Consumer Protection , the Path Covered & Journey Forward

An Expert's View about Corporate Law in India

Posted on: 31 Mar 2010

This paper gives overview of the transition of interpretation of consumer protection law in India.

CONSUMER PROTECTION IN INDIA: THE PATH COVERED AND THE JOURNEY FORWARD Dr. Swati Mehta* INTRODUCTION: The definition of the term 'consumer' given in clause (d) of section 2(1) of the Act is comprehensive one so as to cover not only consumer of goods but also consumer of 1 services . The definition is wide enough to include in 'consumer' that only the person who buys any goods for consideration but also any uses of such goods with the approval of the buyer. Similarly, it covers any person who hires or avails of any services for consideration and also includes any beneficiary of such services, when availed with the approval of the hirer. Thus, any user of goods or any beneficiary of services, other than the actual buyer or hirer, is a consumer for the purpose of the Act and he is competent to make a complaint before the Consumer Disputes Redressal Forums under the Act. The Act aims to protect the economic interest of a consumer as understood in commercial sense as a purchaser of goods and in the larger sense 2 of user and service. The important characteristic of 'goods' and ?service? under the Act is that such goods are supplied at a price to cover the costs, which 3 consequently result in profit or income to the seller of goods or provider of service . 4 It includes anyone who consumes goods or services at the end of the chain of production. THE CONSUMER AS A USER OF GOODS: The definition of 'consumer' given in the Act makes it clear that it includes not only the person who buys any goods for consideration but also any user of such goods when such use is made with the approval of the buyer. This was necessary                                                              * Assistant Professor, Faculty of Law, National Law University, Jodhpur 1 In Oxford Dictionary, a consumer is defined as ?a purchaser of goods or services?. In Black?s Law Dictionary, it is explained to mean ?one who consumes, individuals, who consumes, individuals who purchase, use, maintain, and dispose of products and services?. A member of that broad class of people who are affected by pricing politics, financing practices, quality of goods and services, credit reporting, debt collection and other trade practices for which state and federal consumer protection laws are enacted. 2 Lucknow Development Authority v. M.K. Gupta (1994) 1 CPR 469 (SC). 3 Ibid. 4 Morgan Stanley Mutual Fund v. Kartick Das & Others, (1994) CPJ 7 (SC). because the goods purchased by a buyer are most likely to be used by his family members, relatives, and friends. Under the general principles of the law of contract, such users of goods are not entitled to sue the supplier or trader of such goods on the ground of 'privity of contract'. The rule of 'privity of contract' provides that only 5 parties to the contract can sue and not a stranger . Thus a third person who is not a party to the contract cannot sue. But now under the provisions of the Consumer Protection Act, any user of goods with the approval of the buyer may make a complaint even though he is not a party to the contract for purchase of those goods. There are two types of consumers as envisioned under the said Act namely, 1. Consumer Of Goods 2. Consumer Of Services I. Consumer Of Goods Under sub-clause (i) of section 2 (i)(d) a consumer for the purpose of goods 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 (b) includes any user of such goods other than the person who buys them, when such use is made with the approval of the buyer, but (c) does not include a person who obtains such goods for resale or for any commercial purpose. [Commercial purpose does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood by means of self- employment.] The above provision reveals that a person claiming himself as 'consumer' should satisfy that -                                                              5 Avtar Singh , Law of Contract (1985) pp 68 -77 (1) There must be a sale transaction between the seller and the buyer (2) The sale must be of goods (3) The buying of goods must be for consideration (4) The consideration has been paid or promised or partly paid and partly promised or under any system of deferred payment. (5) The user of the goods may also be a consumer when such use is made with the approval of the buyer. However, the term 'consumer' does not include a person who obtains any goods for resale or for any commercial purpose. It is obvious that the parliament intended to restrict the benefits of the Act to ordinary consumers purchasing goods either for their own consumption or even for use in some small venture which may have embarked upon in order to make a living as distinct from large scale manufacturing or processing activity carried on for profit. Persons buying goods either for resale or for use in a large-scale profit making activity will not be 'consumers' entitled under the Act. II. Consumer of Services The second category of consumer laid down under the Act is that of hirer or user of services. Under sub-clause (ii) of section 2 (1)(d) of the Act, a consumer for the purpose of services means any person, who- (a) Hires or avails of any services for consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment. (b) includes any beneficiary of such services other than the person who hirer or avails of them, when such services are availed of with the approval of the hirer, but (c) does not include a person who avails of such services for any commercial purpose. Commercial purpose does not include a person of services availed by him exclusively for the purpose of earning his livelihood by means of self-employment. The Consumer Protection (Amendment) Act, 2002 has excluded from the definition of 'consumer' any person who avails of services for commercial purpose. The commercial undertakings which are already excluded from approaching the redressal agencies in respect of defective goods will thus be excluded from seeking relief from such agencies in respect of deficient services as well. THE POSITION OF THE CONSUMER UNDER COMMON LAW The fundamental relation between buyer and seller, however, was and to some extent remains that which is implied in the common law maxim- caveat emptor (" let the buyer beware") according to which the onus is placed on the buyer to protect his own interest by insuring that what he purchases is of sufficient quality to meet his needs. This doctrine, which has been progressively modified in the interests of the consumer to the extent that the law is governed more by the exceptions than by the rule itself, accorded well with the principle of laissez -faire capitalism that the buyer is served best by free competition between sellers. Certain changes that have occurred over the past century in the nature of industrial corporations and in the types of products available to the consumer have rendered this assumption invalid. 1. First may be cited the growth of large corporations, exerting monopoly influences, i.e. setting prices and standards of quality for a particular product, so that the consumer is no longer afforded the opportunity to choose among effectively competing suppliers. Such corporations do not have to control a product's entire market, which may infact be divided among several suppliers who offer the consumer products so similar in terms of price and quality that effective choice is impossible. Sometimes the impression of competition may be created by heavy advertising of ?competing" brands or makes. Such a situation, known to economists as one of oligopoly, has often been typical of the markets for detergents and automobiles. 2. A second factor that has weakened the effectiveness of the consumer in protecting his own interests by rational choice among competing alternatives is the complexity of the products that modern technology has made available. There is, for example, little basis on which the consumer can decide between the merits of two different televisions sets, vacuum cleaners, or patent drugs without as mass of technical information, which he would probably be unable to evaluate even if it were given to him. 3. A third factor that is commonly alleged to have eroded the consumer's capacity to choose effectively in his own best interest is his increasing exposure to advertising and to new sales techniques. Advertising, it is argued, is predominantly persuasive rather than informative, serves to create demand for products that are unneeded, and often exploits the hidden fears, insecurities and prejudices of the consumer. Further, modern sales methods ranging from so- called "introductory offers", "free gifts" and trading stamps to the "high pressure" techniques practiced by door-to-door salesmen, are alleged to subject the consumer to an unjustified degree of influence. THE DOCTERINE OF CAVEAT EMPTOR: In the present economic and social scenario the subject of consumer protection is of vital in one form or the other. The consumers do not constitute a separate class. Everybody is 6 included. Everyone is a consumer, the young and old, the rich and poor, workers and ilders . The last two decades have witnessed an over expanding interest in CONSUMERISM. One 7 can see a wave of awakening and an upsurge of enthusiasm for the rights of consumers . Although various scientific and technological developments have brought about perceptible socio-economic changes, the consumer's control over the market mechanism has gradually diminished .His suzerainty in choice of goods and services has been greatly eroded by various forms of unfair monopolistic and deceptive trade practices. The CAVEAT EMPTOR- 'let the buyer beware' doctrine of the law concerning the sale of goods, assumed concerning the sale of goods, assumed that the consumer was responsible for protecting himself and would do so by applying his intelligence and experience in negotiating                                                              6 Reid on 'Consumer and the Market', 1947 pp 87 7 'Consumer Protection Law' article by P.M. Bakshi, Member Law Commission of India, circulated to the trainees at JTRI, (U.P.) See Peter Smi th pp. 8-9. 8the terms of any purchase. That principle may have been appropriate for transaction conducted in village markets. In early times, the consumer may have been able to protect himself since the products were less sophisticated and could be inspected before purchase. But now the conditions have changed. Many modern goods are technological mysteries. The consumer knows little or nothing about these highly sophisticated goods. In real life, products are complex and of great variety and consumers and retailers have imperfect knowledge. The principle of 'caveat emptor', thus, has ceased to be appropriate as a general rule. The consumers need protection by law when goods fail to live upto their promises or indeed cause 9 injury . In recent year, there has been an increasing public concern over the consumer protection issues all over the world. Taking into account the interest and needs of consumers in all countries particularly those in developing countries, the consumers' protection measures should essentially be concerned with- (1) the protection from hazards to health and safety (2) the promoting and protection of economic interests. (3) access to adequate information (4) control on misleading advertisements and deceptive representation. (4) Consumer education 10 (5) Effective consumer redress The consumer deserves to get what he pays for in real quantity and true quality. In every society, consumer remains the centre of gravity of all business and industrial activity. He 11 needs protection from the manufacturer, producer, supplier, wholesaler and retailer . The consumer policy is no longer being viewed solely at the national level. Since the world economy has become so interdependent, national consumer protection policies have now 12 acquired international dimensions . This is mostly due to the international character of                                                              8 See Peter Smith & Dennio Swann ? Protecting the Consumer -- An Economic and Legal Analysis (1979), pp 8-9. 9 Ibid. 10 United Nations, General Assembly ? Consumer Protection ? (Resolution No. 39/248, dated 9-4-1985 para 3) 11 Morgan Stanley Mutual Fund v. Kartick Das, (1994) 4 SCC 225. 12 Economic and Social Council -- International Co-operation and Co-ordination with in the United Nations business practices, in that the marketing of goods and services is often done on a multinational basis, and, in many cases, by transnational corporations and also to the fact that 13 problems encountered by consumers are often not exclusive to any one country. CONSUMER SAFEGAURD MECHANISMS IN INDIA: Section 9 of the Consumer Protection Act, 1986 deals with the establishment of three -tier Consumer Disputes Redressal Redressal Agencies, namely: - 1. The District Forum 2. The State Commission; and 3. The National Consumer Disputes Redressal Commission Sections 10, 16 and 20 of the Consumer Protection Act, 1986 deal with composition of the District Forum, the State Commission and the National Commission respectively; while sections 11, 17 and 21 of the Act lay down the jurisdiction of the Consumer Disputes Redressal Agencies as under: - (a) The District Forum - to ascertain complaints where the value of the goods or services and the compensation, if any, claimed does not exceed rupees twenty lacs. (b) The State Commission ? (i) To entertain complaints where the value of the goods or services and compensation, if any, claimed exceeds rupees twenty lacs but does not exceed rupees one crores. (ii) To entertain appeals against the orders of any District Forum within the State; and (iii)To 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, where it appears to the State Commission that such District Forum has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so                                                                                                                                                                                          System ? Consumer Protection ? Report of the Secretary General (27/5/1983), pp 5. 13 Ibid. vested or has acted in exercise of its jurisdiction illegally or with material irregularity. (c) The National Commission ? (i) To entertain complaints where the value of the Goods or services and compensation, if any, claimed exceeds rupees one crores. (ii) To entertain appeals against the orders of any State Commission; and (iii) To call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested in it by law ,or has failed to exercise a jurisdiction so vested ,or has acted in exercise of its jurisdiction illegally or with material irregularity. PROCEDURE AND RELIEFS AVAILABLE UNDER THE ACT: The manner in which complaint is to be made, the procedure on receipt of complaint and the reliefs that can be granted by the District Forum and the State Commission are incorporated in sections 12 to 14 and 18 of the Act, while the procedure to be adopted by the National Commission is given in section 22 of the Consumer Protection Act, 1986 read with the rules 14 and 15 of the Consumer Protection Rules, 1987. The following reliefs can be granted by the Consumer Disputes Redressal Agencies: - (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 such amount as may be awarded by its as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party; (e) to remove the defects or deficiencies in the services in question; (f) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them; (g) no to offer the hazardous goods from being offered for sale; (h) to withdraw the hazardous goods from being offered for sale; (i) to provide for adequate costs to parties The District Forums and the State Commissions are to be appointed by the State Governments and in every State they have been appointed. They National Commission is to be established by the Central Government by notification in the Gazette of India and consequently the National Commission has been established by the Central Government vide th notification dated 17 August 1988. By virtue of section 23 of the Consumer Protection Act, 1986 an appeal against the order of the National Commission lies to the Supreme Court of India. The Consumer Protection Act, 1986 is intended to protect the legitimate interests of consumers against traders, suppliers, etc. The Consumer Forums have to protect the interests of consumers and would be within their rights if any deficiency in service is noticed from the facts disclosed in the complaint sent by them but which the consumer had failed to formulate and articulate in the complaint. The Consumer Forums are bound only to observe principles of natural justice and, therefore, when they take cognizance of any deficiency in service or unjust reduction in the amount payable to the complaint suo motto on the basis of facts disclosed, full opportunity must necessarily be given to the opposite party to justify and defend its action. Under the Consumer Protection Act, 1986 engagement of lawyers by the complainant is not a must for pleading their cases before the Consumer Forums. On the other hand a petty consumer may be illiterate or ignorant. This makes it all the more necessary for the forums to determine, on the basis of the facts disclosed in the petitions and in the proceedings before them, whether the complainant has been wrongfully denied the amount which becomes payable to him for the alleged defective goods and deficiency in service. Any person aggrieved by an order made by the District Forum may prefer an appeal to the State Commission within thirty days of the order under section 15 of the Act; and any person aggrieved by an order made by the State Commission in exercise of its power may prefer an appeal against such order to the National Commission within a period of thirty days from the date of order as per provision of section 19 of the Act; while any person aggrieved by an order made by the National Commission may prefer an appeal against such order to the Supreme Court within a period of thirty days from the date of order as per provision of section 23 of the Consumer Protection Act, 1986. Under section 24 of the Act every order of a District Forum, State Commission or the National Commission shall, if no appeal has been preferred against such order under the above provisions of this Act, be final. Therefore no civil court can entertain or try any suit against any order passed by these consumer disputes redressal agencies. Section 25 of the Act provides that every order made by the District Forum, the State Commission or the National Commission may be preferred by the District Forum, the State Commission or the National Commission, as the case may be, in the same manner as if it were a decree or order by a Court in a suit pending therein and it shall be lawful for the District Forum, the State Commission or the National Commission to send, in the event of its inability to execute it, such order to the Court within the local limits of whose jurisdiction - (a) in the case of an order against a company , the registered office of the company is situated, or (b) in the case of an order against any other person, the place where the person concerned voluntarily resides a carries on business or personally works for gain is situated, and thereupon, the Court to which the order is sent, shall execute the order as if it were a decree or order sent to it for execution. The object of the Consumer Protection Act, 1986 to provide speedy, simple and inexpensive redressal of consumer disputes has, therefore, been accomplished by the established of three-tier system for the redressal of grievances under the Act. MECHANISUMS OF PUBLIC INTERSET PROTECTION IN CONSUMER INTEREST: The preamble to the Constitution of India has incorporated that - "We, the People of India, having solemnly resolved to constitute India into a Sovereign Socialist Secular Democratic Republic and to secure to all its citizens: Justice, social, economic and political ??". Access to justice is recognized as one of the most important basic human rights today and it is very difficult, if not impossible, to realize most of the human rights without access to justice. Rule of law is the soul of every civilized society. Law is a command or an order and can be better described as the language of the State. Law has the same relationship to the State as the language has to the society. Rule of Law is the common way of life in a civilized society. However, with the passage of time rule of law is being used not only to maintain order and to protect individual interests but is also used to protect the interests of the society and the public at large to fulfill the ideals of the modern welfare state. The interpretation of the law is the function of judiciary in a democracy like ours and the main concern of administration of justice is protection of the rights of the people for the well being of its subjects. In a society where a consumer is generally made victim of the unfair trade practices by the well - organized sector of the traders and businessmen and as such the illiterate, ignorant and financially weak consumer is to fight against the powerful lobby of businessmen, the public interest litigation is the only answer to protect the interests of the consumers. The vast expansion of trade and industry and increase in the services available to the consumers like banking, electricity, entertainment financing, insurance, transport, water supply led to more and more exploitation of the consumers. The filing of a suit for a recovery of damages for defects in the goods or deficiency in services was not only cumbersome and time consuming process but the court fees was required to be paid on each such suit at the time of filing of the suit which had been discouraging the consumers to approach the civil courts in India for recovery of damages under law of torts for such defects in goods or deficiencies in the services. In the absence of public interest litigation by group or class action, the poor unorganized consumers are not only cheated and defrauded, by a number of organized unscrupulous traders and public undertakings who want to make easy money by taking advantage of the ignorance and inactiveness of such consumer; but are exploited to such an extent that these consumers get almost nothing in comparison to money they pay for the purchase of such goods and services in the market. The public interest litigation is finding acceptance in INDIA mainly due to the apathy of the administration and the government owned corporations towards the difficulties of the common people and for the welfare of the public interest. The PIL includes the litigation by a group of persons or a social organization for the benefit of the general public, as well as taking of action by the Courts of law on receipt of a letter by post or a newspaper report where a large number of people are suffering from a common harm although the writer is not one of such persons thereby enlarging the locus standi rule. The proceedings in a public interest litigation are intended to vindicate and effectuate the public interest by prevention of violation of the rights, constitutional or statutory, of sizeable segments of society, which owing to poverty, ignorance, social and economic disadvantages cannot themselves assert and quite often not even aware of those rights. The technique of public interest litigation serves to provide an effective remedy to enforce these group rights and interest? Therefore, in public interest litigation; the petitioner has no legal right to withdraw the litigation without the court's permission. The public interest litigation is finding acceptance in this country mainly due to the apathy of the administration and the government owned corporations towards the difficulties of the common people and for the welfare of the public interest. The public interest litigation includes the litigation by a group of persons or a social organization for the benefit of the general public, as well as taking of action by the courts of law on receipt of a letter by post or a newspaper report where a large number of people are suffering from a common harm although the writer is not one of such persons thereby enlarging the locus standi rule. The proceedings in a public interest litigation as intended to vindicate and effectuate the public interest by prevention of violation of the rights, constitutional or statutory, of sizeable segments of society, which owing to poverty, ignorance, social and economic disadvantages cannot themselves assert and quite often not even aware of those rights. The principle of public interest litigation or social action litigation has been incorporated in the Consumer Protection At, 1986 and to get redress from an unfair trade practices or restrictive trade practice adopted by any trader, or that the goods bought suffer from one or more defects; or that the services hired or availed of or agreed to be hired or availed of suffer from deficiency of that the trader has charged excess price; or that goods which are hazardous to life and safety when used, are being offered for sale to the public in contravention of any law for the time being in force ; a complaint under the Act , as per section 12 of the Consumer Protection Act, can be filed by any one of the following :- (a) the consumer to whom such goods are sold or delivered or agreed to be sold or delivered or such service provided or agreed to be provided. (b) any recognized consumer association whether the consumer to whom the goods sold or delivered or agreed to be sold or delivered or service provided is a member of such association or not; (c) one or more consumers, where there are numerous consumers having the same interest, with the permission of the District Forum, on behalf of, or for the benefit of, all consumers so interested; or (d) the Central of the State Government PENALTIES UNDER THE ACT: Section 27 of the Consumer Protection Act provides that where a trader or a person against whom a complaint is made or the complainant fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission , as the case may be, such trader or person or complainant shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years , or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees, or with both: Provided that the District Forum, the State Commission or the National Commission, as the case may be, may, if it is satisfied that the circumstances of any case so require, impose a sentence of imprisonment or fine, or both, for a term lesser than the minimum term and the amount lesser than the minimum amount, specified in this section. CONCLUSION AND SUGGESTIONS There is a need to create voluntary protection councils on the pattern of public complaints boards like those established in the Scandinavian Countries. The Central Government and the State Governments can also file complaints under the Act. However, the need of the hour is that the voluntary organizations of business and industry like Federation of Indian Chamber of Commerce and Industries (FICCI) should adopt self -regulatory measures to protect the consumers so that the goods which will be hazardous to life and safety of consumers when used, and other dangerous and injurious articles are not produced and marketed in the country because we should not forget that each one of us including the owners and the workers of these industries are basically consumers . The consumer protection cells should also be created in the public utility corporations providing consumer services like telephones, water, electricity, transport and television to solve petty complaints of the consumers. Therefore, it can be said that to encourage public interest litigation in the area of consumer disputes, sufficient protection has been made available to the consumers, the class of consumers and the registered consumers associations under the Consumer Protection Act, 1986 and these associations are now required to act judiciously, patiently and with restraint to create confidence in the public to protect the interests of the consumers. The concept of the public interest litigation has been incorporated under the Consumer Protection Act, 1986 by making provision that a complaint under the Act can be made to the District Forum, the State Commission or the National Commission; as the case may be, by registered post and without paying any court fee. The making of the complaint as well as filing of the appeals by registered post is a significant departure from the earlier procedural law to encourage the public interest litigation in the field of consumer protection. Under Rule 14 of the Consumer Protection Rules, 1987 a complaint shall be presented by the complainant in person or by his agent to the National Commission or be sent by registered post addressed to the National Commission. Similarly under Rule 15 of the Consumer Protection Rules, 1987 the memorandum of appeal or be sent by registered post addressed to the Commission. Similar provisions for filing of complaint by post before the District Forum and the State Commission Protection Rules may and should be framed by various state governments.  
Posted: 31 March 2010

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