Supreme Court clarifies jurisdiction of Consumer Forums over statutory dues in deficiency of service: Punjab Urban Planning and Development Authority vs. Vidya Chetal (2019) INSC 851 (16 September 2019)

Date of the Judgment: 16 September 2019
Citation: (2019) INSC 851
Judges: N.V. Ramana, J., Mohan M. Shantanagoudar, J., Ajay Rastogi, J.
Can consumer forums decide if a statutory body’s demand for fees is justified? The Supreme Court of India addressed this question in a recent judgment, clarifying the extent of consumer protection laws. The court examined if the National Consumer Disputes Redressal Commission (NCDRC) has the power to assess the legality of charges like “composition fee” and “extension fee” imposed by development authorities. This judgment clarifies the scope of ‘deficiency in service’ under the Consumer Protection Act, 1986, especially when statutory bodies are involved.

Case Background

The case originated from a reference made by a two-judge bench of the Supreme Court, questioning the correctness of an earlier judgment in *HUDA vs. Sunita, (2005) 2 SCC 479*. In *Sunita*, the court had held that the NCDRC lacked jurisdiction to examine the legality of “composition fee” and “extension fee” demanded by the Haryana Urban Development Authority (HUDA), stating that these were statutory obligations and not deficiencies in service. The referring bench expressed concern that the *Sunita* judgment was a brief, six-paragraph order without clear reasoning, especially given the beneficial nature of the Consumer Protection Act, 1986.

Timeline

Course of Proceedings

A two-judge bench of the Supreme Court, while hearing a case, doubted the correctness of the judgment in *HUDA vs. Sunita*. This earlier judgment had stated that the NCDRC did not have the jurisdiction to adjudicate the legality of demands for “composition fee” and “extension fee” by HUDA. The two-judge bench referred the matter to a larger bench due to concerns that the *Sunita* judgment lacked proper reasoning and did not align with the spirit of the Consumer Protection Act, 1986.

Legal Framework

The Supreme Court examined several key provisions of the Consumer Protection Act, 1986, to determine the scope of “deficiency in service” and the jurisdiction of consumer forums.

• Section 2(1)(g) of the Consumer Protection Act, 1986 defines “deficiency” as:

  “any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.”

  This definition includes any inadequacy in the quality, nature, or manner of service performance, whether based on contract, law, or other standards.

• Section 2(1)(o) of the Consumer Protection Act, 1986 defines “service” as:

  “service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;”

  This definition is inclusive and covers a wide range of services, including housing construction, but excludes free services and personal service contracts. The court noted that this definition is not exhaustive and requires a liberal interpretation.

Arguments

The petitioner argued that the judgment in *Sunita* was correct in holding that the NCDRC lacks jurisdiction to decide the legitimacy of “composition fee” and “extension fee,” as these are “statutory dues” and cannot be claimed as “deficiency in services.” The petitioner further argued that while the Consumer Protection Act, 1986, is beneficial, it should not be used to extend the scope of the Act beyond what the legislature intended.

The amicus curiae, representing the respondent, contended that the *Sunita* judgment was an aberration and relied on previous judgments like *Lucknow Development Authority v. M.K. Gupta, (1994) 1 SCC 243* and *Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 65*, which established that the NCDRC has jurisdiction to protect consumers against defective services, even when provided by statutory bodies. The amicus curiae argued that statutory authorities fall under the ambit of the Consumer Protection Act, 1986.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the law laid down by this Court in the case of *Sunita* is valid.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following cases and legal provisions:

Judgment

The Supreme Court held that the *Sunita* judgment was incorrect and overruled it. The Court clarified that consumer forums have the jurisdiction to examine the legality of statutory dues when they arise from a deficiency in service. The Court emphasized that not all statutory obligations are sovereign functions and that statutory bodies providing services for a consideration are subject to the Consumer Protection Act, 1986.

The Court stated that while consumer forums cannot challenge the vires of a rule prescribing a fee, they can evaluate if the conditions for imposing the fee have been met. The court also distinguished between taxes, which are for the common burden, and fees, which are for specific services, stating that only the latter falls under the purview of consumer forums.

The Supreme Court observed that the confusion arose from the fact that the authority has the power to levy certain statutory fees. However, this does not prohibit the Consumer forums from evaluating the legality of such exactions or fulfillment of conditions by the authority before such exaction.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to provide a broad and liberal interpretation to the Consumer Protection Act, 1986, to protect consumers from deficiencies in service, even when provided by statutory bodies. The court emphasized that the Act is a beneficial legislation, and its interpretation should further the goal of consumer protection. The court also considered the need to ensure accountability of statutory bodies and to prevent them from acting arbitrarily or capriciously. The court also considered the distinction between taxes and fees, holding that fees charged for specific services are subject to the jurisdiction of consumer forums.

Logical Reasoning

The court’s reasoning was based on a step-by-step analysis of the legal provisions and precedents. The court first examined the definitions of “deficiency” and “service” under the Consumer Protection Act, 1986, emphasizing the broad and inclusive nature of these definitions. The court then reviewed previous judgments, particularly *Lucknow Development Authority* and *Ghaziabad Development Authority*, which had established that statutory bodies are amenable to the jurisdiction of consumer forums. The court also considered the distinction between taxes and fees, concluding that fees charged for specific services are within the purview of consumer forums.

The court rejected the narrow interpretation in the *Sunita* judgment, which had excluded statutory dues from the ambit of consumer forums. The court held that this interpretation was inconsistent with the beneficial nature of the Consumer Protection Act, 1986, and the need to protect consumers from deficiencies in service, even when provided by statutory bodies.

The court also clarified that while consumer forums cannot challenge the vires of a rule prescribing a fee, they can evaluate if the conditions for imposing the fee have been met. This distinction ensures that while the rule-making power of statutory bodies is respected, their actions are still subject to scrutiny for deficiencies in service.

The court quoted from the judgment:

“The basis for application of the consumer laws hinges on the relationship between the service provider and consumer. The usage of ‘otherwise’ within the provision subsumes other modes of standard setting alternative instruments other than contracts such as laws, bye-laws, rules and customary practices etc.”

“The legislative intention is thus clear to protect a consumer against services rendered even by statutory bodies. The test, therefore, is not if a person against whom complaint is made is a statutory body but whether the nature of the duty and function performed by it is service or even facility.”

“Therefore, in line with the law laid down by us, we hold 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.”

Key Takeaways

• Consumer forums have the jurisdiction to examine the legality of statutory dues when they arise from a deficiency in service.
• Statutory bodies providing services for a consideration are subject to the Consumer Protection Act, 1986.
• Not all statutory obligations are sovereign functions, and many fall under the ambit of consumer protection laws.
• Consumer forums can evaluate if conditions for imposing fees have been met, even if they cannot challenge the vires of the rule prescribing the fee.
• The judgment in *HUDA vs. Sunita* was overruled, clarifying the scope of consumer protection laws.

Directions

The Supreme Court directed that the special leave petitions be placed before an appropriate bench for considering the case on merits after obtaining orders from the Chief Justice of India.

Development of Law

The ratio decidendi of this case is that consumer forums have the jurisdiction to examine the legality of statutory dues when they arise from a deficiency in service. This judgment overrules the previous position of law established in *HUDA vs. Sunita*, which had held that NCDRC has no jurisdiction to adjudicate the legitimacy of statutory dues. This decision clarifies and expands the scope of consumer protection laws in India, ensuring that statutory bodies are held accountable for the services they provide.

Conclusion

The Supreme Court’s judgment in *Punjab Urban Planning and Development Authority vs. Vidya Chetal* clarifies the jurisdiction of consumer forums in cases involving statutory dues. The court overruled the earlier judgment in *HUDA vs. Sunita*, holding that consumer forums can examine the legality of statutory dues if they arise from a deficiency in service. This decision reinforces the broad scope of the Consumer Protection Act, 1986, and ensures that statutory bodies are accountable for the services they provide to consumers.