Consumer VOICE
Misleading Ads

Consumer Rights in case of Misleading Advertisements – A Case Study

Most of us are aware that many of the claims made by companies in their advertisements are not wholly true. Pictures of flawlessly turned-out models in cosmetics ads and weight-loss commercials are obvious examples. Hidden fees and surcharges, and terms and conditions in ads of financial products often speak what their ads do not. Yet, we cannot deny the fact that misleading advertisements continue to influence us and many a times persuade us into making a purchase. We present to you one story of misleading advertisements - how an advertising-influenced purchase goes wrong.

Ashok Ramniklal Tolat, a seventy-year-old man with a passion for driving, wanted to buy a sports-utility vehicle (SUV) to make his dream trips to Ladakh, Kashmir and Nepal with his wife. Impressed by Chevrolet Forester’s tagline, An SUV to beat all SUVs, he bought the vehicle. He paid Rs 14 lakh and spent another Rs 2 lakh on it to prepare it for his travels. As it turned out, within a few months the rains began in Mumbai and the supposed offroader refused to wade through the water. It was then that Tolat doubted his vehicle’s capabilities – specifically the all-terrain capabilities that the company brochure and ads had claimed. Another surprise was in store: a service engineer showed Tolat the car manual in which it was clearly stated that the vehicle was a ‘passenger car’.

Aggrieved, Tolat decided to complain against the company and what followed was a three-year battle between a battery of lawyers representing General Motors and Tolat, who never hired a lawyer.

The Case Opens at District Forum

Tolat filed a complaint at the district forum, Ahmedabad. His complaint included the copy of the advertisement that he said influenced him into buying the vehicle in question. The attractive part of the advertisement read thus: Introducing a world without borders, an SUV to beat all SUVs. That's the new Chevrolet Forester. With the Power of 120 horses under its borne unique All-Wheels (AWD), unmatched comfort and luxury by-road, off-road or no- road.

Tolat stated that he had visited the agents of the appellant and was given a book titled ‘For a special journey called life’. He was assured that the vehicle offered for sale would help him realise his dream. The brochure also assured that ‘the vehicle in question is an SUV to end all SUVs’ and that it ‘will put the four corners of the earth within your reach… get you there in unmatched comfort, by road, off-road or no road.’ He was also given a visual presentation of the vehicle and a copy of the VCD. All these documents were shared with the district forum.

Tolat shared all purchase details and related documents with the forum, including the receipts of the accessories worth Rs 191,295 that he had got fitted as well as vehicle insurance and registration details. Tolat’s appeal to the court read: ‘…this Hon'ble Forum be pleased to hold that the opposite parties (joint and severally) have practiced unfair trade practice, towards the complainant and direct them (jointly and severally) to remove unfair trade practice, practised by them against the complainant.’

The district consumer forum ordered in favour of complainant and directed the opposite parties (jointly and severally) to refund the complainant a sum of Rs 14 lakh and Rs 191,295 (spent on accessories) along with 18 per cent interest, from the date of payment to the complainant. The company was asked to take the vehicle (which was parked at the company’s service centre throughout the duration of the case) back from the complainant after refunding the money with interest.

Order Almost Reversed at the State Forum

The said order was challenged by the opposite party before the Gujarat State Commission, Ahmedabad. The Commission held that the vehicle had no mechanical or manufacturing defect, but the advertisement that the car was an SUV amounted to ‘unfair trade practice’. Accordingly, the complainant was held entitled to Rs 50,000 as compensation which included costs of litigation. As for the appellant, the Commission directed them to not describe the vehicle in question as an SUV in any form of advertisement, website, or other promotional literature. It also directed them to make the correction in every communication and mention that the vehicle in question was a passenger car.

Justifying the revision of compensation, the State Commission said: ‘…neither there is any averment in the complaint about the suffering of punitive damages by the other consumers nor the appellant was aware that any such claim is to be met by it. Normally, punitive damages are awarded against a conscious wrongdoing unrelated to the actual loss suffered. Such a claim has to be specially pleaded.’

Opens Again at National Forum

Still aggrieved, Tolat did not hesitate in challenging the State Forum’s order at the National Consumer Disputes Redressal Commission (NCDRC).

The challenge before the Commission was to understand the correctness or otherwise of the order of the State Commission, setting aside the relief given by the district forum. After a thorough review of the case, the National Commission ordered in favour of Tolat and directed the company to refund a sum of Rs 1,250,000 (twelve lakh and fifty thousand rupees) to the consumer. The Commission also asked the company to pay punitive damages for ‘unfair trade practice’ in selling the said vehicle to about 260 consumers. Punitive damages of Rs 25 lakh were calculated. Of this, Rs 5 lakh had to be paid to the complainant and the rest was to be deposited at the Consumer Welfare Fund of the central government.

Final Act at the Supreme Court: Compensation Paid, Punitive Damages Set aside

General Motors challenged the jurisdiction of the National Consumer Forum at the Supreme Court. Its appeal to the court read thus: ‘…the National Commission has gone much beyond its jurisdiction in awarding the relief which was neither sought in the complaint nor before the State Commission. We are thus of the view that to this extent the order of the National Commission cannot be sustained.’

The company’s appeal stated that it accepted the concurrent findings recorded by the district forum, the State Commission and the National Commission that an act of ‘unfair trade practice’ was committed by them and that they were based on adequate material on record. Hence, it did not call for any interference on this by the Supreme Court.

At the same time, it pointed out that there was no claim before the National Commission for the punitive damages, nor did the appellant have an opportunity to argue against such a claim. Hence, it requested for that part of the order of the National Commission to be set aside.

The final operative order passed by the Supreme Court reversed the order of the National Commission with regard to the punitive damages. The Supreme Court held: ‘…we are conscious that having regard to the laudable object of the social legislation to protect the interest of consumers, liberal and purposive interpretation has to be placed on the scheme of the Act avoiding hyper-technical approach. At the same time, fair procedure is hallmark of every legal proceeding and an affected party is entitled to be put to notice of the claim which such affected party has to meet.

‘In present case, neither there is any averment in the complaint about the suffering of punitive damages by the other consumers, nor appellant (General Motors in this case) was aware that any such claim is to be met by it. Normally, punitive damages are awarded against a conscious wrongdoing unrelated to the actual loss suffered. Such a claim has to be specially pleaded. The respondent complainant was satisfied with the order of the district forum and did not approach the State Commission. He only approached the National Commission after the State Commission set aside the relief granted by the district forum. The National Commission in exercise of revisional jurisdiction was only concerned about the correctness or otherwise of the order of the State Commission setting aside the relief given by the district forum and to pass such order as the State Commission ought to have passed. However, the National Commission has gone much beyond its jurisdiction in awarding the relief which was neither sought in the complaint nor before the State Commission.

‘We are thus of the view that to this extent the order of the National Commission cannot be sustained. We make it clear that we have not gone into the merits of the direction but the aspect that in absence of such a claim being before the National Commission and the appellant having no notice of such a claim, the said order is contrary to principles of fair procedure and nature justice. We also make it clear that this order will not stand in the way of any aggrieved party raising a claim before an appropriate forum in accordance with law.’

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