By Tanushree Dubey
Published on: 24 September 2023 at 13:52 IST
Consumer courts in India play a pivotal role in safeguarding the rights and interests of consumers by providing them with a platform to seek remedies for issues arising from defective products, deficient services, or unfair trade practices. While consumers can seek compensation for their actual losses, there are instances when the courts may award extraordinary damages.
This article explores the concept of extraordinary damages in Indian consumer courts, the different forums available and will discuss some cases where court provided extra ordinary damages.
What are Extraordinary Damages?
Extraordinary damages, also known as punitive or exemplary damages, are awarded by courts as a means of punishing the wrongdoers and deterring them from engaging in similar conduct in the future. Unlike compensatory damages, which aim to reimburse the victim for their actual losses, punitive damages are intended to send a strong message that certain behaviour will not be tolerated. In consumer cases, extraordinary damages are awarded when there is gross negligence, willful misconduct, or a blatant disregard for consumer rights by the business or service provider.
Understanding Consumer Courts in India
Consumer Courts in India are special judicial bodies established under the Consumer Protection Act, 2019, to resolve disputes between consumers and businesses. These courts have the authority to provide remedies to consumers who have been victims of unfair trade practices or have received defective goods or deficient services.
Different Consumer Forums in India
India has a well-established system of consumer forums designed to provide redressal to consumers at various levels. These forums include:
District Consumer Disputes Redressal Forum (DCDRF):
This is the entry-level forum that handles cases involving claims up to Rs. 20 lakhs. It is located at the district level and is accessible to consumers for filing complaints related to products and services.
State Consumer Disputes Redressal Commission (SCDRC):
The SCDRC handles appeals against decisions of the DCDRF and deals with cases involving claims between Rs. 20 lakhs and Rs. 1 crore.
National Consumer Disputes Redressal Commission (NCDRC):
The NCDRC is the apex consumer court in India, handling appeals against decisions of the SCDRC. It deals with cases involving claims exceeding Rs. 1 crore.
When Can Consumer Courts Award Extraordinary Damages?
- Gross Negligence:
In cases where businesses or service providers exhibit gross negligence, consumer courts may find it necessary to award extraordinary damages. Gross negligence typically involves actions or omissions that demonstrate a severe lack of care or responsibility on the part of the business.
- Willful Misconduct
Consumer courts may award extraordinary damages when businesses or service providers engage in willful misconduct, which implies that the wrongful actions were deliberate and carried out with an intent to harm or deceive the consumer.
Awarding punitive damages in such cases serves multiple purposes. It punishes the wrongdoer for their intentional misconduct, compensates the victim for their losses, and sends a clear message to other businesses or service provider that engaging in such practices will result in severe consequences.
- Blatant Violation of Consumer Rights
Extraordinary damages may also be awarded when there is blatant violation of consumer rights that goes beyond typical instances of consumer grievances. This may involve situations where a business or service provider engages in conduct that undermines the fundamental rights of consumers.
- Repeat Offenders
Consumer courts are more likely to award extraordinary damages to businesses that are repeat offenders of unfair trade practices. This is done to send a strong message that habitual offenders will face severe consequences.
It’s important to note that the awarding of extraordinary damages is not a common occurrence and is reserved for exceptional cases where the misconduct is particularly egregious. Consumer courts carefully consider the facts and circumstances of each case before deciding whether to impose such damages.
Notable Cases where Court provided Extra Ordinary Damages
- ITC V. Aashna Roy (2023)
In this recent consumer protection case in India, a model sought Rs. 3 Crores in compensation for a “bad haircut” at a salon in the ITC Maurya Hotel, New Delhi, alleging severe negative impacts on her modelling career and mental well-being. The National Consumer Disputes Redressal Commission (NCDRC) awarded her Rs. 2 Crores, citing service deficiency, but the Supreme Court of India questioned the compensation’s proportionality.
The Supreme Court upheld the service deficiency finding but noted the lack of material evidence to substantiate the woman’s claimed losses. She failed to provide proof of her modelling assignments, income, or contracts with brands. The Court stressed the need for compensation to be based on concrete evidence, not just the claimant’s request. Exceptional damages require solid proof of the extent of harm endured.
Consequently, the Supreme Court set aside the NCDRC’s Rs. 2 Crores award and sent the case back for revaluation. It directed the woman to furnish material evidence supporting her claim for Rs. 3 Crores. The ruling underscores the importance of evidence-based compensation in consumer protection cases. It emphasizes that, once service deficiency is established, damages should align with the documented losses incurred by the consumer. This case highlights the significance of a fair and substantiated approach when determining compensation in such cases.
- Nizam Institute of Medical Sciences V. Prasanth S. Dhananka & Ors (2009)
In the case of a consumer protection lawsuit arose from an incident of medical negligence. A 20-year-old student underwent surgery at Nizam Institute of Medical Sciences (NIMS) for a chest tumour, resulting in post-operative paralysis and severe complications. The patient’s family held NIMS and the State of Andhra Pradesh accountable for negligence, citing the absence of pre-operative tests, the lack of a neurosurgeon during surgery, and unauthorized procedures.
The Supreme Court found the doctors and the hospital grossly negligent and awarded Rs. 1 crore in extraordinary damages. This compensation aimed to cover immediate and future medical expenses and address the patient’s life-altering suffering due to negligence. This case underscores the role of consumer protection laws in addressing medical negligence and highlights how extraordinary damages can be awarded when gross negligence results in severe and lasting harm.
- National Insurance Company Ltd. V.. Hindustan Safety Glass Works Ltd. & Anr., (2017)
In this case of the insurance company faced allegations of denying compensation to the insured due to damage caused by heavy rainfall within a specified period. The insurance company justified its refusal by invoking a policy clause that exempted them from liability for losses or damages occurring 12 months after the incident. In response, the insured party lodged a complaint with the National Commission under the Consumer Protection Act, 1986.
The National Commission ruled in favor of the insured party, deeming their claim actionable. It noted that the insured’s goods were covered at the time of the incident, and the claim was promptly filed the next day. The Commission rejected the insurance company’s arguments and ordered them to pay Rs. 21,05,803.89 in compensation, along with interest at a rate of 9% per annum.
This case underscores the importance of consumer protection laws in holding insurance companies accountable for honoring legitimate claims. It also exemplifies how extraordinary damages can be awarded when insurance providers fail to meet their obligations, emphasizing the significance of seeking redress through legal avenues when unjust denials occur.
- Delhi Development Authority (DDA) V. D.C. Sharma (2013)
In the case, the consumer protection lawsuit centered on a DDA plot allotment. D.C. Sharma, a government employee, paid an initial sum of Rs. 5 Lakhs in 1997 for a DDA plot. However, he later discovered that the allotted plot had already been given to someone else two years earlier due to DDA’s negligence. Sharma approached the State Consumer Forum after the District Forum dismissed his case.
The National Commission ruled in Sharma’s favour, emphasizing DDA’s failure to rectify its allotment error dating back to 1995. As a remedy, the Commission directed DDA to provide Sharma with a similar plot or compensate him with Rs. 30 Lakhs. This case highlights the significance of consumer protection laws in holding institutions accountable for their mistakes, and it illustrates how extraordinary damages can be awarded when such errors result in significant harm or inconvenience to consumers.
- Om Prakash V. Reliance General Insurance and Anr. (2017)
In this case Om Prakash’s truck was stolen, leading to a compensation claim. Despite a delay in reporting the theft, Om Prakash filed a claim with the insurance company, which approved it at first. However, the insurer later withheld the payment, citing a breach of terms and conditions regarding immediate notification of the loss.
The case progressed through consumer courts, where initially, Om Prakash’s claim was rejected. However, the Supreme Court of India ruled in his favour, emphasizing that insurance companies cannot deny claims without valid justification. The Supreme Court ordered the insurer to pay Om Prakash the original claim amount of Rs. 7,85,000/- and additional extraordinary damages of Rs. 8,35,000/- along with 8% annual interest. Furthermore, Om Prakash received a compensation of Rs. 50,000.
This landmark judgment underscores the importance of upholding the rights of insurance policyholders and ensuring fair treatment by insurers. It serves as a precedent for similar cases, highlighting the need for insurance companies to justify claim denials and fulfil their contractual obligations.
- Anil Milkhiram Goyel and Anr V. HSBC Limited
The National Consumer Disputes Redressal Commission (NCDRC) has fined Hongkong and Shanghai Banking Corporation Ltd (HSBC Ltd) Rs 15 lakh for negligence and deficient service after HSBC froze a joint savings account, resulting in declined ATM transactions and dishonoured cheques despite sufficient funds. Notably, the NCDRC recognized the exceptional harm suffered by the complainants, including mental distress and reputational damage, and awarded them Rs 15 lakh as compensation. Additionally, HSBC was directed to cover litigation costs of Rs one lakh. The freezing of the account was deemed unjustified since the complainants had updated their Know Your Customer (KYC) details, and the linked loan accounts were settled years ago. HSBC’s actions constituted a deficiency in service, justifying the substantial compensation and corrective measures imposed by the NCDRC.
Conclusion
In summary, extraordinary damages in Indian consumer courts play a vital role in rectifying grave injustices and upholding consumer rights. They are reserved for exceptional cases where gross negligence or willful misconduct by businesses or service providers cause severe harm to consumers. These damages aim to compensate not just for financial losses but also for the emotional distress and disruptions caused.
The rationale behind granting extraordinary damages is twofold: to make consumers whole again and to serve as a powerful deterrent against unethical conduct. However, these damages are not awarded arbitrarily; they require solid evidence of harm and proportionality to the offence.
In essence, extraordinary damages underscore the importance of consumer protection in India. They hold wrongdoers accountable, sending a clear message that consumer rights are non-negotiable and must be upheld.
Also Read: Landmark judgements of NCDRC in 2020 – Law Insider India