How unintended judicial interpretations clogged consumer courts

Poor draftsmanship of a law can lead to unintended consequences and even judicial interpretations contrary to the legislative intent

Poor draftsmanship of a law can lead to unintended consequences and even judicial interpretations contrary to the legislative intent. The Consumer Protection Act is a good example.

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When the law was first drafted and notified in 1986, the legislative intent was clear -- the consumer courts were meant only for individual consumers who had grievances against manufacturers and service providers and not for businesses to settle their disputes with other businesses. Yet, till date, the law has failed to stop large businesses from invoking the jurisdiction of the consumer courts. Many of these cases involve large sums, elaborate hearings and are a drain on the meagre financial and infrastructural resources of the consumer courts.

The Consumer Protection Act, 1986, defined a consumer as a person who buys any goods or hires any service for a “consideration” . And in order to keep out trade and industry from using the consumer justice system, the definition clarified that those who bought goods for “re-sale or commercial purpose” were not consumers under the law.

However, usage of the words “commercial purpose” had an unintended consequence. It denied the right of redress to even individual consumers who bought goods, like a photocopying machine, or a sewing machine or a computer to earn a living through self-employment. So through an amendment in 1993, a small window was opened to allow such consumers to seek compensation for defective goods. This of course has led to courts having to constantly look at who qualifies for the exception, but that is a minor problem.

The biggest faux pas however was the failure of the law makers to draw a distinction between services hired for personal use and for commercial purpose, as was done in the case of goods. This resulted in large corporations making a beeline for consumer courts to settle their high value disputes with power supply undertakings, transporters, couriers, insurers, bankers and such other services.

This obviously was a misuse of the inexpensive and easy access to justice provided to consumers under the law and finally in 2002, the definition of “consumer” in respect of services was amended to exclude those who availed of any service for commercial purpose. While doing so, here too the legislature provided for those who hired services for earning a living through self- employment.

This stopped large commercial enterprises in their tracks, but only temporarily. Following the 2002 amendment to the law, the Gujarat State Consumer Disputes Redressal Commission dismissed three complaints filed by commercial establishments against insurance companies saying that they were barred under the law.

However, the National Consumer Disputes Redressal Commission stepped in. The apex consumer court’s view was that the definition of “consumer” did not prevent businesses from using the consumer courts to settle their claims with insurance companies. The law no doubt barred those who hired or availed services for any commercial purpose, but to come under the definition of “commercial purpose” the service should have an element of profit. Since an insurance policy is taken only to cover losses and not to generate profits, insurance services would not come under the definition of services hired for “commercial purpose” (M/s Harsolia Motors vs M/s National Insurance Company, 2004), the Commission said. So large commercial establishments continue to use the consumer courts to settle their quarrels with insurers.

Meanwhile, unlike the 1986 law, the Consumer Protection Act of 2019 does not give the right of redress to those who may have a grievance against a service provider hired for commercial purpose, even if it is for earning a living through self-employment. But the ambiguity vis-à-vis “commercial purpose” remains . So there is an urgent need for the union ministry of consumer affairs to step in and plug the loophole in the law.

What justice Suhas C Sen, then president of the National Commission, said in 2000 is relevant even now. While dismissing a case filed by Bombay Dyeing and Manufacturing Company against Union Bank of India, Justice Sen said, “There is no reason why the big companies should abandon the remedy provided by the civil court and seek justice from the consumer court by-passing the civil courts altogether. This will have the effect of clogging the wheels of justice in the consumer courts and common people are subjected to unreasonable delay in getting their cases heard.”