Service and Deficiency

Held. Housing construction by a statutory authority or a private builder is a service, and a complaint for delay or defective construction was maintainable even before the amendment. A Commission may award compensation for harassment, mental agony and oppression by a public functionary, on a finding recorded carefully on convincing material and not lightly, and where the compensation is paid out of public funds the department must recover it from the officers responsible; the Court directed one authority to fix responsibility within six months and to recover Rs. 10,000 from the officers' salary.

Why it matters here. It brings statutory authorities inside the Act, which is the single most useful extension for an ordinary complainant, and it adds harassment as a head of compensation.

Facts. Indian Medical Association v. V.P. Shantha, AIR 1996 SC 550, decided on 13 November 1995 by three judges. The question was whether medical treatment is a service, the profession arguing that it was governed by its own disciplinary law.

Held. Service rendered to a patient by a medical practitioner, by way of consultation, diagnosis and treatment, is a service, except where the doctor renders service free of charge to every patient or under a contract of personal service. A contract of personal service requires a master and servant relationship and is different from a contract for personal services, which is not excluded, so an ordinary doctor and patient relationship is inside the Act while a medical officer treating his own employer is outside it. Service rendered free of charge to everybody, in a private or a government hospital, is outside the Act, and a token registration fee does not change that; but where a hospital charges those who can pay and treats the poor free, even the free service is service and its recipient is a consumer.

Why it matters here. It settles the meaning of both exclusions in section 2(42), and chapter [Medical Services under the Act] takes the medical consequences.

A worked example

Five complaints, and whether each is about a service.

A bank refuses to release a fixed deposit on maturity. Banking is named in section 2(42); the refusal is a deficiency.

A development authority delivers a flat four years late. A service, on Lucknow Development Authority v. M.K. Gupta, and the delay is a deficiency; compensation for harassment may be added.

A doctor in private practice misdiagnoses a fever. A service, on Indian Medical Association v. V.P. Shantha; whether there is a deficiency depends on the standard in chapter [Medical Negligence].

A charitable hospital that treats everybody free misdiagnoses a fever. Not a service, because it is rendered free of charge to everybody, and a token registration fee does not alter that.

A friend drives Meena to the airport as a favour and takes the wrong road. Not a service: no consideration and nothing made available to potential users.

What it does NOT mean

It is not limited to the listed sectors. The list is illustrative.

It does not require a written contract. Deficiency covers what was undertaken "in pursuance of a contract or otherwise".

Free service is not always outside. Where a hospital charges some and treats others free, the free treatment is still a service.

Deficiency is not confined to bad performance. Negligence causing loss, and the deliberate withholding of relevant information, are included expressly.

Quick revision

1. Section 2(42): service of any description made available to potential users, illustrated by banking, financing, insurance, transport, processing, energy, telecom, boarding or lodging, housing construction, entertainment, amusement and the purveying of news.
2. Two exclusions: free of charge, and under a contract of personal service.
3. Section 2(11): deficiency is any fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance, and includes negligence causing loss or injury and the deliberate withholding of relevant information.
4. Lucknow Development Authority v. M.K. Gupta, AIR 1994 SC 787: housing construction by a statutory authority is a service; compensation for harassment; recovery from the erring officers.
5. Indian Medical Association v. V.P. Shantha, AIR 1996 SC 550: medical treatment is a service; a contract of personal service needs a master and servant relationship; wholly free treatment is outside, but free treatment in a hospital that charges others is inside.

Test yourself

1. Define service and deficiency under the Consumer Protection Act 2019. Section 2(42) defines service as service of any description which is made available to potential users, including but not limited to the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but excluding the rendering of any service free of charge or under a contract of personal service. Section 2(11) defines deficiency as any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service, and it includes any act of negligence or omission or commission which causes loss or injury to the consumer, and the deliberate withholding of relevant information from him.

2. Are statutory authorities and doctors within the Act? Both are. In Lucknow Development Authority v. M.K. Gupta, AIR 1994 SC 787, the Supreme Court held that housing construction by a statutory development authority or a private builder is a service, so that complaints of delay, non-completion and defective construction are maintainable, and that a Commission may award compensation for harassment, mental agony and oppression by a public functionary, to be recovered from the officers responsible where it is paid out of public funds. In Indian Medical Association v. V.P. Shantha, AIR 1996 SC 550, the Court held that consultation, diagnosis and treatment by a medical practitioner is a service, that disciplinary control by the Medical Council does not exclude the Act, and that the exclusion for a contract of personal service applies only where there is a master and servant relationship, so a medical officer treating his employer is outside the Act while an ordinary doctor and patient relationship is within it.

3. Is a service rendered free of charge ever within the Act? As a rule, no: section 2(42) excludes the rendering of any service free of charge, so a hospital or a practitioner that treats everybody without payment is outside the Act, and the payment of a token amount for registration only does not alter that position. But Indian Medical Association v. V.P. Shantha, AIR 1996 SC 550, drew an important distinction. Where an institution charges those who can pay and treats those who cannot free of charge, the service rendered free is still service within the Act and its recipient is a consumer, because the institution's activity as a whole is carried on for consideration. The same reasoning applies to a government hospital which charges some patients while treating others free.