Consumer Protection Act, 1986

Presentation By, C J Rawandale, C J Rawandale,

Symbiosis Law School, PuneSymbiosis Law School, Pune

April 11, 2023

Introduction

April 11, 2023

Until the enactment of Consumer Protection Act, 1986, there was no specific legislation to compensate the consumer for the wrongs done to them.

The manufacturers and traders reigned supreme for want of effective consumer protection legislation.

A need was felt to educate the consumers about their rights and to establish consumer redressal forums for providing inexpensive and summary relief.

April 11, 2023

Tort of Neligence

Prior to the CPA, the consumer had to claim remedy under tort of negligence.

The essentials of negligence are as follows:

That the defendant owed duty of care; The defendant made a breach of that duty; The plaintiff suffered damage as a consequence thereof.

April 11, 2023

Donoghue v. Stevenson, (1932) AC 562

A purchased a bottle of ginger beer from a retailer for the appellant, a lady friend. Some of the contents were poured in a tumbler and she consumed the same. When the remaining contents of the bottle were poured into her tumble., the decomposed body of a snail floated out with her ginger beer. The appellant alleged that she seriously suffered in her health in consequence of having drunk a part of the contaminated contents. The bottle was dark opaque glass and closed with a metal cap, so that the contents could not be ascertained by inspection. She brought an action against the manufacturer for damage.

One of the defences pleaded by the defendants was that he did not owe any duty of care towards the plaintiff.

The House of Lords held that the manufacturer owed her a duty to take care that the bottle did not contain any noxious matter, and that he would be liable on the breach of the duty.

April 11, 2023

Another defence pleaded by the defendant was that the plaintiff was a stranger to the contract and her action was not maintainable i.e. privity of contract fallacy.

What does it mean?

If A undertook some contractual obligation towards B and the breach of such obligation by A resulted in damage to C , then C could not sue A even in tort because there was no contractual relation between A and C.

The House of Lords rejected the application of this fallacy and allowed the consumer of drink an action in tort against the manufacturer, between whom there was no contract.

April 11, 2023

Doctrine of Caveat Emptor

According to Section 4 of the Sale of Goods Act, 1930, a contract of sale means “a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a price.”

Section 16 of the Sale of Goods Act, 1930, cautions “the buyer be aware”.

It declares that there is no implied condition or warranty as to quality or fitness for any particular purpose which the buyer may have in his contemplation.

April 11, 2023

It is the buyer’s duty to thoroughly examine the goods which he is going to purchase. If goods turn out be defective or do not suit his purpose, he has no one to blame but himself. The seller has no obligation to disclose the defects in the goods of which he may be cognizant.

The matter would be different if there has been fraud or misrepresentation.

Jones v. Padgette (1890) 24 QBD 650

A tailor bought by sample some cloth for making liveries. This fact, however, was not brought to the notice of seller. Held, the seller is not liable for damages. Liveries could not be made out of the cloth purchased.

April 11, 2023

Exceptions to the Rule of Caveat Emptor

1. Fitness for buyer’s purpose [Sec. 16(1)]

2. Condition as to merchantability [Sec. 16(2)]

3. Good sold by sample as well as description [Sec. 15(1)]

4. Goods sold by sample [Sec.17]

5. Condition as to quality or fitness annexed by usage or custom of trade

6. Where consent of buyer has been obtained by fraud or where seller knowingly conceals defects not discoverable on reasonable examination

7. Misrepresentation by seller

Consumer Protection Act, 1986

April 11, 2023

The Consumer Protection Act, 1986 aims at helping a consumer in getting quicker redressal of his complaints through specially established fora, instead of filing a suit in a civil court.

No Court fee is required to be paid for filing a complaint.

One need not engage a lawyer for the purpose, and

The objects of the Act

April 11, 2023

The Consumer Protection Act, 1986 is intended to provide for better protection of the interests of consumers.

The following are the main objects of the Act.

a. Protection of interests of consumer; b. Protection of rights of consumer; c. Establishment of Consumer Protection Councils; d. Establishment of Consumer Dispute Redressal Agencies.

a. Protection of interests of consumer

April 11, 2023

The CPA is designed to protect the common man from wrongs for which the remedy under the ordinary law had become illusory.

In Lucknow Development Authority v. M.K. Gupta, (1994) 1 SCC 243, the Supreme Court held that:

“the importance of the Act lies in promoting the welfare of the society in as much as it attempts to remove the helplessness of a consumer which he faces against powerful business described as a network of rackets or a society in which producers have secured power to rob the rest, and the might of public bodies which are degenerating into storehouses of inaction.”

b. Protection of rights of consumers

April 11, 2023

i. Protection against hazardous goods: A consumer has a right to be protected against the marketing of goods and services which are hazardous to life and property.

ii. Right to information: A consumer must be informed about the quality, quantity, potency, purity, standard and price of goods or services so as to protect him against unfair trade practices like false description, exaggerated claims etc.

iii. Right to access variety of goods or services at competitive prices.

April 11, 2023

iv. Right to be heard: A consumer has the right to be heard and to be assured that his interests will receive due consideration at appropriate redressal forums.

v. Right to seek redressal: A consumer has the right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers.

vi. Right to consumer education: A consumer has a right to education about the remedies available under the Act. The responsibility of creating awareness amongst the consumers has been assigned to the Central Consumer Protection Council.

C. Establishment of Consumer Protection Councils

April 11, 2023

To achieve the objects enshrined in the Act, provision has been made to establish Consumer Protection Councils at the Central and State levels.

D. Establishment of consumer dispute redressal agencies

April 11, 2023

The Act provides for the establishment of a three tier, quasi-judicial machinery at district, state and central levels to deal with consumer disputes and grievances.

These bodies are not required to observe the basic rules of natural justice and are not bound by any rules involving complicated or elaborate procedures.

Working of The Consumer Protection Act

April 11, 2023

A. Consumer Sec. 2 (1) (d)

The Consumer Protection Act provides for the protection of interests of consumers.

According to Sec. 2 (d) of the Act, a “Consumer” has been defined in two parts as follows:

1. a. any person who buys goods for consideration and b. any person who uses goods with the approval of the

purchaser

2. a. any person who hires any service for a consideration and

b. any beneficiary of such services provided the service is availed with the approval of the person who had hired the service for a consideration.

April 11, 2023

The first part of Section 2 (1)(d) deals with goods and the second with services.

Moreover, the consideration for either the goods or service may be either paid, or promised, or partly paid or promised under a system of deferred payments.

Ingradients of a Consumer

April 11, 2023

1. Transaction must be for a consideration:

The consumer must be a person who has purchased the goods, or hired or availed the service for a consideration. The consideration may be in terms of money or exchange of goods or service.

2. Deemed consumer:

The term ‘consumer’ shall include those who use the goods or avail the services as a beneficiary with the approval of a purchaser or hirer for a consideration.

April 11, 2023

3. Purchase must not be for resale and commercial purpose:

A person purchasing goods or hiring services for resale or for a commercial purpose shall be outside the purview of definition of a consumer.

Section 2 (1)(d) has clarified the term commercial purpose does not include the use by a consumer of goods for consumption or private use, or exclusively for the purpose of earning his livelihood by means of self employment.

April 11, 2023

Whether the purchase is for a commercial purpose is a question of fact to be decided on the facts and circumstances of each case.

In Anand Raj Agencies v. TELCO, a car purchased for director’s use is not deemed to be for the private profit making activity of the company. The complainant was a consumer and he could bring an action for the defective car under the Consumer Protection Act.

In Sterling Computer Ltd. v. P.R. Kutty, it has been held that if

a computer purchased for personal use is used by a contractor in his office, the computer is used for a commercial purpose and if the computer does not work properly, the complainant cannot be treated as a consumer.

April 11, 2023

“Commercial Use after 1993”

The Consumer Protection Act has been amended in 1993.

According to the amendment, “Commercial Purpose” does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning the livelihood by means of self employment.

Thus a person purchasing a taxi or a sewing machine for earning livelihood by means of self-employment will be considered to be a consumer.

April 11, 2023

Secretary, Consumer Guidance and Research Society of India v. BPL India Ltd. (1992) 1 CPC 140

The purchase of a photocopier by a lady for earning her livelihood has been held to be not for a commercial purpose.

HCL Ltd. v. Krishna Nanu Naik and Sons, 1993 CPJ 174

The purchase of a computer by a large commercial organisation has been held to be for a commercial purpose.

J.K. Puri Engineers v. Mohan Breweries & Distilleries Ltd. (1993)

Even where goods are purchased for commercial purpose, if there is a warranty for its maintenance, the purchaser will be regarded as consumer.

April 11, 2023

4. There must be the existence of a contract between the seller and the buyer i.e. consumer

There must be a contract between a consumer and a business seller.

But under the comprehensive definition of consumer, even a member of the family may be treated as a consumer under the Act, in the case of an action by a member of the family for any deficiency in service.

In such a case, the concerned trade cannot claim the absence of privity of contract.

April 11, 2023

Spring Meadows Hospital v. Harjot Ahluwalia through K.S. Ahluwalia, (1998)

If due to the fault of a Nursing Home, brain damage is caused to a child, nursing home shall be liable for that under the CPA. Both parents and the child would be entitled to compensation because parents are consumers as they hire the services and the child is a consumer as he is beneficiary of the service.

Surinder Kumar v. Escorts Ltd. (1993)

The purchase of a tractor for agriculture purpose is not a commercial purpose.

Maruti Udyog v. MS Hameed Panaji, (1992)During warranty period, the manufacturer or dealer has to render free service though goods may have been purchased for a commercial purpose.

B. Complaint Sec. 2 (1) (c)

April 11, 2023

It means a written allegation by a complainant that:

i. an “unfair trade practice” or a “restrictive trade practice” has been provided by any trade or service provider;

ii. the goods bought by him or agreed to be bought by him, suffer form one or more ‘defects’;

iii. the service hired or availed or agreed to be hired or availed by him suffer from “deficiency” in any respect;

April 11, 2023

iv. A trader or the service provider has charged for the goods or for the service mentioned in the complaint, a “price in excess” of the price;

a. fixed by or under any law for the time being in force;

b. displayed on the goods or any package containing such goods;

c. displayed on the price list established by him or under any law for the time being in force;

d. agreed between the parties;

April 11, 2023

v. goods which will be hazardous to life and safety when used, are being offered for sale to the public;

a. in contravention of nay standards relating to safety of such goods as required to be complied with by or under any law for the time being in force;b. if the trader could have known with due diligence that the goods so offered are unsafe to the public;

vi. services which are hazardous or are likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety.

April 11, 2023

Manner of making complaint

The complaint to be accompanied by court fee as may be prescribed. It may be admitted or rejected within 21 days.

Procedure on admission of complaint (Sec. 13)

On admission of a complaint the District Forum shall refer a copy of the complaint to the opposite party within 21 days directing him to give version of the case within 30 days. Such period may be extended by 15 days by the District Forum.

The District Forum shall have the same powers as are vested in a civil court.

C. Unfair Trade Practice Sec. 2(1) (r)

April 11, 2023

According to Sec. 2(1)(r), the term ‘unfair trade practice’ shall have the same meaning as in Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969.

It is said to occur when a trade adopts any unfair method or deceptive practice of the purpose of promoting the sale, supply or use of any goods or for the provision of nay services.

April 11, 2023

The following six categories of practices have been declared as unfair trade practices.

i. False Representation and Misleading Advertisements [Sec. 2(1) (r) (1)]

This includes false representation as to standards of goods, standards of services, making of false representation as to sponsorship, approval, misleading representation concerning the need for usefulness of any goods or services, misrepresentation as to price etc.

Alexander Educational Foundation v. B. Chandrasekaran (1995) 1 CPJ 141 Pondicherry

The fact about disaffiliation of the educational institution was not conveyed to the candidates seeking admission to a programme. It was held to be unfair trade practice.

April 11, 2023

ii. False offer of bargain price [Sec. 2(1) (r) (2)]

Polar Industries Ltd. v. G. R. Luthra, (1987)

Giving off season discount on fans on the basis of their future prices and not the present prices, has been held to be an unfair trade practices.

April 11, 2023

iii. Offer of Gifts, prizes [Sec. 2(1) (r) (3)]

iv. Withholding any scheme [Sec. 2(1) (r) (3A)]

v. Sale or supply of goods not complying with prescribed standard [Sec. 2(1) (r) (4)]

vi. Hoarding, destruction or refusal to sell [Sec. 2(1) (r) (5)]

viii. Manufacturing or sale of spurious goods [Sec. 2(1) (r) (6)]

D. Defect Sec. 2 (1) (f)

April 11, 2023

Defect means “any fault, imperfection or shortcoming in the quality, quantity, potency or standard which is required to be maintained by or under any law for the time being in force, or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods.”

Fault, imperfection or shortcoming as claimed by the trader is to be determined with reference to the warranties or guarantees expressly given by the trader.

April 11, 2023

Illustrations

1. If the Limca bottles purchased contain contaminated matter and the guests consuming the same vomiting. The buyer can be awarded refund of price and also compensation for the same.

2. A person purchased one Prestige Pressure Cooker. The cooker burst causing injuries to the complainant’s wife. The opposite party was directed to pay compensation to the buyer of the pressure cooker.

E. Deficiency Sec. 2 (1) (g)

April 11, 2023

Deficiency means “any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.”

Illustrations

If there is considerable delay in the running of a train without any justifiable reason, it amounts to deficiency in service for which railways can be made liable under CPA.

April 11, 2023

In Union of India v. Nathmal Hansaria, (1997), a passenger trying to cross from one compartment to another fell down and dies as the passage was not properly guarded with grills, it amounted to deficiency in services for which the Railways were held liable.

Similarly, if reserved accommodation is not made available to a passenger, this also amounts to deficiency in service.

When a car parked in a parking area is stolen, it amounts to deficiency in service, and the person in-charge of the parking lot can be made liable for such loss.

If Airlines cancel a flight without notice to the passengers, or the flight leaves before time, or an air passenger is charged excess fare, or a passenger suffers due to the negligence of Airline, he can sue for deficiency in service.

April 11, 2023

Indian Medical Association v. V. P. Shantha, AIR 1996 Sc 550,

It was held by the Supreme Court that medical services are covered under the purview of the CPA. A patient aggrieved by the medical treatment can file a complaint as a consumer. However, if the services are rendered free of charge or under a contract of personal service are not covered under the CPA.

Insurance Service is also covered under the CPA. A beneficiary of group insurance is a consumer. An insurance company is liable for the proximate consequences of the risk covered under an insurance policy.

Banking Services are also covered under the CPA. A bank can be held liable for wrongful dishonour of a cheque, or for making payment of a cheque, whose payment has been stopped.

F. Consumer Dispute Redressal Forum

April 11, 2023

The following Fora or redressal agencies have been set up under the Consumer Protection Act:

1. Consumer Dispute Redressal Forum i.e. District Forum

It consists of the President, who is or has been or is qualified to be a District Judge, and two other members, one of whom shall be a woman. (Sec. 10)

It has jurisdiction to entertain complaints, where the value of the goods or services and the compensation, if any, claimed does not exceed Rs. 20 Lakhs. (Section 11)

April 11, 2023

Territorial Jurisdiction (Sec. 11)

The complaint shall be instituted in a District Forum within the local limits of whose jurisdiction:

a. the opposite party or opposite parties actually and voluntarily reside or carry on business or has a branch office, or works for gain; or

b. the cause of action, wholly or in part, arises.

April 11, 2023

Findings of the District Forum (Sec. 14)

If the District Forum is satisfied that the goods complained against suffer from any defect or any of the allegateries about the services are proved, it shall order the opposite party:

To remove the defects in the goods, or replace the goods, or refund the price, or pay compensation, or

To remove the defects in the goods, deficiency in services in question, or award compensation, and

May provide for adequate costs to the parties.

April 11, 2023

Conduct of Proceedings (Sec. 14)

Every proceeding shall be conducted by the President and at least one member of forum.

Every order made by the District Forums shall be signed by the President and the member or members who conduct the proceedings.

Appeals (Sec. 15)

Any person aggrieved by the order of the District Forum may prefer an appeal against such order to the State Commission within a period of 30 days from the date of the order. The period of limitation of 30 days begins from the date the order of the District Forum is communicated.

50% of the decreed amount or Rs. 25, 000/- whichever is less, has to be deposited before making an appeal.

April 11, 2023

2. State Commission

Each State Commission shall consist of its President, who is or has been a judge of the High Court and at least two other members, one of such members shall be a woman. (Sec. 16)

The State Commission shall have the power to entertain complaints where the value of the goods or services and compensation, if any claimed exceeds Rs. 20 Lakhs, but does not exceed Rs. one Crore. (Sec. 17)

It can hear appeals against the orders of any District Forum within the State.

It can also call for the records, and pass appropriate orders in any consumer dispute, which is pending before or has been decided by any District Forum within the State.

April 11, 2023

Appeals (Sec. 18)

Appeals against the order of the State Commission can be preferred to the National Commission, where the value of the goods or services and compensation, if any, claimed exceeds Rs. 20 lacs but does not exceed Rs. one Crore.

50% of the decreed amount or Rs. 35, 000/- whichever is less have to be deposited before making an appeal.

April 11, 2023

3. National Commission

The National Commission shall consist of its President, who is or has been a judge of the Supreme Court, and at least four other members, one of whom shall be a woman. (Sec. 20)

It can entertain complaints where the value of the goods, or services, and compensation, if any, claimed exceed Rs. One Crore. (Sec. 21)

It can also entertain appeals against the orders of any State Commission. (Sec.21)

It can also call for records and pass appropriate orders in any consumer dispute which is pending or has been decided by any State Commission. (Sec. 21)

The powers and procedure applicable to the National Commission is to be the same as of the District Forum under sections 13 and 14 of the Act. (Sec. 22)

April 11, 2023

Appeals (Sec. 23)

An appeal against the orders of the National Commission shall lie to the Supreme Court. The appellant is to deposit 50% of the decreed amount or Rs. 50,000 whichever is lower, before making an appeal.

April 11, 2023

Finality of order (Sec. 24)

Where no appeal has been filed against the order of the District Forum, State Commission or National Commission, the same shall be final.

Limitation Period for filing a complaint (sec. 24A)

The District Forum, the State Commission or the National Commission shall not admit a complaint unless it is filed within two years from the date on which the cause of action has arisen.

Enforcement of Order (Sec. 25)

Every order made by the District Forum, the State Commission or the National Commission may be enforced by the District Forum, or the State Commission or the National Commission, as the case may be, in the same manner as a decree or order made by a civil court.

April 11, 2023

Dismissal of Frivolous or Vexatious complaints (Sec. 26)

Where the complaint is found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, be dismissed. In such a case, there can also be an order that the complainant shall pay costs upto Rs. 10,000/- to the opposite party.

Penalties (Sec. 27)

Every person who fails to comply with the order of the District Forum, the State Commission or the National Commission, as the case may be, shall be punishable with imprisonment for a minimum duration of one month and maximum of 3 years or with the minimum fine of Rs. 2,000/- and maximum of Rs. 1,000/- or with both imprisonment and fine.

Appeal is now permitted after the Amendment Act, 2002 against the order imposing penalty under Section 27. (Sec. 27-A)

April 11, 2023

Thank You!