POST GRADUATE PROGRAMME IN MANAGEMENT

An Report on Consumer Protection Act, 1986 Legal Aspects of Business 23-Feb-2014

Prepared By: Narayan Nandeda 2013PGP238 Section - A

Table of Contents
Introduction ........................................................................................................................................... 1 Consumer Protection Council................................................................................................................. 1 Consumer Disputes Redressal Agencies ................................................................................................. 2 Sections under consumer protection act :................................................................................................ 2 Section 2 in The Consumer Protection Act, 1986 ................................................................................... 3 Section 2(1)(b) of the Consumer Protection Act("Complainant") ....................................................... 3 Section 2(1)(c) of the Consumer Protection Act("Complain") ............................................................ 4 Section 2(1)(d) of the Consumer Protection Act ("Consumer") .......................................................... 5 Section 2(1)(f) of the Consumer Protection Act ("Defect ") ................................................................ 6 Section 2(1)(r) of the Consumer Protection Act( Unfair Trade Practice ) ........................................ 7 Section 2(1)(nn) of the Consumer Protection Act ("Restrictive trade practice") ...................................... 9 Conclusion ............................................................................................................................................ 10 Bibliography. ........................................................................................................................................ 10

Consumer Protection Act

Introduction
The Consumer protection act was enacted in 1986 to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consum-ers' disputes and for matters connected therewith. When the act was enacted ? The act was passed in Lok Sabha on 9th December,1986 and Rajya Sabha on 10th December, 1986 and assented by the President of India on 24th December, 1986 and was published in the Gazette of India on 26th December, 1986. Need for Consumer Protection Act In order to maximize profits, many companies exploit consumers by supplying poor qual-ity goods at higher prices. Unfair and deceptive practices such as selling of defective or sub-standard goods, charging exorbitant prices, misrepresentating the efficiency or usefulness of the goods, negligence to safety standards became rampant. As a result consumers do not get value for their money. They need to be protected from spurious, duplicate and adulterated products, pollution of air, water and noise, and misleading advertising. The consumers need protection against the following: 1. Unsafe and harmful products, 2. Unfair trade practices, 3. False advertising, 4. Abuse of monopoly power, 5. Environmental pollution List of Amending acts 1. The Consumer Protection (Amendment) Act, 1991 2. The Consumer Protection (Amendment) Act, 1993 3. The Consumer Protection (Amendment) Act, 2002 4. The Consumer Protection (Amendment) Act, 2011

Consumer Protection Council

Consumer Protection Councils are established at the national, state and district level to increase consumer awareness. 1. Central Consumer Protection Council 2. State Consumer Protection Council 3. The District Consumer Protection Council

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Objectives of Consumer Protection Council The objectives of the Consumer Protection Council is to promote and protect the rights of the consumers such as:(a) the right to be protected against the marketing of goods and services which are hazardous to life and property. (b) the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be so as to protect the consumer against unfair trade practices. (c) the right to be assured, wherever possible, access to a variety of goods and services at competitive prices. (d) the right to be heard and to be assured that consumer's interests will receive due consideration at appropriate forums. (e) the right to seek redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of con-sumers; and (f) the right to consumer education. (g) the right against consumer exploitation.

Consumer Disputes Redressal Agencies

1. District Consumer Disputes Redressal Forum (DCDRF): Also known as the "District Forum" established by the State Government in each district of the State. The State Government may establish more than one District Forum in a district. 2. State Consumer Disputes Redressal Commission (SCDRC): Also known as the "State Commission" established by the State Government in the State. 3. National Consumer Disputes Redressal Commission (NCDRC): Established by the Central Government. It is a national level court that works for the whole country.

Sections under consumer protection act :

Section No 1 2 3 4 5 6 7 8 9 10 11 12 Description Short title, extent, commencement and application Definitions Act not in derogation of any other law The Central Consumer Protection Council Procedure for meetings of the Central Council Objects of the Central Council The State Consumer Protection Councils Objects of the State Council Establishment of Consumer Disputes Redressal Agencies Composition of the District Forum Jurisdiction of the District Forum Manner in which complaint shall be made
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13 14 15 16 17 17 A 17 B 18 19 19 A 20 21 22 22 A 22 B 22 C 22 D 23 24 24 A 24 B 25 26 27 27 A 28 28 A 29 29 A 30 30 A 31

Procedure on receipt of complaint Finding of the District Forum Appeal Composition of the State Commission Jurisdiction of the State Commission Transfer of cases Circuit Benches Procedure applicable to State Commissions Appeals Hearing of Appeal Composition of the National Commission Jurisdiction of the National Commission Power of and procedure applicable to the National Commission Power to set aside ex parte orders Transfer of cases Circuit Benches Vacancy in the Office of the President Appeal Finality of orders Limitation period Administrative Control Enforcement of orders by the Forum, the State Commission or the National Commission Dismissal of frivolous or vexatious complaints Penalties Appeal against order passed under section 27 Protection of action taken in good faith Service of notice, etc. Power to remove difficulties Vacancies or defects in appointment not to invalidate orders Power to make rules Power of the National Commission to make regulations Rules and regulations to be laid before each House of Parliament

Section 2 in The Consumer Protection Act, 1986

1. Section 2(1)(b) of the Consumer Protection Act(Complainant) Following are the persons who can file a complaint under the Act a consumer; or any voluntary consumer association registered under the Companies Act,1956 or under any other law for the time being in force; or
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the Central Government or any State Government; one or more consumers, where there are numerous consumers having the same interest;

In addition to the above following are also considered as a consumer and hence they may file a complaint Beneficiary of the goods/services Legal representative of the deceased consumer Legal heirs of the deceased consumer A relative of consumer Husband of the consumer Insurance company - If Insurance company pays and settles the claim of the insured and the insured person transfers his rights in the insured goods to the company, it can file a complaint for the loss caused to the insured goods by negligence of goods/service providers Summary - A complaint under the Act can be a consumer, central or state government, insurance company or a relative, legal hires (in case if the consumer dies or deceased) 2. Section 2(1)(c) of the Consumer Protection Act(Complain) A complaint must contain any of the following allegations : An unfair trade practice or a restrictive trade practice has been adopted by any trader; Example : A person(A) sold a six months old car to another person(B) representing it to be a new one. Here B can make a complaint against A for following an unfair trade practice. The goods bought by him or agreed to be bought by him suffer from one or more defects; Example : A bought a computer from B. It was not working properly since day one. A can make a complaint against B for supplying him a defective computer. The services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect. Example : A hired services of an advocate to defend himself against his landlord. The advocate did not appear every time the case was scheduled. A can make a complaint against the advocate. A trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods. Example : A bought a sack of cement from B who charged him Rs. 100 over and above the reserve price of the cement declared by the Government. Here A can make a complaint against B. Goods which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of the provisions of any law for the time being in force requiring traders to display information in regard to the contents, manner and effect of use of such goods. Example : A bought a tin of disinfectant powder. It had lid which was to be opened in a specific manner. Trader did not inform. A about this. While opening the lid in ordinary way,
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some powder flew in the eyes of A which affected his vision. Here A can make a complaint against the trader. Summary - A consumer can file a complaint against any unfair trade practice, if the goods supplied have any defects, deficiencies or if the goods are hazardous to life and safety. But a complaint on behalf of the public which consists of unidentifiable consumers cannot be filed under the Act. 3. Section 2(1)(d) of the Consumer Protection Act (Consumer) Consumer means any person who Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or Hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person; Any person who use the goods with the approval of the buyer is a consumer Example : A purchased a scooter which was in Bs possession from the date of purchase. B was using it and taking it to the seller for repairs and service from time to time. Later on B had a complaint regarding the scooter. He sued the seller. The seller pleaded that since B did not buy the scooter, he was not a consumer under the Act. The Delhi State Commission held that B, the complainant was using it with the approval of A, the buyer, and therefore he was consumer under the Act. [Dinesh Bhagat vs. Bajaj Auto Ltd.] Any person who obtains the goods for 'Resale' or 'Commercial' purpose is not a consumerExample - L Ltd. purchased a computer system from Z. The computer system was giving constant trouble and Z was not attending it properly. L Ltd. filed a complaint against Z with the National Commission. Z contended that L Ltd. was not a consumer under the Act because computer system was used for commercial purposes. L Ltd. argued that computer system was not directly used of commercial purposes rather it was used to facilitate the work of the company. The Commission rejected the argument on the grounds that the system made part of the assets of the company, and its expenses were met by it out of business income. Thus the said purchase was a purchase for commercial purposes and L Ltd. was held not to be a consumer under the Act.
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Any person buying goods for self employment is a consumerWhen goods are bought for commercial purposes and such purchase satisfy the following criteria : the goods are used by the buyer himself; exclusively for the purpose of earning his livelihood; by means of self-employment, Then such use would not be termed as use for commercial purposes under the Act, and the user is recognized as a consumer. Examples A buys a truck for plying it as a public carrier by himself, A is a consumer. A buys a truck and hires a driver to ply it, A is not a consumer. A has one cloth shop. He starts another business of a photocopier and buys a photocopy machine therefore. He hasnt bought this machine exclusively for the purpose of earning livelihood. He is not a consumer under the Act.

Summary - A consumer is a person who consumes/uses the goods, products or services or buys goods for the self employment, but if a person buys the goods for resale or commercial purpose then he is not the consumer and cannot claim against any unfair trade practice. 4. Section 2(1)(f) of the Consumer Protection Act ("Defect ") Defect means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law of the time being in force under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods. Examples: 1. If a Pressure Cooker burst and caused injury to the user. Then it is considered to be a manufacturing defect 2. Electric household appliances which are not in accordance with the standards prescribed by ISI, being unsafe and defective 3. LPG Gas Cylinder containing excessive gas above the permissible limit is defective goods and there is deficiency in service on the part of it dealer and manufacturer in supplying such a gas cylinder to consumers without keeping a view of safety precaution provided under the gas cylinder rules 4. Development of cracks in walls and mosaic floor in a flat after taking possession from a Housing Board are considered as defects Summary - A defect is the deviation from the previously agreed quality, quantity, purity or standard. And as per the law the receiver/ consumer of the good or service can claim for the recovery of the money against the defected good or for the damages occurred due to the defected good.
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5. Section 2(1)(r) of the Consumer Protection Act( Unfair Trade Practice ) : Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:1. The practice of making any statement, whether orally or in writing or by visible representation which, Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model Falsely represents that the services are of a particular standard, quality or grade Falsely represents any re- built, second- hand, renovated, reconditioned or old goods as new goods Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: Provided that where a defense is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defense shall lie on the person raising such defense Gives false or misleading facts disparaging goods, services or trade of another person. Expressed on an article offered or displayed for sale, or on its wrapper or container Expressed on anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display/sale Contained in or on anything that is sold, sent, delivered, transmitted or in any other manner whatsoever made available to a member of the public, shall be deemed to be a statement made to the public by, and only by, the person who had caused the statement to be so expressed, made or contained; 2. Permits the publication of any advertisement whether in any newspaper or otherwise, for the sale or supply at a bargain price, of goods or services that are not intended to be offered for sale or supply at the bargain price, or for a period that is, and in quantities that are, reasonable, having regard to the nature of the market in which the business is carried on, the nature and size of business, and the nature of the advertisement. Bargaining price means A price that is stated in any advertisement to be a bargain price, by reference to an ordinary price or otherwise, or A price that a person who reads, hears or sees the advertisement, would reasonably understand to be a bargain price having regard to the prices at which the product advertised or like products are ordinarily sold
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3. Permits the offering of gifts, prizes or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole. Permits the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest 4. Permits the sale or supply of goods intended to be used, or are of a kind likely to be used, by consumers, knowing or having reason to believe that the goods do not comply with the standards prescribed by competent authority relating to performance, composition contents, design, constructions, finishing or packaging as are necessary to prevent or reduce the risk of injury to the person using the goods 5. Permits the hoarding or destruction of goods, or refuses to sell the goods or to make them available for sale or to provide any service, if such hoarding or destruction or refusal raises or tends to raise or is intended to raise, the cost of those or other similar goods or services Examples Acupressure Therapy Health Centre (1986) The respondents in this case were manufacturing acupressure sandals which they claimed were designed to improve blood circulation, and keeping the users healthy by walking daily on the chappals for 8 minutes every morning and evening before meals. The respondents also claimed that WHO has approved of this therapy, When the matter was referred to the All India Institute of Medical Sciences, it was very clearly stated by way of medical opinion that there was no proven evidence in modern medical literature that acupressure helps treat any ailment. and that the science of acupressure was not accepted even in developed countries. Even the WHO disclaimed any approval having been granted to the use of such sandals. Further, on the box containing the chappals, it was mentioned that the sandals were not to be used for more than ten minutes and that heart and blood pressure patients should consult the doctor before using them, but these facts were not mentioned in the advertisement. The MRTP Commission held that the facts of acupressure thereby were false and misleading. According, injection was issues restraining the respondent from giving out advertisements containing misleading facts. DG (I & R), New Delhi vs. Principal, Kathiar Medical College, Patna (1989) Director General filed an application against Principal, Kathiar Medical College, which was registered under the Societies Registration Act. It was alleged that the respondent had been giving wrong impression in his publicity material that the college was authorized and equipped to impart medical education leading to M.B.B.S. degree. The college was actually neither recognized by the Medical Council of India nor affiliated to any University. The Commission held it to be a case of misleading advertisement amounting to unfair trade practice

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 Delhi University held guilty of unfair trade practice, 2007 Delhi University has been held guilty of "unfair trade practice" by the State Consumer Commission for misrepresenting facts in its brochure about recognition of Bachelor in Information Technology (BIT) course by the University Grants Commission (UGC) seven years ago. The Commission, presided over by Justice J D Kapoor, has directed the leading university to pay Rs 32,000 to Sahil Sansi, who had taken admission in BIT course as the brochure stated that the stream was duly recognized by the UGC. Summary - Unfair trade practices are to falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model, hoarding of goods to extract higher price, conduct of lottery, contest, game of skill or chance for sale promotion, and selling goods which are substandard. Giving of guarantee that is not based on adequate tests, falsely representing any second hand goods or that the seller has a sponsorship which he does not have, are all unfair practices. 6. Section 2(1)(nn) of the Consumer Protection Act ("Restrictive trade practice")- Any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as a condition precedent for buying, hiring or availing of other goods or services Meaning :- A restrictive trade practice means a trade practice which has or may have the effect of preventing , distorting or restricting the competition in any manner and in particular Which tends to obstruct the flow of capital or resources into the steam of production Which tends to bring about manipulation of processes or conditions of delivery or to affect the flow of supplies in the market relating to the goods or services in such a manner or to impose on the consumer's unjustified costs or restrictions A restrictive trade practice shall be deemed to be prejudicial to the public address An analysis of above definition reveals that where sale or purchase of a product or service is made conditional on the sale or purchase of one or more other products and services, it amounts to restrictive trade practice. Common restrictive practices are (i)Cartels, (ii)Fix prices, (iii)Collusive tendering, (iv)Market allocation, (v)Production/sales quota, Example : If a gas distributor force his customers to buy gas stove as a condition to give gas connection, then this can be considered as a restrictive trade practice and the consumer can file a case against the distributor. Summary - The Restrictive Trade Practices covers agreements affecting goods and services both, and if the distributor is forcing for tie-up sales (an arrangement that a purchaser is forced to buy some goods or services which he may not require along with the goods or services) then the consumer can approach to the court. Under Consumer Protection act restrictive trade practice has a very narrow meaning, but under MRTP Act, 1969 it is clearly defined .

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Conclusion
After liberalization of economic policy, consumer goods have flooded the market, very often a customer may get taken in by a misleading advertisement making tall claim as to the high quality and after-sales service. The consumer may discover later that the goods purchased by him are not up to the claims made by the manufacturer. To enable the consumer to have his right to a deal, the consumer protection Act was passed in 1986. The Act promises to rectify all that and make accountant both the manufacture's and providers of service. It provides for setting up of quasi-judicial bodies at district, state and national label for quick and inexpensive redressal of consumer grievances. Three groups the consumer, registered voluntary consumer associations and the central and state government is covered by this facility. A consumer can complain against unfair trade practices, defective goods and overcharging, False claims regarding quality of goods and services and bargain sales without reduction of prices, false and misleading advertising. A time limit of two years has been prescribed in the Act within which a complaint must be filed.

Bibliography:
1. The Consumer Protection Act, 1986 act no. 68 of 1986 2. R.P. Nainta, Laws Relating to Cooperative Societies : A Commentary 3. Justice V.K. Mehrotra ,Consumer Protection Act, 1986, Need for further changes, some suggestions", Page 1-4 4. Staff reporter, DU held guilty of unfair trade practice, Economic Times, New Delhi, 28th October,2007 5. http://ncdrc.nic.in/ "National Consumer Disputes Redressal Commission" 6. http://www.consumerlaw.in/consumer-protection-act-1986/ " Consumer Disputes Redressal Agencies" 7. The Gazette of India, PART II-Section 3-Sub-section (i), New Delhi, the 21st September 2004 8. http://indiankanoon.org 9. http://www.legalhelpindia.com/consumer-protection-act.html 10. http://en.wikipedia.org/wiki/Consumer_Protection_Act,_1986 11. http://www.ncdrc.nic.in/1_1.html#_Hlk149660888 12. http://articles.economictimes.indiatimes.com/2007-10-28/news/27668237_1_ugc-unfair-tradepractice-refund-fees

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