UNIT 2
NEGOTIABLE INSTRUMENTS ACT, 1881
INTRODUCTION
The Negotiable Instruments Act was enacted, in India, in 1881. Prior to its enactment, the supply of the English negotiable instrument Act were applicable in India, and therefore the present Act is additionally based on English Act with certain modifications.
It extends to the entire of India except the State of Jammu and Kashmir. The Act operates subject to the provisions of Sections 31 and 32 of the reserve banks of India Act, 1934.
NEGOTIABLE INSTRUMENTS
What is negotiable?
• Negotiable means transferable.
• The negotiation that goes on refers to the transfer of the instrument between two people, or from one bank to a different, or maybe from one country to a different.
What is an instrument?
• In the broadest sense, almost any agreed-upon medium of exchange could be considered a negotiable instrument.
• In day-to-day banking, a negotiable instrument usually refers to checks, drafts, bills of exchange, and a few sorts of promissory notes.
According to Section 13 (1) of the Negotiable Instruments Act, 1881
“A negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to bearer”. “A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable within the alternative to one of two, or one or some of several payees” [Section 13(2)].
FORMS OF NEGOTIABLE INSTRUMENTS
• A negotiable instrument may be a written, order promising to pay a sum of money.
• A document becomes negotiable when it contains an unconditional promise to pay money and is payable to a bearer or payable on demand.
FEATURES OF A NEGOTIABLE INSTRUMENT
• It may be a written document by which certain rights are created and or/ transferred to a particular person.
• It must be signed by the maker or the drawer as the case may be.
• There must exist the unconditional order or promise to pay.
• There must be a time mentioned for such payment.
• In particular cases, the drawer’s name should be specifically mentioned.
Sorts of negotiable instrument
1. Promissory note
2. Cheque
3. Bills of exchange
DEFINITION
Section 4 of the Act defines, “A promissory note is an instrument in writing (promissory note being a bank-promissory note or a currency promissory note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money to or to the order of a certain person, or to the bearer of the instruments.”
The one that makes the promissory note and promises to pay is named the maker. The person to whom the payment is to be made is named the payee.
Examples:
A Signs instruments within the following terms
a) I promise to pay B or order Rs.500."
b) I promise to pay B Rs.500 which shall flow from to him.
CHARACTERISTICS OF A PROMISSORY NOTE
• It is an Instrument in Writing
• It may be a Promise to Pay
• Signed by the Maker
• Other Formalities
• Definite and Unconditional Promise
• Promise to Pay Money Only
• Maker must be a particular Person
• Payee must be sure
• Sum Payable must be sure
• It could also be Payable on Demand or After a particular Period of time
• It can't be Made Payable to Bearer on Demand
PARTIES TO A PROMISSORY NOTE
• Maker:
Maker is that the one that promises to pay the quantity stated within the promissory note.
• Payee:
Payee is that the person to whom the quantity of the promissory note is payable.
• Holder:
He is either the payee or the person to whom the promissory note may are endorsed.
ESSENTIALS OF PROMISSORY NOTE
Promissory notes must contain the following essentials elements;
- It should be in written shape.
- It must contain a guarantee to give money.
- The promise to give money must be unconditional.
- It must be signed by the maker.
- The maker should be a certain person.
- The payee must also be a certain person.
- The amount must be certain.
- Payment should be of money only.
- Time or period of payment should be fixed.
Consistent with Section 6 of the act, A cheque is “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand”. A cheque is additionally, therefore, a bill of exchange with two additional qualifications:
• It is usually drawn on a specified banker.
• It is usually payable on demand.
Special Benefits of Bill of Exchange:
• A bill of exchange may be a double secured instrument.
• In case of immediate requirement, a Bill could also be discounted with a bank.
ESSENTIAL ELEMENTS OF A CHEQUE
• In writing
• Express Order to Pay
• Definite and Unconditional Order
• Signed by the Drawer
• Order to Pay Certain Sum
• Order to Pay Money Only
• Certain Three Parties
• Drawn upon a Specified Banker
• Payable on Demand
PARTIES TO A CHEQUE
• Drawer:
Drawer is that the one that draws the cheque.
• Drawee/Banker:
Drawee is that the drawer’s banker on whom the cheque has been drawn.
• Payee:
Payee is that the one that is entitled to receive the payment of a cheque. 15
CROSSING OF CHEQUES
• It may be a direction given by the customer to the banker that payment shouldn't be made across the counter.
• Crossing is suffering from drawing two parallel transverse lines with or without particular abbreviations.
• A cheque that's not crossed is an open cheque.
• It is a measure of safety against theft or loss of cheques in transit.
TYPES OF CROSSING
• Special
• General
According to Section 5 of the act, A bill of exchange is “an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a particular person or to the bearer of the instrument”. It’s also called a Draft.
SPECIAL BENEFITS OF BILL OF EXCHANGE:
• A bill of exchange may be a double secured instrument.
• In case of immediate requirement, a Bill could also be discounted with a bank.
ESSENTIAL ELEMENTS OF BILL OF EXCHANGE
• It must be in Writing
• Order to pay
• Drawee
• Signature of the Drawer
• Unconditional Order
• Parties
• Certainty of Amount
• Payment in a similar way isn't Valid
• Stamping
• Cannot be made Payable to Bearer on Demand
PARTIES TO A BILL OF EXCHANGE
• Drawer:
The maker of a bill of exchange is named the drawer.
• Drawee:
The person directed to pay the money by the drawer is named the drawee.
• Payee:
The person named within the instrument, to whom or to whose order the money are directed to be paid by the instruments are called the payee.
KINDS OF BILLS OF EXCHANGE
1. Inland
2. Foreign bills
1. Inland bill:
• It is drawn in India on an individual residing in India, whether payable in or outside India, or
• It is drawn in India on person residing outside India but payable in India
.The following are the inland bills:
a) A bill is drawn by a merchant in Delhi on a merchant in Chennai. It’s payable in Mumbai the bill is a draft.
b) A bill is drawn by a Delhi merchant on an individual in London but is formed payable in
2. Foreign draft
• A bill drawn outside India & made payable in India.
• A bill drawn outside India on a person residing outside India.
• A bill drawn in India on an individual residing outside India and made payable outside India.
CLASSIFICATION OF BILL OF EXCHANGE
Inland and Foreign Bills
Inland Bill:
• It is drawn in India on an individual residing in India whether payable in or outside India; or
• It is drawn in India on an individual residing outside India but payable in India. ◦
Foreign Bill:
• A bill drawn in India on an individual residing outside India and made payable outside India.
• Drawn upon an individual who is that the resident of a far-off country.
Time and Demand Bills:
Time Bill:
A bill payable after a hard and fast time is termed as a time draft. A bill payable “after date” may be a time draft. ◦
Demand Bill:
A bill payable at sight or on demand is termed as a requirement bill.
Trade and Accommodation Bills:
Trade Bill:
A bill drawn and accepted for a real trade transaction is termed as “trade bill”.
Accommodation Bill:
A bill drawn and accepted not for a real trade transaction but only to supply financial help to some party is termed as an “accommodation bill”.
Basis of difference | Bills of exchange | Cheque |
Person/firm | A bill of exchange usually drawn on some person or firm | A cheque is always drawn on bank |
Acceptance | It is essential that a bill of exchange must be accepted before its payment can be claimed | A cheque does not require any such acceptance |
Payable on demand | The B.O.E. May be drawn payable on demand | A cheque can only be drawer payable on demand |
Grace of days | Three days are allowed in case of B.O.E. | In case cheque no grace of days are allowed |
Notice of dishonor | It is necessary in B.O.E. | No. Such notice is required |
Crossing | No crossing of bills of exchange | A cheque may be crossed |
Stamp | It must be properly stamped | No stamp is required |
HOLDER
MEANING
According to sec. 8, Holder of a negotiable instrument is that the person:
Who is entitled in his own name to the possession of the instrument?
Who has the proper to receive, or recover the quantity due thereon from the parties thereto?
In case the instrument (promissory note, bill or cheque) is lost or destroyed, the one that has entitled in his own name to the possession of it or to receive or recover the quantity due thereon from the parties thereto is that the holder of
Who is often a Holder?
• Payee:
The payee is typically the first holder of an instrument. He remains holder till he endorses the instrument.
• Endorsee:
The person to whom an instrument is endorsed becomes holder of in situ of the endorser. An instrument, when endorsed and delivered, the endorsee becomes the holder.
• Bearer:
In the case of a bearer instrument, the person to whom the instrument is delivered becomes the holder. But every bearer of an instrument cannot become the holder.
Example: a thief or a finder of a bearer instrument or a servant possessing an instrument on behalf of his employer cannot become holder.
• Legal representative or heir- a legal representative or heir of a deceased person can become holder by operation of law albeit he's not the payee or the bearer or the endorsee of the instrument.
HOLDER IN DUE COURSE:
Holder in due course may be a one that came into possession of the instrument on payment of consideration and without knowledge of the very fact that the erstwhile owner had a defective title.
The holder in due course features a better title than the holder. Therefore, consistent with sec. 9 of the negotiable instrument Act, holder in due course mans a person who for consideration became the possessor of a note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order before the quantity mentioned in it became payable, and without having sufficient cause to believe that any defect existed within the title of the person from whom he derived his title.[sec. 9].
PRIVILEGES OF A HOLDER IN DUE COURSE
• He can sue every prior party to the negotiable instrument if the instrument isn't duly satisfied.
• When the holder endorses such instrument further, the new owner features a good title unless he's party to fraud.
• The burden of proving his title doesn't lie upon the holder in due course.
According to section 14 of the Act, ‘when a promissory note, bill of exchange or cheque is transferred to a person so on constitute that person the holder thereof, the instrument is claimed to be negotiated.’ the most purpose and essence of negotiation is to form the transferee of a promissory note, a bill of exchange or a cheque the holder there of.
Negotiation thus requires two conditions to be fulfilled, namely:
• There must be a transfer of the instrument to a different person.
• The transfer must be made in such a fashion on constitute the transferee the holder of the instrument.
MODES OF NEGOTIATION
1. Negotiation by delivery (Sec. 47):
Where a promissory note or a bill of exchange or a cheque is payable to a bearer, it's going to be negotiated by delivery thereof. Example: A the holder of a negotiable instrument payable to bearer, delivers it to B’s agent to stay it for B. The instrument has been negotiated.
2. Negotiation by endorsement and delivery (Sec. 48):
A promissory note, a cheque or a bill of exchange payable to order are often negotiated only be endorsement and delivery. Unless the holder signs his endorsement on the instrument and delivers it, the transferee doesn't become a holder. If there are more payees than one, all must endorse it.
ENDORSEMENT [SECTION 15]
The word ‘endorsement’ in its literal sense means, writing on the back of an instrument. But under the Negotiable Instruments Act it means, the writing of one’s name on the rear of the instrument or any paper attached thereto with the intention of transferring the rights therein. Thus, endorsement is signing a negotiable instrument for the aim of negotiation. The one that effects an endorsement is named an ‘endorser’, and therefore the person to whom negotiable instrument is transferred by endorsement is named the ‘endorsee’.
WHO MAY ENDORSE / NEGOTIATE [SECTION 51]:
Every Sole maker, drawer, payee or endorsee, or all of several joint makers, drawers, payees or endorsees of a negotiable instrument may endorse and negotiate an equivalent if the negotiability of such instrument has not been restricted or excluded as mentioned in Section 50.
ENDORSEMENT
Essentials of a legitimate Endorsement:
• It must get on the rear or face of instrument or on an error of paper annexed thereto.
• It must be signed by the endorser.
• It must be completed by the delivery of the instrument
• It must be made by the holder of the instrument.
Kinds of Endorsement:
• Blank or General Endorsement
• Full or Special Endorsement
• Partial Endorsement
• Restrictive Endorsement
• Conditional Endorsement
KINDS OF ENDORSEMENT
1. Blank endorsement: If the endorser signs his name only, the endorsement is claimed to be in blank and it becomes payable to bearer e.g. Mahbubul Haq.
2. Special or Full endorsement: An endorsement “in full” or a special endorsement is one where the endorser not only puts his signature on the instrument but also writes the name of an individual to whom or to whose order the payment is to be made.
3. Conditional endorsement: In conditional endorsement the endorser puts his signature under such an article which makes the transfer of title subject to fulfillment of some conditions of the happening of some events.
Example: Pay to Mr.Sarwar Jahan or order after his marriage- Sd/Badrul Kamal
4. Restrictive endorsement: An endorsement is named restrictive when the endorser restricts or prohibits further negotiation. Example: “Pay to Miss. / A. Pereira only” Sd/HosneAra.
5. Partial endorsement: In Partial endorsement only a part of the quantity of the bill is transferred or the quantity of the bill is transferred to 2 or more endorsees severally. This doesn't separate as a negotiation of the instrument. The law lays down that an endorsement must relate to the entire instrument.
INSTRUMENTS OBTAIN BY UNLAWFUL
• Lost instruments:
• The holder of a lost instrument should give notice of the loss to all or any the parties through public advertisement.
• The finder of the lost instrument isn't entitled to sue thereon in his own name.
• The true owner can recover the instrument from the finder if it's with him but he has parted with the instrument and has received payment thereon and can't return the instrument to the owner, he must compensate the owner.
• An acceptor, maker or drawee that makes payment in due course of a lost instrument gets a legitimate discharge for it.
STOLEN INSTRUMENT
• The thief doesn't get any title to the instrument, but if the instrument is payable to the bearer and it's negotiated to a holder in due course; he will get an honest title thereto not only against the thief but also against any party before him.
• Good title: ownership of real estate which is completely freed from claims against it and thus are often sold, transferred, or put up as security (placing a mortgage or deed of trust on the property).
INSTRUMENTS OBTAIN BY FRAUD
• Valid contracts must be caused by the free consent of the parties competent to contract. Therefore, the person guilty of fraud not only gets no valid title to the thing obtained but also susceptible to damages.
• Forged instruments: Forged instruments within the eyes of law haven't any existence whatsoever. There’s an entire absence of title from the very beginning and a forged signature is altogether inoperative.
"Negotiable Instrument" means a piece of paper in writing entitling a right to the holder, a certain sum of money. It is a piece of paper which contains some value and is transferable by simple delivery or sometimes by endorsement and delivery. (See... Characteristics of Negotiable Instruments)
Section 30 to Section 32 and Section 35 to 42 of the Negotiable Instruments Act deal with the liability of parties to Negotiable Instruments
Liabilities of parties to Negotiable Instruments are as follows:
1. Liability of Drawer
2 Liability of Drawee of Cheque
3 Liability of endorse
4 Liability of Makers of note and acceptor of bill
5. Liability of Prior Parties to a holder in due course
1. Liability of Drawer:
According to Section 30 of the Negotiable Instrument Act 1881, The drawer of a bill of exchange or cheque is bound in case of dishonor by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonor has been given to, or received by, the drawer .
2 Liability of Drawee of Cheque
The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default (Section 31 of the Negotiable Instrument Act 1881)
3 Liability of Makers of note and acceptor of bill:
The maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.(Section 32 of the Negotiable Instrument Act 1881)
4 Liability of endorse:
Liability of endorser In the absence of a contract to the contrary, whoever endorses and delivers a negotiable instrument before maturity, without, in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonor by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonor has been given to, or received by, such endorser as hereinafter provided. Every endorser after dishonor is liable as upon an instrument payable on demand. (Section 35 of the Negotiable Instrument Act 1881)
5. Liability of Prior Parties to a holder in due course
Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.(Section 36 of the Negotiable Instrument Act 1881)
Dishonor is often done by two ways:
• By non- acceptance
• By non- payment
• Notice of dishonor is mandatory
• Noting of dishonor is additionally necessary
Dishonor is just a Refusal
The negotiable instrument could also be dishonored either by;
1) Non-Acceptance of negotiable instrument
2) Non-Payment of mentioned value the dishonor of negotiable instrument can happen even just in case of Promote & Bills of Exchange alongside Cheque.
DISHONOUR OF BILLS OF EXCHANGE (BOE)
Ex: Suppose Mr. X has purchased some goods from Mr. Z .Hence, Mr. X is meant to pay against the products purchased to Mr. Z. So, Mr. Z will draw a Bills of Exchange on the name of Mr. . Here Mr. X Refused to simply accept the Bills of Exchange could also be thanks to dispute or another problem. Such refusal to simply accept the BoE is named as Dishonor by Acceptance. Bills of Exchange are nothing but the order to form payment against value.
Ex: Suppose Mr. X has purchased some goods from Mr. Z . Hence, Mr. X is meant to pay against the products purchased to Mr. Z .So, Mr. Z will draw a Bills of Exchange on the name of Mr. X .Here Mr. X Accepted the Bills of Exchange of maturity period of two months. On the day of maturity (after 2 months), if Mr. X refuses to form payment consistent with the BoE is named as Dishonor by Non-Payment
NOTING AGAINST DISHONOR OF BILLS OF EXCHANGE
When the Drawee (Mr. X) refuses to form payment against Bills of Exchange (Legal Instrument) to the Drawer, it'll be a loss to the Drawer (Mr. Z). Since BoE may be a legal instrument, the Drawer (Mr. Z) can take an action against the defaulter party-Drawee (Mr. X). In such case of Dishonor of BoE, the Drawer can attend the notary within the court to file a complaint by requesting to notice the very fact of non-acceptance (Refusal by Drawee). Notary will write the very fact thereon and Sign & Seal it (BoE).
The notary will first approach to the Drawee (Mr. X) asking him to; 1) Either accepts the BoE or 2) Make Payment against BoE to the Drawer. If still, the Drawee (Mr. X) refuses to simply accept or make payment against BoE, the notary will write of the BoE as Dishonored by Mr. X. This process is named as Noting, which becomes a legal evidence for Mr. Z to require further any action against the defaulter.
PROTEST AGAINST DISHONOR OF BILLS OF EXCHANGE
The drawer can go further and request to notary to issue a certificate mentioning the case of dishonor of BoE alongside Sign and Seal of the notary by paying some fees (Noting Charges). Such certificate obtained by the Drawer from the notary is named as Protest.
DISHONOR OF CHEQUE (SEC. 138 TO 142)
Suppose Akash has drawn (the Drawer) a Cheque of ICICI bank to form payment to Rahul (the Payee). If the Drawee (ICICI Bank) refuses to form payment (clear the cheque) to Mr. Rahul, is named as Dishonor of Cheque. The Maturity Period of Cheque is merely 3 months from the date of its preparation.
CONDITIONS OF DISHONOR OF CHEQUE
1) Insufficient funds within the account of the Drawer
2) If the account is closed either by the account holder or by Bank
3) Order instructions given by the Drawer to his Bank (ICICI) which is additionally called as “Counter Mended Payment”.
4) Signature not matching or incorrect date on Cheque
Issue of Cheque by the Drawer to the Payee (Holder) is nothing but a sort of contract is made between the 2 parties.
The dishonor of Cheque means Breach of Contract and treated as Criminal Offence
The Payee (Holder) now can take an action against the defaulter party (Drawer-Akash). The holder (Rahul) thro’ the notice can provide a period of time (15 days) to Akash to form the due payment.
If Drawer makes part payment, still it'll be a dishonor of cheque. Bank Drawee Mr. Rahul Payee/Holder Informs the rationale of Dishonor Payee (Rahul) Mr. Akash Drawer Send a Legal Notice thro’ his Lawyer Within 30 days of Cheque Dishonor. If after 15 days, the Drawer doesn’t make payment to the Payee (balance part payment or entire amount), then the Payee (Rahul) can file a case against the drawer (Akash) within the court within one month of your time after the 15 days grace period over, by producing; 1) The Bank’s statement alongside reason of Dishonor of cheque & 2) The copy of notice given to the drawer thro’ the Lawyer of Payee Penalty: up to 2 yrs. Imprisonment and double amount of dishonor.
INTRODUCTION
A consumer is the one who assumes to be treated like a King as they carry business to the vendor. Previously “consumer was requested to beware” but lately fingers are pointed to seller “let seller be beware” as thanks to policies introduced, authorities’ laws, consumer protection, NGO and thus the increased competition within the market.
Consumer Protection may be a term given to an exercise wherein we'd like to guard the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All round the world, mechanisms are pondered upon so as to uphold the satisfaction of the consumer.
The Consumer Protection Act was passed in 1986 and it came into force from I July, 1987. The most objectives of the Act are to supply better and every one round protection to consumers and effective safeguards against differing types of exploitation like defective goods, deficient services and unfair trade practices. It also makes provisions for easy , speedy and cheap machinery for redressed of consumer's grievances.
SALIENT FEATURES
• It applies to all goods, services and unfair trade practices unless specifically exempted by the Central Government.
• It covers all sectors-private, public or co-operative.
• It provides for establishment of consumer protection councils at the central, state and district levels to market and protects the rights of consumers and a three-tier quasi-judicial machinery to affect consumer's grievances and disputes.
• It provides a statutory recognition to the six rights of consumers.
THE MAIN OBJECTIVES OF THE CONSUMER PROTECTION ACT
- Providing better and every one round protection to consumer.
- Providing machinery for the speedy redressal of the grievances.
- Creating framework for patrons to hunt redressal.
- Providing rights to consumers.
- Safeguarding rights of Consumers.
- To ensure fair, competitive and responsible markets that employment well for consumers and promote ethical business practices.
- To promote and protect economic interest of consumers.
- To improve access to information that consumers require, to form knowledgeable choices consistent with their individual needs.
- To protect consumer from hazards.
DEFINITIONS
WHO MAY BE A CONSUMER?
The Consumer Protection Act says that consumer means a 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 credit, and includes any user of such goods aside from the one that buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of credit when such use is formed with the approval of such person, but doesn't include an individual who obtains such goods for resale or for any commercial purpose; or
(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 credit, and includes any beneficiary of such services aside from the one that 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 primary mentioned person;
Examples:
1. A jeep was purchased to run it as a taxi. The question was whether the customer of the jeep was a consumer under the Act. The Rajasthan State Commission held that to use the jeep as a taxi with the thing to earn profits was a billboard purpose, and therefore, the consumer/user wasn't a consumer within the meaning of the Act.
CONSUMER OF SERVICES - an individual may be a consumer of services if he satisfy the subsequent criteria:
SERVICES ARE HIRED OR AVAILED OF - The term ‘hired’ has not been defined under the Act. Its Dictionary meaning is - to acquire the utilization of services at a price. Thus, the term ‘hire’ has also been utilized in the sense of ‘avail’ or ‘use’. Accordingly, it's going to be understood that consumer means a person who avails or uses any service.
Example:
A goes to a doctor to urge himself treated for a fracture. Here A is hiring the services of the doctor. Thus, he's a consumer.
What constitutes hiring has been a problem to be addressed in many consumer disputes. If it's established that a specific act constitutes hiring of service, the transaction falls within internet of the consumer Protection Act, and vice-versa.
Examples:
A passenger getting railway reservation after payment is hiring service for consideration.
A landlord neglected and refused to supply the agreed amenities to his tenant. He filed a complaint against the landlord under the consumer.
An aggrieved consumer seeks redressed under the Act through the instrumentality of complaint. It doesn't mean that the consumer can complain against his each and each problem. The Act has provided certain grounds on which complaint are often made. Similarly, relief against these complaints is often granted within the set pattern.
WHAT CONSTITUTES A COMPLAINT [SECTION 2(1) (C)]?
Complaint may be a statement made in writing to the National Commission, the State Commission or the District Forum by an individual competent to file it, containing the allegations intimately, and with a view to get relief provided under the Act.
WHO CAN FILE A COMPLAINT [SECTIONS 2(B) &12]?
At the outset it's clear that an individual who are often termed as a consumer under the Act can make a complaint. To be specific on this account, following are the persons who can file a complaint under the Act:
• A consumer; or
• Any voluntary consumer association registered under the businesses Act, 1956 or under any other law for the nonce effective
• The Central Government or any government,
• One or more consumers, where there are numerous consumers having an equivalent interest.
WHAT A COMPLAINT MUST CONTAIN [SECTION 2(1)(C)]
A complaint must contain any of the subsequent allegations:
• An unfair trade practice or a restrictive trade practice has been adopted by any trader.
Example: A sold a six months old car to B representing it to be a replacement one. Here B can make a complaint against A for following an unfair trade practice.
• The goods bought by him or agreed to be bought by him suffer from one or more defects.
Example: A bought a computer from B. It had been not working properly since day one. A can make a complaint against B for supplying him a defective computer.
• The services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect.
Example: A hired services of an advocate to defend himself against his landlord. The advocate didn't appear whenever the case was scheduled. A can make a complaint against the advocate.
• A trader has charged for the products mentioned within the complaint a price in more than the worth fixed by or under any law for the time being effective or displayed on the products or any package containing such goods.
Example: A bought a sack of cement from B who charged him Rs. 100 over and above the reserve price of the cement declared by the government. Here A can make a complaint against B.
WHEN A COMPLAINT CAN'T BE FILED
A complaint on behalf of the general public which consists of unidentifiable consumers can't be filed under the Act.
Example: A complaint was filed on the idea of a newspaper report that passengers travelling by flight from Calcutta to Delhi on May 13, 1989 were made to remain at the airport and therefore the flight was delayed by 90 minutes causing great inconvenience to the passengers. It had been held that such a general complaint can't be entertained.
No passenger who boarded that plane came forward or authorized the complainant to form the complaint -
• A complaint by a private on behalf of general public isn't permitted
• An unregistered association cannot file a complaint under the Act.
Example: The complainant was an association formed within the Gulf and was unregistered in India. It had been held that since the petitioner wasn't a voluntary organization registered under any law effective in India, cannot come within clause (d) of section 2(1) of the Act and hence can’t file a complaint.
• A complaint after expiry of limitation period isn't permitted. A complaint can't be filed after the lapse of two years from the date on which the explanation for action arise unless the Forum is satisfied about the genuineness of the rationale for not filing complaint within the prescribed time.
Example: A supplied defective machinery to B on 12-1-1998. B filed a suit against A on 10-3-2001. It had been not admitted before the Forum for the rationale that the time available to form complaint lapsed.
• Dismissal of frivolous and vexatious complaints - Since the Act provides for a cheap procedure (Court fees isn't charged in consumer)
The Act provides that, “defect” means any fault, imperfection or shortcoming within the quality, quantity, potency, purity or standard which is required to be maintained by or under any law of the nonce effective under any contract, express or implied or as is claimed by the trader in any manner whatsoever in reference to any goods.
This is an exhaustive definition. It means the Act recognizes only those defects which are covered by the definition. Any sort of defect not mentioned here won't be entertained by Consumer Forums. Moreover, the defect has got to be in reference to goods only, i.e., if an item doesn't fall within the definition of ‘Goods’, no defect are often complained therein. However, the coverage of this definition is extremely wide.
Examples:
1. An autoclave burst and caused injury to the user. It had been held to be a producing defect
2. Failure to handover registration book alongside jeep purchased by complainant may be a defect.
3. Where laboratory test report showed that beverage wasn't fit human consumption, it had been held defective
4. Rape seed oil adulterated with toxic substances, which led to paralysis of limbs and other disabilities, has been considered as defective
5. Electric household appliances which aren't in accordance with the standards prescribed by ISI, being unsafe are defective
6. Gas Cylinder with excessive gas is flawed goods
7. Development of cracks of half inch to 3 and a half inch in walls and mosaic floor during a flat after occupation from a Housing Board
8. A supplied white marble to B. Afterward the color of the marble changed. B sued an alleging supply of defective marble. It had been held that A should have expressly told B that the marble wouldn't retain its color when polished. Within the absence of such assertion, it's deemed that A made B to know that the marble would retain its white color and when the color changed, it comes within the scope of ‘defect’ in goods under the Act
9. A sold a stolen car to B. B wanted to sue A for defect within the title of the car. Here B cannot sue A under the consumer Protection Act because the defect in title of products wouldn't constitute defective goods as defined under the Act.
When a service is found deficient by a consumer, he can make a complaint under the Act. Thus, the prime requirement is that the matter must fall within the definition of service, and it must entail a deficiency as per the norms given by the Act.
WHAT ARE OFTEN TERMED AS A SERVICE - SECTION 2(1) (O)
The Act provides that “service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or loading or both, housing construction, entertainment, amusement or the purveying of news or other information, but doesn't include the rendering of any service free of charge or under a contract of private service.
The definition provides a list of eleven sectors to which service may pertain so as to come under the purview of the Act. The list of those sectors isn't an exhaustive one. Service could also be of any description and pertain to any sector if it satisfy the subsequent criteria:
1. Service is formed available to the potential users, i.e., service not only to the particular users but also to those that are capable of using it.
2. It shouldn't be freed from charge, e.g., the medical service rendered freed from charge in Government hospital isn't a service under the Act;
3. It shouldn't be under a contract of private service.
When we mention ‘service’ under the consumer Protection Act, we take it as a daily commercial transaction. Thus, the services rendered under the contract of private service are specifically excluded from the definition.
The expression ‘contract of private service’ isn't defined under the Act. In common parlance, it means - a contract to render service during a private capacity to an individual. For instance , where a servant enters into an agreement with a master for employment, or where a landlord agrees to provide water to his tenant, these are the contracts of personal service. The thought is that under a private service relationship, an individual can discontinue the service at any time consistent with his will, he needn't approach Consumer Forum to complaint about deficiency in commission .
There is a difference between ‘contract of private service’ and ‘contract for personal service’. Just in case of ‘contract of private service’, the service seeker can order or require what's to be done and the way it should be done. Sort of a master can tell his servant to bring goods from a specific place. But during a ‘contract for private service’, the service seeker can tell only what's to be done. How the work is going to be done is at the wish of the performer. Like when an individual gives a suit to the tailor for stitching, he doesn't tell him which method he should use to stitch it.
Note: That it's ‘contract of private service’ is excluded from the definition of service, ‘contract for private service’ is recognized as service under the Act.
It doesn't make a difference whether the service provider may be a Government body or a personal body. Thus, albeit a statutory corporation provides a deficient service, it are often made liable under the Act.
Example:
An applied for electricity connection for his mill to Rajasthan State Electricity Board. The Board delayed in releasing the connection. It had been held deficient in performing service.
Some other sectors/professionals/services which aren't laid out in the definition of service but which are considered by the consumer Forums as service sectors from time to time are listed below: Advocates, Airlines, Chartered Accountants, Courier, Chit Fund, Education, Gas Cylinder/LPG, Medical services, Postal services, Railways, Investment related services, and Telephone services.
Thus, the test is - whether the person against whom the complaint is formed performs a service for consideration which is sought by a possible user.
WHAT IS MEANT BY “DEFICIENCY” IN SERVICE - SECTION 2(1) (G)
The Act provides that, “deficiency” means any fault, imperfection, shortcoming or inadequacy within the quality, nature and manner of performance which is required to be maintained by or under any law for the time being effective or has been undertaken to be performed by an individual in pursuance of a contract or otherwise in reference to any service.
Reading the above definition by breaking it into elements, we get
(a) “Deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance
Examples:
1. A boarded a train. The compartment during which he and his wife travelled was during a bad shape-fans not working, shutters of windows weren't working, rein of the upper was badly torn and there have been rusty nails which caused some injuries to the wife of A. A made a complaint against the railway department. It had been held that the complaint constituted ‘deficiency in service’ and therefore the compensation of Rs. 1500 was awarded to A
2. Dr. A treated P under Allopathic system, though he himself was a Homoeopathic practitioner afterward for wrong treatment. The Commission held it as deficiency in commission -
3. A booked a car for B and promised to deliver it within one month of booking. The car wasn't delivered even after four months. Here A might be held responsible for deficiency in commission.
Unfair trade practice refers to the utilization of varied deceptive, fraudulent, or unethical methods to get business. Unfair trade practices include misrepresentation, false advertising or representation of an honest or service, tied selling, false free prize or gift offers, deceptive pricing, and noncompliance with manufacturing standards. Such acts are regarded unlawful by statute via Consumer Protection Law, which exposes recourse for consumers by way of way of compensatory or exemplary damages. An unfair trade practice is usually mentioned as a “deceptive trade practice” or an “unfair business practice.”
Understanding Unfair Trade Practices
Unfair trade practices are commonly seen within the purchase of things and services by consumers, tenancy, insurance claims and settlements, and debt collection. Most states’ unfair trade practices statutes were originally enacted between the 1960s and 1970s. Since then many nations have adopted these laws to stop unfair alternate practices. Consumers who are victimized should examine the unfair trade practice statute in their nation to work out whether or not they have an explanation for action.
Unfair trade practices are usually seen within the purchase of products and services with the help of consumers, tenancy, insurance claims and settlements, and debt collection.
UNFAIR PRACTICES
• An act is unfair when it meets the subsequent criteria:
• It causes or is probably going to cause widespread injury to consumers.
• It can't be reasonably avoided by way of consumers.
• It isn't outweighed by countervailing benefits to consumers or to the competition.
• Deceptive Practices
• An act or practice is deceptive when it meets the subsequent criteria:
• A representation, omission, or practice misleads or is probably going to mislead the consumer.
• A consumer’s interpretation of the representation, omission, or exercise is taken into account reasonable under the circumstances.
• The misleading representation, omission, or practice is material.
A restrictive trade practice is defined under Section 2(1) of the consumer Protection Act, 1986. The section covers all the price related deceit that the traders may indulge in to maximize their profits.
Restrictive trade practices are targeted at the consumers who are burdened with restriction and unjustified costs through the practices of the trader. The trader manipulates the worth or the conditions of delivery of the merchandise which ends up in restrictive trade practice. This affects the availability of products and services within the market and includes:
• A likely or definite rise within the price of a commodity thanks to the delay of the trader to supply the great or service.
• A compulsion to get, hire or avail any good or service so as to get the other good or service.
Example Restrictive Trade Practices:
A trader accumulates his stock of food grains so as to extend the worth of the grains within the market in order that he can sell it at a better price.
In order to shop for a television from trader X, one must buy a table first.
DIFFERENCE BETWEEN UNFAIR TRADE PRACTICE AND RESTRICTIVE TRADE PRACTICE:
An unfair trade practice is that the deceitful and misleading representation of products and services which portrays a false image of the merchandise. Information regarding utility, quality and standard, style etc. of products and services could also be twisted under this practice.
Restrictive Trade Practice, however, is when traders attempt to change the flow of cash within the market so as to maximize their profits and to realize a whip hand within the market competition. Here, independent sellers hike their collective profits by limiting supply by controlling selling prices or the costs of purchased inputs. This is often the first difference in unfair trade practice and restrictive trade practice.
An unfair trade practice is defined under Section 2(1)(r) of the consumer Protection Act, 1986, whereas, Restrictive trade practice is defined under Section 2(1)(nnn).
This is the elemental difference between the two, unfair trade practices being a broader concept.
This statute is regarded as the 'Magna Carta' in the field of consumer protection for checking unfair trade practices, ‘defects in goods’ and ‘deficiencies in services’ as far as India is concerned. It has led to the establishment of a widespread network of consumer forums and appellate courts all over India. It has significantly impacted how businesses approach consumer complaints and has empowered consumers to a greater extent
Consumer Protection Council
Consumer Protection Councils are established at the national, state and district level to increase consumer awareness.
Various Consumer Organizations
To increase the awareness of consumers, there are many consumer organizations and NGOs that have been established.
CONSUMER GUIDANCE SOCIETY OF INDIA (CGSI) was THE FIRST CONSUMER ORGANISATION ESTABLISHED IN INDIA IN 1966.
It was followed by many others such as
(1) Consumer Education and Research Centre (Gujarat)
(2) Bureau Of Indian Standards
(3) Federation Of Consumer Organization In Tamil Nadu
(4) Mumbai Grahak Panchayat
(5) Consumer Voice (New Delhi)
(6) Legal Aid Society (Kolkata)
(7) Akhil Bhartiya Grahak Panchayat
(8) The Consumers Eye India.
(9)United India Consumer's Association
HOW TO FILE A CONSUMER COMPLAINT
Before formally filing a Consumer Complaint, it's desired that the consumer gives notice to the other party of the very fact of any deficiency in commission or of unfair trade practice etc. to ascertain if the trader is willing to form good the loss suffered by either replacing the commodity or returning the worth of the acquisition. If yes, the difficulty resolves then and there. But if the trader refuses or neglects here that the consumers must approach the consumer Court.
STEP 1: initially identify the Jurisdiction of the Forum where the complaint is to be filed. This issue must be identified from two angles of jurisdiction i.e. Territorial and Pecuniary.
The Consumer has got to take into consideration both the territorial and pecuniary jurisdiction of the tribunal in mind before filing his complaint and has got to choose the right forum.
Territorial Jurisdiction of the consumer Forums:-
A complaint shall be instituted during a District Forum or State Commission or National within the local limits of whose jurisdiction,—
a) The other party resides or caries on business or features a branch office or personally works for gain, or
b) If there are quite one opposite party, then anybody of the other parties resides, or carries on business or features a branch office, or personally works for gain,
Provided that in such case the permission of either District Forum, State Commission or National Commission because the case could also be , or the other parties who don't reside in such place or keep it up business or have a branch office or personally works for gain because the case could also be , must be obtained , or
c) The explanation for action arose.
1 District Forum: Upto Rs. 20 Lakhs
2 State Commissions: Rs. 20 Lakhs to Rs. 1 Crores
3 National Commission: Exceeding Rs. 1 Crores
Step 2: you'll be required to pay a prescribed fee alongside your complaint before the District Forum, State Commission & the National Commission because the case could also be.
Step 3: Then you've got to draft your complaint stating facts necessary to determine an explanation for action.
Step 4: At the top of the complaint you've got to place your signatures. Just in case the other person is permitted to file the complaint then complaint has got to be accompanied with authorization letter.
Step 5: Don’t forget to say the name, description and address of the complainant and therefore the name, description, address of the other party or parties against whom relief is claimed.
Step 6: Copies of all the documents supporting your allegations. During this you'll placed on record the copy of the bill of the products bought, warranty and guarantee documents and also a replica of the written complaint and see made to the trader requesting him to rectify the merchandise .
Step 7: you'll also invite compensation costs which should be specifically alleged within the complaint. Besides compensation, a consumer also can invite the refunds, damages, litigation costs, and interest amount. You want to give the breakup of amount claimed under different heads but do remember to say compensation or other relief as per the pecuniary value of the forums.
Step 8: Explain in your complaint on how the case falls within the jurisdiction of this forum.
Step 9: Complaint must clearly state on what relief is sought against the other party.
Step 10: The Act provides for limitation period of two years from the date of explanation for action. Just in case there's delay in filing the complaint, please explain the delay which may be are often condoned by the Tribunal.
Step 11: you're also required to file an affidavit alongside the complaint that facts stated within the complaint are true and proper.
Step 12: The complainant can present the complaint face to face or by his/her authorized representative without engaging any advocate. The complaint are often sent by registered mail . A minimum of 5 copies of the complaint is to be filed within the forum. Besides this you've got to file additional copies for every opposite party.
Consumer must be more conscious of the malpractices followed by the trader and will get up for his or her rights. With this text, an endeavor is formed to teach the consumers to file their complaints and of taking action against the unscrupulous traders who thinks that consumers can do nothing if any wrong is caused to them. Allow us to be all Vigilant of the standard and quantity of products supplied to us by the traders.
RELIEFS TO CONSUMER
Consumer courts may grant one or more of the subsequent reliefs:-
A) Repair of defective goods.
B) Replacement of defective goods.
C) Refund of price purchased the defective goods or service.
D) Removal of deficiency in commission.
E) Refund of additional money charge.
F) Withdrawal of products hazardous to life and safety.
G) Compensation for the loss or injury suffered by the consumer thanks to negligence of the other party.
H) Adequate cost of filing and pursuing the complaint.
I) Grant of exemplary damages. Their grievances in an efficient and straightforward manner
Three tier consumer grievances machinery under the consumer protection act
1. District Forum:
District forum consists of a president and two other members. The president is often a retired or working judge of District Court. They’re appointed by using government. The complaints for goods or services worth Rs 20 lakhs or less are often filed during this agency. The agency sends the products for testing in laboratory if required and provides decisions on the idea of facts and laboratory report. If the aggrieved party isn't cozy by the jurisdiction of the district forum then they will file an appeal against the judgment in State Commission inside 30 days by depositing Rs. 25000 or 50% of the penalty amount whichever is a smaller amount.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of Supreme Court. All of them are appointed by government. The complaints for the products really worth quite Rs 20 lakhs and fewer than Rs 1 crore are often filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the products for testing in laboratory if required. Just in case the aggrieved party isn't satisfied with the judgment then they will file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is a smaller amount .
3. National Commission
The national commission consists of a president and 4 member’s one among who shall be a lady. They’re appointed by Central Government. The complaint is often filed in National Commission if the worth of products exceeds Rs 1 crore.
If aggrieved party isn't satisfied with the judgment then they will file a grievance in Supreme Court within 30 days.
Basis | District | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
