Debentures before allotment are not goods; public subscription for capital raising is not trade, trade practice, or service.

Debentures before allotment were treated as instruments of debt and actionable claims, not goods, so convertible debentures retained that character until conversion. The mere invitation of applications for debentures to raise capital was regarded as a financing activity, not trade or trade practice, because it did not amount to carrying on trading operations. The Commission also found that a prospective subscriber receives no service for consideration at the application stage, so no service is made available within the Act. On that basis, the preliminary objections succeeded and the proceedings were closed.

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Issues: (i) Whether debentures before allotment are goods within section 2(e) of the Monopolies and Restrictive Trade Practices Act, 1969, including where they are convertible; (ii) whether the mere invitation of applications for debentures to raise capital amounts to trade or trade practice; (iii) whether such an issue of debentures makes any service available to prospective investors within section 2(r) of the Monopolies and Restrictive Trade Practices Act, 1969.

Issue (i): Whether debentures before allotment are goods within section 2(e) of the Monopolies and Restrictive Trade Practices Act, 1969, including where they are convertible.

Analysis: Debentures were held to be instruments of debt in the hands of the company until allotment and delivery of certificates. On that footing, they were treated as actionable claims and therefore outside the definition of goods under the Sale of Goods Act. They were also held to be distinct from shares and stock, and the inclusive words in section 2(e) did not extend to debentures. Convertible debentures were not treated differently before conversion, because they retained the character of debentures until the conversion event occurred.

Conclusion: Debentures before allotment are not goods, and the position is the same whether they are ordinary, optionally convertible, or compulsorily convertible.

Issue (ii): Whether the mere invitation of applications for debentures to raise capital amounts to trade or trade practice.

Analysis: The act of issuing debentures to raise capital was held to be a mode of financing the company's business, not a practice relating to the carrying on of trade itself. The Commission relied on the statutory definition of trade practice and on the distinction between arranging capital and conducting trading activity. A company not engaged in the business of buying or selling securities was not treated as carrying on trade merely by inviting subscriptions for debentures.

Conclusion: Mere invitation of applications for debentures to raise capital does not amount to trade or trade practice.

Issue (iii): Whether such an issue of debentures makes any service available to prospective investors within section 2(r) of the Monopolies and Restrictive Trade Practices Act, 1969.

Analysis: The Commission held that a prospective investor applying for allotment of debentures does not receive any service for consideration. At that stage there is only an application for a future allotment, and no service, facility, or consumer-type relationship arises. The provision of service was thus not attracted on the facts of a public issue made only for subscription.

Conclusion: No service is provided or made available to prospective investors when debentures are merely issued for subscription.

Final Conclusion: The Commission had no jurisdiction to proceed on the preliminary objections, and the enquiries and compensation applications were closed and dismissed.

Ratio Decidendi: Debentures before allotment are actionable claims and not goods, and the mere raising of capital by public subscription to securities does not constitute trade, trade practice, or service under the MRTP Act.

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