2006 (2) TMI 190 - SC - Customs

Supreme Court Upholds Consumer Rights: Appellants Liable for Breach of Warranty

The Supreme Court upheld the decisions of the State and National Commissions, ruling against the appellants in a case involving a malfunctioning EPABX ... Whether a stipulation in a contract of sale is a condition or a warranty depends, in each case on the construction of the contract? Held that:- It is true, where a stipulation in a contract of sale is a warranty, its breach may give use to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, but where a stipulation in a contract of sale is a condition, its breach may give rise not only to a claim for damages but also generally to a right to treat the contract as repudiated. Although in terms of sub-section (3) of Section 12 no right accrues to a purchaser to reject the goods on breach of stipulation of warranty, the same would not mean that the extent of damages cannot be equivalent to the price of the goods inasmuch as such a power has specifically been conferred upon the Commission. Keeping in view the fact that the State Commission and National Commission cannot be said to have acted without jurisdiction, we are of the opinion that no case has been made out for interference with the impugned judgment. Issues Involved:1. Deficiency in service and malfunctioning of the EPABX system supplied by the appellants.2. Breach of warranty and contractual obligations by the appellants.3. Jurisdiction and powers of the Consumer Disputes Redressal Commission.4. Remedies and compensation under the Consumer Protection Act, 1986.Issue-wise Detailed Analysis:1. Deficiency in service and malfunctioning of the EPABX system supplied by the appellants:The appellants supplied an EPABX telephone system to the respondent in March 1990, which was installed at a cost of Rs. 1,87,599/-. The system was under a one-year warranty. The respondent complained on 13-9-1990 about several defects, including frequent wrong numbers, interrupted conversations, and non-functional instruments with keypad lock systems. Despite assurances, the appellants failed to maintain a permanent resident engineer at Visakhapatnam. The State Consumer Disputes Redressal Commission found that the system was giving poor performance from the beginning, as evidenced by multiple complaints and correspondence (Exs. A-1 to A-3). The system was deemed a failure, with continuous complaints and unsatisfactory repairs.2. Breach of warranty and contractual obligations by the appellants:The appellants did not open a service center at Visakhapatnam as promised and only did so temporarily after complaints were made. The appellants argued that maintaining a separate service center was uneconomical and that they catered to service requirements from their Hyderabad office. The State Commission found that the appellants failed to fulfill their contractual obligations, as the system had not been functioning properly for an extended period, and the appellants were more focused on entering into a service contract rather than ensuring the system worked satisfactorily.3. Jurisdiction and powers of the Consumer Disputes Redressal Commission:The Consumer Protection Act, 1986, provides for better protection of consumer interests. The dispute between the parties was a 'consumer dispute' within the meaning of Section 2(e) of the Act, and there was a 'deficiency of services' as defined in Section 2(g). The State Commission and National Commission, exercising special jurisdiction, found that the deficiencies in the EPABX system started within the warranty period and continued thereafter. The commissions concluded that the appellants failed to attend to the deficiencies immediately, constituting a 'deficiency of services.'4. Remedies and compensation under the Consumer Protection Act, 1986:Section 14 of the Act empowers the Forum to issue orders to the opposite party, including replacing goods or returning the price paid by the complainant. The State Commission directed the appellants to refund Rs. 1,87,559/- with interest at 12% from the date of filing the complaint until payment, after taking back the system. The National Commission upheld this decision. The Supreme Court noted that the appellants had been attending to complaints even after the warranty period, implying an extended warranty. The appellants' conduct suggested a continued contractual obligation to maintain the system. The Court affirmed the commissions' findings and held that the appellants could not escape liability due to the expiry of the warranty period.Conclusion:The Supreme Court dismissed the appeal, affirming the orders of the State and National Commissions. The appellants were held liable for the deficiencies in the EPABX system and were directed to refund the cost with interest. The Court emphasized the broad reach of the Consumer Protection Act and the commissions' jurisdiction to award compensation for consumer grievances. No order as to costs was made.