M.B. Shah, J. President
The question in this petition is: Whether the consumers/purchasers of ornaments of precious metal (gold) should be left at the mercy of the traders who according to Bureau of Indian Standard’s (BIS) report, sell 90% of articles which are not in conformity with the purity declared in the bills /cash memos? This is stated on affidavit filed on behalf of the BIS. Imagine the situation where the cash memos do not mention anything about purity!
The amount involved in the dispute is very small, but the matter raises a vital question with regard to purity of ornaments of a precious metal (gold). Petitioner- Akhil Bhartiya Upbhokta Congress, a Registered Consumer Organization (Madhya Pradesh), has raised important questions with regard to the right of consumers in regard to sale and purchase of gold ornaments. It is contended that under Consumer Protection Act, 1986, consumers have (i) the right to be informed about the quality, quantity, potency, purity, standard and price of goods to protect the consumer against unfair trade practice; (ii) the right to be heard and to be assured that consumers interests will receive due consideration at appropriate forums; and (iii) the right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers.
It is contended that unless there is a proper trade direction to declare the purity/quality of the ornaments, illiterate or literate consumers are bound to be exploited and there is large-scale exploitation in such trade/business. Business in precious metal is increasing day by day and the consumers are exploited to the fullest extent.
Considering the importance of the issue involved and its wide spread impact, notices were issued to the (i) Union of India, (ii) Reserve Bank of India and (iii) Director General, Bureau of Indian Standards, to find out any reasonable method for protecting the consumers, who customarily and traditionally purchase the golden ornaments.
Affidavit by Reserve Bank of India.
On behalf of the Reserve Bank of India, an affidavit is filed by the General Manager in the Reserve Bank of India, Department of External Investments Operations, Central Office, Mumbai, wherein it is stated that Reserve Bank of India has set up a Standing Committee on Gold and Precious Metals under the chairmanship of an Executive Director and comprising Chief General Manager of Department of External Investments and Operations (DEIO), Department of Banking Operations and Development (DBOD), Exchange Control Department (ECD) (recently renamed as Foreign Exchange Department (FED), an official each from the Ministry of Commerce and Ministry of Finance, to deliberate and advise the Government on emerging issues pertaining to gold and precious metals. The Standing Committee recommended that an organization with the relevant infrastructure and competence should monitor and control the purity of gold jewellery sold in India. As a result, in January 1999, the BIS was designated by the Government of India as the agency to evolve and operate the hallmarking scheme for gold jewellery. The BIS launched the hallmarking scheme for gold jewellery on 11th April 2000. The main objective of the hallmarking scheme for gold is to protect the public against the fraud of adulteration and low caratage and to make manufacturers maintain standards for fineness and purity. It is also pointed out that although the hallmarking scheme has made some headway, it was felt that the consumer awareness level need to be improved and the Committee set up under the Chairmanship of the Secretary (Ministry of Consumer Affairs) to examine the ways and means of securing consumer interest in the marketing of gold products.
Affidavit by the Bureau of Indian Standards (BIS).
An affidavit has been filed by Mr.A.S.Jamkhindikar, who is working as Scientist – E & Director with Bureau of Indian Standards, wherein, he has, inter alia stated that:
a) The Bureau of Indian Standards [BIS] is a body corporate constituted under the BIS Act, 1986, for harmonious development of the activities of standardization, marking and quality certification of goods and for matters connected therewith or incidental thereto. As such the functions of the Bureau are, inter alia, to establish, publish and promote in such manner as may be prescribed, the Indian Standard, in relation to any article or process. Most of these standards are voluntary in nature, whereas, the Central Government can, after consulting the Bureau, in the public interest, and by publication in the Official Gazette, notify any article or process, by way of mandatory requirement, to conform to the Indian Standard, failing which penal consequences as provided under the BIS Act, would automatically follow.
b) The Bureau has so far established more than 17,000 Indian Standards, out of which only approximately 100 standards are mandatory under various enactments and Government orders. As far as Hallmarking of Gold Jewellery is concerned, the same is optional. The BIS Precious Metal Sectional Committee (MTD 10) has formulated and published the following Indian Standards on Gold and Gold Alloys :
1. IS1417 Grades of Gold and Gold Alloys, Jewellery / Artefacts – Fineness and Marking.
2. IS 1418 Assaying Gold in Gold Bullion, Gold alloys and Gold Jewellery/Artefacts – Cupellation (Fire Assay Method).
3. IS 2790 Guidelines for manufacture of 23, 22, 21, 18, 14 and 9 carat gold alloys.
4. IS 3095 Gold solders for use in manufacture of jewellery.
c) At this stage it is worth mentioning that the role and functions of the Bureau under the BIS Act 1986 as an enforcement agency, are extremely limited to misuse of the Indian Standard Mark under Section 11, misuse of the name of the Bureau under Section 12, failure to comply with the mandatory requirement of Indian Standard and Mark under Section 14, and breach of the terms and conditions of licence under Section 15, of the BIS Act. Hence I do not admit the contention of the learned Amicus Curie as reproduced in the order dated 28.04.2004 of this Hon’ble Commission that it was the function of the Bureau to provide for necessary rules and regulations so that the consumers are not exploited by the traders by selling ornaments without disclosing its purity. In fact the Bureau neither has the powers to formulate any rules or regulations, or the enforcement machinery or infrastructure to carry out any search and seizure operations, investigations, arrests, recording of statements of witnesses etc. as are conferred on law enforcing machinery of the State such as the Police force, except to the limited extent of carrying out inspections and seizures as provided under the Act, for which also the Bureau’s Inspecting Officers have to rely heavily on assistance from the Police.
d) The Bureau had in press release, marked Annexure E to the Submissions of the Amicus Curiae, referred to the Convention on the Control and marking of Articles of Precious Metals signed in 1972 by some of the European countries (with some other European countries as observers apart from Canada). The objective of the Convention signed in Vienna by the European countries was to facilitate trade in precious metal articles while at the same time maintaining fair trade and consumer protection justified by the particular nature of these articles. For that purpose a Common Control Marks (CCM) indicating fineness, was introduced. Each member country agreed to allow goods marked with CCM to be imported without further testing and marketing if such articles would normally qualify for a domestic market.
e) The Convention thus introduced the first international hallmark ever. It enabled national assay offices of the signatory countries to apply for a Common Control Mark (CCM) to articles of gold, silver and platinum after they have tested the fineness of the alloys used in the articles. However, the marking of articles of precious metals with the CCM is carried out on a voluntary basis. Compulsory hallmarking is not required from the contracting States to the Convention. The purpose of the Convention was thus primarily to facilitate free trade in the precious metals and articles made there from between member countries, on account of the fact that earlier, different European legislations on precious metals control hampered the cross border trade seriously.
f) Government of India launched the Gold Bond Scheme in 1993. Almost concurrently, a Committee within the RBI made a comprehensive set of recommendations for an integrated national gold policy. One of the recommendations of the Committee was that hallmarking of gold jewellery should be introduced in the country at the earliest as a measure of consumer protection. The Standing Committee on Gold and Precious Metals in RBI, which is chaired by the Governor, RBI and has participation from Ministries of Finance and Commerce of the Government of India, in its 9th meeting held in January 1999 at Mumbai, identified Bureau of Indian Standards (BIS) as the sole agency in India to operate Hallmarking Scheme of Gold Jewellery.
g) Bureau of Indian Standards, launched its long term scheme in Hallmarking to encourage the voluntary hallmarking of gold jewellery in April 2000. Known as BIS Certification Scheme for Hallmarking of Gold Jewellery, it is backed by Reserve Bank of India, with four declared objectives, namely –
1. Protection of the consumer against irregular gold quality;
2. Support for export of gold jewellery;
3. Development of gold based financial products to assist in mobilizing dormant gold reserves in private hands; and
4. Development of India as a reliable gold market center commensurate with its status as the word’s largest national gold market.
h) BIS Hallmarking scheme is based on the technical criteria set by the international Convention on the Control and Marking of Articles of Precious Metals (Vienna Convention, 1972), though India is not a contracting party to the Vienna Convention. The scheme is voluntary, and there is no obligation on Certified Jewellers to hallmark all the gold jewellery that they retail, fabricate or wholesale. The BIS Scheme involves the recognition of independent entities and organizations to act as Assaying and Hallmarking Centres, and the certified jewellers who can use the centers for hallmarking purposes. During the last four years BIS has recognized 17 Hallmarking centers (in 10 cities) and certified over 750 Jewellers. Although most Certified Jewellers are retailers, manufactures and wholesalers are also certified. Plain gold Jewellery has been hallmarked since June 2000, and gold jewellery incorporating diamonds since September 2001.
i) In the latter half of 2001/ beginning of 2002, the Bureau jointly with reputed consumer organizations, carried out a general market survey in 8 major cities in India, and purchased jewellery articles from 15 jewellers in each city, and sent the same for testing at the MMTC Assaying Centre, New Delhi. Out of total 120 samples, only 14 confirmed to the purity declared by the Jeweller in the bills/cash memos issued to the official of the Bureau who had purchased the jewellery article, posing as an ordinary consumer. The Bureau in the circumstances, filed complaints initially against 31 Jewellers spread all over the country in whose cases the purity was short by more than 15% of the declared caratage, before the MRTP Commission, New Delhi which took cognizance of the complaints and issued notices to the concerned Jewellers.”
To contain and control the alarming situation in the jewellery trade in the country, the Government of India, Ministry of Consumer Affairs constituted a Committee, which had held its meeting on 22.09.2003 when it was decided to collect data on various aspects. The Terms of Reference are as under:
“(i) Ways and Means to cover the gold jewellery transacted in Rural Areas which may be around 60-70% of the total trade.
(ii) Creation of infrastructure with respect to availability of Hallmarking Centres at least one in each City/District of the country (as compared to 17 centres throughout the country at present)
(iii) Appropriate legislation under which Hallmarking can be made mandatory, if so required.
(iv) Identification of suitable enforcing/implementing Agency in the country.
(v) Incentives for encouraging Jewellers to join the Hallmarking Scheme.
(vi) Ways and means of bringing consumer awareness about benefits of purchasing hallmarked jewellery.”
Further, in the report of dated 13.4.2004 of Bureau of Indian Standards, it is stated that :
“Culturally, the Indian people have a great fascination for gold. It should be recognized that in India, in common with other Asian Countries, gold has a very important role in our cultural heritage. Gold is considered as a commodity, and not a product. Any form of gold is equal to any other form of gold. It is viewed to be homogenous and indistinguishable, having no brand or expiry date. As a result, gold demand is not price-elastic. Rather it is prosperity elastic – that is, increments in household income are generally matched by purchases of more gold.”
It is further stated that “the Indian consumer is very often a victim of irregular metal quality. A buyer, for instance, will be told that he has bought gold of 22 carats. When he goes to sell or exchange it, he discovers that the gold is actually only of 18 carats and many customers have lost money in this way. In India the emphasis is on high caratage jewellery”. It has been further stated that “on taking cognizance of these aspects the RBI Standing Committee on Gold and Precious Metals opined that introduction of a Hallmarking System would not only protect the public from fraud, but also assist exports of jewellery”. There is a reference to Convention on the Control and Marking of Articles of Precious Metals singed 1972 by number of countries. The objective of the convention was to facilitate trade in precious metal articles while at the same time maintaining fair trade and consumer protection justified by the particular nature of these articles.
There is no other affidavit filed on behalf of the Union of India. Mr. Jos Chiramel, the learned counsel appearing on behalf of the Union of India submitted that under the Consumer Protection Act, the Commission cannot give direction to the Central Government to have hallmarking or direct the Central Government to frame rules so as to control irregular business in the precious metal.
As against this, Mr. M.S. Ganesh, the learned Senior Counsel submitted that under the Consumer Protection Act, any voluntary consumer association registered under the Companies Act, 1956 [Section 2(b)ii], is entitled to file a complaint; and the complaint can be, inter alia, for unfair trade practice [Section 2(c)(i)]. Therefore, appropriate relief is required to be granted.
Affidavits filed on behalf of the BIS and the RBI in terms reveal that the hallmarking of the gold jewellery to protect the consumers is the necessity. However, there are various difficulties with regard to the introduction of hallmarking. The highlighted portion reveals that out of 120 samples of gold ornaments, only 14 conformed to the purity declared by the jeweller in the bills/cash memos issued to the official of the Bureau who had purchased the jewellery articles posing as an ordinary consumer. If this is the position it certainly indicates that approximately 90% of the jewellery sold is not as per the specification mentioned in the cash memo or the bill. If that is the situation one has to imagine what would be the fate of the ordinary consumers who are spread over all the country, and, who as a matter of customarily practice or for investment purposes, purchase golden ornaments.
It is also submitted that a Committee within the RBI made a comprehensive set of recommendations which included that hallmarking of gold jewellery should be introduced in the country at the earliest as a measure of consumer protection. Bureau of Indian Standards has also launched a scheme for voluntary hallmarking so as to protect consumers against irregular trade in golden ornaments and as a support for export of gold jewellery. This was also in recognition of the fact that India was a reliable gold market center for export also. Despite this, it was pointed out that it was not possible to have the hallmarking mandatory without the required infrastructure. It was also suggested that in such cases, action under Consumer Protection Act, 1986, can be initiated against the seller if the purity of the ornament purchased by the consumer is not of the same purity/standard as is mentioned in the bill. However, it is admitted that considering the alarming state of affairs throughout the country with regard to false representation/misrepresentation and other unfair trade practices indulged in by jewelers, consumer is at a disadvantage, but the powers, functions and jurisdiction of the Fora under the Consumer Protection Act, 1986 to deal with the nature of the case, may be clarified by a detailed and exhaustive order.
From the statements made in the affidavit filed on behalf of the Government it is apparent that a large-scale unfair trade practice in sale or purchase of precious jewellery is prevailing. Consumers are at the mercy of the jewelers. It is for the Government to protect such consumers. One of the main objectives of the Consumer Protection Act, 1986, is to see that consumer gets information with regard to quality, quantity, potency, purity, standard and price of the goods. This object of the Act is apparently frustrated. There may be some difficulties with regard to hallmarking. But, there cannot be any difficulty in issuing directions or notifications, for the time being, till the hallmarking is made compulsory, to the jewelers/gold-smiths to ‘embsoss’ a mark indicating fineness of the ornament. This would give an opportunity to the consumer to know its purity. Subsequently, at the time of sale or return of such ornaments, the consumer can bargain the repurchase price on the basis of purity mentioned thereon. Further, if the ornament is not of the same purity/quality as per the mark, then it becomes easy for the Consumer Fora to pass appropriate order. Undoubtedly, it is for the Government to see that the rights conferred under the Consumer Protection Act are not made illusory.
However, we accept the contention of the learned counsel for the Union of India that reliefs, which can be granted under the provisions of Section 14 of the Act, are limited. No doubt Section 14(f) empowers the Fora to issue an order directing the opposite party to discontinue unfair trade practice, but it would be difficult for us to grant such relief in general terms. Hence the same is not granted.
In this view of the matter we only observe that it is for the Government to protect the consumers and we, at this stage, would not pass any order in general terms as prayed for. We accept the contention that we are having limited jurisdiction. Hence, we leave it to the discretion of the Government to take appropriate action so as to give relief to the consumers as a whole and not to leave them to be victims of unfair trade practice. We add that for various reasons simplicitor awareness on the part of the consumer may not serve any purpose, and, in most of the cases, consumers, for various difficulties, are avoiding to approach the Consumer Fora.
Findings on Facts:
The case of the complainant is that he had paid Rs.2,700/- on 16.12.1997 for purchasing a gold ring having purity of 23 carat. For that purpose, respondent –jeweller had issued a cash memo. However, on the cash memo there was an endorsement to the effect that in case of return of the ornament, 80% value of the price shall be refunded. Complainant, therefore protested against such cash memo by contending that it is in violation of the provisions of the Consumer Protection Act, 1986 and the Monopolies Restrictive Trade Practice Act, 1969. To the said letter, the jeweller replied on 2.1.1998 that the statement made by the complainant that the purity of the gold used in the ring was only of 18.4 carat was incorrect and that the purity of the gold was 23 carat. It was also stated that even though the purity is 23 carat, 80% of the value of the ring was to be refunded because the remaining 20% is copper and other alloys as the same is used as connecting material (tanka). Hence, complainant filed complaint case No.15/99 before the District Forum, Bhopal contending that jeweller was adopting unfair trade practice. Similar ring was also sold to one Mr. K.L. Pandey and Ms. Urmila Pandey.
The District Forum allowed the complaint and directed the jeweller to supply 23 carat new ring to Mr.B.S.Sharma and Mr.K.L.Pandey in place of the old one and to pay a compensation of Rs.5000/- to Mr. B.S. Sharma. It also directed the jeweller to abandon all kinds of unfair trade practices in future with a direction to mention exact purity of the ornament in the cash memo sold by him.
Against that order the jeweller preferred appeal No.1630/2001 before the State Commission. By the impugned order dated 10th July, 2003, the State Commission allowed the appeal by observing that repurchase of the ring at 80% of its value of the gold was not indicative of purity of gold. While making golden ornaments some addition of other metal is necessary. In addition to this, labour charges are required to be added and the ornaments become ready for sale after proper polish. Therefore, the order of the District Forum was neither practical nor lawful.
Petitioner has challenged the aforesaid order passed by the State Commission by filing this revision. Shri Ajay Mishra, leanred Senior Counsel, appearing on behalf of the respondent submitted that the order passed by the State Commission is just and proper. A small ring was purchased by the complainant. He further submitted that the purity of gold ring was 23 carat but in addition the amount was charged for inputs like labour charges, sales tax, cost of unrecoverable linkage used to make ornament, labour required to be paid for refining and reclaiming gold, wastage or impurity developed due to use and exposure of the
Please Login To View The Full Judgment!
metal. It was pointed out that the complainant has agreed to the condition that the respondent/jeweler would repurchase the article at 80% of its value and that it does not mean that the gold used for manufacturing the ring was of 18.4 carat i.e. 80% of 23 carat. 20% of the sale value was to be deducted at the time of repurchase from the consumers for meeting the charges as mentioned above. It is also pointed out that even petitioner has filed an alleged testing report dated 27.4.2000 issued by the Gwalior Bullion Laboratory wherein the purity of gold was shown as 21 carat. No doubt, the respondent has disputed the aforesaid report by stating that a small portion of the ring purchased by B.S. Sharma was tested and that the contents of the entire ring was not tested, no affidavit of the person who gave the report was filed. No report was obtained by the District Forum as contemplated under Section 13(1)(c) of the Consumer Protection Act. Considering the cash memo, it appears that the jeweller has not stated that the golden ring which was sold, was of 80% purity. The bill only mentions that the article which was sold would be purchased at 80% of its price. This may be because of labour charges and other expenses are excluded while repurchasing the ring. Secondly, the test report upon which the complainant relies, reveals that the gold was having 21 carat (87.5%) purity. In this view of the matter, the order passed by the State Commission on facts only requires some modification. In the result, the impugned order passed by the State Commission is partly modified. In exercise of power under Section 14(f) of the Consumer Protection Act, it is directed that in future respondent-jeweller shall emboss a mark indicating its quality/purity before selling the ornaments. Secondly, we observe that simplicitor awareness on the part of the consumer will not serve any purpose. Therefore, till the hallmarking is made compulsory, Government can issue appropriate directions under the provisions of various Acts, to see that before sale of the gold/precious articles, it should contain its own identification mark of quality/purity. With these directions, the petition is disposed of. There shall be no order as to costs. We appreciate the zeal with which the petitioner has taken up the genuine issue for the benefit of the consumers at large. We also appreciate the assistance rendered and pains taken by Amicus Curiae-learned Senior Counsel, Mr. M.S. Ganesh and others.