LEGAL MATTERS

The New Consumer Protection Bill

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.