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(This is a continuation of the series of articles on this subject)

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(Easy to Read copy of the Bill)

What’s in It for Business?

The first impression about a new and improved “Consumer Protection Act” set to come into India with the likely passage of the Consumer Protection Bill 2015 in the coming Parliament session is that it is meant for activists and lawyers and of course the small set of vigilant consumers.

However it must be  remembered that it is one of those consumers who want a strict Consumer Protection Law who is also the proprietor or business owner who is at the receiving end of a strong Consumer protection legislation. There is no need to presume that he is interested always in cheating the customer and make money. After all all businessmen are not dishonest and greedy. The new Consumer Protection Bill 2015 (CPA2015) will therefore be of great interest to the businessmen and particularly those professionals working in large business houses who conduct business offline and online. It is not only relevant for the Hindustan lever or Nestle or Colgate or Pathanjali, but also to Flipkart, Snapdeal, Amazon and others.

We shall therefore look at the CPA2015 from the “Compliance” angle and try to identify some focus areas for the business. (Refer to the copy of the Act here whenever needed).

Penalty

Let us first look at the “penalty” clause in the Act.

As per Clause 79 of the CPA 2015,

(1) Where a trader or a person against whom a complaint is made or the complainant fails or omits to comply with any order made by the District Commission, the State Commission or the National Commission, as the case may be,

such trader or person or complainant shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years,

or with fine which shall not be less than ten thousand rupees but which may extend to fifty thousand rupees, or with both

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the District Commission or the State Commission or the National Commission, as the case may be,

shall have the power of a Judicial Magistrate of the first class for the trial of offences under this Act, and on Conferment of such powers, the District Commission or the State Commission or the National Commission, as the case may be, shall be deemed to be a Judicial Magistrate of the first class for the purpose of the Code of Criminal Procedure, 1973.

(3) All offences under this Act may be tried summarily by the District Commission or the State Commission or the National Commission, as the case may be.

It is to be noted that there is both a Civil and Criminal liability attached to non-compliance and the authorities entrusted with the responsibility for adjudication have the magisterial powers and take discussions on a summary basis. The scope for dragging the case and harassing the complainant is therefore limited and businesses cannot take the consequences lightly.

Product Liability

Chapter VI of the Bill states that the “manufacturer” or “producer” of product shall be liable for any product liability action if the claimant establishes all of the following by a preponderance of the evidence.

(a) the product contains a manufacturing defect or there is a deviation from manufacturing specifications;

(b) the product is defective in design;

(c) the product failed to contain adequate instructions of correct use to avoid danger or warnings of the improper/incorrect use;

(d) the product did not conform to an express warranty with respect to the product made by the manufacturer or product seller;

(e) the defendant was the manufacturer of the actual product that was the cause of harm for which the claimant seeks to recover compensatory damages; and

(f) the dangerous aspect of the product was the proximate cause of the harm suffered by the claimant.

The Product Seller will be liable for product liability action in the following circumstances.

(i) the product seller exercised substantial control over the aspect of the design, testing, manufacture, packaging, or labelling of the product that caused the alleged harm for which recovery of damages is sought

(ii) the product seller altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought

(iii)the product seller made an express warranty as to such product independent of any express warranty made by a manufacturer as to such product, such product failed to conform to the product seller’s warranty, and the failure of such product to conform to the warranty caused the harm complained of by the claimant;

(iv) the claimant is unable, despite a good faith exercise of due diligence, to identify the manufacturer of the product

(v) the manufacturer is not subject to service of process under the laws of the State; or

(vi) the court determines that the claimant would be unable to enforce a judgment against the manufacturer:

From the above, it can be deduced that sellers of products imported from abroad such as the ubiquitous Chinese products could be liable for product liability since either the manufacturer cannot be identified or cannot be sued.

A Product seller other than the manufacturer may also be liable on the basis of negligence if the seller did not exercise reasonable care in assembling, inspecting or maintaining the product or in passing on warnings or instructions from the manufacturer about the dangers and proper use of the product (Provided that failure to exercise such reasonable care was a proximate cause of the harm).

It is to be noted that a “Complaint” under the CPA 2015 may be made for

a) Unfair Trade Practice

b) Defects in the product or Deficiency of Service

c) Excessive charging

d)Unfair contract entered into

and sale of hazardous and unsafe products as well as violation of safety standards if any.

Any act of withholding relevant information from the consumer could be considered as a “Deficiency” of service and any statements made on the internet or website could be considered as “advertisement”. Any aspects of warranty or promise contained in the communication with the consumer which is known to be untrue would constitute an “Unfair Trade Practice”.

The possibilities of deliberate and not so deliberate mis-statements normally arise because many products require the additional services of “Installation” and “Demo” which are some times handled by third party contractors who have no loyalty either to the brand or to the selling outlet and the product liability could arise out of the actions of these “agents”.

The manufacturers as well as the reputed retailers who have their own brand positioning need to ensure that the agents representing them are well trained and informed to avoid any type of mis-communications or over charging or damage or harm to the consumer at the time of installation.

The retailers conducting “Festival Sales” and the online companies running special campaigns such as “Big Billion Sales” often hire temporary employees during the peak sales time who are untrained and unprofessional. Actions of such persons could create liabilities to the suppliers if properly pursued by a vigilant consumer.

It is also essential for all manufacturers and suppliers to put in place a proper “Grievance Redressal Mechanism” which could act as a cushion to soften any adverse impact of deficient service/defective product.

The CPA2015 suggests its own mediation process but it is possible for the product manufacturers/sellers to squeeze in a dispute resolution mechanism before the mediation process or action from the dispute redressal agencies envisaged under the Bill can be invoked. This is mandatory for the online service providers under ITA 2000/8 and should be useful for others too. Such alternate dispute resolution mechanism can be an “Ombudsman” or “Mediation” or “Arbitration”.

If a consumer gets a reasonable redressal of grievance under these service provider’s dispute resolution mechanisms, the adverse impact of the mediation as envisaged under the Bill could be reduced.

Naavi

(This is a continuation of the series of articles on this subject)

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(Easy to Read copy of the Bill)

Scope of CPB2015

The reasons for which a Consumer can invoke the protective provisions of the Act are indicated in the definition of “Complaint” are

1.  “Unfair Trade Practice”
2.  “Defect in the Product” or
3. “Deficiency in Service”,
4. “Over charging”,
5. Selling of “hazardous” goods
6. Providing of “hazardous services”, and
7. “Causing loss through unfair contract”

A “Consumer dispute” is recognized when the he person against whom a “Complaint” has been made, denies or disputes the allegations contained in the complaint.

For a valid complaint therefore it is necessary for the complainant to show a cause of action under any of the parameters indicated above and also that the dispute has been raised with the seller who has refused to redress the complaint.

The parameters indicated above have been defined in detail in the Act and can be discussed separately.

Similarly, the procedures for lodging a complaint may also be discussed later particularly when the rules are available.

Naavi

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(This is a continuation of the series of articles on this subject)

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(Easy to Read copy of the Bill)

The Dispute Resolution Mechanism

The main objective of CPB 2015 is to ensure that the Consumer has an effective means of redressal of his grievance. For this purpose, the Act tries to establish a comprehensive dispute resolution mechanism.

In the Consumer Protection Act 1986, the following Dispute Resolution system existed.

1. Central Consumer Protection Council
2. State Consumer Protection Councils
3. District Forum (Consumer Disputes Redressal Forum at the District level)
4. State Commission (Consumer Disputes Rederessal commission at the State level
5. National Consumer Disputes Redressal Commission

In the CPA2015, the Dispute Resolution System has been significantly expanded and includes the following

1. Central Consumer Protection Council
2. State Consumer Protection Council
3. District Consumer Protection Council
4. Central Consumer Protection Authority
5. Central Consumer Protection Authority
6. District Commission
7. State Commission
8. National Commission
9. Consumer Mediation Cell

The objectives and constitution of the Central Council and State Council are similar to the present set up.

Additionally, a District level Consumer Protection Council has now been proposed with the Collector as the Chairman. It will have objectives similar to the other councils at the district level, which will be to promote and protect the rights of Consumers.

The Central Consumer Protection Authority (CCPA)

Another new feature of the CPA2015 is the proposal to establish the office of a “Central Consumer Protection Authority” (CCPA) which will have the objective to promote, protect and enforce the rights of consumers. A Commissioner in the rank of the Secretary to the Government would be appointed. He will be assisted with five Deputy Commissioners.

There is a provision in the proposed law for a person of eminence in public or social life with requisite credentials and professional experience of not less than 15 years in the areas related to consumer’s rights and welfare, consumer’s policy, law, economics, business,commerce or industry to be appointed as the commissioner or Deputy Commissioner.

It is expected that at least for some of the posts of Deputy Commissioners, a non Government persons could be appointed But it is unlikely that the post of the Commissioner would go to some body other than an existing or former Secretary of the Government. However, the thought that this post is kept open for an eminent person if available is considered good.

The office of the CCPA will be located in Delhi.

The CCPA will have authority to

(i) to inquire suo motu or on a complaint or a direction from the Government into violations of consumer rights enumerated in this Act and shall launch prosecution in an appropriate court or District Commission or State Commission or National Commission, as the case may be;

(ii) to intervene in any proceeding in any allegation of violation of consumer rights before a court, with the permission of such a court or District Commission or State Commission or National Commission, as the case may be;

(iii) to review factors that inhibit the enjoyment of consumer rights and recommend appropriate remedial measures;

(iv) to review safeguards provided under any law for the time being in force for the protection of consumers and recommend measures for their effective implementation;

(v) to make recommendations for adoption of international covenants and best international practices on consumer rights for to ensure effective enforcement of consumer rights;

(vi) to undertake and promote research in the field of consumer rights;

(vii) to spread and promote awareness about the rights of consumers and consumers’ literacy;

(viii) to encourage of non-governmental organisations and other institutions working in the field of consumer rights and cooperate and work with consumer protection agencies;

(ix) to conduct investigations, either suo motu or on a complaint or on a reference made by any Consumer Disputes Redressal Agency under Chapter IV, into violations of consumers’ rights, conduct search and seizure of documents or records or articles and other forms of evidence, summon delinquent manufacturers, advertisers and service providers and to record oral evidence and direct production of documents and records as may be prescribed by the Central Government;

(x) to pass orders, on the basis of such investigations for recall of goods found to be unsafe or withdrawal of services found to be unsafe or hazardous and direct, on the basis of its investigations, for discontinuation of practices found to be unfair and prejudicial to consumer interest and order reimbursement of the price of the goods (or services) so recalled, to purchasers of such goods or services;

(xi) to mandate the use of unique and universal goods identifiers (GTIN’s) in such goods, as may be necessary to prevent unfair trade practices and protect consumer interests;

(xii) to issue safety notices and alert consumers against unsafe goods or services held to be unsafe; (xiii) to order withdrawal of advertisements found to be false or misleading and direct issuance of corrective advertisements, wherever necessary;

(xiv) to declare as null and void, terms of contracts found to be unfair to the consumer;

(xv) to impose fine which may extend to fifty thousand rupees and while imposing fine, the following factors shall be taken into account by the Central Authority in determining the amount of fine:

(A) the impact of the violation with respect to population and area affected;

(B) the frequency and duration of the violation;

(C) the vulnerability of the class of persons likely to be adversely affected by the violation; and

(D) the gross revenue from sales effected by the conduct.

(xvi) to take cognizance of misleading advertisements;

(xvii) to enforce its orders against conduct of the industry, manufacturers or traders or service provider for exploiting consumers’ interests;

(xviii) to advise Ministries and Departments on Consumer Welfare measures;

(xix) to frame regulations and guidelines to prevent unfair trade practices and to protect consumer’s interest.

The Central Authority may, either suo motu or on a complaint made or a direction given by the Government, after investigation into such violations of consumer rights or any unfair trade practice, or any advertisement prejudicial to the public interest, or to the interest of any consumer or consumers in general or any advertisement in contravention of the rights of the consumers, enumerated in this Act, shall forward the matter to the concerned Regulator, if any, with its recommendations: Provided that the concerned Regulator may take cognizance of the matter referred to it and pass necessary directions as it deems fit.

As we can appreciate, the powers of CCPA are vast. Considering the scope of the CCPA which will affect the entire Consumer industry including Banking, E Commerce, the FinTEch Companies etc, the role is extremely critical and the entire set of  officials who will function as Commissioner and Deputy Commissioners will shoulder a great resposnibility and hopefully the right persons will be found for filling up this crucial positions.

Consumer Disputes Redressal Agencies

There will be the National Consumer Dispute Rederessal Commission to be appointed by the Central Government  along with  the State and District Consumer Disputes Redressal commissions which will be simliar to the current set up.

In the constitution of the District as well as the State Commissions an attempt has been made for representation of eminent educated persons from the public including women which should also be considered as a welcome step.

The jurisdiction of the District commission will be upto Rs 50 lakhs (as against the present Rs 20 lakhs)

State Commission will be the first appeal authority followed by the National Commission and the Supreme Court. It will also have the original jurisdcition where the dispute value is higher than Rs 20 lakhs and upto Rs 10 crores.

The National Commission will be the appeal authority for the State Commission and have the original jurisdiction for disputes above Rs 10 crores or as otherwise may be fixed.

Mediation

A significant step in providing a good dispute resolution mechanism is in the proposal that

-the  State Government shall, establish for the purposes of this Act, by notification a District Consumer Mediation Cell attached to the District Commission in each district of the State and

-a Consumer Mediation Cell attached to the State Commission

– The Central Government shall, establish for the purposes of this Act, by notification a National Consumer Mediation Cell attached to the National Commission

The mediation cell will keep a list of empannelled trained mediators who can settle the disputes through mediation.

The establishment of “Mediation” as an alternate dispute resolution mechanism at all the three levels should  speed up the dispute resolutions and reduce the pendency.

More details on the procedures of complaints handling at all levels will be covered in a subsequent article.

We may in summary state that some significant changes have been made to the dispute resolution mechanism which will make the law more effective.

Naavi

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The Supreme Court has ruled that non-lawyers can represent, appear and argue cases filed under the Consumer Protection Act before Consumer District Forums and Commissions. Suitable rules may be framed in this regard by the National Consumer Commission to accredit non advocates to practice as representatives before a forum.

See article in TOI

This ruling could remove doubts if any and needless delays arising out of the objections raised by opposing lawyers in such cases.

The SC passed the directive while dismissing an eight-year-old appeal filed by the Bar Council of India against a 2002 Bombay high court judgment that permitted agents to represent consumers.

The SC bench of Justice Dalveer Bhandari, Justice R Mukundakam Sharma and Justice Anil Dave on Monday, however, said special guidelines were needed and accordingly, it directed the National Consumer Commission to “frame comprehensive rules within three months” to regulate the eligibility, ethics and conduct of non-legal representatives.

Agents can be friends or relatives but they cannot accept any remuneration and must display competence.

The SC has suggested certain points that the National Consumer Commission may consider while framing rules:

1. An agent appearing on an individual case basis:

a. Must have a pre-existing relationship with the complainant (eg, as a relative, neighbour, business associate or friend)

b. Must not receive any form of direct or indirect remuneration for appearing before the forum and file a written declaration to that effect

c. Must demonstrate competency

2. Accredition may be through written examination on law; academic and professional background, criminal record

3. Fees: The forum may decide on fee amount if an agent seeks to receive any; but he cannot ask for more than 20% of damages sought by a consumer.

The decision is welcome since it provides an opportunity for victims to get represented from those who fight for a cause.

Naavi

Related Articles on Consumer Protection Bill 2015: Article1 : Article 2 : Article 3: Article 4 : Article 5

(Easy to Read copy of the Bill)

(This is a continuation of the series of articles on this subject)

Article1 : Article 2 : Article 3: Article 4 : Article 5

(Easy to Read copy of the Bill)

Who Is a Consumer?

According to the proposed Consumer Protection Act 2015 ,  “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

(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 of any commercial purpose).

Explanation.—For the purposes of this clause,—

(a) the expression “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;

(b) the expression “buys any goods” and “hires or avails any services” include the transactions made through any mode, inclusive of but not limited to, offline, online through electronic means, teleshopping or direct selling or multi level marketing;

We may note that the definition of a “Consumer” is not restricted to the person who actually buys or pays for the goods or services but any user or beneficiary of the product.

The definition also clearly excludes the cases of a person using the goods or services without the approval of the “first mentioned person” which should mean the “buyer” or “owner”.

Understandably the definition excludes the buyer/user who obtains the goods or service for “Commercial Purpose”.

It is interesting to note that the Act does not omit to add the definition of a “Person” which is inherent in our law as well as the General Clauses Act to avoid the kind of confusion that may occur as in the case of ITA 2000/8 which was raised in the Adjudication Cases in Karnataka.

Accordingly, it clarifies that the term “Person” includes

(i) a firm whether registered or not;

(ii) a Hindu Undivided Family;

(iii) a co-operative society;

(iv) an association of persons whether registered under the Societies Registration Act, 1860 or not;

(v) any individual, corporation, company, association, firm, partnership, society, joint stock company, or any other entity including any government entity or unincorporated association of persons;

Naavi

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(This is part of a series of articles on this subject)

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(Easy to Read copy of the Bill)

The Government of India has introduced the Consumer Protection Bill 2015 (CPB2015) in the Parliament and is likely to be passed in the next Parliamentary session. The emerging Consumer Protection Act 2015 (CPA2015) will replace the current Consumer Protection Act 1986.

A copy of the Bill is available here

The salient features of the Bill can be summarised here and later analysed in detail.

1. The definition of a “Consumer” includes the consumer of a “Service” and includes online services. One who obtains goods for resale or for commercial purpose is excluded. Consideration is essential for a consumer.
2. A Central Consumer Protection Authority (CCPA) will be set up to promote,protect and enforce the rights of the Consumers.
3. Product Liability for defects in manufacture,service,marketing etc will be recognized
4. Consumer Dispute Redressal Commissions at District level will function along with the State and National Level commissions for appeal. Final appeal will rest with Supreme Court.
5. Consumer Mediation Cells will be established and attached to the rederessal commissions.
6. Penalties will include imprisonment from one month to 3 years and fine from Rs 10000/- to Rs 50000/-

The detailed analysis can be found below and in continuing articles.

Applicability

CPA2015 shall be applicable for whole of India except the state of Jammu and Kashmir and will apply to all goods and services.

“goods” means goods as defined in sub-section (7) of section 2 of the Sale of Goods Act, 1930, and includes “food” as defined in clause (j) of sub-section (1) of section 3 of the Food Safety and Standards Act, 2006;

“service” means 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, 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;

It may be noted that the exclusions include any service given free of charge or under a contract of personal service.

A Contract of “Personal Service”  is A contract in which the skills or talents of a party are material. Employer and Employee Contracts fall into this category.

The CPA2015 will be in addition to and not in derogation of the provisions of any other law for the time being in force.

(To Be continued)

Naavi

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