Explained: What are the laws that govern class action suits in India?

The Consumer Protection Bill, 2018 - which proposes establishment of Central Consumer Protection Authority empowered to file class action suits on behalf of consumers -was passed by Lok Sabha recently

On January 4, the Supreme Court allowed the National Consumer Disputes Redressal Commission to go ahead with a probe against Nestle India’s Maggi, thereby reviving a 2015 class action suit filed by the Indian government against the Swiss food maker. That was the first time the government had taken action under Section 12-1-D of the Consumer Protection Act, which empowers both the Centre and states to file such complaints. Aashish Aryan explains what constitutes a class action suit, its prevalence in India and related international norms.

What are the circumstances under which a class action suit can be initiated in India?

Simply stated, a class action suit is a civil suit initiated by people with respect to a public right or a private right claimed in common for themselves and for others. Such suits are also called representative suits. The people who initiate the litigation claim to represent not only their own interests, but also the interests of people who may not be parties to the suit. 

Class actions may be initiated either by private individuals, associations of people like societies and trusts or by the government. Such suits are initiated under circumstances when a wrong deed impacts a large group of people, who may not always have the ability or willingness to represent themselves. Class action suits can be initiated only by private individuals who are part of the wronged community. The government, on the other hand, can initiate a class action suit even if it is not part of the wronged community since it is considered a representative of the people.

What are the laws that govern class action suits in India?

The term ‘suit’ typically refers to civil suits filed in the civil courts under the provisions of the Code of Civil Procedure, 1908, in conjunction with other applicable laws. In the case of a class action suit arising from a public nuisance or other wrongful act affecting the public, the Advocate General, or, two or more persons may initiate such a suit. In other instances, where there is a group of people with the same interest, one or more such persons may, with the permission of the court, initiate a representative suit, Gyanendra Kumar, partner, Cyril Amarchand Mangaldas, said.

For example, under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, the government took it upon itself the right to initiate litigations on behalf of the affected people.

Generally, the permission of a court or other relevant authority is required for a group to be certified as a “class”. Other victims are typically given the right to join the class. Class action suits have proliferated in countries that permit lawyers to get a share of the final damages awarded in the class action suit as their contingency fee. In India, such contingency fee is banned by the Bar Council of India, Kumar said.

What are the different kinds of class actions permissible by law?

There are different kinds of class actions under law. The most common type of class action in India has been in the form of writ petitions filed before the Supreme Court or before the High Courts. These are commonly referred to as public interest litigations (PIL). 

Class actions are also initiated under the Consumer Protection Act, 1986, by individual consumers or associations (for instance, the cases filed by flat owners’ associations against a builder) or by the state or the central government. 

The Consumer Protection Bill, 2018 — which proposes establishment of a Central Consumer Protection Authority empowered to file class action suits on behalf of consumers —has been passed by the Lok Sabha recently. Under this, if an adverse finding is made against a corporation, the defendant can be directed to pay compensation for loss or injury suffered by a group of consumers, Amita Katragadda, also a partner at Cyril Amarchand Mangaldas, said.

Various other special enactments also enable class actions. Under the Companies Act, 2013, action may be initiated by a prescribed number of members or depositors of companies on behalf of the members or depositors unless specific members opt out of the class.

What are the international norms guiding class action suits?

Class action suits are recognised by most countries in the world where consumers or affected parties can pursue a common course of action, Katragadda said. These can be in respect of a wide variety of claims concerning consumer protection, environmental law, securities regulation, among other things. One of the most famous class action suits in the US resulted in the Tobacco Master Settlement Agreement in November 1998 between the four largest US tobacco companies and the attorneys general of 46 states. Under the terms of the settlement, the manufacturers agreed to pay a minimum of $206 billion over the first 25 years of the agreement for the states to recover their tobacco-related health-care costs.