25. Consumer Protection – Business Environment



This chapter discusses why the consumer is an important stakeholder for business and examines various aspects of consumer protection, the Consumer Protection Act 1986, and finally the three-tier consumer dispute redressal system available in India. After reading this chapter, you will understand and appreciate its nuances and relate it to every real-life development in that context and perspective.

In economics, the term consumer refers to any person, firm, Hindu undivided family, cooperative, or association that buys or hires (fully/partly paid for) goods or services for non-commercial purposes except self-employment. Anyone using a service that is either free or under a contract of personal service cannot be called a consumer. Economic literature dubs the consumer as the king who decides through the market forces the quality and quantity of goods produced. Consumer protection refers to the steps necessary to be taken or measures required to be accepted to protect consumers from business malpractices. It may be regarded as a movement like consumerism. This is necessary primarily because businessmen aim at maximizing profits and this is often done at the expense of consumers.

On 15 March, 1962, President John F. Kennedy declared before the US Congress the four rights of consumers—rights to satisfaction of basic needs, right to safety, right to be informed and right to choose. Since then, 15 March is celebrated as the World Consumer Rights Day every year. In 1983, the United Nations Secretary General submitted draft guidelines for consumer protection to the Economic and Social Council. Based on it, the Council recommended that the world governments develop, strengthen and implement a coherent consumer protection policy, taking into consideration the guidelines set out therein. A 1998 UN report, stresses that consumer rights must be “defended through (i) strict standards for consumer safety and health; (ii) product labelling about the content and proper use of products and their environmental and social impact; (iii) information and awareness campaigns about potential hazard, such as smoking and the improper use of feeding formula for infants”.1

Over the years, consumer protection has assumed great importance to civil society. For effective consumer protection, it is essential that the three parties—consumers, businessmen and government—which have vested interests in ensuring the consumer protection must be involved.

  1. Role of consumers: Consumers should, as far as possible, take care of their own interest and protect themselves from market malpractices. They should not depend on the good sense of businessmen. This is possible only if they are aware of their rights. Consumers have right to education and also right to be heard. They should attend training programmes for consumers arranged by local consumer associations or by their own association and invite consumer activists to speak to them on consumer rights and remedies available under the law to protect them.
  2. Role of businessmen: Producers, distributors, dealers, wholesalers as well as retailers should pay due attention to consumer rights by ensuring supply of quality goods and services at reasonable prices. To prevent unfair practices, associations of traders, chambers of commerce and industry, and manufacturers’ associations should entertain consumer complaints against their members and take proper action against those guilty of malpractices.
  3. Role of government: Consumer protection is the responsibility of governments in the interest of society. Enforcement of various laws and amending existing laws to protect consumer interests are required to be taken up in the light of recommendations of consumer associations. Representations of consumer groups should also be associated with the policy-making bodies set up by governments both at the centre and the states. A number of consumer protection measures have been taken by the Indian Government from time to time.

The word consumer is used to describe a customer who buys for personal use and not for business purposes. Although the subject is comparatively new, its roots are old. The explosion of interest in consumer matters is very much a creature of the second half of the twentieth century. The reason for this tremendous upsurge of activity is twofold—a combination of new business methods and changing attitudes. The key factors on business methods are to be found in the complexity of the goods themselves and in the changing forms of advertising and distribution. The second half of the twentieth century has seen a growing tendency for manufacturers to appeal directly to the public by forceful national advertising and other promotional methods, further influence during the same period has been the development of a huge market, for extremely complex mechanical and electrical goods in many parts of the world. The need for what is called consumer protection has become far greater because the consumer is no longer in a position to rely on his own judgement when buying a complex product like, say, a computer. The second motivating force is the general move from individualism to collectivism.

The genesis of consumer movement can be traced to the consumer-related awareness that emerged in the United States all through the first half of the twentieth century. The 1920s witnessed serious efforts being made to reduce the exaggerated claims of advertisers of goods and services and demands made for impartial testing of goods. A testing service was established in the United States and it was so popular that it formed the basis for the present Consumers’ Union. The 1930s witnessed the growth of consumer cooperatives, the first federal consumer agency, Food and Drug Administration, demands for labelling of products and the introduction of USDA stamps. The 1940s ushered in 150 local consumer councils across the United States which eventually drew together to form the National Association of Consumers. During the 1950s, The American Council of Consumer Interests was established by 750 members from universities, schools and consumer research organizations.

President Kennedy facilitated the formation of a permanent consumer agency in the Federal Government by establishing the Consumer Advisory Council. He stressed: “Additional legislation and administrative action is required if the Federal Government is to meet its responsibility to consumers in the exercise of their rights-these rights include: the right to safety, the right to be informed, the right to choose, and the right to be heard.”

The 1960s witnessed the formation of the Consumer Federation of America which is a leading consumer protection organization today. It was during this period that Ralph Nader arrived on the scene and popularized the cause of consumer protection. The 1970s saw a flourishing of private consumer protection agencies and councils. Such action prompted President Jimmy Carter to issue an executive order as a prelude to the establishment of a permanent federal consumer agency which is now known as the US Office of Consumer Affairs.

It was Ralph Nader who coined the term consumer advocate. Before Nader's book, Unsafe at Any Speed (1965), car dashboards were usually made of metal. Seat belts were expensive and one had to bolt them to the car's floorboards. Even at low speeds, a car could easily crash. In addition to increasing the accountability of carmakers to the American people, Nader's relentless work has improved the quality of life for Americans in areas as diverse as the environment, health care, insurance, pension and disability rights. He is also the founder of numerous non-profit organizations which carry out this important work. Nader's other great accomplishment concerns the education of America's consumers. Through his efforts over the past half a century, consumers now understand their own power as social activists to make change through collective action.

Thanks to the pioneering efforts of people such as Ralph Nader, the Judiciary of the United States has been a long way ahead of many countries in recognizing and dealing with consumer problems. In particular, the American Courts have increased through their proactive judicial pronouncements the manufacturer's liability in two respects: (i) by moving from negligence liability to strict liability and (ii) by breaking the shackles of the private contract rule. The subject of consumer protection is very much alive in other Western countries.

As we have seen, the consumer has been at the receiving end in most countries of the world, especially in developing nations like India. On account of such exploitation, a strong public opinion has been built over the past five decades demanding protection to consumers. Consumer protection is possible only if adequate and appropriate cooperation is forthcoming from the three concerned parties—consumers, business and the government. Consumers should assert their rights which include: (i) The right to safety; (ii) The right to be informed; (iii) The right to choose; (iv) The right to be heard; (v) The right to seek redressal and (vi) The right to consumer education. They should accept consumerism and should succeed in making government and business more responsive to their rights. Consumerism should be effectively used to make business honest, efficient, responsible and responsive; and stimulate the government to adopt the required measures towards consumer protection and guarantee their legitimate rights.

Consumer protection can be achieved by producers and traders adopting discipline and self-regulation; NGOs and voluntary organizations of consumers acting in concert to safeguard the interests of consumers; by spreading information and awareness about different products and services; and through government legislation to prevent unethical practices of manufacturers and traders.


In providing protection to consumers, governments have a major role and responsibility to play so that they are not misguided, duped, cheated and exploited. Besides the general public, there are certain vulnerable sections of society such as the poor, the aged and the sick who need the special care, concern and protection from the governments from being exploited. As per the Guidelines for Consumer Protection by the United Nations: “The governmental role in consumer protection is vital and finds expression through policy-making, legislation and development of institutional capacity for its enforcement. To provide a legal basis for enforcing basic consumer rights, every country needs to have an irreducible minimum of consumer protection legislation, covering physical safety, promotion and protection of consumers’ economic interests, standards for the safety and quality of goods and services, distribution facilities, redress and education and information programmes. Governments also require the necessary machinery to enforce such legislation”.

In amplifying the role of the governments further, the UN Guidelines want them to set up distribution facilities for essential goods and services. To the required extent, the government is expected to take the following measures:

  1. It should adopt or maintain policies to ensure efficient distribution of goods and services to the public, especially to people living in rural communities and to the poor. Such needy-specific policies should include assistance for the creation of adequate warehousing and retail facilities in rural areas, provision of incentives for consumer self-help and better control of the supply of essential goods and services in such areas;
  2. It should encourage the setting up of consumer cooperatives and provision of information about them;
  3. It should establish legal and administrative measures to enable consumers or relevant organizations to get their grievances redressed fairly inexpensively and expeditiously through formal or informal procedures; and
  4. The state also should encourage businessmen to resolve all consumer disputes in a fair, fast and informal manner, “and to establish voluntary mechanisms including advisory services and informal complaints procedures, which can provide assistance to consumers. Information on available redress and other dispute—resolving procedures should be made available to consumers”.2 The Guidelines encourage governments to develop, strengthen and maintain a strong consumer protection policy. In so doing, each government must set its own priorities for the protection of consumers in accordance with its economic and social circumstances and the needs of its population.3

Consumer protection is not a one-way street. To enjoy protection, consumers have to exercise some responsibilities too. M. R. Pai of the Forum of Free-enterprise, Mumbai, in his booklet has listed a few responsibilities that the consumers are expected to bear.4

  1. Substantiate the complaint: When a consumer makes a complaint against the seller of the product, it should be specific and supported by appropriate evidence, such as bills, acknowledged copies of correspondence. Complaints should not be vague or unsubstantiated. The complainant must be genuine in his claims.
  2. Give a chance to the seller to explain his viewpoint: The consumer complainant should seek the opinion/viewpoint of the seller before lodging a complaint with appropriate authorities. It is likely in some cases that the explanation of the seller may convince the consumer that he has not considered the other side of the problem and to what extent remedy is available to him.
  3. Cooperate with the seller if needed: There could be situations when a consumer has to cooperate with the seller. For instance, if too many consumers vie with one another to get a product or service in short supply, the seller may want the buyers to come in a queue and take it on first-come-first-served basis. Moreover, buyers should not try to misuse their rights to exploit or embarrass the seller. They should give the first opportunity to redress their complaint to the seller himself; going to the consumer court should be the last resort.

    Likewise, there could be occasions when the seller himself may be helpless, as at times when the producer refuses to take back defective items from the seller. On such occasions, if the seller so desires, the consumer should join him in pressuring the producer to replace the defective item free of cost.

  4. Avoid inconvenience to others unconnected with the issue: Consumers, even while they assert their rights from sellers or producers of products or services, should not cause trouble or inconvenience to others. When they resort to dharna or such type of agitations, it should not cause problems to the public.
  5. Don't personalize issues: Consumers should make it a point to complain against the system that causes them problems, and not against individuals, who may be replaced by others who may be as helpless or useless as the former.

    We can add a few more responsibilities.

  6. Don't allow others to use you: Consumers should ensure that they fight for their own causes, and should not lend themselves to be used as pawns in games played by politicians or political parties.
  7. Be well informed before you complain: Consumers should try to be well informed, as far as possible, about the issue of their complaint. They must read and understand the terms of sale before buying goods, especially before lodging complaints. It is often found that people sign forms where they may surrender their rights of appeal by accepting certain clauses in fine prints in a hurry or for want of knowledge or out of sheer carelessness. This will make them ineligible to claim their rights. For instance, most of the medical insurance policies would provide reimbursement only if the patient is admitted into a hospital at least for a day for treatment of their ailments. Consumers not aware of this clause waste their time and the insurers’ in wasteful litigation.
  8. Understand how to get your grievances redressed: Consumers should have, to the best of their ability and understanding, a clear knowledge as to whom they should approach for redressal of their grievances. Instead of going to civil courts for ordinary issues such as poor quality of goods or the producer not keeping his promise of guarantee, the consumer should approach the dealers directly or if they are quality certified, the certifying authority for redressal. This would avoid wastage of time, efforts and resources on both sides.
  9. Avoid impulsive buying: Consumers should plan their purchases, devote some time to select the product or service that would satisfy their wants, survey the market, gain knowledge about alternatives, have an idea of quality and price, and then make purchase decision. They should avoid impulsive buying. Moreover, one may seek the opinion of friends, relatives, neighbours, sellers, information gleaned from advertisements, etc., but the decision should be their own.
  10. Buy goods from authorized agents: As far as possible, one should buy goods or services from genuine authorized agents, after paying due taxes and obtaining bills and receipts. If one tries to avoid sales tax and does not insist on a receipt, it may be a case of “penny-wise and pound-foolish” later on if one wants to lodge a complaint with courts or other government agencies.
  11. Other duties and responsibilities: No consumer should make frivolous complaints. He should avoid rumour-mongering to spite any seller for personal reasons. A consumer should avoid causing damages to the seller's business even if he has a genuine grievance against him over his purchase. Yelling at the seller in front of other customers so as to cause him embarrassment or loss of business is not only bad manners, but also will jeopardize the chances of getting one's grievances redressed. In case he comes across spurious or substandard products or someone charging exorbitant prices, he should caution others against such malpractices of a seller. Consumers should take it as their moral responsibility not to pollute the environment while disposing waste materials. It is important that consumers behave in a responsible manner before they point out an accusing finger against sellers of products and services. Most of the time they are found not only to be ignorant and unbalanced in their approaches, but also greedy and avaricious. Millions of depositors who were lured by abnormally high rates of interest offered by non-banking finance companies lost more than INR 500 billion in the 1990s. Even today, thousands of people get cheated by fly-by-night operators who offer to give them double the value of money in terms of consumer durable items like TV sets if they deposited the money in advance. As the saying goes “as long as there are persons willing to be cheated, there will be persons who will be ready to cheat them”!

It is desirable for consumers to be aware of their rights, and to exercise those rights responsibly and intelligently. In these days of audio-visual publicity on the private and public media, it is indeed very difficult, if not impossible, to verify the exaggerated or false claims made by producers, manufacturers, distributors and dealers of various goods and services. The all-pervasive, exaggerated and often false claims, made for services and goods, emphasize the imperative need for Consumer Protection legislation and creation of awareness about it among the general public.

In this connection, there are a number of enactments in India such as the Prevention of Food Adulteration Act 1954, the Essential Commodities Act 1955, the Drugs and Magic (Objectionable Advertisement) Act 1964, the Monopolies and Restrictive Trade Practices Act 1969, the Hire Purchase Act 1972, The Standards Weight and Measures Act 1976 etc. However, the remedies prescribed there under are time-consuming, inadequate and expensive. As in other areas of judicial processes, the offenders are hardly caught, proceeded against and rarely, if ever, get convicted. When violators go scot-free, the victims have no remedy and get frustrated.


India has one of the largest number of consumers in the world, perhaps next only to China. With more than 1150 million people and almost 20 per cent of them constituting the middle-income group having considerable quantum of disposable income, a still larger population having sizeable pent-up demand and the second fastest growing economy in the world, India offers a very attractive market both for consumers and to those who are eager to cater to their ever-increasing demands. However, this large body of consumers suffers from a number and variety of disabilities. Most of these millions of consumers who lay scattered through the length and breadth of the sub-continent are illiterate and unorganized. Almost 65 per cent of them live in rural and semi-urban areas with poor infrastructure, especially communication facilities. As opposed to these disadvantaged consumers, the suppliers of goods and services, both produces and distributors, are better organized. They are resourceful in every meaning of the term and adopt deceptive and dubious means to deceive and exploit consumers in a number of ways. The following are the most common unethical means through which they cheat consumers.

  1. Exorbitant prices of products and services: Producers fix prices of products far higher than the cost of production including normal profit. Often the prices of some essential commodities are so high that most of the people cannot simply afford them. Some of the life-saving drugs are so costly that the poor and sickly patients who need them most cannot buy them. Producers of these medicines keep charging increasingly high prices with the passage of time. There have been instances where higher prices are marked for the medicines of the same batch, but of different lots. High price, of course, cannot be equated with superior quality. The prices of products in India may appear to be lower as compared to the prices abroad, but if we correspond them with the average Indian incomes, they are very high.
  2. Deceptive selling practices: The Indian consumer, illiterate and ill-informed as he is, is probably the most gullible and deceived of all consumers in the world. He is easily duped by producers. Since most consumers hunt for bargain prices, producers offer “hefty” discounts of say, 50 per cent after hiking the prices by almost 100 per cent. They advertise prominently “Discount from 5% up to 50%” and invariably it will be the lowest percentage discount for the shop-soiled items. Besides, they wriggle out of their publicized obligations by saying that they have placed a legend “Conditions Apply”. But this legend is printed so small that no prospective buyer would have noticed. This dubious practice is followed not only by private sector companies, but also by public sector enterprises. Moreover, since most Indian consumers are ardent users of imported products, they are charged huge prices for them, even though they are of inferior quality. Another side of the story is that many locally manufactured goods are palmed off as imported ones to the gullible buyers and charged very high prices. It is a common knowledge that there is an entire township near Mumbai where hundreds of units produce goods labelled “Made in USA” where “USA” refers to Ulhasnagar Sindhi Association!
  3. False and misleading advertisements to lure unwary customers : In India, many companies resort to false and unethical advertising practices. Many a herbal product is advertised as if it is a cure for all kinds of ailments. There are false and misleading representations that goods and services are of a particular standard, quality, grade, composition, style or mode, when they are not. Passing off rebuilt, second-hand, renovated, reconditioned or old goods as new; claiming that goods or services have sponsorships, approval, performance, characteristics, accessories, uses or benefits; representing that the seller or the supplier has a sponsorship, approval or affiliation; misrepresenting the necessity or usefulness of goods or services—all these are common practices to lure the unwary customer. Many companies provide false warranties/guarantees on the performance, efficiency or the lifetime of products with no intent to honour them. Further, they make misleading promises to replace, maintain or repair an article or any part thereof, to repeat or continue a service until it has achieved a specified result. Such form of purported warranty or guarantee or purpose is materially misleading or there is no reasonable prospect that it will be carried out; misleading representation to the public concerning the price at which a product or like-products or goods have been, or are ordinarily sold; and making false or misleading representation of facts, disparaging the goods, services or trade of competitors. For instance, a pharmaceutical company advertised that use of its paracetamol tablet did not have any side effects like aspirin, but it suppressed the experts’ report that the use of any paracetamol had an adverse effect on the liver.

    A company announced in its advertisement that it was manufacturing 150 cc scooters in technical collaboration with a foreign company, although no such collaboration had been entered into. In another case, a company used the trademark of a well-known company “Philips” in its advertisement for TV sets. On enquiry it was found that the company did not have the necessary permission from Philips for the use of its trademark on TV sets. It was a case of misrepresentation of facts although that company was authorized to use the trademark “Philips” on its audio products (radio sets) only. Such unethical practices are being followed in varying degrees in the country leaving the unsuspecting consumer at the mercy of such unscrupulous suppliers.

  4. Reduction in quality for the same and even higher prices: There are producers who lower the quality of the product they offer to consumers without disclosing it to them, even though they charge the same or higher prices. They may use low-quality inputs or use material inputs of lower specifications than advertised as in computers and in electrical and electronic products. They take advantage of the buyers’ ignorance or the inability of the enforcing authorities to detect such unethical practices and penalize them.
  5. Sale of hazardous products to ignorant consumers: The Indian market is full of products which are hazardous to the health, life and property of the consumers, without their knowledge. In cases of liquor, drugs and cigarettes, most consumers know the side effects of consuming these through public awareness campaigns and by reading about the consequences of consuming such products. But there are other products such as floor cleaning acids and some so-called health care products that could, if used wrongly, could create health problems. Many controversies have arisen both in India and abroad about several herbal products of excessive claims of their curative value and also their containing bone powder and metals that can endanger health of users. It is also said that self-medication or wrong use of medical products could cause a lot of health problems. In all these cases, the problem of choice becomes complex because producers do not caution prospective consumers of wrong uses or excess dosage.
  6. Suppression of material information about products: Unlike in Western countries where manufacturers are legally required to provide material information about the quality and constituents of the products they market and are enforced strictly by public authorities, this consumer-friendly practice is not followed in India. Not only this, producers in the country suppress material information about the quality, purity, standard or performance of the product. For instance, consumers of jewellery in the country lose billions of rupees every year when they buy gold ornaments. The World Gold Council's benchmarks are rarely followed by jewellers, and they sell 18 or 20 carats gold as 22 carats and cheat their customers a lot of money. This is done in cases of several other products and services as well.
  7. False product differentiation: Many producers, who offer to sell superior products, tend to sell inferior substitutes. Whether it is in food products like ghee or in high-tech products such as computers, they do not deliver what they promise but deliver products of an inferior variety or of lesser quality and specifications. Even in several edible oils, there is hardly any product differentiation and consumers end up paying higher prices for oils that are of inferior quality to the ones they pay for.
  8. Producers'/sellers’ collusion to lessen competition and consumer benefits: Consumers in a free market economy reap maximum benefits in the market place such as better quality products, cheaper prices and wider variety of products to choose from. Producers, on the other hand, tend to lose compared to an imperfect competitive market because of intense and fierce competition. So, it is natural that they try to act in restraint of competition through producer or trader collusion. This not only reduces the product choices to the consumer, but he also ends up paying higher prices for poor quality products. It is a well publicized fact that cement consumers in Tamil Nadu pay as much as INR 50–70 more per bag of cement compared to other states due to cartelization of cement manufacturers in the state.
  9. Supply of adulterated and substandard products: It is a well-known fact that in India petrol is adulterated with kerosene, cement with inferior coal ash, dal and grams with coloured mud and so on. It is very rare to find any pricey consumer product in its pure form or as advertised by the producer. Hardware products are invariably spurious and substandard. Even food articles such as edible oil, milk and fruit juices are adulterated in varying degrees. Indian consumers lose billions of rupees not only for paying normal prices for adulterated products but also for medical treatment after falling sick due to consumption of such food articles. The Centre for Consumer Education Research Testing and Training (CONCERT) estimates that, at the national level, 40 per cent of petroleum products are adulterated that costs consumers as much as INR 400 billion in terms of the overall loss.5
  10. Cheating consumers by giving lesser quantity for the price: Various estimates suggest that Indian consumers pay more than 500 billion every year for quantities of products they do not get. Use of false weights and measures is commonplace throughout the country. Whether it is in ordinary provision stores, or public distribution systems or public modes of transport, customers are fleeced through false weights, improperly calibrated metres and the like. Though the departments like civil supplies, police, etc. are equipped with the power to penalize the offenders, it is an open secret that it is never done, unless, of course, the babus want to fleece the fleecers!
  11. Unhonoured guarantees and warranties: Indian manufacturers and sellers are notorious for not honouring their guarantees and warranties for their products. Every Indian user of 300 billion durable consumer products would have experienced the agony of making the seller of products live up to the promises they made at the time of selling the products. They give some reason or the other to evade their responsibility to their customers. For instance, even if a new refrigerator or washing machine breaks down due to the failure of a component, the sellers refuse to replace them saying that these are “perishable items” and not covered under the warranty. Unfortunately, such unsavoury practices are followed not only by new or lesser known producers, but also by famous and well-established companies including MNCs. The very same MNCs which scrupulously stick to the terms of guaranties in Western countries resort to duplicity and deception when dealing with Indian consumers. It is common knowledge that the cola companies have double standards when it comes to the quality of water used in their products.
  12. Poor redressal of customers’ genuine grievances: It is not rare to find producers and sellers refusing to address the genuine grievances of customers once they sell their products and receive the payments. They try to put the blame on the customers as if they have wrongly used the products. Frontline newspapers carry dozens of letters written by affected and unhappy users of products venting their grievances through the public forum for want of sympathetic hearing by the sellers. These days Consumer Courts and Redressal Forums penalize producers of products and service providers almost daily for deficiency of services by them.
  13. Creating a scare out of scarcity: It is a normal situation in the Indian consumer market for sellers of many essential products to create artificial scarcity by hoarding or withholding supplies with a view to forcing buyers pay premium on the prices of their products. Prior to the adoption of the New Economic Policy in 1991, this practice was a routine affair. Companies used to corner licenses in benami names to pre-empt new players, but would not produce the licensed capacity and canvas with the government not to import those goods in shortage in the name of level playing field. This would cerate a scarcity, and would be an ideal ground for them to demand a premium for the scarce products. If it was a controlled product such as cement, iron or coal, there would be a flourishing black market and generation of lots of black money, all at the cost of poor consumer.
  14. Making consumer buy goods they don't need: Producers of goods, taking advantage of consumers’ ignorance and the influence of the electronic media on their minds, manipulate the situation to make them buy new products they don't need. For instance, media advertisements on stain removers on clothes are totally manipulated to make consumers buy them in addition to detergents. They show on TV with excellent visuals how stains instantly vanish once you dip them into the liquid stain remover and then launder the clothes. They use either new or pre-washed clothes to show immaculately clean clothes to convince the viewers. Many new consumers are attracted to buy the costly product and repent at leisure.
  15. Misleading representation about the utility of a product: Many producers take advantage of the ignorance of ordinary consumers and the lax implementation of consumer protection laws, and dupe consumers about the need and utility of their products. For instance, producers of an herbal oil in Tamil Nadu claim that their product offers a panacea for obese, bald-headed, arthritis-suffering and pot-bellied folks. They also show a certificate from a university research cell that it has proven medicinal value. People hardly ask themselves how one product could cure such diverse ailments. When such products are advertised on TV with appealing visuals and earful jingles, people immediately rush to buy those products. Many goods and services we use today are not so essential for our lives that we have bought them, but because producers have advertised them so attractively and convincingly that most of us have been tempted to buy them and use them for whatever they worth. A modern salesman is equipped with such advertising gimmicks that he can easily sell refrigerators to Eskimos!
  16. Manipulating conditions of delivery: Delivery of many products is not a straightforward affair. Several conditions are attached to them which enhance the costs and cause inconvenience to the consumers. An advertisement for air-conditioners cunningly advises prospective customers to book their requirements immediately, pay an advance, and take delivery 3 months thereafter. In small prints it is also mentioned that a substantial amount of delivery charge will have to be added to the final payment. If one works out the total cost, it will be more than what a customer has to pay for air-conditioners available off the shelves. The advertisement is simply to lure the customers to place orders so that the company knows the exact future demand to enable them to work out their production schedule. Another ruse followed by sellers these days is to offer unbelievable “added ones” as a sales gimmick and place a small asterisk, and in a still smaller footnote mention “Conditions Apply” to fool both the prospective consumers and the enforcing authorities. Those conditions, of course, are invitations to get fleeced!
  17. Customers are made to pay for numerous intermediaries: The Indian marketing system is such that in most cases there is a long chain of intermediaries—middlemen, dealers and distributors—who add their own operating costs and profits which have to be borne by the customers. The system neither benefits producers, nor the ultimate consumers. It only adds to the cost of distribution, which is to be paid by the consumers. For instance, it is said that a basket of onions containing 16½ kg are sold by farmers at as low a price of INR 10/- or less at Nashik in Maharashtra whenever there is an abundance of crop, whereas a kilo of onion is sold for more than INR 10/- in cities like Chennai or Bangalore. Even if we add the cost of transportation and other selling costs, it is incomprehensible as to why a consumer has to pay such bloated price for many of the essential products including food grains, vegetables and fruits.
  18. Benefits of drop in prices are never passed on to consumers: In one of the unexplainable situations in the Indian market place, whenever there is a rise in the wholesale prices of goods due to drop in production or natural calamities, consumers are charged higher prices immediately, as in cases of fruits and onions which touched a peak of INR 60/- a kilo due to scarcity in the early 1990s. However, when there is a bumper crop and supply exceeds demand by a large margin, retail prices rarely come down, if at all. The consumer hardly seems to get any benefit out of the bounty of nature.
  19. Consumers are rushed into buying goods they cannot afford: In recent years, a psychological third-degree method is being used by producers with surplus stocks, dealers who want to make more money, advertising agencies with alluring captions and bankers with surplus liquidity. They join together and organize “melas” and “mega exhibitions” to lure gullible and often undecided customers. They are tempted with attractive gifts, easy credit and glib sales talk of the event being an once in a life time opportunity that will never come again. They are never given an opportunity to think about their repayment capability and rushed into the purchase of amenities and appurtenances of life. Having bought goods on instalments, many consumers find it difficult to meet their commitments. Bankers who confiscate thousands of vehicles from owners who could not pay their instalments, and sometimes even sending thugs to collect their dues, are increasing in number every year.
  20. Heavy advertisement cost passed on to consumer: Some producers advertise their products heavily time and again in electronic and other media to create an impression that their product is a popular one. However, the heavy cost of advertisement is stealthily passed on to the consumer making him pay a heavy price without any quid-pro quo.
  21. Counterfeits constitute substantial quantity of goods in store shelves: India is known to have a large amount of counterfeit currency, especially of high denominations, circulating side by side with legal tender currency. Likewise, counterfeit goods also are being mixed with genuine products and sold to unsuspecting consumers. The odds of a customer picking up a counterfeit vary depending on what one buys. If it is stationery, the likelihood is one in two. If it is liquor, it is even higher. There is hardly any industry that is untouched by the scourge of counterfeiting. Data complied by Enforcers of Intellectual Property Rights (EIPR) shows “that the maximum counterfeiting occurs in the computer peripherals and accessories industry, followed by auto parts and components with FMCGs coming a close third.”6 EIPR has been now witnessing an emerging area, namely, international brands of lifestyle products where counterfeiting is rampant. “With large international luxury brands entering in the Indian market, people are suddenly becoming brand conscious and they want to possess the brand, but they don't want to pay the heavy price.”7 So they are supplied with look-alikes of foreign brands such as bags, sun-glasses, wallets, perfumes and the like. The problem is that many genuine consumers willing to pay the real price are also given these cheap imitations if they are not discerning enough.

    A more telling statistical data was provided at a seminar on counterfeiting and pass-offs held on 1 August, 2006 in Bombay. The seminar was organized by the Brand Protection Committee of the Federation of Indian Chambers of Commerce and Industry (FICCI). The following details were revealed at the seminar. A study conducted by A. C. Nielsen shows that the government loses INR 9 billion annually from counterfeiting in the fast moving consumer goods (FMCG) sector alone. Also, nearly INR 40 billion of spurious drugs are sold every year, ten per cent of major soft drink brands sold are spurious, 10–30 per cent of cosmetics, toiletries and packaged foods are counterfeit and the revenue loss to industry as a result is around INR 100 billion annually. Counterfeiting takes place on a massive scale in computer accessories, automobile parts and accessories and in the FMCG sector.

    “These three account for around 60 per cent of all counterfeit products in the country. A new trend that has been noticed is in counterfeit international luxury brands and also the surge in Chinese counterfeit products available here, largely on the back of the Chinese government cracking down on counterfeiters there.” (Ramesh Priyolker, MD, EIPR) Speaking at the seminar, Amitabh Chandra, Commissioner, Food and Drug Administration (FDA), said there were issues relating to punishing counterfeiters. “For prosecution, surprisingly it takes 15–20 years for a verdict, and the conviction is only around 5 per cent. The FDA on its part can suspend or cancel the licence of the counterfeiter.”

    The laws applicable are the Prevention of Food Adulteration Act and the Drugs and Cosmetics Act but these laws talk only about “misbranded” products or “spurious” products and not counterfeit products. Chandra suggested that FICCI should move to set up special courts, “since prosecution in these cases take unduly long”.

  22. Hoarding and black marketing: Hoarding and black marketing is another problem that consumers often face. When any essential commodity is not made available in the open market and stocks are intentionally held back by dealers, it is known as hoarding. Its purpose is to create an artificial scarcity in order to push up the prices. Black marketing is the practice of selling hoarded goods, secretly at a premium. These practices are sometimes adopted when there is a short supply of any product. Most of us have read in the newspapers sometime back about scarcity of onions in the open market in some states and the high prices charged by traders who had hoarded them.
  23. Tie-in-sales: Buyers of durable consumer goods are sometimes required to buy some other goods as a pre-condition to sale or may be required to pay after-sales service charges for one year in advance. There had been a lot of complaints by consumers about tying up of new gas connections with the sale of gas stoves (burners). Also TV sets are sometimes sold on the condition that the buyers make advance payment of a year's service charge.
  24. Offering gifts having no value: Offering gifts having no additional value or coupons to collect a gift on the next purchase of some product are practices aimed at alluring consumers to buy a product. Often gifts are offered after the price of the product on sale has been increased. Dealers also announce contests or lottery among buyers of a product without any intentions of awarding the prize.

Prices in India have been galloping over the past four decades causing severe hardships to consumers. It is true that deficit finance leading to increased supply of money to fund projects necessary for economic growth has been responsible for the inflationary spiral. But no less significant has been the role of producers of goods and services who have been charging very high prices without any reference to their cost of production. As pointed out earlier in cases of products like medicines, the prices charged are exorbitant. Another trick of the trade is to hike up prices and offer discounts to dupe the unsuspecting consumers. Cartelization to curtail competition, and heavy advertising, the cost of which is added to the cost of product, are other factors that adversely affect consumers. Low weighing and poor-quality products are other factors that rob consumers of their money's worth. The worst offence against Indian consumers is adulteration which is practised widely at several points in the supply chain, right from the manufacturer to the last seller. This unethical and often dangerous practice is found most in food and farm products. Small pebbles are added to bags of paddy, wheat, and grams. Dried and ground leaves are mixed with tea. Butter is mixed with coloured vanaspati, chilli powder with dust, spices with sand and saw dust. The worst offenders are producers and sellers of spurious drugs, who play havoc with the health and lives of innocent children and unsuspecting elders.


The need for and importance of consumer protection has been realized in India for a very long time. In fact, even during the British regime, a number of enactments such as the Sale of Goods Act (1930) and Agricultural Produce (Grading and Marketing) Act (1937) had been enacted. After Independence, the now-repealed Monopolies and Restrictive Trade Practices (MRTP) Act 1970 and Consumer Protection Act 1986 were two landmark legislations that were passed to protect the consumers.

Unlike in the Western countries where the functioning of a free-market economy offers only a limited scope for governments to interfere in favour of any one segment of society, in India the socialistic pattern of society we had adopted since Independence allowed the government to arm itself with a number of statutory weapons to control production, supply, distribution, price and quality of a large number of goods and services, apart from having the power to regulate the terms and conditions of sale, the nature of trade and commerce and so on.

Some of the important legislations enacted to protect the Indian consumers include the Sale of Goods Act 1930, Indian Patents and Designs Act, Agricultural Products (Grading and Marketing) Act 1937, the Drugs and Cosmetics Act 1940, Industries (Development and Regulation) Act (IDRA) 1951, Prevention of Food Adulteration Act 1954, the Drugs and Magical Remedies (Objectionable Advertisements) Act 1954, Essential Commodities Act 1955, the Essential Commodities Act 1955, Fruit Products Order 1955, Indian Standard Institute's Certification Act, Standard Weights and Measures Act 1956, Trade Marks and Merchandise Marks Act 1958, Monopolies and the Restrictive Trade Practices Act (MRTP Act) 1969, Hire-Purchase Act 1972, the Trading Stamps Act, the Cigarettes (Regulation, Production, Supply and Distribution) Act 1975, the Emblems and Names (Prevention of Improper Use) Act, and the Household Electrical Appliances (Quality Control) Order 1976, Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act 1980, Narcotic Drugs and Psychotropic Substances Act 1985 and Weights and Measures (Enforcement) Act 1985, Import and Exports Control Act, Packaged Commodities Order, Price and Stock Display Order, Consumer Protection Act 1986, The Food and Drugs Act, Bureau of Indian Standards Act 1986, and The Railway Claims Tribunal Act 1987.

However, most of the objectives of the above pieces of legislation overlap. The multiplicity of laws for trade regulation and consumer protection has caused confusion among consumers as to which one is applicable in their case, and in many cases it enables offenders to slip out of the maze of legislations. Notwithstanding or because of too many legislations, there has been a weak implementation as a result of which unfair and exploitative practices abound in the Indian market. “Lack of competition in a number of product areas, consumers’ illiteracy, consumer indifference towards products, weak consumer organizations and lack of consumerism in the country are among the major factors that further enable erosion of consumer rights by business firms”.8

A number of laws have been passed by the Government of India over the years to protect the interest of consumers. A brief outline of the objectives of some of the important laws is given below:

  1. Agricultural Products (Grading and Marketing) Act, 1937: This Act provides for grading and certifying quality standard of agricultural commodities which are allowed to be stamped with AGMARK seal of the Agricultural Marketing Department of the government.
  2. Industries (Development and Regulation) Act, 1951: This Act provides for control over production and distribution of manufactured goods. According to this Act, the Central Government may order investigation of any industry, if it is of the opinion that there has been substantial fall in the volume of production, or a marked decline in the quality of a product or any unreasonable rise in price. After due investigation, the government may issue directions to set things right. If the directions are not acted upon, the Government may take over the concerned undertakings.
  3. Prevention of Food Adulteration Act, 1954: This Act provides for severe punishment for adulteration of food articles. In the case of sale of adulterated food which is injurious to health and likely to cause death, life imprisonment with a minimum fine of INR 3,000 may be payable. Food inspectors are appointed and they have powers to lift samples and send them for analysis. Penalties are also provided under the Act for offences committed by persons with regard to manufacture, import, storage, sale and distribution of adulterated food articles. A detailed analysis of this Act is provided in the ensuing pages.
  4. Essential Commodities Act, 1955: Under this Act, the government has power to declare any commodity as essential in the public interest. The government can thereby control the production, supply and distribution of the trading of such commodities. It also provides for action against anti-social activities of profiteers, hoarders and black marketers.
  5. The Standards of Weights and Measures Act, 1956: This Act provides for the use of standard weights and standard measures of length throughout the country. “Metre” has been specified as the primary unit for measuring length, and “kilogram’ as the primary unit for measuring weight. Before this Act came into force, different system of weights and measures were used in different parts of the country such as “pound”, “chhatak” and “seer” as weights; yard, inch and foot for length; etc. Such differences provided opportunities for traders to exploit the consumers.
  6. Monopolies and Restrictive Trade Practices Act, 1969: Under the provisions of this Act, as amended in 1983 and 1984, consumers and consumer groups can exercise their right of redressal by filing complaints relating to restrictive and unfair trade practices. The government had constituted the MRTP Commission which was empowered to deal with consumer complaints after due investigation and enquiry. The Commission had power to award compensation for any loss or injury suffered by consumers. After liberalization of the Indian economy, the MRTP Commission has been replaced by the Competition Commission.
  7. Prevention of Black Marketing and Maintenance of Essential Supplies Act, 1980: The primary objective of this Act is to provide for detention of persons with a view to preventing of black marketing and to ensuring maintenance of supplies of commodities essential to the community. The maximum detention for persons acting in any manner against the intention of the Act can be imprisonment up to 6 months.
  8. Bureau of Indian Standards Act, 1986: The Bureau of Indian Standards has been set up under this Act, replacing the Indian Standards Institution (ISI), to protect and promote consumer interest. It has two major activities: formulation of quality standards for goods and their certification through the BIS certification marks scheme by which manufacturers are permitted to use the standardization mark (ISI) on their products after due verification of conformity with prescribed quality standards of safety and performance. The Bureau has set up a consumer affairs department to create quality consciousness among ordinary consumers. There is also a public grievances cell to which the consumers can make complaint about the quality of products carrying ISI mark.
  9. Consumer Protection Act, 1986: This Act provides for consumer protection more comprehensively than any other law. Consumers can seek legal remedy for a wide range of unfair practices not only with respect to goods but also for deficiency in services like banking, insurance, financing, transport, telephone, supply of electricity or other energy, housing, boarding & lodging, entertainment, amusement, etc. This Act also includes provision for the establishment of consumer protection councils at the centre and the state. For the settlement of consumer disputes, the Act has provided for a semi-judicial system. It consists of District Forum, State Commission and National Commission for redressal of consumer disputes. These may be regarded as consumer courts. A detailed analysis of this Act is provided in the ensuing pages.

Though all these and a number of other statues were proclaimed to be consumer welfare-oriented, none of these conferred a legal right upon an aggrieved individual consumer to seek legal redress and recover costs and damages for injury or loans suffered by him as a result of fault and defective goods and services, bought or secured for valuable consideration.

The Consumer Protection Act, 1986

The Consumer Protection Act, 1986 (COPRA) meets this essential social need to a very great extent. A vigilant consumer owes it to himself and his family members to know and understand the relevant provisions of this significant statue, which is a piece of socio-economic legislation.

This Act (COPRA) is applicable to all defective goods and deficiency in service. “Goods”, under the Act mean every kind of movable property, including stocks and shares, growing corps attached to or farming part of the land. And “Service” means service of any description which is made available to potential users including facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information.

“Consumer” means any person who buys or hires any services for some consideration, paid or promised, and includes any other user of goods or services using them with the approval of the buyer. It does not, however, include a person who obtains goods for any commercial purpose or for resale.

The consumer in India, far from being alive to his rights (as is the case in the USA and Britain), is generally at the mercy of the manufacturer of goods, the wholesaler and the retailer, all of whom exploit him.

The Six Rights of the Consumer

The six rights of the consumer as enunciated under Section 6 of the COPRA are

  1. The Right to Safety, i.e. the right to be protected against the marketing of goods and services which are hazardous to life and property.
  2. The Right to Be Informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, so as to protect the consumer against unfair trade practices.
  3. The Right to Choose, i.e. the right to be assured, wherever possible, access to a variety of goods and services at competitive prices.
  4. The Right to be Heard and to be assured that consumer's interests will receive due consideration at appropriate forums.
  5. The Right to Seek Redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of consumers.
  6. The Right to Consumer Education.

The above means that if a consumer wants to know on what basis the bus fare is fixed or whether a product contains ingredients that are vegetarian or not and on what basis a builder determines the area of the flat including the ratio between the super built up area and the carpet area, then this information can be had through the Consumer Protection Councils.

The Consumer Protection Act also makes provision for the establishment of the other authorities for the settlement of consumer disputes through the consumer disputes redressal agencies which include:

  • A Consumer Disputes Redressal Forum known as the District Forum established by the state government in each district of the state by notification.
  • A Consumer Disputes Redressal Commission known as the State Commission established in each state by the state government by notification.
  • A National Consumer Disputes Redressal Commission known as the National Commission established by the centre by notification.

Two of the salient features of the Act are that it is applicable even to enterprises in the government sector, financial institutions and cooperative societies and that its provisions are in addition to, and not in derogation of, the provisions of other laws relating to the consumer.

Industrial development in the field of manufactured goods has led to the influx of various consumer goods into the Indian market to cater to the needs of the consumers and a variety of services such as banking, financing, insurance, transport, construction of houses and entertainment have been made available to the consumers.

In order to protect the consumers from exploitation and to save them from adulterated and substandard goods and deficient services, the Consumer Protection Act came into force on 15 April, 1986 and it applies to the whole of India except the state of Jammu and Kashmir.

Eligibility to File a Claim

The eligibility to file a claim against the seller or manufacturer is vested on a consumer who is described as any person who

  • has bought goods for a consideration and finds any defect in the quality, quantity, potency, purity or standard of the goods; or
  • has hired or availed any service for consideration and finds any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance in relation to the service can approach the courts.

However, if a person has bought the goods for resale or for a commercial purpose he is not a consumer.

Limitation and Appeals

Within what period can a complaint be filed?

A complaint should be filed at the earliest but not later than TWO YEARS from the date on which the cause of action arose. However, the Court may entertain the complaint after a period of 2 years if the complainant is able to satisfy the Court that there was sufficient cause for the delay.


An Appeal from the order of the District Forum lies to the State Commission, against the order of the State Commission to the National Commission and against the order of the National Commission to the Supreme Court.

All appeals are to be filed within 30 days of the order appealed against and are to be accompanied by a certified copy of the order.

The Consumer Protection (Amendment) Act, 2002

When the Consumer Protection Act 1986 was put into operation, it was thought it would address all issues connected with consumer-related problems and enable them find solutions for these issues. The objective of the Act was “to provide for the better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and authorities for the settlement of consumer disputes and for matters concerned therewith”. However, the general perception was that the Act was ineffective and the objectives remained mainly unfulfilled. The Act was also found to be suffering from a number of disabilities. With a view to removing these defects and making it more effective, a bill to amend the Consumer Protection Act 1986 was introduced in the Rajya Sabha in April, 2001. The amendments aim at facilitating quicker disposal of complaints empowering redressal agencies, streamlining procedures and widening the scope of the Act to make it more functional. The Bill was passed by the Parliament in November 2002. After the President of India gave his consent, the Consumer Protection (Amendment) Act, 2002 came into force on 15 March, 2003. The amendment gives more teeth to the Act.

The main changes introduced by the Amendment Act are as follows:

  1. In the original Act, the District Consumer Redressal Forums could deal with complaints involving compensation amount upto INR 500,000, while for the State Commission the limit was fixed at INR 2 million. These amounts were hiked to INR 2 million and INR 10 million respectively. For the National Commission, the limit which previously was INR 2 million, has now been enhanced to more than INR 10 million.
  2. Another consumer-friendly change that was provided by the Amendment Act concerns the setting up of benches and increasing the number of members in the national and state commissions. If the number of cases is large, additional benches can be created which can operate at places other than their original headquarters for helping the consumers, who were earlier going to Delhi or the state capitals for filing or attending cases.
  3. To facilitate uninterrupted selection and filling up of vacancies of members of the State Commission, president and members of the District Forums, the selection committee has been changed by making a sitting judge of the High Court to preside over it, when the president of the State Commission is absent.
  4. In case of absence of the incumbent president of the District Forum, State Commission or National Commission, a provision has been introduced in the Amendment Act to empower the senior-most member to act as president of the respective bodies.
  5. Under the Amendment Act, minimum qualifications have been prescribed for members of all consumer courts.
  6. For procedures such as admission of complaints, issue of notices and disposal of complaints, a specific time frame (21 days for the admissibility of a complaint) has been prescribed under the Amendment Act. The Act also prohibits adjournment during the course of hearing of the case.
  7. Another improvement which is in effect now is the exclusion of services used for commercial purposes from the purview of consumer courts, which can now concentrate on providing relief to individual consumers.
  8. The courts can now issue interim orders. Under the Amendment Act, the court can award punitive damages.
  9. Any affected party which appeals against the order of the Forum, has to deposit 50 per cent of the amount awarded to the consumer.
  10. Further, if any person fails to pay compensation, the consumer court can order recovery in the same manner as arrears of land revenue.

The Prevention of Food Adulteration Act, 1954

The Prevention of Food Adulteration Act, 1954 aims at making provisions for the prevention of adulteration of food. The Act extends to the whole of India and came into force on 1 June, 1955.

What is adulterated food? An article of food shall be deemed to be adulterated

  1. if the article sold by a vendor is not of the nature, substance or quality demanded by the purchaser or which it claims to be
  2. if the article contains any substance affecting its quality or of it is so processed as to injuriously affect its nature, substance or quality
  3. if any inferior or cheaper substance has been substituted wholly or partly for the article, or any constituent of the article has been wholly or partly abstracted from it, so as to affecting its quality or of it is so processed as to injuriously affect its nature, substance or quality
  4. if the article had been prepared, packed or kept under insanitary conditions, whereby it has become contaminated or injurious to health
  5. if the article consists wholly or in part of any filthy, putrid, disgusting, rotten, decomposed or diseased animal or vegetable substance or being insect infested, or is otherwise unfit for human consumption
  6. if the article is obtained from a diseased animal
  7. if the article contains any poisonous or other ingredient which is injurious to health
  8. if the container of the article is composed of any poisonous or deleterious substance which renders its contents injurious to health.
  9. if the article contains any prohibited colouring matter or preservative, or any permitted colouring matter or preservative in excess of the prescribed limits.
  10. if the quality or purity of the article falls below the prescribed standard, or its constituents are present in proportions other than of prescribed standard, or its constituents are present in proportions other than those prescribed, whether or not rendering it is injurious to health.

Institutional Arrangements Under COPRA

The Consumer Protection Act, 1986 has provided for some institutional arrangements to protect and promote consumer rights and to redress their grievances. The institutional arrangements are discussed below in detail. The Act envisages the establishment of Consumer Protection Councils at the national and state levels.

  1. Central Consumer Protection Council: The objects of the Central Consumer Protection Council are to promote and protect the rights of consumers, such as
    1. The right to be protected against marketing of goods and services which are hazardous to the life and property
    2. The right to be informed about the quality, quantity, potency, purity, standard and price of goods and services so as to protect the consumer against unfair trade practices
    3. The right to be assured, wherever possible, access to a variety of goods at competitive prices
    4. The right to be heard and assured that consumers’ interests will receive due consideration at appropriate forums
    5. The right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers
    6. The right to consumer education

      The Council is basically advisory in nature.

          The Central Council will be constituted with the following members:

    1. The Union Minister in charge of the Department of Food and Civil Supplies will be the chairman of the council
    2. Members not exceeding 150 in number consisting officials drawn from various Union Ministries, Members of Parliament, consumer organizations, concerned autonomous bodies, representatives of women, farmers, trade and industry, and persons representing consumer interests

          The member-secretary of the Council will be the Secretary in charge of Consumer Affairs in the Central Government.

          It is required under the Act to meet at least once in a year.

          The Council, within its members, will constitute working groups to perform assigned functions and report the same to the Council for deliberations.

  2. State Consumer Protection Councils: The State Consumer Protection Council will be established in each state by respective state governments. The objects of the State Council are the same as those of the Central Council, namely, to promote and protect within the state, rights of consumers laid down under the Consumer Protection Act. The Council consists of official and non-official members representing consumer interests, as may be nominated or appointed by the state government. The State Council shall meet as and when necessary, but not less than two meetings shall be held every year.

Section 9 of the Consumer Protection Act provides for the establishment of a three-tier system for the redressal of consumer disputes at the district, state and national levels in the ascending order of hierarchy. The objective of the system is to provide cheap and quick redressal of consumer grievances at the appropriate level with minimum technicalities and legal formalities. The Act stipulates that a complaint relating to any goods sold or delivered (or agreed to be sold or delivered), or any service provided (or agreed to be provided) can be filed with the appropriate forum. The complaint can be filed by an individual consumer, a recognized association of consumers or by a state or central government (even if the government itself may not be an aggrieved party). There is also a provision under the Act, for a class action complaint in which one or more consumers can file a complaint on behalf of all interested or involved consumers. However, such a class action complaint can be filed only with the consent of the concerned District Forum.

There are at present 555 District Fora, 32 State Commissions one in each state and union territory, apart from the National Commission. Given below are details of these bodies instituted for the redressal of consumer grievances under the Consumer Protection Act.

The redressal of consumer grievances under the Consumer Protection Act is available under a hierarchical quasi-legal structure comprising the District Forum, State Commissions one in each state and union territory, and in the top of the hierarchy is the National Commission. We discuss them in that order in the following sections.

The District Forum

  1. Composition: The district-level Consumer Redressal Forum is the foundation of the hierarchical structure envisaged by the Act. The Forum would consist of three persons, appointed by the state government on the recommendations of a committee comprising (i) the President of the State Commission who will act as chairman of the selection committee, (ii) Secretary, Law Department of the State, and (iii) Secretary in charge of the Department of Consumer Affairs of the state concerned.
  2. Qualifications of Members: (i) The President of the District Forum should be a person who has been, or qualified to be, a district judge; (ii) A person of eminence in the field of education, trade or commerce and (iii) A lady social worker. Apart from the President, the other two members should have adequate knowledge of law, commerce, accountancy, industry, public affairs and administration.
  3. Term of Office: The term of office of each member of the District Forum is 5 years or up to the age of 65 years, whichever is earlier. Members are not eligible for reappointment.
  4. Remuneration: The service conditions and monetary compensation for the members of the District Forum will be prescribed by the state government.
  5. Jurisdiction of the District Forum: As per the Act, the Forum shall have the jurisdiction to arbiter cases of complaints where the value of goods or services and the claimed compensation do not exceed INR 500,000. The matter of complaint should fall within the local limits assigned to the forum, i.e., the geographic limit of a district. Besides, the opposite party or each of the opposite parties actually resides or carries on business at the time of filing the complaint; or any of the opposite parties actually resides or carries on business at the time of filing the complaint, provided that in such a case, the permission of the District Forum is given or the opposite parties who do not reside within the limits have no objection, or the cause of action, wholly or in part, arises from there.
  6. Procedure for Filing Complaints: Under the Consumer Protection Act, a complaint in relation to any goods sold or delivered or any service provided may be filed with the District Forum by (a) the consumer to whom such goods are sold or delivered or to whom such service is provided; (b) any recognized consumer association whether the aggrieved consumer is member or not; (c) one or more consumers, where there are several consumers united in common interest; and (d) the central or the state government.
  7. Procedure for Settling Disputes: If the dispute arises out of product defect, the Forum may send the product for testing and analysis by a government-approved laboratory and on the basis of the result of the test, the case is decided. When no such test is required, the case is decided on the merits of available evidence.
  8. Powers of the Forum: Under the Act, the District Forum is vested with the same powers as of a Civil Court. Additionally, it has the powers to order any person to produce related documents or products in his custody, furnish any information that may be required for the settlement of the dispute or authorise any officer to search any premise and seize concerned documents and goods which are likely to be destroyed, altered or secreted.

    Moreover, the proceedings of the Forum with regard to its decision on the basis of available evidence cannot be questioned in any Court of law on the ground that the principle of natural justice was not followed. With the District Forum, oral submissions of the respondent (or opposite) party are acceptable.

  9. Remedial Action: In case the complainant has been proved to have a legitimate grievance, the District Forum may, by way of relief or compensation to him or her, order the opposite party (a) to remove the defect or deficiency from the good or service; (b) replace the good with a new one which is free from the defect; (c) refund to the complainant the prices or charges received from the consumer; (d) pay a compensation to the consumer for loss, cost of injury or damage suffered by him or her; (e) cease and desist from the restrictive or unfair trade practice; or (f) withdraw the supply of the hazardous or defective good from the market. If necessary, the District Forum can order one or more of the above types of actions.

    There have been many instances where the District Forums have ordered immediate compensation to the consumer for mental harassment and agony suffered from the action of the producer or supplier. In cases of government officials such as Revenue Officers or of Railways and Road Transport Corporations or Electricity or Water and Sewerage Boards, the forums have ordered compensations be paid out of public funds to the aggrieved complainants, but to be recovered subsequently from the officials responsible for causing the agony or mental harassment.

  10. Dismissal of Frivolous or Vexatious Complaints: Where a complaint instituted before any redressal agency is found to be frivolous or vexatious, the redressal agency shall dismiss the complaint and make an order that the complainant shall pay to the opposite party such cost not exceeding INR 10,000 as may be specified in the order.
  11. Appeals Against Forums’ Orders: Appeal against the order of the District Forum can be filed with the State Commission within 30 days of passing the order. In such cases, with a view to cutting down delay in ensuring speedy consumer justice, no further appeal against the order of the State Commission that heard the appeal is permitted.

Case 25.1 Order of the District Forum Chennai (South)

The complainant, Fr. Arokiasamy Arul, studied at Notredame University, Indiana, USA., during 1994 to 1997. He purchased air ticket from Air India at Chicago for his journey to Bangalore. The complainant stated that he boarded on 9 September, 1997 Flight TWA 730 at O'Hare Airport, Chicago and at that time, his two baggage were checked in through the cargo section and he was allowed to carry one small Targus bag containing a laptop, one small tape recorder and other small things, and another personal bag inside the aircraft. The complainant embarked at JFK New York airport for Amman at about 8.15 a.m. However, the FLT 2262 left the airport belatedly at 2.00 a.m. on 10 September, 1997. The complainant was about to emplane the Flight 2262, when he was stopped by one of the officials of the Royal Jordanian Airlines (which carried Air India's passengers for onward journey) who objected to the complainant carrying the Targus bag with him into the aircraft and told him that the same should be handed over to him for being sent to the cargo section in the aircraft. Despite his protests, the official took away the Targus bag. At Amman the complainant along with other passengers had to take Air India and arrived at Mumbai on 11 September, 1997. When the baggage was cleared, he found that while his two baggage were in tact, the Targus bag was found to be ripped open and the laptop and the tape recorder were missing. Since the respondent airlines failed to make good the loss, the above case was filed claiming compensation of INR 90,300 as damage with interest, INR 100,000 with interest as compensation for mental agony, and a sum of INR 20,000 towards costs.

The airlines contended that the Forum had no territorial jurisdiction and that in any event the Royal Jordanian Airlines was liable to pay USD 400 which is the maximum compensation as per the carriers’ liabilities under the Warsaw Convention.

The District Forum held in its order dated 28 March, 2005 that since the airlines were having offices and working in Chennai, there was a territorial jurisdiction for the Forum to entertain the complaint. As the baggage was handled by the Royal Jordanian Airlines at the airport on behalf of Air India, both the Airlines are jointly and severally liable, as it is not known where and when the baggage was ripped open and the items taken. Therefore, the Forum held that they had committed deficiency in service and were directed to pay the sum of INR 84,000 with interest at the rate of 12 per cent per annum from 11.09.1997 onwards; a sum of INR 5,000 towards the deficiency in service; and a sum of INR 1,000 as costs within a period of two months.


Courtesy: S. Mahimai Raj, Advocate, Chennai. Published with the permission of the author.

The State Commission

This state-wise consumer dispute redressal body, popularly known as STATE COMMISSION is established in each state/union territory under the Consumer Protection Act.

State Commission is the apex body in the state and its orders are binding on all the District Forums in the State.

  1. Organization and structure: The State Commission has, as its chief officer, a President, who is appointed by the state government on the recommendation of the Chief Justice of the High Court. The President of the Commission is one who is or has been the Judge of a High Court. Two members, one of whom a lady, are the others who constitute the Commission. They too are the appointees of the state government. The members have to be persons of ability, integrity and standing with adequate knowledge and experience in such areas as economics, law, commerce, industry and administration.
  2. Compensation: The terms and conditions of service including remuneration, allowance, and perks of the members are determined by the state government.
  3. Terms of office of members of the commission: The term of office of each member is 5 years or till the attainment of the age of 67 years (whichever is earlier) and he/she shall not be eligible for reappointment, as in the case of District Forums.
  4. Jurisdiction of the commission: The jurisdiction of the Commission has three dimensions. In its monetary jurisdiction, it could entertain complaints upto INR 10 million involving compensation exceeding INR 500,000, but less than INR 2 million. In its appellate jurisdiction, it can entertain appeals against the orders of a District Forum in the State. In its supervisory jurisdiction, it can take a case pending at a District Forum in its own hands in rare cases, if the State government is of the view that the Forum is exceeding its jurisdiction or committing material irregularity in the case.
  5. Procedures and dispute resolution: The rules, procedures and manner of disposal of a complaint by a State Commission are similar to those of a District Forum.
  6. Appeals: Appeals against the orders of the Commission (except on appeals against the orders of a District Forum) can be filed in the National Commission within 30 days of the order.
  7. Administrative control: The State Commission has administrative control over the District Forums through (i) calling of periodic returns on its cases dealt by them; (ii) issuance of instructions on procedural matters; and (iii) supervision of the functioning of the forums to ensure that the provisions of the Act are appropriately observed by the District Forums.

Case 25.2 State Commission Confirms District Forum's Order

The BSNL was at the receiving end for unnecessarily harassing a subscriber saying that his cheque for a telephone bill had been dishonoured while the subscriber had made the payment by cash through the post office.

The 8-year long legal battle between the subscriber and the BSNL came to an end in June 2006 with the State Consumer Disputes Redressal Commission (SCDRC) dismissing an appeal by the BSNL and ordering it to pay INR 10,000 compensation for the ordeal caused to the subscriber, B Ravi Shankar of Lampert Nagar in Chennai.

“This is wholly unpardonable…It is a concrete case where the subscriber had made proper payment before the due date, obtained a receipt and still the BSNL chose to harass him”, SCDRC president Justice K Sampath and member Pon Gunasekaran observed while passing orders in the case.

According to the complainant, he was summoned by the BSNL Accounts Department in August 1998 and told that a cheque for INR 1,069 given by him towards the bill for May 1998 had been dishonoured while the fact was that he had made the payment, that too by cash, 3 months earlier through a post office in K K Nagar. As the complainant was away, his N Balasundaram, an elderly man, went to the BSNL office and met Sridhar, the then senior accounts officer (South West division) and showed him the payment receipt. But Sridhar had flatly refused to accept it stating that the receipt did not have details whether the payment was really made in cash. The official went on directing the complainant's father to obtain a “payment certificate” from the post office on the same day, otherwise the telephone line would be disconnected. Left with no other option, Balasundaram went to the K K Nagar post office where he was told that such a certificate could not be issued. That being so, BSNL carried forwad the amount as outstanding in the next month's bill and also sent another message asking him to pay the amount. Unable to bear the harassment any more, the complainant moved the District Consumer Disputes Redressal Forum, Chennai (South), which, in December 2001, directed the BSNL to pay a compensation of INR 10,000 for deficiency in service. In defence, the BSNL argued that the complainant's telephone number also figured in the list of numbers of “cheque return” cases and that was why, as a routine, the department wanted to confirm the same from him. Since it was confirmed that he made the payment by cash, his line was not disconnected and hence there was no deficiency in service on its part, the BSNL argued.

On perusal of the case, the SCDRC observed: ‘Right from the beginning the department is at fault. It cannot be justified that the BSNL, which was duty-bound to seek clarification from the postal department for the discrepancy, made the complainant and his father run from pillar to post. This is a case where no appeal should have been preferred.”


Source: “BSNL Pulled Up for Harassing Subscriber”, New Indian Express, Chennai Edition, 1 July, 2006. Reproduced with permission.

The National Commission

The Consumer Protection Act 1986 envisaged the setting up of the National Commission as an apex body in consumer dispute settlement. Accordingly, the Central Government has established the National Consumer Disputes Redressal Forum at the national level. The main features of the National Commission are as follows:

  1. Composition: The Commission has a president and four members, one of whom is a lady. The President is appointed by the central government on the recommendations of the Chief Justice of India. The Central Government appoints the other four members on the recommendations of a selection committee consisting of (i) a judge of the Supreme Court nominated by the Chief Justice of India, who acts as chairman of the selection committee (ii) Secretary, Department of Legal Affairs, Government of India; and (iii) Secretary of the Department dealing with consumer affairs in the Government of India. The members of the National Commission are selected on the basis of their ability, integrity and standing and should have good knowledge and experience in the areas of economics, commerce, accountancy, industry or public administration.
  2. Term of office: The term of office of a member is 5 years or till the age of 70 years, whichever is earlier.
  3. Service conditions: The remuneration, allowances and other service conditions of the members of the National Commission are decided by the central government.
  4. Jurisdiction: The monetary jurisdiction of the National Commission is above INR 10 million. Its appellate jurisdiction includes all appeals against the order of the State Commission. In its revisional or supervisory jurisdiction, it can call for records and pass orders in the case of a consumer dispute which is pending before a State Commission or has been decided by it, if it is found that it has failed to exercise its jurisdiction, or has exercised it illegally or with material irregularity.
  5. Manner of disposal of complaints: The manner of disposal of a complaint is the same as that of a District Forum. The nature of powers of the National Commission is the same as that of a District Forum. It is obligatory for the parties involved (or their agents) to appear in person before the National Commission.
  6. Administrative controls: The Commission possesses and exercises administrative control over the State Commissions to ensure that the provisions of the Act are suitably observed.
  7. Appeals: Appeals against the orders of the National Commission can be filed in the Supreme Court within 30 days of its orders.

    “At all levels of the three-tier consumer dispute redressal system, orders are considered final if no appeal is made against them. These orders are enforceable in the same manner as that of a Civil Court. These orders can be lawfully sent to the Civil Courts for execution in their territorial jurisdiction. Non-compliance of the orders by the concerned person (against whom the case has been decided) is punishable with imprisonment ranging from one month to three years or fine or both. Costs are also awarded to the winning complainants. If it is found that the complaint is frivolous and vexatious and the complainant has taken advantage of the opposite party, the complaint can be dismissed and the complainant fined up to INR 10,000”.9

  8. Monitoring authority: The Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution, monitors the disposal of cases by consumer courts through the National Commission.

One of the major grievances of Indian consumers is the poor quality of products they buy and pay for. In India, over the past five decades, the quality of products has been extremely poor because of monopolistic and imperfect competitive market situations under the mixed economy regime. Even public sector organizations never bothered to produce quality goods because of their monopolistic position and complacence due to lack of competition. As a result, the Indian consumer has to do with shabby and shoddy goods and equally poor and inefficient services. The situation seems to be improving since 1991 because of intense competition, but even then the country has a long way to go to catch up with the Western societies in the matter of quality of goods and services.

Case 25.3 National Commission Restores State Commission's Order

The complainant, Mohb Ayub presented a cheque on 25 November, 1989 for USD 1400.92 issued by the Kingdom of Saudi Arabian General organization for Social Insurance in his favour to the Manager, Central Bank of India. The validity period was six months. However, the cheque was misplaced by the Bank, but was making efforts for getting the amount credited to his account. It was learnt later on that there was an order to stop payment from the originator on 26 May, 1990. As the amount was not paid to him the complainant filed a complaint before the District Forum. After hearing the parties, the Forum found that even after a long period, the cheque amount was not credited by the Bank to the complainant's account and hence, the contention of the Bank that there was a “stop order payment”, that was given after a long time, cannot be accepted for non-payment. Hence, the Bank was directed to pay the complainant the amount in Indian currency equivalent to USD 1400.92 within one month failing which, to pay with interest at the rate of 12 per cent per annum.

Aggrieved against that order, the Bank preferred the appeal. After hearing the appeal, the State Commission set aside the order of the District Forum on the ground that the complainant was not entitled to receive any payment as the originator of the cheque had stopped its payment.

Aggreived against the order of the State Commission, the complainant preferred the appeal to the National Commission.

The National Consumer Disputes Redressal Commission, New Delhi restored the order of the District Forum and passed the following order.

It is clearly proved through the records that the Bank has lost the cheque and could not trace it for a long time. The stop order was given by the originator six months after the presentation of the cheque and hence, the Bank cannot be allowed to take refuge under the originator's stop payment order. There was clear negligence and deficiency on the part of the Bank in not clearing the cheque within six months’ validity period and consequently the order of the State Commission was set aside and the order of the District Forum was restored and confirmed. Further, the National Commission awarded a cost of INR 10,000.


Courtesy: S. Mahimai Raj, Advocate, Chennai. Published with the permission of the author.

The Bureau of Indian Standards

The national standards body in India was known previously as the Indian Standards Institute that awarded the ISI standards and was affiliated to the world standards body known as the International Standards Organization (ISO), Geneva. Presently, the Indian national standards organization is known as The Bureau of Indian Standards (BIS). The following are the major functions of the Bureau:

  1. Preparation and implementation of quality standards of the country
  2. Administering Certification Schemes, both for products and quality systems
  3. Organizing and maintaining testing laboratories
  4. Spreading consumer awareness
  5. Liaisoning with international standards bodies
  6. Organizing training programmes on quality control and developments
  7. Conducting “search and seize” operations to curb misuse of standards and to protect consumers from spurious products

The Bureau has a national network with offices in state capitals and major metropolitan centres. It is engaged in developing need-based standards. The Bureau also maintains the BIS Product Certification Marks Scheme and the BIS Quality System Certification Scheme based on International Standards of Quality Management (ISO 9000 series). The certification mark scheme is voluntary in nature. However, it has been made mandatory in cases of 131 items such as LPG cylinders, steel products, cement, food colours, etc and 246 pesticides. The need for ensuring the safety of people consuming these products has prompted the public authorities to make certification for these products mandatory.

The Bureau has recently entered into collaboration with the World Gold Council to hallmark jewellery. Though India is the world's largest buyer of gold, there is a lot of cheating of gold users in terms of quality and purity by businessmen in the jewellery industry.

Standards of Weights and Measures

One of the major grievances of Indian consumers for long has been the quantity reductions practised by merchants. To prevent this malpractice, the Standards of Weights and Measurement Act was passed in 1956, which was later replaced by a more comprehensive and less defective Act in 1976 in alignment with International Bureau of Weights and Standards. The Act covers, apart from standards of weights, measures and packaging of products, related areas such as metrology, inter-state verification and stamping, and numeration of products. The Act is supplemented by the Standards of Weights and Measures (Enforcement) Act, 1985 with a set of rules to enforce the Act effectively, apart from having provisions with regard to pre-packaged products. The Ministry of Civil Supplies of the Union Government monitors and administers the Act. However, it is the perception of all consumers in the country that though the statute book has a number of laws regarding weights and measures, they are hardly enforced with the result the poor and hapless Indian consumers lose billions of rupees every year.


In developing countries, it becomes necessary for the government to play a major role in providing protection to consumers and promoting their interests through legislative action. However, it is found that though government passes a series of legislations, their enforcement is very weak due to lack of adequate manpower, low penalties the Acts carry and corrupt practices of bureaucrats. In most of the advanced countries, the growth of consumerism through spread of awareness of consumer rights and strong consumer leadership have resulted in the emergence of voluntary consumer organizations through which consumers are empowered to safeguard their interests in a much better, effective and in an involved manner. A voluntary consumer organization is formed either as (a) an association or council or (b) a cooperative by a number of interested or concerned consumers voluntarily with or without government help with a view to promoting and protecting their rights, saving themselves from exploitation by producers and sellers and enhancing their collective welfare.

In India also consumer associations and cooperatives have been formed in recent times with varying degrees of success.

Consumer Associations or Councils

As far back as in 1963, a pioneering consumer organization was set up in Delhi with a view to collecting market intelligence, publishing bulletins for information of consumers, studying the trends of inflation and organizing consumer resistance against the malpractices of business and trade. This organization was named the National Consumer Service (NCS) to which some consumer associations and councils were affiliated in course of time. A year thereafter, in 1964, another consumer organization named Price Rise Resistance Movement (PRRM) was set up in New Delhi, which organized meetings to protest rising prices and set up open air shops to sell vegetables, fruits and eggs at reasonable prices. In 1966, a voluntary organization by the name Consumer Guidance Society (CGS) was set up in Bombay to protect and promote the rights and interests of consumers. The CGS provides information and guidance to consumers, organizes campaigns against adulteration and publishes test results of goods. A consumer activist H. D. Shourie of Delhi instituted another consumer organization known as “Common Cause” which renders invaluable service to the cause of consumer protection. In 1968, a National Consumer Council of India, as an apex organization for consumer interests was formed in New Delhi.10

Consumer Cooperatives

A consumer cooperative is a voluntary association of individuals to further the cause of consumers. In India, any 10 or more persons belonging to a particular place, class or occupation can come together and form a cooperative society. They can apply to the Registrar of Cooperative Society for registration. The government of India has instituted the Consumer Welfare Fund in 1992 to provide financial assistance to registered consumer organizations. The assistance is provided to any agency or organization engaged in consumer welfare activities such as (i) creating consumer awareness; (ii) spreading consumer education; (iii) preparing publicity materials; (iv) setting up community based rural awareness projects and (v) facilities for setting up testing laboratories, for a period of 3 years.

Consumer cooperatives offer a number of advantages to their members: (1) Since several individuals come together to form a consumer cooperative, their bargaining power increases considerably; (2) Since purchases are made in bulk, they get them at lower prices; (3) Consumers are assured of unadulterated and standard, quality goods; (4) Correct weights and measures are used by the society, thereby the consumer is saved from being cheated on this account; (5) Goods are sold at market prices to avoid unhealthy competition with other retailers. The profits earned on this account are usually spent on various social programmes for the benefit of members; (6) In our country, consumer cooperatives have performed the function of distributing essential commodities at reasonable prices; (7) Cooperatives make goods available to members even when they are scarce outside; and (8) Cooperatives provide an ennobling service to society by promoting attitudes of service, sacrifice and group behaviour. However, they have not succeeded in the country to the extent desired.

Coordination at the National Level

At the national level, the Confederation of Indian Consumer Organizations (CICO) has been formed in Delhi to coordinate the activities of consumer organizations and lead the consumer movement in the country. CICO also helps the formation of state-level federations. It has constituted four working groups to streamline its operations that take care of matters relating to public utilities, pricing, public distribution systems, product standards, quality control, product safety, consumer protection laws and the grievance redressal machinery, quality control, product safety, consumer protection laws and the grievance redressal machinery. At the international level, The International Organization of Consumers’ Union (IOCU) functions as the world federation. Founded in 1960 and based in the Hague, the Netherlands, it links the activities of consumer organizations in about 75 countries.11


Because of the importance and urgency of consumer protection, countries all over the world, including India, have instituted several measures. The Government of India has instituted a Consumer Welfare Fund (CWF) in 1992 with the view to providing financial assistance to protect and promote the welfare of the consumers, developing consumer awareness and strengthening the consumer movement in the country, especially in rural areas. The Fund, set up by the Department of Revenue under the Central Excise and Salt Act, 1994, is administered by the Department of Consumer Affairs and Public Distribution System, Ministry of Civil Supplies.

National Awards

The Ministry of Civil Supplies, Consumer Affairs and Public Distribution of the Government of India has instituted three national awards to encourage the participation of consumer organizations, women and youth in the field of consumer protection, namely, National Award on Consumer Protection, National Women Award and National Youth Award on Consumer Protection. These awards are given every year.

Publicity Measures

“World Consumer Rights Day” is celebrated on 15th March, every year all over the world. The objective is to spread consumer awareness through various means such as display of hoardings, banners, bus panels etc. Doordarshan and AIR also regularly broadcast programmes on consumer protection and brochures and booklets (Salient Features of Consumer Protection Act, 1986; Rights of Consumers'; The Consumer Protection Act and You; Help Prevent Adulteration; Consumer Protection and Weights and Measures; Directory of Consumer Organizations etc.) are also published.12

The Customer Service Department at RBI

In an attempt to enhance the quality of customer service and strengthen the grievance redressal mechanism in banking, the Reserve Bank of India has recently constituted a new department called Customer Service Department (CSD).13 The functions of the CSD include dissemination of instructions or information relating to customer service and grievance redressal by banks and the RBI and overseeing the mechanism in respect of services rendered by it.

Earlier, all these activities were undertaken by different departments of the RBI. The CSD will also administer the Banking Ombudsman (BO) scheme and act as a nodal department for the Banking Codes and Standards Board of India (BCSBI). Ensuring redressal of complaints received directly by the RBI on customer service in banks will also be henceforth undertaken by this department.

The CSD will coordinate between banks, the Indian Banks Association, the BCSBI, BO offices and RBI regulatory departments on matters relating to customer services and grievance redressal. With a view to improving customer services and promoting fair business practices, the Standard Board of India (BCSBI) in consultation with the Indian Banks’ Association, has released the “Code of Bank's Commitment to Customers (CBCC).” The Banking Codes provide an institutional framework to address some of the long-pending grievances and issues that have dogged customers in their dealings with banks.

The code tells a customer in detail the banking services that the customer wishes to know.14

The code promises to correct mistakes in the statements of account promptly and cancel any bank charges wrongly debited. It also promises to automatically register the name of its customers under “Do not call service”. The code also ensures that the bank does not share its customer information with anyone, even with group companies.

The code promises that banks will inform the customers about changes in interest rate and other charges in case they exceed the limits for free transactions or withdrawals. The code also shows unexpected and extremely fine sensitivity to customer feelings. For instance, in a section dealing with collection of dues, it says, “During visits to your workplace for dues collection, decency and decorum would be maintained.” It adds, “Inappropraite occasions such as bereavement in the family or such other calamitous occasions would be avoided for making calls and visits to collect dues.”

In a section dealing with loan guarantors, the code promises to tell the guarantor about his actual liability, the circumstances under which the bank will approach the guarantor and the time and circumstances in which his liability is discharged.

Protecting the consumer from avaricious producers and sellers has become an important task of governments all over the world. But the task of doing it has been made easier in Western countries because of widespread consumer awareness and the interest of sellers to honour their commitments to buyers in terms of quality, purity and standards. But in developing countries like India, there is neither widespread consumer awareness nor understanding of their rights, nor is there the felt obligation of producers and sellers to consumers. Take the instances of government's efforts to promote consumer cooperatives, or its effort to organize efficiently the Public Distribution System. Both of these attempts reflected both the understanding and goodwill on the part of the government, but the results have been poor for a variety of reasons. Two important factors stand out for this poor show—the lackadaisical attitude of most of the consumers themselves, and as in every other facet of the country's economic life, the poor, corrupt and ineffective manner in which the various Acts have been implemented in the country.

Case 25.4 Consumer Protection Act Not Effective

Eighty-two per cent of the consumers are not aware of the Consumer Protection Act and 66 per cent of consumer rights. A whopping 78 per cent consumers feel the government is not making efforts for safeguarding consumer rights leaving consumers to grapple with “market forces” at a time when increase in prices of commodities, arbitrary profit margins and delays in redressing consumers’ grievances had become the order of the day. Consumers spend as much as 82 per cent on lawyers’ fees in consumer courts defeating the very purpose for which the Act was made. Most of them are not aware that they could represent themselves in consumer courts through a simple complaint.

These are some of the observations of an independent survey conducted by ORG-MARG commissioned by the Comptroller and the Auditor General to ascertain the implementation status of the Consumer Protection Act of 1986. The 48,732 consumers surveyed in 138 districts in different states said the redress mechanism was simple, but not very speedy and economical. On its part, the CAG noted that the Consumer Protection Act had not been effective in ensuring speedy and inexpensive redress of consumers grievances and the NGOs had failed to put up a consumer movement in the country. Funds amounting to INR 579.9 million remained unutilized in the Consumer Welfare Fund in the absence of any specific schemes formulated by the Union Department of Consumer Affairs to match the inflow of funds. Yet another fund of INR 66.3 million meant for increasing consumer awareness and empowerment was also unutilized. Another INR 60 million representing deposits realized on appeals and revision petitions remained out of government account.

There were delays extending up to 54 months in establishing consumer courts from the date of notification. Delay of over 15 years in prescribing the time limit for disposal of complaints led to accumulation of cases. There was, no documented policy outlining the priorities of the centre for creation and strengthening the adjudication mechanism.

The Consumer Protection Councils at the district, state and national levels were not functioning well and follow-up action was not monitored centrally through the Working Group, as required. There was no effort from Madhya Pradesh, Uttar Pradesh, Daman and Diu and Delhi to utilize the funds offered by the centre for a Jagriti Shivir Yojna in 2001 to run a campaign for creating consumer awareness. Goa, Karnataka, Maharashtra, Rajasthan and Andaman and Nicobar Islands did not utilize the funds fully.

The Department of Consumer Affairs had released INR 93.5 million to NGOs and Voluntary Consumer Organizations (VCOs) of 26 States in 10 years till the end of March 2005. Of these, only organizations in Meghalaya had utilized the funds fully, while those in Haryana, Jammu and Kashmir, Kerala and Chandigarh had used the funds partially. The Ministry has no mechanism to assess the impact of expenditure incurred through NGOs and VCOs.

Between 2000–01 and 2004–05, the National Commission had 8,301cases pending, while the State Commissions had 11509,4 cases and the district fora had 271,188 cases pending making it a total of 394,583.


Source: Special Correspondent, “Consumer Protection Act Not Effective: A Report”, The Hindu, 28 May, 2006. Reproduced with permission.

  • A consumer is a very important stakeholder to an organization. Protecting the consumer from avaricious producers and sellers has become an important task of governments all over the world. Consumer Protection refers to the steps necessary to be taken, or measures required to be accepted to protect consumers from business malpractices.
  • The task of doing it has been made easier in Western countries because of widespread consumer awareness and the interest of sellers to honour their commitments to buyers in terms of quality, purity and standards. But in developing countries like India, there is neither consumer awareness nor knowledge of consumer rights on a large scale. There is also a lack of obligation of producers and sellers to consumers. False promises and failed guarantees, underweight and wantonly hiked prices are some of the other consumer grievances.
  • Consumer protection is possible only if adequate and appropriate cooperation comes from the three concerned parties—consumers, business and the government. Consumer protection can be achieved if producers and traders adopt discipline and self-regulation; NGOs and voluntary organizations of consumers act in concert to safeguard the interests of consumers; information and awareness is spread about different products and services; and through government legislation to prevent unethical practices of manufacturers and traders.
adulterated food adulterated products ardent consumers
counterfeits tie-in-sales dubious practice
exorbitant prices gullible buyers manipulation of conditions
material information misleading advertisements product utility
quality standards unhonoured guarantees voluntary organizations


  1. Who is an investor/shareholder? What are their rights and responsibilities?
  2. What is the relationship between investor protection and corporate governance? How can better investor protection bring about better corporate governance?
  3. Trace the history and growth of investor protection in India.
  4. Critically examine the functions and powers of the Securities and Exchange Board of India.
  5. How would you rate the role of the Securities and Exchange Board of India as the country's capital market regulator? Substantiate your answer with real-life illustrations.

Agrawal, Meenu (Ed.). Consumer Behaviour and Consumer Protection in India. New Delhi: New Century Publications, 2006.

Aggarwal, V. K. Consumer Protection: Law and Practice. Fifth edition. Delhi: Bharat Law House, 2003.

Chahar, S. S. Consumer Protection Movement in India: Problems and Prospects. New Delhi: Kanishka Publishers Distributors, 2007.

Down to Earth (magazine-fortnightly): Society for Environmental Communications.

Ethical Consumer (Magazine). Manchester, U.K.: ECRA Publishing Ltd. www.ethicalconsumer.org.

Girimaji, Pushpa. Consumer Right for Everyone. Delhi: Penguin Books, 2002

Himahcalam, D. Consumer Protection in India. New Delhi: Associated Publishers, 2006.

Khanna, Sri Ram, Savita Hanspal, Sheetal Kapoor, and H. K. Awasthi, (Eds.). Consumer Affairs. Hyderabad: Universities Press, 2007

Leftwhich, Richard H. and Eckert Ross D. Price System and Resource Allocation. Ninth edition. Chicago, IL: Dryden Press, 1985.

Lipsey, Richard G. Introduction to Positive Economics. Sixth edition. London: Weinderfeld and Nicolson, 1983.

Morris, Jullian and Lynn Searlett. Buying Green: Consumers, Product Labels and Environment. Washington, D.C.: Reason Foundation, 1996.

Nader, Ralph. The Consumer and Corporate Accountability. New York, N.Y.: Harcourt Brace Jovanovich, Inc., 1973.

The Competition Act, 2002

Watson, Donald D. and Holman, Mary A. Price Theory and Its Uses. Fourth edition. Boston, Mass.: Houghton Mifflin, 1977.

Case 25.5 Consumer Rights Originated in India

Contrary to popular beliefs, consumer protection is neither Western nor modern. India's ancient rulers thought about and enacted laws on consumer protection and implemented them effectively. The services of repairers, smiths, weavers, washermen, tailors, doctors and entertainers were all controlled with their responsibilities fixed and punishment for violation of laws. Merchants, artisans and craftsmen had to become members of respective guilds.

If a goldsmith removed gold with the help of chemicals under the pretext of discovering substitution, it was a punishable offence. An exhaustive description of the methods of pilferage, fraud and deception has been given in ancient texts and the methods of detecting them along with the punishment for each such detected deception are meticulously spelt out.

The craftsman, or on his death, the respective guild, must compensate the owner if the entrusted article is lost or destroyed. The artisans had to complete the work agreed upon within the stipulated time failing which their wages would be reduced by one-quarter, with a fine which was highest if one used fraudulent scales. The permitted deviation in weight and measurement was 1/400th. Punishable offences included under-weighing, miscounting, misrepresentation, showing one product and selling another and adulteration of products. Consumers’ interests were protected for all kinds of short-selling.

Washermen were to wash the clothes on wooden boards or smooth stone slabs. If clothes were lost or damaged, they had to pay compensation. If they used customers’ clothes, they had to pay a fine of three panas (approximately a week's earning). Hiring out their clothes invited a fine of 12 panas. If washed and dyed garments were not returned in time, the customer was not charged. For cartelization, the fine was 1,000 panas. In medical services, doctors who did not warn patients about treatment causing danger to life or physical deformity or damage to vital organs were punished. If the patient got deformed or died due to the doctor's treatment, the doctor was punished. Death due to wrong treatment got a higher punishment. All these are codified in Arthashastra by Chanakya who, sometime between 300 BC and 150 AD, compiled the codes of practices that had been in existence much before.


Courtesy: S. Pushpavanam, Secretary, Consumer Protection Council, Tamil Nadu. Published with the author's permission.