CHALLENGE OF THE PECUNIARY JURISDICTION OF CONSUMER FORUM

[DR.MARIAPPAN GOVINDARAJAN]

Pecuniary jurisdiction

Pecuniary jurisdiction in law refers to a court's power to hear cases based on the monetary value or amount of the subject matter involved in a dispute. It determines which court, or level of court, is authorized to handle a particular case based on the monetary value of the claim.  Parliament has the legislative competence to prescribe jurisdiction and powers of courts.   The pecuniary jurisdiction is different from Act to Act. 

Examples

Section 1(4) of the Recovery of Debts and the Bankruptcy Act, 1983 provides that the provisions of the Act shall not apply where the amount of debt is less than Rs.10 lakhs.  Section 4 of the Insolvency and Bankruptcy Code, 2016 provides the provisions of the Code are applicable if the default made by the Corporate Debtor is more than Rs.1 crore.  Section 31(h) of the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 provides that this Act shall not be applicable to repayment of secure financial assets of any financial assets not exceeding Rs.1 lakh.  Likewise, Section 22(c) (1) of the Legal Services Authorities Act, 1987 provides that the permanent Lok Adalat shall not have jurisdiction in matters where the value of the property in dispute exceeds 10 lakh rupees. 

Pecuniary jurisdiction under Consumer Act

The Consumer Protection Act, 1986 (‘1986 Act’ for short) was enacted for the protection of consumers.  The resolution of disputes is very simple and less cost and earlier disposal of the consumer complaints.  The Act has three stages of judicial set up namely District Forum, State Commission and National Commission.  Section 11 of the 1986 Act prescribes the pecuniary jurisdiction of District Forum which will decide the dispute where the value of the goods or services and the compensation, if any, claimed does not exceed Rs.20 lakhs.  Section 17 of the 1986 Act provides the pecuniary jurisdiction for State Commission as the value of the goods or services and compensation, if any, claimed exceeds Rs.20 lalks but does not exceed Rs. 1 crore.  Section 21 of the 1986  Act provides pecuniary jurisdiction for National Commission as the value of the goods or services and compensation, if any exceeds Rs.1 crore.

The 1986 Act was replaced by the Consumer Protection Act, 2019 (‘Act’ for short).  In this Act the pecuniary jurisdiction is based on only the value of the goods or services on consideration.  The compensation is not included in the amount of pecuniary jurisdiction but the limit has been increased considerably.  Section 34(1) of the Act provides the pecuniary jurisdiction of District Commission as the value of the goods or services paid as consideration does not exceed Rs.1 crore.  Section 47(1) of the Act provides the pecuniary jurisdiction of State Commission as the value of the goods or services paid as consideration exceeds Rs.1 crore but does not exceed Rs.10 crores.  Section 58(1) of the Act provides the pecuniary jurisdiction of National Commissioner as the value of the goods or services paid as consideration exceeds Rs.10 crores.

Issue

The issue to be discussed in this article is as to the constitutional validity of Section 34(1), 47(1) and 58(1) of the Act with reference to a decided case law by the Supreme Court.

Case law

In RUTU MIHIR PANCHAL & ORS. VERSUS UNION OF INDIA & ORS. - 2025 (5) TMI 47 - SUPREME COURT, the petitioner’s husband purchased a sedan–Ford Endeavour Titanium car from S.P. Vehicles Private Limited, authorised dealer of Ford India for an amount of Rs. 31.19 Lakhs.  On 20.11.2018 the vehicle met with an accident and the husband of the petitioner died in that accident.  When her 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, the petitioner filed a complaint before the National Commission about the fire incident occurred and death of her husband.  In the said complaint she claimed a compensation of Rs.14.94 crores.  The National Commission dismissed her complaint on the ground that the consideration of insurance policy does not exceed Rs.10 crores

Being aggrieved against the order of National Commission, the appellant filed the present writ petition before the Supreme Court.  The petitioner submitted the following before the Supreme Court-

• Under the new Act an anomaly has arisen regarding pecuniary jurisdiction and hierarchy of judicial system. 
• The impugned provisions of the Act give rise to an anomalous situation wherein, for instance, a person claiming compensation of Rs. 50 Crores for a defect or deficiency in goods purchased or services availed, for consideration lesser than Rs. One Crore will have to go before the District Commission and at the same time one can approach the national commission even if the compensation is less than Rs. One Crore in the 1986 Act.
• The new criterion for determining the pecuniary jurisdiction is discriminatory as consumers who claim identical compensation, but have paid different considerations at the time of purchase of goods or services are treated differently.
• When the definition of ‘consumer’ itself does not discriminate on the basis of the consideration paid and includes every consumer in the wide spectrum, restricting access to judicial remedies on the basis of consideration paid is illegal and arbitrary.
• There is no rationale for introducing the new criterion for determining the pecuniary jurisdiction.
• Wherever value of goods and services paid as consideration is up to Rs. One Crore, a consumer has to necessarily approach a district commission.
• The scheme under the Act has become lopsided and has impaired the original jurisdiction of the state and national commissions.

The Union of India submitted the following before the Supreme Court-

• The Parliament has the legislative competence to determine the jurisdiction and also pecuniary limits of courts and tribunals.
• The classification created on the basis of value of goods and services paid as consideration not only creates an intelligible differentia, but also has a rational nexus with the object sought to be achieved, which is timely and effective administration and settlement of consumer disputes.
• The impugned provisions are not manifestly arbitrary and that they were brought in to prevent exaggerated and inflated claims.

The Supreme Court considered the submissions made by the parties.  The Supreme Court considered that it may determine-

• power to determine pecuniary jurisdiction;
•  reasonable classification under Article 14;
• manifest arbitrariness.

Power to determine pecuniary jurisdiction.

The Parliament has the legislative competence to enact the Consumer Protection Act, 2019.   The legislative competence to prescribe jurisdiction and powers of a court, coupled with the power to constitute and organize courts for administration of justice, takes within its sweep the power to prescribe pecuniary limits of jurisdiction of the courts or tribunals.  The grading of the court is in their hierarchy has reference to the pecuniary and territorial limits rather than to the nature and kind of the subject-matter which they are empowered to deal with.  The 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.  The legislative competence and also the power of the Parliament to prescribe limits of pecuniary jurisdiction of courts and tribunals and in this case, the District, State or the National Commission.

Classification

The Supreme Court considered empowerment of the District, State and National Commissions to exercise jurisdiction on the basis of value of the goods or services paid and whether it is violative of Article 14.  The Supreme Court relied on its own judgment in STATE OF WB. VERSUS ANWAR ALI SARKAR - 1952 (1) TMI 19 - SUPREME COURT in which it was held that in order to pass the test, two conditions must be fulfilled, -

• that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others; and
•  that that differentia must have a rational relation to the object sought to be achieved by the Act.

The Supreme Court observed that 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’.  The Supreme Court analysed the provisions of Section 2(a), (b), (e), (h) of the Contract Act, 1872.

Section 2(7) of the Act defines the term ‘consumer’ as any person who buys any goods or hires or avails any service for a consideration. The consideration could be in the present or future, in whole, part, or by deferred payment. Whichever be the mode, there must be a consideration. The determination of jurisdiction of the District, State or National commissions on the basis of value of consideration paid for purchase of goods and services has rational nexus to the object of provisioning hierarchy of judicial remedies.  The relief or compensation that a consumer could claim remained unrestricted and at the same time, access to the state or the national commission is also not taken away. The court always has the jurisdiction to prevent the abuse of the process of law.

The Supreme Court held that there is no unrestricted claim for compensation and that it is subject to the determination of the court.  The Supreme Court further held that classification of claims based on value of goods and services paid as consideration has a direct nexus to the object of creating a hierarchical structure of judicial remedies through tribunals.

Arbitrariness

The Supreme Court considered the arguments of the petitioner that wherever value of goods and services paid as consideration is up to Rs. One Crore, a consumer has to necessarily approach a District Commission and has impaired the original jurisdiction of the state and national commissions.  The Supreme Court was of the view that this argument is not based on any illegality, much less on legislative incompetency or ultra vires to Constitution.  The soundness of this submission will depend on the working of the statute and the data that may be available for assessing its impact. Its implementation and consequences have to be closely examined, analysed and impact assessed.

The Supreme Court observed that the Act has established two statutory bodies viz., The Consumer Protection Council under Section 3 of the Act and Central Consumer Protection Authority under Section 10 of the Act.  The objects of the Central Council shall be to render advice on promotion and protection of the consumers' rights under this Act.  The Central Consumer Protection Authority is empowered to-

• protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers rights [Section 18(1)(a)];
• recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights [Section 18(2)(e)];
• undertake and promote research in the field of consumer rights [Section 18(2)(f)]; 
• advise the Ministries and Departments of the Central and State Governments on consumer welfare measures [Section 18(2)(k)].

Further the Ministry of Commerce has framed rules and regulations such as-

• The CCPA (Allocation and Transaction of Business) Regulations, 2020;
• The CCPA (Procedure for Engagement of Experts and Professionals) Regulations, 2021;
• The CCPA (Submission of Inquiry or Investigation by the Investigation Wing) Regulations, 2021; and
• The CCPA (Form of annual statement of accounts and records) Rules, 2021.

The purpose and object behind referring to the constitution and functioning of the Council and the Authority is only to ensure that the regulatory regime for consumer protection is clearly identified, coordinated. 

The Supreme Court held that 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.

The Supreme Court dismissed the writ petition challenging the  constitutional validity of  sections  34, 47 and 58 of the 2019 Act.  The Supreme Court declared that the said provisions are constitutional and are neither violative of Article 14 nor manifestly arbitrary.