The Supreme Court has upheld the constitutional validity of key provisions of the Consumer Protection Act, 2019, which prescribed the pecuniary jurisdiction of District, State, and National Consumer forums.
The Bench of Justice PS Narasimha and Justice Manoj Misra upheld Sections 34, 47 and 58 of the 2019 Act, as per which the jurisdiction of the Consumer Commissions was to be determined based on the actual amount paid for the product or service, not on the basis of compensation claimed by the affected party.
The top court of the country held that the classification of claims based on the value of goods and services paid as consideration had a direct nexus to the object of creating a hierarchical structure of judicial remedies through tribunals.
The Bench made these observations while dismissing two petitions, including a writ petition filed under Article 32 of the Constitution, and a civil appeal arising out of an order of the National Consumer Disputes Redressal Commission (NCDRC).
The writ petition challenged the change introduced under the 2019 Act, as per which the pecuniary jurisdiction was determined based on the value of consideration paid and not on the compensation sought, as was the position under the repealed Consumer Protection Act, 1986.
The petitioner contended that her husband had purchased a Ford Endeavour Titanium car for Rs 31.19 lakh, which caught fire and led to his death.
A consumer complaint claiming Rs 51.49 crore in compensation was filed before the District Commission at Vadodara. The petitioner argued that had the 1986 Act still applied, she could have directly approached the NCDRC, given the amount claimed as compensation.
In the connected civil appeal, another petitioner whose husband died due to Covid-19 approached the NCDRC seeking Rs 14.94 crore compensation under an insurance policy. However, her claim was rejected since the consideration for the policy did not exceed Rs 10 crore.
The petitioners argued that the change in determining jurisdiction created an anomaly, discriminating between consumers who might have identical compensation claims but paid different consideration for their goods or services. They contended that the new system was arbitrary and violated Article 14 of the Constitution.
The Apex Court rejected their argument and ruled that classification based on the value of consideration was neither discriminatory nor arbitrary.
Noting that it was not dealing with gratuitous agreements, the Bench held that consideration was an integral part of forming any contract, and the value of consideration could be a valid basis for classifying claims for determining pecuniary jurisdiction.
It said the legislative shift was intended to address the disproportionate burden of cases on the NCDRC and prevent inflated compensation claims that often ousted the jurisdiction of District and State Commissions.
Regarding the misconception of a loss of judicial remedy, the top court of the country said no such event had occurred because of Sections 34, 47 and 58 of the 2019 Act. The relief or compensation that a consumer could claim remained unrestricted. At the same time, access to the state or national commission was not taken away. It was well settled that there was no right or privilege of a consumer to raise an unlimited claim of compensation and thereby choose a forum of his choice for instituting a complaint, it added.
The top court of the country reiterated that while consumers were free to claim any amount of compensation, they could not overvalue their claims to select a preferred forum.
Placing reliance on the decision in Nandita Bose vs Ratanlal Nahata, the Bench ruled that courts and tribunals retained jurisdiction to reassess overvalued claims to prevent the abuse of process.
The Apex Court further addressed the concerns that the new system would restrict large-value insurance claims to District Commissions, since insurance premiums rarely exceed Rs one crore.
Pointing out that this was a matter of statutory working and policy evaluation rather than constitutional flaw, the Bench directed the Central Consumer Protection Council and the Central Consumer Protection Authority, both established under the 2019 Act, to carry out surveys & performance audits, and advise the government about any necessary changes to ensure effective and efficient working of the statute.
It said reviewing and assessing the implementation of a statute was an integral part of the Rule of Law. The purpose of such review was to ensure that a law was working out in practice as it was intended to. If not, it was important to understand the reason and address it quickly, added the Court.