (I.P.M.C.) had addressed letters to leading architects, consultants and dealers misrepresenting therein that the defendants have come to the conclusion that the advertisement issued by the plaintiffs is false. It was brought to the notice of the defendant that the complainant had clearly stated in the complaint that anti termite treatment is fully protective rendering anti borer treatment redundant. Yet now in their own advertisements they had made the same claim as was made by the plaintiffs. This advertisement was enclosed as an annexure to the letter. No action has been taken against the I.M.P.C. although they have published identical advertisement with regard to the same product. Confronted with this, Mr. Thakkar has argued that the defendant only accepts and investigates complaints officially received. Defendant is not bound to act on "false advertisements" which may be brought to their notice by some other interested parties. I find this attitude of the defendant clearly contrary to the code of conduct which has been so heavily relied upon by the defendant. On the one hand the plaintiff is being directed to withdraw the advertisement with regard to Borer on the other hand the I.P.M.C. is being permitted to continue with similar advertisement. The Defendant having arrogated to itself the status of a Regulatory Body is, in my view, required to act fairly and not capriciously or arbitrarily. Its decisions must be just and fair. Permitting I.P.M.C. to advertise and to prohibit the plaintiff is plainly discriminatory.

9. Lastly Mr. Thakkar has contended that grant of ad-interim injunction at this stage would amount to granting final relief. In my view, in this case circumstances are such that the only relief which can be granted is the relief in terms of prayer clause (a) Hence ad-interim relief in terms of prayer clause (a). Prayer clause (a) reads as under:

"(a) that pending the hearing and final disposal of the above suit, this Hon'ble Court may be pleased to pass an order and injunction restraining the defendant from acting in any manner whatsoever in furtherance of the said orders being Exhibits "J" and "T" to the plaint including, inter alia, by publishing and/or publicising the said orders in their Reports and/or communicating the same in any other manner whatsoever to members of the media and the general public."

Certified copy expedited.

Order accordingly.