Prof. Sri Ram Khanna and H. K. Awasthi, VOICE
[email protected],
Part – I
The Emergency of Consumer Law and Jurisprudence in India
In a legal system entangled in complexities, technicalities and long drawn legal procedure,
providing quick, cheap and speedy justice to consumer is an uphill task in India. The United
Nations had laid down two essential points for protection of consumers –
Consumers often face imbalance in economic terms, educational levels and bargaining
power; and
Consumer should have the right to promote just, equitable and sustainable economic and
social development.
The Consumer Protection Act was enacted in 1986 and came into effect immediately thereafter.
However, setting up of the various Fora in all the states and the National Commission at the
National Level took some time and it was only in 1988 after directions from the Supreme Court of
India, that the three-tier machinery envisaged in the Act became functional. The Act was termed as
Magna Carta of consumer rights because for the first time, rights found place and could be termed
as legal rights in furtherance of the Constitutional obligations in the Directive Principles of State
Policy enshrined in the Indian Constitution. Although before the enactment of the Consumer
Protection Act, there were various provisions dealing with consumer protection in the Civil
Procedure Code, Indian Contract Act, Sale of Goods Act, Indian Penal Code, Standards of Weights
& Measures Act, Motor Vehicles Act, Monopolies & Restrictive Trade Practices Act and
Prevention of Food Adulteration Act, yet there was no specific law for redressal of grievances of
consumers and to protect the consumers from exploitation of traders and to save them from
adulterated and sub standard goods and services. Therefore the consumer protection became a
milestone in the history of socio-economic legislation in India.
On 10 Dec. 1986 replying to a debate on the Consumer Protection Bill in the Rajya Sabha, the then
Minister of Food and Supplies, H.K.L. Bhagat, had emphasized that the Bill was compensatory and
not penal in character. It was hoped that this very nature of the Bill would limit the time taken for
settling consumer disputes, while at the same time promoting a healthy respect among
manufacturers for the rights of the consumers. Unfortunately, experience of making of this law for
one and a half decades has shown that the computation of compensation by consumer courts in most
cases is too conservative and meagre to have any salutary effect on the manufacturers or the service
provider. As a matter of the fact, compensation should not only recompense the consumer for the
loss or injury suffered, but should also act as a deterrent which it does not.
Prof. Sri Ram Khanna is Head of Department of Commerce, Delhi School of Economics, University of Delhi, India
and Managing Trustee of VOICE.
H. K. Awasthi is Legal Officer of VOICE, New Delhi, India.
Consumer Right -The Act, inter alia, seeks to promote and protect the rights of consumers such as –
Right to safety – This right gives protection against marketing of goods which are hazardous
to life and property;
Right to be informed – The consumer needs to be informed about the quality, quantity,
potency, purity, standard and price of goods to protect the consumer against unfair trade
Right to Choose – The consumers should have access to an authority of goods at competitive
Right to be heard – The consumers interests should receive due consideration at appropriate
Right to seek redressal – There should be redressal system against unfair trade practices or
unscrupulous exploitation of consumers.
Right to consumer education – Creation of consumer awareness is a must to serve the
purpose of the law to secure the interests of consumers.
As a matter of fact, the protection of consumer interest can be achieved if they exercise their right
and not merely look to any voluntary consumer organisation to fight for them.
Who is a Consumer:In common parlance all of us are consumer of goods and services. The producers of some goods
and services also consume various other goods and services produced by others. But the CPA, has
defined the word consumer meaning a person belonging to the category of buyer of any goods for a
consideration paid or promised or partly paid or promised or under any system of deferred payment.
But a person who obtains goods for resale or for any commercial purpose is not a buyer unless it is
by a self-employed person. Further any user of goods as a beneficiary other than the person who
actually buy the goods is considered as a consumer when such use is made with the approval of the
Consumers have been conferred the right to approach the Consumer Disputes Redressal Forums
constituted under the Act.
A person who has suffered loss or damages as a result of any unfair trade practice adopted
by any trader.
A person who has purchased goods for consideration which are found to suffer from one or
more defects,
A person who has purchased goods for which the trader has charged a price in excess of the
price fixed by or under any law for the time being in force, or displayed on the goods or any
package containing any goods,
A person who has hired any services for consideration, when the services provided are found
to suffer from deficiency in any respect.
Other than the above mentioned categories the consumer must take care not to use the courts for
frivolous complaints.
Who can file a complaint:A complaint can be filed by a consumer or group of consumers or any Voluntary Consumer
Organisation registered under the Societies Registration Act 1890 or the Companies Act 1956 or
any other law or the Govt. Central or State.
What is Complaint:A complaint would mean allegation of suffered loss or damage as a result of any unfair trade
practice of a trader. The complaint may be in respect of some defect in the goods or any deficiency
in service or overcharging of price fixed by law displayed on goods or any package containing the
Frivolous Complaint:Since the consumer legislation is a beneficiary piece of legislation, the legislature in order to help
the consumers, had not prescribed any court fee to be affixed on the complaints by the consumers, it
is expected that the complainants would come before the commission with clean hands and the
relief claimed by them would not be inflated.
Where to file Complaint:For speedy redressal of the consumer complaints, the CPA, has provided for three-tier system of
district forum in every district to entertain complaints involving a claim of Half Million Rupees,
State commission at the state level to have original jurisdiction to settle claims upto an amount of
Rs.2 Million, and the National Commission located at Delhi has original jurisdiction in respect of
all claims above Rs. 2 Million. The State and National Commission have the appellate as well as the
revisionary jurisdiction.
The orders of the National Commission can be challenged before the Supreme Court of India.
Consumer Disputes Redressal Agencies –
District Forum
Chapter III of the CPA deals with consumer disputes redressal agencies. In this chapter, Sec.10
deals with composition of the District Forum as under :i)
President – A person who is or who has been or is qualified to be a District Judge.
Two other members who shall be persons of ability, integrity and standing and adequate
knowledge or experience.
Sec.11 of the Act makes provision as to the jurisdiction of the District Forum in which claim does
not exceed Rs. Half Million. Further Sec. 12 of the Act makes provision about the manner in which
complaint shall be made whereas Sec. 13 makes provision about the procedure to be followed by
the Dist. Forum on receipt of complaint. Sec. 14 provides for the mode of findings of the Dist.
Forums. In Delhi, there are now nine District Forums.
State Commission
The Commission has appellate as well as original jurisdiction. Any person aggrieved by the order of
the District Forum can go in appeal to the State Commission under Sec. 15 whose composition is
dealt with in Sec. 16 as under :
President – A person who is or has been judge of a High Court appointed by the State Govt.
in consultation with Chief Justice of the High Court.
Two other members who shall be persons of ability, integrity and standing, having adequate
knowledge and experience :
Sec.17 deals with jurisdiction of the State Commission in which the claim exceeds Rs. Half Million
but does not exceed Rs. 2 Million. The procedure applicable in the State Commission has been
provided in Sec 18 under Chapter III of the Act which stipulates that the provisions contained in
Sec. 12. 13 and 14 of the Act and the Rules made under the Act for disposal of the disputes by the
State Commission shall be followed by the State Commission. Any person aggrieved by the order
of the State Commission can file appeal within 30 days of the order under Sec. 19 before the
National Commission. The State Commissions have been set up by the State Govt. in the State
National Commission
The National Commission, an apex body which is situated at New Delhi, has been constituted under
Sec. 20 as under :
President – Who is or has been a Judge of the Supreme Court to be appointed by the Central
Govt. in consultation with the Chief Justice of India.
Four other members who shall be persons of ability, integrity and standing having adequate
knowledge or experience.
While Sec. 22 of the Act provides for powers and procedure to be followed by the National
Commission under Sec. 23 any aggrieved person by the order of the National Commission in
exercise of its original jurisdiction has been given the right of appeal to the Supreme Court.
Finality of order –
One of the most noteworthy provision made in Sec. 24 of the Act is that unless and until the orders
of District Forum, the State Commission or the National Commission have been challenged in
appeal under the provisions of the Act, the said orders would be final between the parties, otherwise
on a decision of the appeal the appellate order passed in any case would be final.
Jurisidiction of three agencies –
As mentioned in earlier paragraphs, the Dist. Forum has only the original jurisdiction for hearing
and disposal of complaints involving the value up to Rs. Half Million. The State Commission has
also the original jurisdiction in matters involving value exceeding Rs. Half Million, but not
exceeding Rs. 2 Million.
However the National Commission has the original jurisdiction to adjudicate upon the consumer
disputes involving pecuniary jurisdiction exceeding Rs. 2 Million. Thus the State Commission has
the appellate and revisional jurisdiction over the decisions rendered by the District Forum in the
State and in respect of the matters connected with the cases pending before the Dist. Forums.
Therefore, the State Commission has three-pronged jurisdiction i.e original, appellate and
revisional. However, in all matters where the decisions are rendered by the State Commission on its
original side, appeals, can be preferred before the National Commission. But in the matter
entertained and decided by the National Commission on its original side, the appeal lies before the
Supreme Court. However, so far as the decisions are rendered by the National Commission in
exercise of its appellate or revisional jurisdiction the orders are final under Sec. 24 of the CPA
because the “National commission is the King-pin for effective implementation of the Statutory
Scheme. Within a short period it has already decided a good number of disputes covering a wider
field and has been able to create an appreciable impact on every one”.
Consumer Protection Councils (CPC):As envisaged in the Act, Consumer Protection Councils, comprising of official and non-official
members have been established in the states and as well as the center. The councils meet
periodically to deal with consumer problems and take corrective measures for protecting the rights
of the consumers.
When the consumer courts finally became functional floodgates of consumer litigation was opened
in the country. Delays in the justice system and the prohibitive cost of litigation had kept the
consumers away from law courts. Once the consumer courts were established, there was nothing to
hold back consumer from seeking damages for negligence and shoddy services. This was
particularly due to three reasons :
The Civil Procedure Code (CPC) enacted to lay down the procedure before Civil Courts
during British Colonial Rule would not apply. This ensured that time in adjudication would
be minimized by excluding long drawn procedures.
Judicial wisdom would be tempered by common sense by including two non-judicial
adjudicators on the bench. Non-judicial member of a consumer court would be able to
prevail over hyper-technical interpretations of the law.
A consumer could complain to the Court by making a simple application on plain paper and
would not need a lawyer to present his case. S/he could do it alone or appoint any other lay
person as an authorized agent.
These three features were not born as a result of accident but informed advocacy by consumer
groups such as VOICE and Common Cause that were part of the working group appointed by
Central Government to prepare the draft bill in 1984. In retrospect it can be stated that one reason
this law works quite well in India is that there were no lawyers involved with designing the
structure of this bill and the above features came to be accepted.
The competence and jurisdiction under this law have expanded mainly as a result of legal
interpretation by courts which function in parallel with the Indian Civil Judicial System. In the
initial years most of the complaints were in respect of ‘defective goods’. Soon the arena of judicial
interpretation widened the definition of ‘deficient services’ to include a wide arena of services
under the jurisdiction.
A large majority of cases belonged to the public sector service providers which enjoyed monopoly
status and were not responsive and sensitive to the needs of the consumers. The reason being lack of
accountability of employees for deficiency in service. These included public housing, water supply,
electricity, transport, insurance, medical services, entertainment, transportation and a wide variety
of services. The Consumer Courts were set up at three levels. One District Forum at a district head
quarter with a pecuniary jurisdiction of Rs. 1,00,000/-. Almost 90% of the cases would be filed at
this level. A State Consumer Disputes Redressal Commission was set up in each state capital to deal
with original complaints over Rs. 5,00,000/-. Appeals against order of District Forums were filed at
the State Commission. There was a National Consumer Disputes Redressal Commission (NCDRC)
at the apex with original jurisdiction on disputes beyond Rs. 10,00,000/- and to decide appeals for
orders of a State Commission. According to the information available with the Central Government
as on date, 32 Consumer Disputes Redressal Commissions (State Commission – SC) and 543
Consumer Disputes Redressal Fora (District Forum – DF) have been established in the country. In
addition, the National Consumer Disputes Redressal Commission (National Commission – NC) is
functioning in New Delhi. As of now, 14,82,576 cases had been filed in these Redressal Agencies,
out of which 11,62,289 cases had been disposed off, which works out to 78% disposal of cases. This
is a creditable achievement for any consumer justice system.
With redressal forums coming into being in many states some problems cropped up in day-to-day
functioning of the Fora. Certain judgements of these redressal agencies interpreting the various
sections of the Act brought to light certain lacunae in some of the wordings and the concepts
underlying the Act. There was the feeling that the Act had been drafted in a hurry and needed
improvement. The matter also came up for discussion in various meetings of the Central Consumer
Protection Council constituted under the Consumer Protection Act 1986 and in the Parliament.
Many consumer groups held seminars / workshops and suggested changes to be brought about to
the Act. The President of the National Commission and some of the Presidents of the State
Commission also made some suggestions. Therefore, the Ministry of Civil Supplies and Public
Distribution constituted a high power Working Group on 07.01.1991 under the Chairmanship of
Hon’ble Minister of Food and Civil Supplies, Govt. of West Bengal.
The deliberations of this Group chaired by Hon’ble Sh. Narendra Nath De covered a wide range of
problems arising out of the definitions provided in the Act, especially those relating to the words
‘Consumer’ and ‘complaint’ and the interpretations given by various redressal agencies in some of
their judgements. The representatives of the consumer organisations were of the view that the
definitions were very restricted and required to be enlarged to cover a wider field. They were in
agreement with the view expressed by the Presidents of the National and State Commissions that
the Act was helpless in coming to the rescue of the consumer to prevent likely damages as the
provisions of the Act could be invoked only after the event had taken place and then too, the onus of
proving that loss and injury was caused, rested on the consumer. This required to be changed.
Another problem pertained to the authorities who can file complaints. According to the existing
provision as interpreted by the courts, a consumer organisation cannot file or continue to pursue a
complaint unless the aggrieved consumer continues to be a party to it. This bars a consumer
organisation from taking up or pursuing class action cases of larger interests in issues involving
public interest. This lacuna also has to be removed.
The most important issue on which there was considerable discussion was the question whether the
exclusion of consumers who purchase goods for commercial purposes from the purview of the Act,
should continue or not and if they have to be brought within the purview of the Act, to what extent.
Another burning issue pertained to the desirability of extending the scope of the Act to services
rendered free of charge by Government and other agencies like health services in Government
hospitals, Municipal services etc. It was the opinion of the Group that the citizens had every right to
expect a reasonably good quality service in these areas and State had a duty to provide them.
Therefore, it was necessary to provide the opportunity for redressal even if no direct consideration
was paid to avail of these services. It was, however, also pointed out that it would be too idealistic
to expect all Government services to be perfect at all times and in all places and much depended on
the availability of resources, accessibility and many other factors beyond control. Therefore a
balanced view had to be taken on this issue.
It was brought to the notice of the Group that considering the inflationary trends and the
convenience of complainants, the monetary jurisdiction of the Forums / Commissions requires to be
increased. It was also pointed out that these bodies have to be given more teeth by vesting them
with certain additional powers like- issue of ‘cease and desist’ orders, interim orders and powers to
recall defective goods and to order removal of deficiencies in services. Another lacuna pointed out
was that the procedure adopted by many State Governments for appointing the members to the
Fora/Commissions left much to be desired and that it should be streamlined to ensure that the
people with requisite qualifications as provided in the Act alone are selected.
Thus in 1993 exhaustive amendments were carried out to enlarge its scope and to convey more
powers on the consumer courts. This amending Act provided more teeth to the Consumer Protection
Act and more powers to the redressal Fora.
Many changes were brought in the definitions in Sec. 2 –
Complainant means one or more Complainant having the same interest.
Complaint could be filed for an unfair trade practice or a restrictive trade practice.
Definitions of RTP was introduced and UTP substituted like MRTP Act.
The goods bought or agreed to be bought suffer from one or more defects.
The service hired or availed of or agreed to be hired or availed suffer from deficiency.
Goods hazardous to life and safety when used are being offered for sale to the public in
contravention of law.
Any services hired or availed of for consideration.
Definition of “Service” includes housing construction.
Further the pecuniary value of the complaint to be adjudicated on by the District Fora and State
Commission was raised to half million rupees and Rs. two millions respectively, compared to the
previous value of Rs.1,00,000/- and Rs.1 million respectively.
In addition to the 1993 amending act, the consumer law jurisprudence has tremendously developed
during the last one decade to cover matters of ever increasing cases of medical negligence, defective
goods, deficiency in service by construction agencies, insurance, banks, telecom, postal service and
other service sector agencies.
In 1994 a new Working Group under the chairmanship of Shri Naren De, Minister of Food & Civil
Supplies, Govt. of West Bengal was set up to examine the need to bring about changes in the
Consumer Protection Act and Rules framed thereunder in the light of experience gained and other
difficulties which had been arisen as a result of judicial pronouncements. The Working Group
report submitted in May,1995 was examined in consultation with other Ministries. In the
meanwhile, under the directions of Cabinet Secretariat, the Deptt. of Consumer Affairs set up an
Expert Group in July, 1997 to review all the legislations administered by it and this Group also
suggested certain amendments to amend the Act.
Medical Deficiency
In case of medical negligence, until 1995 High Courts had divergent views as to whether the
services rendered by the medical practitioners were falling within the scope of services U/s 2(1) (o)
2. However the judgements of Supreme Court in Indian Medical Association Vs. V.P. Shantha
(1995) 6SCC65 laid down the correct judicial position on the subject. The Supreme Court laid down
that a complaint for any act of medical negligence (except where medical services are rendered free
of charge to every patient or under a contract of personal service) can be made under the Consumer
Protection Act. The Supreme Court held that the relationship between a medical practitioner and a
patient carries within it certain degree of mutual confidence and trust and, therefore, the services
rendered by the medical practitioner can be between the doctor and the patient. The contract
between the medical practitioner and his patient cannot be treated as a contract of personal service
but is a contract for services and the service rendered by the medical practitioner to his patient under
such a contract is not covered by the exclusionary part of the definition of service contained in
Section 2(1) (0) of the Act. Therefore the services rendered to a patient by a medical practitioner
(except where the doctor renders service free of charge to every patient or under a contract of
personal service) by way of consultation, diagnosis and treatment, both medicinal and surgical,
would fall within the ambit of ‘service’. The fact that Medical Practitioners belong to the medical
profession and are subject to the disciplinary control of the Medical Council of India and / or State
Medical Councils constituted under the provisions of the Indian Medical Council Act would not
exclude the service rendered by them from the ambit of the Consumer Protection Act.
In Harjot Ahluwalia vs. Spring Medow Hospital II (1997) CPJ98 (NC) case the Supreme Court
confirmed the orders of the National Commission that the parents of the child, being beneficiary of
the services of the hospital are consumer under the Act. In clause (ii) of Section 2(1) (d) a consumer
would mean a person who hires or avails of any services and includes any beneficiary of such
services other than the person who hires or avails of the services. When a young child is taken to a
hospital by his parents and the child is treated by the doctor, the parents would come within the
definition of consumer having hired the services and the young child would also become a
consumer under the inclusive definition being a beneficiary of such services. The definition clause
being wide enough to include not only the person who hires the services but also the beneficiary of
such services whose beneficiary is other than the person who hires the services, the conclusion is
irresistible that both the parents of the child as well as the child would be consumer within the
meaning of Section 2(1) (d) (ii) of the Act and as such can claim compensation under the Act. Gross
medical mistake will always result in a finding of negligence. A consultant could be negligent
where he delegates the responsibility to his junior with the knowledge that the junior was incapable
of performing of his duties properly.
Construction Housing Agencies
Similarly the Supreme Court laid down a landmark judgement in Lucknow Development Authority
case AIR 1984 SC 787 with regard to housing construction agencies services and their deficiency.
The term service had variety of meanings. It may mean any benefit or any act resulting in
promoting interest or happiness. It may be contractual, professional, public, domestic, legal,
statutory etc. The concept of service, thus is very wide. How it should be understood and what it
means depends in the context in which it has been used in an enactment. The legislature expanded
the meaning of the word further in modern sense by extending it to even such facilities as are
available to a consumer in connection with banking, financing etc. Each of these are wide ranging
activities in day-to-day life. They are discharged both by statutory and private bodies. In absence of
any indication, express or implied there is no reason to hold that authorities created by the statute
are beyond purview of the Act. When banks advance loan or accept deposit or provide facility of
locker they undoubtedly render service. A state Bank or nationalized bank renders as much service
as private and public transport of insurance companies. Even the supply of electricity or gas which
throughout the country is being made, mainly, by statutory authorities is included in it. The
legislative intention is thus clear to protect a consumer against services rendered even by statutory
bodies. The test, therefore, is not if a person against whom complaint is made is a statutory body but
whether the nature of the duty and function performed by it is service or even facility.
After further rounds of inter-ministerial consultations, necessitated by changes in Government, the
amendments proposed to make which were intended mainly to smoothen the working of the
consumer redressal forums at various levels and also strengthen them, bring more clarity into
certain provisions and achieve quicker disposal of cases.
Even though the Act provides for remedy against unfair trade practices, the provision has barely
been invoked before these courts. One of the reasons could be that initially, as Section 2(1) (c) (i)
stood, in order to file a complaint against an unfair trade practice, a consumer had to show loss of
damage suffered as a result of such practice. The definition of complaint under 2(1) (c) (i) said: ‘a
complaint means any allegation in writing made by a complainant that as a result of any unfair trade
practice adopted by any trader, the complainant has suffered loss or damage’. Secondly, unlike the
Monopolies and Restrictive Trade Practices Commission (MRTPC), the consumer courts did not
have the power to issue ‘cease and desist’ orders.
When the Consumer Protection Act was amended in 1993 the requirement for showing loss or
damage as a result of unfair trade practice under Section 2(1) (c) (i) was removed and the mere
adoption of an unfair or a restrictive trade practice was sufficient to give rise to a complaint before
the consumer courts. Similarly, the addition of ‘f’ to Subsection ‘l’ of Section 14 gave the consumer
courts the power to issue ‘cease and desist’ orders or to be more specific, to give directions to the
opposite partly to discontinue the unfair trade practice or the restrictive trade practice and not to
repeat them.
Another improvement that came about was in the definition of unfair trade practice itself, thereby
widening the scope of the provision. The definition of ‘unfair trade practice’ (UTP) as in Section 36
A of the Monopolies and Restrictive Trade Practices Act, which was applicable under the Consumer
Protection Act also, was earlier very narrow and suffered from several deficiencies. Subsequently,
in 1991, Section 36 A of the MRTP Act was amended to broaden the scope of UTP, thereby
widening the provision under the Consumer Protection Act also. And then Section 2 (1) (i) of the
Consumer Protection Act was amended in 1993, incorporating the definition of UTP. Earlier,
Section 2 (1) (r) merely said that the expression unfair trade practice shall have the same meaning as
in Section 36 A of the MRTP Act.
Unlike the MRTP Commission, the consumer courts still lack the power to issue interim injunction.
This is a big lacuna because in order to tackle unfair trade practices, particularly false or misleading
advertisements and protect the interests of consumers, the consumer courts should have the power
to issue interim injunctions preventing the trader from pursuing such a practice, pending disposal of
the case. And unlike the MRTP Act, there is also no provision to direct the advertiser to issue
corrective advertisement. Besides, the Consumer Protection Act provides for compensation only in
cases where loss or damage is caused as a result of negligence of the opposite party. Since no
negligence is involved in an unfair trade practice, which is an intentional or a deliberate act, a
consumer is not entitled to compensation for loss suffered on account of UTP. (However, State
Commissions have given compensation under UTP and this aspect does not seem to have been
The Consumer Protection Act also provides for relief against restrictive trade practice (RTP) but
unlike the MRTP Commission, the role of the consumer courts in tackling RTP is limited because
the definition under 2(1) (nn) says: ‘restrictive trade practice means any trade practice which
requires a consumer to buy, hire or avail of any goods or, as the case may be services as a condition
precedent for buying, hiring or availing of other goods or services’. Thus, the Consumer Protection
Act basically tackles ‘tie-up’ at retail level only arrangements under RTP. If, for example, a gas
dealer forces a consumer to buy a stove from him, as a precondition to issuing an gas connection, it
constitutes a restrictive trade practice under the Act.
The last but not the least of the concerns is the poor implementation of the law. Having constituted
the courts in the first place with great reluctance and under considerable pressure from the Supreme
Court, many of the state governments obviously have better interest in their smooth functioning.
And this is apparent in the way vacancies that arise in the posts of presiding officers and members
are treated. According to the latest figures, there are thirty-two state commissions and 543 District
Fora, including fifteen additional fora set up in some states. A common feature of these courts is
their temporary closure on account of long delays in appointing new members. The District Forum
and the State Commission have three members : a judicial member who is the president and two
non-judicial members. Their term in office is for five years.
Monitoring of the working of consumer courts by the National Commission in March, 1996, for
example, revealed a distressing state of affairs in several states. In the Western Indian State of
Maharashtra, for example, seventeen out of total of thirty-four District Fora were not working. In
North Indian State of Punjab, six District Fora were functioning while twelve were not. More
recently, information compiled by the Union Ministry of Consumer Affairs between March and
June 1998 revealed that the situation had not improved considerably since then. Only the names of
states were different. While in Bihar, fourteen out of fifty-five District Fora were not functioning
because of vacancies, in Madhya Pradesh, the number of non-functioning Fora was seven out of a
total of forty-five. In Uttar Pradesh, thirty-two out of eighty-seven District Fora were temporarily
shut down.
Some of the redressal agencies suffer from poor infrastructure facilities which, in turn, affect the
functioning of the courts and lead to unnecessary delays. Since State Governments blamed lack of
funds for the poor functioning of these courts, the Union Ministry of Consumer Affairs, with the
approval of the Federal Planning Commission, announced a one-time grant of Rs.6.1 Millions for
consumer courts for the years 1995-97, to improve and strengthen infrastructure facilities.
Accordingly, the amount was released in four instalments – Rs.5 Millions for each State
Commission and Rs.1 Million for each District Forum. However, while the Ministry at the Centre
lamented the poor utilization of the funds, the states said it was inadequate.
The workload of consumer courts is increasing day by day, but there is no corresponding increase in
the facilities provided. Wherever the number of pending cases increases, the law provides for
constitution of an additional forum, so as to ensure quick disposal of cases. A working group
constituted by the Union Ministry of Consumer Affairs in 1994 to suggest amendments to the Act
had recommended that whenever the number of cases pending before a Forum exceeded 800, an
additional Forum be set up. But so far, very few states have bothered to constitute additional Fora.
Similarly, in order to cater to an increasing number of original petitions and appeals filed before the
State Commissions and the National Commission, the law requires to be amended to provide for
Benches. That, however, is yet to come about.
In order to circumvent delays in the justice system in the country, the lawmakers came up with a
parallel system of consumer justice. The anxiety of the lawmakers to ensure swift redress of
complaints before these courts is apparent in the summary procedure prescribed for them. This law
does not provide for a second appeal. More important, the Consumer Protection Rules prescribe a
time limit of ninety days for the disposal of complaints. But courts have failed to stick to this timeframe for adjudications of complaints. However the time taken by Consumer Court is still lesser
than the time taken by the Civil Courts and much more inexpensive.
Consumer Protection (Amendment) Bill 2001
Although effective use of the redressal agencies have been made by consumers a number of
practical difficulties and shortcomings were brought to the notice of the Govt. of India, including
the pronouncements of Consumer Redressal Forums, High Courts of the States and the Supreme
Court of India which had bearing on the working of the redressal agencies. Therefore, in 1994 the
Govt. of India constituted a working group under the Chairmanship of Sh. Niren De, Minister of
Food and Civil Supplies, Govt. of West Bengal to examine the need for further amendments to the
Act. Thus on the basis of recommendations of the said Working Group and also those of an Expert
Group set up in 1997 and after extensive consultations with representative of consumer interests
including VOICE, President of the National Commission and State Commissions and all concerned
Ministries of the Govt. of India, proposals for extensive amendments of the Consumer Protection,
1986 were formulated.
The Consumers Protection (Amendment) Bill 2001 was introduced in the Rajya Sabha on
26.04.2001. It was thereafter referred to the Standing Committee on Food, Civil Supplies and
Public Distribution for examination and report.
The committee consulted representatives of various Deptts./ Ministries/ Organizations of the govt.
of India, as also various Consumer Organisations, including VOICE and gave its report on 30 th
October 2001.
The CP (Amendment) Bill 2001 was passed by the Rajya Sabha and thereafter it was sent to the
Lok Sabha which passed it in the Budget Session in 2002. VOICE conveyed the viewpoint of the
consumers, on some of the more important amendments. These have emerged as consumers’
viewpoint, on the basis of detailed discussions amongst a large number of Consumer Organisations,
throughout the country, including VOICE, during the last several months.
The salient amendments are 1)
In case of death of a consumer, his legal heir or representative shall be complainant.
Complaint of unfair trade practice can be made against any trader or service provider.
In addition to a trader any service provider will also be liable for any complaint.
Sale of hazardous goods in contravention of any standard relating to safety of such goods or
if the trader could have known with due diligence that the goods are unsafe to the public can
be subject of any complaint.
Services which are hazardous or likely to be hazardous to life and safety of the public when
used the service provider shall be liable against a complainant.
Consumer does not include a person who avails of service for any commercial purpose.
However services availed of exclusively for the purpose of earning livelihood by means of
self-employment will not be deemed as commercial purpose.
‘Manufacturer’ means a person who –
makes or manufactures any goods or part thereof or
does not make or manufacture any goods but assembles parts thereof made or
manufactured by others or 4
puts or causes to be put his own mark any goods made or manufactured by any other
The definition of restrictive trade practice has been made exhaustive.
The definition of spurious goods has been incorporated.
District Consumer Council :
The State Govt. shall establish District Consumer Protection Council for every District under the
Chairmanship of the collector of the district. The Council will be constituted by official and nonofficial members and meet at least twice a year.
District Consumer Redressal Forum :
The qualifications of members of District Forum have been given in detail with reference to age,
qualification etc. If the President of the State Commission is unable to act as Chairman of the
Selection Committee, the State Govt. may refer the matter to the Chief Justice of the High Court for
nominating a sitting judge of that High Court to act as Chairman. Every member of the District
Forum shall hold office for a term of 5 years or upto the age of 65 years whichever is earlier.
However he may be re-appointed for another 5 years or upto the age of 65 years. The member may
send resignation to the State Govt. The pecuniary jurisdiction of the District Forum shall be not
exceeding Rs. 2 Millions. Every complaint filed before the Dist. Forum shall be accompanied with
prescribed amount of fee. No complaint shall be rejected without giving a hearing. The
admissibility of complaint shall be decided within 21 days. The complaint shall be decided within 3
months. The Dist. Forum may pass interim order if required and also pass punitive damages.
State Commission :
For preferring any appeal to the State Commission, the appellant has to deposit 50% of the amount
or Rs. 25,000 whichever is less. The qualifications and other eligibility conditions of members of
the State Commission have been detailed. Every member shall hold office for 5 years or upto the
age of 67 years. He will be eligible for reappointment for 5 years or 67 years. He may resign from
his office by writing to the State Govt. The jurisdiction, powers and authority of the State
Commission may be exercised by Benches constituted by the President with one or more members.
The pecuniary jurisdiction of the State Commission shall be exceeding Rs. 2 Millions but not
exceeding Rs. 10 Millions. There may be constituted circuit benches. For filing any appeal against
the order of the State Commission, the appellant shall deposit 50% of the amount or Rs. 35,000/with the National Commission. The State Commission or the National Commission shall be
disposed of within 90 days from the date of admission. Ordinarily, adjournments shall not be
granted unless the reasons are recorded subject to payment of costs.
National Commission :
The National Commission shall have not less than 4 members and there will be one woman
member. They shall fulfill the prescribed qualifications and other conditions of age etc. The
selection committee shall be headed by a Judge of the Supreme Court to be nominated by the Chief
Justice of India. There may be constituted benches of the National Commission with one or more
numbers. The term of office of the member shall be 5 years or upto the age of 70 years. He shall be
eligible for reappointment for another 5 years or upto the age of 70 years. The pecuniary jurisdiction
of the National Commission shall be exceeding Rs. 10 Millions. The Commission shall have power
to review its order. An exparte order may be set aside in the interest of justice. The Commission
shall have power to transfer complaint from the Dist. Forum or State Commission of one state to
another state. A circuit bench may be constituted. In case of vacancy of the office of President of a
Dist. Forum, State Commission or the National Commission, the senior most member shall perform
his duties. For filing appeal before the Supreme Court against the order of the National
Commission, the appellant shall pay 50% of the amount or Rs. 50,000, whichever is less. The
Consumer Fora and Commissions shall have power of judicial magistrate of the first class in matters
of execution of orders.
Honble’ Members of Parliament, were requested to project these view point, so that the Consumer
Protection Act, which is recognized as one of the landmark legislations of the country, emerges as a
more significant instrument, for safeguarding and protecting Consumer Rights. Accordingly, the
more important amendments made by Amendment Bill, are discussed in the following paragraphs.
In all other matters, which were not touched upon in the following paragraphs, we support the
proposed amendments, as also the recommendation of the Standing Committee as agenda for
future:Section 2 (d) of the Principal Act: - Definition of “Consumer”
Existing Provision:- This section as presently worded defines the term “Consumer” in terms of
buyers/users of any goods or services, for consideration etc.
Shortcomings in the Existing Provision.
In the well-known “Morgan Stanley” case, the Supreme Court had in 1994 held that “Shares &
Stock” do not constitute “Goods”. As is well known a very large proportion of the public are
involved in one way or the other, in the purchase and sale of “ Stocks” and “Shares”, as also other
“financial services” such as bonds, debentures etc. They constitute an important segment of
consumers. It is therefore very necessary that their interests are explicitly brought within the ambit
of the definition of “Consumers’ in the Consumer Protection Act, particularly for neutralizing any
restrictive or unfair trade practices followed by the providers of “financial service”. Infact similar
provisions were added earlier to the MRTP Act to cover investors.
It is therefore strongly urged that the proposed amendment to Section 2 (d) of the Principal Act
as contained in the Consumer Protection (Amendment) Bill 2001 may be further amended as
follows:“(cc) in subsection (d), the following may be added as sub clause (iii)
(iii) services to an investor, a consumer of financial service.
The existing Explanation below sub section 2(d) may be numbered as
Explanation1 and a new Explanation 2 may be added as follows below this sub
section :-
Explanation 2 - Financial service includes.
issue of capital or securities like shares, stocks, bonds, debentures, deposits. etc.,
by whatever name called, provision of any service relating, connected or
incidental thereto and also includes,
a service provided by any person in the nature of advice, assistance in respect of
investment, disinvestments, management, use of money in cash or security
making an arrangement for investment by any person for making, offering of or
agreeing to make to another person buying, selling, subscribing for or
undertaking a particular investment,
financial services involving public subscriptions, shall be deemed to commerce
from the date of public invitation for subscription and continue, if and when a
consumer makes an application, from the date a consumer makes application for
allotment of shares, debentures, bonds, deposits to the date such arrangements are
approved/confirmed by allotment”.
It is also suggested that the proposed amended Explanation as included in the Amendment Bill to
be renumbered as Explanation1, may be further elaborated to include “small scale and cottage
industries”. This is because their position is also similar to those of “self employed” and
should therefore not be covered by the general definition of “Commercial purpose”
Section 3 of the Principal Act.
The existing provision of Section 3 in the Principal Act is as follows:“ 3. Act not in derogation of any other law - The provisions of this Act shall be in addition to and
not in derogation of the provisions of any other law for the time being in force”.
It has been proposed in Clause 3 of the Amendment Bill that this section may be amended as
follows:“3 The provisions of this Act shall apply to all claims in respect of which corresponding remedies
of judicial nature are available under any special law for the time being in force”
In this connection the Standing Committee has observed as follows in para 2.5 of its report.
“2.5 the committee deliberated the amendment proposed by the Government in detail. After
hearing the views of the experts, the Committee have noted that the proposed substitution of Section
3 is against the consumer interest. In the opinion of the Committee, exclusion of cases from the
purview of Consumer Courts in regard to which similar remedies are available under special laws,
will harass the consumer in getting quick and inexpensive justice instead of helping him. For
instance a consumer will have to move a long distance and incur heavy expenditure as Tribunals
etc. set up by the Government are in State capitals only whereas District Fora are available in
every district. In view of the Committee, as per proposed amendment, a consumer will have to
move a long distance for redressal of his grievances which will be very expensive. Thus, the quick
and less expensive grievance redressal machinery to a consumer will be defeated.
The committee therefore, strongly recommend that the proposed amendment to Section 3 of the
Consumer Protection Act, 1986 should be withdrawn.
All Consumer Organisations are also uniformly against the proposed amendment and fully support
the views of the Standing Committee. It is however felt that the principle behind the proposed
amendment as also the review point of the Standing Committee can be accommodated if Section 3
is amended as follows.
“3 The provisions of this Act shall apply to all claims, not withstanding any remedies of
judicial nature that may be available under any other law for the time being in force”.
Section 12 of the Principal Act.
It is proposed in Clause 9 of the Amendment Act, that the entire Section 12 of the Principal Act
may be replaced by a new Section 12 which inter-alia includes a new provision as follows in
Section 12 (2) thereof.
“(2) Every complaint filed under sub section
(1) shall be accompanied with such amount of fee and payable in such manner as may be
In this connection the Standing Committee has observed as follows in para 2.10 and 2.11 of its
“2.10 The Committee discussed the issue in detail. In their opinion, Consumer Courts have
been established with a view to provide justice to poor consumer free of cost. Through
this insertion the government has sought to change the basic objective of the
establishment of these Courts and thus Consumer courts will also run more or less on
the pattern of Civil Courts. The reason given by the Ministry that to expedite the
disposal of complaints, collection of fee with the complaints is necessary to cover at
least a part of the costs relating to process, service of notices, etc. is not acceptable to
the Committee. The Committee is of the opinion that in case the Central Government
wants to help the State Governments to earn some revenue for running these courts,
they may issue instructions to the courts to levy cost on decree with the defaulters.
2.11 The Committee, therefore, strongly recommend that proposed Clause 12 (2) of the
Bill should be withdrawn in order to provide inexpensive justice to poor consumers”.
All Consumer Organisations are fully in agreement with the recommendation of the Standing
Committee as indicated above. It is therefore urged that the proposed amendment as contained
in clause 12 (2) of the Bill should be withdrawn
Section 13 of the Principal Act.
The Existing Section 13 deals with “Procedure on receipt of Complaints”.
It is inter-alia proposed in Clause 10 c (iii) of the Amendment Bill that Section 13 may be
amended by inclusion of the following as a new clause (c ) after existing clause (b) in sub-section 2.
“ (c) where the complainant fails to appear on the date of hearing before the District
Forum, the District Forum may either dismiss the complaint for default or decide it on
All Consumer Organisations are strongly of the view that it may not be appropriate to dismiss the
complaint of the complainant for default, if the complainant fails to appear. This is because, there
may be some very valid justifiable and genuine grounds, due to which, in some rare cases the
complainant may not be in a position to put in an appearance. It will be very unfair, if in such a
situation, the complaint is dismissed out right. Since the proposed amendment in any case suggests
that the District Forum may also decide such cases on merits, the first alternative of dismissing the
case should be deleted. Unfortunately, the Honble’ Standing Committee, appears to have
overlooked this aspect, as no recommendations in this regard have been included in its report. It is
therefore strongly urged that the words “may either dismiss the complaint for default”, may be
deleted from the proposed amendment. This will enable the District Forum to decide such cases on
merits and will thus benefit the unfortunate consumer who after having made a complaint, is unable
to be present due to some unavoidable circumstances.
Supreme Court Directive :
The Supreme Court passed an order on 7th January 1994 making it mandatory for all the State
Governments to have a full time Presidents of District Forums. It was after all these initial hurdles
that the object and scheme of the Act that there should be a State Commission in every state and
district forums in all the district in each state to entertain and adjudicate upon grievances brought
before them by consumers could be effectively implemented. This long process took nearly five
years. At present we have the National Commission in Delhi, 32 State Commissions in the various
States and 543 district forums, all of which are fully functional.
Delays in Consumer Courts :
When the Consumer Protection Act was passed wide publicity was given to the beneficial nature of
its provisions and as a result great expectations were generated in the minds of consumers that at
least they will henceforth have a new alternate system of dispensation of justice which will enable
them to secure inexpensive, speedy and effective redressal of grievances. If we are to review the
performance of the consumer forums during the past few years we have to admit with regret that the
inability of the forums to adhere to the time frame specified in the Act for disposal of cases has
given rise to a considerable amount of frustration and disappointment in the public mind. However,
given a choice between civil courts and consumer courts most consumer still choose a consumer
court for its inexpensive and faster remedy.
Supervision of Fora :
The responsibility of supervising the State Commissions and the District Forums has been invested
by the Act in the National Commission. Only by a process of close and continuous monitoring will
it be possible to bring about substantial improvements in the matter of elimination of delay in
disposal of cases and accumulation of huge arrears in some of the forums. At the State level, the
President of the State Commission will have to undertake this responsibility of ensuring that the
district forums in the state carry out their functions in the manner contemplated by the Act.
A number of state governments are known to have tried to retain bureaucratic controls and
undermine the ability of the State Commission to act independently and supervise the District Fora.
Frequent Adjournments :
Despite the clear injunction in the Act that no case shall be adjourned on more than one occasion at
the request of parties or counsel there is a general complaint that adjournments are being repeatedly
granted by many of the fora on grounds which cannot be classified as strong or compelling. One has
to stress emphatically that the work of the fora has to be regarded with utmost seriousness by the
Presidents and the Members and the sittings of the forums should be held on every working day for
the full duration of at least six hours. The posting of cases should be so arranged that only that
number of cases which can be conveniently taken up and disposed of on each particular day should
be posted for that day and once a case is included in the list it should be mandatorily taken up and
heard except in exceptional circumstances based on humanitarian grounds. As already indicated
consumer fora should not degenerate into adjournment courts and the ordinary rule should be that
no case will be adjourned once it is taken up for hearing. It should be continuously heard at a stretch
until the conclusion of the arguments of both sides.
Decorum in Fora :
It is absolutely important that perfect decorum should be maintained while conducting the sittings
of every forum. Punctuality is of utmost importance and the sittings must commence exactly at the
time fixed for the commencement of the work of the courts. The President and the Members of the
forum attending the sitting should all come to the court together and they should rise and depart
only after the work is completed for the day except for taking a short recess for lunch, etc. The
proceedings of the forum should be conducted with dignity and decorum. These points had been
impressed upon to all the Presidents and the Members of the forums in the country at the various
State level conferences.
Service Providers :
It has been found from the existence of the past years that wherever Redressal Fora have been set up
the consumer public has been quick to take resort to them for seeking relief. Quite a large number of
complaints involving different types of consumers’ grievances were filed before the different
District Forums and State Commissions. By now hundreds of thousands of consumers have been
granted relief by these Fora functioning under the Act. By successive land mark orders the National
Commission held that all Governmental and Public Sector organisations providing service to public
for consideration such as Railways, Telecommunication and Postal Services, Life and General
Insurance Corporations, Banks and other financial institutions, Housing Boards and Development
Authorities fall within the perview of the Act. Likewise it was held that services rendered to patients
by medical doctors and hospitals on charging fees and also professional services given for
consideration by Advocates, Engineers, Architects are covered by the Act. These rulings of the
National Commission were all affirmed by the Supreme Court.
Of paramount importance is to tackle the heavy pendency of cases and long delay in the disposals.
One major step to be taken for elimination of delay in disposal of cases is to avoid unnecessary
adjournments of cases. The Consumer Forums should be absolutely strict in the matter of dealing
with requests for adjournments. It is also worthwhile to consider whether a curb should not be
introduced on unduly lengthy oral arguments by calling upon counsel and parties to limit the oral
arguments to a specified time and supplement it, if necessary, by filing written submissions. In this
endeavour to speed up the disposal of cases the Members of the Bar as well as the parties appearing
in the cases should fully cooperate with the President and Members of the forums.
Consumer Awareness :
The object and intentment of the Act will be fully achieved only if the consumers in the rural areas
of the country become duly conscious of their rights and the availability of the cheap and speedy
remedies provided under the Act. An intensive campaign of spreading consumer education amongst
the masses in the villages has to be launched by the Central and State Governments. While the law
making function of Parliament has been effectively discharged by it, it is now for executive
Governments at the Centre and State levels and also to Legal Service and Advisory Committees and
other Legal Aid Bodies to ensure that the average consumer even in the remote rural areas of the
country is made aware of his right to freedom from any kind of exploitation which he can easily
enforce without having to involve any expenditure by resorting to the redressal machinery
established under the statute where he will be able to get quick justice. Consumer organisations all
over the country also have a very distinct role to play in regard to this vital matter of building up
consumer awareness amongst the masses. Well planned out propaganda campaigns have to be
undertaken by all aforementioned agencies with a view to ensure that the message “consumers
awake and be aware of your rights and remedies” reaches every corner of our land and no consumer
will henceforth suffer unfairness and exploitation lying down.
Appearance of authorized agents :
Recently Tamil Nadu State Consumer Disputes Redressal Commission has in the case filed by
Mrs.Madhavi & Family against Apollo Hospital, Chennai have issued directions to all the District
Fora in the State against appointment of non-advocate as an authorized agent for appearing on
behalf of a complainant. This order has been challenged by four voluntary consumer organisations
VOICE, CCAG and two others before the National Consumer Disputes Redressal Commission
being without jurisdiction and in contravention of the Consumer Protection Act and Rules, which
permit appearance of and representation by authorized agents. At the last hearing in this case on 26
Sept. 2002 those orders have been stayed pending final adjudication of the appeal. Interestingly, the
Maharashtra State Commission also passed orders following the orders of the TN State
Commission. The orders the State Commission were challenged before the High Court of Judicature
at Bombay in Writ Petition No. 1147 of 2002 filed by associates of VOICE against the South
Mumbai Consumer Disputes Redressal Forum & others. The High court has quashed the orders of
the State Commission in that a party to the proceeding before the Dist. Forum / State Commission
has right to authorize a person of his choice to represent him and appearance of such agent
authorized by the party on the date of hearing is not restricted to physical presence and but includes
to examine and cross examine the witness, address the court and take part in the proceedings as the
case may be. The High Court has also observed that the entire controversy could have been avoided
if the Act of 1986 and Rules of 2000 were clear and did not suffer from lacunae. Therefore, the law
makers should take appropriate steps and plug the lacunae and amend the law to be clear and
Important Judgements on Consumer Law :
Medical services rendered on payment
Indian Medical Assoc. Vs. V.P. Shantha & Ors.
(1995) 6SCC 651
Requirement not satisfied
Stereocraft Vs. Monotype India Ltd.
II (1991) CPJ 1 (SC)
Applicability of Sec. 34 CPC.
Sovintorg (India) Ltd. Vs. State Bank of India.
II (1999) CPJ 4 (SC)
Insurance Claim
Delay in settlement – grant of interest
United India Insurance Vs. Ajmer Singh Cotton &
General Mills II (1999) CPJ 10 (SC)
Condonation of delay
France B. Martins & Anr. Vs. Mrs. Mafalda,
Maria Teresa Rodrigues
II (1999) CPJ 41 (SC)
Unauthorised - escalation in
price consumer not liable to pay
M/s. Vikas Motors Ltd. Vs. Dr. P. K. Jain
II (1999) CPJ 44 (SC)
Procedure on receipt complaint -
MRF Ltd. Vs. Jagadish Lal
II (1999) CPJ 47 (SC)
Setting aside ex-parte reasoned order
Jyotsana Arvind Kumar Shah Vs.
Bombay Hospital Trust II (1999) CPJ 1 (SC)
Deficiency in Service
Jurisdiction of State Commission
Union Bank of India Vs. M/s. Seppo Rellyoy
III (1999) CPJ 10 (SC)
PF Scheme comes under
Consumer Protection Act
Regional Provident Fund Commissioner
Vs. Shiv Kumar Joshi
CA No. 411 of 1997 decided 14.12.99
Beneficiaries claim upheld
by Supreme Court
Spring Meadows Hospitals Vs. Harjot Ahluwalia
II (1997) CPJ 98 (NC)
Vacancy of member
President to act
Gulzarilal Agarwal Vs. the Accounts officer,
Civil Appeal No. 33 of 1996 decided 25.09.96
Housing Construction is a Service
Lucknow Development Authority Vs. M. K. Gupta
AIR 1984 SC 787
Annexure - A
Statement of cases filed, disposed of and pending in State Commissions in India as on 31.12.2001
Name of the State
Andhra Pradesh
Andaman & Nicobar Islands
Arunachal Pradesh
Dadra & Nagar Haveli
Daman & Diu
Himachal Pradesh
Jammu & Kashmir
Madhya Pradesh
Uttar Pradesh
West Bengal
Cases filed Since
Cases Disposed of
Since Inception
% of
Annexure - B
Statement of cases filed, disposed of and pending in District Forums in India as on 31.12.2001
Name of the State
Cases filed Since
Andhra Pradesh
Andaman & Nicobar Islands
Arunachal Pradesh
Dadra & Nagar Haveli
Daman & Diu
Himachal Pradesh
Jammu & Kashmir
Madhya Pradesh
Uttar Pradesh
West Bengal
Cases Disposed of
Since Inception
% of
Part – II :
Contemporary Competition Law in India
MRTP Act was enacted in India following the acceptance of the Report of the Monopolies Ensuring
Commission set up in 1964. The thinking of the Commission was strongly influenced by ideas of
Nehruvian Socialism, central planning and controlled industrial development which ruled the Indian
political-economic thought vs. the corridor of power in the 1960’s and 1970s. The main thrust of the
law was to control the growth of large enterprises based on their asset base. This law worked in
conjunction with the Industrial Development Act under which Government issued licences for
setting up new features or expansion in existing enterprises. Control of restrictive trade practices
was an objective that appeared to be a subsidiary aim of the law.
In 1969 the Monopolies and Restrictive Trade Practices Act came into force to
Regulate expansions, mergers and amalgamations, and appointment of directors in respect of
‘dominant undertakings having assets of Rs. Ten Million and more and of undertakings
which by themselves or with inter-connected undertakings have assets of not less than
Rs.200 Millions in value;
Regulate the standing of new undertakings which would become inter-connected
undertakings of such existing undertakings the total assets of which exceed Rs.200 Millions.
Control over and prohibition of monopolistic and restrictive trade practices as are found to
be prejudicial to public interest.
Between 1969 and 1984 MRTP Commission had only one Court to execute jurisdiction over the
entire country. In 1983 when VOICE filed its first case at MRTP Commission against TV
companies for tie-up of after sales service with sales of TVs, there were only about a dozen cases
listed in the daily cause list on an average day. This law saw an increase in litigation after the
Sachar Committee set up by the Janata Party Government in 1977 submitted its recommendations to
include unfair trade practices in this Act. 1984 amendments also included the power to grant
temporary injunctions U/S 12A of the Act and the power to award compensation U/S 12 B of the
Act. In 1991 the wave of liberalization swept India as economic reform removed provision for
industrial licensing and removing all legal restraints on expansion in industrial capacity in most
scheduled industries except a few. Foreign Direct Investment became welcome and provisions of
MRTP Act related to control of industrial expansion were removed. The provision of controlling
restrictive and unfair trade practices remained on the Statute Book.
VOICE used the provisions of this law by mean of a statutory locus standii U/S 10(a) (i) of the Act
which allows a voluntary consumer association to file complaints. Its experience between 1983
when the first case was filed (VOICE Vs. Bharat TVs on R.P. 138 of 1984) and its judgement
winning the case 18 years later in 2001, was a better, frustrating and educative experience. By 1988
VOICE had accumulated enough experience to stop filing cases before the MRTP Commission
mainly due to long drawn procedures and intricate court craft that allowed offenders to delay
adjudication or get away with ease. We believed that consumer protection law and competition law
were two sides of the same coin. A strong competition law helped to promote competition in the
economy. Strong competition protected consumers in the market place. By mid 1990’s the VOICE
team was convinced that the law was not serving the objectives it was set up to achieve.
Since competition can ensure availability of quality goods and services at competitive prices. No
amount of regulation, legislation or rule making can achieve what the existence of strong, vibrant
and dynamic competition can achieve in a market place. Strong competition does not come
automatically. In its quest for profit, the enterprise likes to create condition to restrain competition,
inhibit customer choice and create barriers and obstacles which will reduce competition and deliver
easy profits. In the absence of a proactive, working and effective competition law, market players
can do anything to restrict or inhibit competition. MRTP Act, 1969 was devised with similar
objectives. Even after 33 years later the law was not able to achieve the legislative objectives by a
new law which is being scrutinized by the Standing Committee of Parliament in the form of
Competition Bill 2001. VOICE had submitted its Memorandum and thereafter gave person
presentation before the Committee.
The Government set up a high level committee to examine the MRTP Act and strengthen the
competition law. But, unfortunately, the recommendations of the high level committee were vitiated
by the appointment of a representative of a multinational which had been convicted of anticompetitive behaviour on a number of occasions by the MRTP Commission. The presence of such a
representative in the high level committee has been instrumental in diluting the recommendations of
the Committee to control anti-competitive activities.
The recommendations of this committee were accepted by the Government and a new Bill has been
drafted. The Competition Bill 2001 has been presented to Parliament. This part of the paper
critically analyse this Bill which is before the Indian Parliament for adoption.
The bill has some welcome features :
The Proposed Bill enlarges the scope of the jurisdiction of the Commission by framing
different benches in different parts of the country to function as the subordinate to the
Competition Commission. This is highly appreciated step as it gives facilities to the
consumers and gives opportunity to appear in near by areas where the jurisdiction of the
cause of action arises. Section-25 of the proposed Bill says that an enquiry shall be initiated
before the bench within the local limits on whose jurisdiction cause of action has arisen.
The present Bill has limited the period of review unlike MRTP Commission which does not
describe the period of limitation for filling the review. Under the proposed Bill the person
aggrieved by any order the judgement of the Commission may file a review application
within a period of 30 days from the date of the service of the order U/s-37 of the Proposed
The appeal against the order will lie before the Supreme Court only U/s - 40 within 60 days
from the date of the service of the order.
The proposed Bill has taken the problems of the consumer very carefully and enhance the
local jurisdiction U/s - 32 of the Act, the performance or the status of the dominant position
if it is having any impact inside India though the agreement has been signed outside India.
The Competition Commission will have jurisdiction to inquire into. MRTP Act U/s - 55
provided right to appeal against the order of the commission before Hon’ble High Court
A very peculiar feature is that to impose a very heavy fine against the person, company,
enterprises who disobeys, conceals, omits, fabricates or destroys the directions or the
documents necessary for the adjudication of the matter before the Hon’ble Commission.
U/s – 43 the Competition Commission can impose a penalty of Rs. 100,000/- for each day during
the period of failure of complying the direction of the Commission and Director General similarly
empowered to impose a penalty of Rs. 5 Million which may extend to Rs. 10 Million in case any
person being a party to combination makes a statement which is false in any material “particular or
omits to state material” it has further been incorporated U/s - 55 that the Commission will have
jurisdiction to impose a penalty of Rs. 1 Million against any person who furnished or is required to
furnish any document or information and has reason to believe to be false or omits to state any
material fact or willfully alter, suppress or destroy any document which is required to be furnished.
India needs a strong Competition Authority that can effectively control anti-competitive practices.
The MRTP Commission was envisaged as such an authority but it has somehow got caught in a web
of its own, as a result of which it has neither been able to address anti-competitive practices of large
scale business nor provide relief to consumers. Cases before the MRTPC have dragged on for
decades. Therefore, there is need to have an authority similar to the US Federal Trade Commission.
While the Competition Bill 2001 has some welcome features, the Bill fails to meet the needs of a
liberalizing economy because there are four major shortcomings in respect of structure,
jurisdiction, procedure and definition.
Structure of the Commission
A single multimember Commission, quite similar to the MRTP Commission is envisaged. Over 30
years of working is adequate evidence of its structural deficiency. A single tier authority with single
or double member bench behaving very much like a Civil Court is sure recipe for prolonged
litigation. This single tier structure took 18 years to decide a single complaint in VOICE vs Bharat
TV and other (RTP 138 of 84). How can one avoid such delays in adjudication ? Delays can be
avoided by two tiers of adjudication. One tier for giving a judgement in a matter and another tier for
an appeal by aggrieved party. The final appeal should be with the Supreme Court. The completion
of pleadings, recording of evidence, discovery of documents, answering of interrogatories should be
made before Administrative Law Judges. Once the case is ripe for final hearing, it should be put
before the Authority for a decision by a speaking order. The order should be put into operation
immediately unless the Appellate Authority (2nd tier) changed it on appeal by any aggrieved party.
The first Tier Authority should have Regional Benches having jurisdiction over cause of action
arising in each region. The Regional Bench should have requisite number of Administrative law
Judges to deal with procedural matters between the stage of admission by the Authority and final
hearing by the Authority. Administrative Law Judges would have wide powers to call for
information, discover documents and complete the factual aspects of all matters having a bearing on
a case. The 2nd Tier Appellate Authority should be based in Delhi and charged with the overall
supervision of the work of the Regional Authorities. The Appellate Authority should be linked to
region by an Intranet so as to be able to exercise supervision to ensure time bound disposal of cases
before it. It should hear appeals on decisions by Regional Authority. The decision of the Appellate
Authority may be challenged before the Supreme Court on any the point of law.
The high level Committee did not go into the procedures, rules and regulations governing the
process of adjudication to determine the reasons for long delays and the legal and procedural
hurdles. As a result it has not been able to make any recommendations for time bound disposal of
cases. Therefore, the Competition Commission will be afflicted by protracted litigation which have
been faced by MRTPC.
Dealing with the Constitution of the Commission
The age of the retirement of the Chairman and the members has been fixed at very high level which
is not reasonable. The age of retirement should not be more than 65 years. But the most important is
that the appointment of the members of the Competition Commission must not be from the group of
retired judges and / or civil servants from Union and States both. The reason behind this submission
is that the judges and the civil servants are most likely to be influenced by such a system of
reappointment after the retirement. This system has injured the smooth functioning of the justice. It
is also highly appreciated that the civil servants may be influenced by the traditional political
culture at the cost of independence of the devoted services during this tenure. In order to give
continuity a person being appointed must have at least three to five years of service prior to
retirement. We welcome the Clause 11(2) providing for removal of a member or Chairman on
grounds of proved misbehaviour. However, we object to Clause 11(3) which provides for such a
person can be recommended in the interim period even prior to a finding of guilt by the Supreme
Court. The Clause 11(3) may be changed to read “The Central Government may suspend from
office the Chairperson or a member in the interim period with the permission of the Supreme
Court, as the case may be, in respect of whom …..”
Clause 8 (2) (b) the words “consumer affairs” as one of the disciplines for appointment to the
Commission should be inserted. In Clause 9 (3) the last line should be changed to read “…… make
a reference to the selection committee for filling up of the vacancy after it has advertised and
invited applications from qualified persons and has prepared a shortlist of qualified persons
and their relevant knowledge and experience to be conveyed to the selection committee.”
The status of cases relating to restrictive trade and the procedure for their continuation under the
Competition Act needs to be clarified more clearly. The provision in Clause 64(3) needs to be
clarified further. The status of cases relating to unfair trade practices which are transferred to
National Commission under CP Act as provided under Clauses 64(4) and (7) needs to be clarified.
These clauses should be changed to empower the National Commission to have the transferred
matters adjudicated as per pecuniary jurisdictions under CP Act.
Lastly we have found that officials of the Department of Company Affairs whose administrative
control of this law resides inside Government, are insensitive on consumer concerns. Under several
Ministers in past years, the Department of Company Affairs which is charged with administration of
MRTP Act, has paid only lip service to strengthening anti-trust laws. There appears to be a conflict
of interest among officials whose main job is to nurture, protect and facilitate corporate governance
under the framework of the company laws. Company law officials proved their incapability in
undertaking effective action on the anti-trust dimension of commercial, industrial and corporate
behaviour. We feel that administration of anti-trust laws is not safe in the hands of the Department
of Company Affairs and should be shifted to another Ministry where there is no such conflict of
interest. We believe that the time is ripe for shifting of the responsibility of anti-trust laws to the
Ministry of Consumer Affairs, which is already administering the Consumer Protection Act 1986.
Consumer Protection and anti-trust laws are two sides of the same coin all over the world.
Jurisdiction on Issues
The high level Committee did not go into the series of judicial pronouncements by MRTPC for last
30 years. It did not critically examine the judgement of the High Courts and Supreme Court on
different aspects brought before it every year for over 30 years. Therefore, this Bill, which is based
on the Committee’s recommendations does not incorporate the lessons of three decades of litigation
The whole Bill is proposed to deal with the competition. Therefore the soul of the whole act is
“competition” but this word competition for which the whole Act is intended to be made i.e. the law
to protect the consumers has not been taken care of. Commission has been defined under Section –
2(d) but group, competition and other important definitions have been left out. Unless competition
is given clear meaning and definition, the whole Act will become ineffective to achieve the object
of the enactment of the Competition Act.
Even though the administration of the MRTP Act left much to be desired many of legal definitions
under MRTP Act remain relevant and need to be retained. These include :
The definitions of ‘group’ U/s-2 (ef) of MRTP Act is a comprehensive and foolproof
definition. This definition explains meanings of ‘group’, ‘associated persons’, which have
been judicially tested over three decades. This definition is much superior and more
comprehensive than the loosely worded definition under explanation on (b) to Clause 5(b)
of the Bill. There is no definition of “inter-connected” enterprises. Two enterprises can be
legally owned separately and yet be interconnected. By not including the concept of
interconnection the bill provides an open gate for large corporations to escape the law. The
definition of interconnected undertakings’ U/s-2(g) of MRTP Act is an all comprising
concept which defines the mode of control prevalent in the corporate world. It covers
different permutation, and combinations in which control and ownership are organised
through inter-corporate investments, cross holdings and indirect ownership patterns.
Explanation (a) to Clause 5(b) of the Bill defines ‘control’ in a very weak manner and may
provide many escape routes to the offenders. Concept of ownership defined U/s-2(ja) of
MRTP Act is also missing. This definition is very useful to establish ownership of an
enterprise and needs to be incorporated in the definition clause of the Bill.
Clause 3 is not adequate. This will require a very wide definition to restrictive trade
practices with ample illustrations and examples to cover the entire range of anti-competitive
practices. The coverage of Clause 3 is not comprehensive and does not cover all type of
anti-competitive practices.
a) It should cover agreements (formal or informal), horizontal restraints, and vertical
b) It does not cover Intra-brand competition, including competition from parallel imports
after opening of imports under WTO agreements.
c) It does not cover Applying dissimilar conditions to equivalent transactions with other
trading parties, thereby placing them at a competitive disadvantage.
d) It does not cover Horizontal restraints like – price fixing, market division, quotas or
other restrictions on production, information agreements and advertising restrictions.
e) Another class of horizontal restraints that could be covered includes joint ventures
among competitors, R & D Agreements, specialization agreements.
Agreements such as those in Clause 3 which have an adverse effect on competition may not
be written as parties avoid getting caught. Many a times these agreements and
understandings between businessman are oral. They are frequently in nature of
‘conspiracies’ where no evidence is available. In several instances like price fixing by
airlines, cement companies, transport operators etc. this is as a result of private discussions
which cannot be proven by documents. The Bill does not embody rules of evidence to cover
such situations. If the rigid rules of Indian Evidence Act are followed, these commercial
conspiracies cannot be proved in 95 out of 100 cases. The Bill should embody rules of
evidence to prove commercial conspiracies by circumstantial evidence similar to criminal
Clause 4 seeks to prevent abuse of ‘dominant position of an enterprise. This clause is likely
to remain a paper tiger because it will be extremely difficult to prove that an enterprise has a
‘dominant position’. The definition of dominant position in Clause 4 explanation (a) is not
only vague but devoid of material characteristics that can be proven in a judicial manner.
Further the prohibition is for an ‘enterprise’ defined in Clause 2(g). This definition does not
cover a ‘group’ or interconnected undertakings. It covers only subsidiaries. Any enterprise
can abuse its ‘dominant position’ in the manner specified in Clause 4(2) through inter
connected undertakings. It will be very easy for any undertakings to escape this mischief by
simply delegating its abusive practices to third parties and claim that it is not abusing its
dominant position. Therefore the Clause 4(1) should be modified to read as “No enterprise
or group of enterprises or its inter-connected enterprises shall abuse its dominant
Clause 4(2) should be changed as : “There shall be an abuse of dominant position under
sub Section (1); if an enterprise, group of interconnected enterprises acting directly or
indirectly through its representatives, agents, intermediaries, associates, sellers,
resellers under whatever name or description”. Besides ‘Dominant position’ definition in
explanation (a) needs to be modified by adding Sub Clause (iii) as :“iii) hold more than 25% of the market share over a period of three years for which
data is available.”
As for jurisdiction the following matters should be the main subjects before the Competition
Authority. The threshold should be defined as 25% of market share. This threshold already
exists U/s-2(d) of the MRTP Act :
 Preventing companies and groups from ordinarily acquiring market power represented
by more than 25% of the relevant market. The threshold for market power be defined not
by assets but by share of the relevant market. For this purpose the judgements arising out
of the US Federal Trade Commission and US Supreme Court can be useful to drawing
up the core legal concept. This is not provided for in the bill.
 Any merger amalgamation, acquisition of stocks, shares or many other method of
enhancing market power beyond 25% market share must be covered.
The threshold based on size of turnover or assets which is embodied in the Bill is not
meaningful. To our estimate over 90% of Indian Companies may be below this
threshold. The Parliamentary Committee examining this Bill should ask the Department
of Company Affairs to provide statistics to show how many Indian companies are
covered in these thresholds.
With a view to protect consumers a merger or amalgamation that restricts competition in a
given industry can be viewed as an anticompetitive action.
‘Consumer or their Association’ mentioned in Clause 19 (1)(a) have not been defined.
There is a definition of ‘Consumer Association’ which has a judicial meaning under
sector 2(n) of MRTP Act. There is need to either maintain this definition or adopt the
definition of ‘Consumer Association’ under Consumers Protection Act. It will be useful
to continue the definition of U/s-2(n) of the Act and also provide for registration
certificates issued by the Department of Consumer Affairs to recognized consumer
associations under the new law. For this purpose it is suggested to add the following sub
clause to Clause 64: “All the registered consumer associations recognized by the
Central Government under the MRTP Act shall continue to be recognized as such
and shall have the same rights to complain and participate in the proceedings
before the Competition Authority in the same manner as they were empowered
before the MRTP Commission”.
There is no definition of ‘retailer’, ‘trade association’, ‘wholesaler’ which needs to be
adopted from Section 2(p), 2(t) and 2(x) of MRTP Act.
Under Clause 2(y) of the Bill words and expressions used but not defined in this act and
defined in Companies Act, 1956 are to be adopted. The words and expressions in the
Consumers Protection Act, 1986 need to be adopted. This is because many words and
expressions relevant to consumers have been favourably defined legally and interpreted
judicially under Consumers Protection Act, 1986.
The Competition Authority should have a wide array of powers to use for putting an end to
anti-competitive behaviour. The Authority should not only be authorized to pass Cease and
Desist orders but also award the following remedies :a) Award compensation for loss and injury to aggrieved parties including loss of business
b) Levy damages as well as punitive damages payable to aggrieved parties.
c) Exercise powers to divide companies.
d) Prohibiting the owner of the concerned undertaking or the owners of the concerned
undertaking, as the case may be from continuing in indulging in harmful trade practices,
e) Prohibiting the owners of any class of undertaking or undertakings generally from
continuing to indulge in any harmful trade practices in relation to such goods or services,
f) Regulating the production, storage, supply, distribution or control of any goods by the
undertaking or the control or supply of any service by it fixing the terms of sale
including prices or supply thereof.
g) Prohibiting the undertaking from resorting to any act or practice or from pursuing any
commercial policy which prevents or lessens, or is likely to prevent or lessen
competition in the production, storage, supply or distribution of any goods or provision
of any services.
h) Fixing standards for the goods used or produced by the undertaking,
i) Declaring unlawful, except to such extent and in such circumstances as may be provided
or under the order, the making or carrying out of any such agreement as may be
specified or described in the order,
j) Requiring any party to any such agreement as may be so specified or described to
determine the agreement within such time as may be specified, either wholly or to such
extent as may be so specified,
k) Regulating the profits which may be derived from the production, storage, supply,
distribution or control of goods or format be provided of any services so that the
standards thereof may not deteriorate.
We support the exclusion of concept of unfair trade practices from this bill as they are already
covered under Consumer Protection Act.
At the time of writing of this paper in Oct 2002 the Competition Bill 2001 is before the Indian
Parliament. We expect some of the deficiencies placed before the Parliamentary Committee by
VOICE legal team at a hearing on the basis of a memorandum to be removed before it is voted