Star India(P) Ltd. vs Society Of Catalysts . on 23 January, 2020


Supreme Court of India

Star India(P) Ltd. vs Society Of Catalysts . on 23 January, 2020

Author: Mohan M. Shantanagoudar

Bench: Mohan M. Shantanagoudar, K.M. Joseph

                                                                     REPORTABLE


                                  IN THE SUPREME COURT OF INDIA


                                   CIVIL APPELLATE JURISDICTION


                                   CIVIL APPEAL NO. 6597 OF 2008


            Star India (P) Ltd.                                       Appellant(s)


                                               VERSUS


            Society of Catalysts & Anr.                              Respondent(s)


                                                 WITH


                                   CIVIL APPEAL NO. 6645 OF 2008


                                         J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

These appeals arise out of the judgment dated 11.9.2008 of

the National Consumer Disputes Redressal Commission (“National

Commission”) allowing the consumer complaint filed by Respondent
Signature Not Verified

Digitally signed by
ASHWANI KUMAR
Date: 2020.01.23

No. 1 in both these appeals against the Appellants.
16:57:39 IST
Reason:

1

2. The brief facts giving rise to these appeals are as follows:

2.1 Star India (P) Ltd., the Appellant in C.A. No. 6597/2008

(hereinafter “Star India”) used to broadcast the programme ‘Kaun

Banega Crorepati’ (“KBC”) between 22.1.2007 and 19.4.2007. The

programme was sponsored by Bharti Airtel Limited, the Appellant in

C.A. No. 6645/2008 (hereinafter “Airtel”), amongst others. During

the telecast of this programme, a contest called ‘Har Seat Hot Seat’

(“HSHS contest”) was conducted, in which the viewers of KBC were

invited to participate. An objective­type question with four possible

answers was displayed on the screen during each episode, and

viewers who wished to participate were required to send in the

correct answer, inter alia through SMS services, offered by Airtel,

MTNL and BSNL, to a specified number.

2.2 The winner for each episode was randomly selected out of the

persons who had sent in the correct answers, and awarded a prize

money of Rs. 2 lakhs. There was no entry fee for the HSHS contest.

However, it is not disputed that participants in the HSHS contest

were required to pay Rs. 2.40 per SMS message to Airtel, which was

higher than the normal rate for SMSes. Hence, Respondent No. 1,

2
which is a consumer society (hereinafter “the complainant”), filed a

complaint before the National Commission against Star India and

Airtel (but not against BSNL and MTNL), contending that they were

committing an ‘unfair trade practice’ within the meaning of Section

2(1)(r)(3)(a) of the Consumer Protection Act, 1986 (“the 1986 Act”). It

was alleged that the Appellants had created a false impression in

viewers’ minds that participation in the HSHS contest was free of

cost, whereas the cost of organizing the contest as well the prize

money was being reimbursed from the increased rate of SMS

charges, and the profits from these charges were being shared by

Airtel with Star India.

2.3 Further, it was alleged that an unfair trade practice had also

been committed inasmuch as the contest was essentially a lottery

as the questions were simple, and the winners were finally picked

by random selection. The purpose of this contest was to promote

the business interests of the Appellants by increasing the

viewership and Television Rating Points (TRP’s) of the KBC

programme, and thus to command higher advertising charges, and

also by increasing the revenue earned from SMS messages. Hence

3
the Appellants were culpable for conducting a lottery­like contest to

promote their business interests under Section 2(1)(r)(3)(b) of the

1986 Act.

2.4 It is relevant to note that the complainant is only a voluntary

consumer organization which has filed this complaint as part of its

objective of furthering the consumer protection movement. It is not

their case that they have participated in the HSHS contest and

incurred any loss on account thereof. It is further relevant to note

that the complainant’s assertions are solely based on a survey

which it had carried out, in which the majority of participants

apparently stated that they were under the impression that

participation in the HSHS contest was free and the SMS charges

were retained only by the service provider, i.e. Airtel and most of the

viewers felt that the contest was carried out to increase the

popularity of the KBC programme. The conclusions of this survey

were apparently confirmed by a newspaper report dated 15.7.2007

published by the Hindustan Times. As per this newspaper report,

Airtel received 58 million SMS messages, and the revenue earned

from the SMSes was shared by Star India and Airtel.

4

3. The National Commission in the impugned judgment observed

that though the Appellants had not disclosed the revenue earned

from the HSHS contest on grounds of confidentiality of proprietary

information, it was apparent that they had created an impression

that the prize money was being given free of charge, even though

they had not disputed that the prize money for the HSHS contest

was paid out of the money collected through SMS charges. The

Commission relied upon the figures stated in the newspaper article

dated 15.7.2007 (supra), and found that since the Appellants had

not denied that they had received 58 million SMSes, they would

have collected Rs. 13.92 crore from the participants of the HSHS

contest for such messages, whereas a total sum of only Rs. 1.04

crores was paid as prize money. Thus, the gross earnings of the

Appellants were disproportionate to the cost of the prizes offered.
3.1 The Commission further found that no viewer could discern

from the on­screen advertisements that the costs of the contest

were being met through the SMS charges, and the Appellants had

clearly not notified viewers about the same. It found a contradiction

between the Appellants’ stances as to whether the HSHS contest

was advertised as ‘free’ or not. It was also observed that the

5
Appellants had not brought any evidence on record to show that the

transmission of SMS messages for the HSHS contest was a value

added service such that the higher SMS cost was justified, and

hence the same could not be construed as a value added service. It

was presumed by the National Commission that the special

business relationship between Star India and Airtel included an

undisclosed revenue sharing agreement.

3.2 Hence, it was held that since the prize money for the HSHS

contest was fully or partly covered by the revenue earned from

increased SMS charges, the Appellants had committed an unfair

trade practice under Section 2(1)(r)(3)(a) of the 1986 Act. In light of

this finding, the National Commission found it unnecessary to deal

with the complainant’s contention regarding commission of an

unfair trade practice under Section 2(1)(r)(3)(b).

3.3 The National Commission additionally held that the complaint

was maintainable under the 1986 Act and need not have been

preferred before the Telecom Disputes Settlement and Appellate

Tribunal (“TDSAT”) under the Telecom Regulatory Authority of India

Act, 1997 (“TRAI Act”). Further, it was held that the complaint was

6
not bad for non­joinder of parties as there was nothing on record to

suggest that BSNL and MTNL had also recovered large amounts

from the SMS charges for the HSHS contest and that the amount so

recovered by them was used for sharing the cost of the prize money.

3.4 Hence, the complaint was accordingly allowed by the National

Commission. Since the complainant is only a consumer

organization, the National Commission observed that there were no

grounds for granting compensation. However, it awarded punitive

damages of Rs. 1 crore under the Proviso to Section 14(1)(d) of the

1986 Act, for which both Appellants were held jointly and severally

liable. The National Commission also directed them to pay litigation

costs of Rs. 50,000 to the complainant. Hence these appeals before

us.

4. Learned senior counsel for Star India, Shri Gaurav

Pachnanda, submitted that the entire finding of ‘unfair trade

practice’ was based on inferences and speculation, and on reliance

on a newspaper report without corroboration of its contents, which

was impermissible. He disputed the finding of the National

Commission that the Appellant had admitted that the prize money

7
was paid out of the revenue earned from increased SMS rates. It

was stressed that the National Commission had omitted to inquire

into the source of the prize money. It was also stressed that Airtel

had not shared the revenue earned from the increased SMS rates

with Star India at all. The only monetary flow between them was a

fixed periodic lumpsum to be paid by Airtel under the services­cum­

sponsorship agreement between them, which bore no relation to the

revenue received from the SMSes, and that there was no evidence to

suggest that the SMS revenue was used to pay the prize money. The

learned counsel emphatically argued that the expression “covered

by the amount charged in the transaction as a whole” under

Section 2(1)(r)(3)(a) of the 1986 Act only meant direct recovery from

the price paid for the transaction, and not from advertisements or

sponsorship, citing the decision of this Court in HMM Ltd. v.

Director General, Monopolies & Restrictive Trade Practices

Commission, (1998) 6 SCC 485.

4.1 It was further submitted that Airtel was entitled to charge a

higher rate for the SMSes sent in pursuance of the HSHS contest,

since the transmission of SMSes to register options in a multiple

8
choice question game required a special software, the use of which

constituted a value­added service; and that Star India had complied

with the relevant TRAI regulations mandating that such increased

tariff be displayed on the television screen as well as on the KBC

programme website. Therefore, though the participants bore the

cost of sending the SMS messages, they were duly informed of the

same, while participation in the contest itself remained free of

charge. In such circumstances, the National Commission could not

have attributed recovery of prize money to the increased tariff rate

of the SMSes without even inquiring into the breakup of cost, value

addition and profit in the tariff.

4.2 The learned counsel also challenged the award of damages, for

lack of proof of loss or legal injury to the participants in the contest,

which he submitted was required as per Section 14(1)(d) of the

1986 Act. Lastly, he argued that “punitive damages” could not have

been awarded without a specific prayer for the same in the

complaint.

5. Learned counsel for Airtel, Shri Aditya Narain, urged that as

far as the commission of an unfair trade practice was concerned,

9
the only finding rendered by the National Commission was

regarding the creation of a wrongful impression that the contest

was conducted free of charge, which is covered under the second

part of Section 2(1)(r)(3)(a) of the 1986 Act, and that the same was

not attracted in the present case. He took us through the TRAI

direction regarding advertisement of premium rate services,

pleading compliance with the same. Finally, he submitted that the

jurisdiction of the consumer fora was ousted by Section 14(a)(iii)

read with Section 15 of the TRAI Act, which provide that any

dispute between telecom service providers and “a group of

consumers” have to be referred to the TDSAT, and that the

complainant organisation was essentially nothing but a group of

consumers since it was purporting to represent the interest of

consumers at large.

6. Learned Counsel for the complainant, Ms. Madhumita

Bhattacharjee, on the other hand, argued in favour of the decision

of the National Commission, submitting that the Appellants had

given the wrongful impression to consumers that the HSHS contest

prize money was not paid out of the revenue generated from

10
increased SMS tariff rates. She also averred that the complaint

contained a prayer as to punitive damages, and thus the National

Commission had not erred in awarding punitive damages. Finally,

she submitted that the complaint was maintainable under the 1986

Act since the complainant had filed an individual complaint under

the Act, and not acted on behalf of a group of consumers, thus

attracting the exemption available to individual consumers under

proviso (B) to Section 14 (a)(iii) of the TRAI Act.

7. We have heard all the parties and given due consideration to

the material on record.

8. It is apparent that the crucial question to be determined in the

instant case is whether an unfair trade practice has been

committed by the Appellants in the conduct of the HSHS contest, in

terms of Section 2(1)(r)(3) of the 1986 Act. We hasten to emphasize

at this juncture itself that though the complainant had also pleaded

violation of Section 2(1)(r)(3)(b) of the 1986 Act in their complaint,

there was no express finding rendered on this issue by the National

Commission, and subsequently, no contentions were made before

us in this respect. Thus, the limited question before us is whether

11
an unfair trade practice has been committed only within the

meaning of Clause (a) of Section 2(1)(r)(3). It would be useful to

begin by referring to the relevant portion of the definition of “unfair

trade practice” under Section 2(1)(r)(3):

“(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;—

(3) permits—

(a) the offering of gifts, prizes or other items with the
intention of not providing them as offered or creating
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;…”

8.1 Evidently, the mischief that the clause seeks to address may

be in two forms: firstly, the offering of gifts, prizes or other items

with the intention of not providing them as offered, and secondly,

the creation of the impression that something (i.e. a gift, prize or

other item) is being given or offered free of charge in spite of the

cost of the item actually being covered either fully or partly by the

amount charged in the relevant transaction, as a whole. This would

be, for example, where the vendor of a good or service deceptively

increases the price of the good or service being sold, and covers the

12
cost of a prize or gift offered for ‘free’ along with the good or service

through such increased price.

8.2 In the instant matter, the controversy regarding the

commission of an unfair trade practice pertains to the second part

of the clause. This is because the Appellants are questioning the

conclusion of the National Commission that the amount of prize

money paid in the HSHS contest was in fact at least partly covered

by the increased SMS tariff rate charged to participate in the

contest, and that the Appellants had created a false impression to

the contrary, i.e., that participation in the HSHS contest was free of

charge. Thus, the primary bone of contention between the parties is

the source of the funds out of which the prize money has been paid

by Star India.

9. At the outset, after going through the written submissions of

the Appellants before the National Commission, we are compelled to

conclude that the National Commission had no basis to hold that

the Appellants had admitted that the prize money for the HSHS

contest was distributed out of the revenue collected from the SMSes

sent in pursuance of the contest. It is true that the Appellants had

13
not specifically denied that the prize money was paid out of the

increased SMS charges. However, they had clarified in their

submissions that Airtel was merely a sponsor/advertiser of the

program, and the commercial arrangement between the parties was

that Airtel would pay sponsorship charges, whereas Star India

would be independently liable for paying the prize money out of its

pocket regardless of the revenue earned by Airtel.

10. Importantly, we further find that apart from the

aforementioned facts, there is no other cogent material on record

upon which the National Commission could have placed reliance to

render the finding of ‘unfair trade practice’ under Section 2(1)(r)(3)

(a) of the 1986 Act. The National Commission had sought to rely on

the newspaper report dated 15.7.2007 published in the Hindustan

Times (supra) regarding the amount of revenue and profit earned by

the appellants from the HSHS contest. We are of the considered

opinion that such reliance was unwarranted, inasmuch as there

was absolutely no corroboration for the allegations therein with

respect to the number of SMSes received, and the breakup of

revenue earned into cost, value addition from service, and profit.

14
Moreover, the survey report on the basis of which these allegations

were made was not even produced before the National Commission

or before us.

11. It is further relevant to note that there exists a services­cum­

sponsorship agreement between the Appellants, which contains the

specific details of the commercial arrangement between them. They

did not produce the same before the National Commission, claiming

that the said agreement contained a confidentiality clause, and

could only be produced in accordance with law if required. The

Appellants’ case is that they would have offered to produce the

agreement if the National Commission had given a specific direction

to that effect. However, no such direction was rendered at any point

during the proceedings before the National Commission. Even the

complainant did not, throughout the course of the proceedings,

seek a direction to the Appellants to produce the services­cum­

sponsorship agreement. Be that as it may, to establish whether

there was any substance in the National Commission’s conclusion

that the prize money was paid out of the revenue earned from

15
Airtel’s SMS services during the HSHS contest, we deemed it fit to

examine the agreement ourselves.

11.1 Our perusal of the services­cum­sponsorship agreement

reveals that Airtel had the sole and exclusive right to charge fees or

charges towards the services rendered by it to facilitate

participation in the HSHS contest, through SMS, telecalling, etc.,

and thus, Star India had no role in determining the same. Further,

Airtel was liable to pay a monthly lumpsum as fees to Star India,

irrespective of whether such amount was realized from its

subscribers or not. There is no provision in the agreement for

revenue­sharing between the parties, or requiring Airtel to finance

any part of the prize money paid by Star India towards the HSHS

contest.

11.2 Thus, it is evident that Star India was liable to pay the

prize money irrespective of the profits earned by Airtel. It is

needless to say that the sponsorship money paid by Airtel would

come from various sources of revenue, which includes the money

earned from the tariff rates for the HSHS contest. Similarly, Star

India may have had many sources of revenue from which the prize

16
money could have been paid. This is a part and parcel of the

ordinary business dealings of the Appellants, and the complainant

has failed to establish any direct linkage between the increased

SMS tariff rates and the prize money so as to show that the prize

money was deceptively recovered in the guise of increased SMS

rates charged to the participants.

12. Further, since the National Commission failed to conduct any

inquiry whatsoever into the breakup of the price of Rs. 2.40 per

SMS fixed for the purpose of participation in the HSHS contest, we

are of the view that the finding of the National Commission that the

SMS service offered by Airtel under the HSHS contest did not

constitute a value­added service is liable to be set aside. Indeed, the

services­cum­sponsorship agreement reveals that Airtel was liable

to set up the hardware and software required for the HSHS contest

at its own cost, which suggests that the services regarding the

participation in the HSHS contest through SMSes offered by Airtel

constituted a value­added services separate from its ordinary SMS

service. It is reasonable to assume that such cost would have been

recovered by Airtel, at least in part, through the increased cost of

SMSes sent by subscribers participating in the HSHS contest. The

17
direction on ‘Premium Rate Services’ dated 3.5.2005, issued by

TRAI, which was referred to by the Appellants, also states that

televoting and participating in quizzes, etc. through SMS

constitutes a value added service, and that in most of these cases,

the charges for these services are more than the normal tariff rate.

The notification is reproduced below:

“F. No. 305­8/2004­QOS
TELECOM REGULATORY AUTHORITY OF INDIA
A­2/14, Safdarjung Enclave, New Delhi­110029

Dated : 3rd May, 2005
To,
All Cellular Mobile Service Providers
All Unified Access Service Providers

Subject : Direction on Premium Rate

Services.

1. The Authority has observed that in the last few
months, a number of operators and also some
independent agencies have started providing
value added services like quiz, ringtones,
televoting etc. through SMS. In most of these
cases, the charges for these services are more
than the normal published tariffs. The
customers are informed about these value added
premium rate services through SMS,
advertisements in newspaper or T.V. But in this
communication, the cost implication of the
service is not intimated. Sometimes the

18
messages are only followed by wordings “T&C
Apply”.

2. In the present multi­operator multi service
scenario, such premium rate services have
increased considerably. The service provider is
aware of the pulse rate for these services as
either the service provider is providing such
services or it has an agreement with the provider
of such premium services. However, the cost for
such premium services is generally known to the
customer only after the service has been utilized
and the bill is received. This practice of service
providers is against the interest of the
consumers.

3. In view of the above, in the consumer’s interest,
the Authority in exercise of its power conferred
upon it under Section 13 read with Section 11(1)

(b)(i) and (v) of the Telecom Regulatory Authority
of India Act
, 1997 and clause 9 and 11 of the
Telecommunication Tariff Order 1999 hereby
directs all the Cellular Mobile Service Providers
and Unified Access Service Providers to publish
in all communications/advertisements relating
to premium rate services, the pulse rate/tariff
for the service.

This issues with the approval of the Authority.

(Sudhir Gupta)
Advisor (QOS)”

13. However, we need not dwell on this issue much longer, since

not much turns upon it with regard to the determination of the

commission of an unfair trade practice, except to note that the

transmission of SMSes for the purpose of the HSHS contest being a

19
value added service, the Appellants had also taken care to comply

with the TRAI direction dated 3.5.2005 (supra) which mandated the

communication/advertisement of any increase in the cost of cellular

services on account of the rendering of such a value­added service.

Thus, even if the SMS charge is taken as the ‘cost’ of participating

in the contest for the purpose of Section 2(1)(r)(3)(a) of the 1986 Act,

it cannot be said that the Appellants had wrongfully advertised the

charges for the same.

14. Hence, we find that the complainant has clearly failed to

discharge the burden to prove that the prize money was paid out of

SMS revenue, and its averments on this aspect appear to be based

on pure conjecture and surmise. We are of the view that there is no

basis to conclude that the prize money for the HSHS contest was

paid directly out of the SMS revenue earned by Airtel, or that Airtel

and Star India had colluded to increase the SMS rates so as to

finance the prize money and share the SMS revenue, and the

finding of the commission of an “unfair trade practice” rendered by

the National Commission on this basis is liable to be set aside.

20

15. With regard to the award of punitive damages made by the

National Commission, the same could not have been done in as

much as the complainant in the present case had not prayed for

punitive damages in the complaint or proved that any actual loss

was suffered by consumers (See General Motors (India) Private

Limited v. Ashok Ramnik Lal Tolat, (2015) 1 SCC 429). However,

we need not delve further into this aspect since we have found that

there was no unfair trade practice committed by the Appellants in

the first place.

16. On an ancillary note, it was briefly contended before us by the

learned counsels for the Appellants, as mentioned supra, that the

National Commission did not have jurisdiction over the complaint

and it should have been referred to the TDSAT. However, this

argument was not seriously pressed by either of the parties. Hence,

we do not find it relevant to adjudicate upon this issue for the

purpose of the present matter. However, the question of law, as

regards the maintainability of complaints filed by consumer

organisations against telecom service providers before consumer

fora may be kept open.

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17. Thus, we find that the finding of the commission of an unfair

trade practice under Section 2(1)(r)(3)(a) in the impugned judgement

is bad in law. The appeals are allowed and the impugned judgement

is set aside in the aforesaid terms.

…..……………………………………..J.
(MOHAN M. SHANTANAGOUDAR)

….………………………………………J.

(R. SUBHASH REDDY)
New Delhi;

January 23, 2020

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