You are on page 1of 12

An Report on Consumer Protection Act, 1986

Legal Aspects of Business


26-Feb-2014

Prepared By:
Narayan Nandeda
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









Narayan Nandeda, PGP-1, IIM-I Page 1

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


Consumer Protection Act
Narayan Nandeda, PGP-1, IIM-I Page 2
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 Description
1 Short title, extent, commencement and application
2 Definitions
3 Act not in derogation of any other law
4 The Central Consumer Protection Council
5 Procedure for meetings of the Central Council
6 Objects of the Central Council
7 The State Consumer Protection Councils
8 Objects of the State Council
9 Establishment of Consumer Disputes Redressal Agencies
10 Composition of the District Forum
11 Jurisdiction of the District Forum
12 Manner in which complaint shall be made
Narayan Nandeda, PGP-1, IIM-I Page 3
13 Procedure on receipt of complaint
14 Finding of the District Forum
15 Appeal
16 Composition of the State Commission
17 Jurisdiction of the State Commission
17 A Transfer of cases
17 B Circuit Benches
18 Procedure applicable to State Commissions
19 Appeals
19 A Hearing of Appeal
20 Composition of the National Commission
21 Jurisdiction of the National Commission
22 Power of and procedure applicable to the National Commission
22 A Power to set aside ex parte orders
22 B Transfer of cases
22 C Circuit Benches
22 D Vacancy in the Office of the President
23 Appeal
24 Finality of orders
24 A Limitation period
24 B Administrative Control
25 Enforcement of orders by the Forum, the State Commission or the National
Commission
26 Dismissal of frivolous or vexatious complaints
27 Penalties
27 A Appeal against order passed under section 27
28 Protection of action taken in good faith
28 A Service of notice, etc.
29 Power to remove difficulties
29 A Vacancies or defects in appointment not to invalidate orders
30 Power to make rules
30 A Power of the National Commission to make regulations
31 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
Narayan Nandeda, PGP-1, IIM-I Page 4
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,
Narayan Nandeda, PGP-1, IIM-I Page 5
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
consumer-
Example - 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.
Narayan Nandeda, PGP-1, IIM-I Page 6
Any person buying goods for self employment is a consumer-
When 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.
Narayan Nandeda, PGP-1, IIM-I Page 7
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
Narayan Nandeda, PGP-1, IIM-I Page 8

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



Narayan Nandeda, PGP-1, IIM-I Page 9
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 .



Narayan Nandeda, PGP-1, IIM-I Page 10
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-trade-
practice-refund-fees