January 27, 2020

Kaun Banega Crorepati: SC sets aside NCDRC findings of Unfair Trade Practice against Star India and Airtel

[ by Kavita Krishnan ]


A Supreme Court bench of Justices Mohan M. Shantanagoudar and R. Subhash Reddy set aside a ruling by the National Consumer Disputes Redressal Commission (NCDRC) that had ordered Star India (P) Ltd. (Star India) and Bharti Airtel Limited (Airtel) to pay punitive damages of Rs. 1 crore under Proviso to Section 14(1)(d) of the Consumer Protection Act, 1986 (the 1986 Act).

In the year 2007, Society of Catalysts – a consumer society filed a complaint with the NCDRC alleging unfair trade practices by Star India and Airtel during the telecast of the television show “Kaun Banega Crorepati” (KBC). The complaint was regarding a contest called ‘Har Seat Hot Seat’ (“HSHS contest”) during KBC, in which the home viewers were asked an objective type question with four possible answers and the viewers who wished to participate were required to send in the correct answer inter alia through SMS services, offered by Airtel, MTNL and BSNL. The winner was randomly selected out of the persons who had sent in the correct answers, and awarded prize money of Rs. 2 lakhs.

The Society of Catalysts had alleged in the complaint 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. It was alleged that the Appellants (Star India and Airtel) 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 and such an act amounted to ‘unfair trade practice’ within the meaning of Section 2(1)(r)(3)(a) of the Consumer Protection Act, 1986.

The NCDRC relied on a survey report published by the Hindustan Times in which it was stated that the Appellants had received 58 million SMSes from HSHS contest and had 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, holding that the gross earnings of the Appellants were disproportionate to the cost of the prizes offered, the NCDRC slapped a fine of Rs. 1 crore on the Appellants as punitive damages.

Star India and Airtel appealed before the Supreme Court.

The Appellants claimed that the only monetary flow between them was a fixed periodic lumpsum to be paid by Airtel under the services-cum-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 Appellants 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 choice question game required special software, the use of which constituted a Value Added Service. Further Star India had complied with the relevant Telecom Regulatory Authority of India (TRAI) regulations mandating that such increased tariff be displayed on the television screen as well as on the KBC programme website.

The Supreme Court held that the NCDRC could have placed reliance to render the finding of ‘unfair trade practice’ under Section 2(1)(r)(3) (a) of the 1986 Act. The NCDRC had sought to rely merely on the newspaper report published in the Hindustan Times regarding the amount of revenue and profit earned by the appellants from the HSHS contest. The Court held 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.

The Court observed that the Society of Catalysts (complainant) never sought a direction to the Appellants to produce the services-cum-sponsorship agreement.

The Apex Court perused the services-cum-sponsorship agreement between Airtel and Star India which revealed 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 was no provision in the agreement for revenue sharing between the parties, or requiring Airtel to finance any part of the prize money paid by Star India towards the HSHS contest.

The Court thus found that Star India was liable to pay the prize money irrespective of the profits earned by Airtel. The sponsorship money paid by Airtel could comprise various sources of revenue including 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 money could have been paid.

The Court found from the services-cum-sponsorship agreement that Airtel was liable to set up the hardware and software required for the HSHS contest at its own cost suggesting that the services regarding the participation in the HSHS contest through SMSes offered by Airtel constituted a value-added services separate from its ordinary SMS service.

Further, the Court relied on a direction on ‘Premium Rate Services’ dated May 3, 2005, issued by TRAI, (referred to by the Appellants), which 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 Court concluded that 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.

The Court thus set aside the order of the NCDRC stating the impugned judgment to be bad in law.

View Full Judgement

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