India has, for a long time given precedence to Caveat Venditor (Seller Beware) over the ancient maxim of Caveat Emptor (Buyer Beware), with the recognition of various consumer rights enshrined in the Consumer Protection Act, 1986 (“old Act”). However, with the passage of time, the old Act became a little out-dated in respect of certain new kinds of transactions. Over the past several years, the landscape of consumer rights as also transactions has seen a huge shift, in view of which newer provisions of law were much required to recognize rights and remedies available to consumers.
With this motive, the Consumer Protection Act, 2019 (“new Act”) has been enforced with effect from 20.07.2020. As can be witnessed from the insertion of more than 70 new sections in the Act in comparison to the previous one, pervasive changes have been brought about. The government of India has also brought into effect the new Consumer Protection (E-commerce) Rules, 2020 under the new Act. This article analyses the major modifications brought in by the new Act.
New Regime for Online Transactions
The new Act has been made, giving specific attention to the advent of the internet, online transactions, and the e-commerce model of transactions. A specific explanation has been added to the new Act, where the meaning of “buys any goods”, has been expanded to include online transactions[1]. The new Act empowers the Central Government to take measures to prevent unfair trade practices in the domain of e-commerce[2] and the Central Government has in fact brought into effect the new Consumer Protection (E-Commerce) Rules, 2020 also on 20.07.2020. These rules cover the selling of goods and services including digital products over digital or electronic networks. Every e-commerce entity is required to provide specific information relating to the return of goods, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism, payment modes, and also security of payment modes.
New Concept of Product Liability
The new Act now introduces the concept of product liability[3]. This new introduction now allows consumers to file complaints against the product manufacturer, product seller, or service provider of a product, for compensation owing to any harm caused due to a defective product. The new definition of product manufacturer now also includes a person selling the product, thus imposing an additional liability on not only the manufacturer but also the seller. By virtue of Chapter VI, the National Commission as well as the State Commission have now been empowered to hear complaints for product liability actions[4]. Of course, just exceptions have been introduced such as when a product is misused, altered, or modified or used under the influence of a drug/alcohol not prescribed by a medical professional.
Specific Inclusion of Home Buyers
Although various case laws were already existing on the recognition of rights of Homebuyers, the new Act expressly includes the rights of Home Buyers. It includes persons engaged in the sale of constructed or under construction houses or flats under the definition of Product Seller[5]. Thus, the sale of houses and flats can now be looked at, from the prism of Product Liability as provided for, under the regime of the new Act. Apart from this, as before, the new Act is not applicable to immovable property.
Establishment of Central Consumer Protection Council, Central Consumer Protection Authority, and Monitoring Cell
The new Act provides for the establishment of the Consumer Protection Council at the Central level. This authority will prevent the abuse of consumers by promoting the rights of consumers, preventing unfair trade practice, stopping false or misleading advertisements and other steps for protection of consumer’s rights.[6]
Chapter III of the new Act provides for the establishment of a new Central Authority, termed as Central Consumer Protection Authority. Its main objective is to regulate matters relating to violation of the rights of consumers, unfair trade practice, and other matters. Its function is to promote and protect consumer rights and to prevent other activities which would lead to violation of consumers rights.
On reference made to District Collector by the Central Authority, the District collector may inquire or investigate complaints regarding violation of consumer rights or in others matter. This authority also has the power to recall goods if they find that such goods will be dangerous, hazardous, or unsafe.
Any person aggrieved by the order of the authority can file an appeal that will lie to the National Commission.[7]
Similarly, a monitoring cell has also been constituted by the President of the National Commission, whose function shall be to oversee the State Commission’s functioning from the administrative point of view[8].
Change in Pecuniary Jurisdiction
Earlier District Forum had the authority to adjudicate upon the matters with value less than Rs. 20 Lakh.[9] This has now been changed to matters with values less than Rs. 1 Crore. Similarly, for State Commission, it was more than Rs. 20 lakhs and less than Rs. 1 Crore[10] under the old Act, which has been increased to matters with value more than Rs. 1 Crore but less than Rs. 10 Crore as per the new Act. Further, the National Commission, which earlier had authority to entertain those matters whose value was more than Rs. 1 crore[11] under the old Act, now entertains matters with value more than Rs. 10 Crores as per the new Act[12].
Expansion in Territorial Jurisdiction
Under the old Act, a complaint could lie were the cause of action arose or where respondents reside.[13] Now in addition to the previous position of law with regard to jurisdiction, the complaint can be also filed where the complainant resides or personally works for gain.[14] This has been done solely for the convenience of the consumer, especially owing to the fact that consumers usually are in a place of relatively lesser bargaining power.
Introduction of Offences and Penalties
Under the old Act, there was no provision for declaration of any acts to be offenses or the provision for penalties thereof. Now, under the new Act if a person does not comply with the order of Central Authority then he will be imprisoned for 6 months or have to bear a fine which may extend to Rs. Twenty lakhs.[15]
Additionally, punishment for other activities has been provided which includes misleading advertisement, manufacturing for sale, or for storing or distributing or importing of spurious goods or of products containing adulterant.[16]
Similarly, under the old Act, if a person did not comply with the order of the State Commission, he/she would have to pay fine ranging from two thousand to ten thousand rupees. Now even that fine limit has been increased from twenty-five thousand to one lakh rupees[17].
Introduction of new concept of “Unfair Contract”
The new Act has brought in the concept of an “Unfair Contract”. A Contract that has onerous terms like allowing one party to terminate the contract unilaterally without reasonable reason or imposing unreasonable charge on the consumer has been termed as an Unfair Contract under the new Act.[18] A Complaint can be filed under the new Act for adoption of Unfair Contract by a trader or service provider[19].
The National Commission and State Commission have been empowered to entertain complaints with regard to Unfair Contracts and to declare any terms of contract as null and void if they find such term unfair to customers.[20]
Expansion of the definition of Unfair Trade Practices
Another method by way of which extensive protection has been afforded to consumers is by expanding the definition of Unfair Trade Practices under the new Act. Activities such as failure to issue a cash memo, not taking back the defective sold goods, providing personal information of consumers to others etc. are now included in the definition of Unfair Trade Practices also[21]. In effect data protection is finding place in the new Act.
Second Appeal from Orders of District Commissions
Under the old Act, if an order was passed by the District Forum, and an appeal had been filed before State Commission, thereafter no second appeal lied to the National Commission, from an Order passed by the State Commission under such an Order. Only revisional jurisdiction could be exercised by National Commission[22] in such cases. However, now the provision for a second appeal has been introduced from the order of the State Commission passed in an Appeal from the Order of the District Commission, provided that a substantial question of law is involved[23].
Mediation
There seems to be a major push to mediation under the new Act. An entire Chapter V has been added in the new Act to provide detailed provisions with regard to the appointment of mediators, duties of mediators and the procedure of mediation to be followed.
There will be Consumer Mediation Cell attached to each DCDRC, State Commission, and National Commission.
All three forums, DCDRC, State Commission, and National Commission have the authority to refer disputes to mediation[24] and to nominate a mediator from the panel of the mediators.
An additional push has been provided to mediation by providing that no appeals would lie, in case a matter is resolved by mediation. This surely seems to be a measure to encourage out of court settlements and to possibly reduce the burden on Courts while ensuring an amicable resolution of disputes can be achieved.
Recognition of Advertisement and Misleading Advertisement
While the old Act was completely silent about these aspects, in the new Act, Section 2 (1) & Section 2 (28) have been introduced which define Advertisement and Misleading Advertisement respectively. This should further increase the liability of manufacturers, sellers, and service providers as also celebrities endorsing brands, regarding their obligations of honest advertisement. Seems to be a much-needed step in the right direction.
Investigating Powers of the National Commission
The National Commission has now been given the authority to investigate allegations against the President and members of the State Commission[25].
Some other Important Changes
Apart from the changes brought about by the new Act as mentioned hereinabove several other changes have been made. Besides expanding the definition of consumers to include those buying goods or services through online transactions[26], individuals have specifically included within the definition of a person[27] who is a consumer. Further, now even minors can be complainants in case he is a consumer, the only requirement being that he will need to be represented by his parent or legal guardian[28].
The District Consumer Disputes Redressal Forum has been renamed to District Consumer Disputes Redressal Commission (DCDRC) and it has been provided that there can be more than one DCDRC in one district. The time limit for filing appeals from District Forums order to the State Commission has been increased from 30 days[29] to 45 days from the date of the order.[30]
Additionally, the appointment of experts has been expressly provided for in the new Act. National Commission or State Commission may ask for assistance from individuals or organizations in cases where large interest of consumers is involved.[31]
Further, more authority has now been given to Consumer Fora by express provision whereby Orders passed by the National Commission, State Commission or District Commission will be enforced as a decree of civil court.[32]
Denouement
To conclude it may be said that the new Act has not only brought in some much-required changes and codified certain laws established by legislation but has also taken pro-active measures to strengthen the consumer protection laws of the country. With the new Act, consumers are afforded much more protection by plugging in various gaps and addressing many gray areas, and at the same time, manufacturers, sellers, and service providers need to be much more vigilant before taking consumers for a ride. All in all, the new Act seems to be a much-needed step in the right direction and is in fact quite commendable.
We have also prepared a comparative tabular compilation of the old Act vs. the new Act, which can be accessed here.
The author is currently working with Adwitya Legal LLP, as their Partner, Arbitration & Dispute Resolution, email: gunjan@adwlegal.co.in, Grateful to Mr. Akash Kishore, who is currently interning with Adwitya Legal LLP, for his research inputs.
References:
[1] Section 2 (7) Explanation (b)- The Consumer Protection Act, 2019
[2] Section 94 – The Consumer Protection Act, 2019
[3] Section 2 (33) , The Consumer Protection Act, 2019.
[4] Section 2 (34), Section 2(35), Section 39 and Chapter V- The Consumer Protection Act, 2019.
[5] Section 2 (37) , The Consumer Protection Act, 2019.
[6] Chapter III- The Consumer Protection Act, 2019
[7] Chapter III- The Consumer Protection Act, 2019
[8] Section 70 (2)- The Consumer Protection Act, 2019
[9] Section 11(1)- The Consumer Protection Act, 1986
[10] Section 17(a) (i)- The Consumer Protection Act, 1986
[11] Section 21(a) (i)- The Consumer Protection Act, 1986
[12] Section 34(1), Section 47(1) (a) (i), Section 58(1) (a) (i)- The Consumer Protection Act, 2019.
[13] Section 34 (2) The Consumer Protection Act, 1986
[14] Section 34 (2) (d)- The Consumer Protection Act, 2019.
[15] Section 88- The Consumer Protection Act, 2019
[16] Section 89 & Section 90 & Section 91- The Consumer Protection Act, 2019
[17] Section 72- The Consumer Protection Act, 2019
[18] Section 2 (46) – The Consumer Protection Act, 2019.
[19] Section 2 (6) (i)- The Consumer Protection Act, 2019.
[20] Section 49 (2), Section 59 (2)- The Consumer Protection Act, 2019
[21] Section 2 (47) (vii) – The Consumer Protection Act, 2019.
[22] Section 21- The Consumer Protection Act, 1986
[23] Section 51 (2)- The Consumer Protection Act, 1986
[24] Section 28 r/w Section 37(1), Chapter V -The Consumer Protection Act, 2019
[25] Section 70 (1)(b)- The Consumer Protection Act, 2019
[26] Section 2 (7) Explanation (b)- The Consumer Protection Act, 2019
[27] Section 2 (31) (i)- The Consumer Protection Act, 2019
[28] Section 2 (5)- The Consumer Protection Act, 2019
[29] Section 19- The Consumer Protection Act, 1986
[30] Section 41- The Consumer Protection Act, 2019
[31] Section 66- The Consumer Protection Act, 2019
[32] Section 71- The Consumer Protection Act, 2019
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