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CHAPTER II

DEVELOPMENTS OF CONSUMER PROTECTION

IN ONLINE SHOPPING

SYNOPSIS

2.1 Introduction

2.2Historical Perspective

2.2.1 Consumer Protection in Ancient India

2.2.2 Consumer Protection in Medieval India

2.2.3 Consumer Protection in British India

2.2.3.1 The Indian Penal Code, 1860

2.2.3.2 The Indian Contract Act, 1872

2.2.3.3. The Sale of Goods Act, 1930

2.2.3.4. Tort laws

2.3 Constitution of India and Consumer Protection

2.3.1 Constitutional Validity of Consumer Protection Act

2.3.2 Fundamental Rights

2.3.3 Directive Principles of State

2.4Developments in Consumer Protection Laws

2.4.1The Consumer Protection Act, 1986

2.4.2 Amendments to Consumer Protection Act, 1986

2.4.3The Food Safety and Standards Act, 2006

2.4.4 The Essential Commodities Act, 1955

2.4.6 The Bureau of Indian Standards Act, 1986

2.4.6 The Legal Metrology Act, 2009

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2.4.7 The Drugs and Cosmetics Act, 1940

2.4.8 The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

2.5 Information Technology Law in Consumer Perspective

2.6 Conclusion

2.1 Introduction

Consumerism as an ideology has come to stay in business literature. In every society,

consumer remains at the centre of gravity of all business and industrial activity. Consumer

deserves to get what he pays for in real quantity and true quality. He needs protection from

the manufacturer, producer, supplier, wholesaler and retailer.36 The need to ensure basic

rights to consumer welfare has long been recognized by legislations world over. The

phenomenon of consumer protection has been a constant endeavour since Vedic times in

India. It has developed through the centuries under various religious, political and cultural

influences. It is one of the prominent socio-economic problems, having its deep roots in the

ancient Indian jurisprudence. As industrial revolution progressed, proliferation of human

needs in respect of goods and service also increased.

In a laissez faire society the stress was for reliance on market forces unleashed by fair

competition rather than state intervention. For instance, if the seller reduced the price by

compromising on the quality of his product, the goods would not sell. This was an age of

individualism, where the general assumption was that a buyer would use all care and skill

while entering into a transaction or purchasing in the market. Hence, the market place was

ruled by the maxim – ‘Caveat Emptor’ – Let the buyer beware. Put simply, the maxim

relieved the seller of the obligation to make disclosure about the quality of the product which

the buyer could discern by a bare inspection. Freedom of contract, the most cherished right of

the period, gave the consumer a right to choose too. This also gave him the undisputed right

to choose inferior or even unsafe products rather than to pay a higher price for quality

products.

Industrial revolution, which gave rise to liberal economies, found it necessary for the state to

regulate the activities in the market place. The complexities of industrial products made it

impossible for a buyer to evaluate it by observation; he has to rely on the skill, judgement and

36Morgan Stanley Mutual Fund v. Kartick Das, (1994) 4 SCC 225.

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representations made by the manufacturer and distributor. Laws and institutions which had

maintained the sanctity of the market place were found wanting to protect the consumer in

the light of developments of the industrial age. Caveat Emptor had been stretched to its

logical limits to the detriment of the consumer. In order to fix the responsibility of a

manufacturer towards the ultimate consumer the Courts in England found it essential to adapt

the law to the needs of the time by redefining the applicable principles. State regulation is no

more a matter of debate; it is only the limits of state regulation which are relevant at present.

Legislative and administrative reforms in the area of consumer protection have developed to

the response to various consumer associations and consumer activists.37

2.2 Historical Perspective

Consumer movement originated and developed as a natural response to the rights of

consumers from being exploited and abused by manufacturers and traders. The concept of

consumer protection has existed in every social order, primitive to modern, drawing support

from several religious ordainments and commands of kings to various customary norms, with

varying dimensions. During the initial legislative phase, provisions regarding protection of

consumers constituted only a small part of the legislations relating to contract, sale of goods,

prohibition on sale and purchase of certain commodities etc. Consumers had to depend on the

ordinary remedies for defective products under laws governing implied conditions and

warranties, guarantees of after sale service and advertisements in the form of contractual

promises.

Today’s consumerism finds its origin in the late 19th and early 20th century in the United

States marketplace, where the US Congress enacted the first of the consumer protection law

called the mail fraud law in 1872, which makes it an offence to commit mail order fraud. This

law aimed at preventing unsafe, unhealthy and dangerous products from reaching the hands

of the consumers. The Sherman Anti-trust Act was passed in 1890 and henceforth a spate of

legislations were enacted which addressed several areas of consumer protection. Ralph Nader

and John F. Kennedy were the two important leaders who are responsible for the modern

consumer protection laws. In a historic speech in 1962, Kennedy was the first one to define

the basic consumer rights as they are still used today. In his speech at the UN Congress,

Kennedy extolled four basic consumer rights, (i) right to safety; (ii) right to be informed; (iii)

37D.N.Saraf, Law of Consumer Protection in India, p.1-3, (Bombay: N.M. Tripathi Private Limited, 1995).

31

right to choose and (iv) right to be heard, which were later called The Consumer Bill of

Rights. Ralph Nader’s book ‘Unsafe at any Speed’ in 1967 was the first attempt by a

common citizen to exercise his consumer rights against corporate giants.

The adoption of guidelines by the UN General Assembly on Consumer Protection brought

about a vibrant consumer movement leading to enactment of special laws and establishment

of separate machinery for redressal of grievance of consumers by various countries in all

parts of the world. The modern legislation has initiated an era of clear distinction of consumer

rights and their protection with a formal system of enforcement. Hence, protection of

consumer rights has been a continuous process from the primitive times to the modern digital

age.

2.2.1 Consumer Protection in Ancient India

Historically, consideration for consumer protection dates back to the Vedic times (5000 B.C

to 2500 B.C). All sections of the society followed the Dharmasastras which laid out societal

norms and rules and served as guiding principles governing human relations. The Vedas have

elaborately discussed matters relating to civil rights and criminal offences. Four broad

offences relating to consumer protection that were recognized were:

a. Adulteration of food-stuff

b. Charging excess prices

c. Fabrication of weights and measures

d. Sale of forbidden articles.

Several writers and commentators of the ancient times documented the social conditions that

existed in those times through traditional writings (Smriti) and revelations (Sruti). They also

prescribed codes to guide kings and rulers about the method of ruling the State and its

subjects. Consumer protection occupied a prominent concern in their writings. Some of the

authoritative texts include38 –

38 V. Balakrishna Eradi, Consumer Protection Jurisprudence, p. 4, (New Delhi: Lexis Nexis Butterworths,

2005).

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a. Manusmriti (800 B.C – 600 B.C) :

Manu, the ancient law giver describes the social, political and economic conditions of ancient

society. He brought out an extensive code of conduct for traders and prescribed ethical

business. Punishments were prescribed for fraudulent sale of seed corn and for breaking gems

or for improperly boring them. Interestingly the text of Manusmriti also provides guidelines

on how business contracts may be executed and when such contracts may be deemed void.

Manusmriti also laid guidelines on how often weights and measures have to be calibrated,

inspected and laid out the manner in which the results of inspections were to be dissipated.39

b. Kautilya’s Arthasastra (400 B.C – 300 B.C):

Kautilya, who lived during the period of Chandragupta, brought out a treaties focusing on

aspects related to politics, economics, and strategy called “Arthasastra”. In the context of

consumer protection, this literary compilation describes the role of state in regulating trade

and its duty to prevent crimes against consumers. There was a director of trade who had a

primary responsibility to monitor market situations and fair trade practices. Several measures

were taken to maintain standards of weights and measures. Every trader was required to

obtain license to sell. Traders from outside also had to seek permission. There was severe

punishment prescribed for smuggling and adulteration of food products. Also, easy access to

justice for all, including consumers, was considered of great importance during this period.

Two other areas concerning consumers that were expressed in Arthasastra were:

i. Regulations concerning sale of animal flesh; and

ii. Obligation of professionals like artisans, craftsman, weavers, goldsmith, actors, physicians

etc.

c. Yajnavalkyasmriti (300 B.C – 100 B.C.) :

The Yajnavalkyasmriti is a systematic text in the realm of Hindu law dealing extensively in

vyavahara (behavior) and personal rights of man. It dealt with issues of excessive pricing

charged by traders. Demanding higher prices was punishable. The text also stated that the

39Dr. A. Rajendra Prasad, Historical Evolution of Consumer Protection and Law in India – A Bird’s Eye

View,p.2, available at http://www.jtexconsumerlaw.com/V11N3/JCCL_India.pdf, (last visited on March 6,

2012)

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sale and purchase should be conducted according to the value fixed by the king. The text also

prescribed forfeiture of goods to the King, if any merchant was found dealing with prohibited

goods/commodities.

e. Brihaspatismriti (200 A.D – 400 A.D):

It provided an elaborate description of civil and criminal laws. Manufacturing of inferior

quality/spurious goods and gems was punishable according to this text. It also mentioned

various other offences and punishments and penalties to be imposed on violation of law.

2.2.2 Consumer Protection in Medieval India

Consumer protection continued to be of prime concern in the medieval period ranging from

1000 AD to 1750 AD. Several prominent Muslim rulers had ruled India during this period

from their capital in Delhi. The Delhi Sultanates, who reigned between 1206A.D and

1526A.D, laid foundation to economic, financial and commercial backbone during the

medieval period. The most notable achievements in Consumer Protection during the Delhi

Sultanate were during the period of Alauddin Khilji (1290 AD to 1320 AD). During his reign,

there were several improvements in the weights and measures standardization process, which

created transparency in practices of traders with consumers. Commodities were weighed and

measured through standards established by the Sultan and people who did not follow

standards were punished through fines and even capital punishment. He had established

separate shopping centres in Delhi for grains, cloth, sugar, dried fruits, horses, cattle and

miscellaneous commodities. The Sultan was assisted by Controller, State Intelligence Officer

and his secret agencies. Every merchant was registered with the Commerce Ministry.

Sher Shah Suri who ruled during the brief period between 1540 and 1545 AD envisaged that

the economy of a country depends on how well its consumers are treated. He also emphasized

on standardized measures and set out decimal and centenary systems with respect to

measures. He also published quality guidelines for produce, grocery, confectionaries and

pharmaceuticals.

Akbar, who ruled during 1556 A.D to 1605A.D., for the first time introduced the right of

consumer to be informed. All traders were required to publish details regarding quality and

quantity of their merchandise including weights, measures, adulteration if any, age, grade,

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and usability. Violations and deceitful behavior were dealt with the harshest of punishments

including amputation of limbs. Consumers also enjoyed the right to return merchandise

which did not meet the standard requirements related to quality and quantity. This brought

about accountability and transparency in commodity transactions.

However, the Mughal rulers who came later concentrated more on literary, architectural and

military pursuits. This led to deterioration in consumer protection issues by the time the

British gained control in India.40

2.2.3 Consumer Protection in British India

The British regime was a period of revolution of the legal system from the age old traditional

laws to formulation of unified nation-wide legal system. The legislations enacted during this

period mainly aimed at serving the colonial rulers than the people. Some of the laws relating

to consumer protection that were passed during the British rule were the Indian Contract Act,

1872, Sale of Goods Act, 1930, Indian Penal Code, 1860, Drugs and Cosmetics Act, 1940,

Usurious Loans Act, 1918 and Agriculture Produce (Grading and Marketing) Act, 1937. In

addition, principles of common law contained in the law of torts were received in the Indian

law through various judgments of the Privy Council and the High Courts.

2.2.3.1 The Indian Penal Code, 1860

The Indian Penal Code, 1860 was perhaps the first legislation that contained notable

provisions for consumer protection. Sections 264 and 267 of the IPC made fraudulent use of

false instruments for weighing,41 fraudulent use,42 possession43 and making and selling of

false weights and measures44 punishable with imprisonment upto one year or with fine, or

with both. Sections 272 and 273 of IPC made offences such as adulteration of food or drink,

making it noxious, and sale of noxious food or drink punishable with six months

imprisonment or with fine up to one thousand rupees, or with both. Sections 274 to 276 dealt

with similar punishments for adulteration of drugs intended for sale,45 sale of adulterated

40Anoop Madhavan, The Evolution of Consumer Protection, available at http://knol.google.com/k/the-evolution-

of-consumer-protection#, (last visited on February 14, 2012). 41Indian Penal Code, 1860, Sec.264. 42Id., Sec.265. 43Id., Sec.266. 44Id., Sec.267. 45Id., Sec.274.

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drugs,46 and sale of drug as a different drug or preparation47. Sections 479 to 489 which deal

with use of ‘false property mark’ also have relevance to consumer protection. In Sumant

Prasad v. Sheojanam,48the Supreme Court held the accused guilty of offences of both using a

false ‘property mark’ and selling goods marked with a ‘counterfeit property mark’, since his

scent under the name “Pushpa Raj” was an imitation of the property mark of the carton of the

complainant, a best-selling scent called “BasantBahar” in toto and marketed his inferior

product under the same name.

Further, Chapter XIX of the IPC dealing with offences of ‘criminal breach of contract of

service’, makes punishable breach of contract to attend on and supply wants of helpless

persons,49has relevance to consumer safety of persons who are incapable to do so themselves

because of “youth, or of unsoundness of mind, or of a disease or bodily weakness”.

2.2.3.2 The Indian Contract Act, 1872

The Indian Contract Act, 1872 contains various provisions relevant to consumer interests.

Section 2(h) of the Contract Act defines contract as “an agreement enforceable in law”.

Creation of every agreement involves a definite offer by one person and its unqualified

acceptance by the person to whom the offer is made. Agreements become contract only if

they are made by the free consent of the parties, competent to contract, for a lawful

consideration, with a lawful object and not expressly declared by the Act to be void.50

Section 27 of the Act, declaring agreements in restraint of trade as void, aimed at promoting

competition and restricting monopolistic tendencies. Sections 73 and 74 of the Act provides

for compensation for loss or damage by breach of contract under which consumers can seek

relief. Earlier, the Act also contained provisions about sale of goods under Sections 76 – 123.

However, they were found to be inadequate to address several issues relating to sale of goods.

Hence, a new enactment was passed in 1930, namely the Sale of Goods Act, 1930 which

incorporated most of the provisions of the English Sale of Goods Act, 1893.

46Id., Sec. 275. 47Id., Sec.276. 481972 Cr LJ 1707 (SC). 49Indian Penal Code, 1860, Sec.491 50Section 10 of Indian Contract Act, 1872.

36

Judicial approach to consumer protection is reflected in several English cases. For instance,

in Carlill v. Carbolic Smoke Ball Co.,51the plaintiff, relying on the advertisement of

“Carbolic Smoke Ball” a preventive remedy against influenza, purchased a smoke ball and

used the same in accordance with the directions of the defendants, but still caught influenza

and was held entitled to claim ‘reward’ offered by the company on any such happening.

Internet has come as a new medium of communication. Most of such communication is in the

form of advertisement which is similar to the advertisement through any print media. Web

pages also display goods and services along with price as any other conventional shop

displaying on its window. In case of online shopping, the offer invariably comes from the

customer, along with payment through credit card and acceptance from the seller. Once

payment is received, the servers are programmed to generate auto-response by way of

confirmation of the sell order or printing of ticket in case of airlines etc. Basic principles of

contract law continue to prevail in contracts made on the internet. A webpage is everything at

the same time, from a newspaper advertisement to a display on the shelf, a shop window and

a shop.52

2.2.3.3 The Sale of Goods Act, 1930

The Sale of Goods Act, 1930 is an exclusive source of consumer protection law in India. It

was also called the ‘Consumer’s Charter’. The important themes in relation to the Act

comprise of ownership of goods, quality of goods and transfer of ownership. A good would

not move in trade if it cannot be used, and conversely, a good would get into trade only if it is

fit for the ordinary purpose for which it is intended. Hence when goods are sold, it is implied

that they match the description and are of merchantability quality. The criterion of

merchantable quality was evolved early. In Gardiner v. Grey, in 1815, the court ruled:53

“….the intention of both parties must be taken to be, that it shall be saleable in the market

under the denomination mentioned in the contract between them. The purchaser cannot be

supposed to buy goods to lay them on a dunghill.”

51Carlill v. Carbolic Smoke Ball Co., (1893) 1 QB 256. 52Chwee Kin Keong v. Digilandmall.com Pte.Ltd. (2004) 2 SLR 594. 53 Aswan Engineering Establishment Company v. Lupdine Limited (1987) 1 All ER 135.

37

Another early case demonstrating the concept of merchantability is Jones v. Just.54In this

case, the buyer bought Manilla hemp. On arrival, the goods were found to be damaged and

not saleable under that description. The buyer resold the goods under the description ‘Manilla

hemp with all faults’. He received about seventy-five percent of what merchantable Manilla

hemp would have got him. The buyer moved the court to recover the difference as damages.

The court ruled:

“….It appears to us that, in every contract to supply goods of a specified description which

the buyer has no opportunity to inspect, the goods must not only in fact, answer the specified

description, but must also be saleable or merchantable under that description.”

Chapter III of the Act, comprising of Sections 11-17 provide for ‘Implied Conditions and

Warranties’. These implied conditions and warranties play an important role in quality

control and consumer protection. Section 16 is an important provision, which requires the

seller to exercise due skill and judgment while the goods shall be of merchantable quality and

fit for use. Section 16(1) of the Sale of Goods Act, 1930 provides that if the buyer has relied

on the skill and judgement of the seller, the good should be fit for that purpose. In the cases

‘where goods are bought by description’, Section 16(2) imposes an implied condition that the

good should be of merchantable quality.

In the present context, manufacturers communicate with potential buyers about the quality of

their products through advertisements. The retailer is merely an intermediary between the

manufacturer and consumer. Hence, the consumer does not in reality, rely on the skill and

judgment of the seller. The consumer asks for goods of a particular description and the

retailer merely passes on the goods to the buyer. In this situation, there is no privity of

contract between the customer and manufacturer. The person describing the goods is under

no obligation to the buyer, leaving the manufacturer free to misrepresent the goods. This

came to be known as ‘unfair trade practice’, which was addressed in 1984 in the Monopolies

and Restrictive Trade Practices Act, 1969 and later modified in Consumer Protection Act,

1986.

54Jones v. Just (1861-1873) All ER Rep Ext 1975.

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2.2.3.4 Tort laws

The common law remedies under law of torts are still available to consumers in India. The

foundation to this approach of consumer protection under tort laws was reflected in the case

of Donoghue v. Stevenson,55 which laid down the principle that a manufacturer owes a duty

of care to every possible consumer of his product and a consumer can bring an action against

the manufacturer even if there is no contract between the two. In this case, a woman went to a

restaurant with her friend who bought a bottle of ginger beer manufactured by the defendant.

After consuming a part of it she observed the decomposed body of a snail in it. The bottle

being opaque and sealed, the body of the snail could not have been seen earlier. She brought

an action against the defendant alleging that because of the drink she had contracted serious

illness. The House of Lords held that the manufacturer owed the claimant a duty to take care

and make available products free from any noxious matter injurious to health. Such a duty

under tort law is owed not only to specific individuals but to the world at large. This decision

made the law of torts relevant to consumers.

The law of torts provides protection to consumer in the form of damages against

manufacturer, supplier, distributor, retailer and importer of goods and services for loss caused

by any defective, unfit or dangerous products. The liability may arise due to negligence of the

seller or where the manufacturer or seller defrauds the consumer. In case of negligence, the

tort of negligence provides consumer redress for damage suffered due to defective or unsafe

products. Tort of negligence covers all cases of breach of duty caused by omission to do

something which a reasonably prudent person would do (non feasance), and doing something

which such a person would not do (misfeasance). The essentials to be proved in tort of

negligence are: (i) duty of care; (ii) breach of duty; and (iii) breach of duty being the direct

and proximate cause of damage suffered by the plaintiff. In case of fraud, the tort of deceit

provides protection to consumer to recover damages for loss suffered. Tort of deceit also

includes acts of false representation of facts made with the knowledge of its falsehood or

without belief in its truth. A false statement, made honestly but negligently also gives rise to

liability.

Passing off is another tort under which traders pass off their goods under an impression that

they are the goods of a well-known brand. This is used as a deceptive means to boost sales.

55Donoghue v. Stevenson (1932) AC 562.

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Lord Halsbury, LC laid down the rule in Reddamay v. Banham,56that “no man can have any

right to represent his goods as the goods of somebody else”.57 Such a tort gives rise to

liability even without the proof of any knowledge of intention to deceive. The suffering party

also need not prove suffering of any damage since it is presumed to have been caused in such

cases. However, remedy under passing-off action is available only to a trader who may have

earned a goodwill by his trade name but a consumer cannot initiate action on that.

2.3 Constitution of India and Consumer Protection

Human rights are essential in efficient control and fair distribution of resources needed to

meet the basic requirements. The history of human rights can be traced to the 13th century

when they were guaranteed by the Magna Carta in England and later the Constitution of the

United States guaranteed the same in the 18th century. International dimension to human

rights was recognized by the UN in 1948. The UN further adopted the International Covenant

on Economic, Cultural and Social Rights in 1966 and the International Covenant on Civil and

Political Rights in 1966.

India too adopted the concept of human rights in the Constitution, which finds mention in

Chapter III of the Constitution dealing with Fundamental Rights and Chapter IV on Directive

Principles of State Policy. Consumer justice in India is a part of social and economic justice

as enunciated in the Constitution. The Constitution of India does not contain explicit

provisions on protection of consumers, but there are several provisions having a direct

bearing on consumer interests. Following the Constitutional mandate a number of legislations

have been enacted in the field of consumer protection relating to standardization, grading,

packaging, branding, prevention of food adulteration, weights and measures etc.

2.3.1 Constitutional Validity of Consumer Protection Act

In State of Karnataka v. Vishwabharahti House Building Co-operative Society58, the

principle question involved was whether the Consumer Protection Act, 1986 is

constitutionally valid. In view of the constitutional scheme relating to legislative competence

of the Parliament and State Legislature, the Supreme Court held that there cannot be any

doubt or dispute that Parliament has the requisite legislative competence to enact the

56Reddamay v. Banham (1896) AC 199. 57Id., at 204. 58State of Karnataka v. Vishwabharahti House Building Co-operative Society, AIR 2003 SC 1043.

40

Consumer Protection Act, 1986. The apex Court further held that the argument that

Parliament did not have competence to create parallel civil court is fallacious in as much as

the provisions of the said Act are in addition to the provisions of any other law for the time

being in force and not in derogation thereof as is evident from Section 3. The provisions of

the said Act clearly demonstrates that it was enacted keeping in view the long felt necessity

of protecting the common man from wrongs where the ordinary law for all intent and purport

had become illusory. The Supreme Court also held that the said Act is only a supplement and

not supplant to the jurisdiction of civil courts and other statutory authorities. Hence, after

dealing with various provisions of the Consumer Protection Act, the Supreme Court has held

that the Consumer Protection Act, 1986 is constitutionally valid.

2.3.2 Fundamental Rights

As a part of fundamental rights, Article 14 which enshrines fundamental right to equality

ensures equal bargaining powers to both seller and buyer. Several public interest litigations

have been initiated by consumer groups under Article 14 against companies promoting

misleading advertisements. For instance, Mumbai Grahak Panchayat v. Lohia Machines Ltd.,

decided by the National Consumer Disputes Redressal Commission in 1990,59 is an important

public interest litigation that upheld the rights of consumers. The case dealt with delay and

default on the part of the respondent company in promptly making the refund payment. M/s.

Lohia Machines Limited engaged in the manufacture of two wheeler scooters under the brand

name Vespa Xe. The company invited applications from persons interested in purchase of

scooters and the stipulation was that at the time of booking and registration an advance

deposit of Rs. 500 was to be made by each customer which was later to be adjusted against

the total price payable by him at the time of delivery. As per the conditions notified by the

company, the advance deposit of Rs.500 was to carry simple interest but in the event of

cancellation of the booking by the applicant, the money deposited by way of advance was to

be refunded by the company with only interest at the rate of 7 per cent per annum. There was

a further condition that in the case of cancellation of the booking within the first six months

from the date of the close of booking, no interest shall be payable. However, it was clearly

stipulated that the refund of the deposit amount shall be made by the company by a demand

draft to be posted to the customer within two days from the date of receipt of the cancellation

advice.

59Mumbai Grahak Panchayat v. Lohia Machines Ltd., (1991) 1 CPR 184 (NCDRC).

41

However, on account of long delays in deliveries and the absence of any immediate prospect

of getting the scooter many consumers cancelled their bookings and applied for refund of

their advance deposit amounts along with the interest due thereon. The petitioner stated that

in spite of repeated requests made by these customers to the company, no refunds of the

advance deposit amounts were made to them by the company even after long delays ranging

upto three years despite due intimation or cancellation of bookings having been given to the

company. The petitioner further contended that the Opposite Party has been illegally utilising

the huge sums of money aggregating to several crores belonging to such consumers for the

purpose of their business and thereby indulging in unjust, unfair and illegal enrichment. The

Commission observed that it was a clear case of deficiency in service against the Opposite

Party for which the consumers represented by the complainant were entitled to be reasonably

compensated.

Of the consumer rights, right to information is an important right in the context of free flow

of truthful information in the market place. This right to information gains greater momentum

in distance contracts, such as online shopping, where parties to the contract do not encounter

each other face-to-face at any stage of the transaction. Article 19 of the Constitution

guarantees freedom of speech and expression, assembly, association, movement residence

and the right to practice any profession or to carry on any occupation, trade or business.

Justice V.R. Krishna Iyer in his book “Freedom of Information” expressed the view:

“The right to information is a right incidental to the constitutionally guaranteed

right to freedom of speech and expression. The international movement to include

it in the legal system gained prominence in 1946 with the General Assembly of the

United Nations declaring freedom of information to be a fundamental human

right and a touchstone for all other liberties. It culminated in the United Nations

Conference on Freedom of Information held in Geneva in 1948.

Article 19 of the Universal Declaration of Human Rights says:

“Everyone has the right to freedom of information and expression; this right

includes freedom to hold opinions without interference and to seek, receive and

impart information and ideas through any media and regardless of frontiers.”

It may be a coincidence that Article 19 of the Indian Constitution also provides

every citizen the right to freedom of speech and expression. However, the word

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‘information’ is conspicuously absent. But, as the highest Court has explicated,

the right of information is integral to freedom of expression.

“India was a member of the Commission on Human Rights appointed by the

Economic and Social Council of the United Nations which drafted the 1948

Declaration. As such it would have been eminently fit and proper if the right to

information was included in the rights enumerated under Article 19 of our

Constitution. Article 55 of the U.N. Charter stipulates that the United Nations

‘shall promote respect for, and observance of, human rights and fundamental

freedoms’ and according to Article 56 ‘all members pledge themselves to take

joint and separate action in co-operation with the Organisation for the

achievement of the purposes set forth in Article 55’.”60

The Supreme Court interpreted the fundamental right of ‘freedom of speech and expression’

under Article 19(1) (a) of the Constitution in the landmark judgement of Maneka Gandhi v.

Union of India61as follows:

“Freedom of speech and expression carries with it the right to gather information

as also, to speak and express oneself at home and abroad and to, exchange

thoughts and ideas with others not only in India but also outside. On what principle

of construction and for what reason can this freedom be confined geographically

within the limits of India? The constitution-makers have not chosen to limit the

extent of this freedom by adding the words "in the territory of India" at the end of

Article 19(1) (a)….. We have, therefore, no doubt that freedom of speech and

expression guaranteed by Article 19(1) (a) is exercisable not only in India but

outside.”

Similarly, in Secretary, Ministry of Information and Broadcasting, Government of India v.

Cricket Association of Bengal62, the Supreme Court observed - “One sided information,

disinformation, misinformation and non-information, all equally create an uninformed

citizenry which makes democracy a farce.” Hence, it is a settled proposition that the Right to

60Cited in Namita Sharma v. Union of India, 2013 (1) SCC 745, available at

http://supremecourtofindia.nic.in/outtoday/wc21012.pdf, last visited on 03/10/2014 61Maneka Gandhi v. Union of India, AIR 1978 SC 597 62 Secretary, Ministry of Information and Broadcasting, Government of India v. Cricket Association of

Bengal(1995) 2 SCC 161

43

Freedom of Speech and Expression enshrined under Article 19(1) (a) of the Constitution

encompasses the right to impart and receive information.

Article 19(1) (g) guarantees every citizen freedom of profession, trade or business, thereby

ensuring that the State cannot prevent a citizen from carrying on a business, except by a law

imposing a reasonable restriction in the interest of the general public. However, under Article

19(2), no such right can be enforced where the business is dangerous or immoral. Such

business may be absolutely prohibited or may require licensing. Restrictions may also be

imposed on business in terms of time and place. There is no right to carry on a business at

every place and at any time.63Reasonable restrictions can be imposed for public convenience

also.64

While Article 19(1) (g) confers a fundamental right to carry out any trade, business or

profession, Article 301 correspondingly provides for certain safeguards for the carrying on

trade, and commerce. That is, Article 301 is invoked when an individual is prevented from

sending goods within the same state or across the states. The freedom granted by Article 301

is further limited by Articles 302-305, wherein the Parliament and State Legislatures are

given powers to regulate movement of goods in the public interest. Hence, while online

shopping portal are in general granted the freedom to carry out trade and commerce across

the country, reasonable restrictions may be imposed by State on subjects that prejudice public

interest.

Article 21 of the Constitution requires the State, inter alia, to protect life, which is construed

as including right to live with dignity and not to be exploited. The state has no right to

deprive the citizen of the enjoyment of this basic right except in accordance with a law,

which is reasonable, fair and just.65The rights of the consumer flow from the rights enshrined

under Article 21 too. In R.P.Ltd v. Indian Express Newspapers66, the Supreme Court held that

“the people at large have a right to know in order to be able to take part in a participatory

development in the industrial life and democracy. Right to know is a basic right which

citizens of a free country aspire in the broader horizon of right to live in this age in our land

under article 21 of our constitution. The apex court further added the said right has reached

63S.K.Verma, ‘A Treatise on Consumer Protection Laws’, p. 18, (New Delhi: Indian Law Institute, 2004). 64Ebrahim v. Regional Transport Authority (1953) SCR 290,299. 65CR Reddy v. State of Andhra Pradesh AIR 1989 AP 235. 66R.P.Ltd v. Indian Express Newspapers, AIR 1989 SC 203

44

new dimension and urgency and put greater responsibilities upon those who take upon the

responsibility to inform.”

2.3.3 Directive Principles of State

The Directive Principles of State under Articles 38 and 39 of the Constitution, provided under

Chapter IV of the Constitution, mandates inter alia, that the State shall strive to promote the

welfare of the people by securing and protecting as effectively, as it may, a social order in

which justice social, economic and political shall inform all the institutions of the national

life, and the State shall, in particular, direct its policy towards securing:

1. That the ownership and control of material resources of the community are so distributed

as best to subserve the common good; and

2. That the operation of the economic system does not result in the concentration of wealth

and means of production to the common detriment.

These directive principles are of utmost importance from the consumer perspective, as it

supports the public distribution system and administrative mechanism in controlling hoarding

and profiteering in India.67 The Supreme Court in The Oil and Natural Gas Commission and

Another v. Association of Natural Gas Consuming Industries of Gujarat and Others,68 held

that a statutory corporation, whether involved in public utility or not, has to comply with

Article 39 of the Constitution and charge only fair prices. The Court further held that for

commodities not vital for consumers, greater consideration can be given to profit. According

to Article 39-A of the Constitution, the legal system in the country must promote justice on

the basis of equal opportunity and also ensure that the opportunities for securing justice are

not denied to any citizen for reason of economic or other disabilities.

Article 46 provides that State shall endeavour to protect the economic interest of the weaker

section of its population and also protect them from social injustice and all forms of

fraudulent practices which mean all kinds of exploitation and frauds that take place in the

market place. This also has relevance to unscrupulous trade practices that take place in the

virtual markets, where there is greater potential for consumer exploitation.

67Tata Press Limited, Supra note 25, at 20. 68The Oil and Natural Gas Commission and Another v. Association of Natural Gas Consuming Industries of

Gujarat and Others, AIR 1990 SC 1851.

45

2.4 Developments in Consumer Protection Laws

2.4.1The Consumer Protection Act, 1986:

The earlier legislations such as Contract Act, 1872, Sale of Goods Act, 1930 and other

consumer related legislations addressed consumer concerns to a certain extent. However,

despite these legislations, the ultimate consumers could not be protected from unscrupulous

exploitation by manufacturers and traders. One of the reasons was the enormous pendency

and delay in disposal of cases in the Civil Courts. Consumers had to wait for years for

settlement of even trivial cases. It was also felt that consumer protection remained confined

only to the elite section of the society and failed to provide adequate protection to the masses

who were real victims to the exploitation. A forum was badly required to address the

grievance of consumers and afford them quicker and better protection. In view of this and

with a purpose of providing effective forum for consumer grievance redressal, a new

legislation was introduced in 1986 called the Consumer Protection Act, 1986. As the

Preamble states, the Act is “to provide for better protection of the interests of the consumers”,

the main thrust of the Act was to provide simple, speedier and inexpensive redressal to

consumer grievance.

The Supreme Court had occasion to consider the circumstances in which the Consumer

Protection Act, 1986 came to be passed in the case of Lucknow Development Authority v.

M.K.Gupta69, wherein the Court held:

“…The Act meets long felt necessity of protecting the common man from such

wrongs for which the remedy under ordinary law for various reasons has become

illusory. The importance of the Act lies in promoting welfare of the society by

enabling the consumer to participate directly in the market economy. It attempts

to remove the helplessness of a consumer which he faces against powerful

business, described as, ‘a network of rackets’ or a society in which, producers

have secured power to rob the rest and the might of public bodies which are

degenerating into storehouses of inaction where papers do not move from one

desk to another as a matter of duty and responsibility but for extraneous

consideration leaving the common man helpless, bewildered and shocked. The

69Lucknow Development Authority v. M.K.Gupta, (1994) 1 SCC 243: AIR 1994 SC 787.

46

legislature has taken precaution not only to define ‘complaint’, ‘complainant’,

and ‘consumer’ but even to mention in detail what would amount to unfair trade

practice by giving an elaborate definition in clause (r) and even to define ‘defect’

and ‘deficiency’ by clauses (f) and (g) for which a consumer can approach the

Commission. The Act thus aims to protect the economic interest of a consumer as

understood in the commercial sense, as a purchaser of goods and in the large

sense user of services. It is a milestone in history of socio-economic legislation

and is directed towards achieving public benefit.”

The provisions of the Act are in addition and not in derogation of the provisions of any other

law for the time being in force.70 The provisions are supplementary in nature and do not have

an overriding effect. The Act envisages formation of Consumer Protection Councils at the

Centre, State and District levels, with the primary objective of promoting and protecting the

rights of consumers. Such rights include right to be informed about quality, quantity, purity,

potency, standard and price of goods and services; right against marketing of goods and

services which are hazardous to life and property; right to be assured access to a variety of

goods and services at competitive prices; the right to seek redressal against unfair trade

practices or restrictive trade practices or unscrupulous exploitation; the right to be heard and

the right to consumer education. The Act applies to all goods and services in private, public

and co-operative sectors. The Act further applies to all goods and services unless specifically

exempted by the Central Government.

The Consumer Protection Act, 1986 is supported by Consumer Protection Rules, 1987 and

Consumer Protection Regulations, 2005. Section 2(1)(d) of the Consumer Protection Act,

1986 defines a ‘Consumer’ to mean any person who 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 any person 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

70Consumer Protection Act, 1986, Sec. 3.

47

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 for any

commercial purpose. And “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.71

The Act imposes strict liability on manufacturer/producer of goods, in case of supply of

defective goods72, and service provider, in case of deficiency in rendering service73. The

Consumer Protection law recognises several unfair trade practices such as false and

misleading representation of goods and services in terms of standard, quality, grade etc.,

materially misleading the public with respect to the price at which the goods are ordinarily

sold, disparaging of goods, misrepresentations as to warranty or guarantee etc.74

The Act further provides for three-tier quasi-judicial machinery at the National, State and

District levels for redressing consumer grievances. Jurisdiction of Consumer Forums (i.e.,

consumer courts) depends on the monetary value of claims, geographical area, and appellate

powers. The present Consumer Protection Act, 1986 provides for a 3 tier approach to

resolving consumer disputes. The three levels of consumer courts are —

a. District Consumer Disputes Redressal Forum (District Forum) – which limits the value of

claims to Rs. 20 lakh

b. State Consumer Disputes Redressal Commission (State Commission) – which limits the

value of claim from Rs. 20 lakh to Rs. 1 crore

c. National Consumer Disputes Redressal Commission (National Commission) – where value

of claim exceeds Rs. 1 crore.

The territorial jurisdiction of a consumer court is decided on the territory when at the time of

the institution of the complaint—

71 Consumer Protection Act, 1986as amended in 2003, Section 2(1)(d) 72 Consumer Protection Act, 1986, Section 2(1)(f) 73 Consumer Protection Act, 1986, Section 2(1)(g) 74 Consumer Protection Act, 1986, Section 2(1)(r)

48

(a) The party against whom the claim is made actually and voluntarily resides or carries on

business or has a branch office or personally works for gain in that area, or

(b) Where there are more than one opposite parties, each such party actually and voluntarily

resides or carries on business or has a branch office or personally works for gain in that area,

or

(c) The cause of action, wholly or in part, arises in that area.

The Act recognizes the role of consumer organizations in assisting consumer in seeking

Redressal through the consumer dispute redressal agencies as envisaged under the Act. The

Forum so created is uninhibited by the requirement of court fee and formal procedures of a

court. Any consumer can go and file a complaint. Where a large number of consumers have

similar grievance, one or more can file a complaint on behalf of all. Even the Central/State

Government can act on the complainant’s behalf. Even recognized consumer associations can

file complaints on behalf of consumers. The Act provides for ‘business to consumer’ disputes

and not for ‘business- to-business’ disputes.75

2.4.2 Amendments to Consumer Protection Act, 1986

Industrial revolution and development and expansion in the field of international trade and

commerce gave rise to emergence of variety of goods and services into markets. The active

role of media, both print and electronic forms, created greater impact on consumers through

advertising and hoardings, irrespective of the short-comings in quality, quantity and purity of

the goods or deficiencies in services. The Act was first amended by the Consumer Protection

(Amendment) Act, 1991. The Amendment Act inserted new provisions regarding filling up of

vacancy of the office of the President, and vacancies or defects in appointment not to

invalidate the others of the District Forum, State Commission and National Commission. The

Amendment Act also made it clear that the proceeding of the District Forum may be

conducted by the President and one member and not necessarily by all the members.

A need was felt to make the Consumer Protection Act, 1986 more effective and purposeful.

The Central Consumer Protection Council constituted under the Act recommended

constitution of a working group to recommend suitable amendments for this purpose. In

75Laxmi Engineering Works v. P.S.G. Industrial Institute, AIR 1995 SC 1428.

49

pursuance of the recommendations of the working group, comprehensive amendments were

made to the Consumer Protection Act, 1986 which was enacted in 1993. Salient features of

the Consumer Protection (Amendment) Act, 1993 are:

1. The scope of the Act was enlarged to enable class action complaints on behalf of

consumers having similar interests.

2. The scope of the term ‘Commercial Purpose’ excluded from its ambit, goods bought and

used by consumer exclusively for the purpose of earning his livelihood by means of self-

employment.

3. ‘Housing construction’ was included within the definition of ‘service’.

4. Restrictive trade practices were brought within the ambit of the Act and complaints

relating to such practices were allowed to be filed with the redressal agencies.

5. Definition of ‘unfair trade practices’ (as contained in Section 36-A of the Monopolies and

Restrictive Trade Practices Act, 1969) were incorporated under Consumer Protection Act.

6. Constitution of selection committees for selection of non-judicial members of various

redressal agencies.

7. Limits of pecuniary jurisdiction of the district, state and national commissions were

enhanced.

8. A limitation period of two years for filing complaints was provided.

9. Provisions were made to confer additional powers on redressal agencies to award cost to

the parties; and to order to recall goods which will be hazardous to life and safety of the

people, etc.

Although there was considerable improvement in the amended Act of 1993, consumer

activists felt certain shortcomings in the implementation of various provisions of the Act.

With a view to achieving quicker disposal of consumer complaints by Redressal Agencies

and securing effective implementation of their orders and streamlining the procedures, the

Consumer Protection Act was further amended by the passing of the Consumer Protection

(Amendment) Act, 2002.

50

These amendments, inter alia, included:

1. Extending the provisions of the Act to service providers indulging in unfair or restrictive

trade practices or offering services which are hazardous.

2. Including sale of spurious goods and services within the ambit of ‘unfair trade practices’.

3. Provisions for creation of Benches of National Commission and State Commissions as

well as holding of circuit Benches of these Commissions.

4. Prescribing the period within which complaints are to be admitted, notices to be issued to

opposite party and complaints to be decided. Similar provisions have been made in respect of

appeals.

5. No adjournment to be ordinarily allowed, and where allowed, speaking orders giving

reasons would be made.

6. Pecuniary limits of jurisdiction of Consumer Dispute Redressal Agencies were enhanced

so that the District Forums can deal with complaints involving value of goods or services and

claims of compensation upto Rs. 20 lakhs (as against Rs. 5 lakhs). In case of State

Commissions pecuniary limit was fixed in the range of Rs. 20 lakhs to Rs. 1 Crore (as against

above Rs. 5 lakhs to Rs. 20 lakhs) and National Commission above Rs. 1 Crore (as against

above Rs. 20 Lakhs).

7. Prescribing minimum qualifications and disqualifications for members of the Consumer

Disputes Redressal Agencies.

8. Conferring powers of a Judicial Magistrate of the First Class on Redressal Agencies with a

view to trying offences under the Act.

9. Provision for recovery of amounts ordered to be paid by the Consumer Dispute Redressal

Agencies as arrears of land revenue.

10. Provisions for substitution of legal heirs or representatives as party to the complaint in

the event of death of the complainant or the opposite party.

51

The Consumer Protection Act was enacted in 1986, keeping in view the physical world.

Cyberspace was not visualized at the time. Online consumers in today’s world are no doubt

an extension of the offline consumers and Consumer Protection Act logically extends to both

online and offline consumers. With the breakdown of borders coupled with the ability of big

corporations to move goods from far away warehouses to distant consumers in many

instances across borders with ease poses challenge to consumer protection law.

In the context of e-commerce, some of the major amendments made to the Consumer

Protection law through the Consumer Protection (Amendment) Bill, 2015 are as follows:

1. New definitions such as ‘Electronic Form’76, ‘Electronic Intermediary’77 and ‘Electronic

Record’78 are introduced in the context of electronic commerce.

2. The definition of “Consumer’ is amended to further include an explanation to the

expressions ‘buys any goods" and "hires or avails any services" to include transactions made

through any mode, offline, online through electronic means, teleshopping or direct selling or

multi-level marketing.79

3. Consumer Protection Bill, 2015 has introduced ‘Deficiency in service’ under Section

2(12)80 to include any act of omission or commission on the part of service provider in

withholding ‘relevant information’ which may cause damage to the consumer.

4. Failure on the part of business to allocate a 30 days cooling-off period for purchase of

goods or services is also being considered to be included as ‘unfair trade practice’ under

Section 2(41)81 of Consumer Protection Bill, 2015. The same provision also attempts to

76 Clause 2(15) - "electronic form" shall have the same meaning assigned to it under clause (r) of sub-section (1)

of section 2 of the Information Technology Act, 2000. 77 Clause 2(16) - "electronic intermediary" means any person who provides technologies or process to enable

manufacturer, trader and other persons to engage in advertising or selling various goods or services to

consumers and includes online marketplaces and online auction sites. 78 Clause 2(17) - "electronic record" shall have the same meaning as ascribed to it in the Information

Technology Act, 2000. 79Consumer Protection Bill,2015,Clause 2(8) 80Clause 2(12) of Consumer Protection Bill, 2015 “deficiency” include—

(i) any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which

is required to be maintained by or under any law for the time being in force or has been undertaken to be

performed by a person in pursuance of a contract or otherwise in relation to any service;

(ii) any act of omission or commission which causes any damage to the consumer on account of negligence or

consciously withholding of relevant information to the consumer 81Clause 2(41), after sub-clause (G), the following sub-clauses are, namely:—

52

provide data security on consumers’ personal information disseminated on the online

shopping portals.

3. The term ‘unfair contract’ is introduced under Section 2(42) of the Amendment to means

such contracts that contain clauses that:

(i) requires manifestly excessive security deposits to be given by a party to the contract for

the performance of contractual obligations; or

(ii) impose any penalty on a party to the contract for the breach thereof which is wholly

disproportionate to the loss occurred due to such breach to the other party to the contract; or

(iii) refuses to accept early repayment of debts on payment of applicable penalty;

(iv) entitles a party to the contract to terminate without reasonable cause the contract

unilaterally.

(v) prohibiting contract relating to terms permitting or having the effect of permitting one

party to assign the contract to the detriment of the other party without that other party’s

consent.

4. The amendment also introduces electronic filing of complaints. Through this, the

government proposes to enable consumers to file their complaints online to further speed up

the process of justice. Upon filing of online complaints, the forum decides whether to admit

the complaint or not. The consumer will have to be personally present at the time of

admission of the complaint.

5. For execution of orders under the proposed Amendment, every order made by the District

Commission, the State Commission or the National Commission shall be enforced by it in the

same manner as if it were a decree made by a court in a suit pending therein, and it shall be

lawful for the District Forum, the State Commission or the National Commission to send, in

case of its inability to execute such orders, to the court within the local limits of whose

(H) after selling such goods or rendering of such services, refuses to take back or withdraw the goods or

withdraw or discontinue the service and refuses to refund the consideration thereof, if paid, within a period of

thirty days after the receipt of goods or availing of services it is so requested by the consumer.

(I) discloses to any other person any personal information given in confidence by the consumer provided that

disclosure of personal information given with express or implied consent of the consumer or under provisions of

any law in force or in public interest shall not be constructed as unfair trade practice.

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jurisdiction in the case of an order against a company, the registered office of the company

where it is situated; or in the case of an order against any other person, place where the

person concerned voluntarily resides or carries on business or personally works for gain, is

situated. It shall also be the duty of the party against whom the order is passed by the District

Commission or the State Commission or the National Commission, as the case may be, to

report back to the District Forum or the State Commission or the National Commission, as

the case may be, about the status of implementation of the order and the proceedings would

be deemed to be continuing till the implementation of the order and it shall be the

responsibility of the District Forum or the State Commission or the National Commission, as

the case may be, to monitor the same till its implementation and to take appropriate penal

action wherever necessary

6. The Consumer Protection Bill, 2015 also proposes to establish an executive agency to be

known as the Central Consumer Protection Authority, to promote, protect and enforce the

rights of consumers enshrined in the Act.82

7. An important amendment in the context of territorial jurisdiction of consumer redressal

agencies, the Amendment has included a new provision, which states that a complaint may be

instituted in territorial jurisdiction, where the complainant resides or personally works for

gain. This is an important step towards ease of access to justice in complaints arising out of

online shopping, where in most circumstances, the online store is located away from the place

of consumer and provides unreasonable terms for dispute resolution.

8. On admission of complaint, the new amendment requires the electronic intermediaries to

provide such information, documents or records as may be reasonably required in a written

order by the District Commission for the purpose of the procedures.83

9. A new chapter on establishment of consumer mediation cell is introduced in the new

amendment.84

82Chapter III, Consumer Protection Bill, 2015. 83 Consumer Protection Bill, 2015, Clause 33 (3) 84 Chapter V, Consumer Protection Bill, 2015

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2.4.3 The Food Safety and Standards Act, 2006

Safe food is all about preparing, storing and handling of food to prevent from infections and

at the same time to ensure that we consume the right nutrients for a healthy diet. The need for

safe and healthy food has been recognised under the Constitution through the fundamental

rights under Article 21 which includes right to healthy food. The Directive Principles of State

imposes a duty on the State to ensure social order for promotion of welfare of people under

Article 38. It is also a duty of the State under Article 47 to raise the level of nutrition and

standard of living and to improve public health.

The erstwhile Prevention of Food Adulteration Act, 1954 aimed at protecting the consumers

from hazards of food adulteration, to prevent the sale of substandard foods and to protect the

interests of the consumers by eliminating fraudulent practices. The Department of Prevention

of Food Adulteration replaced the above enactment with Food Safety and Standards Act in

2006. The Preamble of the Food Safety and Standards Act, 2006 states that the Act aims to

consolidate the laws relating to food and to establish the Food Safety and Standards Authority

of India for laying down science based standards for articles of food and to regulate their

manufacture, storage, distribution, sale and import, to ensure availability of safe and

wholesome food for human consumption and for matters connected therewith or incidental

thereto.

The Act defines Food85 as any substance, whether processed, partially processed or

unprocessed, which is intended for human consumption and includes primary food,

genetically modified or engineered food or food containing such ingredients, infant food,

packaged drinking water, alcoholic drink, chewing gum, and any substance, including water

used into the food during its manufacture, preparation or treatment but does not include any

animal feed, live animals unless they are prepared or processed for placing on the market for

human consumption, plants, prior to harvesting, drugs and medicinal products, cosmetics,

narcotic or psychotropic substances. Apart from the above, the Central Government may

declare any other article as food for the purposes of this Act having regards to its use, nature,

substance or quality. The Act also defines the term ‘food business’86 as any undertaking,

whether for profit or not and whether public or private, carrying out any of the activities

85 Food Safety and Standards Act, 2006, Section 3(1)(j) 86 Food Safety and Standards Act, 2006, Section 3(1)(n)

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related to any stage of manufacture, processing, packaging, storage, transportation,

distribution of food, import and includes food services, catering services, sale of food or food

ingredients. Food business operator87 in relation to food business means a person by whom

the business is carried on or owned and is responsible for ensuring the compliance of this

Act, rules and regulations made thereunder. A prima facie interpretation of the above

definitions clearly indicates that they apply to online business of food as much as they apply

to offline sale of food. There have been several of such food businesses and food business

operators that have mushroomed in the recent times, who sell food and food products through

online stores. Freshmenu, foodpanda, zomata, bigbasket are some of the illustrations.

The term ‘Food Safety’88 has been defined to mean assurance that food is acceptable for

human consumption according to its intended use. The Act also defines the term “label”89 to

mean any tag, brand, mark, pictorial or other descriptive matter, written, printed, stencilled,

marked, embossed, graphic, perforated, stamped or impressed on or attached to container,

cover, lid or crown of any food package and includes a product insert.

Establishment of Food Safety and Standards Authority of India (FSSAI)

The Act provides for establishment of Food Safety and Standards Authority of India

(FSSAI). The FSSAI provides for establishment of a Central Committee which advises the

Authority on performance of its duties, on the prioritisation of work, identifying potential

risks and such other functions. The FSSAI has also constituted a Scientific Committee, which

shall be responsible for providing the scientific opinions to the Food Authority, and shall

have the powers, where necessary, of organising public hearings. The main duties of the

FSSAI are to regulate and monitor the manufacture, processing, distribution, sale and import

of food so as to ensure safe and wholesome food. The FSSAI provides for an online

mechanism for consumers to post their complaint or queries or make suggestions about food

safety issue related to adulteration, contamination, poor quality, improper packing,

insufficient information on label, misleading advertisements etc. The Act also lays down

certain general principles with respect to food safety and articles of food which are important

with respect to administration of the Act.

87 Food Safety and Standards Act, 2006, Section 3(1)(o) 88 Food Safety and Standards Act, 2006, Section 3(1)(q) 89 Food Safety and Standards Act, 2006, Section 3(1)(z)

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Packaging and Labelling of Food

Section 23 is an important provision under the Act which prohibits any manufacture,

distribution, sale or exposure to sale or despatch or deliver to any agent or broker for the

purpose of sale, any packaged food products which are not marked and labelled in the manner

as may be specified by regulations. The labels should not contain any statement, claim,

design or device which is false or misleading in any particular concerning the food products

contained in the package or concerning the quantity or the nutritive value implying medicinal

or therapeutic claims or in relation to the place of origin of the said food products.

Section 23(2) further provides that every food business operator shall ensure that the labelling

and presentation of food, including their shape, appearance or packaging, the packaging

materials used, the manner in which they are arranged and the setting in which they are

displayed, and the information which is made available about them through whatever

medium, does not mislead consumers.

Restriction of Advertisement and Prohibition of Unfair Trade Practices

Section 24 restricts misleading advertisements and prohibits unfair trade practices,

particularly with respect to standard, quality, quantity or grade-composition of food. The Act

prohibits import of any unsafe or misbranded or sub-standard food or food containing

extraneous matter.90

Section 26 imposes certain special responsibilities on the Food Business Operators.

According to the provision, every food business operator should ensure that the articles of

food satisfy the requirements of this Act and the rules and regulations at all stages of

production, processing, import, distribution and sale within the businesses under his control.

No food business operator shall himself or by any person on his behalf manufacture, store,

sell or distribute any article of food –

(i) which is unsafe; or

(ii) which is misbranded or sub-standard or contains extraneous matter; or

90 Food Safety and Standards Act, 2006, Section 25.

57

(iii) for which a licence is required, except in accordance with the conditions of the licence;

or

(iv) which is for the time being prohibited by the Food Authority or the Central Government

or the State Government in the interest of public health; or

(v) in contravention of any other provision of this Act or of any rule or regulation made

thereunder.

Manufacturers, packers, wholesalers, distributors and sellers are liable for the following

activities under the Act:

(a) Supplied after the date of its expiry; or

(b) Stored or supplied in violation of the safety instructions of the manufacturer; or

(c) Unsafe or misbranded; or

(d) Unidentifiable of manufacturer from whom the article of food have been received; or (e)

Stored or handled or kept in violation of the provisions of this Act, the rules and regulations

made thereunder; or

(f) received by him with knowledge of being unsafe.91

The seller shall be liable under this Act for any article of food which is –

(a) sold after the date of its expiry; or

(b) handled or kept in unhygienic conditions; or

(c) misbranded; or

(d) unidentifiable of the manufacturer or the distributors from whom such articles of food

were received; or

(e) received by him with knowledge of being unsafe.92

91 Food Safety and Standards Act, 2006, Section 27(1).

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Registration and Licensing of Food Business Operators

As per the Food Safety and Standards Act, 2006 and Rules as well as Regulation 2011, it is

mandatory to get registration/licenses for all food business operators.93 Any person desirous

to commence or carry on any food business shall make an application to grant of a License to

the Designated Officer along with fees. Safety, Sanitary and Hygiene conditions have been

laid down for registration/ licensing according to the potential for food related hazards. All

the food Business Operators in this country shall be either registered (Petty food business) or

licensed (depending the scale and volume of business as laid down in Licensing &

Registration Regulations 2010). Registration will be under State Food Safety Authority;

however, licensing for major food business operator and for sectors which are prone to

contamination shall remain under Central Licensing.

Enforcement

With respect to Enforcement of the Act, the Food Authority and the State Food Safety

Authorities are responsible for the enforcement of the Act.94 The Commissioner of Food

Safety for the State is responsible for efficient implementation of food safety and standards

and other requirements laid down under this Act. The Commissioner of Food Safety appoints

Food Safety Officers for such local areas and he may assign to them for the purpose of

performing functions under this Act and the rules and regulations made thereunder.

Offences and Penalties

Chapter X of the Act provides for Offences and Penalties. Some of the general principles

regarding offences as provided under Section 48 are:

1. A person may render any article of food injurious to health by means of one or more of the

following operations, namely:-

(a) adding any article or substance to the food;

(b) using any article or substance as an ingredient in the preparation of the food;

92 Food Safety and Standards Act, 2006, Section 27 (2) 93 Food Safety and Standards Act, 2006, Section 30. 94 Food Safety and Standards Act, 2006, Section 29(1).

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(c) abstracting any constituents from the food; or

(d) subjecting the food to any other process or treatment, with the knowledge that it may be

sold or offered for sale or distributed for human consumption.

(2) In determining whether any food is unsafe or injurious to health, regard shall be had to –

(a) (i) the normal conditions of use of the food by the consumer and its handling at each stage

of production, processing and distribution;

(ii) the information provided to the consumer, including information on the label, or other

information generally available to the consumer concerning the avoidance of specific adverse

health effects from a particular food or category of foods not only to the probable, immediate

or short-term or long-term effects of that food on the health of a person consuming it, but also

on subsequent generations;

(iii) to the probable cumulative toxic effects;

(iv) to the particular health sensitivities of a specific category of consumers where the food is

intended for that category of consumers; and

(v) also to the probable cumulative effect of food of substantially the same composition on

the health of a person consuming it in ordinary quantities;

(b) the fact where the quality or purity of the article, being primary food, has fallen below the

specified standard or its constituents are present in quantities not within the specified limits of

variability, in either case, solely due to natural causes and beyond the control of human

agency, then such article shall not be deemed to be unsafe or sub-standard or food containing

extraneous matter.

While adjudging the quantum of penalty under this Chapter, the Adjudicating Officer or the

Tribunal, as the case may be, shall have due regard to the following:-

a) The amount of gain or unfair advantage, wherever quantifiable, made as a result of the

contravention,

(b) The Amount of loss caused or likely to cause to any person as a result of the

contravention,

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(c) The repetitive nature of the contravention,

(d) Whether the contravention is without his knowledge, and

(e) Any other relevant factor95

For the purpose of adjudication, the Act provides that an officer not below the rank of

Additional District Magistrate of the district where the alleged offence is committed, shall be

notified by the State Government as the Adjudicating Officer for adjudication in the manner

as may be prescribed by the Central Government.96 The adjudicating officer is given the

powers of a civil court. The Act also provides for the establishment of a tribunal known as the

Food Safety Appellate Tribunal to hear appeals from the decisions of the Adjudicating

Officer. Any person aggrieved by a decision or order of the Tribunal may prefer an appeal to

the High Court within 45 days.

2.4.4 The Essential Commodities Act, 1955

The Essential Commodities Act, 1955 was enacted to ensure the easy availability of essential

commodities to consumers and to protect them from exploitation by unscrupulous

traders. The Act provided for control of production, supply and distribution of trade and

commerce in essential commodities. The enforcement/ implementation of the provisions of

the Essential Commodities Act, 1955 lies with the State Governments and Union Territory

Administrations.

In conformity with the policy of the Government towards economic liberalisation,

Department of Consumer Affairs is committed to the development of agriculture and trade by

removing unnecessary controls and restrictions to achieve a single Indian Common Market

across the country for both manufactured and agricultural produce and to encourage linkage

between agriculture and industry. With this object in view, this Department introduced the

Essential Commodities (Amendment) Bill, 2005 in the Parliament in the winter session of

2005 to enable the Central Government to prune the list of essential commodities to the

minimum by deleting all such commodities which have no relevance in the context of present

improved demand and supply position and to facilitate free trade and commerce. Only those

commodities considered essential to protect the interest of the farmers and the large section of

the people "below the poverty line" are proposed to be retained under the Essential

Commodities Act, 1955.

95 Food Safety and Standards Act, 2006, Section 49. 96 Food Safety and Standards Act, 2006, Section 68(1).

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The Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities

Act, 1980 is being implemented by the State Governments/UT Administrations for the

prevention of unethical trade practices like hoarding and black-marketing. The Act empowers

the Central and State Governments to detain persons whose activities are found to be

prejudicial to the maintenance of supplies of commodities essential to the community.

Detentions are made by the States/UTs in selective cases to prevent hoarding and black-

marketing of the essential commodities. As per reports received from the State Governments,

119 detention orders were issued under the Act during the year 2007. The Central

Government and the State Governments also have the power to modify or revoke the

detention orders. The representations made by or on behalf of the persons ordered for

detention are considered and decided by the Central Government.

2.4.5 The Bureau of Indian Standards, Act 1986

In the twilight years of British rule in India, when the country was faced with the gigantic

task of building up the industrial infrastructure, it was the Institution of Engineers (India),

which prepared the first draft of the Constitution of an Institution which could take up the

task of formulation of National Standards. This led to the Department of Industries and

Supplies issuing a memorandum on 3rd September 1946, formally announcing the setting of

an organization called the “Indian Standards Institution”. The Indian Standards Institution

(ISI) came into being on the 06 January 1947 and in June 1947 Dr. Lal C. Verman took over

as its first Director.

Bureau of Indian standards (BIS) came into existence, through an act of parliament dated 26th

November 1986, on 1 April 1987, with a broadened scope and more powers taking over the

staff, assets, liabilities and functions of erstwhile ISI. Through this change over, the

government envisaged building a climate for quality culture and consciousness and greater

participation of consumers in formulation and implementation of national standards.

The Bureau is a Body Corporate consisting of 25 members representing both Central and

State governments, Members of Parliament, industry, scientific and research institutions,

consumer organizations and professional bodies with Union Minister of Consumer Affairs,

Food and Public Distribution as its President and with Minister of State for Consumer

Affairs, Food and Public Distribution as its Vice-President. It has a network of five regional

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officers, 19 branch offices, 5 inspection offices and 8 laboratories which act as an effective

link between BIS, Government, industry and consumers.

Standards

For formulation of Indian Standards, BIS functions through the Technical Committee

structure comprising of Sectional Committees, Subcommittees and Panels set up for dealing

with specific group of subjects under respective Division Councils. The committee structure

of BIS seeks to bring together all those with substantial interest in particular project, so that

standards are developed keeping in view national interests and after taking into account all

significant viewpoints through a process of consultation. Decisions in BIS technical

committees are reached through consensus. As a policy, the standards formulation activity of

BIS has been harmonized as far as possible with the relevant guidelines as laid down by the

International Organization for Standardization (ISO). BIS, being a signatory to the 'Code of

Good Practice for the preparation, adoption and application of standards (Article 4 of WTO-

TBT Agreement, Annex 3)' has also accordingly aligned its standards formulation procedure.

Product Certification

The Product Certification Scheme of BIS aims at providing Third Party Guarantee of quality,

safety and reliability of products to the customer. Presence of ISI certification mark, known

as Standard Mark, on a product is an assurance of conformity to the specifications. The

conformity is ensured by regular surveillance of the licensee's performance by surprise

inspections and testing of samples, drawn both from the market and factory. The

manufacturer is permitted to self-certify the licenced products after ascertaining its

conformity to the Standard. Through its surveillance operations, the Bureau maintains a close

vigil on the quality of certified goods. Although, the scheme itself is voluntary in nature, the

Government of India, on considerations of public health and safety, security, infrastructure

requirements and mass consumption has enforced mandatory certification on various

products through Orders issued from time to time under various Acts. While BIS continues to

grant licences on application, the enforcement of compulsory certification is done by the

notified authorities.

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Under separate arrangements with statutory agencies, some products have been placed under

special certification schemes of lot or batch inspection carried out by BIS inspecting officers.

A majority of gas cylinders, regulators and valves are certified through such schemes.

In order to safeguard the interest of consumers against spurious marking/misuse of ISI mark,

penal provision exists in BIS Act 1986 under section 33(1), as per which any person who

contravenes the provisions of Section 11, Section 12, Section 14 or Section 15 shall be

punishable with imprisonment for a term which may extend upto one year or with a fine

which may extend upto Rs. 50,000 or with both.

International Standards Organization

Under the United Nations Guidelines on Consumer Protection, 1985(revised on 1999) the

object is the interests and needs of consumers in all countries, particularly those in

developing countries, recognizing that consumers often face imbalance, in economic terms,

educational levels and bargaining power; and bearing in mind that consumers should have the

right of access to non-hazardous products, as well as the right to promote just, equitable and

sustainable economic and social development and environmental protection, these guidelines

for consumer protection have the following objectives:

(a) To assist countries in achieving or maintaining adequate protection for their population as

consumers;

(b) To facilitate production and distribution patterns responsive to the needs and desires of

consumers;

(c) To encourage high levels of ethical conduct for those engaged in the production and

distribution of goods and services to consumers;

(d) To assist countries in curbing abusive business practices by all enterprises at the national

and international levels which adversely affect consumers;

(e) To further international cooperation in the field of consumer protection;

(f) To encourage the development of market conditions which provide consumers with

greater choice at lower prices;

(g) To promote sustainable consumption.

For easier grievance redressal, Bureau of Indian Standards also provides for an online

complaint registration mechanism, where consumers can lodge complaints relating to BIS

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certified products, hall marking of gold and silver, standard formulation etc. Vigilance related

complaints against BIS officers/staff are also permitted to be lodged online.

2.4.6 The Legal Metrology Act, 2009

The Standard Weights and Measures Act, 1976 was enacted with the objective of establishing

standards of weights and measures, to regulate trade or commerce in weights, measures and

other goods sold or distributed by weight, measure or number and to provide for matters

connected therewith or incidental thereto. The Standards of Weights & Measures (Packaged

Commodities) Rules, 1977 was further introduced to regulate pre-packed commodities sold

or intended to be sold in the course of inter-state and commerce. The Legal Metrology Act,

2009 replaces the Standards of Weights and Measures Act, 1976 and its allied rules and

regulations. The Preamble of the Act is to establish and enforce standards of weights and

measures, regulate trade and commerce in weights, measures and other goods which are sold

or distributed by weight, measure or number and for matters connected therewith or

incidental thereto.

The Act defines the label97 as any written, marked, stamped, printed or graphic matter affixed

to, or appearing upon any pre-packaged commodity. The Act provides for the base unit of

weights and measures such as length to be measured in meters, weight in kilograms, electric

current in ampere etc.98Pre-packaged Commodity is defined under Section 2(l) to mean a

commodity which without the purchaser being present is placed in a package of whatever

nature, whether sealed or not, so that the product contained therein has a pre-determined

quantity.

The Legal Metrology Director and the Legal Metrology Officers, appointed by the Central

Government are authorized to perform duties and functions as prescribed under the Act. The

Director, Controller or any legal metrology officer are given the powers of inspection, seizure

etc. and even forfeiture of non-standard or unverified weights and measures.

97 The Legal Metrology Act, 2009, Section 2(f) 98 Legal Metrology Act, 2009, Section 5.

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Provisions Relating Pre-packaged Commodities

As per Section 18(1) of the Act, no person shall manufacture, pack, sell, import, distribute,

deliver, offer, expose or possess for sale any pre-packaged commodity unless such package is

in such standard quantities or number and bears thereon such declarations and particulars in

such manner as may be prescribed. Manufacturers and importers are required to seek

approval of model of the weight or measure even if it is meant for domestic uses. Under the

new regulation, verification of a weight or measure will be valid only within the State where

it was stamped and will require further verification before selling or use in another state, even

if the instrument does not require dismantling and reassembling.

The new Act provides for stringent punishment for violation of its provisions. In case of use

of non-standard weights and measures, the person who uses such non-standard weights and

measures shall be imposed a fine of which may extend to twenty-five thousand rupees and for

the second or subsequent offence, with imprisonment for a term which may extend to six

months and also with fine. Similarly, penalties are imposed for alteration of weights and

measures, sale of non-standard weights and measures, quoting or publishing non-standard

weights and measures, use of unverified measures, penalty for false information and false

returns, penalty for counterfeiting of seals.

The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 is further

replaced with the Legal Metrology (Packaged Commodities) Rules, 2011. The Rules has been

framed under section 52(2)(j) and (q) of the Legal Metrology Act,2009 and has, since, been

amended several times, the latest being made under Notification bearing no. GSR 359(E)

dated 06.06.2013. (First amendment of 2013). The Rules provides for consumer protection in

respect of packaged commodities by providing, in pursuance of the recommendations of the

International Organization of Legal Metrology, for the proper indication on the package of

net quantity by weight, measures or number, the identity of the commodity contained therein,

name of the manufacturer, and what is very important, the price of the package.

Every manufacturer or packer or importer of packaged commodities is required to register

under Rule 27 within 90 days of starting business. The Rules provides for specific

requirements for different classes of packages – retail, wholesale and packages for

institutional and industrial consumers. The Rules also applies to import or export of

packages.

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2.4.7 The Drugs and Cosmetics Act, 1940

The Drugs and Cosmetics Act, 1940 was enacted with the objective of regulating the import,

manufacture, distribution and sale of drugs and cosmetics. The term ‘drug’ is defined under

Section 3(b) of the Act to include –

(i) all medicines for internal or external use of human beings or animals and all substances

intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease

or disorder in human beings or animals, including preparations applied on human body for

the purpose of repelling insects like mosquitoes;

(ii) such substances (other than food) intended to affect the structure or any function of the

human body or intended to be used for the destruction of 6 [vermin] or insects which cause

disease in human beings or animals, as may be specified from time to time by the Central

Government by notification in the Official Gazette;

(iii) all substances intended for use as components of a drug including empty gelatine

capsules; and

(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation

or prevention of disease or disorder in human beings or animals, as may be specified from

time to time by the Central Government by notification in the Official Gazette, after

consultation with the Board.

The term ‘Cosmetic’ is defined under Section 3 (aaa) to mean any article intended to be

rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the

human body or any part thereof for cleansing, beautifying, promoting attractiveness, or

altering the appearance, and includes any article intended for use as a component of cosmetic.

Establishments

The Act provides for the establishment of The Drugs Technical Advisory Board, the Central

Drugs Laboratory and the Drugs Consultative Committee. The Drugs Technical Advisory

Board advises the Central Government and the State Governments on technical matters

arising out of the administration of this Act. The Central Drugs Laboratory, which is carried

out at the Central Research Institute, exercises the functions of analysis and tests of drugs and

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cosmetics samples. The Central Government may constitute an advisory committee to be

called “the Drugs Consultative Committee” to advise the Central Government, the State

Governments and the Drugs Technical Advisory Board on any other matter tending to secure

uniformity throughout India in the administration of the Act.

Misbranded, Adulterated and Spurious Drugs and Cosmetics

A drug shall be deemed to be misbranded99—

(a) if it is so coloured, coated, powdered or polished that damage is concealed or if it is made

to appear of better or greater therapeutic value than it really is; or

(b) if it is not labelled in the prescribed manner; or

(c) if its label or container or anything accompanying the drug bears any statement, design or

device which makes any false claim for the drug or which is false or misleading in any

particular.

A drug shall be deemed to be adulterated100—

(a) if it consists, in whole or in part, of any filthy, putrid or decomposed substance; or

(b) if it has been prepared, packed or stored under insanitary conditions whereby it may have

been contaminated with filth or whereby it may have been rendered injurious to health; or

(c) if its container is composed in whole or in part, of any poisonous or deleterious substance

which may render the contents injurious to health; or

(d) if it bears or contains, for purposes of colouring only, a colour other than one which is

prescribed; or

(e) if it contains any harmful or toxic substance which may render it injurious to health; or

(f) if any substance has been mixed therewith so as to reduce its quality or strength.

99Drugs and Cosmetics Act, 1940, Section 9. 100 Drugs and Cosmetics Act, 1940, Section 9A

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A drug shall be deemed to be spurious under the Act101 —

(a) if it is imported under a name which belongs to another drug; or

(b) if it is an imitation of, or a substitute for, another drug or resembles another drug in a

manner likely to deceive or bears upon it or upon its label or container the name of another

drug unless it is plainly and conspicuously marked so as to reveal its true character and its

lack of identity with such other drug; or

(c) if the label or the container bears the name of an individual or company purporting to be

the manufacturer of the drug, which individual or company is fictitious or does not exist; or

(d) if it has been substituted wholly or in part by another drug or substance; or

(e) if it purports to be the product of a manufacturer of whom it is not truly a product.

Likewise the Act defines misbranded cosmetics, adulterated cosmetics and spurious

cosmetics. The Act prohibits import of certain drugs which are of sub-standard quality,

misbranded, adulterated or spurious. Every manufacturer, seller and distributor shall ensure

that the drugs and cosmetics manufactured and sold shall be of standard quality as prescribed

under the Act.

Section 18A is an important provision under the Act in terms of information to be provided,

which requires every person, not being the manufacturer of a drug or cosmetic or his agent

for the distribution thereof, shall, if so required, disclose to the Inspector the name, address

and other particulars of the person from whom he acquired the drug or cosmetic.

Authorities under the Act

The Central Government or State Government may, by notification in the Official Gazette,

appoint such persons as Inspectors for such areas as may be assigned to them by the Central

Government or State Government. The powers of the Inspector includes inspection of

premise where drugs and cosmetics are being manufactured or sold, taking samples of drugs

and cosmetics, search any person, who, he has reason to believe, has secreted about his

person, any drug or cosmetic in respect of which an offence is being committed, order in

101 Drugs and Cosmetics Act, 1940, Section 9B

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writing not to dispose off stocks till inspection is over, examine any record, register,

document or any other material object etc.102

The Act prescribes penalties for various offences committed under the Act such as non-

disclosure of the name of the manufacturer, etc., penalty for not keeping documents, etc., and

for non-disclosure of information, penalty for use of Government Analyst’s report for

advertising etc.

2.4.8 The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 controls

advertising of drugs in India. It prohibits advertisements of drugs and remedies that claim to

have magical qualities, and makes doing so a cognizable offence. The Act defines the term

‘drug’103 to include - (i) a medicine for the internal or external use of human beings or

animals; (ii) any substance intended to be used for or in the diagnosis, cure, mitigation,

treatment or prevention of disease in human beings or animals; (iii)any article, other than

food, intended to affect or influence in any way the structure or any organic function of the

body of human beings or animals; (iv)any article intended for use as a component of any

medicine, substance or article, referred to in sub-clauses (i), (ii) and (iii).

The term ‘magic remedy’104 is defined to include a talisman, mantra, kavacha, and any other

charm of any kind which is alleged to possess miraculous powers for or in the diagnosis,

cure, mitigation, treatment or prevention of any disease in human beings or animals or for

affecting or influencing in any way the structure or any organic function of the body of

human beings or animals.

Section 3 of the Act prohibits certain advertisements that relate procurement of miscarriage

in women, curing, diagnosing or preventing certain diseases listed under Schedule of the Act.

Section 5 of the Act prohibits Advertisement of Magic Remedies for Treatment of Certain

Diseases and Disorders which directly or indirectly claims to be efficacious for any of the

purposes specified above. Section 6 of the Act prohibits import and export from India of

advertisements that are prohibited under the Act.

102 Drugs and Cosmetics Act, 1940, Section 22 103 Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, Section 2(b) 104 Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, Section 2(c )

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Whoever contravenes any of the provisions of this Act [or the rules made there under] shall,

on conviction, be punishable –

a) in the case of a first conviction, with imprisonment which may extend to six months, or

with fine, or with both;

b) in the case of a subsequent conviction, with imprisonment which may extend to one year,

or with fine, or with both.105

The law is rarely enforced and several such products are freely available to the public.106

Some advertisements of these categories are also known to appear on cable television

channels and on the online shopping portals without much repercussion.107 Online portals are

now a hub to several sexual wellness products that violate the guidelines on sale of drugs and

objectionable material. Recently, the CEO of Snapdeal invited an FIR from Maharashtra’s

Food and Drug administration (FDA) for selling sildenafil citrate (Viagra) tablets, which can

be offered by licensed chemists only when a prescription is produced.108

2.4.9 The Competition Act, 2002:The Monopolies and Restrictive Trade Practices Act, 1969

(MRTP Act) was enacted with the objective that the operation of the economic system does

not result in concentration of economic power to the common detriment, for the control of

monopolies, for prohibition of monopolistic and restrictive trade practices and for matters

connected with and incidental thereto. The provisions of the Act were based on the

assumption that if dealers, manufacturers or producers were prevented from distorting

competition, the consumer would get a fair deal. In order to address unfair practices adopted

by traders and industry to dupe customers, the MRTP Act was amended in 1984 to

incorporate inter alia, provisions for regulating unfair trade practices such as false

representation, misleading advertisements, bargain sales etc. The MRTP Act, 1969 is now

replaced with the Competition Act, 2002.

105 Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, Section 7 106Khushboo Narayan and C.H.Unnikrishnan, “Magic drugs firms target India in expansion drive”, Live Mint, 11 March

2008, Retrieved 13 September 2013, available at http://www.livemint.com/Politics/1rH50DxyF

z6yeZ4bzGbEyK/Magic-drugs-firms-target-India-in-expansion-drive.html, (last visited on February 20, 2014). 107Economic Times Bureau, “Misleading advertisements come under government scanner”, The Economic

Times. 18 November 2011. 108 Rohit Panshikar, “Flipkart has stopped selling ‘sexual wellness’ products in India”, available at

http://www.mobiletor.com/133184/flipkart-stops-selling-sexual-wellness-products-to-indian-customers/, (last

visited on June 15, 2015).

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The Competition Act, 2002 deals with four major compartments – anti-competition

agreements, abuse of dominant position, regulation of combinations and competition

advocacy. The term ‘Consumer’ has also been defined under the Competition Act to include

both business-to-business and business-to-consumer transactions.109 There have been several

instances in the recent past, where the fair trade regulator, Competition Commission of India

(CCI) had to decide on anti-competitive issues pertaining to electronic commerce. In one

such instance, the Competition Commission rejected allegations against five e-commerce

majors – Flipkart, Snapdeal, Amazon, Jabong and Myntra, who were accused of controlling

product pricing and unfair business practices. Further, the CCI also held that the exclusive

agreements did not adversely affect the existing players or the new e-portals entering the

retail market.110 Some of the key findings of the case are as follows:

(i) The relevant market for a product marketed through an e-portal is not product specific, but

includes all its substitutes which can exercise a restraint on the pricing of such product.

(ii) The exclusive marketing arrangements between e-portals and manufacturers/suppliers do

not create any entry barriers in the market, as the manufacturers/suppliers are free to sell their

products on their own websites as well as the physical market.

(iii) The availability of a large number of substitutable products, coupled with the multitude

of companies operating e-portal services in the market, is enough to prevent the dominance of

any single entity in this sector.

(iv) E-portals, in fact, improve price transparency, allowing consumers to make a more

informed decision, and thereby enhance competition.

109 Section 2(f) - “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, whether such purchase of goods is for resale or for any commercial purpose or for personal use; (ii)

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 whether such hiring or availing of services is for any commercial purpose or for personal use; 110 “CCI rejects charges against five e-commerce majors”, The Financial Express, May 06, 2015, available at

http://www.financialexpress.com/article/industry/companies/cci-rejects-charges-against-five-e-commerce-

majors/69749/, (last visited on June 06, 2015)

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In yet another instance, the Competition Commission of India is probing into the resale price

maintenance practices adopted by the e-commerce players, which is quite common in

consumer goods and other sectors, a manufacturer and distributor decide that the former’s

product would not be sold at a price below a certain threshold level.111

2.5 Information Technology Law in Consumer Perspective

The past decade has seen an enormous boom in business-to-consumer e-commerce

transactions. Everything from books to software and a variety of services can be bought or

availed online these days. There is no standard definition for the term e-commerce. The

Information Technology Act, 2000 refers ‘electronic commerce’ to transactions carried out

by means of electronic data interchange and other means of electronic communication, which

involve the use of alternatives to paper-based methods of communication and storage of

information. In other words, e-commerce denotes a mode of conducting business through

electronic means distinct from the conventional physical means. Section 10A was inserted112

under the Information Technology Act, 2000 to validate contracts formed through electronic

means.113The Supreme Court in Trimex International FZE Ltd. Dubai v. Vedanta Aluminum

Ltd. 114recognized the validity of electronic transactions, in the context of e-mail exchanges

between parties regarding mutual obligations constitute a contract.

The United Nations Commission on International Trade Law (UNCITRAL) adopted the

Model Law on Electronic Commerce in 1996115. The Model Law recommended that all States

should give favourable considerations to the Model Law when they enact or revise their laws.

The Model law provides for equal legal treatment of users of electronic communication and

paper based communication. The Model Law also provides for legal recognition of electronic

records and digital signatures to enable conclusion of contracts and creation of rights and

obligations through electronic medium. A regulatory regime to supervise Certifying

111 “CCI to probe resale price pacts in e-commerce”, Livemint, August 12, 2015, available at

http://www.livemint.com/Politics/bYY3mBT5oX7qoIKsJJKNBM/CCI-to-probe-resale-price-pacts-in-

ecommerce.html, (last visited on September 30, 2015) 112 Ins.by Act 10 of 2009, Sec.9 (w.e.f 27-10-2009) 113 Information Technology (Amendment) Act, 2008, Section 10A – “Where in a contract formation, the

communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the

case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be

deemed to be unenforceable solely on the ground that such electronic form or means was used for that

purpose.” 114Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd., 2010 (1) SCALE 574 115 UNCITRAL Model Law on Electronic Commerce, adopted by the General Assembly of the United Nations

by its Resolution No.51/162, dated 30th January,1997

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Authorities issuing digital signature certificates is also provided under the Model Law. To

prevent possible misuse arising out of transactions and other dealings concluded over the

electronic medium, it also provides for civil and criminal liabilities for contravention of

provisions of information technology related laws.

In order to give effect to the Resolution, India enacted the Information Technology Act, 2000

(IT Act) which came into force on 17th October 2000. The objectives of the Act are as

follows:

a. To grant legal recognition for transactions carried out by means of electronic data

interchange and other means of electronic communication commonly referred to as

“electronic commerce” in place of paper based methods of communication;

b. To give legal recognition to Digital signatures for authentication of any information or

matter which requires authentication under any law

c. To facilitate electronic filing of documents with Government departments

d. To facilitate electronic storage of data

e. To facilitate and give legal sanction to electronic fund transfers between banks and

financial institutions

f. To give legal recognition for keeping of books of accounts by banker’s in electronic form.

g. To amend the Indian Penal Code, the Indian Evidence Act, 1872, the Banker’s Book

Evidence Act, 1891, and the Reserve Bank of India Act, 1934.

The Act applies to the whole of India and applies also to such offences or contravention

committed outside India by a person.116

With proliferation of information technology enabled services such as e-governance,

ecommerce and e-transactions, protection of personal data and information and

implementation of security practices and procedures assumed greater importance and

required harmonization with the provisions of the Information Technology Act. Further, the

116 Information Technology Act, 2008, Section 1(2).

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need to protect critical information infrastructure pivotal to national security, economy,

public health and safety led to the some amendments to the Information Technology Act in

2008. The amendment also address new forms of cybercrimes such as publishing sexually

explicit materials in electronic form, video voyeurism and breach of confidentiality and

leakage of data by intermediary, e-commerce frauds like personation commonly known as

Phishing, identity theft and offensive messages through communication services.

As has been seen earlier in the Chapter, the recent amendments to Consumer Protection Act

has drawn references to various definitions under the Information Technology Act, 2000 such

as electronic records and electronic form. The term ‘Intermediary’ which was narrower in its

definition to include only internet service providers, telecom service providers and network

service providers was amended to explicitly include online marketplace as

intermediaries.117The Act also provides for immunity to online market intermediaries from

certain liabilities, provided the intermediary observes due diligence and such other guidelines

as the Central Government may prescribe (Section 79)118.

The intermediary is required to publish rules and regulations, privacy policy and user

agreement for access or usage of intermediary’s computer resource by any person under

117 Information Technology Act, 2008, Section 2(1) (w) -"Intermediary" with respect to any particular electronic

records, means any person who on behalf of another person receives, stores or transmits that record or provides

any service with respect to that record and includes telecom service providers, network service providers,

internet service providers, web hosting service providers, search engines, online payment sites, online-auction

sites, online market places and cyber cafes. 118Information Technology Act, 2008, Section 79- Exemption from liability of intermediary in certain cases:

(1) Notwithstanding anything contained in any law for the time being in force but subject to the provisions of

sub-sections (2) and (3), an intermediary shall not be liable for any third party information, data, or

communication link hosted by him. (corrected vide ITAA 2008)

(2) The provisions of sub-section (1) shall apply if-

(a) the function of the intermediary is limited to providing access to a communication system over which

information made available by third parties is transmitted or temporarily stored; or

(b) the intermediary does not-

(i) initiate the transmission,

(ii) select the receiver of the transmission, and

(iii) select or modify the information contained in the transmission

(c) the intermediary observes due diligence while discharging his duties under this Act and also observes such

other guidelines as the Central Government may prescribe in this behalf (Inserted Vide ITAA 2008)

(3) The provisions of sub-section (1) shall not apply if-

(a) the intermediary has conspired or abetted or aided or induced whether by threats or promise or otherwise in

the commission of the unlawful act (ITAA 2008)

(b) upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any

information, data or communication link residing in or connected to a computer resource controlled by the

intermediary is being used to commit the unlawful act, the intermediary fails to expeditiously remove or disable

access to that material on that resource without vitiating the evidence in any manner.

Explanation: For the purpose of this section, the expression "third party information" means any information

dealt with by an intermediary in his capacity as an intermediary.

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Information Technology (Intermediaries Guidelines) Rules, 2011.119 On obtaining knowledge

of any information being grossly harmful, harassing, defamatory, obscene or otherwise

unlawful in any manner or violate any law for the time being in force, the Guidelines requires

the intermediary to act within 36 hours to disable such information.120 The intermediary is

also required to preserve such information and associated records for at least ninety days for

investigation purposes.121 The Rules also requires the intermediary to publish on its website

the name of the Grievance Officer and his contact details by which users who suffer as a

result of access to the computer resource can notify their complaints.

2.6 Conclusion

This chapter has brought out the various advances that have taken place in India in consumer

protection. A trajectory of developments and implementations from customary practices to

the modern day legislation indicates that there is a constant endeavour to achieve consumer

welfare and protection. The digital age is also witnessing advancements in the form of

proposed amendments to the Consumer Protection Act in bringing the contemporary

electronic commerce within the purview of Consumer Protection law. Much needs to be

analysed whether the recent developments meet the challenges posed by the click-and-mortar

system. An understanding of the international developments in the context will further

provide an insight to appreciate the Indian position.

The next section brings out an analysis of the international guidelines and co-operations at the

international and regional levels, national legislations on consumer laws addressing specific

issues of electronic commerce and self-regulations that provide code of conduct to the e-

commerce industry.

119Information Technology (Intermediary Guidelines) Rules, 2011, Rule 3(1) and 3(2). 120 Information Technology (Intermediary Guidelines) Rules, 2011, Rule 3(4). 121Id.