1. Unfair Trade Practices in India
Under Consumer Protection Act
Dissertation
Post Graduate Diploma in Consumer Law and Practice
Submitted By:
Arpit Jain
CLP/129/14
National Law School of India University
Bangalore

2. LIST OF CONTENTS
Chapter 1. Introduction
1.1 Nature and Evolution of Consumer Law
1.2 Laws in the Medieval and Modern Period
1.3 Consumerism
Chapter 2. Important Concepts
2.1 Appropriate Laboratory
2.2 Branch office
2.3 Complainant & Complaint
2.4 Consumer& Consumer Dispute
2.5 Goods, Defects & Deficiency
2.6 Trader & Manufacture
Chapter 3. Consumer
3.1 Who is a Consumer?
3.2 Consumer of Goods
3.3 Consumer of Services
Chapter 4. Defects & Deficiency
4.1 Defects in Goods & Commodities
4.2 Deficiency in Services

3. Chapter 5. Remedies : Enforcement of Consumer Rights
5.1 Consumer Councils
5.2 State Consumer Protection Councils
5.3 Consumer Forum
5.4 District Forum & Jurisdiction to the District Forum
5.5 State Commission & Jurisdiction to the State Commission
5.6 National Commission & Jurisdiction to the National Commission
Chapter 6. Unfair Trade Practices
6.1 False Representation
6.2 False Offer of Bargain Price
6.3 Schemes Offering Gifts
6.4 Non Compliance of Prescribed Standards
6.5 Hoarding, Destruction or Refusal
6.6 Monopolies and Restrictive Trade Practice
6.7 Inquiry into Unfair Trade Practices
6.8 Relief Available
Chapter 7. Suggestions
7.1 How to become a Smart Consumer
Chapter 8. Table of Cases & Bibliography

4. DECLARATION
Certified that this Dissertation is my Original work and that I have not taken or borrowed any
material from others’ work nor I have presented this partly or fully to any other Institution/
College / University.
I have complied with all the formalities prescribed in this regard.
Date :
(ARPIT JAIN)
ID NO: CLP/129/14

5. Chapter 1 :Introduction
Nature & Evolution of Consumer Laws
“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 who faces powerful business, described as, ‘a 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 storehouses of inaction where papers do not move from one desk to
another as a matter of duty and responsibility but for extraneous consideration leaving the
common man helpless, bewildered and shocked. The malady is becoming so rampant,
widespread and deep that the society instead of bothering, complaining and fighting against it,
is accepting it as a part of life. The enactment in these unbelievable yet harsh realities appears
to be a silver lining, which may in course of time succeed in checking the rot”. [Lucknow
Development Authority v. M.K.Gupta, 1994 (1) SCC 243]
The aforesaid law if implemented with diligence and force by all concerned, including the State
Government, consumers of justice would not be frustrated.
The present market scenario revels that instead of the consumer being a king, he is an object of
exploitation. To prevent such exploitation and to give relief to consumers, Consumer Protection
Act, 1986 is enacted. One of the main objects of the Consumer protection Act is – the right to
be protected against the marketing of goods and services which are hazardous to life and
property.
Nature and time changes, so changes the preference. There was a time when manufacturing
and manufacturer had the upper hand. Right from the day when Labour Legislation started,
effort was made by various enactments to recognize the privileges of the labour and the
management. Nobody bothered about the segment of society which consumed the good
manufactured by these two. Consumer was always at the receiving end.
Judiciary in cases like Dongue v. Stevenson for the first time recognized the right of the
consumer but for the first time Consumer Protection Act gave statutory recognition to the right
of consumers.
The act is confined to consumer of goods and also includes services therein which is called
deficiency in services. The consumer themselves are not aware of their rights under the
Consumer protection Act. This effort now aims at to circulate and make people aware of the
rights when goods purchased therein suffers from deficiency or in services or in supply.

6. Evolution of Consumer Laws
With the evolution of mankind from stone age to the present day social welfare stage, the
relationship between the suppliers of goods and services and the consumers has undergone
radical changes. Earlier the production was for self-consumption which gave place to the barter
system and then to the exchange of goods and services through currency and lately by cheques
and credit and debit cards. The present day market system is most complex which is not only
confined to the national level but has assumed international character. ‘Buyer Beware’ as a rule
had been applicable for many years which implies that the buyer should buy the goods and
services after being satisfied that there is no defect in the title, quality or the quantity of the
same.
This principle is however, not applicable to the full extent in the present day market system.
Human wants for the goods and services are unlimited whereas the resources for the
production of these goods and services are scarce and therefore, the economic theory has to
decide how to use the scarce resources or means for obtaining the maximum satisfaction or
utility for the members of the society. Similarly every individual consumer has to decide how to
get the maximum satisfaction from the purchase of goods and services with his limited
resources or means.
Laws in the Medieval and Modern Period
In the medieval period, consumer protection continued to be of prime concern of the rulers.
During Muslim rule, a large number of units of weights were used in India.During the Sultanate
period, the prices used were determined by local conditions.During the rule of Alauddin
Khalji,strict controls were established in the market place.In those days, there was unending
supply of grain to the city and grain-carriers sold at prices fixed by the Sultan. There was a
mechanism for price-enforcement in the market. Similarly, shop-keepers were punished for
under weighing their goods.
In the modern period, the British system replaced the age old traditional legal system of India.
However, one of the outstanding achievements of British rule in India was “the formation of a
unified nationwide modern legal system.” During the British period, the Indian legal system was
totally revolutionized and the English legal system was introduced to administer justice.
However, it is important to note that the traditions and customs of the Indian legal system
were not ignored. “The law itself underwent considerable adaptation. The British institutions
and rules were combined with structural features [e.g. a system of separate personal laws] and
rules [e.g. Dharma, and local custom] which accorded with indigenous understanding. The
borrowed elements underwent more than a century and a half of pruning in which British
localisms and anomalies were discarded and rules were elaborated to deal with new kinds of
persons, property and transactions.” To administer justice, “they were confronted with the
problem of the value suitable to attach in practice to the Indian traditions and customs.”

7. Consumer Protection
Consumer protection is always a matter of great concern. In ancient India, effective measures
were initiated to protect consumers from crimes in the market place. Ancient law givers ably
described various kinds of unfair trade practices and also prescribed severe punishments for
wrong doers. Mainly, acts of adulteration and false weights and measures were seriously dealt
with. In ancient India, the king was the supreme authority to render justice, but his authority
was circumscribed by the rules of Dharma. In the medieval period, some Muslim rulers
developed well organized market mechanisms to monitor prices and the supply of goods to the
markets. During the British period, the modern legal system was introduced in India and many
laws were enacted to protect the interests of consumers generally. Today, the civil justice
system is tainted with deficiencies that discourage the consumer from seeking legal recourse.
However, the Consumer Protection Act of 1986, which provides easy access to justice, has
brought a legal revolution to India as a result of its cost effective mechanisms and popular
support. At the same time, these mechanisms pose a great legal challenge to the traditional
courts which conduct litigation in orthodox ways. In this age of consumers, the regime of Indian
consumer law will undoubtedly rule Indian markets and bestow a new phase on the existing
Indian legal structure with its strong ancient legal foundations.
Consumerism
One could be forgiven for thinking that consumerism was largely invented by Mr. Ralph Nader,
the well-known American Advocate. History of protection of Consumer’s rights by law has long
been recognized dating back to 1824. Every year the 15th of March is observed as the World
Consumer Rights Day. On that day in 1962 President John F. Kennedy of U.S. called upon the
U.S. Congress to accord its approval to the Consumer Bill of Rights. They are (i) right to choice;
(ii) right to information, (iii) right to safety and (iv) right to be heard. President Gerald R. Ford
added one more right i.e. right to consumer education. Further other rights such as right to
healthy environment and right to basic needs (Food, Clothing and Shelter) were added. In India
we have recently started celebrating 24th
December every year as the National Consumer
Rights Day.
In the history of the development of consumer policy, April 9, 1985 is a very significant date for
it was on that day that the General Assembly of the United Nations adopted a set of general
guidelines for consumer protection and the Secretary General of the United Nations was
authorized to persuade member countries to adopt these guidelines through policy changes or
law.
These guidelines constitute a comprehensive policy framework outlining what governments
need to do to promote consumer protection in following seven areas:
1. Physical safety;
2. Protection and Promotion of the consumer economic interest;

8. 3. Standards for the safety and quality of consumer goods and services;
4. Distribution facilities for consumer goods and services;
5. Measures enabling consumers to obtain redress;
6. Measures relating to specific areas (food, water and pharmaceuticals) and
7. Consumer education and information programme.
The factors responsible for legislations to protect consumer’s rights are as follows:
1. Rapidly increasing variety of goods and services which modern technology has made
available;
2. Growing size and complexity of production and distribution system;
3. High level of sophistication in marketing and selling practices, in advertising and other forms
of production;
4. Removal of personal relationship of buyer and seller as a result of mass marketing methods;
and

9. Chapter 2 : Important Concepts
Appropriate Laboratory
Laboratory means a place equipped for experimental study in a science or for testing and
analysis; broadly a place providing opportunity for experimentation, observation, or practice in
a field of study.
For the purpose of consumer protection, where the complainant alleges a defect in the goods
which cannot be determined without proper analysis or test of the goods, the District Forum
shall obtain a sample of the goods from the complainant, seal it and authenticate it in a manner
prescribed, and refer the sample so sealed to the appropriate laboratory along with a direction
that such laboratory make an analysis or test, whichever may be necessary, with a view to
finding out whether such goods suffer from any defect alleged in the complaint or suffer from
any other defect and to report its findings thereon to the District Forum within a period of forty
five (45) days of the receipt of the reference or within such extended period as may be granted
by the District Forum.
“Appropriate laboratory” means a laboratory or organization -
(i) Recognized by the Central Government
(ii) Recognized by a State Government, subject to such guidelines as may be prescribed by the
Central Government in this behalf
(iii) Any such laboratory or organization established by or under any law for the time being in
force which is maintained, financed or aided by the Central Government or a State Government
for carrying out analysis or test of any goods with a view to determining whether such goods
suffer from any defect.
The function of appropriate laboratory is to test or analyze the sub-standard, defective or
adulterated goods and to give expert opinion as to purity or standard of the goods under
question.
2. Branch Office:
It is defined as (i) any establishment described as branch by the opposite party or (ii) any
establishment carrying on either the same or substantially the same activity as that carried on
by the head office of the establishment. This expression “branch office” with its definition has
been inserted by the Consumer Protection (Amendment) Act, 1993 with effect from June 18,
1993

10. 3. Complainant:
It is the complainant who makes complaint in consumer courts for remedy as to defects in
goods or deficiency in services. The Act includes the following groups of persons as
complainant-
(a) A consumer; or
(b) Any voluntary consumer association registered under
 The Companies Act, 1956
 Any other law such as Societies Registration Act, 1980
 Registered organizations under any other law for the time being in force
(c) The Central Government; or
(d) The State Government; or
(e) One or more consumers, where there are numerous consumers having the same interest; or
(f) Legal heirs or representative of deceased consumer.
The provisions of Consumer Protection Act makes remedy under the act simple and popular as
here the consumers are the real aggrieved persons for the purposes of the Act, but besides him
other persons may also file complaint, as to general principle of law that only an aggrieved
person has locus standi to make complaint does not apply.
4. Complaint:
Complaint means any allegation in writing made by a complainant that
(i) An unfair trade practice or a restrictive trade practice has been adopted by any trader or
service provider,
(ii) The goods bought by him or agreed to be bought by him suffer from anoe or more defects,
(iii) The services hired or availed of or agreed to be hired or availed of by him suffer from
deficiency in any respect,
(iv) A trader or service provider has charged for the goods or for the services mentioned in the
compliant, a price in excess of the price-
(a) Fixed by or under any law for the time being in force,

11. (b) Displayed on the goods or any package containing such goods,
(c) Displayed on the price list exhibited by him or under any law for the time being in force,
(d) Agreed between the parties,
(v) Goods which will be hazardous to life and safety when used are being offered to sale to the
public-
(a) In contravention of any standards relating to safety of such goods as required to be
complied with by or under any law for the time being in force,
(b) If the trader could have known with due diligence that the goods so offered are unsafe to
the public,
(vi) 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 with a view to obtaining any relief provided by or
under this Act.
Illustrations:
1. Loan was disbursed by Co-operative Bank in favour of opposite parties. Bank asked them to
repay loan with interest as per the terms of the agreement. Opposite parties became
“customer” of the bank and as such were entitled to get service from the Bank. There were
discrepancies in the loan amount. Opposite parties can file complaint.
2. In the case of United India Insurance Co. v. Puspalaya Printers it was held by the Hon’ble
Apex Court of the country that complaint is maintainable and the insurance company is liable to
pay damages for the damage caused to building and printing press of the complainant due to
vibration from operation of bulldozer on road closed to building as the property was insured
against destruction or damage.
The complaint under the Consumer Protection Act, 1986 can be filed in person or can be sent
by registered post.
5. Consumer:
A ‘consumer’ means a person who buys goods or avails services against payment.
Goods may include consumable goods (like wheat flour, salt, sugar, fruits, etc.) or durable
consumer goods (like television, refrigerator, toaster, mixer, bicycle, etc.). Services that are paid
for may include electricity, telephone, transport, theatre / cinema, postal / courier, etc.

12. It is interesting to know that a beneficiary is also a ‘consumer’. For example, Sanjeev sent an
important medicine by courier to his sister, Nandini, who was ill. The courier reached late by 4
days due to which Nandini’s health condition worsened. She had to be taken to a city hospital
for treatment and incurred heavy expenses. Later, being the beneficiary, she took up the issue
with the courier company.
6. Consumer Dispute:
Consumer dispute means a dispute where the person against whom a complaint has been
made, denies or disputes the allegations contained in the complaint.
The conduct of examination, evaluation of answer books and declaration of result do not
constitute consumer dispute because such services are not availed for any consideration, was
held in Joint Secretary, Gujrat Education Board v. Bharat Narottam Thakur.
The following do not constitutes consumer dispute:
1) The dispute relating to civil matter
2) The subjudice matter
3) Disputes relating to immovable property
4) Breach of contract
5) Matters involving complex questions of law and fact.
6) Criminal proceeding
7) Services as to Sovereign nature
7. Defect:
To prove defect in any goods it should be proved that –
i. there is any fault, imperfection or shortcoming;
ii. such fault, imperfection or shortcoming is in the quality, quantity, potency, purity or
standard;
iii. which is required to be maintained by or under any law for the time-being in force or under
any contract, express or implied;
iv. which is claimed by this trader in any manner whatsoever in relation to any goods.

13. 8. Deficiency:
Deficiency in services 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”.
The term service includes any service that is not rendered free of charge as per the decision in
Lucknow Development Authority v. M.K. Gupta
The term deficiency has been applied differently to different sectors; For example, in the
banking sector, acts such as delay in issuing a cheque book, non encashment of a cheque and
delay have been held to be deficiency and whereas in the medical sector, courts are not as
liberal and count only gross negligence as deficiency. The courts have however been proactive
in holding that even departments such as the housing boards are liable for any deficiency in
services rendered.
9. Goods
Any tangible commodity purchased by households to satisfy their wants and needs. Consumer
goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances)
have a significant life span, often defined as three years or more, and consumption is spread
over this span. Nondurable goods (e.g., food, clothing, and gasoline) are purchased for
immediate or almost immediate consumption and have a life span ranging from minutes to
three years.
The Consumer Protection Act does not define the term ‘Goods’ It says that – “goods” means
goods as defined in the Sale of Goods Act, 1930.
Section 2(7) of the Sale of Goods Act, 1930, defines ‘goods’ as – “Goods means every kind of
movable property other than actionable claims and money; and
includes stock and 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 of sale.”
The definition reveals that—
a) Goods must be movable;
b) Things attached to or forming part of land which can be severed satisfy the movability
criteria;
c) Actionable claim and Money have been specifically excluded from definition of goods.

14. 10. Manufacturer
“Manufacturer” means a person who—
i. makes or manufactures any goods or parts thereof; or
ii. does not make or manufacture any goods but assembles parts thereof made or
manufactured by others and claims the end-product to be goods manufactured by himself; or
iii. puts or causes 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.
Thus manufacturer is a person, who either himself manufactures goods, or assemble any goods
manufactured by others, or puts his own mark or trade mark on the goods manufactured by
others.
Examples:
1. A Ltd. were into manufacturing of Pressure Cookers. B bought a Cooker which burst out while
using. B sued A Ltd. for compensation. Here A Ltd. being manufacturer of the Cooker is liable for
the loss.
2. A Ltd. used to buy components and assemble computers therefrom. They were selling them
under the brand name ‘Rotal’. B bought a Rotal computer which turned out to be defective.
Here B can hold A Ltd. Liable for the loss as they will be considered manufacturer of Rotal
computer under the Act.
It may be noted that where a manufacturer dispatches any goods or part thereof to any branch
office maintained by him, such branch office shall not be deemed to be the manufacturer even
though the parts so despatcher to it are assembled at such branch office and are sold or
distributed from such branch office.
11. Services
Services are hired or availed of – The term ‘hired’ has not been defined under the Act. Its
Dictionary meaning is – to procure the use of services at a price. Thus the term ‘hire’ has also
been used in the sense of ‘avail’ or ‘use’. Accordingly it may be understood that consumer
means any person who avails or uses any service.
Example: A goes to a doctor to get himself treated for a fracture. Here A is hiring the services of
the doctor. Thus he is a consumer.
What constitutes hiring has been an issue to be dealt with in many consumer disputes. If it is
established that a particular act constitutes hiring of service, the transaction falls within the net
of the Consumer Protection Act, and vice-versa.

15. Example: A passenger getting railway reservation after payment is hiring service for
consideration.
12. Trader
Trader has been defined to mean a person –
i) Who sells or distributes any goods for sale; and
ii) Includes the manufacturer thereof; and
iii) Whereas such goods are sold or distributed in package form, include the packer thereof.
The distributor, seller, manufacturer and the packer are included in the term ‘trader’.
A complaint can be lodged in respect of defect in any goods against a ‘trader’ who has sold the
goods. The definition of ‘trader’ and ‘manufacturer’ would show that it does not include
employees of the trader or manufacturer.

16. Chapter 3: Who is a Consumer?
Consumer of Goods
Consumer of goods – The provision reveals that a person claiming himself as a consumer of
goods should satisfy that—
i) Any Person who uses the Goods with the Approval of the Buyer is a Consumer –
When a person buys goods, they may be used by his family members, relatives and friends. Any
person who is making actual use of the goods may come across the defects in goods. Thus the
law construes users of the goods as consumers although they may not be buyers at the same
time. The words “….with the approval of the buyer” in the definition denotes that the user of
the goods should be a rightful user.
Illustration:
A purchased a motorbike which was in B’s possession from the date of purchase. B was using it
and taking it to the seller for repairs and service from time to time. Later on B had a complaint
regarding the motorbike. He sued the seller. The seller pleaded that since B did not buy the
motorbike, he was not a consumer under the Act. The Delhi State Commission held that B, the
complainant was using it with the approval of A, the buyer, and therefore he was consumer
under the Act.
ii) The Goods are bought for Consideration –
There must be a sale transaction between a seller and a buyer; the sale must be of goods; the
buying of goods must be for consideration. The terms sale, goods, and consideration have not
been defined in the Consumer Protection Act. The meaning of the terms ‘sale’, and ‘goods’ is to
be construed according to the Sale of Goods Act, and the meaning of the term ‘consideration’ is
to be construed according to the Indian Contract Act.
iii) Person buying goods for self-employment is a Consumer –
When goods are bought for commercial purposes and such purchase satisfy the following
criteria
 the goods are used by the buyer himself;
 exclusively for the purpose of earning his livelihood;
 by means of self-employment,
then such use would not be termed as use for commercial purposes under the Act, and the user
is recognized as a consumer.

17. iv) Any Person who obtains the goods for ‘resale’ or commercial purposes’ is not a Consumer –
The term ‘for resale’ implies that the goods are brought for the purpose of selling them, and the
expression ‘for commercial purpose’ is intended to cover cases other than those of resale of
goods. When goods are bought to resell or commercially exploit them, such buyer or user is not
a consumer under the Act.
Illustration:
A car was purchased to run it as a taxi. The question was whether the buyer of the car was a
consumer under the Act. The Rajasthan State Commission held that to use the car as a taxi with
the object to earn profits was a commercial purpose, and therefore, the buyer/user was not a
consumer within the meaning of the Act. [Smt. Pushpa Meena v. Shah Enterprises (Rajasthan)
Ltd. (1991) 1 CPR 229].
The intention of the legislature is to exclude big business houses carrying on business with
profit motive from the purview of the Act. At the same time it is pertinent to save the interests
of small consumers who buy goods for self-employment to earn their livelihood, like a rickshaw
puller buying rickshaw for self-employment, or a farmer purchasing fertilizer for his crops, or a
taxi driver buying a car to run it as a taxi, etc.
Illustration:
X was running a small type institute to earn his livelihood. He purchased a photocopy machine-
canon NP 150. It proved defective. He sued the seller who contended that X is not a consumer
under the Act as he purchased the photocopier for commercial use. The Commission held that
by no stretch of imagination it can be said that the photocopier would bring large scale profits
to X. It was a part of his small scale enterprise. He was construed as consumer under the Act.
However, if such a buyer takes assistance of two or more persons to help him in operating the
vehicle or machine, etc., he does not cease to be a consumer
Consumer of Services
A person is a consumer of services if he satisfies the following criteria:
a) Beneficiary of services is also a consumer –
When a person hires services, he may hire it for himself or for any other person. In such cases
the beneficiary (or user) of these services is also a consumer.
Illustration:
A takes his son B to a doctor for his treatment. Here A is hirer of services of the doctor and B is
beneficiary of these services. For the purpose of the Act, both A and B are consumers.

18. Note that in case of goods, buyer of goods for commercial purpose ceases to be a consumer
under the Act. On the other hand, a consumer of service for commercial purpose remains a
consumer under the Act.
Illustration:
Malik applied to Electricity Board for electricity connection for a flour mill. There was a delay in
releasing the connection. Malik made a complaint for deficiency in service. He was held a
consumer under the Act.
b) Services are hired or availed of –
The term ‘hired’ has not been defined under the Act. Its Dictionary meaning is – to procure the
use of services at a price. Thus the term ‘hire’ has also been used in the sense of ‘avail’ or ‘use’.
Accordingly it may be understood that consumer means any person who avails or uses any
service.
Illustration:
Arun goes to a doctor to get himself treated for a fracture. Here Arun is hiring the services of
the doctor. Thus he is a consumer.
What constitutes hiring has been an issue to be dealt with in many consumer disputes. If it is
established that a particular act constitutes hiring of service, the transaction falls within the net
of the Consumer Protection Act, and vice-versa.
Illustration:
I) A passenger getting railway reservation after payment is hiring service for consideration.
II) A landlord neglected and refused to provide the agreed amenities to his tenant. He filed a
complaint against the landlord under the Consumer Protection Act. The National Commission
dismissed the complaint saying that it was a case of lease of immovable property and not of
hiring services of the landlord. [Smt. Laxmiben Laxmichand Shah v. Smt. Sakerben Kanji
Chandan [1992] 1 Comp. LJ 177 (NCDRC)].
c) Consideration must be paid or payable –
Consideration is regarded necessary for hiring or availing of services. However, its payment
need not necessarily be immediate. It can be in installments. For the services provided without
charging anything in return, the person availing the services is not a consumer under the Act.

19. Illustration:
Banti hires an advocate to file a suit for recovery of money from his employer. He promises to pay fee to
the advocate after settlement of the suit. Banti is a consumer under the Act.
Riya goes to a Doctor to get herself treated for a fracture. The Doctor being her friend charged her
nothing for the treatment. Riya is not a consumer under the Act.
The Direct and Indirect taxes paid to the State by a citizen is not payment for the services
rendered.
Illustration:
Jitendra was paying property tax for his house to the local corporation. This corporation was
responsible for proper water supply to the premises under its work area. Jitendra raised a
consumer dispute over the inadequacy of water supply by the corporation. The National
Commission held that it was not a consumer dispute as water supply was made by the
corporation out of its statutory duty and not by virtue of payment of taxes by Jitendra.

20. Chapter 4 : Defects in Goods & Commodities
Goods & Commodities
‘Goods’ means goods as defined in the Sale of Goods Act, 1930, wherein it has been defines to
mean every kind of movable property other than actionable claims and money and includes
stocks and shares, growing crops, grass and things attached to or forming part of the land which
are agreed to be served before sale or under the contract of sale.
Thus as per clause (7) of Section 2 of the Sale of Goods Act, 1930, ‘goods’ mean –
a) Every kind of movable property other than actionable claims and money and
b) Includes –
i) Stocks and shares
ii) Growing crops, grass and things attached to or forming part of the land which are agreed to
be served before sale or under the contract of sale.
The definition of the goods has been enlarged by the inclusion clause used in the definition.
However it must be borne in mind that the non-supply of goods or delay in supply of goods in
not a ‘defect’ in the goods in respect of which alone a grievance can be agitated before the
various for a constituted under the Act.
In relation to transactions of purchase of goods Parliament has excluded from the scope of the
definition any person who obtains goods for resale or for any commercial purpose. Since cases
of resale have been separately referred to, it becomes obvious that the words ‘for any
commercial purpose’ are intended to cover cases other than those of resale of the concerned
goods. The words ‘for any commercial purpose’ are wide enough to take in all cases where
goods are purchased for being used in any activity directly intended to generate profit.
Hazardous Goods
The term “Hazardous Goods” has not been defined in the Act. The dictionary meaning of the
term is – dangerous or risky. However, the term is used in context of ‘goods’ only, i.e., a person
can make a complaint if he is not informed about the hazardous nature of the goods but the
same is not true in case of hazardous services.
The rationale behind this provision is to ensure physical safety of the consumers. The law seeks
to ensure that those responsible for bringing goods to the market, in particular, suppliers,

21. exporters, importers, retailers and the like should ensure that while in their care these goods
are not rendered unsafe through improper handling or storage.
Consumers should be instructed in the proper use of goods and should be informed of the risks
involved in intended or normally foreseeable use. Vital safety information should be conveyed
to consumers.
Illustration:
Anil bought an insecticide from Vikash. Vikash did not inform Anil that touching this insecticide
with bare hands can create skin problem. Anil, while using the insecticide came in contact with
it and suffered from skin problem consequently. Here Vikash can be held liable under the Act.
Defect
Section 2(1)(f) of the Act provides that, “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 of the time being in force under any contract, express or implied or as is claimed
by the trader in any manner whatsoever in relation to any goods.
This is an exhaustive definition. It means that the Act recognizes only those defects which are
covered by the definition. Any type of defect not mentioned here will not be entertained by
Consumer Forums. Moreover the defect has to be in relation to goods only, i.e., if an item does
not fall within the definition of ‘Goods’, no defect can be complained therein.
Illustrations:
A) In T.T. (P.) Ltd. v. Akhil Bhartiya Grahak Panchayat II [1996] CPJ 239 NC a Pressure Cooker
burst and caused injury to the user. It was held to be a manufacturing defect.
B) Laboratory test report showed that soft drink was not fit for human consumption, it was held
defective – Narayanan Vyankatkrishnan Iyengar v. Shakti Foods [1994] 2 CPJ 652 (Mah.)
C) Electric household appliances which are not in accordance with the standards prescribed by
ISI, being unsafe are defective – Farooq Hazi Ismail Saya v. Gavabhai Bhesania (1991) 2 CPJ 452
(Guj.)
D) Deepak sold a stolen car to Prabhu. Prabhu wanted to sue Deepak for defect in the title of
the car. Here Prabhu cannot sue Deepak under the Consumer Protection Act as the defect in
title of goods would not constitute defective goods as defined under the Act.

22. Deficiency in Services
Services
The main purpose of the Consumer Protection Act is to compensate the consumers for
defective goods and in respect of deficiency in service. The term has a variety of meanings,
depending upon the context or the sense in which it is used. Service means duty or labour to be
rendered by one person to another, the former being bound to submit his will to the direction
and control of the latter.
Thus, service is not only extended to the actual users but also to those consumers who are
capable of using it. The clause is very wide and extends to any or all actual or potential users.
So, not only the actual buyer of goods but also those persons who are likely to buy the goods
are consumers of services.
What is Service?
Section 2(1)(o) of the Act provides that “service” means service of any description which is
made available to potential users and includes the provision of facilities in connection with
banking, financing, insurance, transport, processing, supply of electrical or other energy, board
or loading 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.
The definition provides a list of eleven sectors to which service may pertain in order to come
under the purview of the Act. The list of these sectors is not an exhaustive one. Service may be
of any description and pertain to any sector if it satisfy the following criteria:
1. service is made available to the potential users, i.e., service not only to the actual users but also
to those who are capable of using it.
2. it should not be free of charge, e.g., the medical service rendered free of charge in Government
hospital is not a service under the Act;
3. it should not be under a contract of personal service.
When we talk about ‘service’ under the Consumer Protection Act, we take it as a regular
commercial transaction. Thus the services rendered under the contract of personal service are
specifically excluded from the definition.
The expression ‘contract of personal service’ is not defined under the Act. In common parlance,
it means – a contract to render service in a private capacity to an individual.
Illustration:
 Where a servant enters into an agreement with a master for employment,

23.  Where a landlord agrees to supply water to his tenant,
These are the contracts of personal service. The idea is that under a personal service
relationship, a person can discontinue the service at any time according to his will, he need not
approach Consumer Forum to complaint about deficiency in service.
There is a difference between ‘contract of personal service’ and ‘contract for personal service’.
In case of ‘contract of personal service’, the service seeker can order or require what is to be
done and how it should be done. Like a master can tell his servant to bring goods from a
particular place. But in a ‘contract for personal service’, the service seeker can tell only what is
to be done. How the work will be done is at the wish of the performer. Like when a person gives
a suit to the tailor for stitching, he does not tell him which method he should use to stitch it.
Deficiency in Service
A complaint under the Act can be made only when there is a defect in the goods or deficiency in
services. The term “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 in force at that time or has been undertaken to be performed by a person in pursuance of a
contract or otherwise in relation to any service.
The definition is very wide and comprehensive. It also covers the inadequacy in the quality. The
nature and manner of service may be
a) as is required to be maintained by or under any law for the time being in force or
b) which has been undertaken to be performed by a person in pursuance of a contract which
may be expressed or implied.
Illustration:
 Case of excessive billing for telephone services,
 negligent treatment by medical practitioners, a mistaken diagnosis,
 failure of railway administration in checking entry of unauthorized persons in a reserved
compartment etc.etc.
Factors to ascertain the deficiency in rendering the service are
 Inefficiency,
 Lack of due care,
 Absence of bonafides,
 Rashness,
 Haste or omission.

24. It is important to note that deficiency will arise only when an activity is a ‘service’ as defined by
the Act. Therefore, if the activity is not a service, one cannot allege any deficiency in service
under the act.
Inability to render service owing to reasons wholly beyond the control of the opposite party to
render service would not constitute deficiency in service. ‘Deficiency in service’ connotes willful
non-performance of a service which otherwise ought to be performed or the denial of a service
which is not so denied to others placed in similar circumstance.
The following are the instances that may be noted for a better understanding of the deficiency
in services:
 Medical Services:
Medical services including paramedical, diagnostic and surgical services come under the
purview of ‘services’. A mistaken diagnosis may amount to deficiency in service. Similarly,
negligence of doctors in operations, prescribing medicines, running nursing homes and
hospitals and negligence in providing nutritious food and other facilities would amount to
deficiency in medical services.
Illustration:
The Hon’ble Supreme Court dealt with a case where a medical practitioner who operated a
patient left a mop (towel) inside the abdomen while conducting sterilization operation. The
Hon’ble Court found that the negligence in leaving the mop in the deceased’s abdomen during
the operation led ultimately to her death. The Hon’ble Apex Court held that a Diploma holder in
Homoeopathy is under statutory duty to practice in Homeopathy and that he should not enter
the field of any other system of medicine like Allopathy. A person who does not have
knowledge of a particular system of medicine but practises in that system is a quack and a mere
pretender to medical knowledge or skill. His conduct amounted to an actionable negligence
particularly as the duty of care.
 Transport Services
The carriage of goods or passengers by airlines, railways, buses, taxies, trucks and autos is a
‘service’ under the Act. In fact transport is included in the definition of service under the Act.
Thus, any kind of deficiency pertaining to the said services would be a deficiency in service.
Illustration:
The National Commission held that failure of the railway administration in checking entry of
unauthorized persons in reserved compartments is a deficiency in service.

25. When a confirmed and okayed ticket is issued in favour of a person by Airways Authorities,
failure to provide him a seat in the flight when he reports himself at the airport in time would
be negligence on the part of the Airways Authorities and therefore, it would be a clear case of
deficiency in service under the Act. Similarly defect in the food supplied to the passengers,
would be regarded as a deficiency in service.
Persons traveling by air are consumers. Therefore, if their baggage is not delivered to them at
destination or if it is accidentally sent back to the place of boarding and the same is delivered
after a few days, it amounts to negligence on the part of Airways Authority. Hence it would be a
case of deficiency in service.
Where there was a delay in flight and the passengers were requested by the Airways Authority
to wait, but the complainant passenger took chance and went out on some work by which time
the flight had been announced and took off without the complainant. It would not be a case of
deficiency in services.
Not providing the berths to senior citizens in a railway coach when they were holding reserved
tickets as they were occupied by unauthorized persons, would be a clear case of deficiency in
service on the part of Railways.
 Insurance Services
The Insurance companies may cause deficiency in services when they fail to identify the insured
regarding loss, or they fail to make the payment to the nominee appointed or fail to settle the
claim under the insurance policy within a reasonable period of time. Service under an Insurance
Policy can arise only after the occurrence of the contingency viz., the maturity of policy or the
death of insured. Where a claim is paid and received in full and in final settlement there would
be no deficiency in service and no relief against Insurance Companies can be granted under the
Consumer Protection Act.
Illustration:
In a significant judgment, the Hon’ble Supreme Court held that an Insurance Agent has no
authority to receive premium on behalf of L.I.C. and that any such payment made to the Agent
cannot be regarded as payment to the insurer. Where, under an agreement made between the
employer and L.I.C., the premium payable by the employer should be deducted every month
from the salary of employee and to be transmitted to the L.I.C., the employer though collected
the premium from the employee’s salary did not remit the same to the L.I.C., the L.I.C. would
be responsible for paying the insurance amount on the death of the employee.
Repudiation of the insurance claim by the Insurance Company on the ground that the driver
was not holding a valid driving license at the time of accident could not be termed as deficiency
in service or negligence on the part of the insurance company. The Insurance companies must

26. settle or repudiate the insurance claims within a reasonable period of time which would be
construed as a period of 3 months. Any delay beyond that would be a deficiency of service.
In certain cases, upon the death of the insured person, his or her legal heirs fight for the insured
amount. If there is a dispute as to who are the legal heirs or representatives of the insured
policy holder, the Insurance Company would be justified in insisting upon a succession
certificate being produced from the competent court. However, if there is no dispute as to the
legal heirs or legal representatives, the Insurance Company cannot insist on production of
succession certificate. If it does, the same would be a deficiency in service.
 Housing Construction
Till the Amendment made during 1993 to the Act, housing construction was not one of the
services contained within the definition of ‘service’ under the Act. As a result the Hon’ble
Supreme Court’s land mark decision in Lucknow Development Authority v. M. K. Gupta, the
Parliament has inserted housing construction under the Act. Thus, where a Housing Board uses
poor quality of material for construction or does not provide basic amenities like roads, schools,
lifts or parks etc., as promised under the scheme or contract of sale or allotment, it would
amount to deficiency in service. The delay in handing over the possession of the flat, even after
payment of total amount would be deficiency in service. Same would be the case where the
builder of a house uses substandard material in construction of a building or makes a false
representation about the condition of the house. Allotment of developed site under any
particular scheme prepared for a particular purpose would come within the definition of
service.

27. Chapter 5 : Enforcement of Consumer Rights
Meaning and Concept
Every individual is a consumer, regardless of occupation, age, gender, community or religious
affiliation. Consumer rights and welfare are now an integral part of the life of an individual and
we all have made use of them at some or the other point in our daily routine. Every year15th
March is observed as “World Consumer Rights Day”.
A responsible consumer is one who ensures value for the money spent on the purchase of
goods or services, and makes the other fellow-consumers aware of their rights and
responsibilities. A responsible consumer’s actions or choices do not affect the rights and
responsibilities of the other-fellow consumers. In other words, any responsible consumer must
not act in a selfish manner for getting short term pleasure or profit.
In short, the components of the consumer’s responsibilities include:
 recognition of one’s power and ability to control one’s own consumption practices.
 creation of an environment friendly life-style, or what is known as “green consumer life-
style”.
 awareness of accountability for one’s actions and purchase decisions
 capacity for rationale thought
 being a watchdog over the activities of the industries and businesses
 demanding the standards and quality of the products.
Consumer Protection Councils
Krishna, an engineer by profession shifted to Delhi. He bought a computer from Jitendra, a
dealer who gave him all guarantees and warranties. The moment he plugged in the computer,
some noise came and the computer was shut down. He called up Jitendra, but got no response
from him. After making many calls to him, he understood that he was cheated of his money.
Krishna could have gone to courts, but knowing the lengthy and expensive procedures involved,
he preferred not to initiate any action against Jitendra. One day while watching television he
came across a programme on consumer protection. Krishna got interested in it and noted the
address of consumer council which was sponsoring the programme. Thereafter he contacted
the Council and talked about his computer affair. The Council made him aware that there is a
speedy and inexpensive way to assert his right as a consumer, and that where and how a
complaint can be filed for that, and that he need not hire an advocate for the suit, and assured
him of any assistance he may need for the same.

28. The Consumer Councils are created to advise and assist the consumers in seeking and enforcing
their rights. We have Consumer Protection Councils both at Centre level and State level, that is
one Central Council and many State Councils.
These councils work towards the promotion and protection of consumers. They make
investigations and give publicity to the matters concerning consumer interests, take steps
towards furthering consumer education and protecting consumer from exploitation, advice the
Government in the matter of policy formulation keeping consumer interest as pivotal concern,
etc.
While deciding about the composition of these councils, the State keeps in mind that it should
have proper representation from all the possible areas affecting consumer interests. Again the
rules as to when should these councils meet, what should they aim at, how they conduct their
business are framed by the Government with a view to balance the efficacy and practicability of
its business.
Objects of the Councils
There is one basic thought that ‘consumer needs to be protected’. Another thought is – how he
can be protected? Definitely, there has to be some agency to work towards this protection. The
Act has provided for constitution of Consumer Councils for this purpose.
Now, when we say that these councils are there to protect the consumers, a question arises –
consumers are protected against what? Thus the Act has detailed some rights of consumers
which need to be protected by the councils. These are:
i) Right to safety –
It is right to be protected against the marketing of goods and services which are hazardous to
life and property.
Unsafe goods may cause death or serious injury to the user due to defective ingredients,
defective design, poor workmanship, or any other reason. At times safety hazards are found
due to absence of proper instructions to use the product. Thus it is to be ensured that—
 Manufacturers and traders ensure that the goods are safe for the users, in case of
hazardous goods, they give clear instructions as to mode of use, consumer is informed
of the risk involved in improper use of goods, vital safety information is conveyed to
consumers.
 Manufacturers or distributors who become aware of the unforeseen hazards after the
goods are supplied must inform the authorities and the public in order to forewarn
consumers about such hazards.

29.  Where a product is found such as is likely to be hazardous even when properly used,
traders should either recall it and modify the same, or replace it with a new product, or
adequately compensate for it.
ii) Right to information –
It is right to be informed about the quality, quantity, potency, purity, standard and price of
goods or services, with a view to protect the consumer against unfair trade practices.
Adequate information is very important in order to make a right choice. In our country,
however, consumers do not get adequate comparative information about the quality, quantity,
potency, purity, standard and price of different kinds of goods or services which are available.
As a result buying decisions become difficult. Therefore consumers need to be given maximum
information about the wide variety of competing goods available in the market.
iii) Right to choose –
The right to choose can be made meaningful by ensuring access to a variety of goods and
services at competitive prices.
Fair and effective competition must be encouraged so as to provide consumers with the widest
range of products and services at the lowest cost.
iv) Right to represent –
It is right to be heard and to be assured that consumer’s interests will receive due consideration
at appropriate forums.
The Consumer Protection Act, 1986 has well taken care of this right by making available the
instrumentality of Redressal Forums. Every consumer has a right to file complaint and be heard
in that context.
v) Right to redressal –
It is a right to seek redressal against unfair trade practices or restrictive trade practices or
unscrupulous exploitation of consumers.
When consumers are wronged in a market place transaction, appropriate and adequate redress
must be available. The Act has ensured this right by establishing Consumer Forums and
recognizing restrictive and unfair trade practices as a ground to make a complaint.
vi) Right to education –

30. The right to consumer education is a right which ensures that consumers are informed about
the practices prevalent in the market and the remedies available to them.
For spreading this education, media, or school curriculum, or cultural activities, etc. may be
used as a medium.
Note that the Central Council’s object is to ensure these rights of the consumers throughout the
country while the State Councils look to ensure these rights to consumers within their
territories.
Central Council
Members of the councils are selected from various areas of consumer interest, who are, when
possible, leading members of statewide organizations representing segments of the consumer
public so as to establish a broadly based and representative consumer council.
The Consumer Protection Act has authorized the Central Government to make rules as to the
composition of the Central Council. Accordingly, the Central Government has provided that the
Central Council shall consist of the following members not exceeding 150, namely :—
i) the Minister in-charge of Consumer Affairs in the Central Government who shall be the
Chairman of the Central Council;
ii) the Minister of State (where he is not holding independent charge) or Deputy Minister in-
charge of Consumer Affairs in the Central Government who shall be the Vice-Chairman of the
Central Council;
iii) the Secretary in-charge of Consumer Affairs in the Central Government who shall be the
member-secretary of the Central Council;
iv) the Minister in-charge of Consumer Affairs in States;
v) eight Members of Parliament—five from the Lok Sabha and three from the Rajya Sabha;
vi) the Secretary of the National Commission for Scheduled Castes and Scheduled Tribes;
vii) representatives of the Central Government Departments and autonomous organizations
concerned with consumer interests—not exceeding twenty;
viii) representatives of the Consumer Organizations or consumers—not less than thirty-five;
ix) representatives of women—not less than ten;
x) representatives of farmers, trade and industries—not exceeding twenty;

31. xi) persons capable of representing consumer interest not specified above—not exceeding
fifteen;
State Consumer Protection Councils (State Councils)
The power to establish State Councils is with the States. The Act provides that the Minister
incharge of consumer affairs in the State Government shall be the Chairman of the State
Council. About the number and qualifications of the rest of the members, State is the deciding
authority.
For the purpose of monitoring the implementation of the recommendations of the Central
Council and to suggest the working of the Council, the Central Government may constitute from
amongst the members of the Council, a Standing Working Group, under the chairmanship of
the Member Secretary of the Council. The Standing Working Group shall consist of not
exceeding 30 members and shall meet as and when considered necessary by the Central
Government.
Consumer Forums
Skand, a resident of Delhi district, took his son Santosh to a doctor for eye treatment. Due to
negligence of the doctor, Santosh lost sight of his left eye. Ram filed a suit against the doctor in
District Forum claiming Rs. 4 lakh as compensation. The District Forum dismissed his complaint
on the ground that negligence of the doctor could not be proved.
Skand appealed to Delhi State Commission against this order. State Commission also upheld the
decision of District Forum. Now Skand approached the National Commission and made an
appeal therein. Skand knew that after National Commission also, he is still left with an option to
approach the Supreme Court against the order of the Commission. However, the National
Commission decided in favour of Skand.
The Consumer Protection Act provides for a 3 tier approach in resolving consumer disputes.
There are three levels of consumer courts —
First, there is the district court, called District Consumer Disputes Rederessal Forum (District
Forum),
Next comes the State Consumer Disputes Redressal Commission (State Commission),
At the national level, there is National Consumer Disputes Redressal Commission (National
Commission).
District Forum and State Commission are formed by States with the permission of the Central
Government while the National Commission is formed by the Central Government. These

32. forums have not taken away the jurisdiction of the civil courts but have provided an alternative
remedy.
The Consumer Protection Act, 1986 has given powers to the Central and State Governments to
make rules with regard to various aspects of the consumer protection machinery. In our
discussion, we have included the Consumer Protection Rules, 1987 made by the Central
Government, wherever required.
This decentralized system helps the consumers who are aggrieved to approach the appropriate
fora. These quasi-judicial bodies will observe the principles of natural justice and have been
empowered to give reliefs of a specific nature and to award compensation wherever
appropriate. Penalties for non-compliance of the orders given by the quasi-judicial bodies have
also been provided. The services of these consumer fora cover all public, private business and
service sector which includes Banking, Finance, Insurance, Transport, Electricity,
Telecommunications, Entertainment and so on. These fora have been expanding their
jurisdiction in the best interest of consumers.
District Forum
The State Government is empowered to establish a Consumer Disputes Redressal Forum known
as District Forum at each district. The State Government can establish more than one District
Forum in a district, in case the necessity is felt. The District Forum is the lowest in the hierarchy
of the three-tier quasi-judicial system. Prior to the Amendment made to the Act during 1993,
the State Government was empowered to establish a District Forum only with the approval of
the Central Government. However the same requirement has been omitted in the 1993
amendment. As a result, the State Governments have been authorized to establish District
Fora, on their own, without the interference of the Central Government.
Jurisdiction of the District Forum
The ‘District Forum’ has jurisdiction to entertain complaints where the value of goods, services
and compensation claimed (if any)
1. Does not exceed Rs. 20 lakhs
2. A complaint can be filed in the District Forum in whose territorial jurisdiction the
opposite party or parties, at the time of filing of complaint, actually and voluntarily
resides, carries on business, has a branch office or personally works for gain.
3. If any of the opposite parties does not voluntarily reside or carry on business or have a
branch office or personally works for gain, the District Forum should grant permission to
it. The opposite party should get the consent of such an institution.
4. The complaint can also be filed before the District Forum in whose jurisdiction the cause
of action, wholly or in part arises.

33. State Commission
The State Commission called “State Consumer Disputes Redressal Commission” is the second in
the hierarchy of the three-tier quasi-judicial system established under the Act. The State
Commission is to be established by every State Government by issue of a notification to be
published in the Official Gazette. It has both the original as well as appellate jurisdictions.
Jurisdiction of the State Commission
Subject to the other provisions of the Act, the State Commission shall have jurisdiction to
entertain complaints where the value of the goods or services and compensation, if any,
claimed exceeds rupees twenty lakhs but does not exceed rupees one crore. There is no direct
provision under the Act that deals with the territorial jurisdiction of the State Commission. A
State Commission can exercise its original, appellate or territorial jurisdiction only in respect of
the disputes arising within the State.
The State Commission is empowered to entertain appeals against the order of any District
Forum within the State. An aggrieved party may prefer an appeal against the order of a District
Forum within 30 days of that order to the State Commission. The State Commission has the
power to revise the orders passed by the District Forum. An order passed by the District Forum
can be challenged in an appeal before the State Commission only. Similarly an order passed by
the State Commission can be appealed only before the National Commission.
Any person aggrieved by an order made by the State Commission in exercise of its powers
conferred may prefer an appeal against-such order to the National Commission within a period
of thirty days from the date of the order in such form and manner as may be prescribed.
Provided that the National Commission may entertain an appeal after the expiry of the said
period of thirty days if it is satisfied that there was sufficient cause for not filing it within that
period.
National Commission
The Act provides for the establishment of the National Commission by the Central Government
by notification. It is the highest consumer disputes redressal forum among the three tiers
established under the Act.
The National Commission consists of
i) a chairman; and
ii) four other members

34. appointed by the Central Government. The chairman must be either a retired or serving judge
of the Supreme Court and his appointment must be made in consultation with the Chief Justice
of India.
A perusal of the rules and provisions makes it very clear that the Government intended to
secure independence of the Commission. Before assuming the office, the members of the
commission have to give an undertaking that they do not and will not have any financial or
other interests capable of affecting their functions. It is gratifying to note that the President or
any Member is debarred from holding any office for five years after ceasing to hold such office,
in any organization which was a party before the National Commission during his tenure. Any
person contravening this provision would be committing an offence under the Act.
Jurisdiction of the National Commission
Subject to the other provisions of this Act, the National Commission shall have jurisdiction to
entertain
i) complaints where the value of the goods or services and compensation, if any, claimed
exceeds rupees one crore; and
ii) appeals against the orders of any State Commission; and
iii) to call for the records and pass appropriate orders in any consumer dispute which is pending
before or has been decided by and State Commission where it appears to the National
Commission that such State Commission has exercised a jurisdiction not vested in it by law, or
has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction
illegally or with material irregularity.

35. Chapter 6: Unfair Trade Practice
In the United States of America, Unfair Trade Practice means a trade practice declared by a
federal trade commission to be an unfair method of competition pursuant to power given it by
a legislative act designed to curb dishonesty, misrepresentation, and unethical and
monopolistic business practices contrary to public policy and good morals in the business
community
‘Unfair trade practice’ being practiced by the organized sector of traders, manufacturers and
businessman on the unorganized, innocent and poor consumers is the basic challenge of the
day and it is the duty of the government, the consumer activists and the voluntary consumer
organizations or associations to check the same.
The detailed definition of Unfair Trade Practice is given in the Consumer Protection Act, 1986 as
amended by the Consumer Protection (Amendment) Act. 1993. It means a trade practice which,
for the purpose of promoting the sale, use or supply of any goods or for the provision of any
service, adopts any unfair method or unfair or deceptive practice including any of the following
practices, namely:-
a) False or misleading representation,
b) Bargain price
c) Offering of gifts, prize, contest etc.
d) Non-compliance of product safety standard.
e) Hoarding or destruction of goods.
Unfair Trade Practice
Competition in the market place, coupled with greed for increasing profits, has made many
traders adopt unfair practices to the detriment of consumers. To ascertain violation of
consumer rights one must know the unfair trade practices followed by traders and businessmen
to promote their sale. Some of these practices include:
o False Representation
o When goods and services are not of stated standard and quality
o When second hand goods are sold as new
o When goods or services do not have the claimed use or benefit

36. o When the seller does not have the required approval or affiliation
o When products are guaranteed without proper test
o When the product price or the service gain is misleading
o When the goods, services or trade of another person are disparaged by false information.
Examples
a) Advertisement stating that flats were modern. When offered for possession found to be in
dilapidated condition – mislead and misrepresented.
b) Disconnection of mobile phone even before the date when payment was due – deficiency in
service constituting UTP.
c) Financial Institutions offering exorbitant rates of Interest on FD’s – misleading
d) Bargain Selling when there is no bargain
A trader –
o announcing an attractive “bumper sale” without indicating the quality of goods offered and
when the sale is found to contain damaged and soiled items
o promising discounts when such discounts are not available. Offering gifts, prizes, etc. to lure
customers with no intention of providing them.
Eg. Marketing of fans by announcing a scheme of prizes in the form of CD Players, TVs, etc.
when the cost of the prizes are fully or partly covered by the increase in the price of the fans.
o Conducting of any contest, lottery, etc. as a promotional gimmick
Eg: Promoting sales by offering prizes to purchasers by means of draw of lots with a view to
allure prospective buyers.
o Selling goods which do not fall within the safety standards set up by competent authority.
Eg: Marketing of substandard gas stoves, LPG hose without confirming to the approved
specifications.
o Hoarding or destroying goods with the intention of raising the cost of these or similar goods.

37. Eg: Certain products artificially kept in scarcity while other products are manufactured in
greater number so as to manipulate higher prices and also effect the flow of the supplies in the
market in such a manner as to impose unjustified costs or restrictions on the consumers.
o Manufacturing or offering spurious goods or adopting deceptive practices in the provision of
services.
Eg: Selling of gold plated jewels as gold or promising to give a completed four storey building in
three months, when construction is yet to begin.
1. False Representation
The practice of making any statement, whether oral or written or by verbal representation
which:
i) falsely suggests that the goods are of a particular standard, quality, grade, composition, style
or model.
ii) falsely suggests that the services are of a particular standard or quality or grade.
iii) falsely suggests any re-bullet, second-hand, renovated or reconditioned or old goods as new
goods.
iv) represents that the goods or services has sponsorship, approval, performance,
characteristics, accessories, uses or benefits which such goods or services do not have
represents that the seller or the supplier has a sponsorship or approval or
v) affiliation which such seller or supplier does not have.
vi) makes a false or misleading representation concerning the need for or usefulness of any
goods or services;
vii) gives a warranty or guarantee as to the durability, performance or efficacy of the goods
which is not based upon adequate or proper tests. the burden of proof will lie upon him to
show that the goods were adequately and properly tested.
viii) makes to the public a representation in a form that looks like a guarantee or warranty, or a
promise to replace, maintain or repair the goods until they achieve a specified result, and the
representation is materially
ix) misleading or there is no reasonable prospect that the guarantee etc. contained in the
representation shall be carried out.

38. x) materially misleads the public about the prices at which such goods or services are available
in the market.
xi) gives false or misleading facts disparaging the goods, services or trade of another person.
The mode of representation or statement to the public may be by any method. It will be
enough if the statement comes to the knowledge of a buyer of those goods etc. therefore, says
that the representation may appear on the article, or on its wrapper or container, or on
anything attached to, inserted in or accompanying the articles or on anything on which the
article is mounted. An advertisement for sale of holiday resorts held out promises as to
appreciation both in terms of value and rent and offered “free holiday for ever” comparing
them with commercial complexes like those in Connaught Place, the promises and comparisons
were found to be false, the Commission prohibited any further portrayal of the advertisement.
The claim of another advertiser as to cure for Leuckoderma was restrained because the
treatment offered was neither medically sound, nor the clinic was being attended by a “world
renowned doctor,” as represented. An advertisement offering high rate of interest and secured
investment without proof of supporting facts as to financial base etc. has been restrained.
2. False Offer of Bargain Price
The second category is in clause (2). It includes the publication of an advertisement in a
newspaper or otherwise by which goods or services is offered at a bargain price when in fact
this is not the intention or they are not intended to be offered at that price for a reasonable
period or reasonable quantity. The bargain price for the purposes of this provision means the
price stated in the advertisement in such manner as suggests that it is lesser than the ordinary
price or a price which the person coming across the advertisement would believe to be better
than the price at which such goods area ordinarily sold. An announcement for sale of textiles at
a throw away prices, which were not verifiable because neither the quality of the goods was
mentioned nor their prices, has been held by the Commission to be unfair. An advertisement of
off season discount on fans calculated in reference to future and not present prices has been
held to be unfair. In determining which cases to select for formal action, the Federal Trade
Commission (U.S.A.) places a high priority on those matters which relate to the basic necessities
of life, and to situations in which the impact of false and misleading advertising, or other unfair
and deceptive practices, falls with cruelest impact upon those least able to survive the
consequences—the elderly and the poor. Often the type of false advertising attached by the
F.T.C. is designed to make prospective purchasers believe they will be getting a “good deal” in
terms of price if they buy the product in question.
Illustration:
A seller of goods was ordered to refrain from advertising its product for sale by use of a rice
comparison in which its actual price was compared to a higher “regular” price or a
manufacturer’s list price. The Commission ruled that it was deceptive to refer to “regular price”
unless the defendant had usually sold the items at the price recently in the regular course of

39. business. Also it was held deceptive to refer to the “manufacturer’s list price” when that list
price was not the ordinary and customary retail sales price of the items in the locality…..In
ordering enforcement of the Commission’s cease and desist order, the Court of Appeals said:
“We do not understand the Commission to hold that use of the term “manufacturer’s price list”
is unlawful per rather it is unlawful only if it is not the usual and customary retail price in the
area.”
3. Schemes Offering Gifts, etc.
The third category of unfair trade practice includes in it fold the offering of any gifts, prizes or
other items along with the goods when the real intention is different or giving the impression
that something is being offered free of price along with the goods when in fact the price is
wholly or partly covered by the price of the article sold, or some prizes are offered to the
buyers by the conduct of some lottery or chance game when the real aim is promotion of sales
or business. The Commission has also restrained what is called “bait and switch” promotion. In
this method a product is advertised at a low price only as a bait to capture the interest of the
consumer and then switch his attention to another product which the advertiser really desired
to sell from the beginning. The Monopolies and Restrictive Trade Practices Commission
restrained a prize scheme which was designed to boost the sale of cycles during the rainy
season when sales would otherwise be sluggish. The Commission advised the producer that
instead of baiting customers like that he should have given them the benefit of price reduction.
The Commission was of the view that though apparently the scheme was to confer a benefit
upon some consumers who would be selected by chance; it was injurious to the interest of
consumers as a whole inasmuch as it would deprive them of the benefit of competition which is
offered by an affluent market.
3. Non-compliance of Prescribed Standards
The fourth category of unfair trade practices includes cases where goods are sold for use by
consumer knowing or having reason to believe that they do not comply with standards
prescribed by some competent authority. The prescribed standard may relate to performance,
composition, contents, design, and construction, finishing or packing as are necessary to
prevent or reduce the risk of injury to the person using the goods.
4. Hoarding, Destruction or Refusal
The fifth and the last category of unfair trade practices include cases of hoarding, destruction of
or refusal to sell, goods or services. Clause (5) says that a practice will be unfair if it permits the
hoarding or destruction of goods, or refusal to sell the goods or to provide any services if such
conduct is intended to raise or has the effect of raising the cost of those or other similar goods
or services.

40. Monopolies and Restrictive Trade Practice
On a careful analysis of ‘unfair trade practice’ defined in section 36A of the Monopolies and
Restrictive Trade Practice, it is quite clear that the trade practice which is undertaken by the
Company for the purpose of promoting the sale, use or supply of any goods or for the provision
of any service/s adopts one or more following practices and thereby causes loss or injury to the
consumers of such goods or service whether by eliminating or restricting competition or
otherwise would amount to ‘unfair trade practice’.
The expression ‘unfair trade practice’ contained in clause (r) of sub-section (1) of section 2 of
the Act applies not only to the sale or supply of any goods but also to the provision of any
service.
Illustration:
A real estate firm Unitech Ltd. had been held guilty of resorting to “unfair trade practice” by a
consumer forum and the forum directed to pay a customer Rs 6.6 lakh for making “illegal
demands” from him after he booked a flat with it and paid the booking amount. The District
Consumer Disputes Redressal Forum, in its order, observed that the firm and its agent made
“unjustified” demands from the customer and also threatened to forfeit his deposited money.
Amrit Lal Chawla had booked a flat for Rs 5.5 lakh in a residential project, Unitech Verve at
Greater Noida, launched by the firm. Chawla alleged the company sent letters arbitrarily
increasing the rate of the flat from the initially agreed upon rate under the contract and when
he cancelled the booking and asked for refund of his deposited amount from the company, it
threatened to forfeit the same. “The action of the Unitech Ltd and its agent in raising the illegal
demands from time to time and then refusing to refund the booking amount is clearly
unjustified and amounts to unfair trade practice by them. The forum directed the firm and its
agents jointly and severally to refund to the complainant the sum of Rs 5.5 lakhs along with a
compensation of Rs 1,00,000 for physical and mental agony suffered and Rs 10,000 as the
litigation cost. The forum observed that Unitech Ltd “failed to show as to how they had raised
demands at higher rate than what was agreed upon” as it chose not to contest the complaint
despite a notice.
Caveat Emptor replaced by Caveat Venditor
In the early law, the doctrine of caveat emptor (let the buyer beware) was the philosophy of the
law of sales. Today it has been replaced by “let the seller beware”. As a result of this change of
legal philosophy, business is heavily regulated on behalf of the consuming public. The consumer
must get what he is told he is getting. Where, by any method whatsoever, a belief is created in
the minds of consumers as to some quality or utility of goods or services, and they actually fall
short of those standards, this will be unfair to consumers. As a part of the statutory framework
of consumer protection programme, such a method has been regarded by the act as unfair
trade practice. This is so because the primary theme of the provision is to protect the consumer
from the business community.

41. Inquiry into Unfair Trade Practice
The Commission may inquire into any unfair trade practice
 Upon receiving a complaint from any trade association, consumer or a registered consumer
association, or
 Upon reference made to it by the Central Government or State Government
 Upon an application to it by the Director General or
 Upon its own knowledge or information.
Relief Available
After making an inquiry into the unfair trade practice if the Commission is of the opinion that
the practice is prejudicial to the public interest, or to the interest of any consumer it may direct
that-
I. The practice shall be discontinued or shall not be repeated;
II. The agreement relating thereto shall be void in respect of such unfair trade practice or shall
stand modified.
III. Any information, statement or advertisement relating to such unfair trade practice shall be
disclosed, issued or published as may be specified
IV. The Commission may permit the party to carry on any trade practice to take steps to ensure
that it is no longer prejudicial to the public interest or to the interest of the consumer.
However no order shall be made in respect a trade practice which is expressly authorized by
any law in force. The Commission is empowered to direct publication of corrective
advertisement and disclosure of additional information while passing orders relating to unfair
trade practices.

42. Chapter 7: Suggestions
How to become a Smart Consumer?
Consumer Rights under the Act
- To know about the quality, quantity, and price of the goods and/or services being paid for+
- To be heard and be assured that your interest will receive due consideration+
- To seek legal redressal against unfair or restrictive trade practices+
- To be protected against the sale of goods and services which are hazardous and spurious to
life and property+
- To be assured wherever possible, of access to a variety of goods and services at competitive
prices+
- To consumer education+
Responsibilities as a Consumer
- To get full information regarding quality and price before making any purchase+
- To be careful about false and/or misleading advertisements+
- To purchase goods having ISI marks, Agmark,, etc. and for safety and quality+
- Obtain proper receipt/cash memo for purchase made and guarantee/warranty card duly-
stamped and signed by the seller+
- Approach the appropriate forum for redressal of consumer grievances+
- Ensure date of manufacturing, expiry date, maximum retail price etc.+
- No one can sell more than MRP+
After You Buy
What you do after you buy can be as important as what you do before you buy. These steps will
help you avoid as well as deal with any problems that might pop up.+
 Save all papers that you get with your purchase. Keep all contracts, sales receipts,
manuals and warranty documents.

43.  Ensure that the Warranty card is stamped with the seal of the Service provider, date of
purchase, term of warranty period. Any cards without these details render the warranty
null and void.
 Read and follow product and service instructions. The way you use or take care of a
product might affect your warranty rights.
Contact Trader before taking Action
One thing that always be kept in mind that before approaching Consumer For a trader must be
communicated about the defects in goods or deficiency. Such thing must be done at the earliest
opportunity and do not get late in this matter.+
Sometimes negotiation is successful. So try to negotiate and if nothing is coming out then think
for action but do not beg from the trader.+
Filing a Complaint
Complaint can be sent by post or personally filed. Normally, four copies of complaint are
required to be submitted, out of which one is forwarded to the opposite party. Complaint can
be filed and signed by complainant or his authorized agent.+
Complaint Form
The Act does not prescribe any specific form for filing a complaint. A well-drafted complaint
should be in the following format.+
Name and address of complainant+
Name and address of opposite party / parties+
Background of complaint+
Defect / Deficiency / Observed+
Efforts made by complainant to sort out the grievance+
Proofs in support of complaint+
Jurisdiction+
Limitation+
Relief claimed+

44. Place, date and signature+
Admission of Complaint
On receipt of complaint the District Forum may, by order, allow the complaint to be proceeded
with or rejected. Before rejecting a complaint, an opportunity of being heard has to be given to
the complainant.+
Procedure on Receipt of a Complaint
On receipt of the complaint, the District Forum will first decide on admissibility of the complaint
within 21 days. If it is admitted, a copy of the complaint will be sent to the opposite party
mentioned in the complaint within 21 days, asking him to give his version of the complaint. The
reply should be given within 30 days. This period can be further extended by 15 days. The
forum shall proceed to settle the dispute if the opposite party devices or disputes the
allegations in the complaint or does not reply within the time.+
Remedies Available to Consumer
a) To remove the defect pointed out by the appropriate laboratory from the goods.+
b) To replace the goods with the new goods of similar description, which are free from similar
defects.+
c) To return the price or the charges paid by the complainant+
d) To pay such amount as compensation to the consumer for any loss or injury suffered by the
consumer due to the negligence of the opposite party.+
e) To remove the defects or deficiencies in the services in question;+
f) To discontinue the unfair trade practice or the restrictive trade practice or not to repeat.+
g) Not to offer the hazardous goods for sale.+
h) To withdraw the hazardous goods from being offered for sale and+
i) To provide for adequate costs to parties.

45. Chapter 8: Table of Cases & Bibliography
Table of Cases
1. Lucknow Development Authority v. M.K.Gupta
2. Dongue v. Stevenson
3. United India Insurance Co. v. Puspalaya Printers
4. Smt. Pushpa Meena v. Shah Enterprises (Rajasthan) Ltd. (1991) 1 CPR 229].
5. T.T. (P.) Ltd. v. Akhil Bhartiya Grahak Panchayat II [1996] CPJ 239
6. Narayanan Vyankatkrishnan Iyengar v. Shakti Foods [1994] 2 CPJ 652 (Mah.)
7. Farooq Hazi Ismail Saya v. Gavabhai Bhesania (1991) 2 CPJ 452 (Guj.)
8. Smt. Laxmiben Laxmichand Shah v. Smt. Sakerben Kanji Chandan [1992] 1 Comp. LJ
177 (NCDRC)].

46. Bibliography
Books
1.Aggarwal, V.K. (2003) : “Consumer Protection –Law and Practice”,Fifth Edition.
2.Saraf, D.N. (1995): “Law of Consumer Protection in India”,
3.Singh, Avtar(2005): “Law ofConsumer Protection: Principles and Practice”
Articles
http://www.legalservicesindia.com/article/article/consumer-protection-law-in-india-1739-
1.html
http://www.ifmr.co.in/blog/2012/03/23/evolution-of-consumer-protection-laws-in-india-part-
1/
http://www.yourarticlelibrary.com/consumers/consumer-rights-under-the-consumer-
protection-act-india/8786/
Miscellaneous
http://en.wikipedia.org/wiki/Consumer_protection
http://www.consumerrights.org.in/rights.htm