NCDRC orders compensation of ₹ 2 Lakhs for manufacturing defects in product in spite of the product being covered by warranty
The National Consumer Disputes Resolution Commission (NCDRC), in the case of Mercedes Benz India Pvt. Ltd (“Mercedes Benz”) V. Prince Bansal & Ors., passed an order upholding the Chandigarh State Commission (“the CSC”)’s decision directing Mercedes Benz to pay compensation of ₹ 2 Lakhs for defects in the car.
In the present case, the complainant/aggrieved consumer had been faced with several problems with the doors, sunroof, cabin and the tyres of his Benz automobile car within the first few days of the purchase. Upon the consumer’s complaint, Benz had replaced some parts of the car. However, since the problems continued to persist, the consumer got the car inspected upon which it was discovered that the car had severe manufacturing defects.
The consumer then approached the CSC under the Consumer Protection Act, 1986 seeking replacement of the car or alternatively, refund of the purchase amount along with compensation. Benz defended itself claiming that the car had a running warranty period of 3 years, hence, their liability was limited to repair/replacement which was duly fulfilled upon the consumer’s complaint initially.
The CSC constituted a team of experts from Punjab Engineering College. Relying on the expert opinion delivered, the CSC directed a compensation of Rs. 2 Lakhs along with litigation cost.
The NCDRC dismissed Benz’s appeal against the above order saying that the CSC was justified in constituting a team of experts. Further, it explained that a compensation of Rs. 2 Lakhs is not excessive/unreasonable given that the consumer had paid Rs. 37 Lakhs for the purchase and had been facing problems ever since.
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The order passed by the NCDRC will be welcomed by consumers across the country. This order places a greater burden on manufacturers of products to ensure that their product is not defective in any manner, and that, the manufacturers cannot rely on the defence of the product having warranty in order protect themselves from being liable in the event of a product being defective. Further, this principle can be extended to not just the automobile industry but also, to other industries and sectors, thereby extending this principle to all manufacturers across the country.
The Consumer Protection Act, 1986 grants powers to the Dispute Resolution Commissions to constitute expert teams for deciding disputes raised before them. The judgment takes into account several factors involved such as the purchase amount of the car and the severity of the problems faced immediately following the purchase along with the expert opinion. Therefore, though Benz had a warranty term, owing to the persistent problems arising from inherent manufacturing defects, both CSC and NCDRC were justified in directing the said compensation holding Benz liable.
NGT directs FSSAI to constitute a committee to determine the subject of restriction of plastic packaging
In the case of Him Jagriti Uttaranchal Welfare Society (“Society”) v. Union of India &Ors, the main issue brought by the parties before the National Green Tribunal (“NGT”) was relating to the restriction of use of plastic bottles and multilayered plastic packages when it came to packaging of liquor, carbonated soft drinks and other such items. It was contended that the use of such packaging had an adverse impact on health and the environment, also increasing the proliferation of plastic waste in the country.
Key Highlights of the Case
- The Society sought to enforce a notification dated September 29, 2014 issued by the Ministry of Health and Family Welfare (“MHFW”) prohibiting plastic containers for oral pharmaceutical activities, while also directing that no multi-layered plastic packaging or other plastic containers should be used for packing of carbonated drinks or liquor.
- After several reports substantiating the claims of harmful impact of plastic disposal and the dangers of plastic recycling, the NGT observed that multi-layered plastic packaging was injurious to human health. Therefore, directions were issued to the Ministry of Environment, Forest, and Climate Change (“MoEF”), the Food Safety and Standards Authority of India (“FSSAI”) and other authorities to file a collective response.
- In 2019, NGT directed the MoEF to look into the food safety standards framed by FSSAI in respect of food safety standards and file its response. While doing so, the MoEF also indicated that separate provisions of different rules had included a provision for phasing out multi-layered plastic, which in its considered opinion was not technically feasible without suitable alternatives.
A time period of 2 years was proposed for the phasing out process. The NGT came to the conclusion that the question of whether further regulatory provisions were required with respect to the restriction of plastic packaging materials should be examined by an expert committee. The nodal agency for coordination would be the FSSAI and would additionally comprise of Central Pollution Control Board, the Bureau of Indian Standards and the Directorate General of Health Services.
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Plastic packaging materials are in widespread use in our country due to its usefulness but this convenience comes at a high cost to the environment and human health. Till date, the MoEF has primarily focused on waste management, and not on the restriction of the use of plastic itself. Moreover, it has recently found the relevant rules regulating the same to be ineffective.
However, by creating a nodal agency, the NGT has ensured that comprehensive regulations can be made taking into consideration the views of all agencies, in order to reduce the use of plastic.
NCLT not the appropriate authority to determine a corporate as insolvent
The National Company Law Tribunal (NCLT), in the matter of State Bank of India V. Bhushan Energy Ltd., passed an order holding that it is not the competent authority to determine whether a corporate is an ‘insolvent’.
Upon an application by State Bank of India (SBI) against Bhushan Energy Ltd. (BEL), Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 was commenced. In response to the Resolution Professional (RP)’s public notice, Tata Steel Ltd. (TSL) submitted a resolution plan which was subsequently approved.
Later, an ex-promoter of BEL, opposed the resolution in a complaint before the NCLT alleging RP’s bias in favour of TSL, lower valuation of BEL and TSL’s ineligibility to submit a resolution plan because its subsidiary was an ‘insolvent’ facing CIRP itself.
The following points were adjudicated by the NCLT-
- The NCLT found that on a reading of various provisions, a body corporate can also be ‘insolvent’ under the IBC, however, such a body corporate undergoing CIRP cannot be said to be an ‘insolvent’.
- Hence, TSL’s subsidiary is not an ‘insolvent’ and subsequently, TSL’s is qualified to provide a resolution plan.
- The NCLT also noted that the determination of who is ‘insolvent’ has been vested with a court of competent jurisdiction, which it isn’t under the IBC. However, who is the competent authority is has not been determined.
The NCLT, thus, approved TSL’s resolution plan. It also dismissed the allegations of RP’s biased behaviour as lacking any merit.
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The Insolvency and Bankruptcy Code (Amendment), 2018 says that any corporate who is acting jointly with an insolvent is ineligible to submit a resolution plan under CIRP. This judgment ensures that corporates are not restrained from submitting resolution plans for CIRP in their own interest though they or their subsidiaries might be facing insolvency proceedings themselves. Being determined as an ‘insolvent’ impairs a corporate in many ways. Though the judgment highlights that such determination cannot be arbitrary and prior to the conclusion of CIRP, it leaves a grey area as to which competent authority can decide on ‘insolvents’ under the Amendment above. This can only be resolved by the Courts or the Legislature in India.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.