The maximum retail price is supposed to make consumers better off. However, we learn that using fine prints of the law, retailers are selling above MRP and getting away

Aditya Govindaraj

The laws related to maximum retail price (MRP) have been carelessly drafted that even shops which sell above MRP cannot be punished. It would seem that legal experts and bureaucrats who draft legislations are ignorant of the basics. More pertinently, it would seem that not printing the MRP on a packaged commodity would attract punishment, but selling above MRP would be allowed! Most people believe that the MRP printed on packaged commodities is beneficial to the consumers, as they cannot be sold above the MRP. It prevents exploitation of consumers. However, defective drafting of the laws has made MRP a meaningless number.

A recent judgment by the National Consumer Commission (NCC) has upheld the order of Bharuch (Gujarat) District Forum imposing a fine on Hotel Nyay Mandir for charging more than the MRP on some soft drinks. In another case, the Delhi State Consumer Commission imposed huge punitive damages of Rs50,000 on a restaurant serving mineral water to its customers at three times the MRP. While these decisions are welcome from the point of view of the consumer, unfortunately it goes against an order of the Supreme Court and is liable to be struck down.

The Supreme Court order (State of Himachal Pradesh Vs Associated Hotels of India, AIR 1972 SC 1131) given in 1972 makes MRP applicable only to retail sales, i.e. goods sold in shops. The Supreme Court held that such food and drinks can not be considered retail sales since they are always accompanied by service. So food and drinks consumed in hotels, restaurants or airplanes may be sold at prices above the MRP. However, it is different for shops, kirana stores, etc. They could charge more than MRP and still get away with it! Let us explore how and why.

The Standards of Weights and Measures Act, 1976, (the Act) only mandates that the price be printed on the package whereas the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (the Rules) go impermissibly further by stipulating that price charged can not exceed the printed price. The Act always supersedes the rules, and thus the latter would not have any bearing on the former, no matter how sensible or valid. The Act does not forbid selling packaged commodities for a price higher than the printed price much less specify the penalty for selling above the printed price.

According to the Section 39 of The Act, “No person shall—
(a) make, manufacture, pack, sell, or cause to be packed or sold; or
(b) distribute, deliver, or cause to be distributed or delivered; or
(c) offer, expose or possess for sale, any commodity in packaged form
to which this Part applies unless such package bears thereon or a label securely attached thereto a definite, plain and conspicuous declaration, as prescribed, of –
(i) the identity of the commodity in the package;
(ii) the net quantity, in terms of the standard unit of weight or measure, or the commodity in the package; (iii) where the commodity is packaged or sold by number, the accurate number of the commodity contained in the package;
(iv) the Unit sale price of the package;
(v) the sale price of the package.”

According to Section 23(2) of the rules, the retail sale of any packaged commodity at a price higher than the printed MRP is prohibited. It says, “No dealer or other person including manufacturer, packer, and wholesale dealer shall make any sale of any commodity in packed form at a price exceeding the retail sale price thereof.”

Thus it is clear that while the rules state that anything cannot be sold above MRP, sadly it cannot be enforced since the Act supersedes rules. Violation of the Act, I an MRP, would attract a fine of Rs5,000 or a prison term of five years with a fine. Section 63 of the Act states, “Whoever, in the course of inter-state trade or commerce, sells, distributes, delivers or otherwise transfers, or causes to be sold, distributed , delivered or otherwise transferred any commodity in a packaged form which does not conform to the provisions of this Act or any rule made there under, shall be punished with fine which may extend to Rs5,000, and, for the second or subsequent offence, with imprisonment for a term which may extend to five years and also with fine.”

One would expect that legal experts and bureaucrats would notice this and make the change accordingly. However, it seems they haven’t learnt anything and have just simply drafted a new act and rules without bothering to take cognizance of this glaring loophole.

The central government enacted the Legal Metrology Act 2009 (the New Act), which came into force on 1 April 2011 and replaced The Standards of Weights and Measures Act, 1976. The new act rationalizes the units for measurement to be used in India. The Act also specifies the metric system (metre, kilogram, etc.) to be used. It regulates the manufacture, sale and use of standard weights and measures.

According to Chapter V, of the Legal Metrology Act 2009, it appears that the non-conformity refers only to weight, number, etc. and not to the price. So there is no explicit prohibition of sale above the MRP. Several sections in this chapter devote to ‘weight’ or ‘number’ but not price. The only difference in this Act is the quantum of fine is much higher, at Rs25,000 instead of Rs5,000. Section 36 of the Legal Metrology Act states, “Whoever manufactures, packs, imports, sells, distributes, delivers or otherwise transfers, offers, exposes or possesses for sale, or causes to be sold, distributed, delivered or otherwise transferred, offered, exposed for sale any pre-packaged commodity which does not conform to the declarations on the package as provided in this Act, shall be punished with fine which may extend to twenty-five thousand rupees, for the second offence, with fine which may extend to Rs50,000 and for the subsequent offence, with fine which shall not be less than Rs50,000 but which may extend to Rs1 lakh or with imprisonment for a term which may extend to one year or with both.”

Similarly, according to Section 18(2) of The Legal Metrology (Packaged Commodities) Rules, 2011 (which replaced the Standards of Weights and Measures (Packaged Commodities Rules, 1977), it states that, “No retail dealer or other person including manufacturer, packer, importer and wholesale dealer shall make any sale of any commodity in packed form at a price exceeding the retail sale price thereof.”

Basically, the old and the new acts and rules are the more or less the same! It would seem that MRP is just a fiction. Anybody would be able to sell it above MRP.

In fact, there are several Supreme Court orders which prescribe the limits of rules made under an Act. They all say that Rules cannot extend the boundaries of the Act under which they have been made (e.g. Bharathidasan University Vs All-India Council for Technical Education, (2001) 8 SCC 767). They should have included the prohibition of charging a price higher than the printed price in the Act itself and not just in the rules. Unless parliament fixes this lacuna, MRP will continue to remain a paper tiger and not benefit any consumer.