Legal Aspects of Business Management

[MBA Batch- 2024-26, Sem- II]

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DR. SHIVANGI SINHA

PHD, LLM, BBA LLB
SPECIALIZED IN DISPUTE RESOLUTION & CORPORATE
LAW
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Content:- Module 4

 Consumer Protection Act: Historical Background of Consumer

Protection in India
 Definition of Consumer, Goods and Services,
 Defects and Deficiency unfair trade practices,
 Right of a Consumer,
 Judicial Machinery.
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1. Consumer Protection Act: Historical Background of
Consumer Protection in India:-

 Consumer Protection is a concept that was first introduced by John

Fitzgerald Kennedy, the 35th President of the United States on 15th
March 1962.
 He spoke about this concept in a special speech to the Congress. His
speech stressed protecting the consumer’s interest.
 Kennedy also spoke about the four basic rights of the consumer, namely:
  Right to Safety
  Right to be Informed
  Right to be Heard
  Right to Choose.
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Continued:-

 Another important name in the international sphere while

discussing consumer protection is Ralph Nader.
 He is the author of the book “Unsafe at Any Speed” which
indicates the faulty design of automobiles. The book led to a
series of landmark laws that have prevented multiple motor
vehicle accidents thus curbing deaths and injuries.
 He revolutionized Consumer Protection in the United States of
America.
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Continued:-

Ancient India:-
 Ancient India witnessed the supremacy of the Vedas as a
religious text, coming from God himself. The Vedas was strictly
followed by the majority in the ancient Indian society.
 Apart from the Vedas, this period also gave rise to the Code of
Chanakya, Manu Smriti, Narada Smriti and so on. These ancient
codes contained provisions which sought to safeguard the
interests of the consumer, with the aim of consumer safety.
 The punishment was also granted when the consumer-related
provisions were gone against.
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Continued:-

Medieval Period :-
 A shift in the time period of India from ancient to medieval resulted in a focus on
Islam as a religion and the laws of Islam. The Holy Quran, the main text of the
Muslims, also stressed the protection of consumers.
 The Quran has verses that indicate that the use of unjust weights and measures
is unacceptable. During the period of the Sultanate, local conditions determined
the price of commodities.
 Hence, both the Hindu and the Muslim scriptures that were being used together
by the kings of different states of India promoted consumer protection.
 Like the Hindu texts, the Quran also contained various rules and regulations for
protecting consumers from the unfair and unjust malpractices indulged in by
sellers.
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Continued:-

Modern Period:-
 In the modern period, the previous traditional legal systems established by Indian
kings were replaced by new modern laws.
 The British introduced the English Common Law in India along with other
legislative measures for the public and in turn, the consumers.
 Some of these legislations are as follows:
  The Indian Contract Act, 1872
  The Sale of Goods Act, 1930
  Indian Partnership Act, 1932
  The Agricultural Produce(Grading and Marketing) Act, 1937
  The Drugs Act, 1940
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Continued:-

Post-Independence Period:-
 When India attained independence, it adopted the Anglo-Saxon system
of administration of justice. Hence, the previous legislation that was
established by the British continued to function in independent India.
 Along with the existing legislation, the country was on its path to more
laws through the creation of the Indian Constitution and its adoption in
1950.
 Due to the democratic nature of the Constitution, the prime focus of the
laws was the benefit of the general public, who were also consumers.
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Continued:-

The new legislation enacted after Independence are as follows:

 The Prevention of Food Adulteration Act, 1954
  The Essential Commodities Act, 1955
  The Monopolistic Restrictive And Unfair Trade Practices Act, 1969
  The Standard of Weights And Measures Act, 1976
  The Bureau of Indian Standards Act, 1986
  The Consumer Protection Act, 1986
  The Trade Marks Act, 1999
  The Competition Act, 2002
 The Consumer Disputes Redressal agencies- the National Commission, the State
Commission, and the District Forum soon started working and has rapidly resulted in quick
action taken against those who exploit the consumers.
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2. Definition of Consumer, Goods and Services:-

 Consumer protection and contract law are integral parts of the legal
framework that regulate commercial transactions.
 Central to these areas of law are the definitions of key terms such as
“consumer,” “goods,” and “services.”
 According to Consumer Protection Act, 2019 “A consumer is any person
who buys goods or hires services for a consideration.”
 Goods refer to tangible objects that can be bought or sold, such as
physical products, merchandise, or commodities.
 According to United Nations, Manual on Statistics of International Trade
in Services “Services are intangible activities or tasks performed by one
party for the benefit of another.”
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Continued:-
 In India, consumer rights and protections are safeguarded by various laws and regulations, primarily
governed by the Consumer Protection Act, 2019.

The Consumer Protection Act, 2019 outlines several rights and protections for consumers, including:

 Right to be protected against unfair trade practices, such as misleading advertisements, deceptive pricing, or
unfair contract terms (Section 2(9)).

 Right to information about the quality, quantity, potency, purity, standard, and price of goods or services
(Section 2(10)).

 Right to file complaints and seek redressal for any defects, deficiencies, or unfair practices in goods or
services (Section 2(17)).

 Right to compensation for any loss or injury caused by defective goods or deficient services (Section 2(14)).

 Right to a fair and speedy resolution of disputes through consumer courts or alternative dispute resolution
mechanisms (Section 2(17)).

In addition to the Consumer Protection Act, other relevant laws and regulations also contribute to consumer
protection in India. For instance, the Sale of Goods Act, 1930,governs the sale and purchase of goods, the Food
Safety and Standards Act, 2006, ensures food safety and quality standards, and the Legal Metrology Act, 2009,
regulates weights, measures, and labelling of products.
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Continued:-

Goods:-
 In the legal context, goods are described as tangible objects that can be
bought, sold, or exchanged.
 The term “goods” refers to physical products that are perceptible to the
senses and have a material existence.
 The standard definition of goods within the legal framework emphasizes
their tangible nature and tradability. According to Black’s Law Dictionary,
goods are defined as “tangible things that are movable at the time of
identification to the contract for sale.” This definition highlights that
goods are physical entities that can be moved or transported and are
capable of being the subject of a contract for sale.
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1. Categorization of Goods: Goods in India can be categorized based on their nature and use. The classification includes:

 Durable Goods: These are goods that are expected to last for a longer period. Examples include appliances,
vehicles, furniture, and electronic devices.

 Non-Durable Goods: These are goods that are consumed or used up quickly. Examples include food, beverages,
toiletries, and other perishable items.

The categorization of goods helps determine the applicability of specific laws and regulations concerning warranties,
returns, and liabilities based on the nature of the goods.

2. Rights and Obligations of Consumers in Relation to Goods: Consumers in India have certain rights and obligations in
relation to goods:

 Right to receive goods of acceptable quality: Consumers have the right to receive goods that are fit for the intended
purpose, free from defects, and conforming to the agreed-upon specifications.

 Right to refunds or replacements: If goods are defective or do not meet the agreed-upon specifications, consumers
have the right to seek refunds, replacements, or repairs within a reasonable time.

 Obligation to handle goods responsibly: Consumers are obligated to handle goods with reasonable care, follow
instructions provided by the seller or manufacturer, and notify sellers promptly of any defects or issues with the
goods.

3. Product Liability and Warranties: Under the Consumer Protection Act, manufacturers, sellers, or service providers are
held liable for any harm caused to consumers due to defective or unsafe goods. Consumers can seek compensation for
damages resulting from such defects. Manufacturers and sellers may also offer warranties, which are promises to repair,
replace, or refund goods within a specified timeframe if they do not meet specified standards.
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Services:-
 A service is described as an intangible activity or task performed by one
party for the benefit of another.
 A service is defined as “an intangible economic activity that does not
result in ownership of anything” (United Nations, Manual on Statistics of
International Trade in Services).
 This definition emphasizes the intangible nature of services and
highlights that they involve economic activities that do not result in the
transfer of ownership of physical assets.
 Services involve the provision of labour, skill, expertise, or assistance
rather than the transfer of tangible goods.
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Continued:-

[Link] and Variety of Services.

The scope and variety of services in India are extensive, covering
both professional and non-professional domains. Some examples
include:
 Professional Services: Legal, accounting, medical, architectural,
and engineering services fall under the category of professional
services.
 Non-Professional Services: Services related to tourism,
entertainment, housekeeping, maintenance, transportation, and
others fall under the category of non-professional services.
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Continued:-

2. Consumer Expectations and Obligations in Service Transactions:

 In service transactions, consumers in India expect services to be performed with
reasonable care, skill, and expertise. They have the obligation to provide
accurate and relevant information to service providers, adhere to agreed-upon
terms and conditions, and make timely payments for services rendered.
3. Professional Negligence and Liability:
 If a service provider fails to meet the expected standards of care or competence,
it may be considered professional negligence or malpractice. Consumers have
the right to seek legal remedies and compensation for any harm or damages
suffered due to the service provider’s negligence or substandard service.
Relevant laws and regulations govern professional liability and negligence in
various sectors, such as medical malpractice laws for healthcare professionals.
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[Link] and Deficiency Unfair Trade
Practices:-
 Product Liability’ has been defined for the first time under the Consumer
Protection Act, 2019 (“2019 Act”). As per the 2019 Act, product liability
means the responsibility of a product manufacturer or product seller, or
product service provider, to compensate for any harm caused to a
consumer by a defective product manufactured or sold or by deficiency in
services in relation to the product.
 The 2019 Act introduced the legal regime on product liability and dedicated
an entire chapter (Chapter VI) to enumerate the situations where a claim
for compensation under a product liability action would be available for
‘harm’ caused by a ‘defective’ product manufactured by a product
manufacturer or serviced by a product service provider or sold by a product
seller.
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Continued:-
 ‘Harm’, in relation to a product liability inter alia includes — (i) damage to any
property other than the product itself; (ii) personal injury, illness or death; (iii)
mental agony or emotional distress, etc.
 The 2019 Act, under Section 2(36), contains a wide definition of ‘product
manufacturer’, to include every party connected with the sale process within the
scope of the definition.
 Under the 2019 Act, a ‘product manufacturer’ has been defined to mean a person
who: (a) makes any product or parts thereof; or (b) assembles parts thereof made
by others; or (c) puts or causes to be put his own mark on any product made by
any other person; or (d) makes a product and sells, distributes, leases, installs,
prepares, packages, labels, markets, repairs, maintains such product or is
otherwise involved in placing such product for commercial purpose; or (e) designs,
produces, fabricates, constructs or re-manufactures any product before its sale; or
(f) being a product seller of a product, is also a manufacturer of such product.
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Continued:-

 Section 84 of the Act enumerates the situations where a product

manufacturer shall be liable in a claim for compensation under a
product liability action for a harm caused by a defective product
manufactured by the product manufacturer. The situations are as under:
 (a) The product contains a manufacturing defect;
 (b) The product is defective in design;
 (c) The product does not conform to the manufacturing specifications;
 (d) A claim for compensation against a product manufacturer would also
lie when the product does not conform to an express warranty.
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Continued:-

Liability of a Product Seller:-

 A product seller under the 2019 Act is defined to mean any person
who, in the course of business, imports, sells, distributes, leases,
installs, prepares, packages, labels, markets, repairs, maintains, or
otherwise is involved in placing such product for commercial purpose
and includes (a) a manufacturer who is also a product seller; or (b) a
service provider.
 Section 86 of the Act lists the instances under which a product seller
(who is not a product manufacturer) shall be liable in a product liability
action for a harm caused by a defective product sold by the product
seller.
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Penalties that may be imposed:- If the consumer forum arrives at the finding that the product is
defective or any of the allegations of the complainant with respect to service, unfair trade practice
or claim for product liability is proved, the consumer forum may inter alia direct one or more of the
following:
 removal of defect, replacement of the product, return of the price paid by consumer along with
interest,
 compensation to consumer, including punitive damages for negligence, discontinuation of
unfair trade practices,
 withdrawal of hazardous or unsafe goods,
 direction to cease to manufacture hazardous goods or cease to offer for sale hazardous
services,
 compensation for product liability action, cease and desist from issuing misleading
advertisement or direction to issue corrective advertisement.
The 2019 Act aims to provide enhanced protection to consumers, it accordingly provides for more
stringent punishments .
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Unfair Contracts:-
The 2019 Act has also defined ‘unfair contracts’, which means a contract between a
manufacturer or trader or service provider on one hand, and a consumer on the other,
having such terms which cause significant changes in the rights of such consumer;
including
(a) requiring excess security deposits from consumers;
(b) imposing disproportionate penalty upon the consumer for breach of contract;
(c) refusing to accept early repayment of debt;
(d) entitling unilateral termination;
(e) permitting assignment of contract to the detriment of customer without his/ her consent;
(f) imposing on the consumer any unreasonable charge, obligation or condition, which puts
such consumer at a disadvantage.
Both State Commission and National Commission have the power to declare such
contracts null and void.
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Continued:-

 The 2019 Act has also established a Central Consumer Protection Authority
(“CCPA”). The CCPA is a regulatory authority under the Act with powers of
investigation, inquiry and injunctive actions. The primary objective of the
CCPA is to regulate matters pertaining to violation of rights of consumers,
unfair trade practices and false or misleading advertisements that are
prejudicial to the interests of public and consumers.
 CCPA has the power to direct recall of goods or withdrawal of services that
are dangerous, hazardous or unsafe.
 The CCPA can also direct reimbursement of the prices of goods or services
so recalled to the purchasers. Additionally, the CCPA has also been
empowered to direct discontinuation of practices that are unfair and
prejudicial to consumers’ interest.
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Unfair Trade Practices:-
The Consumer Protection Act, 2019 (CPA) protects
consumers from unfair trade practices, false or misleading
advertisements, and other violations of their rights.
• Unfair trade practices
• False representation of a product or service
• False advertising
• Targeting vulnerable populations
• Non-compliance with manufacturing standards
• Refusing to take back goods or services
• Disclosing personal information of the consumer
• Misleading advertisements
• Providing a false description of a product or service
• Providing a false guarantee
• Intentionally withholding essential information about the
product
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5. Judicial Machinery
The three-tier judicial machinery under the Consumer Protection Act, 2019 is a quasi-judicial system
for resolving consumer disputes. The three levels are district, state, and national.
 District level - District Consumer Disputes Redressal Forum: Also known as the District Forum,
one can file a complaint for goods and services of ₹1 crore or less in this agency.
 State level - State Consumer Disputes Redressal Commission: Also known as the State
Commission , one can file a complaint of goods and services worth less than ₹10 crores and
more than ₹1 crore in this agency.,.
 National level - National Consumer Disputes Redressal Commission: Also known as the National
Commission, One can file a complaint of goods and services worth more than ₹10 crores in this
agency.
How it works?
 Consumers can file complaints with the relevant commission.
 The commission will adjudicate the complaint.
 The commission can award compensation or provide relief to the consumer.
 If a case is dismissed at the district level, the consumer can appeal to the state commission.
 If the case is still unresolved, the consumer can appeal to the national commission.
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Landmark Judgements:-

1. Manjeet Singh Vs. National Insurance Company Ltd. & Anr:-

 Facts of the Case: In this case, Manjeet Singh purchased a second-hand truck under a
hire purchase agreement. The truck was insured by the National Insurance Company.
While driving the truck, a passenger asked for a lift. When Singh stopped the truck, the
passenger assaulted him and fled with the vehicle. An FIR was lodged and the
insurance company was informed of the theft. However, the insurance company
rejected the claim, citing a breach of policy terms. Singh approached the District
Consumer Disputes Forum, the State Commission and the National Commission, all of
which rejected his case. Finally, he approached the Supreme Court.
 Judgment: The Supreme Court held that Singh was not at fault. Although there was a
breach of policy terms, it was not fundamental enough to terminate the insurance policy.
The court directed the insurance company to pay 75% of the insured amount with 9%
interest per annum from the date of filing the claim. Additionally, the insurance company
was ordered to pay Rs. 1,00,000 as compensation.
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Continued:-

2. National Insurance Company Ltd. Vs. Hindustan Safety Glass Works Ltd. & Anr
 Facts of the Case: Hindustan Safety Glass Works Ltd. filed a complaint against the National Insurance
Company for denying compensation for damage caused by heavy rain. The insurance company denied
relief based on a policy condition stating that claims must be made within 12 months of the event. The
insured approached the National Commission under the Consumer Protection Act, 1986.
 Judgment: The National Commission held that the claim was actionable and that the goods were insured
at the time of the incident. The insurance company was ordered to pay Rs. 21,05,803.89 with 9% interest
per annum.
3. Karnataka Power Transmission Corporation (KPTC) Vs. Ashok Iron Works Private Limited
 Facts of the Case: Ashok Iron Works applied for electricity from KPTC for its iron production. Despite
paying charges and receiving confirmation in February 1991, the supply began only in November 1991,
causing significant losses. Ashok Iron Works filed a complaint and KPTC argued that the Consumer
Protection Act did not cover commercial supply of goods and that the complainant was not a “person”
under the Act.
 Judgment: The Supreme Court ruled that a private company is a “person” under the General Clause Act.
The supply of electricity by KPTC to a consumer was deemed a “service” under the Act. The case was
sent back to the District Forum for retrial on these grounds.
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Differences:-
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Thank
You !!