Who is Consumer- Business Law

Who is a Consumer as per Consumer Protection Act 1986

Introduction:The industrial revolution and the development in the international trade and commerce has led to the vast expansion of business and trade, as a result of which a variety of consumer goods have appeared in the market to cater to the needs of the consumers and a host of services have been made available to the consumers like insurance, transport, electricity, housing, entertainment, finance and banking. A well organized sector of manufacturers and traders with better knowledge of markets has come into existence, thereby affecting the relationship between the traders and the consumers making the principle of consumer sovereignty almost inapplicable. The advertisements of goods and services in television, newspapers and magazines influence the demand for the same by the consumers though there may be manufacturing defects or imperfections or short comings in the quality, quantity and the purity of the goods or there may be deficiency in the services rendered. In addition, the production of the same item by many firms has led the consumers, who have little time to make a selection, to think before they can purchase the best. For the welfare of the public, the glut of adulterated and sub-standard articles in the market have to be checked. This necessitated a separate law to protect consumers interests and provide a means of justice.

Necessity of Consumer Protection Act:

The moment a person comes into this world, he starts consuming. He needs clothes, milk, oil, soap, water, and many more things and these needs keep taking one form or the other all along his life.

Thus we all are consumers in the literal sense of the term. When we approach the market as a consumer, we expect value for money, i.e., right quality, right quantity, right prices, information about the mode of use, etc. But there may be instances where a consumer is harassed or cheated.

The Government understood the need to protect consumers from unscrupulous suppliers, and several laws have been made for this purpose. We have the Indian Contract Act, the Sale of Goods Act, the Dangerous Drugs Act, the Agricultural Produce (Grading and Marketing) Act, the Indian Standards Institution (Certification Marks) Act, the Prevention of Food Adulteration Act, the Standards of Weights and Measures Act, etc. which to some extent protect consumer interests. However, these laws require the consumer to initiate action by way of a civil suit involving lengthy legal process which is very expensive and time consuming.

The Consumer Protection Act, 1986 was enacted to provide a simpler and quicker access to redressal of consumer grievances. The Act for the first time introduced the concept of ‘consumer’ and conferred express additional rights on him. It is interesting to note that the Act does not seek to protect every consumer within the literal meaning of the term. The protection is meant for the person who fits in the definition of ‘consumer’ given by the Act.

Now we understand that the Consumer Protection Act provides means to protect consumers from getting cheated or harassed by suppliers.

The question arises how a consumer will seek protection ? The answer is the Act has provided a machinery whereby consumers can file their complaints which will be entertained by the Consumer Forums with special powers so that action can be taken against erring suppliers and the possible compensation may be awarded to consumer for the hardships he has undergone. No court fee is required to be paid to these forums and there is no need to engage a lawyer to present the case.

Consumer Protection Act 1986: In order to provide for better protection of the interests of the consumer the Consumer Protection Bill, .1986 was introduced in the Lok Sabha on 5th December, 1986. It is called ACT 68 OF 1986. The Consumer Protection Bill, 1986 was passed by both the Houses of Parliament and it received the assent of the President on 24th December, 1986. It came on the Statutes Book as the Consumer Protection Act, 1986 (68 of 1986).

LIST OF AMENDING ACTS:
1. The Consumer Protection (Amendment) Act, 1991 (34 of 1991).
2. The Consumer Protection (Amendment) Act, 1993 (50 of 1993).
3. The Consumer Protection (Amendment) Act, 2002 (62 of 2002).

An Act to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and for matters connected therewith. It was enacted by Parliament in the Thirty-seventh Year of the Republic of India as follows:-

(1)Short title, extent, commencement and application.This Act may be called the Consumer Protection Act, 1986.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date I as the Central Government may, by notification, appoint and different dates may be appointed for different States and for different provisions of this Act.
(4) Save as otherwise expressly provided by the Central Government by notification, this Act shall apply to all goods and services.

Explanation on Point 2 as above: Jammu and Kashmir one of the most beautiful states of India is also the fulcrum of issues marring India’s Peace Drive. Because of this controversial side of J&K and as the living conditions are not the same compared to rest of India it does not fall under the purview of consumer protection legislation. But as we know rules are substratum for harmonious living, a separate act that is Jammu and Kashmir Consumer Protection act was introduced in 1987.

Statement of Objects and Reasons:
The Consumer Protection Bill, 1986 seeks to provide for better protection of the interests of consumers and for the purpose, to make provision for the establishment of Consumer councils and other authorities for the settlement of consumer disputes and for matter connected therewith.
2. It seeks, inter alia, to promote and protect the rights of consumers such as-
(a) the right to be protected against marketing of goods which are hazardous to life and property;
(b) the right to be informed about the quality, quantity, potency, purity, standard and price of goods to protect the consumer against unfair trade practices;
(c) the right to be assured, wherever possible, access to an authority of goods at competitive prices;
(d) the right to be heard and to be assured that consumers interests will receive due consideration at appropriate forums;
(e) the right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers; and
(f) right to consumer education.
3. These objects are sought to be promoted and protected by the Consumer Protection Council to be established at the Central and State level.
4. To provide speedy and simple redressal to consumer disputes, a quasi-judicial machinery is sought to be setup at the district, State and Central levels. These quasi-judicial bodies will observe the principles of natural justice and have been empowered to give relief of a specific nature and to award, wherever appropriate, compensation to consumers. Penalties for non- compliance of the orders given by the quasi-judicial bodies have also been provided.

Definition of Consumer as per the CPA 1986:

By definition "consumer" means any person who-

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) Subs. by Act 50 of 1993, sec. 2 (w.e.f. 18-6-1993) which added the text “hires or avails of” any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who “hires or avails of” the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment,when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services of any commercial purpose.

Explanation- "commercial purpose" does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment.

Who is a consumer then and what does he actually consume?:

A consumer can consume goods or services. Let us now understand more on how the definition differs with respect to the goods and services.

Consumer of goods - The provision reveals that a person claiming himself as a consumer of goods should satisfy that—
(A) THE GOODS ARE BOUGHT FOR CONSIDERATION - There must be a sale transaction between a seller and a buyer; the sale must be of goods; the buying of goods must be for consideration. The terms sale, goods, and consideration have not been defined in the Consumer Protection Act. The meaning of the terms ‘sale’, and ‘goods’ is to be construed according to the Sale of Goods Act, and the meaning of the term ‘consideration’ is to be construed according to the Indian Contract Act.

(B) ANY PERSON WHO USE THE GOODS WITH THE APPROVAL OF THE BUYER IS A CONSUMER - When a person buys goods, they may be used by his family members, relatives and friends. Any person who is making actual use of the goods may come across the defects in goods. Thus the law construe users of the goods as consumers although they may not be buyers at the same time. The words “....with the approval of the buyer” in the definition denotes that the user of the goods should be a rightful user.
Example : A purchased a Car which was in B’s possession from the date of purchase. B was using it and taking it to the seller for repairs and service from time to time. Later on B had a complaint regarding the Car. He sued the seller. The seller pleaded that since B did not buy the Car, he was not a consumer under the Act. The Delhi State Commission held that B, the complainant was using it with the approval of A, the buyer, and therefore he was consumer under the Act. [Dinesh Bhagat vs. Bajaj Auto Ltd. (1992) III CPJ 272]
(C) ANY PERSON WHO OBTAINS THE GOODS FOR ‘RESALE’ OR COMMERCIAL PURPOSES’ IS NOT A CONSUMER - The term ‘for resale’ implies that the goods are brought for the purpose of selling them, and the expression ‘for commercial purpose’ is intended to cover cases other than those of resale of goods. When goods are bought to resell or commercially exploit them, such buyer or user is not a consumer under the Act.
Examples : 1. A jeep was purchased to run it as a taxi. The question was whether the buyer of the jeep was a consumer under the Act. The Rajasthan State Commission held that to use the jeep as a taxi with the object to earn profits was a commercial purpose, and therefore, the buyer/user was not a consumer within the meaning of the Act. [Smt. Pushpa Meena v. Shah Enterprises (Rajasthan) Ltd. (1991) 1 CPR 229]. 2. Y Ltd. purchased a computer system from Z. The computer system was giving constant trouble and Z was not attending it properly. Y Ltd. filed a complaint against Z with the National Commission. Z contended that Y Ltd. was not a consumer under the Act because computer system was used for commercial purposes. Y Ltd. argued that computer system was not directly used of commercial purposes rather it was used to facilitate the work of the company. The Commission rejected the argument on the grounds that the system made part of the assets of the company, and its expenses were met by it out of business income. Thus the said purchase was a purchase for commercial purposes and Y Ltd. was held not to be a consumer under the Act.
One thing is plain and clear from the decided cases that what is important to decide is - Whether a particular good is used for commercial purposes. If it is the buyer/user is not a consumer, and if it is not - the buyer/user is a consumer.

(D) PERSON BUYING GOODS FOR SELF EMPLOYMENT IS A CONSUMER - When goods are bought for commercial purposes and such purchase satisfy the following criteria : - the goods are used by the buyer himself; - exclusively for the purpose of earning his livelihood; - by means of self-employment, then such use would not be termed as use for commercial purposes under the Act, and the user is recognised as a consumer.
Examples : 1. A buys a truck for plying it as a public carrier by himself, A is a consumer. 2. A buys a truck and hires a driver to ply it, A is not a consumer. 3. A has one cloth shop. He starts another business of a photocopier and buys a photocopy machine therefor. He has not bought this machine exclusively for the purpose of earning livelihood. He is not a consumer under the Act.

The intention of the legislature is to exclude big business houses carrying on business with profit motive from the purview of the Act. At the same time it is pertinent to save the inter­ests of small consumers who buy goods for self employment to earn their livelihood, like a rickshaw puller buying rickshaw for self employment, or a farmer purchasing fertilizer for his crops, or a taxi driver buying a car to run it as a taxi, etc.
Example : A was running a small type institute to earn his livelihood. He purchased a photocopy machine-canon NP 150. It proved defective. He sued the seller who contended that A is not a consumer under the Act as he purchased the photocopier for commercial use. The Commission held that by no stretch of imagination it can be said that the photocopier would bring large scale profits to A. It was a part of his small scale enterprise. He was construed as consumer under the Act.
However, if such a buyer takes assistance of two or more persons to help him in operating the vehicle or machine, etc., he does not cease to be a consumer.
Examples : 1. A buys a truck, ply it himself and hires a cleaner who accompany him all the time and at times drives also when A is busy otherwise, A is a consumer. 2. P, an eye surgeon, purchased a machine from R for the hospital run by him. The machine was found to be a defective one. R contended that P was not a consumer under the Act as the ma­chine was bought for commercial purposes. The National Commission rejected this contention and held that P is a medical practitioner, a professional working by way of self employment by using his knowledge and skill to earn his livelihood. It was not proved by any evidence that P is running a huge hospital. Thus the purchase of machinery is in the nature of self employment. [Rampion Pharmaceuticals v. Dr. Preetam Shah (1997) I CPJ 23 (NCDRC)].

Consumer of services - A person is a consumer of services if he satisfy the following criteria :

(A) SERVICES ARE HIRED OR AVAILED OF - The term ‘hired’ has not been defined under the Act. Its Dictionary meaning is - to procure the use of services at a price. Thus the term ‘hire’ has also been used in the sense of ‘avail’ or ‘use’. Accordingly it may be understood that consumer means any person who avails or uses any service.
Example : A goes to a doctor to get himself treated for a fracture. Here A is hiring the services of the doctor. Thus he is a consumer.
What constitutes hiring has been an issue to be dealt with in many consumer disputes. If it is established that a particular act constitutes hiring of service, the transaction falls within the net of the Consumer Protection Act, and vice-versa.
Examples : 1. A passenger getting railway reservation after payment is hiring service for consideration. 2. A landlord neglected and refused to provide the agreed amenities to his tenant. He filed a complaint against the land­lord under the Consumer Protection Act. The National Commission dismissed the complaint saying that it was a case of lease of immovable property and not of hiring services of the landlord. [Smt. Laxmiben Laxmichand Shah v. Smt. Sakerben Kanji Chandan [1992] 1 Comp. LJ 177 (NCDRC)]. 3. A presented before the Sub-Registrar a document claiming it to be a will for registration who sent it to the Collector of Stamps for action. The matter remain pending for about six years. In the meantime A filed a complaint under the Consumer Protection Act alleging harassment by the Sub-Registrar and Collector and prayed for compensation. The National Commission held the view that A was not a “consumer” under the CPA. Because there was no hiring of services by the complainant for consideration and because a Government official doing his duty as functionary of the State under law could not be said to be rendering a service to the complainant. [S.P. Goel v. Collector of Stamps (1995) III CPR 684 (SC)].

(B) CONSIDERATION MUST BE PAID OR PAYABLE - Consideration is regarded necessary for hiring or availing of services. However, its payment need not necessarily be immediate. It can be in installments. For the services provided without charging anything in return, the person availing the services is not a consumer under the Act.
Examples : 1. A hires an advocate to file a suit for recovery of money from his employer. He promises to pay fee to the advocate after settlement of the suit. A is a consumer under the Act. 2. A goes to a Doctor to get himself treated for a fracture. The Doctor being his friend charged him nothing for the treatment. A is not a consumer under the Act. 3. B issued an advertisement that a person could enter the contest by booking a Premier Padmini car. S purchased the car and thus entered the contest. He was declared as winner of the draw and was thus entitled to the two tickets from New Delhi to New York and back. S filed a complaint alleging that the ticket was not delivered to him. The National Commission held that S was not a consumer in this context. He paid for the car and got it. B was not liable so far as the contract of winning a lottery was concerned. [Byford v. S.S. Srivastava(1993) II CPR 83 (NCDRC)].
The Direct and Indirect taxes paid to the State by a citizen is not payment for the services rendered.
Example : T was paying property tax for his house to the local corporation. This corporation was responsible for proper water supply to the premises under its work area. T raised a consumer dispute over the inadequacy of water supply by the corporation. The National Commission held that it was not a consumer dispute as water supply was made by the corporation out of its statutory duty and not by virtue of payment of taxes by T. - Mayor, Calcutta Municipal Corporation v. Tarapada Chatterjee (1994) 1 CPR 87 (NCDRC).

(C) BENEFICIARY OF SERVICES IS ALSO A CONSUMER - When a person hires services, he may hire it for himself or for any other person. In such cases the beneficiary (or user) of these services is also a consumer.
Example : A takes his son B to a doctor for his treatment. Here A is hirer of services of the doctor and B is beneficiary of these services. For the purpose of the Act, both A and B are consumers.
Note : This is an exception to the rule of privity to the con­tract.
Note that in case of goods, buyer of goods for commercial purpose ceases to be a consumer under the Act. On the other hand, a consumer of service for commercial purpose remains a consumer under the Act.
Examples :

1.S applied to Electricity Board for electricity connection for a flour mill. There was a delay in releasing the connection. S made a complaint for deficiency in service. He was held a consumer under the Act. - Shamsher Khan v. Rajasthan State Electricity Board (1993) II CPR 6 (Raj.).

2.The student is a consumer of service of educational institute; Sushant Yuvaraj Rode v; Shri Ramdeo baba Engineering College, 1993 (III) CPR 624.

Who is not a consumer then?:

(i) Persons buying goods either for re-sale or for use in large scale profit making activity will not be `consumers’ entitled to protection under the Act; Raj Kumar v. S.C. Verma, 2001 (1) CPR 437. (ii) The government servants and the staff of the Accountant General Office of the Comptroller and Auditor General maintains the records of provident fund of government servants, issue slips of deposits of fund and on retirement final payments are made to the subscribers. The government servants and the staff of the Accountant General in discharging their duties does not render any service for consideration, nor hiring of any service is involved hence, maintenance of General Provident Fund Accounts does not fall within the meaning of `service’; Hari Vallabh Vijay v. Administration Officer, 2001 (1) CPR 529.

(iii) The insurance company is not a consumer. Hence the consumer complaint by insurance company is not maintainable; Savani Road Lines v. Sundaram Textiles Ltd., AIR 2001 SC 2630 (iv) The repudiation of the claim by the Insurance Company on the ground that the driver was not holding a valid driving license at the time of the accident could not be termed as deficiency in service or negligence on the part of the Insurance Company within the meaning of section 2 (g) of the Act; New India Assurance Co. Ltd. v. Smt. Pushpa Yashwant Ghatge, I996NCJ 195.

(v)A licensee to run a phone is not a consumer; Techno Combine Associates vs. Union of India, I (1994) CPJ 481: 1994 (I) CPR 298.
(vi) A lottery ticket holder is not "consumer" within the ambit of the definition of "consumer" under the Act; Jagdish Chand v. Director, Sikkim State Lottery, 1994 (I) CPR213.
(vii) Applicant who merely applies for allotment of shares is not a consumer; HG Bhatia v. ABC Computers Pvt. Ltd., 1994 (I) CPR 316.
(viii) The beneficial consumer jurisdiction cannot be extended to lotteries and wagering transactions or consequential rights flowing from void contracts; Jagdish Chand vs. Director, Sikkim State Lotteries, 1994 (I) CPR 213.
(ix) A person who receives medical treatment in a Government hospital is not a consumer under the Act; Consumer Unity & Trust Society v. State of Rajasthan, (1991) I CPR 241. However, the State Commission of Orissa held that a patient is a Consumer being the beneficiary of services in as much as the State Government is paying the consideration amount in the form of salary to the doctors and hospital staff; Smt. Sukanti Behera v. Dr. Sashi Bhusan Rath, II (1993) CPJ 633.

Consumer Protection in UAE:

Consumer Protection Law No. 24 of 2006 protects the rights of consumers in UAE. It is a Federal Law and has been promulgated with 24 Articles covered under 5 chapters issued on 13th August,2006 by UAE President His Majesty Shaikh Khalifa Bin Zayed Al Nahyan.

Consumer Rights as stated in Consumer Protection Law No. (24) 2006:
1.The Right to Safety: To be protected from products, production processes and services that may cause harm to health and safety
2.The Right to Know:To know the accurate information concerning the goods and services (ex: original products, for food to mention expiry date & ingredients, others).
3.The Right to Choose:Right to have multiple options of items and services in competitive prices and quality.
4.The Right to Representation:The right to express opinions to develop the goods, services, prices and availability
5.The Right to Be Informed:Acquisition of knowledge and skill and awareness of consumer rights and responsibilities through continuous awareness programs.
Consumer Code of Rights:

1. Goods must meet a level of quality and performance that would be reasonable to expect, given their price and specifications
2. Goods must be suitable for the purpose that the seller conveys to the consumer, and match the description given to the consumer
3. Services must be carried out with due care and skill
4. Materials used in connection with a service should meet customer requirements
5. Where there are problems with goods or services provided, consumers have rights to remedies as in the form of:
Repairs, replacements and refunds depending on the nature of goods
Having services supplied again or refund its value if cannot be done again.
Conclusion:
We have covered in this essay the need for the consumer protection and who is a consumer as per Indian Act and the UAE Act. We also discussed who is a consumer and who is not a consumer to understand the topic in a more clear perspective. We have several case laws discussed in the examples to understand the implementation of who is a consumer and who is not a consumer under the act from various judgment outcomes.
In essence a consumer has got the importance and necessary protection from being cheated or ending up in a loss and his rights have been reassured by the consumer protection act and an easy way of raising a complaint and getting his grievance redressed has become more robust and less cumbersome.
Despite the availability of the options for consumer, still there is less awareness among general population as to their consumer rights and quite often the retailers/manufacturers are still benefiting out of such lack of awareness.
We hope a thorough understanding on who is a consumer and what are his rights are well understood from our essay.