In Mohanlal gold loan consumer case, what Kerala HC held on celeb endorsements

The borrowers claimed that they were attracted to an advertisement featuring Mohanlal, who was then the company’s brand ambassador.

However, when the borrowers attempted to close the loan and retrieve the gold, Manappurram allegedly demanded interest at a rate higher than what was advertised. They then moved to the District Consumer Disputes Redressal Commission, alleging a deficiency of service and unfair trade practices, seeking a refund of the excess interest and compensation of Rs 25 lakh.

Along with the company and its manager, Mohanlal was arrayed as the second opposite party, solely because of his role in the advertisements.

The actor raised a preliminary objection before the District Commission, a government body for the redressal of consumer disputes. He argued that he had no role in the loan transaction, no interaction with the borrowers, and no say in the interest rates charged.

He stated that being a brand ambassador did not make him a service provider. Relying on the statutory definition of “endorsement” under the Consumer Protection Act of 2019, the District Commission rejected this objection and held the complaint maintainable. The State Consumer Commission, in revision, declined to decide the issue of maintainability at that stage.

The law that the court examined

Section 2(18) of the Consumer Protection Act defines “endorsement” broadly, covering messages or depictions that can make consumers believe an advertisement reflects the opinion or experience of the person featured. Section 2(47) gives “unfair trade practice” a wide sweep, including false representations about price or quality.

The term “endorser” appears expressly only in Section 21, which deals with false or misleading advertisements, and vests powers in the Central Consumer Protection Authority. Section 21 allows penalties against manufacturers and endorsers, including monetary penalties and temporary bans on endorsements.

At the same time, Section 21(5) protects endorsers who have “exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him.”

However, the Act does not further mention endorsers when it comes to consumer disputes over deficiency of service or unfair trade practices before consumer commissions. That, the court said in its ruling, was not accidental. “Going by the statutory stipulations in Section 21, it can be seen that the liabilities contemplated upon the endorser, is in respect of the proceedings envisaged under Section 21 alone,” the order noted.

The court also considered arguments based on the 2022 guidelines on misleading advertisements issued by the Central Consumer Protection Authority. While these guidelines define “endorser” and require due diligence, the court treated them as operating within the statutory framework of Section 21, not as expanding endorser liability across all consumer disputes.

What the court said

Justice Ziyad Rahman AA noted that Mohanlal’s role was limited to appearing in advertisements.

The court examined the complaint to see whether any direct link had been pleaded between the actor and the borrowers’ transaction. It found only two references to Mohanlal: one stating that he was the brand ambassador, and another recording that the company’s manager assured the borrowers that the interest rate would be as promised in advertisements featuring him.

According to the court, that was not enough. The pleadings did not show that the actor persuaded the borrowers to take the loan, participated in the transaction, or made any assurance to them. The assurance, even as pleaded, came from the company’s manager. On that basis, the court held that “no responsibility can be fastened upon the petitioner, in the matter of unfair trade practice or deficiency of service.”

“Merely because, a person falls within the definition “endorser” he cannot be mulcted with the liability for unfair trade practice or deficiency of service, unless the direct link between the relevant transaction and the endorser is established,” the court said.

The court also clarified that even if advertisements are part of the facts leading up to this case, an unfair trade practice arises when the service provider fails to provide the service as advertised. That failure, on the pleadings, could only be attributed to the company, not the endorser. The order stated that liability for deficiency of service or unfair trade practice could not be “fastened” on the endorser, merely because he endorsed the brand.

The High Court quashed the orders of the District and State Commissions as they related to Mohanlal and held that the complaint was not maintainable. At the same time, it clarified that the consumer case against Manappuram Finance would continue, and that if the borrowers had a grievance specifically about misleading advertisements, they were free to invoke remedies under Section 21 before the competent authority.