Consumer

From Justice Definitions Project

Who is a Consumer?

The term consumer can widely refer to any person or entity who purchases a good or avails a service. In India, the jurisprudence around consumer affairs revolves around the Consumer Protection Act, 2019 and previously the Consumer Protection Act, 1986. Black’s Law Dictionary defines a consumer as

“1. the buyer of a good or service.

2. a user that is not using the product but reselling it.”[1]

The legislation in India has a similar definition; however, the scope of it has been expanded in light of current trends in the country.

Consumer as per Indian legislation

Consumer under the Consumer Protection Act

Consumer is primarily defined in the Indian law in Section 2(7) of the Consumer Protection Act, 2019. The provision defines a consumer as any person who is either a purchaser of goods or is using that good with the permission of the purchaser. It also expands in the domain services with Section 2(7)(ii) defining a consumer as anyone who pays for that service or any other person who benefits from that service with the approval of that person.

Explanation of the provision explicitly prohibits the inclusion of anyone who purchases any good or service for commercial purposes or as a means of earning a livelihood.

However, as far as filing a consumer complaint is concerned, Section 2(5) allows that not only the purchaser but also any consumer association, the government, the Central Authority under the Act, the legal heir of the consumer, as well as the parent or the legal guardian of the consumer to file a complaint.

Changes made in the Amended Act

The original act, passed in 1986, went through changes in 2019, taking into account the changing nature of consumer affairs in the country, particularly with the rise of the internet. The 2019 Act explicitly includes online retailers and brings them under the ambit of the Act. The explanation of Section 2(7) includes both offline and online transactions through electronic means. The new Act also defines an electronic service provider as per Section 2(17). The 1986 Act was brought at a time when there was negligible internet penetration in India. The 2019 Act is cognizant of the newer kinds of consumer disputes, and with online retailers having their own obligations under the Act, which include disclosure obligations, refund obligations and no-cancellation-fee rules.

The definition of services has also been expanded under the 2019 Act with the inclusion of telecom, housing construction, and entertainment, among others.

Furthermore, the 2019 Act also expands the ambit of the complainant with legal heir, legal representative, parent/guardian of a minor, as well as the newly established Central Authority, being included under Section 2(5).

Consumer under other statutes in India

Besides the Consumer Protection Act, the term consumer also finds description in the Competition Act, 2002. Section 2(f) has a similar definition of consumer as it exists in the Consumer Protection Act, stating that a consumer is any person who purchases any goods or hires or avails any services.[2]

Besides this, a definition of the term consumer is also present in the Electricity Act, 2003. Section 2(15) of the Act states that a consumer is any person who is supplied with electricity. Albeit, this definition of consumer is only within the context of the Act and is not a generalized definition of consumer with regard to consumer affairs.[3]

There are many other legislations within the country that add to consumer rights, such as the Food Safety and Standards Act, 2006,[4] as well as the Telecom Regulatory Authority of India Act, 1997 (TRAI Act).[5] However, they do not explicitly give a definition of as to who a consumer is, with many relying on the Consumer Protection Act for it.

International Experience

Few countries have the term consumer in their statutes defined as comprehensively as it is in India. In many of these countries, consumer laws have either been clubbed with statutes of competition laws, such as the Competition and Consumer Act 2010 of Australia. Some of these countries have legislation adding to consumer rights at national and even at provincial levels.[6] They, however, do not have a dedicated legislation for it, which can be considered a counterpart of the Consumer Protection Act in India.

Notably, consumer rights are primarily dealt with by the Federal Trade Commission Act (FTC Act).[7] While the FTC Act does add to the consumer rights jurisprudence, the term consumer finds a definition only in the Magnuson-Moss Warranty Act, 1975.[8] Consumer in the Act has been defined as a buyer of any consumer product, any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product, and any other person who is entitled by the terms of such warranty. This term, however, excludes anyone who purchases anything for the purpose of resale.

The United Kingdom, however, has a dedicated legislation to consumer protection, namely the Consumer Rights Act of 2015. Consumer has been defined in Chapter I of the Act, which elucidates it as an individual acting for purposes that are wholly or mainly outside that individual's trade, business, craft or profession.[9]

Within EU law, the consumer is defined under Directive 2011/83/EU of 2011.[10] Article 2(1) of the Directive defines it as a natural person who, for the contracts under the Directive, is not acting within their trade, business, among others. This can be further interpreted through Recital 17 of the Directive, even if the contract concluded is partly within the contract, and the purpose of the trade is highly limited, the person would still fall within the category of a consumer. All in all, while commercial transactions are mostly ruled out, certain exceptions to a limited degree are still there.

Similarly, in New Zealand, the Consumer Guarantees Act 1993, while including the acquirer of goods or services for consumption in the definition of consumer, as per Section 2(1) of the Act, excludes anyone who resupplies the goods or uses them for further manufacture.[11]

All in all, much like India, most legislation recognizing consumers only includes those who intend to benefit directly from that good or service and excludes those who will use them for further transactions. However, in some cases, certain exceptions to a limited extent are allowed, such as the 2011 EU Directive. The exceptions that can be considered depend a lot on the circumstances of the case.

Case Laws

Commercial entities and purpose of transaction

Karnataka Power Transmission Corporation v. Ashok Iron Works Pvt. Ltd.

In Karnataka Power Transmission Corporation and Another v. Ashok Iron Works Private Limited, the Supreme Court, distinguishing between the 'supply' and 'sale' of electricity, added to the definition of consumer, holding that a private limited company can be considered a consumer under Section 2(1)(d) of the Act and would not necessarily be excluded due to supposedly commercial nature of the transaction.[12]

However, the Supreme Court, in furtherance of the definition of consumer, ruled in The Chief Manager, Central Bank of India v M/s Ad Bureau Advertising, that a company taking a loan for commercial purposes does not qualify as a 'consumer'.[13]

However, despite the Act using the term “person”, firms can also come under the scope of the definition of consumer, in accordance with Section 2(31) of the Consumer Protection Act, 2019. In National Insurance Co. Ltd. v. Harsolia Motors and Others, the Supreme Court ruled that companies will still be considered consumers while purchasing insurance. The core contention was that even if the action was by a commercial entity, as long as the purpose was not commercial, it would still fall within the definition of consumer.[14]

Housing and service-based transactions

Lucknow Development Authority v. M.K. Gupta

Homebuyers can also come under the scope of the definition of consumer as established in Lucknow Development Authority v. M.K. Gupta, as housing construction would come under services.[15]

Limits of consumer protection and excluded relationships

Consumer Unity and Trust Society v. CMD, Bank of Baroda

Consumer protection is limited to contractual, market-based service relationships. However, consumer status does not automatically entitle a party to compensation in the absence of statutory deficiency or negligence, as held in Consumer Unity & Trust Society v. Chairman & Managing Director, Bank of Baroda.[16] Students and government servants are excluded from the Act, consistent with the legislative intent in Rajeev Metal Works v. Mineral & Metal Trading Corpn. of India Ltd[17] to confine redressal to services contracted with consumers and to exclude non-consumer and commercial relationships.

This is reaffirmed in Union of India v. Shreepat Rao Kamde, Dr. Jagmittar Sain Bhagat & Ors v. Dir. Health Services, Haryana.[18] and Rajendra Kumar Gupta v. Dr Virendra Swarup Public School & Anr., N. Taneja v. Calcutta Distt. Forum [19]

Sovereign and statutory functions of the State

Consumer Unity and Trust Society v. State of Rajasthan

Consumer status arises only from hiring services for consideration in a market sense and excludes interactions where the State acts in a sovereign or statutory capacity. Accordingly, medical treatment in government hospitals and statutory dealings with the State do not create a consumer relationship, as held in Consumer Unity and Trust Society v. State of Rajasthan,[20] Ministry of Commerce v. Vinod and Co.,[21] and S.P. Goel v. Collector of Stamps.[22]

Requirement of privity of contract

M/s Citicorp Finance India Ltd. v. Snehasis Nanda

Furthermore, in M/S Citicorp Finance (India) Limited v. Snehasis Nanda, it has been held by the Supreme Court that in order for a party to be declared a consumer, it is imperative that there is privity of contract between them.[23]

Consumer status under electricity laws

State of Mysore v. West Coast Papers Mills Ltd.

Consumer status as associated with the Electricity Act, attaches only to the person who is the direct beneficiary as held in State of Mysore v. West Coast Papers Mills Ltd[24] and end-user of the service for which consideration is paid. Mere ownership of property, incidental advantage, or facilitation of service delivery does not create a consumer relationship in the absence of actual availing and benefit as held in several cases some of which include ITC Ltd. v. Forum for Redressal of Consumer Grievances and Karingula Narasimha Reddy v. Consumer Grievances Redressal Forum of Northern Power Distribution Company of A.P. Limited. [25] [26]

Related terms

The term “consumer” is often used synonymously with the term “complainant”. While this is true that most complainants are consumers only, this is not always the case. Section 2(5) of the Consumer Protection Act, 2019, clearly establishes that apart from the consumers themselves, any legally registered consumer association, the government, the Central Authority as established under Section 10 of the Act, the legal heir of the consumers, as well as the parent or legal guardian of a consumer who has not reached the age of majority.

References

  1. ↑ Consumer Protection Act 2019 (India).
  2. ↑ Competition Act 2002 (India).
  3. ↑ Electricity Act 2003, No 36 of 2003 (India).
  4. ↑ Food Safety and Standards Act 2006, No 34 of 2006 (India).
  5. ↑ Telecom Regulatory Authority of India Act 1997, No 24 of 1997 (India).
  6. ↑ Competition and Consumer Act 2010 (Cth) No 51 of 1974.
  7. ↑ Federal Trade Commission Act 1914, 15 USC §§ 41–58 (US).
  8. ↑ Magnuso-Moss Warranty Act 1975, 15 USC §§ 2301–2312 (US).
  9. ↑ Consumer Rights Act 2015 (UK).
  10. ↑ Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights [2011] OJ L304/64.
  11. ↑ Consumer Guarantees Act 1993 (NZ) s 2(1).
  12. ↑ Karnataka Power Transmission Corporation Ltd v Ashok Iron Works (P) Ltd (2009) 3 SCC 240.
  13. ↑ Chief Manager, Central Bank of India v Ad Bureau Advertising (P) Ltd (1997) 2 SCC 270.
  14. ↑ National Insurance Co Ltd v Harsolia Motors (2003) 2 CPJ 27 (SC).
  15. ↑ Lucknow Development Authority v MK Gupta (1994) 1 SCC 243.
  16. ↑ Consumer Unity & Trust Society v Chairman & Managing Director, Bank of Baroda (1995) 4 SCC 482.
  17. ↑ Rajeev Metal Works v Mineral & Metal Trading Corpn of India Ltd (1996) 2 SCC 167.
  18. ↑ Union of India v Shreepat Rao Kamde (1999) 7 SCC 1; Dr Jagmittar Sain Bhagat v Director, Health Services, Haryana(2013) 10 SCC 136.
  19. ↑ Rajendra Kumar Gupta v Dr Virendra Swarup Public School (2004) 1 CPJ 25 (NC); N Taneja v Calcutta District Forum(1994) 1 CPJ 37 (NC).
  20. ↑ Consumer Unity & Trust Society v State of Rajasthan (1991) 1 SCC 251.
  21. ↑ Ministry of Commerce v Vinod & Co (1997) 10 SCC 715.
  22. ↑ SP Goel v Collector of Stamps (1996) 1 SCC 573.
  23. ↑ Citicorp Finance (India) Ltd v Snehasis Nanda (2008) 13 SCC 305.
  24. ↑ State of Mysore v West Coast Paper Mills Ltd (1972) 2 SCC 336.
  25. ↑ ITC Ltd v Forum for Redressal of Consumer Grievances 2010 SCC OnLine AP 547.
  26. ↑ Karingula Narasimha Reddy v Consumer Grievance Redressal Forum, Northern Power Distribution Co of AP Ltd 2012 SCC OnLine AP 454.
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