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Home / India News / Class-action suits, mediation set to give teeth to consumer laws

Class-action suits, mediation set to give teeth to consumer laws

Class-action suits, a legal tool widely used in western consumer markets such as the US, enable one individual complaint of a faulty product or service to be treated as an “interest group” of other people in similar circumstances.

india Updated: Feb 25, 2020 05:46 IST
Zia Haq
Zia Haq
Hindustan Times, New Delhi
Pedestrians and shoppers walk past stores near Crawford market at night in Mumbai.
Pedestrians and shoppers walk past stores near Crawford market at night in Mumbai.(Bloomberg)

By April, consumers in India will be able to initiate class-action lawsuits and also opt for mediation under the new Consumer Protection Act 2019, which gives legal teeth to claims for damages over defective products or poor services.

These are among the two key new measures included in the amended law —cleared by Parliament in August — for which rules are being now framed, to bring consumer protection measures in line with a rapidly evolving marketplace.

Class-action suits, a legal tool widely used in western consumer markets such as the US, enable one individual complaint of a faulty product or service to be treated as an “interest group” of other people in similar circumstances.

This type of legal suit can be invoked to recall an entire batch of faulty products based on a single complaint. If one lot of a consumer item, such as mobile phones or cars, has a common defect, a single complaint can trigger the recall through “class action”.

The Ram Vilas Paswan-headed Union consumer affairs ministry is in the process of finalising an apex investigative authority under an agency called the Central Consumer Protection Authority (CPPA), which will take up class action suits exclusively.

“The agency will start functioning in first week of April. Most of the set up is almost ready,” said a government official who asked not to be named.

The Indian market has seen mass product recalls of faulty products earlier, but such cases have been voluntary rather than a legal necessity under consumer rights. For instance, in April 2017, Toyota Kirloskar Motor announced it was recalling 23,157 units of its sedan Corolla Altis in India, as part of the then ongoing recall of 2.9 million vehicles globally, for defective air bags.

“A faulty medicine causing damage to a large section of people is a fit case for class-action suits. Instead of multiple of claims coming to court, a single case can be a more efficient way of dealing with the problem,” said Sriram Panchu, a Chennai-based lawyer, who specialises in mediation.

According to Panchu, the much-needed provision of mediation under the new law is fit for cases where damages are payable in monetary terms. It can cut prolonged legal battles, he said.

The new law overrides the older Consumer Protection Act 1986, which provided for national consumer dispute redressal courts and commissions. Previously, consumers had to approach such platforms, but there were no clear rules on product recalls, a legal meaning of product liability, which confers post-purchase obligations for a product-maker, as well as rules for mass recalls. Moreover, lack of any provision for mediation meant long-drawn court battles were the only recourse for dispute settlement.

According to the new law, the consumer protection authority has powers to first initiate class action and then enforce recall, refund and return of products. If such mass defects are proven, the manufacturer’s liability and onus of product recall – whereby the maker replaces or fixes the fault – have also been defined in the new law.

At the state level, district collectors have been empowered to probe complaints that affect the interests of consumers as a class.

The new law additionally defines “unfair contract” between a manufacturer or trader or service provider on the one hand and a consumer on the other. Legal recourse will now be available in such cases where an “unfair contract” causes “significant change” in the rights of a consumer. These include a manifestly excessive security deposit or a penalty to be paid to a manufacturer or a service provider which is disproportionate to the losses caused.

“The new law expands the scope of consumer protection by introducing two new concepts, namely product liability and product recall. Moreover, it defines the consumer and manufacturer for the first time. It also covers online transactions,” said Maurice Fernandez of the Bangalore-based Citizens’ Collective for a Safer Marketplace.

“We had a fruitful meeting with the consumer affairs minister Ram Vilas Paswan on various aspects of implementing the new Consumer Protection Act 2019 earlier this month,” said Rajendra Singh of the All-India PET Products Manufacturers’ Association.

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