NSTLE LANKA LTD. vs CONSUMER AFFAIRS AUTHORITY AND ANOTHER

027-SLLR-SLLR-2005-V-2-NSTLE-LANKA-LTD.-vs-CONSUMER-AFFAIRS-AUTHORITY-AND-ANOTHER.pdf


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NESTLE LANKA LTD.VSCONSUMER AFFAIRS AUTHORITY AND ANOTHERCOURT OF APPEALSR I PA VAN JBASNAYAKE JCA 2146/200430TH JUNE, 200511TH JULY, 2005
Consumer Affairs Authority Act, 09 of 2003 Section 18(1), (2), (3) – essentialgoods – Increase of price – discretionary power – compliance with proceduralrequirements – is it imperative ? – can the authority refuse an application for aprice increase in its entirety – should reasons be given ? – if reasons are notgiven is it fatal ?
CA Nestle Lanka Ltd. vs. Consumer Affairs Authority and Another (Sivipavan, J.) 139
The petitioner sought the approval from the Respondent Authority for anincrease in the price of its full cream milk powder products Nespray and Nido,as full cream powder is an essential good for the life of the community, theretail or whole sale price of milk powder cannot be increased without the priorwritten approval of the Respondent Authority. The approval sought was refused.
Held
When an application is made to get the approval to increase the retail/whole sale price the authority would have to –
(i) hold an inquiry ;
,(ii) see whether such increase is reasonable ;
(iii) approve any other increase as the authorities may considerreasonable.
No inquiry has been held, reasons have not been given for the refusal -the impugned decision is illegal and invalid.
The Respondent authority cannot refuse an application for a priceincrease in its entirety, thus the impugned decision is not a decision interms of section 18(4) and hence is void and a nullity.
Application for a price increase remains undetermined as the purporteddecision is not a decision in the eyes of the law.
Per Sripavan J.
“function of a Judge is to give effect to the expressed intention ofparliament as stated in the Enactment. If the words of an Act are plain andclear a Court must follow them and leave it 'to Parliament to set it right ratherthan alter those words to give a different interpretation."
Application for a Writ of Certiorari and Writ of Mandamus.
Sanjeewa Jayawardene with Suren de Silva for Petitioner.
N Idroos S. C., for Respondent
July 18th, 2005
cur adv vult
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SRIPAVAN, J
The Petitioner is a public company duly incorporated in Sri Lanka andproduces internationally known branded products such as Nespray,Lactogen, Nestomalt, Milo etc at its factory at Pannala.
The Minister of Commerce and Consumer Affairs acting under and interms of Section 18(1) of the Consumer affairs Authority Act, No. 09 of
by order published in the Gazette prescribed “full cream milk powder'1as an essential good to the life of the community. Thus in terms of Section18(2) of the said Act, the manufacturers and/or traders cannot increasethe retail or wholesale price of milk powder except with the prior writtenapproval of the first respondent Authority.
The Petitioner by its application dated 02nd September, 2004 soughtthe approval of the first respondent Authority for an increase in the price ofits full cream milk powder products Nespray (01 Kg, 400g and 200g packs)and Nido (01 Kg and 400g packs) as evidenced by P6. Along with theapplication, the petitioner submitted a detail cost structure for Nesprayand Nido together with supporting documents to enable the first respondentAuthority to consider the price increase sought. By letter dated 08thSeptember, 2009, the first respondent Authority called for further informationform the petitioner which was duly furnished by it by letter dated 10thSeptember, 2004. Again, the first respondent by letter dated 14thSeptember, 2004 sought further clarification from the petitioner which wasreplied by the petitioner on the same day as evidenced by the documentsmarked P7 (b) and P7 (c) respectively. The petitioner was informed byletter dated 24th September, 2004 received by fax on 27th September,
and by post on 29th September, 2004 marked P8 and P8(a)respectively that its application for the increase of the prices of Nesprayand Nido had been rejected. No reasons whatsoever were adduced for thesaid rejection. The petitioner seeks, inter-alia, an order in the nature of awrit of certiorari to quash the said determination of the first respondentdated 24th September, 2004 marked P8/P8(a).
The preamble to the Consumer Affairs Authority Act, No. 09 of 2003reads thus
“Whereas it is the policy of the Government of Sri Lanka to providefor the better protection of consumers through the regulation of tradeand the prices of goods and services and to protect traders andmanufacturers against unfair trade practices and restrictive tradepractices…”'
CA
Nestle Lanka Ltd. vs. Consumer Affairs Authority and
Another Sivipavan, J.
141
Accordingly, the Act not only provides better protection to consumersbut also protects traders and manufacturers against unfair trade andrestrictive practices. For purposes of convenience Section 18(3) of thesaid Act is reproduced below.
“A manufacturer or trader who seeks to obtain the approval of theAuthority under sub section (2), shall make an application in that behalfto the Authority and the Authority shall, after holding such inquiry as itmay consider appropriate
approve such increase where it is satisfied that the increase is
reasonable; or
approve any other increase as the Authority may consider reasonable.
and inform the manufacturer or trader of its decision within thirty daysof the receipt of such application.”
This section makes it mandatory that when a manufacturer or tradermakes an application to the first respondent Authority in order to get theapproval to increase the retail or wholesale price, the Authority shall act inthe following manner :
To hold an inquiry as it may consider necessary ; and
Approve such increase where it is satisfied that such increaseis reasonable ; or
Approve any other increase as the Authority may considerreasonable.
Though the aforesaid section gives certain amount of discretion to theAuthority in order to decide on the increase of a reasonable price, theexercise of such discretion necessarily implies good faith in dischargingpublic duty. The abuse of power or discretion constitutes a ground ofinvalidity independent of excess of power. It is to be borne in mind thatwhen a power granted for one purpose is exercised for a different purposeor a collateral object or in bad faith, the court will necessarily interveneand declare such act as illegal or invalid. Statutory powers conferred forpublic purposes are conferred upon trust and not absolutely. That is tosay, that they can be validly used only in the right and proper manner. The
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lawful exercise of a statutory power presupposes not noly compliancewith the substantive and procedural conditions laid down for its performancebut also with the implied requirements governing the exercise of thediscretion. Thus, all statutory powers must be exercised fairly andreasonably, in good faith, for the purposes for which they are given withdue regard to relevant considerations without being influenced by irrelevantconsiderations.
The important question that arises for consideration is whether the firstrespondent Authority in fact complied with the substantive and proceduralrequirements laid down in Section 18(3). The petitioner in paragraph 17(c)
■ of the petition specifically states that the first respondent has violated theprinciples of natural justice by failing to hold an inquiry prior to rejectingthe petitioner's application dated 02nd September, 2004. This avermentwas only denied by the second respondent in paragraph 6 of his affidavitdated 15th April, 2005. The inquiry proceedings before the first respondentAuthority which is material to the respondents’ case were not annexed tothe affidavit of the second respondent. In the absence of any notes ofinquiry, the only inference the court may draw is that in fact no inquiry washeld as contemplated by Section 18(3).
When Section 18(3) prescribes the manner in which the statutory powerhas to be exercised, the power must be exercised in that manner alone :if the exercise of power is in utter violation of the mandatory procedure laiddown therein it cannot be regarded as an act done in pursuance of thesaid provision. In the circumstances, I hold that the impugned decision ofthe second respondent without following the procedure prescribed in Section18(3) becomes illegal, invalid and is of no force or avail in law.
The learned counsel for the petitioner urged that the first respondentAuthority has no power to refuse an application sought to increase thewholesale or retail price. Counsel argued that the use of the word “shall"in the said section compels the first respondent Authority either to approvethe price increase sought or approve such other price increase as theAuthority considers reasonable. The responsibility of the court is to construeand enforce the laws of the land as they are and not to legislate on thebasis of personal inclinations. Thus, the function of a judge is to give effectto the expressed intention of Parliament as stated in the enactment. If thewords of an Act are plain and clear, a court must follow them and leave it
Nestle Lanka Ltd. vs. Consumer Affairs Authority and
Another (Sivipavan, J. )
143
CA
to Parliament to set it right rather than to alter those words to give adifferent interpretation, Hence, I am in total agreement with the submissionsmade by the learned counsel for the petitioner that the legislature in all itswisdom has not empowered the first respondent Authority to refuse anapplication for a price increase in its entirety. Therefore, I hold that theimpugned decision of the first respondent Authority marked P8/P8 (a) isnot a decision in terms of Section 18(4) and hence is void and a nullity inlaw.
The learned Counsel for the petitioner also submitted that no reasonswere given for the decision contained in the documents marked P8 andP8(a). It is a general principle of law that whenever a right of appeal orreview is given from the order of a statutory body, a duty to record findingsand give reasons is implied. Reasons have to contain findings on thedisputed matters that are relevant to the decision. Once proceedingscommence against the first respondent Authority, it is under a legalobligation to disclose to court its reasons in arriving at the decision impugnedin these proceedings. No such disclosure has been made in the case inhand. Unless the petitioner is able to discover the reasoning behind thedecision, it may be unable to decide whether such decision is reviewableor not and be deprived of the protection of the law. Therefore, failure to givereasons amounts to a denial of justice and is itself an error of law.
Learned State Counsel on the other hand contended that despite theorder made by the fjrst respondent, the petitioner as averred in paragraph22 of the petition increased the price of a 400g pack of Nespray to Rs. 146with effect from 20th October, 2004. On this basis, Counsel argued thatthe illegal conduct disentitles the petitioner to the discretionary reliefssought. If the petitioner had in fact acted illegally, the Act makes provisionfor the first respondent Authority to institute proceedings in the relevantMagistrate’s Court against the petitioner for contravening the provisions ofthe Act. This however, does not prevent the petitioner from challenging thedecision marked P8/P8(a) made by the first respondent Authority byfollowing a wrong or incorrect procedure. If there has been some proceduralfailing such as a false or incorrect step in the procedure, the act of theAuthority is condemned as unlawful and unauthorized by law. Since I haveheld that P8/P8(a) is devoid of any legal effect, the first respondent isunder no legal duty to implement it. The decision in P8/P8(a) is a nullityand every proceeding which is followed on is also bad and incurably bad.Accordingly, the court issues a Writ of Certiorari quashing the order dated24th September, 2004 marked P8/P8(a).
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For the avoidance of any doubt, the court holds that the applicationmade by the petitioner for a price increase remains undetermined as thepurported decision marked P8/P8(a) is not a decision in the eyes of thelaw. In view of the conclusion reached, the petitioner is entitled to theprotection of the law provided for in Section 18(4). Hence, the relief soughtby the petitioner in terms of paragraph (c) of the prayer to the petition for awrit of Mandamus directing the first respondent to consider and determinethe petitioner’s application dated 02nd September. 2004 is refused.
The petitioner is entitled for costs in a sum of Rs. 15,000 payable bythe first respondent Authority.
BASNAYAKE J. I agree.Application refused.