1994 (1) TMI 214 - Commission - Companies Law

Private Company Misleading Investors with Promises of Unrealistic Returns

SK. Agro Enterprises (P.) Ltd., In re

The court found that a private company in the vegetable and fruit industry engaged in misleading advertising by promising investors a two-fold return on ... Unfair trade practice - Respondent-company was engaged in vegetable and fruit industry - It invited public to invest in its project with very alluring advertisement promising to repay double amount invested in their project within two years which would be tax-free - Respondent furnished no reliable data in support of its promises - Whether respondent-company could be said to have indulged in unfair trade practice within meaning of section 36A(1)(iv) and (viii) and a 'cease and desist' order deserved to be passed against it - Held, yes Issues:1. Misleading advertisement promising double return on investment within two years.2. Unfair trade practice under sections 36A, 36B(d), and 36D of the Monopolies and Restrictive Trade Practices Act, 1969.3. Ex parte proceedings due to respondent's non-appearance.4. Lack of evidence to support promises made in the advertisement.5. Violation of clauses (iv) and (viii) of section 36A(1) regarding false representations.Detailed Analysis:1. The judgment was based on an investigation into a misleading advertisement by a private company in the vegetable and fruit industry promising investors a two-fold return on investment within two years. The advertisement was deemed misleading and a misrepresentation of facts, constituting an unfair trade practice under relevant sections of the Act.2. The respondent initially failed to appear, leading to ex parte proceedings. Despite attempts to set aside the ex parte order, the respondent did not provide sufficient cause for their non-appearance. The respondent's absence and lack of compliance with orders led to the continuation of ex parte proceedings.3. The Director General filed evidence supporting the allegations, highlighting that the promised returns were unrealistic and lacked substantiation. The investigation revealed that the scheme's claims of doubling investments within two years and offering tax-free income were misleading and not supported by evidence.4. The judgment emphasized that the advertisement's promises were unsubstantiated, and the respondent failed to provide any evidence to support their claims. The company's absence during proceedings indicated a lack of data or proof to validate the advertised scheme's viability.5. The judgment concluded that the respondent's actions fell under clauses (iv) and (viii) of section 36A(1), constituting unfair trade practices that could deceive unsuspecting investors. A 'cease and desist' order was issued, directing the respondent to stop issuing misleading advertisements and pay costs of the proceedings within a specified period to the Director General.