2025 (5) TMI 47 - SC - Indian Laws

Legislative competence to determine the jurisdiction and also pecuniary limits of courts and tribunals - Constitutionality of Sections 34(1) 47(1)(a)(i) and 58(1)(a)(i) of the Consumer Protection Act 2019 - reasonable classification under Article 14 - manifest arbitrariness - loss of remedy - pecuniary jurisdictions of the district state and national commissions on the basis of value of goods and services paid as consideration instead of compensation claimed are challenged in the writ petition - claim on the basis of insurance policy offered by Lions International Club up to two million dollars as compensation to families of deceased members was denied - Appellant s husband a District governor of the Lions Club of Jhansi passed away due to COVID-19 - National commission rejected her petition on the ground that the consideration for the insurance policy does not exceed Rs.10 crores. HELD THAT - From perusal of the record there can be no doubt about the legislative competence and also the power of the Parliament to prescribe limits of pecuniary jurisdiction of courts and tribunals and in our case the district state or the national commission. Four aspects for achieving justice are well founded and articulated as i) distribution of advantages and disadvantages of society ii) curbing the abuse of power and liberty iii) deciding disputes and iv) adapting to change. Adapting to change is important for achieving justice as failure to adapt produces injustice and is in a sense an abuse of power. Thus failure to use power to adapt to change is in its own way an abuse of power. In fact the issue is not one of change or not to change but of the direction and the speed of change and such a change may come in various ways and most effectively through legislation. Legal reform through legislative correction improves the legal system and it would require assessment of the working of the law its accessibility utility and abuse as well. The Executive branch has a constitutional duty to ensure that the purpose and object of a statute is accomplished while implementing it. It has the additional duty to closely monitor the working of a statute and must have a continuous and a real time assessment of the impact that the statute is having. As stated above reviewing and assessing the implementation of a statute is an integral part of Rule of Law. The purpose of such review is to ensure that a law is working out in practice as it was intended. If not to understand the reason and address it quickly. It is in this perspective that this Court has in a number of cases directed the Executive to carry a performance/assessment audit of a statute or has suggested amendments to the provisions of a particular enactment so as to remove perceived infirmities in its working. Shifting the focus of judicial review to functional capability of these bodies is not to be understood as an argument for alternative remedy much less as a suggestion for judicial restraint. In fact this shift is in recognition of an important feature of judicial review which performs the vital role of institutionalizing authorities and bodies impressed with statutory duties ensuring they function effectively and efficiently. The power of judicial review in matters concerning implementation of policy objectives should transcend the standard power of judicial review to issue writs to perform statutory duty and proceed to examine whether the duty bearers the authorities and bodies are constituted properly and also whether they are functioning effectively and efficiently. By ensuring institutional integrity we achieve our institutional objectives. Further effective and efficient performance of the institutions can reduce unnecessary litigation. Id. See para 23. In conclusion we hold that the Council and Authority being statutory authorities having clear purpose and objects and vested with powers and functions must act effectively and in complete coordination to achieve the preambular object of the statute to protect the interest of consumers. As they are impressed with statutory duty their functioning will be subject to judicial review. Vibrant functioning of the Council and the Authority will subserve the purpose and object of the Parliament enacting the 2019 legislation. Conclusions For the reasons stated above; (a) we dismiss the constitutional challenge to section 34 47 and 58 of the 2019 Act and declare that the said provisions are constitutional and are neither violative of Article 14 nor manifestly arbitrary; (b) Central Consumer Protection Council and the Central Consumer Protection Authority shall in exercise of their statutory duties under sections 3 5 10 18 to 22 take such measures as may be necessary for survey review and advise the government about such measures as may be necessary for effective and efficient redressal and working of the statute. With the above directions the Writ Petition and Civil Appeal are disposed of. Pending applications if any are also disposed of accordingly.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

(a) Whether Sections 34(1), 47(1)(a)(i), and 58(1)(a)(i) of the Consumer Protection Act, 2019 (hereinafter, "2019 Act"), which prescribe the pecuniary jurisdiction of the district, state, and national consumer commissions based on the value of goods or services paid as consideration rather than the compensation claimed, are constitutionally valid.

(b) Whether the shift from compensation claimed to consideration paid as the basis for pecuniary jurisdiction results in discrimination or arbitrariness violative of Article 14 of the Constitution.

(c) Whether the Parliament has legislative competence to prescribe pecuniary jurisdiction in this manner.

(d) Whether the new pecuniary jurisdictional scheme causes loss of judicial remedy or impairs access to justice for consumers.

(e) The need for and role of performance audit of the 2019 Act, including the functioning of the Central Consumer Protection Council and Central Consumer Protection Authority established under the Act.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Legislative Competence to Prescribe Pecuniary Jurisdiction

The Court examined the constitutional and legislative framework underpinning the power of Parliament to enact laws prescribing jurisdiction and pecuniary limits of courts and tribunals. The relevant entries under the Union List (List I) and Concurrent List (List III) were considered, including Entry 95 of List I (jurisdiction and powers of courts except the Supreme Court) and Entries 11-A and 46 of List III (administration of justice and jurisdiction of courts).

The Court relied on authoritative precedent establishing that legislative competence to organize courts and prescribe their jurisdiction necessarily includes the power to set pecuniary thresholds. The judgment cited a foundational case wherein it was held that legislation on administration of justice would be ineffective without defining jurisdiction and powers of courts, including monetary limits.

Further, the Court referred to various statutes such as the Recovery of Debts and Bankruptcy Act, Insolvency and Bankruptcy Code, and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, which prescribe monetary thresholds for applicability, underscoring that such legislative classification is well within Parliament's competence.

Conclusion: Parliament possesses clear legislative competence to prescribe pecuniary jurisdiction of consumer commissions based on value of goods or services paid as consideration.

(b) Validity of Classification Based on Consideration Paid vis-`a-vis Article 14

The Court examined whether the classification introduced by the 2019 Act-using the value of goods or services paid as consideration to determine pecuniary jurisdiction-is discriminatory or arbitrary under Article 14.

The Court applied the twin test from established jurisprudence: (1) the classification must be founded on an intelligible differentia distinguishing the grouped subjects, and (2) the differentia must have a rational nexus to the legislative objective.

The Court held that "consideration" is an essential element of contract formation and integral to the definition of "consumer" under Section 2(7) of the 2019 Act. Since every consumer transaction involves consideration, basing jurisdiction on the value of consideration paid is a valid and intelligible classification.

This classification has a rational nexus to the object of the Act, which is to provide timely and effective administration and settlement of consumer disputes. The Court noted that basing jurisdiction on compensation claimed previously led to inflated claims and disproportionate burden on higher commissions, whereas basing it on consideration paid creates a more predictable and administrable framework.

The Court rejected the argument that the classification arbitrarily restricts access to higher forums based on consideration paid, emphasizing that the relief or compensation claim itself remains unrestricted and courts retain power to assess over- or undervaluation of claims to prevent abuse of process.

Conclusion: Sections 34, 47, and 58 prescribing pecuniary jurisdiction based on consideration paid are constitutionally valid and not violative of Article 14.

(c) Impact on Access to Justice and Loss of Remedy

The petitioners contended that the new pecuniary jurisdictional scheme results in anomalous situations where a consumer claiming large compensation but having paid lesser consideration must approach a lower forum, potentially impairing access to justice.

The Court held that there is no absolute right to choose a forum based on compensation claimed. The jurisdictional limits are designed to prevent forum shopping and inflated claims. The courts and commissions have inherent jurisdiction to control abuse of process by reassessing claims.

Therefore, the classification does not cause loss of remedy or access to justice but streamlines the consumer dispute redressal mechanism.

(d) Performance Audit of the 2019 Act and Functioning of Statutory Authorities

The Court acknowledged concerns raised about the practical impact of the new pecuniary jurisdiction scheme, especially in cases like insurance claims where premiums paid rarely exceed Rs. 1 crore, potentially restricting access to national commissions.

The Court emphasized that such concerns relate to the working and impact of the statute rather than its constitutionality. It underscored the importance of performance audit as an integral part of the rule of law, requiring the executive to continuously monitor and assess the effectiveness of legislation.

In this context, the Court highlighted the statutory establishment of two key bodies under the 2019 Act:

• The Central Consumer Protection Council (Section 3), an advisory body comprising government officials, members of parliament, consumer representatives, and experts, tasked with advising on promotion and protection of consumer rights.
• The Central Consumer Protection Authority (Section 10), an executive agency empowered to regulate violations of consumer rights, unfair trade practices, and misleading advertisements, and to promote consumer welfare.

The Court detailed the composition, powers, and functions of these bodies, including their regulatory and advisory roles, and the rules and regulations framed thereunder.

The Court stressed the constitutional duty of the executive to ensure these bodies function effectively, efficiently, transparently, and with accountability to achieve the statute's objectives. It recognized judicial review's role in institutionalizing these authorities to ensure their proper constitution and functioning.

The Court observed that vibrant and coordinated functioning of the Council and Authority is essential to subserve the consumer protection regime and reduce unnecessary litigation.

3. SIGNIFICANT HOLDINGS

"Parliament has the legislative competence to prescribe jurisdiction and powers of courts. This power extends to prescribing different monetary values as the basis for exercising jurisdiction."

"Classification based on value of goods or services on the basis of the amount paid as consideration is valid. 'Consideration' is an integral part of forming any contract. It is also an integral part of the definition of a 'consumer'."

"Vesting jurisdiction in the district, state or national commission on the basis of value of goods or services paid as 'consideration', is neither illegal nor discriminatory."

"There is no right or a privilege of a consumer to raise an unlimited claim of compensation and thereby choose a forum of his choice for instituting a complaint."

"The relief or compensation that a consumer could claim remains unrestricted and at the same time, access to the state or the national commission is also not taken away."

"Assessing the working of the statute to realise if its purpose and objective are being achieved or not is the implied duty of the executive government. Reviewing and assessing the implementation of a statute is an integral part of Rule of Law."

"The Central Consumer Protection Council and the Central Consumer Protection Authority being statutory authorities having clear purpose and objects and vested with powers and functions must act effectively and in complete coordination to achieve the preambular object of the statute to protect the interest of consumers."

Final determination: The constitutional challenge to Sections 34, 47, and 58 of the Consumer Protection Act, 2019 is dismissed. These provisions are upheld as constitutional, neither violative of Article 14 nor manifestly arbitrary. The statutory bodies under the Act are directed to perform their functions effectively to ensure the statute's objectives are met.