Authors – Rashi Suri (Managing Partner) and Pradyun Chakravarty (Associate)
The Consumer Protection Act, 2019 (“CPA 2019” or “the Act”) was enacted by the Indian Parliament on August 9, 2019 and has been brought in force from July 20, 2020. By the recent notification of the Act, a new legal regime change has been brought forth for revamping the legal structure by replacing the three-decade-old Consumer Protection Act, 1986 (“CPA 1986”) which had undergone three amendments but was still found to be needing empowering provisions to tackle certain persisting challenges.
The CPA 2019, has started by first broadening the definition of a Consumer. As per which, a Consumer is a person who “buys any goods” and “hires or avails any services” which includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing*.
The GOI has enacted the new CPA 2019 for providing enhanced protection to the consumers
The Act provides for the definition of "e-commerce" to mean buying or selling of goods or services including digital products over digital or electronic network and an “electronic service provider” to mean a person who provides technologies or processes to enable a product seller to engage in advertising or selling goods or services to a consumer including any online market place or online auction sites.
E-commerce which involves the modern methods of providing goods and services such as through sales on online platforms, tele-marketing, tele- shopping, multi-level marketing etc has been booming due to rapid digitization in India.
Tha Act has also enlarged the definition for a “Consumer” to also include consumers who are involved in online transactions. The Act in effect now also covers E-commerce businesses within its ambit.
2. Definition of “Unfair Trade Practice”
The definition has been expanded to include within its ambit:
Non-issuance of bill or memo for goods and services;
Failure in taking back defective goods or deactivate defective services;
Not refunding the amount within the prescribed time (30 days in case the Bill does not mention it);
Disclosure of personal information of a consumer except when it has been in accordance with law.
Concept of “unfair contract” – This includes those contracts which unduly favor the manufacturers of a product or the service providers and are in their effect against the interest of the consumers, such as the contracts which requires:
Imposition of disproportionate penalty against a loss caused due to the breach of a contract by a consumer;
permitting one party to assign the contract which becomes detriment to the interests of the other party (a consumer) without first taking his consent;
exorbitant security deposits required from a consumer for performance of contractual duties by the manufacturer;
Imposing any unreasonable condition or obligation on the consumer which puts the consumer in a disadvantageous position.
Terminating the contract unilaterally by one party without providing reasonable cause etc.
3. Establishment of Central Consumer Protection Authority (“CCPA”)
In exercise of the powers conferred by section 10 of CPA 2019, the Ministry of Consumer Affairs, Food and Public Distribution from July 24, 2020 has established CCPA so as to regulate, protect and enforce the interest of the consumers and matters related to unfair trade practices. The CCPA will have its headquarter at New Delhi.
Under the Act, the CCPA has been bestowed with a wide range of powers for inquiry, investigation and taking action against the violations of the Act.
As a regulator, the CCPA has the authority for:
Class action suits which can be filed by the CCPA on behalf of various consumers.
Initiation of suo-moto proceedings which can be undertaken against violators of the Act;
Recall of products & services through passing appropriate directions.
One more notable power of the CCPA includes the power to take action against misleading and false advertisement which involves taking an action and imposing penalty against any endorser of such a misleading advertisement. In effect, the celebrities who endorse such misleading and false advertisement can be arraigned and held culpable provided the celebrities failed to carry out due diligence before his/her participation with such misleading advertisements.
The penalty imposed maybe up to Rs.10 Lakhs for the first violation and thereafter up to Rs.50 Lakhs for every subsequent violation of a manufacturer or an endorser, for the misleading advertisement.
Further, such a manufacturer or an endorser may also be sentenced to imprisonment which may extend to two (2) years.
4. Product Liability
The introduction of the concept of product liability is new in the Indian scenario which involves getting compensation for the defective products supplied to a consumer. The term has been defined as the responsibility of a product manufacturer or a product seller, of any product or service, related to the product to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating to the product.
The Act therefore covers in its ambit several parties such as the product manufacturer, product service provider and the product seller making them responsible and accountable for their supplied products and services.
5. Consumer Redressal Forums
Pecuniary Jurisdiction – In the erstwhile regime under CPA 1986, the pecuniary jurisdiction for determining the forum for initiating a compliant was calculable on the value of goods/services along with the compensation being claimed. While under CPA 2019, for filing of complaints the pecuniary jurisdiction now shall be considered only on the value of goods/services provided. This in effect will check the prevalent practice in the erstwhile regime of inflating the compensation amount claimed, for bringing the complaint within a certain jurisdiction of either the State or the National Commission, by which the said forum was being overburdened as a consequence. The jurisdiction of the District forums along with State and National Commission, have also been changed with new pecuniary thresholds:
District Commissions: Pecuniary threshold changed to Rs. 1 Crore from up to Rs.20 Lakhs in CPA 1986;
State Commission: From Rs.1 Crore the threshold has been changed to Rs.10 Crores
National Commission: Pecuniary threshold changed to complaints of Rs.10 Crores or above from Rs.1 Crore in CPA 1986.
ADR mechanism – CPA 2019 has introduced mediation as an alternative dispute resolution means, which is also being employed by the courts in India for faster resolution of disputes. The Act provides the power to a consumer forum for referring a matter that it is seized of to mediation with the prior written consent of both the parties involved in the dispute. In natural extension of the above, the Act has provided for the establishment of a consumer mediation cell by respective State Governments in each District Commission and State Commission as well as at the National Commission by the Central Government.
Territorial Jurisdiction – Unlike CPA 1986, the CPA 2019 provides for filing of consumer complaints by the consumer where he/she personally works or resides. In the erstwhile regime of CPA 1986, consumer complaints had to be filed where the opposite party (manufacturer / service provider) was situated. This brings forth a long required change that will remove the inconvenience and disadvantage faced by the consumers for redressing their grievances against the manufactures/ service providers who may not have a branch office in a city or a state.
The Government of India by enacting the CPA 2019 have brought forth the needed changes that had been long demanded and wanting in the Indian landscape. The Act in addition to bringing in e-commerce into its ambit will also protect the interests of a consumer better, while untying the systemic knots that was persisting and choking consumer rights.
*Section 2 (7) Explanation b) of The Consumer Protection Act, 2019
(Please refer to our previous article on recent changes for regulation of businesses selling through E-commerce websites)