The apex court set aside the NCDRC's September 2008 verdict as it allowed the appeals filed by Star India and Airtel.
A bench of Justices M.M. Shantanagoudar and R Subhash Reddy said: "With regard to the award of punitive damages made by the National Commission, the same could not have been done in as much as the complainant in the present case had not prayed for punitive damages in the complaint or proved any actual loss suffered by consumers."
The NCDRC said Airtel and Star India were creating a "false impression" in the mind of viewers, who participated in "Har Seat Hot Seat" (HSHS) contest, on the KBC between January 22, 2007 and April 19, 2007, assuming it was free of cost.
The viewers sent their answers through SMS services, offered by Airtel, MTNL and BSNL, to a specified number. The winner was randomly selected and awarded prize money of Rs 2 lakh. The contestants were required to pay Rs 2.40 per SMS to Airtel, which was higher than the normal rate for SMS.
The plea before the NCDRC had alleged profits from these charges were being shared by Airtel with Star India. The commission said the prize money for the contest was fully or partly covered by revenue earned from SMS charges. Therefore the companies committed "committed an unfair trade practice" and held them jointly liable for punitive damages.
The apex court did not agree with this reasoning.
"We are of the view that there is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, or that Airtel and Star India had colluded to increase the SMS rates so as to finance the prize money and share the SMS revenue, and the finding of the commission of an unfair trade practice rendered by the National Commission on this basis is liable to be set aside,"