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Consumer Protection Act

Redressal Commissions on Consumer protection Act 2019

Consumer Dispute Redressal Commission (CDRC)

Chapter IV of the Act deals with the Establishment, Qualifications, Jurisdiction, Manner of Complaint, Proceedings etc. regarding the Consumer Disputes Redressal Commission. CDRC is empowered to resolve complaints with respect to unfair and restrictive trade practices, defective goods and services, overcharging and goods which are a hazard to life and safety. It has to be set up at three levels, i.e. the District, State and National levels (commissions). In comparison to the old Act, the jurisdictions of the commissions have been enhanced.

  • The Act proposes the establishment of the Central Consumer Protection Authority (CCPA) as a regulatory authority.
  • The CCPA will protect, promote and enforce the rights of consumers and regulate cases related to unfair trade practices, misleading advertisements, and violation of consumer rights.
  • CCPA would be given wide-ranging powers.
    • The CCPA will have the right to take suo-moto actions, recall products, order reimbursement of the price of goods/services, cancel licenses, impose penalties and file class-action suits.
    • The CCPA will have an investigation wing to conduct independent inquiry or investigation into consumer law violations.

POWERS AND FUNCTIONS OF CENTRAL CONSUMER PROTECTION AUTHORITY

The Central Authority enjoys wide powers under the Act and can discharge regulatory, investigative or adjudicatory functions.

Under section 18(1) the Central Authority has the power to:

  • Protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers rights under this Act.
  • Prevent unfair trade practices and ensure that no person engages himself in unfair trade practices.
  • Ensure that no false or misleading advertisement is made of any goods or services which contravenes the provisions of this Act or the rules or regulations made under this Act.
  • Ensure that no person takes part in the publication of any advertisement which is false or misleading.

For the above-mentioned purposes, the Central Authority under section 18(2) has the power to:

  • Inquire or cause an inquiry or investigation to be made into violations of consumer rights or unfair trade practices, either suo motu or on a complaint received or on the directions from the Central Government.
  • File complaints before the District Commission, the State Commission or the National Commission, as the case may be, under this Act.
  • Intervene in any proceedings before the District Commission or the State Commission or the National Commission, as the case may be, in respect of any allegation of violation of consumer rights or unfair trade practices.
  • Review the matters relating to, and the factors inhibiting enjoyment of, consumer rights, including safeguards provided for the protection of consumers under any other law for the time being in force and recommend appropriate remedial measures for their effective implementation.
  • Recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights.
  • Undertake and promote research in the field of consumer rights.
  • Spread and promote awareness on consumer rights.
  • Encourage non-Governmental organisations and other institutions working in the field of consumer rights to co-operate and work with consumer protection agencies.
  • Mandate the use of unique and universal goods identifiers in such goods, as may be necessary, to prevent unfair trade practices and to protect consumers’ interest.
  •  issue safety notices to alert consumers against dangerous or hazardous or unsafe goods or services.
  • advise the Ministries and Departments of the Central and State Governments on consumer welfare measures.
  •  issue necessary guidelines to prevent unfair trade practices and protect consumers’ interest.

      District Consumer Disputes Redressal Commission (previously known as the District Forum):

District Commission shall consist of a President and not less than two and not more than such number of members as may be prescribed, in consultation with the Central Government. The District Commission now has the jurisdiction to entertain complaints where the value of the goods and services paid as consideration does not exceed one crore rupees. Section 34 (2) (d) categorically states that the complaint can now also be instituted in a District Commission within the local limits of whose jurisdiction the complainant resides or personally works for gain, apart from filing in the jurisdiction where the other side actually or voluntarily resides, or carries a business, or has a branch office or personally works for gain.

      State Consumer Disputes Redressal Commission (previously known as the State Commission):

The State Commission shall have jurisdiction to entertain the complaints where the consideration exceeds one crore rupees but does not exceed ten crore rupees.

      National Consumer Disputes Redressal Commission (previously known as the National Commission):

The National Commission shall have the jurisdiction to entertain complaints where the consideration paid exceeds ten crore rupees. The jurisdiction in which the complaint is to be filed is now on the basis of the value of the goods and services paid, which was not the case in the 1986 Act where it was on the value of the goods and services and the compensation, if any, claimed. A great emphasis has been placed on mediation which will be dealt with further.

BasisDistrict CommissionState CommissionNational Commission
CompositionA district commission includes a president and two other members, and one of the members has to be a woman. A state commission includes a president and at least two other members, and one of the members has to be a woman. A national commission includes a president and four other members one of whom shall be a woman.
Who can be a PresidentA working or retired judge of the District Court can be a president of the District Commission. A working or retired judge of the High Court can be a president of the State Commission. A working or retired judge of the Supreme Court can be a president of the National Commission. 
Appointment of PresidentBy taking the recommendation of the selection committee, the state government appoints the president of the District Commission. After consulting with the Chief Justice of the High Court, the state government appoints the president of the State Commission. After consulting with the Chief Justice of India, the central government appoints the president of the National Commission. 
JurisdictionOne can file a complaint for goods and services of ₹1 crore or less.One can file a complaint of goods and services worth less than ₹10 crores and more than ₹1 crore.One can file a complaint of goods and services worth more than ₹10 crores.
Appeal against ordersIf the aggrieved party is not happy with the jurisdiction of the district commission, then they can appeal against its judgment in the State Commission within 45 days. If the aggrieved party is not happy with the jurisdiction of the state commission, then they can appeal against its judgment in the National Commission within 30 days by depositing 50% of the fine money. If the aggrieved party is not happy with the jurisdiction of the national commission, then they can appeal against its judgment in the Supreme Court within 30 days by depositing 50% of the fine money. However, one can file the complaint only when the value of goods and services exceeds ₹10 crores. 

Mediation

The Act has introduced a new chapter (Chapter V) on mediation as an alternate dispute resolution mechanism in order to resolve the consumer dispute in a much faster way without having to approach the Commissions. Thus, in the events where the mediation is successful in whole, the terms of such agreement shall be reduced into writing accordingly. Where the dispute is settled only in part, the Commission shall record the statement of the issues which have been settled, and shall continue to hear the remaining issues involved in the dispute. In case of unsuccessful mediation the respective Commission shall within seven days of the receipt of the settlement report, pass a suitable order and dispose of the matter accordingly.

Offences and Penalties

Section 21(2) and Section 89 of the 2019 Act provides the Central Authority with the power to impose a penalty in respect of any false or misleading advertisement, by a manufacturer or an endorser, it may, by order, impose on manufacturer or endorser a penalty which may extend to ten lakh rupees. Apart from this, a separate chapter (Chapter VII) for offences and penalties has been introduced where detailed penalties and punishments have been mentioned in relation to non-compliance, or manufacturing for sale or storing, selling or distributing or importing products that are adulterated or spurious.

Related Rules and Regulations

  • The Consumer Protection (E-Commerce) Rules, 2020 which are mandatory and are not advisories, lay down all the important information relating to the e-commerce entities keeping in mind both the consumer and the product/service provider. Key highlights are:
    • E-Commerce entities according to Rule 5 are required to provide information to consumers, relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism, payment methods, security of payment methods, charge-back options and country of origin.
    • These platforms will have to acknowledge the receipt of any consumer complaint within 48 hoursand redress the complaint within one month from the date of receipt. They will also have to appoint a grievance officer for consumer grievance redressal.
    • Sellers cannot refuse to take back goods or withdraw services or refuse refunds,if such goods or services are defective, deficient, delivered late, or if they do not meet the description on the platform.
    • The rules also prohibit the e-commerce companies from manipulating the priceof the goods or services to gain unreasonable profit through unjustified prices.
  • As per the Consumer Protection (Consumer Disputes Redressal Commissions) Rules, 2020 which came into force on 20th July 2020, the amount of fee payable for filing the complaint in the District Commission up to Rs 5 lakhs has been made Nil according to Rule 7.
  • The credit of the amount due to unidentifiable consumers will go to the Consumer Welfare Fund(CWF).
  • State Commissions will furnish information to the Central Government on a quarterly basis on vacancies, disposal, the pendency of cases and other matters.
  • Apart from these general rules, there are Central Consumer Protection Council Rules, provided for the constitution of the Central Consumer Protection Council(CCPC).
    • It will be an advisory body on consumer issues, headed by the Union Minister of Consumer Affairs, Food and Public Distribution with the Minister of State as Vice Chairperson and 34 other members from different fields.
    • It will have a three-year tenure and will have Minister-in-charge of consumer affairs from two States from each region: North, South, East, West, and North-East Region.

Conclusion

The 2019 Act is a much required change in favor of the consumers considering the current age of digitization. It empowers them with clearly defined rights and dispute resolution process which will enable them to get their grievance addressed with a fast track mechanism.

In order to have a better understanding of the concepts have a glance over some of the landmark judgments given by our Courts according to the Consumer Protection Act, 1986 which is now repealed but the guidelines laid down in those cases helped in framing the new Consumer Protection Act, 2019.

  • The Delhi High Court while examining the concept of advertisement decided the case of,

 Horlicks Ltd. v. Zydus Wellness Products Ltd., 2020 SCC Online Del 873

The High Court passed an interim order restraining Zydus from telecasting its advertisement comparing Complan to Horlicks on the grounds that the same was misleading and disparaging. The Court relied on various judgments on misleading advertisements, disparagement and law governing publication of advertisements on television. Major decisions were:

Dabur (India) Ltd. v.  Colortek (Meghalaya) (P) Ltd., 2010 SCC Online Del 391

The Delhi High Court culled out the principles governing disparagement in the advertisements and held:

On the basis of the law laid down by the Supreme Court, the guiding principles for us should be the following:

(i) An advertisement is commercial speech and is protected by Article 19(1)(a) of the Constitution.

(ii) An advertisement must not be false, misleading, unfair or deceptive.

(iii) Of course, there would be some grey areas but these need not necessarily be taken as serious representations of fact but only as glorifying one’s product.

To this extent, in our opinion, the protection of Article 19(1)(a) of the Constitution is available. However, if an advertisement extends beyond the grey areas and becomes a false, misleading, unfair or deceptive advertisement, it would certainly not have the benefit of any protection.

 Pepsi Co. Inc. v. Hindustan Coca Cola Ltd.,2003 SCC Online Del 802

In Pepsi Co. it was held that certain factors had to be kept in mind while deciding the question of disparagement. Those factors were:

(i) Intent of the commercial,

(ii) Manner of the commercial, and

(iii) Story line of the commercial and the message sought to be conveyed.

These factors were amplified or restated in the following terms:

“(1) The intent of the advertisement – this can be understood from its story line and the message sought to be conveyed.

(2) The overall effect of the advertisement – does it promote the advertiser’s product or does it disparage or denigrate a rival product?

In this context it must be kept in mind that while promoting its product, the advertiser may, while comparing it with a rival or a competing product, make an unfavorable comparison but that might not necessarily affect the story line and message of the advertised product or have that as its overall effect.

(3) The manner of advertising – is the comparison by and large truthful or does it falsely denigrate or disparage a rival product? While truthful disparagement is permissible, untruthful disparagement is not permissible.”

Drugs and Cosmetics Act 1940

Drugs Enquiry Committee was appointed by the Government in 1931 under the chairmanship of Colonel R.N.Copra to have control over the import, manufacture and sale of drugs. Thus Finally, to control the import, manufacture, distribution and sale of drugs and cosmetics, the Drugs and Cosmetics Act was passed on 10th April 1940 by the Indian Legislature.

The drug is an essential commodity and is required to be regulated in terms of its import, manufacture, sale and distribution. The Central Government and State Government are charged with the responsibility of providing the drugs of desired quality to needy patients and in order to ensure this primary obligation of the Government, the network is required to be developed to
root out adulterated misbranded and spurious drugs from society.

Objective

  1. For preventing substandard drugs, probably for treatment and preserving high medical standards.
  2. For controlling the import, manufacture, distribution, and sale of drugs and cosmetics by licensing.
  3. Ensuring that the manufacture, distribution, and sale of drugs and cosmetics are done by qualified persons only.
  4. For controlling the manufacture, and sale of Ayurvedic, Siddha, and Unani drugs.
  5. Establishment of Drugs Technical Advisory Board (DTAB) and Drugs Consultive Committees (DCC) for Allopathic and Allied drugs and Cosmetics.

Salient features of the Drugs and Cosmetics Act

The Act has made a significant effort toward regulating the pharmaceutical industry in India and hence ensuring the protection of the health and safety of the public. Some of the salient features of the Act can be summed up as follows:

  1. The maximum penalty is life imprisonment and a fine of Rs. 10 lakhs or three times the confiscated goods’ value, whichever is greater.
  2. Other gazette officers, in addition to officers from the Drug Controller’s Office, are authorised to initiate prosecution under the Act; some of the offences are cognizable and non-bailable;
  3. Specialised courts for the trial of offences covered by the Act;
  4. Provision for the aggregation of minor offences.

Definitions

1. Drug( Sec.3)

(i) All medicines for internal or external use of human beings or animals and substances used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals including, preparations applied on human body for the purpose of repelling insects like mosquitoes.
(ii) The substances other than food which may affect the structure or any function of the human body or used for the destruction of insects or vermin which cause disease in human beings or animals as specified from time to time by the Central Government by notification in the Official Gazette.
(iii) The substances used as components of a drug including, empty gelatin capsules.
(iv) The devices used for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette after consultation with the Drugs Technical Advisory Board (DTAB).

Cosmetic

It means any article intended to be sprayed, poured, rubbed or sprinkled on, introduced into, or applied to the human body or any part for cleansing, beautifying, promoting attractiveness or altering the appearance. It also includes any articles intended for use as a component of cosmetics.

Ayurvedic, Siddha or Unani Drugs

These include all medicines used for internal or external purposes or used in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals and manufactured exclusively in accordance with the formulae described in the authoritative books of Ayurvedic, Siddha and Unani Tibby Systems of Medicines specified in the First Schedule to the Drugs and Cosmetics Act, 1940.

Gudakhu

It is a tobacco product used for rubbing against human teeth. It contains tobacco powder, lime and molasses along with red mineral matter. It is a cosmetic within the provisions of the Act.

Patent or Proprietary Medicine

It means:
(i) In relation to Ayurvedic, Siddha or Unani System of Medicine, all formulations containing only such ingredients mentioned in the formulae described in the authoritative books of Ayurvedic, Siddha or Unani System of Medicine specified in First Schedule to the Act but do not include the medicine .administered by parenteral route.
(ii) In relation to any other system of medicine including, allopathic, a drug presented in a form ready for internal or external administration of human beings or animals and which is not included for the time being in the editions of Indian Pharmacopoeia or any other Pharmacopoeia.

Misbranded Drug (Sec. 9)

A drug is considered a misbranded drug:
(i) if it is not labelled in the prescribed manner,
or
(ii) if it is so coloured, coated, powdered or polished that damage is concealed or it is made to appear of better or greater therapeutic value than it really is, or
(iii) if the label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or gives misleading information.

Adulterated Drug (Sec.9A)

A drug is considered to be adulterated:
(i) if it consists in whole or in part of any filthy, putrid, or decomposed substance, or
(ii) if it has been prepared, packed or stored under poor sanitary conditions whereby, it may have been contaminated with filth and rendered injurious to health, or
(iii) if the container of the drug is composed in whole or in part of any poisonous substance which may render the contents injurious to health, or
(iv) if it contains a colour other than the one which is prescribed, or
(v) if the drug contains any harmful or toxic substance which may render it injurious to health, or
(vi) if the drug is admixed with any substance so as to reduce its quality or strength.

Manufacture in relation to Drugs or cosmetics.


Any process fully or partly used for making, altering, ornamenting, finishing packing, labelling, breaking up or otherwise treating or adopting any drug/cosmetic with a view to its sale or distribution but, does not include the compounding or dispensing of any drug or the packing of any drug or cosmetic in the ordinary course of retail business.

Spurious Drug (SEC.9B)


A drug is deemed to be a spurious drug:
(i) if it is imported under a name which belongs to another drug, or
(ii) if it is an imitation of or a substitute for another drug or if it resembles another drug in a manner likely to deceive or bears upon it or its label or container the name of another drug, or
(iii) if it has been substituted wholly or in part by another drug substance, or
(iv) if it claims to be the product of a manufacturer or company of whom it is not truly a product.

Misbranded Cosmetic(Sec.9C)

A cosmetic shall be deemed to be misbranded:
(i) if it contains a colour which is not prescribed, or
(ii) if it is not labelled in the prescribed manner, or
(iii) if the label or container or anything accompanying the cosmetic bears any statement which is false or misleading.

Spurious Cosmetic(Sec.9D)

A cosmetic shall be deemed to be spurious:
(i) if it is imported under a name which belongs to another cosmetic, or
(ii) if it is an imitation of or a substitute for another cosmetic; resembles another cosmetic in a manner likely to deceive, or bears upon it or upon its label or container the name of another cosmetic, or
(iii) if the label or container bears the name of an individual or a company purporting to be the manufacturer of the cosmetic which individual or company is fictitious or does not exist, or
(iv) if it purports to be the product of a manufacturer of whom it is not truly a product. Schedules to the Act and Rules [2]
There are two Schedules to the Act and 35 Schedules to the Rules.

The Schedules to the Act

First Schedule: It comprises the list of books of references for Ayurvedic, Siddha and Unani medicines. There are 57 books of Ayurveda, 30 books of Siddha and 13 Unani Tibb systems listed in the Schedule which are used for different formulations in accordance with the provisions of the Act.

Second Schedule: It comprises the standards to be complied with for imported drugs, manufacture of drugs, their sale, stocking and storage etc.

Drug Technical Advisory Board (DTAB) :

Drugs Technical Advisory Board is constituted by Central Government and its works to advise the Central Government and State Government on technical matters(Advise technical bases) It is a statutory board established by the Central Government under the provisions of this Act to advise the Central Government and State Governments on all technical matters pertaining to the Act, as well as to establish guidelines for types of formulations as and when requested by the Central Government. It is a technical advisory body composed of members who are ex-officio, nominated, and elected. The DTAB has a total of 18 members who represent various aspects of the pharmacy and medical professions in the country. The Chairman of the DTAB is the Director General of Medical and Health Services, Government of India, and the Member Secretary is the Drugs Controller General of India. The DTAB’s headquarters are located at the ministry of Health and Family Welfare, Government of India, Nirman Bhavan, New Delhi.

Drugs Consultative Committee (DCC) 

It is the Advisory Body appointed by the central government under Section 7 to advise the central and state governments, as well as the DTAB, on matters pertaining to the uniform implementation of DCA and Rules provisions. The DCC is made up of two representatives nominated by the central government and one representative each from the state government and the union territory. The state government or union territory usually appoints the Director of Drug Control Administration or Drug Controller of the State to this Council.

Central Drug Laboratory (CDL)

The Act directed the establishment of a Central Drug Laboratory (CDL) under Section 6 in Kolkata, and it will be headed by a director appointed by the central government. It is the “Statutory Analytical Laboratory for drugs and cosmetics under DCA whose decision with regards to analysis is final in the court of law.” 

Functions of the Central Drug Laboratory

The CDL is responsible for performing various functions, which are:

  1. It analyses drug and cosmetic samples sent by customs collectors and different courts.
  2. As directed by the central government, it advises the central government, state governments, and union territories on drug and cosmetic analysis aspects, and it also undertakes analytical work of a particular nature for samples sent by the central government and state governments.
  3. It may accept samples for analysis in exchange for a fee from private parties, consumer organisations, and so on.
  4. It is involved in research for the development of newer drug and cosmetic analysis techniques.


Drug Inspector :

In relation to any drug or cosmetic, Drug Inspector appointed by Central Government or State Government under section 21; or
In relation to Ayurvedic, Siddha or Unani systems of Medicine, a Drug Inspector appointed by the Central Government or State Government

Inspection of drugs and cosmetics:

The central and state governments are empowered to nominate inspectors for the purposes of inspection of drugs and cosmetics, having the necessary qualifications, in various areas with such powers and obligations as may be prescribed. However, it is not possible to nominate any person who has any financial interest in importing, producing or selling drugs or cosmetics as an inspector.

Role of an Inspector, powers and the procedure of Inspection:

Here, every Inspector is deemed to be a public servant within the meaning of section 21 IPC and is officially subordinate to the authority, specified by the appointing government. According to section 22 of the act, which defines the powers of inspectors, they have multifarious powers including the power to inspect, conduct searches, examine samples, call records etc. They can, therefore, inspect any premises wherein any drug or cosmetic is being manufactured, sold, stocked or exhibited or offered for sale or distribution or where any other related activity is being taken with respect to them. Further, an inspector can, on a reasonable belief, search any person who may have secreted any drug or cosmetic or enter and search any place on a similar belief. Moreover, the provisions of Cr.P.C. apply to any such search or seizure as they apply to any search or seizure made under the authority of a warrant issued under section 94 of the Code.
 

The Procedure of Inspection has been defined under section 23 of the act, it explains the different courses of inspection for different scenarios. Such as the procedure for taking a sample of a drug or cosmetic for the purpose of test or analysis, where the sample is taken from manufacturing premises and where an Inspector conducts a search of a person, place or vehicle regarding any secreted drugs or cosmetics. After all the aforementioned prerequisites are covered under the procedure of Inspection, Section 25 requires a government analyst to whom a sample of any drug or cosmetic has to be submitted. And, the same shall be received by any person or any recognized consumer association.

Penalties under the Drugs and Cosmetics Act, of 1940 

The offences and penalties under the Act can be summed up as follows:

  • Any adulterated or counterfeit drug or cosmetic imported into the nation in contravention of the Act’s requirements is punishable by up to three years in prison and a fine of up to 5,000 rupees.
  • Any medicine or cosmetic other than the one mentioned in the above point that is illegally imported is subject to a six-month prison sentence, a fine of Rs. 500.00, or both.
  • Any medication or cosmetic imported in violation of the terms of a notification issued under Section 10 A is punished by up to three years in prison or a fine of Rs. 5000.00

CASE LAWS

Sri G Ramesh Reddy vs The State By Drugs Inspector SC held that The judge, reaffirmed rulings in earlier cases of a similar kind, holding that a director may not be involved in a company’s daily operations. As a result, the director cannot be immediately implicated simply because of his position unless there is prima facie evidence that the director performed a specific act that led to the commission of the crime.

Court held in Commissioner of Central Excise, Calcutta v. Sharma Chemical Works reported in 2003 (5) SCC 60 has also disapproved the approach of the Department in holding that the product was a cosmetic only because it was not sold by chemists or under doctors prescription. This, according to the decision, does not by itself lead to the conclusion that it is not a medicament. The Court reaffirmed the test as categorically laid down in Shree Baidyanath, namely, that the burden of proof that a product is classifiable under a particular tariff head is on the revenue and must be discharged by proving that it is so understood by consumers of the product or in common parlance. See also Meghdoot v. Commisisoner of Central Excise : 2004 (174) ELT 14 (S.C.).”

In the case of Commissioner of C. Ex., Calcutta-IV vs. Pandit D.P. Sharma reported in 2003 (154) ELT 324 (SC), the question was whether ‘Himtaj Oil‘ is a Ayurvedic medicament or not classifiable under sub-heading 3003.30 or a ‘perfumed hair oil’ classifiable under sub-heading 3305.10. Even though reliance had been placed upon the authority of this Court in Shree Baidyanath Ayurved Bhavan’ case (supra), this Court negatived an argument that the product would not be considered to be a drug because it was not prescribed by a medical practitioner and was one which could be used for a long period of time. It was held that the test was to see what persons using the product understand it to be. On the basis of evidence produced by the manufacturer that the common man understood the product as a medicine it was held that the product was a medicament.

The basis of the show cause notices was the decision of this Court in Shree Baidyanath Ayurved Bhavan Ltd. vs. Collector of Central Excise, Indore reported in 1996 (9) SCC 402 and the tests allegedly laid down in that decision for determining whether a product should be classified under Chapter 33 or Chapter 30.

The two tests according to the show cause notice for determining whether a product was classifiable as a pharmaceutical product under Chapter 30 of the Central Excise Tariff were (1) Whether the products are being used daily and are sold without prescription by a medical practitioner; and (2) whether the products are available in General Store Department / Grocery shops. The department’s case in the show cause notice is that as these two tests were not fulfilled the product failed to come within the prescription of pharmaceutical products in Chapter 30.

Real Estate Regulatory Authority Act 2016 (RERA)

Real Estate Regulatory Authority, well known by the name of RERA came into corporeality under the RERA Act 2016 (Real Estate Regulation & Development Act). The RERA Act was put forward with the central aim of protecting property buyers from lopsided and at the same time boosting up the real estate transactions. The official bill associated with the Act was passed by the Rajya Sabha in 2016 on 10th March. Although it came into effect from 1st May 2016. Initially, the bill embraced 52 sections followed by the introduction of 92 sections under the RERA Act.

The rest of the sections came into the workforce from the next financial year in May 2017. RERA is a new domain and for better understanding, you have a lot to explore. In this well-curated guide, we have covered every minute detail that orients around the Real Estate Act 2016 including the RERA meaning, RERA agent registration, benefits of RERA, RERA no, RERA rules for maintenance charges, RERA official website, and much more. Keep scrolling to know everything about the RERA Act, 2016.

Objective of the Act

  1. Enhance transparency and accountability in real estate and housing transactions.
  2. Promote growth through efficient project execution and standardization.
  3. Promote growth through efficient project execution and standardization.
  4. Boost domestic and foreign investment in the real estate sector.
  5. Enhance transparency and accountability in real estate and housing transactions.•Enhance transparency and accountability in real estate and housing transactions.
  6. Promote growth through efficient project execution and standardization.

Importance

RERA offers an array of benefits to agents, promoters, and homebuyers. It somehow turned the table by offering immense distinct benefits to the real estate domain. If you are looking for Why is RERA important then here are the foremost reasons to justify its importance: 

Security

As per the Real Estate Regulation and Development Act 2016, a notable amount that is 70 percent from the buyer as well as the investors will be held back within a discrete account. Further this amount is granted to the builders for specific purposes such as construction or other costs associated with land. Regardless of your position i.e., developer or constructor, you are permitted to access at max 10 percent of the mortgage cost in terms of advance payment. This amount is sanctioned prior to signing the final agreement. 

Transparency

Constructors are obliged to capitulate all original documents associated with the undertaken projects. However, the builders aren’t allowed to make any sort of changes within the agreed plans especially without the buyer’s consent.

Unbiasedness

RERA have enlightened the developers with the fact that they have to sell all properties thoroughly drew on the carpet area. Considering the property’s super built-up area is outdated, If the RERA approved project somehow gets delayed, the buyers are accredited to ask for the entire paid amount that was initially invested in the property. The buyer is entitled to get their investment back in terms of monthly investments. 

Quality

The constructor has to mandatorily rectify any sort of issue that the buyer faces within five years of the property purchase. Additionally, the builder has to rectify the issue in a limited time frame that is 30 days counting from the day when the complaint was made. 

Authorisation

A regulator isn’t allowed to advertise, construct, sell, or even book any plot without actually getting registered with the RERA regulator. After registering yourself as a regulator, every advertisement made for specific investments will be allotted with a unique number. It will be distinct for every project and will be generated by RERA.

FEATURES

  1. Establish the Real Estate Regulatory Authority (RERA) for regulation and promotion of the real estate sector.
  2. Ensure sale of plot, apartment of building or sale of real estate project, in an efficient and transparent manner
  3. Ensure protection the interest of consumers in the real estate sector
  4. Establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions.
  5. Regulates transactions between buyers and promoters of residential real estate projects
  6. Residential real estate projects, with some exceptions, need to be registered with RERAs
  7. Promoters cannot book or offer projects for sale without registering them.
  8. Real estate agents dealing in these projects also need to register with RERAs
  9. Amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project.
  10. Right to Legal Representation on behalf of client by Company Secretaries or chartered accountants or cost accountants or legal practitioners
  11. Imposes stringent penalty on promoter, real estate agent and also prescribes imprisonment.

Impact of RERA Act 2016

After the establishment of the Act, the sale deed registration of a RERA approved project can’t be put forward through the sub-registrar office. Initially you have to get Occupancy Certificates also called Completion RERA Certificates. Before its existence, these registrations used to take place without any cross checks.

It used to occur without Occupancy Certificates. No one was actually worried about the infused legal consequences. Even after the RERA Act implications, people aren’t restricting their inappropriate sale deed registrations. Here are certain impacts of the Real Estate Regulation and Development Act 2016:

  • Decreased number of launched projects as the involved parties will be more indulged in understanding the impact of the Regulation and Development Act. However, the genuine promoters will get huge benefits from this Act as they won’t have to face unbiased competition. 
  • Unauthentic builders will diminish because they will eventually fail to cope with the new RERA guidelines and won’t be able to sustain within the real estate market.
  • The thirty-two sections added within the Act aim to encourage the overall financial discipline of the real estate sector.
  • After the implementation of the RERA Act, the developers became bound to follow listed formalities to make any sort of change in the existing project. It may result in a short-term chaos, but the overall significance will be bet-fit for long run. It will help to generate buyers’ interest to invest more in the real estate domain. 

Advantages of RERA (Real Estate Development and Regulation Act)2016

  1. Increased FDI
  2. Customer management
  3. Timely completion of the project
  4. Project planning
  5. Transparency
  6. Reduction in litigation

RERA approval and its benefits

Some of the important RERA compliances are:

  • Informing allottees about any minor addition or alteration.
  • Consent of 2/3rd allottees about any other addition or alteration.
  • No launch or advertisement before registration with RERA
  • Consent of 2/3rd allottees for transferring majority rights to 3rd party.
  • Sharing information project plan, layout, government approvals, land title status, sub-contractors.
  • Increased assertion on the timely completion of projects and delivery to the consumer.
  • An increase in the quality of construction due to a defect liability period of five years.
  • Formation of RWA within specified time or 3 months after majority of units have been sold.

The most positive aspect of this Act is that it provides a unified legal regime for the purchase of flats; apartments, etc., and seeks to standardise the practice across the country. Below are certain key highlights of the Act:

Establishment of the regulatory authority: The absence of a proper regulator (like the Securities Exchange Board of India for the capital markets) in the real estate sector, was long felt. The Act establishes Real Estate Regulatory Authority in each state and union territory. Its functions include protection of the interests of the stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. To prevent time lags, the authority has been mandated to dispose applications within a maximum period of 60 days; and the same may be extended only if a reason is recorded for the delay. Further, the Real Estate Appellate Authority (REAT) shall be the appropriate forum for appeals.

Compulsory registration: According to the central act, every real estate project (where the total area to be developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be registered with its respective state’s RERA. Existing projects where the completion certificate (CC) or occupancy certificate (OC) has not been issued, are also required to comply with the registration requirements under the Act. While applying for registration, promoters are required to provide detailed information on the project e.g. land status, details of the promoter, approvals, schedule of completion, etc. Only when registration is completed and other approvals (construction related) are in place, can the project be marketed.

Reserve account: One of the primary reasons for delay of projects was that funds collected from one project, would invariably be diverted to fund new, different projects. To prevent such a diversion, promoters are now required to park 70% of all project receivables into a separate reserve account. The proceeds of such account can only be used towards land and construction expenses and will be required to be certified by a professional.

Continual disclosures by promoters: After the implementation of the Act, home buyers will be able to monitor the progress of the project on the RERA website since promoters will be required to make periodic submissions to the regulator regarding the progress of the project.

Title representation: Promoters are now required to make a positive warranty on his right title and interest on the land, which can be used later against him by the home buyer, should any title defect be discovered. Additionally, they are required to obtain insurance against the title and construction of the projects, proceeds of which shall go to the allottee upon execution of the agreement of sale.

Standardization of sale agreement: The Act prescribes a standard model sale agreement to be entered into between promoters and home buyers. Typically, promoters insert punitive clauses against home buyers which penalised them for any default while similar defaults by the promoter attracted negligible or no penalty. Such penal clauses could well be a thing of the past and home buyers can look forward to more balanced agreements in the future.

Penalty: To ensure that violation of the Act is not taken lightly, stiff monetary penalty (up to 10% of the project cost) and imprisonment has been prescribed against violators.

RERA Benefits

IndustryDeveloper  Buyer  Agents
Project efficiency and robust project delivery  Common and best practices  Significant buyers protection.Consolidation of sector (due to mandatory state registration)  
Standardization and quality  Increase efficiency  Quality products and timely delivery  Increased transparency  
Enhance confidence of investors  Consolidation of sector  Balanced agreements and treatment  Increased efficiency  
Attract higher investments and PE funding  Higher investment  Transparency – sale based on carpet area  Minimum litigation by adopting best practices  
Regulated EnvironmentIncrease in organized funding.Transparency – sale based on carpet area   
Governance and  transparency     
Case Laws:
1. Rakesh Kumar Gupta Vs. Ansal API (2017) The RERA Act aims to protect the allottees first and only then the builders and promoters. But there have been instances, where the builders and promoters have to be protected due to a multitude of reasons. The present case relates to an instance where the allottee delayed in the possession of the property by 45 days. This cost the promoter some expenses on maintenance which was huge.
2. Jitendra Jagdish Tulsiani vs. Lavasa Corporation Ltd (2018) The contention of the present case relates to a specific type of transfer of property-lease. RERA Act does not specifically mention what type of transfer comes under its jurisdiction. Therefore, the authorities themselves dismissed the above-mentioned petition. Ratio Decidendi: RERA Act is applicable with the transfer of immoveable property and the regulation of the same. Leasing is a type of transfer and it would come under the ambit of the RERA Act.

RERA impact real estate agents

Under the Real Estate (Regulation and Development) Act (RERA), real estate agents will need to register themselves, to be able to facilitate a transaction. The broker segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally been unorganized and unregulated. “It will bring a lot of accountability in the industry and the ones who believe in professional and transparent business, will reap all the benefits. Now, the agents will have a much larger and responsible role to perform, as they will have to disclose all the appropriate information to the customer and even help them chose a RERA-compliant developer,” says Sam Chopra, founder and chairman of RE/MAX India. With RERA in force,  brokers cannot promise any amenities or services that are not mentioned in the documents. Moreover, they will have to provide all information and documents to the home buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced, unprofessional, fly-by-night operators, as brokers not following the guidelines will face hefty penalty or jail or both.

Which projects can get RERA approval?

  • Commercial and residential projects including plotted development.
  • Projects measuring more than 500 sq mts or 8 units.
  • Projects without Completion Certificate, before commencement of the Act.
  • The project is only for the purpose of renovation / repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
  • Each phase is to be treated as standalone real estate project requiring fresh registration.

How to register projects under RERA?

  • Authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specification, plan of development work, proposed facilities, Proforma allotment letter, agreement for sale and conveyance deed to be given when
  • Applying for project registration with RERA.
  • Mandatory registration of new and existing projects with RERA before launch.
  • Registration of agents/brokers with RERA.
  • Dispute resolution within 6 months at RERA and RERA appellate tribunals.
  • Separate registration of different phases of a single projects.
  • Developers to share details of projects launched in last 5 years with status and reason for delay with RERA.
  • Timely updating of RERA website.
  • Maximum 1 year extension in case of delay due to no fault of developer.
  • Annual audit of project accounts by a CA.
  • Conveyance deed for common area in favour of RWA.
  • Construction and land title insurance.
  • Project completion time period.

What information does a builder need to provide under RERA

  • Number, type and carpet area of apartments.
  • Consent from affected allottees for any major addition or alteration.
  • Quarterly updating of RERA website with details such as unsold inventory and pending approvals.
  • Project completion time frame.
  • No false statements or commitments in advertisement.
  • No arbitrary cancellation of units by promoter.

What happens if builder delays possession, as per RERA?

Under Section 18 of the RERA Act, if the possession of the property is delayed on the part of the promoter, a consumer can terminate the agreement and request for refund. The promoter must return the entire amount paid by the consumer with interest. The Section 18 also allows a consumer to continue with the project and claim compensation from the developer for every month of delay until the possession of property.

The rate of interest payable by the developer and the format of such complaint are specified under the RERA Rules that vary from state to state. Consumers can file a complaint against the developer in case of delay in possession under Section 31 of the Act. According to Section 31, any aggrieved person may file a complaint with the regulatory authority for violations of the said act. The complaint can be filed by home buyer as well as Association of Allottees.

How to file a complaint under RERA?

Digbijoy Bhowmik, head of policy, RICS, explains, “Complaints can be filed under Section 31 of the Real Estate (Regulation and Development) Act, 2016, either with the Real Estate Regulatory Authority or the adjudicating officer. Such complaints may be against promoters, allottees and/or real estate agents. Most state government rules, made appurtenant to the RERA, have laid out the procedure and form, in which such applications can be made.

Applicable penalties under RERA

For Buyers

OffencePenalty
Non-compliance with Real Estate Regulatory AuthorityThe seller is liable to pay penalty which is usually 5% of the project cost  
Non-compliance with – Appellate TribunalUp to one year of imprisonment or penalty that is 10% of the project cost or both are applicable in certain case

For Promoters

OffencePenalty
Non-registration10 percent of project cost as penalty 
Providing false informationPercent of project cost as penalty 
Violation of lawsThree years’ of imprisonment/ 10 percent of property cost as penalty , or even both for specific case scenarios 

For Agents

OffencePenalty
Non-registration of real estate projectsINR 10,000 on daily basis to 5 percent of the project cost
Non-compliance- RERADaily penalty which can raise to 5 percent of the project value
Non-compliance – Appellate TribunalOne year of imprisonment/ 10 percent of the project cost as penalty and both in certain cases

Can RERA overturn ‘forced consent’ agreements procured by builders for changing project plans?

Section 14 of the RERA prohibits developers from making any amendments to the sanctioned plan of the project, without theprior consent of the home buyers. As per Section 14, any alteration in the plans and specifications of an individual apartment, is permitted only with the prior written consent of the concerned home buyer. On the other hand, alterations in the layout of the entire project and the common areas of the building, cannot be effected unless the developer obtains the prior written consent of two-thirds of all the home buyers (or allottees) in the project. The Bombay High Court, in the case of Madhuvihar Cooperative Housing Society and others vs Jayantilal Investments and others, 2010 (6) Bom CR 517, had the opportunity to interpret Section 7 of the Maharashtra Ownership of Flats Act (MOFA), 1963, which is similar to Section 14 of the RERA. It held that the consent of a home buyer must be an ‘informed consent’, i.e., one which is freely given after the flat purchaser is placed on notice by complete and full disclosure of the project or scheme that the builder plans to implement. Further, the consent must be specific and relatable to a particular project or scheme of the developer which is intended. The bench further added that blanket or general consents, obtained in advance by developers, particularly during signing of agreements, were legally invalid. As Section 7 of the MOFA is analogous to Section 14 of the RERA, the ruling of the Madhuvihar Cooperative Housing Society case will hold good for all cases that come before the Real Estate Regulatory Authority and the Real Estate Appellate Tribunal.

Rights and duties of Allottees:

Rights

Right to obtain information about the project		 Duties

Duty to make payment as agreed.
Right to know the stage-wise time schedule of completion of the projectDuty to pay interest in case of late payment
Right to claim possession of property as declared by the promoterDuty to participate towards the formation of an association or society or cooperative society of the allottees .
Right to refund and compensation if promoter fails to give the possession.Duty to take physical possession of property within· a period of two months of the occupancy certificate

Drawbacks and Apprehensions:

1). Who will ensure how much is 70% of the total project cost? Also, the state government can alter this amount to less than 70%.

2). The Bill mandates that 70% of the amount collected from buyers of a project be used only for construction of that project. In certain cases, the cost of construction could be less than 70% and the cost of land more than 30% of the total amount collected.  This implies that part of the funds collected could remain unutilized, necessitating some financing from other sources. This could raise the project cost.

3). Builders argue that it will be difficult to sell units on the basis of carpet area in an under-construction property in which many units have been already sold on the basis of super built-up area.

4). Developers say that the main cause of delay is slow approvals from government agencies.

5). Under the Act, if the registration is revoked by the regulatory authority, who will complete the construction?

6). A few consumer activists believe that the real estate regulator may not be effective in the matter of handling complaints. The complaints are already being handled by consumer courts. So they say that there is nothing new. Also, the consumer courts were not effective in the redressal of complaints. They express the same reservations about the regulatory authority also.

7).  Does not address important issues like the lengthy process for project approvals, lack of clear land titles, the prevalence of black money etc

8). Since state-level governance is very uneven, this will work patchily. Some states will set up efficient Tribunals and Regulatory Boards; others will not.

9). Many politicians have interests in real estate. That could work both for, and against the concepts of the new Act. Some smart and not-so-crooked politicians will back the new act and use it to accelerate activity. Others will try to hold up the new legislation or subvert it.

Bureau of Indian Standards (BIS)

The Act was originally enacted in 1986 and the BIS came into existence in December 1986. A new act (to replace the BIS Act of 1986) was introduced in the Lok Sabha in 2015, which was subsequently passed by both houses of the Parliament. The new act came into force in 2017.

Bureau of Indian Standards (hereinafter referred to as ‘BIS’) is a statutory body established under the Bureau of Indian Standards Act, 2016 (hereinafter referred to as the ‘Act’). BIS prescribes the standards for covering goods and systems under the standardization regime. Under the Act, BIS has been identified as the ‘National Standards Body of India’ and is regulated under the Ministry of Consumer Affairs, Food & Public Distribution, and Government of India.

Features 

The Act establishes a Bureau for the purpose of standardization, marking and certification of articles and processes.  

  • The Act allows the union government to make it compulsory for certain notified goods, processes, articles, etc. to carry the standard mark in the public interest, safety of the environment, national security or to prevent unfair trade practices.
  • The BIS Act also allows many types of simplified conformity assessment schemes and this includes self-declaration of conformity against a standard which will offer simplified options to manufacturers to adhere to the standards and get a certificate of conformity. 
  • According to the Act, the central government has the power to appoint any agency or authority (apart from the BIS) to verify the conformity of product & services and issue the conformity certificates.
  • Additionally, there is a provision in the Act for the recall or repair for products that bear the Standard Mark but do not conform to the required Indian standard.
  • The Act has identified new areas for standardisation. These include:
    • Medical devices
    • Alternate fuels
    • Smart cities
    • E-mobility
    • New and renewable energy
    • Digital technologies (Artificial Intelligence, Industry 4.0, Blockchain, etc.)
  • The BIS (Hallmarking) Regulations, 2018 makes the hallmarking of precious metals jewellery and artefacts such as gold and silver mandatory.
  • The penalty for improper use of the Indian standard mark will be a fine of up to Rs. 5 lakh.
  • The Act also prescribes penalties for the following points:
  • The improper use of the standard mark by testing and marking centres
  • Manufacturing or selling goods & articles that do not carry a standard mark and have been mandated to do so, etc.

Objectives

To harmonize development of standardization, labeling, and quality certification of items.

To give a push to standardisation and quality control in order to promote industry growth and develop while also meeting customer requirements.

To organise technical committees of specialists for the goal of developing such standards.

Functions

BIS through its core activities of standardization and conformity assessment, has been benefiting the economy by providing safe and reliable and quality goods; minimizing health hazards to consumers; protecting the environment, promoting exports and imports substitute; controlling proliferation of varieties etc. The standards and certification scheme of BIS apart from benefitting the consumers and industry also support various public policies especially in areas of product safety, consumer protection, food safety, environment protection, building and construction, etc.

BIS carries out various activities like that of standards formulation, product certification, hallmarking, laboratory services, training services, etc. However, the primary and most recognized objective of BIS is to formulate and prescribe the standards for products for their certification. BIS also ensures the harmonious development of the activities of standardization, marking and quality certification of goods.

schemes of certification

BIS Compulsory Registration Scheme (CRS)

The Ministry of Electronics and Information Technology (MeitY) notified the Compulsory Registration Scheme (CRS) in 2012. It passed the ‘Electronics and Information Technology Goods (Requirement for Compulsory Registration) Order, 2012’ for 15 categories of electronics items. However, it added more electronic and information technology goods under the CRS subsequently.

Under CRS, the manufacturers of the products listed under the CRS have to obtain the BIS certification for those products mandatorily. As per the 2012 order passed by MeitY, a person cannot manufacture, distribute, or store goods for sale or import that do not conform to the Indian Standards specified in the order and bear the standard mark with a BIS unique registration number.

The BIS grants the licence to the manufacturers of the electronic products to use or apply the standard mark with a unique R-number. The manufacturers can obtain BIS certification under the CRS through registration based on self-declaration of conformity for each product by filing Form-I under smart registration.

ISI Mark Scheme Registration for Domestic Manufacturers

The manufacturers of products that come under the compulsory BIS certification (Scheme-I) have to register through the normal procedure. However, certain products that require compulsory certification are also included in the list of products that come under simplified registration. When the compulsory BIS certification products are listed under the products eligible for simplified registration, the manufacturers of such products should register them under the simplified procedure and not through the normal procedure. 

Under the normal BIS certification procedure, the manufacturer of the compulsory BIS certification product has to submit the BIS registration application to the authorised officer of the jurisdiction where the manufacturing unit is located. The manufacturer of the products must submit Form V under Scheme-I (BIS registration application) along with the required documents and requisite fees. 

The BIS officers will conduct a preliminary factory evaluation after receiving the BIS certification application. The BIS officers will collect samples of the products, test them and obtain an independent testing report. When the products meet the confirmed quality standards, the BIS certification/license is provided. Under this procedure, the BIS license is granted within 4-6 months after submitting the registration application.

Product Certification Scheme – Applicable for tangible products; with some products classified under compulsory certification.

The BIS introduced the simplified procedure to give pace to the process of granting the BIS license. The manufacturers of the products listed under the simplified procedure must mandatorily apply for BIS certification under the simplified procedure. The BIS license is granted within 30 days of submitting the BIS certification application under this simplified procedure.

The manufacturer must submit the BIS registration application, the required documents, self-evaluation reports and test reports of product samples obtained from the approved lab to the respective BIS officer. When the test report meets the standard requirements, the BIS officer will verify the factory and grant BIS certification within 30 days of submitting the BIS application.

The simplified procedure is applicable for grant of BIS license of ‘All India First License’ cases and all the products listed under the simplified procedure except in the following circumstances:

  • Products like valves, cylinders, cement, etc., where it is necessary to obtain approval from another statutory authority
  • All those products where BIS license is issued on the basis of factory testing

System Certification Scheme – Applicable for systems/ process

Foreign Manufacturers Certification Scheme – Applicable for foreign manufacturers who are engaged in the sale of their products in India. The BIS grants the specially designed ISI mark for overseas applicants or foreign manufacturers under the Foreign Manufacturers Certification Scheme (FMCS) within six months. They can obtain BIS certification for products under the Compulsory Registration Scheme (CRS) and compulsory BIS certification scheme (Scheme-I).

The BIS introduced the FMCS in 2000 to enable overseas applicants or foreign manufacturers to obtain and use the standard ISI mark on their products. The foreign manufacturers have to set up a branch office in India with the required permissions and nominate an agent in India.

The foreign applicant must submit the BIS registration application form with the BIS in the prescribed format, the requisite documents and fees. The BIS will conduct a preliminary inspection of the product at the applicant’s manufacturing and testing units and collect samples for independent testing. 

When the BIS is satisfied that the products meet the standard requirements, it shall grant the BIS certification. When the BIS certification is granted to the foreign manufacturer or overseas applicants, they should pay an annual minimum marking fee and annual license fee.

Hallmarking – Applicable for articles made from precious metals like gold and silver

ECO Mark Scheme – Applicable for products affecting or related to the environment. The BIS also provides certification to environmentally friendly products under the ECO mark scheme. Under this scheme, BIS categorises all environmental products that conform to the basic requirements under Indian Standards. The BIS grants an ‘ECO’ logo along with an ‘ISI Mark’ for the products. 

The logo and mark indicate that the product meets certain environmental criteria and the relevant Indian Standards quality requirements. A single mark is granted to the products, which will be the combination of the ISI mark and the ECO logo. 

The procedure to get the BIS license under the ECO mark scheme is similar to obtaining a BIS license for domestic manufacturers under the normal or simplified registration procedure. When a manufacturer already has a valid BIS certification mark for a product and wants to get a new product covered under the ECO mark scheme, the manufacturer has to make a specific request to the BIS. The BIS will take the required steps for grant of BIS license under the ECO mark scheme.

Obtaining the BIS registration is essentially voluntary in nature. However, BIS requires compulsory certification for products which impact the health and safety of consumers. Mandatory certification scheme is bifurcated into ISI (Indian Standards Institute) Mark Scheme and Compulsory Certification Scheme (collectively referred to as ‘Standard Mark’). ISI Mark Scheme is applicable for products such as cement, electrical appliances, baby food, etc. and Compulsory Certification is required mostly for IT/ electronic products. For procurement of the BIS certificate, the manufacturer has to ensure that the product is in compliance with the ‘Indian Standard’.

‘Indian Standard’ has been defined under the Act as the standard set and published by the BIS, with regards to any article or process which is indicative of the quality and specification of such article or process and also includes: (i) Any standard recognized by the BIS and (ii) Any standard established and published, or recognized, by the ISI and which is in force immediately before the date of establishment of BIS.

Role of BIS

The Bureau of Indian Standards Act 2016 further proposes to increase the scope of BIS by allowing theUnion government to make the standard mark mandatory for certain specified products, items, and processes.

It also enables for a variety of compliance assessment methodologies that are in line with best world w standards.

According to the Bureau of Indian Standards Act 2016 provisions, the Union Government has made step increase the ease of doing business. It will also allow any other agency with the requisite certification to conduct conformity assessments against Indian standards. The law would also allow for self-certification and market monitoring

BIS- Offences, Punishment and Enforcement Activity

The Act empowers BIS to pass orders granting, suspending or rejecting a license. Any violation of the provisions of the Act and the non-compliance with the standards set by BIS is punishable with either imprisonment for a period of one year or with a fine extending up to INR 50,000.

BIS also carries out enforcement activity to curb the use of Standard Mark or its imitation by unscrupulous traders and manufacturers not holding a valid BIS license. The objective behind these enforcement activities is to protect consumers from being misled about quality of products that are marked with the BIS Standard Mark. Enforcement raids, which include search and seizure operations are carried out against traders and manufacturers on the basis of intelligence collected regarding misuse of the Standard Mark and where required, prosecution cases are filed in the court of law.

BIS Registration Procedure

The BIS registration procedure generally involves the licensing process and surveillance process. The following steps are involved under the licensing process:

  • The manufacturers submit the BIS registration application 
  • The BIS officer will visit the factory for a preliminary inspection
  • After the inspection, the product samples will be tested 
  • After completion of the evaluation, the BIS officer will derive the final result 

After the inspection process, the inspecting officer will conduct the surveillance process to conduct a complete survey of the factory. The following steps are involved under the surveillance process:

  • The inspecting authority will visit the factory to testify the test results
  • The inspecting officer will send the samples to the independent labs
  • The test report will give feedback or brief the complaint on the investigation
  • The performance review report will be prepared
  • Once the report is reviewed, the BIS license is granted

Documents Required for BIS Certification

The documents vary depending on the type of BIS registration scheme. However, the general required documents that a manufacturer needs to submit to the BIS for obtaining BIS certification are as follows:

  • Name and address proof of office and factory
  • Document showing the establishment of the manufacturing unit such as Incorporation Certificate or Registration Certificate or Memorandum of Association, etc.
  • MSME/SSI certificate, if applicable
  • Manufacturing process flow covering all processes of manufacture (from raw material to finished product stage)
  • Manufacturing machinery list along with the machinery details
  • Details of outsourcing of manufacturing operation, if applicable
  • A detailed list of testing facilities and testing equipment list
  • Copies of valid calibration certificates of testing equipment 
  • Third-party laboratory test report as per Indian Standards, if applicable
  • Layout plan of the factory premises and location plan of the factory
  • In-house or independent test report, if applicable
  • In case the application is signed by the authorised signatory, the authorisation letter from CEO in the authorised signatory name
  • In case of a foreign manufacturer or overseas applicant, nomination details of Indian agent and nomination form

Validity of BIS Certification

The BIS certification issued by the BIS is valid for two years. The manufacturers can renew the BIS certification when there is no change in the concerned products and prescribed standards. The renewed BIS certificate will be valid for at least one year and a maximum of five years.

The renewal of the BIS certificate is subject to an annual advance minimum marking fee and license fee. However, if the renewal application of the BIS certification is filed after the expiry period of the certificate, the applicant needs to pay a late fee of Rs.5000.

Benefits of BIS Certification

The BIS registration provides the following benefits:

  • Ensures quality standards as BIS registration products are bound to follow a certain standard while manufacturing the goods
  • Gives authenticity to BIS certified products as they deliver high-quality performance and reliability
  • BIS certified products minimise environmental risks as BIS has prohibited the usage of certain chemicals and materials under its prescribed norms
  • BIS registration is granted after testing the samples of the products in BIS set-up laboratories, ensuring quality inspection and high-quality of products

Conclusion

BIS is responsible for the quality check of various products and services across 14 different sectors. The quality certification of these products safeguard people from several health and safety hazards. In the era of globalization and the growing importance of ensuring conformity with standards in global trade, BIS has huge significance and responsibility. The conformity assessment procedures have become increasingly important in the modern day and hence, BIS plays a critical role in strengthening Indian trade and exports. The Product Certification Scheme is regarded as one of the biggest around the world, with around 26500 licensees covering no less than 900 products.BIS Certification is fundamental to the use of the mark on their products.

FSSAI

The Food Safety and Standards Authority of India (FSSAI)

On the 23rd of August, 2006 the government of India passed the FSS Act or the food safety and standards act which changed the way food safety and food handling practices are being monitored in India.

The Act empowered by the government of India has been divided into 12 Chapters which discuss in detail the impact, regulations, authorities that the Act carries with it to empower the safety of food products. The Food Safety and Standards Authority of India (FSSAI) was set up in 2008 for the proper monitoring of food hygiene and quality in India. It was functional from 2011 and ever since has been responsible for managing food safety in our country.  The FSSAI has its headquarters at New Delhi. The authority also has 6 regional offices located in Delhi, Guwahati, Mumbai, Kolkata, Cochin, and Chennai. The organisation has been set up as per the FSS Act 2006, until which different acts and laws were being administered under the various ministries of Government. 

The Act basically covers all kinds of food that is consumed by human beings. Most food items including unprocessed/semi-processed/processed foods are covered under this act. It also includes genetically engineered foods, all kinds of substances and water that is used in the preparation of food. 

Packaged juices, drinking water, infant food, alcohol-based drinks, chewing gums, and all other primary foods are covered by the FSSAI Act.

Here, it is important to mention that, the Act considers live animals or products of agriculture, horticulture or animal husbandry as food only when it has already passed on from the hands of a farmer. 

Functions of FSSAI

Following functions are performed by the Food Safety and Standards Authority of India:

  • Setting Rules and Guidelines – FSSAI sets up rules and guidelines which need to be followed by all food manufacturing companies, keeping into consideration hygiene and food safety
  • Granting License – To pursue any food related business, the owner needs to get a certificate and license with the permission of FSSAI
  • Test the Standard of Food – the standard and quality of food manufactured by all companies registered under FSSAI, is done by the organisation themselves
  • Regular Audits – Proper inspection is done for food-producing and manufacturing companies to ensure the standards are at par with the guidelines
  • Spreading Food Safety Awareness – It is the responsibility of FSSAI to spread awareness and inform the citizens about the importance of safe and hygienic food consumption
  • Maintain Records and Data – FSSAI also has the responsibility to maintain proper records and data of all the registered organisations. Any violation of rules prescribed by FSSAI can lead to the termination of the license
  • Keeping the Government Updated – Any food safety-related threat must be informed to the Government authorities for further action. Also, assist them in framing food standard policies

Challenges for FSSAI

There are certain challenges which are to be overcome by FSSAI:

  • Proper laboratories for testing the quality of food need to be organised by the Organisation
  • Arranging qualified manpower to test and approve the standards of food being manufactured
  • Re-evaluating the regulations and terms as per international standards
  • Gaining funds to get advanced technologies 
  • Ensuring proper licensing of every food manufacturing individual or business

Once the Government of India and FSSAI overcome these shortcomings, the organisation is capable of regulating and maintaining the food safety standards in all parts of the country. 

Applicability:

The Food Safety and Standards Act is applicable to all persons who are manufacturing, producing, selling or handling food that is meant for human consumption. 

The Food Safety and Standards Act does not discriminate between a small hawker or a huge Food Business Operator and makes it mandatory for everyone handling food to keep it safe and fit for human consumption. The Act does not categorize individual sellers or small business and universally names everyone as Food Business Operator. Therefore, this Act is applicable to every person that is in the food business. 

The above statements, however, has an exception. As mentioned earlier, the Act is not applicable to farmers even though they are producers of food. Agricultural produce, animal husbandry, etc. are not covered directly under the scope of this Act and thus excludes farmers.  The Act comes into play only when the product leaves the hands of the farmers and reaches the next person. 

  1. The Food Safety and Standards Act has a few regulations mentioned which need to be followed by Food Business Operators  
  2. The regulations under the act basically allow or prohibit the inclusion of substances in food that is meant for human consumption
  3. The Food Safety and Standards Act expressly prohibits the inclusion of harmful substances such as insecticides in food
  4. The Act also mentions clearly that no article of food shall contain any contaminant, naturally occurring toxic substances or toxins, hormones, heavy metals, insecticide and pesticide residues, veterinary drug residues, antibiotic residues, solvent residues, pharmacologically active substances, and microbiological counts in excess of tolerance limit as mentioned in the regulations as well
  5. The act mentions that, if it is a novel, genetically-modified article of food, irradiated food, organic food, foods for special dietary uses, functional foods, nutraceuticals, health supplements, proprietary foods, etc. it cannot be manufactured, distributed, sold or imported into India. Only those that the regulations and provisions of the Food Safety and Standards Act allow can be possible
  6. The Act mandates special labeling for different kinds of food and Food Business Operators are to adhere to these requirements strictly.

Penalties :

Under the act, there are different penalties for different kinds of non-compliance by Food Business Operators. The provisions of the Act include laws where offenses like manufacturing, storing or selling misbranded or substandard food is punishable with a fine. If the offenses are more serious, it could lead to imprisonment as well.  If consumption of unsafe/hazardous/toxic food results in any severe injury or death of a consumer, the Act makes it clear that the Food Business Operator has to pay a hefty fine for the same. 

  1. Some examples of penalties under the act include – 
  2. Penalty for substandard food – Up to 5 lakh rupees 
  3. Misleading advertisement or false guarantee – up to 10 lakh rupees 
  4. Unsanitary or Unhygienic manufacturing of food – 1 lakh rupees 
  5. If FBO are in possession of adulterant not injurious to health – 2 lakh rupees 
  6. If FBO possess adulterant injurious to health – 10 lakh rupees 
  7. Food found unsafe – imprisonment up to 6 months and a fine of up to 1 lakh rupees 
  8. Unsafe food results in grievous injury –  6 years imprisonment and a fine of up to 5 lakh rupees
  9. If unsafe food results in death – not less than 7 years imprisonment and fine up to 10 lakh rupees.
  10. The Act, notably, also provides for a penalty for Food Safety Officer for acting against a Food Business Operator on a false premise. 

Responsibilities of a Food Business Operator: 

  1. If you are a Food Business Operator, your first and foremost duty before beginning a Food business is to obtain a Food License to practice in the food business. It is mandated under the Act that any person planning to start a food business must obtain a license from the appropriate or designated authority. The Food Safety and Standards Act does not make it mandatory for petty business owners or manufacturers to obtain a license before starting a business. But the Act clearly mentions that everyone — even if they are a small or a large business —  must take care of the safety and standard of the food that is being prepared and sold. Therefore, the food must be safe and wholesome for the purposes of consumption, irrespective of who is involved in its manufacture or all kinds of handling.  
  2. The Act makes it mandatory for all Food Business Operators to ensure the safety of food. All the Food Business Operators must comply with the different rules of safety and include the nutritional content as specified by the Act. The Food Business Operators are also required to follow other regulations such as the labeling standards mentioned by the Act. 

Important Initiatives by FSSAI

Many important initiatives have also been taken by FSSAI keeping in mind food safety and standards. Following are few of these important initiatives:

  • Eat Right India – The aim is not just to provide food to one and all, but to provide quality food to everyone. With this initiative, FSSAI intends to make good quality food accessible to every citizen of the country
  • Clean Street Food – This involves training the street food vendors and making them aware of the violations as per the FSS Act 2006. This will also help in the social and economic upliftment of street food vendors
  • Diet4Life – This is another initiative taken by FSSAI, to spread awareness about metabolic disorders.
  • Save Food, Share Food, Share Joy – Encouraging people to avoid food wastage and promote food donation. Through this, FSSAI intends to connect food-collecting agencies with the food-producing companies and share the food with the ones in need

Apart from this, the first-ever World Food Safety Day was celebrated on June 7, 2019, by FSSAI, acknowledging the contribution of states, food businesses, and individuals in maintaining food safety.

Types of FSSAI Registration

FSSAI registration is based on the business types, turnover and capacity of production. Depending upon the installed capacity and turnover, FBOs are eligible for license such as basic license, central license, and state license.

  • FSSAI Basic Registration – FBOs having a turnover of less than Rs.12 lakh p.a must obtain FSSAI basic registration. The FSSAI registration form that the applicant has to fill to obtain FSSAI basic registration is Form A.
  • FSSAI State License – FBOs having a turnover of more than Rs.12 lakh p.a and less than Rs.20 crore p.a must obtain the FSSAI state license. The FSSAI registration form that the applicant has to fill to obtain an FSSAI state license is Form B.
  • FSSAI Central License – FBOs having a turnover of more than Rs.20 crore p.a must obtain the FSSAI central license. The FSSAI registration form that the applicant has to fill to obtain FSSAI central license is Form- B.

FSSAI Registration Eligibility

FSSAI Registration is a basic license and it is required for all the FBOs involved in the small-scale food business. This category covers the following businesses:

  • Any FBO with an annual turnover of not more than Rs. 12 lakh.
  • Petty retailer dealing in food products.
  • Any person who manufactures or sells any food article by himself.
  • Food sale is done by the temporary stall holder.
  • Any individual who distributes food in any religious or social gathering except a caterer.
  • Small-scale or cottage industries dealing in the food business.

Documents Required For Obtaining the FSSAI Registration/License

The following documents are required to obtain FSSAI basic registration, FSSAI state license and FSSAI central license:

  • Photo identity proof of the food business operators.
  • Business constitution certificate, i.e. partnership deed, certificate of incorporation, shop and establishment licence or other business registration certificate.
  • Proof of possession of business premises, i.e. rental agreement, NOC from the owner of the rented premises, utility bills etc.
  • Food safety management system plan.
  • List of food products manufactured or processed.
  • Bank account information.
  • Supporting documents (if required) like NOC by Municipality or Panchayat, Health NOC, copy of License from the manufacturer, etc.

Apart from the above-mentioned general documents, certain specific documents are required for obtaining the FSSAI state license and FSSAI central license. The specific documents required to obtain the FSSAI state license are:

  • Form B duly completed and signed
  • Plan of the processing unit showing the dimensions and operation-wise area allocation   
  • List of Directors/ Partners/ Proprietor with address, contact details, and photo ID
  • Name and list of equipment and machinery used with the number and installed capacity
  • Authority letter from manufacturer nominated a responsible person name and address
  • Analysis report of water to be used in the process to confirm the portability
  • Copy of certificate obtained under Coop Act 1861/Multi-State Coop Act 2002

Apart from the general license, the following specific documents are required to obtain FSSAI central license:

  • Form B duly completed and signed
  • Plan of the processing unit showing the dimensions and operation-wise area allocation   
  • List of Directors/ Partners/ Proprietor with address, contact details, and photo ID
  • Name and list of equipment and machinery used with the number and installed capacity
  • Authority letter from manufacturer nominated a responsible person name and address
  • Analysis report of water to be used in the process to confirm the portability
  • Source of raw material for milk, meat etc
  • Recall plan wherever applicable
  • Ministry of Commerce Certificate for 100% EOU
  • NOC/PA document issued by FSSAI
  • IE code document issued by DGFT
  • Form IX
  • Certificate from Ministry of Tourism
  • Supporting document for proof of turnover and transportation
  • Declaration form

Obtaining a license can provide the food business with legal benefits, build goodwill, ensure food safety, create consumer awareness, and assist in business expansion. Also, it helps regulate, manufacture, storage, distribution and sale of import food. It is easy to obtain funds from investors when an FBO has FSSAI registration.

The FSSAI logo on the food products ensures the quality of food to the customers. The FSSAI registration number displayed on the food premises indicate that the premises comply with the hygiene and quality standards.

Procedure for Obtaining FSSAI Registration Online

  • FBOs can obtain FSSAI registration online by filling and submitting the FSSAI registration form, i.e. Form A (application for Registration) or Form B (application for State and Central License) on the FoSCos portal. The FBOs can also register offline by submitting Form A or Form B to the Food and Safety Department.
  • The FSSAI registration form must be accompanied by the required documents. The documents must be uploaded online on the FoSCos portal at the time of filling the application or submitted to the Food and Safety Department along with the application physically.
  • The FSSAI registration form can be accepted or it may be rejected by the Department within 7 days from the date of receipt of an application either physically or online through the FoSCoS portal. If the application is rejected it has to be intimated to the applicant in writing.
  • The Department will scrutinise the documents submitted.
  • The Department may conduct an inspection of the food premises, before granting the FSSAI registration certificate, if necessary.
  • If the Department is satisfied that the FBO meets all the required criteria, then it will grant an FSSAI registration certificate with the registration number and the photo of the applicant email ID. The applicant can also download the FSSAI registration certificate by logging into the FoSCoS portal.
  • FBO should prominently display the certificate of FSSAI registration at the place of business during business hours.

LAWFUL OBJECT

Section 23 of the Indian Contract Act Section 23 of the Indian Contract Act, 1872 (“the Act”), clarifies three matters, for example, the consideration of an agreement, the purpose of the contract, and the actual agreement. Article 23 imposes restrictions on individual freedoms by entering into agreements and places the rights of such persons in the higher concepts of public policy and the other provisions mentioned under it. 

The Word “Object” used in Section 23 indicates and implies “purpose” and does not mean significance in the same sense as “consideration“. Therefore, unless the consideration of the agreement may be legal and valid, that will not prevent the contract from being invalid if the purpose of the agreement is invalid. Section 23 limits the courts as the section may be guided by thought or motive, for the purpose of exchange or transaction is basically not for reasons leading to equality. Although the consideration is provided under Section 2 (d) 1 of the Act, no official definition of the word ‘object’ exists. An “object” can better be understood as the “purpose” or “design” of a contract. Thus, when a loan is taken under a contract for the purpose of marriage, in that case, the marriage is the purpose of the contract.

Lawful Object and Lawful Consideration– Section 23 Order .The purpose or consideration of an agreement is absolutely valid unless it falls into any of the categories provided below-

  •  It is forbidden by the Law
  • A consideration or object violation of the provision of Law
  • Deceptive thoughts or something
  • A consideration or object includes an injury to a person or property
  • The court considers it immoral
  • The consideration or intent is contrary to public policy Trading with enemy

If the contract’s goal or the consideration it includes is legally prohibited, there is no legal justification for objecting to it. They then inevitably become illegitimate. As a result, the agreement will no longer be valid. Acts that are expressly prohibited by law are included in the category of illegal consideration of an object. This comprises those who are formally in charge of establishing laws and regulations. However, it will not function if the regulations imposed by such bodies do not adhere to the law.

example.     A licensed Department of Forestry for cutting local grass. Departmental officials told him he could not pass such an interest on to anyone else. But the Forest Law does not have that law. So A sold his interest in B and the contract was held legally.

A Consideration or Object Violation of the Provision of Law

In other words, if the contractor seeks to subvert the intent of the law. The stated contract will be void if the courts determine that the parties’ true motivation was to avoid the legal requirements. Give the example of A and B entering into a contract, where A is the debtor and B refuses to accept a limit. However, this is done to undermine the Restrictions Act’s goals so that the contract could be declared void by the courts for violating the law.

Deceptive Thoughts or Something

A legitimate consideration or object can never be deceptive. Agreements entered into that contain the presumption of illicit fraud or material misconduct. Suppose that A decides to sell goods to B and smuggles them out of the country. This is false work as it is useless. Now B cannot reimburse under the law if A does not fulfill his promise.

 A Consideration or Object includes an Injury to a Person or Property

In this case, the word injury refers to acts of violence, harassment, coercion, assault, etc. An assault agreement, for example, falls under this section. Thus, when X borrowed Rupees 1000 from Y and made a bond promising to work for Y without pay for two years and in the event of any failure allowed to pay high interest on the principal amount, the contract was held in vain. as it involved the injury of someone in the contract. 

The Court considers it ImmoralThe term “immorality”

 is often translated in conjunction with the norms and definitions of the Courts. The Supreme Court has given a limited definition of the word “immorality” and has interpreted it as a strong reference to “forms of sexual immorality”. Thus, betting agreements cannot be considered immoral. Explaining the scope of the Gherulal Parakh v Mahadeodas AIR 1959 SC 781, the Supreme Court cited certain agreements in which the consideration or object was immoral: the promise of marriage for consideration, a contract for the sale of goods for the prostitute to continue her work, a contract. facilitating divorce, future settlement agreement, etc. A good example of an agreement that facilitates divorce is when a person, X, gives Y to Y with the promise that Y will divorce Z, and later marry X. Here if Y does not separate from Z, A cannot continue legal action against him. Y refund. The very nature of this contract is immoral and will therefore be regarded as null and void. 

The Consideration or Intent is Contrary to Public Policy

The word ‘enforce’ is broad in scope and is governed by precursors. In the case of Ratanchand Hirachand v Askar Nawaz Jung AIR 1976 AP 112 , the Court defined the definition of “public policy” as the development of the public good on the one hand and the prevention of public evil on the other. When the marriage was dissolved on the condition that the wife would not claim maintenance or maintenance money but later the wife applied for maintenance, the Court held that the terms of the divorce would not prevent the court from granting maintenance as this right was part of it. of a larger “right to life” and would be against public policy to seize it. Thus, anything that harms the public interest or the welfare of the community falls under this category. However, it is not possible to provide a complete list of assumptions against public policy. It varies from time to time. 

Trading with Enemy

An agreement made during the conflict with an unidentified adversary without the Indian government’s approval is illegitimate since it goes against civil policy. A commercial embargo and a ban on interactions with enemy citizens result from the declaration of war. The hostile world’s damaging trade is inherent to war itself.

Conclusion   

It is impossible to overstate the value of respect and legitimacy in a successful agreement. The agreement is null and void if both the object and the consideration are unlawful. We acknowledge that our efforts to pursue our rights under this Agreement in a court of law will be futile until further notice unless our Agreement is subject to the requirements of Sections 10, 23, and 24 of the Indian Contract Act, 1872. This is due to the fact that a covenant like that would not be considered sacrosanct by the law. Therefore, we must be very careful when entering into agreements to guarantee that they are not merely “agreements,” but rather that they comply with the law’s standards so that in the case of a collision, we will be protected.