consumer protection

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): C. Viswanath (Presiding Member) addressed the issue of whether educational institutions fall under the ambit of Consumer Protection Act, 1986.

The instant appeal was filed under Section 19 of the Consumer Protection Act, 1986 against the Order of Uttar Pradesh State Consumer Disputes Redressal Commission, Lucknow.

Appellant, father of Late Master Raunak Gupta, student of the respondent school. During the summer camp, the school invited students for various activities including swimming in which the appellant’s son also participated.

On 28-05-2007, appellant received an urgent phone call from the school requesting him to come immediately since his son was unwell and when the appellant reached the school he was informed that his son has been taken to O.E.F Hospital as he had drowned in the swimming pool.

On reaching the hospital, the appellant’s son was declared dead.

In view of the above facts, the appellant approached the State Commission complaining of negligence and deficiency in service on the part of the School and claimed Rs 20,00,000 along with Rs 2,00,000 on account of mental agony and Rs 55,000 towards the cost of litigation.

State Commission held that, the Complainant is not a consumer of the defendants and the complaint in question, being not covered under the Consumer Protection Act, is not maintainable. Therefore, the Complaint is liable to be dismissed.

On being aggrieved with the above order, present appeal was filed.

Whether extra-curricular activities such as swimming would fall within the purview of the Consumer Protection Act, 1986?

In Anupama College of Engineering v. Gulshan Kumar. the Supreme Court has held:

“… The only question raised in this case is whether a college is a service provider for the purposes of the Consumer Protection Act, 1986. Learned Counsel for the appellant has placed the decision of this Court in Maharshi Dayanand University v. Surjeet Kaur, (2010) 11 SCC 159. The aforesaid decision was followed by this Court in SLP (C) No. 22532/2012 titled as P.T. Koshy & Anr. v. Ellen Charitable Trust & Ors. The order reads as follows: “In view of the judgment of this Court in Maharshi Dayanand University v. Surjeet Kaur,(2010) 11 SCC 159, wherein this Court placing reliance on all earlier judgments has categorically held that education is not a commodity. Educational institutions are not providing any kind of service, therefore, in matter of admission, fees etc., there cannot be a question of deficiency of service. Such matters cannot be entertained by the Consumer Forum under the Consumer Protection Act, 1986. In view of the above, we are not inclined to entertain the special leave petition. Thus, the special leave petition is dismissed”. In view of the consistent opinion expressed by this Court, the orders passed by the National Consumer Disputes Redressal Commission in Revision Petition No. 3571/2013 and Revision Petition No. 807/2017 are not in accordance with the decision of this Court and are therefore set aside. The civil appeals are allowed.”

In the decision of Manu Solanki. v Vinayaka Mission University, 2020 SCC OnLine NCDRC 7, it was held that “…such incidental activities of an Educational Institution while imparting education would also not amount to rendering any service under the provisions of the Consumer Protection Act, 1986.”

Bench in view of the Supreme Court decisions held that Educational Institutions do not fall within the ambit of the Consumer Protection Act, 1986 and education which included co-curricular activities such as swimming, is not a ‘service’ within the meaning of the Consumer Protection Act, 1986.

Hence the present complaint was stated to be not maintainable in view of the above discussion.[Rajendra Kumar Gupta v. Dr Virendra Swarup Public School, First Appeal No. 852 of 2016, decided on 02-02-2021]

Advocates who appeared for the parties:

For the Appellant: Pawan Kumar Ray, Advocate

 For the Respondent: Murari Kumar, Advocate

Also Read:

NCDRC | Coaching Classes do not fall within the definition of ‘Education Institutions’; Matters of Educational Institutions do not fall under Consumer Forum

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and MR Shah, JJ has held that consumer fora has no jurisdiction and/or power to accept the written statement beyond the period of 45 days.

The Court was hearing the case where the National Consumer Disputes Redressal Commission had confirmed the order passed by the Karnataka State Consumer Disputes Redressal Commission rejecting the application seeking condonation of delay in filing the written statement to the consumer complaint. The written version/written statement was filed beyond the prescribed period of limitation provided under the Consumer Protection Act, 1986, i.e., beyond the period of 45 days.

As per the Consumer Protection Act, 1986, the written version/written statement is required to be filed within 30 days and the same can be extended by a further period of 15 days.

As per the decision of the Constitution Bench in New India Assurance company Limited v. Hilli Multipurpose Cold Storage Private Limited, (2020) 5 SCC 757,

“the District Forum has no power to extend the time to file the response to the complaint beyond the period of 15 days in addition to 30 days as is envisaged under Section 13 of the Act.”

It was, however, submitted by the petitioner that as observed in paragraph 63, the said judgment shall be applicable prospectively only. Therefore, the aforesaid decision shall not be applicable retrospectively to the complaints filed before the said decision.

Refusing the accept the contention, the Court said that as per the decision in J.J. Merchant v. Shrinath Chaturvedi, (2002) 6 SCC 635, which was a three Judge Bench decision, consumer fora has no power to extend the time for filing a reply/written statement beyond the period prescribed under the Act. However, thereafter, despite the above three Judge Bench decision, a contrary view was taken by a two Judge Bench and therefore the matter was referred to the five Judge Bench and the Constitution Bench has reiterated the view taken in the case of J.J.Merchant and has again reiterated that the consumer fora has no power and/or jurisdiction to accept the written statement beyond the statutory period prescribed under the Act, i.e., 45 days in all.

The petitioner had then relied on Reliance General Insurance Co. Ltd. v.  Mampee Timbers & Hardwares Pvt. Ltd., 2017 SCC OnLine SC 2027, wherein it was directed that the consumer fora may accept the written statement beyond the stipulated time of 45 days in an appropriate case, on suitable terms, including the payment of costs and to proceed with the matter, keeping in view the fact that the judgment of this Court in the case of New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, (2015) 16 SCC 20 has been referred to a larger Bench.

The Court rejected this contention too on the ground that the Court had, in Reliance General Insurance Co. Ltd, specifically mentioned that

“it will be open to the concerned fora to accept the written statement filed beyond the stipulated period of 45 days in an appropriate case, on suitable terms, including the payment of costs and to proceed with the matter.”

Therefore, ultimately, it was left to the concerned fora to accept the written statement beyond the stipulated period of 45 days in an appropriate case.

In the present case, despite sufficient time granted the written statement was not filed within the prescribed period of limitation. Therefore, the Court observed that the National Commission had considered the aspect of condonation of delay on merits also.

[Daddy’s Builders Pvt. Ltd. v. Manisha Bhargava, 2021 SCC OnLine SC 82, decided on 11.02.2021]

*Judgment by: Justice MR Shah

Petitioner’s Counsel: Advocate Ashish Choudhary

ALSO READ

District Forum can’t extend limitation period of 45 days for filing response under Section 13 of Consumer Protection Act

Case BriefsSupreme Court

Supreme Court: In a case where United Bank of India inadvertently broke the Appellant’s locker, without any just or reasonable cause, even though he had already cleared his pending dues, the bench of MM Shantanagoudar* and Vineet Sarana, JJ Imposed costs of Rs. 5,00,000/­ on the Bank to be paid to the Appellant as compensation. The said is to be deducted from the salary of the erring officers, if they are still in service and if they have already retired, the amount of costs should be paid by the Bank. Additionally, the Appellant shall be paid Rs. 1,00,000/- as litigation expense.

Noticing that the customer is completely at the mercy of the bank, which is the more resourceful party, for the protection of their assets, the Court said that in such a situation, the banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker.

“The very purpose for which the customer avails of the locker hiring facility is so that they may rest assured that their assets are being properly taken care of. Such actions of the banks would not only violate the relevant provisions of the Consumer Protection Act, but also damage investor confidence and harm our reputation as an emerging economy.”

The Court also issued various directions to the Banks. (See below)

Background

Bank inadvertently broke the Appellant’s locker, without any just or reasonable cause, even though he had already cleared his pending dues. Moreover, the Appellant was not given any notice prior to such tampering with the locker. He remained in the dark for almost a year before he visited the bank for withdrawing his valuables and enquired about the status of the locker. Irrespective of the valuation of the ornaments deposited by the Appellant, he had not committed any fault so far as operation of the locker was concerned. Thus, the breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider. The alleged loss of goods did not result from any force majeure conditions, or acts of third parties, but from the gross negligence of the bank itself. It is case of gross deficiency in service on the part of the bank.

Obligations of Banks while allotting and operating the lockers

It was noticed that each bank is following its own set of procedures and there is no uniformity in the rules and it seems that the banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers in themselves as well.

“In as much as we are the highest Court of the country, we cannot allow the litigation between the bank and locker holders to continue in this vein. This will lead to a state of anarchy wherein the banks will routinely commit lapses in proper management of the lockers, leaving it to the hapless customers to bear the costs.”

Hence, it is imperative to lay down certain principles which will ensure that the banks follow due diligence in operating their locker facilities, until the issuance of comprehensive guidelines in this regard.

Noticing that irrespective of the value of the articles placed inside the locker, the bank is under a separate obligation to ensure that proper procedures are followed while allotting and operating the lockers, the Court enumerated a list of obligations:

(a)  Maintenance of a locker register and locker key register.

(b) The locker register shall be consistently updated in case of any change in allotment.

(c)  The bank shall notify the original locker holder prior to any changes in the allotment of the locker, and give them reasonable opportunity to withdraw the articles deposited by them if they so wish.

(d) Banks may consider utilizing appropriate technologies, such as blockchain technology which is meant for creating digital ledger for this purpose.

(e) The custodian of the bank shall additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and the date and time on which they were opened and closed.

(f) The bank employees are also obligated to check whether the lockers are properly closed on a regular basis. If the same is not done, the locker must be immediately   closed   and   the   locker   holder   shall   be promptly   intimated   so   that   they   may   verify   any resulting discrepancy in the contents of the locker.

(g)  The concerned staff shall also check that the keys to the locker are in proper condition.

(h) In case the lockers are being operated through an electronic system, the bank shall take   reasonable steps to ensure that the system is protected against hacking or any breach of security.

(i) The customers’ personal data, including   their biometric data, cannot be shared with third parties without their consent. The relevant rules under the Information Technology Act, 2000 will be applicable in this regard.

(j)  The bank has the power to break open the locker only in accordance with the relevant laws and RBI regulations, if any. Breaking open of the locker in a manner other than that prescribed under law is an illegal act which amounts to gross deficiency of service on the part of the bank as a service provider.

(k)  Due notice in writing shall be given to the locker holder at a reasonable time prior to the breaking open of the locker. Moreover, the locker shall be broken open only in the presence of authorized officials and an independent witness after giving due notice to the locker holder. The   bank must prepare a detailed inventory of any articles found inside the locker, after the locker is opened, and make a separate entry in the locker register, before returning them to the locker holder. The locker holder’s signature should be obtained upon the receipt of such inventory so as to avoid any dispute in the future.

(l) The bank must undertake proper verification procedures to ensure that no unauthorized party gains access to the locker. In case the locker remains inoperative for a long period of time, and the locker holder cannot be located, the banks shall transfer the contents of the locker to their nominees/legal heirs or dispose of the articles in a transparent manner, in accordance with the directions issued by the RBI in this regard.

(m) The banks shall also take necessary steps to ensure that the space in which the locker facility is located is adequately guarded at all times.

(n) A copy of the locker hiring agreement, containing the relevant terms and conditions, shall be given to the customer at the time of allotment of the locker so that they are intimated of their rights and responsibilities.

(o) The bank cannot contract out of the minimum standard of care with respect to maintaining the safety of the lockers as outlined supra.

 

Direction to RBI

It is necessary that the RBI lays down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. The banks should not have the liberty to impose unilateral and unfair terms on the consumers.

Hence, the RBI was directed to issue suitable rules or regulations as aforesaid within six months.

“Until such Rules are issued, the principles stated in this judgment, in general and at para in particular, shall remain binding upon the banks which are providing locker or safe deposit facilities.”

RBI may also issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers, so that the controversy on this issue is clarified as well.

[Amitabha Dasgupta v. United Bank of India, 2021 SCC OnLine SC 124, decided on 19.02.2021]

*Judgment by: Justice MM shantangoudar

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Anup K. Thakur (Presiding Member) dismissed the revision petition while upholding the State Commission’s order.

Respondent/Complainant had sown sugarcane. He purchased herbicides from petitioner 1/OP 1. It was submitted that after the usage of the said herbicide the crop started to suffer severe damage.

In view of the above occurrence, Sub Divisional Agriculture Officer was informed, after which inspection of the affected crop was carried out and a report was submitted.

Consumer complaint seeking compensation of Rs 1,60,000 on account of crop damage was filed.

What was District Commission’s decision?

Circular of Deputy Director of Agriculture was not complied with while constituting the inspection team was a mere inadvertence and did not suggest any malafide intention. In any case, it was an irregularity and on this ground, equity and natural justice could not be denied to the complainant. So reasoning, it allowed the complaint to the extent of Rs.72,850/-, this being the loss on account of 235 quintals of sugarcane in one acre land @ Rs.310/- per quintal, with interest of 9% from the date of filing of the complaint.

 The above reasoning was upheld by the State Commission.

Analysis and Decision

On perusal of the facts and circumstances of the case, Bench opined that no ground for revision of the State Commission’s order was required.

Bench observed that an internal circular of Deputy Director of Agriculture was circulated regarding the composition of the inspection team for the purpose of smooth functioning of the Department of Agriculture in its subordinate filed offices for fulfilling its role of assisting the farmers, including taking prompt action on any complaint as is in the present matter.

On noting the above, the Commission stated that:

To not have included a representative of the OPs was, at worst, an irregularity.

The fact in the present matter was that there was a crop loss and the complainant farmer did therefore had to suffer loss and the inspecting team found the loss to be largely due to the use of herbicides.

Commission added to its reasoning that the business entities viz. dealers, manufacturers of agri-inputs (seeds, herbicides) carry a special responsibility. They are expected to properly inform the farmer and follow up after sale, to ensure that the farmer has understood and is following all the instructions.

In the present case, dealer ought to not have waited for an invitation to join the inspection team if it was already aware of the complaint through information furnished by the complainant. He should have been proactive rather than reactive.

The same goes for the manufacturers of agri-inputs: their dealers should be properly trained to ensure that they see their job as not merely one selling but as providing after-sale service through regular follow up.

With regard to the revisionary jurisdiction, Bench referred to the decision of the Supreme Court in Rubi (Chandra) Dutta v. United India Insurance Co. Ltd., (2011) 11 SCC 269.

Hence, in view of the above discussion, Bench dismissed the revision petitions. [Adama Agan Ltd. v. Ramesh, 2021 SCC OnLine NCDRC 3, decided on 18-01-2021]

Case BriefsSupreme Court

Supreme Court: The 3-Judge Bench of Dr Dhananjaya Y Chandrachud, Indu Malhotra and Indira Banerjee, JJ., observed that

“Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer‘s Agreement.”

Judgment passed by the National Consumer Disputes Redressal Commission is in Challenge

Appellant-Developer challenged the decision of NCDRC wherein refund of the amounts deposited by the Apartment Buyers was directed on account of inordinate delay in completing the construction and obtaining the Occupation Certificate.

Issues for Consideration:

  • Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3, whether it would be from the date of issuance of the Fire NOC as contended by the Developer; or, from the date of sanction of the Building Plans, as contended by the Apartment Buyers;
  • Whether the terms of the Apartment Buyer‘s Agreement were one-sided, and the Apartment Buyers would not be bound by the same;
  • Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986;
  • Whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement, and claim a refund of the amounts deposited with interest.

Analysis

Bench made a pointwise analysis of the instant matter wherein in the first issue, the point of controversy was whether the 42 months’ period is to be calculated from the date when the Fire NOC was granted by the authority concerned as contended by the Developer; or, the date on which the Building Plans were approved as contended by the Apartment Buyers.

In accordance with Section 15 of the Haryana Fire Safety Act, 2009, it is mandatory for a Builder/Developer to obtain the approval of the Fire Fighting Scheme conforming to the National Building Code of India, and obtain a ‘No objection Certificate’ before the commencement of construction.

Clause 13.3 of the Apartment Buyer’s Agreement provides that the 42 months’ period has to be calculated from the date of approval of Building Plans and/or fulfilment of the pre-conditions imposed thereunder.

Bench opined that it was a mandatory requirement under the Haryana Fire Safety Act, 2009 to obtain the Fire NOC before the commencement of construction activity. The said requirement was stipulated in the sanctioned Building Plans, as also in the Environment Clearance.

 The 42 months‘ period in Clause 13.3. of the Agreement for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, and not from the date of the Building Plans being sanctioned.

In the instant matter, there was a delay of approximately 7 months in obtaining the fire NOC by Developer.

♦ Whether the terms of the Apartment Buyer’s Agreement are one-sided?

Court observed on perusal of the clauses mentioned in the Agreement that the said clauses were wholly one-sided terms of the Agreement Buyer’s Agreement, which were entirely loaded in favour of the Developer and against the allottee at every step.

For the said issue, Court held that the terms of the Apartment Buyer‘s Agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986.

Incorporation of one-sided and unreasonable clauses in the Apartment Buyer’s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act.

♦ Whether primacy to be given to RERA over the Consumer Protection Act?

Bench expressed that this Court has upheld the applicability of provisions of Consumer Protection Act as an additional remedy, despite the existence of remedies under special statutes, including the Arbitration and Conciliation Act, 1996.

In the decision of  Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751, it was held that the remedy under the Consumer Protection Act, 1986 is confined to the Complaint filed by a Consumer as defined by the Act, for defects and deficiency caused by the service provider.

In a recent decision of this Court in Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783, it was held that remedies under the Consumer Protection Act were in addition to the remedies available under special statutes. The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear. Section 18 of the RERA Act specifies that the remedies are “without prejudice to any other remedy available”.

♦ Whether the Apartment Buyers are entitled to terminate the Agreement or refund of the amount deposited with Delay Compensation?

Answering this issue, the Court categorised the buyer/allottees into two categories:

  • Apartment Buyers whose allotments fall in Phase 1 of the project comprised in Towers A6 to A10, B1 to B4, and C3 to C7, where the Developer has been granted occupation certificate, and offer of possession has been made
  • Apartment Buyers whose allotments fall in Phase 2 of the project, where the allotments are in Towers A1 to A5, B5 to B8, C8 to C11, where the Occupation Certificate has not been granted so far.

For category 1, it was held that such allottees (barring an exception) were obligated to take possession of the apartments, since the construction was completed, and possession offered on 28-06-2019, after the issuance of Occupation Certificate on 31-05-2019. The Developer is however obligated to pay Delay Compensation for the period of delay which has occurred from  27-11-2018 till the date of the offer of possession was made to the allottees.

So far category 2 is concerned, it was held that such allottees are entitled to refund of entire amount deposited by them, along with compensation and interest.

In view of the above discussion, civil appeals were disposed of. [Ireo Grace Realtech (P) Ltd. v. Abhishek Khanna, 2021 SCC OnLine SC 14, decided on 11-01-2021]

Case BriefsSupreme Court

Supreme Court: The bench of UU Lalit and Vineet Saran, JJ has held that the Real Estate (Regulation and Development) Act, 2016 (RERA Act) does not bar the initiation of proceedings by allottees against the builders under the Consumer Protection Act, 1986.

“It is true that some special authorities are created under the RERA Act for the regulation and promotion of the real estate sector and the issues concerning a registered project are specifically entrusted to functionaries under the RERA Act. But for the present purposes, we must go by the purport of Section 18 of the RERA Act. Since it gives a right “without prejudice to any other remedy available’, in effect, such other remedy is acknowledged and saved subject always to the applicability of Section 79.”

Background of the Case

The said decision of the Court came in the matter relating of delay in handing over the possession of flats to buyers by the developer. The apartments were booked by the Complainants in 2011-2012 and the Builder Buyer Agreements were entered into in November, 2013. As promised, the construction should have been completed in 42 months. The period had expired well before the Project was registered under the provisions of the RERA Act. Even after four years there were no signs of the Project getting completed and hence, a complaint was filed by the Buyers.

RERA Act vis-à-vis CP Act: Statutory Analysis

The Court discussed the following provisions for the purpose of deciding the case at hand:

  • Section 79 of the RERA Act bars jurisdiction of a Civil Court to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered under the RERA Act to determine.
  • Section 88 specifies that the provisions of the RERA Act would be in addition to and not in derogation of the provisions of any other law.
  • Section 89 provides that the provisions of the RERA Act shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force.

The Court noticed that an allottee placed in circumstances similar to that of the Complainants, could have initiated following proceedings before the RERA Act came into force.

A) If he satisfied the requirements of being a “consumer” under the CP Act, he could have initiated proceedings under the CP Act in addition to normal civil remedies.

B) However, if he did not fulfil the requirements of being a “consumer”, he could initiate and avail only normal civil remedies.

C) If the agreement with the developer or the builder provided for arbitration:-

i) in cases covered under Clause ‘B’ hereinabove, he could initiate or could be called upon to invoke the remedies in arbitration.

ii) in cases covered under Clause ‘A’ hereinabove, in accordance with law laid down in Emaar MGF Ltd v. Aftab Singh, (2019) 12 SCC 751, he could still choose to proceed under the CP Act.

The Court noticed that on plain reading of Section 79 of the RERA Act, an allottee described in category (B) stated hereinabove, would stand barred from invoking the jurisdiction of a Civil Court.

“The absence of bar under Section 79 to the initiation of proceedings before a fora which cannot be called a Civil Court and express saving under Section 88 of the RERA Act, make the position quite clear.”

To answer the question whether the Commission or Forum under the CP Act is a civil court or not, the Court referred to the decision in Malay Kumar Ganguli v. Dr. Sukumar Mukherjee, (2009) 9 SCC 221 , where it was held,

“The proceedings before the National Commission are although judicial proceedings, but at the same time it is not a civil court within the meaning of the provisions of the Code of Civil Procedure. It may have all the trappings of the civil court but yet it cannot be called a civil court.”

Hence, Section 79 of the RERA Act does not in any way bar the Commission or Forum under the provisions of the CP Act to entertain any complaint.

The Court further discussed the proviso to Section 71(1) of the RERA Act which entitles a complainant who had initiated proceedings under the CP Act before the RERA Act came into force, to withdraw the proceedings under the CP Act with the permission of the Forum or Commission and file an appropriate application before the adjudicating officer under the RERA Act. It noticed,

“The proviso thus gives a right or an option to the concerned complainant but does not statutorily force him to withdraw such complaint nor do the provisions of the RERA Act create any mechanism for transfer of such pending proceedings to authorities under the RERA Act. As against that the mandate in Section 12(4) of the CP Act to the contrary is quite significant.”

It was held that insofar as cases where such proceedings under the CP Act are initiated after the provisions of the RERA Act came into force, there is nothing in the RERA Act which bars such initiation. Further, Section 18 itself specifies that the remedy under said Section is “without prejudice to any other remedy available”.

“Thus, the parliamentary intent is clear that a choice or discretion is given to the allottee whether he wishes to initiate appropriate proceedings under the CP Act or file an application under the RERA Act.”

[Imperia Structures v. Anil Patni,  2020 SCC OnLine SC 894, decided on 02.11.2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC):  A Division Bench of Dr S.M. Kantikar (Presiding Member) and Dinesh Singh (Member) held that, a homebuyer cannot be made to wait indefinitely for possession.

The instant appeal was preferred by the appellant under Section 19 of the Consumer Protection Act, 1986 against the Order passed by the Maharashtra State Consumer Disputes Redressal Commission wherein OP was directed to handover the possession of the subject flat to the respondent — complainant after receiving the balance consideration amount from respondent — complainant.

Advocates for the appellant — Siddhesh Bhole, Royden Fernandes and Deepam Rangwani.

Advocates for the respondent — Sukruta A. Chimalker and S.B. Prabhavalkar.

State Commission held that there was a deficiency on the part of the OP is not handing over possession and not obtaining the necessary certificates for the subject flat.

Opposite Party was directed to handover possession of the flat within three months after receiving the remaining consideration of Rs. 5.50 lakh as well as to provide Occupancy Certificate and Building Completion Certificate to the Complainant.

Aggrieved with the State Commission’s order, OP filed an appeal before the Commission.

Bench noted that the complainant had paid Rs 11 lakhs by cheque to the OP towards consideration for the subject agreement. OP contended that the subject agreement was cancelled by the complainant.

On perusal of the cancellation letter, it was evident that for more than 2 years, there was no construction work/development at the site of the project. Complainant was also paying interest on the amount paid to the Opposite Party builder firm, therefore, the Complainant requested the Opposite Party to return the entire amount paid.

With regard to the delivery of possession, OP contended that the agreement did not mention the date of delivery of possession of the said flat to the Complainant. However, the buyer cannot be made to wait for an indefinite period.

It was OP’s duty itself to mention the date of delivery of possession in the agreement and failure to do so necessarily requires to be read against the OP. In all contingencies, the complainant could not have been made to wait indefinitely for possession.

OP argued that State Commission grossly erred in disregarding the applicability of the relevant provisions of Specific Relief Act, 1963.

In the above regard, the Court noted that the Act 1986 is for better protection of the interests of consumers, to provide speedy and simple redressal to consumer disputes.

Section 3 specifically provides that the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.

In the year 2003, the complainant requested for refund of the entire amount paid by her but OP did not refund the amount paid with or without interest.

Commission opined that the State Commission’s order was reasoned, hence the instant appeal being misconceived and bereft of merit was dismissed.[Adrian Pereira v. Anita Ronald Lewis, 2020 SCC OnLine NCDRC 466, decided on 16-10-2020]

Cyril Amarchand MangaldasExperts Corner

Introduction

Hollywood films such as A Civil Action and Erin Brockovich brought the concept of ‘class action’ into our everyday conversation. The true story of a struggling single mum-turned-hero, Erin Brockovich filed a lawsuit on behalf of residents of a small California town against a large company. The class action that ensued claimed that the company’s systematic disposal of waste chromium contaminated the groundwater that supplied municipal wells, resulting in hundreds of the town’s residents falling seriously ill. The lawsuit was ultimately settled at about USD 333 million (in 1996), and the film (released in 2000) made the protagonist a hero.

For years, the United States of America has been seen as being the foremost bastion of class action as it has strong tort laws, followed by Canada and some European countries (including the United Kingdom), which have also been putting in place collective redressal mechanisms. Indeed, a class action was filed in late 2019, before a German Court on behalf of the entire German population of male piglets as plaintiffs.[1] Whether the case will be admitted as maintainable with animals as named plaintiffs, remains to be seen.

Shareholder activism has been on the rise globally. The shareholder of today is more involved (or evolved!), than before, and is no mute spectator to the business of the company and acts of its management. It is no longer restricted to raising a voice against oppression by majority shareholder(s), or mismanagement of a company, but includes concerns in relation to business decisions, social and environmental issues, strategic management, brand value, reputation, etc. It is now par for the course, for shareholders to demand answers or specific action, including change or compliance with more stringent corporate governance policies. Activism can take several forms, including proxy shareholder battles, publicity campaigns, shareholder resolutions, etc. This has led to a more dynamic interaction between ordinary shareholders and management/promoter groups.

In India, the development of shareholder activism has been slow but constant, from the more passive past to the more active present. The recent spate of financial frauds and scams have also played their part. Investors, shareholders, and even consumers demand transparency and accountability; and are not afraid to demand it.

Enter the long-awaited Companies Act, 2013 (which replaced the Companies Act, 1956), under which the newly-introduced provisions (notified on June 1, 2016, but yet to be used effectively) enable class action to be initiated against a company and its management in certain circumstances. Aimed at investor protection and enhanced accountability,[2] the 2013 Act was touted by the Government as being a historic measure, that would give impetus to growth and bring about transparency.

The key advantage of class action is that individual complainants who may not have the resources to initiate individual proceedings may join together as a class, benefitting from economies of scale and costs.  Efficiency of the judicial system may also be increased as there is no repetition of witnesses and arguments.

The concept of class action is not new to India, however, as some statutory provisions enable an action to be brought by a few in the name of and for the benefit of many. We briefly consider some of these below.

Representative Actions

The Code of Civil Procedure, 1908, enables the plaintiffs to collectively bring a claim to court in a representative capacity for the benefit of a group or class of persons. It thus carves out an exception to the general rule that all persons interested in a suit should be made parties, and enables a group or class of persons with common interest or grievance in a matter to bring an action through only a few named representative plaintiffs.[3] Similar provisions enable a group of representative defendants to enter a defence on behalf of the entire group.

A representative action needs the permission of the court to proceed. Notice must be given to all persons interested, so that any person on whose behalf, or for whose benefit, the suit is instituted (or defended), may apply to be made a party, particularly since any decree passed, will be binding on all members of the class.

Public Interest Litigation

Public interest litigations, or ‘PILs’ filed by a few petitioners have become ubiquitous in India.  PILs are often filed for the enforcement of fundamental rights under the Constitution of India, of a group of persons or the general public, in public interest.[4]  Multiple and far-reaching orders have been passed by High Courts and the Supreme Court against State entities (remedies are not available against private entities), for far-reaching reliefs in public interest.

As this action is filed on behalf of the public at large, the standard rule of locus standi (the right to bring an action in court), does not apply. The petitioners are not themselves required to have suffered the legal injury complained of, or to be part of the affected class. Even an unconnected third party may initiate such proceedings on humanitarian grounds for the benefit of all members of the group or class.[5]

Consumer Protection

The Consumer Protection Act, 2019, which recently came into force,[6] considerably overhauled consumer protection law in India. Consumer class action has received statutory blessing, enabling registered consumer associations, and one or more consumers (where they have a common interest or grievance) to file a class actionon behalf of the group. Complaints may be filed in relation to any goods sold or delivered with the permission of the District Forum, provided they have the same interest or grievance and seek the same relief on behalf of or for the benefit of the group.

The Central and State Governments are also empowered to file a complaint either in their individual or representative capacity for the interests of consumers in general. A first of its kind case was filed in 2015, suo motu by the Union of India against Nestlé India. Initiated as a class action suit on behalf of consumers of Nestlé’s ‘MAGGI Noodles’, the Union contended that Nestlé’s labels were misleading and that there were high levels of lead detected in the Noodles that are much loved by children.[7]

Initial action against Nestlé India was taken by the Food Safety and Standard Authority of India, directing it to recall the products from the market and cease production, an action which was challenged and set aside by the Bombay High Court. The class action lawsuit was filed by the Union of India immediately thereafter on behalf of Indian consumers. Damages of approximately INR 640 crores (USD 85.5 million) were sought for alleged unfair trade practices and sale of defective goods. The matter is currently pending before the National Consumer Disputes Redressal Commission (‘NCDRC’).

Provisions for Minority Protection against Oppression and Mismanagement

Minority shareholder interests have been protected under the erstwhile Companies Act, 1956 (‘the 1956 Act’), and the Companies Act, 2013 (‘the 2013 Act’). Redressal to minority shareholders is available in relation to acts of oppression by the majority shareholders and/ or mismanagement of the company by the controlling group.[8]

There is a threshold qualification of a minimum of 10 members or 10% the members of a company that must be met before a group can initiate this action. The National Company Law Tribunal (‘the Tribunal’), before whom such an action may be filed, has extensive powers to grant redressal against the complaints of oppression/mismanagement. For instance, the Tribunal may grant orders requiring the majority group to buy out the minority shareholders, appointing/removing a director to/from the board of the company, directing the audit of the company’s accounts, appointing an administrator to take over the management of the company, and in egregious cases, even winding up of the company.

While this minority protection is not in itself a ‘class action,’ it empowers a group of shareholders to jointly seek redress.

Class Action under the 2013 Act

The lack of a specific provision for class action in Indian corporate law was particularly felt in the aftermath of the ‘Satyam scandal’ in 2009,  whenthe Chairman of Satyam Computer Services Ltd. confessed to cooking up the company’s books of account to the extent of about USD 1.47 billion (about INR109  billion).  Not surprisingly, the shares tanked, and investors lost about INR 186  billion in value.

After the scandal broke, several investors went after the Chairman, Directors and auditors of the company. As many as 12 class action suits were filed in the United States, ultimately leading to a settlement of almost USD 125 million for the US investors.

The fate of Satyam’s Indian investors was less happy A consumer protection association, Midas Touch Investors Association (“MITA”), approached the NCDRC seeking compensation of INR 49.87 billion (approximately USD 668.52 million), for around 300,000 retail shareholders. The NCDRC refused to hear the complaint citing, among others, a reason that it was not equipped to deal with such cases.[9] MTIA moved the Supreme Court against the rejection but ultimately withdrew the petition[10] (possibly on account of a realisation that they were unlikely to get relief), and Satyam’s Indian investors watched their money go down the metaphorical drain.

The need to codify class actions in respect of company law had been recommended as early as May 2005, in the J.J. Irani Committee’s Report submitted to the Ministry of Corporate Affairs.[11] Two Companies Bills in 2009 and 2011 introduced provisions for class action, but these Bills lapsed. Notably, the 2011 Bill restricted eligible plaintiffs only to members and depositors, excluding creditors from its purview.  The rationale was that the creditors could enforce their claims through contracts with their borrowers, and as such, there was no necessity for a statutory right to class action; members and depositors not having any security, it was necessary to empower them accordingly.[12]

Section 245 of the 2013 Act

It is in this background that Section 245 was introduced in the 2013 Act, enabling members and depositors of a company, either individually or as a class, to join together for redress and appropriate reliefs from the Tribunal. (Banking companies are excluded from its ambit.)

A numerical threshold must be met as a condition to availing of the benefit of Section 245 viz. a minimum of 100 members or 10% of the total number of members of a company is needed to file a class action suit. Where the company does not have share capital, the minimum threshold is 1/5thof the total number of members. Depositors are also entitled to institute class action on similar thresholds.

All similar applications are consolidated into a single proceeding and the lead applicant is chosen amongst them, either by joint consensus of the group, or by the Tribunal. The lead applicant is in charge of prosecuting the action.

Reliefs may be sought against the company, its directors,  auditors,  expert, adviser or consultant for any fraudulent, unlawful or wrongful act, including monetary compensation or damages for the commission of fraudulent acts or those that that are prejudicial to the interests of the company, or its members or depositors, or against the public interest. Orders passed are binding on them all.

There is no maximum cap on the compensation or damages that may be awarded, or the manner in which they may be distributed amongst the applicants, the same clearly being left to the discretion of the Tribunal.

The costs of the application must be defrayed by the company or any other person responsible for any oppressive act.  On the other hand, unsuccessful applicants may be directed to pay the defendant’s attorney’s fees if such an application is rejected as being frivolous or vexatious.

Funding of Class Actions

The Investor Education and Protection Fund: Recognising the need to support minority shareholders and investors, the Ministry of Corporate Affairs announced that plans to implement a scheme to provide them with financial assistance for class actions through the IEPF (Investor Education and Protection Fund), established by the Central Government under Section 125 of the 2013 Act.[13]

Litigation Financing: Third-party funding and the modality of contingency fees, permitting the plaintiff’s lawyer to bear the risk of litigation with the advantage of windfall profits in the event of a successful claim, have leveraged class action movement in the United States and elsewhere. In India, the absence of regulation and a prohibition on lawyers working on contingency or success fees means that this trend is yet to pick up, although it is simply a matter of time.

The Coronavirus Landscape

It is impossible to write an article today without considering the coronavirus pandemic. As distribution networks stretched thin, ‘force majeure’ and ‘material adverse event’ claims were raised in several different avatars. Amid the exponential rise in disputes, as some businesses are being alleged to have taken undue or unfair advantage, some COVID-19 class action cases have already been instituted.

A class-action lawsuit was filed against online retailer Amazon in Florida for allegedly charging excessive prices “for personal hygiene products during a public health crisis”. The overpriced sale of goods (such as USD 199 for a bottle of hand sanitizer, USD 40 for face masks, and USD 99 for toilet paper) was held to be in violation of State laws combating price gouging.[14] Costco and eBay are the other retailers that are facing class action claims for alleged price gouging of high demand products during the COVID-19 pandemic.

Gojo Industries Inc., faced a class action before the New York Federal Court on the grounds of misleading, deceptive and unfair claims that it’s Healthcare Advanced Hand Sanitiser“kills 99.99% of illness-causing germs” and has the “ability to prevent colds, flu.”[15]

An action has been filed against IPI and its CEO, J. Joseph Kim, on behalf of shareholders who purchased or otherwise acquired IPI securities between February 14 and March 9, 2020,  seeking to recover damages caused due to a massive drop in stock price. The complaint alleges that IPI and its CEO, “falsely described their product as a fully completed vaccine when it was nothing of the sort,” which eventually led to a USD 643 million loss of market capitalisation when a statement from Citron Research disputed IPI’s claim.[16]

Crystal ball gazing

Once the dust on COVID-19 settles down, there may be a floodgate of class action claims against global businesses around the world, ranging from cases of negligence against hospitals, restaurants, the travel industry, etc. alleging that they did not take adequate steps to protect the consumers or negligently exposed them to the virus resulting in personal injury or death, to damage claims on account of stock drop securities class action, for instance, owing to misfeasance, malfeasance.

In the Indian scenario, Infosys, the beleaguered tech giant, became the target of a class-action lawsuit in the United States in 2019, in respect of alleged unethical practices; something which the company vehemently denied.  After Infosys was cleared of wrongdoing by the Securities and Exchange Commission in May 2020, the suit was “voluntarily dismissed without prejudice” by the plaintiffs,[17]  and another Satyam-like crash was avoided.

In conclusion, the waters are being tested and it is certain that more and more consumers,  shareholders, and groups of affected/aggrieved parties will approach Indian courts and tribunals for redressal on the basis of similar class actions.

* Partner, Cyril Amarchand Mangaldas

** Principal Associate, Cyril Amarchand Mangaldas

[1] “Germany’s male piglet population might be about to rewrite legal history”, Rick Noak (November 19, 2019), The Washington Post available at https://www.washingtonpost.com/world/2019/11/19/germanys-male-piglets-just-became-latest-animals-file-cases-court-without-their-knowledge/

[2]Statement of Objects and Reasons to the Companies Act, 2013

[3] See Order I, Rule 8 CPC

[4] Articles 226 and 32 of the Constitution of India 

[5]V. Purushotham Rao v. Union of India, (2001) 10 SCC 305

[6] Notification dated 23-7-2020  issued by Ministry of Consumer Affairs, Food and Public Distribution available at https://consumeraffairs.nic.in/sites/default/files/Provisions%20of%20Act%20comes%20into%20force.pdf

[7] Union of India v. Nestle India Ltd., Consumer Complaint No. 870/2015 filed on 11-8-2015 before NCDRC

[8]Sections 397 and 398 under the 1956 Act, which correspond with Section 241 under the 2013 Act.

[9]https://economictimes.indiatimes.com/tech/software/consumer-forum-rejects-plea-on-compensation-in-satyam-case/articleshow/4510331.cms

[10]https://www.business-standard.com/article/companies/sc-dismisses-midas-touch-investor-association-plea-against-satyam-109081003014_1.html

[11] Report of the Expert Committee on Company Law (2005) dated May 31, 2005 issued by Ministry of Corporate Affairs available at http://reports.mca.gov.in/Reports/23-Irani%20committee%20report%20of%20the%20expert%20committee%20on%20Company%20law,2005.pdf

[12] 57th Report of the Standing Committee on Finance (2011-12) (15th Lok Sabha) (Ministry of Corporate Affairs) on the Companies Bill, 2011, p. 16, available at http://164.100.47.193/lsscommittee/Finance/15_Finance_57.pdf

[13]“Govt to give financial aid to minority investors filing class action suits” Business Standard dated  May 6, 2019 available at https://www.business-standard.com/article/pti-stories/govt-set-to-provide-financial-assistance-to-minority-investors-for-class-action-lawsuits-119050500240_1.html

[14]Armas v. Amazon .com Inc., Case No. 104631782, Eleventh Circuit Court in Miami – Dade County, Florida; [A Copy of the class action complaint is available at https://www.docketalarm.com/cases/Florida_State_Miami-Dade_County_Eleventh_Circuit_Court/2020-005653-CA-01/STEPHANIE_ARMAS_VS_AMAZON.COM_INC./Doc-02-Complaint/]

[15] Magdiela Gonzalez v. Gojo Industries, Inc., Case No. 1:20-cv-00888. United States District Court Southern District of New York; [Copy of the class action complaint is available athttps://webcache.googleusercontent.com/search?q=cache:P4pYvmgjNxAJ:https://www.classaction.org/media/gonzalez-v-gojo-industries-inc.pdf+&cd=1&hl=en&ct=clnk&gl=in]

[16] Copy of the class action complaint is available at https://www.dandodiary.com/wp-content/uploads/sites/893/2020/03/inovia-complaint.pdf

[17] https://www.thehindu.com/business/Industry/class-action-suit-against-infosys-dismissed-in-us/article31647106.ece

Legislation UpdatesRules & Regulations

Central Consumer Protection Authority (Allocation and Transaction of Business) Regulations, 2020

In exercise of the powers conferred by sub-section (1) and clause (b) of sub-section (2) of Section 104 read with sub-section (1) of Section 14 of the Consumer Protection Act, 2019 (35 of 2019), the Central Consumer Protection Authority, with the previous approval of the Central Government, hereby makes the following regulations, namely:– Central Consumer Protection Authority (Allocation and Transaction of Business) Regulations, 2020.

The said regulations shall lay down the regulations under the following heads:

  • Definitions
  • Procedure for transaction and allocation of business
  • Manner and form in which contracts may be executed
  • Affixation of Common Seal
  • Reimbursement
  • Effect of any irregularity of procedure

Read the detailed notification here: NOTIFICATION

Central Consumer Protection Authority

[Notification dt. 13-08-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): A Division Bench of Dr S.M. Kantikar (Presiding Member) and Dinesh Singh (Member), while addressing the issue of medical negligence by the doctors of Christian Medical College, Vellore awarded compensation to the deceased’ wife.

Deceased got admitted to as a private patient at Christian Medical College, Vellore — OP and on being examined it was found to be a case of Coronary Artery Disease.

The treating doctor advised the deceased to undergo Coronary Angiogram test when the same was conducted, the doctor expressed that it would be better if the patient undergoes Coronary Arterial By-pass Graft (CABG) surgery instead of angioplasty to avoid multiple stenting.

After a couple of days, Dr Sujit discontinued medicines Ecospirin and Clopidogrel and started Heparin 5000 units 6 hourly.

Heparin was started without any laboratory investigations and monitoring protocol.

Complainant had notice bleeding at the site of insertion of the needle but the said complaint was ignored by the doctors.

On the 3rd does of Heparin being given to the patient, it was noted that he suffered from a mini-stroke after that.

An immediate CT Scan was to be done but no stroke evaluation was suggested by the doctor. Later the deceased was transferred to the Thoracic surgery unit in Semi-ICU. Neurologist suggested a CT-Brain Plain study but the same was delayed.

The neurologist after conducting the above-stated scan informed the complainant that as the patient already progressed into coma, nothing more could be done. Finally, doctors suggested the family that they should accept the inevitable event and instead of wasting money allow them to withdraw ventilator support.

Later, the complainant took the opinion of several other doctors who said that the delay caused for stroke management was fatal and it was due to lapses in the hospital.

Patients once again suffered a stroke and died on nothing being done by the doctors.

In view of the above-stated, present consumer complaint was filed for medical negligence and callousness of the doctors at CMC causing the death of the patient.

Commission on perusal of the facts and submissions of the case stated that, the high-risk patients living in the hospital/nursing homes or undergoing cardiac procedures should have monitoring systems to help alert the doctor/staff immediately.

Adding to its analysis, the bench also stated that pre-hospital triage and communication between radiologists, neurologists and emergency physicians are more vital.

Delay in diagnosis and management of stroke was a deficiency and not a reasonable or standard of practice.

Another significant setback that was noted was that there was an urgent need for a brain CT scan of the patient but it was delayed for more than 3 hours for the want of a fresh receipt of Rs 1850 towards CT scan charges even though complainants had already deposited 150000 in advance. 

For the above instance, the bench stated,

Hospital has every right to insist the payment but it was also a prime duty to care the emergency patient.

In view of the above, deficiency/negligence was conclusively established and hence ac compensation of Rs 25 lakhs with an interest of 8% p.a was awarded. [Yashumati Devi v. Christian Medical College, 2020 SCC OnLine NCDRC 211, decided on 11-08-2020]

Suggested Reading

Latest addition to EBC’s Layman Series — Consumer Claims [Buy Now]

SCC Online is now on Telegram and Instagram. Join our channel @scconline on Telegram and @scconline_ on Instagram and stay updated with the latest legal news from within and outside India

New releasesNews

Consumer Claims by Akanksha Rana

Overview:

Akanksha Rana’s Consumer Claims is part of EBC’s LAYMAN SERIES and is written for the consumer and to empower them in a way that they can gain awareness of their rights and how to get these rights enforced through appropriate forums. This book explains the purpose and provisions of the latest Consumer Act, 2019 in a simple and lucid manner.

The book starts with explaining the definition and concept of the consumer as per the Indian laws and goes on to explain the rights of a consumer. A chapter has been dedicated to Ombudsman services available for consumers, offered by some service/product sectors like banking, telecommunications, etc. The complete legal process has been explained in detail, starting from the definition of the complainant and understanding the claim, to structure and jurisdiction of consumer forums, and culminating in appeals and enforcement of the final order and beyond.

Chapters dealing with established consumer rights are included with “legal consumer cases” to illustrate the legal points. This is also aimed at “empowering” consumers by connecting them to local and governmental forums and to other consumers with similar problems. The book includes step-by-step guides to file complaints which the reader can use to file his/her complaint correctly. Web links to model formats for filing complaints have been added for reference.

This book includes a companion web resource EBC ExplorerTM (www.ebcexplorer.com), powered by SCC Online providing access to important cases, indicated by the Case PilotTM. Find articles and important links on consumer laws, updates, a discussion forum and a host of free learning resources on EBC ExplorerTM.

Table Of Contents:

Table of Cases

Introduction

Consumer and Its Protection

Ombudsman

Rights of a Consumer

Initiating Legal Action

Outcome of the Legal Action

Online Shopping

Education Services

Insurance Services

Housing Services

Medical Services

Food Products

Transportation Services

Responsibilities of a Consumer

Annexure

Subject Index

Here’s the link to get your copy — CONSUMER CLAIMS

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and Ajay Rastogi, JJ has held that a construction worker who is registered under the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 19961 and is a beneficiary of the Scheme made under the Rules framed pursuant to the enactment, is a ‘consumer’ within the meaning of Section 2(d) of the Consumer Protection Act 1986.

The Court explained that the workers who are registered under the provisions of the Act of 1996 are beneficiaries of the schemes made by the Board. Upon registration, every worker is required to make a contribution to the fund at such rate per month as may be prescribed by the State government. It said that as per the statutory scheme, the services which are rendered by the Board to the beneficiaries are not services which are provided free of charge so as to constitute an exclusion from the statutory definition contained in Section 2(1)(o) and Section 2(d)(ii) of the Consumer Protection Act 1986.

“The true test is not whether the amount which has been contributed by the beneficiary is adequate to defray the entire cost of the expenditure envisaged under the scheme. So long as the service which has been rendered is not rendered free of charge, any deficiency of service is amenable to the fora for redressal constituted under the Consumer Protection Act 1986.”

Noticing that as per the definition contained in Section 2(1)(d), a ‘consumer’ includes not only a person who has hired or availed of service but even a beneficiary of a service, the Court held that the registered workers are clearly beneficiaries of the service provided by the Board in a statutory capacity.

The Court concluded by saying that public accountability is a significant consideration which underlies the provisions of the Consumer Protection Act 1986.

“The evolution of jurisprudence in relation to the enactment reflects the need to ensure a sense of public accountability by allowing consumers a redressal in the context of the discharge of non-sovereign functions which are not rendered free of charge.”

[Joint Labour Commissioner and Registering Officer v. Kesar Lal, 2020 SCC OnLine SC 327, decided on 17.03.2020]

Case BriefsSupreme Court (Constitution Benches)

Supreme Court: The 5-judge bench of Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah and S. Ravindra Bhat, JJ has held that the District Forum has no power to extend the time for filing the response to the complaint beyond the period of 15 days in addition to 30 days as is envisaged under Section 13 of the Consumer Protection Act, 1986.

The bench was answering the reference relating to the grant of time for filing response to a complaint under the provisions of the Consumer Protection Act, 1986 wherein the answers to the following questions were sought:

  • whether Section 13(2) (a) of the Consumer Protection Act, which provides for the respondent/opposite party filing its response to the complaint within 30 days or such extended period, not exceeding 15 days, should be read as mandatory or directory; i.e., whether the District Forum has power to extend the time for filing the response beyond the period of 15 days, in addition to 30 days.
  • what would be the commencing point of limitation of 30 days stipulated under the aforesaid Section.

Answering the first question,  the Court held that the decision rendered by a 3-judge bench in Dr. J. J. Merchant v. Shrinath Chaturvedi, (2002) 6 SCC 635, to be correct in law, wherein it was held that the time limit prescribed for filing the response to the complaint under the Consumer Protection Act, as provided under Section 13(2)(a), is to be strictly adhered to, i.e. the same is mandatory, and not directory.

Considering the Statement of Objects and Reasons of the Consumer Protection (Amendment) Bill, 2002 i.e. quick disposal of cases, the Court in the said verdict noticed that sub­Section (3A) of Section 13 was inserted, providing that the complaint should be heard as expeditiously as possible and that endeavour should be made to normally decide the complaint within 3 months, and within 5 months where analysis or testing of commodities was required. It was further noticed,

“The Provisos to the said sub-Section required that no adjournment should be ordinarily granted and if granted, it should be for sufficient cause to be recorded in writing and on imposition of cost, and if the complaint could not be decided within the specified period, reasons for the same were to be recorded at the time of disposing of the complaint.”

Answering the second question, the bench explained that a conjoint reading of Clauses (a) and (b) of sub-Section (2) of Section 13 would make the position absolutely clear that the commencing point of limitation of 30 days, under the aforesaid provisions, would be from the date of receipt of notice accompanied by a copy of the complaint, and not merely receipt of the notice, as the response has to be given, within the stipulated time, to the averments made in the complaint and unless a copy of the complaint is served on the opposite party, he would not be in a position to furnish its reply. Thus, mere service of notice, without service of the copy of the complaint, would not suffice and cannot be the commencing point of 30 days under the aforesaid Section of the Act.

The Court, further, clarified that,

“the objection of not having received a copy of the complaint along with the notice should be raised on the first date itself and not thereafter, otherwise if permitted to be raised at any point later would defeat the very purpose of the Act, which is to provide simple and speedy redressal of consumer disputes.”

It, hence, held that commencing point of limitation of 30 days under Section 13 of the Consumer Protection Act would be from the date of receipt of the notice accompanied with the complaint by the opposite party, and not mere receipt of the notice of the complaint.

[New India Assurance v. Hilli Multipurpose Cold Storage Pvt. Ltd., 2020 SCC OnLine SC 287, decided on 04.03.2020]

Hot Off The PressNews

The First Session of the Parliament after the 2019 General Elections, the most productive session in the longest time was conducted. In total 30 Bills have been passed this session in 35 sittings.

Bills passed by both the houses of the Parliament are listed below:

  1. The Special Economic Zones (Amendment) Bill, 2019
  2. The Jammu and Kashmir Reservation (Amendment) Bill, 2019
  3. The Homoeopathy Central Council (Amendment) Bill, 2019
  4. The Central Educational Institutions (Reservation in Teachers’ Cadre) Bill, 2019
  5. The Indian Medical Council (Amendment) Bill, 2019
  6. The Dentists (Amendment) Bill, 2019
  7. The Aadhar and Other Laws (Amendment) Bill, 2019
  8. The Central Universities (Amendment) Bill, 2019
  9. The National Investigation Agency (Amendment) Bill, 2019
  10. The New Delhi International Arbitration Centre Bill, 2019
  11. The Appropriation (No. 2) Bill, 2019
  12. The Finance (No. 2) Bill, 2019
  13. The Protection of Human Rights (Amendment) Bill, 2019
  14. The Right to Information (Amendment) Bill, 2019
  15. The Banning of Unregulated Deposit Schemes Bill, 2019
  16. The Muslim Women (Protection of Rights on Marriage) Bill, 2019
  17. The Companies (Amendment) Bill, 2019
  18. The Insolvency and Bankruptcy Code (Amendment) Bill, 2019
  19. The Arbitration and Conciliation (Amendment) Bill, 2019
  20. The Protection of Children from Sexual Offences (Amendment) Bill, 2019
  21. The Unlawful Activities (Prevention) Amendment Bill, 2019
  22. The Codes on Wages, 2019
  23. The Repealing and Amending Bill, 2019
  24. The Airport Economic Regulatory Authority of India (Amendment) Bill, 2019
  25. The Motor Vehicles (Amendment) Bill, 2019
  26. The National Medical Commission Bill, 2019
  27. The Consumer Protection Bill, 2019
  28. The Public Premises (Eviction of Unauthorised Occupants) Amendment Bill, 2019
  29. The Jammu and Kashmir Reorganisation Bill, 2019.
  30. The Supreme Court (Number of Judges) Amendment Bill, 2019

Legislations relating to almost all walks of socio and economic activities have been passed. 30 Bills have been passed by both the Houses of Parliament in this Session which is a record in single first/effective Session after the constitution of new Lok Sabha.

Most important business transacted during this Session is the abrogation of certain provisions from Article 370 and Presidential Orders thereunder.  This will ensure equal opportunities to all sections of Society in Jammu & Kashmir particularly with the restoration of applicability of the provisions of the Constitution of India and all socio-economic legislations thereby ensuring rule of law and equity.  Further, for ensuring better administration and for curbing terrorism, the State of Jammu & Kashmir has been reorganized with the formation of two Union Territories – Jammu &Kashmir and Ladakh. 

Op EdsOP. ED.

Inspired by former U.S. President John F. Kennedy, at the time when he formally addressed the issue of consumer rights back in 1962, the World Consumer Rights Day was first observed on 15th March 1983 and since then it has become a very important day in terms of gathering citizens and persisting them to imparting their voice towards their rights.

The theme for this year’s World Consumer Rights Day, 2019 is “Trusted Smart Products”. The theme has been chosen by “consumers international” with the reasoning that,

“From smart phones to wearable fitness trackers, to voice-activated assistants and smart TVs, many of the products we use are increasingly becoming connected by default.

This World Consumer Rights Day, we want to highlight what consumers want and need from a connected world and how important it is to put them at the heart of the development of these digital products and services.”

This day is celebrated in order to spread awareness amongst the consumers and outspread the rights laid down for them. It is an initiative for the masses and the protection of their rights.

Kennedy said,

“If consumers are offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers.”

Four basic rights that were declared in the speech delivered by US President John F. Kennedy in 1962 were [Foundation Stones]:

  • Right to safety
  • Right to be informed
  • Right to choose
  • Right to be heard

Two decades later, in the 1980s, four more rights were added by the international coalition of consumer groups:

  • Right to redress
  • Right to satisfaction of basic needs
  • Right to consumer education
  • Right to a healthy environment

Since that time these eight rights have formed the basis for ongoing work by consumer groups throughout the world.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.”

-Former U.S. President John F. Kennedy

The constant reminder for Indian citizens for knowing their rights has been “Jago Grahak Jago”. Several campaigns have also been launched for the same yet the need to spread the word should not stop.

Out of the various laws that have been enforced to protect consumer rights in India, the most important is the Consumer Protection Act, 1986. According to this law, everybody, including individuals, a firm, a Hindu undivided family and a company, have the right to exercise their consumer rights for the purchase of goods and services made by them. It is significant that, as a consumer, one knows the basic rights as well as about the courts and procedures that follow with the infringement of one’s rights.

In general, consumer rights in India are listed below:

  • The right to be protected from all kind of hazardous goods and services
  • The right to be fully informed about the performance and quality of all goods and services
  • The right to free choice of goods and services
  • The right to be heard in all decision-making processes related to consumer interests
  • The right to seek redressal, whenever consumer rights have been infringed
  • The right to complete consumer education

Quotes to remember:

Mahatma Gandhi

“Customers are the most important visitor on our premises, they are not dependent on us, we are dependent on them. They are not an interruption in our work. They are the purpose of it. They are not outsiders in our business. They are part of it; we are not doing them a favour by serving them. They are doing us a favour by giving us an opportunity to do so.”

Jeff Bezos
“We see our customers as invited guests to a party, and we are the hosts, it’s our Job every day to make every important aspect of the customer experience a little bit better.”

Herbert Hoover
Competition is not only the basis of protection to the consumer but is the incentive to progress.

List of some famous “Consumer Protection Cases”:

“Awareness” is the only key for the protection of rights.

† Legal Editor, EBC Publishing Pvt. Ltd.

Case BriefsSupreme Court

Supreme Court: After a 3-member committee headed by former Supreme Court judge, Justice Arijit Pasayat, filed it’s report on the facilitating infrastructural improvements in National/State Consumer Fora, the 3-judge bench of Dipak Misra, CJ and AM Khanwilkar and Dr. DY Chandrachud, JJ asked the Central Government to file a comprehensive status report indicating compliance with the directions issued by the Court on 21 November 2016 within six weeks. The committee had submitted the report on March 4, 2017.

On 21.11.2016, the Court had issued the following directions:

  • The Union Government shall for the purpose of ensuring uniformity in the exercise of the rule making power under Section 10(3) and Section 16(2) of the Consumer Protection Act, 1986 frame model rules for adoption by the state governments. The model rules shall be framed within four months and shall be submitted to this Court for its approval;
  • The Union Government shall also frame within four months model rules prescribing objective norms for implementing the provisions 24 of Section 10(1)(b), Section 16(1)(b) and Section 20(1)(b) in regard to the appointment of members respectively of the District fora, State Commissions and National Commission;
  • The Union Government shall while framing the model rules have due regard to the formulation of objective norms for the assessment of the ability, knowledge and experience required to be possessed by the members of the respective fora in the domain areas referred to in the statutory provisions mentioned above. The model rules shall provide for the payment of salary, allowances and for the conditions of service of the members of the consumer for a commensurate with the nature of adjudicatory duties and the need to attract suitable talent to the adjudicating bodies. These rules shall be finalized upon due consultation with the President of the National Consumer Disputes Redressal Commission, within the period stipulated above;
  • Upon the approval of the model rules by this Court, the state governments shall proceed to adopt the model rules by framing appropriate rules in the exercise of the rule making powers under Section 30 of the Consumer Protection Act, 1986;
  • The National Consumer Disputes Redressal Commission is requested to formulate regulations under Section 30A with the previous approval of the Central Government within a period of three months from today in order to effectuate the power of administrative control vested in the National Commission over the State Commissions under Section 24(B)(1)(iii) and in respect of the administrative control of the State Commissions over the District fora in terms of Section 24(B)(2) as explained in this Judgment to effectively implement the objects and purposes of the Consumer Protection Act, 1986.

Requesting Additional Solicitor General Maninder Singh to assist the Court in the matter, the Court fixed 30.01.2018 as the next date of hearing. [State of Uttar Pradesh v. All U.P. Consumer Protection Bar Association, 2017 SCC OnLine SC 1488, order dated 15.12.2017]

Case BriefsSupreme Court

Supreme Court: The bench of Madan B. Lokur and P.C. Pant, JJ held that a Trust cannot file a complaint under the provisions of the Consumer Protection Act, 1986 as a Trust is not a person and therefore not a consumer.

The bench took note of the various definition provisions under the Act to come to the conclusion that a Trust does not fall under the category of a ‘complainant’ as defined under Section 2(b) of the Act. The Court also considered the definition of ‘consumer’ under Section 2(d) of the Act which included the word ‘person’. The Court said that ‘person’ as per Section 2(m) of the Act includes a firm whether registered or not; a Hindu undivided family; a co-operative society; every other association of persons. However, it does not include ‘Trust’.

Hence, the Court held that based on a plain and simple reading of the provisions, a Trust cannot be a complainant and cannot file a consumer dispute under the provisions of the Act. [Pratibha Pratisthan v. Manager, Canara Bank, 2017 SCC OnLine SC 202, decided on 07.03.2017]

Case BriefsSupreme Court

Supreme Court: Showing concern over the deficiency of infrastructure in the adjudicatory fora constituted under the Consumer Protection Act, 1986, the 3-judge bench of T.S. Thakur, CJ and Dr. D.Y. Chandrachud and L. Nageswara Rao, JJ gave the following directions:

  • The Union Government shall for the purpose of ensuring uniformity in the exercise of the rule making power frame model rules for adoption by the state governments and also the model rules prescribing objective norms for implementing the provisions of Section 10(1)(b), Section 16(1)(b) and Section 20(1)(b) in regard to the appointment of members respectively of the District fora, State Commissions and National Commission, within four months and submit to this Court for its approval;
  • The Union Government shall while framing the model rules have due regard to the formulation of objective norms for the assessment of the ability, knowledge and experience required to be possessed by the members of the respective fora in the domain areas referred to in the statutory provisions mentioned above. The model rules shall provide for the payment of salary, allowances and for the conditions of service of the members of the consumer fora commensurate with the nature of adjudicatory duties and the need to attract suitable talent to the adjudicating bodies. These rules shall be finalized upon due consultation with the President of the National Consumer Disputes Redressal Commission, within the period stipulated above;
  • Upon the approval of the model rules by this Court, the state governments shall proceed to adopt the model rules by framing appropriate rules in the exercise of the rule making powers under Section 30 of the Consumer Protection Act, 1986;
  • The National Consumer Disputes Redressal Commission shall formulate regulations under Section 30A with the previous approval of the Central Government within a period of three months in order to effectuate the power of administrative control vested in the National Commission over the State Commissions under Section 24(B)(1)(iii) and in respect of the administrative control of the State Commissions over the District fora in terms of Section 24(B)(2) as explained in this Judgment to effectively implement the objects and purposes of the Consumer Protection Act, 1986.

The Court had, on 14.01.2016, constituted a committee headed by Former Justice Arijit Pasayat to examine the condition prevalent in respect of the matter at hand. The Committee, in it’s enquiry report, had submitted that “the fora constituted under the enactment do not function as effectively as expected due to a poor organizational set up, grossly inadequate infrastructure, absence of adequate and trained manpower and lack of qualified members in the adjudicating bodies. Benches of the state and district fora sit, in many cases for barely two or three hours every day and remain non-functional for months due to a lack of coram. Orders are not enforced like other orders passed by the civil courts. The state governments have failed to respond to the suggestions of the Committee for streamlining the state of affairs.” [State of U.P. v. All U. P. Consumer Protection Bar Association, 2016 SCC OnLine SC 1291, decided on 21.11.2016]