In furtherance to Part - I of the article, the authors shall endeavour to outline some of the salient features of the Act of 2019 and how the same can be used for strengthening the protection of consumer rights in India.
Salient features of the New Act (Cont.)
Courts, in consumer disputes, have often been called in to adjudicate the validity and vires of a specific term of a contract, on the touchstone of reasonableness and unfair disadvantage. The Hon'ble Supreme Court in a catena of decisions especially in relation to the real estate sector on innumerable occasions has set aside unconscionable terms in a contract and interpreted them in favor of the disadvantaged party, i.e. the consumer. However, in the absence of specific guidelines and provisions to determine the unfairness in a term of a contract, leaves them to judicial interpretation and results in uncertainty of outcome for the parties involved. A clear demarcation would therefore ensure both clarity and certainty of law which is of extreme importance in a democracy.
The subject of unfair terms in a contract has attained profound significance in recent times, in relation to both consumer contracts and other contracts. The tremendous expansion in economic activity has led to the need for greater ease of business in the country. Hence, it has become important to have a comprehensive set of laws to deal with 'unfairness' in contracts. This would not only protect the weaker party against the stronger but also create a just and conducive environment for doing business in the country. In the last two decades, several countries have undertaken new laws on the subject in order to protect small businessmen and consumers particularly to grant protection from the disadvantages of extensive introduction of standard terms of contracts which are one sided.
Towards this end, the Unfair (Procedural & Substantive) Terms in Contract Bill, 2018, was introduced before the Rajya Sabha on June 21, 2019. The Bill declares certain provisions of the Indian Contract Act, 1872 and Specific Relief Act, 1963 as procedural and substantive and provides statutory guidelines for each of their determination by courts. The said Act stemmed from the 199th Law Commission of India Report on 'Unfair Procedural and Substantive Terms in a Contract' which was tabled in August, 2006.
The new Act takes this discussion a step further by expressly outlining the ambit of an 'unfair contract' under Section 2(46) which defines the same as a contract between a manufacturer, 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, requiring manifestly excessive security deposits to be given by the 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 of the contract; or refusing to hear early repayment of the debts on payment applicable; or entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or permitting (or have 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.
The inclusion of such a substantive and all-encompassing definition under the Act of 2019 will also go a long way in charting the way forward on the contract law jurisprudence in the country.
Product Liability Action
Another significant departure under the Act of 2019 is the inclusion of a new chapter (Chapter VI) regarding 'Product Liability' under Sections 82 to 87 of the Act. Significantly, under the 1986 Act in the absence of any specific provision regarding the same, consumers were unable to approach an appropriate consumer forum for compensation and were therefore, required to approach a civil court.
The Act of 2019 defines a 'product liability' under Section 2(34) to mean the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold by deficiency in services relating thereto; and under Section 2(35) envisages a 'product liability action' by a consumer for claiming compensation for the harm so caused to him.
Under the scheme of the new Act, a product liability action may be brought by a complainant against a product manufacturer or a product service provider or a product seller, as the case may be, for any harm caused to him on account of a defective product. The Act envisages that a product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making any express warranty of a product. Sections 84 to 86 of the Act of 2019 outline the liability of a product manufacturer, product service provider, and that of a product seller.
Establishment of the Central Consumer Protection Authority (CCPA)
The legislature has provided for a wholly new Chapter in the form of Chapter III envisaging the establishment of a Central Consumer Protection Authority under the Act. As provided in section 10 of the Act, the Central Consumer Protection Authority (CCPA) has been established on July 24, 2020.
The Authority is being constituted under Section 10(1) of the Act of 2019 and seeks to widen the scope of the Act in addressing consumer concerns. The new Act recognises offences such as providing false information regarding the quality or quantity of a good or service, and misleading advertisements. It also specifies action to be taken if goods and services are found "dangerous, hazardous or unsafe", and the establishment of the said Authority is towards providing effective investigation, and consequent redressal of such deficiencies outlined in the enactment.
For operationalisation of the CCPA, Additional Secretary in the Department of Consumer Affairs has been assigned the charge of Chief Commissioner, Joint Secretary the Department of Consumer Affairs as Commissioner, Director General the Department of Consumer Affairs as Director General (Investigation) and Director General, National Test House as Additional Director General (Investigation) in the Central Consumer Protection Authority w.e.f. July 29, 2020 to exercise the powers and discharge the functions under the Act.
The objective of the Central Consumer Protection Authority (CCPA) is to promote, protect and enforce the rights of consumers as a class. Towards this end, under Section 18 of the Act, it will be empowered to conduct investigations into violation of consumer rights and institute complaints / prosecution, order recall of unsafe goods and services, order discontinuation of unfair trade practices and misleading advertisements, impose penalties on manufacturers/endorsers/publishers of misleading advertisements. The jurisdiction to hear an appeal of any person aggrieved by the order of the said authority has been conferred on the National Commission.
For giving effect to the provisions of the Act, the following Rules have also been notified and made effective from 20th July, 2020 -
- The Consumer Protection (General) Rules, 2020
- The Consumer Protection (Central Consumer Protection Council) Rules, 2020.
- The Consumer Protection (Consumer Disputes Redressal Commissions) Rules, 2020.
- The Consumer Protection (Mediation) Rules, 2020.
- The Consumer Protection (Salary, allowances and conditions of service of President and Members of the State Commission and District Commission) Model Rules, 2020.
- The Consumer Protection (Qualification for appointment, method of recruitment, procedure of appointment, term of office, resignation and removal of the President and members of the State Commission and District Commission) Rules, 2020.
- The Consumer Protection (E-Commerce) Rules, 2020.
Another commendable addition to the consumer protection jurisprudence under the Act of 2019 is the formal statutory recognition of mediation. For many years, especially in the Indian context, the authors have observed the reluctance to embrace mediation as an effective means for dispute resolution. Even though the progress experienced in this regard may not have been at the desirable pace, it is indisputable that improvements have been made specially qua matters relating to family and matrimonial disputes. The benefits that mediations bring have been slow to reach the realm of commercial and consumer dispute matters. There has been, however, a concerted effort to make the legal environment more favourable, with many courts finding it increasingly convenient to refer matters to mediation to iron out an amicable settlement rather than resort to the traditional court litigation to resolve the ever-increasing complexity of consumer disputes.
The Act of 2019, under Section 74, directs the establishment of Consumer mediation cells, attached to each of the consumer commissions by the state governments for the state and district commissions and by the Central government for the National Commission, and for each of its regional benches.
In affording judicial recognition to formal mediations in consumer cases, the Act of 2019 has made a remarkable stride in ensuring the benefits of this alternate dispute redressal mechanism is realised by the masses to ensure speedy and amicable settlement of disputes.
Pecuniary Jurisdiction & Power of Review
The new Act has also revised the pecuniary jurisdictions of various forums with the District Commissions now having jurisdictions for cases where the value of goods or services paid as consideration and complaints against unfair contracts does not exceed rupees one crore, State Commissions with jurisdictions in cases where the value of goods or services paid as consideration and complaints against unfair contracts exceed rupees one crore but does not exceed rupees ten crores and the National Commission having jurisdiction over cases with consideration and complaints against unfair contracts over rupees ten crores. Like under the 1986 Act, the Appeals from orders/decisions of the District Commissions shall lie to the appropriate State Commission and from those of the State Commissions to the National Commission.
In addition to the avenue to take an order in Appeal to the higher commission, the Act of 2019 also envisages under Sections 40, 50 and 60 a power of review of any order passed by a consumer commission, hitherto available only to the National Commission under the 1986 Act, if there is an error apparent on the face of the record, either on its own motion or on an application made by any of the parties within thirty days of such order.
Will the Act of 2019 be afforded retrospective operation?
An important topic of discussion in the legal circles today is whether the Act of 2019 can be afforded a retrospective operation. Though in the absence of a definitive pronouncement on the issue by the Hon'ble Supreme Court of India it will be premature to conclusively determine the same, the authors are of the view that the Act of 2019 can only be afforded a prospective operation.
The repeal of a law shall not affect the previous operation of any enactment i.e. the proceedings under Consumer Protection Act, 1986 shall continue for cases which had been filed prior to the implementation of Consumer Protection Act, 2019 on 20.07.2020. The same can be gauged through the repeal and saving section (Section 107) of the Consumer Protection Act, 2019 which has been reproduced below -
"107. Repeal and savings
(1) The Consumer Protection Act, 1986 is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken or purported to have been done or taken under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal."
We may also take the assistance of Section 6 (b) of the General Clauses Act, 1897 to further this view. Section 6(b) of the General Clauses Act, 1897 wherein it is provided that where an enactment repeals any enactment hitherto made, or hereafter to be made, unless a different intention so appears, the repeal shall not (a) revive anything not in force or existing at the time at which the repeal takes effect; or affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder.
Reliance in this regard can also be made to the landmark decision in the case of Commissioner of Income tax v. Vatika Township (P) Ltd., (2015) 1 SCC 1 wherein a Constitution Bench of the Hon'ble Supreme Court of India held as under -
"28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law
"29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. [(1994) 1 AC 486 : (1994) 2 WLR 39 : (1994) 1 All ER 20 (HL)] Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later."
Though it remains to be seen whether the Act of 2019 will truly usher in an era where not only the rights of consumers are protected but rather establish a business order where such rights are supreme, the enactment is a stride in the right direction where the need for a more coherent and stringent statutory system had been felt for quite some time. The authors believe that this earnest step shall ensure that the consumer protection jurisprudence of the nation shall grow into one of the most robust systems in place globally on the shoulders of the Act of 2019.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.