(For Private Circulation Only)
LEGAL REGIME OF ECONOMIC ENTERPRISES
TABLE OF CONTENTS
Unit-I
The rationale of Government Regulation
Constitutional Perspectives
The New Economic Policy
The place of Public, small scale, co-operative, corporate, private and joint sectors
in changing context -Emphasis on consumerism
Unit-II
Regulation of sick undertakings
Deregulation of essential commodities
Licensing policy and Legal Process-Growing trends of Liberalization
Unit-III
Special Aspects of Legal Regulation of some public enterprises
Viz. Telecom Regulatory Authority, Insurance Regulatory Authority
and Broadcasting Regulating Authority
Unit-IV
Legal Regulation of Multi-Nationals
Collaboration agreements for technology transfer
Development and regulation of foreign investments
Investments in India: FDIs and Depository Receipts
Investment abroad, GDR, ADRs
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UNIT-I

CONSTITUTION OF INDIA

COOPERATIVE FEDERALISM

CENTRE-STATE RELATIONS

FORMULATION AND IMPLEMENTATION OF PLANS

SHARE OF STATES IN PUBLIC SECTOR PLAN OUTLAY

BASIC MINIMUM SERVICES (BMS) APPROACH

INTER-STATE RELATIONS

DECENTRALISATION AND PANCHAYATI RAJ

INDUSTRIAL POLICY STATEMENT- 1991

PUBLIC AND PRIVATE SECTOR, JOINT VENTURE AND SECTORS:

CONSUMERISM

THE CENTRAL CONSUMER PROTECTION COUNCIL

ESTABLISHMENT OF CONSUMER DISPUTES REDRESSAL AGENCIES.
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Unit-I

The rationale of Government Regulation

Constitutional Perspectives

The new economic policy

The place of Public, small scale, co-operative, corporate, private and joint sectors
in changing context Emphasis on consumerism
In this unit, we will be discussing the some of the provisions of Indian constitution in
connection the government regulation. De-Centralization of administration for rendering the
economic justice to all sections of the people in state. The various schemes have been taken up
by the Planning commission in different five year plans.
Constitution of India
India, also known as Bharat, is a Union of States. It is a Sovereign Socialist Secular Democratic
Republic with a parliamentary system of government. The Republic is governed in terms of the
Constitution of India which was adopted by the Constituent Assembly on 26th November 1949
and came into force on 26th January 1950.
The Constitution provides for a Parliamentary form of government which is federal in structure
with certain unitary features. The constitutional head of the Executive of the Union is the
President. As per Article 79 of the Constitution of India, the council of the Parliament of the
Union consists of the President and two Houses known as the Council of States (Rajya Sabha)
and the House of the People (Lok Sabha). Article 74(1) of the Constitution provides that there
shall be a Council of Ministers with the Prime Minister as its head to aid and advice the
President, who shall exercise his functions in accordance to the advice. The real executive power
is thus vested in the Council of Ministers with the Prime Minister as its head.
The Council of Ministers is collectively responsible to the House of the People (Lok Sabha).
Every State has a Legislative Assembly. Certain States have an upper House also called State
Legislative Council. There is a Governor for each state who is appointed by the President.
Governor is the Head of the State and the executive power of the State is vested in him. The
Council of Ministers with the Chief Minister as its head advises the Governor in the discharge of
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the executive functions. The Council of the Ministers of a state is collectively responsible to the
Legislative Assembly of the State.
The Constitution distributes legislative powers between Parliament and State legislatures as per
the lists of entries in the Seventh Schedule to the Constitution. The residuary powers vest in the
Parliament. The centrally administered territories are called Union Territories.
Constitution is a living document, an instrument which makes the government system
work. Its flexibility lies in its amendments.
Art. 38. 1[(1)] The State shall strive to promote the welfare of the people by securing and
protecting as effectively as it may a social order in which justice, social, economic and political,
shall inform all the institutions of the national life.
2[(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavour
to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but
also amongst groups of people residing in different areas or engaged in different vocations.]
Art.39. The State shall, in particular, direct its policy towards securing—
(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;
(b) that the ownership and control of the material resources of the community are so distributed
as best to subserve the common good;
(c) that the operation of the economic system does not result in the concentration of wealth and
means of production to the common detriment;
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and the tender age of children are
not abused and that citizens are not forced by economic necessity to enter avocations unsuited to
their age or strength;
[(f) that children are given opportunities and facilities to develop in a healthy manner and in
conditions of freedom and dignity and that childhood and youth are protected against
exploitation and against moral and material abandonment.]
[39A. The State shall secure that the operation of the legal system promotes justice, on a basis of
equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or
schemes or in any other way, to ensure that opportunities for securing justice are not denied to
any citizen by reason of economic or other disabilities.]
73rd Constitutional Amendment
Panchayats : 3 – Tier System:
PART- IX of the Constitution envisages a three-tier system of Panchayats, namely, (a) The
village level; (b) The District Panchayat at the district level; (c) The Intermediate
Panchayat which stands between the village and district Panchayats in the States where the
population is above 20 lakhs.
Composition:
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All the seats in a Panchayat shall be filled by persons chosen by direct election from
territorial constituencies in the Panchayat area. The electorate has been named Grama
Sabha consisting of persons registered in the electoral rolls relating to a village comprised
within the area of a Panchayat. In this way representative democracy will be introduced at
the grass roots.
The Chairperson of each Panchayat shall be elected according to the law passed by a State
and such State Law shall also provide for the representation of Chairpersons of Village and
Intermediate Panchayats in the District Panchayat, as well as members of the Union and
State Legislature in the Panchayats above the village level.
Reservation of seats for Schedule Castes and Scheduled Tribes:
Article 243D provides that seats are to be reserved for (a) Scheduled Castes, and (b)
Scheduled Tribes. The reservation shall be in proportion to their population. If, for
example, the Scheduled Castes constitute 30% of the population and the Scheduled Tribes
21%, then 30% and 21% seats shall be reserved for them respectively.
Out of the seats so reserved not less than 1/3rd of the seats shall be reserved for women
belonging to Scheduled Castes and Scheduled Tribes, respectively.
Reservation for women:
Not less than 1/3rd of the total number of seats to be filled by direct elections in every
Panchayat shall be reserved for women.
Reservation of offices of Chairpersons:
A State may by law make provision for similar reservation of the offices of Chairpersons
in the Panchayats at the village and other levels.
These reservations favouring the Scheduled Castes and Scheduled Tribes shall cease to be
operative when the period specified in Article 334 (at present 60 years i.e., upto 21-12010).
A State may by law also reserve seats or offices of Chairpersons in the Panchayat at any
level in favour of backward classes of citizens.
Duration of Panchayat:
Every Panchayat shall continue for five years from the date of its first meeting. But it can
be dissolved earlier in accordance with the procedure prescribed by State Law. Elections
must take place before the expiry of the above period. In case it is dissolved earlier, then
the elections must take place within six months of its dissolution. A Panchayat
reconstituted after premature dissolution (i.e., before the expiry of the full period of five
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years) shall continue only for the remainder of the period. But if the remainder of the
period is less than six months it shall not be necessary to hold elections.
Qualification for membership:
Article 243F provides that all persons who are qualified to be chosen to the State
Legislature shall be qualified to be chosen as a member of a Panchayat. The only
difference is that a person who has attained the age of 21 years will be eligible to be a
member (in case of State Legislature the prescribed age is 25 years-Article 173). If a
question arises as to whether a member has become subject to any disqualification, the
question shall be referred to such authority as the State Legislature may provide by law.
Powers, authority and responsibilities of Panchayats:
State Legislatures have power, to confer on the Panchayats such powers and authority as
may be necessary to enable them to function as institutions of self-government [Arts.
243G-243H]. They may be entrusted with the responsibility of (a) preparing plans for
economic development and social justice, (b) implementation of schemes for economic
development and social justice, and (c) in regard to matters listed in the Eleventh Schedule
(inserted by the 73rd Amendment). The list contains 29 items, e.g., land improvement,
minor irrigation, animal husbandry, fisheries, education, women and child development
etc. The 11th Schedule thus distributes powers between the State Legislature and the
Panchayat just as the 7th Schedule distributes powers between the Union and the State
Legislature.
Powers to impose taxes and financial resources:
A State may by law authorise a Panchayat to levy, collect and appropriate taxes, duties,
tolls etc. The law may lay down the procedure to be followed as well as the limits of these
exactions. It can also assign to a Panchayat various taxes, duties etc. collected by the State
Government. Grants-in-aids may be given to the Panchayts from the Consolidated Fund of
the State.
Panchayats Finance Commissions:
Within one year from 25th April 1993, i.e., the date on which the Constitution 73rd
Amendment came into force and afterwards every five years the State Government shall
appoint a Finance Commission to review the financial position of the Panchayats and to
make recommendations as to--the distribution between the State and the Panchayats of the net proceeds of taxes, duties,
tolls and fees leviable by the State which may be divided between them and how allocation
would be made among various levels of Panchayats;
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water taxes, duties, tolls and fees may be assigned to the Panchayats;
grant-in-aid to the Panchayats.
The report of the Commission, together with a memorandum of action taken on it, shall be
laid before the State Legislature. These provisions are modelled on Article 280 which
contains provisions regarding appointment of a Finance Commission for distribution of
finances between the Union and the States.
74th Constitutional Amendment
Municipalities And Planning Committees
PART IXA which has come into force on 1-6-1993 gives a constitutional foundation to
the local self-government units in urban areas. In fact such institutions are in existence all
over the country. Some of the provisions are similar to those contained in Part IX, e.g.,
Reservation of Seats, Finance Commission, Election Commission etc.
This part gives birth to two types of bodies:
[i] Institutions of self-government [Art. 243Q], and
[ii] Institutions for planning [Arts. 243ZX and 243 ZE].
Institutions of self-government, called by a general name "municipalities" are of three
types:
Nagar Panchayat, for a transitional area, i.e., an area which is being transformed from a
rural area to an urban area.
Municipal Council for a smaller urban area.
Municipal Corporation for a larger urban area.
Article 243Q makes it obligatory for every State to constitute such units. But if there is an
urban area or part of it where municipal services are being provided or proposed to be
provided by an industrial establishment in that area then considering also the size of the
area and other factors the Governor may specify it to be an industrial township. For such
an area it is not mandatory to constitute a Municipality.
Panchayat Finance Commission:
The Finance Commission appointed under Art. 243-I (see Chapter 18 under Panchayat
Finance Commission) shall also review the financial position of the Municipalities and
make recommendations as to-
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the distribution between the State and the Municipalities of the net proceeds of taxes,
duties, tolls and fees leviable by the State which may be divided between them and how
allocation of shares amongst various levels of Municipalities.
the taxes, duties, tolls and fees may be assigned to the Municipalities.
grant-in-aid to the Municipalities.
the measures needed to improve the financial position of the Municipalities.
any other matter that may be referred to it by the Governor.
Cooperative Federalism
Introduction
In a vast country like ours, the spirit of co-operative federalism should guide the relations
between the Centre and the States on the one hand, among different States and between the
States and the Panchayati Raj Institutions (PRIs) and the Urban Local Bodies (ULBs) on the
other. The essence of co-operative federalism is that the Centre and the State Governments
should be guided by the broader national concerns of using the available resources for the benefit
of the people. Co-operative federalism encourages the Government at different levels to take
advantage of a large national market, diverse and rich natural resources and the potential of
human capabilities in all parts of the country and from all sections of the society for building a
prosperous nation. Co-operative federalism makes it possible to raise all the available resources
by the Government at different levels in a co-ordinated way and channel them for use for the
common good of the people. This requires a harmonious relationship and co-operative spirit
between the Centre and the States and among the States themselves. While a healthy competition
among the States for evolving efficient and socially desirable policies and programmes is
welcome, any competition which nullifies each other's advantages in development and erodes the
resource base of the States should be avoided. Co-operative federalism is intended to ensure a
minimum bundle of basic services and a nationally acceptable level of living for all the people of
the country.
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Centre-State Relations
The relations between the Centre and the States in political, economic, financial and
administrative spheres have been periodically reviewed. The Administrative Reforms
Commission and the Sarkaria Commission were appointed to review the whole gamut of
relations between the Centre and the States and to recommend measures, including changes in
the Constitutional provisions, to harmonise the relationship between the Centre and the States.
While the Government has accepted and implemented several recommendations of the
Administrative Reforms Commission, the recommendations of the Sarkaria Commission are
under consideration in the Inter-State Council (ISC) which is trying to reach a consensus on
various issues. Out of the 247 recommendations of the Sarkaria Commission, the Inter-State
Council has taken a decision on 91 recommendations. These recommendations pertain to All
India Services, Administrative Relations, Deployment of Union Armed Forces, Agriculture,
Forest, Food, Civil Supplies, Mines & Minerals, Trade, Commerce, Mass Media etc. The reactivisation of ISC has opened a new chapter in the Centre-State relations and provided a useful
forum for building a common national approach on various issues.
Formulation and Implementation of Plans
In the sphere of planning, the balance of decision making process tilted more towards the Centre
during the early years of planning. This was probably inevitable as there was lack of adequate
experience in the formulation and the implementation of Plan programmes at the State level. No
doubt, planning from the grass-roots level has been emphasised from the very beginning, but its
implementation has been sporadic and tardy. Even so, the Planning Commission encouraged
District Planning Committees (DPCs) and taluk level planning process from the Fourth Plan.
Subsequently, a significant step was taken through the enactment of the 73rd and the 74th
Amendments to the Constitution in 1993, which conferred a Constitutional status not only on the
PRIs and the ULBs but also on the DPCs. It is now fully realised that the spirit of co-operative
federalism should get reflected in the strong encouragement given to participative planning
9
processes. In other words, the Central Government, the State Governments, the PRIs, the ULBs,
and the non-Governmental organisations, the voluntary action groups and most of all, the people
at the grass-roots have to be involved in the process of formulation and implementation of the
Plans. It is realised that the process of democratic decentralisation can have true meaning only
when sufficient autonomy and freedom is available to the States as well as to the PRIs and the
ULBs in the formulation and the implementation of the Plans. At the same time, autonomy presupposes maturity in decision making and responsibility in the use of national resources.
Decentralisation of the process of formulation and implementation should, therefore, ensure
accountability.
Various steps have been taken in the past to improve the interaction with the States in the process
of formulating and implementing the Five Year Plans. The National Development Council
(NDC), which approves and reviews the Five Year Plans is chaired by the Prime Minister and
includes Union Ministers and the Chief Ministers of all the States. In addition to this, periodic
conferences of State Chief Ministers on major specific policy issues are held not only to elicit
their opinion but also to take them into confidence in regard to the thinking of the Central
Government. Over and above these, conferences of State Ministers of various development
departments are also held to monitor the progress of Plan schemes and to find solutions to the
problems faced by the State Governments in the course of implementing the Plan strategies,
programmes and schemes. These conferences and meetings help resolve the day-to-day problems
faced by the implementing agencies and the delivery system. At the administrative level, the
secretariat of the Planning Commission interacts regularly with the administrative departments of
the State Governments on all matters relating to the formulation and the implementation of the
Five Year Plans. Thus, the regular and periodic interactions with the State Governments have
helped in sorting out various policy issues and chalking out mutually agreed policies and
programmes for achieving the goals of the Five Year Plans. There have also been frequent
conferences and meetings of State Chief Ministers and Ministers at the zonal level to sort out the
administrative problems relating to mobilisation of resources, implementation of Plan
programmes and even maintaining law and order. In a vast country like ours, such periodical
conferences and meetings of the State Chief Ministers and Ministers will go a long way in
resolving certain unique problems relevant to the particular zones.
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Similarly, at the State level, the State Governments should develop machanisms and forums for
interacting with the elected representatives of the PRIs and the ULBs to resolve the issues
relating to the formulation and the implementation of district and grass-root level development
programmes. In some States like Karnataka, a State Development Council has been constituted,
which is presided over by the Chief Minister and attended by the Presidents of Zilla Panchayats
and Municipal Presidents. This is a replica of the NDC, which is worth emulation in other States
also. There is also a need for a horizontal consultation process between the PRIs and the ULBs to
learn from each other's experiences and to resolve day-to-day problems, if any. During the Ninth
Five Year Plan such initiatives will be further encouraged and supported.
Share of States in Public Sector Plan Outlay
An important area of concern in the sphere of planning is the decreasing share of the States in the
overall public sector Plan outlay. The share of the States in the actual public sector expenditure is
going down continuously from the Fifth Plan onwards, so much so that while the share of the
States was about 50% in the Fifth Plan it came down to almost 37% in the Eighth Plan. Further,
the share of the States in terms of total public sector expenditure has been lower than the
originally envisaged outlay in successive Five Year Plans since the Sixth Plan. In the Eighth
Plan, while the share of the States in the total public sector outlay was envisaged to be 41.46%,
in actual realisation it is likely to be of the order of 37 percent. The main reason for the declining
share of the States has been the shortfall in the mobilisation of resources by the State
Governments. Besides others, the non achievement of the States' envisaged outlays has adverse
implications for sectors like Agriculture, Education, Health and other Social and Basic Minimum
Services.
The States' own resources (SOR) for their Eighth Plan were projected at Rs.1,01,485 crore. As
against this, the expected realisation would be only Rs.70,335 crore, i.e., 69.3 percent of the
projected SOR. The major shortfall was in respect of the Balance from Current Revenue (BCR)
and internal contributions of public enterprises of the States. The BCR was projected at
Rs.12,985 crore, while the expected realisation is (-) Rs.2,009 crore only, showing a shortfall of
Rs.14,994 crore. An important reason for such a severe shortfall was the failure of many State
Governments to raise the budgetary resources through additional revenue raising measures,
11
increase in the non-Plan revenue expenditure on the target group oriented programmes, effect of
the adoption of Central Pay scales and Central Dearness Allowances by many State
Governments. The financially unviable operations of the State Electricity Boards, the State Road
Transport Corporations and other State enterprises in most of the States had an adverse impact
on the BCR of the State Governments, as these resulted in higher subsidies and grants to these
enterprises, in addition to substantial loss of revenue in terms of interest and dividends, while
States were forced to pay interest on their loans. The unwillingness of most of the States to revise
the irrigation rates at least to meet the O&M expenditure was another reason for the shortfall in
the States own resources. The most worrisome aspect was the increasing number of States
providing free electricity to the farmers at a time when the country is facing a severe power
shortage.
The internal resources of the State public sector enterprises was projected at Rs.4,000 crore for
the Eighth Plan but the realisation is expected to be around (-) Rs.2,723 crore showing a
deterioration in resources to the extent of Rs.6,723 crore. The shortfall in this was mainly due to
the financially unviable operations of the State Electricity Boards and State Road Transport
Corporations. Had the States implemented the agreed decision to levy a minimum of 50 paise
tariff per unit of energy supplied to the agricultural sector and contained the T&D losses, thefts
and arrears to a reasonable level, the SEBs would have been able to generate resources as
committed in the Plan. The losses of the State Transport Corporations have been attributed
mainly to social responsibilities undertaken by them to ply buses on uneconomic routes and
providing concessions to a large number of weaker sections and students.
The Planning Commission has been emphasising that the States should plug the drain of
resources in the operation of State level public enterprises, especially in the case of State
Electricity Boards and State Road Transport Corporations. These include restructuring the State
Electricity Boards, modernisation and other efficiency improvement as well as tariff revisions to
make these Boards financially viable. The State Electricity Regulatory Commissions should also
be set up without delay. The State Road Transport Corporations also should be made viable
through proper fare revisions and improvements in the efficiency norms. They should be given
support for strengthening their equity base. Further, the Planning Commission has emphasised
the need for improving the Balance from Current Revenue (BCR) of the States through specific
12
budgetary measures and containing the growth of non-Plan revenue expenditure. All these
measures will improve the share of SOR which will enable the States to increase the size of their
public sector Plan outlay. On its part the Government of India should help by providing a
suitable macro economic framework. Efforts are also needed to build up a consensus on various
issues like recovery of user charges, etc. to facilitate decisions at the State level.
Transfer of Centrally Sponsored Schemes
Another issue which has been cropping up from time to time in the relations between the Centre
and the States pertains to the Centrally Sponsored Schemes (CSS). The CSS are being
implemented right from the beginning of the First Plan. When they were conceived, they were
welcomed as they were intended to serve certain specific national goals. One classic example of
CSS, which has made a far reaching impact, has been the introduction of HYV seed. This
ushered in the Green Revolution in the country. But the number of CSS has grown over the years
and they have made deep inroads even into the spheres falling within the domain of the States.
There have been efforts from time to time for transferring the CSS to the States along with the
corresponding funds, but not to much avail. A review undertaken by the Planning Commission
showed that in 1995-96 there were 182 CSS under implementation with the Central funding of
the order of Rs.16,000 crore. This level of Central funding is even more than the normal Plan
assistance given to the States for the State Plans. In principle, the CSS should be confined to
schemes of an inter-State character, matters impinging on national security, selected national
priorities where Central supervision is essential for effective implementation and multi-State
externally financed projects where the Central coordination is necessary for operational reasons.
Except for such schemes, all other schemes should be transferred to the States along with the
corresponding funds. A detailed exercise has been done by the Planning Commission to identify
the schemes which could be transferred to the States in the light of the above approach.
A final decision in the matter would be taken after ascertaining the views of the State
Governments/Central Ministries with the approval of the NDC.
Inter-se Allocation of Plan Assistance
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Since 1969, the Central assistance for the State Plans has been distributed to the States as per the
Gadgil Formula. Some marginal changes have been made in this formula from time to time, but
the emphasis has always been on channelising larger Central assistance to the backward States.
The formula was last amended in 1991-92. As per the existing formula, after setting apart the
funds required for Externally Aided Projects (EAPs) and reasonable amounts for Special Area
Programmes, 30% of the balance is earmarked for ten Special Category States. The balance
amount is distributed among Non-Special Category States on the basis of following criteria and
weightage :
Nature of Central Assistance
Besides the issue of inter-se distribution of Central assistance among the States, the nature of
Central assistance, that is, the grant-loan component, has also been raised from time to time. The
States argue that when 30% of the grant component was introduced in 1969, the revenue
component of the States' Plans was around 30 percent. Subsequently, it has gone on increasing,
reaching upto 45 percent. They maintain that this justifies the increase in the grant component of
Central assistance for State Plans under Gadgil Formula. Further, the States argue that among
other reasons, the 70% loan component in the Central assistance for the States Plans has been a
major reason for their increasing debt burden. They argue that their debt burden has been
increasing so much so that in some cases there is net reverse flow of funds. They have, therefore,
been asking for an increase in the proportion of the grant component in the Central assistance.
The Special Category States have demanded Central assistance to be given as 100 per cent grant.
The Sarkaria Commission had examined this issue and recommended different patterns of loangrant assistance, depending upon the paying capacity of the States. The Finance Commissions in
the past had also looked into the debt position of the States and recommended a scheme for
general debt relief for all States, linked to fiscal performance and specific relief for States with
high fiscal stress, the Special Category States and the States with debt problems warranting
special attention. It has to be recognised that any change in the grant-loan component of the
Central assistance has implications for the resource position of the Central Government. The
NDC may have to decide on the issue of grant-loan proportion in the Central assistance while
considering the question of inter-se distribution of the Central assistance among the States.
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Basic Minimum Services (BMS) Approach
A special focus on meeting the minimum needs of the people has been given since the Fifth Five
Year Plan. However, the minimum needs programme, which was formulated and implemented
for this purpose, did not make much headway, partly because of allocation of inadequate funds.
Because of the persisting gaps in BMS prevailing particularly in rural areas, it was decided to
give a big push to this programme from 1996-97. Accordingly, the Central Government has
made an allocation of a special Central assistance for seven Basic Minimum Services (BMS).
Instead of being routed through the Central Ministries / Departments, this special assistance has
been given to the States as additional Central assistance towards their Plan. With a view to
ensuring that the special Central assistance for BMS is indeed an additionality, it has been
emphasised to the States that this assistance should not be made a substitute for the normal
provisions which were being made by the States for the BMS. By mutual consensus, it has also
been agreed that the States should provide at least 15% of the special Central assistance for BMS
as their share over and above their normal provisions for these schemes. While the States have
been allowed flexibility in deciding their priorities among various components of Basic
Minimum Services, the consensus at the Chief Ministers' Conference was to give the highest
priority to the three services viz., Primary Health, Primary Education and Drinking Water for
universal coverage. Only when the prescribed norms for these services have been achieved, the
States could choose from other BMS for their attention. However, some States have deviated
from the decisions of the Chief Ministers Conference and allocated huge funds for services other
than the three which were to be given the highest priority. Another problem that has been
encountered is that some States have failed to make adequate provisions for the BMS as per the
agreed formula. Considering the difficulties of the Special Category States in mobilising
resources, they have been exempted from providing 15 per cent contribution. To ensure
additionality of Additional Central Assistance (ACA) over normal provisions of the States, the
release of ACA will have to be linked to suitable provisions being made to BMS as per the
decisions already taken. From the Annual Plan 1997-98 onwards the allocation of Central
assistance for BMS has been made on the basis of identified gaps in providing these BMS. This
process will continue during the Ninth Plan period and larger amounts would be made available
to the States for meeting the requirements of BMS so that the basic minimum needs of the people
15
are met by a target date. The approach adopted in respect of BMS has also been followed for the
development of urban slums. The same model can be replicated in respect of other programmes,
as may be found feasible, in future. Since there are backward regions within the States, it is
expected that while making allocations, the States would also keep in view the requirements of
the backward areas within the State so that the basic minimum needs of the people in these areas
are also catered to.
Inter-State Relations
Harmonious and cooperative relations between different States are as important as that between
the Centre and the States for the healthy functioning of our federation. Various problems have
been cropping up in inter-State relations from time to time. On the one hand, there are problems
like increasing competition among the States and on the other, there are disputes over sharing of
river water etc.
With the dismantling of controls and greater freedom for the location of industries, the
competition among the States for attracting industries and other economic activities by offering
incentives has intensified. While a healthy competition among the States for providing better and
efficient services is to be welcomed, the practice of granting tax rebates and subsidies need to be
seen in the right perspective of whether they lead to national welfare. Instances are not lacking
where the States have joined a sort of a race in granting sales tax and other rebates for attracting
new industrial units. This has affected the resource position of the concerned States without
commensurate benefits, because in so far as the same concessions are allowed by a number of
States, these concessions do not remain the main guiding factor for the location of an industry
and other important considerations like efficiency of services and infrastructure facilities may
become more important.
Similarly, often there is a tendency on the part of the States to allow tariff concessions to various
sections. Power tariff is a case in point and many States have been supplying power to various
sectors at a price much lower than the cost of generation. A national consensus had evolved at
the Chief Minister's Conference for fixing the minimum tariff for agriculture and to move over to
a regime of fixing tariffs for recovering the costs. Some States have, however, gone against this
16
consensus and allowed free electricity to agriculture sector. This has not only put the financial
condition of the State Electricity Boards in a precarious position but also created problems for
the neighbouring States where vociferous demands have been made for similar concessions.
Populist measures have a tendency to spread because once they are granted by one State,
pressure builds up in the neighbouring States for allowing the same concessions. Similar is the
position regarding the administrative charges for other services like irrigation and water. Despite
various Commissions recommending minimum rates for such services, so that at least O & M
costs are recovered, many States have not implemented these recommendations, depriving them
of an important source of revenue and putting their financial position under great strain. It is
essential to have a national consensus regarding such issues like harmonisation of tax structure,
minimum tariff for certain services, cap on the level of subsidies and facilitation of inter-State
trade flows. It is necessary that all the States should fall in line for implementing mutually
beneficial policies.
6.34 Another important problem that keeps cropping up time and again is in respect of share in
natural resources like river waters which has given rise to severe tensions and prevented optimal
utilisation of such resources. There is a need for evolving a national policy on this issue and for
putting in place a suitable mechanism for resolving such disputes.
Decentralisation and Panchayati Raj
India has a long history of village panchayats. The framers of the Constitution were aware of this
Indian heritage in village panchayat system. Accordingly, they provided for Village Panchayats
under the Directive Principles of the Constitution. Thus, Article 40 of the Constitution requires
that "the State shall take steps to organise village panchayats and endow them with such power
and authority as may be necessary to enable them to function as units of self-government".
Many State governments attempted to translate this Directive Principle into practice by enacting
necessary legislation and creating Panchayati Raj Institutions (PRIs) but with limited success;
such efforts were confined to selected States. Against this background the need for providing a
firm Constitutional status for PRIs became necessary. And after a great deal of efforts the 73rd
and 74th Amendments to the Constitution have been passed which provide Constitutional status
17
to the PRIs and Urban Local Bodies (ULBs). As per the 73rd Amendment, the PRIs are the local
level institutions comprising of elected representatives entrusted with the responsibility of
identifying, formulating, implementing and monitoring the local level developmental and welfare
programmes. The Constitutional provisions expect the State governments to enact necessary
legislation not only to create PRIs but also to endow them with such financial powers and
functional responsibilities as they may deem appropriate. They are also required to appoint a
State Finance Commission (SFC) to recommend adequate devolution from the State
Governments to PRIs and ULBs. The State governments are also expected to create District
Planning Committees (DPCs) in each district to formulate local level development plans for both
rural and urban areas.
The First Plan recognised the need for a disaggregated planning exercise through a process of
democratic decentralisation incorporating the idea of a village plan and of District Development
Councils. The Second Plan made some headway with the emergence of Community
Development and the National Extension Programme. However, micro-level planning did not go
beyond identification of activities, as neither village nor district plans were prepared. The
Balwant Rai Mehta Committee (1957) recommended the block as the unit of planning with the
Panchayat Samitis as the executive body for planning. It also suggested the setting up of Village
Panchayats, Taluk Development Boards and Zilla Parishads. The government accepted these
recommendations and the State government enacted appropriate legislations to usher in a new
era of PRIs. However, the PRIs worked well only in a few States like Gujarat, Maharashtra,
Karnataka and West Bengal.
The Third Plan reemphasized decentralised planning in many sectors, but the absence of a
planning machinery resulted in poor planning. During the Fourth Plan the emphasis shifted
towards district planning. The Planning Commission also took interest in helping the States in
initiating decentralised planning. Accordingly a scheme of strengthening regional/district
planning units was initiated by the Planning Commission. The concept of an integrated area
approach was adopted and several States did prepare district plans. But once again the success
was limited to three or four States. Two other initiatives were taken -- the `Lead Bank' scheme
was introduced for preparation of `district credit plans' and agencies for specific programmes like
Command Area Development, Small Farmer Development and the development of Marginal
18
Farmers and Agricultural labourers were set up. However in the Fourth and Fifth Plans little
progress was made towards decentralising the planning process. In 1977 the Ashok Mehta
Committee was set up to examine the functioning of PRIs and to suggest measures for making
decentralised planning effective. The Sixth, Seventh and Eighth Plans reemphasised district
planning within a multi-level planning framework. However, proper administrative arrangements
were not made to facilitate this process; there was also a lack of technical expertise and an
absence of financial devolution, both of which acted as impediments in the process of democratic
decentralisation.
As we enter the Ninth Plan, democratic decentralisation has been given a boost with the
enactment of the 73rd and 74th Constitutional Amendment Acts. Consequent to this, most of the
State Governments/UTs have enacted enabling legislations, providing for elected bodies at the
village, inter-mediate (Taluka) and district levels with adequate representation from the weaker
sections and of women. (In case of some UTs only a two tier. structure has been recommended)
Most of the States have constituted State Election Commissions and State Finance Commissions
(SFCs) as stipulated. Almost all the States have constituted panchayati raj bodies as per the new
provisions with the exception of Bihar, where elections have not been held so far, and Goa,
where the Zilla Parishad level panchayats have to be constituted. Elections are also due in the UT
of Pondicherry.
Today, PRIs are Constitutional entities. The State Governments have to endow these panchayats
with powers and authority necessary to enable them to function as institutions of local selfgovernment with the responsibility of preparing plans for socio-economic development and for
implementing them. The Eleventh Schedule has identified 29 subjects which have to be brought
under the purview of the panchayats. However, in order that the PRIs are able to undertake the
responsibility entrusted to them they require both financial and functional autonomy. It is
necessary not only to ensure flow of funds to them from the Consolidated Funds of the States
and from the Central Government via the Centrally-Sponsored Schemes (CSS), but also to give
them independent revenue raising powers of their own. The SFCs were set up with this objective
of making specific recommendations for making the panchayats financially viable.In many
States, the SFCs have submitted their reports and in some of the States their recommendations
have been accepted. However, in some States the recommendations of the SFCs have either not
19
been received at all or they are still under the consideration of the State Governments. It is hoped
that all SFCs submit their recommendations expeditiously and the State Governments will
initiate appropriate action to devolve adequate funds to the PRIs by the end of the current year.
While resource mobilisation by PRIs is generally limited, it is imperative to provide PRIs with
revenue-raising powers of their own in order to reduce their excessive dependence on the State
and Central Governments. There are taxes which can be collected by local bodies. By way of
illustration, in case of West Bengal the SFC has recommended that a substantial part of the plan
expenditure be given to the districts in the form of untied funds; for this a formula has been
developed by the SFC to work out the entitlement' of each local body. In addition, grants for
specific schemes entrusted to the panchayats will be given to them by the State Government.
Funds from Centrally Sponsored Schemes will also be in the form of a grant but those would not
be a part of the untied pool. Sixteen per cent of the net proceeds of all taxes collected by the
State in a year will be transferred to local bodies. Certain taxes like entertainment tax will be
handed over to them. Irrigation rates would be collected by Zilla Parishads and resources
generated in regulated markets will be brought within the purview of District Planning
Committees (DPCs). Further, the three tiers of panchayats have been empowered to raise taxes,
levies and tolls on a variety of activities. Incentive schemes have been suggested to encourage
benefits to increase their incomes. These are some of the ways in which the resource position of
panchayats would be strengthened. In Kerala too untied funds have been provided to each gram
panchayat/ block panchayat and municipalities for the first time. Here too certain taxes have
been assigned to village transferred the accrual of income from minor minerals, fisheries etc. to
the panchayats. Untied grants to panchayats by sharing of tax and non-tax revenues and the flow
of programme funds to the panchayats has been mandated. Various forms of cesses on land
revenues, agriculture and other fees have also been earmarked for PRIs.
In other words, it is imperative that the PRIs raise their own resources. But until such time that
they are financially dependent on funds from the State government, these should be in the form
of untied funds. The State budgets should specify the amount earmarked for district sector plan
under panchayati raj as also the distribution of this among the three tiers. It is suggested that 30 40% of a State's plan be devolved on local bodies.
20
In the case of urban local bodies too they would be permitted to levy their own taxes and cesses
at the local level which could include professional tax, property tax, entertainment tax and motor
vehicle tax etc. In addition, there is considerable scope for them to levy user charges and licence
fees.Wherever feasible elected bodies should be allowed to borrow for productive infrastructure
projects subject to credit worthiness. Urban local bodies may be allowed to raise loan funds
through bonds for financially viable economic activities like water supply, sewerage system etc.
Based on the recommendations of the Tenth Finance Commission these elected local bodies both
rural and urban would receive Rs.5381 crore as grant-in-aid to supplement their resources over a
four year period from 1996-97. When the Eleventh Finance Commission considers this issue the
State Governments may ask for more resources provided that their elected bodies are by then
functioning well and are able to plan and implement various development works entrusted to
them.
In so far as Centrally-Sponsored Schemes are concerned, it is proposed that in the case of
selected schemes funds flow directly to PRIs. In case of such schemes, if they are transferred to
States, funds would be earmarked for elected local bodies. Furthermore, States would be required
to earmark resources out of the total plan of the States for decentralised planning.
Along with financial autonomy, functional autonomy of the PRIs must also be clearly delineated.
Even in respect of the 29 subjects identified in the Eleventh Schedule it is necessary for the State
governments to clearly identify what would be done by the three tiers of panchayats at their
level. Detailed instructions and guidelines would have to be issued by the concerned departments
to their field officers in this regard as it has been done in Karnataka. Furthermore, departmental
functionaries required to implement the programmes at the panchayat level must be placed under
their overall supervision and control. In some States like Gujarat, Maharashtra, Karnataka,
Kerala, Tripura and West Bengal detailed instructions have already been issued and in several
cases departmental functionaries have been placed with the panchayats. It must be reiterated here
that under no circumstances is it necessary to create new administrative structures and hire staff
for undertaking the planning and implementation of these works. Only redeployment of the
existing staff in various departments is required. More recently in Madhya Pradesh 18
Departments have been transferred to the PRIs at various levels.
21
As has already been stated one of the major tasks of the PRIs is the preparation of plans for
fostering economic development and social justice. The district development plans would have
to be prepared through the institution of the DPCs which are mandated. However, in many States
the DPCs have not been set up so far. This should receive top priority and DPCs should be in
position to formulate local level plans before the end of the current year. It is expected that Gram
Sabha would list out priorities and assist in the selection of beneficiaries for various programmes
and schemes. In this way, the aspirations of the people would be articulated. Thereafter, village
level plans will have to be prepared which would be incorporated in the intermediate plans and
finally merged into a district plan. Moreover, broad principles have to be laid down for assigning
the functions of each of the three tiers; this should be based on the rule that what can be done at
the lower level should be done at that level and not at the higher level. Some States have already
identified the works/schemes of sectoral/departments to be undertaken at the different levels. For
instance, in the case of Andhra Pradesh maintenance of community assets, poverty alleviation
programmes, sanitation, markets, internal roads have been devolved at the gram panchayat level.
The intermediate level would be responsible for block component of Primary Education, Women
and Child Welfare and Jawahar Rozgar Yojana. At the Zilla Parishad level drinking water, rural
roads, secondary education and the district component of JRY would be implemented. The DPCs
should not only consolidate plans from below but should take decisions on the development of
the district within the given resource potential and identified needs and constraints.
A core planning team comprising of experts from various disciplines needs to be formed for
every district which could help in the preparation of plans keeping in view the physical and
natural resource endowments of the area and the funds available, as also the priorities of the
people. In addition, experts could be hired on a consultancy basis if expertise is required in a
specific area. In Kerala, a Voluntary Technical Core (VTC) has been created consisting of about
10,000 technical experienced people to vet and re-work projects prepared by the panchayats.
These include retired persons with technical expertise, bank personnel and officials of
government departments. One VTC would be created for each block with the BDO as its
Secretary. The District Planning Officers would scrutinise the document submitted to them by
the panchayats as prepared with the help of VTCs and would see if it can be accommodated
within the overall sectoral allocation. While the plan funds flowing to the districts would be
22
untied, they would thereafter be project linked in order to ensure that the works in the plan are
executed properly. In addition, several well-known institutions of Kerala like Centre for
Developing Studies and Kerala Sastra Sahitya Parishad (KSSP) have provided support to the
programme, particularly in the sphere of literacy and land mapping. Similarly in other States
voluntary groups and institutions need to be identified for providing services, training and
support for effective implementation of programmes at the local level.
However, in order to make decentralised development a success, a time bound training
programme would have to be initiated as majority of the new entrants into the panchayati raj
system may not be familiar with the various programmes of the government, the available
technologies and requisite information. In addition, training of trainers would be given priority
through identified national level institutions like the NIRD, LBSNAA and IIPA and other State
level institutions. To the extent possible NGOs would also be drawn into the training
programme.
In the process of transferring of power to the local level democratic institutions there are bound
to be conflicts of various kinds; most importantly between the democratic institutions and the
bureaucracy. Hence, it is necessary to institutionalise the link between the two in order to
facilitate harmonious functioning by formulating appropriate rules of business. There are
alternative models where such a link has been attempted. In the case of Karnataka, the Collector
is outside the system of elected local governments but the Chief Executive Officer of the Zilla
Parishad is a bureaucrat. In West Bengal, the Collector is the Member Secretary of the DPC with
the chairman of the Zilla Parishad as the chairman of the DPC. In Gujarat, both the Collector and
the President of the District Panchayat are co-vice chairmen of the District Panchayat Board. In
Madhya Pradesh one fifth of the Sarpanchas have been made members of the intermediate
panchayat by rotation each year and all the Adhayakshas of the inter-mediate panchayats are
representative in Zilla Parishads. Each State would have to evolve its own administrative
arrangements to make democratic decentralisation functional on the ground. There would also be
conflict between different political formations at the State and local level as also within a local
area. These would have to be ironed out within the democratic political process itself. Moreover,
a greater involvement of people in the running of institutions and services through PRIs would
also have a positive impact on the quality of life of the local population.
23
Interest of the weaker sections of the society have been safeguarded under the PRIs. The 73rd
Constitutional Amendment Act provides for mandatory reservation for Scheduled Castes/
Scheduled Tribes in every panchayat in the same proportion as the population in the panchayat
area. In addition to this one-third of the seats would have to be reserved for women. What is
more, one-third of the total number of offices of Chairpersons in the panchayats at each level
shall be reserved for women.
It is hoped that the elected representatives of panchayats would articulate the felt needs of the
community more accurately and will be able to mobilise local resources both physical and
financial in a better way. They should be able to educate women about their own rights and other
issues concerning them. As chairpersons, they can act as catalysts in the implementation of
various development programmes. However, in many States where women are reluctant to
participate in the affairs of the panchayats, it is necessary to ensure that they atleast attend Gram
Sabha and panchayat meetings.
So far, we have been concerned with the process of democratic decentralisation involving the
people through their elected representatives. However, it is recognised that in the final analysis
the people themselves must be involved in the process of development. Therefore there is an
urgent need to empower the village community through the Gram Sabhas. For this more powers
have to be vested in the Gram Sabhas who should be have the authority to sanction and disburse
benefits in open meetings, to decide on the location of various community assets and to have
control over common property resources. At present the Gram Sabha has powers in so far as it
can scrutinise the annual accounts, expenditure, audit notes etc., of the gram panchayat. But this
is not enough to persuade people to attend Gram Sabha meetings. Steps have to be taken to
ensure that the minimum number of Gram Sabha meetings take place in all villages in a year and
that these are well attended. Village development plans must be placed before the Gram Sabha.
Selection of beneficiaries and choice as well as location of works may be done as far as feasible
according to the wishes of the villagers. This would also bring about greater transparency in the
functioning of the Gram Sabhas and a system of social audit would evolve. Display of
information regarding schemes and the budgets may be placed on the bill boards outside the
gram panchayat offices and right to information may be facilitated by provision of photocopies
of certain documents on nominal payment and availability of records for inspection. In fact, the
24
initiative taken in Kerala towards making a Gram Sabha more dynamic and transparent system of
democratic decentralisation where the power goes to the people and not the people's
representatives' is the ideal perspective but as it a new process time will tell if it can be
successfully pursued.
The Panchayati Raj system has now been extended to Scheduled Areas. The Provisions of the
Panchayats (Extension to Scheduled Areas) Act, 1996, provides that State legislations should be
in conformity with traditional practice and systems. The Gram Sabha in every village should
safeguard these customs and traditions. It would identify beneficiaries and approve programmes
for socio-economic development. The panchayats should be endowed with ownership of minor
forest produce and should be consulted for grant of prospecting licences or mining lease of minor
minerals and also in the case of acquisition of land. The State Governments will have to take
appropriate action in this regard.
Industrial Policy Statement- 1991
The Industrial Policy Statement of 1991 stated that “the Government will continue to pursue a
sound policy framework encompassing encouragement of entrepreneurship, development of
indigenous technology through investment in research and development, bringing in new
technology, dismantling of the regulatory system, development of the capital markets and
increased competitiveness for the benefit of common man". It further added that "the spread of
industrialization to backward areas of the country will be actively promoted through appropriate
incentives, institutions and infrastructure investments”.
The objective of the Industrial Policy Statement - 1991 was to maintain sustained growth in
productivity, enhance gainful employment and achieve optimal utilization of human resources, to
attain international competitiveness, and to transform India into a major partner and player in the
global arena. Quite clearly, the focus of the policy was to unshackle the Indian industry from
bureaucratic controls. This called for a number of far-reaching reforms :
necessary with a view
to ease restraints on capacity creation, respond to emerging domestic and global opportunities by
improving productivity. Accordingly, the Policy Statement included abolition of industrial
25
licensing for most industries, barring a handful of industries for reasons of security and strategic
concerns, social and environmental issues.
Compulsory licencing was required only in respect of 18 industries. These included, inter alia,
coal and lignite, distillation and brewing of alcoholic drinks, cigars and cigarettes, drugs and
pharmaceuticals, white goods, hazardous chemicals. The small scale sector continued to be
reserved. Norms for setting up industries (except for industries subject to compulsory licensing)
in cities with more than one million population were further liberalised.
foreign direct
investment was accorded a significant role in policy announcements of 1991. Foreign direct
investment (FDI) up to 51 per cent foreign equity in high priority industries requiring large
investments and advanced technology was permitted. Foreign equity up to 51 per cent was also
allowed in trading companies primarily engaged in export activities. These important initiatives
were expected to provide a boost to investment besides enabling access to high technology and
marketingexpertise of foreign companies.
Government
provided automatic approval for technological agreements related to high priority industries and
eased procedures for hiring of foreign technical expertise.
atives towards restructuring of public sector units (PSUs) were initiated, in view
of their low productivity, over staffing, lack of technological upgradation and low rate of return.
In order to raise resources and ensure wider public participation PSUs, it was decided to
offer its shareholding stake to mutual funds, financial institutions, general public and workers.
Similarly, in order to revive and rehabilitate chronically sick PSUs, it was decided to refer them
to the Board for Industrial and Financial Reconstruction (BIFR). The Policy also
provided for greater managerial autonomy to the Boards of PSUs.
Government’s intervention in
investment decisions of large companies through MRTP Act had proved to be deleterious for
industrial growth. Accordingly, pre-entry scrutiny of investment decisions of MRTP companies
was abolished. The thrust of policy was more on controlling unfair and restrictive trade practices.
The provisions restricting mergers, amalgamations and takeovers were also repealed.
Industrial Policy Measures Since 1991
26
Since 1991, industrial policy measures and procedural simplifications have been reviewed on an
ongoing basis. Presently, there are only six industries which require compulsory licensing.
Similarly, there are only three industries reserved for the public sector. Some of important policy
measures initiated since 1991 are set out below:
part of India’s
economic policy. The Government has ensured a liberal and transparent foreign investment
regime where most activities are opened to foreign investment on automatic route without any
limit on the extent of foreign ownership. FDI up to 100 per cent has also been allowed under
automatic route for most manufacturing activities in Special Economic Zones (SEZs). More
recently, in 2004, the FDI limits were raised in the private banking sector (up to 74 per cent), oil
exploration (up to 100 per cent), petroleum product marketing (up to 100 per cent), petroleum
product pipelines (up to 100 per cent), natural gas and LNG pipelines (up to 100 per cent) and
printing of scientific and technical magazines, periodicals and journals (up to 100 per cent). In
February 2005, the FDI ceiling in telecom sector in certain services was increased from 49 per
cent to 74 per cent.
sector has been an
important tenet of industrial policy. Realizing the increased import competition with the removal
of quantitative restrictions since April 2001, the Government has adopted a policy of
dereservation and has pruned the list of items reserved for SSI sector gradually from 821 items as
at end March 1999 to 506 items as on April 6, 2005. Further, the Union Budget 2005-06 has
proposed to dereserve 108 items which were identified by Ministry of Small Scale Industries.
The investment limit in plant and machinery of small scale units has been raised by the
Government from time to time. To enable some of the small scale units to achieve required
economies of scale, a differential investment limit has been adopted for them since October
2001. Presently, there are 41 reserved items which are allowed investment limit up to Rs.50
million instead of present limit of Rs.10 million applicable for other small scale units.
tion up to 24 per cent of the total shareholding in small scale units by other
industrial undertakings has been allowed. The objective therein has been to enable the small
sector to access the capital market and encourage modernization, technological upgradation,
ancillarisation, sub-contracting, etc.
27
Competition Commission
of India was set up in 2003 so as to prevent practices having adverse impact on competition in
markets.
nounced a new North-East
Industrial Policy in December 1997 for promoting industrialization in the North-Eastern region.
This policy is applicable for the States of Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland and Tripura. The Policy has provided various concessions to industrial units
in the North Eastern Region, e.g.,development of industrial infrastructure, subsidies under
various schemes, excise and income-tax exemption for a period of 10 years, etc.
North Eastern Development Finance Corporation Ltd. has been designated as the nodal
disbursing agency under the Scheme.
minority stakes to
strategic sales. Up to December 2004, PSUs have been divested to an extent of Rs.478 billion.
have also been
initiated. For instance, Electricity Act 2003 has been enacted which envisaged to delicense
power generation and permit captive power plants. It is also intended to facilitate private sector
participation in transmission sector and provide open access to grid sector. Various policy
measures have facilitated increased private sector participation in key infrastructure sectors such
as, telecommunication, roads and ports. Foreign equity participation up to 100 per cent has been
allowed in construction and maintenance of roads and bridges. MRTP provisions have been
relaxed to encourage private sector financing by large firms in the highway sector.
Evidently, in the process of evolution of industrial policy in India, the Government’s intervention
has been extensive. Unlike many East Asian countries which used the State intervention to build
strong private sector industries, India opted for the State control over key industries in the initial
phase of development. In order to promote these industries the Government not nly levied high
tariffs and imposed import restrictions, but also subsidized the nationalized firms, directed
investment funds to them, and controlled both land use and many prices.
In India, there has been a consensus for long on the role of government in providing
infrastructure and maintaining stable macroeconomic policies.
However, the path to be pursued toward industrial development has evolved over time. The form
of government intervention in the development strategy needs to be chosen from the two
28
alternatives: ‘Outward-looking development policies’ encourage not only free trade but also the
free movement of capital, workers and enterprises. By contrast, ‘inward-looking development
policies’ stress the need for one’s own style of development. India initially adopted the
latter strategy.
The advocates of import substitution in India believed that we should substitute imports with
domestic production of both consumer goods and sophisticated manufactured items while
ensuring imposition of high tariffs and quotas on imports. In the long run, these advocates cite
the benefits of greater domestic industrial diversification and the ultimate ability to export
previously protected manufactured goods, as economies of scale, low labour costs, and the
positive externalities of learning by doing cause domestic prices to become more competitive
than world prices. However, pursuit of such a policy forced the Indian industry to have low and
inferior technology. It did not expose the industry to the rigors of competition and therefore it
resulted in low efficiency. The inferior technology and inefficient production practices coupled
with focus on traditional sectors choked further expansion of the India industry and thereby
limited its ability to expand employment opportunities.
Considering these inadequacies, the reforms currently underway aim at infusing the state of the
art technology, increasing domestic and external competition and diversification of the industrial
base so that it can expand and create additional employment opportunities.
In retrospect, the Industrial Policy Resolutions of 1948 and 1956 reflected the desire of the
Indian State to achieve self sufficiency in industrial production. Huge investments by the State in
heavy industries were designed to put the Indian industry on a higher long-term growth
trajectory. With limited availability of foreign exchange, the effort of the Government was to
encourage domestic production. This basic strategy guided industrialization until the mid-1980s.
Till the onset of reform process in 1991, industrial licensing played a crucial role in channeling
investments, controlling entry and expansion of capacity in the Indian industrial sector. As such
industrialization occurred in a protected environment, which led to various distortions. Tariffs
and quantitative controls largely kept foreign competition out of the domestic market, and most
Indian manufacturers looked on exports only as a residual possibility. Little attention was paid to
ensure product quality, undertaking R&D for technological development and achieving
economies of scale. The industrial policy announced in 1991, however, substantially dispensed
with industrial licensing and facilitated foreign investment and technology transfers, and threw
29
open the areas hitherto reserved for the public sector. The policy focus in the recent years has
been on deregulating the Indian industry, enabling industrial restructuring, allowing the industry
freedom and flexibility in responding to market forces and providing a business environment that
facilitates and fosters overall industrial growth. The future growth of the Indian industry as
widely believed, is crucially dependent upon improving the overall productivity of the
manufacturing sector, rationalisation of the duty structure, technological upgradation, the search
for export markets through promotional efforts and trade agreements and creating an enabling
legal environment.
Public and Private Sector, Joint venture and sectors:
Introduction
The principle of joint sector (similar to joint ventures in some of the developing countries),
wherein Government and private entrepreneurs join hands to establish new enterprises is indeed
an old one for India. It was quite common for many of the erstwhile princely States (the State of
Baroda, Travancore and Cochin and Hyderabad, to name only a few) to share risk capital in large
industrial projects. Apart from this, it was a widely shared view that the state in the independent
India would have to play an active role in providing financial and other support to new and small
entrepreneurs. Air India International provides a notable example of private sector and the state
coming together to establish business enterprises. The company was established by the Tatas in
1948. The Government of India provided 49 per cent of the equity capital of the company. The
Government subsequently acquired an additional 2 per cent equity from Tata Sons Ltd to convert
it into a government company. In spite of the government holding 51 per cent of the equity, the
Air India continued to be under the management of the Tatas until it was fully taken over by the
Government of India in 1953.
There were twelve other undertakings in 1966-67, in which the Central Government had a
substantial stake in equity capital without having direct managerial control. In a few cases equity
participation by foreign companies in public sector enterprises (PSEs) was also allowed. Madras
Fertilizers Ltd., for example, was established as a joint enterprise in participation with Amoco
Inc., USA and National Iranian Oil Co., Iran. These two foreign companies were partners in
30
Madras Refineries Ltd., too. Cochin Refineries Ltd., was established with the participation of
Phillips Petroleum Co., USA and Duncan Brothers Ltd., Lubrizol India Ltd., with the Lubrizol
Corporation, USA and Triveni Structurals Ltd., with Voest Alpine, Austria. Maruti Udyog Ltd. a
joint venture with Suzuki Motor Co Ltd., Japan is one of the most important cases where a
foreign private corporation has been invited to join hands with the Government. A feature of all
the above cases appears to be that public sector holdings are of majority nature and these are
managed by Government nominated boards with representation of the foreign collaborator on the
board of directors.
The Industrial Policy Resolution, 1956 (IPR, 1956) envisaged that the state would help the
private sector in fulfilling the role assigned to it within the framework of planning and the
industrial policy in force from time to time. In doing so,... the state will continue to foster
institutions to provide financial aid to these industries and special assistance will be given to
enterprises organized on co-operative lines for industrial and agricultural purposes. In suitable
cases, the State may also grant assistance to the private sector. Such assistance, especially when
the amount involved is substantial, will preferably be in the form of participation in equity
capital, though it may also be in part in the form of debenture capital.
In September 1960, the Government of Maharashtra appointed a Consultative Committee
on the Third Five Year Plan, which set up a Study Group on "Joint Sector Enterprises for
Industrial Development" under the Chairmanship of Shri R.G. Saraiya. Messrs Naval H. Tata,
S.M. Joshi, A.R. Bhat, R.M. Deshmukh and A.B. Bardhan were the other members. The Study
Group, in its report submitted in May 1961, expressed the opinion that in order to achieve
maximum development of industries and spread industrialization into the interior, it was
necessary to put to the best use the resources -- managerial ability available with the Government
on the one hand and the private sector on the other. The concept of joint sector, the Group
opined, could be used in furtherance of this objective.
The joint sector scheme was expected to attract entrepreneurs to the relatively backward areas of
the state in the matter of industrial development. With regard to organisation, management and
control of joint sector enterprises, the Group emphasised the need to have mutual trust in all such
cases of joint investment by the state and private entrepreneurs. The Group observed: (a) The
pattern of association should be such that Government can have a substantial voice in public
interests in the policy matters of the undertaking but so that, in cases where the managing partner
31
proves to be lame duck or it is considered necessary for his specific actions or inactions to
displace him, the Government can intervene and take over the management too for a limited or
unlimited period and extent without recourse to the provisions of the Industries (Development
and Regulation) Act, 1951.
(b) The distribution of ownership should be so worked out that there is the minimum
concentration of capital in the hands of individuals or associated groups, this being, however,
circumscribed in suitable cases ... and the desirability of associating available and reputed
entrepreneurship within the country itself or even from abroad where foreign capital is necessary
and forthcoming.
Thus, the concept of joint sector as visualised by the Study Group headed by Mr. Saraiya was in
the form of an industrial organisation that would promote industrial development in the State
(Maharashtra in this case) in general and the backward regions of the state in particular. The
State of Andhra Pradesh was one of the earliest to set up an Industrial Development Corporation
(APIDC).
(1) Joint ventures between two public sector Enterprises
The Central Government or Central Public Enterprises having necessary expertise or
experience in industry may sometimes join with the State Government or state level public
enterprises to implement certain projects under joint venture scheme with or without public
participation.
(2) Ventures of public sector enterprises and/or State Governments with no identifiable
private promoter but with the participation of general public
Under this category the public at large will participate in the risk capital along with the
State Government or state level public enterprises. The majority equity of 51 per cent or more
may be held by the State or PSEs and the balance by the general public through public issue of
shares. As per the definition of the Companies Act, 1956, such companies are, however, treated
as Government companies.58 There can be other cases where the Government/Public Enterprises
holds minority shares and the rest by general public with no identifiable private promoter.
(3) Joint venture between public enterprise and Co-operatives or workers of an enterprise
In this form of joint venture, a part of equity is held by a co-operative society and the rest
by public sector enterprise or Government. Similarly, part of the equity might be held by workers
32
individually or an organisation formed by them.
(4) Joint venture between public enterprises and domestic private entrepreneurs
In this category, the State Government or State Government Undertakings, who are assigned
promotional and developmental role hold licences for projects to be implemented under joint
venture scheme, invite prospective private promoters to participate in the project. The equity
pattern of the proposed enterprise would be such that state level promotional agencies will hold
minimum of 26 per cent, the private promoter 25 per cent and balance 49 per cent will be
subscribed by the public at large. On the other hand, the private promoter who holds industrial
license may approach the state level agencies to implement the license in the joint sector.
(5) Joint venture between public enterprises and foreign collaborators
In this case, public enterprise jointly with foreign collaborators with or without an Indian
private promoter may participate in the share capital to promote an enterprise as a joint venture.
PSEs who hold individual licences may also directly enter into an agreement with foreign. For
example, Madhya Pradesh Electricals Ltd was a joint sector company of Madhya Pradesh
Audyogic Vikas Nigam Ltd, an industrial promotional organisation in Madhya Pradesh and the
NGEF Ltd, a Government of Karnataka enterprise. There are some other such cases in operation
with the joint ownership of the Central and State Governments.
Under section 617 of the Companies Act, 1956, "Government Company means any company in
which not less than fifty one per cent of the paid-up capital is held by the Central Government, or
by any State Government or Governments or partly by the Central Government, and partly by
one or more State Governments also includes a company which is a subsidiary of Government
company thus defined". collaborators to participate in the joint venture.59 Experience shows that
in some state-level public enterprises have entered into such agreements. In this type of joint
ventures, state holds 26 per cent, foreign collaborators 25 per cent and the balance by the general
public. In case the joint sector enterprises also involve Indian promoters, the guidelines indicate
that state corporations should hold a minimum of 25 per cent, Indian entrepreneur 20 per cent
foreign promoter 20 per cent and the balance 35 per cent offered to the general public. It may be
noted that only category (4) and (5) involve private promoter. It is also necessary to mention that
many private sector companies are not treated as JSEs in spite of the fact that public financial
institutions hold substantial shares in them.61 On the other hand, companies not less than 51 per
cent of whose paid-up share capital is held by the Central Government, State Governments,
33
Government-owned corporations including public financial institutions are treated as if they
were Government companies for purposes of appointing auditors. The coverage of the definition
of a public financial institution under the Companies Act, 1956, underwent changes as a number
of institutions were de-notified. This resulted in limiting the application of this provision. The
main point that is sought to be made here is that a number of companies remain outside the joint
sector framework in spite of public sector having more than 25 per cent holding in their risk
capital.
If the recommendations of ILPIC are taken in their spirit most of such companies should have
been treated as belonging to the joint sector. In practice, however, it turned out to be. In some
cases foreign companies were directly involved in joint ventures with the State or SIDCs. For
example, Punjab Anand Lamp Industries Ltd. was promoted as a joint venture of Punjab State
Industrial Development Corpn. Ltd. (PSIDC) (26 per cent) and N.V. Phillips BV, Netherlands
(25 per cent), and C.L. Anand (10 per cent) and the balance by the public. Noble Explochem is a
joint venture between State Industrial Corporation of Maharashtra Ltd. (SICOM) (28 per cent)
and AB Bofors Sweden, Dyno Industries, Norway and Swedish Fund for Industrial Cooperation
with Developing Countries together holding 23.69 per cent of the equity capital.
At this point it may be useful to clarify that the term joint sector needs to be distinguished from
joint ventures. In the Indian policy context, joint venture means firstly an enterprise which is set
up with joint participation of Indian and foreign capital. Secondly business ventures set up by the
Indian firms (belonging to either public or private sectors) in other countries are referred to as
Indian joint ventures abroad.
It is also relevant to mention that a special resolution needs to be passed for (re)appointing
auditors if not less than 25 per cent of the subscribed share capital is held whether singly or in
any combination by -(a) a public financial institution or a Government company or Central Government or any State
Government, or
(b) any financial or other institution established by any Provincial or State Act, in which a State
Government holds not less than fifty-one per cent of the subscribed share capital, or
(c) a nationalised bank or an insurance company carrying on general insurance business.
34
Such companies are treated as 'deemed Government companies'. See: Section 619-B of the
Companies Act, 1956.
Consumerism:
Consumerism is the equation of personal happiness with consumption and the purchase of
material possessions. The term is often associated with criticisms of consumption starting with
Thorstein Veblen or, more recently by a movemen called Enoughism. Veblen's subject of
examination, the newly emergent middle class arising at the turn of the twentieth century, comes
to full fruition by the end of the twentieth century through the process of globalization.
In economics, consumerism refers to economic policies placing emphasis on consumption. In an
abstract sense, it is the belief that the free choice of consumers should dictate the economic
structure of a society (cf. Producerism, especially in the British sense of the term).
History
Consumerism has strong links with the Western world, but is in fact an international
phenomenon. People purchasing goods and consuming materials in excess of their basic needs is
as old as the first civilizations (see Ancient Egypt, Babylon and Ancient Rome, for example).
A great turn in consumerism arrived just before the Industrial Revolution. While before the norm
had been the scarcity of resources, The Industrial Revolution created an unusual situation: for the
first time in history products were available in outstanding quantities, at outstandingly low
prices, being thus available to virtually everyone. And so began the era of mass consumption, the
only era where the concept of consumerism is applicable.
Since consumerism began, various individuals and groups have consciously sought an alternative
lifestyle, such as the "simple living", "eco-conscious", and "localvore"/"buy local" movements.
Consumerism, the promotion of consumer rights and protection. Subject to the doctrine of caveat
emptor (Latin, "let the buyer beware").
The older term and concept of "conspicuous consumption" originated at the turn of the 20th
century in the writings of sociologist and economist, Thorstein Veblen. The term describes an
apparently irrational and confounding form of economic behaviour. Veblen's scathing proposal
that this unnecessary consumption is a form of status display is made in darkly humorous
observations like the following:
"It is true of dress in even a higher degree than of most other items of consumption, that
people will undergo a very considerable degree of privation in the comforts or the
35
necessaries of life in order to afford what is considered a decent amount of wasteful
consumption; so that it is by no means an uncommon occurrence, in an inclement
climate, for people to go ill clad in order to appear well dressed." (The Theory of the
Leisure Class, 1899).
The term "conspicuous consumption" spread to describe consumerism in the United States
in the 1960s, but was soon linked to debates about media theory, culture jamming, and its
corollary productivism.
While consumerism is not a new phenomenon, it has become widespread over the course of
the 20th century,[citation needed] and particularly in recent decades.
Usage
Webster's dictionary defines Consumerism as "The movement seeking to protect and inform
consumers by requiring such practices as honest packaging and advertising, product
guarantees, and improved safety standards.
or alternately "The theory that a progressively greater consumption of goods is
economically beneficial.". It is thus the opposite of anti-consumerism or of producerism.

Anti-consumerism is the socio-political movement against consumerism. In this meaning,
consumerism is the equating of personal happiness with the purchasing material
possessions and consumption.

In relation to producerism, it is the belief that consumers should dictate the economic
structure of a society, rather than the interests of producers. It can also refer to economic
policies that place an emphasis on consumption.
Criticism
Anti-consumerism
In many critical contexts, consumerism is used to describe the tendency of people to
identify strongly with products or services they consume, especially those with
commercial brandnames
and
perceived status-symbolism appeal,
e.g.
a luxury
automobile, designer clothing, or expensive jewelry. A culture that is permeated by
consumerism can be referred to as a consumer culture or a market culture.
Opponents of consumerism argue that many luxuries and unnecessary consumer products
may act as social mechanism allowing people to identify like-minded individuals through
the display of similar products, again utilizing aspects of status-symbolism to
judge socioeconomic status and social stratification. Some people believe relationships with
36
a product or brand name are substitutes for healthy human relationships lacking in societies,
and along with consumerism, create a cultural hegemony, and are part of a general process
of social control in modern society. Critics of consumerism often point out that consumerist
societies are more prone to damage the environment, contribute to global warming and use
up resources at a higher rate than other societies. Dr. Jorge Majfud says that "Trying to
reduce environmental pollution without reducing consumerism is like combatting drug
trafficking without reducing the drug addiction."
In 1955, economist Victor Lebow stated:
"Our enormously productive economy demands that we make consumption our way of life, that
we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction and
our ego satisfaction in consumption. We need things consumed, burned up, worn out, replaced
and discarded at an ever-increasing rate".
Critics of consumerism include Pope Benedict XVI, German historian Oswald Spengler (who
said, "Life in America is exclusively economic in structure and lacks depth", and French
writer Georges Duhamel, who held "American materialism up as a beacon of mediocrity that
threatened to eclipse French civilization".
In an opinion segment of New Scientist magazine published in August 2009, reporter Andy
Coghlan cited William Rees of the University of British Columbia and epidemiologist Warren
Hernof the University of Colorado at Boulder, saying that human beings, despite considering
themselves civilized thinkers, are "subconsciously still driven by an impulse for survival,
domination and expansion... an impulse which now finds expression in the idea that inexorable
economic growth is the answer to everything, and, given time, will redress all the world's
existing inequalities." According to figures presented by Rees at the annual meeting of
the Ecological Society of America, human society is in a "global overshoot", consuming 30%
more material than is sustainable from the world's resources. Rees went on to state that at
present, 85 countries are exceeding their domestic "bio-capacities", and compensate for their lack
of local material by depleting the stocks of other countries, which have a material surplus due to
their lower consumption.
Consumerism in the 21st century
Beginning in the 1990s, the most frequent reason given for attending college had changed to
making a lot of money, outranking reasons such as becoming an authority in a field or helping
others in difficulty. This statement directly correlates with the rise of materialism, specifically
the technological aspect. At this time compact disc players, digital media, personal computers,
and cellular telephones all began to integrate into the affluent American’s everyday lifestyle.
37
Madeline Levine criticized what she saw as a large change in American culture – “a shift away
from values of community, spirituality, and integrity, and toward competition, materialism and
disconnection.”
Businesses have realized that wealthy consumers are the most attractive targets for marketing
their products. The upper class' tastes, lifestyles, and preferences trickle down to become the
standard which all consumers seek to emulate. The not so wealthy consumers can “purchase
something new that will speak of their place in the tradition of affluence” . A consumer can have
the instant gratification of purchasing an expensive item that will help improve their social
status.
Emulation is also a core component of 21st century consumerism. As a general trend, regular
consumers seek to emulate those who are above them in the social hierarchy. The poor strive to
imitate the wealthy and the wealthy imitate celebrities and other icons. The celebrity
endorsement of products can be seen as evidence of the desire of modern consumers to purchase
products partly or solely to emulate people of higher social status. This purchasing behavior may
co-exist in the mind of a consumer with an image of oneself as being an individualist.
Counter arguments
There has always been strong criticism of the anti-consumerist movement. Most of this comes
from libertarian thought.
Libertarian criticisms of the anti-consumerist movement are largely based on the perception that
it leads to elitism. Namely, libertarians believe that no person should have the right to decide for
others what goods are necessary for living and which aren't, or that luxuries are necessarily
wasteful, and thus argue that anti-consumerism is a precursor to central planning or
atotalitarian society. Twitchell, in his book Living It Up, sarcastically remarked that the logical
outcome of the anti-consumerism movement would be a return to the sumptuary laws that
existed in ancient Rome and during the Middle Ages, historical periods prior to the era of Karl
Marx in the 19th century.
The Consumer Protection Act, 1986:
SHORT TITLE, EXTENT, COMMENCEMENT AND APPLICATION.
(1) This Act may be called the Consumer Protection Act, 1986.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
38
(3) It shall come into force on such date 1 as the Central Government may, by notification
appoint and different dates may be appointed for different States and for different provisions of
this Act.
(4) Save as otherwise expressly provided by the Central Government by notification, this Act
shall apply to all goods and services.
2. Definitions.
(1) In this Act, unless the context otherwise requires,1[(a)
"Appropriate laboratory" means a laboratory or organisation(i)
Recognized by the Central Government;
(ii)
Recognized by a State Government, subject to such guidelines as may be
prescribed by the Central Government in this behalf; or
(iii) Any such laboratory or organisation established by or under any law for the time
being in force, which is maintained, financed or aided by the Central Government or a
State Government for carrying out analysis or test of any goods with a view to
determining whether such goods suffer from any defect;]
2[(aa)
"Branch office" means -
(i) Any establishment described as a branch by the opposite party; or
(ii) Any establishment carrying on either the same or substantially the same activity as that
carried on by the head office of the establishment;
(b) "Complainant" means (i) A consumer; or
(ii) Any voluntary consumer association registered under the Companies Act, 1956 (1 of
1956), or under any other law for the time being in force; or
39
(iii)
The Central Government or any State Government, who or which makes a
complaint;
2[(iv)
One or more consumers where there are numerous consumers having the same
interest;]
3[(v)
in case of death of a consumer, his legal heir or representative.]
who or which makes a complaint;
(c) "Complaint'' means any allegation in writing made by a complainant that[(i) An unfair trade practice or a restrictive trade practice has been adopted by 5[any trader or
service provider;]]
(ii)[The goods bought by him or agreed to be bought by him] suffer from one or more
defects;
(iii) [Service hired or availed of or agreed to be hired or availed of by him] suffer from
deficiency in any respect;
[(iv) a trader or the service provider, as the case may be, has charged for the goods or for the
service mentioned in the complaint, a price in excess of the price in excess of the price(a) fixed by or under any law for the time being in force;
(b) displayed on the goods or any package containing such goods;
(c) displayed on the price list exhibited by him by or under any law for the time being in
force;
(d) agreed between the parties;
[(v) goods which will be hazardous to life and safety when used are being offered for sale to
the public;(A) in contravention of any standards relating to safety of such goods as required to be
complied with, by or under any law for the time being in force;
40
(B) if the trader could have known with due diligence that the goods so offered are unsafe to
the public;]
[(vi) service which are hazardous or likely to be hazardous to life and safety of the public
when used, are being offered by the service provider which such person could have known
with due diligence to be injurious to life and safety.]
(d) "Consumer" means any person who, (i) Buys any goods for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any user of such
goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised or under any system of deferred payment when such use is
made with the approval of such person but does not include a person who obtains such goods
for resale or for any commercial purpose; or
(ii) [Hires or avails of] any services for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other then the person who 8[hires or avails of] the services for
consideration paid or promised, or partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the approval of the first mentioned
person [but does not include a person who avails of such services for any commercial
purpose];
[Explanation. For the purposes of this sub-clause "commercial purpose" does not include use
by a consumer of goods bought and used by him and services availed by him exclusively for
the purposes of earning his livelihood, by means of self-employment;]
(e) "Consumer dispute'' means a dispute where the person against whom a complaint has
been
made,
denies
or
disputes
the
allegations
contained
in
the
complaint;
(f) "Defect" means any fault, imperfection or short coming in the quality, quantity, potency,
purity or standard which is required to be maintained by or under any law for the time being
in force or 13[under any contract express or implied or] as is claimed by the trader in any
41
manner whatsoever in relation to any goods; (g) "Deficiency" means any fault, imperfection,
shortcoming or inadequacy in the quality, nature and manner of performance which is
required to be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or otherwise in relation to
any service;
(h) "District Forum" means a Consumer Disputes Redressal Forum established under Cl. (a)
of sec. 9;
(i) "Goods" means goods as defined in the sale of Goods Act, 1930 {3 of 1930);
[(j) "Manufacturer" means a person who(i) Makes or manufactures any goods or parts thereof; or
(ii) Does not make or manufacture any goods but assembles parts thereof, made or
manufactured by others; or
(iii) Puts or causes to be put his own mark on any goods made or manufactured by any other
manufacturer.]
Explanation. Where a manufacturer dispatches any goods or part thereof to any branch office
maintained by him, such branch office shall not be deemed to be the manufacturer even
though the parts so dispatched to it are assembled at such branch office and are sold or
distributed from such branch office:
[(jj) "Member" includes the President and a member of the National commission or a State
Commission or a District Forum, as the case may be;]
(k) "National Commission" means the National Consumer Disputes Redressal Commission
established under CI. (c) of sec. 9:
(l) "National" means a notification published in the official Gazette;
(m) "Person" includes, (i) A firm whether registered or not;
(ii) A Hindu undivided family;
(iii) A Co-operative society;
42
(iv) Every other association of persons whether registered under the societies Registration
Act, 1860 (21of 1860), or not;
(n) "Prescribed" means prescribed by the rules made by the State Government, or as the case
may be, the Central Government under this Act;
[(nn) "regulation" means the regulations made by the national Commission under this Act;
[(nnn) "restrictive trade practice" means a trade practice which tends to being about
manipulation of price or its conditions of delivery or to affect flow of supplies in the market
relating to goods or service in such a manner as to impose on the consumers unjustified costs
or restrictions and shall include(a) delay beyond the period agreed to be a trader in supply of such goods or in providing the
services which has led or is likely to lead to rise in the price;
(b) any trade practice which requires a consumer to buy, hire or avail of any goods or, as the
case may be services as-condition precedent to buying, hiring or availing of other goods or
services.]
(o) "Services" means service of any description which is made available to potential [users
and includes, but not limited to, the provision of] facilities in connection with banking,
Financing insurance, transport, processing, supply of electrical or other energy, board or
lodging or both, [housing construction] entertainment, amusement or the purveying of news
or other information, but does not include the rendering of any service free of charge or
under a contract of personal service;
[(oo) "spurious goods and services" mean such goods and services which are claimed to be
genuine but they are actually not so,]
(p) "State Commission" means a Consumer Disputes Redressal Commission established in a
State under CI (b) of Sec. 9;
(q) "Trader" in relation to any goods means " a person who sells or distributes any goods for
sale and includes the manufacturer thereof, and where such goods are sold or distributed in
package form, includes the packer thereof";
43
[(r) "Unfair trade practice" means a trade practice which, for the purpose of promoting the
sale, use or supply of any goods or for the provision of any service, adopts any unfair method
or unfair or deceptive practice including any of the following practices, namely:
(1) The practice of making any statement, whether orally or in writing or by visible
representation which, (i) Falsely represents that the goods are of a particular standard, quality, quantity; gradecomposition, style or model;
(ii) Falsely represents that the service of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as
new goods;
(iv) Represents that the goods or service have sponsorship, approval, performance,
characteristics, accessories, uses or benefits which such goods or service do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation
which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness of,
any goods or service;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or length of
life of a product or of any goods that is not based on an adequate or proper test thereof
Provided that where a defence is raised to the effect that such warranty or guarantee is based
on adequate or proper test, the burden of proof of such defence shall lie on the person raising
such defence;
(viii) Makes to the public a representation in a form that purports to be (i) A warranty or guarantee of a product or of any goods or service; or
(ii) A promise to replace, maintain or repair an article or any part thereof or to repeat or
continue a service until it has achieved a specified result, if such purported warranty or
guarantee or promise is materially misleading or if there is no reasonable prospect that such
warranty, guarantee or promise will be carried out;
44
(ix) Materially misleads the public concerning the price at which a product or like products
or goods or service, have been or are, ordinarily sold or provided, and, for this purpose, a
representation as to price shall be deemed to refer to the price at which the product or goods
or service has or have been sold by sellers or provided by suppliers generally in the relevant
market unless it is clearly specified to be the price at which the product has been sold or
services have been provided by the person by whom or on whose behalf the representation is
made;
(x) Gives false or misleading facts disparaging the goods, services or trade of another person;
Explanation. For the purposes of CI. (1), a statement that is---(a) Expressed on an article offered or displayed for sale, or on its wrapper or container; or
(b) Expressed on anything attached to, inserted in, or accompanying an article offered or
displayed for sale or on anything on which the article is mounted for display or sale; or
(c) Contained in or on anything is sold, sent, delivered, transmitted or in any other manner
whatsoever made available to a member of the public,
Shall be deemed to be a statement made to the public by, and only by, the person who had
caused the statement to be so expressed, made or contained;
(2) Permits the publication of any advertisement whether in any newspaper or otherwise, for the
sale or supply at a bargain price, of goods or the services that are not intended to be offered for
sale or supply at the bargain price, or for a period that is, and in quantities that are, reasonable,
having regard to the nature of the market in which the business is carried on, the nature and size
of
business,
And
the
nature
of
the
advertisement.
Explanation.-- For the purposes of CI. (2), "bargaining price" means
(a) A price that is stated in any advertisement to be a bargain price, by reference to an ordinary
price or otherwise, or
(b) A price that a person who reads, hears or sees the advertisement, would reasonably
understand to be a bargain price having regard to the prices at which the product advertised or
like products are ordinarily sold:
45
(3) Permits(a) The offering of gifts, prizes or other items with the intention of not providing them as offered
or creating impression that something is being given or offered free of charge when it is fully or
partly covered by the amount charged in the transaction as a whole;
(b) The conduct of any contest, lottery, game of chance or skill, for the purpose of promoting,
directly or indirectly, the sale, use or supply of any product or any business interest;
[(3A) withholding from the participants of any scheme offering gifts, prizes or other items
free of charge, on its closure the information about final results of the scheme.
Explanation: for the purposes of this sub-clause, the participants of a scheme shall be deemed
to have been informed of the final results of the scheme where such results are within a
reasonable time published, prominently in the same newspapers in which the scheme was
originally
advertised.]
(4) Permits the sale or supply of goods intended to be used, or are of kind likely to be used,
by consumers, knowing or having reason to believe that the goods do not comply with the
standards prescribed by competent authority relating to performance, composition, contents.
Design, constructions, finishing or packaging as are necessary to prevent or reduce the risk of
injury
to
the
person
using
the
goods;
(5) Permits the hoarding or destruction of goods, or refuses to sell the goods or to make them
available for sale or to provide any service, if such hoarding or destruction or refusal raises or
tends to raises or is intended to raise, the cost of those or other similar goods or services."[
(6) Manufacture of spurious goods or offering such good for sale or adopting deceptive
practices in the provision of Services.]
(2) Any reference in this Act to any other Act or provision thereof which is not in force in
any area to which this Act applies shall be construed to have reference to the corresponding
Act or provision thereof in force in such areas.
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.
46
4. THE CENTRAL CONSUMER PROTECTION COUNCIL.
(1) The Central Government may, by notification, establish with effect from such date as it may
specify in such notification, a Council to be known as the Central Consumer Protection Council
(hereinafter referred to as the Central Council).
(2) The Central Council shall consist of the following members, namely :(a) the Minister in charge of Consumer Affairs in the Central Government, who shall be its
Chairman, and
(b) such number of other official or non-official members representing such interests as may be
prescribed.
5. PROCEDURE FOR MEETINGS OF THE CENTRAL COUNCIL.
(1) The Central Council shall meet as and when necessary, but at least one meeting of the
Council shall be held every year.
(2) The Central Council shall meet at such time and place as the Chairman may think fit and
shall observe such procedure in regard to the transaction of its business as may be prescribed.
6. OBJECTS OF THE CENTRAL COUNCIL.
The objects of the Central Council shall be to promote and protect the rights of the consumers
such as, (a) the right to be protected against the marketing of goods and services which are hazardous to
life and property;
(b) the right to be informed about the quality, quantity, potency, purity, standard and price of
goods or services, as the case may be so as to protect the consumer against unfair trade
practices;
(c) the right to be assured, wherever possible, access to a variety of goods and services at
competitive prices;
(d) the right to be heard and to be assured that consumers' interests will receive due consideration
at appropriate forums;
(e) the right to seek redressed against unfair trade practices or restrictive trade practices or
unscrupulous exploitation of consumers; and
(f) the right to consumer education.
47
7. THE STATE CONSUMER PROTECTION COUNCILS.
(1) The State Government may, by notification, establish with effect from such date as it may
specify in such notification, a Council to be known as the Consumer Protection Council for
............. (hereinafter referred to as the State Council).
(2) The State Council shall consist of the following members, namely :(a) the Minister in-charge of consumer affairs in the State Government who shall be its
Chairman;
(b) such number of other official or non-official members representing such interest as may be
prescribed by the State Government.
(3) The State Council shall meet as and when necessary but not less than two meetings shall be
held every year.
(4) The State Council shall meet at such time and place as the Chairman may think fit and shall
observe such procedure in regard to the transaction of its business as may be prescribed by the
State Government.
9. Establishment of consumer disputes redressal agencies.
There shall be established for the purpose of this Act, the following agencies, namely:
(a) A Consumer Disputes Redressal Forum to be known as the "District Forum" establishment by
the State Government 1[***] in each district of the State by notification:
[Provided that the State Government may if it deems fit, establish more then one District Forum
in a district.]
(b) A Consumer Disputes Redressal Commission to be known as the "State Commission"
established by the State Government 1[***] in the State by notification; and
(c) A National Consumer Disputes Redressal Commission established by the Central
Government by notification.
12. Manner in which complaint shall be made
[12. Manner in which complaint shall be made
(1) A complaint in relation to any goods sold or delivered or agreed to be sold or delivered or
any service provided or agreed to be provided, may be filed with a District Forum, by-
48
(a) the consumer to whom such goods are sold or delivered or agreed to be sold or delivered or
such service provided or agreed to be provided;
(b) any recognised consumer association whether the consumer to whom the goods sold or
delivered or agreed to be sold or delivered or service provided or agreed to be provided is a
member of such association or not; or
(c) one or more consumers, where there are numerous consumers having the same interest, with
the permission of the District Forum, on behalf of, or for the benefit of, all consumers so
interested; or
(d) the Central Government or the State Government, as the case may be, either in its individual
capacity or as a representative of interests of the consumers in general.
(2) Every complaint filed under sub-section (1) shall be accompanied with such amount of fee
and payable in such manner as may be prescribed.
(3) On receipt of a complaint made under sub-section (1), the District Forum may, by order,
allow the complaint to be proceeded with or rejected:
Provided that a complaint shall be rejected under this sub-section unless an opportunity of being
heard has been given to the complainant:
Provided Further that the admissibility of the complaint shall ordinarily be decided within
twenty-one days from the date on which the complaint was received.
(4) Where a complaint is allowed to be proceeded with under sub-section (3), the District Forum
may proceed with the complaint in the manner provided under this Act:
Provided that where a complaint has been admitted by the District Forum, it shall not be
transferred to any other court or tribunal or any authority set up by or under any other law for the
time being in force.
Explanation : For the purposes of this section, "recognised consumer association" means any
voluntary consumer association registered under the Companies Act, 1956 (1 of 1956), or any
other law for the time being in force.]
8A. The District Consumer Protection Council.
1[8A.
The District Consumer Protection Council.
49
(1) The State Government shall establish for every district, by notification a council to be known
as the District Consumer Protection Council with effect from such date as it may specify in such
notification.
(2) The District Consumer Protection Council (hereinafter referred to as the District Council)
shall consist of the following members, namely:(a) the Collector of the district (by whatever name called), who shall be its Chairman; and
(b) such number of other official and non-official members representing such interests as may be
prescribed by the State Government.
(3) The District Council shall meet as and when necessary but not less than two meetings shall
be held every year.
(4) The district council shall meet as such time and place within the district as the Chairman may
think fit and shall observe such procedure in regard to the transaction of its business as may be
prescribed by the State Government.
Sec.17. JURISDICTION OF THE STATE COMMISSION.
Subject to the other provisions of this Act, the State Commission shall have jurisdiction (a) to entertain (i) complaints where the value of the goods or services and compensation, if any, claimed
exceeds rupees five lakhs but does not exceed rupees twenty lakhs; and
(ii) appeals against the orders of any District Forum within the State; and
(b) to call for the records and pass appropriate orders in any consumer dispute which is pending
before or has been decided by any District Forum within the State where it appears to the State
Commission that such District Forum has exercised a jurisdiction not vested in it by law, or has
failed to exercise a jurisdiction so vested or has acted in exercise of its jurisdiction illegally or
with material irregularity.
50
UNION BANK OF INDIA v. SEPPO R ALLY OY AND ANOTHER.
(1999-(004)-CLJ -0201 –(SC)
JUDGMENT
D. P. WADHWA, J. - Appellant Union Bank of India is aggrieved by the order, dated 18 June,
1996 of the National Consumer Disputes Redressal Commission ('National Commission' for
short) passed on appeal from the order, dated 21 July, 1993, of the State Commission of Delhi.
2. State Commission had allowed the complaint of the first respondent, Seppo Rally OY, a
foreign company based in Finland, against the Union Bank of India, the appellant, directing the
bank to pay 11,234 with interest at the rate of 15% to the first respondent from 27 May, 1992, the
date when the complaint was filed. Bank was also burdened with cost of Rs. 2,500. The National
Commission and the State Commission have been constituted under section 9 of the Consumer
Protection Act, 1986 (for short the 'Act'). State Commission is established by the State
Government in the State and the National Commission is established by the Central Government.
Appeal filed by the bank before the National Commission under section 19 of the Act against the
order of the State Commission was dismissed. Now it was directed that the complainant, the first
respondent, is entitled to an amount of Rs. 3,01,103 with interest at the rate of 15% per annum
from 5 March, 1991, till the date of payment. National Commission said that the complainant
was entitled to 37,336 whereas it was paid only 29,062 on 4 March, 1991. An amount of 8,304
was paid less which is equivalent in Indian currency of Rs. 3,01,102 as on 4 March, 1991.
3. Two contentions have been raised by Mr. Dushyant Dave, senior counsel appearing for the
bank : (1) there was no deficiency in service as defined in clause (g) ofsection 2 of the Act and
(2) Delhi State Commission had no jurisdiction to entertain the complaint as no cause of action
arose within Delhi, Central Office of the Bank was at Bombay and the branch office which
issued the bank guarantee, subject-matter of the complaint, was at Saharanpur in the State of
U.P.
51
4. Dany Dairy and Food Engineers Ltd., who is impleaded as second respondent, on 14
December, 1988, entered into an agreement with the complainant for supply of two evaporator
systems valued at Rs. 25,98,473. Under the agreement, the complainant was to make 100%
advance payment to the second respondent on the condition of second respondent furnishing the
bank guarantee. In the complaint; address of the second respondent was given that of Okhla
Industrial Area, Phase-I, New Delhi. However, second respondent was having its business
operations at Saharanpur, U.P. On the request of the second respondent, Union Bank of India,
Saharanpur branch, on 19 December, 1988, gave a bank guarantee for a sum of Rs. 25,98,475.
This bank guarantee was reduced on 14 August, 1989, to Rs. 10,53,735. The bank guarantee was
in favour of the complainant and was sent directly by the Bank to Skopbank, Helsinki, Finland.
We are not concerned with the conditions of the bank guarantee except to note that it was
invoked
by
the
complainant
on
19
December,
1989.
5. The bank guarantee was extended upto 31 December, 1989. Claim was made in a sum of Rs.
10,53,735. Skopbank also sent a telex message to the Central Office of the bank at Bombay for
immediate payment of the amount under the bank guarantee. Skopbank was informed by telex
message, dated 12 January, 1990 by the Central Office of the Bank that the matter was receiving
attention and sought clarification as to why the claim had been specified to Rs. 10,53,735 instead
of rupee value of 26792. Skopbank was also asked to look into its liability to pay proceeds of
certain bill, dated 7 October, 1988, which had fallen due for payment on 14 March, 1989,
payment of which was guaranteed under its guarantee letter No. 91037668 for 55,000. Notices to
the bank were sent by advocate for the first respondent claiming the amount under the bank
guarantee. Since no reply had been received from the Skopbank regarding 55,000, it appears, the
matter rested at that. The bank was, however, told by a telex message, dated 12 April, 1990, from
Skopbank that it had paid on 11 April, 1990 55,000 under its guarantee No. 2072002002 and that
payment had been transferred according to Dany Dairy and Food Engineers Ltd.'s order to
Grindlays Bank ANZ in New Delhi. Skopbank was informed by telex message, dated 19 April,
1990, from the Central Office of the bank that the payment of GBP 55,000 had not so far been
received by the Grindlays Bank ANZ. Skopbank was requested to give instructions to Grindlays
Bank ANZ for payment of the claim amount of 55,000 to the Saharanpur Branch of the bank in
the account of Dany Dairy and Food Engineers Ltd. On 24 April, 1990, Area Manager of the first
52
respondent wrote to the bank about the discussions he had with the officers of the bank on 19
April, 1990, when the bank had decided to release payment of bank guarantee of Rs. 10,53,735
and that the matter had been taken up with the RBI (Reserve Bank of India) to release the money
in foreign exchange. Thereafter, correspondence went on with the RBI seeking permission to
release the money and RBI seeking certain clarifications. Immediately after the RBI had given its
permission, the amount was paid in the foreign currency which was equivalent to Rs.10,53,735.
6. The question that arises for consideration is : If there has been any deficiency in service
provided by the bank to the first respondent. Service under clause (o) of section 2 of the Act
means
-
"service of any description which is made available to potential users and includes the provision
of facilities in connection with banking, financing, insurance, transport, processing, supply of
electrical or other energy, board or lodging or both, housing construction, entertainment,
amusement or the purveying of news or other information, but does not include the rendering of
any
service
Deficiency
free
under
of
charge
clause
or
(g)
under
a
of section
contract
2 of
of
the
personal
Act
service".
means
-
"any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be maintained by or under any law for the time being in force
or has been undertaken to be performed by a person in pursuance of a contract or otherwise in
relation
to
any
service".
It is not disputed by making available the bank guarantee bank provided service within the
meaning of clause (o) of section 2 of the Act but not making payment under the bank guarantee
immediately after it was invoked was there any deficiency in service, is the question which
requires
consideration.
7. To examine if there is any deficiency in service we have to see whether there has been any
fault, imperfection, shortcoming or inadequacy in the performance of the service by the bank.
Bank guarantee is a separate contract between the bank and Seppo Rally of Finland. It is not
disputed that it is an unconditional bank guarantee and when it was invoked, the amount
guaranteed therein had to be paid to the account of the first respondent. Bank has taken the plea
that it did not fail in any way and that if there was delay, firstly, it was on account of the
Skopbank not replying to its query validly raised and, secondly, the RBI took time to grant
53
permission to remit the amount under the bank guarantee in foreign exchange under the Foreign
Exchange Regulation Act, 1973 (FERA). Reference has been made tosection 8, section
9 and section 24 of FERA to support the submission that the bank could not have of its own
remitted the amount under the bank guarantee in foreign exchange. National Commission itself
modified the order of the State Commission, which had ordered the remittance of the amount of
the bank guarantee in foreign exchange stating that the State Commission could order only
payment in Indian currency and thus arrived at the figure of Rs. 3,01,103. It may be noticed that
by virtue of section 18 of the Act which prescribes procedure applicable to State
Commission, section 14 of the Act has been made applicable. Under section 14 when District
Forum is satisfied that any of the allegations contained in the complaint about the services are
proved, it shall issue an order to the opposite party directing him to do one or more of following
things,
namely,
"(a)
to
(c)
......
(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or
injury suffered by the consumer due to the negligence of the opposite party."
8. In Consumer Unity & Trust Society, Jaipur v. Chairman and Managing Director, Bank of
Baroda, Calcutta and another (1997) 2 Comp LJ 192 (SC) : (1995) 2 SCC 150 - the employees of
the respondent bank resorted to illegal strike which continued for 54 days. In the complaint filed
before the National Commission, it was urged that the bank was liable to pay various amounts to
the customers like interest on overdrafts accounts to be reimbursed at lending rate during the
period the account was not operative; interest at the lending rate on the negotiable instruments
held in suspense during this period to be reimbursed to the customers, etc. This court referred to
the definitions of 'service' and 'deficiency' appearing in clauses (o) and (g) of section 2 of the Act
and said that the expression 'any deficiency' widens the ambit of service and extends it to any
service and even though the depositors were deprived of the service of the bank but the
deficiency did not arise due to one of the reasons mentioned in clause (g). This is how this court
considered
the
question
[at
page
194,
para
5,
of
Comp
LJ]
:
"The shortcoming in the service by the bank did not arise due to failure on the part of the bank in
performing its duty or discharging its obligations as required by law. Since the depositors were
prevented to avail of the services of the bank not because of any deficiency on the part of the
bank but due to strike resorted to by the employees who almost physically prevented the bank
54
from functioning, the failure of the bank to render service could not be held to give rise to claim
for recovery of any amount under the Act. Further, the power and jurisdiction of the Commission
is to award compensation under section 14 (1)(d) of the Act as it has been made applicable to the
Commission by sub-rule (b) of rule 19 of the rules framed under the Act. Clause (d) of subsection
(1)
of section
14 is
extracted
below
:
"to pay such amount as may be awarded by it as compensation to the consumer for any loss or
injury suffered by the consumer due to the negligence of the opposite party."
Each of these expressions used in the sub-section are of wide connotation and are fully
comprehended both in common and legal sense. Negligence is absence of reasonable or prudent
care which a reasonable person is expected to observe in a given set of circumstances. But the
negligence for which a consumer can claim to be compensated under this sub-section must cause
some loss or injury to him. Loss is a generic term. It signifies some detriment or deprivation or
damage. Injury too means any damages or wrong. It means 'invasion of any legally protected
interest of another'. Thus the provisions of section 14 (1)(d) are attracted if the person from
whom damages are claimed is found to have acted negligently and such negligence must result in
some loss to the person claiming damages. In other words, loss or injury, if any, must flow from
negligence. Mere loss or injury without negligence is not contemplated by this section. The bank
has not been found to be negligent in discharge of its duties. Therefore, even if any loss or
damage was caused to any depositor but it was not caused due to negligence of bank, then no
claim
of
damages
under
the
Act
was
maintainable."
9. Considering the stand taken by the bank and the statement of law as spelled out in the
aforesaid judgment, it would be thus seen that there has not been any deficiency in service
provided by the bank and in our view, National Commission and the State Commission were
wrong in coming to the contrary conclusion. We would, however, like to point out that when it is
a question of remittance of foreign exchange and permission of RBI is required, and there is a
query, raised by the RBI, it will be more appropriate to discuss the matter with the concerned
official
of
the
RBI
than
to
have
a
prolonged
correspondence.
10. Next question is regarding jurisdiction of the State Commission constituted for the National
Capital Territory of Delhi. Under clause (p) of section 2 of the Act, State Commission means a
55
Consumer Disputes Redressal Commission established in a State under clause (b) of section 9 of
the Act. Under this clause (b) of section 9, a Consumer Disputes Redressal Commission to be
known as the State Commission shall be established by the State Government in the State by
notification. Section 16provides for composition of the State Commission and section 17 for its
jurisdiction. Under section 18, as noted above, procedure applicable to State Commission is same
as contained in sections 12, secton13 and 14 and the rules made there under for the disposal of
the complaints by the District Forum which shall, with such modification as may be necessary,
be
applicable
to
disposal
of
disputes
by
the
State
Commission.
11. Section 11 deals with jurisdiction of the District Forum. Sub-section (1) provides that a
District Forum will have jurisdiction to entertain complaints where the value of the goods or
services etc. does not exceed rupees five lakhs. Sub-section (2) provides in which District Forum
a
complaint
"11.
could
be
[Jurisdiction
instituted.
of
the
This
sub-section
District
is
Forum.
as
under
-
:
(1)...]
(2) A complaint shall be instituted in a District Forum within the local limits of whose
jurisdiction,
-
a) the opposite party or each of the opposite parties, where there are more than one, at the time of
the institution of the complaint, actually and voluntarily resides or carries on business or has a
branch
office
or
personally
works
for
gain;
or
(b) any of the opposite parties, where there are more than one, at the time of the institution of the
complaint, actually and voluntarily resides, or carries on business or have a branch office or
personally works for gain, provided that in such - case either the permission of the District
Forum is given, or the opposite parties who do not reside, or carry on business or have a branch
office or personally work for gain, as the case may be, acquiesce in such institution; or
(c)
the
cause
of
action,
wholly
or
in
part
arises."
12. Under section 17 of the Act a State Commission has jurisdiction to decide complaints of the
value between rupees five and twenty lakhs, but there is no such provision as contained in subsection (2) of section 11 of the Act applicable to State Commission. Section 18 of the Act does
not make provision of sub-section (2) of section 11 applicable to the State Commission. Each
State has its own State Commission. There is purpose for it. First appeal of the District Forum
56
situated within the State lies to the State Commission, and then State can take cognizance of the
dispute arising within that State. It cannot be the intention of the legislature that dispute arising
in one State could be taken cognizance of by State Commission of other States. We have to have
purposive interpretation of the provisions and we have to hold that similar provisions as
contained in sub-section (2) of section 11 with modifications as may be necessary, shall be
applicable to the State Commission. In fact, these are the basic provisions conferring territorial
jurisdiction on a Tribunal otherwise, it will lead to absurd situations. We must read into section
17 the same provisions as contained in sub-section (2) of section 11 of the Act subject to such
modifications as may be applicable to a State Commission. It may also be noticed that under subclause (ii) of clause (a) of section 17, appeals against orders are heard by the State Commission
against the orders of any District Forum within that State. In the present case, Dany Dairy and
Food Engineers Ltd. approached the Saharanpur Branch of the bank to provide bank guarantee
which it did. The bank guarantee was invoked at Saharanpur and payment was also made by the
Saharanpur branch of the bank. Saharanpur branch is situated within the State of U.P. No part of
the cause of action has arisen in Delhi. It is difficult to agree with the view of the State
Commission and also of the National Commission that the State Commission at Delhi had
jurisdiction
in
the
matter.
13. We, therefore, uphold both the contentions of the appellant and set aside the order of the
National Commission as well as of State Commission. The complaint filed by the first
respondent is dismissed. There shall be no order as to costs.
Sum up:
i.
In this unit, we have discussed the important provisions of constitution of India and
also role of government regulation in economy of state.
ii.
The origin and development of new economy policy, its’ implications, success and
failures of policy taken by government for development and growth of state have
been dealt in detail.
iii.
The role of public, small scale, co-operative, private and joint sectors existence in
today’s economy as India follows the principle of mixed economy.
57
iv.
The concept of consumerism, role and protection of consumers are also covered in
analysis.
v.
The provisions under the consumer protections Act, 1986 are discussed , in the light
of development of consumer education in India.
58