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SOFTSPEC Software Pvt. Ltd. v/s Digital Equipment (India) Ltd. & Others

    Original Petition No. 145 of 1997

    Decided On, 05 November 2001

    At, National Consumer Disputes Redressal Commission NCDRC

    By, THE HONOURABLE MR. JUSTICE D.P. WADHWA
    By, PRESIDENT
    By, THE HONOURABLE MR. JUSTICE J.K. MEHRA
    By, MEMBER
    By, THE HONOURABLE MRS. RAJYALAKSHMI RAO
    By, MEMBER & THE HONOURABLE MR. B.K. TAIMNI
    By, MEMBER

    For the Complainant: Manoj Swarup, P.S. Bajwa, Ajay Gupta, Advocates. For the Opposite Parties: A.N. Haksar, Sr. Adv. with Aditya Bhagat, Sanjay Yadav, Advocates.



Judgment Text

D.P. Wadhwa, President:

1. In this complaint when originally filed there were two opposite parties namely, Digital Equipment Corporation, USA [‘Digital USA’] and Digital Equipment (India) Ltd. [‘Digital India’]. Complainant claims to be carrying on business of computer training. An agreement dated 12.5.1993 was entered into between the three parties under which Digital USA and Digital India were to provide diverse support services to the complainant by way of consultation, training staff, technical assistance, course material, support material, etc. There was yet another agreement dated 20.6.1993 between the complainant and Digital USA for use by the complainant of the Logo Digital. On 22.12.1995 Digital India informed the complainant that Digital USA had announced a business alliance with Global Knowledge Network Inc. (GKN) in terms of which Digital Learning Services would be transferred to GKN. Digital USA was, however, to continue develop courseware for its products. It was stated that transfer of Learning Services business was globally and covers India as well. Again on 22.5.1996 complainant was informed that it should not register any fresh students for training as the Learning Services business of Digital USA had been sold off to GKN. The letter added :

'We are now freezing on the same and will be issuing Digital certificates only to those students who are currently registered with you. Basically these would be names which figure till the last monthly report sent by you on May 27, whichever is earlier.'

By letter dated 4.6.1996 Digital USA gave notice to the complainant of termination of the Logo Agreement w.e.f. 31.12.1996. Complainant was told to ensure compliance with the terms of agreement relating to the consequences of termination. Complainant was also informed that Digital India would be advising it in regard to Licence Agreement. It is the stand of the Digital India, which has not been rebutted, that Digital India would continue to provide existing levels of support and issue the existing Certificate without the Digital Logo for the balance duration of the Licence Agreement.

2. Complaining deficiency in service on account of unilateral termination of the agreement resulting in withdrawal of support services this complaint has been filed on 2.6.1997 for an award of compensation of Rs. 153.47 lakhs with interest @ 18% per annum and damages amounting to Rs. 10.00 lakhs towards harassment and further sum of Rs. 20.00 lakhs as exemplary damages ‘for totally unwarranted conduct of both the parties’.

3. During the pendency of these proceedings, by order dated 9.5.2000 Compaq Computer India Pvt. Ltd. was added as an opposite party. By order dated 7.8.2000 Global Knowledge Network Inc. (GKN) was also added as an opposite party. Complainant gave up Digital USA as an opposite party. Thus presently there are three opposite parties and these are, (i) Digital India, (ii) Compaq Computer India Pvt. Ltd., and (iii) Global Knowledge Network Inc. (GKN).

4. Complainant has not cared to file any amended complaint to contend as to how Compaq Computer India Ltd. or Global Knowledge Network Inc. (GKN) would be liable. These two parties were added on the allegation that Digital USA had been sold to Compaq Computer Corporation, USA which wholly owns Compaq Computer (India) Pvt. Ltd. Earlier Digital USA had sold its Training Services (Learning Services) to Global knowledge Network Inc. (GKN).

5. Digital India has raised preliminary objection that complaint was not maintainable as complainant was not a consumer within the meaning of Clause (d) of Sub-section (1) of Section 2 of the Consumer Protection Act, 1986 (Act for short). It was submitted that as far as termination of Logo Agreement of the use of Digital by Digital USA is concerned it was beyond challenge as Clause 6.2.7 of the Agreement dated 20.6.1993 clearly stipulated that 'notwithstanding any of the aforesaid provisions, Digital USA shall be entitled to terminate this Agreement by giving 90 days’ notice in writing without assigning any reason whatsoever'. Then relationship between Digital India and complainant at best was one of grantor of franchise to complainant, the franchisee holder, and that it was settled law that it could not be said that franchisee i.e. franchisee holder hired the services of the grantor of franchise.

6. We have heard the arguments on this preliminary issue. It is an admitted fact that complainant entered into a Licence Agreement dated 12.5.1993 with Digital USA and Digital India to establish and run a franchisee centre for Digital Authorised Training Centre to impart computer education and training to the students who enrolled for the purpose with the complainant. Digital India was only to provide technical know-how and course material to the complainant, the franchisee. The relationship between the parties was obviously one of grantor of the franchise who was Digital India and the franchisee holder was the complainant. In these circumstances could it be said that complainant hired the services of the grantor of the franchise. We may refer to the definitions of ‘consumer’ and ‘service’ as contained in Clauses (d) and (o) of Sub-section (1) of Section 2 of the Consumer Protection Act :

'(d) `consumer’ means any person who-

(i)buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii)[hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who [hires or avails of] the services for consideration paid or promised, or partly paid any partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.

[Explanation-For the purposes of Sub-clause (i) ‘commercial purpose’ does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;]

(o) ‘service’ means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, (housing construction] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.'

‘Deficiency’ is also defined in Clause (g) and it means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.

7. Agreement dated 12.5.1993 provides that Digital USA hereby grants to the licensee i.e. the complainant a licence during the continuance of the agreement to establish, operate and maintain a centre at the locations stated in the agreement. The licence shall be non-exclusive and non-transferable. Clauses 8 and 9 of the agreement may be referred to :

'8. Course materials-

(a) Licensee (complainant) will only use course materials prescribed by Digital (Digital USA). Licensee shall not use any other course or study materials.

(b) DEIL (Digital India) is authorised by Digital to prepare and distribute such course materials and Licensee will purchase such materials only from DEIL as per relevant DEIL price list and terms and conditions of sale in force from time-to-time. The course materials will be supplied by DEIL on the basis of one set of course materials for each student as detailed in the enrolment export for each course. Additional copies of course materials will not be supplied on any account except where it is proven to the satisfaction of DEIL that the originally supplied material has been lost in transit or has been otherwise destroyed or damaged. Notwith-standing the generality of other provisions in this Agreement, Licensee specifically recognises that the copyright in the course materials is owned by Digital and that Licensee will not directly or indirectly made any copies of the course materials (except as may be specifically authorised by Digial) or in any way infringe the copyright therein.

9. DEIL’s obligations-

(i)DEIL will provide consultation to Licensee in the planning, construction and fitout of the Centre so that the Centre will have an appearance substantially the same as other Centres, and to ensure the Centre is readily identifiable as such to prospective trainees.

(ii)DEIL will provide the course materials required at the Centre pursuant to Clause 8 on DEIL’s prices and terms and conditions of sale in force from time-to-time.

(iii) DEIL will provide training and instructions to selected personnel of the Centre. The number of personnel, the location of the training and the duration thereof may be determined by DEIL from time-to-time. The costs of transportation, boarding and lodging of such trainees shall be borne by Licensee.

(iv) DEIL will, subject to mutual convenience, make available its trained personnel for such duration as may be required by Licensee to provide to the Centre personnel on site training and instruction and to provide advice and consultation to Licensee on the operations of the Centre. Licensee will pay to DEIL a per diem charge for each such personnel at the appropriate rate notified by DEIL from time-to-time. The costs of transportation of such delegated DEIL personnel and their board and lodging during their delegation to the Centre shall be borne by Licensee.'

Clause 15 of the agreement provides for the termination and Clause 16 of the consequences of termination. It is not necessary for us to set down these clauses or any terms of the agreement. It is purely a commercial transaction between the parties. The agreement takes care of the termination and the consequences thereof. Then also the agreement for use of Logo has been terminated by Digital. That cannot be subject matter of any challenge and neither any challenge to that been made. The question that arises for consideration is if the complainant is a consumer and if the agreement provides for any service which was deficient within the meaning of Clause (d), (o) and (g) of Sub-section (1) of Section 2 of the Act.

8. In General Manager, Madras Telephones & Ors. v. R. Kannan, reported at I (1994) CPJ 14 (NC), this Commission held that a franchisee holder is only a licensee of the grantor of the franchise. In that case this Commission while examining the relationship between the operator of STD/PCO and the Telecom Department, observed :

'A franchise holder is only a licensee of the grantor of the franchise for operating in this case the STD/PCO and collecting the call charges on behalf of the franchiser. It is the franchise holder who is rendering service to the grantor of the franchise inasmuch as he runs and maintains STD/PCO relieving the Telcom Department of the responsibility for providing and maintaining Public Call Offices. The franchise holder performs two functions; (a) establishes and runs a Public Call Office; and (b) collects the call charges on behalf of the department. For rendering these services the franchiser, the franchise holder, gets a commission. The mere fact that the franchise holder has been described as the hirer of the PCO does not make him a person who renders service to the revision petitioner, Telecom Department. Consequently, the fact that he has been described as hirer in the agreement would not mean that he is rendering a service to the Telecom Department for consideration. A franchise holder renders service to those who use the Public Call Office which is performed by the Telecom Department directly wherever there is no franchiser to manage a Public Call Office. Consequently it is erroneous to hold in this case that the franchise holder who is maintaining and running a STD/PCO Office, is a consumer vis-a-vis the Revision Petitioner, Telecom Department.'

9. In Prof. P. Narayanankutty v. Uptron India Ltd. & Ors., I (1996) CPJ 340 (NC), this Commission again examined the question of the right of franchise holder and said :

'We have gone through the records of the case and heard the parties. We are of opinion that in the present case the complainant cannot be said to be a consumer qua the opposite parties under the agreement dated 29th March, 1990 for running a Franchise Centre in Calicut. The opposite parties were only supposed to provide technical know-how and other materials to the franchisee as per the terms of the said agreement on payment.

A franchise holder cannot be held to have hired the services of the principal. In the case of Telephone Public Call Offices, this Commission has repeatedly held that a franchisee of the Telephone Department cannot be said to be hirer of services of the Department. Reference can also be made to The General Manager, Madras Telephones & Ors. v. R. Kannan, 1994 CPJ 14 (NC). The same principal applies to the present case.'

In Mysore Sales International Ltd. v. M.N. Misra, II (1996) CPJ 64 (NC), this Commission examined the consequences of failure to appoint the complainant as a selling agent and observed :

'There is no hiring of service of the petitioners herein by the complainant for consideration. Failure to appoint the complainant as a selling agent is a breach of contract for which remedy lies in Civil Court and not before the Consumer Forum... Even if it was a transaction, as the case of the petitioner herein, of the sale of oil, it will be hit by the fact that it was a commercial contract and case relating to non-supply of the oil. The complainant will not be consumer being purchase of goods in which no defect is alleged.'

10. As to what is deficiency we may refer to the decision of the Supreme Court in the case of Ravneet Singh Bagga v. M/s. KLM Royal Dutch Airlines & Anr., III (1999) CPJ 28 (SC), where the Court observed as under :

'The deficiency in service cannot be alleged without attributing fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be performed by a person in pursuance of a contract or otherwise in relation to any service. The burden of proving the deficiency in service is upon the person who alleges it. The complainant has, on facts, been found to have not established any wilful fault, imperfection, shortcoming or inadequacy in the service of the respondent. The deficiency of service has to be distinguished from the tortuous acts of the respondent. In the absence of deficiency in service the aggrieved person may have a remedy under the common law to file a suit for damages but cannot insist for grant of relief under the Act for the alleged acts of commission and omission attributable to the respondent which otherwise do not amount to deficiency in service.'

As to what is the relationship between grantor of franchise and the franchisee holder certainly depends on the terms of the agreement between the parties. Ordinarily a grantor of franchise allows the franchisee holder to use the name of the grantor and to sell the product of the

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grantor strictly in accordance with the agreement while the grantor keeps a watch over the activities of the franchisee to see that there was no breach of the agreement and the franchisee does not act in a manner which brings the name of the grantor in disrepute. In such circumstances a grantor of franchisee does not provide services to its customers. 11. It will be interesting to see the definition of ‘franchise’ in Wharton’s Law Lexicon (Fourteenth Edition), ‘Franchise’ means an incorporeal hereditament synonymous with liberty. A royal privilege or branch of the Crown’s prerogative subsisting in the hands of a subject. It arises either from royal grant, or from prescription, which pre-supposes a grant. The kinds are almost infinite, but the principal are : bodies corporate, the right to hold Courts-leet, fairs, markets, ferries, forests, chases, parks, warrens, fisheries. The remedy for disturbance is an action. Also, the right of voting at an election for a member of Parliament. Complainant in the present case cannot use the Logo Digital and the first opposite party Digital India had offered to provide its services for the whole period of agreement. Considering the terms of the two agreements referred to above it cannot be said that the complainant was a consumer or that the opposite party was to provide any service to the complainant. Moreover, assuming that any service was to be provided by the opposite parties it could not be said that there was any deficiency thereof within the meaning of Clause (g) of Sub-section (1) of Section 2 of the Act. We are, therefore, of the opinion that this petition is not maintainable and it is dismissed. We leave the parties to bear their own costs. Petition dismissed.
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