Consumer Protection Bill, 2018: A Paradigm Shift?

[Chirali Jain is a BBA LLB (Hons) student at National Law University, Jodhpur]

On 20 December 2018, the Lok Sabha passed the Consumer Protection Bill, 2018 (the “Bill”) which is an attempt to replace the entire Consumer Protection Act, 1986 (the “1986 Act”). The question is whether there was a need to replace the entire legislation? What were the insurmountable obstacles that led to a three decades old legislation needing to be replaced? Will such a new legislation be successful in resolving such difficulties? These questions are sought to be addressed by examining the Bill closely.

The sole purpose of the 1986 Act was to protect the interest of the consumers. It was a shift from caveat emptor to caveat venditor. It was neither punitive nor preventive in nature, but compensatory. The intention behind the legislation was to provide simple, speedy and inexpensive redressal to the consumers. But a change or shift in the consumers’ mindset, the advent of new technology, and delay before the Consumer Courts have hinder the effect or purpose sought to be achieved by the 1986 Act. This led to an urgent need on part of the Government to enforce laws that could effectively check consumer frauds and provide necessary amendments in the various provisions of the Act so as to introduce a more successful mechanism.

Thus, in order to address the shortcomings in the 1986 Act, the Bill was introduced in the Lok Sabha this year. The Bill takes into account a rapid changes in consumer market place, deals with misleading advertisements and, most importantly, online and teleshopping. The Bill was referred to a Standing Committee for necessary changes and was approved by the Lok Sabha recently.

The Key highlights of the Bill are:

1. It establishes a Central Consumer Protection Authority (the “CCPA”) which acts a national level regulator. It shall deal with rights of consumers as a class, and with matters that are prejudicial to the interest of the public and the consumers. The CCPA will possess the powers of search and seizure, and headed by the Director General, will play an investigative role. Any unfair trade practice or misleading advertisement shall be construed more severely than before.

If the CCPA has conducted an investigation and there is sufficient evidence to demonstrate violation or any prejudice caused to consumer rights or adoption of any unfair means, it may pass any such order within its powers that may be necessary, including (a) recalling of goods or withdrawal of services which are dangerous, hazardous or unsafe; (b) reimbursement of the prices of goods or services so recalled to purchasers of such goods or services; and (c) discontinuation of practices which are unfair and prejudicial to consumers’ interest. It also has powers to issue directions or penalize manufacturers or celebrity endorsers against any false or misleading advertisements or claims.

2. The Bill contains provisions with respect to misleading advertisements which it defines in clause 2(28). Any person indulging in misleading advertisement can be imposed a penalty of Rs. 10 lakhs according to the directions of CCPA. It has attained a status of a punishable offence along with imprisonment for a term which may extend to 5 years and penalty of 50 lakhs.

3. There is a special provision for liability of endorsers. Endorsement is defined in clause 2(18) as any message, verbal statement, demonstration, depiction of name, signature or any other identifiable characteristic of an individual or depiction of name or seal of any institution which makes the consumer believe that it reflects the opinion, finding or experience of the person making such endorsement is fraudulent shall be liable. However, no liability will be attracted by the endorser if it has exercised due diligence and verified the claims made in the advertisements.

4. Chapter IV of the Bill deals with product liability, a much needed clause in the 1986 Act. It means the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto. But it will not include any harm caused on account of breach of warranty conditions or any commercial or economic loss. The product liability claim can be brought by a complainant against a product manufacturer, service provider as well as a seller exercising substantial control over designing, testing or modifying the product.

5. The Bill seeks to expand the definition of “deficiency” according to clause 2(11) and include acts of negligence or omission or commission and deliberate withholding of relevant information which causes loss or injury to the consumer.

6. The 1986 Act lacks the provision of “unfair contract” which has been incorporated by the new Bill. It is a contract between a manufacturer or a trader and a consumer which leads to causing significant changes in the rights of the consumer. The Bill identifies six types of unfair contracts; (a) requiring manifestly excessive security deposits, (b) imposing any disproportionate penalty on the consumer for the breach of contract, (c) refusing to accept early repayment of debts on payment of applicable penalty, (d) entitling a party to the contract to terminate such contract unilaterally, without reasonable cause, (e) permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent, (f) imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer at a disadvantage.

7. The dispute can be referred to mediation as an alternative dispute redressal mechanism. There is also a provision for setting up a Consumer Mediation Cell. If the parties at any step want to settle their disputes through mediation, the court or the National Commission shall have the power to direct the parties by giving their written consent to resort to mediation.

8. Presently, the pecuniary jurisdiction of the District Consumer Forum is Rs. 20 lakhs and Rs. 1 crore for the State Commission, but according to the current market trends the Bill seeks to raises the pecuniary jurisdiction. Now the District Commission shall deal with cases up to Rs. 1 crore, the State Commission with cases up to Rs. 10 crores and the National Commission with cases exceeding the value of Rs. 10 crores.

Analysis

Apart from the abovementioned provisions, various other provisions have been introduced in the Bill that were absent in the 1986 Act. Thus, in totality, the Bill is an attempt to overcome all the shortcomings of the Act to provide speedy justice and protect the interest of the consumers in a better manner possible. However, certain provisions in the Bill need to be addressed before it takes effect as legislation.

The first such issue relates to the composition of the Commissions under the Bill. The Commission will be headed by a President and will comprise of other members; however, the power of deciding the qualifications of these president has been vested with the Central Government whereas in the existing 1986 Act the Commission shall be headed by a person qualified to be a judge and prescribed minimum qualifications for it as well. The Bill provides only for non-judicial members as a part of the Commission and this would violate the doctrine of separation of powers between the executive and the judiciary. As these Commissions shall be adjudicating bodies, having only non-judicial members would take away the essence of this function.

Secondly, with respect to appointment of members of the Commission, according to the Bill, the Central Government shall notify the method of such appointment. These Commissions are intended to be quasi-judicial bodies. This raises an issue of concern about allowing the executive to appoint the members of the Commission as it would affect the independent functioning of the Commission. Under the 1986 Act, such appointments are carried out by a selection committee which comprises of a judicial member necessarily. There may be situations where the Government might be a party to the dispute itself and the when the dispute does before the Commission, the member appointed by the Government ends up adjudicating.

Apart from the inconsistencies mentioned above, the Bill is a gallant attempt to achieve the said objective of protecting the interest of the consumers but these issues raised above need to be resolved in order to maintain the balance between the executive and judiciary and protect the basic structure of the Indian Constitution.

Chirali Jain

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2 comments

  • A very well written note, Chirali. Just wanted to inquire a few things.
    On the product liability aspect, you mention that product liability is covered in Chap IV of the bill. I am looking at the text of the bill available on prsindia.org. The text seems to reflect product liability in Chap VI of the bill. I am not sure if I am looking at the wrong version of the bill. But please do confirm the chapter reference.

    Further, you have mentioned that product liability will not include any harm caused on account of breach warranty condition. Sections 84 and 85 of the bill dealing with liability of product manufacturer and product service provider seem to indicate that liability under a product liability action will include cases where product / service does not conform to express warranty.

    Just wanted to be sure that I am not missing anything.

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