Radical Reforms in the Consumer Protection Act and it's 'Impact' on Businesses

Contributed by: P&A Law Offices







ITS TRANSITION FROM ‘CAVEAT EMPTOR’ (BUYER BEWARE) TO ‘CAVEAT VENDITOR’ (SELLER BEWARE)

The Indian Parliament passed the Consumer Protection Bill, 2019 on August 6, 2019 to replace the Consumer Protection Act, 1986 (“Old Act”). The President of India gave its assent to the Consumer Protection Act, 2019 (“CPA, 2019”) on August 9, 2019. Keeping in mind the new set of challenges faced by the consumers in a dynamic market setup, the CPA, 2019 was enacted to replace the three-decade old legislation in the field of consumer laws. Ministry of Consumer Affairs, Food and Public Distribution through its notification dated July 15, 2020, has designated July 20, 2020 as the date on which the CPA, 2019 has come into force. The primary objective behind the CPA, 2019 was to overcome the shortcomings of the Old Act and to cope up with the rapid technological advancements taking into consideration the booming e-commerce industry and the modern methods of online buying and selling, tele-shopping, multi-level marketing, etc. The CPA, 2019 aims to strengthen and protect the rights of the consumers by establishing authorities, imposing strict penalties on product manufacturers, product service providers, misleading advertisers and unfair trade practitioners, etc.

The new and important highlights of the CPA, 2019 have been set out herein below: -

  • Product Liability: In India under the Old Act, there was no specific “Product Liability” provision. In the absence of a statutory law, Indian courts were naturally guided by the principles of justice, equity and good conscience and often took resort to the principles of English Law. The CPA, 2019 defines “Product Liability” as “the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto” [which is envisaged under Section 2(34) under CPA, 2019]. This recently introduced provision on ‘Product Liability’ within its ambit covers the product manufacturer, product service provider and product seller, for a claim of compensation against the harm caused to the consumer. The detailed provisions governing ‘Product Liability’ under CPA, 2019 have been enumerated under Chapter VI of CPA, 2019.

  • “E-Commerce” Transactions: The definition of ‘consumer’ under CPA, 2019, now includes any person who buys any goods and hires or avails any services, whether through offline or online transactions, electronic means, teleshopping, direct selling or multi-level marketing [Section 2(7) Explanation (b) of CPA, 2019]. The termE-Commerce" has been defined under Section 2(16) of the Act as the buying or selling goods or services over digital or electronic network. Section 2(17) of the Act subsequently defines "Electronic Service Provider" to be someone who provides technologies and/or processes, which enables a seller to advertise and sell their goods or services to the consumer.

  • Unfair Trade Practices: The CPA, 2019 provides a broader ambit to the definition of “Unfair Trade Practices”, which now prohibits sharing of personal information/ personal data given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law [Section 2(47) of CPA, 2019].

  • Misleading Advertisements: Misleading advertisement in relation to any product or service means an advertisement which falsely describes the product or service; or gives a false guarantee, misleading the consumers about the nature, substance, quantity or quality of such product or service; or deliberately conceals important information about the product or service; or conveys an express or implied representation which would constitute unfair trade practice [Section 2(28) of CPA, 2019]. Notably, a Central Consumer Protection Authority (“CCPA”) has also been formed under Section 10 of CPA, 2019; to regulate and deal in such matters relating to violation of the rights of consumers, unfair trade practice and misleading advertisements, etc.

  • Nullifying Unfair Contract Terms: One of the most vital and important power has been incorporated under Section 49(2) and 59(2) of CPA, 2019, which now gives declaratory power to the State Commission and the National Commission to declare any terms of the contract, which is unfair to any consumer, to be null and void.

  • Introduction of Alternate Dispute Resolution: Chapter V of the CPA, 2019 provides for ‘mediation’ as an Alternate Dispute Resolution mechanism, making the process of dispute adjudication much simpler and quicker [Section 2(25) defines “mediation” for the purposes of CPA, 2019].

  • Introduction of Penal Consequences & Punishment: Chapter VII of the CPA, 2019 deals with offences and penalties which can now be imposed in case of non-compliance of the provisions of the CPA, 2019. For instance, in case if a manufacturer or service provider; causes a false or misleading advertisement to be made which is prejudicial to the interest of consumers, it/he/she shall be punished with imprisonment for a term which may extend to two (2) years and with fine which may extend to INR. 10,00,000/- (Ten Lakh Rupees). Notably, for subsequent offence punishment is enhanced to imprisonment for a term which may extend to five (5) years and with fine which may extend to INR. 50,00,000/- (Fifty Lakh Rupees) [Ref: Section 89 of CPA, 2019]. Meanwhile, in a case where the consumer is grievously injured, the manufacturer, seller, or distributor can be fined up to INR. 5,00,000/- (Five lakhs Rupees) and jailed for up to (7) Seven years. If case relates to consumer’s death, the authority can impose a minimum fine of INR. 10,00,000/- (Ten Lakhs Rupees) and Seven (7) years in prison which may be extended to life imprisonment. [Ref: Section 90 & 91 of CPA, 2019].

IMPACT ON VARIOUS BUSINESSES


After discussing the key highlights of the major amendments brought about by the CPA, 2019; it is important for us to now examine the industry – wise perspective and impact of CPA, 2019:

1. FOOD INDUSTRY AND FOOD AGGREGATORS: Food Aggregators in India run its business mostly through internet app-based business, which provide its consumers with food delivery services through their tie-ups with multiple restaurants. Notably, one important amendment introduced in the CPA, 2019 is in its definition of "goods" under Section 2(21) which now includes under its jurisdiction the definition of "Food" (as defined in clause (j) of sub-section (1) of section 3 of The Food Safety and Standards Act, 2006). This makes it important for the food business/ industry operators to be aware of their duties and the rights of the consumers/ it’s customers under both the legislations and comply with its obligations. Similarly, in instances where a customer suffers a physical harm or other health problems because of the food ordered and consumed, the food aggregators could be held liable. The actual impact of CPA, 2019, will be felt gradually by this industry.

2. SERVICE INDUSTRY: The definition of "services" has been provided under Section 2 (42) of the CPA, 2019 that enumerates service of any description which is made 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, telecom, boarding 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.

Liability of “Product Service Provider”

The term ‘Product Service Provider’ has been defined under Section 2(38) of CPA, 2019 as a person who provides any services in respect to a product. The various instances of liability of a ‘Product Service Provider’ have been listed herein below: -

  • Service provided was faulty, imperfect, deficient or inadequate in quality, nature or manner of performance; or

  • Act of omission or commission or negligence or conscious withholding of any information which caused harm; or

  • Service provider did not issue adequate instructions or warnings to prevent any harm; or

  • Service did not conform to express warranty or the terms and conditions of the contract. [Section 85 of CPA, 2019].

3. MANUFACTURING & RETAIL INDUSTRY: The Act classifies a ‘product manufacturer’ as a person who makes goods (or parts thereof) or assembles parts thereof made by another party, or places his own mark on the goods made by a third party, or designs / produces / fabricates / constructs or re-manufactures any product before its sale, etc. [Section 2(36) of CPA, 2019].


Liability of “Product Manufacturer”

  • Product contains a manufacturing defect

  • Product is defective in design; or

  • Deviation from manufacturing specifications; or

  • Product does not conform to the express warranty (which is a material statement, description, sample of a product conforming that the product corresponds to such statement, description, sample; or

  • Product does not contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage. [Section 84 of CPA, 2019].

The Act classifies a ‘product seller’ as a person who in the course of business, imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains, or otherwise is involved in placing such product for commercial purpose and includes a manufacturer who is a product seller and a service provider [Section 2(37) of CPA, 2019].

Liability of “Product Seller”

A product seller, who is not a product manufacturer, shall be liable in product liability action if:

  • He has exercised substantial control over the designing, testing, manufacturing, packaging or labeling of a product that has caused harm; or

  • He has altered or modified the product and such a step was the substantial factor in causing the harm; or

  • He has made an express warranty of a product independent of any express warranty made by a manufacturer and the product failed to conform to such warranty; or

  • The product has been sold by him and the identity of product manufacturer of such product is not known, or if known, he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or

  • Failure to exercise reasonable care in assembling, inspecting or maintaining such product or failure to pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage while selling such product and such failure was the proximate cause of the harm. [Section 86 of CPA, 2019].

Exceptions to a Product Liability Action


Against the Product Seller:

  • There cannot be a claim for product liability against the product seller in case the product was misused, altered or modified at the time of harm [Section 87(1) of CPA, 2019

Against the Product Manufacturer:

  • In case of obvious of commonly known dangers to the user of such product, taking into account the characteristics of such product.

  • Using the product under the influence of alcohol/ or any prescription drug which has not been prescribed by a medical practitioner.

  • Product ought to have been used legally under the supervision of an expert.

  • The product was sold as a component or material (having necessary warnings and instructions) to be used in another product and the harm was caused by the use of the end product in which such component or material was used.

  • The product was purchased by an employer for use at workplace and the product manufacturer had provided warnings or instructions to such employer [Section 87(2) of CPA, 2019].

4. NEW LEGAL REMEDIES: CPA, 2019 will empower consumers to take legal recourse under various notified rules/ provisions and authorities including raising grievance before “Consumer Protection Councils”, “Consumer Disputes Redressal Commissions”, Mediation, Product Liability and punishment for manufacture or sale of products containing adulterant / spurious goods. The key procedural highlights brought under CPA, 2019 are as follows: -

Addition in Territorial Jurisdiction:

  • The CPA, 2019 now provides an added advantage to the consumers by providing for filing of complaints in a jurisdiction where the ‘Complainant’ resides or personally works for gain.

Enhancement of Pecuniary Jurisdiction:

  • Under Section 34 & 47 of CPA, 2019, the pecuniary jurisdiction of the forums and Commissions have been enhanced. Notably, the District Forum now has the power to deal with consumer complaints where the value of goods or services paid is less than INR. 1,00,00,000 (Rupees One Crore). The State Commission can entertain disputes where such value exceeds INR. 1,00,00,000 (Indian Rupees One Crore) but does not exceed INR. 10,00,00,000 (Rupees Ten Crores), and the National Commission can exercise jurisdiction where such value exceeds INR. 10,00,00,000 (Rupees Ten Crores).

Change in Appeal Procedure:

  • The Appealing Party now needs to deposit 50% of the amount ordered by the District Commission before filing an appeal before the State Commission. This is a drastic amendment to the earlier ceiling limit of INR. 25,000/-. [Section 41 of CPA, 2019].

  • Any person aggrieved by an order of the District Commission may prefer an appeal against such order to the State Commission on the grounds of facts or law within a period of 45 days from the date of the order, as against 30 days prescribed under the Old Act [Section 41 of CPA, 2019].

  • A second appeal to the National Commission has now been permitted under Section 51(3) of CPA, 2019; if it involves a substantial question of law.


Power of Revision

  • Power of revision can still be exercised by the National Commission under Section 58(1)(b) and by the State commission under Section 47(1)(b) of the CPA, 2019.


Conferring Power of Review

  • Power of review has been conferred to District Commission, State Commission and the National Commission under Section 40, 50 and 60 of the CPA, 2019; respectively.


Limitation

  • Period of limitation in filing of complaint remains 2 years from the date on which the cause of action arose, with a power to condone the delay, if sufficient cause is shown [Section 69 of the CPA, 2019].


Enforcement of the Order of the Commission

  • Section 71 of CPA, 2019 states that every order of the District Commission, State Commission or the National Commission shall be enforced in the same manner as if it were a decree made by a Court in a suit before it and confers power of execution as provided Under Order XXI, The Code of Civil Procedure, 1908.


CONCLUSION


CPA, 2019 has incorporated some major improvements to the Old Act. CPA, 2019 has undoubtedly broadened the reach of India’s consumer protection regime. When compared to the Old Act of 1986, CPA, 2019 is far more comprehensive with strong consumer protection laws. On one end the new law is being acknowledged and appreciated as being protective for the consumers, however on the other end, it is being criticized by various industries due to the high compliance costs of the already cash trapped e-commerce sector. The CPA, 2019 aims to transform the jurisprudence from caveat emptor (buyer beware) to caveat venditor (seller beware). However, only time will depict the true aspects of the changes brought about by the CPA, 2019, but at present, it can’t be ignored that CPA, 2019 is a step towards reformation and development of consumer laws.

Contributed by: P&A Law Offices


The above article has been authored by Mr. Gaurav Mahajan(Associate Partner) and Mr. Saksham Babbar(Associate) from P&A Law Offices, New Delhi.


The views expressed are solely those of the authors and should not be attributed to the author’s firm or its clients, or any other organization.


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