“Fixing Jurisdiction on Consideration Paid Is Constitutional: Supreme Court : ‘No Right to Inflate Claims to Choose Forum’ Under Consumer Protection Act 2019”
Kiran Raj
The Supreme Court of India, Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra, upheld the constitutionality of Sections 34(1), 47(1)(a)(i), and 58(1)(a)(i) of the Consumer Protection Act, 2019. The judgment addresses challenges raised against the revised basis of pecuniary jurisdiction for consumer forums, shifting from the compensation claimed to the consideration paid for goods and services. The Court dismissed the writ petition and civil appeal questioning the constitutional validity of these provisions and directed statutory consumer protection bodies to conduct a performance audit to assess the working of the statute.
The writ petition was filed under Article 32 of the Constitution by a petitioner whose husband had purchased a Ford Endeavour Titanium sedan from S.P. Vehicles Pvt. Ltd. for Rs. 31.19 lakhs. The vehicle caught fire on 20.11.2018 while being driven, resulting in the husband’s death. The petitioner filed a consumer complaint before the District Consumer Commission, Vadodara, seeking compensation of Rs. 51.49 crores. Due to the 2019 Act’s provision determining jurisdiction based on consideration paid, the petitioner could not approach the National Commission, which would have been permissible under the repealed Consumer Protection Act, 1986.
In the connected civil appeal, the appellant’s husband, a District Governor of the Lions Club of Jhansi, died due to COVID-19 on 25.07.2020. A claim for Rs. 14.94 crores was made under an insurance policy issued by the Lions International Club. The National Commission rejected the complaint, observing that the premium paid for the policy did not exceed Rs. 10 crores, and hence, jurisdiction did not lie with the National Commission as per the 2019 Act.
The challenge was directed at the shift in pecuniary jurisdiction criteria from the compensation claimed to the consideration paid for the goods or services. The petitioner contended that this change is arbitrary and violative of Article 14 of the Constitution. They argued that under the 1986 Act, jurisdiction was determined by the total value including compensation, enabling higher forums to consider cases involving large claims irrespective of the actual cost of goods or services. It was submitted that the new regime leads to consumers being compelled to approach lower forums despite seeking substantial compensation.
Counsel for the petitioners, Mr. Shreeyash Lalit and Mr. Abhimanyu Bhandari, argued that the definition of “consumer” under Section 2(7) of the 2019 Act encompasses various modes of payment and does not distinguish consumers based on the amount paid. They contended that there was no rational basis for differentiating between consumers who may have paid less for goods or services but suffered significant losses and others who paid more.
On behalf of the Union of India, Mr. Vikramjit Banerjee, Additional Solicitor General, defended the constitutionality of the provisions. It was submitted that the legislature is competent to determine jurisdictional parameters and that the classification based on consideration paid is reasonable. He argued that this change was introduced to prevent inflated claims and reduce the burden on higher consumer forums. It was also pointed out that similar monetary thresholds exist in other legislative frameworks such as the Recovery of Debts and Bankruptcy Act, 1993 and the Insolvency and Bankruptcy Code, 2016.
The Court examined four key issues: the power to determine pecuniary jurisdiction, whether the provisions were discriminatory and violative of Article 14, whether they were manifestly arbitrary, and if there was any loss of remedy.
On legislative competence, the Bench recorded, "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." Citing entries from the Constitution and previous judgments, the Court reiterated that Parliament is empowered to structure judicial forums and their jurisdiction.
Regarding the alleged violation of Article 14, the Court applied the well-established twin test from State of West Bengal v. Anwar Ali Sarkar: "(1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others, and (2) that that differentia must have a rational relation to the object sought to be achieved by the Act." The Court found that consideration paid is a valid classification criterion.
The Court stated, "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." It held that consideration is a central element in contract formation and in defining a consumer under the Act.
The Court further noted, "Value of consideration paid for good or service purchased is closer and more easily relatable to compensation than the self-assessed claim for damages of a consumer." It recorded that the objective behind the revised criteria was to reduce exaggerated claims that previously crowded the National Commission.
The Bench rejected the contention of loss of remedy, stating, "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." It referred to Nandita Bose v. Ratanlal Nahta, affirming that courts can prevent overvaluation or undervaluation to invoke or avoid jurisdiction.
On the issue of performance audit, the Court acknowledged the argument that insurance claims, although potentially involving high compensation, usually involve low premiums. This makes it impractical for such claims to fall within the National Commission’s jurisdiction under the 2019 Act. Recognising the need for data and assessment, the Court called for a performance audit.
The Court elaborated on the constitutional obligation of the executive to review the impact of statutes. It recorded, "Reviewing and assessing the implementation of a statute is an integral part of Rule of Law." The Court referred to Yash Developers v. Harihar Krupa Co-operative Housing Society Ltd. to support this principle.
Further, the Court referred to the roles of the Central Consumer Protection Council (under Section 3) and the Central Consumer Protection Authority (under Section 10), citing their duties to review, advise, and enforce the rights of consumers.
The judgment noted 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."
In conclusion, the Court issued the following directions: “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.”
“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.”
The writ petition and civil appeal were disposed of with these directions. Pending applications, if any, were also disposed of accordingly.
Advocates Representing the Parties
For the Petitioners: Mr. Haresh Raichura, Advocate-on-Record; Mr. Shreeyash Lalit, Advocate; Mrs. Saroj Raichura, Advocate; Mr. Kalp Raichura, Advocate; Mr. Rajat Vats, Advocate; Mr. Abhimanyu Bhandari, Senior Advocate; Mr. Somesh Tiwari, Advocate; Mr. Utsav Saxena, Advocate; Mr. Shubhankar Singh, Advocate; Ms. Aashna Mehra, Advocate; Ms. Manisha Ambwani, Advocate-on-Record
For the Respondents: Mr. Vikramjit Banerjee, Additional Solicitor General; Mr. Nachiketa Joshi, Advocate; Mr. Anmol Chandan, Advocate; Ms. Priyanka Das, Advocate; Mr. T.S. Sabarish, Advocate; Mr. A. Deb Kuamar, Advocate; Mr. Shreekant Neelappa Terdal, Advocate-on-Record; Mr. Amrish Kumar, Advocate-on-Record; Mr. Viresh B. Saharya, Advocate-on-Record
Case Title: Rutu Mihir Panchal & Ors. versus Union of India & Ors.
Neutral Citation: 2025 INSC 593
Case Number: Writ Petition (Civil) No. 282 of 2021 with Civil Appeal arising out of SLP (C) No. 1738 of 2022
Bench: Justice Pamidighantam Sri Narasimha, Justice Manoj Misra
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