Poorly drafted legislation can lead to unintended consequences and even judicial interpretations contrary to legislative intent. The Consumer Protection Act is a good example.
When the law was first drafted and notified in 1986, the legislative intent was clear: consumer tribunals were intended only for individual consumers who had grievances against manufacturers and service providers and not companies to settle disputes with other companies. Yet to date, the law has not prevented large companies from invoking the jurisdiction of consumer courts. Many of these cases involve large sums, complex hearings and strain the meager financial and infrastructural resources of consumer courts.
The Consumer Protection Act 1986 defines a consumer as someone who buys a good or hires a service for “consideration”. And in order to prevent trade and industry from using the consumer justice system, the definition specified that those who purchased goods for “resale or commercial purposes” were not consumers under of the law.
However, the use of the words “for commercial purposes” had an unintended consequence. He denied the right of redress even to individual consumers who purchased goods, such as a photocopier, sewing machine or computer to earn a living through self-employment. Thus, thanks to a 1993 amendment, a small window was opened to allow these consumers to claim compensation for faulty goods. This of course has led the courts to constantly consider who can benefit from the exception, but this is a minor issue.
The biggest misstep, however, has been the failure of the legislator to distinguish between services hired for personal and business purposes, as has been done in the case of property. This has led large corporations to turn to consumer courts to settle their high-value disputes with electricity supply companies, carriers, couriers, insurers, bankers and other services.
This was clearly a misuse of the easy and inexpensive access to justice offered to consumers under the law and finally, in 2002, the definition of “consumer” with respect to services was amended to exclude those who profited from any service for commercial purposes. In doing so, here too the legislator has provided for those who hired services to earn a living through self-employment.
This stopped big business ventures in their tracks, but only temporarily. Following the 2002 amendment to the Act, the Gujarat State Consumer Dispute Redress Commission dismissed three complaints filed by business establishments against insurance companies, saying they were barred by the law.
However, the National Commission for the Redress of Consumer Disputes intervened. The Supreme Consumer Court was of the view that the definition of “consumer” did not prevent companies from using consumer courts to settle their claims with insurance companies. The law undoubtedly prohibited those who hired or profited from services for business purposes, but to fall under the definition of “business purpose” the service would have to have a profit element. Since an insurance policy is taken out solely to cover losses and not to generate profits, the insurance services would not fall under the definition of services hired for “business purposes” (M/s Harsolia Motors vs. M/s National Insurance Company, 2004), the Commission said. Thus the large commercial establishments continue to resort to the consumer courts to settle their quarrels with the insurers.
Meanwhile, unlike the 1986 Act, the Consumer Protection Act 2019 does not give a right of redress to those who might have a grievance against a service provider engaged for commercial purposes, even if it is to earn a living through self-employment. But the ambiguity vis-à-vis the “commercial purpose” remains. There is therefore an urgent need for the union’s consumer affairs department to step in and fill the gap in the law.
What Justice Suhas C Sen, then Chairman of the National Commission, said in 2000 still holds true. While dismissing a case filed by Bombay Dyeing and Manufacturing Company against Union Bank of India, Justice Sen said, “There is no reason for big business to abandon the remedy provided by the civil court and seek justice from the court. of consumption by circumventing the civil jurisdictions. This will clog the wheels of justice in consumer courts and ordinary people will experience unreasonable delays in having their cases heard.