Explainer| How Class Action Suits Work In India

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Ola Electric may be staring at a class action suit if the consumer rights regulator is not satisfied with the electric vehicle manufacturer's response to its show-cause notice.
India Litigation, Mediation & Arbitration

Ola Electric may be staring at a class action suit if the consumer rights regulator is not satisfied with the electric vehicle manufacturer's response to its show-cause notice. The author explains what a "class action" is and how the Central Consumer Protection Authority can file a complaint on behalf of aggrieved customers

Why was a notice served on Ola Electric?

Earlier this month, the consumer affairs ministry had warned Ola Electric that it may initiate a class action suit against it for alleged deficiency in services, misleading advertisement, violation of consumer rights, and unfair trade practices. Following this, Central Consumer Protection Authority (CCPA) issued a show-cause to the electric two-wheeler manufacturer. The National Consumer Helpline (NCH) had received over 10,000 complaints against Ola Electric for the last one year related to quality and after-sales service for its electric two-wheelers. Ola had been given 15 days' time to respond to the notice and in case the ministry was not satisfied with the response and steps taken by the company to address the complaints, a class action suit would be initiated, consumer affairs secretary Nidhi Khare had said.

On Monday, Ola Electric responded to the notice saying 99% of the complaints had been resolved to the consumers' satisfaction. It is now up to the CCPA to decide whether to close the investigation or file a class action suit.

What is a class action suit?

A class action is a legal proceeding in which one or more plaintiffs bring a lawsuit on behalf of a larger group, known as the class. Class action litigation acts as a tool for collective action, allowing aggregation of claims. The concept of "class action" suit/claim is embodied under Order I Rule 8 of the Code of Civil Procedure (CPC) whereby numerous persons having the same interest in one suit, one or more of such persons may, with the permission of the Court, sue on behalf of or for the benefit of all persons so interested. What is critical for an action to qualify as a "class action" under the CPC is the "sameness of interest" and not the "sameness of cause of action".

What Consumer Protection Act says?

"Class Action" was permitted under the Consumer Protection Act, 1986 (CPA) where numerous consumers had the same interest in the subject matter of the complaint. This position has been retained under Section 35(1)(c) of the 2019 Act. The primary objective behind permitting a class action such as a complaint is to facilitate the decision of a consumer dispute in which a large number of consumers are interested, without recourse to each of them filing an individual complaint.

What is the role of the CCPA?

The CCPA is a central authority created under Section 10 of the Consumer Protection Act, 2019 to promote, protect and enforce rights of consumers as a class and regulate all matters relating to violation of consumer rights, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of public and consumers. It has an investigation wing, headed by a Director General which is responsible for conducting inquiry or investigation under the Act.

What are the powers of the CCPA?

–Investigate instances of violation of consumer rights, unfair trade practices and false or misleading advertisements either suo motu or on complaint received or on directions from the central government. For this, the Director General is empowered to conduct search and seizure under Section 22 of the Act.

–File complaints before the District Commission, State Commission or the National Commission and intervene in proceedings before these forums where allegations of violation of consumer rights and unfair trade practices exist.

–Review factors inhibiting consumer rights and make recommendations, besides undertaking and promoting awareness on consumer rights.

–Advise central & state ministries on consumer welfare measures.

–Issue safety notices, and necessary guidelines to prevent unfair trade practices and protect consumer interest.

–Power to recall goods, if there is evidence to show violation of consumer rights or unfair trade practice; and issue directions and penalties against false or misleading advertisements.

–Prosecute as well as compound offences under Sections 88 & 89.

How successful are such lawsuits?

Class action lawsuits in India have been largely restricted to public interest litigations and consumer disputes, especially disputes between homebuyers and builders. However, traction has also been noticed in corporate disputes after notification of the thresholds constituting "class" under Section 245 of the Companies Act, 2013. The success of any class action depends on the merits of the case and whether the prescribed threshold has been met, when suing under a particular statute.

Originally published by FinancialExpress.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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