Professionals and Consumer Protection Act, 1986

An Expert's View about Corporate Law in India

Posted on: 25 Mar 2010

This paper gives an overview of how the consumer protection act of 1986 is applicable to various professional services.

PROFESSIONALS AND CONSUMER PROTECTION ACT, 1986 ? Dr. Swati Mehta (Gold Medalist) 1. INTRODUCTION BY VIRTUE of its section 1 (4), the Consumer Protection Act 1986 (CPA) has been made applicable to "all goods and services." However, attempts by the consumer forums, envisaged and established under this Act, to bring various types of services within its ambit have met with considerable resistance. Despite strong and repeated protestations from some of the concerned sectors, (he issues concerning inclusion of services rendered by airlines, banks, housing boards, insurance companies, railways, roadways and telecommunications within the jurisdiction of CPA have been by and large settled now. It may also be appropriate to mention here that the attempts by the consumer forums to bring at least three types of services {i.e., housing, medical and educational services) within the fold of CPA had met with resistance to such an extent that in two cases {i.e., housing and medical profession) the matters went up to the Supreme Court for a final word and the third issue {i.e., educational services) is also likely to be debated there. Thus with the pronouncements of the apex court in Lucknow Development 1 2 Authority v. M.K. Gupta and in the case of Indian Medical Association v. V.P. Shantha the issues relating to the services rendered by the housing boards/societies/corporations and the ones rendered by the medical professionals respectively appear to have been ? Asstt. Professor, National Law University, Faculty of Law, Jodhpur (Raj.) 1 (1993)1 CTJ 929 (SC) 2 (1995)3 CTJ 969 (SC). settled. However, as far as applicability of CPA to the educational services is concerned, there 3 4 have been a large number of decisions ? both in favour as well as against their inclusion within the ambit of CPA ? which has given rise to a lot of controversy and speculation. Nevertheless, the inevitable conclusion is that till the final word on this issue 5 too comes from the Supreme Court, the matter will certainly remain in contention. Medical professionals are not the only ones being held liable for professional negligence under the Consumer Protection Act. The long arm of the law extends to almost everyone 6 who renders service for a fee- lawyers, architects, engineers, chartered accountants. 2. CONCEPT OF CONTRACT OF PERSONAL SERVICE UNDER CPA AND LIABILITY OF PROFESSIONALS It may be appropriate to mention here that whereas CPA has been made applicable to ?all 7 goods and services? two types of services have categorically been kept out of the purview of this Act. These are: 8 Services rendered free of charge; and 9 Services rendered under a contract of personal service. Whereas, there has hardly been any controversy with regard to the first term, the second term ?contract of personal service? has been vehemently debated before the consumer 3 See, e.g., Tilak Raj of Chandigarh v. Haryuna School Education Board, Bhiwani, 1 (1992) CPJ 76; Abel Pacheco Gracias v. Principal, Bharati Vidyapith College of Engineering, I (1992) CPJ 105; Controller of Examination, Board of Intermediate Examinations, Hyderabad v. Kandukuri Uma Devi, I (1993) CPJ 572; Mumbai Crahak Panchayat, Bombay v. Registrar, University of Bombay, I (1993) CPJ 37; and V. Murugesan v. Registrar, University of Madras. 1993 (1) CPR 190 4 See, e.g., Nirmal Taneja v. Calcutta District Forum, II (1992) CPJ 591; Seemu Bhatia v. Registrar, Rajusthan University, II (1992) CPJ 899; Registrar, Evaluation University of Karnataku v. Poornima G. Bhandari, (1994)2 CTJ 408 (NC); Kurukshetra University v. Viney Parkash Verma, (1994)2 CTJ 429 (NC); and Registrar, University of Madras v. Union of India. (1995) 3 CTJ 100 (HC). 5 For details, see, Gurjeet Singh, "Increasing Ambit and Amplitude of the Consumer Protection Act, 1986 ? A Case Study of its Applicability to Educational Services", I (9) CTJ 166-87 (Sept. 1993); and, "Applicability of the Consumer Protection Act, 1986 to Educational Services: Need for a Final Word from the Supreme Court of India", 3(5) CTJ 70-72 (May 1995). 6 Pushpa Girimaji, "All Professionals Come under CPA", The Times of India, p. 14. 22 Jan. 1996. 7 S. 1(4) 8 S. 2(1)(o) 9 Ibid 2 10 forums in a large number of cases. In the context of medical profession, for instance, the highest decision-making body under CPA ? the National Consumer Disputes Redressal Commission ? has observed that a ?contract of personal service? is the one 11 which involves a ?master and servant relationship? and which is wholly different from a 12 ?doctor-patient relationship.? Thus according to the National Commission, the service rendered by a medical doctor to his patients cannot be called as ?personal service? coming 13 within the exempted category mentioned in section 2(1 )(o) of CPA. The aforesaid issue was ultimately debated at length before the Supreme Court in the case 14 of Indian Medical Association v. V.P. Shantha. It was in this case that the Supreme Court had finally held that CPA was applicable to the medical profession in India. The Supreme Court had defined, distinguished and elaborately discussed the two allegedly controversial terms, i.e., ?contract for services? and ?contract of service? in this case and had observed: A ?contract for services? implies a contract whereby one party undertakes to render services e.g. professional or technical services, to or for another in the performance of which he is not subject to detailed direction and control but exercises professional or technical skill and uses his own knowledge and discretion.... A ?contract of service? implies relationship of master and servant and involves an obligation to obey orders in 15 the work to be performed and as to its mode and manner of performance. According to the Supreme Court, the parliamentary draftsman was aware of this well accepted distinction between ?contract of service? and ?contract for services? and that he had deliberately chosen the expression ?contract of service? instead of the expression ?contract for services? in the exclusionary part of the definition of ?service? in section 10 See, e.g., Motibai Dalvi Hospital v. M.I.Govilkar, 1991(1).CPR 334; Muppooyan v. Premavuthy Mango, 1991(2) CPR 460; Navaneethan v. Dr.Rathinasamy, 1992(1) CPR 41: A.C.Modagi v. Cross Well Tailor, II (1991) CPJ 586 (NC); and Cosmopolitan Hospitals v. Vasantha P. Nair, I (1992) CPJ 302 (NC). However, for a detailed discussion of these various other cases and the issues contested therein, see, Gurjeet Singh, "The Concept of 'Contract of Personal Service' Under the Consumer Protection Act, 1986", 2(3) CTJ 51-56 (March 1994). 11 See, Cosmopolitan Hospitals v. Vasantha P. Nair, id. at 310. 12 Ibid 13 Ibid. For a detailed analysis and comprehensive study of various cases, issues and arguments advanced for and against the inclusion of medical profession within the jurisdiction of the Consumer Protection Act 1986, see, Gurjeet Singh, "The Consumer Protection Act. 1986 and the Medical Profession in India: Conflicts and Controversies", 37 JILI 324-63 (1995). 14 Supra Note 2 15 Id. at 984 3 16 2(l)(o) of CPA. The Supreme Court had accordingly concluded: It is no doubt true that the relationship between a medical practitioner and a patient carries within it certain degree of mutual confidence and trust, and, therefore, the services rendered by the medical practitioner can be regarded as services of personal nature but since there is no relationship of master and servant between the doctor and the patient, the contract between the medical practitioner and the patient cannot be treated as a contract of personal service but is a contract for services and the service rendered by the medical practitioner to his patient under such a contract is not covered by the exclusionary part of 17 the definition of 'service' contained in section 2(l)(o) of the Act. With the aforesaid verdict of the Supreme Court, at least the controversy relating to the applicability of CPA to the medical profession in India appears to have been finally 18 19 settled, notwithstanding the views expressed in favour and against the verdict. All professionals ? Advocates, Architects, Chartered Accountants, Doctors, Engineers, Interior Decorators and others ? are covered under the Consumer Protection Act, 1986.... All the professionals are licenced and covered under respective laws of the land. So it does not mean that professionals are not liable for due compensation under the Consumer Protection Act for their ?negligence? and 20 ?deficiency? in service. He had further observed: It is no doubt true that the relationship between a professional man and a consumer carries with it certain degree of mutual confidence and trust, and therefore, the services rendered by a professional man can be regarded as service of personal nature but since there is no relationship of ?Master? and ?Servant? between the professional man and the consumer, the contract between them cannot be treated as ?contract of personal service? but it is ?contract for service? and the service rendered by a professional man to his customer or client under such a contract, is not covered by the exclusionary part of the definition for ?service?. 16 Ibid 17 Id. at 985. 18 See. e.g., Sheeraz Latif A. Khan, "Patient as Consumer", 2(2) CPJ 4-7 (June 1996) 19 See, e.g., C. Manickam and K.R.Mythili, "Medical Profession and the Consumer Protection Act in India". 1(2) CPJ 1-6 (Feb. 1997) 20 P.D. Dalmia, "Consumers Versus Professional". 1(4) CPJ 15 at 16 (Apr i l 1996). 4 Hence all professionals are answerable and covered under the Consumer Protection Act, 21 1986 which is unique piece of legislation. Another factor that contributed to the apathy of the advocates towards the consumers/litigants was a decision of the National Consumer Disputes Redressal 22 Commission in K. Rangaswamy v. Jaya Vittal which was pronounced as far back as in the year 1990. In this case, the Commission had categorically stated that the service offered by an advocate to a litigant was the one under the ?contract for personal service? and therefore could not be considered as the ?service? within the meaning of CPA. However, the Madras High Court has recently pronounced a landmark decision on the said issue which is completely opposed to the one pronounced by the National Commission. 3. CONSUMER PROTECTION ACT AND LEGAL PROFESSION IN INDIA Roscoe Pound defines professions as ?callings in which men pursue a learned art and are 23 united in the pursuit of it as a public service.? According to another scholar, Marshall, ?Professions are a select body of superior occupants where commercialisation cannot be tolerated and which are pursued not for pecuniary gains but out of a sense of duty to 24 serve society.? Service to individuals in a private relationship of trust between the practitioner and the client is inherent in the idea of professionalism. Thus a profession differs from business in that it is committed to public service and the earnings resulting 25 from such a service is only an incidental one. The lawyers? calling is a profession as it has all the ingredients of a profession namely, ? Collective organisation (the Bar); ? A spirit of service (a duty to the community often transcending the duty towards a particular client); 26 ? Learning and status. As a matter of fact, the profession of law has been characterised as ?noble profession? for 21 Ibid 22 I (1991) CPJ 685 (NC). 23 Roscoe Pound quoted in M.K. Ramesh, "Consumer Interest in Legal Profession: Problems and Perspectives", Cochin U L Rev 405 at 408 (1989) 24 T.H. Marshall quoted in M.K. Ramesh, ibid. 25 M. K. Ramesh, Ibid 26 Ibid 5 good reasons. A case is won or lost as a result of the ability or inability of the lawyer to cope and tackle with the situation successfully by bringing his ingenuity, ability, mental 27 resourcefulness, knowledge of law and advocacy to bear upon it. Though it may seem paradoxical, it is a hard fact that a noble profession like law which is expected to provide specialised services to its clients and champion their causes, is nowadays witnessing resentment amongst its consumers. For example, ever since the implementation of CPA, unlike a large number of cases which came up against the medical profession, though only a limited number of cases involving issues relating to the 28 legal profession have been filed before the consumer forums, this does not indicate a healthy trend. 29 Perhaps the first reported case on the issue was K. Rangaswamy v. Java Vittal. The complainant in this case had engaged the services of an advocate at Bangalore for conducting a civil writ petition before the Karnataka High Court by paying a consolidated fee of Rs.2500. The complainant allegedly paid Rs.2000 to the advocate through two cheques. When the said writ petition came up for hearing, it was passed over to the next day on account of the absence of the respondent's counsel. The said case was not reached on the next date, too. In the meanwhile, the respondent demanded Rs.3000 more but the complainant expressed his inability to pay the said amount. The respondent failed to appear on behalf of the complainant on the day of the next hearing and the case of the complainant was accordingly dismissed. On being informed about the dismissal of the writ petition, the respondent advised the complainant to file an appeal before the Supreme Court and also promised to help the 27 Gurjeet Singh, "Some Observations on the Art of Advocacy", 2(3) LJ Guru Nanak Dev U 57 (July 1984) 28 As far as the reported case law on consumer protection is concerned, a survey of three leading Indian Consumer Law Reporters, i.e., Consumer Protection Judgements, Consumer Protection Reporter, and Consumer Protection and Trade Practices Journal from 1991-96, has enabled us to find only the following cases on the subject. These are: K. Rangaswamy v. Java Vittal, supra note 21, Kankati Annapurnamina v. A.P. State Legal Aid & Advice Board. (1991) (1) CPR 418 (NC); S.P. Thirumala Rao v. Bar Council of India, II (1991) CP.1 201: Niranjan Pandhi v. District Magistrate, II (1992) CPJ 883; S. Mahendran v. Chirayinkil C.P. Bhadrakumar. 1992 (2) CPR 668; R. Sathyanarayan v. Registrar. Supreme Court of India, I (1993) CPJ 279: B. Bakshappa v. Registrar General, High Court of Karnataka, I (1993) CPJ 359; State of Gujarat v. Akhil Bharatiya Grahak Panchayat, II (1993) CPJ 816; Kaniyalal Jethalal Pujara v. J.N. Seth, Advocate, III (1993) CPJ 1270; P.N. Rangaswamy v. Rupert J. Barnabas, III (1993) CPJ 1258; Akhil Bharatiya Grahak Panchayat v. State of Gujarat, I (1994) CPJ 114 (NC); Santilata Panda v. Krushna Chandra Dehuri, III (1994) CPJ 397; and Kumaran Apartments Owners Association v. Civil Rights Cell. 1994(3) CPR 491. 29 Ibid 6 complainant by entrusting his appeal to some of his friends at New Delhi on the payment of a fee of Rs. 10,000. The complainant however spurned his offer and instead filed a complaint against the respondent for his professional misconduct. Thus the main issue involved in this case was whether the services rendered by an advocate to a litigant for a fee was a ?contract of personal service?? The National Consumer Disputes Redressal Commission answered the question in the affirmative and held that the service offered by the respondent to the complainant was one under the ?contract of personal service? and therefore could not be considered as ?service? within the meaning of CPA. According to the Commission, the complainant was not a consumer within the meaning of section 2(d) of CPA and the dispute between him and the respondent could not be termed as a 30 ?consumer dispute?. The above issue has, once again, been vehemently contested in Srimathi v. Union of 31 India ? a recent case decided by the Madras High Court. In this case, the court held that the consumer forums have got the necessary jurisdiction to deal with the claims- against the advocates. The decision in this case has given rise to another controversy and that concerns the applicability of CPA to the legal profession in India. The Madras High Court in this case was dealing with a bunch of writ petitions which had been filed by the practicing advocates against whom claims had been filed by certain persons in the respective cases before the consumer disputes redressal forums. The common question raised in these writ petitions was regarding the validity of section 3 of CPA and a prayer was made in all the writ petitions for a declaration that section 3 of the Act was unconstitutional being opposed to the objects of the said Act. It may be mentioned here that section 3 of the Act lays down that this Act is ?in addition to and not in derogation of the provisions of any other law for the time being in force.? According to the petitioners, if section 3 was struck down as unconstitutional, it would not be possible for any person to drag the advocates before the consumer forums as the claim will be outside the scope of the said Act. It was further submitted that in a proceeding before the consumer forum, no court fee is payable and that it may be possible for any person to file a frivolous action against the advocate in that forum and 30 Id at 687. 31 (1997) 5 CTJ 99 7 even if that persons fails ultimately, he would lose nothing. However, on the other hand, if the advocate concerned wanted to file a claim for damages, it could not be filed without the payment of the court fee by him in the civil court. According to the petitioners, such provisions could cause ?undue hardship and place the advocate in a hazardous situation 32 thereby making his profession worthless?. The Madras High Court, after referring to the statement of the objects and reasons of CPA rejected the petitioners' contentions. The court held: We are unable to find anything in the Statement of Objects and Reasons which runs counter to the provisions of section 3 of the Act. What all section 3 of the Act says is that the provisions of the Act shall be in addition to and not in derogation of the provisions of any other law. In other words, the Act does not have the effect of overriding other enact- ments with reference to matters dealt with in the Act. The section only provides that it will be open to any person to claim the benefits of this Act and also avail himself of the provisions of other enactments if there is no inconsistency of conflict and if he is not 33 barred otherwise, by any other principles of law, like estoppel or election. With regard to the contention that once section 3 was declared unconstitutional, no person could institute any proceeding before the consumer forums, the High Court held that even if the section was declared to be unconstitutional, ?the other sections of the Act will continue to be intact and if the services of the advocate fall within the definition of service under Section 2(o) of the Act, then it will certainly be open to a client to proceed 34 against the advocate before the Consumer Redressal Forum.? The court further observed that the object of the petitioners to exclude the advocates from the purview of the consumer redressal forum could not be achieved by the grant of the prayer made in the writ petitions, namely, to declare section 3 of the Act as 35 unconstitutional. Another argument put forward by the petitioners was that they were governed by the provisions of the Indian Advocates Act and that they shall not be made to answer the claims under CPA. It may be appropriate to mention here that an exactly similar plea was 32 Id at 100 33 Id at 101 34 Ibid 35 Ibid 8 taken by the medical professionals before the Supreme Court in the case of Indian 36 Medical Association v. V.P. Shantha. However, while rejecting their plea, the apex court had categorically held: The fact that medical practitioners belong to the medical profession and are subject to the disciplinary control of the Medical Council of India and/ or State Medical Councils constituted under the provisions of the Indian Medical Council Act would not exclude the 37 services rendered by them from the ambit of the Act. In raising the contention that the advocates were governed by the Indian Advocates Act, the petitioners placed reliance on the decision in the case of Nathamal Ashok Kumar v. 38 Western Railway. The main issue involved in that case was whether a complaint filed before the consumer forum under section 12 read with section 17(1 )(a) of CPA was barred by the provisions of section 15 of the Railway Claims Tribunal Act 1987. Section 15 of the 1987 Act bars the jurisdiction of any court or other authority in relation to the matters referred to in sub-section 1 of section 13 of that Act. According to the Rajasthan State Commission, the claim made before the said forum fell within the scope of section 13 and consequently the bar under section 15 of the said Act would apply. Hence it was held that the proceedings before the forum were not maintainable, inasmuch as, they were 39 banned by section 15 of the Railway Claims Tribunal Act. The Madras High Court, however, rejected this contention, too. On this issue, the court held: The ruling cannot help the petitioners herein as it is a question of interpretation of the relevant provisions of the Act. It is seen that there is a specific section in the Railway Claims Tribunal Act barring the jurisdiction of other courts and authorities. But, there is no such provision in the Advocates Act to bar the jurisdiction of other courts and authorities or Tribunals in relation to matters connected with the advocates or disputes arising between the clients and their advocates. Section 6 of the Advocates Act sets out the functions of State Bar Council. There is no provision in the Advocates Act to enable the Bar Council to deal with the dispute between the client and the advocate if the clients 36 Supra note 2. 37 Id at 989-90 38 1 (1991) CPJ 618 39 Id at 620 9 seek a remedy of damages or refund of money paid to the advocates or sums on monetary claim. The Bar Council can deal with only disciplinary matters and consider whether the advocate is guilty of misconduct which will fall under Section 6(1) of the Advocates Act. Hence, there is no substance in the contention that the Advocates Act will prevail over the Consumer Protection Act and Consumer Redressal Forum will have no jurisdiction to 40 deal with claims against the advocates. The Madras High Court also rejected the argument that an advocate will have to pay court fee if he wanted to proceed against his client for damages or other remedies, whereas the client did not require to pay the court fee if he went before the consumer redressal forum. According to the High Court, that could not in any way invalidate the provisions of CPA. The petitioners finally argued that a client, who engaged an advocate for professional services, was not a ?consumer? under section 2(1) (d) of CPA. This contention was also rejected by the High Court. The court held that the language of the said section was very wide and that it used the expression ?avails of any service for a consideration?. Thus according to the court, ?that will not certainly exclude the services rendered by an 41 advocate.? The High Court referred to the definition of the term ?service? as given in section 2(1) (d) of CPA. A reference was also made to a landmark decision of the 42 Supreme Court, that is the case of Lucknow Development Authority v. M.K. Gupta. In the said case, for instance, the Supreme Court, while referring to the word ?service? had made the following observations: The term has a variety of meanings. It may mean any benefit or any act resulting in promoting interest or happiness. It may be contractual, professional, public, domestic, 43 legal, statutory, etc. The concept of service is very wide. Thus, the Madras High Court rejected all arguments of the petitioners and dismissed all the writ petitions. According to the court, the consumer disputes redressal forums had the necessary jurisdiction to deal with the claims against advocates. Referring to the definition of the term ?service? in CPA the court observed that, ?the first part of the 40 Supra note 32 at 101 41 Id at 102 42 Supra Note 1 43 .Id at 935 10 section makes it clear that services of any description will fall within the scope of the 44 45 section? and ?this will undoubtedly include the service of lawyer to his client.? IMPLICATIONS AND CONCLUSION According to the consumer protagonists, and rightly so, the recent ruling of the Madras High Court has spelled out what was ?already an accepted proposition that services of 46 advocates were covered under the Consumer Protection Act.? As a matter of fact, there is hardly any need for repeating the arguments put forward by the advocates for keeping them outside the jurisdiction of CPA for there appears to be no real substance in those arguments. Nevertheless one important point which deserves mention here is that there are now two inherently contradictory decisions involving exactly the same issue, that is, the applicability of CPA to the legal profession. It may be recapitulated here that whereas the National Commission in K. Rangaswamy v. 47 Jaya Vittal had held that advocates were not governed by the provisions of CPA and that the dispute between an advocate and consumer did not constitute a ?consumer 48 dispute?, the Madras High Court in its decision in Srimathi v. Union of India has held the opposite. Once again, this issue too is likely to be debated before the Supreme Court. Therefore, till the final word comes from the apex court, the matter shall remain in contention. Till then, one thing is clear, and that is with the aforesaid thought provoking decision by the Madras High Court holding that advocates were within the jurisdiction of CPA no professional now seems to be outside its purview. While concluding the discussion, once again it may be argued that with the implementation of CPA and as a result of some of the far reaching decisions pronounced 44 Supra Note 32 at 102 45 Ibid 46 Rosy Kumar, ?Advocates and the Consumer Protection Act?, 5(2) CTJ. 29-30 at 30 (Feb. 1997). Also see, Rajesh Gupta and Gunjan Gupta, ?Pervertive Professional and Perturbed Consumer: Dr. Subramanian's Case ? A Critique?, 2(4). CPJ 33-44 (Aug. 1994). In this article, the learned authors who are themselves practising advocates, while expressing their viewpoint on legal services have argued that ?although judiciary being sovereign function of the state is outside the ambit of the Act, Advocates are not.? (Id at 37). Similar opinion has been expressed by another scholar who finds "no reason why lawyers should be excluded from the Act despite the fact that they like doctors are professionals and are subject to the disciplinary control of the State Bar Council and the Bar Council of India." According to the learned author, a leading Indian advocate, Soli J. Sorabjee also feels the same. The author further laments that the "catalogue of grievances against lawyers, about high charges, negligence by which the claims get barred by limitation and incompetent advice, is formidable." 47 Supra Note 21 48 Supra Note 32 11 by the consumer disputes redressal forums, there is a clear message for accountability on the part of every segment of society in general and that of the professionals in particular. Irrespective of the nature and style of their job and duties, they would now have to be accountable and answerable to the society in general and to the consumers who engage them in particular. In summing up, a consumer activist has rightly observed: Medical professionals are not the only ones being held liable for professional negligence under the Consumer Protection Act. The long arm of the law extends to almost everyone 49 who renders service for a fee- lawyers, architects, engineers, chartered accountants. Therefore, the inevitable conclusion of the above discussion is that if used properly, CPA which is a benevolent, beneficial and indeed a consumer friendly legislation, can definitely ensure accountability in almost every profession. What is required is the necessary awareness amongst consumers about their rights and above all their willingness to assert for these rights as well as the determination and confidence to expose the negligent and insensitive professionals. 49 Pushpa Girimaji, "All Professionals Come under CPA", The Times of India, p. 14. 22 Jan. 1996. 12
Posted: 25 March 2010

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