The Consumer Protection Act, 2019: An Overview

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Introduction

A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.”—Mahatma Gandhi.

Today’s generation is highly dependent on technology for their day-to-day tasks. And this includes our consumers, who are rapidly adapting to these modern technologies. The Consumer Protection Act, 1986, though provided easy access to justice and was cost-effective, failed to serve our modern and technology-dependent customers.

Mr. Ram Vilas Paswan, Minister of Consumer Affairs, Food and Public Distribution, proposed the Consumer Protection Act, 2019 in the Lok Sabha on July 8, 2019 which came into force on 20th July 2020. The President of India gave his assent to the Consumer Protection Act, 2019 on 9th August, 2019. The Consumer Protection Act of 1986 is repealed by this Act.

What is Consumer Protection Act, 2019?

The Act aims towards empowering consumers and helping them in protecting their rights through various rules such as Consumer Protection Councils, Consumer Disputes Redressal Commissions, Mediation, Product Liability and punishment for manufacturing or selling products containing adulterant / spurious goods.

Some key features of the act are as follows:

Definition of customer

Section 2(7) of the new Act defines a “customer” as a person who “buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose” or “hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.”

As a result, a customer will thus be regarded as anyone who “purchases any goods” or “hires any services,” which includes both online and offline transactions, teleshopping, direct selling, and multi-level marketing.

Consumer’s Rights

The most essential component of the new Act is undoubtedly the consumer’s rights under Section 2(9), which include:

  • the right to be protected from the promotion of goods, products, or services that are harmful to one’s health or property;
  • the right to information regarding the quality, quantity, potency, purity, standard, and pricing of commodities, products, or services, as applicable, in order to protect consumers from unfair trade practices;
  • the right to be assured, whenever possible, of competitive access to a wide range of goods, products, or services;
  • the right to be heard and the assurance that the interests of consumers would be taken into account in appropriate forums;
  • the right to seek remedies in the event of unfair commercial practices, restricted trade practices, or unscrupulous consumer exploitation; and
  • the right to consumer awareness.

The terms “defect” and “deficiency” are defined in the Act’s sections 2(10) and 2(11).

Defect” means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods or product and the expression “defective” shall be construed accordingly; whereas “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes— (i) any act of negligence or omission or commission by such person which causes loss or injury to the consumer; and (ii) deliberate withholding of relevant information by such person to the consumer.

E-commerce” Section 2(16), “electronic service provider” Section 2(17), and the required responsibilities in relation to internet frauds are among the new additions in the Act. This has enlarged the Act’s reach, ensuring that e-consumers’ rights are better protected and that they are able to take action against e-commerce websites in the event of any infringement or violation.

Definition of Unfair Trade

In Section 2(46) of the new Consumer Protection Act of 2019, the concept of “unfair contract” is defined as, “contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including the following, namely: —

  • Requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or
  • Imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or
  • Refusing to accept early repayment of debts on payment of applicable penalty; or
  • Entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or
  • Permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or
  • Imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.”

Unfair consumer contracts, such as these, are now covered by this Act, and a customer can submit a complaint in this regard. Many enterprises, particularly real estate developers, would benefit from this, as they frequently demand helpless consumers to sign unjust contracts and accept their standard terms before providing services.

Central Consumer Protection Authority (CCPA)

CCPA is one of the provisions of the Act which aims to promote, protect, and enforce the rights of the consumers. It will deal with issues such as consumer rights violations, unfair trade practices, and deceptive advertising. The CCPA will have an investigation wing, led by a Director-General, that will be able to undertake investigations or inquiries into such offences.

The CCPA will have the following responsibilities:

  • Investigating and prosecuting violations of consumer rights;
  • Issuing instructions for hazardous goods to be recalled or services to be withdrawn, as well as price reimbursement and the end of unfair commercial practices, as outlined in the bill.
  • Providing orders to the concerned trader/ manufacturer/ endorser/ advertiser/ publisher to either stop or change a false or misleading advertisement;
  • Imposing penalties; and
  • Issuing consumer safety alerts about harmful goods and services.

Simplified Dispute Resolution Process

  • It gives the State and District Commissions the authority to review their own order;
  • it allows consumers to file complaints electronically and in Consumer Commissions that have jurisdiction over their area of residence;
  • It allows videoconferencing for hearing and deemed admissibility of complaints if the question of admissibility is not decided within the specified period of 21 days.

False And Misleading Advertisements

The term ‘misleading advertisement’ for any product or service has been defined in the Act as, “an advertisement, which falsely describes such product or service, or gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service, or conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice, or deliberately conceals important information.”

The new Act stipulates severe penalties for false and misleading advertisements.

E-Filing and hearing of Complaints

In an approach towards aiding consumers, the Act also facilitates e-filing of complaints and allows consumers to seek video conference hearing of the case by the Commission.

Only Merit-Based Decision

The new Act eliminates the Commission’s discretionary power to dismiss a case in default and requires that the complaint be decided on the merits only if the complainant fails to appear on the scheduled hearing date.

Mediation

  • It provides an Alternate Dispute Resolution mechanism of Mediation to simplify the adjudication process.
  • A Consumer Commission will send a complaint to mediation if there is a scope for an early resolution and the parties agree.
  • Mediation will take place in the Mediation Cells that will be constructed under the Consumer Commissions’ auspices.
  • No appeal against settlement through mediation.

Product Liability

The manufacturer, product service provider, or the product seller to be held liable for injury or damage caused by a defective product or a service deficiency.

For the manufacture or sale of adulterant/spurious goods, a competent court may impose a penalty. The penalties include:

  • In first conviction—suspension of license issued to the person for a period of up to two years
  • In second or subsequent conviction—cancellation of license. 

Second Appeal and Review

The new Act gives the National Consumer Disputes Redressal Commission the power of a second appeal, which is provided under Section 51 (3), subject to the resolution of a material point of law in the case. While the National Commission retains the authority of review, the Act tries to incorporate the power of revision within the State Commission.

The District Commission, State Commission, and National Commission have each been given the power of review under Sections 40, 50, and 60 of the Act, respectively.

Rules and Regulations

THE CONSUMER PROTECTION (E-COMMERCE) RULES, 2020

According to Rule 5, e-commerce entities are required to provide information on return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanisms, payment methods, payment security, charge-back choices, and so on, as well as the country of origin.

Consumer complaints must be acknowledged within 48 hours of receipt, and the issue must be resolved within one month of receipt. They would also be required to establish a grievance officer to handle customer complaints.

If the goods or services are defective, deficient, or delivered late, or if they do not meet the description on the platform, sellers cannot refuse to accept returns, withdraw services, or refuse reimbursements.

The rules also ban e-commerce entities from modifying the pricing of goods or services in order to make a disproportionate profit.

CONSUMER DISPUTES REDRESSAL COMMISSION RULES

  • No fee for filling cases up to Rs. 5 Lakh.
  • Complaints can be filed electronically
  • Amount due to unidentifiable consumers to be credited to Consumer Welfare Fund (CWF).
  • The State Commissions is required to report vacancies, dispositions, case pending status, and other items to the Central Government on a quarterly basis.
  • Jurisdiction of CDRC:
  • District CDRC—Where the value of products and services does not exceed Rs one crore.
  • State CDRC—Where the value of goods and services is more than Rs one crore but does not exceed Rs ten crore.
  • National CDRC—Where the value of goods and services exceeds Rs ten crore.

CONSUMER PROTECTION COUNCILS RULES

The Central Consumer Protection Council Rules are established for the Central Consumer Protection Council, led by the Union Minister of Consumer Affairs, Food and Public Distribution, with the Minister of State as Vice Chairperson and 34 other members from other sectors.

Ministers-in-charge of consumer affairs from two states from each region (North, South, East, West, and NER) will serve on the Council, which will have a three-year term. There’s also the option of forming working groups from among the members to complete specific tasks.

Offences And Penalties

The Central Authority, under Sections 21(2) and 89 of the 2019 Act, has the jurisdiction to impose a penalty on a manufacturer or endorser who makes a false or misleading advertisement. It can impose a penalty of up to ten lakh rupees on the manufacturer or endorser by order.

Apart from that, a new chapter (Chapter VII) for offences and penalties has been added, with comprehensive penalties and punishments for non-compliance, as well as manufacturing for sale, storing, selling, distributing, or importing adulterated or spurious items.

Concerns Regarding the Bill

The new Act is being praise by many consumer activists for broadening the definition of consumer by including those who engage in multi-level and telemarketing transactions both offline and online. However, some key improvements have yet to be implemented either directly in the Act or through parallel adjustments to the existing system. The following are a few of the significant issues:

  1. To promote, preserve, and develop consumer rights, the Central Consumer Protection Authority (CCPA) was established. The headquarters will be in the NCR, and the government will decide on regional offices. The authority is responsible for enforcing consumer rights, unfair trade practises, and deceptive advertising. The government’s task of enforcing and enhancing this authority will be committed, and its implications will undoubtedly be significant for the 2019 Act. Following are the concerns regarding CCPA:
  2. While this is a commendable initiative, it is unclear how this authority will operate, particularly in terms of investigations and inquiries.
  3. When examining the investigative wing and search and seizure functions, there is some overlap between the director general’s functions.
  4. The CCPA has the authority to mandate product recalls, price reimbursements, and directives, as well as penalise producers and endorsers. Surprisingly, the only way to appeal such orders is to go to the national Commission. The circumstances or criteria under which the National Commission will consider such instances are still unknown. Because of the shift in pecuniary jurisdiction, it’s uncertain whether current cases will be moved.
  5. According to the new Consumer Protection Act, the District Commission must determine which cases are suitable for mediation and then refer them to a mediator. Personal discretion and delay will be introduced as a result of this. As a first alternative, the complaint should be offered the opportunity to ask for mediation. The dispute should only move to the commission if the opposing party refuses to accept mediation. Conciliation should be made available in the CPA. This will help to reduce the amount of cases that end up in commissions.
  6. The new Consumer Protection Act, 2019 overburdens District Consumer Commissions with large claims of up to Rs1 crore. As a result of the delays in obtaining justice, customers with minor claims for low-cost consumer durables such as mobile phones, televisions, refrigerators, music players, washing machines, and so on will be unable to fight for their rights. Regardless of the compensation sought, the new Act determines jurisdiction and charges court fees based on the consideration paid. This will lead to the filing of inflated and exaggerated claims in order to profit from a service deficiency.[1]

Role of Indian Judiciary

Consumers are the heart and soul of any developing nation. Consumer Courts are established for the special purpose of aiding our consumers. Below are some landmark judgments issued by our courts under the Consumer Protection Act, 1986, which has since been repealed, but the rules established in those cases aided in the formulation of the current Consumer Protection Act, 2019.

Horlicks Ltd. v. Zydus Wellness Products Ltd.[2]

While examining the idea of advertisement, the Delhi High Court ruled the above matter. On the basis that the advertising comparing Complan to Horlicks was misleading and disparaging, the High Court issued an interim order prohibiting Zydus from broadcasting it. Various judgements on misleading advertisements, disparagement, and the law governing the publication of commercials on television were cited by the Court. Major decisions were as follows:

  1. Dabur (India) Ltd. v.  Colortek (Meghalaya) (P) Ltd.[3]

The Delhi High Court analyzed the concepts controlling advertising disparagement and concluded:

On the basis of the law established by the Supreme Court, the guiding principles for us should be the following:

  1. Article 19(1)(a) of the Constitution protects advertisements as commercial expression.
  2. False, misleading, unfair, or deceptive advertising is prohibited.
  3. Of course, there will be some grey areas, but they should not be treated as serious representations of fact, but rather as a way to promote one’s own product.

Article 19(1)(a) of the Constitution provides protection to this extent, in our opinion. If, however, an advertisement goes beyond the grey zones and becomes a false, misleading, unfair, or deceptive advertisement, it will almost probably be unprotected.

  • Pepsi Co. Inc. v. Hindustan Coca Cola Ltd.[4] 

In Pepsi Co., it was held that when ruling on the subject of disparagement, certain factors had to be considered. These were the factors:

  1. The intent of the advertisement – this can be understood from its story line and the message sought to be conveyed;
  2. The overall effect of the advertisement – does it promote the advertiser’s product or does it disparage or denigrate a rival product?

In this context, it is important to remember that when advertising a product, the advertiser may make an unfavourable comparison to a rival or competing product, but this may or may not alter the story line and message of the marketed product or have that as its overall effect.

  1. The manner of advertising – Is the comparison generally accurate, or does it unfairly criticise or trash a competitor’s product? While accurate criticism is acceptable, untruthful criticism is not.

Connaught Plaza Restaurants Ltd. Kapil Mitra[5]

As part of Mc Donald’s well publicized “Mc Donald’s Mein Khao Har Bar Prize Le Jao” scheme, the complainant/respondent placed two separate orders totaling Rs 81. The complainant claimed that Connaught Plaza Restaurants Ltd., a franchisee running Mc Donald’s Restaurant indulged in unfair trade practices. 

The NCDRC found that the complaint had not provided proof that CPRL had collected SMS costs or that it had an arrangement with the Telecom Company/Service Provider for SMS charge sharing. As a result, the State Commission’s order could not be upheld on those reasons. Connaught Plaza Restaurants Ltd, on the other hand, was found to have engaged in an unfair trade practice by implementing the scheme. The concurrent findings of the District and the State Commission have established this fact. The complainant, as well as other similar customers who may not have filed a complaint, must be given remedy. The NCDRC partially upheld the appeal, reducing the compensation to Rs. 30,000 and the costs to Rs. 70,000.

Ernakulam Medical Centre P.R. Jayasree[6]

The discharge of a dead body by a hospital to an unaffiliated third party is unquestionably a “deficiency in service” under Section 2(1)(g) and (o) of the Consumer Protection Act, 1986, according to the National Commission Dispute Redressal.

Union of India N.K. Srivastava[7]

Recently, an appeal from an order of the National Consumer Disputes Redressal Commission was dismissed by the supreme court. Sarvodaya Hospital and Safdarjung Hospital were accused of medical malpractice in the complaint. The amendment of Sarvodaya Hospital was approved by the NCDRC. While absolving it of the medical negligence charge, it did hold Safdarjung Hospital liable to pay the State Consumer Disputes Redressal Commission’s compensation of Rs 2 lakhs.

Conclusion

Only when customers in a country are takes a stand for their rights will sellers and manufacturers take precautions to ensure that they are never involved in disputes over violations of consumer rights. The Consumer Protection Act, 2019 primarily focuses on providing timely and effective administration for settlement of consumer’s disputes and protection of their interests. This act covers e-consumers, broadening the act’s purview and putting additional responsibility on them for the goods and services they sell and offer. It also tries to solve concerns that CPA 1986 didn’t fully address, such as customer interests as a class, among other things. Since digitalization has changed how a consumer performs in the twenty-first century, the new Act was much needed.

References

https://prsindia.org/billtrack/the-consumer-protection-bill-2019

https://pib.gov.in/PressReleasePage.aspx?PRID=1639925


[1] Jehangir B Gai, Why the new Consumer Protection Act is a Death Knell of Consumer Rights, available at https://www.mxmindia.com/2020/07/why-the-new-consumer-protection-act-is-a-death-knell-of-consumer-rights/ (Visited on July 15, 2021).

[2] (2020) SCC 873.

[3] (2010) SCC 391.

[4] (2003) SCC 802.

[5] (2020) SCC 192.

[6] (2020) SCC 490.

[7] (2020) SCC 636.

Author: Chetna Meena, University School of Law and Legal Studies, Guru Gobind Singh Indraprastha University

Editor: Kanishka VaishSenior Editor, LexLife India.

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