May 3, 2025 In Uncategorized

THE CONSIDERATION CONUNDRUM; SUPREME COURT UPHOLDS NEW JURISDICTIONAL RULES IN CONSUMER PROTECTION ACT

On April 29 2025, a Division Bench of the Supreme Court of India, comprising Justice P.S. Narasimha and Justice Manoj Misra, delivered its judgment in Rutu Mihir Panchal &Ors. v. Union of India & Ors. (Writ Petition (C) No. 282 of 2021 and Special Leave Petition (C) No. 1738 of 2022). The case examined the constitutionality of amendments to the Consumer Protection Act 2019, which redefined the pecuniary jurisdiction of Consumer Commissions-District, State, and National based solely on the “value of goods or services paid as consideration”, replacing the 1986 Act’s criterion of the combined value of goods or services and compensation claimed.

Facts of the Case

The Appeal arose from two disputes. In Writ Petition (C) No. 282 of 2021, the Petitioner’s husband who died when their Ford Endeavour, purchased for Rs. 31 lakhs, caught fire. She sought Rs. 51.49 crores and filed at the District Commission, arguing that the 2019 Act forced her to start there, unlike the 1986 Act, which would have allowed direct recourse to the National Commission. In Special Leave Petition (C) No. 1738 of 2022, she claimed Rs. 14.94 crores from an insurer after her husband’s COVID-19 death, but the National Consumer Disputes Redressal Commission (NCDRC) declined jurisdiction, citing insufficient consideration under Section 58(1)(a)(i) of the 2019 Act.

Points of Determination

The Court considered:

  1. Whether the amendments to Sections 34(1), 47(1)(a)(i), and 58(1)(a)(i) of the 2019 Act are unconstitutional or undermine its purpose.
  2. Whether these provisions impair consumer protection, particularly in cases like insurance claims with low consideration but high compensation.

 Petitioners’ Arguments

The Petitioners contended:

  1. Arbitrariness: Jurisdiction based on consideration paid on goods and services creates anomalies. For example, a Rs. 50 crore claim for a Rs. 1 crore product goes to the District Commission, while a Rs. 1 crore claim for a Rs. 10 crore product reaches the National Commission; disrupting judicial hierarchy.
  2. Article 14 Violation: Treating identical compensation claims differently based on consideration paid is discriminatory and contradicts the broad “consumer” definition under Section 2(7).
  3. No Rationale: Shifting from compensation claimed to consideration paid lacks logic; raising prior limits to determine jurisdiction could have addressed exaggerated claims.
  4. Restricted Remedies: High-value claims with low consideration, like insurance cases, are relegated to lower commissions, limiting access to justice.

Respondents Arguments

The Respondents countered:

  1. Legislative Competence: Parliament has authority under Entry 95 (List I) and Entries 11-A and 46 (List III), with Article 246, to set jurisdictional limits.
  2. Reasonable Classification: Consideration paid satisfies Article 14’s twin test:
    • Intelligible Differentia: It reflects contractual value.Consideration paid distinguishes cases based on the contractual value of goods or services.
    • Rational Nexus: It aligns with the 2019 Act’s objective of “timely and effective administration and settlement of consumer disputes” ensuring efficient dispute resolution and reduces burden on higher commissions.
  3. Curbing Exaggeration: The statutory shift incorporated through the 2019 Amendment prevents inflated claims which skewed caseloads towards the State and National Commissions.
  4. No Loss of Remedy: The Act regulates forums, not rights w.r.t. the claims, with courts able to adjust valuations.

Supreme Court’s Decision

The Supreme Court upheld the amendments, reasoning:

  1. Legislative Competence: Parliament’s authority to set jurisdictionis derived from Entry 95 of List I and Entries 11-A and 46 of List III, read with Article 246. This was affirmed in the case ofState of Bombay v. Narottamdas Jethabhai (1950 SCC 905), and the amendments in 2019 act are constitutional.
  2. Article 14 Compliance: Consideration paid is a valid classification for determining jurisdiction as per the twin test. The court held consideration is a fundamental element of a contract (as per the Indian Contract Act, 1872) and the definition of a “consumer” includes consideration under Section 2(7) of the 2019 Act, making it a logical basis for classification.
  3. No Remedy Lost: The court held under the amended provisions of the 2019 Act, claimed by the consumer and access to state or national commissions remained unrestricted. While relying on the decision inNandita Bose v. Ratanlal Nahta, the court held consumers cannot choose forums and courts to retain valuation powers.
  4. Practical Concerns: While noting issues like insurance claims and concerns arising out of the 2019 amendment, the court emphasized the need for a performance audit of the 2019 Act to assess its practical impact. It directed the Central Consumer Protection Council (Section 3) and Central Consumer Protection Authority (Section 10) to conduct surveys and reviews and advise the government on measures for effective and efficient implementation.

Conclusion

The Court dismissed the challenge to Sections 34(1), 47(1)(a)(i), and 58(1)(a)(i), finding them constitutional and non-arbitrary. The Petition and Appeal were disposed of,  with instructions to statutory bodies to optimize the Act’s functioning.

Saharsh Patel

4th year

The National Law Institute University Bhopal | NLIU Bhopal

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