You are on page 1of 89

Chapter 29: Consumer Protection Act: Cases

Legal Aspects of Business, 3rd Edition

Consumer Protection Act : Cases

Justice Delivery System


Lower courts- District court- High Court- Supreme Court Procedure bound and time consuming Expensive

Alternative System for Consumers


District Forum

State Commission
National Commission

Only for Consumers


Section 2(d): Consumer means any person who: i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

cond
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who 'hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person; but does not include a person who avails of such services for any commercial purpose; or

Case
Section 2(d): Consumer means any person who:

(i): Buys any good for consideration ...or


(ii) hires or avails of any services for a consideration Abhijit bought a television set for using it at home from an electronics store. The television was defective. Is Abhijit a consumer?

Case
Section 2(d): Consumer means any person who:

(i): Buys any good for consideration ...or


(ii) hires or avails of any services for a consideration Sumit took a cell phone connection for person use from a cell phone company under a pre-paid plan. The service was deficient.

Case
Raman bought an electric iron for using it at home for his family. In the first use itself, while his wife Rima was using it, there was a spark from the iron, injuring Rima. Is Raman a consumer? Is Rima a consumer?

Definition of Consumer
i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

cond
Sec 2(d)(i): Buys any good for consideration ... and includes any user of such goods ... 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

Case
Anand runs a laundry shop. He bought a washing machine from an electronics shop for using in his shop. The machine was installed in his shop. The machine was defective from the time it was delivered. Is Anand a consumer?

Definition of consumer
i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

Case
Anand runs a laundry shop. He bought a washing machine from an electronics shop for using in his shop. The machine was installed in his shop. The machine was defective from the time it was delivered. Is Anand a consumer? Sec 2(d)(i): Buys any good for consideration ... but does not include a person who obtains such goods for resale or for any commercial purpose: or

Case
Balu is a distributor for computer accessories. He bought 100 pen drives from the manufacturers for selling to other computer vendors. Is Balu a consumer?

Definition of consumer
i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

Case
Balu is a distributor for computer accessories. He bought 100 pen drives from the manufacturers for selling to other computer vendors. Is Balu a consumer?

Sec 2(d)(i): Buys any good for consideration ... but does not include a person who obtains such goods for resale or for any commercial purpose: or

Case
Arvind bought cycles for the purpose of hiring it out to tourists visiting the area. Santosh was a tourist who had hired a cycle. The cycles were defective. The handle of the cycle broke injuring Santosh. Are Arvind and Santosh consumers?

Case
Arvind bought cycles for the purpose of hiring it out to tourists visiting the area. Santosh was a tourist who had hired a cycle. The cycles were defective. The handle of the cycle broke injuring Santosh. Are Arvind and Santosh consumers? Sec 2(d)(i): Buys any good for consideration ... and includes any user of such goods ... 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

Case
Baman bought a laptop and gifted it to his son, Suman. Suman is a tax consultant and uses the laptop for his business. Are Baman and Suman consumers?

Case
Baman bought a laptop and gifted it to his son, Suman. Suman is a tax consultant and uses the laptop for his business. Are Baman and Suman consumers? Sec 2(d)(i): Buys any good for consideration ... and includes any user of such goods ... 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

Case
Abhijit bought a pressure cooker for using it at home. He had paid only 30% of the price will buying it. The remaining 70 % was to be paid a week later. The pressure cooker was defective. It burst in the second use. Is Abhijit a consumer?

Definition of consumer
i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

Case
Abhijit bought a pressure cooker for using it at home. He had paid only 30% of the price will buying it. The remaining 70 % was to be paid a week later. The pressure cooker was defective. It burst in the second use. Is Abhijit a consumer?

Sec 2(d) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment

Case
Sujit bought a pressure cooker for using it at home. The money for it was to be paid next week. The pressure cooker was defective. It burst in the second use. Is Sujit a consumer?

Definition of consumer
i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

Case
Sujit bought a pressure cooker for using it at home. The money for it was to be paid next week. The pressure cooker was defective. It burst in the second use. Is Sujit a consumer? Sec 2(d) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment

Case
Suman bought a cell phone for personal use. The payment for the phone was to start next month. The payment was to be done in six monthly instalments. The phone was defective. Is Suman a consumer?

Case
Suman bought a cell phone for personal use. The payment for the phone was to start next month. The payment was to be done in six monthly installments. The phone was defective. Is Suman a consumer? Sec 2(d) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment

Case
A manufacturer of pens was distributing its pens free to the visitors of an exhibition. The pens were defective and leaking. The pens spoilt the clothes of several persons. Sweta is one of the persons who has spoilt her clothes. Is she a consumer?

Case
A manufacturer of pens was distributing its pens free to the visitors of an exhibition. The pens were defective and leaking. The pens spoilt the clothes of several persons. Sweta is one of the persons who has spoilt her clothes. Is she a consumer? Sec 2(d) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment

Laxmi Engineering Works v. PSG Industrial Institute

Consumer: Legal Provision


ExplanationFor the purposes of sub-clause (i), commercial purpose does not include use by a consumer of goods, bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;

Judgement: Supreme Court


The explanation reduces the question, what is a "commercial purpose", to a question of fact to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in the explanation, viz., "uses them by himself", "exclusively for the purpose of earning his livelihood" and "by means of self-employment" make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood.

cond
A person who purchases an auto-rickshaw to ply it himself on hire for earning his livelihood would be a consumer. Similarly, a purchaser of a truck who purchases it for plying it as a public carrier by himself would be a consumer. A person who purchases a lathe machine or other machine to operate it himself for earning his livelihood would be a consumer. (In the above illustrations, if such buyer takes the assistance of one or two persons to assist/help him in operating the vehicle or machinery, he does not cease to be a consumer.)

cond
As against this a person who purchases an autorickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. This is the necessary limitation flowing from the expressions "used by him", and "by means of self-employment" in the explanation. The ambiguity in the meaning of the words "for the purpose of earning his livelihood" is explained and clarified by the other two sets of words.

Bala Enterprises v. Chief Post Master General

Facts
Bala Enterprises sent cut and polished diamonds to M/s. Nofi Jewellers, Dubai by Speed Post through the Foreign Post Office in Delhi. The consignments did not reach their destination. Bala Enterprises filed a case for damages and compensation. According to the Foreign Post Office, the diamonds, after completion of necessary formalities, were handed over to Emirate Airlines and were to be airlifted by its flight No. EK-703 dated 26.11.1995.

cond
All was not well when the consignment reached Dubai Airport. Case of the Foreign Post Office thus was that mischief took pace only after the bag containing consignments had been handed over to Emirate Airlines staff. Bala Enterprises applied to make Emirates Airlines a party to the case. This is called impleading the party. Can this be allowed?

Judgement: National Commission


It is difficult to understand how on the averment of the Foreign Post Office complainant can claim any cause of against Emirate Airlines. There was no privity of contract between the complainant and the Emirate Airlines. Complainant did not pay any charges to the Emirate Airlines to carry the goods to Dubai.

K Syed Mohamed Company v. Punjab National Bank

Facts
K. Syed Mohamed Company is based in Singapore. He has account with the Indian Bank, Singapore. The Indian Bank in Singapore sent to the Punjab National Bank relevant documents for presentation to the buyer in India. The Punjab National Bank failed to do this.

Judgement: National Commission


It is not the bank of the complainant (Company) and there is no consideration, which passed through the complainant to the opposite party (PNB) to hold the opposite party (PNB) guilty of negligence and thus deficiency in service. This complaint fails.

R. Balraj v. Grindlays Bank and the State Bank of India

Facts
Mr. Budhar has a bank account with the Grindlays Bank, Bombay Branch. He requested the bank to make Telegraphic Transfer of money to his brother T. Balraj in his account in the State Bank of India, Kaveripattinam. The Grindlays Bank in Bombay transferred the money through the State Bank of India in Mumbai. By mistake, the State Bank of India sent the money to its Dharmapuri District Branch. It was a telegraphic transfer to expeditiously receive money, Mr. Balraj received the money after two and half months.

cond
Mr. Balraj moved the State Commission against the Grindlays bank and the State Bank of India claiming compensation for negligence and deficiency in service.

Judgement: National Commission


Neither the complainant nor his brother had hired the services of the State Bank of India at any time for any consideration. There was no privity of contract or hiring of the services of the State Bank of India. The State Bank of India acted only as agent of the Grindlays Bank in effecting transfers and is thus not responsible to the complainant or his brother . The complainant is not a consumer qua the State Bank of India. A consumer means any person who hires or avails of any service for consideration. It cannot be said on the facts established on record that the complainant is a consumer who has hired the services of the State Bank of India for consideration. The complaint against the State Bank of India, therefore fails on this short ground and is hereby dismissed.

Gauhati Cooperative Urban Bank Limited v Santosh Kumar Tewari

Facts
Santosh Kumar Tewari, in response to an advertisement, applied in the prescribed form for allotment of equity shares of Rs. 10/- each of Tata Elaxi Ltd. He was unsuccessful in getting the allotment. The company sent refund vouchers, through its banker, the Gauhati Cooperative Urban Bank Limited. The refund voucher was an account payee cheque in favour of Santosh Kumar Tewari. It appears that the Bank did not send the cheque by registered post. The next Mr. Tiwari learnt was that the cheque was encashed from one of their branches. Another person had managed to get possession of the cheque, created an account pretending to be Mr. Tewari and encashed the cheque. This had happened to several people.

cond
The Reserve Bank of India investigated the fraud. According to its investigations, in most of the cases the branch officials of the Banks had not strictly followed guidelines/instructions for opening new account and which facilitated fraudulent encashment. The Reserve Bank of India had advised that as per the existing instructions the Banks are expected to reimburse the genuine investors/account holders.

cond
The Reserve Bank of India investigated the fraud. According to its investigations, in most of the cases the branch officials of the Banks had not strictly followed guidelines/instructions for opening new account and which facilitated fraudulent encashment. The Reserve Bank of India had advised that as per the existing instructions the Banks are expected to reimburse the genuine investors/account holders.

Judgement: National Commission


Hiring of services for consideration is a condition precedent to make a person consumer. The Complainants (Tiwari and others) had to establish the hiring of the services for consideration. In fact no evidence was led by the Complainants before the State Commission that the services of the Appellant or other Banks were hired by the Complainants for consideration.

Bank of India v H.C.L. Limited

Facts
HCL Ltd. is engaged in the business of manufacturing, leasing and selling computers. It entered in an agreement with Dealwell Estates Pvt. Ltd. to supply it computer equipment. Towards supply of equipment, HCL Ltd. got DealWell Ltd. to arrange an irrevocable bank guarantee in its favour. DealWell arranged for this with the Bank of India. The Company invoked the bank guarantee and asked the Bank to make the payment. The bank refused to make the payment. The HCL Ltd. filed a complaint before the State Commission claiming deficiency in service. The case has come before the National Commission in appeal. The bank has raised the contention that the Company there is no privity of contract and thus, the company is not a consumer.

Judgement: National Commission


The bank guarantee was got issued by the Firm (DealWell) from the Bank favouring the Company (HCL). Company is therefore clearly the beneficiary of the contract of service that is entered into between the Firm and the Company and, therefore, the Company falls under the definition of "consumer" as given in Section 2(1)(d) of the Act.

Mumbai Grahak Panchayat v. Dr. Rashmi B. Fadnavis

Facts
Dr. Fadnavis, gynaecologist, operated upon Mrs. Pilanker, who died immediately after the operation. It was a case of medical negligence. The anaesthetist was arranged by Dr. Fadnavis. The State Commission gave an order that there was no privity of contract between the Anaesthetist and the patient. Thus, even if the Anaesthetist was negligent, the patient would not have a claim against him. The case came before the National Commission.

Judgement: National Commission


The National noted the following two points:

1. services of the Anaesthetist are invariably paid for by the patients themselves, their charges being generally shown separately in the bill.
2. CPA defines consumer as one who "hires or avails of any services for a consideration"; this definition does not refer to any privity of contract for that purpose.

cond
Section 2(1)(g) defines "deficiency in service" as:

fault, imperfection or shortcoming or inadequacy in the to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any services."

cond
The words "in pursuance of a contract or otherwise" in the Section make it amply clear that a privity of contract is not needed for a claim to be made under CPA, so long as there is hiring or availing of services for a consideration. Thus the Anaesthetist who participated in the process of delivery of medical services to the beneficiary is as much liable as the main surgeon herself if her negligence had been established.

Spring Meadows Hospital v. Harjot Ahluwalia Through K. S. Ahluwalia

Facts
Harjot, a minor brought in to the hospital. Wrong medication injected to the child. Child collapsed. He had to be put on manual respirator. All India Medical Institute doctors examined Harjot and informed the parents that the child is critical and even if he would survive, he would live only in a vegetative state.

The National Commission awarded damages to Harjot and Mr. and Mrs. Ahluwalia for their suffering.

Contention of the Hospital


1. No payment has been made to the hospital. Thus, within the Consumer Protection Act, it cannot be said that the services of the hospital has been availed for consideration. 2. The complaint has been filed by the Harjot, through his parents. It is only Harjot who can be a consumer under the Consumer Protection Act. As Mr. and Mrs. Ahluwalia are not consumers, the Commission cannot award them compensation for their mental agony and suffering. Thus, the award of Rs. 5 lakhs to them was not justified. A reference was made to the definition of consumer and Section 14 on award by consumer forum/commission.

Judgement: Supreme Court


When a young child is taken to a hospital by his parents and the child is treated by the doctor, the parents would come within the definition of consumer having hired the services and the young child would also become a consumer under the inclusive definition being a beneficiary of such services. The definition clause being wide enough to include not only the person who hires the services but also the beneficiary of such services, which beneficiary is other than the person who hires the services

Signet Corporation v. MCD

Facts
Clauses (a) to (x) of Section 42 of the Delhi Municipal Corporation Act, 1957 enumerate the obligatory functions which the Corporation is required to discharge under the Act.

(a) The construction, maintenance and cleaning of drains and drainage works and of public latrines, urinals and similar convenience;
(c) The scavenging, removal and disposal of filth, rubbish and other obnoxious or polluted matters;"

Judgement: National Commission


This is not a work to be performed by the Corporation under any arrangement of hiring of service for consideration entered into between it and any private party. It is well established by the rulings of the Supreme Court as well of this Commission that payment of a tax which is levied in the exercise of the sovereign function of the State cannot constitute consideration even remotely as quid pro quo for any service rendered or likely to be rendered

SC: IMA v. Santha


A contention has also been raised that even in the Government hospitals/health centres/dispensaries where services are rendered free of charge to all the patients the provisions of the Act shall apply because 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. We do not agree.

cond
The essential characteristics of a tax are that (i) it is imposed under statutory power without the taxpayers consent and the payment is enforced by law; (ii) it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax and (iii) it is part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay.

cond
. tax paid by the person availing the service at a Government hospital cannot be treated as a consideration or charge for the service rendered at the said hospital and such service though rendered free of charge does not cease to be so because the person availing the service happens to be a tax payer.

cond
The supreme Court identified three categories:

1. Fully free for all (including nominal registration charge) 2. Paid for. 3. Free for those who cannot afford

cond
it is necessary to bear in mind that the Act has been enacted "to provided for the protection of the interests of "consumers" The protection that is envisaged by the Act, is protection for consumers as a class. The word "users" (in plural), `potential users' enable a complaint to be filed by any recognised consumer association or one or more consumers where there are numerous consumers lend support to the view that the Act seeks to protect the interest of consumers as a class.

Section 3
Section 3: Act not in derogation of any law: The provisions of this Act shall in addition to and not in derogation of the provisions of any law for the time being in force.

Post Office, Madrasv Dr. U. Shanker Rao

Facts
A person sent a consignment of handloom towels by lorry. The lorry receipt was sent to the Syndicate bank by registered post for the buyer to collect by paying. The next the person heard was that the Syndicate bank never received the registered letter and another person had produced the lorry receipt and collected the consignment.

Section 6: Post Office Act, 1898


6. Exemption from liability for loss, misdelivery, delay or damage.- The Government shall not incur any liability by reason of the loss, misdelivery or delay of, or damage to, any postal article in course of transmission by post, except in so far as such liability may in express terms be undertaken by the Central Government as hereinafter provided

Judgement: National Commission


Section 3 of the Act clearly lays down that the Provisions of the Act are "in addition to but not in derogation of the" provisions of any other law for the time being in force. This shows that the Act provides additional means of obtaining remedy by a consumer but if the remedy is barred under any other Act, then the various Forums constituted under the Act cannot grant the remedy prayed for.

Superintendent of Post Officer and Ors v Upovokta Surakshya Parisad

Facts
A person lost admission in ITI because the local post office delivered the letter a week after the stamp indicating the day on which it was received.

Judgement: National Commission


In the present case, however, what we find is that even under the provision of Section 6, as it is, there is a patent default on the part of the Postal Department based on the admission of the peon that the letters were stamped late and delivered late resulting in a loss of one year in the educational career of the recipient. Not doing something what one ought to do is also an act of Will and, therefore, covered by "wilful act" mentioned in Section 6 as one of the circumstances, where, the liability can be fixed on the Postal Department and its functionaries.

Mrs. Helen Wallia v Cathay Pacific Airways Limited

Letter from Cathay Pacific


Our immediate concern is to settle your claim. As stated in our passenger ticket airlines liability for checked baggage is limited to 20 USD per kilo unless a higher value is declared in advance and additional charges are paid prior to the commencement of carriage. For passengers travelling on the transpacific route. Canada and USA, the maximum weight of each piece of checked baggage is 32 Kilos. This therefore, allows us to settle your claim for USD 640. We do try to settle all baggage claims in a manner that will result in mutual satisfaction as we are a service industry and customer satisfaction is all important.

Carriage by Air Act, 1972.


Rule 22(2) (a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per kilogram, unless the passengers or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that, that sum is greater than the passengers or consignors actual interest in delivery at destination.

Rule 25
25. The limits of liability specified in rule 22 shall not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that in the case of such act or omission of a servant or agent, it is also proved that he acting within the scope of his employment.

Judgement: National Commission


If we examine the provisions of Carriage by Air Act, 1972, there is a limit placed on the liability of the carrier where damages can be awarded @ US $ 20 per Kg of the weight of the lost baggage. This limit would not apply if it was done with the intent to cause damage or recklessly and with knowledge that damage would probably result. There is no such plea in spite of assertion by the learned counsel for the complainant that the baggage of the complainant was lost intentionally by the opposite party. We do not find any merit in this complaint. It is dismissed.

Bharati Knitting Company v. DHL Courier

Bharati Knitting v. DHL Courier


Bharati Knitting sent important original documents relating to an export consignment to a party in Germany with DHL. Only the original documents would have enable the party in receiving the consignment. DHL lost the courier causing losses to Bharati Knitting. Bharati Knitting was demanding the actual losses suffered by it. DHL made its customers sign a form containing the terms. Clause 5 of the terms of courier had limited the liability of the DHL in the event of loss of courier to $100.

Judgement: Consumer Court


It is manifest that the appellant ( DHL) was negligent in not delivering the consignment and due to the deficiency in service the consignment was lost. and because of the negligence, loss has occurred to the complainant (Bharati). However, we are of the view that the loss has to be restricted as per the terms of the contract. Under clause 5 of the agreed terms the liability of the appellant for any loss or damage to the shipment is limited to the lesser of US $ 100 or the amount of loss actually sustained In this case, therefore, the loss has to be restricted in the sum of US $ 100.

Judgement: Supreme Court


a person who signed, a document containing contract and terms is normally bound by them even though he has not read them, and even though he is ignorant of their precise legal effect. (The only exceptions are obtaining signature by coercion, fraud or misrepresentation)