A Peek into the New Consumer Protection Act of 2019

Historical Perspective of “Consumers” and “Consumer Protection”

The concern regarding the need for protection of consumers and their rights as consumers arose out of the need to have pure/ unadulterated goods/commodities and services at appropriate prices and to the fullest satisfaction.They have been recognized since times immemorial.

Inancient period - various treaties were transacted, regulating the socio-economic and political conditions of the people. Manu Smriti, Kautilya’s Arthasastra and various other local scripts laid down various codes of conduct regulating the trade and commerce along with other related areas of people’s lives. These treaties also reflected a belief in the fact that the state/king had a great role to play in the protection of the interests of the consumers.

During the British regime - various laws were passed for the protection of consumer interests, including acts like Indian Contract Act of 1872, Indian Penal Code of 1860, The Sale of Goods Act of 1930, Agriculture Procedure (Grading and Marketing) Act of 1937, etc. All these and various other enactments provided protection to consumers specifically as well as generally, at various levels.

Scenariopost-Independence: For almost 40 Years i.e. from 1947 to 1986, the Sale of Goods Act of 1930 was the only legislation for consumer safeguard and protection. Section 16 (i) provided the main exception to the principle of Caveat Emptor (Concept of “Let the buyer beware”) and made the seller responsible in various situations for the quality of product or service he sells, thussafeguarding the consumers.

Overview of the Consumer Protection Act of 1986: This act replaced the Consumer Protection Act of 1930 and was the sole legislation governing consumer disputes in India for more than last three decades. With the onset of digital era, frequent changes in consumer spending habits, increase In number of high value transactions, complex to very complex scenarios, and high use of social media tools, the need for an updated legal framework was long felt. Initially the Consumer Protection Act of 2018 was introduced to overhaul the consumer dispute redressal mechanism and to strengthen the protection provided to consumers. However, the CPA’2018 could not be proceeded with, due to dissolution of the Lok Sabha. With the aim to provide better protection and effective administration, Consumer Protection Act’2019 (New Act) was introduced. The act was passed by both the houses of parliament and has received the assent of the President on 9th August’2019. The provisions of the New Act shall come into force on such date as the Central Government may notify.

Consumer Protection Act’2019- Key Insights

The Key insights of the new act, which has introduced several changes as compared to the erstwhile act of 1986, are as follows:

Enlargement of various definitions:

• Definition of Complainant/ Aggrieved consumer: The New act has introduced even a minor as a complainant, who may proceed to initiate an action through a parent or a guardian. Such a provision was not available under the old act. This has been brought in due to constant changes in the pattern of consumerism in the digital age/ Virtual transactions.

• Definition of Consumer- Broadened: The New act has enlarged the scope of consumer to include persons indulging in all kinds of online and offline transactions, electronic transactions, and transactions being carried through teleshopping, virtual transactions, direct selling and multilevel marketing. The changes were made keeping in mind the changing pattern of the transactions as the previous act did not keep pace with the changing times and hence all such newly introduced transactions needed to be dealt on individual basis. This is a significant change as compared to the previous act which did not include such transactions.

• Definition of “Goods”: Under the new act the term “goods” includes all kinds of movable property and includes “food”. Thus, the definition has been widened keeping with the requirements.

• Definition of “Product”: The word “Product” covers and means that any article, product or substance, which possesses an intrinsic value, and which is capable of delivery. The erstwhile act had no such coverage.

• Definition of “Product Seller”: The new definition has been widened to include manufacturers who sell products as well as services providers. It also includes persons who are engaged in sale of constructed houses or homes, or flats. Though, professional service providershave not been included in “product sellers”. The erstwhile act had no such coverage.

• Definition of “Unfair Trade Practice”: The following practices have been added to the previous list of unfair Trade Practice: 1. Failure to issue bill, cash memo, or receipt; or 2. Refusing to take back, withdraw, or discontinue defective goods, and deficient services and to refund the consideration; or 3. Disclosing any personal information given in confidence by the consumer unless that disclosure is made in accordance with law.

• Addition and definition of new Terms: The following new terms have further been defined under the new act: Advertisement; Central Authority; Consumer rights; Design; Direct Selling; Director-General; E- Commerce; Electronic service provider; Endorsement; Express Warranty; Harm; Injury; Mediation; Mediator; Misleading Advertisement; Product Liability; Product Liability action; Product Service Provider; Regulator; Unfair Contract;

Empowerment of Regulatory Authorities

• Introduction of Central Consumer Protection Authority (‘Central Authority’): The ‘new act’ provides for the establishment of a Central Consumer Protection Authority to regulatematters relating to the following: 1. Violation of Consumer Rights; 2. Unfair Trade Practices; 3. False or misleading advertisements; which are prejudicial to the interests of the public and the consumers, and to promote, protect and enforce the rights of the consumers as a class. This would lead to faster redressal of grievances.

• District Consumer Redressal Commission: (“District Commission”): Under the “new act”, the district commission has theenhanced jurisdiction to entertain complaints where the value of goods or services paid as consideration is upto Rs. 1 Crore against the earlier limit of Rs. 20 Lacs. Further, the amount of compensation claimed is not included in the value of 1 Crore. Anappeal may be filedagainst the orders of District Commission before the State Commission within 45 Days against the earlier period of 30 days. There is a marked difference in the approach to District Commission as compared to the previous act. In the new act, one must include only the value of goods and services while ascertaining the pecuniary jurisdiction of the District Commission. Earlier the amount of compensation claimed was also included.

Enlargement of Penal clauses and other provisions

• Payment of Compensation: Under the ‘new act’, the minimum value of compensation has been enhanced to 25% of the value of such defective goods or services, which was merely 5% of the value of defective goods and services earlier.

• Introduction of Power to review its own orders: Under the ‘new act’, the District Commission may review its own orders either on its own, or on an application filed in this regard in case of an apparent error. This may be done within a period of 30 days. Such powers have also been conferred on State Commission and on the National Commission.

• Increase in pecuniary Jurisdiction of the ‘State Commission’: Under the ‘new act’, the State Commission may entertain complaints where the value of Goods and services paid as consideration exceeds Rs. 1 Crore but does not exceed Rs. 10 Crore. This range of jurisdiction was Rs. 20 Lacs to Rs. 1 Crore in the erstwhile act.

• Unfair Contracts: The State Commission may declare any of the unfair terms of the contract to be null and void on a complaint filed in this regard. An unfair contract has been defined as any contract which prejudices the rights of the customer including: 1. Demand of unreasonable security deposit for performance of contractual obligations; or 2. Unreasonable imposition of penalty for the breach of contract as compared to the loss occurred; or 3. Refusing to accept early repayment of debts on payment of applicable penalty; or 4. Enabling a party to a contract to terminate the contract unilaterally, without enough cause; or 5. Allowing one party to assign the contract to the detriment of the consumer without his consent; or 6. Imposing any unwarranted charge, obligation or condition on the consumer which puts him/ her to a disadvantage

• Increase in pecuniary jurisdiction of the ‘National Commission’: Under the ‘new act, the ‘National Commission’ may entertain complaints wherein the value of goods or services paid as consideration exceeds Rs. 10Crore whereas, the earlier limit was Rs. 1 Crore

• Unfair Contracts: The “National Commission” may also declare any terms of the contract, which is unfair/ prejudicial to any consumer, to be null and void.

• Increase in Penalty for Non-Compliance: Under the ‘new act’, non-compliance with any of the orders of the District Commission, State Commission, or National Commission may be penalized with a minimum fine of Rs. 25000/- but which may extend to Rs. 1,00,000/-. Earlier the minimum and maximum fines were Rs. 2,000/- extendable up to Rs. 10,000/-

• Introduction of Mediation: Provisions relating to mediation have been introduced for the first time under the new act. If at any stage of the proceeding, it appears to the District Commission, State Commission, and the National Commission that a settlement may be reached between the parties, it may direct the parties to give their written consent within 5 days for the resolution of the dispute by mediation.

• Introduction of ‘Product Liability’: Under the amended act, the concept of Product Liability has been introduced for the first time. It covers the responsibility of the manufacturer, seller of the product, service provider, to compensate for any harm caused to the consumer due to the usage of any such defective product.

• Penalties under the new Act: Any false or misleading advertisement, which is prejudicial to the interests of the consumers may lead to a punishment with imprisonment for a term which may extend to 2 years and a fine which may extend to Rs. 10 Lacs. Persons dealing in ‘adulterants’ will be punished with minimum imprisonment of 6 months extendable up to life imprisonment, and a minimum fine of Rs. 1 Lacs extendable up to Rs. 10 Lacs.

Conclusion:

The ‘CPA 2019’ has gone one step forward in paving the way for identifying, recognizing and incorporating various rights for the consumer protection, which were necessary in view of the changing circumstances of the business environment. It has not only empowered the consumers by incorporating various rights not previously available, but has also imposed enough responsibilities on to the stakeholders like dealers, manufacturers, service providers and even on their endorsers. It has tried to touch upon various issues which were not catered to in the previous act. Thus, the new “CPA’2019” may prove to be more effective in dealing with the objective for which it has been devised once the same comes into force.