Consumer Protection Act, 1986

The Consumer Protection Act, 1986 was enacted to provide a simpler and quicker
access to redress of consumer grievances. The Act seeks to promote and protects the
interest of consumers against deficiencies and defects in goods or services. It also
seeks to secure the rights of a consumer against unfair trade practices, which may be
practiced by manufacturers and traders.
The set-up of consumer forum is geared to provide relief to both parties, and
discourage long litigation. In a process called 'informal adjudication', forum officials
mediate between the two parties and urge compromise.

The Act applies to all goods and services unless specifically exempted by the Central
Government. It covers all the sectors whether private, public or cooperative.

This Act has provided machinery whereby consumers can file their complaints which will
be heard by the consumer forums with special powers so that action can be taken
against erring suppliers and the possible compensation may be awarded to consumer
for the hardships he has undergone.

The consumer under this law is not required to deposit huge court fees, which earlier
used to deter consumers from approaching the courts. The rigours of court procedures
have been replaced with simple procedures as compared to the normal courts, which
helps in quicker redressal of grievances. The provisions of the Act are compensatory in
nature.

Please remember, consumer courts provide redress only in cases of products or services
for personal use, defects in products used for commercial purposes are not entertained.

The industrial revolution and the development in the international trade and commerce has led to
the vast expansion of business and trade, as a result of which a variety of consumer goods have
appeared in the market to cater to the needs of the consumers and a host of services have been
made available to the consumers like insurance, transport, electricity, housing, entertainment,
finance and banking. A well organised sector of manufacturers and traders with better knowledge
of markets has come into existence, thereby affecting the relationship between the traders and the
consumers making the principle of consumer sovereignty almost inapplicable. The
advertisements of goods and services in television, newspapers and magazines influence the
demand for the same by the consumers though there may be manufacturing defects or
imperfections or short comings in the quality, quantity and the purity of the goods or there may
be deficiency in the services rendered. In addition, the production of the same item by many
firms has led the consumers, who have little time to make a selection, to think before they can
purchase the best. For the welfare of the public, the glut of adulterated and sub-standard articles
in the market have to be checked. Inspite of various provisions providing protection to the
consumer and providing for stringent action against adulterated and sub-standard articles in the
different enactments like Code of Civil Procedure, 1908, the Indian Contract Act, 1872, the Sale
of Goods Act, 1930, the Indian Penal Code, 1860, the Standards of Weights and Measures Act,
 1976 and the Motor Vehicles Act, 1988, very little could be achieved in the field of Consumer
Protection. Though the Monopolies and Restrictive Trade Practices Act, 1969 arid the Prevention
of Food Adulteration Act, 1954 have provided relief to the consumers yet it became necessary to
protect the consumers from the exploitation and to save them from adulterated and sub-standard
goods and services and to safe guard the interests of the consumers. In order to provide for better
protection of the interests of the consumer the Consumer Protection Bill, .1986 was introduced in
the Lok Sabha on 5th December, 1986.
STATEMENT OF OBJECTS AND REASONS
The Consumer Protection Bill, 1986 seeks to provide for better protection of the interests of
consumers and for the purpose, to make provision for the establishment of Consumer councils
and other authorities for the settlement of consumer disputes and for matter connected therewith.
2. It seeks, inter alia, to promote and protect the rights of consumers such as-
(a) the right to be protected against marketing of goods which are hazardous to life and property;
(b) the right to be informed about the quality, quantity, potency, purity, standard and price of
goods to protect the consumer against unfair trade practices;
(c) the right to be assured, wherever possible, access to an authority of goods at competitive
prices;
(d) the right to be heard and to be assured that consumers interests will receive due
consideration at appropriate forums;
(e) the right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumers
Basic rights of consumers include:
1. Right to be protected against marketing of goods and services which are hazardous
to life and property.
2. Right to be informed about the quality, quantity, standard and price of goods or
services so as to protect the consumer against unfair trade practices.
3. Right to be assured, wherever possible, access to variety of goods and services at
competitive prices.
4. Right to be heard and to be assured that consumers interests will receive due
consideration at appropriate forums.
5. Right to seek redressal against unfair trade practices.
6. Right to consumer education.
Consumer redressal forum
Under the Consumer Protection Act, every district has at least one consumer redressal
forum also called a consumer court. Here, consumers can get their grievances heard.
Above the district forums are the state commissions. At the top is the National
Consumer Disputes Redressal Commission in New Delhi.

A written complaint to the company is taken as proof that the company has been
informed. The complaint must be backed by copies of bills, prescriptions and other
relevant documents, and should set a deadline for the company to respond. Consumers
can also complain through a consumer organisation.
Claims of less than Rs. 5 lakh should be filed with district forum, claims of Rs. 5-Rs. 20
lakh directly with the state commission, and claims of more than Rs. 20 lakh with the
National Commission.
CONSTRUCTION OF THE ACT

The consumer protection act,1986 is a social benefit oriented legislation

and the provisions of the act have to be construed as broadly as possible
in favour of the consumer to achieve the purpose of the enactment but
without violence to its language. The concept of strict liability and a
duty of reasonable care is also engrained in this act.
The definition of service in section 2(1)of the consumer protection act
,1986 did not expressively include housing construction before
1993.yet the supreme court hold that, having regard of the object of the
act, the authorities constituted under the act could entertain a complaint
by a consumer for any defect or deficiency in relation to instruction
activity against a private builder or a statutory authority like the lucknow
development authority.Facility of housing construction, though then
not expressly included , was held to be service of any description which
is available to potential users within the definition as it then existed the
amendment expressly including housing construction was held to have
been made by way of abundant caution. Similarly the definition of
consumer in sec.2(1)(d)(1) of the same act, which excludes buyers of
goods for any commercial purpose ,was held not to exclude a buyer who
purchases goods for self employment even beforehand explanation
clearifying this meaning was added in this definition.1And interpreting
sec 2 (1)(d)(2) of the same act, it has been held that parents who hire the
services of a hospital and their child for whom the services are hired are
both consumers and can independently claim damages.2Although service
rendered by governmental hospitals /nursing homes and private
hospitals/nursing homes who render free service without any charge to
every person does not fall within the definition of service and the
consumer for a will have jurisdiction to decide these claims 3.The foraa
under the C.P.A. will have jurisdiction to entertain claims regarding
1
LAXMI ENGINEERING WORKS VS P.S.G. INDUSTRIAL INSTITUTE,1995;AIR 1995 SC 1428
2
SPRING MEADOWS HOSPITALS VS HARGOL AHLUWALIA ;AIR 1998 SC 1801
3
KISLIOR LAL VS CHAIRMAN,EMPLOYEES STATE INSURANCE CORPRATION;AIR 2007 SC 1819
deficiency in service unless there jurisdiction is expressly barred despite
the fact that other courts and for a have jurisdiction to entertain the
claims4 . liberal view was also taken in holding that though the foraa
under the act are judicial authority ,they are not hampered by sec. 34 of
the Arbitration Act,19405 and its provisions have to be widely
construed.6 On the same principle bar of jurisdiction of civil courts in a
co operative socities act for deciding a dispute between members and the
society has been held not to apply to forums under the the C.P.A ,19867

HISTORICAL BACKGROUND OF THE ACT

Consumer Protection has its deep roots in the rich soil of Indian civilization, which dates back to 3200
B.C. In ancient India, human values were cherished and ethical practices were considered of great
importance. However, the rulers felt that the welfare of their subjects was the primary area of concern.
They showed keen interest in regulating not only the social conditions but also the economic life of the
people, establishing many trade restrictions to protect the interests of buyers. This article examines the
historical perspective of consumer protection in India from the Vedic age1 (ancient period) to the
modern period. It also briefly analyzes the development of consumer law in India. Finally, an attempt is
made to discuss the legal framework of the Indian Consumer Protection Act of 1986 which led to the
evolution of a new legal culture in India.
Consumer Protection in Ancient India: A Historical Perspective Introduction In ancient India, all sections
of society followed Dharma-sastras(Dharma), which laid out social rules and norms, and served as the
guiding principle governing human relations. The principles of Dharma were derived from Vedas. Vedas
were considered the words of God, and law was said to have divine origin which was transmitted to
society through sages. Thus, Vedas were the primary sources of law in India.
Many writers and commentators of the ancient period documented the living conditions of the people
through their innovative and divine writings, including Smriti (tradition) and sruti (revelation),and also
prescribed codes to guide the kings and rulers about the method of ruling the State and its subjects.
Consumer protection was also a major concern in their writings. Among the Dharmas, the most
authoritative texts are a) the Manu Smriti (800 B.C. to 600 B.C.); b) the Yajnavalkya Smriti (300 B.C. to
100 B.C); c) the Narada Smriti (100 A.D to 200 A.D.); d) the Bruhaspati Smriti (200A.D. to 400 A.D.); and
e) the Katyayana Smriti (300 A.D. to 600 A.D). Among these, Manu Smriti was the most influential.

Manu Smriti

Manu Smriti describes the social, political and economic conditions of ancient society. Manu, the
ancient law giver, also wrote about ethical trade practices.He prescribed a code of conduct to traders
and specified punishments to those who committed certain crimes against buyers. For example, he
referred to the problem of adulteration and said one commodity mixed with another must not be sold

4
KISLIOR LAL VS CHAIRMAN,EMPLOYEES STATE INSURANCE CORPRATION,SUPRA(PARA. 17)
5
REPELLED BY THE ARBITRATION AND COUNCILATION ACT,1996(26 OF 1996)
6
FAIR AIR ENGINEERS PVT. LTD. VS N.K. MODI;AIR 1997 SC 533
7
SECERATRY THIRUMURGAN COPT. AGRICULTURAL CREDIT SOCIETY VS IN. LALITHA; AIR 2004 SC 448
(as pure), nor a bad one (as good) not less (than the property quantity or weight) nor anything that is at
hand or that is concealed. The punishment for adulterating unadulterated commodities and for
breaking gems or for improperly boring (them) was the least harsh.Severe punishment was prescribed
for fraud in selling seed corn: he who sells (for seed-corn that which is) not seed-corn, he who takes up
seed (already sown) and he who destroys a boundary (mark) shall be punished by mutilation.
Interestingly, Manu also specified the rules of competency for parties to enter into a contract. He said a
contract made by a person intoxicated or insane or grievously disordered (by disease and so forth) or
wholly dependent, by an infant or very aged man, or by an unauthorized (party) is invalid.During the
ancient period, the king had the power to confiscate the entire property of a trader in two instances: (1)
when the king had a monopoly over the exported goods; and (2) when the export of the goods was
forbidden.There was also a mechanism to control prices and punish wrongdoers. The king fixed the rates
for the purchase and sale of all marketable goods.16 Manu said man who behaves dishonestly to
honest customers or cheats in his prices shall be fined in the first or in the middle most amercement.8
There was a process to inspect all weights and measures every six months, and the results of these
inspections were duly noted. All these measures show how effective ancient society was in regulating
the many wrongs of the market place. These measures also show how developed the system was in
identifying the market strategies of traders. Thus, Manu Smriti effectively dealt with various consumer
matters, many of which remain of great concern in modern legal systems.

MODERN HISTORY

The consumer protection regime in India may be said to rest on four individual pillars namely, (a)
the common law; (b) assorted statutes; (c) the Consumer Protection Act, 1986; and (d) financial
product specific regulations; each of whose means of enforcement ultimately tie together in the
formal courts of law.
It is useful to disaggregate the study of the evolution of the different sources of consumer protection
laws into four timeframes:
a.pre1950
b.19501986
c.1986
d. 1986 present
Pre-1950
Prior to 1950, issues of consumer protection (albeit not dealt with as consumer protection but
under the relevant legal heads) were dealt with under the technical rules built up in the English
common law. The common law evolved at least three distinct heads of law that are relevant to
consumer protection in India even today: (a) tort; (b) contract; and (c) fiduciary laws. Enforcement
takes place through suits filed in courts of law.
Torts are civil wrongs. There exists several types of torts, each with a test laid down and refined
by courts of law in England (and subsequently in India) over the years. Torts typically open to
aggrieved customers include deceit, fraud, misrepresentation and negligence, depending upon
the facts of the matter. Any individual may sue a provider under these heads in trial court, with relief
granted usually in the form of restitution or monetary damages. A customer may also potentially sue

8
MANUSMRITI
the manufacturer or main service provider himself under the vicarious liability rule (master servant
rule).
Contracts are agreements between two or more parties, setting out their respective rights and
obligations in exchange for consideration (ie. payment or such). Contracts may be written or verbal,
and include express as well as implied terms (including the commercial principle of caveat emptor).
Consumers aggrieved during the purchase of any goods or services may seek redress in trial court,
with relief granted usually in the form of monetary damages. A customer may also potentially sue the
manufacturer or main service provider himself under the vicarious liability rule (principal agent
rule).
Fiduciary responsibilities arise in specific situations where sellers are deemed to be in a position of
trust with respect to consumers (for instance, wealth management advisors and consumers),
consequently becoming answerable to a higher set of responsibilities. Consumers may sue sellers
who owe them a fiduciary responsibility in trial court.
The structure of the system of courts is as follows:

1950 1986
In the years since its creation in 1950 by the Constitution of India, the Union Parliament has passed
several legislations that include consumer protection provisions in their body. The ambit of these
provisions is restricted to the subject matter of these statutes, and they are enforceable through the
trial courts. Failure on the part of any customer to show the statute was applicable meant that he had
to then resort to tort / contract / fiduciary law for relief.
An illustrative list of product specific legislations with consumer protection components is as below:
a. Drugs Control Act, 1950
b. Prevention of Food Adulteration Act, 1954
c. Essential Commodities Act, 1955
1986
In 1986, the Union Parliament passed the landmark Consumer Protection Act [COPRA] which not
only was the first generic customer protection law enacted in India covering goods and services
falling under all categories (as opposed to the earlier set of individual statutes covering specific
products) but also set up a separate chain of courts specifically for their enforcement.
The structure of the system of consumer courts is as follows:

The proceedings at these courts are summary in nature and statutorily applicable penalties includes
punitive damages. Further, they decide the case within 3 months from the date of receipt of notice by
opposite party. Amendments made to the COPRA in 1991, 1993 and most importantly in 2002 have
strengthened the powers of these courts under the last amendment, provision now exists for
attachment and sale of property of a person not complying with the order.
.

SECTION 26 OF CONSUMER PROTECTION ACT

Dismissal of frivolous or vexatious complaints.Where a complaint instituted before the

District Forum, the State Commission or, as the case may be, the National Commission is
found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, dismiss the
complaint and make an order that the complainant shall pay to the opposite party such cost,
not exceeding ten thousand rupees, as may be specified in the order.

COMMENTARY

To put an end to the tendency of filing frivolous and vexatious litigation, Section 26 was inserted
in the Consumer Protection Act in 1993, which provides for a maximum penalty of Rs 10,000 on
complainants if their complaints are baseless. This provision too has not worked well because
not only the penalty amount is incommensurate with the harassment meted out to the defendant
but also it takes years to arrive at that finding. It is now being advocated that the penalty amount
be raised to Rs 1 lakh.
For instance, Suresh Narayan Kumar filed a case against Bihar State Financial Corporation
refusing to give him financial assistance. The National Consumer Disputes Redressal
Commission, while holding that banks and financial institutions are not bound to disburse loans
to everyone, dismissed the complaint and directed the complainant to pay Rs 10,000 as penalty.

In another case, viz. Brij Mohan Kher v. Dr. N.H. Banke9, the National Commission, while
directing the complainant to pay Rs 10,000 each to the two respondent doctors, went on to
observe that "to put an end to the menace of filing vexations complaints, the forums should be
empowered to award much higher costs". Consumer courts have now found a way to impose
deterrent costs not under Section 26 but resorting to the general provision of imposing costs of
litigation, pecuniary or penal.

In a recent case decided by the apex National Consumer Disputes Redressal Commission on
January 6, 2012 (Dwarka Dheesh Investments v. N.K. Bhatia & Anr. 2012 CPR 305) N.K.
Bhatia gave two cheques to Dwarka Dheesh Investments for amounts of Rs 60,000 and Rs
50,000 to purchase 1,000 shares of Hotel Leela and 400 shares of NTPC respectively. He did
another transaction with them and sent shares worth Rs 2,17,210 for sale. The total proceeds of
these two transactions amounting to Rs 3,27,210 were not given to Bhatia despite his repeated
demands. He filed a complaint with Delhi District Consumer Forum, which directed the
company to pay the aforesaid amount to the complainant with compensation of Rs 5000. Its
appeal to the State Commission was also rejected. The investment company filed a revision
petition before the apex National Commission. Rejecting the same by its aforementioned
judgment, the commission observed that the revision petition filed by the company was "most
bogus and frivolous and has been filed just to waste the time of this commission". The
commission directed it to deposit in addition Rs 25,000 as costs.

9
AIR 1994