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Subject: Law of Torts and Consumer Protection Act-II

B.A.LL.B-IInd Sem
Subject Teacher: Akhlaqul Azam
Study Material of Unit-III(A)
Topic: Who is Consumer and Objective of Consumer Protection Act-2019.

Consumer Protection Act-2019

Objective of Consumer Protection Act

The protection of the rights of consumers is of paramount importance. Irrespective of the kind of
goods and services being offered in the market it is imperative that the interest and benefit of the
consumers are safeguarded by the Government and sellers of any industry. Originally The
Consumer Protection Act, 1986 was enacted to provide for better protection of the interest of the
consumers and for the purpose to make provisions for the establishment of Consumer Councils
and other authorities in the settlement of consumer disputes and for matters connected therewith.
It seeks, inter-alia, to promote and to protect the rights of consumers such as protection against
marketing of goods which are hazardous to life and property, the right to be informed about the
quality, quantity, potency, purity, standard and price of goods to protect the consumer against
unfair trade practices, the right to be assured, wherever possible, access to variety of goods at
competitive prices, the right to be heard and to be assured that the interest of consumers will
receive due consideration at appropriate forums, the right to seek redressal against unfair trade
practices or unscrupulous exploitation of consumers and right to consumer education. The object
is also to provide speedy and simple redressal to consumer disputes-quasi judicial machinery is
sought to be set up at District, State and Central Levels. These quasi-judicial bodies are to
observe principles of natural justice and have been empowered to give relief of specific nature
and to award, wherever appropriate, compensation to consumers. Penalties for non-compliance
of orders given by quasi-judicial bodies have also been provided.

The principal objective of the Consumer Protection Act is to grant shield for the improved
safeguard to consumers. Unlike prevailing laws, which are disciplinary or precautionary in
nature, the provisions of this Act are compensatory in nature. The act is aimed to afford simple,
quick and economical redressal to the consumers’ grievances, and reliefs of a particular nature
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and award of damages wherever appropriate to the consumer. . The Supreme Court in the case of
Lucknow Development Authority v. M.K. Gupta(1994), observed that the importance of the Act
lies in promoting welfare of the society by enabling the consumer to participate directly in the
market economy. It attempts to remove the helplessness of a consumer which he faces against
powerful business, described as network of rackets or a society in which producers have secured
power to rob the rest and the might of public bodies which are degenerating into storehouse of
inaction where papers do not move from one desk to another as a matter of duty and
responsibility but for extraneous considerations leaving the common man helpless, bewildered
and shocked. The Act undoubtedly aims at removing injustices and wrongs met by consumers
who are now equipped with a legal weapon to fight against these evils.

The Parliament passed the Consumer Protection Bill, 2019 on 06.08.2019 to replace the
Consumer Protection Act, 1986 ("1986 Act"). The President of India gave its assent to the
Consumer Protection Act, 2019 ("2019 Act") on 09.08.2019 and the same will come into force
on the date it is notified by the Central Government. The 2019 Act has been enacted for the
purpose of providing timely and effective administration and settlement of consumer disputes
and related matters.

The Government instead of bringing an amendment in the 1986 Act, enacted a new Act
altogether so as to provide enhanced protection to the consumers taking into consideration the
booming e-commerce industry and the modern methods of providing goods and services such as
online sales, tele-shopping, direct selling and multi-level marketing in addition to the traditional
methods.

The preamble to CPA-2019 reads as an Act to provide for protection of the interests of
consumers and for the said purpose, to establish authorities for timely and effective
administration and settlement of consumers' disputes and for matters connected therewith or
incidental thereto.

Changes brought by Consumer Protection Act, 2019

i. Covers E-Commerce Transactions: The New Act has widened the definition of 'consumer'. The
definition now includes any person who buys any goods, whether through offline or online
transactions, electronic means, teleshopping, direct selling or multi-level marketing. The earlier
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Act did not specifically include e-commerce transactions, and this lacuna has been addressed by
the New Act.

ii. Enhancement of Pecuniary Jurisdiction: Revised pecuniary limits have been fixed under the
New Act. Accordingly, the district forum can now entertain consumer complaints where the
value of goods or services paid does not exceed INR 10,000,000 (Indian Rupees Ten Million).
The State Commission can entertain disputes where such value exceeds INR 10,000,000 (Indian
Rupees Ten Million) but does not exceed INR 100,000,000 (Indian Rupees One Hundred
Million), and the National Commission can exercise jurisdiction where such value exceeds INR
100,000,000 (INR One Hundred Million).

iii. E-Filing of Complaints: The New Act provides flexibility to the consumer to file complaints
with the jurisdictional consumer forum located at the place of residence or work of the consumer.
This is unlike the current practice of filing it at the place of purchase or where the seller has its
registered office address. The New Act also contains enabling provisions for consumers to file
complaints electronically and for hearing and/or examining parties through video-conferencing.
This is aimed to provide procedural ease and reduce inconvenience and harassment for the
consumers.

iv. Establishment of Central Consumer Protection Authority: The New Act proposes the
establishment of a regulatory authority known as the Central Consumer Protection Authority
(CCPA), with wide powers of enforcement. The CCPA will have an investigation wing, headed
by a Director-General, which may conduct inquiry or investigation into consumer law violations.

- The CCPA has been granted wide powers to take suo-moto actions, recall products, order
reimbursement of the price of goods/services, cancel licenses and file class action suits, if a
consumer complaint affects more than 1 (one) individual.

v. Product Liability & Penal Consequences: The New Act has introduced the concept of product
liability and brings within its scope, the product manufacturer, product service provider and
product seller, for any claim for compensation. The term 'product seller' is defined to include a
person who is involved in placing the product for a commercial purpose and as such would
include e-commerce platforms as well. The defense that e-commerce platforms merely act as
'platforms' or 'aggregators' will not be accepted. There are increased liability risks for
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manufacturers as compared to product service providers and product sellers, considering that
under the New Act, manufacturers will be liable in product liability action even where he proves
that he was not negligent or fraudulent in making the express warranty of a product. Certain
exceptions have been provided under the New Act from liability claims, such as, that the product
seller will not be liable where the product has been misused, altered or modified.

vi. Unfair Trade Practices: The New Act introduces a specific broad definition of Unfair Trade
Practices, which also includes sharing of personal information given by the consumer in
confidence, unless such disclosure is made in accordance with the provisions of any other law.

vii. Penalties for Misleading Advertisement: The CCPA may impose a penalty of up to INR
1,000,000 (Indian Rupees One Million) on a manufacturer or an endorser, for a false or
misleading advertisement. The CCPA may also sentence them to imprisonment for up to 2 (two)
years for the same. In case of a subsequent offence, the fine may extend to INR 5,000,000
(Indian Rupees Five Million) and imprisonment of up to 5 (five) years. The CCPA can also
prohibit the endorser of a misleading advertisement from endorsing that particular product or
service for a period of up to 1 (one) year. For every subsequent offence, the period of prohibition
may extend to 3 (three) years.

viii. The New Act fixes liability on endorsers considering that there have been numerous
instances in the recent past where consumers have fallen prey to unfair trade practices under the
influence of celebrities acting as brand ambassadors. In such cases, it becomes important for the
endorser to take the onus and exercise due diligence to verify the veracity of the claims made in
the advertisement to refute liability claims.

ix. Provision for Alternate Dispute Resolution: The New Act provides for mediation as an
Alternate Dispute Resolution mechanism, making the process of dispute adjudication simpler
and quicker. This will help with the speedier resolution of disputes and reduce pressure on
consumer courts, who already have numerous cases pending before them.

Who is Consumer?

Section 2(7) of the Act defines consumer as any person who—

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(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 service 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 service 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 service for any
commercial purpose.

Explanation.—For the purposes of this clause,— (a) the expression "commercial purpose" does
not include use by a person of goods bought and used by him exclusively for the purpose of
earning his livelihood, by means of self-employment;

(b) the expressions "buys any goods" and "hires or avails any services" includes offline or online
transactions through electronic means or by teleshopping or direct selling or multi-level
marketing;

The definition of “consumer” under the 2019 Act includes those who make purchases online. The
aforementioned definition of the term ‘consumer’ is really comprehensive so as to cover not only
consumer of goods but also consumer of services. The deviation is wide enough to include in
‘consumer not only the person who buys any goods for consideration but also any user of such
goods with the approval of the buyer, likewise it covers any person who hires or avails of any
services for consideration and also includes any beneficiary of such services, when availed with
the approval of the hirer. In this way, any user of goods or any beneficiary of services, other than
the actual buyer or hirer, is a consumer and thus he is competent to make a complaint before the
Consumer Disputes Redress Forums. It includes anyone who consumes goods or services at the
end of the claim of production.

The definition of consumer may be discussed in following two parts:-

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(i) Consumer of goods

(ii) Consumer of services

Consumer of Goods

Goods according to section 2(21) of Act means every kind of movable property and includes
"food" as defined in clause (j) of sub-section (1) of section 3 of the Food Safety and Standards
Act, 2006;

According to section 2(7) a consumer of goods 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

(b) includes any user of such goods other than the person who buys the, when such use is made
with the approval of the buyer but

(c) does not include a person who obtains such goods for resale or for any commercial purpose.
Commercial purpose does not include use by a consumer of goods bought by and used by him
exclusively for the purpose of earning his livelihood, by means of self-employment.

A person claiming himself to be a consumer should fulfill the following requirements:

(i) there should be a sale transaction between the seller and the buyer,
(ii) the sale must be of goods,
(iii) the buying of goods must be for consideration,
(iv) the consideration has been paid or promised or partly paid and partly promised, or under
any system of deferred payment; and
(v) the user of the goods may also be a consumer when such use is made with the
approbation of the buyer.

It may, however, be noted that a person who obtains the goods for resale or for any commercial
purpose is not included within the meaning of the term consumer. This clearly reveals that the
intention of the legislature is to restrict the benefits of the Consumer Protection Act to ordinary
consumers buying goods or hiring services for consumption and not for resale or large scale
commercial activity. Where the goods have been purchased or used by the consumer exclusively
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for the purpose of earning his livelihood, by means of self employment, such use of the goods
will not be treated as ‘commercial purpose.

Consumer of Services

The term ‘consumer’ also covers any person who hires or avails of any ‘services for
consideration and also includes any beneficiary of such sentences. According to section 2(7) of
the Act, a consumer of services includes any person, who

(i) hires or avails of any services for consideration which has been paid or promised or
partly paid and partly promised or under any system of deferred payment, and
(ii) includes any beneficiary of such services other than the person who hires or avails of
them, when such services are availed of with the approval of the hirer.

Service has been defined in section 2(42) of the Act as "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, 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;

For the purpose of consumer of services, it is essential that the services must have been hired or
availed of for the consideration. But it is not essential that the payment of consideration must be
made immediately, it may be paid afterwards or even in installments. The services which are
rendered free of change or under contract of personal service are out side the purview of the Act.

Examinee-Not a Consumer

In Bihar School Examination Board v. Suresh Prasad Sinha (2010), the Supreme Court ruled
that the School Examination Board was not a service provider and a student who took an
examination was not a consumer within the meaning of CP Act. The Court explained that the
Board was a statutory authority, whose function was to conduct school examinations. This
statutory function involving different stages was a non-commercial function. Participation by a
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student in a general examination, the Court said, was not availment of a service by a student and
the examination fee paid by the student was not the consideration for availment of any service.

In Regional Provident Fund Commissioner v. Bhavani (2008), the Apex Court held that the
appellant, who was a person responsible for working of Pension Scheme under the Employees"
Provident Fund and Family Pension Scheme, 1971 was a service giver and the respondent "a
consumer" within the meaning of the Consumer Protection Act.

The respondent, in the instant case, a worker in cashew factory owned and managed by the
Kerala State Cashew Development Corporation Ltd., was a member of the E.P.F. and F.P.
Scheme, 1971 and was making contribution to the Scheme. Though eligible for pension, the
appellant did not order its payment. Upholding the claim of the respondent to pension under the
Scheme, the Apex Court held that it was not a case of rendering of free service or rendering of
service under a contract of personal service so as to bring the relationship between the appellant
and the respondent within the concept of "master and servant."

In Central Bank of India , Tadepalli Padmaja (2008), the petitioner Bank was hired to act as the
Debenture Trustee for the benefit of debenture holders and to protect their interests on receipt of
fees. The petitioner was held to be a "service provider" for a consideration and the debenture
holders as "consumers within the meaning of CP Act.

In Motor Sales and Service v. Renji Sabastian(1991), the complainant booked a Hero Honda for
consideration. His turn was ignored. The dealer was ordered to give him the vehicle at the price
on the day of his turn for the same and to pay him compensation of Rs. 500 in addition.

Purchaser for re-sale or commercial

According to Section 2(7) the term "consumer" did not include a person who obtained such
goods for resale or for any commercial purpose".

Sale Office System Pvt. Ltd. V. MK Jindal (1991) in this case it was held that a purchaser of a
paper copier machine for business purposes was held to be not a consumer.
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However the explanation to section 2(7) provides that the expression "commercial purpose" does
not include use by a person of goods bought and used by him exclusively for the purpose of
earning his livelihood, by means of self-employment.

Thus, if a person purchases a taxi, or a photostat machine, or a sewing machine or any other
goods which are to be used by him exclusively for the purpose of earning his livelihood by
means of self-employment, that will not be deemed to be commercial purpose. Such a person
will be considered as consumer under the Consumer Protection Act.

Hindustan Motors ltd. V. N.P.Tamankar (1996) in this case it was held that The purchaser of a car
(or other goods) as a means of self-employment for earning his livelihood is a consumer and is
entitled to seek relief under the C.P.Act.

In Anant Raj Agencies y TELCO (1996), the company purchased a car for the private use of a
director of the company. The car had serious defects and it stopped working altogether. The
complainant claimed the replacement of the car or the refund of price with interest. It was held
that the car had not been purchased for the profit making activity of the company on large scale.
There was no nexus between the purchase of the car and profit making activity of the company.
The complainant was a consumer and the complaint was admissible under the C.P.A.

In Sterling Computer Ltd. v. P.R. Kutty (1996), the complainant purchased a computer for his
personal use, which was to be used by his office staff for the purpose of business. The
complainant was a contractor by profession. The computer was not being used to earn his
livelihood. The computer did not work properly from the very beginning. The National
Commission held that the computer was purchased for commercial purpose and the complainant
was not a consumer. The complaint was, therefore, dismissed.

Sujit Kumar Banerjee v. M/s. Ramesh Wasan (2009) in this case it was held by SC that in case of
agreement between the land owner and the builder for the construction of a building and delivery
of agreed construction area, the land owner is a consumer and the builder is a service provider.

Consideration for Service Necessary

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To enable a consumer to bring an action, he must have availed the services for a consideration.
The consideration may be either paid or promised or partly paid and partly promised or under
any system of deferred payment.

In Mumbai Grahak Panchayat v. Andhra Pradesh Scooters Ltd.(1991) the complainant made an
advance deposit of Rs. 500 with the respondent for booking a scooter. The complainant was not
given the refund of the deposit when he demanded the same as per his contract with the opposite
party. It was held that the failure to refund amounted to rendering the service defectively within
the meaning of section 2(11) of the Act. The complainant was a consumer, and entitled to relief
asked for by him.

In Union of India v. Mrs. S. Prakash(1991), it has been held that the subscriber of a telephone is
a consumer as the rental charges paid to the Central Government is the consideration for the
services rendered by the Tele-Communication Department. The Consumer Forum, therefore, has
full jurisdiction to entertain complaint in the matter.

Service without consideration

According to section 2(7), the consumer must hire any services for a consideration". Service
does not include the rendering of any service free of charge. When the services are rendered
without consideration, the complaint cannot be entertained in a consumer forum.

CDR V Joshna v. The DG., Air Force Naval Housing Board (1991) it was held that when the
Housing Board of Naval Personnel is established to promote suitable Services to its members
free of charge, no member can bring an action as a consumer, for any deficiency in the
apartments allotted to him.

In Sri A. Srinivasa Murthy v. Chairman, Bangalore Development Authority (1991), the question
which arose was, as to whether a tax payer could be considered to be a consumer in respect of
specific service rendered by an authority. In this case, the complainant, who paid house tax
including the health cess, brought an action against the Bangalore Development Authority for
having failed to check the menace of stray dogs, and claimed compensation for a dog bite. It was
held by the Karnataka SCDRC, Bangalore that there is no quid pro quo between the tax paid and
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the general duty of the Bangalore Development Authority, the complainant is not a consumer
within the meaning of Section 2(7) of the Act and, therefore, his complaint has to be dismissed.

In Smt. Ram Kali v. Delhi Administration (1991) it was held that if a sterilization operation is
done free of cost and moreover incentive money is paid to those taking the benefit of the service,
a person availing such facility is not a consumer. Hence, no complaint can be made in such a
case.

Therefore, it can be said that the Consumer Protection Act was enacted to provide better
protection of the interests of the Consumers, to make provision for the establishment of
Consumer Councils and other authorities for the settlement of consumer disputes. This Act is in
true sense a very unique and highly progressive piece of Social Welfare Legislation. The
provisions of this Act are intended to provide effective and efficient safeguards to consumers
against various types of exploitation and unfair dealings.

Probable Questions

1. Explain the need and objective of Consumer Protection Act.

2. Who is a Consumer? Explain with the help of decided cases.
3. What are the changes brought by Consumer Protection Act, 2019? Explain