The Supreme Court has upheld the validity of the Consumer Protection Act, 2019 provisions, ruling that pecuniary jurisdiction must be based on the actual amount paid for goods or services, not the compensation claimed.
New Delhi: The Supreme Court affirmed the constitutionality of key sections within the Consumer Protection Act of 2019, specifically those outlining the financial limits of authority for District, State, and National Consumer Forums.
A panel of Justices P.S. Narasimha and Manoj Misra validated Sections 34, 47, and 58.
These sections stipulate that the jurisdiction of Consumer Commissions should be determined by the actual price paid for the product or service, rather than the amount of compensation sought by the consumer.
The Court stated,
“The classification of claims based on the value of goods and services paid as consideration has a direct nexus to the object of creating a hierarchical structure of judicial remedies through tribunals.”
Consequently, the Court rejected petitions challenging the provisions that define the financial jurisdiction of the District, State, and National Consumer Commissions.
The Court addressed a writ petition filed under Article 32 of the Constitution, as well as a civil appeal stemming from a ruling by the National Consumer Disputes Redressal Commission (NCDRC).
The writ petition contested the change introduced by the 2019 Act, where financial jurisdiction is now based on the value of the consideration paid, differing from the previous 1986 Act, which used the compensation sought.
The petitioner recounted that her husband had purchased a Ford Endeavour Titanium for Rs.31.19 lakh, which tragically caught fire, resulting in his death.
A consumer complaint seeking Rs.51.49 crore in compensation was filed with the District Commission in Vadodara. The petitioner argued that, under the 1986 Act, she could have directly approached the NCDRC, given the compensation amount.
In a related civil appeal, another petitioner, whose husband died from COVID-19, sought Rs.14.94 crore from the NCDRC under an insurance policy. However, her claim was denied because the policy’s consideration did not exceed Rs.10 crore.
The petitioners argued that the revised jurisdiction determination created an inconsistency, unfairly distinguishing between consumers with similar compensation claims but different consideration amounts for their goods or services. They asserted that the new system was arbitrary and violated Article 14 of the Constitution.
The Supreme Court dismissed this argument, asserting that the classification based on the value of consideration was neither discriminatory nor arbitrary.
The Court observed,
“Vesting jurisdiction in the district, state or national commission on the basis of value of goods or services paid as consideration is neither illegal nor discriminatory… ‘Consideration’ is an integral part of forming any contract. As we are not dealing with gratuitous agreements, value of consideration can be a valid basis for classifying claims for determining pecuniary jurisdiction.”
The Court further explained that the legislative change aimed to alleviate the excessive caseload on the NCDRC and prevent inflated compensation claims that often bypassed the jurisdiction of District and State Commissions.
The Court stated,
“There is also a misconception that there is some kind of a loss of judicial remedy. No such event has occurred because of Sections 34, 47 and 58 of the 2019 Act. The relief or compensation that a consumer could claim remains unrestricted and at the same time, access to the state or national commission is not taken away. It is well settled that there is no right or a privilege of a consumer to raise an unlimited claim of compensation and thereby chose a forum of his choice for instituting a complaint,”
The Court emphasized that while consumers can claim any compensation amount, they cannot inflate claims to select a preferred forum.
The Court cited the decision in Nandita Bose v. Ratanlal Nahata to support the principle that courts and tribunals can reassess overvalued claims to prevent abuse.
The judgment also addressed concerns that the new system might restrict high-value insurance claims to District Commissions, as insurance premiums rarely exceed Rs.1 crore.
The Court clarified that this issue pertains to statutory implementation and policy evaluation, rather than a constitutional flaw.
To address these concerns, the Court instructed the Central Consumer Protection Council and the Central Consumer Protection Authority, both established under the 2019 Act, to conduct surveys, performance audits, and advise the government on any necessary adjustments to ensure the statute’s effective and efficient operation.
Furthermore, it stated that the executive branch’s duty to review and audit the performance of statutes is a component of the rule of law.
“Reviewing and assessing the implementation of a statute is an integral part of Rule of Law. The purpose of such review is to ensure that a law is working out in practice as it was intended. If not, to understand the reason and address it quickly.”
In conclusion, the Court dismissed both petitions and upheld the validity of Sections 34, 47, and 58 of the Consumer Protection Act, 2019.
The petitioners were represented by Senior Advocate Abhimanyu Bhandari along with advocates Haresh Raichura, Shreeyash Lalit, Saroj Raichura, Kalp Raichura, Rajat Vats, Somesh Tiwari, Utsav Saxena, Shubhankar Singh, Aashna Mehra and Manisha Ambwani.
The respondents were represented by Additional Solicitor General Vikramjit Banerjee along with advocates Nachiketa Joshi, Anmol Chandan, Priyanka Das, TS Sabarish, A Deb Kuamar, Shreekant Neelappa Terdal, Amrish Kumar and Viresh B Saharya.
Case Title : Rutu Mihir Panchal & Ors. vs. Union of India & Ors.
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