Project paper for fulfilment of continuous assessment test in

LAW OF TORT

Liability under Consumer protection Act 1986 with reference to

commercial service

Submitted To-

Asst. Professor

Submitted By-SACHIN LOHIA

Semester -1st

National University Of Study and Research in Law Ranchi

Table of Content
INTRODUCTION
Law is a potent tool to regulate human behaviour. It regulates and prescribes limits for every
human behaviour in every society. From time immemorial law has provided us basic premise on
the basis of which human action and its consequences have been redressed.

But still many of us do not know our rights as a consumer and often hesitate to or even complain
stand up to unfair practices and in this way, we indulge ourselves and motivate others to do the
same.

The Consumer protection Act is about making the consumer aware of his/her rights. Though the
first consumer movement began in England after the Second World War, a modern declaration
about consumers rights was first made in the United States of America in 1962, where four basic
consumer rights (choice, information, safety and to be heard ) were recognized. Ralph Nadar, a
consumer activist, is considered as the father of Consumer Movement. March 15 is now
celebrated as the World Consumer Rights Day. The United Nations in 1985 adopted, certain
guidelines to achieve the objectives of maintaining protection for consumers and to establish
high level ethical conduct for those engaged in production and distribution of goods and services.

High prices, duplicate articles, underweight and under measurements, rough behavior,
undue conditions, artificial scarcity are some of the ways by which consumers are exploited by
manufacturers and traders. Limited information, limited supplies and low literacy are factors
causing exploitation of consumers.

In India, the concept of consumer protection is not new. References to the protection of
consumers interest against exploitation by trade and industry, underweight and measurement,
adulteration and punishment for these offences, were made in Kautilyas Arthashastra.
However, an organized and systematic movement to safeguard the interest of consumers is a
recent phenomenon. The consumers have to be aware not only of the commercial aspects of sale
and purchase of goods, but also of the health and security aspects. Food safety has become an
important element of consumer awareness these days. In case of food products, its quality
depends not only on its nutritional value, but also on its safety for human consumption.
Consumption of contaminated or adulterated food is a major cause of human illness and
suffering.

This calls for strong legal measures to ensure that the manufacturers and sellers observe
uniformity and transparency in prices, stocks and quality of their goods. Enactment of Consumer
Protection Act, 1986 was one of the most important steps taken to protect the interest of the
consumers. The provision of the Act came into force, with effect from July 1, 1987. The Act
recognizes consumers right to seek redresses and right to consumer education.

Part I - Introduction
The salient features of the Act are as follows:-
 Applies to all goods and services unless specifically exempted by the Union Government;

Covers all the sectors whether private, public or co-operative;

Enshrines the consumers rights related to safety, information, choice, representation and
redress and consumer education.

The act gives consumers an additional remedy besides those which may be available to them
under the provisions of other existing laws and they are free to choose the remedy.

Empower consumers seeking discontinuance of certain unfair and restrictive trade practices,
defects or deficiencies in services and stopping in services or withdrawal of hazardous goods
from the market.

In fulfilling the objects of the Consumer protection Act the Central Government has established
the Central Consumer Protection Council, and the State governments have established the
District forums and the State Consumer protection Council in their respective states. A complaint
may be made by either the consumer, the government, a recognised consumer society or by one
or more consumers having a common interest, within two years of the grievance arising.

A few instances when such a complaint may be made include losses caused to a consumer as a
result of unfair trade practice, defect in goods, deficiency in services, charging in excess of price
displayed etc. Once the complaint has been received the other party will be asked to give their
version of the case. If the matter pertains to defective goods, the same may be sent to a
laboratory for testing. If it relates to a service matter then both parties shall be asked to produce
evidence in support of their claims. If the authority is convinced that the complaint is valid then
it may order the producer to remove the defect, replace the goods, return the price paid by the
consumer, or pay an amount to the consumer as compensation for any loss or injury suffered. An
appeal may be made against such orders to the next highest authority If a trader or any person
against whom an order has been made, fails to comply with the order then they may be fined or
imprisoned. On the other hand if a complaint is found to be frivolous or malicious then the
complainant may be fined.

One of the major developments in the Consumer protection Act has been with respect to whether
services provided by the medical profession, especially when it is a free service as in the case of
government hospitals can fall under the act. It had been argued that technically such professions
do not provide any contracts for services. The courts however keeping in mind the fact that the
Act was intended to protect consumers have held that all professional services whether free or
paid for would render a person a consumer under the Act.

The procedures under the Act and under the Commissions are relatively simpler and more
informal than under normal litigation. In fact any consumer can appear before the commission
and need not even hire a lawyer to argue ones case. Despite the simple procedures there have
not been too many consumer cases in India unlike the United States where the courts are filled
with consumer grievances. One of the reasons for this fact has been the lack of adequate
consumer awareness of their rights in India and the seemingly intimidating structure of courts
and the legal profession. However to its credit, it must be said the Consumer Protection Act
remains one of those rare laws which allows for a speedy and simple protection of the rights of
ordinary people, and judicious use of the same would foster a greater consumer movement in
India in this age where the market is flooded with more products but not necessarily more
information.

Q. How is my right as a consumer protected under the Consumer Protection Act?

A. The rights of the consumers are invoked in the Indian Legal System through the mechanism
provided in the Consumer Protect Act (CPA). The CPA provides for establishment of Consumer
Protection Councils Advisory and recommendation bodies The Consumer Protection Councils
exist at the National, State and District Level. They are basically advisory bodies who meet at
least 3 times a year to discuss and review consumer protection measures and issues. Two thirds
of the members of these councils are non-official including representatives of women and
consumer organisations. Redressal Forums Courts The CPA provides for a three-tier quasi
judiciary machinery at the national, state and district levels. The District Forum has jurisdiction
to entertain complaints where the value of goods / services complained against and the
compensation claimed is less than Rs. 5 lakhs, the State Commission for claims exceeding Rs. 5
lakhs but not exceeding Rs. 20 lakhs and the National Commission for claims exceeding Rs. 20
lakhs.

Q. Where should one complain?

A. If the value of the services and compensation asked for is a. < Rs 5 lakhs then one can
complain to the District Forum at the District Headquarter, b. > 5 lakhs and within Rs. 20 lakh
the complaint can be filed before the concerned State Commission at the State Capital. c. >20
lakhs the complaint can be filed before the National Commission. If the consumer is not satisfied
with the Judgment of the District Forum, he/she can file and appeal to the State Commission.
Similarly, appeal against an order of a State Commission lies before the National Commission.
Appeal against an order of the National Commission has to be filed before the Supreme Court of
India.

Q. What is method of filing a complaint?

A. A complaint shall be instituted in the District Forum within the local limits of whose
jurisdiction the opposite party (or any one of the opposite parties where there are more than one)
or the defendant actually and voluntarily resides or carries on business, or has a branch office or
personally works for gain at the time of institution of the complaint provided that the other
opposite party/parties acquiescence in such institution or the permission of the Forum is obtained
in respect of such opposite parties; or the cause of action arises, wholly or in part.

Who is a consumer?

All of us are consumers of goods and services.

A consumer under the act is:

One who buys any goods, hires any service or services for consideration which has been paid or
promised or partly paid and partly promised or under any system of deferred payment.

Note: A person is not a consumer if he purchases goods for commercial purpose or resale
purpose. However, a person is consumer if he purchases goods for the purpose of earning his
livelihood by means of self-employment.

Many acts enacted earlier are in force, whether enforced or not. Under any of these acts, one can
seek redressal through the courts of law. But, Consumer Protection Act (Act 68 of 1986)
provides for redressal through specially-constituted agencies at different levels

A glimpse of the provisions is presented herein below

1. It provides for the notification of Central and State Consumer Protection Councils by the respective
governments with a view to protect the rights of consumers such as,

the right to be protected (against hazardous goods)

the right to be informed (about quality, quantity, against unfair trade practices, etc)

the right to be heard (of complaints),

the right to seek redressal (through appropriate agencies), and

the right to consumer education

2. To promote and protect the rights of the consumers with regard to defective goods, deficient
services, overcharging or any unfair trade practices (as defined under MRTP ACT 1969). It includes false
statement on quantity or grade of goods/services, false claims to sponsorship, making false and
misleading promises on the articles, false projection of the needs for or usefulness of goods/services,
giving warranty on products not based on adequate or proper test, and the like, whether made orally or in
writing or by visible representation.

Who can a file a complaint?

A consumer (As above)

Any registered voluntary consumer organisation

The Central Government

The State Government

When can a complaint be filed?

Under the Act, a complaint can be made in writing in the following circumstances:

If you have suffered loss or damage as a result of any unfair trade practices adopted by the trader.

If the services hired/availed of suffer from deficiencies in any respect.

If you have been charged a price in excess of the price displayed or fixed by or under any law for the time
being in force.

If, the goods hazardous to life and safety, when used.

How can you file?

The complaint is to be filed within two years from the date on which cause of action has arisen

There is no fee for filing a complaint. Even an affidavit does not need stamp papers. A complaint can be
sent by post or presented in person by complaint or his authorised agent.

Usually the Forums Require 3-5 copies of complaint.

What information should a complaint contain?

Complaint should contain the following information:

Name and complete address of complainant

Name and complete address of the opposite party or parties as the case may be.

Date of purchase/service obtained.

Amount paid for consideration.

Items of goods with quantities/nature of service.

Whether the complaint relate to unfair trade practice/defective goods deficient service/charging excess
price.

Copies of bills/vouchers/receipts and copies of correspondence made, if any.

The relief sought-Under the Act.

Remedies

The forums/Commissions can order the following relief:

Removal of defects from the goods

Replacement of the goods

Refund of the price paid.

Award of compensation for the loss or injury suffered.

Removal of defects or deficiencies in the services.

Discontinuance of unfair trade practices/restrictive trade practices and directing not repeating them.

Withdrawal of the hazardous foods from being offered for sale.

Award for adequate costs to practice.

Appeals against

District Forum Within 30 days In State Commission

State Commission Within 30 days National Commission

National Commission Within 30 days Supreme Court

There is no fee for filing appeals in the State and National commissions.

Procedure is the same as that complaint except that the application has to be accompanied by the copies
of the orders appealed against with reasons for filing appeals.

Why there is Consumer Protection Act?

Because a consumer has a RIGHT to

SAFETY

INFORMATION

CHOOSE

BEHEARD

REDRESSAL

CONSUMER EDUCATION
CONSUMER .. COMMERCIAL PURPOSE . A DETAILED CASE STUDY

Consumer Protection Act can be described as common mans civil court. The Act is designed to make
available cheap and quick remedy to a consumer.

The object of the act is to protect the consumer forum the exploitative and unfair trade practices to
provide inexpensive, easily accessible and speedy remedy. Basically consumer protection is a social
beneficial legislation.

Consumer protection Act is a beneficial legislation intended to confer some speedier remedy from being
exploited by unscrupulous traders.

The main object of the act is to provide for better protection of interests of consumer.

CONSUMER:

The intention and object of the Consumer Protection Act, is to provide a speedy remedy and for better
protection of interests of consumer.

The Consumer Protection Act, 1986 has defined the term CONSUMER. Only the complainant who falls
under the definition of Consumer can be benefited through Consumer Protection Act. Hence the definition
of CONSUMER is of much importance to determine the applicability of the Act.

CONSUMER AS DEFINED U/SEC 2(1)(d) OF THE ACT:

Consumer means any person who-

Buys any goods for a consideration which has been paid or promised or partly paid and partly
promised, under any system of deferred payment, and includes any user of such goods 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.

Explanation: commercial purpose does not include use by a consumer of goods bought and
used by him exclusively for the purpose of earning his livelihood, by means of self-
employment;]

DEFINITON OF CONSUMER COVERS

One who buys goods for a consideration for personal use

One who obtains goods on hire purchase or lease

One who uses such goods with the permission of buyer of goods

One who buys goods exclusively for purpose of earning his lively hood as self employment

One who hire/ avails of any services for a consideration

One who uses the services with permission of person who has hired the services

One who obtains the services on deferred payment basis

COMMERCIAL PURPOSE:

We can observe from the definition of consumer that a person who obtains goods for resale or for
commercial purpose is not covered. Such person is not a consumer and he cannot be benefited
through Consumer Protection Act.

The act has also clearly given an explanation in regard to commercial purpose.

The act provides that a person who bought goods for self employment will be eligible as
Consumer.

Example: A person buying one truck or tempo or sewing machine or one computer will be
considered as consumer for the purpose of this act.

But if a person buys 2 typewriters, out of which one is used by a person employed by him, he
will not be eligible under CPA as person is buying the goods for resale or commercial purposes is
not a consumer.

MEANING AND INTERPRETAION OF THE TERM COMMERCIAL PURPOSE ..

ESTABLISHED CASE LAWS:

As for the interpretation of term commercial purpose in the

Western India State Motors Vs Subhag Mal Meena & others

(Appeal No. 12/89, order dated 8.11.1989 it was held by the National Commission that a vehicle
purchased for the purpose of running as taxi was undoubtedly a purchase for commercial
purpose.

Any economic activity or transaction carried on with the motive of making profit would fall
under the term Commercial Purpose.

Synco Textiles Pvt Ltd Vs Greaves Cotton & Co. Ltd (1991) CPJ 499

The National Commission observed the main determinants of character of a transaction

whether it is for a commercial purpose or not are immediate purpose as distinct from the ultimate
purpose

Buyers of goods or commodities for self consumption were held to be consumers.

A purchase of goods could be said to be for a commercial purpose only if two conditions were
satisfied, namely

A) The goods must have been purchased for being used in some profit making activity on a large
scale

B) There should be close and direct nexus between the purchase of goods and the profit-making
activity.

Laxmi Engineering Works V P S G Industrial Institute (1995 3 SCC 583 SUPREME

COURT)

It was held that explanation to sec 2(1)(d) was of clarificatory in nature. It further observed that
whether the purpose for which a person had bought goods was commercial purpose was always a
question of facts and to be decided in the facts and circumstances of each case.

If the commercial use was by the purchaser himself of earning his livelihood by means of self
employment such purchaser of goods would yet be a consumer.

The Supreme Court further observed that if a person who purchased a machine to operate it
himself for earning his livelihood, he would be a consumer. But if a person purchases a machine
and appoint or engage another person exclusively to operate the machine, then such person
would not be a consumer.

Bhuperndra Guna Vs Regional Manager and others (II 1995 CPJ 139)

The National Commission held that a tractor purchases primarily to till the land of the purchaser
and let or on hire during the idle time to till the lands of others would not amount to commercial
use.

Super Engineering Corporation Vs Sanjay Vinayak Pant Kores (India) Ltd Vs Samir
Purkayastha (1996) 4 CTJ 579

National Commission, in a given case a farmer had purchased seeds from a party. The seeds did
not germinate. The other party took the plea that I was not a consumer. Whether purchase of
seeds for the purpose of agriculture is purchase for commercial purpose?

Purchase made for agriculture is not for commercial purpose. Therefore, the complainant is a
consumer and entitled to seek redressal of his grievance in a Consumer Court against the party
which supplied defective seed to him.