IN THE MATTER OF HERO HONDA MOTORS LTD. vs State

THIS order will dispose of the above enquiry based on a complaint by Shri S.C. Agarwal in his letter dated 14.6.89 that he had not received the refund of Rs. 500/- alongwith interest on cancellation of booking made by him for the purchase of a Hero Honda motor-cycle. The Commission had ordered a preliminary investigation report from the D.G. The D.G. submitted the report on 28.9.90. Based on the report a notice of enquiry was issued on 10.1.91 under Section 10(a)(iv) and 37 of the M.R.T.P. Act, 1969 read with Regulation 58 of the M.R.T.P. Regulations 1971, which states as under "The above respondent is engaged in the manufacture and sale of Hero Honda motor-cycles. It has booked orders for motorcycles from large number of customers from 1985-89. In course of time a trend of cancellation of bookings for the motor cycles had set in and as a result the customers wanted refund of the booking amount deposited by them with the respondent. The charge against the respondent is that it is not prompt in making refund of the booking advance to the customers cancelling the booking of the vehicles. It appears to the Commission that the respondent by taking deposits on a large scale had indulged in the restrictive trade practice under Section 2(o)(i) of the MRTP Act, inasmuch as it tend to obstruct the flow of capital or resources into the stream of production, for otherwise the same money could have been invested in a fruitful enterprise. It is also a restrictive trade practice under Section 2(o)(ii) of the Act, inasmuch as the delay in the refund of amount of deposit on cancellation of booking and also delay in delivery of vehicles amount to manipulation of prices and conditions of delivery in such a way was to impose unjustified costs or restrictions on the consumers. A copy of the PIR is enclosed or reference of the respondent."

THE findings of the DG in the above PIR which accompanied NOE are as under: "Findings: THE respondent had booked/received advance sale money from Rs. 8.36 lakhs of customers during 1985 to 1989. During the same period the respondent has sold and cancelled about Rs. 4.62 lakhs of motor cycles. At the year end 1989 about Rs. 3.74 lakhs of depositors were either waiting for the delivery or might have applied for the refund of their deposits. In the present case the complainant requested the respondent in February, 1987 for the refund of deposit money. THE complainant chased the refund application for more than two years, but failed to get any reply from the respondent. It was under such circumstances the complainant approached the MRTP Commission for refund of his money. THE respondent refunded his money in March, 1990 after the Hon''ble Commission has ordered preliminary investigation. During the course of investigation 12 more customers have reported that the respondent had not refunded their money inspite of repeated reminders. One customer has reported that he has received the principal amount but the interest due on this amount has not been refunded in full. This is the tip of iceberg, the respondent seems to be retaining the public deposit for longer period of time and not refunding the same on demand. Recommendation: In view of the above findings the Hon''ble Commission may institute an inquiry against the respondent for non-refunding the advance sale booking money, retaining the public deposits for unreasonably longer period of time, thus causing unjustified costs on them. Such type of trade practices attracts the provisions of Section 2(o)(ii) of the MRTP Act."

The respondent filed a reply on 13.5.91. In paras 1 and 2 of his reply it has taken the general defence that the above section of the MRTP Act is not applicable in the present case. In para 3 of the reply, the following submissions were made by respondent: "It is submitted that the complainant had booked a Hero Honda CD 100 motor cycle with respondent by depositing Rs. 500 by means of a Bank Draft and the priority number 1955 was allotted to him which priority number was generated by means of pseudo random number generation technique. The complainant was intimated about the allotment of motor cycle on or about end-January/beginning of February, 1987. The complainant appears to have cancelled the booking about the same time as the allotment was communicated to the complaint. It is submitted that the communication of allotment of the motor cycle and the cancellation of its booking seems to have happened simultaneously or near about the same time. As a result of the respondent having communicated the allotment of motor cycle to the complainant it did not take any action on the cancellation said to have been made by the complainant. It is denied that the complainant had complied with the requirements with regard to the cancellation of booking and he is put to strict proof. It is submitted that in case of cancellation of booking, the applicant should affix a 20 paise revenue stamp at the place marked ''customer''s signature'' on the priority intimation letter and sign the same. The applicant had to return the priority intimation letter alongwith a request for cancellation to the respondent at its head office in New Delhi. The respondent asked the complainant to take delivery of the motor cycle because it had already sent the priority intimation letter and, therefore, the respondent was under the bona fide belief that the priority of the complainant having matured he will take delivery of the vehicle and may opt to take delivery of the vehicle and may not opt for refund of the booking advance with interest. Accordingly, the respondent did not react to the request for refund of the deposit amount. It is wrong and denied that there were several letters and registered notices to the respondent claiming refund of the advance money and the said allegation may be put to strict proof. It is wrong and denied that the respondent was keeping silent as alleged or at all. In any event it is submitted that, without prejudice to the contention herein, the alleged delay in refund of the deposit amount is a stray instance and does not amount to a practice or a trade practice much less a restrictive trade practices as alleged or at all. It is submitted that the respondent has been strictly following the guidelines of the Ministry of Industry both with regard to acceptance of deposits, investment of such deposits and refund thereto on cancellation of booking. Since the respondent has been acting as per the guidelines of the Government of India, it is wrong and denied that any allegation of indulging in a restrictive trade practice could be made or sustained against the respondent. It is further submitted that while the guidelines of the Government of India require that the deposits should carry interest @ 7% per annum. It is also submitted that the respondent has been refunding the deposits within the time-limit set by the Government of India and the respondent has been prompt and diligent in refunding the deposits on cancellation of the booking. It is submitted that keeping in view the large number of bookings made with the respondent and the transactions dealt with by the respondent, a stray case of complaint of alleged delay in refund of deposit does not tantamount to indulging in a restrictive trade practice as alleged or at all. It is submitted that the cancellation of booking for reasons that had nothing to do with the performance of the respondent does not tantamount to a restrictive trade practice and delay if any in the refund of the amount for reasons not within the control of the respondent does not result in indulging in a restrictive trade practice by the respondent."

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After the pleadings were completed the issues were framed on 18.6.91 which are as under: 1. Whether the Notice of Enquiry is not maintainable for the reasons stated in paragraph 1 of the written reply filed on behalf of the respondent ? 2. Whether the respondent has indulged and/or is indulging in the restrictive trade practice as alleged in the Notice of Enquiry ? 3. If answer to Issue No. 2 is in the affirmative, whether the impugned trade practice is prejudicial to public interest ? 4. Relief.

ON behalf of the Director General reliance was placed on Exhibits Al to A4, the details of which are as under: Exhibit A 1: Letter dated 6.3.90 from the office of the Joint Director to the respondent seeking information as stated in the said letter. Exhibit A 2: Letter dated 7.4.90 from the respondent to the Joint Director which letter was accompanied by a statement of refunds made by the respondent together with guidelines dated 24.11.83 and 9.12.88 issued by Ministry of Industry, Government of India. Exhibit A 3: Letter dated 19.4.90 from the Joint Director to the respondent. Exhibit A 4: Letter dated 12.6.90 from the respondent to the Joint Director. The respondent was called upon to admit or deny the aforesaid Exhibits Al to A4. The respondent admitted the receipt only of Exhibits Al and A3 but did not admit the contents. It will be pertinent to quote the following para from Exhibit A4 mentioned above which is as under: "2. We hereby confirm that the Company is not aware of any customer who may have asked for cancellation of bookings in 1987, 1988 and 1989 and have still not been refunded the booking money. In this connection we draw your attention to the statement enclosed with our letter of 19th March, 1990 wherein you will observe that the Company had in respect of the year 1985-86, 1986-87, 1987-88 and 1988-89 refunded Rs. 1167.47 lakhs (representing 2,33,495 cases approx.), on account of cancellations, on which an additional Rs. 133.90 we have further refunded Rs. 185.88 lakhs approx. (representing 37,175 cases approx.), on which interest of Rs. 51.5 lakhs approx., was paid. 3. From the same statement referred to above, you will observe that in addition to refunds made by the Company on account of cancellations, the Company has also adjusted Rs. 1146.97 lakhs (representing 2,29,393 cases) against deliveries made to customers upto 31st March, 1989. During the year 1989-90 an additional Rs. 211.73 lakhs was adjusted against deliveries (representing 42,346 cases) on which interest of Rs. 58.6 lacs was paid. 4. Essentially, at any point-in-time, the Company would have approximately 2,000 applications under processing under the first category where allotment of vehicles has not been made; and 5500 applications approx, under the second category-where cancellation requests have been made after allotment of vehicle to customers.

The Director General was able to produce only one witness who was the complainant, himself. However, the respondent cross-examined the above witness on 24.10.91. He did not want to produce any evidence and liked to rely on the documents only. Thereafter, the case was fixed for final arguments which was finally concluded with the submission of synopsis by both the parties on 17.1.97.

WE have to note that the proceeding is under Section 10A(iv) in which we have to see that the interest of public at large is affected and not of any individual only. The Director General was able to bring only one case of defiant in which payment of Rs. 500/- was delayed. Al though the Director General had mentioned in the PIR that there were 12 but no specific name or any evidences were produced regarding the default of the respondent to make payment to them. Although as per Exhibit A4 produced by the DG it is mentioned that the total approximate refund from the Company would be Rs. 1167.74 lakhs in the approximately 2,33,495 cases. But during the course of proceeding the Director General was not able to produce more than one witness whose refund of only Rs. 500 was delayed. In this connection it will not be out of context to mention the order of this Commission in the case of Auto Agents and Bajaj Auto (RTPE No. 129 of 1986) where it is observed as under: "No evidence has been led on behalf of the Director General to prove that there were delayed delivery of scooters despite payments having been made. Nothing was easier than to prove the case of Acharya on whose instance this enquiry was initiated. Even this has not been done by the Director General. Other instances mentioned in the FIR do not necessarily disprove the case made out by the respondents who admit delayed delivery in certain cases and have offered explanation for the same. After going through the replies given by both the respondents in the light of the PIR, we are satisfied that it is not established on evidence or otherwise that the respondents have indulged in the practice of delivering vehicles long after the necessary payments are made. Practice means that it must be a conduct repetitive in nature. If it had happened in one particular case for which there is some explanation, it cannot be said to be a practice."

Thus this Commission had observed that the practice means it must be a conduct repetitive in nature. If it had happened in one particular case for which there is some explanation it cannot be said to be a practice. Moreover from the second reliance of Exhibit AW 1 produced by the Director General himself it is clear that the party asked for the cancellation only after the delivery order was given to him. Because it was not the cancellation of the booking but non-acceptance of the delivery order. Therefore, the respondent definitely took some time to clarify whether the complainant was interested in delivery order or not. Even the delay in refund right from the date of booking is only for two years and it is only few months from the date of delivery order to the complainant. Thus it would not be said that the refund was unnecessarily delayed for long time. It is submitted that in the present case also on behalf of the Director General no evidence has been led with regard to any delays and much less any ulterior motive to delay the refund of the advance booking. Even in the single, instance of Shri S.C. Aggarwal, no evidence has been brought on record to show that the delay, if any, in refunding the booking advance to Shri S.C. Aggarwal, which was a nominal amount of Rs. 500/-, had been delayed with an ulterior purpose or motive to manipulate the prices or conditions of delivery or the flow of supplies into the market.

IT will also be pertinent to see observation of the Commission in another case of Director General v. Domestic Appliances Corporation & Others, (RTPE No. 1388/87,1394/87 and 1401/87) where the Hon''ble Commission has observed as under: "that the Director General in making this application has not been able to bring forth reasons having a bearing on this delay which could be construed as ''manipulation''. The application is also silent in that the delay in some cases took place due to any ulterior motive on the part of the gas dealer. In the circumstances, I feel that these applications fail to make out a prima facie case under Section 2(o) of the MRTP Act."

Thus it appears that the Director General was not able to prove the manipulation made by the respondent. In view of the above facts, observation and citations the charges framed above are not maintainable against the respondent in public interest. Moreover, the refund has long been made to the complainant with interest who could have otherwise come under Section 12B of the MRTP Act, for compensation. Thus the notice is discharged. There will be no order as to costs. Notice discharged.