The Consumer Protection Bill, 2018 passed by the Lok Sabha

The Consumer Protection Bill, 2018

The Consumer Protection Bill, 2018 which was introduced on 5th January 2018 in the Lok Sabha was passed by Lok Sabha on 20th December, 2018. However, it has not been passed by the Rajya Sabha yet. If this bill is passed by the Rajya Sabha and receives assent of the President, then after coming into force, it shall repeal the Consumer Protection Act, 1986.

Why this new Act?

Although the consumer dispute redressal agencies constituted under the Consumer Protection Act, 1986 have served their purpose to a considerable extent under the said Act, however the disposal of cases has not been fast due to various constraints. Several shortcomings were noticed while administering the various provisions of the said Act.

Consumer markets for goods and services have undergone drastic transformation since the enactment of the Consumer Protection Act in 1986. The modern market place contains a plethora of products and services. The emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices. Misleading advertisements, tele-marketing, multi-level marketing, direct selling and e-commerce pose new challenges to consumer protection and will require appropriate and swift executive interventions to prevent consumer detriment. There is, therefore, a need to amend the Act to address the myriad and constantly emerging vulnerabilities of the consumers. The Consumer Protection Bill, 2018 provides for the establishment of an executive agency to be known as the Central Consumer Protection Authority (CCPA) to promote, protect and enforce the rights of consumers; make interventions when necessary to prevent consumer detriment arising from unfair trade practices and to initiate class action including enforcing recall, refund and return of products, etc. This fills an institutional void in the regulatory regime extant. Currently, the task of prevention of or acting against unfair trade practices is not vested in any authority. This has been provided for in a manner that the role envisaged for the CCPA complements that of the sector regulators and duplication, overlap or potential conflict is avoided.The Bill also envisages provisions for product liability action on account of harm caused to consumers due to a defective product or by deficiency in services. Further, provision of “Mediation” as an Alternate Dispute Resolution Mechanism has also been provided.The Bill provides for several provisions aimed at simplifying the consumer dispute adjudication process of the Consumer Disputes Redressal Agencies, inter alia, relating to enhancing the pecuniary jurisdiction of the Consumer Disputes Redressal Agencies; increasing minimum number of Members in the State Consumer Disputes Redressal Commissions and provisions for consumers to file complaints electronically, etc.

Key Highlights

Who can be a complainant under the new Bill ?

As per Section 2(5), the term “complainant” shall include

  • a consumer; or
  • any voluntary consumer association registered under any law for the time being in force; or
  • the Central Government or any State Government; or
  • the Central Authority; or
  • one or more consumers, where there are numerous consumers having the same interest; or
  • in case of death of a consumer, his legal heir or legal representative; or
  • in case of a consumer being a minor, his parent or legal guardian.

Who is a “consumer” as per the new Bill ?

Section 2(7) defines the term consumer as any person who

  • buys any goods
  • hires or avails of any service
  • any user of such goods other than the person who buys such goods(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)
  • any beneficiary of such service other than the person who hires or avails of the services(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)

for a consideration which has been paid or promised or partly paid and partly promised.

What are the rights of a consumer as per the new Bill?

As per Section 2(9) consumer rights include

  • the right to be protected against the marketing of goods, products or services which are hazardous to life and property;
  • the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices;
  • the right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices;
  • the right to be heard and to be assured that consumer’s interests will receive due consideration at appropriate fora;
  • the right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
  • the right to consumer awareness;

Defect and Deficiency

Section 2(10) defines the term defect and 2(11) defines deficiency

“defect” means any

  • fault
  • imperfection
  • 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
  • under any contract, express or implied
  • as per claims by the trader in any manner whatsoever

in relation to any goods or product and the expression defective shall be construed accordingly.

“deficiency” means any

  • fault
  • imperfection
  • shortcoming
  • inadequacy
  • any act of negligence or omission or commission by a service provider which causes loss or injury to the consumer
  • deliberate withholding of relevant information by a service provider

with respect to the quality, nature and manner of performance which is required to be maintained

  • by or under any law for the time being in force
  • has been undertaken to be performedby a person in pursuance of a contract or otherwise in relation to any service

Harm and Injury

As per Section 2(22) “harm”, in relation to product liability

  • includes
    • damage to any property, other than the product itself;
    • personal injury, illness or death;
    • mental agony or emotional distress attendant to personal injury or illness or damage to property; or
    • any loss of consortium or services or other loss resulting from a harm referred to above
  • does not include
    • any harm caused to a product itself
    • any damage to the property on account of breach of warranty conditions
    • any commercial or economic loss, including any direct, incidental or consequential loss relating thereto

As per Section 2(23) “injury” means any harm whatever illegally caused to any person, in body, mind or property.

Misleading Advertisement

As per Section 2 (28) “misleading advertisement”in relation to any product or service, means 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

Product Liability

As per Section 2(34) “product liability” means the responsibility of a

  • product manufacturer
  • product seller

of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.

Unfair Contract

As per Section 2(46) “unfair contract” meansa 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 Trade Practice

As per Section 2(47) “unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:

  • falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
  • falsely represents that the services are of a particular standard, quality or grade;
  • falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
  • represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
  • represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
  • makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
  • gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof
  • makes to the public a representation in a form that purports to be
    • a warranty or guarantee of a product or of any goods or services; or
    • a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result

and if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out

Where can a complaint be filed ?

As per Section 17, a complaint relating to violation of consumer rights or unfair trade practices or false or misleading advertisements which are prejudicial to the interests of consumers as a class, may be forwarded either in writing or in electronic mode, to any one of the authorities, namely

  • the District Collector, or
  • the Commissioner of regional office or the Central Authority

Central Consumer Protection Authority

As per Section 10, The Central Government shall, by notification, establish with effect from such date as it may specify in that notification, a Central Consumer Protection Authority to be known as the Central Authority to regulate matters relating to

  • violation of rights of consumers
  • unfair trade practices
  • false or misleading advertisements

which are prejudicial to the interests of public and consumers and to promote, protect and enforce the rights of consumers as a class.

As per Section 15, the Central Authority shall have an Investigation Wing headed by a Director-General for the purpose of conducting inquiry or investigation under this Act as per the directions of the Central Authority.

Powers of Central Consumer Protection Authority

 

  • inquire or cause an inquiry or investigation to be made into violations of consumer rights or unfair trade practices, either suo motu or on a complaint received or on the directions from the Central Government;
  • file complaints before the District Commission, the State Commission or the National Commission, as the case may be, under this Act;
  • intervene in any proceedings before the District Commission or State Commission or National Commission, as the case may be, in respect of any allegation of violation of consumer rights or unfair trade practices;
  • review the matters relating to, and the factors inhibiting enjoyment of, consumer rights, including safeguards provided for the protection of consumers under any other law for the time being in force and recommend appropriate remedial measures for their effective implementation;
  • recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights;
  • undertake and promote research in the field of consumer rights;
  • spread and promote awareness on consumer rights;
  • encourage non-Governmental organisations and other institutions working in the field of consumer rights to co-operate and work with consumer protection agencies;
  • mandate the use of unique and universal goods identifiers in such goods, as may be necessary, to prevent unfair trade practices and to protect consumers’ interest;
  • issue safety notices to alert consumers against dangerous or hazardous or unsafe goods or services;
  • advise the Ministries and Departments of the Central and State Governments on consumer welfare measures;
  • issue necessary guidelines to prevent unfair trade practices and protect consumers’ interest.
  • Refer matter to a regulator or for investigation to be made by the Director-General or the District Collector
  • recalling of goods or withdrawal of services which are dangerous, hazardous or unsafe
  • issue directions and penalties against false or misleading advertisements.
  • reimbursement of the prices of goods or services so recalled to purchasers of such goods or services
  • discontinuation of practices which are unfair and prejudicial to consumers’ interest

District Consumer Disputes Redressal Commission

Section 28 provides for establishment of one or more District Consumer Disputes Redressal Commission, to be known as the District Commission, in each district of the State which shall be established by the State Government, by notification.Subject to the other provisions of this Act, the District Commission shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration is up to 1 crore rupees.

State Consumer Disputes Redressal Commission

Section 42 provides for establishment of a State Consumer Disputes Redressal Commission, to be known as the State Commission, in the State. Subject to the other provisions of this Act, the State Commission shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration exceeds 1 crore rupees but is less than 10 crore rupees.

National Consumer Disputes Redressal Commission

Section 53 provides for establishment of a National Consumer Disputes Redressal Commission, to be known as the National Commission.Subject to the other provisions of this Act, the National Commission shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration exceeds 10 crore rupees.

Penalty for non-compliance of order

As per Section 72, Whoever fails to comply with any order made by the District Commission or the State Commission or the National Commission, as the case may be, shall be punishable with imprisonment for a term which shall not be less than one month, but which may extend to 3 years, or with fine, which shall not be less than 25 thousand rupees, but which may extend to 1 lakh rupees, or with both.

Mediation

As per Section 37, at the first hearing of the complaint after its admission, or at any later stage, if it appears to the District Commission that there exists elements of a settlement which may be acceptable to the parties, except in such cases as may be prescribed, it may direct the parties to give in writing, within five days, consent to have their dispute settled by mediation.Where the parties agree for settlement by mediation and give their consent in writing, the District Commission shall, within five days of receipt of such consent, refer the matter for mediation.

As per Section 74, The State Government shall establish, by notification, a consumer mediation cell to be attached to each of the District Commissions and the State Commissions of that State.The Central Government shall establish, by notification, a consumer mediation cell to be attached to the National Commission and each of the regional Benches.

As per Section 77, It shall be the duty of the mediator to disclose—

  • any personal, professional or financial interest in the outcome of the consumer dispute;
  • the circumstances which may give rise to a justifiable doubt as to his independence or impartiality

As per Section 80, Pursuant to mediation, if an agreement is reached between the parties with respect to all of the issues involved in the consumer dispute or with respect to only some of the issues, the terms of such agreement shall be reduced to writing accordingly, and signed by the parties to such dispute or their authorized representatives. The mediator shall prepare a settlement report of the settlement and forward the signed agreement along with such report to the concerned Commission.

As per Section 81, The District Commission or the State Commission or the National Commission, as the case may be, shall, within seven days of the receipt of the settlement report, pass suitable order recording such settlement of consumer dispute and dispose of the matter accordingly.

Liability of product manufacturer

As per Section 84, A product manufacturer shall be liable in a product liability action, if—

  • the product contains a manufacturing defect; or
  • the product is defective in design; or
  • there is a deviation from manufacturing specifications; or
  • the product does not conform to the express warranty; or
  • the product fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage.

Furthermore, A product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of a product.

Liability of product service provider

As per Section 85, A product service provider shall be liable in a product liability action, if—

  • the service provided by him was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or pursuant to any contract or otherwise; or
  • there was an act of omission or commission or negligence or conscious withholding any information which caused harm; or
  • the service provider did not issue adequate instructions or warnings to prevent any harm; or
  • the service did not conform to express warranty or the terms and conditions of the contract.

Liability of product sellers

As per Section 86, a product seller who is not a product manufacturer shall be liable in a product liability action, if—

  • he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or
  • he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or
  • he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or
  • the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or
  • he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product while selling such product and such failure was the proximate cause of the harm.

When can a consumer not bring a product liability action ?

As per Section 87, A product liability action cannot be brought against the product seller

  • if, at the time of harm, the product was misused, altered, or modified
  • where any product liability action is based on the failure to provide adequate warnings or instructions, the product manufacturer shall not be liable, if—
    • the product was purchased by an employer for use at the workplace and the product manufacturer had provided warnings or instructions to such employer;
    • the product was sold as a component or material to be used in another product and necessary warnings or instructions were given by the product manufacturer to the purchaser of such component or material, but the harm was caused to the complainant by use of the end product in which such component or material was used;
    • the product was one which was legally meant to be used or dispensed only by or under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give the warnings or instructions for usage of such product to such expert or class of experts; or
    • the complainant, while using such product, was under the influence of alcohol or any prescription drug which had not been prescribed by a medical practitioner.
  • A product manufacturer shall not be liable for failure to instruct or warn about a danger which is obvious or commonly known to the user or consumer of such product or which, such user or consumer, ought to have known, taking into account the characteristics of such product.

Regulation of e-commerce

As per Section 94, for the purposes of preventing unfair trade practices in e-commerce, direct selling and also to protect the interest and rights of consumers, the Central Government may take such measures in the manner as may be prescribed.

Penalties

If a person does not comply with the orders of the District, State or National Commissions, he may be punished with imprisonmentup to 3 years, ora fine which shall not be less than 25,000 rupees and which may extend to one lakh rupees, or both.

If a person does not comply with an order issued by the Central Consumer Protection Authority (CCPA), he may be punished with imprisonment up to 6 months, or a fine which may extend to Rs 20 lakh, or both.

For false and misleading advertisements, a penalty of up to 10 lakh rupees may be imposed on a manufacturer or an endorser. For asubsequent offence, the fine may extend to 50 lakh rupees.  The manufacturer can also be punished with imprisonment of up to 2 years, which may extend to 5 years in case of every subsequent offence.

The Central Consumer Protection Authority (CCPA) can also prohibit the endorser of a misleading advertisement from endorsing any particular product or service for a period of up to 1 year. For every subsequent offence, the period of prohibition may extend to 3 years.

The Central Consumer Protection Authority (CCPA) may also impose penalties for manufacturing, selling, storing, distributing or importing adulterated products. The penalties are as follows:

  • if injury is not caused to a consumer, the penalty would be a fine of up to 1 lakh rupees along with imprisonment of up to 6 months;
  • if injury is caused, penalty would be a fine up to 3 lakh rupees along with imprisonment of up to 1 year;
  • if grievous hurt is caused, penalty would be a fine up to 5 lakh rupees along with imprisonment up to 7 years; and
  • in case of death, penalty would be 10 lakh rupees or more along with a minimum imprisonment of 7 years, which may extend to imprisonment for life.

 The Central Consumer Protection Authority (CCPA) may also impose penalties for manufacturing, selling, storing, distributing or importing spurious goods (goods which are falsely claimed to be genuine). The penalties are as follow:

  • if injury is caused, penalty would be a fine up to 3 lakh rupees along with imprisonment of up to 1 year;
  • if grievous hurt is caused, penalty would be a fine up to 5 lakh rupees along with imprisonment up to 7 years; and
  • in case of death, penalty would be 10 lakh rupees or more along with a minimum imprisonment of seven years, which may extend to imprisonment for life.

Copy of bill: Consumer Protection Bill, 2018

-Tushar Kaushik

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