Consumer markets have undergone a
tectonic change since the enactment of the Consumer Protection Act in 1986 (“Act”). With the digital age presenting
new opportunities for consumers, it has also made them more vulnerable to new
forms of unfair trade and unethical business practices.
With a view to keep the (Indian) consumer
law updated with changing times, the Consumer Protection 2019 Act, 2019 was
passed by the Parliament on 06.08.2019 which thereafter received the assent of
the President and got published in the official gazette on 09.08.2019, as the
Consumer Protection Act, 2019 (“2019 Act”).
Several ground breaking changes
to the law have been brought about by the 2019 Act, so as to more effectively
afford protections to the consumer. A
critical focus area of the 2019 Act appears to be to enable effective
interventions for consumer protection (in the nature of class actions) and
deployment of effective measures to prevent unfair trade practices. Some chief
highlights of the 2019 Act are discussed in the present note.
The Salient features
of and new concepts in the 2019 Act are briefly discussed below:
CENTRAL CONSUMER PROTECTION AUTHORITY (CCPA)
The CCPA is an executive agency
constituted for the purpose of promoting, protecting and enforcing the rights
of consumers. The CCPA has been entrusted with the task of making interventions
(when necessary) to prevent consumer detriment arising from unfair trade
practices and to initiate class action including enforcing a recall, refund and
return of products.
The headquarters of the CCPA
shall be at New Delhi. It will also have regional offices at such locations
which the Central Government may decide.
Ø Duties of the CCPA
The CCPA shall have the following
principal duties:
i)
Protect,
promote and enforce rights of consumers as a class, and prevent violation of
consumer rights under the Act;
ii)
Prevent
unfair trade practices and ensure that no person indulges in unfair trade
practice; and
iii)
Ensure
that no false or misleading advertisements are made with respect to any goods
or services which contravene the provisions of the Act.
Ø Powers of the CCPA
Amongst other things, the CCPA
shall have the following powers:
i)
To
inquire or cause an inquiry or investigation to be made into violations of
consumer rights or unfair trade practices, either suo moto or on the basis of a complaint or on directions of the
Central Government.
ii)
File
complaints or intervene in complaints before the District, State or National
Commission (as the case may be) in connection with violation of consumer rights
or unfair trade practices.
iii)
Review
matters relating to consumer rights and make appropriate recommendations.
iv)
Recommend
adoption of international instruments and best international practices on
consumer rights to ensure effective enforcement of consumer rights.
v)
Undertake
and promote research in the field of consumer rights; and spread awareness on
consumer rights.
Ø Investigation by CCPA
The CCPA shall have an
investigative wing, headed by a Director General (“DG”) for the purpose of conducting inquiry or investigation under
the Act.
The CCPA may, either suo moto or on receipt of a complaint or
on directions of the Central Government, as the case may be, conduct or cause
to be conducted a preliminary inquiry as to whether there exists a prima facie
case of violation of consumer rights or any unfair trade practice; and if it is
satisfied that a prima facie case exists, it shall cause an investigation to be
made by the DG or the District Collector.
The Act provides to the DG, or
the District Collector, as the case may be, wide powers of investigation which
includes the following powers: (i) power of search and seizure; (ii) power of
discovery and possession.
However, any act of search and seizure, without reasonable grounds, would
attract imprisonment extendable to 1 (one) year or fine extendable to Rs.
10,000/- (Rupees Ten Thousand) or both.
Where, pursuant to an
investigation, the CCPA is satisfied that there has been a violation of
consumer rights or occurrence of an unfair trade practice or a false/misleading
advertisement made, then it may, inter
alia, pass any of the following orders, after giving an opportunity of
hearing to the concerned persons:
i)
Recall
the goods or withdraw the services which are dangerous, hazardous or unsafe;
and reimbursement for the price of such goods or services.
ii)
Discontinuation
of the unfair trade practice.
iii)
Issue
directions to the concerned trader/manufacturer/endorser/publisher (as the case
may be) to discontinue or modify the advertisement, as may be necessary within
such time as may be specified in the order. Further, the CCPA may, in addition
to the above, if it thinks fit, impose a penalty (in respect of the
false/misleading advertisement) which may extent to Rs. 10,00,000/- (Rupees Ten
Lakhs)
iv)
Issue
prohibitory orders restraining the endorser of the advertisement from making an
endorsement
of any product or service for a maximum period of 1 (one) year, which period
may extent to 3 (three) years in case of a subsequent conviction. However, an
endorser who has exercised due diligence to verify the veracity of the claims
made in the concerned advertisement shall not be penalised.
v)
Issue
a maximum penalty of Rs. 10,00,000/- (Rupees Ten Lakhs) against a person who
publishes or is a party to the publication of a misleading advertisement except
where such persons proves that he had published or arranged for the publication
of the advertisement in the ordinary course of his business.
The following factors shall be taken into account while
determining penalty: (i) The population and the area impacted or affected by
the offence; (ii) the frequency and duration of the offence; (iii) the
vulnerability of the class of persons likely to be affected by the offence; and
(iv) the gross revenue from the sales effected by virtue of such offence.
UNFAIR TRADE PRACTICE
Unfair trade practice, in common
parlance, refers to any trade practice wherein unfair or deceptive methods are
deployed for the purpose of luring, misleading or deceiving the consumers. It
includes within its ambit false/misleading statements or representations
regarding various aspects of a product or a service such as its quality,
standard, life, price, utility, warranty etc. Even disparagement of competing
products or services would amount to unfair trade practice. Section 2 (47) of
the 2019 Act provides an elaborate description and definition of the term
‘unfair trade practice’. The offence of unfair trade practice shall now be
dealt with by the CCPA.
MISLEADING ADVERTISEMENT
The expression ‘misleading
advertisement’ in relation to any product or service, means an advertisement
which: (i) falsely describes such product or service; (ii) gives a false
guarantee to the consumer; (iii) tends to mislead the consumer regarding its
nature, substance, quantity or quality; (iv) conveys a representation which
constitutes unfair trade practice; or (v) deliberately conceals important
information.
CONCEPT OF CONSUMER RIGHTS
The 2019 Act has defined the term
‘consumer rights’ as including the following
i)
The
right to be protected against the marketing of goods, products or 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, products or services, as the case may be, so as to protect the
consumer against unfair trade practices.
iii)
The
right to be assured access to a variety of goods, products, or service at
competitive price.
iv)
The
right to be heard at the appropriate consumer fora.
v)
The
right to seek redressal against unfair trade practice or restrictive trade
practices.
vi)
The
right to consumer awareness.
THE CONSUMER DISPUTES REDRESSAL FORA
The erstwhile consumer
legislation provided for a legislative framework to promote and protect the
rights of consumers which included a three level/tier quasi judicial consumer
disputes redressal machinery, also known as the District, State and National
Commissions. The 2019 Act retains the concept of adjudication by consumer
forums,however, various changes have been made to enhance the efficacy of the
forums and of the adjudicatory process. Various provisions have been inserted
which are aimed at simplifying the adjudication process in the consumer fora.
Certain critical
changes are below:
Pecuniary Jurisdiction
The pecuniary limitsof
the consumer courts has been enhanced by the 2019 Act as follows:
|
Court
|
Previous Pecuniary
Limit
|
New Pecuniary Limit
|
|
District Commission
|
Upto Rs. 20,00,000/- (Rupees Twenty Lakhs only)
|
Upto Rs. 1,00,00,000/- (Rupees One Crore only)
|
|
State Commission
|
Upto Rs. 1,00,00,000/- (Rupees One Crore only)
|
More than Rs. 1,00,00,000/- (Rupees One Crore
only) but upto Rs. 10,00,00,000/- (Rupees Ten Crores only)
|
|
National Commission
|
Upwards of Rs. 1,00,00,000/- (Rupees One Crore
only)
|
Upwards of Rs. 10,00,00,000/- (Rupees Ten Crores
only)
|
District Commission
The
District Commission is at the first level of the consumer adjudicatory process.
A complaint (in relation to goods or services) with the District Commission may
be made by any of the following:
(a)
A
consumer:
(i) to whom the goods are sold, delivered, agreed to be sold or delivered; or
service provided or agreed to be provided; or (ii) who alleges unfair trade
practice in respect of such goods or services.
(b)
A
recognised consumer association
irrespective of whether the concerned consumer (in point a above) is a member
of such association or not.
(c)
One
or more consumers, with the permission of the District Commission, on behalf
of, or for the benefit of all consumers so interested.
(d)
The
Central Government, State Government or CCPA.
State Commission
The State Commission is at the
second level of the consumer adjudicatory process. A State Commission has both
original and appellate jurisdiction.
In other words, the following proceedings can be made before the State
Commission: (i) Appeals against an order of the District Commission; and (ii) Complaints
(subject to pecuniary limits described above) in relation to goods and services
and unfair contracts.
National Commission
The National Commission is at the
third level of the consumer adjudicatory process. The National Commission also has both original and
appellate jurisdiction.
The following proceedings can be made before the National Commission: (i)
Appeal against an order of the State Commission; (ii) Complaints (subject to
pecuniary limits described above) in relation to goods and services and unfair
contracts; and (iii) Appeal against an order of the CCPA.
Territorial Jurisdiction
The 2019 Act has expanded the
‘territorial jurisdiction’ of consumer courts. Now, a consumer is permitted to
prefer a complaint with the consumer court within the territorial limits of
which: (i) any of the opposite party ordinarily resides or carries of business or
has a branch office, or personally works for gain; (ii) the cause of action
arises, wholly or partly; (iii) within whose jurisdiction he resides or
personally works for gain. Point (iii) above grants to the consumer an added
flexibility of choosing the appropriate forum on the basis of his residence or
place of work. Such a provision has been added for the sake of consumer
convenience.
Power of Review
The District, State and National
Commission all have been conferred with the power of review of their orders
which suffer from any error apparent on the face of record.
Speedy Disposal of consumer cases
The 2019 Act has introduced
various provisions so as to ensure speedy and efficacious disposal of cases,
which include the following:
(a)
Consumer
courts appear to be set to introduce the concept of electronic filing of cases.
(b)
Appeals
to the State and National Commission are to be adjudicated within set
timelines. Seeking adjournments in the matter (by any party) is to be viewed
seriously by the courts.
UNFAIR CONTRACTS
The 2019 Act has introduced the
concept of ‘unfair contract’ designed primarily to protect the consumers who
are placed in an unequal bargaining position. The term ‘unfair contract’ is
defined under S. 2 (46) of the 2019 Act to mean a contract between a
manufacturer/trader/service provider (on one hand) and a consumer (on the other
hand), having such terms which cause significant change in the rights of the
consumer, including the following:
i)
Requiring
excessive security deposit(s)from the consumer towards his contractual
obligations;
ii)
Imposing
excessive (and disproportionate) penalty for breach of contract.
iii)
Refusing
to accept early repayment of debts even on payment of applicable penalty.
iv)
Entitling
a party to unilaterally terminate the contract without reasonable cause.
v)
Permitting
one party to assign the contract (to the detriment of the other) without his
consent.
vi)
Imposing
any unreasonable charge, obligation or condition on the consumer.
Consumer courts are now empowered to declare the terms of unfair contracts as null and void.
E-COMMERCE AND ONLINE TRANSACTIONS
The
2019 Act specifically introduces all forms of e-commerce transactions within
the ambit and scope of consumer law. The definition of the term ‘consumer’ has
been amended to include within its ambit, goods sold or services availed
through online transactions through electronic means, by teleshopping, direct
selling or multi-level marketing.
In furtherance of the above, meanings and definition of various key terms has
been added to the 2019 Act, which are briefly described below:
a)
The
term ‘electronic service provider’ means a person who provides technologies or
processes to enable a product seller to engage in advertising, selling of goods
or services; and includes any online market-place or online auction sites. The
term ‘e-commerce’ refers to buying or selling of goods or services over digital
or electronic network.
b)
The
term ‘direct selling’ means marketing, distribution and sale of goods or
provision of services through a network of sellers, other than through a
permanent retail location. In simple terms, ‘direct selling’ refers to the sale
of products or provision of services in a non-retail environment. Sales occur
at home, work, or other non-store location. The role of middlemen is reduced or
eliminated. Instead, products go from manufacturer to the direct sales person
and then directly to the consumer. The Central Government has formulated the
Model Direct Selling Guidelines, 2016 and subsequently, various state
governments (including the governments of Himachal Pradesh, Odhisha, Goa, Tamil
Nadu, Kerala, Maharashtra) have enacted their respective Direct Selling
Guidelines for the purpose of regulating the business of direct selling.
Product Liability
The 2019 Act has introduced the
concept of ‘Product Liability’. Product Liability is an area of law where
manufacturers, distributors, suppliers and retailers can be held accountable
for any injury which their products cause. In simple terms, the concept of
‘product liability’
deals with harm caused by a defective product manufactured by a product
manufacturer or serviced by a product service provider or sold by a product
seller. However, as the term suggests, this concept is applicable only to goods
and not to services.
A product liability action is
capable of activation upon occurrence of ‘harm’. As per Section 2 (22) of the 2019
Act, the term ‘harm’, in relation to product liability, includes (i) damage to
any property, other than the product itself; (ii) personal injury, illness or
death; (iii) mental agony attendant to personal injury or illness or damage to
property; or (iv) any loss of consortium or services or other loss resulting from
harm referred above. However, the term ‘harm’ would not include the following:
(i) any harm caused to the product itself; (ii) any damage to property on
account of breach of warranty conditions; or (iii) any commercial or economic
loss, including any direct, incidental or consequential loss relating thereto.
Liability of Product Manufacturer
The 2019 Act defines ‘Product
Manufacturer’ as a person who: (i) makes any product or part thereof; (ii) assembles
parts thereof made by others; (iii) puts or causes to be put any mark on the
product made by others; (iv) makes a product and sells, distributes, leases,
installs, prepares, packages, labels, markets, repairs, maintains such product
or is otherwise involved in placing the product for commercial purpose; (v)
designs, produces, fabricates, constructs or re manufacturer any product before
its sale; or (vi) being a product seller of a product, is also the manufacturer
thereof.
A product manufacturer shall be
liable in a product liability action if: (a) the product contains a
manufacturing defect; (b) the product is defective in design; (c) there is a
deviation from the manufacturing specifications; (d) the product does not
conform to the express warranty; or
(e) the product fails to contain adequate instructions of correct usage to
prevent harm or any warning regarding improper or incorrect usage. Further, the
liability shall not be defeated even if the product manufacturer proves that he
was not negligent or fraudulent in making the express warranty of a product. This
is also known as the ‘no negligence liability’ mechanism as ‘absence of
negligence’ by the product manufacturer’ is not considered a defence.
The Exceptions
However, the following exceptions
are provided in the 2019 Act qua
product manufacturers:
In an action based on failure to
provide adequate warnings, the product manufacturer shall not be held liable if:
(a) the product was purchased by an employer for use at his workplace and the
product manufacturer had provided the warnings/instructions to such employer;
(b) the product was sold as a component to be used in another product, the
product manufacturer had provided necessary warnings/instructions to the
purchaser thereof, and the harm was caused by the ultimate end product; (c) the
product was one meant to be used by or under the supervision of an expert and
the product manufacturer had employed reasonable means to give
warnings/instructions to such expert; or (d) the complainant, while using the
product, was under the influence of alcohol or of any prescription drug not
prescribed by a medical practitioner.
Further, a product manufacturer
shall not be liable for failure to instruct or warn about a danger which is
obvious or commonly known to the consumer of such product or which the consumer
ought to have known, keeping in mind the characteristics of such product.
Liability of Product Seller
The 2019 Act defines ‘Product
Seller’
as a person who, in the course of his business, imports, sells, distributes,
leases, installs, prepares, packages, labels, markets, repairs, maintains or is
otherwise involved in placing such product for commercial purpose and includes
the following: (i) a manufacturer who is also a product seller; or (ii) a
service provider BUT does not include the following: (i) a seller of immovable
property unless such person is engaged in the business of construction; (ii) a
provider of professional services where the sale or use of the product is only
incidental to the transaction; (iii) a person who acts in a financial capacity
with respect to the sale of the product, is not a manufacturer, wholesaler,
distributor, retailer, direct seller or an electronic service provider, or
leases the product under a lease arrangement in which the selection,
possession, maintenance and operation of the product are controlled by another
person.
A product seller (who is not a
product manufacturer) shall be liable in a product liability action if: (a) he
exercised substantial control over the designing, testing, manufacturing,
packaging or labelling of the product that caused harm; (b) he altered or
modified the product and such alteration/modification was the substan
