1. This is an application filed by the Director-General of Investigation and Registration praying for the issue of ex parte ad interim injunction against M/s. Mangalore Bankers and Financial Corporation, Mangalore, restraining them from carrying on the unfair trade practices as spelt out in the application.
2. The Director-General has also filed an application under Section 36B and 36C of the Monopolies and Restrictive Trade Practices Act, 1969, against the same respondent seeking initiation of proceedings under Section 36D of the aforesaid Act and we have directed the issuance of notice of enquiry against the respondent.
3. M/s. Mangalore Bankers and Financial Corporation is a partnership concern having its registered office in Mangalore and administrative office at Bangalore, The respondent issued an advertisement in Deccan Chronicle, dated February 5, 1987, which invited deposits from the public offering the following rates of interest: 4. The respondent also ottered extra interest at 4% up to February 28, 1987. By a later advertisement issued in the Deccan Chronicle, dated March 15, 1987, the extra rate was reduced to 3% and was made applicable on deposits received up to April 10, 1987. The two advertisements also contained an offer of gold sovereign free on deposit of Rs. 30,000 restricted to the first 30 depositors only.
5. Enquiries made by the Director-General revealed that the respondent was registered as a partnership firm with the Registrar of Firms, Karnataka, as recently as on January 9, 1987. The first advertisement thus appeared within a month of its registration. In response to specific questions, the respondent informed the Director-General, vide their letter dated March 7, 1987, that "at present we are accepting deposits and going to start some new ventures" and that " we can give such rate of interest by cutting down our establishment expenses and investing in highly profitable business". It could also be seen from the aforesaid letter that the respondent had not yet worked out the rate of return on its future investments. The only security that the respondent was ready to offer were the business assets which were yet to come into existence. It is in the context of these circumstances that the Director-General has come up with its present application praying for an ex parte ad interim injunction restraining the respondent from giving false and misleading statements inviting deposits on alluringly high rates of interest which it is incapable of paying.
6. We have carefully gone through the Director-General's application and we have also heard the arguments of Shri Dua. We feel that whatever information the respondents have volunteered in response to the Director-General's probing enquiries renders the claims made in the advertisement incredible. We find that at least eight persons have already been lured to part with various amounts aggregating to Rs. 58,500. There is no knowing whether they will receive the promised rates of interest and whether their deposits are secured. The loss or injury to such investors is patent considering that the respondent has not yet even started its business ventures. In this context, therefore, prima facie the respondent has indulged in an unfair trade practice in the form of misleading and spurious claims made in the two aforesaid advertisements within the meaning of Section 36A of the Monopolies and Restrictive Trade Practices Act.
7. The Director-General has also argued that the aforesaid unfair trade practice is detrimental to public interest. In this connection, he has drawn our attention to the following observations of the Supreme Court in the case of Reserve Bank oj India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 (SC) which refer to the mushroom growth of"finance and investment companies"offering interest at astronomical rates which they are in no position to honour (at page 695) : "We would also like to query what action the Reserve Bank of India and the Union of India are taking or proposing to take against the mushroom growth of 'finance and investment companies' offering staggeringly high rates of interest to depositors leading us to suspect whether these companies are not speculative ventures floated to attract unwary and credulous investors and capture their savings.
One has only to look at the morning's newspaper to be greeted by advertisements inviting deposits and offering interest at astronomic rates... Another advertiser offered interest ranging between 30% to 38% for periods ranging between six months to five years. Almost all the advertisers offered extra interest ranging between 3% to 6% if deposits were made during the Christmas--Pongal season. Several of them offered gifts and prizes. If the Reserve Bank of India considers the Peerless Company with eight hundred crores invested in Government securities, fixed deposits with nationalised banks, etc., unsafe for depositors, one wonders what they have to say about the mushroom non-banking companies which are accepting deposits, promising most unlikely returns and what action is proposed to be taken to protect the investors. It does not require much imagination to realise the adventurous and precarious character of these businesses. Urgent action appears to be* called for to protect the public. While, on the one hand, these schemes encourage two vices affecting public economy, the desire to make quick and easy money and the habit of excessive and wasteful consumer spending, on the other hand, the investors who generally belong to the gullible and less affluent classes have no security whatsoever. Action appears imperative." 8. In view of what has been stated by the Director-General in its application under Section 12A, it is obvious that the unfair trade practices indulged in by the respondents in making high-sounding and alluring claims about the deposit-receiving activities are prejudicial to public interest. In this view of the matter, the case falls squarely within the ambit of Section 12A of the Monopolies and Restrictive Trade Practices Act.
9. We are also of the opinion that besides there being a prima facie case, the balance of convenience is against the respondent. In implementing an Act which has the interest of consumers at its heart, it is the convenience of the consumers that has to be kept uppermost in mind. Their interest heavily tilts the balance of convenience against the respondents.
10. We are also of the view that an ex parte injunction is called for to caution the unwary intending investors against the trap laid by the respondent in the form of alluringly high interest rates and any delay would only defeat the very purpose for which the injunction is sought.
We, therefore, in exercise of the powers under Section 12A(1) and (2) issue ex parte interim injunction restraining the respondent from indulging in the unfair trade practices spelt out in the Director-General's application and discussed in this order.
11. In view of Rule 3 of Order XXXIX, Civil Procedure Code, a copy of this injunction order and a copy of the application for issue of injunction, shall be sent by registered post by the Director-General (Investigation and Registration) by tomorrow to the respondent and an affidavit of doing so shall be filed. A notice of the application for issue of injunction as well as injunction order should be communicated to the respondent by the office of the Commission itself.
12. It is clarified that whatever has been stated in this order will not prejudice the respondent's case in the main unfair trade practice enquiry or when the matter comes before the Commission for deciding whether this ad interim injunction has to be varied or made absolute till the disposal of the aforesaid enquiry.