CLASS ACTION LAW SUITS
LLB., FCS., FICWA
kpcrao.india@gmail.com
BACK GROUND
In class actions the plaintiff asks relief not only for himself but for all other similarly situated. By its nature class action asks for more than inter- parties relief. Class action lawsuits have been going on for decades. These are civil suits that are against large companies that have in some way offended the rights of many people. Civil law regulates disputes in which harm may have come to others. You may have seen commercials that are looking for people that have used particular drugs. Other examples are people that work for asbestos removal companies that been exposed to asbestos for decades. The fibers from this material lodged in their lungs has created mesothelioma cancer within their systems. These people can band together in order to seek monetary reward for damages done to their bodies because of their job.
Typically, class-action lawsuits are different from criminal trials because it is not discussing whether or not someone has broken the law, but whether one or more people have been harmed in some way by a corporation. If a group of people have experienced similar circumstances, and the common issues they have shared are the most critical focal points of the lawsuit, then the group can participate together in this legal action.
A very common example in which many consumers have been hurt in a similar manner is through a defective product. There have been recalls that have affected people in this way. Drawstrings on window blinds is an example of a defective product that has actually killed several children. The parents of the children could be gathered together to form a class-action lawsuit against the manufacturer of this product.
There was a particular case in which a fertility doctor had taken the eggs of hundreds of women that he had helped through his fertilization procedures. He was selling the eggs on the black market for millions of dollars without telling the women what he had done. This created a multimillion dollar lawsuit in which hundreds of women received hundreds of thousands of dollars for their losses. Some of these women had children somewhere in the world that they would never meet because this doctor had sold their eggs. In this particular case, it was not only about a physical illegality, but also an emotional one to. The trauma that these women went through in order to have children was a large enough ordeal. The amount of money that they spend caused them financial hardship to conceive children. But then to find out that they had been used for incubators for eggs to be sold on the black market, was too much of an emotional scar to bear.
In the end, the court determines how badly each party was injured and what reparations can be made in order to rectify the injustice. These types of lawsuits can also be used in regard to security claims, contracts, and employers that falsify information. Some of the largest lawsuits involve millions of people that receive small amounts of compensation for their participation. Any person may unknowingly be eligible to participate in a class action lawsuit.
Class action suits are used liberally by US investors and consumers to demand justice and better governance from corporate entities, even though the idea has been abused by so-called "ambulance chasers" -- lawyers who fight for free but take a lion's share of the pickings if they win a suit.
INDIAN CONTEXT
In India ‘class actions’ are governed by Section 91 and Order I Rule 8 of the Civil Procedure Code. After the amendment of Section 91 in 1976 the courts have been given discretion to entertain suits at the instance of two or more persons against public authorities for public nuisance or other public wrongs. Before the amendment the scope of the remedy was highly restrictive, because even a suit for the removal of public nuisance could not be brought except with the consent of the Advocate-General. The Law Commission of India in its 54th Report had suggested a wide amplitude of Section 91 by doing away with the consent requirement and also by including all public wrongs a suit for a declaration and injunction and any other appropriate relief can be filed either by the Advocate-General, or by two or more persons, with the leave of the court, even though no damage has been caused to such persons. There is also no obligation to give notice to all the persons affected by such public nuisance or wrong. The court shall grant leave for the filing of such a suit according to the well-defined principles.
Order I Rule 8 also provides for the filing of a representative suit subject to the conditions that it must be filed by two or more persons acting on behalf of the class and that a notice to this effect must be served, at the plaintiff’s expense, to the persons who are affected.
The inclusion of general class action in the Civil Procedure Code is certainly a welcome step. This is also an indication of the mood of the legislature on PIL for its continuation either as an ordinary or constitutional remedy strategy.
PUBLIC INTEREST LITIGATION (PIL) AND CLASS ACTION
Public interest litigation is important facet of participative justice. It is a signpost which signals the decent of the judiciary from the confines of the ivory towers to the crowded mud huts and the littered pavements, flowing drains and the World of naked street walkers, street urchins, and ragamuffins. With the advent of public interest litigation, realisation is appearing to drawn on the poor, the oppressed, and the exploited that they too have a place under the some and a right to live with dignity, that the constitution protects their rights with the Supreme Court as the custodian of such rights, and their weapon is the new invention called public interest litigation, described by some as 'social action litigation'. The nature and philosophy of public interest litigation was expounded by Bhagwati J in the well-known Asaid case[1] in the following manner:
Public interest litigation which is a strategic arm of the legal aid moment and which is intended to bring justice within the reach of the poor masses, who constitute the low visibility area of humanity, is a totally different kind of litigation from the ordinary tradition litigation which is essentially of an adversary character. Public interest litigation is brought before the court not of the purpose of enforcing the right of one individual against other, but it is intended to promote and vindicate public interest which demands that violations of constitutional or legal rights of larger number of people who are poor, ignorant or in a socially or economically disadvantaged position should not go unnoticed and un redressed. That would be destructive of the rule of law which forms one of the essential elements of public interest in any democratic form of government. The rule of law does not mean that the protection of the law must be available only a fortunate few or that the law should be allowed to be prostituted by the vested interests for protecting and upholding the status quo under the guise of enforcement of the civil and political rights. The pool too have civil and political rights and the rule of law is meant for them also, though today it exists only on paper and not in reality.
The jurisprudential philosophy and the need for public interest litigation has been summarised by justice Krishna Iyer in an extrajudicial writing as follows;
Class actions, public interest litigation, test cases, interventions by public organisations and the like in civil and criminal cases are facets of participate justice on behalf of the poor. This involves jurisprudential changes including redefinition of 'cause of action', 'aggrieved person' and many other concepts. For instance, the horrendous escalation of automobile accidents causes indescribable misery, and no-fault liability, now that insurance is nationalised, is simple social justice. And yet Callous governments and docket crowded courts with no regard to human relief, leave this principle in the code, despite a long ago report of the law commission for its partial acceptance. Therefore, if the poor are to have a stake in the rule of law we may now to create a new jurisprudence. Shall I call it people oriented jurisprudence so necessitous in the third world conditions?
Public interest litigation is, of course, an important and vital branch of public law and the Supreme Court has ruled that in a public law proceeding, there is constitutional obligation imposed on the court to forge new tools necessary to give relief for doing complete justice and to preserve and protect the rule of law. The court is ready to invoke the power available to the Supreme Court under article 142 of the constitution[2].
Public interest litigation has thus become the People's tool fashioned by judges to enforce the obligations of the state, its institutions, and its functionaries to explore and discover ways and Means of giving life and soul to the preambular assurances via the judicial process.
CONSUMERISM AND CLASS ACTION
Consumer is the person who purchases the goods and services in his self consumption including the use of the goods for his self occupations. Consumerism means the welfare of the consumers by safeguarding their rights by giving required protection to them from restrictive trade practices and unfair trade practices, and also from the goods/services injurious to them, and to save them from the economic exploitations by the well organised and trained sellers/traders/manufacturers of goods and services.
The concept of Consumerism has taken a shift in American culture from a producer oriented society in the 19th century to a consumerist society in the 20th century. Changes in Democratic demographics and advances in industrialisation, manufacturing, transportation, and communication all contributed to the change. Consumerism is also contributed greatly to the liberal thrust of the progressive era and spawned the long-running trend of consumer advocacy and consumer production legislation.
The US consumer protection movement gained strength in the 1960s and 70s as consumer activists lobbied for laws setting safety standards etc. Consumer advocacy is carried on worldwide by the International organisation of consumers union (IOCU).
The ideology of consumer protection came into full focus in the 1960s after President John F Kennedy introduced the consumer Bill of Rights, which stated that the consuming public has a right to be safe, to be informed, to choose, and to be heard. The primary concern of this force is to fulfill and protect the rights of the consumers articulated by President Kennedy more than four decades ago.
In India the constitution provides rights to its citizens and the legislature has enacted a number of acts. However, the provisions of these Acts under the umbrella of rigid bureaucrats and administrators, have rendered no help or protection to the ordinary consumers. Under the circumstances, the Indian parliament had enacted the consumer protection act 1986. It is a comprehensive act and gives simple, speedy and inexpensive redressal of consumer grievances. The consumer protection act recognized the “doctrine of caveat venditor”.
By the implementation of the provisions of the consumer protection act, consumer awareness has been developed in entire India. Consumer societies and organisations are formed in the villages, towns and capitals. The consumer began to question, claim the rights for the quantity and quality of the goods and services. Now the consumer movements has spreaded the entire world including India very rapidly and successfully.
CLASS-ACTION SUITS IN COMPANIES BILL 2009
Section 216 of the proposed Companies Bill 2009 talks of class-action suits — a form of lawsuit where a large group of people collectively bring a claim to court. It states that any one or more members or class of members or one or more creditors or any class of creditors may, if they are of the opinion that the management or control of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or creditors, file an application before the Tribunal on behalf of the members and creditors for seeking orders to restrain the company from committing an act which is ultra-vires the articles or memorandum of the company, to restrain the company from committing breach of any provision of the company’s memorandum or articles, etc.
The Tribunal’s orders are binding on the company with the stick for non-compliance being fine which shall not be less than Rs 5 lakh but which may extend to Rs 25 lakh and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall not be less than Rs 25,000 but which may extend to Rs 1 lakh, or with both.
Other Sections in the Bill such as penalty for fraud by officers (312), liability where proper accounts are not kept (313), liability for fraudulent conduct of business (314) and extension of the liability to directors’ (316) also class-actionable. While the provisions are silent against whom class-actions can be made, it seems that the group can go against anyone found guilty of assisting in making the company errant.
The Companies Amendment Bill 2009 is yet to be enacted.
CONCLUSION
In India, we need a law to help people demand for better governance, and the classes that need to be empowered are not only investors, but also consumers, disadvantaged groups (women, dalits, the physically challenged) and taxpayers. Not to speak of ordinary citizens. All of us need remedies for bad governance.
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[Published in Circuit Magazine (Monthly), ICWAI, July, 2010]
[Published in Circuit Magazine (Monthly), ICWAI, July, 2010]
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