LE­GAL MATTERS

The New Con­sumer Pro­tec­tion Bill

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Six rea­sons to cheer for it

The Con­sumer Pro­tec­tion Bill, 2018, was in­tro­duced in Lok Sabha as soon as par­lia­ment was con­vened for the Bud­get ses­sion in Jan­uary 2018. It is the first Bill to be in­tro­duced in 2018 af­ter it passed the leg­isla­tive de­lib­er­a­tions test in the Par­lia­men­tary Stand­ing Com­mit­tee, which had rec­om­mended im­prove­ments and plugging of gaps to make it more ef­fec­tive. Be­fore this, the law (first en­acted in 1986) was amended thrice, in 1991, 1993 and 2002. The present amend­ment is a leap of faith as com­pared to the in­cre­men­tal changes made in the first three amend­ments. We have iden­ti­fied six pos­i­tive fea­tures in the 2018 Bill which seek to re­peal and re­place the ex­ist­ing 1986 Act lock, stock and bar­rel.

What Are the Six Pos­i­tive Changes?

The first is the set­ting up of a new ex­ec­u­tive reg­u­la­tory au­thor­ity called Cen­tral Con­sumer Pro­tec­tion Au­thor­ity (CCPA) to pro­mote, pro­tect and en­force the rights of con­sumers. Sec­ond, it sets up a me­di­a­tion cell in each con­sumer court to me­di­ate on con­sumer dis­putes. Third, it widens the geo­graph­i­cal ju­ris­dic­tion of a con­sumer court to in­clude the home or work­place of the com­plainant and thereby sub­stan­tially en­hances pe­cu­niary ju­ris­dic­tion of con­sumer courts at all three lev­els. Fourth, it in­tro­duces the con­cept of ‘un­fair terms of con­tract’, which can be nul­li­fied by a con­sumer court. Fifth, it has pro­vi­sions for penalty and jail terms in case of adul­ter­ation and mis­lead­ing ads. Sixth, it in­tro­duces the con­cept of prod­uct li­a­bil­ity ac­tion, widen­ing the ju­ris­dic­tion of the con­sumer courts. Let’s un­der­stand the ram­i­fi­ca­tions in some de­tail. 1. Cen­tral Con­sumer Pro­tec­tion Au­thor­ity: The

Bill es­tab­lishes a Con­sumer Pro­tec­tion Au­thor­ity to in­ves­ti­gate into con­sumer com­plaints, is­sue safety notices for goods and ser­vices, and pass orders for re­call of goods and against mis­lead­ing ad­ver­tise­ments. The Au­thor­ity can in­ter­vene to pro­tect con­sumer’s in­ter­ests in the mar­ket­place. While the present law has pro­vi­sions en­abling the cen­tral and state govern­ments to file cases in con­sumer courts, hardly any such cases have been filed in the last three decades. This Au­thor­ity will be able to in­ter­vene in the mar­ket in a wide num­ber of sit­u­a­tions, many of which have been elab­o­rated in the Bill. It’s likely to emerge as a reg­u­la­tory body for con­sumers’ pro­tec­tion.

2. Me­di­a­tion cen­tres in con­sumer courts: A new chap­ter has been added to the Bill re­lat­ing to set­ting up a mech­a­nism for un­der­tak­ing me­di­a­tion in con­sumer dis­putes. The phi­los­o­phy is that will­ing par­ties to a dis­pute should dis­cuss the dis­pute with an em­pan­elled me­di­a­tor to find a mu­tu­ally ac­cept­able so­lu­tion, in­stead of get­ting into a long-drawn lit­i­ga­tion. Me­di­a­tion cen­tres will be set up at the cen­tral, state and dis­trict lev­els. This will en­able set­tle­ment of dis­putes by a me­di­a­tor upon ref­er­ence by a con­sumer court. 3. Widen­ing the ju­ris­dic­tion of con­sumer courts: The ex­ist­ing prin­ci­ple of ju­ris­dic­tion of a dis­trict con­sumer court is the place where the cause of ac­tion arose or where the branch of the opposite party is lo­cated. This point is set­tled by the Supreme Court, which held in Sonic Sur­gi­cal (Civil Ap­peal No. 1560 of 2004) that the case should be filed only in the ju­ris­dic­tion of the branch of­fice where the cause of ac­tion arose. The com­plaint can­not be filed in any branch of the opposite party. Fur­ther, the pro­posed Sec­tion 34 (1) raises the ju­ris­dic­tion of a dis­trict con­sumer court from the ex­ist­ing Rs 20 lakh to Rs one crore. The pro­posed Sec­tion 34 (2) (d) adds the place where the com­plainant re­sides or per­son­ally works for gain as an­other place where the com­plaint can be filed. This welcome change com­pletely up­sets the ra­tio de­ci­dendi in the Sonic Sur­gi­cal case, which is fre­quently cited by con­sumer courts to oust ge­o­graphic ju­ris­dic­tion in cases where the cause of ac­tion arose at an­other place. State Con­sumer Dis­putes Re­dres­sal Com­mis­sions (CDRC) will en­ter­tain com­plaints when the value is more than Rs one crore but does not ex­ceed Rs 10 crore. Com­plaints with value of goods and ser­vices over Rs 10 crore will be en­ter­tained by the Na­tional CDRC.

4. Un­fair terms of con­tract: All con­tracts in In­dia have been judged on the ba­sis of ju­rispru­dence based on The In­dian Con­tract Act of 1872. For nearly 146 years, In­dian courts have up­held the va­lid­ity of all terms of con­tracts if the con­tract was validly en­tered and have re­fused to judge the rea­son­able­ness of terms of con­tracts once par­ties have bound them­selves to such con­tracts, the ma­jor ex­cep­tion be­ing con­tracts in which mi­nors were par­ties or the ob­ject of the con­tract was against pub­lic pur­pose or pol­icy. The Bill clas­si­fies six con­tract terms as ‘un­fair’. These cover terms such as (i) pay­ment of ex­ces­sive se­cu­rity de­posits; (ii) dis­pro­por­tion­ate penalty for a breach; (iii) re­fusal to ac­cept early re­pay­ment of debts; (iv) uni­lat­eral ter­mi­na­tion with­out rea­son­able cause; (v) caus­ing con­sumer detri­ment by as­sign­ing a con­tract to an­other party; and (vi) one that puts the con­sumer at a dis­ad­van­tage.

The Par­lia­men­tary Stand­ing Com­mit­tee had rec­om­mended that the Bill should lay down prin­ci­ples that widen its scope to de­ter­mine whether a con­tract term is un­fair. This would al­low terms of con­tracts other than the spec­i­fied six to be clas­si­fied

as un­fair. How­ever, the change in the open­ing para of Sec­tion 2 (46) does not ap­pear to do justice to this rec­om­men­da­tion and needs bet­ter lan­guage to widen it mean­ing­fully. Only State Com­mis­sions and Na­tional Com­mis­sion are be­ing em­pow­ered to de­clare such terms of con­tracts as null and void. This will cer­tainly re­verse the cur­rent trend of con­trac­tual ju­rispru­dence in B to C trans­ac­tions and is to be wel­comed by con­sumers. 5. Jail for false and mis­lead­ing ads, sale of

spu­ri­ous prod­ucts and adul­ter­ated food: Though the 1986 Act has ad­e­quate pro­vi­sions for ac­tion against mis­lead­ing ads that are deemed to be un­fair trade prac­tices, the act has been de­scribed as tooth­less as there is no penalty against such advertisers. Un­der Sec­tion 89, two years’ jail and a fine of Rs 10 lakh are pre­scribed for mis­lead­ing ads. The term of jail and fine are en­hanced to five years and Rs 50 lakh in case of a re­peat of­fence. The Par­lia­men­tary Stand­ing Com­mit­tee had sug­gested a fine of Rs 10 lakh or an im­pris­on­ment of two years, or both, to de­ter such ad­ver­tise­ments. It also sug­gested that these penal­ties should be ap­pli­ca­ble to the per­sons who en­dorsed the prod­ucts in the ad­ver­tise­ments. The Bill does not have any such pro­vi­sion against the en­dors­ing celebrity. Nev­er­the­less, it may be ex­pected that celebri­ties will now do due dili­gence about the fea­tures of the prod­uct they are pro­mot­ing.

The pro­posed Sec­tion 90 pre­scribes jail for sale of adul­ter­ated food, while Sec­tion 91 pro­vides for jail for sale of spu­ri­ous goods.

6. Prod­uct li­a­bil­ity: A new chap­ter has been in­tro­duced in the Bill to en­force prod­uct li­a­bil­ity against man­u­fac­tur­ers and even make them re­call the prod­uct from the en­tire mar­ket.

The 2015 Bill pro­posed that in or­der to en­force prod­uct li­a­bil­ity a claimant must es­tab­lish four kinds of de­fects in the prod­uct, the in­jury caused from it, and that it be­longed to the man­u­fac­turer. The claimant must also es­tab­lish that the man­u­fac­turer had knowl­edge of such a de­fect. It was ar­gued be­fore the Stand­ing Com­mit­tee that the con­di­tions to es­tab­lish a prod­uct li­a­bil­ity claim were un­rea­son­able. The Com­mit­tee ob­served that this put an un­due bur­den on the con­sumer, since it would not be pos­si­ble to claim li­a­bil­ity if any one of the con­di­tions was not met. It rec­om­mended that the pro­vi­sion be re­drafted such that the con­sumer had to prove any one of the con­di­tions in­stead of all six of them. The Com­mit­tee also noted that it was not clear if de­fi­ciency in ser­vices was cov­ered un­der the Bill. It rec­om­mended that the Bill should also spec­ify con­di­tions for es­tab­lish­ing de­fi­ciency in ser­vices.

Some De­fi­cien­cies Re­main

The new Bill has dropped the due process for ap­point­ments of con­sumer court judges which was based on a po­lit­i­cal con­sen­sus as con­tained in the Con­sumer Pro­tec­tion Act, 1986. It’s like a damp­ener on an oth­er­wise welcome Bill with six pos­i­tive ad­di­tions. The list­ing of qual­i­fi­ca­tions, cri­te­ria for se­lec­tions, selec­tion com­mit­tee com­po­si­tion and terms of of­fice of con­sumer court judges – which are part of the ex­ist­ing law – have been dropped and de­moted to rule mak­ing as del­e­gated leg­is­la­tion. Rules are made by a min­istry with­out any open con­sul­ta­tion process, and are no­ti­fied by govern­ment in the of­fi­cial gazette. This drop­ping opens the door for changes that have the po­ten­tial to in­tro­duce ar­bi­trari­ness, favouritism and selec­tion of un­qual­i­fied per­sons close to the rul­ing dis­pen­sa­tion. The un­pleas­ant top­ping on this cake is the drop­ping of the for­mal role of High Court chief jus­tices in manda­tory con­sul­ta­tion for ap­point­ment of ju­di­cial of­fi­cers as heads of State Com­mis­sions, and of Chief Justice of In­dia in ap­point­ment of pres­i­dent of Na­tional Com­mis­sion. The ex­ist­ing pro­vi­sions of chief jus­tices head­ing selec­tion com­mit­tees to pick con­sumer court judges have also been dropped. This is not welcome, par­tic­u­larly be­cause the small­est con­sumer court will han­dle cases where the value may be up to Rs one crore in a sin­gle case.

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