VIKRAM OVERSEAS PVT. LTD. vs Punjab National Bank

HARMONIOUS interpretation of Section 3 and Section 4(2) of the MRTP Act, 1969 is the key to this case. Before we deal with the interpretation in harmony of the said two sections, it is desirable to articulate the facts of the case in brief for proper appreciation of the legal issues involved.

VIKRAM Overseas Pvt. Ltd. (hereinafter referred to as the applicant) has preferred an application under Section 12B of the MRTP Act, 1969 claiming compensation for the loss suffered by it as a consequence of certain unfair and restrictive trade practices indulged in by the Punjab National Bank (hereinafter referred to as the respondent The applicant is a private limited Company engaged in the business of exports and is a Government recognised Trading House. The respondent is a nationalised Bank besides being the successor of the New Bank of India also a nationalised Bank. With effect from 4th September, 1993, the New Bank of India merged with the respondent namely the Punjab National Bank. The respondent took over the liabilities of the New Bank of India and is ''bound to honour all contracts'' entered into by the New Bank of India.

The applicant had dealings with the New Bank of India, Nehru Place Branch, New Delhi in relation to its business and was availing of bill purchase facility from it. Under this facility, the applicant was presenting its bills to the said Bank, which would purchase the same. The said Bank upon confirmation of the date of payment by the foreign buyers would realise payment from them and in the event of non-payment by a certain date would crystallize the bills into rupee liability on the 30th day from the notional due date, arrived at by adding the transit period, usance period and grace period to the date of purchase at the applicable selling rate of exchange ruling on the date of crystallisation.

ACCORDING to the compensation application, the applicant presented three bills to the New Bank of India on 9th January, 1991. Payment of the same was confirmed by the overseas buyers on 23rd May, 1991. Taking into account the various additive periods like the transit period, usance period etc. the bills were to be crystallised on 1st July, 1991 being the 30th day from the notional due date. The respondent however crystallised the bills only on 3rd July, 1991 on which date the rupee was devalued. Because of the difference in the value of the rupee against the US dollar between the 1st July and 3rd July, the applicant submits, that it suffered a loss of about Rs. 7.89 lakhs. The applicant through its letter dated 19th July, 1991 enquired of the Bank as to why the bills had not been crystallised according to rules. The applicant was informed by the Bank through the latter''s letter dated 16th August, 1991 that it had calculated the notional due date as 2nd June, 1991 reckoning the usance period as 120 days and transit period as 25 days aggregating to 145 days. The Bank further informed that if 30 days were added to the notional due date namely 2nd June, 1991, the bills were removed from export suspense on 3rd July, 1991 and that thus there was no error. Subsequently the applicant in its letter dated 18th August, 1993 pointed out that this position was not correct and requested for necessary corrections. It served on the Bank a legal notice on 13th October, 1993 by which time the Punjab National Bank had taken over the liabilities of the New Bank of India. There was no response to the legal notice.

THE applicant has alleged in its compensation application that the respondent has adopted the unfair and restrictive trade practices of false representation and of manipulation of prices visiting it with unjustified costs. As the unfair and restrictive trade practices attract Section 36A and Section 2(o) of the MRTP Act, the applicant has claimed compensation towards the loss suffered by it of about Rs. 7.89 lakhs with interest. It has also claimed compensation of Rs. 5 lakhs towards non-pecuniary losses suffered by it besides cost of litigation of Rs. 50,000/-. A copy of the compensation application was communicated to the respondent. The respondent Bank in its reply has raised some preliminary objections besides defending itself on merits against the compensation claim. The following constitutes a summary of its reply: Preliminary Objections: 1. The applicant has not placed any facts or evidence in support of any restrictive or unfair trade practice on the part of the respondent. The respondent has acted in line with the Foreign Exchange Dealers Association of India Rules (FEDAI Rules for brief)_ framed and published by the Reserve Bank of India. The respondent cannot be responsible for the loss, if any, because of the action on the part of the Government of India to devalue the rupee. 2. Even assuming but out admitting that the respondent has misinterpreted the FEDAI Rules, it cannot amount to any restrictive or unfair trade practice. 3. The bills in question are indirect bills drawn in US Dollars which is not the currency of United Arab Emirates (drawee''s country) and, therefore, the transit period will be 25 days and usance period 120 days. 4. The notional due date has been arrived at following the FEDAI Rules. On Merits 5. The bills in question were accepted by the Overseas buyers on 23rd May, 1991 but not confirmed. Thus 23rd May, 1991 is the date of the end of usance period and is not the date of confirmation. 6. The respondent did not lure the applicant by misrepresentation. The transaction in question is not ''service'' as defined in the MRTP Act but is just a loan transaction. 7. Section 3 of the MRTP Act excludes the applicability of the Act to the respondent Bank. After the rejoinder was filed by the applicant, the following issues were framed:

Whether the respondent(s) are or have been indulging in restrictive/unfair trade practices as claimed in the compensation application? 2. If the answer to the foregoing issue is in the affirmative whether the restrictive/unfair trade practices are prejudicial to public interest or the interest of the consumer or consumers generally? 3. Whether the applicant has suffered any loss as a result of the unfair/restrictive trade practices? 4. To what relief, if any, is applicant entitled?

After affidavits and counter-affidavits were filed by both the sides, we gave a hearing to Mr. O.P. Dua, Advocate for the applicant and Mr. K.M. Panicker, Advocate for the respondent.

DURING the arguments, one issue which dominated the discussions is whether the MRTP Act is applicable to the Punjab National Bank, respondent herein. In terms of Section 3 of the MRTP Act, a financial institution is excluded from the operation of the MRTP Act unless the Central Government by notification directs. It is not in dispute that the Central Government through its Notification G.S.R. 605(E) dated 27th September, 1991, published in the Gazette of India, Extraordinary of the same date directed that the MRTP Act shall apply, inter alia, to financial institutions. The date of Notification namely 27th September 1991 is very material for the discussion that follows.

A financial institution is defined in Section 2(da) of the MRTP Act which includes a nationalised Bank that is to say a corresponding New Bank as defined in Section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. The argument advanced by Mr. Panicker, Advocate for the respondent originally was that because of Section 3 of the MRTP Act, Punjab National Bank, the respondent as a financial institution is outside the ambit of the MRTP Act. But he fairly agreed later that the Act will apply to the respondent after the Central Government Notification dated 27th September, 1991. Having said this, he submitted that the cause of action namely the crystallisation of the bills being either 1st July, 1991 or 3rd July, 1991 was anterior to the Central Government Notification of date 27th September, 1991 and that, therefore, the MRTP Act would not apply to the transaction. Even for an argument, if the applicant''s contention of notional date and crystallisation date were to be accepted as correct, they would fall well in advance of the date of the Central Government Notification and thus the action of the respondent cannot be regarded as trenching the provisions of the MRTP Act, which are not applicable in this case.

Mr. O.P. Dua, Advocate for the applicant controverted the argument of Mr. Panicker by observing that the cause of action cannot be regarded to have taken place only on the notional due date or the crystallisation date but that it has been continuing even subsequently as the controversy has not been resolved between the applicant and the respondent Bank. We are afraid, we cannot accept this contention of Mr. O.P. Dua as the entire controversy hinges only on what constitutes the notional due date and/or the crystallisation date. Whether the relevant dates are those indicated by the applicant or those indicated by the respondent Bank, they are clearly anterior to 27th September, 1991, the date of the Central Government Notification bringing financial institutions within the ambit of the MrTP Act. Very clearly, it is settled law that a Statute, Rule or Regulation cannot have retrospective operation unless it is specifically directed so by the Authority or Body which enacts such Statutes, Rule or Regulation.

MR. O.P. Dua cited an order of this Commission, in Y.P. Mahna v. Bharat Television, (C.A. No. 63/89 dated 13th October, 1993 reported in 1993 (1) CTJ 547) and argued that the Commission had ruled therein that in so far as restrictive trade practices are concerned. Section 12B is retrospective in operation even if such restrictive trade practices had been indulged in prior to the insertion of that Section namely Section 12B of the MRTP Act. Drawing an analogy, MR. Dua argued that if the alleged restrictive trade practices have been indulged in by the respondent Bank, the compensation application is maintainable, on the same ratio. We are unable to agree with this proposition, as there is no analogy at all between the cited case law and this case. In the case law cited what was at issue was whether Section 12B (compensation section) is applicable alike to the past as well as future acts or omissions constituting restrictive trade practices. Furthermore, the Commission examined in that case, whether a compensation application can be maintained even in regard to restrictive trade practices resulting in a loss to an applicant, carried on prior to the insertion of Section 12B which was on 1st August, 1984. The ruling of this Commission therein was that even if a restrictive trade practice had been indulged in by the charged party before the insertion of Section 12B of the Act, an application for compensation can be sustained, as the insertion of Section 12B cannot be regarded to have created a new obligation or liability but has merely created an additional Forum to the aggrieved. The Commission at that same time observed that the retrospective operation of Section 12B will not apply to unfair trade practices cases. In the instant case, however, it is not that any particular section of the MRTP Act has been amended with or without retrospective effect. All that has happened is that the Central Government through its Notification dated 27th September 1991 had brought financial institutions within the ambit of the MRTP Act. There is no indication in the Central Government Notification that it will apply with retrospective effect. In this view of the matter, distinguishing the legal issue involved in this case from that in the Y.P. Mahna case (supra), we are of the view that the Central Government Notification does not have retrospective effect. This is also explicit from Section 3 of the MRTP Act, that unless the Central Government notifies, the Act shall not apply to financial institutions. We have further support for this conclusion in the ruling of the Hon''ble Supreme Court in Om Prakash v. Asstt. Engineer, Haryana Agro Industries Corporation Limited and Another, (1994) 3 SCC 504 - Civil Appeal 373 of 1994 dated 12th April, 1994) that a trade practice relating to supply of a tractor having been indulged in before 27th September, 1991 will not attract Section 36A of the MRTP Act relating to unfair trade practices as the said section came into force on that day. We, therefore, agree with the Advocate for the respondent that Section 3 of the Act as it stood on the relevant dates (notional due date and/or crystallisation date) will place the respondent outside the tentacles of the MRTP Act.

MR. O.P. Dua offered an alternative argument by referring to Section 4(2) of the MRTP Act. It is desirable to reproduce that section for appreciating the legal question involved. Section 4(2)- "Notwithstanding anything contained in Section 3 or elsewhere in this Act, so much of the provisions of this Act, as relate to matters in respect of which specific provisions exist in the- (i) Reserve Bank of India Act, 1934 (29 of 1934), or the Banking Regulation Act, 1949 (10 of 1949), or (ii) State Bank of India Act, 1955 (23 of 1955), or the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or (iii) Insurance Act, 1938 (4 of 1938), shall not apply to a banking company, the State Bank of India or a subsidiary Bank, as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or an insurer, as the case may be."

Mr. Dua argued that irrespective of Section 3 of the MrTP Act and any Notification that the Central Government might have issued under the said section (like the Notification dated 27th September, 1991 bringing financial institutions within the ambit of the MrTP Act), the provisions of the MrTP Act shall apply to banking company, as long as no specific provision exists in the statutes listed in Section 4(2) of the MrTP Act. More specifically, runs his argument, that even prior to 27th September 1991 the provisions of the MrTP Act would apply to the respondent Bank, as there are no specific provisions relating to matters of unfair and restrictive trade practices in the various statutes listed in Section 4(2) of the Act. Mr. Panicker, Advocate for the respondent, on the other hand, strongly emphasised that the respondent Bank is not a banking company and, therefore Section 4(2) of the Act is not applicable.

THIS, therefore, raises the issue whether the respondent Bank namely the Punjab National Bank is a banking company. A banking company is defined in Section 5(c) of the Banking Regulation Act, 1949, as a company which transacts the business of banking in India. In the same Act, Section 5(d) defines a company as a company registered under the Companies Act, 1956. It is admitted that the respondent Bank is not registered under the Companies Act, 1956 but has been constituted as a "corresponding new Bank" under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Thus the respondent Bank not having been registered under the Companies Act, 1956, cannot be called a banking company in terms of Section 5(c) of the Banking Regulation Act, 1949. In any case, Section 2(da) brings a Nationalised Bank within the expression "financial institution" and thus the respondent Bank being a Nationalised Bank is a financial institution in terms of the said section and falls within the ambit of Section 3 of the MRTP Act. The provisions of Section 4(2) of the MRTP Act will not, therefore, apply to the respondent Bank, not being a Banking Company.

THIS, therefore, implies that the respondent Bank falls squarely within Section 3 of the Act. The aforesaid discussion further implies that the exemption of financial institutions from the ambit of the MRTP Act provided in Section 3 will be available to the respondent Bank till the date of the Central Government Notification namely 27th September, 1991. The cause of action as noted earlier having been anterior to the said date of the Central Government Notification, namely 27th September, 1991 will fall outside the plea of the MRTP Act. These conclusions are an offshoot of the harmonious interpretation of Section 3 and Section 4(2) of the MRTP Act, we have delineated above. In the premises, the compensation application is not maintainable under the MRTP Act. Many arguments were presented to us on the merits of the case but we decline to traverse them because the application itself is not maintainable. We hasten to add that the applicant is free to move an appropriate Forum for redress under any other available law(s), if so advised. The application is dismissed with no order as to costs. Application dismissed.