Govt control has weakened Indian consumers by taking away their right to sue

A regime that substitutes individual and collective legal action with State intervention ultimately hollows out consumer rights.

Illustration: Soham Sen | ThePrint

The year 2025 closed with a series of consumer rights breaches in the services sector. Some made headlines; others not so much.

In early December, IndiGo cancelled and rescheduled flights en masse due to operational mismanagement and pilot scheduling issues. In a radically different segment of the economy—the securities markets—Avadhut Sathe Trading Academy, a popular financial markets training organisation, was alleged to have grossly misled its students on various counts. And, in a lesser-known incident, a consumer approached the Supreme Court over an incorrect negative credit score that the Credit Information Bureau (India) Limited (CIBIL) refused to rectify despite previous court orders asking it to do so.

In all three cases, an arm of the State was asked, or chose, to intervene and protect the hapless Indian consumer. In the first case, the Director General of Civil Aviation constituted an oversight committee, deploying people at IndiGo’s office to oversee operational matters. In the second case, the Securities and Exchange Board of India (SEBI) passed a cease and desist order and impounded more than Rs 500 crore from Avadhut Training Academy pending the closure of the investigation. And in the last case, the Supreme Court asked two banks to clarify their stand on the consumer’s wrong credit score. The case remains pending.

That these interventions fell short of any meaningful redress for the affected consumers underscores a larger point: the law has weakened the average Indian consumer by taking away their agency to sue the service provider and obtain relief for themselves.

A regime that substitutes individual and collective legal action with State intervention may give us a sense of vindication. However, it ultimately hollows out consumer rights by depriving them of voice, choice, and remedy.

Problems with the State enforcing consumer rights

State or public enforcement of consumer rights suffers from multiple problems.

First, it concentrates more power in the State to infringe upon the rights and freedoms of businesses.

Second, the State is vulnerable to capture by the same businesses, and consumer rights violations by big or politically powerful businesses may go unaddressed.

Third, the State is often hobbled by budgets and a lack of capacity to enforce against large businesses. Regulatory agencies must necessarily prioritise some enforcement choices over others, and the consumers of the deprioritised enforcement choices are left without remedy. Consumers who suffer small losses are often at the receiving end of such deprioritisation.

Fourth, the relief the State obtains may not be used to compensate consumers. For example, it is not clear if SEBI will eventually use the impounded proceeds to compensate Avadhut Sathe’s misled students, or if deploying officials at IndiGo’s office premises will adequately compensate passengers affected by the airline’s delays and cancellations. Unlikely.

The power of private enforcement

A critical tool available to consumers in jurisdictions known for strong consumer rights is the class action suit or a similar collective action remedy. A class action is a legal procedure where one or a few parties bring a civil proceeding seeking remedies on behalf of some or all the victims of a legal violation. They aggregate similar claims of violations and damages into a single proceeding for collective resolution. At the risk of a selection bias, class actions have yielded large money settlements for investors affected by accounting frauds such as those at Enron and Satyam, buyers deceived by Volkswagen’s diesel emission disclosures, and US municipal bodies that incurred large public healthcare costs related to tobacco-induced diseases.

The enforcement of private remedies by consumers through mechanisms such as class actions is superior to public enforcement in several important ways.

First, the consumer retains the agency to pursue a remedy of their choice. The goal of class actions is to compensate the victims, making the business pay proportionately to the damage caused. The heavy hand of the State, on the other hand, has no sense of proportion.

Second, the costs and effort involved in pursuing such remedies are distributed across a large body of affected people and not concentrated in the State.

Third, the manufacturer or service provider is incentivised to settle directly with the consumers through financial payouts, tendering an apology, and so on, to prevent further reputational losses.

Fourth, the process is less vulnerable to capture. The manufacturer or service provider may settle with a select few consumers, but such settlements are generally required to be reported in the public domain and do not automatically terminate the class action.

Making class action work in India

Indian law allows class action proceedings to be filed generally under its Code of Civil Procedure, which governs all civil proceedings in Indian courts. Specific groups such as minority shareholders of companies and consumers can also sue as a class under specific laws governing them. The Consumer Protection Act of 2019 allows consumers and consumer associations to file class actions before the Consumer Redressal Commission at the district, state, or national level, depending on the amount involved.

While class actions are not unheard of in India, they are also not the powerful tool they have the potential to be. Three reasons are immediately visible for this.

First, the outcomes and case trajectories of class or representative proceedings have been unpredictable. A consumer class action suit filed against Nestlé by the Indian government in 2015 went all the way to the Supreme Court before being dismissed by the National Consumer Disputes Redressal Commission in 2024. Even in class actions that ended in settlements for the aggrieved classes, the case durations varied between four and 10 years. The overall unpredictability of Indian courts discourages consumers from pursuing such actions and creates zero incentives for manufacturers and service providers to settle the claims of the affected consumers.

Second, India lacks two vital mechanisms to make consumer class action work:

1. The first is the organising force that can bring affected consumers together, or what the Americans call the “plaintiffs’ lawyer”. Consumers are a heterogeneous group of people, often scattered, hard to identify and organise as a group. While often caricatured as ‘ambulance chasers’ who zealously pursue accident victims to aggregate their claims and sue large corporations to extract settlements, the plaintiffs’ lawyers perform the important function of organising large heterogeneous groups of consumers. Generally, they do this for a fee linked to the settlement amount. In India, lawyers are prohibited from charging fees as a percentage of the amount awarded in a legal proceeding.
2. The second is litigation funding, which is similarly frowned upon. Litigation funding not only funds the litigation, as its name suggests, but also provides immediate liquidity to the affected consumers by buying their claims at a discount and seeing the litigation through to the end. The absence of these two powerful incentives leaves no incentive for any services professional to organise aggrieved consumers, collect their claims and evidence, and pursue their case for relief.

Third, in sectors most amenable to class action redress, such as the financial markets, the State monopolises the power to pursue the offender. For instance, investors affected by malpractices and fraud in the securities market must rely upon SEBI to pursue their claim, as the SEBI Act disallows a civil court from entertaining any matter in which the regulator is empowered to act. While there is no similar proscription on consumer forums, the overwhelming presence of the regulator creates a form of cognitive legitimacy where no relief is imaginable except through and by the regulator.

Real consumer protection for IndiGo’s passengers, defrauded investors, and the person living with a wrong credit score for five years requires us to think more about the consumers and less about State intervention. Without credible avenues for private enforcement, consumer protection risks becoming a promise offered by committees that too often ends without meaningful relief.

If India is serious about strengthening consumer welfare, it must empower the consumer to act—individually where possible, and collectively where necessary. Making class action work for consumers is a start.

Bhargavi Zaveri-Shah is the Co-founder and CEO of The Professeer. She tweets at @bhargavizaveri. Views are personal.

(Edited by Prasanna Bachchhav)