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Central consumer protection authority: A critical overview
August 20, 2020The recent Consumer Protection Act, 2019 (“the Act”) has ushered in an added array of protections for consumers of expanding non-traditional market places such as e-commerce portals, online sales, direct selling, multi-level marketing etc. Newly evolved concepts like ‘product liability’ and ‘unfair contracts’ have also been introduced to strengthen and protect the interests of consumers.
Section 10(1), in Chapter III of the Act, provides for the establishment of a ‘Central Consumer Protection Authority’ (“CCPA” or “Central Authority”) to regulate matters relating to violation of rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of the public and consumers and to promote and enforce the rights of consumers as a class. Section 10(2) provides that the Central Authority would consist of a Chief Commissioner and such number of other Commissioners as may be prescribed, to be appointed by the Central Government.
On 23 July 2020, the Central Government notified in the Official Gazette that Chapter III of the Act would come into force on 24 July 2020[1]. Simultaneously, in exercise of powers conferred by Section 10 of the Act, the Central Government notified the establishment of a CCPA as a body corporate having perpetual succession and a common seal with effect from the same day, i.e. 24 July 2020[2].
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The Central Authority enjoys sweeping and wide-ranging powers under the Act and can discharge functions which are regulatory, investigative or adjudicatory in nature. These include the power to:
- inquire or cause an inquiry into violations of consumer rights or unfair trade practices, either suo moto or on a complaint or on directions from the Central Government [Section 18(2)].
- cause investigation to be made by the Director General or by the District Collector if it is satisfied, after a preliminary inquiry, that there exists a prima facie case of violation of consumer rights or any unfair trade practice or any false or misleading advertisement prejudicial to public interest or to the interests of the consumers [Section 19(1)].
- call upon a person found prima facie to be involved in violation of consumer rights or any unfair trade practice or any false or misleading advertisement as described above and also to direct him to produce any document or record in his possession. Additionally, the Director General or the District Collector would have powers of search and seizure under the Code of Criminal Procedure, 1973 and also the power to direct production of any document or record [Section 22].
- recall goods or withdraw services which are dangerous, hazardous of unsafe, or direct reimbursement of the prices of goods or services so recalled or discontinuation of unfair practices after giving the target person an opportunity of being heard [Section 20].
- engage in and promote consumer advocacy including by filing complaints before the District Commission, the State Commission or the National Commission constituted under the Act, intervening in any proceedings before these fora, recommending remedial measures, undertaking research, spreading awareness and issuing safety alerts to consumers [Section 18]
- issue directions, after investigation, to a trader or manufacturer or endorser or advertiser or publisher to discontinue false or misleading advertisements prejudicial to consumers, and to impose monetary penalties up to Rupees ten lakhs [Section 21].
- restrain the endorser of a false or misleading advertisement from making endorsement of any product or service for a period up to one year, or in case of subsequent contravention up to three years [Section 21(3)].
It may be recalled that in Brahm Dutt vs. Union of India (2005) 2 SCC 431, the Supreme Court, in the context of the Competition Act, 2002, observed that if an expert body is to be created, it might be appropriate to create two separate bodies, one vested with advisory and regulatory expertise and the other with adjudicatory expertise. However, the Court left such action to the wisdom of the legislature in that case. Although the Competition Act was amended subsequently, the observations of the Supreme Court to create two separate bodies were not given heed to.
In the context of the present Act, the question why Parliament did not deem it appropriate to vest the adjudicatory functions presently entrusted to the Central Authority upon the Commissions constituted under the Act will be raised, and rightly so, since the Commissions would have been more appropriately equipped to discharge such functions as well.
Additionally, Section 11 of the Act provides that the Central Government may, by notification, make rules to provide for qualifications for appointment of such Chief Commissioner and Commissioners, method of recruitment, procedure for appointment, term of office, salaries and allowances, resignation, removal and other terms and conditions of their service. In other words, the Act itself does not afford any clarity on important aspects such as the qualifications for appointment of its Chief Commissioner and Commissioners, their conditions of service, the constitution of the Selection Committee for making such appointments etc. These rules are yet to be notified.
It is noteworthy that although the Central Authority is vested with adjudicatory powers (including the power to direct search and seizure, pass cease and desist orders and even restrain endorsements by persons) and its orders are appealable to the National Commission, the Act does not contain even a minimum prescription that the Central Authority’s members (or at least some of them) should be drawn from areas of expertise in law and be competent to discharge judicial functions. Rather, Section 13(2) merely provides that the Central Authority may engage experts and professionals of integrity and ability having special knowledge and experience in areas of consumer rights and welfare, consumer policy, law, medicine, food safety, health, engineering, product safety, commerce, economics, public affairs and administration. This could be taken to mean that the engagement of a person having a background, qualification or experience in law is merely optional.
It is likely that these deficiencies in the Act are crafted in this form by design, rather than through legislative inadvertence, considering that even the qualifications and conditions of service of the President and members of the District Forum (Section 29), the State Commission (Section 43) and the National Commission (Section 55) constituted under the Act have been left to be determined by executive fiat. Incidentally, on 15 July 2020, the qualifications for appointment of President and members of the State Commission and the District Commission were notified by the Central Government and brought into effect on 20 July 2020[3].
This approach is in contrast to, for example, the Competition Act, 2002 where the statute itself provides for appointment, as members, of at least two experts of repute to the Competition Commission who have special knowledge of and professional experience in domains including law. Similarly, the Petroleum and Natural Gas Regulatory Board Act, 2006 provides that the Board constituted thereunder shall consist of a Chair Person, a Member (Legal) and three other members to be appointed by the Central Government.
Having said that, this is not an isolated instance. Recently, certain amendments were effected to the Right to Information Act, 2019, vesting absolute power in the Central Government to fix the term of office, salaries and service conditions of Information Commissioners, ostensibly (in that case) to ‘rationalise’ their service conditions and make them distinct from service conditions of election commissioners. This resulted in the amended Right to Information Act, 2019 and the Right to Information Act (Term of Office, Salaries, Allowances and other Terms and Conditions of Service) Rules, 2019 being challenged as unconstitutional by Member of Parliament, Shri Jairam Ramesh, before the Supreme Court of India, on the ground, amongst others, that the rule making power confers “unbridled and uncanalised discretionary power” upon the Central Government which will lead to loss of independence and impartiality of such appointees. The matter is presently under the scrutiny of the Supreme Court of India.
Some discernible threads from the pronouncements of the Supreme Court[4] regarding appointments to tribunals and bodies having the “trappings of the court” and exercising judicial power are worth noticing, including the following:
- i.what is relevant in case of a tribunal or body is whether it exercises judicial functions with all the “trappings of the court” and further exercises judicial power, at least, in respect of some part of its functioning.
- once the tribunal or body has the “trappings of the court” and performs judicial functions, albeit limited ones in the context of its overall functioning, still while performing such judicial functions which may be of far-reaching effect, the presence of a judicial member would become necessary.
- a clause providing for appointment of a person from the field of law as a member of such tribunal or body does not mean any person of law, but a person who is, or has been, holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite experience to have been appointed as a Judge of the High Court or a District Judge.
- every Bench of the tribunal or body which exercises adjudicatory functions should have at least one judicial member.
- the argument that the presence of a judge in the appellate Tribunal or forum (the National Commission, under the Act) would obviate the need of a man of law as a member of the original commission/body constituted is not valid.
The Central Government, while giving effect to the above provisions of the Consumer Protection Act 2019 in exercise of its executive power, would be well advised to take note of the above noted judicial principles. Otherwise, the validity of these provisions and rules framed thereunder could well come under the judicial scanner and stall or delay the implementation of the Act.
Footnotes
[2] https://consumeraffairs.nic.in/sites/default/files/Estt%20of%20CCPA.pdf
[3] https://consumeraffairs.nic.in/sites/default/files/SCDRC-DCDRC%20Rules.pdf
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