IMPORTANT POINT
Shares or convertible debentures even before they are allotted cannot be considered to be "goods" within Section 2(e) of MRTP Act, 1969.

JUDGMENT

S.B. Sinha, J.-The core question in this batch of appeals is as to whether shares or convertible debentures even before they are allotted can be considered to be "goods" within the meaning of Section 2(e) of the Monopolies and Restrictive Trade Practices Act, 1969 (the `MRTP Act ).

2. The appellants herein pursuant to or in furtherance of an invitation to offer debentures linked with equity shares for public issue applied therefor. The respondents are public limited companies. They had offered capital for subscription but had linked the equity shares with the accrued redeemable non-convertible debentures.

3. A complaint was made to the effect (which is the subject-matter of Civil Appeal Nos. 2071-2100 of 1987) that the issue of equity shares tied up with debentures is a restrictive trade practice within the meaning of Sections 2(o)(ii), 33(1)(b) and 33(1)(g) of the M.R.T.P. Act. In Civil Appeal No. 2490 of 1995, the subject-matter of complaint was that the public issue of debentures offered by the respondent therein upon certain terms and conditions amounted to unfair trade practice as the respondent-company in their prospectus for raising capital through the issue of debentures made false and misleading claims.

4. The said complaints were inquired into by the Director General, who upon finding a prima facie case, recommended for issuance of notice; whereafter a proceeding was initiated by the Commission.

5. The respondents herein raised preliminary objection questioning the jurisdiction of the Commission to deal with the subject-matter of such complaints. The Commission on the said preliminary objection, raised the following issues :

1. (a) Whether having regard to true legal nature and characteristics of debentures, the same could be considered as "goods" within the meaning of Section 2(e) of the M.R.T.P. Act, 1969 even before they are allotted to the debenture-holder?

(b) Whether it makes any difference to the answer to the foregoing question, if the debentures offered by the company are compulsory or optionally convertible into an equity share?

2. Assuming that debentures are even prior to their allotment "goods", whether any trade practice is involved where the company simply invites applications for allotment of debenture for the purpose of raising capital for its trade or business?

3. Whether the company provides or makes available any service to the prospective investors where it simply issues debentures and invites application therefor within the meaning of Section 2(r) of the M.R.T.P. Act?

The said preliminary issues were determined by the Commission in favour of the respondents herein and against the appellants.

6. Ms. Indira Jaising and Mr. Anup G. Choudhary, learned senior counsel appearing on behalf of the appellants, inter alia, would submit that the Commission committed a manifest error of law in passing the impugned judgment insofar as it failed to properly construe the definition of goods contained in the Sale of Goods Act, 1930 vis-a-vis its definition contained in Section 2(e) of the M.R.T.P. Amendment Act, 1991, as also the definition of service as contained in Section 2(r) thereof. According to the learned counsel the action on the part of the respondents herein involved unfair trade practice. The learned counsel would urge that as the stocks and shares come within the purview of definition of goods , it cannot be said that only because they had not been allotted to the respective applicants, they would not become so. In any event, it was submitted, notice inviting offer for purchase of shares in lieu of convertible debentures would amount to rendition of service by the Respondent. It was submitted that the expression goods and service must be interpreted in a broad manner.

7. Ms. Indira Jaising further urged that it may be that the definition of expression goods had been amended in the year 1991 so as to bring withi