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of <h1>Debentures pre-allotment not 'goods' under M.R.T.P. Act. Inviting applications not trade practice. Appeals dismissed.</h1> <h3>RD. Goyal Versus Reliance Industries L td.</h3> RD. Goyal Versus Reliance Industries L td. - [2002] 40 SCL 503 (SC), 2002 (4) Suppl. SCR 231, 2003 (1) SCC 81, 2002 (9) JT 594, 2002 (8) SCALE 488 Issues Involved:1. Whether debentures, before allotment, can be considered 'goods' under Section 2(e) of the M.R.T.P. Act, 1969.2. Whether the nature of debentures changes if they are compulsorily or optionally convertible into equity shares.3. Whether inviting applications for debentures constitutes a trade practice under the M.R.T.P. Act.4. Whether issuing debentures and inviting applications constitutes a 'service' under Section 2(r) of the M.R.T.P. Act.Detailed Analysis:1. Whether debentures, before allotment, can be considered 'goods' under Section 2(e) of the M.R.T.P. Act, 1969:The primary issue was whether shares or convertible debentures, before allotment, qualify as 'goods' under the M.R.T.P. Act. The court examined the definitions of 'goods' in the Sale of Goods Act, 1930, and the M.R.T.P. Act. It noted that the definition of 'goods' in the M.R.T.P. Act was amended in 1991 to include shares and stocks, including their issue before allotment. However, the court concluded that debentures are simply instruments acknowledging debt and do not constitute 'goods' under the M.R.T.P. Act. The court emphasized that debentures, unlike shares, represent a loan to the company and not an equity interest.2. Whether the nature of debentures changes if they are compulsorily or optionally convertible into equity shares:The court considered whether the nature of debentures changes if they are convertible into equity shares. It held that even if debentures are convertible, they do not become 'goods' before their allotment. The court reiterated that shares come into existence only upon allotment, and until then, they do not qualify as 'goods.'3. Whether inviting applications for debentures constitutes a trade practice under the M.R.T.P. Act:The court examined whether inviting applications for debentures constitutes a trade practice under the M.R.T.P. Act. It noted that the M.R.T.P. Act aims to regulate trade practices to prevent monopolistic and restrictive practices. The court concluded that the act of inviting applications for debentures does not involve any trade practice that can be regulated under the M.R.T.P. Act, as debentures are not 'goods' before allotment.4. Whether issuing debentures and inviting applications constitutes a 'service' under Section 2(r) of the M.R.T.P. Act:The court analyzed whether issuing debentures and inviting applications constitutes a 'service' under Section 2(r) of the M.R.T.P. Act. It referred to the definition of 'service' in the Act, which includes the provision of facilities in connection with banking, financing, and other activities but excludes services rendered free of charge or under a contract of personal service. The court concluded that the act of inviting applications for debentures does not amount to the provision of any service to the prospective investors.Conclusion:The court upheld the Commission's decision, ruling that debentures, before allotment, do not qualify as 'goods' under the M.R.T.P. Act, and inviting applications for debentures does not constitute a trade practice or service under the Act. The appeals were dismissed accordingly, with no costs awarded.
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