Consumer Protection Law

Consumer law
LLM-Ii SEM-Iii
Pune university.
BY ASST. PROF. SURABHI TOLANI.

SYLLABUS:
OBJECTIVES: To obtain an insight into the provisions and working on the Consumer
Protection law.
1. INTRODUCTION:
a) Historical perspective of consumer protection in India
b) United Nations & consumer Protection
c) Laws dealing with consumer complaints
d) Caveat Emptor
2. CONSUMER PROTECTION ACT
a) Aims & Objects of the Act
b) Consumers
c) Consumer Dispute
d) Defect in Goods and Services
e) Unfair Trade Practices

3. DEFICIENCY IN SERVICES
a) Meaning & Instances
b) Negligence
c) Deficiency in service in various professions: Insurance
services, Banking and Financial services, Housing etc.
4. PROCEDURAL PROVISIONS
a) National Commission
b) State Commission

5. CONSUMER PROTECTION ACT &
CONFLICT WITH OTHER ENACTMENTS
6. CONSUMER PROTECTION
COUNCILS
7. CONSUMER DISPUTES REDRESSAL
AGENCIES

Suggested Readings:
1. Saraf, D.N., Law of Consumer Protection in India.
2. Avtar Singh, The Law of Consumer Protection: Principles and Practice.
3. J.N.Barowalia, Commentary on Consumer Protection Act 1986.
4. P.K.Majundar, The Law of Consumer Protection In India
5. D.P.Wadhwa & W.L.Rajah, The Law of Consumer Protection
6. R.N.P.Choudhary, Consumer Protection Law
7. V.Balakrishna Eradi, Consumer Protection Jurisprudence
8. Gupta S.N., Banks & Consumer Protection Law
9. Kaushal Anoop, Medical Negligence & Legal remedies
10. S.K.Verma & M.Afzal Wani, A Tretise on Consumer Protection Law
11. Landmark Judgement on Insurance & Consumer Protection t, NCDRC
12. Landmark Judgement on Consumer Protection, NCDRC.

MODULE 01: INTRODUCTION
When we buy a good or service, we rarely have
adequate knowledge about its quality and safety. We are
quite concerned about getting cheated. This is when the
need for consumer protection arises. In the past few years,
the subject of consumer protection has become a matter
of increasing public concern because unscrupulous
business tactics seriously affect the nation‘s well-being by
contributing to social unrest and by causing undue
financial distress to consumers. The consumer is the one
who pays to consume the goods and services produced.
As such, consumers play a vital role in the economic
system of a nation. In the absence of their effective
demand, the producers would lack a key motivation to
produce, which is to sell to consumers.

Who is a consumer?
A consumer is defined as someone who
acquires goods or services for direct use or
ownership rather than for resale or use in
production and manufacturing. A
consumer is one who decides whether or
not to buy an item at the store, or someone
who is influenced by advertisement and
marketing. Every time someone goes to a
shop and buys a thing, they make a
decision as a consumer.

(Sec.2(d) of the Consumer Protection Act, 1986):
Consumer means any person who –
(i) buys any goods for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred
payment, and includes any user of such goods other than the person
who buys such goods for consideration paid or promised or partly paid
or partly promised, or under any system of deferred payment when such
use is made with the approval of such person, but does not include a
person who obtains such goods for resale or for any commercial
purpose; or
(ii) hires or avails of any services for a consideration which has been paid
or promised or partly paid and partly promised, or under any system of
deferred payment, and includes any beneficiary of such services other
than the person who hires or avails of the services for consideration paid
or promised, or partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the approval
of the first mentioned person; (but does not include a person who avails
of such services of any commercial purpose).

Consumer Rights:
Right to
Safety
Right to
be
informed
Right to
choose
Right to
be heard
Right to
seek
redressal
Right to
consumer
education

Consumers’ responsibilities:
1. Dealing
with
Advertise-
ments
2. Buying
Quality
Certified
Products
3. Demanding
Bill of the
Purchase
4. Being a
Green
Consumer

HISTORICAL BACKGROUND OF CONSUMER
PROTECTION LAWS IN INDIA
Right to
Safety
Right to
be
Informed
Right to
be Heard
Right to
Choose.
Consumer Protection is a
concept that was first
introduced by John Fitzgerald
Kennedy, the 35th President
of the United States on
15th March 1962. He spoke
about this concept in a
special speech to the
Congress. His speech stressed
protecting the consumer’s
interest. Kennedy also spoke
about the four basic rights of
the consumer, namely:

His discussion sparked a deliberation and
subsequent legislation to protect consumers.
15th March is celebrated as World Consumer
Rights Day, taking inspiration from Kennedy.
Another important name in the international sphere while discussing consumer
protection is Ralph Nader. He is the author of the book “Unsafe at Any Speed”
which indicates the faulty design of automobiles. The book led to a series of
landmark laws that have prevented multiple motor vehicle accidents thus
curbing deaths and injuries. He revolutionized Consumer Protection in the United
States of America.
In order to understand the development of
consumer protection in India, it is important
to trace the beginnings of the formation of
the concept.

Ancient India:
Ancient India witnessed the
supremacy of the Vedas as a
religious text, coming from God
himself. The Vedas was strictly
followed by the majority in the
ancient Indian society. Apart from
the Vedas, this period also gave
rise to the Code of Chanakya,
Manu Smriti, Narada Smriti and so
on. These ancient codes
contained provisions which sought
to safeguard the interests of the
consumer, with the aim of
consumer safety. The punishment
was also granted when the
consumer-related provisions were
gone against.
Among the Dharmas, the
most authoritative texts are:
Manu Smriti
Yajnavalkya Smriti
Narada Smriti
Bruhaspati Smriti
Katyayana Smriti.
Among these, Manu Smriti
was the most influential.

Manu Smriti:
Manu Smriti was all about the social, political and
economic conditions of the society in the ancient
times. It stressed on ethical trade practices, punishing
those who were unfair to the consumers. Its
prescribed code of conduct extended to
adulteration as well, which is mixing of a commodity
with another, resulting in impurity. All goods had a
market price or a sale price, as set by the king. All
weights and measures were inspected every six
months, and the results of these inspections were
kept a record of. Such efficient means of consumer
protection has developed in such an early stage of
settlement is noteworthy.

Kautilya’s Arthashastra:
Kautilya’s Arthshastra clearly defined laws regulating weights and measures. A
penalty was proposed traders who indulged in adulteration of goods namely
grains, medicine, perfumes, salt and sugar. Arthashastra describes the role of
the State in regulating trade and its duty to prevent crimes against
consumers. Black marketing and unfair trade practices were strictly looked
condemned by Kautilya. There were punishments prescribed for different types
of cheating, which were stringent. These fines could be as severe as cutting off
the cheater’s hand. The rights of the traders were also well protected by the
Arthashastra.
The Arthashastra was created during Chandragupta’s period. This period
witnessed healthy trade practices where traders were to possess a license to
sell, which was given on permission. The king granted a margin of profit to sellers
while fixing sale prices. The State was responsible for protecting the consumers
against unfair prices and fraudulent transactions. Such acts were punishable,
including smuggling and adulteration, especially of food. Consumers were
ensured this protection by an easily accessible justice system through different
sets of courts. Providing justice was the duty of the king.

A shift in the time period of India from ancient to
medieval resulted in a focus on Islam as a
religion and the laws of Islam. The Holy Quran,
the main text of the Muslims, also stressed the
protection of consumers. The Quran has verses
that indicate that the use of unjust weights and
measures is unacceptable. During the period of
the Sultanate, local conditions determined the
price of commodities. Hence, both the Hindu
and the Muslim scriptures that were being used
together by the kings of different states of India
promoted consumer protection.

• Like the Hindu texts, the Quran also contained various rules and regulations for
protecting consumers from the unfair and unjust malpractices indulged in by
sellers. During the rule of Alauddin Khalji, the market had been controlled by
various injunctions and prescriptions. The king fixed prices of the grains. There
was a strict price control mechanism implemented in the market. Different
shopping areas were established for different goods, namely
• Grains
• Cloth, sugar, butter, oil and so on
• Horses, slaves and cattle
• Miscellaneous commodities.
• Shopkeepers were also punished for under weighing their goods.

Modern Period:
In the modern period, the previous
traditional legal systems
established by Indian kings were
replaced by new modern laws.
The British introduced the English
Common Law in India along with
other legislative measures for the
public and in turn, the consumers.

The Indian Contract Act, 1872
The Sale of Goods Act, 1930
Indian Partnership Act, 1932
The Agricultural Produce(Grading and Marketing) Act, 1937
The Drugs Act, 1940
The Drugs and Cosmetic Act 1940
These legislations proved to be immensely effective in saving the interests of the consumers
during the time of the British. The rules were now uniform across the country and not arbitrary
to the opinions of the various kings of the Ancient and Medieval periods.
Some of these legislations are as follows:

Post-Independence Period:
When India attained independence, it adopted the
Anglo-Saxon system of administration of justice.
Hence, the previous legislation that was established
by the British continued to function in independent
India.
Along with the existing legislation, the country was
on its path to more laws through the creation of the
Indian Constitution and its adoption in 1950. Due to
the democratic nature of the Constitution, the prime
focus of the laws was the benefit of the general
public, who were also consumers.

Certain implications of the Indian
Constitution that may apply to
consumers :
Article 14 of the constitution implies equality before the law and
equal protection of laws. This results in manufacturers,
producers, traders, sellers and consumers having an equal
position before the law.
Article 39 has two clauses, (b) and (c), according to which the
state is bound to direct its policy to ensure the distribution of the
ownership of the material resources of the society. This
distribution should be done to serve the common good.
According to Article 43, the state must strive to develop an
economic organization or to make legislation in order to secure
a decent standard of life to all the workers. These workers are
the ones who constitute the bulk of the consumers.

The new legislation enacted
after Independence:
• The Prevention of Food Adulteration Act, 1954
• The Essential Commodities Act, 1955
• The Monopolistic Restrictive And Unfair Trade Practises Act, 1969
• The Standard of Weights And Measures Act, 1976
• The Bureau of Indian Standards Act, 1986
• The Consumer Protection Act, 1986
• The Trade Marks Act, 1999
• The Competition Act, 2002
• The Consumer Disputes Redressal agencies- the National Commission, the State Commission,
and the District Forum soon started working and has rapidly resulted in quick action taken
against those who exploit the consumers.
• The efficient justice system in the sphere of consumer protection that we see today is a resulted
of all these previous developments that have taken place in the past. This advanced system and
its roots must be appreciated.

United Nations & consumer
Protection:
• Sherman Act: The Act declared every contract, combination
in the form of trust or otherwise or, conspiracy in restraint of
trade or commerce, to be illegal.
• Federal Trade Commission Act, 1914 and the Clayton Act.
• The Federal Trade Commission Act set up new machinery, the
Federal Trade Commission which shared with the department
of justice the responsibility for enforcement of all anti-trust
legislation. The Act prohibited unfair methods of competition.
• The Clayton Act was designed specially to deal with the
problems of mergers and to prohibit certain types of individual
conduct which were beyond the reach of the Sherman Act.

• The Federal Trade Commission Act set up
new machinery, the Federal Trade
Commission which shared with the
department of justice the responsibility for
enforcement of all anti-trust legislation. The
Act prohibited unfair methods of
competition. The Clayton Act was designed
specially to deal with the problems of
mergers and to prohibit certain types of
individual conduct which were beyond the
reach of the Sherman Act.

United Nations guidelines for consumer
protection
(as expanded in 1999):
• Objectives:
• (a) To assist countries in achieving or maintaining adequate protection for
their population as consumers;
• (b) To facilitate production and distribution patterns responsive to the needs
and desires of consumers;
• (c) To encourage high levels of ethical conduct for those engaged in the
production and distribution of goods and services to consumers;
• (d) To assist countries in curbing abusive business practices by all
enterprises at the national and international levels which adversely affect
consumers;
• (e) To facilitate the development of independent consumer groups;
• (f) To further international cooperation in the field of consumer protection;
• (g) To encourage the development of market conditions which provide
consumers with greater choice at lower prices;
• (h) To promote sustainable consumption.

General principles:
Governments should develop or maintain a strong
consumer protection policy, taking into account the
guidelines set out below and relevant international
agreements. In so doing, each Government should
set its own priorities for the protection of consumers in
accordance with the economic, social and
environmental circumstances of the country and the
needs of its population, bearing in mind the costs and
benefits of proposed measures.

needs of the guidelines:
(a) The protection of consumers from hazards to their health and safety;
(b) The promotion and protection of the economic interests of consumers;
(c) Access of consumers to adequate information to enable them to make informed choices
according to individual wishes and needs;
(d) Consumer education, including education on the environmental, social and economic
impacts of consumer choice;
(e) Availability of effective consumer redress;
(f) Freedom to form consumer and other relevant groups or organizations and the opportunity
of such organizations to present their views in decision-making processes affecting them;
(g) The promotion of sustainable consumption patterns.

Guidelines:
Physical safety
Promotion and protection of consumers’ economic interests
Standards for the safety and quality of consumer goods and services
Distribution facilities for essential consumer goods and services
Measures enabling consumers to obtain redress
Education and information programmes
Promotion of sustainable consumption
Measures relating to specific areas
International cooperation

Consumers International (CI):
Consumers International (CI) is the world
federation of consumer groups that serves as
the only independent and authoritative
global voice for consumers. It is based in
London, England.
Founded on 1st April 1960, currently with over 240 member
organisations in 120 countries around the world, the organisation
continues to build a powerful international movement to empower and
protect consumers everywhere. In campaigning for the rights of
consumers across the world, CI seeks to hold corporations to account
and acts as a global watchdog against any behaviour that threatens,
ignores or abuses the principles of consumer protection.

The organisation was first established in 1960 as the
International Organisation of Consumers Unions
(IOCU) by national consumer organisations. The
original members recognised that they could build
upon their individual strengths by working across
national borders. The organisation then rapidly
grew and soon became established as the voice
of the international consumer movement on issues
such as: product and food standards, health and
patients‘ rights, the environment and sustainable
consumption, and the regulation of international
trade and public utilities.

Caveat emptor:
Latin maxim – meaning-
let the buyer be aware.
The principle of Caveat emptor is
explained in Section 16 of the Sale of
Goods Act 1930 which states that there is
no implied condition or warranty as to
quality or fitness for any particular purpose
of goods supplied.”

The History of Caveat emptor:
In the 19th century, the attitude of common law towards
the buyer can be understood by the maxim Caveat
emptor which means let the buyer beware. This maxim
explains that a purchaser must carefully examine and
judge what is best for him. The purchaser should not take
the risk of the condition and quality of the object which he
needs to buy, he must protect himself by a warranty. The
philosophy behind the rule of Caveat emptor basically was
that buyer shall apply his own skill and judgment before
buying. It is based on the fundamental principle that when
a buyer is satisfied with the suitability of the product for his
use, no subsequent right will be left with him to reject the
same. When the rule of caveat emptor originated, it was
quite rigid and there was no scope for any subsequent
change in the rule.

In English Sale of Goods Act, 1893, it is highly
noticeable and evident that the seller’s duties as
to requirements of disclosure when a product is
sold was minimal. There was no duty upon the
seller to provide information and proper
examination of the goods by the buyer was
considered over and above any other duty. The
Concepts which could be used to shift the
burden as to quality and fitness on the seller such
as ‘fitness of goods’ and ‘merchantability’, were
not encouraged. Another strong statement which
was present in Section 11(1)(c) in the said Act,
which mandated that the buyer could not reject
the goods on any ground in cases where there
was sale of ‘specific’ goods. Thus, it is highly
noticeable that the law was bent towards the
seller and in those times, one could not even find
a corresponding rule which would put the burden
on the seller.
Cont.

The Fallacy & The Need For
Change:
At the time of its origin the rule of Caveat emptor prevailed in
its absolute form but it was later categorised as detrimental to
the development of commerce and trade. Rule of Caveat
emptor in its absolute form was highly detrimental to the buyer
because of the absence of the element of reasonable
examination. Therefore a buyer would have no recourse
against the seller who is aware of the latent defect but did not
aware the buyer about the same and the buyer cannot detect
that defect (as it can not be detected by reasonable
examination).
Another strong reason for the fallacy of the rule of Caveat
emptor, is the need for providing protection to the buyer who
purchases the goods in good faith, that is, where the buyer
purchases goods from the seller by relying on his skill and
judgment. Thus the rule was subsequently diluted so as to give
proper recognition to the relationship between the seller and
the buyer and in order to give rise to a scenario wherein
commercial transactions are encouraged.

How it changed to Caveat
venditor?
For the aforementioned reasons, the rule of Caveat
emptor for the first time suffered backlash in the case
of Priest v. Last, wherein reliance was placed on the
buyer relying on seller’s skill and judgment and the
buyer was allowed to reject the goods for the first
time. In this case the buyer purchased a hot water
bottle relying on the seller’s skill and judgment. It was
observed that if a buyer purchases an object relying
on the seller’s skill and judgment then the buyer will
be allowed to reject the same on the occurrence of
any defect. This was the first ever decision in
common law in which importance was given to the
buyer’s reliance on the seller’s judgment and skill.

Cont.
Gradually this rule gained prominence and the seller’s obligations
have been given a proper shape along various case laws and
statutes limiting the rule of Caveat emptor to ‘reasonable
examination’. In cases like milk containing typhoid germs,
contaminated beer, the Courts have been generous enough to
establish that where the defects would not have been traced by
reasonable examination in ordinary circumstances, the buyer will be
exempted from this duty.
Further, in Harlingdon & Leinster Enterprises Ltd v. Christopher Hull
Fine Art Ltd, the buyer claimed that he had the right to reject the
painting as it was not of the original painter. So, it was observed that
where the buyer has more expertise in a given field and is more
reasonable than the seller then it would be completely wrong to
suggest that the buyer would have the right to reject the purchased
object. Therefore the seller is bound by the duty to make known to
the buyer all the defects in the goods and the information relating
to the usage of goods. This obligation of the seller is irrespective of
his own judgment and skill because what matters is what he is
expected to have and not what he has.

Judicial Trends:
In Ward v. Hobbes (1878) 4 AC 13, the House of Lords held that
if a seller uses artifice or disguise to conceal the defects in the
product which is to be sold, it would amount to fraud on the
buyer; still no duty to disclose the defects in the product is
imposed on the seller by the doctrine of caveat emptor. An
obligation to use care and skill while purchasing goods is
imposed on the buyer by the doctrine of Caveat emptor.
The Court of Appeal in Wallis v. Russel (1902) 2 IR 585,
explained the scope of caveat emptor and laid down that the
rule of Caveat emptor implies that “the buyer must take care”.
It applies to the purchase of those things upon which buyer
can exercise his own skill and judgment, e.g. a picture, book,
etc (also known as specific goods); it also applies in the cases
where by usage or by a term of contract it is implied that the
buyer shall not rely on the skill and judgment of the seller.

Exceptions To The Rule Of Caveat
emptor (Section 16 of The Sale of
Goods Act, 1930):
Fitness for buyers purpose [Section 16(1)]:
Section 16(1) of the said Act provides that in
situations where the seller is aware either
expressly or by necessary implication of the
purpose for which a buyer needs to purchase a
specific product, further, the goods are of such
description which the seller supply in his ordinary
course of business and by relying upon the
judgment and skill of the seller, the buyer
purchases that product, then the goods should
be in accordance with the purpose. In other
words, this section explains the circumstances
where the seller has an obligation to supply the
goods to the buyer as per the purpose for which
he intends to buy the goods.

• Requirements of Section 16(1) are as follows:-
• The buyer should explain the particular purpose for which he is
making the purchase to the seller.
• The buyer should rely on the seller’s skill and judgment while
making a purchase.
• The goods must be of a description which the seller in his ordinary
course of business supply.
• In Shital Kumar Saini v. Satvir Singh, a compressor was
purchased by the petitioner with one year warranty. The defect in
the product appeared within three months. The petitioner sought a
replacement. The seller replaced it but did not provide any further
warranty. The State Commission stated that an implied warranty
was guaranteed under section 16 of the Sale of Goods Act, 1930.

Sale under Trade Name
[Proviso to S. 16(1)]
In some cases, a buyer purchases goods not by
relying on the skill and judgment of the seller but by
relying on the product’s trade name. In such cases,
it would be unfair that the seller is burdened with
the responsibility of quality. The proviso to Section 16
deals with such cases. It provides that:
“Provided that, there is no implied condition as to
fitness for any particular purpose in the case of a
contract for the sale of a specified product under its
patent or other trade names.

Merchantable quality
[Section 16(2):
• The second most important exception to the rule of Caveat emptor
is incorporated by Section 16(2) of the Act. The Section imposes a
duty upon the dealer to deliver the goods of merchantable quality.
• Section 16(2) states that there is an implied condition that when
goods are purchased by description from a seller who deals in the
goods of that description, the goods shall be of merchantable
quality.
• Meaning of Merchantable Quality: It implies that when the
goods are purchased for resale, the goods must be capable enough
of passing in the market under the name by which they are sold.

Merchantable quality
depends on the following two
factors:-
• Marketability- Merchantability does not mean that the goods are
saleable just because the goods look all right, but they shall be
marketable at their full value. “Merchantability does not mean that
the goods are saleable even if it has defects which makes it unfit for
its proper use but is not noticeable on ordinary examination.
• Reasonable fitness for general purposes- “Merchantable quality”
means, that if goods are purchased for self-use, they must be fit for
the purpose for which they are generally used. Example: A person
bought a hot-water bottle which is generally used for the application
of heat. The bottle burst to scald the person’s wife. The seller was
held to be liable.

Examination by buyer [Proviso
to S. 16(2)]:
The proviso to S. 16(2) provides that “if
upon examination of the goods to be
purchased, the defects ought to have
been revealed, then no implied condition
as regards to the defect will exist.” The
requirement provided in the proviso would
be considered as satisfied fully when the
buyer was given full opportunity to
examine the goods and the argument that
the buyer did not use that opportunity will
not make any difference, an existence of
opportunity is sufficient in such cases.

Conditions implied by trade
usage [Sec. 16(3)]:
• Section 16(3) gives statutory force to the conditions implied by the
usage of a particular trade. It states:
• “An implied condition or warranty as to the quality or fitness for
any particular purpose may be annexed by the usage of trade.”
• In the case of Peter Darlington Partners Ltd v Gosho Co Ltd, a
contract for the sale of canary seeds was subjected to the custom of
trade and held that if there exist any impurities in the seeds the
buyer will get a rebate on the price but he would not reject the
goods. However, a custom which is unreasonable will not affect the
parties’ contract.

Conclusion of caveat
emptor:
Thus, it can be concluded from the aforementioned
analysis that the rule of Caveat emptor is being
taken over by the rule of Caveat venditor and is
dying a slow death. The change is taking place in
order to create a more consumer-oriented market
wherein transactions of commercial nature will be
encouraged. Such change will help to create a
more consumer-friendly market and an appropriate
balance can be maintained between the rights and
obligations of the buyer and the seller. But it should
be noted that if this approach is taken too far, it
might end up in becoming extremely pro buyer and
then some people might end up misusing the
protection under the law.

Consumer Protection Law

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