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The Kerala High Court has set aside consumer proceedings against actor Mohanlal, holding that a brand ambassador cannot be held liable for a company’s alleged unfair trade practices unless there is a clear, direct link between the endorsement and the consumer’s transaction.

The ruling arose from complaints against Manappuram Finance, where borrowers claimed they were charged higher interest rates than advertised.

The court clarified the boundary between promotional activity and transactional responsibility, emphasizing that mere appearance in advertisements does not create consumer liability for endorsers.

What’s in Today’s Article?

• Background: The Gold Loan Dispute
• Legal Provisions on Endorsements Examined by the Court
• What the Kerala High Court Held?

Background: The Gold Loan Dispute

• The case arose from gold loans taken by two borrowers in Thiruvananthapuram. They had initially pledged gold with Catholic Syrian Bank at 15% interest.
• In 2018, Manappuram Finance took over the loans after a bank manager allegedly promised a lower interest rate.
• The borrowers claimed they were influenced by advertisements featuring actor Mohanlal, who was Manappuram Finance’s brand ambassador at the time.
• They alleged that the advertised interest rate was lower than what was eventually charged.
• Consumer Complaint and Claims
  • When the borrowers tried to close the loan and retrieve their gold, Manappuram allegedly demanded a higher interest rate.
  • They approached the District Consumer Disputes Redressal Commission, alleging deficiency in service and unfair trade practices.
  • They sought a refund of excess interest and compensation of ₹25 lakh.
• Mohanlal Made a Party to the Case
  • Along with Manappuram Finance and its manager, Mohanlal was named as an opposite party solely because of his appearance in the advertisements.
  • Mohanlal raised a preliminary objection, arguing that he had no role in the loan transaction, no interaction with the borrowers, and no control over interest rates.
• Consumer Fora’s Initial View
  • Mohanlal contended that being a brand ambassador did not make him a service provider.
  • However, relying on the definition of “endorsement” under the Consumer Protection Act, 2019, the District Commission rejected his objection and held the complaint maintainable.
  • The State Consumer Commission later declined to rule on this issue at the revision stage.

Legal Provisions on Endorsements Examined by the Court

• The court examined Section 2(18) of the Consumer Protection Act, which gives a broad meaning to “endorsement”.
• It covers any message or depiction that may lead consumers to believe an advertisement reflects the opinion or experience of the person featured.
• Section 2(47) similarly defines “unfair trade practice” widely, including false representations about price or quality.
• Where Endorsers Are Specifically Mentioned
  • The term “endorser” appears explicitly only in Section 21 of the Act.
  • This provision deals with false or misleading advertisements and empowers the Central Consumer Protection Authority to impose penalties on manufacturers and endorsers, including fines and temporary bans on endorsements.
  • Section 21(5) provides a safeguard for endorsers.
  • It protects them from liability if they have exercised due diligence to verify the truthfulness of the claims made in the advertisement.
• Limits of Endorser Liability in Consumer Disputes
  • Crucially, the Act does not refer to endorsers in provisions dealing with consumer complaints on deficiency of service or unfair trade practices before consumer commissions.
  • The Kerala High Court held that this omission was deliberate, noting that endorser liability is confined to proceedings under Section 21 alone.
• Role of the 2022 Misleading Advertisement Guidelines
  • The court also considered the 2022 guidelines issued by the Central Consumer Protection Authority.
  • While these define endorsers and require due diligence, the court clarified that they operate within the scope of Section 21 and do not expand endorser liability to all consumer disputes.

What the Kerala High Court Held?

• Kerala HC noted that Mohanlal’s role was confined to appearing in advertisements as a brand ambassador.
• No Direct Link to the Transaction
  • The court examined the consumer complaint to identify any direct connection between the actor and the borrowers’ gold loan transaction.
  • It found only two references to Mohanlal: his status as brand ambassador and an assurance allegedly given by the company’s manager referring to advertisements featuring him. This, the court held, was insufficient.
• Liability Cannot Be Presumed
  • The pleadings did not show that Mohanlal persuaded the borrowers, participated in the loan transaction, or made any assurance to them.
  • The assurance, as pleaded, came solely from the company’s manager.
  • Therefore, the court ruled that no liability for unfair trade practice or deficiency of service could be fixed on the actor.
  • The court clarified that merely falling within the definition of an “endorser” does not attract liability.
  • A direct and specific link between the endorser and the consumer transaction must be established to fasten responsibility.
• Company, Not Endorser, Answerable
  • Even if advertisements formed part of the background facts, an unfair trade practice arises when the service provider fails to deliver what was advertised.
  • On the pleadings, that failure could only be attributed to Manappuram Finance, not the endorser.