OFFENCES AND PENALTIES UNDER THE CONSUMER PROTECTION ACT- AN OVERVIEW

Who is a consumer?

The Consumer Protection Act, 2019[1] describes a consumer as an individual who purchases or hires any goods or services for a consideration paid or partly paid or promised or partly promised including a person who makes use of the same with the permission of the buyer. It, however, excludes persons buying or availing these goods and services for any sort of resale or commercial purposes from this category. It bestows upon the consumers, six rights to safeguard their interests[2]

  • Right to safety against the marketing of hazardous goods posing a threat to their life or property.
  • Right to choose from within a variety of goods and services at competitive prices.
  • Right to inquire about crucial details such as price, quality, quantity, and purity of the goods before buying them.
  • Right to consumer education.
  • Right to be heard before the appropriate fora.
  • Right to seek redressal against restrictive and unfair trade practices.
Unfair and Restrictive Trade Practices under the Consumer Protection Act (CPA)

For better clarity, it becomes crucial to understand what is meant by the terms ‘unfair’ and ‘restrictive’ trade practices. ‘Unfair trade practices’ are unjust practices towards the consumer, carried out using deceptive and fraudulent methods; for example, issuing false statements exhibiting a good or service as new when it is not, depicting a good to be of a particular quality and use when it is not, giving false guarantee regarding the product’s life, imposing hidden costs, etc. ‘Restrictive trade practice’, instead, is the manipulation of the flow of goods in the market to maximize the profits by imposing upon the consumers, limitations and arbitrary costs. To elucidate, when a trader intentionally stores onions in his warehouse only for it to lead to a shortage of the same, so that he can later sell them at a higher value than the usual market price, the action would amount to a restrictive trade practice.

Product Liability- A new concept

A product liability action puts a statutory obligation on the manufacturer or seller to make good the loss suffered by a consumer due to the defective goods or deficiency in services.[3] Thus, a product liability action may be brought against any product manufacturer, seller, or service provider before the National, State or District Commission to claim compensation on engagement in any of the terms provided in sections 84, 85, and 86 of the CPA; all of which comprise unfair trade practices.

The CCPA and CDRC

What is CCPA?

To secure consumer rights, the new act repealing the pre-existing 1986 Act has established the Central Consumer Protection Authority (CCPA) under the aegis of the Central government.[4] The authority’s key function is to regulate and inquire into the unfair, restrictive, and exploitative trade practices either suo motu or on receiving complaints or on command of the central government and file the complaint before the appropriate CDRC.[5]

 What is CDRC?

Consumer Disputes Redressal Committee or CDRC is a hierarchical three-tier structure set up at the national, state, and district levels addressing matters related to consumer disputes such as selling of hazardous or defective goods, charging more than the maximum retail price of a good, complaints of unfair contracts, misleading advertisements and all other unfair and restrictive practices. The National CDRC has jurisdiction over matters worth value above ten crores[6], the State CDRC over matters ranging between one and ten crores[7], and District CDRCs deal with matters with a value up to one crore[8].

Powers of the CCPA

After conducting a preliminary inquiry, if the Director-General, District Collector, or any other authorized officer under the CCPA, has a reason to believe that encroachment of any consumer right has occurred, he may at a reasonable time enter any premises for searching, collecting, and seizing any records, documents or pieces of evidence according to the provisions regarding search and seizure mentioned in the Code of Criminal Procedure[9].[10] On being satisfied, the CCPA under section 20[11] has the power to issue directions for recalling hazardous goods and services, providing reimbursement of prices to the purchasers of the recalled goods or services, and discontinuation of services detrimental to consumer interests; provided that the accused is given the opportunity of being heard. 

Under section 21 of CCPA, has the right to command any trader, manufacturer, advertiser, endorser, or publisher to modify or discontinue any false or misleading advertisement violating consumer interests within a specified time.

 Main offences under the CPA

  • Publication of false or misleading advertisements.[12]
  • Failure to comply with the directions of CDRC.[13]
  • Failure to follow the instructions of CCPA.[14]
  • Manufacturing for sale, storage, and distribution of adulterated products.[15]
  • Manufacturing for sale, storage, and distribution of spurious goods.[16]

 Penalties for Offences

Any failure in carrying out the directions of the National, State or District CDRC may amount to an imprisonment of not less than one month with chances of it getting extended to three years or a fine of at least 25,000 which may extend to one lakh rupees or both. As laid down in section 89, any manufacturer or service provider, for putting up a false or misleading advertisement may also be punished with a penalty extending to ten lakh rupees with imprisonment up to two years, with every repetition of the same attracting a penalty up to fifty lakh rupees and imprisonment extending to five years. Further, the endorser of such advertisements may also be restrained from endorsing any other goods or services for a period extending to one year, which may aggravate to three years in case of each subsequent contravention. Any failure to comply with the directions of the Central Consumer Protection Authority under sections 20 and 21 shall result either in imprisonment extending to six months or a fine extending to twenty lakh rupees or both according to section 88. Cognizance of offence under sections 88 and 89 shall be taken by a court only after receiving a complaint from CCPA or an officer authorized by it.[17]

Penalties imposed for manufacturing, storing, selling, distributing, or importing adulterated or spurious products as laid down in sections 90(1) and 90(2) are-

  • Fine up to one lakh with imprisonment up to six months if no injury is caused (applicable only in case of adulterated products)
  • Fine up to three lakh with imprisonment up to three years if injury not resulting in grievous hurt is caused. Grievous hurt carries the same meaning as assigned under s.320 of the IPC.[18]
  • Fine up to five lakh with imprisonment up to seven years if grievous hurt is caused.
  • Fine up to ten lakh with minimum imprisonment for seven years which may extend to imprisonment for life if death is caused. 

The latter two offences are non-bailable and cognizable. For any of the offences included under section 90(1) or 90(2)[19], the court is authorized to suspend any license issued to the convict under any currently operative law for up to two years and cancel the license in case of a subsequent conviction. Also, for any officer causing search or seizure without having any reasonable grounds to do so, the penalty shall be imprisonment up to one year or a fine up to ten thousand rupees or both.[20]

Landmark Judgements

Horlicks Ltd. v. Zydus Wellness Products Ltd. (2020)[21]

In this case, both parties are nutritious drink makers, but Zydus promoted a television advertising that denigrated Horlicks Ltd.’s goods. In multiple languages, including Bengali, Tamil, and English, we’re used to broadcast advertisement. The Delhi High Court concluded that the commercial is defamatory since it offers no specific evidence of the product’s quality, citing several decisions on defamation, deceptive advertising, and the legislation restricting the publishing of ads on television. Furthermore, because electronic media creates an imprint on the minds of viewers, these sorts of commercials would not only be harmful to consumers but would also cause irreversible harm to the complaint.

In Pepsi Co. Inc. v. Hindustan Coca-Cola Ltd., 2003[22], the Delhi High Court found that there are several crucial considerations to be made in cases of disparagement, including the manner of the advertisement, its intended audience, and its plot. This case is based on this famous decision.

Connaught Plaza Restaurants Ltd. Kapil Mitra[23]

In this case, the complainant/respondent went to McDonald’s with his wife to take part in the “Ghar Bulao Sab Lucky Ban Jao” competition. On their subsequent purchases of at least Rs. 20 the clients were promised rewards. The respondent entered the contest but did not hear back from the restaurant for nearly a month about the results. The plans were widely marketed in numerous periodicals, but no terms and conditions were mentioned. He then discussed this with the manager, after which he sent two messages, per message charging Rs. 3 but he still did not receive a response. The outlet too failed to give him a convincing response. The eatery informed the court that the promotions were started for both diners who choose home delivery and those who came in person. It stated that each outlet’s notice board has the terms and conditions posted there. Judge NP Kaushik, a member of the Delhi State Dispute Consumer Redressal Commission, remarked that the fortunate draw results had not been made public and rendered a ruling in the respondent’s favour. The court held this scheme an unfair practice.

Conclusion

The CPA, 2019 is an improved, more consumer-friendly version of the previous act. It includes the remedies which are necessary for securing the rights of the consumers against practices detrimental to their interests. However, it is to be remembered that justice can be secured for all only through combined efforts, awareness, and willingness on part of both the seller and the consumer.

Author(s) Name: Anshika Shahi (Amity Law School Kolkata)

References:

[1] Consumer Protection Act, 2019 (India)

[2] Consumer Protection Act, 2019, s 2(9)

[3] Sidharth Sethi & Bindu Janardhanan, ‘Product Liability under the Consumer Protection Act, 2019: Let the manufacturer/seller beware!’ (Bar & Bench, 24 Jul, 2020) <https://www.barandbench.com/columns/product-liability-under-the-consumer-protection-act-2019-let-the-manufacturer-seller-beware> accessed 4 February 2022.

[4] Consumer Protection Act, 2019, s 10

[5] Consumer Protection Act, 2019, s 18

[6] Consumer Protection Act, 2019, s 58(1)(a)(i)

[7] Consumer Protection Act, 2019, s 47(1)(a)(i)

[8] Consumer Protection Act, 2019, s 34(1)

[9] The Code Of Criminal Procedure, 1973, s 93-102

[10] Consumer Protection Act, 2019, s 22(2)

[11] Consumer Protection Act, 2019, s 20

[12] Consumer Protection Act, 2019, s 89

[13] Consumer Protection Act, 2019, s 88

[14] Consumer Protection Act, 2019, s 88

[15] Consumer Protection Act, 2019, s 90

[16] Consumer Protection Act, 2019, s 91

[17] Consumer Protection Act, 2019, s 92

[18] Indian Penal Code, 1860, s 320

[19] Consumer Protection Act, 2019, s 90

[20] Consumer Protection Act, 2019, s 93

[21] Horlicks Limited v. Zydus Wellness Products Limited, 2020 AIR CC 2416, 14-05-2020

[22] Pepsi Co., Inc. v. Hindustan Coca Cola Ltd., (2003) 27 PTC 305, 01-09-2003

[23] Connaught Plaza Restaurants Ltd. v. Kapil Mitra, 2020 SCC OnLine NCDRC 192, 04-08-2020

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