The Consumer Protection Bill, 2019

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The Consumer Protection Bill, 2019
08 Aug 2019

Introduction

The Consumer Protection Bill, 2019 (Bill) seeks to replace the Consumer Protection Act, 1986 (Act).
The Bill has been passed in the Rajya Sabha on 6 August 2019.
This update addresses the major changes that are likely to be introduced in the law relating to consumer protection.

The Bill has been introduced with a view to widen the scope of the regulatory framework in relation to consumer protection and grievance redressal. The Bill, inter alia, introduces concepts such as “unfair contracts”, “product liability” and provisions relating to goods and services dealt with on online platforms.

The Bill also establishes a network of grievance redressal mechanism for effective resolution of disputes.

Highlights of the Bill

Definition of a “consumer”: the Bill has introduced a wider and comprehensive definition of a consumer.

The Bill defines a consumer as a person who buys any goods or hires or avails any service, for a consideration, whether offline or online through electronic means or by teleshopping, direct selling or multi- level marketing.

However, this does not include a person who obtains goods for resale or avails service for any commercial purpose.

Product liability: the Bill imposes the liability to compensate, on a product manufacturer, product seller or a product service provider, in the event any harm is caused to a consumer due to a defective product manufactured or deficiency in product related services.

Liability of a product manufacturer: an action for product liability can be brought by a consumer against a product manufacturer in the following cases:

  • the product contains a manufacturing defect or is defective in design; or
  • the product does not adhere to the manufacturing specifications; or
  • the product does not conform to the express warranty, that is, the product is distinct from the material statement, affirmation, promise or description made in relation to it; or
  • the product does not contain adequate instructions of correct usage or any warning regarding improper or incorrect usage.

However, the product manufacturer will not be liable if the manufacturer had provided adequate warnings and instructions in relation to the product and:

  • the product was purchased by an employer for use at the workplace; or
  • the product was sold as a component to be used in another product and the harm was caused to the consumer only by use of the end product in which the component or material was used; or
  • the product is legally meant to be used or dispensed only by or under the supervision of an expert; or
  • the complainant, while using the product, was under the influence of alcohol or a prescription drug, not prescribed by a medical practitioner.

The product manufacturer will also not be liable for failing to instruct or warn about obvious danger that are commonly known to the consumer of such products.

Liability of a product service provider: An action for product liability can be brought against a product service provider in the following cases:

  • the service provided was faulty or inadequate in terms of the quality, nature or manner of performance as required to be provided under any law or contract or otherwise; or
  • the service provider was negligent or consciously withheld information that caused harm; or
  • the service provider did not provide adequate instructions or warnings in relation to the service so as to prevent harm; or
  • the service did not conform to express warranty or the terms and conditions of the contract.

Liability of a product seller: an action for product liability can be brought against a product seller (who is not a manufacturer) in the following cases:

  • he exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or
  • he has altered or modified the product and the harm was caused due to such alteration or modification; or
  • he has made an independent express warranty of a product and such product failed to conform to the express warranty, causing the harm; or
  • the product has been sold by him and the identity of product manufacturer of such product is not known; or
  • the product has been sold by him and the product manufacturer cannot be served with a notice or a warrant or he is not subject to the law of India; or
  • he failed to exercise reasonable care in assembling, inspecting or maintaining such product; or
  • he failed to convey, while selling, the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product thereby proximately causing the harm

However, an action of product liability cannot be brought against the product seller if the product was misused, altered, or modified at the time of harm.

Deficiency of services: the Act recognized “deficiency of services” in terms of fault or inadequacy in the quality, nature and manner of performance of a service, as required to be maintained by or under or in pursuance of a contract.

The Bill now adds that any act of negligence, omission or commission by a person which causes loss or injury to the consumer, or deliberate withholding of relevant information, also amount to a deficiency.

Accordingly, a complaint may be filed by a consumer if the services availed by him suffer any deficiency.

Unfair contracts: An unfair contract is defined as:

  • A contract executed between a manufacturer/trader/service provider on one hand, and a consumer on the other; and
  • Such contract contains terms that cause significant change in the rights of a consumer, such as:
  • The contract requires excessive security deposits to be given by a consumer in order to perform contractual obligations; or
  • The contract imposes penalty on a consumer for the breach of contract and such penalty is disproportionate to the loss incurred by the opposite party due to such breach; or
  • The contract disallows acceptance of early repayment of debts on payment of applicable penalty; or
  • The contract allows unilateral termination of the contract by one party, without any reasonable cause; or
  • The contract allows or has the effect of allowing the manufacturer/trader or the service provider to assign the contract without the consent of the consumer and such assignment causes detriment to the consumer; or
  • The contract imposes unreasonable charge, obligation or condition to the disadvantage of the consumer.

Additionally, the State and the National Disputes Redressal Commission have also been given the power to determine whether the terms of a contract are unfair and if so, to declare such terms to be null and void.

Regulation of e-commerce: the Bill defines e-commerce as the purchase and sale of goods or services through digital or electronic network. The Bill also empowers the Central Government to make rules in respect of regulation of ecommerce.

Unfair trade practices: in addition to the provisions for unfair trade practices such as false representation and misleading advertisements under the Act, the Bill has also introduced the following:

  • failure to issue a bill or receipt;
  • refusal to accept a good returned within 30 days; and
  • disclosure of personal information given in confidence, unless required by law or in public interest.

Grievance redressal mechanism: the Bill introduces the resolution of consumer disputes between parties by way of mediation.

Additionally, the grievance redressal mechanism provides for the establishment of:

  • District Consumer Disputes Redressal Commission to entertain complaints for value of goods or services paid as consideration not exceeding INR 1 crores.
  • State Consumer Disputes Redressal Commission to entertain complaints for value of goods or services paid as consideration exceeding INR 1 crores but not exceeding INR 10 crores; and
  • National Consumer Disputes Redressal Commission to entertain complaints for value of goods and services paid as consideration exceeding INR 10 crores.

Conclusion

The Bill is a welcome change for the protection of consumers. While the Act provided for effective resolution of disputes, the Bill goes one step further, and expressly recognizes the rights of a consumer. Most importantly, the Bill recognizes the requirement of fair and balanced agreements between consumers and manufacturers/service providers.

Additionally, the Bill extends the ambit of consumer protection to online transactions and imposes greater liability on a manufacturer, service provider and seller in relation to the products.