The Consumer Protection Act,

1986

Chapter 12
Need for Consumer Legislation
• Most of the manufacturers and traders have been
adopting unfair trade practices for the purpose of
promoting sale, use or supply of any goods, or for
the provision of any services.

• Unfair practices like false and misleading

descriptions about the nature and quality of the
goods, exaggerated statements about their power
and potency, false weights and measurements etc.,
have been causing loss or injury to consumers of
such goods and services.
 The Consumer Protection Act, 1986

• A number of Acts were enacted by the Government to

protect the interests of consumers.
• The Sales of Goods Act, 1930
• The Agricultural Products Grading and Marketing Act,
(AGMARK) 1937
• The Prevention of Food Adulteration Act, 1954,
• The Essential Commodities Act, 1955
• The Standards of Weights and Measures Act, 1956
• The Monopolies and Restrictive Trade Practices Act, 1969
• The Indian Standard Institution (certification of marks)
Act, (ISI) 1952 etc.
 The Following points or ground justify
the need for consumer protection:
• Consumers do not have adequate product knowledge.
• They are ignorant of their rights and remedies available to them.
•  They are in a weak bargaining position.
• Manufacturers and suppliers have the expertise which a consumer does not
have.
• Often products are forced on consumers through eye-caching packing
materials, sensational media advertisement, etc.
• Fake and spenions products are flooding the market and deceiving the
consumers.

• Let the buyer beware' is not realistic in the context of liberalization,

privatization and globalization-complex and mass product goods and
services. Also it permits seller to disown his/ her liability.
 Objectives of the Act
• The Consumer Protection Act, 1986 seeks
to provide for better protection of the.
interests of consumers.
• This Act seeks, inter alia, to promote and
protect the basic rights of consumers.
 RIGHTS OF CONSUMERS
• Right of Protection to Life and Property :
– The right to be protected against marketing of goods which are hazardous to life
and property.
• Right to be informed :
– The right to be informed about the quality, quantity, potency, purity, standard and
price of goods to protect the consumers against unfair trade practices.
• Right to choose :
– The right to be assured, wherever possible, access to a variety of goods at
competitive prices.
• Right to be Heard :
– The right to be heard and to be assured that consumer's interests will receive due
consideration at appropriate forums.
• Right to Redress :
– The right to seek redressal against unfair trade practices or unscrupulous
exploitation of consumers, and
• Right to Education :
– It means the right to acquire the knowledge and skill to be an informed consumer.
 Advantages of seeking relief under the
Consumer Protection Act, 1986
• Firstly administration of justice under the Consumer
Protection Act is comparatively cheaper than the
regular and conventional judiciary.

• Secondly consumer courts are expected to deliver

speedy justice.
– Despite criticism on this aspect some of which is justified,
one agrees that consumer courts certainly score over the civil
courts
 DEFINITIONS
• Consumer [Sec 2(i) (d)]
• 'Consumer' means any person who:
– "buys any goods for a consideration which has been paid or promised,
or partly paid and partly promised, or under a system of deferred
payment"; or hires any services for a consideration which has been paid
or promised, or partly paid and partly promised, or under a system of
deferred payment, i.e. in respect of hire-purchase transactions.
• "uses the goods" with the approval of the person who has
bought the goods for consideration;
• "is beneficiary of services" with the approval of the person who
has hired the service for consideration.
 DEFINITIONS

• consumer is a person who

• (i) buys any goods for a consideration, or
– (ii) hires or avails any services for a consideration.
• In addition to buyer(s) of goods or hirer(s) or
user(s) of services,
– any beneficiary of such services, using the
goods/services with the approval of the purchaser or
hirer or user would also be deemed a 'Consumer'
under the Act.
 DEFINITIONS

• Buyer of goods for consideration :

– The buyer of goods for a consideration is a
consumer. The Act, unlike the Sale of Goods
Act, does not insist on money consideration
only. Transactions of transfer of services, or
barter, or exchange will come within the
purview of the Act.
– the term consumer does not include a person
who obtains such goods for resale or for any
commercial purpose
 DEFINITIONS
• Hirer of services for consideration :
• Any person who hires services for a consideration is a
consumer.
• Consumer, not only means merely one who hires
services for consideration, but also includes a person
who is a beneficiary of such services.
– For example, the user of a telephone, even though he is not
himself the subscriber is a consumer under the Act.
Services include all kinds of professional services, be it the
routine services of a barber or the technical services of a
highly qualified person.
 Resale and Commercial Purpose
• Commercial purpose does not include use by a person of goods
bought and used by him and services availed by him exclusively
for the purpose of earning his livelihood, by means of self
employment.
• A consumer who does not buy the goods for his own consumption
or use, but for resale, is excluded from the preview of the
definition.
• When the goods are re-sold in original condition as bought, it is a
resale.
• When the manufacturer sells the goods to the wholesaler who in
turn sells the goods to a retailer, the wholesaler will be excluded
from the definition of the word consumer as he has bought the
goods for 'resale' or for 'commercial purpose.'
Some instances of persons who are held as consumers
(i) Bank customers;

(ii) S ubscribers of telephones; consumer of electricity;

(iv) A passenger travelling by train;

(v) A patient receiving medical treatment;

(vi) A depositor of money;

(vii) A beneficiary of services, like a nominee of the insured;

(viii) Persons allotted plots/houses by State Housing Boards;

(ix) Nominee of a person insured under LIC

(x) an employee-member of Employees' Provident Fund Scheme is a consumer and duties

performed by Regional Provident Fund Commissioner under the Scheme is ser­vice.
Statutory authority not invested with sovereign function while discharging its statutory
functions provides service and would be liable in case of any deficiency (Regional
Provident Fund Commissioner v. Shiv Kumar Joshi - (2000) 1 SCC 98).
 Who are not Consumers :
• The following persons are not consumers as per the
Consumer Protect
• a person who purchased goods for resale or for commercial purpose
•  a person who buys goods or obtains services without consideration
•  hires or avails of any services without consideration; or
• uses the goods without the approval of the person who has bought the
goods for consideration;
•   is beneficiary of services without the consent of the person who has
hired the service for consideration [Sec.2(l)(d)] or
• a person who obtains services under a contract of personal service .
 The National Commission, in various cases, had
decided that the following are not consumers:

• A client hiring services of an Advocate;

• A student hiring services of a private tutor;
• Purchaser of a taxi;
• Tenant is not a consumer;
• Person presenting documents for registration (S.P. God v. Collector of
Stamps — AIR 1996 SC 839);
• Government servant (State of Orissa v. Divisional Manager, MC— AIR
1996 SC 2519);
• .
 The National Commission, in various cases, had
decided that the following are not consumers:
• Charitable Trust running a diagnostic center where patients ordinarily
are required to pay for CT Scan, purchases of machines made by such
Trust is for commercial purpose and such a charitable trust is not a
consumer
• Tenant of a landlord, where terms of the lease did not contain any
provision for cleaning, repairing and maintenance of the building by
the landlord
• tax-payers to municipality
• contractors
• applicants for jobs
• persons who filed suits in courts, etc
 Consumer Dispute :
• According to section 2( 1 )(e) of the Consumer
Protection Act,
– 'Consumer Dispute' means "a dispute where the
person against whom a complaint has been made
denies or disputes the allegations contained in the
complaint".

– Separate allegation may form separate disputes

requiring separate findings on each dispute.
• Defect:

– "Defect" means

• 'any fault, imperfection or shortcoming in

the quality, quantity, potency, purity or
standard which is required 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
service".
• Manufacturing Defect :
•
– A product is said to have manufacturing defect
when it is not built according to specification and
is consequently unsafe.

– For instance, there may be negligence on the part

of an employee in assembling a part or tightening
a nut or a latent defect (hidden flaw) in the raw
material out of which the product is made.
 Design Defect:
• It appears there is ho clear standard with reference
to standards prescribed by Government or industry,
if any, but courts may liberally interpret the
provision to test the complaint from the angle of
reasonable care in designing a product.

• Some American Courts have held that a product is

defectively designed if the product is more
dangerous than the benefits that accrue on account
of product design in the eyes of an ordinary
consumer.
 Instruction Defect :
• When a manufacturer fails to provide adequate
warning of possible dangers associated with the
product in Product Manual, Instruction booklet or
on package/label regarding safe use of the product.

• A drug manufacturer is expected to warn against

side effects.
• It is not a valid defense to argue that manufacturer
was not aware of the danger.
 Following types of evidence is generally relied upon by
complainants to establish defect in product

• Expert Opinion
• Manufacturer's records
• Government and Industry Standards
• Post accident changes
• Report of Governmental and other agencies
• Past record
• Expert Opinion :
– Complainant hires a technical expert to testify
about the defective characteristics of a product.
– A manufacturer has to retain highly qualified
experts to rebut the findings of complainant's
expert and also educate defense lawyer so well that
he can call the bluff of complainants expert.
• Manufacturer's records :
– If manufacturer's own employees expressed
concern about product safety it can be extremely
persuasive that product defect existed.
Government and Industry Standard :

– Evidence that manufacturer has failed to meet

government or industry standards can be compelling
proof of existence of defect and when such standards are
mandatory it also amounts to automatic findings of
negligence.
Post accident changes :

– Post accident changes may be considered as evidence

that original designs were deficient.
– Though this is a contentious factor as to whether such an
evidence is admissible a jury may be influenced by the
same.
Report of Govt, and the other agencies :
– Generally factual findings of an official
investigation forms admissible evidence.

Past record :
– Complainant may show that past record of the
product proves his claim.
– Manufacturer has the obligation of proving that
other accidents were not similar.
• Who is liable :
– Who is liable to pay compensation is indeed an
important question.
– The liability extends from manufacturer to
retailer or in other words to everyone in the
chain of distribution.
– Even an occasional seller may be held liable for
his own negligence to the extent he should have
known or discovered that the product was
dangerous to users.
 Deficiency
• Deficiency means any
– fault,
– imperfection,
– shortcoming or
– inadequacy in the quality,
• nature and manner of performance
– which is required 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
service [Section 2(l)(g)].
 Deficiency
• Examples
– Lack of facilities promised by Housing Board is
deficiency. Non-allotment of shares is not
deficiency in service [L. C. Chandgotiya v.
Northern Leasing & Industries Ltd - 1991 (2) CPJ
19 (Raj)].
– Failure of insurance company to settle claim
without sufficient cause is deficiency (Premlata v.
National Insurance Co. - 1991 CPJ 423 Raj).
 Excessive Price
• It is for complainant to establish that the trader has
charged for the goods mentioned in the complaint
a price in excess of the price -

– fixed by or under any law for the time being in force; or

– displayed on goods; or
– displayed on any package containing such goods.
• A trader can therefore be charged for having
collected price in excess of what is displayed or
published.
 Hazardous Goods
• In respect of goods which are hazardous to life
and safety, traders shall display information
regarding the contents, manner and effect of
use of such goods.

• Such goods offered for sale without such

display or caution can be a case of complaint.
• Goods :
• Goods means goods as defined in the Sale
of Goods Act, 1930 [Section 2(l)(i)].
• As per Section 2(7) of the Sale of Goods
Act, 1930 'Goods' means every kind of
movable property other than actionable
claims and money; and
– Includes stock & shares, growing crops, grass
and things attached to or forming part of the
land which are agreed to be severed before sale
or under the contract or sale.
 Manufacturer :
• (i) Manufacturer means a person makes or
manufactures any goods or

• (ii) parts thereof, or ii. does not make or

manufacture any goods but assembles parts their of
made of manufactured by himself, or

• (iii) puts or cause to be put his own mark on any

goods made or manufactured by any other
manufacturer and claims such goods to be goods
made or manufactured by himself. [Sec. 2(j)].
 Service [Sec. 2(0)]
• "Service" means
– Service of any description which is made
available to potential users and includes the
provisions of facilities in connection with
banking, financing, insurance, transport,
processing, supply of electrical or other energy,
boarding or lodging or both, house construction,
entertainment, amusement or other information.
• Free services and personal services

• under a control have been excluded from the

protective spell of the Act.
– Thus services must be of commercial nature in the
sense that they must be on payment.
– The payment may be in cash or kind.
– It may be made either at once or partly at once or
partly later i.e., on credit.
– For services rendered without consideration, the
complaint cannot be maintained in forum
• Free services and personal services
– (i) the complainants were not 'consumers' under
the Act, and therefore, were not entitled to
initiate the proceedings; and
– (ii) the treatment rendered in the hospital did not
constitute 'service' under the Act.

• Spurious goods and services

– means such goods and services which are
claimed to be genuine but they are actually not so
[Sec.2(00)].
 CONTRACT OF PERSONAL SERVICE

• A service under a contract of personal service does

not come within the preview of service under the Act.
• A service offered by an Advocate to his client is under
a contract of personal service and therefore is not
included in the definition.

• A client hiring the services of an Advocate is not a

consumer within the meaning of the word 'consumer'
under the Act.
• Service rendered by a private tutor is also as an
example of personal service.
 CONTRACT OF SERVICE AND CONTRACT
FOR SERVICE DISTINGUISHED

• The contract of service implies some

relationship of a master and a servant.
• A servant is obliged to obey the order of his
master.
• This is contract of service.
• Where the person engages the service of
another person and where he can only order
what is to be done, it is a contract for service.
 What are held to be services?
• Services rendered by Housing and Development Board;
• Services rendered by an agency for publication of news;
• Services rendered by Post and Telegraphs Department;
• Services rendered by Insurance Company, including services for
settlement of claims;
• Services rendered by banking and financial institutions;
• Services rendered by transport agencies like bus, rail, air, sea etc.;
• Processing services;
• Supply of electricity;
• Hotel, lodging and boarding services;
• Services rendered by agencies providing entertainment or amusement like
cinema houses,
theatres, etc;
• Services rendered by a hospital or nursing home on payment of fees;
• Supply of food on board of Aircraft;
• To provide cushioned seats in 1st class compartment of Railways;
• Housing construction or building activity.
What are held to be services?
– Services rendered by medical practitioners Indian
Medical Association Supreme Court has cautioned on
the random prosecutions against Doctors.
• Supreme Court has cautioned on the random prosecutions
against Doctors.
– Hospital is responsible for the acts of its permanent
staff as well as visiting staff whose services are
temporarily requisitioned
– Common carrier for loss or damage to the goods
entrusted to it for transportation
– Services rendered by statutory and public authorities;
misfeasance in public office; personal liability of
officials/officers concerned
 What are held not to be services?
• Faulty or medical treatment offered in the Government hospital;

– Services rendered by Municipal Corporation, as payment of direct or

indirect taxes by
public is not consideration paid for hiring the services;
– Services rendered by a private tutor, as it is a contract of personal service;
– Services rendered by an Advocate, as it is a contract of personal service;
– Any service which is rendered gratuitously, i.e., for which no
consideration is paid;
– Non-allotment of shares, in a company;
– Claim for compensation arising out of motor accident as such a claim
cannot be said to be in relation to any service hired or availed by
consumer
– Service rendered by employee to his employer
– Rendering of service by medical practitioner free of charge to all patients
 Complaint
• "Complaint" means any allegation in writing made by a complainant with a
view to obtaining any relief under Act, that:

– as a result of any unfair trade practice or restrictive trade practice, adopted by a

trader, the complainant has suffered loss or damage;

– the goods mentioned in the compliant suffer from one or more defects;
– the services mentioned in the complainant suffer from deficiency in any respect;

– a trader has charged for the goods mentioned in the complainant a price in excess
of the price fixed by or under any law for the time being in force.

– goods which will be hazardous to life and safety when used are being offered for
sale to the public.

– services which are hazardous or likely to be hazardous to life and safety of the
public when used, are being offered by the service provider which such person
could have known with due diligence to be injurious to life and safety.
 Who can make a Compliant?
• A complaint in relation to any goods sold or delivered, or
any service provided may be filed with quasi-judicial
organs constituted under the Consumer Protection Act by
any of the following :

– the consumer to whom such goods are sold or delivered or such

service provided;
– any recognised consumer's association registered under law, or
– the Central or any State Government, and
– one or more consumers on behalf of many consumers having same
interest or
– in case of death of a customer, his legal heir or representative [Sec
2 (1) b]
The Amendment Act 2002 has amendeds

• Every complaint shall be accompanied with such

amount of fee as prescribed.
• On receipt of a complaint, the District Forum may,
by order, allow the complaint to be proceeded
with or rejected
• Where a complaint is allowed to be proceeded
with, the District Forum may proceed with the
complaint in the manner as provided under the Act
 What Complaints may be Lodged?
• that an unfair trade practice or a restrictive trade
practice has been adopted by any trader, or
service provider;

• that the goods bought by him or agreed to be

bought by him suffer from one or more defects;

• that the services hired or availed of or agreed to

be hired or availed of by him suffer from
deficiency in any respect;
What Complaints may be Lodged?
• That a trader has charged for the goods mentioned in the
complaint a price in excess of the price fixed by or under any
law for the time being in force or displayed on the goods or on
any package containing such goods;

• That goods which will be hazardous to life and safety when

used, are being offered for sale to the public in contravention
of the provisions of any law for the time being in force
requiring traders to display information in regard to the
contents, manner and effect of use of such goods

• Note:
– 'Recognised Consumer Association' means any voluntary consumer
association registered under the Companies Act, 1956 or any other law
for the time being in force.
 To Whom the Complaint is to be made

• Consumer Protection (Amendment) Act, 1993,

– Where the value of goods or services and

compensation, if any, claimed does not exceed Rs. 20
lakhs, complaint is to be filed with the District
Forum;

– Where the value of goods or services and

compensation, if any, claimed exceeds Rs. 20 lakhs,
but does not exceed Rs. 1 crore, complaint is to be
filed with the State Commission.
 To Whom the Complaint is to be made
• Where the value of goods or services and compensation, if any, claimed
exceeds Rs. 1 crore, the complaint to be filed with the National Commission.

• representing that the seller or the supplier has a sponsorship or approval or

affiliation which he does not have.

• making a false or misleading representation concerning the need, for, or the

usefulness of any goods or services.

• giving to the public any warranty or guarantee of the performance or length of

life of a product which is not based on adequate test.

• (h) making a materially misleading representation to the public concerning

the price at which a product or like products of goods have been or are
ordinarily sold.

• (i) giving false or misleading facts disparaging the goods, services or trade
of another person
 Unfair Trade Practices

• Sale offer of bargain price

– This includes advertising for supply, at a bargain
price, goods or services that are not intended to be
offered for supply at the price for a reasonable period
or reasonable quantities.
• Schemes offering Gifts or Prizes :
– This category includes :
– (a) offering gifts or prizes or other items with the
intention of not providing them and conducting
promotional contests;
– (b) the conduct of any contest, lottery or game of
chances, etc.
 Unfair Trade Practices
• Non-compliance of prescribed Standards :
– This category includes cases where goods are sold for
use by consumers knowing or having reason to believe
that they do not comply with the standards prescribed by
some competent authority.
– The prescribed standard may relate to performance,
composition, contents, design, construction, finishing or
packing as are necessary to prevent or reduce the risk of
injury to the person using the goods.
• Hoarding, destruction or refusal :

– The fifth and last category of unfair trade practices

includes cases of hoarding, destruction of goods or
refusal to sell goods or services so as to raise the cost of
those or similar goods.
Ingredients of Unfair Trade Practices

• The trade practices must consist of any of

the practices listed as above.
• The purpose of such trade practice must be
to promote the sale, use or supply of any
goods or provision of any services.
• The trade practices must have caused loss
or injury to the consumer whether by
eliminating or restricting competition.
 RESTRICTIVE TRADE PRACTICES (RTP) (under
MRTP Act 1969)

• Obstruction of capital and resources in to stream

of production.

• Manipulation of price or to abstract production,

distribution/supply of goods or provision of
services.

• Agreement falling within the scope of Sec. 33

(of the MRTP Act) which are deemed as
Registrable Agreements relating to Restrictive
Trade Practices.
End of Chapter 12