Advocate Sushil Kaushik’s phone hasn't stopped ringing since June 8, when the National Consumer Disputes Redressal Commission ordered a heavy compensation to flat buyers in Unitech’s Vistas project. Kaushik, who fought the case on behalf of the buyers, has been inundated with calls from aggrieved home owners, emboldened by the landmark verdict.
The order came in a case filed by 24 flat buyers of Unitech's housing project in Sector 70 of Gurgaon. The buyers alleged that they had booked the flats in 2009-2010, and were promised delivery in 36 months. But the buyers have not got possession of their flats yet, suffering double payouts in the form of EMI and rent.
“This verdict is a lesson for companies who think consumer protection in India can be taken for granted. The new law [with amendments] will provide further teeth to consumers to take on whosoever fools them,” says Kaushik.
The proposed amendments to the Consumer Protection Act, 1986, make it a very powerful one, on par with the laws in some of the developed economies. “We have taken a comprehensive review of the act and most of the sections have been changed. This is almost like a new act,” says G. Gurucharan, additional secretary in the department of consumer affairs. Sources in the department say the bill will be introduced in the monsoon session.
Although the 1986 Act was a strong one, there have been many changes in the external environment over the years like the e-commerce boom, direct selling and multilevel marketing. The act, therefore, has to be in sync with the times. “The complexity of the marketplace is such that it can confound even well-informed users. It is very easy for a manufacturer or seller of a product to take advantage of consumers, [thereby] causing consumer detriment,” says Gurucharan.
Take, for instance, the case of Meena Zachariah, who weighed 75kg around two months ago. She saw an advertisement of a slimming centre that promised to reduce 15kg in 25 days. Meena joined the centre after inquiring over the phone and visiting its office once. More than a month later, she managed to lose only 3kg. She felt cheated as she had paid Rs30,000 to the centre. When she raised the matter with the centre head, he accused her of not following the diet. Soon, she discovered that there were others like her who were fooled by the ad.
For such instances, the new bill has proposed a National Consumer Protection Authority (NCPA), which will look into unfair trade practices—from false representation, misleading advertisements to false offers or deals or noncompliance to prescribed standards. “The unfair trade practices are currently an orphan,” says Pradeep S. Mehta, secretary general of Consumer Unity and Trust Society. “Earlier, it used to be looked after by MRTPC [Monopolies and Restrictive Trade Practices Commission]. The CCI [Competition Commission of India] has replaced MRTPC, but it is only looking at competition matters and not unfair trade practices.”
Usually cases involving misleading ads land up in the consumer court. Though one will get compensation, the law does not empower the court to ban such ads, says Mehta. Moreover, consumer courts accept a case only if one has consumed a product or service. The NCPA can take up a complaint even if one has not used a product but has a valid argument against it. But the NCPA will only take up class action suits, and not individual cases.
“The NCPA will have search and seizure powers, similar to that of the director general (investigations) of the erstwhile MRTPC, making it a strong regulatory authority. It can also take suo motu action or act on a direction from the government, which courts obviously cannot do,” says Vaibhav Gaggar, partner at Gaggar & Associates.
The bill will also introduce mediation in petty cases or cases where both the parties want quick settlement. With the help of trained mediators, the matter will have to be settled in 30 days and in not more than three sittings. The adjudication process, too, will be simplified for speedy disposal of cases, with limited number of appeals. For instance, on an order of a district consumer forum, one can move only up to the state forum and not further. District forums and state forums will also be empowered to review their own decisions.
“One of the proposed amendments says that no matter where you buy the product, the case can be filed in a court at the place of residence of the complainant. While this is good from a consumer's perspective, it will create difficulties for e-commerce players and manufacturers,” says Shivpriya Nanda, partner at J. Sagar Associates.
For the first time, there will be a product liability clause applicable to manufacturers, distributors and sellers in case of an injury—physical or mental (the bill has clearly defined mental anguish as a harm)—from a product or a service. Under the existing law, one can’t claim damages; one can only get compensation. But damages will be covered under the new clause.
“The proposed amendments seem to be well-intentioned, suggesting some bold measures that will provide relief to consumers. One would have to, however, wait and watch as to when, whether and in what form such amendments are ultimately enacted,” says Raj R. Panchmatia, partner at Khaitan & Co.
Consumer activist Bejon Misra doubts whether the bill will become an act for there are several provisions that are anti-industry, like the product liability chapter. Officials in the department of consumer affairs, however, do not see it as a problem—first, because the act also deals with counterfeiting and smuggling, which is a serious threat to companies, and second, all industry bodies had okayed the legislation during consultation.
* Among the amendments to the Consumer Protection Act, 1986, a National Consumer Protection Authority will be set up to look into unfair trade practices—from false representation, misleading advertisements to false offers or deals or noncompliance to prescribed standards.
* Petty cases or cases where both the parties want quick settlement can be solved through mediation, leading to quick disposal of cases.
* A consumer can file a case in a court at the place of his or her residence, no matter where the product was brought from.
* There will be a product liability clause applicable to manufacturers, distributors and sellers in case of an injury—physical or mental—from a product or a service.