The Consumer Protection Act, 2019 (‘New Act’) received the assent of the President of India and was published in the official gazette on 9th August 2019. This New Act will replace the old Consumer Protection Act, 1986 (‘Old Act’). The New Act will come into force on such date as the Central Government may so notify.

Now, recently, in exercise of the powers conferred by sub-section (3) of section 1 of the New Act, MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION (Department of Consumer Affairs) has issued a Notification No. S.O. 2351(E) dated 15th July 2020 (‘the Said Notification’) whereby the Central Government has appointed the 20th day of July, 2020 as the date on which the certain provisions of the said Act shall come into force including Chapter IV [Section 28 to 73]- to deal with ‘Consumer Disputes Redressal Commission’.

Unfair Contract-

The New Act has introduced the concept of ‘unfair contract’ which includes those contracts, which favor the manufacturers or service providers and are against the interest of the consumers. The ‘right to terminate unfair contracts’ is a separate consumer right.

A complaint in this regard can now be filed by a consumer. This would help to keep a check on businesses including banks and e-commerce sites that take advantage of their dominance in the market and mandatorily require the helpless consumers to sign such unfair contracts and accept their standard terms before selling them goods or providing services.

Section 49(2) and 59(2) of the New Act gives power to the ‘State Commission’ and ‘National Commission’ respectively to declare any terms of contract, which is unfair to any consumer, to be null and void.

As per Section 2(46) of the New Act, “unfair contract” means a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including the following, namely:—

(i) requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or

(ii) imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or

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

(iv) entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or

(v) permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or

(vi) imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage;

Section 47(1)(a)(ii) of the New Act grants the ‘State Commission’ original jurisdiction to entertain complaints against ‘unfair contracts’, where the value of goods or services paid as consideration does not exceed ₹10 crore.

Also, Section 58(1)(a)(ii) of the New Act grants the ‘National Commission’ original jurisdiction to entertain complaints against ‘unfair contracts’, where the value of goods or services paid as consideration exceeds ₹10 crore.

Remark: In the year 2018, homebuyers of DLF in Gurgaon had complained to the Competition Commission of India(‘CCI’), alleging that DLF imposed unfair and arbitrary contractual terms in the buyer’s agreement. However, the CCI had dismissed the complaint of the homebuyers on grounds that DLF was not dominant in the relevant market. Now, Section 49(2) and 59(2) of the New Act gives power to the ‘State Commission’ and ‘National commission’  respectively to declare any terms of contract, which is unfair to any consumer, to be null and void, therefore, now homebuyers can file a complaint against ‘unfair contract’ at ‘State Commission’ and ‘National Commission’, as the case may be.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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