New Consumer Protection Act – Is Customer the King?

Customer is King’ goes the saying but in reality, is it so? Hardly, I’d think. Virtually every product’s market is flooded with numerous offerings launched by multiple companies. Supposedly, the consumer has a wide variety of options to purchase a specific product of its choice. This is one side of the coin.
On the flip side, certain companies adopt unfair trade practices/hazardous materials/unauthorized methods to manufacture and market the products. As a consequence, such products don’t provide value for consumer money or don’t meet the consumer expectations and at times, even put the consumer health at risk.

To protect the economic interest and health (besides other considerations) of consumers from the gimmicks adopted by errant companies/entities, the central government has enacted the Consumer Protection Act, 2019 (Act) superseding the legislation of 1986 with consumer protection as the paramount objective of the Act.

The key highlights of the Act are as follows:

Council

• A Central/State/District Consumer Protection Council will be established to render advice on promotion andprotection of the consumers’ rights.

Central Consumer Protection Authority

• A Central Consumer Protection Authority (Authority) will be established to protect the consumer interest, to enforce consumer rights and to govern and regulate matters relating to consumers rights violation, unfair trade practices and false/ misleading advertisements.
• The Authority’s act or proceeding shall not become invalid on the ground of irregularity in Authority procedure without affecting the case merits, defect/vacancy in Authority constitution or defect in any member appointment.
• The Authority shall have an Investigation Wing (Wing) to conduct investigation/enquiry into the matters regulated under the Act and submit the investigation report to the Authority.
• The major duties and responsibilities of the Authority are —

(a) Consumer rights protection and prevention of consumer rights violation;

(b) Prevention of participation/occurrence of unfair trade practices/issuance of false or misleading advertisement;

(c) Inquire into any matter associated with consumer protection/violation of provisions of the Act;

(d) Filing of complaints before the National/State/District Commission and Intervention in the proceedings of National/State/District Commission to the extent permitted in the Act;

(e) Encourage consumer authorities and companies to adopt and practice the international covenants and best international practices on consumer rights;

(f) Educating the consumer about their rights by conducting consumer awareness camps;

(g) Conduct research on the matters associated with consumer protection/ rights;

(h) Promote the participation of non-governmental organizations and other institutions working in the protection of consumer rights;

(i) Direct the companies to use unique and universal goods identifiers in goods on a mandatory basis to prevent unfair trade practices and to protect consumers’ interest; and

(j) Issuance of consumer safety notices to alert them against the use of dangerous or hazardous or unsafe goods or services.

• The Authority has the power to prohibit any company from advertising any product/service for one year for the issuance of any false/misleading advertisements and which may be extended up to 3 years for any subsequent issuance of false/misleading advertisements.
• The Authority has the power to impose penalty up to 10 lakhs rupees for misleading/false advertisements on the companies and up to 50 lakhs rupees for every subsequent default.
• The following components will influence the penalty figure for any offence:

1. Offence frequency/duration;
2. Gross revenue generated via sales performed pursuant to the offence; and
3. Offence impact on population/area extent.

National Consumer Disputes Redressal Commission

• A National Consumer Disputes Redressal Commission (National Commission) shall be established by the central government to adjudicate the disputes associated with consumer protection and to uphold the consumer rights.
• National Commission shall have the authority to perform the following acts:

1. adjudicate upon the disputes associated with any goods/services worth in excess of ten crore rupees.
2. resolve the complaints against unfair contracts worth in excess of ten crore rupees.
3. accept/decide the appeals against the orders of State Commission.
4. seek records and requisite information from the State Commission in case if the State Commission acts beyond its authority or fails to exercise the authority conferred on it

State Consumer Disputes Redressal Commission:

• The State government shall establish a State Consumer Disputes Redressal Commission (State Commission) to protect consumer interest and preserve the consumer rights within the jurisdiction allocated to it.
• The State Commission shall have the authority to perform the following acts:

1. adjudicate any disputes wherein the minimum value (in excess of one crore rupees) and maximum value (does not exceed ten crore rupees) of the goods/services;
2. resolve complaints against unfair contracts of value less than ten crore rupees;
3. accept and adjudicate on the appeals against the District Commission orders;
4. seek records and requisite information from the District Commission in case if the District Commission acts beyond its authority or fails to exercise the authority conferred on it.

District Consumer Disputes Redressal Commission

• A District ConsumerDisputes Redressal Commission (District Commission) shall be established by the state government in each district located in such state.
• The pecuniary jurisdiction of the District Commission is restricted to a value of any amount not in excess of INR 1 crore.
• A complaint shall be filed before the District Commission by consumer, recognized consumer association, syndicate of consumers, central/state government and central authority.
• The District Commission has the authority to pass the following orders in relation to any subject matter governed by the Act directing the company in default for:

(a) Rectification of the defect in the goods/services in question based on the recommendations of a designated laboratory;
(b) Replacement of defected goods with new goods free of defects;
(c) Refund of product price along with any additional monies as directed by the District Commission;
(d) Payment of compensation (including punitive damages, if any) as determined by the District Commission for product liability or any other loss/damage suffered by the consumer due to the company negligence;
(e) Discontinuance of the unfair trade practice or restrictive trade practice and no repetition of such practices;
(f) Cessation of hazardous goods manufacture/Withdrawal of hazardous goods sale/Prohibition of hazardous goods sale;
(g) Payment of compensation to a large section of improperly identified consumers – Minimum compensation in such cases should be 25% of defected goods/services value;
(h) Correction of misleading advertisements to purge the misleading aspects from the advertisements and cessation of issuing any misleading advertisements; and
(i) Such other orders as the District Commission may deem fit in the context of the Act.

Appeals

• An appeal on National Commission Order shall be made by the applicant to Supreme Court within 30 days from the National Commission order date. No appeal shall be accepted by the Supreme Court unless the applicant deposited 50% of the compensation (if any) ordered which has to be paid by such party.
• State Commission Order is appealable by the applicant to National Commission within 30 days of State Commission order date. National Commission shall not proceed with an appeal against State Commission Order until deposit 50% of the compensation provided the applicant is obligated to pay the compensation as ordered by the State Commission.
• An appeal on District Commission Order shall be made by the applicant to State Commission within 45 days from the District Commission order. No appeal shall be accepted by the State Commission unless the applicant deposited 50% of the compensation ordered which has to be paid by such applicant.

Order Finality/Limitation Period:

• Any order of National/State/District Commission shall be deemed final if no appeal is filed against such order.
• No application/complaint shall be accepted by the National/State/District Commission which is filed after 2 years from the date of cause of action has arisen.
• Any application/complaint filed by applicant after 2 years from the date of cause of action has aroused shall be admitted by National/State/District Commission only after stating the reasons in writing for condoning the delay provided the applicant has proved to the satisfaction of the concerned Commission that the applicant has sufficient valid reason for filing application beyond the permitted limitation period.

Consumer Mediation Cell:

• A consumer mediation cell will be established as a supporting mechanism to National Commission, State Commission and District Commission.
• Every consumer mediation cell is obligated to maintain the information related to empanelled mediators list, cases list handled by cell, consumer proceedings records and any other information as directed under the Act.
• A quarterly report shall be submitted by the consumer mediation cell to the concerned National/State/District Commission in the format and manner specified in the Act.
• National/State/District Commission shall constitute a panel of mediators for a term of five years – Such panel can be re-empanelled for another term of five years following the completion of the first term.
• It is the responsibility of each empanelled mediator to disclose personal/pecuniary interest in the consumer dispute or any circumstances that could jeopardize such mediator ability to act independently/impartially.
• During the mediation process if the parties decided to conclude the dispute (fully/partially) via a settlement agreement then the mediator shall prepare a settlement report and submit the same to National/State/District Commission.
• If no settlement is reached by the parties then the mediator shall prepare a report of mediator observations and submit such report to the concerned commission.
• Within seven days following the receipt of the settlement report, the concerned commission shall issue apt order recording such settlement and dispose of the dispute accordingly.

Product liability

• Provisions related to product liability shall apply to all claims for compensation under product liability due to a defect in the product sold/service rendered.
• Any claim related to product liability shall be instigated by the applicant against a product manufacturer/service provider/product seller on the ground of any harm caused to such applicant due to the defective product/service.
• Product liability shall be imposed on the product manufacturer for a defect in product manufacture/product design, for deviations from manufacturing specifications or non-conformity with express warranty terms and absence of adequate usage instructions.
• Product liability shall be imposed on the product manufacturer even though such manufacturer proves that there is no negligence or fraud in making the express warranty of a product provided the applicant suffered harm/damage due to the product usage.
• Product service provider shall be exposed to product liability action due to faulty/deficiency in service, for service not meeting with the quality standards/standard consumer expectations, for hiding (intentionally/negligently) critical information related to service, for absence of adequate precautionary instructions and for service fails to meet the express warranty or the terms and conditions of the contract.
• Product seller (who is not a product manufacturer) shall be exposed to product liability action if such seller has:

Substantial control in testing/manufacturing/packaging of the defective product;
b) Altered or modified the product causing considerable harm to the consumer;
c) Provided the product warranty independent of product manufacture warranty and the product does not conform to the product seller warranty; and
d) Sold the product which does not reflect the details related to original manufacturer.

• Product seller shall not be liable for harm suffered by the consumer due to misuse, alteration or modification of the product by the consumer.
• The product manufacturer shall not be liable for any product liability action based on the failure to provide adequate warnings or instructions if:

(a) The employer has procured the product for the benefit of the workforce and adequate product warnings or instructions are provided by the product manufacturer to such employer;
b) The Product manufacturer has sold the product to another manufacturer to be used in integration with components of such other manufacturer and adequate warnings or instructions are provided to other manufacturer provided the product liability claim is based on the end integrated product,
c) The handling of the product should be performed by experts or in experts’ presence and adequate warnings/instructions are provided to the experts; and
d) The complainant has used/handled the product under the influence of any alcohol/banned drug.

• No product manufacturer shall assume liability for failure to instruct or warn about a danger which will be commonly sensed/aware of by the consumers given the product characteristics.

Penalties/offences

• Failure to comply with the directions of Central Authority by any person will expose such person to imprisonment up to 6 months or with fine up to 20 lakh rupees or both.
• If any person/company (who is responsible for issuance of false/misleading advertisements which are detrimental to the public interest) will be punished with imprisonment up to two years and with fine up to 10 lakh rupees – Such imprisonment/fine may be extended up to 5 years/50 lakh rupees for any subsequent offence in this regard.
• Any person who shall be responsible for the manufacture/sale of any product containing adulterant shall be punished in the following pattern:

No injury to a consumer – Imprisonment (6 months)/Fine (Up to 1 lakh rupees);
b) Injury (Not grievous in nature) to a consumer – Imprisonment (1 year)/Fine (up to three lakh rupees);
c) Causing grievous injury to the consumer – Imprisonment (7 years)/Fine (Upto five lakh rupees); and
d) Resulting in consumer death -Imprisonment (No less than 7 years and maybe extended to life imprisonment))/Fine (No less than 10 lakh rupees).

• Any person who shall be responsible for the manufacture/sale of any spurious products shall be punished in the following pattern:

a) Causing non-grievous injury to the consumer – Imprisonment (up to one year)/Fine (Up to 3 lakh rupees);
b) Causing grievous injury to the consumer – Imprisonment (Upto 7 years)/Fine (Upto five lakh rupees); and
c) Results in consumer death – Imprisonment (No less than 7 years which may extend to imprisonment for life)/Fine (No less than ten lakh rupees).

• Despite of knowing the fact that there is no reasonable ground to search/seize – If any officer (exercising powers pursuant to Section 22 of the Act) proceeded with the search of any premises/seize any records shall be punished with imprisonment up to one year, or with fine up to 10,000 or with both.