CONSUMER PROTECTION BILL 2018.

CONSUMER PROTECTION BILL 2018.

On Thursday, 20 December 2018, the Consumers Protection Bill, 2018 was passed  in the Loksabha.

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) specialised 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:

1. 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 the consumer’s interest 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 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.

2. 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.

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. The proposed Section 34(1) raises the jurisdiction of District Consumer Court from existing Rs 20 lakh to Rs 1 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 lakh and it goes up from Rs 1 crore to Rs 10 crore and that of the National Commission to over Rs 10 crore.

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; (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 the 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 paragraph 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.

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 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 penalise celebrities endorsing misleading ads. Under Section 89, two years’ jail and a fine of Rs 10 lakh is prescribed for misleading ads. The terms 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 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.

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 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 is 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

However, these welcome changes are being overshadowed by the dark clouds of deleting existing due process sections of establishing consumer court judges. 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 a dampener 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. Dropping this opens the door for changes that have the potential to introduce arbitrariness, favouritism and selection of unqualified persons close to the ruling dispensation. Also unpleasant is 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 the 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 1 crore in a case.