Alternative Dispute Resolution in Consumer Disputes

Consumer claims are small in value, large in number and asymmetric in strength. The Consumer Protection Act, 2019 answers all three features by providing a summary forum, a statutory mediation channel attached to each consumer commission, and a regulator with power to act against unfair practices. Mediation under Chapter V of the Act is the first instance of a settlement mechanism built into a consumer statute in India, and its outcome is not appealable.

1. The Scheme of the 2019 Act

The Consumer Protection Act, 2019 replaced the Act of 1986 with effect from 20 July 2020. It retains the three-tier structure of District, State and National Commissions, with pecuniary limits revised by notification, and adds three features relevant to this subject: the Central Consumer Protection Authority, a right to file a complaint electronically and at the place where the consumer resides or works, and a statutory mediation channel.

Chapter V, comprising Sections 74 to 81, provides the machinery. Section 74 requires the State Government to establish a consumer mediation cell attached to each District and State Commission, and the Central Government to establish one attached to the National Commission. Section 75 provides for the empanelment of mediators, and requires the panel and the particulars of the mediators to be maintained and made available. Section 76 requires a mediator to disclose circumstances giving rise to justifiable doubts as to his independence or impartiality. Section 79 provides for the conduct of the mediation and for the recording of the settlement, and Section 80 requires the commission to pass an order recording the settlement and to dispose of the matter accordingly.

2. Why the Consumer Field Needs a Settlement Channel

• Disproportion between value and cost. A claim for a defective appliance or a deficient service is rarely worth the cost of a contested hearing with expert evidence, and settlement is often the only economically rational outcome for both sides.
• Volume. Complaints against a single service provider tend to arise in large numbers on identical facts, and a settlement framework allows them to be dealt with in batches.
• Asymmetry. The consumer faces an organisation with repeat experience of the forum, which is why the statute supplies the mediator through a cell attached to the commission rather than leaving the choice of neutral to the parties.
• Continuing relationship. Many consumer disputes concern a service that continues, such as insurance, banking, telecommunications or electricity supply, where the consumer wants the service put right rather than damages.

3. Mediation in the Consumer Commissions in Practice

The reference is made by the commission at the first hearing after admission, or later, and requires the written consent of both parties, which distinguishes it from a reference under Section 89 of the Code of Civil Procedure, 1908. The Consumer Protection (Mediation) Regulations, 2020 and the corresponding Rules govern the procedure, the qualifications and the fees of mediators, and the time within which the mediation is to be concluded. The mediator does not decide; his function is to assist the parties, and the commission retains control of the complaint throughout.

The Mediation Act, 2023 has a bearing here as well. Its Schedules amend the Consumer Protection Act, 2019 to align it with the new framework, and its overriding provision in Section 55 applies to the conduct of mediation notwithstanding anything inconsistent in other laws. The First Schedule to that Act, which lists disputes not fit for mediation, includes proceedings before certain regulators, and matters of that kind cannot be diverted into mediation even by consent.

4. The Wider Consumer Redress Architecture

The ombudsman schemes deserve particular attention because they operate before and outside the commissions. They are free to the complainant, they require the complainant to have approached the service provider first, and they produce an award binding on the institution but not ordinarily on the complainant, who retains the right to pursue other remedies. Section 42(5) of the Electricity Act, 2003 follows the same pattern, requiring every distribution licensee to establish a consumer grievance redressal forum, with an appeal to the Ombudsman appointed by the State Commission.

5. Arbitration and the Consumer

A standard form contract between a supplier and a consumer frequently contains an arbitration clause. The position taken by the National Commission and approved in practice is that such a clause does not oust the jurisdiction of the consumer fora, because the remedy under the consumer legislation is additional to and not in derogation of other remedies, and because the statute is a special beneficial law enacted for the protection of consumers. The consumer may choose the consumer forum notwithstanding the clause; the supplier cannot compel him to arbitrate. This is one of the clearest illustrations in Indian law of the principle that party autonomy yields where the bargaining power of the parties is structurally unequal.

6. Related Topics and Provisions