CONSUMER PROTECTION

ACT, 1986
AND
COMPETITION ACT, 2002

(FOR PRIVATE CIRCULATION ONLY)

2019
PROGRAMME COORDINATOR
Mr. Vishal Ranaware

COURSE DESIGN AND REVIEW COMMITTEE

Ms. Swatee Yogessh Prof. Dr. Shashikala Gurpur
Ms. Nehaa Satalkar Prof. Ujjwala Sakhalkar
Mr. Nikhil Fulambarkar Prof. Medha Kolhatkar
Prof. Nitin Bhandare Prof. Amola Darekar
Ms. Carolin Dennis

COURSE WRITERS
Ms. Medha Kolhatkar Ms. Nehaa R. Satalkar
Mr. Nikhil Fulambarkar Mr. Nitin Bhandare

EDITOR
Ms. Neha Mule

Published by Symbiosis Centre for Distance Learning (SCDL), Pune

July, 2011 (Revision 02, 2014)

Copyright © 2019 Symbiosis Open Education Society

All rights reserved. No part of this book may be reproduced, transmitted or utilised in any form or by any
means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval
system without written permission from the publisher.

Acknowledgement
Every attempt has been made to trace the copyright holders of materials reproduced in this book. Should any
infringement have occurred, SCDL apologises for the same and will be pleased to make necessary corrections
in future editions of this book.
 PREFACE
Consumer Protection is a subject close to our hearts as we all are consumers in one form or the other.
The consumer is said to be the pivot around which the entire business activity revolves.

With liberalization and globalization, the Consumer Protection Law has acquired immense importance.

The Consumer Protection Act, 1986 is a milestone in the history of consumer movement in India. The
Act aims to protect the rights and interests of consumers and to provide for speedy and inexpensive
remedy to the consumer.

This book brings into focus the numerous problems faced by the consumer and the need for consumer
education and awareness.

Similarly, the competition regime in India has undergone a complete change in the recent years resulting
in the introduction of the new legislation, The Competition Act, 2002.

The Competition Act replaces the Monopolies & the Restrictive Trade Practices Act, 1969 (MRTP).
MRTP was the first piece of legislation aimed at regulating free and unfettered trade in India.

The basic difference between the Competition Act 2002 and the MRTP Act 1969 is that the MRTP Act
was driven by the force of the restriction on the growth of the firms, with no extraterritorial authority.
With the advent of the liberalization and globalization in India, MRTP Act became obsolete. While
drafting the Competition Act, due care has been taken that the gaps of the MRTP regime are to be
filled in. The Competition Act is more liberal, which talks about the regulation of the business firms
by analysing the behaviour and structure based on the neo-classical micro-economic analysis, instead
of restriction.

Thus it is mandatory for all those who are concerned with the business practices, especially the business
and corporate law practitioners.

Attempt has been made by the authors to cover all the important concepts and legal provisions
concerning the competition law, however for detailed understanding, much wider study of economics
in context of competition law is required. The website of the Competition Commission of India is the
basic source.

We sincerely hope and believe that this book will be found useful by one and all.

Ms. Medha Kolhatkar

Ms. Nehaa R. Satalkar
Mr. Nikhil Fulambarkar
Mr. Nitin Bhandare

iii
 ABOUT THE AUTHORS

Ms. Medha Kolhatkar is a part-time faculty at ILS Law College, Pune for the last 18 years and is
also working as a corporate consultant. She is BS.L. LL.M. and has qualified SET (Law). She is doing
her doctoral research on law relating to ‘Tenders and Government Contracts’.

She has authored the book titled ‘Human Rights and the Indian Constitution’ for Yashwantrao Chavan
Open University, Maharashtra. She has also revised the 9th Edition of the celebrated book ‘Deeds and
Documents’ by G.M. Divekar. She also has to her credit a number of articles and research papers.

Ms. Nehaa R. Satalkar has completed her LLM from the University of Pune. She has also done
her PG Diploma in Labour Laws and Labour Welfare from the University of Pune. Nehaa Satalkar
has over ten years of deep domain knowledge and experience of the Indian legal practice and has
successfully worked with US corporate clients. She is the author of several course contents for the
Distance Education Programmes of Bharati Vidyapeeth, Pune.

She is also a well qualified and accomplished Legal Process Outsourcing (LPO) consultant with
extensive experience in the LPO industry, including specific exposure in document review, contract
management and deposition summarization having been engaged primarily with clients across the
United States.

Mr. Nikhil Fulambarkar, has completed his LL.M. in Business Laws from Symbiosis Law School, and
has been practicing as an Advocate. He also works as a visiting faculty in various Law and Management
Institutes in Pune as well as in Delhi, including Institute of Company Secretaries, Pune Chapter, Pune.

Mr. Nitin Bhandare has completed his LLM in Criminal Law and Business Law from Symbiosis Law
School. He has qualified UGC NET in Law. He has participated in number of seminars and conferences.
He has also done Internship in the Supreme Court of India with Hon’ble Justice Mr. C.K. Thakker.

iv
 CONTENTS

Unit No. TITLE Page No.

1 Introduction to Consumer Protection Act, 1986 (COPRA) 1-26
1.1 Introduction
1.2 Salient Features of the COPRA, 1986
1.3 Short-Title, Commencement and Application of the Act
1.4 Definitions and their Judicial Interpretations under the Act
1.5 Types of Negligence
1.6 Res Ipsa Loquitor
1.7 Other Cases of Negligence
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
2 ‘Consumer’ under Consumer Protection Act 27-36
2.1 Consumer of Goods
2.2 User of Goods
2.3 Beneficiary of Services - Meaning and Ingredients of Negligence
2.4 Meaning of ‘Commercial Purpose’
2.5 Various Marks that indicate Quality Standards
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
3 Consumer Disputes Redressal Agencies 37-58
3.1 Establishment of Consumer Disputes Redressal Agencies
3.2 Composition of the District Forum
3.3 Jurisdiction of the District Forum
3.4 Composition of the State Commission and Eligibility of Members
3.5 Jurisdiction of the State Commission
3.6 Composition of the National Commission
3.7 Jurisdiction of the National Commission
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

v
 Unit No. TITLE Page No.
4 Procedure for filing Consumer Complaint 59-78
4.1 Introduction
4.2 Who can file the Complaint
4.3 Limitation Period for filing a Complaint
4.4 Contents and Annexure with the Complaint
4.5 Procedure on Admission of the Complaint
4.6 Power of District Forum
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
5 Appeals 79-92
5.1 Introduction
5.2 Appeal to State Commission
5.3 Period of Limitation for Appeal before the State Commission
5.4 Appeal to National Commission
5.5 Appeal to the Supreme Court
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
6 Enforcement of Orders and other relevant Provisions 93-106
6.1 Introduction
6.2 Finality of Orders
6.3 Enforcement of Orders
6.4 Dismissal of Frivolous and Vexatious Complaints
6.5 Penalties and Miscellaneous Provisions
6.6 Appeal against Order passed under Section 27
6.7 Protection of Action taken in Good Faith
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

vi
Unit No. TITLE Page No.
7 Forms 107-128
7.1 Introduction
7.2 Notices and their Model Forms
7.3 Complaints and their Model Forms
7.4 Affidavit and its Model Forms
7.5 Application for Condonation of Delay
7.6 Appeal
7.7 Application for Execution of Order
7.8 Format of Application under Section 27 of the Act
7.9 Format of Application for Production of Documents
7.10 Format of Application for Seizure of Documents
7.11 Format of Application to file Complaint as ‘Class Action’
7.12 Model Form of Application seeking Permission to engage Advocate
Summary
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
8 Introduction to Competition Law 129-148
8.1 Introduction
8.2 Historical Background of the Competition Act
8.3 Development of the Competition Act
8.4 Theories of Competition
8.5 Competition Advocacy
8.6 Monopolies and Restrictive Trade Practices Act
8.7 Restrictive Trade Practices
8.8 Unfair Trade Practices
8.9 Objectives of the Competition Act
8.10 Difference between MRTP ACT, 1969 and Competition Act, 2002
8.11 Components of the Competition Act
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

vii
 Unit No. TITLE Page No.
9 Competition Commission of India 149-164
9.1 Introduction
9.2 Establishment of Commission
9.3 Composition of the Competition Commission in India
9.4 Officers of Competition Commission of India
9.5 Duties of the Competition Commission
9.6 Powers of the Commission
9.7 Rectification of Orders
9.8 Appellate Tribunal
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
10 Anti-Competitive Agreements and Competition Laws 165-176
10.1 Nature and Concept of Anti-Competitive tendencies in the
Economy, and need for Prohibition
10.2 Types of Anti-Competitive Agreements
10.3 Powers of Commissions in Anti-Competitiveness of Agreement
Matters
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
11 Concepts related to Dominant Position and Criteria for determining 177-190
Abuse of dominant Position
11.1 Nature and Concept of Dominant Position and Need for Prohibition
11.2 Criteria for determining Abuse of Dominant Position
11.3 Powers of Commission and Remedies Available
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

viii
Unit No. TITLE Page No.
12 Competition Laws and Regulation of Combinations 191-206
12.1 Definition of Combination
12.2 ‘Takeovers’ distinguished with ‘Merger’
12.3 Theories related to Takeovers
12.4 Regulation of Combinations
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading
References 207-208

ix
x
Introduction to Consumer Protection Act, 1986 (COPRA)
UNIT

1
Structure:

1.1 Introduction

1.2 Salient Features of the COPRA, 1986

1.3 Short-Title, Commencement and Application of the Act

1.4 Definitions and their Judicial Interpretations under the Act

1.5 Types of Negligence

1.6 Res Ipsa Loquitor

1.7 Other Cases of Negligence

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Introduction to Consumer Protection Act, 1986 (COPRA) 1

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Comprehend the need for consumer legislation
----------------------
• Enumerate the salient features of the Act
----------------------
1.1 INTRODUCTION
----------------------
Everyday we as consumers are buying and consuming an incredible variety
---------------------- of goods and services. Consumers constitute the largest unorganized public body
in the country and protection of their rights is of vital importance in a welfare
----------------------
state like India.
---------------------- Since the establishment of consumer courts and due to the efforts of a number
of consumer organizations and the media, and the Government’s support, things
----------------------
are definitely changing.
---------------------- The consumer is said to be the pivot around which the entire business activity
revolves. Consumer interest forms a mutually beneficial relationship between an
----------------------
enterprise and a consumer, and encompasses all those activities that direct the
---------------------- flow of goods and services from the producer to the consumer. As the earning
capacity and education improves, people are becoming conscious of quality of
---------------------- their lives and in general the quality and the durability of the goods they buy.
---------------------- These days are said to be the days of the advertisers and the gullible consumer
comes into their grip, unknowingly, because there are conflicting claims,
---------------------- misleading advertisements, attractive and fancy packaging, bright promises, and
the aggressive marketing mechanism of the manufacturers and the producers of
----------------------
the goods and services.
---------------------- The initiative made by the government and other consumer groups has
proved to be inadequate, basically due to lack of proper attitude on the part of
----------------------
consumer. It is the consumer who offers himself for exploitation, does not resist,
---------------------- object, complaint or seek redressal.
Thus the consumer due to poverty, ignorance, illiteracy, complicated and
---------------------- time consuming legal procedures in the court of law, etc. are the factors which
---------------------- has constantly discouraged the consumer from fighting against unscrupulous and
powerful traders, sellers and manufacturers.
---------------------- Due to liberation and globalization, there are products and brands on display
---------------------- in the market of the country. All this has resulted in stiff competition. Now
the consumers have a wider choice and they can select the products for use at
---------------------- affordable prices.
---------------------- 1.2 SALIENT FEATURES OF THE COPRA, 1986
----------------------
In the history of the development of consumer policy, 9th April 1985, is
---------------------- a very significant date for it was on that day that the General Assembly of the

2 Consumer Protection Act, 1986 and Competition Act, 2002

United Nations adopted a set of general guidelines for Consumer Protection. Notes
Unlike any existing laws, which are punitive or preventive in nature, the
----------------------
provisions of this Act are compensatory in nature.
The Act so far has been amended twice in 1993 and 2002 to extend its ----------------------
coverage, scope to enhance the powers of the redressal machinery and for the
----------------------
effective implementation of the provisions of the Act.
In the statement of objects as reasons, it is said that the Act seeks to provide ----------------------
speedy and simple redressal to consumer disputes. Quasi-judicial machinery is
----------------------
sought to be set up at the District, State and Central levels. These quasi-judicial
bodies will observe the principles of natural justice and have been empowered to ----------------------
give relief of a specific nature and to award, wherever appropriate, compensation
to consumers. Penalties for non-compliances of orders given by the quasi-judicial ----------------------
bodies have also been provided.
----------------------
Consumer Protection Act is a social welfare legislation. Section 2 of the
Consumer Protection Act, 1986 implies that the definitions of various words ----------------------
& expressions given in this section should be followed generally; but if the
----------------------
context otherwise requires then the interpreter has the discretion to adopt such
other meaning of the particular word or expression which is in harmony with the ----------------------
context of the expression and for this purpose sufficient flexibility is provided
by the insertion of these words. ----------------------
The provisions of the Consumer Protection Act thus have to be construed ----------------------
in favour of the consumer to achieve the purpose of enactment as it is a social
benefit oriented legislation. ----------------------
1) Three-Tier Quasi Judicial Machinery: ----------------------

• The National ----------------------

• The State, and ----------------------

----------------------
• The District Level Mechanism
It is the pecuniary jurisdiction that guides the Jurisdiction of these Quasi ----------------------
Judicial Mechanisms.
----------------------
The limit of the National Commission is to award a compensation above
Rs. 1 Crore. ----------------------
The limit of the State Commission is to award a compensation upto Rs. 1 Crore. ----------------------
The limit of the District Forum is to award a compensation upto Rs. 20 Lacs.
----------------------
It is for the first time a separate adjudicating system is provided to protect
and enforce the rights of consumers. This helps in providing speedy justice to the ----------------------
consumers. The Consumer Forum can exercise original, appellate, reversionary,
----------------------
supervisory powers. The District Forum can exercise original jurisdiction. These
quasi-judicial bodies entertain and decide all complaints, appeals, consumer ----------------------
disputes, etc that fall within the scope and ambit of Consumer Protection Act,
1986. ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 3

 Notes
Check your Progress 1
----------------------

---------------------- Multiple Choice Single Response.

1. Consumer Protection Act is a______________ legislation.
----------------------
i. Comprehensive
---------------------- ii. Social welfare
---------------------- iii. Social
2. The Consumer Protection Act has been amended ____________ so far.
----------------------
i. Twice
----------------------
ii. Once
---------------------- iii. Never
----------------------
---------------------- Activity 1
----------------------
Attend the hearing of any matter in any one of the quasi-judicial
---------------------- mechanisms for a first- hand experience.

----------------------
1.3 SHORT TITLE, COMMENCEMENT AND
---------------------- APPLICATION OF THE ACT
---------------------- Section 1
---------------------- (1) This Act may be called the Consumer Protection Act, 1986.
---------------------- (2) It extends to whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by
----------------------
notification appoint and different dates may be appointed for different dates
---------------------- and for different provision of this Act.
(4) Save as otherwise expressly provided by Central Government by notification,
----------------------
this Act shall apply to all goods and services.
---------------------- Territorial Jurisdiction
---------------------- The Act extends to the ‘whole of India’ except the State of Jammu and
Kashmir. Now the term ‘whole of India’ has not been defined. However, as per
---------------------- Article A clause (3) of the Constitution of India ‘the territory of India comprises
---------------------- of the territories of the states, the union territories specified in the first schedule
and other territories as may be acquired.
---------------------- Jammu and Kashmir
---------------------- The state legislature has enacted the Jammu and Kashmir Consumer
Protection Act, 1987. To a great extent, this state enactment follows the Central
----------------------
Consumer Protection Act, 1986.

4 Consumer Protection Act, 1986 and Competition Act, 2002

Commencement of the Act Notes
The Consumer Protection Act received the assent of the President of India
----------------------
on December 24, 1986. The act, except chapter III came into force with effect
from April 15, 1987. Chapter III which deals with the establishment of Consumer ----------------------
Disputes Redressal Agencies came into force from July 1, 1987.
----------------------
Application of the Act
The Act is made applicable to all goods and services. The Central Government ----------------------
is empowered to exempt any goods and services from the application of this Act.
----------------------
So far the central government has not exempted any goods and services. Even
statutory bodies such as housing board, government bodies like railways, etc. ----------------------
fall within the scope and ambit of this Act.
----------------------
Check your Progress 2 ----------------------

Match the following. ----------------------

i. Consumer Protection Act a. J&K ----------------------

ii. Establishment of Consumer Disputes Redressal b. July 1, 1987
Agencies ----------------------
iii. J&K Act,1987 c. April 15, 1987 ----------------------

----------------------
Activity 2 ----------------------

Go through the J&K Consumer Protection Act, 1987 and the Consumer ----------------------
Protection Act, 1986 and note the similarities of the provisions. ----------------------

----------------------
1.4 DEFINITIONS AND THEIR JUDICIAL
INTERPRETATIONS UNDER THE ACT ----------------------
Section 2 of the Act deals with the definitions of various expressions that ----------------------
are used in the Act.
----------------------
While interpreting the definition clause, the courts have to endeavour to find
out the exact sense in which the words have been used in a particular context. ----------------------
They are entitled to look at the statute as a whole and give an interpretation in
consonance with the purposes of the statute and what logically follows from the ----------------------
terms used. They are to avoid absurd results. (AIR 197 SC 113). The definition ----------------------
clause attempts to give as far as possible definite meaning to the various
expressions so defined. ----------------------
In interpreting a social welfare legislation, one should not make a narrow ----------------------
approach but should be guided by the principles of benevolent interpretation
which will help to promote and achieve the object and purpose of the Act, i.e. to ----------------------
protect the interests of the consumers and suppress evil sought to be remedied
by the statute namely the unscrupulous exploitation of consumers. ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 5

 Notes The expression ‘Unless the context otherwise requires’ used in section 2
of the Act implies that the definition of various words and expressions given in
---------------------- this section should be followed generally, but if the context otherwise requires
then discretion is given to adopt such other meaning of the particular word or
---------------------- expression which is in harmony with the context of the expression and for this
---------------------- purpose sufficient flexibility is provided by the insertion of these words.
Some Definitions Under The Act
----------------------
CONSUMER Sec 2(1) (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 than the person
who 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.]
APPROPRIATE LABORATORY Sec 2 (1) (a)
----------------------
Sec 2 (1) (a) defines the term ‘appropriate laboratory’ as follows -
----------------------
[(a) ‘Appropriate laboratory’ means a laboratory or organization -
---------------------- (i) Recognized by the Central Government;
---------------------- (ii) Recognized by the State Government, subject to such guidelines as may be
prescribed by the Central Government in this behalf; or
----------------------
(iii) Any such laboratory or organization established by or under any law for
---------------------- the time being in force, which is maintained, financed or aided by the
Central Government or State Government for carrying out analysis or test
---------------------- of any goods with a view to determining whether such goods suffer from
---------------------- any defect;] (This definition has been introduced by the Amendment Act of
1993).
----------------------
The Consumer Protection Rules, 1987, under Rule 2A provides as to when
---------------------- State Governments has to recognize a laboratory as an appropriate laboratory.
The said rule is as follows -
----------------------
(i) for the purpose of obtaining recognition as an appropriate laboratory, the
---------------------- applicant shall send application, in triplicate, in the proforma prescribed by

6 Consumer Protection Act, 1986 and Competition Act, 2002

 the Bureau of Indian standards with the relevant details to the department Notes
concerned with the Consumer Protection work in the State Government.
----------------------
(ii) The State Government on receiving the application from the applicant,
shall forward its two copies to the Bureau of Indian Standards to assess the ----------------------
suitability of the laboratory from the standards prescribed by them (Bureau
of Standards). The fee charged by the Bureau of Indian Standards for this ----------------------
purpose, shall be paid by the applicant.
----------------------
(iii) The State Government on receiving the recommendations and approval of
the Bureau of Indian Standards shall notify that laboratory as an appropriate ----------------------
laboratory for the purpose of the Consumer Protection Act, 1986 for a period
----------------------
of three years.
Thus from the definitions of the term ‘appropriate laboratory’ it means a ----------------------
laboratory or organization, which is recognized by Central Government or State
----------------------
Government.
BRANCH OFFICE Sec 2(1) (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;]
COMPLAINANT Sec 2(1) (b) ----------------------
(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 ----------------------
(iii) the central government or any state government;
----------------------
[(iv) one or more consumer, where there are numerous consumers having
the same interest;] ----------------------
[(v) in case of death of a consumer his legal heir or representative,] who or ----------------------
which makes a complaint;
----------------------
Any voluntary consumer association can also take up the cause of any
consumer or group of consumers and can file complaint under the Act. Of course ----------------------
the association should be registered as required by the law. The Act also gives
right to the legal heirs of the consumer to file complaint in case of death of a ----------------------
consumer. Even the state government and central government can file a complaint ----------------------
where it is felt that it is necessary in the interest of the consumers to do so.
COMPLAINT Sec 2(1) (c) ----------------------

Complaint ----------------------
(c) “Complaint” means any allegation in writing made by a complainant that – ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 7

 Notes [(i) an unfair trade practice or a restrictive trade practice has been adopted
by [any trader or service provider];
----------------------
(ii) [the goods bought by him or agreed to be brought by him] suffer from
---------------------- one or more defects;
(iii) [the services hired or availed of or agreed to hired or availed of by him]
----------------------
suffer from deficiency in any respect
---------------------- [(iv) a trader or the service provided as the case may be has charged for the
goods or for the services mentioned in the complaint up rise 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;
---------------------- b) if the trader could have known with due diligence that the goods
so offered are unsafe to the public;
---------------------- (vi) services 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;]
As per the abovestated definition, complaint means any allegation in writing
----------------------
made by the complainant with regard to one or more of the following things –
---------------------- i) Complaint against unfair and restrictive trade practice
---------------------- Unfair Trade Practice means false representations, bargain sales, etc. all
such malpractices seriously affects the consumers.
----------------------
ii) Complaint against defective goods
----------------------
A complaint can also be preferred by the complainant in case of supply of
---------------------- defective goods. The terms goods, defect and trader are discussed in detail
in this unit.
----------------------
Defect means any fault, imperfection or shortcoming in the quality, quantity,
---------------------- potency, purity or standard which is required to be maintained under any
law for the time being in force or under any contract express or implied or
---------------------- as is claimed by any trader.
---------------------- (Sudhir Saran Bhatnagar Vs Chairman Competent Automobiles Co. (P) Ltd. I
(1991) CPJ 316 (320) (Del))
----------------------

8 Consumer Protection Act, 1986 and Competition Act, 2002

 When initially the car purchased by the complainant suffered from various Notes
defects including clutch of the car being hard and its pick up not proper,
these two defects pointed out by the complainant fall within the definition of ----------------------
the word ‘defect’ as defined in the Act and as service provided for rectifying
the said defects were deficient, the claim petition filed by the complainant ----------------------
held to fall within the definition of word ‘complaint’ under the Act. ----------------------
iii) Complaint against deficient service
----------------------
Before the amendment Act of 1993 complaint could be filed only for those
services, which were hired by the consumer and suffered from deficiency ----------------------
in any respect. But now with the amendment, a complaint can be made in
----------------------
respect of services hired or availed of or agreed to be hired or availed of
suffer from deficiency in any respect. ----------------------
‘Deficiency’ means any fault, imperfection, shortcoming or inadequacy in
----------------------
the quality, nature and manner of performance. A complaint is required to
be decided within a certain set frame of time and so provisions of Code of ----------------------
Civil Procedure as such are not applicable. The only requirement being the
observance of principles of Natural Justice. ----------------------
iv) Complaint against excess Price ----------------------
The consumer also enjoys the right to sue the seller or service provider if ----------------------
he has charged excess price instead of the prevailing price (i) fixed by or
under any law for the time being in force (ii) displayed on the goods of any ----------------------
package containing such goods (iii) displayed any law for the time being
in force; (iv) agreed between the parties. ----------------------

The consumer can complain about excess pricing only in the above ----------------------
circumstances and no other. The Amendment Act of 2002 has widened
the scope of this provision by including (iii) and (iv) also. The consumer ----------------------
forum cannot investigate into the reasonableness of the price fixation. Only ----------------------
when the price is displayed or agreed or fixed that the consumer courts can
intervene to ensure that the consumer gets the correct prices. ----------------------
In Gujarat Housing Board Vs Dataria Amritlal Fulchand and others (1993) ----------------------
III CPJ 351 (NCDRC)
----------------------
The issue before the commission was excess charge collected by way price.
The commission held that the grievance concerning the pricing for a flat ----------------------
or plot allotted to a person by a housing board or society or other authority
cannot be a subject matter of adjudication under the act, since the prices ----------------------
of flats/plots are not fixed by any law and that even if any excess charge
----------------------
has been collected by way of price that will not constitute a ground for
contending the complaint under the Act. ----------------------
v) Complaint Against Hazardous Goods ----------------------
This clause to file complaint on the ground of hazardous goods has been
inserted by the Amendment Act, 2002. If the goods are hazardous to life ----------------------
and safety when used or being offered for sale to public, the consumer can ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 9

 Notes bring complaint against the same. The goods are hazardous to life and safety
when they are offered for sale
----------------------
(i) in contravention of such goods as required to be complied with, by or
---------------------- under any law for the time being in force;
(ii) if the trader could have known with due diligence that the goods so
----------------------
offered are unsafe to the public.
---------------------- vi) Complaint Against Hazardous Services
---------------------- By virtue of the Consumer Protection Amendment Act, 2002 now the
consumer can file complaint if it is found that the services rendered or
---------------------- provided by the services are hazardous to the life and safety of the consumer.
---------------------- As stated above, it can be seen that the consumer can file complaint on the
aforementioned grounds to seek redressal from the forum.
----------------------
Consumer Dispute
----------------------
(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;
----------------------
From the definition it becomes clear that consumer dispute means a dispute
---------------------- which the consumer/complainant alleges against the opposite party and the
opposite party in turn denies or disputes, the same is said to be a consumer
---------------------- dispute. However, the dispute has to be a bonafide consumer dispute between
the parties for the courts to intervene and grant redressal.
----------------------
Through various judgments, the Consumer Forum have held the following
---------------------- as not a ‘Consumer Dispute’
---------------------- i) The Forum/Commission cannot investigate into the pricing of the flat or
plot. Thus the same is not a ‘consumer dispute’.
----------------------
ii) When the controversy raised in the complaint is concerning a dispute
---------------------- between rival claimants as to the entitlement for receiving the provident fund
amount payable to a deceased subscriber, it is not a matter falling within
---------------------- the jurisdiction and purview of the forums constituted under the consumer
---------------------- protection act in as much as such a dispute is not a ‘Consumer Dispute’.
Defect [Clause (f)]
----------------------
(f) “defect” means any fault, imperfection or shortcoming 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 under any contract, express
----------------------
or implied, or] as is claimed by the trader in any manner whatsoever in
---------------------- relation to any goods;
Under the provisions of the Consumer Protection Act, 1986, a complaint
----------------------
can be made in case of any defect in the goods in question.
---------------------- The term defect includes any fault, imperfection or shortcoming in the
---------------------- quality, quantity, potency, purity or standard.

10 Consumer Protection Act, 1986 and Competition Act, 2002

 The quality, quantity, potency, purity or standard should be such – (i) which Notes
is required to be maintained by or under any law for the time being in force or
under any contract, express or implied or (ii) as is claimed by the trader in any ----------------------
manner whatsoever in relation to any goods.
----------------------
In the case of Wheels World Vs Tejinder Singh Grewal & another, there
were inherent manufacturing defects in the car purchased by the complainant. The ----------------------
car had to be taken to dealer for repairs a couple of times and lastly the engine
----------------------
block had to be removed and sent to the manufacturer for repairs/replacement.
The National Commission directed the manufacturer to pay compensation and ----------------------
interest at the rate of 18% till realization (decided by National Commission on
16.12.94). ----------------------
In Maruti Udyog Ltd. Vs Susheel Kumar Gabgotra (2006) II CPJ 3(SC) as ----------------------
per the terms of warranty, it clearly provided for the replacement of the defective
parts and not the car, therefore the Supreme Court directed that the defective parts ----------------------
should be replaced without charges and the appellant was to pay compensation
----------------------
of Rs. 50,000/- to the respondent for cost of travel to Karnal which was wrongly
advised by the appellant and for the inconvenience caused to him. ----------------------
Deficiency
----------------------
(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 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; ----------------------
Any consumer who suffers due to deficiency in service can prefer complaint under ----------------------
the Consumer Protection Act 1986.
When vital information withheld, will it be deficiency? ----------------------

It was found that the personal health statement submitted by the insured just ----------------------
prior to the revival of policy, he had suppressed the material facts concerning
----------------------
his health. Therefore the National Commission observed that the repudiation of
the policy by the life insurance corporation was fully warranted and there was ----------------------
no deficiency in service because of such repudiation.
----------------------
(LIC of India Vs Smt. S. Vijaya decided by the National Commission on
13.12.1994) ----------------------
Delay in shifting Telephone Connection ----------------------
In the case of General Manager, Calcutta Telephones Vs Dr. Timir Baran
Bhattacharjee (2002) |CPJ 8(NCDRC)), the complainant/respondent was a ----------------------
practicing medical doctor who applied for shifting of his telephone from one ----------------------
residence to another. The telephone department took almost three years to shift
the telephone connection. It was contended that due to this delay it caused great ----------------------
mental pain, suffering, financial loss and extreme hardship to the complainant.
Hence the National Commission awarded Rs. 10,000/- as compensation to the ----------------------
complainant. ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 11

 Notes Change in Telephone number without informing the subscriber
The telephone number was arbitrarily changed of the complainant without
----------------------
any justification and without any notice to her, owing to which she suffered some
---------------------- inconvenience and loss being a leading lawyer. It was held that this amounts
to deficiency in service and the telephone department was directed to pay
---------------------- Rs. 5,000 as damages.
---------------------- Impure/substandard goods
In this case, the complainant filed the complaint on the allegations that
----------------------
he purchased one bottle of ‘McDowell’s soda’ from the hotel of the second
---------------------- respondent on 3rd September, 1987 but found some foreign solid body floating
inside the bottle. According to him, he carried the bottle away with him so that
---------------------- he could make a representation to the appropriate authorities in due course.
Therefore the complainant got his grievance published through the columns
----------------------
of a newspaper by the name ‘Madhyam’. However the complainant did not
---------------------- make any complaint of any authority nor got the bottle sealed and its contents
analyzed by any recognized laboratory. After almost 1 year i.e. on 8th June 1988,
---------------------- the complainant filed complaint before the National Commission claiming
compensation of Rs. 12 lakhs. The National Commission rejected the claim as the
----------------------
complainant could not give the basis of this fantastic amount of compensation,
---------------------- even if his case regarding the existence of same foreign matter in the bottle of
soda purchased by him is assured to be true.
----------------------
(P.A. Pouran Vs McDowell & Co. Ltd. I (1992) CPJ300 (301)(N.C))
---------------------- Defective trailer
---------------------- In Abhaya Kumar Panda Vs Bajaj Auto Ltd. ((1992) | comp LJ 180
(NCDRC), the complainant had purchased a Bajaj Auto Trailer. The said trailer
---------------------- was manufactured by the respondent. It was contented that the Trailer had major
---------------------- structural manufacturing defect. The National Commission directed replacement
of the vehicle by a new auto Trailer and observed that the respondent should not
---------------------- have supplied a product which suffered from a major manufacturing defect.
---------------------- In M/s Karthik Agencies Vs K. Rajkumari & another, decided by National
Commission on 19.8.1993, it was held that the manufacturer of the cylinder and
---------------------- the distributor are both liable for the supply of the defective gas cylinder along
with defective valve, and for the negligence and deficiency in service of the same.
----------------------
Manufacturer [clause ji]
----------------------
[(j)”manufacturer” means a person who -
---------------------- a) makes or manufactures any goods or part thereof; or
---------------------- b) does not make or manufacture any goods but assembles parts thereof made
or manufactured by others; or
----------------------
c) puts or causes to be put his own mark on any goods made or manufactured
---------------------- by any other manufacturer;]
----------------------

12 Consumer Protection Act, 1986 and Competition Act, 2002

 The Consumer Redressal Forum through its various judgments has laid down Notes
that for any manufacturing defect in the goods produced by the manufacturer,
the manufacturer shall be liable to compensate the consumer. ----------------------
A person is deemed to have manufactured goods if he puts or causes to ----------------------
be put his own mark (e.g. name or brand or trademark) on the goods made or
manufactured by any other manufacturer. ----------------------
Manufacturer includes any manufacturer who assembles goods from parts ----------------------
made by others or puts any mark on any goods made or manufactured by any
other manufacturer whether he claims such goods to be manufactured by himself ----------------------
or not.
----------------------
Member
----------------------
[(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;] ----------------------
National Commission: ----------------------
(k) “National Commission” means the National Consumer Disputes Redressal
Commission established under clause(c) section 9; ----------------------

National Commission is established under clause (c) of section 9 of the Act. ----------------------
All complainants wherein the claim is above Rupees One Crore should be filed
----------------------
before the National Commission. The National Commission exercises original,
appellate and revisionary powers. ----------------------
Person
----------------------
(m) “person” includes –
----------------------
i) a firm whether registered or not;
ii) a Hindu undivided family; ----------------------

iii) a co-operative society; ----------------------

iv) every other association of persons whether registered under the Societies ----------------------
Registration Act, 1860 (21 of 1860) or not;
----------------------
According to clause m of sub-section (1) of section 2 of the Consumer
Protection Act, the word ‘person’ includes – ----------------------
a) a firm whether registered or not; ----------------------
b) a Hindu undivided family;
----------------------
c) a co-operative society; and
----------------------
d) every other association of persons whether registered under the Societies
Registration Act, 1860 or not. ----------------------
Every association of persons whether registered under the Societies
----------------------
Registration Act, 1860 or not is deemed to be a ‘person’ under the Act.
----------------------

----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 13

 Notes Regulation
[(nn) “regulation” means the regulations made by the National Commission
----------------------
under this Act;
---------------------- The Consumer Protection (Amendment) Act 2002 has inserted clause
(nn) defining the term regulation. Regulation means the regulations made by
----------------------
the National Commission under the Act. As per section 30 A of the Consumer
---------------------- Protection Act, the central government may by notification make regulations not
inconsistent with the Act to give effect to the provisions of this Act.
----------------------
Restrictive trade practice
---------------------- (nnn) “restrictive trade practice” means a trade which tends to bring about
---------------------- manipulation of price or its conditions of delivery or to affect flow of supplies
in the market relating to goods or services in such a manner as to impose on the
---------------------- consumers unjustified costs or restrictions and shall include -

---------------------- a) delay beyond the period agreed to by a trader in supplier 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;]
---------------------- Now even manipulation of price or delivery or flow of supplies leading
---------------------- to unjustified cost or imposing certain conditions/restrictions on the consumer
and delay beyond the agreed period which has led or likely to lead to rise in the
---------------------- price. Creating artificial scarcity of the product and then sell the commodity at
a higher price also amounts to Restrictive trade practice.
----------------------
Section 2(1) (o) service
---------------------- (o) “service” 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 or 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;
It applies to any service made available to potential users. Housing, Airlines,
---------------------- Telephone, Banking, Transport, Insurance, etc. are a few instances of service
---------------------- made available to the potential users.
In M.G. Ravinarayana Vs Professional Couriers III (1993) CPJ 364, it was
---------------------- held that the commission need not go into that question because except the bald
---------------------- allegation of the complainant that the consignment has not been received by the
addressee, there is no evidence to prove non-delivery of the consignment and
---------------------- therefore the complaint was dismissed.

---------------------- Imparting of education by an educational institution for consideration in form

of fees falls within ambit of ‘service’ as defined in Consumer Protection Act. In
---------------------- Bhupesh Khurana & others Vs Vishwa Buddha Parishad & others decided by

14 Consumer Protection Act, 1986 and Competition Act, 2002

National Commission on 29.9.2000, that a liberal view of the word ‘services’ Notes
needs to be taken rendered by the State Government.
Spurious goods and services ----------------------

[(oo) “spurious goods and services” mean such goods and services which ----------------------
are claimed to be genuine but they are actually not so;]
----------------------
State Commission
----------------------
(p) “State Commission” means a Consumer Disputes Redressal Commission
established in a State under clause (b) of section 9; ----------------------
Unit 5 explains the composition and powers of State Commission.
----------------------
Trader
----------------------
(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;
----------------------
Unfair Trade Practice (UTP)
----------------------
[(r) “unfair trade practice” means a trade practice which, for the purpose of
promoting the sale, 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,
grade, composition, style or model; ----------------------
ii) falsely represents that the services are 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 services have sponsorship, approval,
----------------------
performance, characteristics, accessories, uses or benefits which such
goods or services 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 services;
----------------------
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 defense is raised to the effect that such warranty
or guarantee is based on adequate or proper test, the burden of proof ----------------------
of such defense shall lie on the person raising such defense; ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 15

 Notes 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 services;
----------------------
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;
----------------------
(ix) materially misleads the public concerning the price at which a product
---------------------- or like products or goods or services, 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 services
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 purpose of clause (1), a statement that is -

(a) expressed on an article offered or displaced for sale, or on its
---------------------- wrapper or container; or
---------------------- (b) expressed on anything attached to, 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 that 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 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 purpose of clause (2), “bargaining price” means -
---------------------- (b) a price that is stated in any advertisement to be a bargain price, by
reference to an ordinary price or otherwise; or
----------------------
(c) 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;
----------------------

16 Consumer Protection Act, 1986 and Competition Act, 2002

(3) permits - Notes
(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;
----------------------
[(3-A) 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 a 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 raise or is intended to raise, the ----------------------
cost of those or other similar goods or services;]
----------------------
[(6) manufacture of spurious goods or offering such goods for sale or adopting
deceptive practices in the provision of services.] ----------------------
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 a reference
to the corresponding Act or provision thereof in force in such area. ----------------------
In M/S Vikas Motors Ltd. Vs Dr. P.K. Jain decided by the Supreme Court on ----------------------
24.8.1999, it was held that consumer cannot be made to pay for the default of
opposite party during unauthorized delay on their part, as the price of the vehicle ----------------------
had gone up. Had the appellants conformed to both the letter and spirit of the ----------------------
agreement between the parties, no such situation would have arisen. Hence the
appeal was dismissed. ----------------------
False Representation ----------------------
In Bhupesh Khurana & others Vs Vishwa Buddha Parishad & others decided
by National Commission on 29.9.2000, it was held that the misrepresentation ----------------------
amounted to Unfair Trade Practice and deficiency in service. ----------------------

----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 17

 Notes
Check your Progress 3
----------------------

---------------------- Multiple Choice Single Response.

1. Complainant under the Consumer Protection Act includes:
----------------------
i. Consumer association
----------------------
ii. Central Government
---------------------- iii. State government
---------------------- iv. Legal representative

---------------------- v. All of the above

2. Ram buys 5 kg wheat from Shyam who runs a grocery shop. The
---------------------- wheat sold to Ram is rotten and full of insects. Thus, the wheat sold
---------------------- to Ram by Shyam is defective.
i. Yes
----------------------
ii. No
----------------------
iii. Can’t say
----------------------

----------------------
Activity 3
----------------------
Identify any two cases under “defect in goods” and “deficiency in
----------------------
services”.
----------------------

---------------------- 1.5 TYPES OF NEGLIGENCE

---------------------- The term ‘negligence’ has not been defined under the Consumer Protection
Act. Sec 14 of the Consumer Protection Act, 1986 empowers the forum/
---------------------- commission to award compensation to the complainant for the loss or injury
---------------------- suffered due to the negligence of the opposite party. It is here that the right of
the complainant is recognized to claim compensation for the acts of negligence
---------------------- of the opposite party. Negligence is defined under the law of Torts. It is defined
as doing an act carelessly or recklessly. It is the breach of the duty of the doer.
----------------------
According to Winfield, “Negligence, as a tort, is the breach of a legal duty
---------------------- to take care which results in damage, undesired by the defendant to the plaintiff.”
It is careless conduct, without any guilty mind or there is no intention of the
---------------------- person to cause any harm.
---------------------- The three ingredients of negligence are:
---------------------- 1) a legal duty to exercise due care on the part of the party who owes such duty
to the other,
----------------------

18 Consumer Protection Act, 1986 and Competition Act, 2002

2) breach of said duty; and 3) consequential loss or damage. Notes
Under the Consumer Protection Act 1986, the complainant has to establish
----------------------
that the opposite party owed a duty of care and that opposite party has failed to
exercise the said duty of care against the complainant and therefore the consumer/ ----------------------
complainant has suffered loss or injury. Therefore the complainant has to show
that the opposite party owed the standard care and committed breach of that duty ----------------------
which resulted in loss or injury to the other. The degree of care varies. The degree
----------------------
of duty of care will be different in case of professionals. Professionals such as
lawyers, doctors, architects etc. are people possessing special skills, knowledge ----------------------
and expertise.
----------------------
In Michael Hyde and Associates Vs J.D. Williams & Co. Ltd [(2001) PNLR
233, CA], Sedley L.J. said that where a profession embraces a range of views as ----------------------
to what is an acceptable standard of conduct, the competence of the defendant
is to be judged by the lowest standard that would be regarded as acceptable. ----------------------
For a professional, his work, his name, his reputation will be at stake if he acts
----------------------
carelessly or negligently.
----------------------
Check your Progress 4
----------------------
Multiple Choice Single Response. ----------------------
1. Negligence is defined under __________. ----------------------
i. Consumer Protection Act
ii. Law of Torts ----------------------
iii. Both ----------------------
2. According to __________, “Negligence, as a tort, is the breach of a
legal duty to take care ----------------------
which results in damage, undesired by the defendant to the plaintiff.” ----------------------
It is careless conduct, without any guilty mind or there is no intention
of the person to cause any harm. ----------------------
i. Winfield ----------------------
ii. Salmond
----------------------
iii. H.L.A Hart
3. There are ______ essential ingredients that constitute negligence. ----------------------
i. Five ----------------------
ii. Three
iii. Two ----------------------

----------------------

Activity 4 ----------------------

----------------------
Enumerate two instances from our daily lives that could amount to
negligence keeping in mind the essential ingredients of negligence. ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 19

 Notes 1.6 RES IPSA LOQUITOR
---------------------- The general rule of law of evidence is that if the complainant/plaintiff wants
the court to believe something, then it is for the complainant to plead and prove
---------------------- the said facts before the court.
---------------------- Sometimes the facts of the case are so peculiar in nature that the plaintiff
or complainant is unable to prove the same or has no detailed knowledge about
---------------------- the same. Under these circumstances, it is very unjust and unfair to call upon
---------------------- the plaintiff/complainant to prove the said facts. This situation is recognized by
the rule of Res Ipsa Loquitor. When the accident/mishap explains only one thing
---------------------- and that is that the accident could not ordinarily occur unless the defendant had
been negligent, the law raises a presumption of negligence on the part of the
---------------------- defendant. In such a case, it is sufficient for the plaintiff to prove the accident/
---------------------- mishap and nothing more. For the maxim Res Ipsa Loquitor to apply, it is also
necessary that the event causing the accident must have been in the control of
---------------------- the defendant. Thus where the maxim becomes applicable the burden of proof
is shifted from the plaintiff to the defendant. It is a rule of evidence benefiting
---------------------- the plaintiff by not requiring him to prove negligence. It is not a rule of law.
---------------------- Case Law where Res Ipsa Loquitor Made Applicable
---------------------- In the tragic case, of Geeta Jethani & others Vs Airports Authority of India
& others decided by the National Commission on 5.8.2004, it was held by the
---------------------- National Commission that ‘the principle of Res Ipsa Loquitor (the event speaks
for themselves) is eminently applicable in the instant case. It was the duty of
----------------------
the AAI to maintain the escalator in proper condition. It was the duty of the
---------------------- concerned officers to be more careful at the time of inspecting such installation
and the inspection should not be casual or routine. The opposite party No.1,
---------------------- Airports Authority of India was directed to pay 2,50,000/- French Francs or its
equivalent in Rupees together with interest @10%.
----------------------

---------------------- 1) Contributory Negligence

---------------------- When along with the defendant, the plaintiff by his own carelessness
also contributes to the negligent act in question. It is said to be a case of
---------------------- contributory negligence.
---------------------- Contributory negligence is a defense which the defendant/opposite party can
set up if they can prove that the plaintiff failed to take reasonable care of his
---------------------- own safety and that contributed to the ultimate harm the plaintiff suffered.
---------------------- For e.g. It is the courier company’s responsibility to deliver the
consignment, but if the customer has given confusing and vague
---------------------- address then the courier company is responsible for delay in delivery
of consignment, but the customer is also negligent as he contributed to
----------------------
the negligent act in question. Thus, the courier company can set up the
---------------------- defense of contributory negligence. Age of a person, therefore has to be
taken into account to ascertain whether a person is guilty of contributory
---------------------- negligence or not.

20 Consumer Protection Act, 1986 and Competition Act, 2002

2) Composite Negligence Notes
When the act of negligence is committed by two or more persons which
----------------------
results in same damage to the plaintiff then it is termed as ‘composite
negligence’ and the persons responsible for causing such damage are ----------------------
known as ‘Composite Tort Facers’. The liability of the Composite Tort
Facers’ is joint and several liability. ----------------------

3) Medical Negligence ----------------------

In the case of Dr. Laxman Balkrishna Joshi Vs Dr. Trimbak Babu Godbole ----------------------
and another (AIR 1969 SC128) & A.S. Mittal Vs State of Uttar Pradesh
(AIR 1989SC 1570) it was laid down that when a doctor is consulted by ----------------------
a patient, the former, namely the doctor owes to his patient certain duties ----------------------
which are:
----------------------
i) duty of care in deciding whether to undertake the case;
ii) duty of care in deciding what treatment to give; and ----------------------
iii) duty of care in the administration of that treatment. ----------------------
A breach of any of the above duties may give a cause of action for ----------------------
negligence and the patient may on that basis recover damages from his
doctor. ----------------------
The Supreme Court vide its judgment dated 13.11.1995 pronounced by ----------------------
the three-Judge Bench comprising Hon’ble Mr. Justice Kuldip Singh, Mr.
Justice S.C. Agarwal and Mr. Justice B.L. Hansaria has finally put an end ----------------------
to the controversy. The findings of the Supreme Court on the aforesaid
issues are as under:- ----------------------

(i) Service of any description ----------------------

(a) on the ground that they have failed to exercise reasonable skill and care. ----------------------
(ii) Any service free of charge
----------------------
(a) Services rendered at a government hospital, health centre or dispensary
where no charge whatsoever is made from any person availing the ----------------------
services and all patients (rich and poor) are given free service is ----------------------
excluded from the purview of the act. Registration fee in such cases
will not amount to payment of consideration for the services; ----------------------
(b) Service rendered free of charge by a medical practitioner attached to a ----------------------
hospital or nursing home is excluded from the purview of the act;
(c) Service rendered by a medical officer employed in a hospital or nursing ----------------------
home where services are rendered free of charge to everybody is ----------------------
excluded from the purview of the act;
----------------------
(d) Service rendered at a non-government hospital, nursing home where
no charge whatsoever is made from any person availing the service and ----------------------
all patients (rich and poor) are given free service is excluded from the
purview of the act; ----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 21

 Notes (e) Service rendered at a government hospital; health centre or dispensary
where services are rendered on payment of charges and also rendered
---------------------- free of charge to other persons availing such services, falls within the
purview of the act. Rendering of free services also by such institutions
---------------------- to persons who do not pay is no more a ground for seeking immunity
---------------------- from the scope of the act and even the person who has availed free
service can maintain an action against such institutions;
----------------------
(f) Service rendered at a non-government hospital or nursing home where
---------------------- charges are required to be paid by the persons availing such services,
falls within the purview of the act;
----------------------
(g) Service rendered at a non-government hospital or nursing home where
---------------------- charges are required to be paid by persons who are in a position to
pay and persons who cannot afford to pay are rendered service free of
---------------------- charge, fall within the purview of the act. Rendering of free services also
by such institutions to persons who cannot pay is no more a ground for
----------------------
seeking immunity from the scope of the act and even the person who
---------------------- has availed free service; can maintain an action against such institutions;
(h) Service rendered by a medical practitioner or hospital or nursing
----------------------
home wherein the expenses for consultation, diagnosis and medical
---------------------- treatment are reimbursed and the patient is indemnified under the terms
and conditions of a medical insurance policy contract, falls within the
---------------------- purview of the act;
---------------------- (i) Service rendered by a medical practitioner or hospital or nursing home
wherein the expenses of medical treatment of the patient and his family
---------------------- members are reimbursed and indemnified under the conditions of
---------------------- service of such a patient by his employer, falls within the purview of
the act.
---------------------- (iii) Contract of personal service
---------------------- (a) ‘Contract of personal service’ has to be distinguished from a ‘contract
for personal service’. In the absence of relationship of master and
---------------------- servant between the patient and the medical practitioner, the service
---------------------- rendered by a medical practitioner to the patient cannot be regarded as
service rendered under a contract of personal service. It is a contract for
---------------------- personal service. Where, however, there is a relationship like that of a
master and servant, it is a ‘contract of personal service’ and is excluded
---------------------- from the purview of the act.
---------------------- (b) Service rendered by a medical officer to his employer under the contract
of employment is excluded from the purview of the act.
----------------------

----------------------

----------------------

----------------------

22 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Check your Progress 4
----------------------
Match the following. ----------------------
i. Principle of Res Ipsa Loquitor a. Defence by defendant
----------------------
ii. Contributory Negligience b. Joint and several liability
iii. Composite Tort facers c. The event speaks for itself ----------------------

----------------------

Activity 5 ----------------------

----------------------
Read the Supreme Courts judgement in Indian Medical Association Vs.
V.P. Shantha & Ors 1996 AIR 550, 1995 SCC (6) 651. ----------------------

----------------------
1.7 OTHER CASES OF NEGLIGENCE
----------------------
In Shree Taj Travels and Tours Ltd Vs Jitubhai Bandhi and others
----------------------
decided by N.C on 31.07.2002, the National Commission accepted the contentions
and awarded compensation of Rs.1,10,585/- Here, the complainants were not ----------------------
provided with luxury coach bus for the long and arduous journey of 4 and 1/2
hours to the mountains. The bus met with an accident as the driver who drove ----------------------
was in a drunken condition. Journey to Chitwan was aborted and after waiting
----------------------
on the road sides, complainants came back to Khatmandu in a lorry.
In Haryana State Electricity Board Vs Anand Medicos and another ----------------------
(decided by the N.C. on 1.8.2003), it was held that when all the evidences have
----------------------
been led by both the parties before District Forum, there is no ground to relegate
the complainant to seek remedy in civil court and dismiss the complaint and ----------------------
also upheld the State Commission’s decision directing the opposite party to pay
Rs.2,19,316.76 together with interest @12% from the date of fire. ----------------------

----------------------
Activity 6
----------------------
Visit http://consumereducation.in/lawoftorts.pdf and read the article by ----------------------
Rajiv Kumar Khare titled “LAW OF TORTS, MEDICAL NEGLIGENCE
AND CONSUMER PROTECTION.” ----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 23

 Notes Summary
---------------------- ●● Negligence means doing an act carelessly or recklessly which causes
some injury, loss or inconvenience to another. “Negligence is the breach
----------------------
of duty caused by omission to do something which a reasonable man,
---------------------- guided by those considerations which ordinarily regulate the conduct
of human affairs would do; or doing something which a prudent and
---------------------- reasonable man would not do.”
----------------------
Keywords
----------------------
●● Injury: Any harm whatever illegally caused to any person, in body, mind,
---------------------- reputation or property and mental agony.
---------------------- ●● Negligence: i) Means the absence of proper care, caution & diligence;
ii) Omission to do something which a reasonable man, guided upon
---------------------- considerations which ordinarily regulate the conduct of human affairs
would do or; doing something which a prudent & reasonable man would
----------------------
not do.
----------------------

----------------------
Self-Assessment Questions

---------------------- 1. Explain the concept of ‘Negligence’.

2. What does ‘Res Ipsa Loquitor’ mean?
----------------------
3. What kind of degree and skill is required to be exercised by a professional?
----------------------
4. Cite any two cases of medical negligence.
---------------------- 5. Explain the term ‘Contributory Negligence’.
----------------------
Answers to Check your Progress
----------------------
Check your Progress 1
----------------------
Multiple Choice Single Response.
---------------------- 1. Consumer Protection Act is a______________ legislation.
---------------------- ii. Social welfare
---------------------- 2. The Consumer Protection Act has been amended ____________ so far.
i. Twice
----------------------
Check your Progress 2
----------------------
Match the following.
---------------------- i. – c.
---------------------- ii. – b.
---------------------- iii. – a.

24 Consumer Protection Act, 1986 and Competition Act, 2002

Check your Progress 3 Notes
Multiple Choice Single Response.
----------------------
1. Complainant under the Consumer Protection Act includes:
----------------------
v. All of the above
2. Ram buys 5kg wheat from Shyam who runs a grocery shop. The wheat ----------------------
sold to Ram is rotten and full of insects. Thus, the wheat sold to Ram by ----------------------
Shyam is defective.
i. Yes ----------------------

Check your Progress 4 ----------------------

Multiple Choice Single Response. ----------------------
1. Negligence is defined under __________.
----------------------
ii. Law of Torts
----------------------
2. According to __________, “Negligence, as a tort, is the breach of a legal
duty to take care ----------------------
which results in damage, undesired by the defendant to the plaintiff.” It is ----------------------
careless conduct, without any guilty mind or there is no intention of the
person to cause any harm. ----------------------
i. Winfield ----------------------
3. There are ______ essential ingredients to constitute negligence.
----------------------
ii. Three
----------------------
Check your Progress 5
Match the following. ----------------------

i. – c. ----------------------
ii. – a. ----------------------
iii. – b.
----------------------

Suggested Reading ----------------------

1. http://www.theshillongtimes.com/2012/10/13/patients-rights-under- ----------------------
consumer-protection-act/ ----------------------
2. Bangia, R.K. 2007. Law of Torts. Faridabad: Allahabad Law Agency.
----------------------

----------------------

----------------------

----------------------

----------------------

Introduction to Consumer Protection Act, 1986 (COPRA) 25

 Notes

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

26 Consumer Protection Act, 1986 and Competition Act, 2002

‘Consumer’ under Consumer Protection Act
UNIT

2
Structure:
2.1 Consumer of Goods

2.2 User of Goods

2.3 Beneficiary of Services - Meaning and Ingredients of Negligence

2.4 Meaning of ‘Commercial Purpose’

2.5 Various Marks that indicate Quality Standards

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

‘Consumer’ under Consumer Protection Act 27

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Define a consumer
----------------------
• Identify a “user of goods”
---------------------- • Conclude as to what constitutes “negligence”
---------------------- • State the true beneficiaries of services offered

---------------------- • Identify the quality marks

• Explain the meaning of commercial purpose
----------------------

---------------------- 2.1 CONSUMER OF GOODS

One must be a “Consumer” to be covered under the Consumer Protection Act.
---------------------- He must be either the “User” or a “Consumer” of goods or “services”. To be a
---------------------- consumer or an user of goods one must have paid consideration or he must have
hired the services offered to him. Now let us consider the real meaning and the
---------------------- definition of a “Consumer” and an “User of Goods”.
---------------------- Consumer of Goods
---------------------- Under the Consumer Protection Act, 1986, ‘consumer’ has been defined in
clause (d) of
----------------------
sub-section (1) of section 2 as under:
---------------------- “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 than the person
---------------------- who 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 clause, “commercial purpose” does not
---------------------- include use by a person 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.

28 Consumer Protection Act, 1986 and Competition Act, 2002

The definition of the term ‘consumer’ given in clause (d) of sec 2 (1) of the Notes
act is comprehensive one so as to cover not only consumer of goods but also
consumer of services. ----------------------
The following conditions should be satisfied to be a consumer of goods. ----------------------
1) the subject matter of sale should be goods;
----------------------
2) there must be a sale transaction between the seller & the buyer;
----------------------
3) the goods in question are bought for consideration (price);
4) the consideration has been paid or promised or partly paid & partly promised ----------------------
or under any system of deferred payment; ----------------------
5) The user of the goods may also be a consumer when such use is made with
----------------------
the approval of the buyer.
However, the term consumer does not include a person who obtains any goods ----------------------
for resale or for any commercial purpose.
----------------------
Now let us consider each of these conditions one by one.
----------------------
1. The subject matter of sale should be goods;
Goods ----------------------

(i) “goods” means goods as defined in the Sale of Goods Act, 1930 (3 of 1930); ----------------------
The term ‘goods’ has been defined under section 2 clause (7) of the sale of Goods ----------------------
Act, 1930 as follows:
----------------------
Goods mean -
(a) Every kind of movable property other than actionable claims and money; ----------------------
and
----------------------
(b) Includes -
----------------------
(i) stocks & shares,
(ii) growing crops, grass and things attached to or forming part of land ----------------------
which are agreed to be severed before sale or under the contract of ----------------------
sale. ‘goods’ means any movable property as distinct from immovable
property. ----------------------
2. There must be a sale transaction between the seller & the buyer; ----------------------
The term ‘sale’ has not been defined under the Consumer Protection Act.
----------------------
However, recourse can be had to The Sale of Goods Act, 1930. As per sec 4
of The Sale of Goods Act, a contract of sale of goods is a contract whereby ----------------------
the seller transfers or agrees to transfer the property in goods to the buyer for
a price. ‘Price’ means the money consideration. Under a contract of sale, the ----------------------
property in the goods is transferred from the seller to the buyer, the contract
----------------------
is called ‘sale’, but where the property in goods is to be transferred in future,
the contract is called an ‘agreement to sell’. ‘Seller’ means a person who ----------------------
sells or agrees to sell the goods and buyer means who buys or agrees to buy
the goods. ----------------------

‘Consumer’ under Consumer Protection Act 29

 Notes The clauses 3 & 4 are discussed together. The term ‘consideration is not defined
under the Consumer Protection Act. It is defined under sec 2(d) of the Indian
---------------------- Contract Act, 1872 as follows:
---------------------- When, at the desire of the promisor, the promisee or any other person has done
or abstained from doing or does or abstains from doing, or promises to do or
---------------------- to abstain from doing, something, such act or abstinence or promise is called
‘consideration’ for the promise. Consideration can be past, present & future. It
---------------------- is the recompense given by one person to another.
---------------------- A person registering himself for release of LPG connection with the distributor is
a ‘consumer’ though at that time he pays nothing & the payment is deferred till
---------------------- the time of release of gas connection. Dharam Chand Vs Mandeep Gas Service
---------------------- [(993) 2 CPJ 985 (Punj)].
Subscriber of a law reporter is not a consumer. Delhi Law Times Office Vs
---------------------- Jagdish Prasad [(1996) 2 CPJ 78 (Bihar)].
----------------------
2.2 USER OF GOODS
----------------------
The person who buys is a consumer, so also the person who uses such
---------------------- goods with the approval of the original buyer is a Consumer. In short user of
goods is also a Consumer.
----------------------
In Akhil Bhartiya Grahak Panchayat Vs Meghna Metals {I (1994) CPJ
---------------------- 113}; the complainant purchased Prestige Pressure Cooker from the opposite
party. Inspite of special gasket release system for safety, the cooker burst which
---------------------- resulted in damage to the right hand of the complainants’ wife. The opposite
party was held liable to pay compensation of Rs. 1,00,000/- plus reimbursement
---------------------- of the medical bills although the wife was user of goods and not the buyer, but
---------------------- she used the goods with the approval of the buyer.
In Sonia Bhatia Vs State of UP & others (1981) 2SCC 585, it was held that
---------------------- –‘consideration’ means a reasonable equivalent or other value benefit passed on
by the promisor to the promisee or by the transferor to the transferee.
----------------------

---------------------- Check your Progress 1

----------------------
State True or False.
---------------------- 1. To be a consumer of goods, the goods bought by such person must be
for some consideration.
----------------------
2. Subscriber of a law reporter is not a consumer.
---------------------- Multiple Choice Single Response.
---------------------- 1. X buys an induction stove. His mother Y uses it with the approval of
X. So Y is:
---------------------- i. User of goods
---------------------- ii. Consumer
iii. All of the above
----------------------

30 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Activity 1
----------------------
Give one illustration from your daily life with regard to user of goods. ----------------------

----------------------
2.3 BENEFICIARY OF SERVICES - MEANING AND
INGREDIENTS OF NEGLIGENCE ----------------------

Consumer of Services ----------------------

The second category of ‘consumer’ laid down under the Act is that of hirer ----------------------
or user of services. As per this clause, Consumer means
----------------------
i) any person who hires or avails of any services;
----------------------
ii) services are availed or hired for a consideration;
----------------------
iii) a consideration which has paid or promised or partly paid and partly promised
or under any system of deferred payment and includes any beneficiary of ----------------------
such services with approval of the first mentioned person.
----------------------
There is no element of commercialism involved in the whole process. A
railway passenger is a ‘consumer’ under the Consumer Protection Act & is ----------------------
entitled to the benefits of the services being offered by the railways. ----------------------
Hiring of Services ----------------------
The word ‘hire’ has not been defined in the Act. According to Concise Oxford
----------------------
Dictionary, ‘hire’ means to employ person for wages or fee.
The definition is, thus, an inclusive & extensive one. It brings within its ----------------------
ambit not only the person who has the privity of contract with the person hiring ----------------------
out the services, but also subsequent beneficiaries thereof, even though the latter
may not be a party to the original contract or have a direct nexus therewith. ----------------------
Service Free of Charge ----------------------
Service rendered at a Government hospital/health centre/dispensary where no ----------------------
change whatsoever is made from any person availing the services & all patients
(rich & poor) are given free service – is outside the purview of the expression ----------------------
service as defined in sec 2 (1) (0) of the Act. The payment of token amount for
----------------------
registration purpose only at the hospital/nursing home would not alter the position.
(Indian Medical Association V.V.P. Shantha AIR 1996 SC 550). ----------------------
The Consumer Protection Act has widened the scope of services by including ----------------------
in its fold also the beneficiary of such services provided that he is availing the
services with approval of the hirer. ----------------------
In Spring Meadows Hospital Vs. Harjol Ahluwali (1998) ICPJ 1(sc), the ----------------------
Supreme Court pointed out that in clause (ii) of sec 2 (1) (d) of the Consumer
Protection Act, a consumer would mean a person who hires or avails of any ----------------------

‘Consumer’ under Consumer Protection Act 31

 Notes services & includes any beneficiary of such services other than the person who
hires or avails of the services when a young child is taken to a hospital by his
---------------------- parents & the child is treated by the doctor, the parents would come within the
definition of consumer having hired the services & the young child would also
---------------------- become a consumer under the inclusive definition being a beneficiary of such
---------------------- services. The court thus held that both the parents of the child as well as the
child would be consumer within the meaning of sec 2(1) of the Act & as such
---------------------- can claim compensation under the Act.
---------------------- A person who is using the telephone of a subscriber with his approval is
consumer of telephone services & is entitled to claim compensation under the Act
---------------------- for the period for which his complaints remained unattended by the Telephone
Department (Mahanagar Telephone Nigam Vs. Vinod V. Karkare (1991) II CPJ
----------------------
655).
----------------------

---------------------- Check your Progress 2

---------------------- State True or False.

---------------------- 1. Hirer or user of services does not come under the category of
Consumer.
----------------------
2. Service free of charge does not come under the purview of Sec 2(1)(o).
----------------------

----------------------
Activity 2
----------------------
Read the judgment in Suhas Haldulkar Vs. Secretary, Public Health Dept.,
---------------------- State of Maharashtra 1994 3 CPJ 89.
----------------------
2.4 MEANING OF COMMERCIAL PURPOSE
----------------------

---------------------- Generally ‘Commercial Purpose’ is that purpose the object of which is to

make profit. It thus implies that cases of purchase of goods for consumption or
---------------------- use in the manufacture of goods or commodities on a large scale with a motive
to make profit will fall outside the scope of the definition of term consumer.
----------------------
In Oswal Fine Arts Vs H.M.T. Madras, (1991) ICPRI (NCDRC) the
---------------------- complainant purchased an offset printing machine from the respondent. The
grievance of the complainant was that the machine was defective in several
---------------------- respects due to which he suffered serious loss & claimed compensation. It was
---------------------- admitted that the machine was purchased by the complainant for the purpose
of its use in the printing press, which was a commercial establishment. The
---------------------- national commission held that the goods obtained for the commercial purpose
have specifically been excluded from the scope of the term ‘consumer’ and,
---------------------- therefore, the complaint is not maintainable under the Consumer Protection
---------------------- Act.

32 Consumer Protection Act, 1986 and Competition Act, 2002

 In Sterling Computer Ltd. Vs. P.R. Kutty, ((1996) CPJ 118 (N.C)) the Notes
complainant purchased a computer for his personal use which was to be used by
his office staff for the purpose of business. The complainant was a contractor by ----------------------
profession. The computer was not being used to earn his livelihood. The computer
did not work properly from the very beginning. The National Commission held ----------------------
that the computer was purchased for commercial purpose & the complainant
----------------------
was not a consumer. The complaint was therefore dismissed.
In Binda Prasad Mandal Vs. Eicher Tractor Ltd., ((1993) I CPR 290) the ----------------------
complainant purchased a tractor from the dealer of the respondent which was
----------------------
found to be defective one. The complainant admitted in his evidence that besides
cultivating his own land he has also hired out the tractors to others for cultivation ----------------------
& carrying goods & he charged Rs. 60 per hour. The Bihar State Commission held
that the tractor purchased by the complainant used to be hired out for cultivation ----------------------
for which he used to charge money by way of hire charges then it can be said
to have been purchased for commercial purpose & therefore the complainant is ----------------------
not a consumer under the Consumer Protection Act. ----------------------
The distinction between “Commercial Purpose” and non-commercial
purpose is so obscure that at times it becomes very difficult to reach to a definite ----------------------
conclusion. ----------------------
A person who purchases a brick manufacturing machine for self employment
to earn his livelihood would be a Consumer. Cheema Engineering Services Vs ----------------------
Rajan Singh (1996) II CPR II. ----------------------
In Nirmal Chauhan Vs. New India Assurance Co. and Another {(1999) II
CPJ 33 (H.P.CDRC)}, a Photostat machine was purchased by the complainant ----------------------
for self-employment and the money was borrowed by him from the Bank. The ----------------------
Himachal Pradesh State Commission held that the complainant had discharged the
onus to prove that it was for self-employment exclusively for earning livelihood. ----------------------

----------------------
Check your Progress 3
----------------------
Match the following.
----------------------
i. Goods obtained for commercial a. Purchaser is not a
purpose consumer ----------------------
ii. Goods purchased for personal use or b. Purchaser is consumer
----------------------
for earning livelihood
----------------------

----------------------
Activity 3
----------------------
Think of two acts (other than those mentioned in 2.4) which would fall in
----------------------
the category of purchase for commercial purposes and thereby disqualify
the purchaser from obtaining relief under the Consumer Protection Act. ----------------------

----------------------

‘Consumer’ under Consumer Protection Act 33

 Notes 2.5 VARIOUS MARKS THAT INDICATE QUALITY STANDARDS
---------------------- a) ISI Mark: The use of ISI mark has become widely popular particularly
after the setting up of the Bureau of Indian Standards in the year 1986. The
---------------------- mark symbolizes the use of a standard quality control in the production of
the concerned products. Improper use of mark is an offence.
----------------------
b) PAC Mark: It is the quality mark which covers all building materials and
----------------------
production and components which are out of the ambit of ISI Certification.
---------------------- This mark is issued by Ministry of Urban Development through its Building
Material and Technology Promotion Council.
----------------------
c) ECO Mark: This mark scheme has been evolved by the Ministry of
---------------------- Environment under the water (prevention & control of pollution) Act,
1974 and Air Act, 1981. The necessary license is issued by Bureau of
---------------------- Indian Standards. The products covered by the mark include toilet soap,
---------------------- food products, paper and detergent. In other words, this mark indicates that
products as well as packages are environmental friendly.
----------------------
d) FPO Mark: The Food Processing Order or the FPO mark is provided in
---------------------- the rules framed under the Prevention of Food Adulteration Act, 1954.

---------------------- e) AGMARK: This mark is issued by authorities constituted under the

Agriculture Produce (Trading and Marketing) Act, 1937. Manufacturers use
---------------------- AGMARK for products, including mustard oil, ghee, butter, eggs, fruits,
vegetables, pulses, chillies, jaggery and spices.
----------------------

---------------------- Check your Progress 4

---------------------- Match the following.
---------------------- i. PAC Mark a. Fruits, vegetables, jaggery, spices, etc
ii. ECO Mark b. Food processing order
----------------------
iii. ISI Mark c. Environmental friendly products and packages
---------------------- iv. AGMARK d. Building materials and production components
v. FPO Mark e. Use of standard quality in production
----------------------

---------------------- Activity 4
----------------------
Make a list of products in your house with ISI mark and AGMARK.
----------------------

---------------------- Summary
---------------------- ●● In this unit the expression ‘consumer’ has been explained. The definition
consumer as per Consumer Protection Act includes person who buys
----------------------
goods, who uses goods with the approval of the buyer & a person who hires
---------------------- or avails services & also beneficiary of services. All these transactions

34 Consumer Protection Act, 1986 and Competition Act, 2002

 should be for consideration. The goods purchased or services if availed Notes
are for commercial purpose, then it is outside the preview of this Act.
----------------------
Keywords ----------------------
●● Liable: Bound or obliged by law; accountability & responsibility to ----------------------
another enforceable by legal sanction.
●● Malice: Ill-will against a person; a wrongful act done intentionally ----------------------
without just cause or excuse. ----------------------
●● Opposite Party: Person against whom complaint is filed.
----------------------

Self-Assessment Questions ----------------------

----------------------
1. Who is not a consumer & why?
2. If Mr. A purchases an Air Conditioner for his residence, is he a consumer? ----------------------
3. What is commercial purpose? ----------------------
4. If a computer is purchased for your office, are you a consumer? ----------------------

Answers to Check your Progress ----------------------

----------------------
Check your Progress 1
State True or False. ----------------------
1. True ----------------------
2. True ----------------------
Multiple Choice Single Response.
----------------------
1. X buys an induction stove. His mother Y uses it with the approval of X.
So Y is: ----------------------
iii. All of the above ----------------------
Check your Progress 2
----------------------
State True or False.
----------------------
1. False
2. True ----------------------

Check your Progress 3 ----------------------

Match the following. ----------------------
i. – a.
----------------------
ii. – b.
----------------------

----------------------

‘Consumer’ under Consumer Protection Act 35

 Notes Check your Progress 4
Match the following.
----------------------
i. – d.
----------------------
ii. – c.
---------------------- iii. – e.
---------------------- iv. – a.

---------------------- v. – b.

----------------------
Suggested Reading
----------------------
1. http://www.bis.org.in/cert/procert.htm
---------------------- 2. http://www.cpcb.nic.in/ecomark_logo.php
---------------------- 3. http://mofpi.nic.in/ContentPage.aspx?CategoryId=141
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

36 Consumer Protection Act, 1986 and Competition Act, 2002

Consumer Disputes Redressal Agencies
UNIT

3
Structure:
3.1 Establishment of Consumer Disputes Redressal Agencies

3.2 Composition of the District Forum

3.3 Jurisdiction of the District Forum

3.4 Composition of the State Commission and Eligibility of Members

3.5 Jurisdiction of the State Commission

3.6 Composition of the National Commission

3.7 Jurisdiction of the National Commission

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Consumer Disputes Redressal Agencies 37

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Discuss the establishment of the consumer forums
----------------------
• Identify the hierarchy of the consumer forums
---------------------- • Explain the composition of the forums
---------------------- • Describe the eligibility criteria of the members

---------------------- The consumer forums have been established to ease the cumbersome
process of filing a consumer complaint in the ordinary civil courts and help the
---------------------- consumer get the redressal in a quicker and easier way, without the hassles of
---------------------- going round the lethargic legal procedure.
Now let us see how these forums are established, who has what powers
---------------------- and how these forums function, their pecuniary and territorial jurisdictions.
----------------------
3.1 ESTABLISHMENT OF CONSUMER DISPUTES
---------------------- REDRESSAL AGENCIES
----------------------
Three-tier Consumer Disputes Redressal Mechanism:
---------------------- Section 9 of the Consumer Protection Act, 1986 deals with the establishment of
three-tier Consumer Disputes Redressal Agencies namely
----------------------
Supreme Court of India
----------------------

----------------------

---------------------- National Commission

----------------------

----------------------

---------------------- State Commission

----------------------

----------------------
District Forum
----------------------
The act provides an alternative system of adjudication of cases through
---------------------- simple, inexpensive and easily accessible Consumer Disputes Redressal
machinery at the district, state and national levels. The procedure before these
---------------------- forums is simple devoid of legal complexes and technicalities.
----------------------

----------------------

38 Consumer Protection Act, 1986 and Competition Act, 2002

The District Forum Notes
The State Government is empowered under Sec 9(a) of the Act, to establish
----------------------
a Consumer Disputes Redressal Forum at each District level. It shall be called
the District Forum. However, there can be more than one District Forum in a ----------------------
District, if the State Government deems it necessary to establish the same. This
forum is the lowest in the hierarchy of the three-tier-Quasi Judicial set up. ----------------------

----------------------
Check your Progress 1
----------------------
State True or False.
----------------------
Multiple Choice Single Response.
----------------------
1. _________ forum is the lowest in the hierarchy of the Consumer
Dispute Redressal Mechanism. ----------------------
i. National ----------------------
ii. District
----------------------
iii. State
----------------------

----------------------
Activity 1
----------------------
Refer to the Consumer Protection Act, 1986 and find the alternative ----------------------
name/title by which the District Forum, State Commission and National
Commission are known. ----------------------

----------------------
3.2 COMPOSITION OF THE DISTRICT FORUM
----------------------
The District Forum shall be presided over by:
----------------------
a) A person who is or has been or is qualified to be a District Judge, who shall
be its President. ----------------------
b) Two other members, one of whom shall be a woman. These members have ----------------------
to be persons of ability, integrity and standing and have adequate knowledge
or experience of, or have shown capacity in dealing with, problems relating ----------------------
to economics, law, commerce, accountancy, industry, public affairs or
----------------------
administration.
From the above provisions it becomes clear that the forum compromises of ----------------------
both Judicial and Non-judicial members.
----------------------
a) Procedure for Appointment:
----------------------
Every appointment as mentioned above shall be made by the State
Government on the recommendation of a Selection Committee. The ----------------------
Committee shall consist of the following -
----------------------

Consumer Disputes Redressal Agencies 39

 Notes I. President of the State Commission;
II. Secretary of the Law Department of the State;
----------------------
III. Secretary in-charge of the Department dealing with Consumer Affairs
---------------------- in the State.
---------------------- b) Terms and Conditions of Office:

---------------------- The members of the District Forum shall hold office for a term of five years
or up to the age of 65 years whichever is earlier and shall not be eligible for
---------------------- reappointment. However, a member may resign his office before the expiry
of the term, and the Government on accepting his resignation may fill the
---------------------- vacancy from among persons who belong to that category.
---------------------- The salary or honorarium and other allowances payable to and the other
terms and conditions of service of the members of the District Forum shall
---------------------- be such as may be prescribed by the State Government.
----------------------
Check your Progress 2
----------------------

---------------------- Multiple Choice Single Response.

1. The district forum comprises:
----------------------
i. Judicial members
----------------------
ii. Non-judicial members
---------------------- iii. All of the above
---------------------- 2. The State Government appoints the members of the District Forum
on the recommendation of:
----------------------
i. Department of Consumer Affairs
----------------------
ii. Selection Committee
---------------------- iii. President of India
----------------------

---------------------- Activity 2
----------------------
Visit the District Forum in your district and find the names of its president
---------------------- and members.
----------------------
3.3 JURISDICTION OF THE DISTRICT FORUM
----------------------
Section 11 of the Consumer Protection Act lays down the pecuniary as well
---------------------- as the territorial jurisdiction of the District Forum established under Sec 9 of the
Act.
----------------------
‘Jurisdiction’ means the extent, both territorial as well as pecuniary, within
---------------------- which the Consumer Disputes Redressal Forum has the power and authority to

40 Consumer Protection Act, 1986 and Competition Act, 2002

adjudicate upon a complaint under the Consumer Protection Act. Notes
The Jurisdiction of the Consumer Disputes Redressal Forum is to be found
----------------------
on the basis of the claim laid by the party and not on the basis of relief granted.
Pecuniary Jurisdiction of the District Forum: ----------------------
As per the Consumer Protection Act, 1986 the Pecuniary Jurisdiction of ----------------------
the District Forum originally was to entertain complaints where the value of
the goods and services and the compensation, if any, claimed was less than ----------------------
rupees one lakh; which was increased to five lakhs by the Consumer Protection
----------------------
(Amendment) Act, 1993 and has been further enhanced to rupees twenty lakhs
by the Consumer Protection (Amendment) Act, 2002. So the present pecuniary ----------------------
jurisdiction up to which the compensation can be claimed is Rs. 20,00,000 lakhs
before District Forum. The Act has laid down the upper limit of Rs. 20,00,000/- ----------------------
Territorial Jurisdiction: ----------------------
Section 11, Sub-Section (2) deals with the territorial jurisdiction of the ----------------------
District Forum. It lays down that 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 at the time of institution ----------------------
of the complaint -
----------------------
i. actually and voluntarily resides; or
ii. carries on business; or ----------------------
iii. has a branch office; or ----------------------
iv. personally works for gain ----------------------
b) where there are more than one opposite parties, any of the opposite parties
at the time of the institution of the complaint - ----------------------

i. actually and voluntarily resides; or ----------------------

ii. carries on business; or ----------------------
iii. has a branch office; or
----------------------
iv. personally works for gain
----------------------
Provided that in such a 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. ----------------------

The term ‘resides’ indicates the place where a person normally lives. Further ----------------------
it refers to the natural person and not to legal entities and government.
----------------------
The Amendment Act, 1993 enables the consumers, etc. to file their complaints
under Sec 11(2) even at the place where a ‘branch office’ of the opposite ----------------------
party is functioning.
----------------------

Consumer Disputes Redressal Agencies 41

 Notes For e.g. – If ‘A’ is the seller of the defective goods and ‘B’ is the Buyer of
such goods for consideration, then the buyer, the consumer can file complaint
---------------------- either where the goods were purchased (place where the Cause of Action
arises) or where the seller is residing (where the opposite party resides) or
---------------------- where the seller works for gain, where the seller has his shop/mall or the
---------------------- place where he is manufacturing the goods in question (where the opposite
party works for gain).
----------------------
Personally works for Gain:
---------------------- The words ‘Personally works for gain’ have widened the scope of jurisdiction
of the District Forum. Even if the opposite party is not residing at a particular
----------------------
place but is working for gain at such a place, then complainant can file
---------------------- complaint at such a place also against the opposite party. Thus if the opposite
party is residing in Pune but works for gain in Mumbai, the complainant
---------------------- can file complaint in Mumbai where the opposite party works for gain.
---------------------- Permission of the District Forum or Acquiescence of Opposite Party:
Clause (b) of sub-section (2) of Section 11 of the Consumer Protection Act
----------------------
lays down that a complaint shall be instituted in a District Forum within the
---------------------- local limits of whose jurisdiction 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 has a branch office or personally
works for gain, provided that in such case -
----------------------
i. either the permission of the District Forum is given or
----------------------
ii. 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.
----------------------
Cause of Action Wholly or in Part arises
---------------------- According to Sec 11(2)(c) of the Consumer Protection Act, 1986, a complaint
shall be instituted in a District Forum within the local limits of whose
----------------------
jurisdiction the cause of action, wholly or in part, arises. Every complaint
---------------------- under the Consumer Protection Act must be based on a cause of action.

---------------------- ‘Cause of Action’ means a bundle of facts which taken with the law
applicable, gives the complainant a right to relief against the opposite party.
---------------------- It is settled law that cause of action consists of a bundle of facts which give
cause to enforce the legal injury for redress in a court of law. The cause of
---------------------- action means, therefore every fact which if traversed, it would be necessary
for the plaintiff to prove in order to support his right to a judgment of the
----------------------
court. In other words, it is a bundle of facts, which taken with the law
---------------------- applicable to them, gives the plaintiff a right to claim relief against the
defendant.
----------------------
It must include some act done by the defendant since in the absence of such
---------------------- an act, no cause of action would possibly accrue or would arise. (South
East Asia Shipping Co. Ltd. Vs Nav Bharat Enterprises Pvt. Ltd. (1996)
---------------------- 3 SCC 443)

42 Consumer Protection Act, 1986 and Competition Act, 2002

 The cause of action in consumer transactions arises generally at the place Notes
where the goods are bought or services are hired or where the goods are
delivered or supplied, or services are rendered and thus the jurisdiction is ----------------------
determined accordingly.
----------------------
Case Law
----------------------
1) The payment for railway ticket was made at Delhi for a journey to be
performed from Bombay to Delhi, it was held that the Delhi forum has ----------------------
jurisdiction to entertain the complaint because the payment of the ticket
at Delhi constituted a part of the cause of action. (Union of India Vs K.K. ----------------------
Bhatt (1991) II CPR 578 (Delhi (DCR)).
----------------------
Agreement Ousting Jurisdiction:
----------------------
Sec 28 of the Indian Contract Act 1872 provides that every agreement, which
any party thereto is restricted absolutely from enforcing his rights under or in ----------------------
respect of any contract, by the usual legal proceedings in the ordinary tribunals,
or which limits the time within which he may thus enforce his rights, is void to ----------------------
that extent. ----------------------
Suppose the buyer enters into an agreement with the seller that he will never
ever proceed against the seller for defective goods, etc. such an agreement as per ----------------------
section 28 of the contract act is void, i.e. of no legal consequences. ----------------------
But, parties cannot by an agreement oust the jurisdiction of any court or
confer jurisdiction on a court not otherwise competent. However, where two ----------------------
courts have jurisdiction to try a case, but the parties have agreed that dispute ----------------------
between them should be tried at one court rather than the other, it is valid and
does not contravene sec 28 of the Contract Act. ----------------------
State Commission ----------------------
The State Commission is the second in the hierarchy of the three tier quasi
----------------------
Judicial System established under the Act. The State Commission is to be
established by every State Government by issue of notification in the official ----------------------
Gazette. It has both original as well as appellate jurisdiction. Sec 16 of the Act
deals with the composition of the State Commission. ----------------------

----------------------
Check your Progress 3
----------------------
State True or False. ----------------------
1. “A” buys a car from manufacturer “B” for Rs 10 lakh. Any complaint
relating to the car should be filed in the District Forum that has ----------------------
jurisdiction. ----------------------
2. A buyer enters into an agreement with the seller that he will not take
any action against the seller for defective goods. Such agreement is ----------------------
enforceable. ----------------------

----------------------

Consumer Disputes Redressal Agencies 43

 Notes
Activity 3
----------------------

---------------------- Find the location of District Consumer Disputes Redressal Forum in your
district.
----------------------

---------------------- 3.4 COMPOSITION OF THE STATE COMMISSION AND

ELIGIBILITY OF MEMBERS
----------------------
Every State Commission as per Sec 16 shall consist of one President and not
---------------------- less than two and not more than such number of members as may be prescribed,
---------------------- and one of whom shall be a woman. The members shall have the following
qualifications namely;
----------------------
i) be not less than thirty-five years of age;
---------------------- ii) possess a bachelors degree from a recognized University; and
---------------------- iii) be persons of ability, integrity and standing, have adequate knowledge
and experience of atleast ten years in dealing with problems relating
---------------------- to economics, law, commerce, accountancy, industry, public affairs or
administration.
----------------------
Provided that not more than fifty percent of the members shall be from
---------------------- amongst persons having a judicial background. ‘Judicial background’ shall mean
---------------------- persons having knowledge and experience for atleast a period of ten years as a
presiding officer at the district level court or any tribunal or equivalent level.
---------------------- President of the State Commission
---------------------- The State Commission shall be presided over by the President.
---------------------- A person who is or has been a judge of a High Court is eligible to be appointed
as the President of the State Commission.
----------------------
Appointment of President
---------------------- The President of the State Commission shall be appointed by the State
---------------------- Government. Provided that no appointment shall be made except after consultation
with the chief Justice of the High Court.
---------------------- Disqualifications
---------------------- Sec 16 of the Act lays down that a person shall be disqualified for appointment
as a member if he -
----------------------
a) has been convicted and sentenced to imprisonment for an offence which in
---------------------- the opinion of the State Government, involves moral turpitude, or
---------------------- b) is an undischarged insolvent; or
c) is of unsound mind and stands so declared by a competent court or
----------------------
d) has been removed or dismissed from the service of the Government or a
---------------------- body corporate owned or controlled by the Government; or

44 Consumer Protection Act, 1986 and Competition Act, 2002

e) has in the opinion of the State Government, such financial or other interest; Notes
as is likely to affect prejudicially the discharge by him of his functions as
a member; or ----------------------
f) has such other disqualifications as may be prescribed by the State ----------------------
Government.
----------------------
Tenure of the Members of the State Commission
The President and every member of the State Commission shall hold office ----------------------
for a term of five years or upto the age of sixty-seven years, whichever is earlier;
----------------------
and shall be eligible for re-appointment for another term. However, the President
or any member may ----------------------
(a) by writing under his hand and addressed to the State Government resign his ----------------------
office any time;
(b) be removed from office by the State Government, who – ----------------------

i) has been adjudged an insolvent or ----------------------

ii) has been convicted of an offence, which in the opinion of the State ----------------------
Government involves moral turpitude; or
----------------------
iii) has become physically or mentally incapable of acting as such member;
or ----------------------
iv) has acquired such financial or other interest, as is likely to affect ----------------------
prejudicially his functions, as a member; or
v) has so abused his position as to render his continuance in office ----------------------
prejudicial to the public interest. ----------------------
The President and the members of the State Commission shall not be removed
from the office on the ground of acquiring such financial or other interest as ----------------------
is likely to affect prejudicially his functions as a member; or on the ground of ----------------------
abusing his position as to render his continuance in office prejudicial to the public
interest, except on an inquiry held by the State Government in accordance with ----------------------
such procedure, as it may specify in this behalf, and finds the President or the
member, as the case may be, to be guilty of such ground. ----------------------

Salary and Honorarium, etc. of the President and Members of the State ----------------------
Commission
----------------------
As per Sec 16 (2) of Consumer Protection Act, 1986 the salary or honorarium
and other allowances payable to, and the other terms and conditions of service ----------------------
of, the members of the State Commission shall be such as may be prescribed by
----------------------
the State Government.
The Consumer Protection Amendment Act, 2002 has further laid down that ----------------------
the appointment of a member on whole-time basis shall be made by the State
----------------------
Government on the recommendation of the President of the State Commission
taking into consideration such factors as may be prescribed including the work ----------------------
load of the State Commission.
----------------------

Consumer Disputes Redressal Agencies 45

 Notes The salary and other allowances of the President and members of the State
Commission have been fixed in the rules framed by the State Governments, and
---------------------- generally the following salary and allowances are prescribed in these rules:
---------------------- a) The President of the State Commission shall receive the salary of the Judge
of the High Court, if appointed on whole time basis or a consolidated
---------------------- honorarium of Rs. 200 per day of the sitting if appointed on part-time basis,
shall receive a consolidated honorarium of Rs. 3000 per month and if sitting
----------------------
on part-time basis, a consolidated honorarium of Rs. 150 per day for the
---------------------- sitting.
b) The President and members of the State Commission shall be eligible for such
----------------------
traveling allowance and daily allowance on official tour as are admissible
---------------------- to Grade I officer of the State Government.
c) The terms and conditions of the service of the President and the members
----------------------
of the State Commission shall not be varied to their disadvantage during
---------------------- their tenure of office.

---------------------- Check your Progress 4

----------------------
Match the following.
----------------------
i. Member of the Forum a. Judge of High Court
---------------------- ii. President b. Disqualification
iii. Unsound mind c. Not less than 35 yrs
----------------------

----------------------
Activity 4
----------------------

---------------------- Prepare a list of the names of the president and members of the State
Consumer Disputes Redressal Commission in your state.
----------------------

---------------------- 3.5 JURISDICTION OF THE STATE COMMISSION

---------------------- As mentioned earlier, the term jurisdiction implies the authority to adjudicate.
Section 17 of Act enumerates on the jurisdiction of the State Commission. The
---------------------- State Commission has all the three kinds of original jurisdiction viz, pecuniary,
---------------------- territorial and subject matter. It has original as well as appellate jurisdiction.
Added to it, the State Commission has been vested with revisional jurisdiction
---------------------- also.
---------------------- Original Jurisdiction of State Commission
The term ‘Original Jurisdiction’ of the State Commission means the extent,
----------------------
both territorial as well as pecuniary jurisdiction, within which the State Consumer
---------------------- Disputes Redressal Commission has the power and authority to adjudicate upon
a complaint under the Consumer Protection Act. Each state has its own State
---------------------- Commission. There is purpose for it.

46 Consumer Protection Act, 1986 and Competition Act, 2002

Pecuniary Jurisdiction of State Commission Notes
The State Commission shall have jurisdiction to entertain complaints where
----------------------
the value of the goods or services and compensation, if any, claimed exceeds
rupees twenty lakhs but does not exceed rupees one crore. ----------------------
The pecuniary jurisdiction of the State Commission prior to the amendment
----------------------
of 2002 was upto only Rs. 20 lakhs. However with the amendment now, the
pecuniary Jurisdiction has been increased. ----------------------
Territorial Jurisdiction of State Commission
----------------------
Sec 17 (2) of the Consumer Protection Act is identical with the territorial
jurisdiction of the District Forum which is discussed earlier in this unit. Sec 17(2) ----------------------
lays down that a complaint shall be instituted in a State Commission within the ----------------------
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 has a branch office or personally works for gain, provided ----------------------
that in such case either the permission of the State Commission is given or
the opposite parties who do not reside or carry on business or have a branch ----------------------
office or personally works for gain, as the case may be, acquiesces in such ----------------------
institution; or
----------------------
c) the cause of action, wholly or in part arises.
Appellate Jurisdiction ----------------------
The State Commission can exercise original as well as appellate jurisdiction ----------------------
within the State.
----------------------
Reversionary Jurisdiction of State Commission
In its revisionary jurisdiction, the State Commission has jurisdiction 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. ----------------------
Where there is no error of jurisdiction or illegal exercise of jurisdiction by the ----------------------
Consumer Forum, the Commission declined to entertain the revision petition.
(Kuldip Singh Karla Vs Roshan Lal Pal II (1903) CPJ 170 (171)(NC) ----------------------
Form of complaint before the State Commission ----------------------
According to the Consumer Protection Act, the complaint under this
----------------------
Act can be filed in person or can be sent by registered post. Coming to the
form for filing complaints under the Act before the State Consumer Disputes ----------------------

Consumer Disputes Redressal Agencies 47

 Notes Redressal Commission, the Consumer Protection Rules, framed by various
State Governments provide that the complaint shall be presented by the
---------------------- complainant in person or by his agent to the State Commission or be sent
by registered post addressed to the State Commission, giving the following
---------------------- particulars–
---------------------- a) the name, description and address of the complainant;
---------------------- b) the name, description and address of the opposite party or parties, as the
case may be, so far as they can be ascertained;
----------------------
c) the facts relating to complainant and when and where these arose;
---------------------- d) documents in support of the allegations, contained in the complaint; and
---------------------- e) the relief which the complainant claims
---------------------- Procedure applicable to State Commission Sec 18
The State Commission shall follow the provisions of Sections 12, 13 and 14
----------------------
of the Consumer Protection Act and the Rules made thereunder for the disposal
---------------------- of the complaints by the District Forum with such modifications as may be
necessary. The procedure for filing complaint, appeal and hearing and disposal
---------------------- of the complaint is dealt in separate units.
---------------------- The first appeal of the District Forum situated with the state lies to the State
Commission and then State Commission can take cognizance of the dispute
---------------------- arising within that state.
---------------------- When the bank guarantee was invoked at Saharanpur and payment was also
made by the Saharanpur Branch of the Bank, which is situated within the state of
---------------------- Uttar Pradesh and no part of the cause of action has arisen in Delhi, it has been
---------------------- held that it is not possible to agree with view of the State Commission and also
of the National Commission that the State Commission at Delhi had jurisdiction
---------------------- in the matter? (Union Bank of India Vs Seppo Rally OY, AIR 2000 SC 62 (66))

---------------------- Transfer of cases

By virtue of Sec 17A of the Consumer Protection Act, the State Commission
---------------------- has now been empowered to transfer any complaint pending before the District
---------------------- Forum to another District Forum within the state if the interest of justice so requires.
The transfer of cases/complaints can be done on the application of the
----------------------
complainant or of its own motion by the State Commission.
---------------------- There had been an occasion when a particular District Forum could not
hear a complaint pending before him as the President or Member was a party in
----------------------
such complaint. Such and many other situations gave rise to the insertion of this
---------------------- Section 17A Act.
It is strongly felt here that instead of the words ‘on the application of the
----------------------
complainant’ the words should have been ‘on the application of any party to
---------------------- the complaint’ thereby giving this ground even to the opposite party to seek
transfer of cases when appropriate and needed in the interest of justice. The State
---------------------- Commission should transfer cases only in the interests of justice.

48 Consumer Protection Act, 1986 and Competition Act, 2002

Circuit Benches Sec 17(B) Notes
Section 17B of the Consumer Protection Act states that the State Commission
shall ordinarily function in the State capital but may perform its functions at such ----------------------
other place as the State Government may, in consultation with State Commission, ----------------------
notify in the official Gazette from time to time.
This new section has been inserted by the Consumer Protection (Amendment) ----------------------
Act, 2002 with effect from 15th March, 2003. ----------------------
Thus by issuing notification in the Official Gazette, the State Government
in consultation with the State Commission can hold circuit benches of the State ----------------------
Commission at places other than the State Capital. The State Commission shall ----------------------
entertain and dispose off all the complaints of that particular area falling within
that particular circuit bench by holding regular sitting in that area as per the ----------------------
convenience of the State Commission.
----------------------
The purpose of the publication in the Official Gazette is that it should come to
the knowledge of the public. This provision of circuit benches will help in reducing ----------------------
heavy backlog of cases and will render justice to the consumers more effectively.
----------------------
National Commission
Under the Consumer Protection Act, three-tier quasi judicial mechanism is ----------------------
provided for redressal viz,
----------------------
i) the District Forum, ii) the State Commission, iii) National Commission
The composition and jurisdiction of the District Forum and the State ----------------------
Commission has already been dealt with. Sec 20 of the Act deals with the ----------------------
composition of the National Commission.
The National Commission is the apex body at the centre to adjudicate the ----------------------
consumer disputes under the Act. The National Commission is a powerful body ----------------------
vested with wide powers to promote and safeguard the rights of the consumers.
----------------------
Check your Progress 5 ----------------------

Multiple Choice Single Response. ----------------------

1. The upper limit for the value of goods and services for which the ----------------------
State Commission has jurisdiction to entertain complaints is:
i. 1 crore ----------------------
ii. 50 lakh ----------------------
iii. 20 lakh
iv. None of the above ----------------------
2. The State Commission can exersise ----------------------
i. Original jurisdiction
----------------------
ii. Appellate jurisdiction
iii. Revisionary jurisdiction ----------------------
iv. All of the above ----------------------

Consumer Disputes Redressal Agencies 49

 Notes
Activity 5
----------------------

---------------------- Find the location of the State Consumer Disputes Redressal Commission
in your state.
----------------------

---------------------- 3.6 COMPOSITION OF THE NATIONAL COMMISSION

---------------------- The National Commission is to be presided over by a President and not less
than four and not more than such number of members as may be prescribed and
---------------------- one of whom shall be woman.
---------------------- Qualification of the President and the Members of the National Commission:

---------------------- The qualifications for appointment as President of the National Commission

are that
---------------------- a) he should be a person, who is or has been a judge of the Supreme Court;
---------------------- b) he should be appointed by the Central Government, in consultation with the
Chief Justice of India as such President of the National Commission;
----------------------
c) he should be seventy years of age;
----------------------
d) he should give an undertaking that he does not and will not have any such
---------------------- financial or other interest as is likely to affect prejudicially his functions as
such President;
----------------------
e) he has not been adjudged an insolvent and has not been convicted of an
---------------------- offence, which in the opinion of the Central Government, involves moral
turpitude.
----------------------
The qualification for the appointment of the members (not less than four,
---------------------- one of whom shall be a woman) of the National Commission are that not less
than four, and not more than such number of members as may be prescribed,
---------------------- and one of whom shall be a woman, who shall have the following qualifications,
---------------------- namely –
i) be not less than thirty-five years of age;
----------------------
ii) possess a bachelor’s degree from a recognized university;
----------------------
iii) be persons of ability, integrity and standing and have adequate knowledge
---------------------- and experience of atleast ten years in dealing with problems relating
to economics, law, commerce, accountancy, industry, public affairs or
---------------------- administration provided that not more than fifty percent of the members
shall be from amongst the persons having a judicial background.
----------------------
The members of the National Commission should be recommended for
---------------------- appointment by the selection committee consisting of:
---------------------- i) a judge of a Supreme Court, to be nominated by the Chief Justice of India
(Chairman)
----------------------

50 Consumer Protection Act, 1986 and Competition Act, 2002

ii) the secretary in the Department of Legal Affairs in the Government of India Notes
(member) and
----------------------
iii) the secretary of the Department dealing with consumer affairs in the
Government of India (member) ----------------------

Check your Progress 6 ----------------------

----------------------
Multiple Choice Single Response.
----------------------
1. The President of the National Commission should be:
i. Chief Justice of High Court ----------------------
ii. Judge of Supreme Court ----------------------
iii. Chief Justice of Supreme Court ----------------------
iv. None of the above
----------------------
2. The Selection Committee which recommends the appointment of the
members of the National Commission consists of: ----------------------
i. Judge of Supreme Court ----------------------
ii. Secretary, Department of Legal Affairs
----------------------
iii. Secretary, Department of Consumer Affairs
----------------------
iv. All of the above
----------------------

----------------------
Activity 6
----------------------
Find out who is the current president of the National Commission on ----------------------
Consumer Dispute Resolution.
----------------------
3.7 JURISDICTION OF THE NATIONAL COMMISSION ----------------------
The district Forum can entertain and decide complaints only upto Rs. ----------------------
20,00,000/- (Twenty lakhs). If the complainant wants to claim compensation
above this amount but less than Rs. 1 Crore, then he can file the complaint before ----------------------
the State Commission.
----------------------
When the complainant wants to claim compensation above Rs. 1 Crore,
then the complaint has to be filed before the National Commission. It is pertinent ----------------------
to note that the District Forum has only original jurisdiction. No appeal can be
filed before the District Forum as it is the forum of first instance in the hierarchy, ----------------------
State Commission and the National Commission have original, Appellate and
Revisionary Jurisdiction. ----------------------

Rule 11 of the Consumer Protection Rules 1987, states that the salaries ----------------------
honorarium of other allowances of the President and the members of the National
Commission shall be as under – ----------------------

Consumer Disputes Redressal Agencies 51

 Notes a) The President of the National Commission shall be entitled to salary,
allowances and other perquisites as are available to a sitting judge of the
---------------------- Supreme Court.
---------------------- b) The other members of the National Commission, if sitting on whole time
basis, shall receive a consolidated honorarium of twenty three thousand
---------------------- rupees per month, or if sitting on part-time basis, a consolidated honorarium
of three hundred rupees per day of sitting.
----------------------
c) The President and other member shall be entitled to traveling and daily
---------------------- allowances on official tours at the same rates as are admissible to Group
‘A’ officers of the central government.
----------------------
d) The honorarium or the salary, as the case may be, and other allowances shall
---------------------- be defrayed out of the consolidated fund of India.
---------------------- After having dealt with the Composition, qualification and other important
details about presiding officers of the National Commission.
----------------------
Tenure of the President and the Members of the National Commission
---------------------- The President and every member of the National Commission shall hold
---------------------- office for a term of five years or upto the age of seventy years; whichever is earlier.
Provided that a member shall be eligible for re-appointment for another term of
---------------------- five years or upto the age of seventy years, whichever is earlier, subject to the
condition that he fulfils the qualification and other conditions for appointment
---------------------- mentioned in clause (b) of sub-section (1) and such re-appointment is made on
---------------------- the basis of the recommendation of the selection committee.
Provided further that a person appointed as a President of the National
----------------------
Commission shall also be eligible for re-appointment following the same
---------------------- procedure and requirement as for the first appointment.
Vacancy in the National Commission and its effect
----------------------
Any member of the National Commission may resign his office in writing
---------------------- under his hand addressed to the Central Government and on such resignation
---------------------- being accepted, his office shall become vacant and may be filled by appointment
of a person possessing any of the qualifications mentioned earlier herein above.
---------------------- Sec 20(4) declares that a person appointed as a President or as a member
---------------------- before the commencement of the Consumer Protection (Amendment) Act, 2002
shall continue to hold such office as President or member, as the case may be,
---------------------- till the completion of his term.

---------------------- Salary and Honorarium, etc.

Section 20(2) of the Consumer Protection Act 1986, states that the salary,
----------------------
honorarium and other allowances payable to and the other terms and conditions
---------------------- of service of the members of the National Commission shall be such as may be
prescribed by the Central Government.
----------------------
The scheme of the Consumer Protection Act 1986, is that these three agencies
---------------------- constituted for redressal of ‘Consumer Dispute’ at different levels have as its

52 Consumer Protection Act, 1986 and Competition Act, 2002

President a person who is or has been a judge at the corresponding level. By this Notes
mandatory prerequisites, it is ensured that one of the presiding officers at all the
three levels is a person from the judicial branch and with good experience. ----------------------
As can be seen from the provisions of this Act, the appointment to the office ----------------------
of the President of this Act, the appointment to the office of the President of the
State Commission is to be made ‘only after consultation with the Chief Justice ----------------------
of the High Court’ and to the office of the President of the National Commission
----------------------
after consultation with the chief justice of India. Such a provision requiring prior
consultation with the chief justice is to ensure that most suitable and competent ----------------------
person would be appointed as the President of the Commission.
----------------------
Original Jurisdiction of the National Commission
The term original jurisdiction of the National Commission means the ----------------------
extent, both territorial as well as pecuniary, within which the National Consumer
----------------------
disputes Redressal Commission has the power and authority to adjudicate upon
a complaint under the Consumer Protection Act. From the time of the passing of ----------------------
the Consumer Protection Act by virtue of amendments, the original jurisdiction
has been enhanced. ----------------------
Earlier, the complaint could be instituted in the National Commission where ----------------------
the value of goods or services and compensation if any claimed executed Rs. Ten
Lakhs, but by virtue of Consumer Protection Amendment Act 1993, the pecuniary ----------------------
jurisdiction of the National Commission on the original side was enhanced to ----------------------
the claims exceeding Rs. Twenty lakhs. Thereafter by the Consumer Protection
(Amendment) Act 2002, the original jurisdiction of national commission to ----------------------
entertain complaints has been increased to the amount above 1 crore. So a
complainant who wants to claim compensation above 1 crore has to file complaint ----------------------
before the National Commission. ----------------------
Appellate Jurisdiction of National Commission
----------------------
Against the judgment and order of the State Commission, appeal can be filed
before the National Commission (sec 21(a)(ii)). The appeal may be preferred ----------------------
within a period of thirty days from the date of the order of the State Commission.
The National Commission can condone the delay in filing the appeal, if it is ----------------------
satisfied that there was sufficient cause for not filing it within that period. ----------------------
In Dr. Jagannath Mondal Vs Smt. Soma Roji (1996) IICPR 129 (Cal.H.C.)
----------------------
it was contended by the petitioner that appeal under section 21 of the Consumer
Protection Act is available only against judgment passed by the State Commission ----------------------
and not against an interlocutory order. The Calcutta High Court held that the
provisions of section 21(a)(ii) clearly indicate that the National Commission ----------------------
has jurisdiction to entertain appeal against the order of the State Commission.
----------------------
Therefore it is not correct to say that only against a judgment an appeal is available
and not against the order. Hence an appeal is also available under section 21 of ----------------------
the Act against the order of issuance of summons and notice as passed by the
State Commission. ----------------------

----------------------

Consumer Disputes Redressal Agencies 53

 Notes Revisional Jurisdiction of the National Commission
The National Commission can exercise revisional powers under section
----------------------
21(b) of the Act. The revisional jurisdiction of the National Commission can be
---------------------- invoked wherein a state commission has –
i. exercised a jurisdiction not vested in it by law; or
----------------------
ii. failed to exercise jurisdiction so vested; or
----------------------
iii. acted in the exercise of its jurisdiction illegally or with material irregularity.
---------------------- The National Commission in revision should not interfere if there is no error
---------------------- of jurisdiction or any material irregularity or improper exercise of jurisdiction.
It can call for records and pass appropriate orders.
---------------------- In Kinetic Engineering Ltd. Vs Samasi Saunand and Another (1993) II CPJ
---------------------- 220 (NCDRC) the National Commission in revision petition found that the State
Commission passed an order in appeal against the revisional petitioner when it
---------------------- was not arrayed as a party before the State Commission and against whom there
was no adverse finding in the order of the District Forum appealed against. The
---------------------- National Commission opined that the State Commission proceeded to amplify
---------------------- the order by casting liability against the revision petitioner – Kinetic Engineering
Ltd. The National Commission held that the order of the State Commission is
---------------------- clearly vitiated by illegal exercise of jurisdiction resulting in material irregularity
and therefore be set aside.
----------------------
Sec 22(1) of the Consumer Protection Act lays down that the provisions of
---------------------- sections 12, 13 and 14 and the rules made thereunder for the disposal of complaints
by the District Forum shall, with such modifications as may be considered
----------------------
necessary by the commission, be applicable to the disposal of disputes by the
---------------------- National Commission.
Sec 22(2) lays down that in addition to above, the National Commission shall
----------------------
have the power to review any order made by it, when there is an error apparent
---------------------- on the face of record.
Power to set aside exparte Orders
----------------------
A new section 22A has been inserted by the Consumer Protection Amendment
---------------------- Act 2002.
---------------------- By virtue of this section, the National Commission can set aside exparte
order passed by it on application by the aggrieved party. The said application
---------------------- to set aside can be granted only if the National Commission is satisfied that the
---------------------- aggrieved party was prevented by any sufficient cause from appearing when the
case was called out for hearing.
----------------------
The application for setting aside the exparte order under sec 22A or dismissal
---------------------- of the complaint in default shall be maintainable if filed within thirty days from
the date of the order or date of receipt of the order, as the case may be.
----------------------
Sec 22B, which deals with transfer of cases, has been inserted by the
---------------------- Amendment Act, 2002.

54 Consumer Protection Act, 1986 and Competition Act, 2002

 Sec 22B empowers the National Commission to transfer any complaint Notes
which is pending before the District Forum of one State to a District Forum of
another State or before one State Commission to another State Commission. ----------------------
The National Commission can transfer the cases on the application of the ----------------------
complainant or of its own motion. The right to apply for transfer of cases however
is not available to the opposite party. ----------------------
Circuit Benches ----------------------
As per sec 22C which is also inserted by the Consumer Protection
----------------------
(Amendment) Act 2002, provides that the National Commission shall ordinarily
function at the New Delhi and perform its functions at such other place as the ----------------------
Central Government may, in consultation with the National Commission, notify
in the Official Gazette, from time to time. ----------------------
The Central Government has therefore in consultation with the National ----------------------
Consumer Disputes Redressal Commission, notified the following places and
the places other than New Delhi at which the said Commission shall perform its ----------------------
functions namely ----------------------
1) Ahmedabad 2) Allahabad 3) Bangalore 4) Bhopal 5) Chennai 6) Hyderabad
7) Jodhpur 8) Kolkata 9) Lucknow 10) Nagpur 11) Pune. ----------------------

Vacancy in the office of the President ----------------------

Sec 22D lays down that when the office of President of a District Forum, ----------------------
State Commission, or of the National Commission, as the case may be, is vacant
or a person occupying such office is, by reason of absence or otherwise, unable ----------------------
to perform the duties of his office, these shall be performed by the senior-most
----------------------
member of the District Forum, State Commission or of the National Commission
as the case may be. ----------------------
In the case of National Commission, it provides that where a retired judge
----------------------
of a High Court is a member of National Commission, such member or where
the number of such members is more than one, the senior-most person among ----------------------
such members shall preside over the National Commission in the absence of
President of that Commission. ----------------------
This provision thus ensures the smooth and continuous functioning of these ----------------------
three-tier quasi-judicial bodies.
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

Consumer Disputes Redressal Agencies 55

 Notes
Check your Progress 7
----------------------

---------------------- Fill in the blanks.

1. The value of goods and services for which the National Commission
---------------------- has jurisdiction to entertain a complaint should be ___________.
---------------------- 2. The members of the National Commission shall hold office for a term
of ____ years or up to the age of 70 years, whichever is earlier.
----------------------

----------------------
Activity 7
----------------------

---------------------- Cite a case recently decided by the National Commission on Consumer

Dispute Resolution .
----------------------
---------------------- Summary
---------------------- ●● The Consumer Protection Act, 1986 which aims at the protection and
promotion of the rights of the consumers has provided for three-tier
----------------------
quasi judicial set up for speedy and inexpensive procedure for disposal of
---------------------- complaints and appeals.
●● The presiding officers at these forums comprise of judicial and non-judicial
----------------------
members which ensure that the judgment and order is as per law and in
---------------------- keeping with the prevailing commercial and trade practices. The District
Forum can exercise only original jurisdiction. But the State Commission
---------------------- and the National Commission can exercise Original, Appellate and
Revisionary jurisdiction. National Commission can exercise even Review
----------------------
Powers. Provisions such as transfer of cases, circuit benches, makes the
---------------------- Act more effective.

---------------------- Keywords
----------------------
●● Ex-parte: Expression used to signify something done or said by one
---------------------- person not in the presence of his opponent.
●● Jurisdiction: Legal authority or power; the authority or power of a court
----------------------
to entertain and decide on any judicial proceedings; the area over which
---------------------- the power of the court extends.
●● Review: The process under which a court in certain circumstances can
---------------------- reconsider its own judgment. The term ‘review’ means a judicial re-
---------------------- examination of the case in certain specified and prescribed circumstances.
●● Revision: The act of examining again in order to remove any defect or
---------------------- grant relief against the irregular or improper exercise or non-exercise of
---------------------- jurisdiction by lower court.

56 Consumer Protection Act, 1986 and Competition Act, 2002

●● Void: Not valid; of no effect; having no legal force or binding effect. Notes

Self-Assessment Questions ----------------------

----------------------
1. State the composition of the District Forum.
2. Can a person qualified to be a High Court Judge be eligible to be appointed ----------------------
as President of the State Commission?
----------------------
3. What is the difference between Original Jurisdiction and Appellate
Jurisdiction? ----------------------

4. Upto what age can the President of National Commission hold his office? ----------------------
5. What disqualifications are prescribed for the President and members of the ----------------------
State Commission?
----------------------
Answers to Check your Progress ----------------------
Check your Progress 1 ----------------------
Multiple Choice Single Response.
----------------------
1. _________ forum is the lowest in the hierarchy of the Consumer Dispute
Redressal Mechanism. ----------------------
ii. District ----------------------
Check your Progress 2 ----------------------
Multiple Choice Single Response.
----------------------
1. The district forum comprises:
----------------------
iii. All of the above
2. The State Government appoints the members of the District Forum on the ----------------------
recommendation of:
----------------------
ii. Selection Committee
----------------------
Check your Progress 3
State True or False. ----------------------

1. True ----------------------
2. False ----------------------
Check your Progress 4
----------------------
Match the following.
----------------------
i. – c.
ii. – a. ----------------------

iii. – b. ----------------------

----------------------

Consumer Disputes Redressal Agencies 57

 Notes Check your Progress 5
Multiple Choice Single Response.
----------------------
1. The upper limit for the value of goods and services for which the State
---------------------- Commission has jurisdiction to entertain complaints is:
---------------------- i. 1 crore

---------------------- 2. The State Commission can exersise

iv. All of the above
----------------------
Check your Progress 6
----------------------
Multiple Choice Single Response.
---------------------- 1. The President of the National Commission should be:
---------------------- ii. Judge of Supreme Court

---------------------- 2. The Selection Committee which recommends the appointment of the

members of the National Commission consists of:
---------------------- iv. All of the above
---------------------- Check your Progress 7
---------------------- Fill in the blanks.
1. The value of goods and services for which the National Commision has
----------------------
jurisdiction to entertain a complaint should be above 1 crore.
---------------------- 2. The members of the National Commission shall hold office for a term of
---------------------- five years or up to the age of 70 years, whichever is earlier.

---------------------- Suggested Reading

----------------------
1. http://ncdrc.nic.in/sDetails.html
---------------------- 2. http://ncdrc.nic.in/
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

58 Consumer Protection Act, 1986 and Competition Act, 2002

Procedure for filing Consumer Complaint
UNIT

4
Structure:
4.1 Introduction

4.2 Who can file the Complaint

4.3 Limitation Period for filing a Complaint

4.4 Contents and Annexure with the Complaint

4.5 Procedure on Admission of the Complaint

4.6 Power of District Forum

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Procedure for filing Consumer Complaint 59

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Specify who can file a complaint
----------------------
• State the limitation to file a complaint
---------------------- • Explain the procedure to file the complaint
---------------------- • Identify the procedure upon admission of the complaint

---------------------- • Discuss the procedure for the service of the notice

---------------------- 4.1 INTRODUCTION

---------------------- It is the intention of parliament to provide a simple, inexpensive and
expeditious procedure for disposing the complaints. As it is the consumer has been
----------------------
harassed physically and mentally due to the defect in the goods or the services
---------------------- rendered by the seller. Hence the consumer forums are intended to be accessible
to one and all, irrespective of his social status. Complex procedures, inordinate
---------------------- delays, heavy fees of a lawyer, have been done away with. The Consumer
Protection Act therefore attempts to eliminate all these drawbacks and therefore
----------------------
has laid down that no strict rules of civil procedure Code and Evidence Act are
---------------------- to be adhered to.

---------------------- The procedure to file a consumer complaint is very simple. The

burdensome and time consuming ways of the filing of a civil suit or a criminal
---------------------- case have been done away with. The name itself suggests that it is not a “case”,
but a “consumer complaint”. Even the court fee stamp payable under the Act is
---------------------- nominal and not exorbitant.
---------------------- The need to engage a lawyer has been done away. One may and can engage
a lawyer if one wishes to, but it is not compulsory to do so. The advocates can
---------------------- appear only with the prior permission of the presiding authority. The consumer
---------------------- can file the complaint on his own, in person, and draft the complaint in his own
words. For this purpose, it is important to know as to who can file the complaint,
---------------------- contents of the complaint, procedure for filing complaint and what reliefs can be
granted by the Forum or the Commission.
----------------------
Now let us go through the ways of filing a complaint in a consumer forum.
----------------------
Section 12 of the Consumer Protection Act, 1986 elucidates as to who can
---------------------- file the complaint.

---------------------- 4.2 WHO CAN FILE THE COMPLAINT?

----------------------
A complaint under the Consumer Protection Act, 1986 can be filed by
---------------------- 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;
----------------------

60 Consumer Protection Act, 1986 and Competition Act, 2002

b) any recognized consumer association whether the consumer to whom the Notes
goods sold or delivered or service provided or agreed to be provided is a
member of such association or not; ----------------------
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. ----------------------
d) the Central or the State Government as the case may be, either in its individual ----------------------
capacity or as a representative of interest of consumers in general.
Thus a complaint can be filed by the affected consumer himself or by any ----------------------
recognized consumer association. The term ‘recognized consumer association’ ----------------------
means any voluntary consumer association registered under the Companies Act,
1956 or any other law for the time being in force. ----------------------
Voluntary Consumer Association ----------------------
Case Law
----------------------
i) In Consumer Unify and Trust Society Vs State of Rajasthan (1991) | CPR 30
(Raj CDRC), a complaint was filed by a registered consumer association on ----------------------
behalf of one Smt. Sushila Devi, who underwent an abdominal tubectomy
operation at the Government Hospital, Kota. It was alleged in the complaint ----------------------
that the operation caused serious complications to the patient, on account ----------------------
of the negligence on the part of the civil surgeon, who performed the
operation and also due to lack of proper post operative care and attention. ----------------------
The Rajasthan State Commission observed that the society can maintain
complaint, if the conditions laid down under sec 2(1)(d)(ii) of the Act are ----------------------
satisfied. But in this case, the required condition of ‘hiring services for ----------------------
consideration’ was not satisfied; therefore, the Commission dismissed the
complaint. ----------------------
Legal Representative ----------------------
In Kirti Ramniklal Parekh Vs Bank of Baroda (1995) II CPJ 350 (Guj.
CDRC), the complainant’s father who had a locker with the bank died. The ----------------------
Gujarat State Commission held that the appellant would be ‘consumer’ within ----------------------
the meaning of the Act. On the death of the deceased, Ramniklal Parekh, the
appellant would be one of the beneficiaries though not the sole beneficiary. ----------------------
Therefore, he would be covered by the definition of the word ‘consumer’ and can
file a complaint under the Act. It may be noted that he was also the legal heir. ----------------------

The term ‘legal representative’ has been defined in the Code of Civil ----------------------
Procedure. As per Section 2 (11) of the Code of Civil Procedure, ‘Legal
representative’ means a person who in law represents the estate of the deceased ----------------------
person and includes any person who intermeddles with the estate of the deceased ----------------------
and where a party sues or is sued in a representative character, the person on
whom the estate devolves on the death of the party so suing or sued. ----------------------
A consumer complaint can be filed as an individual complaint or as class ----------------------
action, in a group by the harassed consumers, together. A class action saves
precious court time and money. ----------------------

Procedure for filing Consumer Complaint 61

 Notes Prior to the 1993 amendments, a complaint could be made only when any
goods were sold or delivered or any service provided. With the amendment, now
---------------------- the complaint can be made even if there is an agreement to sell or deliver any
goods or to provide any service. The Central or the State Government can file a
---------------------- complaint by virtue of Amendment Act of 2002.
---------------------- Complaint to be Accompanied with Requisite Fee
---------------------- At the time of enactment of the Consumer Protection Act 1986, no court
fee was required to be paid on the complaints. As per the Consumer Protection
---------------------- (Amendment) Act 2002, which came into force with effect from 15th March, 2003.
Court fee is now required to be paid and in such manner as may be prescribed.
----------------------
In compliance to these provisions of the Act, the Central Government vides
---------------------- notification G.O.No.10/2/2003-CPU, GSR 175(E) dtd. 15.03.2004 and has laid
down the fee as per the table given below:
----------------------

---------------------- Sr. Total value of goods or services and the Amount of

No. compensation claimed fee payable
---------------------- (1) (2) (3)
---------------------- District Forum
---------------------- 1. Up to one lakh rupees - For complainants who are under
the ‘Below Poverty Line’ holding Antyodaya Anna Yojana cards. Nil
----------------------
2. Up to one lakh rupees - For complainants other than Antyodaya
---------------------- Anna Yojana card holders. Rs.100

---------------------- 3. Above one lakh and up to five lakh rupees Rs.200

4. Above five lakh and up to ten lakh rupees Rs.400
----------------------
5. Above ten lakh and up to twenty lakh rupees Rs.500
----------------------
State Commission
---------------------- 6. Above twenty lakh and up to fifty lakh rupees Rs.2000
---------------------- 7. Above fifty lakh and up to one crore rupees Rs.4000

---------------------- National Commission

8. Above one crore rupees Rs.5000
----------------------
The court fee is to be paid in the form of crossed Demand Draft drawn on a
---------------------- National Bank or through a crossed Indian Postal Order in favour of the President
of the District Forum, Registrar of the State Commission or the Registrar of the
----------------------
National Commission as the case may be, and payable at the respective place
---------------------- where the District Forum, State Commission or the National Commission is
situated.
----------------------
The people living below the poverty line are exempted from paying the
---------------------- fee, on the production of the attested copy of the Antyodaya Anna Yojana Cards.
The introduction of the court fee payment is to end the frivolous kinds
---------------------- of vexacious complaints. The amount received in the form of court fee is to be

62 Consumer Protection Act, 1986 and Competition Act, 2002

credited into the Consumer Welfare Fund of the respective State and where such Notes
fund is not established into the Receipt Account of the State Government and
in the case of the National Commission, to the Consumer Welfare Fund of the ----------------------
Central Government.
----------------------
Check your Progress 1 ----------------------

----------------------
State True or False.
1. When the total value of goods or services and the amount of ----------------------
compensation claimed is up to Rs 1 lakh, the court fees for complainants
----------------------
who are under the “below poverty line” holding Antyodaya Anna
Yojana cards is Rs 500. ----------------------
2. The requirement of court fees was introduced by the Consumer
----------------------
Protection (Amendment) Act, 2002.
3. A complaint under the Consumer Protection Act, 1986 can be ----------------------
filed by the consumer, voluntary consumer association and legal ----------------------
representative.
----------------------

----------------------
Activity 1
----------------------
Find at least one voluntary consumer association registered under the ----------------------
Companies Act, 1956 in your state.
----------------------
4.3 LIMITATION PERIOD FOR FILING A COMPLAINT ----------------------
Sec 24A of the Consumer Protection Act declares as to when the complaint ----------------------
can be filed. Sec 24A(1) states that the District Forum, the State Commission
or the National Commission shall not admit a complaint unless it is filed within ----------------------
two years from the date on which the cause of action has arisen.
----------------------
The Consumer Protection (Amendment) Act, 1993 inserted a new section,
namely sec 24A in the Act, which provided for a limitation period of two years for ----------------------
filing the complaint. The period of two years is to run from the date on which the ----------------------
cause of action has arisen. (Best Electrodes Industry Vs M.P. Audyogik Kendra
Vikas Nigam (Rewa) Ltd. (2002)|CPJ|(NCDRC)) ----------------------
It may be noted that section 24A of Consumer Protection Act is not ----------------------
retrospective in operation. (Amarnath Agrawal Vs. Northern Railway II (1996)
CPJ 14 (Delhi SCDRC)). Section 24A of the Consumer Protection Act 1986 ----------------------
provides that neither the District Forum nor the State Commission nor the National
Commission shall admit a complaint unless it is filed within two years from the ----------------------
date on which the ‘cause of action’ has arisen. ----------------------

----------------------

Procedure for filing Consumer Complaint 63

 Notes What is meant by ‘cause of action’?
Cause of Action means a bundle of essential facts, which is necessary for
----------------------
the plaintiff to prove before he can succeed, or which gives the plaintiff right to
---------------------- relief against the defendant. Cause of Action means thoughts, facts, which give
a right to action or obtain a judgment.
----------------------
When the consignment was entrusted to the appellant on 10/5/1996 & on
---------------------- 08/08/1998, 13/10/1998, 7/11/1998 & 08/12/1998, the respondent demanded
delivery; while by letters dated 15/12/1998, 21/06/1999 & 03/06/1999 the
---------------------- appellant assured the respondent that it was in the process of locating the goods &
requested the respondent to wait & assured that it will inform about the status of
----------------------
goods shortly. The respondent waited for the appellant to communicate the status
---------------------- of the goods. As the appellant did not inform the respondent about the status,
the respondent filed the complaint within two years from the date of receipt of
---------------------- the said letter dated 03.07.1999. Under these facts and circumstances on record,
it has been held that in view of the request of the appellant to the respondent to
----------------------
wait till the consignment was traced, the limitation for an action would not start
---------------------- to run until there was a communication from the appellant, either informing about
the loss or expressing it’s inability to deliver or refusal to deliver, or until the
---------------------- respondent makes a demand for delivery or payment of value of the consignment
after waiting for a reasonable period and there is non-compliance and therefore
----------------------
the complaint is not barred under sec 24A of the Consumer Protection Act.
---------------------- (Transport Corporation of India Ltd. Vs Veljan Hydrain Ltd. (2007) 3SCC 142)
In considering the question of limitation, the District Forum, the State
----------------------
Commission or the National Commission in a complaint under the Consumer
---------------------- Protection Act, has to deal with (a) the question as to what are the facts which
constitute the cause of action for the complainant to file the complaint, (b) the
---------------------- question as to on which date the cause of action to file the complaint has arisen,
(c) whether the complaint has been filed within the period of limitation of two
----------------------
years from the date the cause of action has arisen to the complainant and, (d) if
---------------------- there is delay in filing the complaint whether application for condonation of delay
has been filed and whether sufficient cause for not filing the complaint within
---------------------- the period of limitation is made out and if so the complaint shall be entertained
only after the redressal forum records its reasons for doing so.
----------------------
All the above ingredients are mandatory in nature.
----------------------
Under the Indian Limitation Act, sec 3 provides that every suit instituted
---------------------- after a prescribed period shall be dismissed although limitation has not been set
up as a defense. Even if no objection raised by the party regarding limitation has
---------------------- been taken by the defendant and the suit is barred by limitation, it becomes the
---------------------- duty of the court to dismiss the suit. It is therefore, generally for the person who
files a suit/complaint, to satisfy the court forum that his suit/complaint is within
---------------------- limitation.
---------------------- This provision clearly declares that notwithstanding anything contained in
sub-section (1), a complaint may be entertained after the period specified in sub-
---------------------- section (1), if the complainant satisfies the District Forum, the State Commission

64 Consumer Protection Act, 1986 and Competition Act, 2002

or the National Commission, as the case may be that he had sufficient cause for not Notes
filing the complaint within such period. It is further provided unless the District
Forum, the State Commission or the National Commission, as the case may be ----------------------
records its reasons for condoning such delay. On plain reading of sec 24A(2) it
becomes clear that the consumer fora can entertain the complaint beyond the ----------------------
period of two years if the complainant can show that he had sufficient cause for ----------------------
not filing the complaint within the period of limitation. So also the delay can be
condoned but the reasons for condoning the delay should be stated and recorded ----------------------
in writing by the consumer forums.
----------------------
The term ‘sufficient cause’ has been dealt in Unit-5 with reference to appeals.
----------------------
(Alagu Meenal Vs Sarvama G. I(1998) CPJ 37 NC))
This is another interesting case on the point of limitation. In this case, the ----------------------
complainant company deposited a cheque for Rs. 1 Lakh with the respondent
----------------------
bank for collection in June 1983 and the proceeds of the cheque were collected
by the respondent bank on June 17, 1983 but were not deposited in the account ----------------------
of the complainant and in the complaint filed before the State Commission the
objection was taken that the complaint is time barred, it was held by the National ----------------------
Commission that the claim was not barred under Article 22 of the Limitation
----------------------
Act.
(Sovingtorg (India) Pvt. Ltd., Ghaziabad Vs State Bank of India I (1992) ----------------------
CPJ 14 (16)NC) ----------------------
The law of limitation has not been expressly made applicable to Consumer
Protection Act, 1986. However, through various decisions of the National ----------------------
Commission it has been emphasized that the general principles of law of limitation ----------------------
are to be applied to such proceedings in the interest of justice, equity and fair
play. ----------------------
Condonation of delay: ----------------------
Can delay in filing complaint i.e. beyond the prescribed period of limitation
----------------------
of 2 years be condoned orally?
It is to be noted that as per section 24A, the complainant has to move an ----------------------
application for condoning delay and explaining the cause of delay. It is only
----------------------
if the consumer forum is satisfied that there was sufficient cause in not filing
the complaint, the delay can be condoned. Thus the National Commission has ----------------------
correctly held that on oral request delay cannot be condoned.
----------------------
Reasons to be recorded for condoning delay:
Sec 24A, through its proviso further lays down that no complaint shall ----------------------
be entertained by the District Forum, the State Commission or the National ----------------------
Commission after the period of two years from the date the cause of action has
arisen unless the National Commission, the State Commission or the District ----------------------
Forum as the case may be, records its reasons for condoning delay.
----------------------
Government Departments and local authorities cannot claim any privilege
in that regard and they must be treated at par with private individuals. ----------------------

Procedure for filing Consumer Complaint 65

 Notes
Check your Progress 2
----------------------

---------------------- Fill in the blanks.

1. The Consumer Forum cannot entertain the complaint if it is not filed
---------------------- within the period of _________ years from the date of cause of action.
---------------------- 2. According to Section ____, the delay in filing the complaint can be
condoned.
----------------------

----------------------
Activity 2
----------------------

---------------------- Read the decision of the National Consumer Disputes Redressal

Commission in Govind S. Poddar Vs. M/s. Cathay Pacific Airways Ltd.
---------------------- & Ors. with reference to period of limitation available at: http://ncdrc.nic.
in/op1672001.html Also read the judgment in S. Kumar Vs Managing
----------------------
Director, Air India II (1991) C.P.J 111.
----------------------

---------------------- 4.4 CONTENTS AND ANNEXURE WITH THE COMPLAINT

---------------------- Contents of the Complaint

A complaint must contain the following particulars:
----------------------
a) the name, description and the address of the complainant;
----------------------
b) the name, description and the address of the opposite party or parties, as the
---------------------- case may be, so far as they can be ascertained;

---------------------- c) the facts relating to complaint and when and where it arose;
d) documents in support of the allegations contained in the complaint;
----------------------
e) the relief which the complainant claims.
----------------------
The complainant or his authorized agent can present the complaint in person
---------------------- before the appropriate Consumer Redressal Forum/Commission. The complaint
may also be sent by post to such Forum/Commission. The complaint should be
---------------------- signed by the complainant or his authorized agent.
---------------------- Annexure with the Complaint

---------------------- Following documents are required to be filed along with the complaint:
i) Copy of the complaint for the opposite party.
----------------------
ii) Affidavit in support of the complaint.
----------------------
iii) Original documents referred to in the complaint in respect of goods for e.g.
---------------------- purchase bill, warranty card, invoice, receipt and any other documents.
iv) Original documents referred to in the complaint for deficiency in service
----------------------

66 Consumer Protection Act, 1986 and Competition Act, 2002

 e.g. in case of dispute with the builder true copy of the agreement, payment Notes
receipt etc. In case of cancellation of flight, the flight booking ticket etc.
----------------------
v) Where the complainant desires that he may be allowed to be represented
by a lawyer, an application to that effect. (It is to be noted that only when ----------------------
the District Forum/Commission grants the permission, the Advocate can
appear.) ----------------------
vi) Letter of authorization or power of attorney where the complainant is ----------------------
represented by the authorized agent etc.
----------------------
Admissibility of Complaint
The Consumer Protection (Amendment) Act, 2002 Section 12 Sub-Section ----------------------
(3) provides that when any complaint is received by the District Forum, it may, ----------------------
by order, allow the complaint to be proceeded with or rejected. Whether the
complaint is admissible or not shall ordinarily be decided within twenty-one ----------------------
days from the date on which the complaint was received. The complainant has
to be heard at the time of deciding the admissibility of the complaint. 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.
Once the 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.
The provision pertaining to the admissibility of the complaint ensures that ----------------------
the Forum or the Commission have to consider whether the complaint requires ----------------------
admission, as to whether it is frivolous or vexatious. The maintainability has to
be considered before admitting the complaint and issuing notice to the opposite ----------------------
party.
----------------------
It has been reiterated by the Hon’ble High Court of Kerala that the District
Forum or the Commission shall not reject a complaint unless an opportunity ----------------------
of being heard has been given to the complainant. (Fon-Ess India Private Ltd;
----------------------
Bangalore Vs Kerala State Consumer Disputes Redressal Commission AIR 2006
Ker 319) ----------------------

Check your Progress 3 ----------------------

----------------------
Fill in the blanks.
----------------------
1. Whether the complaint is admissible or not shall ordinarily be decided
within ____days from the date on which the complaint was received. ----------------------
2. Letter of authorization or power of attorney is required to be filed ----------------------
along with the complaint where the complainant is represented by the
_______________. ----------------------

----------------------

----------------------

Procedure for filing Consumer Complaint 67

 Notes
Activity 3
----------------------

---------------------- “A” buys a laptop from “B” for Rs 50, 000. After 10 days, the laptop
explodes while “A” was using it and causes burns to him. Imagine yourself
---------------------- as “A” who wants to file a complaint in the Consumer Forum. List out the
documents required to be filed along with the complaint.
----------------------

---------------------- 4.5 PROCEDURE ON ADMISSION OF THE COMPLAINT

---------------------- Section 13 of the Act lays down the procedure to be followed on admission
---------------------- of a complaint.
It is the duty of the quasi-judicial bodies established under the Consumer
---------------------- Protection Act, 1986 to investigate into the consumer dispute and follow
---------------------- meticulously the procedure laid down under Sec 13. The term ‘Procedure’ means
rule of procedure which is either prescribed by law or is well-established by
---------------------- principles of Natural Justice. The expression ‘procedure’ as defined in Wharton,
means the mode in which successive steps in litigation are taken. ‘Procedure’
---------------------- indicates the manner and form of enforcing the law.
---------------------- Procedure applicable to State Commission and National Commission
---------------------- The procedure stated in Sec 13 of the disposal of complaints by the District
Forum is also applicable to the disposal of complaints by the State Commission
---------------------- under Section 18 and by the National Commission under Section 22 read with
Rule 14(2) of the Consumer Protection Rules 1987.
----------------------
The procedure to be followed on receipt of the complaint may be classified
---------------------- into two parts:
---------------------- (i) the complaint relating to service or goods which do not require any analysis
or test; or
----------------------
(ii) the complaint relating to goods which require analysis or test.
---------------------- If the complaint relates to goods:-
---------------------- a) refer a copy of the admitted complaint, within twenty-one days from the date
of its admission to the opposite party mentioned in the complaint directing
----------------------
him to give his version of the case within a period of thirty days or such
---------------------- extended period not exceeding fifteen days as may be granted by the District
Forum.
----------------------
This clause ensures that the Forum or Commission has to act within the
---------------------- stipulated time and must ensure that the opposite party/parties as the case
may be should file their reply within the prescribed time limit.
----------------------
The period of thirty days provided under the section cannot be curtailed.
---------------------- Where the notice did not provide thirty days time to the opposite party to
file its reply, it will be a violation of Section 13 (1) (a) and order passed by
---------------------- Consumer Redressal Forum in the absence of opposite party is liable to be

68 Consumer Protection Act, 1986 and Competition Act, 2002

 set aside. (Held in the case of Super Engg Corpn Vs Sanjay Vinayak Pant Notes
(1992) ICPR 218 (NCDRC))
----------------------
b) Where the opposite party on receipt of a complaint referred to him under
clause (a) denies or disputes the allegations contained in the complaint, or ----------------------
omits or fails to take any action to represent his case within the time given by
the District Forum, the District Forum shall proceed to settle the Consumer ----------------------
disputes in the manner specified in clauses (c) to (g).
----------------------
The parties should appear before the Forum/Commission on the assigned
date and timing or their agents or on any other date to which hearing could ----------------------
be adjourned. If the complainant or his agent fails to appear on such dates,
----------------------
the forum may in its discretion either dismiss the complaint for default or
decide it on merit. Where the opposite or its agent fails to appear on the date ----------------------
of hearing, the forum may decide the complaint ex parte.
----------------------
When the opposite party on receipt of the complaint omits or fails to take
any action to present his case within the prescribed time the Redressal Forum ----------------------
shall proceed to settle the consumer disputes on the basis of evidence brought
to its notice by the complainant. ----------------------
It is to be noted that the District Forum has no power to review its order ----------------------
passed on merit though ex parte. (Hindustan Motor Ltd. Vs E.J. Paul
(1996) II CPR 13(Ker. CDRC)). So also, the State Commission also is not ----------------------
empowered to reconsider, amend or alter its own order as it cannot exercise ----------------------
review powers.
Complaint Regarding Goods Requiring Analysis or Test ----------------------

If the complainant contends a defect in the goods which cannot be determined ----------------------
without proper analysis or test of goods, the forum should obtain a sample of
the goods from the complainant; and if necessary, it may obtain more than one ----------------------
sample. On receiving the sample, the forum should seal and authenticate it in the ----------------------
manner prescribed by the Rules made by the State Government and fix a label
on the container carrying the following information: ----------------------
(i) Name and address of the appropriate laboratory to which the sample will ----------------------
be sent for analysis and test;
----------------------
(ii) Name and address of the District Forum;
(iii) Case number; ----------------------
(iv) Name and description of the goods/articles kept in the sealed container; ----------------------
(v) Seal of the District Forum. ----------------------
Once the sample is sealed and authenticated as required, then it should be
----------------------
sent to the appropriate laboratory for necessary analysis or test, with a view to
finding out whether such goods suffer from any defect alleged in the complaint or ----------------------
suffer from any other defect. The laboratory is then required to submit its report
to the forum within a period of forty-five days of the receipt of the sample or ----------------------
within such extended period as may be granted by the forum.
----------------------

Procedure for filing Consumer Complaint 69

 Notes Before any sample of goods is referred to any appropriate laboratory, the
District Forum may require the complainant to deposit to the credit of the forum
---------------------- such fees as may be specified, for payment to the appropriate laboratory for
carrying out the necessary analysis or test in relation to the goods in question.
----------------------
When the opposite party admits the defects in the goods; there is no need to
---------------------- follow the procedure laid down in Sec 13(1) of the Act, namely taking a sample
of the goods and to send it to the appropriate laboratory for analysis.
----------------------
(Omprakash Mathur Vs Indian Rayan Industries Ltd. & Another, (1992) |
---------------------- CPR 19(NCDRC)
---------------------- If the defect in goods can be seen by naked eyes, there is no need to send it for
laboratory test. In Municipal Corporation of Delhi Vs Narendra Rohtagi (1993)|
---------------------- CPR 654, the complainant alleged that he was being supplied contaminated water
and inspite of his requests the quality of water from that tap was not improved.
----------------------
The sample of the water brought before the Consumer Forum was so dirty that
---------------------- it was not considered necessary to send it for the laboratory test. The Delhi State
Commission therefore upheld the decision of the District Forum of not sending
---------------------- the samples for testing as the impurities were visible to the naked eye. The fees
so deposited shall be remitted to the appropriate laboratory to enable it to carry
----------------------
out the necessary analysis or test.
---------------------- Report of Analysis or Test
---------------------- When the forum receives the report of analysis or test from the appropriate
laboratory, it shall forward a copy of the report along with such remarks as it may
---------------------- feel appropriate to the opposite party. This provision adheres to the principles of
---------------------- Natural Justice. It gives an opportunity to know the report so that the opposite
party can defend itself.
---------------------- Objections if any regarding the report made by the appropriate laboratory
---------------------- shall be made in writing to the District Forum by the complainant or the opposite
party as the case may be. The objections can be with respect to correctness of the
---------------------- findings of the appropriate laboratory or disputes the correctness of the methods
of analysis or test adopted by the laboratory.
----------------------
The District Forum shall thereafter give a reasonable opportunity to the
---------------------- complainant as well as the opposite party of being heard as to the correctness
or otherwise of the report made by the appropriate laboratory and also as to the
----------------------
objection made in relation thereto and issue an appropriate order under Sec 14.
---------------------- Procedure to be Followed in Respect of Services and Others
---------------------- Period for deciding the complaint:

---------------------- 1) Every complaint shall be heard as expeditiously as possible;

2) Endeavour shall be made to decide the complaint within a period of three
---------------------- months from the date of receipt of notice by the opposite party where the
---------------------- complaint does not require analysis or testing of commodities; and
3) Within five months, if it requires analysis or testing of commodities.
----------------------

70 Consumer Protection Act, 1986 and Competition Act, 2002

Adjournment Notes
The Amendment Act 2002 has provided that
----------------------
1) No adjournment shall be ordinarily granted by the District Forum unless
sufficient cause is shown; and ----------------------
2) The reasons for grant of adjournment have been recorded in writing by the ----------------------
forum;
----------------------
3) Provided further that the District Forum shall make such orders as to the
costs occasioned by the adjournment, as may be provided in the regulations ----------------------
made under this Act.
----------------------
In the event of a complaint being disposed off after the period so specified,
the District Forum shall record in writing, the reasons for the same at the time ----------------------
of disposing of the said complaint.
----------------------
Arguments
----------------------
The Consumer Protection Regulations, 2005 have laid down provisions
regarding arguments. These provisions are summarized as follows: ----------------------
i. Arguments should be as brief as possible and to the point at issue.
----------------------
ii. If a party is represented by a counsel, it shall be mandatory to file, a brief
of written arguments, two days before the matter is fixed for arguments. ----------------------
iii. If there is a default to file briefs, the costs shall be imposed at the same rate ----------------------
as laid down for grant of adjournments.
----------------------
Sec 13 Sub-Section (3B) provides that where during the pendency of any
proceeding before the District Forum, it appears to it necessary, it may pass such ----------------------
interim order as is just and proper depending on the facts and circumstances of
the case. ----------------------

Prior to the Amendment Act of 2002 there was no such provision to pass ----------------------
interim order by the Forum or the Commission. Sometimes certain situations
----------------------
demand passing of interim orders to protect the aggrieved consumer. Hence, the
present amendment was carried out empowering the Forums/Commissions to ----------------------
pass interim orders.
----------------------
Interim orders are, as the term itself indicates, not permanent in nature. They
are temporary in nature. Such orders are passed without going into the complete ----------------------
details of the merits of the case.
----------------------
The Consumer Protection Regulation, 2005 provide that any ex parte interim
order issued by the Consumer Forum/Commission shall stand vacated after forty- ----------------------
five days if in the meanwhile the objection to the interim order is not heard and
disposed off. ----------------------

----------------------

----------------------

----------------------

Procedure for filing Consumer Complaint 71

 Notes
Check your Progress 4
----------------------

---------------------- Match the following.

i. Super Engg Corpn Vs Sanjay a. Section 13(1)(a)
----------------------
Vinayak Pant
---------------------- ii. Omprakash Mathur Vs Indian b. Defect visible to naked eye no
Ryan Industries Ltd need for lab test
---------------------- iii. Municipal Corporation Delhi c. On admission of defect analysis
Vs Narendra Rohtagi of samples not required
----------------------

----------------------

---------------------- Activity 4

---------------------- Try to bring awareness among your friends about the simple procedure of
---------------------- filing a complaint with the Consumer Forum.

---------------------- 4.6   POWER OF DISTRICT FORUM

----------------------
Sec 13
---------------------- For the purposes of this section, the District Forum shall have the same powers
as are vested in a civil court under Code of Civil Procedure, 1908 namely:-
----------------------
1) The summoning and enforcing, the attendance of any defendant or witness
---------------------- and examining the witness on oath;
---------------------- 2) The discovery and production of any document or other material object
producible as evidence;
----------------------
3) The receipt of evidence on affidavit;
----------------------
4) The requisitioning of the report of the concerned analysis or test from the
---------------------- appropriate laboratory or from any other relevant source;
5) Issuing of any commission for the examination of any witness, and
----------------------
6) Any other matter, which may be prescribed.
----------------------
The procedure which the District Forum has to follow while trying a
---------------------- complaint has been very clearly indicated in Sec 13 of the Consumer Protection
Act. Certain provisions of civil procedure code have been made applicable for
---------------------- the purposes of summoning, documents etc. It is to be noted here that the code
---------------------- of civil procedure has been applied to the proceedings under the Consumer
Protection Act only to a limited extent.
---------------------- Summoning and Attendance of Witness
---------------------- Elaborate provisions are made under the code of civil procedure to ensure
that no proceedings in a court of law should be conducted to the detriment of
---------------------- any party in his absence. Thus, if the complainant remains absent without any

72 Consumer Protection Act, 1986 and Competition Act, 2002

just cause, the complaint is liable to be dismissed. On the other hand, if the Notes
opposite party remains absent or fails to file reply within stipulated time, then
the proceedings are to be conducted ex parte. ----------------------
It is a fundamental rule of law of procedure that a party must have a fair ----------------------
and reasonable opportunity to represent his case. And therefore, he must have
knowledge that legal proceedings are initiated against him. Thus, service of ----------------------
notice/summons on the opposite party is a condition precedent for a fair trial. If
----------------------
the opposite party mischievously avoids the service of summons then it can be
effectuated by affixing a copy of summons on his address. If inspite of service ----------------------
of summons, the opposite party remains absent then the forum may order the
case to proceed ex parte. ----------------------
Discovery and Production of Documents ----------------------
For the proceedings to be conducted effectively and fairly it is essential that
----------------------
all the relevant documents are before the District Forum. The documents which
are very crucial to decide the consumer dispute are likely to be not in possession ----------------------
and power of the consumer and therefore he is unable to prove the allegations
made in the complaint. To overcome this difficulty, the relevant provisions of ----------------------
CPC pertaining to discovery and production of documents or other material
----------------------
object producible as evidence are made applicable.
‘Discovery’ means to compel the opposite party to disclose what he has ----------------------
in his possession or power. The District Forum can direct the opposite party to ----------------------
produce documents, if they are relevant for the purpose of proceedings before
the forum. ----------------------
Issue of Commission to Examine Witness ----------------------
The District Forum can issue a Commission to examine a witness under the
following circumstances- ----------------------

i) if the person to be examined as a witness resides within the local limits of ----------------------
the courts jurisdiction and is exempted under the code from attending court;
----------------------
or
ii) is from sickness or infirmity unable to attend court; or ----------------------
iii) in the interest of justice or for expeditions, disposal of the case or for any ----------------------
other reason, his examination on Commission will be proper; or
----------------------
iv) if he resides beyond local limits of the jurisdiction of the court; or
v) if he is about to leave the jurisdiction of the court; or ----------------------

vi) if he is a government servant and cannot in the opinion of the court attend ----------------------
without detriment to the public service; or
----------------------
vii) if he is residing out of India and the court is satisfied that his evidence is
necessary. ----------------------
The court may issue such a Commission either suo moto (of its own motion) ----------------------
or on the application of any party to the proceedings.
----------------------

Procedure for filing Consumer Complaint 73

 Notes The above category of persons therefore can be exempted from appearing
and the court generally directs its officer/lawyer to record the evidence of such
---------------------- witnesses.
---------------------- Evidence to be Adduced by Affidavits
Affidavit is a statement in writing made on oath. Before the Consumer
----------------------
Forums all evidence is to be adduced by affidavits. Affidavits shall be confined
---------------------- to such facts as the deponent is able of his own knowledge to prove. Every
affidavit should be drawn up in the first person and should contain only facts
---------------------- and not inferences.
---------------------- Essentials of an Affidavit

---------------------- 1) it must be a declaration made by a person;

2) it must relate to facts;
----------------------
3) it must be in writing;
----------------------
4) it must be in the first person; and
---------------------- 5) it must have been sworn or affirmed before a Magistrate or any other
authorized officer.
----------------------
The prime object sought to be achieved by establishing Consumer Forum is
---------------------- to relieve the conventional courts of their burden which is ever increasing with the
---------------------- mounting arrears and whereat the disposal is delayed because of the complicated
and detailed procedure which at time is accompanied by technicalities. It was
---------------------- felt that by simplifying the procedure the consumers will be encouraged to fight
for their rights and thereby get redressal.
----------------------
Proceedings of Summary Nature
---------------------- The proceeding before the Consumer Disputes Redressal Agencies is to be
---------------------- conducted summarily. The case can be decided on the basis of affidavits filed
by the parties and relevant documents produced by the parties.
----------------------
Merely because recording of evidence is required, or some questions of fact
---------------------- and law arise, would need to be investigated and determined, cannot be a ground
for shutting the doors of any forum under the Consumer Protection Act to the
---------------------- person aggrieved. (Promod Grover and Others Vs Dr. Manninder Kaur (2007)
IICPJ 63 (NCDRC)
----------------------
For summary or speedy trial, exhaustive procedure in conformity with the
---------------------- principles of Natural Justice is provided under the Act. Therefore, merely because
it is mentioned that the Commission or Forum is required to have a summary
----------------------
trial would hardly be a ground for directing the consumer to approach the civil
---------------------- court. The Act provides for sufficient safeguards.
This explains that the procedure laid down under Sec 13 is efficacious and no
----------------------
consumer complaint can be rejected merely on the ground that the case involves
---------------------- important questions of law and fact.

----------------------

74 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Check your Progress 5
----------------------
State True or False. ----------------------
1. If the person to be examined as a witness is unable to attend court due
to sickness or infirmity, the District Forum can issue a commission to ----------------------
examine a witness. ----------------------
2. The procedures provided under the Act are not in conformity with the
----------------------
principles of natural justice.
3. For the purposes of Section 13, the District Forum shall have the same ----------------------
powers as are vested in a civil court under Code of Civil Procedure,
----------------------
1908 for the purpose of summoning and enforcing, the attendance of
any defendant or witness and examining the witness on oath. ----------------------

----------------------
Activity 5 ----------------------

----------------------
Read the case of Oriental Insurance Company Ltd. Vs Munimahesh Patel
(2006) IVCPJ (SC). Do you agree with the judgment? Justify. ----------------------

----------------------
Summary
----------------------
●● Complaint can be filed by the consumer, any authorized person of the
consumer, voluntary association, Central Government, State Government ----------------------
or by the legal representatives. Every complaint must give full details of
----------------------
the complaint as well as of the opposite party. The complaint must state
clearly the other details such as when the goods were purchased, what are ----------------------
the defects etc. The procedure for filing complaint is very simple. Only
nominal amount of court fee is required to be paid and persons ‘below ----------------------
the poverty line’ are exempted from payment of court fee stamp. The
----------------------
redressal agencies are empowered to grant interim reliefs under the Act.
The prescribed procedure ensures that time limit is prescribed at every ----------------------
stage to expedite the proceedings.
----------------------
Keywords ----------------------
●● Affidavit: A declaration on oath reduced to writing, affirmed or sworn ----------------------
to by an affiant, before some person who has authority to administer the
same. ----------------------
●● Ex parte: Expressions used to signify something done or said by one ----------------------
person, not in the presence of his opponent.
----------------------
●● Interim Relief/Order: A temporary court order; some order in the course
of proceedings not being a final order. ----------------------

Procedure for filing Consumer Complaint 75

 Notes ●● Natural Justice: That which is found in equity, in honesty and right.
Justice based upon the innate moral feeling of mankind.
----------------------

---------------------- Self-Assessment Questions

---------------------- 1. Who can file a complaint under the Consumer Protection Act?
2. If the opposite party fails to file a reply, what will happen to the complaint?
----------------------
3. List the documents which are required to be filed along with the complaint.
----------------------
4. What is an affidavit?
---------------------- 5. What is class action?
----------------------
Answers to Check your Progress
----------------------
Check your Progress 1
----------------------
State True or False.
----------------------
1. False
---------------------- 2. True
---------------------- 3. True

---------------------- Check your Progress 2

Fill in the blanks.
----------------------
1. The Consumer Forum cannot entertain the complaint if it is not filed
---------------------- within the period of two years from the date of cause of action.
---------------------- 2. According to Section 24A, the delay in filing the complaint can be
condoned.
----------------------
Check your Progress 3
---------------------- Fill in the blanks.
---------------------- 1. Whether the complaint is admissible or not shall ordinarily be decided
within 21 days from the date on which the complaint was received.
----------------------
2. Letter of authorisation or power of attorney is required to be filed along
---------------------- with the complaint where the complainant is represented by the authorised
agent.
----------------------
Check your Progress 4
----------------------
Match the following.
---------------------- i. – a.
---------------------- ii. – c.

---------------------- iii. – b.

----------------------

76 Consumer Protection Act, 1986 and Competition Act, 2002

Check your Progress 5 Notes
State True or False.
----------------------
1. True
----------------------
2. False
3. True ----------------------

----------------------
Suggested Reading
----------------------
1. http://ncdrc.nic.in/1_1_2.html
----------------------
2. http://consumereducation.in/defectivegood.pdf
----------------------

----------------------

----------------------
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

Procedure for filing Consumer Complaint 77

 Notes

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

78 Consumer Protection Act, 1986 and Competition Act, 2002

Appeals
UNIT

5
Structure:
5.1 Introduction
5.2 Appeal to State Commission
5.3 Period of Limitation for Appeal before the State Commission
5.4 Appeal to National Commission
5.5 Appeal to the Supreme Court

Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

Appeals 79
 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Appraise the provisions regarding appeal
----------------------
• Explain the procedure and disposal of appeal
---------------------- • Enumerate the contents of the appeal memo
----------------------
5.1 INTRODUCTION
----------------------
In the statement of objects and reasons of the Consumer Protection Act,
---------------------- 1986, it is said that the act seeks to provide speedy and simple redressal to
consumer disputes.
----------------------
We have seen the composition and jurisdiction of District Forum, State
---------------------- Commission and National Commission. These quasi judicial bodies are to
observe the principles of natural justice and have been empowered to grant
---------------------- relief to the aggrieved consumer (Unit 7) including compensation and penalties
for non-compliances of orders given by these quasi judicial bodies have also
----------------------
been provided.
---------------------- In this unit, the provisions regarding appeal are dealt with. The consumer
who is aggrieved and dissatisfied by the judgment and order of the District Forum
----------------------
can file appeal against order of the District Forum to the State Commission and
---------------------- the person aggrieved by the order of the State Commission can prefer appeal to
the National Commission. Against the decision of the National Commission, the
---------------------- consumer can then knock the doors of the Apex Court for justice and redressal.
---------------------- Who can file? When can you file appeal? Is any court fee payable? What
document should accompany the appeal? Can a lawyer represent the consumer
---------------------- in appeal?
---------------------- All the above questions are dealt with in the following unit.

---------------------- 5.2 APPEAL TO STATE COMMISSION

----------------------
Meaning of Appeal:
---------------------- Appeal is the right of entering Superior Court and invoking its aid and
interposition to redress the error of the court below. The appellate court therefore
----------------------
acts as a superior body which rectifies the error committed by the lower court.
----------------------
5.3 PERIOD OF LIMITATION FOR FILING APPEAL
----------------------
BEFORE STATE COMMISSION
----------------------
According to sec 15 of the Act, 1986 any person aggrieved by an order
---------------------- made by the District Forum may prefer an appeal against such order to the State
Commission within a period of thirty days from the date of the order in such
---------------------- form and manner as may be prescribed.

80 Consumer Protection Act, 1986 and Competition Act, 2002

 When the appeal memo is presented, it has to be accompanied by the Notes
certified copy of the order of the District Forum. This ensures that a scrutiny
of the appeal by the State Commission at the time of the institution is to satisfy ----------------------
itself whether the appeal has been filed by the person aggrieved by the order or
not. The right to appeal is a pure creature of the statute. There is no natural or ----------------------
inherent right to a first appeal. ----------------------
It is important to note that it is not necessary that the person who has
----------------------
preferred the appeal must be a party in the complaint before the District Forum,
but the leave to prefer the appeal can be granted to a person interested and ----------------------
affected by the order of the District Forum.
----------------------
Appeal to be filed along with certified copies
For filing appeal under sec 15 of the Consumer Protection Act, it is ----------------------
necessary that the certified copy of the order of the District Forum appealed
----------------------
against should be filed with the memorandum of appeal. Rule 8 (3) of the Delhi
Consumer Protection Rules, 1987 prescribes the procedure for the appeals ----------------------
which lays down that each memorandum shall be accompanied by a certified
copy of the order of the District Forum. ----------------------
As the appellant had not filed the certified copy of the order of the District ----------------------
Forum, it has been held that the appeal is not a proper appeal in the eye of the
law and is liable to be dismissed on this short ground. (Municipal Corporation ----------------------
of Delhi Vs. Narinder Kumar Rohtagi II (1993) (PJ 811 (Del)) In this case, ----------------------
the petitioner filed along with the memorandum of appeal, Photostat copies of
the certified copies of the orders of the District Forum instead of the certified ----------------------
copies and when the deficiency was pointed out, the petitioner moved an
application for leave to file the original certified copies and for condonation ----------------------
of delay which application was dismissed by the commission by holding that ----------------------
there is not sufficient ground to condone the delay. In these circumstances, the
National Commission held that the rules of procedure are intended to advance ----------------------
the interest of the consumers and should be so interpreted as to sub serve the
purpose and scope of the act. The relief could not be denied on a hyper technical ----------------------
interpretation of the rules and accordingly, the application for condo nation of ----------------------
delay was allowed and the appeal was remanded to the State Commission for the
decision of the appeal on merits. (V.P. Sant Vs. Chairman, Delhi Development ----------------------
Authority II (1995) CPJ 248 (249) NC)
----------------------
The law of limitation depends upon the maxim interest reipublicae ut sit
finis litium which means that the interest of the State requires that there should ----------------------
be an end to litigation. If a right which is not exercised within a reasonable time
is considered to be non-existent under the law of limitation, the court assists ----------------------
only those who are vigilant and conscious of their rights and who do not sleep ----------------------
over their rights.
The period of limitation for filing appeal before the State Commission ----------------------
against the order of the District Forum is thirty days from the date of the order ----------------------
(sec 15).
----------------------

Appeals 81
 Notes It is further provided that the commission may entertain the appeal after
the expiry of the said period of thirty days if it is satisfied that there was sufficient
---------------------- cause for not filing it within that period.
---------------------- The law of limitation deprives or restricts the right of an aggrieved person
to have recourse to legal remedy and where its language is ambiguous, that
---------------------- construction should be preferred which preserves such remedy to the one which
bars or defeats it. The time requisite for obtaining certified copies undoubtedly
----------------------
means ‘the time properly required’ and thus that period is to be excluded in
---------------------- computing the period of 30 days for filing appeal.
Suppose the District Forum has given its order on 25/01/09. The appellant
----------------------
(the aggrieved person) prefers application for obtaining certified copies on
---------------------- 26/01/09 and gets the certified copies of the judgment and order say on 10/02/09.
Then the period of limitation of thirty days is to be calculated from 11/02/09.
---------------------- But if the appellant negligently fails to apply for certified copies for 30 days,
then he cannot plead that certified copies where not available. Only the period
----------------------
required for obtaining certified copy is to be excluded in computing 30 days.
----------------------
Condonation of Delay
----------------------
As stated earlier, the appeal can be entertained beyond the period of
---------------------- limitation, 30 days as per the proviso to sec 15 and sec 19 of the Consumer
Protection Act 1986. The State Commission and the National Commission can
---------------------- entertain appeal if it is satisfied that there was sufficient cause for not filing it
within the prescribed period of 30 days.
----------------------
The provision of sec 5 of the Limitation Act, 1963 and the proviso to
---------------------- sections 15 and 19 of the Consumer Protection Act are almost similar using the
term ‘sufficient cause’ for condoning the delay in filing the appeal. According to
----------------------
the Supreme Court, the expression ‘sufficient cause’ employed by the legislature
---------------------- is adequately elastic to enable the courts to apply the law in a meaningful manner
which sub-serves the ends of justice that being life purpose for the existence of
---------------------- the institution of courts. (AIR 1987 SC 1353)
---------------------- In Vice Chairman, DDA Vs O.P. Gauba, (III (1995) CPJ 18(NC)) there
was a delay of 38 days by the Delhi Development Authority in making the
---------------------- appeal. The ground for delay was the examining of the case from all its aspects
at different levels. It was held that delay caused by inter-office consultations is
----------------------
not sufficient cause and hence the delay was not condoned.
---------------------- In Mahendra Thakar Vs Devendra Kothari ((1996)IICPR 293(Bihar
---------------------- CDRC)) an appeal against the order of the District Forum was made before
the Rajasthan State Commission after 472 days of the expiry of the period of
---------------------- limitation. The appellant miserably failed to substantiate his case for presenting
the appeal after such a long delay. The commission dismissed the application
---------------------- for condonation of delay and observed: The appellant is required to explain the
---------------------- delay beyond terminus line of the prescribed period of limitation and further
that he has acted diligently for the purposes of filing the appeal.
----------------------

82 Consumer Protection Act, 1986 and Competition Act, 2002

 The provisions of Consumer Protection Act have to be construed in Notes
favour of the consumer to achieve the purpose of the enactment as it is a social-
benefit-oriented legislation. The primary duty of the court, while construing ----------------------
the provisions of such an act, is to adopt a constructive approach subject to that
it should not do violence to the language of the provisions and is not contrary ----------------------
to attempted objective of the enactment (AIR 1994 SC 787). Therefore, the ----------------------
consumer redressal forum should not legalize injustice on technical grounds
of limitation but should prefer cause of substantial justice to that of technical ----------------------
considerations thereby removing injustice being done to the consumers.
----------------------
Whether or not there is a sufficient cause for condonation of delay is a
question of fact and, therefore, the order of allowing or refusing an application ----------------------
to extend time cannot be interfered within revision, unless the lower court has
----------------------
acted with material irregularity or contrary to law or has come to that conclusion
on no evidence. When the court after keeping in view the relevant principles, ----------------------
exercises its discretion granting relief, then unless it is shown to be manifestly
unjust or perverse, it should not be interfered with by the higher court. ----------------------
Therefore it can be inferred that the discretion exercised by the State ----------------------
Commission under application for condonation of delay cannot be interfered
within revision, contrary to law. However no appeal lies against such order ----------------------
allowing or refusing an application for condonation of delay.
----------------------
Affidavit
----------------------
If there is a delay in presenting the appeal i.e. after 30 days, then the
memorandum of appeal shall be accompanied by an application supported by an ----------------------
affidavit setting forth, the fact on which the appellant relies to satisfy the State
Commission that he has sufficient cause for not preferring the appeal within the ----------------------
period of limitation. ----------------------
Appellant to deposit 50% or Rs. 25,000/-
----------------------
By virtue of the Amendment Act 2002, a new proviso to sec 15 has been
added. The new proviso states that no appeal by a person, who is required to ----------------------
pay any amount in terms of an order of the District forum, shall be entertained
by the State Commission unless the appellant has deposited in the prescribed ----------------------
manner fifty percent of that amount or twenty five thousand rupees, whichever ----------------------
is less.
----------------------
The object of this provision is to encourage only serious litigation and
to discourage unnecessary appeals against the order of the District Forum to ----------------------
postpone the liability till the appeal is decided. It is hoped that this provision
will help in bringing only genuine cases before the State Commission and ----------------------
thereby reduce the number of appeals filed with the State Commission.
----------------------
Can interim stay be granted during the pendency of appeal?
----------------------
The filing of appeal may become ineffective if no interim stay is granted
pending the hearing of appeal. The hearing and disposal of appeal is to be done ----------------------
consistently with the accepted principles of justice and statute. The recognition
of the existence of such power in the State Commission to grant suitable ----------------------

Appeals 83
 Notes interim order, depending upon the circumstances of a particular case, keeping
in abeyance enforcement of the order under appeal wholly or in part, upon
---------------------- such condition, if any considered appropriate by it would advance the cause of
justice. Such a view must be preferred to the one, which defeats it. (AIR 1993
---------------------- SC 361) Therefore it can be inferred that interim stay can be granted to serve
---------------------- the ends of justice.
Procedure for Hearing Appeal
----------------------
The Consumer Protection Act 1986, and the rules framed by the states have laid
---------------------- down the following procedure for presenting and hearing of appeal.
----------------------  The appeal has to be preferred within 30 days from the date of the order of
the District Forum (time for obtaining certified copy and public holiday to
---------------------- be excluded in computing the period of 30 days).
----------------------  The memorandum of appeal shall be presented by the appellant or his
authorized agent to the State Commission in person or sent by registered
---------------------- post addressed to the commission.
----------------------  The memorandum shall be in legible handwriting, preferably typed.
----------------------  Every appeal memo shall be signed by the person presenting it. Appeal
memo must be filed along with the certified copy of the order passed by
---------------------- District Forum against which appeal is preferred.
----------------------  Appeal memo also to be accompanied by such of the documents, as may be
required to support grounds of objection mentioned in the memorandum.
----------------------
 The appeal memo shall set forth concisely under distinct heads, the grounds
---------------------- of appeal without any argument or narrative and such grounds shall be
numbered consequently.
----------------------
 Four copies of the appeal memo to be furnished to the State Commission
---------------------- for official purpose.
 The appellant and opposite party should remain present on the date of the
----------------------
hearing or any other day to which hearing may be adjourned.
----------------------  If the appellant or his authorized agent fails to appear on such date, the
---------------------- commission may in its discretion either dismiss the appeal or decide it on
the merits of case.
----------------------
 If the opposite party/respondent or his authorized agent fails to appear on
---------------------- such date, the commission shall proceed ex-parte and shall decide the appeal
ex-parte on the merits of the case.
----------------------
 The State Commission may, on such terms as it may think fit and at any
---------------------- stage, adjourn the hearing of appeal, but not more than one adjournment
shall ordinarily be given and the appeal shall be decided as far as possible
---------------------- within ninety days from the first date of hearing.
----------------------  The appellant and the opposite party to put up their arguments in support
of their case.
----------------------

84 Consumer Protection Act, 1986 and Competition Act, 2002

 The appellant shall not except by leave of the State Commission, urge or Notes
be heard in support of any ground of objection not set forth in the appeal
memo, but the commission, in deciding the appeal, need not confine to the ----------------------
grounds of objection taken by leave of the commission.
----------------------
 The commission shall not rest its decision on any other grounds unless the
party who may be affected thereby, has been given atleast one opportunity ----------------------
of being heard by it. Complete address of the parties and advocates should
----------------------
be given.
 If there is a delay in filing appeal within thirty days, a separate application ----------------------
for condonation of delay should be filed explaining the cause of delay along
----------------------
with affidavit should be presented with the memorandum of appeal.
 Prescribed amount of deposit to be paid at the time of filing appeal. ----------------------

----------------------

Check your Progress 1 ----------------------

----------------------
State True or False.
1. Appeal not filed with the certified copy of the order of the District ----------------------
Forum is not proper in the eyes of law and is liable to be dismissed. ----------------------
2. The State Commission and the National Commission can entertain
----------------------
appeal even if it is satisfied that there was sufficient cause for not
filing it within the prescribed period of 30 days. ----------------------

----------------------
Activity 1 ----------------------

----------------------
Identify with the help of Internet more cases on condonation of delay.
----------------------
5.4 APPEAL TO NATIONAL COMMISSION ----------------------
Sec 19 of the Act states that any person aggrieved by an order made by ----------------------
the State Commission in exercise of its powers conferred by sub-clause (i) of
clause (a) of sec 17 may prefer an appeal against such order to the National ----------------------
Commission within a period of thirty days from the date of the order in such
form and manner as may be prescribed. ----------------------

Appeal may be entertained beyond thirty days. ----------------------

The National Commission may entertain an appeal after the expiry of the ----------------------
said period of thirty days if it is satisfied that there was sufficient cause for not
filing it within that period. ----------------------
The period of limitation for filing appeal under sec 19 of the Consumer ----------------------
Protection Act shall be computed from the date of communication of the order
of the State Commission to the party adversely affected and not from the date ----------------------

Appeals 85
 Notes of the pronouncement of the order. The date of pronouncement of the order in
the open court by itself cannot be the starting point for determining the period
---------------------- of limitation under sec 15 of the Act.
---------------------- It is also required that the order so pronounced was signed by the members
constituting to the parties free of charge. Therefore mere pronouncement of an
---------------------- order in the open court will not be enough but under the scheme of the rules, a
copy of the said order has also to be communicated to the parties affected by
----------------------
the said order so that the party adversely affected therefrom may have a fair and
---------------------- reasonable opportunity of knowing the text, reasons and contents thereof so as
to formulate grounds of attack before the appellate body or higher forum.
----------------------
An appeal to the National Commission can lie only against the order made
---------------------- by the State Commission in exercise of power under its original jurisdiction. It
means the provisions exist only for single appeal. The appeal from the orders
---------------------- of District Forum shall lie only to the State Commission under 17(1)(a)(ii) and
there cannot be second appeal to the National Commission. By providing single
----------------------
appeal, it is intended to save the consumer from unnecessary harassment by the
---------------------- opposite party.
Appeal to the National Commission after Period of Limitation
----------------------
The proviso to section 19 very clearly states that the National Commission
---------------------- may entertain an appeal after the expiry of the period of thirty days if it is satisfied
that there was sufficient cause for not filling it within that period. The words
----------------------
‘sufficient cause’ and ‘satisfied’ used in the proviso are in pari materia with the
---------------------- words used in sec 5 of the Limitation Act 1963.
Affidavit
----------------------
Where there is a delay in filing appeal within 30 days, then an application
---------------------- has to be preferred requesting the court to condone the delay and explaining the
cause for the delay. Such application has to be filed along with an affidavit. It
----------------------
can be seen that same requirements are to be fulfilled for filing appeal before
---------------------- the National Commission as are required for filing appeal before the State
Commission.
----------------------
An appeal filed before the State Commission or the National Commission
---------------------- shall be heard as expeditiously as possible and an endeavour shall be made to
finally dispose off the appeal within a period of ninety days from the date of its
---------------------- admission. The order of National Commission shall be communicated to the
parties concerned free of cost.
----------------------
Appellant to deposit 50% or Rs. 35,000/-
----------------------
The Amendment Act 2002 has added a new proviso to sec 19 of the
---------------------- Consumer Protection Act.
The said proviso states that no appeal by a person, who is required to pay
----------------------
any amount in terms of an order of the State Commission, shall be entertained
---------------------- by the National Commission unless the appellant has deposited in the prescribed
manner fifty percent of the amount or thirty-five thousand and whichever is
---------------------- less.

86 Consumer Protection Act, 1986 and Competition Act, 2002

 With this provision, it will help the complainant with speedy recovery of Notes
compensation and redressal and the tendency to postpone the payment by the
opposite party will be curtailed to certain extent. The condition to deposit 50% ----------------------
of the amount or rupees thirty-five thousand whichever is less will now reduce
the number of appeals and only genuine cases hopefully will be filed before the ----------------------
National Commission. ----------------------
The Procedure for Hearing appeal before National Commission
----------------------
The procedure for presenting and hearing of appeal before the National
Commission is the same as presenting and hearing of appeal before the State ----------------------
Commission. Before the National Commission, six copies of the memorandum
----------------------
of appeal are required to be submitted for official purpose. The procedure for
filing appeal before the State Commission is already stated. ----------------------
The appellant forums under the Consumer Protection Act should not
----------------------
insist on the presence of the appellant nor an authorized representative of his
at the time of hearing. The appeal needs to be decided on the basis of records ----------------------
available before it. Too technical view in dismissing the appeal on the ground
that the appellant was not present at the time when the appeal was taken up for ----------------------
hearing is not valid (I(1994)CPJ207(NC)).
----------------------
As already mentioned, the hearing of appeal has to be completed in a time
bound manner. Sec 19A under its proviso states that an appeal filed before the ----------------------
State Commission or the National Commission shall be heard as expeditiously ----------------------
as possible and an endeavour shall be made to finally dispose off the appeal
within a period of ninety days from the date of its admission. ----------------------
It further stated under the proviso to sec 19A that in the event of an appeal ----------------------
being disposed off after the period so specified, the State Commission or the
National Commission, as the case may be, shall record in writing the reasons ----------------------
for the same at the time of disposing of the said appeal. This proviso is aimed at
speedy disposal and a complete transparency in the proceedings. ----------------------

Adjournment ----------------------
1) No adjournment shall be ordinarily granted by the State Commission or the ----------------------
National Commission as the case may be unless sufficient cause is shown
and the reasons for grant of adjournment have been recorded in writing by ----------------------
such commission.
----------------------
2) The State Commission or the National Commission as the case may be can
impose such costs occasioned by the adjournment as may be provided in ----------------------
the regulations made under this Act.
----------------------
It is settled position of law that in an appeal, the parties cannot urge new
facts. From the pleadings of the respondents before the State Commission, it is ----------------------
found that the respondent pleaded that the property damaged was not covered ----------------------
under the insurance policy but this plea was given by National Commission and
a plea was taken up in grounds of appeal that the terms and conditions of the ----------------------
insurance policy were violated by the applicant by using used kiln furniture,
which on new ground was accepted by the National Commission and in such ----------------------

Appeals 87
 Notes circumstances it has been held by the Supreme Court of India that the order of
the National Commission is not sustainable in law because in the appeal the
---------------------- parties cannot urge new facts. (Modern Insulators Ltd. Vs. Oriental Insurance
Co. Ltd. (AIR 2000 SC 1014))
----------------------
Where the appeal was dismissed on merits without hearing the counsel
---------------------- and the application to recall that order was also dismissed, it is held that the
order cannot be restored. (Indian Oil Corporation Vs. Lakshmi Shankar.
----------------------
(Narayan 2001 NC1 (sc) 517).
----------------------
If the appeal is dismissed without considering it on merit, the order of
---------------------- dismissal is liable to be set aside and the matter be remitted for decision on
merits.
----------------------
(R. Sugumar Vs. Romiel Samuel 2001 NC|SC 566)
---------------------- Power to set aside ex-parte orders
---------------------- Sec 22A which is inserted by the Amendment Act, 2002 provides that
where an order is passed by the National Commission ex-parte against the
---------------------- opposite party or a complainant, as the case may be, the aggrieved party may
---------------------- apply to the commission to set aside the said order in the interest of justice.
This Amendment has therefore now equipped the National Commission
----------------------
with the additional power of setting aside ex-parte order in the interest of justice.
---------------------- The National Commission can set aside ex-parte order (i) on the
application filed by the party aggrieved and (ii) if the National Commission is
----------------------
of the opinion that the said order is liable to be set aside in the interest of justice.
---------------------- The inferences can be drawn as follows:
---------------------- 1) Right to appeal is a statutory right. Every appeal whether before the State
Commission or the National Commission has to be decided and disposed
---------------------- off as expeditiously as possible within a period of ninety days.
---------------------- 2) No adjournment to be ordinarily granted. Costs can be imposed while
adjourning the case. This provision will protect the consumer from being
---------------------- harassed by the delay tactics of the respondent.
---------------------- 3) The appeal has to be decided on merits and a reasoned decision (speaking
order) has to be passed.
----------------------
4) Every appeal has to be filed within 30 days from the date of knowledge of
---------------------- the order.
---------------------- 5) Delay in filing appeal can be condoned if sufficient cause is shown and the
consumer forum is satisfied about the same.
----------------------
6) With the Amendment Act 2002, the State Commission and the National
---------------------- Commission can grant interim relief and interim stay pending the final
disposal of the appeal.
----------------------
7) It is pre-requisite for filing appeal to deposit Rs. 25,000 or fifty percent of
---------------------- the amount ordered

88 Consumer Protection Act, 1986 and Competition Act, 2002

  for filing appeal before the State Commission and Rs. 35,000 or fifty Notes
percent of the amount ordered
----------------------
 for filing appeal before the National Commission and Rs. 50,000 or
fifty percent of the amount ordered whichever is less. ----------------------
This provision is aimed at encouraging only genuine appeals to be filed
----------------------
before the consumer forum.
8) Ex-parte orders can be set aside by the National Commission on the ----------------------
application preferred by the aggrieved party.
----------------------
9) The act provides for only single appeal.
----------------------
Check your Progress 2 ----------------------

Fill in the blanks. ----------------------

1. Right to appeal is a __________ right. ----------------------

2. The period of limitation for filing appeal under Section 19 of ----------------------
the Consumer Protection Act shall be computed from the date of
___________ of the order of the State Commission to the party ----------------------
adversely affected.
----------------------
3. If the appeal is dismissed without considering it on merit, the order of
dismissal is liable to be _______. ----------------------

----------------------

----------------------
Activity 2
----------------------
Find few newspaper articles related to National Commission on Consumer
Dispute Resolution. ----------------------

----------------------
5.5 APPEAL TO THE SUPREME COURT ----------------------
1) Any person who is aggrieved by an order made by the National Commission ----------------------
may prefer an appeal against such order to the Supreme Court within a period
of thirty days from the date of the order. ----------------------
2) Any appeal which is preferred after the expiry of thirty days may be ----------------------
entertained by the Supreme Court if it is satisfied that there was sufficient
cause for not filing it within that period. ----------------------
3) No appeal by a person who is required to pay any amount in terms of an ----------------------
order of the National Commission shall be entertained by the Supreme Court
unless that person has deposited in the prescribed manner fifty percent of ----------------------
that amount or Rupees Fifty Thousand, whichever is less.
----------------------

----------------------

Appeals 89
 Notes Procedure for hearing appeal before the Supreme Court
The procedure is the same as applicable to the National Commission. At
----------------------
least seven copies of the appeal are to be presented.
----------------------
Check your Progress 3
----------------------

---------------------- Multiple Choice Single Response.

1. Any person who is aggrieved by an order made by the National
----------------------
Commission may prefer an appeal against such order to the Supreme
---------------------- Court within a period of____________ from the date of the order.

---------------------- i. one month

ii. 30 days
----------------------
iii. 21 days
----------------------
2. No appeal by a person who is required to pay any amount in terms
---------------------- of an order of the National Commission shall be entertained by the
Supreme Court unless that person has deposited in the prescribed
---------------------- manner ___________.
---------------------- i. Fifty per cent of that amount
ii. Rs 50,000
----------------------
iii. Fifty per cent of that amount or Rs 50,000, whichever is less
----------------------

----------------------

---------------------- Activity 3
---------------------- Go through the Consumer Protection (Amendment) Bill, 2011.
----------------------
Summary
----------------------
●● From the perusal of the provisions of the Consumer Protection Act 1986,
----------------------
it can be seen that an endeavour has been made at every step of the
---------------------- proceedings for speedy disposal of the proceedings. The most discouraging
and frustrating element present in our legal setup of inordinate delays
---------------------- at every stage of proceedings has to a large extent discouraged the
aggrieved, the sufferer from going to the court of law for justice. The
----------------------
right to appeal is a statutory right. All the provisions and procedure for
---------------------- hearing and disposal of appeal has to be done as expediously as possible.
The commissions are not to grant adjournments. The appeal has to be
---------------------- heard and decided on merits of the case.
----------------------

----------------------

90 Consumer Protection Act, 1986 and Competition Act, 2002

 Keywords Notes

----------------------
●● Aggrieved Person: A person who has suffered a legal grievance, the
person whose rights are adversely affected by a judgment, decree or order. ----------------------
●● Appeal: It is the right of entering a superior court and invoking its aid and
interposition to redress the error of the court below. ----------------------

●● Appellant: The person who files the appeal. ----------------------

●● Respondent: The person against whom appeal is filed. ----------------------
●● Pleadings: Plaint or written statement containing in a concise form, the
material facts on which the party pleading relies for his claim or defence. ----------------------

----------------------
Self-Assessment Questions
----------------------
1. State the period of limitation for filing appeal before the State Commission.
----------------------
2. What amount is required to be deposited at the time of filing appeal before
the National Commission? ----------------------
3. Can the National Commission set aside ex-parte orders? ----------------------
4. When can the delay be condoned for filing appeal?
----------------------
5. What is the maximum period laid down under the act for disposing off
appeal by State Commission and National Commission? ----------------------

6. Explain briefly the procedure for filing appeal. ----------------------

7. When can appeal be preferred to Supreme Court? ----------------------

Answers to Check your Progress ----------------------

Check your Progress 1 ----------------------

State True or False. ----------------------

1. True ----------------------
2. False
----------------------
Check your Progress 2
----------------------
Fill in the blanks.
1. Right to appeal is a statutory right. ----------------------

2. The period of limitation for filing appeal under Section 19 of the Consumer ----------------------
Protection Act shall be computed from the date of communication of the
----------------------
order of the State Commission to the party adversely affected.
3. If the appeal is dismissed without considering it on merit, the order of ----------------------
dismissal is liable to be set aside.
----------------------

----------------------

Appeals 91
 Notes Check your Progress 3
Multiple Choice Single Response.
----------------------
1. Any person who is aggrieved by an order made by the National Commission
---------------------- may prefer an appeal against such order to the Supreme Court within a
period of ________ from the date of the order.
----------------------
ii. 30 days
----------------------
2. No appeal by a person who is required to pay any amount in terms
---------------------- of an order of the National Commission shall be entertained by the
Supreme Court unless that person has deposited in the prescribed manner
---------------------- ___________.
---------------------- iii. Fifty per cent of that amount or Rs. 50,000, whichever is less

----------------------
Suggested Reading
----------------------
1. http://consumereducation.in/cjustice.pdf
----------------------
2. http://chdconsumercourt.gov.in/SupremeCourtRules.pdf
---------------------- 3. http://consumereducation.in/cons_book1_final.pdf
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

92 Consumer Protection Act, 1986 and Competition Act, 2002

Enforcement of Orders and other relevant Provisions
UNIT

6
Structure:
6.1 Introduction

6.2 Finality of Orders

6.3 Enforcement of Orders

6.4 Dismissal of Frivolous and Vexatious Complaints

6.5 Penalties and Miscellaneous Provisions

6.6 Appeal against Order passed under Section 27

6.7 Protection of Action taken in Good Faith

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Enforcement of Orders and other relevant Provisions 93

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Discuss the provisions as to finality and enforcement of orders
----------------------
• Specify the limitation period for filing complaints
---------------------- • Enumerate the provisions pertaining to false and frivolous complaints
---------------------- • State the provisions regarding the penalties provided under the
Consumer Dispute Resolution Act , 1986
----------------------

---------------------- 6.1 INTRODUCTION

---------------------- The Consumer Protection Act, 1986 has created a hierarchy of bodies
under the Act with the power to hear complaints and appeals at every stage. The
---------------------- aggrieved party can file appeal to the State Commission against the decision
of the District Forum, and to the National Commission against the decision of
----------------------
the State Commission and before the Supreme Court against the decision of the
---------------------- State Commission and before the National Commission. All the orders passed
by the Consumer Forum/Commission would be meaningless and merely paper
---------------------- orders if there was no provision in the Consumer Protection Act, 1986 for the
effective implementation and enforcement of such orders.
----------------------
Let us now consider the effect of an order against which no appeal is
---------------------- preferred, and also about the enforceability of the orders.
----------------------
6.2 FINALITY OF ORDERS
----------------------
If no appeal has been preferred against the order of the District Forum,
---------------------- State Commission or the National Commission, then such an order under the
provisions of this Act shall be final.
----------------------
The purpose of this section 24 is to give finality to the orders where
---------------------- none of the litigating party has moved up the hierarchy for preferring appeal.
Once the order passed by the District Forum, State Commission or National
----------------------
Commission is under the Act, the order shall be final and cannot be challenged
---------------------- by a substantive suit or any other litigation in any court.

---------------------- 6.3 ENFORCEMENT OF ORDERS

----------------------
Sec 25 of the Consumer Protection Act deals with enforcement of
---------------------- orders passed by the District Forum/Commissions. The Consumer Protection
Amendment Act 2002 has now strengthened the Consumer forum by providing
---------------------- them with the power to attach the property of the person who fails to comply
with the order of the forum.
----------------------
Sec 25(1) states that where an interim order made under this act, is not
---------------------- complied with the District Forum or the State Commission or the National

94 Consumer Protection Act, 1986 and Competition Act, 2002

Commission as the case may be, it may order the property of the person, not Notes
complying with such order to be attached.
----------------------
This clause thus emphasizes that all interim orders passed by the consumer
redressal forum shall be complied with. If there is a failure to comply any such ----------------------
interim order passed by the forum/commission then the property of the person
not complying with such order may be attached. The attachment of property ----------------------
means to take away the power of alienation of the person concerned and also to
----------------------
give notice to the person concerned and also to give notice to the general public
not to purchase or deal with the property attached. The consumer protection act ----------------------
is silent on the issue as to which property can be attached and which cannot be
attached and what would be the manner of attachment. For this, one has to refer ----------------------
to the provision of civil procedure code, 1908, sec 60 to 64 and rules 41 to 59
----------------------
of order XXI.
Properties such as necessary wearing apparel, cooking vessels, beddings, ----------------------
tools of artisans, implements of husbandry, pensions and gratuities, etc. are
----------------------
the properties which cannot be attached. All movable and immovable property
belonging to the person who has failed to comply with the order may be attached. ----------------------
Section 25 (2) lays down that no attachment made under sub-section (1)
----------------------
shall remain in force for more than three months at the end of which, if the non-
compliance continues, the property attached may be sold, out of the proceeds ----------------------
thereof, National Commission may award such damages as it thinks fit to the
complainant and shall pay the balance if any to the party entitled thereof. ----------------------
The attachment order passed by the forum/commissions is to remain in ----------------------
force for three months. Thus sufficient time is given to the party to comply with
the orders of the forum/commissions. It is only after the period of 90 days that the ----------------------
property attached may be sold if the non-compliance still continues. From the sale ----------------------
proceeds of the attached property, the District Forum or the State Commission
or the National Commission may award damages as may be appropriate to the ----------------------
complainant and the balance money if any left to the party entitled to. Thus
sufficient time is made available to comply with the interim order passed by the ----------------------
National Commission, State Commission or the District Forum. ----------------------
Section 25(3) states that where any amount is due from any person under an
order made by a District Forum, State Commission or the National Commission, ----------------------
as the case may be, the person entitled to the amount may make an application to ----------------------
the District Forum, State Commission or the National Commission and then the
forum/commission may issue a certificate for the said amount to the collector of ----------------------
the district (by whatever name called) and the collector shall proceed to recover
amount in the same manner as arrears of land revenue. ----------------------

This provision declares that if any amount is due under any order of the ----------------------
Consumer fora then the said amount can be recovered by the person who is
entitled to such an amount by making an application to the consumer forum ----------------------
and on receiving such an application, the consumer forum as per this clause (3) ----------------------
may issue a certificate for the said amount to the collector. The collector shall
proceed to recover the amount in the same way as arrears of the land revenue. ----------------------

Enforcement of Orders and other relevant Provisions 95

 Notes
Check your Progress 1
----------------------

---------------------- State True or False.

1. According to Section 24, where an interim order passed by the
---------------------- Consumer Forum is not complied with, it has power to attach the
---------------------- property of such person.
2. Attachment of property under Section 25 shall remain in force for
----------------------
three months. Thereafter, it will be sold if non-compliance continues.
----------------------

----------------------
Activity 1
----------------------
Enlist the other laws in which the Court/Forum has been given power to
---------------------- attach property.
----------------------

---------------------- 6.4 DISMISSAL OF FRIVOLOUS AND VEXATIOUS COMPLAINTS

---------------------- Section 26 of the act upholds the spirit of the Consumer Protection Act
1986. Sec 26 of the Act declares that all frivolous or vexatious complaints filed
---------------------- before the District Forum, State Commission or the National Commission shall
be dismissed. The consumer redressal forum shall for reasons to be recorded
----------------------
in writing, dismiss the complaint and make an order thereby calling upon the
---------------------- complainant to pay to the opposite party such cost, not exceeding ten thousand
rupees, as may be specified in the order.
----------------------
Prior to the amendment act of 1993, section 26 of the act simply provided
---------------------- the dismissal of a frivolous or vexatious complaint but did not provide any
penalty for such a complaint. But now the consumer forum can impose penalty
---------------------- as may be necessary while dismissing the complaint which is false, frivolous
and vexatious.
----------------------
There is a possibility of misuse of the enactment and thus sec 26 will
---------------------- discourage the filing of malicious proceedings. The consumer protection act
should be used as a tool to secure justice to the consumer and not as a weapon
----------------------
of harassment or malicious and frivolous litigation.
---------------------- The National Commission in Suresh Narayanlal Vs Managing Director,
---------------------- Bihar State Financial Corporation and others (1994) IIICPJ 3(NCDRC) found
that the complainant was a chronic defaulter and had failed/avoided to discharge
---------------------- his liabilities to the corporation, held that the complaint was frivolous and
vexatious and awarded sum of Rs. 10,000 as cost to the opposite party.
----------------------
(R.S. Metals Pvt. Ltd. Vs New India Assurance Co. Ltd. I (1993) CPJ I 3(NC))
---------------------- In National Insurance Co. Ltd Vs Surinder Lal Arora (1993) III CPR 482
---------------------- (NCDRC) the complaint had suppressed material facts of his ailment in the

96 Consumer Protection Act, 1986 and Competition Act, 2002

proposal form while taking medi-claim policy. The National Commission while Notes
allowing appeal ordered that the complainant in this case pay a sum of Rs. 5000
as cost to insurance company and observed: ----------------------
There is a widespread tendency to lodge false medi-claims against the ----------------------
Insurance companies before the consumer forums, especially because no court
fees are payable for processing their complaints before the consumer forums. ----------------------
It is essential that such a tendency is firmly curbed and abuse of the consumer
----------------------
protection act is discouraged.
If in a complaint under the Consumer Protection Act, the issue involved ----------------------
is legal issue, the complaint cannot be said to be frivolous, then the complaint
----------------------
cannot be dismissed under sec 26 of the Act.
In Rajendra & Bros. Vs. Bank of India (1991) ICPR 450 (Orissa CDRC)) the ----------------------
Orissa State Commission found that the complaint was filed after receiving the
----------------------
amount with interest from the opposite party and the complainant was ingeniously
making an endeavour to have illegal gain by coercion. The commission held ----------------------
that the claim of the complainant was frivolous and was vexatious and therefore
dismissed the complaint. ----------------------

----------------------
Check your Progress 2
----------------------
Multiple Choice Single Response. ----------------------
1. On filing of frivolous or vexatious complaints, the Consumer
Redressal Forum has power to: ----------------------

i. Dismiss the complaint ----------------------

ii. Impose penalty ----------------------
iii. Dismiss the complaint and impose penalty
----------------------
2. Suppression of material facts regarding ailments while taking
mediclaim policy by complainant would make the complaint against ----------------------
insurance company frivolous and vexatious. This was held in ----------------------
i. Suresh Narayanlal Vs Managing Director, Bihar State Financial
Corporation and others ----------------------

ii. National Insurance Co. Ltd Vs Surinder Lal Arora ----------------------

iii. R.S. Metals Pvt. Ltd. Vs New India Assurance Co. Ltd. ----------------------

----------------------
Activity 2 ----------------------

----------------------
Read the article regarding Frivolous Consumer Cases in India Today,
dated March 26, 2012 available at: http://indiatoday.intoday.in/story/ ----------------------
frivolous-consumer-cases-must-be-curbed/1/179465.html
----------------------

Enforcement of Orders and other relevant Provisions 97

 Notes 6.5 PENALTIES AND MISCELLANEOUS PROVISIONS
---------------------- Section 27 of the Act provides for penalties for the non-compliance of
the Consumer Forum. Under this section, the penalty of imprisonment or fine
---------------------- or both can be imposed by the District Forum, the State Commission or the
National Commission under the following circumstances.
----------------------
i) where a trader or a person against whom a complaint is made and who fails
---------------------- or omits to comply with any order made and
---------------------- ii) the complainant who fails or omits to comply shall be punishable with
imprisonment for a term which shall not be less than one month but which
---------------------- may extend to three years or with fine which shall not be less than two
---------------------- thousand rupees but which may extend to ten thousand rupees or with both.
Therefore to attract the penalties under this section, requisite is that there
----------------------
is a failure or omission to comply the order of the consumer forum.
---------------------- On failure to comply with any order of the District Forum, State
Commission or the National Commission by the trader or a person or the
----------------------
complainant, then such trader or person or complainant shall be punishable
---------------------- with imprisonment for a term which shall not be less than 1 month but which
may extend to 3 years or with fine which shall not be less than 2000 rupees but
---------------------- which may extend to 10,000 rupees or both.
---------------------- Under section 27, if a decree holder so wishes, he can prosecute the
judgment debtor, in case the judgement debtor fails to pay the decretal amount.
---------------------- It is evident that sections 25 and 27 are in the nature of execution proceedings
and constitute independent remedies. The decree holder can avail any of them at
----------------------
his will. It does not mean, that he cannot avail of the other remedy, if by availing
---------------------- of one remedy, he failed to recover the amount. Moreover, an application under
section 27 is maintainable by the decree holder against a judgment debtor, inspite
---------------------- of the fact that a remedy by way of execution is available to him under section
25 of the Act. While section 25 visualizes the enforcement of such orders by a
----------------------
civil process, as if they were a decree or order made by court of law, section 27
---------------------- confers a quasi-criminal sanction for their enforcement by way of punishment
with imprisonment or imposition of monetary penalties.
----------------------
For specific enforcement of the Consumer Protection Act, section 27 of
---------------------- the Act gives sanction of the State for imposing penalties against the traders or
persons against whom complaint is made, if it fails to comply the order passed
---------------------- by the District Forum, the State Commission or the National Commission as the
---------------------- case may be. (Union Bank of India Vs K.T. Thiruvengadam II (1993) CPJ242
(244)(NC))
---------------------- In M/S Rajendra Properties & Industries Vs Shri. R.S. Nandwani &
---------------------- another (decided by NC on to 12/01/1999)
The National Commission has held that the proceedings under section
---------------------- 27 of the Consumer Protection Act are in the nature of execution proceedings
---------------------- of basic order. It is settled law that the executing court cannot go behind the

98 Consumer Protection Act, 1986 and Competition Act, 2002

decree. The jurisdiction of the court executing a decree must be determined Notes
with reference to and is circumscribed by the directions contained in the
decree. It has power to go behind it or question its legality or corrections. The ----------------------
executing court must execute the decree as it stands and according to its terms.
It is permissible under law to go behind the basic order of the proceedings under ----------------------
section 27 of the Act. The basic order cannot be amended, modified or varied in ----------------------
the proceeding under section 27 of the Act.
----------------------
Check your Progress 2 ----------------------

State True or False. ----------------------

1. To attract penalty under Section 27, failure or omission to comply ----------------------
with the order of Consumer Forum is necessary.
----------------------

----------------------
Activity 2
----------------------
Read Section 27 and find the maximum amount that can be imposed as a ----------------------
penalty.
----------------------
6.6 APPEAL AGAINST ORDER PASSED UNDER SECTION 27 ----------------------

The Amendment Act, 2002 has inserted section 27A which provides for ----------------------
appeal against the order passed under section 27.
----------------------
Section 27A states as follows:
Section 27A appeal against order passed under section 27. ----------------------

(1) Notwithstanding anything contained in the code of criminal procedure 1973 ----------------------
(2 of 1974) an appeal under section 27, both on facts and on law, shall lie
from - ----------------------

(a) the order made by the District Forum to the State Commission; ----------------------
(b) the order made by the State Commission to the National Commission; ----------------------
and
(c) the order made by the National Commission to the Supreme Court. ----------------------

(2) Except as aforesaid, no appeal shall lie to any court from any order of a ----------------------
District Forum or a State Commission or the National Commission.
----------------------
(3) Every appeal under this section shall be preferred within a period of thirty
days from the date of an order of a District Forum or a State Commission ----------------------
or the National Commission as the case may be.
----------------------
Provided that the State Commission or the National Commission or the
Supreme Court, as the case may be, may entertain an appeal after the expiry of ----------------------
the said period of thirty days, if it is satisfied that the appellant had sufficient
cause for not preferring the appeal within the period of thirty days. ----------------------

Enforcement of Orders and other relevant Provisions 99

 Notes Right to Appeal
On the plain reading of section 27A it becomes clear that notwithstanding
----------------------
anything contained in the code of criminal procedure, any party aggrieved by
---------------------- the order passed under section 27 may prefer an appeal both on facts and law
under section 27A.
----------------------
Where to File Appeal
---------------------- 1) Against the order of the District Forum, the appeal shall lie to the State
Commission.
----------------------
2) Against the order of the State Commission, the appeal shall lie to the National
---------------------- Commission.
---------------------- 3) Against the order of the National Commission, the appeal shall lie to the
Supreme Court.
---------------------- Clause (2) further declares that appeal can be preferred only in aforementioned
manner and that no appeal shall lie to any court against the orders of Consumer Forum.
----------------------
Time Limit for Filing Appeal
----------------------
The time limit for filing appeal under section 27A is enumerated in clause
---------------------- (3) of section 27A.

---------------------- As per clause (3) of section 27A, every appeal under this section shall be
preferred within a period of 30 days from the date of the order passed by the District
---------------------- Forum, State Commission or the National Commission as the case may be.

---------------------- Condonation of Delay

Section 27A under its proviso states that the State Commission or the
----------------------
National Commission or the Supreme Court are empowered to entertain the
---------------------- appeal filed beyond the period of thirty days, if these above stated authorities
are satisfied that ‘sufficient clause’ was there for not preferring the appeal within
---------------------- the prescribed period of thirty days. What amounts to ‘sufficient cause’ has been
dealt with in Unit 9.
----------------------

---------------------- Check your Progress 4

---------------------- Multiple Choice Single Response.
---------------------- 1. The time limit for filing appeal under Section 27A is within _____
days from the date of the order passed.
---------------------- i. 30 days
---------------------- ii. 21 days
iii. 90 days
----------------------
2. Any party aggrieved by the order passed under Section 27 may prefer
---------------------- an appeal both on ______.
i. Facts
----------------------
ii. Law
---------------------- iii. Both facts and law

100 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Activity 4
----------------------
Find out two cases under Section 27A of the Act. ----------------------

----------------------
6.7 PROTECTION OF ACTION TAKEN IN GOOD FAITH
----------------------
Section 28 of the Consumer Protection Act, 1986 states as follows:
----------------------
No suit, prosecution or other legal proceedings shall lie against the members
of the District Forum, the State Commission or the National Commission or ----------------------
any officer or person acting under the direction of the District Forum, the State
Commission or the National Commission for executing any order made by it ----------------------
or in respect of anything which is in good faith done or intended to be done by ----------------------
such member, officer or person under this Act or under any rule or order made
thereunder. ----------------------
Scope of Section 28 ----------------------
The purpose of section 28 appears to be to afford the opportunity to the
members of the Consumer Disputes Redressal Forum and the officers to act in ----------------------
good faith without any fear of the prosecution in discharge of their functions or ----------------------
in performing their duties under the Act.
----------------------
Doctrine of Immunity
Section 28 of the Consumer Protection Act recognizes the doctrine ----------------------
of immunity vis-à-vis the members and officers of the Consumer Disputes
----------------------
Redresssal Forum.
The immunity is provided to the members and officers of the District Forum, ----------------------
State Commission and the National Commission with respect of the following
----------------------
acts done by them namely -
i) for executing any order made by it in good faith under this act or any rule ----------------------
or order made thereunder; ----------------------
ii) for anything which is done in good faith under this Act or under any rule or
order made thereunder; or ----------------------

iii) for anything intended to be done under this Act or any rule or order made ----------------------
thereunder.
----------------------
The doctrine of immunity under sec 28 can be invoked only when the act
is done in good faith and under this act or any rule or order made thereunder. ----------------------
Act done in Good Faith ----------------------
Section 28 protects the actions only if they are done in ‘good faith’. What ----------------------
we mean by the expression ‘good faith’?
The Consumer Protection Act 1986, does not define the term good faith. ----------------------

----------------------

Enforcement of Orders and other relevant Provisions 101

 Notes The Indian Penal Code, 1860 under section 52 defines the expression ‘good
faith’ as follows:
----------------------
“Nothing is said to be done or believed in ‘good faith’ which is done or
---------------------- believed without due care and attention.”
The General Clauses Act 1897, under section 3(22) defines as ‘a thing
----------------------
shall be deemed to be done in good faith’ where it is done honestly.
---------------------- Therefore it can be seen that all those Acts which are done in good faith
are protected under the statute.
----------------------
(M/s Almighty Construction and others Vs M/s Gurupushya Amrut Co-
---------------------- operative Housing Society Ltd. & other (Decided by the National Commission
---------------------- New Delhi on 10/12/2001))
In this case there was a complaint for deficiency service. Inspite of
---------------------- six notices to the opposite party, they did not appear in the matter and the
---------------------- hearing of complaint was proceeded ex-parte. Rs. 5,60,000/- was awarded to
the complainant under various heads. Since no appeal was filed against the
---------------------- said order, it had become final. As the opposite party did not pay, execution
proceedings were initiated for non-compliance of ex-parte order. Non bailable
---------------------- warrants were issued against the opposite party under sec 27 of the Consumer
---------------------- Protection Act. The State Commission further directed the appellants to jointly
and severally deposit Rs.1 lakh with the State Commission within two weeks
---------------------- from the date of the order date 24/10/2001 and the warrants issued against
them were suspended till 21/11/2001. Instead of complying with the just order
---------------------- of the State Commission, the opposite party filed appeal before the National
---------------------- Commission. The National Commission held that there is no infirmity in the
impugned order of the State Commission and hence dismissed the appeal.
---------------------- Service of Notice
---------------------- Section 28A of Act deals with service of Notice, etc.
---------------------- Section 28A reads as under:

---------------------- 28A 1) all notices required by this Act to be served in the manner hereinafter
mentioned in sub-section (2).
---------------------- 2) The service of notices may be made by delivering or transmitting a
---------------------- copy thereof by registered post acknowledgement due addressed to
opposite party against whom complaint is made or to the complainant
---------------------- by speed post or by such courier service as are approved by the District
Forum, the State Commission or the National Commission, as the
---------------------- case may be, or by any other means of transmission of documents
---------------------- (including FAX message).
3) When an acknowledgement or any other receipt purporting to be
---------------------- signed by the opposite party or his agent or by the complainant is
---------------------- received by the District Forum, the State Commission or the National
Commission as the case may be, or postal article containing the notice
---------------------- is received back by such District Forum, State Commission or the

102 Consumer Protection Act, 1986 and Competition Act, 2002

 National Commission with an endorsement purporting to have been Notes
made by a postal employee or by any person authorized by the courier
service to the effect that the opposite party or his agent or complainant ----------------------
had refused to take delivery of the postal article containing the notice
or had refused to accept the notice by any other means specified in ----------------------
sub-section (2) when tendered or transmitted to him, the District ----------------------
Forum or the State Commission or the National Commission, as the
case may be, shall declare that the notice had been duly served on ----------------------
the opposite party or to the complainant.
----------------------
Provided that where the notice was properly addressed, pre-paid and
duly sent by registered post acknowledgement due, a declaration ----------------------
referred to in this sub-section shall be made notwithstanding the
----------------------
fact that the acknowledgment has been lost or mislaid or for any
other reasons, has not been received by the District Forum, the State ----------------------
Commission or the National Commission as the case may be, within
days from the date of issue of notice. ----------------------
4) All notices required to be served on an opposite party or to complainant ----------------------
shall be deemed to be sufficiently served, if addressed in the case of
the opposite party to the place where business or profession is carried ----------------------
and in case of complainant the place where such person actually &
----------------------
voluntarily resides. This lengthy section which is very simple &
easy to comprehend has been introduced by the Amendment Act of ----------------------
2002. It had been observed that litigation gets delayed due to delay
in services of summons & notice on the opposite party. Service of ----------------------
a notice to the opposite party is a sine-qua-non for the proceedings
----------------------
to proceed before the court. The opposite party must get reasonable
time & opportunity to defend itself before the Forum/Commission. ----------------------
Whether section 27 of the Act unconstitutional
----------------------
A writ petition was filed challenging validity of section 27 of the Consumer
Protection Act. The basis of the challenge was that the District Forum, the State ----------------------
Commission and National Commission created under the Act have been clothed ----------------------
with blanket powers to pass orders, including an order of civil imprisonment for
the breach that may be committed by the party against whom the order is passed ----------------------
under the Act. As section 27 does not prescribe any procedure for the trail,
therefore it was prayed that it should be declared as unconstitutional, being ----------------------
violative of Article 21 of the constitution of India. ----------------------
However in the meantime, the Consumer Protection Amendment Act
2002 came into effect that has struck down the proviso, which was declared as ----------------------
unconstitutional by the High Court. Now the Forum/Commission shall have the ----------------------
power of a Judicial Magistrate of first class for the trial of offences under the
Act. ----------------------
Therefore due to amendments already effected Provision of section 27 of ----------------------
the Consumer Protection Act 1986, not unconstitutional.
----------------------

Enforcement of Orders and other relevant Provisions 103

 Notes (State of Karnataka Vs Parmjit Singh & others decided by Supreme Court of
India on 20.3.2006)
----------------------

----------------------
Check your Progress 5

---------------------- Match the following.

---------------------- i. Doctrine of immunity a. Section 28
ii. Service of notice b. Section 27
----------------------
iii. State of Karnataka Vs Parmjit Singh & ors c. Section 28A
----------------------

----------------------
Activity 5
----------------------
Find out under which other legislations, acts done in Good Faith are
----------------------
protected and why?
----------------------
Summary
----------------------

---------------------- ●● If the orders passed by the Consumer Disputes Redressal Forum are not
final, the rights of the consumers will have no meaning. Therefore Sec 24
---------------------- declares that all orders passed by the Consumer Forum Commission shall
be final if the order is not appealed against. Again the court assists those
---------------------- who are vigilant and conscious of their rights. Therefore a complaint has
---------------------- to be filed within 2 years from the date of cause of action. If there is
a delay in filing the complaint, the same may be condoned if sufficient
---------------------- cause is shown. The State Commission and the National Commission
are empowered to exercise administrative control over District Forum
---------------------- and State Commission respectively. This ensures proper maintenance
---------------------- of record and speedy disposal of prescribed number of cases. All cases
which are false, frivolous and vexatious are liable to be dismissed and
---------------------- costs can be imposed for misusing the provisions of the Act. To enforce
its orders, the Consumer Forum can attach the property and satisfy the
---------------------- claim out of the sale proceeds.
---------------------- ●● For the effective implementation of the Consumer Protection Act, it was
felt that imposition of penalties should be adhered to in case of failure to
---------------------- abide by the orders of the Consumer Fora. So section 27 imposes penalties
---------------------- for non-compliance of the orders of the Consumer Fora. If any party is
aggrieved by the order passed under section 27, he can appeal in 30 days
---------------------- under section 27A.

----------------------
Keywords
----------------------
●● Good Faith: A thing shall be deemed to be done in ‘good faith’ where it
---------------------- is in fact done honestly, whether it is done negligently or not.

104 Consumer Protection Act, 1986 and Competition Act, 2002

●● Suo motto: Of its own motion, on his own. Notes
●● Penalty: i) it means recovery of an amount as a penal measure in
civil proceedings. ----------------------
ii) a punishment inflicted by a law for its violation in ----------------------
criminal proceedings.
----------------------
●● Sine qua non: An indispensable requisite.
----------------------
Self-Assessment Questions ----------------------
1. State the provisions regarding penalties under the Act. ----------------------
2. Why is ‘anything done in good faith’ by the presiding officers in the course
----------------------
of their duties protected by section 28?
3. If penalty is imposed under section 27, can you prefer appeal? ----------------------

4. How are the notices to be served under COPRA, 1986? ----------------------

5. Write a short note on ‘the terms and conditions of service of the President ----------------------
and members of the National Commission.’
----------------------
Answers to Check your Progress ----------------------
Check your Progress 1 ----------------------
State True or False.
----------------------
1. False
----------------------
2. True
Check your Progress 2 ----------------------
Multiple Choice Single Response. ----------------------
1. On filing of frivolous or vexatious complaints, the Consumer Redressal ----------------------
Forum has power to:
----------------------
iii. Dismiss the complaint and impose penalty
2. Suppression of material facts regarding ailments while taking mediclaim ----------------------
policy by complainant would make the complaint against insurance
----------------------
company frivolous and vexatious. This was held in
ii. National Insurance Co. Ltd Vs Surinder Lal Arora ----------------------
Check your Progress 3 ----------------------
State True or False. ----------------------
1. True
----------------------

----------------------

----------------------

Enforcement of Orders and other relevant Provisions 105

 Notes Check your Progress 4
Multiple Choice Single Response.
----------------------
1. The time limit for filing appeal under Section 27A is within _____ days
---------------------- from the date of the order passed.
---------------------- i. 30 days

---------------------- 2. Any party aggrieved by the order passed under Section 27 may prefer an
appeal both on ______.
---------------------- iii. Both facts and law
---------------------- Check your Progress 5
---------------------- Match the following.
i. – a.
----------------------
ii. – c.
----------------------
iii. – b.
----------------------

---------------------- Suggested Reading

---------------------- 1. http://consumeraffairs.nic.in/consumer/?q=node/6
2. http://articles.timesofindia.indiatimes.com/keyword/consumer-court
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

106 Consumer Protection Act, 1986 and Competition Act, 2002

Forms
UNIT

7
Structure:
7.1 Introduction
7.2 Notices and their Model Forms
7.3 Complaints and their Model Forms
7.4 Affidavit and its Model Forms
7.5 Application for Condonation of Delay
7.6 Appeal
7.7 Application for Execution of Order
7.8 Format of Application under Section 27 of the Act
7.9 Format of Application for Production of Documents
7.10 Format of Application for Seizure of Documents
7.11 Format of Application to file Complaint as ‘Class Action’
7.12 Model Form of Application seeking Permission to engage Advocate
Summary
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

Forms 107
 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Discuss the process of drafting of complaints, appeals, applications,
---------------------- etc. under Consumer Protection Act
---------------------- • Classify notices, complaints, affidavits, etc. based on certain models

---------------------- 7.1 INTRODUCTION

----------------------
It is necessary to know as to how to draft complaints, applications, appeals,
---------------------- reply to the complaint, affidavits, etc. From unit 1 to unit 6 we have dealt with
the introduction to the Consumer Protection Act, 1986, the definitions regarding
---------------------- consumer, goods, the applicability of the Act, the corum of the Consumer
Courts. It is now necessary to know as to how to draft complaints, applications,
----------------------
appeals, reply to the complaint, affidavits, etc.
---------------------- Various model forms are provided which makes it very simple to draft the
complaint, notice appeal, etc.
----------------------
A simple format needs to be followed. The language should be simple &
---------------------- facts should be stated in concise and in a chronological order. All the supporting
documents have to be listed out in specific manner and attached as originals with
----------------------
the Application Form. The courts place reliance only on original documents
---------------------- & in certain cases on attested copies. It is important to have all the original
documents in the possession and custody of the consumer as far as possible.
---------------------- All the receipts have to be demanded from the shopkeeper while making any
purchases.
----------------------
The complaint should be in such a form that the Consumer Forum is able
---------------------- to comprehend the facts, contentions, allegations and grievance suffered by
---------------------- the complainant & provide relief which the consumer desires from the Forum.
Every complaint has to be accompanied by an affidavit. In this unit, various
---------------------- model forms are given of the Notices, Complaint, Affidavit, Delay Condonation
Application, Appeal, Execution Application and other Miscellaneous
---------------------- Applications.
---------------------- Let us now consider the various model forms.
----------------------
7.2 NOTICES AND THEIR MODEL FORMS
----------------------
It is not mandatory under the Consumer Protection Act, 1986 to serve
---------------------- any notice on the opposite party before filing the complaint. Thus there is no
prescribed form of notice under the act.
----------------------
However, it is advisable to serve notice before approaching the Consumer
---------------------- Disputes Redressal Forum as it will give an opportunity to the parties to settle
the issues if possible amicably. It serves also as a warning to the opposite party.
----------------------

108 Consumer Protection Act, 1986 and Competition Act, 2002

 The notice can be served by the party himself or through his advocate. Notes
The notice should state the transaction, what were the lapses committed by the
opposite party, how the complainant has suffered. The claim of compensation, ----------------------
etc. should be worked out meticulously & precisely and should be stated in the
notice. Notice should also state & give reasonable time to the opposite party to ----------------------
comply with the demands made in the notice. The notice preferably should be ----------------------
sent by Registered Post, acknowledgement due. The postal receipt will help in
proving the fact of services of notice. ----------------------
Notice Reply ----------------------
Every notice received should be replied as promptly as possible. Again ----------------------
notice reply has no prescribed form. Law of evidence raises a presumption
that whatever is not denied is presumed to have been admitted. Therefore ----------------------
whenever any notice is received, all the allegations, averments which are false
----------------------
& fabricated should be generally and specifically denied. The party replying
must also consider ways & means of amicable settlement. ----------------------
While denying any facts or figures, reference should be made to relevant ----------------------
documents, correspondence, etc. based on which the facts are denied. Notice
reply will serve as a basis of written statement/reply to the complaint. Finally, ----------------------
Notice Reply like Notice should also be sent by RPAD.
----------------------
Format of Notice
----------------------
MODEL FORM OF NOTICE (1)
----------------------
To,
----------------------
Name of the Company
----------------------
Address
----------------------

----------------------

----------------------
Kind attention: (Name of the person)
----------------------
Dear Sir/Madam,
----------------------
I ______S/o _______ residing at__________ do hereby call upon you to comply
the following things through this notice. ----------------------

1) That on ______ date, I purchased mixer-grinder of ________make from ----------------------

your showroom at Rs._______/-. You are the manufacturer of the same.
----------------------
2) After purchasing the mixer-grinder as per the instructions I tried to operate ----------------------
the same, it did not work. So accordingly, I informed you about the same.
----------------------

----------------------

Forms 109
 Notes 3) On ______date you had sent Mr.________ from your showroom to inspect
the mixer-grinder and the said Mr.______ informed that the motor of the
---------------------- mixer is defective.
---------------------- 4) The said Mr.________ also informed you about the same over the phone in
our presence.
----------------------

---------------------- 5) That your representative Mr.______ after discussing the matter with
Mr.______ whose designation is manager informed and assured me that
---------------------- they will replace this mixer-grinder in two days time.

---------------------- 6) On ______ date, ______date and _____ date I spoke of your representative
Mr.______ and Mr._______ (Manager) regarding the defective mixer-
----------------------
grinder and its replacement. I was promised that in another four days time
---------------------- the mixer-grinder will be replaced but none of you have turned up to do the
same. The said defective mixer-grinder is lying at my residence.
----------------------
7) Now you have started disconnecting my phone calls. Therefore I am left
---------------------- with no alternative but to send you this notice.
---------------------- 8) I therefore call upon you through this notice
----------------------
i) to replace the mixer-grinder with identical one and without any latent
---------------------- or patent defects within 8 days from the date of receipt of notice.

---------------------- ii) pay Rs. _____ to me as compensation for the harassment and
inconvenience due to carelessness and negligence on your part.
----------------------
9) If you fail to comply with the above then I will be constrained to initiate
---------------------- legal action against you as may be deemed fit.
----------------------

---------------------- Thanking you, Yours faithfully,

----------------------
Place
----------------------
Date
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

110 Consumer Protection Act, 1986 and Competition Act, 2002

 Model Form of Notice (2) Notes
To, ----------------------
Name of the Company ----------------------

Address ----------------------

----------------------

----------------------

----------------------
Kind attention: (Name of In-charge person)
----------------------
Dear Sir/Madam,
----------------------
1) My daughter had placed with you an order for 1 medium size Margaretta
Pizza on_____ date. The price of the Pizza along with taxes was Rs._______ ----------------------

2) That your delivery boy delivered the Pizza and an amount of Rs._______ ----------------------
was paid to him.
----------------------
3) When my daughter sat to eat the Pizza she found a dead cockroach in the
----------------------
Pizza. She showed me the same. She was completely shocked and vomited.
----------------------
4) I phoned you and spoke to Mr.________ and informed him about the same.
----------------------
5) Mr. ________offered to send a fresh pizza and apologized for the same. But
I informed him that my daughter after eating a small portion of that pizza & ----------------------
on finding a dead cockroach in it has vomited & is feeling nauseatic so I do
----------------------
not want any fresh pizza I only want the price to be refunded of the pizza.
----------------------
6) Mr. _________ refused to refund the price to the pizza. My daughter could
not eat properly for almost two days due to all this. Such a high degree of ----------------------
negligence & breach of quality & hygiene standards is not expected from
a reputed company like yours. ----------------------

7) Through this notice I therefore call upon you to ----------------------

----------------------
i) Pay the amount of Rs. ________ i.e. the price of the Pizza along with
taxes. ----------------------
ii) Pay an amount of Rs. ________ towards compensation for the ----------------------
negligence & serving unhygienic Pizza & all the health problems faced
& harassment caused due to all this. ----------------------

----------------------

----------------------

----------------------

Forms 111
 Notes Within eight days from the date of receipt of this notice

---------------------- 8) Failing which I will be compelled to initiate legal action against you before
the District Forum at _________ entirely at your risk as to the cost &
---------------------- consequences of the same.
----------------------
Thanking You,
----------------------
Place
----------------------

---------------------- Date

---------------------- Yours Faithfully

---------------------- Sd____________

---------------------- Model Form of Notice (3)

---------------------- To,
---------------------- Name & Address
---------------------- of Opposite Party/Parties
----------------------

----------------------
Sub:
----------------------
Dear Sir/Madam
----------------------
This is to inform you & bring to your kind notice following facts:
----------------------
(Now state the facts in chronological order in consecutive para)
----------------------
1) That I purchased a car of model _________ from your showroom at
----------------------
______________.
----------------------
2) The said car has both latent & patent defects as follows
----------------------
a)
----------------------
b)
----------------------
c)
----------------------
d)
----------------------
3) Your engineer also has agreed on ______ date & issued a handwritten note
----------------------
promising to look into the matter. But you have not bothered to carry out
---------------------- any repairs so far.

112 Consumer Protection Act, 1986 and Competition Act, 2002

4) I have paid the price of the car as Rs. ___________/- Notes
5) You are guilty of selling defective car & also of deficiency in service as you ----------------------
failed to _______________ these things.
----------------------
6) Due to negligence on your part, I have suffered loss & injury to the tune of
Rs. _________ which you are liable to compensate together with interest ----------------------
at the rate of ______% from the date of purchase of this car till today. ----------------------
7) If you fail to pay the compensation amount of Rs________ at ______% ----------------------
per annum and also to rectify & remove the defects in car/replace the car,
I shall be constrained to initiate legal proceedings against you before the ----------------------
Consumer Forum entirely at your own risk as to costs & consequences of
any action, please note. ----------------------

----------------------

----------------------
Place
----------------------
Date Signature
----------------------

----------------------

7.3 COMPLAINTS AND THEIR MODEL FORMS ----------------------

BEFORE THE HON’BLE STATE COMMISSION AT ________________ ----------------------

Complaint No_______/_________ ----------------------

----------------------
Full Name -

Age - Complainant

Occ -
} ----------------------

----------------------

----------------------
R/at -
----------------------
Vs
----------------------

}
Full Name & Description Opponent
----------------------

----------------------
Complaint for_______ ----------------------

----------------------

----------------------

----------------------

Forms 113
 Notes The complainant above named respectfully submits as under.
1) Introduction
----------------------
In this para who the complainant & respondent/opposite party are should
---------------------- be explained.
---------------------- 2) Narration of facts

---------------------- In the second para, start narrating the facts in chronological order. When
the facts are numerous, introduce the basic facts in this para.
---------------------- 3) Continuation of the facts
---------------------- For e.g. In para 2, state what goods were purchased & in this para state the
defects in the goods, delay in delivery, deficiency in service, etc.
----------------------
4) Rectification
----------------------
Elaborate what communication; correspondence has taken place between
---------------------- the parties to resolve the issue between the parties. Particulars of notices if
any exchanged between the parties.
----------------------
5) State the response of opposite party to the defect/deficiency which were
---------------------- pointed out by the complainant.

---------------------- 6) Other details if any

7) Evidence
----------------------
In this para, the complainant should give details of the evidence, which
---------------------- he/she is adducing before the form; agreement, Purchase Order, Tickets,
Receipts, Invoice, details of medical treatment, Discharge card, etc. may be
----------------------
applicable. Any other reference on any medical texts, diagnosis, etc. These
---------------------- documents should be annexed with the complaint & attested as ‘True Copy’.
8) Details of his suffering/losses & how he wants to be compensated & what
----------------------
reliefs he wants & why he has come before the Forum.
---------------------- 9) Jurisdiction
---------------------- In the para regarding jurisdiction, the complainant should explain how
the District Forum, State Commission or the National Commission has
---------------------- jurisdiction (pecuniary & territorial) to entertain, try & decide the complaint
---------------------- in question.
10) Limitation & Cause of Action
----------------------
The complainant should state in this para as to when did the cause of action
---------------------- arise for filing the complaint & that how the present complaint is well within
the period of limitation.
----------------------

----------------------

----------------------

----------------------

114 Consumer Protection Act, 1986 and Competition Act, 2002

11) Prayer Clause Notes
Detail of the reliefs which the complainant wants the Forum to grant in his
----------------------
favour.
Date ----------------------

Place sd- ----------------------

Complainant ----------------------

----------------------
An affidavit in support is filed herewith.
----------------------
Verification
----------------------
I_______________________ Age_______ Occ________ R/at___________
the complainant above named do hereby solemnly verify that the contents of ----------------------
my above complaint are true & correct to the best of my knowledge, belief &
----------------------
information verified by me on this _________ day of _________ at _________
----------------------

----------------------
Sd,
----------------------
Complainant
----------------------

7.4 AFFIDAVIT AND ITS MODEL FORMS ----------------------

Affidavit means a solemn declaration or a statement made on oath. Generally, all ----------------------
evidence of the parties before the Consumer Forum are recorded with the help
----------------------
of affidavits as the hearing is done with the help of affidavits before the Forum/
Commission is summary in nature. ----------------------
When the complaint, reply, application, etc. are supported by an affidavit, it gives ----------------------
an added strength to the truth & veracity of averments made in the complaint.
----------------------
It is relevant to note provisions of Civil Procedure Code, 1908. Order XIX, which
deals with affidavits. ----------------------

----------------------
(1) Power to order any point to be proved by affidavit -
----------------------
Any court may at any time, for sufficient reason, order that any particular
fact or facts may be proved by affidavit, or that the affidavit of any witness ----------------------
may be read at the hearing or such conditions as the court thinks reasonable.
----------------------
Provided that where it appears to the court that either party bonafide desires
the production of a witness for cross examination & that such witness can ----------------------
be produced, an order shall not be made authorizing the evidence of such ----------------------
witness to be given by affidavit.
----------------------

Forms 115
 Notes (2) Power to order attendance of deponent for cross-examination
a) Upon any application, evidence may be given by affidavit but the
----------------------
court may, at the instance of either party, order the attendance for cross
---------------------- examination of the deponent.
b) Such attendance shall be in court unless the deponent is exempted from
----------------------
personal appearance in the court or the court otherwise directs.
---------------------- c) Matters to which affidavit shall be confined -
---------------------- i) Affidavit shall be confined to such facts as the deponent is able to
his own knowledge to prove, except on interlocutory applications
---------------------- on which statements of his belief may be admitted provided that
---------------------- the grounds thereof are stated.
ii) The costs of every affidavit, which shall unnecessarily set forth
---------------------- matters of hearsay or argumentative matter, or copies of extracts
---------------------- from documents, shall (unless the court otherwise directs) be paid
by the party filing the same.
---------------------- When the complainant files an affidavit in support of his complaint, the opposite
---------------------- party in reply can file counter affidavit. When an affidavit is prepared for the
purposes of filing it in the court of law, then it is exempt from stamp duty.
----------------------

----------------------
Format of Affidavit
----------------------
(Filed in support of the complaint)
----------------------
BEFORE THE HON’BLE DISTRICT FORUM AT DISTRICT FORUM
----------------------

---------------------- STATE COMMISSION

---------------------- NATIONALCOMMISSION

----------------------

---------------------- Complaint No ______/20___

}
----------------------

---------------------- Full Name & description Complainant

---------------------- Vs

}
----------------------
Full Name & description Opposite Party
----------------------

----------------------

----------------------

116 Consumer Protection Act, 1986 and Competition Act, 2002

 Affidavit Notes
I, Name ____________ Age ______ Occupation ___________ Residing/at ----------------------
___________, the above named deponent do hereby state on solemn affirmation
and declare as under: ----------------------

i) That I am complainant in the above titled case. I am thoroughly conversant ----------------------

with the facts and circumstances of the present case and am competent to ----------------------
swear this affidavit.
----------------------
ii) That the facts contained in my accompanying complaint, the contents of
which have not been repeated herein for the sake of brevity may be read as ----------------------
an integral part of this affidavit.
----------------------
iii) The facts of the said mentioned complaint are true & correct to the best of
----------------------
my knowledge, belief & information.
----------------------
I hereby verify & declare that whatever is stated hereinabove is true & correct to
the best of my knowledge, belief & information and nothing material has been ----------------------
concealed therein. Verified this ______ day of ____ 20_______ at ________
----------------------
I know the
----------------------
Affiant Affiant
----------------------

----------------------
7.5 APPLICATION FOR CONDONATION OF DELAY
----------------------
BEFORE THE HON’BLE ___________________ AT _____________
----------------------
Complaint No.______/20_____
----------------------

Full Name & description Complainant

Vs
} ----------------------

----------------------

}
----------------------
Full Name & description Opposite
----------------------
Party
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

Forms 117
 Notes Application for Condonation of delay

---------------------- The applicant/appellant most respectfully states as under:

---------------------- (1) That the appellant has filed the accompanying appeal against the respondent
on various grounds. This applicant/appellant craves leave of this appellate
---------------------- authority to read the appeal memo as part & parcel of this application.
---------------------- (2) That the appellant humbly submits that the Hon’ble District Forum passed
the order on ________ date and the certified copies of the Judgment & order
---------------------- were applied on _________ date & the same were ready on _________ date.
---------------------- Thus there is a delay of 22 days in filing this appeal (In the second para
explain how many delays are there.)
----------------------
(3) The appellant/applicant submits that the day on which the certified copies
---------------------- were ready, this appellants mother suffered severe heart attack and had to
undergo angioplasty at ___________ Hospital and therefore from ________
---------------------- date to _______ date this appellant was busy attending his mother. That
---------------------- on ________ dates while this appellant’s mother was still hospitalized, his
elder son by name ________ age-22 years met with a serious accident and
---------------------- suffered multiple fractures. The appellant/applicant was in a state of shock
& thereafter was busy attending his son & mother & arranging funds for the
---------------------- two major surgeries of his son. Thus this applicant/appellant was prevented
---------------------- for bonafide reasons from filing the present appeal. (In para 3 explain the
cause of the delay)
----------------------
(4) That the applicant/appellant states that he has a good case on merits & is
---------------------- seriously aggrieved by the impugned order passed by the Hon’ble Forum.
If the delay of 22 days in filing this appeal is not condoned, grave injustice
---------------------- will be caused to this appellant/applicant.
---------------------- (5) That the applicant/appellant submits that no hardship, inconvenience will
---------------------- be caused to the opposite party if delay as prayed for is condoned.

---------------------- (6) That the applicant/appellant submits that along with this application the
appellant has produced all the relevant documents, medical certificates, etc.
---------------------- evidencing the fact of hospitalization and accidents.
---------------------- (7) That the applicant therefore had sufficient cause for not filing the present
complaint within limitation as stated above and there are just & sufficient
----------------------
grounds justifying and warranting the condonation of delay and deciding
---------------------- the present case on merits.

---------------------- (8) Therefore in view of the aforesaid facts and circumstances, this applicant/
appellant most humbly prays as under:
----------------------
i) Condone the delay of 22 days in filing the present appeal and admit
----------------------
the same.
----------------------

118 Consumer Protection Act, 1986 and Competition Act, 2002

 ii) Pass any other just & equitable order as deemed fit in the interest of Notes
justice.
----------------------

----------------------
Place
----------------------
Date
----------------------
sd
----------------------
Appellant ----------------------
An affidavit in support is filed herewith. ----------------------

----------------------
7.6 APPEAL
----------------------
As already stated in the previous units, any party aggrieved by the decision of
the Consumer Forum can move up the hierarchy to set aside the impugned order ----------------------
by filing appeal.
----------------------
Appeal has to be preferred within 30 days from the date of knowledge of the
----------------------
order. Every appeal has to be accompanied by the certified copy of the Judgment
& order passed by the lower Redressal Forum. The District Forum has no ----------------------
appellate powers. So appeal can be filed before the State Commission, National
Commission or the Hon’ble Supreme Court of India. ----------------------

Format of Appeal ----------------------

----------------------
BEFORE THE HON’BLE Consumer Dispute
----------------------
Redressal Commission at _________ (Appellate Jurisdiction)
----------------------
Appeal No. _________/20_____
----------------------

}
----------------------
Full Name & description Appellant
----------------------

Vs ----------------------

}
----------------------
Full Name & description Respondent ----------------------

----------------------

----------------------

----------------------

Forms 119
 Notes Appeal against the Judgment & order passed by ____on____

---------------------- The appellant above named begs to state most respectfully as under

---------------------- 1) Being aggrieved & dissatisfied by the judgment & order passed by the
_________ on ________ the present appellant has preferred this appeal.
----------------------
2) This para should state the brief facts of the case and the order passed by the
---------------------- District Forum/State Commission, as the case may be.
----------------------
3) That the impugned order date _______ passed by the Consumer Fora is
---------------------- liable to be set aside/modified/quashed, inter alia on the following grounds.

---------------------- a) ________

---------------------- b) ________
---------------------- c) ________ etc.
---------------------- (Here enumerate the reasons based on facts & law as to why the impugned
---------------------- order is bad/incorrect.)

---------------------- 4) That the appellant has not preferred any other appeal against the impugned
order.
----------------------
5) In this para, state that the appeal is within the period of limitation.
----------------------
The impugned order was passed on ______ date, the appellant applied for
---------------------- certified copies on _______ date, the same were made available on ________
---------------------- date. Hence the present appeal is being filed within the period of limitation.

---------------------- 6) This para should give the details of the amount deposited at the time of filing
the appeal as is required by the Act.
----------------------
7) This para should state the prayer made to the Appellate Consumer Fora. It
---------------------- is therefore, most respectfully prayed that this Hon’ble Commission may
---------------------- kindly be pleased to allow the appeal/set aside/modify/quash the order
date______ passed by the District Forum/State Commission.
----------------------
Place
----------------------
Date Appellant
----------------------
An affidavit in support is filed herewith. (The format of affidavit is same as in
---------------------- the case of complaint)
----------------------

----------------------

----------------------

120 Consumer Protection Act, 1986 and Competition Act, 2002

7.7 APPLICATION FOR EXECUTION OF ORDER Notes
Format of application for execution of the orders of the Forum/Commission ----------------------

BEFORE THE HON’BLE _______________AT _______________ ----------------------

}
Complaint No. ______/20______ ----------------------

Complainant ----------------------

----------------------

}
Vs
----------------------
Opposite Party/Opponent
----------------------

----------------------
Application for execution of the orders
----------------------
This application on behalf of the complainant is as follows:
----------------------
1) That the complainant submits that in the aforementioned complaint the
Hon’ble Forum/Commission was pleased to allow the complaint & as per ----------------------
the final order passed by the Forum/Commission the opposite party was ----------------------
directed to pay Rs. ___________ within a period of ________ days.
----------------------
2) That no appeal has been preferred by the opposite party to the knowledge
of this complainant. ----------------------

3) That the complainant submits that the opposite party has failed & neglected ----------------------
to comply with the order & direction of this Hon’ble Forum/Commission.
Hence this application for execution of the said order. ----------------------

4) That the opposite party has both movable & immovable property situated at ----------------------
_________. The detailed description of the property is annexed herewith. ----------------------
5) That it would be just, necessary & proper and in the interest of justice to ----------------------
attach the said properties of the opposite party & be sold for realization of
the amount due & payable to this complainant. ----------------------

6) It is therefore most humbly prayed ----------------------

i) Attach the properties of the opposite party & the same may please be ----------------------
sold & the amount so received may please be paid to this complainant
----------------------
i.e. Rs. __________ at the rate of ______% interest from _______ date
----------------------
ii) Pass any other just & equitable order as deemed fit in the interest of
justice. ----------------------
Place ----------------------

Date Appellant ----------------------

Forms 121
 Notes 7.8 FORMAT OF APPLICATION UNDER SECTION 27 OF
THE ACT
----------------------
BEFORE THE HON’BLE _________________ AT _____________
----------------------
Complaint No. ______/20______
----------------------

}
----------------------

---------------------- Full Name & description Complainant

---------------------- Vs

----------------------

----------------------
Full Name & description
} Opposite Party

---------------------- Application under section 27 of the Consumer Protection Act

---------------------- This application on behalf of the complainant is as under:
---------------------- 1) The complainant states that the Hon’ble Forum/Commission vide its orders
---------------------- dated _______ passed in the aforementioned Complaint No. was pleased to
allow the complaint of this complainant.
----------------------
2) That as per the orders passed by this Hon’ble Forum/Commission the
---------------------- opposite party was pleased to ________ within a period of ______ days.

---------------------- 3) That the opponents have acted in gross violation of the said orders of this
Hon’ble Forum/Commission as they have neither complied with the orders
---------------------- nor taken any steps even in this regard.
---------------------- 4) The complainant submits that the respondent’s opponents have committed
an offence under section 27 of the Act.
----------------------
5) In view of the aforementioned facts & circumstances, the complainant most
---------------------- respectfully prays as follows
---------------------- i) The respondents/opponents be summoned & tried for having committed
---------------------- the aforesaid offence, under section 27 of the Act & be punished
accordingly.
----------------------
ii) Pass any other just & equitable order as deemed fit in the interest of
---------------------- justice.

---------------------- Place

---------------------- Date

---------------------- Complainant

---------------------- An affidavit in support is filed herewith.

122 Consumer Protection Act, 1986 and Competition Act, 2002

7.9 FORMAT OF APPLICATION FOR PRODUCTION OF Notes
DOCUMENTS
----------------------
BEFORE THE HON’BLE ________________ AT __________
----------------------
Complaint No. ______/20______
----------------------

}
----------------------
Full Name & description Complainant ----------------------

----------------------
Vs
----------------------

}
Full Name & description Respondent/ ----------------------

----------------------
Opposite Party
----------------------

----------------------
Application under section 13 (4)(ii) of Consumer Protection Act, 1986,
----------------------
Read with Rule 10 (1) (a) of the Rules, 1987
----------------------
This application on behalf of the complainant is as follows:
----------------------
1) That the complainant has filed complaint against the opposite party for
various reliefs. The complainant craves leave of this Hon’ble Forum/ ----------------------
Commission to read the contents of the complaint as part and parcel of this ----------------------
application.
----------------------
2) That the complainant in para 4 of his complaint has referred to the following
documents i) ____________ ii) ____________iii) ___________. The said ----------------------
documents are very important, relevant and crucial to decide the complaint
----------------------
on merits. The original documents are in the possession & custody of the
opposite party. ----------------------
3) It is therefore most humbly prayed that the Hon’ble Forum/Commission ----------------------
may please direct the Opposite Party to
----------------------
a) Produce the documents i)______ii)______ & iii)________
----------------------
b) Pass any other order as deemed fit in the interest of justice.
----------------------
Place ----------------------
Dated ----------------------
Applicant ----------------------

Forms 123
 Notes 7.10 FORMAT OF APPLICATION FOR SEIZURE OF
DOCUMENTS
----------------------
BEFORE THE HON’BLE__________ AT ___________
----------------------
Complaint No. ______/20______
----------------------

----------------------

----------------------
Full Name & description Complainant

Vs }
}
---------------------- Full Name & description

---------------------- Respondent/
Opposite Party
----------------------
Application under section 13 (4) (ii) of Consumer Protection Act, 186,
----------------------
Read with Rule 10 (2) (a) of the Consumer Rules, 1987
----------------------
The Applicant/Complainant submits as under:
----------------------
1) That the present applicant have filed a detailed complaint & the same may
---------------------- please be read as part and parcel of this application.
---------------------- 2) That the documents referred to in para 5 of the complaint are vital & relevant
to consider & decide the merits of the case before the Forum/Commission.
----------------------

---------------------- 3) That the applicant apprehends that the opposite party may destroy, alter,
falsify, mutilate or tamper with the said documents and if the opposite party
---------------------- succeeds in his design the very purpose of filing this application & complaint
will be frustrated. The said documents are at __________ place.
----------------------
4) It is therefore most humbly prayed that Forum/Commission may kindly be
---------------------- pleased to pass an order authorizing a competent officer to
----------------------
a) enter upon the premises of the opposite party at ________ and effect
---------------------- search for the aforesaid documents.

---------------------- b) seize the documents, books, paper, etc. as set out above.

---------------------- Place
---------------------- Date Complainant
---------------------- An Affidavit in support is filed herewith.
----------------------
(Note - On similar lines the opposite party can also move application, so also
---------------------- application can be made for seizure of commodities.)

----------------------

124 Consumer Protection Act, 1986 and Competition Act, 2002

7.11 FORMAT OF APPLICATION TO FILE COMPLAINT Notes
AS ‘CLASS ACTION’
----------------------
The Consumer Protection Act in order to avoid multiplicity of proceedings &
to save time & energy of the presiding officers & to save the time, energy & ----------------------
money of the consumers permits class action. The cause of action & nature of ----------------------
relief when are identical, the consumer can file single complaint on behalf of
various consumers. ----------------------

BEFORE THE HON’BLE ________________ AT ______________ ----------------------

Complaint No. ______/20______ ----------------------

----------------------

}
1)
2) ----------------------
3) Complainants
----------------------
4)
5) Etc ----------------------
Full Name & description ----------------------
Vs

Full Name & description } Opposite Party

----------------------

----------------------

Application under section 2(1)(b) (iv)/section 12 (c)/section 13 (6) of ----------------------

Consumer Protection Act, 1986 read with Rule 8 sub rule (1) (a) of the
----------------------
code of Civil Procedure Code, 1908
----------------------
The Complainants/Applicants humbly submit as follows:
----------------------
1) That the ten complainants herein have filed the complaint along with this
application & crave leave of this Hon’ble Forum/Commission to read ----------------------
the contents of the complaint as integral part of this application to avoid
repetition & for the sake of brevity. ----------------------

2) That the applicants submit that the applicants have suffered due to defect/ ----------------------
deficiency in services/__________of the opposite party. That all the
----------------------
complainants/applicants have the identical cause of action, grievances &
seek identical reliefs. So also the evidence is the same which they desire to ----------------------
adduce before the Forum/Commission.
----------------------
3) That the applicants submit that in view of the aforesaid facts it will be
convenient, just & fair to allow these complainants to file a single complaint ----------------------
which will also avoid multiplicity of proceedings.
----------------------

----------------------

----------------------

Forms 125
 Notes 4) It therefore humbly prayed as follows

---------------------- i) Allow the applicants to file a single complaint in the interest of justice.

---------------------- ii) Any other order as deemed fit may be passed.

---------------------- Place -

---------------------- Date -
Complainants
----------------------
1 to 10
----------------------

---------------------- 7.12 MODEL FORM OF APPLICATION SEEKING

---------------------- PERMISSION TO ENGAGE ADVOCATE
---------------------- BEFORE THE HON’BLE ______________ AT __________________

---------------------- Complaint No.______/20_____

}
----------------------
---------------------- Complainant
----------------------

}
Vs
----------------------
Opponent/Opposite
---------------------- Party

---------------------- Application to engage Advocate

---------------------- This application on behalf of the complainant is as follows:
---------------------- 1) That the complainant has filed the accompanying complaint for deficiency
---------------------- in services & various reliefs. The complainant urges the Hon’ble _________
to read the contents of the complaint as part & parcel of this application.
----------------------
2) The complainant submits that he is not educated & works as labourers. The
---------------------- complaint filed by the complainant involves important questions of fact &
law & this complainant cannot put up his case without the aid & assistance
---------------------- of an advocate.
----------------------
3) The complainant submits that no hardship or inconvenience will be caused
---------------------- to the opposite party if the complainant is allowed to engage advocate in
the matter.
----------------------
4) It is therefore most humbly prayed that the complainant may please be
---------------------- allowed to engage advocate in the aforementioned case in the interest of
---------------------- Justice.

126 Consumer Protection Act, 1986 and Competition Act, 2002

Place Notes
Date ----------------------
Complainant ----------------------

The object of Consumer Protection Act has been to make it user friendly and as ----------------------
far as possible to avoid legal technicalities & complexities so that an ordinary
consumer can file complaint before the consumer fora without any assistance ----------------------
from a lawyer. However, in the interest of justice and where the consumer desires ----------------------
to engage a lawyer, consumer courts have granted the permission.
----------------------
Check your Progress 1 ----------------------

----------------------
Multiple Choice Single Response.
1. To serve any notice to the opposite party before filing a complaint ----------------------
under Consumer Protection Act is ----------------------
i. Mandatory
----------------------
ii. Optional
----------------------
iii. Not advisable
2. Notice can be served ----------------------
i. Party himself ----------------------
ii. Advocate ----------------------
iii. All of the above
----------------------

----------------------
Activity 1
----------------------
1. Visit any consumer court in your area and find out how certified ----------------------
copies are made ready.
----------------------
2. Draft a complaint for medical negligence.
3. Mr X purchased a mobile phone from the showroom of the mobile ----------------------
company. The mobile phone stopped working with a week. He was ----------------------
promised a replacement but never got one. Draft a notice to be sent
to the Company. ----------------------

----------------------

----------------------

----------------------

----------------------

Forms 127
 Notes Summary
---------------------- ●● From the facts, try and find out with which consumer fora the pecuniary
& territorial Jurisdiction lies, for e.g. if the claim of compensation is less
----------------------
than 20 lakhs, the complaint has to be filed before the District Forum.
---------------------- Again for the purposes of territorial Jurisdiction, it needs to be ascertained
where the opposite party works or resides & where the cause of action
---------------------- has arisen. Is the complaint within the period of limitation, otherwise the
complaint is likely to be filed before a Forum/Commission which has no
----------------------
jurisdiction & therefore it would be bad in law.
---------------------- ●● The prayer clause also should be drafted carefully. So that the consumer
can get all the reliefs to which he is entitled under the facts & under the
----------------------
law.
----------------------
Self-Assessment Questions
----------------------
---------------------- 1. Draft a complaint wherein the goods supplied by the seller are defective
goods.
----------------------
2. Draft a complaint for deficiency in service.
----------------------
3. Draft the written statement/reply to complaint for deficiency in service.
----------------------
4. Can a lawyer represent the case of the consumer?
----------------------
5. Draft an Affidavit in support of the compliant for defect in goods.
----------------------

---------------------- Answers to Check your Progress

----------------------
Check your Progress 1
---------------------- Multiple Choice Single Response.
---------------------- 1. To serve any notice to the opposite party before filing a complaint under
Consumer Protection Act is
----------------------
ii. Optional
---------------------- 2. Notice can be served
---------------------- iii. All of the above
----------------------
Suggested Reading
----------------------
1. admis.hp.nic.in/ehimapurti/pdfs/cmpleng.pdf
----------------------

----------------------

----------------------

128 Consumer Protection Act, 1986 and Competition Act, 2002

Introduction to Competition Law
UNIT

8
Structure:
8.1 Introduction
8.2 Historical Background of the Competition Act
8.3 Development of the Competition Act
8.4 Theories of Competition
8.5 Competition Advocacy
8.6 Monopolies and Restrictive Trade Practices Act
8.7 Restrictive Trade Practices
8.8 Unfair Trade Practices
8.9 Objectives of the Competition Act
8.10 Difference between MRTP ACT, 1969 and Competition Act, 2002
8.11 Components of the Competition Act
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

Introduction to Competition Law 129

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Describe the historical background of the Competition Act
----------------------
• Outline the development of the Competition Act at international level
---------------------- • Interpret the Monopolies and Restrictive Trade Practices Act
---------------------- • Distinguish between the MRTP Act and Competition Act, 2002

---------------------- • Enlist the objectives of the Competition Act 2002

• Identify the components of the Competition Act
----------------------

---------------------- 8.1 INTRODUCTION

---------------------- Competition Law, also known as anti-trust law in some jurisdictions

is that branch of law which is designed to protect the interest of the consumer
---------------------- by protecting ‘competition’ in the market. This ‘competition’ is protected by
protecting trade and commerce from restraints, monopolies, price-fixing, and
----------------------
price discrimination. A perfect competition exists in “a completely efficient
---------------------- market situation characterized by numerous buyers and sellers, a homogenous
product, perfect information for all parties, and complete freedom to move in and
---------------------- out of the market (Black’s Law Dictionary)”. Even though perfect competition is
a utopian concept, it is used as a standard for measuring market performance.
----------------------

---------------------- 8.2 HISTORICAL BACKGROUND OF THE COMPETITION ACT

---------------------- Even though the history of Competition Law can be traced back to Roman
Empire, the modern day Competition Law has its genesis in the American
---------------------- antitrust statutes like Sherman Act of 1890 and Clayton Act of 1914. But it was
---------------------- only after the Second World War that the American concept of Competition Law
became widely accepted. European Community incorporated the provisions
---------------------- of Competition Law in Articles 81 and 82 of the Treaty of Rome, signed in
1957. Subsequently, most of the major countries, like China, Brazil, Russia,
---------------------- Singapore, South Korea and Japan established their own competition regimes.
---------------------- Today, over hundred jurisdictions have their competition regimes in place and
any enterprise having aspirations to go multinational cannot afford to ignore
---------------------- this law.
----------------------
Check your Progress 1
----------------------
State True or False.
----------------------
1. Modern-day Competition Law owes its origin to antitrust statutes of
---------------------- America.
---------------------- 2. History of Competition Law can be traced back to the British Empire.

130 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Activity 1
----------------------
Using the Internet, find more articles on history of Competition Law. ----------------------

----------------------
8.3 DEVELOPMENT OF THE COMPETITION ACT
----------------------
The development of Competition Law started with grant of individual
freedom against existing guilds in the Europe in the early 18th century. The first ----------------------
traceable event of origin of Competition Law can be regarded as the book of
----------------------
Wealth of Nations by Smith, where he gave the metaphor of the invisible hands.
Smith argued that those who seek wealth by following their individual self-interest ----------------------
inadvertently stimulate the economy and assist society as a whole.
----------------------
Competition ensured that wages and prices of goods would be naturally ----------------------
set. Second, the idea of competition ensured that social welfare would be
maximized. And third, competition provided a theory that justified whatever ----------------------
prices, wages, and rents were received.
----------------------
Middle period of Competition Law began with the Standard Oil opinion’s
pronouncement of the “rule of reason” approach. However, the Sherman Act ----------------------
1890 is considered as the first attempt in the defining of modern Competition
Law, which was an attempt to promote and preserve competition. ----------------------

----------------------
Check your Progress 2
----------------------
Fill in the blanks. ----------------------
1. The book Wealth of Nations by ________ is regarded as the first
----------------------
traceable event of the origin of Competition Law.
----------------------

----------------------
Activity 2
----------------------
Find the object behind the enactment of Sherman Act and Clayton Act.
----------------------

8.4 THEORIES OF COMPETITION ----------------------

Classical and neo-classical competition are the two different theories of ----------------------
the competition. They both differ in their methods and its functioning. Classical ----------------------
competition means both rivalry and freedom from constraints, whereas neo-
classicism means “perfect competition”. It is a state of affairs in which price ----------------------
is driven to marginal cost and firms are forced to minimize their costs through
innovation and growth to the optimal size. ----------------------

----------------------

Introduction to Competition Law 131

 Notes Neo-classicists described competition more as a means to exercise free
choice between buyer and seller than an economic or legal concept. Later on the
---------------------- concept of competition was further changed and it was noted that competition
was something which existed only among the buyers within a single market, or
---------------------- only among the sellers.
----------------------
According to classical political economy, competition itself was a form
---------------------- of liberty. People should be unrestrained in their decisions about what calling to
pursue, what price to charge, or with whom to deal.
----------------------
Background of Competition Law and Common Law
----------------------
Common Law (also known as case law or precedent), is a law developed
---------------------- by judges through decisions of courts and similar tribunals rather than through
legislative statutes or executive branch action. Common Law legal systems
---------------------- are in widespread use, particularly in England. It originated in the middle
---------------------- Ages, and in nations or regions that trace their legal heritage to England, the
former colonies of the British Empire, including the United States, Malaysia,
---------------------- Singapore, Bangladesh, Pakistan, Sri Lanka, India.
---------------------- Common Law is one of the main bases of emergence and crystallization
of Competition Law. However, there is no as such common law of competition.
---------------------- But there are areas in which the operation of common law impacts upon issues
that are closely related to the public regulation of competition. Common law
---------------------- basically deals with unfair competition which is primarily comprised of torts
---------------------- that cause an economic injury to a business, through a deceptive or wrongful
business practice. Unfair competition is sometimes used to refer only to those
---------------------- torts that are meant to confuse consumers as to the source of the product,
for example, trademark infringement litigation. The law of contracts and
---------------------- combinations in restraint of trade was one of the few areas of the common
---------------------- law where the courts expressly accommodated the nineteenth century State’s
economic policy.
----------------------
Competition Law rests on the doctrine of restraint of trade. Generally,
---------------------- contract in restraint of trade are void because they are contrary to public policy
and public interest. Primarily, restraint of trade relates to a situation in which
---------------------- a party agrees with any other party to restrict his liberty in the future to carry
on trade with other persons not parties to the contract in such manner as he
----------------------
chooses.
---------------------- Restraint of Trade
---------------------- It is a common law doctrine relating to the enforceability of contractual
---------------------- restrictions on freedom to conduct business. The common law has evolved to
reflect changing business conditions.
---------------------- Restraining clauses in employment contracts are enforceable if:
----------------------  There is a legitimate interest which needs to be protected. Examples of such
---------------------- interests include business connections and business secrets.

132 Consumer Protection Act, 1986 and Competition Act, 2002

 The restraint is reasonable, i.e. sufficiently protects the interest and goes no Notes
further.
----------------------
Crucial Judgments
----------------------
In Eldridge et al vs. Johnston
----------------------
It was held that a contract imposing a restraint on competition must be
reasonable with regard to area and time if it is to be given effect. A promise is ----------------------
to be considered reasonable if it is not wider than is necessary for the protection ----------------------
of the parties and is injurious to public. If the restraint imposed is greater than
is necessary for the protection of promises, it is invalid. ----------------------
This was further crystallized in ----------------------
Texaco Ltd. vs. Mulberry Filling Station Ltd. ----------------------

Wherein court held that: restraint of trade is part of the doctrine of ----------------------
common law. If it refers to the public at large, it might involve balancing mass
of conflicting economic social and other interests. Such an opinion by the court ----------------------
had the effect of limiting the scope of doctrine. The other important doctrine is ----------------------
doctrine of privity of contract.
----------------------
The doctrine of privity in the common law of contract provides that a
contract cannot confer rights or impose obligations arising under it on any ----------------------
person or agent except the parties to it. Privity of contract occurs only between
the parties to the contract most commonly contract of sale of goods or services. ----------------------

----------------------
Check your Progress 3
----------------------
Multiple Choice Single Response.
----------------------
1. Competition Law rests on:
----------------------
i. Doctrine of restraint of trade
ii. Common law doctrine ----------------------
iii. Doctrine of privity of contract ----------------------
2. Restraint of trade is part of the doctrine of common law was held in
----------------------
i. Eldridge et al Vs. Johnston
ii. Texaco Ltd. Vs Mulberry Filling Station Ltd. ----------------------
iii. None of the above ----------------------

----------------------
Activity 3 ----------------------

----------------------
Read some articles on classical vs. neoclassical conceptions of competition.
----------------------

Introduction to Competition Law 133

 Notes 8.5 COMPETITION ADVOCACY
---------------------- Competition has a different meaning in classical law and classical
economics. Competition was not a theory about price/cost relationships, as it
---------------------- came to be in neoclassical economics.
---------------------- Competition was a belief about the role of individual self-determination
in directing the allocation of resources; it was a theory about the limits of
---------------------- State power to give privileges to one person or class at the expense of others.
---------------------- Competition laws have been described as Magna Carta of free enterprise. The
need for Competition Law arises because market can suffer from failures.
---------------------- This may have adverse impact on economic efficiency and consumer welfare.
Thus there is a need for Competition Law to provide a regulative force which
---------------------- establishes effective control over economic activities.
---------------------- The specific reason for the emergence of Competition Law is still in
debate. J. Dirlam argues that, as history teaches; ‘efficiency’ is not the reason
---------------------- for competition. Competition tends to stimulate lowest-cost production and
---------------------- allocate resources more responsively than a visible public or private hand.
Competition Law protects competitive markets for promoting efficiency
----------------------
by prescribing certain types of conduct. Any conduct, which prohibits or restricts
---------------------- firms from entering into market, introducing new products are considered illegal
by Competition Law.
----------------------
Competition is the engine of free enterprise. Market economy performs
---------------------- with respect to competition in the market. The free rationale behind a free
market economy is that freely operating markets will result in the most efficient
---------------------- allocation of a nation’s scare resources and will bring consumers the widest
variety of choices and the lowest possible process.
----------------------
This leads to a prosperous society and permits individual consumers to
---------------------- determine by their own actions what goods and services they want most. Apart
from free market system, Competition Law also has social purposes.
----------------------
Economic Analysis
----------------------
Economic analysis of competition shows that perfect competition can
---------------------- best run the market and benefit consumers. In a perfect competitive market,
---------------------- demand is equal to supply, which is known as market equilibrium.
Competition promotes productive efficiency by forcing firms to cut their
----------------------
costs in order not to lose sales to more efficient rivals. Competition promotes
---------------------- dynamic efficiency by stimulating investment and innovation.
History of Competition Policy in India
----------------------

---------------------- Before independence in 1947, India was not industrially well-off. Textile
was the main industry but that too consisted largely of handlooms. Our industrial
---------------------- sector also comprised of jute industries, railways but there was absence of vital
industries. Indian businessmen and industrialists had a feeling of unfavourable
---------------------- treatment.

134 Consumer Protection Act, 1986 and Competition Act, 2002

 When Indian independence was becoming certain, Congress was Notes
dominated by socialists- USSR was an example of successful planned economy,
so free market was not viewed in favourably. In such a condition, intervention ----------------------
by government was deemed important because Indian industrialists were weak
to fight it all alone. ----------------------

Bombay Plan 1945-1946 - it was largely drafted by FICCI and businessman. ----------------------
There was a consensus both in the minds of the decision makers and business
community that market needs to be regulated and State has to play proper role ----------------------
in the distribution of resources. For certain sectors, channelization of resources ----------------------
was very important especially in heavy industries where FDI was important but
proper channelization was important even if such sectors did not give immediate ----------------------
benefits. Also, public sector itself was very important because private investors
were not enthusiastic to invest in certain sectors. Also, continuous supervision ----------------------
of FDI was important. Therefore, Joint Stock Company along with Government ----------------------
Company was required.
In 1947, Industrial Policy Resolution was passed in which the role of State ----------------------
was emphasized but it was also that private players had an equally important ----------------------
role though it was very mild in suggesting State’s play.
In 1950 when the constitution was adopted, there was a clear mandate ----------------------
that not just the political independence that we have gained but that economic ----------------------
and social justice was also important and also that the concentration of wealth
should be avoided. ----------------------
In 1951, the Industrial Development and Regulation Act emphasized the ----------------------
role of ‘State’ where certain sectors were kept aloof from the private players
and small scale industries were to be protected, etc. ----------------------
In 1956 with the Industrial Policy Resolution, more emphasis asserted ----------------------
that the role of State was very important.
License Permit Raj was even more stringent for all the activities where ----------------------
government license was required and government started ‘directing’ the ----------------------
industrial development. However, it was the then prevailing situation in India
in 1947 that necessitated such government intervention. It was also important ----------------------
for the diversification of our industry.
----------------------
However, the flipside was around 1960s when Mahalanobis Committee
on distribution of income and levels of living was appointed to see how ----------------------
income was distributed. The Committee said that the License Raj was leading
to concentration of wealth in few hands and expressed that country was not ----------------------
moving towards its constitutional goal of equitable wealth. Therefore, there was
----------------------
anti-competition in the market.
In line with this committee report, Monopolies Inquiry Committee, 1964 ----------------------
was set up to study the actual market situation regarding concentration of wealth
----------------------
and recommended that we needed a Competition Law to ensure that certain
company do not dominate over the market to create entry barriers. But there ----------------------
were certain loopholes. Their term of reference was only for private players, so
the public sectors and agricultural sector kept out from the purview of its study. ----------------------

Introduction to Competition Law 135

 Notes Then in 1969, the Monopolies and Restrictive Trade Practices Act was
passed. It set up Monopolies Restrictive Trade Practices Commission (MRTPC).
---------------------- It was amended three-four times but the major development was the setting up
of Sachar Committee in 1974 to enquire into the working of the Competition
---------------------- Act and MRTP Act. The committee largely gave suggestions with regard to
---------------------- Competition Act. As MRTPC was mainly advisory in nature so main powers
were with central government which was later amended in MRTP Act.
----------------------
Impact of Socialism
----------------------
After independence, Government of India wanted rapid industrial
---------------------- development and equitable distribution of wealth. The same is reflected under
the Constitution of India as adequate provisions were made in the Directive
---------------------- principles of State Policy.
---------------------- Reforms

---------------------- The Government appointed the Monopolies Inquiry Commission (“MIC”)

in April 1964, with the following terms of reference:
----------------------
 To investigate the extent and effect of concentration of power in the private
---------------------- sector, i.e. its factors and social consequences; and
----------------------  To suggest necessary legislative, or other measures in light of the findings.
---------------------- Monopoly power was defined by the MIC as the ability to dictate price
and control the market. The committee also set out the objectives for the
---------------------- legislative recommendations in terms of achieving the highest possible
production with least damage to people at large while having maximum
---------------------- benefits.
---------------------- Thereafter, the Planning Commission of India, in July 1966, appointed
---------------------- Hazari Committee to review the operation of the existent industrial licensing
system under Industries (Development and Regulation) Act 1951. After a
---------------------- heated Parliamentary debate over this report, the Government of India, in July
1967, appointed the Industrial Licensing Policy Inquiry Committee (“ILPIC”),
---------------------- which was asked to look into the licensing and financial structure. The ILPIC
---------------------- submitted its report two years later.
The Industrial Licensing and Policy Inquiry Commission (ILPIC) felt that
----------------------
licensing was unable to check concentration, and suggested that the Monopolies
---------------------- and Restrictive Trade Practices (“MRTP”) Bill (as proposed by the MIC) be
passed to set up an effective legislative regime.
----------------------

----------------------

----------------------

----------------------

----------------------

136 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Check your Progress 4
----------------------
State True or False. ----------------------
1. Competition laws have been described as Magna Carta of free
enterprise. ----------------------

2. Competition promotes productive efficiency by forcing firms to cut ----------------------

their costs in order not to lose sales to more efficient rivals.
----------------------

----------------------
Activity 4
----------------------

Read the Industrial Licensing and Policy Inquiry Commission (ILPIC) ----------------------
Report.
----------------------
----------------------
8.6 MONOPOLIES AND RESTRICTIVE TRADE
PRACTICES ACT ----------------------

After the attainment of independence, India adopted and followed policies ----------------------
comprising of “Command-and-Control” laws, rules, regulations and executive
----------------------
orders. The MTRP Act was one such case wherein such command and control
of the economy was based. ----------------------
Objectives of the MRTP Act
----------------------
After much debate over the Bill, the MRTP Act was enacted in December
1969. It came into force in June 1970 and the MRTP Commission was set ----------------------
up in August of the same year. Prior to Competition Act 2002, Monopolies ----------------------
and Restrictive Trade Practices Act 1969 incorporated the Competition Law
in a substantial manner. The Act deals with the concept of monopolistic and ----------------------
restrictive trade practices and subsequently with the unfair trade practices. It
owes its inspiration to Articles 38 and 39 of the Constitution which enjoins that ----------------------
the State should strive to promote public welfare by securing and protecting ----------------------
a social order in which socio-economic justice shall inform all institutions of
national life, and ensures that the ownership and control of material resources ----------------------
are so distributed as to sub serve the common good and that the operation
of the economic system is based in such a manner which does not result in ----------------------
concentration of wealth and means of production to common detriment. ----------------------
Broadly, the Act was based on four principles.
----------------------
 Social justice with economic growth;
----------------------
 Welfare State;
----------------------
 Regulating concentration of economic power to the common detriment;
 Controlling monopolistic, unfair and restrictive trade practices. ----------------------

Introduction to Competition Law 137

 Notes Promotion of economic growth is the ultimate object of the Act, intended
to achieve. The operation of the economic system should not result in the
---------------------- concentration of wealth and means of production to the common detriment.
An interesting feature of the statute is that it envelops within its ambit, fields of
---------------------- production and distribution of both goods and services.
---------------------- As stated earlier, MRTP Act regulates three types of trade practices,
monopolistic trade practices, restrictive trade practices and unfair trade
----------------------
practices that hamper competition in India or are prejudicial to public interest.
---------------------- Monopolistic trade practice means a trade practice which has or is likely to
have the effect of maintaining the prices of goods or services at an unreasonable
---------------------- level, or limiting technical development or capital investment to the common
detriment deteriorate or allowing the quality of any goods or services in India to
----------------------
deteriorate. It includes unreasonably increasing the cost of production of goods
---------------------- or maintenance of services or the sale or resale prices of goods or the charges of
the services; or the profit which are or may be derived by the production, supply
---------------------- or distribution of any goods or in the provisions of any services; preventing or
lessening competition in the production, supply or distribution of any goods or
----------------------
in the provision or maintenance of any services by adoption of unfair methods
---------------------- or unfair or deceptive practices.
With the passage of time, it was noticed that the MRTP Act’s objective
----------------------
could not be achieved to the desired extent. In June 1977, the government
---------------------- appointed a High-Powered Export (Sachar) Committee to consider and report
the required changes.
----------------------

---------------------- Check your Progress 5

---------------------- Fill in the blanks.

---------------------- 1. The MRTP Act regulates ____ types of trade practices.

---------------------- 2. The ultimate object of the MRTP Act is promotion of __________.

----------------------

---------------------- Activity 5
----------------------
Read the Sachar Committee Report, 1977 to know the changes
---------------------- recommended by it.

----------------------
8.7 RESTRICTIVE TRADE PRACTICES
----------------------
A restrictive trade practice means a trade practice which has, or may have,
---------------------- the effect of preventing, distorting or restricting competition in any manner and
---------------------- in particular which tends to obstruct the flow of capital or resources into the
stream of production, or which tends to bring about manipulation of prices, or
---------------------- conditions of delivery or to affect the flow of supplies in the market relating to

138 Consumer Protection Act, 1986 and Competition Act, 2002

goods or services in such a manner as to impose on the consumers unjustified Notes
costs or restrictions.
----------------------
Certain common types of Restrictive Trade Practices enumerated in the MRTP
Act are: ----------------------
 Refusal to deal.
----------------------
 Tie-up sales.
 Full line forcing. ----------------------
 Exclusive dealings. ----------------------
 Price discrimination.
----------------------
 Re-sale price maintenance.
 Area-restriction. ----------------------

----------------------
Check your Progress 6
----------------------
State True or False. ----------------------
1. Tie-up sales and price discrimination are types of restrictive trade
----------------------
practice.
----------------------

----------------------
Activity 6
----------------------
Find two cases on restrictive trade practice. ----------------------

----------------------
8.8 UNFAIR TRADE PRACTICES
----------------------
An unfair trade practice means a trade practice, which, for the purpose
of promoting the sale, use or supply of any goods or for the provisions of any ----------------------
services, adopts unfair methods or unfair or deceptive practices. The MRTP Act
lists out certain unfair trade practices. However, the definition is not exhaustive. ----------------------
“Advertisement and sales promotion have become well established modes of
----------------------
modern business techniques. That advertisement and representation to the
consumers should not become deceptive has always been one of the points of ----------------------
conflicts between business and consumer”.
----------------------
Making false or misleading representation of facts disparaging the goods,
services or trade of another person is also a prohibited trade practice under the ----------------------
Indian law.
----------------------
The Monopolistic Trade Practice (MTP) came into the statute by an
amendment to MRTP Act in 1984. An MTP is a trade practice, which has or is ----------------------
likely to have the effect of maintaining the prices of goods or charges for the
service at an unreasonable level by limiting, reducing or otherwise controlling ----------------------
the production supply or distribution of goods or the supply of any services. ----------------------

Introduction to Competition Law 139

 Notes Increasing unreasonably

----------------------  the cost of production of any goods;

 charges of the provisions;
----------------------
 maintenance of any services;
----------------------
 the prices at which goods are sold or resold at which the services are or may
---------------------- be provided.
---------------------- Amendment in MRTP Act in 1991 and shift in the emphasis
---------------------- The MRTP Act was amended in 1984, except the non-inclusion of
---------------------- hazardous goods wherein hoarding was also not included. The MRTP Act 1969
amended in 1991 was a part of the new economic reforms set in motion by the
---------------------- Government of that day.

---------------------- During the year 1991, a notification was also issued by the Government
that the MRTP shall apply to public sector undertakings whether owned by
---------------------- the Government or by Government companies, statutory corporations, and
undertakings under the Management of various controllers appointed under any
---------------------- law, cooperative societies and financial institutions.
---------------------- Doctrine Guiding the MRTP
---------------------- The major premises of MRTP is behavioral and reformist in nature. In
terms of the behavioral doctrine, the conducts of the entities, undertakings and
----------------------
bodies which indulge in trade practices in such a manner as to be detrimental
---------------------- to public interest is examined with reference to whether the said practices
constitute any monopolistic, restrictive or unfair trade practice.
----------------------
Failure of MRTP Act
----------------------
One of the reasons for poor performance of the MRTP Act was the
---------------------- absence of proper and adequate definitions in the Act. The Act didn’t contain
definition to many of the acts which are essentially anti-competitive in nature
---------------------- like predatory pricing, cartel, collusion, bid rigging, etc. Along with this, the
---------------------- MRTP Commission was also very poorly resourced with adequate weapons
while checking anti-competitive practices in the market. Ten years after this
---------------------- amendment, the Government understood that the whole set up was to suggest
ways and means to promote competition and to advise a modern Competition
---------------------- Law for India in line with international developments and to suggest a
---------------------- legislative framework. On the basis of the S.V.S. Raghvan Committee Report,
the Government came out with a new Trade Related Competition Bill.
---------------------- The replacement of the Monopolies and Restrictive Trade Practices
---------------------- (MRTP) Act of 1969 by a new Competition Act is a natural corollary to economic
liberalization and opening up of trade to competition.
----------------------
The Government very well received the recommendations of the committee
---------------------- and after consultations with all concerned, including the trade and industry

140 Consumer Protection Act, 1986 and Competition Act, 2002

associations, the government decided to enact a new law on competition, i.e. Notes
the Competition Act 2002.
----------------------
Check your Progress 7 ----------------------

Fill in the blanks. ----------------------

1. The MRTP Act was amended_______ times. ----------------------
2. The _____________ replaced the MRTP Act.
----------------------

----------------------
Activity 7 ----------------------

Find the reasons for failure of MRTP Act. ----------------------

----------------------
8.9 OBJECTIVES OF THE COMPETITION ACT ----------------------
The Competition Act, 2002 was enacted to promote competition in the ----------------------
Indian markets. It was felt by the Government that with the liberalization of the
Indian economy, promotion of competition rather than prevention of monopoly ----------------------
should be its endeavor. The intention towards the enactment of a new Act for
this purpose was expressed in the Finance Minister’s Budget Speech 1999- ----------------------
2000 following which a committee was constituted consisting of persons with ----------------------
the knowledge of the MRTP Act, 1969 and the modern Competition Laws to
examine the MRTP Act provisions and to propose a new Competition Law ----------------------
for India. The committee gave its report on 22nd May, 2000 following which
the Competition Bill was introduced by the government in the Parliament in ----------------------
the subsequent year 2001, which was passed and received the assent of the ----------------------
President of India on 13th January, 2003.
The Competition Act was amended further in the year 2007 vide the ----------------------
Competition (Amendment) Act, 2007, which amended some sections of the ----------------------
existing Act and a separate chapter (Chapter VIIIA) was inserted regarding the
establishment of a Competition Appellate Tribunal and its power. ----------------------
Objects of Competition Law ----------------------
Efficiency and consumer welfare are the primary goals of Competition
----------------------
Law. It would be important to note that the goals of Competition Law are not
only economic but also non-economic. ----------------------
Classical goals ----------------------
Under classical goals, the widely recognized and primary goals of
Competition Law have been categorized. They are: ----------------------

1) Enhancement of efficiency in the market; ----------------------

2) Promoting consumer welfare; ----------------------

Introduction to Competition Law 141

 Notes 3) Avoidance of conglomeration of economic power; and
4) Protection of smaller firms from anti-competitive agreements.
----------------------
Specific goals
----------------------
The specific goals of Competition Law is the creation of a single market,
---------------------- which helps in bringing out lower price, better consumer welfare and liberty to
---------------------- sellers and buyers.
Competition for efficiency
----------------------
There are three types of efficiency:
----------------------
1) Allocative efficiency
----------------------
2) Productive efficiency
----------------------
3) Dynamic efficiency
----------------------
Productive efficiency means optimal production of goods with available
----------------------
input, i.e. use of the most cost effective combination of productive resources
---------------------- available under present technology.

---------------------- Dynamic efficiency refers to development of new products. Competition

should aim at achieving static as well as dynamic efficiency. Competition is
---------------------- valued only when it serves wealth maximization.

---------------------- Competition and Consumer Welfare

---------------------- The previous section conceptualized with competition as a tool for

promoting efficiency in the market. Many a times, competition has been used
---------------------- to enhance consumer welfare and therein efficiency and consumer welfare has
been used synonymously. In other words, competition is not concerned with
----------------------
maximizing of firms; rather it is concerned with defending market competition
---------------------- in order to increase welfare, not defending competitors.
Promotion of small business enterprises
----------------------

---------------------- This is considered more of a non-economic and equity based goal of Competition
Law.
---------------------- Can Competition Act Replace MRTP Act?
----------------------
In view of the policy shift from curbing monopolies to promoting
---------------------- competition, there was a need to repeal the Monopolies and Restrictive Trade
Practices Act. Hence, the Competition Law aims at doing away with the rigidly
---------------------- structured MRTP Act. The Competition Law proposed is flexible and behavior
oriented.
----------------------
After the Act was placed on the web-site and came into the public domain,
---------------------- a question often asked is whether it is not still the old law in substance although
not in form. A clear answer to this question is in the title of this section. The Act
----------------------

142 Consumer Protection Act, 1986 and Competition Act, 2002

is a new wine in a new bottle. The differences between the old law (namely the Notes
MRTP Act, 1969) and the new law (the Competition Act, 2002) may perhaps be
best captured in the form of a table displayed below: ----------------------

----------------------
Check your Progress 8
----------------------
Match the following.
----------------------
i. Creation of single market a. Primary goal
ii. Efficiency and Consumer b. Non-economic/equity-based ----------------------
Welfare goal
----------------------
iii. Promotion of small business c. Specific goal
enterprise ----------------------

----------------------
8.10 DIFFERENCE BETWEEN MRTP ACT, 1969 AND
COMPETITION ACT, 2002 ----------------------

S.NO MRTP ACT, 1969 COMPETITION ACT, 2002 ----------------------

1. Based on the pre-reforms scenario Based on the post-reforms scenario ----------------------

2. Based on the size as a factor Based on the structure as a factor ----------------------
3. Competition offences implicit or Competition offences explicit and
not defined defined ----------------------
4. Complex in arrangement and Simple in language and arrangement ----------------------
language and easily comprehensible
5. 14 per se offences negating the 4 per se offences and rest subjected to ----------------------
principles of natural justice rule of reasons
6. Frowns upon dominance Frowns upon abuse of dominance ----------------------
7. Registration of agreements No requirement of registration of ----------------------
compulsory agreements
----------------------
8. No combinations regulation Combinations regulated beyond a
high threshold limit ----------------------
9. Competition commission Competition commission selected by ----------------------
appointed by the government a collegiums (search committee)
----------------------
10. Very little financial and Relatively more autonomy for
administrative autonomy for the the competition commission ----------------------
competition commission
----------------------
11. No competition advocacy role Competition commission has a
for competition commission competition advocacy role ----------------------
12. No penalties for offences Penalties for offences
----------------------
13. Reactive and rigid Proactive and flexible
----------------------
14. Unfair trade practices covered Unfair trade practices omitted (consumer
forum will deal with them) ----------------------

Introduction to Competition Law 143

 Notes S.NO MRTP ACT, 1969 COMPETITION ACT, 2002
---------------------- 15. Does not vest MRTP Competition law seeks to regulate them
commission to inquire into the
---------------------- cartels of foreign origin in a
---------------------- direct matter
16. Concept of ‘Group’ Act had Concept has been simplified
---------------------- wider import and was unworkable
----------------------

---------------------- Check your Progress 9

---------------------- State True or False.

---------------------- 1. The Competition Act, 2002 is in simple language compared to MRTP
Act.
----------------------
2. The MRTP Act provided penalties whereas Competition Act, 2002
---------------------- does not provide.

----------------------
8.11 COMPONENTS OF THE COMPETITION ACT
----------------------
 Anti-Competition Agreements
----------------------
 Abuse of Dominance
----------------------  Combinations Regulation
---------------------- Anti Competition Agreements
---------------------- Firms enter into agreements, which may have the potential of restricting
---------------------- competition. A scan of the Competition Laws in the world will show that they
make a distinction between horizontal and vertical agreements between firms.
---------------------- The former, namely the horizontal agreements are those among competitors
and the latter, namely the vertical agreements are those relating to an actual
---------------------- or potential relationship of purchasing or selling to each other. A particularly
---------------------- pernicious type of horizontal agreement is the cartel.
Vertical agreements are pernicious, if they are between firms in a position
----------------------
of dominance. Most Competition Laws view vertical agreements generally more
---------------------- leniently than horizontal agreements, as, prima facie, horizontal agreements
are more likely to reduce competition than agreements between firms in a
---------------------- purchaser-seller relationship. An obvious example that comes to mind is an
agreement between enterprises dealing in the same product or products. Such
----------------------
horizontal agreements, which include membership of cartels, are presumed to
---------------------- lead to unreasonable restrictions of competition and are therefore presumed to
have an appreciable adverse effect on competition. In other words, they are per
---------------------- se illegal. The underlying principle in such presumption of illegality is that the
----------------------

144 Consumer Protection Act, 1986 and Competition Act, 2002

agreements in question have an appreciable anti-competitive effect. Barring the Notes
aforesaid four types of agreements, all the others will be subject to the rule of
reason test in the Act. ----------------------
Abuse of Dominance ----------------------
Dominant Position has been appropriately defined in the Act in terms ----------------------
of the position of strength, enjoyed by an enterprise, in the relevant market,
in India, which enables it to (i) operate independently of competitive forces ----------------------
prevailing in the relevant market; or (ii) affect its competitors or consumers or ----------------------
the relevant market, in its favour.
Section 4 enjoins, no enterprise shall abuse its dominant position. ----------------------
Dominant position is the position of strength enjoyed by an enterprise in the ----------------------
relevant market which enables it to operate independently of competitive forces
prevailing in the market or affects its competitors or consumers or the relevant ----------------------
market in its favour. Dominant position is abused when an enterprise imposes
unfair or discriminatory conditions in purchase or sale of goods or services or ----------------------
in the price in purchase or sale of goods or services. Again, the philosophy of ----------------------
the Competition Act is reflected in this provision, where it is clarified that a
situation of monopoly per se is not against public policy but, rather, the use of ----------------------
the monopoly status such that it operates to the detriment of potential and actual
competitors. ----------------------

At this point, it is worth mentioning that the Act does not prohibit or ----------------------
restrict enterprises from coming into dominance. There is no control whatsoever
to prevent enterprises from coming into or acquiring position of dominance. All ----------------------
that the Act prohibits is the abuse of that dominant position. The Act therefore ----------------------
targets the abuse of dominance and not dominance per se. This is indeed a
welcome step, a step towards a truly global and liberal economy. ----------------------
The Act on Combinations Regulations ----------------------
The Competition Act also is designed to regulate the operation and ----------------------
activities of combinations, a term, which contemplates acquisitions, mergers
or amalgamations. Thus, the operation of the Competition Act is not confined ----------------------
to transactions strictly within the boundaries of India but also such transactions ----------------------
involving entities existing and/or established overseas.
----------------------
Herein again lies the key to understanding the Competition Act. The
intent of the legislation is not to prevent the existence of a monopoly across the ----------------------
board. There is realisation in policy-making circles that in certain industries,
the nature of their operations and economies of scale indeed dictate the creation ----------------------
of a monopoly in order to be able to operate and remain viable and profitable. ----------------------
This is in significant contrast to the philosophy, which propelled the operation
and application of the MRTP Act, the trigger for which was the existing or ----------------------
impending creation of a monopoly situation in a sector of industry.
----------------------
The Act has made the pre-notification of combinations voluntary for the
parties concerned. However, if the parties to the combination choose not to notify ----------------------

Introduction to Competition Law 145

 Notes the CCI, as it is not mandatory to notify, they run the risk of a post-combination
action by the CCI, if it is discovered subsequently, that the combination has an
---------------------- appreciable adverse effect on competition. There is a rider that the CCI shall not
initiate an inquiry into a combination after the expiry of one year from the date
----------------------
on which the combination has taken effect.
----------------------
Check your Progress 10
----------------------

---------------------- Match the following.

---------------------- i. Vertical agreement a. CCI

ii. Horizontal agreement b. Relationship of purchasing/
---------------------- selling
iii. Competition Commission of c. Among competitors
---------------------- India
----------------------
---------------------- Summary
---------------------- ●● The Competition Act, 2002 was passed by the Parliament in the year
2002, to which the President accorded assent in January, 2003. It was
---------------------- subsequently amended by the Competition (Amendment) Act, 2007. The
---------------------- main objective of Competition Law is to promote economic efficiency
using competition as one of the means of assisting the creation of
---------------------- market responsive to consumer preferences. The advantages of perfect
competition are three-fold: allocative efficiency, which ensures the
---------------------- effective allocation of resources, productive efficiency, which ensures
---------------------- that costs of production are kept at a minimum and dynamic efficiency,
which promotes innovative practices.
----------------------

---------------------- Keywords

---------------------- ●● Mahalanobis Committee: Committee Appointed by Government on

Distribution of Income and Levels of Living in 1960.
---------------------- ●● Hazari Committee: Committee Report on Licensing Procedure Ministry
---------------------- of Industry, Government of India, New Delhi, 1965.
●● Cartel: A combination of independent business organizations formed to
---------------------- regulate production, pricing, and marketing of goods by the members.
---------------------- ●● Collusion: An agreement between two or more persons to defraud a
person of his rights, by the forms of law, or to obtain an object forbidden
---------------------- by law.
---------------------- ●● Extraterritorial Jurisdiction: It refers to a court’s ability to exercise
power beyond its territory.
----------------------

----------------------

146 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Self-Assessment Questions
----------------------
1. Write the major reasons for the evolution of the Competition Act.
----------------------
2. Explain the importance of the competition in today’s world.
3. Explain the contribution of the different committees which were formed by ----------------------
the government to study the Competition Laws. ----------------------
4. Explain the concept of Unfair Trade Practice. ----------------------
5. Write short note on failure of the MRTP Act.
----------------------
6. Write objectives of the Competition Act 2002.
----------------------

Answers to Check your Progress ----------------------

----------------------
Check your Progress 1
State True or False. ----------------------
1. True ----------------------
2. False ----------------------
Check your Progress 2
----------------------
Fill in the blanks.
----------------------
1. The book Wealth of Nations by Adam Smith is regarded as the first
traceable event of origin of Competition Law. ----------------------
Check your Progress 3
----------------------
Multiple Choice Single Response.
----------------------
1. Competition Law rests on
i. Doctrine of restraint of trade ----------------------

2. Restraint of trade is part of the doctrine of common law was held in ----------------------
ii. Texaco Ltd. Vs Mulberry Filling Station Ltd. ----------------------
Check your Progress 4
----------------------
State True or False.
----------------------
1. True
----------------------
2. True
Check your Progress 5 ----------------------
Fill in the blanks. ----------------------
1. The MRTP Act regulates three types of trade practices. ----------------------
2. The ultimate Object of the MRTP Act is promotion of economic growth.
----------------------

Introduction to Competition Law 147

 Notes Check your Progress 6
State True or False.
----------------------
1. True
----------------------
Check your Progress 7
---------------------- Fill in the blanks.
---------------------- 1. The MRTP Act was amended two times.
---------------------- 2. The Competition Act, 2002 replaced the MRTP Act.
Check your Progress 8
----------------------
Match the following.
----------------------
i. – c.
---------------------- ii. – a.
---------------------- iii. – b.
---------------------- Check your Progress 9
State True or False.
----------------------
1. True
----------------------
2. False
---------------------- Check your Progress 10
---------------------- Match the following.
---------------------- i. – c.
---------------------- ii. – b.

---------------------- iii. – a.

---------------------- Suggested Reading

----------------------
1. http://www.mef.gub.uy/competencia/documentos/cap1.pdf
---------------------- 2. http://www.cuts-international.org/pdf/wiancl.pdf
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

148 Consumer Protection Act, 1986 and Competition Act, 2002

Competition Commission of India
UNIT

9
Structure:

9.1 Introduction
9.2 Establishment of Commission
9.3 Composition of the Competition Commission in India
9.4 Officers of Competition Commission of India
9.5 Duties of the Competition Commission
9.6 Powers of the Commission
9.7 Rectification of Orders
9.8 Appellate Tribunal
Summary
Keywords
Self-Assessment Questions
Answers to Check your Progress
Suggested Reading

Competition Commission of India 149

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Describe the structure and nature of Competition Commission
----------------------
• Discuss the establishment of the Competition Commission and its
---------------------- hierarchy
• State the salient features of the Competition Commission
----------------------
• List the powers and duties of the Commission
----------------------

---------------------- 9.1 INTRODUCTION

---------------------- In today’s world, competition law is being seen as the way to provide better
public services. It is said that the Competition Act is, “an act to provide, keeping
---------------------- in view of the economic development of the country, for the establishment
of a commission to prevent practices having adverse effect on competition
----------------------
in the market, to protect the interest of consumers and to ensure freedom of
---------------------- trade carried on by other participants in the markets, in India, and for matters
connected therewith or incidental thereto.” Today, the whole world is facing
---------------------- the cut throat competition and to stand ‘in’; every nation is trying to pull their
economy up. The globalization and urbanization is also playing a good role in
----------------------
the same. To have a fair and healthy competition, our nation has set up a body –
---------------------- judicial body which is known as the ‘Competition Commission of India’ [CCI].
In India there was an act regarding the competition in the market named
----------------------
MRTP Act [Monopolistic & Restrictive Trade Practice Act] but as the time
---------------------- changed, this Act was not able to prevent the needed defense for the society
and market, and thus new Act named The Competition Act enacted in 2002
---------------------- which is widely known as the ‘Antitrust Act’ in United States. The substance
and practice of this Act differ from jurisdiction to jurisdiction.
----------------------
Competition:
----------------------
 Increases efficiency
----------------------
 Encourages innovation
----------------------
 Enhances consumer welfare - wider choice, lower prices, better quality
----------------------  Conducive to economic and political democracy
----------------------  Empirical studies have demonstrated benefits in several countries, e.g.
Australia, USA, UK and Ireland
----------------------
Why Competition Law?
----------------------
 Market economy can suffer from market failures/distortions, leading to
---------------------- adverse effects on economy and consumers.
----------------------  This necessitates a law and an authority to check against such practices.

150 Consumer Protection Act, 1986 and Competition Act, 2002

 Consequently, about 100 countries have enacted modern competition laws. Notes
 India too enacted new Competition Act, 2002 as part of the second generation ----------------------
economic reforms.
----------------------

9.2 ESTABLISHMENT OF COMMISSION ----------------------

Competition Commission of India is an independent authority of the Indian ----------------------

government. It was established on 14th October 2003, on the recommendation
----------------------
of SVS Raghavan Committee to achieve the objectives of the Competition Act,
2002. The CCI has been proposed to consist of a chairperson and 10 members. ----------------------
The main objective of competition law is to promote economic efficiency
----------------------
using competition as one of the means of assisting the creation of market
responsive to consumer preferences. ----------------------
The advantages of perfect competition are three-fold: allocative efficiency, ----------------------
which ensures the effective allocation of resources, productive efficiency, which
ensures that costs of production are kept at a minimum and dynamic efficiency, ----------------------
which promotes innovative practices. The aim of the Commission is to make
markets work well for consumers through effective competition. The advantages ----------------------
to various sectors arising out of competition should percolate to consumers and ----------------------
businesses for level playing field, redressal against anti-competitive practices,
competitively priced inputs and optimal realization from sale of assets. ----------------------
The Commission shall be a body corporate having perpetual succession ----------------------
and a common seal with power, subject to the provisions of this Act, to acquire,
hold and dispose of property, both moveable and immoveable and to contract ----------------------
and shall, by the said name, sue or to be sued.
----------------------
The head office of the Commission shall be at Delhi. With effect from
such date as the Central Government may, by notification appoint, there shall be ----------------------
established, for the purposes of this Act a Commission to be called ‘Competition
Commission of India’. ----------------------

----------------------
Check your Progress 1
----------------------
State True or False. ----------------------
1. Competition Commission was established on the recommendation of
----------------------
the Hazari Commission.
2. CCI is a body corporate having perpetual succession and common ----------------------
seal. ----------------------

----------------------
Activity 1
----------------------
Read the recommendations of the Raghavan Committee. ----------------------

Competition Commission of India 151

 Notes 9.3 COMPOSITION OF THE COMPETITION
COMMISSION IN INDIA
----------------------
The Commission shall consist of a Chairperson and not less than two and
---------------------- not more than six other members to be appointed by the Central Government.
---------------------- The Chairperson and other members of the Commission shall be appointed by
the Central Government from a panel of names recommended by a committee.
----------------------
The Chairperson and every other member shall be a person of ability,
---------------------- integrity and standing and who has special knowledge of, and such professional
experience of not less than fifteen years in international trade, economics,
---------------------- business, commerce, law, finance, accountancy, management, industry, public
affairs of competition matters, including competition law and policy, which in the
----------------------
opinion of the Central Government, may be used to the Commission.
---------------------- The Chairperson and other members shall be the whole time member.
The Chairperson and every other member shall hold office as such for a term of
----------------------
five years from the date on which he enters upon his office and shall be eligible
---------------------- for reappointment. The Chairperson or other members shall not hold office as
such after he has attained the age of sixty five years. A vacancy caused by the
---------------------- resignation or removal of the Chairperson or any other member or by death or
otherwise shall be filled by fresh appointment.
----------------------
In the event of the occurrence of a vacancy to the office of the Chairperson
---------------------- by reason of his death, resignation or otherwise, the seniormost member shall
---------------------- act as the Chairperson, until the date on which a new Chairperson is appointed
and enters upon his office.
---------------------- When the Chairperson is unable to discharge his functions owing to
---------------------- absence, illness or any other cause, the seniormost member shall discharge the
functions of the Chairperson until the date on which the Chairperson resumes
---------------------- the charge of the functions.

---------------------- The Chairperson and other members shall not, for a period of two years
from the date on which they cease to hold office, accept any employment in, or
---------------------- connected with the management or administration of, any enterprise which has
been a party to a proceeding before the Commission under this Act.
----------------------
The Commission shall meet at such times and such places, and shall
---------------------- observe such rules of procedure in regard to the transaction of business of
meeting as may be provided by regulations.
----------------------
All questions which come up before any meeting of the Commission shall
---------------------- be decided by a majority of the Members present and voting, and in the event of
equality of votes, the Chairperson or in his absence, the Member presiding shall
----------------------
have a second or casting vote.
----------------------

----------------------

----------------------

152 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Check your Progress 2
----------------------
Fill in the blanks. ----------------------
1. The Commission shall consist of a Chairperson and other members to
be appointed by the ____________ Government. ----------------------

2. The Chairperson and other members shall be the whole time member ----------------------
and hold office as for a term of _____ years.
----------------------
3. All questions, which come up before any meeting of the Commission
shall be decided by a majority of the members ___________. ----------------------

----------------------

Activity 2 ----------------------

----------------------
Name the current Chairperson of CCI.
----------------------

9.4 OFFICERS OF COMPETITION COMMISSION OF INDIA - - - - - - - - - - - - - - - - - - - - - -

The Central Government may, by notification, appoint a Director General for ----------------------
the purpose of assisting the Commission in conducting inquiry into contravention
----------------------
of any of the provisions of this Act and for performing such other functions as are,
or may be, provided by or under this Act. The number of other Additional, Joint, ----------------------
Deputy or Assistant Directors General or such officers or other employees in the
office of Director General may be appointed as prescribed. ----------------------
Reference: ----------------------
Where in the course of a proceeding before any statutory authority an ----------------------
issue is raised by any party that any decision which such statutory authority has
taken or proposes to take, is or would be, contrary to any of the provisions of ----------------------
this Act, then such statutory authority may make a reference in respect of such ----------------------
issue to the Commission.
Any statutory authority, may, suo motu, make such a reference to the ----------------------
Commission. On receipt of such reference, the Commission shall give its opinion, ----------------------
within sixty days of receipt of such reference, to such statutory authority which
shall consider the opinion of the Commission and thereafter, give its findings ----------------------
recording reasons therefore on the issues referred to in the said opinion.
----------------------
Where in the course of a proceeding before the Commission an issue is
raised by any party that any decision which, the Commission has taken during ----------------------
such proceeding or proposes to take, is or would be contrary to any provision
of this Act whose implementation is entrusted to a statutory authority, then the ----------------------
Commission may make a reference in respect of such issue to the statutory ----------------------
authority.
----------------------

Competition Commission of India 153

 Notes On receipt of reference from the Commission, the statutory authority
shall give its opinion, within sixty days of receipt of such reference, to the
---------------------- Commission which shall consider the opinion of statutory authority, and
thereafter give its findings recording reasons therefore on the issues referred to
---------------------- in the said opinion.
---------------------- Jurisdiction of The Competition Commission

---------------------- All participants in business - private, public and even government

departments within its ambit come under the jurisdiction of the Competition
---------------------- Commission.
---------------------- For achieving its objectives, the Commission has jurisdiction to:
---------------------- i) Enquire into Anti-Competitive Agreements (e.g. Cartels, bid-rigging, etc.)
[Section 3]
----------------------
ii) Enquire into abuse of dominant position (e.g. Predatory Pricing, etc.)
---------------------- [Section 4]
---------------------- iii) Regulate combinations (Mergers, Amalgamation, Acquisition of shares or
control), [Sections 5 & 6]
----------------------
iv) Undertake Competition Advocacy (including advice on competition policy
---------------------- issues), create public awareness, impart training on competition issues,
(Section 49)
----------------------
Competition Efficiency
----------------------
1) An anti-competitive agreement that causes or is likely to cause an appreciable
----------------------
adverse effect on competition within India shall be void.
---------------------- 2) Any agreement which determines price, controls supply, shares market or
---------------------- results in bid-rigging is presumed to have appreciable adverse effect on
competition.
---------------------- Examples - tie-in arrangement, exclusive supply agreement, exclusive
---------------------- distribution agreement, refusal to deal, resale price maintenance.
Exclusions - agreements involving rights under laws dealing with IPRs
---------------------- to restrain any infringement or to impose reasonable conditions exports to the
---------------------- extent the agreement relates exclusively to the production, supply, distribution
or control of goods or provision of services for such exports.
----------------------
Dominance means a position of strength in the relevant market which
---------------------- enables an enterprise to operate independently of competitive forces or
adversely affects its competitors or consumers and includes predatory pricing
---------------------- (selling below cost to reduce or eliminate competition).
---------------------- Abuse of dominance includes:

----------------------  Direct or indirect imposition of unfair or discriminatory conditions in

purchase or sale or price
----------------------

154 Consumer Protection Act, 1986 and Competition Act, 2002

 Limiting production Notes
 Restricting technical or scientific development to the prejudice of consumers
----------------------
 Denial of market access
----------------------
Activities undertaken by the Commission
Objective ----------------------
The Commission is undertaking Preparatory and Foundational work required ----------------------
to make it fully operational. The objective is to advance this work to a stage
where CCI can be made operational without further loss of time once the Writ ----------------------
Petitions pending before the Hon’ble Supreme Court are disposed of.
----------------------
Activities being undertaken by the Commission:
----------------------
 Administrative Work
 Establishment Work ----------------------
 Competition Advocacy ----------------------
 Preparation of Draft Regulations
----------------------
 Competition Forum
 Miscellaneous Work ----------------------

----------------------
Check your Progress 3
----------------------
State True or False. ----------------------
1. The Central Government can appoint the Director General for
----------------------
assisting CCI.
2. Statutory authority cannot make suo moto reference to CCI. ----------------------
3. CCI has jurisdiction to enquire into Anti-Competitive Agreements ----------------------
and abuse of dominant position.
----------------------

----------------------
Activity 3
----------------------
Search recent articles on CCI. ----------------------

----------------------
9.5 DUTIES OF THE COMPETITION COMMISSION
----------------------
Subject to the provisions of this Act, it shall be the duty of the Commission
to eliminate practices having adverse effect on competition, promote and ----------------------
sustain competition, protect the interest of consumers and ensure freedom of
trade carried on by other participants, in markets in India. The Commission ----------------------
may, for the purpose of discharging its duties or performing its functions under ----------------------
this Act, enter into any memorandum or arrangement, with the prior approval
of the Central Government, with any agency of any foreign country. ----------------------

Competition Commission of India 155

 Notes The provisions of Sec. 19 give power to the Commission for the inquiry
into certain agreements and dominant position of enterprises. Sec. 26 deals
---------------------- with the procedure for inquiry under Sec. 19. Sec. 27 deals with the orders by
Commission after inquiry into agreement or abuse of dominant position. Sec.
---------------------- 28 deals with the division of enterprise enjoying dominant position by the order
---------------------- of Commission. The provisions of Sec. 20 give power to the Commission for
the inquiry into combinations. Sec. 29 of the Act deals with the procedure for
---------------------- investigation of combinations. Sec. 31 deals with the orders by Commission on
certain combinations. Sec. 39 deals with execution of orders of Commission
---------------------- imposing monetary penalty.
----------------------
Check your Progress 4
----------------------

---------------------- Multiple Choice Single Response.

1. The CCI may enter into any memorandum or arrangement with any
----------------------
agency of any foreign country.
---------------------- i. Yes
---------------------- ii. Yes but with prior approval of the Central Government

---------------------- iii. No
2. Duty of CCI includes:
----------------------
i. Promote and sustain competition
----------------------
ii. Protect interest of consumers
---------------------- iii. Ensure freedom of trade
---------------------- iv. All of the above

----------------------

---------------------- Activity 4
----------------------
Read about the landmark case decided in the US − Amino Acid Lysine
---------------------- Antitrust Litigation (1996) US Vs Michael D. Andreas.
----------------------
9.6 POWERS OF THE COMMISSION
----------------------
The Commission shall, notwithstanding that -
----------------------
 An agreement (anti-competitive agreement) has been entered into outside
----------------------
India; or
----------------------  Any party to such agreement is outside India; or
----------------------  Any enterprise abusing the dominant position is outside India; or
 A combination has taken place outside India; or
----------------------

156 Consumer Protection Act, 1986 and Competition Act, 2002

 Any party to combination is outside India; or Notes
 Any other matter or practice or action arising out of such agreement or
----------------------
dominant position or combination is outside India.
Have power to inquire in accordance with the provisions of this Act into ----------------------
such agreement or abuse of dominant position or combination if such agreement
----------------------
or dominant position or combination has, or is likely to have, an appreciable
adverse effect on competition in the relevant market in India and pass such ----------------------
orders as it may deem fit in accordance with the provisions of this Act.
----------------------
Where during an inquiry, the Commission is satisfied that an act in
contravention of Sec. 3(1) or Sec. 4(1) or Sec. 6 has been committed and ----------------------
continues to be committed or that such act is about to be committed, the
Government may, by order, temporarily restrain any party from carrying on ----------------------
such act until the conclusion of such inquiry or until further orders, without
----------------------
giving notice to such party, where it deems necessary.
In discharge of its functions, the Commission shall be guided by the ----------------------
principles of natural justice and, subject to the other provisions of this Act
----------------------
and of any rules made by the Central Government, the Commission shall have
the powers to regulate its own procedure. The Commission shall have, for the ----------------------
purpose of discharging its functions under this Act, the same powers as are
vested in a Civil Court under the Code of Civil Procedure, while trying a suit in ----------------------
respect of the following matters:
----------------------
 Summoning and enforcing the attendance of any person and examining him
on oath; ----------------------
 Requiring the discovery and production of documents; ----------------------
 Receiving evidence on affidavit;
----------------------
 Issuing commissions for the examination of witnesses or documents;
----------------------
 Requisitioning, subject to the provisions of Sec. 123 and 124 of the Indian
Evidence Act, 1872 any public record or document or copy of such record ----------------------
or document from any office;
----------------------
The Commission may call upon such experts, from the fields of economics,
commerce, accountancy, international trade or from any other disciplines it ----------------------
deems necessary to assist the Commission in the conduct of any inquiry by it.
----------------------
The Commission may direct any person -
 To produce before the Director General or the Secretary or an officer ----------------------
authorized by it, such books or other documents in the custody or under the
----------------------
control of such person so directed as may be specified or described in the
direction, being documents relating to any trade, the examination of which ----------------------
may be required for the purposes of this Act;
----------------------
 To furnish to the Director General or the Secretary or any other Officer
authorized by it, as respects the trade or such other information as may be ----------------------
in his possession in relation to the trade carried on by such person, as may
be required for the purposes of this Act. ----------------------

Competition Commission of India 157

 Notes
Check your Progress 5
----------------------

---------------------- Fill in the blanks.

1. The Commission shall be guided by the principles of __________ in
---------------------- discharge of its functions.
---------------------- 2. The Commission may call upon _______ to assist it in conducting
any inquiry.
----------------------

----------------------
Activity 5
----------------------

---------------------- Visit the website of the Competition Commission of India and see its
organogram.
----------------------
---------------------- 9.7 RECTIFICATION OF ORDERS
---------------------- With a view to rectifying any mistake apparent from the record, the Commission
may amend any order passed by it under the provisions of the Act. The Commission
----------------------
may make -
----------------------
 An amendment on its own motion;
----------------------  An amendment for rectifying any such mistake which has been brought to
---------------------- the notice by any part to the order;
 The Commission shall not, while rectifying any mistake apparent from record
----------------------
amend substantial part of its order passed under the provisions of this Act.
---------------------- Representation:
---------------------- A person or an enterprise or the Director General may either appear in
---------------------- person or authorize one or more Chartered Accountants or Company Secretaries
or Cost Accountants or Legal Practitioners or any of his or its officers to present
---------------------- his or its case before the Commission. Thus it is the core area for practising
professionals.
----------------------

---------------------- Check your Progress 6

---------------------- State True or False.
---------------------- 1. Practising professionals like CA, CS and lawyers cannot present the
case before the CCI.
----------------------
2. The Commission may amend by its own motion any order passed by
---------------------- it to rectify any mistake apparent on record.
----------------------

158 Consumer Protection Act, 1986 and Competition Act, 2002

 Notes
Activity 6
----------------------
Mention other commissions like Competition Commission. ----------------------

----------------------
9.8 APPELLATE TRIBUNAL
----------------------
The Central Government established appellate tribunal to be known as
Competition Appellate Tribunal under Section 53 A of the Competition Act, ----------------------
2002 to hear and dispose of appeals against any direction issued or decision
made or order passed by the Commission and to adjudicate on claim for ----------------------
compensation that may arise from the findings of the Commission or the orders ----------------------
of the Appellate Tribunal in an appeal against any finding of the Commission
and pass orders for the recovery of Compensation under section 53N of this ----------------------
Act.
----------------------
The Central Government or the State Government or a local authority
or enterprise or any person, aggrieved by any direction, decision or order may ----------------------
prefer an appeal to the Appellate Tribunal. Every appeal shall be filed within a
period of sixty days from the date on which a copy of the direction or decision ----------------------
or order made by the Commission is received by the Central Government or the ----------------------
State Government or a local authority or enterprise or any person referred to and
it shall be in such form and be accompanied by such fee as may be prescribed. ----------------------
Appellate Tribunal may entertain an appeal after the expiry of the said ----------------------
period of sixty days if it is satisfied that there was sufficient cause for not filing
it within that period. Then the Appellate Tribunal may, after giving the parties ----------------------
to the appeal, an opportunity of being heard, pass such orders thereon as it
----------------------
thinks fit, confirming, modifying or setting aside the direction, decision or order
appealed against. The Appellate Tribunal shall send a copy of every order made ----------------------
by it to the Commission and the parties to the appeal. The appeal filed before
the Appellate Tribunal shall dispose of the same within six months from the ----------------------
date of receipt of the appeal.
----------------------
The Appellate Tribunal shall consist of a Chairperson and not more than
two other members to be appointed by the Central Government. The Chairperson ----------------------
of the Appellate Tribunal shall be a person, who is, or has been a Judge of the
----------------------
Supreme Court or the Chief Justice of a High Court.
A member of the Appellate Tribunal shall be a person of ability, integrity ----------------------
and standing having special knowledge of, and professional experience of not
----------------------
less than twenty five years in, competition matters including competition law
and policy, international trade, economics, business, commerce, law, finance, ----------------------
accountancy, management, industry, public affairs, administration or in any
other matter which in the opinion of the Central Government, may be useful ----------------------
to the Appellate Tribunal. The Chairperson and members of the Appellate
----------------------
Tribunal shall be appointed by the Central Government from a panel of names
recommended by a Selection Committee consisting of – ----------------------

Competition Commission of India 159

 Notes (a) the Chief Justice of India or his nominee ………. Chairperson;
(b) the Secretary in the Ministry of Corporate Affairs………. Member;
----------------------
(c) the Secretary in the Ministry of Law and Justice ………. Member.
----------------------
The terms of the Selection Committee and the manner of selection of
---------------------- panel of names shall be such as may be prescribed.
---------------------- The Chairperson or a member of the Appellate Tribunal shall hold office
as such for a term of five years from the date on which he enters upon his office,
---------------------- and shall be eligible for re-appointment. The Chairperson shall not hold office if
---------------------- he has attained the age of sixty-eight years and in the case of any other member
of the Appellate Tribunal, the age of sixty-five years.
---------------------- The Chairperson or a Member of the Appellate Tribunal may, by notice in
---------------------- writing under his hand addressed to the Central Government, resign his office.
The Central Government may, in consultation with the Chief Justice of India,
---------------------- remove from office the Chairperson or any other member of the Appellate
Tribunal, who -
----------------------
(a) has been adjudged an insolvent; or
----------------------
(b) has engaged at any time, during his terms of office, in any paid employment;
---------------------- or

---------------------- (c) has been convicted of an offence which, in the opinion of the Central
Government, involves moral turpitude; or
---------------------- (d) has become physically or mentally incapable of acting as such Chairperson
---------------------- or other Member of the Appellate Tribunal; or
(e) has acquired such financial or other interest as is likely to affect prejudicially
---------------------- his functions as such Chairperson or Member of the Appellate Tribunal; or
---------------------- (f) has so abused his position as to render his continuance in office prejudicial
to the public interest. The Central Government shall provide the Appellate
----------------------
Tribunal with such officers and other employees as it may think fit.
---------------------- The officers and other employees of the Appellate Tribunal shall discharge
their functions under the general superintendence and control of the Chairperson
----------------------
of the Appellate Tribunal.
---------------------- The Appellate Tribunal shall not be bound by the procedure laid down
in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the
----------------------
principles of natural justice and, subject to the other provisions of this Act and
---------------------- of any rules made by the Central Government, the Appellate Tribunal shall have
power to regulate its own procedure including the places at which they shall
---------------------- have their sittings.
---------------------- The Appellate Tribunal shall have, for the purposes of discharging its
functions under this Act, the same powers as are vested in a civil court under
---------------------- the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of
---------------------- the following matters, namely:

160 Consumer Protection Act, 1986 and Competition Act, 2002

a) summoning and enforcing the attendance of any person and examining him Notes
on oath;
----------------------
b) requiring the discovery and production of documents;
c) receiving evidence on affidavit; ----------------------
d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, ----------------------
1872 (1 of 1872), requisitioning any public record or document or copy of
such record or document from any office; ----------------------
e) issuing commissions for the examination of witnesses or documents; ----------------------
f) reviewing its decisions; ----------------------
g) dismissing a representation for default or deciding it exparte;
----------------------
h) setting aside any order of dismissal of any representation for default or any
order passed by it exparte; any other matter which may be prescribed. ----------------------

The Central Government or any State Government or the Commission or ----------------------

any statutory authority or any local authority or any enterprise or any person ----------------------
aggrieved by any decision or order of the Appellate Tribunal may file an appeal
to the Supreme Court within sixty days from the date of communication of the ----------------------
decision or order of the Appellate Tribunal to them.
----------------------
The Appellate Tribunal shall have, and exercise, the same jurisdiction,
powers and authority in respect of contempt of itself as a High Court has and ----------------------
may exercise and, for this purpose, the provisions of the Contempt of Courts
Act. ----------------------

----------------------
Check your Progress 7
----------------------
Fill in the blanks. ----------------------
1. The Central Government has established the Competition Appellate
----------------------
Tribunal under Section____ of the Competition Act, 2002.
2. Appeal should be referred to the Tribunal within a period ____ days ----------------------
from the date on which the copy of the order of the Commission is
----------------------
received.
----------------------

Activity 7 ----------------------

----------------------
List the name of the current Chairperson and members of the Competition
Appellate Tribunal. ----------------------

----------------------

----------------------

----------------------

Competition Commission of India 161

 Notes Summary
---------------------- ●● To achieve its objectives, the Competition Commission of India endeavours
to do the following: Make the markets work for the benefit and welfare of
----------------------
consumers. Ensure fair and healthy competition in economic activities in
---------------------- the country for faster and inclusive growth and development of economy.
Implement competition policies with an aim to effectuate the most efficient
---------------------- utilization of economic resources. Develop and nurture effective relations
and interactions with sectoral regulators to ensure smooth alignment of
----------------------
sectoral regulatory laws in tandem with the competition law. Effectively
---------------------- carry out competition advocacy and spread the information on benefits of
competition among all stakeholders to establish and nurture competition
---------------------- culture in Indian economy.
----------------------
Keywords
----------------------
●● Competition: The act of seeking, or endeavouring to gain, what another
---------------------- is endeavouring to gain at the same time; common strife for the same.
---------------------- ●● Perpetual Succession: Continuation of an incorporated firm’s existence,
unaffected by the death of any of its owner(s) or the transfer of its shares
---------------------- to a new entity.
---------------------- ●● Allocative Efficiency: The action of satisfying as far as is possible
customer demands for goods and services by pricing them at a price
---------------------- which is near to the production cost while still allowing a margin to the
producer. If a market is allocatively efficient it produces the right amount
----------------------
of goods at the right prices for the right customers.
---------------------- ●● Redressal: Compensation for injuries sustained; recovery or restitution
for harm or injury; damages or equitable relief. Access to the courts to
----------------------
gain reparation for a wrong.
----------------------
Self-Assessment Questions
----------------------
1. Explain the nature of Competition Commission.
----------------------
2. Explain the role of Competition Commission.
----------------------
3. Explain how Competition Commission avoids competition.
----------------------
4. What are the duties of the Competition Commission?
---------------------- 5. What are the powers of the Competition Commission?
----------------------

----------------------

----------------------

----------------------

162 Consumer Protection Act, 1986 and Competition Act, 2002

Answers to Check your Progress Notes
Check your Progress 1 ----------------------
State True or False. ----------------------
1. False
----------------------
2. True
----------------------
Check your Progress 2
Fill in the blanks. ----------------------
1. The Commission shall consist of a Chairperson and other members to be ----------------------
appointed by the Central Government.
----------------------
2. The Chairperson and other members shall be the whole-time member and
hold office as for a term of five years. ----------------------
3. All questions which come up before any meeting of the Commission shall ----------------------
be decided by a majority of the members present and voting.
----------------------
Check your Progress 3
State True or False. ----------------------
1. True ----------------------
2. False ----------------------
3. True
----------------------
Check your Progress 4
----------------------
Multiple Choice Single Response.
1. The CCI may enter into any memorandum or arrangement with any ----------------------
agency of any foreign country.
----------------------
iii. No
----------------------
2. Duty of CCI includes:
iv. All of the above ----------------------

Check your Progress 5 ----------------------

Fill in the blanks. ----------------------
1. The Commission shall be guided by the principles of natural justice in ----------------------
discharge of its functions.
2. The Commission may call upon experts to assist it in conducting any ----------------------
inquiry. ----------------------
Check your Progress 6
----------------------
State True or False.
----------------------
1. False
2. True ----------------------

Competition Commission of India 163

 Notes Check your Progress 7
Fill in the blanks.
----------------------
1. The Central Government has established the Competition Appellate
---------------------- Tribunal under Section 53A of the Competition Act, 2002.
---------------------- 2. Appeal should be referred to the Tribunal within a period 60 days from
the date on which the copy of the order of the Commission is received.
----------------------

---------------------- Suggested Reading

---------------------- 1. http://www.indiajuris.com/comlaw.pdf
----------------------

----------------------

----------------------
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

164 Consumer Protection Act, 1986 and Competition Act, 2002

Anti-Competitive Agreements and Competition Laws
UNIT

10
Structure:
10.1 Nature and Concept of Anti-Competitive tendencies in the Economy, and
need for Prohibition

10.2 Types of Anti-Competitive Agreements

10.3 Powers of Commissions in Anti-Competitiveness of Agreement Matters

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Anti-Competitive Agreements and Competition Laws 165

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Describe the concept of the anti-competitive agreement
----------------------
• Discuss the types of the anti-competitive agreements
---------------------- • State the characteristics of the anti-competitive agreements
---------------------- • Summarise the powers of the commission in assessing the anti-
competitive agreements
----------------------

----------------------
10.1 NATURE AND CONCEPT OF ANTI-COMPETITIVE
TENDENCIES IN ECONOMY AND NEED FOR
---------------------- PROHIBITION
---------------------- The nature of the Anti-Competitive agreements has been explored in sec.
---------------------- 3 of the Competition Act 2002, which lays down the criteria for any agreement
entered by an enterprise. It is important to note that the Act does not define
---------------------- competitive agreement; however it rather quotes what is an Anti competitive
agreement. Hence it could be derived from the provisions that any such an
---------------------- agreement which is not an Anti-competitive Agreement is a Competitive
---------------------- agreement. Thus, provisions under the Act related to Anti-competitive
agreements are drafted in negative way. Any agreement to be legal under the
---------------------- Act must not fall within the periphery of the provisions laid down under the Act.
If the mentioned provisions in sec. 3 are not followed, then any such agreement
---------------------- entered into shall be void.
---------------------- Arrangement and Interpretation of Sec. 3
---------------------- The object of the competition Act is, to provide, for the establishment
of a Commission to prevent practices having adverse effect on competition,
---------------------- to promote and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other participants in
----------------------
markets, in India, and for matters connected therewith or incidental thereto. In
---------------------- the objectives itself, it is clearly mentioned that any such practices which caused
an adverse effect on competition, shall be prevented. The provisions mentioned
---------------------- in sec 3(3), regarding Anticompetitive practices, describes what causes the
Appreciable Adverse Effect on competition and going further, it declares
----------------------
any such agreement which causes or likely to cause an Appreciable Adverse
---------------------- Effect on Competition as void. An agreement may be horizontal i.e. between
enterprises, persons, associations, etc. engaged in identical or similar trade of
---------------------- goods or provision of services, or it may be vertical i.e. amongst enterprises or
persons at different stages or levels of the production chain in different markets.
----------------------

----------------------

----------------------

166 Consumer Protection Act, 1986 and Competition Act, 2002

10.2 TYPES OF ANTI-COMPETITIVE AGREEMENTS Notes
There are several types of Anticompetitive Agreements. The list is not ----------------------
close ended. Cartel and Bid rigging can be mentioned as most common forms
of Anticompetitive Agreements in the business practices. ‘Cartelisation’ is one ----------------------
of the horizontal agreements that shall be presumed to have appreciable adverse ----------------------
effect on competition under Section 3 of the Competition Act, 2002. Cartel is
defined in section 2, sub section (c) of the Act: ----------------------
“Cartel” includes an association of producers, sellers, distributors, traders ----------------------
or service providers who, by agreement amongst themselves, limit, control or
attempt to control the production, distribution, sale or price of, or, trade in goods ----------------------
or provision of services;’
----------------------
Cartels are agreements between enterprises (including a person, a
government department and association of persons / enterprises) not to compete ----------------------
on price, product (including goods and services) or customers. The Act gives a
detailed definition of an enterprise in section 2 (h). The objective of a cartel is to ----------------------
raise price above competitive levels, resulting in injury to consumers and to the ----------------------
economy. For the consumers, cartelisation results in higher prices, poor quality
and less or no choice for goods or/and services. The Consumer Protection Act ----------------------
1986 confers Right to choice and other rights mentioned in Sec. 6 of the Act,
however if there are no choices available in the market these rights would be ----------------------
meaningless. ----------------------
A cartel is said to exist when two or more enterprises enter into an explicit
----------------------
or implicit agreement to fix prices, to limit production and supply, to allocate
market share or sales quotas, or to engage in collusive bidding or bid-rigging ----------------------
in one or more markets. An important dimension in the definition of a cartel is
that it requires an agreement between competing enterprises not to compete or ----------------------
to restrict competition, which is fatal for competition to prevail in the market.
----------------------
An international cartel is said to exist, when not all of the enterprises in a
cartel are based in the same country or when the cartel affects markets of more ----------------------
than one country. In case of an international cartel, provisions of sec 32 of the
competition Act would be relevant. The cartels can be further bifurcated into ----------------------
two categories, Import cartel and Export Cartel. An import cartel comprises
----------------------
enterprises (including an association of enterprises) that get together for the
purpose of imports into the country. An export cartel is made up of enterprises ----------------------
based in one country with an agreement to cartelize markets in other countries.
In the Competition Act, cartels meant exclusively for exports have been ----------------------
excluded from the provisions related to anti-competitive agreements. This is
----------------------
because such cartels do not adversely affect markets in India and are hence
outside the purview of the Act. ----------------------
As far as cartels are concerned, they are presumed injurious per se, i.e.
----------------------
from the very inception. Horizontal agreements, including cartels, of four types
specified in the Act in sec 3 (3), are presumed to have appreciable adverse ----------------------
effect on competition and, therefore, are anti-competitive and void. However,
horizontal agreements, entered into by way of joint ventures or any such ----------------------

Anti-Competitive Agreements and Competition Laws 167

 Notes agreement which increases the efficiency, in production supply, distribution,
storage acquisition, or control of goods or provision of services are not presumed
---------------------- to have appreciable adverse effect on competition and are excluded from the
above provisions of section 3, sub section (3) of the Act. Appreciable adverse
---------------------- effect on competition of agreements other than those covered by section 3, sub
---------------------- section (3) of the Act, including
 tie-in arrangement
----------------------
 exclusive supply arrangement
----------------------
 exclusive distribution agreement
----------------------  refusal to deal and resale price maintenance
---------------------- are commonly known as ‘vertical agreements’ and would not be presumed to
have appreciable adverse effect on competition, and would be evaluated by the
---------------------- Commission based on facts using the ‘rule of reason’ approach. That means any
such vertical agreement would be allowed if such agreement does not cause
----------------------
appreciable adverse effect on competition in the market. The explanation to sec 3
---------------------- (4), further elaborates about the tie in agreements. For the purposes of sec 3 (4)-
(a) “tie-in arrangement” includes any agreement requiring a purchaser of goods,
----------------------
as a condition of such purchase, to purchase some other goods;
---------------------- (b) “exclusive supply agreement” includes any agreement restricting in any
manner the purchaser in the course of his trade from acquiring or otherwise
----------------------
dealing in any goods other than those of the seller or any other person;
---------------------- (c) “exclusive distribution agreement” includes any agreement to limit, restrict
or withhold the output or supply of any goods or allocate any area or market
----------------------
for the disposal or sale of the goods;
---------------------- (d) “refusal to deal” includes any agreement which restricts, or is likely to
restrict, by any method the persons or classes of persons to whom goods
----------------------
are sold or from whom goods are bought;
---------------------- (e) “resale price maintenance” includes any agreement to sell goods on condition
---------------------- that the prices to be charged on the resale by the purchaser shall be the prices
stipulated by the seller unless it is clearly stated that prices lower than those
---------------------- prices may be charged.

---------------------- Conditions Suitable for Formation of Cartels:

---------------------- Formation and survival of cartel is based on the following characteristics
prevailing in given relevant market. If there is effective competition in the
---------------------- market, cartels would find it difficult to be formed and sustained. Some of the
conditions that are conducive to cartelization are:
----------------------
 where there is concentration in production supply distribution of goods and
---------------------- services, and competition in the market is restricted to few competitors,
creates a fertile ground for formation of cartels.
----------------------
 In perfect competition, entry and exit is supposed to be free, however where
---------------------- there is high entry and exit barriers to enter as well as exit from the market,

168 Consumer Protection Act, 1986 and Competition Act, 2002

 gives much power in the hands of existing players, enabling them to regulate Notes
entry as well as exit of the prospective competitors.
----------------------
 The homogeneity of the products that means similarity or identicalness of
products, and similar production costs are important factor, which leads to ----------------------
common cause to regulate the prices prevailing in the market.
----------------------
 Where consumers have high dependence on the product, for example
essential commodities, like fuel, the producers can arrange to form an ----------------------
association for determining high prices, at the cost of the consumers.
----------------------
Common Characteristics of Cartels
 It is very difficult to prove cartels as generally cartels function in secrecy. ----------------------
Any such arrangement to restrict competition by forming association is ----------------------
usually unwritten and secret.
 The members of a cartel seek to hide their activities to avoid detection by ----------------------
the Commission. ----------------------
 Once entered into cartel, survival of cartels is ensured through retaliation
threats. If any member cheats, the cartel members retaliate through temporary ----------------------
price cuts to take business away or can isolate the cheating member. ----------------------
 Another method, known as compensation scheme, is resorted to in order to
----------------------
discourage cheating. Under this scheme, if the member of a cartel was found
to have sold more than its allocated share, it would have to compensate the ----------------------
other members.
----------------------
Bid Rigging:
Bid rigging or collusive bidding is one of the horizontal agreements that ----------------------
shall be presumed to have appreciable adverse effect on competition under Section ----------------------
3 of the Act. The Explanation to sub-section (3) of Section 3, of the Act defines
“bid rigging” as “any agreement, between enterprises or persons referred to in ----------------------
sub-section (3) engaged in identical or similar production or trading of goods or
provision of services, which has the effect of eliminating or reducing competition ----------------------
for bids or adversely affecting or manipulating the process for bidding.” ----------------------
Bid rigging takes place when bidders collude and keep the bid amount
at a pre-determined level. Such pre-determination is by way of intentional ----------------------
manipulation by the members of the bidding group. Bidders could be actual or ----------------------
potential ones, but they collude and act in concert.
Example: ----------------------

1) Consider a case, where a Government Authority, invites bids for construction ----------------------
of road of 1,000 k.m. and the condition precedent is, only a person having
----------------------
500 Crores of net worth would be eligible to bid. A person, who quotes with
minimum amount for construction of road, would be winner of bid. In a ----------------------
given situation, there would be a class of bidders having net worth above
500 crores, as condition prescribes. Such prospective bidders may collude ----------------------
or form a rig together by entering into an arrangement, and may decide to
----------------------

Anti-Competitive Agreements and Competition Laws 169

 Notes allow one particular company to win the bid, by quoting their prices for
bid, higher. A person may have networth above 500 crores, however his
---------------------- assets and resources may be engaged in other projects, making it practically
impossible to complete the task even if he wins the bid. So such persons
---------------------- may give up to contend, after participating in the bid, putting higher prices
---------------------- than predecided winner of bid, allowing him to win, and may charge some
share in earning of the bid winner.
----------------------
2) Consider a case where prior to bid, all bidders collude and decide to quote,
---------------------- double the price of cost as minimum bid price, setting uniformly, a high
level for achieving the object.
----------------------
Bidding, as a practice, is intended to enable the procurement of goods or
---------------------- services on the most favourable terms and conditions. Invitation of bids
is resorted to both by Government (and Government entities) and private
---------------------- bodies (companies, corporations, etc.). But the objective of securing the most
favourable prices and conditions may be negated if the prospective bidders
----------------------
collude or act in concert. Such collusive bidding or bid rigging contravenes
---------------------- the very purpose of inviting tenders and is inherently anti-competitive.
Collusive bidding or bid rigging may occur in various ways. Some of the most
----------------------
commonly adopted ways are:
----------------------  agreements to submit identical bids
----------------------  agreements as to who shall submit the lowest bid, agreements for the
submission of cover bids (voluntarily inflated bids).
----------------------
 agreements not to bid against each other,
----------------------
 agreements on common norms to calculate prices or terms of bids
----------------------  agreements to squeeze out outside bidders
----------------------  agreements designating bid winners in advance on a rotational basis, or on
a geographical or customer allocation basis.
----------------------
 agreement as to the bids which any of the parties may offer at an auction
---------------------- for the sale of goods or any agreement through which any party agrees to
abstain from bidding for any auction for the sale of goods, which eliminates
---------------------- or distorts competition.
---------------------- Inherent in some of these agreements, is a compensation system to the
unsuccessful bidders by dividing a certain percentage of profits of successful
---------------------- bidders. If bid rigging takes place in Government tenders, it is likely to have
---------------------- severe adverse effects on its purchases and on public spending. Bid rigging or
collusive bidding is treated with severity in the law. The presumptive approach
---------------------- reflects the severe treatment.
---------------------- Forms of Bid Rigging
Bid rigging may take many forms, but most bid rigging conspiracies usually fall
----------------------
into one or more of the following categories:
----------------------

170 Consumer Protection Act, 1986 and Competition Act, 2002

1) Bid Suppression Notes
In bid suppression schemes, one or more competitors who otherwise would
----------------------
be expected to bid, or who have previously bid, agree to refrain from bidding
or withdraw a previously submitted bid so that the designated winning ----------------------
competitor’s bid will be accepted.
----------------------
2) Complementary Bidding
Complementary bidding (also known as ‘cover’ or ‘courtesy’ bidding) ----------------------
occurs when some competitors agree to submit bids that are either too high
----------------------
to be accepted or contain special terms that will not be acceptable to the
buyer. Such bids are not intended to secure the buyer’s acceptance, but are ----------------------
merely designed to give the appearance of genuine competitive bidding.
Complementary bidding schemes are the most frequently occurring forms ----------------------
of bid rigging, and they defraud purchasers by creating the appearance of
----------------------
competition to conceal secretly inflated prices.
3) Bid Rotation ----------------------
In bid rotation schemes, all conspirators submit bids but take turns to be the ----------------------
lowest bidder. The terms of the rotation may vary; for example, competitors
may take turns on contracts according to the size of the contract, allocating ----------------------
equal amounts to each conspirator or allocating volumes that correspond ----------------------
to the size of each conspirator. A strict bid rotation pattern defies the law of
chance and suggests that collusion is taking place. ----------------------
4) Subcontracting ----------------------
Subcontracting arrangements are often part of a bid rigging scheme.
----------------------
Competitors, who agree not to bid or to submit a losing bid, frequently
receive subcontracts or supply contracts in exchange from the successful ----------------------
bidder. In some schemes, a low bidder will agree to withdraw its bid in
favour of the next low bidder in exchange for a lucrative subcontract that ----------------------
divides the illegally obtained higher price between them. Almost all forms
----------------------
of bid rigging schemes have one thing in common: an agreement among
some or all of the bidders, which predetermines the winning bidder and ----------------------
limits or eliminates competition among the conspiring vendors.
----------------------
Bid rigging can be difficult to detect. However, suspicions may be aroused
by unusual bidding or something a bidder says or does. An agreement (in ----------------------
collusion) not to respond to an invitation to tender until after discussions with
other persons invited to tender, is also a bid rigging offence. Certain patterns in ----------------------
bids can give rise to suspicion of collusion. Situations of suspicious behaviour
----------------------
include the following (illustrative and not exhaustive):
1) The bid offers by different bidders contain same or similar errors and ----------------------
irregularities (spelling, grammatical and calculation). This may indicate
----------------------
that the designated bid winner has prepared all other bids (of the losers).
2) Bid documents contain the same corrections and alterations indicating last ----------------------
minute changes. ----------------------

Anti-Competitive Agreements and Competition Laws 171

 Notes 3) A bidder seeks a bid package for himself/herself and also for the competitor.
4) A bidder submits his/her bid and also the competitor’s.
----------------------
5) A party brings multiple bids to a bid opening and submits its bid after coming
---------------------- to know who else is bidding.
---------------------- 6) A bidder makes a statement indicating advance knowledge of the offers of
the competitors.
----------------------
7) A bidder makes a statement that a bid is a ‘complementary’, ‘token’ or
---------------------- ‘cover’ bid.

---------------------- 8) A bidder makes a statement that the bidders have discussed prices and
reached an understanding.
----------------------

----------------------
Check your Progress 1

---------------------- State True or False.

---------------------- 1. Section 3 lays down the criteria for any agreement to be entered by
the enterprise which if not followed shall render the agreement void.
----------------------
2. Sec 3(3) of Competition Act, 2002 describes causes of appreciable
---------------------- adverse effect on competition.

---------------------- Match the following.

i. Cartel a. Purchaser to purchase some
---------------------- other goods also
---------------------- ii. Resale price maintenance b. Limit output/supply of goods
iii. Exclusive distribution c. Agreement between enterprises
---------------------- agreement
iv. Tie in agreement d. Prices stipulated by the seller
---------------------- v. Bid rigging e. Identical bids
----------------------

---------------------- Activity 1
----------------------
Find recent cases of bid rigging in India.
----------------------

---------------------- 10.3 POWERS OF COMMISSION IN ANTI-

COMPETITIVENESS OF AGREEMENT MATTERS
----------------------

---------------------- Powers of Commission in inquiry into Anticompetitive Agreements

In exercise of powers vested under section 19 of the Act, the Commission
---------------------- may inquire into any alleged contravention under section 3 (3) of the Act that
---------------------- proscribes cartels and Bid rigging. The Commission, on being satisfied that
there exists a prima facie case of ‘cartel’ or bid rigging, shall direct the Director
---------------------- General to cause an investigation and furnish a report. The Commission has

172 Consumer Protection Act, 1986 and Competition Act, 2002

the powers vested in a Civil Courts. Court under the Code of Civil Procedure Notes
in respect of matters like summoning or enforcing attendance of any person
and examining him on oath, requiring discovery and production of documents ----------------------
and receiving evidence on affidavit. The Director General, for the purpose of
carrying out investigation, is vested with powers of civil court besides powers ----------------------
to conduct ‘search and seizure’. The Commission is empowered to inquire into ----------------------
any cartel, and to impose on each member of the cartel, a penalty of up to 3
times its profit for each year of the continuance of such agreement or 10% of its ----------------------
turnover for each year of continuance of such agreement, whichever is higher.
In case an enterprise is a ‘company’ its directors/officials who are guilty are also ----------------------
liable to be proceeded against. In addition, the Commission has the power to ----------------------
pass inter alia any or all of the following orders
----------------------
 direct the parties to a cartel agreement to discontinue and not to re-enter
such agreement; ----------------------
 impose such penalty, not more than 10% of average turnover for last three
----------------------
preceding financial years upon each such person or enterprise concerned
for said agreement or abuse and direct the enterprises concerned to modify ----------------------
the agreement.
----------------------
 direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment ----------------------
of costs, if any; and
----------------------
 pass such other order or issue such directions as it may deem fit.
Powers of Commission to impose less penalty: ----------------------

Section 46 of the Act empowers the Commission to grant leniency by ----------------------

levying a lesser penalty on a member of the cartel who provides full, true
and vital information regarding the cartel. The scheme is designed to induce ----------------------
members to help in detection and investigation of cartels. This scheme is ----------------------
grounded on the premise that successful prosecution of cartels requires evidence
supplied by a member of the cartel. Similar leniency schemes have proved very ----------------------
helpful to competition authorities in successfully proceeding against cartels.
The Competition Commission has notified the Competition Commission of ----------------------
India (Lesser Penalty) Regulations, 2009 laying the process, procedure and ----------------------
methodology for granting leniency to the cartel members who breaks the
ranks of the cartel and becomes helpful to the Commission and instrumental in ----------------------
busting that alleged cartel. Under section 33 of the Act, during the pendency of
an inquiry the Commission may temporarily restrain any party from continuing ----------------------
with the alleged contravention, until conclusion of the inquiry or until further ----------------------
orders, without giving notice to such party, where it deems it necessary.
----------------------

----------------------

----------------------

----------------------

Anti-Competitive Agreements and Competition Laws 173

 Notes
Check your Progress 2
----------------------

---------------------- Fill in the blanks.

1. The CCI, on being satisfied that there exists a prima facie case of
---------------------- “cartel” or bid rigging, shall direct the __________ to cause an
---------------------- investigation and furnish.
2. The scheme under Section ___ is grounded on the premise that
----------------------
successful prosecution of cartels requires evidence supplied by a
---------------------- member of the cartel.

----------------------

---------------------- Activity 2

---------------------- Find a recent case in which the Commission has imposed penalty on a
company for anti-competitive practices.
----------------------

----------------------
Summary
----------------------
●● The provisions for Anticompetitive Agreements have been enshrined in
---------------------- Sec. 3 of the Competition Act 2002.
 The nature of the Anti-Competitive agreements has been explored in Sec. 3
----------------------
of the Competition Act 2002, which lays down the criteria for any agreement
---------------------- entered by an enterprise.
 An agreement which is not an Anti-Competitive Agreement is a Competitive
----------------------
Agreement. Appreciable adverse effect on competition of agreements other
---------------------- than those covered by Section 3, sub section (3) of the Act, includes

---------------------- 1. tie-in arrangement

2. exclusive supply arrangement
----------------------
3. exclusive distribution agreement
----------------------
4. refusal to deal and resale price maintenance
----------------------  It is very difficult to prove cartels as generally cartels function in secrecy.
---------------------- Any such arrangement to restrict competition by forming association is
usually unwritten and secret.
----------------------  The members of a cartel seek to hide their activities to avoid detection by
---------------------- the Commission.
 Once entered into cartel, survival of cartels is ensured through retaliation
---------------------- threats. If any member cheats, the cartel members retaliate through temporary
---------------------- price cuts to take business away or can isolate the cheating member.

----------------------

174 Consumer Protection Act, 1986 and Competition Act, 2002

 Another method, known as compensation scheme, is resorted to in order to Notes
discourage cheating. Under this scheme, if the member of a cartel was found
to have sold more than its allocated share, it would have to compensate the ----------------------
other members.
----------------------
 Bid rigging or collusive bidding is one of the horizontal agreements that
shall be presumed to have appreciable adverse effect on competition under ----------------------
Section 3 of the Act.
----------------------
 In exercise of powers vested under Section 19 of the Act, the Commission
may inquire into any alleged contravention under Section 3 (3) of the Act ----------------------
that proscribes cartels and Bid rigging. The Commission, on being satisfied
----------------------
that there exists a prima facie case of ‘cartel’ or bid rigging, shall direct the
Director General3 to cause an investigation and furnish a report. ----------------------
 The Commission has the powers vested in Civil Court under the Code of Civil
----------------------
Procedure in respect of matters like summoning or enforcing attendance of
any person and examining him on oath, requiring discovery and production ----------------------
of documents and receiving evidence on affidavit.
----------------------
Keywords ----------------------

●● Export Cartel: An export cartel is an agreement or arrangement between ----------------------

firms to charge a specified export price and/or to divide export markets.
----------------------
●● Anticompetitive Practices: Anticompetitive practices refer to a wide
range of business practices in which a firm or group of firms may engage ----------------------
in order to restrict inter-firm competition to maintain or increase their
relative market position and profits without necessarily providing goods ----------------------
and services at a lower cost or of higher quality. ----------------------
●● Bid: Making a price offer in an auction, stock exchange.
----------------------
●● Injurious per se: Harmful from the very inception.
----------------------
Self-Assessment Questions ----------------------
1. What is Anti Competitive agreement? Explain in detail the concept of ----------------------
Appreciable Adverse Effect.
----------------------
2. What is Cartel? Elaborate how Cartel creates the Appreciable Adverse
Effect? ----------------------
3. Explain the concept of Bid Rigging?
----------------------
4. What powers does the Commission have in case of detection of
Anticompetitive Agreement? ----------------------

----------------------

----------------------

----------------------

Anti-Competitive Agreements and Competition Laws 175

 Notes Answers to Check your Progress
---------------------- Check your Progress 1
---------------------- State True or False.

---------------------- 1. True
2. True
----------------------
Match the following.
----------------------
i. – c.
---------------------- ii. – d.
---------------------- iii. – b.

---------------------- iv. – a.
v. – e.
----------------------
Check your Progress 2
----------------------
Fill in the blanks.
---------------------- 1. The CCI, on being satisfied that there exists a prima facie case of “cartel”
or bid rigging, shall direct the Director General to cause an investigation
----------------------
and furnish.
---------------------- 2. The scheme under Section 46 is grounded on the premise that successful
---------------------- prosecution of cartels requires evidence supplied by a member of the
cartel.
----------------------

---------------------- Suggested Reading

---------------------- 1. http://www.cuts-international.org/pdf/CCIER-7-2008.pdf

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

176 Consumer Protection Act, 1986 and Competition Act, 2002

Concepts related to Dominant Position and Criteria for
determining Abuse of Dominant Position UNIT

Structure:
11.1 Nature and Concept of Dominant Position and Need for Prohibition
11
11.2 Criteria for determining Abuse of Dominant Position

11.3 Powers of Commission and Remedies Available

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Concepts related to Dominant Position and Criteria for determining Abuse of

Dominant Position 177
 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Discuss the concept of dominance
----------------------
• Identify the provisions related to abuse of dominance in the
---------------------- Competition Act
• Explain the powers of the Competition Commission to assess and
----------------------
determine the dominance and abuse of it
---------------------- • Summarise remedies available under the Act for abuse of dominant
---------------------- position

---------------------- 11.1 NATURE AND CONCEPT OF DOMINANT POSITION

AND NEED FOR PROHIBITION
----------------------
The concept of dominance in the economy, in the given sector is not a
----------------------
new concept. The ideology which our nation followed was socialist, which
---------------------- made sure of maximum welfare for maximum individuals and distribution of
resources equally among the people of the nation. To achieve this object, Indian
---------------------- Government started setting up the heavy industries under its own control,
giving very less scope for the private sector. Private sector was essentially
---------------------- under the control of the government and entry and exit was restricted. If any
---------------------- private entity aspired to start the new venture, and enter into the market, it has
to take permission and license from the government. Again, there was plethora
---------------------- of industrial licences and permissions to be taken by the entity, which actually
made any entity to start its own business, too procedural and time consuming.
---------------------- Again corruption and bureaucracy and red tapes were creating all the hurdles
that they could create. Licences and permissions to start business were given
---------------------- to few players in close connections with the government, which resulted in
---------------------- concentration of economic wealth in the few privileged entities in the country.
Thus by achieving the status of major players, these entities started restricting
---------------------- the entry and further technological development of the other companies. The
end sufferer in the scenario was the consumer as he was not getting access to the
---------------------- right of choice and other rights ensured. Such huge business houses had little
competition and they were trying to monopolize the market. The Government
---------------------- of India understood the intentions of such firms. In order to safeguard the
---------------------- rights of consumers, Government of India passed the MRTP Bill. The Bill was
passed and the Monopolies and Restrictive Trade Practices Act, 1969, came
---------------------- into existence. Through this law, the MRTP Commission has the power to
stop all businesses that create barrier for the scope of competition in Indian
---------------------- economy. The basic object of MRTP Act was to act against the concentration
of economic power that happened to be in the hands of huge but few business
----------------------
firms, and which bought them the privilege to be the dominant player in the
---------------------- market, in acquisition of market power. The specific provisions were made for
division of undertaking and power of Central Government to direct severance
---------------------- of interconnected undertakings for such dominant players.

178 Consumer Protection Act, 1986 and Competition Act, 2002

 In 1991, our economy was made free and MRTP Act became obsolete in Notes
the certain context like extra-territorial operations of MRTP Commission and
new policies of Globalization and Liberalization adopted, hence new Act called ----------------------
Competition Act 2002 was legislated, with the provision of Abuse of Dominant
Position. ----------------------

It is very significant to note that, in MRTP Act, the dominance per se was ----------------------
prohibited; however in Competition Act, not Dominance per se, but Abuse of
----------------------
Dominance is prohibited.
In other words, in case of MRTP Act, if you achieve dominance in the ----------------------
market then you come under the scanner of government and necessary action
----------------------
is to be taken, as mentioned above; however in Competition Act, you are free
to achieve dominance, provided the necessary condition, not to abuse such ----------------------
dominance achieved, for anticompetitive practices.
----------------------
This is a very revolutionary change, which facilitated the Indian business
and economy to grow and achieve to any extent; however with legal sanction, ----------------------
if they abuse the economic dominance, then they will be amenable under the
provisions of Competition Act 2002, specifically, abuse of dominance. ----------------------
Competition laws all over the world are primarily concerned with the ----------------------
acquisition and exercise of market power and its abuse. Market power is
important for the business as the market power defines the position of the ----------------------
company in the economy. The term “market power” is variously known as ----------------------
“dominant position”, “monopoly power” and “substantial market power”.
Monopoly power is different from substantial market power and dominant ----------------------
position. Even though it is nowhere defined but monopoly power is where
only single large producer of goods and services is present in the market, and ----------------------
dominant position or substantial market power can be a case where one entity ----------------------
has attained a position of dominance, in presence of other entities. Dominance
means acquisition of significant market power, which enables the enterprise to ----------------------
increase the price or limit production independently of competitors as well as
customers. Dominant position has to be determined in the relevant market and ----------------------
the factors for such determination are provided in the Act. Dominance is not ----------------------
treated illegal per se; it is the abuse of dominant position which is prohibited.
The list of abuses is expressly mentioned in the Act. If a dominant player ----------------------
is found to be indulging in behaviour listed as an abuse, such behaviour is ----------------------
not permitted. The list of abuses is exhaustive. Predatory pricing is one of the
abuses which can be established against a dominant player if the selling price is ----------------------
below cost and there is intent to throw out other competitors.
----------------------

----------------------

----------------------

----------------------

----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 179
 Notes
Check your Progress 1
----------------------

---------------------- Match the following.

i. MRTP Act a. Dominance scanner of government
----------------------
ii. Competition Act b. Free to achieve dominance but abuse
---------------------- prohibited
iii. Socialist ideology c. Equal distribution of resources
----------------------

----------------------
Activity 1
----------------------

---------------------- Go through the Competition (Amendment) Bill, 2009 and see the
amendments made.
----------------------
---------------------- 11.2 CRITERIA FOR DETERMINING ABUSE OF
---------------------- DOMINANT POSITION

---------------------- Dominance is the position of strength enjoyed by an enterprise, in the

relevant market which enables it to operate independently of competitive forces
---------------------- prevailing in relevant market. The word independently here specifically means
that such an enterprise works out of the rules of market, like determination of
----------------------
price by market forces like demand and supply, and related rules of market. Such
---------------------- behaviour leads to appreciable adverse effect to the economy. Thus dominance
is the power that could affect competitors or consumers or the relevant market
---------------------- in favour of such dominant enterprise. In simple words, abuse of dominance is
nothing but ability and practice to prevent effective competition and to behave
----------------------
independently from two sets of market actors, namely other competitors and
---------------------- consumers.
Dominance is not considered bad per se but its abuse is. Abuse is stated
----------------------
to occur when an enterprise or a group of enterprises uses its dominant position
---------------------- in the relevant market in an exclusionary or/and an exploitative manner. The
Act gives an exhaustive list of practices that shall constitute abuse of dominant
---------------------- position and, therefore, are prohibited. Such practices shall constitute abuse
only when adopted by an enterprise enjoying dominant position in the relevant
----------------------
market in India.
---------------------- Abuse of dominance is judged in terms of the specified types of
---------------------- acts committed by a dominant enterprise alone or in concert. Such acts are
prohibited under the law. There is no need for any reference by the Competition
---------------------- Commission, to see whether there had been any adverse effect on competition.
Rather, any abuse of the type specified in the Act by a dominant firm shall stand
---------------------- prohibited.
----------------------

180 Consumer Protection Act, 1986 and Competition Act, 2002

 Section 4 (2) of the Act specifies the following practices by dominant Notes
enterprises or group of enterprises as abuses:
----------------------
 Directly or indirectly imposing unfair or discriminatory condition in purchase
or sale of goods or service; ----------------------
 Directly or indirectly imposing unfair or discriminatory price in purchase ----------------------
or sale (including predatory price) of goods or service;
----------------------
 Limiting or restricting production of goods or provision of services or market;
 Limiting or restricting technical or scientific development to the prejudice ----------------------
of consumers; ----------------------
 Denying market access in any manner;
----------------------
 Making conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to commercial ----------------------
usage, have no connection with the subject of such contracts;
----------------------
 Using its dominant position in one relevant market to enter into, or protect,
other relevant market. ----------------------

Factors to Determine Dominant Position ----------------------

----------------------
Dominance has been traditionally defined in terms of market share of
the enterprise or group of enterprises concerned. However, a number of other ----------------------
factors play a role in determining the influence of an enterprise or a group of
enterprises in the market. These include: ----------------------
 market share of the enterprise; ----------------------
 size and resources of the enterprise;
----------------------
 size and importance of the competitors;
----------------------
 economic power of the enterprise including commercial advantages over
competitors; ----------------------
 vertical integration of the enterprises or sale or service network of such ----------------------
enterprises;
----------------------
 dependence of consumers on the enterprise;
 monopoly or dominant position whether acquired as a result of any statute ----------------------
or by virtue of being a Government company or a public sector undertaking
----------------------
or otherwise;
 entry barriers including barriers such as regulatory barriers, financial risk, ----------------------
high capital cost of entry, marketing entry barriers, technical entry barriers, ----------------------
economies of scale, high cost of substitutable goods or service for consumers;
 countervailing buying power; ----------------------

 market structure and size of market; ----------------------

 social obligations and social costs; ----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 181
 Notes  relative advantage, by way of the contribution to the economic development,
by the enterprise enjoying a dominant position having or likely to have an
---------------------- appreciable adverse effect on competition;
----------------------  any other factor which the Commission may consider relevant for the inquiry.
The Competition Commission is also authorized to take into account any
----------------------
other factor which it may consider relevant for the determination of dominance.
---------------------- Abuses as specified in the Act fall into two broad categories: exploitative
(excessive or discriminatory pricing, including predatory pricing) and
----------------------
exclusionary for example, denial of market access, etc.
---------------------- Predatory Pricing
---------------------- The “predatory price” under the Act means “the sale of goods or provision of
---------------------- services, at a price which is below the cost, as may be determined by regulations,
of production of goods or provision of services, with a view to reduce competition
---------------------- or eliminate the competitors”.
---------------------- Predation is exploitative behaviour and can be indulged in only by
enterprises(s) having dominant position in the concerned relevant market. The
---------------------- major elements involved in the determination of predatory behaviour are:
 Establishment of dominant position of the enterprise in the relevant market.
----------------------
 Pricing below cost for the relevant product in the relevant market by the
---------------------- dominant enterprise.
----------------------  Intention to reduce competition or eliminate competitors.

---------------------- This is traditionally known as the predatory intent test.

---------------------- Example:

---------------------- Consider there is a firm called “A” which is doing business of

manufacturing soap, in a close substitute market from last many years, and
---------------------- has a huge accumulation of profits, has a dominant position in the market, in
terms of production, supply and market standing. This firm can survive in the
----------------------
market even if it makes loss for several periods. The average cost of production
---------------------- of one soap is Rs. 10 and minimum Rs. 2 as profit margin for every producer.
However the firm “A” sells the soap at the price of Rs. 8 per soap making
---------------------- Rs. 4 loss on each soap. Other firms in the market are still selling the soap at
Rs. 12 per soap, as they cannot afford to make loss. Every consumer getting
----------------------
attracted chooses the soap of firm “A” as he is getting the same quality at low
---------------------- price, as compared to prices of rest of the competitors in the market. With the
choice of consumer only to firm “A” soap, other producers of soap in the market
---------------------- suffer huge reduction in sale, thus resulted in reduction in profits. Subsequently
the stage comes when other firms are left with no choice, but, either to close
----------------------
down their business or to sell their business to firm “A”. Thus eliminating and
---------------------- predating competition from the market, by firm “A”. This is abuse of dominant
position in the market, used for predating the competitors from the market,
---------------------- leading to the monopolistic position for firm “A”.

182 Consumer Protection Act, 1986 and Competition Act, 2002

Once such stage is achieved, firm “A” raises the price to Rs. 18 instead of Rs. 12. Notes
Now, consumers have no choice, but to purchase soap for a quoted price. Such
kind of practice is exploitation on the part of consumers, and hence actionable ----------------------
in Competition Act, 2002.
----------------------
Barrier to entry of new enterprises into the relevant market is a major
----------------------
restraint on the dynamics of competition. When a dominant enterprise in the
relevant market controls an infrastructure or a facility that is necessary for ----------------------
accessing the market and which is neither easily reproducible at a reasonable
cost in the short term nor interchangeable with other products/services, ----------------------
the enterprise may not without sound justification refuse to share it with its
----------------------
competitors at reasonable cost. This has come to be known as the essential
facility doctrine (EFD). It has been recognized that any application of the EFD ----------------------
should satisfy the following:
----------------------
 The facility must be controlled by a dominant firm in the relevant market;
 Competing enterprises/persons should lack a realistic ability to reproduce ----------------------
the facility; ----------------------
 Access to the facility is necessary in order to compete in the relevant market;
and ----------------------

 It must be feasible to provide access to the facility. ----------------------

Subject to such conditions being satisfied, the Competition Commission ----------------------

may under the provisions of Section 4 (2) (c) of the Act which is related to denial
----------------------
of market access by a dominant enterprise, pass a remedial order under which
the dominant enterprise must share an essential facility with its competitors in ----------------------
the downstream markets.
----------------------
Dominance is in the Context of Relevant Market
Dominance has significance for competition only when the relevant ----------------------
market has been defined. The relevant market means “the market that may be ----------------------
determined by the Commission with reference to the relevant product market or
the relevant geographic market or with reference to both the markets”. The Act ----------------------
lays down several factors of which any one or all shall be taken into account by
the Commission while defining the relevant market. ----------------------

The Act defines dominant position in terms of a position of strength ----------------------

enjoyed by an enterprise, in the relevant market in India, which enables it to:
----------------------
 Operate independently of the competitive forces prevailing in the relevant
market; or ----------------------
 Affect its competitors or consumers or the relevant market in its favour. ----------------------
It is the ability of the enterprise to behave or act independently of the
----------------------
market forces that determines its dominant position. In a perfectly competitive
market, no enterprise has control over the market, especially in the determination ----------------------
of price of the product. However, perfect market conditions are more of an
economic “ideal” than reality. Keeping this in view, the Act specifies a number ----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 183
 Notes of factors that should be taken into account while determining whether an
enterprise is dominant.
----------------------
Relevant market is based on:
----------------------  Relevant product market;
----------------------  Relevant geographic market.

---------------------- Relevant Product Market

The relevant product market is defined in terms of substitutability. It is
---------------------- the smallest set of products (both goods and services) which are substitutable
---------------------- among themselves, given a Small but Significant Non Transitory Increase
in Price (SSNIP). The market for cars, for example, may consist of separate
---------------------- ‘relevant product markets’ for small cars, mid size cars, luxury cars etc. as
these are not substitutable for each other on a small change in price. A relevant
---------------------- product in a relevant geographic market is what matters.
---------------------- Relevant product market is the smallest set of close substitutes. The
substitutes might be of goods or services available in the market. Substitutability
---------------------- of the products is to be determined by demand side substitutability that is shift
---------------------- of demand, to competing product on price rise, or supply side substitutability,
that is shift of production, to meet demand.
----------------------
Factors to be considered while determining relevant product market:
----------------------  Physical characteristic of product
----------------------  End-use of product
 Price
----------------------
 Consumer preference - empirical evidence
----------------------
 Classification of industrial products
---------------------- In determining ‘Relevant Product Market’, Competition Commission of India
is required to consider:
----------------------
 Physical characteristics or end-use of goods
----------------------
 Price of goods or service
----------------------  Consumer preferences
----------------------  Exclusion of in-house production
----------------------  Existence of specialized producers
 Classification of industrial products
----------------------
Relevant Geographic Market
----------------------
Relevant geographic market is defined in terms of “the area in which the
---------------------- conditions of competition for supply of goods or provision of services or demand
of goods or services are distinctly homogenous and can be distinguished from
---------------------- the conditions prevailing in the neighbouring areas”.
----------------------

184 Consumer Protection Act, 1986 and Competition Act, 2002

Following factors are considered significant for determination of the relevant Notes
geographic market.
----------------------
 Shipment cost
 Regulatory trade barriers such as octroi, sales tax, or concerned duty ----------------------
 Local specification requirements ----------------------
 National procurement policy ----------------------
 Adequate distribution facilities
----------------------
 Transport costs
----------------------
 Consumer preferences
 Need for secure or regular supplies or rapid after-sales services ----------------------

Intellectual property and related laws give abuse of dominance provisions ----------------------
different dimensions. While reasonable use of IPRs stand exempted from the ----------------------
rigours of Section 3 related to anti-competitive agreements, no such derogation
is available in case of abuse of Intellectual Property Rights by right holders, in ----------------------
respect of specified abusive acts.
----------------------
Intellectual Property Rights (IPR) involve grant of exclusive rights to the right
holders to exploit the results of their innovation so as to provide incentive to ----------------------
innovate. Competition Act, 2002 exempts the reasonable use of such rights by
right holders from the provisions of Sec. 3 related to agreements. However, the ----------------------
actions by enterprises that shall be treated as abuse (specified under Section ----------------------
4 (2)) shall stand applicable equally to IPR holders provided such rights are
considered by the Commission to render the holder a dominant player in the ----------------------
relevant market.
----------------------
Check your Progress 2 ----------------------

----------------------
State True or False.
1. Dominance is not bad per se neither is its abuse. ----------------------
2. Denying market access in any manner by dominant enterprise does ----------------------
not amount to abuse under Section 4.
----------------------
3. Market share of the enterprise is an important factor to determine
dominant position. ----------------------

----------------------
Activity 2 ----------------------

----------------------
Find details of the case Singhania and Partners LLP Vs. M/s Microsoft
Corporation India (P) Ltd. decided by the Competition Appellate Tribunal. ----------------------

----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 185
 Notes 11.3 POWERS OF COMMISSION AND REMEDIES
AVAILABLE
----------------------
Every market player, namely, producer as well as consumer has the right
---------------------- to have free and competitive market access. However, if there are no remedies
---------------------- available, the right becomes useless. Thus it is important to study the remedies
available and have access to those remedies in Competition Act 2002. The basic
---------------------- preventive measure could be prohibiting the abuse in future. For the purpose,
specifying the future contract’s terms and conditions and pre notification of
---------------------- the arrangements are some of the precautions encrypted in the Act. Imposition
---------------------- of fines is the deterrent action to be taken under the Act. Structural remedies
include ‘division of enterprise’, which after division, the two parts compete
---------------------- with each other like other players and dominance in the market is divided.
The Commission can pass such other order as may be deemed appropriate, to
---------------------- maintain the objective of the Act. Subject to the provisions of Sec 18 of the
---------------------- Act, it is the duty of the Commission to eliminate practices having adverse
effect on competition, promote and sustain competition, protect the interests of
---------------------- consumers and ensure freedom of trade carried on by other participants, in the
markets in India.
----------------------
For achieving the purpose and discharging the duty mentioned under the
---------------------- Act, the Commission may, on performing its functions under this Act, enter
into any memorandum or arrangement with the prior approval of the Central
----------------------
Government, with any agency of any foreign country.
---------------------- The process starts with the inquiry of the abuse of dominant position. In
exercise of powers vested under section 19 of the Act, the Commission may
----------------------
inquire into any alleged contravention of section 4 (1) of the Act that proscribes
---------------------- abuse of dominance. Section 19 (4) gives a detailed list of factors that the
Commission shall consider while inquiring into any allegation of abuse of
---------------------- dominance. Some of these factors are market share of the enterprise, size and
resources of the enterprise, size and importance of the competitors, dependence
----------------------
of consumers, entry barriers, and social obligations and costs in the relevant
---------------------- geographic and product market.

---------------------- The Commission, on being satisfied that there exists a prima facie case of
abuse of dominance, shall direct the Director General to cause an investigation
---------------------- and furnish a report. The Commission has the powers vested in a Civil Court
under the Code of Civil Procedure in respect of matters like summoning or
---------------------- enforcing attendance of any person and examining him on oath, requiring
---------------------- discovery and production of documents and receiving evidence on affidavit.
The Director General, for the purpose of carrying out investigation, is vested
---------------------- with powers of civil court besides powers to conduct ‘search and seizure’.

---------------------- Powers of the Commission

---------------------- After inquiry, the Commission may pass inter-alia any or all of the
following orders under Section 27 of the Act:
----------------------

186 Consumer Protection Act, 1986 and Competition Act, 2002

 direct the parties to discontinue and not to re-enter such agreement; Notes
 direct the enterprise concerned to modify the agreement;
----------------------
 direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment ----------------------
of costs, if any; and
----------------------
 pass such other orders or issue such directions as it may deem fit;
----------------------
 can impose such penalty as it may deem fit. The penalty can be up to 10%
of the average turnover for the last three preceding financial years upon each ----------------------
of such persons or enterprises which are parties to bid-rigging or collusive
bidding; ----------------------

 Section 28 empowers the Commission to direct division of an enterprise ----------------------

enjoying dominant position to ensure that such enterprise does not abuse
its dominant position. ----------------------

----------------------
Under Section 33 of the Act, during the pendency of an inquiry into abuse
of dominant position, the Commission may temporarily restrain any party from ----------------------
continuance with the alleged contravention the offending act until conclusion
of the inquiry or until further orders, without giving notice to such party, where ----------------------
it deems is necessary. The Competition Appellate Tribunal (CAT) established
----------------------
under Section 53A of the Act, is the authority to hear and dispose of appeals
against any direction issued or decision made or order passed by the Commission ----------------------
under specified sections of the Act. An appeal has to be filed within 60 days of
receipt of the order / direction / decision of the Commission. ----------------------

----------------------
Check your Progress 3
----------------------
Match the following.
----------------------
i. Section 27 a. Inquiry
----------------------
ii. Section 19 b. Orders after enquiry
iii. Section 33 c. Interim/temporary orders ----------------------

----------------------
Activity 3 ----------------------

----------------------
Read about the provisions relating to abuse of dominant position in UK
available at: http://www.oft.gov.uk/shared_oft/business_leaflets/ca98_ ----------------------
guidelines/oft402.pdf
----------------------

----------------------

----------------------

----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 187
 Notes Summary
----------------------  It is very significant to note that, in MRTP Act, the dominance per se was
prohibited; however in Competition Act, not Dominance per se, but Abuse
----------------------
of Dominance is prohibited.
----------------------  Competition laws all over the world are primarily concerned with the
---------------------- acquisition and exercise of market power and its abuse.
 The term “market power” is variously known as “dominant position”,
---------------------- “monopoly power” and “substantial market power”.
----------------------  Monopoly power is different from substantial market power and dominant
position.
----------------------
 Dominance is the power that could affect competitors or consumers or the
---------------------- relevant market in favour of such dominant enterprise. In simple words,
abuse of dominance is nothing but ability and practice to prevent effective
----------------------
competition and to behave independently from two sets of market actors,
---------------------- namely other competitors and consumers.
 The Act gives an exhaustive list of practices that shall constitute abuse
----------------------
of dominant position and, therefore, are prohibited. Such practices shall
---------------------- constitute abuse only when adopted by an enterprise enjoying dominant
position in the relevant market in India.
----------------------
 The “predatory price” under the Act means “the sale of goods or provision
---------------------- of services, at a price which is below the cost, as may be determined by
regulations, of production of goods or provision of services, with a view to
---------------------- reduce competition or eliminate the competitors”.
----------------------  The relevant product market is defined in terms of substitutability. It is the
smallest set of products (both goods and services) which are substitutable
---------------------- among themselves, given a Small but Significant Non Transitory Increase
---------------------- in Price (SSNIP).
 Relevant geographic market is defined in terms of “the area in which the
---------------------- conditions of competition for supply of goods or provision of services
---------------------- or demand of goods or services are distinctly homogenous and can be
distinguished from the conditions prevailing in the neighbouring areas”.
----------------------  Intellectual property and related laws give abuse of dominance provisions
---------------------- different dimensions.
 For achieving the purpose and discharging the duty mentioned under the
----------------------
Act, the Commission may, on performing its functions under this Act, enter
---------------------- into any memorandum or arrangement with the prior approval of the Central
Government, with any agency of any foreign country.
----------------------
 The Commission, on being satisfied that there exists a prima facie case
---------------------- of abuse of dominance, shall direct the Director General to cause an
investigation and furnish a report. The Commission has the powers vested
---------------------- in a Civil Court under the Code of Civil Procedure in respect of matters

188 Consumer Protection Act, 1986 and Competition Act, 2002

 like summoning or enforcing attendance of any person and examining him Notes
on oath, requiring discovery and production of documents and receiving
evidence on affidavit. The Director General, for the purpose of carrying out ----------------------
investigation, is vested with powers of civil court besides powers to conduct
‘search and seizure’. ----------------------

----------------------
Keywords
----------------------
●● Bureaucracy: The purpose of a bureaucracy is to successfully implement
----------------------
the actions of an organization of any size (but often associated with large
entities such as government, corporations. ----------------------
●● Monopoly Power: Monopoly power is the degree of power held by the
----------------------
seller to set the price for a good. In U.S. antitrust law monopoly power is
not measured by market share. ----------------------
●● Dominant Position: A firm is in a dominant position if it has the ability
----------------------
to behave independently of its competitors, customers, suppliers and,
ultimately, the final consumer. ----------------------
●● Per se: From the very inception.
----------------------
●● Countervailing Power: Countervailing power is the theory of political
modification of markets, formulated by American economist John ----------------------
Kenneth Galbraith in his 1952 book American Capitalism. In the classic
liberal economy, goods and services are provided and prices set by free ----------------------
bargaining. Modern economies give massive powers to large business ----------------------
corporations to bias this process, and there arises ‘countervailing’ powers
in the form of trade unions, citizens’ organizations and so on, to offset ----------------------
business’s excessive advantage.
----------------------

Self-Assessment Questions ----------------------

1. Explain the concept of dominant position. Do you think that the dominant ----------------------
position should be allowed to foster the economic growth?
----------------------
2. Write a note on predatory pricing.
----------------------
3. Elaborate in detail the concept of relevant market.
4. What powers does the Commission have in case of abuse of dominant ----------------------
position? ----------------------
5. Elaborate on the provisions mentioned in the Competition Act in relation
to IPR. ----------------------

----------------------

----------------------

----------------------

----------------------
Concepts related to Dominant Position and Criteria for determining Abuse of
Dominant Position 189
 Notes Answers to Check your Progress
---------------------- Check your Progress 1

---------------------- Match the following.

i. – a.
----------------------
ii. – b.
----------------------
iii. – c.
---------------------- Check your Progress 2
---------------------- State True or False.

---------------------- 1. False
2. False
----------------------
3. True
----------------------
Check your Progress 3
---------------------- Match the following.
---------------------- i. – b.

---------------------- ii. – a.
iii. – c.
----------------------

---------------------- Suggested Reading

---------------------- 1. http://www.manupatrafast.com/articles/
---------------------- PopOpenArticle.aspx?ID=8de19f8a-5bbd-42b6-a96a-
692a0f376625&txtsearch=Subject:%20Commercial
----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

----------------------

190 Consumer Protection Act, 1986 and Competition Act, 2002

Competition Laws and Regulation of Combinations
UNIT

12
Structure:
12.1 Definition of Combination

12.2 ‘Takeovers’ distinguished with ‘Merger’

12.3 Theories related to Takeovers

12.4 Regulation of Combinations

Summary

Keywords

Self-Assessment Questions

Answers to Check your Progress

Suggested Reading

Competition Laws and Regulation of Combinations 191

 Notes
Objectives
----------------------
After going through this unit, you will be able to:
----------------------
• Discuss the concepts of combination and thresholds enshrined in
---------------------- the Competition Act
---------------------- • Interpret the legal provisions applicable to the combination
• Examine the remedies available in case where any merger or
----------------------
acquisition falls in the thresholds
----------------------
12.1 DEFINITION OF COMBINATION
----------------------
The provisions relating to combination has been defined in Sec 5 of
---------------------- the Competition Act 2002. The Competition Act does not define directly
what is combination; however it prescribes the threshold limit for any such
---------------------- arrangement that comes under the periphery of combinations mentioned in
Sec 5. The provisions mentioned in Competition Act regarding combinations
----------------------
generally does not apply to petty mergers as there is a very less possibility
---------------------- that such merger will cause an Appreciable Adverse Effect on Competition.
Only those mergers and acquisitions in form of combinations are taken into
---------------------- consideration, which causes appreciable adverse effect on competition. It is
thus important to first understand, what a combination is. In simple terms, a
----------------------
combination happens when two or more enterprise coming together by effect of
---------------------- acquisition of shares, voting rights, or control over the assets of an enterprise,
or control over the assets or management of an enterprise and jointly, total
---------------------- valuation of assets or turnover falls in threshold prescribed by Sec 5. Thus in
other words, combination under the Act means acquisition of control, shares,
---------------------- voting rights or assets, acquisition of control by a person over an enterprise
---------------------- where such person has control over another enterprise engaged in competing
businesses, and mergers and amalgamations between or amongst enterprises
---------------------- when the combining parties exceed the thresholds set in the Act. The thresholds
are clearly specified in the Act in terms of assets or turnover in India and abroad.
---------------------- Entering into a combination which causes or is likely to cause an appreciable
adverse effect on competition within the relevant market in India is prohibited
----------------------
and such combination would be void.
---------------------- A combination may be in the form of mergers, acquisition, takeover or
amalgamation of one enterprise by another. Even if the end result of mergers,
----------------------
acquisition, takeovers and amalgamation of companies are same, that they
---------------------- become one single entity, after process of unification is executed, they are
different in eyes of law, as laws applicable to each of them is different. For
---------------------- example, ‘takeovers’ is made when companies are listed, on Recognised Stock
Exchange under Securities Contract Regulation Act, then SEBI (Substantial
---------------------- Acquisition of Shares and Takeover) Regulation 1997 will be applicable. When
---------------------- Companies are not listed, the Sec 108, 109, 109A, and Sec 391 to Sec 394 of
the Companies Act will be applicable. Combinations generally are executed in
---------------------- the form of mergers, acquisitions and takeovers. The characteristics of mergers

192 Consumer Protection Act, 1986 and Competition Act, 2002

and takeovers are explained in brief, to form the context for understanding Notes
combinations.
----------------------
Mergers are broadly classified into three categories:
(i) Horizontal mergers, which take place between competitors which produce ----------------------
or supply similar or identical products.
----------------------
(ii) Vertical mergers, which take place between enterprises at different levels in
the chain of production, distributors, etc. like manufacturers and distributors. ----------------------
(iii) Conglomerate mergers, which take place between enterprises engaged in ----------------------
unrelated business activities.
----------------------
Mergers are subject to review because of their potential adverse effect on
competition in the relevant market. Such adverse effect could be the result of a ----------------------
unilateral conduct (exercise of dominance) or of coordinated conduct between
two or more enterprises facilitated by the merger. Control of either type of ----------------------
conduct is prospective and aimed at preventing such conduct post-merger. ----------------------
Effect of mergers on competition is thus classified into two broad categories:
unilateral effects and coordinated effects. ----------------------
Unilateral Effects ----------------------
When a merged enterprise gains sufficient market power to enable it to
----------------------
behave independently of market forces, such conduct results in ‘unilateral’
effect on competition. This happens when the rivals in the market are not able ----------------------
to increase output in response to a unilateral increase in price by the merged
enterprise. It can also occur when the products are differentiated and are not ----------------------
close substitutes of each other.
----------------------
Coordinated Effects
----------------------
The anti-competitive effect of a merger is termed ‘coordinated’ when
it facilitates collusive behaviour, either due to express agreement among ----------------------
competitors, as in cartels, or due to tacit coordination by competitors that have
similar effects, irrespective of whether the coordination is legal or not. Markets ----------------------
that are highly concentrated make such coordination easy. Product markets that ----------------------
are homogenous are prone to such coordination. Horizontal mergers are the
main focus of merger control because they typically tend to limit the number ----------------------
of players in the relevant market and eliminate a potential competitor from
the relevant market. Competition issues are the least likely in the case of ----------------------
conglomerate mergers. ----------------------
Takeover occurs when one company acquires the securities, shares, stocks
or assets of another company. There are two companies involved, the “Acquirer ----------------------
Company”, i.e. the Company acquiring the shares, securities or assets, and ----------------------
the “Target Company” whose shares, securities or assets are being acquired.
Takeover takes place when an acquiring Individual or Company acquires the ----------------------
majority of shares of any Target Company either through a tender offer or
through direct purchase of shares of Target Company. ----------------------

----------------------

Competition Laws and Regulation of Combinations 193

 Notes
Check your Progress 1
----------------------

---------------------- Fill in the blanks.

1. A combination may be in the form of mergers, acquisition, takeover
---------------------- or ___________.
---------------------- 2. The _____________ effect of a merger is termed as coordinated
effect.
----------------------
3. Horizontal, vertical and ________________ are the three categories
---------------------- of mergers.
----------------------

---------------------- Activity 1
----------------------
Find a few examples of amalgamation of companies in India.
----------------------

---------------------- 12.2 ‘TAKEOVERS’ DISTINGUISHED WITH ‘MERGER’

---------------------- The takeovers are required to be clearly distinguished with Mergers.
The merger of a Company refers to corporate transaction wherein two or
---------------------- more Companies unify together either to form a new Company or into without
new Company being formed. In such transaction, atleast one of the involved
----------------------
Companies loses its existence. Mergers and amalgamations are forms of
---------------------- unifying two or more Companies, the shareholder of each Company would
become the shareholder of the Company which is undertaking such activity.
---------------------- On the other hand, takeover or acquisition involves purchase or transfer of
defined interests or equity-capital of one Company by the other which enables
----------------------
the acquirer company to exercise control over the affairs of the Target Company
---------------------- thus acquired.
In other words, ‘takeovers’ connotes directly acquiring the control of
----------------------
target Company or firm by acquiring or purchasing the shares or stock of the
---------------------- target Company at a specific or negotiated price through a tender offer or by
direct transfer of shares of the target Company or firm at a given price.
----------------------
The action of acquisition or takeover of one Company by the other
---------------------- requires meeting of certain procedural and legal requirements as contemplated
under the relevant Statutes. The various forms of Takeovers may be “Negotiated
---------------------- Takeovers”, “Bail-Out Takeovers”, or “Open Market Takeovers” etc.
---------------------- A takeover may either be “Friendly” or “Hostile”. Sometimes, Negotiation
may be initiated as friendly but may later develop into hostile with circumstances
---------------------- and vice versa.
----------------------

----------------------

194 Consumer Protection Act, 1986 and Competition Act, 2002

Advantages of Takeovers Notes
Any takeover must provide to all stakeholders the following benefits:
----------------------
 Better allocation of resources
 Synergy gains ----------------------
 Better management discipline ----------------------
 Accurate market valuation ----------------------
 Profit maximization as well as wealth maximization
----------------------
The advantages which encourage Companies to takeover other Companies are:
Diversification of Business ----------------------
Diversifying the areas of business may be the contributing factor for ----------------------
acquiring other Companies by an existing business entity. Such diversification
may lead to enhancing the presence of an acquiring Company into broader ----------------------
market domain. Companies may acquire other companies to optimize Company ----------------------
specific human capital resources, that makes their employees more valuable
and productive and to increase the profitability of the acquiring Company. ----------------------
Sometimes, through takeover of other Company, the Acquirer Company may
optimize their capital resources by utilizing the existing business expertise of ----------------------
the target company foray into new areas of business in the event of any decline ----------------------
in the existing business of the Acquiring Company.
Tax Considerations ----------------------

Garnering advantages in taxes and revenues may be the factors ----------------------

necessitating Corporate Takeover activities. Squaring-off the net operating
----------------------
losses and tax credits, step-up the revenues through assets and the substitution
of capital gains for ordinary income are among the tax-benefits motivating ----------------------
takeovers and acquisitions.
----------------------
Check your Progress 2 ----------------------

Multiple Choice Single Response. ----------------------

1. Which of the following factors encourage companies to take over ----------------------
other companies?
----------------------
i. Profit and wealth maximisation
ii. Tax benefits ----------------------
iii. Increase of employees
----------------------
iv. All of the above
2. Forms of takeovers may be: ----------------------
i. Negotiated takeovers ----------------------
ii. Bail-out takeovers
----------------------
iii. Open market takeovers
iv. All of the above ----------------------

Competition Laws and Regulation of Combinations 195

 Notes
Activity 2
----------------------

---------------------- Read the provisions relating to merger and amalgamation in Sections 391
to 396A in Chapter V of Part VI of the Companies Act, 1956.
----------------------

---------------------- 12.3 THEORIES RELATED TO TAKEOVERS

---------------------- The following theories, stipulate the necessity of takeover activities:
---------------------- 1) The Market Power Theory: This theory holds that gains from takeovers
& mergers result in the concentration of resources leading to collusion and
---------------------- monopoly effects, increasing profits for all stakeholders.
---------------------- 2) Jensen’s Free Cash Flow Hypothesis: This theory holds that Corporate
Takeovers occur because of conflict between managers and shareholders
---------------------- over the payout of free cash flows. The hypothesis points that cash flows in
---------------------- excess of investment needs and should be paid out to shareholders, reducing
the power of management and subjecting the managers to the scrutiny of
---------------------- the public market more frequently.

---------------------- 3) Theory of Value Increase in Takeover: This theory implies that in

takeovers, the gains come at the expense of other shareholders in the firm
---------------------- or Company. Expropriated stakeholders under the redistribution hypothesis
may include bond-holders, Government and employees.
----------------------
4) The Information Theory: This theory attempts to explain why target
---------------------- shares seem to be permanently revalued in a tender offer whether or not
it is successful. The tender offer conveys information to the market that
----------------------
the target shares are undervalued and alternatively the target offers send
---------------------- information to target management that inspires them to implement a more
efficient strategy of their own.
----------------------
5) The Undervaluation Theory: This theory states that the takeovers occur
---------------------- when the market value of target company stock for some reason does not
reflect its true potential value or its value in the hands of an alternative
---------------------- management. Companies can acquire assets for expansion more cheaply by
buying stocks of existing companies or building the assets when the target
----------------------
stock price is below the replacement cost of its assets.
---------------------- 6) The Theory of Strategic Alignment to Changing Environment: This
theory suggests that takeovers and acquisitions takes place in response to
----------------------
environmental changes. External acquisition of needed capabilities allows
---------------------- firms/companies to adapt more quickly and with less risk than developing
capabilities internally.
----------------------
7) The Differential Efficiency Theory: This theory suggests that more efficient
---------------------- firms will acquire less efficient firm and realize gains by improving their
efficiency.
----------------------

196 Consumer Protection Act, 1986 and Competition Act, 2002

8) The Operating Synergy Theory: This theory postulates that there are Notes
economies of scale or scope and that acquisition or takeovers help achieve
level of activities at which these economies can be obtained. It includes ----------------------
the concept of complementary of capabilities. For example; one company
might be strong in Research and Development but weak in Marketing ----------------------
while another Company has a strong marketing department without R & D ----------------------
capability. Acquiring them would result in opening synergy, which would
thereby balance the economies. ----------------------
The thresholds for the combined assets/turnover of the combining parties: ----------------------
The thresholds prescribed in Sec. 5 are levelled for three stages, i.e. Sec 5 (a) (b)
----------------------
and (c). Sec 5 (a) lays down thresholds for any parties involved in acquisition,
Sec 5(b) prescribes about person acquiring control over enterprise and Sec ----------------------
5(c) prescribes about enterprise remaining after merger or amalgamation. The
thresholds are as follows. ----------------------
 Combined assets of the enterprises value more than Rs. 1,000 crores or ----------------------
combined turnover is more than Rs. 3,000 crores. In case either or both of
the enterprises have assets/turnover outside India also, then the combined ----------------------
assets of the enterprises value more than US$ 500 millions, including atleast
----------------------
Rs. 500 crores in India, or turnover is more than US$1500 millions, including
atleast Rs. 1,500 crores in India . ----------------------
 Combined assets of the group to which the acquired enterprise would belong ----------------------
being more than Rs. 4,000 crores or such group having a joint turnover of
more than Rs. 12,000 crores after acquisition or merger. In case such group ----------------------
has assets/turnover outside India, then the combined assets of the group
value more than US$ 2 billion, including atleast Rs. 500 crores in India or ----------------------
turnover is more than US$6 billion including atleast Rs. 1,500 crores in ----------------------
India.
 Group is defined in the Act. Two enterprises belong to a “group” if one is ----------------------
in a position to exercise atleast 26% voting rights or appoint atleast 50% of ----------------------
the directors or controls the management or affairs in the other.
The Act provides for revision of the threshold limits every two years by ----------------------
the government, in consultation with the Commission, through notification, ----------------------
based on the movement in Wholesale Price Index (WPI) or fluctuations in
exchange rates of rupee or foreign currencies. ----------------------
The turnover shall be determined by taking into account the values of ----------------------
sales of goods or services. The value of assets shall be determined by taking
the book value of the assets as shown in the audited books of account of the ----------------------
enterprise, in the financial year immediately preceding the financial year in
----------------------
which the date of proposed merger falls, as reduced by any depreciation. The
value of assets shall include the brand value, value of goodwill, or Intellectual ----------------------
Property Rights like trademarks, patents, copyright, geographical indications,
etc. referred to in explanation (c) to section 5 of the Act. ----------------------

----------------------

Competition Laws and Regulation of Combinations 197

 Notes
Check your Progress 3
----------------------

---------------------- Multiple Choice Single Response.

1. Takeovers and acquisitions take place in response to environmental
---------------------- changes according to __________
---------------------- i. Differential Efficiency Theory
---------------------- ii. Undervaluation Theory
iii. Market Power Theory
----------------------
iv. None of the above
----------------------

---------------------- 12.4 REGULATION OF COMBINATIONS

---------------------- The provisions for regulation of combinations are encoded in Sec. 6 of
---------------------- the Competition Act. Sec 6 is to be read with Sec. 30, 31, 43A, 44 and 45 of the
Act which lays down procedures and penalty for contravening the provisions
---------------------- of the Act relating to the regulations of combinations. It is important to note
again, that only those mergers will fall in the category of Sec 5, which falls in
---------------------- the thresholds prescribed under Sec 5, however any such combination must
---------------------- be notified compulsorily, after proposal is made, and before execution. Any
combination which causes an Appreciable Adverse effect on Competition will
---------------------- be considered as void. Any person or enterprise who proposes to enter into the
combination must give notice, in prescribed form and with prescribed payment
---------------------- of fees to the commission, disclosing the details of proposed combination,
---------------------- within 30 days, once the proposal for combination is approved, or execution
of any document for acquisition. The proposed combination cannot take effect
---------------------- for a period of 210 days from the date it notifies the Commission or till the
Commission passes an order, whichever is earlier. If the Commission does
---------------------- not pass an order during the said period of 210 days, the combination shall
---------------------- be deemed to have been approved. The draft regulations propose to dispose
off notifications within 30 days in respect of mergers, which, in the opinion
---------------------- of the Commission, has little or no potential for appreciable adverse effect
on competition in Indian markets. Merger evaluation involves the following
---------------------- process:
---------------------- (a) Identification of the relevant market, consisting of relevant product market
and relevant geographic market.
----------------------
(b) Consideration whether the merger has appreciable adverse effect on
----------------------
competition in the relevant market in India.
----------------------
(c) Approval, rejection, or approval with modification of the merger.
----------------------

----------------------

198 Consumer Protection Act, 1986 and Competition Act, 2002

(I) Identification of the relevant market Notes
The Act envisages appreciable adverse effect on competition in the ----------------------
relevant market in India as the touchstone. The concept of relevant market is
clearly defined in the Act. It consists of the relevant product (including goods ----------------------
and services) market and the relevant geographic market.
----------------------
The relevant market means “the market that may be determined by the
Commission with reference to the relevant product market or the relevant ----------------------
geographic market or with reference to both the markets”. The Act lays down the
----------------------
factors, any one or all of which shall be taken into account by the Commission
while defining the relevant product/ geographic market as the case may be. ----------------------
Relevant product market is defined in terms of substitutability of ----------------------
products. It means “a market comprising of all those products or services which
are regarded as interchangeable or substitutable by the consumer, by reason of ----------------------
characteristics of the products or services, their prices and intended use.” It can
be taken as the smallest set of products which are substitutable given a small but ----------------------
significant non-transitory increase in price (SSNIP). ----------------------
Relevant geographic market is defined in the Act in terms of “the area
in which the conditions of competition for supply of goods or provision of ----------------------
services or demand of goods or services are distinctly homogenous and can be ----------------------
distinguished from the conditions prevailing in the neighbouring areas”. It can
be understood as the geographic region within which substitutable products can ----------------------
be made available at similar price.
----------------------
(II) Evaluation of ‘appreciable adverse effect on competition’
----------------------
Mergers are regulated under the Act in view of their potential appreciable
adverse effect on competition in the relevant market in India. Evaluation of ----------------------
the adverse effects is not based on any single criterion. The Act empowers the
----------------------
Commission to evaluate the effect of merger on competition in the relevant
market in India based on a number of factors (sub section (4) of section 20). The ----------------------
Commission will use the rule of reason approach for evaluation of combination.
The beneficial and adverse effects of the proposed combination on competition ----------------------
in the relevant market in India would be evaluated by the Commission with
----------------------
reference to the factors indicated in sub section (4) of section 20 of the Act.
Factors to be considered by the commission while evaluating appreciable ----------------------
adverse effect of combinations on competition in the relevant market
----------------------
(a) actual and potential level of competition through imports in the market;
----------------------
(b) extent of barriers to entry into the market;
----------------------
(c) level of concentration in the market ;
(d) degree of countervailing power in the market; ----------------------
(e) likelihood that the combination would result in the parties to the combination ----------------------
being able to significantly and sustainably increase prices or profit margins;
----------------------

Competition Laws and Regulation of Combinations 199

 Notes (f) extent of effective competition likely to sustain in a market;
(g) extent to which substitutes are available or are likely to be available in the
----------------------
market;
---------------------- (h) market share, in the relevant market, of the persons or enterprise in a
combination, individually and as a combination;
----------------------
(i) likelihood that the combination would result in the removal of a vigorous
---------------------- and effective competitor or competitors in the market;
---------------------- (j) nature and extent of vertical integration in the market;

---------------------- (k) possibility of a failing business;

(l) nature and extent of innovation;
----------------------
(m) relative advantage, by way of the contribution to the economic development,
---------------------- by any combination having or likely to have appreciable adverse effect on
competition;
----------------------
(n) whether the benefits of the combination outweigh the adverse impact of the
---------------------- combination, if any.
---------------------- Approval, rejection or approval with modification of the merger based on
evaluation of the combination as above, the Commission may decide to approve
----------------------
the merger, reject the merger or approve the merger subject to modifications.
---------------------- International experience shows that less than 10 per cent of mergers evaluated by
competition authorities have been found to have adverse effect on competition/
---------------------- have the potential for lessening of competition in the relevant market. A large
portion of such cases are eventually approved by competition authorities subject
----------------------
to modifications. It can be reasonably expected that only a small percentage of
---------------------- the total notified mergers may be found to have appreciable adverse effect on
competition in India.
----------------------
Procedure for investigation of mergers has been prescribed in Sec 29 of
---------------------- the Act which lays down the following provisions -
1) Issue of notice by the commission - When it is prima facie opinion of the
----------------------
commission that combination is likely to cause, or has caused an appreciable
---------------------- adverse effect on competition, the commission shall issue notice of show
cause to the parties concerned. Such parties concerned have to give response
---------------------- within 30 days of the receipt of the notice, as to why investigation relating
to such combination should not be conducted.
----------------------
2) Report by Director General, to commission - after response of notice,
---------------------- from parties concerned to combination, the Commission may call for a report
---------------------- from Director General, who is appointed by Central Government Under Sec
16, of the Act, for assisting the commission. The Director General has to
---------------------- file report to commission within time limit as commission may direct.

---------------------- 3) Publication of details of combination, to commission by parties concerned

- if the commission is of prima facie of opinion, that combination causes or
---------------------- may cause adverse effect on competition, directs the parties concerned, to

200 Consumer Protection Act, 1986 and Competition Act, 2002

 publish the details of combination within 10 working days of such direction, Notes
to bring the knowledge of combination to public, and persons affected or
likely to be affected by such combination. The commission may call such ----------------------
persons to file the objection, within 15 days of date of publication to public.
The commission may call for any additional information from the parties ----------------------
concerned. ----------------------
4) Orders of commission - According to Sec 31, if the commission is of the
----------------------
opinion that the concerned combination does cause or is likely to cause
appreciable adverse effect on competition, it may approve such combination. ----------------------
And if the commission is of the opinion that such combination causes or
is likely to cause appreciable adverse effect on competition, it directs, that ----------------------
such combination shall not take effect.
----------------------
5) If commission finds that concerned combination causes is or likely to
cause appreciable Adverse Effect on competition, however such adverse ----------------------
effect can be eliminated by any modification to such combination, it may
----------------------
propose, appropriate modifications to parties concerned. Such combination
to be modified by the parties within time prescribed by the commission, ----------------------
failure of which, the commission will deal with such combination as such
combination causes an Appreciable Adverse effect on Competition. If ----------------------
parties agree and follow the modifications suggested by commission, the
----------------------
commission may approve such combination.
6) Under Sec 32, the commission has power to investigate the Acts taking ----------------------
place outside India but having effect on competition in India. This provision
----------------------
gives extra-territorial jurisdiction to the working of the commission.
----------------------
It is important to note here that the provisions mentioned in Sec 6, does
not apply to the share subscription, or financial institution, foreign institutional ----------------------
investors, bank or venture capital fund pursuant to any covenant of loan
agreement or investment agreement, however public financial banks foreign ----------------------
institutional investors or venture capital funds must file the information of ----------------------
acquisition within 7 days of such acquisition including details of control and
consequences of default arising out of such loan agreement or investment ----------------------
agreement as the case may be. This is because, according to Sec 62 of the Act,
the provisions of the Act shall be applicable in addition to and not in derogation ----------------------
with the provisions of any other law for the time being in force. If banks and ----------------------
financial institutions are to be included under the purview of this section, then
it may hamper the object of Competition Act, to develop and promote the ----------------------
competition in the economy, as the banks and financial institutions has major
business of acquisition of assets and interest in the companies, and if they are ----------------------
supposed to wait for 210 days for investigation, it will slow down the speed of ----------------------
the economy. Most of the expected anti-competitive effects of mergers can be
remedied without holding back the merger itself. Merger analysis consists of ----------------------
assessment of the likely anti-competitive effect of the merger under analysis and
how such effect could be minimized or eliminated. Prohibition is considered ----------------------
only when remedies are either not available or not feasible. Remedies can be ----------------------

Competition Laws and Regulation of Combinations 201

 Notes either structural or behavioural. Although behavioural remedy is preferable, its
implementation is difficult. On the other hand, a structural remedy would entail
---------------------- requiring the merged enterprise to make structural adjustment which could be
in the form of sale of assets, divestment of a division or a unit or creation or
---------------------- strengthening of competitors through, for example, licensing of an Intellectual
---------------------- Property Right (IPR).

---------------------- Check your Progress 4

----------------------
State True or False.
----------------------
1. The Commission has power to investigate the acts taking place
---------------------- outside India but having effect on competition in India.

----------------------

---------------------- Activity 4
---------------------- Visit the website of Competition Commission of India and browse
---------------------- through the Competition Commission of India (procedure in regard to the
transaction of business relating to combination) Regulation, 2011 and its
---------------------- recent amendments.
----------------------
Summary
----------------------
 A combination may be in the form of mergers, acquisition, takeover or
----------------------
amalgamation of one enterprise by another.
----------------------  The Competition Act does not define directly what combination is; however
it prescribes the threshold limit for any such arrangement that comes under
----------------------
the periphery of combinations mentioned in Sec 5.
----------------------  Only those mergers and acquisitions in the form of combinations are taken
---------------------- into consideration, which causes appreciable adverse effect on competition.
 A combination happens when two or more enterprise coming together by
---------------------- effect of acquisition of shares, voting rights, or control over the assets of an
---------------------- enterprise, or control over the assets or management of an enterprise and
jointly, total valuation of assets or turnover falls in threshold prescribed by
---------------------- Sec 5.
 Takeovers is made when companies are listed, on Recognised Stock
----------------------
Exchange under Securities Contract Regulation Act, then SEBI (Substantial
---------------------- Acquisition of Shares and Takeover) Regulation 1997 will be Applicable.
When Companies are not listed, the Sec 108, 109, 109A, and Sec 391 to
---------------------- Sec 394 of the Companies Act will be applicable.
----------------------  Mergers are broadly classified into three categories:
---------------------- I) Horizontal mergers

202 Consumer Protection Act, 1986 and Competition Act, 2002

 II) Vertical mergers Notes
III) Conglomerate mergers
----------------------
 When a merged enterprise gains sufficient market power to enable it to
behave independently of market forces, such conduct results in ‘unilateral’ ----------------------
effect on competition.
----------------------
 The anti-competitive effect of a merger is termed ‘coordinated’ when it
facilitates collusive behaviour, either due to express agreement among ----------------------
competitors, as in cartels, or due to tacit coordination by competitors that
----------------------
have similar effects, irrespective of whether the coordination is legal or not.
 The provisions for regulation of combinations are encoded in Sec. 6 of ----------------------
the Competition Act. Sec. 6 is to be read with Sec. 30, 31, 43A, 44 and 45 ----------------------
of the Act which lays down procedures and penalty for contravening the
provisions of the Act relating to the regulations of combinations. ----------------------
 The Act lays down the factors, any one or all of which shall be taken into ----------------------
account by the Commission while defining the relevant product/ geographic
market as the case may be. ----------------------
●● The Act empowers the Commission to evaluate the effect of merger on ----------------------
competition in the relevant market in India based on a number of factors
(sub section (4) of section 20). ----------------------
●● The provisions mentioned in Sec 6, does not apply to the share subscription, ----------------------
or financial institution, foreign institutional investors, bank or venture
capital fund pursuant to any covenant of loan agreement or investment ----------------------
agreement, however public financial banks foreign institutional investors
or venture capital funds must file the information of acquisition within 7 ----------------------
days of such acquisition including details of control and consequences of ----------------------
default arising out of such loan agreement or investment agreement as the
case may be. ----------------------
●● Most of the expected anti-competitive effects of mergers can be remedied ----------------------
without holding back the merger itself.
●● Prohibition is considered only when remedies are either not available or ----------------------
not feasible. ----------------------
●● Remedies can be either structural or behavioural.
----------------------
●● Although behavioural remedy is preferable, its implementation is difficult.
----------------------
Keywords
----------------------
●● Merger: The combining of two or more companies, generally by offering ----------------------
the stockholders of one company securities in the acquiring company in
exchange for the surrender of their stock. ----------------------
●● Acquisition: A corporate action in which a company buys most, if not all,
----------------------
of the target company’s ownership stakes in order to assume control of
the target firm. Acquisitions are often made as part of a company’s growth ----------------------

Competition Laws and Regulation of Combinations 203

 Notes strategy whereby it is more beneficial to take over an existing firm’s
operations and niche compared to expanding on its own. Acquisitions
---------------------- are often paid in cash, the acquiring company’s stock or a combination
of both.
----------------------
●● Takeover: A corporate action where an acquiring company makes a bid
---------------------- for an acquiree. If the target company is publicly traded, the acquiring
company will make an offer for the outstanding shares.
----------------------
●● Structural Remedies: Structural remedies can involve the breaking of
---------------------- the company into two or more separate companies, either vertically by
product group, or horizontally by creating in effects that compete with
---------------------- each other and start with identical products.
---------------------- ●● Behavioural Remedies: Behavioural remedies seek to change aspects
of business conduct from what may be expected based on businesses’
---------------------- incentives and resources.
---------------------- ●● Unilateral Effect: “Unilateral effects” occur when two products supplied
by the merging parties are closer competitors than other available
---------------------- substitutes, with the result that a merger creates a profitable opportunity
to raise the price of one product because a high proportion of the lost sales
----------------------
will migrate to the other product rather than competing products. The
---------------------- concept can also be applied in “geographic space” (e.g. with retail outlets
in relatively close proximity).
----------------------
●● Coordinated Effect: Co-ordinated effect in a merger analysis happens
---------------------- when the firms have market power to coordinate among themselves
regarding the market forces like demand supply and price, etc.
----------------------

---------------------- Self-Assessment Questions

---------------------- 1. Explain the provisions of combination enshrined in the provisions of the
Competition Act.
----------------------
2. Elaborate in detail the theories for mergers.
----------------------
3. While applying combination provisions, relevant market plays a significant
---------------------- role. Comment.
4. Regulation of the combination is a crucial function of the Competition Act.
----------------------
Elaborate.
----------------------
Answers to Check your Progress
----------------------
Check your Progress 1
----------------------
Fill in the blanks.
----------------------
1. A Combination may be in the form of mergers, acquisition, takeover or
---------------------- amalgamation.

---------------------- 2. The anti-competitive effect of a merger is termed as coordinated effect.

204 Consumer Protection Act, 1986 and Competition Act, 2002

3. Horizontal, vertical and conglomerate are the three categories of mergers. Notes
Check your Progress 2
----------------------
Multiple Choice Single Response.
----------------------
1. Which of the following factors encourage companies to take over other
companies? ----------------------
i. Profit and wealth maximisation ----------------------
2. Forms of takeovers may be:
----------------------
iv. All of the above
----------------------
Check your Progress 3
Multiple Choice Single Response. ----------------------
1. Takeovers and acquisitions take place in response to environmental ----------------------
changes according to __________
----------------------
iv. None of the above
Check your Progress 4 ----------------------

State True or False. ----------------------

1. True ----------------------

----------------------
Suggested Reading
----------------------
1. http://www.cci.gov.in/images/media/Advocacy/Combinations2012.pdf
----------------------
2. http://www.competition-commission-india.nic.in/regulations/
Comments_Regulations/cii_Regulation_of_Combinations.pdf ----------------------

----------------------

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Competition Laws and Regulation of Combinations 205

 Notes

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206 Consumer Protection Act, 1986 and Competition Act, 2002

References

1. Consumer Protection Law & Practice by V.K. Agarwal

2. Law of Tort & Consumer Protection by R.K. Bangia
3. The Consumer Protection Act by Gurubax Singh
4. Consumer Protection Act by O.P. Tiwari
5. Consumer Protection Law and Practices by Dr. V.K. Agarwal
6. Handbook of Consumers Rights, Problems and Remedies by D.S. Mehta
7. Digest of Consumer Cases by Hon’ble Mr. Justice S.N. Phukan
8. Consumer Protection Act by Avtar Singh
9. Consumer Court cases by Hon’ble Mr. Justice S.N. Phukan
10. Commentary on the Consumer Protection Act, By Y.V. Rao
11. The Law of Consumer Protection by Avtar Singh
12. Law of Consumer Protection, by Gurubax Singh, Bharat Law Publication
13. Medico Legal Aid to Hospitals & Doctors with Consumer Protection Law
by M.S. Pandit & Shobha Pandit
14. Medical Negligence & Legal Remedies by Anoop Kaushal
15. Supreme Court and National Commission on Consumer Court Cases by
Hon’ble Mr. Justice S.N. Phukan (In 5 Volumes)
16. The Bare Act of Consumer Protection Act with Model Forms
17. M.P. Jain, The Constitution of India, Nagpur
18. Dr. Pandey, The Constitutional Law of India

References 207
 Notes Websites
1. www.competition/commission.
----------------------
2. www.india.nic.in.
---------------------- 3. www.CCI.net.
---------------------- 4. www.wikipedia.co.m
---------------------- 5. www.iimahm.ernet.
6. surabhi@legalserviceindia.com
----------------------
7. http://articles.manupatra.com/PopOpenArticle.aspx?ID=ebaae57c-b2aa-
---------------------- 43b7-af9f-ac02df0a35b2&txtsearch=
---------------------- 8. h t t p : / / w w w. t a x m a n a g e m e n t i n d i a . c o m / v i s i t o r / d e t a i l _ a r t i c l e .
asp?ArticleID=1096
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208 Consumer Protection Act, 1986 and Competition Act, 2002