This article is written by Preeti Pallavi Jena, pursuing BSc.LLB (IPR Honors) from the school of law, KIIT University, Odisha. This article discusses the class action suits in India, their benefits, and their types.
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In India, we have a set of rules and laws dedicated to the filing of a class-action lawsuit, but these laws have some financial hindrances involved with them. Thus, the laws in India tend to prohibit class-action lawsuits, not directly but they contribute in some way or another. There are many cases in India that have sensible claims and could be considered as class action lawsuits to provide justice to the common people, but they haven’t taken the form of a class action suit due to the lack of development of jurisprudence. The legislature needs to approach such cases in a friendly manner and take care of the financial matters in class action lawsuits.
A class-action suit is a lawsuit where a certain amount of people being hampered with the same damages by the same product can file a suit against the product in a group. This class action suit is basically filed by a group of people but one person is enough to file a suit on behalf of others. Class action suits are necessary for seeking redress. There are many settlements of class actions. The major and biggest one is the tobacco settlement which was made for 206 billion dollars.
If you are individually suffering then the value to support your suit is less, but if a group of people is suffering from the same injury then if they together file a suit it adds much more value to the suit and makes it a stronger one. Many states have different rules for governing the class actions which are filed in their states.
Class action suits can be filed in the following cases:
- A number of people discriminated from the public place.
- Medicines prescribed by a doctor to some patients have side effects after consuming it.
- A product purchased from the market falls defective for many buyers.
Each and every person who is affected by the class action has the right to be notified that a suit is made. It is difficult to mention everyone personally hence they can be notified by television or newspapers. Once there are few people suffering, they can go for a lawsuit on their own. Civil class-action cases lead to injunctive relief, remedies for the filed suit. In small cases, a suit cannot be filed and the individual does not get any remedy hence through litigation, class action this problem gets solved.
A case relating to a civil class action is Brown vs. Board of Education, where there was discrimination against the white and black school-going children, busses facilities, etc. This case was decided by the Supreme Court in 1954. The court struck down the school segregation and declared it to be unconstitutional in nature.
The major benefit is that it collects many people’s claims in a single go. Here, in this kind of suit, the judges hear both the parties and decide who wins and the person who wins, his entire group also wins. If the plaintiff side wins the case, then the judge will decide the recovery money which would be provided to him and that amount will be distributed to their whole group. But if the suit is in favor of the defendant, then the suit is dismissed and the plaintiff cannot file a suit against the same issue again. This also provides a very attractive benefit which is that everyone in the group who filed the class action suit if successful, will receive some amount. Class action suits provide justice to the people. Since a small group of people claims, the cost of the suit is lower almost every time.
Identification of similar people
The first thing before filing a suit needs to be done, is to identify similar members who are facing the same kind of injuries. These identifications should be done by the plaintiff. Members that are connected can easily be identified but who are not it will be difficult for finding them out. All the members are not required to be identified but specific groups should be identified or else no suit can be filed.
Aggregation of claims
A class-action suit is representative in nature. Hence, the claims must represent a considerable part of the whole class. If the court is not satisfied with the adequacy then the court will allow the plaintiffs to make a representation.
These class action suits are expensive and also sometimes reasonable. The litigation process can be long and it cannot be said that it will have reasonable costs and there is also a possibility that the party can lose the case. So expenses need to be paid or else a suit cannot be filed. Also, in case they are not able to afford the cost amount then they can go for third-party funding.
- The judge should approve the suit by seeing it to be fair from both sides.
- The court provides notice of the settlement and gives full opportunity to give their opinions with regard to settlement along with the attorney’s fees.
- If they win, then payment which is received to the class members will be distributed to all the members claiming.
Companies Act, 2013
In 2009, in the Satyam scandal case, it was seen that the shareholders did not have the sources for the class action suit under Indian law. The class-action suits are referred to in Section 245 which is now amended as National Company Tribunal (NCLT) Rules of 2016. Satyam service was under fraud and misrepresentation in stock exchanges, regulators, etc. Around 3,00,000 shareholders were not able to get damages caused to them due to lack of provisions for class action suit in Companies Act, 1956 whereas the investors of America were able to claim for the injuries that happened in the class action suit in the courts of US against the Satyam services.
After the Satyam scam case, in 2009 India introduced the class action suit for the shareholders who are affected and damages are caused to them under section 245 and Section 246 of the Companies Act, 2013. Here, it allowed depositors to go to the NCLT (National Company Law Tribunal) if there is any damage caused to the shareholders of the company. This section also provides remedies to the members and shareholders who are affected by this.
Code of Civil Procedure, 1908 (CPC)
The Code of Civil Procedure (CPC) also gives the class action suit, but it calls these suits as representative suits which are mentioned in Order I, Rule 8 of the Code of Civil Procedure. It states that if many people are facing a similar problem they can all together file a single claim on behalf of all and present it in the court, because if everyone file differently, it is difficult to say everyone will get justice at the same time and it also becomes hectic to see such number of filed cases on a similar problem or interest. They all will get the same remedy or relief for the same interest in crime. These suits are no different from others and hence it is also treated in the same manner as the rest of the suits are treated.
Consumer Protection Acts
Any consumer can file a suit about his interests that are hampered in the Consumer Dispute Redressal Commission under the Consumer Protection Act, 1986. As per Section 12 of this Act, a person or consumer along with other consumers can file a suit, if they have the same interest with respect to any specific product. But the complaint which is made with respect to any goods should be valued more than 1 crore. Recently under Section 17 of the Consumer Protection Act, 2019 the Central Consumer Protection Authority has the ability to make a class action suit with regard to the consumers. A simple inquiry must be done before filing a class suit by the central consumer protection authority. This process is a bit different from the previous procedure of 1986.
Competition Act, 2002
If there is any harmful effect taking place in the market, any class of people can file a lawsuit under the Competition Act, 2002. As per Section 53(N), a number of people have a right to file an application to the National Company Law Appellate Tribunal if any contravention is caused and they have been injured and can also receive compensation in that respect.
Public Interest Litigation (PIL)
A PIL can be filed by a group of people and this number of people is never clarified but it is always considered as a considerable size of the public. It represents the rights of the public as a whole. It is not applicable to individual rights. It is always filed with relation to the collective rights of people. There is no specific procedure even for filing a PIL. This can be filed by any means of communication in the court. This becomes easier for people to file a PIL. PIL can be filed for any reason like for education purposes, wages of labor, pensions, with regards to the environment, if any discrimination caused, etc.
Dr. Virendra Pal Kapoor v. Union of India & Ors
In this case, a senior citizen of age 72 invested 50,000 in SBI Life Insurance for 5 years in the year 2007. In 2012, he lost the entire sum and only got Rs. 248 which was there in these hidden charges. The fraud happened with him and the court declared this policy to be void. The court also ordered them to return the invested money to him and told IRDA to re-examine the policies even though they had already been approved.
In this case, TESLA and Elon Musk, its chief executive officer were slapped along with two other class-action lawsuits in 2018. TESLA is known as Tesla motors who produces various electric vehicles under CEO Elon Musk. Musk made a plan to run the company privately. He was taking the electric car with a share price of 420 dollars. This made Wall Street shock. This also led to investigations that were made by the Securities & Exchange Commission (SEC). Two class-action suits were filed by the investors for violating the federal security laws. One lawsuit was made in San Francisco federal court by Kalman Issacs, who said that Tesla and Musk, both began a scheme and manipulated artificially the prices of the Tesla stock for removing the company’s short-sellers so that the value of the company will not go down. The suit claimed that Musk did not make necessary financial stability to take Tesla private and hence he made many false statements.
Sand Carrier’s Owners v. Board of Trustees, 1989
In this case, the writ petition was filed by different associations on behalf of their members. They basically claimed that they are associations of operators of lorries in Calcutta port. But the defendant stated that petitioners were not a recognized association and were not registered and that is why it is not sustainable. The main question was whether petitioners are from a recognized party or not. People prefer to get justice from ‘class action’ and representative proceedings but there are very few Indians who are getting remedies in the court through collective proceedings. These collective proceedings give better results and also reduce expenses.
Bernard Schwartz stated that, for acquiring judicial review, class action has been recognized many times and it deals with the utility rates, public housing, and also the environmental crisis. In this case, the role of a class action is also mentioned. It says that a class action can be initiated by any member party who got affected by any order or action given by the government. And also if many people are affected by the same action of the same class then one member from the whole can approach the court by filing a writ application under Article 226 of the Constitution.
The court said that the writ petitioners have no locus standi and they were not an aggrieved party or registered associations and hence cannot move the writ application as public interest litigation or class action suit. Therefore the writ petitioners were dismissed without any further queries.
Anjum Hussain & Others v. Intellicity business park Pvt. Ltd, 2019
The appellant booked an office of 440sq.ft which contains shops, residential units, offices. The agreement was made between the respondent and the appellant and the respondent promised to deliver the possession in 4 years time period to the appellant but he failed to give the possession in the time limit and hence the appellants filed a suit for seeking refunds from the respondents of the money paid by the appellant along with the compensation charges. The appellants also filed a case under Section 12(1)(c) of the Consumer Protection Act.
The National Commission dealt with the issue and said that the compliant scope is not limited to him and it is for the entire class, the offices, the shops, and residential units of the project called ‘Intellicity’. He said that, if as a whole, the rights of the entire class are affected then only they can seek remedies or refunds under Section 12(1)(c) of the Consumer Protection Act.
This can be treated as a class action but the project which is booked, the members in whole should have booked it for the sole purpose of earning their livelihood. But since no evidence with this regard was found, the National Commission did not accept this case as a class action and hence dismissed it.
U.P Bank Employees Federation v. Union of India
In this case, the UP Bank Employees Federation which is a trade union registered under the Indian Trade Unions Act, 1926 has moved a writ petition for getting a mandamus commanding the state government to go through the disputes with respect to the services of the workmen mentioned in Annexures 5 to 26 of the government orders.
The bank of the respondent was the State Bank of Bikaner and Jaipur employed the workmen for a period of 80 days based on temporary measure and they were not permitted after the expiry of 80 days. Under Section 2A of the Industrial Disputes Act the references were rejected which were made by the workmen under Section 10 by the State Government because the employer bank guarantees that they will be providing only a single chance to the employees who had served less than the minimum period of 80 days. But the objection was raised which was that the union could not have adopted the cause of workmen sense the dispute was never raised by the union because the union was not in any way connected to it and should not take up the case on behalf of the workmen because the workmen are not coming forward anyway.
The individual workman, who was involved in the case was not a member of the bank and hence writ petition cannot be maintainable. The counsel of the petitioner is opposing the objection on the basis of the concept of a class action or litigation which is recognized in respect of a dispute under the Industrial Disputes Act which is between the workmen being a body of employees.
When the claims are small in amount and individual, claims don’t have a great impact against the opposition, the claims could be aggregated and converted into a class action lawsuit which is very important when the parties don’t have a fair share of the bargain. Hence, for a promoter-run business, such cases are extremely important as they help to enforce corporate governance in the system, elevate the confidence of investors in a company and help to keep the internal affairs in check.
In recent years, India has aimed to increase its economy significantly and for this very purpose, class action suits should be given some priority. This would make a statement to the world that India has the capability to match up to the high standards of corporate governance existing around the world and as a result, this would attract potential investors to our country.
Apart from that, the Indian investors have helped the stock market growth also in this COVID period, while the foreign investors are pulling out day by day. If in case, some large corporate companies are involved in malpractices and the smaller investors are getting sued and we don’t do anything about it, we are going to compromise our own credibility and investors would keep on pulling out. But if we give them away to fight larger companies, such as a class action lawsuit, it would boost up their confidence in the Indian market and we would attract many small investors into our country.
In India, class actions are allowed, but it is in very less amount. Hence, for increasing more filing of class action suits changes are required to be brought in India. The expenses need to be reduced and people must be aware of this more and more. Thus, we lawyers must explore this domain and do something for the greater good in the future.
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