Monday, 24 September 2012

CONSUMER PROTECTION - An Indian Perspective

Indian law makers took 39 years to bring any legislation to protect the consumer.

  1. Any person who buys goods & services for a consideration.
  2. Any person who uses goods & services (other than the buyer himself) with the approval of the buyer. (Vide amendment in 1992)

With the approval of buyer?
It denotes that the user of the goods should be a rightful user.
The law construes users of the goods as consumers although they may not be buyers.

But a consumer does not include any person who buys goods for resale or for any commercial purpose

Prior to amendment
Western India State Motors vs Sobhag Mal Meena (1989) – Defective taxi case – meaning of consumer where goods purchased for resale or commercial purpose.

Synco Textiles Pvt Ltd. vs Greaves Cotton (1991) – Defective generator case – company not in the business of generation & sale of power – generators meant for production purpose  & not for commercial purpose – National commission revised the way it had interpreted commercial purpose – Act did not define commercial purpose – National commission took the dictionery meaning – commercial connoted ‘large scale’.

Amendment in 1992
Commercial purpose does not include use by the consumer of goods bought and used by him exclusively for the purpose of earning his livelihood by means of self employment 

Laxmi Engineering Works vs P S G Industrial Institute (1995) – Mr. Joshi’s small scale industry – machine purchased defective – meaning of livelihood interpreted by the Supreme Court – the meaning of the words ‘for the purpose of earning his livelihood’ is explained and clarified by ‘used by him’ and ‘self employment’.

Commercial Purpose
Important: But it is clear from a series of judgments that even the person who purchases goods for commercial purpose is also a consumer if the defects in the goods purchased are found during the warranty period.

Can a Company be treated as a person?
Karnataka Power Transmission vs Ashok Iron Works Pvt. Ltd (February, 2009) 
– Can company be treated as a person? Is electricity goods or service?

  • Under CPA, the definition of person "includes” a firm, a H.U.F, a Co-operative society and an association of persons. The word “include” means the list is illustrative and not exhaustive. The intent of the legislature has to be considered. Under the General Clauses Act, a company is also a person. The definition has to be interpreted widely. Accordingly, a company can also be a consumer entitled to file a complaint under the CPA.
  • Electricity may be goods for the purpose of Sales Tax but under the CPA it is defined to be a service.

Goods has the same meaning as assigned to it in the Sale of Goods Act 
(meant to be movable property).

"Service" means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or loading or both [housing construction] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service".
A person is a consumer of services if he has hired or availed of the service….

Privity of Contract
Preist & Wife v Last (1903) - P asked L for a hot water bottle – Having being shown one by L he asked L if it would stand boiling water – L replied no, but it would stand hot water – P then bought for his wife – Fifth night of use bottle bursts & injures Mrs. P – turned out that the bottle burst because pure rubber formed a very small proportion of the material – P claims price & damages for wife’s pain & suffering from L – Issues – (a) Privity of contract: Mrs. P has no right? (b) Rights of a buyer who relies on the skill & judgment of the seller (as discussed in the Sale of Goods Act)
If this case was to have taken place in India? Discussion would be based on pre & post consumer protection era….

Remember: Indian courts are reluctant in invoking the law of torts. Also, damages awarded under this law are minimal. Thus, it makes a big difference whether the case goes to a consumer court or not!

  • A Consumer, or
  • Any voluntary consumer association registered under the Companies Act, 1956 or under any other law for the time being in force, or
  • The Central Govt. or any State Government,
  • One or more consumers, where there are numerous consumers having the same interest.

 A Complaint on behalf of the public which consists of unidentifiable consumers cannot be filed under the Act.

The following can also file a complaint:

  • Beneficiary of the goods/services.
  • Legal representative of a deceased consumer.
  • Legal Heirs of the deceased consumer.
  • Husband of the consumer.
  • A relative of a consumer.
  • Insurance company.

Consideration is regarded necessary for hiring or availing of services. The payment need not necessarily be immediate. It can be in installments.

 (For the services provided without charging anything in return, the person availing the services is not a consumer under the act).

Consideration may be:
  • Paid,
  • Promised,
  • Partly paid,
  • Partly promised,
  • Any system of deferred payment.

Contention: That a person who has been given free treatment by a government hospital, would not be a consumer. Argued that there was a consideration involved in this relationship. After all, it is people who pay taxes, which run the government establishments?

Supreme Court on taxes:
  • Taxes are imposed under statutory power without the taxpayer’s consent and the payment is enforced by law.
  • Tax is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of tax.
  • Tax is part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay.

Supreme Court noted that there are three categories of hospitals:
  • Where services are rendered free of charge to everybody availing the said services;
  • Where charges are required to be paid by everybody availing the service; and
  • Where charges are required to be paid by persons availing services but certain categories of persons who cannot afford to pay are rendered service free of charge.

Intention of the act:
  • ‘to provide for the protection of
  • ‘achieving or maintaining adequate protection for their population as consumers’
  • ‘encouraging high levels of ethical conduct for those engaged in the protection for their population of consumers’ 

Where charges are required to be paid by persons availing services but certain categories of persons who cannot afford to pay are rendered service free of charge.

Supreme court ruling: ‘Persons who are rendered free service under this category are beneficiaries of the service which is hired or availed of by the paying class.’

Who are not consumers?
  • A person who purchased goods for resale.
  • A person who purchased goods for commercial purpose.
  • A person who obtains services without consideration.
  • Tax-payers to municipality.
  • Applicants for jobs.
  • Persons who filed suits in courts.

Structure of Consumer Forums / Commissions and Their Jurisdictions

(Final Appeal)

Appellate Authority over State Commission Revisional Jurisdiction
Original Jurisdiction Over Rs.20,00,000

Appellate Authority for District Forum
Suo Moto Revision
Original Jurisdiction over Rs. 5,00,000 up to Rs. 20,00,000

Original Jurisdiction up to Rs. 5,00,000

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 in relation to any goods.

It 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, undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.

It is a statement made in writing to the National Commission, the State Commission or the District Forum by a person competent to file it, containing the allegations in detail, and with a view to obtaining relief provided under the Act.

  • A consumer dispute can be filed within two years from the date on which the cause of action arises.
  •  There is no court fees to be paid to file a complaint in a Consumer Forum/ Commission.
  •  Further, a complainant/opposite party can present his case on his own without the help of a lawyer or employ any person other than a lawyer.

Finding of the District Forum
If, after the proceeding conducted under, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to do one or more of the following things, namely:--
(a) to remove the defect pointed out by the appropriate laboratory from the goods in question;
(b) to replace the goods with new goods of similar description which shall be free from any defect;
(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant;
(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party.
(e) to remove the defects or deficiencies in the services in question;
(f) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them;
(g) not to offer the hazardous goods for sale;
(h) to withdraw the hazardous goods from being offered for sale;
(i) to provide for adequate costs to parties.

Overlap with other Laws
The provisions of the Consumer Protection Act shall be in addition and not in derogation of the provisions of any law for the time being in force.

Section 6 of the Indian Post Office Act, 1898:
‘The government shall not incur any liability by reason of the loss, misdelivery or delay of, or damage to, any postal article in course of transmission by post, except in so far as such liability may in express terms be undertaken by the Central Government as hereinafter provided; and no officer of the Post Office shall incur any liability by reason of any such loss, misdelivery, delay or damage, unless he has caused the same fraudulently or by his wilful act or default.
When Speed post was introduced the Post Rules 1933 were amended: ‘in the event of loss of a Speed Post article or loss of contents or damage to the contents, compensation shall be double of Speed Post charges paid or Rs.1,000/- whichever is less’

Mrs. Helen Wallia v Cathay Pacific Airways Limited (2002)
Loss of baggage-airlines offers $20 for 32 kilos lost-passenger claims Rs.24,63,885 + Interest @18%
The Carriage by Air Act 1972: In the carriage of registered baggage and of cargo, the liability of the carrier is limited to $20 francs per kilogram, unless the passengers or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires.
The limits of liability specified in rule 22 shall not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that in the case of such act or omission of a servant or agent, it is also proved that he was acting within the scope of his employment.

The provisions on Unfair Trade Practices were introduced in 1984, by amending the Monopolies and Restrictive Trade Practices Act.
Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice…..

False statement, oral or written or by visible representation:
Re. quality & grade
Re. need of the goods
Re. Warranties & guarantees
Re. Price
Disparaging another person’s goods or services.*
Re. Characteristics, uses & benefits which are non existing.
Advertisement for sale at a bargain price without intending to do so.
Offer gifts or prizes without intending to do so.
Create an impression that something is offered free when it is covered by the amount charged in the transaction as a whole.*
Conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest.*
Permits sale of goods not conforming to standards set by authority.
Permits hoarding of goods.

Holding of Contests & Schemes
HMM Limited vs DG(IR) MRTP Commission (1998) – Lucky purchaser of a bottle of Horlicks could find a coupon inside the bottle – coupon indicated prize – MRTP Commission held that this was an unfair trade practice as the system of getting the coupon  was nothing but a lottery – only a fraction of buyers could get the benefit – prizes many times costlier than the price of a bottle of Horlicks.
Supreme Court held that this was not a case of a lottery as there was no: ‘… draw of lots or that a price was charged for participation in the draw. The fact that some bottles of Horlicks contained a slip of paper which entitled the buyer to a prize is not a lottery in the ordinary sense of the word’

Godrej GE Appliances Ltd vs Whirlpool of India Limited (1992)– Scratch a gift scheme
Commission observed: ‘In this case also, there is no draw of lots, nor any price charged for participation in the scheme. Each participant got the value for his or her money and in addition, stood a chance for winning a prize.’
While some purchasers of Horlicks in the ‘Hidden Wealth Prize Offer’ did not get any prize, in the ‘Scratch a Gift Scheme’, every purchaser under the scheme would get gifts though of varied values.
The Whirlpool case was on an even sounder foundation than the Horlicks case
Create an impression that something is offered free when it is covered by the amount charged in the transaction as a whole.*

*Society of Catalysts V
Star Plus
Bharti Airtel Ltd

(The ‘Har-Seat-Hot-Seat’ contest on the 3rd Avatar of KBC, wherein Airtel received 58 million sms at Rs.2.40 per sms, amounting to Rs.13.92 crs, prizes given out amounted to Rs. 2 lakhs per episode i.e. Rs. 1.04 crs)
Fined Rs. 1 cr, being 14% of profits made over and above normal profit of Rs. 4.76 crs

Disparaging another person’s goods or services.*
  • Disparagement is not defined in the Act. Its dictionary meaning: ‘to dishonour by comparison with what is inferior, bring discredit or reproach upon; dishonour; lower in esteem; speak on or treat slightingly or vilify; undervalue; and depreciate’
  • Disparagement would occur only by comparison with some identifiable product.
  • A mere claim to superiority in the quality of one’s product by itself does not amount to disparaging products of……
  • Whether the representation complained of misleading the buyer….
  • Does a reasonable man, on reading the representation, form a belief different from what is the truth is?
  • It should be noted that ‘disparagement’ is not the only ground for an advertisement to be an unfair trade practice. The same advertisement could still be contested as an unfair trade practice on the grounds of misrepresenting quality.
  • Disparagement could be by way of comparison through words, gestures, gimmicks, pointing out directly to the inferiority of a product.
  • An advertisement could disparage other products, and yet, it would not be a case of disparagement so long as the disparaged product is not identifiable.
  •  Comparative advertisement & disparaging others’ goods is allowed as long as it is based on objective facts.

Any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as a condition precedent for buying, hiring or availing of other goods and services.

Indian Airlines V S. N Seth (1997)
Travel Agent - travel by air - confirmed tickets issued by authorised travel agent of Indian Airlines - no flight on the date indicated in the air ticket - liability of Indian airlines as principal- held liable.
State Commission awarded him compensation of Rs.10,000/-, Rs.1,210/- being price of the air ticket with interest @ 18% per annum being the refund of the price of the ticket and Rs.500/- as costs, National Commission added Rs.2,000 as cost. (Indian airlines had offered a letter of apology and 2 complementary tickets, which was refused by Seth. Seth had claimed Rs. 5 lacs in damages.)

Kunj Behari Mehta V Ansal Properties & Industries Ltd (2000)
Can a builder after agreeing to deliver the possession within a stipulated time, raise a contention that as the price of the flat/property has gone up, it should not be directed to pay any compensation or to pay compensation at reduced rate for delay in delivering the possession of the property?
‘In the view of the commission, such contention of any builder is unjustified and unreasonable because after sale of the property all the benefits accrue to the purchaser and not to the vendor. In any case, if such contention is accepted, the builders/contractors would earn crores of rupees by delaying the delivery of the possession of the flat/property for months together for one reason or the other.’

Dyspepsia – imperfect or painful digestion - is a disease?
LIC V Smt. Chandra Kanta Lohande (2003)
The issue to be decided in this case is whether dyspepsia – imperfect or painful digestion - is a disease, which has to be mentioned in the proposal form of the LIC? Simple answer to the question is ‘NO’ as dyspepsia is not a disease in itself.

Further, in this matter, the main ground of repudiation is that the assured did not disclose the aforesaid disease he was suffering from. In support, it was stated that assured had taken medical leave. Western Coal Fields is a government owned public sector undertaking. In government departments and undertakings employees have the habit of exhausting all types of leave like casual leave, medical leave and earned leave. The first casualty is casual leave, which is exhausted first, then medical leave, which cannot be accumulated beyond a particular limit nor it can be encashed. Hence, they are liberally taken. But that should not be used as a ground for arriving at a conclusion that assured was suffering from some serious ailment, which required notice.

Hotel Hyaat Regency V Atul Virmani (2004)
The issue involved in this case is if the keys of the car given by the customer of a Five Star Hotel for parking to the uniformed valet of the hotel is stolen whether the Five Star Hotel is responsible for making good the loss to the consumer.
Car insured against third party claim but not for theft.
Rs. 900 charged for entry to discotheque.
Notice of disclaimer printed on docket in small letters.
“Beware giving car keys to the valet of this hotel does not ensure safety of your car, Management is not responsible for theft of the car”, board suggested by the Judge!


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