Consumer protection in india



Personal service items from a master and servant relationship which was totally different from a lawyer-client relationship or other professional or technical relationship. The reason for excluding the rendering of service “under a contract of personal service” from the definition of “service” under the act was obvious. Such an employee can be turned out of service by the master at will end, therefore, no occasion can arise for the master to complain about the deficiency, in the rendering of service by the employee.

Applying the above tests to the present case it will be clear that the petitioner was not in a position to exercise any sort of control or supervision over the work of the respondent. The respondent was independent of any supervision or control of the petitioner while he was cutting the cloth for stitching the pant or was stitching it. While doing his work the respondent was not bound to obey any direction given by the petitioner about the design of the pant but not further. Thus, service rendered by the respondent was in the course of his profession and the service was not rendered by him under any contract of personal service.

So, a distinction is to drawn between a “contract for service” and “contract of service”.


A 'contract for service' implies a contract whereby one party undertakes to render services (such as professional or technical services) to another, in which the service provider is not subjected to a detailed direction and control. The provider exercises professional or technical skill and uses his or her own knowledge and discretion.

A contract for personal services is not, as a rule, an absolute contract, but is generally subject to an implied condition that the servant's inability to serve, if due to illness, shall not be a breach. The servant's illness therefore does not usually entitle the master to determine the contract ; but the master may have an implied right to determine it in the event of an illness which renders the servant permanently incapable of serving, or of an illness which frustrates the object of contract, or goes to the root of the contract.

While the contract remains in force, the servant's right to his wages generally remains intact. It is, as a rule, an implied term of a contract for personal services that the death of either party shall put an end to it, and the rule applies to an engagement expressed to be for a fixed term or to continue until determined by notice.

Relation between Medical Practitioner and patient-Whether a contract for service?

It was urged in the instant case that the relationship between a medical practitioner and the patient is of trust and confidence and therefore it is in nature of a contract of personal service and the service rendered by the medical practitioner to the patient is not “service” under Section 2(1)(o) of the act. The contention ignores the well recognised distinction between a “contract of service” and “contract for service”. A “contract for service” implies a contact whereby one party undertakes to render services e.g. professional or technical services to or for another in the performance of which he is not subject to detailed direction or control but exercises professional or technical skill and used his own knowledge and discretion. A “contract of service” implies a relationship of master and servant and involves an obligation to obey orders in the work to be performed and as to its mode and performance. The court entertain no doubt that parliamentary draftsmen was aware of this well accepted distinction between “contract of service” and “contract for service” and has deliberately chosen the expression “contract of service” instead of expression “contract for service” in the exclusionary part of the definition of “service” in Section 2(1)(o). The reason being that an employer cannot be regarded as a consumer in pursuance of a contract of employment.

By affixing the adjective “personal” to the word “service” the nature of the contracts which are excluded is not altered. The said adjective only emphasizes that what is sought to be excluded is personal service only. The expression “contract of personal service” in the exclusionary part of Section 2(1)(o) must therefore be construed as excluding the services rendered by an employee to his employer under the contract of personal service from the ambit the expression “service”.

It is no doubt true that the relationship between a medical practitioner and a patient carries within it certain degree of mutual confidence and trust and therefore the services rendered by the medical practitioners can be regarded as services of personal nature but since there is no relationship of master and servant between the doctor and the patient the contract between medical practitioner and patient cannot be treated as contract of personal service but is a contract for services and the service rendered by the medical practitioner to his patient under such a contract is not covered by the exclusionary part of the definition of “service” contained in Section 2(1)(o) of the Act.

Private Doctors their services are also covered under the Act.

Adverting to the individual doctors employed and service in the hospitals, the Court was of the view that such doctors working in the hospital/nursing home/dispensaries/whether Government or private belonging to categories (ii) and (iii) would be covered by the definition of “service” under the Act and as such are amenable to the provisions of the Act along with the management of the hospital, etc. jointly and severally.

There may be however, be a case where a person has taken an insurance policy for medi-care where under all the charges of consultation, diagnosis and medical treatment are borne by the Insurance Company. In such a case the person receiving the treatment is a beneficiary of the service which has been rendered to him by the medical practitioner cannot be said free of charge and would therefore fall within the ambit of the expression in Section2(1)(o) of the Act. So also there may be cases where as a part of the conditions of service the employer bears the expense of medical treatment of the employee and his family members dependant on him. The service rendered to him by a medical practitioner would not be free of charge and would therefore constitute service under Section 2(1)(o).

In Indian Medical Association v. V.P. Shantha and Ors the principal issue which arose for decision before the Supreme Court was whether a medical practitioner renders 'service' and can be proceeded against for 'deficiency in service' before a forum under the Consumer Protection Act, 1986. The Court dealt with how a 'profession' differs from an 'occupation' especially in the context of performance of duties and hence the occurrence of negligence. The Court noticed that medical professionals do not enjoy any immunity from being sued in contract or tort (i.e. in civil jurisdiction) on the ground of negligence. However, in the observation made in the context of determining professional liability as distinguished from occupational liability, the Court has referred to authorities, in particular, Jackson & Powell and have so stated the principles, partly quoted from the authorities :-

"In the matter of professional liability professions differ from occupations for the reason that professions operate in spheres where success cannot be achieved in every case and very often success or failure depends upon factors beyond the professional man's control. In devising a rational approach to professional liability which must provide proper protection to the consumer while allowing for the factors mentioned above, the approach of the Courts is to require that professional men should possess a certain minimum degree of competence and that they should exercise reasonable care in the discharge of their duties. In general, a professional man owes to his client a duty in tort as well as in contract to exercise reasonable care in giving advice or performing services.

The Court held that even though services rendered by medical practitioners are of a personal nature they cannot be treated as contracts of personal service (which are excluded from the Consumer Protection Act). They are contracts for service, under which a doctor too can be sued in Consumer Protection Courts.


A contract of service is any agreement whether in writing or verbal, expressed or implied, whereby:

•One person agrees to employ another as an employee; and
•The other person agrees to serve the employer as an employee.

An apprenticeship contract or agreement is also considered a contract of service. A contract of service can be in the form of a letter of appointment/employment. The employer cannot change the terms and conditions of employment unless the employee agrees to it.

Any terms and conditions of employment, in a contract of service, that is less favourable than the relevant provision under the Employment Act is illegal, null and void. The provision in the Act will take precedence over a particular contractual term that is less favourable.

Some of the factors to be considered in identifying a contract of employment include:

1. Control

•Who decides on the recruitment and dismissal of employees?
•Who pays for the employees' wages and in what ways?
•Who determines the production process, timing and method of production?
•Who is responsible for the provision of work?

2. Ownership of Factors of Production

•Who provides the tools and equipment?
•Who provides the working place and materials?

3. Economic Considerations

•Does he carry on business on his own account or carry on the business for the employer?
•Does he involve in any prospect of profit or is he liable to any risk of loss?
•How are his earnings calculated and profits derived?

Essential Clauses of Contract of Service

A contract of service must include the following clauses:
•Commencement of employment;
•Appointment - job title and job scope;
•Hours of work;
•Probation period, if any;
•Employee's benefits (e.g. sick leave, annual leave, maternity leave);
•Termination of contract - notice period; and
•Code of conduct (e.g. punctuality, no fighting at work).

Starting a Contract of Service

If a new recruit who has signed the Letter of Employment fails to turn up for work
If a new recruit has signed the letter of employment but subsequently informed the employer that he does not intend to start work with the company and failed to turn up on his first day of work, the Employment Act does not apply as the employer-employee relationship has not started.

Hence the employer will not be able to claim notice pay or any compensation under the Employment Act.

If the employer wishes to claim compensation from the recruit, he should pursue a civil claim through his own lawyer.

Confirmation of Employees

There is no provision in the Employment Act on the conditions for the confirmation of an employee in his job. An employee's confirmation will depend on the terms spelt out in the employment contract. The length of an employee's service is calculated from the date on which the employee starts work and not the date of confirmation.

Terminating a Contract of Service

Both an employer and an employee can terminate a contract of service. A termination may arise from the expiry of contractual terms (e.g. completion of specific project, completion of specific period of time).

Termination of Contract with Notice

The party who intends to terminate the contract must give notice to the other party in writing. The notice period to be given depends on what is agreed in the written contract. If there is no written contract, the notice period to be given depends on what the parties have agreed upon verbally.
If there is no such period previously agreed upon, the following shall apply:
Length of Service

Notice Period
Less than 26 weeks

1 day
26 weeks to less than 2 years

1 week
2 years to less than 5 years

2 weeks
5 years and above

4 weeks
The day on which the notice is given shall be included in the notice period. The length of notice to be given by an employee (in a resignation) and an employer (in a termination of employment) are the same. By mutual consent, notice can be waived.

Taking of Annual Leave during Notice Period

As the notice period is meant to be served, the employer cannot force his employee to go on leave during the period of notice, unless the employee consents to it. Any unconsumed annual leave can be encashed by the employee.

Offsetting of Annual Leave

An employee can use his annual leave to offset the notice period for termination of contract. If an employee uses his annual leave to offset his notice period and to bring forward his last day of work, he would only be paid till his last day of work and the annual leave used to offset his leave will not be paid. By bringing forward his last day of employment with the company, he is no longer considered an employee of the company and hence he may start work immediately with his new company.

If an employee chooses to offset his leave during the notice period, it is different from situation where he applies to go on approved leave during the notice period.

If an employee applies for annual leave to cover all or part of his notice period and approval has been granted by the employer, he will be paid his salary for the full notice period. In this case, he is considered as an employee of the company until the last day of his notice period. If he wants to join a new company, he can do so only after the last day of his notice period.

Taking Sick Leave during Notice Period

If the employee was on sick leave (whether paid or unpaid) during the notice period, the sick leave taken should be treated as part of the notice period. The employer cannot claim for any short notice from the employee.

Starting Work with New Employer while serving Notice of Termination with Current Employer

The employee serving the notice of termination is still considered an employee of his current employer. Unless his current contract of employment allows him to work with another employer before the date of termination, he has to seek written permission from his current employer to do so.

Using Reservist Period as Notice of Termination

As the notice period is meant to be served, the reservist training cannot be used to offset the notice period. However, both parties may mutually agree to waive the required notice.

Salary In-lieu of Notice (Notice Pay)

Salary-in-lieu of notice does not attract CPF contribution. However if an employee has fully served the required notice period, his salary for the notice period will be subjected to CPF. CPF contributions must be made by both the employer and employee for the salary earned if the employee was working during the notice period, or considered as an employee of the company and hence prohibited to join another company during the notice period.

Termination of Contract without Notice

Both employer and employee may terminate a contract of service without waiting for the required notice period to expire, by paying the other party a sum equal to the salary that would have been earned by the employee during the required period of notice.

An employee may terminate an employment relationship without giving notice to the other party, if:

- The employer fails to pay his/her salary within seven days after salary is due; or

- He/she is called upon to do work that is not within the terms of the contract of service.

An employer may terminate an employment relationship without giving notice to the other party, if:

- The employee is absent from work continuously for more than two working days, without approval or good excuse;

- The employee is absent from work continuously for more than two working days without informing or attempting to inform the employer of the reason for absence.
The party that breaks the contract will have to pay to the other party salary in-lieu of notice.

Changes to Employee's Terms and Conditions of Work

Employers cannot change the terms and conditions of employment, unless his employee agrees to it.
If the employee does not agree to the changes, he should bring up the matter to his employer and try to negotiate for an acceptable agreement to both parties. If there is no agreement to the dispute, either party may choose to end the employment relationship by serving the appropriate notice to the other party.

Rejection of Employee's Resignation

An employer cannot reject an employee's resignation. The employee has the right to resign at any time by serving the required notice or by compensating the employer salary in-lieu of notice. Failure of the employer to allow an employee to leave his service is an offence. The employer shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding six months or to both.

Compensation from employees for terminating a contract

Contracts that require employees to pay a monetary compensation (in addition to notice pay) to the employer for terminating the contract before the completion of a specified period are not covered by the Employment Act. An employee can resign at any time by serving the required notice in accordance with the provisions in the employment contract. The terms pertaining to monetary compensation (in addition to the notice pay) for terminating the contract prematurely is a contractual term and not governed by the Employment Act. Where there are disputes, the civil court will have jurisdiction in deciding the outcome.