Consumer VOICE

The New Consumer Protection Law

The Consumer Protection Bill, 2015, has passed the legislative deliberations test in the Parliamentary Standing Committee, which has recommended improvements and plugging of gaps to make it more effective. Currently a Cabinet Committee is deliberating on the changes proposed by the Standing Committee and the revised bill will have to be approved before it is introduced in Parliament during the winter session. This article sums up the five ‘highlights’ that are going to make the law much stronger, mature and sophisticated as compared to the Bill passed in 1986.

For the record, the original Act of 1986 has been amended twice. The first time was in 1991 after a Central Committee headed by West Bengal Left Front Minister Niren De suggested improvements. It was once again amended in 1996 to bring marginal improvements.

The present amendment is a leap of faith as compared to the incremental changes made in the first two amendments. It was introduced in Parliament on 10 August 2015 by Union Minister Ram Vilas Paswan after wide-ranging consultations with civil society including voluntary consumer organisations (VCOs). The same month it was referred to the Standing Committee of Parliament headed by JC Divakar Reddy. After significant deliberations, the Standing Committee heard a number of experts and officials and identified the lacunae that needed removal as well as made some new suggestions in its report submitted to Parliament on 26 April 
2016.

There are five highlights in the Consumer Protection Bill 2015 which are being deliberated upon by the government, before its revised form is re-introduced in Parliament’s forthcoming winter session. These five highlights are going to make the law much stronger, mature and sophisticated as compared to the Bill passed in 1986. One can say that much water has flown down the Yamuna since 1986, when this law was first enacted. The 2015 version will replace the old Act of 1986 lock, stock and barrel while retaining all essential features but making significant changes and additions to make it stronger.

History

The Consumer Protection Act 1986 was a byproduct of the political action by Prime Minister Rajiv Gandhi’s government to move towards a market-driven economy where ‘consumer was king’, as against the legacy of a socialist economy marked by state control of industry. The Consumer Protection Bill 1986 was prepared by the union ministry for civil supplies, then headed by KPN Singh Deo, and eventually steered in Parliament by Union Minister HKL Bhagat. The day the bill was passed with support from all sides of the aisle in Parliament in December 1986 is celebrated as National Consumer Day in India.

How It Has Worked

The 1986 law proved to be a landmark for consumer protection in India as it set up consumer courts in each district of the country along with a state consumer court in each state and a national consumer court in Delhi. These courts have done remarkable work over the past three decades. They have handled about 45.66 lakh cases since inception, bulk of which were at the district level. Of these, 41.66 lakh cases have been disposed of, which is a disposal rate of nearly 91 per cent. About four lakh cases remain pending currently. Of these, the bulk is pending at the district and state levels; only about 11,000 cases are pending at the national level.

Despite the efficient disposal of cases, if a case is contested, it may take about three to five years at the district level, particularly in metro regions, with again about three to five years at appeals in state and national levels. A hotly contested case could drag on for 10 to 15 years due to first and second appeals. The litigation can be long-drawn and expensive and can wear out any individual fighting a company.

1. Penalising Celebrity Endorsements for False and Misleading Ads

Although the 1986 Act has adequate provisions for action against misleading ads, which are deemed to be unfair trade practices, it has been described as toothless as there is no penalty against such advertisers. The Standing Committee has suggested a fine of Rs 10 lakhs or an imprisonment of two years or both, to deter such advertisements. It has also suggested that these penalties be applicable to the persons who endorse the products in the advertisements.

It is pertinent to note that celebrity endorsement caught public attention when buyers of flats protested against cricket captain MS Dhoni for endorsing Amrapali Builders. These flat buyers were protesting against the delay in giving possession of flats to buyers who had invested their hard-earned money in their new homes. MS Dhoni reacted by withdrawing his association with Amrapali Builders. In 2015, similar charges were levied against Amitabh Bachchan, who had endorsed Maggi noodles, which had been found violating food standards. Maggi noodles had to be withdrawn from the market and were re-introduced only after litigation in the Mumbai High Court. The matter is now before the Supreme Court. The law could take no action against the celebrities.

This issue was also deliberated upon by Central Consumer Protection Council (CCPC), who supported the plea that celebrities should be made liable for ‘misleading advertisements’. The CCPC is a nominated body of experts under the Consumer Protection Act, 1986, and is headed by the union minister of consumer affairs. In its meeting held earlier this year, it deliberated on this issue and recommended regulation of ads that had celebrity endorsements. The union cabinet has to decide whether there will be a jail term for celebrities giving misleading endorsements, along with a monetary penalty, or only a penalty. This issue will be finally decided on the basis of recommendations by a Group of Ministers. In any case, whether there is a jail term for celebrities or not, the law will be strong enough to deter advertisers from releasing misleading ads. The celebrities on their parts may be forced to do due diligence about the features of the product they are promoting.

2. 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 144 years, Indian courts have upheld the validity of all terms of contracts if the contract is validly entered into, and have refused to judge the reasonableness of terms of contracts once parties have bound themselves to such contracts. The major exceptions are contracts in which minors are parties or the object of the contract is 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) unilateral termination without cause; and (iv) one that puts the consumer at a disadvantage. The standing committee has recommended that the Bill lay down principles that widen its scope to determine whether a contract term is unfair. This will allow terms of contracts other than the specified six to be classified as unfair. The consumer courts 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.

3. 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 whereby the Authority can intervene to protect consumers’ 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 the last three decades.

The Consumer Protection Authority will be able to intervene in the market in a wide number of situations that have been elaborated in the Bill. It is likely to emerge as a regulatory body for consumer protection. A similar function is being served by the Bureau of Consumer Protection in the Federal Trade Commission (FTC) of the USA and the Directorate General for Consumers Protection in the European Commission.

4. 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 parties to a dispute should discuss the dispute with an empanelled mediator to find a mutually acceptable solution instead of getting into a long-drawn litigation. Mediation centres will be set up at the central, state and district levels as prescribed by the respective state governments. This will enable settlement of disputes by a mediator except in cases of grave threats to life and physical or mental injuries.

5. Product Liability

A new chapter has been introduced to enforce product liability against manufacturers and even make them recall the product from the entire market.

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

Prof. Sri Ram Khanna, Managing Editor, Consumer Voice

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