The Consumer Protection Act, 1986

Chapter 12

Need for Consumer Legislation

• Most of the manufacturers and traders have been adopting unfair trade practices for the purpose of promoting sale, use or supply of any goods, or for the provision of any services.

• Unfair practices like false and misleading descriptions about the nature and quality of the goods, exaggerated statements about their power and potency, false weights and measurements etc., have been causing loss or injury to consumers of such goods and services.

The Consumer Protection Act, 1986

• A number of Acts were enacted by the Government to protect the interests of consumers.

• The Sales of Goods Act, 1930

• The Agricultural Products Grading and Marketing Act, (AGMARK) 1937

• The Prevention of Food Adulteration Act, 1954,

• The Essential Commodities Act, 1955

• The Standards of Weights and Measures Act, 1956

• The Monopolies and Restrictive Trade Practices Act, 1969

• The Indian Standard Institution (certification of marks) Act, (ISI) 1952 etc.

The Following points or ground justify the need for consumer protection:

• Consumers do not have adequate product knowledge.

• They are ignorant of their rights and remedies available to them.

•  They are in a weak bargaining position.

• Manufacturers and suppliers have the expertise which a consumer does not have.

• Often products are forced on consumers through eye-caching packing materials, sensational media advertisement, etc.

• Fake and spenions products are flooding the market and deceiving the consumers.

• Let the buyer beware' is not realistic in the context of liberalization, privatization and globalization-complex and mass product goods and services. Also it permits seller to disown his/ her liability.

Objectives of the Act

• The Consumer Protection Act, 1986 seeks to provide for better protection of the. interests of consumers.

• This Act seeks, inter alia, to promote and protect the basic rights of consumers.

RIGHTS OF CONSUMERS• Right of Protection to Life and Property :

– The right to be protected against marketing of goods which are hazardous to life and property.

• Right to be informed : – The right to be informed about the quality, quantity, potency, purity, standard and

price of goods to protect the consumers against unfair trade practices.

• Right to choose : – The right to be assured, wherever possible, access to a variety of goods at

competitive prices.

• Right to be Heard : – The right to be heard and to be assured that consumer's interests will receive due

consideration at appropriate forums.

• Right to Redress : – The right to seek redressal against unfair trade practices or unscrupulous

exploitation of consumers, and

• Right to Education : – It means the right to acquire the knowledge and skill to be an informed consumer.

Advantages of seeking relief under the Consumer Protection Act, 1986

• Firstly administration of justice under the Consumer Protection Act is comparatively cheaper than the regular and conventional judiciary.

• Secondly consumer courts are expected to deliver speedy justice. – Despite criticism on this aspect some of which is justified,

one agrees that consumer courts certainly score over the civil courts

DEFINITIONS

• Consumer [Sec 2(i) (d)]

• 'Consumer' means any person who: – "buys any goods for a consideration which has been paid or promised,

or partly paid and partly promised, or under a system of deferred payment"; or hires any services for a consideration which has been paid or promised, or partly paid and partly promised, or under a system of deferred payment, i.e. in respect of hire-purchase transactions.

• "uses the goods" with the approval of the person who has bought the goods for consideration;

• "is beneficiary of services" with the approval of the person who

has hired the service for consideration.

DEFINITIONS

• consumer is a person who

• (i) buys any goods for a consideration, or– (ii) hires or avails any services for a consideration.

• In addition to buyer(s) of goods or hirer(s) or user(s) of services, – any beneficiary of such services, using the

goods/services with the approval of the purchaser or hirer or user would also be deemed a 'Consumer' under the Act.

DEFINITIONS

• Buyer of goods for consideration : – The buyer of goods for a consideration is a

consumer. The Act, unlike the Sale of Goods Act, does not insist on money consideration only. Transactions of transfer of services, or barter, or exchange will come within the purview of the Act.

– the term consumer does not include a person who obtains such goods for resale or for any commercial purpose

DEFINITIONS

• Hirer of services for consideration : • Any person who hires services for a consideration is a

consumer. • Consumer, not only means merely one who hires

services for consideration, but also includes a person who is a beneficiary of such services. – For example, the user of a telephone, even though he is not

himself the subscriber is a consumer under the Act. Services include all kinds of professional services, be it the routine services of a barber or the technical services of a highly qualified person.

Resale and Commercial Purpose

• Commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purpose of earning his livelihood, by means of self employment.

• A consumer who does not buy the goods for his own consumption or use, but for resale, is excluded from the preview of the definition.

• When the goods are re-sold in original condition as bought, it is a resale.

• When the manufacturer sells the goods to the wholesaler who in turn sells the goods to a retailer, the wholesaler will be excluded from the definition of the word consumer as he has bought the goods for 'resale' or for 'commercial purpose.'

Some instances of persons who are held as consumers

(i) Bank customers;

(ii) S ubscribers of telephones; consumer of electricity;

(iv) A passenger travelling by train;

(v) A patient receiving medical treatment;

(vi) A depositor of money;

(vii) A beneficiary of services, like a nominee of the insured;

(viii) Persons allotted plots/houses by State Housing Boards;

(ix) Nominee of a person insured under LIC

(x) an employee-member of Employees' Provident Fund Scheme is a consumer and duties performed by Regional Provident Fund Commissioner under the Scheme is ser vice. Statutory authority not invested with sovereign function while discharging its statutory functions provides service and would be liable in case of any deficiency (Regional Provident Fund Commissioner v. Shiv Kumar Joshi - (2000) 1 SCC 98).

Who are not Consumers :

• The following persons are not consumers as per the Consumer Protect

• a person who purchased goods for resale or for commercial purpose

•  a person who buys goods or obtains services without consideration

•  hires or avails of any services without consideration; or

• uses the goods without the approval of the person who has bought the goods for consideration;

•   is beneficiary of services without the consent of the person who has hired the service for consideration [Sec.2(l)(d)] or

• a person who obtains services under a contract of personal service.

The National Commission, in various cases, had decided that the following are not consumers:

• A client hiring services of an Advocate;

• A student hiring services of a private tutor;

• Purchaser of a taxi;

• Tenant is not a consumer;

• Person presenting documents for registration (S.P. God v. Collector of Stamps — AIR 1996 SC 839);

• Government servant (State of Orissa v. Divisional Manager, MC— AIR 1996 SC 2519);

• .

The National Commission, in various cases, had decided that the following are not consumers:

• Charitable Trust running a diagnostic center where patients ordinarily are required to pay for CT Scan, purchases of machines made by such Trust is for commercial purpose and such a charitable trust is not a consumer

• Tenant of a landlord, where terms of the lease did not contain any provision for cleaning, repairing and maintenance of the building by the landlord

• tax-payers to municipality

• contractors

• applicants for jobs

• persons who filed suits in courts, etc

Consumer Dispute :

• According to section 2( 1 )(e) of the Consumer Protection Act, – 'Consumer Dispute' means "a dispute where the

person against whom a complaint has been made denies or disputes the allegations contained in the complaint".

– Separate allegation may form separate disputes requiring separate findings on each dispute.

• Defect:

– "Defect" means

• 'any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service".

• Manufacturing Defect :

• – A product is said to have manufacturing defect

when it is not built according to specification and is consequently unsafe.

– For instance, there may be negligence on the part of an employee in assembling a part or tightening a nut or a latent defect (hidden flaw) in the raw material out of which the product is made.

Design Defect:

• It appears there is ho clear standard with reference to standards prescribed by Government or industry, if any, but courts may liberally interpret the provision to test the complaint from the angle of reasonable care in designing a product.

• Some American Courts have held that a product is defectively designed if the product is more dangerous than the benefits that accrue on account of product design in the eyes of an ordinary consumer.

Instruction Defect :

• When a manufacturer fails to provide adequate warning of possible dangers associated with the product in Product Manual, Instruction booklet or on package/label regarding safe use of the product.

• A drug manufacturer is expected to warn against side effects.

• It is not a valid defense to argue that manufacturer was not aware of the danger.

Following types of evidence is generally relied upon by complainants to establish defect in product

• Expert Opinion

• Manufacturer's records

• Government and Industry Standards

• Post accident changes

• Report of Governmental and other agencies

• Past record

• Expert Opinion :– Complainant hires a technical expert to testify

about the defective characteristics of a product. – A manufacturer has to retain highly qualified

experts to rebut the findings of complainant's expert and also educate defense lawyer so well that he can call the bluff of complainants expert.

• Manufacturer's records :– If manufacturer's own employees expressed

concern about product safety it can be extremely persuasive that product defect existed.

Government and Industry Standard :

– Evidence that manufacturer has failed to meet government or industry standards can be compelling proof of existence of defect and when such standards are mandatory it also amounts to automatic findings of negligence.

Post accident changes :

– Post accident changes may be considered as evidence that original designs were deficient.

– Though this is a contentious factor as to whether such an evidence is admissible a jury may be influenced by the same.

Report of Govt, and the other agencies : – Generally factual findings of an official

investigation forms admissible evidence.

Past record : – Complainant may show that past record of the

product proves his claim.– Manufacturer has the obligation of proving that

other accidents were not similar.

• Who is liable : – Who is liable to pay compensation is indeed an

important question. – The liability extends from manufacturer to

retailer or in other words to everyone in the chain of distribution.

– Even an occasional seller may be held liable for his own negligence to the extent he should have known or discovered that the product was dangerous to users.

Deficiency• Deficiency means any

– fault,

– imperfection,

– shortcoming or

– inadequacy in the quality,

• nature and manner of performance – which is required to be maintained by or

– under any law for the time being in force or

– has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service [Section 2(l)(g)].

Deficiency

• Examples– Lack of facilities promised by Housing Board is

deficiency. Non-allotment of shares is not deficiency in service [L. C. Chandgotiya v. Northern Leasing & Industries Ltd - 1991 (2) CPJ 19 (Raj)].

– Failure of insurance company to settle claim without sufficient cause is deficiency (Premlata v. National Insurance Co. - 1991 CPJ 423 Raj).

Excessive Price• It is for complainant to establish that the trader has

charged for the goods mentioned in the complaint a price in excess of the price -

– fixed by or under any law for the time being in force; or

– displayed on goods; or

– displayed on any package containing such goods.

• A trader can therefore be charged for having collected price in excess of what is displayed or published.

Hazardous Goods

• In respect of goods which are hazardous to life and safety, traders shall display information regarding the contents, manner and effect of use of such goods.

• Such goods offered for sale without such display or caution can be a case of complaint.

• Goods :

• Goods means goods as defined in the Sale of Goods Act, 1930 [Section 2(l)(i)].

• As per Section 2(7) of the Sale of Goods Act, 1930 'Goods' means every kind of movable property other than actionable claims and money; and – Includes stock & shares, growing crops, grass

and things attached to or forming part of the land which are agreed to be severed before sale or under the contract or sale.

Manufacturer :

• (i) Manufacturer means a person makes or manufactures any goods or

• (ii) parts thereof, or ii. does not make or manufacture any goods but assembles parts their of made of manufactured by himself, or

• (iii) puts or cause to be put his own mark on any goods made or manufactured by any other manufacturer and claims such goods to be goods made or manufactured by himself. [Sec. 2(j)].

Service [Sec. 2(0)]

• "Service" means – Service of any description which is made

available to potential users and includes the provisions of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, boarding or lodging or both, house construction, entertainment, amusement or other information.

• Free services and personal services

• under a control have been excluded from the protective spell of the Act. – Thus services must be of commercial nature in the

sense that they must be on payment. – The payment may be in cash or kind. – It may be made either at once or partly at once or

partly later i.e., on credit. – For services rendered without consideration, the

complaint cannot be maintained in forum

• Free services and personal services– (i) the complainants were not 'consumers' under

the Act, and therefore, were not entitled to initiate the proceedings; and

– (ii) the treatment rendered in the hospital did not constitute 'service' under the Act.

• Spurious goods and services – means such goods and services which are

claimed to be genuine but they are actually not so [Sec.2(00)].

CONTRACT OF PERSONAL SERVICE

• A service under a contract of personal service does not come within the preview of service under the Act.

• A service offered by an Advocate to his client is under a contract of personal service and therefore is not included in the definition.

• A client hiring the services of an Advocate is not a consumer within the meaning of the word 'consumer' under the Act.

• Service rendered by a private tutor is also as an example of personal service.

CONTRACT OF SERVICE AND CONTRACT FOR SERVICE DISTINGUISHED

• The contract of service implies some relationship of a master and a servant.

• A servant is obliged to obey the order of his master.

• This is contract of service.

• Where the person engages the service of another person and where he can only order what is to be done, it is a contract for service.

What are held to be services?• Services rendered by Housing and Development Board;• Services rendered by an agency for publication of news;• Services rendered by Post and Telegraphs Department;• Services rendered by Insurance Company, including services for

settlement of claims;• Services rendered by banking and financial institutions;• Services rendered by transport agencies like bus, rail, air, sea etc.;• Processing services;• Supply of electricity;• Hotel, lodging and boarding services;• Services rendered by agencies providing entertainment or amusement like

cinema houses,theatres, etc;

• Services rendered by a hospital or nursing home on payment of fees;• Supply of food on board of Aircraft;• To provide cushioned seats in 1st class compartment of Railways;• Housing construction or building activity.

What are held to be services?

– Services rendered by medical practitioners Indian Medical Association Supreme Court has cautioned on the random prosecutions against Doctors.

• Supreme Court has cautioned on the random prosecutions against Doctors.

– Hospital is responsible for the acts of its permanent staff as well as visiting staff whose services are temporarily requisitioned

– Common carrier for loss or damage to the goods entrusted to it for transportation

– Services rendered by statutory and public authorities; misfeasance in public office; personal liability of officials/officers concerned

What are held not to be services?• Faulty or medical treatment offered in the Government hospital;

– Services rendered by Municipal Corporation, as payment of direct or indirect taxes bypublic is not consideration paid for hiring the services;

– Services rendered by a private tutor, as it is a contract of personal service;– Services rendered by an Advocate, as it is a contract of personal service;– Any service which is rendered gratuitously, i.e., for which no

consideration is paid;– Non-allotment of shares, in a company;– Claim for compensation arising out of motor accident as such a claim

cannot be said to be in relation to any service hired or availed by consumer

– Service rendered by employee to his employer – Rendering of service by medical practitioner free of charge to all patients

Complaint• "Complaint" means any allegation in writing made by a complainant with a

view to obtaining any relief under Act, that:

– as a result of any unfair trade practice or restrictive trade practice, adopted by a trader, the complainant has suffered loss or damage;

– the goods mentioned in the compliant suffer from one or more defects;– the services mentioned in the complainant suffer from deficiency in any respect;

– a trader has charged for the goods mentioned in the complainant a price in excess of the price fixed by or under any law for the time being in force.

– goods which will be hazardous to life and safety when used are being offered for sale to the public.

– services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety.

Who can make a Compliant?

• A complaint in relation to any goods sold or delivered, or any service provided may be filed with quasi-judicial organs constituted under the Consumer Protection Act by any of the following :

– the consumer to whom such goods are sold or delivered or such service provided;

– any recognised consumer's association registered under law, or– the Central or any State Government, and– one or more consumers on behalf of many consumers having same

interest or– in case of death of a customer, his legal heir or representative [Sec

2 (1) b]

The Amendment Act 2002 has amendeds

• Every complaint shall be accompanied with such amount of fee as prescribed.

• On receipt of a complaint, the District Forum may, by order, allow the complaint to be proceeded with or rejected

• Where a complaint is allowed to be proceeded with, the District Forum may proceed with the complaint in the manner as provided under the Act

What Complaints may be Lodged?

• that an unfair trade practice or a restrictive trade practice has been adopted by any trader, or service provider;

• that the goods bought by him or agreed to be bought by him suffer from one or more defects;

• that the services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect;

What Complaints may be Lodged?• That a trader has charged for the goods mentioned in the

complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or on any package containing such goods;

• That goods which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of the provisions of any law for the time being in force requiring traders to display information in regard to the contents, manner and effect of use of such goods

• Note: – 'Recognised Consumer Association' means any voluntary consumer

association registered under the Companies Act, 1956 or any other law for the time being in force.

To Whom the Complaint is to be made

• Consumer Protection (Amendment) Act, 1993,

– Where the value of goods or services and compensation, if any, claimed does not exceed Rs. 20 lakhs, complaint is to be filed with the District Forum;

– Where the value of goods or services and compensation, if any, claimed exceeds Rs. 20 lakhs, but does not exceed Rs. 1 crore, complaint is to be filed with the State Commission.

To Whom the Complaint is to be made

• Where the value of goods or services and compensation, if any, claimed exceeds Rs. 1 crore, the complaint to be filed with the National Commission.

• representing that the seller or the supplier has a sponsorship or approval or affiliation which he does not have.

• making a false or misleading representation concerning the need, for, or the usefulness of any goods or services.

• giving to the public any warranty or guarantee of the performance or length of life of a product which is not based on adequate test.

• (h) making a materially misleading representation to the public concerning the price at which a product or like products of goods have been or are ordinarily sold.

• (i) giving false or misleading facts disparaging the goods, services or trade of another person

Unfair Trade Practices

• Sale offer of bargain price – This includes advertising for supply, at a bargain

price, goods or services that are not intended to be offered for supply at the price for a reasonable period or reasonable quantities.

• Schemes offering Gifts or Prizes : – This category includes : – (a) offering gifts or prizes or other items with the

intention of not providing them and conducting promotional contests;

– (b) the conduct of any contest, lottery or game of chances, etc.

Unfair Trade Practices

• Non-compliance of prescribed Standards : – This category includes cases where goods are sold for

use by consumers knowing or having reason to believe that they do not comply with the standards prescribed by some competent authority.

– The prescribed standard may relate to performance, composition, contents, design, construction, finishing or packing as are necessary to prevent or reduce the risk of injury to the person using the goods.

• Hoarding, destruction or refusal :

– The fifth and last category of unfair trade practices includes cases of hoarding, destruction of goods or refusal to sell goods or services so as to raise the cost of those or similar goods.

Ingredients of Unfair Trade Practices

• The trade practices must consist of any of the practices listed as above.

• The purpose of such trade practice must be to promote the sale, use or supply of any goods or provision of any services.

• The trade practices must have caused loss or injury to the consumer whether by eliminating or restricting competition.

RESTRICTIVE TRADE PRACTICES (RTP) (under MRTP Act 1969)

• Obstruction of capital and resources in to stream of production.

• Manipulation of price or to abstract production, distribution/supply of goods or provision of services.

• Agreement falling within the scope of Sec. 33 (of the MRTP Act) which are deemed as Registrable Agreements relating to Restrictive Trade Practices.

End of Chapter 12