Law Relating To Consumer Protection: Business Law For Managers P.K. Goel Biztantra

Chapter 6
Law Relating to Consumer

Protection
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Business Law for Managers P.K. Goel Biztantra Copyright©2010, P.K. Goel
""Don't agonise; organise."
- Florynce R. Kennedy
CHAPTER OBJECTIVES
The chapter on the law relating to consumer protection will present the legal principles for safeguarding the
interests of the consumer. A consumer needs to be protected from unfair trade practices or restrictive trade
practices followed by the traders and manufacturers for the purpose of promoting sale, use or supply of goods
or for the provision of any services. After reading the chapter you should be able to understand:
• The objects of the Consumer Protection Act, 1986.
• Who is a consumer and a complainant?
.Eat is the meaning of terms like goods, services, complaint, defect, efficiency, consumer dispute and person?
• I ~at is a restrictive trade practice and an unfair trade practice?
• What are the various consumer disputes redressal agencies and their
• monetary jurisdiction?
• The manner of making a complaint.
• The procedure on admission of complaint.
• a Points clarified by decisions of the Consumer Courts/Supreme Court.
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6.1 Introduction
In India with industrialization and economic development, the

population of consumers and the volume of consumption of goods and
services increased. The Contract Act, 1872 and the Sale of Goods Act, 1930
provided remedies but they were time consuming and expensive.
Consumer issues started gaining importance. The interests of consumers
were highlighted by media, non government organizations, social
activists and even business concerns. The United Nations organized a
session on the need for the protection of consumers. The government of
India also realized that consumers need to be protected by law. The law
relating to consumer protection is contained in the Consumer Protection
Act, 1986 (in short the Act). The Act extends to the whole of India except
the state of Jammu and Kashmir.
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6.2 Objects of the Act
The objects of the Act are as follows:
a. Better Protection of Interests of Consumers: The Act seeks to provide
consumer councils and authorities for settlement of consumer
disputes.
b. Protection of rights of Consumers: The Act seeks to promote and
protect the
rights of consumers such as:
i. The right to be protected: against marketing of goods and
services which are hazardous to life and property.
ii. The right to be informed about the quality, quantity, potency,
purity, standard and price of goods and services so as to protect
the consumers against unfair trade practices.
iii. The right to be assured: where ever possible, access to goods
and services at competitive prices.
iv. The right to be heard: and to be assured that consumer's
interest will receive due consideration at appropriate forums.
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c) Consumer Protection Councils: The above said objects are sought to be
promoted and protected by the consumer protection councils established at
the central, state 'and district levels.
d) Quasi-judicial machinery for speedy redressal of consumer disputes: The Act
seeks to provide speedy and simple redressal to consumer disputes. For this
purpose the following consumer disputes redressal agencies are envisaged:
i. District Forums: at district level.
ii. State Commissions: at State level.
iii. National Commission: at Central or National level.
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6.3 Meaning of Some Important and
Relevant Terms
6.3.1 Consumer
According to the Act, "Consumer means any person who:
a. Buys any goods for consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred
payment and includes any user of such goods other than the person
who buys such goods for consideration paid or promised or partly
paid or partly promised or under any system of deferred payment
when such use is made with the approval of such person, but does
not include a person who obtains such goods for resale or for any
commercial purpose; or
b. hires or avails of any services for a consideration which has been paid
or promised or partly paid or partly promised, or under system of
deferred payment and includes any beneficiary of such services other
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c. than the person who hires or avails of the services for consideration
paid or promised or partly paid and partly promised, or under any
system of deferred payment, when such services are availed of with
the approval of the first mentioned person but does not include a
person who avails of such services for any commercial purpose".
"Commercial purpose does not include use by a person of goods bought
and used by him and services availed by him exclusively for the purposes
of earning his livelihood by means of self-employment".' To put briefly
consumer is a person who buys any goods or hires or avails of any services
for a consideration,
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6.3.2 Goods
As per the Act "Goods mean goods as defined in the Sale of Goods Act,
1930.2 According to the Sale of Goods Act, "'Goods' means every kind of
moveable property other than actionable claims and money; and includes
stocks and shares, growing crops, grass and things attached to or forming
part of land which are agreed to be severed before sale or under the
contract of sale". 3
6.3.3 Services
According to the Act, "'Service' means service of any description which is
available to potential users and includes, but not limited to, the provision
of facilities in connection with banking, financing, insurance, transport,
processing, supply of electrical or other energy, board or lodging or both,
housing construction, entertainment, amusement or the purveying of
news or other information, but does not include the rendering of any
service free of charge or under a contract of personal service."!
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6.3.4 Complainant
According to the Act, "Complainant means-
a. a consumer; or
b. any voluntary consumer association registered under the companies
act, 1956 or under al1lY other law for the time being in force, or
c. the central government or any state government;
d. one or more consumers, where there are numerous consumers
having the same interest;e) in case of a death of a consumer, his legal
heir or representative; who or which makes a complaint. »s
6.3.5 Complaint
'Complaint' means any allegation in writing made by a complainant with
a view to obtaining any relief under the Act.
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6.3.6 Restrictive Trade Practice
According to the Act "Restrictive trade practice means a trade practice

which tends to bring about manipulation of price or its conditions of
delivery or to affect flow of supplies in the market relating to goods or
services in such a manner as to impose on the consumers unjustified costs
or restrictions and shall include:
a. delay beyond the period agreed to by a trader in supply of such goods
or in providing the services which has led or is likely to lead to rise in
the prices;
b. any trade practice which requires a consumer to buy, hire or avail of
any goods or, as the case may be, services as condition precedent to
buying, hiring or availing of other goods or services.:"
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6.3.7 Unfair Trade Practice
Unfair trade practice means a trade practice, which, for the purposes of
promoting the sale, use or supply of any goods or for the provision of any
service, adopts any unfair method or unfair or deceptive practices." The
Act also lists out some of the practices as unfair trade practice, like
misleading advertisements and making of false statements, permitting
publication of any advertisement for the sale at a bargain price that are
not intended to be offered for sale at bargain price, or permitting the
offering of gifts and prizes with the intention of not providing them or
with holding gifts/prizes after declaration of result of the scheme, or not
conforming to prescribed standards or hoarding of goods or
manufacturing of spurious goods.
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6.3.8 Defect
A 'defect' is defined to mean any fault, imperfection or shortcoming in
the quality, quantity, potency, purity or standard which is required to be
maintained under any law or contract."
6.3.9 Deficiency
It is defined to mean any fault, imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance which is required to be
maintained under any law or contract."
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6.3:10 Person
The expression 'person' for the purposes of the Act shall include:
a. a firm· whether registered or not;
b. a hindu undivided family;
c. a co-operative society;
d. every other association of persons whether registered under the
Societies Registration Act or not.
6.3.11 Consumer Dispute

It means a dispute where the person against whom a complaint has been
made, denies or disputes the allegations contained in the complaint."
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6.4 Manner of Making a Complaint
A complaint can be made by any complainant in relation to any goods

sold, delivered or agreed to be sold or delivered or any service provided or
agreed to be provided. Complaint shall be filed along with fees as
prescribed. Fees prescribed is very nominal. Admissibility of the
complaint shall ordinarily be decided within twenty one days of the
receipt of complaint. A complaint may be proceeded with or
rejected. However before rejection, an opportunity to be given to the
complainant for hearing.
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6.5 Procedure on Admission of Complaint
If a complaint relates to any goods, a copy of the admitted complaint
should be given to the opposite party within 21 days for him to give his
version within thirty days. If the opposite party denies or disputes the
complaint or fails or omits to take any action within the time given,
(Initial 30 days and can be extended by 15 days) then the complaint shall
be proceeded further. If the defect in goods needs analysis or testing by a
laboratory, a sample of the goods shall be sent to the laboratory for a
report within forty five days. The fees for the laboratory test shall be
payable by the complainant. The report of the laboratory test is given to
the opposite party. If any of the parties disputes the correctness of the
laboratory test report, the objections to such report shall be made in
writing. A reasonable opportunity of being heard shall be given regarding
the objections made in relation to laboratory test. If the complaint relates
to any services or in respect of goods where laboratory report is
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not required, then a copy of the complaint is referred to the opposite
party directing him to give his version within a period of thirty
days. This can be extended by fifteen days. If the opposite party does not
file any reply .the complaint shall be decided exparte. If the opposite
party, denies or disputes the allegations made in complaint, the matter
will be decided on the basis of evidence adduced by the complainant and
the opposite party. Every complaint shall be heard expeditiously and
endeavour shall be made to decide the complaint within. three months
when it does not require analysis or testing by any laboratory and within
five months if it requires analysis or testing of commodities."
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6.6 Findings
The following orders can be made by the consumer dispute redressal
agency:
a. to remove the defect - pointed out by the appropriate laboratory
from the goods in question;
b. to replace the goods - with new goods of similar description which
shall be free from any defect;
c. to return to the complainant the price - or, as the case may be, the
charges paid by the complainant;
d. to pay compensation - to the consumer for any loss or injury suffered
due to
the negligence of the opposite party. However the consumer disputes
redressal agency shall have the power to grant punitive damages in
such circumstances as it deems fit;
e. to remove the defects in goods or deficiencies in services - in
question;
f. to discontinue the unfair trade practice or the restrictive trade
practice - or not to repeat them;
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g) not to offer hazardous goods for sale;
h) to withdraw the hazardous goods - from being offered for sale;
i) to cease manufacture of hazardous goods - and to desist from
offering services which are hazardous in nature;
j) to pay such sum - as may be determined by it, if it is of the opinion
that loss
or injury has been suffered by a large number of consumers who are
not identifiable conveniently. However, the minimum amount of
sum so payable shall not be less than five percent of the value of such
defective gods sold or services provided as the case may be to such
consumers. It may also provide that the amount so obtained shall be
credited in favour of such person and utilized in such manner as may
be prescribed;
k) to issue corrective advertisement - to neutralize the effect of
misleading advertisement at the cost of the opposite party
responsible for issuing such misleading advertisement;
l) to provide for adequate costs - to parties.'?
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6.7 Miscellaneous
The act also lays down provisions regarding the following;

a. protection of action taken in good faith 13
b. power to make rules by the central government or by the state
governments.“ and laying of such rules before parliament/ state
legislature."
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6.8 Some decisions of National Commission/Supreme
Court
a. Doctors are within the purview of the Act.
b. Government hospitals/health centres/dispensaries where services are
rendered free of charge to all the patients, the provisions of the Act do not
apply. The Supreme Court did not agree with the contention that the expenses
of running the said hospitals are met by appropriation from the Consolidated
Fund which is raised from the taxes paid by the tax payers."?
c. Under the Act, damages are payable only if there is 'negligence' of the opposite
party. IS Employees of Bank of Baroda, Calcutta, resorted to a strike, in
opposition to a scheme of transfer of its employees. The striking employees
created barricades by forming a human wall before the bank. The customers
were prevented from entering the bank for 54 days. The customers had
suffered losses, which included loss of interest. The Supreme Court ruled that
the shortcoming in the service by bank did not arise due to failure on the part
of bank in performing its duty or discharging its obligations as required by
law."
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d) Where the opposite party failed to file written objections within the
time allied, it could not be denied the privilege of oral submissions
before the Forums. The National Commission gave the reason that
the opposite party should not be deprived of its natural and legal
right to put forward its defence."
e) Provident fund subscribers are also consumers."
f) Wearing of jewellery on body of person included in luggage, being in
his charge during travel in Railway. Gold chain snatched by
miscreants while traveling in reserved compartment. It was held that
there was deficiency in service on the part of Railways."
g) A Statutory Authority developing land or constructing a house, is
like a builder or a contractor, if the service is defective, then it would
be an unfair trade practice.“
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Copyright©2010, P.K. Goel
i) Nursing home had no proper arrangements to meet emergency and
not properly equipped, it is deficient in service. When forceps
delivery was done in haste which caused hemorrhage and no attempt
was made to stop profuse bleeding,
it was held that there was negligence and deficiency in medical care."
j) Deceased was insured under the Salary Savings Scheme from L.1.c.
Employer failed to deduct the premium from the salary of the
employee. As a result policy lapsed. It was held that the complainant
(wife of the deceased) in entitled to claim the insurance amount
from the employer Y
k) When there is a delay in delivery of motor vehicle and there is
unauthorized escalation in price, consumer is not liable to pay."
l) Complainant applied for allotment of a flat under a scheme of
Housing Board and made full payment. Possession of the flat was
not given as per the scheme. The contention of the Housing Board
that the scheme was given up due to unavoidable reasons and the
option given to the complainant to opt for another
scheme is not valid. It was held that there was a deficiency in service'
on the part of the Housing Board."
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Chapter 6

Law Relating to Consumer

In India with industrialization and economic development, the

According to the Act "Restrictive trade practice means a trade practice

6.3.11 Consumer Dispute

A complaint can be made by any complainant in relation to any goods

The act also lays down provisions regarding the following;

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