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06 Aug 2020

Highlights On The Consumer Protection Act, 2019

By: Siddhi Vora, Trisha Mandal
 Litigation   Add a comment

Consumers, especially individuals and small buyers, who were at the short end of the bargain when it came to market operations can now seek respite in the new consumer law which significantly turns the table in their favour. Further, the rapid development of technology and e-commerce has posed considerable challenges to adequate protection of consumers’ rights. The Consumer Protection Act, 2019 (“Act”) acknowledges these challenges and marks the commencement of an era of consumer rights which are in tandem with the changing dynamics of the new-age consumer expectations thereby making consumers the king in the true sense. The Act was notified on 9th August, 2019 and it came into force on 20th July, 2020, repealing and replacing the Consumer Protection Act, 1986 (“earlier Act”). The Act aims at revamping the process of resolution and settlement of consumer disputes to make it timelier and more effective.

Key highlights of the Act:

 

  • Definition of Consumer: In recent years, there has been a dramatic expansion in the usage of technology and modern business methods viz. emerging e-commerce retailers/platforms. However, the class of consumers who carried out transactions online was left with no real redressal mechanisms for their protection, as the earlier Act did not recognise online modes of transactions. To keep up with the requirements of the digital era and to give more power and control to the consumers, the Act has widened the definition of a consumer under Section 2 (7) which now includes any person who buys any goods or hires or avails any services, whether offline or online transactions through electronic means, teleshopping, direct selling, or multi-level marketing.
  • Consumer Awareness: Awareness is a key factor for consumers to enable them to enforce their rights and make the right choices, especially in the digital age. Due to lack of awareness, consumers are often exploited and left at the mercy of the manufacturers/sellers. The earlier Act emphasised on consumer education i.e. the focus was on imparting knowledge regarding consumer rights. The Act has now shifted focus to create consumer awareness i.e. foster a cultural sensitivity around rights through education and training to bring about a behavioural change.
  • E-commerce Transactions: The earlier Act did not cover such transactions under its ambit. The Act now recognises and defines terms such as e-commerce (Section 2(16), e-commerce entity (Rule 3 (1)(b) of the Consumer Protection (E-Commerce) Rules, 2020 and electronic service provider (Section 2 (17). There is an increased onus on e-commerce companies, with every such entity being required to provide information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, etc., which are necessary for enabling the consumer to make an informed choice at the pre-purchase stage on its platform. E-commerce platforms must acknowledge the receipt of any consumer complaint within 48 hours and redress the complaint within one month from the date of receipt under the Act. The Consumer Protection (E-Commerce) Rules, 2020 shall apply with regards to all such transactions. 

 

  • Product Liability: The earlier Act did not provide any legal framework specifically with respect to product liability. The Act has introduced the concept of product liability action under Sections 82 to 87 of the Act whereby consumers can claim compensation against manufacturers or product service providers or product sellers for injury or damage caused by the sale of defective products or any deficiency in services. This provision will deter manufacturers, service providers and sellers from delivering defective products or deficient services. The manufacturers, service providers and sellers will bear the brunt of a product liability action subject to exceptions as stated in the Act. The Act also provides for penal consequences for the manufacture or sale of adulterant/spurious goods and suspension of licence for up to two years on first conviction and permanent cancellation on subsequent conviction. 
  • Unfair Contracts: The Act introduces a unique provision that safeguards consumers against unfair contracts i.e. contracts between manufacturer/trader/service provider and a consumer that causes significant changes in and/or hampers the rights of the consumer due to unfair conditions. Few instances of unfair terms would be excessive security deposit, right to terminate or assign unilaterally, disproportionate penalty, unreasonable charges, etc. Section 49 (2) and 59 (2) of the Act empowers the State Commission and National Commission respectively to declare any terms of contract, which is unfair to any consumer, to be null and void. 
  • Misleading Advertisements: Though not specifically provided for under the earlier Act, advertisements were required to not violate the guidelines of the Advertising Standards Council of India (ASCI). By virtue of Sections 2 (1) and 2 (28) of the Act respectively, advertisements and misleading advertisements have now been defined. The Act helps consumers seek redressal against any false or misleading advertisements that cover false descriptions and guarantee of a product or services or deliberate concealment of important information or conveying an express/implied representation. Manufacturers and service providers would attract penal liability for misleading advertisements under the Act, if it is found to be prejudicial to the interest of consumers.
  • Unfair Trade Practice: The Act introduces a broader definition of Unfair Trade Practices (Section 2 (47)), by adding within its ambit three instances– the failure to issue a bill or receipt, the refusal to accept goods returned within 30 days and the disclosure of private information given by the consumer in confidence unless such release is made in accordance with the provisions of law or public interest. The Act is now well covered to protect the consumer against any unfair trade practice carried out by an e-commerce platform.
  • Celebrity Endorsers: Consumers are attracted to opt for various goods/services due to its association with a celebrity who acts as its brand ambassador. However, due to numerous instances in recent past, consumers have fallen prey to misleading advertisements and unfair trade practices under the influence of such celebrities and the earlier Act was silent on this rising issue. Now, endorsement has been clearly defined under Section 2(18) and by virtue of Section 21, celebrity endorsers can be held liable for endorsing a product or service through false or misleading advertisement. Endorsers could face penalties in the form of a fine or a ban from making an endorsement of any product or service, if the same is found to be misleading or prejudicial to the interest of consumers or in breach of consumer rights. 
  • Statutory status of Mediation: An alternative dispute mechanism of Mediation has been given statutory status under Section 74 of the Act. For this purpose, the Act provides for consumer mediation cells to be established under the aegis of the Consumer Commissions, who shall refer the matter for mediation, wherever the scope for early settlement exists and parties agree for it. No appeal shall lie against settlement through Mediation. The Consumer Protection (Mediation) Rules, 2020 shall apply in this regard. Since the earlier Act did not have such a legal provision, this statutory provision is a much-welcomed introduction for speedier adjudication and for reduction of burden on the Courts.
  • Electronic Filing of Complaints & Online Hearings: In the wake of widespread digitisation, the Act also encourages consumers to file complaints electronically and provides flexibility to opt for a hearing through video conferencing. The flexibility of online hearings will reduce the inconvenience caused to parties and additionally save the time and costs incurred by the parties for attending hearing physically.
  • Addition in Territorial Jurisdiction: Sections 34, 47 and 58 are relevant for ascertaining both the territorial as well as the pecuniary jurisdiction of the complaints. Complaints can now be initiated where the complainant resides or personally works for gain in addition to the provisions of the earlier Act, where complaints could be filed at the place where the opposite party resided, personally worked for gain, carried on business or where the cause of action arose . This new provision is a complete win for the complainants whereby they can enjoy the ease and convenience of filing the complaint at a jurisdiction of their choice rather than at the opposite party’s convenience.
  • Enhancement of Pecuniary Jurisdiction: The Act renames the District Forum as District Commission and has enhanced the pecuniary limits of the complaints as stated hereinbelow.

This revision has brought about an increase in accessibility to consumers to seek redressal of complaints at a local level and the National Commission has been vested with adjudication of complaints of higher values and larger stakes. As per the Act, the pecuniary jurisdiction is determined on the basis of the value of goods or services paid as consideration as against the earlier Act wherein, the pecuniary jurisdiction was determined as per the value of goods and services and compensation claimed. There are various complaints where the value of goods or services paid as consideration is equal to/lesser than the fees paid for filing. To assist consumers, the Act now provides that there will also be no fees payable for filing cases up to Rs. 5 Lakhs as per the Consumer Protection (Consumer Disputes Redressal Commission Rules), 2020.

  • Deemed Admissibility: The admissibility of complaint made to the Commission is to be decided within twenty-one days as per the provisions of the Act as well as the earlier Act. However, a notable addition has been encompassed in Section 36 of the Act, whereby if the Commission has not decided the admissibility of a complaint within the time frame of twenty-one days, the complaint is deemed to be admissible.
  • Appointment of President and Members of the Commission: The earlier Act provided for the appointment of President and Members of the Commission through the Selection Committee which comprised of judicial members and other officials. The new Act however does not provide for a Selection Committee and delegates the power of appointment of judicial members and other officials, the qualifications, tenure, etc., to the Central Government. Allowing the Executive to determine such appointment may be counter-intuitive and thus impact the independence of the Commission as a quasi-judicial body and the principle of separation of powers may be violated. Further, the earlier Act required the Commission to be headed by a person who is qualified to be a judge however the Act does not specify the same qualification. The adjudication of matters by Members who do not have a judicial background shall bear its own pros and cons. On one hand the non-judicial Member brings in expertise and rich practical knowledge, on the other hand the Member may lack the knowledge for the application of the required judicial procedure.     
  • Establishment of the Central Consumer Protection Authority (“Central Authority”): The earlier Act did not provide for a separate regulator. By virtue of the Act and Notification in the Official Gazette dated 23rd July, 2020, the Central Authority has been established on 24th July, 2020 as a corporate body. The Central Authority is established to promote, protect, and enforce the rights of consumers and to regulate matters relating to the violation of consumers, misleading advertisements, unfair trade practice, etc. The Central Authority has been empowered to take suo moto actions, pass orders, impose penalty, issue guidelines in the public interest and make interventions to prevent consumer detriments arising from unfair trade practices, initiate class action complaints, including enforcing recall, refund and return of products, etc. The establishment of this new regulator will help to protect consumer rights in a better fashion.
  • Penalties: Stringent penalties are essential to bringing an end to malpractice and mischief. Under Chapter VII of the Act, the term of imprisonment for non – compliance of the order passed by the District, State and National Commission is the same as the earlier Act i.e. not less than a month, but which may extend to three years. However, the penalty by way of fine for the same has increased from Rs. 2500 to Rs.10,000/- as stated in the earlier Act to Rs. 25,000 to Rs.1,00,000/- as per Section 72 of the Act. Further, the Act has for the first time introduced penalties for non–compliance of directions of Central Authority, for the sale or for storing or selling or distributing or importing spurious goods, for unfair trade practice leading to the death of a consumer, for injury caused to the consumers. 
  • Appeals, Review & Revision: The limitation period for filing of an appeal to State Commission has been increased from 30 days to 45 days while retaining the power to condone the delay. The ceiling for appeal deposits provided in the earlier Act before the State Commission (50% of the amount ordered or Rs. 25,000/-, whichever is less), National Commission (50% of the amount ordered or Rs. 35,000/- whichever is less) and the Supreme Court (50% of the amount ordered or Rs. 50,000/- whichever is less) has been removed. Now, under the Act, an appeal by a person shall not be entertained unless he deposits 50% of the amount ordered, if any. This will curb the filing of frivolous appeals. The National Commission can hear appeals against the order of Central Authority by virtue of Section 58 of the Act. A second appeal to the National Commission has now been provided for under Section 51 (3) of the Act if there is a substantial question of law involved, which was not provided in the earlier Act. The power of review has been conferred to District Commission and State Commission and under Section 40, 50 of the Act, respectively. The power of revision can be exercised by the State Commission and National Commission under Section 47(1) (b) and Section 58(1) (b) of the Act.

 

This is a welcome amelioration of the three decades old earlier Act as it brings in modern measures to address the numerous problems faced by consumers in the emerging market and tightens the existing rules to safeguard consumer rights. On the flipside – businesses, manufacturers, sellers, e-commerce entities, etc. will have to be cognizant of the provisions of the Act and amend their business models, products and services accordingly to keep up with the stringent consumer-driven provisions laid down in the Act. For example – to prevent litigation and poor advertising they will have to monitor the quality of their offerings and may have to invest in customer service, etc as well. To reach the desired object, the Act must be executed and implemented in the same spirit with which it was brought in


Image credits : Photo by Mehrad Vosoughi on Unsplash

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