DIRECTOR GENERAL (INVESTIGATION AND RESTRICTION) vs PROGRESSIVE FINANCIAL SERVICES LTD.

THE Director General (Investigation and Registration) {the DG) has made an application under Sections 36A, 36B(c) and 36D of the MRTP Act, 1969 (the Act for brief) charging the respondent, the Progressive Financial Services Ltd. with adoption of and indulgence in unfair trade practices within the meaning of Sections 36A(i), (ii), (iv), (vi) and (viii) of the Act and stating therein that from the complaint dated 25.7.1994 made by one Shri Vinod S. Bongale, it transpires that the respondent has issued a brochure under the caption "Gifts up to Rs. 29,82,800/ Just for you" and it has been further complained by him that though he paid Rs. 2,000/-, he has not received the promised gift. On a scrutiny of the scheme, it appears that to be able to get this amount, 5460 members have to be enrolled and every new member is required to pay Rs. 2,000/- including Rs. 135/- to the respondent. It has been alleged that the claims made in the brochure are misleading and false and thus attract the provisions of Sections 36A(i), (ii), (iv), (vi) and (viii) of the Act.

ON the basis of the aforesaid application, a Notice of Enquiry dated 9.11.1995 was issued to the respondent. In reply thereto, the respondent while denying the allegation of adoption of and indulgence in unfair trade practices, has stated that out of Rs. 2,000/- paid by a new member on enrolment, it only receives a sum of Rs. 300/- for organising the participation of the members in the aforesaid gift scheme and Rs. 35/- towards postal charges and other services provided by it. The other features of the impugned scheme as highlighted in the respondent''s reply stipulate that a person desirous of becoming a member under the above gift scheme is required to pay Rs. 2,000/- including Rs. 135/- to be paid to the respondent as service and postal charges and of the balance, an amount of Rs. 1,350/- is disbursed to the senior members as gifts and an amount of Rs. 500/- is given to the member who enrols the new members. An amount of Rs. 15/ is also retained by him to meet the bank and other expenses. The member at the time of enrolment, under the scheme, is given four application forms showing his name on Serial Number 1 and he is entitled to receive Rs. 500/- from each new/ member, enrolled by him, and he gets Rs. 2,000/- if he enrols four new members and in this manner if the enrolment of new members continues, the claim is completed when 5460 members are enrolled and he will get gifts of Rs. 29,82,800/-. As regards the complaint of Shri Vinod S. Bongale, it has been stated by the respondent that he has paid only Rs. 135/- and not Rs. 2,000/- as alleged by him and he would be entitled to gifts of an amount of Rs. 29,82,800/- if he enrols 5460 new members. The respondent has also submitted the legal opinions obtained from Mr. Justice S. Mohan, former Judge of the Supreme Court and Mr. Justice E.S. Venkataramaiah, formed Chief Justice of India.

On completion of pleadings, the following issues were framed : (1) Whether the respondent is or has been indulging in the unfair trade practices indicated in the NOE within the meaning of Section 36A of the Act ? (2) If the answer to the foregoing issue is in the affirmative, whether the alleged unfair trade practices are prejudicial to the public interest or to the interest of the consumer or consumers generally ?

WHILE on behalf of the DG, the complainant, Shri Vinod S. Bongale appeared as a witness and was cross-examined by the respondent''s Advocate, the respondent produced its Managing Director, Shri B.K. Madhavan as a witness. As the DG''s Advocate did not appear despite several opportunities afforded to him for making oral submissions, arguments were not heard in this case. We have considered the written submissions filed on behalf of the parties and also the oral and documentary evidence adduced by the parties including the legal opinions filed on behalf of the respondent. As regards the legal opinions tendered by Mr. Justice Venkataramaiah, it may be mentioned here that the impugned gift scheme of the respondent was examined by him in the light of the provisions of the Companies Act, 1956 and the Prize Chits and Money Circulation Scheme (Banking) Act, 1978 and, therefore, cannot be said to be relevant to the present enquiry proceedings which have been Initiated under Section 36A{1) of the Act which deals with unfair trade practices. Likewise, the opinion of Mr. Justice S. Mohan also pertains to the legality of the impugned gift scheme under the provisions of the Prize Chits and Money Circulation Scheme (Banking) Act, 1978. It however, very briefly deals with the applicability of the Consumer Protection Act, 1986 and also the MRTP Act to the impugned gift scheme of the respondent. It may be clarified here that while before the amendment of the Act with effect from 27.9.1991, the essential ingredient required to be proved was loss or injury to the consumers as a result of the alleged unfair trade practices, the Act as it stands at present, does'' not require this ingredient to be proved for establishing an unfair trade practice and, therefore, this legal opinion is not strictly relevant or applicable to the present enquiry. A perusal of the tall claim and representation made by the respondent, in the application form, and also the "Important Instructions" to the member for filling up the application form as also the Rules and Regulations given on the back of the application form, reveals that the respondent is luring the gullible consumers to participate in the scheme by holding out the promise of gifts up to Rs. 29,82,800/-. It appears that the complainant, Shri S. Bongale was induced by the allurement of the gift amount of Rs. 29,82,800/- for participation in the scheme and readily paid Rs. 2,000/- to the agent of the respondent, for enrolment as a member. It transpires that his name also appears at Serial No. 1 of the Application Form No. 3/38105 given to him. It also appears that the above mentioned gift scheme has been devised by the respondent ingeniously and it dangles the prospect of a member becoming a proud owner of Rs. 29,82,800/- and, therefore, it can be said to be highly misleading and deceptive. The respondent has not only devised it very cleverly, it is also the kingpin in running it. It is abundantly clear that unless an amount of Rs. 135/- is paid to it, the process of enrolment and participation in the scheme cannot go on, as all the gifts to be sent through Demand Drafts or Cheques, are to be routed through it. Moreover, it is also getting Rs, 135/- on enrolment of each member and in return, it is mainly issuing application forms. Thus, the respondent cannot disown its responsibility for the continuity of chain or success of the scheme by merely taking the plea that it is for the new members to maintain the chain and earn gifts up to a maximum of Rs. 29,82,800/- depending upon the enrolment of new members. Enrolment of 5460 members by one member is a tall order and is unlikely to be achieved and, therefore, to that extent, the claim made by the respondent is false and misleading. It is an allurement offered to the consumer for becoming a member himself and for soliciting membership of other like-minded persons. The respondent can thus be said to have adopted and indulged in unfair trade practices and accordingly, a cease and desist order is required to be passed. The respondent is hereby directed to discontinue the aforesaid unfair trade practice forthwith and also give an undertaking that it shall not indulge in the same or similar trade practice in future. The respondent is further directed to file an affidavit by way of compliance with six weeks from, the date of pronouncement of the order. Application disposed of.