Pecuniary reforms under the new Consumer Law

In August 2019, Parliament passed the Consumer Protection Bill, 2019 to replace the Consumer Protection Act, 1986. The Consumer Protection Act, 2019 received the assent of the President of India on August 9, 2019. The provisions of the 2019 Act were notified with effect from July 20 and 24 of this year.

Paradigm shift in Pecuniary Jurisdiction

The 2019 Act has brought major changes and looks more promising when it comes to protecting the interests of the consumers than the 1986 Act. One of the most significant changes in the 2019 Act, which is the focal point of the instant article, is the change in the pecuniary jurisdiction of the various consumer forums.

Compared to the 1986 Act, the pecuniary jurisdiction of the consumer forums for filing consumer complaints has increased exponentially under the 2019 Act. A comparative chart of depicting the change in pecuniary jurisdiction of the consumer forums is as follows:

Change of method in determining pecuniary jurisdiction

Under the 2019 Act, the pecuniary jurisdiction for District Forums (S. 34), State Commission (S. 47) and National Commissions (S. 58) is required to be determined on the basis of “value of goods or services paid as consideration”. This is a noticeable change from the 1986 Act, wherein pecuniary limits were determined using “value of goods or services and the compensation, if any, claimed”. This change has been possibly incorporated to rid the practice of exaggerating compensation, usually by claiming non-pecuniary elements such as mental harassment, agony etc., just to bring the case within the purview of State or National Commissions.

The flipside is that the District Forum now becomes ground zero for cases, which were hitherto being decided by State and National Commissions by the sheer dint of the compensation claim being over INR 20 Lakhs or INR 1 crore, as the case may be. This adds to the District Forum’s increasing docket load.

Besides, this change creates a peculiar situation for certain category of consumer matters such as those related to insurance and medical negligence, wherein the consideration paid for obtaining an insurance cover or availing medical services would be far less than the claim that arises out of deficiency in such services. One can easily anticipate a case where an insurance cover is obtained for more than INR 1 crore in lieu of an insurance premium costing no more than tens of thousands of rupees.

Recently, a similar situation arose before the Division Bench of the National Consumer Disputes Redressal Commission (NCDRC) in the case of Pyaridevi Chabiraj Steels Pvt. Ltd. v. National Insurance Company Ltd. & Ors. In this case, the complainant had preferred a complaint before NCDRC challenging the decision of an insurance company for wrongfully repudiating its insurance claim of INR 28.23 crore for restoration of its factory premises.

The preliminary point as to the maintainability of the complaint was whether the NCDRC has the pecuniary jurisdiction to the entertain the complaint because the value of consideration paid for goods or services i.e. insurance premium paid was only INR 4.43 lakh, which is less than the pecuniary threshold of INR 10 crore for maintaining a complaint before NCDRC under the 2019 Act.

The complainant argued that “a liberal view” should be taken as if “the word value of consideration paid” is taken to be the amount paid for the purchase of goods or services by a Consumer” since there will be no instance of making payment by any consumer of premium of more than INR 10 crores. It was further argued that if a strict view is taken, insurance claims will have to be necessarily filed either before the District Forums or the State Commissions and not before NCDRC, causing “great hardship” to such consumers.

The NCDRC, while rejecting the complainant’s contention, found that under the 1986 Act, pecuniary jurisdiction was indeed determined by taking the value of the goods or services and compensation, if any, claimed. NCDRC illustrated to say:

“if a person has agreed to purchase a Flat/Apartment/Plot for about Rs.60,00,000/- and he is claiming refund as also compensation of Rs.50,00,000/- then the value will exceed Rs.1,00,00,000/- and the Consumer Complaint has to be filed before the National Commission. Similar, would be the case of taking Insurance Policy of above Rs. 1,00,00,000/-or may be below Rs.1,00,00,000/- but taking into consideration the premium paid and the compensation claimed if the value exceeds Rs.1,00,00,000/- the Consumer Complaint has to be filed before the National Commission.” (emphasis supplied)

Having held so, NCDRC observed that Parliament, while enacting the 2019 Act, was conscious (of the earlier regime) and yet, chose only the “value of the consideration paid” for determining the pecuniary jurisdiction and not “value of the goods or services and compensation”. It held that this is why a specific provision has been made in Sections 34 (1), 47 (1) (a) (i) and 58 (1) (a) (i) of the 2019 Act providing for the pecuniary jurisdiction of the District Forum, State Commission and the National Commission, respectively.

The NCDRC further held that for determining the pecuniary jurisdiction of the various Consumer Fora/Commissions, the value of the goods or services paid as consideration “alone” has to be taken and not “the value of the goods or services purchased/ taken”. Therefore, NCDRC was of the view that Section 58(1)(a)(i) of the 2019 Act is very clear and does not call for two interpretations. In view of the foregoing observations, NCDRC dismissed the complaint as being not maintainable since the value of consideration paid by the complainant was only INR 4.43 lakh, which is not above INR 10 crore for entertaining a complaint by NCDRC.

Way Forward

In our view, NCDRC’s decision adopting a literal interpretation of the pecuniary threshold under the 2019 Act is the correct view. Even though the pecuniary reforms under the 2019 Act are plain and unambiguous, the NCDRC’s latest ruling on this score, at the very least, offers certainty. Since NCDRC’s decision has not been overruled by the Supreme Court, it would govern the field for now. Clearly, this new reform has ushered a change of battle ground for high value consumer cases to District and State fora, which may themselves be in the need of urgent reform.

The authors are Delhi-based advocates.