OEN MICRO SYSTEM LIMITED vs Unfair Trade Practices

A Notice of Enquiry (NOE) was issued to OEN Micro System Limited, Cochin, Kerala on 12.4.1993 under Sections 36B(d) and 36D of the Monopolies and Restrictive Trade Practices Act, 1969 (for brief the Act) levelling allegations that it indulged in unfair trade practices. The NOE was issued after a Preliminary Investigation Report (PIR) was submitted by the Director General (Investigation and Registration) (the DG) based on a complaint filed by Boots Pharmaceuticals Limited, Bombay.

THE facts of the case as contained in the PIR may be summarized as given below : THE informant Company, viz., Boots Pharmaceuticals Limited purchased four terminals marked CT 5392 from the respondent in early 1990 for use with their computer HP 3000/925LX. This computer was gifted to the informant alongwith two terminals HP 700/92. According the informant the computer could be operated with HP 700/92 terminal as well as HP 2392A terminal. THE terminal CT 5392 were purchased by the informant from the respondent on the representation made by the latter as well as the understanding given by it to the manufacturer of the computer Hewlett Packard Limited that the terminals CT5392 manufactured by it are compatible with HP 2392A. THE terminals supplied by the respondent Company was found to be defective inasmuch as there were problems relating to the key boards and they behaved unpredictably when used with the computer. According to the respondent the malfunctioning of their terminals might be due to the fact that the informant was using HP 700/92 terminal and not HP 2392A terminal with the computer. Further, the terminal supplied by it is an indigenous version of Zentec 8392 and is 100 per cent compatible with HP 2392A terminal. The NOE charged that the respondent falsely represented that the terminals supplied by it were compatible for operating HP 3000/900 LX Mini Computer and gave false and misleading guarantee regarding the performance of the terminals.

The respondent filed a reply to the NOE in which the following main points were made : (1) The respondent in its offer of sale of the terminals vide its letter dated 29th September, 1989 only stated that their CRT terminal was fully compatible with HP 2392A and in response to that the Informant placed order on 9th October, 1989 for "4 HP 2392A compatible CRT terminals". (2) The invoice of the respondent dated 19.12.1989 also referred to its goods as CT 5392 and described them as "HP 2392A compatible CRT terminal". (3) The engineers of the respondent Company on their visit to the informant Company found that the informant was using HP 700/92 version of the CRT terminal and not HP 2392A terminal. (4) The informant never disclosed to the respondent while accepting the offer or placing the order that the intention was to use the terminals alongwith HP 700/92. (5) The complaints relating to the key boards were mainly because of some keys getting stuck and they were subsequently rectified by the respondent. (6) The respondent developed its CT5392 terminal based Zentec 8392 manufactured by Zentec Corporation, USA and all the features available in Zentec 8392 are available in respondent''s CT 5392. After the pleadings were completed, the following issues were framed : (1) Whether the respondent has or has been indulging in the unfair trade practice as alleged in the Notice of Enquiry ? (2) If answer to issue No. 1 is in the affirmative whether the said unfair trade practice is prejudicial to public interest, interest of consumer or consumers generally ? (3) Relief.

THE DG produced Shri D.M. Raja, the Vice President and Company Secretary of the informant Company and Mr. N.V. Shah, General Manager (Information Technology) of the informant Company as his witnesses. In his deposition Shri Raja stated that CT 5392 of OEN and HP 700/92 both configured as HP 2392A terminals on their HP 3000/925 LX Mini Computer System and the informant Company had no problems with HP 700/92 terminals. Blue Stars Limited, the agents of Hwelett Packard recommended CT 5392 CT terminals pursuant to the representation made by the respondent that CT 5392 terminals were 100 per cent HP 2392 compatible. Shri M.V. Shah in his deposition stated that any software which ran without difficulty with one terminal must also work on other terminals which are 100 per cent compatible with the same. THE software used by the informant Company was fully compatible with HP 2392A and HP 700/92 but the terminals supplied by the respondent did not function properly which meant they were not 100 per cent compatible to HP 2392A. The witnesses of DG were cross examined by the Advocate for the respondent. During the cross examination, Shri Raja admitted that the informant Company never disclosed to the respondent at any stage while placing the order or at the time of accepting the offer that they intended to use the terminals of the respondent Company for their V-Plus Software for which HP 700/92 terminal was used. He also admitted that the informant used HP 700/92. Similarly, Shri M.V. Shah admitted during cross examination that as per the invoice of the respondent CT 5392 was compatible with HP 2392A and the Informant Company was using HP 700/92 and not HP 2392A. On behalf of the respondent no witnesses were produced and the respondent relied only on documents for evidence.

WE gave a hearing to Ms. Anjana Gosain, Advocate for the DG and Mr. M.L. Sachdev, Advocate for the respondent. WE have carefully gone through the records of the case, the evidences adduced and given due consideration to the arguments advanced by the Advocates. Our findings are as given below : The NOE charges the respondent with indulging in unfair trade practices attracting provisions of Section 36A(i), (vi) and (vii). It also states that the respondent falsely represented that the terminals are compatible for operating HP 3000/90 LX Mini Computer. As it transpired during the enquiry the main charge against the respondent actually was that the terminals supplied by it were not compatible with HP 2392A terminals as represented by it in the letter of offer as well as the invoice at the time of sale. The charge was based on the fact that terminals supplied by the respondent worked unpredictably alongwith HP 700/92 terminals which was claimed to be fully compatible with HP 2392A. On the other hand, it is the case of the respondent that terminal HP 700/92 is an advanced version of HP 2392 A terminal and that may be the reason why the informant Company had problems with the terminals supplied by it. From the documents it is clear that the respondent Company in its letter dated 29th September, 1989 stated that it terminals were "fully compatible to HP 2392A". In its invoice dated 19.12.1989 also it was mentioned that the terminals CT 5392 were "HP 2392A compatible to CRT terminals". The witnesses of the DG both Shri Raja and Shri Shah admitted that they have been using HP 700/92 terminal with their computer. The original complaint of the Informant Company was that HP 770/92 is equal to HP 2392A and the terminals supplied by the respondent should work without any problem with their system. The respondent has taken the stand that the terminals supplied by it would work without any problem with HP 2392A terminal. There is an allegation that the informant Company was willing to provide an HP 2392A terminal for testing purposes and the respondent Company did not avail of the opportunity to prove its contentions.

IN order to hold the respondent guilty of misrepresentation falling within the meaning of Section 36 A of the Act it has to be established that what was represented was not correct. IN this case the representation made by the respondent was that its terminals CT 5392 was compatible with HP 2392 A. It has not been established during the enquiry that this representation was false. Even if the respondent did not avail of the opportunity to be present on one occasion when the informant Company was willing to provide one HP 2392A for testing purposes, no evidence was led to establish that CT 5392 was not compatible with HP 2392A. The statement that HP 700/92 is the same as HP 2392A is not relevant to this charge. The terminal supplied by the respondent might not have worked satisfactorily in conjunction with HP 700/92 for any reason but it does not establish that the representation made by the respondent Company is false. If it had been proved during the enquiry by leading evidence that for proper functioning it was immaterial whether HP 2392 A terminal or HP 700/92 terminal was used men at least there was a base to examine whether the charge against the respondent was valid. If the DC claims only on the basis of literature relating to computers that HP 700/92 and HP 2392A stand on the same footing, there is no reason not to believe the claim of the respondent also that CT 5392 are compatible with HP 2392A as there is no proof to the contrary. IN view of this we are of the view that the charge against the respondent that it indulged in misrepresentation falling under Clause 36A(i) and (vi) is not proved. As regards the charge relating to Section 36A(vii) it has to be established that there has been an infringement of warrantee or guarantee of performance. IN this case there had been problems relating to the key board of the terminals and the unpredictable behaviour of the terminals. The respondent Company had attended to the problems relating to the key board and during the enquiry the DG did not also press the charges relating to this. As regards problems relating to the unpredictable behaviour of the terminals supplied by the respondent, the controversy relating to its cause remained unresolved. The case of the informant Company is that the problem was due to the incompatibility of the terminals supplied by the respondent which HP 2392A terminal and not because it used HP 700/92. On the other hand, the respondent suspects that the problem relating to CT 5392 is because of the use of HP 700/92 by the complainant. The proposition that if CT 5392 is used with HP 2392A the problem will vanish has not been put to test. Under the circumstances, it is not possible to hold the respondent guilty of not honouring any warranty or guarantee of performance. For the foregoing reasons, we hold that the charges against the respondent that it indulged in unfair trade practices falling under Section 36 A(i), (vi) and (vii) have not been proved during the enquiry. We, therefore, order that the NOE be discharged. There is no order as to costs. Enquiry discharged.