The New Consumer Protection Bill, 2018


The working of the consumer dispute redressal agencies under the Consumer Protection Act of 1986 has served the purpose of the legislation very efficiently however, the disposal of cases has not been fast due to various constraints. Several shortcomings have been noticed while administering the various provisions of the said Act. The emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services, and have provided new options and opportunities for consumer. Misleading advertisements, multi-level marketing, and e-commerce pose new challenges to consumer protection. In view of the changed circumstances, the Consumer Protection Bill was introduced in Parliament to replace the existing Act of 1986. Prof. Sri Ram Khanna, our Managing Editor, answers questions on this subject to Ankur Saha, Legal Head, Consumer VOICE.

Ankur Saha: When was the Consumer Protection Bill, 2018 was introduced in Parliament?

Prof Khanna: The Consumer Protection Bill, 2015 was introduced in parliament by Union Minister Ramvilas Paswan on 10 th 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 26 th April, 2016. The government has taken 20 months to process the changes and introduced the revised 2018 Bill in Parliament in January, 2018. The Consumers Protection Bill, 2018 was introduced in Lok Sabha as soon as parliament was convened for the Budget session in Jan 2018. It is the first Bill to be introduced in 2018 after it passed the legislative deliberations test in the Parliamentary Standing Committee which recommended improvements and plugging of gaps to make it more effective in 2016.

Ankur Saha: What is the history behind the amendments which keeps happening over the year?

Prof Khanna:  The 1986 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.

Ankur Saha: According to you, are there any positive changes/amendments in the new Bill? If yes, please mention what they are.

Prof Khanna: The changes in the existing Act of 1986 are mostly positive. There are 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 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.

Ankur Saha: Can you explain how setting up of a Central Consumer protection Authority and Mediation Centres in Consumer Courts will help the consumers in resolving their case? Also, what are the powers available to the Authorities to settle the dispute?

Prof Khanna:  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.

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 governments. This would enable settlement of disputes by a mediator upon reference by a consumer court. This is welcome as it will reduce litigation.

Ankur Saha: How practical is widening the jurisdiction of consumer courts and what would be the impact of this over the earlier precedents by courts?

Prof Khanna:  The existing principle of geographical 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.

Ankur Saha: How far you think Unfair Terms of Contract will be helpful in reaching the right conclusion while deciding the case?

Prof Khanna:  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 needs better language to widened 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. However, District Consumer Courts have not been empowered to decide on unfair terms of contract and this is a deficiency of the Bill.

Ankur Saha: How the new amendment of imposing fine and jail punishment for false and misleading ads, sale of spurious products and adulterated food would be beneficial?

Prof Khanna:  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.

Ankur Saha: What is product liability and don’t you think that burden of proving the defect on consumers is unreasonable?

Prof Khanna: 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.

Ankur Saha: What is your opinion are the deficiencies in the new Bill of 2018 which can have adverse effect on consumers?

Prof Khanna: The above welcome changes are being overshadowed by the dark clouds of deleting existing due process sections of installing consumer court judges which 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 Consumer Protection Bill 2018. 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.

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