CLASS ACTION SUITS UNDER THE CONSUMER PROTECTION ACT, 1986 Sushma Sosha Philip Introduction: Class Action suits originated as a means of overcoming the impracticalities imposed by a large group of plaintiffs/petitioners in a case and to reduce multiplicity in litigation. The Cambridge dictionary defines class action as a legal action (=a case that is decided in a law court) that is organized by a group of people who all have the same legal problem. 1 These suits also known as multi-district litigation and mass tort litigation are filed in cases of consumer frauds, securities frauds, misconduct in corporate or employment related practices or in cases where injuries have been caused due to the use of defective products, medical drugs motor vehicles, etc. Class Action Suits in employment-related matters may be filed where the employees have suffered from discrimination by age, gender or race, etc. These multiparty suits can also be made in cases of a massive accident where people have suffered widespread personal injuries due to a defective product. While class action suits have met with much success in many countries and have served to ensure that justice is done for large groups of complainants, these suits are only gradually gaining popularity in India and there are various ambiguities regarding the maintainability of such class action complaints. Class Action suits can be filed under various regulations in India such as Section 91, Order 1 Rule 8 of Civil Procedure Code, 1908, Section 12 (1) of Consumer Protection Act, Section 245 of the Companies Act 2013 Article 32 and 226 of the Constitution of India etc. Class-action suits An Evolution: While class action suits are often considered to be a characteristic of the U.S legal system, such suits actually originated in England in the 13 th century and went by the nomenclature group litigation. This means of litigation was devised to overcome the hardships presented by poor communication and transport in the Middle Ages. These cases generally involved an action that affected a community as a whole and a representative of such community would present the case before a court. This practice evolved in the Equity courts of the 17 th Century to involve the granting of bills of peace. 2 Bills of peace were often heard in the Courts of Equity when the number of litigants were so large that a joinder of claims was impractical and very often, impossible. In such cases parties named in the suit had to possess a joint interest or grievance and a judgment, if pronounced, would be binding on all parties named, whether they were present in the court or not. This sort of group litigation fell from popularity towards the end of the 1800s in England. However, at around the same time, Justice Joseph Story of the US Supreme Court began advocating this method of litigation in the United States. 3 In West v. Randall, 4 he defended his reasons for supporting bills of peace by stating that "all persons materially interested, either as plaintiffs or defendants in the subject matter of a bill ought to be made parties to the suit, however numerous they may be. The reason is that Junior Associate-Corporate, Altacit Global 1 Class action, Cambridge Dictionary (2017), available at http://dictionary.cambridge.org/dictionary/english/class-action (last visited 10.02.2017) 2 Class action, The Free Legal Dictionary, available at http://legal-dictionary.thefreedictionary.com/class+action+lawsuit (last visited 12.02.2017) 3 Ibid. 4 29 F. Cas. 718 (R.I. 1820)
the court may be enabled to make a complete decree between the parties [and] prevent future litigation by taking away the necessity of a multiplicity of suits." Initially, in the United States of America, such class action suits were instituted under Federal Equity Rule 48 only in matters of equity and not where there were monetary damages involved. In the course of time, Federal Equity Rule 48 was replaced by Federal Equity Rule 38 which did not mandate that all individual parties in such group litigations be present for the hearing in court. The concept further evolved with the introduction of Rule 23 of the Federal Rules of Civil Procedure in 1938 which allowed for the hearing of cases involving matters of equity as class actions, even where monetary damages were claimed. Consumer Complaints as Class Action Suits in India: The Consumer Protection Act was enacted in India in 1986. It provides legal backing for the protection of consumer rights in India. The primary objective of this legislation is to protect the interests of consumers as has clearly been stated in its preamble. Class action litigation is clear evidence of the fact that the provisions of the Consumer Act have been enacted for the main purpose of safeguarding Consumers as it allows for representative filing of complaints as well as the redressal of the complaint of a group which serves to ease the financial burdens of, and time invested in litigation, rather than forcing complainants to engage in multiple litigations having varying outcomes. S. 12 (1) (c) and (d) of the Consumers Act in India: S. 12(1) (c) and S. 12(1) (d) of the Consumer Protection Act, 1986 provide a clear statutory backing for the institution of class action suits in India. Section 12 of the Consumer Protection Act, 1986 details out the manner in which a complaint is to be filed before the District Consumer Forum. Section 12(1) (c) 5 reads as follows; 12 (1) A complaint in relation to any goods sold or delivered or agreed to be sold or delivered or any service provided or agreed to be provided may be filed with a District Forum by; (c) one or more consumers, where there are numerous consumers having the same interest, with the permission of the District Forum, on behalf of, or for the benefit of, all consumers so interested; It is clear from a plain reading of this section that consumer complaints may be filed before the District Consumer Forum by representatives of and on behalf of a group of consumers having the same interest, provided the permission of such Forum is obtained in this regard. Furthermore, S. 12 (1) (d) of the Act reads as follows; 12 (1) A complaint in relation to any goods sold or delivered or agreed to be sold or delivered or any service provided or agreed to be provided may be filed with a District Forum by; (d) the Central or the State Government, as the case may be, either in its individual capacity or as a representative of interests of the consumers in general. This section empowers the Government of India to file complaints in a representative capacity in the interest of consumers as a class. 5 THE CONSUMER PROTECTION ACT, 1986, available at http://ncdrc.nic.in/bare_acts/consumer%20protection%20act-1986.html. (last visited 5.02.2017)
In 2015, the Government of India instituted a class action suit under Section 12(d) of the Consumer Protection Act, in the NCDRC against Nestle alleging that the company had been indulging in unfair trade practices. 6 This case did not reach a conclusion as the proceedings were stayed by the Supreme Court. 7 In 2016, the question of maintainability of class action complaints instituted under S.12(1)(c) of the Consumer Protection Act, 1986 was discussed and clarified by the National Consumer Disputes Redressal Commission in its landmark decision in the case of Ambrish Kumar Shukla & 21 Ors. v. Ferrous Infrastructure Pvt. Ltd. 8 Significance of Ambrish Kumar Shukla & 21 Ors. v. Ferrous Infrastructure Pvt. Ltd: While the case filed by the Government of India against Nestle evidences the fact that representative complaints are filed in the National Consumer Disputed Redressal Commission (NCDRC), Ambrish Kumar Shukla & 21 Ors. v. Ferrous Infrastructure Pvt. Ltd 9 served to clarify the position regarding the maintainability of complaints filed by a group of individuals under 12 (1) (c) of the Consumer s Act. This was a landmark decision, in that it allows consumers with a common grievance or seeking the same relief to directly approach the NCDRC as a group irrespective of the cause of action, provided that the conditions placed regarding pecuniary jurisdiction of this forum are met. Though this decision was with regard to complaints directed at builders and individuals in the construction industry, there is no bar to its application in consumer cases involving complaints regarding other industries as well. 10 Case Brief: The Complainant in this case had booked an apartment owned by Respondent No. 1. This allotment was however cancelled due to non-payment of the balance sale consideration. The complainant, aggrieved by this action of the respondent approached the District Consumer Forum. The complaint was, however dismissed on the grounds that such Forum did not have the requisite pecuniary jurisdiction to hear the complaint as the subject matter of the claim i.e., the apartment was valued at Rs. 46,02,653/-. The complainant then approached the State Commission through a fresh complaint. However, the State Commission stated that the grievance pertained to a deficiency in services and thus the value of the flat should not have been taken into account to when computing the pecuniary jurisdiction. Following from this reasoning, the State Commission noted that the Complainant had claimed Rs. 10,00,000/- as compensation and dismissed the complaint on this ground. The Complainant, aggrieved by this dismissal approached the National Commission. The National Commission referred the questions raised in this complaint to larger Benches of the Commission. The issue of maintainability of a complaint under 12(1)(c) of the Consumers Act, which is the subject matter of this article, was specifically dealt with in this case. The following broad guidelines for filing a S. 12(1)(c) complaint in the NCDRC may be inferred from the observation of the Bench of the National Commission regarding the maintainability of such complaint in this case; Commonality of grievance/ relief: The Bench, relying on the Hon ble Supreme Court s decision in Tamil Nadu Housing Board, Madras v. T.N. Ganapathy 11 stated that there must be a commonality in the grievance or interest rather than the 6 Union of India v. Nestle India Limited, Consumer Complaint No. 870 of 2015. 7 SC stays class suit proceedings against Nestle, THE TIMES OF INDIA, (Dec. 17, 2015), http://timesofindia.indiatimes.com/india/scstays-class-suit-proceedings-against-nestle/articleshow/50211534.cms (last visited 18.02.2017) 8 National Consumer Disputes Redressal Commission, New Delhi, Consumer Case No. 97 of 2016 9 Ibid. 10 Manash Gohain, Builders: NCDRC to take up direct pleas, THE TIMES OF INDIA, (Oct. 13, 2016), http://naredco.in/news-updatesdetails.asp?id=18039&pryear=2016&xmon=oct&st=1&links=nw2(last visited 11.02.2017) 11 Civil Appeal No. 3002 of 1983 para 7
cause of action. In the above-mentioned case, the Supreme Court, regarding the application of Order I Rule 8 of the Code of Civil Procedure stated in no uncertain terms that; The condition necessary for application of the provisions is that the persons on whose behalf the suit is being brought must have the same interest. In other words either the interest must be common or they must have a common grievance which they seek to get redressed. If the grievances or the interest of the complainants are identical, as is the relief claimed by them, then Order I Rule 8 will apply to such consumer complaint by virtue of S. 13(6) of the Consumer Protection Act. Once this commonality of grievance or interest is established, a complaint may be filed under S. 12(1)(c) of the Consumer Protection Act by the complainants with the permission of the relevant Bench of the Commission. However, such a complaint shall not be deemed to have been filed on behalf of consumers with a common interest or grievance who have already filed complaints individually regarding the same. 12 Pecuniary Jurisdiction for complaints under S.12(c) instituted in the NCDRC: Addressing the issue of pecuniary jurisdiction as laid down in S. 21 of the Consumer Protection Act, the Bench stated that complaints wherein the aggregate of the value of the goods/services and the compensation (with any interest due) 13 claimed by all the complainants in toto exceeded Rs. 1 crore, the National Consumer Disputes Redressal Commission would have the pecuniary jurisdiction to entertain such complaint. If such aggregate value is between Rs. 20 lakhs and Rs. 1 crore, the pecuniary jurisdiction to hear such complaint will vest in the State Commission. Thus, the value of the goods/services and compensation claimed by each individual complainant is irrelevant when adjudging whether any Commission has pecuniary jurisdiction. Furthermore, as the Consumer Protection Act does not provide for determination of pecuniary jurisdiction based on the cost of curing the defects of the deficient goods/services, the cost of curing such defects also remains irrelevant while computing pecuniary jurisdiction. Restrictions vis-à-vis the definition of consumer under S. 2(1)(d) A restriction has been placed on who may file a complaint under S. 12(1)(c). The Hon ble Bench in this case clarified the point that only those persons who fall within the definition of consumer as provided for in S. 2(1)(d) of the Consumer Protection Act may file a complaint under S.12(1)(c) of the Act. Thus no person who is not a consumer as envisaged by the above-mentioned provision may file a complaint under S. 12(1)(c) of the Act, or be amongst those people on whose behalf such complaint is filed. This restriction extends to Firms, Societies, Associations or a group of Co-operative Societies unless such Firms, Societies, Associations or group of Co-operative Societies fall within the scope of S. 2(1)(d) of the Consumer Protection Act. Multiplicity of claims under S.12(c) for the same grievance: The Hon ble Bench in this case delved into the legislative intent behind introducing a provision such as S. 12(1)(c) in the Consumer Protection Act. The Hon ble Bench observed; The primary object behind permitting a class action such as a complaint under Section 12(1)(c) of the Consumer Protection Act being to facilitate the decision of a consumer dispute in which a large number of consumers are interested, without recourse to each of them filing an individual complaint, it is necessary that such a complaint is filed on behalf of or for the benefit of all the persons having such a community of interest. 12 Saba, Class action suits held maintainable under Consumer Protection Act, 1986, THE SCC ONLINE BLOG, (Oct. 27, 2016), http://blog.scconline.com/post/2016/10/27/class-action-suits-held-maintainable-under-consumer-protection-act-1986/(last visited 6.02.2017) 13 Ghaziabad Development Authority v. Balbir Singh, (2004)5 SCC 65
The Bench unequivocally held that in cases where permission to institute a class action complaint under S. 12 (1)(c) of the Act has been given, complainants having the same interest cannot institute individual complaints under this section. The only recourse available to such complainants on dismissal of their complaint is to join as a party to the previously instituted class action suit. This is so as to prevent multiplicity of litigation as is object of class action suits. This restriction does not apply to individual complaints filed under S. 12 (1)(c) of the Act by complainants having the same interest, before the class action suit has been permitted and instituted before the Commission. However, such individual complainants also have the right to withdraw their previously instituted complaint and join as a party to the class action suit. Public Notice The Bench in this decision added a note of caution for subsequent Benches of the Commission hearing such class action suits as decisions rendered in suits of this nature are binding on all consumers on whose behalf and for whose benefit the complaint was made, irrespective of whether they chose to be party to the complaint or not. Thus, it is for the Benches of the Commission to exercise care while admitting and hearing such complaint. Before permission is given by the Bench for hearing a complaint of this nature, the opposite party must be given adequate opportunity to be heard. Furthermore, the Bench mandated that once the complaint has been admitted, it is the duty of such Bench to either give individual notices to all those consumers on whose behalf and for whose benefit the complaint was instituted or give adequate public notice of the institution of such complaint. Such notice must disclose the subject matter of the complaint, the class of persons on whose behalf or for whose benefit the complaint has been instituted, the common grievance, the deficiency in services and the relief claimed. Conclusion Through its decision in Ambrish Kumar Shukla & 21 Ors. v. Ferrous Infrastructure Pvt. Ltd 14 the NCDRC has effectively clarified its position regarding the maintainability of a class action complaint under S. 12(1)(c). The clarifications provided by this decision regarding the aspects such as commonality of interest, pecuniary jurisdiction, and public notice will serve as an encouragement to consumers to file more such class action suits. However, the judiciary has ensured that a balance is maintained by placing restrictions on who may file such a complaint under S.12(1)(c), and laid down conditions such as the preliminary requirement to obtain permission from the Commission before which such a complaint is instituted which will serve to prevent frivolous complaints. The NCDRC has also noted and upheld the legislative intent behind the concept of class action suits i.e., to prevent multiple litigations on the same complaint. The Preamble of the Consumer Protection Act, 1986 states that it is an Act to provide for better protection of the interests of consumers. The legislative backing for the institution of class actions suits under S. 12(1)(c) of the Consumer Protection Act and the clarification regarding the condition for maintainability of class action suits in Ambrish Kumar Shukla & 21 Ors. v. Ferrous Infrastructure Pvt. Ltd 15 is a move to ensure that the object of the Act as mentioned in the Preamble is being upheld. While the purpose of literature on this subject is to educate consumers regarding their rights, as Phil McGraw said Awareness without action is worthless. It remains to be seen whether Indian consumers will fully exploit this tool for redressal that has been made available to them. 14 Supra note 8 15 Supra note 8