Chapter 6

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Chapter 6Law Relating to Consumer

Protection

Business Law for Managers P.K. Goel Biztantra Copyright©2010, P.K.

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""Don't agonise; organise." - Florynce R. Kennedy

CHAPTER OBJECTIVES The chapter on the law relating to consumer protection will present the legal principles for safeguarding the interests of the consumer. A consumer needs to be protected from unfair trade practices or restrictive trade practices followed by the traders and manufacturers for the purpose of promoting sale, use or supply of goods or for the provision of any services. After reading the chapter you should be able to understand: • The objects of the Consumer Protection Act, 1986. • Who is a consumer and a complainant? .Eat is the meaning of terms like goods, services, complaint, defect, efficiency, consumer dispute and person? • I ~at is a restrictive trade practice and an unfair trade practice? • What are the various consumer disputes redressal agencies and their • monetary jurisdiction? • The manner of making a complaint. • The procedure on admission of complaint. • a Points clarified by decisions of the Consumer Courts/Supreme Court.


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6.1 Introduction

In India with industrialization and economic development, the population of consumers and the volume of consumption of goods and services increased. The Contract Act, 1872 and the Sale of Goods Act, 1930 provided remedies but they were time consuming and expensive. Consumer issues started gaining importance. The interests of consumers were highlighted by media, non government organizations, social activists and even business concerns. The United Nations organized a session on the need for the protection of consumers. The government of India also realized that consumers need to be protected by law. The law relating to consumer protection is contained in the Consumer Protection Act, 1986 (in short the Act). The Act extends to the whole of India except the state of Jammu and Kashmir.


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6.2 Objects of the Act The objects of the Act are as follows: a. Better Protection of Interests of Consumers: The Act

seeks to provide consumer councils and authorities for settlement of consumer disputes.

b. Protection of rights of Consumers: The Act seeks to promote and protect the rights of consumers such as: i. The right to be protected: against marketing of

goods and services which are hazardous to life and property.

ii. The right to be informed about the quality, quantity, potency, purity, standard and price of goods and services so as to protect the consumers against unfair trade practices.

iii. The right to be assured: where ever possible, access to goods and services at competitive prices.

iv. The right to be heard: and to be assured that consumer's interest will receive due consideration at appropriate forums.


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c) Consumer Protection Councils: The above said objects are sought to be promoted and protected by the consumer protection councils established at the central, state 'and district levels.

d) Quasi-judicial machinery for speedy redressal of consumer disputes: The Act seeks to provide speedy and simple redressal to consumer disputes. For this purpose the following consumer disputes redressal agencies are envisaged:

i. District Forums: at district level. ii. State Commissions: at State level. iii. National Commission: at Central or National level.


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6.3 Meaning of Some Important and Relevant Terms

6.3.1 Consumer According to the Act, "Consumer means any person who: a. Buys any goods for consideration which has been paid or

promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

b. hires or avails of any services for a consideration which has been paid or promised or partly paid or partly promised, or under system of deferred payment and includes any beneficiary of such services other Business Law for Managers P.K. Goel

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c. than the person who hires or avails of the services for consideration paid or promised or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose".

"Commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment".' To put briefly consumer is a person who buys any goods or hires or avails of any services for a consideration,


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6.3.2 Goods As per the Act "Goods mean goods as defined in the Sale of Goods Act, 1930.2 According to the Sale of Goods Act, "'Goods' means every kind of moveable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of land which are agreed to be severed before sale or under the contract of sale". 3

6.3.3 Services According to the Act, "'Service' means service of any description which is available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service."!


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6.3.4 Complainant According to the Act, "Complainant means- a. a consumer; or b. any voluntary consumer association registered under the

companies act, 1956 or under al1lY other law for the time being in force, or

c. the central government or any state government; d. one or more consumers, where there are numerous

consumers having the same interest;e) in case of a death of a consumer, his legal heir or representative; who or which makes a complaint. »s

6.3.5 Complaint 'Complaint' means any allegation in writing made by a complainant with a view to obtaining any relief under the Act. Business Law for Managers P.K. Goel


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6.3.6 Restrictive Trade Practice

According to the Act "Restrictive trade practice means a trade practice which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs or restrictions and shall include: a. delay beyond the period agreed to by a trader in supply of

such goods or in providing the services which has led or is likely to lead to rise in the prices;

b. any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as condition precedent to buying, hiring or availing of other goods or services.:"


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6.3.7 Unfair Trade Practice

Unfair trade practice means a trade practice, which, for the purposes of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practices." The Act also lists out some of the practices as unfair trade practice, like misleading advertisements and making of false statements, permitting publication of any advertisement for the sale at a bargain price that are not intended to be offered for sale at bargain price, or permitting the offering of gifts and prizes with the intention of not providing them or with holding gifts/prizes after declaration of result of the scheme, or not conforming to prescribed standards or hoarding of goods or manufacturing of spurious goods.


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6.3.8 Defect A 'defect' is defined to mean any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained under any law or contract."

6.3.9 Deficiency It is defined to mean any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained under any law or contract."


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6.3:10 Person The expression 'person' for the purposes of the Act shall include: a. a firm· whether registered or not; b. a hindu undivided family; c. a co-operative society; d. every other association of persons whether registered

under the Societies Registration Act or not.

6.3.11 Consumer Dispute It means a dispute where the person against whom a complaint has been made, denies or disputes the allegations contained in the complaint."


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6.4 Manner of Making a Complaint

A complaint can be made by any complainant in relation to any goods sold, delivered or agreed to be sold or delivered or any service provided or agreed to be provided. Complaint shall be filed along with fees as prescribed. Fees prescribed is very nominal. Admissibility of the complaint shall ordinarily be decided within twenty one days of the receipt of complaint. A complaint may be proceeded with or rejected. However before rejection, an opportunity to be given to the complainant for hearing.


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6.5 Procedure on Admission of Complaint

If a complaint relates to any goods, a copy of the admitted complaint should be given to the opposite party within 21 days for him to give his version within thirty days. If the opposite party denies or disputes the complaint or fails or omits to take any action within the time given, (Initial 30 days and can be extended by 15 days) then the complaint shall be proceeded further. If the defect in goods needs analysis or testing by a laboratory, a sample of the goods shall be sent to the laboratory for a report within forty five days. The fees for the laboratory test shall be payable by the complainant. The report of the laboratory test is given to the opposite party. If any of the parties disputes the correctness of the laboratory test report, the objections to such report shall be made in writing. A reasonable opportunity of being heard shall be given regarding the objections made in relation to laboratory test. If the complaint relates to any services or in respect of goods where laboratory report is


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not required, then a copy of the complaint is referred to the opposite party directing him to give his version within a period of thirty days. This can be extended by fifteen days. If the opposite party does not file any reply .the complaint shall be decided exparte. If the opposite party, denies or disputes the allegations made in complaint, the matter will be decided on the basis of evidence adduced by the complainant and the opposite party. Every complaint shall be heard expeditiously and endeavour shall be made to decide the complaint within. three months when it does not require analysis or testing by any laboratory and within five months if it requires analysis or testing of commodities."


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6.6 Findings The following orders can be made by the consumer dispute redressal agency: a. to remove the defect - pointed out by the appropriate

laboratory from the goods in question; b. to replace the goods - with new goods of similar

description which shall be free from any defect; c. to return to the complainant the price - or, as the case

may be, the charges paid by the complainant; d. to pay compensation - to the consumer for any loss or

injury suffered due to the negligence of the opposite party. However the consumer disputes redressal agency shall have the power to grant punitive damages in such circumstances as it deems fit;

e. to remove the defects in goods or deficiencies in services - in question;

f. to discontinue the unfair trade practice or the restrictive trade practice - or not to repeat them; Business Law for Managers P.K. Goel


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g) not to offer hazardous goods for sale; h) to withdraw the hazardous goods - from being offered for

sale; i) to cease manufacture of hazardous goods - and to desist

from offering services which are hazardous in nature; j) to pay such sum - as may be determined by it, if it is of

the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable conveniently. However, the minimum amount of sum so payable shall not be less than five percent of the value of such defective gods sold or services provided as the case may be to such consumers. It may also provide that the amount so obtained shall be credited in favour of such person and utilized in such manner as may be prescribed;

k) to issue corrective advertisement - to neutralize the effect of misleading advertisement at the cost of the opposite party responsible for issuing such misleading advertisement;

l) to provide for adequate costs - to parties.'?


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6.7 Miscellaneous

The act also lays down provisions regarding the following; a. protection of action taken in good faith 13 b. power to make rules by the central government or by the

state governments.“ and laying of such rules before parliament/ state legislature."


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6.8 Some decisions of National Commission/Supreme Court

a. Doctors are within the purview of the Act.b. Government hospitals/health centres/dispensaries where services are

rendered free of charge to all the patients, the provisions of the Act do not apply. The Supreme Court did not agree with the contention that the expenses of running the said hospitals are met by appropriation from the Consolidated Fund which is raised from the taxes paid by the tax payers."?

c. Under the Act, damages are payable only if there is 'negligence' of the opposite party. IS Employees of Bank of Baroda, Calcutta, resorted to a strike, in opposition to a scheme of transfer of its employees. The striking employees created barricades by forming a human wall before the bank. The customers were prevented from entering the bank for 54 days. The customers had suffered losses, which included loss of interest. The Supreme Court ruled that the shortcoming in the service by bank did not arise due to failure on the part of bank in performing its duty or discharging its obligations as required by law." Business Law for Managers P.K. Goel


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d) Where the opposite party failed to file written objections within the time allied, it could not be denied the privilege of oral submissions before the Forums. The National Commission gave the reason that the opposite party should not be deprived of its natural and legal right to put forward its defence."

e) Provident fund subscribers are also consumers." f) Wearing of jewellery on body of person included in

luggage, being in his charge during travel in Railway. Gold chain snatched by miscreants while traveling in reserved compartment. It was held that there was deficiency in service on the part of Railways."

g) A Statutory Authority developing land or constructing a house, is like a builder or a contractor, if the service is defective, then it would be an unfair trade practice.“

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i) Nursing home had no proper arrangements to meet emergency and not properly equipped, it is deficient in service. When forceps delivery was done in haste which caused hemorrhage and no attempt was made to stop profuse bleeding, it was held that there was negligence and deficiency in medical care."

j) Deceased was insured under the Salary Savings Scheme from L.1.c. Employer failed to deduct the premium from the salary of the employee. As a result policy lapsed. It was held that the complainant (wife of the deceased) in entitled to claim the insurance amount from the employer Y

k) When there is a delay in delivery of motor vehicle and there is unauthorized escalation in price, consumer is not liable to pay."

l) Complainant applied for allotment of a flat under a scheme of Housing Board and made full payment. Possession of the flat was not given as per the scheme. The contention of the Housing Board that the scheme was given up due to unavoidable reasons and the option given to the complainant to opt for another scheme is not valid. It was held that there was a deficiency in service' on the part of the Housing Board."


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Chapter 6

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