Caveat Venditor!

(Analysis of the Consumer Protection Act, 2019)

by Adv. Advait U. Shukla (Advocate Bom HC) and Adv. Aditi K. Rajput (Junior Asso., Abhay Nevagi Associates)

INTRODUCTION

On 15th July, 2020, The Ministry of Consumer Affairs, Food and Public Distribution, appointed 20th July 2020 as the date, on which substantial part of the Consumer Protection Act, 2019 (hereinafter “The 2019 Act”) will come into force. After a journey of three decades, the antiquated Act of 1986 which failed to cope with the fast-changing world of ever-growing markets, direct-selling platforms and e-commerce has finally been repealed. The Consumer Protection Act,1986 (hereinafter “The Old Act”) which was passed after the UN General Assemblies adoption of Guidelines for Consumer protection in 1985, was surely a welcome change, however along with the modifications in the UN guidelines the Old Act failed to update itself, and as a result of the same in 2019 pendency of cases reached its peak. When the 2019 Bill was introduced in the Parliament, the National Commission had 20,304 cases pending before it, the State Commissions all over India had around 1,18,319 cases pending before them and the District Commissions had 3,23,368 cases pending[1]. The object of consumerism was reduced to rubble under the old regime. In light of this, The 2019 Act, which introduces a new regime of consumerism in India at par with the growing market needs is a welcome step. This article analyses the skeleton of the 2019 Act.


CENTRAL CONSUMER PROTECTION AUTHORITY

After 105 years of the existence of a robust body like the Federal Trade Commission (FTC) protecting the consumer rights in USA, a need for an equivalent body in India was felt to protect the rights of the consumers. Additionally, the old regime lacked the potential to protect the collective rights of the consumers and therefore, a need for recognising the rights of consumers ‘as a class’ was required. The 2019 Act has introduced a body called- “Central Consumer Protection Authority”/Central Authority (hereinafter “CCPA”) which will be a body for regulating the matters related to the violation of the consumer rights, unfair trade practices and false or misleading advertisements which are prejudicial to consumer and public interests.[2] The Act empowers CCPA with very wide powers, including the power to take suo-motu cognizance of the violation of consumer rights and to inquire, investigate into it[3].


The access to Justice is a constitutional principle, and as per Article 39A, it’s the duty of the state to secure the operation of legal system on the basis of equal opportunity so that the opportunity for securing justice is not denied to any citizen. Considering the social background, it is not possible for every citizen and a consumer to approach the appropriate forum to secure effective remedies. The 2019 Act empowers CCPA to file complaints on behalf of consumers in the District, State or National Commissions. Additionally, it can file cases on behalf of consumers ‘as a class’ and can also intervene in any proceedings pending before commissions.[4]


The CCPA has been empowered to inquire into any complaints or to direct investigation into the complaint. The CCPA, has its own investigation wing[5] which will investigate into the complaints and is also having the powers to enter, search and seize equivalent to the powers under Code of Criminal Procedure[6]. The CCPA is not just a toothless tiger, but has been given powers to recall goods, withdraw services, reimburse prices, direct discontinuation of unfair trade practices and also a power to issue directions and penalties against false and misleading advertisements.[7]


The 15th July, 2020 notification however does not notify the date of appointment for the CCPA, therefore the wait for the authority will continue. The Act received its presidential assent on 9th August, 2019 and after almost 11 months where the Act is being notified to come into force, it still doesn’t mention the establishment of CCPA. Considering the pendency of the cases and misleading advertisements rising in the period of Covid19, the establishment of the Authority could have been immediately made by taking benefit of Section 23, thereby designating any statutory body to function as the Authority till the actual establishment of CCPA. Additionally, the rules and regulations under the Act will have to be framed to make CCPA a body addressing consumer issues through online platforms like the FTC, then the goal of access to justice for consumers will not remain a distant dream.


PRODUCT LIABILITY ACTION

The Consumer Disputes are torts[8]. The Old Act, empowered the District, State and National Commissions to deal with the torts only when the consumer dispute was related to the defect in the goods or deficiency in the services. The Consumer who suffered a harm or injury to the body or property by the usage of the product/service, had to still take a route of filing a civil suit, which would require time and cost. The 2019 Act, has empowered the commissions to deal with the civil wrongs which include power to compensate for any harm or injury caused to the consumer. The product liability action can be taken, against the manufacturers and seller, but it can also be taken against the service providers. The Act creates a no-fault liability[9] against a manufacturer when the harm is caused due to the defective product, even if he proves he wasn’t negligent or fraudulent. However, the 2019 Act also creates a few exceptions to the product liability action[10] where the harm is attributable to the complainant’s acts.


The chapter VI, dealing with product liability action gives effect the principle laid down in a landmark case of Donoghue v. Stevenson[11], where it was held that “a producer sending goods into the market would be liable to the ultimate consumer if his person or property is injured by the normal use of goods.”


UNFAIR CONTRACT

The principle of interpretation of unfair contracts, which made a departure from the common law principles of contract law, was recognised by Lord Denning in Lloyds Bank Ltd. v. Bundy[12], and was also adopted by our Apex court in its many judgments. The Apex Court recognised that in unilateral contracts, where weaker parties have no say or a very little say, the courts should look into the bargaining powers of parties while interpreting the contracts.


In L.I.C v. The Consumer Education and Research Centre[13] it was held:

“47. It is, therefore, the settled law that if a contract or a clause in a contract is found unreasonable or unfair or irrational, one must look to the relative bargaining power of the contracting parties. In dotted line contracts there would be no occasion for a weaker party to bargain or to assume to have equal bargaining power. He has either to accept or leave the services or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forego the service for ever. With a view to have the services of the goods, the party enters into a contract with unreasonable or unfair terms contained therein and he would be left with no option but to sign the contract.”

Very recently in case decided by the NCDRC[14] (dated: 06/07/2020) while noting that the pre-printed and fixed forms of consent cum undertakings from patients by the hospitals are unfair and therefore it was held that:

“[d] We but note that a pre-printed and fixed ‘informed consent cum undertaking’ form, with blank spaces for limited select handwritten entries and for the signatures has been used. The main body of the form is pre-printed and fixed. It can fit into any procedure, any doctor, and any patient, after filling up the blank spaces for the limited select handwritten entries and getting / affixing the signatures. We note this to be administrative arbitrariness and one-sided high handedness, and to be unfair and deceptive”

This jurisprudence of the unfair contracts, where one party has no bargaining power is now statutorily recognised under the 2019 Act. The State Commission has been given an original jurisdiction to deal with all complaints with respect to Unfair contracts up to 10 crores and the disputes arising out of such contracts valued above 10 crores will now be maintainable before National Commission. The definition of Unfair Contracts[15] includes excessive security deposits, imposing penalty on consumers disproportionate to the loss, refusing early repayment of debts, entitlement of unilateral termination of contract, assigning contract to the detriment of consumer and imposing unreasonable charges. This wider definition will act as a huge relief to the consumers who had no say in entering into standardized contracts.


STATUTORY MEDIATION[16]

The 2019 Act, introduced the Alternate Dispute Resolution in the form of Mediation as a statutory part. All the District, State and National Commissions established under the Act will have their respective mediation cells attached to them. The Mediation cells will have records of all proceedings referred to it and will have its own panel of mediators appointed by the commission and a select committee. To make the mediations transparent, the Act recognises the duty of mediators to disclose their personal, financial and professional interests.


Every complaint which can be settled through mediation, can now be referred to the mediation cell within 5 days of obtaining the consent of parties. The commission can record the settlement if any, and can pass a final order against which no appeal will lie.


On one hand statutory recognition of mediation is a welcome change in the 2019 Act, however on the other hand where the Act allows e-filing, hearings through video-conferencing the recognition of Online Dispute Resolution statutorily would have been an even more effective remedy.


SPEEDY JUSTICE AND FAIR TRIAL

The 2019 Act has introduced several changes in it, which can achieve the goal of speedy justice along with the fair trial.

  1. Jurisdiction

a) Pecuniary: The judgment of NCDRC in the case of Ambarish Shukla v. Ferrous Infrastructure Pvt. Ltd.[17] created a huge problem for consumers, and a consumer for a dispute arising out of a minor repair in his property was made to approach the State or National Commission based on the pecuniary valuation of the whole property. The District forum which had a jurisdiction only up to 20 lakhs, had to transfer the majority of its cases to State or National Commissions. The 2019 Act, made the pecuniary jurisdiction of District Commission up to 1 crore. The jurisdiction of State Commission was raised for dealing with complaints up to 10 Crores and that of the National Commission was made above 10 Crores. This will allow the consumers to approach a nearby forum in their district for dealing with complaints up to 1 crore.

Additionally, the power to increase the pecuniary jurisdiction has now been delegated to the Central Government. This will allow making quick changes into the jurisdictions as per the need of time, without waiting for the parliament to make changes.

b) Territorial: The decision in the case of SpiceJet Ltd. v. Ranju Aery[18] settled the position of jurisdiction in the case of transactions through the internet and made it clear that for such transactions the complainant’s place of residence/business will be taken into consideration. The 2019 Act, brings a major change in the jurisdictions of Commissions allowing the consumers now to approach the commission in their territorial limits where they reside or personally work for gain. The change will reduce hardships caused to the consumers.

  1. Deemed Admission

The old Act was amended in 2003 to add the time limit of 21 days to admit the complaints. The said amendment had no impact on the pendency and many matters before the commissions remained pending at the stage of admission. The 2019 Act, now brings a deeming clause, which says if the matter is not admitted within 21 days, then it shall be deemed to have been admitted.

  1. E-filing & Hearing

To cope with the needs of the age, the Act for the first time has recognised filing of the complaints through electronic means. The Act also empowers the commission to hear the matter based on affidavit and documentary evidence. In other cases, the commission is empowered to hear parties through video-conferencing which will help in achieving speedy justice.


OTHER KEY PROVISIONS:

  1. Liability of Endorsers: The Act introduces a liability of the endorsers of any misleading advertisements. The Endorsers are now made liable for penalty up to 10 lakhs for their verbal, written endorsements which will include natural persons as well as institutions.[19]

  2. E-Commerce[20]: Act recognises liability of Service providers as well as E-commerce platforms.

  3. Offences[21]: Along with the penalties, Act of 2019 criminalises manufacturing, sell, storage or distribution of product having adulterant and spurious goods. The offence if leads to causation of grievous hurt or death of an individual, has been made a cognizable and non-bailable offence.

  4. Misleading advertisements: In the times of social media, where the products are sold based on misleading advertisements section 2(28) r/w. Section 21 tries to curb the menace of misleading advertisements.

CONCLUSION:

From the Common Law principle of Caveat Emptor (Buyer Beware), to the movement of Consumerism in 1980s and from there till the age of e-commerce, the law of torts has seen a sea change. The 2019 legislation brings the legal development at par with the societal and technological change. The effective implementation of the Act and the early establishment of CCPA will definitely add more weight into the legislation and will give true effect to the term Caveat Venditor!(Seller Beware).

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[Disclaimer- Views expressed in the article are personal views of the Author]

[Edited by Ms. Achintaya Soni (Student Editor), Mr. Vivek Sharma (Managing Editor)]

[1] Speech of Hon’ble Minister in Rajya Sabha on 2019 Bill: https://www.youtube.com/watch?v=uBtub224e5U&t=816s

[2] Section 10

[3] Section 18(2)(a)

[4] Section 18(2) (b)&(c)

[5] Section 15

[6] Section 22

[7] Section 20 & 21

[8] AVATAR SINGH, Introduction to the Law of Torts and Consumer Protection, 3rd ed. pg. 240.

[9] Section 84(2)

[10] Section 87

[11] [1932] All ER 1.

[12] 1973(3) All E.R. 757

[13] (1995) 5 SCC 482

[14] Consumer Case No. 428 of 2018

[15] Section 2(46)

[16] Chapter V (Ss. 74 to 81)

[17] 2016 SCC Online NCDRC 1117

[18] NCDRC Revision Petition No. 1396/2016, decided on 7/02/2017.

[19] Section 2(18) r/w. Section 21(3)

[20] Section 2(17)

[21] Section 90 & 91

#CCPA #Consumerprotectionlaw

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