CHAPTER VII

INDIAN JURISPRUDENCE ON CONSUMER PROTECTION IN

E-COMMERCE: A CRITICAL STUDY

“If you make customer unhappy in the physical world, they might each
tell six friends. If you make customers unhappy on the Internet, they can
tell six thousand friends.”
Jeff Bezos

The golden rule for every businessman is that there is only one boss- the customer, who
can fire everybody in the company simply by spending his money somewhere else. The
greatest assets of every business either physical or digital are its customers. Consumer is
the nucleus round whom all business activities revolve as the planets do around the
Sun.1 The concept of consumer protection has its deep roots in the rich soils of Indian
civilization. Indian Jurisprudence absorbs within its ambit ample of legislations for the
protection of consumers in physical commercial transactions. However, the Internet has
brought a new ‘e-revolution’ in which the nature of commercial transactions has
become highly advanced and sophisticated. On the one hand, Information and
Communication Technology is transformational tool which has opened the doors of
cyber world for physical world; on the other hand, a shift from physical world to virtual
world has introduced novice hurdles for consumers and sellers. Hence, chapter seven
deals with Law on Consumer Protection in physical commerce as well as in e-
Commerce. It contains two parts. Part-I explains various consumer oriented laws in
physical commerce with reference to the Consumer Protection Act, 1986 and Part-II
contains provisions of consumer concerns in e-Commerce with special emphasis on the
Information Technology Act, 2000. This chapter reflects Consumer cum Cyber oriented
legislations in India with a view to enunciate that it is need of the time to update laws on
consumer protection keeping in view the changing dimensions of marketing.

Part-I

Indian Jurisprudence on Consumer Protection: Tracing the Footprints from

Ancient India to 21st Century
7.1 Introduction
This part traces the roots of spirit of consumer deliberations in Indian Jurisprudence.
The particular attention in this part is centered on historical perspective of Indian

1
D. Himachalam, Consumer Protection in India, The Associated Publishers, Delhi, 2006, p.1.

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legislations to deal with the issue of consumer protection in India. It sketches the nature
of offences against consumers and the history of consumer protection mechanism
thorough out the periods of Ancient, Medieval, Modern and British India. Following
this, the legal mechanism for consumer protection in the post- independence and post-
modernist era has been discussed in detail to show the societal problems and legislative
response in context of these problems in India.

Commerce has played a leading role in making India the universal center of the
economic world in ancient civilizations.2 The history of India has been divided into
Ancient, Medieval and Modern periods. 3 Throughout the historical periods, trade or
commerce has been one of the most prominent factors of Indian economy. 4 In India, the
concern for the protection of consumers is not a new phenomenon. Consumer protection
has its deep roots in the rich soils of Indian civilization, which dates back to 3000 B.C.
In ancient India, human values as well as ethics were cherished by heart. The rulers
showed their keen interest in regulating not only the social conditions but also the
economic life of the people. 5 Historically speaking, the concern for the protection of
buyers or consumers from trader has much deeper relation with ancient Indian
Jurisprudence.6 In ancient India, there was not only development of mathematics,
astronomy, medicine, grammar, philosophy, literature etc., but there was also
tremendous development of law. It is evident from the large number of literature written
in ancient India in Sanskrit. Although only a very small fraction of this total legal
literature survived the ravages of time, but even what has survived is very large from
where the footprints of Indian ancient jurisprudence on consumer protection can be

2
Civilization is a cultural entity involving values, ideals, artistic expressions and moral qualities
shared by individual members of society. The promotion of civilization requires absence of fear
and existence of social order. Homogeneity and togetherness are seeds of civilization. See:
Bharat Bhushan Gupta, India: Through the Ages, Niyogi offset Pvt. Ltd., New Delhi, 2006, p.
21.
3
P.N. Agarwala, The History of Indian Business: A Complete Account of Trades Exchanges from
3000 B.C. to the Present Day, Vikas Publishing House Pvt. Ltd., New Delhi, 1985, p. 9.
4
Prakash Charan Prasad, Foreign Trade and Commerce in Ancient India, Abhinav Publications,
New Delhi, 1977, p. 5.
5
A. Rajendra Prasad, “Historical Evolution of Consumer Protection and Law in India: A Bird’s
Eye View”, Journal of Texas Consumer Law, Volume 11, No. 3, Summer, 2008, pp. 132-136 at
p. 132.
6
Meaning of Jurisprudence: According to Wurzel, “Jurisprudence was the first of the social
sciences to be born”. Jurisprudence deals with structure, uses and functioning of law and legal
concepts. See: R.W.M. Dias, Jurisprudence, Butterworths, London, 1976, p. 1.

283
traced.7 Since this research is focused on the ‘Jurisprudence of e-Commerce and
Consumer Protection’ in India, therefore, an exhaustive examination of historical
perspective of this problem is made. The concern of ancient India about consumer
protection has been highlighted. This part is centered on the protection of consumers on
the touchstone of Ancient Indian Jurisprudence to Post-Modernist Jurisprudence8 in 21st
century in India.

7.2 Ancient Indian Jurisprudence on Consumer Protection

The Indian history begins with immigration of pastral tribes from Europe and West
Asia. Tranquility and salubrious climate in the foothills of Himalayas nourished a life of
thought. Imagination under the scenic beauty of nature produced the Vedas. As
imagination flowered, ideation, reasoning and the spirit of self-communion gave birth to
the metaphysics of Puranas and Upanishads. With each coming generation, the
philosophy of existence produced an intensity of faith. Snatan Dharma,9 the religion of
Hindus, brought people of the land together. The root word ‘Dhr’ is to hold, and that
sustains dharma on the earth.10 In ancient India all sections of society followed
Dharma-Sastras (“Dharma”) which laid down social rules and norms. The principles
of ‘Dharma’ were derived from Vedas. Vedas were considered the words of God. 11
Vedas were the primary source of law in India. It is said that all Hindu law originated
from the Vedas. In fact, the Hindu Law really emanated from books called – The

7
Justice Markandey Katju, “Ancient Indian Jurisprudence vis-à-vis Modern Jurisprudence”,
Speech delivered by Judge, Supreme Court on 23rd February, 2008 at Rashtrasant Turkadoji
Maharaj Nagpur University. Retrieved from <http://www.outlookindia.com/articles.aspx>
visited on 2 January, 2012.
8
Meaning of Post-Modernist Jurisprudence: Postmodernism is “a notoriously ambiguous
concept”. Since it is post modern, it seems it comes after the “modern”, but is it a culmination of
modernity, a phase in late modernity by other means. As “modern” it refers back and claims to
overcome a historical period (modernity), or a system of thought and regime of knowledge
(modern), or cultural and artistic movement (modernism). Post Modernism is a rage against
existing order. See: M.D.A. Freeman, Lloyd’s Introduction to Jurisprudence, Sweet & Maxwell
Ltd., London, 2001, p.1253.
9
Snatana Dharma: Dharma is often translated as “duty”, “religion” or “religious duty”. Snatana-
Dharma, being transcendental, refers to universal and axiomatic laws that are beyond our
temporary belief systems. According to the notion of Snatana-Dharma, the eternal and intrinsic
inclination of the living entity (atman) is to perform seva (service). Retrieved from
<http://hinduism.iskcon.org> visited on 30 June, 2012. See: Raj Kumar Pruthi, An Introduction
to Vedas, UBS Publishers Distributors Pvt. Ltd., New Delhi, 2008, pp. 7-37.
10
Kamlesh Kapur, Hindu Dharma- A Teaching Guide, Xlibris Corporation, UK, 2013, pp. 40-41.
Retrieved from <http://www.books.google.co.in> visited on 25 December, 2013.
11
A. Rajendra Prasad, 2008, p. 132.

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Smritis, namely, Manusmrit, Yajnavalkya Samriti, Smritis of Vishnu, Narad, Parashar,
Apastamba, Vashisht, Gautam etc. These Smirities were books written by Snaskrit
scholars in ancient India who had specialization in law. Later, Commentaries (popularly
known as Nibhandhs or Tikas) were written on these Smritis. All laws were originally
customary law. 12 India has a long history of consumer considerations dating back to the
Vedic age (5000 B.C to 2500 B.C.). The Vedic age in India is considered to be the first
literary source of civilization. This period has been seen as glorious period of cultural
evolution in the ancient India.13 Vedas literally mean knowledge. They are a system of
higher understanding which explains how best to utilize the present situation. 14 Four
main branches of Vedas are: The Rigveda, The Samaveda, The Yajurveda, The
Atharvaveda. In all these, the idea of perfect life has been given. The daily fare of the
Vedic household consisted mainly of parched grain, cakes, milk, butter, curd,
vegetables, fruits, fresh drinking water, soma and sura drinks. Agriculture was the
principle occupation of the village folk. Trade probably consisted mainly of Barter. The
principal means of transport by land was chariots (ratha) and wagons (anas.) 15

In the later Vedic age (800 B.C.-500 B.C.), agriculture continued to be one of the
principal occupation of people. A class of hereditary merchants (Vanija) came into
being. The commerce was facilitated by the use of convenient units of value like the
Nishka, the Sataman and the Krishnala. 16 For the protection of consumers, matters
relating to civil rights and criminal offences were elaborately noted in the Vedas.

12
Justice Markandey Katju speech on “Ancient Indian Jurisprudence vis-à-vis Modern
jurisprudence” Retrieved from <http://www.outlookindia.com/articles.aspx> visited on 2
January, 2012.
13
Charkradhar Jha, History and Sources of Law in Ancient India, Ashish Publishing House, New
Delhi, 1987, p. 210
14
According to Vedas, the Lord created the material world. The spiritual energy of ‘Om’ is
scattered as pure vibrant in this universe. Valmiki, the author of Ramayana has described
Ramarajya as: “Death untimely dire disease, come not to his subject men; Robbers, cheats and
gay deceivers, tempted not with lying world, Neighbor loved his righteous neighbor, and the
people loved their lord.” (It means the land was rid of untimely death and disease. Being a
widow was not unbearable. Robbers and cheaters were very rare. There was truthfulness.
Neighbors loved each another. Trade and commerce was very fair. There was no cheating and
exploitation of rights of consumers. See: Bharat Bhushan Gupta, 2006, p. 53. Also See: R.N.
Vaidya, The Vedas: An Introduction for the Common Man, Books India International, New
Delhi, 2005, pp. 81-85.
15
R.C. Majumdar, H.C. Raychavdhuri and Kalikinkar Dutta, An Advance History of India,
Mcmillan India Limited, London and Basingstoke, 1978, pp. 33-34.
16
ibid., p.45.

285
Throughout the ancient period, offences were mentioned into four broad types namely
(1) Adulteration of food stuffs, (2) Charging of excessive Prices, (3) Fabrication of
Weights and Measures and (4) Selling of Forbidden Articles of which statutory
measures have been recommended by the law of that time. 17 Many writers,
commentators and scholars of ancient period documented the living conditions of the
people through their innovative and divine writings including Smriti (tradition), Sruti
(Revelation), Codes and Regulations to guide the Kings and rulers about the method of
ruling the state and its subjects. Consumer protection was also a major concern in their
writings. Among the Dharmas, the most authoritative texts are: 18

a. The Manusmriti (800 B.C. to 600 B.C.)19

b. The Kautilya’s Arthasastra (400 B.C. to 300 B.C.)20
c. The Yajnavalkaya Smriti (300 B.C. to 100 B.C.)21
d. The Narada Smriti (100 A.D. to 200 A.D.)22
e. The Brihaspati Smriti (200 A.D. to 400 A.D.)23
f. The Katyayana Smriti (300 A.D. to 600 A.D.)24

17
Chakradhar Jha, 1987, pp. 115-116.
18
A. Rajendra Prasad, 2008, p.133.
19
Manusmriti was most influential in legal context. Manu is described as the ancient law giver.
See: Mandagadde Rama Jois, Legal and Constitutional History of India: Ancient Legal, Judicial,
and Constitutional System, Universal Law Publishing Co. Pvt. Ltd., New Delhi, 1984, pp. 27-31.
20
Kautilya is believed to be the fore most writers on the Arthasastra (Economics). His date is
uncertain but general view is that he lived between 400 B.C. to 300 B.C. His work is of great
merit. See: Manorama Upadhyaya, Royal Authority in Ancient India, Books Treasure, Jodhpur,
2007, pp. 312-314.
21
Yajnavalkaya Smriti appears to be more systematic than the Manusmriti. It is also considered to
be a great authority in the realm of Hindu law. It is a great authority on behavior and personal
rights of a man. See: Vishwanath Narayan Malik, Vyavahara Mayukha or Hindu Law including
Yajnavalkaya Smriti, Asian Publication Services, New Delhi, 1982.
22
Narda Smriti is one of the best-known of the Dharmashastras. It is ancient Hindu collection of
rules and prescriptions regulating social and personal life in accordance with the teachings of
Brahmins. The Codes of Narda are an important source for the history and culture of Ancient
and Medieval India. The Codes of Narda provide valuable information about slaveholding,
family relationships, the organization of handicraft production, history and culture. See: R.N.
Vyas, Nature of Indian Philosophy, Asian Publications Services, New Delhi, 1982, pp. 212-214.
23
Historically, it is believed that there were three writers of the name of Brihaspati. One was the
propounder of the Charvaka Philosophy. Another writer of the name of Brihaspati was the writer
of the Brihaspati Smriti. The Third Brihaspati was the writer of Arthasastra. Arthasastra was also
written by Kautilya. Therefore, there is great difference of opinion in the age and authenticity of
Brihaspati as a writer of Arthasastra. See: A. Rajendra Prasad, 2008, p. 134.
24
The Katyayana smriti extensively deals with the substantive and procedural law as well as with
the rules of evidence and various other matters concerning judicial trial. See: A. Rajendra
Prasad, 2008, p.133.

286
The above mentioned chronology and the actual dates of different period are very
difficult to ascertain. The German Scholar Winternitz remarked:

The chronology of the history of Indian literature is shrouded in truly

terrifying darkness and most of the riddles still remain to be solved by
research. It is much better to recognize clearly the fact that for the old
period of Indian literature we can give no certain dates and for the later
period only a few.25

Manu, the ancient law giver described the social, political and economic conditions of
ancient society. He gave a code of conduct to traders and specified punishment to those
who committed crimes against buyers. Cultivation was the basic source of livelihood.
Manu Smriti referred to the organizations of artisans and traders sailing across. For the
first time Manu specified the rules of competency for the parties to enter into a contract.
According to Manu, a contract made by intoxicated, insane, grievously disordered,
infant, very aged man, by fraud and cheating is invalid. Manu Smriti effectively dealt
with various consumer matters, many of which are of great concern in modern legal
system.26

The accession of Chandragupta Maurya (321 B.C.- 297 B.C.) was significant in Indian
history. Three works namely the Kautilya’s Arthasastra, the Kalpasutra of Bhadrabahu
and the Buddhist Katha Vatthu are traditionally attributed to have flourished in the
Maurya period. The most relevant work of Kautilya is primarily concerned with the
matters of practical administration, however, consumer protection occupied a prominent
place in Arthasastra. The Kautilya’s Arthasastra mentions agriculture, cattle breeding
and trade as the common occupation of Vaisyas and Sudras.27 Kautilya speaks of the
four sources of law-Dharma (Written law), Vyavahara (Arguments), Charita (Customs),
Rajasasana (Royal Proclamations). The King was the highest court of justice. The crime
rate was very low during the period of Chandragupta and Chankya. Traders were honest

25
Remarks of German Scholar Winternitz are quoted from the book of Chakradhar Jha, 1987, p.39.
26
Rama Jois Justice M., Ancient Indian Law: Eternal Values in Manu Smriti, Universal Law
Publishing Co. Pvt. Ltd., New Delhi, 2004, pp. 64-69. Retrieved from <http://books.
google.co.in> visited on 26 December, 2013.
27
It was R. Samasastri, who discovered and published the Arthasastra of Kautilya for the first time
in 1909. Kautilya was known as Chanakya and Vishnugupta as well. The Arthasastra is written
in 15 Adhikaranas, 150 Adhyayas, 180 Prakaranas, 600 Slokas. It is mainly written in prose. It is
intermingled with some verses also. See: R.C. Majumdar, H.C. Raychavdhuri and Kalikinkar
Dutta, 1978, pp.125, 134.

287
and consumers were not defrauded. People did not lock their houses. Trade and
commercial transactions were made without any written documents. 28

During the 6-5 B.C., an upsurge of intellectual and spiritual innovation was seen.
Jainism is a religion of great antiquity. The story of Maha Vira’s life is found in the
Kalpasutra.29 According to Mahavira Swami, Karma (action) and not God is the
architect of man’s destiny. It is the fruit of man’s action that causes his birth and rebirth.
These Karmas are behind Samsara- the Cycle of birth and rebirth. Jainism advocates
adherence to five vows (Panchavratas) namely: (1) Ahimsa (Non-Violence) (2) Satya
(Truthfulness), (3) Asteya (Non-stealing), (4) Aprigraha (Non-Possession) and (5)
Brahmacharya. Under the influence of these teaching, the trade or commerce was not
very much adulterated. Consumers were not exploited by traders. Some traders were
greedy, however, general atmosphere was very friendly. 30

Buddhism emerged from the social, intellectual and spiritual milieu of Jainism.
Buddhism received its name from its founder namely Siddharattha Gautama, further
“Buddha” or “Enlightened One.” The four noble truths propounded by Lord Buddha to
every man were: (i) Dukha (Sarrow), (ii) Dukha-Samudaya (Cause of Sorrow), (iii)
Dukha-Nirodha (Cessation of Sorrow) and (iv) Dukha-Nirodha-Gamini-Pratipada
(Path to the Cessation of Sorrow). Buddha has given eight fold path 31 to the ending of
sorrows. On the basis of eightfold path, traders, buyers and people were very

28
According to Kautilya, “The King who administers justice in accordance with Dharma
(Written/Law), Vyavahara (Agreement), Samstha (Customs) and Nyaya (Equity) will be able to
conquer the whole world”. He avers that a person convicted of bearing false witness suffers
mutilation of his extremities. The Penal Code was severe. The Capital punishment, death by
drowning and mutilation of limbs were reserved for heinous crimes. For lesser categories of
crimes, lashing, imprisonment and fines were resorted to. There were separate prison houses for
men and women. See: V.C. Pandey and Anup Pandey, A New History of Ancient India: From
Pre-Historic Time to the Fall of the Vijayanagra Empire, Vishal Publications, Jalandhar, 1998,
pp.195-198 at p. 196.
29
Padmanabh S. Jaini, “The Jain Faith and its History,” Umasvati, Translated by Nathmala Tatia
& Harper Collins, San Francisco, 1994, pp. xxv-xxxxiii.
30
Mahavira Swami propounded that the highest God of Jainism was- Smasara-The Cessassion of
Transmigration means: End of Birth and Rebirth of soul of man. See: Hermann Jacobi, Jainism:
Humanity’s Oldest Religion of Non-Violence, Lotus Press, New Delhi, 2006, pp. 1-50.
31
Buddha has given eight-fold path to the ending of sorrow namely: (i) Right Views, (2) Right
Mindedness, (3) Right Speech, (4) Right Action, (5) Right Livelihood, (6) Right Endeavour, (7)
Right Mindfulness and (8) Right Concentration. See. D.C. Ahir, Buddhism in India Rediscovery,
Revival and Development, Buddhist World Press, Delhi, 2010, pp. 33-34.

288
trustworthy and honest. References are found where cheating and frauds were done,
however, the influence of their ideals were very deep rooted in the minds of people.
Even in modern India, some of ideals are cherished by traders. 32 Gupta period (A.D.
300-750 A.D.) was the classical age of India. Thus, it can be concluded that there has
been an age of prosperity in arts, literature, architect and philosophy in ancient period.

7.2.1 Nature of offences against Consumers in Ancient India: An overview of Indian

Jurisprudence

Throughout the ancient period, offences against consumer can be categorized into four
broad categories which are discussed as under:

7.2.1.1 Adulteration of Food Stuff

In ancient India one of the most common practices was adulteration of different goods.
It was mainly practiced by the traders and sellers. It is mentioned in the Manusmriti and
the Yajnavalkyasmriti that a person who deals in false gold and one who indulge in
selling adulterated meat should be maimed. He was made liable to pay the highest
amercement for adulteration of products.33 According to Manusmriti, the punishment
“for adulterating unadulterated commodities and for breaking gems or for improperly
boring them” was the least harsh. Severe punishment was prescribed for committing
fraud in selling seed corn, that is mutilation.34 The Arthasastra recommended
imposition of a fine of 12 panas on a trader who was involved in adulteration of food
products. The Brihaspatismriti has also contained instances of the practice of
adulterating good articles with those of inferior quality. Severe punishment was
prescribed to manufactures who were involved in imitation of articles.35

7.2.1.2 Charging of Excessive Prices

In ancient India, the trading community used to exploit gullible customers by charging
excessive prices. In order to provide a protective shield to consumers from arbitrary
exactions by unscrupulous traders, the then rulers declared the rates for the sale and
32
V.C Pandey and Anup Pandey, 1998, p.133.
33
A.C. Fernando, Business Ethics and Corporate Governance, Pearson Education, India, 2009, pp.
3.3 -3.5.
34
A. Rajendra Prasad, 2008, p.133.
35
V.K Gupta, Kautilyan Jurisprudence, B.D. Gupta and Company, Delhi, 1987, p. 69.

289
purchase of all marketable commodities. In Manusmriti, it is mentioned that there was a
mechanism to control prices and punish wrongdoers. The King used to fix the rates for
the purchase and sale of all marketable goods, having duly considered from where they
have come (distance), their destination (place to which it should go after sale), transport
charges, original value of goods, incidental expenses and margin of profit. Such fixation
was required to make publically. The Arthasatra was comparatively strict in its
approach towards this problem. It has been mentioned in Arthasastra that the amount of
fine was depended upon the extra profit made by the seller. According to Arthasastra
the director of trade was made responsible for fair trade practices. The director of trade
was advised to avoid even a big profit that would be injurious to consumers. The
tendency was that the traders who during their purchase or sale, raised the price or
secured an extra profit of 5% beyond the limit fixed by the state, were to be fined 200
panas. The fine limit was to go on increasing by 200 panas at each additional increase
of 5% extra profit on the notified price. The Yajnavalkaya Smriti stated that sale and
purchase should be conducted daily according to the value fixed by the King. It was
punishable to demand a higher price. The Agnipurana mentioned that merchants dealing
fraudulently with honest men either in respect of the quality or in price of a commodity
should be punished. There was provision for confiscation of goods by the State.36

7.2.1.3 Fabrication of Weights and Measures

In ancient times, another criminal tendency which was common among the trading
community was practice of false balance and fabrication of weights and measures.
Therefore, from the very early times, the legal texts paid special attention to check this
crime in market. It has been provided in Manusmriti that all weights and measures
should be duly marked by the King and should be re-examined every six months. With
a view to minimize the likelihood of frauds being committed by traders, Kautilya’s
Arthasatra has specifically provided for the appointment of a Superintendent of
Weights and Measures to maintain control over cheatings. For this purpose single
checking and stamping was not enough. Therefore, for maintaining correctness in

36
Ludo Rocher, Puranas: A History of Indian Literature, Otto Harrassowitz Verlag, Wiesbaden,
1986, pp.136-138. Retrieved from <http://www.books.google.co.in> visited on 26 December,
2013.

290
weights and measures constant watch and periodical checking were indispensable.
Accordingly, the Kautilya’s Arthasastra prescribed that at the end of every four months
balances used by the traders for weights and measures were to be re-examined and re-
stamped by the officers so that there might be no fraudulent manipulation in them. The
Naradasmriti made a reference to punish who forged weights and measures. The
Brahasmriti also mentioned punishment to cheaters, forgers and fraudulent traders. The
Katyayanasmriti and the Matsya Purana imposed fines upon trader who used false
weights and measures. It is clear that weights and measures prevalent in the locality
were to be examined by State officials twice a year. Similarly Somadeva made specific
reference to the crime of falsification of weights and measures. 37

7.2.1.4 Restriction on Sale of Forbidden Articles

In ancient times, there were some restrictions on the private sale and purchase of
forbidden articles. These restrictions were imposed by the King as some of the traders
even in olden times did enter into such prohibited transactions. According to
Manusmriti, the King had the power to confiscate the entire property of a trader in two
instances: (i) when the King had a monopoly over the exported goods; and (2) when the
export of goods was forbidden. 38 According to Kautilya, the trade guilds were
prohibited from taking recourse to black marketing and unfair trade practices. Severe
punishments were prescribed for different types of cheating. The rights of the traders
were also well protected. Kautilya said that on the subject of the return of an article
purchased or payment of price thereof, there was fixed rule of time, after which an
article could not be returned. Good trade practices were prevalent. 39 There were severe
punishments for smuggling and adulteration of foods like grains, oils, alkalies, scents

37
Shukla Das, Crime and Punishment in Ancient India, Abhinav Publications, New Delhi, 1977, p.
26.
38
A. Rajendra Prasad, 2008, pp.131-133.
39
According to Arthasastra: During Chandragupta period; in which Kautilya lived, trade practices
were good. Goods could not be sold at the place of their origin, field or factory. They were to be
carried to the appointed markets (panya sala) where the dealer had to declare particulars as to
the quantity, quality and the price of his goods which were examined and registered in the books.
Every trader was required to take a license to sell. A trader from outside had to obtain
permission for commerce. The superintendent of commerce fixed the whole sale prices of goods
as they entered the Customs House. Speculation concerning to prices were prohibited. State took
heavy responsibility for protecting the public against unfair prices and fraudulent practices. See:
Prakash Charan Prasad, 1977, pp. 166-170.

291
and medicines. According to Yajnavalkyasmriti, if any merchant or person dealt in
goods which were forbidden from being sold, the articles were to be forfeited to the
King. Interestingly, under the present laws of India, provisions are more stringent on
this matter. After having a look on these ancient texts it is realized that Kautilya’s
Arthasastra is perhaps only classical text which mentions the ‘Code of Ethics’ of
various professionals. 40

7.3 Indian Jurisprudence on Consumer Protection in Medieval India

The first Muslim raids in the India were made by Arabs on the Western coast and in
Sindh during the 17th and 18th Centuries. There had been Muslim trading communities
in Medieval India. After the bright period of the Gupta Empire India saw the
development of the largest ever dynasty with the rise of the Mughal rule in the country.
The Mughal Empire (1526-1761) at its zenith commanded resources unprecedented in
Indian history.41 Much of the entire expansion of empire was attributed to India’s
growing commercial and cultural contact with the outside world. The Mughals had
tightened control over Indian society and economy. The Mughal system of taxation had
expanded both the cash nexus and commodity production, which, in turn promoted a
network of grain markets (mandis), bazaars and small townships (qasbahs) supplied by
a highly differentiated peasantry in the countryside. 42 With the establishment of Mughal
empire by Babar in 1526, a new era of cultural grandeur commenced in India. The
Mughals brought with them the vigour and dynamism of a new culture. 43 Mughal
Dynasty contributed immensely with their culture, tradition, ethnicity and commerce to
the Indian history. The seeds of consumer protection can be found during the Mughal
times and especially during the time of Khaljis. It is said that Sultan Ala-ud-Din Khalji
(1296 A.D. to 1316 A.D.) had introduced strict price control measures based on
production costs. Hoarding of grain was forbidden. The growers were ordered to sell

40
A. Rajendra Prasad, 2008, p. 133.
41
Editors of Encyclopedia Britannica, Indian History: Ancient and Medieval, Encyclopedia
Britannica (India) Pvt. Ltd., New Delhi, 2003, pp. 32-34.
42
Geeta Ojha, Economic History of India: Trade During the Great Mughals (1526-1707 A.D.),
Shri Sai Printographers, New Delhi, 2000, pp.1-5 at p. 2.
43
Satish Chandra, Medieval India: From Sultanat to the Mughals: Mughal Empire (1526-1748),
Part Two, Har-Anand Publications Pvt. Ltd., New Delhi, 2009, p.186.

292
their grain for cash in their fields at fixed prices and were not allowed to take any grain
home for private sale. The market controller, the State Intelligence officers, and the
Sultan’s Secret Agents, each submitted independent reports on these shopping centers to
the Sultan. Even a minor violation of the rules was not tolerated.44 Sultan Ala-ud-Din’s
Minister of Commerce was also the Superintendent of Weight and Measures and the
Controller of Commercial transactions. He was assisted by the Superintendent for each
commodity. The prices fixed for the Delhi market were also applied in the provincial
capitals and towns. The brokers had been given a special place in the market system.
They acted as middlemen between customers and small scale producers. They were
responsible for rising prices.

Sultan Ala-Ud-Din effectively stopped their profiteering and fixed prices in order to
check exploitation of consumers. During the medieval period, the history of teachings
of Sikh Gurus comprises a unique lineage of the then spiritual masters, beginning with
Guru Nanak Dev Ji (1469) and ending with the enigmatic warrior-saint Guru Gobind
Singh Ji (1708).45 In Gurbani the approach of Guru Nanak Dev Ji to the inference of
‘Greed’ is reflected under the symbolic word ‘Maya’ as the object. According to Guru
Ji, the attachment to ‘Maya’ that is passionate self of man, his sense or desire,
possessiveness or egoistic nature (these are prominent subjective aspect of Maya) is
illusory.46 The essence of man is soul. 47 Till today, the teachings of honesty, seva, daan,

44
Sultan Ala-ud-Din Khalji had introduced strict price control measures based on production costs.
He had also established separate shopping centers in Delhi for grain, cloth, sugar, dried fruits,
herbs, butter, oil, horses, slaves, cattles and other commodities. The supply of grain was ensured
by collecting tax in kind in the producing areas and keeping it in the royal storehouses. The
shopping center for cloth, known as the sara-i-adl, was established near one of the royal palaces
on the inner side of the Buda- un- Gate. All goods, including foreign imports, were first taken
there and their prices were fixed. Costly fabrics and luxury goods could be sold only to those
who had obtained permits from the government. The prices of cattle were also fixed and
unscrupulous merchants were deprived of their trading rights. See: K.S. Lal, History of the
Khaljis, Asian Publishing House, Bombay, 1967. For reference also see: S.A.A. Rizvi, The
Wonder That Was India, Sidgwick & Jackson, London, 1987, pp. 38-39.
45
Christopher Shackle and Arvindpal Singh Mandair, Teachings of Sikh Gurus: Selections from
the Sikh Scriptures, Routledge, London 2005, Preface.
46
Inderpal Singh and Madanjeet Kaur, Guru Nanak: A Global Vision, Guru Nanak Dev University
Amritsar, 1997, p. 44.
47
According to Guru Nanak Dev Ji: The essence of man is soul. The ideal of human being in this
world should be consistent with their nature and harmony with well-being of people.

293
dharam, faith is being followed by some traders. ‘Tera’ ‘Tera’ Sakhi of Guru Nanak
Dev Ji depicted well being of consumers in that period.48

7.4 Indian Jurisprudence on Consumer Protection in Modern India

India was popularly known as ‘Golden Sparrow’. Therefore, European countries were
attracted towards India for prosperity, growth and wealth. Only for commercial
relationships with India, foreigners namely: the Portuguese, the Dutch, the Duns, the
East India Company set their foot on the pious land of India. In 1600 A.D., the
Britishers came to India in the form of East India Company. 49 Their intention was
entirely trade oriented. It was only in the second half of the 18 th Century that the trading
powers of Britishers were converted into territorial power.50 The emergence of the
British Empire in India stands out as a unique event in the history of the world. During
the British regime (1765 to 1947) the government’s economic policies in India were
concerned more with protecting and promoting the Britisher’s interests than with
advancing the welfare of the native population.

The administration’s primary pre-occupation was rested on maintaining law and order,
tax collection and defence. Accordingly much of the legislations enacted during the
British regime were primarily aimed at serving the colonial rulers instead of the natives.
However, a systematic attempt on the path of consumer protection started only during
Britisher’s regime. Some pieces of legislations that came into existence for protection of
the overall public interest are discussed.

1. The Indian Penal Code, 1860

By the Charter Act of 1833, the First Law Commission was appointed by the
Government in India in 1835. Lord Macaulay and three members Charles Hay
Cameron, John Macpherson Macleod and George William Anderson prepared a draft

48
Pritam Singh Gill, The Doctrine of Guru Nanak, New Book Company, Jullandhar, 1969, p. 49.
49
In 1600 A.D. the East India Company, with its official title as “The Governor and Company of
Merchants of London Trading into the East Indies” was incorporated in England on the 31st
December, 1600, by a charter of Queen Elizabeth which settled its Constitution, powers and
privileges. See: M.P. Jain, Outlines of Indian Legal and Constitutional History, Lexis Nexus
Buttersworths Wadhwa, Nagpur, 2006, p. 6.
50
M.P. Jain, 2006, p. 65.

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for the first Indian Penal Code which came into existence in 1860. 51 Various consumer
protection provisions find its place in it, such as (1) Prohibition of fraudulent use of
false instrument for weighing (Section 264), (2) Fraudulent use of false weight or
measures (Section 265), (3) Being in possession of false weight or measure (Section
266) and (4) Making or selling false weight or measure (Section 267). The purposes of
these provisions are to maintain honesty in trade and commerce for the protection of
rights of consumers.52 There are more provisions like: (1) Prohibition of Adulteration of
food or drink intended for sale (Section 272), (2) Sale of noxious food or drink (Section
273), (3) Adulteration of drugs (Section 274), (4) Sale of adulterated drugs (Section
275) and (5) Sale of drug as a different drug or preparation (Section 276). From these
provisions the concern for consumer protection is lucid in the early Indian modern era.53

2. The Indian Contract Act, 1872

A vital element impacting business transactions and regulatory framework is contract.
Law of Contract is the most important and basic part of ‘Mercantile Law’. It is not only
the merchants or trader but every person who lives in the organized society, consciously
or unconsciously, enters into contracts from sunrise to sunset. When a person buys a
computer or hires a taxi or goes to video library to buy a video cassette or takes a credit
card from a bank or gives loan to another or he does booking for a marriage palace,
he/she enters into and performs contracts. Such contracts create legal relations giving
rise to certain rights and obligations.54 This legislation protects the rights of traders as
well as consumers in business transactions. The Indian Trust Act, 1882 was also
enacted during this period.

3. The Sales of Goods Act, 1930

The term ‘Goods’ means every kind of movable property other than money and
actionable claims. The Sale of Goods Act, 1930 is mainly based on the English Sale of
Goods Act, 1893. Before the Sale of Goods Act, 1930, the law relating to sale of goods

51
B.M. Gandhi, Indian Legal and Constitutional History, Eastern Book Company, Lucknow,
2009, p. 297.
52
S.N. Misra and Sanjay Kumar Misra, Indian Penal Code, Central Law Publications, Allahabad,
p. 368.
53
K.D. Gaur, Textbook on the Indian Penal Code, Universal Law Publishing Co. Pvt. Ltd., New
Delhi, 2009, pp. 393-394.
54
K.C. Garg, V.K. Sareen, Mukesh Sharma and R.C. Chawla, Mercantile Law: Incorporating
Latest Amendments in Company Law, Economic Laws and others Laws, Kalyani Publishers,
Ludhiana, 2009, p. 1.

295
was covered under the chapter VII of the Indian Contract Act, 1872, the provision of
which were found to be inadequate. Therefore, a strong need was felt to have an
adequate Sale of Goods Act and consequently a new Act called Sale of Goods Act,
1930 was passed. 55 This Act provides for the settlement of consumer seller disputes.
This Act has changed the principle of ‘Caveat Emptor’ and casted a responsibility on
the seller to offer mercantile goods. Besides return of price or free repair or
replacement, damages can also be claimed for any loss or harm or inquiry if suffered by
buyer.
4. The Agriculture Products (Grading and Marking) Act, 1937
For the purpose of grading and marking of agricultural commodities with the objective
of making available only the quality agricultural products including horticulture and
livestock produce to the consumers, this Act has been enacted. Under the provisions of
this Act, the Central Government is authorized to make rules for specifying mark to
represent particular grade designation, authorizing interested parties to grade, specifying
conditions regarding manner of marking packaging etc., and for providing the
confiscation and disposal of product marked in accordance with the provisions of this
Act. The insignia used for grading is ‘AGMARK’. The Act has been amended in 1960
and 1986, with a view to protect the interests of the consumers and to ensure that there
is no misbranding of articles. Once the ‘AGMARK’ is assigned by the Government or a
body/ persons authorized thereby, it implies that it is fit for human consumption. 56
5. The Drugs and Cosmetics Act, 1940
The purpose of this law is to regulate the production, trade, distribution, import and
export of drugs and cosmetics up to the required standards and also to prevent their sale
under misbranding. 57

55
The Sales of Goods Act, 1930 contains 66 Sections came into force from 1st July, 1930 which
extends to whole of India except the State of Jammu and Kashmir. See: R.K. Bangia, Contract
Law of Contract I With Specific Relief Act, Allahabad Law Agency, Law Publishers, Faridabad,
2009.
56
The Agricultural Produce (Grading and Marking) Act 1937 has been enacted to protect the
interests of the consumers and to ensure that there is no misgrading of articles. The schedule to
the Act, consists of about 60 articles like fruits, vegetables, eggs, oil seeds, honey and ginger for
the purpose of knowing their quality. Under Section 3 of the Act, the Central Government is
empowered to frame rules for fixation of grade designation. Any person, company or
manufacturer quality of counterfeit grading or of selling misgraded articles or of misgrading is
made liable to undergo imprisonment, fine or both.
57
Retrieved from< http://medindia.net/indian_health_act> visited on 30 June, 2012.

296
6. Capital Issues Control Act, 1947
The main objective of this Act is to channelise resources in planned direction on priority
basis. It has provided provisions for protection of innocent investors. These pieces of
legislations protect overall public interest though not necessarily the interests of
consumers. However, the Post-Independence era witnessed a series of measures.58

7.5 Indian Jurisprudence on Consumer Protection in Post-Independence Scenario

15th August, 1947 was a historical occasion. After a thousand years, India had secured
the right to rule herself through her own elected representatives. 59 After independence,
one of the most marvelous works done in the Indian social, legal and political history
was the adoption of the Constitution of India in 1950. 60 The spirit and dreams of
founders of Indian Constitution are reflected in Preamble of the Constitution. The
Constitution makers have given to the Preamble “the place of pride”.61 The
Fundamental Rights (Article 12-35) have very well been described as the Magna Carta
of India. Article 21 ensures that everyone in India should live with human dignity and
free from all types of exploitation. It includes protection of health and strength of
human beings. Article 19(1) (g) guarantees the citizen of India the right to carry on
business of their own choice. The Directive Principles of State Policy62 lay down certain

58
The Capital Issues (Control) Bill, 1992 has been introduced in Parliament which came into force
on 29 May, 1992. Retrieved from <http://parliamentofindia.nic.in> visited on 30 June 2012.
59
At zero hour on 15th August, 1947 all the members of the Constituent Assembly were assembled
in the Central Hall of Parliament to hear the formal announcement by Viceroy Lord Mount
Batten at the end of the British domination in India and the birth of her national freedom. Pandit
Jawaharlal Nehru was sworn in as the first Prime Minister of independent India. See: B. Shiva
Rao, India’s Freedom Movement, Oriented Longman Ltd., India, 1972, p.11.
60
The Constituent Assembly, formally the maker of constitutional documents was a body of
varying size. Dr. Sachchidananda Sinha was the first President (temporary Chairman of the
Assembly) of the Constituent Assembly when it met on 9th December, 1946. Dr. Rajendra
Prasad became the President of the Constituent Assembly, and who later became the first
President of India. The new Constitution of India was signed by Dr. Rajendra Prasad as the
President of the Constituent Assembly on 26th November, 1949. The Constitution of India came
into existence on 26th January, 1950. See: B.M. Gandhi, 2009, pp. 414-415.
61
The Preamble declares: “We, the people of India having solemnly resolved to constitute India
into a Sovereign, Socialist, Secular, Democratic, Republic and to secure to all its citizen: Justice,
social, economic and political; Liberty of thought, expression, belief, faith and worship, equality
of Status and of opportunity; and to promote among them all; Fraternity assuring the dignity of
the individual and the unity and integrity of the Nation.” In Kesavananda Bharti’s case, the
Hon’ble Supreme Court held that the Preamble is the part of the Constitution. See: Durga Das
Basu, Constitutional Law of India, Prentice-Hall of India Pvt. Limited, New Delhi, 1988, p.1.
62
The Directive Principles of State Policy contained in Part IV (Article 36-51) of the Constitution
set out the main aims and objectives to be taken up by the state in the governance of the country.
This novel feature is barrowed from the Constitution of Ireland which had copied it from the
Spanish constitution.

297
economic and social policies to be pursued by the various Governments in India for
welfare of the people and economic democracy. Article 47 binds the government to
ensure safeguards for its people and improvement of public health. 63 The Independent
India adopted a ‘Socialistic’64 pattern of society. The socialism means to provide a
decent standard of life to the working people and especially provide security from
cradle to grave.65

At the time of independence, Indian economy was overwhelmingly rural and

agricultural in character. India opted for planned development through industrialization,
and more specifically, through Five Year Plans. 66 The goals of five year plans were
based on the cherished principles embedded in Directive Principles of State Policy. 67 In
developing countries like India the need for a concept of consumer protection became
imperative on account of economic imbalances and inequalities, teeming population,
high rate of illiteracy, shortages of essential commodities, adulteration, black-
marketing, under-weighing wide variations in the quality, prices of comparable products
and a vast knowledge gap in consumer rights. 68 The declared goals of India’s
development policy were to bring about a rapid increase in living standards, provide full
employment at an adequate wages and reduce inequalities arising from the uneven
distribution of income and wealth. Due to the increased emphasis on industrialization
during the second Five Year Plan, there was tremendous growth and establishment of
heavy industries. As a result, there was a considerable amount of migration of rural

63
D.J. De, The Constitution of India, Vol. I, Article 1-104, Asia Law House, Hyderabad, 2002, pp.
1220-1221.
64
In D.S. Nakara vs. Union of India AIR 1983 SC 130. The Supreme Court has held that the basic
framework of ‘Socialism’ is to provide a decent standard of life to the working people. This
among others on economic side envisaged economic equality and equitable distribution of
income. This is a blend of Marxism and Gandhism leaning heavily toward Gandhian Socialism.
This is the type of socialism which we wish to establish in our country. In Excel Wear vs. Union
of India, AIR 1979 SC 25, the Supreme Court considered the effect of the word ‘Socialist’ in the
Preamble. The Hon’able Court held that the addition of the word ‘Socialist’ might enable the
Courts to lean more in favor of nationalism and State ownership of industry.
65
J.N. Pandey, The Constitutional Law of India, Central Law Agency, Allahabad, 2008, pp. 32-33.
66
Indian Industry has an important role to play in the process of economic development. See: Justice
Paul and A. Ramanathan, “Sources of Industrial Finance: Some Econometric Evidence”, Retrieved
from <http://www.igidr.ac.in> visited on 30 June, 2012.
67
Part IV of the Indian Constitution dealing with the “Directive Principles of State Policy” provides one
of the most novel and striking features of modern Constitutional Government. India has borrowed it
from Irish Republic. Retrieved from < http://preservearticles.com> visited on 21 July, 2013.
68
Observation made by Justice G.R. Luthra, Chairman of the Monopolies and Restrictive Trade
Practices (MRTP) Commission.

298
population to the urban areas in search of employment. Growing urbanisation due to
heavy industrialisation resulted in proliferation of human needs of basic necessities and
also of luxuries. Due to the shortage of certain necessaries and even their non-
availability at reasonable rates with growing menace of adulteration, it was found
necessary to empower the government to control their production, quality, supply and
distribution. Therefore, the decade of the 1950s, right from the very beginning, saw the
enactment of a number of laws to safeguard the interests of the consumers from various
angles.

In the direction of consumer protection, the earliest steps taken by the national
government in India were the enactment of the Banking Companies Act, 1949 and the
Industries (Development and Regulation) Act, 1951, the Emblems and Names
(Prevention and Improper Use) Act, 195069, Industries (Development and Regulation)
Act, 195170, Forward Market (Regulation) Act, 195271, Drugs and Magic Remedies
(Objectionable Advertisements) Act, 195472, the Prevention of Food Adulteration Act,
195473, the Essential Commodities Act, 195574, the Companies Act, 195675, the Indian
Standards Institutions (Certification of Marks) Act, 195676, the Standards of Weight and

69
The Act prohibits the use of specified names, emblems or official seal for general public and
especially for advertising purposes. The purpose is to prevent misleading advertisements.
70
It provides for representation of the interests of consumers in goods manufactured or produced by
scheduled industries on the Central Advisory Council. The Act contains several provisions about
regulation in price/quality and hoarding. The Central Government is also empowered to cause
investigation to be made into scheduled industries in cases of marked deterioration in quality and
unjustified rise in price of any article.
71
It regulates trading in various commodities to which regulatory provisions to this Act have been
applied. It takes action to curb unhealthy speculation, keeps watch over price trends of a number of
commodities.
72
This Act tends to prevent advertisement which claims miracle or magical cure of diabetes, cancer,
arthritis, asthma, sexual impotency, blindness, polio etc. which are difficult to cure.
73
This Act prohibits manufacturing and sale of adulterated food; adulterated food includes articles of
cheaper substance injurious to heath. Under this Act, use of food colors derived from coal tar has
been banned.
74
This law provides for the regulation and control of production and distribution of essential
commodities by the government so that scarce commodities are available for consumption. It
provides for rules and orders to govern the manufacture, distribution, storage, price etc., of essential
commodities.
75
In order to regulate the functions of the corporate form of organizations in the public interest in India,
this legislation has been passed which is landmark in socio-commercial enactments, namely the
Indian Companies Act, 1956. Company legislation in India protects from monopoly of large
corporation by developing a system of checks and controls.
76
It has provided for the operation of certification for marketing schemes in order to ensure quality
in marketable products.

299
Measures Act, 1956 (1976)77, Trade and Merchandise Act, 195878, The Bureau of
Indian Standards Act, 198679 and Monopolistic and Restrictive Trade Practices Act,
196980 (Amended in 1984).81

Other legislations from the point of consumer interest are: Cinematograph Act 1952, the
Vegetable Oil products (Quality Control) Order 1955, Price Competition Act 1955,
Security Contract (Regulation) Act 1956, Specific Relief Act 1963, Hire Purchase Act
1972, the Packaged Commodity Regulation Order 1975, Sales Promotion Employee
(Condition of Service) Act 1976, Prevention of Black Marketing and Maintenance of
Supplies of Essential Commodity Act 1980, the Essential Commodities (Special
Provision) Act, 1981, the Household Electrical Appliances (Quality Control Order 1976
Amendment in 1981) and Textile (Consumer Protection) Regulation 1988.

In various parts of the country during 1970s a new wave of consumer organizations
emerged. These include:- The Indian Association of Consumers, National Consumer
Service (1963), Prince Rise Resistance Movement (1964), Gayatri Charitable Trust,
Bombay Civil Trust, Consumer Guidance Society of India (1996), All India Bankers
Associations (1968), Surat Consumer Association (1969), Karnataka Consumer Service
Society (1970), Visaka Consumers Council (1973), Akhil Bhartiya Grahak Panchayat

77
The Parliament of India has enacted the Standards of Weights and Measures Act 1976 with a
view to establish standards of weights and measures and also to regulate inter-state trade or
commerce in weights and measures of goods which are sold or distributed by weight, measure or
number. The Act aims primarily at the prevention of trading involving false package, false
weights or measure, and unverified weights or measure. The purpose of the legislation is to raise
the standard of weights and measure of goods sold in India to the level of ‘International Bureau
of Weights and Measures’ in France and “International Organization of Legal Metrology”.
Every unit of Weight and measure laid down by the Act is based on the metric system as
recommended by the United States General Conference on Weights and Measures and such
other additional units as may be recommended by the International Organisation of Legal
Metrology.
78
This law provides for the registration of trademarks of manufactured goods so as not only to
protect the business but also the consumer being cheated due to non-identifiable products.
79
The Parliament of India has enacted the Bureau of Indian Standard Act, 1986 with a view to
provide for the establishment of a bureau for harmonious development of the activities of
standardization marking and quality, certification of goods and other connected matters. It is a
social welfare legislation intended for the benefit and welfare of the consumers of various
articles and process.
80
This Act has been enacted with the objective of curbing monopolistic and restrictive trade
practices. Before the 1984 Amendment, the MRTP Act contained no provision for the protection
of consumers from unfair trade practices. The major provisions relating to unfair trade practices
and regulation in India are contained in Section 36-A, 36-B, 36-C, 36-D and 36-E which have
been inserted in the MRTP Act by the 1984 Amendment.
81
K.C. Kohli, “Essential Commodities Act 1955 and the Role of Cost Accountants”, Management
Accountant, Vol. 24, No. 3, 1989, pp. 176-178.

300
(1974), Trichy District Consumer Council (1976). In 1974, another legislations passed
by the Government of India namely, the Maintenance of Internal Security Act, 1971 and
the Prevention of Black-marketing and Maintenance of Supplies of Essential
Commodities Act, 1980. The major aim of these legislations has been to check inflation,
profiteering, hoarding, black marketing and unscrupulous trade practices.82

Under the chairmanship of Mr. Justice Rajinder Sachar, a highly powered expert
committee-popularly known as Sachar Committee has been appointed. The aim of this
committee was to remind the trading community of their social responsibilities.
Committee was in favour of “openness in corporate affairs” that is adequate disclosure
for the benefit of shareholders, workers, consumers, creditors and the community. The
committee recommended radical modifications in the Monopolies and Restrictive Trade
Practices Act, 1969 and the Companies Act, 1956. The MRTP Act amended in 1984
and The Companies Act 1956 amended in 1988. The Sachar Committee observed that:

While all modern legislations on the subject of consumer accept the need
of protection to consumer by law, however, the present legislations do
not deal at all with what is commonly known as Unfair Trade Practices,
misleading advertisements, false information to dupe consumers. Present
legislations do not provide remedy against such practices by
manufacturers...83
In the late 1970s, India witnessed a new phenomenon of judicial activism. New strategy
has become popular namely Public Interest Litigation or Social Interest Litigation.
Since 1990, significant changes have taken place in the field of consumer protection in
India. The Social Action Litigation (SAL) as an instrument for securing economic
justice to the underprivileged has been one of the outstanding development in the Indian
legal system. 84 SAL has revolutionized modern Indian law. There is hardly a major
instance of such type of litigation in the early 1980s on behalf of consumers, but now
under the consumer Protection Act, 1986, there is birth of India’s leading and most

82
These legislations have been enacted as a consequence of resolution passed at the 2nd All India
Consumer Conference in 1974.
83
C.M.K. Thampi, “Unfair Trade Practices” in Vallanadu Narayanan (edited), Consumer Rights in
Service Sector, Concept Publishing Company, 2008, New Delhi, pp. 65-78 at p. 66.
84
The surge of public interest litigation began in the United States in the late 1960s when it
emerged as a part of the legal Aid and Civil Rights Movement. This strategy has been used by
PIL activists and lawyers for the protection of consumers. For more details see: Clark D.
Cunningham, “Public Interest Litigation in Indian Supreme Court: A Study in the light of
American Experience, The Journal of Indian Law Institute, Vol. 20, No. 4, October-December,
pp. 494-523.

301
powerful consumer association, the CERC (Consumer Education and Research Centre)
at Ahmadabad in 1978, coincide with the emergence of the social action litigation
movement in India. Even the enactment of the Consumer Protection Act, 1986 itself has
been largely influenced by intensive lobbying by such consumer groups and voluntary
social organizations.85

7.5.1 The Consumer Protection Act, 1986

The industrial revolution and the development in the trade and commerce have led to
the vast expansion of business and trade. As a consequence of this progress a variety of
consumer goods have appeared in order to cater the needs of the consumers and a host
of services have been made available to the consumers like insurance, transport,
electricity, housing, entertainment, finance and banking. A well organized sector of
manufacturers and traders with better knowledge of marketing has come into existence,
thereby affecting the relationship between the traders and the consumers. New sector of
marketing provided an atmosphere wherein the principle of consumer sovereignty was
almost inapplicable. The advertisements of a variety of goods in television, newspapers
and magazines has greatly influenced the demand by the consumers, however, there are
manufacturing defects or imperfections or short comings in the quality, quantity and the
purity of the goods or there may be deficiency in the services rendered. For the welfare
of the public, the glut of adulterated and sub-standard products in the market needs to be
snubbed. In spite of various provisions providing protection to the consumers and
providing for stringent action against adulterated and sub-standard articles in the
different enactments like Code of Civil Procedure, 1908, the Indian Contract Act, 1872,
the Sale of Goods Act, 1930, the Indian Penal Code, 1860, the Standards of Weights
and Measures Act, 1976 and the Motor Vehicles Act, 1988, very little could be
achieved in the field of Consumer Protection. Though the Monopolies and Restrictive
Trade Practices Act, 1969 and the Prevention of Food Adulteration Act, 1954 have
provided relief to the consumers yet it became necessary to protect the consumers from

85
Consumer Education and Research Centre (CERC), which is now among the most successful
consumer groups is instrumental in safeguarding consumer’s interest by disseminating consumer
education, and above all, litigation on behalf of consumers. The emergence in consumer-oriented
social action litigation owes a lot to the tireless efforts of consumer groups like CERC and
Consumer Guidance Society of India (CGSI). For more details see: Sanjay Kaptan, Consumer
Movement in India: Issues and Problems, Sarup & Sons, New Delhi, 2003, pp. 3-5.

302
the exploitation. In order to provide for better protection to consumer the Consumer
Protection Bill, 1986 was introduced in the Lok Sabha on 5th December, 1986. The
Consumer Protection Bill, 1986 seeks to provide for better protection of the interests of
consumers and to make provision for the establishment of Consumer councils and other
authorities for the settlement of consumer disputes and for matter connected therewith.
The Consumer Protection Bill, 1986 was passed by both the Houses of Parliament and it
received the assent of the President on 24th December, 1986. It came on the Statutes
book as the Consumer Protection Act, 1986 (68 of 1986). The chief characteristics of
the Act are:86

(a) To promote and protect the rights of consumers. The right to be protected
against marketing of goods which are hazardous to life and property;
(b) To inform consumers about the quality, quantity, potency, purity, standard and
price of goods so as to protect them against unfair trade practices;
(c) To confer the right to be assured, wherever possible, access to an authority of
goods at competitive prices;
(d) To provide the right to be heard and to be assured that consumers interests will
receive due consideration at appropriate forums;
(e) Right to seek redressal against unfair trade practices or unscrupulous
exploitation of consumers;
(f) Right to consumer education and consumer awareness. This objective is sought
to be promoted and protected by the Consumer Protection Council that are
established at the Central and State level; and
(g) In order to provide speedy and simple remedy to consumer disputes quasi-
judicial machinery is sought to setup at the District, State and Central levels.
These quasi-judicial bodies are bound to observe the principles of natural
justice and have been empowered to give relief of a specific nature and to
award, wherever appropriate, compensation to consumers. Penalties for
noncompliance of the orders given by the quasi-judicial bodies have also been
provided.

86
This text has been taken from the Statement and Objects (sic) of the Consumer Protection Act,
1986 as given in the Statue passed by Indian Parliament.

303
This Consumer Protection Act, 1986 has been further amended by some amending Acts
like: The Consumer Protection (Amendment) Act, 1991 (34 of 1991), the Consumer
Protection (Amendment) Act, 1993 (50 of 1993), the Consumer Protection
(Amendment) Act, 2002 (62 of 2002) and the Consumer Protection (Amendment) Act,
2008. The Consumer protection legislation is a milestone in the history of socio-
economic legislation and is directed towards public welfare and public benefits. The
revolutionary changes in industry and scientific developments have led to more
consumer goods being produced. The main objective of this legislation is to protect
genuine interests and rights of consumers. 87

After an analysis of this Act, it is observed by the researcher that the Consumer
Protection Act, 1986 is all about people. It is people who struggle for their protection
against injustice. Consumer protection cannot be achieved unless and until every person
is involved. The Consumer Protection Act, 1986 provides a simple, speedy and
inexpensive remedy to the consumers. The Act seeks to promote the basic rights of
consumers and provides three-tier machinery for redressal of consumer grievances,
known as Consumer Dispute Redressal Agencies.88 The Indian legal system
experienced a revolution with the enactment of the Consumer Protection Act 1986
(CPA), which has specifically been designed to protect interests of consumers. This Act
is intended to provide justice which is “less formal, involves less paper work, delay and
less expensive.” The Consumer Protection Act has received wide recognition in India as
poor man’s legislation, ensuring easy access to justice. This Act has initiated a legal
revolution by ushering, in the era of consumer protection a new legal culture among the
masses to take recourse under the Consumer Protection Act, 1986 regardless of their
grievances.89 It is clear that in Post-Independence era, India has a plethora of laws and
regulations to protect the consumer interest but none of these laws is complete in all

87
P.K. Majumdar, Law of Consumer Protection in India, Orient Publishing Company, Allahabad,
2004, p. xi
88
Kurian Joseph, “Consumer Protection : Significance and Effectiveness”, in Zacharias Thomas
(ed.), Current Topics in Economics, Commerce and Management, Discovery Publishing House,
New Delhi, 1998, pp. 185-201 at p. 193.
89
H.K. Saharay, Textbook on Consumer Protection Law, Universal Law Publishing, New Delhi,
2010, pp. 7-10.

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respects. The intention behind enacting these legislations has been to regulate various
marketing activities.90

The Consumer Protection (Amendment) Act, 2002 has introduced additions in the
original Act namely change in the amount of Jurisdictions of three-tier forums and
procedural mechanism. The Consumer Protection Act, 2008 has added “PART IV.6
entitled Prepaid Purchase Cards. Further addition is in DIVISION 3: Inspections,
Investigations and Enforcement. It includes Interpretation of Division. In this Division:
(a) ‘property’ includes computer software; (b) ‘record’ includes any information that is
recorded or stored in any medium or by means of any device, including a computer or
electronic media.

It is observed by the researcher that in all the amendments in this Act, no protection has
been afforded to consumers in online shopping expressly. No procedural mechanism
has been specified for the rights of consumers in e-Commerce. The Government of
India has recently proposed a significant number of changes to the Consumer Protection
Act, 1986 (the Consumer Act) vide the Consumer Protection (Amendment) Bill 2011.
The Amendment Bill, which was introduced in the Lok Sabha in 2011, is seen by many
as a move in the right direction and has now been referred to a Standing Committee.

7.6 Consumer Protection in Indian Constitutional Mandate

The Constitution of India does not contain any explicit provision on the subject of the
consumers, but there are many provisions that have direct bearing on the interests of
consumer. Most of these provisions pertain to the Directive Principles of State Policy.
As a part of fundamental freedoms, the Constitution guarantees under sub-clause (g)
of Article 19(2), freedom of profession, trade or business, thereby ensure that the State
cannot prevent a citizen from carrying on a business, except by a law imposing a
reasonable restriction in the interest of the general public. However, under Article
19(2), no such right can be enforced where the business is dangerous or immoral.
Such a business may be absolutely prohibited or may be required to be licensed.
Moreover, restrictions can be imposed on business in terms of place and time also.
There is no right to carry on a business at every place or at any time. There can be

90
Kurian Joseph, 1998, pp. 185-201 at p.190.

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reasonable restrictions on “business on the streets”91 and any “harmful trade”92 or
“dangerous trade”. 93 Reasonable restrictions can be imposed for public convenience
also. 94

In the context of licenses and permits required for carrying on a business or trade,
the grant of such licenses cannot depend upon the absolute discretion of an
administrative authority, but clear policies have to be laid down on which the
discretion can be exercised, taking due note of consumer interest. The discretion has
to be exercised judicially. If the law requiring license does not set out the
considerations, it would be void. If considerations are set out in the law, but are
departed from by the competent authority, while administering the law, then the
order of the competent authority would be void, despite the law being valid.
Generally, an existing license cannot be revoked without giving the licensee an
opportunity of being heard. 95 There can be restrictions on licenses but these must be
reasonable. 96 The restrictions should be, inter alia, in the interest of consumers,
accordingly, total prohibition can be imposed against manufacture of drugs or
preparations which are injurious to health. 97

Article 21 of the Constitution, guarantees every person life with dignity, free from all
kinds of exploitation. Article 38 mandates the State to bring about a social order in
which justice-social, economic and political justice can be administered to all the
institutions of life. The consumer cannot be ignored while giving any practical shape to
this mandate. According to Article 39(b) and (c), also, the State is required to direct its
policy towards securing the ownership and control of the material resources of the
community in equal distribution so that it sub serve the common good, and the
operation of the economic system should not result in the concentration of wealth and
means of production to the common detriment. This is the most important directive to

91
Pyare Lal vs. Delhi Municipality, AIR 1968 SC 133, 138.
92
Hari Shankar vs. Deputy Commissioner, AIR 1975 SC 1121.
93
Lakhan Lal vs. State of Orissa, AIR 1977 SC 722.
94
Ebrahim vs. Regional Transport Authority, (1983) SCR 290, 299.
95
Dwarka Prasad vs. State of Uttar Pradesh, (1954) SCR 803; Faruk vs. State of Madhya
Pradesh, AIR 1970 SC 93, 96; Fedco vs. Bilgrami, (1960) SCJ 235, 249; and Sukhnandan vs.
Union of India, AIR 1982 SC 902.
96
All Delhi Rickshaw Union vs. Municipal Corporation, AIR 1987 SC 648.
97
Lakshmikant vs. Union of India, (1997) 4 SCC 739.

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the State under Chapter IV of the Constitution, which supports the whole public
distribution system and the administrative mechanism to control hoarding and
profiteering in India. The Supreme Court has held that a statutory corporation, even if it
may not be a public utility, has also to comply with Article 39 of the Constitution and
charge only fair prices.98 For commodity, not vital for consumers, greater consideration
can be given to profit.

The Constitution has distributed the subjects, relating to product and service regulation,
between the Centre and the States for their better quality and efficiency. Most of the
subjects concerning consumer protection have been placed in the Concurrent List. The
relevant entries are99: Preventive detention for the reasons connected with maintenance of
supplies and services essential to the community, Adulteration of foodstuffs and other
goods, Drugs and poisons excepting cultivation manufacture and sale for export of
opium, Economic and Social planning, Commercial and industrial monopolies,
combines and trusts, Legal, medical and other professions, Trade and Commerce in the
production, supply and distribution of the products of any industry where the control of
such industry by the Union is declared by Parliament by law to be expedient in the
public interest, and imported goods of same kind as such products food stuffs;
including edible oilseeds and oils, cattle fodder, including oil cakes and other
concentrates, raw cotton, whether grained or engrained and cotton seed, raw jute,
weights and measures except establishment of standards, price control, electricity,
news papers, books and printing press.

7.7 Consumer Protection Legislations in the era of Post- Modernism in India

The term ‘Post-Modernism’ has been coined by Jean François Lyotard (1948) in his
book ‘The Post-Modern Condition’. Radical changes have occurred in social order over
the last thirty years. These changes are labeled as ‘the post-industrial society’, ‘the
globalised society’, ‘the post-capitalist information order’, ‘the society of advanced
world capitalism’, ‘the consumer society’ and lately, ‘post-modernism’. According to

98
The Oil and Natural Gas Commission and Another vs. Association of Natural Gas Consuming
Industries of Gujarat and Others, AIR 1990 SC 1851.
99
The Constitution of India, Seventh Schedule (Article 246), List III - Concurrent List, Entry 3-
Entry 39.

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Jean Francois Lyotard, Post-Modernism reflects changes in the level of science and
technology, in particular the development of computers, mass communication,
increasing emphasis on language in social and cultural studies. 100 Categorizations of
periodisation may be made as ‘pre-modern’, ‘modern’ and ‘post-modern’ in time space.
Pre-modern is an ancient one and is traditionally derived with orthodox reasoning with
tribalism characteristics. The term ‘Modern’ is a system of thought and regime of
knowledge. Modernity refers back and claims to overcome a historical period.
Modernity was an attempt to create a just society of organized and transparent structure-
a world of coherent practices organized around rules. Modernism is a cultural and
artistic movement. Modernism is a rage against existing order. It is said to exalt “the
attack on form, the belief that one’s ability to go beyond, to transcend to break through,
is the raison d’etre of art and perhaps of life.”101 In Indian Post modernist era new
challenges before Jurisprudence are: Cyber Crimes, e-Consumerism, Cloning,
Homosexuality, Live-in-Relationships, Adultery by women, Giglos; which are need of
the time to resolve by adequate legal system. Cyberspace is the total interconnectedness
of human beings through computers and telecommunication without regard to
geographical location. It is also called virtual space as physical existence of cyberspace
is not detectable at all. Cyberspace is the realm behind the computer screen, the other
side of the telephone receiver, just a centimeter beneath the surface of the keyboard,
where words and sounds and images and all forms of codified phenomena exist. The
golden thread in the cyberspace is Internet.102 The Internet is changing irreversibly the
economic landscape and the fundamental assumptions on which the businesses are
based.103 It has transformed the industrial economy into electronic economy where the
concept of e-Commerce has taken birth. In cyberspace global electronic
communications have created new spaces in which distinct rules sets need to evolve.

100
M. D. A. Freeman, 2001, pp. 1253-1254.
101
id.
102
Joshve Quietter, “Life in Cyberspace: You Deserve a Break Today”, News Day, 7 October,
1994, A 5.
103
Cyber Space does not have definite definition. It does not have geographical location. The term
is used to refer all objects and identities within its network. Cyberspace is an Internet Metaphor.
See: Rodney D. Ryder, “Law and Privacy in the Cyber Space: A Premier on the Indian
Information Technology Act, 2000”, Manupatra Newsline, September, 2008, p. 3.

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The only law on e-Commerce law in the era of Post-Modernism in India is the
Information Technology Act, 2000. The next chapter is focused on the legal control
mechanism on the consequences of entrance of consumers from the ‘physical
marketing’ into the ‘virtual marketing’ or ‘cyber marketing’ and an analytical study has
been made of e-Commerce laws in India.

7.8 Conclusion

This part has presented the actual ground level framework of Indian consumer
protection Jurisprudence. After an analysis of a bundle of consumer oriented
legislations, it is concluded that in India, the concern for the protection of consumers is
not a new phenomenon. Consumer protection has its deep roots in the rich soils of
Indian civilization. After tracing the roots of consumer protection from ancient
jurisprudence to modern jurisprudence, it is revealed that Indian jurisprudence is rich
with consumer protection laws in physical world. However, it is also clear that not even
a single legislation is available in legal text for the protection of rights of consumers in
an online shopping. Therefore, in Indian jurisprudence a strong legislation is required
for the protection of rights of consumers in e-Marketing for online shopping. Next part
of this chapter is based on e-Commerce legislation of India and it is analyzed on the
touchstone of consumer protection in cyberspace. An attempt has been made to explore
concerns of Indian legislations for protection of consumers in cyber world.

Part-II
Indian Law on E-Commerce: A Critical Analysis of the Information Technology
Act, 2000
7.1 Introduction
In this part the focus of research shifts from protection of consumers in physical
commerce to digital commerce. An analysis of various Indian legislations for the
protection of consumers in cyberspace is done and it highlights the actual glimpses of
consumer concerns in courts. In 21st Century India has been experiencing rapid growth
in Internet accessibility and e-Commercial transactions. The arrival of the Internet and
related technologies has made irreversible changes to the world today. In a world,
which is moving steadily towards the information society and knowledge based

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economy, it is essential that law must contribute its inputs to promote e-Commerce.104
Therefore, the most important thing which is required by Indian ‘e-Consumerism
Policy’ is the adequate legal provisions for giving more and more powers to consumers
in online marketing.

In India the Bible of Cyber law and moreover the only e-Commerce law is the
Information Technology Act, 2000. An attempt has been made to analyse each and
every provision of e-Commerce laws minutely. Firstly, the provisions of the
Information Technology Act, 2000 and the Information Technology (Amendment) Act,
2008 have been given. After this, the provisions of UNCITRAL Model Law, 1996 have
been highlighted. The purpose of highlighting the provisions of UNCITRAL Model
Law, 1996 is to make a comparative study as India has adopted e-Commerce laws from
the UNCITRAL Model Law, 1996. Hence, this chapter is based on the critical analysis
of various provisions of e-Commerce law in India from the perspective of protection of
consumers in e-Commercial transactions.

7.2 An Overview of the Information Technology Act (IT Act), 2000

7.2.1 Introduction
The Ministry of Information Technology was formed in 1999 with the objective of
regulation of IT Superpower in India. 105 India has witnessed the enactment of its first
statute relating to Information Technology on the pattern of the Model Law, 1996 on
Electronic Commerce adopted by the United Nations Commission on International
Trade Law (UNCITRAL). The General Assembly of United Nations by its Resolution
No. 51/162, dated 30th January, 1997, recommended that all States should give
favorable consideration to the said Model Law when they enact or revise their laws. 106

104
Pavan Duggal, “Harmonization of e-Commerce Laws and Regulatory Systems in South Asia,
Retrieved from <http://www.unescap.org/tid/publication/tipub2348_part1ii.pdf> visited on 18
June, 2013.
105
Retrieved from <http://www.mit.gov.in> Ministry of Information Technology, Government of
India, visited on 10 July, 2010.
106
The General Assembly of the United Nations by resolution A/RES/51/162, dated the 30th
January, 1997 has adopted the Model Law on Electronic Commerce adopted by the United
Nations Commission on International Trade Law; AND WHEREAS the said resolution
recommends inter alia that all States give favorable consideration to the said Model Law when
they enact or revise their laws, in view of the need for uniformity of the law applicable to
alternatives to paper-cased methods of communication and storage of information; AND
WHEREAS it is considered necessary to give effect to the said resolution and to promote
efficient delivery of Government services by means of reliable electronic records.

310
The Model Law provides for equal legal treatment of users of electronic communication
and paper based communication. Thus, the Information Technology Act, 2000 was
passed by Parliament on 15 May, 2000 approved by the President on June 9, 2000 and
notified to come into existence on 17 October, 2000.107 The IT Act is a pioneer Act in
the field of Information and Communication Technology in India and it is dedicated
itself fully to the legal orientation of various situations of electronic scenario. The IT
Act is basically a commercial law governing recognition to the electronic activities in
108
the country and giving legal camouflage to the Internet born relations. Basically
formulated to legalize online commercial dealings, it slowly covered Cybercrimes as
well. In its about13years old life, it has been amended once in 2008, which can be
called a ‘Cybercrime friendly’ amendment.

7.2.2 Need of the Information Technology Act, 2000

The expanding horizons of Cyberspace, the vanishing legal barriers and the shrinking of
the entire world to the desktop called for a quick legal response before the new situation
opens a plethora of complexities. The geographical barriers have lost their importance
and the transmission of electrons has changed the earth into a global village, densely
connected, closely felt and well-knitted. Billions of documents are stored in silicon
chips so much so that today the world cannot anymore afford to live without computers
and Internet. The Cyberspace law is a complex domain that needs special framework of
law and policy considering the peculiar characteristics of the Cyberspace and the
problems that inevitably emanate there from. Not only that information and data is
transmitted through the conduits but at the same time, important rights and liabilities
flow through them raising multiple legal complexities and quandaries. Therefore, legal
frame to regulate these activities cannot be overlooked.109 With this object in mind, the
IT Act is passed to fill the legal vacuum in the field of Information and Communication
Technology.

While legislative enactments across the world have thrown some light on the basic
issues relating to cyberspace law and the rules that can streamline flow of e-Commerce,

107
Retrieved from<http://www.uncitral.org> visited on 11 July, 2010.
108
Talat Fatima, Cybercrimes, Eastern Book Company, Lucknow, 2011, p. 458.
109
ibid., p. 466.

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information and communication, yet constant amendments are needed due to intricacies
of the subject and the dynamism of the cyber world.110 The purpose of the Information
Technology Act, 2000 is to nurture an environment which facilitates electronic
commerce transactions, electronic filing, maintenance of electronic records and
electronic government transactions. This Act is based upon two important principles:

1. Achieving functional equivalence, which means that, as far as possible, paper based
commerce and electronic commerce should be treated equally by the law; and

2. The related principle of ensuring technology neutrality which means that law should
not discriminate between various forms of technology.

In nutshell, the purpose of acceptance of Model Law is to offer legislators at national

levels a set of internationally acceptable rules as to how a number of legal obstacles to
the development of electronic commerce may be removed, and have a more secure legal
environment for growth of electronic commerce. 111 Thus, the need of this Act is
realized as it validates and recognize contracts formed through electronic means, sets
default rules for contract performance, defines characteristics of a valid electronic
writing and an original document, provides for the recognition of electronic signatures
for legal and commercial purpose and supports the admission of computer evidence in
courts and arbitration proceedings.

7.2.3 Salient Features of the Information Technology Act, 2000

The preamble of the enactment sets forth, in very lucid terms, the main objectives of the
legislation which the legislature intended to achieve by the Act. The preamble is a key
to open the minds of the maker of the enactment. The preamble of this IT Act runs as:

An Act to provide legal recognition for transactions carried out by means of electronic
data interchange and other means of electronic communication, commonly referred to
as “electronic commerce”, which involve the use of alternatives to paper- based
methods of communication and storage of communication, to facilitate electronic filing
of documents with the Government agencies and further to amend the Indian Penal

110
Karnika Seth, Cyber Laws in the Information Technology Age, Lexis Nexis, Butterworths
Wadhwa, Nagpur, 2009, p. 485.
111
Rodney D. Ryder, Guide to Cyber Law, Wadhwa and Company, Nagpur, 2003, pp. 389- 390.

312
Code, 1860, the Indian Evidence Act, 1872, the Bankers’ Books Evidence Act, 1891
and the Reserve Bank of India Act, 1934 and for matters connected therewith or
incidental thereto.

The Act envisages the following salient characteristics:112

1. It provides legal recognition for transactions carried out by means of electronic

data interchange and other means of electronic communication commonly
referred to as “electronic commerce” in place of paper based methods of
communication;

2. This being a cyber law dealing with commercial transactions, it pointedly gives
legal recognition to electronic signatures, electronic records, electronic filing of
documents for authentication of any information or matter that requires
recognition under any law;

3. It facilitates electronic filing of documents with the Government agencies;

4. It facilitates attribution, acknowledgement and dispatch of electronic storage of

data;

5. It provides legal sanction to electronic fund transfers between banks and

financial institutions;

6. It gives legal recognition for keeping of books of accounts by bankers in

electronic form, and to amend the Indian Penal Code, 1860, the Indian Evidence
Act, 1872, the Banker’s Book, Evidence Act, 1891 and the Reserve Bank of
India Act, 1934.

7. Not only that the IT Act deals with the substantial part of the issues connected
with Information Technology, it also lays down the procedure and manner of
filing complaints, investigation, the powers of authorities concerned and the
Tribunals where appeal is to be filed.

112
The entire points are taken as it is from the primary source namely the Information Technology
Act, 2000. Also See: Nandan Kamath, Guide to Information Technology Act, Rules &
Regulations, Universal Law Publishing, Delhi, 2001, p. 51.

313
8. Privacy, which is the most controversial issue in the Internet Age, has for the
first time got a place in the law provisions in India. The breach of confidentiality
and privacy has been made punishable not only with fine but even with
imprisonment.

7.2.4 The Information Technology (Amendment) Act, 2008: Statement of Objectives

and Reasons

This Act has been amended by Information Technology (Amendment) Bill, 2006,
passed in Lok Sabha on December 22nd and in Rajya Sabha on December 23rd of 2008.
The statement of Objects and Reasons for the Information Technology (Amendment)
Act, 2006, which are given as follows113:

1. The Information Technology Act was enacted in the year 2000 with a view to give
a fillip to the growth of electronic based transactions, to provide legal recognition
for e-Commerce and e-transactions, to facilitate e-governance, to prevent computer
based crimes and ensure security practices and procedures in the context of widest
possible use of Information Technology worldwide. However, the use as well as the
misuse of Internet transactions in 2006 is much more than its usage from the initial
year of 2000.

2. With proliferation of Information Technology enabled services such as e-

governance, e-commerce and e-transactions, protection of personal data and
implementation of security practices and procedures relating to these applications of
electronic communications have assumed greater importance and they require
harmonization with the provisions of the Information Technology Act.

3. Further, protection of Critical Information Infrastructure is pivotal to national

security, economy, public health and safety. Therefore, it has become necessary to
declare such infrastructure as a protected system so as to restrict its access.

4. A rapid increase in the use of computer and Internet has given rise to new forms of
crimes like publishing video voyeurism, e-commerce frauds like Personation,
113
All these points are taken as it is from the discussion of Hon’ ble Minister of Communication
and Information Technology, Mr. Dayanidhi Maran. This discussion is retrieved from
<http://cactusblog.files.wordpress.com/2010/07/18962sm_finalnew_isca_cp10.pdf> visited on 6
January, 2013.

314
 Phishing, Pharming, Spamming, Identity theft and offensive messages through
communication services. So, penal provisions are required to be included in the
Information Technology Act, 2000, the Indian Penal Code, 1908, the Indian
Evidence Act, 1872 and the Code of Criminal Procedure, 1973 to prevent such
crimes. With this Amendment Act, 2008 new penal sections have been added in the
original Act.

5. The United Nations Commission on International Trade Law (UNCITRAL) in the

year 2001 adopted the Model Law on Electronic Signatures. The General Assembly
of the United Nations by its resolution No. 56/80, dated 12th December, 2001
recommended that all States must accord favorable consideration to the said Model
Law on Electronic Signatures. Since the digital signatures are linked to a specific
technology under the existing provisions of the Information Technology Act, it has
become necessary within a time span of 2000- 2007 to provide for alternate
technology of electronic signatures for bringing harmonization with the said Model
Law.

6. The service providers may be authorized by the Central Government or the State
Government to set up, maintain and upgrade the computerized facilities and also to
collect, retain appropriate service charges for providing such services at such scale
as may be specified by the Central Government or the State Government. Therefore,
the amendment was required so as to fulfill the need of time and challenges posed
by Internet-era in India.

7.2.5 The Information Technology (Amendment) Act, 2008

The lacunae in the IT Act, 2000 for long necessitated a refurbishing of the legislation.
This was achieved in 2008 when the Act is not only thoroughly amended but a lot more
is done. This amendment is a positive step to bring Cybercrimes within the legal
framework. These changes are highlighted as under:

1. The most prominent change is the replacement of the term “Digital Signature” by
the term “Electronic Signature” thus making the IT law more technology neutral
which has been the approach of the Model Law on Electronic Signatures, 2001.

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2. The major amendments have been in the long- awaited criminal area. A host of new
Cyber crimes like child pornography, obscenity, depiction of sex explicit act,
violation of privacy, cheating by personation, identity theft, cyber terrorism and
sending offensive messages have been introduced.

3. The amendments are more investigation friendly and are paving the way for more
fruitful and easier way to investigate cybercrimes and other online activities.
Attempts and abetment of offences is also recognized as an offence under the Act.
The complaints regarding these offences can now be looked into by an officer of the
rank of Inspector and the earlier provision for Deputy Superintendent of Police has
been done away with.

4. Terms like “Cyber Café”, “e-mail”, “Communication device” have been defined.
This has enlarged the area of law and has enriched its vocabulary to meet the
Internet situations.

5. Elaborate provisions are introduced to safeguard cyber infrastructure in the country.

For this, provisions for the establishment of a National Nodal Agency and Indian
Computer Emergency Response Team (ICERT) have been introduced. The term
“intermediaries” has been defined to include within its area a number of other
service providers so as to enlarge the liability- susceptible class in cyberspace.

6. National Security has been given an upper hand. For this, monitoring, intercepting
and decryption of flowing information have been made mandatory by the
intermediaries and any person in charge of a computer source on the directions of
proposed government agency. Failure to follow the directions has been made an
offence.

7. To make the evidence more acceptable and reliable, the report of the Electronic
Evidence Expert has been made relevant under the Evidence Law by making an
amendment under the same. It is made clear that without technological expertise and
the digitization of the legal process, little can be done to counteract the silicon
onslaught.114

114
Talat Fatima, 2011, p. 499.

316
An Analysis: For the minute analysis, all the provisions of the Information Technology
Act, 2000 (2008) or the e-Commerce laws are studied very carefully and it is observed
that the Information Technology Act, 2000 and the Information Technology
(Amendment) Act, 2008 have highly ignored one of the most important aspects of e-
Commerce-that is consumers in e-Commerce.. The researcher personally feels that with
the participation of consumers in online shopping, the Information Technology Act,
2000 has become living law that comes into operation the moment anyone enters into
‘e’- world. It is submitted that this law is like a skeleton legislation where all provisions
are decorated in a very beautiful and systematic way, however, these are not worth for
ordinary human being who is daily user of this technology. There is lack of soul/spirit
behind these provisions.

The law is of as much interest to the layman as it is to the lawyer. The laws which were
written for traditional world, now, need to be changed to suit the digital world. The
purpose of the Act is not a mere addition as the decoration piece in the legal world
library, but to provide justice to the users of this technology. It is possible only when
keeping aside all the technicalities it must be made easy for layman to understand and
for being applicable. How so ever amendments may be introduced in this Act; it is
believed that unless human spirit is there, it will be just the phantom of what it should
have been. In this work, an attempt has been made to give human touch to these
provisions so that layman do not get confused in technicalities of Cyber law but he/ she
can see and feel the justice if the consumer is betrayed in the e-World. The relevance of
this research is to connect the Information Technology (Amendment) Act, 2008 with
practical issues faced by e-Consumers.

Now a days, Internet and Communication Technology is not only used by educated,
high professionals and computer experts but almost by majority of people in India.
Some suggestions have been given so as to introduce an effective mechanism with
which e-consumers can get justice. Due to torturous procedure of courts even educated
people continue to tolerate these online frauds. The reason is that laws are incompetent
to protect them from these white collar (highly sophisticated) crimes. Not even a single
provision in the Information Technology Act 2000 (as well as 2008) protects consumers

317
from frauds in online shopping. As the Information Technology law has become a
living law, therefore, it needs to be updated as per needs of day to day society.

7.2.6 Legal Control Mechanism under the Information Technology Act, 2000 (2008)
to combat Cyber Frauds

The Information Technology Law, in order to give impetus to the electronic activities
and to secure electronic signatures, has devised the ways and means to achieve
reliability in this regard. Thus, it envisages provisions on its own legal infrastructure to
ensure trustworthy online relations. A hierarchy of authorities is established under this
Act to deal with cyber frauds. These authorities are described as under:

7.2.6.1 Controlling Authorities

Section 17 empowers the Central Government to appoint a Controller of Certifying

Authorities and also appoint such number of Deputy Controllers, Assistant Controllers,
other officers and employees as it deems fit. Such appointment is to be notified in the
Official Gazette. Deputy Controllers, Assistant Controllers, other officers and
employees are under the general supervision of Controller while Controller is subject to
the general control and directions of the Central Government. The major functions of
Controller are: (1) To supervise over the activities of the Certifying Authorities, (2) To
certify public keys of the Certifying Authorities, (3) To lay down standard to be
maintained by the Certifying Authorities, (4) To lay down the qualifications and
experiences of the employees of the Certifying Authorities, (5) To specify the form and
contents of Electronic Signature Certificate and the public key, (6) To specify the
manner in which the Certifying Authorities conduct its dealings with the subscribers,
(7) To lay down duties of the Certifying Authorities and (8) To maintain database
containing the disclosure record of every Certifying Authority containing particulars as
may be specified by regulations, which are accessible to public. Thus, the Controller has
large functions to perform which are almost related to the Certifying Authorities.

7.2.6.2 Certifying Authorities

Under Section 35 of the IT Act, the Certifying Authorities are like a hyphen which
joins, a buckle which fastens the subscriber to the Controlling Authority. It is originated

318
as trusted Third Parties and is primarily instrumental in cryptographic key management
and identification of a party to a transaction. A Certifying Authority can be generically
defined as an authority who shoulders the following responsibilities: 115 (1) Reliable
identification of the persons applying for (signature) key certificates, (2) Verification of
legal capacity of the applicants, (3) Confirming the attribution of a public signature key
to an identified physical person by way of a signature key certificates, (4) Maintaining
the online access to the signature key certificates with the agreement of the signature
key owner, (5) To take measures for the guaranteed confidentiality of a private
signature key and (6) To provide authenticity to the Electronic signatures, thereby
making the electronic messages and public keys reliable. 116 The Certifying Authorities
are subordinate to the Controlling Authorities.

7.2.6.3 Adjudicating Officer

The contraventions of any rule, regulation, direction or order made there under by a
person which renders him liable to pay penalty or compensation under the IT Act, are
adjudicated upon by an officer appointed by the Central Government. A person to be
appointed as an Adjudicating Officer must possess such experience as an adjudicating
officer must possess such experience in the field of Information Technology and legal
experience as may be prescribed by the Central Government.117 Under Section 46(5) the
Adjudicating Officer has all the powers of a civil court which are conferred on the
Cyber Appellate Tribunal under Section 58(2). Thus, the adjudicating officer serves as
the court of first instance regarding contraventions of the IT Act. It has all the powers of
a court and is legally equipped to provide remedy to the aggrieved and punish the
offender. While adjudicating the quantum of compensation, the adjudicating officer
takes into consideration the amount of gain of unfair advantage to the offender, the
extent of loss caused to the aggrieved and to the repetitive nature of the default under
Section 47 of the Act. The order passed by the adjudicating officer is appealable before
the Cyber Appellate Tribunal.
115
Talat Fatima, 2011, p. 471.
116
Electronic Certificates are messages that are signed with the Certification Authority’s private
key. If a person wants to ensure that a public key belongs to a real person, the person to whom
he intends to deal with then to be rest assured, he will have to rely on the identity certificate
issued by a trusted Certification Authority.
117
Section 46 of the Information Technology Act, 2000.

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7.2.6.4 Cyber Appellate Tribunal (CAT)

The Act establishes judicial body to adjudicate upon matters arising within the Act
called CAT. It is a fact finding as well as appellate authority. This is special judicial
body meant solely to adjudicate upon contraventions of the IT Act and also to handle
prosecution of the cybercrimes. This is a body which acts like a court and has all the
powers of a Civil Court established under the Civil Procedure Code, 1908 relating to
calling of records, examination of witnesses, issuing summons and warrant, etc. Appeal
is taken from the CAT to the High Court concerned and hence, the body sits between
the Adjudicating Officer and the High Court. The cyber cases whether civil or criminal
are new to the legal world and their area is also a global, hence, many provisions of
such laws are virgin. The CAT is a pioneer body and all its judgments and ruling would
be trendsetter.118 In addition to all these authorities, the Central Government has been
authorized to formulate rules of this Act.

7.3 Concerns for Protection of Online Consumer: A Detailed Analysis of procedural

provisions under the Consumer Protection Act, 1986 and the Information
Technology Act, 2000 (2008)

An exhaustive study has been made of Indian Cyber-cum-Consumer Jurisprudence and

it is seen that: The enactment of the Consumer Protection Act, 1986 is an important
movement in the country. This Law has been made to provide for the better protection
and promotion of consumer rights through the establishment of Consumer Councils and
Quasi- judicial machinery. Under this Act, Consumer Disputes Redressal agencies have
been set up throughout the country with the District Forum at the District level, State
Commission at the State level and National Commission at the National level to provide
simple, inexpensive and speedy justice to the consumers with complaints against
defective goods, deficient services, unfair and restrictive trade practices. However, all
these protections are provided to consumers in physical world. Expressly online

118
Enormous changes have been made by the IT (Amendment) Act, 2008 in the matters of CATs.
The erstwhile Cyber Regulations Appellate Tribunal (CRAT) has been replaced by the CATs.
Chapter X containing provisions regarding these Appellate tribunals has been renamed as The
Cyber Appellate Tribunal so also the word “Regulations” is dropped from Section 48. The
changes mainly concentrate on techno-legal nature of cybercrimes and have fulfilled the long
awaiting requirements of including a technocrat in the Tribunal so that the legal provisions are
interpreted with the help of technical expertise.

320
consumers in cyber marketing are not mentioned in this Consumer Protection Act,
1986.

If online victimized consumer files his/her complaint under the Consumer Protection
Act, 1986 the appropriate forum is District Forum119 (upto 20 Lakh Rupees because in
online shopping total value of goods or services and the compensation claimed does not
exceed 20 Lakh Rupees) with a fee.120 District forum follows its procedure
systematically as provided in the Consumer Protection Act, 1986. After reading all the
provisions of the Consumer Protection Act, 1986 and procedural framework for online
consumers (the term online consumer is not expressly defined in the Consumer
Protection Act, 1986) under this Act it is observed that, in the context of judicial
procedure, online consumer is weak because of lack of evidence, other documentation
and following factors:

119
Section 11 of the Consumer Protection Act, 1986 deals with Jurisdiction of the District Forum.
120
Section 9 –A of the Consumer protection Rules, 1987: Fee for making complaints before District
Forum: Every complaint filed under Section 12(1), Section 17 (1) and Section 21(a) (i) of the
Act shall be accompanied by a fee as specified in the table given below in the form of Demand
Draft drawn on a nationalized bank or through a crossed Indian Postal Order in favour of the
President of the District Forum, Registrar of the State Commission or the Registrar of the
National Commission, as the case may be, and payable at that respective place where the District
Forum, State Commission or the National Commission is situated. The concerned authority shall
credit the amount of fee received by it into the Consumer Welfare Fund of the respective State
Government and in the case of the National Commission, to the Consumer Welfare Fund of the
Central Government. The complainants who are under the Below Poverty Line shall be entitled
for the exemption of payment of fees only on the production of an attested copy of the
Antyodaya Anna Yojana Cards.
Table of Fee
S.No. Total Value of goods or services and the Compensation claimed Amount of fee payable
I. District Forum
1. Upto one lakh Rupees- For complaints who are under the Below Nil
Poverty Line holding Antyodaya Anna Yojana Cards
2. Upto one lakh Rupees- For complaints other than Antyodaya Rs. 100
Anna Yojana Cards
3. Above one lakh and upto five lakh Rupees Rs. 200
4. Above five lakh and upto ten lakh Rupees Rs. 400
5. Above ten lakh and upto twenty lakh Rupees Rs. 500
II. State Commission
6. Above twenty lakh and upto fifty lakh Rupees Rs. 2000
7. Above fifty lakh and upto one crore Rupees Rs. 4000
III. National Commission
8. Above one crore Rupees Rs. 5000

321
1. Consumers in cyberspace are entirely out of scope of the Consumer Protection Act,
1986.
2. If online consumers are impliedly covered under the Consumer Protection Act,
1986, then their position is weak because at the time of online shopping, consumer
does not keep the full information of URL address of websites, date, time of
transaction, website address and the link with which e-Banking transaction is made.
Most of the time consumer is having a billing detail alone. This ignorance or lack of
awareness results in procedural lapses of complaint mechanism.
3. Section 10 of the Consumer Protection Act, 1986 states composition of the District
forum. Keeping in view the influence of Cyber world on every commercial
transaction, there must be one member who is expert in Cyber law in the panel of
District forum.
4. Section 12 and 13 of the Consumer Protection Act, 1986 provides procedure on
admission of complaint in physical commerce. These provisions are not appropriate
for disputes in online world from the perspective of time, speed and advanced
technology. Traditional procedure is not compatible modern Cyber disputes. The
Consumer Protection Act, 1986 is on the lines of Civil Procedure Code, 1908 which
is itself very slow.
5. In the context of the Consumer Protection Act, 1986, District forum is not consumer
friendly. The period of appeal and execution of orders need to be amended for
speedy remedy in Cyber disputes.
6. Most importantly, in the silent world of Internet there are several bogus or fake e-
Commerce websites and spoofed web sites that look alike original web sites (Speak
Asia). In this case where web sites disappear overnights the biggest issue is
determination of certainty of opposite party and to whom summons will be served
and where.

On the other hand, if victimized consumer fills his/her complaint under the Information
Technology Act, 2000, the appropriate authority is Adjudicating Officer 121 (No
provision is available for online consumers and appropriate authority for them under

121
Section 46 of the Information Technology Act, 2000 states Power to Adjudicate under this Act.

322
this Act, however, an appropriate authority to deal with various Cyber frauds is
Adjudicating Officer) with payment of fees 122. After an in-depth analysis of the
Information Technology Act, 2000 (2008) and procedural framework for online
consumers under this Act it is observed that:

1. If a consumer chooses to file remedy under the Information Technology Act, 2000
then the first point is that online consumers are out of purview of this Act. If online
consumers are impliedly covered under this Act then there is lack of procedural
framework.

2. Many Internet consumers risk suffering a violation of their rights—such as paying

for an item that does not get delivered or defective or expired or unsatisfactory or
sub-standard quality—because seeking justice in a physical court for an online
transaction gone awry becomes very difficult and often an impractical undertaking
because of various technicalities involved in resolution of Internet disputes.

3. Under e-Commerce legislation of India no provision is available for appropriate

authority to which online consumer can file his/ her complaint.

122
According to Section 8 of the Information Technology (Qualification and Experience of
Adjudicating Officers and manner of Holding Enquiry) Rules, 2003: Every complaint of a
matter to the Adjudicating Officer shall be accompanied by fee, payable by a bank draft drawn
in favor of “Adjudicating Officer Information Technology Act” at the place of functioning of
Adjudicating Officer in the States or Union Territories, calculated on the basis of the damages
claimed by way of compensation from the contraveners on the rates provided below.

Table of Fees

I. Damages by way of compensation Fees

(a) Upto Rs.10,000 10% ad valorem rounded of to nearest next
Hundred
(b) From 10001 to Rs.50000 Rs. 1000 plus 5% of the amount exceeding Rs.10,000
rounded of to nearest next Hundred
(c) From Rs.50001 to Rs.100000 Rs. 3000/- plus 4% of the amount exceeding Rs. 50,000
rounded of to nearest next Hundred
(d) More than Rs. 100000 Rs.5000/- plus 2% of the amount exceeding Rs. 100,000
rounded of to nearest next hundred
II. Fee for every application Rs. 50/-

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4. At the time of filing complaint application, consumer usually don’t have complete
documentation because they don’t keep record of online transaction, e-mail address,
telephone number, URL address and website record of the vendor at the time of
online shopping.
5. Most of the consumers are not aware about any remedy in case of online cheatings
and those who know they do not want to follow procedural complications.
Therefore, most of the cases go unreported.
6. Most of the web sites demand Credit Card and PIN Number for transfer of amount
of products from customer to vendor and if the sensitive personal information is
misused on unsecure Internet pages, then to prove this fraud with complete
documentation is very difficult.
It is submitted by the researcher that in both the Acts:
1. The crucial issue is the choice of appropriate as well as adequate law in e-
Commerce frauds. No express protection is provided to consumers in Cyber-
marketing. Everything is implied. Not even a single provision is available that
speaks about rights of online consumers and compensatory provisions to victims of
Cyber- marketing either in Consumer protection or in Cyber law of India.
2. The procedural application of consumer protection in Courts under the IT Act, 2000
is highly ignored. Similarly, the protection of online consumers is no where
provided in consumer protection legislations. If practical application of such cases
in courts is seen it is revealed that most of cases are dismissed due to technical and
procedural formalities.
3. If both the Acts (The Consumer Protection Act, 1986 and The Information
Technology Act, 2000 (2008) are given a harmonious construction, even then,
traditionally framed laws for physical commerce are inapplicable to disputes in
cyber commercial transactions because of following reasons:
a. Time, Speed and Nature of fraud
b. Amount of Goods purchased and Jurisdiction of appropriate authority
c. Certainty of identity of parties
d. Procedural formalities in the courts
e. Period of investigation, appeal and execution of orders
f. Compensatory provisions and penal provisions

324
4. Some suggestions have proposed by researcher in the Information Technology Act,
2000 (2008) so as to make it consumer friendly rather than making amendments in
the Consumer Protection Act, 1986 because it is well suited to disputes in physical
commerce.

7.4 UNCITRAL Model Law on Electronic Commerce with Guide to enactment

1996 with Additional Article 5 Bis as Adopted in 1998

7.4.1 Meaning of the United Nations Commission on International Trade Law

UNCITRAL is the United Nations Commission on International Trade Law. It has been
established by the U.N. in 1996 to harmonize the law of international trade; it is a core
legal body of the United Nations system that works to create accessible, predictable and
unified commercial laws. The Commission is composed of 36 member states elected by
the General Assembly, who are chosen to represent the world’s various geographic
regions and its principle economic and legal system. Members are elected for terms of
six years, with the term of half the members expiring every three years. The
UNCITRAL Secretariat is located in Vienna and carries out its work in annual sessions,
which are held in alternate years in New York and Vienna. 123 The objective of
providing a brief overview of index of UNCITRAL Model Law, 1996 in this research is
to highlight the fact that India has borrowed its e-Commerce laws from UNCITRAL
Model Law 1996. The United Nations Commission on International Trade Law
(UNCITRAL) adopted the Model Law on Electronic Commerce in 1996. This Model
Law provides for equal legal treatment of users of electronic communication and paper
based communication. India being signatory to it has to revise its laws as per the said
Model law.

7.4.2 Need for formulation of UNCITRAL Model Law 1996

The decision by UNCITRAL to formulate model legislation on electronic commerce

was taken in response to the fact that in a number of countries the existing legislation
governing communication and storage of information was inadequate or outdated in the

123
Retrieved from <http://www.uncitral.org.> visited on 6 January, 2013.

325
lap of ‘Cyber Revolution’. The lack of legislation in many countries in dealing with e-
Commerce as a whole has resulted in uncertainty as to the legal nature and validity of
information presented in a form other than a traditional paper document. The purpose of
Model law was to offer legislators of various countries a set of internationally accepted
rules as to how a number of such legal obstacles may be removed, and how a more
secure legal environment can be created for electronic commerce. The Model law seeks
to permit States to adapt their domestic legislation to developments in communication
technology applicable to trade law without necessitating the removal of the paper-based
requirements themselves or disturbing the legal concepts and approaches underlying
those requirements. The Model law, thus, relies on a new approach known as the
‘functional equivalent’ approach which is based on an analysis of the purposes and
functions of the traditional paper based requirement with a view of determining how
those purposes or functions could be fulfilled through electronic commerce
techniques.124 The drafters of the Model law had considered the impracticability of
enacting its entire text as a single statute in all countries. Depending upon the situation
in each enacting State, the Model law can be implemented in various ways: either as a
single statute or in several pieces of legislation. India opted to enact it as one statute
called the ‘Information Technology Act, 2000’.125 Keeping in view the urgent need to
bring suitable amendments in the existing laws to facilitate e-Commerce and with a
view to facilitate Electronic Governance, the Information Technology Bill was
introduced in the Parliament and having been passed by both the Houses of Parliament,
it received the assent of the President on 9th June, 2000. It came on the statue book as
the Information Technology Act, 2000 (21 of 2000). It came into force on 17th October,
2000.126 An overview of all the provisions of UNCITRAL Model Law 1996 has been
given.

124
Guide to Enactment of the Model Law on Electronic Commerce, available at <http://www.
uncitral.org/english/texts/electcom/ml-ec.htm> visited on 8 January, 2013.
125
C.M. Abhilash, “E-Commerce Law in Developing Countries: An Indian Perspective”,
Information & Communication Technology Law, Vol. 11, No. 3, 2002, pp. 269-281 at p. 270.
126
Introduction given in the Bare Act of the Information Technology Act, 2000.

326
 Table 1: UNCITRAL Model Law on Electronic Commerce 1996

PART ONE: ELECTRONIC COMMERCE IN GENERAL

Total Parts : 2
Total Chapters : 4
Total Articles : 17
Chapter I General Provisions
Article 1 Sphere of application
Article 2 Definitions
Article 3 Interpretation
Article 4 Variation by agreement
Chapter II Application of legal requirements to data messages
Article 5 Legal recognition of data messages
Article 5 bis. Incorporation by reference
Article 6 Writing
Article 7 Signature
Article 8 Original
Article 9 Admissibility and evidential weight of data messages
Article 10 Retention of data messages
Chapter III Communication of data messages
Article 11 Formation and validity of contracts
Article 12 Recognition by parties of data messages
Article 13 Attribution of data messages
Article 14 Acknowledgement of receipt
Article 15 Time and place of dispatch and receipt of data messages
PART TWO: ELECTRONIC COMMERCE IN SPECIFIC AREAS
Chapter I Carriage of Goods
Article 16 Actions related to contracts of carriage of goods
Article 17 Transport documents

It is observed that the Model Law is divided into two parts, Part- I deals with electronic
commerce in general and the Part- II deals with electronic commerce in specific areas.
The Part two of the Model Law, which deals with electronic commerce in specific
areas, is composed of a chapter I only, dealing with electronic commerce as it applies to
the carriage of goods. Other aspects of electronic commerce need to be dealt with in the
future, and the Model Law can be regarded as an open-ended instrument, to be
complemented by future work. UNCITRAL intends to continue monitoring the
technical, legal and commercial developments that underline the Model Law.

327
7.5 Comparative Study of the Information Technology Act, 2000 (2008) and the
UNCITRAL Model Law 1996: An Observation

This Model Law, 1996 focuses on commercial law reforms and creating model
commercial laws that enhances the use of paperless communication. In 2001 a Model
Law on Electronic Signatures came into existence. It has played a leading role in
developing model laws for secure and reliable e-Commerce transactions. The
Information Technology Act, 2000 is a commendable piece of legislation for India and
is a step in the right direction. It upholds the spirit of the UNCITRAL Model law. India
has borrowed its e-Commerce law from it; however, it is observed that even in
UNCITRAL Model Law, there is no provision for consumer protection in online
shopping, regulation of e-Commerce websites and regulatory legal mechanism for
compensation to consumers. The Model Law does not go beyond to solve the
jurisdictional questions, legal requirements to data message and communication of data
messages. It is submitted that the Model law is not intended to cover every aspect of the
use of electronic commerce. Hence, there are many more substantive areas that need to
be addressed like Consumer Protection, Data Privacy, Spamming, Intellectual property,
Online Banking transactions, online taxation, adequate online dispute redressal
mechanism etc., etc.

A brief comparative study has been made between the Information Technology Act,
2000 (2008) and the UNCITRAL Model Law, 1996. It is seen that the major aim of
these legislations is to recognize e-documents and e-transactions in e-Governance and
e-Commerce. No protection is afforded to consumers in online commerce or online
shopping. It is submitted that consumer faces severe challenges from the ‘e-revolution’
ushered by the Internet with regard, inter alia, to virtual commercial communications,
contracts concluded without face-to-face negotiation at a distance and e-Banking
transactions. The applicability and effectiveness of traditional rules of consumer
protection in the online environment is limited. 127 With the development of an invisible
world, in which consumers from all corners of the globe do business, difficulties in
implementing traditional law are aggravated. Traditional policies of consumer

127
Hossein Kaviar, “Consumer Protection in Electronic Contracts”, International Arab Journal of
e-Technology, Vol. 2, No. 2, June 2011, pp. 96-104 at p. 96.

328
protection are not suitable for the Internet age and it is need of the time to make suitable
amendments in Indian Legal Jurisprudence. Therefore, in Indian Jurisprudence a strong
legislation is required for the protection of rights of consumers in e-marketing for online
shopping.

7.6 Critical Analysis of the Information Technology Act, 2000 (The Information
Technology (Amendment) Act, 2008

e-Commerce is the latest entrepreneur bandwagon in India. Thousands of e-Commerce

portals have emerged during the year 2008-2012 and an atmosphere of cyber marketing
has been introduced in India. e-Commerce blue print captures full spectrum of business
processes that are being redefined and improved by leveraging the Internet and its
associated technologies towards success. However, in the zest of earning profit, legal
and compliance requirements pertaining to e-Commerce have been totally ignored.128 A
facilitative and legal framework is sine qua non for the promotion and development of
technology like electronic commerce. Besides developing the e-infrastructure in the
country through effective Telecom Policy measures, the Indian Government must take
appropriate steps for trust and confidence building measures for the growth of e-
Commerce. 129 There are many important issues which are critical for the success of e-
Commerce that have not been covered under the Information Technology Act, 2000 as
well as the Information Technology (Amendment) Act, 2008.

7.6.1 Lack of regulation of e-Commerce websites in Indian Cyber market

Lack of an effective Cyber law and Cyber law skills among the law enforcement
agencies of India is resulting in cyber frauds through the medium of e-Commerce
websites in India. Moreover, Cyber law awareness among online consumers is also
missing that has increased e-Commerce frauds in India. Some of these frauds are
highlighted as under:

128
Retrieved from <http://www.electroniccourts.in> visited on 17 June, 2013.
129
Sumanjeet Singh, “e-Commerce Laws in the Indian Perspective”, Retrieved from
<http://www.smsvaranasi.com/insight/e-commerce_laws_in_the_indian_perspective.pdf>
visited on 18 June, 2013.

329
1. The e-Commerce websites that are selling adult merchandise are openly violating
the laws of India.
2. e-Commerce websites engaged in punishable soft porn publication are ignored by
law enforcement agencies.
3. There are well framed legal requirements to start an e-Commerce website and e-
Commerce business in India. But as on date, e-Commerce websites are not
following these legal requirements.
4. e-Commerce websites dealing with online pharmacies, online gambling are clearly
and continuously violating the Cyber laws of India.
5. ‘Cyber Law Due Diligence’ and ‘Cyber Security Diligence’ in India are two fields
that are not taken seriously. Under the Information Technology Act, 2000 there are
many “Due Diligence Requirements” that Banks, Internet Service Providers (ISPs),
Search engines, e-Commerce Portals etc. must fulfill. The e-Commerce websites
must ensure cyber law due diligence in India. However, these due diligence
requirements are not followed till some criminal prosecution takes place.
6. The only law governing online issues of e-Commerce in India is the Information
Technology Act, 2000. It mandates that the e-Commerce entrepreneurs and owners
must ensure ‘Cyber Law due Diligence’ in India. The Cyber law of India has
express provisions for both Civil and Criminal liabilities for “Non Observance of
Due Diligence”. Lack of awareness about Cyber law of India as well as lack of
implementation of Cyber Law Due Diligence Requirements is the main reason of
ignorance of its application.130

The legal requirements for undertaking e-Commerce in India must be in compliance

with the IT Act, 2000, the Contract law, 1872, Indian Penal Code, 1860, the Companies
Act, 1954 and Banking legislations etc. Further, online shopping in India must be in
compliance with the banking and financial norms applicable in India.131 The fact is that
most of e-Commerce web sites are ignorant about these requirements. In India, for
Cyber Security Due Diligence for Banks, Reserve Bank of India (RBI) has recently

130
Retrieved from <http://perry4law.org.> visited on 17 June, 2013.
131
Retrieved from <http://corporatelawsforindia.blogspot.in/2012/04/legal-formalities-required-for-
starting.html> visited on 20 July, 2013.

330
constituted the Working Group on Information Security, KYC (Know Your Customer)
Guidelines, Electronic Banking, Technology Risk Management and Cyber Frauds
(Working Group). RBI has also been taking non compliance of its recommendations
seriously and imposed penalty upon commercial banks for not following prescribed
standards. Similar dedication is also required regarding the recommendations issued by
RBI for ensuring cyber security infrastructure by Indian banks. 132

7.6.2 Absence of Consumer Protection and Compensatory provisions to online

consumers in e-Commerce laws of India

The nature of e-Commerce is conducive to creating a context in which disputes are

more likely than in face-to-face transactions. These disputes must be resolved in an
economically efficient manner, employing processes that the participants to the dispute
accept as fair. In the “real world” there are plethora of consumer protection regulations
and judicial processes that protect the consumers from the full market forces of sellers.
In addition, the market forces are restrained in terms of standard form of contracting
possibilities. Mercantile excesses through standard form contracts unreasonably shift
liability to consumers or impose obligations on consumers. In the ‘real world’ through
consumer protection legislation and courts, governments are willing to reform consumer
contracts to conform to reasonable consumer expectations, however, in online
contracting several issues are still unresolved. Moreover, no mandatory protection has
been provided to consumers against offences like Phishing, Pharming, Cyber Money
laundering, ATM Frauds and other financial frauds wherein innocent consumers are
cheated and defrauded. Exploitation of the rights of e-consumers in online shopping has
grown from a cesspool into a huge Iceberg like: Fake e-Advertisements, Defective
delivery of goods, Extra charges, Delay delivery of products and many more
sophisticated frauds. One of the characteristics of online frauds is that these are
transnational and faceless unlike the conventional crimes. Often investigations end up in
vacuum due to the very nature of these frauds and for the lack of effective legislative
framework in combating the same. In the relatively brief “history” of e-Commerce,

132
Retrieved from <http://www.electroniccourts.in/blog/?p=449> visited on 4 July, 2013.

331
courts have not responded to the needs of e-commerce in a manner that kept pace with
the need for e-Commerce to be governed by settled principles of law. 133

7.6.3 Growth of e-Commerce without effective e-Commercial Legal Mechanism (e-

Justice) is a distant dream

The most significant aspect of the Internet is the economic phenomenon of e-

Commerce, that is, the purchase and sale of goods and services using the Internet. The
ability of buyers to instantly shop and compare among legions of competing sellers
throughout the world, coupled with the ability of vendors to quickly and inexpensively
market to millions of potential consumers, makes e-Commerce extremely efficient and
desirable. Despite advantages that e-Commerce offers, increased Internet sales activity
also brings with it an increase in Internet legal disputes.

e-Commerce without e-Justice is irrelevant. These e-Commerce disputes must be

resolved efficiently, fairly and securely so that online consumers can place full
confidence in e-Commerce markets. The Internet must be viewed as a trustworthy
online global marketplace fully operating under the rule of law. For this to occur, the
principles of fairness, accessibility and equity available in most physical courts must
also be within reach for disputes arising out of online transactions. If e-Commerce
disputes cannot be resolved efficiently, then many of the economic and convenience
advantages of e-Commerce will be threatened due to legal enforcement risks and
resulting business uncertainties. It is need of hour to adapt to pre-Internet legal systems
to adjudicate post-Internet online legal disputes. 134

The fact is that traditional litigation, in a physical court chosen by either the online
seller or the online buyer, is rarely the optimum forum for resolving an online dispute,
especially if the item purchased was relatively cheap. The average online transaction
(online shopping) amount ranges from 100 to 1 Lakh Rupees because most of the

133
Llewellyn Joseph Gibbons, “Creating a Market for Justice; a Market Incentive Solution to
Regulating the Playing Field: Judicial Deference, Judicial Review, Due Process, and Fair Play in
Online Consumer Arbitration”, Northwestern Journal of International Law & Business, Volume
23, Issue 1, Fall, 2002. Retrieved from <http://scholarlycommons.law.northwestern.edu/ njilb>
visited on 4 July, 2013.
134
Fred Galves, “Virtual Justice as Reality: Making The Resolution of E-Commerce Disputes More
Convenient, Legitimate, Efficient, And Secure”, Journal of Law, Technology & Policy, Vol.
2009. Retrieved from <http://jltp.uiuc.edu/archives/Galves2.pdf> visited on 4 July, 2013.

332
products include small products to laptops and electronics. A traditional lawsuit is often
not an economically worthwhile endeavor for an aggrieved party; given the significant
time and cost involved in such a lawsuit. Traditional litigation in a physical court to
resolve an online dispute typically ends up subjecting disputants to comparatively
expensive, inefficient and time-consuming lawsuits, often with unpredictable or
unsatisfactory results. Without a truly accessible and cost-effective legal system to
resolve disputes arising out of online transactions, e-Commerce participants’ end up
having to buy and sell at their own peril, relying principally on the good-faith
performance of their Internet transaction counterparts or on the vagaries of antiquated
pre-Internet legal systems. Consequently, many Internet consumers risk suffering a
violation of their rights-such as paying for an item that does not get delivered or
defective or expired or unsatisfactory, substandard quality- because seeking justice in a
physical court for an online transaction gone awry becomes a very difficult and often an
impractical undertaking. Moreover, some consumers choose not to enter e-Commerce
markets at all and instead choose to conduct all of their transactions exclusively in
traditional physical or non-Internet markets.135

After years of indifference the cyber security policy of India has been finally released
by the Government of Indian. 136 The Central Government has declared the National
Cyber Security Policy (NCSP), 2013 on 2 July, 2013. This policy includes the National
Critical Information Infrastructure Protection Centre (NCIPC), National Cyber
Coordination Centre (NCCC), National Intelligence Grid etc. Some of the areas covered
by the policy include: (1) Cyber Security Skills Development, (2) Cyber Crisis
Management Plan, (3) Critical Infrastructure Protection, (4) Preferential Treatment to
Domestic Hardware Software, (5) Security Issues of its Equipments, (5) Engaging in
public private partnerships to strengthen cyber security of India, (7) Cyber Warfare, (8)
Cyber Terrorism, (9) Cyber Espionage and (10) Protecting Information and building
capabilities to prevent cyber attacks.137 It has also rightly touched the aspects of global

135
Junghyun Kim and Robert LaRose, “Interactive E-Commerce: Prompting consumer efficiency
or Impulsivity?”, JCM, Vol. 10, No. 1, November, 2004. Retrieved from <http://jcmc.
indiana.edu/vol.10/issue/kim-larose.html> visited on 23 March, 2009.
136
Retrieved from<http://technolegalthoughts.wordpress.com/2013/07/03/cyber-security-policy-of-
India-released-but-experts-doubt-its-effectiveness/> visited on 20 July, 2013.
137
Announcement of Cyber Security Policy of India 2013 in The Tribune, Chandigarh, 2 July,
2013.

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co-operation and coordination in the cyber security field. The objectives of the NCSP,
2013 include creation of a ‘Cyber Ecosystem’ in the country, encouraging open
standards, strengthening of regulatory framework, securing e-governance services,
critical infrastructure protection, promotion of research and development in cyber
security, spreading cyber security awareness, providing fiscal benefits to businesses for
adoption of standard security practices and processes, developing effective public
private partnerships and collaborative engagements through technical and operational
cooperation. The policy calls for developing a dynamic legal framework and
periodically reviewing it to address the cyber security challenges arising out of
technological developments in cyber space. The policy plans to operate as 24X7
national level computer emergency response team to function as a nodal agency for
coordination of all efforts for cyber security emergency response and crisis
management.138 It has incorporated many good policy decisions that can go a long way
in improving the cyber security of India. However, till it is made operational and is
actually implemented, it would remain mere paper work. Thus, the real challenge is to
make the National Cyber Security Policy, 2013 operational at the ground level. In India
there are very few cyber security institutions 139 that have the capability to effectuate the
ambitious cyber security policy of India. Similarly, there are many more techno- legal
and social issues that a good and holistic cyber security policy must incorporate. This
NCSP Policy, 2013 is focused on several major issues except consumer concerns in
cyberspace.

7.6.4 Absence of Well-Informed and Structured Online Dispute Resolution

Mechanism for victimized e-Consumers

The continued high growth rate of e-Commerce is likely to be compromised if online

purchasers are not protected within a legal construct that generates confidence in the
Internet. Therefore, the rule of law must keep pace with the growth of the Internet so
that online consumers can have full confidence in the legitimacy of e-Commerce, and

138
Retrieved from<http://perry4law.org/cecsrdi> visited on 20 July, 2013.
139
For instance, Perry4Law and PTLB (Perry4Law Techno-Legal Base) are managing the
exclusive techno legal cyber security research and development centre of India. The cyber
security infrastructure of India must be established in true sense keeping in mind the
sophisticated cyber attacks that are originating from nations well equipped to launch cyber
warfare. If only Indian government hire and retain talented techno legal experts and institutions,
the cyber security policy may be actually implemented as well.

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the realistic ability to pursue a practical and effective legal recourse whenever
necessary. 140 It is argued that best way to resolve e-Commerce disputes involves using
the very convenient and efficient mode in which these transactions are made in the first
place that is- the Internet. Online Dispute Resolution (ODR) can solve many intractable
cost and inefficiency problems associated with trying to adjudicate e-Commerce
disputes using traditional litigation in physical courtrooms. ODR can offer online
buyers and sellers the necessary confidence, convenience, fairness and security to
support the growth and stability of e-Commerce. The methods of Online Dispute
Resolution include cyber-negotiation, cyber-mediation and cyber- arbitration. In India
websites such as Cybersettle (http://www.cybersettle.com), Settlement Online (http://
settlementonline.com), ClickNsettle (http://www.clicknsettle.com), Smartsettle (http://
www.smartsettle.com), Mediate.com (http://www.mediate.com), Onlinearbitrators.com
(http://onlinearbitrators.com), T.V. channel CNBC AWAAZ PEHREDAR (pehredar@
network18online.com) offer services that are entirely online and focus on negotiating
as well as mediating monetary settlements and online consumer disputes. Indian
Council of Arbitration (http://ww.icaindia.co.in) has panel of well-known arbitrators,
mediators and conciliators. The bitter fact is that these modes are not so popular as well
as people are less aware about these modes of online dispute resolution. The Internet
must be perceived as a safe and legitimate global marketplace, where buyers and sellers
can have meaningful access to competent and convenient legal enforcement
mechanisms that adequately protect their legal rights and minimize their economic
risks. Because traditional litigation in physical courtrooms is often expensive in these
types of cases, aggrieved parties often choose to forego their legal remedies because a
formal lawsuit is just not worth it. Therefore, a comprehensive ODR system should be
embraced because it is uniquely adapted to fairly and efficiently resolve e-Commerce
disputes in an accessible, cost-effective online forum that overcomes the physical and
cost barriers associated with traditional litigation.141

140
Fred Galves, “Virtual Justice as Reality: Making The Resolution of E-Commerce Disputes More
Convenient, Legitimate, Efficient, And Secure”, Journal of Law, Technology & Policy, Vol.
2009. Retrieved from <http://jltp.uiuc.edu/archives/Galves2.pdf> visited on 4 July, 2013.
141
Retrieved from<http://jltp.uiuc.edu/archives/Galves2.pdf> visited on 4 July, 2013.

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In India several consumer groups have taken this problem seriously and come up with
organizations to make shopping on the Internet a safe experience. To raise one voice
against online frauds they have formed online portals to listen to the complaints of
consumers. Anyone can log in and submit complaint with complete facts and
documentation. Some of the leading National level, Non-Government and Non-Profit
Organizations working in India are: http://www.nationalconsumerhelpline.in,
http://www.consumerdaddy.com,http://www.indianconsumers.org, http://www.core.
nic.in, http://www.legalhelpindia.com, http://www.cag.org. This Online Dispute
Resolution Mechanism must be taken seriously and strengthened for the resolution of
various Internet frauds. By providing the appropriate incentives, Government must
encourage the private sector to create ODR policies 142 and procedures that are fair,
comport with due process and build e-Consumer confidence.

The primary reason for failure of many e-Commerce websites offering various
commercial services has been lack of faith among online consumers. One of the fears of
the online consumer is whether the online institution is trustworthy. After all, if online
consumer is agreeing to arbitrate through an ODR institution, the very thought that the
online arbitrator’s decision would be binding on the person and can be enforced as a
decree of the Court, is in itself very scary. The parties would never physically see the
arbitrator and there is always an apprehension of partiality and bias. It is, therefore,
must that the ODR institution is able to generate e-trust and e-confidence among the
online consumers.143 Towards this effort ODR services must follow some following
guidelines144: (1) All information and disclosures should be accurately and completely
stated to parties, (2) ODR should disclose the minimum basic information like
organizational information, terms, conditions, disclaimers for the service, explanation of
services and pre-requisite for use of service like geographical location or membership
etc. (3) Disclosure as to the costs for the process and what portion of the cost each party

142
Llewellyn Joseph Gibbons, Retrieved from <http://scholarlycommons.law.northwestern.
edu/njilb> visited on 4 July, 2013.
143
Devashish Bharuka, “Online Dispute Resolution” in S.K. Verma and Raman Mittal (edited),
Legal Dimensions of Cyberspace, The Indian Law Institute, New Delhi, 2004, pp. 306-322 at p.
318.
144
American Bar Association Task Force on E-Commerce and ADR proposed Guidelines and
Recommended Best Practices by ODR Service Providers to assist consumers for asking an
informed and intelligent decision.

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will bear are necessary, (4) In order to reveal impartiality this mechanism must unwrap
its relationship with other organizations to online consumers, (5) ODR institutions must
give their Privacy, Confidentiality, Members of Panel, Neutrality of Members,
Qualification and experience of its members and (6) It must explain jurisdiction where
complaints can be brought, and any relevant jurisdictional limitations.

7.7 Conclusion
From a rural and agriculture dominated entity, India has travelled a long journey on the
Information Superhighway. The need of establishment of an effective and technology-
centric law and enforcement regime led to the creation of Cyber law in the country. An
analysis of the e-Commercial laws reveals that the Information Technology Act, 2000
(2008) is a boon to the online business transactions. Much before the reporting of
Cybercrimes in India, electronic commerce flourished with considerable speed. As the
Internet is a multidimensional junction of online commerce that involves so many legal
issues like: e-Contracts, e-Banking, rights of online consumers and authenticity of e-
Commerce websites, therefore, a lethargic approach has given India a setback in the
area of online commercial activities. The Cyber Law of India is technology centric and
not much attention is given to commerce and economy in this legislation. The IT
(Amendment) Act, 2008 has given importance to Cybercrimes and their magnitude of
hazards to the security of India. The concern for consumer protection in online
commercial activities has highly been ignored in this law. In the absence of sound legal
framework e-Commerce cannot create a success story in India. Indian Government must
give attention to the fact that for safe and secure business environment in cyberspace, a
sound legal framework is needed. It is suggested that court systems and e-Commerce
participants should incorporate Online Dispute Redressal Mechanism as a modern
justice system for online transactions wherein consumers are victims of e-Commerce
frauds.

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