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August 12, 2020

Consumer Protection Act, 2019: A Primer


- Anil Tiwari, Partner [ Hammurabi & Solomon Partners ]
- Shuchi Sejwar, Senior Associate [ Hammurabi & Solomon Partners ]
- Aayushya Aankul, Associate [ Hammurabi & Solomon Partners ]

Business

The New Act addresses consumer concerns arising from the digitization of the business environment...

The Consumer Protection Act, 2019 (hereinafter referred to as “New Act”) was passed by the Parliament on 06.08.2019 and received the assent of the President on 09.08.2019. The Act, inter alia, provides for the protection of the interests of consumers, establishment of a central consumer protection authority, mechanism to settle consumer disputes and specifically regulates product liability and misleading advertisements. The New Act has replaced the three decades’ old Consumer Protection Act of 1986. The New Act has been introduced for effective administration and timely disposal of consumer grievances and complaints. On 15.07.2020, the Central Government issued a notification by which it appointed 20.07.2020 as the date on which the new Consumer Protection Act, 2019 has now come into force. The following provisions have come into force with effect from 20.07.2020:

Anil-Tiwari-Shuchi-Sejwar-Aayushya-Aankul

•     Section 2 (Definition Section)

        [Except Clauses (4), (13), (14), (16), (40)]

•     Sections 3 to 9 (Both inclusive)

•     Sections 28 to 73 (both inclusive)

        [Except sub-clause (iv) of clause (a) of sub-section (1) of section 58.]

•     Sections 74 to 81 (both inclusive)

•     Sections 82 to 87 (both inclusive)

•     Sections 90 and 91

•     Sections 95, 98, 100

•     Section 101

        [Except Clauses (f) to (m) and clauses (zg), (zh) and (zi) of sub-section 2]

•     Sections 102, 103, 105, 106, 107

        [Except Sections 94, 96, 97, 99, 104]

1. KEY HIGHLIGHTS:

•     Widened the definition of ‘consumer’:  The definition now includes any person who buys any goods, whether through offline or online transactions, electronic means, teleshopping, direct selling or multi-level marketing. The earlier Act did not specifically include E-Commerce transactions, and this lacuna has been addressed by the New Act.

•     Enhancement of Territorial Jurisdiction [Section 34(2)]: The Consumer Protection Act, 2019 now provides an added advantage to consumers by providing for filing of complaints where the Complainant resides or personally works for gains as against the 1986 Act which only provides for filing of complaints where the Opposite Party resides or carries on business or where the cause of action arose. This would help in removing the difficulties faced by the consumers in seeking redressal of their grievances against businesses who may not have an office or branch in their state.

1.1    ENHANCEMENT OF PECUNIARY JURISDICTION:

•    Revised pecuniary limits have been fixed under the New Act. Accordingly, the District Forum can now entertain consumer complaints where the value of goods or services paid does not exceed Rs. 1 Crore.

•    The State Commission can entertain disputes where such value exceeds Rs. 1 Crore but does not exceed Rs. 10 Crores.

•    The National Commission can exercise jurisdiction where such value exceeds Rs. 10 Crores.

1.2  ALTERNATE DISPUTE RESOLUTION:

•    The 2019 Act provides for mediation as an Alternate Dispute Resolution mechanism, making the process of dispute adjudication simpler and quicker. This will help with speedier resolution of disputes and reduce pressure on consumer courts, which already have numerous cases pending before them.

•    As per the 2019 Act, the Consumer Forum shall refer the matter to mediation (as per Section 37(1) on the written consent of both the parties within 5 days). For this purpose, the 2019 Act also provides for the establishment of a consumer mediation cell by the respective State Governments in each District Forum and State Commission as well as in the National Commission by the Central Government.

1.3   E-FILING OF COMPLAINTS:

•     The New Act also contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing. This is aimed at providing procedural ease and reducing inconvenience and harassment for the consumers (proviso to Section 35(1)).

•     The electronic filing of complaints will be effective from such date and for such category of cases as may be notified by the President of the National Commission (Rule 8 of CP Rules).

1.4  PRODUCT LIABILITY & PENAL CONSEQUENCES:

•     There was no separate legislation governing ‘product liability’ in India, though it was addressed under CPA 1986, if parties were included within the ambit of ‘consumer’. Insertion of “Product Liability” as a separate chapter in CPA 2019 and a new ground for filing a complaint has been one of the most significant additions to the New Act.

•     The New Act has introduced the concept of product liability and brings within its scope, the product manufacturer, product service provider and product seller, for any claim for compensation.

•     The term ‘product seller’ is defined to include a person who is involved in placing the product for a commercial purpose and as such would include e-commerce platforms as well.

•     There are increased liability risks for manufacturers as compared to product service providers and product sellers, considering that under the New Act manufacturers will be liable in product liability action even where he proves that he was not negligent.

•     Exceptions have been provided under the New Act from liability claims, such as, that the product seller will not be liable where the product has been misused, altered or modified.

1.5  EXPANDING GROUNDS OF FILING COMPLAINT:

•    While the provisions of the Consumer Protection Act, 1986 prescribed six (6) major grounds to file Complaints, the New Act has increased the count to seven (7), and also substantially modified one of the existing grounds to file Complaints as provided under Section 2(c)(i) of CPA 1986. The two key changes are:

    • Introduction of Unfair Contracts as a ground.

    • Expansion of Unfair Trade Practices (Section 2(47) explanation).

•    The New Act introduces a specific broad definition of Unfair Trade Practices, which includes refusal to issue bill, refusal to take back defective goods, sharing of personal information given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law.

•    Endorsers’ Liability: The New Act puts the liability on people/celebrities who endorse brands, since there have been several instances in the past where under the influence of celebrities endorsing certain products/services, consumers have fallen prey to unfair trade practices. In such a case, it becomes the liability of the endorser to take the responsibility to verify the truthfulness of the claims made in the advertisement to prevent liability claims.

2. COMPARATIVE ANALYSIS OF CONSUMER PROTECTION ACT, 1986 AND CONSUMER PROTECTION ACT, 2019:

BASIS Consumer Protection Act, 1986 Consumer Protection Act, 2019
Ambit of Law Online Transactions and Teleshopping were previously not mentioned. All goods and services purchased/availed through all modes of transactions (online, teleshopping, etc.) for which consideration was paid are included. Free and personal services are excluded.
Unfair trade practices (Defined as deceptive practices to promote the sale, use or supply of a goods or service) Includes six types of such practices, such as manufacture of spurious goods, permitting sale/supply of goods that do not comply with the standards prescribed by the Competent Authority, misleading advertisements, etc. The New Act adds three new practices that may be termed as “Unfair Trade Practice”. They are:
i. failure to issue a bill or receipt to the consumer;
ii. refusal to accept a goods returned within 30 days by the consumer;
iii. disclosure of personal information given in confidence, unless required by law or in public interest.
Contests/lotteries may be notified as not falling under the ambit of unfair trade practices.
Product Liability No Provision A Product Liability claim may be made by the Consumer against the manufacturer, service provider and/or the seller.
Unfair Contracts No Provision “Unfair Contract” is defined as a contract which causes significant change in the rights of a consumer. The New Act lays down 6 terms of contract which may be held as unfair to the consumer.
Central Protection Councils Central Protection Councils, established at the district, state, and national level, protect and promote the rights of consumers. Central Protection Councils, established at the district, state, and national level, protect and promote the rights of consumers.
E-Commerce No Provision The New Act defines direct selling, E-Commerce and Electronic Service Provider, which brings them under the purview of Consumer Laws.
Furthermore, the Central Government is empowered to prescribe Rules for Regulating E-Commerce entities. However, the Rules have not yet been notified.
Regulator No Provision The New Act has established the Central Consumer Protection Authority (CCPA), which has the sole purpose of promoting, protecting, and enforcing the rights of consumers as a class.
The CCPA is empowered to issue safety notices, pass orders to recall goods, take steps to prevent unfair practices, reimburse purchase price paid and impose penalties for false and misleading advertisements.
Pecuniary Jurisdiction of Commissions District Commission: Up to Rs. 20 lakh; State Commission: Between Rs. 20 lakh and up to Rs. 1 crore; National Commission: Above Rs. 1 crore.   District Commission: Up to Rs. 1 Crore; State Commission: Between Rs. 1 Crore and up to Rs. 10 Crore; National Commission: Above Rs. 10 Crore.  
Composition of Commissions District Commission: Headed by current or former District Judge and two members. State Commission: Headed by a current or former High Court Judge and at least two members. National Commission: Headed by a current or former Supreme Court Judge and at least four members. District Commission: Headed by a president and at least two members. State Commission: Headed by a president and at least four members. National Commission: Headed by a president and at least four members.
Appointment A Selection Committee, which comprises a Judicial Member and other Officials, recommended Members on the Commissions. There is no provision for a Selection Committee in the New Act. It states that the Central Government shall appoint Members through Notification.
Alternate Dispute Redressal Mechanism No Provision The New Act has mandated that Mediation Cells be attached to the District, State, and National Commissions.
Penalties Non-compliance of the Orders of the Commissions may lead to imprisonment between one month and three years or fine between Rs. 2,000 and Rs. 10,000, or both. As per the New Act, non-compliance of the Orders of the Commission may lead to imprisonment up to three years, or a fine not less than Rs. 25,000 extendable to Rs. 1 Lakh, or both.
Limitation Period for filing Appeal The limitation period for filling an Appeal to State Commission is 30 days. The New Act has increased the limitation period from 30 days to 45 days while additionally empowering the Commission to condone delay in appropriate cases.
Change in deposit amount to file an Appeal before the State Commission The Appellant had to deposit the amount ordered by the District Commission before filing Appeal before the State Commission, up to a maximum of Rs. 25,000/-. As per the New Act, the Appellant shall deposit 50% of the decretal amount ordered by the District Commission before filing an Appeal before the State Commission.
Appeal to National Commission Appeal to National Commission A second appeal to the NCDRC has been provided U/s 51(3) only if there is a substantial question of law involved in the matter.
Power of Revision Yes Power of revision can still be exercised by the National Commission under Section 58(1)(b) of the New Act and by the State Commission under Section 47(1)(b) of the New Act
Power of Review Power of review has been given only to National Commission under Section 22. Power of review has been conferred to District Commission, State Commission and National Commission under Sections 40, 50 and 60 of the New Act, respectively.

3.    ISSUES WITH THE CONSUMER PROTECTION ACT, 2019:

•   Possibility of a clash between the ‘to be established CCPA’ and the prevailing Consumer Forums in cases of a certain class of consumers or a subject matter which may be taken up by both the bodies. There should be a prescribed hierarchy or creation of separate class in order to avoid such a conflict. Further, Section 99 of the New Act directs the CCPA to act according to the directions of the Central Government thereby restricting its autonomy.

•   In case of product liability, it can be anticipated that there may be frivolous claims solely on the basis of discrepancy in designs, even when it results in no actual damage to the consumer or is done in order to improve functionality.

•   Section 2(47) on Unfair Trade Practices pre-determines the existence of a defective product or deficient service. Separately, even if withdrawn or discontinued, Companies could still be held liable under ‘product liability’ or for ‘deficiency of services’.

•   In case of misleading advertisements where even the endorsers may be held liable, the New Act has provided merely one strait-jacketed punishment for different classes of endorsers which may vary in terms of remunerations as well as social reach.

•   The New Act does not empower the Consumer Redressal Commissions to issue either interim injunction or “cease and desist” Orders.

•   Under the New Act, only those services are included for which specific payment is made, such as telephone, electricity, banking, etc. Thus, the doctors, as well as hospitals including those where treatment is given for free such as government hospitals, do not come within the ambit of the Act. The New Act does not explicitly specify healthcare in the list of services listed in the definition of ‘service’.

•   Additionally, the mandatory civil services, such as sanitation, water supply, etc., provided by the State or the local authorities are not covered by the New Act;

•   It is also unclear whether matters currently pending before the Consumer Commissions will continue or if they are likely to get transferred on account of the change in their pecuniary jurisdictions. This ambiguity will further add to delays.

The Consumer Protection Act, 2019 is definitely a step towards a more inclusive legislation. With the introduction of E-Commerce and e-filing provisions, the legislation is catching up with modern techniques and simplifying the process for consumers. The New Act addresses consumer concerns which have arisen due to digitization of the business environment. It also simplifies the process of filing a Complaint and provides for speedy redressal of the same apart from introducing new grounds on which a consumer can initiate action against the seller/service provider.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.

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