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Six Positive Changes in New Consumer Protection Law Passed in Lok Sabha – An Analysis by Prof Sri Ram Khanna & Consumer Voice Team

 

On Thursday, 20 December 2018 The Consumers Protection Bill, 2018 was passed just before the house was adjourned for the day amid noisy disruptions. It was the first Bill to be introduced in  2018 budget session of Lok Sabha after it passed the legislative deliberations test in the Parliamentary Standing Committee. In 2016 the parliamentary Standing Committee had examined the earlier version of Consumers Protection Bill, 2015 and made its recommendations which have taken over a year to process. The first version of the Bill had been finalized during UPA II.

Thrice Amended: The law has been amended thrice. It was first amended in 1991 after a Central Committee headed by West Bengal Left Front Minister Niren De suggested improvements. It was once again amended in 1993 to bring marginal improvements. The third amendment was made in 2002 by the NDA. The present amendment is a leap of faith as compared to the incremental changes made in the first three amendments.  The Consumer Protection Bill, 2015 was introduced in parliament by Union Minister Ram Vilas Paswan on 10th August, 2015 after wide ranging consultations with civil society including Voluntary Consumer Organizations (VCOs) who welcomed the changes. It was referred to the standing Committee of parliament headed by J.C Divakar Reddy the same month. After significant deliberations the Standing Committee heard a number of experts and officials and identified lacunae which needed removal as well as made some new suggestions in its report submitted to parliament on 26th April, 2016. The government had taken 20 months to process the changes and introduced the revised 2018 Bill in Parliament in January, 2018.

WHAT ARE THE SIX POSITIVE CHANGES?

The changes in the existing Act of 1986 are mostly positive. We have identified six positive features in the 2018 Bill which seeks to repeal and replace the 1986 Act lock stock and barrel. These include: First setting up of a new Executive Regulatory Authority called Central Consumers Protection Authority (CCPA) specialized to protect consumers. Second, it sets up a Mediation Cell in each consumer Court to mediate on consumer disputes. Thirdly, it widens the geographical jurisdiction of a consumer court to include the home or workplace of the complainant and 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 introduces punishment to jail and fine for misleading ads and injury from adulteration and spurious goods. Sixth, it introduces the concept of Product liability action widening the jurisdiction of the consumer courts. These positive changes need to be welcomed and appear to be like the warmth of the winter sun on a chilly, cloudy day in North India.

The Six positive issues that constitute the sunshine hiding behind the dark clouds on a winter morning are explained:

Setting up of a 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. It provides teeth to this Bill where the Authority can intervene to protect consumer’s interest in the market place. 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 last three decades. This authority will be able to intervene in the market in a wide number of situations which have been elaborated in the BILL. It’s likely to emerge as a Regulatory Body for Consumers Protection.

Setting up of Mediation Centres in Consumer Courts:
A new chapter has been added to the Bill relating to setting up the 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 to the dispute instead of long drawn litigation. Mediation Centres would be set up at the Central, State and District levels prescribed by respective state and central governments. This would enable settlement of disputes by a mediator upon reference by a consumer court.

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. The proposed Section 34(1) raises the jurisdiction of District Consumer Court from existing Rs. 20 lacs 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 decendi in the Sonic Surgical case which is frequently being cited by Consumer Courts to oust geographic jurisdiction in cases where the cause of action arose at another place. The pecuniary jurisdiction of the State Commissions has been enhanced from Rs. 20 lacs and it goes up from one crore to Rs 10 crores and that of the National Commission to over Rs 10 crores.

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; (vi) one which puts the consumer at a disadvantage. The Parliamentary Standing committee had recommended that the Bill should lay down principles which widen its scope to determine whether contract term is unfair. This would allow terms of contracts other than the specified six to be classified as unfair. The change in the opening para of Section 2(46) does not appear to do justice to this recommendation and could have been better worded 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.

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 which are deemed to be unfair trade practices, the act has been described as toothless as there was no penalty against such advertisers. The Bill has dropped the earlier proposal to penalize celebrities endorsing misleading ads. Under Section 89 two years jail and fine of Rs. 10 lacs is prescribed for misleading ads. The term of jail and fine are enhanced to five years and Rs. 50 lacs 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 will be applicable to the persons who endorse the products in the advertisements. The Bill does not have any such provision against the endorsing celebrity. Though the celebrities on their parts may be forced to 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.

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 are unreasonable. The Parliamentary Standing Committee observed that this puts an undue burden on the consumer, since it would not be possible to claim liability if any one of the conditions are not met. It recommended that the provision be redrafted such that the consumer has 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 is covered under the Bill. It recommended that the Bill should also specify conditions for establishing deficiency in services.

SOME DEFICIENCIES REMAIN AS A DARK CLOUD HIDING THE SUNSHINE

However, these welcome changes are being overshadowed by the dark clouds of deleting existing due process sections of establishing consumer court judges that is like hiding warm sunshine on a chilly winter morning. The new Bill has dropped the due process for appointments of consumer court judges which is based on a political consensus contained in CPA, 1986. It’s like a damner on an otherwise welcome bill with six positive additions to the existing Consumer Protection Law. The now missing 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 also law and are made by a Ministry without any open consultation process and notified by Government in the official Gazette. This dropping opens the door for changes that have the potential to introduce arbitrariness, favoritism and selection of unqualified persons close to the ruling dispensation. The unpleasant topping on this cake is the dark cloud dropping the formal role of High Court Chief Justices in mandatory consultation for appointment of judicial officers as heads of State Commissions and 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 up to value of Rs one crore in a case.

SUGGESTION FROM CONSUMER VOICE: Consumer VOICE suggests retaining the following sections of 1986 act in current bill:

 

COURTS

QUALIFICATION OF MEMBERS

SELECTION COMMITTEE COMPOSITION

TERM & APPOINTMENT

DISTRICT FORUM

10(1)

10(1)(A)

10 (2)(3)

STATE COMMISSIONS

16(1)

16(1)(A)

16 (2), (3)

NATIONAL COMMISSION

20(1)

20(1) (A)

20(2), (3)

 

These six positive highlights are going to make this law much stronger, mature and sophisticated as compared to the Bill first passed in 1986 and thrice amended.  One can say that much water has flown down the Yamuna since 1986 when this law was first enacted. The Consumers protection Bill 2018 will replace the old Act of 1986 lock stock and barrel while retaining all essential features but making significant change and additions to make it stronger to protect consumers.

Prof Sri Ram Khanna is managing editor of Consumer Voice and former Dean and head of Commerce, Delhi School of Economics

Also Read: Consumer Protection Bill 2018 | Consumer Protection Act 1986

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