Introduction
The Hon'ble Supreme Court of India, in its decision in Rutur Mihir Panchal & Ors. v. Union of India & Ors.1, has unequivocally upheld the constitutional validity of a significant legislative shift in the framework governing consumer disputes.
The decision affirms that the right of a consumer to approach a particular forum is appropriately determined by the amount paid as consideration for the goods or services, rather than by the value of the loss or compensation claimed. By endorsing this approach, the Court has reinforced the legitimacy of using the actual monetary transaction i.e. "consideration paid "— as the basis for determining pecuniary jurisdiction. This ruling marks a pivotal development in consumer law, aligning jurisdictional thresholds with the foundational principles of contract law and reinforcing the statutory framework introduced under the Consumer Protection Act, 2019.
Legislative Background
With the evolving landscape of consumer protection laws, one issue that continues to cause considerable ambiguity is the pecuniary jurisdiction of the consumer commissions. Despite multiple amendments aimed at streamlining the adjudicatory framework, clarity on the monetary thresholds remains elusive for many litigants and practitioners in India.
Under the Consumer Protection Act, 1986 (CPA 1986), the determination of pecuniary jurisdiction across the three-tier consumer dispute redressal structure was based on the aggregate value of the goods or services involved in the dispute, along with the compensation claimed by the complainant. The statutory thresholds were clearly demarcated: the District Forum2 was empowered to adjudicate cases where the total value did not exceed Rupees 20 lakhs; the State Commission3 had jurisdiction over disputes involving a value of more than Rupees 20 lakhs but not exceeding Rupees 1 crore; and the National Commission4 was vested with the authority to entertain complaints where the value of goods or services and compensation claimed exceeded Rupees 1 crore.
The Consumer Protection Act, 2019 (CPA 2019), which replaced the erstwhile 1986 Act, brought about significant changes. It not only revised the monetary limits that determine the jurisdiction of the various consumer commissions but also altered the very basis on which pecuniary jurisdiction is computed, thereby marking a decisive shift in the adjudicatory paradigm.
The CPA 2019, came into force on August 9, 2019, ushering in a significant shift in the legal landscape governing consumer disputes. While the earlier regime considered the combined value of goods or services and compensation claimed, the 2019 Act marked a departure by limiting jurisdictional computation to the value of the goods or services paid as consideration. Under this revised structure, the District Commission5 has jurisdiction to entertain complaints where the consideration paid does not exceed Rupees 1 crore; the State Commission's jurisdiction6 extends to matters where such consideration exceeds Rupees 1 crore but does not exceed Rupees 10 crores; and the National Commission assumes jurisdiction7 over disputes involving consideration exceeding Rupees 10 crores. The change reflects a policy shift aimed at streamlining consumer litigation and reducing forum shopping by clearly linking jurisdiction to actual monetary transactions. A plain and simple reading of the provisions make it clear that the 2019 Act shifts the basis of the pecuniary jurisdiction from value of compensation claimed under the repealed 1986 Act to value of the consideration paid for the goods and services.
In exercise of the amendment powers conferred upon the Central Government under the CPA, 2019, it made yet another amendment to the monetary value determining jurisdiction by issuing a notification dated December 30, 20218. As per the notification dated December, 30, 2021, the pecuniary jurisdiction of the consumer commissions under the Consumer Protection Act, 2019 was further revised. Under the updated framework, the District Commission9 now has jurisdiction to entertain complaints where the value of the goods or services paid as consideration does not exceed 50 lakh Rupees. The State Commission10 has jurisdiction over matters where such consideration exceeds 50 lakh Rupees but does not exceed 2 crore Rupees. Complaints involving a consideration amount exceeding 2 crore Rupees now fall within the exclusive jurisdiction of the National Commission11.
The Challenge
The constitutionality of this aspect of pecuniary jurisdiction of consumer commissions was challenged in Rutur Mihir Panchal12 on the ground that legislative shift has the effect of rendering the jurisdictional provisions13 as unconstitutional. It was further contended that 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.
The challenge was resisted on the ground that classification created on the basis of the 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 by the consumer protection legislations.
The Verdict
In the first critical facet of the Supreme Court's decision, the Court upheld Parliament's legislative competence to determine the jurisdiction and powers of courts and tribunals, affirming that this includes the authority to fix pecuniary limits. In doing so, it relied on State of Bombay v. Narottamdas Jethabhai14, which recognised that the power to constitute and organise courts necessarily entails the power to prescribe their pecuniary jurisdiction.
The second and most critical limb of the Supreme Court's decision revolves around the aspect of the alleged discriminatory nature of the jurisdictional provision inasmuch as the statute emphasizes "consideration paid" as a determining factor. The Hon'ble Apex Court, while disregarding the said argument upheld the constitutional validity of the provisions.
The Hon'ble Apex Court in order to determine the constitutional validity of the jurisdictional provisions, relied upon the twin conditions of reasonable classification as explained in State of West Bengal v. Anwar Ali Sarkar15 i.e., (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others, and (2) that differentia must have a rational relation to the object sought to be achieved by the Act. The Supreme Court upheld the validity of classifying consumer disputes based on the value of consideration paid, holding that such classification is rooted in a reasonable and legally sound basis. Drawing from first principles of contract law, the Court observed that consideration is essential for the formation of any valid contract and is likewise central to the statutory definition of a 'consumer' under Section 2(7) of the CPA 2019. Since a consumer is defined by their act of purchasing goods or availing services for consideration, determining jurisdiction on the basis of the amount paid is both logical and consistent with the contractual framework. Accordingly, vesting pecuniary jurisdiction in consumer fora based on the value of consideration paid was held to be neither arbitrary nor discriminatory.
Conclusion:
The ruling in Rutur Mihir Panchal16 not only resolves a constitutional controversy but also establishes a more definite and transparent path for resolving consumer disputes in India. The Apex Court has established the foundation for a system that is less vulnerable to exaggerated claims and forum shopping and more focused on actual and quantifiable transactions by establishing pecuniary jurisdiction based on the value of consideration paid. This clarity would expedite adjudication going forward and could potentially spur more reforms that improve the effectiveness, accessibility, and integrity of India's consumer protection system.
Footnotes
1. Writ Petition (C) No. 282 of 2021
2. Section 11, CPA, 1986
3. Section 17, CPA, 1986
4. Section 21, CPA, 1986
6. Section 47, CPA, 2019
7. Section 58, CPA, 2019
8. https://consumeraffairs.nic.in/sites/default/files/jurisdicton%20of%20Consumer%20Commissions.pdf
9. Section 3, Notification dated December 30, 2021
10. Section 4, Notification dated December 30, 2021
11. Section 5, Notification dated December 30, 2021
12. Supra
13. Sections 34, 47, 58, CPA, 2019
14. (1950) SCC 905
15. (1952) 1 SCC 1
16. Supra
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