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The Supreme Court today ruled that Consumer fora have jurisdiction to decide disputes concerning the validity of the imposition of a statutory due arising out of a “deficiency in service” as per the provisions of the Consumer Protection Act, 1986 (Act).
Consequently, the 2005 decision of the Supreme Court in the case of HUDA v. Sunita [(2005) 2 SCC 479] wherein it had held that National Consumer Dispute Redressal Commission (NCDRC) has no jurisdiction to adjudicate the legitimacy of statutory dues was held to be bad law.
The judgment was delivered by a Bench of Justices NV Ramana, Mohan M Shantanagoudar and Ajay Rastogi in a reference made to it by a Division Bench.
The question before the Court was regarding the correctness of the judgment in HUDA v. Sunita. In that judgment, the Supreme Court had ruled that the National Consumer Disputes Redressal Commission (NCDRC) had no jurisdiction to adjudicate the legality behind the demand of composition fee” and “extension fee” made by HUDA, as the same being statutory obligation, does not qualify as “deficiency in service”.
The Court went on to analyse the scope and purpose of the terms “deficiency” and “service” which are defined in the Consumer Protection Act.
The meaning of deficiency is explained as any fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance of any service or supply of goods, in terms of standards set by the parties themselves through contract or otherwise, or imposed by the law in force. The basis for the application of the consumer laws hinges on the relationship between the service provider and consumer.
This definition of service is not exhaustive rather the legislature has left the task to expound the provision on a case to case basis to the judiciary. The purpose of leaving this provision open-ended, without providing an exhaustive list indicates the requirement for a liberal interpretation. Broadly speaking, it is inclusive of all those services performed for consideration, except gratuitous services and contract of personal services.
Sovereign functions like judicial decision making, the imposition of tax, policing etc, strictly understood, qualify for exemption from the Act, the Court noted. However, the welfare activities through economic adventures undertaken by the Government or statutory bodies are covered under the jurisdiction of the consumer forums. Even in departments discharging sovereign functions, if there are subunits/wings which are providing services/supply goods for consideration and they are severable, then they can be considered to come within the ambit of the Act, the Court held.
The Court also cited various precedents regarding the scope of the above terms including Lucknow Development Authority v. MK Gupta and Standard Chartered Bank Ltd. v. Dr. B N Raman.
In light of the above, the Court ruled that the view in HUDA v. Sunita cannot be sustained.
“Coming back to the Sunita case (supra), this Court held that the NCDRC had no jurisdiction to adjudicate the legality behind the demand of composition or extension fee by a developmental authority. This Court observed that the statutory obligations of a developmental authority and the plot holder under the authority’s statutory framework cannot be construed as acts or omission resulting in a “deficiency in service”. In view of the law laid down by us, the interpretation provided by the Sunita case (supra) cannot be sustained as the service provided by the petitioner herein squarely comes under the ambit of ‘service’.”
While the authority does have the power to levy certain statutory fee, that by itself does not prohibit the Consumer forums from evaluating the legality of such exactions or fulfillment of conditions by the authority before such exaction. In broad terms, non-fulfilment of conditions or standards required amounts to ‘deficiency in services’ under the Act.
The Court also distinguished between a tax and statutory dues imposed as quid pro quo for certain services.
A tax is a mandatory imposition by a public authority for public purpose enforceable by law; and is not imposed with respect to any special benefit conferred, as consideration, on the taxpayer. There is no element of quid pro quo between the taxpayer and the public authority.
However, the above is not the only form of due charged by a statutory authority. Certain statutory dues may arise from services rendered by a statutory authority.
Such statutory dues will be amenable to the jurisdiction of the Consumer fora, the Court ruled.
“…not all statutory dues/exactions are amenable to the jurisdiction of the Consumer Forum, rather only those exactions which are exacted for a service rendered, would be amenable to the jurisdiction of the Consumer Forum….those exactions, like tax, and cess, levied as a part of common burden or for a specific purpose, generally may not be amenable to the jurisdiction of the Consumer Forum. However, those statutory fees, levied in lieu of service provided, may in the usual course be subject matter of Consumer Forum’s jurisdiction provided that there is a ‘deficiency in service’ etc.”
Therefore, the Court ruled that the determination of the dispute concerning the validity of the imposition of a statutory due arising out of a “deficiency in service”, can be undertaken by the consumer fora as per the provisions of the Act. Thus, the decision HUDA v. Sunita (supra), wherein it was held that NCDRC has no jurisdiction to adjudicate the legitimacy of the aforementioned statutory dues, was rendered without considering any of the previous judgments of the Supreme Court and the objects of the Act.
Consequently, the Court ruled that the law laid down in the said case does not hold good before the eyes of the law and overruled the same.